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HomeMy WebLinkAboutQualified Energy Conservation BondsTO: BOARD OF COMMISSIONERS FROM: DAVE INBODY SUBJECT: QUALIFIED ENERGY CONSERVATION BONDS DATE: 6/25/2010 CC: DAVE KANNER, ERIK KROPP Background A Qualified Energy Conservation Bond (QECB) is a taxable bond issued by a state or local government to finance one or more qualified conservation purposes, also referred to as "green projects." QECBs were first authorized by the U.S. Congress in October 2008. At that time, a maximum of $800 million in QECBs was authorized nationwide. As part of the American Recovery and Reinvestment Act of 2009, this maximum volume cap was increased to $3.2 billion. Distribution by state is based on population, which resulted in Oregon being allocated $39.32 million. All local governments with a population of 100,000 or more are allocated funds based on their population with the remainder being administered by the state. Allocations within the State of Oregon are as follows: &^r rx r -r any •^ 'z,c, Ci of Portland 548 185 , ;, $5,751,806 Washin on Coun 521,039 $5,466,974 Clackamas Coun 375,482 $3,939,727 Marion Coun 311 449 $3,267,864 Jackson Coun 199,295 $2,091,094 Lane Coun 194,928 $2,045,273 Multnomah Coun 156,046 $1 637,311 Deschutes Coun 154,028 $1,616,132 Ci of Salem 151,188 $1,586,333 Co of Eu ene 148,663 $1 559,840 Linn Coun 113,264 $1,188,417 Dou_1as Coun 104,119 $1 092,464 All Others 769,769 $8 076 765 TOTAL $39,320 000 QECBs are taxable bonds, but they provide a federal income tax credit to bond holders. The federal income tax credit results in the federal government paying a significant portion of the interest on the QECB, resulting in issuers paying a lower net interest rate on the principal amount borrowed than on a comparable tax-exempt bond. A taxpayer holding a QECB on one of the quarterly credit allowance dates may claim a federal income tax credit equal to 70% of one-quarter of the credit rate for the outstanding face value of the taxpayer's holdings. All available project proceeds must be used for qualified conservation purposes within three years of the issue date of the QECB. All recipients of QECBs are required to file Form 8038 with the IRS upon issuance of the bond. Any project financed with proceeds of a QECB is subject to the federal Davis -Bacon Act prevailing wage laws, including private activity bonds. Qualifying Projects At least 70% of the allocation must be used for government purposes. The remainder may be used as private activity bonds, benefiting businesses or individuals. There are five types of projects that are permitted for QECBs: 1. Capital Expenditures a. Reduce energy consumption by at least 20% in publicly-owned buildings b. Implement green community programs, including the use of loans, grants, or other repayment mechanisms to implement the program c. Production of electricity from renewable energy sources in rural areas d. Any of the following facilities eligible for production tax credits under Section 45 of the Internal Revenue Code: i. Wind facility ii. Closed-loop biomass facility iii. Open -loop biomass facility iv. Geothermal or solar energy facility v. Small irrigation power facility vi. Landfill gas facility vii. Trash facility viii. Qualified hydropower facility ix. Marine and hydrokinetic renewable energy facility 2. Research Facilities and Research Grants a. Development of cellulosic ethanol or other non-fossil fuels b. Technologies to capture and sequester carbon dioxide produced through use of fossil fuels c. Increased efficiency of existing technologies for producing non-fossil fuels d. Automobile battery technology to reduce fossil fuel consumption in transportation e. Technology to reduce energy use in buildings. 3. Mass Commuting Facilities that reduce consumption of energy, including expenditures to reduce pollution from mass commuting vehicles. 4. Demonstration Projects a. Green building technology b. Conversion of agricultural waste in fuel production c. Advanced battery manufacturing technology d. Technology to reduce peak use electricity e. Technology to capture and sequester carbon dioxide emitted from combusting fossil fuels used for producing electricity. 5. Public Education Campaigns to promote energy efficiency other than movies, concerts or other events held primarily for entertainment purposes. Deschutes County QECBs A letter from County Administrator Dave Kanner, was sent on June 7, 2010 to 25 local governmental bodies explaining the bond program. Additionally, a response was requested if the local body had a project that could qualify for this program. The following is the list of contacted bodies and their responses: • Swalley Irrigation District is requesting $200,000 to $500,000 to support a portion of their Main Canal Pipeline & Ponderosa Hydroelectric Project. This project is expected to cost $14 million. The funds generated through the bond will be used to pay down a $3 million debt and provide rate stabilization for patrons of the district (Letter provided as Exhibit A). • La Pine Rural Fire District is requesting $60,000 to replace their current bay doors with insulated doors and upgrade ceiling insulation to R-38. This project, at a total cost of $60,000, will replace 19 doors and upgrade insulation in four buildings (Letter provided as Exhibit B). • City of Bend is requesting funds for the construction of a hydroelectric generation facility. The total amount of the request is yet to be determined. This facility will provide renewable energy to the city and offset water rates to its citizens. The viability of the project depends on the outcome of an application submitted to the Oregon Department of Energy for business energy tax credits (Letter provided as Exhibit C). • Crooked River Ranch Rural Fire District indicated that all of their facilities are located in Jefferson County and therefore they will not be requesting any bond funding. • The following bodies did not respond to the written request: o City of Bend o City of La Pine o City of Redmond o City of Sisters o Bend Metro Parks and Recreation District o La Pine Parks and Recreation District o Redmond Area Parks and Recreation District o Bend -La Pine School District o Redmond School District o Sisters School District o Black Butte Ranch Service District o Sunriver Service District o Central Oregon Community College o Black Butte Ranch Fire District o Cloverdale Fire District o Deschutes County Rural Fire District #1 (Redmond) o Deschutes County Rural Fire District #2 (Bend) o Sisters/Camp Sherman Fire District o Arnold Irrigation District o Central Oregon Irrigation District o Three Sisters Irrigation District o Tumalo Irrigation District OECB Proiects Governmental Bodies Project Bond Amount Swalley Irrigation District Canal pipeline and hydroelectric project $200,000-$500,000 $60,000 La Pine Rural Fire District Bay doors and insulation in facilities City of Bend Hydroelectric generation facility To Be Determined 3 SujaIlQq"O.2 IRRIGATION DISTRICT June 15, 2010 Mr. Dave Kanner County Administrator Deschutes County 1300 NW Wall Street, Suite 200 Bend, Or 97701 Dear Mr. Kanner, X+tlb( `- A In response to your letter of June 7, 2010 Swalley Irrigation District is interested in the Qualified Energy Conservation Bonds available to government entities in Deschutes County. The district's recently completed Main Canal Pipeline and Ponderosa Hydroelectric project would seem to qualify under the eligible project type Capital Expenditures -for rural development of electricity production from renewable sources." Attached are project description documents used in the district's May 26, 2010 ribbon cutting ceremony. Essentially Swalley Irrigation District constructed -the first of its kind in 20 years in the state of Oregon- an in -canal small hydroelectric plant at the end of 5 miles of newly piped irrigation canal. It is tied into the PacifiCorp grid and supplies the energy needs of 375 households simply by utilizing the district's existing water right. It is clean renewable energy. It was found to have no environmental impacts by state or federal agencies. The piping of Swalley's century old main canal resulted in a water savings of 18 million gallons of water a day which was taken off of Swalley's water right and placed permanently in the Deschutes River. This is the single largest contribution of water back in to the Deschutes River by an irrigation district, ever. This project has received acclaim across the country as a good example of how a small government entity can achieve water use efficiency with tangible benefits for river water quality and fish, and produces clean, renewable energy with no environmental impacts. This project cost over $14 million. The district has three loans of about $3 million needed to help finance this project. Swalley Irrigation District is a small irrigation district with 655 patrons and this debt service is challenging for the next 5 years. If the QECB funds have a lower interest rate than what we are paying on the loans we would like to Phone 54:0fin a loan with the QECB funds. Altematively, the district could use these funds Fax 541!389-0433 64672 COOK AVENUE SUITE ONE BEND, OREGON 97701 www.swalley.com not to pay down an existing loan but to serve as a rate stabilization fund so that the patrons' assessments (charge for water) do not have to be increased beyond the rate of inflation to make the debt service payments. The district would be interested in receiving at least $200,000 in QECB funds and as much as $500,000 depending on the interest rate. Please contact me with questions and thank you for informing us of this opportunity. Sincerely, 0°11/1"-e-:, Suzanne Butterfield Manager Attachments SWALLEY IRRIGATION DISTRICT MAIN CANAL PIPELINE AND PONDEROSA HYDROELECTRIC PROJECT SUMMARY Ribbon Cutting Ceremony May 26, 2010 What is Swalley Irrigation District? The district is a local government entity providing irrigation water to 655 patrons having 4,306 acres of water right, located from Bend northward between Highways 20 and 97. The district has been in existence, originally as the Deschutes Reclamation and Irrigation Company, since 1899. Swalley infrastructure consists of a 12.1 mile main Canal and 16 miles of irrigation laterals. Now a small hydroplant is part of the district infrastructure. Swalley's water right is one of the oldest on the Deschutes River making its supply of water quite reliable. The district has a 3 member board of directors and 4 employees. What is the Project? The project was originally conceived of in 2004, planning and engineering design began soon thereafter and construction on the pipeline began in 2007. The project is now complete and consists of the following components: modifications to the state of the art 2004 fish screen at the North Canal Diversion Dam to keep damaging pumice in the river, from entering the pipeljne and the hydro plant; a headworks debris cover to keep large debris out of the pipeline/hydroplant; 5.1 miles of 54" , 48" and 34", made in America pipe, replacing that portion of the 1899-1923 vintage Main Canal from the dam to the hydro plant; and a .75 megawatt in -canal hydroelectric plant at the end of the pipeline. There is 200 feet of fall from the diversion dam to the hydroplant creating 148 feet of head or 64 psi pressure under full operating conditions. Hydroelectric production was added as an approved use to Swalley's existing water right by the Oregon Water Resources Department. The forebay at the hydroplant has a custom sleeve valve which allows the water to be channeled directly into the canal at anytime the hydroplant should shut down. The canal does not discharge into the river. The district has an interconnection agreement with Pacificorp. Transmission facilities and lines have been completed by Pacificorp, up to the project. Swalley has a power sales contract with Pacificorp. The contract is the standard UM 1129 contract requiring utilities to purchase 1 MW or less at PURPA avoided cost prices. The price schedule has been set by the PUC, beginning at about 7 cents per kilowatt hour. What are the benefits to the public and Swalley patrons? As a result of the piping of a very old canal, 28 cubic feet per second, or 18 million gallons a day, of water is conserved — no longer seeps into the ground- and has been placed back into the Deschutes River permanently with an 1899 water right. This enhances flows for fish and improves water quality. This is the largest single contribution of conserved water by an irrigation district into the Deschutes River, ever. As for the hydroplant, it is producing clean, renewable energy to meet the needs of an equivalent of 375 households. No state or federal agencies reported any impact to the environment from the hydroelectric project. The district is contributing to the cost of a fish ladder at the diversion dam pursuant to an agreement with the Oregon Department of Fish and Wildlife. Benefits to Swalley patrons include water pressure for those 52 turnouts on the pipeline itself, better control of the water by district staff, and eventually , net hydroelectric revenue to the district. Safety concerns are reduced when water is delivered through a pipe rather than open canal. Blazing new paths The Ponderosa hydroplant is the first hydroplant built by an irrigation district in over 20 years in the State of Oregon under all new rules from the federal level down to the local level. The last such plant to be built was Central Oregon Irrigation District's hydroplant built in 1989. After that the power rate for purchase declined considerably and only came back up in the last 5 years making such projects feasible again. As a result, Swalley was the first district in the state to go through the Federal Energy Regulatory Commission process for an in -canal hydroelectric plant exemption from FERC rules. The district was the first to go through the Oregon Water Resources Department process for adding hydro power to an existing water right. The district was the first to go through Oregon Department of Fish and Wildlife requirements for a fish ladder at the dam as a result of the in -canal hydroplant 5 miles away from the fish screened diversion. The district was the first to go through the new Deschutes County land use approval and building permit process for an in -canal hydroplant. The district has been a new experience for Pacificorp in dealing with an irrigation district small hydro project. Last but not least, Swalley was the plaintiff in federal court asserting the right of irrigation districts with a canal within a federal right of way to pipe their open canal. The district had to go to court after construction started which caused a one year hiatus in the project, adding to costs. Swalley won that case which paves the way for other such irrigation districts in the northwest to consider piping and hydro projects. Project Cost and Funding Partners The pipeline and hydroelectric project cost $15.5 million. The district was fortunate to have many funding partners. Approximately $10 million of the funding came from non federal partners and $5.5 million from federal partners. The district's two federal funding partners are the US Bureau of Reclamation and the Oregon Department of Environmental Quality, both utilizing federal American Recovery and Reinvestment Act funds. The non- federal partners included the Deschutes River Conservancy who played a major role in securing funds for Swalley from the Oregon Watershed Enhancement Board, the National Fish and Wildlife Foundation and the North Rim Foundation, Energy Trust of Oregon (ETO) and the Oregon Department of Energy (ODOE). The district also has $2 million in loans that will be paid down with ETO funds and an ODOE Business Energy Tax Credit payment when received. District representatives, contractors, suppliers, and attorneys involved with the project Four district managers have been carrying the torch on this project since 2004: Todd Griffiths, Charles Brown, Jan Lee and Suzanne Butterfield. Past and present board members Gary Blake, Andy Tillman, Bob Dickey, Kevin Crew and Helen Eastwood have all guided the project. The pipeline engineer is Jon Burgi of David Evans and Associates of Bend, assisted by Thomas Headley. The pipeline contractors are Todd Weekly of Weekly Brothers of ldleyld Park, Oregon( Phase 1 pipeline) and Ron Robinson and Greg Goss of Jack Robinson and Sons ( Phase 2-4 of the pipeline) of Bend. The hydroplant engineer is Dick Haapala, CH2MHILL, of Yakima Washington. The powerhouse contractor was again Todd Weekly. The engineer overseeing on-site hydroplant construction was David Prull owner of ClearWater Engineering. The supplier of the turbine generator was Rob James of Canyon Hydro in Deming Washington. The electrical contractors were Kronesberg Electric, and BAT Electric. The Owners Representative overseeing completion of the entire project was Brady Fuller, CH2MHILL, of Bend. District Operations and Maintenance Field Supervisor Karl Konklin delivered water all throughout the project period, assisted with the construction process, and is now a hydroplant operator as well. Kathy Ferguson has been the office manager since 2005 and handles all bookkeeping on the project and soothing the patrons. Attorneys involved with the project include Neil Bryant, Mark Reinecke and Paul Taylor of Bryant,Lovlein and Jarvis in Bend; Dan Israel who handled the federal court case on the right to pipe; Tom Nelson who helped the district negotiate a power purchase agreement with Pacificorp; and David Filippi of Stoel Rives who helped the district negotiate the fish passage agreement with ODFW. Thankyou The district thanks all those who helped this project become a reality including the City of Bend who was an early proponent and supporter of the project. The Deschutes Basin is a special place where the cities, counties, irrigation districts, the Deschutes River Conservancy and many other partners are working diligently together to make more of these kinds of projects a reality. Finally we thank the Swalley patrons who lived through the entire process, had their irrigation water disrupted numerous times, and showed understanding that there have to be some sacrifices to propel an organization forward into a new era of efficiency and sustainability. PRESS RELEASE FROM: SWALLEY IRRIGATION DISTRICT, 64672 COOK AVE., SUITE 1, TUMALO DATE OF RELEASE: MAY 20, 2010 CONTACT: SUZANNE BUTTERFIELD, GENERAL MANAGER 541-388-0658 www.swallev.com ANNOUNCEMENT OF RIBBON CUTTING CEREMONY TO CELEBRATE COMPLETION OF 5 MILE MAIN CANAL PIPELINE AND IN CANAL HYDROELECTRIC PLANT Swalley Irrigation District has completed a 5 mile pipeline and a .75 Megawatt in -canal hydropower plant, which is certified operational as of April 2010. A ribbon cutting ceremony to celebrate this major achievement will be held Wednesday morning , May 26 at the hydroelectric plant site, by invitation only. All media are invited. Please contact the district by Monday, May 24 to reserve a seat on the bus. Swalley Irrigation District is a local government entity providing irrigation water through its 1899 water right, oldest on the Deschutes River, to 655 water users on 4,300 acres of land with water rights. District lands are located from Bend northward primarily between Highways 20 and 97. The project engineering began in 2004 and construction has spanned 5 years. A lawsuit filed in federal court by Swalley Irrigation District, due to some landowner opposition, in 2004, to determine whether irrigation districts with a federal right of way deeded canal had a right to pipe those open canals, was won by the district in 2008, and upheld by the Court of Appeals in 2009. The piping of 5 miles of the district's 12 mile main canal, which dates back to 1899, has resulted in 18 million gallons a day of conserved water being able to be placed back permanently instream in the Deschutes River to enhance flows for fish and improve water quality. This is the single largest contribution of conserved water by an irrigation district to the Deschutes River, ever. Clean, renewable energy is being provided to the equivalent of 375 homes through a consummated power purchase agreement with Pacificorp. Swalley Irrigation District is the first irrigation district in 20 years in the state of Oregon to build a hydroelectric plant in its canal, with its existing water right, rather than building a hydroelectric plant on a river. There are no detrimental environmental impacts from this type of energy production. The district has broken new ground that will assist other irrigation districts in pursuing small in -canal hydro energy production. Ck0113FT 13 LaPINE RURAL FIRE PROTECTION DISTRICT 51590 Huntington Road PO Box 10 LaPine, OR 97739 (541) 536-2935 Phone (541) 536-2627 Fax www.lapinef re.org Mr. Dave Kanner Deschutes County Administrator Department of Administrative Services 1300 NW Wall St Suite 200 Bend Oregon 97701 Re: June 7 Letter on American Recovery and Reinvestment Act - Qualified Energy Conservation Bonds. Dear Mr. Kanner. The LaPine Rural Fire Protection District has a very important capital project to make our facilities more energy efficient that may qualify for this program and would like to investigate further. We are doing energy conservation capital upgrades to our facilities by replacing un -insulated bay and man doors with insulated doors, and the addition of ceiling insulation to an R-38 value. The total cost of these capital projects has been cost estimated at just under $60,000. The majority of District current facilities were built in the 1970's and have un -insulated doors and ceiling insulation that was only to the standard of the day. One satellite station was built in the early 90's. Last year the District did a pilot capital project of replacing some insulated bay doors on one of our older stations and along with no other improvements the energy cost for this one building went down at least 11% with out even factoring energy cost increases. Completing this facility's capital energy upgrades as well as the doing like wise at the districts other four buildings will easily reduce energy consumption by 20% and more. The District's capital project outline for Energy Conservation is: Station 101 Complete insulated door replacement (8) 16,000 Insulate ceiling to R-38 6,000 Station 102 Door replacements (4) 8,000 Insulate ceiling to R-38 4,500 Station 103 Door replacements (7) 14,000 Insulate ceiling to R-38 8,400 Administration Insulate ceiling to R-38 2,400 Thank you for the notification of this program and am eager to work with you to see if this is a great fit for our District's energy saving capital project needs. Respectfully, LaPine Rural Fire Protection District Mike Supkis Chief "Pride • Service • Dedicatwn " 2 1 2010 BOARD OF COMrAISSION!: RS ADMINISTRATION 710 WALL STREET P.O. BOX 1458 BEND, OR 97709 [541] 388-5515 TEL [541] 388-5519 FAX www.ci.bend.or.us KATHIE ECKMAN Mayor MARK CAPELL Mayor Pro Tem JIM CLINTON City Councilor JODIE BARRAM City Councilor JEFF EAGER City Councilor TOM GREENE City Councilor ORAN MATER Cily Councilor ERIC KING Cif/ Manager SONIAANDREWS Finance Director SANDRA L BAXTER Police Chief LARRY Hui Fire Chief PATRICIA STELE. City Recorder June 21, 2010 Dave Kanner Deschutes County 1100 NW WaII Street Bend, OR 97701 Re: Qualified Energy Conservation Bonds Dear Dave, "'x1'17 C This letter is in response to your letter dated June 7, 2010 regarding Qualified Energy Conservation Bonds (QECB). The City of Bend would like to express an interest in receiving a sub -allocation of the bonding capacity for its surface water hydro electric facility project. The hydro electric generation facility that the City plans to construct consists of a powerhouse at the City's Outback reservoir site to capture 1,000 feet of hydraulic energy from the City's existing surface water source (at 4,992 feet) and converting this energy to electricity -- harnessing power from a totally renewable energy source that is currently not captured. This project has a "qualified conservation purpose" within the meaning of section 54D(f) of the IRS Code. Initial engineering drawings of this facility are attached. The importance of this hydro electric facility to the City, aside from providing renewable energy, Is the opportunity to offset water rates with hydro electric revenues, thus keeping water rates affordable for the citizens of Bend. Although much work remains to be done, the feasibility of this project is dependent on energy tax credits, low cost and/or subsidized financing that the City can obtain. The City will be submitting an application to the Oregon Department of Energy for business energy tax credits, A sub -allocation of QECB capacity from the County will certainly enhance the viability of this project. Thank you for the opportunity and for your consideration. Please feel free to contact me if you have additional questions or concerns. We look forward to working in partnership with the County. Sin • =rel Son - draws Fin - nce ' irector 312-4902 k it k / / 3 } /§)(§�\ /I` .!®■_! §)® @■�\ >`\ r§, 9 LJ L L]H H LJ Hd L §, y