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SB-242 Property Assessed Clean Energy program: program administrator.(2017-2018)

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Date Published: 05/18/2017 09:00 PM
SB242:v95#DOCUMENT

Amended  IN  Senate  May 18, 2017
Amended  IN  Senate  April 26, 2017
Amended  IN  Senate  April 17, 2017
Amended  IN  Senate  March 20, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 242


Introduced by Senator Skinner

February 06, 2017


An act to add Chapter 29.1 (commencing with Section 5900) to Part 3 of Division 7 of the Streets and Highways Code, relating to the Property Assessed Clean Energy program.


LEGISLATIVE COUNSEL'S DIGEST


SB 242, as amended, Skinner. Property Assessed Clean Energy program: program administrator.
Existing law authorizes applicants, defined as including specified public agencies, entities administering Property Assessed Clean Energy (PACE) financing programs on behalf of and with the written consent of public agencies, or financial institutions, to assist property owners in financing the installation of distributed generation renewable energy sources, electric vehicle charging infrastructure, or energy or water efficiency improvements through the issuance of PACE bonds that are secured by voluntary contractual assessments, voluntary special taxes, or special taxes on property.

The

This bill would require a program administrator that administers a PACE program on behalf of a public agency to comply with certain requirements when approving an assessment contract for the installation of an eligible measure, as well as the administration of that contract, including requiring the contract to comply with specified criteria and requirements. The bill would require a program administrator to obtain a sworn declaration of income containing specified financial information from each property owner, and would provide that a declarant who willfully states as true a material fact on that declaration that he or she knows to be false be subject to a civil penalty of a specified amount. The bill would require a program administrator to underwrite an assessment contract, and would prohibit a program administrator from approving an assessment contract if it determines that the property owner is unlikely to be able to make payments on that contract. unless the program administrator makes a good faith determination that the property owner has a reasonable ability to meet the annual payment obligations for the contract, subject to specified requirements. The bill would require a program administrator, before a PACE assessment is consummated and in addition to other disclosures, a property owner consummates an assessment contract, to provide an oral confirmation of the key terms of an assessment contract with the property owner or an authorized representative of the property owner. The bill would require a program administrator for each PACE Program program that it administers to establish and make publicly available an eligible measure list that has been approved by the sponsoring public agency, and would prohibit the program administrator from approving PACE assessments for a measure that is not included on that list, unless the program administrator establishes a custom measure in accordance with specified requirements.
The bill would prohibit a contractor or other 3rd party from advertising the availability of an assessment contract that is administered by a program administrator, or from soliciting property owners on behalf of the program administrator, unless specified requirements are met. The bill would prohibit a program administrator from providing direct or indirect cash payments or anything of a material value to a contractor or 3rd party that is in excess of the actual price charged to the property owner for the sale or installation of measures financed by an assessment contract, except for reimbursement of expenses as provided. The bill would also prohibit a program administrator from providing direct or indirect cash payments or anything of a material value to a property owner that is explicitly conditioned upon the property owner entering into the assessment contract. The bill would prohibit a program administrator from making any representation as to the tax deductibility of an assessment contract, unless that representation is consistent with applicable state and federal law. The bill would prohibit a program administrator from providing information that discloses specified information relating to the property owner or the property.
The bill would require a program administrator to provide the property owner payment forbearance or a payment holiday for a PACE assessment if the property owner and a mortgage lender had reached an agreement to provide forbearance, as specified. The bill would require a program administrator, for each PACE program that it administers, to establish and make available to property owners a reasonable process to request a payment forbearance or payment holiday, and to establish reasonable criteria for timely receiving, evaluating, and providing forbearance or a payment holiday. The bill would require a program administrator to grant a modification to a PACE assessment if specified requirements are met.
The bill would require a program administrator, for each PACE program that it administers, to submit a report, at least annually, to the public agency that contains specified information regarding that program.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Chapter 29.1 (commencing with Section 5900) is added to Part 3 of Division 7 of the Streets and Highways Code, to read:
CHAPTER  29.1. Clean Energy Assessment Contracts
Article  1. General Provisions

5900.
 The provisions of this article shall apply exclusively to residential real property with three four or fewer units.

5901.
 The provisions of this chapter shall not apply to any public agency. agency that does not use a program administrator to administer a PACE program.

5902.
 For purposes of this chapter:
(a) “Ancillary work” means the improvement of real property made in connection with the installation of a measure.
(b) “Assessment contract” means an agreement entered into between all property owners of record on real property and a public agency in which, for voluntary contractual assessments imposed on the real property, the public agency provides a PACE assessment for the installation of one or more measures on the real property in accordance with a PACE program.
(c) “Authorized representative” means an attorney-in-fact, as defined in Section 4014 of the Probate Code, or conservator of the estate, as defined in Section 2400 of the Probate Code, of the property owner.

(c)

(d) “Custom measure” means a measure that is not on the eligible measure list of a program administrator for a PACE program.

(d)

(e) “Eligible measure list” means, for each PACE program, a list of all measures other than custom measures that have been approved for a PACE assessment by a program administrator.

(e)

(f) “Energy utility” means an “electrical corporation” as defined in Section 218, a “gas corporation” as defined in Section 222, a “local publicly owned electric utility” as defined in Section 224.3, 224.3 of the Public Utilities Code, and a local publicly owned gas utility. “Energy utility” also means a community choice aggregator or other entity, other than an electrical corporation or gas corporation, approved by the Public Utilities Commission to administer programs providing energy-efficiency-related services or incentives for eligible solar energy systems to end users using moneys collected by an electrical corporation or gas corporation from ratepayers or moneys made available pursuant to Section 748.5 of the Public Utilities Code.

(f)

(g) “Measure” means one or more improvements on real property that may be made pursuant to an assessment contract under a PACE program.

(g)

(h) “PACE assessment” has the same meaning as “Property Assessed Clean Energy Bond” or “PACE Bond” as defined in means a voluntary contractual assessment, voluntary special tax, or special tax, as described in subdivisions (a), (b), and (c) of Section 26054 of the Public Resources Code.

(h)

(i) “PACE program” means a program in which financing is provided for the installation of measures on real property and funded through the use of property assessments, as well as other program components defined in this section, established pursuant to any of the following:
(1) Chapter 29 (commencing with Section 5898.10) of Part 3 of this code.
(2) The Mello-Roose Mello-Roos Community Facilities Act of 1982 (Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the Government Code).
(3) A charter city’s constitutional authority under Section 5 of Article XI of the California Constitution.

(i)

(j) “Program administrator” means an entity administering a PACE program on behalf of, and with the written consent of, a public agency.

(j)

(k) “Property owner” means an owner all property owners of record on the property subject to the PACE assessment.

(k)

(l) “Public agency” means a city, county, city and county, municipal utility district, community services district, community facilities district, joint powers authority, sanitary district, sanitation district, or water district, as defined in Section 20200 of the Water Code, that has established or participates in a PACE program, and utilizes a program administrator.

(l)

(m) “Public water system” has the same meaning as defined in subdivision (h) of Section 116275 of the Health and Safety Code.

Article  2. Assessment Contract Requirements

5910.
 A program administrator shall not submit, present, or otherwise approve for signature by a public agency an assessment contract unless that assessment contract complies with paragraphs (1) and (2) of subdivision (e) of Section 53328.1 of the Government Code and Sections 5898.16 and 5898.17 of this code, and the following additional criteria are met:
(a) All property taxes for the property that will be subject to the assessment contract are current current. The property owner shall also certify that there has been no more than one late payment of property taxes on the property for the previous three years or since the current owner acquired the property, whichever period is shorter.
(b) The property owner has no delinquent federal or state tax obligations in excess of one thousand dollars ($1,000).

(b)

(c) The property that will be subject to the assessment contract has no recorded involuntary liens in excess of one thousand dollars ($1,000).

(c)

(d) The property that will be subject to the assessment contract has no notices of default outstanding.

(d)Any property owner that will execute the assessment contract is not a party to any bankruptcy proceeding.

(e) The property owner has not been a party to any bankruptcy proceedings within the last seven years, except that the property owner may have been party to a bankruptcy proceeding that was discharged or dismissed between two and seven years before the application date and the property owner has had no payments more than 30 days past due on any mortgage debt or nonmortgage debt (excluding medical debt) during the 12 months immediately preceding the application date.

(e)

(f) The property owner that will execute the assessment contract is current on all mortgage debt that is secured by the property that will be subject to the assessment contract. on the subject property, and has been late on such payments no more than once during the 12 months immediately preceding the application date.

(f)The property owner that will execute the assessment contract is the title holder of record on the property that will be subject to the assessment contract.

(g) The property that will be subject to the assessment contract is within the geographical boundaries of the applicable PACE program.

(h)The PACE assessment will be for less than 15 percent of the current market value of the property, up to the first seven hundred thousand dollars ($700,000) of the current market value of the property, and for less than 10 percent of the remaining current market value of the property above seven hundred thousand dollars ($700,000). Market value for purposes of this subdivision shall be determined in accordance with subdivision (c) of Section 5898.17 of the Streets and Highways Code.

(h) The measures to be installed pursuant to the assessment contract are eligible under the terms of the applicable PACE program.
(i) The total amount of PACE assessments on the property, inclusive of any preexisting assessments, shall be no more than 15 percent of the market value of the property.

(i)

(j) The total PACE assessment assessments and the mortgage-related debt on the property subject to the PACE assessment contract will not exceed 961/2 percent of the market value of the property. Market value for purposes of this subdivision shall be determined in accordance with subdivision (c) of Section 5898.17 of the Streets and Highways Code.

(j)

(k) The maximum term of the assessment contract shall not exceed the estimated useful life of the measure being installed. to which the greatest portion of funds disbursed under the assessment contract is attributable. The program administrator shall determine useful life for purposes of this subdivision based upon credible third-party standards or certification criteria that have been established by appropriate government agencies or nationally recognized standards and testing organizations.

(k)

(l) The property owner shall agree to place the lien on the title report, and shall agree to notify the program administrator if the property owner has authorized additional PACE assessments on the same subject property. The failure of a property owner to comply with this subdivision shall entitle the program administrator to recover from the property owner the amount of any funds that the program administrator has advanced to or on behalf of that property owner. not invalidate an assessment contract or any obligations thereunder, notwithstanding where the combined amount of the PACE assessments exceeds the criteria set forth in subdivision (j) or (k).

5911.

A program administrator shall obtain a sworn declaration of income and debt obligations from each property owner seeking an assessment contract. A declarant that willfully states as true any material fact he or she knows to be false shall be subject to a civil penalty of up to ten thousand dollars ($10,000). Any public prosecutor may bring a civil action to impose the civil penalty. The program administrator shall underwrite each assessment contract to determine the property owner’s ability to make payments on that assessment contract. A program administrator shall not approve an assessment contract if it determines that the property owner is unlikely to be able to make all payments on the assessment contract.

5911.
 (a) A program administrator may derive market value using one of the following:
(1) An automated valuation model, which is a computerized property valuation system that is used to derive a reasonable real property value.
(2) A broker’s price opinion conducted by a real estate broker licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code.
(3) An appraisal conducted by a state-licensed real estate appraiser licensed pursuant to Part 3 (commencing with Section 11300) of Division 4 of the Business and Professions Code.
(4) The assessed value of the property. If the assessed value is used, the determination of market value shall be deemed valid on its face.
(b) The market value determination by the program administrator shall be disclosed to the property owner.

5912.
 A program administrator shall not submit, present, or otherwise approve for signature by a public agency an assessment contract unless the program administrator makes a good faith determination that, at the time the assessment contract is signed, the property owner has a reasonable ability to meet the annual payment obligations for the PACE assessment based on the property owner’s income, assets and current debt obligations.
(a) The property owner shall state his or her income to the program administrator as a condition of application.
(b) The program administrator shall obtain one or more credit reports on the property owner from a consumer reporting agency in connection with underwriting the PACE assessment, and may use a credit report prepared by a credit reporting agency that is transmitted electronically.
(c) If the annual PACE assessment payments will exceed 1.5 percent of the market value of the property subject to the assessment, the program administrator shall verify the income, assets, and current debt obligations of the property owner.
(d) In evaluating the income, assets, and current debt obligations of the property owner, the equity of the property that will secure the assessment shall not be considered.

5912.5913.
 (a) Before a PACE assessment is consummated, in addition to providing the written disclosure pursuant to Section 5898.17 of the Streets and Highways Code, a property owner consummates an assessment contract, the program administrator shall make an oral confirmation of the key terms of the assessment contract with to at least one owner of the property owner or authorized representative of the property owner. That owner, and shall obtain acknowledgment from the person to whom the oral confirmation is given. Such oral confirmation shall include, but is not limited to, all of the following information:
(1) The measure being installed is being financed by a PACE assessment.
(2) The total estimated annual costs the property owner will have to pay under the assessment contract, including applicable fees.
(3) The estimated date that the first payment will be due.
(4) The term of the assessment contract.
(5) That payments on the assessment contract will be made through taxes assessed on the real property and paid either directly to the county assessor’s office or through the property owner’s mortgage impound account.
(6) That the property will be subject to a lien during the term of the assessment contract.
(7) That the property owner has disclosed whether the property has received or is seeking additional PACE assessments and has disclosed all other PACE assessments or special taxes that are or about to be placed on the property.

(7)

(8) That the property owner understands and affirms the financial information that he or she has provided, and that he or she has the financial means to make payments on the assessment contract in addition to their his or her other expenses.
(9) That any potential utility savings are not guaranteed, and will not reduce the assessment payments or total assessment amount.

(8)

(10) That the program administrator does not provide tax advice, and that the property owner should seek professional tax advice if he or she has questions regarding the tax impact on the PACE assessment or assessment contract.

(9)

(11) That the obligations under the assessment contract may (A) remain on the property or (B) be required to be paid in full before the property owner sells or refinances the property.
(b) The program administrator shall comply with both of the following when giving the oral confirmation described in subdivision (a):
(1) The program administrator shall record the oral confirmation in an audio format in accordance with applicable laws, and shall obtain acknowledgment from the person to whom the confirmation is given of the confirmation. laws.
(2) The program administrator may not comply with the requirement in subdivision (a) through the use of a prerecorded message, or other similar device or method.
(c) The provisions of this section shall be in addition to the documents required to be provided to the property owner under Sections 5898.16 and 5898.17.

5913.5914.
 A program administrator may not waive or defer the first payment on an assessment contract. A property owner’s first assessment payment shall be due no later than the tax fiscal year following the tax fiscal year in which the installation of the measure is completed.

5915.
 Except as provided in subdivision (c) of Section 5913, a PACE program administered by a program administrator shall not be subject to the requirements of paragraph (2) of subdivision (a) of Section 5898.16 or paragraph (2) of subdivision (e) of Section 53328.1 of the Government Code to the extent any requirement in those paragraphs are inconsistent with any provision of this article.

Article  3. Eligible projects; Projects; Contractor Oversight; Transfer of Bonds

5920.
 (a) A program administrator shall not offer a PACE assessment for a measure that is not both of the following:
(1) Permanently affixed to real property.
(2) Consistent with criteria of the PACE program through which the assessment contract is made available.
(b) Before a PACE assessment is consummated, program administrator authorizes a contractor to commence work to install a measure, the program administrator or contractor shall confirm that the measure is included on the applicable eligible measures list or has been approved as a custom measure pursuant to subdivision (c) of Section 5921.

5921.
 (a) For each PACE program that it administers, a program administrator shall establish, maintain, and make publicly available an eligible measure list that has been approved by the sponsoring public agency, and shall establish suitable procedures for the inclusion, maintenance, and removal of information included on the eligible measure list. The eligible measure list shall at minimum include the following information for each measure appearing on that list:
(1) A name or description.
(2) Eligibility criteria, including performance thresholds, certification requirements, and installation criteria.
(3) Expected useful life. The program administrator shall determine useful life for purposes of this subdivision based upon credible third-party standards or certification criteria that have been established by appropriate government agencies or nationally recognized standards and testing organizations.
(b) A measure shall not be included on an eligible measure list unless the program administrator has determined that the measure complies with both of the following:
(1) It is consistent with the scope of the PACE program.
(2) It meets one or more standards or certification criteria that have been established by appropriate government agencies, such as the United States Department of Energy, the United States Environmental Protection Agency, and or the California Energy Commission, or by appropriate and credible third-party private organizations that publish generally acceptable standards with respect to the measure. A measure may comply with this paragraph if it is an improvement eligible for rebate by at least one public utility, energy utility, or public water system that provides services to that property owner.
(c) A program administrator may offer PACE assessments for a measure not included in the eligible measure list if that administrator does both of the following:
(1) Establishes, maintains, and makes publicly available an application process, that has been approved by the sponsoring public agency, to permit a contractor or property owner to request a PACE assessment for a custom measure.
(2) Establishes, maintains, and makes publicly available guidelines, that have been approved by the sponsoring public agency, by which the program administrator shall review and approve the application for a custom measure. Those guidelines shall identify minimum requirements and criteria that must be met in order for a custom measure to be approved, and shall be consistent with subdivision (b).
(d) A PACE assessment shall not be used for ancillary work unless both of the following requirements are met:
(1) The scope of the ancillary work is directly related to and necessary for the installation of a measure. measure, and the total amount financed including both the eligible measure and the ancillary work does not exceed 15 percent of the market value of the property subject to the PACE assessment.
(2) The cost of the ancillary work does not exceed the cost of the eligible measure, and the total amount financed including both the eligible measure and the ancillary work does not exceed 15 percent of the market value of the property subject to the PACE assessment. measure.
(e) The provisions of this section shall not apply to measures that are seismic strengthening improvements authorized under Section 5899.

5922.
 A program administrator shall not permit contractors or other third parties to advertise the availability of assessment contracts that are administered by the program administrator, or to solicit property owners on behalf of the program administrator, unless both of the following requirements are met:
(a) The contractor or third party maintains in good standing an appropriate license from the Contractors State Licensing Board, as well as any other permits, licenses, or registrations required for engaging in its business in the jurisdiction where it operates, and maintains the required bond and insurance coverage pursuant thereto.
(b) The program administrator obtains the contractor contractor’s or third party’s written agreement that the contractor or third party will act in accordance with applicable advertising and marketing laws and regulations, and all other applicable law.

5923.
 (a) Except as provided for in subdivision (b), a program administrator shall not provide any direct or indirect cash payment or other thing of material value to a contractor or third party in excess of the actual price charged by that contractor or third party to the property owner for the sale and installation of one or more measures financed by an assessment contract.
(b) A program administrator is permitted to reimburse documented expenses to a contractor or third party for approved cobranded advertising and marketing campaigns and collateral, leads, training, and training events.
(c) A program administrator shall not provide any direct cash payment or other thing of value to a property owner explicitly conditioned upon that property owner entering into an assessment contract. Notwithstanding the above, programs or promotions that offer reduced fees or interest rates to property owners are neither a direct cash payment or “other thing of value,” provided that the reduced fee or interest rate is reflected in the assessment contract and in no circumstance provided to the property owner as cash consideration.

5924.
 A program administrator shall not make any representation as to the tax deductibility of an assessment contract unless that representation is consistent with the Internal Revenue Service, representations, statements, or opinions of the Internal Revenue Service or applicable state tax agency, representations, statements, or opinions agency with regard to the tax treatment of PACE assessments.

5925.
 A program administrator shall not provide to a contractor or third party engaged in soliciting assessment contracts on its behalf any information that discloses the amount of PACE financing funds for which a property owner is eligible for, under a PACE assessment or the amount of equity in the property, or any other indication of the maximum or potential amount of financing available to a property owner. a property.

5926.
 This chapter does not prevent a program administrator, at its discretion and sole expense, from doing any of the following:
(a) Assigning to a third party its right to close, fund, or administer an assessment contract.
(b) Securitizing its interest in bonds issued pursuant to one or more assessment contracts.
(c) Purchasing, selling, assigning, or taking assignment of an interest in bonds issued pursuant to one or more assessment contracts, or securities backed by assessment contracts.

Article  4. Forbearance

5940.
 For any assessment contract entered on or after January 1, 2018, upon presentation of an agreement of forbearance or payment holiday between a mortgage lender and a property owner for any monthly mortgage payment amount or portion thereof, the program administrator shall provide to the property owner a payment forbearance or payment holiday for the PACE assessment for the same term as the mortgage lender in accordance with the program administrator’s customary servicing practices.

5941.
 (a) For any assessment contract entered on or after January 1, 2018, for each PACE program that it administers, a program administrator shall establish and make available to property owners a reasonable process for property owners to request payment forbearance or payment holiday for a PACE assessment.
(b) A program administrator shall establish reasonable criteria for timely receiving, evaluating, and providing forbearance or payment holiday for a property owner’s PACE assessment. A program administrator shall grant forbearance to a property owner if the program administrator receives credible evidence that the property owner does both of the following:
(1) Experiences a significant reduction of income as a result of involuntary unemployment, temporary disability, a natural disaster, or other unplanned and economically detrimental event.
(2) That such property owner is able to meet all property tax and real estate-secured debt obligations associated with the property, excluding the obligations under the PACE assessment.

5942.
 For each PACE assessment, a property owner is entitled to an aggregate of either:
(a) One annual forbearance payment (comprising a single fiscal year).
(b) Semiannual forbearance payments for the lifetime of the assessment.

5943.
 For any assessment contract entered on or after January 1, 2018, and notwithstanding any provision of this division or the Improvement Bond Act of 1915 (Division 10 (commencing with Section 8500)), if a property owner receives a permanent modification of a mortgage encumbering a property on which the public agency has caused an assessment to be recorded, and such modification results in a reduction of the unpaid principal balance of such mortgage, upon presentation of the agreement of permanent modification, the program administrator shall promptly reduce the unpaid principal balance of the PACE assessment by no less than a percentage equal to the percentage by which the mortgage balance was reduced.

5944.
 (a) For any PACE assessment for which a program administrator provides forbearance, payment holiday, or modification to a property owner, the payments due on the assessment contract during such forbearance or payment holiday or as a result of such modification shall be satisfied by the program administrator, and the program administrator shall be liable for any penalty, late charge, or loss arising from its failure to make such payments during the forbearance or payment holiday.
(b) Any forbearance that results in a delay or deferment of the repayment obligation that results in the timing of the repayment being extended shall not be deemed a violation of any useful life determination used in the assessment term, so long as the useful life determination and assessment term were valid at origination.
(c) The period during which the payment has been deferred or delayed shall not accrue interest.

5945.
 The forbearance, payment holiday, or modification of any PACE assessment shall not affect the validity or enforceability of such PACE assessment or any bonds issued in connection with such PACE assessment, and shall not constitute a violation of any provision of the Improvement Bond Act of 1915 (Division 10 (commencing with Section 8500)).

Article  5. Reporting

5931.5954.
 (a) For each PACE program that it administers, a program administrator shall submit a report at least annually to the public agency that shall contain the following information: information for the preceding calendar year:
(1) The number of properties that received PACE assessments.
(2) The aggregate dollar amount of PACE assessments received.
(3) The average dollar amount of PACE assessments received.
(4) The categories of installed measures whether energy or water efficiency, renewable energy, or seismic improvements improvements, and the percentage of PACE assessments represented by each category type type, on a number and dollar basis.
(5) Rates of default including the number of parcels defaulted and defaulted amount and the number of years in default for each property within the jurisdictional boundaries of the public agency.
(6) Estimated amount of energy savings as expressed in monetary and energy use savings. total amount of energy saved, and the estimated total dollar amount of such savings by property owners by measures installed in the calendar year.
(7) Estimated total amount of renewable energy produced. produced by measures installed in the calendar year.
(8) Estimated total amount of water savings as expressed in monetary and energy use savings. saved, and the estimated total dollar amount of such savings by property owners.
(9) Estimated amount of greenhouse gas emissions reductions.
(10) Estimated number of jobs created.
(b) The program administrator shall make available to the public agency all methodologies and supporting assumptions or sources relied upon in the report.
(c) All reports submitted pursuant to this section shall include only aggregate data, and shall not include any nonpublic personal information.