00 SENATE CS FOR CS FOR HOUSE BILL NO. 80(FIN) 01 "An Act adopting the Municipal Property Assessed Clean Energy Act; authorizing 02 municipalities to establish programs to impose assessments for energy improvements in 03 regions designated by municipalities; imposing fees; and providing for an effective 04 date." 05 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 06 * Section 1. AS 29.10.200 is amended by adding a new paragraph to read: 07 (66) AS 29.55.100 - 29.55.165 (energy improvement assessment 08 programs). 09 * Sec. 2. AS 29.35.200(b) is amended to read: 10 (b) A first class borough may by ordinance exercise the following powers on 11 an areawide basis: 12 (1) provide transportation systems; 13 (2) provide water pollution control; 14 (3) provide air pollution control in accordance with AS 46.14.400; 01 (4) license day care facilities; 02 (5) license, impound, and dispose of animals; 03 (6) establish an energy improvement assessment program under 04 AS 29.55.100 - 29.55.165. 05 * Sec. 3. AS 29.35.210(a) is amended to read: 06 (a) A second class borough may by ordinance exercise the following powers 07 on a nonareawide basis: 08 (1) provide transportation systems; 09 (2) regulate the offering for sale, exposure for sale, sale, use, or 10 explosion of fireworks; 11 (3) license, impound, and dispose of animals; 12 (4) subject to AS 29.35.050, provide garbage, solid waste, and septic 13 waste collection and disposal; 14 (5) provide air pollution control under AS 46.14.400; 15 (6) provide water pollution control; 16 (7) participate in federal or state loan programs for housing 17 rehabilitation and improvement for energy conservation; 18 (8) provide for economic development; 19 (9) provide for the acquisition and construction of local service roads 20 and trails under AS 19.30.111 - 19.30.251; 21 (10) establish an emergency services communications center under 22 AS 29.35.130; 23 (11) subject to AS 28.01.010, regulate the licensing and operation of 24 motor vehicles and operators; 25 (12) engage in activities authorized under AS 29.47.460; 26 (13) contain, clean up, or prevent a release or threatened release of oil 27 or a hazardous substance, and exercise a power granted to a municipality under 28 AS 46.04, AS 46.08, or AS 46.09; the borough shall exercise its authority under this 29 paragraph in a manner that is consistent with a regional master plan prepared by the 30 Department of Environmental Conservation under AS 46.04.210; 31 (14) establish an energy improvement assessment program under 01 AS 29.55.100 - 29.55.165. 02 * Sec. 4. AS 29.35.210(b) is amended to read: 03 (b) A second class borough may by ordinance exercise the following powers 04 on an areawide basis: 05 (1) provide transportation systems; 06 (2) license, impound, and dispose of animals; 07 (3) provide air pollution control under AS 46.14.400; 08 (4) provide water pollution control; 09 (5) license day care facilities; 10 (6) establish an energy improvement assessment program under 11 AS 29.55.100 - 29.55.165. 12 * Sec. 5. AS 29.55 is amended by adding new sections to read: 13 Article 2. Municipal Property Assessed Clean Energy Act. 14 Sec. 29.55.100. Establishment of program. (a) A municipality may establish 15 an energy improvement assessment program under AS 29.55.100 - 29.55.165 to 16 finance the installation or modification of permanent improvements that are 17 (1) fixed to existing privately owned commercial or industrial 18 property; and 19 (2) intended to reduce energy consumption or demand, energy costs, or 20 emissions affecting local air quality, including a product, device, or interacting group 21 of products or devices that use energy technology to generate electricity, provide 22 thermal energy, or regulate temperature. 23 (b) To establish a program under AS 29.55.100 - 29.55.165, the governing 24 body of a municipality shall take the following actions in the following order: 25 (1) adopt a resolution of intent that includes 26 (A) a finding that financing energy improvement projects 27 through assessments serves a valid public purpose; 28 (B) a statement that the municipality intends to allow privately 29 owned commercial or industrial property owners to make assessments to repay 30 financing for energy improvement projects; 31 (C) a description of energy improvement projects that may be 01 subject to assessments; 02 (D) a description of the boundaries of a region within the 03 municipality's boundaries in which the program is available; 04 (E) a description of any proposed arrangements to make third- 05 party financing available or any financing the municipality will provide for 06 energy improvement projects; and 07 (F) a description of municipal debt servicing procedures for 08 any third-party financing and assessments; 09 (2) prepare the report required under AS 29.55.110 and provide notice 10 of the report with the 11 (A) location where the report is available for public inspection; 12 (B) time and place for a public hearing on the proposed 13 program; and 14 (C) name of the local official who administers the program and 15 the appropriate assessor or person who collects the proposed assessments with 16 property taxes imposed on the assessed property; 17 (3) hold a public hearing at which the public may comment on the 18 proposed program and the report prepared under AS 29.55.110; and 19 (4) adopt an ordinance establishing the program and the terms of the 20 program, including each item included in the report required under AS 29.55.110, 21 which may be incorporated by reference. 22 (c) A municipality may 23 (1) hire and set the compensation of a program administrator and 24 program staff; or 25 (2) contract for professional services necessary to administer a 26 program. 27 (d) A municipality may impose fees to offset the costs of administering a 28 program. The fees authorized under this subsection may be assessed as a 29 (1) program application fee paid by the property owner applying to the 30 program; 31 (2) component of the interest rate on the assessment in the written 01 contract between the municipality and the property owner; or 02 (3) combination of (1) and (2) of this subsection. 03 Sec. 29.55.105. Assessment. (a) A municipality that establishes a program 04 under AS 29.55.100 may 05 (1) enter into a written contract with a record owner of privately owned 06 commercial or industrial property in a region designated under AS 29.55.100 to 07 impose an assessment to repay the financing of an energy improvement project on that 08 property; 09 (2) contract with the governing body of another taxing unit to perform 10 the duties of the municipality relating to collection of assessments imposed by the 11 municipality under this section. 12 (b) Financing repaid by an assessment may be provided by 13 (1) a third party under a written contract with the municipality that 14 authorizes the municipality to service the debt by assessment; or 15 (2) if authorized by municipal ordinance, the municipality. 16 (c) An assessment under this section may repay financing for costs of the 17 energy improvement project, including 18 (1) the cost of materials and labor necessary for the energy 19 improvement project; 20 (2) permit fees; 21 (3) inspection fees; 22 (4) lender's fees; 23 (5) program application and administrative fees; 24 (6) energy improvement project development and engineering fees; 25 (7) third-party review fees, including verification review fees, under 26 AS 29.55.120; and 27 (8) any other fees or costs that may be incurred by the property owner 28 incident to the installation, modification, or improvement on a specific or pro rata 29 basis, as determined by the municipality. 30 (d) An assessment under this section may not repay financing for the costs of 31 (1) facilities for undeveloped lots or lots undergoing development at 01 the time of the assessment; 02 (2) the purchase or installation of products or devices not permanently 03 fixed to the privately owned commercial or industrial property; or 04 (3) a utility's purchase or installation of a product, device, or 05 improvement, if the product, device, or improvement will generate electricity or 06 provide thermal energy distributed or used outside of the assessed property; in this 07 paragraph, "utility" has the meaning given in AS 42.05.990. 08 (e) A municipality may establish more than one region. The boundaries of 09 each region may be separate, overlapping, or coterminous. 10 (f) A municipality may not impose a period of an assessment under this 11 section on privately owned commercial or industrial property that exceeds 20 years or 12 the useful life of the project that is the basis for the assessment, whichever is shorter. 13 (g) Except as otherwise provided in (h) of this section, the total financing 14 repaid by assessments 15 (1) may not exceed 20 percent of the assessed value of the property at 16 the time of program application; 17 (2) must be exceeded by the projected monetary savings to the 18 property owner over the life of the assessment as a result of the energy improvement 19 project. 20 (h) If the total financing repaid by assessments does not exceed 50 percent of 21 the assessed value of the property at the time of program application, the property 22 owner may apply for a waiver from the municipality to exceed a limitation under (g) 23 of this section. A waiver application under this subsection must 24 (1) include a reasonable justification acknowledged in writing by the 25 property owner and the party providing the financing to be repaid by the assessment; 26 and 27 (2) for a waiver from the limitation in (g)(2) of this section, address the 28 interests of potential tenants and future property owners. 29 Sec. 29.55.110. Report regarding assessment program. (a) The municipality 30 shall prepare a report for a proposed program required by AS 29.55.100 that includes 31 (1) a map showing the boundaries of each proposed region within 01 which the program is available; 02 (2) a form for a contract between the municipality and a property 03 owner specifying the terms of 04 (A) assessment under the program; and 05 (B) financing provided by a third party or the municipality, as 06 appropriate; 07 (3) if the proposed program provides for third-party financing, a form 08 for a contract between the municipality and the third party regarding the servicing of 09 the debt through assessments; 10 (4) a description of projects that may qualify for assessments; 11 (5) a plan for ensuring sufficient capital for third-party financing and, 12 if appropriate, raising capital for municipal financing for energy improvement 13 projects; 14 (6) if bonds will be issued to provide capital to finance energy 15 improvement projects as part of the program as provided by AS 29.55.140, 16 (A) a maximum aggregate annual dollar amount for municipal 17 financing repaid by assessments under the program; 18 (B) if requests appear likely to exceed the authorization 19 amount, a priority order for ranking a property owner's application for 20 financing repaid by assessments; and 21 (C) a formula for calculating 22 (i) the interest rate and period during which contracting 23 owners would pay an assessment; and 24 (ii) the maximum amount of an assessment; 25 (7) a method to calculate a period of assessment consistent with 26 AS 29.55.105(f); 27 (8) a description of the application process and eligibility requirements 28 for financing repaid by assessments under the program; 29 (9) a method for a property owner applying to participate in the 30 program to demonstrate the property owner's ability to fulfill financial obligations and 31 pay assessments; the method must be based on appropriate underwriting factors, 01 including 02 (A) verification that the property owner 03 (i) is the legal owner of the benefited property; 04 (ii) is current on mortgage and property tax payments; 05 and 06 (iii) is not insolvent or in bankruptcy proceedings; and 07 (B) an appropriate ratio between the amount of the assessment 08 and the assessed value of the property; 09 (10) an explanation of the manner in which the municipality shall 10 assess the property and collect assessments; 11 (11) the lender notice requirement under AS 29.55.115; 12 (12) the review requirement under AS 29.55.120; 13 (13) a description of marketing and participant education services 14 provided by the municipality for the program; 15 (14) a description of quality assurance and antifraud measures 16 instituted by the municipality for the program and the consequence or penalty 17 prescribed by the municipality for a property owner who participates in the program 18 but does not complete an energy improvement project as proposed; and 19 (15) a description of the insurance requirements, including a 20 requirement that the property owner have insurance against damage to the energy 21 improvement project for the life of the assessment. 22 (b) The municipality shall make the report available for public inspection 23 (1) on the Internet website of the municipality; and 24 (2) at the primary governing offices of the municipality. 25 Sec. 29.55.115. Notice to mortgage holder required for participation. 26 Before a municipality may enter into a written contract with a record owner of 27 property to impose an assessment to repay the financing of an energy improvement 28 project under AS 29.55.100, the property owner shall 29 (1) give each holder of a mortgage lien on the property at least 30 days' 30 written notice of the intention of the property owner to participate in a program under 31 AS 29.55.100; and 01 (2) obtain a written consent from each holder of a mortgage lien on the 02 property. 03 Sec. 29.55.120. Review required. The record owner of property on which an 04 assessment is imposed under AS 29.55.105 shall obtain from an independent, third- 05 party qualified energy auditor the following: 06 (1) for each proposed energy improvement project, 07 (A) a review of the energy or emissions baseline conditions, as 08 appropriate; and 09 (B) the projected reduction in energy costs, energy 10 consumption or demand, or emissions affecting local air quality, as 11 appropriate; and 12 (2) for each completed energy improvement project, verification that 13 the energy improvement project was properly completed and is operating as intended. 14 Sec. 29.55.125. Direct acquisition by owner. The proposed arrangements for 15 financing an energy improvement project may authorize the property owner to 16 (1) purchase directly the related equipment and materials for the 17 energy improvement project; and 18 (2) contract directly, including through lease, a power purchase 19 agreement, or other service contract, for the energy improvement project. 20 Sec. 29.55.130. Recording of notice of assessment. (a) A municipality that 21 authorizes financing through assessments under AS 29.55.105 shall file written notice 22 of each assessment in the property records of the recording district in which the 23 property is located. 24 (b) The notice under (a) of this section must contain 25 (1) the amount of the assessment; 26 (2) the legal description of the property; 27 (3) the name of each property owner; and 28 (4) a reference to the statutory assessment lien provided under 29 AS 29.55.135. 30 Sec. 29.55.135. Lien. (a) Assessments under AS 29.55.105 and any interest or 31 penalties on the assessments are liens on the property assessed and are prior and 01 paramount to all liens except municipal tax liens and special assessments. Assessment 02 liens may be enforced as provided in AS 29.45.320 - 29.45.470 for enforcement of 03 property tax liens. 04 (b) Assessment liens run with the land, and that portion of the assessment 05 under the assessment contract that has not yet become due is not eliminated by 06 foreclosure of a property tax lien. 07 (c) Penalties and interest may be added to delinquent installments of the 08 assessments in the same manner as provided in AS 29.45.250. 09 (d) A municipality may recover costs and expenses, including attorney fees, in 10 a suit to collect a delinquent installment of an assessment in the same manner as in a 11 suit to collect a delinquent property tax. 12 Sec. 29.55.140. Bonds or notes. (a) A municipality may issue bonds or notes 13 to finance energy improvement projects subject to assessment under AS 29.55.105. 14 (b) Bonds or notes issued under this section may not be general obligations of 15 the municipality. The bonds or notes must be secured by one or more of the following, 16 as provided by the governing body of the municipality in the resolution or ordinance 17 approving the bonds or notes: 18 (1) payments of assessments on benefited property in one or more 19 specified regions designated under AS 29.55.100; 20 (2) reserves established by the municipality from grants, bonds, or net 21 proceeds or other lawfully available funds; 22 (3) municipal bond insurance, lines of credit, public or private 23 guaranties, standby bond purchase agreements, collateral assignments, mortgages, or 24 any other available means of providing credit support or liquidity; and 25 (4) any other funds lawfully available for purposes consistent with 26 AS 29.55.100 - 29.55.165. 27 (c) A municipal pledge of assessments, funds, or contractual rights in 28 connection with the issuance of bonds or notes by the municipality under this section 29 is a first lien on the assessments, funds, or contractual rights pledged in favor of the 30 person to whom the pledge is given, without further action by the municipality. The 31 lien is valid and binding against any other person, with or without notice. 01 (d) Bonds or notes issued under this section must further one or more of the 02 following essential public and governmental purposes: 03 (1) improvement of the reliability of local electrical systems; 04 (2) reduction of energy costs; 05 (3) reduction of energy demand on local utilities; 06 (4) reduction of emissions affecting local air quality; 07 (5) economic stimulation and development; 08 (6) enhancement of property values; 09 (7) enhancement of employment opportunities. 10 Sec. 29.55.145. Joint implementation. A municipality may enter into an 11 agreement with 12 (1) a third party to administer a program under AS 29.55.100; 13 (2) one or more municipalities to jointly implement or administer a 14 program under AS 29.55.100; if two or more municipalities jointly implement a 15 program, a single public hearing held jointly by the cooperating municipalities is 16 sufficient to satisfy the requirement of AS 29.55.100(b)(3). 17 Sec. 29.55.150. Prohibited acts. A municipality that establishes a region under 18 AS 29.55.100 may not make the issuance of a permit, license, or other authorization 19 from the municipality to a person who owns property in the region contingent on the 20 person entering into a written contract to repay the financing of an energy 21 improvement project through assessments under AS 29.55.105, or otherwise compel a 22 person who owns property in the region to enter into a written contract to repay the 23 financing of an energy improvement project through assessments under AS 29.55.105. 24 Sec. 29.55.155. Application. AS 29.55.100 - 29.55.165 apply to home rule and 25 general law municipalities. 26 Sec. 29.55.160. Definitions. In AS 29.55.100 - 29.55.165, 27 (1) "mortgage" has the meaning given in AS 13.06.050; 28 (2) "program" means a program established under AS 29.55.100. 29 Sec. 29.55.165. Short title. AS 29.55.100 - 29.55.165 may be cited as the 30 Municipal Property Assessed Clean Energy Act. 31 * Sec. 6. This Act takes effect immediately under AS 01.10.070(c).