SB1296 101ST GENERAL ASSEMBLY

LRB101 07063 AWJ 52100 b

101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB1296

Introduced 2/7/2019, by Sen. Melinda Bush

SYNOPSIS AS INTRODUCED:

50 ILCS 50/5
50 ILCS 50/20
50 ILCS 50/25
50 ILCS 50/45 new
50 ILCS 50/50 new
50 ILCS 50/55 new

Amends the Property Assessed Clean Energy Act. Makes changes adding residential property to the scope of the Act. Modifies the requirements of a report needed to establish a PACE area and requirements before entering into an assessment contract. For program administrators and contracts that finance residential properties of 4 or fewer units: provides for contractor oversight and training for residential properties inside PACE areas; prohibits specified soliciting, advertising, and direct or indirect cash payments or other things of value to property owners; requires a local unit of government and third-party program administrators to develop a disclosure form for homeowners and a right to cancel within 3 business days assessment contracts; and requires an oral confirmation call to property owners with specified minimum requirements for the call. Effective immediately.

FISCAL NOTE ACT MAY APPLY

HOUSING AFFORDABILITY IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning local government.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Property Assessed Clean Energy Act is amended by changing Sections 5, 20, and 25 and by adding Sections 45, 50, and 55 as follows:

(50 ILCS 50/5)

Sec. 5. Definitions. As used in this Act:

"Alternative energy improvement" means the installation or upgrade of electrical wiring, outlets, or charging stations to charge a motor vehicle that is fully or partially powered by electricity.

"Assessment contract" means a voluntary written contract between the local unit of government (or a permitted assignee) and record owner governing the terms and conditions of financing and assessment under a program.

"Authority" means the Illinois Finance Authority.

"PACE area" means an area within the jurisdictional boundaries of a local unit of government created by an ordinance or resolution of the local unit of government to provide financing for energy projects under a property assessed clean energy program. A local unit of government may create more than one PACE area under the program, and PACE areas may be separate, overlapping, or coterminous.

"Energy efficiency improvement" means equipment, devices, or materials intended to decrease energy consumption or promote a more efficient use of electricity, natural gas, propane, or other forms of energy on property, including, but not limited to, all of the following:

(1) insulation in walls, roofs, floors, foundations, or heating and cooling distribution systems;

(2) storm windows and doors, multi-glazed windows and doors, heat-absorbing or heat-reflective glazed and coated window and door systems, and additional glazing, reductions in glass area, and other window and door system modifications that reduce energy consumption;

(3) automated energy control systems;

(4) high efficiency heating, ventilating, or air-conditioning and distribution system modifications or replacements;

(5) caulking, weather-stripping, and air sealing;

(6) replacement or modification of lighting fixtures to reduce the energy use of the lighting system;

(7) energy controls or recovery systems;

(8) day lighting systems;

(8.1) any energy efficiency project, as defined in Section 825-65 of the Illinois Finance Authority Act; and

(9) any other installation or modification of equipment, devices, or materials approved as a utility cost-savings measure by the governing body.

"Energy project" means the installation or modification of an alternative energy improvement, energy efficiency improvement, or water use improvement, or the acquisition, installation, or improvement of a renewable energy system that is affixed to a stabilized existing property (including new construction).

"Governing body" means the county board or board of county commissioners of a county, the city council of a city, or the board of trustees of a village.

"Local unit of government" means a county, city, or village.

"Permitted assignee" means (i) any body politic and corporate, (ii) any bond trustee, or (iii) any warehouse lender, or any other assignee of a local unit of government designated in an assessment contract.

"Person" means an individual, firm, partnership, association, corporation, limited liability company, unincorporated joint venture, trust, or any other type of entity that is recognized by law and has the title to or interest in property. "Person" does not include a local unit of government or a homeowner's or condominium association, but does include other governmental entities that are not local units of government.

"Program administrator" means a for-profit entity or not-for-profit not-for profit entity that will administer a program on behalf of or at the discretion of the local unit of government. It or its affiliates, consultants, or advisors shall have done business as a program administrator or capital provider for a minimum of 18 months and shall be responsible for arranging capital for the acquisition of bonds issued by the local unit of government or the Authority to finance energy projects.

"Property" means privately-owned residential, commercial, industrial, non-residential agricultural, or multi-family (of 5 or more units) real property located within the local unit of government, but does not include property owned by a local unit of government or a homeowner's or condominium association.

"Property assessed clean energy program" or "program" means a program as described in Section 10.

"Record owner" means the person who is the titleholder or owner of the beneficial interest in property.

"Renewable energy resource" includes energy and its associated renewable energy credit or renewable energy credits from wind energy, solar thermal energy, photovoltaic cells and panels, biodiesel, anaerobic digestion, and hydropower that does not involve new construction or significant expansion of hydropower dams. For purposes of this Act, landfill gas produced in the State is considered a renewable energy resource. The term "renewable energy resources" does not include the incineration or burning of any solid material.

"Renewable energy system" means a fixture, product, device, or interacting group of fixtures, products, or devices on the customer's side of the meter that use one or more renewable energy resources to generate electricity, and specifically includes any renewable energy project, as defined in Section 825-65 of the Illinois Finance Authority Act.

"Warehouse fund" means any fund established by a local unit of government, body politic and corporate, or warehouse lender.

"Warehouse lender" means any financial institution participating in a PACE area that finances an energy project from lawfully available funds in anticipation of issuing bonds as described in Section 35.

"Water use improvement" means any fixture, product, system, device, or interacting group thereof for or serving any property that has the effect of conserving water resources through improved water management or efficiency.

(Source: P.A. 100-77, eff. 8-11-17; 100-980, eff. 1-1-19; revised 9-28-18.)

(50 ILCS 50/20)

Sec. 20. Report. The report on the proposed program required under Section 15 shall include all of the following:

(1) a form of assessment contract between the local unit of government and record owner governing the terms and conditions of financing and assessment under the program.

(2) identification of an official authorized to enter into an assessment contract on behalf of the local unit of government;

(3) a maximum aggregate annual dollar amount for all financing to be provided by the applicable program administrator under the program;

(4) an application process and eligibility requirements for financing energy projects under the program;

(5) a method for determining interest rates on assessment installments, repayment periods, and the maximum amount of an assessment;

(6) an explanation of how assessments will be made and collected;

(7) a plan to raise capital to finance improvements under the program pursuant to the sale of bonds, subject to this Act or the Special Assessment Supplemental Bond and Procedures Act, or alternatively, through the sale of bonds by the Authority pursuant to subsection (d) of Section 825-65 of the Illinois Finance Authority Act;

(8) information regarding all of the following, to the extent known, or procedures to determine the following in the future:

(A) any revenue source or reserve fund or funds to be used as security for bonds described in paragraph (7); and

(B) any application, administration, or other program fees to be charged to record owners participating in the program that will be used to finance costs incurred by the local unit of government as a result of the program;

(9) a requirement that the term of an assessment not exceed the useful life of the energy project paid for by the assessment; provided that the local unit of government may allow projects that consist of multiple improvements with varying lengths of useful life to have a term that is no greater than the improvement with the longest useful life;

(10) a requirement for an appropriate ratio of the amount of the assessment to the assessed value of the property or market value of the property as determined by an automated valuation model provided by a third-party vendor or by a recent appraisal no older than 12 months;

(11) a requirement that the record owner of property subject to a mortgage obtain written consent from the mortgage holder before participating in the program;

(11) (12) provisions for marketing and participant education;

(12) (13) provisions for an adequate debt service reserve fund, if any; and

(13) (14) quality assurance and antifraud measures.

(Source: P.A. 100-77, eff. 8-11-17; 100-980, eff. 1-1-19.)

(50 ILCS 50/25)

Sec. 25. Contracts with record owners of property.

(a) After creation of a program and PACE area, a record owner of property within the PACE area may apply with the local unit of government or its program administrator or administrators for funding to finance an energy project.

(b) A local unit of government may impose an assessment under a property assessed clean energy program only pursuant to the terms of a recorded assessment contract with the record owner of the property to be assessed.

(c) Before entering into an assessment contract with a record owner under a program, the local unit of government shall verify all of the following:

(1) that the property is within the PACE area;

(2) that there are no delinquent taxes, special assessments, or water or sewer charges on the property;

(3) that there are no delinquent assessments on the property under a property assessed clean energy program;

(4) there are no involuntary liens on the property, including, but not limited to, construction or mechanics liens, lis pendens or judgments against the record owner, environmental proceedings, or eminent domain proceedings;

(5) that no notices of default or other evidence of property-based debt delinquency have been recorded and not cured;

(6) that the record owner is current on all mortgage debt on the property, the record owner has not filed for bankruptcy in the last 2 years, and the property is not an asset to a current bankruptcy.

(7) all work requiring a license under any applicable law to make a qualifying improvement shall be performed by a registered contractor that has agreed to adhere to a set of terms and conditions through a process established by the local unit of government.

(8) the contractors to be used have signed a written acknowledgement that the local unit of government will not authorize final payment to the contractor until the local unit of government has received written confirmation from the record owner that the improvement was properly installed and is operating as intended; provided, however, that the contractor retains all legal rights and remedies in the event there is a disagreement with the owner;

(9) that the amount of the assessment in relation to the greater of the assessed value of the property or the appraised value of the property, as determined by a licensed appraiser, does not exceed 25%; and

(10) a requirement that an assessment of the existing water or energy use and a modeling of expected monetary savings have been conducted for any proposed project on non-residential real property.

(d) At least 30 days before entering into an assessment contract with the local unit of government, the record owner shall provide to the holders or loan servicers of any existing mortgages encumbering or otherwise secured by the property a notice of the record owner's intent to enter into an assessment contract with the local unit of government, together with the maximum principal amount to be financed and the maximum annual assessment necessary to repay that amount. , along with a

If the record owner is of a commercial property, an additional request that the holders or loan servicers of any existing mortgages consent to the record owner subjecting the property to the program must be included. A verified copy or other proof of those notices and the written consent of the existing mortgage holder for the record owner to enter into the assessment contract and acknowledging that the existing mortgage will be subordinate to the financing and assessment agreement and that the local unit of government or its permitted assignee can foreclose the property if the assessment is not paid shall be provided to the local unit of government.

(e) A provision in any agreement between a local unit of government and a public or private power or energy provider or other utility provider is not enforceable to limit or prohibit any local unit of government from exercising its authority under this Section.

(f) The record owner has signed a certification that the local unit of government has complied with the provisions of this Section, which shall be conclusive evidence as to compliance with these provisions, but shall not relieve any contractor, or local unit of government, from any potential liability.

(g) This Section is additional and supplemental to county and municipal home rule authority and not in derogation of such authority or limitation upon such authority.

(h) The imposition of any assessment pursuant to this Act shall be exempt from any other statutory procedures or requirements that condition the imposition of assessments or other taxes against a property, except as set forth in this Act.

(Source: P.A. 100-77, eff. 8-11-17; 100-980, eff. 1-1-19.)

(50 ILCS 50/45 new)

Sec. 45. Contractor oversight and training for residential property.

(a) A program administrator shall not permit contractors or other third parties to advertise the availability of assessment contracts that are administered by the program administrator or to solicit property owners on behalf of the program administrator unless:

(1) the contractor maintains a permit, license, or registration required for engaging in its business in the jurisdiction where it operates and maintains the required bond and insurance coverage for engaging in its business; and

(2) the program administrator obtains the contractor's written agreement that the contractor or third party will act in accordance with applicable advertising and marketing laws and regulations and all other applicable laws.

(b) A program administrator shall not provide any direct or indirect cash payment or other thing of material value to a contractor or third party in excess of the actual price charged by that contractor or third party to the property owner for one or more qualified improvements financed by an assessment contract.

(c) A program administrator shall not provide to a contractor engaged in soliciting financing agreements on its behalf any information that discloses the maximum amount of funds for which a property owner may be eligible for qualifying improvements or the amount of equity in a property.

(d) A program administrator shall not reimburse a contractor or third party for expenses for advertising and marketing campaigns and collateral which solely benefit the contractor. A program administrator may reimburse a contractor's bona fide and reasonable training expenses related to PACE area financing if:

(1) the training expenses are actually incurred by the contractor; and

(2) the reimbursement is paid directly to the contractor and is not paid to its salespersons or agents.

(e) A program administrator shall not provide any direct or indirect cash payment or other thing of value to a property owner conditioned upon that property owner entering into an assessment contract. Programs or promotions that offer reduced fees or interest rates to property owners are not a "direct or indirect cash payment or other thing of value" if the reduced fee or interest rate is reflected in the assessment contract and the program or promotion is not provided to the property owner as a cash consideration.

(f) A contractor shall not provide a different price for a project financed under this Section than the contractor would provide if paid in cash by the property owner.

(g) A program administrator shall establish and maintain a training program for contractors that includes, but is not limited to, the following topics:

(1) Programs and assessment contracts.

(2) Disclosures.

(3) Ethics.

(4) Fraud prevention.

(5) Nondiscrimination.

(6) Senior financial abuse.

(h) This Section only applies to program administrators and contractors that finance residential properties of 4 or fewer units. This Section does not apply to commercial, industrial, multi-family (5 or more units), or agricultural properties.

(50 ILCS 50/50 new)

Sec. 50. Disclosure form.

(a) Every local unit of government or third-party program administrator shall develop a disclosure form for homeowners that shall disclose all key financing terms of the assessment contract, including, but not limited to:

(1) the total amount funded, including the cost of the installed improvements, program fees, and capitalized interest, if any;

(2) the annual tax obligation process and schedule;

(3) the annual payment amounts;

(4) the term of the assessment;

(5) the fixed rate of interest charged;

(6) the annual percentage rate;

(7) a payment schedule that fully amortizes the amount financed;

(8) the improvements to be installed;

(9) that if the property owners sell or refinance their property, then they may be required by a mortgage lender to pay off the assessment as a condition of sale or refinance;

(10) the penalty that shall be assessed or collected for prepayment of the assessment, if a prepayment penalty exists, and the form shall disclose if there is no pre-payment penalty for the assessment;

(11) that any potential utility savings are not guaranteed and will not reduce the assessment payments or total assessment amount;

(12) that the assessment will be collected along with their property taxes and will result in a lien on their property from the date of the assessment contract;

(13) that the payments will be added to their property tax bill, and if they pay their property taxes through their mortgage payment, using an impound account, the property owners should notify their mortgage lender so that their monthly mortgage payment can be adjusted to cover their increased property tax bill;

(14) that failure to pay the property assessment may result in penalties and fees and issuance of a tax sale or foreclosure that could result in the property owners losing their home; and

(15) that the property owners should seek professional tax advice if they have questions regarding tax credits, tax deductibility, or of the tax impact on the assessment contract or financing agreement.

(b) A program administrator shall present the disclosure form to property owners for acknowledgment prior to the execution of an assessment contract.

(c) A program administrator shall, as a part of its assessment contract, provide a 3-day right to cancel the qualifying improvements financing. The 3-day right to cancel expires on midnight of the fourth day, not including weekends or holidays, after a property owner signs the assessment contract. A program administrator shall provide a printed form for the right to cancel that is presented to the property owners no later than the time of signing of the assessment contract.

(d) The local unit of government shall develop a form to notify the property owner in writing and to include in the call procedure in Section 55 that the owner may rescind any assessment contract entered into pursuant to this Section not later than 3 days, not including weekends and holidays, after entering into the agreement. All local units of governments or third-party program administrators shall provide the form at the same time as the disclosure form above. The notification shall be provided to the property owner as a printed copy unless the property owner agrees to an electronic copy.

(e) This Section only applies to program administrators and contractors that finance residential properties of 4 or fewer units. This Section does not apply to commercial, industrial, multi-family (5 or more units), or agricultural properties.

(50 ILCS 50/55 new)

Sec. 55. Oral confirmation call.

(a) Before a property owner executes an assessment contract, the local unit of government or third-party program administrator shall:

(1) make an oral confirmation that at least one owner of the property has a copy of the assessment contract documents with all the key terms completed, the financing estimate and disclosure form, and the right-to-cancel form with a hard copy available upon request; and

(2) make an oral confirmation, in plain language, of the key terms of the assessment contract with the property owner on the call or to a verified authorized representative of the owner on the call and shall obtain acknowledgment from the property owner on the call to whom the oral confirmation is given.

(b) The oral confirmation shall include, but is not limited to, all of the following information:

(1) At the onset of the call after the determination of the preferred language of communication, that the property owner on the call has the right to have other persons present for the call and an inquiry as to whether the property owner would like to exercise the right to include anyone else on the call. This shall occur.

(2) The property owner on the call is informed that they should review the assessment contract, financing estimate, and disclosure form with all other owners of the property.

(3) The qualified improvement being installed is being financed by an assessment contract.

(4) The total estimated annual costs the property owner will have to pay under the assessment contract, including applicable fees.

(5) The total estimated average monthly amount of funds the property owner would have to save in order to pay the annual costs under the assessment contract, including applicable fees.

(6) The term of the assessment contract.

(7) That payments on the assessment contract will be made through an additional annual assessment on the property and paid either directly to the county tax collector's office as part of the total annual secured property tax bill or through the property owner's mortgage impound account, and that if the property owner pays his or her taxes through an impound account, he or she should notify their mortgage lender to discuss adjusting his or her monthly mortgage payment by the estimated monthly cost of the assessment contract.

(8) That the property will be subject to a lien during the term of the assessment contract and that the obligations under the assessment contract may be required by a mortgage lender to be paid in full before the property owner sells or refinances the property.

(9) That the property owner has disclosed whether the property has received or is seeking additional PACE area assessments and has disclosed all other PACE area assessments or special taxes that are or about to be placed on the property if known to and understood by the property owner.

(10) That any potential utility savings are not guaranteed and may not reduce the assessment payments or total assessment amount.

(11) That the local unit of government, third-party program administrator, or contractor do not provide tax advice, and that the property owner should seek professional tax advice if he or she has questions regarding tax credits, tax deductibility, or of other tax impacts on the PACE area assessment or assessment contract.

(12) That the property owner has a 3-day right to cancel the assessment contract.

(13) The estimated date that the first payment will be due.

(c) The program administrator shall comply with the following when giving the oral confirmation described in subsections (a) and (b):

(1) The program administrator shall record the oral confirmation in an audio format in accordance with applicable laws.

(2) The program administrator may not comply with the requirements in subsections (a) and (b) solely through the use of a prerecorded message or other similar device or method.

(3) Recording of an oral confirmation shall be retained by the program administrator for at least 5 years from the time of the recording.

(d) The program administrator shall develop additional procedures to address the needs and concerns of elderly persons.

(e) This Section only applies to program administrators and contractors that finance residential properties of 4 or fewer units. This Section does not apply to commercial, industrial, multi-family (5 or more units), or agricultural properties.

Section 99. Effective date. This Act takes effect upon becoming law.