HB2405 – Authorizes counties to establish commercial property assessed clean energy financing programs.
Prime Sponsor – Representative Duerr (D; 1st District; Bothell)
Current status – Referred to the Governor for signature.
In the House – (Passed)
Amended by the sponsor in a minor way and passed out of the House Committee on Local Government January 24th. Referred to Appropriations; had a hearing there on Saturday February 8th. A 2nd substitute with major changes passed out of Appropriations February 11th; referred to Rules. Replaced on the floor with a striker by the prime sponsor and passed by the House February 18th. House concurred with the Senate amendments March 6th.

In the Senate – (Passed)
Referred to the Senate Committee on Environment, Energy & Technology; had a hearing February 25th. Replaced by a striker and voted out of committee February 27th; referred to Ways and Means. Had a hearing there on February 29th. Passed out of committee March 2nd, and referred to Rules. Passed by the Senate March 5th.
Next step would be – Signature by the Governor.
Legislative tracking page for the bill.
SB6222 is an identical companion bill in the Senate.

Comments –
This bill reintroduces the most recent version of Representative Doglio’s HB1796, which she brought forward as a striker on the floor in the 2019 session, but which was never considered. (The striker shifted from authorizing municipalities to authorizing counties, and made a couple of further legal adjustments which are summarized by staff at the end of that version.

Property assessed clean energy financing programs make the repayment of a loan for an energy efficiency upgrade a lien on the property, which is repaid through the property tax billing process, and which stays as an obligation of the new owners if the building changes hands. Thirty states have established these programs. However, it isn’t clear that they’re legal in Washington, because our Constitution prohibits any gift of public funds to private parties.

ShiftZero, a coalition of green building organizations, has been promoting this idea, and has obtained a serious legal opinion which says that they would be legal if they were structured the way they are in Texas, because that relies entirely on private financing, rather than lending any state funds. (However, it isn’t clear whether the State using its property tax mechanism to implement a private loan and other details in this bill are constitutional here. Presumably, a court will settle those questions if the bill passes.) ShiftZero has a flyer about the bill.

The amendments in the House Local Government Committee added reducing or eliminating lead in water for drinking or cooking to the list of qualified projects, and would allow counties to narrow that list to focus on their climate action goals.

The 2nd substitute adopted in Appropriations removes allowing Commerce to establish a loan loss reserve/credit enhancement program, and removes a county’s responsibility to enforce delinquent assessments and C-PACER financing installment payments. (Presumably these steps help avoid the Constitutional issues. I think that means lenders would have to recover through a lien on the property if the borrower defaulted.) It also specifies that neither the state nor any county is required to use public funds to fund or repay the assessments authorized through a C-PACER program.

The House striker requires counties to establish a program, whether or not money’s appropriated for that, and limits them to doing that and recording the liens. It adds a list of items specifying  the details of Commerce’s responsibilities in administering the program, which are summarized by staff on the last page of the striker.

The changes in the Senate committee striker are summarized by staff on its last two pages. Among other things, it now bases the lien on the property owner entering into voluntary assessment agreement to repay the loan, lets Commerce contract out the administration of the program, lets it provide grants to counties to help them set up programs, and allows it to create a program guidebook including various standard legal forms which counties would be required to use.

Summary –
The bill authorizes counties to set up programs like this for energy efficiency, water conservation, renewable energy, and resiliency projects in agricultural, commercial, and industrial properties; and in multifamily properties with five or more units.

A county can impose fees on property owners who want to participate in order to pay for the reasonable costs of administering the program, provided the fees don’t exceed the municipality’s actual costs. It can contract with another county or entity to administer loans, or administer them in cooperation with other counties.

The Department of Commerce is also to set up or contract for the administration of a program to administer these loans, and a county could contract with Commerce to participate in that program. However, the county itself would remain responsible for collecting payments on a loan, and for foreclosing on the property if that became necessary.

If Commerce contracted with a third party to administer the statewide program, it would have to be done efficiently and transparently, including:

• Making any services offered to property owners, such as estimating energy savings, overseeing project development, or evaluating alternative equipment installations, priced separately and open to purchase by the property owner from qualified third-party providers;
• Making information about any properties joining the program available to all interested and qualifying third-party capital providers so the owners could receive impartial terms from them;
• Disclosing any financial interest the administrator had in any of the services provided to property owners to the public;
• Allowing financial underwriting and evaluation to be performed by capital providers, and;
• Working in a collaborative process with capital providers and other stakeholders to develop a program guidebook and documents or forms.

If funding were appropriated, Commerce could set up a loan loss reserve or credit enhancement program to support financing of qualified projects.

Last session’s history
In 2019, a substitute bill passed out of the House Committee on Local Government. The various legal adjustments in the substitute are summarized on p. 6 of the House Bill Report. Representative Doglio introduced this striker on the floor, but it was never considered, and the bill was still in the house of origin by cutoff.