SR-510-006 (3)
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Council Meeting: ctober 12, 1982
.
Santa Monica, Cal i fornla
TO:
Mayor and City Council
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OCT 1 ...; 1582
FROM:
City S t a f f
SUBJECT:
Solar Energy Leasing Services
Introduction
This report presents background information on solar energy
leasing services for City property owners and recommends that the
City Council direct the City Attorney to draft an ordinance which
would establish a municipal solar utility prior to January 1,
1983. This ordinance will enable the City to create a program for
solar leasing where residents who lease a solar system may take
full advantage of State tax credits.
Background
The FY 1982-83 budget objectives for the Energy Management and
Conservation Program include review and recommendations regarding
the establishment of a solar energy leasing service whereby City
residents may lease solar systems from private investors.
Staff belleves that some residents may find solar energy leasing
arrangements to be attractive for several reasons.
First, leasing does not require a large initial capital outlay.
Payments may be spread out over terms of 3-7 years with an option
to renew the lease or purchase it at the end of the term. And, in
comparison to loans, lease arrangements ~ay not require a trust
deed or real estate 1 ien.
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OCT 1 2 1932
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Council Meeting: ~ctober 12, 1982
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Santa Monica, California
This aspect should be particularly attractive to local homeowners
and apartment owners who do not want to encumber their property.
Finally, maintenance is sometimes provided with lease arrangements
which lessens the risk some property owners perceive to be
associated with solar technology.
In addition, on September 30, 1982, the Governor signed into law
AB3788 (Hannigan) which permits taxpayers who lease a solar energy
system on their premises to claim the State 55% solar energy tax
credit for their first three years of lease payments. Previously
this State credit was only available to persons who purchase the
systems outright.
In order to be eligible for the solar leasing credit, the system
must be partially owned and partially leased from a municlpal
utility or from any lessor granted a permit from a municipal solar
utility established by ordinance of the local jurisdiction prior
to January ~, 1983.
Several
other
California cities have established municipal
utilitles wlth a solar leasing component to enable residents to
claim this credit. The City of Santa Clara has operated a leasing
program since 1976.
Santa Clara's electric utility directly
leases solar pool heating systems to property owners. More
recently,
the
cities of Oceanside and Monterey Park have
established
municipal solar utilities using private leasing
companies and private investment capi tal.
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Council Meeting: ctober 12, 1982
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Santa Monica, California
The Oceanside program has received widespread attention for its
success in attracting private investment capital to the City for
residential solar water heating systems.
In Oceanside, the City
bills for lease payments through City water bills and provides a
consumer protection role by issuing permits to participating
leasing and management companies and solar installers. The City
also inspects system installations and approves model lease
agreements used by the leasing companies for full disclosure of
contract terms. Since the program began last December, over 600
dwelling
un i ts
in
Oceanside
have
1 eased
solar systems
(approximately 25 single family units and 575 apartment and
condominium units).
To cover administrative costs, the City of
Oceanside retains 5% of the lease revenues.
Staff believes that a simplified version of the Oceanside program
(including
the
the
City
permitting and inspection roles, but
eliminating
billing
function,
for example) could be
established in Santa Monica. Members of the Chamber of Commerce
Energy
Committee,
including
representatives
of the solar
installation industry and apartment industry, have expressed
interest in having a solar leasing option available in Santa
Monica
provided
it is a streamlined program and promotes
competi tion.
Passage of the recommended ordinance would only enable the City to
develop a leasing program of this type.
It would not create or
require a subsequent program.
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G S : S E S : P'G : N B : J AS.
Council Meeting: ctober 12, 1982
.
Santa Monica, Californla
Recommendation
In order to enable City property owners to claim the State solar
energy tax credlt for partially owned and partially leased solar
systems, it is recommended that the City Council:
1.
Di rect the Ci ty
ordinance which
uti 1 i ty; and
Attorney to draft within 30 days an
would establish a municipal solar
2. Direct staff to report back with proposed program details
within 90 days.
Prepared by: Stan Scholl
Peggy Gardels
Ni na Byrne
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