Originally posted on the Missouri Association of School Business Officials website
School administrators are always challenged with balancing building needs and capital project funds. One strategy school business officials have at their disposal is the Performance Contracting mechanism. Enabled by RSMO 8.231, this allows school districts to fund building projects out of energy savings, and often provides flexibility to address building needs outside of a bond issue. Alternatively, we have seen schools combine bond issues with an energy project through a Performance Contract to effectively extend the amount of work that can be accomplished through the bond issue. In this article we discuss how schools can potentially address lingering facility concerns that may have been delayed as school administrators have prioritized life and education during the Pandemic.
In Missouri, our schools consume $240,000,000 annually on energy to power our buildings. This equates to between $200-300 per student. Outside of salaries and benefits, energy costs are typically the second most costly item for a school district. We often see schools that are able to save between 20-35% on their energy bills through more efficient operation. These potential savings provide a huge potential for budget reductions or could be used to fund other needs throughout the district.
One school district that has effectively used this mechanism to help address building needs is the Oak Grove R-VI School District. As is often the case with schools, Oak Grove recognized they had far more needs than funds available. So, the District considered the implementation of a performance contract along with their bond issue. Through the performance contract, the district was projected to save over $3,000,000 in utilities over 15 years. This project focused on old and inefficient HVAC equipment and building automation systems throughout the district and was completely funded with energy and operational savings. This allowed the other part of the design team, the architect and construction manager, to focus on new square footage and other renovations to existing space. Ultimately, this process allowed the Oak Grove School District to effectively extend their bond dollars by 25% through financing part of their project through energy and operational savings!
The first year is showing great results from the projects implemented. The district saw a reduction of over $300,000 on their utility bills the first year of their program! This projects to over $4,500,000 of savings over 15 years the school can now re-direct to education programs and other facility challenges.
The example above with Oak Grove School District is one success story of many we see across the state. Effectively redirecting utility funds back into education is something we have found is a great success story for school boards and communities! While this mechanism is somewhat different than a typical design and construction process, it may have utility to you as you evaluate your building needs. An Energy Services Company (ESCO) can help you through the process of evaluation of utility bills and a preliminary evaluation of your buildings to help determine if this mechanism could be of value to your school district. If you are not familiar with an ESCO, you may start with NAESCO, the National Association of Energy Services Companies, where you can find active companies that might be able to help you in this effort to improve your buildings.
About the author – Ryan Terry is a business development manager with Navitas. His background as a professional engineer and 19 years of experience in the energy industry help him bring a practical approach to developing strategies for public sector clients who want guidance in how to initiate an energy conservation program in their facilities. He can be reached at rterry@navitas.us.com.