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March 31, 2013

$778,000 more needed for plant consultants

Reimbursement will be discussed in negotiations.

LOGANSPORT — Logansport City Council will vote Monday whether to appropriate an additional $778,000 to the team of consultants assisting with the Logansport Municipal Utilities power plant project to fund their involvement through negotiations with the proposed plant’s developer.

Florida-based Pyrolyzer LLC has proposed to build the plant, which would be powered by refuse-derived fuel, without financial contribution from the city for amounts that have ranged from $400 million to $566 million.

Its proposal states the plant would generate electricity at an initial rate of no more than 5.5 cents per kilowatt-hour. LMU and city officials say the motivation behind building a new plant comes from the impending multi-million-dollar upgrades that would be necessary in order to continue with its current electricity distribution and future fees that will be imposed on coal-powered plants by the Environmental Protection Agency.

City council voted in favor of negotiating with Pyrolyzer March 4. Logansport Mayor Ted Franklin said negotiations began earlier this month and expects them to go through October. Franklin said he and the consultants and attorneys working for the city are negotiating with Pyrolyzer to determine the terms of three main agreements, including a public-private partnership and a power purchase agreement, which will solidify the initial electricity rate of 5.5 cents per kilowatt-hour Pyrolyzer has proposed.

The parties will also be working on a build-operate-transfer agreement, which will determine the amount of time Pyrolyzer will own the plant before turning it over to the city. According to city officials and consultants working on the project, this duration is expected to be around 20 to 25 years. The negotiations will also address the permitting required by the Environmental Protection Agency and Indiana Department of Environmental Management.

John Molitor, an attorney working as special counsel for the city, recently sent a memorandum to city council outlining the city’s options to obtain reimbursement for the costs pertaining to the power plant project provided by taxpayers so far. In the memorandum, Molitor writes Indiana Code allows the city to seek full reimbursement from Pyrolyzer for all costs associated with the project, including expenses for the preparation of the request for proposals issued in November and the costs of the consultants’ services, attorneys’ fees and other legal expenses accrued so far and into the remainder of the current negotiation phase.

Expenses associated with any zoning reviews and building inspections required for the installation of new equipment are mentioned in the memorandum as well.

This appropriation, which Franklin said will be the final contribution from the city, puts the consultants’ price tag at more than $1.5 million.

“It makes my heart skip a beat to think about it, but it’s a little bit comforting knowing we have the memorandum that guarantees reimbursement,” Franklin said.

Franklin said he is also reassured because Pyrolyzer would be paying property taxes on the plant before transferring it to the city for the period of time dictated in the build-operate-transfer agreement.

“It’s $566 million worth of investment and they’ll be paying property taxes on it,” Franklin said. “At a 1 percent property tax cap, it puts millions of dollars in our pocket every year.”

Councilman Bob Bishop said he was in favor of appropriating the money.

“We have some controversy on this,” Bishop said. “We have a few people who are really trying to stop this process. That could send mixed messages to the people that are making these investments. I’ve thought about doing this more in increments, but with what’s going on, I think I would like to send a clear message that I’m 100 percent in support of this project.”

Councilman Chuck LaDow voted against allowing the city to enter into negotiations with Pyrolyzer. He said he would not vote in favor of appropriating the additional $778,000 to the consultants, either.

“There’s no way... I’m going to vote for an additional $778,000,” he said, adding he is not satisfied with the amount of detail in the consultant’s invoices for their previous work.

“All this for something they say is going to work but they’ve never done before,” Ladow added, saying the investment and risk to taxpayers’ dollars is incredible. “In the same breath, I realize something has to be done, but Jiminy Christmas, I must be in the wrong business... Before long we’re going to be broke and still not have a workable solution.”

The vote comes just weeks after Julie Kitchell, a Logansport citizen, filed a lawsuit against the city for what she feels to be an abuse of power regarding the project. Attorneys working for the city have filed a request to have the case dismissed in Cass County Superior Court II, where the suit was filed.

Judge Rick Maughmer of Superior Court II stated in a court order filed March 19 that he will rule on the motion to dismiss sometime after April 9.

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