small cities climate action partnership (sccap) innovator...

Small Cities Climate Action Partnership (SCCAP) Innovator Pilot Program

Municipal Reinvestment Mechanism Strategy Report

Prepared For: Innovator Pilots a Program of

Pacific Gas and Electric Company San Francisco, CA

Prepared By:

Strategic Energy Innovations

July 2012

Innovator Pilots is administrated by the Pacific Gas and Electric Company (PG&E), using funds from the Public Goods Charge (PGC) authorized by the California Public Utility Commission (CPUC). Customers of California’s three largest investor-owned utility companies pay the PGC through their electric utility

bills. Customers pay the surcharge per unit of consumption (kilowatt-hours). Money raised by the PGC is spent on services and programs deemed to be in the public interest, including energy efficiency

initiatives such as Innovator Pilots.

This program is funded by California utility customers and administered by PG&E under the auspices of the California Public Utilities Commission.

LEGAL NOTICE

THIS REPORT WAS PREPARED AS A RESULT OF WORK SPONSORED BY THE CALIFORNIA PUBLIC UTILITIES COMMISSION (“COMMISSION”). IT DOES NOT NECESSARILY REPRESENT THE VIEWS OF THE COMMISSION, ITS EMPLOYEES, OR THE STATE OF CALIFORNIA. THE COMMISSION, THE STATE OF CALIFORNIA, ITS EMPLOYEES, CONTRACTORS AND SUBCONTRACTORS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AND ASSUME NO LEGAL LIABILITY FOR THE INFORMATION IN THIS REPORT; NOR DOES ANY PARTY REPRESENT THAT THE USE OF THIS INFORMATION WILL NOT INFRINGE UPON PRIVATELY OWNED RIGHTS. THIS REPORT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION IN THIS REPORT.

NEITHER PACIFIC GAS AND ELECTRIC COMPANY NOR ANY OF ITS EMPLOYEES: (1) MAKES ANY WRITTEN OR ORAL WARRANTY, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO THOSE OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; (2) ASSUMES ANY LEGAL LIABILITY OR RESPONSIBILITY FOR OR MAKES ANY REPRESENTATION OR WARRANTY REGARDING THE ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY INFORMATION, DATA, DEVICE, PRODUCT, PROCESS, METHOD, POLICY OR PROCEDURE CONTAINED OR DESCRIBED HEREIN; OR (3) MAKES ANY WARRANTY OR REPRESENTATION AS TO WHETHER THE INFORMATION OR ITS USE MAY INFRINGE THE INTELLECTUAL PROPERTY OR PROPRIETARY RIGHTS OF ANY PERSON OR ENTITY (INCLUDING, BUT NOT LIMITED TO, COPYRIGHT, PATENTS, OR TRADEMARKS).

ANY PROJECT COSTS, ENERGY SAVINGS, AND GHG EMISSIONS REDUCTIONS PRESENTED IN THIS DOCUMENT REPRESENT CALCULATED ESTIMATES AND ARE PREDICATED ON A NUMBER OF ASSUMPTIONS.

Small Cities Climate Action Partnership Innovator Pilot Program:

Reinvestment Mechanism Strategy Report

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Table of Contents

1. EXECUTIVE SUMMARY 2

2. BACKGROUND 5

2.1. OBSTACLES AND BARRIERS 5 2.2. OVERVIEW OF A REINVESTMENT FUND 5

3. PROPOSED REINVESTMENT FUND FRAMEWORK & BEST PRACTICES 6

3.1. GOALS 7 3.2. FUND MANAGEMENT ROLES 8 3.3. FLOW OF FUNDING 10 3.3.1. SOURCE OF INITIAL FUNDS 10 3.3.2. FUND CAP 11 3.3.3. REPAYMENT 12 3.3.4. ADMINISTRATIVE COSTS 14 3.3.5. DEDICATED FUNDS 14 3.4. PROJECT CRITERIA 16 3.4.1. GENERAL PROJECT CRITERIA 16 3.4.2. FISCAL PERFORMANCE CRITERIA 17

4. IMPLEMENTATION, MONITORING, AND REPORTING ACTIVITIES 19

5. APPENDICES 20

5.1. SAMPLE STAFF REPORT 20 5.2. SAMPLE RESOLUTION DOCUMENT 22 5.3. MRF CASE STUDY INFORMATION 22 5.4. SAMPLE PROJECT APPLICATION 23



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1. EXECUTIVE SUMMARY A reinvestment mechanism is a financial tool – an internal fund - designed to support ongoing municipal improvements that are outside of specific project and departmental structures. Such a mechanism is designed to pay for itself overtime, and can become a permanent source of funding for improvements for a municipality and a method to track and utilize resource savings. A reinvestment mechanism can become self-sustaining as energy and water savings from projects implemented under the fund reduce costs to the city, and the fund manager tracks these savings.

This document is designed to assist local governments to set up a Municipal Reinvestment Fund (MRF) that meets their needs. This document addresses Best Practices from other municipal and university funds, defines the organizational structure of a reinvestment mechanism and responsibilities for implementation, provides an overview of accounting approaches, defines potential requirements for eligible projects, and outlines key points to focus on when establishing a MRF. Sections include:

Obstacles and barriers often faced in setting up reinvestment mechanisms; Best practices and frameworks for establishing a customized reinvestment mechanism including

goals, management role, financial flow, and project criteria; Implementation and monitoring activities related to operating a reinvestment mechanism; Key points to consider when establishing a MRF; A sample staff report, policy document and other key resources; and A sample resolution to be considered when seeking adoption at the Council level.

The following table summarizes the proposed MRF framework and outlines the tasks recommended for setting up the city’s MRF. All parts of this framework are explained in detail in the subsequent sections of this report.

Table 1: Proposed Framework Implementation Activities



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Task Sub-Tasks Level of Effort

1. Define goal statement • Define costs/resource savings goals • Review existing city goals and incorporate important elements Medium

2. Determine fund manager placement and roles

• Determine staff responsible for the fund • Convene key stakeholders to determine if there is ideal

existing staff to manage the fund • Place fund manager in the best department to oversee the

fund • Coordinate with the finance staff to establish the relationship

between the fund manager and finance staff • Define fund manager key roles and responsibilities • Train fund manager on tools that can be utilized to track

municipal projects, costs, energy and cost savings, etc. (e.g. Municipal Energy Plan)

High

3. Determine flow of funding

3.1. Source of Initial Funds

• Determine available financing sources and opportunities • Determine initial amount of funds • Designate funds to MRF

High

3.2. Fund Cap • If desired, determine a maximum amount the fund can grow to,

as well as a minimum amount below which the fund cannot be reduced.

Low

3.3. Repayment Structure

• Determine criteria for repayment of fund • Set up repayment structure • Determine how savings are allocated • Determine flow of funding if fund cap is reached, if applicable

Medium

3.4. Administrative Costs

• Incorporate administrative costs in the operations of the fund, if desired Low

3.5. Dedicated Funds • Determine if the fund can be setup so that it is permanently

established, or if it will have to be approved annually along with other budget items.

Medium

4. Create project criteria

4.1. General Project Criteria

• Set up general project approval criteria in alignment with goals flow of funding

• Create project application form based on general project criteria and resources in Appendix 5.4

Medium

4.2. Fiscal Performance Criteria

• Clearly define fiscal performance criteria • Define annual portfolio of projects that will achieve a

reasonable overall return on investment Medium

Below, Table 2 outlines the tasks that are necessary to successfully implement, monitor, and report the performance of an MRF. The information below also provides cities with some guidance on the level of effort and timing that are typically required for each task. The Fund Manager should be in charge of overseeing these tasks. By tracking savings, cities can demonstrate realized energy and costs savings and make the case for continuing the fund.

Table 2: MRF Implementation, Monitoring, and Reporting Activities

Task Sub-Tasks Freq. Level of Effort



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Develop MRF design

• Design MRF program utilizing available resources (e.g. Proposed MRF Framework presented in this document) At beginning of

project High

Obtain City Council approval

• Present MRF framework along with associated outcomes and benefits to City Council for approval

At beginning of project High

Obtain seed funding

• Secure financial opportunities for setting up MRF At beginning of project High

Develop MRF mechanisms and procedures

• Based on adopted MRF framework, develop detailed fund procedures and mechanisms. This may include but is not limited to developing project applications (a sample project application can be found in the Appendix Section 6.4), rules for participating in the fund, protocol for assessing eligibility of projects, timelines, etc.

At beginning of project, and on going on an annual basis.

High

Research and share available opportunities for funding projects

• Research existing and future funding opportunities for energy/water efficiency projects and share with participating city departments

On-going basis Low

Assess eligibility of projects

• Based on criteria set in the adopted MRF Framework, evaluate the feasibility of projects and select approved projects

• Refer projects that do not qualify to other possible funding resources, if available

At least once yearly Medium

Track project savings and progress

• Establish a system to maintain and track detailed records of energy use and cost data for all projects and their progress

• As needed use third-party audit to validate energy savings • Provide each participating city department an annual/quarterly

summary report of their projects’ performance and energy savings

On-going basis High

Modify fund design

• “True Up” savings estimates based on actual performance data as it becomes available to ensure costs, savings and outcomes reflect real-world conditions as much as possible.

• Evaluate performance and strengths and weaknesses of fund • Evaluate the fund performance on each element (e.g. goals,

fund management roles, flow of funding), and make modifications when appropriate

• Share changes in MRF design with City staff

Yearly Medium

Report outcomes • Report/present annually to City Council Yearly High

This guideline was developed from various related resources and compiled by Strategic Energy Innovations (SEI) through a Program funded by Pacific Gas and Electric Company’s (PG&E’s) Innovator Pilot Program.



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2. BACKGROUND

2.1. Obstacles and Barriers Generating funds to implement energy efficiency projects can be a challenge for small cities. Sustaining these funds and continued implementation of these projects in the long-term is equally as difficult. Though cities have access to municipal operating and capital budgets, energy efficiency projects must also compete with a host of public service projects, which generally have shorter-term paybacks than energy efficiency projects. Thus, when the operating budget is strained to provide immediate services to the public, energy efficiency opportunities are often overlooked. Furthermore, municipalities depend on the capital budget to fund infrastructure maintenance and upgrades and there are limited resources for small cities to tap in to. To ensure that a sustainable funding resource for energy efficiency projects is maintained, cities can utilize a reinvestment mechanism. The implementation of a reinvestment mechanism is one way to enable under-resourced small cities to develop a “reinvestment fund”, which is used to continuously fund energy efficiency projects, and to make certain that energy savings are consistently reallocated to fund future energy efficiency projects.

2.2. Overview of a Reinvestment Fund A reinvestment fund is generally established to fund projects that will require initial seed money, but will generate additional revenue after project implementation. This model has been adapted to fund a variety of projects including community development and environmental conservation. This document addresses the establishment, implementation, and monitoring of a Municipal Reinvestment Fund (MRF) focused on energy and resource conservation projects. The MRF is set up with initial seed funding and is replenished by project cost savings (typically energy cost savings) overtime. The flow of the fund is circular, as projects generate revenue and are funneled back to the fund. The diagram below represents the general overview of the fund.

Figure 1: Cycle of Reinvestment



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3. PROPOSED REINVESTMENT FUND FRAMEWORK & BEST PRACTICES Below, research and analysis of the Municipal Reinvestment Fund (MRF) has been distilled into four elements: Goals, Fund Management Roles, Flow of Funding, and Project Criteria. The proposed framework is a guide for cities to use in the development of their specific reinvestment mechanism. The framework introduces each element and includes best practices based on information gathered from case studies on successful municipal and university reinvestment funds. The framework also includes Guiding Questions aimed to help cities illuminate their unique opportunities and constraints. By addressing the questions at the end of each subsection, and utilizing the information from the best practices, cities can design an MRF that meets their climate or energy action and financial goals, as well as internal operational structures.

The framework discussed in this document is based on primary and secondary research conducted by SEI on existing reinvestment funds that have been successfully designed and implemented by various local governments (including City of El Cerrito, a SCCAP partner) as well as colleges/universities throughout the United States and Canada. The case study examples are discussed in detailed throughout the subsequent sections below, and the sources for each case study are outlined in the Appendix (Section 6.3).

The following table summarizes the proposed MRF Framework and outlines the tasks recommended for setting up your city’s MRF. All parts of this framework are explained in detail in the subsequent sections.

Table 3: Proposed Framework Implementation Activities




• Determine staff responsible for the fund • Convene key stakeholders to determine if there is ideal

existing staff to manage the fund • Place fund manager in the best department to oversee the

fund • Coordinate with the finance staff to establish the relationship

between the fund manager and finance staff • Define fund manager key roles and responsibilities • Train fund manager on tools that can be utilized to track

municipal projects, costs, energy and cost savings, etc. (e.g. Municipal Energy Plan)

High




High

3.2. Fund Cap • If desired, determine a maximum amount the fund can grow to,

as well as a minimum amount below which the fund cannot be reduced.

Low



Medium





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3.5. Dedicated Funds • Determine if the fund can be setup so that it is permanently

established, or if it will have to be approved annually along with other budget items.

Medium





Medium


• Clearly define fiscal performance criteria • Define annual portfolio of projects that will achieve a

reasonable overall return on investment Medium

3.1. Goals With strong goals and objectives, the fund can be strategically structured so as to support projects aligned with both the city’s environmental goals as well as its financial objectives. Does your city have specific costs savings or emissions reduction targets it wishes to achieve through the MRF? This is the type of important question to address to ensure the success of the MRF.

When formulating the goals of the MRF, it is important to consider the scope of the fund and the ways in which the MRF can most closely align with the needs of the city. Will it be intended to fund projects with a very specific objective (such as increased energy performance) or will it also be used to promote innovation? Is the goal to use the MRF to impact municipal operations only, or also to impact the community? Carefully designed goals will support better project implementation and protect the fund from competing purposes within the city’s budget.

The procedural methods for establishing the MRF goals can take different shapes, including and not limited to staff bringing goals to management staff or the City Council for approval (e.g. Visalia and El Cerrito) or setting up a task force/committee to determine the MRF’s goals.

Examples of goals are summarized in the table below.

Table 4: Goal Examples

Goal Entity Details

Energy Consumption

San Jose Aligns with San Jose's Green Vision in 2007 which included goals to reduce citywide energy usage by 50% and use 100% renewable energy (This goal alignment came after the fund was established)

Ann Arbor, MI Supports energy efficiency capital projects

Phoenix, AZ Supports energy efficiency capital projects

Emissions Toronto, Canada CO2-reducing project without alternative financing options

Resource Efficiency El Cerrito

The Energy and Water Efficiency Program (EWEP) is a revolving loan fund that was established by the City of El Cerrito in 2008 to fund projects that improve the resource efficiency of City operations.

Financial Alameda County

Protect money from being lost at the end of the year if unspent, and from being used to balance the General Fund budget

Financial Visalia

The purpose of the Conservation Fund is to accrue funding for future conservation projects and provide a competitive edge in future grant funding. Recommendations for goals were developed by city staff then taken to council for authorization



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Goal Entity Details

Broad McCalister College

“The Mission of the Clean Energy Revolving Fund (CERF) is to encourage global sustainability on campus and in the community, by funding innovative projects that demonstrate environmental leadership and economic benefit. CERF will empower Macalester College and its students to build a sustainable community. CERF will foster local projects that further the worldwide movement for a sustainable future. As an independent fund at Macalester College and administered by members from all parts of the Macalester community, CERF will fund renewable energy, energy efficiency and other cost-saving projects that demonstrate sustainable design.”

Guiding Questions: An effective MRF is shaped by a strong goals-statement that can provide direction to staff as well as ensure that the implementation remains in alignment with city priorities. To determine both specific and broad goals that may be pursued through the MRF, the following questions can be addressed:

What level of costs savings does your city hope to achieve? What level of resource (energy, water, etc.) savings does your city hope to achieve? What level of reductions in CO2 emissions does your city hope to achieve? Will your city use the MRF to finance less cost-effective projects that would traditionally be

unfunded? How broad will your fund objectives be? For example

o Is the fund to be used only for specific resource performance (e.g. energy) projects? o Can the fund be used to educate municipal employees about resource conservation

issues? o Can the fund be used to institutionalize environmental performance into existing

departments? o Can the fund be used to analyze potential projects (e.g. studies)?

Will your city be opening MRF funding to all departments within the city/town operations, or will it target specific departments?

Will your city fund a predetermined level of projects from all municipally run departments or only from specific departments?

3.2. Fund Management Roles Managing an MRF effectively is critical to ensure success. Considering that energy, water, and other resource conservation projects are complex, the potential benefits can be hard to track, and changing conditions can unravel desired outcomes if not monitored. Highlighted in this section are best practices for defining how the MRF is managed.

In designating a fund manager (either an individual or committee), it must be decided what sort of authority they will have. Their role is likely to include overseeing the daily operations of the fund, which is likely to include: project approval, fund allocation, choice of appropriate payback periods, monitoring and verifying savings from all conservation measures funded, maintaining current financial records on audit and installation costs, and continually seeking ways to increase and maintain the revolving fund. Particularly in smaller cities, it may be preferable to have an individual staff person responsible for managing these daily operations, rather than a group of staff. However, if the fund will be affecting multiple departments, having a committee with representation from all departments may be important.



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In deciding which department is best to oversee the fund, the choice will likely depend on a number of factors, such as who has the most existing resource conservation-related responsibilities, and how budgets for improvements are handled within the municipality. While some municipalities have given this role to Energy Management staff, others have given it to their Office of Finance, City Management, Environmental Services, or Capital Improvements Departments. Depending on the size of the fund, it may be important to include the costs of staffing in the fund structure (either allocating a portion of a person’s time or creating a new position). Some examples of fund management roles are highlighted in Table 5.

Table 5: Fund Management Examples

Fund Manager Entity Details

Energy Management Staff

City of Houston

The Office of Energy Management has responsibility for administering the Green Lights Revolving Fund, determining which projects to fund, establishing the base year for funded facilities to be upgraded, monitoring and verifying energy savings from any and all energy conservation measures funded, maintaining current financial records on audit and installation costs, and continually seeking ways to increase and maintain the revolving fund.

City of San Jose The City of San Jose established an Energy Officer position, in the Environmental Services Department, to facilitate implementation of energy efficiency and renewable energy projects. The Energy Fund covers the cost of the position.

Alameda County

The Energy Fund covers the "Energy Program staff that manages energy efficiency and renewable energy project development, quality control, savings analysis, and financing." The fund has enough money to fund an Energy Program Manager, two project managers and two electricians.

Ann Arbor

In Ann Arbor, Michigan the Revolving Energy Fund is administered by the City’s Energy Office, which is responsible for collecting and tracking applications (among other things) and relaying them to a three-person board which is responsible for reviewing applications and making final decisions on which projects to finance.

A Board or Committee

Macalester College

The Clean Energy Revolving Fund (CERF) will be managed by “The CERF Board;” a body initially composed of one college administrator, one faculty member, one alumnus/ae, and two students. The CERF board will act as a decision-making, financing, and implementing body for conservation, renewable energy, and sustainability initiatives on Macalester College’s campus.

A Sustainability Office

Harvard University

Chaired by the Office for Sustainability, the Fund is comprised of Financial Staff and Facilities staff representing most of the University’s Schools and University Central Administrative departments.

Environmental Services City of El Cerrito

Environmental Services will designate a Fund Manager responsible for project identification/implementation, energy/water analysis, bill analysis, reporting, and budgeting.

Guiding Questions In order to determine how and by which department or staff the MRF will be managed; the following questions can be addressed:

Does Energy Management staff have sufficient resources to manage the MRF? Is there an existing department that can manage the fund (e.g. Office of Finance, City

Management, Environmental Services, or Capital Improvements Departments)? Can the MRF allocate funding for staffing of the fund management? What management structure would enable the fund to operate most effectively? If the MRF is not operated by the Financial Department, what will the relationship be between

the fund management and finance staff?



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3.3. Flow of Funding How funding flows into and out of the MRF is likely the most important fund element to define and understand. Although there are many different ways to define this flow, best practices reveal five essential flow elements that have to be defined in order to set up and operate the MRF successfully:

Source of Initial Funds Fund Cap Repayment Structure Administrative Costs Dedicated Funds

3.3.1. Source of Initial Funds

Initial seed funding for an MRF may come from a combination of both traditional and creative financial structures. The hurdle of identifying the funding source is commonly overcome through unique financial opportunities that arise within the municipality. Possible financing sources may include any combination of: grants, incentives, utility rebates, maintaining an expired budget line item, capital improvement projects, bonds, overcharge funds, special legislation, the annual budget, and many other additional sources. The simplest and most direct method of establishing an MRF is to allocate funds through the city’s annual budget. This approach may also be the most difficult to implement, especially in small cities where available funds or political will are limited, and where public service projects are prioritized.

The city’s search for initial funding may be prioritized by the goals set for how much the city would like to utilize in initial rounds of funding. This figure should be based on the pipeline of proposed projects (short, medium, and long-term) and the anticipated payback for those projects.

Examples of how cities and universities have secured their initial seed funds are provided in Table 6 below.

Table 6: Source of Initial Funds Examples

Funding Source Entity Details

Grants

San Jose, CA - Energy Fund

The City of San Jose's $4 million Energy Efficiency and Conservation Block Grant (EECBG) funded municipal energy efficiency projects and should generate enough funding to maintain the Energy Fund over the next several years.

Visalia, CA Initial funding was made possible by the Energy Efficiency & Conservation Block Grant (EECBG). Any rebate incentives received from utilities for energy efficiency retrofits is allocated to the Revolving Fund.

Incentives Alameda County, CA, Energy Fund

Over 10 years, Alameda County was able to accumulate $3,000,000 in incentives for energy savings to establish the Energy Fund.

Allocation of Funds from within

Organization

Harvard Green Campus Initiative

(HGCI)

The fund began with a $3 million allocation from the Harvard bank to the Harvard Green Campus Initiative (HGCI). In its first two and a half years of operation, GLCF-funded projects saved the University just under $900,000 a year, for an average return on investment of over 30 percent. As a result of this impressive performance, Harvard’s President doubled the fund size in December 2004, and again in April 2006, producing a total fund size of $12 million.

Macalester College Green

Fund

Macalester’s Clean Energy Revolving Fund (CERF) was established in spring 2006 with $27,000 in funding from the Macalester College Student Government and Macalester’s Environmental Studies department

Maintaining an Expired Budget

Line Item Ann Arbor, MI

Ann Arbor created their Revolving Energy Fund (REF) by maintaining repayment for a recently repaid bond in their operating budget. The amount retained in the budget was only 50% of the original repayments but still provided $100,000 a year for the



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Funding Source Entity Details REF, for a five-year period. This allowed Ann Arbor to create a Fund with seed capital of $500,000. Because a large cost has been incorporated into the municipal budget for a number of years, it is often easier to maintain that budget line after the expense has been fully paid than it would have been to budget funds where no expense previously existed.

Capital Improvement

Project overage and energy

savings cost from previous project

El Cerrito, CA

El Cerrito established its fund, Energy and Water Efficiency Program (EWEP), using an initial seed amount of $25,000. $15,000 was provided from the 2008-9 Capital Improvement Project overage, and $10,000 was allocated from the General Fund based on the estimated savings provided by the Energy Watch Lighting retrofit projects.

Nashua, New Hampshire

The City of Nashua was able to create their Fund with a $20,000 surplus due to energy savings from a lighting conversion.

Bonds Mercer County, NJ

Using a pool of funds - estimated at $25 million - to be established by the sale of tax-exempt bonds by the Mercer County Improvement Authority, the County has established a lease-purchase type funding program for municipalities and school districts lacking the financial resources for energy efficiency projects.

Overcharge Funds Phoenix, AZ

The City of Phoenix took advantage of oil overcharge funds - settlements obtained by state governments from oil companies who overcharged for oil during the OPEC crisis - to set up a revolving energy efficiency fund.

Special Legislation Toronto, Canada

The City of Toronto established the Toronto Atmospheric Fund through special legislation, a C$25 million endowment created through the sale of municipal real estate to invest its capital in local energy efficiency projects.

Other Potential Sources

• Capitalizing on existing energy savings and other cost reductions • Cost Reductions from Competitive Bidding • Private Foundations & Government Grants • Utility Surcharge and/or Rate Increase • Sale of Unused Municipal Assets • Regional Greenhouse Gas Initiative Allowances • Municipal Lease Purchase Agreements • Partnerships with Financial Institutions - Direct Loans, Energy Bank

Programs • Direct Financing from Capital Budget • Selling Carbon Offsets

3.3.2. Fund Cap

For most cities, there is a reasonable amount at which a fund can operate to meet their resource conservation project needs. If a fund is too small, there will not be enough capital to implement projects at a scale sufficient to make a difference. If too large, the fund may not be fully utilized, thus leaving precious capital idle for the city. Setting up the MRF as a modest allocation of general fund resources will help limit the likelihood of it becoming a target for future reductions. For these reasons, the MRF should be set up as a capped fund. Once the cap is reached, all additional dollar savings from resource savings flow back to the city, further emphasizing the positive impact on the overall municipal budget. It is also possible to adjust the cap over time either upward to allow for further reach, or downward if efficiency objectives are met. The cap should be adjusted for inflation annually at a rate equivalent to prevailing costs to the city. When determining the cap for a fund, the city should consider these factors in light of its particular needs and funding priorities.

In addition to the upper cap, a lower cap can also be considered in order to ensure that all planned projects can be funded, and that all administrative costs associated with the MRF will be covered. Although a specific case study for fund cap minimum could not be find, when cities are determining a minimum cap for their MRF, they should take in consideration funding for covering any administrative



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fees associated with the MRF for at a minimum specified amount of time (e.g. two years) as well as funding for all projects planned during those years. Additionally, it is important to consider the payback period of all proposed projects so that replenishment of the MRF can be anticipated to never drop below the cap.

The table below shows a Fund Cap example.

Table 7: Fund Cap Example

Cap Entity Details

$500,000/year Phoenix, AZ

Phoenix started the Energy Conservation Savings Reinvestment Plan in 1984 with $50,000 seed money from state oil overcharge funds. Each year, Phoenix reinvested half of all documented energy savings in the Plan. By 1986, annual energy savings were over $1 million, capping off the Plan at its maximum allowable limit of $500,000 a year.

3.3.3. Repayment

Another component of setting up the MRF is determining the repayment structure of the fund. The repayment structure establishes how the recipient of an MRF-funded project is charged to repay the fund. It is important to note that the repayment process is not necessarily a literal repayment, as many municipal departments do not segregate funding in such a way that specific project costs are “repaid”. However, for practical purposes, it is often prudent to track the “repayment” of a project costs to the reinvestment fund. Repayment consists of two elements; the Repayment Term and the Savings Allocation, as described below.

Repayment Term As projects generate energy cost savings, revenue is reinvested back into the fund. The City should decide how long these funds would accrue back to the fund. A City can choose to track the “repayment” of project costs until the original fund investment is “repaid” through resource savings. Some funds track repayments of more than 100% in order to allow the fund to grow over time. The percentage of savings reinvested in the MRF can vary, but if repayments are going to be tracked it is ideal to define a method in which the fund can grow. Alternately, cities can define repayment periods based on a set number of years (e.g. 2 years, 5 years). Regardless of which approach is chosen, it is advisable to choose a repayment term that allows the fund to be replenished and ideally to grow.

Savings Allocation In setting up the repayment structure, cities should determine where the cost savings are annually allocated. Generally, a City will allocate a portion of savings to the MRF and the remainder to the general fund or the department where the project was implemented. Often at least 50% of the resource savings are returned to the MRF during the repayment period, sometimes 100%. Allocating a percentage of savings to the implementing department or the general fund, encourages support for conservation efforts because the benefits to department or City wide budgets can be seen sooner, however this also slows the pace of fund growth and makes it harder to implement future projects.

If the city bills each department for energy, water, waste, etc. it may make sense to credit the departments where projects are implemented. If utility bills are paid as a whole across the city, it can make sense to track the savings as a reduction in general fund costs. However, it is important to note that allocating savings back to specific departments based on projects implemented is inherently more complicated than tracking general fund savings as a whole, and this should be considered when



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determining a method for allocation of savings. In general, once the repayment term has been met, ongoing savings will accrue either to the department that implemented the project, or to the city’s general fund. However, savings can also be allocated to the fund indefinitely for as long as the resource saving equipment is in service. The table below provides examples of how cities and colleges repay their funds.

Table 8: Repayment Structure Examples

Entity Repayment Term

Annual Savings Allocation

Repayment Period Details

El Cerrito, CA N/A

75% savings reinvested in 1st year; 50% in 2nd year; and 25%

in 3rd year

Over 3 years

The dollar savings are allocated from the affected departmental budget, and they accrue to back into the fund over 3 years using the formula of 75% of the estimated savings for the first year, 50% the 2nd year, and 25% the last year. Savings to be allocated to the fund are based on the estimated savings (as opposed to verified using final bill analysis or monitoring equipment). The assumptions behind the estimates should be transparent.

Macalester College

Green Fund - Short Term

Projects

110%

90% reinvested

10% to project recipient

Until 110% of original

investment is repaid (adjusted

for annual inflation); all additional savings to

project recipient

From a project’s calculated (or best estimate) annual savings, 90% of the cost savings will be paid to the fund by the cost-savings recipient and the other 10% of savings will accrue to the recipient of the project. This process will be repeated over subsequent years until 110% of the initial cost (adjusted for annual inflation) of the project has accrued to the fund. After this point, all further savings will accrue to the project’s recipients.

Macalester College

Green Fund - Long Term

Projects

125%

50% reinvested


Until 125% of the original

investment is repaid (adjusted

for annual inflation); all additional savings to

project recipient

For longer-term projects, 50% of the estimated savings may be paid back annually until 125% of the inflation-adjusted cost has been repaid. The other 50% of savings will accrue to the recipient of the project, providing some immediate financial relief. This process will be repeated over subsequent years until 125% of the initial project cost (adjusted for annual inflation) has accrued to the fund. After this point, all further savings will accrue to the project’s recipients.

Visalia, CA N/A

50% reinvested


3 years after project

implementation

Half of the annual utility cost savings for the first three years after the project's implementation is placed into the Revolving Fund.

Ann Arbor, MI N/A

80% reinvested


5 years, all additional savings

retained to REF

Ann Arbor’s municipal Revolving Energy Fund (REF) loan grantees are responsible for repaying 80% of energy savings to the Fund for a 5-year period of time. By only requiring 80% of energy savings to be repaid, the Fund allows 20% of the savings to be retained by the department implementing the reduction measures. After the 5-year payback period, 100% of the energy savings are retained by the implementer.

San Jose, CA N/A 100% + rebates / incentives 2 years

From the project's estimated energy savings from audits (not the actual utility bill reductions), first and second year energy cost savings from implemented energy projects replenish the fund. Rebates and incentives are also deposited into the fund. The Energy Fund is replenished by projects that are funded



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Entity Repayment Term

Annual Savings Allocation

Repayment Period Details

by or whose utility accounts are paid by the General Fund. Projects that are new construction and receive "Savings by Design" rebates/incentives are deposited into the Energy Fund, however, energy saving costs are not transferred to the fund because the savings are inherent in the project design.

Alameda County, CA N/A

Incentives + Surcharge on

utility bills N/A

The Energy Fund is replenished by incentives of projects that have short life cycles and less than 5-year payback without incentives, and from incentive refunds from local utility companies. Since all utility bills are paid through the General Services Agency (GSA), GSA adds a surcharge (usually 9%-11%) on the utility costs before charging the Department, and this surcharge helps pay for the Energy Program Staff.

Houston, TX 125% N/A N/A

The facility-operating department repays the revolving fund the amount of the total project cost plus 25% over a specified time for fund replenishment and administrative fees.

3.3.4. Administrative Costs

Depending on the size of the fund and the complexity of implemented projects, it can take significant staff time to administer a fund. To effectively monitor and determine the value and benefits of an MRF, it is important to include administrative costs in the operations of the fund. These administrative costs should cover the fund manager’s time spent managing and reporting on the fund. If a city is small and/or the fund amount and the number of projects are limited, it is highly recommended that the city track the administrative costs. However, as a best practice in general for implementing MRFs, cities are encouraged to include administrative costs as a cost as it will affect the finances and performance of the fund.

3.3.5. Dedicated Funds

A system that permanently commits part of the revenue from resource savings into a dedicated revolving fund allows staff to put less of their time and resources into justifying and gaining support for the program and more into developing additional projects. This makes the fund itself more resilient, and as a result, more capable of bringing in additional revenue for the municipality and achieving greater savings and environmental benefits. Even when substantial revenue has been created by a non-dedicated fund, the reinvestment may continue to be challenged when there are budget restrictions. When this is the case, it is best practice to establish the fund as a line item in future ongoing capital budgets rather than an expense item in the operational budget. The table below summarizes dedicated and non-dedicated MRF examples.

Table 9: Dedicated or Non-dedicated Fund Examples

Dedicated? Entity Details Non-Dedicated

Fund Phoenix, AZ Although it has clearly managed to provide for energy efficiency initiatives, in reality it

is not a true dedicated fund. Each year, the city treasurer must approve the funds to be reinvested.

Toronto, Canada In 1990, Toronto City Council resolved to reduce community-wide CO2 emissions by 20 percent. In 1991, the city council voted to establish the Toronto Atmospheric Fund (TAF) with an endowment of $23 million from the sale of municipal property to assist



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the city in achieving its goal. Today, TAF continues to reinvest its capital in energy efficiency projects that generate revenue for grants and repay the endowment. By 2003, the agency's total granting payout was about $7.9 million.

Dedicated Fund

Houston, TX Houston officials established a Green Lights Revolving Fund that consists of an internal, dedicated, self-replenishing funding source based on a performance-contract approach for city energy improvements identified through the Green Lights audits.

Guiding Questions In order to set up a fund that effectively supports project implementation, the following questions can be addressed:

Source of Initial Funds What financing sources and opportunities are available (e.g. grants, incentives, etc.)? How can the available financing sources be utilized to start the MRF? Are there available funds in the municipal operating and capital budget that can be allocated to

start the fund?

Fund Cap What should be the fund caps (maximum and minimum) for the MRF (e.g. $25,000, $500,000)? Will the fund cap amounts allow the MRF to meet city project needs? Will the set minimum cap still allow administrative fees for the course of two to three years, as

well as the funding for all planned project that are to be implemented within the year? What is the minimum funding necessary to sustain the MRF and continue meeting the city

project needs? At what point does the city start seeking additional funding if the MRF isn’t accruing as

quickly/sustainably as predicted?

Repayment Structure Will the Fund track project costs and resource savings at the department level or just at the

general fund level? What approach will be used to track repayment of project costs? (e.g. percentage, or term of

years)? How will the city allocate annual cost savings (e.g. 50% to MRF, 50% to the general fund, 100%

to MRF)? Where will funds be allocated after the repayment period expires (e.g. to the general fund, to the

MRF, to the project recipient)?

Administrative Costs Should the city track administrative costs? How will administrative costs be tracked?

Dedicated Funds Can the city establish a dedicated fund for the MRF? If the fund cannot be designated as a dedicated fund, where should the fund reside to minimize

the chances it is defunded in subsequent years?



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3.4. Project Criteria It is important to clearly define the criteria for the types of projects the MRF will invest in so that the fund’s resources are best utilized. If it is not clearly defined, the fund will run the risk of being used for purposes outside of the scope of the fund’s overall goals and objectives.

Due to varying needs, cities will have slightly differing selection criteria for the kinds of projects they might pursue with an MRF. It is best practice to concentrate funding on projects that will have the greatest environmental impact based on quantifiable metrics (e.g. water, energy, waste savings) and those that can take advantage of existing utility incentives/rebates.

Each municipality’s finances must also be considered when determining criteria for projects. For instance, some cities may only fund projects that have a life cycle of over 20 years. Others may only fund projects that have a return on investment (ROI) that is over 10%. Some cities may use funds for a maintenance/replacement project for which the maintenance budget covers only the standard upgrade, and the MRF covers the increase in the efficiency of the equipment to a higher level.

All quantifiable criteria should be considered and weighed against other intangible co-benefits that go beyond the scope of the goal statement (e.g. leadership, education, air quality) to determine the appropriate set of project criteria for the city. For the purposes of this report, we divide these criteria into two categories: General Project Criteria and Fiscal Performance Criteria.

3.4.1. General Project Criteria

General project criteria might include boundary principles (e.g. only facilities or only energy efficiency), opportunities that are on the horizon (through grants), broader sustainability principles of importance to the city, local workforce criteria, or any number of factors that define what the fund can be used for. Some of these criteria should be assessed on an annual basis to allow the fund to prioritize project types that address particular goals for the year. For example, projects may be selected based on the emissions profile of the city in a given year, or the availability of state or federal match funds to pursue specific projects. Furthermore, the purpose of the project as well as the appropriate balance of these project criteria (e.g. no more than 10% of funds go towards education, etc.) should also be considered on an annual basis. The table below summarizes examples of general project criteria.

Table 10: General Project Criteria Examples

Project Criteria Entity Details

Long-term projects and increased

energy efficiency projects

Alameda County, CA

The Energy Fund is used to cover the costs for projects that have a life cycle of over 20 years and are implemented when the projects internal ROI is over 10%. The funds are also used to enhance projects for which the maintenance budget pays only for the standard energy efficiency upgrade, and the Fund pays to increase efficiency to a higher level.

Projects that save money on resource

consumption

Macalester College Green

Fund

Clean Energy Revolving Fund (CERF) funding will primarily be used for projects that save money for a specific recipient(s) on fuel, electricity, water, building maintenance, storm water fees, or some other (or multiple) cost source(s) by making a positive impact on sustainability. The CERF Board should be open both to smaller, rapid payback projects and larger, longer-term ones. All projects should seek to maximize the overall benefits of sustainability in a financially responsible manner.

Reduce energy cost and GHG emissions Ann Arbor, MI Eligible projects include municipal energy efficiency projects and pilot projects

that reduce energy cost and greenhouse gas emissions. Reduce energy cost and GHG emissions Phoenix, AZ The fund is targeted for energy efficiency capital projects and covers the

incremental cost of the energy efficiency equipment.



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3.4.2. Fiscal Performance Criteria

Fiscal performance is core to the purpose of MRFs, therefore, clearly defining fiscal performance criteria is critical to the operation and success of a fund as these criteria are used to determine whether projects have greater benefits than costs. The methods for conducting cost-benefit analysis range from simple to advanced. Three primary cost-benefit methods for evaluating project alternatives are: simple payback analysis, return on investment (ROI), and net present value (NPV).

Simple payback analysis is a method by which a project’s total cost is divided by the cost savings accruing to it in the first year after it has begun. A simple payback calculation provides a rough initial estimate of the time needed to recover the initial investment.

ROI is a method that evaluates the profitability of capital expenditures over their useful lives. ROI gives an annualized rate of return for an investment based on life-cycle payments.

NPV is a profitability indicator that takes into account both the life-cycle cash flows and the time-value of money.

All three methods can be used for MRF fiscal performance criteria. The choice of method may depend on the City’s finance department preferences.1

As resource conservation projects must compete with the immediate services the public expects from municipalities, projects that have longer-term paybacks (e.g. as eight or ten years) may not be implemented.2 Although it is essential that projects provide savings that can be credited to the MRF, it is also important to be able to pursue environmental improvements that may have limited direct savings. Although requiring high fiscal performance may provide a "high" ROI, this approach does not capture many longer-term saving opportunities. To manage this balance, MRF performance should be evaluated in terms of annual savings, and individual projects should be bundled into annual portfolios whose collective fiscal performance is assessed as opposed to each project’s performance. With this approach a fund manager can define an annual portfolio of projects that will meet fiscal performance criteria, while still allowing latitude to include more challenging, but still worthy opportunities. The table below summarizes the examples of payback periods.

Table 11: Payback Period Examples

Payback Period Entity Details

Projects with 5-year payback time

El Cerrito, CA Projects for a given year will have a combined weighted average simple payback of 5 years.

Visalia, CA

Projects funded by the Conservation Fund must pay back the fund with the savings over a period not exceeding 10 years. The payback period must be less than or equal to the lifecycle of the project efficiency measure(s). Preference will be given to projects that leverage grant funding and/or utility incentives.

1 The Municipal Energy Plan (MEP) database developed by Strategic Energy Innovations (SEI) and provided to all SCCAP partner cities includes all of the described measures of fiscal performance – ROI, simple payback, and NPV – and can be used to help assess fiscal performance on a project-by-project or portfolio basis. 2 One way this issue can be addressed is through participation in On-Bill Financing (OBF), which is a utility program where the utility finances the project, and the customer pays the loan – interest free – through their monthly utility bills. More information on PG&E’s OBF can be found at this web address: http://www.pge.com/obf/



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Payback Period Entity Details

Different criteria for different paybacks

Ann Arbor, MI

At least 70% of Fund monies can be allocated to projects that have a savings payback of five years or less, 20% can be allocated to projects that demonstrate and educate about energy savings or renewable energy regardless of their payback period, and no more than 10% can be used to provide information to facility managers on energy saving opportunities, which require no repayment at all.

Guiding Questions In order to define project criteria that will be successful, manageable, and representative of the city’s goals and interests, the following questions should be addressed: General Project Criteria

What are the parameters for the MRF’s project criteria (e.g. water, energy, renewable, education, etc.)?

How will these parameters be evaluated for a given project? How often should the city reevaluate general project criteria (e.g. annually, or longer)?

Fiscal Performance Criteria Which cost-benefit methods will be used (e.g. ROI, simple payback, NPV) and what thresholds

will be set for the chosen method (e.g. > 10% ROI, < 5 years simple payback) How are projects bundled for assessing portfolio cost-effectiveness (e.g. by year, by type)? If they are allowed, how are non-fiscal projects (e.g. educational projects) accounted for?



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4. IMPLEMENTATION, MONITORING, AND REPORTING ACTIVITIES In order to implement a Municipal Reinvestment Mechanism (MRF), a number of steps should occur. Table 122 below outlines the tasks that are necessary to successfully implement, monitor, and report the performance of an MRF. The information below also provides cities with some guidance on the level of effort and timing that are typically required for each task. The Fund Manager should be in charge of overseeing these tasks. By tracking savings, cities can demonstrate realized energy and costs savings and make the case for continuing the fund. The fund should also be evaluated and adjusted over time. The fund manger can adapt the MRF to better serve the city’s needs by identifying successes and weaknesses. Additionally, to ensure that monitoring procedures are effective, it is recommended that the city evaluate the success of these procedures and report annually to the City Council.

Table 12: MRF Implementation, Monitoring, and Reporting Activities


Develop MRF design

• Design MRF program utilizing available resources (e.g. Proposed MRF Framework presented in this document) At beginning

of project High

Obtain City Council approval

• Present MRF framework along with associated outcomes and benefits to City Council for approval

At beginning of project High

Obtain seed funding

• Secure financial opportunities for setting up MRF At beginning of project High

Develop MRF mechanisms and procedures

• Based on adopted MRF framework, develop detailed fund procedures and mechanisms. This may include but is not limited to developing project applications (a sample project application can be found in the Appendix Section 6.4), rules for participating in the fund, protocol for assessing eligibility of projects, timelines, etc.

At beginning of project, and on going on an annual basis.

High

Research and share available opportunities for funding projects

• Research existing and future funding opportunities for energy/water efficiency projects and share with participating city departments

On-going basis Low

Assess eligibility of projects

• Based on criteria set in the adopted MRF Framework, evaluate the feasibility of projects and select approved projects

• Refer projects that do not qualify to other possible funding resources, if available

At least once yearly Medium

Track project savings and progress

• Establish a system to maintain and track detailed records of energy use and cost data for all projects and their progress

• As needed use third-party audit to validate energy savings • Provide each participating city department an annual/quarterly

summary report of their projects’ performance and energy savings

On-going basis High

Modify fund design

• “True Up” savings estimates based on actual performance data as it becomes available to ensure costs, savings and outcomes reflect real-world conditions as much as possible.

• Evaluate performance and strengths and weaknesses of fund • Evaluate the fund performance on each element (e.g. goals, fund

management roles, flow of funding), and make modifications when appropriate

• Share changes in MRF design with City staff

Yearly Medium

Report outcomes • Report/present annually to City Council Yearly High



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5. APPENDICES

5.1. Sample Staff Report Subject: Municipal Reinvestment Mechanism Strategy Report

Action Requested Approve the Municipal Reinvestment Strategy guide to implement best practices related to the establishment and implementation of a Municipal Reinvestment Mechanism (MRF). It is recommended that the MRF Fund Manager implement the selected reinvestment mechanism procedures in coordination with other city departments that will participate in the City’s municipal reinvestment program.

Background The Municipal Reinvestment Mechanism Strategy Report (MRMSR) was prepared by Strategic Energy Innovations (SEI) to support resource conservation programs in small cities in California and to help these cities create a sustainable funding mechanism to support municipal energy efficiency projects. The report was prepared as part of PG&E’s Small Cities Climate Action Partnership Innovator Pilots Program (SCCAP-IP), which provides support to seven East Bay small cities including Albany, Benicia, El Cerrito, Piedmont, Orinda, Moraga, and San Pablo. These seven cities, and lead implementer SEI, were awarded funding to develop and test innovative ways to increase the implementation of energy efficiency projects in small cities, including the development of a municipal reinvestment mechanism strategy report.

The City of [city name] is encouraged to use the MRMSR as a guide for set-up, implementation and monitoring of an MRF. The central objective of the guide is to provide best practices and a framework for how [city name] might create and maintain their own municipal reinvestment fund.

Analysis A municipal reinvestment mechanism is a financial tool – an internal fund - designed to support ongoing environmental improvements that are outside of specific project and departmental structures. The municipal reinvestment mechanism is set up with initial seed funding and is replenished by project cost savings (typically energy cost savings) overtime. The flow of the fund is circular, as projects generate revenue and are funneled back to the fund. Such a mechanism is designed to pay for itself overtime, and can become a permanent source of environmental improvements for a municipality and a source of resource savings. A municipal reinvestment mechanism can become self-sustaining as energy and water savings from projects implemented under the fund reduce costs to the city, and the fund manager tracks these savings.

The MRMSR is designed to assist local governments to setup reinvestment mechanisms. The MRMSR addresses best practices from other municipal and university funds, defines the organizational structure of a reinvestment mechanism, the responsibilities for implementation, provides an overview of accounting approaches, and defines potential requirements for eligible projects all of which are included in the following sections.



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The recommended reinvestment mechanism strategy framework is summarized in the table below:

Task Sub-Tasks Level

of Effort



• Determine staff responsible for the fund • Convene key stakeholders to determine if there is ideal existing staff to

manage the fund • Place fund manager in the best department to oversee the fund • Coordinate with the finance staff to establish the relationship between the

fund manager and finance staff • Define fund manager key roles and responsibilities • Train fund manager on tools that can be utilized to track municipal

projects, costs, energy and cost savings, etc. (e.g. Municipal Energy Plan)

High




High

3.2. Fund Cap • If desired, determine a maximum amount the fund can grow to, as well as a minimum amount below which the fund cannot be reduced. Low



Medium



3.5. Dedicated Funds

• Determine if the fund can be setup so that it is permanently established, or if it will have to be approved annually along with other budget items. Medium





Medium


• Clearly define fiscal performance criteria • Define annual portfolio of projects that will achieve a reasonable overall

return on investment Medium

Financial Considerations The Municipal Reinvestment Fund requires initial seed funding to set up the fund. While the initial seed funding is often difficult to locate, the establishment of a municipal reinvestment fund will create a sustainable solution to funding future resource conservation projects, and no additional money will be needed as projects generate savings to replenish the fund. Best practices outlined in the MRMSR can guide city staff to locating the initial funds. The Municipal Reinvestment Fund also requires staff time to manage the fund, but these costs are ideally incorporated into the Municipal Reinvestment, thus not producing additional costs to the city.

Reviewed by:

City of [City Name], City Manager



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5.2. Sample Resolution Document

RESOLUTION NO. [XXXX]-

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF [XXX] SUPPORTING THE MUNICIPAL REINVESTMENT FUND

WHEREAS, public agencies can reduce resource use (e.g. energy and water) and cost by

implementing resource efficiency and conservation measures within the City’s facilities;

WHEREAS, investing in resource efficiency and conservation practices can have a positive effect on both the finances of the City as well as global climate change by reducing greenhouse gas emissions;

WHEREAS, generating funds to implement resource efficiency and conservation projects can be a challenge for local governments, especially those that are small/under-resourced, and sustaining those funds for continued implementation of additional projects in the long-term is equally as difficult.

WHEREAS, the implementation of a municipal reinvestment mechanism is an effective tool to enable local governments to develop a “reinvestment fund” that can be used to continuously fund resource efficiency and conservation projects, and to make certain that the cost savings from those projects are consistently reallocated to fund future resource savings projects.

WHEREAS, local governments throughout the Bay Area, California, and the rest of the country are utilizing municipal reinvestment funds as an effective investment tool to implement a wide range of energy and water saving measures throughout their municipal facilities;

WHEREAS, it is critical to both the economic and environmental health of the greater Bay Area

that local officials provide leadership in the area of resource efficiency and conservation;

NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of [XXX] approves the development and implementation of a Municipal Reinvestment Fund, an effective approach to sustainable resource efficiency and conservation project funding.

5.3. MRF Case Study Information The MRF framework discussed in this document is based on primary and secondary research conducted by SEI on existing reinvestment funds that have been successfully designed and implemented by various local governments (including City of El Cerrito, a SCCAP partner) as well as colleges/universities throughout the United States and Canada.

Many universities have been champions of MRFs, and elements of their funds have been included in this report’s best practices. Whereas the financial barriers as well as opportunities for universities differ from those of cities, there is much to be gained from analyzing their chosen methodologies. For that



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reason, reinvestment fund examples from universities are included in this document. Entity Program Name Source

Alameda County Revolving Energy Fund & Municipal Surcharge

Statewide Energy Efficiency Collaborative. Local Government Energy Efficiency. Revolving Energy Fund & Municipal Utility Surcharge. http://californiaseec.org/documents/best-practices/best-practices-alameda-county-ac-fund

City of San Jose Energy Fund Statewide Energy Efficiency Collaborative. Local Government Energy Efficiency. San Jose Energy Fund. http://www.lgc.org/freepub/docs/energy/case_studies/SanJose_EnergyFund.pdf

Macalester College Clean Energy Revolving Fund (CERF)

Association for the Advancement of Sustainability in Higher Education. Creating a Campus Sustainability Revolving Loan Fund. A Guide For Students. http://www.macalester.edu/cerf/reports/creatingacampussustainabilityrevolvingfund.pdf

Harvard University Harvard Green Loan Fund Harvard University Office for Sustainability. Harvard Green Loan Fund. April 20, 2011. http://www.epa.gov/greenpower/documents/events/20apr11_henriksen.pdf

City of El Cerrito Energy and Water Efficiency Program

Institute for Local Government Innovative Financing: El Cerrito Energy and Water Efficiency Program. http://www.ca-ilg.org/case-story/innovative-financing-el-cerrito-energy-and-water-efficiency-program

City of Houston Green Lights Revolving Fund

The Free Library by Farlex. Establishing a Green Lights Revolving Fund in Houston. http://www.thefreelibrary.com/Establishing+a+Green+Lights+Revolving+Fund+in+Houston.-a018900047

University of Colorado Sample Loan Agreement The University of Colorado Energy and Climate Revolving Fund. http://greenbillion.org/wp-content/uploads/2012/05/CU_Boulder_Sample_Redacted.pdf

City of Phoenix Energy Conservation Savings Reinvestment Plan

The Results Center: The City of Phoenix Energy Management Program Profile #118. http://www.ecomotion.us/results/118.htm

5.4. Sample Project Application



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