What HVAC Teams Should Know About COVID Stimulus Funding

Since the start of the COVID-19 pandemic, the U.S. government has passed over $5 trillion in stimulus funding. Of that, millions of dollars are allocated explicitly for HVAC improvements. Each of the three major COVID-19 relief spending packages (CARES, CRRSA, ARPA) contain funds that can be used to upgrade heating and cooling systems to make buildings more resistant to COVID-19 and other disease outbreaks.

Commercial HVAC sales reps have never had a more compelling pitch for prospective customers, and customers have never had access to so much government help to make improvements. That’s why it’s so important for reps and managers to be familiar with the stimulus landscape, to prospect more effectively, and educate potential customers about the available funds.

In this article, we’ll pay special attention to schools since they’ve received some of the biggest slices of the stimulus pie. But we’ll also look at other, lesser-known stimulus provisions that can make for appealing prospects.

Education Stimulus Funds

Education has received some of the largest earmarks for COVID-19 relief, including funds for improving HVAC systems. The entire nation (and especially the nation’s parents) wants schools to reopen safely in fall 2021, making this summer the perfect time to upgrade facilities.

On top of that, many schools are long overdue for HVAC improvements. A 2020 Government Accountability Office (GAO) report found that 41% of school districts needed HVAC improvements in at least half their schools. Some schools are working with equipment dating back to the 1930s, like this boiler in Washington state.

For HVAC teams, schools are promising prospects, but sales reps have to make a compelling case to a wide range of decision-makers to win those contracts.

Here’s a brief rundown on the available funds and how they’re being spent.

What COVID-19 stimulus funding is available?

COVID-19 stimulus funding for education is a bit of an alphabet soup of acronyms, which funnel money through various programs. But in a nutshell: All three COVID-19 relief packages directed money to the Elementary and Secondary School Emergency Relief (ESSER) Fund for K-12 Schools. The programs also directed funds to colleges and universities via the Higher Education Emergency Relief (HEER) Fund.

You’ll often see schools reference ESSER I, ESSER II, and ESSER III, which correspond to ESSER’s money in each successive stimulus bill.

These funds are available to all public schools and some charter and private schools, depending on their eligibility.

How can schools spend stimulus money on HVAC?

The Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA) allotted money for “inspection, testing, maintenance, repair, replacement, and upgrade projects to improve the indoor air quality in school facilities, including mechanical and non-mechanical heating, ventilation, and air conditioning systems, filtering, purification and other air cleaning, fans, control systems, and window and door repair and replacement.” The American Rescue Plan Act (ARPA) then borrowed the same language.

In practice, these funds need to be spent on CDC and EPA-approved technologies. These include filtration, ventilation, and ultraviolet germicidal irradiation (UVGI). (Thus far, ionization has not received official approval to make schools safer.)

How do schools obtain funding?

States apply to the federal government for grants and must allocate at least 90% of the funds they receive to local educational agencies (LEAs).

States can apply for ESSER funds until September 2023. But once they receive the funds, they only have 60 days to pass them onto LEAs, which only have one year to spend money once they receive it. These are tight deadlines and should motivate school administrators to take decisive action in choosing projects.

Who controls spending?

The question of who has ultimate approval for HVAC projects varies from district to district and often along an urban/rural divide. In urban districts, highly paid superintendents make spending decisions, and they often hire third-party consultants to make recommendations. Administrators are more likely to implement districtwide solutions instead of operating on a school-by-school basis. That means these urban contracts can be particularly lucrative, but getting access to consultants and superintendents can be challenging.

Meanwhile, in suburban and rural districts, principals and facilities managers have more independence and are more open to guidance. But the distribution of funds in these districts also varies significantly, depending on the concentration of low-income students.

One universal fact of prospecting to schools is that spending on COVID-19 projects is highly political. Administrators at every level are anxious to spend stimulus funds on projects that do the most good. They want to avoid the kind of bad press that has plagued schools in Sacramento, Calif. That district spent $6 million in CARES funding on air cleaners that The Sacramento Bee criticized as “overpriced, inefficient and included unnecessary and unproven technology.” Reps should keep these concerns in mind when speaking to stakeholders.

Non-Education Stimulus Funds

Competition for school contracts is fierce, and school administrators are generally well-educated about their eligibility for stimulus funds. But property owners in other fields may not be aware that stimulus money is available for HVAC upgrades, which means they’re great prospects.

Note: This list of opportunities isn’t exhaustive, and you should check your state’s policies on how funding is distributed.

Health centers

Next to schools, health centers have been singled out for the most direct aid for facilities improvements. ARPA allows eligible health centers to apply for up to $500,000 in funds to modernize or install new HVAC.

This grant is only available to health centers that are already grant recipients of the Health Center Program, and health center administrators are responsible for applying for funds.

Humanitarian Services

Homeless shelters, food banks, and other nonprofits and government agencies that help vulnerable populations can apply for ARPA funds to improve their facilities as well. Among the approved uses for these funds is HVAC installation or improvement worth up to $5,000.

For more information on this program, including application deadlines, check out the United Way’s comprehensive guide.

Private sector

The CARES Act offered a little-known tax incentive that enables building owners to write off the cost of HVAC retrofits. Unlike many CARES Act provisions, which apply to specific properties (like health centers and schools), private businesses can take advantage of this.

According to the DLL Group: “With the new CARES Act, an HVAC retrofit may qualify for bonus depreciation. By financing an HVAC retrofit using a capital lease structure this year, the system can be paid for over time, while potentially writing off the entire cost of the system this tax year.”

Public buildings

Some state and local government entities have used CARES Act funds for HVAC upgrades, giving recipients broad discretion in using the money.

For instance, the North Carolina State Agriculture Department spent $400,000 on ionization systems for buildings on the State Fair Fairgrounds. Much of the CARES funds have already been spent, but it’s still worth asking facilities managers if they have funds in need of a project.

Claim Your Business’ Share of Stimulus Funds

Once you know where the stimulus money is flowing, you can use it to identify prospects and tailor your pitch accordingly. And it’s a heck of a sales pitch since improving indoor air quality is hugely important to ending the COVID-19 pandemic and making buildings healthier in the long term.

Some prospects will already know about these programs, but they’ll still be happy to work with a sales rep who is educated on their needs. And some prospects will need to be educated about the funds they’re entitled to and how to apply. Either way, you can use stimulus funds to kick-start a strong relationship with a new customer.