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HomeMy WebLinkAbout09780* City Clerk’s Office Item # S-1 BACKGROUND PAPER FOR PROPOSED EMERGENCY ORDINANCE COUNCIL MEETING DATE: September 14, 2020 TO: President Dennis E. Flores and Members of City Council CC: Nicholas A. Gradisar, Mayor VIA: Brenda Armijo, City Clerk FROM: Scott Hobson, Acting Director of Planning and Community Development SUBJECT: AN EMERGENCY ORDINANCE APPROVING A SOLAR ENERGY SITE LEASE AND EASEMENT AGREEMENT BETWEEN THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION AND BIGHORN SOLAR 1, LLC, A DELAWARE LIMITED LIABILITY COMPANY RELATING TO THE LEASE OF UNIMPROVED CITY-OWNED PROPERTY FOR THE DEVELOPMENT OF A SOLAR ENERGY SITE AND AUTHORIZING THE MAYOR TO EXECUTE SAID AGREEMENT SUMMARY: Attached is an Emergency Ordinance approving and authorizing the Mayor to sign a Solar Energy Site Lease and Easement Agreement with Bighorn Solar 1, LLC for the development and operation of a solar generating facility on up to 150-acres of City-owned property in the St. Charles Industrial Park south of the Comanche Power Plant. PREVIOUS COUNCIL ACTION: On July 27, 2020, City Council approved an Option Agreement by Ordinance No. 9753 for a solar energy site with Bighorn Solar 1, LLC relating to the lease of unimproved City-owned property for the development of a solar energy project. BACKGROUND: On August 13, 2019, Public Service Company of Colorado entered into a Solar Purchase Power Agreement with CF&I Steel, LP to supply electric energy generated by photovoltaic solar collectors. Bighorn Solar 1, LLC entered into an Option Agreement with the City of Pueblo relating to the future lease of up to 150 acres of City-owned property in the St. Charles Industrial Park, south of the Comanche Power Plant. Bighorn Solar 1, LLC has exercised its option to lease the property owned by the City to place solar energy generation facilities in order to meet the solar power commitment to CF&I Steel. This Emergency Ordinance approves the Lease and Easement Agreement with Bighorn Solar 1, LLC FINANCIAL IMPLICATIONS: Commencing on the Effective Date of this Lease and continuing throughout the Term, Bighorn Solar 1, LLC will pay the City an annual rental payment from the Effective Date of this Lease, equal to $750.00 per acre of the Site or $5,200.00 per MWac of the installed capacity on the Site only (specifically excluding any installed capacity on adjacent property not owned by Landlord which may be considered part of the Generating Facility), whichever is greater. On each anniversary of the Effective Date, the Rent shall be increased in an amount equal to one and one- half percent (1.5%) increase from the previous twelve (12) months rent. The lease will be effective for a twenty-five (25) year period following the Commercial Operations Date (the “Initial Term”). Bighorn Solar 1, LLC shall have the option to extend the Initial Term for four (4) additional five (5) year periods (each a “Renewal Term”) and together with the Initial Term. In addition, Bighorn Solar 1, LLC will compensate the City with a one-time payment of $4500.00 per acre for the acreage comprising the Access Easement. Based on the calculation of 150 acres utilized at an initial annual cost of $750 per acre with an escalation rate of 1.5% per year, the City would receive $3,382,090 over the 25-year term. If Bighorn fully develops their proposed 24 Mw solar facility on the 150 acres and pays a lease fee per Mw of $5,200, the lease income would potentially be 10.9% greater than the per acre estimate. BOARD/COMMISSION RECOMMENDATION: None. STAKEHOLDER PROCESS: None. ALTERNATIVES: If this Ordinance is not approved, the City property will remain unimproved and the City will not be in compliance with the provisions of the Option Agreement entered into with Bighorn Solar 1, LLC on July 27, 2020. RECOMMENDATIONS: Approve the Emergency Ordinance. Attachments: Proposed Emergency Ordinance Solar Lease Agreement and Attachments ORDINANCE NO. 9780 AN EMERGENCY ORDINANCE APPROVING A SOLAR ENERGY SITE LEASE AND EASEMENT AGREEMENT BETWEEN THE CITY OF PUEBLO, A COLORADO MUNICIPAL CORPORATION AND BIGHORN SOLAR 1, LLC, A DELAWARE LIMITED LIABILITY COMPANY RELATING TO THE LEASE OF UNIMPROVED CITY- OWNED PROPERTY FOR THE DEVELOPMENT OF A SOLAR GENERATING FACILITY AND AUTHORIZING THE MAYOR TO EXECUTE SAID AGREEMENT WHEREAS, On July 27, 2020, through Ordinance No. 9753, City Council approved an Option Agreement for a solar energy site with Bighorn Solar 1, LLC relating to the lease of up to 150 acres of unimproved City-owned property for the development of a solar energy project; and, WHEREAS, Bighorn Solar 1, LLC has exercised its option to enter into a lease and easement agreement with the City of Pueblo under the terms and conditions of the Solar Energy Site Lease and Easement Agreement; NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The Solar Energy Site Lease and Easement Agreement (“Lease Agreement”) between the City of Pueblo, a Colorado municipal corporation and Bighorn Solar 1, LLC, a Delaware limited liability company, dated September 14, 2020, a copy of which is attached hereto including all associated documents, having been approved as to form by the City Attorney, is hereby approved. The Mayor is authorized to execute and deliver said Lease Agreement in the name of the City and the City Clerk is directed to affix the seal of the City thereto and attest same. SECTION 2. The City Council finds that this Ordinance qualifies for treatment as an Emergency Ordinance pursuant to City Charter because of the urgency to expedite the issuance of a building permit prior to September 18, 2020 for the solar infrastructure to meet the solar power commitment to CF&I Steel required for the implementation of the EVRAZ steelmaking expansion project. SECTION 3. The officers and staff of the City are authorized and directed to perform any and all acts consistent with this Emergency Ordinance to implement the policies and procedures described herein. SECTION 4. This Ordinance shall become effective immediately upon final action by the Mayor and City Council. Action by City Council: Introduced and initial adoption of Ordinance by City Council on September 14, 2020. Final adoption of Ordinance by City Council on September 14, 2020. President of City Council Action by the Mayor: ☒ Approved on September 17, 2020 . □ Disapproved on based on the following objections: _ Mayor Action by City Council After Disapproval by the Mayor: □ Council did not act to override the Mayor's veto. □ Ordinance re-adopted on a vote of , on □ Council action on _______ failed to override the Mayor’s veto. President of City Council ATTEST City Clerk