Many school administrators face a daily struggle to balance their school budget in terms of paying for existing needs and finding dollars to implement needed improvements. K-12 schools spend around $8 billion on energy annually, making energy the second-highest operating expenditure for schools after personnel costs. This is more than is spent on instructional materials and computers combined.
Many school districts are also faced with aging facilities that require attention. The average construction year for school buildings in the United States is 1968. This means that many of our schools are over 50 years old. They have served generations of students well, but many are in dire need of improvements in order to serve future generations. However, without the passing of a bond issue, there is very little money in a school district’s budget for these improvements.
One answer maybe clean energy-related improvements. A well-designed energy efficiency and renewable energy improvement project can stabilize or reduce operating costs. These projects can include upgrades such as replacing lighting, adding insulation, replacing heating and cooling equipment, installing energy management systems and controls, adding solar systems, and replacing windows, doors, and roofs.
Clean energy-related improvements offer a range of benefits, such as:
- Lower energy consumption and bills
- Modernized infrastructure and reduced facility maintenance costs
- Improved comfort, health, and safety for students and staff
- Environmental benefits, such as bringing in more outside air into the classrooms
The Cost of Waiting Until More Money is Available
It may seem like a good idea to wait until the operating of capital budget dollars are available before implementing clean energy-related improvements rather than financing the installation immediately. This idea is attractive because if internal budget dollars are used, paying interest can be avoided completely. But delaying installation of energy conservation improvements delays the point at which energy savings can begin.
For example, if proposed project costs $500,00 (like when interior lighting is upgraded to LEDs) and has a 5-year simple payback, the average monthly savings will be about $8,333/month ($500,000 divided by 60 months). But if the school district decides to delay the project for 12 months, they will lose this savings and end up paying the local utility $100,000 ($8,333 multiplied by 12) more than if the equipment was installed immediately. That is a lot of money. In fact, the savings realized by installing the equipment immediately, rather than waiting for 12 months, would effectively reduce the interest rate for borrowed funds to 0%.
About the author – Paul Harrell is a business development manager with Navitas. His background as a Certified Public Accountant and 33 years of experience in the education sector help him bring a practical approach to developing strategies for school districts wanting guidance in how to manage their overall budget and utility costs. He can be reached at pharrell@navitas.us.com or 913-344-0049