Agenda Date: 02/20/2018
Subject:
Title
An ordinance on second reading amending the 2018 Littleton Sewer Utility Enterprise budget
Body
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Presented By: |
Keith Reester, Public Works Director |
REQUESTED COUNCIL ACTION:
Does city council support amending the Sewer Utility Enterprise budget by $4,000,000 to fund the biogas project at the Littleton Englewood Wastewater Treatment Plant (LEWWTP)?
BACKGROUND:
The Englewood and Littleton city councils provided feedback to the LEWWTP Supervisory Committee to pursue a change in operations to reduce the vented and flared gases by investing in a project to convert biogas generated from the wastewater treatment process (i.e. methane) into Renewable Natural Gas (RNG). In the fall of 2017, both city councils directed staff to begin the preliminary engineering for creating the systems to inject the biogas into a nearby transmission line owned by Xcel Energy. Currently less than 10% of the methane gas created through the wastewater treatment process is recaptured and the balance is flared as carbon dioxide into the atmosphere. The proposed change in operations serves two complimentary purposes: recapture gas and convert it into resaleable gas in the transportation market generating revenue, and substantially reduce greenhouse gas emissions into the atmosphere.
Based on prior city council study sessions included in the initial design services package for the Biogas to Renewable Natural Gas (RNG) Project, the project team evaluated financing approaches that best align with the LEWWTP’s project drivers and the cities’ financial goals. The council presentation included financing options recommended by staff and approved by the LEWWTP Steering Committee. The team recommended an approach that balances risk, maintains control and allows the wastewater facility to have maximum flexibility as market conditions or treatment processes change within the RNG marketplace or plant operations. The discussion considered financing options including: cash financing, using a third party agreement or public-private partnership, and municipal lease. The LEWWTP issued a Request For Information (RFI) in November 2017 and received five submittals which were used to allocate assumptions for the third-party agreement approach.
The LEWWTP Supervisory Committee approved moving forward with the project on a cash funded basis. Council provided direction at the January 23, 2018 council meeting for staff to prepare an ordinance amending the Sewer Utility Enterprise budget to include funding for the city’s share of the biogas project. The city’s share will be funded out of reserves in the Sewer Utility Enterprise.
The total anticipated project cost is $8,000,000 which is shared on a 50/50 basis between the cities. The City of Englewood’s share is authorized in its 2018 budget.
PRIOR ACTIONS OR DISCUSSIONS:
The biogas project was discussed as part of the 2018 budget sessions in September 2017 and included in the 2018 proposed budget. Council voted to remove the biogas funding until additional information was presented by LEWWTP staff. An additional study session was held January 23, 2018 to discuss the project and funding options.
STAFF ANALYSIS:
Staff has reviewed capital funding needs for the next five years for the Sewer Utility Enterprise and has determined there are sufficient reserves to fund this project at this time. The Sewer Utility Enterprise reserves are estimated at approximately $25,000,000 at the end of 2017.
OPTIONS/ALTERNATIVES:
1. Approve the ordinance to amend the 2018 Sewer Utility Enterprise budget by $4,000,000 authorizing the expenditures for the biogas project.
2. Not approve the ordinance, hence, not fund the city’s portion of the project.
FISCAL IMPACTS:
The Sewer Utility Enterprise fund reserves will be reduced by $4,000,000 to fund this project. In addition, the estimated payback by utilizing RIN credits is approximately four years. It is anticipated that RIN credits will be available after the four years, which will help offset potential future sewer utility rates.
STAFF RECOMMENDATION:
Staff recommends approval of the ordinance on first reading.
PROPOSED MOTION:
Proposed Motion
I move to approve the ordinance on second reading amending the 2018 Littleton Sewer Utility Enterprise budget.