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HomeMy WebLinkAboutMINUTES - 11172015 - D.2RECOMMENDATION(S): ACCEPT this staff report recommending that the Board of Supervisors authorize implementation of the California HERO PACE financing program in the unincorporated area of the County. 1. ADOPT Resolution No. 2015/442 to become an Associate Member of the Western Riverside Council of Governments (WRCOG), a joint powers authority, and to join the California HERO PACE financing program established by WRCOG. 2. AUTHORIZE the Conservation and Development Director, or designee, to execute an operating agreement with WRCOG authorizing WRCOG to operate the California HERO PACE financing program in the unincorporated area of Contra Costa County. 3. FISCAL IMPACT: There is no fiscal impact to the County associated with this item. APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 11/17/2015 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor Federal D. Glover, District V Supervisor 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: November 17, 2015 David Twa, County Administrator and Clerk of the Board of Supervisors By: , Deputy cc: Conservation & Development Deputy Director, Treasurer-Tax Collector, Auditor-Controller, County Administrator D. 2 To:Board of Supervisors From:John Kopchik, Director, Conservation & Development Department Date:November 17, 2015 Contra Costa County Subject:Property Assessed Clean Energy (PACE) Financing BACKGROUND: 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 voluntarily choose to enter into a contractual assessment and borrow funds from the district to make energy efficiency improvements. The assessment is then repaid in installments on the property tax bill. If the property owner were to default on their property taxes, the Treasurer-Tax Collector would have the authority to foreclose on the property to collect payment. 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. 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. 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. 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, 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 June 16, 2015, the Board of Supervisors approved the recommendation of the Internal Operations Committee to direct the Department of Conservation and Development (DCD) to establish an application process and accept applications from PACE providers to operate within the unincorporated area of the County. The Board also approved the form of an Operating Agreement the County would require PACE providers to enter into with the County as a condition of operations. The purpose of the Operating Agreement is to protect the County and the general public from the potential costs and risk of PACE programs. The Operating Agreement requires PACE providers to participate in the State PACE Loss Reserve Program, disclose financial costs and risks to participating property owners, and indemnify the County from legal claims arising from the operation of PACE programs. In July 2015, DCD received applications from two PACE providers: CaliforniaFirst and California HERO. CaliforniaFirst is a PACE financing program established by the California Statewide Communities Development Authority (CSCDA), a joint powers authority. Contra Costa County is already a member of CSCDA. California HERO is a PACE financing program established by the Western Riverside Council of Governments (WRCOG), a joint powers authority. Contra Costa County will be an Associate Member of WRCOG if the Board approves joining the California HERO program. Consistent with direction received from the Board, staff began review of the application materials submitted by these two PACE providers. On September 14, 2015, the Internal Operations Committee, at the Board's direction, discussed changes to the Operating Agreement that the PACE providers had proposed. As an outcome of this meeting, the IO Committee recommends that the following changes be made to the form of the Operating Agreement approved by the Board on June 16, 2015: Assessed vs. Fair Market Value: The Committee recommends that the greater of assessed value or fair market value, rather than assessed value only, be used as the basis for calculating maximum PACE assessment amounts (consistent with the formulas in 5. below) and that fair market value be determined 1. using automated valuation supplied to the PACE providers through a third party vendor, or using a certified appraisal if preferred by the property owner. Contractors Indemnifying the County: The Committee recommends revising the requirement requiring contractors to indemnify the County so that the language in the Operating Agreement is consistent with the contractor indemnification language in the Contractor Participation Agreement, to which all participating contractors have agreed. 2. Contractor General Liability Insurance & Additional Insured Requirements: The Committee recommends requiring contractors to carry the industry standard amount of $1M (vs. $2M) per occurrence for commercial general liability insurance, strike the requirement for a Builder's Risk policy, and strike the requirement for contractors to add the County as an additional insured. 3. Lender Consent: The Committee recommends requiring Program Participants who own non-residential properties to obtain written consent to participate in the PACE Program from lenders who have made loans to the Program Participant only where the property in question serves as security for the loan. 4. Loan Limits for Residential and Non-Residential Properties: The Committee recommends the Operating Agreement mirror the residential loan limitation language in the States PACE Loss Reserve regulations, which state "The Financing is for less than fifteen percent (15%) of the value of the property, up to the first seven hundred thousand dollars ($700,000) of the value of the property, and is for less than ten percent (10%) of the remaining value of the property above seven hundred thousand dollars ($700,000)." The Committee also decided to remove the 20% of value cap on non-residential PACE loans, modify the limitation in the County's Operating Agreement that a PACE assessment cannot result in property taxes exceeding 5% of market (vs. assessed) value, and stipulate in the Operating Agreement that the PACE assessment plus the mortgage related debt on a residential property must not exceed 95% of market value of the property. 5. Definition of Residential vs. Non-Residential Properties: The Committee recommends adding the following definition to the Operating Agreement: “Non-residential property” is any property that is a multi-family property containing five or more units of housing, or any commercial, agricultural, or industrial property that would otherwise be eligible for PACE financing. It was acknowledged that there is a discrepancy between the State's definition of residential property and the PACE law definition of residential property as "one to three units" and multi-family as "five or more units", leaving properties of four or more units in limbo. The Committee preferred to treat properties of four or less units as residential property for the purpose of the County's PACE Operating Agreement. 6. Tax Deductibility Disclaimer: The Committee decided to provide in the County's Operating Agreement that PACE providers may recommend that property owners consult with a tax professional prior to claiming any tax deductions associated with the project, and shall not recommend or indicate that homeowners take any particular filing position regarding their annual or semi-annual PACE assessment payments. 7. Following the Internal Operations Committee meeting on September 14, staff completed its review of the application materials submitted by CaliforniaFirst and California HERO. Staff finds that the applications submitted by these two PACE providers satisfy the County’s requirements. Staff recommends today that the Board authorize the Conservation and Development Director, or designee, to execute an Operating Agreement with California HERO to operate a PACE financing program within the unincorporated area of the County and to adopt Resolution No. 2014/442 required for the PACE program to operate within the County’s jurisdiction. The Operating Agreement reflects the changes recommended by the Internal Operations Committee. CaliforniaFirst and CSCDA are currently reviewing the Operating Agreement, and staff expects to bring that application to the Board in December. CONSEQUENCE OF NEGATIVE ACTION: If the Board of Supervisors does not approve the recommended actions, the California HERO PACE financing If the Board of Supervisors does not approve the recommended actions, the California HERO PACE financing program will not be able to provide property owners in the unincorporated area of the County with financing for energy and water efficiency improvements to their property. CLERK'S ADDENDUM Jason Crapo, Department of Conservation and Development (DCD), presented the staff report. Mr. Crapo directed the Board's attention to the background information in the Boardorder regarding the September 14, 2015 meeting of the Internal Operations Committee. The agreement providers requested a revision to the operating agreement to reflect that the combined amount of any pre-existing loans plus the PACE lien of a property not exceed 95% of the value of the property. The Internal Operations Committee recommends this revision be adopted. Additionally it was noted that Exhibit A to Resolution 2015/442 was not attached at the time of publication, and staff requested a motion to enter the exhibit into the record. By unanimous vote with all Supervisors present, the Board WAIVED the Better Government Ordinance (BGO) 96-Hour Time Limit to allow inclusion of the exhibit. The Board ACCEPTED the staff report; ADOPTED Resolution No. 2015/442 and exhibits to become an Associate Member of the Western Riverside Council of Governments (WRCOG), a joint powers authority, and to join the California HERO PACE financing program established by WRCOG; and AUTHORIZED the DCD Director, or designee, to executed an operating agreement, as revised today, with WRCOPG authorizing WRCOG to operate the California HERO PACE financing Program in the unincorporated area of Contra Costa County. ATTACHMENTS Resolution No. 2015/442 - HERO PACE PROGRAM Exhibit A to Resolution No. 2015/442 HERO PACE Operating Agreement with Attachments A-D A - 1 20323.00016\7605303.2 EXHIBIT A [attach Amendment to Joint Exercise of Powers Agreement] B - 1 20323.00016\7605303.2 AMENDMENT TO THE JOINT POWERS AGREEMENT ADDING COUNTY OF CONTRA COSTA AS AN ASSOCIATE MEMBER OF THE WESTERN RIVERSIDE COUNCIL OF GOVERNMENTS TO PERMIT THE PROVISION OF PROPERTY ASSESSED CLEAN ENERGY (PACE) PROGRAM SERVICES WITH SUCH COUNTY This Amendment to the Joint Powers Agreement (“JPA Amendment”) is made and entered into on the ___ day of November, 2015, by County of Contra Costa (“County”) and the Western Riverside Council of Governments (“Authority”) (collectively the “Parties”). RECITALS WHEREAS, Authority is a joint exercise of 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 “Joint Exercise of Powers Act”) and the Joint Power Agreement entered into on April 1, 1991, as amended from time to time (the “Authority JPA”); and WHEREAS, as of October 1, 2012, Authority had 18 member entities (the “Regular Members”). WHEREAS, Chapter 29 of the Improvement Bond Act of 1911, being Division 7 of the California Streets and Highways Code (“Chapter 29”) to authorize cities, counties, and cities and counties to establish voluntary contractual assessment programs, commonly referred to as a Property Assessed Clean Energy (“PACE”) program, to fund various renewable energy sources, energy and water efficiency improvements, and electric vehicle charging infrastructure (the “Improvements”) that are permanently fixed to residential, commercial, industrial, agricultural or other real property; and WHEREAS, Authority intends to establish a PACE program to be known as the “California HERO Program” pursuant to Chapter 29 as now enacted or as such legislation may be amended hereafter, which will authorize the implementation of a PACE financing program for cities and county throughout the state; and WHEREAS, County desires to allow owners of property within its jurisdiction to participate in the California HERO Program and to allow Authority to conduct proceedings under Chapter 29 to finance Improvements to be installed on such properties; and WHEREAS, this JPA Amendment will permit County to become an associate member of Authority and to participate in California HERO Program for the purpose of facilitating the implementation of such program within the jurisdiction of County; and B - 2 20323.00016\7605303.2 WHEREAS, pursuant to Government Code sections 6500 et seq., the Parties are approving this JPA Agreement to allow for the provision of PACE services, including the operation of a PACE financing program, within the unincorporated territory of County; and WHEREAS, the JPA Amendment sets forth the rights, obligations and duties of County and Authority with respect to the implementation of the California HERO Program within the unincorporated territory of County. MUTUAL UNDERSTANDINGS NOW, THEREFORE, for and in consideration of the mutual covenants and conditions hereinafter stated, the Parties hereto agree as follows: JPA Amendment. The Authority JPA. County agrees to the terms and conditions of the Authority JPA, attached. Associate Membership. By adoption of this JPA Amendment, County shall become Associate Member of Authority on the terms and conditions set forth herein and the Authority JPA and consistent with the requirements of the Joint Exercise of Powers Act. The rights and obligations of County as an Associate Member are limited solely to those terms and conditions expressly set forth in this JPA Amendment for the purposes of implementing the California HERO Program within the unincorporated territory of County. Except as expressly provided for by the this JPA Amendment, County shall not have any rights otherwise granted to Authority’s Regular Members by the Authority JPA, including but not limited to the right to vote on matters before the Executive Committee or the General Assembly, right to amend or vote on amendments to the Authority JPA, and right to sit on committees or boards established under the Authority JPA or by action of the Executive Committee or the General Assembly, including, without limitation, the General Assembly and the Executive Committee. County shall not be considered a member for purposes of Section 9.1 of the Authority JPA. Rights of Authority. This JPA Amendment shall not be interpreted as limiting or restricting the rights of Authority under the Authority JPA. Nothing in this JPA Amendment is intended to alter or modify Authority Transportation Uniform Mitigation Fee (TUMF) Program, the PACE Program administered by Authority within the jurisdictions of its Regular Members, or any other programs administered now or in the future by Authority, all as currently structured or subsequently amended. B - 3 20323.00016\7605303.2 Implementation of California HERO Program within County Jurisdiction. Boundaries of the California HERO Program within County Jurisdiction. County shall determine and notify Authority of the boundaries of the unincorporated territory within County’s jurisdiction within which contractual assessments may be entered into under the California HERO Program (the “Program Boundaries”), which boundaries may include the entire unincorporated territory of County or a lesser portion thereof. Determination of Eligible Improvements. Authority shall determine the types of distributed generation renewable energy sources, energy efficiency or water conservation improvements, electric vehicle charging infrastructure or such other improvements as may be authorized pursuant to Chapter 29 (the “Eligible Improvements”) that will be eligible to be financed under the California HERO Program. Establishment of California HERO Program. Authority will undertake such proceedings pursuant to Chapter 29 as shall be legally necessary to enable Authority to make contractual financing of Eligible Improvements available to eligible property owners with the California HERO Program Boundaries. Financing the Installation of Eligible Improvements. Authority shall develop and implement a plan for the financing of the purchase and installation of the Eligible Improvements under the California HERO Program. Ongoing Administration. Authority shall be responsible for the ongoing administration of the California HERO Program, including but not limited to producing education plans to raise public awareness of the California HERO Program, soliciting, reviewing and approving applications from residential and commercial property owners participating in the California HERO Program, establishing contracts for residential, commercial and other property owners participating in such program, establishing and collecting assessments due under the California HERO Program, adopting and implementing any rules or regulations for the PACE program, and providing reports as required by Chapter 29. County will not be responsible for the conduct of any proceedings required to be taken under Chapter 29; the levy or collection of assessments or any required remedial action in the case of delinquencies in such assessment payments; or the issuance, sale or administration of the Bonds or any other bonds issued in connection with the California HERO Program. Phased Implementation. The Parties recognize and agree that implementation of the California HERO Program as a whole can and may be phased as additional other cities and counties execute similar agreements. County entering into this JPA Amendment will obtain the benefits of and incur the obligations imposed by this JPA Amendment in its jurisdictional area, irrespective of whether cities or counties enter into similar agreements. B - 4 20323.00016\7605303.2 Miscellaneous Provisions. Withdrawal. County or Authority may withdraw from this JPA Amendment upon six (6) months written notice to the other party; provided, however, there is no outstanding indebtedness of Authority within County. The provisions of Section 6.2 of the Authority JPA shall not apply to County under this JPA Amendment. Mutual Indemnification and Liability. Authority and County shall mutually defend, indemnify and hold the other party and its directors, officials, officers, employees and agents free and harmless from any and all claims, demands, causes of action, costs, expenses, liabilities, losses, damages or injuries of any kind, in law or equity, to property or persons, including wrongful death, to the extent arising out of the willful misconduct or negligent acts, errors or omissions of the indemnifying party or its directors, officials, officers, employees and agents in connection with the California HERO Program administered under this JPA Amendment, including without limitation the payment of expert witness fees and attorneys fees and other related costs and expenses, but excluding payment of consequential damages. Without limiting the foregoing, Section 5.2 of the Authority JPA shall not apply to this JPA Amendment. In no event shall any of Authority’s Regular Members or their officials, officers or employees be held directly liable for any damages or liability resulting out of this JPA Amendment. Environmental Review. Authority shall be the lead agency under the California Environmental Quality Act for any environmental review that may required in implementing or administering the California HERO Program under this JPA Amendment. Cooperative Effort. County shall cooperate with Authority by providing information and other assistance in order for Authority to meet its obligations hereunder. County recognizes that one of its responsibilities related to the California HERO Program will include any permitting or inspection requirements as established by County. Notice. Any and all communications and/or notices in connection with this JPA Amendment shall be either hand-delivered or sent by United States first class mail, postage prepaid, and addressed as follows: Authority: Western Riverside Council of Governments 4080 Lemon Street, 3rd Floor. MS1032 Riverside, CA 92501-3609 Att: Executive Director County: Contra Costa County Conservation & Development Department 30 Muir Road Martinez, CA 94553 B - 5 20323.00016\7605303.2 Entire Agreement. This JPA Amendment, together with the Authority JPA, constitutes the entire agreement among the Parties pertaining to the subject matter hereof. This JPA Amendment supersedes any and all other agreements, either oral or in writing, among the Parties with respect to the subject matter hereof and contains all of the covenants and agreements among them with respect to said matters, and each Party acknowledges that no representation, inducement, promise of agreement, oral or otherwise, has been made by the other Party or anyone acting on behalf of the other Party that is not embodied herein. Successors and Assigns. This JPA Amendment and each of its covenants and conditions shall be binding on and shall inure to the benefit of the Parties and their respective successors and assigns. A Party may only assign or transfer its rights and obligations under this JPA Amendment with prior written approval of the other Party, which approval shall not be unreasonably withheld. Attorney’s Fees. If any action at law or equity, including any action for declaratory relief is brought to enforce or interpret the provisions of this Agreement, each Party to the litigation shall bear its own attorney’s fees and costs. Governing Law. This JPA Amendment shall be governed by and construed in accordance with the laws of the State of California, as applicable. No Third Party Beneficiaries. This JPA Amendment shall not create any right or interest in the public, or any member thereof, as a third party beneficiary hereof, nor shall it authorize anyone not a Party to this JPA Amendment to maintain a suit for personal injuries or property damages under the provisions of this JPA Amendment. The duties, obligations, and responsibilities of the Parties to this JPA Amendment with respect t o third party beneficiaries shall remain as imposed under existing state and federal law. Severability. In the event one or more of the provisions contained in this JPA Amendment is held invalid, illegal or unenforceable by any court of competent jurisdiction, such portion shall be deemed severed from this JPA Amendment and the remaining parts of this JPA Amendment shall remain in full force and effect as though such invalid, illegal, or unenforceable portion had never been a part of this JPA Amendment. Headings. The paragraph headings used in this JPA Amendment are for the convenience of the Parties and are not intended to be used as an aid to interpretation. Amendment. This JPA Amendment may be modified or amended by the Parties at any time. Such modifications or amendments must be mutually agreed upon and executed in writing by both Parties. Verbal modifications or amendments to this JPA Amendment shall be of no effect. Effective Date. This JPA Amendment shall become effective upon the execution thereof by the Parties hereto. B - 6 20323.00016\7605303.2 IN WITNESS WHEREOF, the Parties hereto have caused this JPA Amendment to be executed and attested by their officers thereunto duly authorized as of the date first above written. [SIGNATURES ON FOLLOWING PAGES]