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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/15/2016 - FIRST READING OF ORDINANCE NO. 035, 2016, AMENDINGAgenda Item 10 Item # 10 Page 1 AGENDA ITEM SUMMARY March 15, 2016 City Council STAFF John Phelan, Energy Services Manager SUBJECT First Reading of Ordinance No. 035, 2016, Amending the Code of the City of Fort Collins to Clarify On-Bill Utility Financing Terms and Increase the Outstanding Loan Balance Available for the On-Bill Utility Loan Program. EXECUTIVE SUMMARY The purpose of this item is to revise the available capital funds for On-Bill Financing (OBF) program from Utilities reserve funds and to clarify interest rate language in relevant Utilities rate ordinances. Between July 2015 and December 2015, the rate of loan participation in the Home Efficiency Loan Program (HELP, aka OBF) increased by 500% over the previous 2+ years. OBF capital comes from Light & Power and Water reserve funds, with the source being determined by the project type. The funding is a “balance sheet transaction,” where the funds are accounted for by moving from reserves to accounts receivable. As such, loan funding is not a typical expenditure or a budget item. Council has authorized Utilities to maintain a maximum outstanding balance of $800,000 for the loan program. Based on staff’s recommendation, the Ordinance would increase the maximum outstanding balance limit to $1.6M. The additional funding would be loaned at a 4% interest rate, which is within the range approved by Council for the program in January 2015 and remains the Chief Financial Officer’s recommendation. Staff plans to return to Council in conjunction with the 2017 rate ordinance with options and recommendations for potential transition to third party capital for OBF. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BACKGROUND / DISCUSSION The On-Bill Financing (OBF) pilot program (also known as the Home Efficiency Loan Program) provides residential and certain commercial utility customers with low-cost financing for energy efficiency, solar photovoltaic, and water conservation improvements to support the Utilities’ efficiency and conservation efforts and the outcomes adopted in City of Fort Collins policies and plans, such as the Climate Action Plan, Energy Policy and Water Efficiency Plan. The OBF program was established by Ordinance No. 033, 2012, which 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 OBF program was launched in January 2013, and was reviewed by Council in August 2013, October 2014 and January 2015. Based on the participation to date, staff recommends increasing the maximum outstanding loan balance limit, revising the interest rate for loans based on the new funding and planning for a transition to third party capital. Agenda Item 10 Item # 10 Page 2 Increasing the maximum outstanding loan balance limit for Utilities reserve funds OBF loan balance monies come from Light & Power and Water reserve funds, with the source being determined by the project type. The funding is a “balance sheet transaction,” where the funds are accounted for by moving from reserves to accounts receivable. As such, loan funding is not a typical expenditure or a budget item. Council previously authorized Utilities to maintain a maximum outstanding balance of $800,000 for the loan program. Loan activity ramped up significantly in the second half of 2015 and continues into early 2016 (see chart below). Increased outreach to participating contractors, a focus on marketing to customers receiving efficiency audits and the low introductory interest rates all contributed to the ramp in loan activity. Based on a forecast from this recent activity, the outstanding loan limit is likely to be met by the end of March or soon after. Continuing this forecast and estimating the impacts of the Efficiency Works Neighborhoods pilot and recent solar contractor activity, the OBF program is likely to require an additional $800,000 in capital through the end of 2016. The program to date has seen 98% of the activity in energy loans. The proposed ordinance increases the maximum outstanding balance limit to $1.6M to account for the anticipated program activity in 2016. Revising On-bill Financing Interest Rates Under the current model, where loan capital is provided by Utilities reserve funds, the City has broad discretion for the setting of loan characteristics. The interest rate range is set by Council in the annual rate ordinances, while the City’s Financial Officer administratively adjusts the rate in coordination with Council. Agenda Item 10 Item # 10 Page 3 The rate ordinances define the allowable range of interest rates, currently set from 2.5% to 10%. This range was set based on a 2014 market analysis indicating similar programs have been successful with market rates in the 4.5% to 6.5% range. The lower end of this range at 2.5% was included, at Council direction, to support getting the program started with a favorable interest rate. The higher range was included to allow for flexibility moving forward and to accommodate changes in the financial marketplace. The Council Finance Committee provided direction in November 2014 that the City Financial Director set interest rates at the City’s cost of capital less 100 to 200 basis points. For the Council meetings in January and February of 2015, the recommended interest rate was 4%. During these meetings, Council provided direction to set the interest rate at 2.5% and also to extend the maximum loan term from 15 to 20 years. On February 22, 2016, staff presented to the Council Finance Committee the recommendations for the OBF capital funding and program interest rates. The Committee also clarified the intent to manage the available funds as a revolving loan fund over time, where repaid funds become immediately available for use by the on- bill financing program. Based on that discussion and Chief Financial Officer’s recommendation, staff is proposing that the interest rate for loans funded by the increase in capital be serviced with a 4% fixed interest rate. The proposed rate increase is to 0.75% above the U.S. Prime Lending Rate, as stated in the Wall Street Journal on November 1, 2015, which was at 3.25%. Staff further recommends annually using the U.S. Prime Lending Rate, as stated by the Wall Street Journal on November 1 of each year, as the benchmark for setting the interest rate for loans issued in the subsequent year. The proposed change in interest rate will better align loan rates with available market rates and will provide for testing of the interest rate as a driver for program participation. The timing of the current loan interest rate change does present challenges for communications and outreach, as Utilities has promoted the use of HELP loans for home efficiency and solar projects as well as the new Efficiency Works Neighborhoods pilot. Planning for Third Party Capital Sources The question of what comes next for sources of capital has been informally discussed over time. The proposed higher outstanding balance limit will, in effect, create a timeline for a project to recommend next steps for capital sources and loan options for customers. Based on the proposed new limit, an interdepartmental staff team will develop recommendations by late summer 2016 for implementation by the end of the year or sooner. Staff will charter a project team to research, identify and recommend options for consideration by Council to meet future capital requirements for HELP and the On-Bill Finance programs. The team will be comprised of staff from Utilities Resource Conservation, Utilities Finance, City Finance, the City Attorney’s Office and Sustainability Services. Team members also represent a number of Climate Action Plan strategic teams (Energy Efficiency, Financing and Climate Economy). The results of this team’s efforts will be presented to Council Finance and/or Council for consideration, including but not limited to: • Cost of capital to City, Utilities and/or loan recipients • Scalability • Impact on City or Utilities balance sheet • Legal review for servicing of loans on utility bills under a new structure • Characteristics of loan terms (e.g. qualifications, interest rates, loan term) • Relationship to existing and proposed efficiency and renewable energy programs and services. HELP loans currently support three different programs. All of the loan activity in 2015 can be attributed to the Efficiency Works Home (insulation, air sealing, windows, heating and cooling) and Solar Rebate (photovoltaic systems) programs. Agenda Item 10 Item # 10 Page 4 In January 2016, Utilities launched the Efficiency Works Neighborhoods program as a pilot, in coordination with Platte River Power Authority and the American Public Power Association. This program is piloting a number of innovations, including new segmentation and outreach, home efficiency packages with standardized pricing, streamlined project management services and integrated financing. Over 1500 customers have in specific neighborhoods are in the initial target group and have received information regarding all the program elements, including the current HELP loan terms. The pilot is scheduled through September 2016, and may continue as an ongoing program afterwards. The project team recommendations presented later in 2016 will include a recommended roadmap for all loan characteristics. Update on Billing System Customization for Tenant Billing Staff has been working with the software vendor for Utilities existing customer billing system (CIS) to develop a scope of work for a customization which would allow for “tenant billing.” The customization would allow for loans to be initiated by an owner of a residential or small commercial rental property. The payments for these loans would be charged on the utility bills of the current tenants of the property, who also receive the benefit of lower utility bills. The scope of work and software modification specifications were recently completed and “signed off” by both parties. As of March 1 Utilities is awaiting the cost estimate and proposed schedule from the software vendor. After receiving the estimate, staff will review and may be sending updated information to Council. While this effort has been developed, Utilities has also initiated a comprehensive review of options to determine the next steps for CIS, such as upgrading or replacing the software. Therefore, recommendations for potential investments in customization of the existing software will take into consideration these options. Relationship of Financing to Climate Action Plan The developing implementation plan to meet the 2020 CAP objectives includes expanded efficiency results, accounting for nearly 50% of the 2020 reduction target. It is expected that financing of energy efficiency will be a key tactic to reaching higher participation levels. It will be important to balance the requirements of financing partners with the expectations of customers. Efficiency Works Home retrofit projects, which are supported by the HELP loans, contributed over 8,000 metric tons of carbon reduction in 2014. The target for the CAP 2020 objectives would require an approximately 4x increase in results from residential programs, requiring reaching more customers and completing more comprehensive improvements saving both electricity and natural gas. Continuing to offer attractive financing is considered to be an important element for success moving forward. Over 60 loans have been completed to date, used primarily for home efficiency upgrades and with a few solar and water projects. The energy loans, taken as a group, are estimated to be saving 10% of the carbon emissions of these homes. This equates to 1.2 tons avoided per household and 72 annual tons per year. Including the lifetime savings of these improvements brings the customer cost to approximately $400 per ton carbon avoided. The improvements are also providing utility bill savings, comfort improvements and health and safety benefits. Because the loans are paid back to Utilities with interest by customers, the cost to Utilities from the HELP program is low to negligible. Program Development and Characteristics The OBF program was developed collaboratively by Utilities (Energy Services and Customer Finance (billing)), City Finance, and the City Attorney’s Office with assistance from the consulting firm Harcourt, Brown and Carey. The program was modeled after successful programs and is most succinctly described as a traditional loan program which is serviced by Utilities on customer’s monthly bills. Customers qualify based on their bill payment history and credit score, eligible projects are defined by Utilities incentive programs, and the loans are secured via a UCC lien filing recorded with Larimer County. Agenda Item 10 Item # 10 Page 5 The City Code changes adopted by Council in 2012 and 2015 authorize Utilities to provide financing services to meet the program deliverables. A key element of the program is that the loan payments are treated like any other element of a customer’s bill (e.g. electricity, water, wastewater and stormwater). With such treatment, loan payments are not differentiated from other services. Utilities normal and customary practices for non- payment apply, up to and including service disconnection. Utilities also has established rights under Section 26-718 of the City Code for collection of any past due amounts at a property time of sale, known as a “perpetual lien”. The program uses pre-existing standard capabilities of the Utilities billing system. 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 local Fort Collins Community Development Financial Institution. The interest rate range is defined in Utilities’ annual residential rate ordinances. The City Finance Department developed a set of rules and regulations for administrative implementation of the OBF program. The OBF capital comes from Light & Power and Water reserve funds, determined by the project type. The funding is a “balance sheet transaction,” where the funds are accounted for by moving from reserves to accounts receivable. As such, loan funding is not a typical expenditure or a budget item. Loan Activity and Information  As of March 1, 2016, total outstanding balance was $423k, with $192k preapproved. This is a total of $613k, leaving approximately $187k available for new loan projects.  Based on end of 2015 data, the annual repayment amount would be approximately $50k annually and the dollar weighted average term is 12.4 years. Median term is 10 years.  Average loan amount is $8,500.  Approximately $110k has been repaid (or paid off) plus a modest amount of interest income has been collected since the program started.  98% of the outstanding program loan balance has come from the Light & Power fund. Loan Program Characteristics Attribute Notes Interest Rates Allowable range from 2.5-10% per proposed rate ordinance 2015 rate at 2.5% per direction from Council Customer qualification Minimum six months bill payment history Credit score minimum of 640 Fees Fees are cost based for services current fees of $25 for application, $150 for closing, $11 for recording Recording UCC filing recorded with Larimer County Loan term 5, 7, 10, 15, or 20 years Selected by applicant Customer eligibility Residential single family and townhome properties, small business customers (by owner), Rental properties (by owner) CITY FINANCIAL IMPACTS Increasing the maximum outstanding loan balance does not impact the Utilities budget, as the funds are not appropriated or expended. The increase does limit the liquidity of the Utilities reserve funds as the outstanding loan balance is not immediately available for other uses. Utilities Strategic Financial Manager and the City’s Chief Financial Officer are comfortable with this impact for the proposed amount. Agenda Item 10 Item # 10 Page 6 BOARD / COMMISSION RECOMMENDATION At its February 22, 2016 meeting, the Council Finance Committee discussed this topic and recommended it be brought forward for Council consideration. ATTACHMENTS 1. Council Finance Committee minutes, February 22, 2016 (draft) (PDF) EXCERPT FROM COUNCIL FINANCE COMMITTEE MEETING, February 22, 2016 ON-BILL FINANCING: UPDATE & FUTURE DIRECTION Lisa Rosintoski and Kim DeVoe presented the On-Bill Financing topic with regards to Capital Planning for the project also known as the Home Efficiency Loan Program. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED  Does Council have feedback regarding the proposed two-step process to provide capital funding for the Home Efficiency Loan Program?  Clarify intent for use of Utilities reserves as an ongoing revolving loan fund.  Is Council ready to consider a resolution for increasing the outstanding loan balance from Utilities reserve funds at an upcoming meeting? Home efficiency loan has reduced carbon emissions by an average of 10%. Number of loan production increased from 6 in 2013 to 17 in 2015 and to 37 in 2015. Phase 1: increase outstanding balance to $1.6M to establish a revolving loan fun. Increase the interest rate to 4 %. Phase 2: Maintain financing program, transition to using outside capital. Mike Beckstead comment: There are some potential ethical/legal questions that will need to be answered prior to transitioning over to a third party loan carrier. 1. Can we use our billing system to collect payments for third party loans? 2. If we use a third party carrier, can we still use the current leverage we have as far as turning off service in the event of a loan default? Ross Cunniff question #1: why are we considering increasing the interest rate? Mike Beckstead answered: Market interest rates are currently 4-5.5%, whereas we are currently at 2.5%. If we move to third party loans, we need to be at market rate ahead of the change. Ross Cunniff question #2: are we continuing to market to contractors? Are we telling them that the interest rate will be increasing? He would like to see feedback from the contractors and potential users of the loan before the rate is increased. Mike B: this is linked to our Climate action change plan. We need to know what the financial implications are if we stay at the same interest rate. Ross Cunniff question #3: how are the estimates on the carbon emissions reduction impacting our Climate action plan? Lisa Rosintoski responded: this is something that her department will work on getting for a future meeting. Ross Cunniff question #4: what are the types of projects that are being done with the loans? Kim DeVoe answered: insulation, some solar projects and HVAC upgrades. Gerry Horak question: are we coordinating with Larimer county energy savings? Kim DeVoe answered: they do general assessments. The City does a more in depth assessment as far as energy audits. ATTACHMENT 1 Kim DeVoe commented: their department is creating a packaged streamlined process for homeowners to do more through the efficiency program. They are trying to help those that don’t have disposal income to do energy upgrades by using the HELP loan program. Wade Troxell, Ross Cunniff & Gerry Horak said to go forward. Mike Beckstead said: a resolution will be brought forward in a future meeting. -1- ORDINANCE NO. 035, 2016 OF THE COUNCIL OF THE CITY OF FORT COLLINS AMENDING THE CODE OF THE CITY OF FORT COLLINS TO CLARIFY ON-BILL UTILITY FINANCING TERMS AND INCREASE THE OUTSTANDING LOAN BALANCE AVAILABLE FOR THE ON-BILL UTILITY LOAN PROGRAM WHEREAS, the On-Bill Utility Financing (“OBF”) program (also known as the Home Efficiency Loan Program) was established by Ordinance No. 033, 2012, which amended Chapter 26 of the City Code to enable Fort Collins Utilities to offer financing and on-bill servicing of loans for residential energy efficiency, water efficiency and renewable energy upgrade projects; and WHEREAS, the OBF program provides low-cost financing for energy efficiency, solar photovoltaic, and water conservation improvements, in an effort to pursue Utilities’ efficiency and conservation efforts as well as policy goals from Plan Fort Collins, the Climate Action Plan, Energy Policy and Water Conservation Plan; and WHEREAS, the OBF program has been a valuable addition to Utilities' efficiency and renewable energy programs, which foster sustainability through reduced energy and water use, local contractor education and investment in the built environment, and improved home comfort, health and safety; and WHEREAS, on February 17, 2015, City Council adopted Ordinance No. 012, 2015, which expanded eligibility for OBF program participation to Utilities’ business customers, set the term for new loans at 20 years, and set a range of loan interest rates to be applied pursuant to procedures and standards adopted by the Financial Officer under Section 26-720 of the City Code; and WHEREAS, in prior budgets, budget exceptions and balance sheet reserve actions, City Council approved an outstanding balance of $800,000 for the OBF program to be drawn from Utilities Light & Power and Water reserve funds; and WHEREAS, OBF program activity significantly increased in the second half of 2015 and the first quarter of 2016, and forecasts estimate the existing outstanding program loan balance will be fully distributed by the end of March 2016, requiring an increase in available capital to accommodate new OBF program projects; and WHEREAS, in addition to historic OBF program activity, launch of the Efficiency Works Neighborhoods pilot and recent solar contractor activity require an additional allocation of capital to the OBF program through the end of 2016; and WHEREAS, based on current participation and increasing demand from recently- launched community programs, Utilities staff recommends City Council increase the allocated outstanding balance limit for the OBF program to $1,600,000; and -2- WHEREAS, sufficient net operating revenue reserves budgeted in 2016 exist in the Electric Utility and Water Utility reserve funds to accommodate increase of the OBF program outstanding balance limit; and WHEREAS, on February 22, 2016, the Council Finance Committee expressed support for staff’s additional recommendation that the OBF program be managed as an ongoing revolving loan fund, where repaid loan capital is returned to and available for re-issuance through the OBF program; and WHEREAS, staff has also identified several instances in Chapter 26 of the City Code where clarification of the interest rate range for new loans is required to match the range approved by City Council in Ordinance No. 012, 2015; and WHEREAS, the City Council has determined it is desirable to maintain appropriate financing for the OBF program to provide flexibility in the administration of new loans and collection on existing loan projects, in furtherance of the benefits available to ratepayers through the OBF program; and WHEREAS, the City Council has further determined it is desirable to clarify in the City Code the expression of the approved interest rate range for new OBF program loans; and WHEREAS, Article XII of the City Charter authorizes City Council to expend net operating revenues of the City’s utilities for renewal, replacement, extraordinary repair, extension, improvement, enlargement, and betterment of such utilities, or other specific utility purposes determined by Council to be beneficial to the ratepayers of said utilities; and WHEREAS, Section 26-720 of the City Code authorizes the Financial Officer to formulate and promulgate rules and regulations for the administration of Chapter 26 with respect to credit and lending standards and rates and administrative practices for utility loan programs, which shall include efficiency-related conditions on loans for renewable energy development and utility loans terms of up to twenty (20) years. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. 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 and serve a public purpose. Section 3. That the outstanding available loan balance maximum for the On-Bill Utility Financing Program, as a portion of Electric Utility and Water Utility reserve funds, shall be ONE MILLION SIX HUNDRED THOUSAND dollars ($1,600,000). -3- Section 4. That Sec. 26-129(f) of the Code of the City of Fort Collins is hereby amended to read 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 two and five tenths (2.5) percent and no more than ten (10.0) percent, per annum, with the interest rate for new loans to be set annually, based on the City’s cost of capital minus 100 to 200 basis points, at three-quarters of a percent (0.75%) above the U.S. prime lending rate as stated in the Wall Street Journal on November 1, in the administrative rules and regulations adopted by of the Financial Officer pursuant to § 26-720. . . . Section 5. That Sec. 26-289(6) of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-289. Miscellaneous fees and charges. . . . . . . (6) Interest for wastewater service-related loans: 2.5% - 10% per annum; to be set for new loans annually at three-quarters of a percent (0.75%) above the U.S. prime lending rate as stated in the Wall Street Journal on November 1, based on the City’s cost of capital minus 100 to 200 basis points in the administrative rules and regulations adopted by of the Financial Officer pursuant to § 26-720. . . . Section 6. That Section 26-464(q) of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-464. Residential energy service, schedule R. . . . -4- (q) Loans. 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 two and five-tenths (2.5) percent and no more than ten (10.0) percent per annum, with the interest rate for new loans to be set annually, based on the City’s cost of capital minus 100 to 200 basis points, at three-quarters of a percent (0.75%) above the U.S. prime lending rate as stated in the Wall Street Journal on November 1, in the administrative rules and regulations adopted by of the Financial Officer. Obligations for repayment of any such loans are subject to the provisions of Article XII of this Chapter. Loan-related fees for electric service-related loans shall be set annually based on related program costs, in the administrative rules and regulations of the Financial Officer pursuant to § 26-720. . . . Section 7. That Section 26-465(s) of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-465. Residential demand service, schedule RD. . . . (s) 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 two and five-tenths (2.5) percent and no more than ten (10.0) percent, per annum, with the interest rate for new loans to be set annually based on the City’s cost of capital minus 100 to 200 basis points, at three- quarters of a percent (0.75%) above the U.S. prime lending rate as stated in the Wall Street Journal on November 1, in the administrative rules and regulations adopted by of the Financial Officer. Obligations for repayment of any such loans are subject to the provisions of Article XII of this Chapter. Loan related fees for electric service-related loans shall be set annually based on related program costs, in the administrative rules and regulations of the Financial Officer pursuant to § 26-720. Section 8. That Section 26-466(s) of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-466. General service, schedule GS. -5- . . . (s) 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 two and five-tenths (2.5) percent and no more than ten (10.0) percent, per annum, with the interest rate for new loans to be set annually based on the City’s cost of capital minus 100 to 200 basis points, at three- quarters of a percent (0.75%) above the U.S. prime lending rate as stated in the Wall Street Journal on November 1, in the administrative rules and regulations adopted by of the Financial Officer. Obligations for repayment of any such loans are subject to the provisions of Article XII of this Chapter. Loan-related fees for electric service-related loans shall be set annually based on related program costs, in the administrative rules and regulations of the Financial Officer pursuant to § 26-720. Section 9. That Section 26-467(s) of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-467. General service 25, schedule GS25. . . . (s) 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 two and five-tenths (2.5) percent and no more than ten (10.0) percent, per annum, with the interest rate for new loans to be set annually, based on the City’s cost of capital minus 100 to 200 basis points, at three- quarters of a percent (0.75%) above the U.S. prime lending rate as stated in the Wall Street Journal on November 1, in the administrative rules and regulations adopted by of the Financial Officer. Obligations for repayment of any such loans are subject to the provisions of Article XII of this Chapter. Loan-related fees for electric service-related loans shall be set annually based on related program costs, in the administrative rules and regulations of the Financial Officer pursuant to § 26-720. Section 10. That Section 26-712(b) of the Code of the City of Fort Collins is hereby amended to read as follows: Sec. 26-712. Miscellaneous fees and charges. -6- . . . (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 … Interest rate for utility service-related loans: 2.5% - 10% per annum; to be set annually for new loans at three-quarters of a percent (0.75%) above the U.S. prime lending rate as stated in the Wall Street Journal on November 1, based on the City's cost of capital minus 100 to200 basis points in the administrative rules and regulations adopted by of the Financial Officer pursuant to § 26-720 . . . Other miscellaneous charges will be based on direct cost plus fifteen (15) percent indirect costs. Introduced, considered favorably on first reading, and ordered published this 15th day of March, A.D. 2016, and to be presented for final passage on the 5th day of April, A.D. 2016. __________________________________ Mayor ATTEST: _______________________________ City Clerk Passed and adopted on final reading on the 5th day of April, A.D. 2016. __________________________________ Mayor ATTEST: _______________________________ City Clerk