83R5580 PAM-F
 
  By: Keffer H.B. No. 1094
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to authorizing assessments for water and energy
  improvements in districts designated by municipalities and
  counties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Chapter 376, Local Government Code, is
  transferred to Subtitle C, Title 12, Local Government Code,
  redesignated as Chapter 399, Local Government Code, and amended to
  read as follows:
  CHAPTER 399 [376]. MUNICIPAL AND COUNTY WATER AND [CONTRACTUAL
  ASSESSMENTS FOR] ENERGY IMPROVEMENT DISTRICTS [EFFICIENCY
  IMPROVEMENTS]
         Sec. 399.001  [376.001]. SHORT TITLE. This chapter may be
  cited as the Property Assessed Clean Energy Act.
         Sec. 399.002.  DEFINITIONS. In this chapter:
               (1)  "District" means a district designated under this
  chapter.
               (2)  "Local government" means a municipality or county.
               (3)  "Program" means a program established under this
  chapter.
               (4)  "Qualified improvement" means a permanent
  improvement fixed to real property and intended to decrease water
  or energy consumption.
               (5)  "Qualified project" means the installation or
  modification of a qualified improvement or the acquisition,
  installation, or improvement of a renewable energy system.
               (6)  "Real property" means privately owned real
  property.
               (7)  "Renewable energy system" means a permanently
  fixed product or device, or interacting group of permanently fixed
  products or devices, on the customer's side of the meter that uses a
  renewable energy technology to generate electricity, provide
  thermal energy, or regulate temperature.
               (8)  "Renewable energy technology" means any
  technology that exclusively relies on an energy source that is
  naturally regenerated over a short time and derived directly from
  the sun, indirectly from the sun, or from moving water or other
  natural movements and mechanisms of the environment. A renewable
  energy technology includes a technology that relies on energy
  derived directly from the sun, on wind, geothermal, hydroelectric,
  wave, or tidal energy, or on biomass or biomass-based waste
  products, including landfill gas. A renewable energy technology
  does not rely on energy resources derived from fossil fuels, waste
  products from fossil fuels, or waste products from inorganic
  sources.
         Sec. 399.003.  EXERCISE OF POWERS. The governing body of a
  local government that establishes a program in accordance with the
  requirements provided by Section 399.008 may exercise powers
  granted under this chapter.
         Sec. 399.004.  AUTHORIZED ASSESSMENTS [FINANCING]. (a)  An
  assessment under this chapter may be imposed to repay the financing
  of qualified projects on real property located in a district
  designated under this chapter [finance:
               [(1) energy efficiency public improvements to developed
  lots for which the costs and time delays of creating an entity under
  law to assess the lot would be prohibitively large relative to the
  cost of the energy efficiency public improvement to be financed;
  and
               [(2) the installation of distributed generation
  renewable energy sources or energy efficiency improvements that are
  permanently fixed to residential, commercial, industrial, or other
  real property].
         (b)  [Sec. 376.002.  CERTAIN FINANCING PROHIBITED.] An
  assessment under this chapter may not be imposed to repay the
  financing of [used to finance]:
               (1)  facilities for undeveloped lots or lots undergoing
  development at the time of the assessment; or
               (2)  the purchase or installation of products or
  devices [appliances] not permanently fixed to real property.
         Sec. 399.005  [376.003]. WRITTEN CONTRACT  [CONSENT] FOR
  ASSESSMENT REQUIRED. A local government [municipality] may impose
  an assessment under this chapter only under a written contract with
  the record [consent of the] owner of the real property to be 
  assessed [property at the time of the assessment].
         Sec. 399.006.  ESTABLISHMENT OF PROGRAM. (a) The governing
  body of a local government may determine that it is convenient and
  advantageous to establish a program under this chapter.
         (b)  An authorized official of the local government that
  establishes a program may enter into a written contract with a
  record owner of real property in a district designated under this
  chapter to impose an assessment to repay the owner's financing of a
  qualified project on the owner's property. The financing to be
  repaid through assessments may be provided by a third party or, if
  authorized by the program, by the local government.
         (c)  If the program provides for third-party financing, the
  authorized official of the local government that enters into a
  written contract with a property owner under Subsection (b) must
  also enter into a written contract with the party that provides
  financing for a qualified project under the program to service the
  debt through assessments.
         (d)  If the program provides for local government financing,
  the written contract described by Subsection (b) must be a contract
  to finance the qualified project through assessments.
         (e)  An assessment imposed under this chapter may include the
  cost of program application and administrative fees. The financing
  for which assessments are imposed may include:
               (1)  the cost of materials and labor necessary for
  installation or modification of a qualified improvement or
  installation or improvement of a renewable energy system;
               (2)  permit fees;
               (3)  inspection fees;
               (4)  lender's fees;
               (5)  water or energy review and verification review
  fees; and
               (6)  any other fees or costs that may be incurred by the
  property owner incident to the installation, modification, or
  improvement on a specific or pro rata basis, as determined by the
  local government.
         Sec. 399.007  [376.004]. DESIGNATION OF DISTRICT [AREA FOR
  ASSESSMENT]. (a) [The governing body of a municipality may
  determine that it is convenient and advantageous to designate an
  area of the municipality within which authorized municipal
  officials and property owners may enter into contracts to assess
  properties for energy efficiency public improvements described by
  Section 376.001(1) and make financing arrangements under this
  chapter.
         [(b)]  The governing body of a local government
  [municipality] may determine that it is convenient and[,]
  advantageous[, and in the public interest] to designate an area of
  the local government as a district [municipality] within which
  authorized local government [municipal] officials and record
  [property] owners of real property may enter into written contracts
  to impose assessments to repay the financing by owners of qualified
  projects on the owners' property and, if authorized by the local
  government program, finance the qualified project [assess
  properties to finance the installation of distributed generation
  renewable energy sources or energy efficiency improvements that are
  permanently fixed to real property].
         (b) [(c)]  An area designated as a district by the governing
  body of a local government [municipality] under this section:
               (1)  may include the entire local government; and
               (2)  must be located wholly within the local
  government's jurisdiction [municipality].
         (c)  For purposes of determining a municipality's
  jurisdiction under Subsection (b)(2), the municipality's
  extraterritorial jurisdiction may be included.
         (d)  A local government may designate more than one district.
  If multiple districts are designated, the districts may be
  separate, overlapping, or coterminous.
         Sec. 399.008  [376.005]. PROCEDURE FOR ESTABLISHMENT OF
  PROGRAM [RESOLUTION OF INTENTION TO CONTRACT FOR ASSESSMENT]. (a)  
  To establish a program [make a determination] under this chapter
  [Section 376.004], the governing body of a local government
  [municipality] must take the following actions in the following
  order:
               (1)  adopt a resolution of intent that includes:
                     (A)  a finding that, if appropriate, financing
  qualified projects through contractual assessments is a valid
  public purpose;
                     (B)  [indicating the governing body's intention
  to designate an area for assessment.
         [(b)  The resolution of intention must:
               [(1) include] a statement that the local government
  intends [municipality proposes] to make contractual assessments to
  repay [assessment] financing for qualified projects available to
  property owners;
                     (C)  a description of [(2)  identify] the types of
  qualified projects [energy efficiency public improvements,
  distributed generation renewable energy resources, or energy
  efficiency improvements] that may be subject to contractual
  assessments [financed];
                     (D)  a description of [(3)  describe] the
  boundaries of the district [area in which contracts for assessments
  may be entered into];
                     (E)  a description of any [(4)     thoroughly
  describe the] proposed arrangements for third-party financing to be
  available or any local government financing to be provided for
  qualified projects [the program];
                     (F)  a description of local government debt
  servicing procedures if third-party financing will be provided and
  assessments will be collected to service a third-party debt;
                     (G)  a reference to the report on the proposed
  program prepared as provided by Section 399.009 and a statement
  identifying the location where the report is available for public
  inspection; [and]
                     (H)  a statement of [(5)  state] the time and
  place for a public hearing on [and that interested persons may
  object to or inquire about] the proposed program [at the hearing.
         [(c)     If contractual assessments are to be used to finance
  the installation of distributed generation renewable energy
  sources or energy efficiency improvements that are permanently
  fixed to real property, the resolution of intention must state that
  it is in the public interest to do so.
         [(d)     The resolution shall direct an appropriate municipal
  official to:
               [(1)  prepare a report under Section 376.006]; and
                     (I)  a statement identifying the appropriate
  local official and [(2)  consult with] the appropriate
  assessor-collector for purposes of consulting [appraisal district
  or districts] regarding collecting the proposed contractual
  assessments with property taxes imposed on the assessed property;
               (2)  hold a public hearing at which the public may
  comment on the proposed program, including the report required by
  Section 399.009; and
               (3)  adopt a resolution establishing the program and
  the terms of the program, including:
                     (A)  each item included in the report under
  Section 399.009; and
                     (B)  a description of each aspect of the program
  that may be amended only after another public hearing is held.
         (b)  For purposes of Subsection (a)(3)(A), the resolution
  may incorporate the report or the amended version of the report, as
  appropriate, by reference.
         (c)  Subject to the terms of the resolution establishing the
  program as referenced by Subsection (a)(3)(B), the governing body
  of a local government may amend a program by resolution.
         (d)  A local government may:
               (1)  hire and set the compensation of a program
  administrator; or
               (2)  contract for professional services necessary to
  administer a program.
         (e)  A local government may impose fees to offset the costs
  of administering a program. The fees authorized by this subsection
  may be assessed as:
               (1)  a program application fee paid by the property
  owner requesting to participate in the program;
               (2)  a component of the interest rate on the assessment
  in the written contract between the local government and the
  property owner; or
               (3)  a combination of Subdivisions (1) and (2).
         Sec. 399.009  [376.006]. REPORT REGARDING ASSESSMENT. (a)
  The [An appropriate municipal official designated in the resolution
  shall prepare a] report for a proposed program required by Section
  399.008 must include [containing]:
               (1)  a map showing the boundaries of the proposed
  district [area within which contractual assessments are proposed to
  be offered];
               (2)  a form [draft] contract between the local
  government and the property owner specifying the terms of:
                     (A)  assessment under the program; and
                     (B)  financing provided by a third party or the
  local government, as appropriate [that would be agreed to by the
  municipality and a property owner within the contractual assessment
  area];
               (3)  if the proposed program provides for third-party
  financing, a form contract between the local government and the
  third party regarding the servicing of the debt through
  assessments;
               (4)  a description [a statement of municipal policies
  concerning contractual assessments including:
                     [(A)  identification] of types of qualified
  projects [energy efficiency public improvements, distributed
  generation renewable energy sources, or energy efficiency
  improvements] that may be subject to [financed through the use of]
  contractual assessments;
               (5)  a statement identifying [(B)  identification of]
  a local government [municipal] official authorized to enter into
  written contracts [contractual assessments] on behalf of the local
  government [municipality];
               (6)  a plan for ensuring sufficient capital for
  third-party financing and, if appropriate, raising capital for
  local government financing for qualified projects;
               (7)  if bonds will be issued to provide capital to
  finance qualified projects as part of the program as provided by
  Section 399.015:
                     (A)  [(C)] a maximum aggregate annual dollar
  amount for financing through contractual assessments to be provided
  by the local government under the program [of contractual
  assessments];
                     (B)  [(D)] a method for ranking requests from
  property owners for financing through contractual assessments in
  priority order if requests appear likely to exceed the
  authorization amount; and
                     (C)  a method for determining:
                           (i)  the interest rate and period during
  which contracting owners would pay an assessment; and
                           (ii)  the maximum amount of an assessment;
               (8)  a method for ensuring that the period of the
  contractual assessment does not exceed the useful life of the
  qualified project that is the basis for the assessment;
               (9)  a description of the application process and
  eligibility requirements for financing qualified projects to be
  repaid through contractual assessments under the program;
               (10)  [(E)] a method as prescribed by Subsection (b)
  for ensuring that property owners requesting to participate in the
  program [financing] demonstrate the financial ability to fulfill
  financial obligations to be repaid through [under the] contractual
  assessments;
               (11)  a statement explaining the manner in which
  property will be assessed and assessments will be collected;
               (12)  a statement explaining the lender notice
  requirement provided by Section 399.010;
               (13)  a statement explaining the water and energy
  review requirement provided by Section 399.011;
               (14)  a description of marketing and participant
  education services to be provided for the program;
               (15)  a description of quality assurance and antifraud
  measures to be instituted for the program
               [(4) a plan for raising a capital amount required to pay
  for work performed in accordance with contractual assessments that:
                     [(A) may include:
                           [(i)     amounts to be advanced by the
  municipality through funds available to it from any source; and
                           [(ii)  the sale of bonds or other financing;
                     [(B) shall include a statement of or method for
  determining the interest rate and period during which contracting
  property owners would pay any assessment; and
                     [(C) shall provide for:
                           [(i)  any reserve fund or funds; and
                           [(ii)     the apportionment of all or any
  portion of the costs incidental to financing, administration, and
  collection of the contractual assessment program among the
  consenting property owners and the municipality]; and
               (16)  [(5)] the results of the consultations with the
  appropriate assessor-collector [appraisal districts] concerning
  incorporating the proposed contractual assessments into the
  assessments of property taxes.
         (b)  The method for ensuring a demonstration of financial
  ability under Subsection (a)(10) must be based on appropriate
  underwriting factors, including:
               (1)  providing for verification that:
                     (A)  the property owner requesting to participate
  under the program:
                           (i)  is the legal owner of the benefited
  property;
                           (ii)  is current on mortgage and property
  tax payments; and
                           (iii)  is not insolvent or in bankruptcy
  proceedings; and
                     (B)  the title of the benefited property is not in
  dispute; and
               (2)  requiring an appropriate ratio of the amount of
  the assessment to the assessed value of the property.
         (c)  The local government shall make the report available for
  public inspection:
               (1)  on the local government's Internet website; and
               (2)  at the office of the official designated to enter
  into written contracts on behalf of the local government under the
  program.
         Sec. 399.010.  NOTICE TO MORTGAGE HOLDER REQUIRED FOR
  PARTICIPATION. (a) In this section, "commercial or industrial
  property" means privately owned real property other than a
  residential dwelling with fewer than five dwelling units.
         (b)  Before a local government may enter into a written
  contract with a record owner of real property to impose an
  assessment to repay the financing of a qualified project under this
  chapter:
               (1)  the holder of any mortgage lien on the property
  must be given written notice of the owner's intention to
  participate in a program under this chapter on or before the 30th
  day before the date the written contract for assessment between the
  owner and the local government is executed; and
               (2)  if the property is commercial or industrial
  property, a written consent from the holder of the mortgage lien on
  the property must be obtained.
         Sec. 399.011.  REVIEW REQUIRED. (a) A program established
  under this chapter must require a baseline water or energy review to
  be conducted for each proposed qualified project to establish
  future water or energy savings.
         (b)  After a qualified project is completed, the local
  government shall obtain verification that the qualified project was
  properly completed and is operating as intended.
         (c)  A baseline water or energy review or verification review
  under this section for commercial or industrial property, as
  defined by Section 399.110, must be conducted by an independent
  third party.
         Sec. 399.012  [376.007]. DIRECT ACQUISITION [PURCHASE] BY
  OWNER. The [On the written consent of an authorized municipal
  official, the] proposed arrangements for financing a qualified
  project [the program pertaining to the installation of distributed
  generation renewable energy sources or energy efficiency
  improvements that are permanently fixed to real property] may
  authorize the property owner to:
               (1)  purchase directly the related equipment and
  materials for the installation or modification of a qualified
  improvement or the installation or modification of a renewable
  energy system [the distributed generation renewable energy sources
  or energy efficiency improvements]; and
               (2)  contract directly, including through lease, power
  purchase agreement, or other service contract, for the installation
  or modification of a qualified improvement or the installation or
  modification of a renewable energy system [the distributed
  generation renewable energy sources or energy efficiency
  improvements].
         Sec. 399.013  [376.008]. LIEN. (a) A contractual [An]
  assessment [imposed] under this chapter and any interest or
  penalties on the assessment:
               (1)  is [constitutes] a first and prior lien against
  the real property [lot] on which the assessment is imposed until the
  assessment, interest, or penalty is paid; and
               (2)  has the same priority status as a lien for any
  other ad valorem tax.
         (b)  The lien runs with the land, and that portion of the
  assessment under the assessment contract that has not yet become
  due is not eliminated by foreclosure of a property tax lien.
         (c)  The assessment lien may be enforced by the local
  government in the same manner that a property tax lien against real
  property may be enforced by the local government to the extent the
  enforcement is consistent with Section 50, Article XVI, Texas
  Constitution.
         (d)  Delinquent installments of the assessments incur
  interest and penalties in the same manner as delinquent property
  taxes.
         (e)  A local government may recover costs and expenses,
  including attorney's fees, in a suit to collect a delinquent
  installment of an assessment in the same manner as in a suit to
  collect a delinquent property tax.
         Sec. 399.014.  COLLECTION OF ASSESSMENTS. The governing
  body of a local government may contract with the governing body of
  another taxing unit, as defined by Section 1.04, Tax Code, or
  another entity, including a county assessor-collector, to perform
  the duties of the local government relating to collection of
  assessments imposed by the local government under this chapter.
         Sec. 399.015.  BONDS OR NOTES. (a) A local government may
  issue bonds or notes to finance qualified projects through
  contractual assessments under this chapter.
         (b)  Bonds or notes issued under this section may not be
  general obligations of the local government. The bonds or notes
  must be secured by one or more of the following as provided by the
  governing body of the local government in the resolution or
  ordinance approving the bonds or notes:
               (1)  payments of contractual assessments on benefited
  property in one or more specified districts designated under this
  chapter;
               (2)  reserves established by the local government from
  grants, bonds, or net proceeds or other lawfully available funds;
               (3)  municipal bond insurance, lines of credit, public
  or private guaranties, standby bond purchase agreements,
  collateral assignments, mortgages, or any other available means of
  providing credit support or liquidity;
               (4)  tax increment revenues that are lawfully available
  for purposes consistent with this chapter; and
               (5)  any other funds lawfully available for purposes
  consistent with this chapter.
         (c)  A local government pledge of assessments, funds, or
  contractual rights in connection with the issuance of bonds or
  notes by the local government under this chapter is a first lien on
  the assessments, funds, or contractual rights pledged in favor of
  the person to whom the pledge is given, without further action by
  the local government. The lien is valid and binding against any
  other person, with or without notice.
         (d)  Bonds or notes issued under this chapter further an
  essential public and governmental purpose, including:
               (1)  improvement of the reliability of the state
  electrical system;
               (2)  conservation of state water resources consistent
  with the state water plan;
               (3)  reduction of energy costs;
               (4)  economic stimulation and development;
               (5)  enhancement of property values;
               (6)  enhancement of employment opportunities; and
               (7)  reduction in greenhouse gas emissions.
         Sec. 399.016.  JOINT IMPLEMENTATION. (a) Any combination
  of local governments may agree to jointly implement or administer a
  program under this chapter.
         (b)  If two or more local governments implement a program
  jointly, a single public hearing held jointly by the cooperating
  local governments is sufficient to satisfy the requirement of
  Section 399.008(a)(2).
         (c)  One or more local governments may contract with a third
  party, including another local government, to administer a program.
         SECTION 2.  The changes in law made by this Act apply only to
  a program established under Chapter 399, Local Government Code, as
  transferred, redesignated, and amended by this Act, on or after the
  effective date of this Act. A program established under Chapter
  376, Local Government Code, before the effective date of this Act,
  is governed by the law in effect on the date the program was
  established, and the former law is continued in effect for that
  purpose.
         SECTION 3.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2013.