All posts in the topic YES ! Lets use 130 million dollars in bonding for geothermal/solar (bonding soon expires)RE: Biomass/burning: not a good idea /RE: Renewables (Short link)
Summary
- There are 7 posts — by 5 authors — in this topic.
- Latest post made by Steve Brandt at Nov 25 22:24 UTC
On Nov 20, 2008, at 11:09 AM, Mark Sulander wrote:
> 2. O.K. here's where the Minneapolis funding for these
> alternative energy projects could come from:
>
> There's 130 million dollars still left
> in bonding authority at the City of Minneapolis,
> tied to it's Federal 10 year Empowerment Zone
> Program
And "because we can", you want to plunge our city $130,000,000
deeper in debt? That was the city of Starbuck, Minnesota's reason for
bonding over a million dollars for a new city hall, despite the fact
that they have several vacant and underused public buildings that
could easily be converted into a city hall. They bonded to the legal
maximum, despite having among their growing inventory of tax
delinquent properties one that is in foreclosure and owes over
$60,000. Today they're borrowing money to service that debt, and
they'll be a hefty tax increase next year. I'm sure our esteemed geek
with her spreadsheet from BE&T can further demonstrate the fiscal
stupidity of your proposal.
> PROBLEM: as little as a couple weeks left to claim
> this money before the 10 year EZ program expires in
> December.
And just to make sure your proposal never receives the proper due
diligence most needed in these tough economic times, you want to rush
it through in barely a month? Half my block is foreclosed and vacant,
three quarters of my block is behind on their taxes, and you want put
another $400 worth of debt on each of our shoulders?
On to Jim Grahams wisdom:
> Alcohol of course pollutes much less than petroleum or coal. To
> argue differently is foolish. Burning corn produces far less
> pollution than the environmental pollution from coal powered
> electricity. The problem is societal cost. Burning FOOD to keep
> warm simply costs TOO much. Sure, large corporate farmers get
> massive government welfare to underwrite the sale price, but it
> does bear an enormous societal cost, and especially impacts poor
> people directly with outrageous food costs.
I was out in western Minnesota today... The elevators are full,
they're piling corn 50 feet high on the ground, and there's more corn
in the field they haven't even harvested yet. In the Dakotas the corn
crop is just as bodacious, but due to the last few rains it's around
20% moisture so there letting it dry in the fields a bit. The beet
crop was just as awesome, although the wet fields have hampered the
harvest and some will be lost to rot. None the less, the processing
plants still expect more beets than they'll be able to harvest. Ah,
if only we had the capacity to convert those rotting beets to fuel.
Suffice to say, there's no shortage of corn or just about any other
foodstock.
Mark Sulander wrote:
>Here's the whole post, including some basic information on the 130 million in
pre-approved IRS tax free bonding authority. Amazingly the bonding authority
will expire and be going back unused, to the Federal government, in just a few
weeks, unless a proposal can be created to make good use of the 130 million.
>Don't forget: this bonding authority is not cash from the Federal Government.
This is for tax-exempt bonds that are sold on the regular bond market and
bought by investors.
>This bonding authority has been foolishly sitting on the city's shelf, unused
for nearly 10 years. I am not advocating that we blindly go into debt. Rather,
I am saying: what if we put together a financially sound proposal that has
solid cash-flow, that will be a good investment for the city, as well as moving
us toward clean energy and energy independence.
..clipped...
>There's 130 million dollars still left in bonding authority at the City of
Minneapolis, tied to it's Federal 10 year Empowerment Zone Program (economic
and job development areas in Phillips neighborhood and areas of north
Minneapolis). These bonds are used by the city, but put out on the normal bond
market and bought by private investors through Piper Jaffray, etc.
>PROBLEM: as little as a couple weeks left to claim this money before the 10
year EZ program expires in December. Note: unlike any ordinary bonding money
that Minneapolis gets--most has to come from MN. legislature controlled bonding
limits. That's a real political football every year.
>By contrast, THESE BONDS are pre-approved for Minneapolis and Minneapolis is
in control of who can use the bonding authority.
I wanted to clarify a few things here. First off, bonds are not money. Bonds
are borrowing. They have to be paid back. The fact that someone somewhere has
given us authority to issue bonds isn't a big deal. The City issues bonds all
the time (last Wednesday in fact...). The trick is in how you find money to
pay them back.
Most of the bonds issued by government are tax-free. That also is not
extraordinary. The idea is that the federal government can't tax local
governments, hence the tax-free status of most bonds issued by state and local
government.
We can pretty much issue as many bonds as we want to. We don't have to have
authority from the state or from the feds or anyone to do that. That is what
the Board of Estimate does. We don't need anything pre-approved by anyone.
There is one caveat in that if a single project is over $15 M, we have to ask
the voters. But those are our voters, not another level of government. So it
is no biggie that these bonds are "authorized" by the feds. We still have all
our own processes to go through.
As I noted above, the trick with borrowing is in the payback. In your post,
you write about how there should be a good payback plan for these, one that
cash flowed. If this is a project where we are investing in a business and
expecting a payback or a healthy cash flow, then that is something that should
be done through private capital markets and not government. It isn't the role
of government to provide capital to private entities. If the project is so bad
that it can't get funding on the private markets and is coming to government
(oh, say like a giant auto maker..) government should be extremely suspicious.
If the private sector doesn't provide funding, there is a high risk that
government (and yes taxpayers) will get stuck footing the bill.
I would lastly note that government has an abysmal track record owning
revenue-producing businesses. Government owning businesses is called
"socialism" and, setting aside all of the inflammatory rhetoric from this
election season, we rarely do it in the United States because government
doesn't do a very good job of it. When government runs businesses, the forces
of the market become distorted by politics and the businesses typically are not
run very efficiently. Most of Europe did this a lot twenty years ago but
Margaret Thatcher came and started a wave of divesting as many services as
possible from government and most have done much better being severed from the
political forces of government. This is why few cities have built their own
power plants over the last twenty years and many have sold theirs off.
I would think we would need to think very hard about why government should be
involved in something like this and why the private sector isn't doing it.
There may be exceedingly good reasons why the private sector isn't and
government intervention won't change those fundamentals.
Carol Becker
Longfellow
President, Board of Estimate and Taxation
Who is amazed at how conservative she sounds in this post...
While I tend to agree with almost everything Carol Becker says on the subject
of "Bonding" I may disagree slightly about public utilities. Especially, the
part about the City government being involved in "where we are investing in a
business and expecting a payback or a healthy cash flow". The "Meet
Minneapolis", Ryan's Target fiasco, Brookfield, and some others quickly come to
mind in my agreement with Carol. No, that would usually NOT be a good idea.
As far as a possible utility Coop that would guarantee Minneapolis residents
less expensive energy, and continual energy, that might be another matter. I
believe that was the purpose of REA's when they were created. It is also the
reason there is a Minneapolis Water Works.
Energy Coops tend to be successful uses of "bonding", whereas most other
"investments" that the City would dabble in simply are not. They certainly are
a better public use of bonding than (and with a better return than) say
investing in Stadiums, and Target Centers.
After all folks you can go out and play a little touch football, or watch the
kids play a little hockey or basketball at a park, but you cannot easily
manufacture your own heat and lights on a 20 below night.
My suggestion was first of all to have some building guide lines ensuring
viable buildings were built for the future with new construction guidelines. My
suggestion was also to use the Cities buying power to provide cost savings to
residents for new existing technology that would enable more people to take
advantage of it.Especially poor people and the economically vulnerable.
The City would not "risk" its funds, simply guarantee the purchase of X number
of units. Tack on a 5% administrative charge, or not as a public service, and
pass the savings along to residents. Heck, the City could even arrange to
recieve large grants to make it even more affordable ifMinneapolis had a real
"Grants and Special Projects" division. (In this time of dwindling financialil
resources where can we find ourselves another Ken Brunsvold).
There are many ways the City could actually be involved in City services if we
had wise leadership. Remember folks, the City does provide good clean water at
a reasonable rate. Can you imagine what that would cost if we bought it from
private suppliers? Take a look at the cost of bottled water or from Glenwood
Inglewood or a Culligan. We don't do that because we want such a necessary
thing for our quality of life to be "guaranteed". Well folks, energy in
Minnesota is a very necessary thing. If you do not believe so then please talk
to a few of the homeless people who were forced to sleep outside last night by
our failure to provide adequate shelter for all people. Or take a couple of
blankets and sleep outside for the next couple of days.
So Carol Becker (and others), what would you say a proper use of OUR"Bonding"
power should be, if not to provide essential services to OUR Minneapolis
residents?
Jim Graham
The City that scorns excellence in community infrastructure as a humble
activity and tolerates shoddiness in political philosophy because it is an
exalted activity will have neither good sewers nor good public policy: its
political policies will hold more crap than its pipes. - Gem
Having just reviewed the capital section of the City of Minneapolis Budget, oh
my god I truly am a geek! The City's debt capacity is determined by State
Statute and limited by policy-maker's willingness to tax and raise fee's to
ensure adequate debt service coverage ratio's. Debt service is equal to a
margin of 3 1/3% of assest market value after adjustments, I assume these
adjustments are commensurate with tax increment finance districts and other
development related activities. For fiscal year 2008 the net debt bonding
capacity for the City of Minneapolis was $1.25 billion, leaving $940 million
available. That said I had been arguing with the Charter Commission over the
fact that the City Charter does not allow for the City to bond on behalf of a
public utility. I argued that we already owned a water works which we do own
and will be bonding for as one of our five enterprise funds. The last time I
played monopoly I could buy Water Works which was a Utility. Brian Melendez,
the leader of our DFL party and former commissioner to the Charter Commission
informed me that the Water Works were grandfathered in and were built before
the City Charter prohibited this activity. Having read the City Charter, is it
possible for me to be a bigger geek! I was trying to get a river run hydro
electric plant authorized at the time, but I estimated the cost to be in excess
of the available City Debt capacity. I would need the State of Minnesota to
become an active player in carbon-less renewable energy. As for the E-Zone
funds, I think, and someone can correct me as I am not sure exactly how the
E-Zone debt would be issued that we stand as the agent to a private business
who would be pledging to repay these bond and would offer further guarantees
through private banks of repayment holding our tax payers harmless in case of
project failure. I believe that it would not be much different than the
issuance of debt though the Minneapolis Community Development Agency. The
benefit to using the City as the agent is that re-marketing this debt would be
tax free and thus yield lower than taxable market rates making repayment cost
lower for the borrower.
Michael Katch
Downtown Minneapolis
Yes Michael, you really are a Geek, and God, could the City use such a Geek
downtown.Imagine someone at City Hall that actually understood finance!!!It
amazes me that so few understand that bonding capacity of the EZ, and howthe
Citytotally mismanaged that whole program. Mismanaged it probably because there
was not enough "Real" people from the community controlling it, and making good
use of that resource the Feds gave us. Just wasn't "cool" enough I guess for
them. Should have taken a few lessons from NRP.
The Empowerment Zones never were inclusive of actual neighborhood groups and
were really run by Non-Profits for their interests rather than for actual
"Empowerment" of the poor neighborhoods. BTW, we can thank Ken Brunsvold for
even having those Federal designations. The City sure has missedKen in a
leadership capacity for the last several years
Just in case anyone is wondering, that "Geek" is meant as a compliment to
Michael.The first timeI read that entire budget cover to cover I also felt for
a while like a geek. A seedy bar, a couple or three of double tequilas gargled,
and a dare you to a couple of rough looking guys and my macho suddenly
reappeared un-blemished by the experience. Those ta kill ya's also gave
perspective to the whole budget thing. I decided we really needed a few more
Geeks to read the things. I also miss Vicki Heller poking the Council on these
issues on the "Minneapolis Issues List".
Michael you are correct about the Charter and Water Works. I believe that is
why we have the capacity to amend the City Charter. Of course we should first
amend it to have Council Members serving two years so as to have "Responsible
City Government for a Change". Without that you would have Council Members with
conflicts of interest promoting their own energy utilities.
I am sure a good part of the present utilities exclusion was from the
expectation of poor management by the Minneapolis Council Members, as well as
successful lobbying from the existing utilities fearing for their government
sanctioned monopolies. Of course we have come a long way from the old
Minnegasco and NSP. Energy is simply too important to leave to just the
vagaries of "private" enterprise. After all the present monopolies on utilities
hardly allow free market to reign anyway.
Every park in Minneapolis should have at least one wind turbine. Every
industrial area should have several. That huge smoke stack at the Cedar and
Lake transfer station should have rebar put in it and pumped full of concrete
and a large wind turbine mounted on it. (I stole that idea from Bob Albee).
We must use the collective thinking power of our people to creatively address
the real problems of our City and its future. Energy will be the real problem
and opportunity of the future. Those Cities who successfully address that
problem early will prosper, those who do not will become the Detroit's and
Gary's of the future. We simply can NOT trust such things to a group that
thinks half million dollar fountains are a way of improving the quality of life
of Minneapolis, while the City faces economic ruin. They will "fiddle" with
their water fountain fluff while Rome ----ahhhh, I mean Minneapolis falls down
around them.
Jim Graham
The City that scorns excellence in community infrastructure as a humble
activity and tolerates shoddiness in political philosophy because it is an
exalted activity will have neither good sewers nor good public policy: its
political policies will hold more crap than its pipes. - Gem
Jim Graham asked:
>So Carol Becker (and others), what would you say a proper use of OUR
"Bonding" power should be, if not to provide essential services to OUR
Minneapolis residents?
At the risk of sounding like a Republican, I would say that the proper use of
bonding is to provide essential services to our Minneapolis residents, services
that cannot for some reason be provided efficiently by the private sector. A
small but important difference. Just because government can do something
doesn’t mean that it should. Government could provide everything for us
(communism) but we know that this isn’t a particularly efficient and effective
way of providing services. I know Jim that you believe that the solution is in
electing good people but I also believe that certain ways of organizing
services result in certain outcomes no matter how good the people.
The clinker in Jim’s discussion is the “guarantee Minneapolis residents less
expensive energy.” If public involvement could truly guarantee this, I would
agree with you. But that hasn’t been the history. Municipal-owned power
utilities are less than 15% of the overall electrical market and they are
declining not increasing. Publicly-owned utilities are being sold exactly
because they are more, not less expensive than the private market because
government has more concerns than just providing a profit. Maybe someone can
explain how public involvement would guarantee less expensive energy because I
am not understanding how government will be able to better do things than the
private sector can.
As to water, in economics, there is this thing called a “natural monopoly.” A
natural monopoly is where one firm can produce an output at a lower cost than
two or more firms can. Simply stated, two companies are more expensive than
one. This is why the city runs the water system. If you had a competitive
market for water, say five or six companies all laying pipe and building water
plants and laying pipe to every house, it would be much more expensive than
having one entity. Two water plants would also be more expensive than one
because there isn't differentiation in water treatment. (by and large) So there
is no competitive market, a good reason for government to be involved.
Electricity is different. Although there is a natural monopoly in the
distribution system, there most definitely isn’t in the generation. I think
there are seven thousand different power producers in the country. Which is
also why I don’t understand why public electrical power makes sense. !
Maybe someone can explain this to me?
Carol Becker
Longfellow
Let me interject a note of caution about the concept of using the $130 million in EZ bonding authority allocated to Minneapolis, regardless of the purpose. The program is extremely hard to use, given the limits on the use of the proceeds from the bonds. If it was easy, some of the city's allocation would have been used. Although my checks with HUD last winter found that a majority of cities selected at the same time as Minneapolis have found a way to use some of their allocation, most used only a small portion of it. There are very tightly circumscribed limits on how the proceeds may be used, and businesses here found them too difficult to meet, according to CPED staff. That includes Kandiyohi Development Partners, which explored use of the bonds at first, but later turned to other financing for its proposed biomass power plant. If it were easy to use these bonds, they would have been used. For an example of the thresholds required, see page 6 at http://beta.asoundstrategy.com/sitemaster/userUploads/site26/EZ%20Bond1.pdf I'm back on the forum now after an absence of several months, caused by an unsolicited change in e-mail addresses. The old one still works for incoming e-mails, but my e-mail program put the new one on my outgoing e-mail and e-democracy's apparatus didn't recognize me. Thanks to Alice Murphy of the support team for steering me back after multiple failed attempts. Steve Brandt Reporter Star Tribune 612-673-4438 <email obscured><mailto:<email obscured>>