Pharos-Tribune

February 3, 2013

Assistance needed as plant talks go forward

Mayor estimates another $400,000, says reimbursement could be part of future negotiations

by Mitchell Kirk
Pharos-Tribune

LOGANSPORT — Logansport city officials are close to formalizing an agreement with a company to build a power plant fired by refuse-derived fuel, but the question now is how much more the city will have to spend on attorneys.

Following a consultant team’s presentation Tuesday at the Utilities Service Board meeting, where they recommended energy company Pyrolyzer to develop the city’s new refuse-derived fueled power plant, the board voted unanimously to endorse the recommendation and recommend that the city enter into a memorandum of understanding with the company.

The memorandum, a sign of good faith between the parties, would set the stage for future negotiating between the city, LMU and Pyrolyzer, on how much more work there is to be done and what kind of work it will entail.

One of the concerns brought up at Tuesday’s board meeting was whether the consultants’ services would be required as negotiations go forward, should the City Council vote to approve Pyrolyzer.

Bernie Paul, one of the consultants attending the board meeting, said that was something that would have to be worked out with the city and LMU.

“I think that’s anticipated,” Paul told the board at the meeting. “We’ve been with you through the initial part of the process, we’ll be there to help with the negotiations on the [power purchase agreement] and the [build operate transfer agreement] and other technical aspects of the project.”

Mayor Ted Franklin said the consultants’ contract would take the city and LMU through the signing of the memorandum of understanding and the public-private partnership agreement with Pyrolyzer, should its proposal be accepted. He said further counsel would be necessary as well.

“For the next phase, it’s going to require a lot of attorneys,” Franklin said, adding their services would be needed when actual negotiations begin with Pyrolyzer, should its proposal be approved.

As the city has already spent $509,000 on consulting fees, with LMU contributing $250,000, the concern now is how much longer outside assistance will be needed and what the price tag will be.

“If we pass the buck to the City Council, City Council then is the one that’s going to have to come up with the money, because we’ve already said we’re out of money,” said Utility Service Board member Todd Miller at the meeting Tuesday.

The $250,000 LMU contributed to investigating energy alternatives was drawn from the plant’s depreciation and replacement fund, which is made up of money set aside for emergencies and capital expenditures, LMU Superintendent Paul Hartman said.

While LMU’s search for energy alternatives was “not necessarily an emergency,” Hartman added, “it’s definitely something you can spend capital expenditures for. If you know you’re going to have to close your facility, you need to know your decision is the correct decision.”

Franklin estimated $400,000 would be necessary for the next phase involving the attorneys, adding that funds would likely be used from the city’s economic development income tax fund.

“$30 million a year is what sales are in electricity,” Franklin said. “If you take $30 million and divide it by 52, $576,000 is what customers pay every week for electricity. If we do nothing to address this problem, we face a 95 percent increase, that’s over $1 million every week. Yes, this is expensive, but if we do nothing, what we’ve spent so far is what we’ll be spending every week in the future.”

The rate increase Franklin referred to comes from a study released by professional services firm Crowe Horwath in November, which analyzed four proposals on how to keep LMU’s current plant running, each concluding with a minimum 95 percent increase in base rates.

Another reassurance Franklin said he has regarding the continued use of funds is the possibility that Pyrolyzer would take on the consultants’ fees as a part of negotiations between it and the city, should its proposal be approved.

“Everything that gets us up to construction is what we’ve been trying to get reimbursed if we move forward and actually do the plant,” Franklin said. “Our intent is to roll all the costs involved in this project — LMU’s [$250,000] contribution, the city’s $500,000, the additional $400,000, everything is negotiable.”

Should City Council echo the Utility Service Board’s endorsement, the negotiations Franklin spoke of are expected to begin shortly after the March 4 council meeting, where the council is scheduled to vote on adopting an ordinance calling for the city to enter into a memorandum of understanding with Pyrolyzer.

That’s the earliest the council would be able to vote, as the timeline is ultimately at its discretion. The first reading of the draft ordinance regarding the memorandum is scheduled for the Feb. 14 council meeting, following the LMU board’s presentation of its decision regarding the consultants’ recommendation at the Feb. 4 council meeting.

Mitchell Kirk is a staff reporter at the Pharos-Tribune. He can be reached at 574-732-5130 or mitchell.kirk@pharostribune.com.

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