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outright. The alternate PPA option would also earn a rebate but in a lesser amount of $367,000 that would go directly to the developer. Mr. Smith stated that the Council also authorized staff to issue an RFQ for design and installation of the solar photovoltaic system. Three bids were received and staff recommends that the Council award the contract to Cupertino Electric, whose proposal included a superior quality panel that other bidders offered at an additional cost. He explained that Cupertino Electric’s proposal was unique in that it does not call for trenching and most of the equipment would be assembled offsite, allowing for less disruption of operations at the OSC. Mr. Smith reviewed the financial projections based on both outright purchase and a PPA. He noted that the winning bid was $1.678 million, nearly $1 million less than the original estimate of $2.533 million and creating a new net present value of $808,734. The purchase option would mean $3.6 million in electrical savings over the 25-year life of the panel and is the recommendation of both staff and the consultant, Energy Solutions. While the PPA option requires no out of pocket costs, it offers roughly half the savings of outright purchase and no rebate or tax options. He explained that outright purchase is also estimated to net nearly twice the amount if the money were invested in the city’s current portfolio. Councilmember Sullivan asked if the projected rate of return is comparable to the city’s other investments. Mr. Smith stated that the current portfolio earns 2.4%, roughly half of this project’s estimated net return. Councilmember McGovern commented on the tremendous cost reduction in the last 4 months. Mr. Smith concurred, noting that the City has considered future solar projects that stimulus funds could finance and there is no better time to do so. Councilmember Sullivan thanked Mr. Smith for putting together a project that provides so many environmental benefits, improves management of energy costs, doubles the city’s investment rate of return, and provides a clear example of a green economy. He supported the use of a local Bay Area firm and urged staff to move forward with other opportunities like this. Councilmember Thorne questioned what unacceptable payback terms would be, noting that the private sector will not approve anything more than a 5-year payback. Mr. Smith said it would depend on the project and that in some instances a PPA would be more viable. Councilmember Sullivan advised that renewable energy projects should be looked at from a life cycle rate of return. Motion: It was m/s by Cook-Kallio/McGovern to authorize the City Manager to enter into a contract with Cupertino Electric Inc. in the amount of $1,678,000 for Design and Installation of a solar photovoltaic system at the Operation Services Center. Motion passed by the following vote: Ayes: Councilmembers Cook-Kallio, McGovern, Sullivan, Thorne, Mayor Hosterman Noes: None Absent: None MATTERS INITIATED BY COUNCIL Mayor Hosterman asked the Council how to best address the concerns raised regarding the Sharks Ice Rink project. She said that she had questions herself, many of which were answered this City Council Minutes Page 9 of 11 August 18, 2009