A company made the kind of “savings guaranteed or we pay” pitch normally seen on TV infomercials or by door-to-door pitchers.
But this one was at the Mesa Public Schools Governing Board meeting as Midstate Energy said, “Money saved on energy and operating costs can pay for building improvements. Guarantee: If the project fails to reduce costs as guaranteed, Midstate pays the difference.”
Midstate Energy is the company that made the big pitch. No action was taken, as this was an information item on the board agenda. It was quite a lot of information.
Indeed, the total cost for a district-wide equipment replacement project: $200 million.
With interest, the plan runs a cool quarter-billion: $250 million.
“Big projects mean a lot of savings to be able to put away from the utility company and into your buildings,” Randy Falconer, the pitchman, said.
“We’re redirecting money you guys pay in utilities to buy new equipment,” he continued. “There’s a statue in Arizona for this. I have to guarantee this takes place. If the savings do not materialize, I’m responsible for writing a check to the district for the difference.”
He claimed Midstate has worked with “50 some schools just in this state alone.”
The plan is highlighted by replacing heating and air conditioning systems, installing equipment to increase energy efficiency and adding a massive solar system.
The first phase alone includes a $20 million solar system “to generate electricity and reduce purchase from the local electric utility.”
Assistant Superintendent Scott Thompson said MPS talked to three companies about “the concept ... that allows for a district to enter into a lease-purchase of equipment with the idea that the expenses would be offset by the savings.
“Midstate has done quite a great deal of work at their own risk and their own expense,” Thompson noted.
“It’s a little different beast. We’re thinking innovatively,” Thompson stressed, kicking off a 90-minute presentation and discussion
Falconer summarized the $79 million first phase of the project.
According to his pitch: “Total Gross Savings = Over $99 million.”
That, however, assumes a contribution of federal pandemic relief funds totaling $30 million.
The total net savings, according to the Midstate presentation, with “additional savings beyond cost to pay for products,” is $37 million, if the pandemic relief money is used. Without that, the saving is only $2.8 million, according to Falconer.
Falconer’s pitch advised using those relief funds rather than Maintenance and Operation funds, which cover normal district expenses, such as payroll.
“Additional savings, savings greater than the amount needed to pay for products, will be M&O savings that can be driven back into the classroom.”
Part of the sales plan might sound familiar to those who have contemplated solar systems at home.
“Instead of paying a utility company you can use that money to improve the health of your buildings for the occupants and alleviate capital dollar needs. Drive your savings dollars into the classroom or wherever it is needed most. Simply put, ‘you are paying for this project whether you do it or not,’” the Midstate presentation said.
In addition to saving millions, Midstate promised better “improved classrooms” with better indoor air quality and “improved safety.”
Midstate is a division of Veregy, which on its website claims it is “an industry leader in energy efficiency solutions, solar and smart building technology” and has “delivered billions in energy performance contracts for clients in: K-12 education; local government; healthcare; transportation; higher education; federal government; commercial.”
The “win-win” idea presented is to reduce the district’s carbon footprint while saving big money.
“Utilizing savings created from energy efficient products lowers your utility bills costs and those savings can be used to pay for the energy efficient products without affecting current budgets. You are using your utility costs to improve your buildings,” Falconer said.
Board members debated aspects of the presentation, and different funding options.
One was ready to charge ahead.
“I would like for us to agree to move forward,” Kiana Sears said. “We have families saying, ‘It’s hot in the classrooms.’ We have these 40-year-old systems.”
“For me, especially being a green person, this is a no brainer,” she added. “We have this guarantee. I don’t understand why we aren’t getting this done for our families and kids.”
Board member Lara Ellingson agreed, stating, “This is necessary, absolutely.”
But she expressed concern about “$50 million in interest...We need to have a discussion on how we’re going to pay for this.”
Falconer had an answer: “These are the lowest interest rates we’ve ever seen.”
And, he stressed, “The interest is included in the guarantee.”
The board did not vote on the system, which likely will be presented for a vote at a future meeting.
“I feel the sense of urgency,” Marcie Hutchinson said. “Our parents want our kids in healthy and safe classrooms. A healthy classroom means comfortable temperature, it means great air quality.”
Though he noted each phase could last two years, Falconer exuded confidence, repeatedly talking about huge savings and his company’s extraordinary expertise:
“We’ve done this a million times.”