The gloomy financial forecast that has San Jose considering shuttering its branch libraries and community centers next summer could also claim another casualty: a money-saving solar project at the heart of Mayor Chuck Reed's clean-energy plan.

The threatened closures could kill plans to install solar panels at no cost to the city on the roofs or parking lots at libraries and community centers.

Despite that stark scenario -- a setback to Reed's Green Vision plan -- the City Council on Tuesday will consider whether to move ahead on power purchase agreements with San Mateo-based SolarCity to install and maintain solar panels on 28 city-owned sites, including 23 branch libraries and community centers.

"One of my goals is to reduce or get half of our electricity from clean, renewable energy sources, and to do it with other people's money," Reed said.

The financing mechanism is exactly what makes the deal so appealing.

A staff memo outlining the original proposal shows that SolarCity would pay to install and maintain the solar array systems at each site. But more likely because of the city's budget problems, sources say, solar will be installed only at five of the 28 locations: the Municipal Water Office, Police Activities League Sports Center, South Service Yard, Kelley Park and Prusch Park.

In return, San Jose would agree to buy the electricity generated by the system from SolarCity for 20 years, with two five-year options.

As initially planned, a solar panel system at all 28 sites would produce about 68 percent of the electricity required by those facilities, which would save San Jose $140,000 in the first year and $5.7 million over 20 years.

The 28 sites could generate 4 megawatts of power, in addition to at least 2.5 megawatts of solar already installed across at least 13 city or redevelopment agency facilities.

Solar industry experts say that one megawatt of solar can power about 200 households.

City officials wouldn't say how much cost savings would result from a smaller solar panel project at only five sites, but as San Jose heads into its 11th straight consecutive budget shortfall, savings of any amount could help.

San Jose projects a deficit next year estimated at $78 million to $115 million, and deficits for at least five years after that.

Reed said that the city staff had done a preliminary analysis to come up with a list of the best city-owned sites for solar. But that was before last Tuesday's City Council meeting, where the anemic 2012-13 fiscal year budget was discussed and the stunning possibility of closing all city libraries and community centers was detailed publicly.

That announcement changed the outlook for the current proposal, Reed and others said.

Now, city staff will re-evaluate each location to determine if solar is appropriate at that site and whether the facility should remain open, said Tom Manheim, the city manager's spokesman.

While installing solar panels on empty buildings might seem profitable -- after all, San Jose could sell its surplus electricity back to PG&E -- some city officials say the finances may not pencil out. That's because PG&E pays less than market rate for surplus electricity.

"What is clear to everybody is that it would not make sense to move forward (with solar) on a facility that ends up having a net cost versus a benefit," Manheim said.

Kerrie Romanow, the city's acting environmental services director, stressed that any solar project proposal cannot dip into the city's general-fund coffers.

"A lot of cities are putting up solar and may be paying a little more in the earlier years" to do that, Romanow said. "But this system has to come with no cost -- it has to break even or save money in year one."

Reed argued that if solar isn't installed on all 28 sites, adding solar panels to even a handful of sites will be worthwhile.

Whether SolarCity is still on board with a smaller project isn't certain. A company spokesman declined to comment Friday, though city officials said SolarCity remained committed after being told last week that the project would be scaled back.

"It could shrink so much that SolarCity is uninterested in the package, but that seems unlikely," Reed said. Still, "they have to be able to do something that makes economic sense for them."

On Friday, SolarCity reported that the U.S. Energy Department told the company it won't complete a $275 million conditional loan guarantee it offered to SolarCity before a Sept. 30 deadline.

DOE officials based their decision on increased documentation requirements that have resulted from the current congressional investigation into the bankruptcy of Solyndra, the Fremont solar panel maker.