[Senate Report 110-60]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 131
110th Congress                                                   Report
                                 SENATE
 1st Session                                                     110-60

======================================================================



 
              PUBLIC BUILDINGS COST REDUCTION ACT OF 2007

                                _______
                                

                  May 3, 2007.--Ordered to be printed

                                _______
                                

    Mrs. Boxer, from the Committee on Environment and Public Works, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 992]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Environment and Public Works, to which was 
referred a bill (S. 992) to achieve emission reductions and 
cost savings through accelerated use of cost-effective lighting 
technologies in public buildings, and for other purposes, 
having considered the same, reports favorably thereon with 
amendments and recommends that the bill, as amended, do pass.

                    GENERAL STATEMENT AND BACKGROUND

    This bill accelerates the implementation of cost-effective 
lighting and energy-saving technologies and practices in 
federal and local public buildings. These improvements are 
expected to reduce the costs to taxpayers of operating these 
buildings, and to reduce the air emissions from the combustion 
of fossil fuels often used to generate the heat or electricity 
used by these buildings.
    Specifically, the bill accelerates the retrofit of lighting 
in buildings owned or leased, subject to certain lease terms, 
by the General Services Administration (GSA). In addition, the 
bill authorizes the U.S. Environmental Protection Agency (U.S. 
EPA) to establish a new competitive grant program for the 
retrofit of public buildings owned by local units of 
government, subject to cost-share requirements.
    The Senate Committee on Environment and Public Works has 
jurisdiction under Senate Rule XXV over ``public buildings and 
improved grounds of the United States generally,'' including 
GSA buildings. The GSA owns and leases over 340 million square 
feet of space in more than 8,900 buildings, located in every 
state. The GSA calls itself the ``largest public real estate 
organization'' in the country.

Related Executive Orders and Statutes

    The bill seeks to accelerate the implementation of new 
requirements for federal building performance. On January 24, 
2007, President Bush signed a new Executive Order that calls 
for an increase in energy efficiency and use of renewable fuels 
throughout the federal government, Executive Order (E.O.) 
13423. With respect to federal buildings, the President has set 
as a goal that agencies should reduce the amount of energy used 
per square foot of building space in 2003 by 3 percent annually 
or 30 percent by 2015.
    Executive Order 13423 amends Executive Order 13123, which 
was issued by President Clinton in June 1999. E.O. 13123 
required each federal agency to reduce energy consumption per 
gross square foot at existing facilities by 30 percent by 2005 
and by 35 percent by 2010, relative to a 1985 baseline.
    The Energy Policy Act of 2005 (EPAct 05), Public Law No. 
109-58, 109 Stat. 594 et seq., extended the energy reduction 
goals outlined in Executive Order 13123 for existing federal 
buildings by mandating that agencies use a new baseline of 2003 
energy consumption and achieve additional reductions per gross 
square foot of 2 percent each year beginning in 2006 and ending 
with a 20 percent reduction by the year 2015.
    In the case of new building construction and major 
renovation, E.O. 13423 sets as a goal that agencies meet the 
Guiding Principles for Federal Leadership in High Performance 
and Sustainable Buildings, which include a target energy use of 
30 percent below the average building performance for new 
buildings and a target of 20 percent below the average for 
renovations. By 2015, the goal is for 15 percent of each 
agency's building inventory to meet these Guiding Principles, 
which a number of federal agencies agreed to in early 2006.
    The Executive Order provides in section 10(c) that it is 
not intended to be legally enforceable. The Committee concluded 
that it would be helpful to expedite some of the energy-
efficiency goals in the Order and to embody in statute a 
requirement for their adoption.

                      SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This section provides that the title may be cited as the 
`Public Buildings Cost Reduction Act of 2007'.

Section 2. Cost-effective technology acceleration program

    Subsection 2(a) requires the Administrator of General 
Services to establish a program to accelerate the use of more 
cost-effective technologies and practices at GSA facilities. 
The program is required to ensure centralized oversight and 
responsibility for coordination of relevant government 
agencies' accelerated adoption of cost-effective technologies 
and practices, to provide technical assistance and operational 
guidance, and to track progress of agencies and departments 
under the program. The provision of technical assistance and 
guidance should include training of the building managers to 
enable them to meet the cost reduction through energy 
efficiency requirements and goals of this legislation. 
Effective training of building managers in cost reduction 
through energy savings could potentially pay for itself many 
times over. This program has several phases, established in 
subsections 2(b) and 2(c).
    Subsection 2(b) provides that within 90 days after the date 
of enactment of this Act, the Administrator is directed to 
conduct a review of the current use and availability to GSA 
building managers of cost-effective, highly energy-efficient 
lighting technologies that are available for use in GSA 
facilities.
    As part of the program established under subsection 2(b), 
not later than 180 days after the date of enactment of this 
Act, the Administrator is directed to establish a cost-
effective lighting technology acceleration program to achieve 
maximum feasible replacement of existing lighting technologies 
with more cost-effective and energy-efficient lighting 
technologies in each GSA facility using available 
appropriations.
    To implement the program established under subsection 2(b), 
the Administrator is required to establish a timetable 
including milestones for specific activities needed to replace 
existing lighting technologies with more cost-effective 
lighting technologies, to the maximum extent feasible 
(including at the maximum rate feasible), at each GSA facility. 
The goal of the timetable is to complete, using available 
appropriations, maximum feasible replacement of existing 
lighting technologies with more cost-effective lighting 
technologies by not later than the date that is 5 years after 
the date of enactment of this Act.
    Subsection 2(c) directs the Administrator to ensure, not 
later than 180 days after the date of enactment of this Act and 
annually thereafter, that a manager responsible and accountable 
for accelerating the use of cost-effective technologies and 
practices is designated for each GSA facility.
    In addition, subsection 2(c) directs the Administrator to 
develop and submit annually to Congress a plan that identifies 
the specific activities needed to achieve a 20-percent 
reduction in operational costs (from 2003 cost levels) through 
the application of energy-saving cost-effective technologies 
and practices by not later than 5 years from the date of 
enactment of the Act. The plan must also estimate the funds 
needed to achieve the 20-percent cost reduction and describe 
the status of the implementation of energy-efficient cost-
effective technologies at GSA facilities. This plan must be 
implemented to the maximum extent feasible and at the fastest 
rate feasible, using available funds, by not later than 5 years 
after enactment of the Act.
    Use of project bundling can combine multiple actions into a 
single project, and can effectively allow the combination of 
cost-effective technologies that may have short payback periods 
with other energy conservation measures that may have longer 
than five-year payback periods, to achieve greater overall 
total savings and energy use reductions. Nothing in this 
legislation, including the five-year payback provision (section 
2(c)(2)(G)), is intended to limit or otherwise affect current 
authorities.

Section 3. Environmental Protection Agency demonstration grant program 
        for local governments

    Under this section, the Administrator of the Environmental 
Protection Agency (EPA) is directed to establish a 
demonstration program under which the Administrator shall 
provide competitive grants to assist local governments to 
deploy cost-effective energy-efficient technologies and 
practices at local government buildings.
    No grant awarded under this section shall exceed $1 million 
and the Federal cost share is 40 percent. The bill provides for 
cost share waivers for economically distressed communities, 
which are identified through the Administrator's adoption, in 
guidelines published in advance, of specific objective economic 
criteria for such waivers. The program is authorized to receive 
$20 million per year for each of fiscal years 2007 through 
2012, and sunsets on September 30, 2012.

Section 4. Definitions

    This section establishes definitions of terms in the bill.

                          LEGISLATIVE HISTORY

    S. 992 was introduced on March 27, 2007, and referred to 
the Committee on Environment and Public Works.

                                HEARINGS

    On March 28, 2007, the Committee on Environment and Public 
Works held a hearing on Reducing Government Building 
Operational Costs through Innovation and Efficiency: 
Legislative Solutions. Specific testimony was taken on S. 992. 
Witnesses included: David Winstead, Commissioner, Public 
Buildings Service, U.S. General Services Administration; Kateri 
Callahan, President of the Alliance to Save Energy; and Melanie 
Townshend, Project Executive, Gilbane Building Company, 
Associated General Contractors of America.

                             ROLLCALL VOTES

    The Committee on Environment and Public Works met to 
consider S. 992 on March 29, 2007. The committee voted 
favorably by voice vote to adopt Warner Amendment 1, which 
added certain coordination, technical assistance, and success 
tracking requirements to the program required by section 2(a), 
and by voice vote to adopt Warner Amendment 2, as modified, 
which authorized reduction or waiver of the local cost share 
requirement for communities determined, pursuant to published 
objective guidelines, to be economically distressed. The 
committee agreed to report S. 992 by voice vote.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

    Summary: S. 992 would authorize the Environmental 
Protection Agency (EPA) to provide $120 million in grants over 
the 2007-2012 period to local governments for programs to 
reduce energy use in government buildings. In addition, the 
legislation would direct the General Services Administration 
(GSA), using existing appropriations, to increase the use of 
energy-efficient lighting throughout federal buildings. The 
legislation also would require various reports to the Congress 
regarding the grant program and energy efficiency in government 
facilities.
    CBO estimates that implementing S. 992 would cost $10 
million in 2008 and $85 million over the 2008-2012 period, 
assuming appropriation of the authorized amounts. Enacting S. 
992 could affect direct spending by changing the use of 
existing funds, but CBO estimates it would likely have no 
significant effect on direct spending. However, if agencies 
entered into Energy Savings Performance Contracts (ESPCs) with 
a substantially greater value than anticipated under current 
law to increase the use of energy-efficient lighting in federal 
buildings, the bill could result in additional direct spending 
in the near term, and could lead to savings of future 
appropriated funds over the long term. Enacting the bill would 
not affect revenues.
    S. 992 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would benefit local governments that participate in the 
demonstration program authorized in the bill. That program 
would provide $100 million over 5 years for competitive grants 
to assist local governments in reducing energy use in public 
buildings.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 992 is shown in the following table. The 
cost of this legislation falls within budget function 300 
(natural resources and the environment).

------------------------------------------------------------------------
                                      By fiscal year, in millions of
                                                 dollars--
                                 ---------------------------------------
                                   2008    2009    2010    2011    2012
------------------------------------------------------------------------
              CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Authorization Level.............      20      20      20      20      20
Estimated Outlays...............      10      16      19      20      20
------------------------------------------------------------------------

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted before the end of fiscal year 2007, that 
the amounts authorized by the bill will be appropriated for 
each year beginning in 2008, and that spending will follow 
historical patterns for current and similar programs.

Spending subject to appropriation

    EPA Grant Program. Section 3 would authorize the 
appropriation of $20 million annually, through 2012, for an EPA 
program of matching grants up to $1 million annually for local 
governments to reduce energy consumption by their facilities. 
The program would terminate on September 30, 2012. Assuming 
appropriation of the authorized amounts, beginning in 2008, CBO 
estimates that implementing this provision would cost $85 
million over the 2008-2012 period.
    GSA Lighting Technology Program. Section 2 would require 
GSA, using available appropriations, to retrofit or replace 
existing lighting technology in its buildings with more energy-
efficient lighting technology within five years. This would 
build upon certain sections of Executive Order 13423--
Strengthening Federal Environmental, Energy, and Transportation 
Management. That order set goals in many areas, including 
energy efficiency, renewable energy, and sustainable buildings. 
Based on information from GSA, CBO estimates that implementing 
this provision would increase the priority of replacing 
existing lighting technologies, but not significantly increase 
costs over the 2008-2012 period.
    Other Provisions. The legislation would require GSA to 
establish a program to accelerate the use of cost-effective 
technologies and practices in federal buildings. The 
legislation also would require an annual and final report to 
the Congress on the matching grant program, as well as reports, 
plans, and recommendations within six months by GSA on energy 
efficiency and energy usage by federal buildings. Based on 
information from EPA and GSA and the cost of similar 
activities, CBO estimates that those provisions would cost less 
than $500,000 annually over the 2008-2012 period, subject to 
the availability of appropriated funds.

Direct spending

    The bill's direction to GSA to increase energy-efficient 
lighting in federal buildings--using existing appropriations--
could affect direct spending by changing the government's up-
front commitments in Energy Savings Performance Contracts. CBO 
estimates, however, that S. 992 is unlikely to result in a 
significant change in the overall costs of such ESPCs.
    The instructions for implementing Executive Order 13423--
Strengthening Federal Environmental, Energy, and Transportation 
Management (which sets various environmental goals for federal 
energy usage)--recommends the use of ESPCs and other financial 
instruments (e.g., enhanced-use leasing) to reach the goals of 
the order. ESPCs enable federal agencies to enter into long-
term contracts with an energy savings company (ESCO) for the 
acquisition of energy-efficient equipment, such as new windows, 
lighting, and heating, ventilation, and air-conditioning 
systems. Using such equipment can reduce the energy costs for a 
facility, and the savings from reduced utility payments can be 
used to pay the contractor for the equipment over time. Because 
the government does not pay for the equipment at the time it is 
acquired, the ESCO borrows money from a nonfederal lender to 
finance the acquisition and installation of the equipment. When 
an agency enters into an ESPC, the government commits to paying 
for the full cost of the equipment as well as the financing 
costs for the project. Since the ESCO faces higher borrowing 
costs than the U.S. Treasury, total interest payments for the 
equipment acquisition will be higher than if the government 
financed the acquisition of the equipment directly with 
appropriated funds.
    The obligation to make payments for the equipment and the 
financing costs is incurred when the government signs the ESPC. 
Under current law, agencies can use ESPCs to acquire new 
energy-efficient equipment, without an up-front appropriation 
for the full amount of the purchase price. (Such contracts 
generally require payments over an extended period--up to 25 
years.) Thus, consistent with government accounting principles, 
CBO believes that the budget should reflect that commitment as 
new obligations at the time that an ESPC is signed and that the 
authority to enter into these contracts without budget 
authority for the full amount of the purchase price constitutes 
direct spending.
    Since 1988, the Department of Energy (DOE) estimates that 
agencies have entered into ESPCs valued over $2.6 billion. Of 
that amount, GSA has agreed to ESPC contracts valued at $500 
million, primarily for large energy projects, including 
heating, ventilation, and air conditioning, boiler and chiller 
improvements, and lighting improvements. If GSA used existing 
appropriated funds for financing instruments like ESPCs for the 
replacement of more energy-efficient lighting technology, the 
bill could result in additional direct spending. However, based 
on information from GSA, DOE, and the Office of Management and 
Budget, CBO expects that under the bill, the specific ESPCs 
that GSA chooses to execute may increase the priority of 
replacing existing lighting technology, but that any such 
changes are not likely to significantly change the overall cost 
of ESPCs.
    Intergovernmental and private-sector impact: S. 992 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would benefit local governments that 
participate in the demonstration program authorized in the 
bill. That program would provide $100 million over five years 
for competitive grants to assist local governments in reducing 
energy use in public buildings.
    Estimate prepared by: Federal Costs: Matthew Pickford and 
Susanne S. Mehlman; Impact on State, Local, and Tribal 
Governments: Theresa Gullo; Impact on the Private Sector: Craig 
Cammarata.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                                  
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