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Home My WebLink AboutREVISED 12/10/09 - Res 09-62 Amend EIP CITY OF PALM DESERT STAFF REPORT (REV� REQUEST: ADOPT CITY COUNCIL RESOLUTION 09- 62 DECLARING THE INTENTION TO AMEND ENERGY INDEPENDENCE PROGRAM (EIP) REPORT AND ADMINISTRATIVE� GUIDELINES AND SETTING A PUBLIC HEARING THEREON SUBMITTED BY: PAUL S. GIBSON, FINANCE DIRECTOR DATE: DECEMBER 10, 2009 CONTENTS: CITY RESOLUTION NO. 09- 62 Recommendation: That the City Council adopt the following resolution: Resolution No. 09- 62 , a Resolution of the City Council of the City of Palm Desert Declaring Its Intention to Amend Energy Independence Program Report and Administrative Guidelines Prepared Pursuant ta Section 5898.22 of the California Streets and Highways Code and Setting Public Hearing Thereon; Discussion: Procedural Background. On July 21, 2008, the Governor signed into law AB 811, which became effective immediately as an emergency measure. The bill authorizes cities to establish a program to enter into contractual assessment agreements with property owners to finance the installation of distributed generation renewable energy sources or energy efficiency improvements that are permanently fixed to real property. On August 28, 2008, the City Council established the City's Energy Independence Program (EIP) pursuant to AB 811. Prior to establishing such a program, AB 811 requires the City Council to adopt a resolution of intention, which (i) declares the City Council's intention to establish such a financing program under AB 811, (ii) sets the time and place of a public hearing, and (ii) directs an appropriate city official to prepare a report pursuant to Section 5898.22 of the California Streets & Highways Code. On July 21, 2008, the City Council adopted Resolution No. 08-75 declaring its intent to establish the Energy Independence Program ("EIP") pursuant to AB 811 and ordering a P6401.1043\�-1��a1g.1 ___ oiu� nc�eG-r ��r��tgS1189519.2 Intention to Amend EIP Report Staff Report December 10, 2009 Page 2 of 6 public hearing to be held on August 28, 2008. In accordance with AB 811, the City Clerk provided notice of the public hearing by publishing Resolution No. 08-75 once a week for two weeks in the Desert Sun. On August 28, 2008, following the public hearing, the City Council approved Resolution No. 08-89, which approved the City's Energy Independence Program Report and Administrative Guidelines (the "EIP Report") prepared pursuant to Section 5898.22 of the California Streets & Highways Code. Similarly, prior to making changes to the EIP and the EIP Report, the City Council must also adopt a resolution of intention, which (i) declares the City Council's intention to amend its EIP program and report, (ii) sets the time and place of a public hearing, and (ii) directs an appropriate city official to prepare an amended report pursuant to Section 5898.22 of the California Streets & Highways Code. The City Council has made amendments to the EIP Report once since its adoption. Earlier this year, on May 21, 2009, the City Council adopted Resolution No. 09-34 declaring its intent to amend the EIP Report and ordering a public hearing to be held on June 25, 2009. In accordance with AB 811, the City Clerk provided notice of the public hearing by publishing Resolution No. 09-34 once a week for two weeks in the Desert Sun. On June 25, 2009, following the public hearing, the City Council approved Resolution No. 09-52, which approved the certain amendments to the EIP Report, such as (i) requiring documentation of consent by a preexisting lender for any Program loan that is $30,000 or more, (ii) establishing $100,000 as the maximum amount of any Program loan, and (iii) requiring fifty percent of funds available for Program loans to be reserved for energy efficiency upgrades and retrofits. EIP Financial Strateav Based on comments from the Finance Committee staff's recommendation is revised to take into account the Citv's qolicv for the EIP as initiated bv former Citv Manaaer Carlos Orteaa. This oriainal alan conceived of aotential fundina for the aroaram in an amount uq to $15 million bv the Citv. if there were sufficient interest in the nrnnram hv a plicants and if such fundinq could be confirmed as financiallv qrudent for the Citv To date. the Citv has arovided �5,651.000 in financina to the EIP. thr�uah a combination of the �2 500 000 initial advance from the Citv's General Fund and __ __ - - proceeds from the sale of 2 limited obliaation bonds to the Palm Desert Redeveloament Aaencv in the respective initial principal amounts of $2 015,000 and $1,136,000 To reach the oriainal qolicv threshold amount of $15.000.000 of internal funciinn 9.349.000 of additional fundina from the Citv is reauired Currentiv. interest in the EIP is still at a very hiah level. In the last nr�aram ann�icatinn intake period. apalications for $1 million in fundina were submitted bv interested participants within 1 hour. As to the arudent nature of additional fundina bv the Citv up to $9.349.000, the Citv would raise this EIP fundina bv sellina additional IimitPci P6401.1043\"�-�.T1189519.2 Intention to Amend EIP Report Staff Report December 10, 2009 Page 3 of 6 obliaation bonds to the Palm__Desert Redeveloament Aaencv ($5 millionl and bv also purchasina limited obliaation bonds itself. as Citv investments ($4.349 million) both on a rivate alacement basis. Secured bv and reaavable from EIP contractual assessment revenues. the limited obliaation_ bonds are arudent investments as the sunerior lien prioritv of AB 811 assessments and the fact that the entire qroaertv (not iust the imqrovement) is securitv for the AB 811 lien qrovide for sianificant overcollateralization in the event foreclosure on a delinauent parcel is reauired The issuance of such bonds also aoses no risk to the Citv's General Fund. as reaavment of the bonds is limited to revenues derived from aledaed EIP assessment contracts Additionallv. the interest rate offered bv the Citv on such limited obliqation bonds will exceed the current rates available for the investment of Citv or Aaencv funds For instance. the averaae interest rate currenttv earned bv the Citv's General Fund qortfolio is 1.69%. and interest rate offered bv LAIF for investment of Citv or Aaencv monies is currentiv below 1.00%. Limitina financial risk to the Citv as the issuer of the bonds, the interest rate on the bonds also will not exceed the 7 00% interest rate currentiv paid bv propertv owners on the EIP assessments In order to meet the Citv's five-vear aoal to cut enerav usaae bv 30 percent it is anticiaated that additional EIP_fundina, above the $15 million total Citv fundina will hP required. In furtherance of the financial strategy of the Program, City staff has consulted with respondents to the City's "Request for Proposals — Energy Program Financing," dated February 2009 and also with legal counsel as to amendments to the EIP and the EIP Report necessary to provide for certain credit criteria and legal flexibility in order to secure third party financing for the EIP on workable terms for the City. Proposed Amendments to EIP and EIP Report. �#eBased on the leaal and financial consultation noted above the necessary amendments to secure third aartv financina for the EIP on workable terms for the Citv include the following general concepts: (1) Clarify that City's right of access to project includes (a) once a year visual inspection to verify improvement is still in place and (b) additional right to visit and inspect "for cause." (2) Clarify that City's right to inspect property owner's books and records includes records and dcacuments relating to continued maintenance and repair of the improvement. (3) Add annual certification from property owner as to improvement being in place and functioning, any additions/changes to the improvement, changes in ownership of P6401.1043\��$��_'I-9�1189519 2 Intention to Amend EIP Report Staff Report December 10, 2009 Page 4 of 6 the property, information of insurer providing property insurance, or certain listed material events affecting the property or its owner. (4) Add requirement that property owner provides evidence of property insurance covering the improvement, prior to entering into loan agreement, and covenant to maintain insurance during assessment repayment term. �5�roi��v'r�vc,_,Tn�ororc-.�ii-iaca-v��a-��i,,,�oo��: 0 0 � p ' � � Require minimum value-to-lien ratio of 10 to 1, with ability for property owner to appeal to City Manager to grant a lower value-to-lien ratio (no lower than 8 to 1 permitted) if sufficient evidence is presented, in the City Manager's sole discretion. Value may be established by assessed value or appraisal (cost of appraisal to be paid by property owner). (�6) Require that repayment term cannot exceed the reasonably expected useful life expectancy of improvements (as determined by City policy), with ability for property owner to appeal to City Manager to grant a longer repayment term (not to exceed 5 additional years) if sufficient evidence is presented, in the City Manager's sole discretion. Value may be established by assessed value or appraisal (cost of appraisal to be paid by property owner). For properties with multiple improvements, useful life expectancy is calculated on a weighted basis (by value of improvement). Additionallv, deaendina on market and leaal conditions it mav be necessary for the Citv to raise interest rates offered bv the EIP in order to secure third qartv financina on workable terms for the Citv However anv such interest rate increase can be considered at a later date and/or in connection with a saecific third partv financina As ordered in the attached resolution, the Finance Director will work with staff to prepare amendments to the EIP Report, and will place the EIP Report on file with the City Clerk to be available for review prior to the January 14, 2010 public hearing. The proposed amendments to the EIP Report will be reviewed by the Finance Committee for its recommendation to the City Council prior to the January 14, 2010 City Council meeting. P6401.1043\��-1-�-�1189519 2 Intention to Amend EIP Report Staff Report December 10, 2009 Page 5 of 6 Future Actions: Following the public hearing on January 14, 2010, the City Council will consider a resolution approving the amendments to the EIP Report. Also on January 14, 2010, the City Council will be asked to consider approval of bond financing (for sale to the Aaencv 5 million and Ci 4.349 million to additionally fund the EIP, and related actions. Submitted by: Appr va . �� Paul S. Gibs J h M. Wohlmuth City Treas Director of Finance it Manager CiTY COUNCILAG�IbN APPROVED DFNtETf RECEIVED OTHER MEETI G DATE • � AYF,S: ' .� NOES: ABSENT: - �� ....r.�,�,,,..,,�„�....,,,,,�,...�. AQSTAIN: VERIFIED BY: Original on File with City Cte 's Offic�t P6401.1043\��-��5�a 1189519 2 Document comparison done by DeltaView on Wednesday, December 09, 2009 3:22:37 PM it�put: Document 1 iMana eDeskSite://RWGLADMS/RWGIMAN1/1189519/1 Document 2 iMana eDeskSite://RWGLADMS/RWGIMAN1/1189519/2 Renderin set standard Legend: Insertion �e�t�-i� �1��tl #:}��}�� 9��ved to Style change Format change � s �! �:�_ .e: Inserted cell Deleted cell Moved cell S lit/Mer ed cell Paddin cell Stafi�tics: Count Insertions 16 Deletions g Moved from p Moved to p St le chan e 0 Format chan ed p Total chan es 24 RESOLUTION NO. 09- 62 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT DECLARING ITS INTENTON TO AMEND ENERGY INDEPENDENCE PROGRAM REPORT AND ADMINISTRATIVE GUIDELINES PREPARED PURSUANT TO SECTION 5898.22 OF THE CALIFORNIA STREETS AND HIGHWAYS CODE AND SETTING A PUBLIC HEARING THEREON WHEREAS, pursuant to Chapter 29 of Part 3 of Division 7 of the California Streets and Highways Code (the "Act"), the City Council established its Energy Independence Program (the "Program" or "EIP") to assist property owners with the cost of installing distributed generation renewable energy sources or making energy efficient improvements that are permanently fixed to their property; and WHEREAS, in connection with the Program and as required by the Act, the Director of the City's Office of Energy Management prepared a report (the "Report") in accordance with Section 5898.22 of the Act; and WHEREAS, the Report contains (a) a map showing the boundaries of the territory within which the Program is proposed to be offered, (b) a draft application for participation in the Program, (c) a draft contract (the "Contract") specifying the terms and conditions that would be agreed to by a property owner and the City for participation in the Program, (d) a statement of city policies concerning contractual assessments including: (1) identification of types of facilities, distributed generation renewable energy sources, or energy efficiency improvements that may be financed through the use of contractual assessments, (2) identification of a City official authorized to enter into contractual assessments on behalf of the City, (3) a maximum aggregate dollar amount of contractual assessments, (4) a method for setting requests from property owners for financing through contractual assessments in priority order in the event that requests appear likely to exceed the authorization amount, (e) a plan for raising a capital amount required to pay for work performed pursuant to contractual assessments, (fl a statement of or method for determining the interest rate and time period during which contracting property owners would pay any assessment, (g) the establishment of any reserve fund or funds, (h) 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 City, and (i) a report on the results of the consultations with the County Auditor-Controller's office; and WHEREAS, on August 2$, 2008, the City Council approved the Report and established the Program following a full and fair public hearing at which interested persons were afforded the opportunity to object to, inquire about or provide evidence with regard to the proposed Program or any of its particulars; and WHEREAS, on June 25, 2009, the City Council approved amendments to the Report following a full and fair public hearing at which interested persons were afforded the opportunity to object to, inquire about or provide evidence with regard to the � Resolution No. 09- 62 proposed amendments to the Program or any of its particulars, including without limitation amendments (i) to require documentation of consent by a preexisting lender for any Program loan that is $30,000 or more, (ii) to establish $100,000 as the maximum amount of any Program loan, and (iii) to require fifty percent of funds available for Program loans to be reserved for energy e�ciency upgrades and retrofits; and WHEREAS, in furtherance of the financial strategy of the Program, City staff has consulted with respondents to the City's "Request for Proposals — Energy Program Financing," dated February 2009 and also with legal counsel as to amendments to the Program and the Report necessary to provide for certain credit criteria and legal flexibility in order to secure third party financing for the EIP on workable terms for the City; and WHEREAS, to facilitate the financial strategy of the Program, the City Council now desires to further amend the Report (i) to clarify the City's right of access to the project, (ii) to clarify the City's right to inspect property owners' books and records, (iii) to require certain annual certification from property owners, (iv) to require that property owners maintain property insurance covering the EIP improvement and provide evidence of such insurance prior to entering into the EIP Contract, (v) to require a minimum value-to-lien ratio, (vi) to require a nexus between the repayment term and the reasonably expected useful life expectancy of the EIP improvements, and (vii) to make other changes that the Finance Director of the City or the City Manager determines are necessary for implementation of financial strategy of the Program, as set forth in the Report. NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF PALM DESERT HEREBY FINDS, DETERMINES, RESOLVES, AND ORDERS AS FOLLOWS: Section 1. The City Council hereby directs the Finance Director to prepare and file at or before the time of the public hearing described in Section 2 hereof with the City Council proposed amendments to the Report as described in the Recitals hereto. Section 2. The City Council hereby calls a public hearing to be held on January 14, 2010 at 4:00 p.m., or as soon thereafter as feasible, in the Council Chambers, 73-510 Fred Waring Drive, Palm Desert, California, on the proposed amendments to the Report. At the public hearing all interested persons may appear and hear and be heard and object to or inquire about the proposed amendments to the Report. 2 Resolution No. 09- 62 Section 3. The City Clerk is hereby directed to provide notice of the public hearing by publishing this Resolution once a week for two weeks, pursuant to Section 6066 of the California Government Code, in the Desert Sun and the first publication shall not occur later than 20 days before the date of such hearing. PASSED, APPROVED AND ADOPTED this 10th day of December 2010, by the following vote to wit: AYES: NOES: ABSENT: ABSTAIN: Robert A. Spiegel, Mayor ATTEST: Rachelle D. Klassen, City Clerk 3