HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 08/04/2021 - FIRST READING OF ORDINANCE NO. 098, 2021, APPROPRI Agenda Item 11
Item # 11 Page 1
AGENDA ITEM SUMMARY August 4, 2021
City Council
STAFF
Chad Crager, Outside Plant Director
Travis Storin, Chief Finance Officer
David Lenz, FP&A Director
Cyril Vidergar, Legal
SUBJECT
First Reading of Ordinance No. 098, 2021, Appropriating Prior Year Reserves for Use as Contingency Capital
Funding of the Broadband System Construction.
EXECUTIVE SUMMARY
The purpose of this item is to appropriate prior year reserves to fund the continued build of the Broadband
system. The original construction budget is approximately 85% spent through the end of June 2021. Increased
boring costs, additional premises in the build area and the construction schedule developed from the
design/build framework have contributed to the need to access these funds.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading.
BACKGROUND / DISCUSSION
During elections in 2015 and 2017, City of Fort Collins residents voted to approve constructing a City owned
Fiber-to-the-Premise (FTTP) broadband network. In 2018, through the Electric Utility Enterprise the City raised
$142,815,541 in proceeds from two bond offerings. Of this amount, $108,608,249 was dedicated and
appropriated to the initial capital projects budget, pursuant to Ordinance No. 056, 2018. An additional
$27,458,550 of unappropriated bond proceeds was targeted for future operation and capital expansion needs.
The design/build contract with the prime contractor Atlantic Engineering Group (AEG) allowed for an
accelerated construction schedule. During the initial buildout phase, variable underground conditions, including
greater than expected rock density, have resulted in higher cost projections due to the lack of available conduit
suitable for use and the need for additional boring activities. Additionally, the number of serviceable premises
in the current build area has exceeded the original business plan estimates. To address costs and materials
associated with these updated conditions, the City and AEG executed four amendments to the original
construction contract. Despite these adjustments, updated construction estimates nevertheless project the
build moving faster than anticipated and completion is expected by year end 2022. At least one additional
contract amendment (i.e. Fifth Amendment) will be likely to cover final quantities and costs. The operation and
capital expansion needs to complete the project qualify for applying the unappropriated portion of bond
proceeds Council designated in 2018.
During the initial buildout phase, the City has realized favorable financial impacts from the interest earned on
existing unspent bond proceeds and containment of operating costs. These unanticipated monies have
allowed opportunities for redeployment of previously appropriated operating funds of $5,400,000 to the
buildout capital project and avoided the need to seek additional appropriation to complete work under the First
Agenda Item 11
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through Fourth Amendments to the contract with AEG. In preparation for completing the work and any
associated amendments to the contract with AEG once final quantities and conditions are identified,
Broadband and Finance staff are requesting Council appropriate an additional $8,200,000 from previously
unappropriated bond revenues, which will bring the total available appropriated funds for the capital project to
$122,208,249, including the original appropriation of bond proceeds, and appropriations of unanticipated and
excess revenues and lower operating costs in 2019, 2020, and 2021 annual budgets.
CITY FINANCIAL IMPACTS
Prior Appropriated Funds $ 108,608,249
Prior Appropriated Funds – Budget Re-deployed $ 5,400,000
Current Appropriation Request $ 8,200,000
Total Available Project Funds $ 122,208,249
ATTACHMENTS
1. Powerpoint Presentation (PDF)
August 4, 2021ATTACHMENT 1
Purpose1stReading - Consideration of Appropriation:• $8.2M set-aside for capital project from original bond offering2ATTACHMENT 1
FinancingBackground:• Raised $142.8M in bond proceeds in 2018 for Connexion project build• $109M appropriated for initial capital budget – majority targeted to Atlantic Engineering Group (AEG) as the prime contractor• Additional $8.2M set aside for future appropriation for success/contingency purposesAccess additional capital funds:• Less available conduit / More boring costs than anticipated• Additional premises in buildout area vs. business plan estimates3ATTACHMENT 1
Capital Project Spending Contract 6/30/2021LTD SpentContracted / EncumberedAEG (Network build) $75M $91M On Trac (Premise installations) $4M $6M Equipment & All Other $13M $15MTotal Project $92M $112M 4Final contract amounts are pending updated design and estimates, likely to amount to $122M+ATTACHMENT 1
Capital Project Funding Original Appropriation$109MRe-deployed Operating Budget$5MAppropriation Request$8MTotal Available (pending appropriation)$122M5Total Project Encumbered to-date (previous slide) $112M • Additional market share / take rate drives additional upfront capital cost• In Q4 2021 Council Work Session, staff will bring forward: • Updated project design, construction schedule, and budget• Market penetration and revenue estimatesATTACHMENT 1
29% Current Residential Take RateTake Rate and Number of Customers6• Take Rate only includes those areas that have had service for at least 90 days. • Working toward dashboard with trends.Take Rate =28% Business Plan Target Take Rate____Customers___Potential CustomersATTACHMENT 1
Thank You7ATTACHMENT 1
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ORDINANCE NO. 098, 2021
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROPRIATING PRIOR YEAR RESERVES FOR USE AS CONTINGENCY CAPITAL
FUNDING FOR THE BROADBAND SYSTEM CONSTRUCTION
WHEREAS, upon passage of Ordinance No. 003 (2018), of the Board of the City of Fort
Collins, Colorado, Electric Utility Enterprise (the “Enterprise Ordinance”), the Electric Utility
Enterprise (the “Enterprise”) issued its “City of Fort Collins, Colorado, Electric Utility
Enterprise, Tax-Exempt Revenue Bonds, Series 2018A” (the “2018A Bonds”) and its “City of
Fort Collins, Colorado, Electric Utility Enterprise, Taxable Revenue Bonds, Series 2018B” (the
“2018B Bonds” and, together with the 2018A Bonds, the “Bonds”); and
WHEREAS, per the Enterprise Ordinance, the Bonds were issued and sold to fund
construction of a municipal broadband system by the City’s Electric Utility (the “Electric
Utility”) to provide telecommunication facilities and services, including the transmission of
voice, data, graphics and video, to customers within the City, which facilities and services the
Electric Utility had not previously provided but is authorized to provide pursuant to City Charter
Article XII, Section 7 and City Code Section 26-570 et seq. (the “Broadband System”); and
WHEREAS, pursuant to Ordinance No. 056, 2018, City Council appropriated
$115,356,991 of the net proceeds ($142,815,541) from the sale of the Bonds to fund construction
of the Broadband System, including capital, operating and debt service expenditures, leaving an
unappropriated amount of $27,458,550 for future Broadband System operation and expansion
costs; and
WHEREAS, in 2018, the City engaged Atlantic Engineering Group (AEG) under a
design-build contract to construct the Broadband System, and the parties have since executed
four amendments to that contract in 2019, 2020, and 2021 to address changes in quantities and
underground conditions, without requiring additional appropriation of Bond proceeds; and
WHEREAS, in 2019, 2020, and 2021 annual budgets, as customers subscribed to City
broadband services, City Council appropriated unanticipated and excess broadband operating
revenues to complement the appropriation in Ordinance No. 056, 2018 and fund ongoing
construction of the Broadband System; and
WHEREAS, in anticipation of completing construction of the Broadband System in
2022, Broadband staff has identified the need for additional appropriation from the Bond
proceeds in the amount of EIGHT MILLION TWO HUNDRED THOUSAND DOLLARS
($8,200,000) as contingency capital funding, which purpose qualifies for use of unappropriated
Bond proceeds under Ordinance No. 056, 2018; and
WHEREAS, this appropriation benefits the public health, safety and welfare of the
residents of Fort Collins and serves the utility purpose of enabling timely and cost-effective
completion of the Broadband System construction; and
WHEREAS, Article V, Section 9 of the City Charter permits the City Council, upon
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recommendation of the City Manager, to appropriate by ordinance at any time during the fiscal
year such funds for expenditure as may be available from reserves accumulated in prior years,
notwithstanding that such reserves were not previously appropriated; and
WHEREAS, the City Manager has recommended the appropriation described herein and
determined that this appropriation is available and previously unappropriated from the
Broadband Fund and will not cause the total amount appropriated in the Broadband Fund to
exceed the current estimate of actual and anticipated revenues and all other funds to be received
in that Fund during any fiscal year; and
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That the City Council hereby makes and adopts the determinations and
findings contained in the recitals set forth above.
Section 2. That there is hereby appropriated for expenditure from prior year reserves
in the Broadband Fund the sum of EIGHT MILLION TWO HUNDRED THOUSAND
DOLLARS ($8,200,000) to allow for the use of contingency capital funding of the Broadband
System construction.
Introduced, considered favorably on first reading, and ordered published this 4th day of
August, A.D. 2021, and to be presented for final passage on the 7th day of September, A.D.
2021.
__________________________________
Mayor
ATTEST:
_______________________________
Interim City Clerk
Passed and adopted on final reading on the 7th day of September, A.D. 2021.
__________________________________
Mayor
ATTEST:
_______________________________
Interim City Clerk