WASHINGTON — A draft bill released by House Ways and Means Committee chairman Sander Levin late Monday would authorize over $5 billion in new bond authority for renewable energy projects and open the door for private-activity bonds to be used by states and localities to finance energy-efficient upgrades to residential homes.
The bill does not include highly sought extensions of several high-profile bond programs that were authorized by the American Recovery and Reinvestment Act — including Build America Bonds.
But that’s no reason to panic, according to sources and market participants, who remain optimistic that lawmakers will take another crack at legislation extending BABs and other expiring tax-law provisions during the coming weeks.
BABs were excluded from the energy bill primarily because they are not energy-related, a congressional source said.
The House had approved a two-year extension for BABs in jobs legislation it passed last month. But the BABs and other bond program and tax law extensions were carved out of the legislation after lawmakers in the Senate failed to garner enough votes to limit debate and avoid a filibuster. President Obama signed the much narrower bill last week.
The draft Domestic Manufacturing and Energy Jobs Act of 2010 unveiled by Levin would authorize an additional $3.5 billion of clean renewable energy bonds, 60% of which would be allocated to public power providers with the remaining 40% going to rural electric cooperatives.
It also would expand the use of CREBs to include energy storage systems and certain biogas equipment. CREBs can be issued as either tax-credit bonds or direct-pay bonds like BABs.
In the direct-pay mode, issuers would receive subsidy payments equal to 70% of interest costs.
The Joint Tax Committee estimated the CREBs provision would cost $1.391 billion over 10 years.
The Levin draft legislation also would authorize $2.4 billion of a new type of tax-credit bond — home energy conservation bonds — that the Treasury Department would allocate to state and local governments.
The bonds could be used to finance residential energy-efficiency assistance programs, provided at least 20% of the proceeds are used to make low-income energy efficiency assistance grants and loans, and at least 10% are used to make “very low-income residential energy efficiency assistance grants,” according to the legislative text.
Like CREBs, issuers would have the option of issuing the bonds as tax-credit or direct-pay bonds.
The provision is estimated to cost $1.252 billion over 10 years.
The legislation also would allow states and localities to issue private-activity bonds to finance homeowner energy-efficiency upgrades and retrofits as part of a property assessed clean-energy program.
The PACE programs have been adopted by 21 states and the District of Columbia. Under the programs, tax-exempt bond proceeds are used to finance the “green” upgrades and are eventually paid back by homeowners via a special assessment on their property taxes.
The provision is estimated to cost $730 million over 10 years by the Joint Tax Ccommittee.
While it would expand financing options for PACE programs, the legislation does not address concerns by Fannie Mae and Freddie Mac, and their regulator, the Federal Housing Finance Agency, that have brought such programs to a standstill.
The government-sponsored enterprises and FHFA have said the PACE assessments make the underlying mortgages too risky, and are refusing to purchase them
Legislation has been introduced by Rep. Mike Thompson, D-Calif., a member of the House Ways and Means Committee, that would force Fannie and Freddie to adopt underwriting standards to accommodate the PACE programs, but that language was not included in Levin’s draft energy bill.
The legislation also would provide tax credits for expenditures tied to mass transit projects for the New York Liberty Zone, an area of lower Manhattan targeted for rejuvenation following the Sept. 11, 2001, terrorist attacks.
That provision is estimated to cost $1.151 billion over 10 years, according to the JTC.