HB1669

SECTION 1. The legislature finds that as a result of its goal to reach one hundred per cent renewable energy by 2045, the State now leads other states in nearly every category of renewable electricity. Despite great progress, Hawaii continues to depend heavily upon imported petroleum for its energy needs, and still falls far short of its ambitious renewable energy goals.

The legislature further finds that improving energy efficiency is the most economical, expedient, and cleanest way to accelerate the State's transition to one hundred per cent renewable energy. Energy consuming residential properties that are not using energy conservation strategies offer enormous opportunities for energy savings, yet the potential for savings is not readily apparent through current disclosure and information sharing requirements.

The legislature also finds that the State has a compelling statewide interest in accelerating the progress toward its clean energy and greenhouse gas emission reduction goals by improving property that is not using energy conservation strategies. Property that has been retrofitted with energy-related qualifying improvements receives the benefits of alleviating the property's burden from energy consumption. The installation and operation of qualifying improvements not only benefit the affected properties for which the improvements are made, but also assist in fulfilling the goals of the State's energy initiatives and policies. In order to make qualifying improvements more affordable and assist residential property owners who desire to undertake such improvements, there is a compelling statewide interest in enabling property owners to voluntarily finance such improvements with government assistance. The voluntary financing of qualifying improvements through government loans repaid through non-ad valorum property assessments is reasonable and necessary for the prosperity and welfare of the State and its residential property owners.

The purpose of this Act is to:

(1) Require the Hawaii state energy office to partner with the counties to implement a property assessed clean energy (PACE) program that allows residential property owners to finance qualifying clean energy improvements through non-ad valorum assessments collected by the county; and

(2) Authorize each county to establish and administer a property assessed clean energy (PACE) program that is funded by the State's issuance of revenue bonds.

SECTION 2. Chapter 196, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part . PROPERTY ASSESSED

CLEAN ENERGY (pace) PROGRAM

§196- Definitions. Whenever used in this part, unless a different meaning clearly appears from the context:

"County" means a county (except the county of Kalawao) and any agency of a county.

"Non-ad valorem assessment" means a special assessment or charge that is not based on the value of the property and appears on a property tax bill.

"Qualifying improvement" means a new energy technology system that captures and converts a renewable source of energy, such as solar or wind energy, into:

(1) A usable source of thermal or mechanical energy;

(2) Electricity; or

(3) Fuel.

"Residential property" means any single-family or multi-family residential dwelling or townhouse.

§196- Clean energy financing agreement. (a) Notwithstanding any county ordinance to the contrary, a residential property owner may apply to the county in which the property is located for funding to finance a qualifying improvement and enter into a financing agreement with the county. A county may enter into a financial agreement only with the record owner of the affected property.

(b) Before entering into a financing agreement, the county shall reasonably determine that all property taxes, and any other assessments levied on the same bill as property taxes, are paid and have not been delinquent for the preceding three years or the property owner's period of ownership, whichever is less; that there are no involuntary liens, including but not limited to construction liens on the property; that no notices of default or other evidence of property-based debt delinquency have been recorded during the preceding three years or the property owner's period of ownership, whichever is less; and that the property owner is current on all mortgage debt on the property.

(c) The financing agreement shall include the amount of an annual assessment over a fixed term that will appear on the property owner's tax bill annually.

(d) Any financing agreement, or summary memorandum of such agreement, shall be recorded in the public records of the county within which the property is located by the county within five days after execution by the parties to the agreement. The recorded agreement shall provide constructive notice that the assessment to be levied on the property constitutes a lien of equal dignity to county taxes and assessments from the date of recordation entered into pursuant to this section.

§196- Qualifying improvement requirements. (a) A qualifying improvement shall be affixed to a building or facility that is part of the property and shall constitute an improvement to the building or facility or a fixture attached to the building or facility. An agreement between a county and a qualifying property owner may not cover wind-resistance improvements in buildings or facilities under new construction or construction for which a certificate of occupancy or similar evidence of substantial completion of new construction or improvement has not been issued.

(b) Any work requiring a license under any applicable law to make a qualifying improvement shall be performed by a contractor properly licensed pursuant to chapter 444.

§196- Lienholders. (a) Without the consent of the holders or loan servicers of any mortgage encumbering or otherwise secured by the property, the total amount of any non-ad valorem assessment for a property under this part may not exceed twenty per cent of the just value of the property as determined by the county property appraiser.

(b) At least thirty days before entering into a financing agreement, the property owner shall provide to the holders or loan servicers of any existing mortgages encumbering or otherwise secured by the property a notice of the owner's intent to enter into a financing agreement together with the maximum principal amount to be financed and the maximum annual assessment necessary to repay that amount. A verified copy or other proof of such notice shall be provided to the county. A provision in any agreement between a mortgagee or other lienholder and a property owner, which allows for acceleration of payment of the mortgage, note, or lien or other unilateral modification solely as a result of entering into a financing agreement as provided for in this section is not enforceable. This section does not limit the authority of the holder or loan servicer to increase the required monthly escrow by an amount necessary to annually pay the qualifying improvement assessment.

§196- Sale of subject property. At or before the time a purchaser executes a contract for the sale and purchase of any property for which a non-ad valorem assessment has been levied under this part and has an unpaid balance due, the seller shall give the prospective purchaser a written disclosure statement in the following form, which shall be set forth in the contract or in a separate writing:

QUALIFYING IMPROVEMENTS FOR ENERGY EFFICIENCY, RENEWABLE ENERGY, OR WIND RESISTANCE. The property being purchased is located within the jurisdiction of a county that has placed an assessment on the property pursuant to Chapter 196, Hawaii Revised Statutes. The assessment is for a qualifying improvement to the property relating to energy efficiency, renewable energy, or wind resistance, and is not based on the value of the property. You are encouraged to contact the county property appraiser's office to learn more about this and other assessments that may be provided by law.

§196- Collection of non-ad valorum assessment. (a) A county may incur debt for the purpose of providing financing for qualifying improvements payable from revenues received from the improved property or revenue bonds issued by the Hawaii state energy office.

(b) The county shall collect the property owner's voluntary non-ad valorum assessment contained in the finance agreement and property tax bill annually.

(c) A non-ad valorum assessment is not a tax upon the real property and is collected because of benefit to residential property owners for qualifying improvements.

§196- Revenue bonds; authorization. (a) The Hawaii state energy office, through its chief energy officer and with the approval of the governor, may issue revenue bonds pursuant to part III, chapter 39 and parts IV and of this chapter, in an aggregate principal amount not to exceed $ at such times and in such amounts as the Hawaii state energy office deems advisable for the purpose of implementing the property assessed clean energy (PACE) program under this part.

(b) The revenue bonds shall be issued in the name of the Hawaii state energy office, and not in the name of the State.

§196- Statewide protection environment. The provisions of this part are in exercise of the State's constitutional mandate to promote and maintain a healthful environment under article IX, section 8, of the Hawaii State Constitution. The powers granted to the county under this part are additional and supplemental to county home rule authority and not in derogation of the county's constitutional power to tax real property pursuant to article VIII, section 3, of the Hawaii State Constitution."

SECTION 3. Section 196-71, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The Hawaii state energy office shall:

(1) Provide analysis and planning to actively develop and inform policies to achieve energy efficiency, renewable energy, energy resiliency, and clean transportation goals with the legislature, public utilities commission, state agencies, and other relevant stakeholders;

(2) Lead efforts to incorporate energy efficiency, renewable energy, energy resiliency, and clean transportation to reduce costs and achieve clean energy goals across all public facilities;

(3) Provide renewable energy, energy efficiency, energy resiliency, and clean transportation project deployment facilitation to assist private sector project completion when aligned with state energy goals; [~~and~~]

(4) Engage the private sector to help lead efforts to achieve renewable energy and clean transportation goals through the Hawaii clean energy initiative[.]; and

(5) Partner with each county to implement a property assessed clean energy (PACE) program pursuant to part and, through the chief energy officer and with the approval of the governor, may issue revenue bonds to finance qualifying improvements under the PACE program."

SECTION 4. Section 196-72, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) Subject to the approval of the governor, the chief energy officer shall:

(1) Formulate, analyze, recommend, and implement specific policies, strategies, and plans, in coordination with public and private sector stakeholders, to cost-effectively and equitably achieve the State's energy goals;

(2) Identify, track, and report key performance measures and milestones related to the State's energy and decarbonization goals;

(3) Provide technical assistance to state and county agencies to assess and implement projects and programs related to energy conservation and efficiency, renewable energy, clean transportation, energy resiliency, and related measures;

(4) Coordinate the State's energy programs with those of the federal government, other territory and state governments, the political subdivisions of the State, departments of the State, and governments of nations with interest in common energy resources;

(5) Identify market gaps and innovation opportunities, collaborate with stakeholders, and facilitate public-private partnerships to develop projects, programs, and tools to encourage private and public exploration, research, and development of energy resources, distributed energy resources, and data analytics that will support the State's energy and decarbonization goals;

(6) Create and review proposed state actions that may have a significant effect on the State's energy and decarbonization goals, report to the governor their effect on the energy program, and perform other services as may be required;

(7) Evaluate, recommend, and participate in the development of incentives and programs that encourage the development of energy efficiency, renewable energy, energy resiliency, distributed energy resources, and clean transportation resources;

(8) Assess and evaluate the effectiveness and continued necessity of existing energy related incentives, tax credits, and programs, and provide recommendations and proposed changes;

(9) Develop and maintain a comprehensive and systematic quantitative and qualitative capacity to analyze the status of energy resources, systems, and markets, both in-state and in other states and countries, particularly in relation to the State's economy, and to recommend, develop proposals for, and assess the effectiveness of policy and regulatory decisions, and energy emergency planning;

(10) Develop and recommend programs for, and assist public agencies in the implementation of, energy assurance and energy resilience;

(11) Support the development, evaluation, revision, and adoption of energy-related codes and standards that advance the State's energy goals;

(12) Act as the State's energy data clearinghouse by identifying, collecting, compiling, analyzing, publishing, and where possible, monetizing energy and clean transportation data and analyses;

(13) Advocate for the State's energy and decarbonization goals at relevant venues and departments, including but not limited to the public utilities commission, legislature, and division of consumer advocacy, to ensure that state energy policies and regulations align with the state strategic goals and are data-driven;

(14) Support economic development and innovation initiatives related to and resulting from the State's renewable energy and distributed energy resources experience, capabilities, and data analyses;

(15) Facilitate the efficient, expedited permitting of energy efficiency, renewable energy, clean transportation, and energy resiliency projects by:

(A) Coordinating and aligning state and county departments and agencies to support, expedite, and remove barriers to deployment of energy initiatives and projects; [~~and~~]

(B) [~~Identify~~] Identifying and [~~evaluate~~] evaluating conflicting or onerous policies and rules that unreasonably impede project development and deployment and propose regulatory, legislative, administrative, or other solutions to applicable stakeholders; and

(C) Issuing revenue bonds as necessary for the implementation and administration of the property assessed clean energy (PACE) program;

(16) Identify and recommend policies to align utility goals with those of ratepayers, including evaluating utility models that best support state energy goals;

(17) Prepare and submit an annual report and other reports as may be requested to the governor and to the legislature on the implementation of this part;

(18) Contract for services when required for the implementation of this part; and

(19) Adopt rules, pursuant to chapter 91, for the administration of this part."

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1669
THIRTIETH LEGISLATURE, 2020
STATE OF HAWAII