EPC Public Sector Case Studies• City of Marquette, Michigan

ü Multi-measure project including security/life safetyü Innovative tax-exempt lease financing model

• Hawai’i Department of Transportationü Multi-measure project including renewablesü Municipal obligation bond financingü Largest U.S. single-state EPC project

Performance ContractingProject Overview

City of Marquette… “Goals and Challenges”

The City’s mission statement:

…The City of Marquette is dedicated to providing a superior quality of life through professional municipal services.

§ Project aligns with the City of Marquette’s mission statement and addresses the following challenges:

ü Aging Infrastructure

ü High Energy Costs

ü Insufficient Capital Funds for Necessary Upgrades

ü City did not want to negatively impact its bond capacity by funding program with traditional bonds

ü Operational Risk (Equipment Failure)

ü Deferred Maintenanceü Desire to Reduce Energy Usage

ü Continuous Improvement

Scope of Work Highlights

§ Updating 22 traffic intersections throughout the city

§ Replacing over 3,300 new water meters and installing a “Smart City” Itron AMI

system on all 6,100 meters

§ Complete renovation of the upper floor of City Hall to provide more user friendly,

customer service for local community

§ Installing LED lights on 2,498 street lights

§ Installing LED lights on 125 bike path lights

§ Electrical co-generation plant at the waste water treatment plant

§ Numerous building envelope, lighting and HVAC improvements

§ City wide security and IT upgrades

§ Fire Alarm Upgrades

§ Complete Lakeview Arena ice system replacement

§ Implement a City wide service agreement to support City operational staff for life of

program

Program Outcomes

•Self Funded Solutions - $27 million in improvements paid for through savings

•Guaranteed Outcomes - $42 million in benefits over the term through Guaranteed

Savings (37% reduction in energy usage)

•Transfer of Liability - Reduced Risk Through Guarantees on Fixed Cost and

Performance

•Turnkey Approach - Single Point of Accountability

•Alternative Financing Approach – Financed project using New Tax Exempt

Lease Purchase Legislation

•Operational Integrity – Replacing Aging Equipment Prior to Major Failure

•Local Economic Impact – 70% of project executed by local companies!

Tax Exempt Municipal Lease (TELP)

• Not Debt - “A Lease Purchase Agreement issued under this subsection shall not be

subject to the Revised Municipal Finance Act, 2001 PA 34, MCL 141.2101 to

141.2821…and shall not be a municipal security or a DEBT as those terms are

defined in that act”

• Flexible - “The legislative body may make payments under a lease purchase

agreement from any legally available funds or from a combination of energy or

operational savings, capital contributions, future replacement costs avoided or billable

revenue enhancements that result from energy conservation improvements…”

• Ownership - “During the term of the lease purchase agreement, the legislative body

shall be the vested owner of the energy conservation improvements and may grant a

security interest in the energy conservation improvements to the provider of the lease

purchase agreement”

Overall Benefits to the City of Marquette§ Project aligns with the City of Marquette’s mission statement by directly impacting

the following City objectives for Employee Development and Public Service:

ü Plan for our future while preserving our past – Self funding project with guaranteed outcomes

ü Change with the challenges – New Fiscally Responsible Financial Mechanism

ü Provide a safe, healthy environment – Becoming a “Smart City” by addressing infrastructure while maintaining budget integrity

ü Create a sense of community – Improved reliability of City services, and City investments in local subcontractors through the project

ü Recognize the accomplishments of employees and community members –Provide public relations to promote program outcomes

ü Provide opportunities for personal and community growth – Training programs for staff, and local job creation. This project includes 78,585 hours of local labor at prevailing wages, equating to 37 full time jobs over two years

ü Provide leadership for the community – Leadership in Sustainability

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Hawai’i Department of Transportation

The largest single-state ESPCin the United States

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The Hawai’i Challenge90+% of electricity is generated via fossil fuel

• $5.1B leaves Hawaii economy annually for fuel costs alone

• Renewable Energy and Sustainability is key to keeping these dollars at home

Hawaiian Islands are the most remote islands in the world

• Hawaii has the highest utility rates in the nation

• Each island has its own generation capacity and electrical grid

• There is no interconnection of grids between islands

State is committed to renewable technology and sustainability

• Governor Ige’s goal is 100% renewable by 2045

• State committed to Performance Contracting as an important tool towards achieving this goal

Johnson Controls Inc.11

Preserving Paradise

12 Hawaii DOT airports98,000 lighting fixtures upgraded to LED

24,400 solar photovoltaic panels

Air conditioning upgrades

Deferred maintenance items

Airports HighwaysHarbors

9 Commercial Harbors

1,500 miles of State Roadways on Oahu & Maui

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First Year Energy Savings = $25M

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renewable energy

8 MW

49%reduction in energy

Guaranteed savings

$710M

in tax revenues

$27.3M

in income to households

$186.6M

economicdevelopment

$865M

jobs local created

7,962

100%renewable by 2045

Sustainable Hawai’i

Thank you!