Solar Power at the Market Demonstration Project or Just Bad Investment?

On June 3, 2008 an articles in the Ann Arbor News by A. Nash had the headline: Ann Arbor Farmers Market invests in solar collectors .

The article reported:

The project is one step toward a city goal of having municipal operations running on 30 percent renewable energy by 2010, and about 20 percent of the entire community on renewable energy by 2015.

"It's a good place to show off the technology a little bit," said Mayor John Hieftje. "Part of the project is not just to power city government but to educate our residents about what can be done."

The 156 solar collectors will generate about $1,500 worth of electricity per year to be used by the market offices. The solar power also can supply the electrical needs of the vendors who set up their stalls at the market.

Downtown Development Authority provided $100,000 for the project at the Farmers Market, said David Konkle, the city's energy coordinator.

The solar collectors should be up and running by July.

It is now 2010 and time to evaluate this demonstration project. The following chart shows the utility costs for the Market

The utility cost would include water and sewage costs, but about half of the expense is for electricity. The market office uses electric heat and an electric hot water heater. The data for fiscal years 2006 through 2009 came from the audited financial statements of the city of Ann Arbor. The data for fiscal 2010 are from a hand out provided by the Market Manager at the February meeting of the Market Commission.

If the panels were operating in July 2008, that would have been the beginning of fiscal year 2009. The cost savings for the electricity should be very apparent in 2009. Obviously it is not, utilities in 2009 were greater than in 2008. If you look very closely you might claim that the increase is less than it would have been without the solar panels. But even this is only about $100, and it may just be a statistical fluctuation.

How could our city officials have gotten it so wrong? They simply did not stop to think or they did not want too. They calculated the value of total power the panels could generate, but you cannot store electricity. The Michigan state law is not very receptive to forcing the utility companies like DTE to buy power from small generators.

Mayor Hieftje commented:

The collectors are generating power and it's being used, said Hieftje. However, there's a dispute over whether the city or DTE should pay for a special electric meter. Until that's settled, the city can't push surplus power back onto the electrical grid.(1)

So basically it is use it or lose it. The Market uses most of its electric power in early morning when the vendors need lights for setting up or in winter for heating the market office. These are the two periods when the solar panel either do not work at all,or provide little power.What did the city get for $100,000? A nice sign at the market that proclaims Ann Arbor a Solar City.

(1)http://www.mlive.com/news/ann-arbor/index.ssf/2009/04/city_of_ann_arbor_still_paying.html

Farmers Market - Financial Trends

Almost every sector of the city is in fiscal difficulty. The Ann Arbor Farmers Market is not an exception. The following bar chart of the Market expenses illustrates some of the reasons. The graph shows operating expenses only, any large one time expenses such as replacing the lighting are not included

The Market was operated by an independent contractor to the city until about 2000. During this period the Market operating expenses averaged a little over $50,000 and were fairly constant.

After 2000 the Market was transferred to the Parks Department and the cost of operation has steadily increased. The budgeted cost of operation for the current fiscal year, not shown, is over $150,000. The largest single cost is personnel, however the city imposes IT and municipal fees which total about $30,000

The following bar chart shows the Market income. This is the income from operation. The primary source of income is rental to the vendors of the Farmers Market, but income from all use of the facility, such as special rentals is included. Payment the facility receives from the DDA as parking lot rental is not included since the intent here is to compare revenue from operations to the expense of operation.

Clearly the revenue has not increased as fast as expenses. Back when the Market cost $50,000 to operate the income was about $60,000. Last year the cost of operation increased to over $140,000 but revenue was only a bit over $80,000.

A particularly ominous trend is the downward decline in revenue since 2004. Stall fees were increased in 2004. This caused income to initially increase to over $100,000, but it has since decreased. I believe that the number of vendors at the Market decreased. I do not know if this was cause by the increase in stall fees or was a deliberate attempt to reduce crowding.

Stall fees were raised about 20% this year, fiscal 2010. This can only be expected to increase revenue to about $100,000. But fiscal 2010 expenses are budgeted at $150,000. Clearly this trend cannot continue very long. More disturbing, if the revenue increase anticipated for 2010 is followed by a slow decline as it was in 2004 the Market will be much worse off than before.

The data for the bar charts came from the audited financial statements of the city of Ann Arbor. The 2010 fiscal budgeted amounts are from a hand-out sheet distributed at the February 2010 meeting of the Market Commission.

Market Renovations - Financial

On May 7,2007 Council was asked to approve a contract with Becket and Rader for consulting on the proposed modifications to the Ann Arbor Farmers Market. The services were to include concept drawings for site plan review, construction drawings for construction bids and construction management. Council approved the contract and a project budget of approximately $1 million.

The Community Services Administrator is now asking Council to approve transferring funds to add another $100,000 to the Becket and Rader Contract yet very little of the work described in the original memorandum to Council has been done.

Council is asked to expand the project budget to over $ 2 million. But there is very little documentation of the advantages of this project. Considering the current economic situation Council should review this project carefully before proceeding.

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Farmers Market Renovations

There are two basic issues with using storm water fees to fund the Farmers Market renovations. The first is whether this is an appropriate use of the storm water fees and second, even if it is, is this a good storm water project. Education is now claimed as a primary reason for doing the project at the Market. Is the education benefit worth the expense of the storm water treatment? The final question is whether this expensive storm water project is a requirement for the Market renovations.

USE of STORM WATER FEES

Jeff Dehring presented a brief history of the Market renovation project to the Parks Advisory Commission (PAC) on January 20, 2009. Mr. Dehring stated that the Market project had been divided into phases so that initial work could begin while additional sources of funding were found to complete the project. He described a loan from the State of Michigan, obtained through the County Drain Commissioner's Office, as the funding now available to complete the project. The loan is to be paid back over the next 20 years from the storm water fees that are part of our utility bills.

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