Wisconsin State Agency Power Plant Sales To Benefit Private Businesses; Who's Driving This Train?

Scott Walker is hell-bent to declare 37 state power plants "surplus" - - and sell them even without bids.

We need to know why Walker is so keen on this sop to private firms, and what other state assets, like office buildings, conservation areas, state forests and other resources he and his team want to take out of the public domain.

I am posting below the text about the power plant issue taken from a Legislative Fiscal Bureau memo dated March 10 - - note that the issue was deleted from the bill Republicans rushed to approval, and which is now enjoined by Dane County District Court Judge Maryann Sumi from publication - - that shows what the Walker administration had in mind and what it is likely to come back with as a separate bill or a section of the 2011-13 budget.

I am bold-facing what I think is important:

1.    SALE AND CONTRACTUAL OPERATION OF STATE-OWNED POWER PLANTS
Governor:

Allow the Department of Administration (DOA) to sell any state-owned heating, cooling, or power plant or contract with private entities for the operation of any such plant, with or without solicitation of bids, for any amount the Department determines to be in the best interest of the state.

Under current law, through June 30, 2011, DOA may sell state-owned property, if the Department determines that it is in the best interest of the state. The sale may be conducted using public bids, or negotiated prices. The Department may reject bids if they do not serve the state's interest. Such sales must be approved by the Building Commission. After June 30, 2011, such property would have to be declared surplus (property not needed for agency operations) in order

ADMINISTRATION

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to be sold by the state. In addition, the University of Wisconsin System Board may sell or dispose of property as allowed under statute and as is deemed beneficial to the System and the state. The bill would exempt the sale of state-owned heating, cooling and power plants from these current law requirements. Specify that DOA may attach conditions to the sale or contractual services agreement as it finds in the best interest of the state.

Specify that any outstanding public debt, including principal, interest, and premiums re- lated to refunding of the debt associated with a state-owned heating, cooling or power plant would be paid from the net proceeds of any sale of the property. Specify that property acquired, constructed, or improved using federal financial assistance would be repaid to the federal government through any net proceeds, if required under federal law. If there are any net proceeds after debt service, and repayments to the federal government have been completed, specify that remaining funds be deposited into the budget stabilization fund, unless the sale of property comes from the sale of property or assets at the Northern Center for the Developmentally Disabled, in which case the proceeds would be used for the current law purpose of deposits into the Department of Health Services institutional operations appropriation.

Specify that public utilities would not have to seek Public Service Commission (PSC) approval in order to buy or contract for the operation of a state-owned heating, cooling or power plant. Under current law, the PSC must approve and certify construction, renovation, improvement, expansion, sale, lease, and consolidation of electric generating facilities for public utilities. Public utilities are currently defined as an entity that provides heat, light, water, or power directly or indirectly to the public.

Specify that DOA would only be responsible for state power plants if they are owned and operated by the state. Under current law DOA must operate, maintain, and keep in repair certain state facilities, including the Capitol heating plant, and other power plants that are operated in conjuncture with state facilities.

If DOA sells or enters a contract for the operation of a state-owned heating, cooling, or power plant, unless otherwise agreed between DOA and the operator, specify that the purchaser or contractor would continue to operate the plant, keep it in good repair, and continue to provide adequate and sufficient heating, cooling and/or power to meet the state's current and future needs. Specify that the contract would also have to require the purchaser to submit to the jurisdiction of PSC, if the Commission determines that the purchaser or contractor qualifies as a public utility.

If it is determined that the purchaser or operator is not a public utility because it is not providing service directly or indirectly to the public, specify that PSC would regulate the facility as a public utility, if, upon the petition of DOA, PSC determines that it is in the interest of the public.

Require the DOA Secretary to require agencies to submit expenditure estimates for any appropriation related to the operation of a state-owned heating, cooling or power plant during a bi- ennium in which a plant is sold that provides services to that agency. The DOA Secretary would be required to deny estimates for the operation of the facility if the plant will be operated by a private entity. The Secretary could then allow the agency to expend these funds for payments of contractual services for heating, cooling and power. Specify that if the DOA Secretary determines that less funds would be needed to pay for heating, cooling, or power under a contract with

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a private entity, the Secretary may lapse or transfer from GPR or PR sum certain appropriations the estimated excess into the general fund, effective on the date in which the facility is no longer operated by the state.

Specify that, if a state-owned heating, cooling, or power plant is sold or a contract is agreed to for the operation of the facility, then the DOA Secretary could identify and delete any full-time equivalent positions authorized for the operation of the facility. The reduction of state positions would be effective on the date in which the facility is no longer operated by the state.

Specify that the DOA Secretary would have to notify the Co-chairpersons of the Joint Committee on Finance of any action taken to sell these facilities, delete agency position authority, payment of debt service, deposit funds into the budget stabilization fund, transfer or lapse appropriated amounts for the operation of plants into the general fund, or reallocate resources within appropriations for contracted services relating to purchasing contracted services.

The provision does not require the sale of state-owned heating, cooling or power plants, nor does it specify profit margins in the event of a sale. It is, therefore, unknown what amounts, if any, would be deposited into the budget stabilization fund from net proceeds or into the general fund from lapses and transfers from operating budgets.

The Department of Administration identifies 37 heating, cooling and power plants, includ- ing 14 at University of Wisconsin institutions, 13 at Department of Corrections facilities, five at Department of Health Services facilities and five at other agency facilities.

Since most of the heating, cooling, and power plants are tied into specific state facilities, it is likely that any purchase or lease would be agreed to only if there was an additional agreement requiring the state to purchase heating, cooling, and power from the purchaser or leaser. The long-term value of any sale, from the state's perspective, will hinge on any contractors ability to provide heating, cooling and power for less than it would cost to produce the same commodities on its own. The value from the perspective of any buyer or leaser would be based on that company's ability to recover more net profits (including sales price, production costs, and taxes and tax incentives) from the purchase or lease than in the absence of such a purchase or lease.

Joint Finance: Specify that the Department of Administration (DOA) could not sell, enter a lease, or contract for any of the operations of a state-owned heating, cooling or power plant unless such a transaction was approved by the Joint Committee on Finance under a 14-day passive review process. Require the Department of Administration to submit the following to the Committee as part of any request: (a) estimated value of the facility as determined by DOA and at least one qualified privately-owned assessor; (b) full cost of retiring remaining debt for the facility; (c) a cost benefit analysis that considers the short-term and long-term costs and benefits to the state for selling, leasing, or entering a contract for facility operations; (d) the length and conditions of any proposed sale, lease or service agreement between the state and a proposed purchaser; (e) the estimated budgetary impact for affected state agencies for at least the current and following biennium; and (f) any other information requested by the Committee.

Authorize the Building Commission to determine and make payments to the federal government so as to avoid an adverse effect on any exclusion of interest from gross income for
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federal income tax purposes on public debt, revenue obligations, appropriation obligations, operating notes, and master lease obligations and to make payments to advisors that assist in making the determination. This provision would allow the state to make payments to federal Internal Revenue Service (IRS) so as to retain the tax exempt status of bonds issued to finance a power plant or facility in the event that plant or facility is subsequently sold to a private entity for which that tax exempt status would not apply. Under current law, the Building Commission has the authority to only make payments to federal government so that public debt, revenue obligations, and operating notes are not treated as arbitrage bonds. The payment provisions under the amendment are broad enough to continue to allow these payments to be made. The amendment would also modify the existing program revenue appropriation from which current law payments can be made to incorporate the payments allowed under the amendment.

Modify the portions of the bill relating to the payment of any debts owed on the heating, cooling and power plants in the event of a sale, lease, or contract for service to specify that debt service shall be repaid for the portion of a building project that was related to the construction of the heating, cooling, or power plant.

Require DOA to determine any actions that may be necessary or appropriate as to avoid an adverse effect on any exclusion of interest on such public debt from gross income for federal income tax purposes should a plant be sold, leased or where there would be a contractual services agreement. This may include payments to advisors or the IRS. Net proceeds from the sale of a plant would be in the following order, based on sufficiency of funds: (a) payments to advisors or the IRS determined by DOA to be necessary and appropriate; (b) the repayment of any federal funds used to acquire, construct, or improve the plant, that are required under federal law; (c) to deposit sufficient amounts in the bond security and redemption fund to repay the principal and the interest on any portion of the total debt used to construct the plant; and (d) budget stabilization fund.

Conference Committee: Delete provisions specifically relating to the sale or lease of power plants. Retain sections that would authorize the Building Commission to determine and make payments to the federal government so as to avoid an adverse effect on any exclusion of interest from the gross income for federal income tax purposes on public debt, revenue obligations, appropriation obligations, operating notes, and master lease obligations and make payments to advisors that assist in making the determination. This provision would allow the state to make payments to the IRS so as to retain the tax exempt status of the bonds issued to finance a state facility in the event such a facility is subsequently sold to a private entity for which that tax exempt status would not apply. Under current law, the Building Commission has the authority to only make payments to the federal government so that public debt revenue obligations and operating notes are not treated as arbitrage bonds. The payment provisions would continue to allow these payments to be made.
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