Partner Updates

As a city manager responsible for preparing the budget, unknowns are inevitable. Sure, you make plans and projections, but events beyond your control create challenges for you as the top operating official in a local government. Yet, some things are certain – the need for: jobs and economic development, planning for the future needs of the community, maintenance of current facilities, and the dreaded infrastructure renewal. How do you meet those needs while balancing an operating budget with minimal cushion to absorb fiscal challenges that could impact the City’s short and long term financial condition?

A recent example of a fiscal challenge is the drying up of monies from the federal government passage of two huge spending bills – the CARES Act and ARPA – as part of the response to the COVID-19 Pandemic. Many communities benefited from this funding for operating expenses, capital budgets, and maintaining staffing levels but this supplement is rapidly concluding, the band-aid is slowly coming off, so to speak. Is there a plan in place to address this challenge?

This phrase has been used in the past that, as a city manager, you deal with it and gain experience by learning to pivot. After all, the ‘to-do’ list of capital needs extends well beyond supplemental funding.

Energy Systems Group® (ESG) can assist with the pivot. We help our clients uncover opportunities to improve their bottom line so they can invest in and maintain their facility and utility infrastructure in a manner that levels out the fiscal unknowns.

Optimize Budgets, Minimize Costs

When times are tough, people find ways to scrimp. However, when cities put off essential infrastructure projects, it can lead to safety risks, a decline in resident and business confidence, increases in energy and insurance costs, and inflationary impacts later. But what can be done when budgets decline due to federal monies drying up or other reasons? There’s cost-cutting, which is always painful, or raising taxes/passing levies, a last resort, especially when inflation has left many families struggling.

ESG can find ways to reduce operating expenses, support your capital budget, and identify new sources of revenue.  Our strategy is to develop an understanding of your needs, challenges, and objectives and then dig through the budget to find pockets of money, locate areas of potential savings, and align solutions with your objectives.

ESG’s expertise goes beyond cost-reduction strategies. Our methods promote efficient decision- making so our customers can move rapidly from concept to engineering to procurement to project execution. We get customers to cost certainty on projects quickly.

Certainty includes something we deliver called performance assurances. ESG believes there is an increasing gap between what works in theory and what works in the real world. We deliver capital improvements that will operate as designed with intended contractual outcomes relating to system performance and achieving projected savings. So, if the project does not perform as we projected, ESG has a contractual obligation to make it right.

Simplifying the Procurement Process

At ESG, we aim to make the procurement process as seamless as possible for our clients. Local governments and organizations can easily advance projects through qualification-based selection methods without being tied to the low-bid process. For instance, in Ohio, local governments can contract for projects using a qualifications-based process. This allows them to select a partner based on professional expertise rather than the lowest bid. Additionally, as a qualified partner through Sourcewell, customers can directly procure our services without going through the formal, time-consuming bidding process because Sourcewell has already done the work. This streamlined approach saves time and ensures that the most qualified professionals handle projects.

There are other procurement channels, such as TIPS, offering even more flexibility for cities seeking to simplify project procurement. By leveraging these alternative procurement options, you can avoid the limitations of traditional low-bid methods, ensuring high-quality results and smoother project execution.

Let us handle the heavy lifting in finding the best ways to make your procurement process efficient and effective.

Ohio Success Stories

We’ve worked with multiple cities throughout Ohio. Because ESG orchestrates much of the heavy lifting involved with the projects, it makes it easy for local governments. With limited staff and resources, our turnkey solution with a single point of contact means a limited staff does not limit the possibilities. Check out these two success stories.

Infrastructure Renewal without Raising Taxes

Facing a range of complex challenges, the City of Huber Heights needed to modernize critical infrastructure, honor its commitments to taxpayers, but contend with 84% of unvoted debt spoken for from previous economic development investments. Aging HVAC equipment made it difficult for the city to maintain comfortable and healthy indoor environments, a critical need elevated during the COVID-19 pandemic. The typical, lengthy procurement process for capital improvements hindered its ability to address urgent modernization needs efficiently and keep up with growing demands. ESG was able to bring expertise to the table to expedite implementation through our direct procurement and project management capabilities.

We provided engineering, design, financing, construction, and project management services for the following project scope:

• Infrastructure renewal at eight buildings and several parks
• HVAC improvements
• Installing a city-wide Energy Management System
• Indoor Air Quality (IAQ) upgrades at multiple facilities
• Rebuild of two major intersections including drop lane
• Citywide interior lighting upgrade
• Replacement of emergency generators at two fire stations.

Through the solutions implemented by ESG, the City of Huber Heights was able to modernize eight buildings while also realizing savings of $949,000 in operational costs and $677,000 in energy costs over 15 years. The $3.3 million project capital improvement project was completed without new taxes.

Facility Renewal Results in Significant Savings on Operating Expenses

The City of Vandalia was seeking a partner to help them create a vibrant community, maintain sustainable fiscal practices, and leverage technology across the city. With original equipment in most major buildings, failure of A/C on the hottest week of the year made it clear that phasing the project over multiple years was off the table.

ESG supported the heavy lifting required to deliver fact-based recommendations to Council on “what now” and “what could wait”. ESG expedited engineering and development to lock down prices early in very volatile markets. Once implementation was complete, ESG developed a comprehensive plan so that future needs are identified, quantified and become part of the capital budget process.

The City was then able to understand its needs rather than be limited by an arbitrary budget placeholder. The results were a comprehensive facility renewal program.  It included:

• 100,000 sq ft of Roof Replacements
• HVAC System Upgrades
• LED Building and Street Lighting Retrofit
• Traffic Signal Maintenance and Interconnectivity
• Illuminated Overhead Street Signage
• Solar-powered walking path lighting
• Emergency generator for Municipal Building’s
• Emergency Operations Center (EOC)
• Comprehensive facility plan
• HVAC duct cleaning

Moving Projects Forward

As a City Manager, you’re constantly juggling the demands of the city and the available budget. While funding sources shrink or dry up, facility and utility infrastructure needs don’t. ESG helps cities overcome the financial barriers that block essential projects and achieve cost surety. Get ahead of what you are behind on, and invest in solutions that improve livability, workability, and resiliency with our unique funding strategy.

Many months of hard work, planning, and collaboration among various partners have been rewarded this spring as the DeWine Administration announced the results of the long-anticipated Appalachian Community Grant (ACG) Program.

Last week, Governor Mike DeWine, Lt. Gov. Jon Husted, and Ohio Department of Development (ODOD) Director Lydia Mihalik toured eastern and southeastern Ohio announcing $204 million in grants to 39 communities in the final awards of the ACG Program. The bulk of last week’s awards were part of $152 million to Ohio’s Wonderful Waterfronts Initiative with $52 million coming at the end of the week for a collection of waterfront, downtown, and recreational projects. A week earlier, the same leaders toured southern Ohio awarding $154 million for the Appalachian Downtowns and Destinations Initiative.

In March, the state announced that 28 ACG projects were funded through a $64-million award for the Appalachian Children’s Health Initiative that will create or expand school-based health clinics and launch healthcare-focused workforce development programs.

All in total, 97 project awards have been announced this year. These awards are on top of $80 million that was awarded during 2023 to a small batch of shovel-ready projects.

Collectively, the $500-million ACG should spark transformational developments across the 32 Appalachian Ohio counties through enhancements to recreation, tourism, downtown revitalization, healthcare, and workforce development. In addition to Administration officials, the Governor’s Office of Appalachia (GOA), the four Appalachian Local Development Districts (LDDs), procured planners, local officials, and applicants alike should all take some time to relish the unprecedented magnitude of these awards.

For the applicants, the real hard work starts now. What are the implications for the eligible winners?

1. With the American Rescue and Recovery (ARPA) clock ticking—all such funds must be fully spent by fall 2026—there is no time to rest as deadlines loom to complete projects. Planning all action steps now will save time, money, and avoid pitfalls.
2. Grant and subrecipient agreements will need to be executed.
3. If not already under contract, design professionals will need to be legally procured, and full designs will need to be completed. Permits may need to be secured and bidding documents will need to be drafted.
4. Construction contracts (traditional bid, design-build, or construction-manager-at-risk) will need to be executed. Plans will need to be made for construction supervision and fiscal oversight and controls.
5. Having a plan for prevailing wage compliance will be important.
6. If any hiring is required, appropriate HR policies and procedures will need to be in place.
7. Once built, required reporting must be administered to ensure the projects yield the public benefits promised.

As a long-time legal partner to many communities across Ohio, including many Appalachian counties, Bricker Graydon offers well-earned congratulations to all of the ACG project winners.

The Ohio Attorney General (OAG) released an opinion in March 2024, Opinion No. 2024-003, to clarify the kinds of services that may be procured under R.C. 9.48. The March 2024 opinion specifically references an OAG opinion released in August 2019, Opinion No. 2019-028, in which the OAG opined on the authority of a political subdivision to contract for construction services through joint purchasing programs under R.C. 9.48. With the August 2019 opinion, the OAG declared that a political subdivision cannot procure construction services pursuant to R.C. 9.48. Since its issuance, this opinion has had a significant limiting effect on joint purchasing programs that rely on procurements from out-of-state government entities, and it has had a corresponding limiting effect on political subdivisions within the state that have historically relied on those programs for procurement of construction services.  

In general, R.C. 9.48 allows political subdivisions to participate in (1) contracts entered into by another political subdivision, (2) joint purchasing programs, and (3) contract offerings from the federal government. Procurement pursuant to R.C. 9.48 is attractive to political subdivisions because such procurement is exempt “from any competitive selection requirements otherwise required by law if the contract in which it is participating was awarded pursuant to a publicly solicited request for a proposal or a competitive selection procedure of another political subdivision within this state or in another state.” Stated another way, a political subdivision can procure equipment, materials, supplies, or services pursuant to R.C. 9.48 without adhering to its own competitive procurement requirements, because another political subdivision has already done so.  

In the August 2019 opinion, however, the OAG determined that R.C. 9.48 could not be used to procure “construction services.” In making its determination, the OAG focused on 9.48(B)(1), which provides that a political subdivision may, for a fee, participate in a contract entered into by another political subdivision for “equipment, materials, supplies, or services.” The opinion notes that although the General Assembly had used the terms “construction” and “construction services” in other locations within the Revised Code, the General Assembly did not use those terms in the list of items that can be procured pursuant to R.C. 9.48. Due to this omission, the OAG determined that “construction services” cannot be procured under R.C. 9.48. The OAG opined that “[i]f the legislature intended to include ‘construction services’ in R.C. 9.48, it would have used the language to do so.” Id. at 4. Thus, according to the OAG, R.C. 9.48 does not provide an exception to the bidding statutes for construction services contracts.   

In the last five years following the August 2019 opinion, there has been little guidance as to what services are considered “construction services.” Based on the August 2019 opinion, a conservative interpretation of what would constitute “construction services” would include any typical construction-type improvements to facilities, such as roofs, flooring, HVAC, or lighting improvements. The March 2024 opinion clarifies that this is not always the case.    

Specifically, in the March 2024 opinion, the OAG considered what the General Assembly intended to be included under the term “services” contained within R.C. 9.48. The OAG concluded that “installation, maintenance, repairs and the like” are appropriately considered permissible “services” under R.C. 9.48, especially when they are procured with equipment, materials, and supplies under the program. By contrast, the OAG stated the word “construction” is commonly defined as “the process or art of constructing; act of building; erection; act of devising and forming; fabrication composition; also, a thing constructed; a structure.”   

Thus, the syllabus for the March 2024 opinion lands with a cautionary note, stating: “[w]hether any particular service acquired under R.C. 9.48, including any repair, maintenance, replacement, installation, or upgrade constitutes ‘construction’ or ‘construction services’ is a question of fact beyond the opinion-rendering function of the Attorney General.” Therefore, if you are a political subdivision in Ohio and plan to use a joint purchasing program to procure services for a building improvement project, you will want to work with legal counsel to determine whether the services sought are construction services and therefore prohibited from being obtained through a joint purchasing program, or rather, services limited to the “installation, maintenance, repair, and the like,” and ultimately permissible through a joint purchasing program.

Access the original article here.

After months of speculation, the U.S. Department of Labor (DOL) has published its long-anticipated final rule increasing the salary threshold for persons exempt from overtime requirements.  The new rule, which increases base salaries for the traditional white-collar exemptions (Executive, Administrative, and Professional) and the exemptions for Outside Sales and Computer Employees, was first proposed in September 2023.  In addition to the salary increases, the new rule maintains the requirement that a person meet the duties tests associated with each of these exemptions, as detailed in the Fair Labor Standards Act (FLSA).

Unless a person is expressly exempted from (carved out of) the FLSA’s requirement that overtime be paid for all work over 40 hours per workweek, an individual is ordinarily entitled to be paid 1.5 times their regular hourly rate for all overtime worked.  Since 2017, when the salary thresholds for exemptions were last updated by the DOL, a person has had to meet the duties tests of one of the above exemptions and also receive a fixed weekly salary of no less than $684 (annualized, $35,568 a year).  The overtime exemption for the highly compensated employees currently covers persons who perform office or nonmanual work and are paid at least $107,432 a year, including a weekly salary of at least $684.

When the current proposed rule was first announced in 2023, the proposal was to increase the salary floor to $82,732 by 2026.  Following the receipt of over 33,000 comments from employers and various trade associations objecting to these increases, the new rule, which will take effect July 1, 2024, will update the salary floor for persons exempted from the FLSA, but not to those levels.  The published rule:

• Raises the threshold for the white-collar exemptions to no less than $844 per week ($43,888 annual salary)
• Escalates the salary floor to no less than $1,128 per week (annualized, $58,656) on January 1, 2025, keeping in place the same duties tests
• Raises the salary floor for highly compensated employees from the current $107,432 to $132,964 on July 1, 2024, and $151,164 on January 1, 2025, to include a weekly salary not less than $844 and $1,128 in each year, respectively
• After 2025, automatic increases will occur every 3 years based on earnings data

The DOL projects the 2025 increase will impact 3 million workers.  It noted that these increases reflect the 35^th percentile of weekly earnings of full-time salaried workers in the southern United States, the lowest-wage region based on census data.

The new rule may face opposition in the courts, as the last salary increase did, but for now, employers should review their job descriptions and salary thresholds to ensure that exempt employees will remain exempt, or that employees who may lose the exemption due to the increased salary thresholds are either limited from working overtime or are paid for overtime work in accordance with the FLSA.

Read here.

When it comes to a city’s major capital improvement projects, city managers are often faced with tight budgets, inflationary pressures and looming deadlines. Add to that the need for stable and safe infrastructure that encompasses economic development through building revitalization, and long-term sustainability—all of which can lead to a lengthy and complicated procurement process.

At Energy Systems Group® (ESG), our processes are specifically designed to balance our design-build approach to project development and execution that is structured to promote efficient decision-making for our customers and a quicker path to procurement.

Saving Both Time and Money

Delivering a project as design-build means self-performing design and estimating in parallel with introducing specific contractors into the process early to maximize value. Doing so minimizes risk and time for design, scope development, cost estimates and, ultimately, the bidding process, if warranted.

This approach has proven to reduce the overall project delivery, including procurement and decision-making. ESG provides cost certainty through firm, fixed cost contracts where we take the cost risk, a particular value in the present, highly-variable, inflationary market.  ESG leverages this design experience to provide our customers with guaranteed building performance to maintain operating budgets and support sustainable construction.  Our approach expedites delivery through a design-build approach along with performance guarantees to create what we term  a sustainable capital improvement program.

Single Source of Accountability

The City of Vandalia is an example of having a single point of contact for risk and cost accountability. When a problem developed in a mission-critical building, ESG managed the details and took full responsibility to resolve the issues. Our relationships with equipment suppliers allowed ESG to leverage an effective and timely solution.  Similarly, we seamlessly delivered a project for the City of Huber Heights.  We protected them from costly change orders while addressing manufacturer delivery and quality issues – we owned it.

What’s Best for Your Budget

ESG’s goal is to help cities find ways to enhance revenue, save energy, and reduce capital and operating costs. Our depth of experience working within detailed, transparent project budgets maximizes value. Further, ESG has a committed team specifically engaged in identifying all available special funding, grants, and rebates to help support the project to minimize the need of appropriating money from future budgets.

ESG has the pleasure of working with the City of Fairborn where the project will use funds from the American Rescue Plan Act (ARPA). This project centers around repurposing an old, out-of-service fire station into a community space, providing amenities to help attract developers to invest in market rate housing in downtown Fairborn. The City capitalized on a sustainable capital improvement program to move through the procurement process quickly, which will position the project to be completed quickly and cost-effectively. Bringing this building back to life as quickly as possible will help the City of Fairborn support the revitalization of their downtown and create a connection to the corridor as this project becomes an important bookend to the development of downtown.

Taking Advantage of the Inflation Reduction Act

Another benefit ESG brings to the table is helping cities take advantage of federal dollars from the Inflation Reduction Act (IRA) to enhance facilities and lower operational costs. The IRA, newly rolled out in 2023, provides numerous tax credits to local government aiming to reduce their energy consumption and transition to renewable energy. ESG can help local governments navigate this complicated process, ensuring use of the $369 billion in federal funding and tax credits afforded through the Act.

Much like the iconic big, red Easy Button, ESG’s sustainable capital improvement program provides an easy solution for local governments. ESG’s “easy button” offers the benefits of cost savings and a quicker path to procurement, in addition to our understanding of legislation, funding and energy efficiency.

To learn more about how ESG can help determine if design-build is the right approach for your next project, contact Keith Valiquette, CEM, PE, LEED AP, Business Developer, at kvaliquette@esg.email or 937-602-6630.

Federal energy policy is making many new incentives available for local governments to fund energy-related assets. The Inflation Reduction Act (IRA), enacted in 2022, established a set of energy-related asset categories that are now being directly subsidized by the federal government. Under the IRA, nearly any advanced or renewable energy asset constructed by a local government is eligible for some kind of federal cash subsidy. (more…)

2023, the year of the rabbit in the Chinese zodiac, may well turn out to be the year of the CRANE (Community Reinvestment Areas in Need of Expertise) in Ohio. On January 2, 2023, Governor Mike DeWine signed Substitute Senate Bill 33, which, in large part, modifies not only the establishment and management of Community Reinvestment Areas (CRAs), but also the agreements for commercial and industrial projects that seek to take advantage of the property tax incentives the CRA program can offer. 

Cities Must Reinvest in Their Buildings

With today’s transient workforce, employees have the ability to work anywhere, and businesses today have more choices than ever in terms of where to locate. Selecting a site requires a lot of considerations — high speed broadband, cost and availability of transportation, utilities, incentives, taxes, as well as an available, trained workforce. So how does this relate to the condition of city hall?

Real Estate and Economic Growth

In addition to creating an attractive city image, investing in public facilities supports local real estate values, which can be a significant contributor to economic development. Government facilities can provide stability in real estate value that helps retain current residents while also attracting new residents. This retention and influx is important not just for property taxes, but also because it provides the necessary talent to support current and new businesses that will drive economic growth.

In addition to improving government facilities in regular use, cities can also focus on improving underutilized
or even vacant government-owned space that needs to be remodeled or repurposed. With the continued growth of government services or temporary programs like the American Rescue Plan Act (ARPA), a municipality can provide flexible and on-demand spaces for piloting new government programs or supporting the needs of community partners, which can further contribute to a growing, dynamic corridor.

Moreover, many cities tend to build a new building without necessarily demolishing the existing structure. In some cases, there may be an opportunity to save capital funds by carrying out an exterior facelift or complete renovation to the facility, whether that be an old fire station, public works building, or a commercial building purchased by the municipality for future development.

ESG Modernizes Municipal Infrastructure

We Handle the Details

ENERGY SYSTEMS GROUP® (ESG) has been helping cities address their facility needs for more than 25
years. Many cities fall behind on facility improvements and never present their best image because they get hamstrung by the development, procurement, and management required to execute these projects. ESG helps customers succeed by handling the heavy lifting and acting as the sole source of responsibility, managing the various development stages and parties involved in the project. We help create economics around projects that make sense, and we can help customers navigate supply chain and labor factors while integrating these into a workable schedule. We can help you, but it starts with a procurement process to select a partner like ESG to co-author a plan that aligns with your goals.

Our Collaborative Approach

Our approach is collaborative. At the conceptual stage of a project, we listen to our customers to understand their external pressures and how they are impacting their goals. We are skilled at listening to customer goals and packaging a technical and financial plan around achieving them using existing legislation to support the procurement. We identify, integrate, and implement comprehensive technology solutions that drive revenue, reduce costs, and promote security and sustainability.

When cities and local governments invest in critical government facilities and assets, they create an image that is broadcast to the outside world.

Keith Valiquette

CEM, PE, LEED AP

Energy Systems Group

www.energysystemsgroup.com