Ethanol takes next steps

The news at city hall these days has been ethanol and will be ethanol for some time to come.

Water has been the key part of our discussions. We are seeing evidence that the water is available and is able to be permitted. Our focus has been on learning what other communities have learned the hard way and going to school on their experiences.

What is great at this point is application of the lessons learned.
· Everton is looking for and finding water resources for the plant using their resources.
· Everton will be constructing the wells, well houses, and piping system that connects it to the City of Concordia.
· Everton wants the effluent water from the waste water treatment plant for use in their cooling towers. They will clean this water with sand filters to be built on the WWTP grounds.
· The entire infrastructure will be given to the City of Concordia before the plant is constructed.
· At the end of the day, we will charge them for the privilege of providing water to them.

This ends up being a great benefit for the City. Without Everton’s intent to build a plant, the City could not secure the water rights Everton is acquiring because we have a surplus in the allocation of what we have versus what we use. Everton can get access to water because it will become part of the municipal water system.

Due to the private financing process they are using, Everton is not able to keep these assets on their books and asked the City to finance this infrastructure. Our first reaction to this was guarded. What looked like a good deal suddenly looked shaky. The result of our concerns produced the following results:

· During construction of all the infrastructure elements, Everton will provide a $6 million letter of credit to ensure construction is complete. If something happens to Everton during this construction period, we call the bank holding the letter of credit and the project is paid. Period. Again, if something happens to Everton during this construction period, we call the bank holding the letter of credit and the project is paid. There is no risk there.
· Once the construction is complete and the water system is operating. The cost of construction will be converted to a Special Assessment District Bond where Everton is the sole member of the district. That bond picture will have two years of bond payment reserves held so that if Everton goes away, we have two years of bond payments available while Everton’s financiers work out how to pay those debts.

While the first one is very little risk, the second financing method has some risk. While we don’t expect or wish any failure on Everton’s part, we do have to consider the possibility of a business failure.

A key element in the risk planning is knowing that the special assessment district bonds are a first position debt if a failure happens. Our $6 million comes before the $200 million. For the folks that own the $200 million debt, having the City of Concordia in the first position will be troublesome. They will want Concordia’s lien removed thus paying off that bond.

This week at the City Commission meeting, the Commission and Everton will be discussing the development agreement. No action will occur at that meeting. Adoption consideration is scheduled for the June 6, 2007 meeting.