in Houston, Texas
Houston schools may borrow $39 million for energy efficiency; trustees have questions
Tuesday, Mar 27, 2012, 09:36AM CST
By Mike Cronin
CFL

A proposal to cut the Houston schools' energy costs will require the school district to borrow $39 million – an expense that some school board members said wasn't part of the package when they began discussing it last summer.

The initial approach consisted of contracting with two companies to install and own all new, energy-efficient equipment at Houston schools, which could include light bulbs, computer dimmers, thermostats, reflective windows, white and liquid reflective roofs, boilers and chillers. The district would pay for the program with the savings it earned on cutting its energy bills.

But Houston Independent School District administrators changed that plan, approved by the board in June, without consulting the trustees, some trustees said.

Instead, Chief Operating Officer Leo Bobadilla and Chief Financial Officer Melinda Garrett presented board members a different strategy earlier this month that calls for HISD to buy, own and maintain the equipment, and to issue bonds to pay for it.

“I thought it was going to be a giraffe, and it came out as a hippopotamus,” said Houston school board President Mike Lunceford.

Trustee Manuel Rodriguez had a different analogy: “It’s like we agreed to buy a 2012 Camaro and now we’re going to save up to go after a Ford Mustang.”  

Bobadilla and Garrett declined to comment on the plan through a school district spokesman.

Under the plan trustees approved on June 9, two companies would examine the age and condition of HISD's mechanical, lighting, infrastructure and other building systems, according to that board meeting’s agenda.

Chevron and Carrollton-based Schneider Electric came out on top after going through a district competitive-bid process.

What Schneider and Chevron employees found during their examination would determine what measures they would take to slash HISD’s energy bills.

The district would pay for the program with the savings it earned on cutting its energy bills.

Borrowing the money instead made more sense, Bobadilla and Garrett told trustees, because as a government entity, the school district could obtain a lower interest rate than could Schneider or Chevron.

During a March 5 board agenda-review meeting, Garrett said HISD could save up to $7 million with the revised approach.

The problem was no HISD officials briefed the board that they had decided to change the financial structure of the energy-savings program, several trustees told Texas Watchdog.

Rodriguez joined Lunceford and Trustee Greg Meyers in sharply questioning Bobadilla and Garrett about the revisions during an agenda review meeting.

“It’s not what we talked about,” Meyers said. “Don’t bring it forward without first bringing it up at a workshop (meeting).”

Rodriguez added, “It was the opposite of what we discussed last summer.”

Rodriguez said he understood in June that Schneider and Chevron would be responsible for any necessary repairs and maintenance of any equipment installed by the two companies.

HISD would pay for that work, so the arrangement would operate similar to a lease agreement, Rodriguez said.

“My understanding was that these two companies were going to assume the risk,” Meyers said. “Now, all of a sudden, we’re going to assume the risk.”

Lunceford also said that he is concerned that the bonds would have a 20-year life span – too long for HISD to realize any savings.

“By the time we paid off the costs, the savings would only be something like $90,000 over 20 years,” Lunceford said. “That’s not a very good return. The length of time should be five years, not 20. The faster you get your money back, the higher the returns.”

Over a longer term, many things could change, Lunceford said, eliminating any savings for the district.

“Some of the schools could be knocked down,” he said.

HISD staff currently is preparing a comparison between the original and the new plan, Meyers said.

“I’m grateful that the administration will bring the two back and we can examine them side by side more coherently and make sense of the two,” Meyers said.

***
Contact Mike Cronin at mike@texaswatchdog.org or 713-228-2850. Follow him on Twitter at@michaelccronin or @texaswatchdog.

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Photo by flickr user AZAdam, used via a Creative Commons license. 


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Comments
Vance Jochim
Tuesday, 03/27/2012 - 02:01PM

Here in Lake County, FL the School District did a similar project after a proposal from a subsidiary of the local power company, Progress energy. However, the term was much shorter, like 7-10 years, and it was mostly to replace bulbs and some inefficient air conditioners and hvac equipment on our 50 schools. I think the borrowing wasn't bonds, but from a central funds pool run by the State of School systems at low interest, OR they signed an agreement with the provider since the School District was already bonded out. The big argument was why didn't the staff do the work, instead of the Progress energy owned firm. This was all done, in my opinion, due to lack of proper maintenance planning by the administrators until they got a presentation from progress. Your bonding term of 20 years is ludicrous. That is like buying a furnished house for a 30 year mortgage, financing short life furniture, TV etc over 30 years. Critics are right, your financing shouldn't be longer than the life of the new items and the payback period.

Vance Jochim'

FiscalRangers.com - a blog local government fiscal issues for Lake County, FL

tired dog
Tuesday, 03/27/2012 - 08:27PM

Show me the payback period...and then I'll tell you what should be done.

Peggy Venable
Monday, 04/09/2012 - 04:13PM

Thanks for the reporting. But let's keep in mind that HISD is already almost $4 billion in debt...that is, Houston ISD taxpayers, their kids and grandkids are almost $4 billion in school district debt.

sims
Wednesday, 04/11/2012 - 03:27PM

Sounds like Obama is up to some more of his "backdoor" Cap and Trade Tricks again!!! If he can't get Cap and Trade approved in Congress, he's going to get the school districts to do his dirty work for him. As with most of the "energy efficient" Obama solutions like the Hybrid vehicles, they don't pay for themselves until many years down the road, it at all !! But, let's have the TAX PAYERS foot the bill. We're already TAXED TO DEATH in this country....let's just add a little more!

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