Carolina Journal News Reports
ASHEVILLE — A solar energy project in Buncombe County Schools with a 30-year life cycle is fraught with financial risks to taxpayers, and parts of the decision-making process are cloaked in secrecy, a Board of Education member says.
Rising costs and diminishing returns for the school district, and allowing a for-profit company exclusive use of a public building as a potentially lucrative, subsidy-laden “investment scheme” are reasons cited by school board member Lisa Baldwin for her opposition to the initiative.
The board will vote Thursday on a contract to FLS Energy of Asheville to install solar photovoltaic panels to generate electricity and a solar thermal system to heat water at Enka High School. The school system could purchase the equipment after seven years and operate it another 23 years.
School board Vice Chairman Dusty Pless dismisses Baldwin’s concerns. “Hopefully, it’s going to, down the road, save us some money and make us a little money,” Pless said. “Saving us money by saving on our hot water heating. Making money by being able to sell the electricity it produces to Progress Energy.”
Baldwin, who has a master’s degree in economic policy and law from the University of Maryland and did her master’s thesis on energy conservation policy, said the project already has cost the school district $102,966 for two studies by Legerton Architecture, an Asheville firm. A third, $13,000 study has yet to be done.
Baldwin said the school district could have saved those costs by using its two full-time staff architects. A $120,000 roof repair put into the capital outlay budget in case the solar panel installation is approved was performed without a board vote, Baldwin said.
An initial best-scenario presentation to the board showed benefits of up to $1,243,000 from the solar panel project and $488,000 from solar thermal. The least rosy of four analyses showed $977,000 in benefits.
“Now we’re down to $700,000” without an explanation, Baldwin said.
Original plans included FLS buying an air-conditioning chiller, at a cost she estimated at $300,000, and doing a $42,000 roof upgrade. Those were removed, she said.
Baldwin is skeptical of the projected financial benefits. “The biggest savings come to us in years 20 through 30,” she said, yet the agreement with Progress to purchase electricity generated by the solar panels expires in year 20 with no guarantee of an extension.
There are maintenance costs nobody is talking about and information is sketchy on what warranties the equipment will have, Baldwin said.
“With this investment scheme, we don’t know who the investors are. I don’t know if there’s a conflict of interest,” Baldwin said.
“People with a tax burden come in and purchase the solar equipment and probably within four or five years the investors recoup all their money” by trading for tax credits, selling some of those credits, selling electricity, and then selling the equipment to the host school system, she said.
State House Speaker Thom Tillis, R-Mecklenburg, assured Baldwin that the FLS plan is legal. But she believes it is unethical, at a minimum, for the district to single out one private entity to profit using taxpayer property.
She proposed an alternative to the school board to get a donor to contribute the project costs and to allow the school district to install and operate the panels. Only one school board member expressed interest.
Asked about possible conflicts of interest going undetected without knowing who the FLS investors are, Pless said, “I’m not very concerned about that at all.” Pless disputed that projected benefits of the solar project have plummeted from more than $1.2 million to $700,000, and that the largest part of the payback on the project comes in years 20 through 30, as the equipment is aging and at risk of breakdowns or in need of replacement.
“I’m not sure if Miss Baldwin has her facts straight on the age of the equipment, or the payback,” Pless said.
A chart released at a Sept. 1 board meeting shows nearly $422,000 of the total $701,399 comes in years 20 through 30.
Pless said he’s “not terribly concerned” there was no performance guarantee in the bidding criteria. “We’re just leasing the roof of our building. We’re not purchasing this equipment nor are we obligated to purchase it in the future.”
Pless said he couldn’t remember if the agreement with Progress is limited to 20 years. Asked if he was concerned that taxpayers could be left holding the bag should an extension not be granted for the big payback years, Pless abruptly ended the interview, saying he had family matters to tend to.
But Tim Fierle, Buncombe Schools facilities director, acknowledges “there is no guarantee” the school district would be able to extend the power purchase agreement.
“It’s pure speculation,” Fierle said. “It assumes after year 20 that that sale of electricity with Progress Energy continues. You’ve got to make some assumptions.” Even if that doesn’t happen, the school could then use the electricity itself instead of selling it, and the $300,000 gained up to that point is “a good return on investment, especially in these economic times,” he said.
The $701,399 figure is what would be left after an annual maintenance contract costs and purchase of the solar equipment, Fierle said. However, he said there was no hard number for the equipment purchase because it’s impossible to know what the market value of the equipment will be in seven years. And putting a price in the contract would move it from a lease agreement to a lease-buy arrangement, which would nullify FLS’s financing package, he said.
Fierle admitted there was no performance guarantee requested in the bid package, but doesn’t believe it’s needed. “If they don’t produce the power, if they don’t produce the hot water during those seven years, they do not receive the payments from Progress Energy. We don’t buy hot water from them,” Fierle said. “I’m sure their financiers wouldn’t be real happy about that.”
He characterized the FLS financing structure and withholding of investors’ names as “very unusual.”
He said, “I’ve never done this type of project before. I understand the concern.” The investor’s names are protected “because they consider that a trade secret,” Fierle said. “They don’t want their competition to have access to all their ways and means.”
The board accepted the trade secrets condition and extended it to all bidders, he said.
FLS “reported to our board attorney that there was no conflict of interest and the investors were regional investors,” Fierle said.
Jim Marks, a local Tea Party member active in the county Republican Party, is a former school board member in Connecticut. He opposes the solar project and supports Baldwin’s watchdog role.
Citing the failures of Solyndra and other solar firms that received federal stimulus money, Marks said it is risky business to pursue this project with taxpayer funds as collateral.
“I just don’t see this thing paying for itself,” Marks said. The current system, “while it’s old, can be refurbished for far less than these solar panels.”
“We have buildings here in Buncombe County that go back to 1927, so that raises the question why is this a priority” to upgrade Enka High School with solar technology when it was built in 1985 and is rated one of the most energy-efficient buildings in the district, said Linda Humphries, a retired teacher of 33 years in Buncombe County Schools, 22 of them at Enka.
“This isn’t a time to gamble with taxpayers’ money. We need to maintain what we have,” Humphries said. “I’m very concerned as a taxpayer and mother of three.”
“The solar panels are just an experiment,” she said. “Why do we have anonymous investors? As a citizen I’d like to know who they are. What kind of a tax write-off are they accumulating in this process? What kind of financial windfall are they getting?”
There are “a lot of irregularities” to the process that the school board has used, said Gary Shoemaker, a retiree who spent most of his working years in electronic control and heating and air-conditioning systems.
“How much would it have cost to put in (a traditional) HVAC system” to meet all power demands, Shoemaker asked. “It would be a hell of a lot less money.”
In his career experience, he said, it is unusual in a competitive environment that only one company would submit a bid, unless the criteria favored a particular product, technology, or design.
Fierle said the board was “surprised” so few bids were tendered, even though Innovative Design, a Raleigh-based firm that did the architecture design work for the district, “put this out to a very large number of entities … folks they knew of in the Southeast that might be interested.”
He speculated the economy may have affected the number of bids.
“In this day and age it’s hard to get financing. Apparently FLS is set up in a way where they’re set up to respond to it,” Fierle said. The only other bid was for a straight sale of equipment rather than the lease arrangement requested, he said. And one company said it didn’t bid because the project was too small for its investors.
Dan Way is a contributor to Carolina Journal.