City Searching for Means to Finance Solar

By Judith Scherr
Thursday May 01, 2008 - 09:43:00 AM

A plan to support the proliferation of solar panels in Berkeley, approved in concept by the City Council last year, is neither quick nor cheap to implement, city officials have found. 

While an Oct. 23, 2007, press release from the mayor’s office announced that “Berkeley is set to become the first city in the nation to allow property owners to pay for energy improvements and solar system installation ... on their individual property tax bill,” Berkeley is not likely to see its first city-supported solar panel for six months or more. 

City officials updated the council on the plan at a workshop on the question last week. 

When the plan gets finalized, perhaps six months down the road, a preliminary group of 25 participants will be testing the waters. Staff is still working on the application process and on questions such as how the first participants will be selected and when the installer gets paid, according to an April 22 report to the council 

The council approved the idea in concept in November, and approved a “special tax financing law” more formally at its April 22 meeting. This law is the first of about a dozen formal steps the city must take to implement what they are calling “FIRST,” or the Financing Initiative for Renewable and Solar Technology. 

The idea is to create a tax district that would encompass the entire city. Property owners would opt into the program.  

The city would work with a banking institution that would provide financing for the solar panels for qualified property owners who wanted it. A bond would be issued, backed by liens against the participants’ property. The bond proceeds would finance the solar systems upfront.  

Participating owners would pay for the systems over a 20-year period as part of their property taxes. If they sold the property, the tax burden would be tranferred with it. 

There’s a lengthy legal path the city must navigate to create this kind of district, with some 12 steps the council will be asked to approve over the coming months. 

But even more difficult is “getting an agreement from a lending institution,” Neal DeSnoo, the city’s energy officer, said Tuesday. 

One of the questions that must be answered is the role of the city when a property tax payment is late. Would the city be responsible? The degree to which the financial institution would be responsible would be part of determining the cost of the financing, De Snoo told the Planet. 

City staff and “pro bono” consultants—likely to be hired after grant funds are received, according to De Snoo—are taking proposals to various lending institutions to determine whether they want to participate as well as the interest rates they can offer participants. 

The program depends on getting financing costs down to a minimum—below the rate homeowners could get through equity loans. In the end, the goal is to get the owners’ monthly costs more-or-less equal to the savings they would get from lower PG&E bills.  

Homeowners participating in the program would select a solar installer registered with the California Solar Initiative, sponsored by the Public Utility Commission and the state’s Energy Commission. These licensed contractors are in good standing with the Secretary of State’s office, but are not vetted in other ways. They are listed on the CSI website at: www.gosolarcalifornia.ca.gov. 

The first phase, which is a pilot, will home in on solar voltaic panels exclusively, in order to test the financing. Participants will have to comply with the city’s Residential Energy Conservation Ordinance (RECO), which mandates installation of low-flush toilets, insulation and other energy conservation measures.  

Councilmember Laurie Capitelli noted at the April 22 workshop that mandating RECO standards is setting a “low bar.” 

The second phase, in which there will be 75 participants, will include solar hot water financing and may include financing for other energy-saving measures beyond the RECO requirements, such as the installation of a more efficient heater or double-paned windows. 

The process is not without costs. The city will be hiring staff to run the program and consultants to put together the financing. Most of the expenses will be funded through grants to be used over two years. An Environmental Protection Agency grant for $115,000 and a Bay Area Air Quality District grant for $75,000 are still being finalized, according to DeSnoo.  

Ongoing administrative costs would be built into the costs of the financing mechanism, according to the April 22 staff report. 

The city’s share in the initial two-year phase is about $37,000 plus staff time. Staff time expended working on the project to date has not been logged, according to DeSnoo. 

When the plan was first widely publicized by the mayor’s office in the fall, there was an unanticipated reaction by homeowners then considering installing solar systems. They told solar installers they planned to wait for the city’s solar financing.  

City staff now say people should not wait, since it is unknown if federal tax credits will be available in the future. A $2,000 federal tax credit is set to expire by the end of the year, though it may be renewed, DeSnoo said..