New Year, New Everything: 5 Tips City Managers Can Use

With the New Year roaring in with some strong headwinds, many public CEOs and leaders are faced with tough decisions on managing their organizations and budgets amid shifting policies, sustainability mandates, changing laws and unpredictable inflationary pressures. Additionally, new federal policies and state-mandated programs are evolving rapidly, directly impacting municipalities. Below are five key tips to help city managers navigate these challenges effectively.

New State Mandates

The California Energy Commission (CEC) plays a critical role in statewide energy policy, setting efficiency and environmental standards for energy-related products. Recent regulatory changes include the phase-out of specific lighting and refrigerants, requiring city managers to take immediate action.

Transition Municipal Lighting to LED

Tip 1: Assess municipal facilities to identify existing fluorescent lighting and develop a transition plan to other compliant alternatives. Upgrading lighting systems now can help mitigate supply challenges, reduce energy costs and ensure compliance with the new regulations.

Effective January 1, 2025, California will prohibit the sale and distribution of linear fluorescent tube-type lamps (LFLs) and pin-base compact fluorescent lamps (CFLs) for new or replacement lighting systems which can be found in any city facility. This follows the 2024 ban on screw or bayonet-base CFLs.

Evaluate and Upgrade HVAC Systems

Tip 2: Conduct an immediate assessment of municipal HVAC and refrigeration systems to determine current refrigerant use, potential compliance risks and future budget impacts for replacements or retrofits.

Starting January 1, 2025, California will prohibit the sale, distribution or introduction of bulk hydrofluorocarbons (HFCs) with a global warming potential of 2,200 or greater. This regulation primarily impacts cities maintaining HVAC and refrigeration systems that use refrigerants such as R-404A and R-22, which must now be serviced with reclaimed refrigerants (exempt from the ban). New cooling and refrigeration equipment must comply with the updated global warming potential limits or be manufactured and pre-charged with restricted refrigerants outside of California.

Federal Energy and Infrastructure Policy Changes

Tip 3: Stay informed about available funding opportunities and strategically plan infrastructure investments to maximize financial support for your city’s energy and sustainability initiatives.

With a shifting political landscape, there is ongoing debate regarding potential amendments to the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law. Despite political discussions, most experts agree that key funding mechanisms, particularly the investment tax credits available for the installation of clean energy systems (solar, wind and energy storage), will likely remain in place, ensuring continued support for municipal projects. If substantive changes to the IRA are brought forth by the Administration, these would require approval by Congress which will be challenging due to the popularity of the investments and jobs that have been created in both red and blue states.

We don't expect, and I think lots of people out there don't expect, the IRA to completely be blown up and be obliterated.
_{—Marlene Motyka, Deloitte's U.S. renewable energy leader}

Based on a plain reading, as well as the subsequent clarification from the OMB, it would appear tax credits under the IRA fall outside the order’s scope as currently drafted.

CliftonLawsonAllen

Increasing Utility Rates in California

Tip 4: Invest in energy-efficient infrastructure and explore renewable energy options to reduce dependency on volatile utility rates. Implementing energy efficiency and clean energy programs, leveraging low cost funding options and securing state/federal grants and tax credits will help improve City General Funds and mitigate utility rate increases and other budgetary pressures.

The California Public Utilities Commission (CPUC) oversees statewide utility rates, which have seen significant increases over the past decade due to rising generation costs, increased system maintenance costs, wildfire mitigation efforts and the addition of new renewable energy sources to meet electricity demand. Given that utility expenses represent a significant portion of municipal budgets, energy efficiency upgrades, onsite renewable generation and energy storage can offer long-term budget predictability and cost savings.

The rate of electricity price escalation has increased over the past 5-10 years in California. Depending on where you are located in the state, in the past five (5) years electricity prices have increased by 41.6% in San Diego Gas & Electric’s (SDGE) territory, by 73.1% in Southern California Edison’s region and by 71.3% in Pacific Gas and Electric Company’s (PG&E) territory. (See Table and Chart below). Electrical Rates in CA have been running at 2-3X the rate of core inflation and may well continue into the foreseeable future.

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Construction Inflation

Tip 5: Expedite planning and execution of city infrastructure projects to avoid rising costs. Conducting an RFP process & securing agreements early can help lock in lower prices and prevent delays caused by high demand for construction resources.

Due to recent wildfires and supply chain constraints, construction inflation in California is expected to rise. The increased demand for materials and labor to rebuild affected areas will likely drive up costs for municipal infrastructure projects. See below for trends in construction costs since 2010.
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*Source:* *https://edzarenski.com/2022/12/20/construction-inflation-2023/*

Cities in California like San Leandro, Ontario, Clayton, Santa Clarita, Fountain Valley and many others have shown leadership by investing smartly in their Energy Infrastructure which significantly blunted the negative budgetary effects of spiraling utility cost Inflation. Take the opportunity to discuss these topics with your city manager colleagues and find out how they have addressed these difficult challenges and achieved a big win for their city, the environment and citizens.

By proactively addressing these issues, city managers can ensure their municipalities remain compliant, financially stable and well-prepared for the evolving regulatory landscape.

AUTHORS

Thomas Jackson, Corporate Vice President Sales & Major Projects, Climatec LLC a Robert BOSCH Company
Bruce Dickinson, President, Eagle Energy Solutions, LLC

Latest updates

Climatec expands Southeast operations with the acquisition of Engineered Control Solutions, Inc.

Phoenix, AZ
August 6, 2024

Further growth in building automation and expansion of regional presence
Customers of both companies benefit from expanded range of building technology solutions that can increase safety, efficiency, and comfort.

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Phoenix, AZ – Climatec, LLC, a Bosch company, has acquired the business of Engineered Control Solutions (ECS), a leading building automation solutions provider and system integrator with offices in North and South Carolina. ECS has about 100 employees. Terms of the transaction were not disclosed.

Founded in 1999, ECS is serving customers in the Southeast US and nationally. The company provides building automation solutions for efficient control, regulation and monitoring of technical building equipment such as heating, ventilation, air conditioning and lighting across the education, government, healthcare, and commercial building sectors. These owners and operators of commercial buildings and infrastructures have benefited from increased efficiency and simplified processes, as well as improved comfort for users. ECS’ building experts and regional operations are an excellent complement to Climatec’s portfolio.

“ECS is a perfect fit for Climatec’s business and culture,” said Ramesh Jayaraman, president, Bosch Building Technologies Integrator Business – North America. “The professionalism and dedication of the ECS’s team to deliver innovative building solutions fully aligns with the Climatec entrepreneurial spirit and mission for operational excellence and world-class service.”

“Climatec and Bosch’s commitment to customers and employees, the strength of their building technology partnerships, and long-term business focus made this decision easy,” said Lee Revis, president, Engineered Control Solutions. “The fact that the deal coincides with our 25^th anniversary underscores our excitement for a great future ahead for our team and our customers.”

“We are thrilled to have ECS as a part of the Climatec team,” said Shawn Flahart, Climatec vice president for Building Automation Services. “The addition of the ECS team gives us countless new opportunities to expand our services, grow our business in the Southeast, and better serve our national customers.”

All associates and the management team will continue in their respective roles.

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About Climatec, LLC

For nearly 50 years, Climatec has invested in people, technology, and services needed to be its customers’ trusted business partner for building solutions. Today, Climatec is a leading provider of building technologies and energy solutions in the nation. Climatec’s technology partners include the world’s leading suppliers of building automation, security, life safety, and energy efficiency technologies. And since 2015, Climatec has been part of Robert Bosch, LLC. For further information see www.climatec.com.

Press/Media/PR Contact

‍Jill Boileau
Director of Communications
Communications@Climatec.com
(602) 819-4945

Top Reasons Arizona Cities and Towns Need Comprehensive Energy Infrastructure Investments Now

Inflation and spiraling costs have impacted us all. The price of gasoline, the cost of eggs, bacon and most other basic needs for food and transportation have exploded in the last few years. To combat these inflationary pressures, employees, unions and workers across all industries are expecting needed salary increases just to commute to work and put food on the table. Many municipalities are wondering, “What can we focus on to make some positive impacts and get a WIN?”

One of the major budget line items for most municipal governments (often just behind salaries and pensions) are their electricity and natural gas payments. Not a surprise to any CBO: utility increases in Arizona have shot up dramatically in the last few years. All the Investor-Owned Utilities (IOUs), such as Southwest Gas, Arizona Public Service (APS) and Tucson Electric Power Company, have seen commercial electricity rate increases skyrocket. From 2020 to 2021, Arizona’s average electricity price increased by 6%, making this the third largest increase in the western United States. The chart below further proves the upward trend of average electricity prices by comparing prices from 2005 to 2021.
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*Source:* *Senior Research Economist Jennifer Pullen of University of Arizona, 2022*

Many experts believe that with the mandated transition to more renewable energy production, the significant upward trend in utility rate increases will continue well into the future. Even as current rates rise, IOUs are slated to continue the upward trajectory on costs. Imagine your total utility bill doubling in the next few years.

According to KAWC, Southwest Gas increased rates in 2023 by 7.6% for residential customers and 13.7% for small business customers. Additionally, the Phoenix Business Journal reports that APS expects an average residential customer monthly bill increase of 13.6%. APS President Ted Geisler told KTAR News 92.3 FM’s Arizona’s Morning News that a proposed monthly base rate increase of at least 23% is necessary but likely won’t make its way to customers.

It is easy to focus on electricity rate increases, but with current energy policies and global market dynamics, natural gas prices have risen at an even faster pace than electricity with residential consumers experiencing upwards of a 36% increase since 2020.
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*Source:* *US Energy Information Administration, 2023*

So, if you are a city manager or city council member, what can you do to blunt these massive utility cost increases? Doing nothing or hoping the problem will go away is not a strategy. Leading cities across Arizona, including the City of Yuma, City of Tucson, City of Sierra Vista and Town of Gilbert, showcase how cities and towns can proactively combat the impact of rising utility costs with investments in modernization, efficiency and sustainability.

The City of Yuma, for example, made strides toward its mission to enhance sustainability by modernizing City facilities with exterior and interior lighting upgrades, park lighting improvements, HVAC and pool boiler replacements, smart building controls and pool pump variable frequency drive and solar array installations. This project relieves approximately $6 million in general funds over the lifecycle of the new equipment, achieving $434,555 in just the first year.

Most municipalities have contemplated energy and sustainability initiatives for years, but the required upfront capital, staff resource constraints, stakeholder coordination and complex analysis makes it hard to get projects off the ground. Cities may take several approaches, but there is one approach that is proven to be the most effective for completing projects in less time, with fewer resources and with lower risk.

Compared to “piece-mealing” projects one at a time or waiting for equipment to break down, a design/build energy services approach allows a city to look at energy holistically and through the lens of the long term. Bundling all pieces of the puzzle together–rather than one or two at a time, as typically done in traditional construction methods–comprehensively addresses deferred maintenance needs, as well as resiliency and sustainability goals. What’s more, is the legislative availability of streamlined procurement options available, which make it easy to competitively procure a single-point of accountability without hiring multiple consulting firms, and incurring all the incremental costs and delays associated with a traditional 4-5 year+ construction/retrofit process.

If energy efficiency and sustainability (plus blunting budget-busting utility increases) are on your to-do list and you are looking for reasons to prioritize energy infrastructure projects in 2023, read on:

TOP REASONS TO ACT NOW

PRICE & TIMELINE CERTAINTY
- According to CBRE, construction cost escalations have seen double digit increases for the last two years and are anticipated to escalate. If your city has constructed any facilities or has done any significant construction projects recently, you know firsthand the risks, delays, budget overruns, litigation, etc., that can result.
  
  Not to mention the other delays created by supply chain disturbances, with many components often taking up to 12 months to arrive. The combined impact of inflation and delays are costing billions, forcing many cities to defer decision making or cancel projects altogether. By the time projects are ready to be pursued, it’s common for cities to see projects at double the cost than was originally budgeted in years prior.
  
  Acting NOW, with a streamlined design/build approach, puts you in the driver’s seat and ensures you can lock down–and stand behind–the budgets and timelines you promise to stakeholders.
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GRANTS, INCENTIVES, REBATES
- More funding is available today from grants, incentives and rebates than ever before. Ranging from federal, state, local and private sector programs, municipalities have a chance to free up or stretch the impact of capital funds without taking on any debt. Finding a partner who has deep expertise in helping your city secure incremental funds is imperative. The money is out there.
- In addition to the billions in ARPA stimulus cities must obligate before December 2024, you can now also tap into an additional $370 billion from the Inflation Reduction Act (IRA) for clean energy generation, efficiency measures, improvements to water/wastewater facilities and EV charging infrastructure. IRA funds can help fund approximately one-third of the cost of solar for your city with direct payment tax incentives. Lighting, HVAC, battery storage and many other types of “electrification” also qualify for potential grants.
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EFFICIENCY - STILL YIELDS MUCH LOW-HANGING FRUIT
- It’s common for cities to think they’ve done all the low-hanging fruit there is to do if you have completed a few efficiency upgrades over the last decade. Even in relatively new facilities or buildings that meet LEED standards, run times and automation settings often get modified or overridden with time. Plus, technology improvements have changed drastically in just the last few years, particularly when it comes to ventilation standards or the electrification of natural gas-consuming equipment.
  
  By optimizing your current infrastructure to peak efficiency and today’s standards, you can reduce your facilities’ utility consumption by 30%-40% or more.
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PIECEMEAL & BREAKDOWN APPROACHES DON’T WORK
- When it comes to energy, piecemeal approaches or waiting for things to break leads to unintended consequences with a variety of negative impacts, including staff resource strain, comfort and productivity issues, emergency repair cost, etc. Furthermore, the stacking order for pursuing building efficiency and renewable energy projects is critically important to avoid alternative energy system oversizing, another common pitfall of a piecemeal approach.
  
  Having a single point of accountability for the energy analysis, design, implementation and overall savings assurance gets your projects off the ground without the risks of aforementioned budget overruns and delays. A comprehensive approach also allows you to reduce the load of your facilities first and then properly size solar energy and storage solutions to precisely meet the needs of your now more efficient facilities. The technology to achieve Zero-Net Energy and Carbon Neutrality is available today, however, these ambitious goals can only be achieved with a well-planned, comprehensive perspective.
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Find a city that has had success with a comprehensive energy program and ask them about their process. Ask for a sample RFP and adopt the document for your needs. Once you drive a competitive process, select a design/build partner and conduct a citywide assessment. You will then have the tools and data to align a scope of work and funding plan specifically targeting your stakeholder and city needs. Before proceeding with program implementation, you’ll be equipped with a whole picture perspective to make intelligent long-term decisions that best serve your city’s interest today, tomorrow and for the next twenty years. Act NOW, and you can capture a big WIN in the next year or two for your city, while striving to address the numerous other longer term challenges city leaders face today.

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Author: Thomas Jackson is Corporate Vice President for Sales & Major Projects for Climatec Energy Services. He holds a degree in Energy Resource Management & currently serves on the Board of Advisors for Sustainability & Technology at Eastern Illinois University. Climatec is a wholly owned LLC as part of the Robert BOSCH family of companies.