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Financial Cure for Deferred Maintenance_National
1. enable.schneider-electric.com
This Budget Season,
Find a Financial Cure for
Deferred Maintenance
The 2008 recession hit the nation’s K-12 schools
particularly hard. Now, after years of deferred
maintenance, schools are finally starting to address
long-needed energy and infrastructure upgrades.
What’s your school district trying to accomplish this year?
2. enable.schneider-electric.com | 2FINANCIAL CURE FOR DEFERRED MAINTENANCE
It’s Time for a Long-Term Plan
Addressing Your Infrastructure and Maintenance Backlog
If you’re like most schools, it’s difficult to decide where to begin when
addressing your infrastructure and maintenance needs. That’s because the
recession left schools facing an uphill battle against population growth, tax-
weary voters, debt avoidance and debt caps.
Looking ahead, the problem only seems to be getting worse. While public
school enrollment is projected to gradually increase nationwide through
2019, state and local school construction funding continues to decline.
National spending on school construction diminished to approximately
$10 billion in 2012, about half the level spent prior to the recession, while
the condition of school facilities continues to be a significant concern for
communities, according to ASCE. That leaves schools with the additional
burdens of having to extend the life of existing facilities and modernize
learning environments to today’s demanding standards.
That’s why budget season is an ideal time to think about developing a
long-term plan to manage your school system’s infrastructure to address
your maintenance backlog and prepare for future challenges. Many K-12
schools systems have found relief by using energy savings performance
contracting to fund infrastructure improvements without having to tap into
their annual operating budgets. Performance contracts use savings from
energy conservation improvements to fund infrastructure and maintenance
projects. For example, energy upgrades that create $400,000 in annual
savings can be leveraged over 20 years to create $10 million in revenue to
fund additional improvements.
The True Cost of Deferred Maintenance
School facility managers know all too well the vicious cycle schools have
been locked in since the recession. “When schools face funding challenges,
facility operation and energy budgets are often the target,” says Tammy
Fulop, Schneider Electric vice president. “Once something gets put into
the deferred maintenance slot, it’s difficult to move it out. Meanwhile,
schools become more expensive to operate and less safe for the staff and
students.”
Breaking this cycle requires a combination of time, money and expertise.
Unfortunately, most schools lack at least one of these crucial assets.
Thus, many schools are operating without a plan to address ongoing
maintenance. That’s where things go wrong because though many may not
realize it, building maintenance costs far surpass first construction costs.
For example, a $10 million building requires a $40 million budget to pay for
the cost of maintenance and utilities over its lifecycle.
When those costs get deferred, it reduces the lifecycle of the buildings
and makes them more expensive to operate. It also creates unplanned
budget spikes when a deferred maintenance item suddenly becomes an
emergency, such as when a boiler blows. Even then, some schools are so
financially strapped or indebted they can’t act.
Did you know?
Energy upgrades that create $400,000
in annual savings can be leveraged over
20 years to create $10 million in revenue to
fund additional improvements.
A $10 million building requires a
$40 million budget to pay for the cost of
maintenance and utilities over its lifecycle.
Schools got a disappointing “D” on the
American Society of Civil Engineer’s
Report Card for America’s Infrastructure.
The investment needed to modernize and
maintain our nation’s school facilities is at
least $270 billion.
3. The Power of Partnership
Many schools are surprised by just how much
they can accomplish through performance
contracts—often far beyond just energy and
infrastructure improvements. Some schools have
used their performance contracts to fund safety
and security improvements, technology and
communication upgrades, building envelope
repairs and even public relations and public
engagement initiatives.
But crafting smart, effective performance
contracts can seem daunting if school officials
don’t understand the intricacies of how they work
and what makes most sense for their needs.
That’s where energy service companies, or ESCOs,
come in. ESCOs are experts in all things related
to performance contracts. Working with a trusted
partner instead of going it alone also means
schools can let go of the hassles of managing the
project including all the complications related to
architects, contracts and subcontractors. Because
performance contracts come with performance
guarantees that pay customers back if they fail to
deliver, it also means schools let go of the risk in
financing facility upgrades.
Finding the right partner isn’t always easy,
especially when it comes to the complex
financing a performance contract can entail. And
choosing the wrong partner can cost schools
significantly down the road. Some companies
dangle quick fixes and fast paybacks. Those
opportunities may be real, but they miss the true
long-term funding potential of a well-crafted
performance contract.
An important part of that service is developing a
diverse financing package that secures the most
money for the energy improvement plan
at the lowest cost possible.
“The ESCO is very important in getting the best
financing package,” Fulop says. “A strong ESCO
partner will go above and beyond to match
innovative financing with grants, rebates and
other funding sources to maximize what a school
district can accomplish.”
California district leverages Prop 39 funding
to save over
$12 millionHacienda La Puente Unified School District
City of Industry, California
Largest ever K-12 energy project in Alabama saves
school district
$40 millionMadison County Schools
Huntsville, AL
enable.schneider-electric.com | 3FINANCIAL CURE FOR DEFERRED MAINTENANCE
Their Vision:
Address much needed facility
improvements with a quality, cost
effective solution, and design a
five year energy master plan.
Funding:
• Proposition 39
• Energy Savings Performance
Contract (ESPC)
• Tax exempt lease purchase
• Certificate of participation
(COP)
Energy Conservation Measures:
• Interior and exterior lighting
• Building automation systems
• HVAC replacements
• IT power management
• Electrical distribution
upgrades
Results:
• Guaranteed annual savings of
$818,101
• 38% electricity savings
• Increased operational
efficiency
• Reduced maintenance issues
Their Vision:
• Address backlog of deferred
repairs
• Implement district-wide
infrastructure maintenance
program
• Find new sources of funding
Funding:
• Energy Savings Performance
Contract
• Federal Qualified Energy
Conservation Bond
• 0% state loan
• Local government energy loan
• Utility rebates
• Tax exempt lease purchase
Energy Conservation Measures:
• StruxureWare building
automation system
• Lighting upgrades/renovations
• IT enterprise management
system
• HVAC replacements/upgrades
• Water fixture commissioning/
upgrades
• Smart meters
Results:
• Guaranteed annual savings of
$1,284,423
• 40% reduction in energy
consumption
Read the full case study
Read the full case study
