SENATE BILL 215
53rd legislature - STATE OF NEW MEXICO - first session, 2017
RELATING TO LOCAL GOVERNMENT; AMENDING, REPEALING AND ENACTING SECTIONS OF THE RENEWABLE ENERGY FINANCING DISTRICT ACT; ENABLING EFFICIENCY, STORAGE AND WATER CONSERVATION IMPROVEMENTS TO BE FINANCED WITH SPECIAL ASSESSMENTS; CHANGING THE PRIORITY OF LIENS UNDER THE ACT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 5-18-1 NMSA 1978 (being Laws 2009, Chapter 180, Section 1) is amended to read:
"5-18-1. SHORT TITLE.--[This act] Chapter 5, Article 18 NMSA 1978 may be cited as the "Renewable Energy Financing District Act"."
SECTION 2. Section 5-18-2 NMSA 1978 (being Laws 2009, Chapter 180, Section 2) is amended to read:
"5-18-2. LEGISLATIVE FINDINGS.--The legislature finds that:
A. the development of distributed renewable energy sources and energy storage, improvements to the energy efficiency of structures and water conservation will advance the security, economic well-being and public and environmental health of the state, as well as contributing to the energy independence of the nation and addressing the issue of global climate change;
B. it is in the best interests of the state, municipalities and counties to encourage the development and installation of distributed generation renewable energy sources and [the installation by] energy storage, improvements to the energy efficiency and water conservation measures by owners of existing and new real property [owners of such energy sources];
C. the high front-end costs of renewable energy, [installations] energy storage, energy efficiency and water conservation improvements to real property [prevents] prevent many property owners from making these improvements, and many property owners lack access to traditional financing and therefore it is desirable and necessary to authorize alternative financing procedures to promote the installation of the improvements; [and]
D. it is desirable and necessary to authorize alternative financing procedures to promote the installation of renewable energy, energy storage, energy efficiency and water conservation improvements by owners of commercial, residential, agricultural and other real property; and
[D.] E. the creation and administration of renewable energy financing districts to facilitate the development of renewable energy, energy storage, energy efficiency and water conservation improvements on property in the district will serve a valid public purpose and is expressly declared to be in the public interest."
SECTION 3. Section 5-18-3 NMSA 1978 (being Laws 2009, Chapter 180, Section 3) is amended to read:
"5-18-3. DEFINITIONS.--As used in the Renewable Energy Financing District Act:
A. "assessment contract" means a contract entered into between a district, an owner and, if applicable, a third-party lender, under which the district or such third-party lender agrees to provide financing for an energy improvement or water conservation in exchange for a property owner's agreement to pay an annual assessment for a period not to exceed the useful life of the energy project;
[A.] B. "county" means any county, including an H class county;
[B.] C. "debt service" means the payment of principal of, interest on and premium, if any, on [the bonds] any bonds or other financial instrument:
(1) when due, whether at maturity; or [prior redemption]
(2) upon redemption prior to maturity and fees, [and] costs [of agents necessary to handle the] and expenses incurred in connection with the issuance and administration of such bonds or other financial instrument and the costs of credit enhancement or liquidity support;
[C.] D. "district" means a renewable energy financing district formed pursuant to the Renewable Energy Financing District Act by a municipality or by a county in an unincorporated area or in an incorporated area with the applicable municipality's consent, or a regional district formed pursuant to Section 8 of this 2017 act;
E. "department" means the energy, minerals and natural resources department;
[D.] F. "district board" means the board of directors of the district, except for regional districts, which shall be composed of the members of the governing body of the municipality or county in which the district is located, or at the option of the governing body, five directors appointed by the governing body, as provided in Section [9 of the Renewable Energy Financing District Act. The board shall serve until replaced by elected directors, which shall occur not later than six years after the date on which the resolution establishing the district is enacted;
E. "election" means an election held in compliance with the provisions of the Renewable Energy Financing District Act;] 5-18-9 NMSA 1978;
G. "efficiency improvement" means a modification that is permanently installed on or affixed to property that is designed to reduce energy consumption or energy-related operating costs, and may include the following:
(1) insulation of a building structure or system within a building;
(2) "cool roofing" or radiant barriers that reflect heat;
(3) storm windows or doors, caulking or weatherstripping, multiglazed windows or doors, heat-absorbing or heat-reflective glazed and coated window or door systems, additional glazing, reductions in glass area or other window and door system modifications that reduce energy consumption;
(4) automated or computerized energy control systems;
(5) heating, ventilating or air conditioning system modifications or replacements;
(6) replacement or modification of lighting fixtures to increase the energy efficiency of the lighting system without increasing the overall illumination of a facility, unless an increase in illumination is necessary to conform to the applicable state or local building code or nationally accepted standards for the lighting system after the proposed modifications are made;
(7) energy recovery systems; and
(8) cogeneration or combined heat and power systems that produce steam, chilled water or forms of energy such as heat, as well as electricity, for use primarily within a building or complex of buildings;
H. "energy improvement" means a renewable energy improvement, energy efficiency improvement or energy storage improvement;
I. "energy storage improvement" means any modification that is permanently installed on or affixed to property that is capable of absorbing energy or storing it for a period of time and thereafter delivering the energy;
[F.] J. "governing body" means the body or board that by law is constituted as the governing body of the municipality or county in which the district is located;
[G.] K. "municipality" means an incorporated city, village or town;
[H.] L. "owner" means the person who is listed as the owner of real property in the district on the current property tax assessment roll;
[I.] M. "renewable energy improvement" means a photovoltaic, solar thermal, geothermal heat pump or wind energy system permanently installed on real property; [and
J.] N. "special assessment" means a levy imposed against real property within a district; and
O. "water conservation improvement" means a modification that is permanently installed on or affixed to property and that is designed to reduce water consumption."
SECTION 4. Section 5-18-4 NMSA 1978 (being Laws 2009, Chapter 180, Section 4) is amended to read:
"5-18-4. RENEWABLE ENERGY FINANCING DISTRICTS AUTHORIZED.--
A. A governing body of a municipality or county may form a district for the purpose of encouraging, accommodating and financing [renewable] energy improvements and water conservation improvements on property within the municipality or county. A district shall include only property for which an owner executes an agreement consenting to the inclusion of the property within the district and to the imposition of a special assessment on the property for the purpose of financing [renewable] energy improvements and water conservation improvements.
B. A district formed by a municipality shall be wholly within the boundaries of the municipality. A district formed by a county shall be wholly within the boundaries of the county and shall be in the unincorporated area of the county, or may include an incorporated area with the municipality's consent. A district may include contiguous and noncontiguous property.
C. Except as otherwise provided in this section, a district shall be a political subdivision of the state, separate and apart from the municipality or county."
SECTION 5. Section 5-18-5 NMSA 1978 (being Laws 2009, Chapter 180, Section 5) is amended to read:
"5-18-5. RESOLUTION DECLARING INTENTION TO FORM DISTRICT.--
A. A governing body may adopt a resolution declaring its intention to form a district. The resolution shall [state] include the following:
(1) the purposes for which the district is to be formed;
(2) that the district shall include only property for which the owner has agreed to the inclusion of the property within the district, and that inclusion of property may occur subsequent to the adoption of the resolution forming the district;
(3) the process by which a property owner can execute an agreement to include property in the district;
(4) [a description of the specific types of renewable] that only energy improvements, [that] water conservation improvements and improvements incidental to such improvements, not to exceed twenty percent of the total amount financed, will be eligible for the financing provided pursuant to the Renewable Energy Financing District Act;
(5) that inclusion of property in the district will result in the imposition of special assessments on the property to pay the costs of [the] approved [renewable] energy improvements, water conservation improvements, financing and administrative fees;
(6) the method of calculating the amount of the special assessment and the manner of collection of the special assessment;
(7) that standards and requirements will be set by the district board for [renewable] energy improvements and water conservation improvements to be installed on property in the district;
(8) a contract form to be used for assessment contracts between the district, the owner of the qualifying property and, if applicable, a third-party lender governing the terms and conditions of financing and annual assessments, including provisions for the district's collection of its administrative and other costs;
(9) the application process and eligibility requirements for financing energy improvements and water conservation improvements;
(10) that the district shall only finance energy improvements for which the reasonably estimated economic benefits, including energy cost savings, maintenance cost savings and other property operating savings expected from the improvement during the financing period, are equal to or greater than the principal cost of the improvement less the estimated cost of a similar improvement to property that does not provide such benefits and less property value increase;
[(8)] (11) a reference to the Renewable Energy Financing District Act; and
[(9)] (12) that the district will be governed by a district board composed of the members of the governing body or by five directors to be appointed by the governing body.
B. The resolution shall direct that a hearing on formation of the district be scheduled and notice be published as required for public hearings of the governing body.
C. After passage of a resolution pursuant to Subsection A of this section, a district may enter into an assessment contract with the record owner of qualifying property within the district and, if applicable, with a third-party lender to finance an energy improvement or water conservation improvement on the qualifying property. The costs financed under the assessment contract may include the cost of materials and labor necessary for installation, permit fees, inspection fees, application and administrative fees, bank fees and all other fees, costs and expenses that may be incurred by the owner pursuant to the installation. The assessment contract shall provide for the repayment of all fees, costs and expenses through annual assessments upon the qualifying property benefited by the energy or water conservation improvement. The funds for payment of the annual assessment may be collected more frequently than annually and escrowed by the third-party lender."
SECTION 6. Section 5-18-7 NMSA 1978 (being Laws 2009, Chapter 180, Section 7) is amended to read:
"5-18-7. SPECIAL ASSESSMENT--LIEN CREATED--PRIORITY OF LIENS.--
A. The district board may impose a special assessment on property within the district to facilitate the financing of [renewable] energy improvements and water conservation improvements to the property. The special assessment shall be sufficient in the case of each property to pay the costs of the financing of the [renewable] energy improvements and water conservation improvements, including the costs of bond issuance, debt service and administrative costs of the district and the municipality or county in which the district is located.
B. The special assessment shall be levied and collected at the same time and in the same manner as property taxes are levied and collected, except to the extent that the district board has provided for other imposition and collection procedures. Money derived from the imposition of the special assessment shall be kept separately from other funds of the governing body.
C. A special assessment shall constitute a tax lien on the property, which shall be effective during the period in which the assessment is imposed and shall have priority over all other liens except liens for ad valorem property taxes; provided that only the delinquent portion of such special assessment shall have priority to liens for a first lien mortgage such as those insured by the federal housing administration, as provided in Subsection E of this section.
D. The obligation to pay the special assessment may be prepaid and permanently satisfied, and the district board shall specify the conditions under which this may be achieved.
E. In the event a scheduled payment of the special assessment is not paid when due, the amount of the scheduled payment and collection costs for the payment, and only those amounts, shall have priority over a first lien mortgage such as a mortgage insured by the federal housing administration. Payment of an obligation created under the Renewable Energy Financing District Act shall not accelerate for any reason, including late payments, and the property shall not be subject to an enforceable accelerated claim or lien superior to a first lien mortgage such as those insured by the federal housing administration for the full outstanding obligation at any time.
F. There shall be no terms or conditions in the special assessment that limit the right of the owner to transfer property encumbered by a special assessment pursuant to this section; provided, however, that property shall remain encumbered by the special assessment until such time as the obligation related to the special assessment is paid in full.
G. The district shall cause the special assessment and the assessment contract to be recorded with the clerk of the county in which the property is located.
H. In the event of the sale, including a foreclosure sale, of a property with an outstanding special assessment, the special assessment and the associated liens shall remain with the property until the financing related thereto is paid in full. Unless the special assessment is paid in full in connection with the sale, the buyer will assume the obligation and will be responsible for the payments on the outstanding special assessment."
SECTION 7. Section 5-18-8 NMSA 1978 (being Laws 2009, Chapter 180, Section 8) is amended to read:
"5-18-8. SPECIAL ASSESSMENT BONDS AND LENDER FINANCING.--
A. A district may issue one or more series of bonds to provide money for [renewable] energy improvements and water conservation improvements to property in the district, and the bonds may be payable from the special assessments levied pursuant to one or more assessment resolutions.
B. For any bonds issued pursuant to the Renewable Energy Financing District Act, the district board shall prescribe the denominations of the bonds, the principal amount of each issue and the form of the bonds and shall establish the maturities, which shall not exceed [twenty] thirty years, interest payment dates and interest rates, whether fixed or variable, not exceeding the maximum rate stated in the resolution of the district board. The bonds may be sold by competitive bid or negotiated sale for public or private offering at, below or above par. The proceeds of the bonds shall be deposited in a segregated account with the treasurer of the district board, or with a trustee or agent designated by the district board, to the credit of the district to be withdrawn solely for the purposes provided by the Renewable Energy Financing District Act. Pending that use, the proceeds may be invested as determined by the district. The bonds shall be made payable as to both principal and interest solely from revenues of the district, and shall specify the revenues pledged for such purposes, and shall contain such other terms, conditions, covenants and agreements as the district board deems proper.
C. No holder of special assessment bonds issued pursuant to the Renewable Energy Financing District Act may compel any exercise of the taxing power of the district, municipality or county to pay the bonds or the interest on the bonds. Special assessment bonds issued pursuant to that act are not a debt or general obligation of the county or the municipality in which the district is located, nor is the payment of special assessment bonds enforceable out of any money other than the revenue pledged to the payment of the bonds.
D. Pursuant to this section, the district may issue and sell refunding bonds to refund any special assessment bonds of the district authorized by the Renewable Energy Financing District Act. Refunding bonds issued pursuant to this section shall have a final maturity date no later than the final maturity date of the bonds being refunded.
E. A district may raise capital to fund energy improvements and water conservation improvements under the Renewable Energy Financing District Act from third-party lenders or permit owners to finance such energy improvements and efficiency improvements by entering into "property assessed clean energy" financing directly with third-party lenders. Such third-party lenders shall be entitled to the full benefits of the provisions of the Renewable Energy Financing District Act and such loans shall be permitted to be secured by special assessment liens in favor of the lender, with the same priority, rights and protections as special assessment liens granted in favor of the district directly; provided, however, the district shall not have a repayment obligation to the third-party lender in connection with any third-party financing provided directly to owners as permitted hereunder."
SECTION 8. Section 5-18-11 NMSA 1978 (being Laws 2009, Chapter 180, Section 11) is amended to read:
"5-18-11. POWERS AND DUTIES OF A DISTRICT.--
A. The district board shall:
(1) establish guidelines and standards for [renewable] energy improvements and water conservation improvements to be made to property included in the district;
(2) establish guidelines and procedures for a property owner to enter into an agreement with the district board to include property in the district;
(3) establish guidelines for the documentation required from a property owner prior to property being included in the district of the owner's contracts or agreements for purchase and installation of [renewable] energy improvements and water conservation improvements;
(4) establish the amount of and impose special assessments for the financing of the [renewable] energy improvements and water conservation improvements, including the costs of bond issuance, debt service and administrative costs of the district and the municipality or county in which the district is located; and
(5) enter into contracts, agreements and trust indentures to obtain credit enhancement or liquidity support for its bonds and process the issuance, registration, transfer and payment of its bonds and the disbursement and investment of proceeds of the bonds.
B. The district board may enter into contracts to carry out the purposes of the district on such terms and with such persons as the board determines to be appropriate."
SECTION 9. A new section of the Renewable Energy Financing District Act is enacted to read:
"[NEW MATERIAL] REGIONAL DISTRICTS.--
A. Two or more municipalities, two or more counties or one or more municipalities and counties may enter into a joint powers agreement pursuant to the Joint Powers Agreements Act to create a regional district.
B. The joint powers agreement shall require that the governing body of each entity shall approve an identical resolution creating the regional district and each bond issuance.
C. A regional district shall have the same powers as a district pursuant to the Renewable Energy Financing District Act, except as limited by the Joint Powers Agreements Act or the constitution of New Mexico.
D. The joint powers agreement shall provide for the formation of a district board for the regional district."
SECTION 10. A new section of the Renewable Energy Financing District Act is enacted to read:
"[NEW MATERIAL] DUTIES OF THE DEPARTMENT.--On or before April 1, 2018, the department shall adopt rules as necessary to implement the Renewable Energy Financing District Act that shall include model ordinances and resolutions for the creation of districts."
SECTION 11. REPEAL.--Section 5-18-10 NMSA 1978 (being Laws 2009, Chapter 180, Section 10) is repealed.
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