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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 06/28/2005 - STORMWATER FINANCING ALTERNATIVES DATE: June 28, 2005 STAFF: Mike Smith WORK SESSION ITEM Terri Bryant FORT COLLINS CITY COUNCIL Jim Hibbard Bob Smith SUBJECT FOR DISCUSSION Stormwater Financing Alternatives. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Is there any additional information Council would like on this issue? 2. Are there other alternatives Council would like to see? 3. Which alternative(s) should staff prepare for Council consideration? BACKGROUND In 2001, Council adopted a 25-year pay-as-you-go financing plan to fund approximately $120 million in stormwater improvements. This plan called for rates to increase 45% in 2002, 10% in 2003 and 2004, 6% each year from 2005 through 2008, and return to maintenance levels in 2027. During the 2005 budget process, Council expressed concern the stormwater rates were becoming unreasonable and did not adopt the scheduled rate increase, asking staff to return with alternatives. Stormwater rates are based on the potential of a developed parcel to generate stormwater, which depends on two factors; (1) area, and (2) the runoff characteristics of the parcel. There are over 31,000 single family residential stormwater accounts. The current monthly rate for a typical single family residence is $14.27. Single family residential accounts generate 46% of the monthly fee revenue. There are about 7,000 commercial stormwater accounts. Monthly commercial rates vary widely, with 25% paying less than $17.14, 25% paying between $17.14 and $28.11, 25% paying between $28.11 and $62.14, and 25% paying more than more than $62.14. Approximately 1% of our commercial customers pay over $1,000 per month. Commercial accounts generate 54% of the monthly fee revenue. Staff has developed three scenarios. While each has a different proposal for rates, all continue the pay-as-you-go philosophy (no new debt) adopted in 2001. The revenue projections for all scenarios have been refined using data from the first four years of the 25-year financing plan adopted in 2001. In addition, all three scenarios anticipate adjustments in stormwater impact fees, to be considered by Council later this year. June 28, 2005 Page 2 Alternative 1 —Return to the rate increases as proposed in the 2001 financing plan. This alternative calls for 6% rate increases each year for the next four years. Under this alternative, master plan improvements would be complete in 2022, four years sooner than projected in the 2001 financing plan. This is due to refined revenue projections and anticipated adjustments in stormwater impact fees, to be considered by Council later this year. The typical single family residential monthly fee would increase to $18.19 by 2009, remain level until 2023 and then adjust to a maintenance level. The total cost of the improvements with estimated inflation would be $148,400,000. PROS CONS • Best alternative for meeting • Highest rate impact customer expectations for building projects • Least risk compared to the other alternatives • Lowest overall costs Alternative 2 —One-half of the rate increases proposed in the 2001 financing plan. This alternative calls for 3% rate increases each year for the next four years. Under this alternative, master plan improvements would be complete in 2026, essentially the same 25-year build out proposed in the 2001 financing plan. The ability to complete the master plan improvements in the original time frame with lower rate increases is due to the previously mentioned refined revenue projections and anticipated adjustments in stormwater impact fees. The typical single family residential monthly fee would increase to $16.06 by 2009, remain level until 2027 and then adjust to a maintenance level. The total cost of the improvements with estimated inflation would be $158,700,000. PROS CONS • More likely to meet customer • Moderate rate impact expectations for building projects, same as original financing plan • Lower risk due to shorter build out • Lower costs June 28, 2005 Page 3 Alternative 3 —No additional rate increases for the foreseeable future. Under this alternative, master plan improvements would be complete in 2036. This is approximately 10 years longer than the 25-year build out proposed in the 2001 financing plan. The typical single family residential monthly fee would remain at $14.27 until 2037, and then adjust to a maintenance level. The total cost of the improvements with estimated inflation would be $185,200,000. PROS CONS • Lowest rate impact • Delayed projects may not meet customer expectations • Higher risk due to longer build out • Higher costs due to inflation Alternative Comparison 2001 Financing Alternative 1 Alternative 2 Alternative 3 Plan Future rate 6% each year 6% each year 3% each year 0% increases 2005 to 2008 2006 to 2009 2006 to 2009 Highest typical $18.19 $18.19 $16.06 $14.27 single family fee Construction 2026 2022 2026 2036 build out Chance of a 100-year storm 19% 16% 19% 27% during build out Construction costs with $158,700,000 $148,400,000 $158,700,000 $185,800,000 inflation June 28, 2005 Page 4 Recommendation One of the primary reasons the pay-as-you-go approach was chosen in 2001 was that it gave the Council the flexibility to modify the priority, timing, and scope of future projects if deemed desirable or necessary. Staff has attempted to quantify the characteristics associated with each alternative. From a policy perspective, the main issue appears to be one of risk versus rates. The following table compares the alternatives on these two criteria. Risk Rates Alternative 1 Lowest Highest Alternative 2 Intermediate Intermediate Alternative 3 Highest Lowest If Council's concern is to minimize risk and reach build-out sooner, choose alternative 1. If Council would like to reach build-out in the original 25-year time frame with intermediate impact on rates, choose alternative 2. If Council's immediate concern is avoiding a rate increase, choose alternative 3. ATTACHMENTS 1. Presentation Slides Staff presentations for certain Work Session items have been video taped in advance of this meeting. The presentations will be broadcast on City Cable Channel 27 at the following times: Thursday,June 23 6:00 p.m. Sunday,June 26 4:00 p.m. & 8:30 p.m. Friday,June 24 1:00 a.m., 6:30 a.m.,&5:00 p.m. Monday,June 27 11:30 p.m. Saturday,June 25 4:00 a.m. & 11:00 a.m. Tuesday,June 28 7:00 a.m. &4:00 p.m. Videos of the presentations will also be available via a high-speed internet connection at www.fegov.com by 5:00 p.m.,Friday,June 24. ATTACHMENT Stormwater Financing Plan City of Fort Collins Council Work Session June 28, 2005 2001 Financing Plan • $120 million in stormwater improvements, • 25 years, build-out in 2026, • $15 million in bonds, • Then pay-as-you-go. 1 2001 Financing Plan Year Projected Rate Increase 2002 45% 2003 10% 2004 10% 2005 6% 2006 6% 2007 6% 2008 6% Current Monthly Rates • Residential (typical) - $14.27 • Commercial - varies — 25% less than $17.14 — 25% between $17.14 and $28.11 — 25% between $28.11 and $62.14 — 25% over $62.14 2 Alternatives 1 . Return to rate increases as proposed in the 2001 financing plan (6% each year for four years) 2. One-half of the rate increases proposed in the 2001 financing plan (3% each year for four years) 3. No additional rate increases for the foreseeable future Alternative Comparison 2001 Financing Alternative 1 Alternative 2 Alternative 3 Plan Future rate 6%each year 6% each year 3%each year 0% Increases 2005to 2008 2006to 2009 2006 to 2009 Highest typical single $18.19 $18.19 $16.06 $14.27 family fee Construction build out 2026 2022 2026 2036 Chance of a 100-year 19% 16% 19% 27% flood during build out Construction costs with $158,700,000 $148,400,000 $158,700,000 $185,800,000 Inflation 3 Risk versus Rates RISK RATES Alternative 1 Lowest Highest (6/o) Alternative 2 Intermediate Intermediate (3%) Alternative 3 (0 ) Highest Lowest Recommendation • Minimize risk — Alternative 1 • Original build-out with intermediate rate impact — Alternative 2 • No increase in rates — Alternative 3 4 Questions for Council • Is there any additional information Council would like on this issue? • Are there other alternatives Council would like to see? • Which alternative(s) should staff prepare for Council consideration? 5