REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Travis Hopkins, City Manager
VIA: Chau Vu, Director of Public Works
PREPARED BY: Patrick Bannon, Capital Projects Supervisor
Subject:
title
Conduct a Public Hearing to adopt Resolution No. 2025-70 approving a Performance Contract with Alliance Building Solutions, LLC. (ABS), and Resolution No. 2025-71 approving a Finance Agreement and related documents with Metro Futures, Inc. for the construction of energy conservation at various City facilities.
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Statement of Issue:
Request City Council approval for a resolution and agreement to implement energy efficiency and infrastructure measures along with associated financing.
Financial Impact:
The total estimated project cost is $7,358,861 to be financed through a tax-exempt equipment lease purchase agreement. The City’s total savings through this project are estimated at $23,089,221. The City is anticipating the cost of the Project will be less than the anticipated marginal cost to the City in the absence of such measures.
Recommended Action:
recommendation
A) Make the findings that the funds for the repayment of the financing are projected to be available from the funding that otherwise would have been used for the purchase of energy.
B) Adopt Resolution No. 2025-70, authorizing “Performance Contract” and related exhibits for the energy conservation project with Alliance Building Solutions, LLC. in the amount of $7,358,861.
C) Authorize City Manager to execute documents approved as to form by the City Attorney necessary to manage, and complete the project with Alliance Building Solutions, LLC.
D) Adopt Resolution No. 2025-71, authorizing “Financing Lease Agreement” and related lease documents to fund energy related upgrades with Metro Futures, Inc. in the amount of $7,383,861
E) Authorize City Manager to execute documents approved as to form by the City Attorney necessary to finance the project with Metro Futures, Inc.
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Alternative Action(s):
Do not adopt Resolution No. 2025-70 and advise staff on how to proceed.
Analysis:
In November 2024, the City Council approved an agreement with Alliance Building Solutions, LLC (ABS) to complete a detailed energy audit identifying cost-effective opportunities for energy efficiency upgrades to be funded through guaranteed savings. ABS was selected through a competitive Request for Proposals (RFP) process to provide comprehensive, turn-key energy services - including audit, design, construction, and financing of capital improvements.
This project represents the next phase of Huntington Beach’s ongoing commitment to energy efficiency, cost savings, and infrastructure modernization. The planned measures will reduce energy consumption, lower maintenance costs, and prepare City facilities to meet future environmental regulations - all while remaining budget-neutral.
Project Scope
The proposed improvements include a broad range of energy and infrastructure upgrades across City facilities:
Lighting: LED retrofits and smart lighting controls at 20 interior and 9 exterior sites.
HVAC Systems: Replacement and optimization at 8 facilities.
Building Controls: Upgrades to building automation and energy management systems.
Electrical Systems: Replacement of transformers for improved reliability and efficiency.
Renewable Energy: Installation of a solar photovoltaic canopy at the Senior Center.
Collectively, these measures have an average simple payback of approximately 10 years. A detailed cost and savings breakdown by facility is provided in the accompanying table.
Statutory Authority
City staff recommends awarding the construction agreement under Government Code Section 4217.10 et seq., which provides an alternative procurement pathway for energy efficiency projects. This statute allows public agencies to select contractors based on best value - rather than lowest bid - when implementing energy performance contracts. Huntington Beach successfully used this provision in 1999 and 2011 for previous energy-saving initiatives.
The Government Code also authorizes public agencies to finance such projects when the total savings exceed the cost of financing, ensuring fiscal prudence and protecting the General Fund from performance risk. Under the proposed structure, the City will also benefit from a guaranteed savings provision: if the systems underperform, ABS is contractually obligated to reimburse the difference.
Project Financing
The project will be funded through a tax-exempt lease purchase agreement with Metro Futures, Inc., rather than through traditional bonds or cash reserves.
Project Cost: $7.36 million
Term: 15 years
Mechanism: Metro Futures will fund all design, construction, and installation costs upfront.
Repayment: The City repays Metro Futures over time using the verified annual energy and operational savings.
Guarantee: ABS guarantees that savings will meet or exceed the annual lease payments.
Because the lease is tax-exempt, the City benefits from a lower interest rate than would be available through commercial lending. This structure allows the City to undertake critical infrastructure improvements without upfront capital outlay or General Fund impact.
Comparison to Bond Financing
While conventional bond financing could potentially offer an interest rate approximately 0.6% lower, pursuing that option would delay implementation by several months and result in the loss of more than $500,000 in available energy rebates and incentives. Those lost incentives would offset the financing advantage of the lower bond rate.
By contrast, the Alliance proposal enables the City to proceed immediately, locking in rebate eligibility and ensuring timely project completion. Additionally, the Alliance financing provides flexibility for early payoff and a streamlined closing process.
When accounting for timing, rebate preservation, and the guaranteed performance of the ESCO structure, the Alliance approach represents the most practical, risk-averse, and financially sound path forward for delivering these critical energy and infrastructure improvements.
Environmental Status:
This project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15031c under Class 1 of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential to have a significant effect on th
Strategic Plan Goal:
Goal 6 - Infrastructure Investment, Strategy C - Conduct an assessment of all City facilities to determine priorities for upgrades and repairs, implementation and financial priority.
Attachment(s):
1. RCA Contract Agreement Summary
2. Resolution No. 2025-70
3. City of Huntington Beach Performance Contract
4. Equipment Lease Purchase Agreement
5. Measurement and Verification Agreement
6. Resolution No. 2025-71