HF 3946

as introduced - 93rd Legislature (2023 - 2024) Posted on 04/24/2024 05:07pm

A bill for an act
relating to energy; modifying the commercial property assessed clean energy
program; amending Minnesota Statutes 2022, sections 216C.435, subdivisions 3a,
3b, 4, 10, by adding subdivisions; 216C.436, subdivisions 1, 3, 4, 7, 8, 10;
Minnesota Statutes 2023 Supplement, sections 216C.435, subdivision 8; 216C.436,
subdivisions 1b, 2.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2022, section 216C.435, subdivision 3a, is amended to read:

Subd. 3a.

deleted text begin Cost-effective deleted text end Energy improvements.

" deleted text begin Cost-effective deleted text end Energy improvements"
means:

(1) any new construction, renovation, or retrofitting of qualifying commercial real
property to improve energy efficiency that new text begin : (i) new text end is permanently affixed to the property deleted text begin , deleted text end new text begin ; and
(ii) new text end results in a net reduction in energy consumption deleted text begin without altering the principal source
of energy, and has been identified deleted text end new text begin or greenhouse gas emissions, as documented new text end in an energy
audit deleted text begin as repaying the purchase and installation costs in 20 years or less, deleted text end based on the amount
of future energy saved deleted text begin and estimated future energy prices deleted text end new text begin or emissions avoided new text end ;

(2) any renovation or retrofitting of qualifying residential real property that is permanently
affixed to the property and is eligible to receive an incentive through a program offered by
the electric or natural gas utility that provides service under section 216B.241 to the property
or is otherwise determined to be deleted text begin a cost-effective deleted text end new text begin an eligible new text end energy improvement by the
commissioner under section 216B.241, subdivision 1d, paragraph (a);

(3) permanent installation of new or upgraded electrical circuits and related equipment
to enable electrical vehicle charging; or

(4) a solar voltaic or solar thermal energy system attached to, installed within, or
proximate to a building that generates electrical or thermal energy from a renewable energy
source that has been deleted text begin identified deleted text end new text begin documented new text end in an energy audit or renewable energy system
feasibility study deleted text begin as repaying their purchase and installation costs in 20 years or less, based
on the amount of future energy saved and estimated future energy prices deleted text end new text begin , along with the
estimated amount of related renewable energy production new text end .

Sec. 2.

Minnesota Statutes 2022, section 216C.435, subdivision 3b, is amended to read:

Subd. 3b.

Commercial PACE loan contractor.

"Commercial PACE loan contractor"
means a person or entity that installs deleted text begin cost-effective energy deleted text end new text begin eligible new text end improvements financed
under a commercial PACE loan program.

Sec. 3.

Minnesota Statutes 2022, section 216C.435, is amended by adding a subdivision
to read:

new text begin Subd. 3e. new text end

new text begin Eligible improvement. new text end

new text begin "Eligible improvement" means one or more energy
improvements, resiliency improvements, or water improvements made to qualifying real
property.
new text end

Sec. 4.

Minnesota Statutes 2022, section 216C.435, subdivision 4, is amended to read:

Subd. 4.

Energy audit.

"Energy audit" means a formal evaluation of the energy
consumption of a building by a certified energy auditor, whose certification is approved by
the commissioner, for the purpose of identifying appropriate energy improvements that
could be made to the building and including an estimate of the deleted text begin length of time a specific
energy improvement will take to repay its purchase and installation costs, based on the
amount of energy saved and estimated future energy prices deleted text end new text begin effective useful life, the reduction
of energy consumption, and the related avoided greenhouse gas emissions resulting from
the proposed eligible improvements new text end .

Sec. 5.

Minnesota Statutes 2023 Supplement, section 216C.435, subdivision 8, is amended
to read:

Subd. 8.

Qualifying commercial real property.

"Qualifying commercial real property"
means a multifamily residential dwelling, a commercial or industrial building, or farmland,
as defined in section 216C.436, subdivision 1b, that the implementing entity has determined,
after review of an energy audit, renewable energy system feasibility study, new text begin water
improvement study, resiliency improvement study, new text end or agronomic assessment, as defined in
section 216C.436, subdivision 1b, can benefit from deleted text begin the installation of cost-effective energy deleted text end new text begin
installing eligible new text end improvements or land and water improvements, as defined in section
216C.436, subdivision 1b. Qualifying commercial real property includes new construction.

Sec. 6.

Minnesota Statutes 2022, section 216C.435, subdivision 10, is amended to read:

Subd. 10.

Renewable energy system feasibility study.

"Renewable energy system
feasibility study" means a written study, conducted by a contractor trained to perform that
analysis, for the purpose of determining the feasibility of installing a renewable energy
system in a building, including an estimate of the deleted text begin length of time a specific deleted text end new text begin effective useful
life, the production of renewable energy, and any related avoided greenhouse gas emissions
of the proposed new text end renewable energy system deleted text begin will take to repay its purchase and installation
costs, based on the amount of energy saved and estimated future energy prices. For a
geothermal energy improvement, the feasibility study must calculate net savings in terms
of nongeothermal energy and costs deleted text end .

Sec. 7.

Minnesota Statutes 2022, section 216C.435, is amended by adding a subdivision
to read:

new text begin Subd. 11a. new text end

new text begin Resiliency improvement. new text end

new text begin "Resiliency improvement" means one or more
installations or modifications to eligible commercial real property that are designed to
improve a property's resiliency by improving the eligible real property's:
new text end

new text begin (1) structural integrity for seismic events;
new text end

new text begin (2) indoor air quality;
new text end

new text begin (3) durability to resist wind, fire, and flooding;
new text end

new text begin (4) ability to withstand an electric power outage;
new text end

new text begin (5) stormwater control measures, including structural and nonstructural measures to
mitigate stormwater runoff;
new text end

new text begin (6) ability to mitigate the impacts of extreme temperatures; or
new text end

new text begin (7) ability to mitigate greenhouse gas embodied emissions from the eligible real property.
new text end

Sec. 8.

Minnesota Statutes 2022, section 216C.435, is amended by adding a subdivision
to read:

new text begin Subd. 11b. new text end

new text begin Resiliency improvement feasibility study. new text end

new text begin "Resiliency improvement
feasibility study" means a written study that is conducted by a contractor trained to perform
the analysis to: (1) determine the feasibility of installing a resiliency improvement; (2)
document the improved resiliency capabilities of the property; and (3) estimate the effective
useful life of the proposed resiliency improvements.
new text end

Sec. 9.

Minnesota Statutes 2022, section 216C.435, is amended by adding a subdivision
to read:

new text begin Subd. 14. new text end

new text begin Water improvement. new text end

new text begin "Water improvement" means one or more installations
or modifications to qualifying commercial real property that are designed to improve water
efficiency or water quality by:
new text end

new text begin (1) reducing water consumption;
new text end

new text begin (2) improving the quality, potability, or safety of water for the qualifying property; or
new text end

new text begin (3) conserving or remediating water, in whole or in part, on qualifying real property.
new text end

Sec. 10.

Minnesota Statutes 2022, section 216C.435, is amended by adding a subdivision
to read:

new text begin Subd. 15. new text end

new text begin Water improvement feasibility study. new text end

new text begin "Water improvement feasibility study"
means a written study that is conducted by a contractor trained to perform the analysis to:
(1) determine the appropriate water improvements that could be made to the building; and
(2) estimate the effective useful life, the reduction of water consumption, and any
improvement in water quality resulting from the proposed water improvements.
new text end

Sec. 11.

Minnesota Statutes 2022, section 216C.436, subdivision 1, is amended to read:

Subdivision 1.

Program purpose and authority.

An implementing entity may establish
a commercial PACE loan program to finance deleted text begin cost-effective deleted text end energy new text begin , water, and resiliency new text end
improvements to enable owners of qualifying commercial real property to pay for deleted text begin the
cost-effective energy deleted text end new text begin eligible new text end improvements to the qualifying real property with the net
proceeds and interest earnings of revenue bonds authorized in this section. An implementing
entity may limit the number of qualifying commercial real properties for which a property
owner may receive program financing.

Sec. 12.

Minnesota Statutes 2023 Supplement, section 216C.436, subdivision 1b, is
amended to read:

Subd. 1b.

Definitions.

(a) For the purposes of this section, the following terms have the
meanings given.

(b) "Agronomic assessment" means a study by an independent third party that assesses
the environmental impacts of proposed land and water improvements on farmland.

(c) "Farmland" means land classified as 2a, 2b, or 2c for property tax purposes under
section 273.13, subdivision 23.

(d) "Land and water improvement" means:

(1) an improvement to farmland that:

(i) is permanent;

(ii) results in improved agricultural profitability or resiliency;

(iii) reduces the environmental impact of agricultural production; and

(iv) if the improvement affects drainage, complies with the most recent versions of the
applicable following conservation practice standards issued by the United States Department
of Agriculture's Natural Resources Conservation Service: Drainage Water Management
(Code 554), Saturated Buffer (Code 604), Denitrifying Bioreactor (Code 605), and
Constructed Wetland (Code 656); or

(2) water conservation and quality measures, which include permanently affixed
equipment, appliances, or improvements that reduce a property's water consumption or that
enable water to be managed more efficiently.

(e) "Resiliency" means new text begin :
new text end

new text begin (1) new text end the ability of farmland to maintain and enhance profitability, soil health, and water
quality deleted text begin . deleted text end new text begin ;
new text end

new text begin (2) the ability to mitigate greenhouse gas embodied emissions from an eligible real
property; or
new text end

new text begin (3) an increase in building resilience through flood mitigation, stormwater management,
wildfire and wind resistance, energy storage use, or microgrid use.
new text end

Sec. 13.

Minnesota Statutes 2023 Supplement, section 216C.436, subdivision 2, is amended
to read:

Subd. 2.

Program requirements.

A commercial PACE loan program must:

(1) impose requirements and conditions on financing arrangements to ensure timely
repayment;

(2) require an energy audit, renewable energy system feasibility study, new text begin resiliency
improvement study, water improvement study, new text end or agronomic or soil health assessment to
be conducted on the qualifying commercial real property and reviewed by the implementing
entity prior to approval of the financing;

(3) require the inspection new text begin or verification new text end of all deleted text begin installations and a performance verification
of at least ten percent of the cost-effective energy deleted text end new text begin eligible new text end improvements or land and water
improvements financed by the program;

(4) not prohibit the financing of all deleted text begin cost-effective energy deleted text end new text begin eligible new text end improvements or land
and water improvements not otherwise prohibited by this section;

(5) require that all deleted text begin cost-effective energy deleted text end new text begin eligible new text end improvements or land and water
improvements be made to a qualifying commercial real property prior to, or in conjunction
with, an applicant's repayment of financing for deleted text begin cost-effective energy deleted text end new text begin eligible new text end improvements
or land and water improvements for deleted text begin that deleted text end new text begin the qualifying commercial real new text end property;

(6) have deleted text begin cost-effective energy deleted text end new text begin eligible new text end improvements or land and water improvements
financed by the program performed by a licensed contractor as required by chapter 326B
or other law or ordinance;

(7) require disclosures in the loan document to borrowers by the implementing entity
of: (i) the risks involved in borrowing, including the risk of foreclosure if a tax delinquency
results from a default; and (ii) all the terms and conditions of the commercial PACE loan
and the installation of deleted text begin cost-effective energy deleted text end new text begin eligible new text end improvements or land and water
improvements, including the interest rate being charged on the loan;

(8) provide financing only to those who demonstrate an ability to repay;

(9) not provide financing for a qualifying commercial real property in which the owner
is not current on mortgage or real property tax payments;

(10) require a petition to the implementing entity by all owners of the qualifying
commercial real property requesting collections of repayments as a special assessment under
section 429.101;

(11) provide that payments and assessments are not accelerated due to a default and that
a tax delinquency exists only for assessments not paid when due;

(12) require that liability for special assessments related to the financing runs with the
qualifying commercial real property; and

(13) prior to financing any improvements to or imposing any assessment upon qualifying
commercial real property, require notice to and written consent from the mortgage lender
of any mortgage encumbering or otherwise secured by the qualifying commercial real
property.

Sec. 14.

Minnesota Statutes 2022, section 216C.436, subdivision 3, is amended to read:

Subd. 3.

Retail and end use prohibited.

new text begin (a) new text end Energy generated by an energy improvement
may new text begin be included in a community solar garden, but must new text end not be new text begin otherwise new text end sold, transmitted,
or distributed at retail and deleted text begin may deleted text end new text begin must new text end not provide for end use of the electrical energy from
an off-site facility. On-site generation is allowed to the extent provided for in section
216B.1611.

new text begin (b) new text end This section does not modify the exclusive service territories or exclusive right to
serve as provided in sections 216B.37 to 216B.43.

Sec. 15.

Minnesota Statutes 2022, section 216C.436, subdivision 4, is amended to read:

Subd. 4.

Financing terms.

Financing provided under this section must have:

(1) a cost-weighted average maturity not exceeding the useful life of the deleted text begin energy deleted text end new text begin eligible new text end
improvements installed, as determined by the implementing entity, but in no event may a
term exceed deleted text begin 20 deleted text end new text begin 30 new text end years;

(2) a principal amount not to exceed the lesser of:

(i) the greater of deleted text begin 20 deleted text end new text begin 30 new text end percent of the assessed value of the real property on which the
improvements are to be installed or deleted text begin 20 deleted text end new text begin 30 new text end percent of the real property's appraised value,
accepted or approved by the mortgage lender; or

(ii) the actual cost of installing the deleted text begin energy deleted text end new text begin eligible new text end improvements, including the costs of
necessary equipment, materials, and labor, the costs of each related energy audit deleted text begin or deleted text end new text begin , new text end renewable
energy system feasibility study, new text begin water improvement study, resiliency improvement study,
new text end and the cost of verification of installation; and

(3) an interest rate sufficient to pay the financing costs of the program, including the
issuance of bonds and any financing delinquencies.

Sec. 16.

Minnesota Statutes 2022, section 216C.436, subdivision 7, is amended to read:

Subd. 7.

Repayment.

An implementing entity that finances an deleted text begin energy deleted text end new text begin eligible new text end
improvement under this section must:

(1) secure payment with a lien against the qualifying commercial real property; and

(2) collect repayments as a special assessment as provided for in section 429.101 or by
charter, provided that special assessments may be made payable in up to deleted text begin 20 deleted text end new text begin 30 new text end equal annual
installments.

If the implementing entity is an authority, the local government that authorized the
authority to act as implementing entity shall impose and collect special assessments necessary
to pay debt service on bonds issued by the implementing entity under subdivision 8, and
shall transfer all collections of the assessments upon receipt to the authority.

Sec. 17.

Minnesota Statutes 2022, section 216C.436, subdivision 8, is amended to read:

Subd. 8.

Bond issuance; repayment.

(a) An implementing entity may issue revenue
bonds as provided in chapter 475 for the purposes of this section and section 216C.437,
provided the revenue bond must not be payable more than deleted text begin 20 deleted text end new text begin 30 new text end years from the date of
issuance.

(b) The bonds must be payable as to both principal and interest solely from the revenues
from the assessments established in subdivision 7 and section 216C.437, subdivision 28.

(c) No holder of bonds issued under this subdivision may compel any exercise of the
taxing power of the implementing entity that issued the bonds to pay principal or interest
on the bonds, and if the implementing entity is an authority, no holder of the bonds may
compel any exercise of the taxing power of the local government. Bonds issued under this
subdivision are not a debt or obligation of the issuer or any local government that issued
them, nor is the payment of the bonds enforceable out of any money other than the revenue
pledged to the payment of the bonds.

Sec. 18.

Minnesota Statutes 2022, section 216C.436, subdivision 10, is amended to read:

Subd. 10.

Improvements; real property or fixture.

deleted text begin A cost-effective energy deleted text end new text begin An eligible new text end
improvement financed under a PACE loan program, including all equipment purchased in
whole or in part with loan proceeds under a loan program, is deemed real property or a
fixture attached to the real property.