I was really hoping someone would ask questions at the finance committee Monday night, but they didn’t. Perhaps they have memos and info the public can’t see?
I went down the rabbit hole . . . feel free to join me.
WHY DOES THIS MATTER?
From what I can tell the city has the authority to issue bonds for the utility. The city is not on the hook for the money, and MG&E will pay any costs for the bonds. So on the one hand, it seems like it doesn’t really matter all that much. On the other hand, it’s nearly $65M and I bet it matters a whole hell of a lot to MG&E. I wonder, is there anything the city needs from MG&E at the moment. Or, better yet, anything the good people of Madison need from MG&E. Cuz when this resolution passes the council, they have to notify the city residents that they have he right petition the city for a referendum to approve the bonds.
Now, I’m not the greatest environmentalist, but uh, the climate crisis. It’s a big deal right? If this gigantic loan is going to go through shouldn’t we get some better answers before the city agrees to this? I mean, this seems to be leverage, as they say.
My biggest question was, and the reason I opened the legistar file was, I wanted to know what are they spending the $45,000,000 on? It’s not in the resolution. The best info in there simply says:
to finance various capital improvements and to upgrade the capacity of, or acquire new, lines, transformers and substations, and capital improvements to its generating stations, including compliance with applicable pollution abatement requirements, and additions and improvements to increase the generating capacity of the Company (the “2020 Project”).
TRYING TO UNDERSTAND THE INFO
Misleading title on the resolution. When I first read the title, I thought the city was just borrowing $19.3M. Turns out they are refinancing $19.3M first borrowed in 1982. And, they are financing additional capital projects up to $30M or $45M. Not sure which.
Fiscal note conflicts with the resolution.
This is what the fiscal note says:
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.
But if you read the “Body v2” pdf it says this:
WHEREAS, the Company has requested that the City issue one or more issues or series of its industrial development revenue bonds (collectively, the “2020 Bonds”), with a portion of the 2020 Bonds presently estimated at $19,300,000 to be used to refund in whole the 2002B Bonds (the “2020 Refunding Bonds”), and a portion of the 2020 Bonds presently estimated at not to exceed $45,000,000 (the “2020 New Money Bonds”) to be used to fund various capital improvements and to upgrade the capacity of, or acquire new, lines, transformers and substations, and capital improvements to its generating stations, including compliance with applicable pollution abatement requirements, and additions and improvements to increase the generating capacity of the Company (the “2020 Project”); and
That’s off by $15M!
What are they funding? They keep referring to the “2020 Project” so I thought I was going to find an attachment that described the project. They never get specific.
How does the city know we will have a “direct benefit”? If we don’t know what the projects are, how do we know if it meets the public purposes. The resolution says it meets
“the public purposes of employment retention, stimulation of the flow of investment capital to benefit the local economy, preservation of the City’s industrial base, and creation of a direct benefit to the residents of Madison, given that 70 percent of the rate payers of MGE are taxpaying residents of the City.”
Does it?
The resolution says that it is a “finding and determination of this Common Council that the City would derive public benefit from the issuance of the 2020 Bonds, including, by way of illustration but not limitation, the following: (i) the provision and retention of employment opportunities for the citizens of the City; (ii) the stimulation of the flow of investment capital into the City which will result in beneficial effects on the economy in the City; (iii) the preservation and enhancement of the City’s industrial base; and (iv) the creation of a direct benefit to the taxpaying residents of the City inasmuch as over 70 percent of the ratepayers of the Company constitute taxpaying residents of the City; that the 1982 Project, the 1992 Project and the 2020 Project described herein each constitutes a “project” within the meaning of the Act; and that the Company is an “eligible participant” within the meaning of the Act”
and it also says that “it is the further finding of this Common Council that the issuance of the 2020 Bonds are all in the best interests of the City.”
Is it?
I mean, it might be, but how would we know? Do the alders have info that is not in legistar?
Perhaps it will all be disclosed later? But shouldn’t it be disclosed now so the public knows if it would like a referendum or not? The resolution “shall not be binding unless and until: (a) The details of the revenue agreements and all documents pertinent thereto are agreed to by the parties and reviewed, authorized, and approved in substantially final form by resolution of this Common Council;” But, again, will that be after the 30 days the public has to decide if it wants a referendum?
Or maybe we find out at this public hearing? “(6) The City Clerk is hereby directed to determine, in consultation with the Company, a date for a public hearing, if deemed necessary by Bond Counsel, to be held pursuant to Section 147(f) of the Internal Revenue Code of 1986, as amended, with respect to the issuance of the 2020 Bonds, and to cause to be published notice of such hearing in accordance with said Section.” That is, if it is deemed necessary by the Bond Counsel that MG&E is paying for.
What’s on the MG&E website?
- I searched their website for the word “bond” – I found nothing.
- I searched their website for the word “IRB” and “industrial revenue bond” – I found nothing.
I went to MGE Energy, thinking maybe I’d find something there? Even tho that is not who the contract is with, the resolution says “Madison Gas and Electric Company”. I didn’t find anything there either.
The purpose of the Industrial Revenue Bonds according to the WEDC website is to “The Industrial Revenue Bonds (IRB) Program is to incent expansions of manufacturing facilities in the state of Wisconsin.”
“IRB bonds are tax-exempt bonds that can be used to stimulate capital investment and job creation by providing private borrowers with access to financing at interest rates that are lower than conventional bank loans. The IRB process involves five separate entities – the borrower, lender, bond attorney, issuer, and WEDC. Each year, federal law establishes a “volume cap” which applies at the state level.
The municipalities and counties sell the IRBs and loan the proceeds to eligible businesses undertaking eligible projects.”
Funny thing about the jobs – the resolution says this:
WHEREAS, the City has been informed by the Company that (1) the 1982 Project and the 1992 Project maintained the same number of jobs at the Project sites and elsewhere in the State of Wisconsin as were in existence at the time the 1982 Bonds and the 1992A Bonds, respectively, were initially issued, (2) no jobs were eliminated anywhere in the State of Wisconsin as a result of such Projects, (3) no jobs were eliminated, created or maintained in connection with the issuance of the 2002A Bonds or 2002B Bonds, and (4) no jobs are expected to be eliminated, created or maintained in connection with the issuance of the 2020 Bonds; and
LOBBYING?
MG&E had lobbyists at the meeting. 2 of them. They didn’t speak because this item was on the consent agenda. I’m guessing they have been lobbying the alders and mayor and that’s why the alders had no questions?
There is no 2020 lobbying information available on the clerk’s office website, so I don’t know if they are registered or not in 2020.
In 2019, this is what the lobbying information says:
- BENFORADO, DAVID – MADISON GAS AND ELECTRIC COMPANY
- CHRISTENSON, PAMELA – MADISON GAS AND ELECTRIC COMPANY
- HOBBIE, LYNN – MADISON GAS AND ELECTRIC COMPANY
- RENLUND, CARI ANNE – MADISON GAS AND ELECTRIC COMPANY
- SUMI, JOHN – MADISON GAS AND ELECTRIC COMPANY
These 5 all have the exact same incomplete and vague answers
Provide a reasonably specific narrative summary of areas of legislative and administrative action the principal may attempt to influence:
IN THE COURSE OF MGE’S DAILY OPERATIONS AS A REGULATED UTILITY, MGE WILL SPEAK WITH CITY OFFICIALS REGARDING STORMWATER MANAGEMENT AND CONSTRUCTION WORK ON STREETS THAT ARE AT OR NEAR MGE FACILITIES. MGE WILL ALSO DISCUSS WITH THE MAYOR’S OFFICE AND
List the City agencies in which the principal seek to influence administration action:
1. CITY TRAFFIC AND ENGINEERING, 2. MAYOR’S OFFICE, 3. PLANNING AND ZONING DEPARTMENT, 4. COMMISSION ON THE ENVIRONMENT, 5. PARKS DEPARTMENT, 6. OTHERS
- Spencer, Matthew S – MADISON GAS AND ELECTRIC COMPANY
He had nothing listed as the “reasonably specific narrative” and just checked the box “all” for the city agencies in which the principal seek to influence administrative action.
So how much did MG&E Spend?
I can’t find the expense reports on the clerk’s website, so I guess you need to go down to their office to see them?
WRAPPING UP
I guess I have more questions than answers here . . . more to follow if I get any answers. this inquiring mind would like to know . . . what is this money being used for (hopefully its towards net-zero carbon electricity by 2050 and strategies to achieve it), what is the correct fiscal information and ahem, what’s up with the lobbying information?
Take a look at this page:
https://www.mge.com/our-environment/green-power/solar-power/mge-solar-projects
MG&E has been making a decent effort lately to build solar voltaic arrays. Capital funds they put towards solar project installations have been providing work for many people.
The bonds attained throught City of Madison reduce the borrowing costs to MG&E for capital improvements. This is a good thing for all ratepayers within the City of Madison because if costs can be reduced for MG&E then those cost will not have to passed on to everyone’s utility bills.
The other improvements, such as to existing power plants (natural gas, they no longer own any coal power plants) are required to stay compliant with EPA Air Permit requirements. These plants must remain in operation because there is not yet enough renewable energy and energy storage to shut down existing generators. Maintenance of existing assets is easier, cheaper, and less overall environmental impact than building new. There have been no requests to build a new MG&E fossil fuel power plant.
https://www.mge.com/about-mge/electricity/electricity-sources
I see what projects they are working on, I’m just wondering if those projects are why they are borrowing $65M or if there is a different reason. If they are for all the good things you have mentioned here, then why don’t they just come out and say that? A little transparency would go a long way.
Likely because they want flexibility for what they spend the money on. Spelling out specific projects in a legally binding document can cause delays (which translates to cost) if a budget or even location for a specific project is changed in a way that it no longer perfectly matches what is stated in the legal document.
For me, as long as the money is only spent on capital improvements and doesn’t go to some investor’s pocket I’m OK with it to help keep costs down.