HomeMy WebLinkAboutItem 7.2 Energy Saving Project~~~~ Off' nU~~~
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DATE:
TO:
FROM:
STAFF REPORT
CITY COUNCIL
CITY CLERK
File #600-30
May 15, 2012
Honorable Mayor and City Councilmembers
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Joni Pattillo, City Manager ° ~'
SUBJECT: Authorization to Explore Possible Financing of Energy Saving Projects including a
Lease Purchase Arrangement
Prepared by Paul S. Rankin, Administrative Services Director
EXECUTIVE SUMMARY:
The City is working with Chevron Energy Solutions to present a comprehensive strategy to
reduce the City's consumption of energy. In order to present the City Council with a
comprehensive package, Staff has discussed with the Consultants options to finance the
projects using a lease purchase financing. In order to explore this further and to obtain a firm
cost of financing, Staff is requesting that the City Council authorize obtaining non-binding rate
locked commitments from financing entities. The City Manager would also be authorized to
execute anon-binding commitment based on the proposal which best met the needs of the City
at the lowest cost. The financing would require a City Council approval of the authorization at a
future City Council meeting where the full project scope will be presented.
FINANCIAL IMPACT:
The preliminary estimate of the cost of improvement, results in total financing required of
approximately $7.6 million. The source of funding may include a combination of funding
sources based on the final project scope. The concept is to use energy savings to offset the
cost of financing the improvements, plus possible contributions from City Internal Service funds,
and energy grants obtained as part of this project. The current activity will only explore the
costs of a lease purchase financing and will not commit the City, without further approval from
the City Council. The proposals will seek lease terms that are in the range of 15 years.
RECOMMENDATION:
Staff recommends that the City Council authorize the City Manager to execute anon-binding
rate lock for lease purchase financing of energy saving projects as described in this report. The
final approval shall be subject to City Council approval.
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Submitted By Reviewed By
Administrative Services Director Assistant City Manager
DESCRIPTION:
Page 1 of 2 ITEM NO. 7.2
On May 3, 2011, the City Council authorized the City Manager to enter into an agreement with
Chevron Energy Solutions to conduct a comprehensive energy audit of all the City's facilities.
The Consultant is nearing the completion of identification of projects that can produce energy
savings for the City. Staff is planning to present the comprehensive report to the City Council on
June 5, 2012.
Given the potential scope of improvements, the report will include an element on methods for
financing the improvements. The study has identified, over the long term, the cost of
improvements that can be funded through expected energy savings. This project may,
however, require an initial capital outlay of approximately $7.6 million. This is an estimate as
the final project scope and costs are being finalized. One option is to evaluate lease purchase
financing of the improvements. The parameters under review would seek a lease with a 15 year
term. The security for the lease would be the improvements and the ownership reverts to the
City at the end of the lease.
In order to obtain realistic and firm commitments for financing, Staff is proposing to work with
Chevron Energy Solutions to solicit proposals for a lease purchase. Chevron Energy Solutions
would prepare and coordinate a Request for Proposal (RFP) to secure the most competitive
financing rate from several banks. In order to lock in the rate with the bank that has the most
competitive rate and terms, it is typical that the City would need to sign anon-binding proposal
which is subject to City Council approval.
The information provided through the non-binding proposal would allow Staff to present, on
June 5, 2012, a complete package including costs associated with financing. If the City Council
concurs and decides to move forward with the energy efficiency and renewable project, the next
step would be to present for City Council consideration, at the June 19, 2012 meeting, approval
of the financing agreement.
NOTICING REQUIREMENTS/PUBLIC OUTREACH:
A copy of this Staff Report was provided to Chevron Energy Solutions.
ATTACHMENTS: None
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