Uncertainties about the funding and risk involved in a wind energy development led the Rochester School Board on Tuesday to authorize a withdrawal from the project.
In November the board entered into an agreement with developer Johnson Controls Inc. and 23 other Minnesota school districts to pursue the planning of a 10- to 20-megawatt wind farm in a yet-to-be-determined location.
The primary purpose would be to support the production of clean, renewable energy. Johnson Controls is promising the districts involved that the wind farm will produce a “positive cash flow annually and will completely pay for itself within the term of the financing,” which would be 15 to 20 years.
However, during a project kickoff Jan. 18 for the participating districts, Rochester board members and district staff learned that Johnson Controls changed the funding strategy for the development. One of the reasons, the company said, was to reduce financial risk for the school districts.
That caused concern because the company originally said there would be no risk with the initial funding model using federal Clean Renewable Energy Bonds, board member Cris Fischer said during a school board study session Tuesday.
“There are so many unknowns, and I’m very uncomfortable with it right now. In principle, I love it. But I don’t feel we’re at a point where we can put our budget at risk,” Fischer said.
Rather than having each district issue a debt of $3 million in the renewable energy bonds, Johnson Controls decided to go with an “equity transfer” funding model. It would require districts to enter into a limited liability company with a private investor, who would put up 99 percent of the cost of the construction and the wind turbines. Each school district would have an upfront investment of $100,000. In 10 years, the districts would become owners of the wind farm.
Fischer and other board members were concerned about the possibility of losing the $100,000 and incurring unknown costs. Also, it is unclear whether Minnesota law allows public school districts to enter into limited liability corporations. Board members also worried that, although the district has invested nothing yet, it already could be incurring development expenses.
There were just too many unanswered questions.
Superintendent Romain Dallemand shared the concerns and suggested that the board invite Johnson Controls to discuss the project further. That still might happen, even though the board decided not to be part of the current project, said board chairwoman Breanna Bly.
Two of the seven board members voted to continue with the project. One was Fred Daly, who said the district needs to get involved in renewable energy for the good of the environment and the future of the community’s children.
“What good is educating kids if in the future they can’t breath the air or drink the water?” Daly said.
By Edie Grossfield
6 February 2008
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