HomeMy WebLinkAboutEnergy Efficiency Fund Creation Approved - Resolution 2011-6 s
Council/Agency Meeting Held:
Deferred/Continued to:
)kAppr ed ❑ Conditionally Approved ❑ Denied �, r2 it ler 's i g n eu e
Council Meeting Date: September 6, 2011 Department D Number: FN 11-016
CITY OF HUNTINGTON BEACH
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Fred A. Wilson, City Manager
PREPARED BY: Lori Ann Farrell, Director of Finance
SUBJECT: Approve creation of the Energy Efficiency Fund, authorize
appropriation of funds, amend the June 6, 2011 loan agreement to
show repayment from this fund, adopt Resolution No. 2011-62
authorizing a loan from the City's Water Fund to the Energy Efficiency
Fund for the purpose of funding Energy Conservation Measures
Statement of Issue:
To ensure compliance with Generally Accepted Accounting Principles (GAAP) and Governmental
Accounting Standards Board (GASB) requirements, City Council approval is requested to create a
new Internal Service Fund, titled the "Energy Efficiency Fund." Approval is also requested to
authorize appropriations in the "Energy Efficiency Fund" for repayment of the loan from the Water
Fund to the General Fund for the Energy Efficiency Projects authorized by the City Council on June 6,
2011.
Financial Impact:
Approval of this recommended action is fiscally neutral and will not impact the fund balance of the
General Fund or Water Fund.
Recommended Action: Motion to:
A) Approve creation of the Energy Efficiency Fund (an Internal Service Fund); and,
B) Authorize appropriations in the amount of $1,675,000 in the Energy Efficiency Fund; and,
C) Amend the loan agreement approved on June 6, 2011, between the General Fund and the Water
Fund to show repayment of the loan from the Energy Efficiency Fund; and,
D) Adopt Resolution No. 2011-62, "A Resolution of the City Council of the City of Huntington Beach
Authorizing a Loan from the City's Water Fund to the City's Energy Efficiency Internal Service Fund
for the Purpose of funding Energy Conservation Measures."
Alternative Action(s):
Do not authorize creation of the Energy Efficiency Fund and accompanying appropriations, resulting
in a $1,675,000 negative fiscal impact to the FY 2010/11 General Fund budget and direct staff
accordingly.
HB -307- Item 7. - I
REQUEST FOR COUNCIL ACTION
MEETING DATE: 9/6/2011 DEPARTMENT ID NUMBER: FN 11-016
Analysis:
The City is currently implementing energy efficiency and infrastructure improvements per City Council
action on June 6, 2011. To fund this project, the financing method involved a 10-year loan between
the City's Water Fund and General Fund to pay for the General Fund's upfront project costs that
would later be offset and repaid by energy cost savings.
According to the loan terms, $1,675,000 would be repaid to the Water Fund from the General Fund
over a 10-year period at an interest rate equal to the City Treasurer's annual return on investments.
This financing method results in an annual loan repayment of approximately $200,000 from the
General Fund to the Water Fund.
Due to Governmental Accounting Standards Board (GASB) pronouncement Number 34 and
Generally Accepted Accounting Principles (GAAP), it is necessary to create an Internal Service Fund
to properly record and account for the loan.
The Energy Efficiency Fund would record the liability of the loan amount of $1,675,000. Without
creating the Energy Efficiency Fund, the entire $1,675,000 cost of the loan would have to be recorded
in the General Fund in FY 2010/2011 creating an unnecessary and unanticipated General Fund
expense. Creating this Internal Service Fund allows this project to be completed while minimizing the
up-front expenditures to the General Fund.
Following GASB pronouncements and GAAP guidance, the original intent of minimizing the up-front,
one-time impact to the General Fund can be realized. The Water Fund will still be repaid the principal
loan amount, plus interest, and will be made whole over the 10-year life of the loan.
The Energy Efficiency Fund would record annual lease payments from the General Fund and loan
payments out to the Water Fund. The total cost to the General Fund will not change by creating this
Internal Service Fund.
Environmental Status:
Not applicable.
Strategic Plan Goal:
1. Maintain financial viability and our reserves.
2. Maintain, improve and obtain funding for infrastructure and equipment.
Attachment(s):
1. Resolution No. 2011-62, "A Resolution of the City Council of the City of Huntington Beach
Authorizing a Loan from the City's Water Fund to the City's Energy Efficiency Internal
Service Fund for the Purpose of funding Energy Conservation Measures," including
Attachment 1 - Interfund Loan Agreement by and between the City of Huntington Beach
Water Fund and Energy Efficiency Internal Service Fund, and Exhibit A — Interfund Loan
from Water Fund (506) to Energy Efficiency Fund (556) for Energy Projects Amortization
Table
2 Request for Council Action — Energy Efficiency Report dated June 6, 2011
Item 7. - 2 HB -308-
ATTACHMENT # 1
RESOLUTION NO. 2011-62
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF HUNTINGTON BEACH
AUTHORIZING A LOAN FROM THE CITY'S WATER FUND TO THE CITY'S ENERGY
EFFICIENCY INTERNAL SERVICE FUND FOR THE PURPOSE OF FUNDING ENERGY
CONSERVATION MEASURES
WHEREAS, on June 6, 2011, the City Council of the City of Huntington Beach (the "City")
adopted a plan for Energy Conservation Measures; and
The City has determined that it is more cost effective to loan funds from the Water Fund
to the Energy Efficiency Internal Service Fund to pay for Energy Conservation Measures rather
than secure third party financing; and
The City has determined that there are sufficient unencumbered Water funds available in
such that the City will not violate City Council policy on reserve fund balances or investments;
NOW, THEREFORE, the City Council of the City of Huntington Beach does hereby
resolve as follows:
1. That the City of Huntington Beach supports a commitment to sustainable
practices through energy efficiency, and provides leadership and guidance in promotion,
facilitating and instituting such practices in the community.
2. That the City of Huntington Beach supports and endorses the Southern California
Edison Orange County Cities Energy Leader Partnership as an effective method to help meet
community economic and environmental goals.
3. That the City of Huntington Beach formally adopts the 2011 Huntington Beach
Energy Action Plan, thereby achieving Gold Partner Status within Southern California Edison's
Orange County Cities Energy Leader Local Government Partnership.
4. That the City of Huntington Beach agrees to amend the interfund loan agreement
by and between the Water Fund to the General Fund approved on June 6, 2011, by creating an
interfund loan agreement by and between the Water Fund to the Energy Efficiency Internal
Service Fund in the amount of $1,675,000, as evidenced by the Amended Interfund Loan
Agreement dated September 6, 2011,the form of which is attached to this resolution.
PASSED AND ADOPTED by the City of Huntington Beach at a regular meeting thereof
held on the 6 h day of September, 2011.
11-3050/69496
Resolution No. 2011-62
NOW, THEREFORE, the City Council of the City of Huntington Beach does hereby
resolve as follows:
PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a
regular meeting thereof held on the 6th day of September , 20 11 .
Mayor
REVIE APPROVED: APPROVED AS TO FORM:
n-Y
City n er y Attorney
1NIT TED AND APPROVE
Director of Finance
11-3050/69496
Resolution No. 2011-62
INTERFUND LOAN AGREEMENT
BY AND BETWEEN
THE CITY OF HUNTINGTON BEACH
WATER FUND AND ENERGY EFFICIENCY INTERNAL SERVICE FUND
The following amends the interfund loan agreement by and between the Water Fund(Fund 506) and the General
Fund (Fund 100) approved on June 6, 2011. The Water Fund is loaning the Energy Efficiency Internal Service
Fund (Fund 556) $1,675,000 in accordance with Resolution No.2011-6$f the City of Huntington Beach as of
September 6, 2011.
Amount of loan: $1,675,000
Loan date: June 6, 2011
Variable Interest Rate: Based on City Treasurer's annual return on investments
Term: 10 annual payments starting on September 30, 2012 and paid on September 30t'of each subsequent year
with final payment due on September 30, 2021.
Payment Schedule:
Pmt# Date Payment
1 9/30/2012 200,000
2 9/30/2013 200,000
3 9/30/2014 200,000
4 9/30/2015 200,000
5 9/30/2016 200,000
6 9/30/2017 200,000
7 9/30/2018 200,000
8 9/30/2019 200,000
9 9/30/2020 200,000
10 9/3 0/2021 185,13 8.62
Final payment is estimated and is subject to change due to variable interest rates. Amortization schedule as
detailed in Exhibit A attached hereto and incorporated herein by reference.
The General Fund will make lease payments to the Energy Efficiency Internal Service Fund based on the
payment schedule above and subject to the City Treasurer's annual return on investments. Lease payments to
the Energy Efficiency Internal Service Fund from the General Fund shall be payable from energy savings
realized in the General Fund from the AECOM Efficiency Project, but is not limited to these savings. The
Energy Efficiency Internal Service Fund shall make the loan payments to the Water Fund. Additional loan
repayments may be made or the entire loan may be repaid to the Water Fund before the scheduled payments are
due with no prepayment penalties.
This eement was approved by a resolution of the City Council at its meeting held on September 6`b, 2011.
AC EDGED:
F lson Lori Ann Farrell
City anager Director of Finance
Approved,as tto form:
ITC ll
Jennifer McGrath
City Attorney
Resolution No. 2011-62
Exhibit A
Interfund Loan from Water Fund (506)to Energy Efficiency Fund(556)for Energy Efficiency Project
Amortization Table
Compound Period: Annual
Estimated Nominal Annual Rate: 3.000%
Actual interest rate applied to the loan will be equal to the City Treasurer's
annual return on investments.
CASH FLOW DATA
Event Date Amount Number Period End Date
1 Loan 6/6/2011 1,675,000.00 1
2 Payment 9/30/2012 200,000.00 9 Annual 9/30/2020
3 Payment 9/30/2021 185,138.62 1
The first 9 payments will will be$200,000 and the final payment will be
adjusted based on the remaining balance after the actual interest rate
is applied over the term of the loan.
AMORTIZATION SCHEDULE- Normal Amortization
Date Payment Interest Principal Balance
Loan 6/6/2011 1,675,000.00
1 9/30/2012 200,000.00 66,698.96 133,301.04 1,541,698.96
2 9/30/2013 200,000.00 46,250.97 153,749.03 1,387,949.93
3 9/30/2014 200,000.00 41,638.50 158,361.50 1,229,588.43
4 9/30/2015 200,000.00 36,887.65 163,112.35 1,066,476.08
5 9/30/2016 200,000.00 31,994.28 168,005.72 898,470.36
6 9/30/2017 200,000.00 26,954.11 173,045.89 725,424.47
7 9/30/2018 200,000.00 21,762.73 178,237.27 547,187.20
8 9/30/2019 200,000.00 16,415.62 183,584.38 363,602.82
9 9/30/2020 200,000.00 10,908.08 189,091.92 174,510.90
10 9/30/2021 185,138.62 10,627.72 174,510.90 0.00
Grand Totals 1,985,138.62 310,138.62 1,675,000.00
Res. No. 2011-62
STATE OF CALIFORNIA
COUNTY OF ORANGE ) ss:
CITY OF HUNTINGTON BEACH )
I, JOAN L. FLYNN the duly elected, qualified City Clerk of the City of
Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby
certify that the whole number of members of the City Council of the City of
Huntington Beach is seven; that the foregoing resolution was passed and adopted
by the affirmative vote of at least a majority of all the members of said City Council
at a regular meeting thereof held on September 6, 2011 by the following vote:
AYES: Shaw, Harper, Hansen, Carchio, Bohr, Dwyer, Boardman
NOES: None
ABSENT: None
ABSTAIN: None
CiJVClerk and ex-officioo5erk of the
City Council of the City of
Huntington Beach, California
ATTACHMENT #2
Council/Agency Meeting Held: 6 1/
Deferred/Continued to:
App ve ❑ Conditionally Approved ❑ Denied C'/(CI r s Signat re
Council Meeting Date: June 6, 2011 7Department ID Number: AD 11-009
CITY OF HUNTINGTON BEACH
REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Fred A.Wilson, City Manager
PREPARED BY: Bob Hall, Deputy City Manager
SUBJECT: Award and authorize execution of an agreement with AECOM
Technical Services in the amount of$3,069,487 to implement a
Energy Saving Performance Contract; adopt Resolution No. 2011-37
authorizing a $1,675,000 Inter-Fund Loan; and, appropriate $300,000
for the rehabilitation of deferred maintenance items
Statement of Issue: Council is being asked to approve a resolution and agreement to
implement energy efficiency and infrastructure measures and associated financing.
Financial Impact: $3,069,487 in capital costs with $1,675,000 of the funding provided by
an inter-fund loan which will be repaid with market rate interest from the annual energy
savings generated by the project. The balance of the funding is from grant and utility
incentive programs.
Recommended Action: Motion to:
A) Make the findings that the funds for the repayment of the financing are projected to be
available from the funding that otherwise would have been used for purchase of energy; and,
B) Award and authorize the Mayor and City Clerk to execute the "Agreement for Program
Management Services for Design and Build of Energy Conservation Measures" in the
amount of$3,069,487 with AECOM Technical Services; and,
C) Approve and adopt Resolution No. 2011-37 authorizing a $1,675,000 inter-fund loan from
the City's Water Fund to the City's General Fund for the purpose of funding the loan
agreement; and,
D) Appropriate funds in the amount of $300,000 for the rehabilitation of deferred
maintenance items in the Civic Center, City Yard and Central Library parking lots, waive
public bidding requirements, and authorize staff to procure contract services not to exceed
$300,000 under the provisions of Government Code 4217; and,
E) Authorize City Manager to execute any subsequent documents approved as to form by
the City Attorney necessary to advance, manage and complete the project.
Alternative Action(s):
Do not approve the agreement or adopt Resolution No. 2011-37, and advise staff on how to
proceed.
H B -31 Item 7. - 9
REQUEST FOR COUNCIL ACTION
MEETING DATE: 6/6/2011 DEPARTMENT ID NUMBER: AD 11-009
AC unit overnight
Gothard & Lake Replace inefficient and poorly $80,172 $844
Fire Stations functioning HVAC units
Rodgers Senior's Replace inefficient and poorly $25,865 $184
Center functioning furnaces
City Gym — pool Replace inefficient and poorly $50,197 $991
functioning pool heater and
improve water treatment
Sports Complex Replace inefficient lighting $3,912 $927
All City Facilities Install communicating $37,199 $1,077
thermostats and controllers to
save staff time on hot/cold
calls and improve scheduling
of HVAC services.
Civic Center and Address deferred maintenance $300,000 N/A
Central Library in parking lots (pavement
rehabilitation and repairs)
Staff researched potential funding sources that are commonly used for these types of
projects ranging from Qualified Energy Conservation Bonds to tax exempt equipment lease
financing. The small amount of the financing for this project would have resulted in very high
transaction and interest costs. This led staff to an inter-fund loan solution to provide the
taxpayers of Huntington Beach the best value by structuring a variable interest, market rate
inter-fund loan of $1,675,000 to be repaid over a 10 year term with an annual payment of
$200,000, thus avoiding at least$150,000 in transaction costs and penalty interest rates.
This project has energy cost savings, using recent energy prices; of about $242,000
annually, compared to the annual debt service payment of$200,000 over the 10 year period.
The savings will escalate over the years based on rate increases from the utilities. An
additional benefit is the avoided energy consumption also provides a cleaner environment
protecting the quality of life in Huntington Beach.
The City has been a leader in meeting future regulatory mandates through energy efficiency
and renewable energy. If approved this project would propel the City to 134% of the 2020
regulatory requirement for electricity savings and 42% of the natural gas savings.
Environmental Status: This project is exempt from CEQA under the following
provisions:
§ 15268— Ministerial projects; each installation for energy efficiency does not require
discretionary approval.
§ 15301 — Class 1; Maintenance/permitting/minor alteration of existing public/pdvate
structures. Negligible/no expansion of existing uses.
Strategic Plan Goal: Maintain, improve and obtain funding for infrastructure and equipment
Item 7. - 10 B B -3 1 6-
1
REQUEST FOR COUNCIL ACTION
MEETING DATE: 6/6/2011 DEPARTMENT ID NUMBER: AD 11-009
Analysis: On July 6, 2010, City Council approved an agreement with AECOM to complete
a detailed energy audit as the first phase of this energy services project. AECOM was
competitively selected using an inter-agency agreement which provides for the two phase
contracting process specific to energy savings projects. AECOM's audit of the project costs,
feasibility and energy savings must be completed prior to entering into the construction
agreement since the' audit becomes the scope of work for the construction agreement
including the energy savings.
This project builds on the success to date of the city's energy management program which
was formally documented and adopted by Council in an Energy Action Plan on April 18tn,
2011. The savings created from the previous energy projects is over $375,000 annually.
This project represents the next set of cost-effective energy and infrastructure measures that
will extend Huntington Beach's leadership in eliminating energy waste, reducing
environmental impacts and preparing for future regulations.
City staff recommends the award of this construction agreement under Government Code
4217,10 et seq. This code allows public agencies an alternative to the lowest bidder
requirements to permit competitive selection of subcontractors that provide the best value in
the implementation of energy projects such as this one. The city utilized these provisions in
1999 to implement an energy savings performance contract.
This Government Code also provides the mechanism to use debt financing to implement
energy savings projects as long as the savings are greater than the cost of financing the
improvements. The use of financing to increase the size of the project made certain
infrastructure improvements possible that otherwise would not be able to be addressed given
the current budget constraints. This project provides a budget neutral mechanism to fund
investment in city infrastructure. The specific measures listed below combine energy and
infrastructure measures to provide a comprehensive energy solution to the City.
City Facilities Energy and Infrastructure Leasure Cost Savings
Improvements
Civic Center Server Virtualization and $216,345 $10,265
Server Room HVAC upgrade
Civic Center Chilled Water System upgrade $1,126,902 $58,550
including emergency backup
chiller
Civic Center Fans and controls upgrades $387,956 $45,775
Civic Center Replace inefficient lighting $176,079 $23,772
Central Library Replace inefficient lighting $232,251 $40,923
Central Library Fans and controls upgrades $216,797 $19,869
Central Library Replace obsolete and wasteful $188,548 $16,541
controls system
Central Libra Re-size Theatre transformer $21,445 $2,700
Pier and Beachfront LED Lighting upgrades $290,640 $18,941
lots
Lifeguard HQ Computer room AC unit to $15,179 $473
reduce wear and tear on main
H B -31 7- Item 7. - 11
REQUEST FOR COUNCIL ACTION
MEETING DATE: 6/6/2011 DEPARTMENT ID NUMBER: AD 11-009
Attachment(s):
• Description,
`1. "Agreement for Program Management Services for Design=pril",
f
� Conservation Measures"with guaranteed maxi
2. Exhibit A- tment Grade Assessment Re
3. Exhibit B—Schedule alues `Y
4. Exhibit C- Schedule of P ce
5. Exhibit D- IES nd ASHRAE comfort dards
6. Exhi -EECBG Flow-down Terms and Conditio
7 Resolution No. 2011-37, including Inter-Fund Loan Agree t and
amortization table
Item 7. - 12 HB _;1 8- -