Maintenance Backlogs Are Leading to Creative Financing

Dallas, Texas: Exterior view of the Dallas County Criminal Courts building in the city center (September 2009)

Dallas, Texas: Exterior view of the Dallas County Criminal Courts building in the city center (September 2009) Ceri Breeze / Shutterstock.com

 

Connecting state and local government leaders

COMMENTARY | Communities are leveraging savings from energy conservation improvements for maintenance and other needs.

Many government officials do not realize that building maintenance costs far surpass initial construction expenses. For example, a $10 million building requires a $40 million budget to pay for the cost of maintenance and utilities over its lifecycle. These simple economics make it critical for cities and counties to make the most of their initial building investments by adopting a strategic facility maintenance approach. 

According to the National Association of Counties’ 2016 survey, 44 percent of county officials reduced or eliminated programs and services last fiscal year due to budget constraints. At the same time, officials often lack the expertise to take on major infrastructure projects. 

For many local governments, the result of these combined forces is a mounting list of maintenance backlogs that becomes more difficult to tackle with each passing fiscal year. By delaying maintenance investments, local governments are actually reducing the overall life of their buildings and increasing operating costs. It also creates unplanned budget spikes when a deferred maintenance item suddenly becomes an emergency. Even then, some governments are so financially strapped, they can’t act.

A growing number of municipalities are turning to alternative funding mechanisms that create new opportunities to turn deferred maintenance into innovative improvements. These governments are using savings from energy conservation improvements, along with other alternative financing options, to create a budget-neutral solution to fund infrastructure and maintenance projects. Known as an energy savings performance contract, or ESPC, they allow municipalities to make significant facility improvements without tapping into annual budgets, bringing together financing, technology and operational efficiency into one initiative.

The ninth largest county in the U.S. with more than 2.5 million residents, Dallas County was spending millions each month on utility expenses due to inefficient lighting, outdated technology and unchecked water usage. County officials brought in Schneider Electric to develop a multi-phase ESPC project that uses projected energy savings to pay for infrastructure improvements over time. 

In total, the project reduces Dallas County’s utility bills and operational costs by 23 percent annually, which equals more than $90 million in projected lifetime utility and operational savings over the term of the estimated 20-year contract. The project has also made a significant environmental impact on the community by reducing carbon emissions by more than half a million tons—the equivalent of planting more than 636,000 trees to restore the environmental balance. It is also giving a boost to the labor market by creating the equivalent of 867 local jobs and driving an additional $122 million in business sales. 

On the other side of the spectrum, officials in Elmore County, Alabama had been struggling to address a growing list of deferred maintenance issues within its local landmark, the ornate and historic courthouse. The older structure suffered from drafty windows, an outdated HVAC system, antique lighting and minimal information technology infrastructure. 

Officials knew renovating historic buildings could be difficult and costly, but they were committed to modernizing all their county facilities, while protecting the architectural appeal of the courthouse.

Elmore County partnered with Schneider Electric on an ESPC project to transform five of the county’s critical buildings with modern energy conservation technologies. At the courthouse, the renovation included replacing open-flame gas heaters and AC window units with a new centralized HVAC system with building controls, updating the original windows for better efficiency and restoring antique lighting with new LED technology.

The results have made a significant impact on Elmore County. The project will reduce the county’s annual utility budget by 38 percent, which equals more than $4.4 million in savings over the life of the project. In addition to dramatically improving the energy efficiency of Elmore’s facilities, the project will have a substantial environmental impact, removing 15,525 metric tons of CO2 from the atmosphere – the equivalent to removing 3,279 cars from the road or planting 14,696 acres of trees.

Cities and counties of all sizes can learn from the successes of Dallas and Elmore Counties and find creative ways to uncover hidden funding streams to ultimately achieve their long-term infrastructure goals. 

Jonathon Bazan is the Assistant County Administrator for Dallas County, Texas. Richie Beyer serves as County Engineer and now Chief Engineer and Operations Officer for Elmore County, Alabama. Tammy Fulop is the Vice President of Energy Solutions Sales at Schneider Electric.

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