Revision: Jan. 11, 2023, 11:25 a.m.
HB 576-FN-A-LOCAL - AS INTRODUCED
2023 SESSION
23-0399
06/10
HOUSE BILL 576-FN-A-LOCAL
SPONSORS: Rep. Mangipudi, Hills. 11; Rep. Darby, Hills. 11; Rep. McWilliams, Merr. 30; Rep. Preece, Hills. 17; Sen. Watters, Dist 4; Sen. Altschiller, Dist 24
COMMITTEE: Science, Technology and Energy
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ANALYSIS
This bill establishes a state energy conservation loan program and an energy conservation project fund. This bill also establishes the state PACE reserve fund.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
23-0399
06/10
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty Three
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 New Chapter; Energy Conservation Loan Program. Amend RSA by inserting after chapter 4-H the following new chapter:
CHAPTER 4-I
ENERGY CONSERVATION LOAN PROGRAM
4-I:1 Findings. The general court finds that it is in the best interest of the state of New Hampshire to promote energy conservation projects within the state of New Hampshire, undertaken by owners of privately-held real property, the state of New Hampshire, cities or towns, and nonprofit institutions by facilitating the financing of the acquisition, design, construction, installation, renovation, repair, or expansion of such energy conservation projects.
4-I:2 Definition. In this chapter:
I. “Commission” means the New Hampshire public utilities commission.
II. “Eligible borrower” means any public body, municipality, institution, or person, provided that an owner of privately-held real property may participate through the municipal PACE program.
III. “Eligible project” means the acquisition, design, construction, repair, renovation, rehabilitation, or other capital improvement or deferred maintenance of an energy conservation project undertaken by an eligible borrower, and in the case of owners of privately-held real property, shall include, but not be limited to, energy conservation and efficiency and clean energy improvements under the municipal PACE program.
IV. “Energy project bonds” means bonds, notes, certificates of participation or beneficial interest, or other evidences of indebtedness or ownership, issued pursuant to an executed indenture, financing document, or other agreement of the state treasurer, the proceeds of which are used to finance loans for eligible projects, and that are payable from loan repayments, and are further secured by system benefits charges (SBC).
V. “Financing order” means an order of the commission which shall provide for a first priority lien on all or a portion of the SBC to further secure energy project bonds.
VI. “Fund” means the energy conservation project fund established under RSA 4-I:4 and held by the financing entity, within which the financing entity shall create loan accounts and reserve accounts.
VII. “Loan” means a direct loan of moneys or any other financing arrangement from the financing entity to an eligible borrower to finance all or a portion of an eligible project.
VIII. “Municipal PACE program” means a program implemented and administered by a municipality pursuant to RSA 53-F.
IX. “SBC” means the mandatory system benefits charge imposed pursuant to RSA 374-F:4.
X. “Special purpose entity” means any partnership, limited partnership, association, corporation, limited liability corporation, or other entity established and authorized by the state treasurer to issue energy project bonds, subject to approval by the state treasurer.
4-I:3 Loans and Financing Agreements. The state treasurer shall make loans to or enter into other financing arrangements directly with eligible borrowers for eligible projects or, in the case of eligible projects under the municipal PACE program, shall fund loans made by municipalities to property owners in accordance with such program. Such loans shall be funded from energy project bonds issued by the state treasurer in accordance with this chapter or from amounts held in the fund. The state treasurer shall pledge loan repayments received directly from eligible borrowers, or from cities and towns on behalf of real property owners pursuant to the municipal PACE program to the repayment of the related energy project bonds issued by the state treasurer or by a special purpose entity, as applicable. As further security for any such bonds or debt obligations, the commission shall issue one or more financing orders, granting the state treasurer a statutory first priority lien in all or a portion of the SBC as set forth in such financing order. Each loan shall be made pursuant to a loan agreement between the state treasurer and the eligible borrower. In the case of the municipal PACE program, the state treasurer may accept loan agreements entered into by the applicable municipality and the property owner. All loan agreements, including those entered into under the municipal PACE program, shall specify the security for such loan, and the repayment and other terms of such loan.
4-I:4 Energy Conservation Project Fund. There is established in the state treasury, the energy conservation project fund. All energy project bond proceeds, together with any other moneys lawfully made available to the fund in order to make loans, shall be credited to the loan accounts within the fund. The purpose of the loan accounts within the fund shall be to make loans to finance eligible projects.
4-I:5 Financing Terms. Pursuant to the financing order, the state treasurer shall be granted a first priority lien on all or a portion of the SBC to provide additional security for any energy project bonds issued. Amounts transferred to the state treasurer pursuant to such financing order that are not needed to pay debt service on energy project bonds or direct costs and expenses of the state treasurer associated with the issuance of such energy bonds, shall be held in the reserve account within the fund or in a reserve fund created under the financing documents, in either case, as a reserve securing the energy project bonds, in accordance with the provisions of the financing documents governing the energy project bonds. Any amounts in excess of such required reserve shall be transferred by the state treasurer to the commission in accordance with the provisions of the financing documents governing the energy project bonds. The state treasurer shall hold the reserve account within the fund in a separate account, segregated from all other financing entity funds. The state of New Hampshire shall not:
I. Alter the provisions of RSA 374-F:4 which imposes the SBC in a manner that limits or otherwise adversely affects the amount of SBC pledged to secure any energy project bond in accordance with a financing order; or
II. Limit or alter the financing order and all rights thereunder until the energy project bonds, together with the interest thereon, are fully met and discharged.
4-I:6 Tax Exemption. The exercise of the powers granted by this chapter shall be in all respects for the benefit of the people of the state of New Hampshire by increasing the energy efficiency of buildings in the state of New Hampshire. As the exercise of such powers shall constitute the performance of essential government functions, the state treasurer shall not be required to pay any taxes or assessments upon the property acquired or used by the state treasurer pursuant to the provisions of this chapter or upon the income therefrom. The energy project bonds issued pursuant to the provisions of this chapter, their transfer and the income therefrom, including any profit made on the sale thereof, shall at all times be exempt from taxation within the state of New Hampshire.
4-I:7 Issuance of Energy Project Bonds. Upon the written approval of the state treasurer and the commission, the state treasurer may issue energy project bonds on behalf of the fund. Proceeds of energy project bonds shall be used for the purposes authorized by this chapter. Any such energy project bonds shall be issued as revenue bonds and shall be recourse only to the related loan repayments by eligible borrowers and other moneys available in the reserve account within the fund or held under the related financing documents. The energy project bonds shall not be general obligations of the state of New Hampshire.
4-I:8 Reimbursement of Administrative Costs. The state treasurer shall be reimbursed from the loan account within the fund for all reasonable and necessary direct costs and expenses incurred in any fiscal year associated with its bond issuance, administration, management, and operation of the funds, including reasonable staff time and out-of-pocket expenses and the reasonable and approved administrative costs incurred by any qualified organizations which the state treasurer may contract for services. The state treasurer may establish a minimum reserve to be maintained by the fund for the purpose of ensuring the satisfaction of the state treasurer’s and its agents’ administrative costs.
4-I:9 Contracts for Administration. The state treasurer may enter into contracts with one or more qualified organizations to manage some or all of the administrative aspects of managing the loan program on behalf of the state treasurer, and on behalf of municipalities participating in the municipal PACE program. Contracts executed pursuant to this section shall address, but shall not be limited to, proposed rules and guidelines for the funds; providing technical assistance to potential eligible borrowers and to municipalities in implementing and managing their municipal PACE programs; reviewing and evaluating loan applications; providing findings and recommendations to the financing entity as to which loans should be approved and awarded; and serving such loans once they are awarded and funded.
2 New Section: Priority Lien. Amend RSA 374-F by inserting after section 4-b the following new section:
374-F:4-c Priority Lien.
I. Notwithstanding the foregoing, upon receiving notice from the state treasurer that energy project bonds are to be issued in accordance with RSA 4-I the commission shall issue in a timely manner one or more financing orders, granting a first priority lien on the mandatory charge established by RSA 374-F:4, VIII, and all or a portion of the amounts collected pursuant thereto, as set forth in such financing order to secure such energy project bonds. Upon the effective date of a financing order, there shall exist a first priority lien on all mandatory charges imposed by this section then existing or thereafter arising pursuant to the terms of the financing order. This lien shall arise by operation of this paragraph automatically without any action on the part of the commission, the financing entity, or any other person. This lien shall secure all obligations then existing or subsequently arising to the holders of such energy project bonds, the trustee or representative for such holders, and any other entity specified in the financing order. The persons for whose benefit this lien is established shall upon the occurrence of any defaults specified in the financing order, have all the rights and remedies of a secured party upon default pursuant to RSA 382-A, the uniform commercial code, and shall be entitled to foreclose or otherwise enforce this statutory lien in the mandatory charges. This lien shall attach to such mandatory charges regardless of who shall own, or shall subsequently be determined to own, the mandatory charges, including any electric distribution companies and municipal aggregators, any affiliate thereof, the financing entity, or any other person. This lien shall be valid, perfected, and enforceable against all third parties upon the effectiveness of the financing order without any further public notice; provided, however, that any person may, but, shall not be required to, file a financing statement. A perfected statutory lien in the mandatory charges shall be a continuously perfected lien in all revenues and proceeds arising with respect thereto, whether or not the revenues or proceeds have accrued.
II. The commission may issue financing orders in accordance with this section to facilitate the financing or refinancing of eligible energy projects, as defined in RSA 4-I:3. A financing order shall specify that all or a portion of the amounts collected pursuant to the mandatory charges set forth in paragraph I, shall be allocated first to the energy project bonds, and shall be paid over to the state treasurer upon receipt and second to other projects financed in accordance with this section. Financing orders issued pursuant to the provisions of this section shall not constitute a debt or liability of the state of New Hampshire or of any political subdivision thereof, and shall not constitute a pledge of the full faith and credit of the state of New Hampshire or any of its political subdivisions, but, shall be payable solely from the funds provided therefor pursuant to the provisions of RSA 4-I and this section.
3 New Paragraph: Municipal PACE Program. Amend RSA 53-F:3 by inserting after paragraph VI the following new paragraph:
VII In furtherance of the provisions of this section, participate in the energy conservation loan program established pursuant to RSA 4-I for the purposes of obtaining funds to make loans in accordance with this section. To the extent that the city or town receives funds pursuant to such program, it shall enter into a loan agreement with the property owner that has been approved by state treasurer, and will pledge such loan agreement and all amounts received pursuant thereto to the state treasurer. In the event of a payment default by the property owner, the city or town shall enforce its rights under any betterments or other security granted under the applicable loan agreement. All amounts realized by the city or town as a result of such enforcement, or otherwise realized under the betterments or other security granted under the applicable loan agreement or as a result of this section shall be immediately transferred to the state treasurer.
4 New Sections; Property-assessed Clean Energy; Reserve Fund. Amend RSA 53-F by inserting after section 8 the following new sections:
53-F:9 Reserve Fund Established.
I. There is established a reserve fund for paying the past due balances of an assessment under this chapter in the event that there is a foreclosure upon the property subject to the assessment and the proceeds resulting from the foreclosure are, after all superior liens have been satisfied, insufficient to pay such balances. Each municipality that establishes a district under this chapter shall participate in the reserve fund.
II. The reserve fund shall be funded by participating property owners at a level sufficient to provide for the payment of past due balances in the event of a foreclosure upon a participating property and the costs of administering the reserve fund and shall only be used to provide for such payment and administration.
III. The contribution of each participating property owner to the reserve fund shall be included in the special assessment applicable to the property. From time to time, the commissioner of the department of revenue administration shall determine the appropriate contribution to the fund.
IV. The reserve fund shall be capitalized in accordance with standards and procedures approved by the commissioner of the department of revenue administration to cover expected foreclosures and fund administration costs based on good lending practice experience. Interest earned shall remain in the fund. The administrator of the reserve fund shall invest and reinvest the moneys in the fund and hold, purchase, sell, assign, transfer, and dispose of the investments in accordance with the standard of care established by the prudent investor rule under RSA 564-B:9. The administrator shall apply the same investment objectives and policies adopted by the New Hampshire retirement system, where appropriate, to the investment of moneys in the fund.
V. The municipality shall disclose in advance to each interested property owner the amount of that property owner's required payment into the reserve fund. Once disclosed, the amount of the reserve fund payment shall not change over the life of the assessment.
VI. A special purpose entity appointed under RSA 4-I:2, X shall administer the reserve fund.
(a) The entity's costs of administering the reserve fund shall be considered costs of operating the districts under RSA 53-F:3.
(b) In the event of foreclosure on a property that is subject to a special assessment and is in a district that participates in the reserve fund administered by the entity, the entity's obligation shall be to disburse, at the direction of the municipality, moneys from the reserve fund to apply to the past due balances of the assessment. In no event shall other moneys received or held by the entity be available to meet this obligation or the payment of balances on an assessment.
(c) The entity shall keep an accurate account of all activities, receipts and expenditures under this paragraph. An independent audit of the reserve fund shall be conducted annually. The cost of such an audit shall be considered a cost of administering the reserve fund. Where feasible, the entity shall cause this audit to be conducted in conjunction with other independent audits of its accounts, receipts, and expenditures.
53-F:10 State PACE Reserve Fund.
I. There is hereby established the state PACE reserve fund in the state treasury for the purpose of reducing the risk faced by an investor making an agreement with a municipality to finance a clean energy district.
II. The treasurer may invest moneys in the fund as provided by law, with interest received on such investment credited to the fund. The moneys in this fund shall be nonlapsing. The treasurer shall submit an annual report to the general court containing an accounting of receipts, disbursements, and earnings of the fund.
III. Moneys deposited to the state PACE reserve fund and any interest on moneys in that fund shall be used for the sole purpose of paying claims as described in paragraphs IV and V. In no event shall any moneys received or held by the state of New Hampshire, other than moneys deposited into the state PACE reserve fund or interest on moneys in that fund, be available to meet this obligation or the payment of a remaining past due balance or any other obligation under this chapter.
IV. In this section, "remaining past due balance" means that amount, if any, of a past due balance on an assessment under this chapter that exists:
(a) Immediately following foreclosure on a property in a district that participates in the loss reserve fund administered by the entity described in RSA 53-F:9.
(b) After the application, to the past due balances of the assessment on that property, of the proceeds available from the foreclosure, net of superior liens, and of the assets of that loss reserve fund.
V. The obligation of the state PACE reserve fund shall be to fund 90 percent of a remaining past due balance, upon presentation of a claim and application acceptable to the treasurer and the administrator, provided that the total amount of all such funding from the state PACE reserve fund shall not exceed the lesser of:
(a) $1,000,000;
(b) The funds available under paragraph III.
(c) Five percent of the total of all assessments under this chapter in the districts that participate in the loss reserve fund administered by the entity
described in RSA 53-F:9, VI.
5 New Subparagraph; Application of Receipts. Amend RSA 6:12, I(b) by inserting after subparagraph (387) the following new subparagraph:
(387) Moneys received in the state PACE reserve fund established in RSA 53-F:10.
6 Effective Date. This act shall take effect 60 days after its passage.
23-0399
1/9/23
HB 576-FN-A-LOCAL- FISCAL NOTE
AS INTRODUCED
FISCAL IMPACT: [ X ] State [ ] County [ X ] Local [ ] None
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| Estimated Increase / (Decrease) | |||
STATE: | FY 2023 | FY 2024 | FY 2025 | FY 2026 |
Appropriation | $0 | $0 | $0 | $0 |
Revenue | $0 | Indeterminable Increase | Indeterminable Increase | Indeterminable Increase |
Expenditures | $0 | Indeterminable Increase | Indeterminable Increase | Indeterminable Increase |
Funding Source: | [ X ] General [ ] Education [ ] Highway [ X ] Other - Energy Conservation Project Fund and PACE Reserve Fund | |||
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LOCAL: |
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Revenue | $0 | $0 | $0 | $0 |
Expenditures | $0 | Indeterminable Increase | Indeterminable Increase | Indeterminable Increase |
The Legislative Budget Assistant Office is still awaiting information from the Department of Energy. The Department was originally contacted on December 12, 2022.
METHODOLOGY:
This bill establishes a state energy conservation loan program and an energy conservation project fund. This bill also establishes the state PACE reserve fund.
The State Treasury indicates this bill would increase state revenues and expenditures by an indeterminable amount. The bill establishes a state energy conservation loan program, an energy conservation project fund, and the state PACE reserve fund. The Treasurer is authorized to make loans or enter into other financing arrangements directly with eligible borrowers for eligible projects or, in the case of eligible projects under the municipal PACE program, fund loans made by municipalities to property owners. Such loans would be funded from energy project bonds issued by the Treasurer or from amounts held in the Energy Conservation Project Fund. Loan repayments would be pledged to the repayment of the related energy project bonds. The Treasurer would be granted a statutory first priority lien in all or a portion of the System Benefit Charge (“SBC”) as set forth in financing orders from the New Hampshire Public Utilities Commission. The bill establishes the energy conservation project fund in the State Treasury. All energy project bond proceeds, together with any other moneys made available to the Fund to make loans, would be credited to the loan accounts within the Fund. The purpose of the loan accounts within the fund would be to make loans to finance eligible projects. Amounts transferred to the Treasurer that are not needed to pay debt service on energy project bonds or direct costs and expenses of the Treasurer associated with the issuance of energy bonds would be held in the reserve account within the Fund or in a reserve fund created under the financing document as a reserve securing the energy project bonds. Any amounts in excess of the required reserve would be transferred to the Public Utilities Commission.
The bill permits the Treasurer, upon approval of the State Treasurer and Commission, to issue energy project bonds on behalf of the Fund. Energy project bonds issued would be issued as revenue bonds and shall be recourse only to the related loan repayments by eligible borrowers and other moneys available in the reserve account within the Fund or held under related financing documents. Energy project bonds would not be general obligations of the state of New Hampshire. A financing order would specify that all or a portion of the amounts collected pursuant to the mandatory charges should be allocated first to the energy project bonds, and should be paid over to the Treasurer upon receipt, and second to other projects financed. Financing orders would not constitute a debt or liability of the state of New Hampshire or of any political subdivision, but would be payable solely from the funds provided. The bill also allows the State Treasurer to be reimbursed from the loan accounts within the Fund for all reasonable and necessary expenses such as bond issuance costs, administration, management, and operation of the funds.
The bill would expand the Municipal PACE Program by adding the newly established energy conservation loan program. To the extent that cities or towns receive funds, they would enter into a loan agreement with the property owner that is approved by the State Treasurer, and would pledge such loan agreement and all amounts received. In the event of a payment default by a property owner, the city or town would enforce its rights under any betterments or other security granted under the applicable loan agreement. All amounts realized of any such enforcement would be transferred to the State Treasurer.
The bill also establishes a reserve fund under the Municipal PACE Program for the purpose of paying past due balances of an assessment in the event there is a foreclosure upon a property subject to an assessment and the proceeds from the foreclosure are insufficient to pay such balances. The reserve fund would be funded by participating property owners at a level sufficient to provide for the payment of past due balances in the event of a foreclosure upon a participating property. The contributions of each participating property owner to the reserve fund would be included in the special assessment. The Commissioner of the Department of Revenue Administration is required to determine the appropriate contribution to the reserve fund. The fund would be capitalized to cover expected foreclosures and fund administration costs. Interest earned would remain in the fund. The administrator of the reserve fund would invest and reinvest the moneys in the fund in accordance with the standard of care established by the prudent investor rule. The reserve fund is to be administered by a special purpose entity and their costs of administering the reserve fund would be considered costs of operating.
In addition, the bill establishes a State PACE Reserve Fund in the State Treasury for the purpose of reducing the risk faced by an investor making an agreement with a municipality to finance a clean energy district. The Treasurer may invest moneys in the fund as provided by law, with interest received on such investments being credited to the PACE reserve fund. The State Treasurer would submit an annual report to the general court containing an accounting of the PACE reserve fund. The obligation of the fund would be to fund 90% of a remaining past due balance, upon presentation of a claim and application acceptable to the Treasurer and the Administrator, provided that the total amount of all such funding from the fund would not exceed the lesser of $1,000,000; the moneys deposited in the fund; or 5% of the total of all assessments in the districts that participate in the loss reserve fund administered by the entity.
The State Treasury indicates the bill would increase the expenditures and revenues of the Treasury by an indeterminable amount. The Treasury does not have the infrastructure or staff needed to administer a Loan Program as the one described in this legislation. At a minimum, the Treasury would require a credit underwriter to perform risk and credit analyses of potential borrowers, a legal counsel to perform legal work, and an accountant or administrator to coordinate the program. The Treasury also notes that any revenue bonds issued under this program would likely be issued as taxable bonds.
The Department of Revenue Administration (DRA) indicates the bill establishes a reserve fund to pay past due balances of an assessment issued for the participation in energy conservation and efficiency improvement or clean energy improvements under RSA 53-F, when such property is under foreclosure. This reserve fund shall be funded by property owners participating in the energy efficiency and clean energy districts and made through the special assessment applicable to the property. The DRA assumes the assessments are to be included in the property tax bills of the applicable property. A special purpose entity established and authorized by the State Treasurer shall be appointed to administer the reserve fund with the contribution amount being determined periodically by the Commissioner. In addition, the fund shall be capitalized in accordance with standards and procedures approved by the Commissioner. Because the energy project bonds shall not be general obligations of the State and exempted from New Hampshire taxation, including the income from transfers of these bonds, the DRA expects the fiscal impact of the tax exemption to be revenue neutral. The Commissioner of the DRA is required to calculate the contribution amount and provide advance information to interested property owners via municipalities. The DRA expects that such calculations would require, at the very least, the gathering of information on the loans made to the property owners, the amount and value of assessments that are past due, and any expectations of new assessments that may become delinquent. The DRA assumes it could administer the provisions of this bill without additional administrative costs that could not be absorbed in the DRA operating budget.
The New Hampshire Municipal Association states proposed Property-Assessed Clean Energy (PACE) financing would allow property owners to borrow money from a local government to pay for energy improvements. Under current law, PACE financing can only be provided through private entities. This bill expands the role of the municipality in the creation of energy efficiency and clean energy districts. The amount borrowed would be repaid via a special assessment on the property. Owners of appropriately zoned private property may opt into an energy financing district after such a district has been created and may obtain funding for a broad array of energy efficiency upgrades or renewable energy investments. If a municipality votes to establish this district it will have an administrative role in the assessment of energy improvement, entering into loan agreements with qualified property owners, be required to participate in a reserve fund, calculate and disclose the amount the property owners are required to pay into the reserve fund, and in the event of foreclosure direct a disbursement of funds for the past due assessment. In the event of a foreclosure, it is possible that the municipality may not be able to recover 100% of the due balance. The Association indicates there would be an indeterminable increase in local expenditures.
It is assumed that any fiscal impact would occur after FY 2023.
AGENCIES CONTACTED:
State Treasury, Departments of Energy and Revenue Administration and New Hampshire Municipal Association