Fiscal Note & Local Impact Statement
126 th General Assembly of Ohio
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BILL: |
DATE: |
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STATUS: |
SPONSOR: |
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LOCAL IMPACT
STATEMENT REQUIRED: |
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STATE FUND |
FY 2006 |
FY 2007 |
FUTURE YEARS |
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General Revenue Fund and
other state funds |
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Revenues |
- 0 - |
- 0 - |
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Expenditures |
Variable increase in
design, construction, and administrative costs; potential increase in
procurement costs |
Variable increase in
design, construction, and administrative costs; potential increase in
procurement costs |
Variable increase in
design, construction, and administrative costs, but potential decrease in
energy costs over time; potential increase in procurement costs |
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State institutions of
higher education |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
Variable increase in
administrative and construction costs to meet guidelines; potential increase
in procurement costs |
Variable increase in
construction costs; potential increase in procurement costs |
Variable increase in
construction costs, but potential decrease in energy costs over time;
potential increase in procurement costs |
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State Architect's Fund
(Fund 131) Department of Administrative Services |
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Revenues |
Potential minimal gain in
State Architect fees corresponding to cost of potential new oversight
expenses |
Potential minimal gain in
State Architect fees corresponding to cost of potential new oversight
expenses |
Potential minimal gain in
State Architect fees corresponding to cost of potential new oversight
expenses |
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Expenditures |
Increase in staffing and
supply costs from $800,000 to $1 million |
Increase in staffing costs
from $800,000 to $1 million |
Increase in staffing costs
from $800,000 to $1 million |
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Various Federal Funds
Department of Development |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
Minimal increase in
administrative expenses |
Minimal increase in
administrative expenses |
Minimal increase in
administrative expenses |
Note: The state
fiscal year is July 1 through June 30.
For example, FY 2006 is July 1, 2005 June 30, 2006.
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Engineering requirements. Various state agencies may experience additional costs to achieve an
energy efficiency design standard for state-funded facilities that is 20% above
the standard set by the American Society of Heating, Refrigerating, and
Air-Conditioning Engineers handbook (ASHREA).
This requirement is estimated to add an additional 1% to 5% in capital
costs to a project.
·
Committee of the Interuniversity Council of Ohio. State colleges and universities and DAS' Office of Energy
Services may experience minimal travel and administrative costs to assist the Interuniversity Council of
Ohio in developing guidelines for state colleges and universities to use in ensuring
energy efficiency and conservation in on- and off- campus buildings.
·
Energy efficiency at state colleges and universities. State colleges and universities are likely to
experience various expenditures increases to meet energy efficiency goals, incorporate
various energy efficiency standards, develop an energy plan, prepare project
impact assessments, and prepare reports, pursuant to the guidelines adopted by
the Interuniversity Council of Ohio.
Currently, an accurate estimate of what these costs may be is unknown
and are likely to vary per college and university based on the institutions
financial resources available to meet the goal.
·
Administrative costs. Associated
administrative costs that may result in order to comply with the new engineering
requirements include: hiring a building
operator and providing training; completing various forms, preparing life cycle
and energy consumption cost analyses, and preparing purchasing documents.
·
Potential long-term energy savings. Any short-term costs incurred by state agencies by incorporating
ASHREA standards, and state institutions of higher education meeting an energy
reduction goal of 20% by 2014, would presumably be offset in the long run by
reduced energy expenses. Any savings
would likely depend on the fixed cost of the energy efficient equipment versus
the variable cost of energy supplies.
·
Department of Administrative Services (DAS) Additional Construction
Oversight. If the new energy oversight and review
procedures result in additional staff time or personnel costs, there may be new
costs for the Office of Energy Services, a unit of DAS's Office of State
Architect. Those costs would likely be
passed on to the owners of capital projects through higher State Architect
fees, which are deposited in the State Architect's Fund (Fund 131). DAS estimates the new requirements in the
bill may result in the need to hire an additional eight to ten employees. Hiring these new employees may result in an
additional $800,000 to $1 million in salary, benefit, and supply expenses.
·
DAS Procurement Bid Preference. The bill requires DAS to give preference to products and services
that meet energy efficiency guidelines set by the United States Environmental
Protection Agency and Department of Energy.
Because preference will be given to certain products or services, the
purchase price may be more expense. DAS
indicates that energy efficiency products and services are currently being
used, but they are not mandated. Under
the bill, this preference would be mandated and could result in additional
review of bids by DAS, though these tasks are likely to be done with existing
staff.
·
Department of Development Technical Assistance. The bill requires the
Department of Development to cooperate in providing information and technical
expertise to the Office of Energy Services (OES) within DAS to ensure adoption
of energy efficiency rules and to assist OES in providing training programs and
workshops to state employees involved in the purchasing process. Currently, the Department does not have a
cost estimate of these provisions; however, LSC anticipates these costs to be
minimal, and that these costs would be paid from federal funds that currently
support Development's Office of Energy Efficiency.
·
No
direct fiscal effect on political subdivisions. However, if political subdivisions choose to adopt the preference
for energy efficient products and services in their procurement policies, there
could be higher costs if these items are more expensive than competing items
that do not meet these standards.
However, over time, by purchasing more energy efficient products and
services political subdivisions may experience some savings.
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The bill makes
several changes to current law regarding energy efficiency in state
government. Most notably, the bill:
requires DAS to adopt additional energy efficiency rules that will require
compliance with specific engineering standards, makes changes to life cycle
cost analysis and energy consumption analysis specifications, and requires the
incorporation of energy efficiency requirements in state purchasing. The fiscal impact of these provisions on
various state agencies, state colleges and universities, and local governments
is discussed below.
Adoption of energy efficiency rules
To assist the
Department of Administrative Services' (DAS) Office of Energy Services (OES) in
cost-effectively reducing the energy consumption of state-funded facilities,
the bill requires OES to adopt rules specifying cost-effective, energy
efficiency and conservation standards that shall govern the lease, design,
construction, operation, and maintenance of all state-funded facilities. These rules however, do not apply to the
facilities of state institutions of higher education. Furthermore, the bill
requires the Department of Development (DOD) to cooperate in providing
information and technical expertise to OES to ensure adoption of rules of
maximum effectiveness. The bill
requires the rules to be adopted no later than nine months after the effective
date of the bill. Below is a discussion
of some of the rules and their corresponding fiscal impact.
1. Rules to use ASHREA specifications
The bill states that the
rules must include a specification of an energy efficiency design standard for
heating, refrigeration, and air conditioning systems, components and equipment
in state-funded facilities that is 20% above the applicable standard specified
in the American Society of Heating, Refrigerating, and Air-Conditioning
Engineers handbook (ASHREA). The bill
further requires that a state-funded facility adhere to that standard, though
the bill exempts facilities of state institutions of higher education.
Fiscal effect on various
state agencies. LSC is
uncertain about what impact this new requirement would have on the planning,
design, and costs of capital projects.
Currently, LSC does not have an estimate of the costs associated with
bringing certain state-funded facilities into compliance with these
standards. Costs are likely to vary
based on the square footage of buildings and the cost of the systems,
components, and equipment at each facility.
It is reasonable to assume that projects that are already programmed may
be delayed in order to make design modifications in order to comply with the
requirements. DAS estimates that to
achieve the 20% standard, an additional 1% to 5% in capital costs may be added
to the initial project estimate according to industry standards.
Fiscal effect on DAS' Office
of Energy Services. DAS' Office
of Energy Services (OES), within the State Architect's Office, would be
primarily responsible for ensuring that certain state facilities are using the
energy efficiency standards required by the bill. The mission of this office is to ensure that energy conservation
goals are observed in the design, construction, renovation, and utilization of
state-owned, assisted, and leased facilities.
OES is funded largely from appropriation item 100-639, State Architect's
Office within the State Architect's Fund (Fund 131). OES has an operating budget of approximately $555,000 in FY 2006
and $562,300 in FY 2007.
The bill leaves it up to OES
to determine exactly what the appropriate standards are and to ensure that
those standards are being met.
Depending on how these new guidelines are enforced, the bill's
requirements may be difficult to meet without hiring additional staff. Currently, there is only one person assigned
to OES. In order to implement and
enforce the ASHREA specifications, DAS reports that the bill may result in the
need to hire an additional eight to ten professional employees. This may result in additional salary,
benefit, and supply expenditures ranging from $800,000 to $1,000,000. To cover these costs it is possible the
State Architect's Office may increase their service fees, which are calculated
as a small percentage of the overall project construction budget.
2.
Rules related to life cycle cost analysis and energy consumption
analysis specifications
The bill states that no
state agency, department, division, bureau, office, unit, board, commission,
authority, quasi-governmental entity, or institution shall lease, construct, or
cause to be leased or constructed, a state-funded facility without having
secured from OES, a life cycle cost analysis, or in the case of a lease, an
energy consumption analysis. Currently,
this requirement is only applicable to state agencies. Currently the number of new such cost
analyses to be submitted to DAS by all these entities is unknown. Furthermore,
the bill requires these entities, whenever they request a release of capital
improvement funds for any state-funded facility, to submit copies of all
pertinent life cycle cost analyses.
Currently this submission requirement applies only to a state
department, agency, or institution.
DAS notes that
the majority of agencies currently do not submit these analyses. In order to comply with the provisions of
the bill various state agencies, authorities, quasi-governmental agencies, and
institutions may have to use internal staff or contract with private
architectural and engineering firms to provide them, thus incurring additional
costs. Currently a cost estimate of
these analyses is not available and will likely vary by project.
3. Rules related to waiver of application
The rules shall allow a
project manager of a state-funded facility, except a facility of a state
institution of higher education, who are exempt form this requirement to apply
for a waiver of compliance of the rules regarding cost-effective, energy
efficiency and conservation standards governing the lease, design,
construction, and operation, and maintenance of state-funded facilities. The waiver application shall include a
written explanation and documentation of how the facility will meet energy
efficiency and conservation standards prescribed in the rules. Further, OES shall notify the applicant with
30 days after the application's filing if more supporting information is
desired.
The development of a waiver,
subsequent review of the waiver application, and notification requirements are
likely to create minimal costs to OES.
Similarly, project managers of certain state-funded facilities are
likely to experience minimal costs to prepare the waiver as well as provide
associated explanations and documentation of energy efficiency goals.
4. Rules requiring a building operator
The bill also requires the
rules to include a requirement that not later than two years after the
effective date of the bill, each state-funded facility, except a facility of a
state institution of higher education, be managed by at least one building
operator certified under the building operator certification program or any
equivalent program or standards. The
rules must allow a building operator to manage more than one state-funded
facility.
Currently, it is
unknown how many building operators will be hired or whether state agencies
will actually use current employees to fulfill this responsibility. Regardless, agencies are likely to incur
training costs, which according to DAS is estimated to cost about $1,200 per
student.
Energy efficiency in procuring products and
services
The bill requires DAS to
require that each bidder provide sufficient information about the energy efficiency
or energy usage of the bidder's product or service, including whether the
product or service meets the agency efficiency guidelines set by the United
States Environmental Protection Agency (USEPA) and United States Department of
Energy (USDOE). Under current law, DAS may
require that each bidder provide this information. However, as part of the contract awarding process, the bill
requires that when DAS is considering awarding a contract for products, it give
preference to the lowest most responsive and reasonable bidders whose products
or service meets the energy efficiency guidelines set by USEPA and USDOE. DAS reports that modifying current
competitive selection procedures will likely require additional staff time and
resources (as part of the eight to ten additional people as previously
discussed) in OES.
While the bill does not
specifically state which standards shall be adopted, this provision most likely
would require preference to be given to "Energy Star" products. The Energy Star program provides products in
areas such as lighting systems, air handling systems, cooling systems, office
equipment, elevators, auxiliary heating, and others. Use of such products can reduce energy costs in state facilities. DAS indicates that this new preference could
increase the purchase price for these services and products, and may lead to
minimally increased expenses associated with more detailed review of bids.
Role of the Department of
Development in state purchasing. As part of
the procurement of energy efficient products, the bill requires OES to work
cooperatively with DOD's Office of Energy Efficiency to identify available
energy efficiency and conservation opportunities. Currently, OES alone is only required to identify energy
conservation opportunities. Further,
the bill requires OES to provide technical assistance and training programs to
state employees involved in the purchasing process cooperatively with DOD's
Office of Energy Efficiency. Under
current law, OES is required to provide training programs and workshops to
state employees involved in the purchasing process, but without DOD's
assistance.
LSC assumes that DOD's
Office of Energy Efficiency is likely to incur minimal administrative costs to
assist OES in identifying available energy efficiency and conservation
opportunities. This may include the
monitoring, studying, and evaluating the cost-effectiveness of the states
purchases and use of motor vehicles and of major energy consuming systems
having a significant impact on energy consumption by government. As far as the requirement that OES provide
training and technical assistance to state employees in the purchasing process,
DAS reports that current procurement staff would assume these duties with no
additional costs.
Fiscal effect on local
governments who choose to adopt new purchasing rules. Also, regarding the new bid preference for purchasing products from
lowest most responsive and reasonable bidders whose products or service meets
the energy efficiency guidelines set by the USEPA and USDOE, this could add new
costs for local governments, but only if they choose to adopt the new proposed
state requirement as their own.
Committee of the Interuniversity Council of
Ohio
The bill requires the
creation of a committee under the Interuniversity Council of Ohio. The
committee shall be comprised of the presidents of the state institutions of
higher education or their designees.
The committee in consultation with OES, shall develop guidelines for the
board of trustees of each state institution of higher education to use in
ensuring energy efficiency and conservation in on- and off campus
buildings. The bill requires initial
guidelines to be adopted no later than March 31, 2006.
The guidelines are required
to include: (1) a goal of reducing
energy expenditures by at least 20% by 2014, (2) minimum energy and efficiency
standards for any new on- or off-campus capital improvement project with a
construction cost of more than $100,000 or more, (3) minimum energy efficiency
and conservation standards for the leasing of an off-campus space of at least
20,000 square feet, (4) the use of best practices into energy efficiency and
conservation standards and plans, (5) a provision that each board of trustees
develop its own 15-year plan for phasing-in energy efficiency and conservation
projects, (6) project impact assessments including the fiscal effects of energy
efficiency and conservation recommendations and plan, and (7) a mechanism for
each board of trustees to report periodically to the committee on its progress
relative to the guidelines.
Further, the bill requires
the board of trustees of a state institution of higher education adopt rules to
carry out the guidelines outlined above.
The OES and presidents of
state institutions of higher education may experience minimal administrative
and travel costs to meet to develop the guidelines. Once these guidelines are adopted state colleges and universities
may experience costs to carry out the guidelines. These costs may include hiring additional personnel and acquiring
additional resources. Further, to meet
the goal of reducing energy expenditures by at least 20% by 2014, may involve
the replacement or modification to current heat,
ventilation, and air conditioning systems as well as lighting systems. Currently an accurate estimate of
what these costs may be is unknown and are likely to vary per college and
university based on the institutions financial resources available to meet the
goal.
·
The
As Reported version eliminates the requirement that all state-funded facilities
reduce its average energy consumption by at least 20% per square foot by
December 31, 2014. This is expected to
reduce the bill's costs significantly, likely in the tens of millions.
·
The
As Reported version creates a
committee of the Interuniversity Council of Ohio to develop guidelines for the
board of trustees of each state college and university to use in ensuring
energy efficiency and conservation in on- and off-campus buildings. By requiring energy savings goals, not
energy savings requirements as in the previous version of the bill, it is
uncertain what costs may be incurred in order to achieve these goals.
·
The
As Reported version now exempts state colleges and universities from various
rules that apply to the energy efficiency and conservation standards governing
the lease, design, construction, operation, and maintenance of state-funded
facilities, specifically: rules to use ASHREA specifications; rules related to
life cycle cost analysis and energy consumption analysis; rules related to a
waiver of application; rules requiring reduction of energy conservation by at
least 20% per square foot by 2014; and rules requiring a building operator.
·
The
As Reported version eliminates the requirement that OES submit an annual report
to the General Assembly assessing the progress of state-funded facilities
meeting the 20% average energy consumption requirement.
·
The
As Reported version eliminates the requirement that life cycle cost analysis
and energy consumption analysis be made part of the competitive bidding
process.
LSC fiscal staff: Ann Braam, Budget Analyst
Jonathan Lee, Senior Analyst