TO: Board of Education
FROM: Randall Booker, Superintendent
DATE: October 14, 2020
RE: BOND PROGRAM UPDATE
I. SUPPORT INFORMATION
A. Construction Update
i. STEAM Building
Occupancy. There is good news to report on construction progress. The final elevator and fire/life/safety inspections for the STEAM building are now scheduled for October 16, and the State is expected to issue a Certificate of Occupancy for the building immediately after. The District will begin moving educators and administrators into the building the week of October 19, and STEAM teachers who wish to do so may begin teaching from their classrooms the week of October 26.
Although October 26 is later than originally planned, it is important to note that the schedule change was not caused by the construction team — the change was caused by delays by PG&E and disruptions in the supply of materials and subcontractor labor caused by the Covid-19 pandemic. The Districtâ€™s general contractor, Overaa, has been a remarkable partner in jobsite and schedule management under extraordinary conditions, and avoided the work stoppages that have been common in other school construction projects over the last six months.
Building Interior. Delivery of materials that have been long-delayed due to the Covid-19 pandemic are now arriving on campus. These materials include: epoxy countertops and sinks for all science and prep rooms; operable windows and actuators; certain doors and electronic hardware; operable classroom partitions; specialized glazing for the Art rooms; and other materials. For this reason, some of the finishing work and miscellaneous â€œpunch listâ€ work will continue after staff move into their classrooms and offices. Recent interior photos follow (click any thumbnail to view full-size image):
Site Work. All concrete pours have been completed, including the Magnolia Avenue sidewalk, Engineering Patio, and Art Patios. Recent progress photos that show concrete work, trellises and patios, and installation of the solar panels that double as window shades follow:
ii. Performing Arts Center (PAC)
Construction of the PAC foundation is progressing on schedule (with completion of the PAC expected in the Fall of 2021). Like the STEAM foundation, the PAC foundation will be highly reinforced because of the siteâ€™s specific geologic conditions and proximity to the Hayward Fault. The PAC foundation will be anchored to underlying bedrock with roughly 70 rock anchors, bolts, and rods that extend up to 40 feet into the ground. The first two of several concrete pours have been completed, and all structural steel components have already been fabricated. Recent foundation progress photos follow (click any thumbnail to view full-size image):
District staff and members of the Board are now fielding questions from students, staff, and the community about the decision to defer installation of rooftop solar panels on both the new STEAM and Performing Arts Center buildings. At the same time, there is a new, time-limited opportunity to purchase a portion of the deferred panels at a deeply discounted price (due to contractor excess inventory). What follows is an overview of the history of solar power in the District and this new opportunity, which is available until mid-October.
Over the last 14 years, the District investigated how to incorporate solar power at the various school sites. Three comprehensive analyses were prepared for the District, by Chevron and Bank of America (2009), Kyoto Solar Master Plan (2015), and Angel Fierro (2019). The District encountered four main impediments to moving forward with any solar plan:
- Space limitations, which in turn limit the amount of energy that can be generated, and limit the economic feasibility of a Power Purchase Agreement (PPA) a common vehicle for acquiring a solar array without purchasing the panels.
- Separate meters prevent the sharing of energy among buildings and school sites.
- Unresolved questions about what would happen at the end of a lease for solar panels.
- Existing conditions (older roofs) at some school facilities prevent the easy installation of rooftop panels without making greater alterations.
Notwithstanding these impediments, the Districtâ€™s goal is to maximize solar power at each school site. During the Fall of 2015, a team of architects and engineers assessed each school facility for energy efficiency, among other issues, and this work led to the development of a solar master plan in conjunction with the Bay Area Air Quality Management District. The ultimate goal is to generate enough solar power across the District to offset all of the Districtâ€™s energy use.
ii. STEAM Building and PAC
Designs for the two new high school buildings include infrastructure for solar power and solar (photovoltaic, or PV) panels. Designs for both buildings include both rooftop PV panels and PV panels that double as shades for windows and patios. Based on the past impediments noted above, the District planned to purchase the PV panels, maximizing the savings in energy costs and, when possible, selling energy to PG&E. In 2017, the District applied for and â€œlocked-inâ€ favorable rates to sell energy to PG&E in the future.
Facing unprecedented cost escalation and extraordinary market conditions for construction over the last several years, the District decided to defer the purchase of the rooftop panels for these two projects, saving roughly $1.2 million (roughly $600,000 per building) in the near term. (For more information on cost escalation and cost cutting, see this Measure H1 Bond Program 2018-19 Year-End Report) The District made this decision in consultation with its Facilities Steering Committee and Value Engineering Subcommittee.
Although purchase of the rooftop panels has been deferred, all solar power infrastructure and all window and patio shade panels have been retained. When the STEAM building opens, all shade panels on the south and west windows, and all shade panels on the engineering patio and art patios will be in place and fully operational.
iii. Re-examination of Solar Power Finance Options
In 2019, the District created an ad hoc Solar Power Financing Committee, to re-examine options for financing the rooftop solar panels, and to consider the addition of battery storage to the STEAM and PAC projects and District-wide. The Committee included community members who have expertise in commercial solar financing â€” Angel Fierro, Cisco Devries, Josh Possamentier, and Steve Schiller, who helped develop the Cityâ€™s Climate Action Plan. The Committee helped develop a Request for Proposals to lease panels and battery storage under a power purchase agreement (PPA).
Under a PPA, the provider would install and maintain the PV panels and batteries, and guarantee a certain level of electric output. In exchange, the District would pay the provider for electric power at a rate per kilowatt hour that is slightly below PG&Eâ€™s rates. The key advantages of a PPA are that the District could reduce its energy costs without the capital investment required to purchase and maintain the panels. A key disadvantage is that the Districtâ€™s ongoing energy expenses would be higher than if it owned the PV panels outright, and for this reason some members of the Board of Education expressed reservations about this approach. In the end, the District did not receive any responsive proposals for a PPA.
The Committee concluded that the outright purchase of panels was the only option available to the District at that time. Further, given the purchase cost (at the time) and the rate of return analysis (based on PG&E rates at the time), the Committee did not recommend fundraising to purchase these panels. The decision can and will be reevaluated in the future based on changing prices for PV panels and changing rates imposed by PG&E.
iv. Recent Inquiries and New Opportunity
Recently, there has been a wave of inquiries to District staff and to members of the Board concerning the deferral of rooftop PV panels. Inquiries have come from the PHS Green Club, members of the community, and PEF. The timing of these inquiries is fortuitous — there is now an opportunity to buy roughly one-third of the deferred rooftop panels for the STEAM building at a substantial discount, but this is a time-limited offer.
Although the District deferred purchase of the rooftop PV panels, a subcontractor mistakenly ordered a portion of the deferred panels for the STEAM building. The subcontractor has offered to deliver and install these at cost. This would be a substantial discount — roughly $65,000 for panels that would have cost $200,000 under the terms of the Districtâ€™s contract with Overaa, and which may cost more in the future as the price of panels continues to rise.
The $65,000 for these panels is not in the budget, and private donations would be required to cover this cost. Members of the PHS Green Team and other members of the Piedmont community have expressed interest in raising funds to pay for these panels. Although a funding commitment is needed in the near term, the actual funds are not needed until the end of the fiscal year.
Approved in March 2019, the Districtâ€™s contract with Overaa is for $49,973,479, including $29,475,345 for construction of the STEAM building and $20,498,135 for the Performing Arts Center (PAC).
The STEAM building is nearly completed with roughly 3% in change orders. This is typical for a project of this scope. The largest change orders are, roughly: $176,000 for photovoltaic panels for the trellises; $177,000 for acid waste removal systems; $165,000 in added structural steel and rebar; and a range of charges related to ensuring the health, safety and appropriate social distancing of workers. District staff are in the process of negotiating these change orders, and will eventually ask the Board to modify the contract with Overaa, increasing the amount for the STEAM building to reflect the additional charges.
The PAC, on the other hand, is still in the early stages of construction and is already nearing 3% in change orders. The largest of these change orders is due to additional structural requirements imposed by Californiaâ€™s Division of State Architect, which increased costs by roughly $1.2 million. District staff are in the process of negotiating with subcontractors, reviewing the means and methods of construction, and value engineering in order to contain the added costs.
Throughout the cost-cutting process, the District has been and will continue to be guided by the principle that it will only remove â€œscopeâ€ that can be restored if other funds become available in the future. More to the point, the District is committed to do further value engineering throughout the construction process through the rigorous review of means and methods, to preserve and restore as much of the original project scope as possible.
II. RECOMMENDATION: INFORMATION AND DISCUSSION
Discuss the bond program update.