9 minute read
School Facility Renewal Quantifying and managing the issue
SCHOOL FACILITY RENEWAL Quantifying and Managing the Issue By Douglas J. Wall, P. Eng.
Just as we face certainties in life such as death, taxes and, to varying degrees, gravity, facility managers have to deal with the incontrovertible fact that, as their building portfolios age, they require an ever increasing amount of capital investment in order to keep facilities safe, comfortable and viable for their intended use. Age related facility renewal is an issue rapidly gaining in its level of importance as North America's infrastructure grows older and, in many cases, approaches the end of its intended life span. Figure 1 shows North America's public building construction activity over the last century and the impact that the post-war construction boom will have on future renewal needs. School facilities are not exempt from the issue and many jurisdictions are having to resort to more creative solutions to quantify and manage the problem.
In keeping with the higher levels of autonomy afforded to B.C. school districts in recent years, the capital funding mechanism for K-12 facility renewal has migrated towards more local decision making and higher levels of “block” funding. The change from the previous Annual Capital Allowance (ACA) to the current Annual Capital Grant (ACG) has essentially doubled the amount of block funding while eliminating the “small capital” category of central funding. However, along with this increased autonomy, there has also been an associated increase in accountability in the form of a subtle shift in asset stewardship responsibilities to the districts.
Despite the fact that all the “minor capital” renewal work
North American Cleaning Equipment has changed their name to NaceCare solutions. The new name symbolizes the change in company focus and direction. We not only sell cleaning equipment, but also provide solutions for the cleaning industry.
Providing clean fresh indoor air to hospitals, institutions, commercial buildings and residences for 38 years. Specialists in HVAC
Member of NADCA www.nadca.com cleaning (604) 879-0668 • (604) 882-9290
www.airvacservices.com • email airvac@axion.net
Building Area
Construction Activity by Year
that was previously funded centrally still needs to get done within ACG budgets, some districts might look upon the increase from ACA to ACG funding as “found money” which can lead to ACG funds not being spent on renewal as intended. Compounding this is the operating budget pressures that school districts face where it would only be natural to look for opportunities where ACG investments could generate shortterm operating budget relief. If these investments are not renewal related, however, the lack of renewal investment can only compound any existing deferred renewal problem unless the operating savings are subsequently reinvested in renewal. For example, ACG funds should only be used on non-renewal energy efficiency measures if the resulting utility savings are retained by the facilities budget for subsequent investment in renewal (which is not always done).
Given B.C.'s historical renewal funding mechanisms, it should not come as a surprise if some school districts have not yet fully adapted to their newly acquired asset stewardship responsibilities. However, perhaps a more pressing reason behind any non-strategic ACG investments might be the lack of a standard methodology or system to help districts quantify their renewal issue as well as plan and manage long and short term solutions. If school districts could quantify their current renewal situation using a standard methodology and software tool, they would be able to predict how various investment decisions will impact their current and future renewal backlog and hence facility condition. In some cases, such a process might alert a school district to renewal issues that they did not otherwise know existed but were nonetheless responsible for. Figure 2 depicts annual renewal costs for a typical school against building age and illustrates the cumulative impact of deferring these costs (red line). While the average age of
Reaching together to provide
customized interiors solutions for the
education market, Tandus unites the
industry’s leading specialized
commercial flooring brands-
C&A, CROSSLEY and MONTEREY.
Customer Service - 800.667.8181 marketing@tandus.com tandus.com www.westwindhardwood.com 1-800-667-2275 ~ 656-0848
~ Wide selection of today’s popular hardwoods and softwoods. ~ Species include: red oak, alder, pine and many more. ~ Shorter boards and lower grades available in most woods, priced to fit the tightest budgets. ~ Take advantage of our shipping credit.
Call us, ask questions, and find out how we can help you this year!!!
$25 $200 incentives from BC Hydro Power Smart,
Annual Costs )$/sqft) $5 $10 $15 $20 ACG Funded Major Capital $40 $80 $120 $160 Cumulative Costs ($/sqft) Annual Costs Cumulative Costs NRCan and Terasen Gas. A classic example of how renewal-oriented thinking can enhance the benefits of a project is in the area of boiler replacements. Traditionally, the lengthy simple payback of such measures prohibited them from being included in most efficiency projects.$0 010203040506070 $0 However, one should take into account that if a boiler replacement can be paid for from Building Age (Years) FIGURE 2 energy savings, it precludes the district from and the limited capital they have to deal with it, strategic manhaving to spend scarce ACG funds on that B.C.'s K-12 facility portfolio may not be as high as other juris- replacement in the future and the avoided capital of any such dictions such as Ontario, deferred renewal problems are only measure must be included in the business case analysis. It is a matter of time in B.C. unless the issue is quantified and not uncommon to find existing boiler plants with seasonal effiplanned for. ciencies as low as 60% and by replacing such a plant with a
There are a number of commercially available software new mid-high efficiency boilers, gas consumption can be systems that can be used by school districts to quantify their reduced by as much as 30% or more. Recent gas price increasfacility renewal backlog using an industry standard measure- es, combined with the recognition of the renewal benefit of ment known as Facility Condition Index (FCI). By standard- boiler replacements, have made such measures important izing the implementation of such a system across the province, components of comprehensive efficiency/renewal projects. school districts would have much better information with A comprehensive efficiency project will likely not be the which to strategically plan for renewal while giving the panacea or total solution for a schools district's renewal issues Ministry the ability to adapt funding formulas to actual needs but it can make a significant contribution. In most jurisdicby tracking and projecting FCI at the district and provincial tions, access to the additional capital for such a project level. requires a transfer of the performance risk to the private sector Energy Efficiency as a approve any borrowing of funds for efficiency/renewal projFacility Renewal Strategy ects and this permission requires adequate risk transfer.
Traditional thinking regarding energy efficiency projects However, the Green Buildings B.C. program provides prein schools has been that they are merely a way of reducing approved standard procurement and contract documents to operating costs. However, as more jurisdictions start to recog- help school districts and other public buildings owners with nize the magnitude of their current or projected renewal deficit the approval and implementation processes. (savings guarantee for example). In B.C., the Minister must agers are looking at energy efficiency projects as a method of Other Jurisdictions creating additional renewal capital. Instead of optimizing the In 2002, the Ministry of Education in Ontario purchased simple payback of ACG investments, these managers develop a capital planning software program called RECAPP on behalf projects that maximize the amount of renewal capital that can of Ontario's 72 school districts. Physical Planning be generated which results in far more comprehensive proj- Technologies Inc. (PPTI), the program's creators, coordinated ects. The theory is that if it makes sense to redirect utility the standardized technical site review of 240 million square waste back into the facilities, then one should take maximum feet of learning space in over 5000 schools and managed the advantage of the one-time opportunity to do so while interest initial modeling and population of the database. The result is a rates are at historic lows. When facility condition is factored powerful capital planning and lifecycle management tool for in, a comprehensive renewal-oriented efficiency project will the school districts while the Ministry can use the global data always generate more value for the owner than an internally to formulate funding policies and track results. The improved funded, multi-year campaign with its inherent payback term information on facility condition and renewal backlog at the limitations. This is further enhanced by increased access to district level has resulted in a significant shift in the way
Quantifying and Managing the Issue
Ontario school districts look at energy efficiency projects. Utility savings opportunities are now being used as the vehicle to achieve a higher objective of creating additional capital for renewal. This has resulted in many districts financing renewal-oriented efficiency projects with amortization terms as long as 20 years.
In May 2004, the Ontario Provincial government announced an Amortization Fund, which school districts can access to help them deal with their significant deferred facility renewal problems. The Province is providing annual funding of $200 million per year, which school districts can use to finance renewal projects. This fund is expected to create more than $2.1 Billion in renewal capital which school districts finance themselves over amortization periods of up to 25 years. The creation of this fund was a direct result of the Ministry of Education's ability to the use data from the RECAPP system to generate a robust business case for additional renewal funding to take to Treasury Board (SuperBuild). In June 2003, the Alberta Ministry of Learning, in consultation with Alberta Infrastructure, approved an amendment to the School Act Borrowing Regulations that allows school districts to borrow funds for guaranteed energy efficiency projects for up to 20 years (increased from the previous limit of 10 years). This term extension was made in recognition of the increased flexibility it would give school districts in terms of using energy efficiency opportunities to create much needed capital for facility renewal. Alberta Infrastructure has also purchased the RECAPP system and has plans to expand its use to the individual school district level over the next 2 years. In summary, an issue cannot be properly managed unless it can be properly measured. Facility Condition, as measured by the level of deferred renewal for a building or portfolio (FCI) would be a good measurement of the adequacy of current funding levels as well as the effective use of that funding. It would also help identify opportunities to supplement that funding such as energy efficiency projects. Doug Wall is Western Regional V.P. for Ameresco Canada Inc.
