Dairy asks county to help finance $45M gas project

A Marathon County dairy farm is asking the county government to issue $45 million in tax-exempt municipal bonds to finance construction of a waste disposal facility that would convert cow manure into natural gas.

Van Der Geest Dairy Cattle, Inc., located in the village of Maine north of Wausau, is working with a Delawarebased limited-liability corporation to secure funding for an anaerobic digester that will generate renewable energy from farm waste. The corporation – WI RNG VDG, LLC – is requesting that the county board approve an initial resolution supporting an industrial development revenue bond issue at its Oct. 24 meeting.

“The initial resolution is not a commitment to issue bonds, but merely evidences the county’s ‘official intent’ to issue bonds pending satisfactory negotiation of the terms,” wrote Lynda Templen, senior counsel for Husch Blackwell, a law firm representing WI RNG VDG.

The Human Resources, Finance and Personnel Committee reviewed the proposed bond issue at its Tuesday meeting, and members raised a number of questions about the environmental and financial impacts of the project. The issue was referred to the Environmental Resources Committee and the Extension, Education and Economic Development Committee for further discussion.

As a so-called “conduit issuer” of the revenue bonds, the county would not be responsible for any principal or interest payments, and the bonds would not count against the county’s debt limit, according to Husch Blackwell. Van Der Geest would be able to save on borrowing costs because at least some of the bonds will be tax-exempt.

Board chairman Kurt Gibbs, however, wanted to know if the county’s bond rating could be negatively impacted if the company defaulted on the debt.

County administrator Lance Leonhard said the board should not look at the proposal as “co-signing a loan,” since the company receiving the bond proceeds will accept all of the risks and own the assets, as spelled out in state statute. Leonhard said the county has already consulted with its bond counsel, its auditors and its financial advisors about the issue, but it’s still looking for guidance from the board on how to evaluate the terms of the bond proposal.

If an initial resolution is approved, Marathon County electors will have 30 days to circulate a petition calling for a referendum on what is known as a “solid waste disposal revenue bond.” At least five percent of the county’s electors must sign the petition for a referendum to be held.

“In my personal experience, only one such referendum has ever been placed on the ballot, out of hundreds of industrial development revenue bond issues,” Templen wrote.

A final resolution officially authorizing the revenue bonds would be presented to the board for approval at a future meeting. Before that happens, a public hearing must be held as mandated by the Tax Equity and Fiscal Responsibility Act of 1986.

The project is expected to create 10 full-time jobs within the next three years, according to a document provided by WI RNG VDG.

Husch Blackwell estimates its legal fees to be about $137,500, but those will be covered by WI RNG VDG, along with any other costs related to issuing the bonds.

“The key point to remember is that the county will be considering, from a policy standpoint, whether to encourage the location of the project in the county,” Templen wrote. “By issuing the bonds, the county will give the borrower an interest rate benefit because the bonds will be tax-exempt in the hands of the purchaser.”

Committee chairman John Robinson said he could see some benefits for the county, particularly when it comes to odor reduction for neighbors of the Van Der Geest farm and the production of renewable energy from an agricultural byproduct. Still, he said the board needs to make sure all of the county’s costs for issuing the bonds are covered and perhaps even consider a revenuesharing venture. Supervisor Ann Lemmer, however, was more skeptical of the proposed project, saying she has “gobs of questions” about the impact of constructing a large manure digester in the village of Maine and how issuing bonds might affect the county’s finances.

“I’m really struggling to understand how this fits with our goals, especially given the fact that it is a for-profit company,” she said, noting that she would like to see a cost-benefit analysis or a business plan from the company.

Gibbs said several other large farm operations in the county have been approached about installing manure digesters, including those in the towns of Cassel and Rib Falls and one near Athens.

“I can tell you there’s a lot of interest in this because outside companies are coming in and looking at this as an option,” he said When Lemmer asked staff for their input on the proposal, county conservationist Kirstie Heidenreich said she spoke to officials in Lafayette County, who turned down a similar proposal that would have served multiple farms with a single digester. She said the company ended up striking a separate deal with a farm in an unzoned town within Lafayette County.

Heidenreich said she also spoke to the Wisconsin DNR’s groundwater bureau chief, who has “significant concerns” about the lack of water in the Maine area.

“There is extremely limited water supply in that area,” she said. “There is no water left.”

It’s unclear how much extra water the proposed digester at Van Der Geest would use, but Heidenreich said the water bureau chief told her that he toured a facility that consumes a “tremendous” amount of electricity and water.

Robinson listed several questions that need to be answered before the proposal moves forward, and directed county staff to help find those answers.

“We look forward to a quick turnaround on this issue,” he said.