Mayor Tom Bates of Berkeley has just proposed a very interesting idea: city financing of solar and energy efficiency investments paid for over 20 years through a tax assessment on the property being improved. See this press release for more details.
Say you want to buy a $20,000 solar PV system. The city pays the contractor and places a tax assessment on your property for 20 years at a rate of $1,500 per year (or something like that). The $30,000 that you will pay includes $20,000 of principal and $10,000 of interest. (This example assumes that the interest rate is 4.5%.)
If I understand the proposal correctly, the homeowner's tax payments are tax deductible (if he itemizes), unlike an ordinary loan in which only the interest paid is deductible (and there are limitations on the deductibility of interest). [Update: according an e-mail from Cisco de Vries in the mayor's office, the tax payments are deductible from your California tax return but not Federal. He didn't explain why the deductibility varies.]
If homeowners can get low interest (because the loan is secured by the taxing power of the city) and better deductibility of interest, it would revolutionize solar financing and potentially many other capital-intensive (but sensible) investments in renewable energy and conservation.
Kudos to Mayor Bates and his Chief of Staff Cisco de Vries!
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This measure passed unanimously in Berkeley's City Council Meeting on Nov. 6. I've read in the SF Chronicle that San Francisco is considering the same approach.
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