Slide 1 Are your Buildings Managing You? 2007 IASBO Conference May 16, 2007 Mike Steffens, Ameresco Jerry Brendel, Superintendent, Woodridge SD #68 Wendy Flaherty, First Trust Portfolios, L.P.

Slide 2 Agenda  Introduction  Questions  Traditional Procurement  Performance Contracting  Case Study - Woodridge 68  The cost of waiting  A look at the numbers  Financing options

Slide 3 Questions????? Have you been deferring work on your buildings? How much? Have you ever been surprised with price increases or change orders in the middle of a renovation project? If difficulties have arisen during a renovation project, who ultimately bore the risk?

Slide 4 The Age Profile Construction Year Currently affecting Deferred Maintenance & Renewal Budgets Unplanned future Risk affecting Capital Renewal & Operational Budgets Basis for funding practices Area

Slide 5 Traditional Procurement Process –Owner hires an architect –Project is put out to bid –Lowest responsible bidder is awarded

Slide 6 Performance Contracting an Alternate Approach Enabling Legislation Article 19B of the School Code Provides School Districts with an alternative method of procurement Establishes Financial and Performance Guarantees (savings must pay for the project over the contract term) Allows you to choose someone who meets District qualifications

Slide 7 The Performance Contracting Process 1. Agree to Procurement Method Investigation 2. Establish Timeline 3. Identify Technical and Financial Requirements 4. Verify Direction 5. Request For Proposal 6. Contract

Slide 8 Performance Contracting Benefits lQuality  Strategic versus tactical (solutions vs. specification based)  Complete a lot of items at one time  Usage of local vendors with known track records  Single point of accountability/responsibility lCost  Guaranteed price  Negotiated procurement  No change orders  Financing flexibility lTimeliness  Compressed time frame  Guaranteed project completion date *Traditional This Approach Unit Cost per square foot $120$80 Schedule Growth % 4.4%0% Construction Speed (square feet per month) 5,1359,091 *From a study by Pennsylvania state University on 351 building projects using Alternate Project Delivery Methods – published in ASBO Intl. School Business Affairs

Slide 9 Case Study, Woodridge 68 My favorite quote Why my District chose the Performance Contract approach –Turn key Ease of contracting work –Guarantee –Risk assumption Questions?

Slide 10 The cost of waiting Just as a business would look at whether the investment in new machinery and equipment is worth it versus ongoing repair and maintenance on old machines, you too need to analyze the cost of waiting.

Slide 11 Woodridge SD #68 7 roof systems need replacing –Initial plan, replace one roof a year over 7 years Restroom renovations –Initial plan, renovate bathrooms annual over 7 years Other –All other project to be paid for with operational funds over a period of time (5-7 years)

Slide 12 Assumptions All 7 roof projects, all restroom renovation projects and various life safety project were done at one time Annual energy savings for the work done is $5,213. Annual repair and maintenance savings for the work done is $47,518. Construction costs escalate at 8% annually Labor costs escalate at 3% annually Cost of financing the project over 10 years is 5%

Slide 13 The Cost of Completing Work over 7 years

Slide 14 Waiting 10 years!!!

Slide 15 Other considerations This analysis looked at the “hard dollar savings” Did not look at additional costs such as: –Change orders –Cost overruns Costs associated with delays in the project completion Soft dollar savings such as personal time in not having to completely oversee project

Slide 16 Financing the solution Questions –Revenue Sources O & M Lease Levy Education –Levy opportunities Debt Service Extension Base Not tax capped county

Slide 17 Financing Options Operating Funds –Debt Certificates –Alternate Revenue Source Bonds –Lease Levy Non-Referendum Levy –Limited Tax Bonds Life Safety Bonds –Need amendment process Working Cash Bonds –Requires 30 day petition period Funding Bonds –Debt Certificates –Requires 30 day petition period Referendum –Unlimited General Obligation Bonds

Slide 18 Conclusion Consider performance contracting solutions as an alternative strategy to meet your construction needs Review the costs and benefits Make an informed decision