Revolving Funds for Sustainability Projects at Airports (2019)

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79 The GRF model is already well established across many different types of institutions, including higher education, K–12 schools, city and state governments, hospitals, and faith organizations. GRFs have been most commonly used and popularized on college and univer- sity campuses. The longest-running GRF was established in 1980 by Western Michigan Uni- versity, where it continues to provide financing to energy- and resource-efficiency projects. Research conducted by the Sustainable Endowments Institute into GRFs in higher education identified 79 GRFs in operation in 2012 (Flynn et al. 2012). Ongoing research suggests that as of 2017, at least 140 GRFs are in operation in various sectors across the United States and Canada. The following case examples explore how GRFs have been established at different institutions and illustrate the impact they can have in a short period of time. Additional case examples can be found at http://greenbillion.org/resources/#case-studies. C.1 Non-Airport Case Examples The City of Santa Barbara The city of Santa Barbara’s revolving fund (covered by the Utility Management Program Revolving Fund) was launched in 2016 and is aimed at financing EE/RE that would otherwise be constrained by the city’s limited capital budget. An outside consultant was hired to research the revolving fund concept and facilitate stakeholder collaboration. Because of the city’s reluc- tance to structure the capital disbursed from the fund as a loan, the fund is recapitalized only if annual energy expenditures are lower than the city’s projected energy budget for the year, with the difference revolving to the fund. The fund is not currently open to enterprise departments, which manage their revenue and costs independently (such as the local airport). Santa Barbara hopes to open the fund to enterprise departments in the future. This case example is relevant as an example of a revolving fund hosted by a local municipality with an airport. Harvard University The Harvard Green Loan Fund demonstrates the long-term stability and significant financial impact enabled by GRFs. Originally capitalized with $1.5 million in 2001, average annual returns of 30% on sustainability projects convinced administrators to expand the fund several times. It now stands at $12 million, and as of 2011, had saved Harvard $4.8 million annually while reducing the campus’s environmental footprint. This case example is adapted with permission from the Sustainable Endowments Institute’s Green Revolving Funds in Action case study series (Foley 2011). A P P E N D I X C Case Examples

80 Revolving Funds for Sustainability Projects at Airports Denison University The Green Hill Fund at Denison was established in 2011 after staff from the sustainability, facilities, and finance offices crafted a joint GRF proposal. The Denison administration’s strong commitment enabled a rapid start for the fund, pointing to what is possible when institutional decision-makers believe in the GRF concept. In its first 2 years, the GRF financed 49 lighting upgrades and has since been expanded from $1 million to $3 million. This case example is adapted with permission from the Sustainable Endowments Institute’s Green Revolving Funds in Action case study series (Blank 2014). Lane Community College Lane’s Energy Carryover Fund has equipped Lane Community College to pursue its insti- tutional sustainability goals. Through its first 8 years of operation, the fund had an average ROI of 23%. Lane has since restructured the fund to grow over time by maintaining project payback for 3 years beyond full repayment of the project cost. This case example is adapted with permission from the Sustainable Endowments Institute’s Green Revolving Funds in Action case study series (Flynn and Silverstein 2014). C.1.1 The City of Santa Barbara—Utility Management Program Revolving Fund Summary The city of Santa Barbara Energy Team (part of the city’s Public Works Department) oper- ates the Utility Management Program, a revolving fund that supports investment in EE/RE projects at city facilities. The revolving fund launched in July 2016 and has a unique structure that allows it to fit into existing departmental and budget allocation structures. This case exam- ple examines the revolving fund’s creation, structure, and operational principles (A. Parenteau, personal communication, Dec. 4, 2017). History In 2014, the city of Santa Barbara Energy Team had a backlog of potential EE/RE projects that it was unable to fund because of limited city capital budgets. To overcome this hurdle, the Energy Team envisioned the creation of a revolving fund to be used for dedicated invest- ments in city EE/RE projects. The city hired an outside consultant to conduct initial research and stakeholder engagement, and then to develop an appropriate concept for a new revolving fund (A. Parenteau, personal communication, Dec. 4, 2017). Today, the fund covers only projects implemented by general fund departments, but the Energy Team hopes that it will be expanded to enterprise departments in the future. Enterprise departments generate their own revenue through fees for goods or services. Departments sup- ported by general funds rely on tax receipts for funding. Municipalities typically keep enter- prise funds and general funds separate to ensure that fee-based services are self-sustaining. For example, the airport in Santa Barbara is an enterprise department that generates its own revenue (A. Parenteau, personal communication, Dec. 4, 2017). The revolving fund does not make loans at this time, given municipal concerns regarding a loan model structure. Instead, the fund provides capital funds for projects and captures utility budget savings over an open-ended timeframe. The term “loan” is not used. Operations Fund Governance Structure. The Energy Team manages the fund. It is structured as an EE/RE capital projects account held by the city of Santa Barbara.

Case Examples 81 Project Approval Process. The Energy Team manages project sourcing through multiple channels. First, there is a team of citywide energy ambassadors—City employees in various departments—tasked with informing energy decisions and coaching their departments on energy-saving behavioral changes. These energy ambassadors identify project needs and report back to the Energy Team. The Energy Team also proactively identifies energy-saving opportuni- ties (such as LED street lighting) as part of the city’s zero-net energy plans. Projects may also address immediate needs (e.g., an HVAC system fails and needs replacing). After identifying the potential projects, the Energy Team reviews and approves them in conjunction with the energy ambassadors (A. Parenteau, personal communications, Dec. 4, 2017, and Dec. 8, 2017). Project Criteria. There are no formal criteria for project funding through the Utility Management Program. However, the revolving fund supports projects with a simple payback of 5 years or less. Implementation Process, Savings Tracking/Revolving Process, and Accounting. Once a project is approved, funds are allocated from the revolving fund’s EE/RE capital projects account. For the purposes of the revolving fund, the Energy Team tracks savings at the citywide utility budget level against projected electricity and natural gas budgets. The city creates the utility budget projections based on an average of the previous 3 years of electricity and natural gas bills, plus an escalation factor of 3%. As EE/RE projects are implemented, actual utility expenses should decline, creating a surplus. At the end of each fiscal year, the city reviews actual utility expenses versus the projected budget and transfers any unused surplus to the revolving fund’s capital projects account. There is no time limit within which an individual project must be fully repaid; instead, the city council reviews the amount to be revolved each year and adjusts that amount, if needed. This budget projection-based model theoretically leaves the revolving fund at risk, if utility expenses exceed projections; in such a case, the city could use the fund’s capital balance to cover utility expenditures exceeding projections. The Energy Team tracks individual project performance and city utility expenditures monthly to ensure performance (A. Parenteau, personal communications, Dec. 4, 2017, and Dec. 8, 2017). Project Spotlight To build its initial capital balance, the fund spent its first year in operation evaluating city utility accounts to ensure that they were operating on the most beneficial rate structure. This process resulted in more than $60,000 in rate savings alone. Additionally, the city began upgrading its streetlights to LEDs. One hundred city-owned streetlights were converted from 150-watt fixtures to 50-watt fixtures, saving the city $5,000 per year (A. Parenteau, personal communications, Dec. 4, 2017, and Dec. 8, 2017). Performance The revolving fund reports performance annually to the city council. It completed its first full year of operation in July 2017. In the 2016–2017 year, the fund invested $25,000. Utility savings for 2017 totaled $87,459, mostly from utility rate optimizations. The total fund bal- ance currently sits at $208,159, as a result of revolved savings and general fund allocations (A. Parenteau, personal communications, Dec. 4, 2017, and Dec. 8, 2017). Conclusions The city finance director, the city budget manager, and the city Energy Team were all crucial stakeholders to the successful creation of the fund. The Energy Team prefers payments structured as surcharges—for example, as an energy efficiency line item on electricity bills. Structuring payments as surcharges prevents the fund

82 Revolving Funds for Sustainability Projects at Airports capital balance from being at risk for utility overages caused by factors outside of the Energy Team’s control, such as behavior changes that lead to increased energy use. C.1.2 Harvard University—Green Loan Fund Summary The GLF at Harvard University has been an active source of capital for Harvard’s Schools and departments to implement high-performance campus design, operations, and mainte- nance projects. The GLF has accelerated the implementation of cost-effective EE/RE projects across campus. It has provided a dedicated source of capital for energy efficiency projects, allowing facilities to overcome the challenges of competing priorities for capital renewal proj- ects within a constrained budgetary environment. The GLF has successfully financed projects that save the university electricity, natural gas, water, and waste disposal fees, along with other operating costs. This case example examines the GLF’s history, starting in 2002, when it was one of the first to be adopted by a higher education institution (although the fund existed as a pilot project start- ing in 1992). The GLF has been a successful self-replenishing tool for encouraging Harvard’s facilities and operations teams to invest in projects that strengthen the university’s research and teaching mission through cost savings, efficiencies, and resource conservation. Originally funded by the President’s Office at $1.5 million as a pilot project, the GLF’s size was thrice doubled, eventually becoming the $12 million fund that exists today. Harvard’s GLF has served as a model for other institutions and has been a foundational tool for helping the university meet its ambitious emissions reduction goals. History Harvard’s GLF is reviewed on an ongoing basis to ensure it continues to meet the needs of the university’s stakeholders and the evolving demands of the university’s climate and energy commitments. Changes that have been made as the GLF evolved over time include the following: • The GLF has increased from the original $1.5 million to the current value of $12 million today, as demand for the fund grew. • It has moved from requiring a simple payback analysis to requiring life-cycle cost (LCC) analysis (using Harvard’s own LCC calculator). • The GLF has increased the allowable repayment period from 5 years to 11 years. • Funds can cover the full cost or the incremental cost of a conserva- tion measure. • The fund was interest-free until 2007, when a 3% administrative fee was added to defray administrative costs of the GLF and pay for initial consulting to ensure project teams followed Harvard’s Green Building Standards. Based on feedback from university stakeholders, the fund has returned to providing interest-free capital because the administrative fee proved to be a significant barrier to using the fund. Operations Approving Project Proposals. The first step for an applicant wishing to utilize the GLF is to complete an LCC analysis of the Harvard Green Loan Fund Overview YEAR CREATED 2001 SIZE $12,000,000 SOURCE Offices of the President and Provost AVERAGE PAYBACK PERIOD 3 Years ADMINISTRATORS Office for Sustainability AVERAGE RETURN ON INVESTMENT 30% TOTAL SAVINGS >$4.8 Million Annual Savings

Case Examples 83 project using Harvard’s LCC tool, which is populated with established university discount rates, energy escalation estimates, and other financial assumptions. After an applicant sub- mits a proposal, the project then goes through an internal approvals process, which includes review by the Office for Sustainability (OFS), Green Building Services (GBS), Campus Services Finance, and the Vice-President of Campus Services. The project can be modified to address any concerns that are raised during the approvals process. Once a loan is approved, the applicant moves forward with the project and sends paid invoices to the OFS, which issues the loan in the form of an internal fund transfer. The recipient of the loan begins repaying the loan at the start of the subsequent fiscal year, according to a payback schedule determined by the cost of the project and the annual cost savings. The fund will only reimburse projects that are successfully completed. For actual results, see Table 11. Types of Loans and Loan Criteria. There are two primary categories of loan types: (1) GHG/utility reduction loans and (2) innovation loans. Projects are eligible projects if they include the following: • Reduce GHG emissions • Reduce energy use • Reduce water use • Reduce sewage or stormwater Note: This table highlights several measures of the GLF’s performance over the years, including the average ROI of all loans issued so far for almost a decade, as well as some data on the performance of the Resource Conservation Incentive Program. Average annual ROI figures are based on highly detailed engineering estimates of the projected resource, maintenance, and cost savings resulting from the projects. Table 11. Harvard University GLF performance.

84 Revolving Funds for Sustainability Projects at Airports • Reduce pollutants • Improve operations • Educate occupants • Install renewable energy • Purchase electric vehicles These projects are subject to the following rules: • Applicants must use Harvard’s LCC for GHG emissions or utility reduction projects. • Disbursed funds are repaid based on estimated annual savings. • Applicants must pursue rebates or incentives. • Projects must have a SIR of 1 or greater and be NPV+ (savings to university). • Disbursed funds up to $1 million will be considered. • Disbursed funds must be paid back within 11 years. • Funds must be drawn within 1 year of the approval of the application. • Applicants need to provide a revised application, if there is a change of scope requiring addi- tional funds. • Multiple conservation measures can be combined in one application. • Funds can cover the full cost or the incremental cost of a conservation measure. • Applicants are required to provide data verifying performance of implemented projects. • Renewable energy and electric vehicle projects qualify for GLF loans regardless of the entire project’s payback period. Performance These projects have produced a healthy annual ROI. Other highlights include the following: • 225 projects funded since 2002 • Total of $26 million disbursed from the fund since 2002 • $7 million total annual savings to the university as of 2018 • Overall simple payback of 3.6 years (with many individual projects significantly longer than this) Project Spotlight Harvard Business School (HBS) used the Harvard GLF to install a 75kW cogeneration unit, along with infrastructure for the future installation of a second 75kW unit, in the basement of Shad Hall. The cogeneration units were installed to increase Shad Hall’s overall energy efficiency and to substantially reduce energy expenses by simultaneously producing heat and electricity. The project had a payback of 4 years and resulted in an estimated reduction of approximately 769 metric tons of CO2. The natural gas fired unit routes exhaust heat-to-heat exchangers that warm water for the entire domestic hot water heating load for showers. The unit feeds electricity into the building’s main electric grid, supplementing building power provided from the grid and by photovoltaic panels on the roof. Conclusions Since its inception, the GLF has strengthened the university’s research and teaching mission through cost savings, efficiencies, and resource conservation that help meet ambitious climate change and sustainability goals. The GLF fund has helped extend the reach of sustainability initiatives across the entire university by funding projects that deliver measurable and positive environmental change on campus. OFS regularly reviews the GLF to ensure it fits within larger institutional sustainability com- mitments and goals. In February 2018, Harvard announced the next generation of its ambitious

Case Examples 85 climate goals, striving to become fossil-fuel-neutral by 2026 and fossil-fuel-free by 2050. Because many “low-hanging fruit” projects have been completed, the university is now at a turning point where projects with higher costs and longer paybacks must be encouraged. The future of the fund will have to evolve to address these developments in support of Harvard’s research and teaching mission. These may involve expanding the evaluation criteria to focus on innovation and new technology, in addition to longer payback periods to accommodate costlier, higher impact projects. C.1.3 Denison University—Green Hill Fund Summary Denison University’s Green Hill Fund (a GRF) began in 2011 and was the product of col- laboration among sustainability, facilities, and finance staff. The fund has leveraged Denison’s commitment to reduce energy use and increase the number of opportunities for efficiency projects on campus to become a key driver for capital improvement and achieving carbon neutrality by 2030. The fund has drawn primarily from a project pipeline established by facilities staff through auditing from an outside company and is overseen by the Director of Sustainability and Campus Improvement. Throughout its design and implementation, the Green Hill Fund has benefitted from the support and encouragement of decision-makers at all levels of Denison’s administration. This support has enabled the fund to identify projects, build its operating and accounting structure, and invest hundreds of thousands of dollars in a relatively short amount of time. Initial projects focused on lighting, HVAC, and improving metering on campus, and staff are beginning to consider more comprehensive retrofits, as well as solar and geothermal for the future. History Denison University performed a university-wide energy audit in early 2011 with an outside company, Perfection Group, to assess the energy conservation measures (ECMs) that Denison could implement. Additionally, in early 2011, Denison’s Campus Sustainability Coordinator was introduced to the GRF model through the Billion Dollar Green Challenge. Denison staff looked at energy performance contracts but preferred direct funding to secure the savings immediately. At the end of the 2010–2011 fiscal year, Denison’s Plant Adaptation and Renewal Funds (PAR Funds)—a portion of the annual operating budget spent on capital improvements—had approximately $1 million remaining. The university typically budgets about $7 million a year for PAR Funds, which enable Denison to maintain the physical plant and minimize deferred maintenance. The campus viewed this as an optimal opportunity to seed a revolving fund, because energy efficiency projects often overlap with the capital improvements that PAR Funds typically finance. The Sustainability team sought to calculate the potential ROI from the energy audit’s proj- ect opportunities to build its case for a GRF at Denison. The team then pitched the idea to the university president, who approved of the projected financial savings and allocated a portion of the PAR Funds and some designated and restricted gifts to capitalize Denison’s fund with $1 million. In summer 2011, the Green Hill Fund began financing projects. Operations Identifying the First Round of Projects. During the first 2 years of the Green Hill Fund’s operation, Denison decided to install projects, even if tracking and measurement systems were not yet in place. The campus was in an especially strong position to launch the fund, as it already

86 Revolving Funds for Sustainability Projects at Airports had a list of ECMs identified through its 2011 energy audit. With additional input from the facili- ties team, Denison assembled an initial list of 70 ready-to-implement projects. Denison’s practice of implementing projects ahead of its ability to track savings did not hinder the Green Hill Fund’s operation. The fund’s managers decided to base repayments to the GRF on estimated savings, until more precise measurement was in place. Denison was thus able to move forward on projects that created both cost savings and a visible impact on campus, while simultaneously developing the mechanisms for tracking energy savings. Choosing the Right Projects. Potential projects for the Green Hill Fund are evaluated according to multiple criteria: • Low implementation cost • High opportunity for cost savings • Estimated payback period • Ease of implementation (time, complexity, disruption) • Significant GHG emissions reduction • Significant educational or research potential • Significant social benefit beyond carbon • Opportunities for partnership and collaboration within Denison and with the surrounding community • High campus stakeholder buy-in and participation • Ability for long-term success Managing the Green Hill Fund. The GRF team follows a guiding document that outlines the operating procedures of the fund. Once a project has been approved, the Accounting Office will direct funds from the GRF into a project-specific account. Depending on the project, the Facilities Services Department or an outside contractor will handle implementation and install equipment. Different members of the GRF team are responsible for tracking rebates for the Green Hill Fund, man- aging project implementation, and tracking project-related savings. Simple Tracking and Accounting. The Green Hill Fund’s measure- ment of energy- and resource-savings is based on both realized and esti- mated data. Obtaining realized data for some projects is simple because most campus buildings have electricity submeters installed. Savings cal- culations take into account previous university spending on electricity over the past 3 years and any changes that occurred after project instal- lation. While no individual ECM (e.g., a lighting upgrade) is attached to a meter, Denison uses both engineering estimates and real-time whole- building data to calculate the amount of energy savings. In the future, Denison plans to normalize its estimated savings data for weather varia- tions, providing an even more accurate view of a project’s impact. More Meters, Better Tracking. The Green Hill Fund also invests in projects that improve metering on campus to increase the level of pos- sible M&V for the fund. One such campus-wide project will help many future HVAC projects observe energy use. By installing condensate flow meters around campus, a $36,102 project, the facilities team will be able to measure steam usage from all buildings. Each meter is attached to five or six buildings, and steam savings at the building level can be estimated based on this data. While implementing these meters does not result in direct financial savings for the university, the meters will improve Green Hill Fund Overview YEAR CREATED 2011 SIZE $3,000,000 SOURCE Plant Adaptation and Renewal (PAR) Funds, a Portion of the Operating Budget AVERAGE PAYBACK PERIOD 5.8 Years ADMINISTRATORS Campus Sustain- ability Coordina- tor, Director of Facilities, and Vice President of Finance and Management AVERAGE RETURN ON INVESTMENT 17%

Case Examples 87 diagnostic capabilities to determine the efficiency of the system and steam savings from the Green Hill Fund and additional projects. The fund plans to recoup the project cost of these meters by bundling it with other projects that have faster paybacks and higher returns. Project Repayment Process. The Green Hill Fund verifies energy savings at the end of each fiscal year and then makes a payment from the utilities budget to the GRF based on 100% of the calculated project savings. This savings payment will continue each year until 100% of the project cost has been recouped by the Green Hill Fund. During a project’s repayment period, Denison maintains the utilities portion of the operating budget so that it can continue paying back cost savings to the Green Hill Fund. Once the project has been repaid and the annual cost of utilities has decreased, savings accrue to the operating budget. Based on these savings, increased utilities prices, and overall campus utility use, Denison can determine how much to decrease the operating budget. Performance Cumulative Project Data. With dozens of projects to finance during the first 2 years of the fund’s operation, Denison invested $1,232,000 toward its GRF projects. During that period, it also received $133,562 in rebates, mainly from its utility company, American Electric Power, as well as a small amount from the EnerNOC DemandSMART program. In the first two fiscal years of the Green Hill Fund, Denison saved $301,523. Denison cal- culated that this avoided approximately 19,590.9 million British thermal units (MMBTUs) or 5,741,500 kWh in energy use; these figures result from both electricity and natural gas savings. With these savings, Denison will be able to reduce its annual carbon emissions by 6.9% (using the 2013 fiscal year as a baseline), supporting Denison’s Presidents’ Climate Commitment goal of carbon neutrality by 2030. The average annual ROI for projects funded in the first 2 years was 17.7%, with an average project payback period of 5.8 years. Investing to Identify More Projects. In 2013, the Green Hill Fund took a chance by invest- ing in two large projects with no direct payback: the condensate flow metering system and a study on the heating plant. The heating plant study was conducted to determine the economic feasibility of switching to natural gas or building a cogeneration facility as opposed to operating on coal as it does currently. Despite no direct cost savings, these projects were chosen because of their ability to help identify and track other Green Hill Fund projects. Project Spotlight Residence Hall Lighting Projects. In fall 2011, Denison used $375,025 from the Green Hill Fund on materials and labor to update lighting in all 33 campus residence halls. These lighting upgrades had been identified in the campus energy audit during summer 2011 and chosen by Denison for their combined estimated payback period of approximately 4 years. For the upgrades, estimated savings were cal- culated by assuming that the residence hall lighting would be on for at least 8 hours a day, which was chosen because lights are typically only used for a few hours during the daytime and used 4 to 6 hours at night. These upgrades were installed in hallways and in students’ rooms, as well as some exterior lighting. Perfection Group, an outside com- pany, conducted the installations. The work involved switching out T-12 fluorescent bulbs with more efficient T-8 bulbs; in some cases, they installed even higher efficiency T-5 bulbs. The increased brightness from the upgrades meant that in a small number of fixtures, the lighting Residence Hall Lighting Projects INSTALLATION COMPLETED December 2011 Average Project Cost: $11,373 per building SIZE $375,025 SIMPLE PAYBACK 5.4 Years AVERAGE RETURN ON INVESTMENT 10.3%

88 Revolving Funds for Sustainability Projects at Airports could be reduced from four bulbs to two or three. Exterior lighting was upgraded from halogen or metal halide to LED. The lighting upgrades received $54,381 in rebates from the local utility, American Electric Power Company, which were applied back to the Green Hill Fund. The cost for materials and labor in each residence hall varied greatly, with project costs from $513 (in Shannon House, 1,800 sq. ft.) to $50,604 (in Shepardson Hall, 39,073 sq. ft.). The residence halls range in size from a single-family home to a building housing hundreds of students. The average project cost per building for these lighting upgrades was $11,373.13. Bundling Payback Periods. The payback periods for upgrading each residence hall ranged from 1.3 years (Beta House) to 19.9 years (Huffman Hall). Denison estimates the average (mean) payback period for these projects to be 5.4 years, with a median of 4.3 years. The range in pay- back periods is due to several differences between the buildings including square footage, prior lighting efficiency, and cost of technology for each upgrade. Denison financed lighting upgrades in residence halls at the same time to bundle shorter- and longer-term payback periods, which allowed implementation of projects with longer-than- normal payback periods. Impact of Denison’s Lighting Upgrades. Overall, these upgrades save the campus more than 877,889 kWh per year, an annual financial savings of approximately $66,672 per year. The average lifetime ROI for these projects was 103%. For this calculation, a conservative 10-year lifespan was assumed for the lights, although it is possible that many of the lights will last longer. The project has reduced Denison’s GHG emissions by approximately 801.5 metric tons of carbon dioxide equivalent (CO2e) emissions annually. To inform the campus, an email notification went out about these lighting upgrades that detailed the financial and environmental returns the projects would provide. The community has noticed, too, with some Denison students reporting a better quality of light in their dorms. Conclusions Reducing Campus Energy Use. The impact of Denison’s GRF projects can be easily seen when looking at campus energy use, normalized for weather, over the past few years (see Fig- ure 14). Significantly, the campus MMBTU/square footage/degree day has gone down 13.5% between 2008 and 2013. The reductions that occurred during the 2011 academic year and the 2012 academic year correlate with the inception of the Green Hill Fund and the implementation of GRF and other efficiency projects across campus. The projects came at a crucial time for the university, as electricity prices rose 33% (from $0.06 to $0.08 per kWh) between 2011 and 2013. By making its buildings more energy efficient, Denison will counteract the rising utility bills that it would otherwise have incurred. Growing the Fund. The community at Denison views the Green Hill Fund as an innovative tool for funding many efficiency projects on campus, to the extent that it would benefit from a larger budget. In fall 2013, Denison made the decision to grow the Green Hill Fund from $1 mil- lion to $3 million in the coming years, by adding $500,000 annually from PAR Funds. “We were convinced that we were early enough in these efforts that it won’t be challenging to find $3 million worth of good projects to do,” commented the then-Vice President of Finance and Management. Denison’s Campus Sustainability Coordinator also supported growing the fund as a way to finance more projects sooner stating, “This allows us to think a bit bigger each year.” As of 2018, the fund stands at $2.8 million with investments in 124 projects, resulting in an annual utility savings of $527,000. Since the fund’s inception in 2011, Denison has realized a 28% reduction in energy usage across campus.

Case Examples 89 C.1.4 Lane Community College—Energy Carryover Fund Summary The Energy Carryover Fund, Lane Community College’s (Lane’s) GRF, was created in 2006 with an allocation of $166,000 from surplus funds in the college’s utilities budget. The GRF has helped Lane meet its sustainability goals and formalize a process to identify energy efficiency projects. Since its creation, the Energy Carryover Fund has gone through operational and struc- tural changes as Lane learned how to best utilize it. It was restructured in January 2016 to estab- lish stronger repayment standards and was renamed the Living Green Revolving Fund; however, this case example examines the fund’s original form. The Energy Carryover Fund was administered by the Vice President of College Services, the Energy Analyst, and the Sustainability Coordinator. The fund had an average ROI of 23% and achieved a total of $113,000 in savings as of 2014. It also provided an opportunity to engage students in Lane’s renewable energy program, enabling them to gain hands-on learning expe- rience in selecting and implementing projects. History A Strategy to Reduce Energy Use. Before Lane adopted sustainability as a core value in 2007, its Vice President of Operations formally created a campus GRF. The fund, known as the Energy Carryover Fund, tracked the transfer of leftover money in the college’s utilities budget and used it to finance EE/RE projects on campus. The Vice President recommended that the fund invest in strategies that would reduce energy use and enable Lane to seed a portfolio of renewable energy projects in which students could participate. The GRF concept was also chosen as a method to hedge against the school’s rising energy costs. The first step in implementing the Energy Carryover Fund was to record estimated cost and projected annual and total financial and energy savings (in MMBTUs) for 21 proposed projects. These projects included lighting efficiency upgrades, photovoltaic installations, and direct digital controls (DDC) commissioning. Reallocating Savings from the Utilities Budget. Lane’s initial GRF was structured differ- ently than the typical GRF. While a traditional fund loans money for specific energy or resource Figure 14. Total heating and electrical energy consumption at Denison University.

90 Revolving Funds for Sustainability Projects at Airports projects and tracks the cost savings from each effort in a dedicated account, the Energy Carry- over Fund was replenished by the leftover money between the operating expenditures at the end of each fiscal year and the projected annual energy savings (and related incentives) in dollars, which was then earmarked for energy efficiency projects. At the fund’s inception, the college did not have comprehensive building submeters installed on the main campus, so to track energy savings, Lane developed a calculation for establishing annual energy savings based on an energy use benchmark from 2005 and the current year’s energy prices. Because of the fund’s atypical structure, it was less insulated from the college’s budget pressures, which caused the fund balance to fluctuate. Operations Managing the Fund. Lane’s GRF is managed within its Institute for Sustainable Practices (ISP) by the Energy Analyst and Sustainability Coordinator, who are responsible for the fund’s day-to-day administration. Previously, the Energy Analyst had coordinated the fund within Lane’s facilities department but, in 2013, the role transitioned to the ISP. This allowed the Energy Analyst to dedicate more time for data collection and analysis of campus projects. Project Criteria and the Project Selection Process. Potential proj- ects are chosen from a prioritized master list drafted by the Energy Analyst with help from energy management students, as part of a class requirement. Projects are prioritized and considered for approval based on the following set of criteria: • Projected resource savings • Funding availability • Availability of incentives • Expected life of the project • Financial payback • Creation of educational opportunities • Timing within the academic calendar • Availability of technical support to implement and oversee the project • Ease of project maintenance • Health and safety implications • Support of Lane’s core values • Support of Lane’s climate commitment If Lane decides to hire an external contractor, that expense is included in the total project cost. The Energy Analyst is then respon- sible for tracking and monitoring the performance of the energy conservation measure or renewable energy project over time. These criteria allowed the college to plan multiple years of work and estimate energy use and the potential energy savings from Energy Carryover Fund projects. Lane keeps its decision-making process informal intentionally. A small committee consisting of Lane’s Facilities Director, Budget Officer, Sustainability Coordinator, Energy Analyst, Chief Financial Officer, and lead faculty in the energy management degree program makes decisions on a case-by-case basis. The committee relies on methodology outlined in a flowchart (see Fig- ure 15) to determine which projects to fund. The flowchart takes into account opportunities for energy savings, projected project payback, and available incentives to ultimately decide whether or not a project should be funded. Energy Carryover Fund Overview YEAR CREATED 2005–2006 SIZE $124,900 SOURCE Unused Utility Budget from 2005. Incentives from Local Utility, and Capital Outlay Funds AVERAGE PAYBACK PERIOD 3 Years ADMINISTRATORS Vice President of College Services, Energy Analyst, and Sustainability Coordinator AVERAGE RETURN ON INVESTMENT 23%

Case Examples 91 Performance Lane has made strides in reducing the campus’ overall environmental impact through the implementation of its GRF. The college has realized consistent annual returns from low-hanging fruit projects, such as the installation of plug load controls, compact fluorescent lamps, low- wattage space heaters, and strategic heating and lighting use. These GRF projects have decreased Lane’s overall building energy consumption but required little change in day-to-day activities for campus users. Overall Impact. By 2014, the eight projects financed by the Energy Carryover Fund had reduced campus energy consumption by an estimated 8,211 MMBTUs. At that time, the largest project financed by the fund was the DDC Commissioning project. For more information, see the Project Spotlight section. Figure 15. Lane Community College GRF decision flowchart (July 19, 2012).

92 Revolving Funds for Sustainability Projects at Airports Project Spotlight In July 2008, Lane completed a recommissioning project in 17 campus buildings. The project was a continuation of a previous 2004 upgrade from the building’s pneumatic mechanical controls to DDC. The upgrade created a hybrid system that kept pneumatic con- trols on the building’s mechanical equipment (like dampers and actua- tors) and translated air signals into digital control. This change allowed for staff-centralized control of the entire building from a remote loca- tion via a computer network. Energy savings from the project were realized by strategically scheduling building mechanical equipment with the centralized DDC system according to the occupancy needs. The DDC project payback period was less than 3 years. Over the life of the project, Lane estimated savings of approximately $212,000 and an annual ROI of 37%. Conclusions Increased Identification of Projects through the GRF. By instituting a GRF, Lane’s staff was given time to plan and compile a longer, more comprehensive project list and create a tracking system for the projects. The list has also allowed Lane to benefit from GRF-financed projects that advance the college’s sustainability goals and capitalize on shovel-ready projects outside of the GRF, if additional financial resources become available. Importance of Clear Fund Guidelines. Lane recommends establishing clear fund man- agement guidelines and operating practices early to ensure that the GRF runs smoothly. The Energy Carryover Fund initially faced several barriers, because of the fund’s dependence on the annual transfer of utility funds. However, Lane met an unanticipated situation when there were no leftover funds from the operating budget after the first year of operation. Year-to-year budget pressures, external factors, and internal funding competition also restricted the amount that was allocated to energy efficiency. In January 2016, Lane instituted operating guidelines to anticipate contingencies like this, established a separate GRF account, and now performs M&V for nearly all GRF projects. Thus, the Energy Carryover Fund was transformed into the Living Green Revolving Fund and has since been insulated from budget pressures even as the college has experienced budget shortfalls. The GRF has been successful at promoting EE/RE projects, such as learning labs on campus, and encouraging student participation in renewable energy projects. The GRF investment also helped Lane infuse dollars and staff time into small but meaningful projects that otherwise may have gone unfunded. The fund has become an important tool to help achieve the college’s climate commitment goals. C.2 Airport-Related Case Examples Hartsfield-Jackson Atlanta International Airport Sustainability staff at Hartsfield-Jackson Atlanta International Airport (ATL) set up an account intended to be a GRF outside of the airport’s operational and capital budget. However, the account, called the Sustainable Resource Fund (SRF), has yet to be capitalized. Staff are exploring various ways to capitalize the account. When ATL starts to make planned invest- ments, SRF will likely become the first airport GRF. Project: Direct Digital Controls Commissioning INSTALLATION COMPLETED 2008 PROJECT COST $32,088 SIMPLE PAYBACK 2.27 Years AVERAGE RETURN ON INVESTMENT 37.3% ESTIMATED ANNUAL SAVINGS $14,115 ESTIMATED SAVINGS TO DATE $85,748

Case Examples 93 Virginia Airports Revolving Fund Research into funding at Virginia airports focused on the Virginia Airports Revolving Fund (VARF) administered by the Virginia Resources Authority (VRA). VARF is a state-managed revolving fund that finances airport projects but is not dedicated to sustainability projects, there- fore, it is not a GRF. The fund is meant to cover projects at Virginia airports that are not eligible for state or federal grants. Between these funds and VARF, there is the potential for establishing airport-managed revolving funds through a savings reclamation model. C.2.1 ATL—Sustainable Resource Fund Summary The Asset Management and Sustainability Division of ATL is working to establish the SRF. To date, it has successfully created an account for the SRF and is currently seeking sources of seed funding. The fund will pay for high-level resource efficiency upgrades, emissions reduction projects beyond the standard sustainability projects already undertaken each year at the airport, and purchasing of carbon offsets. Once the SRF is fully implemented, ATL will have the first self-managed airport GRF. History Rationale. The Asset Management and Sustainability Division has several reasons for pursuing an airport GRF. First, a GRF would provide stability in the form of a predictable funding source for sustainability projects and initiatives every year. Second, it would help iso- late enhanced sustainability projects and initiatives, making it easier to quantify their impacts separately from other capital funding projects (i.e., the impacts will be evident in utility cost savings, which will in turn be used to replenish the fund). Finally, the Asset Management and Sustainability Division wants to undertake more significant sustainability projects to meet the goal of becoming one of the most resilient airports in the world. It envisions a fund that will go beyond funding operational improvements to funding capital improvements. The Director of Asset Management and Sustainability states, “We don’t want to use SRF to fund activities that would be in the purview of enhanced sustainable design. If an airport wants to push the ‘envelope’—the SRF could provide support and funding” (M. Cheyne and L. Milagro, personal communication, Feb. 18, 2018). Campaign to Establish the Fund. ATL has a sustainable management plan and dedicates some funds to sustainability projects each year. The projects that the Asset Management and Sustainability Division proposes are considered in competition with other capital projects. Outcome The SRF account was established in the third quarter (Q3) of 2016, but it was not capitalized. While airlines at ATL agreed to designate an average of $1.8 million each year for sustainabil- ity projects (subject to review on an annual basis), thus far they have opted to do so through avenues other than the SRF. Today, the Asset Management and Sustainability Division is work- ing to finance the new SRF through multiple funding mechanisms. So far, it has succeeded at capturing certain rebates from Georgia Power, which otherwise would have been allocated to the city’s general fund. This is the only current funding source. The Division is also exploring the ability to capture savings from projects funded by airlines in airport-owned areas. Unfortunately, these projects and the resulting savings have been hard to track, because the airlines undertake energy efficiency projects at concourses or terminals

94 Revolving Funds for Sustainability Projects at Airports and pay for them through capital expenditures, without airport involvement. The Division is currently investigating ways to incorporate energy service provider contracts, in coordination with the airlines. Another potential source of funding may be cost savings from projects financed through the city’s revolving loan fund. Recently, ATL used capital from the city’s revolving loan fund to finance an LED retrofit of the airport garages. After the loan was fully repaid, the savings were de-obligated from the utility budget and returned to the general fund. However, in the future, these savings could be deposited into the SRF to help capitalize it. Other promising ideas include the “Good Traveler” program, a voluntary carbon offset pro- gram for individual travelers. As part of the offset sale, an additional fee could be applied to capitalize the SRF fund. Marketing fees on trash compactors and rebates from EV charging sta- tions are additional options. ATL is also in the process of establishing another revenue stream through an airport land management company. The company diverts waste to a processing plant for recycling, rather than the landfill. While more waste is being diverted from a landfill, the airlines are still paying their previous tipping fee. The Asset Management and Sustainability Division negotiated that the savings from diverting waste from the landfill—along with 15% of any revenue generated—will capitalize the SRF (M. Cheyne and L. Milagro, personal communication, Feb. 18, 2018). Operations Eventually, the airport, not the airlines or the state, will oversee the SRF. Once it is funded— likely through rebates and the other sources described—financial flows will be necessary to revolve project savings. As the Director of Asset Management and Sustainability states, “Nothing would preclude revolving savings. Everything we spend on sustainability should and could go back to a revolving fund.” The Asset Management and Sustainability Division will be responsible for proposing projects. “Approval to expend SRF funds on capital projects will proceed through the typical Planning and Development capital project approval process or through the approved Specialized Construction Services methodology consistent with city of Atlanta procurement guidelines. The Deputy General Manager will approve use of SRF funds used on expense items” (Hartsfield-Jackson Atlanta International Airport 2017). Currently, the SRF receives no fund- ing from energy efficiency project savings, because there is only enough capital to finance small projects with relatively little savings that would be too tedious to track. If the SRF grows to the point that it can fund major projects with highly visible savings, it will be more worthwhile to track the amount and reinvest it in the SRF. Lessons Learned Sustainability staff at airports should anticipate airline resistance to a GRF. If airports pursue revolving funds, they need to consider how to involve their partner airlines. As the Director of Asset Management and Sustainability observes, “Airlines may push back against earmarked funds.” ATL has an excess fund, outside of the capital fund, that is independent of the airline agreement and contractual obligations. This structure can help to protect the integrity of the GRF and its capacity to provide reliable funding for sustainability projects, without being burdened by yearly requests for capital funding. ATL is pioneering the GRF approach without any peer airports to share lessons learned and is addressing challenges as they emerge. Sustainability is still viewed with skepticism by many in the aviation industry. Cultivating a network of airports working to establish their own GRFs may increase the visibility of GRFs, enable knowledge sharing among active airports, spark a reevalu- ation of sustainability project outcomes by key industry players, and encourage other airports to

Case Examples 95 get involved. “If more airports were aware of the policy that we wrote, that would help (spread the concept),” states the Director of Asset Management and Sustainability (M. Cheyne and L. Milagro, personal communication, Feb. 18, 2018). As the Director of Asset Management and Sustainability has witnessed firsthand, the initial size of the GRF matters. Establishing a large GRF is important, because it demonstrates that the time and resources invested to track and revolve savings are worthwhile; a small GRF may have trouble gaining momentum, because the projects are too small to merit careful tracking of cost savings. C.2.2 Virginia Airports Revolving Fund Summary The VARF issues loans to help Virginia’s public-use, publicly owned airports undertake proj- ects that are not typically eligible for federal or state funding. VRA administers and oversees the VARF and is responsible for approving projects. The VARF was established in 2000 and capitalized with $25 million, allotted by the Virginia General Assembly. Since then, the fund has leveraged $90 million in airport project financing, surpassing expectations (M. Swain, personal communication, Dec. 7, 2017). While the VARF is not an example of an airport-managed revolving fund or of a fund spe- cifically dedicated to sustainability projects, it is one of very few operational revolving funds associated with airports. It demonstrates the positive potential impact of revolving loan funds and provides an alternative to individual airport-sponsored GRFs. History Many airport projects are eligible for federal and state funding through programs such as FAA’s AIP, the PFC program, and Virginia Department of Aviation’s state matching grants. However, these programs are often oversubscribed and some airport project types—like most revenue-producing projects—are ineligible for Virginia state funding. In 2000, VRA created VARF to (1) support airport projects that could not be funded through federal or state grants, with a specific focus on projects that generate revenue; and (2) expand the number of institutions that could draw on state revolving funds (M. Swain, personal com- munication, Dec. 7, 2017). Operations In its revolving fund capacity, VARF makes below-market rate loans to support the imple- mentation of capital improvement plans at public-use, publicly owned airports in the Com- monwealth. VRA administers and oversees VARF and is responsible for approving projects. A manager at Virginia’s Department of Aviation Airport Services Division notes that, while there are no official criteria for determining whether a proposed project receives funding, VRA does look at each airport’s approved 20-year Master Plan before reaching a decision. The plans tend to include the types of projects that should take place every 5 to 10 years, so VRA verifies that the proposed project fits into the airport’s Master Plan. The general rule is that funding is “first come, first served.” If the amount of funding requested exceeds the amount available, VRA can prioritize projects as needed but that has not yet been necessary (M. Swain, personal commu- nication, Dec. 7, 2017). Airports that cannot fund projects through federal and state grants often look to VRA for funding. VARF and other VRA loans often offer interest rates 0.5% below market rates, giving

96 Revolving Funds for Sustainability Projects at Airports airports a cheaper option than a bank loan. Direct loans have ranged in size from $23,000 to $27 million, with 10- to 25-year terms. Monthly payments from outstanding loans recapitalize the fund on an ongoing basis (M. Swain and P. D’Alema, personal communication, Mar. 2, 2018). To date, the most significant end use of VARF funding has been parking and hangar construc- tion at GA airports. Apart from making revolving loans, the VARF also uses its capital to provide security for bond issuances, allowing it to leverage private capital to support larger projects (M. Swain, personal communication, Dec. 7, 2017). Performance With $25 million in initial seed funding, the VARF has funded $90 million in projects since 2000, surpassing VRA’s expectations (M. Swain, personal communication, Dec. 7, 2017). To date, the VARF has not had any loan defaults and has lent at an average interest rate of 4.3%. The average loan size for the portfolio is $2.6 million, but projects have ranged in size from $23,000 to $27 million. Most projects are secured by a revenue pledge from the borrowing airport (or corresponding city or county). A revenue pledge is a provision that requires the borrower to use the net revenues to pay back the principal and interest on the loan before being allowed to use them for other purposes. Some of the projects have also been secured using special rev- enue pledges tied to the revenue generated from specific projects. At any given time, the fund has around $5 million in total dollars available to lend (M. Swain, personal communication, Dec. 7, 2017). The VARF has supported a wide variety of project types including hangars, parking lots, fuel farms, lighting, and equipment (Virginia Resources Authority 2017). Specific examples include the following: • Charlottesville-Albemarle Airport Authority has done a series of four projects funded through the VARF totaling just over $11 million including the design and construction of a rental car service facility, parking lot construction, and the construction of new parking in the terminal area. • Hanover County/Hanover Regional Airport used VARF funding to construct new hangars including purchasing new electrical and gas equipment. • Chesterfield County/Chesterfield County Airport used VARF funding to replace an existing fuel farm. • Stafford Regional Airport Authority completed three projects using VARF funding totaling just over $3.4 million including the construction of a fuel tank farm and the construction of hangars, fencing, lighting, and other improvements. Lessons Learned The VARF provides an excellent example of how revolving funds can and do work in an air- port context. It also provides a model for deploying a GRF solution at a state level instead of at an individual airport. A state-level fund can be particularly useful for small airports in which a limited number of smaller projects makes it hard to justify the cost of setting up and managing an airport-specific GRF. For these airports, a regional- or state-level fund solves that issue.