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County approves participation in California FIRST program

The San Diego County Board of Supervisors approved the County of San Diego’s participation in the California FIRST program to help homeowners finance renewable energy systems and energy efficiency devices.

The supervisors’ December 8 vote adopts the resolutions necessary for participation in the program and also directs the county’s Chief Administrative Officer to consider in future budgets any additional funding which may be needed to support permit fee waivers for solar energy installation as a result of the increased installations expected from the financing program. The Chief Administrative Officer was also directed to communicate the county’s participation in the California FIRST program to the county’s 18 incorporated cities.

Renewable energy devices such as solar energy systems and other energy efficiency improvements such as new windows, roofing, and insulation save an energy customer money over time but can be expensive to install. The State of California recently passed Assembly Bill 811, which allows municipalities to create financing programs which enable immediate installation of renewable energy or energy efficiency devices with repayment through property tax bills.

(The state legislature subsequently passed Assembly Bill 474, which extended similar authority for the financing of water efficiency projects.) While AB 811 did not provide a source of funding for those programs, the California Center for Sustainable Energy has worked with potential partners for external financing.

In 1988, the California State Association of Counties and the League of California Cities worked together to create a joint powers agency called the California Statewide Communities Development Authority (CSCDA). Although CSCDA membership is not required to participate in programs, the County of San Diego is a member.

The CSCDA was created to provide local governments, non-profit public benefit corporations, and private entities, with access to low-cost, tax-exempt financing for projects which create jobs, help communities prosper, and improve the quality of life of local residents.

The CSCDA has statutory authority to issue bonds, notes, or other financing documents in order to promote economic development (including the provision and maintenance of multi-family housing), although in the case of a private or non-profit recipient the jurisdiction in which the project is located must approve the project and financing in order for the CSCDA to issue the financing mechanism. Since its inception the CSCDA has issued more than $44 billion of tax-exempt bonds.

In response to AB 811, CSCDA created the California FIRST program which will issue bonds to finance property-assessed clean energy (PACE) improvements. Participation is voluntary for property owners, and contractual assessments will be levied on a property to repay the bonds. Renewable Funding LLC and RBC Capital Markets will provide administration and financing for the California FIRST program.

Property owners who choose not to participate will have no impact to their property tax bills, although if a property is sold the obligation stays with the property. The long-term repayment through property tax bills thus addresses the deterrent that the initial homeowner might not stay in the home long enough to reap the return on investment for the energy-saving systems.

Because the benefitting property can be used as security, strong personal credit is not necessary although personal credit history may affect the interest rate paid, which is expected to range between seven percent and 10 percent. Although the financing program includes a 20-year repayment period, the property owner can choose to pay off the assessments at any time prior to maturity of the repayment.

California FIRST will create a Web site with information for interested property owners and will provide a toll-free telephone number and e-mail address to address public inquiries. The California FIRST program will also coordinate directly with property owners for application processing, eligibility determination, quality assurance and customer service. The program includes an energy audit for property owners, since in

some cases other energy-efficient devices may be more feasible than solar panels.

A 5-0 Board of Supervisors vote September 23 directed the county’s Chief Administrative Officer to explore the cost, benefits and feasibility of implementing two potential financing programs and to return to the supervisors with a recommendation.

One option was for the county to join the statewide California FIRST program while the other involved the county contracting for a stand-alone program specific to San Diego County. The California FIRST program advantages include lower set-up and administrative costs while a stand-alone program would allow for greater flexibility.

The one-time legal, marketing, and technology set-up costs to join California FIRST are estimated at $25,000. The one-time set-up cost for a stand-alone program was estimated at $50,000.

The California FIRST program allows some customization in the design of a program but involves some standardization in offerings, and local residents will compete with individuals throughout the state for funding. Access to the municipal bond market through California FIRST is also expected to create a lower borrowing cost than if the county had implemented a stand-alone program.

On numerous occasions the county has worked with CSCDA to finance affordable housing projects. The county has also worked with CSCDA to securitize receivables from involuntary state loans; in February 2005 the county supervisors approved the sale of Vehicle License Fee revenue receivables to CSCDA which then sold the receivables to bondholders and in October 2009 the county approved securitization of the state’s planned repayment of local government revenues taken by the state in the 2009-10 budget process.

In addition to the one-time costs, the Auditor and Controller’s Office will incur staff time costs to add the assessments to property tax bills, although those costs can be recovered by the administrative fees assessed to participating property owners.

In July 2001, the county supervisors approved a waiver of permit fees for photovoltaic installations, although permits which include a plan review and inspection of equipment to insure proper installation and compliance with building codes are still required.

The county’s current subsidy for such waivers is approximately $200,000 annually, and participation in the California FIRST program will increase the cost to the county to process the fee-exempt permits.

Although the County of San Diego has been receiving calls from interested homeowners, the public rollout of the program does not begin until summer 2010.

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