83R5580 PAM-F
By: Carona S.B. No. 385
A BILL TO BE ENTITLED
AN ACT
relating to authorizing assessments for water and energy
improvements in districts designated by municipalities and
counties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 376, Local Government Code, is
transferred to Subtitle C, Title 12, Local Government Code,
redesignated as Chapter 399, Local Government Code, and amended to
read as follows:
CHAPTER 399 [376]. MUNICIPAL AND COUNTY WATER AND [CONTRACTUAL
ASSESSMENTS FOR] ENERGY IMPROVEMENT DISTRICTS [EFFICIENCY
IMPROVEMENTS]
Sec. 399.001 [376.001]. SHORT TITLE. This chapter may be
cited as the Property Assessed Clean Energy Act.
Sec. 399.002. DEFINITIONS. In this chapter:
(1) "District" means a district designated under this
chapter.
(2) "Local government" means a municipality or county.
(3) "Program" means a program established under this
chapter.
(4) "Qualified improvement" means a permanent
improvement fixed to real property and intended to decrease water
or energy consumption.
(5) "Qualified project" means the installation or
modification of a qualified improvement or the acquisition,
installation, or improvement of a renewable energy system.
(6) "Real property" means privately owned real
property.
(7) "Renewable energy system" means a permanently
fixed product or device, or interacting group of permanently fixed
products or devices, on the customer's side of the meter that uses a
renewable energy technology to generate electricity, provide
thermal energy, or regulate temperature.
(8) "Renewable energy technology" means any
technology that exclusively relies on an energy source that is
naturally regenerated over a short time and derived directly from
the sun, indirectly from the sun, or from moving water or other
natural movements and mechanisms of the environment. A renewable
energy technology includes a technology that relies on energy
derived directly from the sun, on wind, geothermal, hydroelectric,
wave, or tidal energy, or on biomass or biomass-based waste
products, including landfill gas. A renewable energy technology
does not rely on energy resources derived from fossil fuels, waste
products from fossil fuels, or waste products from inorganic
sources.
Sec. 399.003. EXERCISE OF POWERS. The governing body of a
local government that establishes a program in accordance with the
requirements provided by Section 399.008 may exercise powers
granted under this chapter.
Sec. 399.004. AUTHORIZED ASSESSMENTS [FINANCING]. (a) An
assessment under this chapter may be imposed to repay the financing
of qualified projects on real property located in a district
designated under this chapter [finance:
[(1) energy efficiency public improvements to developed
lots for which the costs and time delays of creating an entity under
law to assess the lot would be prohibitively large relative to the
cost of the energy efficiency public improvement to be financed;
and
[(2) the installation of distributed generation
renewable energy sources or energy efficiency improvements that are
permanently fixed to residential, commercial, industrial, or other
real property].
(b) [Sec. 376.002. CERTAIN FINANCING PROHIBITED.] An
assessment under this chapter may not be imposed to repay the
financing of [used to finance]:
(1) facilities for undeveloped lots or lots undergoing
development at the time of the assessment; or
(2) the purchase or installation of products or
devices [appliances] not permanently fixed to real property.
Sec. 399.005 [376.003]. WRITTEN CONTRACT [CONSENT] FOR
ASSESSMENT REQUIRED. A local government [municipality] may impose
an assessment under this chapter only under a written contract with
the record [consent of the] owner of the real property to be
assessed [property at the time of the assessment].
Sec. 399.006. ESTABLISHMENT OF PROGRAM. (a) The governing
body of a local government may determine that it is convenient and
advantageous to establish a program under this chapter.
(b) An authorized official of the local government that
establishes a program may enter into a written contract with a
record owner of real property in a district designated under this
chapter to impose an assessment to repay the owner's financing of a
qualified project on the owner's property. The financing to be
repaid through assessments may be provided by a third party or, if
authorized by the program, by the local government.
(c) If the program provides for third-party financing, the
authorized official of the local government that enters into a
written contract with a property owner under Subsection (b) must
also enter into a written contract with the party that provides
financing for a qualified project under the program to service the
debt through assessments.
(d) If the program provides for local government financing,
the written contract described by Subsection (b) must be a contract
to finance the qualified project through assessments.
(e) An assessment imposed under this chapter may include the
cost of program application and administrative fees. The financing
for which assessments are imposed may include:
(1) the cost of materials and labor necessary for
installation or modification of a qualified improvement or
installation or improvement of a renewable energy system;
(2) permit fees;
(3) inspection fees;
(4) lender's fees;
(5) water or energy review and verification review
fees; and
(6) any other fees or costs that may be incurred by the
property owner incident to the installation, modification, or
improvement on a specific or pro rata basis, as determined by the
local government.
Sec. 399.007 [376.004]. DESIGNATION OF DISTRICT [AREA FOR
ASSESSMENT]. (a) [The governing body of a municipality may
determine that it is convenient and advantageous to designate an
area of the municipality within which authorized municipal
officials and property owners may enter into contracts to assess
properties for energy efficiency public improvements described by
Section 376.001(1) and make financing arrangements under this
chapter.
[(b)] The governing body of a local government
[municipality] may determine that it is convenient and[,]
advantageous[, and in the public interest] to designate an area of
the local government as a district [municipality] within which
authorized local government [municipal] officials and record
[property] owners of real property may enter into written contracts
to impose assessments to repay the financing by owners of qualified
projects on the owners' property and, if authorized by the local
government program, finance the qualified project [assess
properties to finance the installation of distributed generation
renewable energy sources or energy efficiency improvements that are
permanently fixed to real property].
(b) [(c)] An area designated as a district by the governing
body of a local government [municipality] under this section:
(1) may include the entire local government; and
(2) must be located wholly within the local
government's jurisdiction [municipality].
(c) For purposes of determining a municipality's
jurisdiction under Subsection (b)(2), the municipality's
extraterritorial jurisdiction may be included.
(d) A local government may designate more than one district.
If multiple districts are designated, the districts may be
separate, overlapping, or coterminous.
Sec. 399.008 [376.005]. PROCEDURE FOR ESTABLISHMENT OF
PROGRAM [RESOLUTION OF INTENTION TO CONTRACT FOR ASSESSMENT]. (a)
To establish a program [make a determination] under this chapter
[Section 376.004], the governing body of a local government
[municipality] must take the following actions in the following
order:
(1) adopt a resolution of intent that includes:
(A) a finding that, if appropriate, financing
qualified projects through contractual assessments is a valid
public purpose;
(B) [indicating the governing body's intention
to designate an area for assessment.
[(b) The resolution of intention must:
[(1) include] a statement that the local government
intends [municipality proposes] to make contractual assessments to
repay [assessment] financing for qualified projects available to
property owners;
(C) a description of [(2) identify] the types of
qualified projects [energy efficiency public improvements,
distributed generation renewable energy resources, or energy
efficiency improvements] that may be subject to contractual
assessments [financed];
(D) a description of [(3) describe] the
boundaries of the district [area in which contracts for assessments
may be entered into];
(E) a description of any [(4) thoroughly
describe the] proposed arrangements for third-party financing to be
available or any local government financing to be provided for
qualified projects [the program];
(F) a description of local government debt
servicing procedures if third-party financing will be provided and
assessments will be collected to service a third-party debt;
(G) a reference to the report on the proposed
program prepared as provided by Section 399.009 and a statement
identifying the location where the report is available for public
inspection; [and]
(H) a statement of [(5) state] the time and
place for a public hearing on [and that interested persons may
object to or inquire about] the proposed program [at the hearing.
[(c) If contractual assessments are to be used to finance
the installation of distributed generation renewable energy
sources or energy efficiency improvements that are permanently
fixed to real property, the resolution of intention must state that
it is in the public interest to do so.
[(d) The resolution shall direct an appropriate municipal
official to:
[(1) prepare a report under Section 376.006]; and
(I) a statement identifying the appropriate
local official and [(2) consult with] the appropriate
assessor-collector for purposes of consulting [appraisal district
or districts] regarding collecting the proposed contractual
assessments with property taxes imposed on the assessed property;
(2) hold a public hearing at which the public may
comment on the proposed program, including the report required by
Section 399.009; and
(3) adopt a resolution establishing the program and
the terms of the program, including:
(A) each item included in the report under
Section 399.009; and
(B) a description of each aspect of the program
that may be amended only after another public hearing is held.
(b) For purposes of Subsection (a)(3)(A), the resolution
may incorporate the report or the amended version of the report, as
appropriate, by reference.
(c) Subject to the terms of the resolution establishing the
program as referenced by Subsection (a)(3)(B), the governing body
of a local government may amend a program by resolution.
(d) A local government may:
(1) hire and set the compensation of a program
administrator; or
(2) contract for professional services necessary to
administer a program.
(e) A local government may impose fees to offset the costs
of administering a program. The fees authorized by this subsection
may be assessed as:
(1) a program application fee paid by the property
owner requesting to participate in the program;
(2) a component of the interest rate on the assessment
in the written contract between the local government and the
property owner; or
(3) a combination of Subdivisions (1) and (2).
Sec. 399.009 [376.006]. REPORT REGARDING ASSESSMENT. (a)
The [An appropriate municipal official designated in the resolution
shall prepare a] report for a proposed program required by Section
399.008 must include [containing]:
(1) a map showing the boundaries of the proposed
district [area within which contractual assessments are proposed to
be offered];
(2) a form [draft] contract between the local
government and the property owner specifying the terms of:
(A) assessment under the program; and
(B) financing provided by a third party or the
local government, as appropriate [that would be agreed to by the
municipality and a property owner within the contractual assessment
area];
(3) if the proposed program provides for third-party
financing, a form contract between the local government and the
third party regarding the servicing of the debt through
assessments;
(4) a description [a statement of municipal policies
concerning contractual assessments including:
[(A) identification] of types of qualified
projects [energy efficiency public improvements, distributed
generation renewable energy sources, or energy efficiency
improvements] that may be subject to [financed through the use of]
contractual assessments;
(5) a statement identifying [(B) identification of]
a local government [municipal] official authorized to enter into
written contracts [contractual assessments] on behalf of the local
government [municipality];
(6) a plan for ensuring sufficient capital for
third-party financing and, if appropriate, raising capital for
local government financing for qualified projects;
(7) if bonds will be issued to provide capital to
finance qualified projects as part of the program as provided by
Section 399.015:
(A) [(C)] a maximum aggregate annual dollar
amount for financing through contractual assessments to be provided
by the local government under the program [of contractual
assessments];
(B) [(D)] a method for ranking requests from
property owners for financing through contractual assessments in
priority order if requests appear likely to exceed the
authorization amount; and
(C) a method for determining:
(i) the interest rate and period during
which contracting owners would pay an assessment; and
(ii) the maximum amount of an assessment;
(8) a method for ensuring that the period of the
contractual assessment does not exceed the useful life of the
qualified project that is the basis for the assessment;
(9) a description of the application process and
eligibility requirements for financing qualified projects to be
repaid through contractual assessments under the program;
(10) [(E)] a method as prescribed by Subsection (b)
for ensuring that property owners requesting to participate in the
program [financing] demonstrate the financial ability to fulfill
financial obligations to be repaid through [under the] contractual
assessments;
(11) a statement explaining the manner in which
property will be assessed and assessments will be collected;
(12) a statement explaining the lender notice
requirement provided by Section 399.010;
(13) a statement explaining the water and energy
review requirement provided by Section 399.011;
(14) a description of marketing and participant
education services to be provided for the program;
(15) a description of quality assurance and antifraud
measures to be instituted for the program
[(4) a plan for raising a capital amount required to pay
for work performed in accordance with contractual assessments that:
[(A) may include:
[(i) amounts to be advanced by the
municipality through funds available to it from any source; and
[(ii) the sale of bonds or other financing;
[(B) shall include a statement of or method for
determining the interest rate and period during which contracting
property owners would pay any assessment; and
[(C) shall provide for:
[(i) any reserve fund or funds; and
[(ii) the apportionment of all or any
portion of the costs incidental to financing, administration, and
collection of the contractual assessment program among the
consenting property owners and the municipality]; and
(16) [(5)] the results of the consultations with the
appropriate assessor-collector [appraisal districts] concerning
incorporating the proposed contractual assessments into the
assessments of property taxes.
(b) The method for ensuring a demonstration of financial
ability under Subsection (a)(10) must be based on appropriate
underwriting factors, including:
(1) providing for verification that:
(A) the property owner requesting to participate
under the program:
(i) is the legal owner of the benefited
property;
(ii) is current on mortgage and property
tax payments; and
(iii) is not insolvent or in bankruptcy
proceedings; and
(B) the title of the benefited property is not in
dispute; and
(2) requiring an appropriate ratio of the amount of
the assessment to the assessed value of the property.
(c) The local government shall make the report available for
public inspection:
(1) on the local government's Internet website; and
(2) at the office of the official designated to enter
into written contracts on behalf of the local government under the
program.
Sec. 399.010. NOTICE TO MORTGAGE HOLDER REQUIRED FOR
PARTICIPATION. (a) In this section, "commercial or industrial
property" means privately owned real property other than a
residential dwelling with fewer than five dwelling units.
(b) Before a local government may enter into a written
contract with a record owner of real property to impose an
assessment to repay the financing of a qualified project under this
chapter:
(1) the holder of any mortgage lien on the property
must be given written notice of the owner's intention to
participate in a program under this chapter on or before the 30th
day before the date the written contract for assessment between the
owner and the local government is executed; and
(2) if the property is commercial or industrial
property, a written consent from the holder of the mortgage lien on
the property must be obtained.
Sec. 399.011. REVIEW REQUIRED. (a) A program established
under this chapter must require a baseline water or energy review to
be conducted for each proposed qualified project to establish
future water or energy savings.
(b) After a qualified project is completed, the local
government shall obtain verification that the qualified project was
properly completed and is operating as intended.
(c) A baseline water or energy review or verification review
under this section for commercial or industrial property, as
defined by Section 399.110, must be conducted by an independent
third party.
Sec. 399.012 [376.007]. DIRECT ACQUISITION [PURCHASE] BY
OWNER. The [On the written consent of an authorized municipal
official, the] proposed arrangements for financing a qualified
project [the program pertaining to the installation of distributed
generation renewable energy sources or energy efficiency
improvements that are permanently fixed to real property] may
authorize the property owner to:
(1) purchase directly the related equipment and
materials for the installation or modification of a qualified
improvement or the installation or modification of a renewable
energy system [the distributed generation renewable energy sources
or energy efficiency improvements]; and
(2) contract directly, including through lease, power
purchase agreement, or other service contract, for the installation
or modification of a qualified improvement or the installation or
modification of a renewable energy system [the distributed
generation renewable energy sources or energy efficiency
improvements].
Sec. 399.013 [376.008]. LIEN. (a) A contractual [An]
assessment [imposed] under this chapter and any interest or
penalties on the assessment:
(1) is [constitutes] a first and prior lien against
the real property [lot] on which the assessment is imposed until the
assessment, interest, or penalty is paid; and
(2) has the same priority status as a lien for any
other ad valorem tax.
(b) The lien runs with the land, and that portion of the
assessment under the assessment contract that has not yet become
due is not eliminated by foreclosure of a property tax lien.
(c) The assessment lien may be enforced by the local
government in the same manner that a property tax lien against real
property may be enforced by the local government to the extent the
enforcement is consistent with Section 50, Article XVI, Texas
Constitution.
(d) Delinquent installments of the assessments incur
interest and penalties in the same manner as delinquent property
taxes.
(e) A local government may recover costs and expenses,
including attorney's fees, in a suit to collect a delinquent
installment of an assessment in the same manner as in a suit to
collect a delinquent property tax.
Sec. 399.014. COLLECTION OF ASSESSMENTS. The governing
body of a local government may contract with the governing body of
another taxing unit, as defined by Section 1.04, Tax Code, or
another entity, including a county assessor-collector, to perform
the duties of the local government relating to collection of
assessments imposed by the local government under this chapter.
Sec. 399.015. BONDS OR NOTES. (a) A local government may
issue bonds or notes to finance qualified projects through
contractual assessments under this chapter.
(b) Bonds or notes issued under this section may not be
general obligations of the local government. The bonds or notes
must be secured by one or more of the following as provided by the
governing body of the local government in the resolution or
ordinance approving the bonds or notes:
(1) payments of contractual assessments on benefited
property in one or more specified districts designated under this
chapter;
(2) reserves established by the local government from
grants, bonds, or net proceeds or other lawfully available funds;
(3) municipal bond insurance, lines of credit, public
or private guaranties, standby bond purchase agreements,
collateral assignments, mortgages, or any other available means of
providing credit support or liquidity;
(4) tax increment revenues that are lawfully available
for purposes consistent with this chapter; and
(5) any other funds lawfully available for purposes
consistent with this chapter.
(c) A local government pledge of assessments, funds, or
contractual rights in connection with the issuance of bonds or
notes by the local government under this chapter is a first lien on
the assessments, funds, or contractual rights pledged in favor of
the person to whom the pledge is given, without further action by
the local government. The lien is valid and binding against any
other person, with or without notice.
(d) Bonds or notes issued under this chapter further an
essential public and governmental purpose, including:
(1) improvement of the reliability of the state
electrical system;
(2) conservation of state water resources consistent
with the state water plan;
(3) reduction of energy costs;
(4) economic stimulation and development;
(5) enhancement of property values;
(6) enhancement of employment opportunities; and
(7) reduction in greenhouse gas emissions.
Sec. 399.016. JOINT IMPLEMENTATION. (a) Any combination
of local governments may agree to jointly implement or administer a
program under this chapter.
(b) If two or more local governments implement a program
jointly, a single public hearing held jointly by the cooperating
local governments is sufficient to satisfy the requirement of
Section 399.008(a)(2).
(c) One or more local governments may contract with a third
party, including another local government, to administer a program.
SECTION 2. The changes in law made by this Act apply only to
a program established under Chapter 399, Local Government Code, as
transferred, redesignated, and amended by this Act, on or after the
effective date of this Act. A program established under Chapter
376, Local Government Code, before the effective date of this Act,
is governed by the law in effect on the date the program was
established, and the former law is continued in effect for that
purpose.
SECTION 3. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2013.