Solar Project Financing Guide for California Reclamation Districts

Thinking About Solar?

Is your reclamation district considering a solar project to cut costs and improve sustainability? Energy costs can add up quickly, and districts have been installing solar panels and storage systems for long-term savings and greater energy resiliency.

Since energy savings build up over time, financing a solar project lets you spread out the cost while enjoying the benefits right away.

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Why Finance Your Solar Project?

Paying for a solar project upfront can be a big expense. Financing makes it much more manageable.

Reclamation districts benefit from tax-exempt financing, which comes with lower interest rates than typical loans. This helps keep costs down and make the project more affordable.

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Municipal Equipment Leasing: Smart and Flexible Financing Option

‍One of the most efficient ways for a reclamation district to finance a solar project is through a municipal equipment lease. Here’s why it makes sense:

• Liming collateral to the project keeps other assets free and clear.
• No need to pledge assessment revenues for the repayment of the debt. This gives you more flexibility for funding other capital projects.
• You can finance up to 100% of the project cost.

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How Does a Municipal Equipment Lease Work?

You might hear “lease” and think of a car lease, but this is different. With a municipal equipment lease:

• Your district owns the solar system from day one.
• The full project cost is financed.
• The entire project cost is repaid over the term of the lease.
• There is no buyout at the end—the system is yours free and clear once the final payment is made.

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Finding the Right Lender

Not every bank is equipped to handle municipal equipment leases—your local bank may not even know where to start. Instead, specialized public finance divisions of certain banks offer this type of financing. To get the best deal, it’s a good idea to run a competitive Request for Proposals (RFP) process.

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What to Expect with Financing Terms

• Most solar projects are financed over a 10-year term.
• Payments can be structured to align with the energy savings your district will see over time.
• Some banks put the money into an escrow account to pay for project costs, while others allow you to take out money as needed.

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What Happens After Financing Closes?

Once your financing is in place, you’ll have a couple of ongoing responsibilities:

• The lender will require periodic financial reporting, most likely your audited financial statements and budget.
• The State of California requires all public agencies that borrow money to file Annual Debt Transparency Reports.

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Need Help? A Municipal Advisor Can Make a Big Difference

Municipal financing can be complex, with plenty of details and nuances. Each bank has different terms and covenants. How can you make sure that you get a good deal that is the right fit for your district?

A municipal advisor can guide you through the process, helping you structure the financing, avoid mistakes, and ensure on-going compliance. As fiduciaries, municipal advisors are legally required to act in the district’s best interest, providing independent, unbiased advice. They assist with evaluating financing options, conducting competitive lender selection processes, negotiating terms, and ensuring all legal and reporting requirements are met.

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About Ridgeline

Ridgeline Municipal Strategies, LLC is an independent registered municipal advisory and financial consulting firm assisting cities and special districts with financial planning and financing for infrastructure, facilities, and equipment.

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Need financing for your project?