HomeMy WebLinkAbout09-17-2013 b3 wrf energy efficiency proj
FROM: Wayne Padilla, Finance and Information Technology Director
Carrie Mattingly, Utilities Director
Prepared By: Wayne Padilla, Finance and Information Technology Director
SUBJECT: WATER RECLAMATION FACILITY ENERGY EFFICIENCY PROJECT -
FINANCING
RECOMMENDATION
Adopt a resolution approving documents and actions related to the private placement financing of
the Water Reclamation Facility Energy Efficiency Project.
DISCUSSION
Background
At the May 7, 2013 City Council Meeting, the City Council took the following actions:
• Approved the Water Reclamation Facility (WRF) Energy Efficiency Project, a
public/private partnership with PG&E, for a total project construction cost of $9,478,948.
Annual savings from the project will be approximately $325,000 through energy efficiency
savings and the reduction of operations and maintenance costs with an annual carbon offset
exceeding one million pounds of carbon dioxide per year.
• Council authorized staff to pursue $7,186,258 in project financing and directed staff to
return for approval of the appropriate financing documents.
• Approved a resolution allowing the Sewer Enterprise Fund to be reimbursed from financing
proceeds for the cost of eligible expenses incurred on this project before the financing
transaction is closed.
Since that time, staff has considered two financing options (private placement and I-Bank) for this
project and is recommending one for the Council’s consideration. The private placement financing
proposal received from Green Campus Partners has been found to be more economical over the
term of the borrowing compared to the offering provided by the I-Bank. When all costs for the
financing are considered, the proposal from Green Campus Partners generates approximately
$220,000 in savings compared to the I-Bank financing proposal, which includes that amount for
cumulative loan maintenance fees.
The city’s financial advisor, Fieldman, Rolapp and Associates (FRA) contacted nine potential
private placement financing providers to receive quotes to finance this project over a 15-year term.
The firms contacted are shown below:
• Bank of America Merrill Lynch
• BBVA Compass
• Capital One
Meeting Date
Item Number September 17, 2013
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WRF Energy Efficiency Project – Financing Page 2
________________________________________________________________
• Chase
• Green Campus Partners
• Pinnacle Public Finance
• Umpqua Bank
• Western Alliance
• U.S. Bank
The lowest bid received by FRA on behalf of the City was a bid of 2.63% from Green Campus
Partners and the next lowest bid was received by Umpqua Bank at 2.85%.
After receiving the bids, FRA compared the 2.63% bid received from Green Campus Partners
against the current interest rate and other terms provided by the I-Bank as shown below:
Interest Locked
Initial
On-
going
Financing Provider Rate Now? Term Costs Fees?
Green Campus
Partners 2.63% Yes 15 yrs $55,000 No
I-Bank 2.66% No 15 yrs $63,571 Yes
The following table compares the payment streams for both financing alternatives:
Payment
Date I-Bank Loan Private
Placement
Savings
Using PP
Savings
Using I-Bank
9/30/201363,571.50 55,000.00 8,571.50 (8,571.50)
12/1/2014636,304.98 612,491.92 23,813.06 (23,813.06)
12/1/2015635,161.32 612,491.93 22,669.39 (22,669.39)
12/1/2016633,886.12 612,491.92 21,394.20 (21,394.20)
12/1/2017632,577.01 612,491.92 20,085.09 (20,085.09)
12/1/2018631,233.06 612,491.92 18,741.14 (18,741.14)
12/1/2019629,853.36 612,491.93 17,361.43 (17,361.43)
12/1/2020628,436.97 612,491.92 15,945.05 (15,945.05)
12/1/2021626,982.90 612,491.92 14,490.98 (14,490.98)
12/1/2022625,490.16 612,491.92 12,998.24 (12,998.24)
12/1/2023623,957.71 612,491.91 11,465.80 (11,465.80)
12/1/2024622,384.48 612,491.92 9,892.56 (9,892.56)
12/1/2025620,769.42 612,491.92 8,277.50 (8,277.50)
12/1/2026619,111.39 612,491.92 6,619.47 (6,619.47)
12/1/2027617,409.27 612,491.92 4,917.35 (4,917.35)
12/1/2028615,661.87 612,491.92 3,169.95 (3,169.95)
Total 9,462,791.51 9,242,378.81 220,412.70 (220,412.70)
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WRF Energy Efficiency Project – Financing Page 3
________________________________________________________________
Staff spoke with a representative from another city and two other financial advisors and has
information from the city’s bond counsel indicating that Green Campus Partners has proven its
ability to complete the financing satisfactorily.
On September 3, 2013 the City Council accepted the financing proposal from Green Campus
Partners and directed staff to proceed with the development of the documents required to complete
the private placement financing and approved the engagement of Fieldman, Rolapp as Financial
Advisor and Jones Hall as Bond Counsel to assist with the development of those documents. The
documents to be considered this evening include the Installment Sale Agreement and the
Assignment Agreement.
FISCAL IMPACT
The WRF Energy Efficiency project will cost $9,534,000. The majority of the funding for the
Energy Efficiency Project is proposed to come from two sources; $7,479,000 from Green Campus
Partners and $2,055,000 from the sewer fund working capital. When the Council reviewed the
financing plan in May, the forecast reflected the assumption that $293,000 in rebates would be paid
by PG&E and used to finance a portion of the project costs. Due to the fact that the rebates will not
be available until after construction is complete, the amount to be financed has now been set at
$7,479,000. Once the rebates are received, the full amount will be applied to the next scheduled
debt service payment.
There are fees associated with the financing plan that are proposed to be paid from working capital.
These fees include: Jones Hall (city bond counsel) $22,500; FRA $22,500; Green Capital Partners
bond counsel $10,000).
As indicated in the table shown above and by the comparison of rates offered by other financial
institutions, the financing terms offered by Green Campus Partners offers the greatest amount of
savings. Compared to the offer from the I-Bank, the city will save at least $220,000 over the life of
this financing.
Project costs and their sources of payment are shown below:
Project Costs and Funding Sources
Working Capital Green Campus
Partners
Total
Design $517,000 $517,000
Construction $1,483,000 $7,479,000 $8,962,000
Loan Origination Fee $55,000 $55,000
Total $2,055,000 $7,479,000 $9,534,000
Funding for this project is included in the 2013-14 Sewer Fund budget and adequate funding for the
City’s $2,055,000 is available in working capital. Current adopted sewer rates have incorporated
this project’s costs.
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WRF Energy Efficiency Project – Financing Page 4
________________________________________________________________
ATTACHMENTS
The Installment Agreement and Assignment agreement were still being drafted at the time that the
agenda was published. A separate Council Agenda Correspondence Memo will be issued to provide
copies of those documents once they are ready.
Council Resolution for 9-17
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RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN
LUIS OBISPO APPROVING DOCUMENTS AND ACTIONS
RELATING TO THE FINANCING OF WATER RECLAMATION
FACILITY ENERGY EFFICIENCY PROJECT
WHEREAS, the City of San Luis Obispo (the “City”) owns and operates facilities
and property for the collection, treatment and disposal of wastewater within the service
area of the City (the “Wastewater Enterprise”), and is proceeding to finance the
acquisition and installation of improvements to its water reclamation facility, consisting
generally of the onsite cogeneration of energy, solids management, upgrading and
optimizing aging infrastructure, efficient lighting, and process system controls (the
“Project”); and
WHEREAS, the City Council has previously adopted its Resolution on
September 3, 2013, approving a financing plan for the installment sale financing of the
Project on a private placement basis with U.S. Bancorp Government Leasing and
Finance, Inc., as designee of Green Campus Partners LLC (the “Lender”), through the
use of an installment sale agreement between the City and the City of San Luis Obispo
Capital Improvement Board (the “Board”); and
WHEREAS, pursuant to such authorization the City has previously executed a
commitment letter from the Lender which obligates the City and the Board to proceed
with the financing and to enter into the documentation which is described in such
commitment letter; and
WHEREAS, the final form of the legal documentation relating to the financing has
been prepared by bond counsel, and the City Council wishes at this time to approve
such legal documentation;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of San
Luis Obispo as follows:
SECTION 1. Installment Sale Agreement. The City Council hereby approves the
Installment Sale Agreement relating to the financing of the Project, between the City and
the City of San Luis Obispo Capital Improvement Board (the “Board”), in the form thereof
on file with the City Clerk together with any changes therein or additions thereto deemed
advisable by the City Manager or the Director of Finance and Information Technology
(each, an “Authorized Officer”); provided that the execution thereof by an Authorized
Officer shall be conclusive evidence of the approval of any such changes or additions.
An Authorized Officer is hereby authorized and directed for and in the name and on
behalf of the City to execute, and the City Clerk is hereby authorized and directed to
attest, the final form of the Installment Sale Agreement.
SECTION 2. Assignment by Board. The City Council hereby approves the
assignment by the Board of its rights under the Installment Sale Agreement, including
the right to receive the Installment Payments, to the Lender. Such assignment shall be
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made pursuant to an Assignment Agreement between the Board and the Lender in
substantially the form on file with the City Clerk, which the City Council hereby approves.
SECTION 3. Official Actions. The Mayor, the City Manager, the Director of
Finance and Information Technology, the City Clerk and all other officers of the City are
each authorized and directed in the name and on behalf of the City to make any and all
assignments, certificates, requisitions, agreements, notices, consents, instruments of
conveyance, warrants and other documents, which they or any of them deem necessary
or appropriate in order to consummate any of the transactions contemplated by the
agreements and documents approved under this Resolution. Whenever in this
Resolution any officer of the City is authorized to execute or countersign any document
or take any action, such execution, countersigning or action may be taken on behalf of
such officer by any person designated by such officer to act on his or her behalf in the
case such officer is absent or unavailable.
SECTION 4. Effective Date. This Resolution shall take effect immediately upon
its passage and adoption.
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On motion of ____________________, seconded by ___________________,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 17th day of September, 2013.
Mayor
ATTEST:
City Clerk
APPROVED:
City Manager
City Attorney
Director of Finance and Information Technology
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