HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 10/28/2014 - FIRST READING OF ORDINANCE NO. 146, 2014, REVISINGAgenda Item 2
Item # 2 Page 1
AGENDA ITEM SUMMARY October 28, 2014
City Council
STAFF
Ellen Switzer, Utilities Financial Operations Manager
Lance Smith, Strategic Financial Planning Manager
Kevin Gertig, Utilities Executive Director
SUBJECT
First Reading of Ordinance No. 146, 2014, Revising Chapter 26 of the City Code Regarding Payments in Lieu
of Taxes and Franchise Fees, and Specifying that the Operation and Maintenance of the Street Lighting
System is an In Kind Payment by the Light & Power Fund in Lieu of Taxes and Franchise Fees.
EXECUTIVE SUMMARY
The purpose of this item is to codify the longstanding City policy and practice whereby the Light & Power Fund
has been responsible for providing municipal street lighting as an in-kind payment to the General Fund as part
of the Electric Utility’s payment in lieu of taxes and franchise fees. The Ordinance also revises the language
related to the Water and Wastewater Funds’ required 6% payment to the General Fund to clarify that this is a
payment in lieu of taxes and franchise fees (as opposed to just a payment in lieu of taxes). This change is
consistent with Article V, Section 23 of the City Charter and with the wording used in City Code to reference
the same fee paid by the Light & Power Fund.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading.
BACKGROUND / DISCUSSION
Prior to 1986 the operation and maintenance costs related to street lighting were paid by the City’s General
Fund. In 1986, City Council determined that the Electric Utility should assume fiscal responsibility for operating
and maintaining the street lighting system. Ordinance No. 095, 1986 deleted the municipal street lighting rate
schedule from the City Code and street lighting costs were no longer billed to the General Fund. The City
Council in 1986 deemed this change to be consistent with the then-current Charter, which stated that the utility
was responsible for the “designing, construction, reconstruction, addition, repair, replacement, maintenance,
supervision, and operation of the water and light plants, and the street lighting system and equipment.” The
Agenda Item Summary presented with Ordinance No. 095, 1986 referenced this expense as an additional
payment in lieu of taxes.
In 1987, voters approved changes to the City Charter which eliminated the specific duties of many
departments. At that time, all references to which department or fund bore the responsibility for street lighting
were removed from the Charter. The Charter change was not intended to change the Electric Utility’s
responsibility for the street lighting system, but rather to remove the specific codified list of duties and
responsibilities for various funds and departments from the Charter to allow more administrative flexibility. The
Charter has been silent on street lighting since 1987.
The Light & Power Fund has maintained fiscal responsibility for the street lighting system since 1986. In
addition, City Council has set the Light & Power Fund’s cash payment in lieu of taxes and franchise fees at 6%
of the Fund’s operating revenues. (The cash payment was increased from 5% in 1989.) The proposed
Agenda Item 2
Item # 2 Page 2
Ordinance codifies the current practice of requiring the Electric Utility to maintain fiscal responsibility for the
operation and maintenance of the street lighting system in addition to payment of taxes and franchise fees. No
changes are proposed for the cash payment of 6% of operating revenues. The Ordinance is consistent with
the direction given by City Council when adopting Ordinance No. 095, 1986 and does not change any current
practice or policy. Since the costs of street lighting have been built into the electric rates since 1986 there will
be no rate impact to rate payers related to the Ordinance.
The Light & Power Fund, Water Fund, and Wastewater Fund each pay 6% of operating revenues to the
General Fund. In the City Code this payment is referred to as a “payment in lieu of taxes and franchise” in the
Light and Power Fund, but as a “payment in lieu of taxes” in the Water and Wastewater Funds. The City
Charter at Article V, Section 23 characterizes the payments as “payment to the general fund in lieu of taxes
and franchise fees”. The omission of the reference to franchise fees appears to have been inadvertent. This
Ordinance also changes the wording in the Water and Wastewater Funds to be consistent with the Charter and
with similar references to the same payments by the Light & Power Fund in the City Code. The Stormwater
Fund is not subject to a payment in lieu of taxes and franchise fees, so no corresponding update is required to
that portion of the City Code.
FINANCIAL / ECONOMIC IMPACTS
In 2013, the cost of operating and maintaining the street light system totaled $1.3 million. The costs of street
lighting have been built into the electric cost of service and electric rates since 1986, and the current request to
amend the City Code under this Ordinance will have no rate impact.
Payments in lieu of taxes and franchise fees vary among Colorado cities and throughout the country as do in
kind services. The amounts paid to the General Fund by the Light & Power, Water, and Wastewater Funds
are within normal ranges. A 2012 survey of the fees and free services is attached for reference.
ENVIRONMENTAL IMPACTS
None identified.
BOARD / COMMISSION RECOMMENDATION
Since there are no policy changes proposed, and this Ordinance substantially addresses issues of clarification
of existing practices, this item was not reviewed by the Energy or Water Boards.
PUBLIC OUTREACH
Out-of-city customers were notified of the proposed ordinance and a public notice was issued in the
Coloradoan.
ATTACHMENTS
1. Survey of Municipalities (PDF)
2. Ordinance No. 095, 1986 (PDF)
3. Powerpoint presentation (PDF)
ATTACHMENT 1
ATTACHMENT 2
1
Street Lighting
Ordinance No. 146, 2014
City Council
October 28, 2014
1st
Reading
2
Background – PILOTs
• The electric, water and wastewater utilities
are required by City Charter to pay the
General Fund an amount equivalent to the
taxes and franchise fees such utilities would
pay if they were privately owned.
• The fee is called a payment in-lieu of taxes
and franchise fees (PILOTs)
• The 6% PILOTs is set by City Council by
ordinance
3
Background - Streetlights
• Prior to 1986 street lighting was paid for by the General Fund through
a monthly streetlight rate
• In 1986, it was determined that the City Charter would permit L&P to
assume these costs
• Ordinance 98, 1986 deleted the Streetlight Rate Schedule from City
Code
• City Charter was simplified in 1987 and became silent on the
responsibility for street lighting
• Since 1986 L&P has paid for the energy and O&M of the street
lighting system and has been considered a non-cash PILOT
4
What the Ordinance does?
1. Revises City Code to align with long term
practice/policy assigning fiscal responsibility
of the municipal streetlight system to the
Light and Power Fund
– Clarifies that the in kind service is a franchise fee in
addition to the 6% PILOT
– No financial impact to Light and Power or rates
5
What the Ordinance does?
2. Clarifies that the PILOT for the Water and
Wastewater utilities is for payment in-lieu of
taxes and franchise fees
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ORDINANCE NO. 146, 2014
OF THE COUNCIL OF THE CITY OF FORT COLLINS
REVISING CHAPTER 26 OF THE CODE OF THE CITY OF FORT COLLINS
REGARDING PAYMENTS IN LIEU OF TAXES AND FRANCHISE FEES, AND
SPECIFYING THAT THE OPERATION AND MAINTENANCE OF THE STREET
LIGHTING SYSTEM IS AN IN KIND PAYMENT BY THE LIGHT & POWER FUND IN
LIEU OF TAXES AND FRANCHISE FEES
WHEREAS, prior to July 1, 1986, the operation and maintenance costs related to the
City’s street lighting system were paid by the City’s General Fund; and
WHEREAS, on July 1, 1986, City Council adopted Ordinance No. 095, 1986, which
removed the municipal street lighting rate schedule from City Code and stopped internal billing
of street lighting costs to the General Fund; and
WHEREAS, City Council at the time determined it was consistent with Article IX,
Section 2 (B) of City Charter, as it existed in 1986, for the Electric Utility to assume fiscal
responsibility for operating and maintaining the street lighting system; and
WHEREAS, the agenda materials accompanying Ordinance No. 095, 1986, characterized
the shift in fiscal obligation as an additional payment by the Electric Utility in lieu of taxes; and
WHEREAS, voters in the City approved City Charter revisions in 1987 that eliminated
the specific duties of many City departments and created broader administrative flexibility in
fund and department management; and
WHEREAS, in streamlining the statements of department’s duties, the 1987 Charter
revisions also removed any reference to which department(s) or fund(s) bore responsibility for
street lighting costs; and
WHEREAS, since 1987, the Light & Power Fund has maintained fiscal responsibility for
the street lighting system, and the costs of street lighting have been incorporated into the electric
rates paid by customers of the Electric Utility; and
WHEREAS, City Council has established, pursuant to Article V, Section 23 and Article
XII, Section 6 of the City Charter, that an annual cash payment in lieu of taxes and franchise fees
is owed by the Light & Power Fund, Water Fund, and Wastewater Fund in the amount of 6% of
the operating revenues in each fund; and
WHEREAS, staff recommends clarifying descriptions of the annual operating revenues
payment made by the Water Fund in Article III, Chapter 26 of the City Code, and by the
Wastewater Fund in Article IV, Chapter 26 to be consistent with how the annual Light & Power
Fund payment is described in Article VI, Chapter 26, to reflect that such funds are collected in
lieu of taxes and franchise fees; and
WHEREAS, staff also recommends updating the City Code to codify the longstanding
custom and practice of the Electric Utility bearing fiscal responsibility for the operation and
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maintenance of the street lighting system in addition its annual payment in lieu of taxes and
franchise fees; and
WHEREAS, this revision to the City Code will not affect the rates paid by customers of
the Electric Utility nor increase the amount of operating revenues paid by the Light & Power
Fund in lieu of taxes and franchise fees.
NOW, THEREFORE BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That updating descriptions in the City Code to reflect the consistent
purposes for which the Light & Power Fund, Water Fund, and Wastewater Fund designate a
portion of operating revenues for payments in lieu of taxes and franchise fees is in the best
interest of the customers of the respective utility services and of the City.
Section 2. That amending the City Code to reflect the custom and practice of
providing street lighting system operation and maintenance as an additional in-kind component
of the franchise fee paid by the Electric Utility in its annual payments in lieu of taxes and
franchise fees is in the best interest of the customers of the Electric Utility and of the City.
Section 3. That Section 26-118(c) of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 26-118. Determination of user rates.
. . .
(c) In addition to the monthly service charges set forth in §§ 26-126 and 26-127,
there shall be a charge for payments in lieu of taxes and franchise. The charge shall
be six and zero-tenths (6.0) percent of said monthly service charges billed pursuant
to said §§ 26-126 and 26-127.
. . .
Section 4. That Section 26-277(c) of the Code of the City of Fort Collins is hereby
amended to read as follows:
Sec. 26-277. Determination of user rates; annual adjustment.
. . .
(c) In addition to the monthly service charges set forth in §§ 26-279, 26-280 and 26-
282, there shall be a charge for payments in lieu of taxes and franchise. The charge
shall be six and zero-tenths (6.0) percent of said monthly service charges billed
pursuant to said §§ 26-279, 26-280 and 26-282.
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Section 5. That Section 26-392 of the Code of the City of Fort Collins is hereby
amended by the addition of a new Subsection (e) to read as follows:
Sec. 26-392. Utility considered a City-owned enterprise.
(e) The enterprise shall annually operate and maintain the City street lighting system
as an additional payment in lieu of franchise fees otherwise paid by the enterprise
pursuant to Article V, Section 23 of the City Charter.
Introduced, considered favorably on first reading, and ordered published this 28th day of
October, A.D. 2014, and to be presented for final passage on the 18th day of November, A.D.
2014.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
Passed and adopted on final reading on the 18th day of November, A.D. 2014.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk