THE FINANCING OF ENERGY CONSERVATION MEASURES BY ARKANSAS SCHOOL DISTRICTS Presented by: Heartsill Ragon III

► Acts 2156 and 2177 of 2005 grant School Districts greater flexibility in financing their acquisition of energy conservation measures. ► Energy conservation measures may now be financed up to 20 years and possibly up to 30 years, subject to certain conditions. ► School districts may enter into "Short Term Lease-Purchase Agreements" or "Long Term Lease-Purchase Agreements" in acquiring their energy conservation measures.

► Short Term Lease-Purchase Agreement: Can finance purchase of energy conservation measures over a 20-year period of time. Financing cannot exceed the useful life of the equipment and must be coupled with an "Energy Savings Contract" with a "Qualified Provider." ► Long Term Lease-Purchase Agreement: Can finance buildings and related facilities (includes HVAC systems) over a 30-year period of time. If coupled with a "Termination Clause," then financial obligation will not be considered in calculating school district debt ratio.

► "Energy Savings Contract" is defined as: (a) a contract for the installation of energy conservation measures and pre-installation energy audit and analysis costs; and (b) wherein the energy savings are guaranteed to the extent necessary to pay for the costs of the energy conservation measures. If these tests are met, then the financial obligation is not considered in calculating school district debt ratio.

► "Qualified Provider" is defined as a business that (a) holds an Arkansas contractor license; (b) has at least 5 years experience; (c) has technical capability; and (d) is pre-approved by Division of Public School Academic Facilities and Transportation. ► If awarded a bid, a Qualified Provider must: (a) post payment and performance bond to assure proper installation; and (b) may be required to post letter of credit, bond or investment grade corporate guarantee of performance.

► A school district may enter into a Guaranteed Energy Savings Contract with a Qualified Provider if the amount spent on the equipment does not exceed the energy and operational cost savings within a 20-year period, assuming all operational recommendations are followed. ► Routine RFP process is required. Proposals must include: (a) estimate of costs; (b) qualifications of provider; (c) certification of equipment by Refrigeration Institute; (d) state-licensed engineer certificate as to energy savings; and (e) anticipated useful life of the equipment.

Other unique financing alternatives: (a) ability to sublease school district facilities to day-care, civic clubs, other entrepreneurial third parties; (b) ability to sell and lease back school district facilities; (c) ability to outsource school building development and construction and lease- purchase from entrepreneurial developer; issuance of QZAB bonds. Other unique financing alternatives: (a) ability to sublease school district facilities to day-care, civic clubs, other entrepreneurial third parties; (b) ability to sell and lease back school district facilities; (c) ability to outsource school building development and construction and lease- purchase from entrepreneurial developer; issuance of QZAB bonds.

Heartsill Ragon III Gill Elrod Ragon Owen & Sherman, P.A. Little Rock, Bentonville, Arkansas