Battery Purchase Amendment & Next Steps
Project: Battery Purchase for Safe Harbor
Purpose: Discuss and Finalize BESS Amendment & Discuss Final Approval Steps/Timing Date: November 13, 2025
1. Battery Purchase Amendment
▪ Review Amendment
▪ Final edits together
▪ Further discussion?
2. Supplemental Financial Explanation
Overview
As part of securing the full federal Investment Tax Credit (ITC) value for the City's Battery Energy Storage System (BESS) project, it is important that the project "Begin Construction" in 2025 under the IRS 5% Safe Harbor rule. Beginning construction prior to 2026 allows the project to avoid the forthcoming Foreign Entity of Concern (FEOC) restrictions, which would otherwise limit ITC eligibility for battery projects starting construction in 2026 and beyond. To meet this requirement, the City must incur enough qualified project costs in 2025 to exceed the 5% Safe Harbor threshold.
Based on our updated Rough Order of Magnitude (ROM) cost estimate (as of Monday 11/10/25), the total BESS turnkey project cost is approximately $3.44 million, meaning the IRS-required 5% Safe Harbor amount would be roughly $172,000.
However, industry best practice and guidance from tax advisors strongly recommends exceeding the bare minimum 5% to ensure the project remains protected even if final construction costs rise during design, contracting, or installation. To provide this buffer and maintain a simple, conservative approach, we recommend the City make a 10% Safe Harbor deposit of $344,240. This ensures the project comfortably meets the Safe Harbor test and maintains eligibility for 2025 ITC treatment regardless of future cost adjustments.
If approved, this deposit will secure the project under current ITC rules, protect it from 2026 FEOC restrictions, and maximize long-term federal incentive value for the City. We are prepared to move forward immediately with the necessary documentation to meet year-end Safe Harbor timing.
Plan for Reconciling When Final Costs are Ready
Willan will plan to provide a detailed project cost breakout that will include hard costs (direct project costs), soft costs (professional services), and contractor fees (overhead and profit) with GMAX. We will still provide a turnkey project cost, savings, and grants/incentives table for comparison purpose as well as a subcontractor bid summary. These will all be included in a handout as part of the Final Project Presentation and “IGA Findings” Summary needed for 4217 and IGA contract compliance.
We expect there to be overages from the 10% estimate above and will clearly show in these financial summaries how those overages will be credited back to the Water Department in those breakouts.
Battery Purchase Amendment & Next Steps
3. Example Detailed Project Financials Breakout (approved by Public Works)
Battery Purchase Amendment & Next Steps
4. Project Schedule Review
5. BESS Purchase Final Steps
▪ Willdan execute BESS amendment and email digital version to Water Dept by early Fri 11/14 morning (or sooner).
▪ Water Dept sign and begin routing through CAO, CMO, Finance, etc. ▪ Willdan print and execute two (2) hard copies with wet signatures. FedEx to Water Dept. Is this acceptable by Mon 11/17?
▪ City Council Meeting on Wed 11/19. Would Water Dept like me to attend? I will be in town.
Anything I am missing?
Critical Path Milestones for BESS and Remaining IGA Milestones Task Target Date
Willdan Meets with Water Dept to Finalize Amendment Details 11/13/2025 Amendment Executed by Willdan; Water Dept Begins Routing through all Required C ity Depts for Signature 11/14/2025 C ity C ouncil Approves BESS Amendment as C onsent Agenda Item 11/19/2025 C ity Executes BESS Purchase C ontract and Provides to Willdan (expedited by Matt C to Recorder's Office) 11/20/2025 Willdan Initiates Purchase of BESS from Vendor; Obtains all Necessary Documention for Safe Harbor 11/21/2025 ESPC C ontract Meeting with C ity Attorney Team 11/24/2025 Subcontractor Proposals Due 11/26/2025
Willdan Bid Qualification and Leveling (Week of 12/3) 12/3/2025 Willdan Finalizes Project and GMAX (Week of 12/10) 12/10/2025 Final Project Presentation to Water Dept Team with BESS Safe Harbor Update (Week of 12/15) 12/17/2025 ESPC C ontract Development Meeting with Water Dept Attorney 12/22/2025 Safe Harbor Deadline 12/31/2025
Water Dept Approves Final Project and ESPC C ontract 1/12/2025 ESPC C ontract Executed by Willdan; Water Dept Begins Routing for Approvals (Targeting 2/11/25 Council Meeting) 1/16/2025 C ity C ouncil Meeting - Post Public Hearing Notice for ESPC /4217 1/28/2026 C ity C ouncil Meeting - C ouncil Approves ESPC C ontract 2/11/2026 ESPC C ontract Executed 2/13/2026