Bill Text: MI HB5118 | 2023-2024 | 102nd Legislature | Introduced
Bill Title: Energy: alternative sources; participation in property assessed clean energy program; extend to energy, environmental hazard, and water usage projects on residential property. Amends title of 2010 PA 270 (MCL 460.931 - 460.949); designates sec. 1 as pt. 1 & secs. 3 - 19 as pt. 2 & adds pt. 3. TIE BAR WITH: HB 5119'23
Spectrum: Partisan Bill (Democrat 5-0)
Status: (Introduced) 2023-10-11 - Bill Electronically Reproduced 10/10/2023 [HB5118 Detail]
Download: Michigan-2023-HB5118-Introduced.html
HOUSE BILL NO. 5118
A bill to amend 2010 PA 270, entitled
"Property assessed clean energy act,"
(MCL 460.931 to 460.949) by amending the title, by designating section 1 as part 1 and sections 3 to 19 as part 2, and by adding part 3.
the people of the state of michigan enact:
An act to authorize local units of government to adopt property assessed clean energy assessment programs and to create districts to promote the use of renewable energy systems, and energy efficiency improvements, water usage and sewage treatment improvements, air quality improvements, and environmental hazard projects by owners of certain real property owners; to provide for the financing of such programs through voluntary property assessments, commercial lending, and other means; to authorize a local unit units of government to issue bonds, notes, and other evidences of indebtedness and to pay the cost of renewable energy systems, and energy efficiency improvements, water usage and sewage treatment improvements, air quality improvements, and environmental hazard projects from the proceeds thereof; to provide for the repayment of bonds, notes, and other evidences of indebtedness; to authorize certain fees; to prescribe the powers and duties of certain governmental officers and entities; and to provide for remedies.
PART 1
GENERAL PROVISIONS
PART 2
COMMERCIAL AND INDUSTRIAL PROPERTY
PART 3
NONCOMMERCIAL, NONINDUSTRIAL PROPERTY
Sec. 20. As used in this part:
(a) "Administrator" means a person authorized by a local unit of government under section 28(1) to administer a property assessed clean energy program on behalf of and at the discretion of the local unit of government.
(c) "Anaerobic digester energy system" means an anaerobic digester and the devices used to generate electricity or heat from methane produced by the anaerobic digester or to store the methane for the future generation of electricity or heat.
(d) "District" means a district created by a local unit of government under a property assessed clean energy program that lies within the local unit of government's jurisdictional boundaries. A local unit of government may create more than 1 district under the program, and districts may be separate, overlapping, or coterminous.
(e) "Energy efficiency improvement" means the acquisition, installation, replacement, or modification of equipment, devices, or materials intended to decrease energy consumption, including, but not limited to, any of the following:
(i) Insulation in walls, roofs, floors, foundations, or heating and cooling distribution systems.
(ii) 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.
(iii) Automated energy control systems.
(iv) Heating, ventilating, or air-conditioning and distribution systems.
(v) Caulking, weather-stripping, or air sealing.
(vi) Lighting fixtures.
(vii) Energy recovery systems.
(viii) Day lighting systems.
(ix) Electrical wiring or outlets to charge a motor vehicle that is fully or partially powered by electricity.
(x) Any other equipment, devices, or materials approved as a utility cost-savings measure by the governing body.
(f) "Energy project" means any of the following:
(i) An energy efficiency improvement.
(ii) The acquisition, installation, replacement, or modification of a renewable energy system or anaerobic digester energy system.
(g) "Environmental hazard project" means the acquisition, installation, replacement, or modification of equipment, devices, or materials intended to address environmental hazards, including, but not limited to, measures to do any of the following:
(i) Mitigate lead, heavy metal, or polyfluoroalkyl substance (PFAS) contamination in potable water systems.
(ii) Mitigate the effects of floods or drought.
(iii) Increase the resistance of property against severe weather.
(iv) Mitigate lead paint contamination in housing built before 1978.
(v) Reduce emissions to outdoor or indoor air or control indoor humidity.
(vi) Replace or improve an on-site septic sewage system, including either of the following:
(A) Conversion to a central sewage system.
(B) Repairs or modifications to the on-site septic sewage system or to a lateral connection to a central sewage system.
(h) "Governing body" means any of the following:
(i) The county board of commissioners of a county.
(ii) The township board of a township.
(iii) The council or other similar elected legislative body of a city or village.
(iv) The governing body of a separate legal entity created pursuant to section 7 of the urban cooperation act of 1967, 1967 (Ex Sess) PA 7, MCL 124.507.
(i) "Local unit of government" means a county, township, city, or village or a separate legal entity created pursuant to section 7 of the urban cooperation act of 1967, 1967 (Ex Sess) PA 7, MCL 124.507.
(j) "New construction energy project" means an energy project to which either of the following applies:
(i) It occurs at a newly constructed building or other structure.
(ii) It consists of significant modifications to an existing building or other structure.
(k) "Person" means an individual, firm, partnership, association, corporation, unincorporated joint venture, or trust, organized, permitted, or existing under the laws of this state or any other state, a federal corporation, or a combination thereof. However, person does not include a local unit of government.
(l) "Project" means any of the following:
(i) An environmental hazard project.
(ii) An energy project.
(iii) Measures to reduce the usage of water or increase the efficiency of water usage.
(m) "Property" means privately owned real property used for residential purposes located within the local unit of government. However, property does not include multifamily residential property with 5 or more dwelling units.
(n) "Property assessed clean energy program" or "program" means a program as described in section 21(2).
(o) "Record owner" means the person or persons possessed of the most recent fee title or land contract vendee's interest in property as shown by the records of the county register of deeds.
(p) "Renewable energy resource" means a resource that naturally replenishes over a human, rather than a geological, time frame and that is ultimately derived from solar power, water power, or wind power. Renewable energy resource does not include petroleum, nuclear, natural gas, or coal. A renewable energy resource comes from the sun or from thermal inertia of the earth, minimizes the output of toxic material in the conversion of the energy, and includes, but is not limited to, all of the following:
(i) Biomass.
(ii) Solar and solar thermal energy.
(iii) Wind energy.
(iv) Geothermal energy.
(v) Methane gas captured from a landfill.
(q) "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 1 or more renewable energy resources to generate electricity. Renewable energy system includes a biomass stove but does not include an incinerator or digester.
Sec. 21. (1) Pursuant to section 22, a local unit of government may establish a property assessed clean energy program and may create a district or districts under the program.
(2) Under a property assessed clean energy program, the local unit of government may enter into a written contract with the record owner of property within a district to finance or refinance 1 or more projects on the property. The contract may provide for the repayment of the cost of a project through assessments on the property benefited. The financing or refinancing may include the cost of materials and labor necessary for installation and of permit fees, inspection fees, application and administrative fees, bank fees, or any other fees that may be incurred by the record owner for the installation on a specific or pro rata basis, as determined by the local unit of government.
Sec. 22. (1) To establish a property assessed clean energy program, a governing body shall take the following actions in the following order:
(a) Adopt a resolution of intent that includes all of the following:
(i) A finding that financing projects is a valid public purpose.
(ii) A statement of intent to provide funds for projects, which may be repaid by assessments on the property benefited, with the agreement of the record owner.
(iii) A description of the proposed arrangements for financing the property assessed clean energy program.
(iv) The types of projects that may be financed.
(v) Reference to a report on the proposed property assessed clean energy program as described in section 23(1) and where the report is available pursuant to section 23(2).
(vi) The time and place for a public hearing on the proposed property assessed clean energy program.
(b) Hold a public hearing at which the public may comment on the proposed property assessed clean energy program, including the report required by subdivision (a)(v).
(c) Adopt a resolution establishing the property assessed clean energy program and setting forth its terms and conditions, including, but not limited to, all of the following:
(i) Matters required by section 23(1) to be included in the report. For this purpose, the resolution may incorporate the report or an amended version of the report by reference.
(ii) A description of aspects of the program that may be amended without holding a new public hearing and aspects that may be amended only after a new public hearing is held.
(d) Offer a workshop by an organization knowledgeable about property assessed clean energy program financing, to provide information about the program to realtors and other interested persons. The workshop shall be offered each year during the first 3 years of the program.
(2) A governing body that establishes a property assessed clean energy program shall prohibit the administrator, a project contractor, or a third party hired by the administrator or project contractor to solicit program financing from describing program financing as government assistance or as free of charge.
(3) The governing body may amend a property assessed clean energy program by resolution. Before adopting the resolution, the governing body shall hold a public hearing if required by the resolution under subsection (1)(c).
Sec. 23. (1) The report on the proposed property assessed clean energy program required under section 22 shall include all of the following:
(a) A form of contract between the local unit of government and the record owner governing the terms and conditions of financing and assessment under the program.
(b) The identity of an official authorized to enter into a program contract on behalf of the local unit of government.
(c) A maximum aggregate annual dollar amount for all financing to be provided by the local unit of government under the program.
(d) An application process and eligibility requirements for financing projects under the program.
(e) A method for determining repayment periods, the maximum amount of an assessment, and interest rates on assessment installments.
(f) An explanation of how assessments will be made and collected consistent with section 25(3).
(g) A plan for raising capital to finance improvements under the program. The plan may include any of the following:
(i) The sale of bonds or notes, subject to section 26.
(ii) Amounts to be advanced by the local unit of government through funds available to it from any other source.
(iii) Owner-arranged financing from a commercial lender. Under owner-arranged financing, the local unit of government may impose an assessment pursuant to section 24 and forward payments to the commercial lender or the record owner may pay the commercial lender directly.
(h) Information regarding both of the following, to the extent known, or procedures to determine the following in the future:
(i) Any reserve fund or funds to be used as security for bonds or notes described in subdivision (g).
(ii) Any application, administration, or other 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.
(i) A requirement that the term of an assessment not exceed the useful life of the project paid for by the assessment.
(j) A requirement that the total amount of the assessments under the program not exceed 20% of the current value of the property.
(k) A requirement that the total amount of the assessments under the program on a property, plus all existing mortgage debt on the property, not exceed the current value of the property.
(l) A requirement that the total amount of the annual assessment under the program on a property not exceed 10% of the annual income of the record owner.
(m) Provisions for marketing and participant education, including a requirement that before a record owner signs a program financing agreement, the administrator provide the record owner with a program guide, written in plain language, describing all of the following:
(i) How the program operates.
(ii) How to understand program disclosure documents.
(iii) How property tax and escrow increases operate.
(iv) How to understand quotes from project contractors.
(v) Other standard types of financing compared to financing under the program.
(vi) Applicable federal grant programs, such as the United States Department of Energy's weatherization assistance program, available to qualifying low-income record owners.
(n) Provisions for an adequate debt service reserve fund.
(o) Quality assurance and antifraud provisions.
(p) For an energy project financed with more than $250,000.00 in assessments, both of the following:
(i) A requirement for ongoing calculation of the savings realized by the record owner from the energy project.
(ii) A requirement that a project contractor guarantee to the record owner that the energy project will achieve a savings-to-investment ratio greater than 1 and agree to pay the record owner, on an annual basis, any shortfall in savings below this level. This subparagraph does not apply to a new construction energy project.
(q) A requirement that a new construction energy project meet the applicable requirements of the Stille-DeRossett-Hale single state construction code act, 1972 PA 230, MCL 125.1501 to 125.1531, and rules promulgated thereunder.
(r) A requirement that the contract and financing for the project comply with applicable state consumer financial protection laws.
(s) A requirement that the administrator maintain project pricing controls to help prevent project contractors from charging record owners more for materials, labor, or both than would be charged if the project was financed outside of the program or paid for in cash. The pricing controls shall be developed using data from reputable, third-party, independent sources. The administrator shall not disclose the pricing controls to any project contractor or any third party engaged in soliciting program financing. The administrator shall not disclose to any project contractor or any third party engaged in soliciting program financing the maximum amount of financing for which a record owner is eligible.
(t) Requirements that the administrator do all of the following:
(i) Confirm that all project contractors are licensed, insured, and bonded as required by state law.
(ii) Conduct reputational and criminal background checks on all project contractors or verify reputational and criminal background with the department of licensing and regulatory affairs.
(iii) Ensure that all project contractors agree in writing to comply with all program requirements and advertising and marketing standards.
(iv) Develop and maintain written procedures for monitoring project contractors for compliance with program requirements and for the suspension or termination of project contractors who violate program requirements or exhibit unscrupulous behavior.
(u) A requirement that the administrator develop and maintain policies and procedures to assist a record owner facing foreclosure for failure to pay annual assessments related to program financing.
(v) A requirement that the administrator develop and maintain options, such as assessment modifications and forbearance policies, to help record owners whose household income is below 80% of the area median income avoid foreclosure for failure to pay annual assessments related to program financing, to the extent consistent with applicable state laws and other legal obligations.
(w) A requirement that the administrator provide record owners over 75 years of age and low-income record owners, based on the owner's stated income, with proactive communication during the financing origination process, including all of the following:
(i) During the telephone call under section 24(3)(c), notice of the record owner's 5-day right to cancel the project financing agreement under the program.
(ii) A second telephone call before expiration of the right-to-cancel period to confirm the record owner's understanding of the project financing agreement under the program.
(iii) A final telephone call with the record owner to confirm project completion after the administrator's receipt of written confirmation of project completion.
(x) A requirement that, when a change order on a project significantly increases the cost of the original project or significantly expands the scope of the original project, the administrator notify, confirm the change with, and provide an updated financing estimate and disclosure document to the record owner.
(y) A requirement that the administrator develop a document outlining the annual assessments, the monthly amount record owners must add to their impound account with the mortgage lender, and a form the record owner can use to communicate that information to the loan servicer. The administrator shall provide the document to the record owner when the project is funded. At least 60 days before the due date of each of the first 2 property tax payments that include a program assessment, the administrator shall provide a notice to the record owner. The notice shall indicate that the document developed under this subdivision was provided to the record owner when the project was funded and that the record owner may need to adjust its mortgage escrow payments with its servicer.
(z) A requirement that the administrator make the program guide under subdivision (m), program contracts between the local unit of government and the record owner, and disclosure documents available in English and Spanish.
(2) The local unit of government shall make the report required under section 22 available for review on the local unit of government's website or at the office of the clerk or the official authorized to enter into contracts on behalf of the local unit of government under the property assessed clean energy program.
Sec. 24. (1) A local unit of government may impose an assessment under a property assessed clean energy program only pursuant to a contract under section 21(2) with the record owner of the property to be assessed.
(2) Before entering into a contract with the record owner under section 21(2), the local unit of government, using reasonable means, must verify that all of the following apply:
(a) None of the following are delinquent with respect to the property:
(i) A tax, special assessment, or water or sewer charge.
(ii) An assessment for another project under a property assessed clean energy program.
(iii) A mortgage payment.
(b) The property is not subject to a reverse mortgage.
(c) The record owner is not subject to a mortgage forbearance.
(d) The record owner is not a party to a current bankruptcy proceeding.
(e) The property was not gifted to the record owner by a nonprofit entity.
(f) The requirements of section 23(1)(j), (k), and (l) will be met.
(3) Before a local unit of government enters into a contract with the record owner under section 21(2), all of the following requirements must be met:
(a) The local unit of government must deliver to the record owner a written financing estimate that discloses all of the following:
(i) The project term.
(ii) The project interest rate and annual percentage rate.
(iii) The project costs, including, but not limited to, fees as described in section 23(1)(h)(ii).
(iv) The projected annual payment on the assessment.
(v) That all financing under the program, home equity lines of credit, and home equity loans may need to be paid in their entirety if the property is sold or refinanced.
(vi) The total amount of the assessment.
(vii) The total amount the record owner will pay over the financing term.
(viii) The payment schedule.
(ix) That the failure to pay the assessment can result in foreclosure on the property.
(b) The record owner must acknowledge in writing that the record owner has read and understands the financing estimate under subdivision (a).
(c) The local unit of government must conduct a live telephone call with the record owner, in English or Spanish at the option of the record owner, to help ensure that the record owner understands the financing estimate. The call must be completed before a contractor is authorized to begin work on the project. The call shall be recorded and include the following:
(i) Project cost.
(ii) The project interest rate and annual percentage rate.
(iii) The project fees as described in section 23(1)(h)(ii).
(iv) The payment amount, frequency, and term.
(v) An explanation, in plain language, of how the assessment is levied and collected.
(vi) An explanation that the assessment will result in a lien on the property.
(vii) The notice required under section 23(1)(w)(i), if applicable.
(4) All of the following apply to a contract entered into under section 21(2):
(a) The term shall not exceed the useful life of the project, as determined by credible, third-party sources.
(b) The interest rate shall be fixed and non-variable.
(c) Payments shall be fully amortizing.
(d) The annual percentage rate shall be calculated using generally accepted practices within the United States consumer financial services industry.
(e) Payment terms shall not include a prepayment penalty or balloon payment.
(f) The contract may be canceled by the record owner, with or without a reason and without any penalty, within 5 business days after the contract is executed by the record owner.
(5) Final payment shall not be issued to the contractor for a project under a program, unless both of the following requirements have been met:
(a) The record owner of the property certifies in writing that the project has been completed to the satisfaction of the record owner.
(b) The contractor certifies in writing all of the following:
(i) That the project meets the requirements of this act and standards established by the United States Department of Energy, the Environmental Protection Agency, other federal and state agencies, or reputable third parties.
(ii) That final permits or inspections required by law have been or will be obtained.
(iii) That the contractor has not received and will not receive a direct cash bonus or compensation, beyond payment for the contracted cost of the project, in exchange for submitting an application for financing the project under the program.
Sec. 25. (1) An assessment imposed under a property assessed clean energy program, including any interest on the assessment and any penalty, constitute a lien against the property on which the assessment is imposed until the assessment, including any interest or penalty, is paid in full. The lien runs with the property and has the same priority and status as other property tax and assessment liens. The local unit of government has all rights in the case of delinquency in the payment of an assessment as it does with respect to delinquent property taxes. When the assessment, including any interest or penalty, is paid, the local unit of government shall remove the lien from the property.
(2) The administrator shall do all of the following:
(a) Within 60 days after the establishment of a program, create a registry of the local unit of government's liens under subsection (1).
(b) Maintain the registry and enter program lien information in the registry promptly.
(c) Review the registry before underwriting new projects.
(d) Provide access to the registry to all other administrators for local units of government who are authorized to make assessments under the program within the same jurisdiction.
(3) Installments of assessments due under a property assessed clean energy program shall be managed as provided in 1 of the following:
(a) Included in each summer and winter tax bill issued under the general property tax act, 1893 PA 206, MCL 211.1 to 211.155, and collected at the same time and in the same manner as taxes collected under that act.
(b) Billed and collected as provided in a special assessment ordinance of general applicability adopted by the local unit of government pursuant to state law or local charter.
Sec. 26. (1) A local unit of government may issue bonds or notes to finance projects under a property assessed clean energy program.
(2) Bonds or notes issued under subsection (1) shall not be general obligations of the local unit of government, but shall be secured by 1 or more of the following as provided by the governing body in the resolution or ordinance approving the bonds or notes:
(a) Payments of assessments on benefited property within the district or districts.
(b) Reserves established by the local unit of government from grants, bond or note proceeds, or other lawfully available funds.
(c) Municipal bond insurance, lines or letters of credit, public or private guaranties, standby bond purchase agreements, collateral assignments, mortgages, or any other available means of providing credit support or liquidity, including, but not limited to, arrangements described in section 315 of the revised municipal finance act, 2001 PA 34, MCL 141.2315.
(d) Tax increment revenues that may be lawfully available for that purpose.
(e) Any other amounts lawfully available for that purpose.
(3) A pledge of assessments, funds, or contractual rights made by a governing body in connection with the issuance of bonds or notes by a local unit of government under this part constitutes a statutory lien on the assessments, funds, or contractual rights so pledged in favor of the person or persons to whom the pledge is given, without further action by the governing body. The statutory lien is valid and binding against all other persons, with or without notice.
(4) Bonds or notes of a series issued under this part may be secured on a parity with bonds or notes of another series issued by the local unit of government pursuant to the terms of a master indenture or master resolution entered into or adopted by the governing body of the local unit of government.
(5) Bonds or notes issued under this part are subject to the revised municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821.
(6) Bonds or notes issued under this part and interest payable on the bonds and notes, are exempt from taxation by this state and its political subdivisions.
(7) Bonds or notes issued under this part further essential public and governmental purposes, including, but not limited to, reduced energy costs, reduced greenhouse gas emissions, improved public health, protection against climate hazards and other environmental hazards, economic stimulation and development, improved property valuation, and increased employment.
Sec. 27. An electric or natural gas provider shall receive appropriate credit toward applicable renewable energy or energy waste reduction standards established under the clean and renewable energy and energy waste reduction act, 2008 PA 295, MCL 460.1001 to 460.1211, as a result of implementation by its customer of an energy project under a property assessed clean energy program.
Sec. 28. (1) A local unit of government may join with any other local unit of government, with any other person, or with any number or combination thereof, by contract or otherwise as may be authorized by law, for the implementation of a property assessed clean energy program, in whole or in part.
(2) If a property assessed clean energy program is implemented jointly by 2 or more local units of government pursuant to subsection (1), a single public hearing held jointly by the cooperating local units of government is sufficient to satisfy the requirements of section 22(1)(b).
Enacting section 1. This amendatory act does not take effect unless Senate Bill No.____ or House Bill No. 5119 (request no. 02420'23 a) of the 102nd Legislature is enacted into law.
