Santa Cruz Valley board approves up to $11 million lease for districtwide energy upgrades and solar

The Santa Cruz Valley Unified School District governing board voted to authorize a tax‑exempt equipment lease not to exceed $11,000,000 to pay for energy conservation measures across district facilities, including LED lighting, HVAC upgrades, smart‑building controls and parking‑lot solar arrays.

The vote, taken at the board’s February meeting, followed a presentation from Verigee, the vendor selected to design and deliver the work, and legal and financing remarks from the district’s counsel and placement agent. Verigee’s presenter said the project is structured so energy‑cost savings will cover lease payments and that the company must guarantee performance under Arizona law governing these financings.

Verigee representative Randy Faulkner told the board the package blends multiple energy conservation measures (ECMs) and that the district would own the solar arrays rather than enter a third‑party power purchase agreement. ‘‘The statute was written to take the risk off the district,’’ Faulkner said, adding that the company models savings conservatively and typically uses about 85% of forecasted savings as the basis for lease payments.

Counsel Jim Gill summarized the financing terms included in the resolution, saying the board was being asked to approve parameters rather than a final financing: a lease amount not to exceed $11,000,000, a maturity not to exceed 25 years and an interest rate not to exceed 6%. Gill said the placement agent will solicit market bids and that final bank selection and loan terms will be handled by district administration within those limits.

Board members asked for details about vendor guarantees, measurement and verification and the cost of third‑party validation. Faulkner said Verigee guarantees the project’s annual energy savings and that annual reconciliation — including weather normalization — is required to verify results. He estimated third‑party measurement and verification would be an ongoing expense accounted for in the savings model.

Board members were also told federal incentives, including funds available through the Inflation Reduction Act, materially reduce the project cost. Faulkner said rebates and incentives factored into the financial analysis total more than $2,000,000. He also told the board there is a safe‑harbor requirement tied to federal incentives that requires a portion of project costs to be on‑site or under construction by a stated date to secure certain tax incentives.

After brief discussion the board approved the resolution. The motion to adopt the resolution authorizing the lease purchase agreement passed by voice vote; the chair announced, "Ayes have it." The resolution delegates authority to district administration, counsel and the placement agent to finalize contracts and select the financing institution within the parameters approved by the board.

Next steps the board was told include finalizing contracts, placing product orders and coordinating the construction schedule to meet any incentive safe‑harbor requirements. Counsel reiterated lease payments are subject to annual appropriation and differ from property‑tax‑backed bonds; if the district chose not to appropriate funds in a future year, the leasing bank’s remedy would be limited to the leased equipment.

The board approved the resolution at the February meeting; administration will return with final financing documents and procurement details when they are complete.