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Berkeley FIRST Financing Initiative for Renewable and Solar Technology *** Sustainable
Energy Financing District Program
Description With the current state and
federal subsidies, installation of solar electric and solar thermal
systems are cost effective for many residential and commercial property
owners. However,
disincentives to installation remain, particularly the high upfront cost
and other financial hurdles. Berkeley’s
proposed “Sustainable Energy Financing District” would address many of
those disincentives. The
citywide voluntary Sustainable Energy Financing District would allow
property owners (residential and commercial) to install solar systems and
make energy efficiency improvements to their buildings and pay for the
cost as a 20-year assessment on their property tax bills.
No property owner would pay an assessment unless they had work done
on their property as part of the program.
Those who do have work done on their property would pay only for
the cost of their project and fees to administer the program.
The City would secure the upfront funding through the placement of
a taxable bond. The
financing mechanism is loosely based on existing “underground utility
districts” where the City serves as the financing agent for a
neighborhood when they move utility poles and wires underground.
In this case, individual property owners would contract directly
with qualified private solar installers and contractors for energy
efficiency and solar projects on their building.
The City provides the funding for the project from a bond or loan
fund that it repays through assessments on participating property
owners’ tax bills for 20 years. The
Financing District solves many of the financial hurdles facing property
owners. First, there would be
little upfront cost to the property owner.
Second, the upfront costs are repaid through a voluntary tax on the
property, therefore funding approval is not determined directly by
property owner's credit or the equity of in the property. Third, the
total cost of the solar system and energy improvements is comparable to
financing through a traditional equity line or mortgage refinancing
because the well-secured bond will provide lower interest rates than is
commercially available. Fourth,
the tax assessment is transferable between owners.
Therefore, if you sell your property prior to the end of the
20-year repayment period, the next owner takes over the assessment as part
of their property tax bill. Property
owners and their contractors would be required to agree to certain terms
and conditions mandating energy efficiency steps, appropriate warranties,
and other performance measures to take advantage of the financing. The
Berkeley City Council has the legal authority to create this Financing
District under its authority as a Charter City.
Currently, the City has completed its initial legal and financial
review and is now beginning to work with solar installation companies on
program design. The City
Council unanimously approved the concept and framework of the program in
November. The goal is to
formally approve and launch the pilot phase of the program in the summer
of 2008. The Sustainable Energy Financing District is being developed as part of the City’s implementation of Measure G – last year’s ballot measure setting greenhouse gas reduction targets for Berkeley and directing the Mayor to lead the development of a plan to meet those targets. (Updated December 26, 2007) |
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