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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 04/07/2020 - ITEMS RELATING TO THE 15-YEAR CAPITAL FOR THE 2020Agenda Item 4 Item # 4 Page 1 AGENDA ITEM SUMMARY April 7, 2020 City Council STAFF Terra Sampson, Project Manager, Energy Services John Phelan, Energy Services Manager Blaine Dunn, Senior Treasury Analyst Sean Carpenter, Climate Economy Advisor John Duval, Legal SUBJECT Items Relating to the 15-year Capital for the 2020 Epic Homes Loan Program. EXECUTIVE SUMMARY A. Second Reading of Ordinance No. 047, 2020, Making a Supplemental Appropriation from the Light & Power Fund to be Expended as Loans to Utility Services Customers Under the Epic Loan Program. B. Second Reading of Ordinance No. 048, 2020, Making a Supplemental Appropriation from Unappropriated Prior Year Reserves in the Light & Power Fund to Make Debt Service Payments Under the Vectra Bank Line of Credit for the Epic Loan Program. These Ordinances, unanimously adopted on First Reading on March 20, 2020, appropriate funds for the Epic Loan Program in 2020 for 15-year loan issuance to Fort Collins Utilities electric customers, and anticipated debt service to third-party capital providers. The Epic Loan Program is part of the Epic Homes comprehensive portfolio for single-family home performance for both owner- and renter-occupied homes. These appropriations will cover 15-year loan agreements adopted on First Reading on March 20 by the Electric Utility Enterprise Board and considered on April 7 for Second Reading and are necessary to formally authorize the disbursement of funds for customer loans. For future years, staff will include loan issuance and debt service as part of the biennial Budgeting for Outcomes process. Contingent upon authorization of the 15-year loan agreements by the Enterprise Board, the 2020 appropriation for 15-year loan issuance is $1,600,000 and the appropriation for debt service is $100,000. STAFF RECOMMENDATION Staff recommends adoption of the Ordinances on Second Reading. ATTACHMENTS 1. First Reading Agenda Item Summary, March 20, 2020 (w/o attachments) (PDF) 2. Ordinance No. 047, 2020 (PDF) 3. Ordinance No. 048, 2020 (PDF) Agenda Item 5 Item # 5 Page 1 AGENDA ITEM SUMMARY March 20, 2020 City Council STAFF Terra Sampson, Project Manager, Energy Services John Phelan, Energy Services Manager Blaine Dunn, Senior Treasury Analyst Sean Carpenter, Climate Economy Advisor John Duval, Legal SUBJECT Items Relating to the 15-year Capital for the 2020 Epic Homes Loan Program. EXECUTIVE SUMMARY A. First Reading of Ordinance No. 047, 2020, Making a Supplemental Appropriation from the Light & Power Fund to be Expended as Loans to Utility Services Customers Under the Epic Loan Program. B. First Reading of Ordinance No. 048, 2020, Making a Supplemental Appropriation from Unappropriated Prior Year Reserves in the Light & Power Fund to Make Debt Service Payments Under the Vectra Bank Line of Credit for the Epic Loan Program. The purpose of this item is to appropriate funds for the Epic Loan Program in 2020 for 15-year loan issuance to Fort Collins Utilities electric customers, and anticipated debt service to third-party capital providers. The Epic Loan Program is part of the Epic Homes comprehensive portfolio for single-family home performance for both owner- and renter-occupied homes. These appropriations will cover 15-year loan agreements being considered by the Electric Utility Enterprise Board on March 17 for First Reading and April 7 for Second Reading and are necessary to formally authorize the disbursement of funds for customer loans. For future years, staff will include loan issuance and debt service as part of the biennial Budgeting for Outcomes process. Contingent upon authorization of the 15-year loan agreements by the Enterprise Board, the 2020 appropriation for 15-year loan issuance is $1,600,000 and the appropriation for debt service is $100,000. The 15-year capital agreements were presented at the January 27, 2020 Council Finance Committee meeting. STAFF RECOMMENDATION Staff recommends adoption of the Ordinances on First Reading. BACKGROUND / DISCUSSION 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 communities. The City’s proposal, 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 ATTACHMENT 1 Agenda Item 5 Item # 5 Page 2 Colorado State University, Fort Collins is also establishing a research study which links the health and well-being 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 back-drafting water heater, to air leakage pollutants entering the home from the garage or crawlspace, to combustion appliances that need tuning or replacing producing excess carbon monoxide. 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’ On-Bill Finance 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 for energy efficiency and renewable energy, reduced greenhouse gas emissions and increased equity and well-being for 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 significant percentage of the City’s housing stock. The original On-Bill Finance program issued loans from 2013 through 2016 when the maximum outstanding loan balance funded through Light & Power reserves was reached ($1.6 million). On-Bill Finance was revitalized as the Epic Loan Program in August 2018 during the Champions Phase of the Bloomberg Mayors Challenge. The City has been awarded grants from the Colorado Energy Office ($200,000) and from Bloomberg Philanthropies ($688,350) for the Epic Loan Program. The Electric Utility Enterprise has also entered into a $2.5M line of credit loan agreement with U.S. Bank to provide up to 10-year capital for the Program. 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 Proposals for third-party capital providers, discuss the capital strategy and review proposed capital agreement terms. An ongoing and attractive financing structure to support energy efficiency retrofits will be a critical element for success moving forward. Through 2019, Fort Collins Utilities has serviced 211 on-bill loans to support energy efficiency upgrades in residential homes and overcome financial barriers for making these important upgrades. Detailed information regarding the Epic Homes program and loan terms can be found at https://www.fcgov.com/utilities/epichomes/. 2020 15-Year Capital Appropriation for Loan Issuance and Anticipated Debt Service These appropriations will cover 15-year loan agreements being considered by the Electric Utility Enterprise Board on March 17 for First Reading and April 7 for Second Reading and are necessary to formally authorize the disbursement of funds for customer loans. The Epic Loan Program will have available $1,600,000 from 15- year capital sources being considered by the Electric Utility Enterprise Board, and contingent upon authorization of the loan agreements, for loan issuance to support energy efficiency upgrades in Fort Collins’ owner- and renter-occupied homes. The capital available is summarized in Table 1. Table 1. 15-year Capital Sources for Loan Issuance in 2020 Capital Source Amount Vectra Bank Colorado $800,000 (of $2,500,000 line of credit) Colorado Energy Office $800,000 Total $1,600,000 Agenda Item 5 Item # 5 Page 3 The Epic Loan Program blends various capital sources to meet customer demand and offer attractive interest rates for customers, including grants, Light and Power reserves, and third-party market capital. The third-party capital will have associated debt service, anticipated to be up to $100,000 in 2020 for the Vectra Bank Colorado loan. The Colorado Energy Office loan will not require debt service in 2020. The anticipated debt service is summarized in Table 2. The source of funding for the associated debt service will be from prior years reserves in the Light & Power Fund. Table 2. Anticipated 15-Year Capital Debt Service in 2020 Interest Rate Anticipated 2020 Borrowing Anticipated 2020 Debt Service Vectra Bank Colorado 10-year US Treasury + 2.75% (4.30% Currently)* Up to $730,435 Up to $100,000 Colorado Energy Office 0% Up to $389,565 None until 2035 *As of February 18, 2020; subject to change. These appropriations are in addition to the appropriations authorized in Ordinance No. 004 and 005, 2020. For future years, staff will include loan issuance and debt service as part of the biennial Budgeting for Outcomes process. The City Manager recommended the appropriations described in both Ordinances and the City Finance Department determined that the total amount of these appropriations, together with all previous appropriations from the Light & Power Fund for this fiscal year, will not cause the total amount appropriated in the Light & Power Fund to exceed the current estimate of actual and anticipated revenues to be received in the Light & Power Fund during this fiscal year. CITY FINANCIAL IMPACTS Staff projects the Program will be cashflow positive. Staff also projects the Ordinances under consideration will meet the projected demand in loans for 2020 and anticipated debt service for loan terms up to 15 years. The Ordinances are not anticipated to affect electric rates. Risks include lack of customer demand for energy upgrade loans and/or risk of customer default if borrowers choose not to repay their Epic Loans. 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 however the line of credit model helps ensure that principal borrowed matches the Epic Loan volumes as closely as possible. Core tenants 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 The 15-year loan agreement details and capital sources were discussed at the January 27, 2020, Council Finance Meeting (Attachment 2) ATTACHMENTS 1. Epic Homes Structure and Components Diagram (PDF) 2. Council Finance Committee Minutes, January 27, 2020 (excerpt) (PDF) -1- ORDINANCE NO. 047, 2020 OF THE COUNCIL OF THE CITY OF FORT COLLINS MAKING A SUPPLEMENTAL APPROPRIATION FROM THE LIGHT AND POWER FUND TO BE EXPENDED AS LOANS TO UTILITY SERVICES CUSTOMERS UNDER THE EPIC LOAN PROGRAM WHEREAS, the City has previously established and funded a program to assist certain Electric Utility customers of Fort Collins Utility Services (“Utility Services”) in financing home- energy-efficiency and renewable-energy improvements for single-family residential properties they own by making loans to these customers, whether their properties are owner- or renter- occupied (“Epic Loan Program”); and WHEREAS, two new sources of funds for such loans in the Epic Loan Program have recently become available to Utility Services through an anticipated $800,000 loan to be obtained by the City’s Electric Utility Enterprise (the “Enterprise”) from the Colorado Energy Office (the “CEO Loan”) and an anticipated $2.5 million line-of-credit to be obtained by the Enterprise from Vectra Bank Colorado (the “Vectra Bank Line of Credit”); and WHEREAS, for loans under the Epic Loan Program in 2020, Utility Services expects to need all $800,000 of the proceeds from the CEO Loan and to draw up to $800,000 from the Vectra Bank Line of Credit; and WHEREAS, this $1.6M in total proceeds from the CEO Loan and the Vectra Bank Line of Credit will be deposited into the City’s Light and Power Fund established in City Code Section 8- 77 (the “Light & Power Fund”); and WHEREAS, City Charter Article V, Section 8 allows an appropriation to be made by City Council based upon anticipated revenues, reserves or other funds provided such appropriation does not exceed those anticipated revenues, reserves or other funds; and WHEREAS, City Charter Article V, Section 9 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, do not exceed the current estimate of actual and anticipated revenues to be received during this fiscal year; and WHEREAS, the City Manager has recommended the appropriations described herein and determined that the total amount of these appropriations, together with all previous appropriations from the Light & Power Fund for this fiscal year, will not cause the total amount appropriated in the Light & Power Fund to exceed the current estimate of actual and anticipated revenues to be received in the Light & Power Fund during this fiscal year; and WHEREAS, this appropriation benefits the public’s health, safety and welfare and serves the utility and public purposes of improving the energy efficiency of older homes in Fort Collins, thereby benefiting Electric Utility ratepayers and the health, safety and comfort of the inhabitants of the improved homes. -2- 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 the Light & Power Fund, in anticipation of receiving the proceeds from the CEO Loan and the Vectra Bank Line of Credit, the sum of ONE MILLION SIX HUNDRED THOUSAND DOLLARS ($1,600,000) to be expended as loans to Utility Services customers under the Epic Loan Program. Introduced, considered favorably on first reading, and ordered published this 20th day of March, A.D. 2020, and to be presented for final passage on the 7th day of April, A.D. 2020. __________________________________ Mayor Pro Tem ATTEST: _______________________________ City Clerk Passed and adopted on final reading on the 7th day of April, A.D. 2020. __________________________________ Mayor ATTEST: _______________________________ City Clerk -1- ORDINANCE NO. 048, 2020 OF THE COUNCIL OF THE CITY OF FORT COLLINS MAKING A SUPPLEMENTAL APPROPRIATION FROM UNAPPROPRIATED PRIOR YEARS RESERVES IN THE LIGHT & POWER FUND TO MAKE DEBT SERVICE PAYMENTS UNDER THE VECTRA BANK LINE OF CREDIT FOR THE EPIC LOAN PROGRAM WHEREAS, the City has previously established and funded a program to assist certain Electric Utility customers of Fort Collins Utility Services (“Utility Services”) in financing home- energy-efficiency and renewable-energy improvements for single-family residential properties they own by making loans to these customers, whether their properties are owner- or renter- occupied (“Epic Loan Program”); and WHEREAS, as one source of funds for the Epic Loan Program, the City’s Electric Utility Enterprise (the “Enterprise”) anticipates obtaining a $2.5 million line-of-credit from Vectra Bank Colorado (“Vectra Bank Line of Credit”); and WHEREAS, it is anticipated that up to $800,000 will be drawn from the Vectra Bank Line of Credit in 2020 by the Enterprise and then loaned to eligible Utility Services customers under the Epic Loan Program, thereby requiring a debt service payment in 2020 from the City to Vectra Bank Colorado in an amount of up to $100,000; and WHEREAS, this Ordinance authorizes the appropriation of this $100,000 from unappropriated prior years’ reserves in the Light and Power Fund established in City Code Section 8-77 (the “Light & Power Fund”); 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, do not exceed the current estimate of actual and anticipated revenues to be received during this fiscal year; and WHEREAS, the City Manager has recommended the appropriation described herein and determined that the total amount of this appropriation, together with all previous appropriations from the Light & Power Fund for this fiscal year, will not cause the total amount appropriated in the Light & Power Fund to exceed the current estimate of actual and anticipated revenues to be received in the Light & Power Fund during this fiscal year; 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 in the Light & Power Fund, notwithstanding that such reserves were not previously appropriated; and WHEREAS, this appropriation benefits the public’s health, safety and welfare and serve the utility and public purposes of improving the energy efficiency of older homes in Fort Collins, thereby benefiting Electric Utility ratepayers and the health, safety and comfort of the inhabitants of the improved homes. -2- 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 unappropriated prior years reserves in the Light & Power Fund the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000) to be used for the payment of debt service under the Vectra Bank Line of Credit. Introduced, considered favorably on first reading, and ordered published this 20th day of March, A.D. 2020, and to be presented for final passage on the 7th day of April, A.D. 2020. __________________________________ Mayor Pro Tem ATTEST: _______________________________ City Clerk Passed and adopted on final reading on the 7th day of April, A.D. 2020. __________________________________ Mayor ATTEST: _______________________________ City Clerk