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RESOLUTION NO. 2015-115 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING THE PROPERTY ASSESSED CLEAN ENERGY (PACE) PROGRAM GUIDELINES TO HELP GUIDE EXPANSION OF PACE PROGRAM OFFERINGS AVAILABLE TO CHULA VISTA PROPERTY-OWNERS
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolution.
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SUMMARY
As part of its Climate Action Plan implementation, the City has pursued the establishment of Property Assessed Clean Energy (PACE) programs to provide property-owners with a novel financing tool for energy efficiency, water conservation, and renewable energy improvements. Currently, Chula Vista property-owners can choose between two different PACE programs: the local Clean Energy Chula Vista program (administered by Ygrene Energy Fund) and the statewide CaliforniaFIRST program (administered by the California Statewide Community Development Authority & Renewable Funding). The City is considering allowing more PACE program offerings in order to provide property-owners with more choice, potentially create more competitive rates in the market, and maximize the number of completed energy and water efficiency retrofits in the community. As such, the City has created minimum program and underwriting guidelines to help guide expansion of PACE program offerings and to ensure high levels of program accountability and consumer protection.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a "Project" as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
BOARD/COMMISSION RECOMMENDATION
At their October 13th meeting, the Resource Conservation Commission recommended that the City Council expand Property Assessed Clean Energy (PACE) program offerings in Chula Vista to provide greater customer choice and to maximize energy and water efficiency retrofit opportunities. On January 12th, the Resource Conservation Commission provided feedback on draft program and underwriting guidelines.
DISCUSSION
As part of its Climate Action Plan implementation, the City has been pursuing the establishment of Property Assessed Clean Energy (PACE) programs, which allow property-owners to finance energy and water-saving improvements through a voluntary tax assessment on their property. The resulting utility savings are used to help offset the new assessment and the assessment obligations generally transfer with the property upon sale, because the new owner continues to benefit from the efficiency improvements. PACE programs were authorized under California Assembly Bill 811 and Senate Bill 555 and have successfully facilitated building energy and water upgrades in over 230 California communities, while creating local economic development benefits. Typically, third-party administrators, on behalf of host jurisdictions or joint powers authorities, manage the day-to-day program operations including contractor outreach, property-owner enrollment, and private financing coordination.
Due to potential issues with the Federal Housing Finance Agency (described further below), the City released a formal Request for Proposals for a local PACE provider in February 2013 to carefully consider program options in order to minimize risk to Chula Vista property-owners and the City. In July 2013, Chula Vista began working with Ygrene Energy Fund (Resolution #2013-257) to create a local PACE program - known as Clean Energy Chula Vista. The Clean Energy Chula Vista program began financing projects in August 2014 and has funded 57 overall retrofit projects totaling approximately $2.8 million as of December 31st. In addition, Ygrene Energy Fund has opened an office in Chula Vista employing 2 full-time employees and has recruited about 100 contractors to participate in their program. Through the City's membership in the California Statewide Community Development Authority (Resolution #2010-005), Chula Vista residents and businesses are also able to utilize the statewide CaliforniaFIRST program, which has about 95 contractors participating in the region. However, CaliforniaFIRST had been inactive in Chula Vista until recently and there have not been any local projects financed under the program to date.
When the City began investigating PACE two years ago, there was uncertainty regarding the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac-backed mortgages. In 2010, the FHFA issued a directive stating that it considered PACE-related property liens to be a threat due to their senior nature and outlined potential responses to residential PACE programs, including increasing underwriting standards for all properties within a jurisdiction. Since then, the FHFA has instructed its lending institutions to simply require a PACE lien to be repaid when a property is transferred or refinanced. It should be noted that residential PACE programs across the state indicate that lenders typically do not require PACE liens to be paid-off.
Over the last 9 months, the City has received requests from community members to allow additional PACE programs to operate in Chula Vista. In discussions with the Resource Conservation Commission (RCC), members also expressed interest in expanding PACE program offerings. Some of the identified benefits include providing greater consumer choice, possibly fostering more competitive rates/terms, expanding contractor involvement, and completing more energy and water retrofits in the community. There was some concern about potentially causing customer confusion (due to having multiple PACE program providers), but RCC members believed that knowledgeable contractors would help alleviate this issue. Most jurisdictions in the San Diego region now offer multiple (2 or 3) PACE programs.
With the Federal Housing Finance Agency issue seemingly settled, there is now less uncertainty in the PACE market. Staff suggests that if expansion of PACE program offerings is pursued, it should be guided by certain minimum standards to continue to ensure high levels of consumer protection and program accountability. As such, staff has compiled a list of program and underwriting guidelines that could be used to evaluate additional PACE programs seeking to operate in Chula Vista (Attachment 1). These guidelines build off of the best practices developed by the State of California, US Department of Energy, and others (Attachment 2) and were peer reviewed by experts at the University of San Diego's Energy Policy Initiatives Center and Center for Sustainable Energy. Any new PACE programs would still need to be formally reviewed by the City Attorney's Office and approved by the City Council.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site specific and consequently, the 500-foot rule found in California Code of Regulations section 18705.2, is not applicable to this decision. Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City's Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. PACE programs support the Healthy Community goal as they fund energy and water upgrades in the community, which is a key objective under Initiative 3.2.1. - "Design and implement innovative environmental & conservation programs."
CURRENT YEAR FISCAL IMPACT
There is no net fiscal impact to the City's General Fund from expansion of PACE program offerings. PACE programs are implemented at no-cost to the City and staff time associated with reviewing additional PACE programs would be reimbursed through the City's Local Government Partnership with San Diego Gas & Electric.
ONGOING FISCAL IMPACT
There is no ongoing fiscal impact to the City's General Fund from expansion of PACE program offerings.
ATTACHMENTS
Attachment 1 - Proposed PACE Program Guidelines
Attachment 2 - PACE Best Practices Comparison Table
Staff Contact: Brendan Reed