By Mary Velan
Gov1
What Happened?
When Brian Haddix came on board as the City Manager of Sanger, California, the city was still reeling from the economic recession. In an interview with Gov1, Haddix explained how he was able to launch three efficiency programs that improved public services while improving the city’s financial stability and outlook.
The Situation
Haddix assumed the role of City Manager the same time a new conservative majority took over the city council. The majority members made it known from the start that any raise to electric rates would be immediately vetoed. It was up to Haddix to find an efficient way to cut costs without burdening taxpayers.
“When I joined, Sanger’s budget was upside and the city was more than $700,000 in the red,” Haddix told Gov1. “To avoid raising rates, it had to be all about efficiency. So I combed through budget to see where the greatest portion of money was bleeding out to see some of the spending could be controlled.”
What Haddix found in the budget was an electric cost more than $500,000 higher than he expected. Because electric rates vary year-to-year, this number would likely continue to grow in the future. So Haddix knew where to start and took out a lease revenue bond to get the ball rolling.
Project 1: Wastewater
The city’s wastewater treatment plant was costing Sanger about $800,000 a year in electric costs to operate. The plant was also in need of repairs and maintenance work that had been postponed during the economic downturn. Unable to raise rates to pay for these costs, Haddix found the money elsewhere: in solar.
“We were able to pull up to 85 percent of power demands off of the electric grid using solar technology, which generated significant savings to be used in other ways,” Haddix explained. “Power costs were not only lowered but became more stable and consistent. I could now predict costs for the next 20 years and budget for it rather than wait to see what the new electric rates would be.”
The savings from the switch to solar helped the city pay off lease revenue bond debts with money to spare.
“I ended up with hundreds of thousands of dollars in savings leftover that I could apply to the deferred maintenance program,” Haddix told Gov1. “We were able to modernize the facility, put in new kinds of pumps that ran at variable speeds and save a tremendous amount of power in the short and long term.
Project 2: Drinking Water
Similar to the wastewater project, Haddix invested energy savings into modernizing pumps for drinking water in the community. By updating the pumps, the system was able to operate at variable speeds, not just on or off. This reduced the amount of electricity used to operate, which generated even more savings. Haddix then took this free capital and put in new water meters in houses without them or with outdated devices.
“I realized 10 percent of water meters in Sanger were old and not functioning properly,” Haddix explained. “These houses were being charged a flat rate rather than a variable rate based on how much water was actually used.”
After updating the residential water meters, the city was able to accurately measure water consumption and charge accordingly. This resulted in more money going back into the water system.
In addition, the new water meters were able to be outfitted with new leak detection technology. Once a leak was detected in the home, the city was able to immediately fix it before too much water was wasted and property was ruined. This meant water savings for both the city and residents.
Project 3: HVAC
All municipal buildings in Sanger were housing old air conditioning units that required maintenance and devoured energy. Haddix decided to modernize the HVAC systems of all city buildings by upgrading the technology to more energy efficient options. The savings from the new, modern equipment paid for the cost of buying and deploying the technology across the city.
In each of these projects, Haddix was able to leverage a lease revenue bond to cover initial costs and then immediately repay the bond debt with generated savings.
Furthermore, Haddix worked with Johnson Controls to complete the projects and required the company to hire locally at least 75 percent of its workforce
“Its final number came out to be 83 percent local hire,” Haddix told Gov1. “That had a tremendous multiplier effect on local paychecks being spent in the community. Also, it had a residual effect of leaving behind a newly skilled workforce for solar panel installation, meter installation and the like.”
The Outcome
The savings for all three energy savings projects came out to $631,197 annually. But a recent audit of the city’s costs found when Sanger teamed up with Johnson Controls to deploy the efficiency programs, an additional $108,000 in savings was achieved - though not anticipated. This brings the grand total savings to about $740,000 each year.
In addition, the investments made in electric and water resources should generate cost-savings for Sanger in the years to come through predictability and efficiency. Haddix explained the value of understanding where budget money was going and realizing ways to refine and improve spending decision making. Rather than falling victim to rising electric rates, the city’s power bills are now under control.
“Through this process, extra money was brought back into the system and our financial situation improved,” Haddix told Gov1. “Costs were no longer controlling the city and we were able to grow some wiggle room in the budget for future projects. We achieved all this without raising rates on our citizens.”
The successes of these projects did not go unnoticed. Standards & Poor acknowledged the city’s new found financial stability by raising its rating from -BBB to A.
“The ratings agency looked at how in control the city became of its expenses and the monetary cushion generated from savings,” Haddix said. “Not having to raise rates meant it was still an available option in the future, if need be. This is a good sign for ratings agencies.”