HB 7179, Revisions to
Chapter 163, F.S.
A PRESENTATION BY ERIN DEADY, ESQ., AICP
Lewis, Longman & Walker, P.A.
HB 7179
• Senator Mike Bennett filed SB 2322, it merged with HB 7179 and the ultimate
bill that passed became HB 7179.
• Authorizes local governments to finance "qualifying improvements" on homes or
businesses.
• Retrofits for energy efficiency, renewable energy installations or improvements
to increase a buildings storm resistance.
• Creates the Florida Development Finance Corporation
• Last bill to pass the Session!
HB 7179 Findings:
Linkage between retrofits on existing building
stock and compelling state interest.
Improvements
• “Improvements” must be affixed
to property: no appliances.
• Existing, not new construction.
Specifically prohibits financing
wind resistance improvements
on new construction.
• Work performed by licensed
contractor.
• Establishes a requirement that
the loan may not exceed 20% of
the appraised value of the home
unless an energy audit
determines that the savings of
improvements would outweigh
the assessment payment.
Qualifying Improvements
• Energy efficiency, including but not limited to: air
sealing, insulation, HVAC, daylighting, windows, energy
control/recovery systems, electric vehicle charging
equipment and efficient lighting.
• Renewable improvements (system) with one or more of
the following sources: hydrogen, solar, geothermal,
bioenergy and wind.
• Wind resistance, including but not limited to: roof deck
attachment, secondary water barrier, wind resistant
shingles, gable-end bracing, roof-to-wall connections,
storm shutters, or installing opening protections.
Benefits
• Financing overcomes upfront capital costs
of retrofits/projects for homeowner.
• Longer repayment than an alternative home
improvement loan.
• Immediate energy savings with reduction in
electricity bills to offset assessment.
• Runs with the land and is not payable upon
the sale of the property.
• Obvious: economic, energy security,
environmental and disaster preparedness
benefits.
• Not so obvious: Local construction
industry, retailers, renewable energy
providers and energy auditors.
Climate Bills & Energy
• President’s Proposal (pre-Climate Bills): 25% renewable electricity by 2025,
100% new building efficiency by 2030, phase out traditional incandescents by
2014
• Waxman-Markey Proposal: Differing regional needs were allowed for within the
Act, states and local governments would be required to adopt the new national
codes, or codes that achieve equal or better energy savings. 15% renewable
electricity + 5% efficiency by 2020, 75% new building efficiency by 2030,
appliance and lighting efficiency standards. Noncompliance would result in loss
of significant funding to the state.
• American Power Act: Support for state-level standards; if national standard
based on Bingaman energy bill, weaker than projected business-as-usual.
– Use of GHG cap and trade allowance revenue from allocations to State
energy efficiency and renewable energy programs to accelerate efficiency
improvements of residential and commercial buildings, as well as to foster
July in 2007…. rebates for solar on
adoption of distributed renewables15,the form ofFlorida Summitwater
Global Climate for public buildings.
heaters, solar photovoltaic and distributed windChange….
Process
• Local government provides the upfront funding through an agreement that a
property owner voluntarily signs.
• Repaid through an assessment on participating property owners’ tax bills. City,
county or dependent special districts levy the assessments.
– Administrative costs of program can be included in non-ad valorem assessments
across all participants.
– Exempts assessment process from cumbersome notice (hearing) and adoption
procedures of Chapter 197, F.S.
• Must be record property owner, agreement recorded in public property records,
property taxes must be paid and no delinquent for 3 years
assessments/involuntary liens; no property-based debt (current on mortgage)
• Property owner must notify their mortgage holders of their intent to enter into a
financing agreement (with a stated principal and assessment) amount at least 30
days prior to agreement
• Requires written disclosure of the assessment to prospective purchasers of the
property
Administration of
Program
• Local government adopts an ordinance, secures capital
financing, reviews applications for financing and enters
into financial agreements with the property owner.
• Local governments can partner to stretch administrative
costs.
• Program can be funded through bonds, private capital,
general revenue, other sources.
• Administration can be by the local government, a for profit
or not-for-profit organization.
Important Points with HB
7179
• Local government may levy non ad valorem
assessments (CDFI different model).
• Administration may be in the assessment.
• Record financing agreement within 5 days
after execution.
• Assessment by Florida law is a lien equal in
dignity to county taxes and assessment
(important).
• 20% of just value issues (need to relate to
constitutional provision on valuation
increases for renewable energy projects).
• No acceleration on mortgage.
• Notice to new buyer (unpaid balance due)
in written disclosure statement.
Programs Nationally
• Babylon, NY ($3 Million), Boulder, Colorado ($13 Million to date), Berkley ($1.5
Million), Sonoma ($21 Million to date), Palm Desert ($7.5 Million to date).
• GreenFinanceSF launched April 1 and since then has about 200 property owners
signed up.
• CaliforniaFIRST: A multi-jurisdictional PACE finance program including a pilot phase
for 14 counties and over 120 cities and set to launch in summer 2010. California
Communities intends to extend CaliforniaFIRST to include all interested counties and
cities following a successful pilot. Sponsored by the California Statewide
Communities Development Authority (California Communities), an association of
counties and cities created through a Joint Powers Agreement.
• Many others in various states and stages of implementation.
Leon County
• Leon Energy Assistance Program (“LEAP”)
• Official launch July 14th
• Two phases: a pilot program, which will provide up to 100 free home energy
audits, followed by the potential for a fully implemented program
• Survey to determine desire to enter into program implement many of the audit
findings and recommendations.
• If more than 1/3 of the homeowners indicate support, then the full PACE program
would be funded.
• Municipalities included unless they opted out. Can’t be City of Tallahassee utility
customers (have own rebate program)
• Looking at bank financing and/or general fund at initial capitalization of $1 Million.
• Eligible improvements include caulking; weatherstripping; air duct sealing;
insulation of walls, roof and floor; heating, ventilating and air conditioning controls;
replacing windows and doors; lighting upgrades; installation of a water or pool
heater; rainwater harvesting units; and cooling or reflective roof systems.
Other Programs
• State of Florida applied to DOE for $3-4
Million to seed pilots in 5 Counties
(Leon, St. Lucie, Miami-Dade, Orange,
Sarasota)
• Miami-Dade and Broward counties
beginning to move out on programs.
Resolutions, staff recommendations, etc.
• Sarasota moving out on program,
• Empower St. Lucie $20 million low
interest bank loans through Community
Development Financing Institution
(different approach, actual loan).
• Town of Cutler Bay, formed district,
seeking capital for a solar only program.
Fannie/Freddie/FHFA
Debate
• Protections for consumers and lenders (Most programs and state
law have safeguards). They say, makes it harder for people to pay
mortgages?
• Concerns raised from existing mortgage lenders because PACE
takes a senior lien position (Legal issues related to tradition
assessments). 37,000 special assessment districts in U.S. and all of
those assessments have the same senior lien status. (Only past
due assessments due at property transfer to limited exposure is
what is in state law).
• Debt to income test (20% threshold in state law). PACE reduces
loan to value limits in mortgages.
• Truth in lending disclosures (Leon Ordinance addresses this).
The Cases
• US District court for the Northern District of CA (Case No. C10-03084).
Attorney General of California files complaint for Declaratory and Equitable
Relief (Violations of NEPA and unfair business practices).
• US District court for the Northern District of CA (Case No. C10-3270).
Sonoma County files complaint for Declaratory and Equitable Relief (FHFA
exceeded statutory jurisdiction and authority, failure to adhere to rulemaking
procedures under Federal APA, request for judicial declaration to prevent
harm to their PACE program, disruption of contractual relationships with
existing participants in program, violations of NEPA).
• Babylon, NY complaint draft ready to file in Eastern District of NY. Same
claims plus local claims including geographic discrimination (adjustment of
loan to value ratios/threats of redlining by Fannie/Freddie), tortious
interference and local assessment arguments.
What They Did…
• Fannie / Freddie send lender caution notices early May (debate
stems to last year).
• Upheld and supported by FHFA in early July.
• FHFA characterizes assessments as loans and are “unlike routine
tax assessments and post unusual and difficult risk management
challenges for lenders, servicers and mortgage securities investors.”
• PACE first liens run contrary to the Uniform Security Instrument but
tells Fannie / Freddie to waive prohibitions for those who have
PACE assessments prior to July 6, 2010.
• FHFA directs Fannie and Freddie to take actions that they restrict
mortgage lending opportunities and lower credit lines for
homeowners who live in municipalities that offer home energy
retrofit programs because energy retrofit lending programs present
significant safety and soundness concerns that must be addressed
by the regulated entities”.
The Politics- What’s Next?
Congressman Mike Thompson (D-CA)
joined by 29 other members of Congress
introduced legislation “PACE Assessment
Protection Act of 2010”
Orders lenders to adopt underwriting
standards consistent with mortgage practice.
Liens consistent with same shall not be a
mortgage default triggering lender’s
remedies-
No requirements to pay assessments before
transfer of property-
No discrimination of communities with PACe
programs-
Questions to Ponder…
• 1. Do you want to have a large program initially
or something smaller like a pilot program?
• 2. What financing do you want to use, bonds,
private bank financing, pursue grants?
• 3. What types of improvements do you want to
include (there is some flexibility here)? Leon =
Water!
• 4. Do you want to partner with other local
governments or run your program individually (if
at all)?
Other Leveraging Ideas
• Other types of districts under home rule powers (TIF, Lake Worth
Park of Commerce example)
• Partnered governments (5 City Grant)-
• Capitalize on utility demand side management programs-
• Incorporate tax rebates (need research to assure updated
provisions)
• Leverage grants with one another (PBC example, but be weary of
constraints and commitments)
• Revolving loan funds