City, GREC begin talks Monday on buying biomass plant
Published: Friday, October 25, 2013 at 6:19 p.m.
Last Modified: Friday, October 25, 2013 at 6:19 p.m.
The city of Gainesville and the owners of the Gainesville Renewable Energy Center begin negotiations next week on the city's potential purchase of the new biomass plant.
A teleconference between city staff and GREC representatives is scheduled for Monday afternoon, said David Richardson, GRU's acting chief financial officer
The City Commission, in a 4-3 vote, has made a non-binding initial offer of $400 million to purchase the plant. The official written offer was forwarded to GREC officials on Oct. 21, opening a 30-day window for the two sides to negotiate exclusively with one another.
GREC Chief Financial Officer Al Morales declined to offer an opinion on the city's offer or discuss any other electric companies the company may be considering for a sale of the plant.
"We have an offer from the city and keeping with our obligations under the contract, we will negotiate with them," Morales said.
Whether the two sides reach a mutually agreeable figure remains to be seen. At the Oct. 17 City Commission meeting, Commissioner Yvonne Hinson-Rawls, one of four commissioners in the slim majority voting to make an offer, said she was not interested in the city paying more than $450 million for the plant.
Commissioner Lauren Poe, who also voted in support of making an offer, said he feels ownership can bring the city cost savings and lower bills for electric customers compared to the 30-year, $3.1 billion contract the city now has to purchase all the plant's power.
For one thing, the city will no longer have to pay GREC for assuming the risk involved in the ownership and operation of the plant, Poe said.
He said the city, as a public utility, will get a more favorable interest on the debt issued to buy the plant. He also said there could be savings in operations and maintenance, since those costs are fixed for the 30-year life of the project and the plant should require less maintenance in the early years.
Commissioner Susan Bottcher, who opposed making an offer on the plant at this point in time, mapped out some of her reasons in an Oct. 5 email to Gainesville Regional Utilities General Manager Bob Hunzinger.
Bottcher said the projected cost savings and benefits of a purchase were based on "assumptions and educated guesses in the face of too many factors that no one has control over today or in the future."
Bottcher went on to note that the city did not have an appraised value for the facility and that the plant, which started producing test power in August, does not have proven track record of operation.
GRU staff and consultants projected that city ownership and operation could save some $8.7 million annually in fixed operation and maintenance costs and $10 million in property taxes.
That property tax figure is very much a projection at this point.
"It's not something that we're saying at this point," Alachua County Property Appraiser Ed Crapo said.
Crapo said that, before assessing the plant's value, his department still needs information from the Department of Environmental Protection on how much of the plant's costs are for pollution control devices, which carry a lower appraised "salvage" value. GREC also has to file a report showing its costs, Crapo said.
"Absent that, we don't really have anything to work with," Crapo said.
The negotiations also come with ongoing complaints from residents of the Turkey Creek Golf & Country Club over noise and odor issues. The odor, residents have said, is akin to decomposing wood or burning wood.
GREC is working to ease the noise coming from the plant. A consultant's proposed solution will be in place by December: 6-inch-thick, 48-foot-long noise-absorbing acoustic panels inside the power plant's stack.
Citing dust concerns at its adjacent Public Works facility, the County Commission is also seeking an administrative hearing over the pending DEP decision to modify the air permit for the plant.
The proposed modifications include removing a requirement for GREC to hand in a final Best Management Plan, or BMP, for minimizing dust, fire prevention and pile management within 180 days prior to the plant becoming operational and instead changing the preliminary BMP to the final BMP.
In an Oct. 23 email to a Turkey Creek resident, a DEP official said the agency's inspectors have responded to numerous complaints over odor and dust and found no violation. The email stated that the agency had instructed its area inspector to frequently check on operations and swiftly respond to complaints.
Next Thursday, the City Commission is scheduled to discuss and potentially hire an interim GRU general manager to replace the resigning Hunzinger. Bottcher and Commissioner Todd Chase want the air permit issue and the ongoing noise complaints added to the agenda. In an email sent Thursday, Bottcher said she wants the commission to discuss intervening in the permitting process if noise and dust issues are not addressed to their satisfaction.
Bottcher also broached the issue of a vote to enforce the city noise ordinance on the plant under the standard of a "plainly audible" noise that "disturbs a reasonable person of normal sensitivities."
The Gainesville Police Department has concluded that the plant does not, at this point, violate the noise ordinance.
As it stands, the City Attorney's Office projects that the costs for outside legal counsel on the negotiations during the initial 30-day period will be in the range of $100,000 to $300,000. If the talks proceed to a sale, the range of additional legal costs could be $500,000 to $1.3 million.
That cost would not include money paid to bond counsel when the city borrows money for the plant.
The city hired consultants and attorneys with five firms in advance of making an offer. The full cost of that work is not yet known. The only firm to submit an invoice at this point, according to reco