HomeMy WebLinkAboutStaff Report 2507-4921CITY OF PALO ALTO
CITY COUNCIL
Monday, September 08, 2025
Council Chambers & Hybrid
5:30 PM
Agenda Item
6.Approve Amendment #1 of the Memorandum of Agreement (MOA) with the California
Alternate Energy and Advanced Transportation Financing Authority (CAEATFA), to Extend
the Term of the Agreement from Two Years to Five Years, to Continue to Enable the
Residents of Palo Alto to Participate in the GoGreen Home Energy Financing
Program. Supplemental Report added
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Utilities
Meeting Date: September 8, 2025
Report #:2507-4921
TITLE
Approve Amendment #1 of the Memorandum of Agreement with the California Alternate Energy
and Advanced Transportation Financing Authority, to Extend the Term of the Agreement from
Two Years to Five Years, to Continue to Enable the Residents of Palo Alto to Participate in the
GoGreen Home Energy Financing Program
RECOMMENDATION
Approve Amendment #1 of the Memorandum of Agreement (MOA) with the California Alternate
Energy and Advanced Transportation Financing Authority (CAEATFA), to Extend the Term of the
Agreement from Two Years to Five Years, to Continue to Enable the Residents of Palo Alto to
Participate in the GoGreen Home Energy Financing Program.
EXECUTIVE SUMMARY
To meet Palo Alto’s ambitious greenhouse gas reduction goals, residents will need to implement
energy efficiency and electrification projects at their homes. These projects may need thousands
of dollars in capital expenditure. The GoGreen Home Program is a long-standing State-run1
financing program with participating financing companies (PFCs) to provide consumer financing
for these types of projects at competitive rates2.
Since Palo Alto is not served by any investor-owned energy utilities, a separate agreement with
the State was required to enable participation of Palo Alto residents. In September 2023, the
Council approved a $300,000 agreement with CAEATFA for a two-year term (Staff Report: 2212-
04753). This program was intended to support single-family electrification, with the
1 Description of GoGreen Financing Program: https://gogreenfinancing.com/residential
2 Current interest rates range from 4% to 9.75% depending on the term of the loan and the credit rating of the
borrower. In January 2025, the average interest rate for the 415 loans processed statewide was 6.48%, with an
average term of 139 months2. There has been one participant from Palo Alto in the Program to date.
3 September 2023 Staff Report: https://recordsportal.paloalto.gov/Weblink/DocView.aspx?id=2950
understanding that it would be most helpful for space heating rather than water heating projects.
As expected, the first loan for this program came after incentives for space heating electrification
were launched in January 2025. The one loan, for a space heating project, was issued in May 2025
for $25,000 at an interest of 3.98% for a 30 month (2.5 years) term. As more space heating
projects are completed more loans are expected.
BACKGROUND
4. The loans fund the following Eligible Energy Efficiency Measures:
appliances (including electrified appliances such as heat pumps), building envelope, demand
response, HVAC, lighting, pool products, water heating. The Program also funds Solar PV, Battery
Energy Storage and EV charger installation projects5.
4 Financing Companies Serving Santa Clara County: https://www.gogreenfinancing.com/energy-efficiency-home-
loans-california/finance-options/?_counties_filter=santa-clara%2Call&zip_code=94301
5 Energy Efficiency Measures: https://www.gogreenfinancing.com/wp-
content/uploads/2025/04/reel_eeemsList.pdf
• Up to 30% of loan amount can be used toward non-energy improvements (e.g. home
remodels, drought tolerant landscaping)
• No prepayment penalties
• Currently no closing costs or origination fees (may change in the future)
• No contractor fees (lenders often charge contractors thousands of dollars to finance
projects)
• Below-market interest rates and extended payback periods (due to credit enhancement
provided to lender)
ANALYSIS
Staff recommend that the City continues enabling the GoGreen Program for Palo Alto residents
to finance higher-cost electrification projects. The program requires little staff time to
implement, and the administrative cost is low. The City’s electrification program in 2023-24
period was focused on heat pump water heaters, a lower cost (thousands of dollars) compared
to the high cost (tens of thousands of dollars) of whole home electrification projects the City
started promoting in 2025. Staff anticipate the financing needs for these higher cost projects will
increase in the coming years.
Cost of Participating in the Program and Funding Needs
The MOA in place is funded for up to $300,000 ($140,000 for administrative cost and $160,000
for LLR funding). During the past two years, the Palo Alto program incurred an administrative
expense of $4,757 to start the program. The City is responsible for variable administrative costs
for each loan processed. No ongoing administrative expense is incurred in the absence of a loan.
Additionally, $50,000 is being held by CAEATFA to fund the Loan Loss Reserve (LLR), which
enables Palo Alto residents to receive lower interest rates. The contract provides for a monthly
fee to cover administrative expenses, but such a fee has not been charged to date. Staff
recommends continuing funding program costs from revenues gained from the auction of
allowances allocated the City as part of its participation in the State’s Cap and Trade program.
As part of the program, City has to contribute ~8% (based on the statewide program experience)
of the underlying loan amounts to the loan loss reserve (LLR)6. A large part of this LLR would be
returned to the City if the loan portfolio does not suffer large delinquencies. Statewide, the loss
rate since program inception in 2016 is 1.42%, or 153 loans out of 10,755 loans enrolled have
defaulted. Statewide, the $168 million loan portfolio has lossed incurred to date of $1.42 million.
Statewide the LLR currently has a balance of $16 million, most of it funded by the IOUs7, but will
also be funded by the City as Palo Altans continue to enroll in the program. Currently approved
6 A loan loss reserve is a fund that lenders set aside to cover potential losses from borrowers who default on their
loans. The LLR for this program is funded at 5% of the underlying loan (for borrowers with a credit score > 700) and
at 15% (for borrowers with credit score <700). The $25,000 loan processed required a 5% LLR funding, or $1,250.
7 GoGreen Program Performance Report: https://www.treasurer.ca.gov/caeatfa/cheef/monthlyreel/2025/01.pdf
$160,000 in LLR funding will support $2 million in loans by Palo Altans. This amount is expected
to support around 100 loans, assuming loan sizes in Palo Alto match the statewide average
(about $19,900 per loan).
FISCAL/RESOURCE IMPACT
STAKEHOLDER ENGAGEMENT
rd meeting. Staff will be
providing the Council a Supplemental Memo on UAC’s action and discussion before September
8th when Council will be voting on this recommendation.
ENVIRONMENTAL REVIEW
POLICY IMPLICATIONS
ATTACHMENTS
APPROVED BY:
CAEATFA R08-23 Amendment 1
AMENDMENT NO. 1
Recitals
IT IS AGREED as follows:
AMENDMENTS TO THE AGREEMENT
City’s funding of administrative and credit enhancement cost under the MOA would
remain unchanged at an amount not to exceed $300,000, according to Section 3 of
the Agreement.
GENERAL PROVISIONS
CAEATFA R08-23 Amendment 1
AUTHORIZED REPRESENTATIVE SIGNATURES
City of Palo Alto
By: ____________________________________________
Printed Name: Ed Shikada
Title: City Manager
By: ____________________________________________
Printed Name: Madeleine Salah
Title: City Attorney or Designee
California Alternative Energy and Advanced Transportation Financing Authority
By: ____________________________________________
Printed Name: Christina Sarron
Title: Executive Director