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Tivoli's Smart Growth incentives notch $2.2 million for first installment

Tuesday, March 21, 2000 by

Bulk of $11.9 million package to come later

A $2.2 million down payment on the total package estimated at $11.9 million for incentives to keep Tivoli Systems Inc. in Austin comes due Thursday in items before the City Council. The package was devised under the city's Smart Growth Initiative to motivate this major employer and homegrown company to remain here–and it worked. After considering three sites in the Austin area in a 11-month search, the company announced Jan. 27 that it would build its new campus on property owned by parent IBM Corp. at 11400 Burnet Road and adjacent land on Gracy Farms Drive.

According to Tivoli's web site, the company was started in 1989 by two former IBM programmers, Todd Smith and Robert Fabbio. After an initial public offering in 1995, IBM bought the company in 1996 for $743 million. The company designs software for managing large computer networks from laptops to mainframes, and claims to manage 95 percent of Global 1000 companies. Hoover's Online reports the company had estimated sales of $1.5 billion and 3,000 employees in 1998.

The company is expected to build an initial 300,000 square feet of offices for a new headquarters on 90 acres of land, and could grow to 1.5 million square feet, according to the Austin American-Statesman stories of Jan. 28 and Feb. 3. Company offices are currently scattered, most in northwest Austin near the Arboretum.

The total incentive package is not restricted to Tivoli but will also be shared by parent company IBM. The $2.2 million to be considered by the City Council on Thursday includes:

• Development fee waivers–Fees will be waived for site plans, $9,345; building plan reviews, $25,175; and building permits, $310,984.

• Water and wastewater fee waivers–capital recovery, $84,400; and meters, $13,838.

• Water and wastewater cost reimbursements–Hard construction cost of 16-inch water main and water and wastewater service mains and appurtenances, $289,412, plus engineering design cost of $51,250.

• Street improvements–Turn lanes, median improvements, street cuts, intersection improvements and installation of four traffic lights, $1,430,000.

• Street lighting–Enhancements not to exceed $20,000.

Still to come are $9.7 million in energy related improvements. John Baker, director of customer care and marketing for Austin Energy, tells In Fact Daily that the specifics won't be known until Tivoli finalizes its design for the new facility and details are negotiated. However, a Jan. 20 letter from City Manager Jesus Garza to IBM outlined what has been offered, including:

• District cooling–Austin Energy offers $6 million at total buildout to provide all costs associated with planning, engineering, constructing, owning and operating a central chilled water plant that will serve the Tivoli expansion. This would be similar to the chiller for which contracts have already been awarded to serve Computer Sciences Corp., the new City Hall, the state Hobby Building, and possibly the Museum Park office project. The city's offer applies to an expansion of an existing chiller, the creation of a new chiller, or separate units for each building. The initial cost savings to Tivoli is estimated at $800,000 in avoided construction costs for an initial 200,000 square foot building. Thermal storage to be built at Austin Energy's expense would provide major energy savings to IBM of an estimated $80,000 a year, plus additional savings for Tivoli. Thermal energy storage also provides an environmental benefit because it shifts a large energy demand from afternoon peak hours to overnight production.

• Heating, ventilation and air-conditioning–Austin Energy proposes to pay all costs, estimated at $2.4 million, to plan, engineer, construct, and operate Tivoli's air-handling pumps, boxes and controls. The cost savings is estimated at $320,000 for each 200,000-square-foot building and would save the company some $30,000 a year in operations.

• Transmission lines–Austin Energy proposes to relocate the existing transmission power lines to a more visibly pleasing location, at an estimated charge of $1.3 million by the city and an additional $1.3 million for the Lower Colorado River Authority. However, in lieu of charges for the relocation of the lines, Austin Energy proposes to negotiate an agreement with IBM to obtain ownership or a long-term lease of the existing IBM central chiller plant. This would reduce the charge for relocating transmission lines by the fair market value of the existing chiller plant.

GreenChoice subscribers include major manufacturers and hotels

Sales net nearly 20 percent of available power to deliver this fall

Austin Energy's bid to be the greenest utility in the country is off to a flying start, as five major businesses have signed up to pay extra to get renewable energy. Some 700 residential customers have already signed up as well, bringing total sales to about 18.5 percent of the 40 megawatts of renewable energy that Austin Energy purchased for its GreenChoice program. That new power is expected to flow into Austin's electric distribution network this fall.

Austin Energy announced yesterday that Samsung Austin Semiconductor and AMD are each purchasing 12 million kilowatt-hours (kWh) of renewable energy annually–enough between them to power 2,000 homes year-round. Both companies spoke highly of the program in a written statement released by Austin Energy. "As a large user of electricity, Samsung is pleased to support the alternative energy program," said Sung W. Lee, president of Samsung Austin Semiconductor. "The GreenChoice program allows us to share environmentally friendly resources with the people of Austin." Roland Guerrero, environmental manager of AMD Texas, said, "Our values commit us as individuals and employees of AMD to actions that enhance the quality of life and protect the environment in the communities in which we do business. Participating in Austin Energy's GreenChoice program reflects our commitment to these values."

Mark Kapner, energy services manager for the utility, tells In Fact Daily Samsung and AMD will pay an extra $48,000 a year each for the 12 million kWh, based on the premium of 4-10ths cent per kWh, the same premium that residential subscribers will pay. Large electric users may subscribe for a minimum of 10 percent of their electric power or 12 million kWh, whichever is smaller, Kapner says.

While its purchase of renewable energy doesn't match that of Samsung or AMD, Fisher-Rosemount Systems wins the prize for the greenest company in Austin. The subsidiary of Emerson Electric, a multinational electronic firm with annual revenue of $14.3 billion, has committed to purchase 100 percent of its power under the GreenChoice program. The company's 6 million kWh annual consumption will cost an extra $24,000 a year. Fisher-Rosemount specializes in process control equipment (see for more on the company). "This is a definite energy cost advantage for Fisher-Rosemount Systems in the near future…and a tremendous environmental advantage that's here now. It's just good business for everybody," said Norm Erlandson of Fisher-Rosemount.

Two hotels signed up to buy 10 percent of their power from GreenChoice, the Hyatt Regency Austin and the Four Seasons Hotel. "We all benefit from a beautiful, natural environment and we see this progressive step as a way to strengthen our commitment to the environment," said Don Kerchof, director of sales and marketing at the Four Seasons.

"We commend these companies for taking the lead," said Chuck Manning, general manager of Austin Energy. "Clean renewable energy is a perfect fit for our community and we expect to build one of the nation's premier programs."

While all those who sign up for GreenChoice will pay the extra premium of 4-10ths cent per kWh, Kapner said over time both commercial and residential customers who subscribe to the program may wind up paying less for their electricity than those who do not opt into the program. The reason is that the GreenChoice "will substitute for the fuel price adjustment," he says, adding that fuel prices are usually adjusted at the beginning of each year to reflect higher fuel prices. Over time, the annual increases in fuel charges may exceed the GreenChoice premium. (Residential customers see the fuel charge on bills as the "secondary fuel adjustment," and commercial bills show it as "primary fuel adjustment," Kapner says.)

The 40 megawatts of power the utility purchased to supply the GreenChoice program equates to 220,000 megawatt-hours a year. "Once that's fully subscribed, there's no assurance we'll be able to offer the same attractive rates, because we don't know what the price will be (to buy more renewable energy)," Kapner says.

Kapner says the five companies signed up so far resulted from about nine personal sales calls made jointly by Kapner and his sales group. "We hope to make presentations to about 100 companies over the next few months," he says.

Demand for GreenChoice is expected to accelerate for the power available under the program, based on nine billboards put up yesterday, including one that southbound motorists on I-35 will see overlooking the upper deck near 34th Street. The billboards feature large white windmills spinning in a deep blue sky, the Austin Energy logo, and the statement, "GreenChoice: The Power to Choose." Also included is the web site address and phone number, 499-7827.

The program was first announced in January (In Fact Daily Jan. 13), drawing rave reviews from environmentalists who touted the benefit to help clean the air by burning less fossil fuel to generate power. They also praised the program's cost-effectiveness and fixed price, as well as the fact that it fosters the construction of new sources of renewable energy. Taking advantage of this affinity, Austin Energy plans to mail GreenChoice brochures to the 30,000 members of Austin's environmental groups over the next two months. GreenChoice booths will be staffed at community events and outside major businesses to sign up customers as well.

The premium for GreenChoice of 4-10ths cent per kWh is the smallest premium of any green power program in the nation, according to the U.S. Department of Energy. Austin Energy is committed to spending $7.8 million in each of the next 10 years to build its GreenChoice program.

Power for GreenChoice will come from a dozen wind turbines to be built in Upton County and from the construction of six landfill gas-recovery projects, including two in Houston, one in San Antonio, one near Galveston and one near Dallas. Methane gas recovered from the landfills will be used to supply nearby electric generators.

Capital Metro welcomes new rail manager and rail freight operator

Trans-Global to take over freight operations Wednesday

Karen Rae, general manager of the Capital Metropolitan Transportation Authority, introduced Bill LeJeune, the agency's new rail manager, to Capital Metro's board of directors Monday. Capital Metro Chair Lee Walker said, "Welcome to a real quiet job." Rail operations have been anything but quiet during the past six months as Capital Metro has battled with its freight operator, Longhorn Railway. On March 8, Capital Metro announced the decision to cancel its contract with Longhorn at 4 p.m. Wednesday. Sallie Crosby, Capital Metro's attorney, told In Fact Daily that Capital Metro's new rail operator, Trans-Global Solutions Inc., would take over operations at 4:01 p.m. Wednesday.

Contacted later, Don Cheatham, general manager of Longhorn Railway, said he hopes to have his locomotives off the track by Wednesday's deadline. However, Cheatham said he believes Capital Metro hasn't scheduled enough time for the change in operators, but indicated that he would not fight the change. "I'm so sick of these people," Cheatham said, "I will never look back…I've been divorced before, so I have good practice for this."

Dick Scott, president of Trans-Global, told the board that in handling freight operations, "You either do the business and they hand you a check or…they don't come back. I recognize we haven't had the luxury of being able to set foot on the track yet." Scott said he expects the Central Texas line to provide good business opportunities for his company. Scott said his company has experience handling materials much more hazardous than the ones being handled now by Longhorn, and has received a number of safety awards.

Walker said, "I think there's a lot of anxiety about what's going on here. We're trying to provide a superb rail service." Scott agreed to present an assessment of the rail situation at the directors' regular meeting in April.

Monday was LeJeune's first day at Capital Metro, but he quickly outlined his 23 years of rail experience, including 18 years with Southern Pacific Railroad. He said the Central Texas area "used to be part of my division" with Southern Pacific. Most recently, LeJeune said, he has been in charge of expanding BART ( Bay Area Rapid Transit) to the San Francisco airport.

LeJeune told In Fact Daily he was tired of commuting every weekend between his home in Houston, where his wife and three children live, and his job in San Francisco. LeJeune said his 17-year-old son will finish high school this spring in Houston and then the family would move to Austin to join him.

Robert Bolduc, Capital Metro's previous rail manager, resigned last November, saying he believed that Capital Metro was trying to force Longhorn out of business and abandon freight service to the area. (In Fact Daily Nov. 22)

LeJeune told In Fact Daily his first order of business would be "to work with the new operator to facilitate that changeover (to Trans-Global) as quickly and smoothly as possible. After that, LeJeune said he probably would concentrate on signalization, track maintenance and bridge renewal along the entire line, which stretches from Giddings to Llano.

Rae said the agency would be cleaning trash from the railroad right of way that has angered neighbors in the Cherrywood and Crestview-Wooten Neighborhoods. She said also that the agency would be finishing the McNeil exchange to better serve freight rail customers.

Rae said she would be announcing a five-point action plan for the railway at the board's next meeting, March 27. She said Williamson County officials have asked that trains not operate at busy intersections during peak hours and that Trans-Global employees believe they can accommodate that request.

Rae has signed a letter agreement with Trans-Global "in an amount not to exceed $200,000," according to board documents. The board is scheduled to consider a six-month contract with Trans-Global on March 27 and a longer contract in August.

SOS Alliance rings up no sale…While Save Our Springs Alliance Chair Robin Rather has gone on record supporting the Bradley Settlement ( In Fact Daily March 10), the board's stance remains opposed to the deal. SOSA staff attorney Grant Godfrey told In Fact Daily last week it was possible the board would reconsider the deal. Yesterday, however, SOSA e-mailed a new position statement still opposed to the settlement. Among the reasons: "Instead of providing a 'sprawl wall' that preserves land and sets final boundaries on utility service, the proposal could breach the dike of preserved Proposition 2 land and set the stage for more intense development beyond the preserves." SOSA finds the proposal "unworkably complex and unenforceable over the long term." The group asks that utilities not be extended beyond the current city limits, options be negotiated for purchase of each tract of land, Chapter 245 grandfathering claims be settled by crediting donations of land and waiving capital recovery fees for only those areas already approved for water and wastewater service, and a regional planning process be started for the Barton Springs Zone to guide future development decisions in a sustainable manner… Redevelopment rules flap…The proposed changes to the City Code for redevelopment of existing sites (Item 100 on the March 23 council agenda) would override parts of the Save Our Springs Ordinance. This also has sent up a red flag for the Save Our Springs Alliance. The group is rallying the troops to tell the council to adopt the city Environmental Board's recommendations. (See In Fact Daily Feb. 24 for the lengthy list of recommendations, including that the ordinance would apply only in the Desired Development Zone.)

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