SB 1087: PACE program: program administrators.

(1)Existing law, known commonly as the Property Assessed Clean Energy (PACE) program, authorizes a public agency, by making specified findings, to authorize public agency officials and property owners to enter into voluntary contractual assessments to finance the installation of distributed generation renewable energy sources or energy or water efficiency improvements that are permanently fixed to real property.

Existing law, the California Financing Law (CFL), requires a program administrator who administers a PACE program on behalf of, and with the written consent of, a public agency to comply with specified requirements relating to the PACE program, including requiring, commencing on January 1, 2019, a program administrator to be licensed by the Commissioner of Business Oversight. Existing law requires a program administrator, as of that date, to establish and maintain a process for the enrollment of, and the cancellation of that enrollment, a PACE solicitor and a PACE solicitor agent.

This bill would require the program administrator to maintain the processes described above in writing.

(2)The CFL requires a program administrator to ensure criteria related to the assessment contract are satisfied before the contract is approved for recordation, including ensuring that the property owner is current on all mortgage debt on the subject property. The CFL requires a program administrator to derive market value for those purposes in accordance with certain requirements, including that the appraisal is conducted within 6 months by a state-licensed or state-certified real estate appraiser.

This bill would make clarifying changes to that criteria, including requiring the program administrator to ensure that the property owner is current on all mortgage debt on the subject property as of the application date. The bill would modify the appraisal requirements by, among other clarifying changes, authorizing a program administrator to rely upon an appraisal obtained from the property owner if certain requirements are met.

(3)The CFL, commencing on April 1, 2018, prohibits a program administrator from approving an assessment contract for funding and recording by a public agency unless the program administrator makes a reasonable good faith determination that the property owner has a reasonable ability to pay the PACE assessments, subject to specified requirements and procedures, including a requirement that the program administrator verify the property owners income. The CFL, commencing on April 1, 2018, requires the program administrator to be responsible for the difference between the determination of the ability of the property owner, who is obligated on the underlying home improvement contract, to pay the annual PACE obligations and the actual amount financed for the property owner, provided certain requirements are met.

This bill would require a program administrator that is unable to verify the property owners income before the assessment contract is executed, to verify that information in a timely manner following the execution of the contract. This bill would require the assessment contract to include a disclosure that is substantially similar to the language in existing law described above that requires, absent intentional misrepresentation by the property owner, a program administrator to be responsible for the difference between the determination of the property owners ability to pay the annual PACE obligation and the amount financed for the property owner.

(4)The CFL requires the commissioner to file an annual report with the department as a public record that is a composite of the annual reports and any comments on that report that the commissioner determines to be in the public interest. The CFL, commencing on April 1, 2018, requires a program administrator to report annually to the commissioner all PACE assessments that were funded and recorded.

This bill would require a program administrator to include information on all PACE assessments that were funded and recorded into the annual composite report described above.

(5)Existing law, the California Financial Information Privacy Act, prohibits a financial institution from selling, sharing, transferring, or otherwise disclosing nonpublic personal information to, or with, nonaffiliated 3rd parties without the explicit prior consent from the consumer to whom the information relates. The CFL, commencing on April 1, 2018, requires a program administrator to comply with the California Financial Information Privacy Act.

This bill would require a program administrator to be subject to all provisions of the California Financial Information Privacy Act that are applicable to financial institutions.

(6)The CFL, commencing on January 1, 2019, authorizes the commissioner to conduct an examination under oath of every person engaged in the business of program administrator for the purpose of discovering violations of the CFL. Existing law provides that if during the course of an inspection, examination, or investigation of a program administrator the commissioner has cause to believe that the program administrator, PACE solicitor, or PACE solicitor agent may have committed a violation of the CFL or that certain conditions are met, the commissioner may take specified actions to investigate a PACE solicitor or a PACE solicitor agent, including inspecting specified files and communications of the PACE solicitor or PACE solicitor agent and requiring the attendance of witnesses under oath. The CFL provides that if, after an inspection, examination, or investigation, the commissioner has cause to believe that a PACE solicitor or PACE solicitor agent has committed a violation of the CFL, the commissioner is required to exhaust a procedure before bringing an order. Under existing law, that procedure requires the commissioner to issue a report to that person identifying each violation and requires that person to have an opportunity to provide a written answer to that report within a reasonable time. The CFL authorizes the commissioner, after the time period for a response has expired, and if the commissioner believes further action is necessary or appropriate, to demand a corrective action by the person subject to the investigation, demand the person stop violating the relevant portion of the CFL or rules or orders issued thereunder, or demand the PACE solicitor or PACE solicitor agent, or both, discontinue engaging in the business of soliciting property owners to enter into assessment contracts related to any and all program administrators or demand the program administrator deauthorize the PACE solicitor or PACE solicitor agent for a specified period of time. The CFL requires that, in that instance, any examinations and correspondence related to that investigation remain confidential, but authorizes the commissioner to make publicly available the identity of any PACE solicitor or PACE solicitor agent who has agreed to discontinue engaging in business as a consequence of an investigation. The CFL authorizes the commissioner, after the procedure described above is exhausted, to bring an order against the person subject to the investigation, subject to certain standards.

This bill would revise the procedure described above by, among other clarifying changes, requiring the commissioner to issue a report documenting the commissioners findings, and if applicable, requesting corrective action or a cessation of any violation of the CFL. The bill would require any answer to a demand to include any voluntary corrective action or other action taken or planned to address the commissioners request, and would require the commissioner to shorten the period of time to provide a written answer to no greater than 5 business days if he or she has reasonable grounds to believe that person is conducting business as a PACE solicitor or PACE solicitor agent, or both, in an unsafe or injurious manner. The bill would remove the provision that authorizes the commissioner to make publicly available the identity of any PACE solicitor or PACE solicitor agent who has agreed to, or been required to, discontinue engaging in business as a consequence of an investigation, and would no longer require that examinations and correspondence related to an investigation as described above be confidential.

This bill require the commissioner to bring an order against a person following the issuance of a demand for the PACE solicitor or PACE solicitor agent, or both, to discontinue engaging in the business of soliciting property owners to enter into assessment contracts or following the issuance of a demand that the program administrator deauthorize the PACE solicitor or PACE solicitor agent for a specified period of time. The bill would also require the commissioner to bring an order against a person following the issuance of a demand to take corrective action or to stop violating the relevant portion of the CFL if the commissioner believes that the publics interest will be served by the public nature of the order The bill would require that any order addressing unsafe or injurious behavior by a PACE solicitor or PACE solicitor agent, or both, be effective immediately, but would provide that any other order issued under this process be effective once final in accordance with certain requirements.

The bill would require the department, beginning on January 1, 2020, to maintain on its Internet Web site the identities of enrolled PACE solicitors and PACE solicitor agents. The bill would require the department to maintain on its Internet Web site the identities of PACE solicitors and PACE solicitor agents ordered to discontinue engaging in the business of soliciting property owners to enter into assessment contracts.

(7)Existing law makes it unlawful to commence work under a home improvement contract if the property owner entered into the home improvement contract based on the reasonable belief that the work would be covered by the PACE program and the property owner applies for, accepts, and cancels the PACE financing within the right to cancel period.

The bill would also apply the above prohibition if the property owner applied for, but was not approved for, PACE financing, and would make a conforming change to that effect. The bill would also broaden that prohibition to make it unlawful to deliver any property or perform any services, except to obtain a building permit or other similar services, under a home improvement contract if the circumstances described above are met. The bill would state that the provision governing home improvement contracts does not authorize the commencement of work under a home improvement contract if the commencement of work is prohibited by specified provisions of the CFL.

(8)This bill would make other clarifying changes to the provisions of the CFL relating to program administrators, PACE solicitors, and PACE solicitor agents.