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Country may serve as municipal conduit for energy upgrade funding

 

By James Tilson

and Suzanne Dean

Staff writer

1-26-2017

 

MANTI—The North Sanpete School District may ask Sanpete County to serve as what is called a “municipal conduit,” which would enable the district to qualify for $5.9 million in federally subsidized bonds for new furnaces and other energy upgrades.

Eric Thatcher, senior sales executive in the Salt Lake City office of Siemens USA, the prospective contractor for the upgrades explained the federal program to the Sanpete County Commission on Jan. 3.

Congress has appropriated money to encourage states, cities, counties and other public entities to make their facilities energy-efficient. The money has been allocated to states and larger counties and cities based on population.

In Utah, the program is administered by the Governor’s Office of Energy Development (OED). While Sanpete was not one of the counties to receive an allocation, Thatcher said the county could use allocations the state is holding in reserve, or allocations that have been waived by other Utah counties.

State and local government entities that want to participate can come up with energy conservation projects. Once the state approves the projects, the government units can qualify for Qualified Energy Conservation Bonds (QECBs) in amounts up to their designated allocations.

The North Sanpete School District would not qualify for a QECB bond on its own, Thatcher said. But it could qualify if county government acted as its municipal conduit, or sponsor. Thatcher assured the commission that serving as a municipal conduit would not obligate the county in any way for repayment of a QEBC.

A QEBC is among the lowest-cost public financing tools available because the U.S. Department of Treasury subsidizes the borrowing costs.

Thatcher told the commission the bond the school district is considering would run for 20 years. Ordinarily, the interest rate on such a bond would be 3.5-4 percent, but the federal offset on the QECB would reduce the rate to 2 percent.

In an interview, North Sanpete Superintendent Sam Ray said if the district doesn’t put at least $3 million into new boilers or furnaces at Fairview Elementary, North Sanpete Middle School and North Sanpete High School, “we’re going to have some catastrophic failures.”

Earlier, Siemens to conducted an energy audit of the whole district, including every school, the school district office and the bus garage.

Besides redoing the basic heating systems at the three schools, the audit recommended upgrades to heating control systems, lighting retrofits, and weather stripping of windows and doors at all buildings, Ray said.

The audit also recommended installation of solar panels at buildings served by Rocky Mountain Power, which offers net metering. The total list added up to the $5.9 million the district is now seeking to fund.

Ray said the district hopes to find some of the funds to pay off potential bonds from energy cost savings. The district is considering a “performance contract” with Siemens under which the company would guarantee a certain amount in savings. If energy savings fell short of projections, Siemens would cut a check to the district for the difference.

Commission Chairwoman Claudia Jarrett asked when the commission could expect to see a draft application from the school district for the QEBC program.

Thatcher said that engineers from Jones and Demille are reviewing the proposed project. Once the review is complete, the North Sanpete School Board would vote on the project.

If the board voted to move forward with QECB funding, the commission could expect to see a request from the school district for a resolution approving the application in 30-45 days after the vote.

Meanwhile, Superintendent Ray emphasized that a QECB bond sponsored by Sanpete County was one of three funding strategies the district was exploring.

North Sanpete is also looking into creating a Local Building Authority to qualify for a QECB. Such an authority would be a political subdivision under state law, and as such would be eligible to receive QECB bonding authority on its own without going through the county, Ray said.

Another option is a U.S. Department of Education bonding program called Qualified Zone Academy Bonds (QZAB). Bonds under that program are at zero percent interest. But the school district would have to put up a 10 percent cash match up front.

Ray said the district put together a request for a grant from Rocky Mountain Power under its Blue Sky program to cover the 10 percent.

The fourth option, he said, would be drawing on a fund the Utah Legislature set up to help school districts with building needs. The fund is administered by the Utah State Office of Education.

“We’re just trying to turn over every rock” to find a way to fund the upgrades without being forced to go to taxpayers for authority to issue a general obligation bond, Ray said.

According to Thatcher, while Siemens would be the general contractor for the work under any of the options, the sub-contractors would almost all be local to Sanpete.

For a further update on the project funding, read our coverage of the most recent North Sanpete School District Board meeting on this issue’s school page.