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Minnesota Community Living July/August 2008

From the President
By Mark Schoenfelder

Featured Community: Green Communities
By Mark Gittleman

Bulk Cable: Not an Exclusive Relationship Any Longer
By Christopher P. Renz, Esq. & Matthew A. Drewes, Esq.

2008 Vision Award Winners

Did Your Developer Plant Strong Financial Roots?
By Matthew A. Drewes, Esq.

Collecting Assessments in Hard Times
By Michael D. Klemm, Esq,


Green Communities Back to Index
The Carlyle
The Carlyle

By Mark Gittleman, Gittleman Management


s energy rates increase for both natural gas and electricity, management of energy consumption is becoming an even more critical issue at condominium associations, particularly those with their own central heating and/or cooling equipment.

The operating expense structure related to electricity and natural gas consumption in such buildings will vary based on the following key factors, among others:

  • type of heating, ventilation and air conditioning equipment;
  • condition and operating efficiencies of the equipment;
  • efficiency of lighting and other electrical devices; and
  • and non-mechanical energy efficiencies of the building.

To demonstrate the potential impact of rising energy expenses on association assessments in condominiums with central heating and air conditioning, the chart (above right) presents a sample case study to underscore the impact of rising utility expenses from 2008 to 2009. The example assumes the following:

  • central heating and cooling;
  • 2008 electricity and natural gas expenses are 15% and 20% of the total operating budget respectively exclusive of reserve contributions;
  • electricity rates will increase by 6% from 2008 to 2009 and electricity usage will remain constant;
  • natural gas rates will increase 40% from actual 2008 to projected 2009;
  • offset by a warmer winter in 2009, gas usage will be down so that total winter gas expenses increase 25% relative to 2008;
  • all other operating expenses go up by 2% from 2008 to 2009.
Sample Association Assumptions on Energy and Non Energy Expenses as a Percentage of the Operating Budget
% of 2008
Operating Expenses
% of 2009
Operating Expenses
Electricity (6% increase in $ in 09) 15% 14.80%
Natural Gas (25% increase in $ in 09) 20% 23.30%
Electricity and Natural Gas Combined 35% 38.20%
Other Operating Expenses (2% increase in $ in 09) 65% 61.80%

Often, association managers and boards of directors spend a considerable amount of time on projects and expenditures that represent less than .5% of the association’s operating expenses. It is increasingly important to carefully consider options for energy expense savings as the expense structure for energy increases significantly. We can see through the example above the magnitude of effect that large changes in utility expenses will have on many associations’ finances on a cumulative basis if energy prices rise on a multi-year basis.

Questions Checklist

  • Is the equipment on a preventive maintenance program and being maintained properly so that it operates efficiently?
  • Has an audit on electrical and gas equipment been undertaken by a maintenance engineer or third party professional to make recommendations on equipment replacement to reduce operating expenses?
  • Can additional controls be added to optimize the operation of the equipment?
  • Have energy rebates been examined for energy-efficient upgrades that are under consideration?
  • Are energy-saving equipment replacements that have a relatively large return on investment been included in a capital replacement program?
  • Have the board of directors and management company publicized efforts to increase energy efficiencies to build support for funding future energy efficiency related capital investments?
  • Are energy efficiency considerations incorporated into specifications and requests for proposals for building components that will otherwise need to be replaced?
Estimated Energy Savings and Payback Time Calculated Below
Payback years
VFD on Lead Chiller $3,912.00 $4,029.00 $4,150.00 $4,274.00 $4,403.00 $4,535.00
Purge Unit 2,502.00 2,477.00 2,654.00 2,654.00 2,816.00 2,900.00
Annual Energy Savings $6,414.00 $6,506.00 $6,804.00 $6,928.00 $7,219.00 $7,435.00
Rate of Inflation:  3.00%
Project Payback:  5.98 yrs.

Much has been written and implemented with regard to energy saving opportunities for lighting replacement by installing efficient fluorescent light fixtures. There are also opportunities for significant electricity savings by fine tuning the performance of or installing upgrades to existing mechanical equipment.

River Towers
Rebate on one (1) VFD installed $6,206.00
Rebate on Chiller Purge Unit 4,563.00
Total Rebates $10,769.00
Project Costs - VFD and Purge Unit $52,100.00
Total Costs less rebates $41,331.00

On the right is a sample of energy savings from 2005 upgrades to River Towers’ chillers based on 2005 energy expenses. In the example, The management company worked with the Board of Directors and a third party consultant to identify and analyze potential energy efficient upgrades to the cooling plant. These included a variable frequency drive and a more efficient “purge” unit on the association’s lead chiller. The more efficient purge unit pulls more oil contaminants out of the refrigerant which enables the chiller to operate more efficiently.

As noted in this study, the payback at the time that this work was undertaken was 5.98 years.

Variable Frequency Drives or VFDs such as the one included in the upgrade above are digital controllers that vary the electrical input to a motor to control its speed. This enables the motor to start slowly and only use as much energy as needed for the load on the pump, thereby operating at peak efficiency. Large, state-of-the art new buildings are typically built with variable frequency drives on motors that are of significant size and operate at variable speed. At The Carlyle, for example, our client account’s facility has more than 40 such VFDs originally installed.

VFDs offer significant savings on existing motors at older buildings. They can be retrofitted on some efficient motors that have already been replaced in the last few years. Older motors typically require replacement to a higher efficiency motor along with installation of the VFD in order for the VFD to be operate effectively.

VFDs on two 15 Horsepower Pumps
VFDs on two 15-horsepower pumps

Types of installations where VFDs often have significant payback typically include motors in excess of 7. 5 horsepower with variable energy loads. These typically include domestic water pumps, certain HVAC pumps in certain closed loop heating and cooling systems, cooling tower fans, and certain make-up air units.

The graph above illustrates an energy savings cost benefit analysis for a complete chiller replacement at The Crossings for a chiller that is at the end of its useful life and, therefore, in need of replacement. In this instance, the key energy efficiency question for purposes of decision making was not how much money could be saved relative to the old chiller, but what the energy efficiency advantages would be for different, new chiller options suitable for the facility.

As noted, the most efficient chiller option (the multistack turbocore chiller) was not the option that offered the best value for the association as the substantially higher installation expenses decreased the return on investment. The two rotary chillers were only slightly less efficient and provided greater efficiency gains relative to the original chiller or a single 300 ton centrifugal chiller (which was also ruled out for a few reasons, one of which was its lower energy efficiency).

The final segment of the chart above, which was prepared by Michaud Cooley and Erickson, demonstrates how the period by which the return on investment is realized drops as the assumed rates for utilities increase year over year. Given significantly rising energy price structures, this is an increasingly important variable in any analysis.

Optimizing Existing Mechanical Systems
Some large, contemporary buildings are built with energy management systems or such systems have been installed after the fact. At such facilities, one can evaluate and optimize the operation of the building equipment more easily on an ongoing basis. A few of the key features included in such systems are as follows:

  • control make up air automatically with changes in air temperature and humidity;
  • establish programmable settings for temperatures in common areas of the building including night set-back temperatures; and
  • establish, monitor and record information on operation of the equipment on an ongoing basis and reprogram equipment as appropriate to operate more efficiently.
Simple Payback Calculation
Existing 300 ton chiller
1 - 300 ton Centrifugal Chiller
2 – 180 ton Rotary Chillers
Multistack Turbocore Modular Chiller (4-80 ton)
1st Cost
Xcel Energy Rebate
Adjusted 1st Cost
Incremental 1st Cost
Ann. Energy Svgs.
 $           - 
Payback (years)
% Annual Electric Rate Increase
1 - 300 ton Centrifugal Chiller
2 – 180 ton Rotary Chillers
Multistack Turbocore Modular Chiller (4-80 ton)

As mechanical equipment is replaced in older buildings, additional controls on new mechanical equipment can be considered as an option along with replacement of old equipment to facilitate more efficient management and operation of the equipment on an ongoing basis.

In some instances, changes can be made by thoughtful reengineering without the purchase of significant new equipment. In early 2008, the management company sought options to provide the limited cooling called for by some of the residents at The Carlyle during winter months when this demand is largely limited to south facing units on warmer-than-normal days. In order to reduce operating expenses, we sought to avoid operating that winter cooling tower and chiller that was designated for this use.

Our building engineer devised and executed a plan to provide the desired cooling capacity without using the chiller or cooling tower. Instead, through installation of some additional controls and valves, we routed the chilled water loop through a make-up air coil that is exposed to outside air to chill the chilled water loop without any additional equipment. This resulted in estimated electricity savings of at least $2,500 per month plus additional savings in water, water treatment, maintenance, and long-term wear and tear on the cooling tower and chiller. The expense to undertake the installation was approximately $2,000. 

Examples of Heating Plant Improvements to Reduce Natural Gas Expenses
Installation of Carbon Monoxide Controls for Garage Make-Up Air
Most enclosed parking facilities currently have carbon monoxide controls for the make-up air so that air in the building is only exchanged and exhausted when carbon monoxide levels reach a designated threshold. The building code requires that if carbon monoxide controls are not in place to control make-up air, exhaust fans must run every 15 minutes in the garage for a period of fifteen minutes.

During the winter, this has the net effect of exhausting tempered air out of the garage and then heating incoming make-up air to the thermostatically controlled set point. The net energy expenses resulting from this will vary depending on the size of the garage, the set point of the thermostat, and the make-up air unit.  Installation of carbon monoxide controls offer substantial natural gas savings.  In the summer months, the carbon monoxide controls have the positive benefit of bringing in less humid air into the garage on the hottest days thereby keeping the garage cooler.

We also recommend ensuring that garage temperatures are set as low as possible in the winter without compromising sprinkler or plumbing lines that may run through the garage. An evaluation of the location and type of pressured plumbing or sprinkler lines is necessary in order to determine an appropriate set point that is safe.
Replacement of Burners on Boilers
Burners on larger, older boilers are substantially less efficient than burners on contemporary boilers by the added capability of operating at a very high turn down level measured by the “turndown ratio” during partial demand.  Depending on the size and the amount of load on the boilers, there can be substantial savings by installing high efficiency burners.  Depending on the size of the boilers and the nature of the demand, high efficiency burners can save as much as 10-15% in natural gas use in certain installations. 

Cloud 9 Sky Flats BoilersInstallation of More Efficient Boilers
At a client association, Cloud 9 Sky Flats, we worked with a mechanical contractor to replace an old boiler with a condensing boiler rated above 90% efficiency.  These condensing boilers are able to achieve high efficiencies because they incorporate an extra heat exchanger that utilizes heat that is otherwise wasted through the flue with a traditional boiler system.  This heat then pre-heats the water in the boiler system, enabling the boiler to achieve the same results with less work, essentially.  These boilers result in an estimated 10% reduction in the facility's gas bill annually.



Grant ParkEvaluating Air Exchange from the Interior Common Areas
At Grant Park, our building engineer discovered that substantial amounts of air were being exhausted from the building through dampers on the elevator penthouse cooling equipment.  This unintended exhaust was a result of “stack effect”, warm air rushing up chases in high rise buildings during the winter when there is a high temperature differential.  Grant Park DampersOur engineer and mechanical service contractor devised a plan to install automatic dampers that would only open when required for the cooling system in the elevator penthouse.  The estimated energy savings from reduced natural gas consumption from installation of the automatic dampers was $13,023 annually.

As management companies and community associations with central heating or cooling address these issues we recommend the following:

  • working closely with the mechanical service firm(s) or maintenance engineers most familiar with the building to look for energy saving opportunities;
  • being aware of eligible rebates from utility  companies,
  • developing a relationship with a third-party mechanical engineer who can bring a fresh set of eyes and experience from other projects and independent credibility to number evaluations and number crunching; and
  • build awareness within the community to develop support of initiatives that may require an initial expenditure/investment of capital replacement funds.

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