MEETING DATE:
SEPTEMBER 24, 2024
SUBJECT:
Title
RESOLUTION NO. 2024-9357 - APPROVING A RESOLUTION IN ACCORDANCE WITH COUNCIL POLICY 2012-04 TO APPROPRIATE AND UTILIZE UP TO $466,000 IN ONE-TIME RECURRING SAVINGS/OPPORTUNITY RESERVE FUNDS TO PROCURE AND INSTALL A SOLAR ENERGY SYSTEM AT THE CORKY SMITH GYM FACILITY
Body
Recommendation
Recommendation
ADOPT resolution approving the use of one-time recurring savings/opportunity reserve funds to procure and install a solar energy system at the Corky Smith Gym and delegate authority to the City Manager to negotiate and execute a contract with Core Energy Solutions for equipment and installation.
Body
Relevant Council Strategic Theme
Planning for the Future
Good Governance
Executive Summary
The Corky Smith Gym is slated for a solar energy system installation to enhance sustainability and reduce costs, aligning with the City’s Climate Action Plan. Core Energy Solutions, a sole source vendor, will install a system that will cover 40% of the gym's energy needs, saving about $60,000 annually. With available federal tax credits potentially reducing the initial cost from $466,000 to $280,000, the system would pay for itself in about 4.5 years. The One-Time Recurring Savings/Opportunity category of the General Fund Reserve Policy allows for opportunities that will result in future efficiencies and will provide funding for the project.
Discussion
The Corky Smith Gym has been identified as an optimal location for the installation of a solar energy system. This initiative supports the City’s Climate Action Plan (CAP) goals by reducing carbon emissions and energy costs.
Procurement
Core Energy Solutions possesses a unique and cost savings benefit for this project based on prior work provided and thereby the sole source provider for this project. In early 2023, the Boys & Girls Club (BGC) partnered with the City on a project to install solar infrastructure on the roof of the Corky Smith Gym. The City owns the BGC building and the City allowed access and an agreement for the BGC to install solar on the facility. Core Energy was contracted by the Boys & Girls Club to research, design and install the project. During this process, Core Energy secured a Net Energy Metering (NEM) 2.0 reservation for the site that includes both the Corky Smith Gym and the Boys & Girls Club. The BGC and Corky Smith Gym share the same electric service infrastructure which is what led to the partnership and why they were able to secure a NEM 2.0 reservation for the entire site. Since that time, the NEM 2.0 program is no longer available, and NEM 3.0 is the current program. NEM 2.0 has far greater benefits to the City than the new NEM 3.0 program, such as the ability to receive credits at the full retail rate for any excess electricity sent to the grid, as well as time-of-use rates, and no grid participation charge. The NEM 2.0 reservation is not transferable to another vendor so if a new vendor was chosen, the City would lose the NEM 2.0 reservation, compromise the continuity of the project and be required to instead work under the new Nem 3.0 regulations which would not be as financially favorable to the City .
The new NEM 2.0 system will produce approximately 40% of the annual energy consumed at the gym facility which equates to a savings in the first year of roughly $60K. This savings would increase over time under the assumption that energy rates continue to climb as they historically have and with potential federal tax credits, the system would pay for itself in about 4.5 years.
The project will include procuring Photovoltaic (PV) panel installation on the gym’s roof, integration with the existing electrical infrastructure, structural enhancements to support the solar panels, installation of inverters, monitoring equipment, and other necessary components as well as testing and commissioning of the final system.
Financial Implications:
The Inflation Reduction Act (IRA) of 2022 extended and expanded the federal tax credits for clean energy technologies providing opportunity for the City to take an active role in building clean energy and demonstrate climate leadership, also known as the IRA “elective pay” (often called “direct pay”). For the first time, tax-exempt governmental entities will be able to receive a direct payment equal to the full value of certain tax credits.
The total initial project cost is about $466K, covering all aspects of the equipment, installation including materials, labor, and associated expenses. However, after meeting direct pay and tax credit requirements, the net cost to the City could be about $280K. The tax credits being sought by the City for this project allows 30 percent of the cost as eligible for a rebate incentive as well as an additional 10 percent due to the fact that the project location is in a low-income community. The potential 40% total incentive equates to about $186K, which would be credited to the City by the Department of Treasury as a direct payment after the project is complete and in service.
One-Time Recurring Savings/Opportunity Reserve Funding:
The One-Time Recurring Savings/Opportunity Reserve was specifically designed to facilitate such investments which result in future efficiencies, ensuring that critical projects like this solar system can proceed while maintaining fiscal responsibility. Funding for this project will be drawn from the City’s One-Time Recurring Savings/Opportunity Reserve category of the General Fund Reserve Fund, which is governed by City Council policy No. 2012-04. Use of up to $466K of the reserves will maintain the minimum 40% reserve requirement.
Per the above analysis, staff recommends that the council approve budget appropriation from the One-Time Recurring Savings/Opportunity Reserve category of the General Fund Reserve for the full solar project and that the City Council delegate authority to the City Manager to negotiate and execute a contract with Core Energy Solutions to complete the design, procurement, and installation of the system.
Environmental Review
The activity performed under this action is not a “Project” as defined under Section 15378 of the CEQA Guidelines; and, is therefore not subject to environmental review pursuant to CEQA Guidelines section 15060(c)(3). The construction of the project will be evaluated for compliance with CEQA prior to the onset of construction.
Fiscal Impact
Appropriate up to $466K from the One-Time Recurring Savings/Opportunity Reserve category of the General Fund Reserve Fund within the FY 2024-25 operating budget and delegate authority to the City Manager to negotiate and execute a contract for solar equipment and installation with Core Energy Solutions.
Attachment(s)
Resolution
Prepared by: Darren Chamow, Public Works Director
Submitted by: Darren Chamow, Public Works Director
Reviewed by: Donna Apar, Finance Director
Approved by: Michelle Bender, City Manager