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City leaders in Burlington, Vermont, are asking voters next month to allow the city to borrow millions of dollars to help meet its ambitious clean energy goals.
Burlington is aiming to eliminate fossil fuels in the heating and transportation sectors by 2030. While the city has made substantial progress in recent years, including transitioning its electricity supply to all renewables, it will take a bigger push to get more buildings using heat pumps and more people driving electric vehicles.
The proposed $20 million Net Zero Energy Revenue Bond would go a long way toward funding electrification incentives and grid upgrades to begin accommodating increased electricity demand.
Burlington, which has a municipal-run electric department, is among the first municipalities in the country to propose a bond specifically for clean energy goals. Success will depend on whether voters approve the measure, which could be complicated if they don’t realize that, unlike other bonds, this one doesn’t involve a tax increase.
The city earlier this year announced it was on track to meet its net-zero goal, but some of that progress was likely because people have driven less during the pandemic, said Darren Springer, general manager of the Burlington Electric Department. “We know that there is more work that needs to be done to keep up with the ambitious pace,” he said.
The net-zero bond would be used over the next three years in combination with other annual bonds issued by the electric department. Investments would include $5.3 million to continue an enhanced incentive program Burlington implemented during the pandemic, focusing on encouraging uptake by residents of heat pumps and electric vehicles.
Another $12.3 million would be used for grid improvements to improve reliability and accommodate new electric load. The city’s 2020 integrated resource plan studied grid implications for the net-zero goal. It found that if Burlington is successful in reaching those ambitions, peak demand could go from the current 65 megawatts to 140 megawatts. The upgrades made with the bond would be able to accommodate a peak of 102.8 MW, which the integrated resource plan predicted could be reached by 2024.
Other funding from the bond would be used for maintenance of power generation plants, new electric vehicle charging stations, and upgrades to the electric department’s data management systems that would allow for more dynamic electric rate designs, like real-time pricing for electric vehicle charging.
The idea of a revenue bond has been on the table for a few years, Springer said, but he said now was the right time to approach voters, in part because customer uptake of incentives has been increasing. “We’re just seeing the pace picking up in a way that supports this investment being a good idea at this moment,” he said.
Burlington in April hiked its electric rate for the first time in more than a decade. This bond would allow the city to borrow money for its investments rather than raise customer rates. Higher revenues from increased electric sales would help pay back the debt, and those revenues would also help keep rates from rising again in the future.
The bond wouldn’t involve a tax increase for residents, something city leaders hope voters are clear on. Unlike other municipal bonds, a revenue bond like this doesn’t rely on taxpayer funding.
“That’s a huge thing to understand,” said Burlington City Councilor Jack Hanson, who helped draft the city’s net-zero energy roadmap. Burlington’s early voting ballots have already started arriving in mailboxes. Hanson noted the ballot has only two items: this bond and another one that would raise taxes. They could be easy to confuse.
“We have to really be communicating that to the public,” said Hanson, who added that local neighborhood news bulletins and planning meetings will be important opportunities to reach voters. He said he hasn’t heard opposition to the bond, which the City Council voted unanimously in September to allow on the ballot.
The money from the bond has been factored into the electric department’s five-year financial projections. If voters don’t approve it, the city would likely have to defer or cancel investments and programs it has planned, according to Burlington Electric.
Springer said he’s unaware of any other municipality that’s tried to issue a bond to fund its net-zero goals. “We’re hopeful that if this is successful, that it could be something that’s a model for other utilities or communities that are trying to move in this direction,” he said.
Emily Brock, who leads advocacy efforts for the Government Finance Officers Association, compared Burlington’s concept to green bonds: Both are meant to show investors their money will be used to achieve specific climate-related goals.
She added that this isn’t necessarily a new concept. Cities often issue revenue bonds to fund environmentally responsible improvements, such as water or sewer upgrades. That said, Burlington may be the first to call this a net-zero energy bond, she said. “By calling it that, it communicates to the investor base that ‘this is Burlington’s final objective, and can you help us get there,’” Brock said.
“To our knowledge, Burlington Electric is the only public power utility to issue this specific kind of bond,” Patricia Taylor, senior manager of regulatory policy and business programs at the American Public Power Association, wrote in an emailed statement. “As public power utilities nationwide continue to reduce their greenhouse gas emissions, we hope these kinds of innovative financing mechanisms will help with electric vehicle deployment and other electrification efforts.”
Burlington in 1990 issued an $11.3 million revenue bond to launch substantial progress on energy efficiency goals. City leaders have compared the new initiative in Burlington to the 1990 one.
“If we’re fortunate enough to have the voters approve it in December, I think it will be seen in the future as being foundational to the effort to move towards electrification to reduce emissions,” Springer said.
Election Day is Dec. 7.