LOS ANGELES — California Controller John Chiang and state Sen. Kevin de León, D-L.A., unveiled legislation on Tuesday to recast a bond-based program encouraging cost-effective retrofits of commercial buildings throughout the state.
Under Senate Bill 1130, the state of California would aggregate or “pool-together” energy retrofit loans made by commercial and investment banks to property owners.
The state would then sell tax-exempt revenue bonds and use the proceeds to repay the property owners’ initial loans from the banks.
That lowers the cost of financing, and offers the security necessary for financiers to lend, Jacob Roper, a spokesman in the state controller’s office, said in an interview.
“The banks have a ton of money on their balance sheets,” de León said. “I think this is an ingenious way to use government to help tear down market barriers and get private capital into the game.”
While local governments throughout California have received the authority to issue such Property Assessed Clean Energy, or PACE, bonds, SB 1130 would put the state government into the PACE game.
De León said that he and Chiang have been working together to try to come up with proposals that will help create jobs without adding to the state’s financial worries.
“This unique program will bring private commercial property owners, labor, and environmentalists together to improve California’s economy by creating jobs, increasing the value of commercial buildings and cleaning up the environment,” Chiang said.
“It is a market-driven policy that will spark our economy by bringing investment capital into our state — and help California dig out of this recession with little risk to California taxpayers.”
The bill targets the particularly hard-hit construction industry, de León said. It will help further stimulate the job market by putting the exact industry segment back to work that is most in need — the construction trades, he said.
Since the Great Recession began, California has lost nearly 1.4 million jobs, including 400,000 in the construction industry alone, said Cesar Diaz, who represents the State Building and Construction Trades Council.
“SB 1130 will provide much needed construction jobs that will help lead the state’s economic recovery,” Diaz said.
The state has the second-highest unemployment rate in the country at 11.1%, he noted.
The legislation adds a secure repayment plan directly from commercial real estate owners to the bondholders by adding it to the property taxes collected through the state’s Board of Equalization, according to Roper.
The payments supporting the bonds are attached to the property’s deed, so if the property is sold the new owner would make payments until the bonds are paid off.
California in April 2010 passed a bill authorizing PACE programs to assist local jurisdictions in financing energy retrofits for both commercial and residential real estate.
That bill appropriateed up to $50 million from the Renewable Resource Trust Fund to the California Alternative Energy and Advanced Transportation Financing Authority through Jan. 1, 2015, for the PACE reserve program.
Under the new legislation, the CAEATFA would also issue PACE bonds. Through the bill’s proposed Building the Economy Through Energy Retrofits program, applicants would apply directly to the state rather than applying through municipalities’ programs.
One advantage is that commercial real estate owners who have buildings throughout California will not have to apply in multiple jurisdictions, according to Roper.
“There has been a criticism on the local level that there are not enough dollars to lower rates enough to attract people,” Roper added. “We needed legislation to create a secure payment method at the state level.”