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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/01/2012 - SECOND READING OF ORDINANCE NO. 033, 2012, AMENDINDATE: May 1, 2012 STAFF: John Phelan Mike Beckstead AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 7 SUBJECT Second Reading of Ordinance No. 033, 2012, Amending Chapter 26 of the City Code to Allow for On-Bill Utility Financing. EXECUTIVE SUMMARY This Ordinance, unanimously adopted on First Reading on April 17, 2012, revises language in Chapter 26 of the City Code to enable Utilities to provide financing and on-bill servicing of loans for energy efficiency, water efficiency and renewable energy projects. Utilities is proposing to pilot a new program element for 2012, providing on-bill financing 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. The primary goal of the on-bill financing pilot is to facilitate more efficiency upgrades in the residential sector. These upgrades reduce our need for future energy resources, reduce our environmental footprint, promote local economic health by investing in our built environment and improve the health, comfort and safety of our homes. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. ATTACHMENTS 1. Copy of First Reading Agenda Item Summary - April 17, 2012 (w/o attachments) COPY COPY COPY COPY ATTACHMENT 1 DATE: April 17, 2012 STAFF: John Phelan Mike Beckstead AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 24 SUBJECT First Reading of Ordinance No. 033, 2012, Amending Chapter 26 of the City Code to Allow for On-Bill Utility Financing. EXECUTIVE SUMMARY This Ordinance revises language in Chapter 26 of the City Code to enable Utilities to provide financing and on-bill servicing of loans for energy efficiency, water efficiency and renewable energy projects. Utilities is proposing to pilot a new program element for 2012, providing on-bill financing 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. The primary goal of the on-bill financing pilot is to facilitate more efficiency upgrades in the residential sector. These upgrades reduce our need for future energy resources, reduce our environmental footprint, promote local economic health by investing in our built environment and improve the health, comfort and safety of our homes. Council approved a budget exception in fall 2011 for the 2012 budget to provide $300,000 for on-bill financing, subject to bringing the necessary changes in the City Code and additional details of the pilot program. Funding for subsequent years will be addressed through the Budgeting for Outcomes process. BACKGROUND / DISCUSSION Policy Alignment The proposed 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 will be 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. Specific Council Policy references: • Development of On-Bill Financing is a near-term priority action item (#35) within Plan Fort Collins. • Energy Policy objectives which align with On-bill Financing include: N Promote sustainable practices in homes and businesses by supporting increased efficiency in existing buildings. N Strive to invest climate improvement monies locally in programs that have long-term positive impacts. History Fort Collins Utilities has offered the Zero Interest Loan Program (ZILCH) since the early 1980s. The Program was very successful for many years. However, in recent years 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. The On-Bill Financing Program will supersede 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, will be continued under a revised administrative model that is currently being developed. Home Efficiency Program Description Utilities began offering the Home Efficiency Program to customers in 2010, with a goal of providing a comprehensive and best practices approach to improving the performance of existing homes. The Home Efficiency Program elements guide homeowners with: COPY COPY COPY COPY April 17, 2012 -2- ITEM 24 • 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” Since January 2010, the Home Efficiency Program has: • Completed over 1,100 audits • Supported efficiency improvement projects in over 375 homes • Trained over 100 individuals from 40 contracting companies • Received ratings from customers of over 95% “extremely satisfied” with the audit, contractor and rebate aspects of the Program The On-Bill Financing Program will be integrated into the Home Efficiency Program and provide the financing mechanism for homeowners to implement recommendations from the audit using the established contractors and installation standards of the Home Efficiency Program. Pilot Program Summary The objective of the On-Bill Financing Program element is to increase the number of residential efficiency and renewable energy projects by addressing the up-front cost barrier via on-bill financing. Key aspects of the Program include: • 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 and wind) • Direct Program expenses will be recovered via fees and interest rates • On-Bill Financing will replace the existing Zero Interest Loan Program. The proposed Program is based on selecting best practices from on-bill programs in Kansas, Kentucky, South Carolina and Oregon and loan parameters from a successful Fannie Mae and Pennsylvania energy improvement loan program. Together with the proven components of Fort Collins Home Efficiency Program, an On-Bill Financing Program element will further support customers who choose to improve the efficiency of their homes. Pilot Program Details Description Details Customer eligibility Energy projects – Utilities electric customer Water projects – Utilities water customer Project eligibility Home Efficiency Program • 23 types of projects based on rebate categories http://www.fcgov.com/utilities/residential/conserve/energy-efficiency/home-efficiency- program/rebates Renewable energy rebate requirements • http://www.fcgov.com/utilities/residential/conserve/renewables/solar-rebates Water supply line replacement/repair (similar to Zero Interest Loan Program) Not carried over from Zero Interest Loan Program • Air quality projects, high efficiency clothes washers COPY COPY COPY COPY April 17, 2012 -3- ITEM 24 Description Details Rental properties Owner is applicant and note holder Owner options for payment mechanism: • Owner receives separate loan payment bill from Utilities, or • Tenants may make payments depending on lease type and if utility account is in tenant’s name (requires notification and acknowledgement by tenant) Applicant qualification Varies with loan amount and credit score (2 tiers) • Utility bill payment history • Credit score • Income Loan details Amount: $1,000 to $15,000 Term: 3 to 10 years Interest: prime plus 2-5% Application fee ($25) Origination fee ($150) Risk mitigation and security Chapter 26 utility service – permanent lien and disconnect provisions Recorded lien (provides notification for title search) Loan qualification track record Payments and Payoff Payments on utility bill Payoff on loan completion or property sale Pilot Program Administration The pilot program will be administered collaboratively by Utilities staff and a third party (to be selected). Due to the state and federal requirements related to mortgage origination, Utilities will seek a third party to complete several of the steps in the loan process. The table below represents a simple overview of steps and likely split of responsibilities between Utilities and the third party. Loan Process Responsible Party Utilities 3rd Party Efficiency Audit required X Application: project approval based on preliminary rebate application and contractor estimate XX Application: Bill payment history, credit score, income X X Project verification X Loan origination X Contractor payment X Set up loan within billing system X Recording of obligation X Loan payment servicing X Pilot Program: Next Steps Utilities has several tasks that need to be completed prior to being able to offer the pilot On-Bill Financing Program to customers. The goal is to be ready to offer this service to customers by June 1. These steps include: • Finalize testing of billing system • Document/finalize internal business processes and 3rd party resources • Document accounting procedures • Integrate financing options with existing Home Efficiency Program outreach and marketing plans COPY COPY COPY COPY April 17, 2012 -4- ITEM 24 On-bill financing has great potential to increase efficiency and renewable energy projects in the community. It is the intent of this 2012 pilot program to prove the concept in Fort Collins with a limited scope of building, project types and available funds. Future expansion of the Program could include the small commercial sector and additional projects types (e.g., expanded water conservation measures, both indoor and outdoor). The structure of the pilot, especially the loan parameters, is based on successful programs with extended track records. This structure was chosen because it is scalable, both in administrative and financial terms. The long-term vision is to attract capital to the loan fund so that the funding is not limited to what Fort Collins Utilities can provide, either through reserves or ratepayer funds. FINANCIAL / ECONOMIC IMPACTS Council approved a budget exception in fall 2011 to provide $300,000 for on-bill financing, subject to bringing the necessary changes in City Code and additional details of the pilot program, which are presented here. This funding for the 2012 pilot is coming from Utilities reserves. Utilities expects to also have available approximately $30,000 in remaining Zero Interest Loan funds from the 2012 adopted budget which can be utilized by the pilot program. Based on 2011 efficiency project rebate requests, it is expected that this level of funding will support 50 to 75 efficiency projects. The On-Bill Financing Program element will add to the positive economic impact of the Home Efficiency Program. There are currently 40 participating contractors working with the Program, with over 100 individuals going through training for best practices installation standards. Retrofit projects in 2011 represented an investment (by homeowners, supported by rebates) of approximately $1.2 million towards improving existing home efficiency. Utility bill savings from improved homes also results in additional spending on local goods and services. 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% (15% 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 reaching these homes in the coming years. The Home Efficiency Program also directly addresses indoor environmental air quality. The audit, installation standards and project verification testing specifically address combustion safety of natural gas appliances and educate homeowners on other aspects of indoor air quality. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BOARD / COMMISSION RECOMMENDATION Staff presented information related to the On-Bill Financing Program and proposed pilot program at the February 27, 2012, meeting of the Council Finance Committee. A summary of the discussion is included as Attachment 2. At its March 1, 2012 meeting, the Energy Board passed a motion unanimously stating the Energy Board endorses expanding the role of Utilities as the financing agent for energy reduction projects. A memo from the Energy Board is included as Attachment 3. COPY COPY COPY COPY April 17, 2012 -5- ITEM 24 At its March 15, 2012 meeting, the Water Board unanimously voted to endorse the proposed pilot program. An excerpt from the unapproved Water Board meeting minutes is included as Attachment 4. PUBLIC OUTREACH Staff met with representatives from the Community for Sustainability, Fort Collins Sustainability Group and other community stakeholders on March 5, 2012 to receive feedback on utility financing in general and the proposed pilot program. Staff has discussed the pilot program with several community members who are rental property owners and property managers, seeking feedback related to the Program in general and the provisions for accommodating rental properties in particular. Notice of the proposed change to City Code to include this type of program was published in the Coloradoan on March 18, 2012, and a mailing was sent to City electric customers outside of the city limits. ATTACHMENTS 1. Council Finance Committee minutes, February 27, 2012 2. Water Board minutes, March 15, 2012 3. Energy Board memo, April 5, 2012 4. Powerpoint presentation ORDINANCE NO. 033, 2012 OF THE COUNCIL OF THE CITY OF FORT COLLINS AMENDING CHAPTER 26 OF THE CODE OF THE CITY OF FORT COLLINS TO ALLOW FOR ON-BILL UTILITY FINANCING WHEREAS, Utilities has proposed to pilot a new program element for 2012, providing on- bill financing for residential customers participating in the Home Efficiency Program and the Solar Rebate Program, and for customers who need to repair or replace a water supply line (the “On-Bill Utility Financing Program”); and WHEREAS, the primary goal of the On-Bill Utility Financing Program pilot is to facilitate more efficiency upgrades in the residential sector in order to reduce the need for future energy resources, reduce the community’s environmental footprint, promote local economic health by investing in the built environment, and improve the health, comfort and safety of homes in the Fort Collins community; and WHEREAS, in the fall of 2011, the City Council approved a budget exception for the 2012 budget to provide $300,000 for the On-Bill Utility Financing Program, subject to bringing the necessary changes in the Code and additional details of the pilot program; and WHEREAS, funding for subsequent years will be addressed through the Budgeting for Outcomes process; and WHEREAS, the proposed pilot On-Bill Utility Financing Program supports the policy goals of Plan Fort Collins, the Climate Action Plan, Energy Policy and Water Conservation Plan; and WHEREAS, the program will be 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; and WHEREAS, Fort Collins Utilities has offered the Zero Interest Loan (ZILCH) program since the early 1980s, but after many years of success, in recent years the program has seen relatively little activity; and WHEREAS, in order to update the model for providing this type of support to residential customers, staff has proposed that the On-Bill Utility Financing Program replace the ZILCH program for Utilities-funded loans; and WHEREAS, the Council has determined that it is desirable to establish an appropriate range of interest rates for loans in the On-Bill Utility Financing Program, while providing some flexibility for administration of specific loans based on administrative procedures and standards to be adopted by the Financial Officer pursuant to existing authority under Section 26-720 of the City Code; and WHEREAS, on March 1, 2012, the Energy Board voted unanimously to recommend expansion of the role of Utilities as the financing agent for energy reduction projects, and on April 5, 2012, the Energy Board voted unanimously to recommend adoption of the proposed Ordinance; and WHEREAS, on March 15, 2012, the Water Board voted unanimously to recommend the adoption of the proposed On-Bill Utility Financing Program; and WHEREAS, in accordance with the foregoing, the Council is adopting revisions to Chapter 26 of the City Code, as set forth herein. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That, for the reasons stated above, the City Council hereby finds and determines that the On-Bill Utility Financing Program as described herein will be for the betterment of the affected Utilities, and will be beneficial to the ratepayers of those Utilities. Section 2. That Section 26-129 of the Code of the City of Fort Collins is hereby amended by the addition of new subparagraphs (f) and (g) which read in their entirety as follows: Sec. 26-129. Schedule D, miscellaneous fees and charges. . . . (f) The interest rate for water service-related loans shall be no less than the most current U.S. prime lending rate at the time of loan origination plus two percent (2%) and no more than the most current U.S. prime lending rate at the time of loan origination plus five percent (5%), per annum, with the interest rate for each loan to be set in accordance with the administrative rules and regulations of the Financial Officer pursuant to §26-720. (g) Loan-related fees for water service-related loans shall be as follows: (1) For loan application: $25.00 (2) For loan origination: 150.00 Section 3. That Section 26-130 of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-130. Agreements for special water services. (a) Special services or complex service arrangements that are beyond those required for basic water service may be arranged by a written services agreement which the Utilities Executive Director may negotiate and enter into on behalf of the water utility. Said agreement shall establish the terms and conditions for any such special services or arrangements and shall incorporate by reference the requirements of this Chapter, as applicable. -2- (b) Special services in the form of loans for water service-related improvements, conservation measures or efficiency enhancements shall be documented on forms determined by the Utilities Executive Director and the Financial Officer. Any such loans shall be made consistent with the applicable program requirements, credit and risk standards, and interest rate provisions as set forth in this Article and in the administrative rules and regulations adopted by the Financial Officer pursuant to § 26-720. Obligations for repayment of any such loans are subject to the provisions of Article XII of this Chapter. (c) Any special services agreement modifying the rates, fees or charges for said services from those set forth in this Article shall be subject to approval by the City Council in accordance with § 6 of Article XII of the Charter. Section 4. That Section 26-289 of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-289. Miscellaneous fees and charges. The following is a schedule of miscellaneous fees and charges: Description Amount (1) Connection fees and service charges Fees shall be set forth as in § 26- 712(b) (2) Industrial discharge permits a. Administration $76.00 annually b. Surveillance Determined for each user annually, based on direct cost plus 15% indirect costs, billed monthly (3) Laboratory support services Determined on a case-by-case basis based on direct cost plus 15% indirect costs (4) Materials and labor provided by City Determined on a case-by-case basis based on direct cost plus 15% indirect costs (5) Charges for disposal at the Fort Collins Regional Sanitary Waste Transfer Station: a. Septic tanks, vaults, privies, -3- portable toilets: Generated within Larimer County $0.071 per gallon Generated outside Larimer County $0.108 per gallon b. Recreational vehicle sanitary waste holding tanks: Residential customers of the City of Fort Collins Wastewater Utility No charge for individual disposal at Transfer Station Others $2.35 base fee plus $0.071 per gallon (6) Interest rate for wastewater service-related loans: No less than the most current U.S. prime lending rate at the time of loan origination plus two percent (2%) and no more than the most current U.S. prime lending rate at the time of loan origination plus five percent (5%), per annum, with the interest rate for each loan to be set in accordance with the administrative rules and regulations of the Financial Officer pursuant to § 26-720. (7) Loan-related fees for wastewater service-related loans: a. For loan application: $25.00 b. For loan origination: $150.00 (8) Miscellaneous fees Determined on a case-by-case basis based on direct costs plus 15% indirect costs Section 5. That Section 26-290 of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-290. Agreements for special wastewater services. (a) Special services or complex service arrangements that are beyond those required for basic wastewater service may be arranged by a written services -4- agreement which the Utilities Executive Director may negotiate and enter into on behalf of the wastewater utility. Said agreement shall establish the terms and conditions for any such special services or arrangements and shall incorporate by reference the requirements of this Chapter, as applicable. (b) Special services in the form of loans for wastewater service-related improvements, conservation measures or efficiency enhancements shall be documented on forms determined by the Utilities Executive Director and the Financial Officer. Any such loans shall be made consistent with the applicable program requirements, credit and risk standards, and interest rate provisions as set forth in this Article and in the administrative rules and regulations adopted by the Financial Officer pursuant to § 26-720. Obligations for repayment of any such loans are subject to the provisions of Article XII of this Chapter. (c) Any special services agreement modifying the rates, fees or charges for said services from those set forth in this Article shall be subject to approval by the City Council in accordance with § 6 of Article XII of the Charter. Section 6. That Section 26-464 of the Code of the City of Fort Collins is hereby amended by the addition of a new subsection (p) which reads in its entirety as follows: Sec. 26-464. Residential energy service, schedule R. . . . (p) Loans. Special services in the form of loans for electric service-related improvements, conservation measures or efficiency enhancements shall be documented on forms determined by the Utilities Executive Director and the Financial Officer. Any such loans shall be made consistent with the applicable program requirements, credit and risk standards, and interest rate provisions as set forth in this Article and in the administrative rules and regulations adopted by the Financial Officer pursuant to § 26- 720. The interest rate for such loans shall be no less than the most current U.S. prime lending rate at the time of loan origination plus two percent (2%) and no more than the most current U.S. prime lending rate at the time of loan origination plus five percent (5%), per annum, with the interest rate for each loan to be set in accordance with the administrative rules and regulations of the Financial Officer. Obligations for repayment of any such loans are subject to the provisions of Article XII of this Chapter. Section 7. That Section 26-465 of the Code of the City of Fort Collins is hereby amended by the addition of a new subparagraph (r) which reads in its entirety as follows: Sec. 26-465. Residential demand service, schedule RD. . . . -5- (r) Loans. Special services in the form of loans for electric service-related improvements, conservation measures or efficiency enhancements shall be documented on forms determined by the Utilities Executive Director and the Financial Officer. Any such loans shall be made consistent with the applicable program requirements, credit and risk standards, and interest rate provisions as set forth in this Article and in the administrative rules and regulations adopted by the Financial Officer pursuant to § 26- 720. The interest rate for such loans shall be no less than the most current U.S. prime lending rate at the time of loan origination plus two percent (2%) and no more than the most current U.S. prime lending rate at the time of loan origination plus five percent (5%), per annum, with the interest rate for each loan to be set in accordance with the administrative rules and regulations of the Financial Officer. Obligations for repayment of any such loans are subject to the provisions of Article XII of this Chapter. Section 8. That Section 26-712(b) of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-712. Utility bill and account charges authorized; procedures. . . . (b) The following account and miscellaneous fees and charges shall apply to all City utility customers receiving service pursuant to the terms of Chapter 26, whether within or outside of the corporate limits of the City, except as otherwise expressly stated: Fees and Charges Amount Service connection fee for account with one or more metered services (including nonmetered services for the same account) $19.65 Customer-initiated rate change (after 90 days of new service) 19.65 Service connection fee for account with only nonmetered services (stormwater, wastewater, wind, flat commercial electric, sprinkler clocks, cable towers and floodlights) 10.00 Service fee to reinstate an account to the owner/property manager between tenants 10.00 Meter reading charge, per month, for those customers who request the option of mechanical electric meter and/or a mechanical water meter instead of the standard advanced metering equipment 11.00 per month Turn-off notice fee 10.00 Reconnect fee per service for water or electric 20.00 -6- following disconnection for delinquency Trip charge for special services requested by customer during normal service hours 19.65 After-hours reconnect or after-hours trip charge for special service requested by customer - Water (after 5:00 p.m. weekdays or weekend/holiday) 85.35 After-hours reconnect or after-hours trip charge for special service requested by customer - Electric (after 5:00 p.m. weekdays or weekend/holiday) 85.35 Return item fee (check, electronic fund transfer, credit card, etc.) 25.00 Owner-requested repair disconnect fee, per trip 20.00 Research/document fee per hour 20.00 Interest rate for utility service-related loans: No less than the most current U.S. prime lending rate at the time of loan origination plus two percent (2%) and no more than the most current U.S. prime lending rate at the time of loan origination plus five percent (5%), per annum, with the interest rate for each loan to be set in accordance with the administrative rules and regulations of the Financial Officer pursuant to § 26-720. Loan-related fees for utility service-related loans: a. For loan application: $25.00 b. For loan origination: $150.00 Other miscellaneous charges will be based on direct cost plus fifteen percent (15%) indirect costs. . . . Section 9. That Section 26-720 of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-720. Administrative rules and regulations. The Financial Officer shall formulate and promulgate rules and regulations for the administration of this Article, not inconsistent with the provisions of this Article, with respect to the billing and collection of utility fees and charges, credit and lending -7- standards and rates and administrative practices for utility loan programs, which shall include, but shall not be limited to, efficiency-related conditions on loans for renewable energy development, and other matters relating to the administration of customer accounts. Said rules and regulations may regulate without limitation, the forms and procedures for giving notice to customers; policies for adjusting billed amounts as necessary to correct errors or for administrative efficiency or to achieve equity; procedures for appeals; and procedures for the documentation of liens. Any rules or regulations promulgated by the Financial Officer hereunder shall be effective upon the Financial Officer's filing of the same with the City Clerk. Section 10. That the City Manager is hereby directed to submit a written report to the City Council on or before July 31, 2013, or within thirty (30) days of disbursement of all available loans funds for the On-Bill Utility Financing Program, whichever is earlier, describing the implementation of the provisions of this Ordinance, including, but not limited to, the number of applications received by the City for loans, the amounts disbursed by the City for the loans, the types of improvements for which the loans have been made, and any recommendations as to changes to the program that might make the program more effective. Introduced, considered favorably on first reading, and ordered published this 17th day of April, A.D. 2012, and to be presented for final passage on the 1st day of May, A.D. 2012. _________________________________ Mayor ATTEST: _____________________________ Interim City Clerk Passed and adopted on final reading on the 1st day of May, A.D. 2012. _________________________________ Mayor ATTEST: _____________________________ Interim City Clerk -8-