SENATE, No. 1570


with committee amendments




DATED:  JUNE 16, 2016


      The Senate Environment and Energy Committee favorably reports Senate Bill No. 1570 with committee amendments. 

      This bill, as amended, authorizes municipalities to provide for public or private financing of renewable energy systems, energy produced by such systems, energy efficiency improvements, energy storage, microgrids, water conservation, storm shelter construction, and flood and hurricane resistance projects through the use of voluntary special assessments on real property, thereby expanding the "clean energy special assessment," established by P.L.2011, c.187 (C.40:56-1.4 et al.), and renaming it the "PACE special assessment," using the acronym for the term "property assessed clean energy."  Under the bill, owners of industrial, agricultural, commercial, residential property with five or more dwelling units, and property owned by a tax-exempt or nonprofit entity such as a school, hospital, institution of higher education, or religious institution may participate in the program. 

      Under current law, the governing body of a municipality, upon application to and approval by the Director of the Division of Local Government Services in the Department of Community Affairs, may undertake the financing of the purchase and installation of renewable energy systems and energy efficiency improvements made by property owners. By ordinance, the municipality may provide for a "clean energy special assessment" to be imposed on those properties when the property owner has requested the assessment in exchange for receiving assistance with the initial financing.  The only projects currently eligible for this program are installations of renewable energy systems and energy efficiency improvements.  The bill, as amended, would expand the class of eligible projects and the financing methods under a municipal PACE program but would continue to require approval of the program by the Director of the Division of Local Government Services.

      Under the bill as amended, a PACE project may include the purchase, lease, or installation, or any combination thereof, of renewable energy systems or the energy produced by such systems, energy efficiency improvements, energy storage, microgrids, water conservation projects, flood resistant construction projects, hurricane resistant construction projects, storm shelter projects, and safe room projects.    

      This bill permits municipalities to issue bonds upon terms set forth in the ordinance.  However, the bill provides that no such funding can be guaranteed by the full faith and credit of the municipality, or any other public entity.  The bill also allows a municipality to designate a county, county improvement authority, another public entity, or one or more private entities to implement a PACE program on behalf of a municipality.  When so designated to a public entity, the bill would further authorize the public entity to designate a private entity to develop, implement, administer, or finance a PACE program. The bill, as amended, provides that any agreement between a municipality, county, county improvement authority, or other public entity, and a private entity would be subject to the "Local Public Contracts Law."

      Under the bill, an entity that implements the program may issue bonds to fund PACE projects.  The proceeds would be used to repay the debt service on the bonds and pay the projects’ costs.   The bill, as amended, provides that the PACE special assessment imposed would constitute a single continuous first lien on the property paramount to all prior liens except subsequent taxes or assessments.  If payment of the special assessment is not made, it is treated in the same manner as unpaid property taxes.  Under the bill, as amended, the PACE special assessment may be assigned by the municipality, or other entity administering the PACE program, and the assignment would transfer all of the municipality’s rights, title, and interest in the PACE special assessment, as well as the rights and remedies under any special assessment agreement.

      The committee amendments:

      (1)  change the definition of PACE project to include financing of energy storage and microgrid projects and eliminate purchase contracts, leases, and power purchase agreements;

      (2)  change the definition of “property” to limit the residential aspect of the program to residential properties with five or more dwelling units, and to include property owned by tax-exempt or nonprofit entities such as schools, hospitals, institutions of higher education, and religious institutions;

      (3)  require the Director of the Division of Local Government Services to approve a municipality’s participation in the program;

      (4)  require contracts between local governments and private entities to be subject to the “Local Public Contracts Law”;

      (5)  delete language exempting the issuance of bonds from the review of the Local Finance Board;

      (6)  delete language that authorizes bond proceeds to pay for public entity or private entity financing obligations;

      (7)  delete language that requires permission by the municipality in order for the property owner to assign or transfer solar renewable energy certificates or other renewable energy certificates;

      (8)  delete language that exempts the municipal ordinance establishing a PACE program from certain notice and publication requirements;

      (9)  allow the municipal ordinance to provide for eligibility requirements and project development guidelines;

      (10)  require the municipal ordinance to include certain information regarding the program in the ordinance rather than allow the information to be established through a subsequent municipal resolution;

      (11) change the ratio of the maximum allowable combination of PACE financing and existing loan-to-value ratio from 100 percent to 80 percent;

      (12)  require existing mortgage holders to provide written consent for the imposition of the PACE special assessment (which constitutes a first lien);

      (13)  delete language allowing the commencement of the payment obligation of a PACE special assessment before completion of a project, and language providing the authority to combine a supplemental special assessment with the initial special assessment if additional funds are required for a project;

      (14)  delete language by which provisions of law establishing the PACE program would control in the event of inconsistency with any other law; and

      (15)  make technical amendments to the bill.