c. 23M, § 3. Establishment of commercial sustainable energy program; PACE bonds; procedure upon financing request by benefited property owner; financing and assessment agreement; term and amortization schedule; recording of agreement; lien on property; sale or assignment of lien; tax obligation upon property or income acquired by agency; review of program; rules and regulations
Section 3. (a)(1) The agency, in consultation with the department, shall establish a commercial sustainable energy program in the commonwealth, and in furtherance thereof, is authorized to issue PACE bonds, either directly or through a special purpose entity, and to establish and administer a third-party financing program for the purpose of financing all or a portion of the costs of the activities comprising one or more commercial PACE projects.
(2) Upon the approval of a commercial PACE project by the department, the agency or the special purpose entity may issue PACE bonds. PACE bonds shall be issued in accordance with section 8 of chapter 23G; provided, however, that the agency or special purpose entity shall not be required to make the findings set forth in subsections (a) and (b) of said section 8 of said chapter 23G. PACE bonds issued in furtherance of this section shall not be subject to, or otherwise included in, the principal amount of debt obligations issued under section 29 of said chapter 23G. Such PACE bonds may be secured as to both principal and interest by a pledge of revenues to be derived from the commercial sustainable energy program, including revenues from betterment assessments on qualifying commercial or industrial property on which the commercial PACE projects being financed by the issuance of PACE bonds are levied, as well as any reserve funds or other credit enhancements created in connection with the commercial sustainable energy program.
(b) The agency working in conjunction with the department, shall develop program guidelines governing the terms and conditions under which financing for commercial PACE projects may be made available to the commercial sustainable energy program, which shall include standards to require that property owners undertake projects where the energy cost savings of the commercial energy improvements over the useful life of the improvements exceeds the costs of the improvements, including any financing costs and associated fees. The agency or special purpose entity: (1) shall provide information as requested by the department regarding the expected financing costs for commercial PACE projects; (2) may serve as an aggregating entity for the purpose of securing state or private third-party financing for commercial energy improvements pursuant to this section; (3) may establish a loan loss, liquidity reserve or credit enhancement program to support PACE bonds issued under this section; and (4) may use the services of one or more private, public or quasi-public third-party administrators to administer, provide support or obtain financing for commercial PACE projects under the commercial sustainable energy program.
(c) If a benefitted property owner requests financing from the agency or special purpose entity for commercial energy improvements under this section, the agency or special purpose entity shall:
(1) refer the project to the department for approval under the guidelines established by subsection (13) of section 6 of chapter 25A;
(2) upon confirmation of project approval by the department, evaluate the project for compliance with the financial underwriting guidelines established by the agency;
(3) impose requirements and conditions on the financing in order to ensure timely repayment, including, but not limited to, procedures for placing a lien on a property as security for the repayment of the betterment assessment;
(4) require that the property owner provide a copy of a contract duly executed by the contractor performing the commercial energy improvements;
(5) require that the property owner obtain consent from any existing mortgage holder of the property to the intent to finance such commercial energy improvements pursuant to this section; and
(6) if the agency or special purpose entity approves financing, require the participating municipality to levy a betterment assessment in a manner consistent with this section and with chapter 80, insofar as such provisions may be applicable and consistent with this section, on the qualifying commercial or industrial property in a principal amount sufficient to pay the costs of the commercial energy improvements and any associated costs that the agency determines will benefit the qualifying commercial or industrial property, including costs of the agency or special purpose entity.
(d)(1) The agency or special purpose entity may enter into a financing and assessment agreement with the property owner of qualifying commercial or industrial property. The agency or special purpose entity may raise funds to supply the financing under such agreement by issuing PACE bonds. Upon execution of such agreement and immediately prior to making the funds, which may constitute all or a portion of the proceeds from the issuance of such PACE bonds, available to the property owner for the commercial PACE project under the agreement, the agency or special purpose entity shall notify the participating municipality and the participating municipality or its designee shall record the betterment assessment and lien on the qualifying commercial or industrial property.
(2) Prior to the final execution of the contract, the agency or special purpose entity shall disclose to the property owner, in written format, the costs associated with participating in the commercial sustainable energy program established by this section, including the effective interest rate of the betterment assessment, any fees charged by the agency or special purpose entity to administer the program any fees charged by third parties such as originators or other intermediaries, the estimated payment schedule, an explanation of the lien being placed on their property, and the implications of the betterment assessment being levied.
(e) Before the betterment assessment is made, the agency or special purpose entity shall set the term and amortization schedule, the fixed or variable rate of interest for the repayment of the betterment assessment amount, and any required closing fees and costs, and disclose this information to the participating property owner in writing. The amortization schedule shall provide for an amortization period of no longer than the lesser of: (1) the useful life of the longest-lived of the commercial energy improvements comprising the commercial PACE project financed by such betterment assessment; or (2) 20 years. The interest rate, which may be supplemented with state or federal funding, shall be sufficient to pay the principal and interest and shall be calculated to include the agency's fees, financing and administrative costs of the commercial sustainable energy program, including delinquencies. The property owner shall acknowledge in writing receipt of the disclosure.
(f) When the agency or special purpose entity has authorized, but not issued, PACE bonds for commercial PACE projects and other costs of the commercial sustainable energy program, including interest costs and other costs related to the issuance of PACE bonds, the agency or special purpose entity shall require the participating municipality where the qualifying commercial or industrial property is located, to record the agreement between the agency or the special purpose entity and the property owner as a betterment pursuant to chapter 80, except that such betterment may apply to a single parcel of qualifying commercial or industrial property, and as a lien against the qualifying commercial or industrial property benefitted. Upon recording of said lien, the municipality shall notify the property owner, in writing, of the recording.
(g) Betterment assessments levied pursuant to this section and the interest, fees and any penalties thereon shall constitute a lien against the qualifying commercial or industrial real property until they are paid, notwithstanding the provisions of section 12 of chapter 80, and shall continue notwithstanding any alienation or conveyance of the qualifying commercial or industrial real property by one property owner to a new property owner. A new property owner shall take title to the qualifying commercial or industrial property subject to the betterment assessment and related lien. The lien shall be levied and collected in the same manner as the property taxes of the participating municipality on real property, including, in the event of default or delinquency, with respect to any penalties, fees and lien priorities. Each lien may be continued, recorded and released upon repayment in full of the betterment assessment in the manner provided for property tax liens. Each lien, subject to the consent of existing mortgage holders, shall take precedence over all other liens or encumbrances, except a lien for taxes of the municipality on real property. If a lien for property taxes of the municipality is foreclosed, the betterment assessment lien shall be extinguished solely with regard to any installments that were due and owing on the date of foreclosure of such tax lien but the betterment assessment lien shall otherwise survive the foreclosure. To the extent betterment assessments are paid in installments and any such installment is not paid when due, the betterment assessment lien may be foreclosed to the extent of any unpaid installment payments and any penalties, interest and fees related thereto. In the event such betterment assessment lien is foreclosed, such lien shall survive the foreclosure to the extent of any unpaid installment payments of the betterment assessment secured by such lien that were not the subject of such foreclosure.
(h) Any participating municipality shall assign to the agency or special purpose entity any and all liens filed by the tax collector, as provided in the written agreement between the participating municipality and the agency or special purpose entity. The agency or special purpose entity may sell or assign, for consideration, any and all liens received from the participating municipality. The agency and the assignee shall negotiate the consideration received by the agency. The assignee shall have and possess the same powers and rights at law or in equity as the agency and the participating municipality and its tax collector would have had with regard to the precedence and priority of such lien, the accrual of interest and the fees and expenses of collection. The assignee shall have the same rights to enforce such liens as any private party holding a lien on real property, including, but not limited to, foreclosure in a manner consistent with the rights afforded a mortgagee pursuant to section 21 of chapter 183 and an action of contract or any other appropriate action, suit or proceeding. The assignee shall recover costs and reasonable attorneys' fees incurred as a result of any foreclosure action or other legal proceeding brought pursuant to this section and directly related to the proceeding from those having title to the property subject to the proceedings. Such costs and fees may be collected by the assignee at any time after the assignee have made a demand for payment.
(i) The agency shall not be required to pay any taxes or assessments upon the property acquired or used by the agency under this section or upon the income derived therefrom. The PACE bonds issued under this section, their transfer and the income derived therefrom, including any profit made on the sale thereof, shall at all times be free of taxation within the commonwealth.
(j) The activities of the commercial sustainable energy program shall be reviewed in the 3–year planning process and annual reviews undertaken pursuant to section 21 of chapter 25.
(k) The agency shall establish rules and guidelines necessary to implement the purposes of the program, including procedures describing the application process, consumer disclosures and other protections, and criteria to be used in evaluating application for PACE bonds under this section.
