Calendar:
   (See Below)

Agenda Notes:
-  Revised Workshop Agenda - Deferral of Cultural Facilities Reequest Presentation

Information Items:
-  Business Attraction:  X-Rite Corporation
-  SBE Loan Program Quarterly Update
-  Performance Contracting for Energy Savings

Attachments:
-  May and June Calendars
-  Workshop Agenda
-  Energy Performance

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Calendar:
Monday, May 2, 2005
     4:00 pm -  Budget Presentation, Meeting Chamber - (Please Note Location)
     5:00 pm - Council Manager Dinner Briefing, Room 267
     7:30 pm - Citizen's Forum, Room 267

Wednesday, May 4, 2005
     12:00 pm - Economic Development and Planning Committee Meeting, Room CH-14  AGENDA: Industrial Study

 

Agenda Notes:
Revised Workshop Agenda - Deferral of Cultural Facilities Request Presentation
Staff Resource: Ruffin Hall, 704-336-3403At the request of the Arts and Science Council (ASC), the cultural facilities request presentation scheduled for Monday's Council workshop meeting has been deferred. Lee Keesler, President/CEO of the ASC, has requested deferral of the presentation from May 2 until May 23. The request of deferral is to allow for additional time to work with representatives of the hospitality industry and car rental companies.

Attached is the revised Workshop agenda reflecting this change.

Information Items:
Business Attraction: X-Rite Corporation
Staff Resource: Tom Flynn, 704-432-1396

In January 2005, we informed City Council of the possible relocation to Charlotte of a high tech engineering company that would employ more than 500 people. This company is X-Rite Corporation of Kentwood, Michigan. Executives of the company recently informed us that they had decided to stay in Kentwood (a suburb of Grand Rapids) rather than relocate to Charlotte.

Charlotte was a finalist for this relocation for the following reasons:

   -  Ease of recruiting technology workers due to our high quality of life
   -  Air service
   -  Research capabilities of UNC-Charlotte, particularly in the area of opto-electronics
   -  Very competitive incentive proposal ($30 million state and local combined)

The Chamber, Regional Partnership, UNC-Charlotte, NCDOC, County, City and private sector worked together to develop and present a very compelling proposal to X-Rite. Unfortunately, this proposal could not overcome X-Rite's concerns about the business interruption and costs that a move to Charlotte would involve.

SBE Loan Program Quarterly Update
Staff Resources: Richard Bargoil, 704-336-2142 and Dale Harrold, 704-409-5915

Since the last quarterly program update, Self Help Credit Union has approved 3 new loans to small businesses under the SBE Loan Fund for a total of 33 loans since the program's inception in 2003. The Fund continues to serve as a good resource for small businesses, particularly minority and women-owned businesses, in need of non-conventional financing for working capital and equipment loans with an average loan size of $53,558. The Fund also continues to assist start-up businesses. The ratio of funds set aside in the investors collateral reserve account to that loaned in Self-Help dollars is 1:4.5 ($4.50 in Self Help funds has been leveraged for each $1.00 of funds set aside in the collateral reserve account).

SBE Loan Fund activity as of 3/31/05:

Loans Closed	32 loans / $1,735,400
Loans pending closing	1 loan / $32,000
Grand Total loans closed and pending	33 loans / $1,767,400
Average loan amount	$53,558
Amount set-aside in reserve account	$385,100 (1:4/5)
Minority-owned businesses	17 loans ($811,400 ~ 51.5%)
Women-owned businesses	16 loans ($885,000 ~ 50%)
Start-Ups	17 loans ($895,000 ~ 51.5%)

Performance Contracting for Energy Savings
Staff Resource: Jim Schumacher, 704-336-3656

During the March 2 budget workshop, a report on performance contracting for energy savings in City buildings was requested. Engineering & Property Management has reviewed performance contracting as an option for realizing energy cost savings with the assistance of a company that does performance contracting and consultation with other local energy experts. A similar review of performance contracting was conducted approximately six years ago.

Performance contracting is contracting with a private firm to evaluate, design, and install new heating, ventilation and air conditioning systems, lighting and other energy saving improvements, at their cost. The private firm takes the risk that resulting energy savings will recover the capital and financing costs of the equipment and a profit. The City commits to operational and temperature parameters in the buildings, independent measurement and verification of results, and investment grade energy audits required by financing entities.

The most direct benefits of performance contracting are that the City would be able to reallocate the funding being used for HVAC and other energy improvements, and perhaps realize a small portion of the energy savings. In contrast, making self-funded, regular energy improvements would allow the City to realize all of the energy savings.

Many public agencies use performance contracting. Our review indicates it is a good solution when certain conditions exist, such as:

   -  Mechanical and lighting equipment is at the end of, or past, its service life, and in poor condition;
   -  Energy costs exceed $1.50 per square foot per year (benchmark from the North Carolina State Energy Office); and
   -  Funding and management resources are not available to regularly replace and upgrade equipment in-house.

Three million square feet of space over 98 City facilities are maintained by Engineering & Property Management. A comprehensive energy management program was begun 7 years ago. Below are key points related to the program:
   -  The average annual cost of energy is $1.15 per square foot. For comparison, the Building Owners and Managers Association (BOMA) lists the average cost of utilities for a standard office building in 2003 in Charlotte as $1.33 per square foot.
   -  83% of the City facilities operate at least 2 shifts - many (such as fire stations) run 24 hours/7 days a week.
   -  Annual appropriations of approximately $400,000 are used to replace and upgrade mechanical and lighting equipment. Equipment in each building is replaced at the end of its service life to minimize overall life cycle costs. As replacements occur, one-quarter to one-half of the funding is used for upgrades to more efficient equipment that will result in energy savings in all future years.
   -  Annual savings from improvements total $180,000 (efficiency improvements + rate corrections). Within only a few years, the annual energy savings will be fully recovering the annual $400,000 costs of capital improvements.
   -  Last year's rate structure analysis included a review of enterprise fund accounts and an additional $380,000 in savings was realized.
   -  By keeping equipment in good to excellent condition, making use of the full service life, and incurring only incremental costs for more efficiency when replacements occur, the

City realizes all energy savings and avoids performance contracting costs, such as financing, audits, and contract administration.

While the average cost of $1.15 per foot is less than the BOMA average, the Utilities Administration Building is high at $1.98 per foot, and needs new mechanical and lighting equipment. Engineering & Property Management will be working with CMUD to evaluate alternatives for upgrading the equipment in the building. Performance contracting will be evaluated as an option in that case.

In addition, the equipment in the original portion of Discovery Place is nearing the end of its service life. When a renovation plan for the museum is in place, performance contracting will be considered for the mechanical equipment component of the improvements.

In conclusion, performance contracting can be a good method for replacing energy equipment under the right circumstances. However, due to the City's proactive energy management program in place for the 3 million square feet maintained by Engineering & Property Management, most of those buildings have equipment in good to excellent condition, producing significant energy savings to the City each year. Performance contracting will always be an option for improvements when the circumstances of the individual building might make it the best overall solution.

Attached is more detailed information of our review of performance contracting.