Norfolk schools go for green, but official says city can't afford debt

NORFOLK

Rising energy bills are leading school officials from around the region to consider a state incentive to go greener.

The deal allows public agencies to invest in more energy-efficient equipment and pay for the upgrades using savings on future utility bills.

Norfolk school officials have put forth a particularly ambitious proposal that totals $31 million for more than 50 school buildings. The problem: City Manager Regina V.K. Williams said the city can't afford to take on that much debt right now.

The school division would borrow money to pay for the work, such as converting to more efficient lights, installing a centralized energy-monitoring system, and making changes to conserve water. The most costly items are 17 boilers and three geothermal systems.

Fred Schmitt, the school division's chief financial officer, said he hopes bond rating agencies will recognize that the project is meant to pay for itself and that the agencies will give the city some latitude on its debt burden.

Norfolk administrators said some of the projects were included in the $579.7 million preliminary building plan that was released in June.

Better lighting and air quality also would improve the learning environment, Schmitt said.

The construction would take about two years and, once completed, would save an estimated $5.1 million annually in energy and maintenance costs, according to an estimate by Pepco Energy Services, which would oversee the work.

The school division would have 12 years to pay down the debt, Schmitt said.

"If the savings don't materialize, they pay us for what they said they would save us," he said. "There's no new debt being passed on to the taxpayer."

That guarantee is part of the state's contract with several approved vendors, and it has helped attract government agencies to look into energy performance deals over the last few years, said Stephen Walz, senior adviser for energy policy with the office of the governor.

About 36 state agencies have signed such contracts, for a total of about $135 million and annual savings of more than $11 million, said Charlie Barksdale, utilities and performance contracting manager with the Virginia Department of Mines, Minerals and Energy.

The department doesn't track the exact number of local governments or school divisions participating, but several have taken on projects, Barksdale said. Others decided against the contracts because of the potential for debt.

One way money could be lost on the deal is if energy rates fall below an agreed-upon base price while the public agency is paying back the debt. Barksdale said he knew of no examples of such cases, and added that some agencies reaped more savings than expected.

After the payback period, any savings would be available for other uses.

The Newport News school division entered into a $14 million energy performance contract about three years ago, said Keith Webb, executive director of plant services. The work included installing a new climate-control system at a high school, work on five roofs, lighting changes, water consumption controls and a computerized management system.

So far, the school division has seen the promised savings, Webb said.

There were no problems with the financing, he said. The way the contracts are written, the loan doesn't have to be interpreted as debt because the savings - and payback - are guaranteed.

Chesapeake officials are considering a change of 42,000 lights in more than 30 buildings that could result in annual savings of as much as $350,000, said Steven Gilbert, assistant superintendent for operations. He didn't know yet how much the work would cost, but said other projects could follow if this one was successful.

In Virginia Beach, administrators are looking at two projects that would affect lighting and climate system changes at six schools, said Jim Morris, assistant director for school plant services. The total cost could reach $3.75 million, with estimated annual utility savings around $250,000.

"We're going slow on it

because we want to see how the process works," Morris said.

Suffolk is also considering the program. Portsmouth school officials did not return phone calls.

In Norfolk, the School Board has endorsed the project, and administrators hope to work out details with city officials in coming weeks.

The school division could scale back its proposal, but there are advantages to including everything, Schmitt said.

Projects completed more quickly, such as changing the lights, would generate savings that could then help pay for other work, he said.

"This is one of those cases where you have to pay money to make money."

Staff writer Harry Minium and news researcher Jakon Hays contributed to this report.

Amy Jeter, (757) 446-2730, amy.jeter@pilotonline.com