Director of Public Works Dan Vander Hyde and representatives from Johnson Controls told the commission Oct. 13 that the city is being asked to approve a project development agreement (PDA) that would allow Johnson Controls to perform the engineering and design work for a potential energy performance contract under Michigan’s Public Service Act 625.

Director Dan Vander Hyde said the PDA before the commission is the engineering phase for a larger, financed guaranteed-savings project. He told commissioners the PDA cost is “about $550,000” and that these engineering costs are not payable today but would be due if the city chose not to proceed with the full construction contract; if the full project is approved, engineering costs would roll into the financed project.

Chris Downs of Johnson Controls said the company envisions a package that could include upgrades at the Department of Public Works facility, City Hall (including replacement of an aging chiller), the water-filtration plant, water-meter replacement and public lighting/controls. He described the program as an energy performance contract with guaranteed savings and said Michigan’s enabling statute (referred to in the meeting as Public Service Act 625) and federal guidance underpin the structure.

Johnson Controls proposed that water meters be a central element: the city has roughly 14,000 water meters, of which about 2,000 have already been replaced; Johnson Controls proposed completing replacement of the remainder and deploying an advanced metering infrastructure (AMI) and customer portal to reduce lost revenue from aging meters and provide leak alerts. Company representatives said meter warranties would be 20 years with “new meter accuracy” guarantees (the transcript cites a guaranteed accuracy number of about 98.5% for 20 years) and that the meter work could generate billable revenues and operational savings that would offset other project costs.

Downs and other Johnson Controls staff described a sister-city example (Marquette) where a 2019 project delivered roughly $1.2 million more savings than projected through upgrades including streetlights, meters, cogeneration and HVAC improvements. Downs said the PDA before the commission is an initial development agreement (engineering and design) that Johnson Controls estimates at up to $554,000; the larger construction phase could range — depending on scope — from several million to a larger multimillion-dollar contract to be determined during the next six to eight months of study.

Commissioners asked about key risks and constraints. Staff and Johnson Controls said:

- Timeline and scope: the engineering phase will include workshops and detailed scopes and is expected to take roughly 6–8 months; the vendor will return with a complete implementation package for commission consideration.
- Financing: the construction phase would be financed under a long-term arrangement (Johnson Controls described tax-exempt lease/lease-purchase terms as typical, up to 20 years but not to exceed equipment useful life); staff said lenders are solicited on the city’s behalf and cited example rates in discussion (staff mentioned roughly 4.25% as illustrative in current markets). Johnson Controls said it works with a panel of lenders and will seek terms on the city’s behalf.
- Guarantees: Johnson Controls said guaranteed savings are part of the contract; if projected savings are not realized, the vendor would make up the shortfall (company representatives said they would “cut a check” or fix the issue until the guaranteed savings are realized).
- Cost exposure: Vander Hyde emphasized that approving the PDA obligates the city to the engineering costs if the city later declines to proceed with construction; commissioners asked for clarity and staff said the PDA is only the development/engineering contract but that the city should not approve it unless comfortable moving forward with at least much of the anticipated scope.

Other details Johnson Controls raised include infiltration-reduction work on manholes, lighting and irrigation upgrades at parks and the marina, controls and VFD installations, and potential future solar work (the company said solar opportunities were currently less favorable in some locations because of economics and roof-life timing, but that solar could be added later if feasible).

Commissioners expressed interest in receiving line-item comparisons showing current maintenance/repair costs versus projected replacement costs and savings over time, and asked staff to return with a clear, itemized scope and financial model. Vander Hyde and Johnson Controls said they will conduct the engineering and return in the spring with detailed, finance-ready proposals. The manager and staff confirmed the PDA will be on the commission consent agenda for formal consideration at the next meeting.

Why it matters: the agreement would allow the city to pursue a financed, guaranteed-savings program to address deferred capital projects, replace aging meters more quickly, and capture operational and energy savings; the engineering agreement itself is a near-term commitment (up to $554,000) that the commission must authorize before detailed costs are finalized.