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Wind farms 'coming'

Mike Newman from First Southwest Company in Dallas, an investment banking firm that specializes in public finance, told commissioners at their special meeting earlier this month wind farms in northern areas of the county appears to be on horizon. He explained the advantages of an ordinance, the use of industrial revenue bonds for financing a project and providing tax breaks, and the dollar savings of coordinating with a neighboring county.

Northern Lincoln County could be coveted for wind energy, but county commissioners are advised to prepare an ordinance, first

Wind farms seem to be a good fit for Lincoln County, but county commissioners were warned at a special meeting they need to be prepared with an ordinance and not rush into approving projects.

Mike Newman from First Southwest Company in Dallas, an investment banking firm that specializes in public finance, told commissioners at their special meeting earlier this month wind farms in northern areas of the county appears to be on horizon. He explained the advantages of an ordinance, the use of industrial revenue bonds for financing a project and providing tax breaks, and the dollar savings of coordinating with a neighboring county.

Developers research a county for good wind and access to a transmission line, he said.

"Typically good wind is in remote areas," he said. "Lincoln County is perfectly positioned if you have the wind, because you have the main transmission line out to California, so I suspect if you have seen one (wind farm developer), you will see more."

County Manager Tom Stewart said landowners in the county are being approached.

"The charts for the county show some of... more [truncated due to possible copyright]  

Northern Lincoln County could be coveted for wind energy, but county commissioners are advised to prepare an ordinance, first

Wind farms seem to be a good fit for Lincoln County, but county commissioners were warned at a special meeting they need to be prepared with an ordinance and not rush into approving projects.

Mike Newman from First Southwest Company in Dallas, an investment banking firm that specializes in public finance, told commissioners at their special meeting earlier this month wind farms in northern areas of the county appears to be on horizon. He explained the advantages of an ordinance, the use of industrial revenue bonds for financing a project and providing tax breaks, and the dollar savings of coordinating with a neighboring county.

Developers research a county for good wind and access to a transmission line, he said.

"Typically good wind is in remote areas," he said. "Lincoln County is perfectly positioned if you have the wind, because you have the main transmission line out to California, so I suspect if you have seen one (wind farm developer), you will see more."

County Manager Tom Stewart said landowners in the county are being approached.

"The charts for the county show some of highest wind in the state is north of Capitan, so it's coming," he said.

Commission Chairman Tom Battin said, "It concerns me a little bit about timing, relative to contracting between developers and landowners. I would think it would be to the advantage of the landowners to have an ordinance for protection. If they sign contracts prior to an ordinance, I wonder as to the effectiveness."

"I think we're under pressure to get it done," Stewart agreed.

"The new president of the New Mexico Association of Counties is from Union County and went to great lengths to says how helpful Mike and his company were," Commissioner Dave Parks told fellow board members. Newman guided the development of an ordinance for Union County in cooperation with Harding County, because the proposed project straddled the two counties. To date, commissioners in Union have not passed the ordinance.

"It doesn't come free," Stewart said of Newman's help.

"We're consultants and work by contract." Newman explained. Counties don't have much extra money and the company contracts on a contingent basis. "If financing goes forward, we get paid from that, and there is no cost, if doesn't go forward," he said. "My job is to help clients make the best decisions and protect them."

His company's contract is a simple 4 1/2-page document, he said. "We don't go forward if we don't think a project is likely," Newman said. "It's a generic document and we attach an addendum with a fee schedule. It's a five-year agreement that can be canceled anytime for any reason with 30 days notice. We don't want to be where someone doesn't want us or somewhere we don't want to be."

Wind farms work on a thin profit margin as developers sell their power in a competitive market. The company's $25,000 maximum fee is payable from industrial revenue bond proceeds, "so if (the deal) is not closed, there is no fee to you."

County Attorney Alan Morel said that information covers his concern about violating the state procurement code to require requests for proposals, because the fee falls under the $50,000 mark.

At their regular meeting Tuesday, commissioners approved the contract with First Southwest and set a public hearing for their August meeting on the proposed ordinance. Stewart said the one-month breather will give a chance for the contract to be reviewed by another consultant, who works for the county handling cell tower applications. Representa-tives of the industry "will come out of the woodwork," when they hear an ordinance is being adopted, the manager said.

During the previous special meeting, Newman said one attorney from Modrall Sperling in New Mexico tends to represent most of the wind farm developers in New Mexico on projects. The developer will have plenty of attorneys. He advised the commission to hire an attorney and financial advisor loyal to the commission with a fiduciary responsibility to the board. The bond counsel is not tied to the county, he's there to do handle the bonds, Newman said. "You tend to see problems where there is one person for both sides," he said.

"After they come, they will want to build on a timeline," Newman said of the developers. "Every-thing will be a rush. I would suggest examination and implementation of an ordinance to develop wind farms before they come, so you can do it at your pace and decide what's important to Lincoln County and the protection of its citizens. It covers predominantly safety and building issues, setbacks" and de-commissioning of equipment when worn out or closed down.

"It's easier to get something done before someone who has an agenda at cross purpose to what you want to achieve. While the wind farm developers initially fought an ordinance and said to 'trust them,' they came to realize the value of an ordinance that sets rules and regulations for both sides."

A major issue covered in the ordinance was repair of roads used by trucks hauling heavy equipment, but other aspects such as height limits also were included. Height approvals are required by the Federal Aviation Administration and the military, because of air traffic over the wind farm territory.

"It gave them ground rules so they knew what to build and if they did that in compliance, they were protected from changes in law, so (an ordinance) benefited both sides," Newman said. "That project straddled Union and Harding, which wasn't going to do an ordinance, but when (wind farm developers) realized the value, they pushed for adoption so they had certainty."

An outfit called High Lonesome Wind Farm is developing turbines in neighboring Torrance County, Newman said. "It's the same one doing the facility in Union/Harding County. Typically a developer approaches a land-owner first for easements to put up the towers. Almost all are wildcatters, who put a deal together. They have no money and bring in Southern Calif-ornia Edison, which is what happened in Union. They couldn't get access to transmission lines to bring power to buyers. They got that from Tri-State Power. They brought in Southern Cal Edison to finance and own it. The wildcatter will get a percentage and ultimately will be taken out of ownership by Southern Cal Edison. I believe that's the same way High Lonesome will work."

Commissioner Eileen Sedillo said small ranchers came together to form an association. An individual rancher is at a disadvantage against large corporation, she said. They band together for better leverage and because wind projects may run through multiple properties. They can create bigger tracts.

"Otherwise," Newman said, "a turbine may be on one and not the other, so one owner doesn't share in the revenue. Some larger ranch owners think they have enough property to stay on their own."

Newman said wind farms in New Mexico have benefited from industrial revenue bonds that only can be accessed by a county or municipality. "So if they want that tax break, they have to come to you and then you can say as county commissioners, we have a responsibility to the community and want them to sit down and negotiate. You set the law with which they have to comply." It's to their advantage to have that law in place before they conclude their contracts with landowners, he said.

Industrial revenue bonds shield the purchase of most equipment to construct the turbines and towers from gross receipts taxes, Newman said. If a county takes a lease-hold interest, that takes the land off the tax rolls, so counties ask for compensation for losing those taxes.

"In Union County, the developer said this is all I can afford to pay," he said. "A commissioner said he wanted to know what was fair, the value of the tax break, so he would be able to tell his constituents."

Newman said he created a spreadsheet and how the project in Union was estimated to grow over time.

"We could not give an absolute value difference," but estimated the loss against gains and presented it at a town meeting. The public complimented commissioners for having an independent professionals answer the question."

Developers initially contended the state Construc-tion Industry Division would handle all inspections, "and not to worry."

"We spoke to the person at CID who inspects wind farms and there is no inspection code for such in New Mexico, but because they generate power and are elevated, they fall under utility construction. We had to validate all of the representations by the developer." His company also projected the number of permanent jobs to be created and the average salary. They projected lodgers tax and gross receipts tax produced, and service demand impacts.

"An important aspect was to protect the roads against wear and tear, and we made the developer agree to put roads back (to previous condition) and to designate which roads they would use, any remediation from damage through construction to ensure the county was back to looking like rural New Mexico when they were finished," Newman said.

The turbines are built to last from 20 to 30 years, he said.

Newman warned that although IRBs are used in the state to foster economic development by giving a tax break to companies, wind farms are not "credit worthy," because there is start-up and long-term risk.

"The name on the Modrall document would be the county's, so they carry a reputation risk," he said. "You want to make sure it's explicit in the documents and disclosed to investors, they have no financial recourse and you are indemnified. The wind generators are the sole source of repayment. There is no pledge of taxes. That should be explicit throughout the document."


Source: http://www.ruidosonews.com/...

JUL 21 2009
http://www.windaction.org/posts/21335-wind-farms-coming
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