03/01/2022 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB227 | |
| HB243|| SB143 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 227 | TELECONFERENCED | |
| *+ | HB 243 | TELECONFERENCED | |
| + | SB 143 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
March 1, 2022
8:03 a.m.
MEMBERS PRESENT
Representative Sara Hannan, Co-Chair
Representative Calvin Schrage, Co-Chair
Representative Harriet Drummond
Representative Ken McCarty
Representative Kevin McCabe
Representative Mike Prax
MEMBERS ABSENT
Representative Josiah Patkotak, Vice Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 227
"An Act relating to municipal energy and resilience improvement
assessment programs; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 243
"An Act relating to horizontal property regimes and common
interest communities; and relating to mortgages, deeds of trust,
and other property liens."
- HEARD & HELD
SENATE BILL NO. 143
"An Act relating to horizontal property regimes and common
interest communities; and relating to mortgages, deeds of trust,
and other property liens."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 227
SHORT TITLE: MUNI ENERGY IMPROVEMNT ASSESSMENT PROGRAM
SPONSOR(s): REPRESENTATIVE(s) SCHRAGE
01/18/22 (H) PREFILE RELEASED 1/7/22
01/18/22 (H) READ THE FIRST TIME - REFERRALS
01/18/22 (H) ENE, CRA
01/20/22 (H) ENE AT 10:15 AM ADAMS 519
01/20/22 (H) Heard & Held
01/20/22 (H) MINUTE(ENE)
01/27/22 (H) ENE AT 10:15 AM ADAMS 519
01/27/22 (H) Moved HB 227 Out of Committee
01/27/22 (H) MINUTE(ENE)
01/31/22 (H) ENE RPT 4DP 2NR
01/31/22 (H) DP: ZULKOSKY, CLAMAN, FIELDS, SCHRAGE
01/31/22 (H) NR: KAUFMAN, RAUSCHER
03/01/22 (H) CRA AT 8:00 AM BARNES 124
BILL: HB 243
SHORT TITLE: COMMON INTEREST COMMUNITIES; LIENS
SPONSOR(s): REPRESENTATIVE(s) NELSON
01/18/22 (H) PREFILE RELEASED 1/7/22
01/18/22 (H) READ THE FIRST TIME - REFERRALS
01/18/22 (H) CRA, L&C
03/01/22 (H) CRA AT 8:00 AM BARNES 124
BILL: SB 143
SHORT TITLE: COMMON INTEREST COMMUNITIES; LIENS
SPONSOR(s): SENATOR(s) REVAK
01/18/22 (S) PREFILE RELEASED 1/7/22
01/18/22 (S) READ THE FIRST TIME - REFERRALS
01/18/22 (S) L&C
02/09/22 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/09/22 (S) Moved SB 143 Out of Committee
02/09/22 (S) MINUTE(L&C)
02/11/22 (S) L&C RPT 3DP
02/11/22 (S) DP: STEVENS, MICCICHE, GRAY-JACKSON
02/16/22 (S) TRANSMITTED TO (H)
02/16/22 (S) VERSION: SB 143
02/17/22 (H) READ THE FIRST TIME - REFERRALS
02/17/22 (H) L&C
02/17/22 (H) CRA REFERRAL ADDED BEFORE L&C
03/01/22 (H) CRA AT 8:00 AM BARNES 124
WITNESS REGISTER
SHAINA KILCOYNE, Energy and Sustainability Manager
Solid Waste Services
Municipality of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint about C-PACE
during the hearing on HB 227.
MELANIE LUCAS-CONWELL, Manager
49th State Angel Fund
Municipality of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Co-presented a PowerPoint about C-PACE
during the hearing on HB 227.
RYAN JOHNSTON, Staff
Representative Calvin Schrage
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Offered clarification during the hearing on
HB 227 on behalf of Representative Schrage, prime sponsor.
BALI KUMAR, Chief Operating Officer
PACE Loan Group
Minnesota
POSITION STATEMENT: Testified in support of HB 227.
JEREMIAH BENSON, Realtor
Wasilla, Alaska
POSITION STATEMENT: Testified in support of HB 227.
TOM NEUKRANZ, CEO
Global Pacific Capital, LLC
No address provided
POSITION STATEMENT: Testified in support of HB 227.
JESSA COLEMAN, Associate Director
Policy and Programs
Nuzeen Green Capital
No address provided
POSITION STATEMENT: Testified in support of HB 227.
TOM BENKERT, Business Development Manager
KI Energy
Wasilla, Alaska
POSITION STATEMENT: Testified in support of HB 227.
NICHOLAS ZUBA, Director
PACE Policy and Programs
Clean Fund, LLC
No address provided
POSITION STATEMENT: Testified in support of HB 227.
REPRESENTATIVE DAVID NELSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor of HB 243, gave a brief
introduction to companion bill SB 143.
SENATOR JOSH REVAK
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As prime sponsor, presented SB 143.
SUSAN JENSEN, Manager
Bayshore Owners Association
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on SB 143.
SARAH BADTEN, Attorney at Law
Birch Horton Bittner & Cherot
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 143.
EMMA TORKELSON, Staff
Senator Josh Revak
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions on behalf of Senator
Revak, prime sponsor of SB 143.
ACTION NARRATIVE
8:03:22 AM
CO-CHAIR SARA HANNAN called the House Community and Regional
Affairs Standing Committee meeting to order at 8:03 a.m.
Representatives Schrage, McCarty, McCabe, and Hannan were
present at the call to order. Representatives Drummond and Prax
arrived as the meeting was in progress.
HB 227-MUNI ENERGY IMPROVEMNT ASSESSMENT PROGRAM
8:03:59 AM
CO-CHAIR HANNAN announced that the first order of business would
be HOUSE BILL NO. 227, "An Act relating to municipal energy and
resilience improvement assessment programs; and providing for an
effective date."
8:04:58 AM
CO-CHAIR SCHRAGE, as prime sponsor, presented HB 227. He read
from the sponsor statement [included in the committee packet],
which read as follows [original punctuation provided]:
Property Assessed Clean Energy (PACE) is an innovative
financing mechanism that enables owners of commercial
and industrial properties to obtain fixed rate, long-
term financing through private lenders for energy
efficiency and renewable energy projects and pay the
costs back over time through a voluntary assessment on
the property tax. PACE attaches the loan to the
property, rather than the borrower. If the property is
sold, the loan transfers to the new owner. With lower
energy costs, building owners unlock positive cash
flow for their businesses and increase their
buildings' value from day 1.
Passed in 2017, the statute allows local governments
to create and manage C-PACE programs. The Municipality
of Anchorage launched the state's first program in
April 2021. Other regions are interested in launching
a program and are reviewing administration options.
While program administration is offset by
administrative fees, staff capacity is still required
to maintain the program and review applications.
Alaska's statute is based on Texas's C-PACE statute.
Based on the growing success of C-PACE, lawmakers
around the country are adding new eligible uses of C-
PACE. Several statutory clean-ups will ensure
efficient statewide promulgation and will greatly
facilitate investment in our building stock,
especially at a time when economic development is
needed most.
House Bill 227 aims to expand C-PACE in Alaska by:
1. Allowing new construction financing
2. Allowing Resiliency projects
3. Allowing C-PACE refinancing
4. Considering Market Values rather than assessed
values
5. Eliminating the Savings-to-Investment Ratio (SIR)
HB 227 changes serve the common goal of creating a
large, thriving and active C-PACE market, which in
turn will benefit Alaskans. These amendments were
developed in coordination with the Municipality of
Anchorage and the Alaska Energy Authority using the
best practices & lessons learned in the Lower 48. In
all cases, C-PACE assists property owners in dealing
with the up-front cost of property upgrades that
create a public benefit.
HB 227 will help municipalities and boroughs statewide
achieve the greatest overall environmental and
economic development benefits at no cost to state or
local governments.
8:08:16 AM
SHAINA KILCOYNE, Energy and Sustainability Manager, Solid Waste
Services, Municipality of Anchorage, co-presented a PowerPoint
on Alaska C-PACE in relation to HB 227. She described C-PACE as
"a government policy that says commercial energy efficiency and
renewable energy are a public benefit." Statute passed in 2017
"allowed jurisdiction to create programs." She said many
entities were involved in bringing the first program to Alaska,
as shown on slide 2, including: the State of Alaska, Alaska C-
PACE, the Alaska Energy Authority, the U.S. Department of
Energy, McKinley Research Group, LLC, and PACE Financial
Servicing.
8:10:17 AM
MELANIE LUCAS-CONWELL, Manager, 49th State Angel Fund,
Municipality of Anchorage, took a turn at the PowerPoint
presentation, drawing attention to slide 3, "What makes C-PACE
special?," which lists the following: No upfront project cost;
long-term, fixed-rate, nonrecourse financing; transferable;
priority lien; increases property value; and requires project to
"pencil out."
MS. LUCAS-CONWELL explained the benefit of having no upfront
project costs means being able to roll hard and soft costs into
the loan, such as costs for engineering, permitting, and energy
audits. She said there are no fixed interest rates; the
provider of the capital decides on the terms of the interest
rate; currently the longest term is 20 years or the lifetime of
the project - whichever is shorter - with non-reverse financing
tied to the real assets rather than the property owners, which
is what makes it transferable. Further, there is no required
owner guarantee, credit score, or bond rating. She said it is a
property lien that is placed on the property itself by the
municipality or jurisdiction; it is "senior to any existing
mortgages"; and any existing mortgage or lien holders must be
given 30-day notice of the assessments "to be able to consent to
the assessments." The installation of new clean energy or
renewable energy should, over the lifespan of the property,
increase its value, she said, while improving operations and
maintenance costs. Regarding the requirement to "pencil out,"
she explained that any project must have a savings ratio of at
least 1:1, which is dollars spent to energy savings. This means
the projects should be "cashflow positive from day one."
8:13:53 AM
MS. LUCAS-CONWELL moved to slide 4, "C-PACE Nationwide," which
shows that nationally, C-PACE has resulted in over $2 billion in
investments, over 2,500 commercial projects, and over 24,000
jobs created. It has been an important source of credit for
property owners seeking credit to make improvements on their
properties and to address deferred maintenance issues resulting
from "past capital restraints." Further, C-PACE can help in
situations where existing lenders may be "tapped out" and costs
have increased due to construction delays.
MS. LUCAS-CONWELL turned to slide 5, "C-PACE Status in Alaska,"
and noted Co-Chair Schrage had stated that the program was
launched April 1, 2021, and several boroughs are anticipated to
pass ordinances that will expand the program. There is yet to
be an application in Anchorage, but the process takes time.
There is an anticipated multi-million project in downtown
Anchorage.
8:16:26 AM
MS. LUCAS-CONWELL moved to slide 6, "Eligibility," which lists
the eligibility requirements for property owners, properties,
and projects, and which read as follows [original punctuation
provided, with some formatting changes]:
Property Owner
? Legal record holder
? Current on mortgage and property tax payments
? Must not be insolvent or in bankruptcy proceedings
Property
? Commercial or industrial
? Existing property
? Privately owned
Project
? Installation or modification of permanent
improvements
? Reduces energy use
? Not easily removed
? Savings to Investment Ratio
? 20% Loan to Value Ratio
MS. LUCAS-CONWELL showed slide 7, "What Measures Are Eligible
For C-PACE Financing?" She reviewed the following measures
shown on the slide: efficient lighting; boilers and furnaces;
solar energy; water conservation; combined heat and energy;
building energy management systems; hot water heating; and
building shell improvements.
8:18:37 AM
MS. KILCOYNE picked up the presentation at slide 8, "Delinquency
or Default," which read as follows [original punctuation
provided]:
C-PACE assessments are liens on the property assessed
and are prior and paramount to all liens except
municipal tax liens and special assessments.
The Municipality will enforce any delinquent
assessment payment against the property for the
benefit of the Capital Provider, in the same manner as
a property tax lien against real property may be
enforced by a local government per state statutes.
Nationally, there have been no foreclosures as a
result of a delinquent C-PACE assessment.
MS. KILCOYNE reminded the committee that the municipality is not
required to pay the capital ledger once the owner is delinquent.
She noted that once the property is sold, the loan is sold with
it, and the new owner would make the loan payments. She said it
is a nonaccelerating loan; therefore, "likely they would be
paying just a small portion of that loan payment."
MS. KILCOYNE moved on to slide 9, "HB 227: Proposed Statute
Amendments," which read as follows [original punctuation
provided]:
1) Include New Construction
2) Allow Resiliency Projects
3) Allow Refinancing
4) 30 year max, Refer to 25% of Market Value
5) Eliminate the Savings-to-Investment Ratio (SIR)
MS. KILCOYNE stated that the desired amendments to statute come
from best practices, investigations of other programs, and
discussions with property developers, property owners, and C-
PACE experts. She indicated that the amendments would help to
overcome limitations, and she said some states are working on
similar changes. She said, "We believe that these amendments
will bring us in line with the way C-PACE is being used in the
Lower 48."
MS. KILCOYNE showed slide 10, "New Construction," which shows
that new construction is allowed in 25 state programs and
comprises approximately half of C-PACE transactions in the last
two years. She said Alaska's statute is replicated from that of
Texas, which is working to include new construction in its
statute. She said the Municipality of Anchorage has had
inquiries about new construction of "quite large projects," and
[C-PACE] offers developers opportunities for financing and
facilitates more energy efficient buildings. She said this is
in line with the intent of HB 227.
8:21:56 AM
MS. KILCOYNE drew attention to slide 11, "Resiliency," and said
HB 227 includes resiliency projects that support public policy
goals, which are listed on slide 11, which read as follows
[original punctuation provided]:
? seismic improvements
? stormwater management, flood mitigation and
protection
? fire hardening, fire or wind resistance
? erosion management
? microgrids for energy storage and backup power
generation
? water or wastewater efficiency including reuse and
energy recovery
? electric vehicle charging stations
? retrofitting that improves the envelope, structure,
or systems of the building, and any other improvement
project approved by a municipality as a resilience
improvement project
MS. KILCOYNE added that individual jurisdictions would be able
to offer improvements relevant to their regions.
8:23:15 AM
REPRESENTATIVE MCCABE questioned inclusion of micro grids for
energy storage and backup power generation because he observed
they are covered under building energy management systems rather
than under the topic of resiliency. Further, he said he is
unclear how electrical charging stations would improve "any kind
of resiliency of a building."
MS. KILCOYNE responded that micro grids would not work "in the
initial language" for a couple reasons. One has to do with the
large, upfront cost that improves resiliency. She said the
Municipality of Anchorage is dependent on two pipelines and
microgrid resiliency, for example. She added, "But, you know,
maybe it doesn't fit in the initial bill; maybe it doesn't say
that in 20 years; but still is good for a community." Regarding
electric vehicles, she pointed out that they reduce air
emissions, and with 90 percent of electric vehicle owners
charging at home, the load on the grid is evened out throughout
the day, in terms of kilowatt usage.
8:26:33 AM
MS. LUCAS-CONWELL added all resiliency projects are voluntary.
She noted that in the case of a gasoline shortage, the existence
of easy access charging stations would allow electric and hybrid
cars to continue to operate.
REPRESENTATIVE MCCABE opined that this issue belongs in a
transportation bill, not in "a building bill." He said it
appears this issue was placed in hiding within the proposed
legislation, to which he remarked, "I'm not going there."
8:28:05 AM
CO-CHAIR SCHRAGE said he appreciates Representative McCabe's
"healthy degree of skepticism." He said he views HB 227 as a
means to achieve a lower cost of capital, with loans associated
to those items that would increase value of property. He
mentioned multi-unit communities where a solar system panel or
micro grid unit could be put in to improve resiliency. He said
many building owners want to provide charging stations, which
ties into the bigger picture of community resiliency. He
expressed a willingness to continue the conversation on this
matter.
REPRESENTATIVE MCCABE said he lives off-grid and agrees about
the need for resiliency, but explained his point was that he
thinks "it's already covered in this bill"; therefore, language
in the bill referring to electrical charging stations does not
belong. He said he would not support "that one bullet" [point
on slide 11, "electric charging stations"].
CO-CHAIR SCHRAGE said that is a policy call for the committee.
He said a private lender will not approve a loan that does not
make sense and does not add value to a building.
8:32:12 AM
REPRESENTATIVE MCCARTY said he understands why the loan is going
to be tied to the property, but he questioned who is responsible
for making payments in the event of a foreclosure.
8:33:22 AM
MS. KILCOYNE, from the perspective of the Municipality of
Anchorage, said the municipality would take its usual course of
action to enforce any delinquent payments.
8:35:01 AM
MS. KILCOYNE continued with the PowerPoint, to slide 12,
"Refinancing," which read as follows [original punctuation
provided]:
AS 29.5..160 defines "finance" and "financing" to
include "refinancing" throughout AS 29.55.100 -
29.55.165.
Explicitly allows traditional refinancing of loans
Allows refinancing of eligible projects known as a
'look-back period'
C-PACE can retroactively fund recently completed
projects in California, Connecticut, Florida,
Kentucky, Michigan, Minnesota, Missouri, New York,
Ohio, Pennsylvania, Rhode Island, and Washington D.C.
MS. KILCOYNE noted that financing and refinancing language is
contained in HB 227; however, she said she is not seeing the
full definition and suggested that could be considered.
MS. KILCOYNE turned next to slide 13, "Refer to 25% of Market
Value," which read as follows [original punctuation provided]:
More inline with industry standard
Referring to market value rather than assessed value
allows the property owner to capture 'As-built' or
'As-operating' assessments
Particularly important for new construction
MS. KILCOYNE, referring to the slide about eligible measures,
reminded members that Ms. Lucas-Conwell had said that the
current maximum financing may not exceed 20 percent of the
assessed value of the property at the time of the program
application. She mentioned an option of a waiver to 50 percent
of assessed value. She said this is fairly limiting with
projects that would ultimately increase value. She indicated
the municipality has looked at considering smaller loans or
"doing two separate loans once the value increases enough."
Returning to slide 13, she said using the term "market value"
allows more flexibility in capturing the value of the
improvements, and 25 percent is more in line with the industry
standard.
MS. KILCOYNE shared slide 14, "30 Year Max and No SIR," which
read as follows [original punctuation provided]:
Allows refinancing of eligible projects within two
years, known as a 'lookback period'
C-PACE can retroactively fund recently completed
projects in California, Connecticut, Florida,
Kentucky, Michigan, Minnesota, Missouri, New York,
Ohio, Pennsylvania, Rhode Island, and Washington D.C.
MS. KILCOYNE said government-designed SIR requirements often
generate counter-product results, and it is not a measure of a
property owner's ability to pay. She suggested debt/service
coverage ratio is more appropriate. She displayed slide 15, the
final slide, which gives contact information. She expressed
enthusiasm for the proposed legislation for its ability to
remove restrictions.
8:41:03 AM
REPRESENTATIVE MCCARTY asked how C-PACE would increase standards
of construction when there are already standards in place.
8:41:39 AM
CO-CHAIR SCHRAGE responded that lowering the cost of capital
allows people to make upgrades, such as seismic upgrades,
therefore resulting in a higher standard of building.
REPRESENTATIVE MCCARTY expressed concern with the market
"bursting" and asked what the impact on this lending mechanism
would be when it does.
CO-CHAIR SCHRAGE responded that accounting uses market value in
terms of appreciation, so many business owners may or may not
have incentive already; the proposed legislation would not
inflate market value.
8:44:32 AM
REPRESENTATIVE MCCABE said he disagrees because of language on
page 6, line 17, of HB 227, which read: "or completion of the
proposed energy or resilience improvement project". He opined
that that sentence "opens the door to huge ... problems."
CO-CHAIR SCHRAGE reiterated that he thinks those incentives
already exist. He continued:
All this bill does is, for certain projects, allow[s]
us to utilize the municipal taxing authority to apply
a lien to the property instead of doing [a]
traditional loan direct to a bank, to the actual
individual property owner - [the] group that owns the
property. This allows the municipal taxing authority
to ... levy a lien on the property itself, allowing
for a lower interest rate, because it lives on with
the property; it can be done for 30 years - the useful
life of that upgrade.
CO-CHAIR SCHRAGE said it is still the private lender that is "on
the hook," so all the proposals will be vetted by the private
lender to ensure that "someone isn't just putting out a pie-in-
the-sky value for what some ... proposed upgrade will provide."
8:47:47 AM
RYAN JOHNSTON, Staff, Representative Calvin Schrage, Alaska
State Legislature, on behalf of Representative Schrage, prime
sponsor of HB 227, offered clarification that it is 25 percent
of the market value of the property. For example, he said in a
$5 million project, if the market value of the building was
$400,000, then the C-PACE loan would be only up to $100,000.
REPRESENTATIVE MCCABE pointed again to the sentence that read
"or completion of the proposed energy or resilience improvement
project." He reasoned, "So, if $5 million is added on to your
$400,000 building, then it's 25 percent of $5.4 million, not
$400,000." He suggested it was a discussion he could continue
outside of the committee.
8:49:01 AM
CO-CHAIR HANNAN opened public testimony on HB 277.
8:49:20 AM
BALI KUMAR, Chief Operating Officer, PACE Loan Group, testified
in support of HB 227. He said PACE Loan Group is a national
PACE loan provider. He said he is on the board of PACE Nation -
a national nonprofit advocating for PACE and energy efficiency
through PACE; he is also part of the PACE Alliance, which
advocates for best practices in commercial PACE industry
nationwide. Prior to this, he said, he was CEO of Lean and
Green Michigan, which is the statewide PACE program
administrator in Michigan. He offered further details of his
experience there, as well as the progress of legislation there.
He opined that issues he has addressed are being properly
addressed through HB 227. First, he said the issue of assessed
value versus complete value makes sense to flag. He offered his
experience in this regard. He said lenders lend against
complete value, based on an appraisal and assurance that the
borrower can "beat" all debt obligations. He said PACE lending
encourages property owners to build in excess of code - enough
to extend life of property.
MR. KUMAR talked about property owners buying when cash rich,
and then, as witnessed during the pandemic, refinancing through
the PACE program, which helps keep the business afloat.
Regarding the savings investment ratio, he said property owners
do not want statute to tell them they have to achieve "a certain
type of fade-in vis--vis their investment"; they also do not
want to be prohibited from accessing a 30-year loan, which
allows for lower payments.
MR. KUMAR, regarding the issue of charging stations, said
property owners nationwide are building shopping centers or
apartment complexes, and while not required to provide charging
centers, they want to do it using PACE funding, because it
attracts more people to their building. He stated that
resilience nationwide is "really proliferating," with
legislation around the country including issues such as seismic
events and storm strengthening improvements. He said PACE Loan
Group is currently working with a property owner in Alaska that
wants to use PACE to make the building more energy efficient,
and he stated that "HB 227 would streamline the process."
8:57:15 AM
JEREMIAH BENSON, Realtor, spoke about his experience in
commercial plumbing and heating, including large projects, and
as an investor. He said he sees "nothing but win/win
situations" with options such as [PACE]. He expressed support
for HB 227.
8:59:08 AM
TOM NEUKRANZ, CEO, Global Pacific Capital, LLC, said the
business finances hundreds of millions of dollars by providing
C-PACE capital for clean energy construction. He gave examples
of the types of buildings and projects, and he noted almost all
the structures include electric vehicle charging stations. He
emphasized the importance to Anchorage of constructing new
buildings, citing the many types of jobs that creates and the
tax revenue that is brought to the city.
9:02:29 AM
JESSA COLEMAN, Associate Director, Policy and Programs, Nuzeen
Green Capital, testified in support of HB 227. She said Nuzeen
Green Capital invests in commercial buildings through the C-PACE
financing structure. She offered some examples. She said the
amendments sought under HB 227 support best practices in terms
of C-PACE and the broader real estate industry. She spoke of
increasing the value and quality of long-term assets through C-
PACE funding. She said removing the savings to investment ratio
requirement in the program would recognize that not all building
improvements worth investing repay themselves but can still be
worth the investment because of the improved quality of the
building. Allowing application submission for C-PACE financing
to be based on the market value of a building is the standard
practice in all real estate transactions. She offered her
understanding that HB 227 would allow C-PACE to refinance
eligible projects that have already been funded, which she said
is a means of recuperating stranded assets. She noted that C-
PACE programs have had significant [positive] impact on economic
development.
9:06:48 AM
TOM BENKERT, Business Development Manager, KI Energy, spoke of
his involvement with C-PACE. He said he has educated customers
about the benefits of the program. He talked about the use of
grants to hire experts to make the program happen. He specified
that C-PACE is a descriptive, not prescriptive, program; it
allows flexibility. He added that "the amendments allow even
more flexibility." He said the building owner needs to ensure
that the project considered makes sense. Further, the program
does not "shove conditions down lenders' throats." He talked
about pulling tax data during the early stages of the program,
which informed market sizing in each community, as well as
showed there was "a rapidly aging building stock." He opined
that C-PACE is a great program for upgrading buildings to bring
them up to a higher standard of performance, thus lowering the
operating costs. The money saved can be used in any way the
owner sees fit, including an increased capability for servicing
debt.
9:12:12 AM
MR. BENKERT said the original statute "missed the mark" on a
number of issues. For example, it did not allow the financing
of energy measures in new construction, which was problematic,
because builders needed additional funding above and beyond what
lenders would give in order to provide measures "above and
beyond code." He said KI has an increasing number of developers
interested in new construction and looking to C-PACE for
financing. He said C-PACE is operational in Anchorage. He
spoke of having the benefit of seeing what other states have
done to improves their programs, for example, including new
construction and retrofitting, resiliency, and addressing issues
specific to each jurisdiction. He talked about the benefit of
electric charging stations bringing in customers.
MR. BENKERT discussed the benefit of the amendments to statute
that would be made under HB 227. He mentioned the removal of
SIR, which at a current 1:1 basis is an extremely low bar. He
named other proposed changes that would benefit projects, such
as the change from assessed value to market value, and updating
language to included more modern forms of energy. He mentioned
increased cashflow, an improved ability to retain a loan, and
reduced operating costs. He talked about the transfer of
buildings from one owner to the next and that the new owner
"will have a portion of paying for that reduced operating cost."
He mentioned insurance, warranty, and pre-paid maintenance - all
things that will continue long-term operations of energy
projects. He stated emphatic support for the proposed
legislation.
9:19:19 AM
REPRESENTATIVE MCCABE asked how many applications had been made
outside of Anchorage.
MR. BENKERT answered zero, because Anchorage currently is the
only jurisdiction with this program. In response to a follow-up
question, he said it is an opt-in program, and he explained that
the program works only in an area with taxing authority. He
indicated the original plan was to involve Anchorage, Fairbanks,
and Juneau. He said with the onset of the COVID-19 pandemic,
priorities changed in various jurisdictions and interests "waxed
and waned," with Anchorage, Alaska pursuing the project. He
said today there is a strong interest in building in the
Matanuska-Susitna (Mat-Su) Borough and interest in Juneau, as
well, in terms of using C-PACE. He clarified that it is current
statute that has the limitation regarding areas with taxing
authority.
9:22:45 AM
NICHOLAS ZUBA, Director, PACE Policy and Programs, Clean Fund,
LLC, said his firm has done approximately $300 million-worth of
C-PACE volume across the country. He mentioned his experience
not only with C-PACE but with a residential program, as well.
He stated that no program is perfect at its inception. He said
the expansion to include new construction and resiliency are
vital changes to be made to the program, because it is a
critical component for fighting climate change. In a time of
rising interest rates, he remarked, developers want to see the
least cost in capital as possible. He talked about the
importance of resiliency to face the increase in storms, floods,
and wild fires. He mentioned seismic activity in Alaska. He
talked about the importance of protecting buildings as a way of
caring for the state's economy, because businesses are housed in
those buildings.
MR. ZUBA said Clean Fund, LLC, supports the structural
programmatic changes proposed under HB 227. He said many
property owners are not aware of C-PACE, even with advertising
and outreach efforts, and he opined that building owners should
not be penalized for taking on an energy-improvement project on
their own, not knowing about the program; they should be able to
take advantage of the C-PACE financing to take advantage of the
capital and perhaps be able to refinance. He stated support for
the proposed removal of the SIR requirement, because it does not
"capture all those achieved benefits from doing a project when
the property owner decides to implement it." He equated
limiting of financing to unrealized savings for property owners.
He promoted financing based on percentage of property value,
which he said aligns with current practices in financing
nationwide. He concluded by stating support of the proposed
legislation, expressing anticipation of being able to extend
financing to Alaska's property owners in creating sustainability
and resiliency while bolstering the state's economy.
9:31:10 AM
CO-CHAIR HANNAN, after ascertaining there was no one else who
wished to testify, closed public testimony on HB 227.
9:31:27 AM
CO-CHAIR HANNAN announced that HB 227 was held over.
9:31:42 AM
The committee took an at-ease from 9:32 a.m. to 9:33 a.m.
HB 243-COMMON INTEREST COMMUNITIES; LIENS
SB 143-COMMON INTEREST COMMUNITIES; LIENS
9:33:18 AM
CO-CHAIR HANNAN announced that the next order of business would
be HOUSE BILL NO. 243, "An Act relating to horizontal property
regimes and common interest communities; and relating to
mortgages, deeds of trust, and other property liens." and SENATE
BILL NO. 143, "An Act relating to horizontal property regimes
and common interest communities; and relating to mortgages,
deeds of trust, and other property liens."
CO-CHAIR HANNAN noted that HB 243 and SB 143 are companion
pieces of legislation, and she explained that today the
committee would focus primarily on SB 143.
9:33:48 AM
REPRESENTATIVE DAVID NELSON, Alaska State Legislature, as prime
sponsor of HB 243, gave a brief introduction to companion bill
SB 143, which he said would help over 250 homeowner and
condominium associations formed prior to 1986 collect dues and
amend their governing documents.
9:34:55 AM
SENATOR JOSH REVAK, Alaska State Legislature, as prime sponsor,
presented SB 143. He said the issue was brought to his office
by a constituent; [the bill] has been legally vetted; and thus
far there has been no opposition. He explained that in 1986,
the Uniform Common Interest Ownership Act (UCIOA) made major
revisions to Alaska statutes governing homeowners associations
(HOAs) and condominium owners associations (COAs) in Alaska.
The amendment process created by UCIOA requires that homeowners
associations receive written consent from all loan holders
before the association can make amendments to its governing
document, and associations have found it nearly impossible to
obtain written responses and have, therefore, been left with
outdated rules they find impossible to legally change. He noted
that Susan Jensen, a manager of a homeowners association in
Anchorage was available to speak on how this issue has been a
problem in her community.
SENATOR REVAK discussed the two changes that would be made under
SB 143. First, SB 143 would not repeal the current process but
would create an alternative: If homeowners associations provide
the required notice to lien holders, then the lien holder will
be considered to have approved the notice if the association
does not receive a response within 60 days. Second, SB 143
would clarify language already in statute to assure pre-1986
associations will be able to collect unpaid dues just like their
counterparts since 1986 have are able to do. The clarification
would provide consistency in how liens are handled for both pre-
and post-UCIOA communities.
9:40:00 AM
CO-CHAIR HANNAN opened [invited] testimony on SB 143.
9:40:28 AM
SUSAN JENSEN, Manager, Bayshore Owners Association, said
Bayshore was founded in 1974 and has been unable to make
amendments. As an example of the negative impact, she said the
association had been offered $100,000 to create a safe walking
path for children in a greenbelt area, but it could not proceed
because the required written consent was not possible to obtain.
She gave other examples, including the issue of foreclosures and
bad debt being passed on from previous owners, all a result of
this issue. She urged the committee to pass SB 143.
9:43:34 AM
SARAH BADTEN, Attorney at Law, Birch Horton Bittner & Cherot,
noted she has been practicing community association law in
Alaska for over 15 years. The focus of her work has been to
assist associations in interpreting and enforcing their
governing documents. She emphasized the numerous times she has
seen associations wishing to amend their governing documents be
unable to do so "because of this burdensome requirement that
they get mortgage lender approval in writing." She emphasized
how wonderful SB 143 would be in addressing the two major issues
faced by the older associations. She gave examples. She said
the banks are "apathetic" and will not take action without
approval in writing, and many simple progressive changes go
unmade because of this. She said the issue effects not only
associations, but the homeowners, as well. The only option is
for associations to operate in violation of their documents,
which she said she cannot advise. She pointed out another
positive result of SB 143 would be equitable treatment of both
older and newer associations, especially regarding "the super
priority lien."
9:48:42 AM
REPRESENTATIVE PRAX asked whether the bill sponsor had reached
out directly to the banking community regarding SB 143.
9:49:02 AM
CO-CHAIR SCHRAGE responded yes. He said he had spoken directly
with banking lobbyists, who are aware of the goal of SB 143 and
have "zero opposition."
9:49:25 AM
CO-CHAIR HANNAN asked for affirmation that SB 143 would
establish neither a new super lien procedure nor a new way to
amend association documents; rather, the proposed legislation
would simply allow the older associations into current
operational standards.
9:50:09 AM
EMMA TORKELSON, Staff, Senator Josh Revak, Alaska State
Legislature, on behalf of Senator Revak, prime sponsor of SB
143, confirmed that Co-Chair Hannan was correct. She indicated
that new language would allow action if the association does not
hear back [from the homeowner within 60 days].
9:51:35 AM
CO-CHAIR SCHRAGE, in response to a question from Representative
Prax, reemphasized that the only change created under SB 143
would be the provision that no response after 60 days equals
consent.
MS. TORKELSON, in response to a follow-up question from
Representative Prax, explained that SB 143 would not affect "the
two-thirds requirement" for changes; it is just about lien
holders.
9:53:13 AM
MS. BADTEN, in response to a question from Co-Chair Hannan,
provided information about the amendment process of homeowners
associations. In response to Representative Prax, she clarified
that currently there must be an affirmative vote to change
bylaws, and the vote can be made in person or by proxy.
9:56:45 AM
CO-CHAIR HANNAN announced that SB 143 [and HB 243] were held
over.
9:57:08 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 9:57 a.m.