Municipal Bonds for Energy Efficiency - AB 811

Cities and counties form the front line of energy supply for their citizens, and through partnering with public or private utilities, they have looked out for the public balance of energy and productivity.

Utility company reliance on hydrocarbons -- coal, natural gas and oil, has led to cheap energy provided by the earth. Non-renewable stores of fossil fuels. Today, renewable sources such as sunlight, wind and renewable plant materials are being developed to replace dependence on limited supplies of hydrocarbons.

Just as bonds were used to develop roads and utility infrastructures, municipal bond strategies are now being developed to develop renewable energy for more local self-reliance and economic stability.

Conservation of Energy

But technology also plays a role in conservation, and with more efficient lighting systems, more fuel efficient vehicles, and more affordable renewable energy systems, conservation is saved as a percentage of every productive activity.

California AB 811, Contractual assessments: energy efficiency improvements

It was the stated the intent of the California Legislature that B 811 should be used to finance public improvements to lots or parcels which are developed and where the costs and time delays involved in creating an assessment district pursuant to other provisions of this division or any other law would be prohibitively large relative to the cost of the public improvements to be financed.

It was also the intent of the Legislature that AB 811 should be used to finance the installation of distributed generation renewable energy sources or energy efficiency improvements that are permanently fixed to residential, commercial, industrial, or other real property.

Excluded from AB811 were parcels undergoing development; financing the purchase or installation of appliances that are not permanently fixed to residential, commercial, industrial, or other real property.

And payment for these energy efficiency installations are through assessments levied only with the free and willing consent of the owner of each lot or parcel on which an assessment is levied at the time the assessment is levied.

Municipal bonds for Energy Efficiency and Generation

Because of the special tax-exempt status of most municipal bonds, investors usually accept lower interest payments than on other types of borrowing (assuming comparable risk). This makes the issuance of bonds an attractive source of financing to many municipal entities, as the borrowing rate available in the open market is frequently lower than what is available through other borrowing channels.

Different types of bonds are secured by various types of repayment sources, based on the promises made in the bond documents:

• General obligation bonds promise to repay based on the full faith and credit of the issuer; these bonds are typically considered the most secure type of municipal bond, and therefore carry the lowest interest rate.
• Revenue bonds promise repayment from a specified stream of future income, such as income generated by a water utility from payments by customers.
• Assessment bonds promise repayment based on property tax assessments of properties located within the issuer's boundaries.

Learning about Muni Bonds

Official statements generally are available at no charge from the Electronic Municipal Market Access system (EMMA) at emma.msrb.org operated by the Municipal Securities Rulemaking Board (MSRB).

California AB811 For Energy Efficiency Municipal Bonds