County lien puts RMWD solar project in jeopardy

By Karen Brainard

What appeared to be a win-win, no-cost energy-savings proposition to the Ramona Municipal Water District board two years ago has left the directors in a no-win situation.

The solar project for the San Vicente wastewater treatment plant cannot proceed due to a county lien on the property and, with a California Solar Initiative (CSI) deadline looming, the district could lose its $10,000 rebate reservation refund.

Construction on the solar project must begin by May 31 to meet the Oct. 1 CSI deadline for the refund, Alejo Lopez, a manager with Siliken USA, the solar company, said at the RMWD board’s May 22 meeting.

John Woody with Enfinity, the financing partner working with Siliken, told the board that a possible option to the lien would be to obtain a bond in favor of the county, but the estimated minimal cost is $8,000 annually.

Two years ago, RMWD directors, with some hesitation, approved paying $25,000 to reserve a solar rebate, known as the California Solar Initiative, from the California Center for Sustainable Energy (CCSE). The rebate reservation fee was to be refunded once solar projects at the Santa Maria and San Vicente sewer treatment plants were completed.

Shortly after reserving the rebate, the board entered into a Power Purchase Agreement (PPA) with a private company, known as the power provider, that would construct the two solar projects. The power provider would own, operate, and maintain the photovoltaic systems on RMWD property and sell the electricity generated to the water district at an agreed upon price that would be less than the amount paid to San Diego Gas & Electric. After 20 years, RMWD would have the option to buy the solar systems or the power provider could remove them. The projects were estimated to save approximately $2.2 million in energy costs over the 20 years.

Since that time, the projects have been delayed for numerous reasons and have received two deadline extensions from the CCSE. RMWD legal counsel said CCSE has never granted a third extension.

Lopez said construction can begin at the Santa Maria wastewater treatment plant and be completed in time to receive $15,000 of the rebate refund.

A county lien discovered by Enfinity in February is holding up construction at the San Vicente site.

“Back in 2000, the County of San Diego placed a lien on the real property on the San Vicente site to secure future road improvements at that site,” Woody said. “And because there’s this lien on the property, it inhibits our right to finance the project because basically the county can come in and foreclose the lien which would thereby make our site lease on the property null and void and effectively terminate the site lease.”

According to Woody, Enfinity and RMWD have been trying to work with the county to either have the lien extinguished or subordinated.

“Unfortunately we haven’t been successful in that,” he said.

Language in the lien contracts prohibit the county from subordinating the lien, he added.

RMWD General Manager David Barnum said the county put the lien on the San Vicente plant property in 2000 when the water district constructed a holding pond. The lien secures $808,030 in drainage and road improvements for Vicente Meadow Drive and San Vicente Road.

Woody said county counsel is receptive to the idea of RMWD possibly purchasing a bond to secure the construction of the drainage and road improvements in exchange for removal of the lien contracts.

Barnum, however, said the county has not informed them how much the improvements would cost now ­— 12 years later — and what kind of bond would be required. In addition, the arrangement would need to be approved by the director of the county’s Department of Public Works, he said.

Based on an estimated bond amount of $808,030 and a premium range of 1 to 3 percent, the annual cost of a bond premium would be between $8,000 to $24,000 until improvements are constructed or the county releases the bond, district staff reported.

“So the question is: Do we pay 8 to save 10 and the 8 is escalating?” asked board president Bryan Wadlington, referring to the $8,000 minimum for a bond.

“And the 8 is per year,” added Director Joe Zenovic.

Zenovic asked why the lien was not discovered earlier. Woody said Enfinity is the third financing partner to work on the project. Enfinity came on board in January, he said, and began working with RMWD legal counsel and county counsel when it discovered the lien a month later.

“I’m really not happy with what’s taken place here because I think this should have all been discovered before these contracts were signed,” said Director Darrell Beck. “Irregardless, we probably would have had to pay for some kind of a bond because the county is not ...helping us out at all.”

Wadlington told Woody that he did not understand the late timing and voiced his displeasure at having to make a decision that night “that has vast ramifications of the profitability, the viability...I highly resent it.”

According to Lopez and Woody, if RMWD pulls out of the San Vicente project, it would not be liable for any costs incurred by the other parties.

Siliken had reported in April that it has invested nearly $250,000 into the projects.

After continued discussion and assurance that the board could call a special meeting with 24-hour notice, the directors voted 4-0, with Director Kit Kesinger absent, to authorize staff to explore the possibility of procuring a bond, in favor of the county, to secure the drainage and road improvements in lieu of the lien.

   
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