MC Council shoots down $327K solar energy project for public library

MASON CITY – The Mason City council has indicated it will not go through with a $327,000 solar energy project at the Mason City library.

The Mason City Library Board approved the project previously. Solar panels would have been installed on the flat roofs of the library. The solar energy plant would have potentially saved $30,000 or more in energy costs annually for the city. The library board selected a low bidder to complete the solar plant installation, Perry Novak Electric, Inc. of Decorah, Iowa at a cost of $327,000. The library received a grant from Kinney-Lindstrom of $25,000 and if the project was complete and operational by October 31, 2014, the library would have been eligible for an Alliant Energy Rebate of $25,000.

At a city council work session held Tuesday, July 29, the following discussion was undertaken by the council regarding the feasibility of moving ahead with the library’s solar project, with the council ultimately deciding to scrap the idea.

2014 Mason City Public Library Solar Energy Plant Construction Project #1:

Tornquist stated a few weeks ago he had asked questions related to technical aspects of the project and Kuhn had a lot of very good questions regarding the financials and after review of this packet while he still had some questions on the technical side they were taking a back seat because he had significant concerns regarding the financials and unless the financial hurdles could be cleared everything technical was a moot point. He explained why the Council was looking at this emphasizing the Library Director and Board had done a very good job of trying to get ahead of the budget issues. He also stated if he was a member of the Library Board he would be entirely in favor of the project, but the problem he had was the Council had to look at the bottom line for the taxpayers, noting this project would cost reduce Library operations by approximately $22,000 a year in utility cost which was good for the Library operation but for the community to put the Library in that spot, the Council had to issue $361,000 in bonds and those were 10 year bonds. He advised he had talked to Finance Director Jacobson who had informed him that the interest on the bonds to be issued was approximately $35,000 so in round numbers, $400,000 for a 10 year debt to be able to put the Library in a position to cost reduce $22,000 a year and that was $40,000 spent annually as a community to save $22,000. He further stated it was a project, that according to the information in the packet had a 16½ year payback, but when adding the debt of $35,000 a year and saving $22,000 it basically put the payback at 18 years and stressed he really struggled with that. He further stated he did not think he had ever supported a Capital project that had more than a 10 year payback and noted even economic development opportunities and tax incentives generally had a 10 year payback for the taxpayers. He also mentioned a baby born this summer would graduate from high school before this project was net even for the taxpayers and at that point in time it had 7 years life cycle remaining before the solar panels were worn out and had to be removed and then they were back to where they were right now which was status quo exactly or another solar project for replacement. He concluded his comments by stating he was in favor of talking about projects that could cost reduce operations, but thought rather than solving a problem this was shifting it and for him to be comfortable it, it would have to have a 10 year payback or better.

Kuhn thanked everyone for the information, advising he wished the Council had had it sooner and referenced the GO Bonds and the Library Electricity Usage Reduction Project, explaining based on his notes, the Council had been told it would be an 8 to 9 year payback, but the analysis done by Energy Consultants Group dated May 22nd stated the cash payback on the solar alone was 16.1 years. He expressed concern over what the community had originally been told was the return on investment versus what it actually was (16.1 years), stressing the Council would never have known that unless they had requested the information and that was bothersome to him. He also referred to the other projects that were supposed to bring this to net zero in 7, 8 or 9 years which were not in the Capital Improvements budget, not part of the cost analysis and not budgeted by the City and he wasn’t sure when those projects would be scheduled and paid for with Library Director Markwalter stating the consultant had suggested doing one project at a time, but completing them all within a year. She also stated staff had written grants with the biggest being strategically placed windows.

Kuhn questioned the other pieces (modified geo thermal and LED) and whether the Library was planning on completing it this fiscal year with Markwalter stating “if we had funding for it, yes”.

Tornquist stated he did not know if the other 3 projects were germane to the Solar Panel Project and saw them all as stand alone projects. He referred to the window project stating the savings quoted wasn’t right and he did not know who was telling her that the HVAC wouldn’t be running for 4 or 5 months but that was a bunch of baloney explaining hot air rises, there were high ceilings and it was a brick façade and there was a high thermal transfer across that wall, even at night when the sun went down, so it wouldn’t be minimized much at all and they would still have to run all the motors on all the equipment to circulate air or there would be stratification and while there would be some savings it wouldn’t be a $18,000 payback on a $29,000 investment. He stressed this underscored one of the concerns Kuhn and he had shared with Trout in that as well intended as the Library Board and staff were there was non-technical people making technical decisions and there had to be a check point with the Engineering Department to make sure they were making the right technical decisions and even though there was a grant for windows he would urge that be looked at closely.

Lee stated his biggest concern was the 16 year payback, advising he had talked to a friend who was in heating and cooling (not solar) who was surprised the City was considering a 16 year payback because in his world 5 to 7 years was what everyone was doing and over 7 was a “no go”. He also stated that individual dealt with purely performance based contracts and asked if that was looked at with Markwalter stating they had looked at it as a couple of pieces and yes the payback for just solar was long, but when looking at windows and other things that brought the total price down.

Lee reiterated 16 years was a long time with Markwalter concurring if only the solar was done.

Administrator Trout reviewed the information he had received regarding a purchase power agreement (3rd party ownership) and who might be interested in that.

Solberg thanked everyone for their technical knowledge, but mentioned her husband had severe allergies and she would never consider putting in those types of windows and also wasn’t excited about a 16 year payback.

Marinos stated she really admired the Library Board for taking the initiative and moving forward with this, but was very uncomfortable with a 16 year payback.

Tornquist asked if the bonds could be used for other Library projects or only for a solar project with Trout stating he would have to check into that.

Further Council discussion followed regarding bonding and PPA (Purchase Power Agreement).

Tornquist emphasized in the end he was looking at a payback to the taxpayer that was 10 years or less and minimized exposure and he really wasn’t excited about 18 years with a debt service payback on a project that was basically kicking the can to the next generation.

Hickey referred to the 10 year warranty and asked how the City would pay for repairs after 10 years with Trout stating the Council would have to set aside money.

Kuhn stated he has been supportive of this since January and listed the reasons why, but stressed at that time the Council was told the payback was 7½ to 9 years and now it was 16.1 years and when adding on the debt service it was close to a $400,000 financial obligation from the City or a 18 to 20 year return on a system that had a life cycle of 25 years and he had a tough time finding out that information only a few hours prior to the July Council Meeting.

Russell Novak with Perry Novak addressed some of the questions including the price per watt, micro inverter and panel warranties, inflation and provided a brief overview of PPA, advising the PPA would not get the payback under 10 years unless there was a larger buyout at the end of the PPA.

Tornquist referred to the solar panel warranty from a company called ET stating he had concerns with that company.

A member of the audience advised the Council they were no longer looking at ET with Tornquist stating he had read 100 pages of ET material this weekend and while he did have issues with ET because they were built in China he could not now talk intelligently about warranty because he did not have information on the other product.

Marinos reiterated if there was some way this could be reworked so it was less than a 16 year payback she would entertain looking at it again and commended the Board for taking a chance on this with Lee stating if they could get it down to 10 years he would be interested.

Tornquist stated it appeared for a solar project to make sense it the City would have to go bigger (not just one building) and get into a position of putting power on the grid for credits.

Mayor Bookmeyer stated it appeared there was a general consensus to not move forward with the project because of payback concerns.