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Energy-saving projects may be the answer to Nicolet's budget woes

Recent legislation allows Nicolet to override revenue limits

March 19, 2013

Glendale - Faced with the governor's proposed freeze on school revenue limits, the Nicolet district may use recent legislation to borrow for energy-saving projects, in effect dodging the freeze to raise taxes and in-part mitigating a potential budget crunch.

Though the legislature may increase school districts' revenue limit - the maximum amount districts can take in via state aid and local tax levy - in the 2013-15 biennial budget, district officials are planning based on the governor's recommendation of no increase.

Flat revenue over the next two years means Nicolet would begin by cutting about $300,000 out of its budget to fund a stormwater system overhaul and expand facility for students with severe cognitive disabilities, and would likely need to make further cuts to mitigate inflation.

Act 32, passed by the state legislature in 2011, allows districts to levy more than the amount prescribed by state-mandated revenue limits to fund energy-saving projects, so long as third-party project managers assume the risk of the projects by guaranteeing energy savings.

According to a plan presented to the School Board on Monday by District Business Manager Jeff Dellutri and representatives from Johnson Controls and Robert W. Baird, approximately $4 million worth of projects from Nicolet's five-year capital plan could qualify as energy savings projects under Act 32.

By borrowing the $4 million and raising local taxes by an estimated average of 1.5 percent over the next three years via the revenue limit exemptions allowed by Act 32, Nicolet could take about $200,000 worth of projects per year out of the capital plan, reducing the amount of upfront budget cuts from $300,000 to $100,000.

"The proposal is to take those out of our long range (capital plan), increase our revenue limit and finance (the projects) over time," Dellutri explained "by using (the projects) as a way to get our budget back toward a base."

Lighting the way

The energy projects, said Dellutri and Facilities Director Brian Reiels, are composed of replacements for parking lot lighting, changes in lighting inside the building and replacements of windows around the district, many of which were covered over with insulation during the 1970s to save money and offset the oil shortage.

Reiels said the underground infrastructure, wiring and fixtures of the parking lot lights are at or beyond their usable lifetime.

"Literally we've had some start on fire," Reiels told the board.

By replacing the old parking lot lights with much more efficient light-emitting-diode (LED) lamps, the district would save a considerable amount over time, Reiels said, adding that the lights could be programmed in an "endless" amount of ways to brighten and dim throughout the day to save money.

Likewise, the district would stand to save money by replacing old windows with ones designed to help preserve heat. By replacing some of the now-covered windows, Reiels said, the district could save more money by using natural daylight at times instead of indoor lighting.

With the board's consent, Nicolet staff and Johnson Controls will begin detailed modeling to outline potential savings for a later report to the board.

According to a project timeline provided by Johnson Controls, a project development agreement will come before the board at an April meeting, project specifics are to be fleshed out around June, the project will come before the board for approval in July, and work will begin in August - though the parking lot lighting would need to be done earlier to coincide with the stormwater overhaul slated for construction over the summer months.

Financial implications

According to Dellutri, the tax levy would need to increase by 2 percent in the 2013-14 year, 1.5 percent in the 2014-15 year, and 1 percent in the 2015-16 year to repay debt on the projects.

The proposal shows the district paying the majority of the energy savings debt in those three years in order to scale the levy up to a point where an increased operational referendum would be more palatable to voters. The current referendum, which passed in 2011 and will expire after the 2015-16 year, increased the tax levy by $2.15 million annually.

The increased levy resulting from the energy savings projects would necessitate a $2.75 million operational referendum to keep the district's overall revenue the same.

"It builds up your levy, so by the time you get to our next operational referendum, it's going to be flat," Dellutri said. "When you go out to the community for referendum, there won't be another big hike in the tax levy. It'll happen systematically over the next three years."

Board member Ellen Redeker commented that a "substantial" increase to taxes over the next few years, paired with the prospect of another referendum at an increased amount, is a lot to ask of district voters.

"I don't know," Redeker said. "I think it's kind of scary."

The energy saving projects will come before the board at its upcoming April meeting.

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