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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 08/21/2001 - RESOLUTION 2001-93 ADOPTING A STORMWATER FINANCING AGENDA ITEM SUMMARY ITEM NUMBER: 43 FORT COLLINS CITY COUNCIL DATE: August 21,2001 STAFF: Dave Agee SUBJECT: Resolution 2001-93 Adopting a Stormwater Financing Plan. RECOMMENDATION: Staff recommends adoption of the Resolution. FINANCIAL. IMPACT: Substantial increases in monthly stormwater fees are needed in order to implement a 25-year plan to build out the City's storm drainage system. If the Resolution is adopted, staff will prepare the 2002-2003 budget with a 45% increase in monthly stormwater fees in 2002 and 10% in 2003. For a typical residential customer (8,600 square foot lot with light runoff coefficient) fees would increase from the current level of$8.13 per month to $11.79 in 2002 and $12.97 in 2003. The increases are expected to produce operating revenues in,the Storm Drainage Fund of approximately $9.5 million in 2002 and$10.8 million in 2003. EXECUTIVE SUMMARY: The City's new rainfall standards and work on updating master plans have produced the need to re-examine the City's Stormwater Financing Plan. In 1998, when the current City-wide approach to financing stormwater capital improvements was adopted, existing master plans reflected a cost of approximately $68 million to build out the system. Based on this amount, Council decided to finance the stormwater improvements over a 15-year period using primarily municipal debt financing. Some of the master plans from which this information was derived were nearly 20 years old. Since that time, improved mapping and other planning techniques have revealed drainage problems not previously identified. This, along with the change in rainfall standards, has driven cost estimates for needed improvements in the entire system to approximately $120 million. Due to the increase in costs, it was necessary for staff and the Water Board to look at new stormwater financing options. As options were developed, the following key factors were considered: DATE: August 21,2001 2 ITEM NUMBER: 43 ■ Reasonableness of stormwater fees and overall utility fees ■ Amount of debt financing to be used ■ Lengthening the original timetable ■ Reducing the 100-year protection standard to some lesser amount Based on input from the Water Board, the following stormwater financing alternatives were developed by staff. Alternative 1 —Fifteen Year Build-out Schedule Using a Combination of Municipal Bonds and Pay-As-Yon-Go This alternative meets the original 15-year schedule developed in 1998. Under this alternative, rates would need to increase 70% in 2002 and then 11-12%per year every pear until 2008. It is assumed that the Utility would borrow $30 million in 2002 with a 15-year repayment schedule which, along with some pay-as-you-go funding, would provide the necessary funding to complete the projects. Staff has a real concern about the ability to do a good job and complete these projects within the remaining 13-year time-frame. Alternative 2—Fifteen Year Build-out Schedule Using Pay-As-You-Go This alternative also meets the original 15-year schedule. Under this alternative, rates would need to increase 140% in 2002 and another 10% in 2003 to accumulate enough cash flow to complete the projects within the 15-year period. 3% increases would also be needed in each of the years 2009 through 2011. No more borrowing would take place beyond what has already been done. The same concern about the ability to get the projects done properly within the alloted time-frame also applies. Alternative 3—Twenty-Five Year Schedule Using Municipal Bonds This alternative extends the build-out schedule by 12 years and relies mostly on debt financing to construct the improvements. Under this approach, rates would need to increase 5-6% per year every year from 2002 through 2018 (a 17-year period) before finally leveling off. The biggest drawback to this scenario is that debt payments would continue another 20-years beyond completion of the improvements. In addition, debt service payments would constitute approximately 66%of the total operating budget for several years. Alternative 4—Twenty-Five Year Schedule Using Pay-As-You-Go This alternative also extends the build-out schedule by 12 years, but relies exclusively on pay-as- you-go financing from 2002 forward. Under this approach, rates would need to increase 40% in 2002, then by an average of about 7% per year from 2003 through 2008. This is the alternative preferred by staff and the Water Board because: (1) it eliminates reliance on debt and the related obligation of the City many years into the future; (2) the impact on fees is dramatic at first, but then levels off; (3) fees are reduced dramatically coincident with the completion of the projects; and(4) fee amounts are high but not unreasonable in relation to costs. DATE: August 21,2001 3 ITEM NUMBER: 43 Council's Preferred Alternative At the May 22 Study Session, Council directed staff to present Alternative 4 with some modifications for Council consideration. Council generally favored the pay-as-you-go approach to stormwater financing in order to reduce the City's reliance on debt financing for these improvements. However, Council expressed a desire to see the City move ahead and make some significant progress on getting the highest priority improvements done in the next few years. This was based on concern that the longer the City waits to complete the improvements, the more likely significant damage to persons and property could result from flood events. Based on this direction, staff recommends borrowing $15 million in 2002 to "jump-start" the twenty-five year improvement program and then proceeding with a pay-as-you-go approach to finishing the rest of the improvements. As mentioned above, this approach requires a 45% increase in fees in 2002 and 10% in 2003. Future monthly fee increases are expected to approximate those outlined in Alternative 4, but could change somewhat depending on the final costs of the improvements, growth in new customers added to the system, and the future cost of operating and maintaining the system. As was mentioned at the Study Session, the pay-as-you- go approach also gives the City the flexibility to modify the priority, timing, and scope of future projects if deemed desirable or necessary. RESOLUTION 2001-93 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROVING A STORMWATER FINANCING PLAN WHEREAS,on October 6,1998,the City Council adopted on second reading Ordinance No. 168, 1998, amending Chapter 26 of the Code of the City of Fort Collins relating to the fees of the Stormwater Utility,such that the monthly stormwater fee established in Section 26-513 of the City Code would be imposed on a uniform and city-wide basis for the purposes of operating,maintaining, and improving existing stormwater facilities and for the purposes of designing, acquiring right-of- way for, and constructing future stormwater facilities; and WHEREAS,on March 16, 1999,the City Council adopted on second reading Ordinance No. 42, 1999,amending the"Stone Drainage Design Criteria and Construction Standards"by revising the rainfall intensity duration curve graph;and WHEREAS,the modification of the rainfall intensity curve graph,together with improved mapping and other planning techniques used to develop updates to the master drainage plans for various stormwater basins in the city, are expected to result in additions and modifications to previously recommended and planned stormwater capital improvements; and WHEREAS, the additional or modified stormwater capital improvements expected to be implemented throughout the city as a result of these developments will cost substantially more than the improvements anticipated in 1998 at the time of adoption of a 15-year plan for financing those improvements; and WHEREAS, City staff has recommended a proposed financing plan to reflect the current recommendations for expected stormwater capital improvements,which plan would finance those improvements, at a total estimated cost of $120 million, over a 25-year period (the "Financing Plan"); and WHEREAS, City staff presented its Financing Plan recommendation, together with other possible alternative financing approaches,to the City Council at the Council's May 22,2001,study session; and WHEREAS,the Financing Plan contemplates the borrowing of$15 million to"jump-start" the capital improvement program,and then proceeding with a pay-as-you-go approach to finish those improvements over the course of the 25-year period; and WHEREAS,the Financing Plan would require a 45%increase in the stormwater utility fee base rate set forth in Section 26-514 of the City Code effective in 2002, and an additional 10% increase in that fee effective in 2003, with future increases to be dictated by the final costs of the planned capital improvements, growth in the number of system customers, and the future costs of operating and maintaining the stormwater system; and WHEREAS,the Council has determined that it supports the Financing Plan,as recommended by City staff,and intends to proceed with the necessary budget,appropriation,fee rate change,debt issuance,and other steps necessary to carry out the Financing Plan. NOW THEREFORE,BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS that the Council hereby declares its policy and intent that the capital improvements necessary to carry out approved master plans for the city stormwater system shall be financed and proceed in a manner consistent with a financing plan that will finance those improvements at a total estimated cost of$120 million,over a 25-year period,with an initial borrowing of$15 million and subsequent Stormwater Utility fee increases as necessary to fully fund the design, construction, operation and maintenance of stormwater system facilities consistent with the adopted storm drainage master plans for the city,and otherwise consistent with the terms of this Resolution,subject to the adoption by the Council of such ordinances as may be required to cant' out said financing plan. Passed and adopted at a regular meeting of the City Council held this 21 st day of August, A.D. 2001. Mayor ATTEST: City Clerk Alternative 1 --Fifteen Year Schedule Using Municipal Bonds Meets the original 15-year schedule 70% rate increase in 2002 Average rate increases of 11-12% per year from 2003 - 2008 By 2008, monthly fees for a typical residential customer would be $26.00 (compared to current $8.13 City of Port Collins Utilities Graph of Alternative 1 $30.00 $25.00 - - --- - - 3 $20.00 ---- - - -- - -- E $15.00 - - -- - - - -- 15 Ye a r De bt s Cc: $10.00 - - --- — $5.00 - - $- _ _O O O O T r r r T- _" " CV CV C j N c%j " {%j C4 c%J N 04 N O C J Year City of Fort Collins Utilities Alternative 2--Fifteen Year Schedule Using Pay As You Go Meets the original 15-year schedule 140% fee increase in 2002 10% fee increase in 2003 3% fee increases in 2009-2011 By 2011, monthly fees for a typical residential customer would be $23.00 (compared to current $8.13 City of Fort Collins Utilities 0 . 0 Graph of Alternative 2 $30.00 $25.00 C o $20.00 -- E $15.00 - - --- —- — 15 Ye a r P AYG s o $10.00 $5.00 -- ---- - - $- _ _ _ O O O O O T T T T N N N N N N N N N N O N N N N N N N N N N Year City of Fort Collins Utilities Alternative 3--Twenty Five Year Schedule Using Municipal Bonds 6% fee increases from 2002 - 2007 5% fee increases from 2008 - 2018 By 2018, monthly fees for a typical residential customer would be $20.00 (compared to current $8.13 City of Fort Collins Utilities Graph of Alternative 3 $30.00 $25.00 - - c o $20.00 -- - -- - - - E .$1500 � -- — - -- 25 YearDebt C. Cc $10.00 --- --- -- - $5.00 $- _ O CD O O O r co T r T7 N N N N N CD N N co NM n N d'N N N N N N N N N N Year City of Fort Collins Utilities Alternative 4--Twenty Five Year Schedule Using Pay As You Go 3Mfi• I . 40% fee increase in 2002 - A • . 5-10% fee increases from 2003 - 2009 By 2009, monthly fees for a typical residential customer would be $16.00 (compared to current $8.13) City of Fort Collins Utilities 0 Graph of Alternative 4 $30.00 $25.00 -- a $20.00 E 11 $15.00 — - --- -- -- -- -- - - - - -- 2 5 Ye a r P AYG C. E $10.00 - - $5.00 - $- O p p p p *' r co r r T7 N N N N N a N N N N N N N N N N N N N N N Year I City of Fort Collins Utilities Currently Proposed Alternative--Twenty Five Year Schedule Using $ 15 Million Additional Debt in 2002, Then Pav=As- You -Go 45% fee increase in 2002 10% fee increases from 2003 - 2004 6-7% fee increases from 2005-2008 By 2008, monthly fees for a typical residential customer would be $18.00 (compared to oft current $8.13) City of Fort Collins Utilities 0 Graph of Current Alternative $30.00 $25.00 o $20.00 E $ 5.00 - --- - - - Current Alte m a tive s i cc $10.00 -- - - $5.00 - - - -- - - $- � r` o co to m c� u7 co CD cmCD N cli N N N N CO N N N Year City of Fort Collins Utilities Comparison of Stormwater Financing Methods $30.00 $25.00 --- - - C ,00015 YearDebt o $20.00 -- --. - - - - - E • . 15 YearPAYG $15.00 - - - - - - - . 25 YearDebt $�0.00 - - - - .25 YearPAYG - --- �Cutre nt Ahe ma tive $5.00 nr Q O o T N N N N N N N O N N O N N Year City of Fort Collins Utilities • s s