Agenda Item No: M.2
AGENDA REPORT
DATE: August 19, 2025
TO: Mayor and Council
FROM: David Gassaway, City Manager
SUBJECT: Resolution 2025 -170 FN Approval of T ax-Exempt Lease Purchase Financing Agreement
Approval of an Equipment Lease/Purchase Agreement and an Escrow and Account Control Agreement with Banc of America Public Capital Corp to Finance Energy Efficiency Improvements, and Declaration of Intention to Reimburse Expenses
Funding Source: $21,309,756; Various Funds
Contact: John Furtado, (707) 428-7629
RECOMMENDED ACTION
Adopt resolution.
STATEMENT OF ISSUE
The City of Fairfield has undertaken a comprehensive energy efficiency initiative in partnership with Willdan Energy Solutions. The project includes solar installations, lighting retrofits, Heating, Ventilation, and Air Conditioning ( HVAC) upgrades, and other conservation measures across multiple City facilities. The total cost of the contract with Willdan is expected to be $29,998,064.
The City expects to fund $8.6M of the costs with available City funds and to finance the remainder of the improvements.
The City issued a Request for Proposals for financing, and, following a competitive evaluation process, Banc of America Public Capital Corp (BAPCC) was selected based on its favorable interest rate, flexible terms, and experience with public sector energy projects.
The City would like to use certain of the proceeds from the Lease to reimburse expenditures made prior to the execution of the Lease.
DISCUSSION
For flexibility, the resolution provides for a maximum financing amount of $23M and a maximum interest rate of 4.1%. However, staff expects the following financing details:
Principal Amount: $21,309,756
Interest Rate: 4.015% (tax-exempt, fixed)
Term: 15 years
Repayment: Semiannual payments
Structure: Annual Appropriations Lease with no prepayment penalty
The financing will be used to implement energy -related improvements at City facilities, consistent with California Government Code Sections 4217.10 to 4217.18.
Alternatives such as a 20 -year payment term and annual payments were considered but would have resulted in higher interest rates which would have resulted in additional interest costs of up to $3.4M.
No closing costs or escrow agent fees are anticipated. The City’s contribution of approximately $8.6M will be funded from various internal sources, including Construction License Tax, Bedroom Tax, and Civic Center Improvement funds.
Good Faith Estimates:
PFM Financial Advisors LLC has provided good faith estimates on the cost of the Lease, as required by California Government Code Section 5852.1. All amounts and percentages are estimates and are made in good faith based on current information available.
1. True Interest Cost of the Lease: 4.006516%.
2. Finance charge of the Lease, being the sum of all fees and charges paid to third parties in the amount of $40,000.
3. Amount of proceeds of the Lease expected to be received by the City, net of proceeds for Costs of Issuance in (2) above and net of capitalized interest (if any) and reserves (if any) paid or funded with the proceeds of the Lease: $21,309,756.
4. Total payment amount for the Lease, being the sum of (a) debt service to be paid to final maturity, plus (b) any financing costs not paid from proceeds of the Lease: $28,930,091.18.
Federal Tax Law. It is not uncommon for public agencies to expend money on the initial capital costs of a project (most frequently, design and engineering costs) prior to obtaining financing for the project, and to reimburse itself for those initial costs with financing proceeds.
However, the Internal Revenue Service has issued regulations limiting public agencies’ ability to reimburse themselves with proceed s of tax -exempt financing; among other things, the regulations require the public agency to declare its intent to reimburse itself.
FINANCIAL IMPACT
The Lease will require repayments from the General Fund, Golf Funds, and Transit Funds. The details are included in the funding summary. Repayments will be offset from energy savings and designated capital improvement funds.
Description Fund Financing Allocation
General Fund 101 $16,431,116
Rancho Solano Club 471 $1,772,811
Paradise Valley Club 472 $82,685
Transportation Center 451/452 $3,023,144 Total $21,309,756
Willdan has estimated energy savings assuming a 5% escalation factor of $42.6M over 30 years with an additional operating and maintenance savings of $2.9M. It is anticipated that the long - term savings will be more than sufficient to fund the repayment of the financing requirements.
The reimbursement resolution does not have any immediate fiscal impacts. The resolution preserves the City’s flexibility to reimburse itself for capital expenditures if the council determines such reimbursement is in the City’s best interest.
PUBLIC CONTACT/ADVISORY BODY RECOMMENDATION
N/A
ALTERNATIVE ACTION
Reject the proposed financing and seek alternative funding sources.
COORDINATED WITH
Public Works Department and City Attorney’s Office
STAFF CONTACT
John Furtado, Director of Finance
(707) 428-7629
[email protected]
ATTACHMENTS
Attachment 2: Proposed Resolution
Attachment 3: Proposed Equipment Lease/Purchase Agreement Attachment 4: Proposed Escrow and Account Control Agreement