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: |
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STATE FUND |
FY 2007 |
FY 2008 |
FUTURE YEARS |
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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 |
Potential minimal gain in
State Architect fees |
Potential minimal gain in
State Architect fees |
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Expenditures |
Potential increase in
staffing costs up to $200,000 |
Potential increase in staffing
costs up to $200,000 |
Potential increase in
staffing costs up to $200,000 |
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General Revenue Fund and
other state funds |
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Revenues |
- 0 - |
- 0 - |
- 0 - |
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Expenditures |
Variable increase in
design, construction, and administrative costs |
Variable increase in
design, construction, and administrative costs |
Variable increase in
design, construction, and administrative 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 |
Variable increase in
administrative and construction costs to meet guidelines |
Variable increase in
administrative and construction costs to meet guidelines |
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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 |
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Administrative
Building Fund (Fund 026) |
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Revenues |
Gain of $3.6
million |
- 0 - |
- 0 - |
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Expenditures |
- 0 - |
-0 - |
- 0 - |
Note: The state
fiscal year is July 1 through June 30.
For example, FY 2007 is July 1, 2006 – June 30, 2007.
·
DAS energy efficiency administrative costs. The Department of Administrative Service's State Architect Fund
(Fund 131) may experience a minimal gain from State Architect fees associated
with charges to state agencies for costs to implement and enforce energy
efficiency design standards and rules.
These fees may not be enough to cover the anticipated personnel needs to
adopt and implement the rules. The
Department estimates it may need one to two additional personnel at a cost up
to $200,000 in the first few years. As
a result, it is possible other State Architect fees may be increased to offset
the added payroll cost if it is found these added costs cannot be supported by
the General Services Division budget.
Some of these added costs may include providing training, completing
various forms, preparing and reviewing life cycle and energy consumption cost
analyses, reviewing purchasing documents, and enforcing rules.
·
State agency energy efficiency costs. Various state agency funds and/or the GRF may experience an
increase in expenditures in order to comply with the new rules adopted by
DAS. LSC is uncertain of the fiscal
impact the new rules and design standards will have on the planning and design
costs of agency capital projects.
Currently, LSC does not have an estimate of the costs associated with
bringing certain state-funded facilities into compliance with energy efficiency
standards adopted by DAS.
·
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. 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.
·
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
(OEE).
·
Advanced Energy Fund and Administrative Building Fund (Department of
Development). The bill transfers the name,
purpose, and appropriations of the current Energy Efficiency Revolving Loan
Fund (Fund 5M5) to the newly created Advanced Energy Fund. The bill does not adjust the current
appropriation of $12 million in FY 2007 in Fund 5M5, nor does the bill include
any new earmarks from this fund. The
bill also requires $3.6 million in FY 2007 to be transferred from Fund 5M5 to
the Administrative Building Fund (Fund 026) to incorporate energy efficiency
into the design and construction of state buildings.
·
No
direct fiscal effect on political subdivisions.
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The bill makes
several changes to current law regarding energy efficiency in state
government. Most notably, the bill:
·
Grants
DAS permissive authority to adopt energy efficiency and conservation standards
for state-funded facilities;
·
Makes
changes to life cycle cost analysis and energy consumption analysis
specifications;
·
Creates
the Interuniversity Council of Ohio to develop energy efficiency guidelines for
college and university buildings; and
·
Changes
the current Energy Efficiency Revolving Loan Fund (Fund 5M5) to the Advanced
Energy Fund.
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 allows the OES to adopt permissive 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 or public schools. 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.
Overall, DAS notes that at a
minimum, since the rules initially will be permissive and fairly flexible, the
costs to implement and evaluate the rules may require the Department to hire
one to two additional staff. With
fringe benefits, these added costs could be upwards of $200,000. These added payroll costs would result in an
increase in expenditures to the State Architect's Fund (Fund 131). 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.
Below is a
discussion of some of the rules in detail the bill requires DAS to adopt.
1.
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 and an energy consumption
analysis. Both a life cycle cost
analysis and an energy consumption analysis are needed to construct a facility
of 5,000 square feet or more. Only an
energy consumption analysis is needed to lease a facility of 20,000 square feet
or more. Currently, this requirement is
only applicable to state agencies.
Under the bill, public schools are exempt from this requirement.
Currently, the number of new
cost analyses to be reviewed by DAS is unknown. Also, 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.
2. Rules related to waiver of application
The bill states that 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 from 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 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.
3. 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. 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. DAS notes that many of these costs would be covered by payroll assessments
to the Workforce Development Fund (Fund 5D7).
4. State purchasing
Department of Administrative
Services role. The bill makes several
changes to state purchasing requirements.
The bill specifies that (1) the OES must adopt rules ensuring consideration
of energy efficiency and conservation in state purchasing, (2) permits DAS to
adopt minimum purchasing standards based on federal testing and labeling or on
standards developed by the OES, (3) requires the OES to work with OEE in
identifying savings opportunities and providing technical assistance in
purchasing, and (4) requires DAS to monitor the potential savings of the state
purchases of motor vehicles and major energy-consuming items. All of these duties will pose a minimal
fiscal effect, if any, and will likely be covered with current budgeted
resources. DAS reports that many of these requirements codify current
practices.
Department of Development
role. As part of the procurement of energy
efficient products, the bill requires OES to work cooperatively with the
Department of Development's (DOD) 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 and evaluating the cost-effectiveness of the state's 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 various
state agencies. LSC is
uncertain about what the new rules as a whole will 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 energy efficiency
standards adopted by DAS. Costs are
likely to vary based on the square footage of buildings and the cost of the
systems, components, and equipment at each facility. Any added costs are likely to affect various state agency funds
and possibly the GRF. However, the bill
does transfer $3.6 million in FY 2007 from the Energy Efficiency Loan and Grant
Program Fund (Fund 5M5) to the Administrative Building Fund (Fund 026) under
CAP-835, Energy Conservation Projects to provide support for agency energy
efficiency upgrades.
The bill requires the
creation of a committee under the leadership of the chair of the
Interuniversity Council, and the secretary of the Ohio Association of Community
Colleges comprising the presidents of the state institutions of higher
education or their designees. In
consultation with OES, this committee is to 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 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.
Background on the new fund. The bill eliminates the Department of Development's Energy Efficiency
Revolving Loan Fund (Fund 5M5) and renames it the Advanced Energy Fund. Fund
5M5 was originally created by the General Assembly under the 1999 Electric
Restructuring Act (S.B. 3). The
revenues to the Advanced Energy Fund will be the same as the revenues that were
credited to Fund 5M5. These revenues
included: riders on retail electric
distribution rates, revenues from loan repayments, and revenues remitted by
municipal electric companies and rural electric cooperatives.
The rider is a fee on the electric bills of the customers of the five
investor-owned electric utilities in Ohio (AEP, Cinergy, First Energy, Dayton
Power and Light, and Monongahela/Allegheny Power). The rider is approximately nine cents per month from a typical
residential customer. Collections of
the current rider began on January 1, 2001 and are expected to last ten years
generating no more than $100 million in total.
The collection rate was designed to generate $15 million each year for
the first 5 years (January 2001 to December 2005) and then drop to $5 million
for the last five years (January 2006 to December 2010). Once Fund 5M5 reaches $100 million the rider
will be eliminated. The bill does not
change any provisions related to the current temporary rider.
New Advanced Energy Program. As part of renaming the Energy Efficiency Revolving Loan Fund to
the Advanced Energy Fund, the bill also renames the Energy Efficiency Revolving
Loan Program to the Advanced Energy Program.
The bill expands the program to include technical and related assistance
for projects and financial incentives.
The program will continue to provide loans, grants, loan participation
agreements, linked deposits, and award contracts as it does under the Energy Efficiency
Revolving Loan Program. The entities
eligible to apply for funding under the program can borrow money from Fund 5M5
at an interest rate typically half the standard bank interest rate. The projects that the fund will support will
be for technologies, products, activities, or management practices or
strategies that reduce or support the reduction of energy consumption or
support the production of clean, renewable energy for industrial, commercial,
institutional, governmental, research, not-for-profit, or residential energy
users. Examples of renewable energy
include: wind power, geothermal energy,
solar thermal energy, energy from micro turbines, from heat and power
applications, and from fuel cells powers by various sources.
To effectuate this transfer,
the bill amends the Department of Development's appropriation section of Am.
Sub. H.B. 66 (the main appropriations bill for the FY 2006-2007 biennium) and
changes the name of the Energy Efficiency Loan and Grant Program (Fund 5M5) to
Advanced Energy Program. Appropriations
to the fund in both FY 2006 and FY 2007 is unchanged, remaining $12 million in
each fiscal year. The transfer of the
name and purpose of Fund 5M5 to the Advanced Energy Fund will not affect any
current projects or funding already approved or in progress.
Energy conservation projects
The bill amends H.B. 66 and
requires that in FY 2007 the Director of Budget and Management transfer $3.6
million in cash from the Energy Efficiency Loan and Grant Program Fund 5M5
(changed to the Advanced Energy Fund in the bill) to the Administrative
Building Fund (Fund 026) under CAP-835, Energy Conservation Projects. This transfer will increase CAP-835, Energy
Conservation Projects from $890,085 (as appropriated in Am. Sub. H.B. 530 – the
recent capital reappropriations bill) to $4,490,085. This transfer will be used by the Department of Administrative
Services to incorporate energy efficiency into the design and construction of
state buildings. For example, the funds
will be used to assist agencies in purchasing more efficient heating systems,
controls, lighting systems, and motors.
The DAS reports that in the long run this transfer may generate more
than $500,000 in energy savings annually for a period of 10 to 15 years.
Oil and Natural Gas Marketing Program
The
bill changes the rate of assessment on the production of oil and natural gas in
the state used to fund the Oil and Natural Gas Marketing Program. This program is governed by the Technical
Advisory Council with the Department of Natural Resources' Division of Mineral
Resources Management. This is an
educational outreach program that provides advertising, education, safety, and
speaking opportunities related to the oil and gas industry.
Under current law the assessment rate is one cent per gross barrel of oil and one-tenth on one cent per thousand cubic feet of natural gas. The bill changes these assessments to 5 cents for oil and 1 cent for natural gas. With these changes, the program is expected to receive a revenue gain of approximately $920,000. The following table displays the change in revenue as a result of the bill. Overall, the state and local governments will not experience any direct fiscal impact from this provision.
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Amount of Revenue to the Oil and
Gas Marketing Program |
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Resources |
Current Assessment Rate |
Barrels of oil/cubic feet of gas |
Current Revenue |
Future Assessment Rate |
Future Revenue |
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Oil |
1 cent per gross barrel |
5 million |
$50,000 |
5 cent per gross barrel |
$250,000 |
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Natural Gas |
One-tenth of one percent per thousand cubic foot |
80 billion |
$80,000 |
One cent per thousand cubic foot |
$800,000 |
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TOTAL |
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$130,000 |
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$1,050,000 |
According to the Ohio Oil
and Gas Association, the assessment rate changes will be effective only if
independent producers agree to do so by referendum. The program will remain voluntary and any producer can request
and receive a full refund of the amount the producer paid into the
program. Furthermore, these expenses
will not affect consumers since the price producers receive for their product
is based on what national commodity markets indicate the commodity is
worth.
LSC fiscal
staff: Ann Braam,
Budget Analyst
Jonathan Lee, Senior Analyst