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District to pursue $1.5 million energy performance contract

Last week, the Archuleta School District 50 Jt. board agreed to pursue drafting a $1.5 million energy performance contract (EPC) with Honeywell Building Solutions in order to retrofit schools with energy-saving features, with a guarantee written into the contract that money saved by upgrades would fully finance those improvements.

In light of a failed bond initiative (defeated by a substantial margin last fall) for construction of new schools, District Superintendent Mark DeVoti stated that, when asked what “Plan B” was, his response would be, “Plan B is sitting there in the front row,” indicating where Honeywell consultants Deborah Overbey and Kevin Taylor were sitting.

DeVoti told the board that most of Honeywell’s work would be completed by August.

Telling the board that proposed upgrades are “a self-funded project,” Taylor said he and Overbey were before the board only to ask that DeVoti and the district’s attorney draft the contract, “Which we would like to go forward with in the next couple of weeks ... using your existing budgets, and energy, to pay for the project.”

When asked by board director Tim Taylor what the payback schedule would be, Kevin Taylor responded that, “The savings over the next 15 years will pay for the project,” and added that the project would be financed at a 2.04 percent rate.

Assessing district schools for the past several months, looking at areas where buildings could be made more energy efficient, Honeywell consultants made numerous recommendations to the board including upgrades to building envelopes (such as weather stripping and sealing, additional insulation, etc.), expanded natural solar lighting and geothermal energy, improved energy management systems and installation of more energy-efficient lights (to include occupancy sensors).

With the installation of a new roof on the elementary school currently taking place, District Maintenance Supervisor Dolly Martin stated that this summer would be the best time to install solar tubes (a form of natural day lighting for classrooms) and that the roofing contractor would warranty no leaks from the installation of those features for 20 years.

Later in the meeting, Honeywell consultants also provided the board with a first reading of a policy for energy-saving guidelines beyond the proposed upgrades.

“It’s part of what Honeywell does in addition to the performance contract,” said Kevin Taylor, adding that the policy was, “more about changing habits than policing.”

Honeywell consultants said the proposed improvements would have the added benefit of increased student comfort while in the classroom. Pagosa Springs Middle School Assistant Principal Justin Cowan added that numerous studies have shown student performance improves when provided with more natural light.

While the EPC would appear to be a win-win for the district, students and taxpayers, questions have been raised as to the propriety of the district pursuing a sole source contract with Honeywell while sidestepping a Request For Proposal (RFP), the normal process when committing such a large sum of money for services.

Answers to those questions are provided from a number of sources.

First, improving energy efficiency in schools was a program initiated by the Governor’s Energy Office (GEO) over a decade ago, with that program leading to the development of EPCs as a means for financing energy efficiency improvements (spelled out in Article 30 of Title 24 in Colorado Revised Statutes). As such, Honeywell was required to be preapproved by GEO in order to qualify for an EPC. In order to qualify, service providers submit an RFP to GEO with those bids available for inspection on the GEO website.

In essence, the district would have engaged in a redundant process had it issued its own RFP; that RFP would have cost the district additional money.

Second of all, the Colorado Department of Education (CDE) approved the district’s selection of Honeywell three months ago. Having partnered with GEO to improve energy efficiency, CDE has made it a policy to allow districts latitude in selecting GEO-approved service providers for sole source EPC agreements.

Finally, given the blessing of both GEO and CDE, C.R.S. 24-103-205 states that the district may pursue sole sourcing while C.R.S. 24-101-401 states that the district’s EPC shall be public record.

Furthermore, C.R.S. 24-30-2001, 2002 and 2003 stipulate the terms of an EPC, as well as what upgrades are required by the state to draft such a contract. Many of Honeywell’s recommended upgrades follow the letter of the law, with other recommendations going beyond the scope of statute.

In the end, Honeywell consultants reported that the district would save $1,493,065 in energy costs, as well as operations and maintenance costs over the next 13 years, sufficient savings to pay off initial financing two years earlier than the timeframe Honeywell consultant Kevin Taylor provided to the board — estimates that, by terms of C.R.S. 24-30-2002, are to be guaranteed by the service provider.

While payment for the project comes from resulting energy savings, money that the district would have otherwise spent on utilities and maintenance sans the upgrades, Kevin Taylor told the board that the EPC did not prevent the district from pursuing grants while DeVoti added that geothermal upgrades might qualify the district for certain rebates (a Department of Local Affairs grant is specified for energy efficiency improvements in schools).

Following numerous questions by the board as to the nature and efficacy of Honeywell’s proposed upgrades, District Business Manager Janell Wood expressed what seemed to be the board’s overall sentiment of the project.

“I’m always hesitant to commit to something this large and this long, not knowing what may come the next day,” Wood said. “But I feel these are all things that we need to address for our buildings. With limited funding, I feel this is probably the most prudent use of taxpayer money, the way it (ECP) is structured.”

One person in the audience was not so convinced, however. Local blogger Bill Hudson asked the board about the dollar amount required for the project (the answer for which had been discussed several times at the start of the discussion, prior to Hudson’s arrival).

After board President Linda Lattin explained, “It actually has to do with our energy dollars already spent,” then reiterated the amount discussed earlier.

After exhibiting a fundamental misunderstanding of the ECP process and statutes (with a question of pursuing BEST funding), Hudson asked why the district was not going to the voters to pursue a bond initiative to fund the project.

Hudson had been an active and outspoken opponent of the district’s 2011 bond initiative, using his blog to voice opposition while launching numerous personal attacks on local residents supporting the proposed construction of new schools.

“If you went to the voters and said, ‘we need $1.4 million,’ I’m in favor. If you can save on some financial charges and we can pay for this work out of our pockets next year or the year after and save the school district money, you’re still going to save all the energy money because you’re going to do the project. If I can save a half million dollars by paying for it out of my taxes, I’m in favor,” Hudson said.

After Director Greg Schick told Hudson that he believed it was unreasonable for the district to propose small bond after small bond to the voters, Lattin again explained that the total costs, including interest built into the financing, was already being paid by the district in existing energy costs.

“This is money we’re already spending,” Lattin said, “we’re just trying to make the best use of that money.”

“Essentially what you’re doing is bypassing the voters,” Hudson said. “You’re essentially borrowing money for a long period of time to fix up some things that really need to be fixed. I don’t think the voters are going to like being treated this way. I think the voters like to be able to approve the spending of their money.”

“Which is why we have an elected board that represents the voters,” DeVoti responded.

After Schick made a motion, with Lattin clarifying that the board was agreeing to give DeVoti and the district’s attorney authority to, “Review, approve and negotiate,” the ECP with Honeywell (along with line item discretion on recommended upgrades), the directors voted unanimously to move forward with the contract.

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