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CONSIDERATION OF APPROVING AN ENERGY SERVICE CONTRACT
RESOLUTION NO. 2017-227 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN ENERGY SERVICE CONTRACT WITH JOHNSON CONTROLS, INC.
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RECOMMENDED ACTION
Recommended Action
Council adopt the resolution.
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SUMMARY
Internal Revenue Code Section 54C provides for issuance by local governments of Clean Renewable Energy Bonds (or “CREBs”) to finance energy efficiency projects at subsidized interest rates. On July 10, 2017, the City entered into a project development agreement with JCI for the Energy Conservation Performance Contract in order to develop the necessary calculations for a CREBS application submittal. On August 3, 2017, the City received approval letters from the IRS for thirteen separate CREBS eligible projects totaling $17,774,627. The contract attached for your consideration would authorize JCI to design and install a total of 2.437 MegaWatts of solar panels at 12 City facilities and 120 kW of battery storage at 2 City facilities at a not to exceed cost of $13,454,759
ENVIRONMENTAL REVIEW
Environmental Notice
Environmental Notice
The Project qualifies for a Class 3 Categorical Exemption pursuant to Section 15303 (New Construction or Conversion of Small Structures) of the California Environmental Quality Act State Guidelines.
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Environmental Determination
The Director of Development Services has reviewed the proposed project for compliance with the California Environmental Quality Act (CEQA) and has determined that the project qualifies for a Class 3 Categorical Exemption pursuant to Section 15303 (New Construction or Conversion of Small Structures) of the State CEQA Guidelines. Thus, no further environmental review is required.
BOARD/COMMISSION RECOMMENDATION
N/A
DISCUSSION
The CREBs program provides a mechanism for the City to obtain a federally subsidized interest rate for debt issued to fund City projects that reduce energy use and the associated greenhouse gas emissions. The staff has identified a number of sites throughout the City that could benefit from the installation of solar photovoltaic panels, which are one of the permitted projects that may be financed with CREBs. Possible sites include City’s Civic Center, Police Station, Montevalle Recreation Center, Loma Verde Aquatic Center, Parkway Aquatic Center & Gymnasium, Main Civic Center Library, Boys & Girls Club, Public Works Facility, Mount San Miguel Park, Animal Care Facility, Salt Creek Recreation Center, and the South Chula Vista Library.
The federal government requires a comprehensive application be submitted for an allocation to issue CREBs. Staff solicited proposals from two consulting firms that specialize in energy efficiency projects eligible for CREBS consideration. The application also requires input from an underwriter (Brandis Tallman), bond counsel (Stradling Yocca Carlson & Rauth), and financial advisor (Harrell & Associates). The “Financing Team” completed the CREBS application in late July 2017 and received a response from the IRS accepting all 13 projects submitted on August 3, 2017. After additional analysis it was determined that one of the projects, the Elite Athlete Training Center, was not financially feasible and was therefore removed from consideration.
A CREBs allocation does not guarantee that a bond issuance will occur. The projected energy savings that will be generated from the energy retrofits for each individual facility must exceed the financing costs in order for an individual project to be deemed economically feasible. The City’s financial advisor has put together preliminary savings numbers in Attachment 3 assuming interest rates stay fairly steady over the next several months. Staff will return to the City Council for authorization of CREBS bonds in the near future.
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council members and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. Consequently, this item does not present a disqualifying real property-related financial conflict of interest under California Code of Regulations Title 2, section 18702.2(a)(11), for purposes of the Political Reform Act (Cal. Gov’t Code §87100,et seq.).
Staff is not independently aware, and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. This item initiates the process to utilize renewable energy solutions at multiple sites throughout the City. This utilization achieves both the Operational Excellence and Economic Vitality goals by creating energy systems that are conservation-minded and more fiscally efficient than the components they will replace.
CURRENT YEAR FISCAL IMPACT
There is no current year fiscal impact as a result of this contract approval. An item will be brought forward to Council in the near future that will authorize the issuance of bonds that will pay for all costs related to this project.
ONGOING FISCAL IMPACT
Assuming interest rates stay fairly steady until bond issuance, the annual savings to the City is projected at $100,00 to $280,000 over the next 25 years. After 25 years the annual savings will jump to over $1.5 million after the bonds are paid off.
ATTACHMENTS
Attachment 1 - Performance Contract, JCI
Attachment 2 - Savings Projections
Staff Contact: David Bilby, MSBA, CPFO, Director of Finance/Treasurer