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Home My WebLink About7.5 Energy Efficiency Bdgt STAFF REPORT CITY CLERK File #600-35 CITY COUNCIL DATE:July 17, 2012 TO: Honorable Mayor and City Councilmembers FROM: Joni Pattillo, City Manager SUBJECT: Energy Efficiency Upgrade Budget Establishment Prepared by Roger Bradley, Assistant to the City Manager EXECUTIVE SUMMARY: The City Council will considering creating Capital Project No. 930018 and appropriating funds for Fiscal Year 2012-2013 to construct various energy efficiency improvements at all City facilities. The City Council will also consider establishing a budget and authorizing the City Manager to enter into an agreement for project management to assist the City in coordinating the construction efforts. FINANCIAL IMPACT: The total project cost is $7,530,976, of which $7,430,976 is for construction costs, and $100,000 is for project management services. Of the $7,530,976 in project cost, it is recommended that $507,707 be funded from the City’s Internal Service Fund. The full cost of the improvements, including interest, will be offset through the estimated energy savings. This project is funded through a combination of Lease Financing and Internal Service Fund reserves. RECOMMENDATION: Staff recommends that the City Council: 1) amend the Five-year Capital Improvement Program to include Project No. 930018; 2) adopt the Budget Change Form; and 3) authorize the City Manager to procure project management services in an amount not to exceed $100,000. Submitted By Reviewed By Assistant to the City Manager Assistant City Manager DESCRIPTION: At the City Council meeting on June 19, 2012, the City Council approved a contract with Chevron Energy Solutions (Chevron ES) to conduct energy efficiency upgrades at all City facilities. It is anticipated that the improvements will result in an expected annual net savings to the City of over $3.4 million in the first five years and approximately $14.8 million dollars over 25 years. In addition, the plan would provide an important opportunity for the City of Dublin to ITEM NO. 7.5 Page 1 of 3 implement measures that not only reduce energy consumption but also reduce GHG emissions within the community. As part of the project, eight photovoltaic electricity production (solar) installations are proposed at the following locations: Civic Center; Library; Shannon Community Center; Senior Center; all 3 Fire Stations; and Valley High School (Stager Gym). These installations will generate nearly 1 MW of solar energy at all sites combined, and includes a display monitor to be placed at the Civic Center and Valley High with a link to the City website to allow for public viewing of real time tracking of production, savings and environmental benefits. The solar arrays will be a combination of solar shade structures at the Civic Center, Library, Shannon Community Center, and Valley High with roof mounted solar installations at the remaining facilities. In addition to the renewable energy provided by the project, the scope also includes multiple energy efficiency measures at various sites. The energy efficiency scope includes: HVAC upgrades at the Civic Center, Library, and future Public Safety complex. The project will also address interior and exterior lighting upgrades at City facilities, including occupancy sensors where appropriate; installation of irrigation control devices to prevent overwatering and water loss at City parks; water fixture replacements. Finally, the project will upgrade the City's streetlights byreplacing the high pressure sodium cobra head lighting fixtures with a light emitting diode (LED) lighting technology. As authorized by the City Council, an agreement has been executed for lease purchase financing for the improvements. The lowest interest rate and lowest total financing cost was provided by US Bank after completing a competitive solicitation among multiple banks. Staff is recommending that certain portions of the project be funded from reserves in the Internal Service Fund for Building System Replacements. This includes $382,528 in building lighting and $25,179 in Building water fixture replacements. Based on the type of improvements, it makes greater sense to fund these from reserves and not carry debt service on them for a period of 15 years. In addition, Staff believes that the project requires project management services in order to manage the scope and scale of multiple projects. It is proposed that the construction management costs will also be paid from the Internal Service Fund reserves. As a result, Staff recommends that the City Council authorize the City Manager to procure project management services at an amount not to exceed $100,000. The average annual lease payment over the 14 year repayment period is estimated to be approximately $614,093 per year, but the lease payment will fluctuate on a yearly basis depending on the timing of rebates and other incentives that will be applied to the lease principal. The energy savings and incentives are projected to fully offset the annual lease cost. The financing is a lease arrangement with US Bank holding title to the improvements being installed. Once all lease payments are made, the improvements will be fully owned by the City. The total amount to be financed through the US Bank Lease is approximately $7,023,268. The interest rate is fixed at 2.66%. Chevron ES projects that full project implementation will provide immediate and long term benefits to the City of Dublin including:  Providing nearly 1 MW of clean renewable energy;  Reducing energy consumption of 2,723,849 kWh per year;  Utility/maintenance expense reductions of over $560,000 per year;  Over $14.8 million in savings to the City over 25 years; Page 2 of 3  Capturing $277,795 in one-time rebates;  Capturing $446,599 in California Solar Initiative incentives;  Savings of over $67,000 in water costs annually without estimating increases; and  Reduction of 1,920 metric tons of greenhouse gas emissions within the City annually. As this project was not included within the Five-year Capital Improvement Program, it will be necessary for the City Council to incorporate it within the program. Additionally, Staff is requesting that the City Council establish a budget for this project and to recognize the revenues and expenditures that will result from project activities. As such, Staff recommends that the City Council amend the Five-year Capital Improvement Program to include Project #930018 (Attachment 1) and adopt the Budget Change Form (Attachment 2). NOTICING REQUIREMENTS/PUBLIC OUTREACH: None. ATTACHMENTS: 1. Capital Improvement Project #930018 2. Budget Change Form Page 3 of 3 930018Energy Efficiency UpgradeGeneral Improvements Number - Project - Program – PROJECT DESCRIPTION This project provides for an energy efficiency upgrade of all City of Dublin facilities. The Energy Upgrade project includes eight photovoltaic (solar) installations, which are planned for the following locations: Civic Center; Library; Shannon Community Center; Senior Center; all 3 Fire Stations; and Valley High School (Stager Gym). The solar arrays will be a combination of solar shade structures at the Civic Center, Library, Shannon Community Center, and Valley High School with roof mounted solar installations at the remaining facilities. Total system size for all facilities planned for installation is approximately 730 kilowatts. The scope of work also includes multiple energy efficiency measures at various City sites, including: HVAC upgrades; interior and exterior building lighting upgrades; installation of centralized irrigation control devices at City parks; and water fixture replacements. Additionally, the City will upgrade approximately 3,200 streetlights by replacing high pressure sodium cobra head lighting fixtures with a light emitting diode (LED) lighting technology. Additionally, project management services are included within the budget to assist the City in coordinating project outcomes. All projects are anticipated to be complete in Fiscal Year 2012-2013. MANAGING DEPARTMENT: Environmental Services ESTIMATED COSTS PRIOR YEARS 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 TOTALS 9200 – Contract Services $0 $100,000 $100,000 9400 – Improvements $0 $7,430,975 $7,430,975 $0 $7,530,975 $7,530,975 TOTAL FUND PRIOR YEARS 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 TOTALS 7101– Debt Service Fund$0$7,023,269 $7,023,268 6201– Internal Service Fund – Buildings $0$507,707 $507,707 $0 $7,530,975 $7,530,975 TOTAL ANNUAL OPERATING IMPACT — — — — — — — CITY OF DUBLIN BUDGET CHANGE FORM FISCAL YEAR 2012/2013 CHANGE FORM # _________________ New Appropriations:Budget Transfers: (City Council Approval Required) X From Un-Appropriated Reserves ____ From Budgeted Contingent Reserve (Approval Req’d) ____ Within Same Department Activity ____ Between Departments (City Council Approval Req’d) X From New Revenues ____ Other: ______________________________________ _____________________________________ INCREASE BUDGET ACCOUNT AMOUNT INCREASE BUDGET ACCOUNT AMOUNT Name: Debt Service Fund/Energy Name: General Improvements Efficiency Capital Lease/Proceeds CIP/Energy Efficiency Upgrade from Lease Financing Project/ Improvements (Debt Service Fund) Proj Acct #: 930018.9400.9401.7101 GL Account #: 7101.1901.49102$7,023,269 GL Account #: 3300.9301.73103 $7,023,269 Name: General Improvements Name: General Improvements CIP/Energy Efficiency Upgrade CIP/Energy Efficiency Upgrade Project/ Improvements (ISF Building Project/ Construction Admin (ISF Fund) Building Fund) Proj Acct #: 930018.9400.9401.6201 Proj Acct #: 930018.9200.9204.6201 GL Account #: 3300.9301.73103 $407,707 GL Account #: 3300.9301.64001 $100,000 FROM DEBT SERVICE TO CIP FROM DEBT SERVICE TO CIP Proj Acct #: 930018.9309 GL Account #: 7101.1901.891017,023,269 GL Account #: 3300.9301.49999 7,023,269 FROM BUILDING ISF TO CIP FROM DEBT SERVICE TO CIP Proj Acct #: 930018.9305 GL Account #: 6201.1901.89101507,707 GL Account #: 3300.9301.49999 507,707 REASON FOR BUDGET CHANGE ENTRY : At the City Council meeting on June 19, 2012, the City Council approved a contract with Chevron Energy Solutions to conduct energy efficiency upgrades at all City facilities. As presented at the July 17, 2012 City Council meeting, the City Council approved the creation of Capital Project #930018 Energy Efficiency Upgrade and appropriated funds for Fiscal Year 2012-2013 to construct various energy efficiency improvements at all City facilities. The debt service fund #7101 is established to account for the capital lease financing program. The total project costs of $7,530,976 of which $7,430,976 is for construction costs and $100,000 is for project management services. Of the $7,530,976 in projects cost, $507,707 will be funded from the Building Internal Service Fund. The full cost of the improvements including interest will be offset through energy savings. Debt service payment will begin July 2013 and be included in future budget. As Presented at the City Council Meeting on: Date: 7/17/2012 #################(Finance Use Only)################### Posted By: Date: _____ City Council Minutes Excerpt Attached Reviewed By: ____________________________________________ ATTACHMENT 2