How to Make the Case for HVAC Upgrades

Facility and maintenance managers usually know when it’s time to replace or upgrade their facility’s HVAC system. However, when it comes time to HVAC upgrades, it’s important for these managers to take the time to prepare a summary of their HVAC recommendations. The executives of the company want to understand exactly how this will impact finances, so it’s important to write this out in financial terms.

If you’re planning on speaking to your executive team about #HVACupgrades, speak in financial terms. Click To Tweet

If the facility manager needs assistance with the long-term costs, the CFO is the best individual to approach for help. They will be able to provide current costs and possibly a structure to follow in order to ensure all aspects of the investment are accounted for. Besides just listing the financial benefits/impacts, the analysis needs to address other business matters like the HVAC zoning, comfort, and flexibility for each option.

Executive Considerations

When making decisions about the HVAC system and when speaking to executives about the importance of the HVAC upgrades, there is quiet a bit to consider.  Facility managers need to keep in mind that the major cost of running a building is not the HVAC cost itself, but the cost of personnel who use the building. Meaning, a small improvement in personnel productivity will provide large economic gains for the company overall. Productivity suffers when workers that are too hot or too cold suffers thanks to an increased rate of distraction and discomfort. Studies find that the highest productivity levels are found with temperatures at 71.6 degrees F. You could be paying 10% more in labor expenses when the office temperature is uncomfortable, according to a Cornell University study.

Creating the Productive Workplace says, “A 30 percent saving in HVAC energy…translates into something of the order of $0.25–$0.35 per square foot. However, the 3 percent loss in productivity associated with poor environmental quality would correspond to approximately $4.50–$6.00 per square foot, with unmeasured additional impacts of discomfort and poor health.”

Keep Options for HVAC Upgrades Open

Over the life of a building, there will continue to be innovations that reduce utility operating costs and improve tenant comfort. In an ideal scenario, facility managers would keep their renovation options open, so the building can grow and change over time. Even more, the company’s needs will adjust.

Remember, operating costs have a direct impact on a net operating income of the building, which has a direct impact on the value of the building if it were to be listed for sale.

[Upgrading your HVAC’s can have a huge impact on your unit’s upkeep. Download our HVAC Preventative Maintenance Checklist to find out more!]

Upgrading or replacing an HVAC system is a large expense for building owners. Fortunately, due to recent legislation, the Tax Cuts and Jobs Act of 2017, which went into effect on January 1, 2018, has allowed building owners to use upgrades or replacements as tax write-offs. Building owners now have the financial capacity to upgrade their inefficient or outdated HVAC system for a modern one that provides increased comfort, reliability and lower energy bills.

Studies show the highest #productivity levels are found with facility temperatures at 71.6 degrees F. Click To Tweet

This new federal tax law includes a provision that allows HVAC products to be expensed immediately. This means that under section 179, all components of “heating, ventilation, and air conditioning” systems can now be deducted, in full as a “business expense” during the first year after its purchase, instead of being slowly broken up, or “depreciated.”

This tax deduction incentive for upgrading your commercial HVAC system is fantastic news for businesses large and small.

New tax law effective January 1, 2018:

26 U.S. Code § 179 – A taxpayer may elect to treat the cost of any section 179 property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the section 179 property is placed in service. Qualified Real Property includes heating, ventilation, and air-conditioning property.

Speak in Financial Terms

Professional facility managers should speak in financial terms when trying to convince executives it’s time for an update and/or to purchase an energy-efficient HVAC system. Money speaks volumes to leadership. The likelihood that these decisions will get approved is much greater when the team feels they are making a smart financial decision. Making major capital decisions based on upfront costs alone will soon become a problem for facility managers down the road.

If you’re looking for commercial HVAC services in Omaha, Council Bluffs, Denver, Sioux City, Sturgis, Kearney, Lincoln or surrounding areas, contact us today! Our HVAC services are customized for each unique customer and are focused on preventive, predictive and proactive solutions.