The Muskegon City Commission heard a presentation Monday on a proposed project development agreement with Johnson Controls Inc. (JCI) to complete engineering and design work for a possible energy performance contract covering municipal buildings, the Department of Public Works facility, and water-system upgrades.

Director of Public Works Dan VanderHyde said the development agreement is the engineering phase for a potential larger project. “This particular agreement is about $550,000, and we don't owe that particular amount today,” VanderHyde told the commission, adding that the city will ultimately be responsible for the development cost either rolled into the larger contract or due if the city elects not to proceed.

Johnson Controls representatives described the scope they would study during the next six to eight months: a replacement chiller and related chilled-water equipment at city hall; heavy mechanical and space work at the DPW building, lighting retrofits and controls across park and marina facilities, and an accelerated program to replace aging water meters and deploy an advanced metering infrastructure (AMI) network. Chris Downs of Johnson Controls identified water meters as a “foundational piece” of the work and noted the utility revenue and conservation benefits that newer meters and a customer portal can deliver.

JCI proposed completing the detailed engineering and cost estimates under a project development agreement capped at $554,000; staff said those development costs would be rolled into the implementation contract should the city decide to proceed. VanderHyde emphasized that commissioners should not approve the development agreement unless they are willing to accept the potential for a larger multi‑million dollar implementation contract later. He told the commission: “we should not agree to this item tonight unless you're comfortable with the idea of an energy performance contract of the improvements that this agreement will detail.”

Johnson Controls cited prior work in Michigan as context: a 2019 Marquette project of approximately $28 million and more than 160 completed projects in the state. JCI described financing as a long-term vehicle (commonly 20 years, not to exceed equipment useful life) that uses guaranteed energy and operational savings—plus any billable revenue increases such as from improved water-metering—to defray or pay project costs. Chris Downs said JCI guarantees projected savings and will make up shortfalls per standard guaranteed-savings structures.

The commission asked detailed operational and fiscal questions. Commissioners sought clarity on timing (staff and JCI expect six to eight months of study and a spring return with final scope and pricing), financing mechanics (staff described tax-exempt lease-purchase or similar long-term arrangements and said the team solicits multiple lenders to secure terms), and customer impacts (JCI said the meter replacements carry a 20-year warranty and that improved meter accuracy and customer portals can reduce lost revenue and help customers detect leaks). Key figures discussed included roughly 14,000 total water meters in the system with about 2,000 already replaced and a staff estimate of completing the remaining meters much more quickly under the proposed program.

Several commissioners raised concerns about scope control and transparency. VanderHyde said the $554,000 cap represents a maximum development cost and that line-item engineering work could be stopped if the commission decides not to advance particular elements; he characterized the number as a ceiling rather than an automatic spend. Commissioners also discussed whether lighting and trail upgrades, solar, and stormwater/manhole rehabilitation could be added or evaluated as part of the project; JCI said solar economics would require additional analysis and that some items might be handled as amendments or follow-ups.

No formal contract award occurred at the work session. The project development agreement with Johnson Controls is scheduled for formal consideration on the commission’s consent agenda at the next meeting.

Ending

If approved at the consent vote, the development work would proceed over several months and return to the commission with a final scope, guaranteed-savings analysis, financing terms, and recommended implementation contract that the city could accept, reject, or modify.