'"s^^.^
(?V.
82<0
I?s •^-'^^
PASADENA WATER AND POWER
MEMORANDUM
April 9, 2026
To: Mayor and City Council
From: Miguel Marque ^.<>-' )
City Manager ^Jr^//
David Reyes
General Manager, Water and Power
Subject: FY 2027-2031 Capital Improvement Program — Carbon-Free Investment Analysis
Executive Summary:
Pasadena Water and Power ("PWP") is spearheading the City's transformational transition ofsourcing 100% carbon-free electricity by the end of 2030, as established by Resolution 9977. The proposed FY 2027-2031 Capital Improvement Program ("CIP") reflects that commitment in concrete dollar terms: approximately $794 million in total investment is either directly generating and storing clean energy or structurally enabling the distribution system to deliver the power in a safe and reliabie manner.
Solar plays a key role, while the scale of this undertaking goes even further — it is a wholesale rebuilding of Pasadena's electric infrastructure for a carbon-free future.
Of that total, $664 million is funded through a combination of Power Revenue Bonds, Power Fund revenues, federal and state grants, and the Public Benefit Charge ("PBC").
The remaining $130 million within the five-year CIP window and up to $337 million when longer-horizon projects are included is currently shown as "unfunded." It is important to be precise about what that label means: these projects are not abandoned or deprioritized. They are funding-source unidentified; meaning PWP is actively evaluating the most strategic, financially responsible mechanism for each one, whether that is a future bond issuance, a state or federal grant, expanded PBC revenues, IRA direct-pay credits, or a public-private partnership. The phasing is intentional: issuing all bonds at once would strain debt sen/ice coverage ratios, compress financial flexibility, and risk upward pressure on customer rates.
The timing of this CIP also reflects a candid acknowledgment of where the City stands.
The two-year rate plan adopted in the prior cycle was built around the FY 2026-2030 CIP. The Optimized Strategic Plan ("OSP"), which includes expanded municipal solar, 04/13/2026
ITEM: 18
CIP Carbon-Free Investment Analysis
April 9, 2026
the Broadway Energy Storage project, and accelerated grid modernization, added significant new capital scope. PWP is working to bridge that gap: aligning capital priorities set by policy with rate structures designed to keep service affordable. The projects in this CIP represent the result of that balancing act, and the funding strategy for projects with unidentified funding sources to be developed in concert with the next rate review cycle.
To understand the scale of what changed, it helps to compare this plan directly to its predecessor. The FY 2026-2030 adopted CIP totaled $460 million across electric system projects planned FY2027 and beyond, which has now over $800 million. Four areas, in particular, illustrate how dramatically the investment picture has shifted.
Municipal-Owned Solar Program — $90 million, new CIP. The prior CIP did not identify municipal solar investment. The OSP provided an additional path forward. This program — deploying 20 MW of additional solar across City-owned properties in four tranches (2 MW, 4 MW, 6 MW, and 8 MW) between FY 2027 and FY 2031 — is a direct creation of the Council's December 2025 policy direction. The first 2 MW phase ($9 million) is funded through the Public Benefit Charge and will begin installations at libraries, the City Yards, and the Sunset Reservoir Complex. The remaining $81 million across the larger tranches is currently pending identification of funding sources, which is why a deliberate, phased approach to both deployment and financing is essential. This program results in Pasadena generating its own clean power on its own facilities at a meaningful scale.
T.M. Goodrich Intertie Transformer Upgrades — $4.2 million in the prior CIP, $65.2 million in the new CIP (+$61 million). This is the single largest project-level increase in the CIP. The T.M. Goodrich Receiving Station is Pasadena's primary connection point to the CAISO grid — the gateway through which virtually all imported electricity enters the City. The prior CIP-funded routine equipment upgrades. The new CIP adds a major feasibility study on increasing import capacity, reflecting a fundamental strategic shift: as local fossil generation is retired and carbon-free electricity must increasingly come from outside the City, the intertie importing that power from the grid becomes a critical constraint. Investing in its capacity is not an infrastructure upgrade; it is the enabling infrastructure for the entire carbon-free transition. Also, while this is a significant increase, the actual construction projections for further expansion for which estimates are in the hundreds of millions range. PWP is working to solidify planning figures.
Advanced Metering Infrastructure ("AMI") — $38.5 million in the prior CIP, $48.2 million in the new CIP (+$9.7 million). The AMI program — deploying smart meters, two-way communications infrastructure, and data management systems citywide — has been accelerated and expanded. The additional investment reflects both the expanded scope of the rollout and the increased urgency: AMI is foundational to nearly every carbon-free customer program PWP intends to offer. Without smart meters, there is no time-of-use pricing to shift toad away from peak carbon hours, no real-time visibility into distributed solar generation, and no reliable platform for EV charging coordination. The CIP Carbon-Free Investment Analysis
April 9, 2026
$9.7 million increase accelerates the completion of the AMI system, including its network infrastructure and meters, through FY 2029, to help meet the schedule of carbon-free by end of 2030 goal
Substation Upgrades — significantly expanded across multiple locations. The prior CIP carried modest placeholder funding for several substations. The new CIP reflects the real costs to modernize these facilities for a carbon-free grid. Chester Substation grew from $3.3 million to $21.5 million (+$18.2 million); Villa Substation from $2.9 million to $14.7 million (+$11.8 million); Oak Knoll from $3.0 million to $5.6 million (+$2.6 million). Wilson and Hastings substations — totaling $12.5 million — are entirely new to this CIP. Each of these projects is explicitly cited in the CIP as required to accommodate carbon-free power flow consistent with Resolution 9977. As more renewable power flows through Pasadena's distribution system, the substations that enable the transfer of power must be rebuilt to handle it. The combined substation investment across the new CIP represents a recognition that the "pipes and valves" of the clean energy system require the same level of commitment as the generation and storage resources they serve.
The following addresses five specific questions about this capital program in detail: 1) Which projects qualify as carbon-free investments; 2.) How much is currently funded versus pending a funding source; 3.) What the funding options are; 4.) How the operating budget supports carbon-free goals; and 5.) How the proposed Water and Power Headquarters project fits into this financial picture. Taken together, these questions and answers tell the story of a utility that has made extraordinary progress — and is managing a complex, multi-year transition with fiscal discipline and transparency.
This analysis is based on the proposed FY 2027-2031 Capital Improvement Program, which has not yet been approved by the City Council and has not yet been presented to committee for discussion. All budget figures, project allocations, and program descriptions reflect proposed plans only and are subject to change pending City Council review and approval. The analysis of future debt issuances, bond financing scenarios, and debt service coverage ratio projections included herein is for illustrative purposes only and does not constitute a commitment, authorization, or recommendation to issue debt.
Question 1: Carbon-Free Projects & Projected Costs
Combined Carbon-Free Investment Summary
Category
Direct Carbon-Free Projects
Indirect Carbon-Free Enablement Projects
COMBINED TOTAL
Total Estimated Cost
$188,595,500
-$605,089,790
-$793,685,290
The breadth of this investment demonstrates that the vast majority of PWP's FY 2027- 2031 capital program is either directly advancing or structurally enabling Pasadena's carbon-free goals.
CIP Carbon-Free Investment Analysis
April 9, 2026
Direct Carbon-Free Projects
The following projects have generating, storing, or enabling carbon-free energy as their primary purpose:
Project
Glenarm Energy Storage Systems
Broadway Energy Storage Systems
Municipal-Owned Solar Program (2-20 MW,
FY27-FY30)*
Electric Vehicle Charging Infrastructure
Customer Solar/Storage System
Interconnections
Emerging New Technology Development &
Testing
Power Integrated Resource Plan 2023
Power Integrated Resource Plan 2028
CIP#
3206
3275
Various
3225
3287
3288
3249
Total Est. Cost
$28,160,000
$38,036,500
$90,000,000
$27,162,000
$1,803,000
$204,000
$1,680,000
$1,550,000
$188,595,500
*
The Municipal-Owned Solar Program consolidates four separate CIP solar projects spanning FY27-FY30: 2 MW ($9M, FY27-28), 4 MW ($18M, FY28-29), 6 MW ($27M, FY30-31), and 8 MW($36M, FY30). Individual project CIP numbers are pending assignment for the 4 MW, 6 MW, and 8 MW phases. Combined total reflects the full program cost of $90,000,000 across all tranches.
Indirect Carbon-Free Enablement Projects
The following projects enable carbon-free power flow, support grid modernization, or are explicitly cited in the CIP as required to meet Resolution 9977 carbon-free goals:
Project
Subtransmission Path
2 Upgrade
CIPTotal Est.
Cost
3282 $73,180,000
Distribution System
Voltage Conversion 3227 $33,868,571
(4kVto17kV)
Advanced Metenng ^^ $48,206,356Infrastructure (AMf) °'^ ^°^"°- Ties to Carbon-Free Goals
Explicitly required to partially remove
importation limitations and transport
carbon-free power; critical to meeting
carbon-free goals. Also, a major
project to increase system reliability.
Increases grid capacity for higher
carbon-free power flows; reduces
system losses and improves reliability
Enables smart grid supporting
distributed energy resources and
CIP Carbon-Free Investment Analysis
April 9, 2026
ProjectCIPTotal Est.
Cost
Fair Oaks &
Brookside Substation 3267 $75,009,000
Upgrades
T.M. Goodrich Intertie
Transformer 3263 $65,210,031
Upgrades
Receiving Station
35kV Upgrades
Substation Switch
Replacement
Program
Wilson Substation
Upgrade
Substation
Modernization
Program
Distribution Switch
Replacement
Program
Conductor
Replacement
Program
Electrical Vault
Replacement &
Reinforcement
Distribution
Transformer
3262 $26,674,758
3284 $8,259,000
$12,407,904
3235 $14,523,000
3231 $21,762,500
3226 $13,994,427
3229 $26,070,000
3237 $12,460,000
Ties to Carbon-Free Goals
carbon-free goals; supports EV
charging and customer solar
Cited as necessary to accommodate
carbon-free power; NW Pasadena
grid modernization directly supports
clean energy delivery. Also, a major
project to increase system reliability.
Primary CAISO interconnection point;
feasibility study and procurement
initiation on increasing import capacity
tied to imporiiing more carbon-free
power
Addresses obsolescence at key
receiving stations carrying imported
carbon-free power
Maintains distribution reliability
needed to carry increasing carbon-
free imports
Cited as consistent with Resolution
9977; transformer upgrades
supporting power flow including
carbon-free resources
Upgrading substation transformer
voltage control systems essential for
managing distributed renewable
resources
Maintains distribution reliability
needed to carry increasing carbon-
free imports
Maintains distribution reliability
needed to carry increasing carbon-
free imports from distributed
resources
CPUC compliance and maintains
distribution reliability needed to carry
increasing carbon-free imports
Cited as necessary to accommodate
carbon-free power flow from
CIP Carbon-Free Investment Analysis
April 9, 2026
C IP Total Est.
Cost Project
Replacement
Program
Fire ?erTAM^sation 3258 $14.764.000
Fire Threat MitigationTier 3 Areas ^f ;>D'UOU'1
Transmission System ^^ $7,913,666*Enhancements olao ^/.a10^ SCE^n%Tm 3245 ,12,260,000
GIS Enhancements 3240 $3,448,500
Disjr^bution System 3^46 $796.521GIS Enhancements °^u <p/yu" Deteriorated Pole
Replacement
Program
Power Facility
Wastewater/Storm
Water Capture
Subtransmission Line
Upgrades &
Replacements 35kV
3233 $27,995,556
3270 $28,853,000
$9,070,000
Glenarm Receiving
'Statk)n"Upg"radesa 3266 $4.836.000
Ties to Carbon-Free Goals
distributed resources; supports load
growth from electrification
Supports ability to operate safely in
wildfire zones; undergrounding
required for system resilience as
climate warms
Extreme fire risk areas converted to
underground service
Upgrades 220kV system — PWP's
primary source of imported power
including carbon-free sources;
consistent with Resolution 9977
Monitoring and control of distribution
and transmission systems; essential
for integrating variable renewables
Supports system planning and field
operations needed for renewable
integration
Supports Outage Management
System and engineering decisions for
carbon-free power distribution
Structural integrity of overhead
infrastructure required to carry
increasing loads from carbon-free
imports
Environmental compliance at
Glenarm and Broadway Plants;
supports transition to clean energy
site use
Designed to increase reliability and
capacity of bulk power delivery for
long-term load growth including
carbon-free imports
Consistent with Resolution 9977;
upgrades protection and control for
subtransmission lines supporting
power flow including carbon-free
resources
CIP Carbon-Free Investment Analysis
April 9, 2026
Page? of 15
ProjectCIPTotal Est.
Cost
Santa Anita 35kV
Receiving Station 3260 $10,785,000
Upgrades
Distribution Power
Quality & Protection 3252 $4,697,000
Enhancement
Chester Substation
Upgrades
Villa Substation
Upgrades
Oak Knoll Substation
Upgrades
Hastings Substation
Upgrades
3273 $21,507,000
3278 $14,712,000
3277 $5,623,000
$123,000
-$605,089,790
Ties to Carbon-Free Goals
Addresses obsolescence risk at
subtransmission receiving station
carrying carbon-free imports
Voltage stability and power quality
required to integrate intermittent
renewable resources at distribution
level
Consistent with Resolution 9977;
switchgear, and protection and control
upgrades of subtransmission lines
supporting power flow including
carbon-free resources
Cited as consistent with Resolution
9977; switchgear, and protection and
control upgrades of subtransmission
lines supporting power flow including
carbon-free resources
Cited as consistent with Resolution
9977; switchgear, and protection and
control upgrades of subtransmission
lines supporting power flow including
carbon-free resources
Cited as consistent with Resolution
9977; transformer upgrades
supporting power flow including
carbon-free resources
*
Transmission System Enhancements (3195) shows $0 in Total Estimated Cost due to a CIP formatting anomaly. The figure above represents appropriations through FY26.
FY27-FY31 proposed funding of$500K/year brings the total to approximately $10.4M.
Question 2: How Much Is Identified as Funded?
Direct Carbon-Free Projects — Funding-Source Identified and Unidentified Project
Glenarm Energy Storage
Broadway Energy Storage
Municipal-Owned Solar Program
(combined)
Total CostFundedUnidentified
$28,160,000 $28,160,000
$38,036,500 $38,036,500*
$0
$0*
$90,000,000 $20,000,000 $70,000,000
,**
CIP Carbon-Free Investment Analysis
April 9, 2026
Project
EV Charging Infrastructure
Customer Solar/Storage
Interconnections
Emerging New Technology
Power I RP 2023
Power IRP 2028
DIRECT TOTALS
Total Cost
$27,162,000
$1,803,000
$204,000
$1,680,000
$1,550,000
Funded
$27,162,000
$1,803,000
$164,000
$1,680,000
$1,550,000
Unidentified
$0
$0
$40,000*
$0
$0
**
$188,559,500 $118,555,500 $70,040,000
*
Broadway Energy Storage shows $38M in the Power Fund column, but the project table also lists ~$165.1M in Unidentified across FY28-FY31 and beyond as the Broadway Plant site is redeveloped into a much larger energy storage facility. Including that, Broadway's total funding-source unidentified exposure is ~$165M beyond what appears in the Power Fund.
** Municipal-Owned Solar Program: the 2 MW phase ($9M) is funded. The 4 MW phase ($18M) is partially funded with $11M appropriated and $7M unidentified. The 6 MW ($27M) and 8 MW ($36M) phases are pending identification of funding sources. *** Emerging Technology has $40K unidentified in FY28, then approximately $42.5M unidentified in FY29-FY30 for future phases.
Indirect Carbon-Free Enablement Projects — Funding-Source Identified and Unidentified
Project
Subtransmission Path 2
Upgrade
Distribution Voltage
Conversion (4kV-17kV)
Advanced Metering
Infrastructure (AMI)
Fair Oaks & Brookside
Substation Upgrades
T.M. Goodrich Intertie
Transformer Upgrades
Receiving Station 35kV
Upgrades
Substation Switch
Replacement Program
Substation Modernization
Program
Total CostFunded
$73,180,000 $73,180,000
$33,868,571 $33,868,571
$48,206,356 $48,206,356
$75,009,000 $75,009,000
$65,210,031 $65,210,031
$26,674,758 $26,674,758
),259,000 $8,259,000
$14,523,000 $14,523,000
Unidentified
$0
$0
$0
$0
$0
$0
$0
$0
CIP Carbon-Free Investment Analysis
April 9, 2026
Project
Distribution Switch
Replacement Program
Conductor Replacement
Program
Electrical Vault Replacement &
Reinforcement
Distribution Transformer
Replacement Program
Fire Threat Mitigation Tier 2
Areas
Fire Threat Mitigation Tier 3
Areas
Transmission System
Enhancements
SCADA System Expansion
CIS Enhancements
Distribution System GIS
Enhancements
Deteriorated Pole Replacement
Program
Power Facility
Wastewater/Storm Water
Capture
Subtransmission Line
Upgrades 35kV
Glenarm Receiving Station
Upgrades
Santa Anita 35kV Receiving
Station Upgrades
Distribution Power Quality &
Protection Enhancement
Chester Substation Upgrades
Villa Substation Upgrades
Oak Knoll Substation Upgrades
Hastings Substation Upgrades
Total Cost
$21,762,500
$13,994,427
$26,070,000
$12,460,000
$14,764,000
$6,080,000
$12,260,000
$3,448,500
$796,521
$27,995,556
$9,070,000
$4,836,000
$10,785,000
$21,507,000
$14,712,000
$5,623,000
$123,000
Funded
$21,762,500
$13,994,427
$26,070,000
$12,460,000
$14,764,000
$6,080,000
$7,913,666 $7,913,666
$12,260,000
$3,448,500
$796,521
$27,995,556
$28,853,000 $8,753,000
$0
$4,836,000
$10,785,000
$4,697,000 $4,697,000
$21,507,000
$985,000
$1,421,000
$0
Unidentified
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$20,100,000^
$9,070,000
$0
$0
$0
$0
$13,727,000*
$4,202,000"
$123,000
*
**
,**
CIP Carbon-Free Investment Analysis
April 9, 2026
ProjectTotal Cost
Wilson Substation Upgrades $12,407,904
Funded
$0
Unidentified
$12,407,904
INDIRECT TOTALS$605,089,790 $545,459,886 $59,629,904
* Power Facility Wastewater has $20.1M proposed in FY28 via Power Bond not yet appropriated.
** Villa and Oak Knoll show Power Fund amounts already appropriated but the bulk of their Power Bond allocations are in FY29-FY31 and not yet committed.
Consolidated Funded and Funding-Source Unidentified Summary Category
Direct Carbon-Free Projects
Indirect Carbon-Free
Enablement Projects
COMBINED TOTAL
Total Cost
$188,595,500
$605,089,790
Funded
$118,555,500
$545,459,886
Unidentified
$70,040,000
$59,629,904
$793,685,290 $664,015,386 $129,669,904
Note: Broadway Energy Storage carries an additional ~$165M in unidentified exposure beyond the FY27-31 window, and Emerging Technology carries ~$42.5M in unidentified funding source for future phases. Including these, total funding-source unidentified carbon-free exposure across the full program horizon approaches ~$337M.
Question 3: Fundina-Source Unidentified Amounts & Possible Funding Sources Funding-Source Unidentified Carbon-Free Projects Summary Project
Broadway Energy
Storage (beyond FY31)
Emerging New
Technology (FY29-
FY30)
Subtransmission Line
Upgrades 35kV
Power Facility
Wastewater/Storm
Water
Type
Unidentified
AmountNotes
Municipal-Owned Solar
Program (4 MW, 6 MW, Direct
8 MW phases)
4 MW partially funded ($7M gap);
J'uuu 6 MW and 8 MW unidentified
Direct -$165,100,000 Long-term unidentified horizon
Direct -$42,540,000 Future phases unidentified
Indirect $9,070,000 Awaiting funding identification
Indirect $20,100,000FY28 Power Bond not yet
appropriated
CIP Carbon-Free Investment Analysis
April 9, 2026
Project
Villa Substation
Upgrades
Oak Knoll Substation
Upgrades
Hastings Substation
Upgrades
Wilson Substation
Upgrades
TOTAL
UNIDENTIFIED (within
CIP window)
Type
Unidentified
Amount
Indirect $13,727,000
Indirect $4,202,000
Indirect $123,000
Indirect $12,407,904
-$337,269,904
Notes
FY29-FY31 Power Bond not yet
committed
FY28 and FY31 Power Bond not
yet committed
Funding-source unidentified; to
be created FY31
Funding-source unidentified; to
be created FY29
Possible Funding Sources
Funding Source | Applicability
Power Revenue BondsHigh—all
types
Federal Grants
High -
solar,
storage, EV
California CEC Grants
Public Benefit Charge
(PBC)
High -
solar,
storage
Medium —
solar
Notes
Primary mechanism used across the CIP;
natural fit for large infrastructure; already
committed for most funded projects. All new
bond issuances are sized and sequenced to
maintain PWP's debt service coverage ratio
at sustainable levels consistent with bond
covenant requirements and financial policy
targets.
IRA direct-pay tax credits now available to
public agencies although at greatly
narrowed scope since OBBB passage; DOE
Grid Resilience grants applicable to
subtransmission and substation work. Grant
funding is particularly valuable because it
reduces bond issuance needs and
preserves debt coverage headroom. PWP
consistently applies.
California Energy Commission offers grants
and low-interest loans for municipal
renewable projects; non-debt funding that
does not affect coverage ratios.
Already funding 2 MW Solar; expanding
PBC surcharge or redirecting existing PBC
revenue could fund additional solar tranches
CIP Carbon-Free Investment Analysis
April 9, 2026
Funding Source Applicability
HQ Bond ReallocationMedium —
solar
Debt Medium —
Restructuring/Refunding all types
Public-Private
Partnerships
Medium —
EV, solar
Notes
without requiring debt issuance. PBC rate
can also be increased.
If HQ project is deferred or scaled down,
~$33M in Power Bond capacity could be
redirected to solar; total system debt service
impact would be equivalent since the same
bond capacity is being deployed.
If existing bonds can be refunded at lower
rates, freed-up debt service capacity creates
room for new issuances while maintaining or
improving coverage ratios. PWP is already
pursuing this within existing workplan.
Third-party ownership/PPA structures for EV
chargers and rooftop solar reduce capital
burden on PWP entirely, with no impact on
debt levels or coverage ratios. Would be
presented through the operating budget
most likely.
Important Note on Debt Capacity and Coverage Ratios: The phasing offunding-source unidentified projects across FY28-FY31 and beyond is intentional. PWP's financial plan manages bond issuances to maintain a sustainable debt service coverage ratio, the ratio of net revenues to annual debt service, consistent with bond covenant requirements and financial policy targets. This means the full ~$337M funding-source unidentified carbon-free program cannot and should not be closed all at once. The sequencing of future bond issuances, grant awards, and PBC revenues must be modeled against projected net revenues each year to ensure coverage ratios remain at levels that protect PWP's credit rating, preserve access to the tax-exempt bond market at favorable rates, and keep customer rate impacts manageable. Grants, PBC revenues, and IRA direct-pay credits are especially valuable in this context because they fund capital investment without adding to debt service obligations.
Question 4: Operatina Budget Allocation for Carbon-Free Goals Rather than a separate carbon-free budget line, PWP's operating spending reflects a wholesale transition — fossil fuel procurement has been eliminated from future purchases, meaning the entire power procurement budget advances the carbon-free goal.
The PBC is already being split between capital and operating uses. The 2 MW Solar project draws $9M from PBC and Emerging Technology draws $60K from PBC, indicating PBC revenues flow to both sides of the ledger. The operating share of PBC directed toward carbon-free programs such as customer efficiency rebates, EV CIP Carbon-Free Investment Analysis
April 9, 2026
incentives, and renewable energy education would need to be pulled from the operating budget document for a complete picture. There is also approximately 80% of the PBC fund in the operating budget being spent on energy efficiency programs and rebates furthering the carbon-free goals.
Question 5: Water &JPower Headquarters — Financial Analysis Shows Significant Net Cost Savings
What Is the PWP Headquarters ("HQ") Project?
CIP #3285 — Water and Power Department Headquarters — proposes a needs assessment and eventual procurement of a permanent, consolidated headquarters for PWP office business units. Currently PWP operations are dispersed across multiple leased and City-owned locations. The project consolidates office business units into one site to improve coordination, customer service response, and emergency management.
In FY27 the work is limited to continuing the needs assessment and identifying potential sites. The major capital commitment ($26M in FY28, $6.5M in FY29) represents acquisition and/or construction. The other portion (35%) is in the Water Fund as the facility would consolidate multiple operations into one site.
The bond analysis, debt service projections, and own vs. rent comparisons that follow are for illustrative purposes only and do not constitute a commitment, authorization, or recommendation to issue debt. All financing scenarios are subject to City Council approval.
CIP Allocation for HQ
Funding
Source
Power Bond
Power Fund
TOTAL
TotalFY27FY28FY29FY30
$33,280,000 $650,000 $26,000,000 $6,500,000 $130,000
$390,000 $390,000 $0 $0 $0
$33,670,000 $1,040,000 $26,000,000 $6,500,000 $130,000
Bond Analysis: $50M Building, 30-Year Bonds at 4.5%
Annual debt service on a $50M, 30-year municipal bond at 4.5%, using the standard annuity formula:
Annual Payment = P x [r(1+r)n] / [(1+r)" -1]
P = $50,000,000 | r = 4.5% | n = 30 years -^ Annual Debt Service » $3,070,000/year CIP Carbon-Free Investment Analysis
April 9, 2026
Own vs. Rent Comparison (3% Annual Rent Escalation)
Year
Year 1
Year 5
Year 10
Year 15
Year 20
Year 25
Year 30
30-Year Total
Annual Rent
$4,000,000
$4,508,000
$5,226,000
$6,059,000
$7,022,000
$8,144,000
$9,430,000
-$190,000,000
Annual Debt
Service
$3,070,000
$3,070,000
$3,070,000
$3,070,000
$3,070,000
$3,070,000
$3,070,000
-$92,100,000
Annual Savings
$930,000
$1,438,000
$2,156,000
$2,989,000
$3,952,000
$5,074,000
$6,360,000
At the end of 30 years, PWP owns a fully paid-off asset worth $50M or more. The financial case for owning is compelling from year one and strengthens significantly over time.
Deb( Coverage Ratio Consideration — HQ and Solar
Whether PWP procures an HQ or continues to lease, the debt service coverage ratio is affected differently by each path:
Scenario
Build HQ via
$50M bond
Debt
Service
Impact
+
$3.07M/year
debt sen/ice
Operating
Expense Impact
- $4.0M+/year
rent eliminated
Continue
leasing, redirect
bond capacity to
solar
No new debt
service from
HQ bond
$4.0M+/year rent
continues and
escalates
Net Coverage Ratio Effect
Net neutral to slightly positive —
bond service is less than current
rent, so net revenues available
for coverage actually improve
over time as rent savings grow
Rent continues to escalate,
reducing net revenues available
for debt coverage; solar bond
adds ~$3.07M debt service but
may generate operating savings
through avoided power
purchase costs
Key Insight: Eliminating $4M+/year in escalating lease expense through an HQ bond actually improves net revenues available for debt sen/ice coverage over time, whereas continuing to pay rent slowly erodes that coverage headroom. This means the HQ bond CIP Carbon-Free Investment Analysis
April 9, 2026
would not compete with solar bonds for coverage ratio capacity — it would instead create additional coverage headroom that enables future solar bond issuances.
Key Considerations
Factor
Annual carrying cost
Operating cost savings
Asset at end of period
Resolution 9977 alignment
Coverage ratio impact
Timing flexibility
Own HQ/Office Consolidation
~$3.07M debt service
Avoided cost of leasing ~$4M+/year escalating
$50M+ building owned free and clear
Indirect — supports operations efficiency
Neutral to positive — rent savings offset debt service
and grow over time
FY28 is first major commitment — this budget cycle is
the decision point
No major HQ capital commitment is locked in until FY28, giving PWP a full budget cycle to model the full debt service coverage ratio impact of each scenario before any major decisions are made. Given that owning provides immediate cost savings over renting at $4M/year and that eliminating lease expense strengthens the net revenue base that supports debt coverage, owning a facility improves PWP's long-term financial position relative to the status quo.