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SR-11-12-2013-3FYo i Council Report Santa Monica City Council Meeting: November 12, 2013 Agenda Item: 3F To: Mayor and City Council From: Dean Kubani, Sustainability Manager, Office of Sustainability and the Environment Subject: Resolution Authorizing Participation in the California HERO Program Recommended Action Staff recommends that City Council: 1. Adopt the attached resolution authorizing the City's participation in the California HERO Program. 2. Authorize the City Manager to negotiate and enter into an agreement with the Western Riverside Council of Governments to permit the provision of the California HERO Program services in Santa Monica. Executive Summary The California Home Energy Retrofit Opportunity (HERO) Program is a Property Assessed Clean Energy (PACE) financing program that enables property owners to borrow the cost of energy efficiency improvements and renewable energy systems by placing a voluntary assessment on their property tax bill. PACE financing is attractive to property owners for a number of reasons. Making PACE financing available to Santa Monica property owners has the potential to stimulate the installation of energy efficiency improvements and renewable energy systems. Adopting the resolution will make Santa Monica property owners eligible to participate in the California HERO Program. There would be no financial impact for the City of Santa Monica and no budget action would be required. Background Assembly Bill (AB) 811, signed into law on July 21, 2008, amended Chapter 29 of Part 3 of Division 7 of the Streets & Highways Code of the State of California ( "Chapter 29 ") to authorize legislative bodies to designate an area within which authorized public officials and free and willing property owners may enter into voluntary contractual assessments to finance the installation of renewable energy sources and energy efficiency improvements that are permanently fixed to real property. AB 474, effective January 1, 1 2010, expanded the amendment of Chapter 29 to include financing for water efficiency improvements. Participating property owners repay the cost of the improvements through an assessment levied against their property which is payable in semi - annual installments on property tax bills. A lien is filed against the property as security until the assessment is re -paid. The assessment remains with the property should the owner transfer or sell the property before the loan is re -paid. The Western Riverside County HERO Program was launched in late 2012. In its first year of operation the program has funded over $25 million in energy and water efficiency and renewable energy investments in over 4,000 homes. Due to this success, the program has been rebranded as the California HERO Program and is now offered as a turnkey program for use by other California jurisdictions in order to save the time and resources needed to develop stand -alone programs. To participate, jurisdictions must adopt a resolution authorizing participation in the program and approve an amendment to the joint exercise of powers agreement related to the California HERO Program. The Santa Monica City Council adopted a resolution on July 13, 2010 authorizing participation in the Los Angeles County Energy Program ( LACEP), which is also a Property Assessed Clean Energy (PACE) program. At the time it was envisioned that LACEP would offer PACE financing to both commercial and residential property owners. However, to date LACEP has only offered a program for commercial property owners. The Los Angeles County Energy Program will continue to be offered to Santa Monica Businesses, while the California HERO Program would be available to both residential and commercial property owners. Discussion The California HERO Program allows property owners in participating cities and counties to finance energy and water efficiency improvements, renewable energy systems, and electric vehicle charging infrastructure on their property. If a property E owner chooses to participate, the improvements to be installed on the owner's property would be financed by the issuance of bonds by a joint power authority, Western Riverside Council of Governments ( "WRCOG "), and secured by a voluntary contractual assessment levied on the owner's property. Participation in the program is entirely voluntary. Property owners who wish to participate in the program agree to repay the money through the voluntary contractual assessment which is added to the owner's annual property tax assessment. PACE financing through a program such as the California HERO Program mitigates two key barriers that often prevent property owners from installing energy efficiency, water efficiency and renewable energy projects: 1) it eliminates the need for property owners to pay out of pocket up -front costs for improvements; and 2) it establishes a loan obligation that is attached to the property and not to the individual borrower. The availability of PACE financing can be a catalyst in spurring the local economy by creating energy retrofit jobs and stimulating construction activities. Energy retrofit improvements to existing buildings would allow property owners to reduce energy and water use as well as greenhouse gas emissions. Participating property owners would reduce operating costs for electricity, natural gas and water and improve the comfort and safety of their homes and businesses. Increasing the adoption of renewable energy and energy efficiency improvements is a component of the Climate Action Plan adopted by Council in February 2013. The Climate Action Plan calls for the City to make a PACE financing program available to residential property owners. The WRCOG will provide all assessment administration, bond issuance and bond administration functions for the California HERO Program. As a participant, the City is not obligated to repay the bonds issued by the Joint Powers Authority or collect or pay the assessments levied on the participating properties. The attached resolution enables the California HERO Program to be available to Santa Monica residential and commercial property owners to finance renewable energy, 3 energy efficiency and water efficiency improvements and electric vehicle charging infrastructure. The resolution also approves an amendment to the WRCOG Joint Powers Agreement to add the City as an Associate Member in order that the California HERO Program may be offered to the Santa Monica property owners who wish to participate. Property owners will have access to California HERO Program information through a variety of sources, including a comprehensive website that includes an online application process. Marketing and outreach material templates will be provided by the program at no charge for use by the City in its own promotion of the program within the community. The City will provide additional marketing and outreach about the program to Santa Monica residents and businesses through the ongoing activities of the Solar Santa Monica program. Other jurisdictions have seen an increase in solar energy and energy efficiency installations once PACE financing is made available. An increase in adoption of solar energy will further the goals established by the Climate Action Plan. F1 Should the resolution be adopted, the California HERO Program's legal counsel will begin a process of judicial validation. During that time outreach to property owners and contractors will begin to inform them of the pending availability of PACE financing through the California HERO program. The program will be launched and marketing efforts will begin in four to six months after resolution adoption. Financial Impacts & Budget Actions There are no direct financial impacts associated with adoption of this resolution. All California HERO Program administrative costs are covered through an initial administrative fee included in the property owner's voluntary contractual assessment and an annual administrative fee which is also collected on the property owner's tax bill. Prepared by: Matt Henigan, Energy Efficiency Engineer Approved: Dean Kubani Director, Sustainability Manager Attachments: 1) Resolution 5 Forwarded to Council: Rod Gould City Manager Reference: Resolution No. 10780 (CCS)