Energy
Financing Initiative for Renewable and Solar Technology – FIRST
To meet climate action goals to reduce greenhouse gas emissions by creating a funding mechanism for property owners to be able to finance solar PV installations.
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Berkeley FIRST is a solar financing program offered by the City of Berkeley, providing property owners with the means to borrow money from the City’s Sustainable Energy Financing District for solar photovoltaic electric system installation. The city first issues bonds on behalf of the Special Tax District and then uses the sale proceeds of the bonds to finance the installation of the solar photovoltaic systems for Berkeley property owners.
The advantages of the Berkeley FIRST program for the property owner include: relatively little up-front cost to the property owner; the cost for the solar system is paid for through a special tax on the property, and is spread over 20 years; the financing costs are comparable to a traditional equity line or mortgage; and since the solar system stays with the property, so does the tax obligation — if the property is transferred or sold, the new owners will pay the remaining tax obligation.
The Berkeley FIRST program is an easily replicable policy that serves to alleviate some of the up-front funding issues related to financing solar photovoltaic installations. By sharing the underlying principals of the Berkeley FIRST program, other cities may learn how they too can form Special Tax Districts (Sustainable Energy Financing Districts) in their communities.
By encouraging renewable energy, the City of Berkeley is helping property owners reduce their greenhouse gas emissions and combat climate change. In addition, this program serves as an educational tool to help residents understand the need for both renewable energy and overall energy efficiency.
Staff conducted three public information workshops on the Berkeley FIRST program in community centers across town as well as one specifically for solar installers. Links to the PowerPoint presentations for these workshops are located online; in addition, there was active outreach through press releases that were picked up locally as well as nationally and internationally.
Berkeley FIRST is a solar financing program offered by the City of Berkeley. It provides property owners an opportunity to borrow money from the City’s Sustainable Energy Financing District to install solar photovoltaic electric systems and allow the cost to be repaid over 20 years through an annual special tax on their property tax bill
• There is relatively little up-front cost to the property owner.
• The cost for the solar system is paid for through a special tax on the property, and is spread over 20 years.
• Property owner chooses their own solar installers
• Fixed interest rate for the entire 20-year period
• Since the solar system stays with the property, so does the tax obligation
Not yet available. The FIRST program is currently in its pilot stage and will initially fund 40 installations distributed throughout Berkeley. It provides financing up to $37,500 per installation for either residential or commercial properties.
After the completion of the pilot project (summer of 2009) there will be an evaluation conducted that will measure the outcomes and overall success of the Berkeley FIRST program. Depending on the success of the program and the availability of future funding, it is anticipated that there will be additional application cycles. Future phases of the program may include funding for solar thermal hot water installations and energy efficiency home performance upgrades.
Berkeley FIRST received wide support from the community who see the program as a benefit to property owners. The solar installer’s industry also supported the Berkeley FIRST program and helped to publicize it with their customer base. Because the special tax district only affects those who will voluntarily choose to participate in the program, little-to-no opposition was voiced at the City Council meeting when the ordinance was heard. In fact, its popularity has been quite dramatic; a mere nine minutes after the on-line application opened, 40 applications had been received. And by the close of the two-week application period, the number of applications had reached 77. The Berkeley FIRST program has attracted international and national attention including press and interest from other city department administrators who are looking to replicate the program in their home communities.
The City Council allocated $1.5 million in bond funding for the pilot project to finance up to 40 solar PV installations.
The City of Berkeley pays for the capitol costs of the individual solar installations through proceeds derived from the sale of the Berkeley FIRST bonds. The bonds are then repaid from an incremental tax charged on the participating property owner’s tax bills over 20 years. A critical aspect of the development of this program has been to create a financing structure that yields sufficient revenue to make principal and interest payments to the investors, as well as the necessary administrative costs of the program, while at the same time remaining competitive with other available funding mechanisms for solar installation.
Renewable Funding LLC is under contract with the City of Berkeley as the third party administrator and the financier for the Berkeley FIRST program. Renewable Funding oversees the application process and purchases the Berkeley FIRST bonds as they are issued. The costs for the City of Berkeley to administer the program include 1 full-time staff to manage the program and on-going additional support from part-time staff as well as $80,000 in consulting fees for attorney, financial advisors and outside evaluators.
The City Council approved an amendment to the Berkeley Municipal Code (BMC) to create the Special Tax Financing Law (new BMC Chapter 7.98). The Special Tax Financing Law was created under the City’s Charter authority and incorporates by reference the provisions of the Mello-Roos Act of 1982, allowing for the creation of a special tax financing district. Community Facilities Districts are used statewide and have become an important component of local government finance. The Sustainable Energy Finance District extends this idea to allow private property owners to use property tax bills as a financing tool in order to install energy efficient improvement on their own property. Ultimately this code grants legal authority to finance solar and energy efficiency improvements for private property, which is not currently allowed under the Mello-Roos Act. The Special Tax Financing Law is the implementing legislation that allows for the creation of the Sustainable Energy Financing District.
The Sustainable Energy Financing District was developed as part of the City’s implementation of Measure G – a ballot measure setting greenhouse gas reduction targets for Berkeley and directing the Mayor to lead the development of a plan to meet those targets. The idea for Berkeley FIRST came from the Mayor’s Office staff but was implemented by the Office of Energy and Sustainable Development, a unit of the Planning Department.
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