Sunday, September 14, 2008

The real issue with performance contracting

In the past I've touched on the reason why the Council majority is opposed to performance contracting. And while reasonable people could conclude that the majority opposes energy conservation, IMO the primary reason they:

1) oppose performance contracting and
2) fail to create a comprehensive energy action plan


is because their beloved ratings agencies have informed them that the value of such contracts would be viewed as debt... even though no debt would be incurred with a comprehensive energy action plan engaged via a performance contract. And that may negatively impact their much bally-hooed improved bond rating.

As staff explained in August:

"The idea of having savings pay down the debt (on a performance contract) has enormous potential, but it's still viewed as debt on the books." (NHR, by Luther Turmelle)

And recall... back in December '06 the Town got a "rating upgrade" from A to AA. That upgrade was trumpeted to the public:

The most immediate benefit of this upgrade will be a reduction in the Town’s interest rate on borrowings

Then in November '07, the Council majority ran on that bond rating upgrade (see the second bullet point):

So for me, I view the failure to:

1) seriously consider performance contracting and
2) create a comprehensive energy action plan


as a result of very poor judgment that (without putting pen to paper) favors debt (and interest expense) minimization over energy conservation. If we would simply put pen to paper, I believe the "business case" would be made easily. Though that remains to be seen, because the majority opposes putting pen to paper as it runs the risk of making the case for energy conservation... and negatively impacting the bond rating.

So while reasonable people could conclude that the majority is simply opposed to energy conservation because of a desire to continue wasting energy and consuming fossil fuels unnecessarily... I don't fall in that camp.

Tim White

7 comments:

Anonymous said...

I am trying to understand Performance Contracting and why the TC is opposed.
Let me see if I understand....
We will have a company perform the job using energy saving products. The savings we earn will go to paying off the contract.
The TC would rather use, non-energy saving products that we will pay for by bonding, but we pay less in interest.
Is that correct?
Maybe I am "over simplifying" it, but those of us in the public need a simple explanation as to why we should or shouldn't do this.
I wonder if all the TC members understand it.
They must clarify what this all means to those of us who are paying taxes and will have to pay off the low interest bonding.
What is the most economical and cost effective way to do these projects.
I don't feel Altieri and Esty should put it on TW to find communities and contrators where it works. Let them show us where it doesn't.
This has to change!

Anonymous said...

Face it, energy systems related performance based contracting could result in much less need for routine municipal worker involvement in day-to-day energy related town building issues. Anything which threatens the status quo relative to town municipal labor contracts and employee longevity will be of little interest to the council’s political majority. They need all the support they can buy to stay in power. Voters need to wake up quick on this issue and demand better worker productivity across the board.

Anonymous said...

A simple return on investment or financial analysis is required. If the high school retrofit was to cost 2 million is it cheaper to borrow money at 4% for 20 years or is it cheaper to pay for the work through a performance contract over 20 years.

Bill said...

Tim,

What time on Tuesday and where is the meeting about the Pool Bubble Study Committee?

tim white said...

Sept 16
7:30
Room 210

I presume that's in the PM.

Anonymous said...

The Dems on the TC simply freeze when it is not the mall, the turf, awarding contracts to their special people or marching in lockstep to benefit the special interests of a few local Good Old Boys.

Who do you think will get the hish school heating/ a/c job?

Anonymous said...

If they keep raising the taxes and keep spending we (homeowners) will go broke. We will not have to worry about our property values and the Town will have a low collection rate if things keep on the way they are going. If some good ideas come up like performance contracting why are not all TC members supporting this? This question should be asked by all the taxpayers that they were elected to represent. Spend our money wisely before the well dries up.