Cynthia W. Johnston, Housing and Redevelopment Director

Transcription

1 Agenda Item No. 8A September 27, 2011 TO: FROM: SUBJECT: Honorable Mayor and City Council Members Attention: Laura C. Kuhn, City Manager Cynthia W. Johnston, Housing and Redevelopment Director RESOLUTION APPROVING THE FORMATION OF THE ENERGY AND WATER EFFICIENCY ASSESSMENT DISTRICT AND ADOPTION OF THE CALIFORNIA PROPERTY ASSESSED CLEAN ENERGY (CALIFORNIA PACE) PROGRAM AND RELATED REPORT PURSUANT TO CHAPTER 29 OF PART 3 OF DIVISION 7 OF THE CALIFORNIA STREETS AND HIGHWAYS CODE; CONFIRMING THE BOUNDARIES OF THE ASSESSMENT DISTRICT AND THE LEVY OF CONTRACTUAL ASSESSMENTS; AUTHORIZING PARTICIPATION IN THE PACIFIC HOUSING AND FINANCE AGENCY CALIFORNIA PACE PROGRAM; AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH DISCUSSION: On July 12, 2011, the City Council adopted a Resolution of Intention to establish an energy and water efficiency assessment district and to adopt the California Property Assessed Clean Energy Program (California PACE) pursuant to AB 811. This legislation permits local governments to create assessment districts that allow property owners, who voluntarily choose to participate, to finance energy efficiency improvements on their property through tax assessments. Energy efficiency improvements may include (but are not limited to): high-efficiency air conditioners; dual-pane windows; water saving equipment; solar panel systems; and insulation. Under the umbrella of Pacific Housing & Finance Agency (PHFA), California PACE goals are to: Provide a non-city funded mechanism for property owners to make energy- and watersaving property improvements; Provide affordable financing to property owners to make energy- and water-saving property improvements thereby lowering their energy costs; and Provide a public benefit of decreased energy/water demand, creation of green jobs, increased sales tax and permit fee revenues (due to equipment purchases, business license, and construction permit fees), and increased property values. Following formation of the voluntary assessment district by the City, PHFA and its administrative contractor (FIGtree) will: Issue bonds to generate financing that is loaned to interested, qualified property owners for energy efficiency improvements; Meet and work with property owners interested in receiving assistance under the program; Pair property owners with qualified, licensed, and bonded contractors to help secure required permits and make the energy efficient improvements; and Arrange for repayment through an assessment reflected on Solano County property tax billing statement.

2 As noted above, financing revenue is secured through issued bonds and paid through property tax assessments from property owners who elect to voluntarily participate in the assessment district. All participants will be informed of their additional assessment commitments prior to making any improvements. California PACE will not assess non-participating property owners, nor will City funds be encumbered for the payment of the bonds. Tonight the Council is being asked to conduct a public hearing to consider adopting a Resolution to form the voluntary assessment district, set the district boundaries (City limits), permit the levy of assessments, and to approve the Program. The Program Report (Attachment A), as required by state law, provides the guidelines for the Program and includes: 1. A map showing the voluntary contractual assessment district (Vacaville City limits). 2. A sample/draft contract specifying the terms and conditions to be agreed upon by a property owner and the PHFA as the financing entity. 3. A statement of PHFA policies concerning voluntary contractual assessments including: a. Identification of types of facilities, distributed generation renewable energy sources, or energy efficiency improvements that may be financed with voluntary contractual assessments. b. Identification of PHFA official authorized to enter into voluntary contractual assessments on behalf of PHFA. c. Maximum aggregate dollar amount of voluntary contractual assessments to be repaid over a period not to exceed 20 years or the useful life of the equipment being installed. d. Method for prioritizing property owner requests for financing through voluntary contractual assessments in the event requests appear likely to exceed the authorized amount. e. Description of criteria for determining the underwriting requirements. f. Safeguards that will be used to ensure that the total annual property taxes and assessments on the property will not exceed five percent of the property s market value. 4. A plan for the issuance of bonds, including a statement of, or method for determining the interest rate and time period during which contracting property owners would pay any assessment and the apportionment of all or any portion of the costs incidental to financing, administration, and assessment collection from the consenting property owners. 5. A report on the results of consultations with the County Auditor-Controller's Office regarding the additional fees that will be charged to the City for incorporating the proposed voluntary contractual assessments into the assessments of general taxes of the City on real property, and a plan for financing the payment of those fees. During the July 12 meeting, several questions related to the Program were asked. A summary of those questions, with answers and a reference to where additional information can be found in the Program Report (Attachment A), is attached as Attachment B. FISCAL IMPACT: No General Fund Impact. Funding of this program would result from voluntary property tax assessments. No additional City resources are required. RECOMMENDATION: By simple motion, to adopt the subject resolution. Attachments: A Program Report B July 12, 2011 Questions/Answers

3 RESOLUTION NO XX RESOLUTION APPROVING THE FORMATION OF THE ENERGY AND WATER EFFICIENCY ASSESSMENT DISTRICT AND ADOPTION OF THE CALIFORNIA PROPERTY ASSESSED CLEAN ENERGY (CALIFORNIA PACE) PROGRAM AND RELATED REPORT PURSUANT TO CHAPTER 29 OF PART 3 OF DIVISION 7 OF THE CALIFORNIA STREETS AND HIGHWAYS CODE; CONFIRMING THE BOUNDARIES OF THE ASSESSMENT DISTRICT AND THE LEVY OF CONTRACTUAL ASSESSMENTS; AUTHORIZING PARTICIPATION IN THE PACIFIC HOUSING AND FINANCE AGENCY CALIFORNIA PACE PROGRAM; AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the City of Vacaville (the City ) is a municipal corporation organized and existing pursuant to the laws of the State of California; and WHEREAS, the Pacific Housing & Finance Agency (the PHFA ) is a joint powers financing agency and has established an energy and water efficiency assessment financing program known as the California Property Assessed Clean Energy (California PACE) program (the Program ) pursuant to Chapter 29 of Part 3 of Division 7 of the California Streets and Highways Code ( the Act ); and WHEREAS, through its California PACE Program, the PHFA facilitates financing to property owners within PHFA s participating member jurisdictions for the financing of energy and water saving property improvements; and WHEREAS, pursuant to the Act and the California PACE Program, the PHFA requires its participating member jurisdictions to form a contractual assessment district, and the PHFA will finance participating property owners within the assessment district funds secured by an assessment lien on the subject property; and WHEREAS, the PHFA Program provides for the funding and administration of the assessment district for its member jurisdictions; and WHEREAS, on July 12, 2011, the City Council adopted its Resolution No (the Resolution of Intention ), declaring its intention to form an energy and water efficiency assessment district pursuant to the Act for the purpose of participating in the PHFA California PACE Program to finance distributed generation renewable energy sources and energy and water efficiency improvements within the geographical boundaries of the City; and WHEREAS, the Resolution of Intention ordered the City s Authorized Officer to prepare and file a report (the Report ) with the City Clerk in accordance with Sections and of the Act and the Director has filed the Report with the City Clerk; and WHEREAS, the Resolution of Intention set the time and place for a hearing on the proposed formation of the assessment district; and WHEREAS, the Resolution of Intention described the proposed funding of the California PACE Program from the proceeds of bonds issued by the PHFA; and WHEREAS, on September 27 th, 2011, following notice duly given in accordance with law, the City Council held a full and fair public hearing at which interested persons were afforded the opportunity to object to, inquire about, or provide evidence with regard to the

4 proposed assessment district or any of its particulars, including the extent of the area proposed to be included within the assessment district, the terms and conditions of the draft contract (described below), or the proposed financing provisions; and WHEREAS, the Report contains (a) a map showing the boundaries of the assessment district as the geographical boundaries of the City, (b) a draft application for participation in the Program (the Application ), (c) a draft contract (the Contract ) specifying the terms and conditions upon which a property owner and the PHFA agree to participation in the California PACE Program, (d) a statement of PHFA policies concerning contractual assessments including: (1) identification of types of facilities, distributed generation renewable energy sources, or energy and water efficiency improvements that may be financed through the use of contractual assessments (the Authorized Equipment List ), (2) identification of a PHFA official to enter into the Contract on behalf of the assessment district, (3) a maximum aggregate dollar amount of contractual assessments, (4) a method for setting requests from property owners for financing through contractual assessments in priority order in the event that requests appear likely to exceed the authorization amount of contractual assessments, (5) description of criteria for determining the underwriting requirements, (6) safeguards that will be used to ensure that the total annual property taxes and assessments on the property will not exceed 5 percent of the property s market value, (e) a plan for the issuance of bonds by the PHFA, (f) a statement of, or method for, determining the interest rate and time period during which contracting property owners would pay assessments, (g) the establishment of any reserve fund or funds, (h) the apportionment of all or any portion of the costs incidental to financing, administration of the assessment district between the assessment district and contractual assessment property owners, and (i) a report on the results of the consultations of the County Auditor-Controller s office; and WHEREAS, the City Council, having considered all oral and written testimony, desires to approve the formation of the energy and water efficiency assessment district and participation in the California PACE Program. NOW THEREFORE, BE IT RESOLVED that Section 1. Section 2. Section 3. Section 4. Section 5. The above recitals are all true and correct and are incorporated herein by this reference. The City Council declares that the Report as filed is hereby approved. The City Council hereby establishes the energy and water efficiency assessment district (the Assessment District ) to be implemented as provided for by the California PACE Program and related Report. The City Council hereby finds and determines that the property within the area of the Assessment District will be benefited by the improvements and activities funded by the assessments. The City Council hereby confirms the contractual assessments to be levied within the parameters of the California PACE Program Report. The City Council hereby appoints and designates the Executive Director of the PHFA to administer the Assessment District in connection with the Program. The Executive Director of PHFA is hereby authorized and directed to file with the City Treasurer and to revise, as appropriate, a list of the parcels for which the PHFA and a property owner have entered into a contractual assessment agreement (each, a Assessment Financing Agreement ) pursuant to the Program as and when such Assessment Financing Agreement(s) are entered.

5 Section 6. Section 7. Upon the execution of any Assessment Financing Agreement by all parties thereto pursuant to the Program, the Executive Director of the PHFA is hereby directed to cause to be recorded in the office of the Superintendent of Streets and in the office of the County Recorder of the County of Solano an assessment lien on the subject property in the form as provided in the California PACE Program Report. The City Manager, or her designee, and City Clerk are hereby authorized and directed to do all acts and things which may be required of them by this Resolution, or which may be necessary or desirable in connection with the Assessment District and carrying out the California PACE Program and all matters incidental thereto, including without limitation, to make clarifying changes to the Report and to modify as deemed necessary by the Director of the PHFA or the City Manager, or her designee, the Authorized Equipment List, the draft Application and the draft Contract included therein. I HEREBY CERTIFY that the foregoing resolution was introduced and passed by the City Council of the City of Vacaville, at its regular meeting of September 27, 2011, by the following vote. AYES: NOES: ABSENT: ATTEST: Michelle A. Thornbrugh, City Clerk

6 City of Vacaville Property Assessed Clean Energy Program California PACE PROGRAM REPORT Sponsored & Authorized By: Administered By: Pacific Housing & Finance Agency 9915 Mira Mesa Blvd. Suite 130, San Diego CA Tel: (877)

7 Contents Introduction... 1 Residential Property Financing... 1 Goals... 2 Background... 2 Program Benefits... 3 Program Administration... 3 Program Requirements... 4 Eligible Property Owners... 4 Eligible Properties... 4 Eligible Contractors... 5 Eligible Efficiency Measures... 5 Eligible Costs... 6 The Financial Strategy... 8 Program Parameters... 9 Minimum Assessment Financing Amount... 9 Maximum Assessment Financing Amount... 9 Maximum Portfolio... 9 Priority of Funding... 9 Financing Duration Interest Rate Reserve Fund Administrative Fees Application Process Changes to Report Exhibits Exhibit A City of Vacaville Boundary Map Exhibit B Draft Assessment Financing Contract Exhibit C Eligible Efficiency Measures Exhibit D California PACE Applications... 19

8 Introduction This property assessed clean energy assessment district report ( Program Report ) has been prepared to be in compliance with Section of Chapter 29 of the California Streets and Highways Code in connection with the establishment of the City of Vacaville ( City ) California Property Assessed Clean Energy ( California PACE ) Assessment District. This is the guiding document for the California PACE Program and fulfills the requirements that this report contain the following: A. A map showing the boundaries of the territory within which contractual assessments are proposed. (See Exhibit A) B. A draft contract between a property owner and the PHFA specifying the terms and conditions. (See Exhibit B) C. Agency policies concerning contractual assessments which includes the following: 1. types of improvements that may be financed. 2. Identification of Agency official authorized to enter into contractual assessments on behalf of the Agency. 3. maximum aggregate dollar amount of contractual assessments. 4. method for setting requests in priority order in the event that requests will likely exceed authorization amount. 5. Brief description of underwriting criteria requirements. 6. Safeguards used to ensure that total annual property tax and assessments on property will not exceed 5% of property value. D. A plan for raising money to pay for the work performed. E. Solano County Auditor/Controller fees. The California PACE Program ( Program ) described is designed to help the City of Vacaville property owners implement water conservation and energy efficiency measures which are necessary to address the issue of global climate change. The Program helps property owners save energy and money while doing right for the environment. Residential Property Financing Although the California PACE program is designed to include residential property financing, such financing is not available at this time because of Federal Housing & Finance Agency (FHFA) concerns pertaining to property lien status and program guidelines. We expect State and Federal changes in the near future that will facilitate the use of PACE assessment financing on all property types including residential property for energy efficiency improvements. Because we expect changes soon that will allow for PACE financing on residential properties, the report includes financing guidelines for residential properties. Currently however, residential properties with no mortgage liens as well as residential properties that have jumbo loans may be eligible 1

9 for Assessment Financing with California PACE so long as they do not fall in the purview of the FHFA. Goals The Program seeks to provide multiple benefits to those property owners who are desirous of the following: Saving money by reducing their utility bill Improving their residence or business Promoting energy conservation Stimulating the local economy Background Assembly Bill 811and AB 474 were approved by the California Legislature and signed into law by the Governor. Under these bills, the California Legislature has declared that a public purpose will be served by a contractual assessment program that provides local government with the authority to finance the installation of distributed generation renewable energy sources - such as solar - and energy efficiency improvements and water savings equipment that are fixed to residential, commercial, industrial, or other real property (collectively known as "energy and water efficiency measures"). To make energy and water efficiency measures more financially affordable and to promote their installation, the law authorizes voluntary property tax assessments to finance the cost of these improvements. The Program is only possible when a public agency forms an assessment district and there is a property owner who choose to make energy and water efficiency improvements to their property. On January 25, 2010 the Pacific Housing & Finance Agency (PHFA) Joint Powers Authority (comprising over 60 cities in the State) approved a Property Assessed Clean Energy program called the California PACE Program. In addition, the Board authorized the issuance of up to $95 Million in California PACE Bonds to fund the program. The PHFA California PACE Program can provide Program Assessment Financing (Assessment Financing) to property owners within the City of Vacaville, to finance the installation of energy and water efficiency measures pursuant to contractual assessment agreements. Property owners will repay the Assessment Financing through an assessment levied against their property which is payable in semi-annual installments over time on property tax bills. 2

10 Program Benefits From the City's perspective, the program provides a local stimulus to the economy through local energy conservation-related job creation. The City may also receive benefit from: Sales tax revenues from energy and water efficiency improvement installations Permit fee revenues from business license permits, building permits, and other permit revenue Cleaner communities The California PACE program has the potential to provide a significant industry shift in the region towards an energy and water efficiency and renewable energy economy. For property owners, the Program offers: A no-money-down means of financing energy and water improvements Fixed-rate assessment financing repaid and amortized up to 20 years Financing without requiring a property appraisal Reduced utility costs through efficiency improvements The California PACE program offers property owners a means of financing improvements with lower equity requirements than may be required in conventional financings and establishes a financing obligation that is attached to the property and not to the individual borrower. Program Administration The Program will be administered by the Joint Powers Authority, Pacific Housing & Finance Agency, which is headed by the Executive Director (Director). The PHFA has the authority to enter into Financing Assessment Contracts. The PHFA is supported by FIGtree Energy Resource Company (FIGtree). FIGtree staff will be responsible for: Collaborating with the City Assisting property owners in obtaining Program Assessment Financing applications and materials Processing Assessment Financing applications Managing and tracking Assessment Financing Assisting in monitoring individual and collective energy conservation The intent of these services is to provide a "turn-key" service for the City of Vacaville property owners who want to finance energy and water improvements. 3

11 Program Requirements California PACE applicants must meet a number of financial well-being standards that, combined with property-based lending criteria, create a robust program to responsibly deliver PACE financing. Assessment program participants make no personal guarantees, as the amount of California PACE financing available to them is determined by the property s assessed land value. Because the maximum financeable amount is based on the assessed land value, California PACE provides accessible financing that does not encumber property owners personal credit. Property owners that wish to use California PACE as one layer of an overall financing strategy can use alternative methods to secure personal credit-based financing. Of note, the standards of the California PACE program take special precautions not to induce bankruptcy or other financial hardships against California PACE participants. The underwriting criteria for qualifying California PACE participants include: 1. Applicant(s) is/are the legal owner of the property described in the application; 2. Property Owner is current on property taxes; 3. Property Owner is current on mortgage(s). For commercial property, the lender(s) have given consent / acknowledgement to California PACE Assessment Financing; 4. Property Owner is not in bankruptcy and the property is not an asset in a bankruptcy; 5. Requested Financing Amount does not exceed the greater of one hundred percent of the Assessed Land Value or ten percent of the Assessed Value (land plus improvements); 6. The Lien to Value Ratio (excluding Assessed Financing Amount) does not exceed one hundred percent (No negative equity); 7. Property is developed and located within participating City/County boundaries; 8. Property is classified as commercial property (or residential with no mortgage loan or jumbo loan). Eligible Property Owners All owners of improved real property are eligible for the Program. Property owners may be individuals, associations, business entities, cooperatives, and virtually any owner paying real property taxes. A property owner needs to be current in the payment of property taxes and current on any mortgages on the parcel. Property owners are eligible to make multiple applications for additional energy and water efficiency measures. Eligible Properties California PACE Assessment Financing is available to all owners of improved real properties located within the geographic boundaries of a participating City or County. 4

12 For a listing of participating member agencies, please visit Currently, only commercial properties are eligible to participate. Commercial property is generally defined as any property not used as a single family residence (1 to 4 units). Commercial property includes: Multi-Family Units (5 or more units) Manufacturing/Industrial Office Shopping Centers Warehouse Hotel Retail/Wholesale Restaurants Residential properties may also be eligible for Assessment Financing with California PACE if they have a jumbo loan or no mortgage lien on their property. Eligible Contractors Assessment Financing is made to property owners whose equipment has been installed and verified in accordance with the Program requirements. All licensed (County/City and State) contractors in good standing are eligible to participate in providing energy and water efficiency measures to eligible property owners. The contractors would need to simply: 1. Obtain / download a Contractor Application form from the Program Administrator s website 2. Once approved (usually within 48 hours), the contractor will be added to the Eligible Contractors list and can start contracting with property owners. 3. Per the Agreement, participating contractors would be responsible for installation of the equipment on the property (after receiving approval from PHFA), and then would be reimbursed from Municipal Bond Proceeds from the Pacific Housing & Finance Agency within 90 days of the PHFA verifying that the qualifying equipment is installed and permanently fixed to the property. Eligible Efficiency Measures The Program affords property owners in the City of Vacaville the opportunity to take advantage of a wide range of energy and water savings measures, consistent with the following provisions: 1. The Program provides Assessment Financing for energy and water efficiency measures permanently fixed to the property. 5

13 2. Property owners choosing to voluntarily engage in broader retrofit projects - such as home or business remodeling - will only be provided Assessment Financing for that portion of the costs used to retrofit existing structures with energy and water efficiency measures (discussed further in the Eligible Costs section). 3. Assessment Financing is intended for retrofit activities to replace outdated equipment and to install new equipment that takes energy off the grid and/or reduces water consumption. However, Assessment Financing is also made available for purchasers of new homes and businesses that wish to add energy and water efficiency measures after the property owner takes title to the property. 4. Assessment Financing is made available for the following types of improvements: Energy and water efficiency measures that promote energy efficiency and saves water. Solar Systems. Solar systems included range from photovoltaic to solar thermal. Alternative / Custom Improvements. Upon review and approval by the PHFA, Assessment Financing is made available for emerging technologies for energy improvements that provide new ways to save or generate energy. These improvements will be evaluated on a case-by-case basis. 5. Assessment Financing is also made available for combinations of energy efficiency improvements such as bundling energy efficiency and renewable energy measures. For instance, a property owner may choose to replace both an aging and inefficient air conditioner, insulation, doors, windows and install a solar system. For further examples of eligible measures, see Exhibit C. Eligible Costs Eligible costs of the energy and water efficiency measures include the cost of equipment and installation. Installation costs may include, but are not limited to, labor, drafting, engineering, application fees, permit fees, processing fees, and inspection charges. The installation of energy and water efficiency measures must be completed by a qualified contractor of the property owner's choice from the list of California PACE approved contractors published by the PHFA at Property owners are encouraged to obtain multiple bids from several contractors, since each transaction is between the property owner and the contractor. Property owners must 6

14 protect their own interests and obtain the best price, service and warranties. In order to participate in the California PACE program, the City of Vacaville will adopt the California PACE Program and create the voluntary assessment district. The PHFA is responsible for financing the energy and water efficiency measures while the property owner is totally responsible for his or her purchase, service expectations and warranties. Any contractor is eligible to become an approved contractor, as long as they are licensed in good standing, insured, and agree to the Reimbursement Terms set forth in the Contractor Reimbursement Agreement. Eligible costs do not include labor costs for property owners who elect to do the work themselves. In each case, the PHFA Director will determine whether the estimated equipment and installation costs are reasonable. Pacific Housing & Finance Agency reserves the right to evaluate market conditions and, at its discretion, require additional bids to determine whether costs are reasonable. While the property owner is encouraged to select the bidder of his or her choice from the list of California PACE approved contractors, the amount available for Assessment Financing may be limited to an amount deemed reasonable by the PHFA. 7

15 The Financial Strategy FIGtree Energy Resource Company and the Pacific Housing & Finance Agency will collaborate in the issuance of taxable municipal bonds to reimburse approved contractors for authorized energy and water efficiency projects. As the program administrator, FIGtree will be placing the charges on each participating property owner s tax bill each year the Assessment Financing is outstanding for repayment. The PHFA will market, originate, provide assessment district financing (subject to PHFA Program approval) to approved California PACE property owners to finance implementation of distributed renewable energy, and energy/water efficiency equipment and projects. The bonds sold are special limited obligations of the PHFA, and as such are not a debt of the City of Vacaville, nor the State of California or any of its political subdivisions (other than the PHFA), and neither the City of Vacaville, the State nor any of its political subdivisions (other than PHFA) is liable for the payment thereof. The Bonds are special obligations of the PHFA payable exclusively from the revenues (secured by assessment district liens on participating property owners property), and amounts held in certain funds and accounts created pursuant to the indenture. The Bonds will not be payable from any other revenues or other assets of the PHFA. PHFA does not have any taxing power. The Bonds do not constitute indebtedness within the meaning of any constitutional or statutory limitation or restriction. Any contractor is eligible to become a California PACE approved contractor, as long as they are licensed in good standing, insured and agree to the Reimbursement Agreement terms with the Pacific Housing & Finance Agency. The approved contractors will contractually agree to provide and install the energy equipment on an approved order basis whereby the property owner completes the application process and once approved, the energy contractor installs the equipment. After successful verification the contractor is reimbursed within 90 days through the issuance of taxable municipal bonds. Bond issuance proceeds will be deposited within the Bank Trustee s designated fund for contractor reimbursement. 8

16 Program Parameters Minimum Assessment Financing Amount The minimum size for Assessment Financing is $5,000. Maximum Assessment Financing Amount The California PACE program will finance a maximum based on the County assigned assessed value of the property. The maximum Assessment Financing amount is determined by the greater of the: Total Land Assessed Value, or 10% of the Total Assessed Value (including structure value) The Maximum Financing Amount available may be reduced to ensure that the total annual property taxes and the Assessment Financing amount does not exceed 5% of the property s value. In order to ensure that the total annual property tax and assessments on the property will not exceed 5 percent of the property s value, FIGtree will calculate and determine the Financing available for the property owner before final approval. If a property owner feels the assessed values do not accurately reflect their market value, an appraisal may be authorized. Authorizations are provided on a case by case basis. The maximum amount available for Assessment Financing may be limited to an amount deemed reasonable by the PHFA. Maximum Portfolio The maximum principal amount of the Program Assessment Financing available to property owners under the Program is $95 million. This represents the total amount of financing available to all participating cities and counties that are members of the Pacific Housing & Finance Agency, including the City of Vacaville. The maximum principal amount of the Program Assessment Financing can be increased through PHFA resolution and PHFA Board Approval. Priority of Funding Applications from property owners for financing will be given priority based on the date on which the application is approved. If a request from a property owner for financing would cause the California PACE Program to exceed the initial $95 million authorized by the PHFA, then the application will be ineligible for financing, unless the PHFA board authorizes additional funding. The PHFA will retain the authority to grant exceptions to the priority status of individual applications. 9

17 Financing Duration The term of the Assessment Financing is based on the life expectancy of the improvements installed and can t exceed the useful life of the improvements up to 20 years. Interest Rate Assessment Financing will be made for property owners at an annual interest rate that is determined by market conditions and is secured by the property owner at the time the application is approved. In any event, the law does not allow the interest rate to exceed 12%. The Pacific Housing & Finance Agency will issue and market the taxable municipal bonds at the then prevailing market for such bonds. Upon successfully marketing the bonds, the program interest rate for Program Assessment Financing will be established. After the property owner affirms that the improvements have been installed as set forth in the Program Assessment Financing Contract and after inspection of the improvements, the funding of the Program Assessment Financing will be concluded upon bond closing. Program Assessment Financing that is entered into at different times will have different interest rates depending on bond market conditions and successful marketing of the bonds. Reserve Fund In order to enjoy the benefits of municipal financing, all property owners must allocate ten percent (10%) of their total Assessed Financing Amount to establish a reserve fund for their share of the bonds. For example, if a property owner is approved for a total $500,000 in California PACE financing, $50,000 of that amount will be set aside and allocated for the reserve fund. The remaining $450,000 will be eligible for project costs. During the final years of the outstanding bonds, property owners will see their reserve fund allocation returned to them as a credit to their annual levy amount assuming no delinquencies or late payments in the district. Administrative Fees Administrative Fees are recovered by the "spread" between bond rates and the Program Assessment Financing issuance rate. Other than the fees below, the property owners will not be billed for any additional charges or assessments. The following costs will be the responsibility of the property owner: 1. Title costs - including title verification - will be borne by the property owner but reimbursable through the program. This cost to the property owner is $395 per Assessment Financing Application. For commercial property owners, an 10

18 additional fee is added to the application fee to cover the costs of a commercial energy audit on the property (if required). Please see the California PACE application for a table of fees (Exhibit D). 2. County Tax Collector Assessment collection costs will appear as a line item on property taxes not to exceed $40 per property per year - and will be paid by property owners. The $40 per year may escalate 2% per year for County Fee Increases. 3. A green permit fee may be required in connection with the proposed improvements. Such fee will be required to be paid at the time the permit is pulled within the City of Vacaville. Such cost is reimbursable under the program. 4. The City of Vacaville may recover annual administrative charges up to 5% of the total assessment amount. This administrative cost recovery will be added to the annual assessment amount. Such administrative charges for actual costs of services may include, but not limited to staff time and expenses incurred in administering the California PACE program. 11

19 Application Process Definition / Role of Key Participants JPA Agency: Pacific Housing and Finance Agency (PHFA). PHFA is the Joint Powers Authority (JPA) sponsoring the California PACE Program in which Member Agencies may participate in. Former Assemblyman Mr. Dave Elder is the Executive Director for the PHFA. Member Agency: Any City/County or Public Agency that is a member of the Pacific Housing and Finance Agency (PHFA) Joint Powers Authority. For a complete list of current Member Agencies please visit our website at Bond Underwriter: The municipal bond underwriter, JK Chilton & Associates, will use its best efforts for issuing municipal bonds to finance approved property owner energy efficiency measures for participating Member Agencies. The bond underwriter will market the bonds at the market given then existing bond market conditions. It is possible, if economic situations that arose in late 2008 and the first half of 2009 were to reappear, that there would be no market for the Pacific Housing & Finance Agency California PACE Energy Improvement Bonds. Bond Counsel: The municipal bond counsel, Timothy Sabo of Lewis, Brisbois, Bisgaard & Smith, LLP, is responsible for rending a legal opinion on the municipal bonds issued. Program Administrator: FIGtree Energy Resource Company (FIGtree) is the program administrator for the PHFA responsible for program administration including property owner questions, debt administration (including tax roll billing) and Member Agency support. STEP 1: Application Submission A property owner can download an application for California PACE Assessment Financing at or may call (877) to have an application mailed. The property owner submits the Application together with its required attachments to the Program Administrator: FIGtree Energy Resource Company Attention: California PACE Program 9915 Mira Mesa Blvd., Suite 130 San Diego, CA

20 Questions regarding the status of an application should be directed to FIGtree toll free at (877) FIGtree determines whether each Application is complete and acceptable per Program guidelines. Incomplete Applications will not be accepted. Applications will be processed on first-come, first-served basis. When the application is received, FIGtree reviews the application for the following: 1. The application is complete and accurate; 2. The property owner(s) owns the subject property; 3. The subject property is developed and located in the boundaries of the Member Agency s defined Program Boundaries; 4. The subject property is not exempt from ad valorem property taxes; 5. The property owner(s) is/are current in the payment of ad valorem property taxes for the subject property; 6. The property owner(s) has/have declared that the subject property is/are not currently involved in a bankruptcy proceeding or foreclosure process; STEP 2: Title Report / Lender Consent Once an application is deemed complete and acceptable per Program guidelines, a Title Report is ordered on the property. The Title Report allows FIGtree to verify ownership of the property. In addition, it identifies the mortgage lenders. If there is a mortgage on the property, FIGtree will work with the property owner to obtain lender consent. STEP 3: Energy Audit The property owner will be contacted to schedule an energy audit (if required). Currently energy audits are only required for financing amounts in excess of $200K. STEP 4: Defining the Energy and Water Efficiency Measures The energy and water efficiency measures to be installed are identified. Property owners can work directly with any California PACE approved contractor (all licensed and insured contractors are eligible to become an approved contractor) to determine the scope of a project. Property owners should schedule meetings with approved contractors to discuss proposed energy and water improvements guarantees and warranties and to get assistance with planning for those improvements. It is encouraged that property owners solicit multiple bids for the work the property owner desires to have completed. 13

21 Once a property owner defines the improvements and selects a contractor, the property owner forwards the bid or purchase agreement to FIGtree. The property owner does NOT make any payments to the contractor. The California PACE program will directly reimburse contractors in accordance with contractor Reimbursement Agreement. STEP 5: Enter Into Contract Once the Financing Amount and the contractor bid has been approved, FIGtree will forward to the Property Owner the final Assessment Financing Contract, assessment lien (needs to be notarized), the interest rate of the Assessment Financing and any final disclosures. The property owner will be required to return all documents for final recordation. After the lien has been recorded against the property, FIGtree will provide the contractor an approval number authorizing the contractor to install the approved water and energy efficiency measures. STEP 6: Installation of Efficiency Measures The Property owner enters into a contractual arrangement directly with the contractor for energy and water efficiency measures. All work is subject to the Member Agency s Building Department permitting and inspections and all other applicable federal state and local laws and regulations. All work must be completed within 180 days of execution of the Contract. Progress payments are not permitted under the Program. However, if the Financing Amount is $20,000 or greater, the property owner may request in writing that the PHFA Executive Director approve a progress payment prior to the completion of the work. Any such decision shall be final. STEP 7: Final Inspections Once the Property owner notifies the Program Administrator that all work has been completed, the Program Administrator (or assignee) will verify the completed work within seven (7) business days of receipt of notification that work is completed. Based on satisfactory project completion, the Program Administrator shall direct that bond proceeds be disbursed to the approved Contractor according to the terms of the Contractor Reimbursement Agreement. Within 90 days after all required paperwork has been received, and all energy and water efficiency measures verified, the Contractor shall be paid in accordance with the Contractor Reimbursement Agreement. STEP 8: Annual Payment of Property Taxes The property owner shall be responsible for the California PACE Program Assessment Financing payment included in their annual Property Tax Bill, and shall be collected with and in the same manner as Property Taxes. The Program Administrator staff annually 14

22 sends a database of assessment installments to the County Auditor/Controller for collection of the assessment on the property tax roll. At any time, the property owner can request a payoff quote at no-charge to pre-pay the California PACE assessment lien on the property. Such payoff calculation includes the principal balance, any bond redemption premiums, interest amounts due, and any administrative charges if applicable. Changes to Report The Pacific Housing & Finance Executive Director may make changes to this Report that is reasonably determined to be necessary to clarify its provisions. The Pacific Housing & Finance Director may modify from time to time the Eligible Efficiency Measures (Exhibit C), the Assessment Financing Contract (Exhibit B), and terms of the California PACE Application (Exhibit D) as deemed necessary. The City of Vacaville may also request modifications and/or consult with the Pacific Housing and Finance Director when modifications occur. Exhibits Exhibit A City of Vacaville Boundary Map Exhibit B Draft Assessment Financing Contract Exhibit C Eligible Efficiency Measures Exhibit D California PACE Application 15

23 Exhibit A City of Vacaville Boundary Map The boundary of the Assessment District shall be the same as the City of Vacaville Boundaries as modified from time to time, and the complete City Boundary Map is on file with the Office of the City Engineering Department, City of Vacaville and is incorporated herein by reference. 16

24 Exhibit B Draft Assessment Financing Contract (see attached) 17

25 DRAFT California PACE Program Assessment Financing Contract (A PROGRAM SPONSORED BY THE PACIFIC HOUSING & FINANCE AGENCY) This Assessment Contract ( Contract ) is made and entered into as of this day of, 20, by and between the Pacific Housing & Finance Agency / the California PACE Assessment District ("Agency") and and ("Borrower"). RECITALS WHEREAS, the Agency has established the California Property Assessed Clean Energy Program (the "Program") to which the Agency may extend to property owners to finance the acquisition and installation on their property certain qualifying renewable energy systems and energy and water efficient equipment ( Equipment ). The purpose and method of administration of the assessments under the Program are described in the California PACE Program Report adopted by the City Council on September 27 th, 2011 as it may be amended from time to time (the "Report'). WHEREAS, the Program is authorized by Chapter 29 of Part 3 of Division 7 of the California Streets and Highways Code (the "Act"). WHEREAS, the Borrower has submitted to the Agency that certain California PACE Program Assessment Financing Application dated, 20, a copy of which is attached hereto as Exhibit A and incorporated herein by this reference (the "Application") and the Agency has approved the Application as provided in the Report. The renewable energy system and/or energy efficient equipment which is to be financed with the proceeds of the Assessment Financing described herein, and to be constructed on or installed in the property of Borrower are described in Exhibit "B" attached hereto and incorporated herein by this reference (the Improvements and Property ). WHEREAS, the Borrower wishes to participate in the Program by executing this Assessment Financing Contract with the Agency and using the proceeds made by the Agency to the Borrower hereunder to finance the acquisition, construction, and installation on the Property the Improvements described in Exhibit B. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties agree as follows:

26 Assessment Financing Contract 1. Contract A. Subject to the conditions set forth herein, the Agency agrees to extend assessment financing ("Financing") to Borrower in the amount of up to Dollars ($ ) (the " Amount"). Notwithstanding anything to the contrary contained herein, the Amount shall not in any event exceed the actual cost of the Improvements. The Borrower shall be solely responsible for the payment of all cost of the Improvements which exceeds the Amount and Borrower agrees in any event to complete the Improvements and to fund all costs associated with such completion which may be in excess of the Amount. This Contract, together with the Application, the Report and the documents and instruments attached to or referenced in this Contract and the Application are collectively referred to herein as the "Documents." B. The term of the Assessment Financing and this Contract shall be ( ) years from the date that the Assessment Financing Lien is first recorded on the Property. C. lnterest shall accrue on the unpaid principal balance of the Amount from the date the Assessment Financing Lien is recorded at the simple interest rate of percent ( %) per annum. lnterest shall be computed on the basis of a three hundred sixty (360) day year. If a law which applies to the Contract and which sets maximum interest rates or charges is interpreted by a court of competent jurisdiction in a manner as would cause the interest or other charges collected or to be collected in connection with the Contract to exceed the limits permitted by such laws, then: (i) any such interest or charge shall be reduced by the amount necessary to reduce the interest or charge to the permitted limit; and (ii) any sums already collected which exceed permitted limits will be refunded by the Agency. The Agency may choose to make the refund by reducing the outstanding principal amount of the financing or by making a direct payment to the Borrower. D. The Borrower promises to pay to the Agency, without deduction or offset, the Amount and the interest accrued thereon as provided herein. The repayment of the Amount and interest accrued thereon shall be repaid by the Borrower to the Agency by the payment of an assessment levied against the Property pursuant to Section of the California Streets and Highway Code (the "Assessment"). In addition to the Assessment, the Borrower promises to pay to the Agency, without deduction or offset, an annual assessment levied against the Property to pay costs which result from the administration and collection of the Assessment or from the administration or registration of any associated bonds or reserve or other related funds (the "Annual Administrative Assessment"). The Annual Administrative Assessment shall include costs incurred by the Solano County