Colorado Springs Utilities got the go-ahead today to issue up to $325 million in debt to buy out its partner in the Front Range Power Plant, a gas-fired plant it owns with Mesquite Colorado Holdco.
More than a third of the debt, $138 million, will be issued in Build America Bonds, a tool created as part of the Obama administration's stimulus bill to help cities and states spark job creation through cheaper than normal financing. The issuer, in this case Springs Utilities, gets a 35 percent subsidy if the bonds are sold by year's end when the program concludes.
But when the Independent asked Utilities Energy Officer Bruce McCormick how many jobs the financing would create here, he said, "My understanding is none."
Utilities likely isn't alone in using Build America Bonds simply to finance a project that won't create jobs, however.
Still, that wasn't even mentioned during the lengthy discussion at a special meeting called by the City Council today expressly to approve the debt.
Council members, who double as the Utilities Board, weren't happy that the backup materials for the deal wasn't provided to the public prior to the meeting.
It prompted Councilor Tom Gallagher to call for postponing the matter, but he was outnumbered.
"The public hasn't been engaged," he said. "I've had over a dozen phone calls from people saying where is this information? I think more public notice should be given."
Utilities CEO Jerry Forte said the enterprise had put out information on the proposal through newspapers and other media over the past four months.
Utilities chief planning and finance officer Bill Cherrier said Utilities finished up some of the negotiations only a week ago. The matter is urgent, he said, because the city is facing a deadline for issuing the Build America Bonds or risk paying higher interest rates, which could cost the city $150 million in savings over the 30-year life of the bonds. The deal also requires approval by the Federal Energy Regulatory Agency, among others, he said.
During his presentation, he said the city plans to issue $52 million in tax exempt bonds, $83 million in private activity bonds, $52 million in taxable bonds and $138 million in Build America Bonds. The deal would involve setting up a for-profit entity to acquire the plant and later transfer ownership to Springs Utilities, he said.
Front Range Power became operational in 2003. It provides about 40 percent of the city's 1,100 megawatt capacity, energy manager Drew Rankin said.
Although Councilor Sean Paige and Gallagher suggested the partnership to buy Front Range had been a mistake and cost ratepayers more than it should have, Forte said, "There's nothing wrong with Front Range Power. It's been a well-performing plant for us."
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