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Prop. 2 would approve the purchase of Columbia Energy Center

Wednesday, March 30, 2011 | 7:08 p.m. CDT

CITY PROPOSITION 2

BALLOT LANGUAGE: Shall the City of Columbia, Missouri issue its Water and Electric System Revenue Bonds in the amount of Forty Nine Million Five Hundred Thousand Dollars ($49,500,000) for the purpose of purchasing the outstanding shares of the Columbia Energy Center?

YES (  ) 
NO  (  )

The authorization of the bonds will authorize the City to purchase the outstanding shares of the Columbia Energy Center with no additional rates and charges for such services provided by law, to produce income and revenues sufficient to provide funds to pay principal and interest on the bonds as they become due and to retire the same within twenty-five years from the date thereof, and to provide for the establishment of reasonable reserves therefore.

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What is the Columbia Energy Center? It is a 144 megawatt electric generation facility fired with natural gas that was built in 2001. It's located on Peabody Road near the city landfill, on the northeast side of town. The plant is connected to the Columbia transmission system. Columbia Water and Light currently has contractual agreements with Ameren Energy Marketing for 50 percent of the plant. In 2010, the city purchased 25 percent of the plant.

Amount of bond issue: $49.5 million.

Approval: A simple majority of Columbia voters is required.

Why purchase the facility? Purchasing the remaining portion of the plant would cost $1 million a year less than the current lease with option-to-purchase agreements. The energy center supplies electricity during high usage periods and helps meet federal requirements for the city to have a reserve of 14 percent more electricity than the city expects to use. That ensures reliability because a utility has a backup in case one of the energy sources is not available. The energy center also serves as a backup for renewable resources.

Breakdown of the $49.5 million:

  • $45.2 million to purchase the Columbia Energy Center.
  • $3.6 million reserve requirement. (Bond financing requires that the last principal and interest payment be reserved in a special account.)
  • $678,000 — the cost of issuing the bonds.

Revenue source: Columbia Water and Light would pay back the borrowed money through electric utility funds. Electric system investments would be funded through electric rates, not taxes. No tax revenue would be used.

How would the transfer of ownership affect the property tax collected for schools? If Columbia Water andLight bought the outstanding shares of the energy center from Ameren, the ownership would transfer from private sector to the public utility. Columbia Public Schools would lose $800,000 each year in taxes.

Columbia Water and Light doesn’t pay property tax, but a Paymentin lieu of Tax is paid to the city's general fund. That payment is based on the purchase price of the plant and would be similar to the amount charged for the energy center if it continued to be privately owned. The city general fund would make payments from those funds to Columbia Public Schools “to cushion the blow,” said Jim Windsor, manager of  rates and fiscal planning of Water and Light, so the lost property tax revenue would be phased out.

The amounts of money that would be transferred from the payment fund to the schools are: $411,927 in 2012, $566,057 in 2013, $377,371 in 2014 and $188,686 in 2015.

“The schools were aware of this the day the plant was built,” Windsor said. "At least the county assessor is aware of it, and it should have been passed along to the schools.”

District spokewoman Michelle Baumstark said: "We've been working with the city since the beginning," when the city started considering purchasing the energy center. "And we've got this phase-out plan." Baumstark said the schools are cooperating with the city because it's something good for the community as a whole and that the schools would make budget adjustments accordingly. As of now, she said, there is not a detailed out plan. 

Would electric rates be increased to finance the bonds? No. There's no scheduled rate increase related to the purchase of the energy center.

How would Water and Light pay off the bonds without increasing rates? Water and Light is already spending about $6 million a year to lease 50 percent of the plant's capacity. If voters approved the purchase, annual expenses would total about $5 million for costs including interest and principal on bonds, property tax eqivalent payments to Payment in lieu of Tax and operating costs. 

How would the Water and Light Department use the $1 million saved? "This will allow us not to increase rates this year," Windsor said. "Water and Light has a budget of over $100 million, so we are talking about only 1 percent here."

There would be other costs that Water and Light would need to use that $1 million to cover.

What is the life expectancy of the energy center? The center should easily last 30 to 40 years if properly maintained, Windsor said.

How is the generation power of the energy center compared with the municipal power plant? The Columbia Energy Center can generate 144 megawattts of electricity per hour. The Municipal Power Plant can generate about 86 megawatts per hour. It's more expensive, however, to generate electricity with natural gas than the coal used at the power plant. That means the energy center would be limited to times of high demand or emergency situations.


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