HomeMy WebLinkAboutAgenda Report - October 18, 2017 C-05TM
CITY OF LODI
COUNCIL COMMUNICATION
AGENDA ITEM
c-5
AGENDA TITLE: Adopt Resolution Establishing Minimum Standards for Property Assessed Clean
Energy (PACE) Programs within the City of Lodi
MEETING DATE: October 18, 2017
PREPARED BY: Business Development Manager
RECOMMENDED ACTION Adopt a resolution establishing minimum standards for Property
Assessed Clean Energy (PACE) programs within the City of Lodi.
BACKGROUND INFORMATION: PACE programs provide property owners a long term financing
option to fund property improvements, including energy and water
efficiency, renewable energy generation, the installation of electric
vehicle charging infrastructure, and seismic strengthening, with repayment through a special assessment
on the property tax bill. PACE financing programs were established under the legislative authority of two
separate California PACE laws; Assembly Bill 811 (2008) and Senate Bill 555 (2011).
Assembly Bill 811 PACE Contractual Assessment Program:
Assembly Bill (AB) 811 added Chapter 29 to the Improvement Bond Act of 1911 (Division 7 of the
California Streets and Highways Code) to authorize cities and counties to establish voluntary contractual
assessment programs for the purpose of financing private property improvements that promote the
generation of renewable energy, energy and water efficiency, the installation of electric vehicle charging
infrastructure, and seismic strengthening. Individual properties within the City of Lodi can be annexed into
an AB 811 program and be subject to the property tax assessment that is imposed to repay project
financing only if the Council adopts a resolution consenting to the inclusion of parcels in the incorporated
limits of the City of Lodi within the program. The vast majority of PACE programs are authorized through
AB 811.
Senate Bill 555 PACE Community Facilities District:
Senate Bill (SB) 555 amended the Mello -Roos Community Facilities Act, set forth in sections 53311
through 53368.3 of the California Government Code (the Act), to add sections 53313.5(1) and 53328.1(a)
to allow for the creation of Community Facilities Districts (CFD) for the purpose of financing or refinancing
the acquisition, installation, and improvement of energy efficiency, water conservation, renewable energy,
and electric vehicle charging improvements permanently affixed to private or publicly -owned real
property. Individual properties can be annexed into a CFD and be subject to the special tax that is
imposed to repay project financing only if the City Council adopts a resolution consenting to the inclusion
of parcels in the incorporated limits of the City of Lodi within the CFD, and the owner of the individual
property provides its written approval to annex its property into the CFD.
APPROVED:
Lit `1,viky
Stephen Schwabauer, City Manager
Adopt Resolution Establishing Minimum Standards for Property Assessed Clean Energy (PACE) Programs within the City of
Lodi
October 18, 2017
Page 2 of 2
PACE Programs in Lodi
To -date, the Council has authorized participation in three PACE programs, including the California HERO
PACE program (2014), the CaliforniaFIRST PACE program (2014), and the California Statewide
Communities Development Authority Open PACE program (2015). The California HERO PACE
program's online reporting tool indicates the program has financed improvements for 213 Lodi homes,
totaling more than $4.5 million in project funding. As of the time of writing this report, program
participation statistics have not been provided by the other two PACE programs operators.
PACE Concerns
Staff is aware of concerns with the PACE program:
Superior lien position: The Federal Housing Finance Authority has prohibited Fannie Mae and Freddie
Mac from purchasing loans with PACE liens which take precedence over the first mortgage, citing
concerns about taxpayer risk. Some in the real estate community have expressed similar concern that a
superior lien may hinder a property owner's ability to sell or refinance the property. A couple of California
jurisdictions, including Kern County and the City of Bakersfield, recently decided to rescind all existing
authorizing resolutions and cease participation in the PACE program. In order to ease these concerns, a
PACE Loss Reserve Program is being administered by the California Alternative Energy and Advanced
Transportation Financing Authority. The $10 million dollar loss reserve program will reimburse the first
mortgage lender for the PACE payments made while in possession of the property during foreclosure.
According to PACE representatives, to date more than 125,000 residential PACE projects have been
completed throughout the State and not a single foreclosure has been initiated by a PACE provider.
Predatory lending: Another concern circulating is the belief PACE providers engage in predatory lending
practices, and there is a lack of oversight for the industry. In response to this, Assembly Bill 2693, known
as the "PACE Preservation and Consumer Protections Act", was signed into law in September 2016. The
bill created an industry -wide framework for PACE financing loans to promote standardized disclosures
and protections for consumers.
Minimum Standards
San Joaquin County staff reported to the Board of Supervisors in August 2017 that five of the seven cities
within San Joaquin County have opted to allow PACE programs within their jurisdictions, including: Lodi,
Manteca, Ripon, Stockton, and Tracy. County staff also reported that since first appearing on the County
tax roll in 2015-16, the PACE programs do not appear to be affecting assessment payment performance,
with payment results reflecting a lower delinquency rate on PACE assessments than the countywide
delinquency rate. The County identified specific standards for PACE programs seeking approval to
operate within the unincorporated County. Although City staff is not aware of any specific complications
arising from PACE financing programs currently offered within the City, staff recommends the Council
adopt a resolution establishing similar standards for PACE programs within the City, including:
PACE Program Contractor Standards: PACE providers shall ensure participating contractors have the
appropriate license from the California State License Board and shall only make true claims about
performance and/or savings associated with projects.
Financing: PACE providers shall ensure property owners are aware their tax assessments will increase
by the amount due for loans under this program.
PACE Loss Reserve Program: PACE providers operating within the City of Lodi shall participate in the
State of California's PACE Loss Reserve Program.
Adopt Resolution Establishing Minimum Standards for Property Assessed Clean Energy (PACE) Programs within the City of
Lodi
October 18, 2017
Page 2 of 2
Local Workforce Development and Training: PACE providers shall develop and implement a program
focused on getting local contractors trained and certified to participate in the PACE program.
FISCAL IMPACT:
There is no financial impact to the City of Lodi. Property owners who
elect to participate in PACE financing programs are solely
responsible for repayment of the loans through a special
assessment on their property tax bill.
FUNDING AVAILABLE: Not applicable.
Business Development Manager
RESOLUTION NO. 2017-195
A RESOLUTION OF THE LODI CITY COUNCIL
ESTABLISHING MINIMUM STANDARDS FOR
PROPERTY ASSESSED CLEAN ENERGY (PACE)
PROGRAMS WITHIN THE CITY OF LODI
WHEREAS, Property Assessed Clean Energy (PACE) financing programs provide
property owners a long-term financing option to fund property improvements, including energy
and water efficiency, renewable energy generation, the installation of electric vehicle charging
infrastructure and seismic strengthening, with repayment through a special assessment on the
property tax bill; and
WHEREAS, Assembly Bill 811 (2008) added Chapter 29 to the Improvement Bond Act
of 1911 (Division 7 of the California Streets and Highways Code) to authorize cities and
counties to establish voluntary contractual assessment programs for the purpose of financing
private property improvements that promote the generation of renewable energy, energy and
water efficiency, the installation of electric vehicle charging infrastructure, and seismic
strengthening; and
WHEREAS, Senate Bill (SB) 555 (2011) amended the Mello -Roos Community Facilities
Act, set forth in sections 53311 through 53368.3 of the California Government Code (the Act),
to add sections 53313.5(1) and 53328.1(a) to allow for the creation of Community Facilities
Districts (CFD) for the purpose of financing or refinancing the acquisition, installation, and
improvement of energy efficiency, water conservation, renewable energy, and electric vehicle
charging improvements permanently affixed to private or publicly -owned real property; and
WHEREAS, individual properties within the City of Lodi can be annexed into an AB 811
program and be subject to the property tax assessment that is imposed to repay project
financing only if the Council adopts a resolution consenting to the inclusion of parcels in the
incorporated limits of the City of Lodi within the program; and
WHEREAS, individual properties can be annexed into a CFD and be subject to the
special tax that is imposed to repay project financing only if the City Council adopts a resolution
consenting to the inclusion of parcels in the incorporated limits of the City of Lodi within the
CFD, and the owner of the individual property provides its written approval to annex its property
into the CFD; and
WHEREAS, to -date, the Council has authorized participation in three PACE programs,
including the California HERO PACE program (2014), the CaliforniaFIRST PACE program
(2014), and the California Statewide Communities Development Authority Open PACE program
(2015); and
WHEREAS, staff has become aware of concerns with the PACE program, including 1) a
concern that a superior lien may hinder a property owner's ability to sell or refinance the
property, and 2) a concern PACE providers may engage in predatory lending practices and with
a lack of industry oversight; and
WHEREAS, staff is also aware of efforts by the State to address these concerns,
including the establishment of the PACE Loss Reserve Program, which is administered by the
California Alternative Energy and Advanced Transportation Financing Authority and which
would reimburse a first mortgage lender for the PACE payments made while in possession of
the property in the case of foreclosure; and
WHEREAS, in 2016 the State legislature also passed Assembly Bill 2693, the "PACE
Preservation and Consumer Protections Act," creating an industry -wide framework for PACE
financing loans to promote standardized disclosures and protections for consumers; and
WHEREAS, San Joaquin County reported in August 2017 five of the seven cities within
San Joaquin County have opted to allow PACE programs within their jurisdictions, including
Lodi, Manteca, Ripon, Stockton and Tracy; and PACE programs do not appear to be affecting
assessment payment performance, with payment results reflecting a lower delinquency rate on
PACE assessments than the countywide delinquency rate; and
WHEREAS, San Joaquin County has identified specific standards for PACE programs
seeking approval to operate within the unincorporated County and, while City staff is not aware
of any specific complications arising from PACE financing programs currently offered within the
City, out of an abundance of caution, staff recommends the Council adopt a resolution
establishing similar standards for PACE programs within the City, as follows:
PACE Program Contractor Standards: PACE providers shall ensure participating
contractors have the appropriate license from the California State License Board and
shall only make true claims about performance and/or savings associated with projects.
Financing: PACE providers shall ensure property owners are aware their tax
assessments will increase by the amount due for loans under this program.
PACE Loss Reserve Program: PACE providers operating within the City of Lodi shall
participate in the State of California's PACE Loss Reserve Program.
Local Workforce Development and Training: PACE providers shall develop and
implement a program focused on getting local contractors trained and certified to
participate in the PACE program.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council does hereby adopt
this Resolution establishing minimum standards for Property Assessed Clean Energy (PACE)
programs within the City of Lodi, as outlined above.
Dated: October 18, 2017
I hereby certify that Resolution No. 2017-195 was passed and adopted by the City
Council of the City of Lodi in a regular meeting held October 18, 2017, by the following vote:
AYES: COUNCIL MEMBERS — Chandler, Johnson, Mounce, Nakanishi, and
Mayor Kuehne
NOES: COUNCIL MEMBERS — None
ABSENT: COUNCIL MEMBERS — None
ABSTAIN: COUNCIL MEMBERS — None
NNIFE
ity Clerk
2017-195
M. FERRAIOLO