Funding Facility Renewal With No Up-Front Cost And With Guaranteed Results: A New And Proven Strategy In An Era Of Declining Budgets

Mario P. Iusi, President
Ameresco Canada

RIGHT NOW, MUNICIPAL BUILDINGS and their associated facilities across the province, and the country, are crumbling, some faster than others and literally in many cases. This is simply a reality today. Or does it have to be?

Is it possible to restore and upgrade the physical conditions of municipal buildings within current budget constraints, and with environmental concerns in mind? The answer is a resounding yes. Facility renewal can be successfully achieved with no up-front cost and with guaranteed results!

The Old Way of Facility Renewal

Over the years, public sector building owners have used money from facility budgets to fund programs. One undesirable result, however, is the creation of a significant unfunded liability, or facility renewal funding gap.

The old, so called ESCO (Energy Service Company) concept of facility renewal focused on reducing energy costs by retrofitting lighting, heating and air-conditioning systems. While there was often a renewal impact, it was not addressed directly.

Deteriorating public sector facilities and their related problems are a threat to the quality of Municipalities, Provincial and Federal Governments, Education, Healthcare, Public Housing, stakeholder satisfaction and competitiveness. Private and publicly held companies within the various market sectors such as commercial, industrial and hospitality have also been challenged with increased costs and facility renewal needs with limited budgets and increased shareholder expectations.

Clearly, Facility Directors everywhere require a powerful and proven new strategy to deal with the issue of facility renewal. And it has arrived.

The New Way of Facility Renewal

AMERESCO CANADA, an independent energy solutions company, is a pioneer in facility renewal, and for the past 30 years has been a leader in delivering long-term customer value through innovative systems, strategies and technology.

The new strategy focuses on facility renewal funded directly through energy savings. This dramatic shift in thinking has resulted in a performance breakthrough, creating significant new opportunities for facility renewal.

This solution is based on partnering for enhanced facility quality, essentially uncovering financial opportunities from within a current infrastructure, and redirecting these dollars into higher investment priorities. This proven approach aligns all key stakeholders and is designed to help clients cope with the funding gap that is created by aging structures and limited budgets.

Exciting Opportunities for Facility Renewal

The good news is that the omnipresent challenge of rising energy costs may actually be an opportunity for facility renewal. Experience has shown that for every dollar a building owner spends on energy, up to five dollars worth of facility renewal can be created.

This new Strategic Renewal Partnership (SRP) can have a major impact on facility renewal and has been developed to:

• Provide creative ways to relieve building renewal funding problems and advance facility renewal more rapidly
• Offer new capital asset management approaches to help maximize the value of a client’s physical assets
• Improve the learning environment within each sector
• Increase the competitiveness of facilities; retain and grow enrollment within each sector
• Enhance the working environment within client facilities.

The focus of the new strategy is to create better facilities by enabling clients to focus on three primary and related objectives:

1. Facility Renewal: Maximize the conversion of energy waste to facility renewal to improve space quality, occupant safety and satisfaction, and facility competitiveness.
2. Organizational Renewal: Include components in the solution that will help build a culture of teamwork and partnerships to create new value in terms of facility quality and better learning.
3. Program Renewal: In addition to enhancing program quality through better facilities, our objective is to find ways to add value directly to occupants of the facility.

Critical Factors for Success

These factors underline the growing success of the solution model programs:

1. Goal alignment: Everyone identifies with the shared goal of improving the facility to achieve as much renewal as possible, as soon as possible. All decisions are evaluated through the lens of the impact on the facility.
2. Facility Director as Integrator: Director actively supports the facilitation of strategic goal alignment and the integration of Facilities Management with all stakeholders to generate the most value.
3. Partnering Approach: Partnerships are facilitated starting at the top of the organization and extending to all parties involved. The result is increasing value at every level.
4. Integrated Solution Components: The solution components are integrated. Each adds value to the other. In addition, solution components integrate across all Facility functions to create more value.
5. Depth of Experience: This new renewal strategy has been developing and improving since 1996. Our team has successfully completed retrofits in over 3,000 facilities across Canada.
6. Financial Strategy and Structure: Financial structures are jointly developed with clients. The new renewal strategy employs a variety of new financial strategies to maximize the leveraging of energy waste dollars and budget dollars to create maximum facility renewal and the best returns on investment.

The Results

Five Ontario school boards, representing over 15% of the total classroom space in Ontario, have used this strategy to create approximately $125 million in school renewal based on leveraged energy waste. Here is a sample of key results:

• Significant improvements in classroom quality and overall stakeholder satisfaction
• Major shifts from reactive to preventive maintenance, including significant reductions in trouble calls and risk of instructional days lost because of school shutdowns.
• Improved competitiveness of facilities, enhancing staff retention and student enrollment.
• Greater satisfaction among parents and trustees.

Toronto City Hall and Toronto Public Libraries have also applied this approach and have improved their energy savings strategies by utilizing energy to renew their facilities. These cost savings have made the City more cost efficient and have saved tax dollars.

Getting Started

You may be wondering, will this work for me? What’s my opportunity? Where do I start? Here are the first steps to consider:

1. Clarify your real unfunded liability. In our experience, most facility owners underestimate their renewal-funding gap by as much as 300%. We can help you to make an educated guess as to your real unfunded liability, and advise you on how to do an in-depth assessment if and when it is appropriate.
2. Determine your magnitude of opportunity for converting energy waste for facility renewal. Again this is often underestimated by a wide margin. By comparing your energy costs to established benchmarks for your region, you can construct a realistic estimate of the amount of renewal you can achieve with no additional cost, how much of your liability you can eliminate, and what strategic results you can achieve.
3. Align your management teams with high-level strategic goals. It is essential to have strategy and goal alignment at the executive team level and between the executive level and the operational level.
4. Design your facility renewal partnership RFQ, selection criteria and selection process.
5. Select your partner.
6. Co-design and implement your optimal solution model. Because no two clients and facilities are alike, it is critical to have a tailored Solution Model that meets and reflects its unique needs and circumstances. An effective and successful Solution Model can only emerge from extensive client consultations that result in comprehensive, turnkey solutions that meet or exceed client expectations.

ABOUT THE AUTHOR

MARIO P. IUSI is President of AMERESCO CANADA and has over 20 years of experience in all aspects of energy related business, including energy performance contracting, consulting engineering, business development, structuring, financing, and energy management. He was instrumental in the creation of the performance contracting business in Canada.

AMERESCO CANADA Inc. is the leader in the provision of integrated energy solutions, delivering long-term customer value through innovative systems, strategies and technology. As a Federation of Canadian Municipalities (FCM) member since 1998, AMERESCO CANADA works closely with various clients within the municipal sector to achieve vibrant, sustainable communities through funding vehicles such as FCM’s Green Municipal Fund and the Government of Canada’s Infrastructure Canada Program.

Economic Development Journal of Canada | Economic Development Journal of Canada, 2003