The Berkeley City Council is scheduled to vote tonight on a program that would pay for solar power installations for its residents and businesses and recoup the costs through property taxes.
The council will hold a public hearing on the loan program before voting on three steps that would move the city closer to carrying it out. The program would pay to reimburse property owners for the costs of putting in solar power systems (see city staff report). The residential and business property owners would pay the city back over 20 years, including interest.
Creating special tax districts to collect taxes for public projects, from building sewers to schools, is a common practice among cities throughout the country. But Berkeley's program would use the same mechanism to fund solar-power systems on private properties.
Only property owners who opt to take advantage of the program would see the extra charges on their tax bills.
The city in November claimed to be the first to approve the creation of a program using property taxes to front the costs of residential and commercial solar projects. Other cities and counties in the country, including Santa Cruz County in California and the city of Boulder in Colorado also plan to create similar programs using the Berkeley model, the San Francisco Chronicle reported.
While the program would make solar power systems more affordable, it also could compete directly with financing options offered by a slew of solar-power installers.
Some of these companies, such as SunRun, pay for the costs of installing and operating solar power systems in exchange for a one-time payment to defray the initial cost and a long-term electricity contract with each residential customer, who doesn't own the system.
For example, a SunRun customer would pay $12,800 for a 3.75-kilowatt system and then a flat rate for the electricity use. Without the financing, the same customer would pay $35,700 to own the system outright (see SunRun Grabs $12M, Eyes Residential Rooftop Market).
Others companies, such as SolarCity, offer leasing programs in which homeowners would pay a small portion of the upfront equipment and installation costs - about $2,000 - followed by a monthly fee (see Battle for Home Solar Financing Begins and Solar City Sees Sales Spike). The company had offered a "zero down" special, in which residents were able to pay nothing upfront, for a few months earlier this year.
Berkeley's program could make solar-power systems half as expensive to home and business owners because the city can borrow money, via bonds, at a lower interest rate than is available to solar-power system installers, which typically borrow money from private investors or banks, Local Power CEO Paul Fenn said last December, when the city council approved the creation of the loan program (see Berkeley to Finance Solar Installations).
"Public financing could be viewed as competition because the government is coming in, but I believe that would be a strategic mistake," said Fenn at the time.
Local Power, based in San Francisco, works with public agencies to set up renewable-energy programs. "Those companies that adapt to the market and shift to [add value by] participating in those programs will win; those that try to compete against them will lose."
On Tuesday night, the city council is scheduled to vote on whether to create the special tax district, set the program's total cost at $80 million and introduce an ordinance that sets general rules for levying the taxes.
The city doesn't know yet how many property owners would participate in the program. It has come up with the $80 million borrowing cap based on an estimate from the University of California at Berkeley's Renewable and Appropriate Energy Laboratory, which expects 4,000 homes in the city to take advantage of the program.
The city might pass, not just one, but a series of bonds for the program, said Christine Daniel, Berkeley's deputy city manager. The interest rate could vary based on when the property owners decide to participate in the program.
The city staff report provided a calculation of how much each property owner might have to pay over the 20-year period. The staff has estimated that the average cost of the solar power system in Berkeley is $28,077, before an average $6,108 rebate from the California Solar Initiative, a state-run program for customers of investor-owned utilities such as Pacific Gas and Electric Co.
Including the rebate and factoring in potential administrative costs, the financing rate and special tax charges, the projected annual special tax is $2,089, or $182 per month, according to the staff calculation.
If the council approves all three steps Tuesday night, it will still have to reapprove the ordinance to levy special taxes to make it official. If the council passes it on the second vote, scheduled for Sept. 23, the program will be slated to begin Oct. 24.
But the city council will still have to decide on the amount of the bond to be issued and other financing details for the program after that date. The city staff is still negotiating with banks and private-investment firms to underwrite the bond or bonds for the program.
The city aims to start accepting applications this fall, Daniel said.