Amendment #15 to H4377

fueling job creation through energy efficiency

Representatives Kulik of Worthington, Hogan of Stow, Benson of Lunenburg, Smizik of Brookline, Cusack of Braintree, Garballey of Arlington and Chan of Quincy move to amend the bill by adding the following new sections:

SECTION 1: The General Laws are hereby amended by adding the following Chapter 23M:

Section 1. As used in this chapter, the following words shall have the following meanings, unless the context clearly requires otherwise:

“Agency”, the Massachusetts Development Finance Agency as established in chapter 23G or a special purpose entity created or duly authorized by the agency.

“Betterment Assessment”, an assessment of a betterment on qualified commercial or industrial property or residential property in relation to commercial energy improvements established under the commercial sustainable energy program, or in relation to residential energy improvements established under the residential sustainable energy program, that has been duly assessed in accordance with chapter 80.

“Benefitted property owner”, an owner of qualifying commercial or industrial property or residential property who desires to install commercial or residential energy improvements and who provides free and willing consent to the betterment assessment against the qualifying commercial or industrial property or residential property.

“Commercial Energy Improvements”, (1) any renovation or retrofitting of qualifying commercial or industrial real property to reduce energy consumption or installation of a renewable energy system to serve qualifying commercial or industrial property, provided such renovation, retrofit or installation is permanently fixed to such qualifying commercial or industrial property, or (2) the construction of an extension of an existing natural gas distribution company line to qualifying commercial or industrial property to enable the qualifying commercial or industrial property to obtain natural gas distribution service to displace utilization of fuel oil, electricity or other conventional energy sources.

“Commercial or industrial property”, any real property other than a residential dwelling containing fewer than five dwelling units.

“Commercial PACE project”, with respect to a parcel of qualifying commercial or industrial property, (1) design, procurement, construction, installation and implementation of commercial energy improvements; (2) related energy audits; (3) renewable energy system feasibility studies; and (4) measurement and verification reports of the installation and effectiveness of such energy improvements.

“Commercial sustainable energy program”, a program that facilitates commercial PACE projects and utilizes the betterment assessments authorized by section 3 as the source of both the repayment of and collateral for the financing of commercial PACE projects.

“Department”, the Department of Energy Resources as established in chapter 25A.

“Municipality” a city, town, county, the Devens Regional Enterprise Zone created by Chapter 498 of Acts of 1993 or the Southfield Redevelopment Authority created by Chapter 291 of the Acts of 2014.

“PACE bonds”, bonds, notes or other evidence of indebtedness, in the form of revenue bonds and not general obligation bonds of the commonwealth or the agency, issued by the agency related to the commercial and residential sustainable energy program established by this chapter.

“Participating municipality”, a municipality that has determined to participate in a commercial sustainable energy program and a residential sustainable energy program.

“Program administrator”, the agency or another entity assigned responsibility by the agency, which program administrator may be the agency, or one or more private, public or quasi-public third-party administrators, to administer, provide support, and provide financing for the residential sustainable energy program.

“Qualifying commercial or industrial property”, any commercial or industrial property owned by any person or entity other than a municipality or other governmental entity, that meets the qualifications established for the commercial sustainable energy program in accordance with the program guidelines as established in subsection (c) of section 2 and in subsection (13) of section 6 of chapter 25A.

“Residential PACE project”, with respect to a residential property, (i) the design, procurement, construction, installation and implementation of energy efficiency or conservation improvements; including the installation of electric vehicle charging stations permanently affixed to the property; (ii) the design, procurement, construction, installation and implementation of water efficiency or conservation improvements and (iii) the design, procurement, construction, installation, and implementation of a renewable energy system, including any required feasibility studies.

“Residential property”, any real property other than a commercial or industrial property with fewer than five dwelling units, provided that the property is owned by any person or entity other than a municipality or other governmental entity.

“Residential Energy improvements”, any renovation, retrofitting or installation of energy efficiency measures to reduce energy consumption and/or water conservations and savings on a residential property, installation of a renewable energy system to serve a residential property, or installation of electric vehicle charging infrastructure; provided, however, that any such renovation, retrofit or installation shall be permanently fixed to the residential property.

“Residential sustainable energy program”, a program that facilitates residential PACE projects and utilizes the betterment assessments authorized by section 4 as the source of both the repayment of and collateral for the financing of residential PACE projects.

“Special purpose entity”, a partnership, limited partnership, association, corporation, limited liability company or other entity established and authorized by the agency to issue PACE bonds, subject to approval by the agency as provided by the agency in its resolution authorizing the special purpose entity to issue PACE bonds.

Section 2.  Municipal Opt In.  Each municipality in the Commonwealth shall have the option to participate in the commercial sustainable energy program and the residential sustainable energy program, together, as a participating municipality by a majority vote of the city or town council, by a majority vote of the board of selectmen or by resolution of its legislative body, as may be appropriate, pursuant to which the municipality shall assess, collect, remit and assign betterment assessments, in return for commercial energy improvements or residential energy improvements for a benefitted property owner located within such municipality and for costs reasonably incurred in performing such acts. Any energy use reduction accomplished through the commercial sustainable energy program and residential sustainable energy program shall count toward the municipality’s 20 per cent baseline reduction required by section 10 of chapter 25A in order to qualify as a green community.

Section 3. Commercial Sustainable Energy Program. (a)(1) The agency, in consultation with the department, shall establish a commercial sustainable energy program in the commonwealth, and in furtherance thereof, is authorized to issue PACE bonds, either directly or through a special purpose entity, for the purpose of financing all or a portion of the costs of the activities comprising one or more commercial PACE projects.

(2) Upon the approval of a commercial PACE project by the department, the agency may issue PACE bonds.  Such PACE bonds shall be issued in accordance with section 8 of chapter 23G; provided, however, that the agency shall not be required to make the findings set forth in subsections (a) and (b) of said section 8.  PACE bonds issued in furtherance of this section shall not be subject to, or otherwise included in, the principal amount of debt obligations issued under section 29 of chapter 23G. Such PACE bonds may be secured as to both principal and interest by a pledge of revenues to be derived from the commercial sustainable energy program, including revenues from betterment assessments on qualifying commercial or industrial property on which the commercial PACE projects being financed by the issuance of such PACE bonds are levied, as well as any reserve funds or other credit enhancements created in connection with the commercial sustainable energy program.

(b) The agency, (1) working in conjunction with the department, shall develop program guidelines governing the terms and conditions under which financing for commercial PACE projects may be made available to the commercial sustainable energy program, which may include standards to encourage property owners to undertake projects where the energy cost savings of the commercial energy improvements over the useful life of the improvements exceeds the costs of the improvements; (2) shall provide information as requested by the department regarding the expected financing costs for commercial PACE projects; (3) may serve as an aggregating entity for the purpose of securing state or private third-party financing for commercial energy improvements pursuant to this section; (4) may establish a loan loss, liquidity reserve or credit enhancement program to support PACE bonds issued under this section; and (5) may use the services of one or more private, public or quasi-public third-party administrators to administer, provide support or obtain financing for commercial PACE projects under the commercial sustainable energy program.

(c) If a benefitted property owner requests financing from the agency for commercial energy improvements under this section, the agency shall:

(1) Refer the project to the department for approval under the guidelines established by subsection (13) of section 6 of chapter 25A;

(2) Upon confirmation of project approval by the department, evaluate the project for compliance with the financial underwriting guidelines established by the agency;

(3) Impose requirements and conditions on the financing in order to ensure timely repayment, including, but not limited to, procedures for placing a lien on a property as security for the repayment of the betterment assessment;

(4) Require that the property owner provide a copy of a contract duly executed by the contractor performing the commercial energy improvements;

(5) Require that the property owner obtain consent from any existing mortgage holder of the property to the intent to finance such commercial energy improvements pursuant to this section; and

(6) If the agency approves financing, require the participating municipality to levy a betterment assessment in a manner consistent with this section and with chapter 80, insofar as such provisions may be applicable and consistent with this section, on the qualifying commercial or industrial property in a principal amount sufficient to pay the costs of the commercial energy improvements and any associated costs that the agency determines will benefit the qualifying commercial or industrial property, including costs of the agency.

(d)(1) The agency may enter into a financing and assessment agreement with the property owner of qualifying commercial or industrial property.  The agency may raise funds to supply the financing under such agreement by issuing PACE bonds.  Upon execution of such agreement and immediately prior to making the funds, which may constitute all or a portion of the proceeds from the issuance of such PACE bonds, available to the property owner for the commercial PACE project under the agreement, the agency shall notify the participating municipality and the participating municipality or its designee shall record the betterment assessment and lien on the qualifying commercial or industrial property.

(2) The agency shall disclose to the property owner the costs associated with participating in the commercial sustainable energy program established by this section, including the effective interest rate of the betterment assessment, any fees charged by the agency to administer the program and any fees charged by third parties such as originators or other intermediaries.

(e) At the time the betterment assessment is made, the agency shall set the term and amortization schedule, the fixed or variable rate of interest for the repayment of the betterment assessment amount, and any required closing fees and costs.  The amortization schedule shall provide for an amortization period of no longer than the lesser of: (1) the useful life of the longest-lived of the commercial energy improvements comprising the commercial PACE project(s) financed by such betterment assessment; or (2) 20 years.  The interest rate, which may be supplemented with state or federal funding, shall be sufficient to pay the principal and interest and shall be calculated to include the agency’s fees, financing and administrative costs of the commercial sustainable energy program, including delinquencies.

(f) When the agency has authorized, but not issued, PACE bonds for commercial PACE projects and other costs of the commercial sustainable energy program, including interest costs and other costs related to the issuance of PACE bonds, the agency shall require the participating municipality where the qualifying commercial or industrial property is located, or the program administrator duly approved by the agency, to record the agreement between the agency and the property owner as a betterment pursuant to chapter 80, except that such betterment may apply to a single parcel of qualifying commercial or industrial property, and as a lien against the qualifying commercial or industrial property benefitted.

(g) Betterment assessments levied pursuant to this section and the interest, fees and any penalties thereon shall constitute a lien against the qualifying commercial or industrial real property until they are paid, notwithstanding the provisions of section 12 of chapter 80, and shall continue notwithstanding any alienation or conveyance of the qualifying commercial or industrial real property by one property owner to a new property owner.  A new property owner shall take title to the qualifying commercial or industrial property subject to the betterment assessment and related lien.  The lien shall be levied and collected in the same manner as the property taxes of the participating municipality on real property, including, in the event of default or delinquency, with respect to any penalties, fees and remedies and lien priorities.  Each lien may be continued, recorded and released upon repayment in full of the betterment assessment in the manner provided for property tax liens.  Each lien, subject to the consent of existing mortgage holders, shall take precedence over all other liens or encumbrances, except a lien for taxes of the municipality on real property. To the extent betterment assessments are paid in installments and any such installment is not paid when due, the betterment assessment lien may be foreclosed to the extent of any unpaid installment payments and any penalties, interest and fees related thereto. In the event such betterment assessment lien is foreclosed, such lien shall survive the judgment of foreclosure to the extent of any unpaid installment payments of the betterment assessment secured by such lien that were not the subject of such judgment.

(h) Any participating municipality shall assign to the agency any and all liens filed by the tax collector, as provided in the written agreement between the participating municipality and the agency.  The agency may sell or assign, for consideration, any and all liens received from the participating municipality. The agency and the assignee(s) shall negotiate the consideration received by the agency. The assignee(s) shall have and possess the same powers and rights at law or in equity as the agency and the participating municipality and its tax collector would have had with regard to the precedence and priority of such lien, the accrual of interest and the fees and expenses of collection.  The assignee(s) shall have the same rights to enforce such liens as any private party holding a lien on real property, including, but not limited to, foreclosure and a suit on the debt.  The assignee(s) shall recover costs and reasonable attorneys’ fees incurred as a result of any foreclosure action or other legal proceeding brought pursuant to this section and directly related to the proceeding from those having title to the property subject to the proceedings.  Such costs and fees may be collected by the assignee(s) at any time after the assignee(s) have made a demand for payment.

(i) The exercise of the powers granted by this section shall be for the benefit of the people of the commonwealth by increasing energy efficiency in the commonwealth.  As the exercise of such powers shall constitute the performance of essential government functions, the agency shall not be required to pay any taxes or assessments upon the property acquired or used by the agency under this section or upon the income derived therefrom.  The PACE bonds issued under this section, their transfer and the income derived therefrom, including any profit made on the sale thereof, shall at all times be free of taxation within the commonwealth.

(j) The activities of the commercial sustainable energy program shall be reviewed in the 3-year planning process and annual reviews undertaken pursuant to section 21 of chapter 25.

(k) The agency may establish rules and guidelines as are necessary to implement the purposes of the program, including procedures describing the application process and criteria to be used in evaluating application for PACE bonds under this section.

Section 4. Section 6 of chapter 25A of the General Laws, as appearing in the 2010 Official Edition, is hereby amended by striking subsection 12 and inserting in place thereof the following subsections:

(12) intervene and advocate on behalf of small commercial and industrial users before the department of public utilities in any dispute between such businesses and generation or distribution companies, as defined pursuant to section 1 of chapter 164; and

(13) plan, develop, oversee and operate the commercial sustainable energy program, with the Massachusetts Development Finance Agency, in accordance with the provisions of chapter 23M.  In accordance with this section, the Department shall approve each commercial PACE project prior to the issuance of a PACE bond under chapter 23M and in so doing shall consider whether the energy cost savings of the commercial energy improvements over the useful life of such improvements exceed the costs of such improvements.

Section 5. Residential Sustainable Energy Program. (a) The agency, by resolution of its board of directors, and in consultation with the department, shall establish a residential sustainable energy program pursuant to this section.

(b) The agency shall have the power and authority to issue PACE bonds to finance all or a portion of the costs of the activities comprising one or more residential PACE projects.  Such PACE bonds shall be authorized by a resolution of the board of directors of the agency; provided, however, that the agency shall not be required to make the findings required by subsections (a) and (b) of section 8 of chapter 23G.  PACE bonds issued pursuant to this section shall not be subject to or otherwise included in the calculation of any limitation on the incurrence of indebtedness by the agency set forth in any general or special laws.  PACE bonds may be secured as to both principal and interest by a pledge of revenues derived from the residential sustainable energy program, including revenues from betterment assessments on residential property on which the residential PACE projects being financed by the issuance of the PACE bonds are located and any reserve funds or other credit enhancements created under the residential sustainable energy program.  PACE bonds of each issue may be dated, may bear interest at such rate or rates, may mature or otherwise be payable at such time or times, may be redeemable before maturity, and may be subject to such other terms and conditions as may be provided for by the agency.

(c) The agency shall designate a program administrator, which may be the agency or one or more other public, private or quasi-public third-parties to administer, provide support and provide financing for the residential sustainable energy program.  The program administrator may: (i) by working in conjunction with the agency, develop program guidelines governing the terms and conditions under which financing for residential PACE projects may be made available to the residential sustainable energy program; (ii) originate, execute, and finance contracts for residential energy improvements with property owners on behalf of the agency; (iii) develop eligibility and underwriting guidelines and consumer protection features for the residential sustainable energy program, subject to the approval of the agency; (iv) develop procedures for working with contractors and installers of residential energy improvements for the purposes of facilitating residential energy improvements; (v) work with the agency to enable efficient and cost-effective financing mechanisms for the residential sustainable energy program; (vi) provide information as requested by the agency regarding the expected financing costs for residential PACE projects; and (vii) in consultation with the department, develop program guidelines regarding residential energy improvements. The agency may: (A) serve as an aggregating entity to secure state or private third-party financing for residential energy improvements pursuant to this chapter; and (B) use the services of one or more private, public or quasi-public third-party administrators to administer, provide support or obtain financing for residential PACE projects under the residential sustainable energy program.

(d) If the owner of a benefitted property requests financing from the agency for residential energy improvements for a residential PACE project under this section, the agency or its designated program administrator shall:

(i) evaluate the project for compliance with the financial underwriting guidelines established for the residential sustainable energy program;

(ii) evaluate the project for compliance with the program guidelines established for residential energy improvements;

(iii) impose requirements and conditions on the financing to ensure timely repayment including, but not limited to, procedures for placing a lien on the benefitted property as security for the payment of the betterment assessment; and

(iv) upon approval of financing, require the participating municipality to levy a betterment assessment in a manner consistent with this section and with chapter 80, as such provisions may be applicable and consistent with this section, on the benefitted property in a principal amount sufficient to pay the costs of the residential energy improvements and any associated costs, including the costs and fees of the program administrator and the agency and the costs of the participating municipality.

(e)(1) The agency shall enter into a financing and assessment agreement with the owner of a benefitted property. The agency may raise funds to supply the financing under the agreement by issuing PACE bonds or from other financing sources, including by encouraging third-party capital providers to participate directly or indirectly in the program. Upon execution of the agreement and immediately prior to making the funds, which may constitute all or a portion of the proceeds from the issuance of the PACE bonds or other source of financing, available to the property owner for the residential PACE project under the agreement, the agency or its designated program administrator shall notify the participating municipality and the participating municipality or its designee shall record the betterment assessment and lien on the benefitted property.

(2) The agency or its designated program administrator shall disclose, in written format, to the property owner the costs associated with participating in the residential sustainable energy program established by this section, including the effective interest rate of the betterment assessment, any fees charged by the agency or the program administrator to administer the program and any fees charged by third parties such as originators or other intermediaries, and the estimated payment schedule. The property owner shall acknowledge receipt of the disclosure.

(f) At the time the betterment assessment is levied, the program administrator shall set the term and amortization schedule, the rate of interest for the repayment of the betterment assessment amount and any required closing fees and costs, and disclose this information to the participating property owner. The term of each financing shall not exceed the lesser of (i) twenty five (25 years) or (ii) the weighted average of the estimated useful life of the residential energy improvements comprising the residential PACE projects financed by the betterment assessment. The assessment contract shall specify that the interest rate shall be fixed, and that payments of principal and interest shall be in roughly equal installments and principal payments shall be fully amortized over the term of the financing.

(g) At the time that the residential energy improvement is completed, the participating municipality where the benefitted property is located or the program administrator duly approved by the participating municipality or the agency shall notice and record the agreement between the agency and the property owner as a betterment pursuant to chapter 80 and place a lien on the property according to the terms of the agreement between the property owner and the agency, as security for the PACE bonds or other financing from the agency or other third-party capital providers; provided, however, that the betterment may apply to a single parcel of benefitted property and as a lien against the residential property benefitted.

(h) Notwithstanding section 12 of chapter 80, betterment assessments levied pursuant to this section and the interest, fees and any penalties on the betterment assessments shall constitute an assessment and a lien against the benefitted property until they are paid and shall continue notwithstanding any alienation or conveyance of the benefitted property by one property owner to a new property owner, including by foreclosure of the right of redemption by a mortgagee, by a municipality for unpaid taxes or otherwise. A new property owner shall take title to the benefitted property subject to the betterment assessment and lien. Only those past due balances of any betterment assessment under this Section shall be considered delinquent and subject to foreclosure. All payments on the betterment assessment that become due after the date of transfer by foreclosure or otherwise shall continue to be secured by a lien on the benefitted property and shall be the responsibility of the transferee. Betterment assessments payable pursuant to this Section shall constitute a covenant that runs with the premises, and that portion of the betterment assessment that is not yet due shall not be accelerated or eliminated by foreclosure of any lien, including a property tax lien.  The assessment and lien shall be treated, levied and collected in the same manner as the property taxes of the participating municipality on real property including, in the event of default or delinquency, the manner in which the participating municipality collects any penalties and fees and exercises remedies. Each lien may be continued, recorded and released upon repayment in full of the betterment assessment in the manner provided for property tax liens.

(i) Notwithstanding the provisions of section 12 of chapter 80, a lien on a benefitted property established pursuant to this section shall be: (i) subordinate to any existing lien against the benefitted property in existence and properly recorded on the date on which the betterment assessment is recorded; (ii) subordinate to any subsequent purchase money mortgage or first deed of trust recorded after the date on which the betterment assessment is recorded, provided, that the purchase money mortgage or first deed of trust was executed with or obtained from a mortgage lender licensed to do business in the Commonwealth; and (iii) except as otherwise agreed by the parties to the assessment agreement, superior to any other subsequent lien against the property recorded after the date on which the betterment assessment is recorded.  The agency or participating municipality may choose to implement clauses (i) or (ii) above, through contract if convenient and/or necessary; however, at no time shall a betterment lien established pursuant to this chapter be deemed by any court or agency of the Commonwealth to not be subordinate in accordance with the above. This subsection shall not affect the status or priority of any other municipal or statutory lien.

(j) The agency may sell or assign any betterment assessment receivables and any and all liens filed by the tax collector as provided in an assessment contract executed pursuant to this chapter. Notwithstanding any general or special law to the contrary, the provisions of Sections 2A and 2C of chapter 60 and any regulations promulgated pursuant thereto shall not apply to the assignment or sale of betterment assessment receivables or liens securing such receivables pursuant hereto.  The agency and the assignee shall negotiate the consideration received for such assignment. The assignee shall have the same powers and rights at law or in equity as the agency, the participating municipality, and the participating municipality’s tax collector would have had with regard to the precedence and priority of the lien, the accrual of interest, and the fees and expenses of collection. The assignee shall have the same rights to enforce the liens as any private party holding a lien on real property including, but not limited to, foreclosure. The assignee shall recover costs and reasonable attorney’s fees incurred as a result of any foreclosure action or other legal proceeding brought pursuant to this section and directly related to the proceeding from those having title to the property subject to the proceedings. Such costs and fees may be collected by the assignee at any time after the assignee has made a demand for payment.

(k) The exercise of the powers granted pursuant to this section shall constitute the performance of essential government functions and neither the agency nor the participating municipality shall be required to pay any taxes or assessments upon the property acquired or used by the agency or the participating municipality or upon the income derived from the property acquired or used by the agency or the participating municipality under this section. The PACE bonds issued under this section, their transfer and the income derived from their transfer, including any profit made on the sale of the PACE bonds, shall not be subject to taxation in the commonwealth.

(l) The activities of the residential sustainable energy program shall be reviewed on an annual basis by the agency.

(m) The agency may establish rules and guidelines to implement the program, including procedures describing the application process and criteria to evaluate the applications for PACE bonds under this section.

(n) The agency shall establish rules and guidelines with respect to consumer protection, including but not limited to contractor participation and standards, underwriting, disclosures and marketing practices, and product eligibility.  The agency shall conduct periodic reviews of compliance with these rules and guidelines.

(o)  Betterment assessments established pursuant hereto shall not be subject to Sections 20A or 21C of Chapter 59 of the General Laws.

(p)  Notwithstanding any general or special law to the contrary, the provisions of any other general or special law, regulation, ordinance or bylaw providing for the advertising, bidding awarding of contracts or consultation for the design, construction or improvement of property shall not apply to the procurement of residential PACE projects financed pursuant hereto.