CRA/LA BUILDING COMMUNITIES

CRA/LA BUILDING COMMUNITIES Community Redevelopment Agency qfthe CITY OF LOS ANGELES _o T_Ei _ FILE CODE I :c0-=:_ec 1'6 _20_10 1200 West 7th Street I Suite 500 los Angeles I California 90017-2381 ~~~~~~~-~~~-~~~ ~~~~~~~-~~~~~-~-~-~--~--~-~-~~~- ~~ T 213 9771600 IF 213 977 1665 www.crala.org Honorable Council of the City of Los Angeles John Ferraro Council Chamber 200 N. Spring Street Room 340, City Hall Los Angeles, CA. 90012 ' CRA File No. tl\2,0\ Council District: 1-15 Contact Person: Sharon Gi (213) 977-1975 COUNCIL TRANSMITTAL: Transmitted herewith, is a Board Memorandum adopted by the Agency Board on December 16, 2010, for City Council review and approval in accordance with the "Community Redevelopment Agency Oversight Ordinance" entitled: VARIOUS ACTIONS RELATED TO: Various actions to accept up to $5,495,000 in American Recovery and Reinvestment Act (ARRA) State Energy Program funding from the Local Government Commission to establish the citywide Commercial Retrofit Municipal Financing District Program RECOMMENDATION That City Council approve(s) recommendation(s) on the attached Board Memorandum. ENVIRONMENTAL REVIEW The recommended action does not constitute a "project" as defined by the California Environmental Quality Act "CEQA") FISCAL IMPACT STATEMENT There is no fiscal impact to the City's General Fund, as a result of this action. ief Executive Officer cc: Sharon Gin, Office of the City Clerk (Original & 3 Copies on 3-hole punch) Lisa Johnson Smith, Office of the CAO lvania Sobalvarro, Office of the CLA Steve Ongele, Office of the Mayor Noreen Vincent, Office of the City Attorney

THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA I MEMORANDUM DATE: DECEMBER 16, 2010 CN3600 TO: FROM: STAFF: SUBJECT: CRA/LA BOARD OF COMMISSIONERS CHRISTINE ESSEL, CHIEF EXECUTIVE OFFICER JENNA GULAGER, MANAGER OF CAPITAL FINANCE SHARON Gl, ASSISTANT PROJECT MANAGER Commercial Retrofit Municipal Financing District Program. Various actions to accept up to $5,495,000 in American Recovery and Reinvestment Act (ARRA) State Energy Program funding from the Local Government Commission to establish the citywide Commercial Retrofit Municipal Financing District Program All Regions (CDs 1-15) RECOMMENDATION(S) That the CRA/LA Board of Commissioners, subject to City Council approval, authorize the Chief Executive Officer or designee to: SUMMARY 1. Request that the City Council receive and file the prior Council transmittal dated October 7, 2010 (Council File No. 10-0771) and consider instead the following Board actions, if approved; 2. Adopt a joint resolution authorizing the acceptance of State Energy Program funds from the Local Government Commission, or any other entity selected by the California Energy Commission, in the amount of up to $5,495,000 for the development and implementation of a Citywide Commercial Retrofit Municipal Financing District Program and request City Council to adopt said resolution; 3. Authorize the Chief Executive Officer, or designee, to negotiate and execute all necessary contracts and agreements with Local Government Commission, in the amount of up to $5,495,000 for the Municipal Financing District Program grant under the State Energy Program; and 4. Amend the FY11 Budget for Citywide Non-Housing (CN) to recognize up to $5,495,000 in State Energy Program funding for subsequent expenditures and deposit said funds into budget line item "public improvements" in the City-Wide Non Housing Program Area (CN3600). On October 7, 2010, the CRA/LA Board authorized the acceptance of State Energy Program (SEP) funds in the amount of up to $5,495,200 from the California Statewide Communities Development Authority (CSCDA) and associated actions. City Council has not yet acted on those recommendations. On October 21, 2010, the California Energy Commission (CEC) acted to replace CSCDA with the Local Government Commission (LGC) as the prime contractor for the contract and program administration of SEP. (Additionally, the maximum total award amount has decreased by $200 from $5,495,200 to $5,495,000 due to administrative

ACCEPTANCE OF STATl.::NERGY PROGRAM GRANT ( PAGE2 oversight.) Hence, an amendment to the previously approved contract authorization for SEP funds is being requested from the CRA/LA Board to replace CSCDA with LGC, to revise the maximum total award amount to $5,495,000, and to request that the City Council receive and file the previous transmittal dated October 7, 2010 (Council File No. 10-0771). The authorizing resolution for the SEP funds states that the CEO is authorized and empowered to execute in the name of CRAILA, all necessary contracts and agreements, and amendments thereto, to implement and carry out the purposes specified in the application. (Please see Attachment A for Authorizing Resolution). In order to use the SEP grant proceeds, CRA/LA staff is requesting the authority to negotiate and execute all necessary contracts and agreements with the LGC. The term of the grant agreement will be two years. PREVIOUS ACTIONS November 18, 2009 (CF 09-0648-815)- City Council approval for the use of ARRA Energy Efficiency and Conservation Block Grant (EECBG) formula funds in the amount of $37 million, of which $3 million will be allocated to the CRA/LA as the lead agency to establish a commercial tax-lien energy retrofit program and to capitalize a loan loss reserve. January 7, 2010 and January 20, 2010 (CF 10-0050) - CRA/LA Board and City Council approval for CRA/LA to submit a Municipal Financing Program grant application under SEP and authorization for the CRAILA to develop, establish and, if approved, administer the City of Los Angeles Commercial Retrofit Municipal Financing District Program. May 6, 2010 and May 25, 2010 (CF 10-0771)- CRA/LA Board and City Council approval for CRA/LA to accept a $4,676,513 Municipal Financing Program grant from the CEC under the SEP and a $3,000,000 EECBG award from the City of Los Angeles and authorization to develop and administer the commercial retrofit municipal financing district program for the City of Los Angeles. October 7, 2010 (CF 10-0771)- CRA/LA Board approval for CRA/LA to accept $5,495,200 in SEP funds from and to negotiate and execute all necessary contracts and agreements with CSCDA for the development and implementation of a Citywide Commercial Retrofit Municipal Financing District Program. City Council has not yet acted on this CRAILA Board action. DISCUSSION & BACKGROUND On February.1 0, 2010, the CRA/LA was awarded a Municipal Financing Program grant by the CEC under SEP in the amount of $4,676,513 to establish a City-wide AB 811 program for private commercial buildings. California received $226 million in federal American Recovery and Reinvestment Act (ARRA) funds for SEP. CRA/LA submitted an application for $5 million in SEP funds on behalf of the City on December 21, 2009. On July 22, 2010, the CEC cancelled the Program Opportunity Notice (PON) 400-09-401 for Municipal Financing Programs funded by SEP, and the Notice of Proposed Awards issued thereunder. The CEC recalled the PON due to statements issued by the Federal Housing Finance Agency (FHFA) and the Office of the Controller of the Currency (OCC) questioning the security of residential Property Assessed Clean Energy (PACE) financing. The original PON funded both residential and commercial PACE programs. After the cancellation of the PON, the CRA/LA sent a memorandum to the CEC and gathered letters of support to re-instate its SEP funding, as CRA/LA was setting up a commercial PACE program, rather than a residential PACE program. On September 22, 2010, the CRA/LA was awarded $5,495,200 in SEP funds as a sub-grantee to the... CSCDA to develop a Citywide

ACCEPTANCE OF STATE energy PROGRAM GRANT PAGE3 Commercial Retrofit Municipal Financing District Program, which will serve as a pilot program for other local governments throughout the state. On October 21, 2010, the CEC acted to replace CSCDA with the LGC as the prime contractor for the contract and program administration of SEP. Location CRA/LA staff is developing the Commercial Retrofit Municipal Financing District Program on behalf of the City of Los Angeles and in partnership with the Clinton Climate Initiative (CCI). This Program is specific to the City of Los Angeles, thus projects must be commercial properties located within the boundaries of the City of Los Angeles. Description and Project Context The goal of the program is to incentivize private financing of energy efficiency retrofits for commercial buildings in the City of Los Angeles. In addition, the program will offer no-cost Energy Audits, no-cost Investment Grade Audits, and access to a Loan Loss Reserve Fund to encourage early adoption into the program. Commercial Property Assessed Clean Energy (PACE) is an "owner-arranged" tax lien financing model, through which individual property owners may negotiate financing from commercial lenders on the terms, scale, and schedule that best suit the project, and secure repayment through a contractual assessment that sits on the building's property tax bill. A one-stop web portal will provide building owners access to all relevant information including: PACE financing, details regarding rebate and incentive programs, a list of retrofit lenders, access to free energy audits, and technical support to carry out the retrofit. Interested building owners will submit an online application to participate in the program. Project Historv CRA/LA has been allocated $2.8 million of the City's formula allocation of EECBG in addition to the $5.5 million in SEP funds to develop the Commercial Retrofit Municipal Financing District Program on behalf of the City of Los Angeles. The program will be the first commercial retrofit program in the country. There is significant potential for energy savings and green job creation. Community Benefits The program has the potential to overcome major existing market barriers to energy efficiency investments in commercial real estate and will allow individual property owners to expeditiously arrange financing from private lending sources on the terms, scale and schedule that best suits their buildings. This program will have the added benefits of creating direct and indirect jobs, boosting occupancy in the Los Angeles commercial real estate market, and strengthening the overall local economy. The Program is expected to accelerate the adoption of efficiency and renewable energy products, services, and practices by promoting comprehensive retrofit and retro-commissioning of, at minimum, 13 million square feet of projects or approximately 33 commercial building projects, leading to the creation of 228 jobs and the reduction of 39,720 tons of greenhouse gas (GHG) emissions per year. SOURCE OF FUNDS American Recovery and Reinvestment Act (ARRA) and Energy Efficiency and Conservation Block Grant (EECBG) funds. No CRAILA funds are required for this action.

ACCEPTANCE OF STAT~ energy PROGRAM GRANT PROGRAM AND BUDGET IMPACT ( PAGE4 This action is consistent with the adopted FY2011 Budget and Work Program. Following approval, the recommended action will allow CRA/LA to recognize up to $5,495,000 in SEP funds to be placed in Work Objective CN3600 for subsequent expenditure under this program. There are no local match requirements. There is no negative impact on the City's General Fund as a result of this action. ENVIRONMENTAL REVIEW The recommended actions are "categorically exempt" from the provisions of the California Environmental Quality Act (CEQA), pursuant to Section 15308 (Actions by Regulatory Agencies for Protection of the Environment) of the CRA/LA CEQA Guidelines. Christine Esse! Chief Executive Officer By: ~~ Chief Operating Officer Real Estate and Economic Development There is no conflict of interest known to me which exists with regard to any CRA!LA officer or employee concerning this action. ATTACHMENTS Attachment A: Resolution

ATTACHMENT A RESOLUTION NO. A JOINT RESOLUTION OF THE BOARD OF COMMISSIONERS OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA (CRAILA), AND THE CITY COUNCIL OF THE CITY OF LOS ANGELES, CALIFORNIA, AUTHORIZING CRAILA TO DEVELOP, ESTABLISH AND ADMINISTER THE MUNICIPAL FINANCING DISTRICT PROGRAM FOR THE CITY OF LOS ANGELES. WHEREAS, the Community Redevelopment Agency of the City of Los Angeles, California (the "CRA/LA") recognizes that it is in the interest of the regional, state, and national economy to stimulate the economy; create and retain jobs; reduce fossil fuel emissions; and reduce total energy usage and improve energy efficiency within its jurisdiction; and WHEREAS, State Energy Program (SEP) funds are available through the California Energy Commission and the Local Government Commission for cost-effective energy efficiency projects; and WHEREAS, the CRA/LA is eligible for SEP funding under the California Energy Commission's SEP Program as a sub-grantee to the Local Government Commission; and WHEREAS, the CRA/LA is proposing to implement the energy efficiency project described in Exhibit A in order to qualify for SEP funds from the California Energy Commission as a subgrantee to the Local Government Commission. NOW THEREFORE, THE BOARD OF COMMISSIONERS OF THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA AND THE CITY COUNCIL OF THE CITY OF LOS ANGELES, CALIFORNIA DO HEREBY RESOLVE AS FOLLOWS: 1. The City of Los Angeles designates the CRA/LA to administer the proposed project described in Exhibit A on its behalf. 2. The City of Los Angeles authorizes the CRA/LA to accept a grant award up to the amow 1t of this application for $5,495,000 and authorizes the Chief Executive Officer, or designee, acting for the CRNLA to execute in the name of CRA/LA, all necessary contracts and agreements, and amendments hereto, to implement and carry out the purposes specified in the application. ADOPTED BY THE CRNLA: APPROVED BY THE CITY COUNCIL

( ( EXHIBIT A California Assembly Bill 811 states that a City's financing plan "may include amounts to be advanced by the city through funds available to it from any source," which can be interpreted to allow for private equipment lease financing of any type, so long as the money flows through the City to the project. Rather than issuing bonds, the Community Redevelopment Agency of the City of Los Angeles proposes to develop an "owner-arranged" financing model for large commercial properties under which individual property owners can arrange financing from any commercial lender on terms, scale and schedule that best suits the project, securing repayment through a tax-lien on the property. The Community Redevelopment Agency of the City of Los Angeles (CRA/LA) as the lead agency would perform an intermediary function and work with the Los Angeles County Assessor's Office to administer the program. In order to apply for the program, owners would submit a project summary, list of measures, project cost, projected energy savings by year, amortization schedule, measurement and verification plan, contractor information, and the proposed lender. Projects must be structured such that during the term of the loan, the energy savings would cover or exceed the cost of the newly-created special assessment. Upon receipt of the application package, the City would verify that the owner is current on all property taxes and assessments. Acknowledgement by the City that the retrofit, as proposed, qualifies for an assessment under the Program will empower the owner to complete and negotiate the financing transaction with various commercial lenders. The County will assign both the tax lien and the right to receive the assessments to the retrofit lender of record. The SEP funding would be utilized to provide additional financial incentives to accelerate adoption of the program. Given that Los Angeles would be the first city in the United States with a commercial tax-lien retrofit financing program, financial incentives will be necessary to "move the market." These financial incentives would include: Loan Loss Reserve Fund, Marketing and Outreach Activities, and Energy Audits. Marketing and Outreach Activities Energy Audits Provide no-cost Energy Audits to owners that to certain measures.