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EXECUTIVE SUMMARY

Resilient infrastructure protects community interests and budgets, reducing the capital costs of emergencies and extreme events. Community resiliency can also help businesses and citizens avoid losses and invest in their own assets by protecting property and productivity. Finding the capital to invest in infrastructure resiliency and protect your community's capital isn't always easy. This paper explores how energy projects help local governments create the funding they need for key infrastructure upgrades. While reducing utility spending and upgrading local facilities are also benefits, the unique financial solution of an energy savings performance contract can help community leaders invest in infrastructure resiliency without upfront costs.

Without Resilient Infrastructure, Crisis Costs Multiply

Local leaders work hard to balance budgets. When critical infrastructure fails, crisis mode threatens all that work. Hiring firms, contractors, and project managers for an emergency fix can be expensive, even without the expected change orders and additional work needed.

If a critical infrastructure failure is completely unplanned for, costs don't just balloon for the administration. Community members and businesses lose time and productivity, maybe even real estate value, while having to spend more on workarounds or repairs of their own.

Resiliency is the ability to deal with crisis events by either keeping critical infrastructure from failing or having proactive plans in place to help everyone recover quickly. Protecting key needs like communications, information systems, community shelters, and emergency resources for community members requires resilient infrastructure. That includes power for key resources, heating and ventilation for shelters, and operational support for local emergency service facilities.

Reality Check: Funding Infrastructure Remains a Challenge

Leaving out defense assets, state and local governments own over 90% of public infrastructure assets and spend the majority of their capital expenditures on them. While federal infrastructure spending has been cut in half over the last 35 years, state and local capital spending (as a percent of GDP) is also the lowest it's been since 1950.¹

The American Society of Civil Engineer's Infrastructure Report Card estimates that $4.5 trillion is needed to make up for that lack of spending.² While it's easy to think about bridges, dams, and roads making up most of those numbers, local governments are responsible for facilities that citizens and businesses depend on, both for day-to-day operations and during emergencies, such as departments of public works and public safety.

How to Prioritize Infrastructure Funding

Step one is getting the information leaders need. Many communities do not have access to engineering expertise, planning and project management resources, or the funding experience needed to assess needs and develop options for improvement. That's the first place an energy solutions partner can step in and help, by sharing knowledge of infrastructure assessment, project management, and fiscal solutions.

With the resources needed to build turnkey solutions already in place, an energy solution partner has the technical expertise on hand and the financial scope to guarantee a project over 20 years. An expert partner has the information needed to build consensus on real opportunities to improve infrastructure. With that information in hand, local leaders can show clear benefits to the community among competing priorities for capital.

95% of mayors report impacts over the last 5 years from extreme events like flooding, storms, heat waves, or drought.³

Healthy infrastructure increases resilience to extreme events.

WHAT IS RESILIENCY?

Retaining functionality or recovering it quickly during and after emergencies.

HOW DOES RESILIENCE IMPACT BUDGETS? ⁴

• Reduced disaster losses
• Reduced insurance costs
• Enhanced property values
• Enhanced credit and bond ratings

SKILLS NEEDED TO SHIFT FROM REACTIVE TO PROACTIVE

Infrastructure often isn't addressed until there's a crisis. If there's infractions and fines in play, or exorbitant repair and replacement costs, it's already too late. The community is depending on a reactive fix. Shifting to a proactive strategy is a clear win, but if a community is already running lean, it's hard to connect challenges with the opportunities to overcome them. The community needs key skillsets to help make proactive strategies a possibility.

• Leaving aging and deteriorating infrastructure as is will cut $3.9 trillion from the U.S. GDP by 2025.⁵
• $1 spent on hazard mitigation saves $6 on future disaster costs.⁶
• Inadequate infrastructure costs the American family $3,400 a year.⁷

KEY SKILL: ENGINEERING

Assessing infrastructure requires expertise in multiple technical disciplines. An energy performance contractor has already developed engineering resources in many of those areas because of their energy impacts. The physical building envelope, lighting, heating and ventilation, power systems, water conservation, building controls, and more all impact energy spend.

Innovative energy performance partners also have engineers experienced with renewable energy, electric vehicle charging, and mission critical infrastructure. A mission critical system is one that's required to be resilient in the face of power outages, such as a data center. If your local government has key systems that need to stay online, such as emergency information and communication systems, resources for first responders, or emergency shelters, a mission critical infrastructure team has the expertise on hand to assess needs and propose cost-efficient options.

A truly multi-disciplinary team will be able to identify solutions that drive multiple benefits. For instance, a solar energy installation or electric vehicle charging project can also build community resilience with high-capacity power storage batteries. In the event of power grid failure or a climate event, those batteries can power key infrastructure.

KEY SKILL: PROJECT FINANCING

The most accomplished, cost- effective engineering can't help a community without a funding solution for it. An energy partner has the financial experience to deliver that solution. Stewards of public funds have their own complexities to deal with, so it takes experience with both public and private finance to help local leaders create financial possibilities that fit their fiscal system.

An energy performance contract can be built to pay for infrastructure improvements without new upfront costs, using the projected energy savings over a period of years. It's a different model that can avoid a new bond or a new tax.

KEY SKILL: PROJECT PLANNING AND MANAGEMENT

With a funding solution in place, an energy performance project can blend infrastructure upgrades for energy savings with infrastructure upgrades for community resiliency. Achieving multiple goals through custom technical solutions takes resourceful project planning. Completing the project on time and on budget takes experienced project management.

In a complex project, many skills are essential, but when it comes to delivering value to the community, reliable project management is essential. Once a plan is in place, and the pressures of budgets and time are on, it's easy to put those project priorities over the needs of the people it's serving. A trusted partner follows through on the scope of work and commits to helping local leaders deliver superior benefits for their community.

WHAT RESILIENCY ISSUES ARE IMPORTANT TO YOUR COMMUNITY?

1. Nuisance flooding has increased 300 to 900% over the last 50 years.
   
   https://www.eesi.org/papers/view/issue-brief-congressional-action-on-resilient-infrastructure-areas-of-progress-and-future-needs

2. Superstorm Sandy (2012) led to a 50% failure rate of diesel generators and diesel costs up to $35 a gallon.
   
   https://www.cleanegroup.org/wp-content/uploads/Resilient-Cities.pdf
   
   https://www.greentechmedia.com/articles/read/after-superstorm-sandy-states-look-to-distributed-energy-and-microgrids

3. 46% of Americans reported they could not cover a $400 emergency expense.
   
   https://www.washingtonpost.com/news/wonk/wp/2016/05/25/the-shocking-number-of-americans-who-cant-cover-a-400-expense/

4. The 5 hottest years on record have happened since 2015, but the frequency and intensity of winter storms has also risen since 1950.
   
   https://www.noaa.gov/news/2019-was-2nd-hottest-year-on-record-for-earth-say-noaa-nasa
   
   https://nca2014.globalchange.gov/report/our-changing-climate/changes-storms

GETTING STARTED WITH OUTCOMES

In the beginning, there are a lot of questions to ask, and the work needed to answer them can paralyze the process before it starts. When something fails, the problem is easy to define, but that clarity comes at a high price. To start getting proactive, focus first on desired outcomes.

With a desired outcome in place, infrastructure can be assessed and solutions explored. For instance, many communities use school buildings for shelters, either to shelter children in place during an event, or for the wider community. More efficient systems in a shelter last longer on emergency backups, and an energy project may be the perfect time to upgrade those backups. Building control systems can increase efficiency in a local government facility, but can also be a boon during crisis events, both large and small.

For instance, a control system can help a facility change modes to fit event response plans. Apps, web-based tools, and mobile notifications help teams respond to a point of need faster. If a system keeps detailed information about facility infrastructure, response teams can use it to act more efficiently, without having to dig for plans or rely on a single individual for key information.

Critically, an assessment will not only show where improvements can help achieve resiliency goals, it will uncover issues that already threaten resiliency. Infrastructure that is already in need of maintenance, or has unaddressed compliance and safety issues, could be in danger of failure already. That could put the community at risk for higher capital costs.

SAMPLE RESILIENCY OUTCOMES:

• Keep emergency communications and information systems operating during disasters.
• Address aging infrastructure before a failure impacts the community.
• Protect infrastructure from flooding or other extreme weather events.
• Ensure power and heating for community shelters, schools, and key local government facilities.

An assessment identifies those issues so a plan can be built to keep infrastructure resilient, both for day-to-day operations and in response to events. If an asset in an older building is now in danger from flooding, a retrofit might fix daily resiliency issues, but ignore the flooding risk. A replacement could achieve both goals, avoiding repair issues and risk of failure during flooding, while also improving efficiency for the facility.

Putting a Plan in Motion

With clear outcomes and all the assessment data in hand, effective solutions can be created. The big questions of how to pay for a project, and how to drive it to completion, are ready to answer.

An energy performance partner may be able to help you pay for all or most of a large, complex project with savings from energy and operational efficiency. Their experience building financing solutions can help you avoid or minimize the upfront costs, or help manage capital risk and spending over a contracted period. Knowledgeable partners will help with grants and utility rebates. Putting those options together in one funding solution also helps the project retain priority in the face of other capital needs because the funding solution is unique.

HAVE YOU CONSIDERED

Is there a way to fund critical fixes and upgrades without additional tax burdens on the community?

Is there a strategy for cost-effectively getting the resources and best practices together for managing this project?

CASE IN POINT: FROM CAPITAL VOLATILITY ANALYSIS TO FUNDED SOLUTION

Faced with millions of dollars of failing infrastructure, a community in Southern Michigan realized that the reactive strategy of past administrations put them in a bind. Without their own engineering and infrastructure project management staff to turn to, and few financial options, the new administration needed resources to turn things around.

A facilities solutions partner was able to perform a capital volatility analysis, painting a clear picture of capital assets and budget stresses. They followed up with a capital improvement plan, an asset management plan, and a solution that could fund $2.4 million in critical upgrades.

CONCLUSION

Like any investment in infrastructure, the positive effects of more resilient infrastructure on a community can be enormous. Improved safety, more reliable services, and a better budget outlook all have positive impacts on citizens and businesses. With the right partner, local governments can achieve more than cost avoidance, they can mitigate risks and invest in key projects that help move their community forward.

PROSPECTIVE PARTNER CHECKLIST

• Resources: Can they financially guarantee performance outcomes?
• References: Can they show a track record of managing complex infrastructure upgrades?
• Technical Expertise: Can they analyze assets, benchmark facility spending, and advise you on the life-cycle costs of current and new technologies?
• Turnkey: Can they perform and manage all the functions needed?

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Sources:

1. https://www.cbpp.org/research/state-budget-and-tax/its-time-for-states-to-invest-in-infrastructure

2. https://www.infrastructurereportcard.org/

3. https://www.c2es.org/press-release/as-climate-impacts-threaten-cities-mayors-take-action/

4. https://obamawhitehouse.archives.gov/sites/default/files/omb/reports/omb_resilience_finance_report.pdfa

5. https://nca2018.globalchange.gov/chapter/11/

6. https://www.nibs.org/page/mitigationsaves

7. https://news.asce.org/asce-report-estimates-failure-to-act-on-infrastructure-costs-families-3400-a-year/

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