Schools look for private investment to help fund wind farm

When state Sen. Michael Noland and state Rep. Fred Crespo went to bat for wind power last year, they predicted a hard-fought battle against Illinois' electric utilities.

They were right.

The freshman state lawmakers and the more than 60 Illinois school districts that supported their efforts effectively lost that battle when a state House committee - whose members have received more than $45,000 in campaign cash from ComEd and Ameren - voted against sending their bill to the full House for a vote.

Undeterred, three suburban school districts - Community Unit District 300, Keeneyville District 20 and Prospect Heights District 23 - are considering a different strategy that would allow them to exploit wind power within the existing legal framework.

The districts have proposed a public-private partnership that would take advantage of tax credits in the federal stimulus package and culminate in a 20-Megawatt wind farm downstate.

If they succeed, the districts are hoping to become a model for other public entities in Illinois.

"We're the Don Quixotes looking for the windmills," said Gary Ofisher, director of operations in District 20. "We were the ones that started this. Whatever we can do and share with other school districts so they can reduce their operating expenses helps kids."

The concept is not wholly different from what Districts 300 and 20 pursued last year before the failure of Crespo's bill deflated their plans. Under the previous plan, the districts would receive a one-to-one credit for the electricity they produced downstate - at retail prices.

But current law only allows the districts to get paid at the wholesale price - as little as 20 percent of retail - when they produce electricity off-site. Because of the lower reimbursement rate, the turbines would wear out before the districts would have earned enough to pay for them.

But the districts think they have found a way to dramatically reduce the payback. Here's how it would work:

A consortium made up of the three districts would issue an estimated $46 million in bonds to pay for the construction of the 20-Megawatt wind farm downstate, perhaps in Stark County near an existing wind farm in Camp Grove.

A private investor or investment group would place $30 million in escrow and reap about $16 million in revenues during the first six years of the wind farm's operation. Under a lease with the consortium, the investors would have to pay back the bond in annual payments over six years - no matter what.

That means that even if the wind farm underproduces, the investors would still be obligated to repay the bonds - and, theoretically, taxpayers would be protected.

"If there is a shortfall, the (investors) would have to cover that shortfall over the entire lease period, so the burden does not fall on the taxpayers," said Kirk Heston of Heston Wind, the Milwaukee-based consultant on the project.

The investors would be eligible for a 100 percent tax write-off and a 30 percent federal tax credit for renewable energy, worth another $14 million.

The investors would operate the wind farm for the first six years, incurring the estimated $1.5 million annual cost. At the end of the six years, with the construction bonds paid off, the school district consortium would take full ownership of the farm and begin operating the turbines.

The school districts, unencumbered with debt, then would be able to realize the full profits of the wind farm, an estimated $3 million annually.

If all goes according to plan, the project will be underway in two years.

The school districts now are considering an agreement that would create the consortium and divide costs and profits of the venture, with 80 percent going to District 300 and 10 percent to each of the other districts.

Supporters acknowledge that to some it may sound too good to be true. But they stress the plan is still in its conceptual stages, and the districts still need to explore whether the proposed site has enough wind, whether they can find investors during a recession and whether the so-called "capital lease" model will work.

"You can't guarantee that the wind is going to blow tomorrow," Heston said. "That's what this whole 'phase one' is about: Is it too good to be true? Conceptually, it's possible."

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