How any city can replicate the success of the Ann Arbor Municipal Energy Fund

by ‐ Tags: financing

How do you feel about the idea of lowering your operating cost? We all know that becoming more "Green" can help save our planet, but the problem is that these sustainability projects have high start-up costs. This is often the reason why municipalities and cities don't bother becoming more efficient. The city of Ann Arbor, Michigan on the other hand, has created a way in which "going green" can pay for itself.

The Municipal Energy Fund was rolled out in 1998 to use investments from the people of Ann Arbor to create a sustainable source of funds to pay for new energy efficiency projects. How? you might ask. By issuing bonds with the intention of paying back, with interest, the city's investors. The simple concept behind this bond system is to pay back 20% of the savings from the projects and reinvest the other 80% for future projects. If implemented properly, this fund can become sustainable in 3-5 years, requiring no more annual contributions. Below is a chart that demonstrates how effective the idea has been:


Annual Energy Savings_Municipal Energy Fun_Ann Arbor


What does a city need to start?

First, the city must gather investments from the public or an existing budget. This could prove to be a daunting task at first, but if this concept is effectively proposed then the burden should be lightened. Next, the city must appoint a manager to oversee the funds, create sustainability projects that will best help the city, and then coordinate these projects. The city's mayor can use a fixed number of estimated savings to calculate the payouts on these bonds. Constantly changing weather conditions and other variable factors mean that it's better for both the city and the investors if the number is fixed. The good news is that more and more cities are adopting the idea of having an energy council to create ideas for sustainability projects.

Some successful energy projects the city of Ann Arbor has implemented are:

• Upgraded streetlights and crosswalk displays

Upgraded parking garage lighting

• New boilers for cities operating facilities

Electric city vehicles

Photovoltaic cells

What are the benefits? Who are the beneficiaries?

The program benefits the city in many ways. Of course the financial impact is the easiest to measure, and it is also the easiest selling point, but there are many other reasons why any city should adopt this.

• The city's operating facilities are more comfortable and healthy for employees and citizens. By making the climate control in these buildings easier to manage, working conditions improve.

• Cleaner air throughout the city is good for everyone and can boost tourism

• The city's facilities act as a role model to local business and homeowners

• Improved lighting throughout the city

• Preserves precious fossil fuels

• Reduces greenhouse gas emissions

Here is the link for Ann Arbor's Energy Commission website, which provides a more in depth explanation of their program and can help you strategize your own program.

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