Title
Recommendation to Authorize Participation in Open Property Assessed Clean Energy (PACE), HERO, Ygrene, Figtree and E3 to Operate a Property Assessed Clean Energy Program and Authorize the Interim City Manager to Execute the Member Acknowledgement Forms for Each New Property Assessed Clean Energy Provider;
Adoption of Resolution Consenting to the Inclusion of Properties within the Territory of the City in the California Statewide Communities Development Authority (CSCDA) Open PACE Programs; Authorizing the California Statewide Communities Development Authority to Accept Applications from Property Owners, Conduct Contractual Assessment Proceedings and Levy Contractual Assessments within the Territory of the City; and Authorizing Related Actions;
Adoption of Resolution Consenting to Inclusion of Properties within the City’s Jurisdiction in the California HERO Program to Finance Distributed Generation Renewable Energy Sources, Energy and Water Efficiency Improvements and Electric Vehicle Charging Infrastructure and Approving the Amendment to a Certain Joint Powers Agreement Related Thereto;
Adoption of Resolution Consenting to Inclusion of Properties within the City’s Jurisdiction in the Golden State Finance Authority Community Facilities District to Finance Renewable Energy Improvements, Energy Efficiency and Water Conservation Improvements and Other Authorized Improvements and Approving Associate Membership in the Joint Exercise of Powers Authority Related Thereto;
Adoption of Resolution Joining the Figtree Pace Program; Authorizing the California Enterprise Development Authority to Conduct Contractual Assessment Proceedings and Levy Contractual Assessments within the Territory of the City of Alameda; and Authorizing Related Actions; and
Adoption of Resolution Consenting to the Inclusion of Properties within the Territory of the City in the California Municipal Finance Authority Open PACE Programs; Authorizing the California Municipal Finance Authority to Accept Applications from Property Owners, Conduct Contractual Assessment Proceedings and Levy Contractual Assessments within the Territory of the City; and Authorizing Related Actions. (Public Works 274.1)
Body
To: Honorable Mayor and Members of the City Council
From: David L. Rudat, Interim City Manager
EXECUTIVE SUMMARY
Property Assessed Clean Energy (PACE) programs offer financing for energy efficiency, water efficiency, and seismic retrofits for property owners. Property owners repay the costs at fixed interest rates through a levy on their property tax. The City has only authorized one PACE program in Alameda out of ten that operate in the Bay Area. Different PACE programs offer different services and rates. Additionally, many contractors only offer financing through one or two of those PACE programs. As a result, restricting authorization to only one PACE program limits the options for Alamedans wishing to finance sustainable retrofits. As a result of the benefits and recent steps taken by the California State Legislature to mitigate risks, staff recommends authorizing all PACE programs that operate in the Bay Area
BACKGROUND
PACE programs are intended to allow property owners to finance energy and water efficiency improvements through annual installments on their property tax bill. An alternative to traditional financing methods, PACE programs may be more affordable and accessible to property owners. Property owners’ who wish to participate in PACE agree to repay the money through the voluntary contractual assessment collected with property taxes. The voluntary contractual assessments are levied by the PACE program provider and collected in annual installments through the applicable county secured property tax bill. In 2010, the City authorized one PACE program, California FIRST, to operate in Alameda. Since that time, the City has not authorized any additional PACE programs.
The use of PACE programs is contractor driven. For example, if a homeowner wishes to make an energy efficiency investment in the owner’s home, the contractor the owner works with will present an array of financing options. Those options may include PACE financing, through one or more PACE programs, in addition to traditional financing options. The contractor can only offer PACE financing for PACE programs that the contractor is authorized to offer. If the property owner wishes to finance the project through a PACE provider, such as California FIRST, the PACE program representative is required to contact the property owner by phone and ensure that the property owner understands the terms of the financing. Upon the PACE program representative’s approval, the property owner can then sign a contract using this PACE financing option with the contractor.
Each PACE program has an associated financing organization, administrator, and Joint Powers Authority (JPA). For most PACE programs, the financing organization and administrator are the same. Each PACE program is governed by its associated JPA. For a local government to authorize a particular PACE program to be used in its jurisdiction, that local government must join the JPA associated with that PACE program. For example, when the City of Alameda authorized California FIRST in 2010, the City Council passed a resolution to join the California Statewide Communities Development Authority (CSCDA), which is the JPA governing California FIRST. Joining these JPAs requires no subsequent participation after the City has adopted a resolution to authorize the relevant PACE program.
In the past, concerns were raised that PACE lacked adequate consumer protection and adequately rigorous and standardized underwriting. Two recent bills from the California legislature, both of which took effect on January 1, 2018, address these concerns. SB 242 (Skinner) institutes new consumer protections, including new standards on how contractors can market the financing to homeowners and an expanded “right to cancel” for property owners. AB 1284 (Dababneh) strengthens PACE underwriting, regulates PACE at the state level under the Department of Business Oversight, and enforces compliance with all PACE laws by PACE administrators and individual contractors.
DISCUSSION
Staff recommends authorizing nine new PACE providers to operate in the City of Alameda. By doing so, City of Alameda would join our neighbors in Hayward, Oakland, Berkeley, Fremont, San Francisco, and San Leandro, who have chosen to authorize all of the PACE programs recommended in this staff report.
Authorizing more PACE providers will:
1. Increase choice for Alamedans as PACE offers 100% financing for eligible improvements, a longer repayment period of up to twenty years, and the reliability of pre-approved contractors. In addition, each PACE program offers different terms and covers different kinds of upgrades, so authorizing all of them will increase the number of choices available to Alamedans.
2. Increase competition between PACE providers in City of Alameda and lower Alamedans costs. Recent trends in California indicate that authorizing multiple PACE programs results in contractors charging lower rates, easing the financial burden on property owners wishing to participate in the program.
3. Increase the number of energy efficiency investments by property owners, thereby advancing the greenhouse gas reduction goals of the City’s Climate Action Plan.
At this time, Alameda has one authorized PACE provider, California FIRST. Staff recommends authorizing nine new PACE providers:
• HERO, sponsored by the Western Riverside Council of Governments (WRCOG), for Commercial and Residential properties;
• Ygrene, sponsored by Golden State Finance Authority, for Commercial and Residential properties;
• Figtree, sponsored by California Enterprise Development Authority, for Commercial properties;
• E3, sponsored by California Municipal Finance Authority, for Residential properties; and
• Open PACE, which is comprised of a suite of five PACE programs and is sponsored by (CSCDA), for Commercial and Residential properties.
The risks to the City are minimal since its participation in the PACE process is limited to authorizing PACE programs to operate in Alameda. While mitigated through State legislation, as discussed above, there are risks to property owners who default on their PACE assessments.
The City can further minimize its own and property owners’ risk by signing the Member Acknowledgement Forms (Exhibit 1) in order to let PACE providers know that the City recognizes the Regional Collaborative Services Agreement (RCSA) created by ABAG. This RCSA defines standards and best practices that all PACE providers who sign the Agreement must follow. If a PACE provider is found to be out of compliance with the RCSA, then ABAG can remove that provider from its list of approved PACE providers, and the City can subsequently terminate its authorization to operate in the City’s jurisdiction. Currently, every PACE provider for the Bay Area has signed on to the RCSA.
If authorization of additional PACE providers is not approved, Alameda property owners will continue to have fewer choices for financing sustainability-oriented retrofits than their neighbors in Oakland, Berkeley, San Leandro, Hayward, Fremont, and San Francisco.
FINANCIAL IMPACT
The potential benefits of PACE financing over other options include 100% financing for eligible improvements, a longer repayment period of up to twenty years, and the reliability of pre-approved contractors. The potential risk of PACE financing for property owners is that it increases the debts of property owners and could lead to foreclosure in the case of default. All financial responsibility is through the property owner and the PACE provider. There is no impact to the General Fund.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action does not affect the Municipal Code.
ENVIRONMENTAL REVIEW
This action has no expected negative environmental impacts.
RECOMMENDATION
Adopt five resolutions authorizing Open PACE, HERO, Ygrene, Figtree and E3 to operate a Property Assessed Clean Energy Programs within the City of Alameda; and
Authorize the Interim City Manager to execute the Member Acknowledgeable Forms for each new Property Assessed Clean Energy provider.
Respectfully submitted,
Liam Garland, Public Works Director
By,
Patrick Pelegri-O’Day, Climate Action Coordinator
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibit:
1. Acknowledgement Forms and Agreement