Pueblo County School District 70 began working with 360 Energy Engineers in 2017 to identify energy projects qualifying under the Energy Performance Contracting Program administered by the State of Colorado Energy Office. The District identified approximately $30 million in projects, and categorized them (in priority) by tiers. The highest priority, Tier I, included $13.35 in projects. Ehlers, the long time Municipal Advisor to Pueblo 70, was consulted to help source financing options to fund Tier 1 Projects.
Pueblo County School District 70 officials engaged Ehlers for debt issuance & management and financial management planning services. Since the District did not have any unused voter-approved General Obligation (GO) Bond authorization, Ehlers advised there were only two alternatives available to them. Option 1) do a Lease transaction subject to annual appropriation or Option 2, wait until November and seek voter approval to issue GO Bonds. The Energy projects were projected to generate significant immediate savings and because the projects were urgently needed, the District decided to pursue a lease financing. Two lease alternatives were considered: A Certificate of Participation or a bank loan. Based on the District’s requirement financing be callable with the best possible terms, and on informal discussions with Investment and Commercial Banks, it was decided seeking competitive bids for a bank loan was not in the best interest of the District. The District then identified three banks to receive a Request for Proposal: Bank of The San Juans (relationship Bank for the District), Bank of America and Sterling National Bank. All banks submitted very competitive bids, but based on the Bank of The San Juans’ proposal to provide the most favorable call terms, the District agreed to negotiate final terms with them.
The District entered into a Lease Agreement and Escrow Agreement to finance the energy project, dated June 15, 2018, with Bank of The San Juans. The loan (under the terms of the Lease Agreement) is subject to annual appropriation, with the Leased Property being the energy improvements. The District intends (with voter approval) to exercise the call as soon as possible. This will allow the District to refund the Bank Loan with GO Bonds, thus allowing the District to relieve the General Fund of the financing burden.