SANTA FE, N.M. — Late last month, Santa Fe city government achieved several firsts on the financial front.
It was the first city in New Mexico to sell green bonds, the first in the state to have bonds certified as green by an international bonding agency in London, and the first in the world to have the construction of an anaerobic digester financed by green bonds.
That’s no small thing, says Mayor Alan Webber.
“This is significant in the context of climate change, and what cities nationally and internationally are doing to achieve sustainability,” Webber told the Journal, adding that the sale of green bonds for a $15 million upgrade at the city’s wastewater treatment plant is in step with the 25-year sustainability plan the City Council adopted last year.
“There are environmental benefits from the project, and then you combine that with how it’s financed, it’s a big win.”
The overhaul of the system the city uses at its wastewater treatment plant means microorganisms break down biodegradable waste and wastewater sludge, reducing emission of biogases into the atmosphere and becoming a source of renewable energy. An anaerobic digester, along with existing solar generators, will also produce about three-quarters of the energy needed to power the entire plant.
The city could also save a lot of money over the next 20 years by financing the project through green bonds at low interest rates.
“We’re not just doing this because it’s the right thing to do,” Webber said, “we’re doing it because it’s the smart thing to do.”
As green as it gets
The mayor credited the city’s Finance Department with what he described as “a new way to demonstrate financial creativity” through the sale of green bonds, a relatively new asset class linked to climate change solutions that invites private investment.
The idea is that a green certification improves the market for the bonds among people looking for environmentally friendly investments.
“If an investor wants to back green projects, this is a way to do that in a sustainable way,” Webber said.
Santa Fe’s new anaerobic digester will be about as green as it gets. It was the first municipal project to be certified green by the Climate Bond Initiative, an international nonprofit organization based in London that focuses solely on financing projects that combat climate change.
Brad Fluetsch, the city’s financial planning and reporting officer, recognized an opportunity when the need for a new digester and how to finance it was first discussed.
The Wastewater Division had the cash to pay for the project, but with interest rates at historic lows, it made more sense to issue bonds, he said. The idea is that, long term, the city should be able to make more money on earnings from its cash reserves than it pays out in interest retiring the bonds.
Another first is that this will be the first time the city’s Wastewater Division has issued a bond backed solely by wastewater revenues.
“Last fall, when we did the GRT bond, it had a AA+ rating, but that was through the city,” Fluetsch said of the $20 million bond for various city infrastructure improvements. “This is the first time that Wastewater went out on a stand-alone basis.”
The Wastewater Division was able to lock in on an interest rate of 3.1 percent, thanks to the AA+ rating it got from both Fitch Ratings and Standard & Poor’s.
“The quality of the project warranted the high-level rating that we received, which is unusual,” said Fluetsch, adding that the city had conference calls with both rating services prior to receiving the rating. “It speaks volumes for the caliber of the project.”
Investors apparently liked the project, as well. Fluetsch said the city received about a dozen bids totalling $52 million for what was a $13.5 million bond, including 12 who cited green bond status as the reason for bidding. About $1.1 million of it will be financed through local investors.
‘So Santa Fe’
Shannon Jones, the city’s public utilities director, says the project doesn’t change how the city treats its wastewater; it just does it in a more efficient way.
“The concept is not new,” he said. “We have a digester at the plant, but it’s run on natural gas. This is more efficient and more self-sustaining.”
Construction of the new anaerobic digester project is already underway and scheduled to be completed by this fall.
The way it works is wastewater sludge is piped into one of two anaerobic digester tanks – which will be 15 percent larger than existing tanks – where, over the course of a few weeks, it decomposes. The decomposed sludge, or biosolids, are taken out and combined with green waste to make a compost that is sold to construction contractors and the public.
Meanwhile, the biogas emitted from the tank is collected, cleaned and sent to a generator that converts it to heat to keep the digester warm and electricity to help power the plant.
Jones said using the waste to heat the anaerobic digesters eliminates the need to buy natural gas. It also means not having to flare the methane, a greenhouse gas that harms the environment.
Jones noted that the cities of Albuquerque and Las Cruces also have anaerobic digesters, and use the methane that they produce to generate electricity. Santa Fe’s will be cleaner.
Currently, a photovoltaic array is used to help power the wastewater facility. Combined with the energy produced by the anaerobic digester, about 94 percent of the energy needed to power the plant will be produced on site.
Mayor Webber says the energy savings will be big.
“The energy savings will be the equivalent of taking 743 cars off the road, or enough to provide energy for 610 homes for one year. It will eliminate the equivalent of 3,100 metric tons of carbon dioxide,” he said.
The city has pledged to work toward the goal of reaching 100 percent carbon neutrality by 2040. With that aim, the city took three years to develop its 25-year sustainability plan.
“We envision a thriving community where climate impacts are neutralized, natural resources are abundant and clean, and sustainable economic activity is generated through enhancing social equity and the regenerative capacity of the environment,” says the plan’s vision statement.
“This project is so Santa Fe,” said Fluetsch. “It nails where Santa Fe wants to be, leading the way with water conservation, recycling, sustainability – things that are important to Santa Fe. It’s kind of within our ethos.”