So, the Madison City Council tried to get the answers out of Larry, Darryl and Darryl to no avail. The best answer is, they will tell us later when they figure it out. Here’s the details! Or lack thereof.
I first wrote about this on January 29th asking what projects they planned to finance with the $45M of new bonds. I also wrote about the answer I received from MG&E.
COUNCIL QUESTIONS AND DISCUSSION
Video starts at 1:34:55
Introduction
NOTE: They finally updated the fiscal note since my first article asking what they were spending the money on and the second article on the MG&E response.
Mayor Satya-Rhodes Conway reads part of the resolution title and reads the names of the three gentlemen who are registered to answer questions.
The three gentlemen are Ken Farsetto (sp?), Greg Murray and Matthew Spencer. I’d look up and verify who they have registered but . . .
Alder Barbara Harrington-McKinney makes the motion, Mike Verveer seconds.
Questions of MG&E Lobbyists
Alder Sally Rohrer says she has a question for the people from MG&E.
Matthew Spencer introduces himself, he’s the Government Affairs Manager and has Ken Farsetto and Greg Murray who are subject matter experts on this and they would like to answer the questions as a team.
Mayor says “fine”. (Note – Spencer is on the right – not sure which one is which on the other two, googling failed me.)
Rohrer asks them to clarify for herself and the public the Industrial Development Revenue Bonds. The 19M and the 45M, can you offer what the distinction is between those two numbers and clarify that.
The other guy in the blue shirt (presumably Greg), no tie with jacket says that the general distinction between the two is to think about the $19.3M as refinancing and existing set of bonds. That is a set of bonds that was previously taken out by the city, quite a long time ago and by refinancing ultimately we are looking to save customers money by getting a lower interest rate. The $45M is seeking authority to explore potential projects. It is important to understand that this is not the end of the process, its the beginning of the process so there will be a second step to this in March when the final resolution comes before the city council. At this point they are seeking authority to start the process for the $19.3 in refinancing and $45M in for potential new projects that are not confirmed at this time.
Rohrer asks if there are discussions about what those projects will be at this point, or is that something we will hear about later?
The other guy in the blue shirt with a tie (presumably Ken), no jacket says that they will be, to add to Greg’s note, the $45M would have to come back and get all the regulatory approvals, internal approvals as well as come back to the city for approval. Right now it kind of starts the clock so they can go back and anything they are spending on qualifying projects, which they are reviewing at this point in time, they can use in the financing.
Rohrer asks about the clause that there has to be a direct benefit to residents, how do you guys look at that and qualify that when you are thinking about projects?
The other guy in the blue shirt (presumably Greg) says for the $45M they are thinking about the benefit to the public, especially on the $45M is that we do have to come back and specifically identify a project that we would use that money for. And there would have to be a public hearing on it and lots of information to the city council and to the public, and not just to this body but several other bodies would need to be required to provide public approval and public hearings. So in terms of getting to the answer for that “up to” $45M, and we are not seeking authority for that full $45M today, but “up to”, whatever project once we complete our due diligence on that, we would have to come to this body and explain what it is and what that specific benefit to the public is before this body took action to issue those new money bonds for the up to $45M project.
Rorher says “thank you, that was really helpful”
Alder Rebecca Kemble asks how they came up with the figure of $45M?
Ken in the blue shirt says that he looked at their 2020 board approved Cap Ex budget and typically electric distribution assets are included in that, so he has a list of those, which they also have some renewable projects that they are looking at. All of these projects would again have to be reviewed and see if they qualify under federal tax law.
Kemble asks him to list those out for them.
Ken in the blue shirt says its just electric, there are many, many projects.
Kemble asks if that budget is available for public inspection? Can they see that somewhere?
Ken in the blue shirts says “That, I don’t know.”
Kemble says they are giving them authority to borrow $45M and we’re just trying to get a general idea of what you want to use it for.
Greg in the blue shirt says that if they were to come forward with the projects for the new money portion they would be required to provide that list. At this point in time they are not seeking final approval for that and they are still researching that these potential projects would qualify under various federal laws and requirements to meet the various bonding requirements that they need to meet to make sure they are qualified projects, so the action that the council would take tonight is not to issue final approval for that, but at the point of final approval we would have to come with a more detailed list to say, here is what we would be spending that money on, specifically.
Kemble says she understands that, but it seems like you know what you are talking about, but we don’t know what you are talking about and we have people, our residents, asking us, what do they need this money for. So can you just give us a general idea of what you want to build.
Greg in the other blue shirt says that the types of projects Ken was referring to are what we would call electric distribution infrastructure projects and we are potentially exploring whether or not renewable energy projects would also qualify under federal law. When we say “infrastructure projects” that’s poles and wires and . . . Kemble says substations . . . Ken says converters, a numerous amount of small little projects that could be added up to $45M, but no all of them may qualify so it goes through a due diligence process. It starts the clock where they can look in the future when they finance rehab, an amount that they can bring to the city for approval, at that point in time they would be detailed out as far as what the projects are.
Alder Sheri Carter says you keep saying $45M, but its really up to $45M, correct? I could be less? They confirm.
Carter says tonight we are looking at the $19M? Is that what you are looking at tonight and then the authorization to go to up to $45M. They say its an additional $45M.
Mayor Satya Rhodes-Conway says its an additional $45 on top.
Carter asks if this goes through the PFC also, or no. They say yes, they need PFC regulatory approval, they would have to go back to the city and the county, there’s many many approval processes and steps they would have to go, this is really just starting the clock for using whatever we are spending now, forward.
Alder Patrick Heck asks about the projects they are thinking about, would those potentially include facilities that generate electricity?
Ken in the blue shirt says that they are looking at the possibility, there are strict regulation tax laws on what our qualifying expenditure have to be within a two county rule. But like our local solar we’re planning is going to be reviewed, and potentially, but he can’t say for certain.
Heck asks if it could potentially include facilities that generate electricity from non-renewable sources, potentially.
Greg in the blue shirt says they don’t have any . . . crosstalk and Greg jumps back in and says they are not exploring any projects of that nature to use any type of that potential $45M in financing for any projects of that nature. I think in response to Alder Kemble, we are really looking at two classes for potential use of that money, and that is what he would call electric distribution infrastructure and potential for renewable projects, but in terms of the projects they are investigating right now non-renewable generating projects are not something they are exploring at this time and he thinks its fair to say they don’t have any intent to do that.
Heck says that is helpful. He asks about the public benefit or public good, is the public the people of the City of Madison, MG&E customers, a wider range of people? How do you define that public in that circumstance.
Greg in the blue shirt says that is a very good question. With respect to this particular bond resolution we are focusing on City of Madison customers primarily because City of Madison is the conduit we are using, would potentially use for this section of the financing.
Alder Marsha Rummel asks if the initial $19M, the city is not on the hook for this, we’re just sort of the agency via state law to let you do this. Can you explain what that is about so we all kind of get the idea.
Ken in the blue shirt says that under tax law, tax exempt bonds like this go through a conduit, be it city or county or some sort of municipality. So, yes, there is no obligation to the city, it the obligation of MG&E, its simply a conduit.
Rummel asks if the $19M is a separate process from the $45, just to make sure I hear your question. Ken says the $19.3M have already been issued, its has been outstanding for a while. Rummel says since 2002 its being recycled. He says its similar to refinancing your home, as interest rates go down, you go in and refinance to get lower interest rate, that’s simply what we do. We’re looking at the $19.3 is really what is going to be approved in the final resolution. It’s simply all that savings will be passed on to the customer’s lower rates.
Rummel asks what triggers a referendum for the use of this money.
Ken in the blue shirt says its part of the process. Rummel asks if they will do a referendum no matter what happens? He says yes, its part of the process . . . but . ..
The other dude in the blue shirt is shaking his head and interrupts and the lobbyist dude is glaring at him. Rummel points out the other blue shirt is saying no.
Greg in the blue shirt says that he thinks the question is if a referendum is required, he says there is a state statute that requires a referendum potential be noticed to the public. State Statute requires that as part of the public notice, if the council grants the motion tonight and approves this resolution, part of the state statute as part of this process says that you know this must be put out to the public to see if the public would like to have a referendum on this.
NOTE: How would the public know if it wants to have a referendum is we don’t know what the money is being asked for – that is the whole point they seem to be either willfully missing or Larry, Darryl and Darryl’ing.
Greg in the blue shirt says that if the public does not get the . . . (he stops himself from most likely saying “signatures”), go through that process, then there wouldn’t be a referendum. He says he doesn’t know if he said that clearly. The law says we notice the public that they have the option to ask for a referendum.
Rummel asks if the public in this case is the council, because we can ask for referenda, but a random person, do they ask for a referendum. She says you can look at the city attorney, I would too.
Mayor jumps in and says that she feels like some of the questions you have are probably questions for staff.
Rummel say ok, finally, thank you for coming tonight and she knows you heard from a bunch of us so you showed up and I appreciate that, she says I think what you are hearing is some sort of community concern like, we want high quality projects from our local utility company, I know you know that. So, for her, she will just throw it out there, you know electric distribution infrastructure, one of the things she sees as a project is undergrounding, so could you please find out if that is something you could pay for. (Laughter)
The lobbyist dude in the blue shirt, tie and jacket speaks for the first time and says “We will certainly look into that, yes.” (More or continuing laughter)
Alder Donna Moreland asks why the two issues are together, because they are separate, so why are they in the same item.
Greg says the process that we use to refinance the 19.3M is the same process, to start the process, that could be used for the $45M. That is why they are in a single resolution tonight, because we know we are going to ask, in attempt, if they get the council’s approval, we know we are going to pursue the $19.3M in refinancing in order to potentially get a better interest rate and save money for our customers. Starting the $45M, starting them both at the same time allows us as Ken said to start the clock ticking and give us a window to look into and conduct the due diligence on these other potential projects, that is why they are tied together, because the start of the process is the same. This is step one of a two step process. And if the council approves the introductory resolution tonight, what is likely going to happen in March is we come back to the council and request a final resolution just on the $19.3M. So that will be separate, just the $19.3M in March to complete that process. If and when we are able to complete our due diligence on other new projects to see if some of the projects qualify in the right way, either infrastructure or renewable, they would come back a second time, at some other point in time after March to seek the council’s approval of that project and it is at that point in time that we would then have more specifics about those projects and we’d have a public hearing on that and acquire our other approvals. So the reason we are starting it tonight is so we don’t have to come back perhaps in another month or two and start the same process again, but we can start the clock tonight for both processes. Does that make sense?
NOTE: What he has been very careful not to mention when talking about “starting the clock” is also about going to referendum. Again, I don’t know how the public could decide if it wanted to go to referendum if it doesn’t know anything about what is being asked.
Moreland says “no” to the question. More laughter. She says it seems like even if it were two ordinance they seem like two totally separate things, we can approve the refinancing, but then you are asking for $45M and her thought is if it doesn’t sound like there are any concrete plans for these new projects, so how do you know its $45M vs. $100M vs. $50M vs. $25M? I know its “up to” but how do we get there and why are we merging something that has already been done with something that we really don’t’ have a clear direction as to what we are going to do?
Ken in the blue shirt says the $45M simply just starts the clock.
Moreland says, to say you have to start working on some projects?
Ken says that they look back and forward on the projects, the $45M is looking at what we had planned for 2020, and what has qualified in the past is our electric distribution assets and he looked at all of those projects and it totalled close to $45M plus what they planned or spent so far, so he will put a more detailed list and they will review that list and see if it actually qualify. Counsel has to go through that and make sure that these specific projects do. Then, if we say ok we do have $35M out of the budgeted $40M that he has listed, only $30M qualify, they go through this whole process again with the city, we get approvals, its much more rigorous, they have to go to PFC and get approval, from a regulatory standpoint board approval, they have to go several steps. This is just starting the clock so he can include these capital expenditures going forward, does that make sense.
Moreland asks about the electrical distribution infrastructure and the renewable energy projects, these are projects that they have gotten input from someone, some group that it is priority for the city that you work on this?
Well . . .
Moreland says the renewable she would assume, but
Ken in the blue shirt says tax exempt financing can be a cheaper cost for our rate payers, its another market that MG&E has the option to use that a lot of public utilities don’t have that option, so its prudent to at least have that market available, so that is why he is going through this process. So if they do qualify and they do have tax exempt and get approvals, they can save rate payers or customers money, but giving them lower cost of debt.
Question of Staff
The Mayor says just let me anticipate questions and ask Mr. Schmiedicke or Attorney May to start at the beginning and walk us through so we can take it in order.
City Attorney Michael May says that part of this is to refinance the $19M that has been out there for a number of years and they are doing that. The second part of it is to give them the possibility of coming back and issuing an additional $45M and the reason they want to have it in the same resolution because this counts as a marker and once this resolution is passed, they can go back up to 60 days behind this or up to a year ahead of time after this to find a project that qualifies and come in and seek those further approvals, the public service commission and everybody else. And it is at that time that they would actually ask to issue some of the bonds for the $45M. So what this resolution does is essentially for Internal Revenue Services and under the development bonds in state statute it sets the marker and they can go back 60 days, they can go out a year and it sets the time running if someone wants a referendum to go out an get the signatures and ask for a referendum. So that’s the reason they are combining them here, they want to be able to look at the projects for a year. I assume those projects that they are talking about have been identified not by anyone other than by people at MG&E who study their system and look at what they think they might need over time. He says he would be interested in knowing how they define “distribution”, what the upper level of KW is for distribution system improvement, because we would hope it would all be stuff within the city or if it goes outside the city he’d like to know where it is. Maybe it all has to be within the city. They mentioned the possibility of solar, he doesn’t know if they are looking at wind, whether that is one of them in here, those are a couple of questions that might be worth finding out from them. But that is the basis for why they want to combine the resolution now, to give them both of those things, the ability to refinance and to set the marker of approximately a little over a year period of time to identify any projects in that period that fit within the definition that they could bring forward and ask for you to approve subsequent to this date. That’s what he had in his notes to explain to people but if there are other questions he’d be happy to try to answer them or refer them to Mr. Schmiedicke if its about money.
Moreland asks if it is because this is a good time for cheap money to refinance, to get money at a lower rate.
May says first of all it clearly is, cuz that is why they are refinancing the $19M. They want to get a lower rate and save some money there. And he suspects that the $45 they are looking at now is a very good time to lock that in and get that rate and that’ll cover them and between the next year, rather than take the risk of what might happen during the next 12 months, not that there is anything going on in the country that might affect the markets (more laughter) but he suspects that is part of the rationale. He doens’t know if they talked to Dave about . . .
Dave Schmiedicke, the Finance Director says he thinks that is correct. Just as the city would look at if we may have issued bonds or notes 7 or more years ago and we now see that the interest rate that we issued them at if we refinance is quite a bit less, I imagine MG&E has done that same calculation on the remaining payments of the 2002 IRBs that were issued.
Moreland says that if she could make a suggestion, we could safe hours if you would just say this is a good time to refinance because of lower interest rates, that would do it for me.
Talking off mic I can’t really hear.
Motion Again?
The mayor asks for a motion again – lots of jokes, McKinney Harrington suggests a motion to adjourn – jokes. She re-makes the motion to adopt, even tho it was already done earlier with Verveer seconding.
Discussion/Disclosure/Vote
Christina Albouras discloses that he knows the Government Affairs Director from a previous life, he doesn’t think in any way that this will not make him objective, he justs wants to disclose that. He asks attorney May if he has concerns with that and it seems he doesn’t.
No discussion.
Passes on a voice vote seemingly unanimously.
The mayor says she can guarantee there will be more discussion about this in the future.
REFERENDUM ANYONE?
The notice MG&E will post in the State Journal will say the following according to the resolution (page 6&7):
TAKE FURTHER NOTICE THAT THE ELECTORS OF THE CITY OF MADISON MAY PETITION FOR A REFERENDUM ON THE QUESTION OF ISSUING SAID BONDS. Section 66.1103(10)(d), Wisconsin Statutes, as supplemented and amended, provides:
“(d) The governing body may issue bonds under this section without submitting the proposition to the electors of the municipality for approval unless within 30 days from the date of publication of notice of adoption of the initial resolution for the bonds, a petition conforming to the requirements of section 8.40, signed by not less than 5% of the registered electors of the municipality, or, if there is no registration of electors in the municipality, by 10% of the number of electors of the municipality voting for the office of governor at the last general election as determined under section 115.01(13), is filed with the clerk of the municipality and as provided in section 8.37 requesting a referendum upon the question of the issuance of the bonds. If a petition is filed, the bonds may not be issued until approved by a majority of the electors of the municipality voting on the referendum at a general or special election.”
I have no idea if it should be done or not because I don’t know what they are asking for the money for . . . you?
