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How to Pay for Solar Through Taxes

Berkely is set to begin a $1.5 million program that allows property owners to finance solar power systems through their property taxes.

The city of Berkeley has chosen Renewable Funding to finance a $1.5 million pilot program that will allow residents and businesses to pay for solar power systems through property taxes.

The city council on Tuesday night authorized the city manager to sign contracts with Oakland, Calif.,-based Renewable Funding. The decision was made after its staff spent about 10 months trying to line up backers for the city's unusual solar loan program.

The complexity of running the program caused several banks and private investment firms to back out of discussions, according to a staff report.

As a result, the city decided to start with a trial program to gauge how it might want to finance and operate the program over the long term. The City Council also approved an ordinance Tuesday night that would allow the city to borrow up to $80 million for the program.

Berkeley first approved the idea of the program in November, then approved more details – subject to a second and final vote Tuesday – last week (see Berkeley to Finance Solar Installations and Berkeley Set to Vote on Solar Financing).

The city said it was the first in the country to approve this kind of program, which finances the upfront costs of installing solar-panel systems on residential and business properties. Home and business owners pay the city back through property taxes over 20 years, including interest. The interest rate would be determined and locked in at the time that a property owner signs on by joining a special tax district created for the program.

Only property owners who opt to take advantage of the program will see the extra charges on their tax bills.

Other cities and counties in the country, including Santa Cruz County in California and the city of Boulder in Colorado, have expressed interest in creating programs using Berkeley's model.

An average solar-power system costs roughly $28,000, not counting an average $6,108 rebate available though the state-run California Solar Initiative. After adding other fees and charges, a property owner could expect to pay about $2,100 per year on his or her tax bill, the city said.

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