Emergency Economic Stabilization Act Frees Eight Hundred Million Dollars Community Wind Projects

The 700 billion dollar federal bailout’s (HR 1424) contains 800 million dollars more of CREBs awards under subpart (HR 6049) intended for community wind projects. This legislation, and a pending economic stimulus proposal of one trillion dollars likely to go through under the Obama administration, makes now an opportune time for school districts, cities and counties to stake their claim on a portion of the financial bailout package.

Clean Renewable Energy Bonds (CREBs) were created in 2005.  Supported by Senators Baucus and Grassley the federal bond allocation sought to equalize the energy production opportunities between taxable and non-taxable entities.  Previous tax benefits for clean energy such as Production Tax Credits (PTCs) and the Modified Accelerated Tax Recovery System (MATRS) excluded the participation of any non-taxable entity.  While corporations could cash in on federal money, other entities from Indian tribes, school districts, counties to municipalities, were excluded.

CREBs legislation was skillfully designed to meet the needs of all its participants.  Not only do non-taxable entities (e.g. school districts) become energy independent while their investors gain tax breaks but all participants contribute to energy independence for the United States.  Meanwhile the federal government supports local U.S. economies and the environment takes one more step toward a healthier future.  However, this resourceful design is understandably complex.

The first step requires the non-taxable entity (school district, county, municipality, tribe) to apply for the authority to issue the CREBs.  The application must include a formal evaluation of the project's feasibility by a registered professional engineer.  Once the allocation is awarded the project must be financed through bond sales.  Bond proceeds pay project costs up front and bond purchaser's principal is repaid with power revenue over a period of fourteen to sixteen years, the time period varying based on  a federal index.  In lieu of interest payments, the bond purchasers receive tax credits from the Internal Revenue Service.   During the repayment period positive cash flow may be minimal, but after the fourteen to sixteen year principal amortization period, all revenue is funneled back into the community or district. 

Matney-Frantz Engineering has been at the forefront of CREBs legislation and projects since its beginning, lobbying for amendments necessary to its implementation and aiding in over 50 applications with awards totaling over $50M.  The firm believes that the current opportunities will continue to grow over the next presidential term. 

Matney-Frantz is currently gathering data to prepare CREBs applications for the next cycle.  To contact your area’s representative or learn more about how CREBs work, contact us at andrew@matneyfrantz.com or call Andrew at (406) 599-2474.