Hydro plant or no, the city of Aspen is still facing 23 more years of up to $360,000 in annual debt service costs for the bonds voters approved in 2007 to partially finance the energy project.
Local voters handed the city and its plans for a Castle Creek Energy Center a loss in this month’s election, when just over 51 percent voted “no” on an advisory question asking if the city should continue pursuing the project.
City Council is planning to meet in January to discuss the implications of the vote, the future of the project and other options related to city energy policy. Many project opponents are hoping the vote signaled the end of any city involvement with the project. Others note that since the vote was not legally binding, the city is within its rights to continue pursuing a hydropower station, which would increase existing municipal diversions from Castle and Maroon creeks to generate electricity. Others still, even some who voted “no” on the ballot question, want to see the city hit the pause button and re-evaluate the project, and potentially revive it later once outstanding community concerns have been addressed.
One thing is certain: When the city went to market with $5.5 million in general obligation bonds in 2008, following the affirmative vote approving the debt in 2007, it committed itself to a total repayment cost of $9.52 million through 2035. The bonds carry interest rates of between 1.9 percent and 4.85 percent, depending on when they are scheduled to mature, city finance director Don Taylor said. This means the annual debt service on the bonds costs the city between $350,000 and $360,000 a year, he said.
While it has since been paying the debt service on those bonds out of water department funds, by mid-decade the city had planned to start paying the bonds back directly with revenue generated by the hydro plant, Taylor said.
It’s likely, Taylor noted, that water rates would have to be increased at some point to cover the bond repayments if revenue from the hydro plant never materializes. The city evaluates its water rates every two years, and recently increased rates to bring them in line with the actual cost of service.
Through 2012, the city has paid $1.47 million toward the hydro bonds, Taylor said. It makes an interest payment semi-annually, and pays down the principal once a year, he said.
About $7 million has been spent on various components of the project, including a 4,000-foot-long penstock that also works as an emergency drainline for the city’s Thomas Reservoir; the city also already purchased the proposed plant’s turbine. The total budget to complete the project, initially estimated at $6.2 million in 2007, has grown to $10.5 million.