HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/05/2015 - ITEMS RELATING TO APPROPRIATION OF FUNDS TO REIMBUAgenda Item 12
Item # 12 Page 1
AGENDA ITEM SUMMARY May 5, 2015
City Council
STAFF
Jessica Ping-Small, Revenue and Project Manager
Mike Beckstead, Chief Financial Officer
SUBJECT
Items Relating to Appropriation of Funds to Reimburse Woodward, Inc. For Development Fees, Capital
Improvement Expansion Fees and Use Tax.
EXECUTIVE SUMMARY
Option 1:
First Reading of Ordinance No. 057, 2015, Appropriating Prior Year Reserves in the General Fund to
Reimburse Woodward, Inc. for Development Fees, Capital Expansion Improvement Fees, and Use Tax.
Option 2:
First Reading of Ordinance No. 058, 2015, Appropriating Prior Year Reserves in the General, Capital
Expansion, and Street Oversizing Funds to Reimburse Woodward, Inc. for Development Fees, Capital
Expansion Improvement Fees, and Use Tax.
The purpose of this item is to appropriate $2,107,261 of prior year reserves for a rebate to Woodward for fees
and use tax as approved by City Council on April 2, 2013 (Ordinance No. 055, 2013). Ordinance No. 055, 2013
approved an agreement between the City, Downtown Development Authority (DDA), and Woodward, Inc. The
agreement provides Business Investment Assistance for the relocation of Woodward’s headquarters as well as
an expansion of its manufacturing and office facilities to a new location at the corner of Lincoln Avenue and
Lemay Avenue. The project will retain or create between 1,400 and 1,700 primary jobs in the City. The City’s
assistance includes a rebate of Use Tax, Development Fees, and Capital Improvement Expansion Fees. The
Council is presented with two options. Option 1 is an ordinance that would appropriate all rebates from the
General Fund’s prior year reserves. Option 2 is an ordinance that would also appropriate all the rebates from
the General Fund’s prior year reserves, except for the rebate of Capital Improvement Expansion Fees, which
would be appropriated from the prior year reserves in the Capital Expansion and Street Oversizing funds for
the rebated Capital Improvement Expansion Fees. Council should adopt only one of the proposed options; the
other ordinance will be withdrawn.
STAFF RECOMMENDATION
Staff recommends adoption of Option 2, Ordinance No. 058, 2015, on First Reading.
BACKGROUND / DISCUSSION
Agreement Summary
On April 2, 2013, City Council adopted Ordinance 055, 2013 approving an Economic Development Project
Agreement (“Agreement”) between the City, the DDA, and Woodward, Inc. The Agreement specifies
Woodward is eligible for a rebate in three areas:
Agenda Item 12
Item # 12 Page 2
Use Tax on Construction Materials and Eligible Equipment (up to 80%)
Development Fees (100%)
Capital Improvement Expansion Fees and Utility PIF Fees (up to 50%).
Employment Level Requirements
The three rebate categories were offered with the stipulation that employment levels must reach or exceed
1,400 employees within the City by December 31, 2018.
If a rebate request is made prior to December 31, 2018, the City will withhold 40% of the rebate until
set employment levels have been met
If a rebate request is made prior to December 31, 2018, 60% of the earned rebates will be paid on the
schedule agreed upon by Woodward
If the target employment level is reached after December 31, 2018 but before December 31, 2020,
Woodward will receive the retained 40 percent less $500,000 (combined between use tax and
development fee rebates)
Woodward will not be entitled to the remaining 40 percent if the target level is not reached by
December 31, 2020.
Rebate Schedule as agreed upon with Woodward
Staff has developed a rebate schedule with Woodward which is consistent with the Agreement whereby two
rebate applications will be processed each year. The two applications per year consist of the following
components:
Application 1 includes:
o January through June: Development Review and Capital Improvement Expansion Fees
Application 2 includes:
o July through December: Development Review and Capital Improvement Expansion Fees
o January through December: Use Tax
Rebate funds will be appropriated by City Council biannually as part of the rebate process.
This rebate application is for 2014 and includes use tax for the entire year and development review fees and
capital improvement expansion fees for July through December.
Agenda Item 12
Item # 12 Page 3
*Use Tax Rebate only paid once per year and includes use tax for Jan-Dec 2014.
**General Fund backfill based on full rebate owed
For the application period, Woodward earned a total of $3,512,102 in rebates. Of that amount, 40% is held
back pending the aforementioned employee level requirements. The remaining 60% which totals $2,107,261 is
requested for rebate at this time. The 40% that is held back has been assigned within the General Fund in
recognition of the potential future obligation.
General Fund Backfill Discussion
When the Agreement was originally signed in 2013, the approach at the time was that the General Fund would
be used as “backfill” to make the funds that were impacted by the agreement whole. The original approach is
summarized as follows:
2013 Approach:
100% of the Capital Improvement Expansion Fee (“CIE”) rebate will be paid from the General Fund
100% of the Development Review Fee rebate would be paid from the General Fund
100% of the Utility Plant Investment Fees would be paid from the General Fund
100% of the dedicated taxes will be paid from the General Fund
o .25% Natural Areas
o .25% Streets and Transportation
o .25% Building on Basics Projects
o .85% Keep Fort Collins Great
After further consideration, the approach to backfill the Capital Improvement Expansion Fee funds has been
revisited. After reviewing the question of backfill in CIE fees with the City Attorney’s Office, staff is requesting
that Council consider a new approach. The new approach would not backfill the CIE funds from the General
Fund. No change is being considered to the Development Review Fees, Utility Plant Investment Fees and
Dedicated Use Tax approach.
The pros of not using the General Fund to backfill the CIE funds are:
Retaining funds within the General Fund provides greater flexibility for future expenditures
General Fund revenue can support capital projects in the future if needed whereas CIE funds cannot
support General Fund needs
Agenda Item 12
Item # 12 Page 4
The con of the approach is:
CIE funds have less revenue
Impact of Backfill to CIE Funds:
Factors for City Council Consideration:
The original rebate of CIEs was and is an exception to normal practice
Backfill decision is specific to the Woodward rebate and NOT a long term policy decision on how other
rebates may be addressed in the future
No impact to near term projects by not using General Fund backfill
o Police and Fire funds primarily used for debt service currently
o Street oversizing fees have long term funding requirements that exceed revenue estimates. A
general evaluation of street oversizing fees is currently under way with a scheduled
completion of late 2015.
Options for City Council Consideration
Option 1
Approve Woodward rebate with General Fund backfill of all fees subject to the requested rebate including the
CIE fees
Option 2
Approve the Woodward rebate with General Fund backfill of all funds except for the CIE funds
The Council Finance Committee reviewed the rebate at its February meeting and approved the Woodward
rebate; however, there was not consensus regarding the backfill discussion.
FINANCIAL / ECONOMIC IMPACTS
The total rebate amount is $2,107,261.
Agenda Item 12
Item # 12 Page 5
Option 1
The full amount of $2,107,261 will come from prior year General Fund Reserves and will be appropriated for
the purpose of remitting the rebate to Woodward.
Option 2
The amount of $1,888,079 will come from prior year General Fund Reserves and the following amounts will
come from the CIE Funds:
General Government: $24,879
Police: $7,313
Fire: $12,854
Street Oversizing: $174,136
ENVIRONMENTAL IMPACTS
The 101.5 acre project included a restoration of a 31-acre river buffer natural area which was transferred to the
City upon completion. In addition, a 10-foot wide Poudre Trail was reconstructed through the new natural
area.
ATTACHMENTS
1. Council Finance Committee minutes, February 9, 2015 (PDF)
2. Powerpoint presentation (PDF)
ATTACHMENT 1
1
Woodward Rebate
City Council Meeting
May 5, 2015
ATTACHMENT 2
2
Woodward Rebate Summary
• Rebates Allowed Per the Agreement
Ø Use Tax on Construction Materials and Eligible Equipment (80%)
Ø Development Fees (100%)
Ø Capital Improvement Expansion Fees (CIE) & Utility PIFs (50%)
• Rebates Schedule as agreed upon with Woodward
Ø 2 applications per year
Ø Application 1 – Covers January - June
§ Includes Development Review and Capital Improvement
Expansion Fees (CIE), and Utility PIF
Ø Application 2 Includes:
§ June-December – Dev. Review, CIE Fees, Utility PIFs
§ January-December – Use Tax
3
Estimated Current Rebate Due
For Period July 1, 2014 – December 31, 2014
Total Due: $2,107,261
Rebate Payment
Development
Fees
100%
CIE Fees
50%
Utility
PIF
50%
Use Tax
80%*
Not
Eligible
for Rebate
Total
Total Fees Collected $493 $730 $2,278 $1,893 $295 $5,691
Rebate Owed 493 365 1,139 1,514 N/A 3,512
Rebate Eligible for
Payment - 60% 296 219 684 909 N/A 2,107
Rebate Holdback- 40% 197 146 456 606 N/A 1,405
General Fund
Backfill** 0 365 1,139 632 N/A 2,137
*Use Tax Rebate only paid once per year - $1.9M reflects 12 months of fees collected
** General Fund backfill based on full rebate owed
($ 000s)
4
General Fund Backfill
• At the time the Woodward agreement was approved, the
structure was to “backfill” CIE fees from the General Fund
• After further consideration, the approach to backfill CIE
fees has been revisited with City Attorney’s Office
• A new option identified - Fund the CIE rebates out of the
capital improvement expansion funds instead of the
general fund
• All other rebates to be paid from the General Fund
5
Pros and Cons of Alternative Approach
• Pros – Future Spending Flexibility
ØRetaining funds within the General Fund provides
greater flexibility for future expenditures
ØGeneral Fund revenue can support capital projects
in the future if needed whereas CIE funds cannot
support General Fund needs
• Cons
ØCIE funds have less revenue
6
Impact of Backfill to CIE Funds
CIE Fund
($ 000s)
2014
Yearend
Balance
Fees
Paid
Rebate
Earned
Rebate
Owed
60%
% of
Year
End
General
Government
$7,562 $83 $42 $25 .5%
Police 927 24 12 7 1.2%
Fire 847 43 21 13 2.4%
Street Oversizing 14,505 580 290 174 1.9%
Total $365 $219
Total impact to General Fund: $365k
($ 000s)
7
Additional Considerations
• Rebate of CEIs was/is an exception to normal practice
• Backfill decision is specific to the Woodward rebate
and NOT a long term policy decision on how other
rebates may be addressed in the future
• No impact to near term projects by not using General
Fund backfill
– Police and Fire funds primarily used for debt service currently
– Street oversizing fees have long term funding requirements that
exceed revenue estimates
8
Summary of Options for Council
• Option 1:
ØApprove Woodward rebate with General Fund
backfill of CIE funds
• Option 2:
ØApprove Woodward rebate with NO General Fund
backfill of CIE funds
- 1 -
OPTION 1
ORDINANCE NO. 057, 2015
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROPRIATING PRIOR YEAR RESERVES IN THE GENERAL FUND TO REIMBURSE
WOODWARD, INC. FOR DEVELOPMENT FEES, CAPITAL EXPANSION
IMPROVEMENT FEES, AND USE TAX
WHEREAS, the City, the Fort Collins Downtown Development Authority, and
Woodward, Inc. (“Woodward”) entered into that certain “Agreement with Woodward, Inc.”
dated April 16, 2013 (the “Agreement”), which Agreement provides business investment
assistance for the relocation of Woodward’s headquarters and the expansion of its manufacturing
and office facilities in Fort Collins; and
WHEREAS, the Agreement specifies that Woodward is eligible for reimbursement from
the City for the following paid by it to the City: (1) Use Tax on Construction Materials and
Eligible Equipment, (2) Development Fees, and (3) Capital Improvement Expansion Fees; and
WHEREAS, under the Agreement, Woodward can apply for reimbursement biannually
for Development Review and Capital Improvement Expansion Fees and once a year for the Use
Tax rebate; and
WHEREAS, all funds reimbursed must be appropriated by Council as part of the rebate
process; and
WHEREAS, the Agreement was approved by City Council pursuant to Ordinance No.
055, 2013, on April 2, 2013; and
WHEREAS, the current reimbursement due to Woodward for the period of July 1, 2014,
through December, 31, 2014, is $2,107,261 for eligible fees and Use Tax; and
WHEREAS, staff is requesting appropriation of the full amount, $2,107,261 from prior
year reserves in the General Fund to reimburse Woodward in accordance with the Agreement;
and
WHEREAS, Article V, Section 9, of the City Charter also permits the City Council to
appropriate by ordinance at any time during the fiscal year such funds for expenditure as may be
available from reserves accumulated in prior years, notwithstanding that such reserves were not
previously appropriated.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS that there is hereby appropriated for expenditure from prior year reserves in the
General Fund the sum of TWO MILLION ONE HUNDRED SEVEN THOUSAND TWO
HUNDRED SIXTY-ONE DOLLARS ($2,107,261) to reimburse Woodward for Development
Fees, Capital Expansion Improvement Fees, and Use Tax as required by the Agreement.
- 2 -
Introduced, considered favorably on first reading, and ordered published this 5th day of
May, A.D. 2015, and to be presented for final passage on the 19th day of May, A.D. 2015.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
Passed and adopted on final reading on the 19th day of May, A.D. 2015.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
- 1 -
OPTION 2
ORDINANCE NO. 058, 2015
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROPRIATING PRIOR YEAR RESERVES IN THE GENERAL,
CAPITAL EXPANSION, AND STREET OVERSIZING FUNDS TO REIMBURSE
WOODWARD, INC. FOR DEVELOPMENT FEES, CAPITAL EXPANSION
IMPROVEMENT FEES, AND USE TAX
WHEREAS, the City, the Fort Collins Downtown Development Authority, and
Woodward, Inc. (“Woodward”) entered into that certain “Agreement with Woodward, Inc.”
dated April 16, 2013 (the “Agreement”), which Agreement provides business investment
assistance for the relocation of Woodward’s headquarters and the expansion of its manufacturing
and office facilities in Fort Collins; and
WHEREAS, the Agreement specifies that Woodward is eligible for reimbursement from
the City for the following paid by it to the City: (1) Use Tax on Construction Materials and
Eligible Equipment, (2) Development Fees, and (3) Capital Improvement Expansion Fees; and
WHEREAS, under the Agreement, Woodward can apply for reimbursement biannually
for Development Review and Capital Improvement Expansion Fees and once a year for the Use
Tax rebate; and
WHEREAS, all funds reimbursed must be appropriated by Council as part of the rebate
process; and
WHEREAS, the Agreement was approved by City Council pursuant to Ordinance No.
055, 2013, on April 2, 2013; and
WHEREAS, the current reimbursement due to Woodward for the period of July 1, 2014,
through December, 31, 2014, is $2,107,261 for eligible fees and Use Tax; and
WHEREAS, in accordance with the terms of the Agreement, staff is requesting
appropriation of the full amount to reimburse Woodward from prior year reserves from the
following funds:
General Fund: $1,888,079
Capital Expansion Fund
General Govt. $ 24,879
Police $ 7,313
Fire $ 12,854
Capital Expansion Fund: $ 45,046
Street Oversizing Fund: $ 174,136
Total Reimbursement Request: $2,107,261
- 2 -
WHEREAS, Article V, Section 9, of the City Charter also permits the City Council to
appropriate by ordinance at any time during the fiscal year such funds for expenditure as may be
available from reserves accumulated in prior years, notwithstanding that such reserves were not
previously appropriated.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That there is hereby appropriated for expenditure from prior year reserves
in the General Fund the sum of ONE MILLION EIGHT HUNDRED EIGHTY EIGHT
THOUSAND SEVENTY NINE DOLLARS ($1,888,079) to reimburse Woodward for
Development Fees and Use Tax as required by the Agreement.
Section 2. That there is hereby appropriated for expenditure from prior year reserves
in the Capital Expansion Fund the sum of FORTY FIVE THOUSAND FORTY SIX DOLLARS
($45,046) to reimburse Woodward for General Government, Police and Fire Capital Expansion
Improvement Fees as required by the Agreement.
Section 3. That there is hereby appropriated for expenditure from prior year reserves
in the Street Oversizing Fund the sum of ONE HUNDRED SEVENTY FOUR THOUSAND
ONE HUNDRED THIRTY SIX DOLLARS ($174,136) to reimburse Woodward for Street
Oversizing Capital Expansion Improvement Fees as required by the Agreement.
Introduced, considered favorably on first reading, and ordered published this 5th day of
May, A.D. 2015, and to be presented for final passage on the 19th day of May, A.D. 2015.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
- 3 -
Passed and adopted on final reading on the 19th day of May, A.D. 2015.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk