The city of Monona struck a deal last year to get about $600,000 worth of solar panels on four public buildings without putting the project out for bid.
The installation was arranged through a lease agreement with Colorado-based Falcon Energy Systems LLC, the owner of the panels.
In the agreement, Monona got free electricity from the panels for City Hall, a library, a pump station and a parking garage. Falcon got tax credits, discounted rent for the space on the buildings and, because the company did not sell the electricity to the city, freedom from the regulations that apply to public utilities.
As a side effect of the deal, Falcon was able to forgo soliciting bids for the installation and instead hired the electrical contractor of its choice, Madison-based Full Spectrum Solar LLC.
Jeff Crocker, assistant business manager at the International Brotherhood of Electrical Workers Local 159 in Madison, said some of his members would have liked a shot at winning that contract. Rather than finding out about the project through a request for bids, though, he learned of it from a member who had attended a Monona City Council meeting where the job was discussed.
“If the city of Monona would have put that work out for public bidding, and if it would have been an open and fair playing field,” Crocker said, “there would be no complaining.”
Bill Cole, Monona city attorney, was unapologetic about the way the sides brokered the deal. It had to be unorthodox, he said, because the city by itself could not take advantage of most of the economic incentives the federal government uses to encourage such projects.
Those incentives come primarily in the form of tax credits. The city of Monona does not have taxable income, so it had no need for the relief.
Falcon did, though. And it got that relief by becoming a third-party owner of the project. The company’s compensation will now come in the next six years as the city buys the renewable-energy credits that are created for each megawatt of electricity produced by the Monona solar project.
According to the contract for the deal, the city must pay $130 for each credit, a cost expected to be covered in large part by the electricity savings brought about by the project. The city also will recoup money from Falcon’s lease payments.
Sidestepping the bidding, Cole said, was never a goal for Monona officials, but the outcome was justifiable.
Because Falcon and its investors own the solar arrays and bear most of the project’s risk, they should be free to work with the electrical contractors of their choice, Cole said.
“It’s analogous to when we are leasing space on water towers for cellular providers,” he said. “That’s their stuff.”
Even so, Cole acknowledged that Falcon, unlike cellphone companies, is serving only two entities in Monona: city government and the library.
To critics such as Crocker, that difference puts Monona close to being a government that has had something built for its own benefit. That, he said, means the job should have gone out to bid.
The city, though, avoided making a direct purchase to which bidding rules would have applied, Cole said. He noted the lease expires after six years, a much shorter time than the equipment will last. After those six years, he said, the city is free under the contract to buy the equipment, renew the lease or terminate the relationship.
But Crocker cast doubt on the idea that Monona officials would choose to end the third-party agreement once the lease expires, partly because the city would have to cover some of the dismantling costs. That likely reluctance, he said, shifts the panel installation back toward being a direct purchase of equipment to be used for the long term.
In reality, Crocker said, Monona officials found a backdoor way to pay for a public works project without putting it out to bid. He said the bidding process is important because it gives companies a fair chance at winning public contracts and because construction workers on government projects must be paid prevailing wages, which are meant to reflect the average rate paid to each trade in the area where a job is taking place.
Crocker said he is not privy to the details of Monona’s solar project and does not know for certain how the workers were compensated.
“But I would have to say,” he said, “more than likely, there wasn’t a prevailing wage paid on that.”
Selecting the contractor
Burke O’Neal, an owner of Full Spectrum Solar, confirmed Crocker’s suspicion. O’Neal said Full Spectrum, a nonunion company, does not pay prevailing wages on many of its projects, although it has won bids for government contracts in which paying that wage was a requirement.
He said his company was enlisted for the Monona work by Solar Connections, a Madison-based consulting business with which he and his associates had worked on several projects.
pairs of panels proposed for four public buildings in Monona
the length of Monona’s lease agreement with Falcon Energy Systems LLC
maximum number of years estimated to be required to recoup purchase price through electrical savings, if the city chooses to purchase the equipment
increase in use of renewable fuels Monona plans to achieve by 2025
Source: City of Monona project fact sheet
One reason for that relationship came to the forefront at a July 15 meeting of the Monona City Council, at which council members expressed concerns that the solar project they were then considering had not been put out to bid. In response, Kurt Reinhold of Solar Connections distributed price quotes from three additional companies: Sustainable Solar LLC, Madison; Midwest Solar Power LLC, Madison; and Adolfson and Peterson Construction, Minneapolis.
Of the four, Full Spectrum had the lowest price per kilowatt hour.
Even so, there was no general solicitation of quotes, and Solar Connections was free to get prices from whatever companies it wanted. Absent from the presentation was a quote from H&H Energy Services Inc., a solar equipment installer in Madison and a union shop.
Crocker said that is exactly the sort of company that should have as good of a chance as any to win such a project.
But Chris Collins, H&H Energy solar marketing director and project manager, expressed reluctance to complain about the way the Monona project came about. He said he would have liked to submit a bid but can understand why it might be unfair for him to sweep a contract out from under another company that has gone to the trouble of lining up investors and developers.
Collins said he too is privy to few of the details of the Monona project, but he is familiar with third-party agreements with public entities. H&H Energy, he said, has been hired by the state to construct solar water heaters at the University of Wisconsin-Oshkosh campus, prisons and other government buildings.
Collins said he had to submit bids for all of those projects, putting his company in danger of losing the work to competitors despite the time spent lining up investors and other partners. Still, he said, he is reluctant to say bidding should be required for all work involving government money.
“If they put this whole thing together,” Collins said, “and they had investors and talked to Monona, then more power to them.”
Twenty-two states have passed laws explicitly permitting those sorts of third-party ownership arrangements. Wisconsin, though, has not, raising questions about which rules apply to private companies that provide electricity.
The complaints of unions, meanwhile, have caught the attention of at least one lawmaker who is working on legislation that would make it clear that third-party owners of generating systems are not public utilities. State Rep. Chris Taylor, D-Madison, said she has put several years’ worth of work into the legislation, which she is writing with an Assembly Republican, state Rep. Gary Tauchen of Bonduel.
The reason a bill has not been introduced, Taylor said, is her and her colleagues’ continued attempts to seek advice from all of the groups that would be most affected by such a law, including unions, public utilities and renewable-energy companies. Through that work, she said, she has become aware of, and shares, the concerns about prevailing wage.
Taylor said she plans to introduce the bill this legislative session but doubts lawmakers have enough time to arrange a vote before recessing for the summer. However the final product deals with prevailing wages and public bidding, Taylor said, the legislation should be appreciated for its promise of economic benefits.
That promise is enticing, Crocker said, but he wants to be sure all companies have an equal chance of winning work such as that in Monona and of contracting at what he considers a fair price.
“Being a public building project,” Crocker said, “there should have been a prevailing wage paid on that.”Follow @TDR_WLJDan
Editor’s Note: The above story was corrected Feb. 11, 2014, to reflect that the state of Wisconsin does not bestow renewable-energy credits that are created for each megawatt of electricity a project produces.