BILL NUMBER: AB 2693AMENDED BILL TEXT AMENDED IN SENATE AUGUST 2, 2016 AMENDED IN SENATE JUNE 22, 2016 AMENDED IN SENATE JUNE 6, 2016 AMENDED IN ASSEMBLY MAY 10, 2016 AMENDED IN ASSEMBLY APRIL 28, 2016 AMENDED IN ASSEMBLY APRIL 11, 2016 AMENDED IN ASSEMBLY MARCH 17, 2016 INTRODUCED BY Assembly Member Dababneh (Coauthors: Assembly Members Travis Allen, Hadley, and Linder) FEBRUARY 19, 2016 An act to amend Section 53328.1 of the Government Code, and to amend Section 5898.15 of, to amend, renumber, and add Section 5898.16 of, and to add Section 5898.17 to, the Streets and Highways Code, relating to property improvements. LEGISLATIVE COUNSEL'S DIGEST AB 2693, as amended, Dababneh. Financing requirements: property improvements. (1) Existing law authorizes the legislative body of a public agency, as defined, to determine that it would be convenient, advantageous, and in the public interest to designate an area within which authorized public agency officials and property owners may enter into voluntary contractual assessments to finance certain improvements, including the installation of distributed generation renewable energy sources or energy or water efficiency improvements that are permanently fixed to real property, as specified. Existing law prohibits a public agency from permitting a property owner to participate in any program established pursuant to these provisions if the owner's participation would result in the total amount of any annual property taxes and assessments exceeding 5% of the property's market value, as determined at the time of approval of the owner's contractual assessment. This bill would also prohibit a public agency from permitting a property owner to participate in a program pursuant to these provisions unless the property owner satisfies certain conditions and the property owner is given the right to cancel the contractual assessment at any time prior to midnight on the 3rd business day after certain events occur without penalty or obligation, consistent with certain requirements. The bill would require a financing estimate document or a substantially equivalent document to be completed and delivered to a property owner at least 3 business days before the property owner consummates a voluntary contractual assessment pursuant to one of these programs. The bill would prohibit a public agency or other party to a voluntary contractual assessment pursuant to one of these programs to make any representations to a property owner regarding the effect the financed improvements will have on the market value of the property unless the public agency or other party derives its estimates of market value using specified methods. This bill would limit these provisions to a property owner who seeks to participate in a program established to finance the installation of distributed generation renewable energy sources or energy or water efficiency improvements that are permanently fixed to real property pursuant to these provisions for a residential property with 4 or fewer units. (2) The Mello-Roos Community Facilities Act of 1982 specifies the requirements for the establishment of a community facilities district, including, among other things, a petition, a hearing, the establishment of the boundaries of the community facilities district, and an election on the question. Existing law authorizes a community facilities district formed pursuant to an alternative procedure under which the district initially consists solely of territory proposed for annexation to the community facilities district in the future and territory is annexed and subjected to special taxes only upon unanimous approval of the owners, to finance and refinance the acquisition, installation, and improvement of energy efficiency, water conservation, and renewable energy improvements. This bill would require a legislative body to comply with the requirements described above prior to the annexation of a parcel or parcels to a community facilities district formed pursuant to the alternative procedure. The bill would prohibit a parcel or parcels from being annexed to a community facilities district formed pursuant to the alternative procedure unless the parcel satisfies specified conditions. Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature finds and declares all of the following: (1) The Property Assessed Clean Energy program has been promoted in California widely as an innovative and alternative form of financing for environmental improvements for the benefit of the public and California's environment. (2) The promotion of the Property Assessed Clean Energy financing is now a popular and widespread form of alternative financing for consumers seeking solar energy, water conservation, energy efficiency, and earthquake retrofitting improvements to the benefit of all Californians. (3) The consumer obligation to repay voluntary contractual assessments created by the Property Assessed Clean Energy program is sometimes misunderstood and may affect the consumer's ability to refinance their loan or sell their property. (4) Making residential real estate secured loans to consumers through Property Assessed Clean Energy financing for home improvements has grown rapidly, raising questions as to whether the Property Assessed Clean Energy program is adequately supported by government regulation. (5) The passage of this act is essential to promote standardized disclosures and protections for consumers to ensure that the Property Assessed Clean Energy program can continue to be widely used to offset the adverse impacts of years of climate change. (b) This act shall be known, and may be cited, as the PACE Preservation and Consumer Protections Act. SEC. 2. Section 53328.1 of the Government Code is amended to read: 53328.1. (a) As an alternate and independent procedure for forming a community facilities district, the legislative body may form a community facilities district that initially consists solely of territory proposed for annexation to the community facilities district in the future, with the condition that a parcel or parcels within that territory may be annexed to the community facilities district and subjected to the special tax only with the unanimous approval of the owner or owners of the parcel or parcels at the time that the parcel or parcels are annexed. In that case, the legislative body shall follow the procedures set forth in this article for the formation of a community facilities district, with the following exceptions: (1) The legislative body shall not be obligated to specify the rate or rates of special tax in the resolution of intention or the resolution of formation, provided that both of the following are met: (A) The resolution of intention and the resolution of formation include a statement that the rate shall be established in an amount required to finance or refinance the authorized improvements and to pay the district's administrative expenses. (B) The maximum rate of special tax applicable to a parcel or parcels shall be specified in the unanimous approval described in this section relating to the parcel or parcels. (2) The legislative body shall not be obligated to specify in the resolution of intention the conditions under which the obligation to pay the specified special tax may be prepaid and permanently satisfied. Instead, a prepayment provision may be included in the unanimous approval of the owner or owners of each parcel or parcels at the time that the parcel or parcels are annexed to the community facilities district. (3) In lieu of approval pursuant to an election held in accordance with the procedures set forth in Sections 53326, 53327, 53327.5, and 53328, the appropriations limit for the community facilities district, the applicable rate of the special tax and the method of apportionment and manner of collection of that tax, and the authorization to incur bonded indebtedness for the community facilities district shall be specified and be approved by the unanimous approval of the owner or owners of each parcel or parcels at the time that the parcel or parcels are annexed to the community facilities district. No additional hearings or procedures are required, and the unanimous approval shall be deemed to constitute a unanimous vote in favor of the appropriations limit for the community facilities district, the authorization to levy the special tax on the parcel or parcels, and the authorization to incur bonded indebtedness for the community facilities district. (4) Notwithstanding Section 53324, this paragraph establishes the applicable protest provisions in the event a local agency forms a community facilities district pursuant to the procedures set forth in this section. If 50 percent or more of the registered voters, or six registered voters, whichever is more, residing within the territory proposed to be annexed to the community facilities district in the future, or if the owners of one-half or more of the area of land proposed to be annexed in the future and not exempt from the special tax, file written protests against establishment of the community facilities district, and protests are not withdrawn so as to reduce the protests to less than a majority, no further proceedings to form the community facilities district shall be undertaken for a period of one year from the date of decision of the legislative body on the issues discussed at the hearing. If the majority protests of the registered voters or of the landowners are only against the furnishing of a specified type or types of facilities or services within the district, or against levying a specified special tax, those types of facilities or services or the specified special tax shall be eliminated from the resolution of formation. (5) The legislative body shall not record a notice of special tax lien against any parcel or parcels in the community facilities district until the owner or owners of the parcel or parcels have given their unanimous approval of the parcel's or parcels' annexation to the community facilities district, at which time the notice of special tax lien shall be recorded against the parcel or parcels as set forth in Section 53328.3. (b) Notwithstanding the provisions of Section 53340, after adoption of the resolution of formation for a community facilities district described in subdivision (a), the legislative body may, by ordinance, provide for the levy of the special taxes on parcels that will annex to the community facilities district at the rate or rates to be approved unanimously by the owner or owners of each parcel or parcels to be annexed to the community facilities district and for apportionment and collection of the special taxes in the manner specified in the resolution of formation. No further ordinance shall be required even though no parcels may then have annexed to the community facilities district. (c) The local agency may bring an action to determine the validity of any special taxes levied pursuant to this chapter and authorized pursuant to the procedures set forth in this section pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure. Notwithstanding Section 53359, if an action is brought by an interested person pursuant to Section 863 of the Code of Civil Procedure to determine the validity of any special taxes levied against a parcel pursuant to this chapter and authorized pursuant to the procedures set forth in this section, the action shall be brought pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure, but shall, notwithstanding the time limits specified in Section 860 of the Code of Civil Procedure, be commenced within 15 days after the date on which the notice of special tax lien is recorded against the parcel. Any appeal from a judgment in any action or proceeding described in this subdivision shall be commenced within 30 days after entry of judgment. (d) A community facilities district formed pursuant to this section may only finance facilities pursuant to subdivision (l) of Section 53313.5. (e) (1) The legislative body shall comply with the requirements specified in Sections 5898.16 and 5898.17 of the Streets and Highways Code prior to the annexation of a parcel or parcels to a community facilities district formed pursuant to this section. (2) A parcel or parcels shall not be annexed to a community facilities district formed pursuant to this section unless the parcel complies with the conditions specified in subdivision (a) of Section 26063 of the Public Resources Code and in subdivision (b) of Section 10081 of Title 4 of the California Code of Regulations. (f) In connection with formation of a community facilities district and annexation of a parcel or parcels to the community facilities district pursuant to this section, and the conduct of an election on the proposition to authorize bonded indebtedness pursuant to the alternate procedures set forth in Section 53355.5, the local agency may, without additional hearings or procedures, designate a parcel or parcels as an improvement area within the community facilities district. After the designation of a parcel or parcels as an improvement area, all proceedings for approval of the appropriations limit, the rate and method of apportionment and manner of collection of special tax and the authorization to incur bonded indebtedness for the parcel or parcels shall apply only to the improvement area. (g) In connection with a community facilities district formed under this section, as an alternate and independent procedure for making the changes described in Section 53330.7, the changes may be made with the unanimous approval of the owner or owners of the parcel or parcels that will be affected by the change and with the written consent of the local agency. No additional hearings or procedures are required, and the unanimous approval shall be deemed to constitute a unanimous vote in favor of the proposed changes. If the proceeds of a special tax are being used to retire any debt incurred pursuant to this chapter and the unanimous approval relates to the reduction of the special tax rate, the unanimous approval shall recite that the reduction or termination of the special tax will not interfere with the timely retirement of that debt. SEC. 3. Section 5898.15 of the Streets and Highways Code is amended to read: 5898.15. (a) A public agency shall not permit a property owner to participate in any program established pursuant to this chapter if the owner's participation would result in the total amount of any annual property taxes and assessments exceeding 5 percent of the property's market value, as determined at the time of approval of the owner's contractual assessment. (b) Nothing in this chapter shall be construed to void or otherwise release a property owner from the contractual obligations incurred by a contractual assessment on a property, particularly in the event that the total amount of annual property taxes and assessments exceeds 5 percent of a property's market value after the property owner has entered into a contractual assessment pursuant to this chapter. (c) This section applies to a property owner who seeks to participate in a program established pursuant to this chapter for types of property not subject to the requirements of Sections 5898.16 and 5898.17. SEC. 4. Section 5898.16 of the Streets and Highways Code is amended and renumbered to read: 5898.18. All references to financing in this chapter shall be deemed to also refer to refinancing, except that with respect to refinancing, the legislative body shall conclude that providing the refinancing will result in an increased adoption of the improvements authorized to be financed by this chapter. This section does not constitute a change in, but is declaratory and a clarification of existing law. SEC. 5. Section 5898.16 is added to the Streets and Highways Code, to read: 5898.16. (a) A public agency shall not permit a property owner to participate in any program established pursuant to this chapter for the purposes specified in paragraph (2) of subdivision (a) of Section 5898.20 if any of the following apply: (1) The property owner's participation would result in the total amount of the annual property taxes and assessments exceeding 5 percent of the property's market value, as determined at the time of approval of the property owner's contractual assessment. (2) The property does not comply with the conditions specified in subdivision (a) of Section 26063 of the Public Resources Code and in subdivision (b) of Section 10081 of Title 4 of the California Code of Regulations. (b) A public agency shall not permit the property owner to participate in any program established pursuant to this chapter for the purposes specified in paragraph (2) of subdivision (a) of Section 5898.20 unless the property owner is given the right to cancel the contractual assessment without penalty or obligation, consistent with the following: (1) The property owner shall receive two copies of the right to cancel document set forth below or a substantially similar document that displays the same information in a substantially similar format. Right to Cancel Property Owner: ____________________________ (Owner Full Name), (Phone), ________ (Email) Property Address: ____________________ (Property Address) Your Right to Cancel: You are entering into a contractual assessment with __________ for financing that will result (Provider) in a lien on the property at __________________ (Property Address) . You may cancel this transaction, without cost, until midnight on the third business day after whichever of the following events occurs last: (1) The date on which you signed the contractual assessment. (2) The date you received your Financing Estimate and Disclosure. (3) The date you received this notice of your right to cancel. If you cancel the transaction, __________, (Provider) within 20 calendar days after __________ (Provider) receives notice of cancellation, must take the steps necessary to reflect the fact that, if recorded, the lien on your property has been discharged and removed from the tax rolls,been discharged or reconveyed,and __________ must return to you any money you (Provider)(Provider)must return to you any money you have given inhave given in connection with your application,not includingnot including the application processing fee.AfterAfter __________ has done the things mentionedabove,(Provider)above, you must return any money paid to you oron youron your behalf, whether to your contractor or anyotherother person. All money must be returned to theaddressaddress below.If you cancel the transaction: 46 You will not be charged a cancellation fee; and 46 You will be refunded any money you have given, excluding application and processing fees as applicable. To cancel this transaction, you may submit this form to __________ in writing at: (Provider) Provider: __________ Attn: Right to Cancel Notification Email: __________ Fax number: __________ Address: __________ Deadline to Cancel: If you want to cancel this transaction, you must submit this form on or before (Insert date). You may use any written statement that is signed and dated by you and states your intention to cancel, or you may use this notice by dating and signing below. If you cancel by mail, fax, or email, you must send the notice no later than midnight of the third business day following the date on which you signed the contractual assessment. If you send or deliver your written notice to cancel some other way, it must be delivered to the above address no later than the da time indicated above. I WISH TO CANCEL ________________ _____ Property Owner Date (2) The property owner is deemed to have given notice of cancellation at the moment that the property owner sends the notice by mail, email, or fax or at the moment that the property owner otherwise delivers the notice, as applicable. (c) This section only applies to a property owner who seeks to participate in a program established pursuant to this chapter for the purposes specified in paragraph (2) of subdivision (a) of Section 5898.20 for a residential property with four or fewer units. (d) For the purposes of this section, "property owner" shall include allpersons listed on the title to the property.owners of record. SEC. 6. Section 5898.17 is added to the Streets and Highways Code, to read: 5898.17. (a) The disclosure set forth below, or a substantially equivalent document that displays the same information in a substantially similar format, shall be completed and delivered to a property owner at least three business days before the property owner consummates a voluntary contractual assessment described in this chapter for purposes specified in paragraph (2) of subdivision (a) of Section 5898.20 or a special tax described in Section 53328.1 of the Government Code. The disclosure shall be provided to the property owner as a printed copy, if requested by the property owner. A sample of the disclosure set forth below shall be maintained on a public Internet Web site available to property owners. (b) This section only applies to disclosure to a property owner who seeks to participate in a program established pursuant to this chapter for the purposes specified in paragraph (2) of subdivision (a) of Section 5898.20 for a residential property with four or fewer units. Financing Estimate and Disclosure Notice to Property Owner: You have the right to request that a hard copy of this document be provided to you before and after reviewing and signing. The financing arrangement described below will result in an assessment against your property which will be collected along with your property taxes and will result in a lien on your property. You should read and review the terms carefully, and if necessary, consult with a tax professional or attorney. Customer Service Toll-Free telephone number and email: In the event you have a consumer complaint, questions about your financing obligations related to the contractual assessment or your contractual rights under the terms of this contract, you can contact either this toll-free telephone number or email address provided below and receive a response within 24 hours or one business day. Toll-Free telephone number: ___________ Customer service email address: ___________ Products and Costs Product costs (including labor/installation ) $________ Description 1. 2. 3. Financing Costs Application fees $________ and costs $________ Prepaid Interest $________ Other Costs $________ Total Amount Financed Annual Percentage Rate (APR) ______% Simple Interest Rate ______% Total Annual Principal, $______ Interest, and Administrative Fees Note: If your property taxes are paid through an impound account, your lender may apportion the amount and add it to your monthly payment. See ""Other important considerations,'' below Total Amount you will have paid over the life of thelofin ancing $________ Other Costs Appraisal Fees Bond related costs Annual Administrat ive fees $________ Estimated closing $________ costs $________ Credit Reporting $________ Fees $________ Recording Fees $________ Total Financing Costs and Closing Costs $________ Estimated Cash (out of pocket) to close $________ Other Terms Prepayment fee Assumable by new ( ) No ( ) Yes ______ owner ( ) No ( ) Yes ______ Additional Information About These Financing Comparisons (Use this information to compare to other financing options) ------------------ $________ Principal you will have paid off. $________ Amount ofOver the term interest you have paid.In 10 years $________ Amount of financingof the financing $________ Amount of financing and other costs you will have paid. $________ Total you will have paid. ------------------ Annual Percentage ______% Rate + -------------------------------- + Total Interest Paid (as a percentage of all the payments ______% you have made) Other Important Considerations Assumption ( ) Yes - Allowed by New Buyer on original terms ( ) No - Not Allowed on original termsI understand that if I refinance my home, myI understand that my mortgage company may require me to pay off the full remaining balance of this obligation before I can refinance my home. If I sell my home, the buyer or their mortgage company mortgage company may require me to pay off the full remainingfull remaining balance of this obligation, unlessI request that the lien be subordinated to anexisting mortgage and the holder of the lienagrees to subordinate (allow the mortgage lien totake a higher priority). If I sell my home, thebuyer or their mortgage company may require me topay off the full remaining balance of thisobligation.balance of this obligation before the home may be sold. You should consider consulting with your mortgage company or an attorney. _______________ (Borrower initials) Monthly Mortgage Payments Your payments will be added to your property tax bill. Whether you pay your property taxes through your mortgage payment, using an impound account, or if you pay them directly to the tax collector, you will need to save an estimated $_______ for your first tax installment. If you pay your taxes through an impound account you should notify your lender, so that your monthly mortgage payment can be adjusted by your lender to cover your increased property tax bill. _______________ (Borrower initials) Tax Benefits: Consult your tax advisor regarding tax credits, credits and deductions, tax deductibility, and other tax benefits available. Making an appropriate application for the benefit is your responsibility. _______________ (Borrower initials) Statutory Penalties: If your property tax payment is late, the amount due will be subject to a 10% penalty, late fees, and 1.5% per month interest penalty as established by state law, and your property may be subject to foreclosure. _______________ (Borrower initials) Three Day Right to Cancel You, the property owner, may cancel the contract at any time prior to midnight on the third business day after the date of the transaction to enter into the agreement without any penalty or obligation. To cancel this transaction, you may mail or deliver a signed and dated copy of the contract with notice of cancellation to: ___________ (name of business) at ___________ (address) You may also cancel the contract by sending notification of cancellation by email to the following email address: _________________(email address of business). _______________ (Borrower initials) Confirmation of Receipt This confirms the receipt of the information in this form. You do not have to accept this financing just because you acknowledge that you have received or signed this form, and it is NOT a contract. __________________________ __________________ (Property Owner Signature - ________ Date) (Property Owner Signature - Date) (c) A public agency or other party to a voluntary contractual assessment described in this chapter for the purposes specified in paragraph (2) of subdivision (a) of Section 5898.20 or a special tax described in Section 53328.1 of the Government Code shall not make any representations to a property owner regarding the effect the financed improvements will have on the market value of the property unless that public agency or other party derives its estimates of the market value using one of the following: (1) An automated valuation model, which is a computerized property valuation system that is used to derive a real property value. (2) A broker's price opinion conducted by a real estate broker licensed pursuant to Part 1 (commencing with Section 10000) of Division 4 of the Business and Professions Code. (3) An appraisal conducted by a state licensed real estate appraiser licensed pursuant to Part 3 (commencing with Section 11300) of Division 4 of the Business and Professions Code. (d) For the purposes of this section, "property owner" shall include allpersons listed on the title to the property.owners of record.