City Council Meeting - FINAL

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Meeting Date: 03/21/2023  
From: Nicole Antonopoulos, Sustainability Director

Consideration and Approval of Contract:  An Energy Efficiency Services Job Order Contract with NORESCO, LLC; and Construction Work Order No. 1 with NORESCO, LLC, in an amount not to exceed $4,423,547, for Phase One of Project Implementation.
  1. Award an Energy Efficiency Services Job Order Contract with NORESCO, LLC;
  2. Award Construction Work Order No. 1 with NORESCO, LLC, in an amount not to exceed $4,423,547, for Phase One of Project Implementation; and
  3. Authorize the City Manager to execute all necessary documents. 
Executive Summary:
On November 29, 2021, the City of Flagstaff (City) and NORESCO, LLC (NORESCO) entered into an Energy Service Contract wherein NORESCO agreed to conduct an Investment Grade Audit (Audit) of certain identified City facilities. After providing the City the Audit, the City and NORESCO collaborated to develop an energy program that provides a full range of energy and operational conservation measures (ECMs) to be implemented at a variety of City facilities through a three-phased effort. This program will allow the City to demonstrate the capability of energy cost savings to fund infrastructure improvements that reduce GHG emissions, electrify infrastructure, provide needed capital improvement projects (CIP), and reduce deferred maintenance. The Energy Efficiency Services Job Order Contract is the overarching agreement between NORESCO and the City. Awarding Construction Work Order No. 1 will initiate the performance of the ECMs for Phase One.
Financial Impact:
The cost of Construction Work Order No. 1 (Phase One) of this project will be $4,423,547. Construction Work Order No. 1 will be expended in the General Fund. The fiscal year 2022-2023 portion of the cost is available in account 001-09-402-1310-1-4405 for $2,500,000. The remaining balance will be budgeted in fiscal year 2023-2024. Of this total cost $3,190,847 is related to General Fund program costs.

The remaining $1,232,700 will be paid by other funds through a revenue transfers. These funds include Library, Economic Development, Sustainability, Tourism, Water, Wastewater and Solid Waste. 

All transfers are expected to be completed by fiscal year 2027-2028. Staff is recommending using cash balances to fund Construction Work Order No. 1. An option of financing was available, however, financially the City will be able to save approximately $1.4 million in interest expenses over a 20-year period by not financing the cost.  

Under Arizona Revised Statute 35-105, the City can use guaranteed utility and operational savings to reinvest in infrastructure. The legislation allows for project terms of up to 25 years. This project pays for itself by generating $6.1 million in savings during the 20-year project term and an additional $2.1 million in years 20 to 25.
Policy Impact:
The Energy Efficiency Services Job Order Contract and Construction Work Order No. 1 with NORESCO support the City's Carbon Neutrality Plan.
Connection to PBB Priorities/Objectives, Carbon Neutrality Plan & Regional Plan:
Priority Based Budget Key Community Priorities and Objectives
Council Goals:
Take meaningful climate change action.  
 Strategic Priorities:
High performing governance
Safe and healthy community
Inclusive and engaged community
Sustainable, innovative infrastructure
Robust resilient economy
Livable community

Carbon Neutrality Plan
BE-1: Achieve net zero energy City of Flagstaff facilities.
CR-1: Ensure all mitigation actions improve Flagstaff’s ability to adapt to the future.
FS-3:  Support fuel switching in existing residential and commercial buildings.
FS-1:  Reduce or remove natural gas usage in municipal buildings
WS-3:  Continue to support water conservation efforts across the Flagstaff community.
BE-3:   Reduce energy use in existing buildings.
Regional Plan
Goal E&C.2. Achieve carbon neutrality for the Flagstaff community by 2030.
Goal E&C.3. Prepare Flagstaff’s community systems and resources to be more resilient to climate change impacts, and address climate change in a manner that prioritizes those most impacted and ensures the costs and benefits of climate adaptation and mitigation are equitably distributed.
Goal E&C.4. Integrate available science into policies governing the use and conservation of Flagstaff’s natural resources.
Has There Been Previous Council Decision on This:
  1. Adoption of the Climate Action and Adaptation Plan on November 20, 2018. 
  2. Adoption of the Climate Emergency Declaration Resolution on June 23, 2020. 
  3. Adoption of the Carbon Neutrality Plan on June 15, 2021. 
  4. Award of contract to NORESCO on November 2, 2021 to perform an Investment Grade Audit.
Key Considerations:
Upon approval of the Energy Efficiency Services Job Order Contract, NORESCO will be authorized to provide a full range of energy and operational conservation measures (ECMs) to be implemented at a variety of City facilities. Each of the three phases will be detailed and seek the approval of City Council through Construction Work Orders. Currently, City Council is being provided Construction Work Order No. 1 for consideration to authorize NORESCO to perform the ECMs for Phase One.
Energy Conservation Measures
The recommended Phase One ECMs within Construction Work Order No. 1 include the following highlighted upgrades to reduce utility consumption, costs, and associated GHG emissions. Concurrently, the City will realize capital improvement cost avoidance and resolution of maintenance issues as it standardizes equipment and, most importantly, initiates the process of building and infrastructure electrification. 
  1. LED Lighting and Controls Upgrades – Includes over 5,900 interior retrofits of lighting to LED and 319 lighting control sensors.  
  2. Mechanical Upgrades – Heating, ventilating, and air conditioning (HVAC) systems will be electrified with heat pumps at Montoya Community and Senior Center. Concurrently, the Energy Management System software will be upgraded and sequences optimized at six locations.  
  3. Electric Rate Switch for Pumping Accounts – Following an extensive review of water supply electric accounts, it is recommended to switch the electric rate for Lake Mary Well #8 from its current Medium General Service Rate (E-32 M) to a Pumping Rate (E-221).  
  4. Building Envelope Improvements – This ECM will install weatherstripping, seal windows, and apply spray-foam insulation at 15 facilities totaling approximately 600,000 square feet. Also included at the Jay Lively Ice Rink is the installation of two air curtains at the entrance to the ice arena and an automated roll-up door operator where the ice resurfacing machine exits the building to dump the ice. 
  5. Electric Vehicle Charging Stations – NORESCO will install 7 level two, dual-port electric vehicle (EV) charging stations at three facilities.
  6. Water Conservation – The existing WeatherTRAK irrigation control system will be re-commissioned at 20 locations to maintain coverage while optimizing water use. This ECM includes the installation of new heads, nozzles, flow sensors and master valves at select locations.
  7. Water Meter Testing – This task will assist the development of Phase 2 – Water Meters/AMI implementing the water meter testing plan, described in Section 5.2, for small meters (2" and under) and survey of large meters (>3"). It includes removal of 179 small meters for accuracy testing and incorporation into recovered revenue models, and replacement with new ultrasonic meters with Itron 500W encoders.
Project Schedule
The Project Schedule for Construction Work Order No. 1 outlines a 20-month project duration inclusive of the final design and installation of the ECMs described herein. Due to current supply chain delivery issues and chip shortages, major mechanical and electrical equipment has significantly prolonged delivery times. The overall schedule duration accounts for these extended material delays coupled with seasonal constraints. With an anticipated contract signing in March 2023, the work will be divided into two separate construction phases.
The first phase will combine the Interior/Exterior LED Lighting, Weatherization (including Jay Lively Ice Rink), Electric Vehicle Charging Stations, and Irrigation Repairs & Re-commissioning. This first phase of construction will be complete by approximately September/November of 2023 and will allow energy savings to start being accrued. The second phase will commence in the spring of 2024 when the major mechanical and electrical equipment is being delivered and/or the weather is favorable for replacing the exterior-mounted equipment and Water Meter Test installations.
Measurement and Verification
NORESCO developed an ECM-specific Measurement and Verification (M&V) Plan for each of the ECMs proposed, which will provide cost-effective verification of savings throughout the Guarantee Period. The proposed M&V Plan offers the City a savings verification strategy that emphasizes M&V rigor where it is best applied, yielding the best return to the City. 
Energy Services & Work Order
Investment Grade Audit Agreement
Investment Grade Audit


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