I tend to vote “no” on most Georgia constitutional amendments. The language is often unnecessarily ambiguous to disguise the actual purpose, and often the amendment is designed to create one more special class of citizen (who had an even more special lobbyists) to get a tax break. I am generally encouraged this year, however, by Amendment 4.
Currently, the state is not allowed to enter into multi-year contracts with private entities. I would view this as a good thing, as it prohibits the effects of an unethical procurement action to continue in perpetuity, and doesn’t obligate the state for funds that have not yet been budgeted and approved.
Amendment 4 is designed to be an exception to this rule, in order to facilitate multi-year contracts for retrofitting state buildings for increased energy efficiency. The need for a multi-year contract in this case is that the upgrades will be paid for from “guaranteed energy savings” over a number of years. In effect, the contractors that will do this work will be paid from the state as energy bills are lowered. These savings will be over a number of years, and thus, the need for a multi-year contract.
There will be a press conference by the Taxpayers for Energy Efficiency tomorrow to generate some media behind this proposal. As a primer, I’m including the entire press packet sent to me below the jump.
Overall, this seems like a bi-partisan winner. It’s a private enterprise solution to increased environmental responsibility at no additional cost to the state. At least, that’s my read of it. Discuss:
Amendment 4, A Winning Solution for Georgia
Amendment 4 cuts government waste, creates jobs and champions energy efficiency
Atlanta, GA—This November, Georgia’s voters have the opportunity to cut wasteful government spending, create jobs and support energy efficiency by voting “Yes” on Amendment 4. Passed in the 2010 legislative session, Amendment 4 originated from Senate Resolution 1231.1 Lead sponsor, Senator Ronnie Chance (R-Tyrone), second-signer Senator Steve Henson (D- Tucker) and Senate Majority Leader Chip Rogers (R-Woodstock) led the bi-partisan effort for passage. Senate Resolution 1231 overwhelmingly passed both the Senate and House chambers and is now up for ratification by the voters.
The Problem: Georgia’s outdated building infrastructure costs taxpayers hundreds of millions of dollars in utility bills annually. In these hard economic times, the state simply cannot afford to spend the half-billion needed to update its equipment and to lower its bills.
According to the Georgia State Property Commission, the state of Georgia is responsible for the utility bills for more than 15,000 buildings.2 The Georgia Environmental Finance Authority (GEFA) estimates that the state pays at least $225 million each year on energy and water for its facilities.3 From college classrooms to corrections facilities, the state must pay for electricity, heating, cooling, water and the ongoing maintenance of the equipment.
As the state’s equipment ages, utility costs increase and repair costs remain, thereby creating a vicious cycle of wasteful spending and energy inefficiency. Leaky faucets may get repaired for the time-being, but rarely are they replaced with new water-saving technology. In some buildings, dated light switches keep the lights on automatically—even if no one is in the office. Decades-old HVAC units can use more than twice the energy of newer models, keeping electric bills high.
Because Georgia’s Constitution forbids the state from entering into multi-year agreements to finance energy or conservation projects, the state can only replace aging and/or failing utility equipment if the funds are appropriated in the annual budget. And in these hard economic times, there simply isn’t the extra cash to upgrade the state’s aging and inefficient infrastructure—particularly when Georgia is facing a structural deficit of more than $1.5 billion a year.
The Solution: If passed, Amendment 4 will allow the state to enter into ‘guaranteed energy savings performance contracts’ with energy service companies. These companies guarantee savings to the state and are then paid back directly from future energy savings over a series of years for the entire costs of a building’s energy and water retrofits.
Other states, including Alabama, Florida, North Carolina, South Carolina and Tennessee, have faced this same problem and found their solutions with ‘guaranteed energy savings performance contracts.’ In fact, other state and local governments, the private sector and the federal government have successfully used energy performance contracting for nearly 30 years.4 In a guaranteed energy savings performance contract, the state goes through an open, competitive process to choose an energy service company (ESCO) to implement energy efficiency measures. The ESCO selected must guarantee that the state will save a certain amount of money with the installation of modern, energy efficient equipment and systems. Then, rather than having to appropriate all the funds in one year, the state uses the guaranteed savings to repay the ESCO for its work over a period of years. As a result, no new tax dollars are needed to finance the improvements.
Upon completion, the state enjoys both immediate and future savings. After installation, the state will no longer have to provide for the costs associated with repairing aged and outdated energy equipment. And after the contract with the ESCO has been fulfilled, the state enjoys lower utility bills for years to come, cutting tens of millions of dollars of unnecessary spending from the budget.
Once passed, Amendment 4 will amend Georgia’s Constitution allowing the state to enter into multiyear guaranteed energy savings performance contracts strictly for energy efficiency and conservation measures.
Additional Benefits: With the passage of Amendment 4, Georgia will enjoy tremendous financial savings, the creation of new jobs and the fulfillment of Governor Perdue’s Energy Challenge which committed all state agencies to reducing their energy costs by 15 percent by the year 2020.5
Passage of Amendment 4 guarantees three collateral benefits of guaranteed energy savings performance contracting—cutting government waste, the creation of jobs and enhanced energy efficiency.
Fiscal Responsibilities: Voting “Yes” to Amendment 4 is a vote for cutting wasteful government spending. Based on conservative estimates, the state of Georgia spends at least $225 million each year on energy and water for its facilities.6 According to the U.S. Environmental Protection Agency, a savings of 25 percent of that cost would translate into the ability to finance up to $530 million in energy improvement projects over ten years allowing the state facility managers to acquire much-needed energy or conservation equipment improvements; thus providing long-term savings well into the future.7 Experts at GEFA estimate that the improvements could ultimately save taxpayers more than $50 million per year now spent on utility payments by state agencies.8
More Jobs: The utilization of performance contracts will create much-needed jobs in Georgia—upwards of 11,000. The new energy performance contracts will create 5,000 direct jobs—many in skilled trades such as electrical, plumbing, sheet metal working and general construction. Furthermore, an additional 6,000 indirect jobs in support businesses and industries are possible.9
Energy Efficiency: In 2008, Governor Sonny Perdue issued the “Governor’s Energy Challenge.” The challenge committed all state agencies to reduce energy consumption per square foot 15 percent below the FY2007 levels by the year 2020.10 In order to fulfill the Governor’s challenge, guaranteed energy savings performance contracting is needed. Approving Amendment 4 allows Georgia to move forward, participate in a clean technology economy and fulfill its energy efficiency expectations.
Case Study: Other entities such as the federal government, local governments and the private sector have participated in guaranteed energy savings performance contracts for years. The following example illustrates the success of the city of Clearwater, FL:
The Problem—Outdated lighting and HVAC equipment in Clearwater’s city buildings yielded high annual utility costs. The city of Clearwater sought to lower its bills and significantly reduce its energy consumption and its carbon footprint.
The Solution—Clearwater entered into a guaranteed energy savings performance contract with the ESCO, Honeywell earlier this year. The ESCO guaranteed Clearwater that by upgrading the HVAC units and control panels, as well as the light fixtures, the city would save more than $281,000 a year in energy costs and a total savings of $4.2 million over the life of the project. The cost of the project, just over $3.4 million, will be paid back over a series of years directly from the energy savings.
Benefits—As required by guaranteed energy savings performance contracting, no new dollars were appropriated for this project. The ESCO guaranteed that over 20 buildings will benefit from the upgraded energy efficient equipment and that the project will generate 38 new jobs. Each year an audit will be performed to determine the actual expenses incurred as compared to the established baseline and if the savings are lower than the guaranteed amount then Honeywell will pay Clearwater the difference. If the savings is greater, the city will keep the added savings. The city of Clearwater, FL is now on the road to greater energy efficiency and fiscal responsibility.
Additional case studies from around the nation can be found by clicking HERE.
While other state and local governments, the federal government and the private sector enjoy the successes of guaranteed energy savings performance contracts, the state of Georgia is currently forbidden from participating. As technology grows, our state deserves the ability to use these new technologies to achieve greater fiscal responsibility. This November, voters have the opportunity to move Georgia forward, joining other states across the nation by voting “Yes” to Amendment 4.
A “Yes” vote to Amendment 4 will allow Georgia to ultimately save millions of taxpayer dollars, create much-needed jobs and fulfill its requirement to become more energy efficient. This commonsense proposal will eliminate the outdated bureaucracy currently binding the state from moving towards greater energy efficiency and stronger fiscal conservancy.
- Georgia General Assembly. http://www.legis.state.ga.us/legis/2009_10/fulltext/sr1231.htm
- “Fiscal Year 2009 Annual Report.” Georgia State Property Commission, June 30, 2009, page 3. http://gspc.georgia.gov/vgn/images/portal/cit_1210/39/12/149628057SPCAnnRpt9-09.pdf
- “Georgia State Buildings Performance Contracting Program, Employment Potential Estimate.” National Association of Energy Service Companies. http://www.yestoamendment4.com/downloads/naesco.pdf
- Bourdeax, Carolyn and Sjoquist, David L. “Estimating Georgia’s Structural Budget Deficit.” Fiscal Research Center, Andrew Young School of Public Policy, July 2010. http://aysps.gsu.edu/frc/files/Rpt_209FIN_-_7-30-2010.pdf
- Governor’s Energy Challenge. http://www.governorsenergychallenge.org/
- See #3.
- See #3.
- See #3.
- See #3.
- See #5.
- “Industrial Process and Mechanical Upgrades.” Chevron Energy Solutions. http://www.yestoamendment4.com/downloads/CES_Federal_Case_Study_MCLB.pdf
Taxpayers for Energy Efficiency (TEE) is a grassroots group of employers and citizens
who believe now is the time for Georgia to begin cutting waste, saving tax dollars and creating jobs. Visit them on the web at www.YesToAmendment4.com for more information and to sign-up for email updates.