Santa Barbara County FCU Looking on Sunny Side With Solar Energy System Loans

SANTA BARBARA, Calif. – Santa Barbara County Federal Credit Union has a bright and sunny outlook these days with what may be the first-of-its-kind credit union loan program designed specifically to promote the use of solar energy. And the credit union is not only encouraging its members to take advantage of its “No-Hassle Solar Power Loan,” but is leading the way by becoming the first credit union in California to install an environmentally friendly solar electric system on the roof of its building. “It’s not only a good environmentally consciousness thing to do, but it also makes economic sense,” explained Pat McPherson, a member of the credit union’s board of directors and a leading advocate of solar energy. “If you can do something that’s better for the environment and it makes economic sense, why would you not do it.” McPherson said one of the major stumbling blocks to more widespread acceptance of solar energy was obtaining financing. Most financial institutions typically only offer conventional home equity loans for such a purchase, he said, requiring “a lot of hassle, a lot of paperwork, a lot of forms,” including having to have a home appraisal. McPherson said he couldn’t understand why a person wanting to install a solar system had to go through such rigmarole. “If somebody is willing to put an addition on their house that was going to pay for itself, why does it have to be so complicated,” he asked. “This is a no brainer.” The result was the solar power loan, secured by the equity in a borrower’s home. The credit union uses an abbreviated loan form and does not require an appraisal on the property. “If they (borrowers) have a first mortgage on the place and no second, chances are in Santa Barbara they’re going to have a lot more equity than this (solar system) is going to add, plus the solar system will add even more equity,” McPherson said. The median home price in Santa Barbara – where the sun shines more than 300 days a year making it ideal for solar energy systems – is currently more than $1 million. Installation of a solar system on a residence can add $20 of home value for every $1 of yearly energy cost savings, according to industry officials. The credit union offers one-week turnaround time on loan applications with rates starting at 4.25%. The credit union is a partner in the local Community Environmental Council’s Million Solar Roofs partnership, which is part of a federal program to install solar energy systems on one million roofs in the U.S. by the year 2010. It also sees the no-hassle loan program as a way to increase its loan portfolio. McPherson said the number of home equity loans at the credit union declined after borrowers, lured by low interest rates, refinanced their first mortgages and rolled their existing seconds into the new loan. Credit union officials can tout the financial advantages of the solar loan program to their 6,000 members based on their own real world experience, insisted McPherson, who has a solar system installed on the roof of his Ojai home. He said the credit union was realizing substantial savings with the solar system, which consists of photovoltaic cells which convert the sun’s energy into direct current electricity. The solar system generates about 60% of the credit union’s electrical needs, he reported. Rather than putting excess cash into low-paying CDs, McPherson said the credit union opted for the solar electric system and expects to realize a 7% return on its investment. The system was installed in December 2004. “It made economic sense,” McPherson said. “Once we could see the financial benefit of installing solar on the credit union and getting a better return than putting the money in a CD, we said if this works for us, why wouldn’t it work for our members.” R.E.C. (Renewable Energy Concepts) Solar, headquartered in Los Osos, Calif., installed the 38-kilowatt solar electric system at the credit union. Officials there said electricity cost savings would pay for the system within 10-15 years. That payback is longer than most commercial installations due to the fact the credit union is non-profit and did not qualify for all the various tax savings, noted Heather Zwaduk, a spokesperson for R.E.C. Solar. The credit union, did, however, receive a state rebate of 50% on the system. A typical 2 kilowatt home solar system costs approximately $18,000 to $20,000, or about $9 to $10 a watt, including installation. A 30% state rebate, a 7.5% state tax credit and property tax savings can reduce the total figure by 30% to 40%, Zwaduk said, speeding up the actual payback. A commercial system costs about $6.20 a watt before rebates and other savings. Solar systems are estimated to last anywhere from 25 to 40 years. To promote solar energy and its loan program, the credit union recently hosted a ribbon cutting ceremony that involved community members and business and government leaders. Representatives of state and federal elected officials presented the credit union with certificates for its service to the community; Santa Barbara Mayor Marty Blum also addressed the small crowd, saying the city was looking at solar installations at some of its sites. “It just makes sense.” Blum said. Originally planned for January, the event had to be postponed when the region was slammed with heavy rainstorms. The rescheduled event in mid-February – which took place on the same day the Kyoto protocol to reduce greenhouse gases to stem global warming went into effect – took place under gray drizzly skies. The U.S. is not a signatory to the Kyoto protocol. “It doesn’t matter what agreements [are signed] or anything,” Blum said. “We know it’s the right thing to do.” Zwaduk said she believed the credit union was the first in the state to install a solar system and was one of only a handful of financial institutions nationwide to offer a loan strictly designed for solar energy systems. At least one credit union, Permaculture CU based in New Mexico, offers low-interest loans for environmentally conscious projects, although it does not have a loan designed strictly for solar energy system purchases. “Lenders don’t know enough about it (solar) to know what it is,” Zwaduk said, adding that home equity loans for such systems were “kind of overkill.” “Santa Barbara County Federal Credit Union has taken the initiative to offer a simple loan with quick turnaround,” she said. “They’re just trying to make it as easy and simple as they can and to keep the interest rate low.” Zwaduk and others said such efforts would likely encourage businesses and individuals to consider the advantages of solar energy. “This credit union and what they’re doing will serve as a wonderful role model for all the other credit unions around the state,” said Jennifer Anconi, a spokesperson for Assemblyman Pedro Nava, who represents Santa Barbara in the California Assembly. “Anything that gets people talking about solar is good for the industry,” Zwaduk added. 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