Tackling facility improvement projects may seem easier said than done for cash-strapped school districts. Especially since many schools find themselves in what experts call "the deferred maintenance trap." Consider that over its lifecycle, a $10 million building requires a $40 million budget to pay for the cost of maintenance and utilities, and you begin to get an idea just how this trap operates. It’s no surprise then that nearly half of educators give their school’s facilities a “C” grade or lower, according to a survey from Education Week
Fortunately, schools can unlock innovative funding streams that can stretch their budgets further, reduce the cost of a project, and bridge post-ESSER funding gaps—without taking money from classroom budgets or increasing taxes and fees. These alternative financing options to create funding for facility and maintenance projects may include:
- Energy Savings Performance Contracting (ESPC): ESPCs allow school districts to capture energy and operational savings and reinvest those savings into their facilities. They begin with an Energy Service Company (ESCO), who will conduct a thorough audit of your school facilities to find areas of improvement. The ESCO can then guarantee a certain level of energy savings, make the necessary upgrades with zero upfront costs, and is then reimbursed from the cost savings achieved.
- Federal and state funding: Federal and state governments are now offering a wide range of grants to schools for facility improvements, particularly in the areas of air quality, physical security, energy efficiency, and sustainability. Federal financial assistance programs including low-interest and no-interest loans are also available to schools.
- Utility rebates: Utility companies commonly offer rebates to schools who make facility upgrades that will significantly reduce their energy usage. These allow schools to defray the upfront costs of construction, while also benefiting long-term from reduced energy and operational costs. Utilities that are closer to capacity are more likely to offer rebates.
- Net-metering agreements: Many states and local utilities have net-metering rules in place. These allow for agreements between power consumers and utilities, wherein the utility company agrees to pay for any excess power generated by the consumer. For schools with onsite solar panels, net-metering could represent a recurring source of income that can be reinvested into facility improvements.
- Tax rebates and incentives: Historically, tax-exempt entities have not been able to benefit from tax rebates. But as of 2023, non-taxable entities (including schools!) can now apply for up to 30% in rebates from the federal government for solar, battery storage, and other energy-related upgrades.
- Capital lease programs: Sometimes called a tax-exempt lease purchase, capital leasing schools to buy equipment on a lease-purchase agreement. Operational savings created by the upgraded equipment can then be leveraged to create funding for additional projects.
- Energy-as-a-service (EaaS): EaaS allows schools to upgrade their energy systems and adopt renewable energy sources, all without any upfront costs. An EaaS provider will oversee the design, purchase, operation, and maintenance of the energy system. The school then pays a predetermined monthly fee for the service, effectively converting substantial upfront expenses into predictable operational costs.
Further reading: Hear from three US school districts who layered innovative funding streams to fund their facility projects.
The right mix of funding allows K-12 leaders to tackle facility modernization and also achieve their district’s larger goals in the process. School buildings can be transformed to:
- Create healthy, comfortable learning environments
- Build safety and security into every facility
- Give teachers the modern tools they need to engage students
- Make schools more attractive to prospective students and their families
Whatever your goals are, take a comprehensive approach to project planning that will stretch your funding dollars further. A comprehensive approach means designing projects with solutions that work together to optimize the overall performance of any building, while maximizing all available funding avenues. This approach will help school districts become less reliant on funding from taxpayers for major capital improvement projects.
As you begin planning any infrastructure or operational project scope, work with an expert to evaluate the applicability of the various funding streams available to you. Schneider Electric has helped hundreds of schools nationwide execute facility improvements that fund their top priorities. The only question left is . . . what’s your vision?