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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 08/27/2013 - ON-BILL UTILITY FINANCING PILOT UPDATEDATE: August 27, 2013 STAFF: John Phelan Mike Beckstead Pre-taped staff presentation: available at fcgov.com/clerk/agendas.php WORK SESSION ITEM FORT COLLINS CITY COUNCIL SUBJECT FOR DISCUSSION On-Bill Utility Financing Pilot Update. EXECUTIVE SUMMARY The purpose of this item is to provide a Council-requested update on the On-Bill Utility Financing Program after nine months of implementation. Ordinance No. 033, 2012 revised language in Chapter 26 of the Municipal Code to enable Utilities to provide financing and on-bill servicing of loans for energy efficiency, water efficiency and renewable energy projects. The On-Bill Financing Program (OBF) pilot began in November 2012, offering on-bill repayment of loans for residential customers participating in the Home Efficiency Program, the Solar Rebate Program and for customers who need to repair or replace a water supply line. Participation in the program as of August 14, 2013 consists of four completed loans and two loans in the approved/pending process. When the pilot program was approved, Council requested an update at a work session to determine progress. Staff is recommending a number of changes to the structure and terms of the program to position the program for greater activity levels. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Based on the pilot program activity and early lessons learned, does Council continue to support the On-Bill Utility Financing Program? 2. Seek feedback from Council on proposed modifications to the program to enhance its effectiveness. BACKGROUND / DISCUSSION Policy Alignment The pilot On-Bill Utility Financing Program supports the policy goals of Plan Fort Collins, the Climate Action Plan, Energy Policy and Water Conservation Plan. The program is a valuable addition to Utilities’ efficiency and renewable energy programs which foster sustainability through energy and water use reductions, local contractors and investment in the built environment and improved home comfort, health and safety. August 27, 2013 Page 2 History Fort Collins Utilities offered the Zero Interest Loan Program (ZILCH) from the early 1980s until late last year. The program was very successful for many years. However, from 2002 to 2009 the program saw relatively little activity. The recent national mortgage crisis resulted in changes to the requirements for local government entities to be able to originate loans for home improvements. As a result, the Zero Interest Loan Program was suspended in early 2011. The program restarted in fall 2011 under a model where the loans are unsecured. Based on the Home Efficiency Program structure, ZILCH loan activity ramped up from 2010 through 2012. The On-bill Financing Program has superseded the energy and water efficiency aspects of the Zero Interest Loan Program. The air quality related aspects of the Zero Interest Loan Program, with funding from the Environmental Services Department, continues under a revised administrative model. OBF Program Development The OBF program was developed collaboratively by Utilities (Energy Services and Billing), Finance, and City Attorney departments. The program uses the pre-existing standard capabilities of the Utilities billing system. In compliance with federal and state lending rules, customer qualification and loan closing services are provided in partnership with a third party financial partner, EnergySmart Partners LLC. EnergySmart Partners is a subsidiary of the non-profit Funding Partners, a Community Development Financial Institution. Program fees and the interest rate range are defined in Utilities’ residential rate ordinances. The City Finance Department developed a set of rules and regulations for administrative implementation of the OBF program. Home Efficiency Program Description Utilities Home Efficiency Program provides a comprehensive and best practices approach to improving the performance of existing homes. The Home Efficiency Program elements guide homeowners with: • Low-cost audits, which prioritize home improvement measures to address the barrier of “what to do” • Participating contractor lists, which address the barrier of “who to call” • Rebates, which partially address the “first cost” barrier • Installation standards and verification, which address the barrier of “is it done right” • Free energy advisor services in support of customers throughout the process As such, the OBF program has been integrated into the Home Efficiency Program to provide a financing mechanism for homeowners to implement recommendations from the audit in a more comprehensive package than a homeowner could typically afford to pay for with cash. OBF Program Summary The objective of OBF program is to increase the number of residential efficiency and renewable energy projects by addressing the up-front cost barrier. Key aspects of the program include: August 27, 2013 Page 3 • Simple application and approval processes • Financing 100% of project costs • Repayment of loans on the utility bill Specific elements of the program include: • Eligible properties are single family homes and townhomes, both owner occupied and rental properties with the owner as applicant. • Project types are based on existing definitions within utility programs and include energy efficiency (e.g., insulation, furnace, AC, windows), water supply line replacement/repair and renewable energy (e.g., solar PV) Program information is available on the City’s website at fcgov.com/financing. Application information is available on the EnergySmart Partners website at www.vlender.com /c/connieealey/city_of_fort_collins_on-bill_finance.html. The OBF Program Guideline is included as Attachment 1. OBF Program Results Participation in the OBF financing program has been slow, with three loans closed and three approved. The table and charts below show activity levels through August 14, 2013. While the activity for OBF loans has been much less than anticipated, results for the Home Efficiency Program continue to be strong and growing. Since the program started in January 2010, over 775 homes have been upgraded. 168 upgrades have occurred year-to-date in 2013, which is on track to exceed the annual goal of 300 homes. Table 1: OBF Program Activity Summary Description Number Loan Amounts Notes Completed loans 4 $37,853 Approved/Pending loans 2 $19,695 Withdrawn applications 1 $7,681 Completed project with other funds Denied applications 3 $13,000 FICO scores marginally low Analysis of Initial Results The results to date are the tangible outcome of a number of identified factors. The factors are noted in the table below, and come from both quantitative and anecdotal information. August 27, 2013 Page 4 Issue Notes and Potential Changes Contractors have been reluctant to promote the new program to customers. Customers are not asking contractors about the program. • Recent activity points to more contractors participating. As contractors successfully complete the projects using the process, they will become more comfortable promoting the program to customers. • Increased outreach and marketing to customers showing the advantages of using OBF will result in them asking contractors for the OBF program option. See “Next Steps and Recommendations” section below. Terms of the loans appear to have limited customer participation From anecdotal feedback, the interest rate appears to be an issue for some customers as they compare to the record low mortgage rates of the last year. Longer terms will reduce monthly payments where more projects could be cash flow neutral during the repayment period. See “Next Steps and Recommendations” section below. The qualification requirements have limited customer participation To date, denied loans have been based on FICO scores, which were very close to the minimum requirements. Participation in the Green Colorado Credit Reserve (GCCR) may offer an opportunity to expand the qualification requirements. See “Next Steps and Recommendations” section below. Other financing options are available Customers are being offered consumer (unsecured) financing by contractors, who often receive a direct financial benefit. Increased awareness amongst customers OBF program will help to counter sales pitches for other products. Some customers may also take advantage of traditional home equity type of financing opportunities. Next Steps and Recommendations Customer and Contractor Participation: The program will benefit from market awareness on both contractors and customers. • Staff recommendation: Enhanced marketing and outreach to include continuing to provide contractors with updated information on participation, direct program marketing to customers to build awareness and providing energy advisor services which include on-bill finance options. Interest Rates: The current interest rate level is set annually by the City Finance Officer, within the boundaries established in the residential rate ordinance. The current range is 5.25% to 7.25% (indexed to the “prime rate” plus 2-5%). August 27, 2013 Page 5 • Staff recommendations: N Revise the rate ordinance to remove the index to prime, replacing it instead with a simple range of 5-10%. Rates would continue to be set annually by the City Finance Officer based on current economic conditions. The proposed change would be included in the utility residential rate ordinance in October 2013. N Offer a single interest rate for all loans, replacing the matrix of qualification tiers and loan terms currently in place to simplify the application process and program marketing. This change can be done administratively. Term: Longer loan terms, up to the maximum of ten years, for all loan amounts will reduce monthly payments where more projects could be cash flow neutral during the repayment period. • Staff recommendation: Allow customers to choose five, seven or ten year terms for all loan amounts. This change can be done administratively. Qualification: As noted in the analysis of initial results, a number of loan applications have been denied due to marginally low credit scores. In the last year, a new program has become available from the Colorado Energy Office, the Green Colorado Credit Reserve (GCCR). GCCR is a loan loss reserve fund, which is available for the OBF Program. In the GCCR, for each loan made by a participating lender, the GCCR will provide a loan loss reserve equal to 15% of the amount of the loan. Losses from loans incurred by Utilities may be recovered from reserves deposited in the GCCR account (up to 100% based on available funds in the reserve). The establishment of this loss reserve account would enable Utilities to make loans to customers who would not qualify without additional credit enhancement. • Staff recommendation: Investigate submitting an application to the Colorado Energy Office for the Green Colorado Credit Reserve (GCCR), including review by the City legal and finance departments. Subsequent to the completed application, reduce the minimum qualifying credit score to 620. Revise the rules and regulations to include limits on the dollar value of loans within the lower credit zone, tied to the availability of the GCCR loan loss reserve. FortZED Meter Based Loan Pilot Even though the current OBF program is in its infancy, there is interest in leveraging OBF for a pilot program related to FortZED. The FortZed Steering Committee is working with Rocky Mountain Institute to create an implementation plan that can help FortZed and the City reach their energy goals, with a specific focus on the electricity sector. This is a complex problem, involving multiple stakeholders, different types of initiatives, and multiple potential outcomes. Staff is in the very early stages of creating a plan that can help FortZed, the City, and the community to: • Create local jobs • Invigorate additional economic growth • Drive local energy independence and improved reliability • Improve building and living standards • Distinguish Fort Collins as a leader in clean technology and green energy August 27, 2013 Page 6 • Create clean supplies of energy from distributed and utility sources • Improve energy efficiency to allow continued growth while minimizing additional utility infrastructure One component of the strategy may be to create a mechanism whereby energy loans would be “attached” to the meter (or premise) rather than to an individual or person. This model could have a great impact on rental homes in Fort Collins, as the cost of upgrades is paid for by the tenants who are receiving the benefits. However, it is a significant issue to obligate future utility customers to bill charges which were made previous to their living at a particular premise. FINANCIAL/ECOMOMIC IMPACTS One important change has been implemented related to the underlying capital funding of the OBF program. Council originally approved a budget exception in fall 2011 to provide $300,000 for on- bill financing, subject to bringing the necessary changes in the Code and additional details of the pilot program, which were completed in fall 2012. In addition, $500K annually was allocated in the 2013 – 2014 budgeting for outcomes process. Use of these additional funds was contingent on the one year review. Upon further discussion with the Finance Department, it was determined that loan funds should be handled as a “balance sheet transaction.” Compared to a typical City or Utility process, no funding is being “expended.” The funds are moved from reserves to accounts receivable. As a result, the 2014 funding was removed via the budget revision process. Ultimately, the level of available funding will be determined by a maximum level of funds to be outstanding in accounts receivable for this purpose. Staff’s recommendation is that the program continue with a maximum outstanding loan amount of $800,000. When the program nears that ceiling amount, staff will return to Council to request additional balance sheet funding. ENVIRONMENTAL IMPACTS The On-Bill Financing Program supports the City’s goals for energy use reduction through efficiency, carbon emissions reduction from improving the efficiency of the built environment and increasing local renewable energy production. Homes are seeing 5-50% (10% on average) energy reductions as a result of improvements made through the Home Efficiency Program. The opportunity for on-going participation in the program is many thousands of homes. The On-bill Financing program is expected to be a very effective approach to making a more substantial improvement to a larger number of existing homes in the coming years. The Home Efficiency Program also directly addresses indoor environmental air quality. The audit educates homeowners on what steps to take to improve their indoor air quality. And the installation standards and project verification testing specifically address combustion safety of natural gas appliances, and reducing infiltration of contaminated air into the living space from garages, attics and crawl spaces. August 27, 2013 Page 7 STAFF RECOMMENDATIONS • Increase marketing and communication efforts to both customers and participating contractors. • Revise the rate ordinance to remove the index to prime, replacing it instead with a simple range of 5-10%. Rates would continue to be set annually by the City Finance Officer based on current economic conditions. The proposed change would be included in the utility residential rate ordinance in October 2013. • Offer a single interest rate for all loans, replacing the matrix of qualification tiers and loan terms currently in place to simplify the application process and program marketing. This change can be done administratively. • Allow customers to choose five, seven or ten year terms for all loan amounts. This change can be done administratively. • Set total loans on the balance sheet to $300K from 2012 and $500K from 2013 for a total limit of $800K in loans. • Investigate submitting an application to the Colorado Energy Office for the Green Colorado Credit Reserve (GCCR). Subsequent to successful review and completion of the participation agreement, reduce the minimum qualifying credit score. • As part of the FortZED initiative, consider development for a meter or premise based loan program whereby loans would be transferable to future customers. ATTACHMENTS 1. On-Bill Finance Product Guideline 2. Powerpoint presentation 1 Revised 03/15/2013 EnergySmart Partners LLC Product Guideline City of Fort Collins Utilities On-Bill Financing Program Eligible Borrowers: Applicants who own residential property located in Fort Collins that is to be improved by the loan and are current City of Fort Collins electric utility customers (for qualified energy efficiency and renewable energy improvements) or water utility customers (for qualified water improvements). For energy efficiency and renewable energy improvements, customers must have scheduled or received a City of Fort Collins Home Efficiency Audit. Eligibility of Utility customers to participate is based on credit scores and stated or verified income and pursuant to other criteria and procedures adopted in administrative rules and regulations adopted by the City of Fort Collins Chief Financial Officer. Utilities reserves the right to also base qualification on utility bill payment history (reviewed by City of Fort Collins Utility staff), All applicants claiming ownership interest in the subject property must be natural persons (no legal entities) and provide a single valid Social Security Number or Individual Tax Identification Number (ITIN), consistent among all forms of income verification. Further eligibility defined within a classification table shown below on page three. Loan Amount Minimum loan amount is $1,000; Maximum loan is $15,000 (per utility premise). Loans can be up to 100% of eligible project costs within loan limits stated above. Rebates Home Efficiency Program rebates are processed and distributed separately from the On-Bill Finance loan. The rebate check is sent directly to the homeowner by Fort Collins Utilities staff. Property Type: Eligible properties are single family dwellings or townhomes. Residential rental properties are eligible with loan application from the owner, a natural person. A loan secured by a deed of trust on a rental property will be billed directly to the person who obtained the loan. Collateral: Loans will be secured by a deed of trust recorded with Larimer County. Electric service may be discontinued for nonpayment of past-due accounts directly or indirectly related to the provision of electric service, in which event written notice shall be given in accordance with Section 26-713 of the Fort Collins Municipal Code and any Council-approved service rules and regulations. Interest Rate: Fixed interest calculated at time of application based upon a classification table shown below on page four. Interest rates to be revised annually by the City Financial Officer. Income Threshold: Loan terms may depend upon verified household income though no maximum income limit is imposed for program eligibility. Debt Ratio: When borrower debt-to-income ratio requires verification, proposed loan repayment amount combined with all other obligations of the borrower shall not exceed standards defined by borrower classification table shown below on page three. Repayment: Monthly payment of principal and interest will be collected by the City of Fort Collins Utility Billing Office as a line item on the borrower’s City of Fort Collins monthly utility bill. Escrow for hazard insurance and property taxes are not provided by EnergySmart Partners LLC (ESP) and remain the sole responsibility of the home owner. ATTACHMENT 1 2 Revised 03/15/2013 Term: Loan amounts of $1,000 to $2,500 are limited to a 60 month loan term, loan amounts of $2,501 to $7,500 will mature within 84 months or less, and loan amounts of $7,501 to $15,000 will mature within 120 months or less; with all outstanding principal, interest and other sums due. Loan Payoff: Loans will be closed after receipt of all principle and interest. Loans must be paid off at time of property sale or refinancing of the property first mortgage. Use of Funds: Permitted capital improvement projects shall enhance the health, safety, and energy or water efficiency of the home, including installation of renewable energy systems as allowed by the City of Fort Collins Utilities On-Bill Financing Program administrator. A list of qualifying energy improvements and the rebates available can be found by accessing the links on the Home Efficiency Program (HEP) home page: www.fcgov.com/homeefficiency. A list of qualifying renewable energy projects and the rebates available can be found by accessing the links on the Solar Rebates home page: www.fcgov.com/utilities/residential/conserve/renewables/solar-rebates. Water service line repairs qualify as described on the service line repair page: www.fcgov.com/utilities/what-we-do/water/water-distribution/service-line- repairs. Loan Fees: A one-time non-refundable application fee in the amount of $25 shall be due and payable upon submittal of all City of Fort Collins Utilities On-Bill Financing Program loan applications. An additional origination fee in the amount of $150 is due to ESP at time of loan settlement. Customer may choose to pay the origination fee at closing or add the amount to the loan principle (not to exceed loan maximum). Public recording and any other third party service fees are the responsibility of the borrower and assessed at the time of loan settlement. Origination Procedures Application: EnergySmart Partners LLC, a wholly-owned subsidiary of Funding Partners for Housing Solutions, Inc. collectively referred to as “ESP”, will receive completed residential loan applications from applicants through ESP’s website: www.energy-smart-partners.com, a signed Authorization to Release Information and supporting documentation. A credit report and processing fee of $25 shall be due ESP at time of application and paid by applicant on ESP website. Processing: ESP will order third party verifications including credit report(s), the property owner and encumbrances report, evidence of hazard insurance and the City of Fort Collins Utility estimated rebates. Under normal circumstances and if ESP has received all required information, an applicant can expect receive information about whether the applicant is eligible to receive a loan within 24 hours or one-business day. Confirmation of credit determination, loan terms and remaining documentation requirements, as applicable, will be delivered in electronic format to the applicant for review and acceptance. Pre-Settlement: ESP will prepare loan closing documents that shall include a Lien Waiver & Completion of Work Affidavit wherein the borrower must acknowledge the amount paid to the project contractor upon loan settlement. The project contractor is required to acknowledge that all work is or will be completed according to the Fort Collins Utilities program standards and in a good and workmanlike fashion within the agreed-upon timeframe. The project contractor is required to verify that all suppliers and/or subcontractors for the project are paid in full with no further recourse to the borrower, and furnish lien waivers to that effect. The building permit for the project must have received final approval from the City of Fort Collins Building Department and the project work must be approved by the HEP inspectors and staff prior to loan closing. 3 Revised 03/15/2013 Fees Collected: Application, public recording and other third party fees shall be assessed and detailed within a settlement statement prepared by ESP. Borrower must pay the loans fees at time of settlement. Settlement: ESP will present all loan documents to borrower at the time of loan settlement. Each Borrower must acknowledge receipt of a standard Colorado Notice of Rescission, allowing cancellation of the deed of trust within three business days of settlement. The deed of trust documents must be signed in the presence of a notary public, which will be arranged between ESP and the borrower. Funding: Upon receipt and acceptance of completed and signed Lien Waiver & Completion of Work Affidavit and HEP Rebate Application forms from the project contractor(s) and, if applicable, subcontractors, ESP shall release loan proceeds directly to project contractor(s) upon confirmation that all work is complete. Dependent upon the scope of the proposed project, ESP will disburse funds to all applicable contractors and will disburse payment directly to the borrower for any deposits the borrower has paid to the contractor upon receipt of a paid receipt. Execution of a release of lien affidavit, and a completed Rebate Application sent to Fort Collins Utilities, is required from all applicable contractors prior to each distribution of loan proceeds. Disbursement of funds is prohibited prior to expiration of the three business day rescission period. Post Closing: ESP shall retain all original documents and permanent loan file, record deed of trust documents and UCC filings as necessary, process and issue subsequent project draw requests, and issue release of collateral obligations upon final satisfaction of the Note. Copies of all executed loan documents will be provided to City of Fort Collins after loan settlement. Loan Qualifications: In order to obtain a loan from ESP under the City of Fort Collins Utilities On- Bill Financing Program, a borrower must meet the following requirements: Credit Metrics Tier 1 Tier 2 Minimum FICO (Credit Score) • Each borrower must meet the minimum FICO score • If there are multiple borrowers, the lower the score (regardless of income) must be used for qualification • 680 if salaried (or fixed income) • 720 if self- employed less than 2 years • 640 if salaried (or fixed income) • 680 if self- employed more than 2 years • 720 if self- employed less than 2 years • Utility Bill History (if available, reviewed by Fort Collins Utility staff) • 6 months timely payments • 12 months timely payments Bankruptcy, Foreclosure, 4 Revised 03/15/2013 Interest Rate and Loan Term Schedule: Tier 60 Month Term ($1,000 - $2,500) 84 Month Term or less ($2,501 - $7,500) 120 Month Term or less ($7,501 - $15,000) 1 5.25% 5.75% 6.25% 2 6.25% 6.75% 7.25% The Interest Rates above have Annual Percentage Rates (APR’S) that may range as low as 5.47% to as high as 14.32% based on the borrower’s credit worthiness, loan amount, term and income verification type, and is subject to our credit qualifications. Interest Rates and APR’s are subject to change without notice. Income Verification Requirements: Salaried Employees, Pension, SSI Income, etc. Self Employed Stated Income (No Verification Required) • When the loan amount is less than $5,000 • Or any loan amount if the FICO is greater than 680 Income Verification Required • When the loan amount is greater than $5,000 • And the FICO is less than 680 • One pay stub with YTD earnings dated within 30 days of the application or award/benefit letter for SSI or pension showing income amount, payment frequency and start and end dates. Rental income verified by lease or Schedule E from tax return. NOTE: Any “other” income (not primary income), which is being used to qualify the loan, must be verified. Stated Income (No Verification Required) • When the loan amount is less than $5,000 • Or any loan amount if the FICO is greater than 680 Income Verification Required • When the loan amount is greater than $5,000 • And the FICO is less than 680 • Most recent federal income tax return (first 2 pages of 1040) plus Schedule C if applicable. Rental income verified by lease or Schedule E from tax return. NOTE: Any “other” income (not primary income), which is being used to qualify the loan, must be verified. Maximum Debt to Income Ratio Requirements (“Max DTI Ratio”): Debt to Income Ratio Tier 1 Tier 2 List Total Monthly Obligations • Any loan which has a remaining term of less than 6 months may be excluded from the calculation • When revolving accounts do not show a minimum payment use the greater of 1% per month or $10 • Real Estate taxes and homeowners insurance (if not included in the mortgage payment) must be included in ratio • Reductions to the Borrower’s monthly Utility Obligations derived from improvements may be 1 1 On-Bill Utility Financing Program Update Fort Collins City Council Work Session August 27, 2013 2 Overview • On-Bill Utility Financing Program (OBF) review: – History and development of the program – OBF program parameters – Activity over the first nine months – Analysis of program results – Recommendations for program modifications Council requested program review during first year after approving code changes in April 2012. ATTACHMENT 2 2 3 • Based on the pilot program activity and early lessons learned, does Council continue to support the On-Bill Utility Financing Program? • Seeking feedback from Council on proposed modifications to the program to enhance its effectiveness. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 4 • Increase the number and scope of residential efficiency and renewable energy projects by addressing the up-front cost barrier via on-bill financing – Simple application and approval processes – Finance 100% of project cost – Repayment of loans on the utility bill On-Bill Financing “in a nutshell” 3 5 Objectives • Add financing to projects supported by existing Utilities programs • Structure program such that direct expenses are recovered through fees and interest rates Scope • Single family and townhomes • Owner occupied and rental properties • Project types – Energy efficiency (insulation, windows, heating, cooling) – Renewable energy – Water supply line replacement/repair Program Objectives and Scope 6 • Financing coordinated with the existing Home Efficiency Program – Low-cost audits, “what to do” – Contractor list, “who to call” – Installation standards and verification, “do it right” – Rebates partially address “first cost” Program Elements 4 7 • Utilities Roles – Approve customer and project eligibility – Approve project completion and rebates – Enter loan information and process payments on bills – Program marketing and outreach •3rd Party Partner Roles – Customer credit qualification and communication – Loan closing services – Recording with County records Program Structure 8 • OBF “available” December 1, 2012 • Program outreach started January 1, 2013 * All were energy efficiency projects Results to Date Description Number* Loan Amounts Notes Completed loans 4 $37,853 Approved/Pending 2 $19,695 Withdrawn applications 1 $7,681 Completed project with other funds Denied applications 3 $13,000 Credit scores low 5 9 • Slow start, but ramping up • Process working well – Applications – Project payments to contractors – Loan repayments on utility bill Analysis of Results 10 • Reasons for slow start – Lack of awareness – Reluctant contractors – Loan terms – Qualification requirements – Other financing options Analysis of Results 6 11 1) Develop market awareness from customers (pull) and contractors (push) • Direct marketing of on-bill financing • Customer and contractor testimonials Staff Recommendations 12 2) Interest rates • Current – Set annually by the City Finance Officer – Range established in utility rate ordinance (prime plus 2-5%) – Rate set by loan term and qualification level • Proposed – Remove the index to prime, replace with range of 5-10% • Change via utility rate ordinance in October 2013 – Offer a single interest rate for all loans • Administrative change via rules and regulations Staff Recommendations 7 13 3) Loan term • Current – Term set by loan amount • Five, seven or ten years • Proposed – Allow customers to choose term of five, seven or ten years • Administrative change via rules and regulations Staff Recommendations 14 4) Qualification requirements • Current – Minimum credit score of 640 • Proposed – Submit application to Green Colorado Credit Reserve from the CO Energy Office to utilize loan loss reserve funding – Revise minimum credit score to 620 • Administrative change via rules and regulations Staff Recommendations 8 15 5) Finance • Set program limit to $800k in outstanding balance sheet loans (based on approved budgets for 2012/2013) • Staff may seek additional approval from Council for additional allowance in the future Staff Recommendations 16 • FortZED developing models for deploying efficiency at scale • Key element would be creation of a mechanism whereby energy loans could be “attached” to the meter (or premise) rather than to an individual or person – Benefit for rental market upgrades – Significant issue to obligate future utility customers Planning Ahead - FortZED 9 17 1. Increase marketing and communication 2. Revise the rate ordinance with a simple range of 5-10% 3. Offer a single interest rate for all loans 4. Allow customers to choose five, seven or ten year terms 5. Submit an application to the Colorado Energy Office for the Green Colorado Credit Reserve; reduce the minimum qualifying credit score 6. Set outstanding loan balance limit at $800k 7. Consider development of a meter based loan program in support of FortZED Recommendations Summary 18 • Based on the pilot program activity and early lessons learned, does Council continue to support the On-Bill Utility Financing Program? • Seeking feedback from Council on proposed modifications to the program to enhance its effectiveness. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 10 19 Questions considered at the underwriter’s discretion List Total Monthly Income Divide Total Obligations by Total Income to determine DTI Ratio Maximum total monthly obligations to total monthly income (Max DTI Ratio). 50% Max DTI Ratio Maximum total monthly obligations to total monthly income (Max DTI Ratio). 45% Max DTI Ratio Repossession None in the last 7 years None in the last 5 years Unpaid Collection Accounts, Judgments, Tax Liens No more than $2,500 No more than $2,500 Loan Amounts $1,000 to $15,000 $1,000 to $15,000 *Loans may be assigned to a different approval tier, be declined or subject to further review if underwriter determines that FICO score or other factors are inconsistent with actual credit and employment profile.