Providence expects to save $24M by purchasing streetlights

Providence plans to purchase 16,800 streetlights. (Photo by Dan McGowan/WPRI)

PROVIDENCE, R.I. (WPRI) – The city’s financial outlook is looking a little brighter, and the Elorza administration has one source to thank: streetlights.

Providence says it’s poised to save more than $24 million over the next 11 years by purchasing all of the city’s 16,800 streetlights from National Grid and converting them to light-emitting diode fixtures, or LED lights.

With both administration officials and the city’s internal auditor calling the idea a “no-brainer,” the City Council Finance Committee on Monday approved a plan to borrow $13 million to finance the project. The full City Council could consider the proposal as soon as Thursday.

Under the terms of the deal, the city would borrow $13 million through a 10-year lease from Vermont-based Municipal Leasing Consultants in order to buy the streetlights and convert them to LED lights. At the end of the lease, Providence will buy the streetlights for $1, according to Matt Clarkin, the city’s internal auditor.

The city will make an annual debt service payment of $1.6 million for 10 years beginning during the 2017-18 fiscal year, a payment arrangement that gives the city “near-term budget relief” in addition to long-term savings, Clarkin said. The city also expects to receive a $2.5-million reimbursement for the LED light conversion through a rebate program offered by National Grid in August 2016, a figure that will be applied to the city budget in either the current fiscal year or in the 2016-17 fiscal year.

“It’s a great initiative,” Finance Committee Chairman John Igliozzi said during Monday’s meeting. The proposal was included in the current fiscal year’s budget.

“Can [Ward 15] be the first one on the list?” Councilwoman Sabina Matos joked, referring to the Olneyville neighborhood she represents.

Providence’s plan is made possible by the state’s Municipal Streetlight Investment Act, a 2013 law that allows cities and towns to buy streetlights from utility companies – in Rhode Island, that largely means National Grid – and gives them the ability to maintain complete control over the maintenance of the lights.

Even with the city paying $1.6 million in debt service annually, Clarkin said, the purchase of the streetlights and their conversion to LED lights will save the city about $24.2 over 11 years through a combination of maintenance cost reductions and lower electric usage.

As it stands now, National Grid charges the city about $138 per light for maintenance each year, totaling around $2.3 million, Clarkin said. The city plans to transfer maintenance of its lights to the Partnership for Rhode Island Streetlight Management (PRISM) at a cost of about $25 per light, totaling $420,000. (PRISM, which will hire an outside company to oversee maintenance efforts, will also receive an administrative fee of $62,000 a year.)

The city’s streetlights currently use about 17.6 million kilowatt-hours per year. The LED lights are expected to use about 3.9 million kilowatt-hours per year, Clarkin said.

Providence could use the savings.

An independent audit that will be released Wednesday is expected to confirm that the city ended the 2014-15 fiscal year with a roughly $5-million shortfall. That will bring the city’s cumulative deficit – a figure that combines the amount Providence owes from deficits incurred in 2011, 2012 and now 2015 – to about $13.67 million.

State law requires municipalities to pay cumulative deficits down over the course of five years. Paying down the deficit doesn’t mean that money is actually transferred to the state; the city is simply expected to run an operating surplus each year to offset the earlier red ink.

Administration officials have said they expect to end the current fiscal year with a balanced budget, but they should release a more precise forecast on the city’s finances by the end of February.

Elorza is expected to release his budget proposal for the 2016-17 fiscal year in March or April.

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Dan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Facebook and Twitter: @danmcgowan

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