HomeMy WebLinkAboutAgenda - Full - Finance Committee - 12/01/2021 -Finance Administration
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AGENDA
Council Finance & Audit Committee
December 1, 2021
3:00 - 5:00 pm
Zoom Meeting https://zoom.us/j/8140111859
Approval of Minutes from the November 3, 2021 Council Finance Committee meeting.
1.Utility Long-term Financial & Capital Improvement Plan (Part 2of 2)
Water & Wastewater
60 mins. L. Smith
2. Consideration of New Revenue Sources 30 mins. J. Poznanovic
G. Sawyer
Other Business
Page 1 of 116
Council Finance Committee
Agenda Planning Calendar 2021-2022
RVSD 11/24/21 ts
Dec. 1st 2021
Utility Long-term Financial Plan and Capital Improvement Plan
(part 2/2) 60 min L. Smith
Consideration of New Revenue Sources 30 min J. Poznanovic
G. Sawyer
Jan. 5th 2022
EPIC Home Loan Program 30 min J. Phelan
C. Conant
Financial Policy Updates 30 min B. Dunn
Feb. 2nd 2022
2023 Development Review and Capital Expansion Fee Updates 25 min D. Lenz
Mar. 2nd 2022
Debt Offering: Hughes Land, Natural Areas, Golf 40 min B. Dunn
2023-2024 Budget Process Review 30 min L. Pollack
2022 Reappropriation 20 min L. Pollack
Page 2 of 116
Page 3 of 116
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
Finance Committee Meeting Minutes
November 3, 2021
3:00 - 5:00 pm
Zoom
Council Attendees: Julie Pignataro, Kelly Ohlson, Emily Francis, Shirley Peel
Staff: Blaine Dunn, Carrie Daggett, John Duval, Ryan Malarky, Kyle Stannert, Theresa
Connor, Lance Smith, Jen Authier, Adam Bromley, Kraig Bader, Matt Fater,
Teresa Roche, Tyler Marr, Amanda King, Amanda Newton, Victoria Shaw, Barb
Brock, Aaron Harris, Erik Martin, Dave Lenz, Zack Mozer, Jo Cech, Renee Callas,
Lawrence Pollack, Cody Forst, Jennifer Poznanovic, Ginny Sawyer, Molly Reeves,
Javier Echeverria, SeonAh Kendall, Nina Bodenhamer, Josh Birks, Carolyn Koontz
Others: Kevin Jones, Fort Collins Area Chamber of Commerce
Cara Neth, CSU
Vicky McLane
____________________________________________________________________________________
Meeting called to order at 3:00 pm
Approval of minutes from the October 6, 2021, Council Finance Committee Meeting. Kelly Ohlson moved for
approval of the minutes as presented. Emily Francis seconded the motion. Minutes were approved unanimously via
roll call by; Julie Pignataro, Kelly Ohlson and Emily Francis.
A. Utilities Long Term Capital Improvement Plan & Strategic Financial Plan Updates -
For Light & Power and Stormwater Utilities
Lance Smith, Utilities Strategic Financial Director
EXECUTIVE SUMMARY
The purpose of this agenda item is to provide the Council Finance Committee with an overview of the planning
processes underway within Fort Collins Utilities. This agenda item will focus on the Light & Power and
Stormwater Enterprise Funds. The Water and Wastewater Enterprise Funds will be presented for discussion in
December. The 2021 Capital Improvement Plans (CIPs) and the 2021 Strategic Financial Plans for each utility are
outlined. The resulting investment projections set the basis for beginning the 2023-24 Budgeting For Outcomes
(BFO) cycle. The overall 10-year rate projections for both utilities are also presented here along with the
forecasted debt issuance needs.
Through active management of O&M expenses, modest rate adjustments and the issuance of some debt, the
Light & Power Enterprise Fund is expected to be able to meet its operational objectives through targeted capital
investments over the coming decade.
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The Stormwater Enterprise Fund has a significant amount of capital investment required to complete the initial
buildout of all the needed infrastructure. Given the high operating ratio (operating income / operating revenue)
and the amount of capital investment needed, this utility will require the issuance of significant debt over the
next 25 years as this initial infrastructure is built. Modest rate adjustments allow for some increase in the debt
capacity of this Fund but not enough to accelerate the build out. Timely debt issuances will allow for rates to
remain close to current rates while completing build out over the next 25 years. Funding the Stream
Rehabilitation Program at a higher level of investment could allow for 25 years of such work to be completed in
16 years.
The electric utility portion of the Light & Power and Telecommunications Enterprise Fund has an increased level
of capital investment primarily driven by anticipated annexations which will require a new substation and
associated equipment. Tightly managing the operating expenses will be necessary going forward to ensure
adequate operating income is being generated to meet system renewal needs with modest rate adjustments.
The climate action goals set by both the City and Platte River Power Authority will require rate increases as well
during this same time period. A single debt issuance is anticipated as being necessary ahead of beginning the
Mulberry annexation conversion work.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Does the Council Finance Committee support the Utilities Strategic Financial Plan assumptions ahead of the 2023-
42 BFO cycle? In particular, the projected rate increases necessary to meet anticipated revenue requirements.
BACKGROUND/DISCUSSION
The financial health of each utility Enterprise Fund depends on active management of ongoing operating and
maintenance expenses as well as planning for large capital expenditures. In some years it is expected that the
capital investment alone may exceed the annual operating revenues for an Enterprise Fund even before
considering operating expenses. Thus, the capital investment required to maintain the current levels of service
provided by each of the four utility services to the community requires a long planning horizon and consistent
reevaluation and prioritization. Additionally, the expected operating and maintenance expenses must be
forecasted and managed so that the financial sustainability of each utility is ensured while continuing to provide
the levels of service expected without large rate increases being necessary in any given year.
10 Year Capital Improvement Plans
The capital improvement planning process begins with periodically developing and updating Operational Master
Plans for each utility. These plans assess current infrastructure for needs and risks and review expected growth
and regulatory requirements. The Master Plans generate a list of recommended capital projects over the
planning horizon which are then included in the Capital Improvement Plans (CIP). The Utility Asset Management
program is developing a standardized process to prioritize necessary capital investments. This prioritized list will
provide the associated annual capital investment which becomes an input into the long term Strategic Financial
Plan. This list is updated ahead of the two-year BFO process and will be prioritized using metrics intended to
measure the levels of service that each utility is targeting to provide to the community. The financial position of
each utility is also reviewed in this step with the output being a recommended path forward which may involve
rate adjustments and future debt issuances in order to achieve the operational objectives and needs of each
utility.
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Light & Power Enterprise Fund
The 10-year Capital Improvement Plan (CIP) for the Light & Power Fund consists of projects needed to provide
adequate substation and distribution capacity to developing areas of the City, anticipated annexations including
the Mulberry Corridor, operational technology improvements and system renewal of existing substations and
underground distribution assets.
Assess Operational
Needs / Risks
Determine Optimal
Solutions & Mitigations
Identify Anticipated
Capital Projects Over Planning Horizon
Establish Capital
Project Prioritization Criteria
Determine Relative
Weighting of Criteria
Prioritize Projects with
Criteria
Review Financial
Position of Each Utility
Determine Capital
Investment Capacities
Recommend
Financial Strategy to Achieve Operational
Objectives
Master
Planning
Capital
Improvement
Planning
Strategic
Financial
Planning
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The 2021 CIP for Light & Power at $221M includes a significant increase in identified capital work over the 2019
CIP. The 2017 CIP identified $165M as being needed to meet the capital investments needed over the next
decade. The 2019 CIP included $99M of capital investments. This is due in part to new growth and load
projections which are anticipated to require the addition of a new substation, as had previously been
forecasted. A more stable 10-year capital investment plan will allow for more modest rate adjustments when
required and efficient use of bond revenues.
Light & Power Operations
Operating revenues have grown significantly over the past decade through rate increases while total energy
sales have remained flat. Based on the projected revenue requirements for O&M and capital investment
revenues are projected to grow at a rate slower than the past decade.
The colored area represents the 95% confidence band around the expected operating expense.
Page 7 of 116
Strong revenue growth in residential sales have increased operating revenues and thereby operating income
over the past decade. This revenue growth is being driven entirely by the rate increases as increased customer
growth has been offset by increased efficiency. The operating revenue growth is slightly below the annual rate
increases suggesting that it is not realistic to expect to fully realize the revenue growth of a proposed rate
increase.
Light & Power O&M expenses have increased at an unsustainable rate over the past decade. This has begun to
be addressed through active management (a flattening of the curve can be seen in 2018-20). The rate and debt
issuance forecasts in the plan assume that O&M will increase at a rate close to the rate of inflation.
The colored area represents the 95% confidence band around the expected operating expense.
FUND:
501 - Light & Power Enterprise Fund
Budget
Year 2021
10 Yr
Annualized
Trend
5 Yr
Annualized
Trend
3 Yr
Annualized
Trend
1 Yr
Annualized
Trend
Customers 77,741 1.61%1.70% 1.94% 1.54%
Annual Rate Adjustment 3.00% 4.15%3.69% 3.93% 5.00%
Residential Elec Services 53,070,000$ 4.85%5.52% 6.38% 12.39%
Commercial Elec Services 43,450,000$ 2.89%1.17% 0.42% -3.35%
Industrial Charges for Services 33,230,000$ 4.66%3.26% -0.27% -2.92%
Green Energy Program 340,000$ -7.05%-8.74% -15.40% -33.52%
PILOTs 7,810,000$ 4.09%3.47% 2.64% 3.02%
Operating Revenue 137,900,000$ 4.10%3.46% 2.65% 3.04%
Development Fees/PIFs/Contributions 2,895,000$ 8.46%-5.48% -15.22% -4.21%
Interest Revenue 247,660$ -7.51%-6.76% -2.67% -11.84%
Transfers In
Other Misc 1,155,000$ -1.75%-8.53% -18.93% -40.47%
Non-Operating Revenue 4,297,660$ 3.41%-5.44% -14.41% -17.88%
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The table below shows the recent trends in expenses along with the relative size of each line through the 2021
budgeted expenses. Positive trends in purchased power expenses and L&P Operations are driving the overall
trend. Fort Collins electric customers have benefited from lower wholesale purchased power increases the past
few years due to some flattening of the overall load curve through load shifting under time-of-day rates as our
contribution to the coincident peak has diminished.
By limiting O&M to a more modest rate of growth it is expected that the L&P Fund will generate positive
operating income consistently which will be available for capital investments. This will limit the amount of debt
issuance that is necessary over the coming decade.
FUND:
501 - Light & Power Enterprise Fund
Budget
Year 2021
10 Yr
Annualized
Trend
5 Yr
Annualized
Trend
3 Yr
Annualized
Trend
1 Yr
Annualized
Trend
Annual Demand (KWH)1,495,938,741 0.1% -0.2% -0.9% -1.8%
Purchase Power -Tariff 1 PRPA 96,550,000$ 3.4% 1.7% 0.0% -2.5%
Purchase Power - Renewables PRPA 1,900,000$ 0.4% 0.1% 0.0% 0.0%
Purchase Pwr - Community Renewables 2,257,900$ 36.3% 10.4% 17.7% 32.2%
L&P Operations 9,973,705$ 3.7% 1.5% -1.0% -1.3%
Energy Services 5,723,389$ 1.7% -4.0% -7.6% -1.6%
PILOTs 7,810,000$ 4.1% 3.5% 2.6% 3.0%
Admin Services - CS&A 7,263,617$ 3.9% 6.8% 7.9% 16.1%
Admin Services - General Fund 1,090,628$ 1.4% -5.1% -0.8% 2.5%
Other Payments & Transfers 902,398$ -2.4% -7.6% -16.2% -8.5%
Depreciation 12,000,000$ 4.6% 5.7% 3.4% -0.8%
Total Operating Expenses 145,471,637$ 3.6% 2.1% 0.6% -0.5%
Debt Service 12,660$ -12.0% -58.2% -76.7% 0.0%
System Addition/Replacement 5,559,120$ -6.5% -17.3% -15.2% -17.0%
Capital (other than Sys Add)7,647,504$ -7.1% -4.5% -23.2% -29.6%
Total Non-operating Expenses 13,219,284$ -6.8% -14.2% -22.9% -24.0%
Total Expenses 158,690,921$ 2.6% 0.6% -1.5% -2.2%
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Light & Power Rate and Debt Forecasts
Rate increases above those necessary to cover wholesale purchased power increases are not anticipated to be
significant over the coming decade although any significant change in the necessary capital investments may
require modest adjustments to ensure adequate operating revenue is generated to support the system renewal
investments. Some debt is anticipated to be needed for capital investments over the next decade.
The overall debt capacity of the fund is determined by the net pledged revenues and targeted debt coverage
ratio. The table below shows the debt capacity at various coverage ratios as well as the current outstanding
debt.
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 2.0% 3.0% 4.1% 4-5% 4-5% 3-5% 2-3% 2-3% 2-4% 2-5%
Debt Issued ($M)$55.0
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Stormwater Enterprise Fund
Stormwater CIP
The Capital Improvement Plan for the Stormwater Fund includes new cost estimates for all anticipated initial
buildout projects. Updating the cost estimates, along with some preliminary design refinements to some of the
project requirements, increased the anticipated capital investment needed to build out the stormwater
infrastructure from $374M in the 2019 CIP to $568M. Cost adjustments for stream restoration projects are also
included in the model which now shows $30M in stream restoration projects in addition to the water quality
and flood protection projects. The CIP is now being proposed to be built over a 25-year period which as the
graph below shows will still require investing almost 4 times as much each year in capital infrastructure than the
previous decade’s level of investment. In addition, City Council has established acceleration of the Stream
Rehabilitation program as a priority. In 2016 when the Stream Rehabilitation Program was established 16% of
the revenue was to be dedicated to Stream Rehabilitation Projects or $650,000. The most recent CIP projections
have been allocating $800,000 per year. Because of the nature of these projects, that means some years
$3,100,000 is allocated for a project like in 2021 to and some years there is not an allocation like 2022. On
average approximately $800,000 per year is spent in the Stream Rehabilitation Program. The options to
accelerate this program include:
1. Increase the allocation within the CIP by $400,000 a year which would bring the total allocation to
$1,200,000 each year. This allows flexibility to address either larger projects or taking on concurrent
projects depending on the size of the project.
2. Instead of doing one project every two years, do two projects every three years by having one in design
while another is in construction. This may take additional staff resources to manage additional projects
within the program.
The additional financial resources for Stream Rehabilitation can either be generated through a rate increase of
2.5 percent to generate the additional $400,000 each year needed to cover those costs or the time period for
the flood protection capital work can be extended. A modest 2.5% rate increase would not limit other
suggested rate increases while remaining below the 5% ceiling in the next few years and would establish the
incremental revenues going forward. Taking an additional $400,000 from the current operating income
allocation for the CIP would not necessarily delay any capital project but rather would more likely lead to issuing
Debt Capacity Estimation
Interest Rate:2.50%
Net Pledged Revenue (5yr ave):$15,296,600
Debt Coverage
Ratio
Debt Capacity (10
yr Debt)
Debt Capacity (15
yr Debt)
Debt Capacity (20
yr Debt)
1.0 $136 $193 $244
1.2 $113 $161 $204
1.4 $97 $138 $175
1.6 $85 $121 $153
1.8 $75 $107 $136
2.0 $68 $96 $122
2.2 $62 $88 $111
2.4 $57 $80 $102
2.6 $52 $74 $94
2.8 $48 $69 $87
3.0 $45 $64 $82
Outstanding Debt in 2021:$129.6 M
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higher revenue bonds when an issuance is needed. Please see that attached memorandum on the Stream
Rehabilitation program (Attachment 2).
The CIP with the current projection of flood protection and stream rehabilitation work is shown below.
The amount of anticipated capital investment is much greater than what has been made over the previous
decade. This will require significant operational planning and project management to ensure that the bond
revenue is utilized efficiently.
The trend in the anticipated capital investments is cautionary. With each review and update of the capital
improvement plans there is an escalation of the estimated total investment required. This is being driven
primarily by higher cost estimates for known capital projects rather than from new projects being identified.
Stormwater Operations
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Operating revenues have grown modestly over the past decade primarily through annexations and infill
development along with some modest rate adjustments.
The colored area represents the 95% confidence band around the expected operating expense.
Stormwater O&M has increased as more infrastructure is built requiring O&M. The financial forecast recognizes
this but assumes that the growth can be managed to increase at the rate of inflation. The largest increases were
seen in drainage and detention as well as in the administrative charges.
The colored area represents the 95% confidence band around the expected operating expense.
Page 13 of 116
The growing divergence between the operating revenue and operating expense is necessary to increase the net
pledged revenues necessary to cover the increased outstanding debt over the next few decades.
Stormwater Rate and Debt Forecasts
With the strong operating income being generated every year in this utility only providing a fourth of the
anticipated capital investment required to fully build out the infrastructure for the community over the next 25
years it will be necessary to issue significant debt to complete the remaining flood mitigation infrastructure.
Significant rate increases could be implemented rather than, or in conjunction with, issuing debt, however, the
capital needs are not ongoing capital needs. Rates are usually adjusted to fund ongoing operational and capital
needs. There is significant debt capacity in this fund that operates with an operating margin of 40%. Increasing
rates would increase the operating margin but not necessarily allow for the initial infrastructure to be built on an
accelerated schedule because of the relative scale of the capital investment compared to the operating
revenues. The anticipated levelized annual capital investment required to complete the initial build out over the
next 25 years along with minor capital investments required on existing infrastructure is $20M per year.
Infrastructure that is expected to last for at least 50 years into the future could be financed over that time
period with those customers benefiting from the new investment paying for its cost rather than increasing rates
substantially. The table below shows the amount of debt that would need to be issued over the next decade to
establish this 25 year build out schedule while adhering the financial boundary conditions of gradual, modest
rate adjustments, positive operating income, and a debt coverage ratio of at least 2.0.
As the table below shows, there will be the need to issue debt for several capital investments over the next
decade. The first such issuance should be done in 2023 as part of the 2023-24 BFO cycle. Modest rate
adjustments can be made to increase the net pledged revenues available for debt service as the debt is issued or
more modestly over two or three years ahead of the next issuance.
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The debt capacity should be sufficient to meet the anticipated cost of the buildout o the protective
infrastructure assuming a 25 year build out period rather than the 10-year schedule. The need to issue debt will
drive some rate increases over the next 10 years in order to maintain the targeted debt coverage ratio of at least
2.0.
Conclusions and Next Steps
Updating the ten-year Capital Improvement Plans ahead of the budget cycle allows for an assessment of
potential rate adjustments and debt issuances that may be necessary in the near future. The Strategic Financial
Plan provides a financial path forward to meet the operational needs of each utility.
Through active management of O&M expenses, modest rate adjustments and the issuance of some debt, the
Light & Power Enterprise Fund is expected to be able to meet its operational objectives through targeted capital
investments over the coming decade.
The Stormwater Enterprise Fund has a significant amount of capital investment required to complete the initial
buildout of all the needed infrastructure. Given the high operating ratio (operating income / operating revenue)
and the amount of capital investment needed, this utility will require the issuance of significant debt over the
next 25 years as this initial infrastructure is built. Modest rate adjustments allow for some increase in the debt
capacity of this Fund but not enough to accelerate the build out. Timely debt issuances will allow for rates to
remain close to current rates while completing build out over the next 25 years. Funding the Stream
Rehabilitation Program at a higher level of investment could allow for 25 years of such work to be completed in
16 years.
The electric utility portion of the Light & Power and Telecommunications Enterprise Fund has an increased level
of capital investment primarily driven by anticipated annexations which will require a new substation and
associated equipment. Tightly managing the operating expenses will be necessary going forward to ensure
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 0.0% 2.0% 2.0% 3-5% 3-5% 3-5% 2-3% 2-3% 2-4% 2-5%
Debt Issued ($M)$80.0 $43.0
Debt Capacity Estimation
Interest Rate:2.25%
Net Pledged Revenue (5yr ave):$12,011,600
Debt Coverage
Ratio
Debt Capacity (10
yr Debt)
Debt Capacity (15
yr Debt)
Debt Capacity (20
yr Debt)
1.0 $107 $152 $192
1.2 $89 $126 $160
1.4 $76 $108 $137
1.6 $67 $95 $120
1.8 $59 $84 $107
2.0 $53 $76 $96
2.2 $48 $69 $87
2.4 $44 $63 $80
2.6 $41 $58 $74
2.8 $38 $54 $69
3.0 $36 $51 $64
Outstanding Debt in 2021:$2.1 M
Page 15 of 116
adequate operating income is being generated to meet system renewal needs with modest rate adjustments.
The climate action goals set by both the City and Platte River Power Authority will require rate increases as well
during this same time period. A single debt issuance is anticipated as being necessary ahead of beginning the
Mulberry annexation conversion work.
DISCUSSION / NEXT STEPS:
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Does the Council Finance Committee support the Utilities Strategic Financial Plan assumptions ahead of the 2023-
42 BFO cycle? In particular, the projected rate increases necessary to meet anticipated revenue requirements.
Kelly Ohlson; The $568M showing in Stormwater – when was the last time Council had a look at what we are
spending this money on?
Lance Smith; we typically do that ahead of the bi-annual budget process, so we would have done that in 2019
anticipating a 2020-2021 budget so that would have been the last time.
Kelly Ohlson; I would love to review those materials and what was agreed to as far as the $58M. Downtown flood
protection that I am not convinced of but am open to being convinced – concerned we may be overengineering a
bit – if I approve rate increases, I want to feel comfortable with what it is we are doing.
Stream rehab – pleased that you are upping the game –in the last 9 years we have done 1 mile of stream
restoration – if we have 18 miles to do … timeframe -
Stream restoration – a lot of this was done with destructive practices – stormwater protection
Lance Smith; the follow up materials for the $500M – I will come back to Council Finance next month to talk about
the other two utilities and will try to wrap it all together and provide some of that detail behind what is in the CIPs
Theresa Connor; the first projects that we have done are definitely the most complicated and complex and the
most severe erosion – we have learned a lot – stream rehab is a bit of an art to the local streams – react to local
conditions and do it well – I think we can move faster as moving forward we may be able to combine projects –
and they are less severe – we took some time to do it right and started with the most complex
Matt Fater; our priority system – we did the most extreme sections of the streams first – the 4 projects – from
there we prioritize – less complex as we move through the program – the additional funding gives us the ability
to combine sections of stream with our design and construction practices.
Kelly Ohlson; grateful that it made the list of council priorities – thank you for the additional information
Emily Francis; I actually have a question for Kelly - he alluded to something about downtown in the stormwater
projects – can you provide some additional background
Kelly Ohlson; in the past we have had the chance to look at this a lot – some of the projects although not
intentionally we spent $10s of millions to make sure that someone didn’t get water in their basement -real dollars
– would like to be convinced of the need – in the past often times I was not convinced
ACTION ITEM: Emily Francis; one thing that would be helpful for me is to look at the projected increases for all
utilities in one place so we can look at those together as a stack and what that will look like for our customers over
time – for the second part of our conversation next month.
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ACTION ITEM:
Julie Pignataro; would be helpful to see a layered map of all of the utilities and who gets what - GIS
Are we planning to put new programs in place or expand existing assistance programs to help community
members who need help as these increases are rolled out – does this all come at the same time? I just want to
make sure that when we talk about increases we are talking about this as well.
Lance Smith; that is certainly something we are always trying to be mindful of. There is some room in the rates –
5% ceiling – asking for 2-3% there could be additional funds that could help those customers.
ACTION ITEM: Julie Pignataro; interested in the standardized process you are developing to use to prioritize our
capital investments – that could be a 1:1 meeting
Julie Pignataro; What happens if Council decided not to go forward with a proposed increase? Has that ever
happened?
Lance Smith; I have been with the city for 10 years and two weeks into the job I was advocating for an 8.3%
increase in electric rates and a 7% increase in wastewater and a 6% increase in water and Council did approve
them but there was a lot of discussion – my takeaway was that we needed to do a lot more long-term planning to
mitigate these larger increases by doing more long-term planning and maybe more frequent but smaller rate
adjustments.
Julie Pignataro; in the materials it says;
‘The amount of anticipated capital investment is much greater than what has been made over the
previous decade.’
Did something happen or not happen that makes this statement true?
Lance Smith; CIPs have increased partly in L&P is making it much more comprehensive, so there is work around
the Mulberry Annexation that wasn’t in previous CIPs. On the Stormwater side there is some capital work, but
we are also recognizing that costs are increasing – it is kind of a combination.
Kelly Ohlson; piggybacking on what Julie said – I thought it said our plans for stormwater in 2019, $374M and in
2021 it is $568M – that is quite a change in 2 years
Lance Smith; that trend is cautionary – primarily increased costs of projects but there are some new projects in
there
Matt Fater; a lot of the cost increase is related to increase in construction costs and we have been updating our
master plans over the last few years – though that process, new projects are identified and are included in the
CIP.
Julie Pignataro; do we expect because of climate emergency and with more intense storms there will be more
pressure on our stormwater system?
Theresa Connor; we discuss this frequently – with our design storm which is pretty up to date with the local
analytics from NOAA and others – with that 1% chance of occurrence - the statistics around it are fascinating –
we haven’t seen movement on increasing that design storm from what we have but what we see communities
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doing because of the peaks and valleys and because the extremes are happening more often – we see them
adding green infrastructure and LID (Low Impact Development) to add in some capacity to those design
elements and make sure the community is protected through the unknowns of what will happen with climate
change. That is how we see communities addressing the unknowns of what will happen with climate. You use
that 100-year design storm
and then add in some additional infiltration capacity through green infrastructure to help absorb the impacts.
Matt Fater; I will add that the design storm is really based on historical data and in the stormwater field there is
discussion of what the next 50 years of data is going to look like - we are watching that as we update our
statistics – there is some speculation that the design storm may increase over time.
Julie Pignataro; we have a 2% stormwater increase – 0% in 2022, 2% in 2023, 2% in 2024 and then moving forward
it is 3-5% range - why wouldn’t we do a consistent percentage increase like 2.5% in 2023 and 2024 instead of
larger increase jumps - to smooth the burden
Lance Smith; we could smooth that out – rate smoothing – sometimes Council says let smooth rates and
sometimes they say no
Julie Pignataro; annexation has come up a lot in different recent conversations – I think our direction to staff is
that we are still in an exploratory phase but everything I see is that it is a foregone conclusion – I have yet to see
anything come forward that shows this is a fantastic idea. Can Tyler or Kyle give me a brief rundown of where we
are in terms of annexation?
Tyler Marr; because of the gravity of the decision, which is solely Councils to make around timing and scope – it
is really about ensuring we have accurate information to plan for that - certainly not ever the intent that it be
recognized as a foregone conclusion - it is just recognizing the burden it could place on various existing systems
because we now are past the threshold in ability to annex - we can forecast with assumptions that are of course
Council’s prerogative to change.
Julie Pignataro; no need to change it – I just wanted to make sure I hadn’t missed something.
Question around stream rehabilitation, is part of what we need to rehab due to fires?
Theresa Connor; no, this is an urban area so these are our urban streams, activity can cause erosion, making sure
the creeks are stabilized and provide good aquatic habitat for stream rehab- mainly the tributaries
Kelly Ohlson; construction costs / inflation - Could add inflation to the information requested year over year?
Lance Smith; I am planning to provide a rate forecast but also where rates have been – are you asking for us to do
the same information for development fees?
Kelly Ohlson; If our rates are 2 and inflation is 3.5 - it if not like we are raising fees to make money to fund police
or fire - look at inflation - it is not 1 to 1 – thought it would be helpful to add and wouldn’t take much time to find.
Page 18 of 116
B. Natural Areas Land Acquisition Financing
Blaine Dunn, Accounting Director
November 23rd Work Session related to the Hughes land purchase.
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DISCUSSION / NEXT STEPS;
Julie Pignataro; is Natural Areas a type of Open Space?
Zoe Shark: Natural Areas are defined - there is a specific definition in the1041 regulations. - Open Space is a
broader term and there is not a city definition. Part of the public engagement is clarifying ‘when you said you
wanted more open space, what does that look like to you, to the community?
Julie Pignataro; so many people use these terms interchangeable – Are golf courses considered open public space?
Zoe Shark; Parks and golf courses are "Public Open Lands"
Julie Pignataro; Public open land is the zoning - I applaud how much engagement the city does.
Do our golf courses pay for themselves?
Victoria Shaw; our golf courses are enterprise funded which means that they do fund themselves and they will
repay the General Fund for any administrative services that we provide. In this case, we are adding in the bonding
for the irrigation system at Southridge which will be repaid out of golf revenues. This was a need that was
recognized several years ago in terms of needing financing for this and this is an attractive option with the right
timing.
Blaine Dunn; in the past we have done similar things in the past with tagging golf course projects to other debt
financing packages.
Julie Pignataro; are the irrigation upgrades going to save water?
Victoria Shaw: yes
Julie Pignataro; I don’t want to delay the golf irrigation as we need to conserve water which is such a precious
resource - I appreciate all of the information you have provided. I believe the other Councilmembers will have a
lot to say about these options as well. Do we know how much debt the city has?
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ACTION ITEM:
Blaine Dunn; we keep a very close eye on that, and I will follow up via a memo as we like to keep our enterprise
and governmental debt separate both from a policy and from a disclosure standpoint. Governmental debt is
roughly $37M
Blaine Dunn; we were scheduled to bring our Debt and Investment Policies forward at this meeting for your
review, but that topic was moved to accommodate this specific item. We do have some policies in place including
that we won’t have more than 4-5% of the General Fund committed at any time for the governmental side.
Kelly Ohlson; staff recommendation - 3 years payment from Natural Areas go to second land parcel – we would
recommend no debt financing for the second parcel - funds will be made whole over time
Kelly Ohlson; We don’t know what part of this will end up as part of the Natural Areas portfolio.
I like the true up of funds based on land use determination and I want to make sure that is very clear and in
writing when we move forward with this land deal. What are the 3-year payments from Natural Areas of $2.2M
per year if we are starting with the 50/50 option and then truing up later?
Blaine Dunn; we could have made that bullet more clear - the 3-year payments from the Natural Areas fund are
purely to go to the 2nd land parcel purchase. If this is a hybrid option we would recommend not debt financing
the 2nd land parcel at all - that Natural Areas would pay for the 2nd land parcel as they are planning to do now.
Kelly Ohlson; I am good
Emily Francis; next time, can you put all 3 options in a table so we can see that all at one time?
I like the staff recommendation. Where are we using it for? Where is it coming from? We will need to talk about
any trade-offs as a community.
Shirley Peel; what would a tribal land bank initiative actually look like?
Tyler Marr; that is partly why we have a work session scheduled on November 23rd – outlining what an
engagement effort would look like for all stakeholders including the indigenous community, Recreation and
Natural Areas stakeholders - including clarity and timing of what that might look like.
Blaine Dunn; we wanted to come to Finance Committee prior to the Work Session since it is a rather large $12M
purchase.
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C. 2022 Long Term Financial Plan
Zack Mozer, Analyst II, Financial Planning & Analysis
Dave Lenz, Director, Financial Planning & Analysis
EXECUTIVE SUMMARY
The City updates the Long-Term Financial Plan (LTFP) outlook every two years as part of the Strategic Planning
Process. The objective is to highlight potential challenges facing the City and aid in philosophical decision-
making on strategies that span the longer term (5 – 10 plus years). Over the past two years, the City was faced
with unprecedented levels of uncertainty related to the COVID-19 pandemic. As a result of numerous
management activities that curtailed spending, and a quicker than anticipated economic bounce-back that kept
revenue losses to manageable levels, the City’s finances remain in excellent condition. Moody’s just re-affirmed
the City’s Aaa credit rating in October.
In spite of the near-term conditions, the City still faces significant challenges to its’ finances as it looks forward –
primarily associated with future funds for park life cycle and maintenance costs; transit and other transportation
infrastructure; affordable housing options and other asset management needs. This update to the LTFP will
contemplate the impacts of taking on these additional expenses and explore options to fund these programs
and services. The 2022 LTFP provides a Baseline Scenario and builds up three additional scenarios.
• Baseline Scenario:
• Scenario A: Adjust for Historic Budget Underspend
• Scenario B: Added Services, Life-Cycle and Maintenance Costs
• Scenario C: New Revenue Sources – Gap Closure
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Does Council Finance Committee have any questions related to the 2022 Long-Term Financial Plan?
BACKGROUND/DISCUSSION
The LTFP Baseline Scenario assumes current operating conditions and service level delivery, as well as no outlier
impacts. The COVID-19 pandemic, a true, Black Swan event, has been one of these impacts but is not something
that was “expected” to occur in long range planning models. However, the near-term impacts and City
responses to the pandemic are factored into the current LTFP update. The underlying analysis utilizes historic
data from the past 21 years, macroeconomic outlooks, correlation analysis and unique drivers at an
organizational level to provide a view of what leadership needs to plan for the long-term growth of the city.
Baseline Scenario:
In comparing the prior 2020 LTFP with the current 2022 LTFP, there has been an improvement in overall fund
balances which was primarily realized in the difference between the both the 2019 and 2020 forecasts vs.
actuals results. This was caused by additional revenues in 2019, as well as the 2020 COVID-19 cost containment
efforts that overcompensated for the actual revenue shortfall. Additionally, this established a new baseline
from which to project estimates going forward, thereby improving the long-term outlook.
The Baseline Scenario also assumes underspend and higher revenues vs. the budget to maintain overall
governmental fund balances by year-end 2021. 2022 utilizes the City Manager recommended budget for
revenues and expenses as the starting point to forecast into the future. Presented below are the yearly revenue
and expense projections, with the resulting year-end fund balances.
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Scenario A: Adjust for Historic Budget Underspend
In looking at the City’s historical financial data, there has been an approximately 5% average underspend vs.
budgeted expenses each year. Given the nature of our budgeting process, whereby we may not deficit spend
above expected revenues and available reserves, this result is not unexpected. By removing this budgeted 5%
from the analysis, the Baseline Scenario is adjusted, and the resulting fund balances are stabilized at much
higher levels.
Scenario B: Added Services, Life-Cycle and Maintenance Costs
As has been highlighted in the current 2022 Budgeting For Outcomes (BFO) process, significant offers for asset
management, maintenance costs, capital refreshes and other initiatives were not all able to be funded. This
scenario adds in specific project costs to account for identified needs such as parks refresh, transit additions,
affordable housing, City Hall refresh and future commitments on new neighborhood parks and Community
Parks. In total, these projects add approximately $160 million in cumulative expenses by the year 2030.
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Scenario C: New Revenue Sources – Gap Closure
In addition to cost containment, the potential solutions to the funding shortfalls from Scenario B include
exploring new revenue streams. The City has put together a cross-functional working team to investigate the
feasibility, impacts and timelines for a wide variety of alternatives. For illustrative purposes here, Scenario C
below includes the impacts of an incremental 0.25% Sales Tax increase, a property tax mill addition and an
added maintenance/improvement use fee to support ongoing maintenance for parks and neighborhood
livability. The impacts from such measures provide greater stabilization of overall fund balances.
The City has significant, unfunded longer-term operating cost and capital needs. While the City has a long track
record in successful delivery of world class services to its’ stakeholders, it likely will require additional revenue
streams to address some of the items highlighted above. Longer term degradation to service delivery is a risk if
these needed investments continue to be deferred.
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DISCUSSION / NEXT STEPS;
Kelly Ohlson; I am assuming that we are going to get a lot more data at some point – for example with transit –
we get some comparison of what we would do with additional money -routes - how much it costs per rider -we
are a long way away from deciding what amounts, etc.
Dave Lenz; that is exactly true - along the way and going back multiple planning cycles we have identified certain
things. I will look at Parks as an example - we have been identifying short falls and needed long term
infrastructure support needs in that group but before we put forward anything to voters, any consideration that
we will raise more money to support these things there will be much more hashed out with full detail – the
whole process here is to help tee up the things to be discussed and identified from the Strategic Plan – this is on
the front end of the Strategic Plan and then rolling into the full budget process. There are multiple iterations of
vetting and process to come for prioritizations etc.
Kelly Ohlson; assuming you are not looking for even our 5% cursory thoughts on sales tax vs. property, vs
maintenance and improvement - that is for many discussions to come – that you are not specifically looking for
direction on those
Dave Lenz; that is correct – not looking for any A vs B in terms of solution today
on revenue generation specifically, we will have another full kick off of that next month at Council Finance to
start to frame those discussions and potential approaches - we are not proposing or advocating
Kelly Ohlson; it would help if we just said
additional revenue sources will likely be required to fund long term service level delivery at ‘appropriate’ levels
rather than ‘world class’ levels. We need to determine what is appropriate for our town – and that might be in
most cases better than most comparable cities - those phrases set me off a bit. A wording change
Also, the funding around neighborhood and community parks - I am assuming it is to move up construction
but historically we do them fee based – so we build them as fees come in and accumulate to a certain level
I am assuming this means you want to use the General Fund to build them earlier than we have ever done in the
past.
Dave Lenz; a fee structure based on collections are meant to do exactly as you said - with a project that is
out in the future - those construction cost / inflation impacts are greater in the near term - so some of those
costs we talked about specifically – we are facing the same challenges as what Lance mentioned earlier on the
utility side - in terms of timing and scope that is a project that has been slated in a schedule and is continually
being revisited - we are realizing in our projections that there may be some cost pressures that are bigger than
we had initially thought – the bigger part too is the maintenance and ongoing support for the continual refresh
of the suite of assets, we have across the city – that is the pressure that is unfunded right now
Kelly Ohlson; to confirm understanding, historically we have built neighborhood and community parks when the
fees have accumulated and we had the money in hand – you want us to explore the possibility, because of the
cost pressures of accelerating the development and building of a park or two - that would be made whole by the
fees that are coming in because you think we would save money in the long run because it would be cheaper to
do now - I am not talking the refresh, I am talking construction of new parks.
Dave Lenz; we are not suggesting pulling something forward from its proposed schedule, that is not what we are
suggesting here
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Kelly Ohlson; ok, it is that they are going to cost more than we think they are, more than the fees will generate
Dave Lenz; potentially, and the issue is which is continually going to be looked at in terms of what those
expectations are, the growth pressures and the timing of such. We are suggesting that those pressures are
higher given the current inflationary environment that we see.
Blaine Dunn; I think Councilmember Ohlson is looking at the bullet at the top of page 77 of the packet (see last
bullet below) build up schedule of new neighborhood and East Community Park.
The build-up schedule - What is that bullet driving within the model – what are we looking at?
Zack Mozer; the intent was to build a neighborhood park every other year for approximately $2.5M
Every 10 years, a community park – based on the schedule that is in place right now – we are not advocating
changing it in any fashion - incremental cost above the base line
Emily Francis; when we are talking about additional revenue sources such as increasing taxes - At what point do
we talk about the trade offs between world class and appropriate service levels? Before we refer anything to
the voters we need to understand what those differences are. When do we talk about those trade offs and
what the differences look like?
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Dave Lenz; this is part of the process of why this is done on the front end of the strategic planning discussion and
updates and the cycle that leads into our biannual budget process so the whole intent of highlighting things in
this format is to start that dialog about what are we going to focus on? What are the strategic objectives and
other measures and bring that together with the council priorities? How are we going to address that equation
as we go into both the strategic planning portion which is the 5-10 year look and the biannual budget that
comes at the back end of that.
Kyle Stannert; this is definitely a level of service conversation. We are in the middle of the natural cycle of how
we do budgeting – we have the priorities from the Council, and we are moving into strategic planning which will
inform our budget and other decisions past that - a great question.
In these conversations that will be coming to Council Finance and to the full Council and to work sessions as
well.
Blaine Dunn; starting now for input and will start coming to Council in various forms early next year.
Adoption date is March 15th but there will be multiple sessions / work sessions prior
To get inputs to the plan.
Emily Francis; remembering level of service and what that actually means -
Be clear on what we are talking about - Thinking about what that means between world class and appropriate
sometimes get lost in that conversation.
Kelly Ohlson; Most of us want to do everything really well but in order to do that you have to raise sales tax,
property tax and add fees to achieve world class. That is why we want to have this discussion on what is
appropriate versus world class – the cost is much greater to lower income folks than it is to higher income folks.
Shirley Peel; thank you for this presentation – I know we have a plan and are going somewhere with it - so
appreciate this.
Kyle Stannert; for those of us that are joining what would have been the middle of a two-year budget process –
this is the conversation that helps frame that so that as you are looking at budget proposals you understand
those tradeoffs and projections. We are on the cusp of getting back on track and I think that will be helpful for
everybody.
Meeting Adjourned at 4:58 pm
Page 31 of 116
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COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Lance Smith, Utilities Strategic Financial Director
SUBJECT FOR DISCUSSION – Utilities 2021 Capital Improvement Plans and Strategic Financial Plan
Updates for the Water and Wastewater Utilities
EXECUTIVE SUMMARY
The purpose of this agenda item is to provide the Council Finance Committee with an overview of the
planning processes underway within Fort Collins Utilities. This agenda item will focus on the Water and
Wastewater Enterprise Funds. The Light & Power and Stormwater Enterprise Funds were presented for
discussion in November. The 2021 Capital Improvement Plans (CIPs) and the 2021 Strategic Financial
Plans for each utility are outlined. The resulting investment projections set the basis for beginning the 2023-
24 Budgeting For Outcomes (BFO) cycle. The overall 10 year rate projections for both utilities is also
presented here along with the forecasted debt issuance needs.
Recognizing that these utilities share customers, a more comprehensive view is also taken here of how the
combined plans will impact what our community pays for utility services over the coming decade and the
levels of service to be expected for such. The capital improvement plans are intended to maintain the
current levels of service for each utility through sustainable asset renewal plans and targeted new
infrastructure. This can be achieved through the modest rate increases being planned and timely debt
issuances shown here.
For the 2023-24 Budgeting For Outcomes process the table below summarizes the impact of the
proposed rate increases for the average residential customer.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does the Council Finance Committee support the Utilities Strategic Financial Plan assumptions
ahead of the 2023-42 BFO cycle? In particular, the projected rate increases necessary to meet
anticipated revenue requirements?
BACKGROUND/DISCUSSION
This is a continuation of the discussion began last month with the presentation of the Electric and
Stormwater utility financial plans and associated rate and debt forecasts. With this presentation of the
Water and Wastewater utility financial picture, any feedback will be utilized in developing the initial 2023-
24 budget offers. After discussing each of these two utility services, the comprehensive picture is
presented and the forecasted impacts on customer utility costs can be seen. The feasibility of the
financial paths presented is then discussed.
2021 2022 2023 2024
Residential Utility Cost Baseline % Change Bill % Change Bill % Change Bill
Electric $78.14 2.0% $79.70 3.0% $82.09 4.1% $85.46
Water $49.03 0.0% $49.03 2.0% $50.01 2.0% $51.01
Wastewater $34.25 0.0% $34.25 2.0% $34.94 2.0% $35.63
Stormwater $16.78 0.0% $16.78 2.0% $17.12 2.0% $17.46
Total $178.20 0.9% $179.76 2.4% $184.16 2.9% $189.56
Page 33 of 116
The confidence in the long term financial modeling that is the basis of these forecasts depends on the
assumptions used in the modeling. Some of those assumptions are macro-economic assumptions
around long term inflation, how inflation affects the cost of debt service through the associated interest
rates and how well the economy is doing in general. The recent pandemic has stressed the economy
over the past two years yet it has also highlighted the necessity for utility services as is reflected in the
relatively stable revenues for such. Other assumptions are more micro-economic and, as such, depend
on internal efforts to effectively manage operating costs along with capital and resource planning. The
financial resiliency of each of these utility enterprise funds relies on active management and strong
leadership over the coming decade.
Water Enterprise Fund
The 10 year Capital Improvement Plan (CIP) for the Water Fund consists of projects needed to provide
an adequate water supply such as Halligan Reservoir, a modern water quality laboratory, some
improvements needed at the water treatment plant and asset renewal both at the plant and the water
distribution infrastructure. It is anticipated in the CIP that it will take a few years to reach the targeted
asset renewal rate of 1.0% per year.
The 2021 CIP for Water has $286M through 9 years and an additional $72M beyond 2030. This is a
significant increase in identified capital work over the 2019 CIP which had been stable to previous efforts.
The 2021 CIP includes the additional funding needed for the Halligan Reservoir
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Water Capital Improvements 2021-2030
Water Distribution
Water Production
Water Quality Lab
Water Resources
Water Fund
Ave Annual Capital
2011-2020
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Water Operations
Operating revenues have grown modestly over the past decade through rate increases while total water
sales have remained almost flat. Based on the projected revenue requirements for O&M and capital
investment revenues are projected to grow at a rate slightly higher than the past decade at 3.9%
compared to 3.6% since 2011.
The colored area represents the 80% confidence band around the expected operating expense.
Strong revenue growth in residential sales have increased operating revenues and thereby operating
income over the past decade. This revenue growth is being driven mainly by rate increases as increased
customer growth has been mostly offset by increased efficiency. The operating revenue growth is slightly
below the annual rate increases suggesting that it is not realistic to expect to fully realize the revenue
growth of a proposed rate increase.
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
2016 CIP 2017 CIP 2019 CIP 2021 CIP
Water 10 year Capital Improvement Plan Totals
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031
Operating Revenues (2011 -2031)
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Water O&M expenses have increased at an inflationary rate over the past decade. This has been
achieved through active management. The rate and debt issuance forecasts in the plan assume that
O&M will increase at a rate close to the rate of inflation of 3.5% annually through 2031.
The colored area represents the 80% confidence band around the expected operating expense.
The table below shows the recent trends in expenses along with the relative size of each line through the
2021 budgeted expenses. Positive trends in engineering, metering and treatment are being offset by
higher than inflationary increases in transmission and distribution as well as administrative expenses
within the Utilities Service Area.
FUND:
502 - Water Enterprise Fund
Budget
Year 2021
10 Yr
Annualized
Trend
5 Yr
Annualized
Trend
3 Yr
Annualized
Trend
1 Yr
Annualized
Trend
Customers 36,541 0.88%0.71% 0.68% 0.65%
Annual Rate Adjustment 2.00% 2.70%2.00% 1.67% 0.00%
Residential Water Sales 16,601,500$ 2.49%3.28% 2.87% 7.15%
Com/Indl Water Sales 9,833,000$ 3.46%3.05% 1.49% 1.35%
District Water Sales 1,890,100$ 8.19%11.44% 8.52% -7.59%
Other Water Sales 905,400$ 4.35%2.56% -5.94% 10.99%
PILOTs 1,701,000$ 2.84%2.91% 2.19% 4.01%
Operating Revenue 30,931,000$ 3.13%3.55% 2.35% 4.19%
Development Fees/PIFs/Contributions 1,780,000$ -1.33%-24.52% -48.22% -27.53%
Other Misc 255,000$ 5.03%6.05% -38.02% 5.99%
Internal Transfers In 250,000$ 7.11%-14.30%#DIV/0!-45.78%
Non-Operating Revenue 2,902,155$ -0.67%-16.30% -38.57% -26.51%
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
$50,000,000
2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031
Operating Expenses (2011 -2031)
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By limiting O&M to a more modest rate of growth it is expected that the Water Fund will generate
sufficient operating income consistently to fund asset renewal investments at the targeted levels. This will
limit the amount of debt issuance that is necessary over the coming decade.
502 - Water Enterprise Fund
Budget
Year 2021
10 Yr
Annualized
Trend
5 Yr
Annualized
Trend
3 Yr
Annualized
Trend
1 Yr
Annualized
Trend
Treated water delivered- acre feet 26,869 1.0% -0.6% 4.5%
Water Treatment 10,524,490$ 1.7% 1.6% -0.6% -0.3%
Transmission & Distribution 3,063,802$ 3.0% 3.0% 6.0% 6.0%
Water Meters O&M 777,527$ 2.6% 0.8% 11.8% 2.9%
Engineering 955,161$ 17.2% 30.7% -3.2% -7.4%
Water Resources 3,623,845$ 6.6% 2.7% -1.2% 0.7%
Water Conservation 1,117,086$ 12.8% 4.8% 4.8% -4.4%
Water Quality Lab 1,103,031$ 2.4% 1.2% 2.5% 6.3%
PILOTs 1,701,000$ 2.8% 2.9% 2.2% 4.0%
Admin Services - CS&A 4,260,134$ 1.0% 7.5% 13.4% 15.9%
Admin Services - General Fund 871,248$ 0.2% -0.1% 5.0% 2.5%
Other Payments & Transfers 1,336,228$ -5.7% -7.0% -22.5% -210.3%
Depreciation 7,500,000$ 4.4% 4.4% 2.8% 2.1%
Total Operating Expenses 36,833,553$ 3.1% 3.6% 3.1% 5.5%
Debt Service 188,224$ -25.8% -43.8% -60.2% -48.8%
Internal Transfers Out 415,206$ #DIV/0!13.3% -7.5% -0.4%
Minor Capital 2,341,433$ 5.4% -13.2% -17.3% -6.3%
Major Capital 7,922,083$ 5.3% -4.9% -7.0% 34.2%
Total Non-operating Expenses 10,866,946$ 0.8% -9.2% -13.7% 24.7%
Total Expenses 47,700,500$ 2.4% -0.8% -2.6% 9.9%
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
$50,000,000
201120122013201420152016201720182019202020212022202320242025202620272028202920302031Operating Income 2011 -2031
Operating Income Operating Revenue Operating Expense
Page 37 of 116
Water Rate and Debt Forecasts
Rate increases are not anticipated to be significantly over inflationary pressures in the coming decade
although any significant change in the necessary capital investments may require modest adjustments to
ensure adequate operating revenue is generated to support the system renewal investments. Some debt
is anticipated to be needed for capital investments over the next decade.
The overall debt capacity of the fund is determined by the net pledged revenues and targeted debt
coverage ratio. The table below shows the debt capacity at various coverage ratios as well as the current
outstanding debt.
Wastewater Enterprise Fund
Wastewater CIP
The Capital Improvement Plan for the Wastewater Fund includes improvements necessary at both water
reclamation facilities, a modern pollution control laboratory and a ramping up of investment in asset
renewal programs for the collection system. Prioritization of the capital projects will need to be
considered before the 2023-24 budget process to ensure investments are made where needed the most.
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 0.0% 2.0% 2.0% 1-3% 1-3% 1-3% 2-3% 2-3% 2-4% 2-4%
Debt Issued ($M)$86.0 $86.0
Debt Capacity Estimation
Interest Rate:2.50%
Net Pledged Revenue (5yr ave):$17,729,600
Debt Coverage
Ratio
Debt Capacity
(10 yr Debt)
Debt Capacity
(15 yr Debt)
Debt Capacity
(20 yr Debt)
1.0 $155 $219 $277
1.2 $129 $183 $231
1.4 $111 $157 $198
1.6 $97 $137 $173
1.8 $86 $122 $154
2.0 $78 $110 $138
2.2 $71 $100 $126
2.4 $65 $91 $115
2.6 $60 $84 $106
2.8 $55 $78 $99
3.0 $52 $73 $92
Outstanding Debt in 2021:$0.0 M
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The amount of anticipated capital investment is greater than what has been made over the previous
decade, consistent with what has been seen in the other utilities in 2021. This will require significant
operational planning and project management to ensure that the bond revenue is utilized efficiently.
Wastewater Operations
Operating revenues have grown very modestly over the past decade at 2.4% annually through some
larger rate adjustments through 2012 followed by more modest and less frequent rate adjustments after
2012. Modest rate adjustments will be necessary to increase revenues in this fund as wastewater
services are not metered but rather depend on the amount of water being consumed by a customer.
Conservation efforts on water usage can negatively impact revenues for the wastewater utility.
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Wastewater Capital Improvements 2021-2030
Wastewater Collection
Water Reclamation & Biosolids
Pollution Control Lab
Other Enterprise Functions
Ave Annual Capital 2011-2020
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
$160,000,000
$180,000,000
2016 CIP 2017 CIP 2019 CIP 2021 CIP
Wastewater 10 year CIP Totals
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The colored area represents the 80% confidence band around the expected operating expense.
Almost no revenue growth in residential services over the past decade combined with reduced
commercial wastewater demands has put rate pressure on the wastewater utility. The operating revenue
growth is expected to increase only slightly in the coming decade through modest rate adjustments.
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031
Operating Revenues (2011 -2031)
503 - Wastewater Enterprise Fund
Budget
Year 2021
10 Yr
Annualized
Trend
5 Yr
Annualized
Trend
3 Yr
Annualized
Trend
1 Yr
Annualized
Trend
Average flow wastewater treated- million 15 #DIV/0!-1.37% -1.16% 0.00%
Annual Rate Adjustment 0.00% 3.20%1.80% 1.00% 0.00%
Residential WW Sales 15,750,000$ 3.29%1.60% 0.58% -0.26%
Com/Indl WW Sales 6,200,000$ -0.67%0.24% -4.16% -7.17%
District WW Sales 400,000$ 1.00%2.00% 1.34% 0.61%
Other WW Sales 200,000$ 2.37%-1.86% -0.08% 25.39%
PILOTs 1,350,000$ 2.04%1.28% -0.76% -2.03%
Operating Revenue 23,900,000$ 2.05%1.21% -0.72% -1.90%
Development Fees/PIFs/Contributions 750,000$ -5.13%-11.98% -28.03% 167.56%
Other Misc 115,000$ 11.73%25.56% 49.24% 497.86%
Interest Revenue 369,638$ -0.93%2.26% -2.62% -36.78%
Non-Operating Revenue 1,234,638$ -2.41%-6.20% -18.35% 68.12%
Page 40 of 116
Wastewater O&M has increased modestly over the past decade and is expected to continue to grow
modestly at around the historical inflationary level of 3.2%.
The colored area represents the 80% confidence band around the expected operating expense.
The table below shows the recent trends in expenses along with the relative size of each line through the
2021 budgeted expenses. Positive trends in engineering and treatment are being offset by higher than
inflationary increases in trunk and collection as well as administrative expenses within the Utilities Service
Area.
By limiting O&M to a more modest rate of growth in all departments it is expected that the Wastewater
Fund will generate sufficient operating income consistently to fund asset renewal investments at the
targeted levels. This will limit the amount of debt issuance that is necessary over the coming decade.
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031
Operating Expenses (2011 -2031)
503 - Wastewater Enterprise Fund
Budget
Year 2021
10 Yr
Annualized
Trend
5 Yr
Annualized
Trend
3 Yr
Annualized
Trend
1 Yr
Annualized
Trend
Water Reclamation & Biosolids 5,768,036$ 2.1% 2.1% 0.1% -2.4%
Trunk & Collection 1,643,171$ 1.6% 3.7% 1.7% 12.8%
Engineering 846,422$ 16.3% 27.5% -2.5% -11.6%
Pollution Control Lab 1,255,183$ 0.7% 1.3% 0.4% 3.6%
PILOTs 1,350,000$ 2.0% 1.3% -0.8% -2.0%
Administrative Services
Admin Services - CS&A 2,541,579$ 1.4% 3.1% -1.2% 19.1%
Admin Services - General Fund 636,389$ -0.4% 2.5% -3.4% 2.5%
Other Payments & Transfers 1,236,037$ -9.2% -6.5% -9.4% 254.8%
Depreciation 6,500,000$ 6.7% 3.0% 2.2% 1.2%
Total Operating Expenses 21,776,817$ 2.7% 2.6% 0.3% 4.1%
Debt Service 2,213,700$ -10.8% -2.2% 0.2% 0.9%
Minor Capital 1,346,819$ 5.0% -9.9% -15.9% -40.8%
Major Capital 13,827,736$ -1.5% -3.1% 1.3% 82.8%
Total Non-operating Expenses 17,388,255$ -3.9% -3.2% 0.3% 50.2%
Total Expenses 39,165,072$ -0.7% -0.1% 0.3% 19.3%
Page 41 of 116
The consistent difference between the operating revenue and operating expense allows for asset renewal
to be funded with less debt issuances than would be necessary without such operating income. Modest
rate adjustments will allow for pledged revenues to be sufficient for any anticipated debt issuances over
the next few decades.
Wastewater Rate and Debt Forecasts
As the table below shows, there will be the need to issue debt for several capital investments over the
next decade. The first such issuance should be done in 2023 as part of the 2023-24 BFO cycle. Modest
rate adjustments can be made to increase the net pledged revenues available for debt service as the debt
is issued or more modestly over two or three years ahead of the next issuance.
The overall debt capacity of the fund is determined by the net pledged revenues and targeted debt
coverage ratio. The table below shows the debt capacity at various coverage ratios as well as the current
outstanding debt.
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
201120122013201420152016201720182019202020212022202320242025202620272028202920302031Operating Income 2011 -2031
Operating Income Operating Revenue Operating Expense
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 0.0% 2.0% 2.0% 1-3% 1-3% 1-3% 2-3% 2-3% 2-4% 2-4%
Debt Issued ($M)$33.0 $60.0 $21.0
Page 42 of 116
Conclusions and Next Steps
Over the past two meetings ten year rate and debt forecasts have been discussed which indicate that the
significant capital investments expected over the coming decade can be achieved for each utility
independently. However, it is also necessary to look more holistically at the impacts on these plans on our
community. By limiting rate increases annually to no more than 5.0% per utility in a given year, the overall
cost of utility services for customers of receiving some or all of these services through the municipal utility
will increase less than 5% annually, consistent with long term inflation.
To do so, the financial state of each utility is expected to change substantially from one of almost no
outstanding debt today to one with significant outstanding debt with healthy operating margins to adequately
meet debt service obligations while maintaining the good credit ratings on such debt. This increased level
Debt Capacity Estimation
Interest Rate:2.50%
Net Pledged Revenue (5yr ave):$13,086,600
Debt Coverage
Ratio
Debt Capacity
(10 yr Debt)
Debt Capacity
(15 yr Debt)
Debt Capacity
(20 yr Debt)
1.0 $115 $162 $204
1.2 $95 $135 $170
1.4 $82 $116 $146
1.6 $72 $101 $128
1.8 $64 $90 $113
2.0 $57 $81 $102
2.2 $52 $74 $93
2.4 $48 $68 $85
2.6 $44 $62 $79
2.8 $41 $58 $73
3.0 $38 $54 $68
Outstanding Debt in 2021:$16.2 M
$101.67
$61.67
$43.40
$49.03
$78.14
$34.25
$16.78 $22.86
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031Monthly Average Residential Utility BillDebt Issuances $M
Forecasted Cost of Utility Services for Residential Customers
with Debt Issuances
Page 43 of 116
of debt is manageable through expected revenue growth and cost containment resulting in significantly
more capital investment being completed over the next decade than the previous decade. This increased
capital investment will ensure that our community will continue to benefit from municipal utility services in
the future.
The next steps down this path are focused on the 2023-24 Budget process. Offers will be developed and
submitted consistent with the CIPs considered here after going through a prioritization process to ensure
those projects that most impact the targeted levels of service are submitted for consideration. Some of
those Offers will identify “Bond Proceeds” as the funding source which may require additional due
diligence outside of the budget process. Submitting such capital projects through the 2023-24 budget
process will allow for them to be considered in the larger context of all budget offers. Other, smaller
capital projects to be considered for funding through anticipated revenues and available reserves will also
be submitted with the anticipated revenues reflecting the proposed rate adjustments discussed here. Like
the City Strategic Plan effort that begins each budget cycle, this financial strategic plan and the underlying
CIPs are reviewed every two years to ensure alignment and reflect new considerations, strategic
objectives and cost estimates.
Attachments
Attachment 1 - PowerPoint presentation
Attachment 2 - Service Territory Maps for Water and Wastewater Services
Attachment 3 - Capital Improvement Plan Projects by Utility
Enterprise Rate Increase (%/yr) Operating Revenue (%/yr)Operating Expenses (%/yr) Operating Income ($M/yr)
Fund Historical
2011-2020
Forecast
2022-2031
Historical
2011-2020
Forecast
2022-2031
Historical
2011-2020
Forecast
2022-2031
Historical
2011-2020
Forecast
2022-2031
L&P *4.1%3 - 5%3.8% 3.8%3.4% 2.9%($2)$7
Water 2.7%3 - 5%3.6% 3.9%3.5% 3.5%$4 $6
Wastewater 3.2%2 - 4%2.4% 2.3%3.2% 3.1%$4 $5
Stormwater 0.9%3 - 5%2.8% 2.8%4.3% 4.2%$7 $8
* Series 2018A and 2018B outstanding for Connexion
Enterprise Outstanding Debt Principal Debt Issued Available Reserves Annual Capital
Investment ($M/yr)
Fund 2011 2021 2031 2021 - 2031 2011 2021 2031
Historical
2011-2020
Forecast
2022-2031
L&P *$16M $0 $25-30M $40-50M $16M $23M $66M $160M $270M
Wat er $26M $1M $140-175M $170-200M $9M $41M $71M $130M $440M
Wastewater $42M $16M $90-100M $110-120M $1M $19M $24M $90M $200M
Stormwater $34M $2M $100-110M $120-140M $2M $12M $13M $70M $240M
* Series 2018A and 2018B outstanding for Connexion
Page 44 of 116
12-01-2021
Lance Smith –Utilities Strategic Finance Director
Utilities Long Term Financial and
Capital Improvement Plans
Page 45 of 116
2Purpose and Direction Sought
Objective:
•Provide an update on the Capital Improvement Plans and Strategic Financial Plan for
the Water and Wastewater Enterprise Funds
•Recommend strategic path forward to meet 10 year operational and financial
objectives ahead of the 2023-24 Budget cycle for Light & Power, Water, Wastewater
and Stormwater utility services
Direction Sought:
•Does the Council Finance Committee support the Utilities Strategic Financial Plan
assumptions ahead of the 2023-24 BFO cycle? In particular, the rate increases
associated with the anticipated revenue required?
Page 46 of 116
3Utilities Planning Process
Assess Operational
Needs / Risks
Determine Optimal
Solutions &
Mitigations
Identify Anticipated
Capital Projects Over
Planning Horizon
Establish Capital
Project Prioritization
Criteria
Determine Relative
Weighting of Criteria
Prioritize Projects with
Criteria
Review Financial
Position of Each Utility
Determine Capital
Investment
Capacities
Recommend
Financial Strategy to
Achieve Operational
Objectives
Master
Planning
Capital
Improvement
Planning (CIP)
Strategic
Financial
Planning5-7 years2 years2 yearsPage 47 of 116
4Utilities Strategic Financial Plan
Objectives
•Maintain adequate reserve balances such that:
•Meet Minimum Reserves Policy
•Reserves and revenues adequate to cover near term capital
requirements
•Maintain current credit ratings for each Enterprise Fund and the City
•Avoid rate spikes by limiting rate increases to no more than 5%
annually
Page 48 of 116
5
Water Enterprise Fund
Page 49 of 116
6Water CIP
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Water Capital Improvements 2021-2030
Water Distribution
Water Production
Water Quality Lab
Water Resources
Water Fund
Ave Annual Capital
2011-2020
Page 50 of 116
7Water Operating Income
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
$50,000,000
201120122013201420152016201720182019202020212022202320242025202620272028202920302031Operating Income 2011 -2031
Operating Income Operating Revenue Operating Expense
Page 51 of 116
8Water Rate and Debt Forecasts
•Modest rate increases will be necessary to meet asset renewal targets and
increased debt service
•Halligan is expected to begin construction in 2026
•$1M of additional revenue would require a one time rate increase of 3.3%
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 0.0% 2.0% 2.0% 1-3% 1-3% 1-3% 2-3% 2-3% 2-4% 2-4%
Debt Issued ($M)$86.0 $86.0
Page 52 of 116
9
Wastewater Enterprise Fund
Page 53 of 116
10Wastewater Fund CIP
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Wastewater Capital Improvements 2021-2030
Wastewater Collection
Water Reclamation & Biosolids
Pollution Control Lab
Other Enterprise Functions
Ave Annual Capital 2011-2020
Page 54 of 116
11Wastewater Operating Income
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
201120122013201420152016201720182019202020212022202320242025202620272028202920302031Operating Income 2011 -2031
Operating Income Operating Revenue Operating Expense
Page 55 of 116
12Wastewater Rate and Debt Issuance Forecasts
•Near term capital needs are met with a debt issuance for 2023-24
BFO cycle
•Modest rate increases are necessary to offset O&M expense
growth and the anticipated capital investments
•$1M of additional revenue would require a one time rate increase
of 4.25%
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 0.0% 2.0% 2.0% 1-3% 1-3% 1-3% 2-3% 2-3% 2-4% 2-4%
Debt Issued ($M)$34.0 $59.0 $21.0
Page 56 of 116
13
Pulling it all together …
Page 57 of 116
1410 Year Rate and Debt Issuance Forecasts
Stormwater 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 0.0% 2.0% 2.0% 3-5% 3-5% 3-5% 2-3% 2-3% 2-4% 2-5%
Debt Issued ($M)$34.0 $58.0 $32.0
Light & Power 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 2.0% 3.0% 4.1% 3-4% 3-4% 3-4% 2-3% 2-3% 2-4% 2-4%
Debt Issued ($M)$41.0
Water 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 0.0% 2.0% 2.0% 1-3% 1-3% 1-3% 2-3% 2-3% 2-4% 2-4%
Debt Issued ($M)$86.0 $86.0
Wastewater 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 0.0% 2.0% 2.0% 1-3% 1-3% 1-3% 2-3% 2-3% 2-4% 2-4%
Debt Issued ($M)$33.0 $60.0 $21.0
Page 58 of 116
15Impact to Residential Utility Costs 2023-24
2021 2022 2023 2024
Residential Utility Cost Baseline % Change Bill % Change Bill % Change Bill
Electric $78.14 2.0% $79.70 3.0% $82.09 4.1% $85.46
Water $49.03 0.0% $49.03 2.0% $50.01 2.0% $51.01
Wastewater $34.25 0.0% $34.25 2.0% $34.94 2.0% $35.63
Stormwater $16.78 0.0% $16.78 2.0% $17.12 2.0% $17.46
Total $178.20 0.9% $179.76 2.4% $184.16 2.9% $189.56
Page 59 of 116
16Impact to Residential Utility Costs 2022-2031
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031Monthly Average Residential Utility BillForecasted Cost of Utility Services for Residential Customers
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031Monthly Average Residential Utility BillDebt Issuances $M
Forecasted Cost of Utility Services for Residential Customers
with Debt Issuances
Electricity (Ave
Annual Increase
= 3-5%
Water (Ave
Annual Increase
= 3-5%
Wastewater
(Ave Annual
Increase = 2-4%
Stormwater
(Ave Annual
Increase = 3-5%
Page 60 of 116
17Financial Assumptions & Considerations
Macro-economics
•Inflation
•Interest rates
•Infrastructure Funds
Micro-economics
•O&M Costs
•CIP updates
•Resource / Project management
•Efficient use of capital
Page 61 of 116
18Reserve Balances
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
501 - L&P 502 - Water 503 - Wastewater 504 - Stormwater$ MillionsUtility Enterprise Funds Available Reserve Balances 2011 -2020 Year End 2011
Year End 2012
Year End 2013
Year End 2014
Year End 2015
Year End 2016
Year End 2017
Year End 2018
Year End 2019
Year End 2020
Page 62 of 116
19Financial Assumptions & Considerations
Enterprise Rate Increase (%/yr) Operating Revenue (%/yr)Operating Expenses (%/yr) Operating Income ($M/yr)
Fund Historical
2011-2020
Forecast
2022-2031
Historical
2011-2020
Forecast
2022-2031
Historical
2011-2020
Forecast
2022-2031
Historical
2011-2020
Forecast
2022-2031
L&P *4.1%3 - 5%3.8% 3.8%3.4% 2.9%($2)$7
Water 2.7%3 - 5%3.6% 3.9%3.5% 3.5%$4 $6
Wastewater 3.2%2 - 4%2.4% 2.3%3.2% 3.1%$4 $5
Stormwater 0.9%3 - 5%2.8% 2.8%4.3% 4.2%$7 $8
* Series 2018A and 2018B outstanding for Connexion
Page 63 of 116
20Financial Assumptions & Considerations
Enterprise Outstanding Debt Principal Debt Issued Available Reserves Annual Capital
Investment ($M/yr)
Fund 2011 2021 2031 2021 - 2031 2011 2021 2031
Historical
2011-2020
Forecast
2022-2031
L&P *$16M $0 $25-30M $40-50M $16M $23M $66M $160M $270M
Water $26M $1M $140-175M $170-200M $9M $41M $71M $130M $440M
Wastewater $42M $16M $90-100M $110-120M $1M $19M $24M $90M $200M
Stormwater $34M $2M $100-110M $120-140M $2M $12M $13M $70M $240M
* Series 2018A and 2018B outstanding for Connexion
Page 64 of 116
21Next Steps
•January 2022 -Finalize the prioritization of the CIPs for all Utility Enterprise Funds
•January –March 2022 -Develop budget offers to support the asset renewal and
CIP needs
•March 2022 –Enter 2023 and 2024 revenue projections with rate adjustments as
the first step in BFO 2023-24
Page 65 of 116
22Purpose and Direction Sought
Objective:
•Provide an update on the Capital Improvement Plans and Strategic Financial Plan for
the Water and Wastewater Enterprise Funds
•Recommend strategic path forward to meet 10 year operational and financial
objectives ahead of the 2023-24 Budget cycle for Light & Power, Water, Wastewater
and Stormwater utility services
Direction Sought:
•Does the Council Finance Committee support the Utilities Strategic Financial Plan
assumptions ahead of the 2023-24 BFO cycle? In particular, the rate increases
associated with the anticipated revenue required?
Page 66 of 116
THANK YOU!
Page 67 of 116
§¨¦25
§¨¦25
E HARMONY RD
E MULBERRY S T
SCOLLEGEAVEELCO WaterDistrict
Fort CollinsUtilities(Water)
Fort CollinsLoveland WaterDistrict
WestFort CollinsWater District
North WeldCounty WaterDistrict
City Limits
Growth Management Area
Fort Collins Utilities Water Disrtict
Page 68 of 116
§¨¦25
§¨¦25
E HARMONY RD
E MULBERRY S T
SCOLLEGEAVEBoxelder Sanitation District
City of Loveland
Cherry Hills Sanitation District
City of Fort Collins
South Fort Collins Sanitation District
Town of Windsor
Fort Collins Utilities Wastewater Districts
City Limits
Growth Management Area
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WORK SESSION
AGENDA ITEM SUMMARY TEMPLATE
Staff: Lance Smith, Utilities Strategic Financial Director
SUBJECT FOR DISCUSSION – Utilities 2021 Capital Improvement Plans and Strategic Financial Plan
Updates for the Light & Power and Stormwater Utilities
EXECUTIVE SUMMARY
The purpose of this agenda item is to provide the Council Finance Committee with an overview of the
planning processes underway within Fort Collins Utilities. This agenda item will focus on the Light & Power
and Stormwater Enterprise Funds. The Water and Wastewater Enterprise Funds will be presented for
discussion in December. The 2021 Capital Improvement Plans (CIPs) and the 2021 Strategic Financial
Plans for each utility are outlined. The resulting investment projections set the basis for beginning the 2023-
24 Budgeting For Outcomes (BFO) cycle. The overall 10 year rate projections for both utilities is also
presented here along with the forecasted debt issuance needs.
Through active management of O&M expenses, modest rate adjustments and the issuance of some debt,
the Light & Power Enterprise Fund is expected to be able to meet its operational objectives through targeted
capital investments over the coming decade.
The Stormwater Enterprise Fund has a significant amount of capital investment required to complete the
initial buildout of all the needed infrastructure. Given the high operating ratio (operating income / operating
revenue) and the amount of capital investment needed, this utility will require the issuance of significant
debt over the next 25 years as this initial infrastructure is built. Modest rate adjustments allow for some
increase in the debt capacity of this Fund but not enough to accelerate the build out. Timely debt issuances
will allow for rates to remain close to current rates while completing build out over the next 25 years. .
Funding the Stream Rehabilitation Program at a higher level of investment could allow for 25 years of such
work to be completed in 16 years.
The electric utility portion of the Light & Power and Telecommunications Enterprise Fund has an increased
level of capital investment primarily driven by anticipated annexations which will require a new substation
and associated equipment. Tightly managing the operating expenses will be necessary going forward to
ensure adequate operating income is being generated to meet system renewal needs with modest rate
adjustments. The climate action goals set by both the City and Platte River Power Authority will require rate
increases as well during this same time period. A single debt issuance is anticipated as being necessary
ahead of beginning the Mulberry annexation conversion work.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does the Council Finance Committee support the Utilities Strategic Financial Plan assumptions
ahead of the 2023-42 BFO cycle? In particular, the projected rate increases necessary to meet
anticipated revenue requirements?
BACKGROUND/DISCUSSION
The financial health of each utility Enterprise Fund depends on active management of ongoing operating
and maintenance expenses as well as planning for large capital expenditures. In some years it is
expected that the capital investment alone may exceed the annual operating revenues for an Enterprise
Fund even before considering operating expenses. Thus the capital investment required to maintain the
current levels of service provided by each of the four utility services to the community requires a long
planning horizon and consistent reevaluation and prioritization. Additionally the expected operating and
maintenance expenses must be forecasted and managed so that the financial sustainability of each utility
Page 77 of 116
is ensured while continuing to provide the levels of service expected without large rate increases being
necessary in any given year.
10 Year Capital Improvement Plans
The capital improvement planning process begins with periodically developing and updating Operational
Master Plans for each utility. These plans assess current infrastructure for needs and risks and review
expected growth and regulatory requirements. The Master Plans generate a list of recommended capital
projects over the planning horizon which are then included in the Capital Improvement Plans (CIP). The
Utility Asset Management program is developing a standardized process to prioritize necessary capital
investments. This prioritized list will provide the associated annual capital investment which becomes an
input into the long term Strategic Financial Plan. This list is updated ahead of the two year BFO process
and will be prioritized using metrics intended to measure the levels of service that each utility is targeting
to provide to the community. The financial position of each utility is also reviewed in this step with the
output being a recommended path forward which may involve rate adjustments and future debt issuances
in order to achieve the operational objectives and needs of each utility.
Assess Operational
Needs / Risks
Determine Optimal
Solutions & Mitigations
Identify Anticipated
Capital Projects Over Planning Horizon
Establish Capital
Project Prioritization Criteria
Determine Relative
Weighting of Criteria
Prioritize Projects with
Criteria
Review Financial
Position of Each Utility
Determine Capital
Investment Capacities
Recommend
Financial Strategy to Achieve Operational
Objectives
Master
Planning
Capital
Improvement
Planning
Strategic
Financial
Planning
Page 78 of 116
Light & Power Enterprise Fund
The 10 year Capital Improvement Plan (CIP) for the Light & Power Fund consists of projects needed to
provide adequate substation and distribution capacity to developing areas of the City, anticipated
annexations including the Mulberry Corridor, operational technology improvements and system renewal
of existing substations and underground distribution assets.
The 2021 CIP for Light & Power at $221M includes a significant increase in identified capital work over
the 2019 CIP. The 2017 CIP identified $165M as being needed to meet the capital investments needed
over the next decade. The 2019 CIP included $99M of capital investments. This is due in part to new
growth and load projections which are anticipated to require the addition of a new substation, as had
previously been forecasted. A more stable 10 year capital investment plan will allow for more modest
rate adjustments when required and efficient use of bond revenues.
Page 79 of 116
Light & Power Operations
Operating revenues have grown significantly over the past decade through rate increases while total
energy sales have remained flat. Based on the projected revenue requirements for O&M and capital
investment revenues are projected to grow at a rate slower than the past decade.
The colored area represents the 95% confidence band around the expected operating expense.
Strong revenue growth in residential sales have increased operating revenues and thereby operating
income over the past decade. This revenue growth is being driven entirely by the rate increases as
increased customer growth has been offset by increased efficiency. The operating revenue growth is
slightly below the annual rate increases suggesting that it is not realistic to expect to fully realize the
revenue growth of a proposed rate increase.
Light & Power O&M expenses have increased at an unsustainable rate over the past decade. This has
begun to be addressed through active management (a flattening of the curve can be seen in 2018-20).
FUND:
501 - Light & Power Enterprise Fund
Budget
Year 2021
10 Yr
Annualized
Trend
5 Yr
Annualized
Trend
3 Yr
Annualized
Trend
1 Yr
Annualized
Trend
Customers 77,741 1.61%1.70% 1.94% 1.54%
Annual Rate Adjustment 3.00% 4.15%3.69% 3.93% 5.00%
Residential Elec Services 53,070,000$ 4.85%5.52% 6.38% 12.39%
Commercial Elec Services 43,450,000$ 2.89%1.17% 0.42% -3.35%
Industrial Charges for Services 33,230,000$ 4.66%3.26% -0.27% -2.92%
Green Energy Program 340,000$ -7.05%-8.74% -15.40% -33.52%
PILOTs 7,810,000$ 4.09%3.47% 2.64% 3.02%
Operating Revenue 137,900,000$ 4.10%3.46% 2.65% 3.04%
Development Fees/PIFs/Contributions 2,895,000$ 8.46%-5.48% -15.22% -4.21%
Interest Revenue 247,660$ -7.51%-6.76% -2.67% -11.84%
Transfers In
Other Misc 1,155,000$ -1.75%-8.53% -18.93% -40.47%
Non-Operating Revenue 4,297,660$ 3.41%-5.44% -14.41% -17.88%
Page 80 of 116
The rate and debt issuance forecasts in the plan assume that O&M will increase at a rate close to the rate
of inflation.
The colored area represents the 95% confidence band around the expected operating expense.
The table below shows the recent trends in expenses along with the relative size of each line through the
2021 budgeted expenses. Positive trends in purchased power expenses and L&P Operations are driving
the overall trend. Fort Collins electric customers have benefited from lower wholesale purchased power
increases the past few years due to some flattening of the overall load curve through load shifting under
time of day rates as our contribution to the coincident peak has diminished.
By limiting O&M to a more modest rate of growth it is expected that the L&P Fund will generate positive
operating income consistently which will be available for capital investments. This will limit the amount of
debt issuance that is necessary over the coming decade.
FUND:
501 - Light & Power Enterprise Fund
Budget
Year 2021
10 Yr
Annualized
Trend
5 Yr
Annualized
Trend
3 Yr
Annualized
Trend
1 Yr
Annualized
Trend
Annual Demand (KWH)1,495,938,741 0.1% -0.2% -0.9% -1.8%
Purchase Power -Tariff 1 PRPA 96,550,000$ 3.4% 1.7% 0.0% -2.5%
Purchase Power - Renewables PRPA 1,900,000$ 0.4% 0.1% 0.0% 0.0%
Purchase Pwr - Community Renewables 2,257,900$ 36.3% 10.4% 17.7% 32.2%
L&P Operations 9,973,705$ 3.7% 1.5% -1.0% -1.3%
Energy Services 5,723,389$ 1.7% -4.0% -7.6% -1.6%
PILOTs 7,810,000$ 4.1% 3.5% 2.6% 3.0%
Admin Services - CS&A 7,263,617$ 3.9% 6.8% 7.9% 16.1%
Admin Services - General Fund 1,090,628$ 1.4% -5.1% -0.8% 2.5%
Other Payments & Transfers 902,398$ -2.4% -7.6% -16.2% -8.5%
Depreciation 12,000,000$ 4.6% 5.7% 3.4% -0.8%
Total Operating Expenses 145,471,637$ 3.6% 2.1% 0.6% -0.5%
Debt Service 12,660$ -12.0% -58.2% -76.7% 0.0%
System Addition/Replacement 5,559,120$ -6.5% -17.3% -15.2% -17.0%
Capital (other than Sys Add)7,647,504$ -7.1% -4.5% -23.2% -29.6%
Total Non-operating Expenses 13,219,284$ -6.8% -14.2% -22.9% -24.0%
Total Expenses 158,690,921$ 2.6% 0.6% -1.5% -2.2%
Page 81 of 116
Light & Power Rate and Debt Forecasts
Rate increases above those necessary to cover wholesale purchased power increases are not
anticipated to be significant over the coming decade although any significant change in the necessary
capital investments may require modest adjustments to ensure adequate operating revenue is generated
to support the system renewal investments. Some debt is anticipated to be needed for capital
investments over the next decade.
The overall debt capacity of the fund is determined by the net pledged revenues and targeted debt
coverage ratio. The table below shows the debt capacity at various coverage ratios as well as the current
outstanding debt.
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 2.0% 3.0% 4.1% 4-5% 4-5% 3-5% 2-3% 2-3% 2-4% 2-5%
Debt Issued ($M)$55.0
Debt Capacity Estimation
Interest Rate:2.50%
Net Pledged Revenue (5yr ave):$15,296,600
Debt Coverage
Ratio
Debt Capacity (10
yr Debt)
Debt Capacity (15
yr Debt)
Debt Capacity (20
yr Debt)
1.0 $136 $193 $244
1.2 $113 $161 $204
1.4 $97 $138 $175
1.6 $85 $121 $153
1.8 $75 $107 $136
2.0 $68 $96 $122
2.2 $62 $88 $111
2.4 $57 $80 $102
2.6 $52 $74 $94
2.8 $48 $69 $87
3.0 $45 $64 $82
Outstanding Debt in 2021:$129.6 M
Page 82 of 116
Stormwater Enterprise Fund
Stormwater CIP
The Capital Improvement Plan for the Stormwater Fund includes new cost estimates for all anticipated
initial buildout projects. Updating the cost estimates, along with some preliminary design refinements to
some of the project requirements, increased the anticipated capital investment needed to build out the
stormwater infrastructure from $374M in the 2019 CIP to $568M. Cost adjustments for stream restoration
projects are also included in the model which now shows $30M in stream restoration projects in addition
to the water quality and flood protection projects. The CIP is now being proposed to be built over a 25
year period which as the graph below shows will still require investing almost 4 times as much each year
in capital infrastructure than the previous decade’s level of investment. In addition, City Council has
established acceleration of the Stream Rehabilitation program as a priority. In 2016 when the Stream
Rehabilitation Program was established 16% of the revenue was to be dedicated to Stream Rehabilitation
Projects or $650,000. The most recent CIP projections have been allocating $800,000 per year.
Because of the nature of these projects, that means some years $3,100,000 is allocated for a project like
in 2021 to and some years there is not an allocation like 2022. On average approximately $800,000 per
year is spent in the Stream Rehabilitation Program. The options to accelerate this program include:
1. Increase the allocation within the CIP by $400,000 a year which would bring the total allocation to
$1,200,000 each year. This allows flexibility to address either larger projects or taking on
concurrent projects depending on the size of the project.
2. Instead of doing one project every two years, do two projects every three years by having one in
design while another is in construction. This may take additional staff resources to manage
additional projects within the program.
The additional financial resources for Stream Rehabilitation can either be generated through a rate
increase of 2.5 percent to generate the additional $400,000 each year needed to cover those costs or the
time period for the flood protection capital work can be extended. A modest 2.5% rate increase would not
limit other suggested rate increases while remaining below the 5% ceiling in the next few years and would
establish the incremental revenues going forward. Taking an additional $400,000 from the current
operating income allocation for the CIP would not necessarily delay any capital project but rather would
more likely lead to issuing higher revenue bonds when an issuance is needed. Please see that attached
memorandum on the Stream Rehabilitation program (Attachment 2).
The CIP with the current projection of flood protection and stream rehabilitation work is shown below.
Page 83 of 116
The amount of anticipated capital investment is much greater than what has been made over the previous
decade. This will require significant operational planning and project management to ensure that the
bond revenue is utilized efficiently.
The trend in the anticipated capital investments is cautionary. With each review and update of the capital
improvement plans there is an escalation of the estimated total investment required. This is being driven
primarily by higher cost estimates for known capital projects rather than from new projects being
identified.
Stormwater Operations
Operating revenues have grown modestly over the past decade primarily through annexations and infill
development along with some modest rate adjustments.
The colored area represents the 95% confidence band around the expected operating expense.
Stormwater O&M has increased as more infrastructure is built requiring O&M. The financial forecast
recognizes this but assumes that the growth can be managed to increase at the rate of inflation. The
largest increases were seen in drainage and detention as well as in the administrative charges.
Page 84 of 116
The colored area represents the 95% confidence band around the expected operating expense.
The growing divergence between the operating revenue and operating expense is necessary to increase
the net pledged revenues necessary to cover the increased outstanding debt over the next few decades.
Stormwater Rate and Debt Forecasts
With the strong operating income being generated every year in this utility only providing a fourth of the
anticipated capital investment required to fully build out the infrastructure for the community over the next
25 years it will be necessary to issue significant debt to complete the remaining flood mitigation
infrastructure. Significant rate increases could be implemented rather than, or in conjunction with, issuing
debt, however, the capital needs are not ongoing capital needs. Rates are usually adjusted to fund
ongoing operational and capital needs. There is significant debt capacity in this fund that operates with
an operating margin of 40%. Increasing rates would increase the operating margin but not necessarily
Page 85 of 116
allow for the initial infrastructure to be built on an accelerated schedule because of the relative scale of
the capital investment compared to the operating revenues. The anticipated levelized annual capital
investment required to complete the initial build out over the next 25 years along with minor capital
investments required on existing infrastructure is $20M per year. Infrastructure that is expected to last for
at least 50 years into the future could be financed over that time period with those customers benefiting
from the new investment paying for its cost rather than increasing rates substantially. The table below
shows the amount of debt that would need to be issued over the next decade to establish this 25 year
build out schedule while adhering the financial boundary conditions of gradual, modest rate adjustments,
positive operating income and a debt coverage ratio of at least 2.0.
As the table below shows, there will be the need to issue debt for several capital investments over the
next decade. The first such issuance should be done in 2023 as part of the 2023-24 BFO cycle. Modest
rate adjustments can be made to increase the net pledged revenues available for debt service as the debt
is issued or more modestly over two or three years ahead of the next issuance.
The debt capacity should be sufficient to meet the anticipated cost of the buildout o the protective
infrastructure assuming a 25 year build out period rather than the 10 year schedule. The need to issue
debt will drive some rate increases over the next 10 years in order to maintain the targeted debt coverage
ratio of at least 2.0.
Conclusions and Next Steps
Updating the ten year Capital Improvement Plans ahead of the budget cycle allows for an assessment of
potential rate adjustments and debt issuances that may be necessary in the near future. The Strategic
Financial Plan provides a financial path forward to meet the operational needs of each utility.
Year 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Rate Increase 0.0% 2.0% 2.0% 3-5% 3-5% 3-5% 2-3% 2-3% 2-4% 2-5%
Debt Issued ($M)$80.0 $43.0
Debt Capacity Estimation
Interest Rate:2.25%
Net Pledged Revenue (5yr ave):$12,011,600
Debt Coverage
Ratio
Debt Capacity (10
yr Debt)
Debt Capacity (15
yr Debt)
Debt Capacity (20
yr Debt)
1.0 $107 $152 $192
1.2 $89 $126 $160
1.4 $76 $108 $137
1.6 $67 $95 $120
1.8 $59 $84 $107
2.0 $53 $76 $96
2.2 $48 $69 $87
2.4 $44 $63 $80
2.6 $41 $58 $74
2.8 $38 $54 $69
3.0 $36 $51 $64
Outstanding Debt in 2021:$2.1 M
Page 86 of 116
Through active management of O&M expenses, modest rate adjustments and the issuance of some debt,
the Light & Power Enterprise Fund is expected to be able to meet its operational objectives through targeted
capital investments over the coming decade.
The Stormwater Enterprise Fund has a significant amount of capital investment required to complete the
initial buildout of all the needed infrastructure. Given the high operating ratio (operating income / operating
revenue) and the amount of capital investment needed, this utility will require the issuance of significant
debt over the next 25 years as this initial infrastructure is built. Modest rate adjustments allow for some
increase in the debt capacity of this Fund but not enough to accelerate the build out. Timely debt issuances
will allow for rates to remain close to current rates while completing build out over the next 25 years. Funding
the Stream Rehabilitation Program at a higher level of investment could allow for 25 years of such work to
be completed in 16 years.
The electric utility portion of the Light & Power and Telecommunications Enterprise Fund has an increased
level of capital investment primarily driven by anticipated annexations which will require a new substation
and associated equipment. Tightly managing the operating expenses will be necessary going forward to
ensure adequate operating income is being generated to meet system renewal needs with modest rate
adjustments. The climate action goals set by both the City and Platte River Power Authority will require rate
increases as well during this same time period. A single debt issuance is anticipated as being necessary
ahead of beginning the Mulberry annexation conversion work.
Attachments
Attachment 1 - PowerPoint presentation
Attachment 2 – Memorandum to City Council on Stream Rehabilitation Program Update
Page 87 of 116
Page 88 of 116
1
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Jennifer Poznanovic, Sr. Revenue Manager
Ginny Sawyer, Sr. Project Manager
Date: December 1, 2021
SUBJECT FOR DISCUSSION
Consideration of New Revenue Sources
EXECUTIVE SUMMARY
The purpose of this item is to discuss specific identified revenue needs and potential funding
options.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. What questions does Council Finance Committee have on the identified revenue
priorities?
2. Which revenue options should staff pursue?
3. Does Council Finance Committee have questions regarding upcoming election
opportunities?
4. Does Council Finance Committee agree with staff proposed next steps?
BACKGROUND/DISCUSSION
The three revenue needs identified through master plans include parks, transit, and housing.
Annual shortfalls range from six to ten million per need. Parks and transit have specific
operational plans and a focus on asset management. Housing continues to be a top Council and
community priority.
Parks and Recreation
The Parks and Recreation Master Plan was adopted on January 19, 2021, and incorporated a year
of extensive staff, community and stakeholder participation. The funding section of the plan
features a primary goal to enhance the financial sustainability of Parks and Recreation. While
existing operations and maintenance budgets are close to what is needed, there are no dedicated
funding sources for capital investment. The funding gap identified in the plan is captured in the
table below:
Page 89 of 116
2
• Operations and Maintenance - the daily tasks needed to keep parks and recreation
facilities running and minor repairs to capital assets to keep them in a good state of
repair.
• Life Cycle Replacement (Capital) - includes critical maintenance projects or
repair of existing assets—when regular maintenance can no longer keep them in a
good state of repair—safety and ADA (Americans with Disabilities Act)
improvements, and existing debt service obligations. Many of these types of
improvements typically require one-time funding and are not likely to increase annual
operations and maintenance costs. In many cases, these types of projects may reduce
annual operations and maintenance costs.
• Minor Refresh (Capital) - Minor refreshes include strategic changes to existing
parks or recreation facilities to better meet the unmet needs of the community,
including adding features such as play fields, shade structures, adult fitness
equipment, covered picnic shelters, and trail loops to extend recreation opportunities.
Minor refreshes may also include a refresh of plantings or other design elements
within the framework of an existing, relevant site master plan. These types of
improvements typically require one-time funding and may trigger slight increases in
annual operations and maintenance costs, depending on the nature of the
improvements.
The Parks and Recreation master plan identified primary goals of providing equitable access to
parks and recreational experiences. By investing in ongoing life-cycle replacements and minor
refreshes, community members will experience a more consistent level of service across existing
amenities, while the City minimizes costs associated with the need for a major refresh.
Page 90 of 116
3
Transit
The Transit Master Plan (TMP), adopted by Council in April of 2019, outlines the vision and
policies for expanding the transit system according to current and future demand. The costs over
the next 20 years are significant and are not currently funded:
Table from page 85 of the Transit Master Plan
The costs in the above table are expected to include federal grant funding to be matched by local
dollars. Based on current federal allocations, the following assumptions have been made:
• Capital Projects - Expect 50% Federal Match o Local need over 20 years: $7.7 million annually • Operations & Maintenance - Expect 25% Federal Match o Local additional need at full build-out: $9.75 million annually
It is important to note that the cost estimates outlined in the TMP were based on 2016 operating
figures and assumptions. These projections did not account for the transition of the Transfort
fleet from CNG to zero-emission vehicles, which have a significantly higher up-front cost, but an
expected lower operating and maintenance cost over the life of the vehicle.
Staff have hired a consultant to conduct a comprehensive Funding Study for Transfort, which
will include:
• Updated capital, operating and maintenance estimates for the 20-year span of the TMP
• Identification of a preferred, dedicated and permanent funding source or sources,
including extensive public outreach
• Full analysis of the current fare structure and associated costs, as well as feasibility of a
fare-free system
The Funding Study is expected to conclude no later than quarter 4 of 2022.
The TMP is an ambitious plan intended to transform mobility options throughout the City and
region. This plan is also key to the City’s Climate Action Plan. Plan highlights are described in
the following graphic:
Page 91 of 116
4
Projects in support of the TMP, which are currently in development include, but are not limited
to:
• West Elizabeth Bus Rapid Transit (BRT) - This project is near completion of 30% design
which will result in eligibility for Small Starts grant funding (the same program that
helped complete MAX) as early as 2023, if local match can be secured. This project is
currently in Project Development with the Federal Transit Administration (FTA)
• North College BRT extension – A transit-oriented development (TOD) study is currently
being conducted and is expected to complete in quarter two of 2022.
• North Transit Maintenance Facility – Transfort has exceeded capacity at the Transit
Maintenance Facility on Portner Road and further service expansion will require an
additional facility. Staff are currently identifying potential locations for the new facility
and will soon have a funding need to purchase this real estate. Once design is complete,
staff will seek federal grant funding to build this project.
• Fleet Electrification Master Plan
Housing
Data compiled for the Housing Strategic Plan (HSP) illustrates that the housing needs in Fort
Collins are concentrated at the lower end of the income spectrum. For renters, the need is
greatest at 60% AMI and below ($41,880 for a 2-person household); for owners, the need is
greatest at 120% AMI and below ($83,760 for a two-person household). However, it is important
to acknowledge that there are also gaps in housing supply throughout the entire housing system.
City Plan estimated a housing shortage of approximately 2,000 units by 2040, assuming that
growth and housing production remained relatively consistent over time. In short, housing price
escalation and limited availability of housing in Fort Collins will likely continue to worsen
unless we can increase the overall supply of housing while also seeking to increase the
community’s inventory of deed-restricted, affordable housing.
Page 92 of 116
5
In 2015, affordable housing made up 5% of the City’s housing stock. Between 2015-2019, the
City and its partners added 373 new affordable homes. In 2020 and 2021 to date, an additional
246 homes were added to the City’s affordable housing inventory. However, the total number of
housing units has also increased proportionally, which means that affordable units still make up
only 5% of our overall housing stock. To get back on track to achieve our 10% goal by 2040, we
need to increase the amount of affordable housing by 282 or more units every year from 2020
onward. This is more than double the City’s average annual production of affordable housing.
Page 93 of 116
6
While the City has affordable housing incentives and provides between $2 million to $3 million
in direct subsidy funding every year, these resources are not enough to meet the City’s affordable
housing goals. The City needs about 700 additional affordable units to meet our 2020 goal of 6%
of all housing being affordable. Assuming a $39,000 investment by the City yields one unit of
affordable housing, the City would need to invest $28,000,000 of direct subsidy funding to close
the 2020 gap..
On an ongoing basis, the City’s annual affordable housing production goal is 282 units or more
of affordable housing each year. Again, assuming that a $39,000 investment yields one unit of
affordable housing, the estimated annual funding need for affordable housing is $10-11.5 million
per year ($8-9.5 million above current levels). This calculation also assumes that federal
subsidies for the development of affordable rental housing (Low Income Housing Tax Credits)
remain steady, that there are enough tax-exempt government bonds (Private Activity Bonds, or
PABs) available to support each project, and that private developers have the ability to deliver
projects.
The strategy section of the Housing Strategic Plan includes recommendations for new and
expanded tools and funding sources to better support achieving our housing goals. Strategy 11
specifically recommends creation of a new dedicated revenue stream for affordable housing:
• Revenue Options for Housing (Strategy 11 – Create a new dedicated revenue stream to
fund the Affordable Housing Fund): Though Fort Collins invests $2-3 million into
affordable housing production and preservation annually, the HSP estimates that the total
annual funding need is closer to $10-11.5 million. Exploring a range of options (sales tax,
impact fees, inclusionary housing fees-in-lieu, etc.) to generate consistent, dedicated, and
flexible revenue for affordable housing will be a critical piece of HSP implementation. In
addition, the current Community Capital Improvement Program quarter-cent sales tax
that funds the Affordable Housing Capital Fund and other capital improvements will
expire in 2025.
Page 94 of 116
7
Potential Revenue Options
Below is a list of potential revenue options for consideration:
Below are estimates of annual revenue projections for several potential revenue options:
Regarding Capital Expansion Fees (CEFs) it is important to note that per City Code, these fees
collected are for the purpose of funding additional capital improvements required to address the
impact of growth within the City as the City's population increases. They intend to regulate the
use and development of land by ensuring that new growth and development in the City bear a
proportionate share of the capital expenditures necessary to provide community parkland, police,
fire protection, general government, neighborhood parkland and transportation capital
improvements to address the impacts of growth. If Council Finance Committee chooses to
further explore this option, staff will need to work with the City Attorney’s Office, as
reconfigured CEFs do not fall within the current standard models for CEF analysis. In addition,
the imposition and calculation of CEFs, as impact fees, are legally constrained by certain
constitutional and statutory requirements and limitations.
Page 95 of 116
8
Another option is to consider these needs as existing dedicated taxes are set to expire and new
measures are developed. Both the quarter cent street maintenance and Community Capital
Improvement Program (CCIP) dedicated taxes are set to expire in December of 2025. Each
quarter cent tax raises an estimated nine million per year.
Timeline
Below is the current timeline for Council Meetings along with potential election opportunities:
Proposed Next Steps
After direction from Council Finance Committee, staff plans to kick-off the project with the team
comprised of executive sponsors, a core team, financial analysts and subject matter experts. Staff
plans to discuss findings and an engagement outreach plan with Council during a work session in
quarter two of 2022.
ATTACHMENTS (numbered Attachment 1, 2, 3,…)
1. Consideration of New Revenue Sources (PPT)
2. Parks and Recreation Master Plan
3. Transit Master Plan
4. Housing Strategic Plan
5. Other Known Priorities and Funding Needs
Page 96 of 116
Consideration of New Revenue Sources
12-01-2021
Council Finance Committee
Travis Storin, Ginny Sawyer & Jennifer PoznanovicPage 97 of 116
2Purpose
New Revenue Consideration
Revenue needs identified through master plans
•PARKS -$6M to $9M annual shortfall (Parks & Recreation Master Plan)
•TRANSIT -$8M to $10M annual shortfall (Transit Master Plan)
-Funding study underway –results expected October 2022
•HOUSING -$8M to $9.5M annual shortfall (Housing Strategic Plan)
Page 98 of 116
3Parks and Recreation
•Aim to close $6M to $9M annual shortfall with emphasis on asset management
•Funding gaps by area identified in Parks and Recreation Mater Plan:
•Goal to provide equitable access to parks and recreational experiences
Page 99 of 116
4Housing
•Average annual funding: $2 million -$3 million a year
•Competitive Process (CDBG/HOME) funding –$1.5-2.5 million (Federal)
•Affordable Housing Capital Fund (CCIP) –$4M (sales tax; expires 2025)
•Average affordable housing City subsidy, 2015-2020: ~$39,000 per unit (CCIP/Federal)
•Expected yield given current average funding: 38-77 units per year
•Annual affordable housing production goal: 282+ units per year
•Total funding need: $10-11.5 million annually
•Estimated annual ongoing need: $10-11.5 million (additional $8-9.5 million from current)
•700 units behind 2020 goal
Page 100 of 116
5Other Known Priorities & Funding Needs
CLIMATE
•Adopted goals for 2030 and 2050 and implementation of Our Climate Future Need to intensify
efforts in next decade with funding needs for critical pathways
•Currently conducting peer research
CULTURE AND ART
•Future capital needs estimated at $2M per year to maintain facility portfolio
CHILDCARE
•Coordination with County-wide initiative
•Council Priority
•Public funding need (COVID recovery and beyond)
REGIONAL TRANSPORTATION
•Regional transit & trails
•Regionally significant corridors (Shields, Taft, SH 1, East Prospect, SH 14/Mulberry)
Page 101 of 116
6Tax Rate History
Expiring 12/31/2025:
•¼ cent Street Maintenance
•¼ cent CCIP
3.85%
Current City
Sales Tax rate
2.85%
Page 102 of 116
7
Colorado City & County Tax Rates
by Population
*All counties except Douglas and Larimer have other taxes that include transportation, culture and public safety
County Population Total County
Mill Levy
State
Rate
County
Rate
Other Sales
Taxes
City
Rate Seat *Total Seat
Rate
El Paso County 730,395 7.692 2.90 1.23 1.00 3.07 Colorado Springs 8.20
Denver County 715,522 --2.90 0.00 1.10 4.81 Denver 8.81
Arapahoe County 655,070 13.013 2.90 0.25 1.10 3.00 Littleton 7.25
Jefferson County 582,910 24.578 2.90 0.50 1.10 3.00 Golden 7.50
Adams County 519,572 26.897 2.90 0.75 1.10 3.75 Brighton 8.50
Larimer County 359,066 22.458 2.90 0.80 0.00 3.85 Fort Collins 7.55
Douglas County 357,978 19.274 2.90 1.00 0.00 4.00 Castle Rock 7.90
Boulder County 330,758 24.771 2.90 0.99 1.10 3.86 Boulder 8.85
Weld County 328,981 15.038 2.90 0.00 0.00 4.11 Greeley 7.01
Mesa County 155,703 11.703 2.90 2.00 0.37 3.25 Grand Junction 8.52
Page 103 of 116
8
Colorado City Full Stack
Sales Tax Rates
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Boulder Denver Grand
Junction
Brighton Colorado
Springs
Castle Rock Fort Collins Golden Littleton Greeley
Total Tax Rates
State County Rate Other Taxes City RatePage 104 of 116
9Potential Revenue Options
Option Voter
approval
Δ in
governance
Resilient to
recession
Precedent to
residents
Stakeholder
Impact
1 Increase the base rate X X Resident, Individual
2 Dedicated sales tax X X Resident, Individual
3 Repurpose ¼ cent dedicated taxes X X Resident, Individual
4 Fees (parks, transit)X X Resident
5 Property tax X X X Resident
6 Reconfigure capital expansion fees X Business
7 Tax on services X Resident, Individual
8 Tax on specific goods
(marijuana, tobacco, alcohol, sugar beverages, etc.)X Resident, Individual
9 Fundraising X N/A
10 Special districts X X X X Resident
11 Business occupational privilege tax X Business
Page 105 of 116
10Potential Revenue Options
Option Annual Revenue
Projection
Special district mill levy $11M+
¼ cent tax increase $9M+
Excise tax (ex: sugar beverages at $0.02 per fluid ounce)$4M+
$4 monthly occupational privilege tax ($48/yr)$4M+
$5 monthly fee (ex: transit, parks) ($60/yr)$4M
3% tax on marijuana $3M
Reconfigure CEF parks fees $2M
Additional Considerations
Reconfigure taxes set to expire in 2025:
•¼ cent Street Maintenance
•¼ cent CCIP Page 106 of 116
11Timeline & Milestones
Long-term
Look at
Possible
Tax
Renewals
ASSUMES 10 YEAR
TERMS
2021 2022 2023 2024 202520212022202320242025
•ELT
•CFC
•Council Work
Session
•Earliest potential
November Election
•Earliest potential
April election
•November election
•November election
only
•Last elections prior
to expiration
Page 107 of 116
12Proposed Project Team
Executive Sponsors
•Kelly, Kyle, Tyler, Travis
Core Team
•Project Management
•Ginny, Jennifer, Dean, Travis, Amanda, Nina
Financial Analysts
•PDT, Sustainability, Community Services
•Monica, Javier, Victoria
Subject Matter Experts
•PDT, Sustainability, Community Services
•Carrie, Jackie, Caryn, Seve, and associated staff
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13Proposed Next Steps
Staff team project kick-off:
•Official project team kick-off after direction from CFC
•Council Work Session in Q2 2022
•Develop engagement outreach plan
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14Next Steps
Questions and suggestions from Council Finance Committee?
1)Questions on the identified revenue priorities?
2)Which revenue options should staff pursue?
3)Questions regarding upcoming election opportunities?
4)Agreement with staff proposed next steps?
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16
Backup
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17Utility Rate Comparison
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18Utility Bill Comparison
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Other Known Priorities & Funding Needs
Climate
Having achieved the most recent greenhouse gas (GHG) emissions reduction target set by
Council (20% drawdown by 2020), staff and the community are setting sights on 2030.
Achieving an 80% reduction in GHG emissions by 2030 will require transformational leadership
across sectors including significant new financial investments. Three "critical pathways" to our
2030 emissions reduction goal are 1) switching to 100% renewable electricity, 2) greatly
increasing transit ridership, and 3) ensuring access to universal composting. Combined, these
three initiatives will help us reach halfway to the 2030 target. Adopted Council Priorities as well
as the Big Moves and Next Moves in Our Climate Future (OCF) begin to lay out additional
strategies to accelerate progress on the climate emergency.
A sustainable, dedicated funding source for climate action is one way that communities around
the country are filling the gap between what is currently feasible and their aspirations for a
sustainable future. Regional examples include voter-approved excise taxes in Boulder (2006) and
Denver (2020) that dedicate investments for climate action generating from $1.7M up to $40M,
annually. Further analysis of peer communities will be conducted if this is an area that Council
Finance Committee wishes staff to explore, including projecting cost estimates for the critical
pathways and other strategies to reach 2030 goals.
Culture and Art
The cost of maintaining major assets within the Cultural Department facilities are not on a
budgeted replacement schedule. Addressing the needs and associated future financial impacts are
paramount. Examples include: the catering kitchen and Magnolia Theater seats at The Lincoln
Center, exterior furniture and structures at the Gardens such as the outdoor kitchen and
classroom, green roof structure, Everitt Pavilion and the plant collection; exhibit displays,
technology and the Digital Dome Theater at the Museum.
Childcare
Within the Economic Heath Strategic Outcome, City Council identified as a priority affordable,
quality, and accessible childcare infrastructure with a focus on workforce development/retention,
and to expand the City's support for system-level childcare projects. A county-wide approach
may be best the method for a systems-level approach. Earlier this year, a community led
proposal recommended that the Larimer County Board of County Commissioners refer a county-
wide sales and use tax quarter cent increase question to voters for the purpose of supporting
working parents, children, and early care and education programs in Larimer County. The
initiative did not move forward but estimated that a quarter cent county-wide tax could raise
$17M per year.
Regional Transportation
The City of Fort Collins plays a critical role in the transportation system of the Northern
Colorado region. Working collaboratively with our regional partners to identify solutions to
regional transportation issues will be critical to triple- bottom-line success for the City and the
region (environmental, economic, and social health).
Regional transportation corridors have significant funding needs to improve safety, reduce
congestion, and add travel options. Specific needs include improvements to regionally significant
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corridors, development of a regional transit strategy, improved regional multi-modal trails, and a
regional approach to travel demand management and other trip reduction strategies.
This work is aligned with Policies identified in City Plan including the following:
Policy T 4: Pursue Regional Transportation Solutions
Policy T 4.1 – Regional Transportation Planning
Policy T 4.2 – Partnerships for Interstate Travel
Policy T 4.3 – Efficient Mobility
Policy T 4.4 – Regional Connections
Policy T 4.5 – Partnerships for Multimodal Travel
Policy T 4.6 – Use of Existing Railroad Rights-of-Way
Policy T 4.7 – Future Passenger Rail
Policy T 4.8 – Regional Transit
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