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ITEM 4

City Council Memorandum City Manager's Office Memo No.

Date:

June 9, 2025

To:

Mayor and Council

Thru:

Joshua H. Wright, City Manager
Dawn Lang, Deputy City Manager, CFO

From:

Steven Turner, Sustainability & Performance Officer

Subject:

Resolution No. 5917, Master Energy Services Agreement between Ameresco, Inc., and the City of Chandler for New Solar Installations

Proposed Motion:

Move City Council pass and adopt Resolution No. 5917, authorizing the Master Energy Services Agreement between Ameresco, Inc., and the City of Chandler, for New Solar Installations at City Facilities, in an amount not to exceed $34,028,753; authorizing the City Manager or designee to execute work orders for each solar site; and approving a contingency transfer from General Fund, Non-Departmental, Contingency Account, to the General Capital Projects Fund, Sustainability Programs Project, in the amount of $18,953,753.

Background:

In 2023, the Chandler City Council added Sustainability & Technology as a focus area in its Strategic Framework. This decision underscored the city's commitment to advancing smart energy solutions aimed at reducing service costs and enhancing environmental resilience. The first step to accomplishing this goal was to conduct a solar feasibility study. On March 7, 2024, the City Council Sustainability and Technology Subcommittee convened to deliberate the outcomes of the solar feasibility study. Various financing options were discussed for adding solar at various facilities, with emphasis placed on utilizing one-time revenue to generate ongoing savings. The Subcommittee directed staff to propose the $10 million down payment option, but if possible, increase the down payment as part of the FY 2024-25 proposed budget. On July 20, 2023, the City Council approved an agreement with Ameresco to complete this study (also known as Milestone One), with a goal of studying the viability of various solar installation options, including ground-mounted, roof-mounted, and solar-covered parking configurations across 25 municipal facilities and a budget of $15,000,000 was approved in the FY 2024-25 Capital Improvement Plan (CIP).

As part of the study, the following municipal sites were evaluated:
Airport Water Reclamation Facility (AWRF)
Ocotillo Water Reclamation Facility (OWRF)
Pecos Surface Water Treatment Facility
City Hall
Fire Administration Building
Transportation & Development Building
Information Technology Building
Chandler Nature Center
Chandler Heights Substation
Public Safety Training Facility
Parks & Facilities Service Center
McQueen Yard
Sunset Library
Delaware Parking Lot (Note: Not included in recommendations due to the dimensions of the parking lot)
Fire Stations 1-11 (Note: Fire Station 4 was not included in the recommendations because it is scheduled to be rebuilt within five years in the current CIP)

In April 2024, City Council approved an amendment to the agreement with Ameresco to begin Milestone Two. As part of Milestone Two, Ameresco prepared the following:
- Final Engineering Design: Completion of detailed engineering plans and specifications for the selected portfolio of solar installations, achieving 100% development per the scope outlined in Exhibit A of the original agreement.
- Project Portfolio Preparation: Finalization of the selected portfolio for solar installations, ensuring all technical and design requirements are met to move forward with potential construction.

Ameresco determined 23 of the 25 sites evaluated were suitable for solar installations:
Airport Water Reclamation Facility (AWRF)
Ocotillo Water Reclamation Facility (OWRF)
Pecos Surface Water Treatment Facility
City Hall
Fire Administration Building
Information Technology Building
Chandler Nature Center
Chandler Heights Substation
Public Safety Training Facility
Parks & Facilities Service Center
McQueen Yard
Transportation & Development Building
Sunset Library
Fire Stations 1-3 and 5-11

This proposed Master Energy Services Agreement will enter the City of Chandler into a 20-year agreement with Ameresco, Inc., for a comprehensive energy savings initiative, with a total cost not to exceed $34,028,753. Upon completion of all work orders for each solar site, the final guaranteed savings will be established. Current estimates project gross savings of approximately $42.4 million over the 20-year period, with net savings of $22 million after capital recovery, factoring in anticipated utility rate increases and annual degradation of solar panels and related equipment. The solar panels carry a 25-year warranty but are tested to function effectively for up to 35 years, potentially generating additional savings over the extended lifespan. The project is anticipated to reach its break-even point in 15 years. Approximately 70% of the savings will accrue to the utilities funds (60% Wastewater and 10% Water), with the remaining 30% allocated to the General Fund. The savings generated meets the goal of using one-time funds to produce ongoing savings, allowing the city to help minimize future cost increases that affect utility rates.

This agreement utilizes an $8.3 million Energy Investment Tax Credit from the Inflation Reduction Act, enhancing the project's financial benefits.

Discussion:

Please note the Pecos Surface Water Treatment Plant is included in this agreement as one of the facilities where solar infrastructure will be installed. However, as this facility is currently undergoing a redesign, it is anticipated the project scope and potential energy savings at this location may adjust in the future. Any such modifications may be brought to City Council as amendments to this agreement.

Financial Implications:

The funding for this project will come from an $8.3 million Energy Investment Tax Credit (ITC) from the Inflation Reduction Act and General Fund. The current Sustainability Programs budget is $15,075,000. A contingency transfer from General Fund, Non-Departmental, Contingency Account (101.1290.5911), to the General Capital Projects Fund, Non-Departmental Capital Cost Center, Sustainability Programs Project (401.1291.6211.6GG674) of $18,953,753 will be required to fund the difference. The use of this additional amount was planned in the forecast when preparing the FY 2025-26 budget. The project will be funded up front with the ITC coming in year two to offset what was spent initially. Ongoing energy savings of approximately $1.8M will be recognized annually over the next 20 years. Once work orders for each solar site are completed, guaranteed annual utility savings can be determined.

Attachments

Reso 5917 and Agreement