Sussex County's $26 million problem
By Nathan Mayberg
NEWTON — How did a solar power company that had only been in business for two years get loan guarantees of nearly $90 million from Sussex, Morris and Somerset counties?
And why would Sussex County, with a budget of about $100 million, put at risk $27.7 million through bond guarantees for a private company?
Sussex County Administrator John Eskilson says Sussex County is potentially facing $26 million in losses after SunLight General Capital, a solar power energy company, was unable to pay back most of the $27.7 million in bonds the county took out for them through debt issued by the Morris County Municipal Authority.
Settlements being discussed this week could reduce the county's exposure to $6.5 million through revenue measures that Eskilson said can't be released at the direction of the county's special counsel David Weinstein and the Board of Freeholders.
Eskilson said the terms will be made public following the board's vote on the settlement scheduled for Feb. 25. The board voted to approve the settlement by a 3-2 vote.
Freeholder Gail Pheobus has been publicly opposing the secrecy. She, as well as Assemblyman Parker Space have called for state and federal investigations into the deals. Space approved the original agreements as a freeholder. Pheobus wasn't on the board at the time.
"We need accountability," Pheobus said. "I'm not sure why the other county freeholders believe it should not be public."
She said the agreement was only put in front of freeholders last week.
"This is a taxpayer bailout of a failed solar developer," she said.
Phoebus said she wants an independent accountant to examine the financial details of the agreeement before the board votes.
The settlement, she said, "is a very large amount of money that is not our money. It's the taxpayer's money."
The Sussex County Board of Freeholders is considering a settlement to a lawsuit this week brought by Power Partners Mastec LLC to recover tens of millions of dollars they say are owed to them by SunLight General Capital.
Sussex County guaranteed $27.7 million bonds issued by the Morris County Improvement Authority for SunLught General Capital in 2011.
The bonds were to pay for solar panels installed on municipal buildings and schools throughout Sussex County. A total of $88 million in bonds were issued for Morris and Somerset counties for similar projects.
SunLight General Capital was the lone bidder on the project.
An evaluation team consisting of Eskilson, Birdall Services Group, NW Financial Group LLC, representatives from Gabel Associaties and lawyers from the firm of Inglesino, Pearlman, Wyciskala & Taylor took part in evaluating the project, Eskilson said.
The Sussex County Board of Freeholders unanimously approved the contract with SunLight General Capital, a firm with offices in New York City and Hillsborough, NJ.
Power Partners Mastec LLC has claimed they are owed more than $60 million for purchasing and installing solar panels on municipal buildings in Sussex, Morris and Somerset counties. SunLight General Capital has fought the case in court.
Meanwhile, Sussex County has been on the hook for the attorney fees of SunLight General Capital.
Last year, a federal mediator ordered the county to pay $920,000 in attorney fees for SunLight General Capital.
Eskilson said the lawsuits stem from financial issues related to a crash in the solar power energy market, changes in design, and change orders which Power Parners Mastec LLC claimed they were not paid for.
According to its website, SunLight General Capital's leadership is comprised mainly of former officers at the French firm Societe Generale.
The company also employed Peter Drubro, formerly a senior project designer for Uni-Solar in Mount Laurel, New Jersey.
Stephen Schneider, who is listed as director of operations, was previously the director of operations at Pfister Energy, a solar integrator based in Hawthorne, in Pasaic County.
Stacey Hughes, who worked previously at Salomon Brothers, is listed as the chief marketing officer.
It is not known if all of the partners listed on the website still work for the company.
According to the company's website, they finance, own and operate solar energy projects, They sell electricity to clients, usually municipal entities or qualifying commercial sites, through long-term purchase contracts. The company has been in business since 2009.
If Sussex County chooses not to settle the lawsuit, the financial impact could be between $17 and $26 million to county taxpayers, Eskilson said.
That would translate into $1.7 million to $2.3 million annual impact on budget after accounting for revenue generated through sale of solar powered electricity and through the increased cost of electricity.
Under a settlement, that impact could be approximately $6.5 million, with a first year payment of $895,000 in 2015.
Eskilson said the settlement includes new revenues available to the county but said he was under orders by counsel and the freeholders not to discuss those potential revenues publicly.
Eskilson said part of the settlement costs could be paid through the proceeds from the $7.5 million sale of the Homestead Rehabilitation and HealthCare Center.
The county will still have to issue new bonds to pay for the remainder of the $24 million issued through the Morris County Municipal Authority which the county is on the hook for, Eskilson said. That could be as much as $26 million, he said.
Eskilson said the case boils down to whether the county wants to continue paying lawyers to argue the case in court for years with an "uncertain outcome" or to settle.