To: Board of County Commissioners
Through: Michelle Halstead, Acting Director, Facilities & Fleet Management
Prepared By:
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Keith Jones, Division Manager of Facility Operations; Isaac Lewis, Facility Systems Manager
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presenter
Presenter: Keith Jones, Division Manager of Facility Operations; Isaac Lewis, Facility Systems Manager
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Subject:
title
1:30 PM *Recommended Next Steps for Energy Performance Contract No. 3
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Purpose and Request:
recommended action
The purpose of this study session is to present the proposed audit results and contract options, review the financial and operational evaluations conducted by the Facilities and Fleet Management Department, and provide staff’s recommendation on next steps for the county’s third energy performance contract.
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Alignment with Strategic Plan: Sustainable Growth and Infrastructure - Support environmentally responsible development and energy efficiency in county operations.
Background and Discussion: Energy Performance Contracting (EPC) allows public entities to finance facility improvements through guaranteed future energy and maintenance cost savings. Colorado's EPC program began in 1997; the Colorado Energy Office operates the statutory program, providing no cost technical assistance to eligible public entities. Arapahoe County has completed two EPCs in its history: EPC #1 began in 2006 ($10M+ financed, $660k/yr savings), while EPC #2 was executed in 2014 ($7.7M+ invested, $560k/yr savings). Industry best practices recommend evaluating an EPC every 7-10 years based on facility needs and the Board supported pursuing a third EPC in November 2025 to help determine additional tangible benefits, such as offsetting rising utility costs and replacing end-of-life equipment with more efficient options. The County worked with the Colorado Energy Office, competitively procuring an Energy Service Company (ESCO) - Willdan - to complete an investment grade energy audit across 38 facilities, representing 1.58M square feet of space and $2.2 million annual utility budget.
As part of their analysis, Willdan presented a EPC Phase 1 in June 2026, proposing a rooftop solar project for up to six facilities, taking advantage of federal tax credits to reduce utility costs, improve long-term operational sustainability, and lower greenhouse gas emissions from County operations. The Board approved advancing this phase one project, authorizing a $393,674 advanced payment for material procurement to meet federal safe harbor timing requirements and continued due diligence and engineering work associated with the approximately $3.5 million project.
Willdan presented several proposed Phase 2 project options for consideration:
15-Year Base Bundle (78 Measures across 6 Facility Improvement Measure (FIM) Groups): Includes campus-wide LED lighting retrofits, building automation system retro-commissioning (Willdan RCx), high-efficiency transformers, Endotherm heat transfer fluid additives, water valve commissioning, and Blade Air filtration. Total installed cost: $2,483,206 to $4,744,654 depending on EV inclusion, generating $151,779 to $322,551 in annual cost savings with a simple payback of 14.7 years.
20-Year Bundle (103 Measures across 8 FIM Groups): Adds legacy LON control hardware updates at 4 facilities and air handler rebuilds at Arapahoe Plaza ($7.81M installed cost, 19.6-year payback).
25-Year Bundle (90 Measures across 9 FIM Groups): Incorporate limited end-of-life HVAC replacements (e.g. Courthouse 1 chiller, Fairgrounds Main Hall AHU, Peoria/ESC RTUs) with an installed cost of $9.01M and a 25.0-year payback.
5-Year Spend Optimization Bundle (135 Measures across 12 FIM Groups): Combines deep efficiency with an estimated $11.02M/year expenditure spend optimization strategy ($25.49M installed cost). This administrative approach used the ESCO to negotiate or optimize purchasing of vendor contracts, supplies, services, and employee benefits to achieve budget efficiencies that can be redirected.
A table is attached that shows a summary of proposed Wildan EPC #3 project bundles and financial metrics. Willdan’s audit report is also attached for reference.
FFM Evaluation & Rationale for Recommendation
Facilities and Fleet Management evaluated the proposed project options against the County's long-term facility needs, capital budget constraints, and risk tolerance. FFM recommends NOT moving forward with Willdan’s proposed Phase 2 based on three core findings:
1. Exclusion of Essential CIP Deferred Maintenance Projects: One of the primary motivations for exploring EPC #3 was to accelerate major deferred maintenance and capital replacement projects across County buildings (such as critical roof replacements, window and building envelope restorations, and complete HVAC system overhauls at Admin 1, ACJC, Altura, DA Building, and Fairgrounds). However, the feasible EPC options presented by Willdan omit these major capital replacements due to statutory payback limitations, focusing instead on lower-capital operational retrofits (lighting, filters, additives, and controls retro-commissioning). As a result, capital funding for these projects can’t be leveraged to expand how the county addresses deferred capital maintenance.
2. Poor Return on Investment and Long Payback Horizons: The financial metrics for the proposed bundles do not offer a compelling return. In the 15-year base model ($2.48M installed cost), annual debt service payments ($214,828/year) exceed initial annual utility savings ($150,454/year). Net annual savings remain negative from Years 1 through 10, with cumulative cash flow turning positive only in Year 11 (2038) for a modest 15-year net gain of $298,651. Furthermore, Electric Vehicle charging infrastructure represents 57% of the installed cost ($1.40M) with zero modeled utility cost savings.
3. More Direct & Urgent Utilization of Funds: Committing county capital or entering into a 15-year debt obligation for low-impact energy measures limits the County's fiscal flexibility. The ongoing debt service obligations can be better deployed directly toward urgent, dire facility repairs and critical CIP projects through traditional procurement, ensuring immediate operational risk reduction.
FFM does recommend moving forward with Phase 1 as EPC No. 3, which will allow the county to install its first-ever rooftop solar investment, reducing energy costs, lowering generated greenhouse gas emissions, and advancing the county’s sustainability efforts. Further engineering analysis has reduced the number of buildings from 6 to 4, retaining: Courthouse I, Courthouse II, Sheriff’s Office, CentrePoint.
The Fairgrounds and Administration buildings were removed after further structural analysis. There is an opportunity to explore ground mounted solar if the Board is interested in pursuing this option.
The project is estimated to cost no more than $3.5 million and could achieve cumulative savings of $3.4 million over 35 years with a break even at 20 years.
Alternatives: Alternative 1: Re-Scope or Negotiate Capital Buydown with Willdan: Request Willdan re-structure the project to focus strictly on severe HVAC equipment failures, utilizing significant direct capital buydowns (e.g. $2.75M to $3.8M capital infusion) to force long-payback capital equipment into a statutory 15-year window.
Alternative 2: Proceed with Proposed Phase 2 for EPC #3 Plan: Authorize the execution the Investment-Grade Audit and proceed with Willdan's 15-year base bundle. Benefit: Achieves minor energy savings and EV infrastructure. Consequence: Commits County to 15 years of debt service while leaving core facility CIP deferred maintenance unresolved.
Fiscal Impact: The fiscal impact of EPC #3 is a one-time allocation of $3.5 million from the fund balance for phase 1 (solar). By not moving forward with phase #2, the County avoids entering into $2.34M to $4.67M in long-term financing, saving $214,828 to $428,971 per year in annual debt service obligations over 15 years. These funds and capital balances will remain available within the CEF, BMF, and CIP budgets to directly address critical facility repairs and urgent infrastructure needs.
Alignment with Strategic Implementation Strategies: N/A
Staff Recommendation: Facilities and Fleet Management recommends not moving forward with phase #2 scope of EPC #3 with Willdan. This position is based on the finding that critical Capital Improvement Plan (CIP) projects are not included in the proposed scope, and the projects proposed do not provide sufficient return given their high capital costs and long payback periods. FFM does recommend advancing the phase #1 scope as the County’s third EPC and allocating $3.5 million towards implementation.
Concurrence: The Finance Department concurs on the fiscal and operational evaluation, agreeing that capital funds are more effectively deployed toward direct CIP priorities rather than long-payback energy retrofits at this time.