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HomeMy WebLinkAboutCOUNCIL - COMPLETE AGENDA - 08/23/2016 - COMPLETE AGENDACity of Fort Collins Page 1 Wade Troxell, Mayor City Council Chambers Gerry Horak, District 6, Mayor Pro Tem City Hall West Bob Overbeck, District 1 300 LaPorte Avenue Ray Martinez, District 2 Fort Collins, Colorado Gino Campana, District 3 Kristin Stephens, District 4 Cablecast on FCTV Channel 14 Ross Cunniff, District 5 and Channel 881 on the Comcast cable system Carrie Daggett Darin Atteberry Wanda Winkelmann City Attorney City Manager City Clerk The City of Fort Collins will make reasonable accommodations for access to City services, programs, and activities and will make special communication arrangements for persons with disabilities. Please call 221-6515 (V/TDD: Dial 711 for Relay Colorado) for assistance. Adjourned Meeting August 23, 2016 6:00 p.m. (revised 8/22/16)  CALL MEETING TO ORDER  ROLL CALL 1. Council will consider a motion to adjourn into executive session to seek legal advice regarding TABOR issues related to the Keep Fort Collins Great (KFCG) Sales and Use Tax and such other business as may come before the Council. 2. Consideration of next steps regarding the KFCG tax and timing of the presentation of related ballot issues.  OTHER BUSINESS  ADJOURNMENT A. Council will consider a motion to adjourn to 6:00 p.m., Tuesday, August 30. City of Fort Collins Page 1 Wade Troxell, Mayor Council Information Center (CIC) Gerry Horak, District 6, Mayor Pro Tem City Hall West Bob Overbeck, District 1 300 LaPorte Avenue Ray Martinez, District 2 Fort Collins, Colorado Gino Campana, District 3 Kristin Stephens, District 4 Cablecast on FCTV Channel 14 Ross Cunniff, District 5 and Channel 881 on the Comcast cable system Carrie Daggett Darin Atteberry Wanda Winkelmann City Attorney City Manager City Clerk The City of Fort Collins will make reasonable accommodations for access to City services, programs, and activities and will make special communication arrangements for persons with disabilities. Please call 221-6515 (TDD 224- 6001) for assistance. City Council Work Session August 23, 2016 After the Adjourned Meeting, which begins at 6:00 p.m.  CALL TO ORDER. 1. Grade Separated Railroad Crossing Prioritization. (staff: Rick Richter, Tim Kemp; 10 minute staff presentation; 1 hour discussion) The purpose of this item is to inform Council of the preliminary results of a grade separated crossing prioritization study currently underway. Council previously expressed a desire for a more in-depth master plan vision and prioritization of long-term solutions at the August 12, 2015 Work Session. The Master Street Plan could ultimately be updated based on the priorities identified in the study. 2. The existing Lemay Avenue/Vine Drive intersection and the realigned Lemay Avenue/Suniga Road intersection. (staff: Tim Kemp, Rick Richter; 10 minute staff presentation; 1 hour discussion) The purpose of this item is to update Council of the project status for realigned Lemay Avenue and Suniga Road, and to discuss design elements, construction funding, and phasing options. 3. Broadband Plan Update - Business Model and Feasibility Analysis. (staff: SeonAh Kendall, Mike Beckstead; 20 minute presentation; 1 hour discussion) The purpose of this item is to provide City Council an update on the Broadband Plan and review the recent findings of the updated Broadband Market Demand Study, Broadband Feasibility Analysis by Business Models, Baseline Financial Feasibility, and next steps.  OTHER BUSINESS.  ADJOURNMENT. DATE: STAFF: August 23, 2016 Rick Richter, Director of Infrastructure Services WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Grade Separated Railroad Crossing Prioritization. EXECUTIVE SUMMARY The purpose of this item is to inform Council of the preliminary results of a grade separated crossing prioritization study currently underway. Council previously expressed a desire for a more in-depth master plan vision and prioritization of long-term solutions at the August 12, 2015 Work Session. The Master Street Plan could ultimately be updated based on the priorities identified in the study. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED City staff is presenting the rating criteria and preliminary findings of the study. City staff is seeking feedback on the criteria used and resulting prioritization. 1. Does Council support grade separated crossings? 2. Does Council have any concerns regarding the rating criteria and subsequent prioritization suggested in the study? 3. Are there areas of concern that staff has not addressed? BACKGROUND / DISCUSSION Three railroads operate in Fort Collins; Burlington Northern Santa Fe Railway (BNSF), Union Pacific (UP), and Great Western Railway (GWR). The prioritization study examines and prioritizes 22 at-grade railroad crossings on arterial roadways within city limits for potential grade separation. Rating criteria includes: Operations  Decrease in Vehicle Delay – Total decrease in annual vehicle delay costs based on vehicle volume and train crossing duration data.  Multimodal Benefit – Increase in benefit to the bicycle/transit system based on existing bicycle facilities and bus routes. Safety  Predicted Accident Cost Reduction – Total predicted annual accident cost reduction based on non-train related crashes that would be eliminated with grade separation.  Emergency Vehicle Response Benefit – Increase to emergency response ability based on feedback from the Poudre Fire Authority. Practical  Adjacent Land Use Rating – Amount of impact to adjacent land uses and roadway network based on surrounding land use and zoning, access points, and potential right of way acquisition needed.  Constructability – Ability to construct grade separation based on proximity to overhead electric transmission lines, irrigation ditches, adjacent intersections or structures, and capital construction costs. 1 Packet Pg. 2 August 23, 2016 Page 2 A variety of data was used to establish the criteria including average daily traffic volume, fire station and emergency response service areas, number of train crossings per day, train crossing duration, train speed, pedestrian and bicycle routes, proximity to nearest arterial intersection, traffic signal pre-emption, and crash data. A weight was applied to each criterion, based on the relative importance of that measure to the City of Fort Collins. The top 7 priorities based on the rating criteria above are as follows: 1. Lemay at Vine (BNSF/GWR) 2. Harmony west of Mason (BNSF) 3. Timberline at Vine (BNSF/GWR) 4. Vine east of Timberline (BNSF) 5. Prospect west of College (BNSF) 6. Drake at McClelland (BSNF) 7. Mulberry at Riverside (UP & GWR) Currently the master street plan (2011 Update) identifies 8 locations, of which three are in common with the recent study results. The master street plan identifies the following locations in no particular order:  Lemay at Vine (BNSF/GWR)  Timberline at Vine (BNSF/GWR)  Drake at McClelland (BNSF)  Mountain Vista west of I-25 (BNSF)  Trilby east of Shields (BNSF)  Troutman west of Mason (BNSF) Pedestrian crossing constructed in 2012  Trilby east of Lemay (UP) Existing Grade Separated Crossing  Carpenter west of Timberline (UP) State Hwy 392  Keenland West of Timberline (UP) Proposed Pedestrian Crossing The UP and BNSF crossings on North College/Hwy 287 and the UP crossing at Carpenter/Hwy 392 were not included in the study as those are located on state highways. The study also did not include the downtown crossings of the BNSF due to extensive constructability issues and land use impacts related to grade separated construction. Next Steps  The final draft of the Railroad Crossing Prioritization Study will be published in October 2016.  Based on the final study results, staff will bring proposed changes to Street Master Plan for Council consideration in the first quarter of 2017. ATTACHMENTS 1. Railroad Crossing Prioritization Map (PDF) 2. Technical memo, August 8, 2016 (PDF) 3. Powerpoint presentation (PDF) 1 Packet Pg. 3 > > > > > > > > > G G G GG G G G GG G G G G G G G G GG G G G G G G G G G G G G G G G BNSF RAILROAD BNSF RAILROAD FORT COLLINS MUNICIPAL RAILROAD GREAT WESTERN RAILROAD UNION PACIFIC RAILROAD BNSF RAILROAD UNION PACIFIC RAILROAD UNION PACIFIC RAILROAD MEMORANDUM Project: Railroad Crossing Prioritization Study To: City of Fort Collins From: Nancy Lambertson, PE, and Chris Chamberlin, EI, Muller Engineering Date: August 8, 2016 Subject: Preliminary Screening Summary Introduction The Railroad Crossing Priority Study is a project undertaken for the City of Fort Collins with the purpose of prioritizing existing at-grade railroad crossings that are candidates for reconstruction as grade separated crossings. The study considers a wide variety of data to develop recommendations, including traffic congestion and safety, constructability, emergency response, adjacent land use impacts, and multimodal factors. The project also incorporates input from the City of Fort Collins staff and Poudre Fire Authority into the evaluation. Study Area The project area included railroad crossings within city limits that were identified by the City of Fort Collins as candidates for potential grade separation projects. Figure 1 indicates the crossings that were evaluated. The downtown BNSF crossings were excluded from this study due to extensive constructability issues and land use impacts related to grade separated construction. The UPRR crossing of Carpenter Road (SH 392) and the two crossings of North College Avenue (US 287) were eliminated due to their locations on state highways. Project Approach The evaluation of the railroad crossings was conducted in two phases: Phase 1 Information Gathering and Data Compilation and Phase 2 Prioritization Criteria and Screening. The evaluation represents a “snapshot” of existing conditions as they relate to railroad crossings. The evaluation did not attempt to assess future conditions (e.g. land use and traffic growth). Phase 1. Information Gathering and Data Compilation The objective of this phase was to gather all relevant information and data at each at-grade crossing in order to gain a thorough understanding of existing conditions. This involved compiling data that had already been collected and was readily available from local agencies. Information on train volume, speed and duration was provided by the City of Fort Collins. Emergency vehicle response time data was collected by analyzing proximity of crossings to fire stations and hospitals. Adjacent land use, zoning, and right-of- way data was obtained from The City of Fort Collins and Larimer County Assessors GIS maps. Constructability data including potential utility conflicts, adjacent intersections and access points, was ATTACHMENT 2 1.2 Packet Pg. 5 Attachment: Technical memo, August 8, 2016 (4740 : Railroad Crossings) Memorandum Railroad Crossing Prioritization Study August 8, 2016 Preliminary Screening Summary determined using aerial and street view imagery, as well as input from City Engineering staff. Multimodal data was collected from the Fort Collins Bicycle Master Street Plan (BMSP) and the City of Fort Collins Transit map. Finally, traffic data was provided by the city and compiled for each crossing. Figure 1: City of Fort Collins Grade Separated Crossing Candidates Page 2 1.2 Packet Pg. 6 Attachment: Technical memo, August 8, 2016 (4740 : Railroad Crossings) Memorandum Railroad Crossing Prioritization Study August 8, 2016 Preliminary Screening Summary Phase 2. Prioritization Criteria and Screening The objective of this phase was to establish criteria for analyzing the existing conditions of at-grade crossings based on the data collected during Phase 1. The crossings were then evaluated based on how beneficial a separated grade crossing would be as compared to existing conditions. A general list of desired criteria items was provided by the City of Fort Collins as a starting point for this effort. The criteria fell into three broad categories: operations, safety, and practicality. Each crossing was then assigned a rating from 0-10 for each criterion with 10 indicating the project would be highly recommended for grade separation. x Operations o Decrease in Vehicle Delay – A quantitative measure calculated from vehicle volume and train crossing duration data. For some at-grade crossings, train crossing duration data was not available and was interpolated from adjacent crossings on the same railroad line. o Multimodal – A quasi-quantitative measure calculated from bicycle facilities, bus routes, and BMSP proposed grade separation for the crossing. x Safety o Predicted Accident Cost Reduction – A quantitative measure calculated from FRA accident prediction formulas. This measure was amended based on data provided by the City of Fort Collins on the benefit of a grade separation crossing to safety at adjacent intersections. o Emergency Vehicle Response Benefit – A qualitative measure originally evaluated based on proximity to fire stations and hospitals and predicted railroad crossing use by emergency vehicles. This measure was amended based on feedback from the Poudre Fire Authority. x Practical o Adjacent Land Use Rating – A qualitative measure determined based on surrounding land use and zoning, access points, and potential ROW acquisition required to construct the project. o Constructability – A qualitative measure determined based on proximity to overhead electric transmission lines/irrigation ditches, adjacent intersections or structures, modifying the road grade versus the railroad grade, and comparative capital construction costs. A weight was applied to each criterion, based on the relative importance of that measure to the City of Fort Collins. The weighting can be revised in the matrix as priorities with regard to at-grade crossings change. An evaluation matrix was created ranking the crossings by the aggregate score across all categories. After the initial matrix was created, a review with City staff was conducted. Feedback from this review was used to amend the matrix. The results can be seen in Table 1. Five crossings evaluated in this study had been previously identified in the Fort Collins Master Street Plan (MSP) as candidates for grade separation. These crossings were identified in the evaluation summary but received no extra weighting in the rankings. Page 3 1.2 Packet Pg. 7 Attachment: Technical memo, August 8, 2016 (4740 : Railroad Crossings) Memorandum Railroad Crossing Prioritization Study August 8, 2016 Preliminary Screening Summary Table 1. Evaluation Summary Arterial Crossing Crossing Location DOT # 523434 Lemay Vine 244645J Yes 10 3 8 10 4 3 145 Harmony West of Mason 244620N No 7 10 8 10 5 2 142 Timberline Vine 244647X Yes 8 3 6 10 6 4 139 Vine East of Timberline 244648E No 2 7 3 10 7 10 133 Prospect West of College 244626E No 7 7 4 10 3 5 129 Drake McClelland 244624R Yes 6 7 6 10 3 3 122 Lemay Riverside 245306H No 5 7 8 10 4 2 122 Mulberry Riverside 244861C No 5 3 8 10 4 3 120 Harmony West of Timberline 804503R No 2 7 4 10 5 7 118 Horsetooth McClelland 244622C No 676742109 Horsetooth West of Timberline 804504X No 1 7 4 10 6 5 108 Trilby East of Shields 244618M Yes 3 0 4 3 8 10 103 Drake West of Timberline 804505E No 1 10 477398 Timberline South of Prospect 244867T No 1 0 4 10 5 5 92 Mountain Vista (Co Rd 50) West of I-25 089373X Yes 20437991 Willox East of Shields 804512P No 10377687 Prospect West of Timberline 804506L No 1 3 4 10 5 2 87 Prospect West of Timberline 244866L No 1 3 4 10 5 2 87 Lincoln Northeast of Jefferson 906295A No 3 3 3 7 3 3 80 Linden Jefferson 906296G No 13373370 Swallow McClelland 089367U No 23334362 Willow East of College 094505R No 20433459 Criteria Weighting of Criteria Total Benefit Rating for Grade Separation Railroad Crossing Decrease in Vehicle Delay Identified as Grade Separation in MSP Multimodal Benefit Predicted Accident Cost Reduction Emergency Vehicle Response Benefit Adjacent Land Use Rating Constructability OperationsPractical Safety Page 4 1.2 Packet Pg. 8 Attachment: Technical memo, August 8, 2016 (4740 : Railroad Crossings) Memorandum Railroad Crossing Prioritization Study August 8, 2016 Preliminary Screening Summary The evaluation spreadsheet has been designed to help the decision-maker quickly and clearly see a comparison of the proposed projects by aggregating a large quantity of variables into a single summary table. It is a snapshot of the existing conditions, designed in a way to allow the City to reevaluate the at- grade crossings as new data becomes available. The evaluation summary is not the final solution to the prioritization process, but rather a method to arrive at a documented, understandable, and justifiable system of screening and short-listing grade separation projects. The list of crossings that are identified as good candidates for grade separation will be prepared for the City of Fort Collins to incorporate into future updates of the Transportation Master Plan. Page 5 1.2 Packet Pg. 9 Attachment: Technical memo, August 8, 2016 (4740 : Railroad Crossings) 1 Railroad Crossing Prioritization Study Rick Richter 8-23-16 ATTACHMENT 3 1.3 Packet Pg. 10 Attachment: Powerpoint presentation (4740 : Railroad Crossings) Railroad Crossing Prioritization 2 • Potential Grade Separation • 22 Arterial Roadway Crossings • Master Plan Vision • Preliminary Study Results 1.3 Packet Pg. 11 Attachment: Powerpoint presentation (4740 : Railroad Crossings) Questions for Council 1. Does Council support grade separated crossings? 1. Does Council have any concerns regarding the rating criteria and subsequent prioritization suggested in the study? 2. Are there areas of concern that staff has not addressed? 3 1.3 Packet Pg. 12 Attachment: Powerpoint presentation (4740 : Railroad Crossings) Rating Criteria Operations • Decrease in Vehicle Delay Costs • Multimodal Benefit Safety • Predicted Accident Cost Reduction • Emergency Vehicle Response Benefit Practical • Adjacent Land Use Rating • Ease of Construction 4 > > > > > > > > > G G G GG G G G GG G G G G G G G G GG G G G G G G G G G G G G G G G BNSF RAILROAD BNSF RAILROAD FORT COLLINS MUNICIPAL RAILROAD GREAT WESTERN RAILROAD Rating Criteria Operations Decrease in Vehicle Delay Costs • Total decrease in annual vehicle delay costs • Based on vehicle volume and train crossing duration data Multimodal Benefit • Increase in benefit to bicycle and transit system • Based on existing bicycle facilities and bus routes 5 1.3 Packet Pg. 14 Attachment: Powerpoint presentation (4740 : Railroad Crossings) Rating Criteria Safety Predicted Accident Cost Reduction • Total predicted annual accident cost reduction • Based on non-train related crashes Emergency Vehicle Response Benefit • Increase to emergency response ability 6 1.3 Packet Pg. 15 Attachment: Powerpoint presentation (4740 : Railroad Crossings) Rating Criteria Practical • Adjacent Land Use Rating • Amount of impact to adjacent land uses and roadway network • Ease of Construction • Ability to construct grade separation • Based on adjacent utilities, ditches, intersections, structures and construction costs 7 1.3 Packet Pg. 16 Attachment: Powerpoint presentation (4740 : Railroad Crossings) Grade Separation Priorities Preliminary Study Results 1. Lemay at Vine 2. Harmony west of Mason 3. Timberline at Vine 4. Vine east of Timberline 5. Prospect west of College 6. Drake at McClelland 7. Mulberry at Riverside 2011 Master Street Plan • Lemay at Vine • Timberline at Vine • Drake at McClelland • Mountain Vista west of I-25 • Trilby east of Shields • Trilby east of Lemay • Carpenter west of Timberline (SH 392) 8 1.3 Packet Pg. 17 Attachment: Powerpoint presentation (4740 : Railroad Crossings) Questions for Council 1. Does Council support grade separated crossings? 1. Does Council have any concerns regarding the rating criteria and subsequent prioritization suggested in the study? 2. Are there areas of concern that staff has not addressed? 9 1.3 Packet Pg. 18 Attachment: Powerpoint presentation (4740 : Railroad Crossings) Thank You! 10 1.3 Packet Pg. 19 Attachment: Powerpoint presentation (4740 : Railroad Crossings) DATE: STAFF: August 23, 2016 Timothy Kemp, Civil Engineer III WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION The existing Lemay Avenue/Vine Drive intersection and the realigned Lemay Avenue/Suniga Road intersection. EXECUTIVE SUMMARY The purpose of this item is to update Council of the project status for realigned Lemay Avenue and Suniga Road, and to discuss design elements, construction funding, and phasing options. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED City staff is presenting traffic and train delay information, concepts of the bridge over the Burlington Northern Santa Fe (BNSF) railway, and funding options. City staff is seeking direction on options for construction funding and feedback regarding the bridge. 1. What direction does Council have regarding the options presented for construction funding? 2. What feedback does Council have on the bridge over the Burlington Northern Santa Fe railway? BACKGROUND / DISCUSSION Lemay Avenue realignment and intersection improvements have been prioritized as the City’s number one Transportation Capital Improvement Project. The improvements will construct a new road and intersection (future Suniga Road and Lemay Avenue) slightly north and east of the existing Vine Drive and Lemay Avenue intersection. The Lemay Avenue realignment and grade separation has been on the City’s Master Street Plan for nearly 30 years and is a critical infrastructure improvement needed to address existing transportation deficiencies and neighborhood livability issues. The existing intersection operations continue to degrade which has led to increased safety, congestion, and access problems for local residents, BNSF railway, emergency services, and the travelling public. Project Goals  Community Revitalization - Complete critical transportation improvements that will enhance connectivity for local neighborhoods to employment, schools, goods and services. Existing residents suffer from the constraints of congestion on a daily basis.  Safety and Multi-Modal Connectivity - Foster a safe, connected, resilient and accessible system for all modes of travel to key activity centers, access to high frequency transit service, and bicycle and pedestrian facilities.  Commerce and Accessibility Improvements - Construction of the improvements will reduce congestion along existing roadways and the BNSF rail corridor, which in turn helps improve railway switching operations and the ability to move goods and services efficiently throughout northeast Fort Collins. 2 Packet Pg. 20 August 23, 2016 Page 2  Expandable Network for the Future - This project is a key element for the future of the Mountain Vista area. The project will be phased to address existing operational and connectivity issues now, and expandable in the future as subsequent development adds capacity to the transportation system. Unlike most railroad crossings within Fort Collins, the existing Vine and Lemay intersection is greatly impacted due to the proximity of the BNSF and Great Western switching yard along Vine Drive. Through discussions with BNSF, there are no plans to move the switching yard or switching operations from this location. Additionally, the existing intersection is severely congested with limited options to expand through lanes or turn capacity due to proximity to houses and driveways. The project will include multi-modal and landscape improvements on existing Lemay, after this section of roadway is downgraded to a local street. Current Tasks City staff is currently working on an Alternatives Analysis to determine the best plan to appropriately serve the project area and increase safety to meet the needs of existing residents and the travelling public. The Alternatives Analysis will consider options including the following:  The grade separation of realigned Lemay Avenue at the BNSF crossing  A roundabout versus signalized intersection at realigned Lemay Avenue and Suniga Road  Construction phasing, construction estimates, and funding scenarios  Cost/benefit of constructing realigned Lemay Avenue as a 2-lane arterial, expandable to a 4-lane arterial in the future as subsequent development adds capacity to the transportation system Staff is currently negotiating right-of-way and easement acquisitions on the Kederike parcel (northeast of the existing Vine and Lemay intersection), in conjunction with City Stormwater and the Northeast College Corridor Outfall (NECCO) project. Construction will begin this fall on the NECCO project which will install large-diameter storm sewer along future Suniga Road and build regional detention/water quality ponds on the Kederike parcel. Council previously approved Ordinance No. 124, 2015 and 029, 2016 in support of these City efforts. Outreach and Public Engagement  February 2016 Public Open House at Streets Facility - 122 people signed in for the event  February 2016 presentation to the Transportation Board  May 2016 presentation to the Futures Committee  May 2016 presentation to the Council Finance Committee  August 10, 2016 Lincoln Neighborhood Ice Cream Social  Ongoing, numerous meetings with property owners in the area  Upcoming this fall o Neighborhood meetings with Andersonville and Alta Vista o Public Open House #2 o Additional presentations to boards and commissions  Project website is available at: <http://www.fcgov.com/engineering/vine-lemay.php> Grant Opportunities The City has an excellent track record with securing federal grants to aid in the design and construction of our projects. This project is not located on a state Highway or a North Front Range Metropolitan Planning Organization (NFRMPO) “regionally significant corridor”. This has hindered the City’s ability to secure grant funding. Staff will continue to look for opportunities, but it is unlikely we will be able to obtain federal funds. Staff has submitted 3 times for TIGER funding, most recently in April 2016, with no success to date. 2 Packet Pg. 21 August 23, 2016 Page 3 ATTACHMENTS 1. Location Map (PDF) 2. Public Meeting Summary (PDF) 3. Tolling Option Memo (PDF) 4. Powerpoint presentation (PDF) 2 Packet Pg. 22 ATTACHMENT 1 2.1 Packet Pg. 23 Attachment: Location Map (4736 : Vine / Lemay / BNSF) ATTACHMENT 2 2.2 Packet Pg. 24 Attachment: Public Meeting Summary (4736 : Vine / Lemay / BNSF) 2.2 Packet Pg. 25 Attachment: Public Meeting Summary (4736 : Vine / Lemay / BNSF) 2.2 Packet Pg. 26 Attachment: Public Meeting Summary (4736 : Vine / Lemay / BNSF) AECOM Technical Services, Inc. 9400 Amberglen Boulevard, Austin, TX 78729 T 512-454-4797 F 512-454-6499 A Trusted Global Environmental, Health and Safety Partner - 1 – Memorandum Date: August 9, 2016 To: City of Fort Collins, CO From: AECOM project team Subject: Lemay Avenue at E. Vine Drive Toll Feasibility Study Introduction This project memorandum summarizes analysis of the financial feasibility of tolling the grade-separated segment of realigned Lemay Avenue. The following assumptions were made: x All electronic tolling with one toll gantry on the bridge x No toll barriers with unimpeded traffic flow x Customers will have either transponder or video billing x Customers will be fined for non-payment violation x Use regional/national private tolling service The Project is expected to provide the following benefits: x Closure of at-grade rail crossing for enhanced operations and safety x Reduction in number and severity of accidents at intersection and rail crossing x Reduced journey times and improved journey time reliability x Improved distribution of traffic from/to Downtown Fort Collins x Reduction in air/noise pollution Traffic & Revenue Analysis Traffic & revenue forecast includes a projection of future traffic volumes under the proposed project configuration and an estimation of annual revenues with the assumed tolling policy. x Existing traffic counts were collected from the City of Fort Collins website including annual daily counts and peak hour turning movement counts at the intersection. x The daily traffic growth rate is derived from population and employment growth in the region. x We assume that, during the 50 years project cycle, the traffic will grow at 2% annual compound rate for the first 15 years, 1% for the second 15 years, and 0.5% for the remainder 20 years. x It is assumed the Project will complete construction and be open to traffic in Year 2020. A total of 50 years is assumed to be the tolling period for the purpose of analysis. x Toll rate for the Lemay grade separation is assumed to be 35 cents for opening year 2020 and escalate with inflation (equivalent to about 1-minute time savings for work related travel and about 1.5-minute time savings for leisure travel). x We assumed through traffic volumes will remain as is with no toll diversion. Also no reduction is applied for ramp up periods since existing route has few viable alternatives. ATTACHMENT 3 2.3 Packet Pg. 27 Attachment: Tolling Option Memo (4736 : Vine / Lemay / BNSF) AECOM Technical Services, Inc. 9400 Amberglen Boulevard, Austin, TX 78729 T 512-454-4797 F 512-454-6499 A Trusted Global Environmental, Health and Safety Partner - 2 – x Future traffic forecast and revenues were calculated and tabulated and the project is expected to generate $87 million in toll revenue over a 50-year period. Project Cost x Upfront construction cost includes $25 million construction cost + $3 million tolling system cost x Toll system maintenance cost is assumed $200,000 a year and escalate at CPI rate. Based on industry practice, the feasibility study also assumes a lifecycle replacement of electronic system every 7 years that is equal to $1 million. x This feasibility study considers toll operation costs in both electronic transponders incurring 8 cents per transaction plus a 2.5% merchant fee and video billing costs. Financial Analysis x The value of the project was assessed using the Net Present Value (NPV) of the discounted cash flows for a 30-year analysis period with a Weighted Average Cost of Capital (WACC) as the discounted rate. A WACC of 4.5% is assumed to be consistent with municipal funding backed by toll revenue stream. There is no consideration of financing requirements such as Debt Service Coverage. Construction cost is assumed to escalate at 3.0%, higher than the 2.0% Retail Price Index which is Federal Reserve goal. x The Net Present Valuation analysis demonstrates that the project does not meet typical market criteria for funding secured on a future toll revenue stream, even when roadway and bridge maintenance costs are not considered in the analysis. Substantial public sector funding would be required to close the funding gap. Tolling Project Risks 1. Political acceptability: The project will require strong advocates and legal authority to overcome the dual obstacles of this Project being the first toll project in Fort Collins and a possible perception of double taxation: tax plus tolls. 2.3 Packet Pg. 28 Attachment: Tolling Option Memo (4736 : Vine / Lemay / BNSF) AECOM Technical Services, Inc. 9400 Amberglen Boulevard, Austin, TX 78729 T 512-454-4797 F 512-454-6499 A Trusted Global Environmental, Health and Safety Partner - 3 – 2. Achieving Local Buy-In: The communities immediately adjacent to the proposed toll road will likely need to use the toll road on multiple occasions each day. The improved safety provided by the elimination of the at-grade rail crossing will be assessed against the effect on net household income. Local buy-in would likely be improved if the project were part of a safety program in which all improvements were tolled. 3. Schedule: Introducing tolling could impact the schedule for completion of the project. o Environmental justice: The specific effects of tolling on communities would be considered as part of an environmental re-evaluation. o Funding: The use of toll revenue financing could accelerate the implementation of the project. 4. Net Revenue: This conceptual analysis has used a rational economic model to assess the potential diversion of traffic due to tolling. Public perception may increase or decrease that diversion of traffic. As the first toll road in Fort Collins, initial market penetration of transponders might be slow, increasing toll operations costs for a facility that offers no economies of scale. Partnership with an existing toll entity could help to mitigate these risks and costs. Disclaimer This technical memorandum is for a high level feasibility study only. The traffic and revenue forecasts are subject to change. It is AECOM’ opinion that the toll revenue projections are reasonable at this level and that they have been prepared in accordance with accepted practice. However, given the uncertainties within the current international and economic climate, it is important to note the following limitations: x This report presents the results of AECOM’ consideration of the information available as of the date hereof and the application of AECOM’ experience and professional judgment to that information. It is not a guarantee of any future events or trends. x The traffic and toll revenue forecasts will be subject to future economic and social conditions, demographic developments and regional transportation construction activities that cannot be predicted with certainty. x The projections contained in this report, while presented with numeric specificity, are based on a number of estimates and assumptions which, though considered reasonable to us, are inherently subject to significant economic and competitive uncertainties and contingencies, many of which are beyond the control of the client and cannot be predicted with certainty. In many instances, a broad range of alternative assumptions could be considered reasonable. Changes in the assumptions used could result in material differences in projected outcomes. x AECOM’ toll revenue projections only represent its best judgment and AECOM does not warrant or represent that the actual toll revenues will not vary from its projections, estimates, and forecasts. x If, for any reason, any of these conditions should change due to changes in the economy or competitive environment, or other factors, AECOM’ opinions or estimates may be affected. x This technical memorandum is for the limited purpose of providing information to the City of Fort Collins, and is not intended and is not to be used or read to provide any municipal advisory advice or otherwise used in connection with the offering of any securities that may be issued in connection with the Lemay/Vine Grade Separation Project and no person or entity other than the City of Fort Collins, is authorized or permitted to rely on this report without the express written consent of AECOM. 2.3 Packet Pg. 29 Attachment: Tolling Option Memo (4736 : Vine / Lemay / BNSF) 1 Vine and Lemay – Council Work Session Engineering Department August 23, 2016 ATTACHMENT 4 2.4 Packet Pg. 30 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Presentation Overview 2 • Crossing Conditions • Traffic Impacts • Alternatives Analysis • Construction Funding 2.4 Packet Pg. 31 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Public Outreach 3 • Public Open House at Streets Facility – 122 people signed in • Transportation Board Presentation • Futures Committee • Council Finance Committee • Multiple Events associated with Lincoln Avenue Corridor • More Public Engagement Events this Fall 2.4 Packet Pg. 32 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Existing Deficiencies 4 • Safety, Congestion, Delay, and Air Quality Issues • Neighborhood Livability, Access, and Connectivity Concerns • Substandard Multi- Modal Infrastructure 2.4 Packet Pg. 33 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Total Blockage Duration by Month 5 0 18 36 March April May June July Aug Sept Oct Nov Dec Jan Feb March BNSF - Drake and McClelland Crossing BNSF - Vine and Lemay Crossing Blockage (Hours) 27 9 2.4 Packet Pg. 34 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Impacts - Current Traffic Operations 6 • 10 Minute or Greater Train Blockage occurs nearly once per day • Traffic System Impacts – Lemay / Vine – Lemay / Conifer – Lemay / Lincoln Influence Area 2.4 Packet Pg. 35 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Preliminary Alternatives Analysis 7 2.4 Packet Pg. 36 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Current Status and 2016 Goals 8 • Property Owner and Neighborhood Meetings, Public Open Houses, Boards and Commissions • Preliminary Design (30% Plans) • Right-of-Way and Easement Acquisitions north of Vine Drive • Alternatives Analysis Report for Council Consideration, Fall 2016 2.4 Packet Pg. 37 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Financial Picture (Full Build Out) 9 Project Funding Current Appropriation Capital Expansion Fee (Street Oversizing) BNSF Contribution Local Street Obligation Unfunded $16 M - $18 M $5.0 M $1.5 M $1.0 M $0.5 M Total Project Cost: $24 M - $26 M 2.4 Packet Pg. 38 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Potential Funding Sources 10 Traditional Methods to Fill the Funding Gap • Budgeting for Outcomes and Mid Budget Processes • $2.0 M Offer Submitted for 2017 / 2018 Budget • Renewal of Community Capital Improvement Tax • Evaluation of Federal Grants – Unsuccessful with Three (3) TIGER Applications – Low Probability of Large Format Grant Opportunities – Not on Regional, State or Federal Roadway System 2.4 Packet Pg. 39 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Potential Funding Sources 11 Less Traditional Methods to Fill the Funding Gap – Expansion of Capital Expansion Fee – Reserves to “front” Local Street obligations – New Sales Tax Options • 5-year 1/4 Cent or Dedicated, Sun Setting 1/10 Cent – Tolling Option (Summary Memo in AIS Packet) – “Trip Shed” Fee (Development Contributions) 2.4 Packet Pg. 40 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Next Steps 12 • Continued City-wide Outreach and Public Engagement • Presentations to Boards and Commissions • Finalize Alternatives Analysis Report • Continued Property Owner Meetings • Lemay Local Street Design and Input (Buckingham to Vine) • BNSF and Public Utilities Commission Meeting (late Fall, 2016) 2.4 Packet Pg. 41 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) Questions 13 • What direction does Council have regarding the options presented for construction funding? • What feedback does Council have on the bridge over the BNSF Railway? 2.4 Packet Pg. 42 Attachment: Powerpoint presentation (4736 : Vine / Lemay / BNSF) DATE: STAFF: August 23, 2016 Seonah Kendall, Economic Policy & Project Manager Mike Beckstead, Chief Financial Officer WORK SESSION ITEM City Council SUBJECT FOR DISCUSSION Broadband Plan Update - Business Model and Feasibility Analysis. EXECUTIVE SUMMARY The purpose of this item is to provide City Council an update on the Broadband Plan and review the recent findings of the updated Broadband Market Demand Study, Broadband Feasibility Analysis by Business Models, Baseline Financial Feasibility, and next steps. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED This is an overview of the different business model structures, financial feasibility and next steps. BACKGROUND / DISCUSSION On November 3, 2015, 83% of Fort Collins voters supported Ballot Issue 2B, which overturned Senate Bill 05-152 removing legal barriers for the City’s involvement, direct or indirect, in providing telecommunication services. This vote allows the City and citizens to consider and pursue the best broadband solutions based on the needs and desires of our community. It is important to note that the November election did not commit the City to provide broadband services in Fort Collins, nor does it mean that such services would be available immediately. Additionally, in late 2015, the City of Fort Collins engaged Uptown Services LLC, a Colorado consulting firm, to provide six deliverables related to the City’s exploration of broadband services:  Asset Report and Map(s)  Broadband Service Market Demand Report  Target Broadband Standards Report  Feasibility Analysis - by business model  Strategic, Financial, Operational and Technological Risk and Opportunities Report - by business model  Broadband Strategic Plan Synopsis and Recommendation Report This update will focus on the updated market demand study, business model alternatives, sensitivity analysis, baseline financial feasibility model and next steps. City Broadband Strategic Objectives The Broadband Plan overall objective is to bring high speed Internet to the City of Fort Collins, while making an informed decision through evaluation of risk and opportunities. Additional benefits include competitive pricing (market pricing at $70/month or less for 1 Gbps and an affordable Internet tier), universal coverage across the City, underground service for improved reliability, and providing services within a reasonable timeframe. Fort Collins Market Demand Study Update In March 2016, Comcast announced the 2016 scheduled rollout of its 1 Gbps-capable DOCSIS 3.1technologies to residential and business users in Atlanta, Nashville, Chicago, Detroit and Miami. Estimated full rollout is anticipated by the end of 2017. Comcast’s promotional price for 1 Gbps DOCSIS 3.1 is $70/month for a 3-year contract or $139.95/month on a non-contract basis. The City’s consultants, Uptown Services, had already 3 Packet Pg. 43 August 23, 2016 Page 2 performed the initial Fort Collins Market Demand Study which serves as inputs to model the City’s financial feasibility analysis. The statistically-valid initial study estimated demand and take-rate (i.e., potential subscribership rate) assumptions by sector. However, with the Comcast announcement, there were concerns of the potential loss of “first market advantage” in Fort Collins. Thus, Uptown completed a second market demand study (from the initial 400 respondents) to understand the price sensitivity of the Fort Collins market and the potential lost market share. The original pre-DOCSIS 3.1 survey indicated that there is high purchase intent by residents, estimating a take- rate of 38.8%. The survey describes residential and small-to-medium sized business market (or “mass market”) needs are lower prices, increased Internet speed and improved reliability. The updated study surveyed 100 of the original 400 respondents and tested three post-DOCSIS 3.1 scenarios:  1Gbps provider at $70/month (City loses first mover advantage)  City offers 1Gbps at $50/month and Comcast offers DOCSIS 3.1 1Gbps at $70/month (baseline pro forma)  City and Comcast both offer 1 Gbps at $70/month (to evaluate elasticity) Currently, Comcast has 57% of the current Internet market share in Fort Collins; Century Link has 37%, satellite and other methods account for 6% of the market. If Comcast was to provide 1 Gbps before a rollout of any other 1 Gbps fiber-to-the-premise (FTTP), the market disbursement would be: Comcast - 62%, Century Link 33%, satellite and other methods at 5% of the Fort Collins market. In essence, Comcast would add 5 points in market share and lock in 22% of the Fort Collins Internet subscribers with a $70 Gig tier. This results in a drop of FTTP Internet penetration from 38.8% to 30.2% for pro forma analysis purposes. Additionally, voice service penetration would drop from 28.6% to 8.4% if Comcast was to roll out DOCSIS 3.1 before a FTTP system build out. Business Model Alternatives and Sensitivity Analysis Each market and business model presents a unique combination of opportunities and challenges. City staff and Uptown Services modeled the outcome of each business model from a quantitative perspective to allow for a back-to-back comparison for each scenario. Three broadband business models were explored: municipal utility/retail, wholesale and franchise.  Municipal-owned Retail Municipal utility/retail model is similar to the model that Longmont, CO is providing. The municipality would build and maintain the physical fiber infrastructure network to pass all premises. The municipality acts as the Internet and voice service provider and manages all customer acquisition and services (video is optional).  Public/Private Partnership Examples of public/private partnerships (or “wholesale model”) are Huntsville, Alabama (Google Fiber) and Westminster, Maryland (Ting). Each wholesale model is unique to the community and private partner. The structure of wholesale terms and risk allocation has improved within municipal broadband with lessons learned from legacy wholesale agreements. The general basis is that the municipality builds and maintains the physical fiber network to pass all premises. The private partner or “retailer” is responsible for all other functions/costs such as customer acquisition, connection, Internet service provider and customer service. The municipality is compensated via monthly per passing (connected or not) and/or per connected premises fees. Success is dependent upon private partner. Additionally, many municipalities have required a non-exclusive franchise agreement that allows additional potential parties to utilize the network.  Franchise A franchise model is similar to Google Fiber in Kansas City and Allo in Lincoln, NB. The municipality grants a franchise agreement, including terms for franchise fee, premises passed, ROW access and construction requirements. End user fees are not specified or regulated other than non-discriminatory pricing. The private 3 Packet Pg. 44 August 23, 2016 Page 3 provider builds and maintains the physical infrastructure and acts as the Internet provider who manages all customer acquisition and services. A disadvantage for a municipality is that there is less control of quality, availability and technological advances. Additionally, companies such as Google Fiber has moved away from this type of model and moved toward a public/private partnership. Municipal Retail Wholesale (alternative) Franchise Capital Expenditures (CapEx) (Years 1 - 5) $110M $85M $0 CapEx (Years 6 - 15) - upgrades/maintenance $15M $3M $0 Total CapEx $125M $88M $0 FTE 33 5 0 Project Break Even 15 Years 12 - 18 Years N/A Uptown Findings A retail model is financially feasible-even in the post-DOCSIS 3.1 environment. Total funding requirement for a retail model is $125M with the project becoming net cash positive in 15 years. Recent terms announced in other communities are not attractive for the wholesale (or public/private partnership) due to the higher risk on municipalities and low pass per premise fee paid to the municipalities (does not become net cash positive within 15 years). Fort Collins pass per premise fee requirement needs are higher due to higher costs associated to undergrounding infrastructure. However, using an alternative scenario with an ideal pass per premise fee, a wholesale model could be feasible. Total funding requirement for a wholesale model is $88M. Baseline Financial Feasibility Models The feasibility analysis methodology creates a market-driven demand planning tool that is flexible and will allow for various options and strategies rather than a detailed business plan of a single option. Uptown Services, with City staff, has created a baseline financial analysis using the municipal broadband (retail) model. Key assumptions included in the baseline financial feasibility model are:  Post-DOCSIS 3.1 rollout in Fort Collins o 30.2% penetration rate  Build-out in 5 years (1 year of engineering, 3 - 4 years of installation);  Construction cost of $984/premise passed (based on sample design),  Hiring of 33 FTEs and the purchase of assets such as property, plant and equipment for a full-service Internet provider. The cost per passing (CPP) is the most significant assumption used in the model. The CPP was calculated by sample design-staff identified 7 subdivisions representative of the community for Uptown to use to identify costs associated. Single family homes were weighted based on parcels per zoning district and include labor, materials and a 15% contingency for the initial infrastructure build out. Multi-Density Units and commercial sampling were not completed. MDU cost is estimated to be 50% of single family costs. Weighted CPP is $984/passing. In conclusion, the baseline financial feasibility model is viable, becoming net cash positive by year 15. Next Steps Based on the findings of the financial and strategic analysis, the broadband core team will engage citizens, businesses and City Council to present findings, goals and strategies of the broadband plan. Additionally, City staff will begin exploratory discussions with potential partners and incumbents about the different business models. As additional information becomes available, financial feasibility analysis will be revised. Following this work and community outreach, staff anticipates having a recommendation outlining a long-term broadband plan and recap of community outreach for the Council work session scheduled for December 13, 2016. 3 Packet Pg. 45 August 23, 2016 Page 4 ATTACHMENTS 1. Broadband Feasibility Analysis (PDF) 2. Broadband Assessment of Risk and Opportunity Report (PDF) 3. Powerpoint presentation (PDF) 3 Packet Pg. 46 FTTP Feasibility Study for The City of Fort Collins Task 4 Report: Feasibility Analysis August 2016 Uptown Services, LLC Dave Stockton & Neil Shaw, Principals ATTACHMENT 1 3.1 Packet Pg. 47 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 2 † Overview of Potential Business Structures † Retail (Longmont Model) † Wholesale (Huntsville and Westminster Models) † Franchise (Lincoln Model) † Financial Modelling Overview † Pro Forma Analysis: Retail Model † Baseline Detailed and Summary Financial Metrics † Incremental Financial Impact of Adding Video Services † Pro Forma Analysis: Wholesale and Franchise Models † Summary Financial Metrics † Pro Forma Conclusions Study conducted by Uptown Services, LLC 3.1 Packet Pg. 48 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and Potential Business Structures Overview 3.1 Packet Pg. 49 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 4 † Franchise Model † City grants franchise agreement including terms for franchise fee, premises passed, ROW access, and construction requirements † End user fees are not specified or regulated other than non-discriminatory pricing † City executes conduit lease agreement (optional) providing long term access rights to City conduit † City does not fund the FTTP system* † Wholesale Model † City builds and maintains the physical fiber network to pass all premises † Retailer is responsible for all other functions/costs † Details of partner roles on next slide Study conducted by Uptown Services, LLC * Pro forma analysis is not relevant to the Franchise Model with no City investment requirement. 3.1 Packet Pg. 50 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 Study conducted by Uptown Services, LLC 5 Business Model Municipality Service Provider Funding Retail Longmont, Colorado The City The City via Revenue or General Obligation Bond Wholesale Westminster, Maryland Ting Huntsville, Alabama Google Fiber Franchise Lincoln, Nebraska Allo The Service Provider Austin, Texas & Others Google Fiber 3.1 Packet Pg. 51 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 6 Function Operational Responsibility Longmont Model Westminster Model Huntsville Model Private Partner NA Ting Google Fiber Total Premises 40,000 7,000 105,000 Network Services Data: City Voice: CLEC Video: Not Offered Data: RSP Video & Voice: RSP or 3rd Party Not Specified Network Assets Backbone, Feeder, and Distribution Conduit/Fiber City City FTTP Electronics RSP Fiber Drop City RSP ONT and Inside Wiring RSP Network Maintenance Fiber & Conduit City Electronics RSP Outage Response City Not Specified Bandwidth Backbone Interconnection RSP Software OSS/BSS RSP Fiber Management City & RSP Marketing & Promotion Advertising, Sales, Branding RSP or 3rd Party Community Engagement City & RSP Not Specified End User Pricing RSP Customer Operations Help Desk, Service Calls, Billing RSP or 3rd Party Customer Installs and Disconnects RSP Study conducted by Uptown Services, LLC 3.1 Packet Pg. 52 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 7 † City Role † Design, construction, and maintenance of the fiber network. City retains title to the network. † 24/7 availability for unscheduled maintenance with 4 hour on-site response timeframe † Network Point of Demarcation † Residential: Exterior wall closest to public ROW † Commercial: Patch panel in telecom closet † Services † Triple Play with Ting providing data service (up to 1Gbps) and ‘arranging’ for voice and video † Retail rates are at the sole discretion of Ting † Financial Terms † Premise Passed Fee: $6/month † Connected Premise Fee: $17/month † Fees apply whether business or residential connection † ARPU Adjustment: The Connected Premise Fee will increase by $1 for every 10% increase in Ting’s realized ARPU (compared to baselined ARPU at 1,500 subscribers) Study conducted by Uptown Services, LLC 3.1 Packet Pg. 53 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 8 † Ting is exclusive provider for Phase 1 † ‘Open Access’, but with initial period of exclusivity for Ting for data service. Exclusivity protection lasts until either: † Two years after the launch of each deployment phase service area, or † Penetration reaches 20% and/or Ting achieves 3,000 end user customers (of 7,200 HHs) † Ting operates under 2 roles: Network Operator and Services Provider † As Network operator it is the active wholesaler to unaffiliated Service providers that it will be competing with. The City has no active role with RSPs other than Ting. † Ting will individually negotiate wholesale agreements with each additional RSP. Agreements must be non-discriminatory but terms can vary across these agreements. † As Network Operator Ting will install and maintain all premise inside wiring and CPE, including the ONT. The ONT will be outdoor vs. indoor. † Other Terms † 10 Year Term with 2 ten year renewal periods † City must renew if actual wholesale revenues exceed debt service by 10% or more † Termination for Convenience: City can terminate with 6 months notice Study conducted by Uptown Services, LLC 3.1 Packet Pg. 54 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 9 † Background † Virtual Wireless Network Operator launched in 2012. Sprint and T-Mobile are their host networks. † Owned by parent Tucows † FTTP Services † Residential and commercial Internet access (1G residential/commercial and 5M residential) † Video in development † Retail Service Provider for 2 municipal FTTP systems † May 2015: Charlottesville, VA (18k households) † August 2015: Westminster, MD (7k households) † In development: Holly Springs, NC (8k households) and Sandpoint, ID (4k households) † Overbuild Competitors † Charlottesville, VA: Comcast and CenturyLink † Westminster, MD: Comcast and Verizon † Holly Springs, NC: Study conducted by Uptown Services, LLC 3.1 Packet Pg. 55 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 10 † City Role † Provide access to “excess fibers” beyond what Huntsville Utilities requires † FTTP system design, subject to review and approval by Google Fiber † Obtain all required permits † Construction, and maintenance of the fiber network. City retains title to the network. † Network Point of Demarcation † Dark fiber ports originating at a colocation structure † Dark fiber ports terminating at a Multiport Service Terminal or Network Access Point † Services † Not specified in Fiber Network Agreement † Financial Terms † Premise Passed Fee: $5/month per MST port † Premise Passed Fee: $100/month per NAP port † Backbone Fiber Strands: $3,500/month each † Fees apply whether business or residential connection Study conducted by Uptown Services, LLC 3.1 Packet Pg. 56 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 11 † Construction Timeframes & Milestone Targets † Completion of Phase 1 is due 6 months after design acceptance † All construction completed 3 years from Phase 1 design acceptance † Targeted total premises passed of 105,000 premises upon network completion † Missed milestone penalties † If fewer than 95k premises passed at network completion, 1% of the total lease fee will be credited for each day of delay † If fewer than 75k premises passed at network completion, Google may terminate agreement † Google Fiber (GF) can terminate the Fiber Lease Agreement under multiple conditions † If the City cannot correct design deficiencies within 30 days of GF submitting revisions † If the City cannot provide a video franchise agreement within 3 months of the Lease Agreement, or the video franchise is revoked during the Lease Agreement term † If the City fails to construct and deliver Phase 1 of the network on time † If the City fails to construct the complete network on time Study conducted by Uptown Services, LLC 3.1 Packet Pg. 57 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 12 † City Role † Access to all City conduit via 25 year lease † No investment by the City † No guarantee of coverage/premises passed – only best effort † End user prices † Retail pricing not specified † Affordable Internet tier will be offered † Ability to Compete against Comcast? † Experience as an independent telco in NE – not an overbuilder † 1G priced at $90 MRC Study conducted by Uptown Services, LLC 3.1 Packet Pg. 58 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 13 Structure Model Network Services Pre DOCSIS3.1 Post DOCSIS3.1 Retail “Longmont Model” Data & Voice Services per Task 2 Report Pre-DOCSIS VIEW Penetration (Res / Bus) • Internet: 38.8% / 45% • Voice: 28.6% / 41% • Video: 24.6% / 0% BASELINE (Post-DOCSIS) Penetration updated per follow-up survey • Res Internet: 30.2% • Res Voice: 8.4% (at peak) • Bus: No Change BASELINE + VIDEO • Res Video: 19.1% Wholesale “Westminster Model” Dark fiber lease Fees based on premises passed and connected WESTMINSTER Penetration = Baseline • Residential: 38.8% • Commercial: 45.0% Westminster contract wholesale rates WESTMINSTER -50% Penetration @ 50% of Baseline • Residential: 15.1% • Commercial: 45.0% “Huntsville Model” Dark fiber lease Fees based on premises passed HUNTSVILLE Penetration is irrelevant Huntsville contract wholesale rates N/A Franchise Lincoln Long term conduit lease (optional) Financial analysis not required (No City investment) Study conducted by Uptown Services, LLC 3.1 Packet Pg. 59 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and Pro Forma Analysis Retail Model 3.1 Packet Pg. 60 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 15 † Reflects specific Ft. Collins market conditions † Quantitative market research † Sample designs to evaluate and cost out construction options and methods † Salaries, wages, and overhead † Retail Business Structure † Wholesale options evaluated as separate models † Based on Longmont and Other Municipal FTTP Deployments † Headcount and contractor costs † Recent bids for equipment and construction labor † Bids and proposals for software, CLEC partner terms † Assumes Comcast deployment of DOCSIS3.1 and reduced penetration impact (details provided in the Task 5 Report) † Capital budget uses estimated cost/passing + 15% contingency † Long term debt interest rate at 3.0% includes 75 basis point contingency Study conducted by Uptown Services, LLC 3.1 Packet Pg. 61 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 16 $0 $5 $10 $15 $20 $25 $30 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Baseline Revenue (in millions) Other High Cap Voice Internet August 16 KEY INPUTS • Premises • Residential: 62,000 • Commercial: 8,000 • % Complex: 5% • Year 5 Penetration • Internet: 30.2% • Voice (eroded): 8.4% • Residential Internet • Affordable Internet: $10.00 • 25Mbps Tier: $39.95 • 1Gbps Tier: $49.95 • WiFi Upgrade: $7.95 • Commercial Internet • 25Mbps Tier: $59.95 • 50Mbps Tier: $69.95 • WiFi Upgrade: $9.95 8/17/2016 17 Direct Access Configuration Transport Lease 2 10G transport circuits to 910 15th Street in Denver • A Location is 300 Laporte Ave • Z Location is Meet Me Room at 910 POP • Provider “A”: 10G circuit for $13,126 MRC/$0 NRC and 3 year term • Provider “B”: 10G circuit for $8,070 MRC/$200 NRC and 3 year term Access Lease 2 backbone connections at 910 15th for 10G capacity (CDR) on each • Provider “A”: 10G Bandwidth for $7,900 MRC/$0 NRC and 2 year term • Provider “B”: 10G circuit for $3,400 MRC/$0 NRC and 5 year term • Lease IP addresses (IPv4). Budget at 40¢ each. Other Fees X-Connect: $250 MRC per circuit x 2 = $500 MRC There are 2 strategy options for the City to acquire the necessary bandwidth to provide Internet access service: A. Contract for delivered bandwidth to the City network headend from a service provider B. Lease/build a transport circuit for direct access to a major POP and separately lease bandwidth from another provider via x-connect to their cage The direct access solution is more efficient, even at launch, given the scale of the Fort Collins FTTP system with a composite cost of $1.63/Mbps ($1.06 for transport and $.57/Mbps for bandwidth) Study conducted by Uptown Services, LLC 3.1 Packet Pg. 63 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 18 Yr2 Yr3 Yr4 Yr5 Yr6 Yr7 Yr8 Yr9 Yr10 Yr11 Yr12 Yr13 Yr14 Yr15 Bandwidth Required (Gbps) 10 20 40 70 90 110 120 140 150 170 180 200 210 220 Annual Bandwidth Fees (000's) $68 $137 $216 $378 $486 $528 $576 $672 $630 $714 $756 $720 $756 $792 Bandwidth $/Sub $19.11 $7.18 $5.05 $5.47 $5.85 $6.27 $6.81 $7.91 $7.29 $8.23 $8.68 $8.09 $8.47 $8.83 $137 $216 $378 $486 $528 $576 $672 $630 $714 $756 $720 $756 $792 $- $100 $200 $300 $400 $500 $600 $700 $800 $900 0 50 100 150 200 250 Annual Bandwidth Fees (000’s) Bandwidth Required (Gbps) Study conducted by Uptown Services, LLC 3.1 Packet Pg. 64 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 19 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Voice Revenue & COGS (in millions) COGS Gross Margin $ Gross Margin % August 16 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 Year 1 Year 2 Year 3 Year 4 20 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Baseline Opex (in millions) Internet Backbone/IPAddresses Professional Services Staffing Expenses Vehicle Maintenance Vendor Maintenance Rents and Utilities August 16 KEY INPUTS • Bandwidth/IP Addresses • 2 transport circuits to Denver POP (quoted) • Bandwidth & x-connect fee at POP (quoted) • Allocated bandwidth starting at 1.5M (res) and 750K (com) per user • IPv4 lease fee of $.40/address/mo. • Staffing • Headcount per detail slide (excludes customer care as SG&A) • 2.5% annual wage increase • 30% benefits loading • Vehicle Maintenance 21 $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 $1.2 $1.4 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Baseline SG&A (in millions) Marketing Expenses Customer Service Expenses Billing Expenses August 16 KEY INPUTS • Marketing • Year 1: $100k • Years 2-5: $250k • Year 6+: 1% of revenues • Customer Service • Commercial Acct Reps: 2 FTE • CSRs: 4 FTE (Year 2) • CSRs: 6 FTE (Years 5+) • 2.5% annual wage increase • 30% benefits loading • Billing • 80% of residential and 50% of commercial using paperless billing • Paper bill cost of $.75/each/month and growing 3% annually 22 † Dedicated FTTP System Full Time Equivalents (FTE) † System GM † Marketing Coordinator † MDU Account Manager † Commercial Account Rep † Sales Engineer † Headend Technician † Data Technician † Field Ops Supervisor † Positions funded at City wage scale midpoints and 30% benefits loading and 2.5% annual salary increase 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 68 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 23 † Customer / Technical Service Representatives (CSRs/TSRs) † CSRs handle inbound/office sales, order entry and first tier support † TSRs handle all second tier customer support, dispatch and service provisioning † Staffed at 1 FTE per 2k accounts growing to 4k by Year 5, but with minimum of 3 FTE each for CSR and TSR positions to ensure phone coverage † Install Technicians † Installs are 2-phase with pre-install followed by separate premise install † All pre-installs completed by a contractor at fixed rate ($200) for Years 1-5, and then insourced † Premise installs are completed by internal FTE, except in Year 4 (25%) and Year 5 (50%) by a contractor at fixed rate ($250) to maintain Install Tech headcount at long term levels † Each Install Tech can complete 3/day growing to 4/day by Year 5 † Service Technicians † Service techs fix subscriber problems † Service call volume equals 50% of all subscribers/year dropping to 25% by year 5 † Each Service Tech can complete 4/day growing to 6/day by Year 5 † Maintenance Technicians † Network techs maintain the fiber system from the backbone to the network access point. Network tech is most senior tech in the line crew † 1 per 1,000 plant miles 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 69 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 24 Position Title Salary (unloaded) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 System GM $135,000 1 1 1 1 1 1 1 Marketing Coordinator $75,000 .5 1 1 1 1 1 1 MDU Account Manager $75,000 1 2 2 2 2 2 2 Comm. Acct Rep $80,000 1 2 2 2 2 2 2 Sales Engineer $80,000 1 1 1 1 1 1 1 Headend Tech $95,000 Data Tech $105,000 1 2 2 2 2 2 2 Field Ops Supervisor $80,000 1 1 1 1 1 CSRs $50,000 4 4 5 6 6 6 TSRs $60,000 4 4 5 6 6 6 Install Techs $55,000 3 7 6 5 6 5 Maintenance Techs $65,000 1 1 2 2 2 2 Service Techs $60,000 1 3 4 4 4 4 Total Headcount 5.5 22 29 32 33 34 33 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 70 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 25 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Year 11Year 12Year 13Year 14Year 15 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 Internet Backbone/IPAddresses Professional Services Right of Way Fees Staffing expenses Vehicle maintenance Vendor Maintenance Rents and Utilities Marketing Expenses 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 71 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 26 † Network Construction † OSP Construction: $950 composite cost per meter passed † Subsequent plant extensions: $450/meter passed † Backbone/Feeder Construction: $100/meter passed † Year 10 Network electronics upgrade: $75/premise passed † Facility Capital Costs † Broadband Offices & Shop Location: 8,800 Sf (Offices) and 9,500 Sf (Shop) † $5.6M (retail) or $1M (wholesale) via Facilities Quote † Other Capital Costs † Implementation support: $480k or $240k (wholesale) † Back Office Systems (OSS/BSS) † OSS/BSS: $300k † Fiber Management & Network Management: $250k † Fixed Equipment † Backbone electronics and core HE switch: $600k † Internet systems back office: $125k † Field Tech Equipment/Tools: $250k Study conducted by Uptown Services, LLC 3.1 Packet Pg. 72 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 27 † Vehicles † Service Vans Per Install Technician: 1.0 † Heavy Service Trucks Per Maintenance Technician: 0.5 † Service vans: 13 at $45k each † Heavy Service Trucks (non-insulated): 1 at $90k each † Install Rigs: 1 per Install Technician at $20k each † Vehicles replaced at 6 year intervals † Contract Labor † Pre-Installs: 100% of Years 1-5 3 at $200 each † Premise Installs: 25% of Year 4 and 50% of Year 5 at $250 each † Optical Network Terminals (ONTs) † Residential/Business ONT (non-WiFi): $140 each † Residential/Business ONT (80211.ac WiFi): $240 each † Year 7 ONT upgrade: $700k ($40/ea.) † Fiber Drop & Powering † Fiber drop and connectors: $75 each † Power cord and UPS: $52 each ($12 for non-voice install without UPS Study conducted by Uptown Services, LLC 3.1 Packet Pg. 73 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 28 † Engineering and Integration † Walk out & strand mapping: $250 per mile † Make ready engineering: $0 per mile † FTTP design: $3,000 per mile † Construction management services: $4,000 per mile † As-built drawings: $250 per mile † Backbone/Feeder design: $75k flat fee † Locates † Year 1 budget of $216k in capex † Ongoing annual operating expense of $266k to staff 4 locators Study conducted by Uptown Services, LLC 3.1 Packet Pg. 74 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 29 † Long term financing † Two rounds of financing (Years 1 and 4) † Three years interest only † 12 years of level payments † 2.0% issuance, $0 reserve requirement † Interest rate – 3.75% for Year 1 issue and 4.75% for Year 4 issue † Short term financing † Provides for cash needs not covered by long term financing † Balance accumulates over first five years including interest † Level payments begin in year six over ten year payment plan † Start-up period included as Year 1 of the business case † No revenues assumed during first year of the plan † Technical Trial underway at the end of Year 1 † Other assumptions † Bad debt = 1.5% of gross revenues † 2% interest on cash reserves † Discount rate = 5% for present value calculations † 10 billable months in year2 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 75 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 30 $79,985,272, 73% $5,600,000, 5% $552,000 , 1% $550,000 , 1% $0, 0% $4,589,245, 4% $791,817, 1% $7,021,532, 6% $3,995,869, 4% $2,632,646, 2% $0, 0% $3,745,502, 3% Five Year Capex = $110M Network Construction Facility Capital Costs Other Capital Costs Back Office Systems Middleware and Conditional Access Fixed Equipment Vehicles Contract Installation FTTP ONTs Fiber Drop and Powering Converters Engineering Services 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 76 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 31 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Year 11Year 12Year 13Year 14Year 15 -$5,000,000 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 Network Construction Facility Capital Costs Other Capital Costs Back Office Systems Middleware & Conditional Access Fixed Equipment Vehicles Contract Installation FTTP ONTs Fiber Drop and Powering Converters Engineering Services 8/17/2016 Study conducted by Uptown Services, LLC Network Construction Electronics Upgrade ONT Upgrade Start-Up Tasks 3.1 Packet Pg. 77 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and Study conducted by Uptown Services, LLC 32 ($10) ($5) $0 $5 $10 $15 $20 Operating Income Interest Expense Bad Debt Interest Income Earnings Before Taxes and Depreciation 8/17/2016 3.1 Packet Pg. 78 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and Study conducted by Uptown Services, LLC 33 ($40) ($30) ($20) ($10) $0 $10 $20 $30 $40 $50 $60 Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10Year11Year12Year13Year14Year15 Earnings Before Taxes and Depreciation Capital Spending Equity Proceeds Cash Flow 8/17/2016 3.1 Packet Pg. 79 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and Study conducted by Uptown Services, LLC 34 ($140) ($120) ($100) ($80) ($60) ($40) ($20) $0 $20 $40 $60 Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15 Cash Reserves Long Term Debt Short Term Debt Total Net Cash 8/17/2016 3.1 Packet Pg. 80 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and Triple Play with Video Baseline + Video 3.1 Packet Pg. 81 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 36 † Incremental Opex Requirements † NCTC membership fee: $62k in Year 1 † Leased circuit to LiveVU POP for video feed transport: $8k/month † LiveVU license fee: $1.75 per video subscriber/month † Headend Technician: 1 additional FTE † CSR:Subscriber Ratio: Drops from 1:2,000 to 1:1,500 (Year 1) and 1:4,000 to 1:3,000 (Year 5) † Service Call Truck Rolls: Drops from 4/Tech/Day to 3/Tech/Day (Year 1) and 6/Tech/Day to 4/Tech/Day (Year 5) † OSS/BSS: Increases from $300k to $350k † Install Contractor: Premise install cost increases from $250 to $300 † Incremental Capex Requirements † Video hub site facility cost: $400k † Video hub site electronics: $455k (LiveVU terrestrial delivery) † Headend design and integration: $30k † HD and HD/DVR set tops: $100 and $225 each respectively † Middleware (initial license fee): $275k † Middleware (per video subscriber): $52 per year † Conditional Access (initial license fee): $25k † Conditional Access (per video subscriber): $22 per year 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 82 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 37 ($140) ($120) ($100) ($80) ($60) ($40) ($20) $0 $20 $40 $60 Year1 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15 Millions Baseline Revenue Baseline + Video Revenue Baseline Net Cash Baseline + Video Net Cash 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 83 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and Pro Forma Analysis Wholesale Models 3.1 Packet Pg. 84 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 39 † Shares funding, revenue and operating costs with retailer partner. Typical outcomes: † Capital requirement reduced to 80% of retail † Opex requirement reduced to 10-20% of retail † Revenue reduced to 25-40% of retail † Financial feasibility requires both parties to meet financial return obligations † Municipal: Debt service of the bond(s) † Retailer: Sufficient ROI for shareholders † Wholesale financial terms are key, and depend on financial ‘mechanics’ (Task 5 Report) Study conducted by Uptown Services, LLC 3.1 Packet Pg. 85 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 40 $79,985,272, 94% $1,000,000, 1% $3,745,502, 5% Five Year Capex = $85M Network Construction Facility Capital Costs Other Capital Costs Back Office Systems Middleware and Conditional Access Fixed Equipment Vehicles Contract Installation FTTP ONTs Fiber Drop and Powering Converters Engineering Services 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 86 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 41 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Year 11Year 12Year 13Year 14Year 15 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 Retail Wholesale 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 87 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 42 Position Title Salary (unloaded) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Retail Model/Wholesale Fiber Lease System GM $135,000 1 1 1 1 1 1 1 Marketing Coordinator $75,000 .5 1 1 1 1 1 1 MDU Account Manager $75,000 1 2 2 2 2 2 2 Comm. Acct Rep $80,000 1 2 2 2 2 2 2 Sales Engineer $80,000 1 1 1 1 1 1 1 Headend Tech $95,000 Data Tech $105,000 1 2 2 2 2 2 2 Field Ops Supervisor $80,000 1 1 1 1 1 CSRs $50,000 4 4 5 6 6 6 TSRs $60,000 3 4 / 3 4 / 3 5 / 3 6 / 3 6 / 3 6 / 3 Install Techs $55,000 3 7 6 5 6 5 Maintenance Techs $65,000 1 / 1 1 / 1 2 / 1 2 / 2 2 / 2 2 / 2 Service Techs $60,000 1 3 4 4 4 4 Total Headcount 5.5 / 3 22 / 4 29 / 4 32/ 4 33 / 5 34 / 5 33 / 5 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 88 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 43 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Year 11Year 12Year 13Year 14Year 15 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 Retail Wholesale 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 89 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 44 $0 $5 $10 $15 $20 $25 $30 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Retail Wholesale (Huntsville) Wholesale (Westminster) August 16 3.1 Packet Pg. 90 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 8/17/2016 Study conducted by Uptown Services, LLC 45 ($100) ($90) ($80) ($70) ($60) ($50) ($40) ($30) ($20) ($10) $0 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15 Millions Huntsville Westminster (Pre-DOCSIS3.1) Westminster (Post-DOCSIS3.1) 3.1 Packet Pg. 91 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and August 16 46 † The structure of wholesale terms and risk allocation has improved within municipal broadband with lessons learned from legacy wholesale agreements † Three overall wholesale/franchise models have emerged as contemporary examples: † Wholesale: City funds the build and charges retailer monthly fees per premise passed and/or per connection † Wholesale: City funds the build and leases dark fiber to the retailer † Franchise: City provides franchise (with or without conduit IRU) and retailer funds the incremental build costs † The current wholesale models are not strategically or financially viable for Ft. Collins under the terms of the actual agreements reviewed † Lease rates are too low to pay off the long term debt from the fiber build † Retailer price levels of $90 Gig will not be competitive in a DOCSIS3.1 environment † Retailer is not bound to serve all premises and can cherry pick service areas † Possible Exception: Google Fiber funded by Alphabet and not the City* * Noting that the Google Fiber-funded deployed markets average almost 2.6M population. 3.1 Packet Pg. 92 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and Pro Forma Analysis Conclusions 3.1 Packet Pg. 93 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and 48 Outcome City as Retailer (Post DOCSIS3.1 Baseline) City as Wholesaler Huntsville Model City as Wholesaler Westminster Model Internet Penetration 30.2% Voice Penetration 8.4% Cost Per Premise Passed $983 (incl. 15% Cont.) Equity Investment - Long Term Debt $117.3M $93.2M $93.2M Operating Losses (Working Capital ) $8.1M $83.0M $20.9M Total Funding $125.4M $176.2M $114.1M Net Cash - Year15 $13.1M - $86.6M - $26.1M Project Break Even 15 Years > 15 Years > 15 Years 8/17/2016 Study conducted by Uptown Services, LLC 3.1 Packet Pg. 94 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and FTTP Feasibility Study for The City of Fort Collins Task 5 Report: Assessment of Risks & Opportunities August 2016 Uptown Services, LLC Dave Stockton & Neil Shaw, Principals ATTACHMENT 2 3.2 Packet Pg. 95 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 8/17/2016 2 Uptown sees the following primary risk areas for the municipal FTTP system being considered : 1. Comcast DOCSIS3.1 Upgrade 2. Market and Operating Risks † Technology costs † Market substitution (Voice and video) † Economic trends (premise growth, interest rates) † Construction cost overruns The risks associated with DOCSIS3.1 were evaluated using market research and pro forma revisions. Market and operational risks were evaluated using sensitivity analysis Study conducted by Uptown Services, LLC 3.2 Packet Pg. 96 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - DOCSIS3.1 3.2 Packet Pg. 97 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 8/17/2016 4 † Total sample size of 100 respondents out of original 400 † Respondents screened to ensure † Decision-maker for telecommunications and entertainment services in the home and live within city limits † Currently using Internet in the household † Respondents with immediate family members employed by any of the following were excluded: The City of Fort Collins CenturyLink Comcast † Demographics were recorded (age, income, rent/own) but results not weighted for age † Three post-DOCSIS3.1 scenarios tested: † Comcast sole 1G provider at $70 MRC † Comcast and City 1G both at $70 MRC † City 1G at $50 MRC and Comcast 1G at $70 MRC Study conducted by Uptown Services, LLC 3.2 Packet Pg. 98 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - Participants were asked if they would – or would not – switch to a different Internet service if both of the following services were provided in the future. The new service options would be the following two Internet services, both offering 1 Gbps speed… 8/17/2016 5 I Would Switch to Comcast I Would Switch to Ft Collins I Would Retain My Current Service Don't Know 1% 79% 18% 2% 10% 43% 44% 3% Q4-5: “If these services were available to your home, and offer the same speed, which of the following statements best describes your likelihood to switch?” Comcast $70/City $50 Both $70 Study conducted by Uptown Services, LLC Demand for 1G is highly price elastic City is preferred provider by a factor of 3x 3.2 Packet Pg. 99 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - † Original Survey Question 8: “In stating that you would switch to the City’s 1G Internet service, what is the primary reason you would switch?” 8/17/2016 6 Prefer City as Provider Prefer the Lower Price Other Reason 37% 54% 9% Study conducted by Uptown Services, LLC 3.2 Packet Pg. 100 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - † The majority of respondents, when given the choice, would prefer to receive high speed Internet from the City… 8/17/2016 7 CenturyLink Comcast The City FRII A new provider Don't Know 11% 15% 45% 4% 3% 23% 13% 17% 55% 4% 11% Q28: “Among the following list of potential providers, who would you prefer to receive high-speed Internet service from?” Ft Collins (n=400) Ft Collins Followup (n=100) Study conducted by Uptown Services, LLC 3.2 Packet Pg. 101 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - August 16 Study conducted by Uptown Services, LLC 8 37% 57% 4% 2% Current Internet Market Share (Households) FTTP System CenturyLink Comcast - All Tiers Satellite Other 0% 33% 62% 4% 1% Internet Market Share Post DOCSIS3.1 (No FTTP & Comcast 1G @ $70) 22% 78% Comcast Internet Dispersion (Comcast 1G @ $70) 1 Gbps All Other Tiers What if Comcast implements DOCSIS3.1 and is the sole provider of residential Gig service? †Add 5 points to market share †Upsell 22% of subscribers to 1Gig 3.2 Packet Pg. 102 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 8/17/2016 Study conducted by Uptown Services, LLC 9 2016: Pre-DOCSIS3.1 2/1/2016 (n=400) Current Incidence No Internet 3 1% Dial-Up 0 0% DSL/FiOS 141 35% Cable 218 55% Satellite 15 4% Fixed Wireless/Other 6 2% DK Type 17 4% 400 100% No Internet 3 1% Comcast 218 55% Not Comcast 179 45% Intent to Switch to FTTP @ 10% Less Comcast Not Comcast All Market Share 55% 45% Definitely Switch 47.0% 33.4% 39.8% Probably 26.7% 36.1% 29.9% Might/Might Not 17.3% 17.8% 19.3% PN/DN/DK 9.0% 12.7% 11.0% Penetration 42.6% 36.0% 38.8% 2017: Post-DOCSIS3.1 6/1/2016 (n=100) Intent to Upgrade to 1G @ $70 MRC Comcast Not Comcast All Definitely 27.4% 8.8% Probably 32.3% 14.7% Might/Might Not 21.0% 14.7% PN/DN/DK 19.3% 61.8% Penetration 31.0% 12.0% 22.3% Intent to Switch to FTTP @ 10% Less After DOCSIS3.1 Comcast Not Comcast All Definitely 32.4% 29.4% Probably 18.4% 31.8% Might/Might Not 11.9% 15.7% 1G Upgraded 31.0% 12.0% PN/DN/DK 6.2% 11.2% Penetration 29.4% 31.7% 30.2% 3.2 Packet Pg. 103 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 8/17/2016 10 † Determined that Comcast would add 5 points in market share and lock in 22% of Internet subscribers with a $70 Gig tier (3 year contract term) † This results in a drop of FTTP Internet penetration from 38.8% to 30.2% for the pro forma analysis. Baseline case revised accordingly. † Once FTTP is launched, Comcast’s $70 Gig service is not competitive with FTTP service at $50/month due to strong provider preference and price elasticity Study conducted by Uptown Services, LLC 3.2 Packet Pg. 104 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 8/17/2016 11 Comcast DOCSIS 3.1 ‘Longmont Model’ (City is RSP) ‘Westminster Model’ (Ting is RSP) ‘Huntsville Model’ (Google is RSP) Residential Comcast 1G / 35M Monthly: $140 MRC: $70 NRC: TBD Term: 3 Years 1G / 1G Charter Member MRC: $49.95 NRC: $0 Term: Monthly 1G / 1G MRC: $98* NRC: Up to $200 1G / 1G MRC: $70*** NRC: $0 Term: 1 Year Commercial TBD 1G / 500M MRC: $799.95 NRC: $0 1G / 1G MRC: $148** NRC: Up to $400 Custom Quote Affordable Internet 10M MRC: $9.95 Income Qualifier: Yes Not Offered 5M / 5M MRC: $28* NRC: Up to $200 Income Qualifier: No 5M / 1M MRC: $0 NRC: $300 Income Qualifier: No * Internet service is $89/month and ONT rental is $9/month or purchase for $200. ** Internet service is $139/month and ONT rental is $9/month or purchase for $200. *** Based on Austin, TX pricing. Study conducted by Uptown Services, LLC 3.2 Packet Pg. 105 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - Business Model & Partnership Risk 3.2 Packet Pg. 106 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - August 16 13 † Retail Model Risks † Service revenues may be insufficient to cover debt service requirement † Technology advances may require more frequent or costly system upgrades than forecast † Personnel or other operating expenses may exceed forecast † Wholesale Model Risks † Lease rates may be too low to pay off the long term debt from the fiber build † Retailer price levels may not be competitive in a DOCSIS3.1 environment with Comcast's $70 Gig service † Retailer may go bankrupt or default on wholesale payments † Franchise Model Risks † Retailer is not bound to serve all premises and can cherry pick service areas † Retailer performance may not achieve original City goals with FTTP 3.2 Packet Pg. 107 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 8/17/2016 Study conducted by Uptown Services, LLC 14 Westminster 7,000 Households Huntsville 67,000 Households Lincoln 104,000 Households Model Structure Wholesale Dark Fiber Lease Wholesale Dark Fiber Lease Franchise Conduit Lease Retailer Ting Google Fiber Nelnet (acquired Allo Communications) Retailer Background Virtual Wireless Network Operator since 2012 Entered FTTP in 2015 1st launch in 2012 and now serving 120k subs in 5 urban markets Nelnet: Education Loan Servicing Allo: Telecom provider since 2003 Wholesale Rates • Premise Passed Fee: $6/mo. • Connected Premise Fee: $17/mo. • Premise Passed Fee: Averages $5/mo. • Backbone Fiber Strands: $3,500/mo. each Retailer pays conduit lease of $3/mo. per customer Deployment Status Launched Aug. 2015 Not Launched Contract Date: Feb. 2016 Not Launched Contract Date: Nov. 2015 Current End User Pricing (Res) Gig: $89/mo. + $200 for ONT* (not guaranteed) Gig: $70/mo. (not guaranteed) Gig: $90/mo. (not guaranteed) Service Coverage 100% anticipated (City builds) 100% anticipated (City builds) Unknown – Not Required (Nelnet builds) 15 Retail Model Wholesale Fiber Lease Models $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 Network Construction Facility Capital Costs Other Capital Costs Back Office Systems Middleware & Conditional Access Fixed Equipment Vehicles Contract Installation FTTP ONTs Fiber Drop and Powering Converters Engineering Services 8/17/2016 Study conducted by Uptown Services, LLC $109M vs. $85M Wholesale =78% of Retail CAPEX 3.2 Packet Pg. 109 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 16 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr 11 Yr 12 Yr 13 Yr 14 Yr 15 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 Retail Model Wholesale Fiber Lease Models 8/17/2016 Study conducted by Uptown Services, LLC 13% of Retail Saving $5M annually in Opex 3.2 Packet Pg. 110 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 17 $0 $5 $10 $15 $20 $25 $30 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr 11 Yr 12 Yr 13 Yr 14 Yr 15 Revenue (in millions) Retail Model Huntsville Model Westminster Model Westminster Model (DOCSIS3.1) August 16 35% of Retail 26% of Retail Losing $15-$17M annually in Revenue 3.2 Packet Pg. 111 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 8/17/2016 18 Risk Factor Degree of Risk Ability to Mitigate R W F Lower Penetration Due to DOCSIS3.1 Retail model pro forma is feasible with penetration reduced by 22% (Internet & Voice). Interdependent with Price Advantage Risk. Lower Penetration Due to Brand Preference Aside from Google Fiber, brand preference is very low for an alternative provider new to the market. Lower Penetration Due to Loss of Price Advantage Significant questions about the ability of retailers, other than Google Fiber, to compete using $90+ Gig Internet. Higher Opex Due to Increased Staffing Costs Pro forma salary and FTE levels are robust, but many muni FTTP systems exceed staffing budgets Higher Capex Due to Construction Cost Overrun Retail model pro forma is feasible at up to 25% construction cost overrun. Higher Debt Service Due to Higher Interest Rates Interest rate thresholds identified. Cannot eliminate all risk with uncertain bond issue #2 interest rate Lower Community Support Due to < 100% Availability Franchise model would require minimum density threshold Study conducted by Uptown Services, LLC LEGEND: R = Retail Model W = Wholesale Model F = Franchise Model 3.2 Packet Pg. 112 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - Sensitivity Analysis 3.2 Packet Pg. 113 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 8/17/2016 20 † Core team identified issues: • Higher network upgrade cost (Year 7 & 10) • Higher construction cost • Higher construction cost & higher network upgrade cost (Year 7 & 10) • Higher bond interest rate É Higher Internet dispersion in 1G Charter Member É Higher premise growth rate † Model identified issues: † Identification of Top 10 most sensitive variables Study conducted by Uptown Services, LLC 3.2 Packet Pg. 114 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 21 ($140) ($120) ($100) ($80) ($60) ($40) ($20) $0 $20 $40 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15 Millions Baseline 25% Over Construction 2x Upgrade Cost 2nd Bond @ 5.25% 25% Over Construction & 2x Upgrade Higher Premise Growth Rate Higher 1G Dispersion 8/17/2016 Study conducted by Uptown Services, LLC 3.2 Packet Pg. 115 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 8/17/2016 Study conducted by Uptown Services, LLC 22 A310 A104 A025 A073 A031 A080 A103 A028 A062 A154 A395 A058 A061 A148 A076 A397 A195 A155 A151 A185 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 Net Cash Year15 ID A31 A10 A02 A07 A03 A08 A10 A02 A06 A15 Title Blended Cost per Meter Passed - During Build Residential Internet Tier2 - Year1 Residential Internet Access Penetration High Capacity Services Penetration of Med-Large Tier2 Year 10 - Res Percentage of all Businesses Residential Internet Tier1 - Year1 Tier1 Year 10 - Res Commercial Internet Access Penetration DIA ARPU Best $1,082 $54.95 5.5% $43.95 $1,650 Worst $885 $44.96 4.5% $35.96 $1,350 ID A39 A05 A06 A14 A07 A39 A19 A15 A15 A18 Title Bond Rate - Series 1 Business Package 1 Lines per Business Package Business Package 1 Per Line - Year1 DIA Year 10 - Bus Conclusions 3.2 Packet Pg. 117 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 24 † Retail model is financially feasible - even in a post-DOCSIS3.1 environment † Total funding requirement is $125M † Project is net cash positive in 15 years † The retail model remains feasible under most sensitivities: † Construction overrun of 10%: 15 year net payback † Bond issue #2 50 basis point higher interest rate: 15 year net payback † Construction overrun of 10% & 2x Upgrade Cost: > 15 year net payback † Wholesale and/or franchise partner discussions could be pursued but will require much improved terms † Franchise model: Google Fiber (funded by Alphabet) is ideal with community-wide coverage commitment, but scale will be an issue † Wholesale Model: Viable financial terms in port-DOCSIS3.1 environment are unlikely 8/17/2016 Study conducted by Uptown Services, LLC 3.2 Packet Pg. 118 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 1 Broadband Strategic Plan Alternatives – City of Fort Collins ATTACHMENT 3 3.3 Packet Pg. 119 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility • Review of Timeline & Strategic Objectives • Updated Market Demand Study – DOCSIS 3.1 • Business Model Alternatives & Sensitivity Analysis • Baseline Financial Model – Broadband Utility • Next Steps 2 City Broadband Strategic Objectives 3.3 Packet Pg. 120 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 3 2016 Timeline 3.3 Packet Pg. 121 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility City Broadband Strategic Objectives Goal of Project: • Bring high speed internet to the City • Make an informed decision and fairly evaluate alternative risks Additional Benefits: • Competitive pricing - Market pricing at $70/month or less for 1G - Affordable Internet tier • Full coverage across City – no winners or losers • Have system up and running within a reasonable time • Underground service for improved reliability • Share risk and ensure financial stable partner if one is desired 4 3.3 Packet Pg. 122 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Feasibility – Analysis Complete 5 Primary Market Research - Follow-up residential survey to evaluate DOCSIS3.1 with known Comcast pricing Sample Designs - Full design of seven ‘neighborhood type’ areas totaling 1,274 passings - Evaluation of centralized vs. distributed splitter design Business Model Evaluation - Definition of possible business structure models and division of responsibility - Secured the executed contracts for the most relevant and current wholesale model examples - Comprehensive financial evaluation of each using the actual terms Financial Analysis - Inputs based upon research findings, deployment actuals, and city staff input - Full vetting of financial model by city financial staff 3.3 Packet Pg. 123 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility City Broadband Strategic Objectives • Review of Timeline & Strategic Objectives • Updated Market Demand Study – DOCSIS 3.1 • Business Model Alternatives & Sensitivity Analysis • Baseline Financial Model – Broadband Utility • Next Steps 6 3.3 Packet Pg. 124 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Market Demand Study Update 8/18/2016 7 Study conducted by Uptown Completed in March 2016 • Residential - 400 telephone surveys • Residential/SMB Needs – lower prices, higher reliability, increased speed • Large Businesses/Institutional Partners – current providers largely meet needs Comcast Announcement of DOCSIS 3.1 Three post-DOCSIS 3.1 scenarios tested: • DOCSIS 3.1 1G provider at $70/month (City loses first mover advantage) • City 1G at $50/month and Comcast 1G at $70/month (baseline pro forma) • Comcast and City both offer 1G at $70/month (to evaluate elasticity) 3.3 Packet Pg. 125 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 8 Study Findings – DOCSIS3.1 Prior to FTTP 37% 57% 4% 2% Current Internet Market Share (Households) FTTP System CenturyLink Comcast - All Tiers Satellite Other 0% 33% 62% 4% 1% Internet Market Share Post DOCSIS3.1 (No FTTP & Comcast 1G @ $70) FTTP System CenturyLink Comcast Satellite Other 22% 78% Comcast Internet Dispersion (Comcast 1G @ $70) 1 Gbps All Other Tiers 3.3 Packet Pg. 126 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Post DOCSIS 3.1 Survey Findings Original Market Study Post DOCSIS 3.1 Internet (residential) 38.8% 30.2% Voice (residential) 28.6% 8.4% 9 The study accounts for Comcast DOCSIS 3.1 rollout before a fiber-to-the-premise (FTTP) system build out. If First to Market, Take Rate Estimate – 38.8% If Competing with Comcast in the Market, Take Rate Estimate – 30.2% 3.3 Packet Pg. 127 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility City Broadband Strategic Objectives • Review of Timeline & Strategic Objectives • Updated Market Demand Study – DOCSIS 3.1 • Business Model Alternatives & Sensitivity Analysis • Baseline Financial Model – Broadband Utility • Next Steps 10 3.3 Packet Pg. 128 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Business Models Municipal Utility - Retail Model (Longmont) • City builds and maintains the physical fiber network to pass all premises • City provides Internet and voice services directly to customers (video is optional) Wholesale Model (Huntsville & Westminster, Maryland) • City builds and maintains the physical fiber network to pass all premises • Retailer is responsible for all other functions/costs • City is compensated via monthly per passing and/or per connected premises fees Franchise Model (Google Fiber in KC, Allo in Lincoln NB) • City grants franchise agreement including terms for franchise fee, premises passed, ROW access, and construction requirements • End user fees are not specified or regulated other than non-discriminatory pricing • City executes conduit lease agreement (optional) providing long term access rights to City conduit 11 3.3 Packet Pg. 129 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 12 The structure of wholesale terms and risk allocation has improved within municipal broadband with lessons learned from legacy wholesale agreements Three overall wholesale/franchise models have emerged as contemporary examples: • Wholesale: City funds the build and charges retailer monthly fees per premise passed and/or per connection • Wholesale: City funds the build and leases dark fiber to the retailer • Franchise: City provides franchise (with or without conduit IRU) and retailer funds the incremental build costs The current wholesale/franchise models would require changes to be viable for FC • Lease rates are too low to pay off the long term debt from the fiber build • Retailer price levels of $90 Gig will/may not be competitive in a DOCSIS3.1 environment • Retailer may not serve all premises and can cherry pick service areas • Possible Exception: Google Fiber funded by Alphabet and not the City* Study Findings – Business Structure Analysis * Noting that the Google Fiber-funded deployed markets average 2.9M population. 3.3 Packet Pg. 130 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Uptown Findings Municipal retail model is financially feasible - even in a post-DOCSIS3.1 environment • Total funding requirement is $125M • Project is net cash positive in 15 years The municipal retail model remains feasible under most sensitivities • Construction overrun of 10%: 15 year net payback • Bond issue #2 100 basis point higher interest rate: 15 year net payback • Construction overrun of 10% & 2x Upgrade Cost: > 15 year net payback Wholesale or franchise model discussions could be pursued • Wholesale Model: - Current terms of agreements not attractive – municipal carries the risk, success dependent on the partner • Franchise model: - Google Fiber (funded by Alphabet) is ideal with community-wide coverage commitment - Other Providers require detailed financial/risk assessment 13 3.3 Packet Pg. 131 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Capital Expenditure (CAPEX) by Business Model 14 Municipal Retail Model Wholesale Model Franchise Model $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 Network Construction Facility Capital Costs Other Capital Costs Back Office Systems Middleware & Conditional Access Fixed Equipment Vehicles Contract Installation FTTP ONTs Fiber Drop and Powering Converters Engineering Services No CAPEX Requirement 3.3 Packet Pg. 132 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 15 Financial Feasibility – Risk Analysis Risk Factor Degree of Risk for City Municipal Ability to Mitigate Retail Wholesale Franchise Lower Penetration Due to DOCSIS3.1 Retail model pro forma is feasible with penetration reduced by 22% (Internet & Voice). Interdependent with Price Advantage Risk. Lower Penetration Due to Brand Preference Aside from Google Fiber, brand preference is very low for an alternative provider new to the market. Lower Penetration Due to Loss of Price Advantage Significant questions about the ability of retailers, other than Google Fiber, to compete using $90+ Gig Internet. Higher Opex Due to Increased Staffing Costs Pro forma salary and FTE levels are robust, but many muni FTTP systems exceed staffing budgets Higher Capex Due to Construction Cost Overrun Retail model pro forma is feasible at up to 25% construction cost overrun. Higher Debt Service Due to Higher Interest Rates Interest rate thresholds identified. Cannot eliminate all risk with uncertain bond issue #2 interest rate Lower Community Support Due to < 100% Availability Franchise model would require minimum density threshold 3.3 Packet Pg. 133 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility City Broadband Strategic Objectives • Review of Timeline & Strategic Objectives • Updated Market Demand Study – DOCSIS 3.1 • Business Model Alternatives & Sensitivity Analysis • Baseline Financial Model – Broadband Utility • Next Steps 16 3.3 Packet Pg. 134 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 17 Municipal Broadband (Retail) – Key Input Assumptions • Build out – 5 years • 30.2% take-rate • Construction cost of $984/passing (based on sample design) • Funding requirements • Long term debt of $125M across 2 issues of 12 years at 3.75% and 4.75%, respectively • May not borrow for working capital $10M • TBD decision – borrow through Utility or General Obligation • Operational Needs • Talent – 33 FTEs • Assets – equipment and technology such as trucks, billing systems, etc. Financial Feasibility – Baseline Assumptions 3.3 Packet Pg. 135 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 18 • Single family homes weighted based on parcels per zoning district • Represented MDU and commercial sample designs were not completed • MDU cost estimate to be 50% of single family costs • Weighted average cost per passing includes labor, materials and 15% contingency = $984/passing for initial infrastructure build out Cost per Passing is the Most Significant Assumption Within the Model Financial Feasibility – Sample Design 3.3 Packet Pg. 136 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Municipal Retail - CAPEX 19 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 Network Construction Facility Capital Costs Other Capital Costs Back Office Systems Middleware & Conditional Access Fixed Equipment Vehicles Contract Installation FTTP ONTs Fiber Drop and Powering Converters Engineering Services 3.3 Packet Pg. 137 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Municipal Retail - Cashflow 20 ($140) ($120) ($100) ($80) ($60) ($40) ($20) $0 $20 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15 Millions Baseline 25% Over Construction 2x Upgrade Cost 25% Over Construction & 2x Upgrade 3.3 Packet Pg. 138 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Wholesale - CAPEX 21 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 $0 $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 Network Construction Facility Capital Costs Other Capital Costs Back Office Systems Middleware and Conditional Access Fixed Equipment Vehicles Contract Installation FTTP ONTs Fiber Drop and Powering Converters Engineering & Inspection Services 3.3 Packet Pg. 139 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Wholesale - Cashflow 22 ($100) ($80) ($60) ($40) ($20) $0 $20 $40 $60 Year2 Year3 Year4 Year5 Year6 Year7 Year8 Year9 Year10 Year11 Year12 Year13 Year14 Year15 Millions Huntsville Huntsville Hypothetical* Westminster (Pre-DOCSIS3.1) Westminster (Post-DOCSIS3.1) Hypothetical outcome 3.3 Packet Pg. 140 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Next Steps 23 • Community Outreach and Engagement on Alternatives • Exploratory Discussions: • Franchise Agreements • Other Potential Partnerships • Final Revisions to Financial Feasibility Model • Recap of Community Outreach and Engagement and Recommendation – December 2016 3.3 Packet Pg. 141 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 24 Back-Up 3.3 Packet Pg. 142 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 1% 79% 18% 2% 10% 43% 44% 3% I Would Switch to Comcast I Would Switch to Ft Collins I Would Retain My Current Service Don't Know Q4-5: “If these services were available to your home, and offer the same speed, which of the following statements best describes your likelihood to switch?” Comcast $70/City $50 Both $70 Study conducted by Uptown Services, LLC Demand for 1G is highly price elastic 25 Post DOCSIS 3.1 Survey Findings 3.3 Packet Pg. 143 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Business Models 26 Control Investment & Risk Franchise Retail Public/Private Partnership 3.3 Packet Pg. 144 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Retail vs. Wholesale vs. Franchise 27 Model Example Network Services Pre DOCSIS3.1 Post DOCSIS3.1 Retail Longmont Data & Voice Services per Task 2 Report Pre-DOCSIS VIEW Penetration (Res / Bus) • Internet: 38.8% / 45% • Voice: 28.6% / 41% • Video: 24.6% / 0% BASELINE (Post-DOCSIS) Penetration from follow-up survey • Res Internet: 30.2% • Res Voice: 8.4% (at peak) • Bus: No Change BASELINE + VIDEO • Res Video: 19.1% Wholesale Westminster Dark fiber lease Fees based on premises passed and connected WESTMINSTER Penetration = Baseline • Residential: 38.8% • Commercial: 45.0% Westminster contract wholesale rates WESTMINSTER -50% Penetration @ 50% of Baseline • Residential: 15.1% • Commercial: 45.0% Huntsville Dark fiber lease Fees based on premises passed HUNTSVILLE Penetration is irrelevant Huntsville contract wholesale rates N/A Franchise Lincoln Long term conduit lease (optional) Financial analysis not required (No City investment) 3.3 Packet Pg. 145 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 28 100% GPON standards based system • Relying on next generation standards to support future growth • Nx10G capabilities over time Centralized split architecture • One fiber per passing terminates in splitter cabinet • Approximately one splitter cabinet per 250 passings • Deploy 1x32 splitters as required in splitter cabinets • Network Access Points (NAPs) connect subscriber drops to network • All drops fusion spliced at serving NAP Design assumes the use of standard cable technology • Single jacket – loose tube fiber cable design throughout • 1.5 IN HDPE conduits employed for drops and distribution pathways No above ground structures Study Findings – Design Standards 3.3 Packet Pg. 146 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 29 OUTSIDE PLANT COSTS WEIGHTED AVERAGE PER PASSING TOTAL CONSTRUCTION COST @ 72,435 PASSINGS* Materials $116 $8,402,460 Labor $739 $53,529,465 Total $855 $61,931,925 Contingency @ 15%* $128 $9,271,680 Total $984 $71,276,040 Key Construction Costs • Directional boring in landscaped areas - $10.00 per foot • Vault, hand hole and flower pot adder - $2.00 per foot • Pulling fiber in conduit - $0.75 per sheath foot (average for all cables) • Splicing - $30 per splice Study Findings – Construction Cost *(NOTE: Does not include other system costs e.g. electronics and operations) 3.3 Packet Pg. 147 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 30 Outcome City as Retailer Internet/Voice (Baseline Pro Forma) Internet Penetration 30.2% Voice Penetration 8.4% Cost Per Premise Passed $984 (incl. 15% contingency) Equity Investment - Long Term Debt $117.3M Operating Losses (Working Capital ) $8.1M Total Funding $125.4M Net Cash - Year15 $13.1M Project Break Even 15 Years Study conducted by Uptown Services, LLC Financial Feasibility - Baseline 3.3 Packet Pg. 148 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Study Findings – Market Analysis 31 • Satisfaction for Internet and voice service benchmarks low compared to other communities • Top market needs are: - Mass Market: Lower prices, increased Internet speed, and improved reliability - Complex Market: Lower prices and carrier-grade reliability • Strong provider preference for the City to provide service (3x higher than incumbents and 15x higher than a new alternative provider) • Mass market purchase intent is very high and exceeds Longmont survey metrics in the current pre-DOCSIS3.1 environment: - Internet: 38.8% residential penetration - Voice: 28.6% residential penetration • The study must account for a Comcast DOCSIS3.1 rollout prior to FTTP system build-out and impact to pro forma market penetration: - Internet: 30.2% residential penetration - Voice: 8.4% residential peak penetration (adjusted for DOCSIS3.1 and LPC actuals) 3.3 Packet Pg. 149 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 32 Study Findings – Passing Cost Design Analysis Sample Design Area OH Miles UG Miles Passings Passings per Mile Weight Materials per Passing Labor per Passing Total per Passing Quail Hollow 0.0 3.2 243 75 30.1% $140 $980 $1,120 English Ranch 0.0 2.5 243 96 22.6% $132 $781 $913 Alta Vista 0.0 0.7 63 95 6.4% $128 $792 $920 Old Town 0.0 2.2 235 98 5.7% $126 $699 $825 Hearthfire 0.0 2.6 174 66 2.1% $165 $1,097 $1,262 Taft Canyon 0.0 3.8 235 62 1.8% $170 $1,187 $1,356 Willow Brook 0.0 0.6 81 143 0.0% $98 $530 $628 MDUs* 0.0 0.0 0 0 31.3% $73 $424 $497 Weighted Average / Total 0.0 15.6 1,274 82 100% $116 $739 $855 • Single family weightings based on parcels per zoning district • Representative MDU and commercial sample designs not completed • Willow Brook design area was not deemed to be representative • MDU costs estimated to be 50% of average single family costs 3.3 Packet Pg. 150 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 33 Study Findings – Revenues – Retail vs. Wholesale $0 $5 $10 $15 $20 $25 $30 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr 11 Yr 12 Yr 13 Yr 14 Yr 15 Millions Retail Model Huntsville Model Westminster Model Westminster Model (DOCSIS3.1) 35% of Retail 26% of Retail Losing $15-$17M annually in Revenue 3.3 Packet Pg. 151 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility 34 Study Findings – OPEX – Retail vs. Wholesale Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Yr 11 Yr 12 Yr 13 Yr 14 Yr 15 $0 $1 $2 $3 $4 $5 $6 $7 $8 Millions Retail Model Wholesale Model 13% of Retail Saving $5M annually in Opex 3.3 Packet Pg. 152 Attachment: Powerpoint presentation (4737 : Broadband Plan Update - Business Model and Feasibility Bond Rate - Series 2 Bandwidth Minimum Capcity Trigger Direct Fiber High Cap ARPU Tier1 Bus Price Residential Average Bandwidth - Year1 Best 4.1% 4.2 $15.40 5.2% $3,300 $65.95 1,650 Worst 3.4% 3.4 $12.60 4.3% $2,700 $53.96 1,350 Scenario = Retail-2P(Post-DOCSIS3.1) 3.2 Packet Pg. 116 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - * Or $9/mo. ONT lease 3.2 Packet Pg. 108 Attachment: Broadband Assessment of Risk and Opportunity Report (4737 : Broadband Plan Update - 3.1 Packet Pg. 67 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and • 15k miles annually per vehicle • $.75/mile growing at 2.5% • Professional Services • Implementation: Capitalized • Legal/Acct: $30k (Yr1)/$10k • Other Opex • Vendor maintenance of $55k/year for OSS/BSS and FTTP electronics • $20k/year for utilities 3.1 Packet Pg. 66 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Internet Revenue & COGS (in millions) COGS Gross Margin $ Gross Margin % 3.1 Packet Pg. 65 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and • Voice • Residential: $25 net wholesale • Commercial: $14 net per line • Install Fees • Residential: $30 (Year 6) • Commercial: $50 (Year 8) 3.1 Packet Pg. 62 Attachment: Broadband Feasibility Analysis (4737 : Broadband Plan Update - Business Model and UNION PACIFIC RAILROAD BNSF RAILROAD UNION PACIFIC RAILROAD UNION PACIFIC RAILROAD UNION PACIFIC RAILROAD GREAT WESTERN RAILROAD GREAT WESTERN RAILROAD GREAT WESTERN RAILROAD UNION PACIFIC RAILROAD GREAT WESTERN RAILROAD S TIMBERLINE RD STRAUSS CABIN RD RIVERSIDE AVE STATE HIGHWAY 392 E COUNTY ROAD 50 E COUNTY ROAD 38 MOUNTAIN VISTA DR E COUNTY ROAD 32 E MULBERRY ST E COUNTY ROAD 36 ZIEGLER RD N SHIELDS ST N LEMAY AVE S COLLEGE AVE N US HIGHWAY 287 ZIEGLER RD N COUN TY ROAD 11 S COUNTY ROAD 9 N COUNTY ROAD 9 E HORSETOOTH RD S LEMAY AVE S LEMAY AVE S COUNTY ROAD 11 E MULBERRY ST TERRY LAKE RD E MULBERRY ST 9TH ST N COLLEGE AVE JEFFERSON ST E HARMONY RD E COUNTY ROAD 50 E COUNTY ROAD 32 N TAFT HILL RD S CO UNTY ROAD 7 KECHTER RD E COUNTY ROAD 36 RICHARDS LAKE RD N TIMBERLINE RD N LEMAY AVE E LINCOLN AVE W DRAKE RD W COUNTY ROAD 38E S TIMBERLINE RD COUNTY ROAD 54G S COUNTY ROAD 9 E COUNTY ROAD 48 GREGORY RD E HARMONY RD LAPORTE AVE W TRILBY RD CARPENTER RD E PROSPECT RD E COUNTY ROAD 52 W HORSETOOTH RD S LEMAY AVE W WILLOX LN W VINE DR S SHIELDS ST W PROSPECT RD E DRAKE RD S TAFT HILL RD E TRILBY RD W MULBERRY ST COUNTRY CLUB RD E WILLOX LN S COUNTY ROAD 19 S SUMMIT VIEW DR W HARMONY RD E VINE DR INTERSTATE 25 INTERSTATE 25 Railroad Crossing Prioritization Study Crossing Locations on Arterial Roadways Printed: August 05, 2016 G G > BNSF RAILROAD GREAT WESTERN RAILROAD UNION PACIFIC RAILROAD 0 0.4 0.8 1.2 1.6 Miles © MAJOR ARTERIAL CROSSING ARTERIAL CROSSING PROPOSED GRADE SEPARATION 2011 MASTER STREET PLAN 1.3 Packet Pg. 13 Attachment: Powerpoint presentation (4740 : Railroad Crossings) UNION PACIFIC RAILROAD GREAT WESTERN RAILROAD GREAT WESTERN RAILROAD GREAT WESTERNRAILROAD UNION PACIFIC RAILROAD GREAT WESTERN RAILROAD S TIMBERLINE RD STRAUSS CABIN RD RIVERSIDE AVE STATE HIGHWAY 392 E COUNTY ROAD 50 E COUNTY ROAD 38 MOUNTAIN VISTA DR E COUNTY ROAD 32 E MULBERRY ST E COUNTY ROAD 36 ZIEGLER RD N SHIELDS ST N LEMAYAVE S COLLEGE AVE N US HIGHWAY 287 ZIEGLER RD N COUNTY ROAD 11 S COUNTY ROAD 9 N COUNTY ROAD 9 E HORSETOOTH RD S LEMAYAVE S LEMAYAVE S COUNTY ROAD 11 E MULBERRY ST TERRY LAKE RD E MULBERRY ST 9TH ST N COLLEGE AVE JEFFERSON ST E HARMONY RD E COUNTY ROAD 50 E COUNTY ROAD 32 N TAFT HILL RD S COUNTY ROAD 7 KECHTER RD E COUNTY ROAD 36 RICHARDS LAKE RD N TIMBERLINE RD N LEMAYAVE E LINCOLN AVE W DRAKE RD W COUNTY ROAD 38E S TIMBERLINE RD COUNTY ROAD 54G S COUNTY ROAD 9 E COUNTY ROAD 48 GREGORY RD E HARMONY RD LAPORTE AVE W TRILBY RD CARPENTER RD E PROSPECT RD E COUNTY ROAD 52 W HORSETOOTH RD S LEMAYAVE W WILLOX LN W VINE DR S SHIELDS ST W PROSPECTRD E DRAKE RD S TAFT HILL RD E TRILBY RD W MULBERRY ST COUNTRY CLUB RD EWILLOX LN S COUNTY ROAD 19 S SUMMIT VIEW DR W HARMONY RD E VINE DR INTERSTATE25 INTERSTATE 25 Railroad Crossing Prioritization Study Crossing Locations on Arterial Roadways Printed: August 05, 2016 G G > BNSF RAILROAD GREAT WESTERN RAILROAD UNION PACIFIC RAILROAD 0 0.4 0.8 1.2 1.6 Miles © MAJOR ARTERIAL CROSSING ARTERIAL CROSSING PROPOSED GRADE SEPARATION 2011 MASTER STREET PLAN ATTACHMENT 1 1.1 Packet Pg. 4 Attachment: Railroad Crossing Prioritization Map (4740 : Railroad Crossings)