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Impediments Urban district heating and cooling systems face a number of financial, and political problems that impede their ability a ~ __ ~ equal footing with other sources of enerov Particularly oil and cast economic, to grow at rate comparable to that of institutional systems or to compete on an , - . . - - - ,, , . These impediments include the lack of data and information that make district heating and cooling an unfamiliar technology to most people in the United States. They also include the high cost of building a new system, the taxes and fees that add to those costs, the requirements that potential investors place on loans that further raise costs and complicate planning, the restrictions imposed by economic regulation, and the complex institutional arrangements that are required to meet the political needs of local and state governments as well as labor and public interest groups. Once again, it is worth noting that the impediments have largely affected the urban, investor-owned utility systems. Their effects on the growth of municipal or nonprofit urban systems have been far less serious. Their effects on institutional systems have been minimal, which helps explain the greater growth of these systems in recent decades. Overcoming or mitigating such impediments will be necessary if district heating and cooling is to fulfill its potential outlined in Chapter 3. Without such action, as the Argonne National Laboratory figures cited earlier show, district heating and cooling will grow, but very slowly (Figure 3-1~. Removing the impediments cannot be done by one agency or level of government alone. Nevertheless, the major focus for governmental change will rest on the state and, especially, on the local level. Much of the responsibility will also cooling ~ manufacturers lie with the district heating and community itself--system operators, suppliers, designers, and and their representatives. 57

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58 DATA AND INFORMATION District heating and cooling has suffered from a lack of public interest in the United States. In large part, this is because people are unaware that the technology exists, works, and has been around for a long time (CRS, 1983~. There is a near total lack of adequate data and information on U.S. systems on which to base public and private decisions about district heating and cooling. Currently available data in the United States are incomplete, often biased, and not comparable with international data. No adequate data exist, for example, on the extent of institutional systems. No U.S. government agency or private association systematically collects or disseminates information about district heating and cooling, although a new trade group has begun to do so. As a result, many people are unaware of the extent to which district heating and cooling is already in place. In part, this problem stems from the definitional differences between the United States and Europe and from the many names by which district heating and cooling is known within this country (see Chapter 1~. Europeans, in particular, are often unaware of district heating and cooling in the United States because of the lack of full U.S. participation in international efforts. There are three specific areas where credible data and information are important. First, municipal officials and the public are often unaware of district heating and cooling systems or consider them to be a new and untried technology. Second, not recognizing the potential market, U.S. manufacturers have been slow to advance a research agenda that would help develop the products necessary to ensure their ability to compete with foreign equipment suppliers. Third, similarly lacking awareness of the magnitude of successful systems in the United States, the financial community imposes high risk penalties on what it perceives as a new and untested technology. Unbiased and widely disseminated data about successful systems have not been available to the financial community or the general public. In part, information is lacking because the district heating and cooling industry is fragmented and lacks nationally recognized leadership. This situation, typical of the construction industry, results from the large number of small companies involved. The combination of industry fragmentation and inadequate data has made new market aggregation and new product development difficult. The current data, although incomplete and occasionally biased, indicate the potential for a large domestic and international market. A credible data base is needed to analyze potential and to develop appropriate research and development programs. These, in turn, are necessary if U.S. firms are to compete successfully with foreign companies.

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59 The industry's outreach and educational efforts with the financial community and local governments have been insufficient to date. Too much activity has been geared solely to lobbying and too little to developing the potential market. More information is needed to stimulate market growth and product development. The lack of data and information has contributed to other impediments. The U.S. tax regulations, for example, are ambiguous concerning both depreciation rules and the use of tax-exempt industrial revenue bonds for financing district heating and cooling. Similarly, district heating and cooling is rarely a specific eligible activity in major federal grant and loan programs. Further, the United States has not yet participated fully in the district heating and cooling activities of the International Energy Agency (IEA). By not participating, the United States has missed opportunities to share information and facilitate technology transfer. TAXES AND FEES District heating and cooling systems are subject to a variety of federal, state, and local taxes that often place investor-owned utility systems at a competitive disadvantage relative to other energy supply systems. AS a result, district heating and cooling has sometimes lost the price advantage that should be its prime attraction. For example, district heating and cooling systems are often required to obtain a "certificate of public convenience and necessity. " This involves paying a franchise tax, a common way that state and local governments regulate and tax public utilities (Kier et al., 1981~. On the other hand, competitors who build, install, or maintain gas-fired boilers or electrical heat pumps are not required to obtain certificates or pay franchise taxes. Most of these competitors are relatively smal1-business electrical, mechanical, or plumbing contractors rather than large electric or gas utilities. In addition, utilities are often taxed both on the fuel they buy and on the energy they produce and sell from burning that fuel (Hanselman, personal communication). In effect, the utilities are being taxed for energy as a fuel and as a product. In the worst case, the tax amounts to 20 percent of the product's cost. In fact, such multiple taxation of utility-provided gas and electricity appears to be growing. To many financially pressed state and municipal governments, district heating and cooling systems are viewed as a revenue source rather than as a community resource. As a result, too many governments charge fees for construction permits, inspections, and franchises that add to costs and increase the time it takes to build the systems. In another area, the federal government and some states have granted tax credits and a variety of other incentives to encourage the installation of energy-conserving equipment' including insulation,

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60 multiple glazed windows, and solar energy panels. These incentives are not available, however, to individual building owners who want to retrofit their buildings to connect them to an energy-conserving district heating and cooling system. Tax credits for individual heating equipment are scheduled to expire in 1985 unless Congress renews them. Taxes more generally favor onsite heating, ventilation, and air-conditioning equipment. Individual heating equipment qualifies for a one-time tax credit while tax credit for the equipment to connect a building to a district heating and cooling system must be determined case by case. Jamestown, New York, for example, had to apply to the Internal Revenue Service (IRS) to get such a credit for building owners who connected to its new system (see Appendix A). In addition, IRS regulations and federal tax laws are unclear as to whether for-profit systems can depreciate their equipment over 5 or 15 years. Five year depreciation creates a favorable climate for investors because there is a shorter payback period, thus improving prospects and terms for financing. The latter affects the costs of developing a system and, ultimately, the price customers pay for thermal energy. The Tax Equity and Fiscal Responsibility Act of 1982 made district heating and cooling projects eligible for tax-exempt industrial development bonds (Kier et al., 1981~. In 1984, however, Congress placed a per state limit of $150 per capita on tax-exempt industrial development bonds that any municipality or state agency may sell. Congress exempted certain high-cost, capital-intensive projects, but did not specifically include district heating and cooling systems in the exemption. This tax policy has increased the uncertainty for potential investors in district heating and cooling systems. Because district heating and cooling projects are costly, they may have difficulty competing with other nonexempt projects for industrial development bonds available under the state limit. The first phase of the St. Paul project, for example, cost $44 .3 million or $165 per capita (OTA, 1982~. If St. Paul had had to compete for a share of the Minnesota state allocation, it might not have been funded (see Appendix A). Bills introduced in Congress to create tax incentives to encourage district heating and cooling via tax-exempt financing, investment tax credits, and residential energy credits, among other incentives, have so far not been enacted. These bills would have removed the need to decide depreciation allowances for retrofit equipment on a case-by-case basis. In Europe, such incentives have often successfully encouraged consumers to connect to district heating systems. Attempts to persuade Congress to authorize the Synthetic Fuels Corporation to fund district heating and cooling systems have likewise failed (CRS, 1983~. District heating and cooling does not require preferential treatment to succeed. Rather, it needs even-handed and consistent tax policies. The current situation has led to increased use of

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61 tax-exempt, not-for-profit corporations to build or revitalize district heating and cooling systems, as in St. Paul. In some cases, this is a positive development, but it slows the overall growth of district heating and cooling by not taking advantage of the potential for growth that investor-owned utility systems represent. REGULATION The degree of regulation district heating and cooling systems face varies from state to state. As a factor encouraging or inhibiting their growth, regulation ranks second only to financial incentives, according to Argonne National Laboratory models (see Figure 3-11. As of 1981, 35 states specifically regulated urban district heating and cooling systems through state public utility commissions (Kier et al., 1981~. In addition, New York has recently authorized its cities to establish municipal public utility commissions. As of October 1984, 18 had done so. Electric utilities are generally subject to economic regulation as public monopolies. Most states regulate the sale of thermal energy, especially when that sale is made by an otherwise regulated, investor-owned utility. As a result, utilities generally prefer to supply heat at the boundaries of their generating plants rather than to potential customers located longer distances away (Kier et al., 1981). In some cases, the question of whether a district heating and cooling system is subject to regulation may be quite complicated. The Maryland Public Service Commission, for example, decides whether to regulate or not based on the number and type of customers served. The Baltimore Resource Energy System Company (RESCO) is not regulated when it sells thermal energy from its municipal solid waste incinerator to institutional users, such as the Cherry Hill housing development run by the Housing Authority of Baltimore County (HABC), but would be if it sold directly to privately owned residential units (see Appendix A). Utilities involved in district heating and cooling find not only their rates but also their returns on investment regulated. Price regulation is particularly burdensome when it prevents the recovery of costs that would be acceptable in the marketplace. Such economic regulation discourages investment and has contributed to the demise of older systems. The growth of institutional systems can be explained, in large part, by the fact that they are not subject to state regulation and taxes. Similarly, cities such as St. Paul and Jamestown, New York, have used not-for-profit corporations to avoid regulatory problems. In Los Angeles, the Southern California Gas Company, a regulated subsidiary of the Pacific Lighting Corporation, has set up a nonregulated subsidiary of Pacific Lighting to provide district heating and cooling to Century City and six other locations in southern California (see Appendix A).

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62 Economic regulation is an impediment, especially when contrasted with the lack of such regulation imposed on the owners of individual boilers or on the suppliers of alternative fuels. Fuel oil distributors, for example, do not have to appear before state regulatory commissions or have their rates or profits set for them. Investor-owned utilities have traditionally been regulated because they possess an effective monopoly on electrical generation. But no such monopoly exists when they sell thermal energy as a by-product of electrical generation. Here, they must compete in the marketplace with fuel oil, natural gas, and other energy sources. In certain cases, regulation has been mitigated by state action. In Missouri, for example, the state legislature specifically exempted the Bi-State Development Authority in St. Louis in 1983 from public service commission regulation for the steam-based district heating and cooling system the authority took over from Union Electric, an investor-owned utility (RDA, 1983~. Regulation contributes to the high costs of planning, financing, installation, and operations, which make economic feasibility uncertain. District heating and cooling requires a large early investment, when few if any revenues are generated. Where regulation limits the return on investment and controls the ability to roll investment costs into rates, the incentive to develop is removed. Most successful district heating and cooling systems in the United States are now operating without state utility regulation because they are not-for-profit, municipal, or institutional installations. Most new or revitalized urban systems are not connected with a regulated public utility. The latter are more often than not abandoning (as in Chicago) or selling (as in Pittsburgh) their district heating and cooling systems. A number of urban systems, such as that in St. Paul (see Appendix A), have been established under Section SO1 of the Internal Revenue Tax Code to escape state regulation as tax-exempt, nonprofit entities. As a short-term measure, nonprofit status has enabled a number of systems to proceed. However, this use of Section 501 by corporations other than municipally owned utilities could provoke congressional review. Current national policy aims at increasing energy production by deregulating oil and gas prices. The profit from district heating and cooling systems hinges on pricing energy services, allocating benefits and costs among customers and investors, and initially limiting services to areas of high energy demand. The uncertainty about regulatory treatment of these issues significantly affects both actual and perceived financial risks of district heating and cooling compared with those of more conventional systems. Risk directly translates into higher costs, for example, from the imposition of "risk premiums" in the form of long-term customer contracts, full faith and credit guarantees by municipalities, and special insurance coverages.

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63 More consistent state regulations are needed before district heating and cooling can develop nationally. A better understanding of the highly competitive environment in which these systems must operate might lead state governments to reduce their economic regulation of utility-owned district heating and cooling systems. The development of a model regulatory approach would aid in the broadest implementation of district heating and cooling in the future. District heating and cooling depends on the flexibility of using low-cost, locally abundant fuels, including coal and municipal solid waste. State and local environmental regulations often restrict the use of coal and municipal solid wastes as fuels. Such fuels typically require large central plants or storage facilities located near urban centers, so that they may raise environmental or esthetic concerns. Fuel flexibility represents a major source of price advantage for district heating and cooling systems, which can substitute lower-priced fuels such as coal or municipal solid wastes for higher- priced gas or oil. When fuel choice is restricted, systems cannot compete successfully because their other costs are too high. New York City, for example, restricts the burning of coal. It only allows public schools to burn coal, but not public utilities or other central power plants. Nationally, the U.S. Environmental Protection Agency (EPA), acting under the authority of the Clean Air Act, sets air quality standards that state governments must adopt plans to meet. The current standards allow the use of the so-called "bubble policy," which permits power plants to make trade-offs among fuels and pollution control equipment. The bubble policy, as now implemented, does not adequately consider the many untreated, individual boilers that one treated, central power plant will replace in a district heating and cooling system. Computer studies of district heating and cooling system scenarios for Boston and Minneapolis-St. Paul, for example, showed that overall air quality levels were greatly improved by conversion to district heating and cooling, even though net emissions increased slightly (Levine and Santini, 1984~. Where existing power plants (mostly using residual oil) are used to generate the added electrical and thermal requirements, those plants showed a 21-percent increase in total emissions (Figures 4-1, 4-2, and 4-3~. For Boston, the computer scenario showed that sulfur dioxide emissions were increased by 5.9 percent and particulates by 2.2 percent, but nitrogen oxide emissions declined by 2.9 percent. EPA's bubble policy may need some modification to allow trade-offs between a single treated source and multiple untreated sources of air pollution. Such modifications are necessary if cogenerating and urban district heating and cooling systems are to succeed. In fact, EPA is considering modifying the bubble policy to give pollution "credits" to cities and companies for actions that reduce overall emissions. Such actions might include, for example, replacing a fleet of gasoline-powered cars with methane-powered cars. In such a case, a

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64 28 24 20 0 16 en cn UJ u, UJ lo: cow 8 4 Emissions Power Plants 0~\\\~] District Htg. Service Area 12 7.1 o 3.3 5.9 TWIN CITIES BOSTO N FIGURE 4-1 Annual average increase in SO2 emissions due to district heating (Levine and Santini, 1981~.

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65 24 22 20 - 12 10 8 6 4 2 o Before District Htg. ///~ After District Htg. 4.7 12.3 ,. ~ 4.7 6.1 Downtown City City Fringe B OSTO N FIGURE 4-2 Ambient SO2 levels in Boston from the heating sector (Levine and Santini, 1981~.

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66 70 ^ ~ 60 O c^ ~on o o O 40 o O on _ w~ o 20 10 5g Before Di~ricl Ha. After District Htg. 47 41 48 30 11 28 ~inneapolk .Paul TWIN CITIES Cay Cay Fringe FIGURE 4-3 Ambient SO2 levels in the Twin Cities from heating and other large point sources (Levine and Santini, 1981) e

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67 company might be given credits for use against the emission levels of its manufacturing or generating plant. No such credits have yet been given, however. Moreover, while district heating and cooling systems might qualify, there are no indications that EPA specifically intends to include them. If EPA does not specifically include district heating and cooling, then each system will have to be judged case by case. Regulation can significantly increase a system's cost. In Boston, the cost of a new cogenerating and district heating plant for the Harvard medical facilities and five other Boston hospitals ran almost five times the original estimate. In part, this was due to more than three years of hearings on the project's environmental impacts. The first round of state reviews alone included 186 hours of oral testimony and produced 7,300 pages of transcripts and documents (OTA, 19821. The prospect of such a long, drawn-out process would certainly discourage many potential investors. Even though regulation inappropriately applied can impede district heating and cooling, not all regulation serves to discourage the technology. Regulation can be used to advance district heating and cooling in several ways. A state's regulatory powers can, for example, be used to obtain property or easement rights for distribution pipes, to build investor and public confidence, and to ensure reasonable standards of safety, service, and reliability (Kier et al., 1981~. Moreover, the committee is primarily concerned with economic regulations that make district heating and cooling less competitive. District heating and cooling does not require regulatory favoritism or incentives to succeed, merely a regulatory approach that allows it to compete on an even basis with other forms of energy supply and generation. COSTS District heating and cooling systems are highly capital-intensive. effect, they substitute the cost of capital for fuel (RDA, 1981~. the average, district heating operates with 80-percent fixed costs 20-percent variable costs, exactly the opposite of the cost ratios its gas competitors. This shows that district heating and cooling extremely sensitive to interest rates and financing methods. Two-thirds or more of the capital costs are represented by the distribution and transmission network (Figure 4-4~. Costs can be minimized by keeping the number and length of pipes to a minimum. Thus, most systems serve high-use customers within specified areas. None of the existing U.S. steam systems, for example, serves more than 3,500 customers and most have less than 1,000 (OTA, 1982~. The high cost of the distribution network derives in part from the large number and size of utility and service delivery lines found in the streets (gas, electricity, water, sewer, etc). The larger size of In On and for IS

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68 40 35 30 25 20 15 10 s o - NORTHEASTERN CITIES ~ r_~ I _ _ _ r-Ji (MIDWESTERN CITIES L_J l J PLANT TRANS- DISTRI- BLDG. REPLACEMENT CHARGES MISSION BUTION RETROFIT CAPACITY FIGURE 4-4 Components of system cost as a percentage of total costs (Argonne National Laboratory).

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69 district heating and cooling pipes also increases their installation costs over those for a conventional gas utility. In addition, building owners commonly incorporate the cost of an onsite heating plant in the mortgage financing for the entire structure. This makes part of the true cost of the competing system invisible compared with the cost of a stand-alone district heating and cooling system. The real and perceived cost differences between conventional and district heating and cooling systems are heightened by the difficulties in financing the latter, as discussed below. FINANCING Financing for a new or revitalized district heating and cooling system should be similar to that for any other large-scale, long-term municipal utility project (Table 4-1~. In this sense, the project should be able to generate sufficient revenue to pay back its costs over its useful life. District heating and cooling systems, however, face financing problems that other major utility projects do not (Karnitz, 1983~. District heating and cooling systems are often required to obtain 20-year "take or pay" contracts from 80 percent of their potential customers before a commitment for construction financing can be obtained. No similar requirement applies to (or is included in the mortgage for) competitive heating, ventilating, and air-conditioning systems installed in individual buildings. Obviously, this places district heating and cooling systems at a distinct competitive disadvantage. The requirement that systems get their customers to sign 20-year take or pay commitments is difficult to meet because the commitments may be considered a lien against property. While the legal validity of these commitments has not been tested, the requirement unnecessarily complicates already difficult institutional arrangements and extends the long development time further. Finally, the recently established federal limits on tax-exempt financing discussed above fail to include specific exceptions for district heating and cooling and for solid waste disposal projects. Thus, these projects must compete with other projects in obtaining tax-exempt financing under each state's $150 per capita limit. Since 1981, a number of cities have relied for financing on various government grant programs, such as the urban development action grant (UDAG) and community development block grant (CDBG) programs of the U.S. Department of Housing and Urban Development (HUD), and U.S. Department of Energy (DOE) demonstration funds, to help pay for new or revitalized district heating and cooling systems. The number of financing mechanisms has become more severely limited since 1980 because of shifts in government policies, the great competition for nongovernment funding, and high interest rates.

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70 TABLE 4-1 Construction and Permanent Financing for Alternative Energy Projects: Key Risk Assessment and Containment Strategies Key Project Cons ider ations -Well-contained risks -Existing and identified markets for the energy produced -Long-term sales contracts -Proven technologies -A favorable regulatory environment Financing Techniques -Internal corporate cash flow -Borrowing with full faith and credit of the corporate sponsor -Project financing, when the project generates sufficient cash flows to meet debt service or lease payments Major Components of Project Financing -For construction financing, short-term, floating-rate loan -For permanent financing, single-vnvestor lease, leveraged lease, limited partnership, or joint venture Basic Economic Factors -Current and future fuel prices -Current and future electricity rates -Utility avoided cost rates -Proj ect -Cost of costs capital

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71 TABLE 4-1 Construction and Permanent Financing for Alternative Energy Projects: Key Risk Assessment and Containment Strategies (continued) . . . . . . . . . . . Regulatory Considerations -Environmental, land use and building permits -Public Utilities Regulatory Policies Act of 1978 (PURPA) -Geographic considerations (state implementation of PURPA, utilities' fuel and capacity costs, difficulty of adding generating capacity): Best environments in California, Gulf Coast, New England, and Middle Atlantic states Summary of Alternative Energy Projects Risks -Design risk: Can facility be built? -Completion risk: Will construction delays disrupt financing term, tax benefits or repayment schedules? -Construction cost risk -Force majeure risk: weather, strikes -Operating performance risk -Price risks: inputs and outputs, avoided costs -Regulatory r isk -Money cost r isk -Tax r isk: legal changes SOURCE: GE Credit.

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72 During the period of recession and high interest rates in the early 1980s, the financial community sought short-term returns on its investments. This fostered increased competition for limited capital, further constraining the growth of district heating and cooling systems. As capital markets have tightened in the face of escalating interest rates and recessionary cycles, lenders have sought more protection for projects deemed risky. The situation has usually led to higher financing costs and requirements forcing communities to commit their full faith and credit to a district heating and cooling or cogeneration project. District heating and cooling's ability to compete for financing is also affected by the price of fuels and the system's flexibility to choose among several fuel sources, such as coal and municipal solid waste. If a clear economic advantage is gained over competing energy systems, investment capital will become available. However, because the use of solid fuels is heavily regulated and restricted by environmental laws, investment capital might not be forthcoming. Some European countries, such as Sweden, have relaxed their regulation of solid fuels and treatment facilities to promote the development of district heating. As a result, district heating and cooling projects have often had to seek alternative financing means. Table 4-2 summarizes and compares several such financing means. Until the 1984 tax law established a per state limit of $150 per capita on industrial development bonds, tax-exempt financing appeared to provide an attractive alternative to private investors. This type of financing usually involves two steps: issuing tax-exempt bonds through state or local governments and loaning the bond proceeds to the private developer, who agrees to install a district heating and cooling system and related improvements. Tax-exempt bonds provide loans for a longer term (up to 40 years) than traditional bank financing, which usually is for 10 to 15 years. Traditional bank financing is normally available only to finance feasibility studies. While subject to variations depending on the current market rate, tax-exempt financing usually carries a lower interest rate than conventional financing. The current market rate for tax-exempt development bonds ranges from 10 to 14 percent. Similar bank loans since 1980 have had a rate of 17 to 18 percent. Tax-exempt financing is an often-used third-party technique.* Various studies conducted over the past four years suggest that third-party financing techniques may account for from 45 to almost 70 *A third party is an individual, partnership, corporation, or institution that agrees to provide financing for a project that is not charged to the project's sponsors. The third party assumes the risks of the investment, but gains its benefits. These include tax credits, sales, and interest payments. The sponsor gains an energy-efficient system financed by independent sources of capital.

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74 percent of successful district heating and cooling projects by 1990. Third-party financing also poses a unique opportunity to address and avoid a number of regulatory constraints that are imposed on projects when an investor-owned electric utility is involved. Both general obligation bonds and revenue bonds are used to finance district heating and cooling projects. The general obligation bond is secured by the pledge of the municipality's full faith and credit and is supported by the municipality's authority to tax and collect sufficient money to meet its obligations. Several factors limit the amount of general obligation bonds that a municipality can issue, restricting the availability of such tax-exempt bond financing. The city's revenue base limits the number of bonds on which it can afford to pay interest while also providing necessary services to its citizens. ALSO, many states limit the amount of bonds that can be issued by a municipality, thus forcing projects to compete with each other for financing. Finally, some municipalities are limited in their taxing authority, which restricts the issuance of general obligation bonds. For these and other reasons, few if any municipalities are likely to use general obligation bonds to finance district heating and cooling systems. Instead, municipalities are likely to view revenue bonds as the preferred alternative. A revenue bond embodies a promise to repay the bondholder's principal and interest from the revenue derived from a specific project. In effect, the bondholders are making a loan through the local municipality to the district heating and cooling developer. The encouragement of economic development and the revitalization of communities are valid public goals that district heating and cooling can help promote. Tax-exempt bonds are desirable for district heating and cooling projects for several reasons: o Bonds may promote the revitalization of basic urban infrastructures and increase economic development associated with district heating and cooling within the community. Such investments could create or retain employment and increase the economic vitality of industrial, commercial, and residential communities. 0 Such financing will enhance energy self-sufficiency by using domestic energy resources. 0 Revitalization of existing urban infrastructures and development of more efficient delivery systems would also increase the value of other long-term property investments within the community, which should increase the community's property tax revenues without increasing its rates. o Energy self-sufficiency and the ability to mitigate pr ice increases in the future would also help attract new business and industry to the city.

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75 The complexity of municipal financing requirements coupled with the requirements of third-party techniques have together moved district heating and cooling toward smaller-scale projects for limited numbers of customers. Two tax bills before Congress in the 1983-1984 session either sought special recognition for district heating and cooling projects or proposed specific incentives to use tax-exempt financing for these projects. The proposals focused on federal energy tax credits (H.R. 2105) and a government loan guarantee program (H.R. 2489~. Neither bill passed.