News & Press
Borrego Solar helping schools finance solar
Clean Energy Authority
May 2, 2012
Let’s face it, schools are strapped for cash. They’re looking for more innovative ways to save money and one of those ways is to go solar, by creating different types of municipal bonds. Borrego Solar has been working with school districts to help develop such bonds, which can sometimes be cash positive to the district almost from the beginning.
“We’ve been doing a fairly robust amount of business, with them using general obligation bonds. Those go on the tax rolesâ€¦and are paid through property taxes,” said David Potovsky, a senior project developer with Borrego.
“School districts budgets were savaged in California by budget cuts,” Potovsky said. As such officials have had to make tough choices like laying off teachers. “Here’s a method to save money and create a positive cash flow and save hundreds of thousands with renewable energy.”
Such bonds must be used for capital improvements to a school, not for books or more teachers. Since the project is financed through a bond, the school repays the bond over 15 years through its property tax payment, reducing its energy bill thereby freeing up more cash for other purposes. “A general operations bond is a way for a school to create revenue in essence and not have to pay it back,” Potovsky said. However, at least in California such bonds are voted on and they need to be approved by a 55 percent margin.
The bonds are usually part of a larger bond for a school district. For instance, Borrego recently signed a contract with the Santa Clara Unified School District to put solar on nine of their schools. “It was part of $3 million district wide general operations bond. They took a chunk of the money to do renewable energy projects,” Potovsky said.
“Not all school districts have passed general operations bonds. You have to have the credit or capability to pay it back. You have to look at tax base and tell whether it can support a tax bond,” Potovsky said.
There are also other bonding options like certificate of participation offerings. With a certificate of participation offering the school district or municipality can prove that through the energy savings and the rebate, the system can pay for itself, according to Potovsky. “You don’t have to take that to voters,” he said. Those bonds, however, need to be repaid more like traditional bonds.
In addition to California Borrego also has seen a lot of these types of financing take place in the Northeast and in New Jersey. The company has developed both public and private-sector projects through municipal bonds and power-purchase agreements. “We’ve done about $150 million, mostly public and a few private entities,” Potovsky said. He added that such projects also are growing in size.
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