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HomeMy WebLinkAboutMINUTES - 06162015 - D.13RECOMMENDATION(S): 1. ACCEPT this report from the Internal Operations Committee on PACE financing; and, 2. DIRECT the Department of Conservation and Development (DCD) to implement an application process to enable PACE financing providers to apply to operate PACE programs in Contra Costa County. FISCAL IMPACT: Costs incurred by the County to review and process applications from PACE providers will be reimbursed through an application fee. BACKGROUND: Summary California law allows cities, counties, and other authorized public agencies to establish voluntary financing districts to facilitate energy and water efficiency improvements to existing residential and commercial properties. Such financing is commonly referred to as Property Assessed Clean Energy (PACE) financing. Once established, property owners within the boundaries of such a district can opt to borrow funds from the district to make energy efficiency improvements, and repay the funds in installments on their property tax bill. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 06/16/2015 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS Contact: Jason Crapo (925) 674-7722 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: June 16, 2015 David Twa, County Administrator and Clerk of the Board of Supervisors By: , Deputy cc: D.13 To:Board of Supervisors From:INTERNAL OPERATIONS COMMITTEE Date:June 16, 2015 Contra Costa County Subject:Property Assessed Clean Energy (PACE) Financing BACKGROUND: (CONT'D) > Several PACE financing providers have expressed interest in establishing PACE financing districts and offering PACE loans to property owners in Contra Costa County. Such financing districts would not be formed or operated by the County, but the establishment of such financing districts requires a resolution of approval by the Board of Supervisors. The County Treasurer-Tax Collector and County Auditor-Controller would administer collection of assessment payments from property owners through the property tax collection process. PACE financing has the potential to generate both environmental and economic benefits to County residents, and is consistent with County policy objectives to improve energy efficiency and reduce greenhouse gas emissions. However, the extent of these benefits is yet to be determined because PACE financing is relatively new and the degree to which it might be utilized by property owners within the County is unknown. Due to regulatory intervention by the federal government to discourage the use of PACE financing, such programs carry potential risks and costs to the County and to property owners that should be mitigated to the greatest degree possible. On August 14, 2012, the Board of Supervisors referred to the Internal Operations Committee (IOC) an evaluation of establishing PACE districts within the County. The matter was taken up by the IOC in December 2012, but as new information became available regarding legal and federal regulatory issues, Supervisor Mitchoff, who introduced the matter to the Board for study, decided to withdraw her committee referral. The matter was again referred to the IOC on September 9, 2014. The IOC had a lively discussion of the program on November 3, 2014 and requested additional information from staff and PACE Program administrators for future deliberations in March 2015. The IOC received a follow-up report from DCD on March 9, 2015 and, based on the Committee's review, recommends the Board of Supervisors direct DCD to accept applications from entities proposing to form PACE financing districts in Contra Costa County and assess the risks and costs associated with various program proposals in consultation with County Counsel, the County Auditor-Controller and the County Treasurer Tax-Collector. Upon successful completion of such review, PACE financing providers would be required to enter into an Operating Agreement with the County that would establish conditions for operations within the County. The County’s costs of reviewing a PACE program application would be reimbursed by the applicant in the form of an application fee. District Formation and Property Owner Participation State law allows for the formation of either Assessment Districts or Mello-Roos Community Facilities Districts (PACE financing districts) for the purpose of financing energy or water efficiency improvements to existing residential and commercial properties. Once established, these districts would raise capital either through selling bonds or securing financing from banks or other private lenders. This capital would be made available to property owners on a voluntary basis to finance energy efficiency improvements on private property. Once a PACE district is established, property owners within the district’s boundary can voluntarily opt into the district by entering into a contract (known as a “contractual assessment”) with the public agency responsible for administering the district. The contract would not be with the County, but rather with another public agency. For most current PACE programs, the sponsoring public agency is a joint powers authority (JPA), which forms the financing district and is responsible for its administration. In such cases, the County would need to be a member of the JPA in order for the PACE program to operate within the County. By entering into a contractual assessment, a property owner would be able to borrow funds from the PACE district to construct energy or water efficiency improvements. This property assessment would be repaid in installments collected by the County Treasurer-Tax Collector on property tax bills. PACE Has Potential Benefits, but is New and Extent of Benefits is Unknown PACE financing benefits property owners by providing an additional source of capital to fund energy efficiency improvements. Such lending activity also has the potential to produce indirect public benefits that are consistent with County policy objectives. Improved energy efficiency on private property reduces greenhouse gas emissions and the associated negative impacts of climate change, consistent with the County’s Climate Action Plan. Construction of energy and water efficiency improvements on private property also stimulates the local economy, expanding employment and increasing tax revenue for the County. However, the extent to which PACE financing may generate public and private benefits within the County is unknown. PACE is a relatively new financial product, and the market for the services offered by PACE districts is in its initial stage of development. Furthermore, these districts will be in competition with other established forms of energy efficiency financing, such as equipment leasing and conventional bank lending, that may offer more competitive financing terms. Prior Action Taken by the County In 2010, the Board of Supervisors passed a resolution authorizing the formation of a PACE financing district for the CalforniaFIRST program, a partnership between a private financial services firm called Renewable Funding and a joint powers authority called the California Statewide Communities Development Authority (CSCDA), of which Contra Costa County is a member. CSCDA is a public agency having the legal authority to establish a PACE financing district within the County. Federal Intervention to Regulate Residential PACE In 2010, soon after the County adopted a resolution to participate in CaliforniaFIRST, the Federal Housing Finance Agency (FHFA) intervened and took the position that PACE financing represents a form of lending that is detrimental to the mortgage industry, and directed Fannie Mae and Freddie Mac to restrict their purchase of mortgages where PACE districts exist (Attachment A). Fannie Mae and Freddie Mac subsequently stopped purchasing mortgages for properties that have opted into PACE districts (Attachment B). The federal government’s assertion that PACE financing has an adverse impact on mortgage lenders results from the senior lien position of PACE liens over other debts on the property, such as a mortgage or other forms of private lending. The federal government argues that the senior position of a PACE lien undermines the credit value of other debt on a property, such as a mortgage. FHFA’s actions have created negative financial impacts for property owners with PACE loans. Due to FHFA’s actions and resulting decisions by Fannie Mae and Freddie Mac to cease purchases of mortgages for properties with PACE liens, some home owners have been required to pay off their PACE loans in order to obtain new mortgage financing on their property, as is typically necessary to sell a home or refinance an existing mortgage. State and Federal Officials in Continuing Disagreement Regarding PACE Shortly after FHFA intervened to regulate residential PACE lending in 2010, the State of California and several local jurisdictions, including Sonoma County, litigated against the federal government over its regulatory intervention into this area, arguing that FHFA had not followed the required rule-making process for establishing such regulation. The State ultimately lost this lawsuit in federal court in 2013. Failing to overturn FHFA’s position in court, the State has subsequently attempted to address FHFA’s concerns regarding the negative impacts of PACE on the mortgage industry by establishing a PACE Loss Reserve Program to insure mortgage lenders against financial losses resulting from PACE liens (Attachment C). The creation of California’s PACE Loss Reserve Program has resulted in renewed interest in residential PACE lending throughout the state. However, despite these efforts, FHFA remains opposed to residential PACE lending and continues to prevent Fannie Mae and Freddie Mac from purchasing mortgages on properties with PACE liens. This position was reiterated in a recent letter from the Director of FHFA to Governor Brown (Attachment D). The ongoing dispute between the State of California and FHFA places local jurisdictions that implement residential PACE programs at risk of potential negative action by FHFA. The magnitude of this risk is unknown. However, FHFA’s General Counsel has recently sent letters to County Counsels in California, such as the County Counsel for Santa Clara County (Attachment E) requesting that counties participating in PACE disclose the potential adverse implications of PACE loans to property owners. Review of PACE Applications by the County Ongoing efforts by FHFA to discourage mortgage lending on residential properties with PACE loans require the County act prudently in considering the formation and operation of PACE financing districts. Each proposal to form such a district should be reviewed by County staff to minimize the public’s exposure to the risks and costs associated with these programs. To this end, the Internal Operations Committee recommends that PACE programs interested in operating within the County be required to submit an application that would be reviewed by County staff. A copy of the proposed PACE Application form is attached to this Board Order (Attachment F). DCD would serve as the central point of contact for applicants and would work closely with other County departments in the review of applications, including County Counsel, the County Auditor-Controller and the County Treasurer Tax-Collector. DCD will collect an initial deposit of $5,000 to pay for County staff time and other costs incurred by the County in reviewing applications. Any portion of the deposit not spent will be returned to the applicant at the conclusion of the application process. Staff may seek additional reimbursement of application processing costs from program providers if such costs exceed the initial $5,000 application fee deposit. Following a satisfactory review of application materials, PACE providers will be required to enter into an Operating Agreement with the County, in a form substantially similar to the one attached to this Board Order (Attachment G). The Operating Agreement requires PACE providers participate in the State’s PACE Loss Reserve Program, disclose potential financial risks to borrowers, including risks resulting from federal regulatory actions, and indemnify the County from claims that may arise from operation of the PACE program within the County. Such conditions are intended to protect the interests of the County and property owners in light of ongoing federal opposition to PACE. Other conditions may also apply based on staff review of application materials. The Operating Agreement and other documents requiring Board approval to implement the PACE program would then be submitted to the Board of Supervisors for consideration. CONSEQUENCE OF NEGATIVE ACTION: Without Board approval, PACE financing would not be available to homeowners in Contra Costa County. CLERK'S ADDENDUM Speakers: Jonathan Kevles, Renew Financial, and Program Administrator for the CaliforniaFIRST PACE Program; Mitch Smith, Solar Technology Builders; William L. Noack, HERO program; Eve Perez, HERO program. County Counsel noted that a disclosure for the homeowner of the lien on the property is included in the operating agreement between the installer and the homeowner. Supervisor Piepho requested it also be included in the permitting process to ensure the homeowner has clear understanding about the priority order of repayment of the loan (a senior lien), in the event the property owner desires to take such actions as sale of the property or refinancing of the mortgage; Supervisor Andersen noted that Riverside County District Attorney's office has opened an investigation into a PACE program provider for suspected predatory lending practices. She requested staff reach out to Riverside County to obtain further information on the status of that. The Board discussed the valuation of the property using the amount listed on the Assessor's tax roll versus the fair market value. The current proposal is based on the assessed value of the property. It was noted other jurisdictions use whichever value is greater. The Board expressed great concern about the risk of exposing the property owner to predatory lending practices. It was noted that the policy to use the more conservative basis of assessed value can be amended at a later date. The Board will move forward with the program in its current form to prevent delay in the implementation. The Board ADOPTED the recommendations as presented today; DIRECTED the Conservation and Development Department to return to the Board at the last meeting in December 2015 with a report on such items as the actual staff cost of processing the application, how many applicants did or did not qualify, and any other pertinent statistics available. ATTACHMENTS Attachment A: FHFA 2010 Position Letter on PACE Attachment B: Fannie Mae 2010 Announcement Regarding PACE Attachment C: CA State PACE Loss Reserve Program Attachment D: 2014 FHFA Letter to Gov. Brown Attachment E: 2014 FHFA Letter to Santa Clara County Counsel Attachment F: Proposed Contra Costa County PACE Application Form Attachment G: Proposed Contra Costa County PACE Operating Agreement FEDERAL HOUSING FINANCE AGENCY Office of the Director May 1, 2014 The Honorable Edmund G. Brown Jr. Governor, State of California State Capitol Sacramento, CA 95814 RE: California Property Assessed Clean Energy Program Dear Governor Brown: Thank you for your letter of April 28,2014 about California's Property Assessed Clean Energy (PACE) program. The Federal Housing Finance Agency's (FHFA) General Counsel has been in touch with your staff, and I appreciate the time and materials they have provided concerning California's PACE program and intentions in creating the Reserve Fund. I am writing to inform you that FHFA is not prepared to change its position on California's first-lien PACE program and will continue to prohibit the Enterprises from purchasing or refinancing mortgages that are encumbered with first-lien PACE loans. California's PACE program would allow local governments to finance energy-related home improvement projects by placing an assessment on a homeowner's property in a first lien position, resulting in the subordination of an existing Enterprise- backed mortgage to a second lien position. The effect of this is to increase the risks and possibility of losses to the Enterprises. Additionally, because these loans run with the land, the ongoing monthly assessments for PACE loans are passed on to any subsequent property owners - including after a foreclosure or other distressed sale - unless fully paid off beforehand. In making this determination, FHFA has carefully reviewed the Reserve Fund created by the State of California and, while I appreciate that it is intended to mitigate these increased losses, it fails to offer full loss protection to the Enterprises. The Reserve Fund is not an adequate substitute for Enterprise mortgages maintaining a first lien position and FHFA also has concerns about the Reserve Fund's ongoing sustainability. Should you wish to discuss this matter further, I would be happy to discuss alternatives to first-lien PACE programs with you. Melvin L. Watt xc: The Honorable Barbara Boxer The Honorable Zoe Lofgren 400 7th Street, S.W., Washington, D.C. 20024 • 202-649-3801 • 202-649-1071 (fax) Federal Housing Finance Agency Constitution Center 400 7th Street, S.W. Washington, D.C. 20024 Telephone: (202) 649-3800 Facsimile: (202) 649-1071 www.fhfa.gov August 20, 2014 Orry P. Korb County Counsel Office of County Counsel for County of Santa Clara 70 West Heading Street, East Wing, 9th Floor San Jose, CA 95110-1770 RE: PACE Lending Dear Mr. Korb: The Federal Housing Finance Agency has been advised that a number of communities in Cahfornia, including yours, recendy announced plans to move forward with programs to approve Property Assessed Clean Energy (PACE) loans with a first Hen on residential properties. Consequendy, I am writing to remind you that Fannie Mae and Freddie Mac do not purchase mortgages for either home sales or re-financings that are encumbered with first Hen PACE (or similar program) loans. This pohcy has been in place since 2010 and was reaffirmed by FHFA in 2014. The Federal Home Loan Banks, which also are regulated by FHFA, have been directed to protect their interests in the coUateral they accept for advances, which could become subject to PACE encumberances. FHFA urges your community to inform potential borrowers of the pohcies of Fannie Mae and Freddie Mac and to provide them the web addresses that homeowners can utilize to determine whether their loan is currendy held or guaranteed by one of the Enterprises. These websites are https://knowyouroptions.com/loanlookup for Fannie Mae and for Freddie Mac https: / / ww3.freddiemac.com/loanlookup /?intcmp=LLT-HPstepl. Thank you for your attention in this matter. If you have any questions, you may contact me direcdy at 202 649 3050. With aU.best wishes, I am Sincerely, General Counsel Contra Costa County Department of Conservation and Development 30 Muir Road, Martinez, CA 94553 PHONE: 925-674- FAX: 925-674- PROPERTY ASSESSED CLEAN ENERGY (PACE) PROGRAM APPLICATION FORM APPLICANT INFORMATION Applicant (PACE Financing Joint Powers Authority): Program Name: Statutory Authority for PACE Financing and Contractual Assessments (check one): ☐ The Improvement Act of 1911 (Streets and Highways Code section 5898.10 et seq. AB 811) ☐ The Mello-Roos Community Facilities Act (Government Code section 53311 et seq. SB 555) Mailing Address: Program Site (if different): Primary Contact: Title: Phone: Email: REQUIRED INFORMATION 1. 2. Contra Costa County requires PACE programs to participate in the State of California’s PACE Loss Reserve Program, administered by CAEATFA. Please provide evidence of your current participation in this program, and a copy of all application materials submitted to CAEATFA. Please update this informati on if changes have been made since your application materials were submitted to CAEATFA. Information should be submitted to the County in the same sequence as listed on the CAEATFA PACE Program Application form. In addition to the PACE Loss Reserve Program application materials in 1. above, please describe how your program addresses the following topics: Program Eligibility; Underwriting Criteria; Contractor Restrictions; Energy Audit Requirements; Treatment of State or Federal Rebate or Incentive Programs; Eligible Costs to be Financed; Minimum and Maximum Assessment Amounts; Financing Term (time duration of financing); Current Interest Rates; Fees Assessed to Property Owners; Program Reserve Fund. 3 Contra Costa County requires PACE programs to disclose all financial risks to potential program participants, including risks associated with Federal Housing Finance Agency (FHFA) regulation of mortgage financing. Please describe how disclosure information is provided to program participants and provide copies of supporting materials. 4 Provide the following: the form of Resolution and any other documents requiring approval by the County to initiate the County’s participation in the proposed PACE program; the form of the contractual assessment required of participating property owners; executed agreements between the public agency sponsoring the PACE financing district and parties responsible for administering the PACE program on behalf of the sponsoring agency; and any relevant Joint Powers Authority agreement. ADDITIONAL PROGRAM REQUIREMENTS ☐ PACE Providers operating PACE programs in Contra Costa County are required to enter into an Operating Agreement with the County. A copy of the form Operating Agreement is attached to this application form. Initial here to indicate your acknowledgment of this requirement __________. ☐ PACE program applicants are required to provide an initial deposit of $5,000 to process the application. Please initial here to acknowledge that your deposit payment is attached to this form __________. Signature (PACE Financing Joint Powers Authority):_____________________________ Title:__________________________ Date:__________ PACE Financing Operating Agreement TEMPLATE Page 1 of 11 OPERATING AGREEMENT BETWEEN CONTRA COSTA COUNTY AND PACE PROVIDER FOR PROPERTY ASSESSED CLEAN ENERGY (PACE) FINANCING This agreement ("Agreement"), dated as of , 2015 (“Effective Date”), is by and between Contra Costa County, a political subdivision of the State of California (the "County"), and _________________, a California limited joint powers authority established pursuant to Chapter 5 of Division 7, Title 1 of the Government Code of the State of California (Section 6500 and following (the “PACE Provider”). R E C I T A L S A. Property Assessed Clean Energy (PACE) financing is a method of providing loans to property owners to finance permanent energy efficiency improvements on real property. A property owner who obtains a PACE loan repays the loan by entering into an agreement that allows an assessment to be levied on the property. These assessments are known as voluntary contractual assessments. B. Voluntary contractual assessments that are utilized to finance the installation of energy efficiency improvements on real property are authorized by (1) the Improvement Act of 1911, as amended by AB 811 (Streets and Highways Code Section 5898.10 et seq.) (“Improvement Act”) and (2) the Mello-Roos Community Facilities Act of 1982, as amended by SB 555 (Government Code Section 53311 et seq. (“Mello-Roos Act”). C. The PACE Provider is a joint exercise of powers authority that was created to establish a PACE financing program. The PACE Provider has established the ________________ Program (“PACE Program”) to allow the financing of certain renewable energy, energy efficiency and water efficiency improvements that are permanently affixed to real property through the levy of assessments voluntarily agreed to by property owners participating in the PACE Program. Under the PACE Program, the PACE Provider accepts applications from eligible property owners, conducts assessment proceedings, and levies assessments. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, the parties agree as follows: A G R E E M E N T 1. Definitions. As used in this Agreement, the following terms have the following meanings: a. “PACE Administrator” means an independent contractor of the PACE Provider that markets, administers and carries out the PACE Program on behalf of the PACE Provider. PACE Financing Operating Agreement TEMPLATE Page 2 of 11 b. “Eligible Improvement” is a renewable energy improvement, energy efficiency improvement or other improvement authorized by the Improvement Act, the Mello-Roos Act or other state law pertaining to voluntary contractual assessments. c. “Participating Contractor” is any contractor that installs Eligible Improvements that are funded by a PACE Provider. d. “Program Participant” is a property owner who enters into a voluntary contractual assessment with the PACE Provider. e. “Property Assessed Clean Energy (PACE) Financing” is a means of financing Eligible Improvements as authorized by the Improvement Act, the Mello-Roos Act, or other state law pertaining to voluntary contractual assessments. 2. General Requirements. a. PACE Provider's Specified Services. The PACE Provider may offer and provide Property Assessed Clean Energy Financing to property owners in the unincorporated areas of the County. The PACE Provider is solely responsible for the formation, operation and administration of the PACE Program, including the conduct of assessment proceedings, the levy and collection of assessments, and the offer, sale and administration of any bonds issued by the PACE Provider on behalf of the PACE Program. b. Cooperation with County. The PACE Provider shall independently operate its program and cooperate with the County and County staff as described in this Agreement. c. Performance Standard. The PACE Provider shall provide PACE Financing in a manner consistent with the level of competency and standard of care normally observed by an organization providing PACE Financing pursuant to the Improvement Act or Mello-Roos Act. 3. Disclosure Requirements. The PACE Provider shall do all of the following: a. Disclose in writing to potential Program Participants the financial risks associated with PACE Financing, including the risks associated with federal regulation and administration of mortgage financing and the position of the Federal Housing Finance Agency (FHFA) on PACE lending. The disclosure materials must include a copy of the August 20, 2014 FHFA letter to Santa Clara County regarding PACE lending, which is attached and incorporated herein as Attachment A. PACE Financing Operating Agreement TEMPLATE Page 3 of 11 b. Require potential Program Participants to sign a written acknowledgment of the Federal Housing Finance Agency (FHFA) position on PACE liens. c. Require Program Participants who own non-residential properties to obtain written consent to participate in the PACE Program from any lender that has outstanding loans to the Program Participant. d. Provide federal Truth in Lending Act disclosure details to the applicant specific to the requested amount of the financing. e. Advise potential Program Participants of available state or federal rebate or incentive programs. f. Require each Program Participant to obtain from the County all building permits for improvements. 4. Financial Requirements. a. The PACE Provider shall administer and review Program Participant eligibility and determine the Eligible Improvement costs to be financed. b. The PACE Provider shall establish its own interest rates, payback terms and fees. c. The PACE Provider shall participate in the State of California’s PACE Loss Reserve Program, administered by the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA), and provide evidence of current participation and copies of all application materials submitted to CAEATFA. If the State discontinues the PACE Loss Reserve Program, or if the County determines that the State’s PACE Loss Reserve Program does not provide adequate coverage, then the County may terminate this Agreement unless the County is satisfied with coverage by an alternative loan loss reserve program. d. For residential properties with an assessed value of less than $700,000, the PACE Provider will ensure that the loan amount to a Program Participant does not exceed 15% of the assessed value of the property. For residential properties with an assessed value greater than $700,000, the PACE Provider will ensure that the loan amount does not exceed 10% of the assessed value of the property. e. For non-residential properties, the PACE Provider will ensure that the loan amount does not exceed 20% of the assessed value of the property. f. The PACE Provider shall ensure that any loans existing prior to the proposed PACE lien have an aggregate amount of no more than 90% of the PACE Financing Operating Agreement TEMPLATE Page 4 of 11 assessed value of the property, including all mortgage-related debt as determined as of the date the assessment contract is executed. g. The PACE Provider shall ensure that the total property taxes and assessments for each property that will have PACE Financing will not exceed 5% of the assessed value of the property as determined as of the date the assessment contract is executed. h. The PACE Provider shall verify that each Program Participant is current on all property taxes and has not made late payments in the past three years, and verify that each Program Participant has not filed for bankruptcy in the past three years. i. It is the PACE Provider’s obligation to coordinate with the Auditor- Controller’s Office each year regarding delinquent assessments. 5. Reports. For each property that has entered into a voluntary contractual assessment through the PACE Provider, the PACE Provider shall provide project information and data in an accessible electronic format to the County on a monthly and annual basis and upon request, including but not limited to the following: a. The Assessor’s Parcel Number (APN) and property type (residential or non- residential) of the property. b. The amount of the contractual assessment. c. All installed Eligible Improvements financed through PACE Financing. d. The solar STC-DC rating in watts or kilowatts of each Eligible Improvement. e. The expected financial and energy savings associated with each Eligible Improvement. 6. Participating Contractor Obligations. The PACE Provider shall ensure that each Participating Contractor agrees to and abides by the following terms and conditions: a. Each Participating Contractor shall have all required California State License Board licenses and all other required State and County licenses. b. Each Participating Contractor’s bonding must be in good standing. c. Each Participating Contractor shall hold harmless, indemnify and defend the County as set forth in Section 9 (c). d. Each Participating Contractor shall have insurance as required in Section 12 (b). PACE Financing Operating Agreement TEMPLATE Page 5 of 11 e. Participating Contractors and their representatives, employees, and agents shall not represent themselves as agents, representatives, contractors, subcontractors, or employees of the County or the Department of Conservation and Development or claim association or affiliation with the County or Department of Conservation and Development. 7. Agreement with County Auditor-Controller. The PACE Provider will enter into a separate agreement with the Contra Costa County Auditor-Controller for the administration of property tax assessments placed on properties through the PACE Financing program. 8. Agreement with Program Participant. Each voluntary contractual assessment between the PACE Provider and a Program Participant shall require the Program Participant to hold harmless, indemnify and defend the County in accordance with the terms set forth in Attachment B, attached hereto. The terms set forth in Attachment B shall be incorporated into the PACE Provider’s voluntary contractual assessment with each Program Participant for PACE Financing. 9. Indemnification and Release. a. Indemnification Obligation of the PACE Provider. To the fullest extent not prohibited by applicable law, the PACE Provider shall defend, indemnify, protect, save, and hold harmless the County, the County Auditor-Controller, the County Treasurer-Tax Collector, their respective employees, agents, attorneys, officers, divisions, related agencies and entities, affiliates, successors and assigns (collectively and individually the “Indemnitees”), from any and all claims, cost, loss, liability, expense, damage (including consequential damages), or other injury, claim, action or proceeding (collectively “Liability”) arising out of or connected with this Agreement or activities taken by the parties pursuant to this Agreement, including: (i) any claim, action or proceeding to attack, set aside, void, abrogate, rescind or annul this Agreement or the actions of either party under this Agreement; (ii) the placement or collection of assessments on participating properties; or (iii) the acts, errors or omissions of the PACE Provider, its officers, employees, agents, contractors, subcontractors, or any person under its direction or control in connection with this Agreement; and will make good to and reimburse Indemnitees for any expenditures, including reasonable attorney’s fees, the Indemnitees may make by reason of such matters. If requested by any of the Indemnitees, the PACE Provider will defend any such suits at the sole cost and expense of the PACE Provider with counsel selected or approved by the Contra Costa County Counsel. The PACE Provider’s obligations under this section will exist regardless of concurrent negligence or willful misconduct on the part of any Indemnitee or any other person; provided, however, that the PACE Provider will not be required to indemnify Indemnitees for the proportion of Liability a court determines is attributable to the sole negligence or willful misconduct of the County, its PACE Financing Operating Agreement TEMPLATE Page 6 of 11 governing body, officers or employees. This indemnification clause shall survive the termination or expiration of this Agreement. b. PACE Provider’s Release. To the fullest extent not prohibited by applicable law, the PACE Provider hereby releases and forever discharges the County, the County Auditor-Controller, the County Treasurer-Tax Collector, their respective employees, agents, attorneys, officers, divisions, related agencies and entities, affiliates, successors and assigns (collectively “Released Parties”), from any and all claims, cost, loss, liability, expense, damage (including consequential damages), or other injury, claim, action or proceeding (including without limitation, attorneys fees and expenses), which the PACE Provider now has or could assert in any manner arising out of or connected with this Agreement, the subject matter of this Agreement, or activities taken by the parties pursuant to this Agreement, including any claim, action or proceeding to attack, set aside, void, abrogate, rescind or annul this Agreement or the actions of either party under this Agreement. The PACE Provider knowingly waives the right to make any claim against the Released Parties for such damages and expressly waives all rights provided by section 1542 of the California Civil Code, which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.” The rights and obligations contained in this paragraph will survive termination of this Agreement. c. Indemnification and Release Obligations of Participating Contractors and PACE Administrator. The PACE Provider must require each Participating Contractor and PACE Administrator to release, defend, indemnify, protect, save, and hold harmless the County, the County Auditor-Controller, the County Treasurer-Tax Collector, their respective employees, agents, attorneys, officers, divisions, related agencies and entities, affiliates, successors and assigns, to the same extent as the indemnity and release provided by the PACE Provider to the County in sections 9(a) and 9(b) of this Agreement. 10. Term of Agreement. The term of this Agreement shall be from the Effective Date until termination in accordance with the provisions of Section 11, Termination. 11. Termination. a. Termination without Cause. Notwithstanding any other provision of this Agreement, at any time and without cause, the County or PACE Provider shall have the right, in its sole discretion, to terminate this Agreement by PACE Financing Operating Agreement TEMPLATE Page 7 of 11 giving 30 days’ written notice to the other Party of this Agreement. This Agreement may be cancelled immediately by written mutual consent. b. Termination for Cause. Notwithstanding any other provision of this Agreement, if the PACE Provider fails to uphold any of its obligations under this Agreement, or otherwise violates any of the terms of this Agreement, the County may immediately terminate this Agreement by giving the PACE Provider written notice of such termination, stating the reason for termination. c. Discontinuation of PACE Program. Upon 24 hours’ notice from the County, the PACE Provider shall immediately discontinue its residential PACE Program in the County’s unincorporated area if the Federal Housing Finance Authority (FHFA) takes any action in California pertaining to PACE Financing, as it relates to Fannie Mae and Freddie Mac mortgages, that the County determines will create an undue liability to the County or Program Participants. d. Delivery of Data and Information upon Termination. In the event of termination and within 14 days following the date of termination, the PACE Provider must deliver to County all data and information for all properties with contractual assessments, as specified in Section 5, Reports. e. Effect of Termination. If the Board of Supervisors terminates this agreement pursuant to this Section 11, the PACE Provider may not solicit new assessment contracts within the unincorporated areas of the County. f. Upon termination of this Agreement or the discontinuance of the PACE Program, the PACE Provider shall continue to administer all voluntary assessment contracts that exist at the time of the termination. 12. Insurance. a. The PACE Provider is self-insured, and shall provide the County with a letter of self-insurance within 30 days after the effective date of this Agreement. b. The PACE Provider will ensure that the following insurance requirements are incorporated into all contracts entered into by the PACE Provider with each PACE Administrator and Participating Contractor, or their respective contractors, subcontractors or assigns, in connection with this Agreement: (1) each PACE Administrator and Participating Contractor must maintain workers’ compensation insurance pursuant to state law; (2) each PACE Administrator and Participating Contractor must maintain commercial general liability insurance, including contractual liability (or blanket contractual) coverage, owners’ and contractors’ protective coverage, and PACE Financing Operating Agreement TEMPLATE Page 8 of 11 broad form property damage coverage, with a minimum of $2 million per occurrence; (3) each Participating Contractor must maintain builders’ risk insurance in an amount equal to the construction contract amount, with a waiver of subrogation for the County, and naming the County as additional insured; (4) each PACE Administrator and Participating Contractor must maintain vehicle liability insurance with a minimum combined single-limit coverage of $500,000 per occurrence; and (5) each PACE Administrator shall maintain Professional Liability Errors and Omissions Insurance coverage at $1,000,000 per occurrence or aggregate limit. Each PACE Administrator and Participating Contractor shall provide certificates of insurance to the County, copies of policies, or endorsements evidencing the above insurance coverage and requiring at least 30 days’ written notice to the County of policy lapse, cancellation, or material change in coverage. The commercial general liability insurance and vehicle liability insurance shall include endorsements naming the County, and its governing body, officers, agents and employees, as additional insured. The aforementioned insurance policies shall contain a provision that the insurance afforded thereby to the additional insureds shall be primary insurance to the full limits of the policy and that, if any of the additional insureds has other insurance or self-insurance against a loss covered by such policy, such insurance or self-insurance shall be excess insurance only. 13. Miscellaneous Provisions. a. Independent Contractor Status. The parties intend that the PACE Provider, in implementing and operating the PACE Program, is an independent contractor, and that the PACE Provider will control the work and the manner in which it is performed. This Agreement is not to be construed to create a relationship between the parties of agent, servant, employee, partnership, joint venture, or association. The PACE Provider is not a County employee. This Agreement does not give the PACE Provider any right to participate in any pension plan, workers’ compensation plan, insurance, bonus, or similar benefits County provides to its employees. b. Compliance with the Law. The PACE Provider is subject to and must comply with all applicable federal, state, and local laws and regulations with respect to its performance under this Agreement, including but not limited to, licensing, employment, and purchasing practices; and wages, hours, and conditions of employment, including nondiscrimination. c. Authorization. The PACE Provider represents and warrants that it has full power and authority to enter into this Agreement and to perform the obligations set forth herein. d. Assignment and Delegation. Neither party hereto shall assign, delegate, sublet, or transfer any interest in or duty under this Agreement without the PACE Financing Operating Agreement TEMPLATE Page 9 of 11 prior written consent of the other, and no such transfer shall be of any force or effect whatsoever unless and until the other party shall have so consented. This Agreement binds the heirs, successors, assigns and representatives of the PACE Provider. e. Method and Place of Giving Notice. All notices shall be made in writing and shall be given by personal delivery or by U.S. Mail or courier service. Notices shall be addressed as follows: TO COUNTY: Contra Costa County Department of Conservation and Development Deputy Director, Building Inspection Division 30 Muir Road Martinez, CA 94553 TO PACE PROVIDER: The effective date of notice is the date of deposit in the mail or other delivery, except that the effective date of notice to the County is the date of receipt by the Deputy Director, Building Inspection Division, Department of Conservation and Development. Changes may be made in the names and addresses of the person to whom notices are to be given by giving notice pursuant to this paragraph. f. Inspection. Upon the County’s request, the County or its designee shall have the right at reasonable times and intervals to inspect the PACE Provider’s financial and program records at the premises of the PACE Provider and the PACE Administrator. The PACE Provider or the PACE Administrator shall maintain all PACE Program records for a period of four years following termination of the Agreement, and shall make them available for copying upon the County’s request at the County’s expense. g. No Waiver of Breach. The waiver by the County of any breach of any term or promise contained in this Agreement shall not be deemed to be a waiver of such term or provision or any subsequent breach of the same or any other term or promise contained in this Agreement. h. Construction. To the fullest extent allowed by law, the provisions of this Agreement shall be construed and given effect in a manner that avoids any PACE Financing Operating Agreement TEMPLATE Page 10 of 11 violation of statute, ordinance, regulation, or law. The parties agree that in the event that any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the provisions hereof shall remain in full force and effect and shall in no way be affected, impaired, or invalidated thereby. The PACE Provider and the County acknowledge that they have each contributed to the making of this Agreement and that, in the event of a dispute over the interpretation of this Agreement, the language of the Agreement will not be construed against one party in favor of the other. i. Consent. Wherever in this Agreement the consent or approval of one party is required to an act of the other party, such consent or approval shall not be unreasonably withheld or delayed. j. No Third Party Beneficiaries. Nothing contained in this Agreement shall be construed to create, and the parties do not intend to create, any rights in third parties. k. Choice of Law. This Agreement is made in Contra Costa County and is governed by, and must be construed in accordance with, the laws of the State of California. l. Captions. The captions in this Agreement are solely for convenience of reference. They are not a part of this Agreement and shall have no effect on its construction or interpretation. m. Survival of Terms. All express representations, waivers, indemnifications, and limitations of liability included in this Agreement will survive its completion, expiration or termination for any reason. n. Time of Essence. Time is and shall be of the essence of this Agreement and every provision hereof. o. Entire Agreement. This Agreement contains all the terms and conditions agreed upon by the parties. Except as expressly provided herein, no other understanding, oral or otherwise, regarding the subject matter of this Agreement will be deemed to exist or to bind any of the parties hereto. p. Duplicate Counterparts. This Agreement may be executed in duplicate counterparts. The Agreement shall be deemed executed when it has been signed by both parties. PACE Financing Operating Agreement TEMPLATE Page 11 of 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. PACE PROVIDER By: ___________________________ Name: _________________________ Title: __________________________ CONTRA COSTA COUNTY By: _________________________ Name: _______________________ Title: ________________________ ATTACHMENT B WAIVER, RELEASE OF LIABILITY AND INDEMNIFICATION PROVISIONS ASSESSMENT CONTRACT BETWEEN PACE PROVIDER AND PROGRAM PARTICIPANT 1. Waiver of Assessment Proceedings. Because this Agreement between the PACE Provider and Program Participant reflects the Program Participant’s free and willing consent to pay the Assessment, the Program Participant hereby waives any otherwise applicable requirements of Article XIIID of the California Constitution or any other provision of California law for an engineer’s report, notice, public hearing, protest or ballot. The Program Participant hereby waives the right to repeal the Assessment by initiative or any other action, or to file any lawsuit or other proceeding to challenge the Assessment or any aspect of the proceedings of the PACE Provider undertaken in connection with the PACE Program. 2. Responsibility for Eligible Improvements. The Program Participant hereby agrees that the Program Participant and its successors in interest to fee title in the property shall be solely responsible for the installation, operation and maintenance of the Eligible Improvements. The Program Participant hereby acknowledges that the Program Participant and its successors in interest to fee title in the property will be responsible for payment of the Assessment regardless of whether the Eligible Improvements are properly installed, operated or maintained as expected. The Program Participant hereby agrees that the PACE Provider is entering into this Agreement solely for the purpose of assisting the Program Participant with the financing of the installation of the Eligible Improvements, and that the PACE Provider, PACE Administrator and the County shall have no responsibility of any kind for, and shall have no liability arising out of, the installation, operation, financing, refinancing or maintenance of the Eligible Improvements. 3. Indemnification Obligation of Program Participant. To the fullest extent not prohibited by applicable law, the Program Participant shall defend, indemnify, protect, save, and hold harmless the PACE Provider, PACE Administrator, Contra Costa County, the County Auditor-Controller, the County Treasurer-Tax Collector, their respective employees, agents, attorneys, officers, divisions, related agencies and entities, affiliates, successors and assigns (collectively and individually the “Indemnitees”) from any and all claims, cost, loss, liability, expense, damage (including consequential damages), or other injury, claim, action or proceeding (collectively “Liability”) arising out of or connected with this Agreement or activities taken by the parties pursuant to this Agreement, the Operating Agreement between the PACE Provider and Contra Costa County, or the agreement between the PACE Provider and the PACE Administrator, including: (i) any claim, action or proceeding to attack, set aside, void, abrogate, rescind or annul said Agreements or the actions of either party under said Agreements; (ii) the placement or collection of assessments on participating properties; or (iii) the acts, errors or omissions of the Program Participant, its officers, employees, agents, contractors, subcontractors, or any person under its direction or control in connection with this Agreement or the PACE Program; and will make good to and reimburse Indemnitees for any expenditures, including reasonable attorney’s fees, the Indemnitees may make by reason of such matters. If requested by any of the Indemnitees, the Program Participant will defend any such suits at the sole cost and expense of Program Participant with counsel selected or approved by the affected Indemnitees. The Program Participant’s obligations under this section will exist regardless of concurrent negligence or willful misconduct on the part of any Indemnitee or any other person; provided, however, that the Program Participant will not be required to indemnify any Indemnitee for the proportion of Liability a court determines is attributable to the sole negligence or willful misconduct of that Indemnitee. This indemnification clause shall survive the termination or expiration of this Agreement. 4. Release. To the fullest extent not prohibited by law, the Program Participant hereby releases and forever discharges the PACE Provider, PACE Administrator, Contra Costa County, the County Auditor-Controller, the County Treasurer-Tax Collector, their respective employees, agents, attorneys, officers, divisions, related agencies and entities, affiliates, successors and assigns (collectively “Released Parties”) from any and all claims, cost, loss, liability, expense, damage (including consequential damages), or other injury, claim, action or proceeding (including without limitation, attorneys’ fees and expenses), which the Program Participant now has or could assert in any manner arising out of or connected with the subject matter of this Agreement, the Operating Agreement between the PACE Provider and Contra Costa County, or the agreement between the PACE Provider and the PACE Administrator, or activities taken by the Released Parties pursuant to said Agreements, including any claim, action or proceeding to attack, set aside, void, abrogate, rescind or annul said Agreements or the placement or collection of assessments on participating properties. The Program Participant knowingly waives the right to make any claim against the Released Parties for such damages and expressly waives all rights provided by section 1542 of the California Civil Code, which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.” The waivers, releases and agreements set forth in this document shall survive termination of the Agreement.