To: Board of Supervisors
Department or Agency Name(s): County Administrator’s Office
Staff Name and Phone Number: Peter Bruland (707) 565-3086; Rhianna Frank (707) 565-6483
Vote Requirement: 4/5th
Supervisorial District(s): All
Title:
Title
Establishing Appropriations to Implement the Comprehensive Energy Upgrades Project
End
Recommended Action:
Recommended action
Adopt a Resolution amending the FY 2024-25 Budget by $56,164,679 to implement the Comprehensive Energy Upgrades Project.
end
Executive Summary:
To support Sonoma County's 2021-2026 Strategic Climate Action & Resiliency and Resilient Infrastructure goals, including investments in electric power resiliency at County facilities, staff presented near-term energy upgrade recommendations to the Board on May 14, 2024. The Board then instructed staff to begin the process of issuing Certificates of Participation (COPs) through a public offering, coordinated by the county's municipal advisor, KNN Public Finance LLC, and to return for financing review and approval.
On August 13, 2024, the Board approved the financing package presented by staff, with an estimated total cost, as the Total Interest Cost (TIC) would not be known until the COPs closed on August 20, 2024. Upon closing, KNN Public Finance LLC received 11 bids for the COPs, with the lowest bid having a TIC of 3.261393%, which was approximately 40 basis points lower than the lowest rate initially presented. This lower TIC resulted in a significant increase in the projected cumulative lifetime savings for the project.
The proceeds from the COPs were received by the Auditor-Controller-Treasurer-Tax Collector (ACTTC) on August 29, 2024, and the work order for the energy upgrade implementation was signed by the Director of Public Infrastructure shortly thereafter. Construction mobilization for the energy upgrades project is expected to commence on September 24, 2024, at which time the first drawdown from the COP proceeds will be initiated. Budget appropriations will need to be established to implement the construction phase of the project and allow for the project cost drawdown from the COP proceeds.
Staff recommends that the Board adopts a resolution amending the FY 2024-25 Budget to implement the Comprehensive Energy Project.
Discussion:
The Board of Supervisors’ 5-Year Strategic Plan aims to achieve carbon neutrality for Sonoma County by 2030. This includes making County operations carbon-free, zero waste, and resilient. In October 2021, the County engaged PG&E's Sustainable Solutions Turnkey (SST) program, which involved energy and water audits through PG&E’s subcontractors. A preliminary assessment of 96 county facilities led to 56 buildings being chosen for detailed Investment Grade Audits (IGAs). The resulting IGA report was presented to the Board in May, revealing a $204M cost to meet the 2030 goals. During the May meeting, the Board approved near-term energy upgrades, which are cost-effective and can be implemented within 24 months. These upgrades are intended to reduce utility costs and pay for themselves over the life of the project.
The original scope was modified to address considerations that were identified within the solar scope. The final scope includes LED lighting retrofits, water conservation measures, a 1.8-Megawatt solar PV system, and battery storage.
Financing alternatives were presented to the Debt Advisory Committee (DAC) on March 20, 2024, when the Investment Grade Audit report and the pricing for the upgrades were received from PG&E and Willdan. The DAC recommended financing through a Certificate of Participation (COP) via public offering coordinated through the County's municipal advisor, KNN. An update was provided to the DAC on June 7, 2024, and the COP was deemed to still be the best financing option for the County.
Given the difficulty in accurately predicting borrowing rates prior to completing the financing process, staff initially presented a table to illustrate a range of project costs associated with the financing. Upon closing, KNN Public Finance LLC received 11 bids for the COPs, with the lowest bid having a TIC of 3.261393%, which was approximately 40 basis points lower than the lowest rate initially presented. This lower TIC resulted in the projected cumulative lifetime savings for the project, increasing from $3.3 million to $5.0 million.
Below, you will find a comparison of the estimates versus the actual financing details:
|
Estimate |
Hi-end scenario |
Actual |
|
COP Financing at 3.697% |
COP Financing at 4.1% |
COP Financing at 3.261393% |
Average Annual Debt Service: |
$2,181,382 |
$2,266,395 |
$2,089,237 |
Total Financed |
$30,171,180 |
$30,295,874 |
$29,944,719 |
Total Debt Service |
$41,456,250 |
$43,061,500 |
$39,695,500 |
The Auditor-Controller-Treasurer-Tax Collector (ACTTC) received the COPs proceeds on August 29, 2024. The Director of Public Infrastructure signed the work order for the energy upgrade project shortly after. Construction is set to start on September 24, 2024, and the first drawdown from the COP proceeds will occur then. To proceed with the construction phase and draw from the COP proceeds, budget appropriations need to be established.
Staff recommends that the Board adopts a resolution amending the FY 2024-25 Budget to implement the Comprehensive Energy Project.
Strategic Plan:
This item directly supports the County’s Five-year Strategic Plan and is aligned with the following pillar, goal, and objective.
Pillar: Climate Action and Resiliency
Goal: Goal 3: Make all County facilities carbon free, zero waste and resilient
Objective: Objective 1: Design or retrofit County facilities to be carbon neutral, zero waste and incorporate resilient construction techniques and materials.
Objective: Objective 3: Invest in County owned facilities, establishing carbon eliminating microgrid technology and improving energy grid resilience to reduce the impact of power loss during power shutdowns and natural disasters (floods, fires, earthquakes), prioritizing critical infrastructure such as command and communications facilities.
Pillar: Resilient Infrastructure
Goal: Goal 2: Invest in capital systems to ensure continuity of operations and disaster response.
Objective: Objective 2: Invest in electric power resiliency projects at County facilities, including Veteran’s Buildings, used for evacuation sites, warming/cooling centers, or as alternate work facilities for delivery of critical services.
Pillar: Organizational Excellence
Goal: Goal 1: Strengthen operational effectiveness, fiscal reliability, and accountability
Objective: Objective 1: Align the Board of Supervisor’s strategic priorities, policy, and operational goals with funding and resources.
Racial Equity:
Was this item identified as an opportunity to apply the Racial Equity Toolkit?
No
Prior Board Actions:
8/13/24: Comprehensive Energy Resiliency Project - Work Order and 2024 Certificates of Participation Financing Authorizations
5/14/24: Financing for Energy Upgrades
12/11/2023: Climate Resilience Comprehensive Action Plan Workshop
10/3/2023: Financing package for Energy Upgrades at the Santa Rosa Veterans Memorial Building
8/29/2023: Climate Action and Resiliency Workshop
8/22/2023: Energy and Resiliency Upgrades to the Santa Rosa Veterans Memorial Building Using the Pacific Gas and Electric Company’s Sustainable Solutions Turnkey Program
2/01/2022: Board Update: Legislative Affairs, Strategic Plan and Climate Action & Resiliency
4/20/2021: Update on the county Participation in PG&E Sustainable Solutions Program Energy Services and Self Generation Programs
6/09/2020: Application for the Self Generation Incentive Program and Payment of the Application Deposit
Fiscal Summary
Expenditures |
FY24-25 Adopted |
FY25-26 Projected |
FY26-27 Projected |
Budgeted Expenses |
|
|
|
Additional Appropriation Requested |
$56,164,679 |
|
|
Total Expenditures |
$56,164,679 |
|
|
Funding Sources |
|
|
|
General Fund/WA GF |
|
|
|
State/Federal |
|
|
|
Fees/Other |
56,164,679 |
|
|
Use of Fund Balance |
|
|
|
General Fund Contingencies |
|
|
|
Total Sources |
$56,164,679 |
|
|
Narrative Explanation of Fiscal Impacts:
COP proceeds totaling $28,226,572 were deposited into the General Fund on August 29, 2024. This item will 1) recognize that revenue in the General Fund; 2) add appropriations to transfer the proceeds into the County Wide Energy Improvements Project Capital Project (Project) fund for use on the project; 3) add appropriations in the Project fund of $27,053,100 for not-to-exceed project contract and $885,007 for contamination/remediation work needed in advance of the solar project. The remaining $288,465 is available for contingencies and will not be appropriated at this time. Interest earned on the fund balance will remain in the Project fund for use paying debt service in FY 2025-26.
Narrative Explanation of Staffing Impacts (If Required):
NA
Attachments:
Attachment 1: Attachment 1 Resolution Comprehensive Energy Project Budget Adjustment 9.17.24
Related Items “On File” with the Clerk of the Board:
N/A