Georgia County Government - July/August 2012 - (Page 23)

Feature Performance Contracting: A Creative Solution By Laura A. Hernandez L ike automobiles and athletes, buildings perform. A structure’s performance can be evaluated and benchmarked; it can be measured as excellent or poor. Low-performance buildings drain resources by using energy inefficiently. They make interior spaces uncomfortable for those who must breathe the low-quality air, sit under harsh lighting or shiver and sweat through variable temperatures. Such buildings are also damaging to the beyond the agreed-upon threshold accrue to the customer. The Time is Right Although state-approved processes for performance contracting have existed in many states for more than 25 years, in late 2010, Georgia became one of the last two states to approve performance contracting legislation. The main purpose of the 2010 legislation was to enable state agencies to enter into long-term performance contracts. The legislation also allowed cities and counties the option of using a stateapproved process, which is currently being developed by the Georgia Environmental Finance Authority (GEFA). Prior to 2010, the lack of enabling legislation meant that few counties and cities in Georgia had employed performance contracting. The passing of this initiative has increased the legitimacy of local government performance contracting, and interest in the method is growing across the state. It’s no wonder, since the economic environment demands low-risk, high-reward solutions like this one. “With SPLOST dollars and property tax revenues down, many counties in Georgia are faced with budget shortfalls,” said Bill Stark, Customer Solutions Manager with Honeywell. “They don’t have the budgets that they normally would have to provide for capital improvements to buildings. Performance contracting offers a financial mechanism to make those needed upgrades in an environment where capital and operational budgets are being strained.” The argument for performance contracting is a common-sense one. Through this method, counties can reallocate funds that would have otherwise gone to pay energy bills and operational support into investments in their buildings. Limited budgets PERFORMANCE CONTRACTING continued on page 24 JULY/AUGUST 2012 environment: According to the U.S. Energy Information Administration, nearly half of all greenhouse gas emissions come from existing buildings. A high-performance building, in contrast, is like a top-of-the-line sports car or Olympic gold medalist. In it, efficiencies are maximized. Such buildings are easier to operate, more affordable to maintain, and safer and more comfortable for the people who work in them. They also make a smaller carbon footprint. Perhaps most importantly, a high standard of performance often enables operational savings to come into play, with reduced repair and maintenance budgets, and better utilization of staff. In today’s economic environment, keeping facilities high performance, rather than high maintenance, counts for a lot. When counties can spend less on their utilities and operations, they gain the flexibility to undertake new initiatives that generate added value and enhance citizens’ quality of life. Improving system efficiencies and making buildings into high-performance entities may seem like a goal that is out of reach. Fortunately, county governments can improve their ailing infrastructure — at no extra cost and sometimes at a profit. The key is the budget-neutral financing method of performance contracting, of which a number of Georgia counties have already made use. The concept is simple: After an energy audit and competitive selection process, an agreement is formalized between a county and an energy service company (ESCO) in which the ESCO will execute energy improvements. Within the terms of the contract, the company guarantees that the resulting savings will meet the cost of these projects. If savings don’t measure up, the ESCO writes a check for the difference. Performance contracting has been used since the 1970s, with variations on the standard business model. The method was originally based upon split savings between contractor and customer. This wasn’t the best deal for customers, as they often had to give up more than was necessary. Now energy service companies, like ACCG partners Honeywell and Trane, offer a contracting plan of guaranteed savings. Projects are financed over a period of years, and savings A Honeywell technician works on an infrastructure improvement project. With a performance contract, counties can use the energy and operational savings the upgrades produce to pay for the work. Photo courtesy of Honeywell. 23

Table of Contents for the Digital Edition of Georgia County Government - July/August 2012

President’s Message
Director’s Desk
Henry County: Building Bridges to Benefit One Henry
Piedmont Henry Hospital Adds Important Healthcare Component to One Henry
Five Georgia Events that Changed History
Performance Contracting: A Creative Solution
Energy Savings Performance Contracts: Risks and Rewards for Local Governments
Georgia Legacy: Making the Economic Case for Land Conservation
Extension News: The Impact of Weatherization Programs in Georgia
News & Notes
Index of Advertisers

Georgia County Government - July/August 2012