LAKEPORT >> The Lakeport City Council will resume talks on the proposed solar power project at its regular meeting today and explore its financing options.
In a staff report to the council, Finance Director Dan Buffalo presented three ways to get the approximately $2.9 million endeavor developed: a full purchase of the system, a prepaid power purchase agreement (PPA) with a buyout or have the company own it while the city pays for the energy produced at planned facilities off Highway 175 and Linda Lane.
Despite the cost, the finance department projects cash flow savings for each possibility from about $5 million to more than $8 million (the PPA). That’s because the two-system power system would significantly decrease the city’s reliance on PG&E for its operations such as sewer and water. According to Buffalo, the city pays nearly $20,000 a month to the utility giant.
“Cost savings benefit the entire city agency, notably the general fund, water fund, and sewer fund,” he said. “Each would benefit based on its historical share of energy consumption.”
The first two choices would most likely require private 15-year financing from a bank or other lending institution, Buffalo said, because grant funding wasn’t available.
“We didn’t find anything reasonable for the city to pursue,” he added.
If the direct purchase is chosen, the city would own the system outright but it would require a loan for the full amount.
On the other hand, the latter option — which Buffalo is recommending — would require a loan for 82 percent of the cost ($2.28 million). However, the city wouldn’t own the solar panels until the contracted company’s federal tax credits run out and it pays a residual cost. The time and price of the buyout will be negotiated, but the finance director roughly estimated it to occur in the 10th year and cost about $70,000.
“It depends on the appraisal of the system,” he said, explaining how the amount is determined. “We’d have to identify what the best benefit is for the city and go from there.”
The financed options would also come with debt issuance costs (similar to closing fees) and would require the city offer some of its assets, like real estate holdings, as collateral.
Yet, the savings would eventually pay for the project because the lifetime of the arrays is 25 years. According to his report, the city will pay back the loan in 15 years and will have ten additional years to collect. The city projected that the panels would save them $645,000 in its last year.
Even the residual cost should be easily paid as Buffalo claimed it was “well within the operating margin.”
When asked why he didn’t recommend the last option, he said that his calculations had the least cost savings despite having no cost to the city except the electric bill.
“It comes down to what the total savings would be,” he said. “I see a lot more benefit for the second option.”
If approved the city would have to expend $20,000 from the General, sewer, and water funds to secure financing via professional services and part-time employees.
The meeting begins at 6 p.m.
