Committee approves contingent borrowing to finance city energy-efficiency and solar projects

The Finance and Personnel Committee approved contingent borrowing to finance multiple city energy-efficiency and solar projects and adopted a substituted performance contract awarding guaranteed energy-savings work to Johnson Controls.

The administration presented three related items (files 241509, 241510 and 241332) together. The Environmental Collaboration Office (ECO) described goals to reduce energy use in city buildings and to install solar where cost-effective. ECO said a competitive process selected Johnson Controls for an energy-savings performance contract. The administration proposed financing through a tax-exempt lease purchase (TELP) to spread payments over 20 years; the city comptroller and budget staff recommended a 15-year contingent borrowing alternative as a cheaper, faster option.

Comptroller’s office staff estimated contingent borrowing would save about $635,000 in debt service costs compared with the 20-year TELP and avoid approximately $50,000 in issuance expenses; ECO also noted the projects are expected to qualify for federal direct-pay tax credits of roughly $575,000–$580,000 payable after project completion. ECO emphasized the administration’s priority is moving the projects forward; the comptroller argued contingent borrowing lowers the overall cost and enables quicker closing, reducing the risk of losing tax credits.

Committee members discussed cash-flow tradeoffs: contingent borrowing requires higher near-term payments but reduces total interest costs over the financing term. The committee also confirmed that equipment ownership remains with the city at project end under either mechanism, typically with a nominal purchase option (often $1) at the end of a lease.

The committee placed the TELP (file 241509) on file and approved contingent borrowing authority (file 241510) for up to $1,800,000 for the 2025 contingent borrowing program. The committee also adopted Substitute A to file 241332, which grants authority to enter a guaranteed energy-savings performance contract with Johnson Controls for conservation and facility improvements.

ECO and the comptroller will coordinate next steps on closing the financing, applying federal tax credits when available, and finalizing the performance contract scope and schedule.