An Introduction from Johnson Controls, Inc. Find Money Here: Performance Contracting Self Funding Municipal Upgrades.

An Introduction from

Johnson Controls, Inc.

Find Money Here:

Performance ContractingSelf Funding Municipal Upgrades

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Johnson Controls Incorporated

• Founded in 1885 – A Fortune 75 Company• Over 130,000 Employees Worldwide• 1000 + Locations Worldwide• Global Resources/Local Delivery

– 6 Pennsylvania Locations

• $3.6 Billion Active Guarantees

Globally Recognized Leader in

Performance Contracting

Mechanical & Control Service

Municipal Solutions

Facility Management

Fire and Security

Building Automation

Green Building Design

Central Plant Services

Emerging Technology

York/Coleman/Diehard

Our Vision and Values

Our Values

• Integrity

• Customer Satisfaction

• Employee Engagement

• Innovation

• Sustainability

Our Vision A more comfortable, safe and sustainable world.

Johnson Controls – Building Efficiencies Group

• Systems – New Construction Installations of Building Automation Systems (BAS) with Contractors

• Service – Preventative & Predictive Maintenance of Mechanical and Control Equipment. Replacement of Equipment.

• Solutions – Performance Contracting – Self funding upgrades and new services

Privilege of Focus on Local Government

• Dedicated Local Government Team• Experience in Municipal Government• Involvement with local and national partners helps to:

– Learn best practices and share ideas– Understand municipal challenges

Active member in PLCM, CCAP, NLC, ICMA, Clinton Climate Initiative

Facility Budget

CapitalBudget

EnergyBudget

MaintenanceBudget

RepairBudget

Facility Manager Challenges

• Budget Constraints• Short-Staffed• Staff Limited Expertise/Staying Current• Rising Costs of Utilities• Necessary Capital Improvements• Upcoming Electric Deregulation• Consistent Budget Plan

Facility Manager Dilemma

• Budget Battles• Capitol Debt• Tax Increases• Political Pressure• Neglected Facilities• Poor Working Conditions• Deteriorating Services to Public

JCI Brings Value to Local Governments

Local Government Value Proposition:We support the creation of:

Progressive, Efficient, and Technologically Advanced

Sustainable communities.

How Do We Do It:JCI partners with local government to:

Provide the Technology, Implementation Expertise

and Funding strategies for

Projects that Reduce Waste, Upgrade Technology,

Improve the Environment and Reduce Operating Expenses.

JCI

Guaranteed,

Self-Funding

Performance Contracting

ImprovementsWithout Tax Impact!

Self Funded Solutions

Energy Performance Contracting

• Alternate procurement mechanism:

– Implement necessary infrastructure improvements that reduce energy consumption

– Financed through existing utility/operations budget

Typical enabling legislation -

PA Act 77 of 2004 11

Energy Performance Contracting

• “Competitive sealed proposals -- all governmental units are authorized to utilize competitive sealed proposal procurement.

• A governmental unit may enter into a guaranteed energy savings contract with a qualified provider if it finds that the amount it would spend on the energy conservation measures recommended in the proposal would not exceed the amount to be saved in both energy and operational costs within a 15-year period.”

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Energy Performance Contracting

• “ Before the award of a guaranteed energy savings contract, the qualified provider shall provide a report … summarizing estimates of all costs of installation, maintenance, repairs and debt service and estimates of the amounts by which energy or operating costs will be reduced.”

• “A governmental unit may enter into a single guaranteed energy savings contract with each responsible provider selected in accordance with the provisions of this subchapter.”

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Energy Performance Contracting

• “A governmental unit may enter into a single guaranteed energy savings contract with each responsible provider selected in accordance with the provisions of this subchapter.”

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Energy Performance Contracting

• “A governmental unit may enter into a single guaranteed energy savings contract with each responsible provider selected in accordance with the provisions of this subchapter.”

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Concept

Portion of Utility Budget finances infrastructure improvements:

UtilityBill

Utility

Bill

EnergyCost

Savings

UtilityBill

Before PerformanceContract

During PerformanceContract

After PerformanceContract

P&I Payment

City’s Share

City’s Share

Before Performance Contract-City’s utility budget can be reduced by replacing old inefficient equipment

During Performance Contract-Energy Services Company finances (bank), installs and maintains new energy efficient

equipmentSavings monitored & verifiedCity pays back investment with portion of utility savings

After Performance Contract- City keeps all the savings after investment is paid off

Features of Performance Contracting

• A Single Point of Contract & Responsibility

• Implement infrastructure improvements without capital investment, tax increase

• Paid for through existing appropriated utility budget

• Guaranteed Project Price• Design/Build with Quality Subcontractors• Results Guaranteed for 15- year Duration• Risk is shifted to Energy Service

Company

Facility Efficiency & Upgrades

• Building Envelope• HVAC Efficiency• Building Controls• Lighting Quality &

Efficiency• Indoor Air Quality• Re-Commissioning• Access & Security• Maintenance Strategy• Staff Training• Boilers & Chillers• Renewable Energy

Technologies• Water Conservation

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Wastewater Operations

• Process Enhancement• Energy Efficiency• Sludge Handling• Methane Harness• Co-Gen Operations• Telemetry• Aeration• Building Envelopes (roof,

windows)• Lighting• Boilers• Digester Gas Utilization• Controls • Pumps• Motors, Drives

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Water Distributions Systems

• Energy Efficiency

• Pump & Motor Controls

• Security• Leak Detection• Trenchless

Piping

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Sustainable Energy Strategies

• Solar Energy• BioMass Fuels• Wind Power• Thermal Storage• LEED Certification• White & Green Tag• Carbon Reduction

Credits• Demand Response

Preventative & Predictive

Maintenance

of Mechanical and Control Equipment.

One Point of Contact &

Responsibility!

Service

Telecommunications Solutions

• T1 replacement• Ethernet replacement• Phone line elimination• AMR, Telemetry, SCADA• Fee based Services• Public Safety In-Car Networking• Secure mobility for First

Responders • Radio Interoperability • High Definition Video

Surveillance

Public Lighting, Traffic Control

• LED Lighting• QL Lighting• T-8, T-5 Lighting

Utility Metering

• Meter Size & Type• Meter Set• Meter Testing• Meter Age & Accuracy• Automatic Meter

Reading

Typical Finance & Procurement Methods

• Increases debt service• Requires detailed construction documents• Involves municipal bidding with multiple

contracts• Control of project costs and quality• Manage risk• Responsible for the Outcome & Maintenance

Performance Contracting Financing

• 3rd party financing available– Tax exempt municipal lease– 15 year financing typical for municipal projects– Preserves capital for other priorities

• May not impact borrowing capacity– Non-appropriations clause

• Project benefits exceed payments• Eliminates competition for capital

Local Government Performance Contracting Experience

• Northampton County, PA• Carroll County, MD• Monroe County, PA• City of Baltimore, MD

• Cape May County, NJ• Charles County, MD• Cumberland County, MD• Blair County, PA

Over 2000 Local Government Customers!

$443,000,000+ 5-year TotalLocal Government

Performance Contracting

Can My Municipality Benefit

• Establish goals – Identify specific infrastructure needs – Other benefits- Environmental, reduced O&M

• Size of utility budget– Can it fund desired improvements

• Preliminary analysis– Potential to achieve goals?

Now is the Right Time

• Electric Rate Cap Expiration• State Initiative on Energy Independence Looms• PA Act 77 Enables & State Promotes PC• Reduction of Municipal Carbon Footprint –

Green House Gas/Climate Change Agreement • New Public Safety Demands• Limited City Resources• Pressure for Additional Services• Economic Development Incentives

Advantages of Performance Contracting

• Firm fixed price, no change orders• Does not increase municipal debt service• Lower overall project cost• Allows for design/build contracts• Local Subcontractors, Professionals• Limits equipment substitutions• Municipality gets exactly what it wants• ESCO assumes performance risk• Allows for implementation of multiple infrastructure

improvement projects while capital is preserved for

other priorities

Question& Answer

Harvey L. [email protected]