HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 12/20/2016 - RESOLUTION 2016-096 ADOPTING AMENDMENTS TO THE CITAgenda Item 16
Item # 16 Page 1
AGENDA ITEM SUMMARY December 20, 2016
City Council
STAFF
John Voss, Controller/Assistant Financial Officer
SUBJECT
Resolution 2016-096 Adopting Amendments to the City's Financial Policies Relating to the Revenue Policy.
EXECUTIVE SUMMARY
The purpose of this item is to update Financial Policy 2 - Revenue. The Revenue and Debt Policies were last
updated in 2013. No changes are recommended to the Debt Policy, but changes are recommended to the
Revenue Policy. They primarily relate to Colorado’s Taxpayer’s Bill of Rights (TABOR) and the recent need for
voter approval to keep the excess revenue associated with the “Keep Fort Collins Great” sales and use tax.
The related changes are meant to reduce the potential for another such election. All other changes are
clarifications or removal of sections with little to no policy elements. Council Finance Committee reviewed and
approved the recommended changes on November 21, 2016.
STAFF RECOMMENDATION
Staff recommends adoption of the Resolution.
BACKGROUND / DISCUSSION
Financial Policies of certain significance are approved by the City Council. Others are approved by the City
Manager and Chief Financial Officer. Staff and Council Finance Committee have agreed to review and update
City Council approved policies every three years. This year two polices were reviewed by the staff and Council
Finance Committee: Revenue and Debt. No changes are recommended for the Debt Policy.
The Revenue Policy has five main sections. Recommended changes are summarized as follows:
Section 2.1 relates to the Limitations relating to TABOR.
New item C. TABOR Notice for New Tax or Tax Increase
- Develop revenue forecasts that are reasonable and factor in the implications of over collection
- Review these forecasts with the appropriate staff
New item D. Monitor New Tax Revenue
- Staff will monitor actual revenue against the forecast revenue disclosed in the TABOR election notice.
- In the second year, confirm actual revenue to forecast and determine any action is needed.
Submit a report to the City Council on the results and any recommended actions.
New item E. TABOR Legislation and Judicial Decisions
- When such matters are discovered affecting the City, staff will confer to determine what actions, if any,
the City should take in response
Agenda Item 16
Item # 16 Page 2
New item F. Maintain Records of 'Fiscal Year Spending'
- Calculate annually
- Maintain supporting records for at least 6 years
- Document which City-related agency funds and revenues qualify as fiscal year spending under TABOR
Section 2.2 Revenue Review, Objectives and Monitoring
Item C. Targets: Section removed because no targets are actually set
New Item C. Monitoring revenue sources: language clarified about summary financial report to Council
Finance Committee
Section 2.4 Sales & Use Tax Distribution
This section has no policy elements. The controlling documents are actually the ballot language and City
Code, not the Revenue Policy. Added a reference to City Code Chapter 25, updated listing of the various
elements of Sales & Use Tax and added language noting this section is informational.
BOARD / COMMISSION RECOMMENDATION
Council Finance Committee reviewed and approved the recommended changes on November 21, 2016.
ATTACHMENTS
1. Revenue Policy (redlined to show changes) (PDF)
2. Council Finance Committee Minutes, November 21, 2016 (draft) (PDF)
Financial Management Policy 2
Policy – Revenue Issue Date:
11/19/201312/20/2016
Version: 23
Issued by: Revenue and Project
Manager
Financial Policy 2 – Revenue DRAFT PROPOSED WITH CHANGES
1
2.1 LimitationsLimitations under TABOR (Taxpayer Bill of Rights)
A. Background
The City of Fort Collins’ revenue and expenditures are limited by Article X, Section 20 of the
Colorado Constitution (TABOR). While TABOR limits both revenue and expenditures, its
primarily application is in limiting revenue collections. Growth in revenue is limited to the
increase in the Denver-Boulder-Greeley Consumer Price Index plus local growth (new
construction and annexation). This percentage is added to the preceding year’s revenue
base, giving the dollar limit allowed for revenue collection in the ensuing year. Any revenue
collected over the limit must be refunded to the citizens unless the voters approve the
retention of the excess revenue. Federal grants or gifts to the City are not included in the
revenue limit. City enterprises (electric, water, wastewater and stormwater utilities) are
also exempt from the imposed limits. In 2003, the Golf Fund revenue sources was
considered for enterprise status for purposes of TABOR. In order for an entity to become an
enterprise, voters must approve a Charter amendment for that entity.
Objective:
Monitoring and controlling revenues is important to the City of Fort Collins. Through its revenue policy, the
City primarily aims to maintain a diversified revenue system which will protect it from possible short-term
fluctuations in any of its various revenue sources. To accomplish this, revenues are monitored on a
continuous basis. An understanding of the economic and legal factors which directly and indirectly affect
the level of revenue collections is an important part of the City’s revenue policy.
Applicability:
This policy applies to all City Revenues. This policy does/does not apply to or govern revenues generated by
City-owned general improvement districts, DDA, URA, PFA or Library District.
Authorized by:
City Council, Resolutions 1994-174, & 2013-093, and 2016-XXX
ATTACHMENT 1
Financial Policy 2 – Revenue DRAFT PROPOSED WITH CHANGES
2
B. ‘De-Brucing’
In November 1997, Fort Collins’ voters approved a ballot measure that allows the City to
retain revenues that exceed the growth limit imposed by TABOR. The measure specified
that any retained revenues over the growth limit must be used for certain designated
purposes.
x Public Health and Safety (including, but not limited to, environmental monitoring
and mitigation)
x Transportation
x Growth Management
x Maintenance and Repair of Public Facilities
Legal principles require that those revenues collected in excess of the growth limit from
fees charged or other legally restricted revenues must be used for the purpose for which
they were collected. In addition, such revenues must also be used for the designated
purposes approved by the voters.
C. TABOR Notice for New Tax or Tax Increase
x Develop revenue forecasts that are reasonable and factor in the implications of over
collection.
x Review these forecasts with the appropriate leadership staff.
D. Monitor New Tax Revenue
x Staff will monitor actual revenue against the forecast revenue disclosed in the TABOR
notice.
x In the second year, confirm first years’ actual revenue to forecast and determine if any
action is needed. Provide a report to the City Council with results and any
recommended action.
E. TABOR Legislation and Judicial Decisions
Staff shall monitor new TABOR legislation, judicial decisions and actions taken by other
governments to see if they affect the City. This will include working with the City’s outside
consultants, such as special bond counsel and CML. When such matters are discovered
affecting the City, staff will confer to determine what actions, if any, the City should take in
response.
F. Documentation of ‘Fiscal Year Spending’ under TABOR
Although the City has de-Bruced, current interpretations of TABOR section 20(3)(c) merits
the need for the ongoing calculation of ‘fiscal year spending’. Staff will maintain and update
records annually to calculate the City’s fiscal year spending under TABOR. These records
shall be kept for at least six years. Also, documentation shall be kept current that defines
which related agencies, funds and types of revenues are required under TABOR to be
included in fiscal year spending and those that can be excluded.
Formatted: Numbered + Level: 1 +
NumberingStyle:A,B,C,…+Startat:1+
Alignment: Left + Aligned at: 0.25" + Indent
at: 0.5"
Comment [JV1]: Recommend deleting, there is
no policy established by this paragraph
Financial Policy 2 – Revenue DRAFT PROPOSED WITH CHANGES
3
2.2 Revenue Review, Objectives and Monitoring
A. Review and Projections
The City reviews estimated revenue and fee schedules as part of the budget process.
The major revenue sources in the General Fund are sales and use tax, property tax,
lodging tax, intergovernmental revenues, fines and forfeitures, user fees and charges,
and transfers from other funds. Conservative revenue projections are made for the
budget term. The projections are monitored and updated as necessary.
B. Principles
The City has established six (6) general principles that will be used to guide decisions on
revenue:
1. Develop and maintain stable revenue sources.
The City will strive to maintain stable revenue sources by:
a. Targeting revenue sources with minimal volatility
b. Monitoring current revenue sources for variability
c. Adjusting forecasts as necessary to accommodate unanticipated
increases and declines
d. Monitoring and adjusting expenditures for unanticipated revenue
gains/losses
2. Develop and maintain a diverse revenue base.
For all general government operations, the City will strive to maintain
diverse revenue sources. The City recognizes that becoming too dependent
upon one revenue source would make revenue yields more vulnerable to
economic cycles. Therefore, the City will strive to maintain diverse revenue
sources by:
a. Targeting revenue from multiple sources
b. Working to expand fee based revenue where possible
c. Working to minimize overdependence on any single revenue source
d. Staff will monitor dependency on sales and use tax to ensure an over
reliance does not occur
3. Cultivate revenue sources that are equitable among citizens of different
economic levels.
The City will strive to preserve a revenue stream that does not overburden
low income residents by:
a. Providing low income citizens with opportunities to participate in
programs through reduced fee structures and scholarships
b. Providing a Sales Tax on Food and Utility rebate to lessen the burden of
taxes and fees on low income citizens
Financial Policy 2 – Revenue DRAFT PROPOSED WITH CHANGES
4
c. Ensuring fees do not exceed cost to provide service
4. Generate adequate revenue to maintain service levels in line with citizen
expectations.
The City will generate adequate revenue to maintain core service levels by:
a. Ensuring fees for service do not exceed cost to provide service
b. Maintaining a cost recovery model
c. Monitoring service level performance annually through the Community
Scorecard
d. Regularly reviewing services to assess core vs. desired
5. Maintain healthy reserves.
The City will maintain healthy reserves by:
a. Adhering to State mandated reserve and internal reserve policies
b. Maintaining a Tabor (State) reserve for the General Fund of 3% or more
of the City’s fiscal year spending
c. Meeting City policy for the General Fund of an additional contingency of
60 days or 17% of next year’s adopted budgeted expenditures
6. Fees for Services are fairly born by those who use those services.
C. Targets
The City's major source of revenue for governmental activities and more specifically for
programs within the General Fund is Sales and Use Tax. The City will monitor the
dependency on Sales and Use Tax by tracking the percentage of the General Fund and
General Government that comes from Sales and Use Tax.
D.C.Monitoring
The percentages are monitored each yearIn with the preparation of the an annual
annual summary financial report the major sources revenue and the associated
percentages will be . The percentages are reviewed by the Council Finance Committee
annually.
Comment [JV2]: No policy established,
recommend removing this section from policy
Financial Policy 2 – Revenue DRAFT PROPOSED WITH CHANGES
5
2.3 Fee Policy
As a home rule municipality, the City of Fort Collins has the ability to determine the extent
to which fees should be used to fund City facilities, infrastructure and services. There are
two kinds of fees that the City may establish: Impact Fees and Special Service Fees. Impact
fees are typically on-time charges levied by the City against new development. The fees are
based on current levels of service and act as a buy-in method for new development. The
revenue can only be used for capital infrastructure needs created by the impact of the new
development. Special service fees are charges imposed on persons or property that are
designed to defray the overall cost of the particular municipal service for which the fee is
imposed. This Policy sets forth principles for identifying: 1) the kinds of services for which
the City could appropriately impose fees; 2) methods for calculating the percentage of costs
to be recovered by such fees; and 3) the manner in which the fees should be allocated
among individual fee payers.
A. Fees should be cost related
The amount of a fee should not exceed the overall cost of providing the facility,
infrastructure or service for which the fee is imposed. In calculating that Ccost may
include, direct and indirect costs may be included. That is:
1. Costs which are directly related to the provision of the service; and,
2. Support costs which are more general in nature but provide support for the
provision of the service.
B. Percentage of cost recovery
The extent to which the total cost of service should be recovered through fees
depends upon the following factors:
1. The nature of the facilities, infrastructure or services. In the case of fees for
facilities, infrastructure as well as governmental and proprietary services, total
cost recovery may be warranted. In the case of governmental services, it may be
appropriate for a substantial portion of the cost of such services to be borne by the
City’s taxpayers, rather than the individual users of such services.
2. The nature and extent of the benefit to the fee payers. When a particular facility
or service results in substantial, immediate and direct benefit to fee payers, a
higher percentage of the cost of providing the facility or service should be
recovered by the fee. When a particular facility or service benefits not only the fee
payer but also a substantial segment of the community, lower cost recovery is
warranted.
3. The level of demand for a particular service. Because the pricing of services can
significantly affect demand, full cost recovery for services is more appropriate
when the market for the services is strong and will support a high level of cost
Financial Policy 2 – Revenue DRAFT PROPOSED WITH CHANGES
6
recovery.
4. Ease of collection. In the case of impact fees, ease of collection is generally not a
factor. In the case of fees for services, however, such fees may prove to be
impractical for the City to utilize if they are too costly to administer.
C. Establishment and Modification of Fees and Charges
Aside from user fees, (e.g. recreation classes and facility room rentals), all fees
imposed by the City will be established by the City Council by ordinance. In the case of
impact fees, utility fees and charges, and special service fees assessed against property
the ordinance establishing the fees will determine:
1. The level of cost that should be recovered through the fees according to the
criteria established in this Policy;
2. An appropriate method for apportioning the cost of providing each service among
the users of the service; and,
3. A procedure for periodically reviewing and modifying the amount of fees in order
to maintain appropriate cost recovery levels.
The amounts of these kinds of fees may be modified only by ordinance of the City
Council.
The amounts of other Special Service Fees, such as user fees charged for the use of
City facilities, may be determined by the City Manager, according to criteria
established by the City Council by ordinance, absent any provision of the City Charter
or Code to the contrary.
All fee revenues will be estimated by the City Manager and submitted to the City
Council as part of the City Manager’s recommended budget.
D. Rebate Programs
If the amount of a particular fee is considered to be too high to accommodate the
needs of particular segments of the community and the public interest would be
served by adjusting the amount or manner of payment of such fees in particular
instances, the amount of the fee may be waived, rebated, or deferred as appropriate.
In the case of fees established by ordinance, the criteria for waiving, rebating, or
deferring payment of such fees shall be established by the City Council by ordinance.
Financial Policy 2 – Revenue DRAFT PROPOSED WITH CHANGES
7
2.4 Sales and Use Tax Distribution
Sales and Use Tax shall be used and accounted for as intended by the voters. Details of how
the different segments of sales and use tax are used are outlined in the City Code Chapter
25. The following is a summary for informational purposes only.
The City's Sales and Use Tax currently totals 3.00 85 cents, developed as follows:
1968 - General City uses 1.00 cent
1980 - General City uses 1.00 cent
1982 - General City uses 0.25 cent
2006 2015 - Street Maintenance 0.25 cent*
2006 2015 - Building on Basics Community Capital Improvement Program 0.25 cent*
2006 - Natural Areas & Open Space 0.25 cent*
2011 - Keeping Fort Collins Great 0.85 cent**
3.85 3.85 cents
* Excludesing sales and use tax onf grocery food for home consumption.
** Excludes sales and use tax on grocery food for home consumption and manufacturing
equipment
Financial Policy 2 – Revenue DRAFT PROPOSED WITH CHANGES
8
Revenue generated by the Sales and Use Tax will be distributed, based on adopted budgets,
in the following manner:
Subject to appropriations, actual Sales and Use Tax revenue generated by the 2.25 cent tax
in excess of the fixed dollar amounts listed above, will be deposited to the General Fund.
Actual sales and use tax revenue generated by the 0.25 cent tax for Natural Areas and Open
Space will be transferred to, and be retained in the Natural Areas Fund to be used to
acquire, operate and maintain open spaces, community separators, natural areas, wildlife
habitat, riparian areas, wetlands and valued agricultural lands and to provide for the
appropriate use and enjoyment of these areas by the citizenry, through land conservation
projects to be undertaken where there is an identifiable benefit to the residents of the City,
as determined by the City Council, either within the City or its growth management or
regionally, provided certain provisions are met.
Actual sales and use tax revenue generated by the 0.25 cent tax for Street Maintenance will
be deposited and retained in the Transportation Services Fund to be used to pay the costs of
planning, design, right-of-way acquisition, incidental upgrades and other costs associated
with the repair and renovation of City streets, including but not limited to curbs, gutters,
bridges, sidewalks, parkways, shoulders and medians.
Actual sales and use tax revenue generated by the 0.25 cent tax for Building on Basics
projects will be transferred to, and be retained in the Capital Projects Fund or
corresponding operating funds to be used to pay the costs of planning, design, right-of-way
acquisition, construction, and at least seven (7) years of operation and maintenance for
street/transportation projects and other community capital projects, identified during the
Building on Basics process, approved by the voters.
Actual sales and use tax revenue generated by the 0.85 cent tax for Keep Fort Collins Great
will be deposited and retained in the Keep Fort Collins Great Fund which is allocated as
follows: 33% for street maintenance and repair; 17% for other street and transportation
needs; 17% for police services; 11% for fire protection and other emergency services; 11%
for parks maintenance and recreation services; and 11% for community priorities other
than those listed above, as determined by the City Council.
2.5 Private Contributions
The City encourages the solicitation of private contributions. These services and programs
represent extra services that the City has not been able to provide to residents through its
regular revenue base. In times of revenue constraints the City may not be able to provide
the same level of service without additional support. Therefore, Eefforts should be made to
secure private contributions in support of City these programs and services, as these
contributions are an integral part of their successful operation. With respect to TABOR, the
City’s Finance Department will make a determination as to whether a contribution is a gift
and is therefore excluded from constitutional limits.
Comment [JV3]: Redundant with City Code
Chapter 25 sec. 25-75 Rate of tax. Not adding value,
recommend eliminating
Comment [JV4]: Recommend eliminating non-
policy language portions.
Financial Policy 2 – Revenue DRAFT PROPOSED WITH CHANGES
9
Getting Help
Please contact the Revenue and Project Manager with any questions at 970.221.6626.
Related Policies/References
City Code Chapter 25 Taxation, Article III Sales & Use Tax
City Code Chapter 26 Utilities
Administrative Fee
Definitions
Governmental Services: services provided by the City for the public good such as regulating land use,
maintaining streets, and providing police and fire protection.
Impact Fees: usually one-time charges, levied by the City against new development to offset the impacts of
the new developments
Proprietary Services: services provided for the benefit and enjoyment of the residents of the City, at their
discretion, such as parks and recreation services
Rebate: a return of a portion of a fee within a specified time. Unlike a waiver or discount, the rebate is given
after the fee has been paid in full
Special Service Fee: charges imposed on persons or property that are designed to defray the overall cost of
the particular municipal service for which the fee is imposed
Waiver: when a portion of a fee is reduced before being paid by a buyer
COUNCIL FINANCE COMMITTEE
NOVEMBER 11, 2016
Excerpt from draft minutes
C. Financial Policies Update ‐ Revenue and Debt
John Voss, Controller
EXECUTIVE SUMMARY The Revenue and Debt Policies have not been updated since 2013. No changes
are recommended to the Debt Policy. Changes recommended to the Revenue Policy relate to TABOR
and the recent need for voter approval to keep the excess revenue associate with KFCG.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Concur with recommended changes?
Recommend bringing the City Council December 21, 2016?
Policies up for Review
• Financial Management Policy 2 ‐ Revenue
• Financial Management Policy 5 ‐ Debt
Both were last modified and reviewed in 2013
Mike Beckstead; we are in the first round of the review and the updates‐ we are bringing 2 policies
today ‐ Revenue and Debt ‐ we are on a rotating 3 year cycle ‐ in 2017 we will look at 3 more ‐ 9 polices
so each will be reviewed periodically ‐ John Voss will talk us through the proposed changes to the
revenue policy which are largely TABOR driven. Not much changing in the Debt policy.
John Voss; it was asked in the past that we put these out on fcgov which we have done and we will
match the external and internal website information to include; the date last reviewed and date last
changed.
Policy 2 ‐ Revenue
1. Limitations (TABOR)
2. Revenue Review, Objectives and Monitoring
3. Fees
4. Sales & Use Tax Distribution
5. Private Contributions
Recommend new sections that relate to TABOR, clarify several areas and delete a few redundant items
2.1 Limitations under TABOR
Add section C. TABOR Notice for New Tax or Tax Increase
• Develop revenue forecasts that are reasonable and factor in the implications of over collection.
• Review these forecasts with the appropriate leadership staff.
Add section D. Monitor New Tax Revenue
• Staff will monitor actual revenue against the forecast revenue disclosed in the TABOR notice.
• In the second year, confirm actual revenue to forecast and determine if any action is needed.
Add section E. TABOR Legislation and Judicial Decisions
ATTACHMENT 2
COUNCIL FINANCE COMMITTEE
NOVEMBER 11, 2016
Excerpt from draft minutes
• When such matters are discovered affecting the City, staff will confer to determine what actions, if
any, the City should take in response.
Add section F. Maintain Records of ‘Fiscal Year Spending’
• Calculate annually
• Maintain supporting records for at least 6 years
• Document which agencies, funds and revenues qualify under TABOR
2.2 C. Targets
• Currently no policy is set
• Recommend removing section
2.2 D. Monitoring Revenue Sources
• Set clearer standard
2.4 Sales & Use Tax Distribution
• Update listing of Sales & Use Tax portions
• Note that this section of policy is informational
• Add reference to City Code Chapter 25 for details on:
o Rate
o Taxable transactions
o Permitted uses
o Term of tax, if applicable
John Voss; 2.4 We want to keep it brief and add that all details are included in Chapter 25 of the Code ‐
so as not to include duplicative information and to reduce the number of documents we need to update
Ross Cunniff; one key thing we should do after a tax is approved is to make it a policy that we always
review the collections vs projections.
Mike Beckstead; I want to monitor it during the year as well as do a formal closeout ‐ where did we land
relative to the forecast and what if anything needs to happen next?
Gerry Horak; can we add under 2.1 that there will be a report sent to City Manager and Council so it is
clear and Council is aware?
Mike Beckstead; that is our intent and we can certainly modify the second bullet under D to include that
a report will sent to Council.
John Voss; since we debruced in 1997 this has not be happening ‐ now if we get a new tax we need
those for reference points for the TABOR notice at that time and the rebates and revenue forecasts.
Gerry Horak; so documenting what method is used and include which agencies, funds and revenues
qualify under TABOR
John Voss; we will document which agencies, which funds are in and which are out
Policy 7 ‐ DEBT
A. Purpose and Use of Debt
COUNCIL FINANCE COMMITTEE
NOVEMBER 11, 2016
Excerpt from draft minutes
B. Types of Debt and Financing Arrangements
C. Debt Structure and Terms
D. Refinancing Debt
E. Debt Limitations and Capacity
F. Debt Issuance Process
We don’t have any recommended changes
John Voss; we want to ask if we are ready to go to Council the 2nd week in December
Gerry Horak; I say yes and I appreciate the effort that has been put into getting these policies clearly
documented and tightened up
Mayor Troxell; I agree – good work
Mike Beckstead; we have created an on line place for all Financial Policies
Ross Cunniff; I like the process
Mike Beckstead; we will bring this forward to Council and look for adoption on consent.
-1-
RESOLUTION 2016-096
OF THE COUNCIL OF THE CITY OF FORT COLLINS
ADOPTING AMENDMENTS TO THE CITY’S FINANCIAL
POLICIES RELATING TO THE REVENUE POLICY
WHEREAS, City Council has adopted Financial Management Policies for the City
pursuant to Resolution 1994-174 (the “Financial Policies”); and
WHEREAS, Resolution 1994-174 provides that City Council may adopt amendments to
the Financial Policies, which the Council has done several times over the years; and
WHEREAS, the City’s Chief Financial Officer and City Manager have recommended
new amendments to the Financial Policies related to the current section of the Financial Policies
that addresses financial policies related to revenues to insure that the City’s practices concerning
its revenues comply with the applicable requirements of the Taxpayer’s Bill of Rights in the
Colorado Constitution (“TABOR”); and
WHEREAS, the City is committed to sound and efficient financial planning and
management consistent with the best practices as established by the Government Financial
Officers Association (“GFOA”); and
WHEREAS, the new “Financial Management Policy 2 - Revenue” is attached hereto and
incorporated by reference as Exhibit “A” (the “Revenue Policy”); and
WHEREAS, the Council Finance Committee has reviewed the Revenue Policy and voted
to recommend that the Council approve it; and
WHEREAS, the City Council wishes to amend the Financial Polices, as most recently
updated on August 18, 2015, with the adoption of Resolution 2015-079, by adopting the
Revenue Policy in pursuit of its objectives of sound and efficient financial planning and
management consistent with GFOA’s best practices and to ensure that the City’s revenue
practices comply with all applicable TABOR requirements.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
FORT COLLINS, as follows:
Section 1. That the City Council hereby makes and adopts the determinations and
findings contained in the recitals set forth above.
Section 2. That the City Council hereby approves and adopts the Revenue Policy.
Section 3. That the Revenue Policy shall replace and supersede the “Financial
Management Policy 2 – Revenue” now in the Financial Policies, and the Financial Policies, as
previously amended and as amended herein, shall hereafter remain unchanged and in full force
and effect until the same are amended or repealed by subsequent action of the City Council.
-2-
Passed and adopted at a regular meeting of the Council of the City of Fort Collins this
20th day of December, A.D. 2016.
_________________________________
Mayor
ATTEST:
_____________________________
City Clerk
Financial Management Policy 2
Revenue Issue Date: 12/20/2016
Version: 3
Issued by: Revenue and Project
Manager
Financial Policy 2 – Revenue DRAFT PROPOSED CLEAN
1
2.1 Limitations under TABOR (Taxpayer Bill of Rights)
A. Background
The City of Fort Collins’ revenue and expenditures are limited by Article X, Section 20 of the
Colorado Constitution (TABOR). While TABOR limits both revenue and expenditures, its
primary application is in limiting revenue collections. Growth in revenue is limited to the
increase in the Denver-Boulder-Greeley Consumer Price Index plus local growth (new
construction and annexation). This percentage is added to the preceding year’s revenue
base, giving the dollar limit allowed for revenue collection in the ensuing year. Any revenue
collected over the limit must be refunded to the citizens unless the voters approve the
retention of the excess revenue. Federal grants or gifts to the City are not included in the
revenue limit. City enterprises (electric, water, wastewater and stormwater utilities) are
also exempt from the imposed limits. In 2003, the Golf Fund revenue sources was
considered for enterprise status for purposes of TABOR. In order for an entity to become an
enterprise, voters must approve a Charter amendment for that entity.
Objective:
Monitoring and controlling revenues is important to the City of Fort Collins. Through its revenue policy, the
City primarily aims to maintain a diversified revenue system which will protect it from possible short-term
fluctuations in any of its various revenue sources. To accomplish this, revenues are monitored on a
continuous basis. An understanding of the economic and legal factors which directly and indirectly affect
the level of revenue collections is an important part of the City’s revenue policy.
Applicability:
This policy applies to all City Revenues. This policy does/does not apply to or govern revenues generated by
City-owned general improvement districts, DDA, URA, PFA or Library District.
Authorized by:
City Council, Resolutions 1994-174, 2013-093, and 2016-XXX
EXHIBIT A
Financial Policy 2 – Revenue DRAFT PROPOSED CLEAN
2
B. ‘De-Brucing’
In November 1997, Fort Collins’ voters approved a ballot measure that allows the City to
retain revenues that exceed the growth limit imposed by TABOR. The measure specified
that any retained revenues over the growth limit must be used for certain designated
purposes.
x Public Health and Safety (including, but not limited to, environmental monitoring
and mitigation)
x Transportation
x Growth Management
x Maintenance and Repair of Public Facilities
C. TABOR Notice for New Tax or Tax Increase
x Develop revenue forecasts that are reasonable and factor in the implications of over
collection.
x Review these forecasts with the appropriate leadership staff.
D. Monitor New Tax Revenue
x Staff will monitor actual revenue against the forecast revenue disclosed in the TABOR
notice.
x In the second year, confirm first years’ actual revenue to forecast and determine if any
action is needed. Provide a report to the City Council with results and any
recommended action.
E. TABOR Legislation and Judicial Decisions
Staff shall monitor new TABOR legislation, judicial decisions and actions taken by other
governments to see if they affect the City. This will include working with the City’s outside
consultants, such as special bond counsel and CML. When such matters are discovered
affecting the City, staff will confer to determine what actions, if any, the City should take in
response.
F. Documentation of ‘Fiscal Year Spending’ under TABOR
Although the City has de-Bruced, current interpretations of TABOR section 20(3)(c) merits
the need for the ongoing calculation of ‘fiscal year spending’. Staff will maintain and update
records annually to calculate the City’s fiscal year spending under TABOR. These records
shall be kept for at least six years. Also, documentation shall be kept current that defines
which related agencies, funds and types of revenues are required under TABOR to be
included in fiscal year spending and those that can be excluded.
Financial Policy 2 – Revenue DRAFT PROPOSED CLEAN
3
2.2 Revenue Review, Objectives and Monitoring
A. Review and Projections
The City reviews estimated revenue and fee schedules as part of the budget process.
The major revenue sources in the General Fund are sales and use tax, property tax,
lodging tax, intergovernmental revenues, fines and forfeitures, user fees and charges,
and transfers from other funds. Conservative revenue projections are made for the
budget term. The projections are monitored and updated as necessary.
B. Principles
The City has established six (6) general principles that will be used to guide decisions on
revenue:
1. Develop and maintain stable revenue sources.
The City will strive to maintain stable revenue sources by:
a. Targeting revenue sources with minimal volatility
b. Monitoring current revenue sources for variability
c. Adjusting forecasts as necessary to accommodate unanticipated
increases and declines
d. Monitoring and adjusting expenditures for unanticipated revenue
gains/losses
2. Develop and maintain a diverse revenue base.
For all general government operations, the City will strive to maintain
diverse revenue sources. The City recognizes that becoming too dependent
upon one revenue source would make revenue yields more vulnerable to
economic cycles. Therefore, the City will strive to maintain diverse revenue
sources by:
a. Targeting revenue from multiple sources
b. Working to expand fee based revenue where possible
c. Working to minimize overdependence on any single revenue source
d. Staff will monitor dependency on sales and use tax to ensure an over
reliance does not occur
3. Cultivate revenue sources that are equitable among citizens of different
economic levels.
The City will strive to preserve a revenue stream that does not overburden
low income residents by:
a. Providing low income citizens with opportunities to participate in
programs through reduced fee structures and scholarships
b. Providing a Sales Tax on Food and Utility rebate to lessen the burden of
taxes and fees on low income citizens
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c. Ensuring fees do not exceed cost to provide service
4. Generate adequate revenue to maintain service levels in line with citizen
expectations.
The City will generate adequate revenue to maintain core service levels by:
a. Ensuring fees for service do not exceed cost to provide service
b. Maintaining a cost recovery model
c. Monitoring service level performance annually through the Community
Scorecard
d. Regularly reviewing services to assess core vs. desired
5. Maintain healthy reserves.
The City will maintain healthy reserves by:
a. Adhering to State mandated reserve and internal reserve policies
b. Maintaining a Tabor (State) reserve for the General Fund of 3% or more
of the City’s fiscal year spending
c. Meeting City policy for the General Fund of an additional contingency of
60 days or 17% of next year’s adopted budgeted expenditures
6. Fees for Services are fairly born by those who use those services.
C. Monitoring
In an annual summary financial report the major sources revenue and the associated
percentages will be reviewed by the Council Finance Committee.
2.3 Fee Policy
As a home rule municipality, the City of Fort Collins has the ability to determine the extent
to which fees should be used to fund City facilities, infrastructure and services. There are
two kinds of fees that the City may establish: Impact Fees and Special Service Fees. Impact
fees are typically on-time charges levied by the City against new development. The fees are
based on current levels of service and act as a buy-in method for new development. The
revenue can only be used for capital infrastructure needs created by the impact of the new
development. Special service fees are charges imposed on persons or property that are
designed to defray the overall cost of the particular municipal service for which the fee is
imposed. This Policy sets forth principles for identifying: 1) the kinds of services for which
the City could appropriately impose fees; 2) methods for calculating the percentage of costs
to be recovered by such fees; and 3) the manner in which the fees should be allocated
among individual fee payers.
A. Fees should be cost related
The amount of a fee should not exceed the overall cost of providing the facility,
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infrastructure or service for which the fee is imposed. Cost may include direct and
indirect costs. That is:
1. Costs which are directly related to the provision of the service; and,
2. Support costs which are more general in nature but provide support for the
provision of the service.
B. Percentage of cost recovery
The extent to which the total cost of service should be recovered through fees
depends upon the following factors:
1. The nature of the facilities, infrastructure or services. In the case of fees for
facilities, infrastructure as well as governmental and proprietary services, total
cost recovery may be warranted. In the case of governmental services, it may be
appropriate for a substantial portion of the cost of such services to be borne by the
City’s taxpayers, rather than the individual users of such services.
2. The nature and extent of the benefit to the fee payers. When a particular facility
or service results in substantial, immediate and direct benefit to fee payers, a
higher percentage of the cost of providing the facility or service should be
recovered by the fee. When a particular facility or service benefits not only the fee
payer but also a substantial segment of the community, lower cost recovery is
warranted.
3. The level of demand for a particular service. Because the pricing of services can
significantly affect demand, full cost recovery for services is more appropriate
when the market for the services is strong and will support a high level of cost
recovery.
4. Ease of collection. In the case of impact fees, ease of collection is generally not a
factor. In the case of fees for services, however, such fees may prove to be
impractical for the City to utilize if they are too costly to administer.
C. Establishment and Modification of Fees and Charges
Aside from user fees, (e.g. recreation classes and facility room rentals), all fees
imposed by the City will be established by the City Council by ordinance. In the case of
impact fees, utility fees and charges, and special service fees assessed against property
the ordinance establishing the fees will determine:
1. The level of cost that should be recovered through the fees according to the
criteria established in this Policy;
2. An appropriate method for apportioning the cost of providing each service among
the users of the service; and,
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3. A procedure for periodically reviewing and modifying the amount of fees in order
to maintain appropriate cost recovery levels.
The amounts of these kinds of fees may be modified only by ordinance of the City
Council.
The amounts of other Special Service Fees, such as user fees charged for the use of
City facilities, may be determined by the City Manager, according to criteria
established by the City Council by ordinance, absent any provision of the City Charter
or Code to the contrary.
All fee revenues will be estimated by the City Manager and submitted to the City
Council as part of the City Manager’s recommended budget.
D. Rebate Programs
If the amount of a particular fee is considered to be too high to accommodate the
needs of particular segments of the community and the public interest would be
served by adjusting the amount or manner of payment of such fees in particular
instances, the amount of the fee may be waived, rebated, or deferred as appropriate.
In the case of fees established by ordinance, the criteria for waiving, rebating, or
deferring payment of such fees shall be established by the City Council by ordinance.
2.4 Sales and Use Tax Distribution
Sales and Use Tax shall be used and accounted for as intended by the voters. Details of how
the different segments of sales and use tax are used are outlined in the City Code Chapter
25. The following is a summary for informational purposes only.
The City's Sales and Use Tax currently totals 3.85 cents, developed as follows:
1968 - General City uses 1.00 cent
1980 - General City uses 1.00 cent
1982 - General City uses 0.25 cent
2015 - Street Maintenance 0.25 cent*
2015 - Community Capital Improvement Program 0.25 cent*
2006 - Natural Areas & Open Space 0.25 cent*
2011 - Keeping Fort Collins Great 0.85 cent**
3.85 cents
* Excludes sales and use tax on grocery food for home consumption
** Excludes sales and use tax on grocery food for home consumption and manufacturing
equipment
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2.5 Private Contributions
Efforts should be made to secure private contributions in support of City programs and
services, as these contributions are an integral part of their successful operation.
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Getting Help
Please contact the Revenue and Project Manager with any questions at 970.221.6626.
Related Policies/References
City Code Chapter 25 Taxation, Article III Sales & Use Tax
City Code Chapter 26 Utilities
Administrative Fee
Definitions
Governmental Services: services provided by the City for the public good such as regulating land use,
maintaining streets, and providing police and fire protection.
Impact Fees: usually one-time charges, levied by the City against new development to offset the impacts of
the new developments
Proprietary Services: services provided for the benefit and enjoyment of the residents of the City, at their
discretion, such as parks and recreation services
Rebate: a return of a portion of a fee within a specified time. Unlike a waiver or discount, the rebate is given
after the fee has been paid in full
Special Service Fee: charges imposed on persons or property that are designed to defray the overall cost of
the particular municipal service for which the fee is imposed
Waiver: when a portion of a fee is reduced before being paid by a buyer