. 213·

TO:

FROM:

RE:

City Council Agenda Report

City Council

Public Works Director, Ruben Martinez, 879-6901

Meeting Date: January 20, 2015

CONSIDERATION OF A RESOLUTION TO PARTICIPATE IN THE CALIFORNIAFIRST

PROPERTY ASSESSED CLEAN ENERGY (PACE) PROGRAM.

REPORT IN BRIEF:

California law allows cities and counties to offer Property Assessed Clean Energy (PACE) programs to propertyowners who are Interested in entering into a contractual agreement to finance the installation of renewable energysources or the installation of permanent energy/water efficient improvements, and pay back the loans as anassessment on their property taxes. Participation in PACE programs is completely voluntary and property taxesremain unchanged for properties that do not participate in PACE programs. The Council is requested to considerjoining the CaliforniaFIRST PACE program, which is offered through the California Statewide CommunitiesDevelopment Authority (CSCDA) and administered by Renewable Funding, LLC.

Recommendation: The Public Works Director recommends that the City Council adopt the followingresolution:

RESOLUTION OF THE COUNCIL OF THE CITY OF CHICO AUTHORIZING THE CITY OF CHICO TO

JOIN THE CALIFORNIAFIRST PROGRAM; AUTHORIZING THE CALIFORNIA STATEWIDECOMMUNITIES DEVELOPMENT AUTHORITY TO ACCEPT APPLICATIONS FROM PROPERTY

OWNERS, CONDUCT CONTRACTUAL ASSESSMENT PROCEEDINGS AND LEVY CONTRACTUALASSESSMENTS WITHIN THE INCORPORATED TERRITORY OF THE CITY; AND AUTHORIZINGRELATED ACTIONS

FISCAL IMPACT:

The CaliforniaFIRST program will handle all assessment administration, bond issuance, and bond administrationfunctions. If approved by Council, staff would mainly just assist in communicating the availability of this new

financing tool to the community through the City's website and other economic development efforts.

This new financing option also has the potential to spur local job creation in energy efficiency and renewableenergy supply contractors. In addition, job training to meet these specialized trades is anticipated to benefit localand regional residents.

BACKGROUND:

California state law (Assembly Bill 811 and Senate Bill 555) enable cities and counties to establish financingprograms in which property owners may obtain financing for the acquisition and installation of energy-efficiency,water-conservation, and renewable-energy improvements to or on their real property, including homes andcommercial buildings. Property owners that choose to obtain such financing would repay it through assessmentsor special taxes on their property tax bills over a set period of time. This type of program is often referred to asPACE financing. Typically, PACE programs are funded through bonds, warehouse funds, or private financinginstitutions, and are administered by a third-party administrator.

The City Council has previously approved resolutions to allow properties within the Chico incorporated area to beincluded in the regional FIGTREE and Ygrene PACE programs developed by the County of Butte. The benefitsof PACE programs may include:

Property Owner Incentives:

1. Lower energy costs.2. Ability to replace outdated equipment.

3. Accessible financing based on property values and the market interest rates.

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RE: CaliforniaFIRST PACE ProgramMeeting Date: 1/20/15Page 2

No money down or up front costs needed.No credit checks since it is secured against the property.A low, fixed interest rate for long term financing (up to 20 years) that stays with the property if it is sold.Increased building valuation.

Benefits to the City of Chico and Community:

Stimulates the economy through job growth.Local job creation as contractor and "green retailers" are put to work.Sales tax generated from equipment and supplies purchased.Reduction in energy and water use and the greeting of our community.Ability to leveraging outside capital for this incentive financing.No costs to implement and administer the program.

DISCUSSION:

The CaliforniaFIRST PACE Program was created and approved by the CSCDA to allow owners of property inparticipating cities and counties to finance a variety of improvements, including, but not limited to, renewableenergy, energy efficiency and water efficiency improvements and seismic strengthening improvements. Thefinancing and the assessment process for the CaliforniaFIRST is authorized by Chapter 29 of Division 7 of theStreets & Highways Code, as amended. CSCDA is a joint powers authority sponsored bythe League of CaliforniaCities and the California State Association of Counties. The member agencies of CSCDA include 57 counties,the City of Chico, and more than 400 other local agencies throughout California. CSCDA will facilitate thecontractual assessments with the property owners and has selected Renewable Funding, LLC to administer andprovide funds for the program.

Unlike the FigTree and Ygrene PACE programs, the CaliforniaFIRST program is a participant in the statewidePACE Loss Reserve Program administered by the California Alternative Energy and Advanced TransportationFinancing Authority. The $10 million Loss Reserve Program makes mortgage lenders, including Fannie Mae andFreddie Mac, whole foranylossesfrom a foreclosureor forced saleattributabletoa PACE lien. Therefore, joiningCaiforniaFIRST will provide more opportunities for residential property owners in Chico to participate in a PACEprogram. A matrix comparing the different PACE programs in Butte County is attached as Exhibit "B"

The proposed resolution authorizes CSCDA to accept applications from participating Chico property owners, toconductthe assessment proceedings, and levythe assessments againstthese properties. The Citycan withdrawfrom the CaliforniaFIRST Program at any time by passing a resolution rescinding the authorization.

ENVIRONMENTAL REVIEW:

The adoption of the Resolution is not a "project" under the California Environmental Quality Act (CEQA), becauseitdoes notinvolveanycommitmenttoa specificprojectwhich mayresultina potentiallysignificantphysical impacton the environment, as contemplated by Title 14, California Code of Regulations, Section 15378 (B) (4).

PUBLIC CONTACT: None

Reviewed by

Ruben Martinez, Pu-bli451Work Director

DISTRIBUTION:

City Clerk (3)Jennifer Macarthy, Butte CountyJoe Livaich, Renewable Funding, LLC

ATTACHMENTS:

Exhibit "A": Resojution

Exhibit "B" PACE Program Comparison Matrix

Approved by:

Mark Ortle, City Manager

M:\MSC\Energy Projects\PACE\CAL First PACE\Cal First PACE 1-20-15 Council Agenda Report.frm

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RESOLUTION NO.

RESOLUTION OF THE COUNCIL OF THE CITY OF CHICO AUTHORIZING THE

CITY OF CHICO TO JOIN THE CALIFORNIAFIRST PROGRAM; AUTHORIZINGTHE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY

TO ACCEPT APPLICATIONS FROM PROPERTY OWNERS, CONDUCTCONTRACTUAL ASSESSMENT PROCEEDINGS AND LEVY CONTRACTUAL

ASSESSMENTS WITHIN THE INCORPORATED TERRITORY OF THE CITY;AND AUTHORIZING RELATED ACTIONS

WHEREAS, the California Statewide Communities Development Authority

("California Communities") is a joint exercise of powers authority the members of which

include numerous cities and counties in the State of Cali fornia, including the City of Chico

("City"); and

WHEREAS, California Communities has established the CaliforniaFIRST program

(the "CaliforniaFIRST Program") and will provide financing for certain improvements

authorized by Chapter 29 of Division 7 of the Streets & Highways Code ("Chapter 29"),

including, but not limited to, renewable energy, energy efficiency and water efficiency

improvements and seismic strengthening improvements (the "Improvements") through the

levy of contractual assessments pursuant to Chapter 29 of Division 7 of the Streets &

Highways Code ("Chapter 29") and the issuance of improvement bonds (the"Bonds") under

the Improvement Bond Act of 1915 (Streets and Highways Code Sections 8500 and

following) (the "1915 Act") upon the security of the unpaid contractual assessments; and

WHEREAS, Chapter 29 provides that assessments may be levied under its provisions

only with the free and willing consent of the owner of each lot or parcel on which an

assessment is levied at the time the assessment is levied; and

WHEREAS, the City desires to allow the owners of property ("Participating Property

Owners") within the incorporated territory of the City to participate in the CaliforniaFIRST

Program and to allow California Communities to conduct assessment proceedings under

Chapter 29 within the incorporated territory of the City and to issue Bonds under the 1915 Act

to finance the Improvements; and

WHEREAS, California Communities will conduct assessment proceedings under

Chapter 29 and issue Bonds under the 1915 Act to finance Improvements;

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WHEREAS, the City will not be responsible for the conduct of any assessment

proceedings; 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 CaliforniaFIRST Program;

NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Chico as

follows:

1. The Council hereby finds and declares that properties in the City's incorporated area

will benefit from the availability of the CaliforniaFIRST Program within the

incorporated territory of the City and, pursuant thereto, the conduct of special

assessment proceedings by California Communities pursuant to Chapter 29 and the

issuance of Bonds under the 1915 Act.

2. In connection with the Cali forniaFIRST Program, the City hereby consents to the

conduct of special assessment proceedings by Cali fornia Communities pursuant to

Chapter 29 on any property within its jurisdiction and the issuance of Bonds under the

1915 Act; provided, that

a. The Participating Property Owners, who shall be the legal owners of such

property, execute a contract pursuant to Chapter 29 and comply with other

applicable provisions of Cali fornia law in order to accomplish the valid levy of

assessments; and

b. The City will not be responsible for the conduct of any assessment

proceedings; 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 CaliforniaF1RST Program.

c. The issuance of Bonds will occur following receipt of a final judgment in a

validation action filed by California Communities pursuant to Code of Civil

Procedure Section 860 that the Bonds are legal obligations of Cali fornia

Communities.

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3. Pursuant to the requirements of Chapter 29, California Communities has prepared and

will update from time to time the "Program Report" for the CaliforniaFIRST Program

("Program Report"), and California Communities will undertake assessment

proceedings and the financing of Improvements as set forth in the Program Report.

4. The appropriate officials and staff of the City are hereby authorized and directed to

make applications for the CaliforniaFIRST program available to all property owners

who wish to finance Improvements; provided, that California Communities shall be

responsible for providing such applications and related materials at its own expense.

5. The Public Works Director, together with any other staffpersons chosen by the City

Manager from time to time, are hereby designated as the contact persons for California

Communities in connection with the CaliforniaFIRST Program:

6. The appropriate officials and staff of the City are hereby authorized and directed to

execute and deliver such closing certificates, requisitions, agreements and related

documents as are reasonably required by California Communities in accordance with

the Program Report to implement the CaliforniaFIRST Program for Participating

Property Owners.

7. The City Council hereby finds that adoption of this Resolution is not a "project" under

the California Environmental Quality Act, because the Resolution does not involve

any commitment to a specific project which may result in a potentially significant

physical impact on the environment, as contemplated by Title 14, California Code of

Regulations, Section 15378(b)(4).

8. This Resolution shall take effect immediately upon its adoption. The City Clerk is

hereby authorized and directed to transmit a certified copy of this resolution to the

Secretary of Cali fornia Communities.

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THE FOREGOING RESOLUTION was adopted by the City Council of the City of

Chico at its meeting held on , by the following vote:

AYES:

NOES:

ABSENT:

ABSTAINED:

DISQUALIFIED:

ATTEST:

Deborah R. Presson, City Clerk

APPROVED A TO F RM AND CONTENT:

Vin ™ent C. Ewing. City Attorney

Eligible Improvements

Financing/Assessment

Legislative Authority

Assessment Authority/Entity

Program Administrator

Minimum Project Amount

Maximum Loan Amount

Lien Requirements

Notice to Lenders

Loan to Value Ratio

Interest Rates

Term

Sources of Funding

Program Cost to PropertyOwner

Program Cost to Contractors

City Staff Time Requirement

Program Revenues to theCounty/City

Indemnification

EXHIBIT B

COMPARISON OF BUTTE COUNTY PACE PROGRAMS

Renewable energy, energy efficiency. and

water conservation improvements which

are permanently affixed to the property.

Chapter 29 of Division 7 of the Streets &

Highways Code, as amended.

California Enterprise Development

Authority (CEDA)

Figtree

$5,000

Up to 20% of the property value

Senior lien over mortgage liens is

required. Lien is on par with propertytaxes.

The mortgage lender must provide a

written consent and acknowledgement

thatthe property owner will not be indefault by participating in the PACE

Program Figtree obtains lender consenton behalf of the property owner to ensure

that property owners are not in violation of

existing mortgage covenants.

1 to 1. Total amount of financing must notexceed 20% of the value of the property.

Approximately 6.3% - 6.5% fixed rate.

Up to 20 years based on useful life of the

mprovements.

Through the issuance of municipalbonds, free market sourcing. and

warehouse lending.

A fee of $695 will be added to the total

amount of the assessment at the time of

closing An additional $100 charge willapply to each of any additional parcels in

connection with the assessment.

There is no application fee to apply to

become a Figtree Registered ContractorA fee of $695 is due to Figtree at the time

of funding of each project

Neglible. Figtree administers the programand pays assessment and recording feesto County

2% of annually assessment payments are

provided as payment to the County tocompensate for County costs In addition,FIGREE pays costs noted above to ClerkRecorder and Auditor/Controller

Figtree and CEDA provide full

indemnification to the County and

participating cities.

Renewable energy. energy efficiency, andwater conservation improvements which are

permanently affixed to the property.

Mello-Roos Community Facilities Act of 1982(California Government Code §§ 53311)

Butte County

Ygrene

$2,500

Up to 15% of the property value

Senior lien over mortgage liens is required

Lien is on par with property taxes.

The Ygrene program does not require lenderconsent, but requires lender notification. The

property owner is required to notify all lendersby Certified Mail of the property owner's intent

to participate in the PACE program. The

Notice states that lender has 30 days toprovide documentation demonstrating that

program liens would violate existing loan

covenants After 20 days of the waiting periodhas lapsed, if the property owner has not

been contacted by the lender, the property

owner is to send an additional Notice by

Certified Mail stating that the the project isscheduled for funding approval in 10 days.

85% loan to value.

Wall Street Prime Rate (currently 3 25%) plus3.2%.

Up to 20 years based on useful life of the

mprovements

Through the issuance of municipal bonds,

free market sourcing, and warehouse

lending.

Application fee of $50 plus various additional

fees depending on the project for processing,

underwriting, recording. and disbursement.

Contractors charged a fee not to exceed 3%

of the bid amount for each project submittedfor funding.

Neglible. County Administration reviews,

approves, and signs all applications

(approximately 30 minutes per month).

Will negotiate amount to reimburse Countyfor time spent to review/approve applications

In addition. Ygrene pays (through theproperty owner fees) recording andassessment costs to Clerk Recorder and

Auditor/Controller

Ygrene provides full indemnification to theCounty and participating cities.

Renewable energy. energy efficiency. and

water conservation improvements which

are permanently affixed to the property.

Chapter 29 of Division 7 of the Streets &

Highways Code, as amendedCalifornia Statewide Communities

Develoment Authority (CSCDA)

Renewable Financing, LLC

$5,000 for residential projects

$50.000 for commercial projects

Up to 15% of the property value

Senior lien over mortgage liens is

required. Lien is on par with propertytaxes.

The mortgage lender must provide a

written consent and acknowledgementthat the property owner will not be in

default by participating in the PACE

Program. Figlree obtains lender consenton behalf of the property owner to ensure

that property owners are not in violation of

existing mortgage covenants

70% loan to value.

Depends on the cost of capital financed

and ongoing program fees.

Up to 20 years based on useful life of theimprovements.

Through the issuance of municipalbonds, free market sourcing, and

warehouse lending.

Closing fees include program

management, project undelwriting. lienrecordation, bond document preparation

and funding disbursement

None

Neglible. Renewable Funding, LLC

administers the program and paysassessment and recording fees.

Not applicable. County is currently notparticipating in CaliforniaFIRST

Full indemnification to the CSCDA and

the City.