Staff Report
PREPARED BY: JIM HARBIN
Facilities & Environmental Programs Manager
Reviewed by: Town Manager, Assistant Town Manager, Town Attorney, Finance Director, and Parks and
Public Works Director
110 E. Main Street Los Gatos, CA 95030 ● 408-354-6832
www.losgatosca.gov
TOWN OF LOS GATOS
COUNCIL AGENDA REPORT
MEETING DATE: 10/02/2018
ITEM NO: 7
DATE: SEPTEMBER 27, 2018
TO: MAYOR AND TOWN COUNCIL
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: PPW JOB NUMBER 821-2008 ENERGY EFFICIENCY UPGRADES TOWN-WIDE
A. APPROVE A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF
LOS GATOS MAKING FINDINGS DISPENSING WITH THE FORMAL
BIDDING REQUIREMENTS PER THE CALIFORNIA GOVERNMENT CODE
SECTIONS 4217.10-4217.18 AND AUTHORIZING THE TOWN MANAGER
TO EXECUTE AN ENERGY SERVICES AGREEMENT WITH SYSERCO, INC.
FOR THE DESIGN, INSTALLATION AND COMMISSIONING OF HVAC AND
LIGHTING IMPROVEMENTS AT VARIOUS TOWN FACILITIES FOR A
TOTAL PROJECT COST NOT TO EXCEED $1,664,358.
B. AUTHORIZE THE TOWN MANAGER TO NEGOTIATE AND EXECUTE
NECESSARY AGREEMENTS TO PARTICIPATE IN PG&E ON BILL
FINANCING IN THE AMOUNT OF $1,439,995.
C. AUTHORIZE A BUDGET ADJUSTMENT RECOGNIZING REVENUE FROM
PG&E ON BILL FINANCING IN THE AMOUNT OF $1,439,995.
D. AUTHORIZE THE REALLOCATION OF FUNDS FROM VARIOUS ENERGY
EFFICIENCY PROJECTS TO PPW JOB NUMBER 821-2008 IN THE
AMOUNT OF $258,354.
RECOMMENDATION:
Staff recommends that the Town Council:
1. Approve a Resolution (Attachment 1) of the Town Council of the Town of Los Gatos
making findings dispensing with the formal bidding requirements per the California
Government Code Sections 4217.10-4217.18 and authorizing the Town Manager to
execute an Energy Services Agreement (Exhibit A to Attachment 1) with Syserco, Inc. for
the design, installation, and commissioning of HVAC and Lighting improvements at
various Town facilities for a total project cost not to exceed $1,664,358.
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RECOMMENDATION (cont’d):
2. Authorize the Town Manager to negotiate and execute necessary agreements
(Attachment 2) to participate in PG&E On Bill Financing in the amount of $1,439,995.
3. Authorize a budget adjustment recognizing revenue from PG&E on bill financing in the
amount of $1,439,995.
4. Authorize the reallocation of funds from various energy efficiency projects to PPW job
number 821-2008 in the amount of $258,354.
BACKGROUND:
Most of the Town’s municipal buildings were constructed in the 1960’s and 1970’s and the
lighting, heating and air conditioning (HVAC), and other building systems and controls have
aged and lack today’s energy efficiency technology. The antiquated nature of these systems
contributes to a backlog of facility capital replacement needs. In addition, much of the
equipment requires high levels of maintenance due to its age. The Town’s five-year CIP
includes six projects which address some of these deficiencies.
This project would typically be subject to the California Public Contract Code and the Town
public contracting policies, which generally requires competitive bidding and awarding to the
lowest bidder for public works projects. However, in reviewing the delivery of these projects,
staff explored the potential for taking advantage of a specific section of the California
Government Code (4217.10 et seq) that allows for entering into energy services contracts.
Government Code section 4217.12 allows the Town to dispense with bidding for these energy
service contracts if the Town Council finds, at a public hearing, that the contract is in the best
interest of the Town and upon the making of certain cost savings findings. This design-build
model allows for the Town to work directly with a licensed contractor to develop and complete
energy efficiency projects. This method streamlines the process by bundling related projects,
providing for improved communication, and helping to reduce the typical risks of delay, change
orders, and assigned responsibility.
Town staff conducted a Request for Proposals (RFP) for an energy services company in April of
this year and as a result entered into an agreement with Syserco, Inc. Under this agreement,
Town staff worked with Syserco to conduct an initial assessment of Town facilities. The goal of
this initial assessment was to identify projects with potential energy savings and to refine that
list to align with Town needs. This program allows for a scope that is far broader than the six
projects in the CIP, maximizing the return on the effort involved in delivering the projects.
At the June 19, 2018 Town Council meeting, the Town Council approved moving forward with
the next steps in the program, including an Investment Grade Audit with the goal of utilizing a
PG&E loan program called On Bill Financing. This PG&E program provides a loan for the project
cost that is recovered through monthly charges on the utility bill. The loan is sized to equate to
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BACKGROUND (cont’d):
projects that create energy savings over ten years where the energy savings equal the cost of
the project, resulting in no net cost to the Town.
DISCUSSION:
Following the initial review of the facilities and identification of potential projects, the program
conducted the Investment Grade Audit (included in Exhibit A to Attachment 1). The Investment
Grade Audit is the next step to confirm that the energy savings calculated by Syserco are
reasonable. An Investment Grade Audit is a review of proposed energy savings projects based
on established industry standards which serves to validate the projected savings associated
with those projects. The cost of this audit will be rolled into the final project budget unless no
project is awarded, wherein the cost of the audit will be due to Syserco.
Following the Investment Grade Audit, Syserco created an Energy Services Proposal (included in
Exhibit A to Attachment 1) for energy conservation and infrastructure improvements, where
Syserco’s technical team analyzed the energy conservation measures (ECMs) and invited
qualified contractors to competitively propose improvement measures and infrastructure
upgrades at the following facilities: Town Hall, Police Operations Building, Corporation Yard,
Library, Adult Recreation Center, Youth Recreation Center, and parking lot four (the two story
garage).
ECM priority was given to replacement of HVAC and lighting infrastructure as both provide for
significant savings and are among the most inefficient and unreliable infrastructure
components. The proposed ECMs and anticipated energy savings will be reviewed by a PG&E-
approved, third party consultant. This review pre-validates the Town’s application to PG&E for
on-bill financing and supports the validity of the energy conservation measures and their
forecast savings. Once the project is complete, Syserco will verify that each ECM is performing
as calculated. This verification will occur again at the end of one year.
The proposed energy conservation and infrastructure improvement projects identified would
provide a reduction in electrical consumption by 671,377 kilowatt hours (kWh) annually and
natural gas consumption by 7,740 therms annually. This translates to an annual reduction in
greenhouse gas emissions of 41 metric tons. The positive environmental impacts associated
with the proposed energy conservation and infrastructure improvements align directly with the
Town’s goals for positive environmental impact by reducing greenhouse gas emissions,
consistent with the Town’s General Plan and Sustainability Plan. These improvements also
include the ability to more accurately monitor and control the HVAC systems in Town facilities,
such as the Council Chambers, and to provide renewed infrastructure where aged and outdated
equipment exists.
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DISCUSSION (cont’d):
It should be noted that in the event projected savings do not materialize at the calculated level,
the Town will still be obligated to pay the cost of the construction loan on the utility bill on a
monthly basis. In order to mitigate that risk staff performed an extensive review of the initial
list of potential projects and provided significant input and review of savings attributed to those
projects. A further layer of review and increased scrutiny comes from the Investment Grade
Audit and then a final layer of review by PG&E. Additionally, the verification that occurs as the
project comes online and the follow up verification which occurs one year later will provide
further validation that the projects are performing as anticipated . Finally, the ten-year return
on investment is reasonably short with some equipment on a 15 year or longer life cycle.
CONCLUSION:
The end result from this project is renewed and enhanced infrastructure paid for through
projected energy savings over ten years. The Town will benefit from the short-term upgrade of
aging and ineffective infrastructure and will receive the residual energy savings after ten years
by way of reduced utility bills. The outcomes are additional capacity to deliver a broad array of
capital projects over a short period of time, demonstration of sustainability leadership through
the Town’s investments in energy conservation for its own facilities, and increased benefits to
the facility users.
COORDINATION:
This report was coordinated with the Town Manager’s Office, Town Attorney, and Finance
Department
FISCAL IMPACT:
Through the June 19, 2018 Council action, the Town has committed to the cost of the facility
audit of $34,750. If the Town proceeds with the construction of energy savings projects, the
cost of the audit will be rolled into the total project cost. If the Town chooses not to proceed,
this amount will be due to Syserco and Town staff will use the results to prioritize future capital
projects.
The cost of the proposed project bundle of ECMs totals $1,664,358. The bundle includes
priority projects for the Town, such as independently monitoring energy use at New Museum of
Los Gatos (NUMU) and replacement of equipment that has reached the end of its serviceable
life and must be replaced regardless. To allow for the inclusion of these projects while keeping
the overall payback period at ten years, staff recommends utilizing the funds already
appropriated to energy saving capital projects. This results in a total on bill financing cost of
$1,439,995.
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FISCAL IMPACT (cont’d):
The PG&E On Bill Financing program provides reimbursement for project costs after the project
is complete and energy savings are confirmed. The Town will need to carry the cost of the
projects until receipt of the PG&E reimbursement, which may be several months. Sufficient
funds reside within the capital program to carry these expenses.
ENVIRONMENTAL ASSESSMENT:
This is a project as defined under CEQA but is Categorically Exempt [Section 15301(a)]. A Notice
of Exemption will not be filed.
Attachments:
1. Resolution, includes Exhibit A - Energy Services Agreement with Investment Grade Audit
2. PGE On Bill Financing Template Agreement
Project #Source Budget Costs
On Bill Financing 1,439,995$
821-2008 Energy Efficiency Upgrade - Townwide 75,000$
821-2110 Civic Center Building Energy Efficiency Measures*25,000$
821-2307 Mechanic Bay Heater*25,000$
821-2112 Exterior Lighting Replacement - Civic Center*17,234$
821-2115 HVAC- Chiller Repair*93,520$
821-2113 Youth Recreation Center HVAC*22,600$
Total Available Funding 1,698,349$
Total Project Cost 1,664,358$
Remaining Balance 33,991$
Energy Efficiency Upgrades - Townwide
* The funding for these projects will shift to the Energy Efficiency Upgrades - Townwide
project and be completed within that scope. The individual projects will be closed out.