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HomeMy WebLinkAboutRes2011-067 Sponsored by: Oates CITY OF SEWARD, ALASKA RESOLUTION 2011 -067 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, AUTHORIZING THE CITY MANAGER TO SUBMIT AN APPLICATION TO THE ALASKA ENERGY EFFICIENCY REVOLVING LOAN FUND FOR AN AGGREGATE AMOUNT NOT TO EXCEED S678,533, TO PAY THE COST OF ENERGY UPGRADES AT THE ALASKA SEALIFE CENTER BUILDING WHEREAS, pursuant to AS 18.56.855, the Alaska Housing Finance Corporation ( "AHFC ") may make loans to a municipality from the Alaska Energy Efficiency Revolving Loan Fund (the "Fund ") for the purpose of funding energy efficiency improvements to buildings owned by the municipality; and WHEREAS, the City owns the Alaska SeaLife Center, and entered into a Lease and Operating Agreement with the Seward Association for the Advancement of Marine Science (the "SAAMS ") for the lease and operation of the Alaska SeaLife Center; and WHEREAS, SAAMS proposes to construct and acquire energy efficiency upgrades (the "Project ") at the Alaska SeaLife Center building, and has requested that the City borrow an h.w amount not to exceed $678,533 from the Fund (the "Loan ") to pay the cost of the Project; and WHEREAS, this resolution authorize the City to apply for a loan, but does not commit the City to borrowing from AHFC. NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Seward, Alaska, that: Section 1. The City Manager is hereby authorized to apply for a loan from AHFC through the Alaska Energy Efficiency Revolving Loan Fund Program in an amount not to exceed $678,533. This authorization excludes entering into any loan agreement, and does not authorize borrowing by the City of Seward. Section 2. This resolution shall take effect immediately. PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 22' day of August 2011. CITY OF SEWARD, ALASKA RESOLUTION 2011 -067 4. all THE CITY OF SEWARD, ALASKA /f illard Dunham, Mayor AYES: Valdatta, Bardarson, Keil, Shafer, Casagranda, Dunham NOES: None ABSENT: Smith ABSTAIN: None ATTEST: ..ii J i hanna Kinney, CMC ity Clerk (City Seal) •` ,,,0 ■ • m i e 1 • • s • • ■ ilij Council Agenda Statement Meeting Date: August 22, 2011 From: Phillip Oates, City Manager ii" ana g er' Agenda Item: AEERLP Application for Energy Efficiency Improvements at Alaska SeaLife Center BACKGROUND: In spring 2009 the Seward Association for the Advancement of Marine Science, dba, Alaska SeaLife Center (SAAMS) commenced a Facility Improvement preliminary audit with Siemens Industry — Building Technologies Division (Siemens). The preliminary audit was completed in fall 2009 with a recommendation that the Alaska SeaLife Center building had the potential to achieve a potential 15 -20% energy cost saving over 10 years with completion of Facility Improvement Measures (FIM). In November 2009, SAAMS signed a Letter of Intent with Siemens to perform an investment grade energy audit. This audit was completed over the winter 2009 -2010 with a finding that a base energy project with a project cost of $678,533 could be financed by energy and operational savings from the project plus achieve energy and operational savings of $647,000 over a 20 -year project useful life. SAAMS would like to City to apply for a loan to finance these energy improvements. ALASKA ENERGY EFFICIENCY REVOLVING LOAN FUND PROGRAM (AEERLFP): The 2010 Alaska Legislature with the passage of SB 220 created the Alaska Energy Efficiency Revolving Loan Fund Program (AEERLP) under the Alaska Housing Finance Corporation that provides financing for permanent energy efficient improvements to buildings owned by regional educational attendance areas, by the University of Alaska, by the State, or by municipalities in the State. Eligible borrowers obtain an Investment Grade Audit (IGA) as the basis for making cost - effective energy improvements, selecting from the list of energy efficiency measures identified with the Audit. As a City -owned facility, the ASLC cost - effective energy improvement measures identified in the Siemens audit are eligible for funding under the AEERLP. Loans are for a 15 -year term maximum and there are no penalties for early loan payoff. Interest rates vary between 4.25% to 5% depending on the loan term. SAAMS has proposed making debt service payments to the City from money saved as a result of the efficiency improvements that would otherwise be spent on energy costs. The City's loan would be repaid from amounts received from SAAMS and, if such funds are not available, by intercepting any other State funds that would otherwise be paid by the State to the City. ASLC PROPOSAL TO THE CITY: SAAMS is seeking City Council authorization for the City administration to apply for an AEERLP loan to finance the base energy project developed from the Siemens audit consisting of a new building automations system, lighting control upgrades and HVAC balancing. The Detailed Investment Grade Audit (IGA) and Energy Services and cash flow analysis using a 4.375% annual interest rate financed over 14 -years shows the forecast energy and operational savings would retire the loan in 14- years, with cumulative net cash flow over 20 -years of $647,032. The benefits to the City and SAAMS include a project that is cash neutral (the payments are expected to equal the cost savings from the improvements); guarantees reduction in energy usage (provided all Siemens requirements are met); reduces carbon emissions, provides new systems that reduce maintenance demands; and compliments the recently installed seawater heat pump system. Under the terms of the Siemens Performance Agreement, Siemens provides a firm price for the identified scope of work and the savings generated from energy, operational and maintenance savings repay the financing. Energy and operational savings are guaranteed to offset the cost of the loan payments. Siemens guarantees that the energy savings meet or exceed the cost of the financing, otherwise they pay the difference. Siemens has the option of implementing additional improvement measures at their expense to meet the guarantee. Ongoing measurement by SAAMS and verification will ensure that the guaranteed energy savings continue for the contract term. SAAMS representatives and Seward City Council met in a work session on May 23, 2011 to review the Siemens audit and AEERLP. As a result of the work session, the City Administration was requested to prepare the AEERLP corporate borrowing resolution for consideration by Council, and SAAMS was requested to prepare an amendment to the Lease and Operating Agreement for the SeaLife Center and an assignment agreement whereby SAAMS will assume all obligations for payment of the AEERLP loan and all obligations of Siemens to ensure Siemens' guaranteed cost savings remain effective. The AHFC has indicated that a 14 -year AEERLP loan could be made at 4.375% interest. Following Council adoption of the borrowing resolution, the application package can be submitted to AHFC who have indicated that a term loan commitment letter will shortly follow. This will authorize the loan, but will not commit the City to borrowing under the AEERLP. Under the provisions of the AEERLP regulations the application documentation is as follows: 1. Loan Application signed and dated (AHFC Form AEELRP -1); 2. Resolution authorizing the application; 3. Evidence of title vesting in the property — copy of warranty deed of preliminary title report; 4. Copy of an approved Investment Grade Audit and list of selected energy efficiency measures (scope of work); 5. Copy of Performance Contract; and 6. Other documentation as reasonably requested by AHFC. Upon receipt of an application for a loan under the program, AHFC will review the information and either issue a term loan commitment letter, decline the loan, or pend for additional information. AHFC will require the following documents to be executed for the loan closing: 1. Corporate Borrowing Resolution authorizing the borrowing and authorize the signers to enter into the loan transaction; 2. Promissory Note (there will also be promissory note executed by the ASLC to the city); 3. Loan Agreement (there will also be a loan agreement executed between the city and ASLC): 4. Assignment of Siemens Performance Contract Payment Guarantee to AHFC; 5. Approved scope of work, including anticipated draw schedule; 6. Legal opinion from city attorney regarding the transaction; 7. Any other documentation as requested by AHFC. The AHFC will assess a .50% loan fee at the time of closing which will be the obligation of the ASLC to pay. The ASLC will also the pay the city's reasonable costs in completing the necessary loan documentation. INTENT: To authorize the city manager to make a non - binding application to AHFC for an Alaska Energy Efficiency Loan to fund energy efficiency measure at the Alaska SeaLife Center consisting of lighting controls, new building automation system (BAS), and HVAC balancing in the amount of $678,533. Authorization to enter into the loan will be subject to future city council resolution following public hearing on an amendment to the SAAMS /City Lease and Operating Agreement. CONSISTENCY CHECKLIST: Where applicable, this resolution is consistent with the Seward City Code, Charter, Comprehensive Plans, Land Use Plans, Strategic Plan and City Council Rules of Procedures or Other Plans or Policies. FISCAL NOTE: This is authorization to submit an application for an AEERLP and does to bind the City to enter into a loan or any other transaction with AHFC. Approved by Finance Department: ATTORNEY REVIEW: Yes X No RECOMMENDATION: The City Council approves Resolution No. 2011 - authorizing the City Manager to submit an Alaska Energy Efficiency Revolving Loan application to finance energy improvement measures at the Alaska SeaLife Center.