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ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
water; energy; financing program.
Purpose
Requires a body or board that by law is constituted as the legislative department of the authorizing county or municipality (governing body) to adopt a resolution or ordinance to establish a Commercial Property Assessed Clean Energy (C-PACE) Program and outlines requirements of the resolution or ordinance. Outlines requirements for special assessment agreements, delinquent installments, and administrative procedures associated with the sale procedure, certificate of sale, and redemption of sale.
Background
C-PACE is a tool for financing energy efficiency and renewable energy improvements on commercial property. C-PACE Programs must be authorized by state legislation and local governments. C-PACE Programs may be organized at the local, multi-jurisdictional, or statewide levels, and may be publicly or privately funded to finance property improvements. Eligible improvements may include energy efficiency, renewable energy, energy storage and non-energy measures (USDOE).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
C-PACE Program
1. Requires a governing body to adopt a resolution or ordinance to establish the C-PACE Program.
2. Requires a governing body, before adopting a resolution or ordinance to establish a C-PACE Program, to hold a public hearing to consider establishing the C-PACE Program.
3. Requires the resolution or ordinance to include:
a) a statement that the financing of qualifying improvements, repaid by special assessments, is in the interest of public health, safety and welfare;
b) a statement that the authorizing county or municipality (local government) intends to authorize direct financing between property owners and a private entity, or its designee, successor or assign, that finance or refinances a qualifying improvement (capital providers) as the means to finance qualifying improvements;
c) a statement that the local government intends to authorize special assessments, entered into voluntarily by a property owner with the local government by means of a written special assessment agreement, as the means to repay the special assessment financing;
d) a description of the local government's procedures for billing and collecting special assessments, including whether a local program authority (LPA) or capital provider is responsible for billing and collecting the special assessment;
e) a statement that the enforcement method for a delinquent special assessment installment by a LPA or capital provider is the prescribed procedure;
f) a statement that identifies, authorizes and directs the LPA to:
i. execute special assessment agreements and other documents on behalf of the local government related to an application submitted to a program administrator to demonstrate that the proposed improvements qualify for special assessment financing (project applications) approved by an official, agency or private third party designated by a local government to administer a C-PACE Program (C-PACE Program administrator);
ii. bill and collect special assessment installments;
iii. enforce delinquent special assessments in the manner set forth; and
iv. undertake any other obligations that the local government assigns to the LPA and any actions necessary to effectuate the delegated obligations;
g) an incorporation by reference of the program guidebook and provision that authorizes the program guidebook to be amended by the local government;
h) a description of the boundaries of the region in which qualifying property owners may finance qualifying improvements; and
i) a description of proposed arrangements for administering the C-PACE Program.
4. Allows a C-PACE Program to be amended in accordance with the resolution or ordinance that establishes the C-PACE Program.
5. Allows a city, town or county to provide for or allow the construction, installation or modification of critical capital expenditure improvements, energy efficiency improvements, renewable energy improvements or resiliency improvements on qualifying property by establishing a C-PACE Program.
6. Excludes a city or town from entering into a financing agreement for the direct financing of a qualifying improvement.
7. Allows an authorizing municipality or county, if authorized pursuant to an adopted resolution or ordinance, to enter into an intergovernmental agreement with another local government for the purposes of C-PACE Program administration.
8. Exempts any intergovernmental agreement from the Arizona Procurement Code.
Special Assessment Agreements
9. Allows an LPA to enter into a special assessment agreement with property owners to secure special assessment financing.
10. Requires a property owner to submit a project application to the C-PACE Program administrator on a form prescribed by the C-PACE Program guidebook.
11. Outlines requirements for the project applications.
12. Requires the LPA, before entering into a special assessment agreement, to receive:
a) written consent from any holder of a lien, mortgage or security interest in the qualifying property that the property may participate in the C-PACE Program and that the special assessment lien shall have priority superior to all liens, claims and titles except for general property taxes and prior special assessments; and
b) certification from the C-PACE Program administrator that the proposed improvements, qualifying property and property owner qualify for special assessment financing.
13. Requires special assessment financing to be provided and disbursed directly by capital providers to fund qualifying improvements subject to a financing agreement.
14. Requires a financing agreement, notwithstanding the obligation of the local government to remit a special assessment installment received from a property owner to the applicable capital provider, to specify that the local government is not:
a) liable in any way for the debt of the property owner;
b) a third party obligor; and
c) pledging or lending credit to the property owner or the capital provider.
15. Prohibits a capital provider from having any right or cause of action against the local government for nonpayment of the special assessment financing.
16. Requires a capital provider to look solely to the property owner for recourse.
17. Outlines included costs capitalized into the special assessment financing principal amount.
18. Allows a financing agreement to authorize the property owner to directly purchase the related equipment and materials for installing or modifying a qualified improvement or contract, including through lease, power purchase or other service contract.
19. Allows the LPA or C-PACE Program administrator, notwithstanding amounts retained by a local government, LPA or program administrator, to charge a property owner program administrative fees that reflect the reasonable costs of the LPA or C-PACE Program administrator to provide administrative services but that do not exceed the lesser of one percent of the principal amount of the special assessment financing or $50,000.
20. Requires, on entering into a special assessment agreement, the LPA to record or delegate to the capital provider, a notice of special assessment lien on the subject property in the county recorder's office of the county in which the property is located.
21. Outlines included requirements for the recording of the notice of special assessment lien.
22. Requires a special assessment lien to be effective for the period in which the special assessment is imposed, until the special assessment is paid in full and has priority superior to all liens, claims and titles, except for general property taxes and prior special assessments.
23. Stipulates a special assessment lien runs with the land, and that portion of the special assessment lien that has not yet become due is not accelerated or eliminated by foreclosure of the special assessment lien or any lien for taxes or other assessments imposed by Arizona or a local government or district against the property on which the special assessment lien is imposed, or by the foreclosure of the qualifying party.
24. Requires the LPA, at the same time the notice of special assessment lien is recorded, to execute and record a notice of special assessment lien from the local government to the applicable capital provider on the subject property in the county recorder's office of the county in which the property is located.
25. Outlines requirements for the notice of assignment of special assessment lien.
26. Requires the applicable capital provider, on execution of a notice of assignment of special assessment lien, to have and possess the delegable powers and rights at law or in equity as the local government would have if the special assessment had not been assigned with regard to:
a) the precedence and priority of the special assessment lien;
b) the proceeds of special assessment installments; or
c) accrual of penalties and fees related to the special assessment.
27. Stipulates the assignee of a special assessment enforced by the local government has the right to enforce the special assessment and special assessment lien.
28. Requires, when the underlying special assessment financing has been satisfied, the applicable capital provider to notify the LPA, and the LPA to record a release of the special assessment lien by the local government.
29. Requires special assessments to be collected in installments at the time and terms pursuant to the special assessment agreement.
30. Outlines requirements for the billing and collection of special assessment installments.
31. Requires the LPA when billing and collecting special assessment installments, in the event of a nonpayment of a special assessment installment, by one year after the date on which the special assessment installment became delinquent, to collect the delinquent special assessment installment.
32. Allows the capital provider, if the LPA fails to collect the delinquent special assessment or has executed a notice of delegation of authority to the capital provider at any time after the one year after the date of delinquency of an unpaid special assessment installment and without waiving any other available relief, to initiate a suit for foreclosure against the property owner of the qualifying property to recover all delinquent special installments and any interest and penalties specified in the financing agreement.
33. Requires the suit for foreclosure to follow the procedures for judicial foreclosure of a mortgage.
34. States that the portion of the special assessment lien that has not yet become due is not accelerated or eliminated by foreclosure of the special assessment lien.
Delinquent Installments
35. Requires the LPA, within 20 days of the date of delinquency, to prepare a list of the special assessments on which any installment is delinquent that includes:
a) a description of each parcel of qualifying property and the name of the property owner as stated in the special assessment; and
b) the amount of the delinquent special assessment installment and penalties and costs due, including the costs of advertising.
36. Requires the LPA to notify the property owner that unless each delinquent special assessment installment and the penalties and costs due are paid, the qualifying property on which the special assessment is a lien will be sold at public auction at the time and place specified in the notice.
37. Requires the notice, at least 10 days before the date of the sale, to be mailed to the owner of the qualifying property or parcel on which a special assessment installment is delinquent at the address shown on the most recent property tax roll.
38. Prohibits the time of the sale to be less than 10 days after the notice is mailed.
39. Requires the place of public auction be in or in front of the office of the LPA, or at the place otherwise designated on the notice.
40. Allows any party having an interest in the qualifying property, at any time before the sale of any qualifying property subject to a delinquent special assessment installment, to pay the delinquent special assessment installment on the qualifying property together with the penalty and costs due, including the cost of advertising.
41. Requires the LPA, on payment, to note in the record the date of payment, the name of the person by or for whom the payment is paid and the amount paid.
Notice to Lien Payments
42. Requires the LPA, before the date fixed for the sale or before the date to which the sale has been postponed, to obtain a record search that shows the names and addresses of record of all lien claimants on and other persons with an interest in, all properties or parcels on which a special assessment installment is delinquent.
43. Allows the cost of a record search to be added to the special assessment and to be deemed a portion of the delinquent special assessment installment.
44. Requires the LPA, at least 10 days before the sale date or the date to which the sale has been postponed, to mail a notice of the date and place of the sale or postponed sale to the property owner and to each of the lien claimants and other persons with an interest as shown by the search of records.
45. Requires the notice to include:
a) the date of the sale, the amount of the delinquent special assessment installments, including penalties, costs of advertisement and costs of record search;
b) that the whole amount of the special assessment installments and costs and penalties are due at the time of the sale; and
c) that, unless redeemed within the time allowed by law, a deed will be delivered to the purchaser that conveys title to the lands described in the deed free and clear of all interests and liens, except for the lien for general property taxes and prior special assessments, including special assessment lien for the unpaid portion of the special assessment.
46. Prohibits a final sale from being held unless the LPA has provided notice by mail to all lien claimants and other persons with an interest discovered in the search of records.
47. Allows the mailing to occur either before the date originally set for the sale or before the date of any postponed sale, and only one mailing and one record search are required.
Sale Procedure
48. Requires, the LPA, at 10:00 a.m. on the date set for the sale or any time thereafter to which the sale may be adjourned, to begin the sale of the property advertised.
49. Allows the LPA to postpone or continue the sale from day to day until all the property is sold.
50. Requires each property assessed to be offered for sale separately.
51. Requires the sale to be for the delinquent special assessment installment, and not for the entire assessment.
52. Requires the qualifying property, if there is not a purchaser for any qualifying property offered for sale, to be struck off the capital provider as the purchaser if all outstanding taxes and prior assessments are paid by the capital provider.
53. Allows the capital provider to sell any qualifying property, so purchased after the expiration of the time for redemption at public or private sale.
54. Requires all proceeds of a sale of the qualifying property or purchase of a deed to be remitted to the applicable capital provider.
55. Requires the LPA to retain the actual and reasonable costs the LPA incurred to enforce a delinquent special assessment installment.
Certificate of Sale
56. Requires the LPA, after making the sale, to execute in duplicate a certificate of sale stating the description of the qualifying property sold, the name and address of the owner and all lien claimants as given by their record search, that the qualifying property was sold for a delinquent special assessment installment, specifying the:
a) improvements for which the special assessment was made;
b) amount for which the qualifying property was sold;
c) date of the sale;
d) name of the purchase; and
e) first date on which the purchaser may apply for a deed.
57. Requires the lien of the delinquent special assessment, on filing the copy of the certificate in the office of the LPA, to vest in the purchaser and is only divested by a redemption of the qualifying property, but does not extinguish or change the lien for the remaining special assessment installments.
58. Requires the LPA to also enter on the record of the special assessment installment lien, opposite the description of each qualifying property offered for sale, a description of the part thereof sold, the amount of which the qualifying property was sold, the date of the sale and the name of the purchaser.
Redemption
59. Allows the redemption to be made by any party having an interest in the qualifying property at any time before the execution and delivery of a deed for the qualifying property by paying to the LPA the amount for which the qualifying property was sold and:
a) 5 percent thereon if paid within 3 months from the date of sale;
b) 10 percent if paid within 6 months;
c) 12 percent if paid within 9 months;
d) 15 percent if paid within 12 months; or
e) 20 percent if paid at any time after twelve months from the date of sale.
60. Requires the LPA, when redemption is made, to note that fact on the duplicate certificate of sale in the LPA's office and deposit the amount paid with the capital provider.
61. Requires the capital provider to credit the purchaser named in the certificate of sale with the amount paid and pay the sum to the purchaser or the purchaser's assignee, on the surrender of the certificate of sale.
Failure to Redeem
62. Requires the LPA, after the expiration of 12 months from the date of sale, to execute to the purchaser or the purchaser's assignee, on application, if the purchaser is in full compliance, a deed to the property sold in which must be recited substantially the matters contained in the certificate, any assignment thereof and that no person has redeemed the qualifying property.
63. Requires the LPA to receive from the applicant for a deed $1 for making the deed.
64. Requires the purchaser, at least 30 days before applying for a deed, to mail to outlined recipients a written notice that the qualifying property, giving the description, has been sold for a delinquent special assessment installment, specifying the:
a) improvements for which the special assessment was made;
b) amount for which the qualifying property was sold;
c) amount necessary to redeem at the time of the notice,
d) time when the purchaser or assignee will apply to the LPA for a deed; and
e) that, on issuance of the deed, all interests in the qualifying property, whether of record before or after the delinquent assessment lien, will be extinguished, except for the lien for general property taxes and prior special assessments including the unpaid potion of the special assessment.
65. Requires the applicant to file with the LPA an affidavit showing that notice of the application has been given, and if the mailed notice was returned to the sender, that due diligence, was used to find the owner.
66. Requires the person making the redemption to pay, in addition, for payment to the purchase, $10 for the service of notice and the making of the affidavit, if redemption of the qualifying property is made after the affidavit is filed and more than 12 months from the date of sale.
67. Deems the deed of LPA as prima facie evidence of the truth of all matters recited therein, and of the regularity of all proceedings before the execution thereof and of title in the grantee.
68. Requires the deed of the LPA to convey to the purchaser fee title to the lands described therein, free and clear of all interests, liens, claims and encumbrances whether of record before or after the special assessment lien, except for the lien for general property taxes and prior special assessments and the special assessment lien for the unpaid portion of the special assessment imposed.
Proof of Notice
69. Requires, unless otherwise provided, proof of mailing, publishing and posting the notices required to be made by affidavit of the person required to mail, publish or post the notice.
70. Requires the affidavit to:
a) state the manner of mailing, publishing or posting the notice;
b) state the date the notice was mailed, published or posted;
c) have attached to the affidavit a copy of the publication or notice that was mailed or posted; and
d) be filed in the office of the LPA.
71. Deems an affidavit prepared as prima facie evidence of the posting, publishing, or mailing described.
72. States that the failure of any person to receive a mailed notice does not affect the validity of any notice that was mailed.
73. States that the failure to mail a notice to one or more persons does not affect any notices mailed to other persons.
74. States that an error or informality in a notice does not invalidate other portions of a notice.
75. Deems the costs of mailing and publishing as valid incidental expenses.
76. Deems notice served on a:
a) married person as notice on the person's spouse;
b) guardian and administrator as notice to heirs and wards; and
c) attorney-in-fact as notice to the attorney's principal.
Miscellaneous
77. Defines authorizing county as a county that forms a C-PACE Program.
78. Defines authorizing municipality as a city or town that forms a C-PACE Program.
79. Defines critical capital expenditure improvement as an improvement to an existing structure or a component of new construction that provides or contributes to the structural and mechanical support or function of the structure or that increases utility use efficiency to a structure and that has a weighted average useful life of 10 years or more, including water conservation improvements, energy efficiency improvements, renewable energy improvements and resiliency improvements.
80. Defines C-PACE Program as a special assessment program that provides commercial property assessed capital expenditure financing for eligible improvements.
81. Defines energy efficiency improvement as a device intended to decrease energy consumption or demand through the use of efficiency technologies, products or activities that reduce or support the reduction of energy consumption.
82. Defines financing agreement as an agreement under which a private property owner agrees to repay a capital provider for the special assessment financing, including details of finance charges, fees, debt servicing, accrual of interest and penalties and terms relating to treatment of prepayment and partial payment of the special assessment financing.
83. Defines LPA as an official, other that the county treasurer, or agency designated by a local government to perform certain obligations related to entering into special assessment agreements, imposing special assessments and enforcing an collecting special assessments.
84. Defines notice of assignment of special assessment lien as a written notice in the form prescribed by the local government to be recorded with the assignment of a special assessment by a local government to the applicable capital provider and each subsequent assignment of the special assessment.
85. Defines notice of delegation of authority as a written notice executed by a local government that assigns the billing, collection and enforcement duties to a capital provider.
86. Defines notice of special assessment lien a as written notice of a special assessment lien in the form prescribed by the local government to be recorded with the assignment of a special assessment by a local government to the applicable capital provider and each subsequent assignment of the special assessment.
87. Defines notice of delegation of authority as a written notice executed by a local government that assigns the billing, collection and enforcement duties to a capital provider.
88. Defines notice of special assessment lien as a written notice of a special assessment lien in the form prescribed by the local government to be recorded with a special assessment agreement and attendant lien on a benefited property.
89. Defines program guidebook as a comprehensive document adopted by a local government that establishes appropriate guidelines, specification, approval criteria and other standard forms consistent with administering a C-PACE Program, including forms for a special assessment agreement, notice of assignment of special assessment lien, notice of special assessment lien, notice of delegation of authority and project application.
90. Defines property owner as the owner listed on a qualifying property's legal documents on file in the county recorder's office, the owner of an improvement on a possessory right or the owner of an estate for years or leasehold created pursuant to a written ground lease agreement or government property lease excise tax development agreement.
91. Defines qualifying improvement as:
a) privately owned commercial, industrial or agricultural real property or multifamily residential real property with five or more dwelling units, an improvement on a possessory right or property owned by a nonprofit or tax-exempt entity other than a residential property with up to four dwellings; or
b) real property owned by Arizona or a local governmental entity but leased to a privately owned entity or real property improvements owned by a private party pursuant to a written ground lease agreement, government property lease excise tax development agreement of similar agreement whose owner of record, including Arizona or any local government in additional to a private entity, consents in writing to a special assessment being levied on the real property.
92. Defines region as the geographic area within the corporate limits of a municipality, the unincorporated area of a county and the incorporated areas of a county with the consent of affected municipalities in which the county seeks to impose a special assessment.
93. Defines renewable energy improvement as a device or a group of products or devices that use low or zero carbon emissions energy technology to generate electricity, provide thermal energy or regulate temperature.
94. Defines resiliency improvement as improvements or building components that increase the resilience of a qualifying property, including air quality, flood mitigation, wind and storm mitigation, stormwater management, energy storage and microgrids, alternative vehicle charging infrastructure, fire or wind resistance or inundation adaptation.
95. Defines special assessment as a voluntary assessment imposed on a qualifying property by a local government for the total amount of special assessment financing pursuant to a special assessment agreement.
96. Defines special assessment agreement as a written agreement between the applicable local government and the property owner in the form prescribed by the local government setting forth the terms and conditions of the special assessment and allowing the government to impose a special assessment on the qualifying property to repay the special assessment financing.
97. Defines special assessment financing as financing and refinancing provided by a capital provider pursuant to a financing agreement for qualifying improvements.
98. Defines special assessment lien as a lien to secure the special assessment that remains on the qualifying property until paid in full.
99. Defines water conservation improvement as measures, equipment or devices that:
a) decrease the consumption of or demand for water;
b) recycle, recapture or store water; and
c) address safe drinking water or eliminate lead from water used for drinking or cooking.
100. Makes technical and conforming changes.
101. Becomes effective on the general effective date.
Prepared by Senate Research
February 13, 2023
RA/slp