HB2578 - 502R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 15-213.01, Arizona Revised Statutes, as amended by House Bill 2830, section 3, fiftieth legislature, second regular session and as transmitted to the governor, is amended to read:

START_STATUTE15-213.01. Procurement practices; guaranteed energy cost savings contracts; definitions

A. Notwithstanding section 15‑213, subsection A, a school district may contract for the procurement of a guaranteed energy cost savings contract with a qualified provider through a competitive sealed proposal process as provided by the procurement practices adopted by the state board of education.

B. A school district may enter into a guaranteed energy cost savings contract with a qualified provider if it determines that the energy savings project pays for itself within fifteen years or less the expected life, according to the manufacturer's equipment standards, of the energy cost savings measures implemented, the term of the financial agreement or twenty‑five years, whichever is shortest, if the recommendations in the proposal are followed. The school district shall retain the cost savings achieved by a guaranteed energy cost saving contract, and these cost savings may be used to pay for the contract and project implementation.

C. The school district shall use objective criteria in selecting the qualified provider, including the cost of the contract, the energy cost savings, the net projected energy savings, the quality of the technical approach, the quality of the project management plan, the financial solvency of the qualified provider and the experience of the qualified provider with projects of similar size and scope. The school district shall set forth each criterion with its respective numerical weighting in the request for proposal.

D. In selecting a contractor to perform any construction work related to performing the guaranteed energy cost savings contract, the qualified provider may develop and use a prequalification process for contractors. These prequalifications may require the contractor to demonstrate that the contractor is adequately bonded to perform the work and that the contractor has not failed to perform on a prior job.

E. A study shall be performed by the selected qualified provider in order to establish the exact scope of the guaranteed energy cost savings contract, the fixed cost savings guarantee amount and the methodology for determining actual savings. This report shall be reviewed and approved by the school district before the actual installation of any equipment. The qualified provider shall transmit a copy of the approved study to the school facilities board and the governor's office of energy policy.

F. The guaranteed energy cost savings contract shall require that, in determining whether the projected energy savings calculations have been met, the energy savings shall be computed by comparing the energy baseline before installation or implementation of the energy cost savings measures with the energy consumed after installation or implementation of the energy cost savings measures. The qualified provider and the school district may agree to make modifications to the energy baseline only for any of the following:

1. Changes in utility rates.

2. Changes in the number of days in the utility billing cycle.

3. Changes in the square footage of the facility.

4. Changes in the operational schedule of the facility.

5. Changes in facility temperature.

6. Significant changes in the weather.

7. Significant changes in the amount of equipment or lighting utilized in the facility.

8. Significant changes in the nature or intensity of energy use such as the change of classroom space to laboratory space.

G. The information to develop the energy baseline shall be derived from historical energy costs or actual energy measurements or shall be calculated from energy measurements at the facility where energy cost savings measures are to be installed or implemented. The baseline shall be established before the installation or implementation of energy cost savings measures.

H. At the qualified provider's expense, the proposal shall include an independent third-party validation of cost savings calculations associated with each proposed energy cost savings measure by a licensed, registered professional engineer, with credentials from the national association of energy engineers, who has demonstrated experience in energy analysis. The school district must approve the selection of the credentialed engineer.

I. A school district, or two or more school districts, may enter into a financing agreement with a qualified provider or the financial institution, trustee or paying agent for the purchase and installation or implementation of energy cost savings measures. The guaranteed energy cost savings contract may provide for payments over a period of not more than fifteen years the expected life, according to the manufacturer's equipment standards, of the energy cost savings measures implemented, the term of the financial agreement or twenty‑five years, whichever is shortest. The contract shall provide that all payments, except obligations on termination of the contract before its expiration, shall be made pursuant to the terms of the financing agreement. If a school district purchases the energy cost savings measure, the qualified provider shall guarantee that the energy costs cost savings meet or exceed the school district's total cost of the energy savings project purchase.

J. The guaranteed energy cost savings contract shall include a written guarantee of the qualified provider that the energy savings will meet or exceed the costs of the energy cost savings measures over the term of the contract, which shall not exceed fifteen years expected life, according to the manufacturer's equipment standards, of the energy cost savings measures implemented, the term of the financial agreement or twenty‑five years, whichever is shortest. The qualified provider shall:

1. For the term of the guaranteed energy savings contract, prepare a measurement and verification report on an annual basis in addition to an annual reconciliation of savings.

2. Reimburse the school district for any shortfall of guaranteed energy cost savings on an annual basis

3. Use the international performance and measurement and verification protocol standards or the federal energy management program standards to validate the savings guarantee.

K. The school district may obtain any required financing as part of the original competitive sealed proposal process from the qualified provider or a third-party financing institution.

L. A qualified provider that is awarded the contract shall give a sufficient bond to the school district for its faithful performance of the equipment installment.

M. The qualified provider is required to make public information in the subcontractor's bids only if the qualified provider is awarded the guaranteed energy cost savings contract by the school district.

N. For all projects carried out under this section, the district shall report to the governor's office of energy policy and the school facilities board:

1. The name of the project.

2. The qualified provider.

3. The total cost of the project.

4. The expected energy cost savings and relevant escalators.

5. The agreed on baseline in the measurement and verification agreement in both kilowatt hours and dollars.

O. For all projects carried out under this section, the district shall report to the school facilities board, by October 15 each year, the actual energy cost savings.

P. This section does not apply to the construction of new buildings.

Q. A school district may utilize a simplified energy performance contract for projects less than five hundred thousand dollars. Simplified energy performance contracts are not required to include an energy savings guarantee and shall comply with all requirements in this section except for the requirements that are specifically related to the energy savings guarantee and the measurement and verification of the guaranteed savings.

R. For the purposes of this section:

1. "Construction" means the process of building, altering, repairing, improving or demolishing any school district structure or building, or other public improvements of any kind to any school district real property. Construction does not include the routine operation, routine repair or routine maintenance of existing structures, buildings or real property.

2. "Energy baseline" means a calculation of the amount of energy used in an existing facility before the installation or implementation of the energy cost savings measures.

3. "Energy cost savings measure" means a training program or facility alteration designed to reduce energy consumption and may include one or more of the following, and any related meters or other measuring devices:

(a) Insulating the building structure or systems in the building.

(b) Storm windows or doors, caulking or weather stripping, multiglazed windows or door systems, additional glazing, reductions in glass area, or other window and door system modifications that reduce energy consumption.

(d) Heating, ventilating or air conditioning system modifications or replacements, including geothermal.

(e) Replacing or modifying lighting fixtures to increase the energy efficiency of the lighting system without increasing the overall illumination of a facility unless an increase in illumination is necessary to conform to the applicable state or local building code for the lighting system after the proposed modifications are made.

(f) Indoor air quality improvements to increase air quality that conform to the applicable state or local building code requirements.

(g) Energy recovery systems.

(h) Installing a new or retrofitting an existing day lighting system.

(i) Procurement of low-cost utility supplies of all types, including electricity, natural gas, propane and water.

(j) Devices that reduce water consumption and water costs or that reduce sewer charges.

(k) Rainwater harvesting systems.

(l) Combined heat and power systems.

(m) Renewable and alternative energy projects and renewable energy power service agreements.

(n) Self-generation systems.

(o) Any additional building systems and infrastructure that produce energy, or that provide utility cost savings not specifically mentioned in this paragraph, if the improvements meet the life cycle cost requirement and enhance building system performance or occupant comfort and safety, excluding those systems that fall under the provisions of section 15-213.02.

(p) Geothermal.

4. "Guaranteed energy cost savings contract" means a contract for implementing one or more energy cost savings measures.

5. "Life cycle cost" means the sum of present values of investment costs, capital costs, installation costs, energy costs, operating costs, maintenance costs and disposal costs and utility rebates over the life of the project, product or measure as provided by federal life cycle cost rules, regulations and criteria contained in the United States department of energy federal energy management program "guidance on life-cycle cost analysis" required by executive order 13423, January 2007.

6. "Qualified provider" means a person or a business that is experienced in designing, implementing or installing energy cost savings measures, that has a record of established projects or measures of similar size and scope, that has demonstrated technical, operational, financial and managerial capabilities to design and operate cost savings measures and projects and that has the financial ability to satisfy guarantees for energy cost savings. END_STATUTE

Sec. 2. Section 15‑213.03, Arizona Revised Statutes, as added by House Bill 2830, section 5, fiftieth legislature, second regular session and as transmitted to the governor, is amended to read:

START_STATUTE15-213.03. Procurement practices; guaranteed energy production contracts; definitions

A. Notwithstanding section 15-213, subsection A, a school district may contract for the procurement of a guaranteed energy production contract with a qualified provider through a competitive sealed proposal process as provided by the procurement practices adopted by the state board of education.

B. The school district shall use objective criteria in selecting the qualified provider, including the guaranteed energy price, the guaranteed energy production, the quality of the technical approach, the quality of the project management plan, the financial solvency of the qualified provider and the experience of the qualified provider with projects of similar size and scope. The school district shall set forth each criterion with its respective numerical weighting in the request for proposal.

C. In selecting a contractor to perform any construction work related to performing the guaranteed energy production contract, the qualified provider may develop and use a prequalification process for contractors. These prequalifications may require the contractor to demonstrate that the contractor is adequately bonded to perform the work and that the contractor has not failed to perform on a prior job.

D. When submitting a proposal for the installation of equipment, the qualified provider shall include information containing the guaranteed energy production associated with each proposed energy production measure. The school district shall review and approve this guarantee before the actual installation of any equipment. The qualified provider shall transmit a copy of the approved guarantee to the school facilities board and the governor's Office of energy policy.

E. A guaranteed energy production contract shall include a guaranteed energy price, and a written guaranteed energy production as measured on an annual basis over the expected life of the energy production measures implemented or within fifteen twenty‑five years, whichever is shorter. The qualified provider shall:

1. Prepare a measurement and verification report on an annual basis in addition to an annual reconciliation of any guaranteed energy production shortfall.

2. Reimburse the school district for any guaranteed energy production shortfall on an annual basis by multiplying any energy production shortfall by either the difference between the guaranteed energy price and the effective utility rate, or an alternative method as mutually agreed on by the school district and the provider.

F. The school district may obtain any required financing as part of the original competitive sealed proposal process from the qualified provider or a third-party financing institution.

G. A qualified provider that is awarded the contract shall give a sufficient bond to the school district for its faithful performance of the equipment installment.

H. The qualified provider is required to make public information in the subcontractor's bids only if the school district awards the qualified provider the guaranteed energy production contract.

I. For all projects carried out under this section, the district shall report to the governor's office of energy policy and the school facilities board:

1. The name of the project.

2. The qualified provider.

3. The total cost of the project.

4. The expected guaranteed energy production and guaranteed energy price, including relevant escalators, if applicable, over the term of the guaranteed energy production contract.

J. For all projects carried out under this section, the district shall report to the school facilities board, by October 15 each year, the actual energy production and guaranteed energy price.

K. For the purposes of this section:

1. "Actual energy production" means the actual amount of energy that flows from the energy production measure on an annual basis as measured by a meter in kilowatt hours alternating current.

2. "Construction" means the process of building, altering, repairing, improving or demolishing any school district structure or building, or other public improvements of any kind to any school district real property. Construction does not include the routine operation, routine repair or routine maintenance of existing structures, buildings or real property.

3. "Effective utility rate" means the average price per kilowatt hour that a school district paid to its utility provider for electricity service to the facility that is the subject of the guaranteed energy production contract over the previous twelve months.

4. "Energy production measure" means renewable and alternative energy projects or renewable energy power service agreements.

5. "Guaranteed energy price" means the agreed on price to be charged to the school for each kilowatt hour alternating current of actual energy production as such may change on an annual basis as set forth in the guaranteed energy production contract.

6. "Guaranteed energy production" means the amount of energy, measured in kilowatt hours alternating current, that the qualified provider guarantees for each year of the guaranteed energy production contract.

7. "Guaranteed energy production contract" means a contract for implementing one or more energy production measures between one or more qualified providers and a school district.

8. "Guaranteed energy production shortfall" means the amount, if any, that the actual energy production is less than the guaranteed energy production in any given year.

9. "Qualified provider" means a person or a business that is experienced in designing, implementing or installing energy cost savings measures, that has demonstrated technical, operational, financial and managerial capabilities to design and operate cost savings measures and projects and that has the financial ability to satisfy guarantees for guaranteed energy production, financial solvency and experience for projects of similar size and scope.END_STATUTE

Sec. 3. Section 15-910.02, Arizona Revised Statutes, as amended by House Bill 2830, section 6, fiftieth legislature, second regular session and as transmitted to the governor, is amended to read:

START_STATUTE15-910.02. Energy and water savings accounts

A. Each school district may establish an energy and water savings account that consists of a designated pool of capital investment monies to fund energy or water saving projects in school facilities. A school district may deposit in the account monies generated from the energy or water savings projects or measures implemented in school facilities. A school district may use monies in the energy and water savings account for payments under a performance contract entered into pursuant to section 15‑213 or 15‑213.01.

B. The auditor general and the department of education shall prescribe the appropriate designation of the energy and water savings accounts in the uniform system of financial records and shall prescribe reporting requirements on the appropriate budget forms and annual financial report forms.

C. Monies deposited in an energy and water savings account shall be used as a designated pool of capital investment monies to pay for the incremental cost of energy or water savings measures in school facilities that are owned by the school district. Any contract entered into pursuant to this section shall contain an agreement between the qualified provider and the energy or water services company that both parties have performed a reasonable investigation to determine that the measures contemplated by the contract will result in stated energy or water savings. Contract terms may extend the period of the capital investment repayment schedule prescribed in subsection G of this section up to the term of the guaranteed energy savings contract, which shall not exceed fifteen years expected life, according to the manufacturer's equipment standards, of the energy cost savings measures implemented, the term of the financial agreement or twenty‑five years, whichever is shortest.

D. Expenditures from an energy and water savings account shall be used only for the following:

1. Projects or measures pursuant to a contract pursuant to this section or section 15‑213.01 that save energy or water in school facilities that are owned by the school district. Monies may be used pursuant to this paragraph to provide technical assistance regarding energy or water savings to school districts by a qualified provider, or energy or water services company.

2. Payment of principal, interest, related financing costs and prepayment premiums.

E. School districts shall procure energy or water savings measures or services with monies distributed from the energy and water savings accounts.

F. Before the implementation of the energy or water savings measures or services, the qualified provider, or energy or water services company shall compute, and the school district shall review and approve, the estimated amount of the energy or water savings and the associated impact on energy or water costs to be achieved by the school district on an annual and monthly basis over the term of the guaranteed energy savings contract and shall include these estimates in the contract. The qualified provider and the school district shall update the annual and monthly energy or water savings and associated cost impact estimates annually based on actual experience for the term of the guaranteed energy savings contract.

G. Before the implementation of the energy or water savings measures or services, the qualified provider or financial institution, trustee or paying agent and the school district shall jointly develop a schedule of monthly or another mutually agreed on interval of payments for repayment of the capital investment monies. The repayment schedule shall result in lower energy or water costs, which shall include the total cost of all the installed energy or water savings measures for the school district over the term of the guaranteed energy savings contract, which shall not exceed fifteen years expected life, according to the manufacturer's equipment standards, of the energy cost savings measures implemented, the term of the financial agreement or twenty‑five years, whichever is shortest. The repayment schedule shall be included in the contract.

H. The school district shall transfer on a monthly basis the amount of the monthly payment prescribed pursuant to subsection G of this section to the energy and water savings account from the maintenance and operation portion of the school district's budget to repay any unpaid balance of the capital investment previously deposited in the energy and water savings account from the qualified provider, or energy or water services company plus a reasonable carrying charge. For the period of time that the company's capital investment monies and reasonable carrying charge remain unpaid, the qualified provider, or energy or water services company shall provide a separate billing or billing component to repay the capital investment on a monthly basis, pursuant to the repayment schedule prescribed pursuant to subsection G of this section, which shall be paid by the school district from the energy and water savings account. The school district's general budget limit shall be reduced by the amount of monies transferred to the energy and water savings account pursuant to this section.

I. After the balance of the qualified provider, provider's or energy or water services company's capital investment monies deposited in the energy and water savings account plus a reasonable carrying charge are repaid in full by the school district, the school district may discontinue the deposit in the energy and water savings account of amounts that are prescribed in subsection G of this section.

J. Any monies associated with an energy or water savings project remaining in the energy and water savings account after the capital investment monies of the qualified provider, or energy or water services company plus a reasonable carrying charge are repaid in full may be transferred to the maintenance and operation portion of the school district's budget, and the general budget limit may be increased by the amount transferred.

K. School districts may deposit energy‑related rebate or grant monies in the energy and water savings account to assist in funding energy or water savings projects. These rebate or grant monies may be used to reduce the total cost of energy or water savings projects and to reduce the amount of capital investment monies received from and repaid to utility, energy or water services companies. School districts are not required to repay the rebate or grant monies in the manner described in subsection G of this section pursuant to the agreements with the providers of rebate or grant funds.

L. School districts shall not use or deposit any excess utilities monies budgeted pursuant to section 15-910 in the energy and water savings account.

M. School districts may deposit monies from other funding sources in the energy and water savings account to fund energy or water saving projects in school facilities. These monies shall be repaid in a manner consistent with this section and pursuant to the contract between the school district and the provider of the funding.

N. This section does not impose an obligation on any energy utility, water utility, public service corporation or agricultural improvement district to invest monies or contract with any school district.

O. For all projects carried out under this section, the district shall report to the school facilities board:

1. The name of the project.

2. The qualified provider.

3. The total cost of the project.

4. The expected energy cost savings and relevant escalators.

5. The agreed on baseline in the measurement and verification agreement in both kilowatt hours and dollars.

P. For all projects carried out under this section, the district shall report to the school facilities board, by October 15 each year, the actual energy cost savings. END_STATUTE

Sec. 4. Section 15-2011, Arizona Revised Statutes, is amended to read:

START_STATUTE15-2011. Minimum school facility adequacy requirements; definition

A. The school facilities board, as determined and prescribed in this chapter, shall provide funding to school districts for new construction as the projected number of pupils in the district will fill the existing school facilities and require more pupil space.

B. School buildings in a school district are adequate if all of the following requirements are met:

1. The buildings contain sufficient and appropriate space and equipment that comply with the minimum school facility adequacy guidelines established pursuant to subsection F of this section. The state shall not fund facilities for elective courses that require the school district facilities to exceed minimum school facility adequacy requirements. The school facilities board shall determine whether a school building meets the requirements of this paragraph by analyzing the total square footage that is available for each pupil in conjunction with the need for specialized spaces and equipment.

2. The buildings are in compliance with federal, state and local building and fire codes and laws that are applicable to the particular building. An existing school building is not required to comply with current requirements for new buildings unless this compliance is specifically mandated by law or by the building or fire code of the jurisdiction where the building is located.

3. The building systems, including roofs, plumbing, telephone systems, electrical systems, heating systems and cooling systems, are in working order and are capable of being properly maintained.

4. The buildings are structurally sound.

C. The standards that shall be used by the school facilities board to determine whether a school building meets the minimum adequate gross square footage requirements are as follows:

1. For a school district that provides instruction to pupils in programs for preschool children with disabilities, kindergarten programs and grades one through six, eighty square feet per pupil in programs for preschool children with disabilities, kindergarten programs and grades one through six.

2. For a school district that provides instruction to up to eight hundred pupils in grades seven and eight, eighty‑four square feet per pupil in grades seven and eight.

3. For a school district that provides instruction to more than eight hundred pupils in grades seven and eight, eighty square feet per pupil in grades seven and eight or sixty‑seven thousand two hundred square feet, whichever is more.

4. For a school district that provides instruction to up to four hundred pupils in grades nine through twelve, one hundred twenty‑five square feet per pupil in grades nine through twelve.

5. For a school district that provides instruction to more than four hundred and up to one thousand pupils in grades nine through twelve, one hundred twenty square feet per pupil in grades nine through twelve or fifty thousand square feet, whichever is more.

6. For a school district that provides instruction to more than one thousand and up to one thousand eight hundred pupils in grades nine through twelve, one hundred twelve square feet per pupil in grades nine through twelve or one hundred twenty thousand square feet, whichever is more.

7. For a school district that provides instruction to more than one thousand eight hundred pupils in grades nine through twelve, ninety‑four square feet per pupil in grades nine through twelve or two hundred one thousand six hundred square feet, whichever is more.

D. The school facilities board may modify the square footage requirements prescribed in subsection C of this section or modify the amount of monies awarded to cure the square footage deficiency pursuant to this section for particular school districts based on extraordinary circumstances for any of the following considerations:

1. The number of pupils served by the school district.

2. Geographic factors.

3. Grade configurations other than those prescribed in subsection C of this section.

E. In measuring the square footage per pupil requirements of subsection C of this section, the school facilities board shall:

1. Use the most recent one hundredth day average daily membership.

2. For each school, use the lesser of either:

(a) Total gross square footage.

(b) Student capacity multiplied by the appropriate square footage per pupil prescribed by subsection C of this section.

3. Consider the total space available in all schools in use in the school district, except that the school facilities board shall allow an exclusion of the square footage for certain schools and the pupils within the schools' boundaries if the school district demonstrates to the board's satisfaction unusual or excessive busing of pupils or unusual attendance boundary changes between schools.

4. Compute the gross square footage of all buildings by measuring from exterior wall to exterior wall. Square footage used solely for district administration, storage of vehicles and other nonacademic purposes shall be excluded from the gross square footage.

5. Include all portable and modular buildings.

6. Include in the gross net square footage new construction funded wholly or partially by the school facilities board based on the square footage funded by the school facilities board. If the new construction is to exceed the square footage funded by the school facilities board, the excess square footage shall not be included in the gross net square footage if any of the following applies:

(a) The excess square footage was constructed before July 1, 2002 or funded by a class B bond, impact aid revenue bond or capital outlay override approved by the voters after August 1, 1998 and before June 30, 2002 or funded from unrestricted capital outlay expended before June 30, 2002.

(b) The excess square footage of new school facilities does not exceed twenty‑five per cent of the minimum square footage requirements pursuant to subsection C of this section.

(c) The excess square footage of expansions to school facilities does not exceed twenty‑five per cent of the minimum square footage requirements pursuant to subsection C of this section.

7. Require that excess square footage that is constructed after July 1, 2002 and that is not excluded pursuant to paragraph 6 of this subsection meets the minimum school facility adequacy guidelines in order to be eligible for building renewal monies as computed in section 15‑2031.

8. Exclude square footage built under a developer agreement according to section 15-342, paragraph 33 until the school facilities board provides funding for the square footage under section 15-2041, subsection O.

F. The school facilities board shall adopt rules establishing minimum school facility adequacy guidelines. The executive director of the school facilities board shall report monthly to the joint committee on capital review on the progress of the development of the proposed rules establishing the guidelines. The joint committee on capital review shall review the proposed guidelines before the school facilities board adopts the rules to establish the minimum school facility adequacy guidelines. The guidelines shall provide the minimum quality and quantity of school buildings and facilities and equipment necessary and appropriate to enable pupils to achieve the academic standards pursuant to section 15‑203, subsection A, paragraphs 12 and 13 and sections 15‑701 and 15‑701.01. At a minimum, the school facilities board shall address all of the following in developing these guidelines:

1. School sites.

2. Classrooms.

3. Libraries and media centers, or both.

4. Cafeterias.

5. Auditoriums, multipurpose rooms or other multiuse space.

6. Technology.

7. Transportation.

8. Facilities for science, arts and physical education.

9. Other facilities and equipment that are necessary and appropriate to achieve the academic standards prescribed pursuant to section 15‑203, subsection A, paragraphs 12 and 13 and sections 15‑701 and 15‑701.01.

10. Appropriate combinations of facilities or uses listed in this section.

G. The board shall consider the facilities and equipment of the schools with the highest academic productivity scores, as prescribed in section 15‑2002, subsection A, paragraph 9, subdivision (d), and the highest parent quality ratings in the establishment of the guidelines.

H. The school facilities board may consider appropriate combinations of facilities or uses in making assessments of and curing existing deficiencies pursuant to section 15‑2002, subsection A, paragraph 1 and in certifying plans for new school facilities pursuant to section 15‑2002, subsection A, paragraph 5.

I. For the purposes of this section, "student capacity" means the capacity adjusted to include any additions to or deletions of space, including modular or portable buildings at the school. The school facilities board shall determine the student capacity for each school in conjunction with each school district, recognizing each school's allocation of space as of July 1, 1998, to achieve the academic standards prescribed pursuant to section 15‑203, subsection A, paragraphs 12 and 13 and sections 15‑701 and 15‑701.01. END_STATUTE

Sec. 5. Section 15-2031, Arizona Revised Statutes, is amended to read:

START_STATUTE15-2031. Building renewal fund; definitions

A. A building renewal fund is established consisting of monies appropriated by the legislature. The school facilities board shall administer the fund and distribute monies to school districts for the purpose of maintaining the adequacy of existing school facilities. Monies in the fund are continuously appropriated and are exempt from the provisions of section 35‑190 relating to lapsing of appropriations.

B. The school facilities board shall inventory and inspect all school buildings in this state in order to develop a database to administer the building renewal formula. The database shall include the student capacity of the building as determined by the school facilities board. The board shall distribute monies from the building renewal fund to school districts in an amount computed pursuant to subsection I of this section. A school district that receives monies from the building renewal fund shall use the monies first for any projects that fall below the minimum school facility adequacy guidelines, as adopted by the school facilities board pursuant to section 15‑2011, and that are part of any buildings in the database and second for any other projects that are part of any buildings owned by the school district for any of the following:

1. Major renovations and repairs of a building.

2. Upgrading systems and areas that will maintain or extend the useful life of the building.

3. Infrastructure costs.

4. Relocation and placement of portable and modular buildings.

C. Monies received from the building renewal fund shall be used for primary projects, unless only secondary projects exist.

D. Notwithstanding subsections B and C of this section, school districts shall use building renewal monies on secondary projects to comply with building, health, fire or safety codes. Before spending building renewal monies on secondary projects to comply with building, health, fire or safety codes, the school facilities board shall approve the projects.

E. Monies received from the building renewal fund shall not be used for any of the following purposes:

1. New construction.

2. Remodeling interior space for aesthetic or preferential reasons.

3. Exterior beautification.

4. Demolition.

5. The purchase of soft capital items pursuant to section 15‑962, subsection D.

6. Routine maintenance except as provided in section 15‑2002, subsection K and subsection L of this section.

F. The school facilities board shall maintain the building renewal database and use the database for the computation of the building renewal formula distributions. The board shall ensure that the database is updated on at least an annual basis to reflect changes in the ages and value of school buildings. The facilities listed in the database shall include only those buildings that are owned by school districts that are required to meet academic standards. Each school district shall report to the school facilities board no later than October 15 of each year the number and type of school buildings owned by the district, the square footage of each building, the age of each building, the nature of any renovations completed and the cost of any renovations completed. The school facilities board may review or audit, or both, to confirm the information submitted by a school district. If a joint technical education district leases a building from a school district, that building shall not be included in the school district's square footage calculation for the purposes of determining the school district's building renewal distribution pursuant to this section. The board shall adjust the age of each school facility in the database whenever a building is significantly upgraded or remodeled. The age of a building that has been significantly upgraded or remodeled shall be recomputed as follows:

1. Divide the cost of the renovation by the building capacity value of the building determined in subsection I, paragraph 3 of this section.

2. Multiply the quotient determined in paragraph 1 of this subsection by the currently listed age of the building in the database.

3. Subtract the product determined in paragraph 2 of this subsection from the currently listed age of the building in the database, rounded to the nearest whole number. If the result is negative, use zero.

G. The school facilities board shall submit electronically an annual report to the president of the senate, the speaker of the house of representatives, the Arizona state library, archives and public records and the governor by October 1 that includes the computation of the amount of monies to be distributed from the building renewal fund for the current fiscal year. The joint committee on capital review shall review the school facilities board's calculation of the building renewal fund distributions. After the joint committee on capital review reviews the distributions computed by the school facilities board, the school facilities board shall distribute the monies from the building renewal fund to school districts in two equal installments in November and May of each year.

H. School districts that receive monies from the building renewal fund shall establish a district building renewal fund and shall use the monies in the district building renewal fund only for the purposes prescribed in subsection B of this section. Ending cash balances in a school district's building renewal fund may be used in following fiscal years for building renewal pursuant to subsection B of this section. By October 15 of each year, each school district shall report to the school facilities board the projects funded at each school in the previous fiscal year with monies from the district building renewal fund, including the amount of expenditures dedicated to primary projects and to secondary projects. On receipt of these reports, the school facilities board shall forward this information to the joint legislative budget committee staff and the governor's office of strategic planning and budgeting staff. Each school district shall also report to the school facilities board an accounting of the monies remaining in the district building renewal fund at the end of the previous fiscal year and a comprehensive three year plan that details the proposed use of building renewal monies. If a school district fails to submit the report by October 15 or the information required by subsection F of this section, the school facilities board shall withhold building renewal monies from the school district until the school facilities board determines that the school district has complied with the reporting requirement. When the school facilities board determines that the school district has complied with the reporting requirement, the school facilities board shall restore the full amount of withheld building renewal monies to the school district.

I. Notwithstanding any other provision of this chapter, if a school district converts space that is listed in the database maintained pursuant to this section to space that will be used for administrative purposes, the school district is responsible for any costs associated with the conversion, maintenance and replacement of that space. The building renewal amount for each school building shall be computed as follows:

1. Divide the age of the building as computed pursuant to subsection F of this section by one thousand two hundred seventy‑five or, in the case of modular or portable buildings, by two hundred ten.

2. Multiply the quotient determined in paragraph 1 of this subsection by 0.67.

3. Determine the building capacity value as follows:

(a) Multiply the student capacity of the building by the per student square foot capacity established by section 15‑2041.

(b) Multiply the product determined in subdivision (a) by the cost per square foot established by section 15‑2041.

4. Multiply the product determined in paragraph 2 of this subsection by the product determined in paragraph 3, subdivision (b) of this subsection.

J. If the school facilities board determines that a school district has spent monies from the building renewal fund for purposes other than those prescribed in subsection B of this section, the school facilities board shall notify the superintendent of public instruction. Notwithstanding any other law, the superintendent of public instruction shall withhold a corresponding amount from the monies that would otherwise be due the school district under the capital outlay revenue limit until these monies are repaid.

K. A school district is not entitled to receive monies from the building renewal fund for any buildings that are to be replaced with new buildings that are funded with deficiencies corrections monies. The replacement buildings are not eligible to receive building renewal funding until the fiscal year following the completion of the building.

L. Notwithstanding subsections B and E of this section, a school district may use eight per cent of the building renewal amount computed pursuant to subsection I of this section for routine preventative maintenance. The board, after consultation with maintenance specialists in school districts, shall provide examples of recommended services that are routine preventative maintenance.

M. A school district that uses building renewal monies for routine preventative maintenance shall use the building renewal monies to supplement and not supplant expenditures from other funds for the maintenance of school buildings. The auditor general shall prescribe a method for determining compliance with the requirements of this subsection. A school district, in connection with any audit conducted by a certified public accountant, shall also contract for an independent audit to determine whether the school district used building renewal monies to reduce the school district's existing level of routine preventative maintenance funding. The auditor general may conduct discretionary reviews of a school district that is not required to contract for an independent audit.

N. For the purposes of this section:

1. "Primary projects" means projects that are necessary for buildings owned by school districts that are required to meet the academic standards listed in the database maintained pursuant to subsection F of this section and that fall below the minimum school facility adequacy guidelines, as adopted by the school facilities board pursuant to section 15‑2011.

2. "Routine preventative maintenance" means services that are performed on a regular schedule at intervals ranging from four times a year to once every three years and that are intended to extend the useful life of a building system and reduce the need for major repairs.

3. "Secondary projects" means all projects that are not primary projects.

4. "Student capacity" has the same meaning prescribed in section 15‑2011. END_STATUTE

Sec. 6. Section 15-2041, Arizona Revised Statutes, is amended to read:

START_STATUTE15-2041. New school facilities fund; capital plan; report

A. A new school facilities fund is established consisting of monies appropriated by the legislature and monies credited to the fund pursuant to section 37‑221. The school facilities board shall administer the fund and distribute monies, as a continuing appropriation, to school districts for the purpose of constructing new school facilities and for contracted expenses pursuant to section 15‑2002, subsection B, paragraphs 2, 3 and 4. On June 30 of each fiscal year, any unobligated contract monies in the new school facilities fund shall be transferred to the capital reserve fund established by section 15‑2003.

B. The school facilities board shall prescribe a uniform format for use by the school district governing board in developing and annually updating a capital plan that consists of each of the following:

1. Enrollment projections for the next five years for elementary schools and eight years for middle and high schools, including a description of the methods used to make the projections.

2. A description of new schools or additions to existing schools needed to meet the building adequacy standards prescribed in section 15‑2011. The description shall include:

(a) The grade levels and the total number of pupils that the school or addition is intended to serve.

(b) The year in which it is necessary for the school or addition to begin operations.

3. Long‑term projections of the need for land for new schools.

4. Any other necessary information required by the school facilities board to evaluate a school district's capital plan.

5. If a school district pays tuition for all or a portion of the school district's high school pupils to another school district, the capital plan shall indicate the number of pupils for which the district pays tuition to another district. If a school district accepts pupils from another school district pursuant to section 15‑824, subsection A, the school district shall indicate the projections for this population separately. This paragraph does not apply to a small isolated school district as defined in section 15‑901.

C. If the capital plan indicates a need for a new school or an addition to an existing school within the next four years or a need for land within the next ten years, the school district shall submit its plan to the school facilities board by September 1 and shall request monies from the new school facilities fund for the new construction or land. The school facilities board may require a school district to sell land that was previously purchased entirely with monies provided by the school facilities board if the school facilities board determines that the property is no longer needed within the ten year period specified in this subsection for a new school or no longer needed within that ten year period for an addition to an existing school. Monies provided for land shall be in addition to any monies provided pursuant to subsection D of this section.

D. The school facilities board shall distribute monies from the new school facilities fund as follows:

1. The school facilities board shall review and evaluate the enrollment projections and either approve the projections as submitted or revise the projections. In determining new construction requirements, the school facilities board shall determine the net new growth of pupils that will require additional square footage that exceeds the building adequacy standards prescribed in section 15‑2011. If the projected growth and the existing number of pupils exceed three hundred fifty pupils who are served in a school district other than the pupil's resident school district, the school facilities board, the receiving school district and the resident school district shall develop a capital facilities plan on how to best serve those pupils. A small isolated school district as defined in section 15‑901 is not required to develop a capital facilities plan pursuant to this paragraph.

2. If the approved projections indicate that additional space will not be needed within the next two years for elementary schools or three years for middle or high schools in order to meet the building adequacy standards prescribed in section 15‑2011, the request shall be held for consideration by the school facilities board for possible future funding and the school district shall annually submit an updated plan until the additional space is needed.

3. If the approved projections indicate that additional space will be needed within the next two years for elementary schools or three years for middle or high schools in order to meet the building adequacy standards prescribed in section 15‑2011, the school facilities board shall provide an amount as follows:

(a) Determine the number of pupils requiring additional square footage to meet building adequacy standards. This amount for elementary schools shall not be less than the number of new pupils for whom space will be needed in the next year and shall not exceed the number of new pupils for whom space will be needed in the next five years. This amount for middle and high schools shall not be less than the number of new pupils for whom space will be needed in the next four years and shall not exceed the number of new pupils for whom space will be needed in the next eight years.

(b) Multiply the number of pupils determined in subdivision (a) of this paragraph by the square footage per pupil. The square footage per pupil is ninety square feet per pupil for preschool children with disabilities, kindergarten programs and grades one through six, one hundred square feet for grades seven and eight, one hundred thirty‑four square feet for a school district that provides instruction in grades nine through twelve for fewer than one thousand eight hundred pupils and one hundred twenty‑five square feet for a school district that provides instruction in grades nine through twelve for at least one thousand eight hundred pupils. The total number of pupils in grades nine through twelve in the district shall determine the square footage factor to use for net new pupils. The school facilities board may modify the square footage requirements prescribed in this subdivision for particular schools based on any of the following factors:

(i) The number of pupils served or projected to be served by the school district.

(ii) Geographic factors.

(iii) Grade configurations other than those prescribed in this subdivision.

(iv) Compliance with minimum school facility adequacy requirements established pursuant to section 15‑2011.

(c) Multiply the product obtained in subdivision (b) of this paragraph by the cost per square foot. The cost per square foot is ninety dollars for preschool children with disabilities, kindergarten programs and grades one through six, ninety‑five dollars for grades seven and eight and one hundred ten dollars for grades nine through twelve. The cost per square foot shall be adjusted annually for construction market considerations based on an index identified or developed by the joint legislative budget committee as necessary but not less than once each year. The school facilities board shall multiply the cost per square foot by 1.05 for any school district located in a rural area. The school facilities board may only modify the base cost per square foot prescribed in this subdivision for particular schools based on geographic conditions or site conditions. For the purposes of this subdivision, "rural area" means an area outside a thirty‑five mile radius of a boundary of a municipality with a population of more than fifty thousand persons.

(d) Once the school district governing board obtains approval from the school facilities board for new facility construction funds, additional portable or modular square footage created for the express purpose of providing temporary space for pupils until the completion of the new facility shall not be included by the school facilities board for the purpose of new construction funding calculations. On completion of the new facility construction project, if the portable or modular facilities continue in use, the portable or modular facilities shall be included as prescribed by this chapter, unless the school facilities board approves their continued use for the purpose of providing temporary space for pupils until the completion of the next new facility that has been approved for funding from the new school facilities fund.

4. For projects approved after December 31, 2001, and notwithstanding paragraph 3 of this subsection, a unified school district that does not have a high school is not eligible to receive high school space as prescribed by section 15‑2011 and this section unless the unified district qualifies for geographic factors prescribed by paragraph 3, subdivision (b), item (ii) of this subsection.

5. If a joint technical education district leases a building from a school district, that building shall be included in the school district's square footage calculation for the purposes of new construction pursuant to this section.

E. Monies for architectural and engineering fees, project management services and preconstruction services shall be distributed on the completion of the analysis by the school facilities board of the school district's request. After receiving monies pursuant to this subsection, the school district shall submit a design development plan for the school or addition to the school facilities board before any monies for construction are distributed. If the school district's request meets the building adequacy standards, the school facilities board may review and comment on the district's plan with respect to the efficiency and effectiveness of the plan in meeting state square footage and facility standards before distributing the remainder of the monies. If the school facilities board modifies the cost per square foot as prescribed in subsection D, paragraph 3, subdivision (c) of this section, the school facilities board may deduct the cost of project management services and preconstruction services from the required cost per square foot. The school facilities board may decline to fund the project if the square footage is no longer required due to revised enrollment projections.

F. The school facilities board shall distribute the monies needed for land for new schools so that land may be purchased at a price that is less than or equal to fair market value and in advance of the construction of the new school. If necessary, the school facilities board may distribute monies for land to be leased for new schools if the duration of the lease exceeds the life expectancy of the school facility by at least fifty per cent. A school district shall not use land purchased or partially purchased with monies provided by the school facilities board for a purpose other than a site for a school facility without obtaining prior written approval from the school facilities board. A school district shall not lease, sell or take any action that would diminish the value of land purchased or partially purchased with monies provided by the school facilities board without obtaining prior written approval from the school facilities board. The proceeds derived through the sale of any land purchased or partially purchased, or the sale of buildings funded or partially funded, with monies provided by the school facilities board shall be returned to the state fund from which it was appropriated and to any other participating entity on a proportional basis. Except as provided in section 15‑342, paragraph 33, if a school district acquires real property by donation at an appropriate school site approved by the school facilities board, the school facilities board shall distribute an amount equal to twenty per cent of the fair market value of the donated real property that can be used for academic purposes. The school district shall place the monies in the unrestricted capital outlay fund and increase the unrestricted capital budget limit by the amount of monies placed in the fund. Monies distributed under this subsection shall be distributed from the new school facilities fund. A school district that receives monies from the new school facilities fund for a donation of land pursuant to section 15‑342, paragraph 33 shall not receive monies from the school facilities board for the donation of real property pursuant to this subsection. A school district shall not pay a consultant a percentage of the value of any of the following:

1. Donations of real property, services or cash from any of the following:

(a) Entities that have offered to provide construction services to the school district.

(b) Entities that have been contracted to provide construction services to the school district.

(d) Entities that develop land for residential use in that school district.

2. Monies received from the school facilities board on behalf of the school district.

3. Monies paid by the school facilities board on behalf of the school district.

G. In addition to distributions to school districts based on pupil growth projections, a school district may submit an application to the school facilities board for monies from the new school facilities fund if one or more school buildings have outlived their useful life. If the school facilities board determines that the school district needs to build a new school building for these reasons, the school facilities board shall remove the square footage computations that represent the building from the computation of the school district's total square footage for purposes of this section. If the square footage recomputation reflects that the school district no longer meets building adequacy standards, the school district qualifies for a distribution of monies from the new school construction formula in an amount determined pursuant to subsection D of this section. Buildings removed from a school district's total square footage pursuant to this subsection shall not be included in the computation of monies from the building renewal fund established by section 15‑2031. The school facilities board may only modify the base cost per square foot prescribed in this subsection under extraordinary circumstances for geographic factors or site conditions.

H. School districts that receive monies from the new school facilities fund shall establish a district new school facilities fund and shall use the monies in the district new school facilities fund only for the purposes prescribed in this section. By October 15 of each year, each school district shall report to the school facilities board the projects funded at each school in the previous fiscal year with monies from the district new school facilities fund and shall provide an accounting of the monies remaining in the new school facilities fund at the end of the previous fiscal year.

I. If a school district has surplus monies received from the new school facilities fund, the school district may use the surplus monies only for capital purposes for the project for up to one year after completion of the project. If the school district possesses surplus monies from the new school construction project that have not been expended within one year of the completion of the project, the school district shall return the surplus monies to the school facilities board for deposit in the new school facilities fund.

J. The board's consideration of any application filed after December 31 of the year in which the property becomes territory in the vicinity of a military airport or ancillary military facility as defined in section 28‑8461 for monies to fund the construction of new school facilities proposed to be located in territory in the vicinity of a military airport or ancillary military facility shall include, if after notice is transmitted to the military airport pursuant to section 15‑2002 and before the public hearing the military airport provides comments and an analysis concerning compatibility of the proposed school facilities with the high noise or accident potential generated by military airport or ancillary military facility operations that may have an adverse effect on public health and safety, consideration and analysis of the comments and analysis provided by the military airport before making a final determination.

K. If a school district uses its own project manager for new school construction, the members of the school district governing board and the project manager shall sign an affidavit stating that the members and the project manager understand and will follow the minimum adequacy requirements prescribed in section 15‑2011.

L. The school facilities board shall establish a separate account in the new school facilities fund designated as the litigation account to pay attorney fees, expert witness fees and other costs associated with litigation in which the school facilities board pursues the recovery of damages for deficiencies correction that resulted from alleged construction defects or design defects that the school facilities board believes caused or contributed to a failure of the school building to conform to the building adequacy requirements prescribed in section 15‑2011. Attorney fees paid pursuant to this subsection shall not exceed the market rate for similar types of litigation. On or before December 1 of each year, the school facilities board shall report to the joint committee on capital review the costs associated with current and potential litigation that may be paid from the litigation account.

M. Until the state board of education and the auditor general adopt rules pursuant to section 15‑213, subsection I, the school facilities board may allow school districts to contract for construction services and materials through the qualified select bidders list method of project delivery for new school facilities pursuant to this section.

N. The school facilities board shall submit electronically a report on project management services and preconstruction services to the governor, the president of the senate and the speaker of the house of representatives by December 31 of each year. The report shall compare projects that use project management and preconstruction services with those that do not. The report shall address cost, schedule and other measurable components of a construction project. School districts, construction manager at risk firms and project management firms that participate in a school facilities board funded project shall provide the information required by the school facilities board in relation to this report.

O. If a school district constructs new square footage according to section 15‑342, paragraph 33, the school facilities board shall review the design plans and location of any new school facility submitted by school districts and another party to determine whether the design plans comply with the adequacy standards prescribed in section 15‑2011 and the square footage per pupil requirements pursuant to subsection D, paragraph 3, subdivision (b) of this section. When the school district qualifies for a distribution of monies from the new school facilities fund according to this section, the school facilities board shall distribute monies to the school district from the new school facilities fund for the square footage constructed under section 15‑342, paragraph 33 at the same cost per square foot established by this section that was in effect at the time of the beginning of the construction of the school facility. Before the school facilities board distributes any monies pursuant to this subsection, the school district shall demonstrate to the school facilities board that the facilities to be funded pursuant to this section meet the minimum adequacy standards prescribed in section 15‑2011. The agreement entered into pursuant to section 15‑342, paragraph 33 shall set forth the procedures for the allocation of these funds to the parties that participated in the agreement. END_STATUTE

Sec. 7. Repeal

Sections 15-2063 and 15-2092, Arizona Revised Statutes, are repealed.

Sec. 8. Section 15-2131, Arizona Revised Statutes, is amended to read:

START_STATUTE15-2131. Definitions

In this article, unless the context otherwise requires:

1. "HVAC system" means the equipment, distribution network and terminals that provide, either collectively or individually, the process of heating, ventilation or air conditioning to a building.

2. "School activity hours" means the time of day in which students or school personnel occupy school facilities.

3. "Standard 62" means the American national standards institute/American society of heating, ventilating, refrigeration refrigerating and air conditioning engineers standard 62 62.1 entitled "ventilation for acceptable indoor air quality". END_STATUTE

Sec. 9. Section 34‑105, Arizona Revised Statutes, as added by House Bill 2830, section 9, fiftieth legislature, second regular session and as transmitted to the governor, is amended to read:

START_STATUTE34-105. Guaranteed energy savings contracts; definitions

A. An agent may contract for the procurement of a guaranteed energy cost savings contract with a qualified provider.

B. An agent may enter into a guaranteed energy cost savings contract with a qualified provider if the agent determines that the amount the agent would spend on the energy cost savings measures recommended in the proposal would not exceed the amount to be saved in energy costs over the term of the contract, which shall not exceed fifteen years expected life, according to the manufacturer's equipment standards, of the energy cost savings measures implemented, the term of the financial agreement or twenty‑five years, whichever is shortest, after the date that installation or implementation is complete, if the recommendations in the proposal are followed. An agent shall retain the cost savings achieved by a guaranteed energy cost saving contract, and these cost savings may be used to pay for the contract and project implementation.

C. An agent shall use objective criteria in selecting the qualified provider, including the cost of the contract, the energy savings, the net projected energy savings, the quality of the technical approach, the quality of the project management plan, the financial solvency of the qualified provider and the experience of the qualified provider with projects of similar size and scope. An agent shall state each criterion with its relevant order of importance in the request for proposal.

E. The selected qualified provider shall perform a study in order to establish the exact scope of the guaranteed energy cost savings contract, the fixed cost savings guarantee amount and the methodology for determining actual savings. The agent shall review and approve this report before the actual installation of any equipment. The qualified provider shall transmit a copy of the approved study to the governor's office of energy policy.

F. The guaranteed energy cost savings contract shall require that in determining whether the projected energy savings calculations have been met, the energy costs savings shall be computed by comparing the energy baseline before installation or implementation of the energy cost savings measures with the energy consumed after installation or implementation of the energy cost savings measures. The qualified provider and the agent may agree to make modifications to the energy baseline only for any of the following:

1. Changes in utility rates.

2. Changes in the number of days in the utility billing cycle.

3. Changes in the square footage of the facility.

4. Changes in the operational schedule of the facility.

5. Changes in facility temperature.

6. Significant changes in the weather.

7. Significant changes in the amount of equipment or lighting utilized in the facility.

8. Significant changes in the nature or intensity of energy use such as the change of classroom space to laboratory space.

H. When submitting a proposal for the installation of equipment, the qualified provider shall include information on the projected energy savings associated with each proposed energy cost savings measure.

I. An agent, or two or more agents, may enter into a financing agreement with a qualified provider or the financial institution, trustee or paying agent for the purchase and installation or implementation of energy cost savings measures. The guaranteed energy cost savings contract may provide for payments over a period of not more than the term of the contract, which shall not exceed fifteen years expected life, according to the manufacturer's equipment standards, of the energy cost savings measures implemented, the term of the financial agreement or twenty‑five years, whichever is shortest. The contract shall provide that all payments, except obligations on termination of the contract before its expiration, shall be made pursuant to the terms of the agreement. If an agent purchases the energy cost savings measure, the qualified provider shall guarantee that the energy cost savings meet or exceed the agent's total cost of purchase.

J. The guaranteed energy cost savings contract shall include a written guarantee of the qualified provider that the energy cost savings will meet or exceed the costs of the energy cost savings measures over the term of the contract, which shall not exceed fifteen years expected life, according to the manufacturer's equipment standards, of the energy cost savings measures implemented, the term of the financial agreement or twenty‑five years, whichever is shortest, except as provided in subsection I of this section. The qualified provider shall:

1. For the term of the contract, prepare a measurement and verification report on an annual basis in addition to an annual reconciliation of savings.

2. Reimburse the agent for any shortfall of guaranteed energy cost savings on an annual basis.

3. Use the international performance and measurement and verification protocol standards or the federal energy management program standards to validate the savings guarantee.

K. The agent may obtain any required financing as part of the original competitive sealed proposal process from the qualified provider or a third‑party financing institution.

L. A qualified provider that is awarded the contract shall give a sufficient bond to the agent for its faithful performance of the equipment installment.

M. This section does not apply to the construction of new buildings.

N. An agent may use a simplified energy performance contract for projects less than five hundred thousand dollars. Simplified energy performance contracts are not required to include an energy savings guarantee and shall comply with all requirements in this section except for the requirements that are specifically related to the energy savings guarantee and the measurement and verification of the guaranteed savings.

O. For the purposes of this section:

1. "Agent" has the same meaning prescribed in section 34-101 but also includes a community college district organized under title 15, chapter 12, the department of administration and the Arizona board of regents.

2. "Construction" means the process of building, altering, repairing, improving or demolishing any structure or building, or other public improvements of any kind to any real property. Construction does not include the routine operation, routine repair or routine maintenance of existing structures, buildings or real property.

3. "Energy baseline" means a calculation of the amount of energy used in an existing facility before the installation or implementation of the energy cost savings measures.

4. "Energy cost savings measure" means a training program or facility alteration designed to reduce energy consumption and may include one or more of the following, and any related meters or other measuring devices:

(a) Insulating the building structure or systems in the building.

(d) Heating, ventilating or air conditioning system modifications or replacements, including ground source heat pumps.

(f) Indoor air quality improvements to increase air quality that conform to the applicable state or local building code requirements.

(g) Energy recovery systems.

(h) Installing a new or retrofitting an existing day lighting system.

(i) Procurement of low-cost utility supplies of all types, including electricity, natural gas, propane and water.

(j) Devices that reduce water consumption and water costs or that reduce sewer charges.

(k) Rainwater harvesting systems.

(l) Combined heat and power systems.

(m) Renewable and alternative energy projects and renewable energy power service agreements.

(n) Self-generation systems.

(p) Geothermal.

5. "Life cycle cost" means the sum of the present values of investment costs, capital costs, installation costs, energy costs, operating costs, maintenance costs and disposal costs and utility rebates over the life of the project, product or measure as provided by federal life cycle cost rules, regulations and criteria contained in the united states department of energy federal energy management program "guidance on life-cycle cost analysis" required by executive order 13423, January 2007.

Sec. 10. Conditional enactment

A. Section 15‑213.01, Arizona Revised Statutes, as amended by this act, is not effective unless section 15‑213.01, Arizona Revised Statutes, as amended by House Bill 2830, section 3, fiftieth legislature, second regular session and as transmitted to the governor, becomes law.

B. Section 15‑213.03, Arizona Revised Statutes, as amended by this act, is not effective unless section 15‑213.03, Arizona Revised Statutes, as added by House Bill 2830, section 5, fiftieth legislature, second regular session and as transmitted to the governor, becomes law.

C. Section 15‑910.02, Arizona Revised Statutes, as amended by this act, is not effective unless section 15‑910.02, Arizona Revised Statutes, as amended by House Bill 2830, section 6, fiftieth legislature, second regular session and as transmitted to the governor, becomes law.

D. Section 34‑105, Arizona Revised Statutes, as amended by this act, is not effective unless section 34‑105, Arizona Revised Statutes, as added by House Bill 2830, section 9, fiftieth legislature, second regular session and as transmitted to the governor, becomes law.