A federal economic rescue package may help bail out the city as it breaks free from a 20-year energy contract with the Chase family.
The announcement came four days before aldermen vote on the city’s request to build a $5 million power plant in an economic crisis. Click here to read a previous story about the request.
The federal incentive was one argument that city officials brought to a meeting room in City Hall Thursday night, where they sought to persuade skeptical aldermen to vote for their plan.
Unfortunately for the DeStefano administration, only one alderman trudged through the rain to hear the proposal: Beaver Hill’s Carl Goldfield, the president of the board, whose vote City Hall had already secured.
In absence of an aldermanic audience, City Engineer Dick Miller (pictured) and the city’s four-man power plant team presented their case to two reporters.
The team explained why the city should proceed with a plan to spend $5 million for the new plant, even as it considers a spending freeze, union concessions and possible layoffs.
Which Way Out? Negotiations Continue
The problem is that New Haven’s energy contract with Chase Family Limited Partnership just “ain’t working,” in the words of Goldfield.
The city currently heats and cools City Hall and the Hall of Records with energy from a power plant in the basement of the Hall of Records. The plant is inefficient because it’s twice as big as it has to be, Miller said.
The city can’t take over the plant: As part of the so-called Chase Agreement struck in 1985, city leased the power plant to Chase for 99 years.
The city can, however, get its heating and cooling elsewhere. A 20-year contract to buy energy from Chase expires on June 30, 2009. The city chose not to renew it. Instead, the city decided its best option is to build its own power plant in an empty space under a raised plaza behind City Hall.
When city officials sprang that plan on the board in the form of a mid-year budget request, aldermen balked at their timing.
Thursday, Miller explained the work his team did, scrambling to find a solution as it faced a drop-dead date on renewing the contract this year.
First, the city tried to get other customers to buy energy from the plant so that it wouldn’t be so woefully underused. The mayor set up a meeting with potential customers, including NewAlliance Bank and the developers of the Shartenberg project (aka “360 State”). The customers weren’t interested, Miller said.
The city also tried to negotiate with Chase to become more of a partner, and less of a customer, in the power plant. According to its contract, the city has to pay whatever rates Chase charges. The city proposed joint ownership of a new plant at the same site.
Chase “has not taken the lead” on that idea, Miller said. Joint ownership could be in Chase’s interest, he argued, since Chase now stands to lose its main customer at the power plant.
A Chase spokeswoman could not be reached for comment Friday morning. City officials said the company has made good on its contract, but that the contract just doesn’t work for the city anymore.
Negotiations are still underway, Miller said.
Until any deal is hatched, the city is proceeding with the belief that Chase and the city won’t be working together, Miller said. That’s why the city is lining up funding for a new power plant.
Aldermanic approval of the new plant could also theoretically strengthen the city’s negotiating hand with Chase.
Bailed Out
Building the plant became a more attractive proposal when the federal government included energy conservation bonds in its bailout bill, according to Rusconi.
The bonds were established by a $700 billion economic rescue plan signed by the President in October. The bill authorized $800 million of new “qualified energy conservation bonds.” The bonds can be used for “capital expenditures incurred for purposes of reducing energy consumption in publicly-owned buildings by at least 20 percent.”
If the city’s project qualifies, which Rusconi believes it would, the city would be able to issue zero-interest bonds.
People who buy the bonds would not earn any interest. Instead, they’d get a federal tax credit.
“It’s basically the federal government picking up the tax tab for us,” explained Goldfield.
Rusconi didn’t know how soon the city could apply for the tax-free bonds.
Without the federal aid, the city would reap $6 million in energy savings in the first 20 years, according to Rusconi. If the city qualifies for the energy conservation program, those savings would leap up to as high as $8 million, according to Edward Melchiori, a consulting engineer hired to work on the project.
“It’s one more reason” for the city to build its own power plant, reasoned Rusconi.
Aldermen are set to vote on the matter at Monday’s full board meeting at 7 p.m. in City Hall.