CaliforniaFIRST Program Handbook for Non-Residential Properties. As of 5/19/15

Transcription

1 CaliforniaFIRST Program Handbook for Non-Residential Properties As of 5/19/15 CaliforniaFIRST Program Handbook 1

2 Table of Contents Section 1 - Introduction Program Overview Program Purpose Legal Structure of Program Finance Structure of Program Program Administration Local Participation Definitions and Acronyms... 4 Section 2 Non-Residential Program Information Program Details Property and Project Eligibility Criteria Compliance with Existing Mortgages Eligible Contractors Eligible Project Lenders Finance Details Financing Structure Financing Cost; Interest Rate Important Legal Terms Amounts that can be Financed Administrative Fees Application and Financing Process Overview of Stand- Alone Bond Application and Financing Process Overview of Pooled Bond Application and Financing Process Application Process Funding Reservation and Installation Funding Request and Disbursement Progress Payments Transfer or Resale of Property Technical Details Authorized Improvements Quality Assurance Participation in Rebate/Incentive Programs Section 3 General Terms and Provisions Taxes Changes in State and Federal Law Changes in the Program Terms; Severability Disclosure of Property Owner Information Renewable Energy Credits Fraud Exceptions to these Terms and Provisions Appendix of Program Documents References CaliforniaFIRST Program Handbook 2

3 Section 1 - Introduction 1.1 Program Overview The California Statewide Communities Development Authority ( CSCDA ) is a statewide joint powers authority sponsored by the California State Association of Counties and the League of California Cities. CSCDA s mission is to provide local governments access to low-cost financing for projects that provide a tangible public benefit, contribute to social and economic growth, and improve the overall quality of life in local communities. CSCDA is offering the CaliforniaFIRST Program (the Program ) within participating communities throughout the State of California (the State ), to encourage property owners to invest in renewable energy sources and energy and water efficiency improvements. CSCDA is offering the Program to provide financing for the installation costs of energy efficiency, water efficiency and renewable energy improvements through proceeds derived from the sale of bonds issued by CSCDA. The bonds are repaid through a contractual assessment (described in detail under 1.3 Legal Structure of Program below), which is represented by a new line item on participating property owners property tax bills over 5 to 20 years. The program is completely voluntary, so property taxes remain unchanged for those who do not choose to participate. The non-residential component of the Program is based on an open market approach. Under this approach, the property owner works directly with a lender and leverages CSCDA s ability to issue a bond and levy assessments on the property tax bill. The lender purchases the bond on a private placement basis. The Program s underwriting criteria focus on relevant payment history and value of the property rather than the creditworthiness of the property owner. See Section 1.6, Local Participation, for information regarding participating communities. At this time, only non-residential properties are eligible for Program financing. Non-Residential Properties consist of commercial, industrial, agricultural, large multi-family (five or more units), or non-profit-owned properties. This purpose of this Handbook is as a reference document for Program participants. It does not obligate the Program nor constitute an offer to finance. A separate handbook will become available for the residential component of the Program when it launches. 1.2 Program Purpose With the passage of Assembly Bill 32, the State set ambitious goals for reducing carbon emissions from existing buildings and increasing their alternative energy use and improving energy efficiency. Many California cities and counties have also set their own greenhouse gas reduction targets. Similarly, water conservation efforts, including the promotion of water-related improvements to non-residential, industrial, or other real property, are necessary to address the issue of chronic water shortages in the State. Property owners can help local governments achieve greenhouse gas reductions and reduce water use. At the same time, they can save money by investing in renewable energy and energy and water efficiency improvements. The Program enables property owners to finance the often-large upfront costs of these investments. 1.3 Legal Structure of Program The Program utilizes a tool that is widely used by local agencies in California to finance public benefit projects: land-secured financing. State law has long provided cities and counties with the power to issue bonds and levy assessments on the county property tax bill for financing public projects, such as sewers, parks, and the undergrounding of utilities. The Program utilizes the provisions of Chapter 29 of Part 3 of Division 7 of the Streets & Highways Code of the State, which is commonly referred to as AB 811, to levy contractual assessments for the purpose of CaliforniaFIRST Program Handbook 3

4 financing the installation of renewable energy and energy and water efficiency improvements that are permanently affixed to private property. A contractual assessment is an assessment that is levied by contract (an Assessment Contract ) pursuant to AB 811. The Assessment Contract will be executed by each participating property owner and CSCDA. A list of other Program-related documents is available in the appendix. Under the Program, a contractual assessment lien is placed on each participating property in an amount necessary to (i) finance the installation of authorized renewable energy, energy efficiency and water efficiency improvements over a 5- to 20-year period of time, depending upon the expected useful life of the financed improvements and (ii) pay the costs of administering the Program. The contractual assessments are paid on the County property tax bill and will have priority over the existing mortgage lien. If the owner sells the property, the repayment obligation remains an obligation of the property. CSCDA will issue bonds payable from the contractual assessments. If contractual assessments are not repaid in a timely manner, a judicial foreclosure action may be filed to collect delinquent installments, plus any penalties and interest. The Program is completely voluntary and does not impact the property tax bills of non-participating properties. CSCDA does not guarantee that the Program is the best financing option for each property. Property owners are encouraged to research all available types of financing and select the one that is most appropriate for them. 1.4 Finance Structure of Program The Program is based on the open market approach, in which a property owner negotiates financing directly with a project lender of their choice. Generally, financing will involve the issuance by CSCDA of a bond that is secured by the contractual assessment obligation of a single property. However, in the case when the project amount is low (for example below $75,000), similarly underwritten projects may be aggregated. 1.5 Program Administration CSCDA has hired a third-party administrator (the Program Administrator ), initially Renewable Funding, LLC, to administer the Program. The Program Administrator will review applications and provide marketing and customer service through a website, , and telephone. 1.6 Local Participation In order for a property to participate in the Program, (1) the city in which the property is located (or the county if the property is in unincorporated territory) must adopt a resolution to join the Program, (2) the city or county must be a member of CSCDA, and (3) CSCDA must have established the Program in the county jurisdiction. Those counties and cities that are interested in participating in the Program or that would like additional information should info@californiafirst.org. A current list of participating cities and counties is available at Definitions and Acronyms The following terms used throughout the remainder of this Handbook will have the meanings given to them below. Appraiser A designated Member of the Appraisal Institute (MAI) or certified by the Society of Real Estate Appraisals (SREA) ASHRAE American Society of Heating, Refrigeration and Air-Conditioning Engineers CaliforniaFIRST Program Handbook 4

5 Assessment Total dollar amount of the lien placed on the property to fund the installation of improvement, including project amount, closing fees, and interest calculation. Assessment Contract - A contract between CSCDA and the owner of a participating property pursuant to AB 811 Authorized Improvements Has the meaning given to it in Section 2.4.1, Authorized Improvements. CSCDA California Statewide Communities Development Authority CSI California Solar Initiative Non-Residential means commercial, industrial, agricultural, large multi-family residential (five or more units) and other non-residential use PACE Property Assessed Clean Energy Pooled bond - bonds that are secured by contractual assessments of a number of properties Program Administrator A third-party administrator hired by CSCDA to administer the Program in the County Property The real property on which the Authorized Improvements are installed and that is subject to the lien Property Owner The record owner(s) of the fee title to the Property Real Property - Any structures or improvements that are attached to the land and not movable Reservation Period The period of time during which a funding reservation is effective Stand-alone bond a bond that is secured by the contractual assessment of a single property State The State of California CaliforniaFIRST Program Handbook 5

6 Section 2 Non-Residential Program Information 2.1 Program Details The section below outlines the Program parameters for eligibility and participation of Non-Residential properties Property and Project Eligibility Criteria In order to receive financing from the Program, a Non-Residential property, its property owner(s), and its proposed project must meet the following basic requirements Property Requirements a. The property to be improved with the Authorized Improvements (the subject property ) must be located in a Program jurisdiction and must be eligible to pay property taxes. b. The subject property must be Non-Residential property. c. The property owner must obtain the written affirmative acknowledgment of existing mortgage lenders whose consent is required for further encumbrance. The Program will provide templates for this purpose but it is the property owner s responsibility to obtain consent from the mortgage lender(s). The owner must submit a copy of the mortgage lender s written affirmative acknowledgment with the Final Application. d. All owners of the fee simple title to the subject property, or their legally authorized representatives, must sign the Program documents. Therefore, before submitting an Initial Application please ensure that all owners (or their representatives) of the fee simple title to the subject property will agree to participate in the Program on the terms set forth in this Handbook. e. The financed improvements must be Authorized Improvements and must be installed by an appropriately licensed contractor (see Section 2.1.3). f. The property owner must further agree to participate in surveys and Program evaluations, which may include access to utility bill usage information. g. The property owner must certify that it (and its corporate parent if the property owner is a single-purpose entity) is solvent and that no proceedings are pending or threatened in which the property owner (or the corporate parent, as applicable) may be adjudicated as bankrupt, become the debtor in a bankruptcy proceeding, be discharged from all of the property owner s (or corporate parent s, as applicable) debts or obligations, be granted an extension of time to pay the property owner s (and the corporate parent s, as applicable) debts or be subjected to a reorganization or readjustment of the property owner s (and the corporate parent s, as applicable) debts. The property owner must also certify that the property owner (or any corporate parent if the property owner is a single-purpose entity) has not filed for or been subject to bankruptcy protection in the past three years. h. The property owner must be current in the payment of all obligations secured by the subject property, including property taxes, assessments and tax liens and have had no delinquencies within the past 3 years (or since taking title to the subject property if it has been less than 3 years). The Program Administrator may review public records, including the real property records, to verify compliance with this requirement. CSCDA reserves the right to make allowances for certain property tax payment delays that do not reflect financial distress. Properties that are currently appealing a property tax assessment will be reviewed, and eligibility for the Program will be CaliforniaFIRST Program Handbook 6

7 determined on a case-by-case basis. Property owners must also certify that other properties that they own are current and in good standing with their obligations. i. There must be no notices of default or foreclosure, whether in effect or released, due to non-payment of property taxes or loan payments filed against the subject property within the last 5 years (or since ownership, if less than 5 years). Exceptions may be granted on a case-by-case basis. j. The property owner must have no involuntary liens, defaults or judgments applicable to the subject property. The Program may review public records, including the real property records and court documents, to verify compliance with this requirement. A property owner with an involuntary lien(s),default or judgment may be allowed to participate in the Program if it can demonstrate an acceptable reason for the lien, default or judgment and a path for resolution along with supporting documentation. k. The assessed value of the property plus the value of the Authorized Improvements to be financed by the Program must be equal to or greater than the sum of (i) the total private property debt including mortgages and equity lines of credit secured by the property, (ii) the principal amount of any Program indebtedness attributable to the property, and (iii) the aggregate principal amount of any fixed assessment liens or special tax debt on the property. If the property does not pass the above test with the assessed value, a property owner may, at its own cost, use an appraised value determined by an Appraiser or market value calculated according to a method identified by the Program. The appraisal must be dated no earlier than 90 days before the financing date. Property owners with properties that have a mortgage(s) should approach the mortgage lender(s) for consent prior to ordering an appraisal, in case the mortgage lender has a specific appraisal requirement. l. The total sum of all items appearing on the property s annual property tax bill including annual ad-valorem property taxes, special taxes and assessments, in addition to the contractual assessment to be levied in connection with the Program, may not exceed 5% of the property s market value. For the purposes of demonstrating value for this requirement, market value will be measured using assessed value plus the cost of the improvement. If the property does not pass the above test with the assessed value, a property owner may, at its own cost, use an appraised value identified by a Program-approved appraiser or market value calculated according to a method identified by the Program. The appraisal must be dated no earlier than 90 days before the financing date. Property owners with properties that have a mortgage should approach the mortgage lender for consent prior to ordering an appraisal, in case the mortgage lender has a specific appraisal requirement. m. The PACE lien amount (which is the amount requested for financing) is typically 20% or less than the assessed or appraised value of the property, whichever is higher. CaliforniaFIRST offers flexibility on this requirement where the property strongly meets other eligibility criteria, warranting exception. Specialty properties may have more stringent lien-to-value (LTV) requirements. n. The property owner must certify that it is not party to any litigation or administrative proceeding of any nature in which the property owner has been served, and that no such litigation or administrative proceeding is pending or threatened that, if successful, would materially adversely affect the property owner s ability to operate its business or pay the contractual assessment when due, or which challenges or questions the validity or enforceability of the Assessment Contract or any other documents executed by property owner in connection with the Program. o. The Program involves issuance of bonds by CSCDA for the Program; the bonds are secured by a contractual assessment. Therefore, it is important that property owners pay their contractual assessment and other property-related obligations in full on a timely basis or risk property foreclosure. Consequently, the Program reserves the right to request additional information in its sole discretion and to deny applications CaliforniaFIRST Program Handbook 7

8 Project Requirements based on any information that reflects on the likelihood that a property owner may not pay its contractual assessment. a. The property owner must commission a professional energy and/or water audit on the property that corresponds to the types of Authorized Improvements the owner is seeking to finance. The audit must meet ASHRAE Level 2 standards or be a comparable energy analysis (i.e. development of projected energy savings, cost savings, and project costs). The audit must be conducted on the property within the 36 months prior to the submission of the Initial Application. b. The property owner will be encouraged (as described below) to participate in appropriate state and local incentive programs to the extent the subject property is eligible for such programs at the time of application. For example, property owners planning to finance the installation of a solar photovoltaic system will be encouraged to participate in the CSI rebate program (if available) with respect to the subject property. Property owners will also be encouraged to participate in similar incentive programs for solar thermal (hot water) systems. Property owners will be encouraged (but not required) to participate in other utility rebate and incentive programs (if available) that cover the Authorized Improvements. The financed amount will be reduced by an equivalent sum of all rebates received for the project. c. Projects must have a useful life of at least five years. d. Projects must be permanently affixed to the real property or building. e. Projects must reduce energy or water usage, or generate clean power for the property. f. The project will be reviewed for compliance with California Environmental Quality Act (CEQA). Property owners with projects that do not comply or are not exempted from this requirement will be asked to perform an individual CEQA environmental review before becoming eligible for financing. g. See Section for additional information on specific Authorized Improvements Compliance with Existing Mortgages Recordation of the Notice of Assessment will establish a continuing lien as security for the obligation to pay contractual assessments. The lien securing the obligation to pay contractual assessments will have priority over all private liens on the property, regardless of the time of their creation, including the existing purchase mortgage(s). Many mortgage and loan documents limit the ability of a property owner to further encumber the property particularly encumbrances with priority over the mortgage/loan. Property owners should confirm with any mortgage lender that participation in the Program will not adversely impact their rights with respect to any existing loan documents, or require them to prepay their contractual assessment. Property owners must notify the mortgage lender(s) in writing and receive written affirmative acknowledgment from any existing mortgage lender. The Program will provide mortgage lenderacknowledgment templates, but property owners are responsible for addressing issues with existing mortgage lenders Eligible Contractors The Program will comply with applicable State and federal laws, as well as eligibility requirements of applicable State and federal rebate programs Licensing and Insurance. Contractors must (i) demonstrate compliance with all applicable State and local licensing laws, (ii) be in good standing with the Contractors State License Board, and (iii) possess the license or licenses required by the State for the specific improvements they install and any other work they perform. Contractors must be sufficiently insured and bonded Permits. Contractors shall obtain all required building permits including MECH/LTG forms for Title 24 and the installed improvements must successfully pass the final building inspection. CaliforniaFIRST Program Handbook 8

9 Participation in Rebate Programs. Contractors are encouraged to participate in State incentive and rebate programs, as available, and meet the requirements of such programs. The Program encourages property owners to research, check the bonding limits of, and receive bids from multiple contractors before signing a contract. The Program is not responsible for determining the appropriate equipment, price or contractor. By establishing contractor eligibility criteria, the Program is not recommending a particular contractor or warranting the reliability of any such installer. The Program is a financing program only. Neither CSCDA nor the Program Administrator will participate in the resolution of any dispute between the property owner and their installer, contractor or equipment manufacturer Eligible Project Lenders Project lenders purchasing the bond must generally meet basic qualification criteria, including that the lender is one of the following: 1. An accredited investor as defined by Rule 501(a) promulgated under the Securities Act of 1933, as amended; or 2. A qualified institutional buyer as defined in Rule 144A under the Securities Act of Finance Details Financing Structure The Program will use either a Stand-Alone Bond or a Pooled Bond (each such term defined below) to finance projects Stand-Alone Bonds. A Stand-Alone Bond is a bond that is secured by the contractual assessment of a single property. The Stand-Alone Bond structure permits each project to customize transaction timing, interest rate, and payback term. The property owner may choose the lender that offers the best financing terms for the property owner s circumstances. Stand-alone bonds may also be used in conjunction with PACE revenue assignments that the Program may arrange with a capital provider in an effort to leverage better pricing for projects. Under this scenario, the Program will finance projects on-demand using the assignment as security and, over a period of time, group them for a bond issuance Pooled Bonds. Pooled Bonds are bonds that are secured by contractual assessments of a number of properties. The pooling process requires standardization of bond terms such as interest rate. The sizing of the bond issuance may take some time an aggregation period during which projects accepted into the Program will receive a financing reservation. A property owner may proceed to install its project with confidence that financing will be available only after receiving a Notice to Proceed. Pooled bonds may be issued when A) multiple, lower-cost projects are aggregated into a single bond issuance or B) a property owner wishes to finance projects on multiple properties. In either scenario, a project lender would be identified by the property owner(s) and the pooled bond would be privately placed. CaliforniaFIRST s pooled bond financing is an option for property owners wishing to finance $50,000- $500,000. In many cases, pooled bond financing can present a more cost-efficient transaction for such projects. It enables the projects to be aggregated with a pool of similar projects in order to share transaction costs. Property owners should understand not only the benefits of pooled financing, but also its impact on their project s interest rate, timing, and other key terms Financing Cost; Interest Rate The following terms are helpful in understanding the Program s financing structure. Financing Cost. An amount equal to (i) the principal amount received through the Program, (ii) interest on the principal amount financed through the Program and (iii) initial and on-going program expenses. Principal Amount. The amount equal to all project costs that the property owner may choose to finance through the Program, which may include costs associated with implementing the project such as CaliforniaFIRST Program Handbook 9

10 permits, audit expenses, closing fees, a deposit to a debt service reserve fund (if required) and capitalized interest (see Capitalized Interest below). Interest Rate. The rate of interest on the bonds issued by CSCDA, which may vary based on project lender. Capitalized Interest. Interest on the bond that is financed by the Program. Depending on when a project s financing is closed, it may not be possible to place the contractual assessment on the county s property tax bill until the following tax roll cycle. Where such delay occurs, the interest payments that the property owner would have paid in the first tax year are capitalized into the principal amount. Debt Service Reserve Fund. A debt service reserve fund is used to cover shortfalls in debt service payments. It is possible that not all project lenders will require a Debt Service Reserve Fund. One-Time and On-going Program Administrative Fees. One-time and on-going administrative fees cover the costs to operate the Program. One-time administrative costs may include 1) application fees, which are paid directly by the participating property owner and 2) closing fees, which are included in the total financed amount. Annual administrative costs are collected as part of the contractual assessment installments on the property tax bill. The fees for any specific project will be disclosed and agreed to prior to financing. Fees may vary based on the project size and bond structure Important Legal Terms Repayment Terms. Following execution of the Assessment Contract and recordation of the Notice of Assessment, the property owner will be obligated to pay the contractual assessment on the terms specified in the Assessment Contract Project Lender Financing Terms. Capital sources used as project lenders may impose additional terms on property owners and contractors beyond those described in this Handbook Contractual Assessments. A property owner must pay the agreed-upon contractual assessment regardless of their financial circumstances, the condition of the property, or the performance of the Authorized Improvements. No property owner should apply for financing if they are not certain they can pay the contractual assessment. The failure to pay the contractual assessment in full will result in financial repercussions, including penalties, interest and, potentially, foreclosure of the property. If an escrow account is used to pay semi-annual property taxes, participants must notify their escrow company of the contractual assessment payments. The escrow agent will need to increase monthly payments to the escrow account by an amount equivalent to the applicable participant s annual contractual assessment divided by 12 months Amounts that can be Financed The Non-Residential Program requires a minimum funding request of $50,000. The Program will only authorize funding requests in an amount equal to the final cost of installing the Authorized Improvements (including any energy audit fees, if applicable) less State, city and utility rebates (see Section Participation in Rebate/Incentive Programs ) plus the additional items identified in this Handbook, such as administrative costs and fees. The funding limits are per property per financing request. Maximum funding limits will also be limited as described in Section , Property Requirements. The property s existing lenders may impose additional minimum and maximum project funding requirements Administrative Fees In order to receive financing, property owners must agree to pay various administrative and financing fees that may vary given the type of bond structure involved, Pooled or Stand-Alone, and the size of the project. One-Time Fees Application Fees. Application fees are currently waived. Property owners interested in applying for financing should check with the Program Administrator prior to submission of an Initial Application to ensure that the waiver provision is still in effect. CaliforniaFIRST Program Handbook 10

11 Closing Fees. Closing fees are included in the financed amount and depend on bond structure and project size. Closing fees include program management, project underwriting, legal document preparation and review, lien recordation, and funding disbursement as well as other transaction related project fees Optional Closing Fees. Optional closing fees may vary based on additional services requested by the property owner and the county in which the project is located. Optional closing fees must be specifically related to project design or installation a. Service Fees. Participating Non-Residential property owners may voluntarily elect to contract for additional services to assist with project scoping and review, finance structuring or mortgage lender negotiation. The exact costs for these services will vary from project to project and depending on the firm(s) the property owner elects to use. On-Going Fees On-Going Fees. On-going fees which pay for preparation of the assessment installment bills, preparation of continuing disclosure reports, monitoring project funds, tracking delinquencies, and fees charged by the County for the collection of the contractual assessment installments on the County property tax bill will be included in the contractual assessment installments. 2.3 Application and Financing Process The application and financing process will vary depending on the type of financing structure used (Stand- Alone Bonds or Pooled Bonds) Overview of Stand- Alone Bond Application and Financing Process Because it is customizable to the needs of specific projects, the Stand-Alone Bond application and financing process may vary greatly from project to project. The basic framework is described below. Step 1: Submit an Initial Application. Property owners complete and submit an application to establish the Program eligibility of the property and project. This stage requires only a high-level description of a proposed project so that basic eligibility can be established prior to the property owner spending more significant funds on project scoping. Step 2: Initial Reservation and Project Scoping. Once the Program has reviewed and approved the Initial Application, a Conditional Reservation will be issued. The Conditional Reservation lets the property owner know that the property meets basic underwriting criteria. The property owner can then expend funds to develop and scope a project. A Conditional Reservation will last 90 days before expiring. Step 3: Final Application and Final Reservation. A property owner will submit the Final Application when the details of the project are known, including an accurate estimate of financing costs. Step 4: Final Applications meeting Program requirements will be issued a Final Reservation. Step 5: Assessment Contract and Lien Placement. The assessment contract obligates the property owner to the negotiated financing terms. Once executed the Program will execute financing documents with the capital source, either a bond issuance or assignment of PACE revenue, and a lien will be placed on the subject property. Step 5: Project Installation. Once the financing is closed, the Program will confirm with the property owner that the funds are in a trustee account and that project installation may begin. Step 6: Funding Request and Payment(s). Upon completion of installation or significant portion of the installation, property owner submits a Funding Request along with verification materials. Following successful verification, the Program will distribute funds to the property owner. Funds may be distributed directly to the contractor at the request of the property owner. See Section of the Handbook for information on progress payments. CaliforniaFIRST Program Handbook 11

12 Applicant Program or PACE assignment *The Program process flow may vary from project to project Overview of Pooled Bond Application and Financing Process The Pooled Bond application and financing process aggregates financing for multiple projects. Its defining characteristic is its aggregation period during which the Program receives commitments from property owners to proceed within a pre-approved interest range but does not provide financing until the volume of projects needed for cost-effective bond issuance is reached. Step 1: Submit an Application. Property owners complete and submit an application to establish the eligibility of the property and project. Step 2: Funding Reservation. Applications that are approved by the Program are provided a Funding Reservation. The Funding Reservation is a conditional commitment by the Program to provide financing and obligates the property owner for the principal financed amount at a not to exceed interest rate. If the not to exceed rate cannot be achieved when the bond is ready for issuance, the issuance will be cancelled or delayed. Step 3: Aggregation Period. During the aggregation period, the Program will pool the contractual assessment obligations of many projects in an effort to structure and size a favorable bond issuance. The aggregation period may last 90 days or more. Since bond issuance is not guaranteed, it is important that property owners not enter into private installation agreements with contractors or begin construction during this period. Step. 4: Bond Issuance and Notice to Proceed. At the conclusion of the aggregation period, CSCDA will issue the bond if it can be issued at or below the not to exceed interest rate. If the CaliforniaFIRST Program Handbook 12

13 bond issuance is successful, property owners will receive a Notice to Proceed with their projects, notice of final administrative and financing costs, and contractual assessments will be levied. Step 5: Project Installation. Upon receiving a Notice to Proceed, property owner enters into a contract with project contractor(s) and the project is installed. The installation contract is a private agreement, and neither CSCDA nor the Program Administrator guarantees or vouches for installation workmanship and product. See Section of the Handbook for information on progress payments. Step 6: Funding Request and Funds Distribution. Upon completion of installation, property owner submits Funding Request along with verification materials demonstrating property compliance with the Program. Following successful verification, the Program will disburse funds to property owner. Applicant Program Application Process The application process can initially be completed on-line or via a paper application. It is a three-step process to 1) submit information for confirmation of eligibility, 2) submit a final application with all appropriate documentation, and then, 3) request the release of funds. The process will be slightly different depending on the type of financing structure. See sections and above. All approved or denied applications will receive a confirmation with the name and contact information of a program processor indicating the status of the application. Any questions, concerns or disputes will be handled by the assigned program processor. CaliforniaFIRST Program Handbook 13

14 Initial and Final Application for a Funding Reservation; Approval or Denial; Application Fee a. Initial Application. All property owners interested in applying to the Program must submit an on-line or paper initial application. This step does not require any additional documentation. b. A final application must be submitted along with the other items described below. c. Application Documentation 1) Final Application 2) Contractor bids/estimates 3) Executed Lender Acknowledgement of Contractual Assessment (if applicable) 4) Appropriate energy and/or water audits or assessment 5) Estimates of eligible incentives 6) Term sheet from an eligible project lender (see Handbook for details) that will act as the project investor and will supply the capital for the financing of the project 7) Copy of most recent mortgage statement (if applicable) 8) Utility Information Customer Release form 9) Property Owner Acknowledgement of Program Terms 10) Contractor Acknowledgement of Program Terms 11) Power of Attorney, Corporate Resolution and/or Articles of Incorporation (if applicable) 12) Title Report 13) Appraisal (optional) (if applicable) d. Application Fee. The property owner must pay an application fee (subject to applicable law) when it submits an application. If the application is approved but the property owner does not meet the funding requirements or decides not to utilize the Program funding, the fee may not be refunded. The application fee may be waived at the beginning of the program. e. Approval or Denial. Based on the eligibility requirements listed in Property Eligibility Criteria above, The property owner will be notified of approval or denial via . Approval or denial will be based on the eligibility requirements listed within this Handbook. Submission of an application does not guarantee that a property owner will be approved for Program participation. If the property owner proceeds with installation before notification of a Final Reservation (Stand-Alone Bonds) or Notice to Proceed (Pooled Bonds), the property owner risks incurring the cost of installation without the benefit of Program financing. Program financing also requires that projects, upon installation, conform to the Program s project verification/quality assurance process (see section 2.4.2) Funding Reservation and Installation A property owner will be notified of a funding reservation via . The installation of the Authorized Improvement must occur during the reservation period, as described below Assessment Contract. After submittal of the application documents, the program will prepare the associated Assessment Contract and deliver them to the property owner. Within 7 calendar days thereafter, the property owner must review, sign (if they are correct and if not, have them corrected), and submit to the Program Administrator, the following: 1) An executed and notarized Assessment Contract. 2) An executed Authorization to Release Information to CaliforniaFIRST Administrators Funding Reservation; Reservation Period. If the Program approves the final application, the funding reservation will be effective 360 days from the date of the Notice to Proceed, which will be delivered as an notification Expiration. Once the Program issues a Notice to Proceed, approval will be effective for 360 calendar days (the reservation period ). Property owners that receive Program approval must have a qualified contractor complete installation of the Authorized Improvements on the subject property and complete funding disbursement within this period. Failing to have a qualified contractor complete the CaliforniaFIRST Program Handbook 14

15 installation of Authorized Improvements on the subject property within the reservation period will result in expiration of Program reservation and approval. Property owners may request to extend the Program reservation period prior to its expiration. An extension fee may be required. An applicant may cancel a reservation in writing during the 360-day period, but will forfeit the application fee and the opportunity to receive funding under that reservation. However, additional fees may apply at cancelation of the project if a bond has already been issued for that project. The applicant may reapply, but will not be guaranteed funding availability and will have to pay another application fee Cancellation. A property owner may cancel a funding reservation during the reservation period, but will forfeit any application fee. The cancellation is irrevocable. The property owner may reapply but will not be guaranteed funding availability and will need to pay another application fee Funding Request and Disbursement Funding Request. After the installation of the project, a property owner must complete and submit the funding request by submitting the following Project Verification Documents: 1) A signed final permit inspection from the applicable city/county building department for applicable projects 2) A final invoice from all contractors, with an invoice cover sheet 3) If applicable, copies of rebate reservations 4) Mechanic s lien release 5) A Payment Assignment Form, if the payment is to be assigned to the contractor 6) Executed wire request, if applicable Funding Request Amount. All funding requests will be deemed final upon submission of the required documentation listed and may not be subsequently changed Disbursements. The Program will approve the issuance of a check or wire to the property owner (or the contractor, if the property owner instructs the administrator to pay the contractor directly) after it has received all required documentation from the property owner, and after it has confirmed compliance with the eligibility requirements. See section on potential Progress Payments Non-completion or Cancellation. In the event that a project is not completed or financing is canceled after a request for funding is submitted to the Program, all expenses incurred by the Program for recording the assessment lien, preparing bond documents and removing assessment liens will be the responsibility of the property owner. The Program will terminate the lien evidenced by recordation of the Notice of Assessment upon receipt of reimbursement from the property owner for these expenses Progress Payments The Program will consider approving progress payments on a case-by-case basis. In general, the Program may agree to make progress payments before the installation of the Authorized Improvements is complete if certain criteria are met, which may include (i) the amount financed exceeds $100,000, (ii) total project installation time exceeds 90 days, (iii) the amount of each progress payment is at least 20% of the approved finance amount, (iv) percentage of progress payment must be equal to or less than percentage of work completed on the project, and (v) the installation contractor has provided a Performance Bond to the property owner(s). With each progress payment distribution request, contractors must provide documentation as to costs incurred. The Program may withhold up to 25% of the amount financed for final disbursement to occur upon completed project installation in conformance with Program requirements. At the time of a progress or final payment, any mechanic s liens on the property must be released Transfer or Resale of Property If the property is sold prior to the end of the agreed-upon contractual assessment period, the new owner will assume the contractual assessment obligation. Ownership of any Authorized Improvements on the subject property will transfer to the new owner at the close of the real estate sale. Authorized Improvements financed through the Program may not be removed from the property until the bond issued by the Program CaliforniaFIRST Program Handbook 15

16 to finance installation of the Authorized Improvements has been retired. Program participants agree to make all legally required disclosures about the existence of the contractual assessment lien on the property in connection with any sale. 2.4 Technical Details Authorized Improvements In order for property improvements to be eligible for financing through the Program, they must have an expected useful life of five years or longer, be permanently affixed to the real property or building and have the capacity to reduce energy or water usage, or generate clean power for the property. Eligible measures that have been identified by the property owner in their Final Application and approved by the Program in the Final Reservation are described as Authorized Improvements Common Measures. : The Program has an extensive list of common energy efficiency, energy generation, and water conservation property improvements (or measures) that are eligible for financing, which can be found in the separate Authorized Improvements List document organized by these categories. The measures are further organized into system and subsystem groupings for easier navigation within the list Custom Measures. The Program will also consider, on a case-by-case basis, other measures (custom measures) that do not appear in the Authorized Improvements List. Such custom measures will require additional technical review by the Program if they are not covered by an incentive program that approves them likely at additional cost for the applicant No Loading Order. Property owners are not required to install energy efficiency measures prior to the financing of renewable energy measures New Space Additions. For additions of new spaces, or conversions of existing, unconditioned spaces, only a portion of the project may be eligible for financing through the Program. New construction costs are not eligible for Program financing Responsibility for Authorized Improvements. The Program is a financing program only. By establishing the Authorized Improvements List, the Program is not recommending or warranting any particular improvements. None of the Program staff, CSCDA, or any of its employees or its agents is responsible for the measures or their performance. Property owners are solely responsible for the measures installed on their property. Should there be any unsatisfactory performance or other system-related issues that arise during or after installation, the property owner must address those directly with the responsible contractor according to the terms of the contract between the two parties Quality Assurance Demonstration of Energy Savings. The Program requires properties seeking to finance measures through the Program demonstrate the energy savings benefit of those measures. This requirement may be accomplished through a qualified energy audit or alternative energy assessment that the Program Administrator will consider on a case-by-case basis, informed by mortgage lender and project lender requirements or preferences. The Program is not liable for any delays or issues with the utility interconnection of renewable energy generation systems Energy Audit Standard. Energy audits assist property owners to identify and prioritize buildingspecific energy and water saving opportunities and to predict associated cost/energy/water savings. To be eligible for financing, properties must have an ASHRAE 2 audit or a comparable energy analysis. The program allows substantial flexibility in meeting the energy audit standard and, upon property owner request, will consider any professional analysis that may be more cost effective a Solar Audits CaliforniaFIRST Program Handbook 16

17 If solar is being installed as part of a larger project that includes energy efficiency improvements, an ASHRAE level II audit is required to be performed and must include the information listed below as part of its report. However, if ONLY solar panels are being installed, then a solar audit performed by a licensed engineer is required and an ASHRAE audit is not required. All audits containing solar measures should, ideally, include the following information: System Info: Solar panel type Inverter make/model System size (kw-ac) Azimuth/ Tilt/ Standoff/ Shading De-Rate System warranty Production guarantee (if included) Total % of customer's annual energy usage estimated to be offset by the PV system Annual production (kwh) Typical demand (kw) Payback Info System installed cost Price per kwh Assumed percentage annual increase in utility energy cost Assumed annual production degradation Assumed cost of inverter replacement and when Expected incentives Copy of the output from the EPBB calculator that is used to estimate the CSI incentive Calculated payback Quality Assurance Inspections or Audits. A Project Lender may require that a quality assurance inspection or audit be completed prior to the release of funds. If so, the property owner may be asked to pay an additional fee to cover the expense of quality assurance Participation in Rebate/Incentive Programs The Program encourages participation in applicable rebate and/or incentive programs Benefits. Rebate and incentive programs reward participants with cash payments or tax credits for implementing measures that reduce energy (or water) usage, thus reducing a property owner s project cost. Netting out rebates and incentives reduces the total financing amount available to a property owner through the Program. Leveraging such existing programs also helps reduce overall program costs by providing credible savings projections, quality control and assurance, and project inspection services at no additional cost Availability of Rebates/Incentives. Property owners seeking financing through the Program are encouraged to participate in rebate or incentive programs (if available to them) if installing measures covered by those programs. Examples of rebate/incentive programs are provided in the table below. Required Rebate/Incentive Programs Trigger for Participation Required Program Participation Installation of solar photovoltaic California Solar Initiative (CSI) system rebate program Installation of solar thermal (hot CSI-Thermal program water) system Energy efficiency projects Utility-sponsored programs* * California Utility-sponsored energy efficiency rebate programs are listed here: =1&RE=0 CaliforniaFIRST Program Handbook 17