SR-510-006 (4)
GS:SES:N6:KS ...
Councll Meetlng:Ai"I'l 13, 1982
S/O-OO6
san~onlca, Callfornla
II-c:
APR 1 3 1982
TO:
Mayor and Clty Councll
F-
FROM:
C 1 ty S t a f f
, -----"
SUBJECT: Munlclpal Solar Energy and Conservatlon Utll1ty
Introductlon
It lS recommended that the Clty Counc1l approve the deta1ls of
the proposed solar energy and conservatlon loan fund program and
authorlze the C1ty Manager to negot1ate wlth Bank of Amerlca to
establ1sh the loan fund.
Background
Authorlzat1on for a $125,000 loan fund from munlclpal enterprlse
reserves for solar energy and energy conservatlon loans 1S
conta1ned 1n the C1ty budget for F1scal Year 1981-82. Clty funds
wlll be deposlted w1th a local lender for one year. The funds
wlll be earmarked for loans to slngle-famlly and mult1-fam1ly
property owners and local buslness owners at below market
lnterest rates. It 1S expected that the greatest demand for the
loans wlll be from slngle-famlly and multl-famlly property owners
for solar systems, from multl-fam1ly property owners for energy
efflclency 1nvestments such as llght1ng efflclency converS1ons In
common areas, and from buslnesses for heat pumps, cogenerat1on
and mechanlcal system efflclency 1mprovements.
11-<:.,
1
APR 1 3 1982
GS:5ES:NB:KS ...
Counc11 Meetlng:AlJII'IIIIfl 13, 1982
san~onlca, Callfornla
51xteen local lenders and lnstltutlons WhlCh hold Clty funds were
contacted by letter regardlng thelr lnterest ln establlshlng a
solar energy and conservatlon loan fund.
Three lenders, Santa Monlca Bank (SMB), Flrst Federal Savlngs and
Loan Assoclatlon (FFS), and Bank of Amerlca (8 of A) have offered
to match the Clty'S contrlbutlon of S125,OOO, creatlng a total
loan pool of at least $250,000. 5MB and FFS offer the Clty a
hlg~er overall annual rate of return on lts deposlt than B of A.
The B of A proposal, however, offers a lower lnterest rate for
borrowers, and walver of all serVlce fees.
The B of A proposes to establ1sh the fund as a revolvlng loan
fund under the Communlty Improvement and Restoratlon Programat
one of the Santa Monlca branches.
Accord1ng to the bank's proposal, the Clty would ln1t1ally
deposlt $125,000 for one year at the current cert1flcate of
deposlt rate (14%-15%, compounded dally).
The C1ty'S deposlt may be leveraged wlth bank funds 1n one of
several ways:
2
GS:$ES:NB:KS ...
Counc11 Meetlng:A~l 13, 1982
san~onlca, Ca11fornla
Loan Interest
Clty Share Bank Share Loan Fund (1) Ra te
90% 10% $138,889 4.25%
70% 30% $178,571 7.25%
50% 50% $250,000 10.25%
30% 70% $416,667 13.50%
1. Assumes Clty share 1S 5125,000 1n all cases.
The greater the Clty'S share 1n the loans, the lower the lnterest
rate charged to borrowers. The Clty'S deposlt would be drawn
down lncrementa1ly each month as determlned by the Clty to cover
the CltylS share of the projected demand for energy loans that
14-15%.
The ba1 ance of the 1 n1 tl a1 depoSl t woul d still earn
The drawn-down funds would be loaned at the selected
month.
lnterest rate. The Clty would earn no lnterest on 1tS funds out
on loan. As the bank recelves monthly payments on the loans, the
Clty'S share of prlnclpal would be depos1ted at 14%-15% untll
drawn down aga1n.
B of A would serV1ce all loans at no extra charge. The bank
would
wa1ve
ong1natlon
fees
and
absorb t1t1e search,
recordat10n, credlt report and processlng fees. These serVlces
could otherwlse cost borrowers approxlmately $250.00 per loan.
Loan terms would be a maXlmu~ of 5 years. All loans would be
secured by a deed of trust on the property to be lmproved. The
Clty and bank would share defaults proportlonally, depend1ng on
the compensatlng balance arrangement selected. For example, wlth
3
GS:SES:NB:KS .
Counc1l Meet1ng:A 1 13, 1982
sant~on1ca, Cal1forn1a
a 50% compensat1ng balance, the Clty would be at r1sk for half of
each loan.
No down payment would be requ1red. However, each borrower would
be requlred to make a deferred down payment of 25% of the loan
prlnc1pal 1n June of the year follow1ng the loan. Th1S enables
more loans to be made the follow1ng years. MaX1mum loan amounts
would be $4,000 for slngle-fam1ly solar and $1,000 per dwell1ng
un1t for mult1-fam1ly solar, up to a maX1mum of $20,000 per
apartment bU1ldlng.
It appears that the 13.50% loans would be marketable. The local
chapter of the Cal1forn1a Solar Energy Industr1es Assoclat1on has
subm1tted a letter support1ng the 13.50% 1nterest rate because of
the larger total pool of funds Wh1Ch would be avallable at that
rate.
$416,667 would be ava1lable at th1S rate as 1nd1cated on
page 3. Ind1v1dual solar contractors have stated that they feel
the 13.50% rate 15 marketable to both 51ngle fam1ly and
multl-famlly property. Staff concludes that an lnterest rate of
13.50% would be marketable.
Program Goals
W, th a total loan pool of $416,667, and a loan 1 nterest rate of
13.50%, the flrst year goals for loan d1spersal would be as
follows:
4
GS:SES:NB:KS .
Counc1l Meet1ng:A 1 13, 1982
sant~on1ca, Cal1forn1a
30 Slngle-Fam1ly Solar Energy Loans
@ $4,000 Max1mum Amount-------~------ $120,000
10 Mult1-Fam1ly Energy Eff1c1ency Loans
@ $2,000 Average Amount-------------- $ 20,000
236 Un1ts Mult1-Fam1ly Solar Energy Loans
@ $1,000/Dwell1ng Un1t Max1mum Amount $236,667
4 Commerc1 al Loans
@ $10,000 Max1mum Amount-------------- $ 40,000
TOTAL LOANS $416,667
INSPECTIONS
The C1ty BU1ld1ng and Safety Department est1mates that an average
of SlX {6} solar water heat1ng systems were 1nstalled per month
1n Santa Mon1ca over the past year.
ApproX1mately 75% are on
slngle-fam1ly dwell1ngs and 25% on apartments and condom1n1ums.
Presently, 1nspect1on of these systems cons1sts of a slte V1S1t
by
the
plum bin 9
1nspector and the electr1cal 1nspector.
Inspectors check that the system 1S anchored f1rmly, that there
lS a pressure rel1ef valve, and that the system 15 hard w1red or
has a ground fault 1nterrupt. The 1nspect1on takes an average of
20 m1nutes.
BU1ld1ng and Safety has agreed to ass1st the MSCU w1th conduct1ng
more detalled lnspectlons of solar systems flnanced through the
MSCU on a p1lot bas1s.
All solar energy systems and energy conservat1on 1mprovements
would be 1nspected by the BU1ld1ng and Safety Department for
5
GS:SES:NB:KS .
Counc1l Meet1ng:Ap 1 13, 1982
sant~on1ca, Cal1fornla
conformance w1th safe construct1on practlces and the latest State
ReS1dent1al
Conservatlon
SerV1ces' requ1rements for energy
conservatlon
measures
and
Publ1C
Ut1l1t1es
Commlss10n
requ1rements or Cal1forn1a Energy Commlsslon requ1rements for
solar systems, wh1chever lS more recent. Local lnstallers would
be advlsed of the requlrements and only those systems adherlng to
the requlrements would be flnanced. In addltlon, lnstallers must
adhere to the equlvalent of the Callfornla Solar Energy Assurance
label (CalSEAL) consumer orotectlon program bondlng and lnsurance
requlrements 1n order to partlclpate.
SAVINGS
The projected energy savlngs alone from these lnstallatlons would
be equlvalent to 4,996 MMBTU per year or enough to supply the
annual heat1ng needs of 88 homes. Over 5 years, 24,978 MMBTU
would be saved.
Clty resldents taklng advantage of the loans
would save an estlmated $22,414 on thelr utl11ty bllls after the
flrst year. The value of savlngs would lncrease wlth rlslng fuel
prlces, whlch are projected to lncrease at 9.5% per year. Over 5
years, estlmated cumulat1ve savlngs are $170,769. Sample flrst
year cash flows for borrowers are attached as Appendlx A.
Accordlng to the State Franchlse Tax Board, slngle famlly and
multl-famlly property owners would be ellglble for the 40% state
lncome tax credlt on certaln conservatlon measures, and the 55%
state lncome tax cred1t on solar systems flnanced through these
6
GS:SES:NB:KS .
Councll Meetlng:A 1 13, 1982
san~onlca, Callfornla
loans.
These credlts may be carrled over lndeflnltely on future
state tax returns lf they exceed state lncome tax llablllty ln
anyone year.
Staff
has
asked Cal,fornla Solar Energy and Conservatlon
Development Authorlty (CalSECDA) legal consultants for an opinlon
on whether taxpayers would also be e11g1ble to c1alm a port1on of
the credlts agalnst federal lncome tax returns for lmprovements
f1nanced through the loan fund.
Federal law restrlcts tax
cred1ts lf government SUbsld1zed flnanclng 1S used.
Coord1natlon wlth Other Flnanc1ng Programs
The Clty'S loan fund wl11 be the only avallab1e source of
slngle-fam11y and mu1t1-faml1y solar loans at below market
lnterest rates. The commerCl al home lmprovement loan rate 1S
currently 18-1/4% for fl ve years. 5, x percent loans WhlCh were
offered by the Gas Company through a demonstratlon solar
f1nanclng program were very popular, but are no longer avallab1e.
Both the Gas Company and the Edlson Company plan to offer low
1nterest loans for energy efflclency (conservat10n) lmprovements
to s1ngle famlly and mult1-fam1ly property owners wlthln the next
year.
The Gas Company has recelved authorlzatlon from the
Cal1fornla Publ1C Utllltles Comm1ss10n to proceed wlth an 8% loan
program for certaln energy efflclency ~easures such as hot water
plpe lnsu1atlon and water heater 1"sulat10n.
The Gas Company
loans are expected to start ln July of 1982. The C1ty1s loan
7
GS:SES:NB:KS .
Councl1 Meet1ng:A 1 13, 1982
sant~onlca, Ca11fornla
program would flnance only those measures not e11g1ble for Gas
Company loans, such as 11ght1ng eff1clency converSlons, sWlmmlng
pool covers, and solar systems.
Llght1ng eff1clency and water
heater 1mprovements could cost up to $2,000 for a 21-un1t
bUl1dlng.
The
Edlson Company 15 expected to 1n1t1ate a
lOW-lnterest loan program slmllar to the Gas Company.s and a
rebate program for apartment 11ghtlng eff1c1ency converSlons 1n
June of 1983.
Both
ut111t1es
offer
cash
rebates
for
c erta 1 n en ergy
1mprovements.
The Gas Company offers an $8 per month per
dwe111ng un1t rebate for three years for apartment solar systems,
and the Ed1son Company offers $720.00 to slngle famlly electr1c
customers for solar water heatlng. Resldents who quallfy for
these rebates would also be el1g1b1e for the Clty loans.
Evaluatlon
Slnce th1s program 1S the Clty'S f1rst effort to f1nance energy
lmprovements, staff w1l1 evaluate the program results agalnst the
followlng objectlves:
1. By June 1983, 100% of the energy funds
wi 11 be loaned out.
2. Between June 1982-83, 20% of the domestlc
solar water heat1ng systems and energy
eff1c1ency 1mprovements lnstalled ln the
C1 ty w1l1 be f1 nanced through the MSCU.
ThlS evaluatlon would be accompl1shed by
a notatlon by the BU11dlng and Safety
Department on all solar energy and
conservatlon bUlldlng permlts.
8
GS:SES:NB:KS .
Councll Meetlng:Ap 1 13~ 1982
Sant~on1ca, Cal1forn1a
3. By June 1983~ 50 solar and energy
conservatlon 1nstallatlons w1ll be
flnanced by the MSCU.
4. By June 1983, 85% of customers 1nstall1ng
a solar energy or conservatlon
1mprovement f1nanced by the MSCU w1ll be
sat1sfled w1th the system performance and
costs.
5. By June 1983~ 1nstallatlons by the MSCU
w1ll save the equ1valent of 4~000 MMBTU
per year. Th1S evaluat10n wlll be
accompllshed by request1ng customers to
permlt the MSCU to analyze the1r ut1l1ty
b1lls for the two years preced1ng and
follow1ng lnstallat1on.
If there lS slgn1f1cant demand for the energy loans and the
program meets lts goals on a p1lot bas1s~ staff w1ll seek a
second year fund1ng source to cap1tal1ze the program that would
permlt the Clty to earn a hlgher rate of return on 1tS funds.
CalSECDA, a jOlnt powers author1ty to WhlCh the Clty belongs, lS
researchlng
bond
lssuances and other means of lower-cost
capltal1zat10n for 1tS members.
The follow1ng are unresolved lssues that must be settled 1n order
to successfully 1mplement the program:
1.
Determlne whether
from the fund are
energy tax credlts
tax cred1ts.
res1dents borrow1ng
el1g1ble for federal
1n addlt10n to state
2. Determlne WhlCh energy savlng measures
wlll be ellg1ble for forthcomlng utll1ty
company flnanclng programs and adjust the
program goals, lf necessary~ to avold
dupllcatlon of serVlces.
3. Establ1sh POllCY w1th the Rent Control
Board for amortlzatlon of apartment
property energy lmprovements.
9
GS:$ES:NB:KS .
Councll Meetlng:A 1 13, 1982
Sant~onlca, Callfornla
4. Establlsh lnspectlon procedure wlth the
BU11dlng and Safety Department, and adopt
the Unlform Solar Energy Code or another
code of lnstallatlon requlrements for
solar energy systems.
Staff sets a goal of resolv1ng these
1ssues by May 15, 1982 and lmplementlng
the program by June 1, 1982.
Recommendatlon
It 1S recommended that the Clty Councll approve the proposed
solar energy and conservatlon loan fund w1th a 30% compensatlng
balance of Clty funds and a loan lnterest rate of 13.50%. It 1S
further recommended that the C1ty Counc1l author1ze the Clty
Manager to negotlate w1th Bank of Amer1ca to establlsh the loan
fund and dlrect staff to resolve the unanswered lssues and
lmplement the program.
Prepared by: Stan Scholl
N1na Byrne
10
GS:SES:NB:KS .
Councll Meetlng:A 1 13, 1982
Sant~onlca, Callfornla
APPENDIX A
SAMPLE LOANS
SINGLE-FAMILY SOLAR WATER HEATER (Electrlc Replacement)
Sy stern P r 1 c e
$ 4,000.00
Flnance @ 13.50% for 5 Years
Flrst Year Monthly Payments
Total Flrst Year Payments
~
92.04
Rernalnlng Balance of Prlnclpal
$ 1,104.47
$ 1,000.00
$ 2,399.26
Deferred Down Payment of 25%
New Monthly Payments
X 4 Years
s
65.03
Total Payments
S 3,121.68
$ 5,226.15
SIMPLIFIED FIRST YEAR CASH FLOW
Flrst Year Loan Payment S 1,104.47
Deferred Down Payment $ 1,000.00
Energy Savlngs (Estlmated) (1) + $ 333.40
Tax Credlt of 55% + $ 2,200.00
Net Cash Flow + $ 428.93
(1) 4,885 KWH x .65 Efflclency x 10.5c/KWH = $333.40
11
GS:$ES:~B:KS ...
Councll Meetlng:A~l 13, 1982
san~onlCat Callfornla
SAMPLE LOANS
MULTI-FAMILY SOLAR WATER HEATER (Central Gas Replacement)
System Pnce
S10tOOO.00
$ 230.41
$ 2,764.89
$ 2,500.00
$ 6,000.16
$ 162.64
$ 7t806.82
$13t071.71
Flnance @ 13.50% for 5 Years
Flrst Year Monthly Payment
Fl rst Year Total Payments
Deferred Down Payment of 25%
Remalnlng Balance of Prlnclpal
New Monthly Payments
X 4 Years
Total Payments
SIMPLIFIED FIRST YEAR CASH FLOW
Deferred Down Payment $ 2t500.00
Flrst Year Loan Payments $ 2,764.89
Energy Savlngs (Estlmated) (1) + S 330.00
Tax Cred,ts of 55% + $ 5t500.00
Rebates from So. Ca 1 . Gas + $ 960.00
Net Cash Flow + $ 1,525.11
(1) 195 Therms x 10 Unlts x .65 Efflclency
x 30.5c/Therm = $386.59
12
.
.
ADOPTED AND APPROVED THIS
23rd
DAY
OF
November
, 1982.
./l
;' I //J ~
f ~ ...,
! !. Ii ~ / '
Uurk -jl.~cd ., it),;!.{
~ MAYOR .
I HEREBY CERTIFY THAT THE FOREGOING ORDINANCE,
NO. 1263
(CCS), WAS DULY AND REGULARLY INTRODUCED AT A
MEETING OF THE CITY COUNCIL ON THE 9th DAY OF 'YoveJTlber
1982; THAT THE SAID ORDINANCE WAS THEREAFTER DULY ADOPTED
AT A MEETING OF THE CITY COUNCIL ON THE 23rd DAY OF\'ovember
1982 BY THE FOLLOWING SCJ~CIL VOTE:
AYES:
COUNCILMEMBERS: Conn, Ed"ards, Jennln~s, Press, Reed,
Zane and 'fa"'oy 'Vannatta Gold.\'av
NOES:
caUNC I LMEMB E RS: :Jane
ABSENT:
C OUN C I LMEMB E RS: Kone
ABSTAIN:
COUNCILMEMBERS: \one
ATTEST:
r~m
CLERK
-,NJrow- T"; 7'2!i".~__~"""'J:;f ~--.po'-":G,,:=:;..:'.i"~-*-~-""~-:__ ~ ~-- ~::. +-=:.~.:.-~-...;~.--"":~-_.. 10'" - -:------....~-....-.y....._......__.~~::~--oF'.(.;::--..:::.::':.---=:=-'~~-~;.c-:......":-~
'11f::~~i_,m~~f~~Lili-_'-~~~~.~'~~r~-_~~.~ICL1~-i!~~~1~A~ n '..I..l.~_~.~A'~~'~"li
~---~ - . i~--' -.... --~l!"-w-....?- ..11..1 -f III - ~I I" -~ ~- ~ . l~ 1-. -. _ . .-___1. ..-:__:----_---:~ _. _n_ -...- .----.... _..~
.
.
...
declares that it would have passed this ordinance and each and
every
section,
subsectlon,
sentence,
clause or phrase not
declared invalid or unconstitutional without regard to Whether
any portion of the or~lnance would be subsequently ~eclared
invalid or unconstitutional.
SECTION 4.
The Hayor s11all sign
and the Clty Cler~ shall attest to the passage of this or~inance.
Thls Clty Cler~ shall cause the s~e to be published once in the
official newspaper withln 15 days after its adoption. The
ordinance shall become effective after 30 days from its adoption.
APPROVED AS TO FO~~:
/"~. -~.;. {.
/. .. ...... ~-~ r.... ).-4::'
--: . ~ ~ ~-
'j ~~ ...c~ ~i"~
(~
Robert H. Myers \.sl
City Attorney
3
~~-
.
.
I<
municipal solar utility or from a lessor granted a permit from a
nunlcipal solar utility provlded the mun~clpal solar utility was
created by ordlnance by January 1, 1983; and
~~EREAS, the C~ty desires to establish a r~nicipal Solar
Utility to effectuate the purposes of this ordinance,
NC~'J , THCREFORE,
THE CITY COU~CIL OF THE CITY OF SANTA
~ONICA COES ORDAr~ AS FOLLOWS:
SECTION 1.
Section 2203 is added to the Santa r10nica
nunlcipal Code to read as follows:
There is hereby created as a
division of the General Services
DeparD~ent a Mun~clpal Solar Utility.
The Mun~cipal Solar Utllity shall develop
and lmpl~ent a solar leasing prograM and
other progra~s WhlCh shall be uoopted and
from time to t~e anended by resolution
of the City Council.
SECTION 2. Any provlsion of the Santa Monica Municipal
Code or appendices thereto inconsistent with the provisions of
this ordinance,
to the extent of such inconslstencies and no
further, are hereby repealed or modified to that extent necessary
to affect the provls1ons of thlS ordinance.
SECTION 3_ If any section, subsection, sentence, clause,
or phrase of this ordinance lS for any reason held to be invalld
or unconstltutional by a decision of any court of any competent
]urlsdiction, such decision shall not affect the validity of tDe
remalning portlons of the ordinance. The City Counell hereby
2
.
.
,
CA:RMM:r
City Council Meeting 11-23-82 Santa Monica, California
ORDINANCE Nill1BER 1263(CC5)
(City Council Series)
AN ORDlRANCE OF THE CITY COUNCIL
OF THE CITY OF SANTA MONICA ADDING
SECTION 2203 TO THE SANTA MONICA
MV~ICIPAL CODE ESTABLISHING A
MUNICIPAL SOLAR UTILITY
vlliEREAS,
the application of solar energy systems and the
efficient
use
of
conventional
energy sources in homes,
businesses, and ~ndustries in the City will reduce utility bills
for residents, stiMulate the local econo~y, create private sector
Jobs, reduce air pollution, and mitigate the potential adverse
effects of future fuel shortages; and
WHEREAS,
the City desires to promote the use of solar
energy systems and energy efficiency measureSi and
r~IEREAS, barriers to the increased use of solar energy
systems lnclude high initlal cost and consumer uncertainty; and
WHEREAS,
a solar energy system leasing program utilizlng
prlvate lessors and consumer protectlon procedures can reduce
those barriers; and
WHEREAS,
the City deSlres to facilite the leasing of solar
energy systems and to assist in the prevention of fraudulent
leasehold-marketing practices; and
WHEREAS,
the Revenue and Taxation Code provides that tax
credits are available for solar energy systems leased from a
1