On Friday, the Tucson City News blog featured a plan by the City to install solar panels on six facilities around town. The City will finance construction by selling $11.2 million in bonds and project a savings in electricity costs to the city of $3.9 million over the 25-year life of the project. (And we all know how well City financial projections turn out.) The bonds will pay about 3% interest.

“These bonds will be repaid through the Tucson Electric Power Renewable Energy Standard Tariff”, that is, a surcharge to your electric bill. I presume that the interest will also be charged to ratepayers.

Interest payments to bond holders (at 3%) will be $336,000 per year for 25 years (total $8.4 million).

So, if I understand this correctly, ratepayers will eventually have to pay back $11.2 million of bond principal plus $8.4 million in interest for a total of $19.6 million to save the City $3.9 million. Does this sound like a good deal for ratepayers? Perhaps I just don’t understand City high finance.

“Tucson’s Mayor and Council will discuss the projects on Tuesday, December 21, 2010…” I suggest you ask your council person about this great deal.