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Berkeley Financing Program Brings Renewable Energy Home

| Written by John Farrell | No Comments | Updated on Sep 17, 2008 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/berkeley-financing-program-brings-renewable-energy-home/

With has the potential to become one of the nation’s fastest spreading local renewable energy programs, the Berkeley city council last night voted unanimously to use the city’s bonding authority to finance rooftop solar on residential properties. The city will pay the upfront costs and property owners will repay those costs over 20 years through a special assessment on their property tax bills. If a person moves, the solar system will stay at the property and the new owners will assume the remaining years of the assessment.

A little backgound to start.

On November 6, 2007 the City Council approved the concept of the "Sustainable Energy Financing District" by which the City would help property owners finance solar installations and energy efficiency improvements by creating a special tax that is paid through their individual property tax bills. Only property owners who choose to use this method of financing for such improvements would pay the special tax. On May 6, 2008 the City Council approved an amendment to the Berkeley Municipal Code (BMC) and created the Special Tax Financing Law (new BMC Chapter 7.98). The Special Tax Financing Law is the implementing legislation that allows for the creation of the Sustainable Energy Financing District.

On July 22, 2008 the Council adopted a Resolution of Intention to Establish the Sustainable Energy Financing District and a Resolution of Intention to Incur Bonded Indebtedness for the District.

City staff proposed to establish a cap of $80 million for the bonded indebtedness. This is based on a preliminary estimate by UC Berkeley’s Renewable and Appropriate Energy Laboratory that there are 4,000 homes in Berkeley that could benefit from having solar photovoltaic installed on their rooftops. Because the bonds will finance improvements to private residences, the interest on the bonds will not be exempt from federal income taxation.

City staff has estimated that the average photovoltaic system in Berkeley costs $28,077 with an average California Solar Initiative rebate of $6,108. A hypothetical financing structure for an average system is set forth below.

Hypothetical Financing for $28,077 Solar System (~3kW)
Project Financing Amount: $22,569
Estimated Financing Rate: 6.75% (to be determined)
Program Costs to be Amortized: $600 Bank and Administration Fees
Term of Repayment: 20 years Paid Through Annual Special Tax
Annual Special Tax Charges: 4.5% of Special Tax County and Program Administration
Projected Annual Special Tax: $2,089/Year – Equates to $182/month

The property tax increase will be offset by the value of the electricity produced by the system. At the outset and based on PG&E’s rates, one could expect the solar systems to result in at least $70/month in lower electric bills.

Since the concept for this program was approved by the Council in November 2007, staff and the City’s outside consultants have met with a variety of possible financial partners who could provide funding for the program. The project team has met with commercial banks, community banks and several private investment firms, all of whom expressed interest in the program. As of last night, city staff reported that they are continuing to work through various issues related primarily to the costs of financing for the program, but is confident that an arrangement with a financial partner will be reached soon.

The New York Times reported that the city council decided to go with an initial pilot program saying, "the city seeks to raise $1.5 million for a pilot program for about 50 homes. If it program is successful, the kitty could eventually contain tens of millions of dollars."

Final Council actions to adopt an ordinance that will allow the levy of special taxes and approve bond financing for the District will be placed on the Council’s meeting agenda in the near future. City staff envision the program to be fully operational by late October 2008.

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About John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power. More

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