Legislature(2015 - 2016)BELTZ 105 (TSBldg)
03/12/2015 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
|---|---|
| Start | |
| SB19 | |
| SB56 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 19 | TELECONFERENCED | |
| *+ | SB 56 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
SB 56-MUNI ENERGY IMPROVEMNT ASSESSMNTS/BONDS
3:39:32 PM
CHAIR BISHOP reconvened the meeting and announced the
consideration of SB 56.
GENE THERRIAULT, Director, Energy Policy and Outreach, Alaska
Energy Authority (AEA), provided some background for SB 56. He
explained that in 2010 the legislature set a goal of increasing
statewide energy efficiency 15 percent by 2020, and AEA operates
a number of programs that work toward that goal. One is the
commercial facility energy audit program. Through that program,
about 150 audits have been performed and the few building owners
that have used the information have achieved a 30 percent
reduction in their energy use. At this point AEA is trying to
figure out why more owners aren't following through with the
improvements suggested in the audit.
MR. THERRIAULT said that when he became interested in property
assess clean energy (PACE) financing for commercial and
residential properties he learned that initial attempts at this
type of financing ran into difficulties with the federal
secondary loan market. They opposed including residential
properties out of concern that the bank loan would become
secondary to the PACE financing. There appears to be no
opposition to commercial properties and 31 or 32 states across
the country are beginning to take advantage of commercial Pace
financing to do energy efficiency upgrades.
MR. THERRIAULT discussed the importance of providing a level of
uniformity in the statutes to empower local governments to
initiate PACE financing. This will make it easier for lenders to
figure out how to move forward and help the state achieve the
goals intended by PACE financing. He noted that SB 56 is modeled
on Texas legislation that provides protections for banks.
3:44:56 PM
EMILY FORD, Manager, Energy Policy and Outreach, Alaska Energy
Authority (AEA), discussed PACE financing and its benefits.
These programs allow property owners to finance qualifying
energy efficiency improvements through a voluntary assessment on
their property tax bill. Participation is a local option for
municipalities and commercial property owners and mortgage
holder consent is required before applications can be approved.
Improvements can include lighting upgrades, renewable energy,
conversion to natural gas, high-efficiency boilers, and
additional energy efficiency improvements. The repayment
obligation transfers with the sale of the property.
She explained that energy efficiency upgrades are financed with
capital secured by a primary lien on the property, lower-
interest capital, and favorable repayment terms that can be
raised from the private sector. With a longer repayment periods,
the building owner can realize immediate savings while repaying
the debt. Traditional lending sources can be used and in Alaska
it provides consistency with the state energy goals.
Thirty one states have authorized PACE programs after their
state legislature provided the authority for local governments
to establish and operate the program. Municipalities can create
the program and select the financing models and there are many
national resources available to both governments and consumers
including the U.S. Department of Energy, PaceNow.org, and C-
Pace.com.
MS. FORD explained that there are three potential PACE models.
In the local-government driven model either the property
assessment office or a PACE office is used to interface with
commercial property owners and potential lenders. Municipal bond
financing is available for improvement efforts. In the private-
sector driven model there is a third-party administrator under
contract with the local government and private financing is
emphasized. In the hybrid model all potential funding sources
are available for use including bonds, revolving loan funds, and
private capital. Smaller governments can contract with
communities or regional organizations to administer the program.
MS. FORD discussed the provisions in SB 56. It is authorizing
legislation for the 24 local governments that collect property
taxes to choose to create a PACE program and allow commercial
property owners to opt in.
She provided a sectional analysis for SB 56.
Section 1 amends Title 29 by adding a new chapter 49: Municipal
Property Assessed Clean Energy Act.
AS 29.49.020 would allow property tax assessments to be added
for financing of qualified projects on real property. The
improvements may not be made to vacant lots or property
undergoing development at the time of the assessment. The
financing may not be used to purchase temporary products or
anything not permanently fixed to real property.
AS 29.49.030 would require a written contract between the local
government and owner of record of the real property.
3:49:08 PM
CHAIR BISHOP asked if a business that manufactures modular homes
for a North Slope camp could qualify for financing under section
.020.
MR. THERRIAULT replied the manufacturing facility itself could
take advantage of the financing, but not the product they
manufacture.
MS. FORD continued the sectional analysis.
AS 29.49.040 says that a local government may enter into a
contract with a property owner to impose an assessment.
Financing can be provided by the municipality or a third-party.
If third-party financing is used, the municipality, third-party
financer and real property owner must enter into a contract. The
assessment may cover some costs for the commercial property
owner, including permit and lenders fees, administration, and
project development and engineering costs.
AS 29.49.050 states that the municipality's governing body may
designate one or more areas within the municipality's
jurisdiction as a PACE-eligible region.
AS 29.49.060 defines the procedure to create the program. If the
municipality chooses to create a PACE program the governing body
first must adopt a resolution of intent that: 1) shows that
providing the PACE program serves a valid public purpose; 2)
includes a statement the municipality intends to make PACE
available to property owners; 3) includes a description of
qualified projects; 4) describes the boundaries of the region; 5)
describes the available financing for qualified projects; 6)
describes the municipal debt servicing procedures if third-party
financing is used 7) describes how the public can access the
program report required by AS 29.29.070; and 8) identifies
public contacts regarding the collection of the proposed
contractual assessments. Second, the governing body must hold a
public hearing with the opportunity for public comment. Finally,
the governing body must adopt a resolution establishing the
program, including terms consistent with the publicly-available
program report required by AS 29.49.070.
3:51:11 PM
The program can only be amended by resolution. The municipality
may hire and set compensation for an administrator, staff, or
contract for professional services and impose fees to offset the
costs of administering the program.
AS 29.49.070 requires a publicly-available program report that
is available online and at municipal offices that includes: 1) a
map of the program region boundaries; 2) a form contract between
the municipality and the property owner that specifies the terms
of the assessment and any financing; 3) if appropriate a form
contract between the municipalities and the third-party financer
regarding the servicing of the debt through assessments; 4) a
description of qualified projects; 5) a plan for ensuring
sufficient capital; 6) bonds information if appropriate about
the maximum aggregate annual dollar amount for financing, a
method for ranking requests from property owners, and a method
for determining the interest rate and maximum amount of an
assessment; and 7) a method for ensuring the repayment period
does not exceed the useful life of the qualified project; 8) a
description of the application process and eligibility
requirements; 9) a method for ensuring qualified applicants can
demonstrate financial ability to fulfill financial obligations
and verify the applicant is the legal owner of the property, is
current on mortgage and property taxes and is not insolvent or
in bankruptcy; 10) an explanation of the assessment and
collection process; 11) an explanation of the lender notice
requirement provided by AS 29.40.080; 12) an explanation of the
review requirement provided by AS 29.49.090; 12) a description
of the marketing and education services to be provided; 14) a
description of quality assurance and antifraud measures; 15)
collection procedures; and 16) a requirement for an appropriate
ratio between the assessment and property value.
AS 29.49.080 requires notice to a mortgage holder.
AS 29.49.090 requires a third-party baseline energy audit and
projected energy savings. Once the project is complete, the
municipality shall obtain third-party verification that the
project was properly completed and operating as intended.
AS 29.49.100 allows direct acquisition by the owner.
AS 29.49.110 states that the contractual assessment must be
noticed and filed in the real property records.
AS 29.49.210 states that contractual assessments and any
interest or penalties are primary liens on the property. The
exceptions are municipal tax liens and special assessments.
These leans stay with the land and are not eliminated by
foreclosure. Penalties and interest may be added to delinquent
installments and municipalities may recover costs and expenses
to collect a delinquent installment.
3:54:38 PM
AS 29.49.130 allows municipalities to contract with another
governing body of another taxing unit to perform assessments
collections. This is important for small communities that may
not have the capacity to implement a PACE program.
AS 29.49.140 allows municipalities to issue bonds. They may not
be general obligations bonds and must be secured by one or more
of the following: payments of the contractual assessments;
municipal reserves; municipal bond insurance; and any other
funds lawfully available for purposes consistent with this
chapter.
AS 29.49.150 allows for joint implementation. A combination of
municipalities may join to implement the program or contract
with a third party.
AS 29.49.160 discusses prohibited acts. Permits, licenses and
authorizations cannot be made contingent on a commercial
building entering a PACE program.
AS 29.49.900 adds definitions.
AS 29.49.995 adds the short title.
Section 2 establishes an immediate effective date.
CHAIR BISHOP stated he would hold SB 56 in committee.
3:56:12 PM
SENATOR EGAN asked Mr. Therriault if this legislation addresses
the concerns that financial institutions have voiced.
MR. THERRIAULT advised that separating the residential and
commercial components has allowed the commercial PACE financing
to move forward. Concerns about residential PACE financing was
the basis of the Fanny Mae and Freddie Mac lawsuits in a number
of states and jurisdictions because they didn't want their
residential loan to become secondary to the PACE financing. Most
states addressed the problem by separating the two and moving
forward with the commercial component. That has made lenders
more comfortable, particularly if there's the requirement that
the mortgage holder give their consent before the property owner
can participate in the program.
He noted that he began working with the banking association last
fall letting them know AEA was considering the concept and that
it would likely be patterned after the Texas model. He opined
that the banks will be watching to see that the protection stays
in the legislation.
SENATOR HOFFMAN asked how the program will be implemented when
there's a zero fiscal note.
MR. THERRIAULT explained that the implementation and operation
of the program is a local option and the municipalities are
allowed to charge fees to cover the costs.
MS. FORD highlighted that the costs of the audit and third-party
review do not have to be borne by the municipality.
4:00:26 PM
LUKE HOPKINS, Mayor, Fairbanks North Star Borough, Fairbanks,
Alaska, noted that he submitted written testimony in support of
SB 56. He stated that the option of having the owners of
commercial properties use PACE financing for energy improvements
and conversions is well worthwhile and the process is well laid
out.
CHAIR BISHOP closed public testimony.
4:04:08 PM
At ease
4:04:21 PM
MR. THERRIAULT highlighted that this would apply to any
municipality that has property tax powers. He noted that it has
special meaning for Fairbanks because the hope there is to
convert as much of the community as possible from fuel oil to
natural gas. That qualifies as an energy efficient step and is a
tool that would be applicable statewide.
CHAIR BISHOP held SB 56 in committee for further consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 56 PACE Presentation 03 12 15.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 Fiscal Note.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 Request for Hearing and Explanation of Bill.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 Bill Text.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 REAP Support Letter.docx |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 IGU Support Letter.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 FNSB Support Letter.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| CSSB 19 Version H.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 19 |
| CSSB 19 Amendment.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 19 |
| SB 19 Amendment Explanation.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 19 |
| SB 56 ABA Support Letter.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 DEC USDOE Support Letter.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 Doyon Support Letter.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 Hearing Request.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |
| SB 56 Sectional Analysis.pdf |
SCRA 3/12/2015 3:30:00 PM |
SB 56 |