City of Philadelphia: City Announces Sale of Revenue Bonds for Building Energy Conservation Project

March 26, 2012
Mark McDonald, Press Secretary

(City of Philadelphia) On May 31, 2012, the City of Philadelphia, through the Philadelphia Municipal Authority, completed the sale of its City Agreement Revenue Bonds, Series 2012A and Series 2012B (Federally Taxable Qualified Energy Conservation Bonds) totaling approximately $12.6 million. Proceeds from the bonds will fund implementation of energy efficiency upgrades at Philadelphia’s City Hall, Justice Juanita Kidd Stout Center for Criminal Justice, Municipal Service Building and One Parkway. The project is a major step toward achieving the goal of reducing City government energy consumption by 30% by 2015 as outlined in Greenworks Philadelphia, the City’s comprehensive sustainability plan.

“The City of Philadelphia is committed to a sustainable future, and important projects like this show that the City is leading by example,” said Mayor Michael A. Nutter. “This project reduces our long-term energy consumption, creates new opportunities for businesses, improves City facilities, and saves money which we can use in other areas of need.”

The project uses $6.25 million of the City’s allotment of Qualified Energy Conservation Bonds (QECBs), tax credit bonds that qualify for an interest rate subsidy from the federal government. The American Recovery and Reinvestment Act allocated $15 million of QECBs to the City of Philadelphia for funding qualified conservation projects. The 2012 bonds benefited from improving market reception of the City’s credit, and received favorable interest rates, resulting in a true interest cost (net of Federal subsidy) of 2.31% for the 15-year bonds.

The project is being completed under the auspices of the Pennsylvania Guaranteed Energy Savings Act (GESA) program. The act allows municipalities to contract with energy service companies (ESCOs) that guarantee energy efficiency upgrade project savings and commit to pay the difference if actual energy savings fall short of expected savings. The City of Philadelphia contracted with NORESCO, an ESCO, to perform energy audits on targeted buildings and install energy conservation measures (ECMs). The energy savings achieved will more than pay for the energy efficiency improvements, with the energy savings expected to exceed net bond debt service by more than $10.2 million over the life of the transaction.

The City plans to install ECMs, including lighting replacements, control system upgrades, and water conservation improvements, among others. The upgrades will reduce energy usage in the four buildings by approximately 20%, increase human comfort, reduce the immediate capital needs of the facilities, and make the facilities easier to operate. The project’s Economic Opportunity Plan contains aggressive minority, women, and disabled owned business participation rates.

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