Consideration and Approval of Financing:   Capital Financing for Solar Photovoltaic Systems

Consider awarding a contract to Banc of America Public Capital under RFP No. 2013-24 to authorize capital financing for the installation of up to four (4) solar photovoltaic electric energy generating systems on City property including the Airport, Aquaplex, Rio de Flag Wastewater Treatment Facility, and Wildcat Wastewater Treatment Facility.

To commit the City to the generation of safe, reliable, and long-term affordable power that achieves a balance between high quality, long-term, low-cost energy, and the environmental impacts of energy resources.

Arizona Public Service energy incentives, capital financing interest rates, and construction costs are leveraged to make the project cash flow positive within the first two (2) years.  The projected cash flow is attached.  The cost of the financed structures will be paid through energy savings and there is no annual cost increase to the City. 

Effective governance.

Yes.  On March 15, 2010 the Council awarded a contract to Ameresco for the installation of solar services.

• Approve the recommended financing to continue the City's commitment to green energy sources
• Reject all bids and direct staff to research other financing mechanisms for this project.
• Reject all bids and return renewable energy incentives to Arizona Public Service

In November 2009, staff was directed to develop renewable energy systems on City properties.  In March 2010, a solar installation contract was awarded to Ameresco (formerly APS Energy Services).  Phase 1 and 2 installed three (3) solar systems to date totaling 862 kilowatts.  Phase 3 proposes up to four additional solar systems at the Airport, Aquaplex, Rio de Flag Wastewater Treatment Facility, and Wildcat Wastewater Treatment Facility totaling 927 kilowatts.  The City received incentives from the Arizona Public Service Schools and Government and Performance Based Incentive Programs ranging between $0.06 - $0.12 per kilowatt hour of renewable energy generation.    This initiative supports the City's commitment to achieve the goals set forth in Resolution 2010-16 (Increased Energy Efficiencies and Renewable Energy Production and Purchase).

Collectively the proposed systems will generate approximately 1,549,688 kilowatt hours per year.  The information by site is:

Airport:          125 kilowatt system     213,561 kilowatt hours annually   55% of current energy use offset
Aquaplex      270 kilowatt system      433,047 kilowatt hours annually   37% of current energy use offset
Rio de Flag  301 kilowatt system       504,133 kilowatt hours annually   27% of current energy use offset
Wildcat         231 kilowatt system       398,947 kilowatt hours annually   23% of current energy use offset

Additionally, the incentives expire in October 2013 and future Arizona Public Service renewable energy incentives are unavailable for an indeterminate amount of time.

The City received  four (4) responses to the RFP including Alliance Bank, Banc of America, Green Campus Partners, and Holman Capital.  These four (4) were evaluated and the summary rating sheet is attached. 

Holman Capital was subsequently disqualified as they were lacking multiple documents required by the RFP including the Non-Collusion Affidavit, Exceptions, Confidential and Additional Materials, Proposer Questionnaire, and Addendum's.

Other firms expressed interest including:
BBVA Compass:  Their proposal was four (4) hours late and it was returned to them, sealed.
National Bank of Arizona was unable to meet the terms of the RFP so they did not submit a proposal.
Sovereign Bank was also unable to meet the terms of the RFP so they did not submit a proposal.
Carlyle Capital Markets submitted a letter of "no bid" at the bid due date and time.

The City evaluated four areas including:
Experience and Qualifications - 10%
Presented Approach - 30%
Fixed Interest Rate - 50%
References - 10%
as quantified on a 0 to 5 rating scale.

With an aggregate score of 2150, Banc of America received the highest total score per the 'Total Criteria Ranking'.

The fixed rate for this project is critical for the City to meet and/or exceed the projections as shown on the pro forma cash flow.  The pro forma anticipated a 3% interest rate so the City should realize savings in excess of what is depicted to date.  The City will also refine the amount financed as projects are finalized.  It is anticipated the City will be borrowing something less than $4 million, most likely in the $3.6 million dollar range. 

Approving the financing will not add cost to the City's overall budget. Rather, this will be paid from the projected savings per site after allowing for the additional operational, maintenance, insurance, and interest costs.  The financing and the pro-forma are predicated on a fifteen (15) year term, however the City anticipates the life of the equipment will be a minimum of 20 and it is during this time period (between years sixteen (16) and twenty (20) that the City will realize the greatest savings.

This action awards the contract.  A second action will come forward that includes the resolution authorizing the execution and delivery of the lease purchase agreement.

The Flagstaff community will benefit from the City utilizing a safe, reliable, and long-term affordable energy source.  Additionally, the City can increase awareness of renewable energy technologies by implementing projects that include educational components.

Inform

• Approve the recommended financing to continue the City's commitment to green energy sources
• Reject all bids and direct staff to research other financing mechanisms for this project.
• Reject all bids and return renewable energy incentives to Arizona Public Service

04/02/2013 - EAB - Approved 6 - 1 - Councilmember Oravitz voted no.