HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 09/03/2019 - FIRST READING OF ORDINANCE NO. 110, 2019, INCREASIAgenda Item 8
Item # 8 Page 1
AGENDA ITEM SUMMARY September 3, 2019
City Council
STAFF
Terra Sampson, Project Manager, Energy Services
John Phelan, Energy Services Manager
Travis Storin, Accounting Director
Sean Carpenter, Climate Economy Advisor
John Duval, Legal
SUBJECT
First Reading of Ordinance No. 110, 2019, Increasing the Current Loan Fund Available for the Epic Loan
Program and Appropriating Funds for the Program From Reserves in the Light and Power Fund.
EXECUTIVE SUMMARY
The purpose of this item is consideration of an Ordinance to increase from $1.6 million to $2,488,350 the
revolving loan fund available in the Utilities’ Light and Power Fund to provide loans to Utilities’ customers under
the Epic Loan Program (Program) and to appropriate these funds for the Program. This increase in the loan
fund is the result of the City recently receiving for the Program a grant of $200,000 from the Colorado Energy
Office and a grant of $688,350 from Bloomberg Philanthropies. The Program, formerly known as the On-Bill
Utility Financing Program, provides low-cost financing to Utilities’ customers for energy efficiency, water
efficiency, and renewable energy improvements.
The Ordinance also provides that this loan fund will increase by three proposed future borrowings by the City’s
Electric Utility Enterprise from third-party lenders as these borrowings are approved by the Board of the
Enterprise. These borrowings are: (i) up to a $1 million loan from the Colorado Energy Office, (ii) up to a $2.5
million loan from U. S. Bank (to be considered by the Board of the Enterprise at this September 3rd meeting),
and (iii) up to a $1.5 million loan from either the Colorado Clean Energy Fund or a bank partnering with it
(Enterprise Borrowings). If the Enterprise Borrowings are approved by the Enterprise Board, the revolving loan
fund for the Program will be increased under the Ordinance to $7,488,350.
This item was discussed at the July 15, 2019, Council Finance Committee meeting with support to bring
forward the included ordinance for full Council consideration.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading.
BACKGROUND / DISCUSSION
Increasing & Appropriating Loan Fund for Program
Prior to 2016, the revolving loan fund for the Program was $800,000. In 2016, City Council adopted Ordinance
No. 035, 2016, to increase the loan fund to $1.6 million. The City has recently been successful in obtaining
grant money for the Program. It has been awarded a $200,000 grant from the Colorado Energy Office and a
$688,350 grant from Bloomberg Philanthropies. With these additional funds, the loan fund for the Program can
be increased by $888,350 resulting in a new loan fund of $2,488,350. The proposed Ordinance approves this
Agenda Item 8
Item # 8 Page 2
new loan fund and appropriates the $2,488,350 from the Light and Power Fund reserves for use in the
Program.
The Ordinance also contemplates and authorizes the loan fund for the Program to be further increased if the
City’s Electric Utility Enterprise (Enterprise) borrows additional funds for the Program from third-party lenders.
Utilities is proposing that the Board of the Enterprise (Board) consider the following borrowings for the
Program: (i) up to a $1 million loan from the Colorado Energy Office, (ii) up to a $2.5 million loan from U. S.
Bank (to be considered by the Board at this September 3 meeting), and (iii) up to a $1.5 million loan from
either the Colorado Clean Energy Fund or a bank partnering with it (Enterprise Borrowings). The Ordinance
provides that as each of these Enterprise Borrowings is approved by the Board, the loan fund will increase by
the principal amount to that loan. Therefore, if all three Enterprise Borrowings are approved by the Board, the
Program’s approved loan fund will increase up to a maximum of $7,488,350.
Epic Homes
In October 2018, Fort Collins became a winner of the 2018 Bloomberg Mayors Challenge and the associated
$1M prize. The 2018 Bloomberg Mayors Challenge involved over 300 cities proposing ideas to address
important issues in their community. Epic Homes was selected as a winner for its innovative approach to
providing health and equity benefits to residents, specifically for low-to-moderate income renters, by improving
the energy efficiency of rental homes. Residential property owners can take advantage of Epic Homes’ easy
streamlined steps to make their homes more comfortable, healthy and efficient. Partnering with Colorado State
University, Fort Collins is also establishing a research study which links the health and wellbeing indicators of
improved indoor environmental quality.
Epic Homes provides non-energy benefits in addition to efficiency, such as increased comfort, health and
safety. In nearly every energy assessment, energy advisors identify a health and safety hazard in need of
attention. This could vary from a failing water heater causing mold, to cracks letting undesirable air into the
home from the garage or crawlspace, to combustion appliances expelling carbon monoxide. For example, one
energy advisor has shared a story of walking into a home for an energy assessment and his personal safety
monitor immediately going off from carbon monoxide levels because the furnace had gone out and the
household was using their oven for heat. Loans are available for over 25 different types of efficiency measures,
including replacing an old furnace with a new efficient furnace that has important safety features, such as
sealed combustion with intake and exhaust to the outside.
Epic Loans
Fort Collins’ innovative On-Bill Finance (OBF) program (previously also known as Home Efficiency Loan
Program or Help and now called the Epic Loan Program), a component of the Epic Homes portfolio
(Attachment 1), supports a number of community and City Council priorities, including ambitious goals around
energy efficiency and renewables, reduced greenhouse gas emissions and increased equity and wellbeing of
all residents. Meeting these objectives will require, among other activities, greater numbers of property owners
to undertake comprehensive efficiency improvements in the coming years, particularly for older, less-efficient
rental properties which make up a large percentage of the City’s housing stock. An ongoing and attractive
financing structure to support energy efficiency retrofits will be a critical element for success moving forward.
The original OBF operated successfully from 2013 through 2016 when the maximum outstanding loan balance
funded through Light & Power reserves was reached. Epic Loans were revitalized in August 2018 during the
Champions Phase of the Bloomberg Mayors Challenge using the $100,000 award from the Champions Phase
and a $200,000 grant from the Colorado Energy Office. To date, Fort Collins Utilities has serviced 198 on-bill
loans to support energy efficiency upgrades in residential homes and overcome financial barriers for making
these important upgrades.
Staff has been working to develop third-party capital agreements to scale impact for owners and renters in Fort
Collins. This has included presentations with the Council Finance Committee to discuss the Request for
Proposal for third-party capital providers, discuss the capital strategy and review proposed capital agreement
terms. Staff discussed further details related to the national green bank provider with Council Finance on
Agenda Item 8
Item # 8 Page 3
August 19, 2019 and plans to bring more information about 15-year capital sources to the Electric Utility
Enterprise Board on October 1, 2019. The proposed ‘capital stack’ is provided in Table 1 below and the
customer interest rates based on third-party capital terms are provided in Table 2.
Table 1. Epic Loan Capital Stack Summary
Capital
Type
Provider Term Rate Amount
Internal &
Grant
Previously authorized Light &
Power reserves
Ongoing 0% $1,600,000
Bloomberg Philanthropies Grant 0% $688,350
Colorado Energy Office – Grant Grant 0% $200,000
Internal Subtotal $2,488,350
External
Market
Colorado Energy Office – Loan 15 year 1.25% - 2.25% Up to $1,000,000
National Commercial Bank (US
Bank)
5 & 10
year
76% of Prime
(3.99% Currently)
Up to $2,500,000
National Green Bank (Colorado
Clean Energy Fund)
15 year Prime + .25%
(5.50% currently)
Up to $1,500,000
External Subtotal $5,000,000
Total $7,488,350
Table 2. Customer Interest Rate
Loan Term
Customer Rate
(Effective Aug. 2019)
3 or 5 years 3.75%
7 or 10 years 4.25%
15 years 4.75%
Policy Considerations
The City Debt Policy states that “The City will normally not issue variable rate debt … certain circumstances
may warrant the issuance of variable rate debt, but the City will attempt to stabilize the debt service payments
through the use of an appropriate stabilization arrangement.” The proposed 5- and 10-year facility with U.S.
Bank, being considered by the Enterprise on September 3, 2019, conforms to this existing policy because staff
has arranged for Term Loan conversion rights during the 2-year variable draw window which effectively
stabilizes the debt service per policy.
Third-Party Capital
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In all third-party loan agreements, the Enterprise will be the borrower, with the third-party funds being loaned to
customers by Utilities. The Enterprise will be responsible for the repayment to the capital provider. In turn,
Utilities’ customers carry the obligation for repayment of loans to the City via their utility bill. Utilities has
various code-specified tools for recourse of delinquent utility bills that makes the risk profile for the Epic Loan
portfolio extremely low. In fact, there have been zero loan defaults since OBF began in 2013.
Additionally, the Ordinance is not anticipated to affect electric rates. Third-party capital providers will have a
subordinate position on Electric Utility system revenues, after the more senior pledge held by revenue
bondholders for the currently outstanding Connexion bonds. Finally, the City may pre-pay any of these
borrowings in whole or in part at any time and without penalty.
CITY FINANCIAL IMPACTS
Staff projects the Epic Loan Program will be cashflow positive. Staff also projects the Ordinance under
consideration by the Electric Utility Enterprise Board on September 3, 2019, will meet the project demand for
the next 4 years or more, for loans with a payback of up to 10 years. The 15-year external capital sources are
scheduled to be considered at the October 1 Electric Utility Enterprise Board meeting.
A variety of risks exist including variable interest rate exposure, customer demand risk, and customer default
risk. Customer default risk is considered de minimis based on lack of defaults over the 6-year history of the
program and the default protections the City already has in place. Customer demand risk is difficult to assess,
but the line of credit model helps ensure that principal borrowed matches the Epic Loan volumes as closely as
possible.
To manage interest rate risk, staff built in Term Loan conversion and pre-pay options into the loan agreements,
incorporated a 1.0% spread between borrowed rates and customer rates, and performs regular reviews of
customer rates. In the event of extreme market interest rate activity or the portfolio going “upside-down”, the
City can exercise its rate-lock option and freeze new Epic Loan customer offerings, effectively capping the
exposure.
Core tenets of the loan program are to ensure no negative impact on Light & Power planned debt offerings,
and to protect the Utilities credit rating and broadband coverage covenants.
BOARD / COMMISSION RECOMMENDATION
Third-party capital agreements and terms were discussed at the July 15, 2019, Council Finance Meeting
(Attachment 2). Council Finance supported bringing forward the included Ordinance for Council consideration
on September 3, 2019. Staff presented additional 15-year capital source details to Council Finance on August
19, 2019, and, plan to bring forward for Electric Utility Enterprise Board consideration on October 1, 2019.
ATTACHMENTS
1. Epic Homes Structure and Components Diagram (PDF)
2. Council Finance Meeting Minutes, July 15, 2019 (PDF)
ATTACHMENT 1
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Travis Storin; these are not cash accounts but are upstream from JDE - managing developer escrows to funds –
there is no interface built into the system, so the balancing activity is a manual activity (similar to balancing
checkbook)
Mike Beckstead; we will get a process defined and a cadence to that process put in place and the team will be
focused on this effort in 2019 – 20.
Chris Tilley; our recommendation is exactly as Mike Beckstead stated (analyze, clean up, reconciliation, no
impact)
Ross Cunniff; you mentioned that some smaller federal grants might never be audited - risk to city is much lower
but randomly picking one of them every year for auditing might be something to consider.
Chris Telli; we can look into doing that – they would never be required due to $750K threshold.
Programs that never reach that threshold typically don’t get to the point of requiring an audit.
ATION ITEM
Ross Cunniff; Do any of your other clients have whistle blower programs?
Chris Tilly; many clients have a fraud hotline in place which we highly recommend - it should be available to all
employees and to the community at large. There are many other vendors that offer this service in addition to
BKD.
Kelly DiMartino; we have an Ethics Hotline available to employees and citizens. It is promoted on our website.
Ross Cunniff; what about policies against retaliation?
Darin Atteberry; we have internal administrative policies around retaliation
ACTION ITEM:
Ross Cunniff; I would recommend we take this to Council as a Resolution given that we have a significant finding.
Mike Beckstead; we will get that scheduled and bring it forward to Council.
Kudos to BKD and to the Staff for a great working relationship.
B. Epic External Borrowing Terms / Details
Sean Carpenter, Lead Specialist, Economic Sustainability
Travis Storin, Director, Accounting
SUBJECT FOR DISCUSSION: Epic Homes Capital Plan - Update & Next Steps
EXECUTIVE SUMMARY
This item will provide an update to Council Finance regarding the Epic Homes capital plan and next steps for
capital agreements. Updates include:
Council Finance Committee July 15, 2019 Meeting Minutes
Excerpt: Epic External Borrowing Terms/ Details P. 5-12
ATTACHMENT 2
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• Review of on-bill financing history and capital recruitment process;
• Future capital stack;
• Loan terms and rates;
• Cash flow projections; and
• Next steps regarding securing and appropriation of third-party capital into a revolving loan fund.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
• Does the Council Finance Committee approve the presentation of financial / loan agreements to the full City
Council for consideration in August?
BACKGROUND/DISCUSSION
Fort Collins’ innovative On-Bill Finance (OBF) program supports a number of community and City Council
priorities, including ambitious goals around energy efficiency and renewables, reduced greenhouse gas
emissions and increased equity and wellbeing of all residents (see Energy Policy and Climate Action Plan).
Meeting these objectives will require, among other activities, that greater numbers of property owners
undertake comprehensive efficiency improvements in the coming years, particularly for older, less-efficient
rental properties which make up a large percentage of the City’s housing stock. An ongoing and attractive
financing structure to support energy efficiency retrofits will be a critical element for success moving forward.
On-Bill Financing History
The Home Efficiency Loan Program (HELP, aka OBF 1.0) operated successfully from January 2013 through early
2017 when the maximum outstanding loan balance of $1.6M was reached. In 2017, Elevations Credit Union was
selected through an RFP process for energy loan financing. Utilities staff qualify the efficiency project based on
the rebate measures in the Efficiency Works Home program; however, the loan origination and servicing are
independent of Utilities programs. With the implementation of Epic Loans, Elevations loans will continue to be
an option for interested customers.
Epic Loans (aka OBF 3.0) were revitalized in August 2018 during the Champions Phase of the Bloomberg Mayors
Challenge. The $100,000 award from the Champions Phase and a $200,000 grant from the Colorado Energy
Office were used to kick off the revitalized on-bill financing. Fort Collins is among nine winning cities for the
Mayor Challenge, each receiving $1 M to implement their winning idea. The grant agreement with Bloomberg
Philanthropies was completed in February 2019 and the initial $100,00 tranche of the $1M was awarded. As of
March 2019, Epic Loans has serviced over 20 on-bill loans for $280,000 to support energy efficiency retrofits that
would not have occurred without an attractive financing option.
Leveraging external capital is critical to achieving the long-term vision of Epic Loans and offers a continuing
source of funds to meet increasing customer demand for energy efficiency financing. Epic Loans is designed to
balance the programmatic objectives and financial requirements of the City, while also meeting the needs and
expectations of capital providers and Utilities customers. The program team seeks to design an “evergreen”
revolving loan fund which:
• Supports residential energy efficiency upgrades for years to come;
• Scales to meet long-term efficiency objectives;
• Removes financial barriers to efficiency upgrades with attractive rates and terms;
• Aligns capital commitments with customer loan terms; and
• Minimizes the City and Utilities risk and administrative effort.
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Council Finance Meetings Review
The Epic Homes team presented to Council Finance in November 2018 regarding the program background and
issuing an RFP for third-party capital sources. The City issued RFP #8842 in December 2018 and the team
pursued conversations and negotiations with respondents and other potential capital providers.
The Epic Homes team presented to Council Finance again in May 2019 regarding the potential capital sources
and next steps for bringing capital agreements to Council. Staff have continued negotiations with potential
capital providers (including a locally managed national bank, a regional bank, Coalition for Green Capital, and the
Colorado Energy Office) and received Legal and Purchasing review of draft contracts.
Capital Stack and Terms
Capital sources for the Epic Loan need to align with the following high-level objectives:
• Attractive: The loan program must be able to provide attractive loan terms to customers, specifically
attractive interest rates.
• Scalable: The program must be scalable in support of Fort Collins ambitious energy goals. It is
anticipated that Fort Collins will upgrade thousands of homes in the coming years.
• Parity: In both length and rate, borrowed capital should match loaned capital as closely as possible.
• Simple: The implementation and administration of the program must be as simple as possible for all
parties, including customers, Utilities, and the capital partners.
Capital Stack
To provide sufficient financing for the expected number of projects, the short-term (3-4 year) capital goal is $7M
to $8M. This assumes $1.5M to $2M annually in energy efficiency project financing. The longer-term capital goal
is up to $16M in order to establish a self-sustaining revolving loan. To meet the short-term capital goal, the Epic
Homes team proposes the capital stack below.
Capital Type Provider Term Rate Amount Status
Low or No Cost
Bloomberg Philanthropies –
Champions Phase Award
N/A 0% $100,000 Appropriated July
2018
Bloomberg Philanthropies – Award
Initial Tranche
N/A 0% $100,000 Appropriated
March 2019
Bloomberg Philanthropies – Award
Second Tranche
N/A 0% $488,350 To be appropriated
August 20
Colorado Energy Office –Grant N/A 0% $200,000 Appropriated
August 2018
Colorado Energy Office – Loan 15 year 1-2% $1,000,000 To be appropriated
August 20
External Market
National Commercial Bank 5 & 10
year
3.95% -
4.25%
$2,500,000 To be appropriated
August 20
Regional Private Bank (through
National Green Bank)
15 year 5.75% $2,500,000 To be appropriated
August 20
Internal
Repayments of previously paid
loans
N/A 0% $374,000 Appropriated as
part of revolving
loan fund in OBF
1.0
Total $7,262,350
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Flexible structures which minimize the need for the City to carry non-deployed debt capital, such as lines of
credit versus term loans, are being pursued with the capital providers. In all cases, Fort Collins Utilities would be
the borrower, with the third-party funds being loaned to customers by Utilities. Fort Collins Utilities would be
responsible for the repayment to the capital provider. In turn, Utilities customers carry the obligation for
repayment of loans to the City via their utility bill. Utilities has various code-specified tools for recourse of
delinquent utility bills that makes the risk profile for the Epic Loan portfolio extremely low. Third-party capital
providers will have a senior pledge on customer loan repayments and second position on Electric Utility
revenues, after the more senior pledge held by revenue bondholders. Finally, the City may pre-pay any of these
agreements in whole or in part at any time and without penalty.
Capital Source #1: Colorado Energy Office
• Amount: Up to $1,000,000
• Length: 15-years inclusive of draw period
• Draw period: None
• Fixed Rate: 1.25% to 2.25%
External Capital Source #2: National Commercial Bank
• Amount: Up to $2,500,000
• Length: 5-year and 10-year portions, inclusive of draw period
• Draw period: Up to 2 years with monthly draws based on customer loans
• Variable Rate Period: Fed SOFR plus X% (applies during draw period)
• Fixed Rate: 5-year or 10-year Treasury Note plus X% (rate becomes fixed after draw period)
External Capital Source #3: National Green Bank
• Amount: Up to $2,500,000
• Length: 15-years inclusive of draw period
• Draw period: Up to 2 years with quarterly draws based on customer loans
• Variable Rate: Wall Street Journal Prime + 0.25% (currently 5.75%)
• Collateral: City will deposit 50% of drawn amount into FDIC-insured account
Policy Exceptions
Source #2 and #3 each have terms that interact or conflict with Financial Policy #7.
Debt Instrument Policy Issue
Source #1: State Energy Office • None
Source #2: 5- and 10-year National
Commercial Bank
• Variable rate for 2 years, managed in 6-
month intervals
Source #3: 15-year National Green Bank • Credit Enhancement, and
• Variable Rate, or
• Derivative Swap instrument
For source #2 (5- and 10-year commercial funds), staff has arranged for rate-lock rights during the 2-year
variable draw window which effectively stabilizes the debt service per policy.
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For source #3 (15-year green bank funds), staff assesses an appropriate use of a credit enhancement via the
collateral pledge.
The note is written with variable rate for its duration, however. Staff has attempted to negotiate rate lock-in
rights during the draw period, but the lender has been unable to flex. Alternatives are to accept the terms of this
deal, terminate the deal, or manage the variable rate risk via an interest rate swap. The swap would qualify as a
derivative instrument, which is also covered by policy as an instrument the City should avoid.
Retail Rates and Terms
In December 2018, the financial officer’s rules and regulations were revised to remove language about specific
interest rates and allows for regular review and necessary adjustments of interest rates based on third-party
capital terms, and approval of the City CFO. The City will blend capital sources and interest rates into loan
offerings that recover the cost of capital and include a modest administrative premium to cover administrative
costs in the future. The current loan interest rates interest rates based on capital sources are as follows:
Loan Term Interest Rate (Effective
Jan. 2019)
Interest Rate (Effective
Jul 2019)
3 or 5 years 3.49% 3.75%
7 or 10 years 3.99% 4.25%
15 years 4.49% 4.75%
Next Steps
The Epic Homes team is finalizing lending agreements with third-party capital providers. The Epic Homes team
seeks approval from Council Finance to proceed with City Council consideration of financial agreements during
the August 20 Council session. A separate ordinance will be prepared for each capital provider.
NEXT STEPS / DISCUSSION:
Mike Beckstead; policy consideration - some I would consider to be in a bit of a gray zone - we want to be clear -
we will be coming back to clarify consistency in terms with our current debit policy. Variable rates, slots.
There is one that is are looking for a 50% deposit of what we borrow as a credit enhancer which is a stretch to
our current policy and needs to be discussed. We pushed back hard, and they came back and said it is a
requirement to do this loan.
Sean Carpenter; we have heard consistently that trying to borrow money beyond 10 years will be difficult -
finding 15 year money has been a real challenge but it is important programmatically especially in the
Bloomberg project where we are targeting rental properties - HVACS - owners need that longer term to keep
payments lower.
Travis Storin; there are several interactions with policy and one outright exception - we will be very transparent
and upfront about any proposed policy exceptions when this is brought forward.
L&P reserves would fund it and would be restricted for the life of the contract and would become reserves we
can’t appropriate.
Variable Rate Debt – discouraged by not prohibited by policy - if we feel it is warranted.
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15 year money variable rate for life offered - we can terminate the deal if we needed to or modify our program
or product offerings to Epic loan customers or we can try to manage that risk with another instrument - variable
interest rate swap which is a derivative financial instrument and is to be avoided per policy - approach a
separate bank - the financial industry calls it a plain vanilla swap - fixed for variable rate trade. Low risk and
widely available.
Mike Beckstead; challenge to me is borrowing 15-year money at a variable rate and loaning it out at a fixed rate
is a bit of a non-starter from my perspective - that is where the swap came from – has some challenges but
might be better than doing nothing.
Ross Cunniff; access to larger pool of money - moves some of the risk to the lender - use our capital as collateral
3 different policy excursions from this same source - to get us a 15-year product it will cost us half of that total -
we could do 15-year terms but we would assume the risk
Mike Beckstead; we have the Council approved $1.6M of L&P reserves and of that amount $400K is still
available. Less attractive because it will take a while to get those funds paid back but using our money is an
option if we wanted to do that out of reserves and fund balance
Travis Storin; From a scalability perspective, we have gone at this from the view that the city cannot be the
banker long term - Staff assessment to date is that it is unattractive to use our own money to deploy loans
Darin Atteberry; what is the cost premium for the plain vanilla swap?
Travis Storin; currently it would be 25-50 basis points above the prevailing variable rate.
100 basis points of spread between our overall costs and the costs the consumer sees- this is not intended to be
money making. We previously offered a 20-year product, but we are not going to offer 20-year product in the
future.
Mike Beckstead; one of our tenets is we don’t borrow money for a shorter period than we loan money.
Ross Cunniff; 15-year loans would be for HVAC and largely for multi-family rental housing. Do we ask for any
collateral?
Travis Storin; UCC filing - right to shut off the utility - No defaults in 300 loans we have issued
Ross Cunniff; heading down the road of using our own capital – one of the considerations to mitigate our risk
Sean Carpenter; more comprehensive programs – folks also want that 15-year loan - Want to prove our
hypothesis – positive impacts from these upgrades / changes.
Variable draw period lines up with program parameters nicely
Mike Beckstead; we are thinking $1.5 - 2M a year in loans - Can we get an option for year 3 from the lenders if
we don’t draw at all or do we renegotiate a separate program in year 3 – our expectation is that we won’t use
$6M in a two year process - we will be 2/3 of that at best based on our historical loan rates - still some
ambiguity with what we do in year 3
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Mike Beckstead; August 20th is the design to put these in place in time to support the program - we are not
presuming Council Finance is going to support. That date is subject to this discussion.
Ken Summers; what is the largest amount we would loan in a 15-year time frame?
Sean Carpenter; $25K is the maximum loan amount - multi-unit apartment buildings, duplex / triplex / quad plex
- larger than that would be commercial. Average loan size is in the $11-12K range. Larger would include solar -
other features - solar companies - attractive financing
Ross Cunniff; heat pump type installation - solar which as an obvious payoff - solar companies are able to create
their own deals
Sean Carpenter; after almost a year of prototyping these with rental property owners, we learned that the
15 year was critical to get monthly payments down - to incentivize them to make these upgrades on older,
inefficient properties.
Ross Cunniff; I understand and support the analysis - I don’t know about question #3 - what is your
recommendation as of now?
Mike Beckstead; I haven’t had a chance to meet with Lance Smith to investigate implications - borrowing
variable and lending fixed is a non-starter for me so that is where the swap comes into play. 25-50 basis point
premium - that is a way to contain risk. Making sure we are not lending at low end of curve then locking in a
higher end. Our ability to adjust rates when we need to - Can’t borrow low and lend high
Action Item; Keep Option 3 separate – We have work to do to tighten up before 20th
Research on interest rate
Ross Cunniff; come back to Council Finance to discuss #3 (15-year product)
#1 and #2 sources can come forward on the 20th but let’s discuss #3 again at Council Finance (scheduled for
August 19th)
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Darin Atteberry; A brief synopsis / read before would be helpful
B. Northfield Metro District Application
Josh Birks, Director Economic Sustainability
SUBJECT FOR DISCUSSION
Proposed Metro District by Landmark Homes for the Northfield Metropolitan District
EXECUTIVE SUMMARY
The developer of the proposed Northfield Metro District has submitted a Metro District Service Plan to
support a proposed development of approximately 56 acres located north of Vine Street on the west
side of Lindenmeier Road/Lemay Avenue (southeast of the Lake Canal and north of the to-be
designated historic Alta Vista neighborhood). The development is anticipated to include approximately
442 attached housing units, of which a minimum of approximately fourteen percent (14%) will be
designated and sold as deed-restricted affordable housing, and the majority of the rest of the units will
be sold as attainable housing units. The Planned Development is also anticipated to include a mixed-
use center that will offer light commercial use on the first floor, residential for-rent units on the second
floor, and small amenities open to the public. The estimated population at build-out is 1,139.
Construction of the Planned Development is planned to be completed by year 2026.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. What additional information does the committee recommend including for the Council evaluation
of the Landmark Development’s proposed Metro District Service Plan?
BACKGROUND/DISCUSSION
Landmark Homes is proposing a residential community situated within walking distance of the City’s
Old Town. The Planned Development incorporates goals of the following plans: City Plan,
Transportation Master Plan, Master Street Plan, Nature in the City Strategic Plan, Natural Areas Master
Plan, Paved Recreational Trail Master Plan, Northside Neighborhoods Plan, Pedestrian Plan, and Bicycle
Master Plan.
PROJECT OVERVIEW
The proposed Metro District will support 56 acres of planned development located north of Vine Street
on the west side of Lindenmeier Road/Lemay Avenue (southeast of the Lake Canal and north of the to-
be designated historic Alta Vista neighborhood). The project anticipates constructing:
• Approximately 442 residential units (a mix of single-family and multi-family);
• Minimum of 14.7% affordable (65 units)
• The remaining housing units in the project are expected to be priced in an attainable range,
considered by other cities to be between 80% and 120% of AMI.
• A mixed-use center that will offer light commercial use on the first floor, residential for-rent units
on the second floor, and small amenities open to the public
-1-
ORDINANCE NO. 110, 2019
OF THE COUNCIL OF THE CITY OF FORT COLLINS
INCREASING THE CURRENT LOAN FUND
AVAILABLE FOR THE EPIC LOAN PROGRAM AND
APPROPRIATING FUNDS FOR THE PROGRAM FROM
RESERVES IN THE LIGHT AND POWER FUND
WHEREAS, in 2012, the On-Bill Utility Financing Program, now known as the “Epic
Loan Program” or “Program,” was established by Ordinance No. 033, 2012, which amended
Chapter 26 of the City Code to enable Fort Collins Utilities (“Utilities”) to offer financing and
on-bill servicing of loans to Utilities’ customers for residential energy efficiency, water
efficiency, and renewable energy upgrade projects (the “Program”); and
WHEREAS, the Program provides low-cost financing for energy efficiency, solar
photovoltaic, and water conservation improvements in an effort to further Utilities’ efficiency
and conservation efforts and the City’s other policy goals in Plan Fort Collins, the Climate
Action Plan, Energy Policy and Water Conservation Plan; and
WHEREAS, the Program has been a valuable addition to Utilities' efficiency and
renewable energy programs, which foster sustainability through reduced energy and water use,
local contractor education and investment in the built environment, and improved home
comfort, health, and safety; and
WHEREAS, in 2015, City Council adopted Ordinance No. 012, 2015, which expanded
eligibility for participation in the Program to Utilities’ business customers, set the term for new
loans at 20 years, and set a range of loan interest rates to be applied under procedures and
standards adopted by the City’s Financial Officer under City Code Section 26-720; and
WHEREAS, in 2018, City Council adopted Ordinance No. 162, 2018, to further enhance
the incentives and financing options available under the Program; and
WHEREAS, before 2016, City Council authorized the amount of $800,000 to be used for
loans under the Program and to be funded with the Utilities’ Light & Power and Water reserve
funds; and
WHEREAS, in 2016, City Council adopted Ordinance No. 035, 2016, to increase the
authorized amount available for loans under the Program from the $800,000 to $1.6 million, with
this increased amount to also be funded with the Light & Power and Water reserve funds (the
“Current Loan Program”); and
WHEREAS, since 2016, Utilities has acquired other sources of capital to fund loans
under the Program, including a $200,000 grant from the Colorado Energy Office and a $688,350
grant from Bloomberg Philanthropies (jointly, the “Grants”); and
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WHEREAS, the $888,350 from the Grants has been received and is now available to be
added to the Current Loan Program to increase the total authorized amount from $1.6 to
$2,488,350 and appropriated for use in the Program; and
WHEREAS, Article V, Section 9 of the City Charter permits the City Council, upon
recommendation of the City Manager, to make supplemental appropriations by ordinance at any
time during the fiscal year, provided that the total amount of supplemental appropriations, in
combination with all previous appropriations of that fiscal year, does not exceed the current
estimate of actual and anticipated revenues to be received during the fiscal year; and
WHEREAS, the City Manager has recommended the appropriation described herein and
determined that this appropriation is available from reserves in the Light and Power Fund and
will not cause the total amount appropriated from the Light and Power Fund to exceed the
current estimate of actual and anticipated revenues to be received in this Fund during this fiscal
year; and
WHEREAS, Utilities is also proposing that the City’s Electric Utility Enterprise (the
“Enterprise”) borrow from third-party lenders additional capital for the Program, which would
be: (i) up to a $1 million loan from the Colorado Energy Office (the “CEO Loan”), (ii) up to a
$2.5 million loan from U. S. Bank (the “US Bank Loan”), and (iii) up to a $1.5 million loan from
either the Colorado Clean Energy Fund or a bank partnering with it (the “Energy Fund Loan”);
and
WHEREAS, the CEO Loan, the US Bank Loan and the Energy Fund Loan shall be
referred to herein collectively as the “Enterprise Borrowings”; and
WHEREAS, with the Grants now received and if the City Council, acting as the board of
the Enterprise (the “Board”), approves each of the Enterprise Borrowings, the total Program
authorization can be increased from $1.6 million to as much as $7,488,350; and
WHEREAS, the Council Finance Committee has expressed at its July 15, 2019, and
August 19, 2019, meetings support for increasing the current total authorization for the Program
by the amount of the Grants and by the amount of each of the Enterprise Borrowings as they are
approved by the Board; and
WHEREAS, the City Council has determined that it is desirable to increase the total
amount authorized for loans under the Program by the amount of the Grants and by the amount
of each of the Enterprise Borrowings as they are approved by the Board and to appropriate the
updated total authorized loan amount to ensure that the Program has sufficient funds available in
2019 to achieve the Program’s intended benefits and goals; and
WHEREAS, Article XII of the City Charter authorizes City Council to expend net
operating revenues of the City’s utilities for renewal, replacement, extraordinary repair,
extension, improvement, enlargement, and betterment of such utilities, or other specific utility
purposes determined by Council to be beneficial to the ratepayers of said utilities; and
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WHEREAS, the City Council hereby determines that approving and appropriating the
updated total amount authorized for loans under the Program and authorizing its increase as the
Enterprise Borrowings are approved by the Board serve the public purposes of fostering
sustainability through reduced energy and water use, local contractor education and investment
in the built environment, and improving home comfort, health, and safety, all of which are in the
City’s best interest, beneficial to the Utilities’ ratepayers, and necessary for the public’s health,
safety, and welfare.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That the City Council hereby makes and adopts the determinations and
findings contained in the recitals set forth above.
Section 2. That the City Council hereby approves increasing the Current Loan
Program of $1.6 million by $888,350, the total amount of the Grants, for a total of $2,488,350
available for use in the Program.
Section 3. That the total amount authorized by the Council for loans under the
Program shall hereafter be increased by the maximum principal amount of each of the Enterprise
Borrowings as they are each approved by the Board, but in a total amount not to exceed
$7,488,350.
Section 4. That there is hereby appropriated for expenditure in the Epic Loan
Program from reserves in the Light and Power Fund the sum of TWO MILLION FOUR
HUNDRED EIGHTY-EIGHT THOUSAND THREE HUNDRED FIFTY DOLLARS
($2,488,350).
Section 5. That notwithstanding the foregoing, the Utilities’ use of the funds from the
proposed Enterprise Borrowings for the Program shall be subject to the usual appropriation by
the City Council either as part of an annual appropriation or as a supplemental appropriation.
Section 6. That it is the City Council’s intent that the funds in use for the Program
will be available on a revolving basis for future loans under the Program, subject to future
appropriation of those funds.
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Introduced, considered favorably on first reading, and ordered published this 3rd day of
September, A.D. 2019, and to be presented for final passage on the 17th day of September, A.D.
2019.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
Passed and adopted on final reading on the 17th day of September, A.D. 2019.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
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