MG&E projects that require $65M are . . .

MG&E answers what projects they need $65M for.  Prepare for disappointment in their answer.  Council votes tonight.

BACKGROUND

Last week I wrote an article about the $65M that MG&E wants the City of Madison to borrow through industrial revenue bonds.  The resolution before the council tonight kicks off a process where the public is notified and has 30 days to decide if they want a referendum on borrowing the money.  The resolution requires the city to find that the borrowing will have a “public benefit” and that is is in the “best interests” of the city.

I’m not sure how the council can find that without knowing what the projects are.

QUESTION NUMBER ONE

From: Brenda Konkel
Sent: Sunday, February 02, 2020 4:58 PM
To: Schultz, Steve B
Subject: Industrial Revenue Bonds

It appears the Madison City Council has a resolution to approve $65M in revenue bonds for MG&E projects, could you tell me what those projects are?

Thanks!
Brenda Konkel
forwardlookout.com

ANSWER

I found the answer a bit hard to follow, but here it is.

Hi, Brenda.

Thank you for the question. It may be helpful to think about this in terms of two parts – a refinancing of our existing IRBs and additional funding authority.

MGE is asking the City of Madison to refinance $19.3 million of our current Industrial Development Revenue Bonds (IRBs). This request is a refinancing of existing debt (through previously issued IRBs) at a lower rate – the savings then would be passed onto MGE customers.

Electric system projects qualify for financing through an IRB. As you may know, the City has issued revenue bonds to finance MGE projects benefitting the area for a number of years.

The primary purpose of the resolution before the City Council is to refinance MGE’s current IRB and save money for our customers by refinancing at a lower interest rate.

MGE also is asking the City Council for funding authority for potential projects that will be identified if/when we elect to act on that funding authority (if it’s approved). The resolution also includes the potential for IRBs for financing up to $45,000,000 in electric system projects to serve and benefit customers in the City of Madison.

If, as part of our internal review, we identify specific qualifying projects for financing, we would seek the issuance of IRBs for additional financing (up to $45,000,000 if necessary). No specific projects have been identified; however, it gives the City and MGE an option to finance electric system projects in the area at a lower rate, thereby benefitting customers who are served by our electric system infrastructure.

MGE would identify those projects if we were to act upon the option of additional financing through IRBs. If we can’t identify a project(s) for the $45,000,000 funding authority, we will not seek further approval from the City for financing.

IRBs have certain requirements for the types of projects that qualify. We are exploring the possibility of whether renewable generation projects would qualify for an IRB. We know that electric system projects do qualify for financing through an IRB. If MGE identifies a project for the $45,000,000 funding authority, additional City approval will be needed to move forward.

Thanks,

Steve Schultz
Corporate Communications Manager
Madison Gas and Electric Co.

WHAT DOES THIS MEAN?

I seems they are trying to get approval now so they don’t have to go to referendum when and if they have projects later.  I think they should only be getting approval for the refinancing now and if they have projects later they should go through the whole process.  Giving the 30 day notice for referendum so the public knows what the projects are, and can determine if they think referendum is appropriate at the time the money is needed.

Many have speculated that the projects is likely to be for the new campus they are building out by the old Shopko/new storage place and Pick-n-Save.  They bought 5 acres out there and the Oscar Mayer plan says that:

• Madison Gas & Electric purchased the 30 acre former wastewater treatment site between Shopko Drive and Pankratz Street.  They are relocating their operational center and offices to this site.

That might be a good use of the money if they are doing what the neighbors there want.  It might be a bad use of money if they are trying to bend neighborhood plans to fit their vision for the area.

Wouldn’t it suck if the city agreed to borrow the $45M for them and then we didn’t get what we wanted?  If that is the project they are borrowing the money for, who knows?  I guess we don’t really know?  So how do we, the public, know if we want a referendum or not?

STILL CONTAINS CONFLICT IN FISCAL NOTE

The fiscal note this morning still says that they are borrowing $30M for new projects:

IRBs were issued by the City for MGE in 1982, 1992, and 2002.  The proposed 2020 IRB issuance includes $19.3 million to refund the 2002 IRBs and up to $30 million for various capital improvements.  Consistent with state law, MGE has informed the city that no jobs have been eliminated as a result of any of the IRBs issued by the City on behalf of MGE.

But the 2nd resolution (2nd full paragraph from the bottom of page 2) still says they are borrowing $45M for new projects: