Light Your World Blog

    Paying for street lighting upgrades

    October 22, 2019
    LA Skyline

    Installing a new street lighting system that will last a generation or more requires the community to make a significant financial commitment. Among many other factors, communities must consider what is needed, when it’s needed, how the chosen solution will be integrated into the community, and what is the best way to pay for the new lighting system.
     

    This article presents a summary of the most common options, in rough order of popularity, for communities who desire to implement a street lighting system upgrade immediately but who will need to pay for the system over time.

    Tax-exempt bonds
     

    •  City pays the principal and interest on the debt.
    •  Bond documents and offering memorandum prepared with the bond underwriter.
    •  Approval required by the city council and the public (through a bond referendum).

        o   Pros:  Low cost of borrowing.

        o   Cons: Long preparation period and high preparation costs.

                         Slower realization of savings from the new lights.

                         Sometimes not possible due to existing bond covenants.

                         Risk that referendum will be rejected (and project delayed or cancelled).

    Philips Guadalajara

    Tax-exempt lease purchase (TELP)

     

    • Long-term tax-exempt debt
    • City pays the principal and interest on the debt.
    • Standard documentation prepared with bank.
    • Approval required by the city council

        o   Pros:  Low execution costs

                         Short preparation period and low preparation costs.

                         Not constrained by existing bond covenants.

                         Faster realization of savings from the new lights.   

        o   Cons: Higher cost of borrowing.
     

    Public private partnership
     

    • City partnership with a privately-owned special purpose entity (SPE).
    • City pays for lighting services provided by the SPE (lighting for streets).
    • Custom documentation prepared with the SPE.
    • Approval required by the city council.

        o   Pros:  Some risks shifted to SPE (fund raising and light repairs).

                         Possible lower total costs (if the SPE can sell services to others).

        o   Cons: Long preparation period.

                         Higher cost of capital for the SPE.

                         Complex documentation may delay or cancel the project.

                         Slower realization of savings from the new lights.

    City lights

    Government grants and incentives
     

    • Combination of a government grant or incentive with a bond or a TELP.
    • City obtains grants or incentives from other government agencies (Federal, State, other).
    • Government grant documentation prepared by the other government agencies.
    • Bond or TELP documentation prepared as usual by the city.
    • Approval required by the city council and the other government agencies.

        o   Pros:  Grants may reduce the city’s costs for the lights.

        o   Cons: Long preparation period.

                         Risk that grant may not be approved or that grant budgets may get cut.

                         Slower realization of savings from the new lights.
     

    In conclusion

     

    There are many financing options available to communities to fund lighting system upgrades, and Signify, through its Signify Capital arm, is here to work with community partners to help arrange and implement these, or other custom options that fit your community’s unique needs. To learn more about how Signify can help you start lighting your community the smart way, contact your Signify sales representative, or email Signify at enterprise@signify.com.

    Blogger

    Post tags

    Street lighting system upgrade, financing lighting upgrades, tax exempt bonds, public bond referendum, Tax Exempt Lease Purchase Agreements, long-term tax-exempt borrowing, tax-exempt lease purchase agreement, Public Private Partnerships, Government Grants and Incentives, government sponsored grants, low-cost loans, elected council, Signify Capital 

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