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Creative Financing Brings Boston HousingAuthority $16 Million for Energy Investment
Contact: Lydia Agro, Boston Housing Authority, 617-988-4109

Through an ambitious public/private partnership, the Boston Housing Authority will capture $16 million in energy savings over a ten year period that will improve the quality of life for thousands of BHA residents by installing new energy and water systems in seven BHA-owned developments.

With two of the largest energy performance contracts underway in the Nation, the BHA has found a way to pay for new energy and water efficient equipment with the savings gained over a ten year period through the installation of this equipment. The move represents a cutting edge approach by the BHA to leverage energy and water savings to finance the installation of new heating and water equipment. Residents in more than 2,500 apartments in 221 BHA buildings will benefit from greater comfort and quality of life through more consistent apartment temperatures and more reliable heating and domestic hot water systems as a result of these improvements.

“The Boston Housing Authority continues to find new and innovative ways to improve the lives of residents with limited funding available for capital improvements,” said Mayor Thomas M. Menino. “This effort is an excellent example of public/private partnership at its best and will greatly improve the livability of the public housing stock in the City of Boston.”

“This project is a triple win for residents, the Boston Housing Authority and the taxpayers,” said BHA Administrator Sandra B. Henriquez, “and it underscores the Agency as being a responsible landlord. Finding a new and unique way to finance major capital improvements for our public housing portfolio represents a truly creative approach to managing the sustainability of Boston’s public housing developments."

With the assistance of Rebuild Boston Energy Initiative, an initiative funded by the U.S. Department of Energy and led by the Northeast Energy Efficiency Council, as well as help from the Massachusetts Department of Housing and Community Development (DHCD) and the U.S. Department of Housing and Urban Development (HUD), the BHA has recently entered into two energy performance contracts with Northeast Energy Services, Inc. (NORESCO), a national energy services company located in Framingham, MA. NORESCO was chosen as the contractor for these projects through a competitive bid process. Under this unique contracting arrangement, the BHA is able to pay for new energy and water conservation equipment including new heating and domestic hot water systems, low-flush toilets, faucets, shower heads and exterior lighting by using the cost savings generated by the replacement of old systems with new ones. Approximately two-thirds of the BHA’s operating funds, including utility payments, come from HUD for the federal developments and the remaining one-third of the BHA’s operating funds are received for state developments from DHCD. The monetary gain realized by these energy savings is then used to pay back the debt service. At the end of ten years, when the debt is paid off, HUD and DHCD have new equipment for their respective developments, along with a lower utility bill for future years. An important part of this energy performance contract requires NORESCO to guarantee that a minimum amount of savings, of sufficient value to cover the debt service, will be generated annually throughout the ten-year term. Hence the financing for this project is almost risk free for the housing authority.

“This is an excellent example of public agencies working with the private sector to provide better service to residents in public housing,” said Jane Wallis Gumble, Director of the Massachusetts Department of Housing and Community Development. “I believe this energy savings initiative reflects an entrepreneurial approach to government that is paying significant dividends for taxpayers and those who receive public assistance.”

One of the energy performance contracts, at a value of $8.6 million, will include the abandonment of the central heating system and installation of gas-fired steam boilers to heat and provide domestic hot water to the 35 buildings located at the Mary Ellen McCormack development, a HUD funded development. Also, all of the approximately 1,000 units at the development will receive more efficient toilets and showerheads, which will significantly reduce total water usage. Rebuild Boston Energy Initiative assisted the BHA with technical expertise and financial resources to assess its water and energy conservation needs and develop its first performance contracting bid process which resulted in the contract for this development. Mary Ellen McCormack, the first housing development built in the City of Boston, still utilizes its original 1938 central heating system. Work will start on the new systems in January, 2000 with completion anticipated by the end of the year. This contract was made possible through tax exempt lease financing at 5.61% for a ten-year term.

The second contract, valued at $7.3 million, provides for energy and water upgrades at the Archdale development in Roslindale, the Gallivan Boulevard development in Dorchester, the Orient Heights development in East Boston, the South Street development in Jamaica Plain, and the West Broadway and Msgr. Powers developments in South Boston. All of these developments receive operating monies from DHCD. Staff from DHCD assisted with the development of the bid solicitation and provided technical oversight leading to construction. Depending on need, these developments will receive new hot water and heating systems, installation of more efficient water systems and exterior lighting. Work for this contract was started during the summer of 1999 and encompasses more than 1,500 resident apartments. It is expected to be completed by the fall of 2000. This contract was made possible through tax exempt municipal lease financing by NORESCO at 4.3% for a ten-year term.

As an extension of these projects, the BHA has set up an energy advisory board to develop an energy and water efficiency master plan for the entire BHA portfolio. Several of the BHA energy partners have committed a total of $280,000 in financial and technical resources to this master plan project. Those partners include Rebuild Boston Energy Initiative, DHCD, Boston Edison, and Boston Gas. The U.S. Department of Energy and the Boston Water and Sewer Commission are providing additional technical assistance. The advisory board will hire an energy consultant to undertake a detailed energy audit of the entire BHA portfolio and develop a master plan. It is expected that the master plan will identify developments where future energy performance contracts could be undertaken as well as a full program of in-house initiatives for energy and water savings.

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