To: Sonoma County Board of Supervisors, Sonoma County Water Agency Board of Directors, and the Sonoma County Public Financing Authority Board Members
Department or Agency Name(s): County Administrator Office, Auditor-Controller/Treasurer-Tax Collector, Sonoma County Water Agency, and Sonoma County Public Financing Authority
Staff Name and Phone Number: Terri Somers 707-565-6489; Rhianna Frank 707-565-6483, Kathleen Parnell 707-565-6124
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
9:45 A.M. Sonoma County Energy Independence Program Semi-annual Bonding Authorization and Revision to the Program Guidelines.
End
Recommended Action:
Recommended action
Acting as the Sonoma County Board of Supervisors:
A) Approve revisions to the Program Guidelines increasing the pass-through fee for automated property valuation from $12 to $16.50, beginning April 1, 2024.
B) Adopt resolutions authorizing the Treasurer to invest in bonds issued by the Sonoma County Public Finance Authority and authorizing execution of various related agreements with the Sonoma County Public Finance Authority, including a bond purchase agreement and a loan agreement.
Acting as the Directors of the Sonoma County Water Agency:
C) Adopt resolutions withdrawing funds from the Sonoma County Treasury Pool and authorizing withdrawn funds to be invested in Sonoma County Energy Independence Program bonds as a long-term Sonoma County Water Agency Investment.
Acting as the Directors of the Sonoma County Public Finance Authority:
D) Adopt resolutions and approve agreements with the County authorizing continued issuance of sale of revenue bonds and loan of funds to the County to fund the Sonoma County Energy Independence Program.
end
Executive Summary:
The County Administrator’s Office Sonoma County Energy Independence Program (“SCEIP” or “Program”) staff is requesting authorization to issue bonds and enter into related financing agreements to continue the Program through September 30, 2024. With your Board’s last action in September 2023 a total of $60 million in bonds was authorized for issuance by the Public Financing Authority and purchase (investment) by County Treasury ($45 million) and Sonoma County Water Agency (“Sonoma Water”) ($15 million) for the purposes of the Program. This authorization expires on March 31, 2024, and must be renewed to allow the Program to continue. These bond issuance approvals are done in six-month increments and have been approved bi-annually by the Board since 2009.
There is currently $26.9 million in outstanding bonds and $33.1 million in funding accessible to property owners wanting to do energy efficiency, water conservation, renewable generation, wildfire safety, and seismic strengthening improvements. As of February 29, 2024, the Program has cumulatively funded over $105 million in residential and commercial property improvements.
With this item, we are requesting authorization to issue $60 million in bonds and enter into related financing agreements to continue the Sonoma County Energy Independence Program funding mechanism in place over the next period of April 1, 2024 through September 30, 2024.
Staff also recommends a revision to the Program Guidelines to include a small increase in the pass-through fee costs associated with the automated valuation tool imposed by a SCEIP vendor, from $12 to $16.50.
Discussion:
On September 19, 2023, your Board authorized the issuance of bonds related to the Program over the next period of October 1, 2023, through March 31, 2024. These agreements ensure the continuance of an alternative financing mechanism that allows property owners to install improvements that contribute to the reduction of greenhouse gas emissions through the built environment, and make buildings healthier, more durable, and resilient to natural disasters.
Over the Program’s history it has cumulatively funded $105 million in residential and commercial property improvements. Through the installation of building improvements, the County has eliminated over 130,000 metric tons of carbon dioxide and created or retained over 3,000 jobs.
This County-administered, public service program provides financing and education services community-wide, without profit, to assist in meeting the County’s greenhouse gas emission reduction goals, and to promote community resilience to drought, earthquakes, and wildfires.
Principally, the Program makes financing available to a property owner by placing an assessment on the property, which is used to fund eligible property improvements and then paid back through property taxes over 10 or 20 years with a fixed interest rate. Financing is available to both residential and non-residential property owners with a minimum assessment amount of $2,500. The amount available for financing is based on the value of the property; the program interest rate is currently 7.49%.
The Program provides access to capital through financing that does not consider the applicant’s income, credit score, or debt-to-income ratio, which increases access to non-traditional capital resources.
Program revenues continue to increase relative to expenditures as the outstanding principal that generates interest income grows. On June 4, 2024, staff will be providing a Program update along with revisiting the interest rate for the Program.
Bond Financing Structure
Under the Program, the Sonoma County Public Finance Authority (“Authority”) is authorized to issue bonds each month. The bonds mature in 10 years and 20 years. The total aggregate principal amount of bonds outstanding cannot exceed $60 million. The current outstanding aggregate principal amount of bonds is $29.6 million. This means that the Authority may issue up to $30.4 million in aggregate principal amount of additional bonds, which is $60 million minus the aggregate principal amount of bonds outstanding.
If the Authority issues the total available principal amount of $30.4 million, the total amount of proceeds received by the Authority would be that principal amount less an amount deposited to a capitalized interest account to pay the interest on the Bonds through the following September 1. Because the bonds are issued monthly, in varying amounts, with terms of either 10 or 20 years, the amount of capitalized interest cannot be estimated in advance of issuing the bonds.
The Authority does not incur any financing charges or fees paid to third parties, except for a small amount (expected to be less than $200) paid to the California Debt and Investment Advisory Commission in connection with filings for the bonds and $1,750 paid to outside legal counsel for the monthly bond issuance.
Program Guideline Amendments:
Staff also recommends a revision to the Program Guidelines to increase the pass-through fee cost associated with the CoreLogic (AVM) Fair Market Valuation Tool, which has increased under SCEIP’s contract with the vendor from $12 to $16.50. The updated tool will give SCEIP staff Fair Market Values that are more current, based on a larger collection of data available, provide more details than the previous report, and are more accurate to assist staff in maintaining the Lien to Value (LTV) ratios, which are not to exceed 95%. Other application pass-through fees, which include $41 for recordation of contracts and $140 for a title report, will not change. The total amount of pass-through fees collected from each applicant will be increase by $4.50, from $193 to $197.50, effective April 1, 2024.
Strategic Plan:
This item directly supports the County’s Five-year Strategic Plan and is aligned with the following pillars, goal, and objective.
Pillar: Climate Action and Resiliency
Goal: Goal 2: Invest in the community to enhance resiliency and become carbon neutral by 2030
Objective: Objective 2: Provide $20 million in financing by 2026 that incentivizes property managers and renters to retrofit existing multi-family housing towards achieving carbon neutral buildings. Funds received for the 2.2 pillar have been fully expended for a comprehensive marketing and outreach plan covering 22-23 and 23-24 fiscal years.
Pillar: Climate Action and Resiliency
Goal: Goal 1: Continue to invest in wildfire preparedness and resiliency strategies
Objective: Objective 1: Provide educational resources to the community that promote and facilitate carbon neutral and fire hardening construction for new and existing homes. Funds received for this pillar are still being distributed for comprehensive marketing, education and outreach.
Racial Equity:
Was this item identified as an opportunity to apply the Racial Equity Toolkit?
No
Prior Board Actions:
9/19/23 - Sonoma County Energy Independence Program (SCEIP) Semi-Annual Bonding Authorization
8/30/22 - Board authorization for the approval of Grapevine Holdings, LLC Sonoma County Energy Independence Program (SCEIP) financing application for $722,160.
7/12/22 - Sonoma County Energy Independence Program (SCEIP) Update, Semi-Annual Bonding Authorization, and Annual Interest Rate Determination
3/22/22 - Sonoma County Energy Independence Program Semi-Annual Bonding Authorization and Program Update
9/21/21 - Sonoma County Energy Independence Program Semi-Annual Bonding Authorization, Program Update, and Annual Interest Rate Determination.
Fiscal Summary
Narrative Explanation of Fiscal Impacts:
There are no fiscal impacts to the County as a result of this action.
Narrative Explanation of Staffing Impacts (If Required):
N/A
Attachments:
Att 1 Authority Bond Resolution April 2024
Att 2 County Resolution Authorizing the Purchase of Bonds April 2024
Att3 County Resolution Approving Loan Agreements April 2024
Att 4 Water Agency Resolution Authorizing Investment April 2024
Att 5 County Resolution Consenting to Water Agency Investment April 2024
Att 6 SCEIP Program Report and Admin Guidelines
Related Items “On File” with the Clerk of the Board:
Agreement 1: Form of Bond Purchase Agreement between the Treasury and Public Financing Authority to purchase Sonoma County Energy Independence Program contractual assessment revenue bonds - March 2024
Agreement 2: Form of Loan Agreement between the County and the Public Financing Authority - March 2024