Utility committee hears presentation on bond-backed long-term gas purchase program; vote possible next month

Ron Reagan, the presenter for a proposed long-term gas purchase program, told the utility committee that the program would offer participating municipal utilities a bond-funded discount on natural gas purchases if the city opts in.

Chair Matt opened the discussion, stressing that "nobody's gonna be asked to vote on anything tonight," and invited Reagan to walk through program mechanics, timing and risks. Reagan said the current program provides about a 35¢ monthly discount with a year-end true-up and that the new offering — if approved — would start Aug. 1 after the existing program expires on July 31.

Reagan described the program as bond-backed and said the structure creates the discount through the taxable/exempt spread in the offering. "We're hoping to be in that 35 to 40¢ range again for this current program," he said, adding the committee can choose a five- or 10-year tranche depending on which yields the largest discount. He told members the plan assumes roughly 70% of typical monthly volumes will be covered, a conservative figure intended to avoid shortfalls in unusually high-demand months such as January.

On legal and contract details, Reagan said the core gas supply agreement runs about 72 pages and that the resolution packet the committee would ultimately approve is much shorter (about seven to eight pages, including certificates). He referenced IRS requirements that "95% of the volumes" must be used by qualified participants and said an independent legal opinion letter would be provided to participating municipalities. Reagan emphasized that the city would not be issuing the bonds and that bond obligations are funded by future gas sales; "you don't owe anything on that ever," he said, describing the city as having no recourse on the bonds.

Committee members pressed for supporting materials and contacts; Reagan offered to provide the full gas supply agreement, a participant contact list and sample rebate figures from existing participants (he cited Morton, Ill., and Rensselaer, Ind., among other participants). Using the volumes provided in the proposal, Reagan estimated approximately $64,000 in savings per year at a 35¢ discount on those volumes and suggested multiplying that annual figure by the chosen tranche (for example, seven years) to estimate lifetime savings. He said he would supply a precise, itemized calculation to the committee.

Reagan identified typical market counterparties involved in past offerings, noting that firms such as Goldman Sachs have placed bonds for similar programs and that BP has served as a swap/clearing counterparty; he said the program contains mechanisms to replace counterparties if necessary.

On schedule, Reagan and members agreed staff would review materials at the utility meeting next week and that the committee could take a resolution to the city council in the March cycle (the 16th was discussed as a possible date). Reagan said the group was "looking to fund this as early as April" and that, if approved, the program would be active Aug. 1. He noted the program provides monthly invoice discounts (a monthly portion) and an annual true-up that issues the remaining rebate; based on the timeline discussed, he said the committee’s first full true-up would be in October 2027.

The committee did not vote on the program at the meeting. Members requested the additional documents and participant contacts Reagan promised. The meeting was then adjourned.