Why did Ann Arbor identify the need for an Energy Fund? What were the challenges? 

The Energy Plan adopted in 1981 called for the City to "promote energy conservation by using City facilities as a role model for the community." Following this directive, the City utilized its municipal bonding authority in 1988 to fund a $1.4 million Energy Bond project. The Energy Bond enabled the City to implement energy efficiency measures at 30 City facilities. The payments for this ten-year bond have been generated through energy cost savings.

In July 1996, the City of Ann Arbor became a partner in the EPA’s Green Lights program. This partnership committed the City to survey all of its facilities (over 100 buildings) and upgrade 90% of the lighting which was identified as desirable based on energy savings. The City was able to utilize state and public utility programs to perform many of the audits at little or no cost to the City but had difficulty in finding funding to implement the recommended upgrades.

In 1998, the final payment on the Energy Bond was made. Energy Bond payments of over $200,000/year had been included in the annual City budget for each of the last ten years. The Energy Commission proposed that rather than discontinue that budget item, that it be reduced to $100,000 that would be used to establish a Municipal Energy Fund. The Fund presented an opportunity to pay for the recommended lighting upgrades from the Green Lights Program as well as other energy saving measures. A well-developed plan for implementation and operation of a self-sustaining Municipal Energy Fund was presented to the City Administrator and City Council and was approved for the fiscal year 1998-99 budget. Succeeding budgets have contained similar appropriations.

The original plan called for facilities that utilized the Energy Fund to reimburse the fund with 80% of their actual energy cost savings calculated at the end of each fiscal year. However, the City’s Budget Director requested that the annual fund reimbursements be based on the estimated savings from the energy audits, a fixed number, rather than the uncertain "actual" energy savings. It was pointed out that the actual energy savings will vary with changes in the weather as well as changes in use patterns and occupancy of the buildings. This request was acceptable to the facility managers and City Administration and has served to simplify the accounting for the Energy Fund.

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