Title
Resolution to Support of Geothermal Installations at City Facilities
Memorandum
In 2020, Ann Arbor City Council unanimously adopted the A2ZERO Plan and the goal of achieving community-wide carbon neutrality by 2030. One of the core tenants of the A2ZERO plan is switching from fossil gas systems to electric systems - including transiting vehicles; heating, cooling, and ventilation systems; lawn equipment; and other gas or diesel based systems.
Over the last several years, the City has made progress in installing solar systems, with over 20 city facilities now powered, in part, with solar. Work is also underway to expand electric vehicle charging and energy storage at many of these same facilities, along with sustained energy efficiency efforts. One area where investment is still needed, however, is in decarbonizing heating and cooling solutions.
With the sunsetting of the Investment Tax Credits in 2027 for geothermal systems, the City has a strategic opportunity to move intentionally and quickly with installing geothermal over the next year. Moreover, a recent determination by the Internal Revenue Services gives Ann Arbor and all of Washtenaw County an additional 10% incentive bonus when installing geothermal systems through the Direct Pay/Elective Pay program. This is on top of the 30% tax incentive already available for geothermal, plus another possible 10% incentive if domestic content is used in the installation. Together, this means that the installation of geothermal systems at City facilities in Ann Arbor between now and summer 2027 may be eligible for up to a 50% rebate of the full cost of system installation.
This unique moment combined with the City’s sustainability goals and the volatility in the fossil gas market, present an opportunity for the City to intentionally and expeditiously move forward with geothermal installations.
Budget/Fiscal Impact: The study of geothermal systems could be covered by the Office of Sustainability and Innovations existing fiscal year 2027 budget. Budget for installing geothermal systems, once designed, will be determined based on the selected locations, costs, and funding availability.
Staff
Reviewed by: Missy Stults, Sustainability & Innovations Director
Milton Dohoney Jr., City Administrator
Body
Whereas, In 2020, Ann Arbor City Council unanimously adopted a plan to achieve a goal of community-wide carbon neutrality by 2030;
Whereas, One of the strategies in that plan was transitioning off of fossil gas towards renewable energy solutions for heating and powering our buildings and vehicles;
Whereas, Notable progress has been made in transitioning many City facilities towards having their electrical systems, at least in part, powered with solar energy;
Whereas, A large opportunity still remains to transition the heating and cooling of facilities to a sustainable solution;
Whereas, The City has gained significant experience over the last several years with geothermal systems for heating and cooling;
Whereas, The City of Ann Arbor has recently become eligible for even greater Direct Pay reimbursement for the installation of geothermal systems, at least through June of 2027;
Whereas, With this new Direct Pay eligibility, the City may be able to receive up to 50% reimbursement for the cost of installing geothermal systems through June of 2027; and
Whereas, The Office of Sustainability and Innovations budgeted funds in the fiscal year 2027 budget to advance building decarbonization efforts at three to five City facilities;
RESOLVED, That City Council affirms its support for decarbonizing City buildings and facilities;
RESOLVED, That City Council encourages the City Administrator to expeditiously compete a study of geothermal potential, conduct designs, and issue a request for proposal to construct geothermal systems at as many City facilities as possible in the coming months;
RESOLVED, That City Council encourages the City Administrator to install geothermal systems at as many viable sites as possible to try and take advantage of the up to 50% reimbursement for geothermal systems that is viable until the end of June 2027; and
RESOLVED, That the City Administrator is authorized to take the necessary administrative actions to implement this resolution.
Sponsored by: Councilmembers Cornell, Akmon, and Briggs