LANSING – Michigan local governments would be able to make energy efficiency improvements to their buildings without incurring debt under legislation under consideration in the Michigan House Local Government Committee.
The bills (HB 4990, HB 4991, HB 4992, HB 4993 and HB 4994) would allow counties, cities, villages and townships to enter lease-purchase agreements for the energy upgrades.
Because the equipment is on lease, the agreement does not count toward the debt limit for local governments, Rep. Al Pscholka (R-Stevensville), sponsor of the package, said.
The local unit could also stop payments in any fiscal year if the equipment does not work as expected or if the service is substandard, Pscholka said. The lease can also call for the contractor to make up the difference if the energy savings are not as projected.
Ken Osborn, legislative liaison for the Department of Treasury, said the department does not have a position on the bills but does have some concerns.
“Certainly the agreements, if they’re working as intended, can provide savings,” Osborn said. “Our concern is what happens if things don’t go as intended.”
He said equipment like a ventilation system is going to be difficult to remove and replace if the local government decides to cancel the lease. “In a practical sense, the municipality’s going to need to continue to make payments on that,” he said.
Osborn said there are also some existing statutes that might better guide the lease agreement.
David Roeder with Sterling National Bank, which finances such lease agreements nationally, acknowledged it was rare for local governments to cancel the agreements.
“You see it happen more often with things like copiers where a copier can be unplugged and a new one brought in,” he said of canceling lease agreements. “It doesn’t happen very often with energy performance contracts.”
The committee adopted H-1 substitutes for all of the bills but took no further action.
TIFA: Fire chiefs joined the list of groups that have asked the committee, as it reviews tax increment finance authorities, to put some time limit on those entities.
Michael O’Brien, chief of the Brighton Area Fire Authority and speaking for the Michigan Association of Fire Chiefs, said the authorities often do contribute equipment and other benefits to departments, but they also mean additional work.
A time limit on the tax capture would ensure the funds return to the fire department to be sure it can meet the demand crated by the new development, he said.
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