HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 11/20/2018 - FIRST READING OF ORDINANCE NO. 138, 2018, APPROPRIAgenda Item 8
Item # 8 Page 1
AGENDA ITEM SUMMARY November 20, 2018
City Council
STAFF
Randy Reuscher, Utility Rate Analyst
Lance Smith, Utilities Strategic Finance Director
Cyril Vidergar, Legal
SUBJECT
First Reading of Ordinance No. 138, 2018, Appropriating Unanticipated Revenue in the Light and Power Fund
for Purchased Power Expenses.
EXECUTIVE SUMMARY
The purpose of this item is to appropriate unanticipated revenues in the Light & Power Enterprise Fund to
offset higher purchased power expenses experienced in 2018. The Light & Power Fund realized $2.8M of
unanticipated revenues in 2018, while purchased power expenses for 2018 have been $2.9M higher than what
was budgeted for this expense. Because purchased power expenses represent 70-72% of all expenses, this
appropriation is necessary to ensure the Enterprise Fund remains under budget for the year.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading.
BACKGROUND / DISCUSSION
In previous budget cycles the Light & Power Fund has budgeted expenses more conservatively than the 2017-
18 budget cycle, when the Light & Power budgeted expenses before enhancement offers were reduced by
5.3% from 2016. By tightening budgeted expenses to more closely match historical spending, more revenue
was made available for enhancements. However, it is also necessary to ensure that revenues are similarly
adjusted down so that the enterprise fund is not taking on more risk of spending the full budget without
realizing adequate revenue to support those expenses. Hence the budgeted revenues were also reduced in
the 2017-18 budget.
Through this October, the 2018 Light & Power revenues have exceeded the budgeted amount by $2.8M and
the purchased power expense has exceeded the budgeted amount by $2.9M. Appropriating $2.5M is
necessary to ensure that expenditures from the enterprise fund do not exceed the total amount appropriated
for the 2018 calendar year as required by City Charter.
The table below summarizes the fund reserve balance through October 2018 with $5.5M of reserves available
for appropriation. This appropriation will leave $3.0M available for other future appropriations in the Light &
Power Fund. The 2019-2020 budget will need to utilize $0.3M of this balance in 2019 with the 2020 budget
showing $0.3M being added back to reserves.
CITY FINANCIAL IMPACTS
The use of this unanticipated revenue to meet the purchased power obligations will reduce the Light and
Power Enterprise Fund available reserves from $5.2M as of November 1, 2018 to $3.0M in order to ensure
that the enterprise fund remains below the 2018 budget.
Agenda Item 8
Item # 8 Page 2
With the proposed 5.0% electric service rate increases in 2019 and 2020 this enterprise fund is expected to
begin generating positive operating income, which will add to the available reserve balance for future capital
needs.
Fund 501 Reserves
$M
Reserve Balance 12/31/2017 $33.5
LESS Minimum Required Reserves ($8.4)
LESS Appropriations Prior to 12/31/2017 ($9.2)
LESS 2018 Budget Use of Reserves ($4.5)
Reserves Available 01/01/2018 $11.4
LESS 2018 Appropriations to date ($8.4)
LESS 2019-20 Budget Use of Reserves ($0.3)
PLUS 2018 Unanticipated Revenues $2.8
Reserves Available 11/1/2018 $5.5
Reserve Balance after this appropriation
($2.5)
$3.0
LESS Appropriation Request being made here
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ORDINANCE NO. 138, 2018
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROPRIATING UNANTICIPATED REVENUE IN THE LIGHT AND
POWER FUND FOR PURCHASED POWER EXPENSES
WHEREAS, through October 2018, the Light & Power Utility Energy Services Division
received unanticipated revenues from retail operation of the electric utility in the amount of
$2,800,000; and
WHEREAS, through October 2018, the Light & Power Utility Energy Services Division
also experienced unanticipated purchased power expenses under energy purchase transactions
with Platte River Power Authority (in the amount of $2,900,000), which purchases were
necessary for retail operation of the electric utility; and
WHEREAS, Utilities staff recommends aligning unanticipated Light & Power Utility
operating expenses and revenues with the approved 2017-2018 budget to reconcile realized
differences in budgeted amounts and minimize potential impacts to enterprise fund reserves,
which will require an appropriation of $2,500,000 from unanticipated revenues in the Light and
Power Fund received in fiscal year 2018; and
WHEREAS, Utilities staff recommends Council appropriate these unanticipated Light &
Power Utility Energy Services Division revenues received through October 2018 to fund the
unanticipated excess energy purchase costs necessary to operate the City’s electric utility during
that period; and
WHEREAS, appropriating unanticipated Light & Power Utility Energy Services Division
revenues as recommended will serve the purpose of paying City electric utility operating costs,
while maintaining funds for the replacement of depreciated property and the extension,
improvement and betterment of said utility for the benefit of electric utility rate payers; 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 such supplemental appropriations,
in combination with all previous appropriations for that fiscal year, does not exceed the current
estimate of actual and anticipated revenues to be received during the fiscal year; and
WHEREAS, this appropriation benefits public health, safety and welfare of the citizens
of Fort Collins and serves the public purpose of supporting the delivery of essential government
services, including electric power and emergency communication; and
WHEREAS, the City Manager has recommended the appropriation described herein and
determined that this appropriation is available and previously unappropriated from the Light and
Power Fund and will not cause the total amount appropriated in the Light and Power Fund to
exceed the current estimate of actual and anticipated revenues and reserves to be received in that
fund during the 2018 fiscal year.
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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 there is hereby appropriated from unanticipated revenue in the Light
and Power Fund the sum of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000) for purchased power expenses.
Introduced, considered favorably on first reading, and ordered published this 20th day of
November, A.D. 2018, and to be presented for final passage on the 4th day of December, A.D.
2018.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
Passed and adopted on final reading on the 4th day of December, A.D. 2018.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk