Legislature(2017 - 2018)SENATE FINANCE 532
02/06/2017 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB30 | |
| SB39 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 30 | TELECONFERENCED | |
| + | SB 39 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE BILL NO. 39
"An Act adopting the Municipal Property Assessed Clean
Energy Act; authorizing municipalities to establish
programs to impose assessments for energy improvements
in regions designated by municipalities; imposing
fees; and providing for an effective date."
9:40:29 AM
Co-Chair MacKinnon read the title of the bill.
9:40:58 AM
SENATOR JOHN COGHILL, SPONSOR, gave a high-level overview
of the legislation.
9:42:29 AM
RYNNIEVA MOSS, STAFF, SENATOR COGHILL, discussed the
Sectional Analysis (copy on file):
Sec. 1. Adds C-PACE financing to powers of Home Rule
municipalities.
Sec. 2. Adds C-PACE financing to powers of First Class
Boroughs.
Sec. 3. Adds C-PACE financing to powers of Second
Class Boroughs on a non-areawide basis.
Sec. 4. Adds C-PACE financing to powers of Second
Class Boroughs on an areawide basis.
Sec. 5. Creates a new chapter (Chapter 55) of law
under Title 29 - Municipal Government which
establishes the Municipal Property Assessed Clean
Energy Act, sets the requirements for establishing the
program:
(b)(1) Adopt a resolution of intent with
findings, intent, description of eligibility of
property owners and projects, repayment, third-
party financing, municipal debt servicing
procedures for third-party financing.
(2) Provide a notice of the report regarding
assessment program with location of the report,
time and place of public hearing, name of local
administrator of program, and name of the
assessor.
(3) Hold a public hearing taking public comment.
(4) Adopt an ordinance establishing the program
and the terms of the program.
(c) A municipality may hire a program
director or contract for professional
services to administer the program.
(d) A municipality may set an application
fee, an interest rate, or a combination of
both to offset costs of administrating the
program.
Sec. 29.55.105. (a) Allows for an assessment to
be imposed to repay the financing of qualified
projects on commercial real property in the
municipality that adopts the program.
(b) All parties to the loan must have a
written contract.
(c) Identifies qualifying costs.
(d) Qualified projects do not include
undeveloped lots or lots undergoing
development at the time of assessment or the
purchase of products or devises that are not
a permanent part of the property.
(e) Provides that a municipality can create
programs in more than one region of the
municipality.
Sec. 29.55.110. To create a program a
municipality must prepare a report with the
following items:
(a)
(1) A map showing the boundaries of each
region of the municipality in the program.
(2) A form for written contracts between
municipality and property owner.
(3) A form for written contracts between the
municipality and third-party financers.
(4) A description of qualified projects.
(5) A plan ensuring third-party financing
sources(s) and, if applicable, raising
capital for municipal funding (such as
bonding).
(6) Setting perimeters for issuance of
bonds.
(7) Justifying the period of assessment.
(8) Description of application process and
eligibility for funding.
(9) Solvency requirements for applicant.
(10) Process municipality will use to assess
the property and collect assessments.
(11) Method of notice to mortgage holder
required for participation.
(12) Method of review by third party.
(13) Description of marketing and
participant education provided by the
municipality.
(14) Description of quality assurance and
antifraud measures.
(b) The report will be made available on the
Internet website of the municipality and at
the primary administrative office of the
municipality.
Sec. 29.55.115. Requires the municipality to give
30-day notice to any mortgage holder on the
property and obtain written consent from them to
enter into a written contract with the property
owner.
Sec. 29.55.120. Requires the property owner to
hire an independent third party to prepare:
(1)
(A) a review of the baseline
conditions, savings;
(B) outline the projected reduction in
energy costs, energy consumption or
demand, or a reduction in emissions
affecting local air quality; and
(2) verification of completion of project.
Sec. 29.55.125. Allows property owner to purchase
equipment and materials directly; and contract
directly for services.
Sec. 29.55.130. Requires the municipality to
record in the appropriate recording district
details of a C-PACE assessment.
Sec. 29.55.135.
(a) C-PACE assessments are paramount to all
other liens except municipal tax liens and
other special assessments.
(b) Assessment liens run with the property
and remaining balances are not eliminated by
foreclosure.
(c) Penalties and interest can be added to
delinquent installments.
(d) Allows municipalities to recover costs
and expenses of a lawsuit to collect
delinquent PACE assessments.
Sec. 29.55.140. Allows a municipality to issue
bonds or notes to finance PACE projects.
Sec. 29.55.145. Allows a municipality to enter
into an agreement with a third party or one or
more municipalities to administer a C-PACE
program.
Sec. 29.55.150. A municipality may not coerce a
property owner by making the issuance of a
permit, license, or other authorizations from the
municipality contingent on that property owner
entering into a PACE contract.
Sec. 29.55.155. Applicability section.
Sec. 29.55.160. Definitions.
Sec. 29.55.165. Short title.
Sec. 6. Immediate effective date.
Co-Chair MacKinnon remarked that the current version of the
bill was version J.
Senator Micciche looked at 29.55.150, and noted that a
municipality could only use it as a "carrot and not as a
stick" on other municipal processes. He asked that the
issue be addressed. Ms. Moss asked for a repeat of the
concern.
9:47:12 AM
Senator Micciche looked at page 3, Section 29.55.150.
Co-Chair MacKinnon wondered if Senator Micciche was
referring to the Sectional Analysis. Senator Micciche
replied in the affirmative.
Co-Chair MacKinnon queried the page number of the bill.
Ms. Moss explained that the issue was on page 10, line 7.
She stated that it was a coercive clause that outlined that
a municipality may not issue a permit, license, or other
authorization to a person on the condition that they enter
into the PACE program.
Senator Dunleavy wondered if there were any anticipated
costs to the state. Ms. Moss replied in the negative. She
noted that page 7, line 16, which stated that if there was
a mortgage on the property the mortgage holder must sign
off on the loan as they were waiving some of their rights
for collection.
Senator von Imhof wondered whether the act could create a
fund that could be comingled with other sources of money
other than bond money such as federal or private grant
money. Ms. Moss replied in the affirmative, and declared
that there were federal loan and grant programs. She stated
that there was a speaker from the Alaska Energy Association
(AEA) who would address loans and grants available from the
USDA and rural utilities programs that had zero interest
and other programs at approximately 3 percent interest.
Senator von Imhof wondered whether the program could be
comingled with municipal bond money for one program; or
were there separate programs that a homeowner could use on
each source of funds. Ms. Moss deferred to AEA.
Co-Chair MacKinnon asked whether municipalities could
access the State Municipal Bond to provide similar loans.
Ms. Moss replied in the affirmative.
Co-Chair MacKinnon queried a requirement that the
applicants have a good credit rating. Ms. Moss responded
that she assumed that would be a requirement. She stated
that the banks required good credit.
Co-Chair MacKinnon announced that she wanted clarification
from AEA as to how potential borrowers met a credit
standard. She wondered whether there could be a
manipulation to a construction loan to someone who would
not otherwise qualify. Ms. Moss replied that the
municipality would create the rules for the loans.
9:51:46 AM
AT EASE
9:54:25 AM
RECONVENED
9:54:29 AM
Co-Chair MacKinnon noted that there was a similar bill in
the previous session, which included a letter dated March
16, 2015. She wondered if there was a letter from the
Alaska Bankers Association on the current legislation. Ms.
Moss replied that there was not yet a letter, but they had
met the week prior and anticipated sending a new letter.
Senator Dunleavy wondered whether the bill put an existing
lienholder in a lower position. Ms. Moss replied in the
affirmative. She looked at page 7, line 16, which noted
that the mortgage holder was required to approve the loan
before the loan was issued. The value of the investment of
the loan-held property would increase.
Co-Chair MacKinnon felt that the issue may speak to the
credit worthiness issue. She remarked that the remaining
consideration would be related to the maximum dollar value
of a loan. Ms. Moss looked at page 7, line 3, and noted
that there had been appropriate ratio between the amount of
the assessment and the assessed value of the property.
Co-Chair MacKinnon queried an appropriate ratio, and
wondered if that was approved by the local municipality.
Ms. Moss replied that it was approved by the municipality.
Co-Chair MacKinnon felt that there should be work with the
Alaska Energy Authority (AEA) to streamline some best
practices, rather than a variety of best credit practices
adopted individually by multiple municipalities.
9:58:22 AM
GENE THERRIAULT, DEPUTY DIRECTOR, STATEWIDE ENERGY POLICY
DEVELOPMENT, ALASKA ENERGY AUTHORITY, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, introduced
himself.
SEAN SKALING, DEPUTY DIRECTOR, ALTERNATIVE ENERGY AND
ENERGY EFFICIENCY, ALASKA ENERGY AUTHORITY, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT (via
teleconference), discussed the presentation, Commercial
Property Assessed Clean Energy (C-PACE)" (copy on file).
Mr. Skaling addressed slide 2, "Commercial Property
Assessed Clean Energy":
C-PACE is a financing mechanism for cost-effective
energy improvements to commercial building.
Energy improvement loans are repaid through a
separate, voluntary line on the property tax bill.
Mr. Skaling looked at slide 3, "C-PACE Scenario." He
remarked that AEA had provided partial reimbursement for
commercial energy audits to commercial building owners, and
many took advantage of that program. He stated that the
scenario was typical of the businesses that received an
energy audit.
10:03:27 AM
Senator Micciche stressed that the four-year payback
challenged the cash flows of a commercial property owner
and provided an appropriate ratio between the amount of the
assessment and the assessed value of the property. He
asserted that the bill did not define an appropriate ratio.
He queried a definition of an appropriate ratio. Mr.
Skaling replied that the typical investments in PACE
programs in the country were all cost-effective measures.
The energy cost savings would pay back the loan period.
Co-Chair MacKinnon stressed that Senator Micciche's
comments were a concern for the committee.
10:05:07 AM
Mr. Skaling looked at slide 4, "How C-PACE Works":
Voluntary
Long-term financing
Attractive loan terms
Less Risk
Positive cash flow
Seamless transfer if building sold
Repayment attached property
Mr. Skaling addressed slide 5, "C-PACE Eligible
Improvements":
Energy efficiency
Heating/Cooling system
Lighting
Controls
Building envelope/insulation
Motors/pumps
Mr. Skaling addressed slide 6, "C-PACE Eligible
Improvements":
Alternative energy
Heat pumps
Solar
Fuel switching with efficiency
Mr. Skaling looked at slide 7, "Cash Flow from Energy
Improvements." He explained that the green was the energy
cost that the building owner was paying. He noted the
energy efficiency improvements, and noted a roughly 30
percent savings in the energy costs of the building. He
noted that, through the savings, a loan could be repaid as
long as the loan was stretched out long enough to provide
positive cash flow in the yellow area. He explained that
they were trying to achieve a loan repayment that was cash-
flow positive after the improvements.
Mr. Skaling highlighted slide 8, "PACE: How Loan is
Repaid." The slide showed how the program functioned. He
noted the property owner in the middle. The property owner
made improvements to the building, therefore hiring the
supplier community. The funding was made by the investors,
banks, or financial institutions. The property owner paid
back the loans through a voluntary line on the property tax
payment to the city or local government, which then paid
the investor.
Mr. Skaling addressed slide 9, "33 States Enabled PACE." He
stated that Alaska's PACE program was modeled after Texas,
which had continued success. He stated that Texas had a
program called, "PACE in A Box" which helped Texas
communities to quickly establish uniformed programs between
communities.
Co-Chair MacKinnon wondered which states originated the
program. Mr. Skaling deferred to Mr. Therriault.
Mr. Therriault agreed to provide that information.
10:11:39 AM
Co-Chair MacKinnon wanted to know best practices on whether
the program was misused by commercial buildings in
depressed areas. She queried the unintentional consequences
of the program. She wondered if the bill could be improved.
Mr. Therriault replied that the first PACE program was
established in California in 2008. He stated that there was
advice from the nationwide group, PACE Nation, who tried to
pull information and education from all the involved states
to determine the best practices. He felt that the abuse
would drive default rates, but the default rates were less
than one percent.
Senator von Imhof wondered whether there were any programs
that were rescinded. Mr. Therriault replied that was not
aware of any programs, but agreed to provide information.
He stated that there were some initiated programs that did
not see any uptake, and those programs were amended.
Senator von Imhof noted that Texas had requested uniform
rules to apply to all the municipalities, but there would
be flexibility in each municipality under the legislation.
She queried a better best practice. Mr. Therriault replied
that the language was adopted straight from the Texas
statute. The uniformity was related to the community's
establishment of the program, and how it communicated with
banks and businesses. It also outlined a broad framework of
the interworking of the program.
10:16:30 AM
Senator von Imhof assumed that there would be an evaluation
of the loan-to-value, debt-to-equity ratio, ability to pay
credit, etc. She stressed that there would be an assumption
that the municipality had done its own due diligence in
providing the loan. She wondered if the municipality would
be in a second position. Mr. Therriault replied in the
affirmative. The PACE repayment obligation was an
assessment on the tax bill. All property tax and
assessments were superior liens to mortgages.
Senator von Imhof surmised that no signature meant no deal.
Mr. Therriault agreed.
Senator Micciche noted that line 2 said "obtain written
consent from the holder of a mortgage lien on the
property." He noted that there could be two lenders on one
piece of property, and the ratio could be satisfied by one
lender. He wondered if there should be clarification that
each holder of a mortgage must approve. He felt that it
could put the primary lender as a secondary payee, and they
may increase the loan with a secondary lender. He wanted to
ensure than each mortgage holder have approval.
Co-Chair MacKinnon encouraged Senator Micciche to
communicate his concerns with the sponsor of the bill.
Senator Micciche understood that there was recommended
ratio recommended by the PACE program. He stressed that
there were energy policies that were often based on hope or
political rhetoric rather than established science on the
proven practices to improve efficiencies.
Co-Chair MacKinnon stressed that the case previously made
sense because of the previous high energy costs. She
stressed that Fairbanks had air quality issues, whether the
prices were high or not. She stressed that the program
could benefit the Interior for other reasons than costs.
She wondered how active the programs were in the country
now that energy prices were decreased.
10:21:19 AM
Senator Olson wondered how the communities who were
suffering with a debt load would take advantage of the
program. He remarked that Galena was facing financial
strain, and wondered whether that community could take
advantage of the PACE program. Mr. Therriault replied that
the program would not be available in Galena. He explained
that the legislation allowed for a local government that
levied a property tax to use the bill to collect to repay a
PACE loan. The statute would apply across the state, but
only be available to those municipalities that levied a
property tax.
Senator Olson wondered if a community with great strain
would be able to use the program. Mr. Therriault responded
that the mechanism allowed for the community to use the
existing relationship with the property owner to collect a
PACE.
Co-Chair MacKinnon noted that there were approximately 11
or 12 of the 33 states did not have programs established,
but had passed enabled legislation. She noted that there
were even more. She wondered if the comparison to Texas
only showed one program. Mr. Therriault replied that there
were 12 municipalities in Texas who had initiated the
program under the refresh of the program.
Co-Chair MacKinnon surmised that there were many states in
the starting stages of the program.
10:26:07 AM
Mr. Skaling looked at slide 10, "Time to Add Alaska to the
Map." He stressed that there was no cost to the state and
the program was voluntary.
Mr. Skaling discussed slide 11, "C-PACE is a Win-Win-Win":
Property owners
Lenders
Contractor, vendors
Energy auditors
Alaska economy
Mr. Skaling highlighted slide 12, "Easy Win for Alaska":
Fully vetted last session
Strong support
Completely voluntary
No cost to state
Mr. Therriault addressed slide 13, "Financing Options":
Bank loan
Muni revenue bond
Energy Efficiency and Conservation Loan Program
(EECLP)
Rural Energy Savings Program (RESP)
Other federal sources
10:33:24 AM
Senator Micciche remarked that he would examine other
legislation, and compare the other programs in the country.
Co-Chair MacKinnon noted that the bill would benefit
private sector ownership. Mr. Therriault agreed.
Co-Chair MacKinnon announced that school districts could
not qualify, because they were not paying property taxes.
Mr. Therriault agreed.
Co-Chair MacKinnon wondered whether school districts or
other government owned buildings could qualify for the
Energy Efficiency and Conservation Loan Program or for the
Rural Energy Savings program. Mr. Therriault replied that
he was not sure. He explained that the funds were available
to help with efficiency.
Co-Chair MacKinnon noted that there were schools in climate
regions that were suffering from lack of weatherization or
energy efficient opportunities. She was curious about
programs that schools, or other government organizations
could use to lower the energy use and consumption.
Senator von Imhof wondered who paid for and conducted the
energy audits. Mr. Therriault replied that the customer
would pay for that expense, but it could be rolled into the
financing.
Senator Olson stressed that the auditors were the general
raters in the winterization program, so those people could
be qualified to conduct the assessment. Mr. Therriault
agreed.
Mr. Skaling furthered that the commercial properties
required an additional certification for the auditors.
10:37:34 AM
CHRIS ROSE, EXECUTIVE DIRECTOR, RENEWABLE ENERGY ALASKA
PROJECT, SUTTON (via teleconference), spoke in support of
the bill.
Co-Chair MacKinnon wondered whether they both served on the
Alaska Energy Advisory. Mr. Rose replied in the
affirmative.
BRITTANY SMART, FAIRBANKS NORTH STAR BOROUGH, FAIRBANKS
(via teleconference), testified in support of the bill.
Co-Chair MacKinnon CLOSED public testimony.
Vice-Chair Bishop discussed the fiscal note.
Co-Chair MacKinnon announced that amendments were due by
5pm the following day. She discussed the following day's
schedule.
SB 39 was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 30 PPT to SFIN 02.06.17.pdf |
SFIN 2/6/2017 9:00:00 AM |
SB 30 |
| SB 39 C-PACE Senate Finance 02.06.17.pdf |
SFIN 2/6/2017 9:00:00 AM |
SB 39 |
| SB 39 Sectional for CRA CS.pdf |
SFIN 2/6/2017 9:00:00 AM |
SB 39 |