Project News

This article originally appeared in the November 2022 issue of School Business Affairs magazine. Click here to download a PDF of the article.

Jefferson City is the capital of Missouri and home to the Jefferson City School District. The school district serves nearly 9,000 students in 16 school buildings. Like many school districts, Jefferson City is faced with aging facilities, rising utility costs, and limited financial resources.

When school district patrons passed a general obligation bond issue to build a second high school and renovate their existing high school, available bond dollars were allocated to the two high school projects. However, the district did not have a clear mechanism to fund the improvements needed in other aging facilities.

Frank Underwood, Jefferson City School District’s director of facilities, safety, transportation, and security, was faced with the challenge of how to maintain and update the school district’s remaining 14 facilities when new general obligation bonds were targeted toward the high school projects.

Underwood wanted to find ways to increase discretionary dollars available to his department by leveraging money already being spent on electricity, gas, and water to finance the needed upgrades and repairs. He saw performance contracting as a potential avenue to make that happen.

By partnering with an energy service company (ESCO), the district entered into an energy-savings performance contract to generate funds for additional improvements in the remaining school sites.

What Is an Energy-Savings Performance Contract?

An energy-savings performance contract (ESPC) uses guaranteed savings from the maintenance, operations, and utilities budget to upgrade and modernize a building’s environmental systems, which are then financed over a specified time.

By partnering with an ESCO, school districts can use ESPCs to improve the energy performance of their buildings, thereby enhancing building operations and saving energy.

ESCOs are project developers; they integrate the project’s design, financing, installation, and operational elements and typically offer turnkey installation ser- vices. The primary differentiator between an ESCO and other energy-efficiency contractors is the guarantee of energy savings, which is specified as part of the terms of an ESPC.

With an ESPC, the school district repays the money borrowed to finance the project, usually over several years, using the energy cost savings generated from the project.

The ESCO monitors the performance of the project for the life of the contract and verifies the resulting energy savings. In some cases, the ESCO may also operate and maintain the new equipment and systems.

Benefits of Hiring an ESCO

Hiring an ESCO is a proven strategy for identifying and implementing energy-saving capital improvements, while managing risks inherent in such projects.

ESCOs can provide a range of services, from an energy audit to a third party–financed turnkey project, with a comprehensive set of measures and guaranteed energy savings. Their specialty is the energy-savings performance contract that shifts some of the project’s performance risk to the ESCO in exchange for allowing the ESCO to capture a share of the savings.

The following are key benefits of working with ESCOs:

• Effective building performance
• Options for project financing and risk management
• Access to professional expertise
• New equipment
• Training with little to no up-front cost

The ESPC can apply to an individual building or an entire campus.

The Jefferson City School District Project

The Jefferson City School District completed a request for qualifications process to select and hire an ESCO. The selected ESCO was engaged to perform an investment-grade audit to identify critical facility issues and develop energy conservation and facility improvement measures to address them.

The school district was able to complete the following projects through the ESPC:

• Upgrade the interior lighting with energy-efficient LED lamps and fixtures
• Upgrade heating, ventilating, and air-conditioning (HVAC) equipment
• Coordinate building automation systems
• Replace water-source heat pumps
• Implement water conservation measures
• Weatherize buildings
• Optimize building performance through data analytics

Underwood explains, “Without using general obligation bond dollars, the district was able to fund $16 million in improvements by utilizing a guaranteed energy-savings performance contract and reallocating dollars made available through the [Elementary and Secondary School Emergency Relief] funding.”

By implementing this project, Jefferson City School District will save an estimated $10.8 million over the 15-year term of the ESPC.

The Jefferson City School District project improved the environment with the annual reduced emission of an estim

ated 6,015,994 pounds of carbon dioxide, a harmful greenhouse gas. That emission reduction is equivalent to preserving 20 acres of forest from deforestation or conserving 308,525 gallons of gasoline.

The school district also qualified for a $586,000 rebate from Ameren, its electric services provider. In April 2022, Ameren recognized the school district for its efforts with its Energy Efficiency Champion Award for conserving resources by upgrading its HVAC systems.

To learn more about ESPCs, visit the National Association of Energy Service Companies website at www.naesco.org.

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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

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This article originally appeared in the November 2022 issue of School Business Affairs magazine and is reprinted with permission of the Association of School Business Officials International (www.asbointl.org). The text herein does not necessarily represent the views or policies of ASBO International, and use of this imprint does not imply any endorsement or recognition by ASBO International and its officers or affiliates.

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.

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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.