A dispute in 2012 over modifying the terms of the redeveloper’s agreement that will govern the solar farm project at the former French’s Landfill site will cause Brick to miss out on as much as $1 million in revenue, Mayor John Ducey said.
In July 2012, a Democratic-led township council voted in favor of changing the agreement so Standard Alternative, the redeveloper, would pay off a township bond issuance at 4.5 percent interest. If the township was able to borrow the approximately $31 million required to fund the project below that rate, Standard would have been locked into the fixed rate, and the township would have pocketed the excess.
But former Mayor Stephen C. Acropolis, a Republican who came out against the Democrats’ plan, never signed the measure that was passed by the council, thus nullifying the changes to the contract. Acropolis said at the time he was worried in the two years it would take to build the solar array and get the project off the ground, interest rates could rise, and the township would lose money if rates rose above 4.5 percent.
“They put something through that puts the taxpayers at risk,” Acropolis said at the time.
Two years later, with interest rates still low, the township would have ended up profiting on the deal. But now it is off the table, officials have said, and the lack of the interest rate revenue will “safely” be $1 million or more, according to Ducey.
“When I became mayor, I signed [the resolution], but I found out that it wasn’t binding,” said Ducey.
Kevin Starkey, the current township attorney, said he estimates interest rates on the bonds for the project will be about 3.8 percent, well below the 4.5 percent fixed rate that Standard Alternative, now called Brick Alternative, would have been obligated to pay.
“That gap between 4.5 percent and 3.8 [percent] is what the township is not going to get paid,” said Starkey. “It’s not an out-of-pocket loss to the township, but it is money that is not going to come in.”
At a meeting of the township council held Tuesday night, the governing body made a few minor changes to the agreement, but none as drastic as implementing a fixed interest rate. The main item included in the revision was changing the initial rate the township will pay for discounted energy from 9 cents to 8.5 cents per kilowatt hour. A 3 percent escalator clause that was in the original contract will remain.
“We had very little room to negotiate,” said Starkey. “It’s not a huge change, but we’re doing the best we can with what we have in front of us.”
Under the original agreement, the township receives land lease payments from Brick Alternative and will be able to save significantly on energy costs through the opportunity to buy discounted electricity. But the interest rate revenue over 15 years will not materialize; Brick Alternative will repay the township based on whatever interest rate at which the township bonds.
The latest revision also includes a largely administrative clause that calls for the township to purchase the solar array after the 15 year agreement comes to an end, though Starkey said the purchase language was placed in the agreement so the redeveloper could take advantage of tax credits. The “market value” the agreement calls for will be set at either a negative number or zero, he said.
“The formula has been carefully put together,” said Starkey.
Ducey said he expects the bonds for the project to be approved at the next council meeting, which is scheduled for Sept. 23. The solar array itself will likely be producing power by Oct. 1, Starkey said.