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Council approves electric substation lease deal

subphoto8 5 15WEBMiddletown Borough Council approved an agreement to have URI build the town's new electric substation, pending the review of the borough solicitor. 

Middletown Borough Council approved an agreement on Monday, Sept. 21 whereby a private developer will build a new consolidated electric substation for the borough as part of the Woodland Hills development, then lease the substation back to the town.

Council’s 5-1 vote in favor of the lease agreement with developers URI Group of Silver Spring, Md., is subject to the deal being reviewed by borough Solicitor Adam Santucci, who was not present at the meeting.

The original motion to approve the lease, put on the table by Councilor John Brubaker, did not call for solicitor review of the agreement. The provision for solicitor review was added at the urging of Councilor Ben Kapenstein and Mayor James H. Curry III, both of whom said that Santucci had not seen the lease proposal that was coming before council for a vote.

“He’s not comfortable with the legality of it as of right now,” said Kapenstein, who was the only councilor of those present to vote against approving the lease.

During a break in the meeting, URI Managing Director David Stubbs sought to correct what he called “misinformation” that under the proposal the borough will be giving or loaning URI money to build the substation.

The perception that the borough was subsidizing construction of the substation was fueled by public comments made before the vote by Jim Nardo, owner of the Westpointe shopping center on West Main Street and a member of the Middletown Industrial and Commercial Development Authority.

“Why in the hell are we digging a hole after we just got ourselves out of a hole?” Nardo asked, referring to the borough getting $43 million to pay off debt by leasing its water and sewer system to United Water for 50 years. “I’ve been in the development business for 40 years and I have never once asked any municipality, any government agency, to finance my development.”

Stubbs said that URI will provide the financing to cover the estimated $11.5 million cost to build the substation in Woodland Hills. The project also includes purchase of a smart metering system.

However, Stubbs and other partners with URI Group also acknowledged during a council meeting on Aug. 17 that URI’s proposal to build up to 511 new homes, apartments and townhomes throughout the 170-acre Woodland Hills tract cannot be done without the borough committing to building the substation there.

The substation project is essential to URI Group attracting the financing from private investors to fund the Woodland Hills project, partners with URI Group said during the Aug. 17 session.

“He can’t get funding for his project” without the borough committing to the substation at Woodland Hills, said Greg Wilsbach, a candidate for borough council in November’s general election and the former head of the town’s electrical department. “This borough should not be funding a project like that off the backs of our taxpayers and electric users and customers.”

Wilsbach from the start has been a critic of the plan to take the borough’s two existing substations at Mill and Spruce streets and consolidate them in the new substation at Woodland Hills.

In further comments made before council’s vote on the lease agreement on Sept. 21, Wilsbach said that the borough already has a smart meter system that only requires “a couple upgrades to your program.”

He contended that the $11.5 million cost for the consolidated substation at Woodland Hills is “way over” what the borough needs to spend in that the Spruce Street substation could be upgraded for $1.5 million at most and that the substation at Mill Street – rebuilt after being damaged by a flood during Tropical Storm Lee in 2011 – could be “very cheaply” moved one block to get it out of the flood plain.

Wilsbach also contends that consolidating the substation at Woodland Hills will lead to more electrical outages for the town as a whole because the system will go from 10 circuits to four.

“Middletown will be out of power a lot more. Trust me, I know these circuits,” Wilsbach said.

However, supporters of consolidating the substation at Woodland Hills got backing from an unexpected source – Dauphin County.
That the plan would get the substation out of the flood plain could strengthen the county’s application for up to hundreds of millions of dollars in grant money to be awarded by the federal government and the Rockefeller Foundation.

Dauphin County is one of just 40 applicants – and the only one from Pennsylvania – competing nationwide for the competitive grant, said George Connor, county deputy economic development director. Connor spoke to council before its vote on the substation lease along with Leah Eppinger, a planner with the Tri-County Regional Planning Commission.

“We are here not so much to support the particular project – that will be up to you – but the innovative concepts that the project has will help our point system in the application,” Connor said.

Besides the substation and its associated smart meter system, the Woodland Hills project as a whole has other aspects that could help give a boost to the county’s application for the grant, Eppinger said.

“Some of the development ideas that we are working with the developers on in this Woodland Hills project are features that the county has sort of pushed in their green development and green infrastructure program,” Eppinger said.

After council’s vote, Stubbs said that the county could potentially provide the borough with funds that would help the town make the lease payments for the substation after it is built.

“This project is a priority of the county,” Stubbs said of Woodland Hills.

However, as Eppinger noted, the county is one of 40 applicants competing for the HUD/Rockefeller Foundation money.

“This is a competitive grant. We are guaranteed nothing at this point,” Eppinger said. Even if the county’s application is approved, there is no guarantee that the county will receive any money that could be provided to the borough.

HUD wlll have “the opportunity to pick and choose to fund all, some or none” of the projects that have been identified throughout Dauphin County. Woodland Hills among them, Eppinger said.

In their comments opposing the lease, Kapenstein and Curry said that the borough had not spent enough time investigating all the alternatives for getting the town’s electrical infrastructure out of harm’s way in case of another flood.

“We haven’t done any research as a body, other than to try and push this one option through,” Curry said. “I think that we have a great deal more research to do in order to make an informed decision.”

The mayor also contended that most of the council members present to vote on the lease deal did not even know which financing option the agreement was based upon.

During the Aug. 17 meeting, URI had presented two such options: one in which the borough would obtain the financing through issuing tax-exempt bonds and another in which URI would provide the financing and then lease the substation back to the borough.
Curry noted that of all councilors present for the vote, only two – Kapenstein and Mike Bowman – had been present for the Aug. 17 session where the financing options were detailed.

The mayor in particular challenged Councilor Sue Sullivan, who because of health reasons had not attended a full council meeting since March. Sullivan attended the Sept. 21 meeting

“You don’t know how it works,” Curry said to Sullivan, who did not respond. “How can you vote on it?”

Council President Chris McNamara countered that the planning to consolidate the substation to Woodland Hills had not been done in secret and was long in the making.

“On Nov. 17 (2014) this body took action in a unanimous decision recorded in the minutes 9-0 authorizing the engineer to move forward with the relocation of the substation on the grounds of Woodland Hills,” McNamara said. “In February, council again took action where you authorized me to sign a developers’ agreement with the URI Group. You all knew what was coming over the past several months that we have been putting together the master lease arrangement.”
After the 5-1 vote to approve the agreement subject to solicitor review, Bowman sought to pass a motion to earmark all future payments from United Water under the separate water and sewer lease deal toward covering the payments the borough will have to make to lease the substation once it is built.

The move would help ensure that electric rates do not have to go up to cover the lease payments for the substation, according to Councilor Robert Louer said.

However, Kapenstein objected that most of the money from the future annual payments from United Water is already committed to the general fund, and that restricting this money to cover the substation lease payments will lead to a tax increase or substantial funding cuts.

Kapenstein said he could agree with earmarking a portion of the future water and sewer lease payments to cover the substation debt, but not all of it.

Brubaker also noted that whether power rates go up has more to do with what the borough ends up having to pay to providers for its own electricity.

Bowman’s motion ended up failing, with McNamara, Brubaker, Kapenstein and Sullivan voting against it.

Stubbs after the meeting said that the new substation at Woodland Hills could be completed by October or November of 2016, although this all depends upon how soon URI Group can start building it.

And at this point, that depends upon the outcome of Santucci’s review of the lease agreement, and how long that takes, Stubbs said.

Following the meeting on Tuesday, Sept. 22, borough spokesman Chris Courogen told the Press And Journal that Santucci had expressed some concerns regarding the first draft of the lease agreement with URI Group, and had suggested some changes. The borough forwarded those comments to URI to be incorporated in a revised lease agreement, Courogen said.



URI Group Presentation to Middletown Borough Council (August 2015)