HomeMy WebLinkAboutAgenda - Mail Packet - 10/22/2013 - Council Finance Committee Agenda & Ura Finance Committee Agenda - October 21, 2013Council Finance Committee & URA Finance Committee
Agenda Planning Calendar 2013
RVSD 10/17/13 kw
Oct. 21 TOPIC TIME WHO
CFC
Policy Discussion Related to Capstone/Summit Loan 20 min M. Beckstead
Revenue Policy Review 30 min J. Ping-Small
New Fees Review – In advance of Nov 26th work session 30 min J. Ping-Small
Foothills Mall Financial Review 30 min M. Beckstead
URA URA Direction / Policy / Process 30 min J. Birks
Nov. 18 TOPIC TIME WHO
CFC
Transfort Business Review 60 min Ravenschlag
Budget Policy Review 30 min L. Pollack
Investment Policy Review 5 min J. Voss
URA
Dec. 16 TOPIC TIME WHO
CFC
Policy Review – Reserve/Fund Balances 30 min J. Voss
Audit Findings and Recommendations: Corrective Actions 15 min J. Voss
PFA IGA Revenue Allocation Formula 30 min M. Beckstead
URA
Jan. ? TOPIC TIME WHO
CFC
URA
Future Council Finance Committee Topics:
• Revenue Implications of Annexation
• Financial Management Policy Reviews during 2013 – Quarterly Commitments
• Review Special Improvement Districts
• Rebate Update (Q1 2014)
Future URA Committee Topics:
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
AGENDA
Council Finance & Audit Committee
October 21, 2013
10:00 to noon
CIC Room – City Hall
Approval of the Minutes from the September 16, 2013 meeting
1. Policy Discussion Related
to Capstone/Summit Loan 20 minutes M. Beckstead
2. Revenue Policy Review 30 minutes J. Ping-Small
3. Street and Park Maintenance Fees 30 minutes J. Ping-Small
4. Foothills Mall Financial Review 30 minutes M. Beckstead
5. Scheduling Conflicts for 2014 Meetings 02 minutes M. Beckstead
6. Long Range Financing Plan—Update 02 minutes M. Beckstead
7. Council Work Plan—Update 02 minutes M. Beckstead
8. Flood Appropriation—Update 02 minutes M. Beckstead
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
Council Audit & Finance Committee
Minutes
9/16/13
10:00 to 12:00
CIC Room
Council Attendees: Mayor Karen Weitkunat, Bob Overbeck
Staff: Timothy Allen, Darin Atteberry, Mike Beckstead, Megan
Bolin, Steve Catanach, Chris Donegon, Brian Hergott, Brian
Janonis, Tom Leeson, Ken Mannon, Lawrence Pollack, Wayne
Sterler, Lance Smith, Steve Roy,
John Voss, Katie Wiggett
Others: Dale Adamy, Douglas Donne, Daniel Parsons,
Allen Shuman
Approval of the Minutes
Mayor Karen Weitkunat moved to approve the minutes for the August 18 meeting. Bob Overbeck
seconded the motion. Minutes approved unanimously.
Block 32 Master Plan Review
Darin Atteberry explained that several years ago, Council allocated funds for improving the 700 Wood
Street facility. Before spending the funds, Utilities realized that a new building on Block 32 would better
solve long-term needs. The City of Fort Collins teamed up with RNL Design to look at a master plan for
Block 32 and see how it can be developed and where a new Customer Service Building might be located
on this block. As a Utility Customer Service Building would be the first of several improvements to Block
32, it is necessary to have a plan for Block 32 before beginning construction on the new Utility building.
RNL has developed several possible designs that incorporate the City’s vision, mission and values and
support a long-term vision for the City.
Brian Janonis explained that 700 Wood Street is an older building that is actually several buildings which
have been combined into one over the past 30 years. The resulting facility is one of the least energy
efficient buildings the City owns. Substantial improvements are necessary to address the inefficiencies.
An evaluation of the costs associated with these improvements and the necessary addition revealed that
it is a better long term investment to construct a new building and renovate a portion of the existing vs.
a full renovation and addition to 700 Wood Street.
Councilmember Bob Overbeck and Mayor Weitkunat asked several questions about the proposed plans
for Block 32. While Ken was able to present 3 rough sketches, more detailed and readable plans will be
necessary for a Council discussion and decision.
2
The mayor noted that the first thing Staff needed to look at was how it messages this project to Council
and the public. Staff needs to present the need and show how this will be a positive thing for staff and
citizens. Staff should be focusing on social benefit of providing public service in a convenient location.
Utility Building/Financing
Lance Smith led a discussion on how a new Utilities Customer Service and Administration building would
be financed. Staff recommends a revenue bond to finance this project.
Preliminary discussions have resulted in the recommendation that the revenue bond be issued out of
one utility fund rather than having four separate, smaller revenue bonds coming to market at once.
Because the Light & Power Enterprise Fund is the largest utility fund, and it has debt capacity in excess
of $50M, it is the recommended utility fund. The other three utility funds would make annual transfers
to cover their portion of the debt repayment. This issuance will be for $15.5M, leaving more than $35M
in debt capacity. The only identified potential need for future debt issuance in the Light & Power Fund is
for the Mulberry Annexation which is several years into the future and is expected to be $10-15M.
In addition to the new building, this debt issuance would also allow for the renovation of existing space
at 700 Wood Street to meet growing operational needs. Together, the construction of the new building
and the renovation of the existing building are expected to cost $20M. Currently, the Light & Power
Fund has $4.5M in Reserves for this effort, leaving a need for $15.5M to be financed.
The new building would initially have unused space for the Utilities to grow into in the future. The City’s
Sustainability Services department could utilize this space through a lease arrangement which would
provide some revenue toward the debt obligation. Incremental revenues from expiring and new
service agreements are sufficient to cover debt obligations. This is significant because it means we
should not have to adjust utility rates to finance these improvements.
Utilities is seeking guidance on whether Council wants Fort Collins Utilities to continue to study and
design this new building and bring forth a bond ordinance to the Electric Utility Enterprise Board and an
appropriation request to City Council in early 2014 for this project. Construction could begin as soon as
May 2014 so it will be necessary to bring the bond ordinance before the City Council and Electric Utility
Enterprise Board in early 2014 for action. Lance presented an estimated timeline that included several
boards that would be consulted. The Mayor asked that the Parks board be added to the list. Darin
asked that Utilities also bring the information to the DDA.
The Mayor again emphasized the need for public outreach that emphasizes the social good of this
project. Darin noted that this improvement is part of moving toward Utilities of the 21st Century. It’s an
important, significant improvement for the community. It will also be a great boon for downtown
businesses as it will bring 135 more City employees to the downtown area.
The Mayor asked if a 25 year plan is adequate and appropriate. Darin noted that this would be similar
to the Police Building plan. Ken Mannon agreed that a 50 year plan may be better and he will look into
what a 50 year plan would look like and whether it would be possible.
Clean-up Memo Going to Council – Questions?
Lawrence Pollack asked if Council Finance had any questions concerning the 2013 Clean-up Ordinance
that is going to City Council for 1st reading on October 1, 2013. Bob Overbeck noted that he would like it
3
to be clearer whether the allocation for Cable 14 also includes Chanel 97. Mike Beckstead said that he
will look into the specifics of what was being asked for. The Mayor asked whether No. A. 5 and No. C.2
are actually the same monies. Lawrence confirmed that they are and this will be corrected before first
reading.
Next Steps
Staff will redesign the presentation of the Block 32 Master Plan to better speak to the social side of the
project.
Staff will bring the Clean-up Ordinance to Council on October 1, 2013.
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Mike Beckstead, Chief Financial Officer
SUBJECT FOR DISCUSSION: Financial Management Policy Format and Introduction
EXECUTIVE SUMMARY:
A current matter before the Council concerns the interest rate proposed on a loan between the
City and the Fort Collins Urban Renewal Authority (URA). A deviation from the current
investment policy is proposed to Council because of a short fall in estimated revenue and an
increase in interest costs from the September 2011 estimates when Council approved a
commitment to support the Capstone/Summit project.
The City Attorney has recommended language be included within the Financial Management
Policy that specifically states that the policies are developed per the Charter to provide guidance
to staff, and that the Council has the ability to approve exceptions to the policies, either by
resolution or ordinance, if it determines that doing so is in the best interests of the City.
Staff and the CAO think the best place for this clarification belongs in the introduction section of
the Financial Management Policy document and not within each individual policy.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Council Finance Committee agreement to the proposed Introduction section of the Financial
Management Policy document.
BACKGROUND/DISCUSSION
Staff has committed to review and update the existing Financial Management Policies of the City
with Council Finance during 2013. Other priorities has caused these reviews to be delayed,
however the Debt Policy was reviewed in August, the Revenue Policy is to be reviewed in
October, and the Budget, Investment & Reserve/Fund Balance Policies will be reviewed in
November and December. During this review, staff has implemented a new standard format for
all financial policies and is updating existing policies to the new format as part of the review.
A current matter before the Council concerns the interest rate proposed on a loan between the
City and the Fort Collins Urban Renewal Authority (URA). A deviation from the current
investment policy is proposed to Council because of a short fall in estimated revenue and an
increase in interest costs from the September 2011 estimates when Council approved a
commitment to support the Capstone/Summit project.
The City Attorney has recommended language be included within the Financial Management
Policy that specifically states that the policies are developed per the Charter to provide guidance
to staff, and that the Council has the ability to approve exceptions to the policies, either by
resolution or ordinance, if it determines that doing so is in the best interests of the City.
Staff and the CAO think the best place for this clarification belongs in the introduction section of
the Financial Management Policy document and not within each individual policy.
ATTACHMENTS
1. Financial Management Policy – Introduction Section
Financial Management Policies
Introduction
Section I and II of the attached are Financial Management Policies adopted by the Council of the City
of Fort Collins, pursuant to the provisions of Article V, Section 12 of the City Charter, to guide the
administration management, deposit and investment of City funds and to foster sound and efficient
financial planning and management of the City’s financial affairs. They reflect the current
requirements and laws that apply to the City’s financial activities and, in the judgment of the City
Council, represent the best financial practices for the City. The formulations of these policies has
been guided by input and standards derived from nationally recognized organizations such as the
Government Finance Officers Association (GFOA), National Advisory Council on State and Local
Budgeting (NACSLB), and International City and County Managers Association (ICMA). A key
objective of these Financial Management Policies is to provide a central location for all Council
approved financial policies. Nothing herein is intended to supersede the provisions of the City
Charter or City Code. Rather, these policies are intended to provide more detailed rules and
guidelines to be used by decision makers, management staff, and other City employees in
administering the financial affairs of the City.
To supplement and implement these Financial Management Policies, and to further preserve and
strengthen the financial health of the City, the City Manager and City Financial Officer may, in
carrying out their respective duties and responsibilities under the City Charter and City Code, adopt
any such additional administration policies as they deem necessary for that purpose. These
additional administrative financial policies are included in Section III. Such policies will generally
be more detailed and operationally focused.
If, from time to time, the City Council determines that changing circumstances or changing
objectives warrant revisions or exceptions to these Financial Management Policies, the City Council
may approve by resolution or ordinance such amendments or exceptions to the same as the City
Council considers to be in the best interest of the City. The City Financial Officer with concurrence
of the City Manager may at times determine that changing circumstances or changing objectives
warrant revisions or exceptions to the administrative financial policies.
INDEX
REF.
# POLICY TITLE/SECTION Last Update Approver Page
Section I – City Financial Management Policies
1 Budget 11/15/2005 City Council
2 Revenue 11/15/2005 City Council
3 General 11/15/2005 City Council
4 Fund 04/15/2008 City Council
5 Reserves (Fund Balance) 04/15/2008 City Council
6 Capital Improvement Funds 11/15/2005 City Council
7 Debt 11/15/2005 City Council
8 Investments 12/18/2012 City Council
Section II – City Council Decisions related to URA
Financial Management Policies
URA TIF Financing Incentives (in process) TBD City Council
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Jessica Ping-Small, Controller/Assistant Financial Officer
SUBJECT FOR DISCUSSION: Updated Revenue Policy
EXECUTIVE SUMMARY: The Revenue Policy has not been updated in many years.
Staff has developed a new framework for updating, controlling, formatting and publishing
financial policies. The most significant change to the Revenue Policy is the inclusion of 5
revenue principles that provide staff and City Council a foundation for making sound financial
decisions that will provide the citizens of Fort Collins a diverse, stable and fair revenue stream
equipped to provide the services necessary to keep Fort Collins great.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Are there any questions about the new policy?
2. Are there any changes requested?
3. Is the policy ready to bring to City Council for consideration and approval?
BACKGROUND/DISCUSSION The current revenue policy evolved as part of the Budget
document. In that context it focused on explaining revenue concepts rather than setting policy.
Staff has come up with a new format for financial policies. Because of the major overhaul in
both format and content, it was impractical to use strike through and underline new text. The
only significant change to the revenue policy’s content is the addition of 5 revenue principles:
1. Maintain a diverse revenue base
2. Maintain a stable revenue base
3. Cultivate revenue sources that are equitable among all economic levels
4. Generate adequate revenue to maintain core service levels
5. Maintain healthy reserves
These revenue principles provide staff and City Council a foundation for making sound financial
decisions that will provide the citizens of Fort Collins a diverse, stable and fair revenue stream
equipped to provide the services necessary to keep Fort Collins great.
The principles were presented to the Council Finance Committee and the Futures Committee in
2012 as part of the ongoing revenue diversification study.
ATTACHMENTS
1. PowerPoint presentation
2. New Revenue Policy (proposed)
3. Old Revenue Policy (current)
4. 2012 Revenue Diversification presentation
1
Council Finance Committee
Revenue Policy
October 21, 2013
2
New Policy Framework
• Uses newly created format
• Assigns persons responsible for policy
• Keeps language simple
• Eliminates or minimizes non-policy language
• Tracks policy versions
• Provides direction on where to seek help interpreting policy
Staff Will Bring Additional Policy Revisions to
Council Finance Using the New Framework
3
Revenue Policy Update - Approach
• Reviewed existing City of Fort Collins revenue policy
• Information presented to Council Finance and Futures
Committee in 2012 as part of Revenue Diversification analysis
• Researched cities and organizations locally and nationally for
revenue diversification and/or sustainable revenue policies
Examples: GFOA, ICMA, Colorado Springs, Loveland, Broomfield,
Boulder, Centennial, Lakewood, Association of Metropolitan
Municipalities of Minnesota, etc..
• Analyzed various policies to create 5 principles that staff
recommend be incorporated into existing City revenue policy
document and adopted by City Council (reviewed previously by
CFC)
STAFF IS RECOMMENDING 5 REVENUE PRINCIPLES
4
Revenue Principles
1. Maintain a diverse revenue base
2. Maintain a stable revenue base
3. Cultivate revenue sources that are equitable among all economic levels
4. Generate adequate revenue to maintain core service levels
5. Maintain healthy reserves
THESE PRINCIPLES WILL SERVE AS A FOUNDATION
FOR FUTURE REVENUE DECISIONS
5
• The City will seek and maintain primary revenue sources that are markedly
distinct and varied from one another
• City will strive to maintain diverse revenue sources by:
Targeting revenue from multiple sources
Working to expand fee based revenue where possible
Working to minimize overdependence on any single revenue source
Staff will monitor dependency on sales and use tax to ensure an over reliance
does not occur
• Other Factors:
Research suggests a “three-legged stool” approach or equal revenue from 3
primary sources
Cities that achieve “three-legged stool” diversity have an income tax, occupation
privilege tax or significantly higher property taxes
Not feasible in Fort Collins
IN 2011, SALES & USE TAX WAS 51%
OF GENERAL GOVERNMENT REVENUE
Principle 1 - Maintain a Diverse Revenue Base
6
Principle 1
Maintain a Diverse Revenue Base
SALES AND USE TAX IS THE PRIMARY SOURCE OF REVENUE
2011 General Government Revenue Total - $191,576,730
Sales & Use Tax
109,732,062
48%
Intergovernmental
53,191,662
23%
Charges for Services
30,742,497
14%
Property Tax
18,187,824
8%
Other Misc.
4,223,645
2%
Other Taxes
3,571,402
2%
Fines & Forfeitures
2,782,990
1%
Investment
1,754,139
1%
Licenses/Permits
2,183,681
1%
Intergovernmental: PILOT,
Highway user tax, Lottery,
Grants, etc.
Charges for Services: Admin
charges, Recreation, Transit,
Transportation work for others,
etc..
2012 General Government Revenue
7
Principle 2 - Maintain a Stable Revenue Base
• City will strive to maintain stable
revenue sources by:
Targeting revenue sources with
minimal volatility
Monitoring current revenue sources for
variability
Adjusting forecasts as necessary to
accommodate unanticipated increases
and declines
Monitoring and adjusting expenditures
for unanticipated revenue gains/losses
Other Factors:
The perception of volatility is a key
reason sales and use tax is seen as
a problematic revenue source
The fact is sales and use tax has been
relatively stable over the past 10 years:
Sales
Tax
Growth
Per
Capita
Change
2002 -0.51% -2.68%
2003 -0.44% -1.59%
2004 3.32% 1.01%
2005 2.46% 1.66%
2006 6.32% 4.32%
2007 1.60% -0.21%
2008 0.39% -1.43%
2009 -3.84% -5.74%
2010 2.40% 1.28%
2011 5.21% 3.67%
2012 5.46% 3.80%
8
Principle 3
Cultivate revenue sources that are
equitable among all economic levels
• The City will strive to preserve a revenue stream that does not
overburden low income residents by:
Providing low income citizens with opportunities to participate in
programs through reduced fee structures and scholarships
Providing a Sales Tax on Food and Utility rebate to lessen the burden
of taxes and fees on low income citizens
Ensuring fees do not exceed cost to provide service
• Other Factors:
Sales Tax is often referred to as a regressive tax
The City tax rate on food is 2.25% to mitigate the regressive nature of
sales tax
9
Principle 4
Generate adequate revenue to maintain
core service levels
• The City will generate adequate revenue to maintain core
service levels by:
Ensuring fees for service do not exceed cost to provide service
Maintaining a cost recovery model
Monitoring service level performance annually through the
Community Scorecard
Regularly reviewing services to assess core vs. desired
THE CHALLENGE IS TO BALANCE DESIRED SERVICE
LEVELS WITH CORE OR NECESSARY SERVICE LEVELS.
10
Principle 5
Maintain healthy reserves
• The City will maintain healthy reserves by:
Adhering to both State mandated reserve and internal reserve
policies
Maintaining the Tabor (State) reserve for the General Fund of
3% or more or the City’s fiscal year spending
Meeting City policy for the General Fund of an additional
contingency of 60 days or 17% of next year’s adopted
budgeted expenditures
• Each fund has a specific reserve policy that is adhered to
and considered before granting interagency loans
CITY MEETS AND GENERALLY EXCEEDS ALL RESERVE POLICIES
11
Closing
• Recommended policy will provide staff and City Council a foundation to
make sound financial decisions that will provide the citizens of Fort
Collins a diverse, stable and fair revenue stream equipped to provide
the services necessary to keep Fort Collins great.
• Future Policy revisions coming to Council Finance:
• Investment Policy – Nov 2013
• Budget Policy – Nov 2013
• Reserve/Fund Balance Policy – Dec 2013
Financial Management Policy 2
Policy – Revenue Issue Date:
Version:
Issued by: Revenue and Project
Manager
Financial Policy 2 – Revenue
1
2.1 Limitations
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.
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.
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.
Authorized by:
City Council
Financial Policy 2 – Revenue
2
• Public Health and Safety (including, but not limited to, environmental monitoring
and mitigation)
• Transportation
• Growth Management
• 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.
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 five (5) 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
Financial Policy 2 – Revenue
3
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
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
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. Monitoring
The percentages are monitored each year with the preparation of the annual financial
report. The percentages are reviewed by Council Finance Committee annually.
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.
Financial Policy 2 – Revenue
4
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 cost, 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
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
Financial Policy 2 – Revenue
5
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
6
2.4 Sales and Use Tax Distribution
The City's Sales and Use Tax totals 3.00 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 - Street Maintenance 0.25 cent*
2006 - Building on Basics 0.25 cent*
2006 - Natural Areas & Open Space 0.25 cent*
2011 - Keeping Fort Collins Great 0.85 cent*
3.85 cents
*Excluding sales of grocery food.
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.
Financial Policy 2 – Revenue
7
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, efforts should be made to
secure private contributions in support of 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.
Financial Policy 2 – Revenue
8
Getting Help
Please contact the Revenue and Project Manager with any questions at 970.221.6626.
Related Policies/References
Information about related policies or procedures, guidelines, forms, etc. Give complete references and
ensure that documents cited are readily available (i.e. either as widely distributed manuals or online). If
needed provide additional background discussion here. Reference to detailed procedures that are
recommended in order to carry out the intent of the policy.
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
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
REVENUE POLICIES
2.1. REVENUE LIMITATION
The City of Fort Collins’ revenue and expenditures are limited by Section 20 of Article X,
Section 20 of the Colorado Constitution (Article X, Section 20 or ATABOR@). While
TABOR places limits on both revenue and expenditures, its primary application is in
limiting of the State and all local governments. Even though the limit is placed on both
revenue and expenditures, the constitutional amendment in reality applies to a limit on
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. Beginning in 2003, the Golf Fund revenue source was s will allow it
to be considered for enterprise status for purposes of Article X, Section 20TABOR. In
order for an entity toTo become an enterprise, voters would need tomust approve a
Charter amendment for the Golf Fundthat entity.
In November 1997, Fort Collins’ voters approved a ballot measure that allows the City to
retain revenues that exceed the growth limit imposed by Article X, Section 20TABOR.
The measure was effective for 1996 and ensuing years. The approved measure
specified that any retained revenues over the growth limit must be used for certain
designated purposes.
$ Public health and safety (including, but not limited to, environmental monitoring and
mitigation)
$ Transportation
$ Growth management
$ Maintenance and repair of public facilities
While not included as part of the approved ballot measure, legal 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.
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 major revenue sources in the general General fund Fund are
sales & use tax, property tax, lodging tax, intergovernmental revenues, fines & and
Formatted: Indent: Left: 0.5"
Formatted: Indent: Left: 0.5", First line: 0"
Formatted: Font: (Default) Arial, 11 pt
Formatted: Indent: Left: 0.5"
Formatted: Indent: Left: 0.5", First line: 0"
Formatted: Font: (Default) Arial, 11 pt
Formatted: Indent: Left: 0.5"
Formatted: Indent: Left: 0.5", First line: 0"
Formatted: Font: (Default) Arial, 11 pt
Formatted: Indent: Left: 0.5"
Formatted: Indent: Left: 0.5", First line: 0"
Formatted: Font: (Default) Arial, 11 pt
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. ObjectivesPrinciples
The City has established five (5) 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.
A. 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
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:
Formatted: Font: Not Bold, No underline
Formatted: Indent: Left: 0.88", First line: 0"
Formatted: Font: Not Bold, No underline
Formatted: Indent: Left: 1.25", No bullets or
numbering
Formatted: Font: Not Bold
Formatted: Underline
Formatted: Font: (Default) Arial, 11 pt
Formatted: Normal, Indent: Left: 1.5", No
bullets or numbering, Tab stops: Not at 0"
Formatted: Font: (Default) Arial, 11 pt
Formatted: Indent: Left: 1.25", No bullets or
numbering
Formatted: Font: Not Bold
Formatted: Font: Not Bold
Formatted: Font: Not Bold
Formatted: Font: Not Bold
Formatted: Font: Not Bold
Formatted: Font: Not Bold
Formatted: Font: Not Bold
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
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.
c. Targets
The City's major source of revenue for governmental activities and more
specifically for programs within the General Fund is the 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.
Over the past five years, 2000-2004, the percentage of General Government Total
Revenue from sales and use tax (the 2.25% portion not dedicated for specific uses
by the voters) has been approximately 38%. The target for this percentage shall
be 40%.
For the General Fund, the percentage of revenues from sales & use tax has been
approximately 60%. When the Comprehensive Annual Financial Report is
completed each year, the Finance Department will monitor these two percentages
and report the results to Council. For the General Fund the target shall be 60%.
d. Monitoring
The percentages will beare monitored each year with the preparation of the annual
financial report. Preliminary estimates of the percentages should be available in
April and be incorporated into the budget process. The percentages will beare
reviewed by Council Finance Committee annually. and Council annually.Council.
e. Policy Action
In the event the percentages exceed the targets, the City Manager will provide an
analysis of the City's revenues to the Council. The City Manager may propose
adjustments to revenue sources other than the sales and use tax (some examples
include user fees, fines & forfeitures, transfers from other funds) to meet the
Formatted: List Paragraph, Left, Numbered +
Level: 1 + Numbering Style: a, b, c, … + Start
at: 1 + Alignment: Left + Aligned at: 1.5" +
Indent at: 1.75", Tab stops: Not at -0.83" +
-0.5" + 0" + 0.5" + 0.88" + 1.25" + 1.63" +
2" + 2.5" + 3" + 3.5" + 4" + 4.5" + 5" +
5.5" + 6" + 6.5"
Formatted: Font: +Headings (Cambria)
targets or decrease the trend of increasing dependency on sales and use tax.
Generally, for this policy to be effective, revenues from all other sources will need
to grow at roughly the same rate as the sales and use tax collections.
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 one-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. to generate revenue for the
construction of infrastructure and capital facilities needed to offset the impacts 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 fees could appropriately be imposed by
the Cityimpose 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 cost, 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. Governmental services are those which are provided by the City for
the public good such as regulating land use, maintaining streets, and
providing police and fire protection. Proprietary services are those which are
provided for the benefit and enjoyment of the residents of the City, at their
discretion, such as parks and recreation 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
Formatted: Indent: Left: 0.88"
Formatted: Font color: Red
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, which can be collected at the
time of issuance of a building permit, 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 kinds of special service fees, such as user fees charged for
the use of City recreational and cultural 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
The City's Sales and Use Tax totals 3.00 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 - Street Maintenance 0.25 cent*
2006 - Building on Basics 0.25 cent*
2006 - Natural Areas & Open Space 0.25 cent*
2011 - Keeping Fort Collins Great 0.85 cent*
3.85 cents
*Excluding sales of grocery food.
Revenue generated by the Sales and Use Tax will be distributed, based on adopted
budgets, in the following manner:
TAX ON ALL SALES & USES: 2.25 cents
$ Fixed Dollar Amounts
Annual Debt Service
Sales & Use Tax Debt Service Reserves
$ General Fund
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 transferred 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 transferred to, 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
Formatted: Indent: Left: 0", First line: 0"
for street/transportation projects and other community capital projects, identified during
the Building on Basics process, approved by the voters.
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, efforts should be made to secure
private contributions in support of these programs and services, as these contributions are an
integral part of their successful operation. With respect to Article X, Section 20 of the State
ConstitutionTABOR, the City=’s Finance Department will make a determination as to whether a
contribution is a gift and is therefore excluded from constitutional limits.
Formatted: Font color: Red
Getting Help
Please contact the Revenue and Project Manager with any questions at 970.221.6626.
Related Policies/References
Information about related policies or procedures, guidelines, forms, etc. Give complete references and
ensure that documents cited are readily available (i.e. either as widely distributed manuals or online). If
needed provide additional background discussion here. Reference to detailed procedures that are
recommended in order to carry out the intent of the policy.
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
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
Formatted: Font color: Red
Formatted: Font color: Red
1
Council Finance Committee
Revenue Diversification
September 17, 2012
2
Overview
• Where Are We Now
• How Do We Compare
3
Revenue Diversification
“Not putting all your eggs in one basket”
Revenue – the total income produced by a given source
Diversity – the condition of having or being composed of
differing elements
There is merit in the notion that states and local
governments should balance their tax systems
through reliance on the "three-legged stool“**
** Source – National Conference of State Legislatures (NCLS)
Is the “three-legged stool” a feasible option for Fort Collins?
4
Fort Collins Governmental Revenue
Fort Collins is Currently More of a Two-Legged Stool
Sales & Use Tax
74,718,996
45%
Property Tax
17,832,713
11%
Other Revenue
Other Taxes
3,134,928
2%
68,956,811
42%
2010 Total Revenue
$164,643,444
Govermental Funds Only
Other Revenue
• Intergovernmental - $37M
• Charges for Service - $23M
• Other Misc. - $2.7M
• Fines & Forfeitures - $2.8M
• License/Permits - $1.2M
• Investments - $2.0M
5
How do we compare in
Colorado and Nationally?
6
2010 Revenue Comparison - Colorado Cities
Fort Collins reliance on sales tax increased to 51% with KFCG
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Other Revenue
Other Taxes
Property Tax
Sales & Use Tax
7
2010 Revenue Comparison – National Cities
Limited Revenue Diversification in Other Cities….
Diversity Requires Increase in Property Tax or an Income Tax
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Other Revenue
Other Taxes
Sales & Use Tax
Property Tax
Other Taxes
• Springfield, OH – Income Tax &
State levied shared taxes
• State College, PA – Income Tax
• Williamsburg, VA – Restaurant
Tax, Hotel-Motel Tax
8
Tax Burden Comparison – Colorado & National Cities
$-
$2,000.00
$4,000.00
$6,000.00
$8,000.00
$10,000.00
$12,000.00
Total Tax Paid (Income, Property, Sales)
Fort Collins is in the Middle of the Pack
on Citizen Tax Burden
What do the * mean on the graph??
$-
$1,000.00
$2,000.00
$3,000.00
$4,000.00
$5,000.00
$6,000.00
$7,000.00
$8,000.00
$9,000.00
$10,000.00
Total Tax Paid (Income, Property, Sales)
**Based a normalized salary of $75k and a normalized home value of $250k
9
Fort Collins Combined Sales Tax Rate is on the Low End
Current Sales Tax Rate Comparison – Colorado Cities
**Jurisdictions with multiple tax rates due to special districts and/or located in multiple counties
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
Other
Cultural
County
State
RTD
City
10
Layer Cake of Taxes….
Significant Portion of Tax Rate Sunsets
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
Sales Tax Rate
Sale and Use Tax Rate, 1968-2035
.25 BCC Community
Enhancements, Voter
Approved
1% by City Council Ordinance 140, 1979
1% DTT Voter
Approved
1% General, Voter Approved
.25% by City Council Ordinance 149, 1981
.25% Necessary
Capital (RECAP)
Voter Approved
.25%
11
Mill Levy Rate Comparison
Fort Collins is Slightly Above the Average of 8.828 mills
Compared to Other Colorado Cities
0
5
10
15
20
25
30
35
8.828
mills
12
Conclusions of Comparison
• Only three Colorado communities analyzed achieve
revenue diversity
• Revenue diversification in Fort Collins would require a
three-fold increase in the property tax rate…the mill
levy would need to be raised to….31.162!!
• Issue – How to reduce dependency on tax rates that
sunset and carry the risk of non renewal
13
Conclusion
• Future actions concerning revenue diversification should be
integrated with the overall strategy to renew the BOB and
Transportation ¼ cent taxes that sunset in 2015
Questions?
Council Direction…
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Jessica Ping-Small, Revenue and Project Manager
Mike Beckstead, Chief Financial Officer
SUBJECT FOR DISCUSSION: Street and Park Maintenance Fees
EXECUTIVE SUMMARY
Street maintenance is currently funded primarily through sales tax including the designated ¼
cent sales tax that has a sunset date of December 31, 2015 and the Keep Fort Collins Great sales
tax. Although sales tax initiatives have been supported multiple times by citizens, relying on an
expiring sales tax has risks such as revenue variability and potential expiration. Staff has
explored the feasibility of a Street Maintenance Fee (SMF) to replace the ¼ cent designated sales
tax.
Park and trail maintenance is currently funded though the General Fund and $735K of
Conservation Trust Funds that were diverted from trail construction in due to funding shortfalls.
Staff has drafted a Park Maintenance Fee (PMF) to generate $735K annually which would allow
the Conservation Trust Funding to go back to trail construction.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Are there any questions about the fees?
2. Is there additional information requested for the Work Session?
BACKGROUND/DISCUSSION
Street Maintenance Fee
History
The Transportation Maintenance or Transportation Utility Fee has a long history in Fort Collins,
dating back to its adoption by City Council in 1988, and a subsequent review of the fee by the
Colorado Supreme Court. A court challenge regarding the ability of the City to levy such a fee
was made and the case was argued at the Colorado State Supreme Court. In the case, the court
found that the fee was not a property tax, excise tax or special assessment, but rather a special
service fee. Though the fee was upheld, the fee was discontinued.
In 2005, staff embarked on a second journey to implement a Transportation Maintenance Fee
(TMF). The proposed street maintenance fee was not a replacement of the ¼ cent sales tax but
was in addition to the existing ¼ cent sales tax. The ordinance was passed on first reading,
however, between first and second reading, the Library District was formed. The creation of the
Library District freed up General Fund dollars for street maintenance therefor the ordinance did
not pass second reading.
Overview
A Street Maintenance Fee (SMF) would be charged on City utility bills for maintaining City
streets, bike lanes, medians (excluding landscaping) and City maintained sidewalks.
Maintenance includes such work as keeping pavement surfaces in good condition, performing
seal coats as needed, repairing potholes and cracks, repaving and other work to keep our
transportation system safe. This fee is being considered due to the quarter-cent sales tax
approved by voters in 2005 that is sun-setting in 2015.
The fee will be assessed based a flat fee for residential residents and a trip generation based fee
for non-residential properties. The fee will be assessed on the following parcel use categories:
• Residential
• Commercial
• High-Traffic Retail
• Retail
• Industrial
• Institutional
The basis of this fee is to charge users of the City’s transportation system for a portion of its
maintenance. By charging a fee for the cost of maintenance, a portion of the system would be
funded by the parties most frequently using the streets and most directly benefiting from its
maintenance.
The fee would be based on the actual cost of maintaining the system, including City streets, bike
lanes, medians (excluding landscaping), and City maintained sidewalks. The fee would be
allocated to different users based on the average number of trips each type of user generates in a
day. This results in a fee structure in which users pay in rough proportion to the extent they use
the system. For example, users who add 10 trips per day to the transportation system pay a fee
much lower than those user types (i.e. high traffic businesses) that average 300 trips per day.
This trip generation theory is similar to the method used to calculate street oversizing fees, and
has also been recognized by courts as a fair and legally appropriate way of apportioning costs.
Fee Structure:
Street Maintenance Fee
(Enter target here) $ 7,216,500 Pavement Management Need
Total Annual Percent of Fee
SMF Fee Schedule Revenue by Land Use
Institutional $45.30 Per Acre 757,894 10%
Industrial $39.01 Per Acre 297,899 4%
High Traffic Retail $478.45 Per Acre 1,557,960 22%
Retail $191.00 Per Acre 1,913,765 26%
Commercial $45.30 Per Acre 551,458 8%
Residential $2.99 Per Unit 2,137,524 30%
Total Fee $ 7,216,500
Administrative Cost (3%) (216,495)
Revenue Net of Administrative Fees $ 7,000,005
Potential Costs to Consider
Utility Billing Charge (unknown)
Rebate/Delinquencies (1200 estimated) (259,550)
Institutional Exemption
Government (303,386)
Public Schools (307,429)
Private Schools (13,715)
Churches (133,364)
Total Potential Costs $ (1,017,444)
Revenue Sought
Use Monthly
Fee
Yearly
Fee
Lot Size
in Acres
Industrial
Manufacturing $210.66 $2,527.88 5.4
Manufacturing $2,730.74 $32,768.87 70
Retail
Drug Store $401.10 $4,813.24 2.1
Old Town Restaurant $38.20 $458.40 0.2
Old Town Shop $22.92 $275.04 0.12
Large Retail $1,890.92 $22,691.01 9.9
Institutional
Church (large lot) $226.51 $2,718.07 5
Church (small lot) $22.65 $271.81 0.5
Elementary School $244.63 $2,935.52 5.4
High School $543.61 $6,523.38 12
High Traffic Retail
Fast Food $861.21 $10,334.49 1.8
Bank $574.14 $6,889.66 1.2
Convenience Store $382.76 $4,593.10 0.8
Grocery Store $2,822.85 $33,874.15 5.9
Commercial
Law Office $11.33 $135.90 0.25
Motel $63.42 $761.06 1.4
Total Annual Fee Cost Per Residential Unit: $35.88
Total New Fee Revenue $ 7,000,005
Distribution of Total New Fees By Land Use
30% Residential
70% Non-Residential
Sample Street Maintenance Fees
Park Maintenance Fee
History
City Council by Resolution 83-173 on October 4, 1983 adopted a policy that Conservation Trust
(Lottery) monies should be utilized primarily for 1) the acquisition and development of Open
Space and Trails, and 2) any other project deemed appropriate by City Council. However, due to
General Fund shortfalls, Conservation Trust Funding was redirected by Council to parks and trail
maintenance. Currently, $735K is used for maintenance leaving only $470K for trail planning,
design, right-of-way, and construction. To help offset the loss of Conservation Trust funding,
the Natural Areas Department has contributed about $350K annually to trail construction since
2003. However, Natural Areas may not be able to make this contribution after 2014 due to NA
program funding needs. Staff has drafted a Park Maintenance Fee (PMF) to generate $735K
annually which would allow the Conservation Trust Funding to go back to trail construction.
Overview
A Park Maintenance Fee would be assessed on residential dwellings through the Utility billing
system to contribute to maintenance funding of community parks and neighborhood parks
Park maintenance includes, but is not limited to maintenance of all landscaped areas, facilities,
infrastructure, administration and minor capital improvements as needed to keep the park
facilities in safe and usable condition for the general public.
The fee is structured to replace the $735K of Conservation Trust Funds currently being used to
fund park maintenance. The fee is only assessed to residential units.
Fee Structure
General Fund Revenue Projections
Proposed Park Maintenance Fee
Funding to Replace Transfer from Conservation Trust Residential Accts only
Total Fee Revenue $757,750
Administrative Fee (3% of fees) ($22,733)
Net Fee Revenue $735,018
Potential Costs to Consider
Utility Billing Charge (unknown)
Rebate Program (1,200 refunds, assuming 100% fee rebate) ($15,263)
Total Potential Costs ($15,263)
Residential Units Only
Residential Units= (electrical accounts) 59,575
Monthly Fee 1.06
Additional Considerations – Both Fees:
If City Council chooses to continue the discussion the following items will need additional
consideration:
• Significant public outreach/education
• Exemption for Institutional (churches, schools, government) –SMF ONLY
• Utility billing fee and actual retail space on bill
• Rebate Program
• Delinquency Issues
Staff has completed a TBLAM exercise for the street maintenance fee and a analysis has been
scheduled for the park maintenance fee. The outcome of the analysis will be presented as part of
the work session packet.
Next Steps
The fees will be discussed at the City Council Work Session on November 26, 2013.
ATTACHMENTS
1) Power Point Presentation
2) Benchmark Data
1
Street and Park
Maintenance Fees
Council Finance Committee
October 21, 2013
2
3 Year Work Plan
2012-Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2-Q4 2014
Revenue Diversification
Analyze
Street
Maintenance
Fee and Park
Maintenance
Fee
Complete
Comprehensive
Fee Study
Council Decision
on Fee vs. Tax
for Street
Maintenance
Analyze
Additional Fees
– Parking and
Transit
Analyze
City’s Revenue
Diversity &
Draft Policy
DONE
Revenue diversification and fee analysis will continue through 2014.
3
Fees – Approach
• Developed methodology including:
– What is it?
– What will it fund?
– How will it be assessed?
– How much?
– Current funding source – does it go away?
• Additional analysis:
– Benchmark data both locally and nationally
– TBLAM (will be included in work session
packet)
4
Street Maintenance Fee - History
• In 1984, City Council adopted an ordinance establishing a
Transportation Utility Fee (TUF) to fund street
maintenance
• In 1985 a lawsuit was filed regarding the validity of the
fee
• The validity of the fee was upheld by the Colorado
Supreme Court, however City Council repealed the
ordinance in 1992
• In 2006, City Council was poised to adopt a new iteration
of the TUF but with the formation of the Library District,
the fee was tabled
5
Street Maintenance Fee (SMF)
• Why now?
– ¼ cent Street Maintenance sales tax expires December
2015 (forecasted at $7M in annual revenue)
– Direction is needed on whether to pursue a fee or tax
• What is it?
– A fee assessed monthly on utility bills to residents
and businesses within the City to fund street
maintenance
• What will it fund?
– A portion of the maintenance for streets, bike lanes,
medians (excluding landscaping) and city maintained
sidewalks
6
Street Maintenance Fee
• How will it be assessed?
– Fee calculation based on factors such as:
• Trip Generation
• Land Use Type
• Square footage for commercial
• Who pays?
– Residential households
– Commercial and Industrial properties based on
factors of land use, size and trip generation
Fee calculation is based on the proportional
use of streets by each land use type.
7
Street Maintenance Fee – How Much?
Fee based on current annual revenue projection of the
¼ cent sales tax or $7 million annually.
Land Use Monthly
Fee per Acre
% of Fee
Revenue by
Land Use
Institutional $45.30 10%
Industrial $39.01 4%
High Traffic Retail $478.45 22%
Retail $191.00 26%
Commercial $45.30 8%
Residential $2.99 per Unit 30%
8
Street Maintenance Fee – Examples
Use Monthly
Fee
Annual
Fee
Lot Size in
Acres
Manufacturing $210 $2,527 5.4
Manufacturing $2,730 $32,768 70
Old Town Restaurant $38 $458 0.2
Large Retail $1,890 $22,691 9.9
Fast Food $861 $10,334 1.8
Grocery Store $2,822 $33,874 5.9
Office $11 $135 0.25
Residential $2.99 $35.88 N/A
High traffic retail and industrial land uses will see the most impact.
9
Street Maintenance Fee
The revenue source is stable yet impactful to the business community.
Pros Cons
Stable and predictable funding
source for core service
Costs shifted to businesses
that generate the most traffic-
very impactful
Shifts cost of maintenance to
those who use streets most
heavily
Perception that non-residents
get a free pass to use the
streets
Relatively easy to implement
via existing utility bills
Businesses may perceive that
they pay a disproportionate
share
10
Park Maintenance Fee (PMF)
• Why now?
– Conservation Trust funds have been redirected from
trail construction to park and trail maintenance for
many years
– The use of Conservation Trust funds for maintenance
have impacted the ability to construct new trails
– A PFM provides a reliable and stable funding source
for maintenance
• What is it?
– A fee assessed monthly on utility bills to
residents within the City
Objective of PMF fee is to replace $735k of Conservation Trust
Funds currently directed from trail construction to park maintenance.
11
Park Maintenance Fee
• What will it fund?
– A portion of park and trail maintenance which
includes landscaped areas, facilities,
infrastructure, administration, etc.
• How will it be assessed?
– Fee based on the revenue needs and the number
of residential utility meters
• Who pays?
– Residents through their utility bill
12
Park Maintenance Fee
• How much?
– $735K annual revenue (net of admin fees)
– Fee = $1.06 per month per household
– $12.75 annually
Although the fee is minimal, it is a new fee assessed to residents.
Pros Cons
Reliable funding source New fee
Redirects Conservation Trust
funds back to trail construction
Adds revenue – not replaces
which could be a negative for
residents
Funds future trail construction Increases utility bill
13
Street and Park Maintenance Fee
• Additional considerations:
– Significant public outreach/education
– Institutional exemption - $760K annually (SMF
ONLY)
– Utility bill considerations (fee and space)
– Rebate program
– Delinquency issues
There are significant considerations and public outreach
work to be completed if staff is directed to move forward.
14
Street and Park Maintenance Fee
Benchmark Data
• Street Maintenance Fee:
– Loveland is the only local jurisdiction with one
– Common in Oregon
– Trip generation/land use methodology very common
– Many street maintenance programs funded with
general fund or designated sales tax
• Park Maintenance Fee:
– Not common – Longmont, CO uses one
– Generally a flat fee
– Maintenance commonly funded by general fund
15
Next Steps
• City Council Work Session – November 26
• Street Maintenance Fee - based on direction from
work session staff will proceed with fee analysis or
¼ cent sales tax renewal effort
• Park Maintenance Fee- staff will proceed as directed
by City Council in November
STREET MAINTENANCE TYPE FEES IMPOSED BY OTHER MUNICIPALITIES
City Residential Commercial Multi-Family
Austin, TX $7.80 per unit $39.02 per developed acre $5.93/per unit
Bryan, TX * $14 per unit $49-$210 depending on size
Canby, OR $5.00 per unit $0.522 per trip charge - minimum $5.00 $3.34/unit
Corpus Christi, TX $5.38 per unit $5.38 per meter (SF/1500 x TF x $5.38 per meter) $2.42/unit
Corvallis, OR $1.53 per unit $0.023 x trip generation $1.02/unit
Lake Oswego, OR $4 per unit $2.45 - 20.58 $2.68/unit
Lewistown, MT annual determination based on need by district - covers 75% of cost
Loveland, CO 1.87 per unit 20.71-207.09 per acre based on category
Mission, KS $72/year less than $1,000 year (1.490 cent trip rate)
Tigard, OR $5.56 per unit. $1.25 per required parking space $5.56/unit
* Fee is used for both Transportation and Drainage
STREET MAINTENANCE FUNDING SOURCES
City Funding Sources
Fort Collins Dedicated Sales Tax & General Fund
Boulder Dedicated Sales Tax, General Fund, Federal & State Funding
Broomfield General Fund
Colorado Springs General Fund
Greeley Dedicated Sales Tax, General Fund, Federal & State Funding
Lakewood General Fund
Longmont Dedicated Sales Tax, General Fund, & Intergovernmental
Loveland Street Utility Maintenance Fee, General Fund, Federal & State Funding
Thornton General Fund
Westminster General Fund
PARK MAINTENANCE FEES IMPOSED BY OTHER MUNICIPALITIES
City Funding Sources
Longmont, CO $1 per unit
West Linn, OR $10.70 per household
San Antonio, TX $1.00 per unit
Medford, OR $.31 per unit
PARK MAINTENANCE FUNDING SOURCES
City Funding Sources
Fort Collins General Fund & Conservation Trust
Boulder General Fund
Broomfield General Fund
Greeley General Fund
Longmont Park Maintenance Fee & General Fund
Loveland General Fund
Westminster General Fund
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Mike Beckstead, Chief Financial Officer
SUBJECT FOR DISCUSSION: Foothills Mall Financial Update
EXECUTIVE SUMMARY:
The planned development at Foothills Mall associated with the Redevelopment Agreement and
incentive package approved by Council on May 7, 2013 has several modifications and revisions
that will be going back to the Planning & Zoning Board in November 2013 and January 2014.
These changes will have a minor impact on the financial incentive package. Staff will review the
details of all changes to the financial incentive package as detailed in the attached presentation.
In summary, the deal is intact, there is no change to the incentive package, and the financial
return to the City is substantially unchanged. Details are highlighted below:
1. The Foothills Mall has reduced in size by approximately 10%.
2. The opening of the Mall is delayed approximately 1 year.
3. The Foothills Activity Center is planned at 18K square feet and to be located in between
Macy’s and the planned parking structure.
4. Estimated sales per square foot have increased from $350 to $378 based on known
tenants that will occupy the Mall.
5. The incentive value of $53M to support the public improvements is unchanged.
6. The par value of the bonds has declined slightly from $73M to $71M.
7. The maximum bond payment amount is unchanged at $180M
8. Sales tax remitted as part of the Sales Tax Revenue Pledge is unchanged at $9M.
9. Net new sales tax revenue has increased from $108M to $117M.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Council Finance Committee understanding of the current proposed redevelopment
agreement financial incentive package and underlying return to the City of Fort Collins
BACKGROUND/DISCUSSION
ATTACHMENTS
1. PowerPoint presentation
1
Foothills Mall Redevelopment
Redevelopment and Reimbursement
Agreement
Oct 21, 2013
2
• Objectives:
• Realize Community Vision & Expectations
• Launch a Catalytic Opportunity in Midtown
• Realize a Significant Revenue Opportunity
• Minimize Risk to Balance Sheet, Credit Rating & Revenue
• Challenges
• Build a Competitive Design & Create a Sense of Place
• Resolve Tenant Issues without Resorting to Eminent Domain
• Create a Connection with Mason BRT
• Replace the Youth Activity Center
• Resolve County Concerns around URA TIF
Objectives & Challenges
3
Summary
• Change in Mall Configuration
• Commercial square footage down by 10%
• Grand opening delayed approximately 1 year – phased opening
• P&Z reviews and approval scheduled
• Deal is Intact
• $53M Public Improvements
• Maintained cap on maximum bond payments at $180M
• Financial Return to the City Slightly Improved
• Sales per square foot increased based on known tenant mix
• Net new sales tax net of remittance increased from $108M to 117M
4
Foothills Activity Center
Less Retail
Eliminate Entrance
No D&B Above Theater
Reconfigure Shops
Along College
Acquire & More Retail
More Retail
More Retail
5
Planning Process
• November 14 & /or Nov. 21st
The Planning & Zoning Board hearing for the Foothills
Redevelopment Overall Development Plan, Major Amendment to
the approved Project Development Plan and Phase One.
• December 4th
Phase Two (Major Amendment) Final Plans submitted by Alberta.
• December 6th
Phase One Final Plans to be approved (administrative) and
recorded.
• December 23rd
Building Permit for Phase One
• January 22nd
Phase Two (Major Amendment) Final Plans administratively
approved and recorded.
6
Mall Financing
7
Foothill Mall Project Summary Comparison
10% Smaller Mall but with Higher Sales Per Square Foot…..
City Sales Tax Remittance $9M…..
Net New Sales Tax Revenue Increase from $108M to $117M
GLA 711K + 24K 637K + 18K
Sales Per Sq Ft $350 $378
Total Cost Retail Project $237 $231
Open Assumption Nov ’14 Phases ‘14-’15
Bonds at Par Value $ 73 $ 71
Cum Bond Payments $165 $158
Metro District Revenue $170 $151
Dedicated Sales Tax Rev $105 $106
GF Sales Tax Revenue $147 $149
Estimated City ST Remitted $ 8.8 $9.0
Net New ST Revenue $108 $117
($ millions) May 7th Oct 16th
8
Public Improvement Costs
No Change to Public Improvement Costs
($ millions)
Blight Removal
Infrastructure
City
Infrastructure
Total
Public
Land Acquisition $ 5.5 $ 5.5
Parking Structure 9.6 9.6
Deconstruction / Abatement 3.9 3.9
Fixture & Amenities 1.4 1.4
Ditch Relocation 2.8 2.8
Site Work 12.9 12.9
Utilities 4.5 4.5
Soft Costs 4.6 4.6
Foothills Activity Center 4.8 4.8
Pedestrian Crossing / Culvert 3.0 3.0
TOTAL $ 45.2 $ 7.8 $ 53.0
9
Bond Details
• Bond Issue Spring of 2014 $71M
less Capitalized Interest 8M
less Reserve Fund 7M
less Issuance Cost 3M
• Net Proceeds $53M
• Additional Supplemental Reserve of $7.1M from Pledged
Revenue
• Senior Lien on Pledged Revenue in order of seniority:
• Metro District 50 mills of property tax
• URA Property Tax Increment
• Developer 1% Public Improvement Fee (PIF)
• City Sales Tax Revenue Pledge on 2.25% Core rate
Slight Reduction in Bond Par Value, Still Anticipate 7% Interest
Rate, No Change to the Seniority of Pledged Revenue
10
Metro District Funding
• Metro District revenue:
• Releases Sales Tax Share if Metro District revenue covers debt
• PIF expires when bonds paid off
• Remaining excess assigned to a Foothills Mall Fund
•
Metro District Assigned 3 Revenue Sources….
Property Tax, Public Improvement Fee, Property Tax Increment
($ millions)
May 7th Oct 16th
Cumulative
Metro District Revenue 25 Years
District Property Tax $ 50.0 $ 2.1
Sales PIF 64.7 2.3
URA Property Tax Increment 55.2 2.3
Metro District Funding $ 169.9 $ 6.7
Today's Value $ 62.5
Annual
Funding 2020
25 Years
$ 43.1 $ 1.8
65.6 2.4
42.7 1.9
$ 151.4 $ 6.1
$ 55.3
Cumulative
Funding
Annual
Funding 2020
11
Sales Tax Revenue
Total of Sales Tax Revenue Expected over 25 years $252M………………….$255M
Annual Sales Tax Revenue in the First Full Year $8.4M………………….$8.7M
Base = existing revenue from the existing mall
Transfer = revenue from other areas of the city that will transfer to the mall
New = net new revenue associated with the redeveloped mall
($ millions)
May 7th
Oct 16th
Cumulative
City Sales Tax Revenue 25 Years First Full Year
Dedicated Base / Transfer / New $ 104.6 $ 3.5
Core Base 44.4 1.8
Core Transfer & New 102.7 3.1
City Sales Tax $ 251.7 $ 8.4
Today's Value $ 94.7
Annual
Funding 2016
25 Years First Full Year
$ 106.0 $ 3.6
44.5 1.8
104.6 3.3
$ 255.1 $ 8.7
$ 94.8
Cumulative
Funding
Annual
Funding 2016
12
Base Transfer New
44 31 74 $ 149
32 22 52 $ 106
$ 76 $ 53 $ 126 $ 255
Sales Tax over 25 years
New and Pledged Sales Tax Revenue
May 7th = $108M of Net New Sales Tax Revenue Anticipated
Oct 16th = $117M of Net New Sales Tax Revenue Anticipated
($ millions)
Base Transfer New
Core Tax - 2.25% 44 35 68 $ 147
Dedicated Tax 1.6% 32 24 49 $ 105
$ 76 $ 59 $ 117 $ 252
Sales Tax over 25 years
Remitted Revenue: $9M $9M
Sales Tax Revenue retained by the City = $149M $151M
Sales Tax Revenue pledged towards debt service = $103M $105M
May 7th New City Revenue Oct 16th
13
Risk Analysis
1% increase in bond rate results in $25M more debt service and $xxM
reduction in Net New City Revenue…
Oct 16th
model estimates $9M in Remitted Sales Tax and a resulting $9M
increase in Net New City Revenue
($ millions)
Note: 2012 Sales per Square Foot at Foothills = $185 sq ft
Assumptions Oct 16th May 7th May 7th May 7th May 7th
Sales per square foot $378 Sq Ft $350 Sq Ft $350 Sq Ft $315 Sq Ft $280 Sq Ft
Property Tax Estimate Value Estimate Value Estimate Value Base less 10% Estimate Value
Cum Bond Pmts & Supp Res $159 $165 $190 $165 $165
Risk Sensitivity
Metro Revenue 151 170 170 150 157
Remitted Sales Tax Revenue 9 9 20 15 11
Net New City Revenue $ 117 $ 108 $ 97 $ 85 $ 73
7% Interest
Base Case
7% Interest
Base Case
10%
Reduction
8% Interest
Case
Prop Tax Base
-20% Sales Adj
Will Update For the Meeting
14
Project Assumptions
• Project Timing
• Mall except Sears
– Ground breaking June 2013
– Completion Nov 2014
• Sears & Residential – Summer 2015
• Economics:
• Annual Sales per square foot - $350
• Occupancy – 80% 2015, 95% thereafter
• Growth – 2% year sales,
1% year property assessed value
• Project Costs - $319M:
• Mall - $237M
• Residential 446 units - $82M
• Public Improvement Costs - $53M
• Blight Removal & Infrastructure - $45M
• Public Benefits - $8M
Mall Open for 2014 Holidays, Fully
Completed by Summer 2015…
Total Cost $319M Including $53M of
Public Improvement Costs
May 7th
Oct 17th
• Project Timing
• Mall
– Ground breaking Winter 2013
– Partial Completion Spring 2015
• Majority completed Winter 2015
• Economics:
• Annual Sales per square foot - $378
• Occupancy – 50-75% 2015, 95% 2016
• Growth – 2% year sales,
1% year property assessed value
• Project Costs - $313M:
• Mall - $231M
• Residential 446 units - $82M
• Public Improvement Costs - $53M
• Blight Removal & Infrastructure - $45M
• Public Benefits - $8M
Partial Mall Open in Spring 2015,
Majority Completed Winter 2015.
Total Cost $313M Including $53M of
Public Improvement Costs
15
Summary
• Change in Mall Configuration
• Commercial square footage down by 10%
• Grand opening delayed approximately 1 year – phased opening
• P&Z reviews and approval scheduled
• Deal is Intact
• $53M Public Improvements
• Maintained cap on maximum bond payments at $180M
• Financial Return to the City Slightly Improved
• Sales per square foot increased based on known tenant mix
• Net new sales tax net of remittance increased from $108M to 117M
16
Back-Up
17
($ millions) City Sales Tax Revenue – First 5 Years
Remitted Sales Tax Revenue = $8.8M
+
+
=
=
YEAR
2012 - 4.8
2015 2.1 2.5 4.6 - 5.0 5.0
2016 2.3 3.1 5.4 - 5.3 5.3
2017 6.5 3.2 9.7 - 5.4 5.4
2018 6.5 3.3 6.0 3.3 5.5 8.8
2019 6.7 3.4 5.7 3.4 5.6 9.0
City Sales
Tax
Revenue
Metro
District
Revenue
Pledged
Sales Tax
Increment
Bond
Payments
& Reserve
Sales Tax
Returned
to City
Base &
Dedicated
Sales Tax
Sales Tax Revenue in 2016 Exceeds 2012 Current Revenue.
City Net New Sales Tax Revenue Exceeds May 7th
Estimate.
+
+
=
=
May 7th
YEAR
2012 - 4.8
2015 1.8 0.8 2.7 - 3.8 3.8
2016 2.4 3.2 5.6 - 5.5 5.5
2017 4.9 3.3 8.1 0.2 5.5 5.7
2018 5.5 3.4 5.3 3.4 5.6 9.0
2019 5.5 3.5 5.4 3.5 5.7 9.2
City Sales
Tax
Revenue
Metro
District
Revenue
Pledged
Sales Tax
Increment
Bond
Payments
& Reserve
Sales Tax
18
($ millions) Sales Tax Revenue
Illustration of Revenue Retained by the City and Revenue Pledged
Sales Tax Revenue retained by the City
Sales Tax Revenue pledged towards debt service
Base Transfer New
Core Tax - 2.25% 1.8 1.0 2.1 $ 4.9
Dedicated Tax 1.6% 1.3 0.7 1.5 $ 3.5
$ 3.1 $ 1.7 $ 3.6 $ 8.4
Base Transfer New
Core Tax - 2.25% 1.8 1.1 2.2 $ 5.1
Dedicated Tax 1.6% 1.3 0.8 1.6 $ 3.7
$ 3.1 $ 1.9 $ 3.8 $ 8.8
Sales Tax in 2016
Sales Tax in 2018
May 7th
Base Transfer New
1.8 1.0 2.3 $ 5.1
1.3 0.7 1.6 $ 3.6
$ 3.1 $ 1.7 $ 3.9 $ 8.6
Base Transfer New
1.8 1.0 2.4 $ 5.3
1.3 0.7 1.7 $ 3.8
$ 3.2 $ 1.8 $ 4.2 $ 9.1
Sales Tax in 2016
Sales Tax in 2018
Oct 17th
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
AGENDA
Urban Renewal Authority Board Finance Committee
October 21, 2013
noon to 12:30 p.m.
CIC Room – City Hall
Approval of the Minutes from the September 16, 2013 Meeting
1. URA Direction / Policy / Process 30 minutes J. Birks
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
URA Finance Committee Meeting
Minutes
9/16/13
11:00 to Noon
CIC Room
Council Attendees: Mayor Karen Weitkunat, Bob Overbeck
Staff: Timothy Allen, Darin Atteberry, Mike Beckstead, Megan
Bolin, Chris Donegon, Tom Leeson, Lawrence Pollack,
Lance Smith, Steve Roy, John Voss, Katie Wiggett
Others: Dale Adamy, Daniel Parsons
Approval of the Minutes of May 20, 2013
Mayor Karen Weitkunat moved to approve the minutes for the May 20, 2013 meeting. Bob Overbeck
seconded the motion. Minutes were approved unanimously.
Prospect Station TIF Support
Tom Lesson presented the Prospect Station Redevelopment Project, a project improving the SW corner
of the Mason Trail and Prospect Road, including 32 residential rental units and 1 commercial/retail unit.
The project has significant public benefits including blight remediation and infrastructure Upgrades. The
total TIF Requested for this project is $494,000. This is a significant reduction from the original request
of $772,879. Total TIF collection over the life of the project with 0% growth each year is forecasted at
$865,340. The project will use combination lump sum payment and pay over time TIF reimbursement
structure.
Mike Beckstead noted that this project’s TIF Reimbursement Structure is a great example of Finance and
Economic Development working together to improve City practices. Tom Leeson presented the
following key reimbursement points:
• Developer must obtain C.O. of building before URA will make lump sum payment
• URA may pre-pay the reimbursement at any time
• TIF projection is based on County Estimate of Value
• Annual payment is fixed = $11,762
Tom Lesson noted that the City developed a hybrid structure because the developer began with the
assumption that they’d get a total lump sum as had been done in the past. When Staff told them the
City was planning on a pay as collected structure, the developer said he would have to walk away from
the project. The hybrid method allowed the project to move forward. The City’s total obligation will be
$494,000 plus financing costs estimated at $175,284. Based on current estimates including financing,
77% of the available TIF will be used to support the project.
2
URA Loan – Summit
In September 2011, the Fort Collins Urban Renewal Authority (URA) approved a Redevelopment
Agreement with Capstone Development Corp (Developer) for The Summit on College, a mixed-use
student housing project in the Prospect South Tax Increment Financing (TIF) District. The Agreement
obligated the URA to reimburse the Developer for up to $5 million of eligible costs upon completion of
the project. The Developer obtained a Certificate of Occupancy for the project in August 2013 and is in
the process of submitting their reimbursement request to the URA.
When the amount of tax increment generated by The Summit was estimated in 2011, the URA used a
methodology based on project costs and assumed 1% appreciation each year, for a total of approximately $8
million. It was anticipated that the URA would have to borrow from the City to pay the reimbursement to
the Developer, and at the time, the financing charge on a $5 million loan was estimated to be $2.4 million.
Based on the most recent August 2013 preliminary valuation from Larimer County, the project is estimated
to generate $7 million of tax increment, creating a $1 million revenue shortfall from the original projection.
Additionally, a combination of rising interest over the past two years (adding 71 basis points) and the City’s
new interagency loan policy (adding 25 basis points), have increased the expected interest rate on the loan
from the City from 4.0% to 4.96% increasing interest cost from $2.4M to $3.8M. Table 1 summarizes the
difference between the original estimates and actual numbers:
Table 1* – Note: numbers have been updated per latest interest rates
2011 Estimates 2013 Actuals
Total Tax Increment $8 million $7 million
Reimbursement Obligation $5 million $5 million¹
Financing Cost to URA $2.4 million $3.8 million
Balance $0.6 million ($1.8 million)
¹ Subject to final verification by URA staff.
*Number have been updated since the
Between the decrease in tax increment revenue and increase in financing charge, the URA would be unable
to afford the full debt obligation of a $5 million loan from the City under current investment policy interest
rates. Consequently, City and URA staff have negotiated a loan agreement that allows the URA to uphold
its reimbursement obligation to the Developer and remain financially solvent, while making a concerted
effort to uphold the City’s interagency loan policy.
Proposed Loan Agreement Terms
The URA cash flow does not support a $5 million loan from the City based on the current interest rates and
the current interagency loan policy. A new loan structure was developed that assigns an interest rate based
on the known revenue stream and term, which turns out to be 2.68%. Since City policy would require 4.96%
interest, this leaves a gap of $1.78 million. To fill this gap, the URA commits to pledge 50% of future
unencumbered revenue from the Prospect South TIF District to the City.
For example, assume the URA collects $1 million in revenue in a given year and owes the City a $400,000
payment on the Capstone loan; 50% of the remaining $600,000, or $300,000, would be paid to the City to
help pay down the $1.78 million interest rate gap. This revenue share structure would continue for the life
3
of the Prospect South TIF District, or until the $1.78 million is paid in full, whichever happens first.
While City and URA staff support the negotiated loan terms, the variation from current policy is duly
acknowledged. Several practices have been put into place since approval of the Capstone Redevelopment
Agreement to prevent the need for additional policy exceptions, including:
Tax increment estimates are based on Larimer County’s estimate of valuation that the Developer
provides to the URA; the estimates assume 1% appreciation over the life of the associated TIF
District.
Establishing a maximum percentage of tax increment that would be available to reimburse a project
that includes a combination of both reimbursable costs to the developer and URA financing costs.
Establishing a maximum tax increment contribution percentage of the total project cost.
These items, particularly the last two bullets, have been the topic of recent discussions between the City and
URA, and staff is scheduled to present more detail to the Finance Committee for further vetting at an
upcoming meeting.
Bob Overbeck asked why the City would make an exception to common practices in this case. Mike
Beckstead answered that the City has a commitment to the developer, and by making this exception, we
can honor that commitment. The Mayor agreed that Council would need to know how this exception
would affect City policies or practices. Is the City setting a precedent by making this exception? Mike
Beckstead answered that, going forward, the City may limit itself to a 75% commitment to ensure that
this situation never happened again.
Next Steps
Staff will work on drafting a policy for estimating TIF financing.
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Josh Birks, Economic Health Director; Tom Leeson, Redevelopment Program Manager
SUBJECT FOR DISCUSSION: Urban Renewal Authority Financial Management Policy -
Tax Increment Financing Parameters
EXECUTIVE SUMMARY:
PURPOSE: Present a proposed Financial Management Policy related to Tax Increment
Financing commitments to the URA Finance Committee and seek feedback.
The Fort Collins Urban Renewal Authority (URA) has been engaged in a process of continuous
improvement since the beginning of 2012. Recent improvements include:
Reorganization moving the management of the URA out from under the Finance
Department allowing for an independent review by Finance;
Changes to the method for estimating Tax Increment generated by a project, consistent
with the proven track record of the Downtown Development Authority’s approach;
Increased consultation with outside legal counsel relative to specific URA financing,
operations, and formation issues; and
Documentation of the Redevelopment Agreement negotiation, adoption, and execution
process.
The item presented to the URA Finance Committee today continues the process of improvement
by present a series of parameters to be used in developing the TIF commitments made to
individual projects by URA staff.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does the URA Finance Committee have questions about the proposed TIF
commitment parameters?
2. Does the URA Finance Committee believe that the proposed URA Financial
Management Policy needs to be reviewed by the entire URA Board during a work
session?
BACKGROUND/DISCUSSION
The attached proposed URA Financial Management Policy (Financial Polisy) addresses a
concern consistently voiced by URA Board members in the past two years. The concern relates
to over commitment of TIF dollars to individual redevelopment projects. This concerns stems
from recent experience where initial estimates of the TIF generated by a project exceeded the
initial actual TIF generated by the project.
One measure taken to address this concern has been adopting a method of estimating the TIF
anticipated from a project by using the approach employed by the DDA. This approach has a
long proven track record. In addition, estimates of TIF over the course of a Urban Renewal Plan
Area (Plan Area) life have been adjusted to assume no growth as an additional layer of
conservatism.
The proposed Financial Policy provides additional insulation against this concern. The Financial
Policy is intended to provide a set of operating norms for future TIF commitments to be used by
URA staff. The financing parameters presented represent a range of preferred methods. The
decision to use one method over another or to blend methods will be contingent upon a project’s
need for gap financing, the size of the particular project, the type of improvements supported by
the TIF and/or the public benefit provided by the project.
The attached proposed Financial Policy (See Attachment 1) provides parameters related to the
two primary approaches to providing TIF commitments: (a) lump sum payments (historically the
prevalent approach) and (b) pay over time. In addition, the parameters are defined by two of the
three previously outlined URA assistance purposes:
(a) Create – When existing conditions on a site make private market rate redevelopment
impractical (i.e., environmental contamination or insufficient infrastructure) so providing
TIF assistance removes financial barriers and helps to create a project that would not
otherwise happen, and
(b) Enhance – When conditions on a site are such that the likely market rate redevelopment
outcome is not consistent with goals for Targeted Redevelopment and Infill Areas. In
these cases, providing TIF assistance changes the scope of the project so that it conforms,
or exceeds identified objectives in City Plan.
Specific details of the proposed financing parameters are provided in the attached Financial
Policy (See Attachment 1).
ATTACHMENTS
1. Urban Renewal Financial Management Policy 1.1 – Tax Increment Financing Parameters
2. PowerPoint presentation
1
URA Financial Management Policy
1.1 Tax Increment Financing Parameters
URA Finance Committee Meeting
October 21, 2013
2
Direction Sought
• Does the URA Finance Committee have
questions about the proposed TIF commitment
parameters?
• Does the URA Finance Committee believe that
the proposed URA Financial Management Policy
needs to be reviewed by the entire URA Board
during a work session?
3
Recent Improvements
• Reorganization allowing for an independent
review by Finance
• Changes to the method for estimating Tax
Increment generated by a project
• Increased consultation with outside legal counsel
• Documentation of the Redevelopment Agreement
negotiation, adoption, and execution process
4
Proposed Parameters
URA Assistance Purpose: Create URA Assistance Purpose: Enhance
Element Lump Sum Payment Pay Over Time Lump Sum Payment Pay Over Time
Max % TIF
Commitment Available
to Support Project
75%* 90%** 75%* 75%
TIF Payment
Calculation
Fixed $ Commitment
(a) % of Actual Annual Tax
Increment collected
(b) Fixed Annual $
Commitment
Fixed $ Commitment
(a) % of Actual Annual
Tax Increment
collected
(b) Fix Annual $
Commitment
URA Cost of Capital
Borrowing Costs:
-City Interagency Loan
Policy
-Bank Loan Underwriting
Req.
-Other: Section 108
standards
N/A
Borrowing Costs:
-City Interagency Loan
Policy
-Bank Loan Underwriting
Req.
-Other: Section 108
standards
N/A
Developer Cost
Capital
N/A
-Negotiated
-Limited by the Max % TIF
Commitment Available
N/A
-Negotiated
-Limited by the Max % TIF
Commitment Available
% TIF Contribution
relative to Total
Project Cost
25% 15%
*Includes borrowing costs
**Max % TIF Commitment on Future Prospect South projects limited to 75%
5
Three Basic Approaches
• Lump Sum Payment (Historically Prevalent)
• Pay Over Time – Percent of TIF collected
• Pay Over Time – Fixed Dollar Amount
– In the first year if actual TIF comes in lower than the
Estimate of Value, the actual TIF reimbursed will be
prorated based on the actual TIF received.
– In the first year, if actual TIF comes in higher than the
Estimate of Value, the TIF reimbursed will be based on the
original Estimate of Value calculation.
– The actual TIF paid does not grow with inflation. Once
established in (b) above, it stays constant. Once
established by (a), it can grow to equal (b) but not exceed
(b).
6
General Procedures
• Use updated TIF estimation method
• Growth Estimate will be held at 0%
• Cash flows shall be based on absolute dollars and
NPV.
– The discount rate used shall equal the URA cost of
capital.
• The term of a City loan to the URA shall be based on
the estimated TIF stream.
– The term shall be minimized to the greatest extent
possible given the estimated cash flow.
• The minimum time to process the request for payment
from the development will be 90 calendar days.
7
Direction Sought
• Does the URA Finance Committee have
questions about the proposed TIF commitment
parameters?
• Does the URA Finance Committee believe that
the proposed URA Financial Management Policy
needs to be reviewed by the entire URA Board
during a work session?
URA Financial Management Policy 1.1
1.1 Tax Increment Financing
Issue Date: TBD
Version: 1
Issued by: Director
Economic Health
URA Financial Policy 1.1 – TIF Parameters
1.1-1
1.1 Guiding Principles
A. Retaining a percentage of the total tax increment collected guards against the risk
associated with rising interest rates, a diminution of assessed value, and other market
risks.
B. During volatile and/or rising rate environments, consideration will be given to reducing
the amount of TIF committed by the URA as a hedge against dramatic rate increases that
increase the cost of financing to the URA
Objective:
The following parameters are intended to provide a set of operating norms for financing URA
projects. The financing parameters represent a range of preferred methods. The decision to
utilize a particular financing method is contingent upon a project’s need for gap financing, the size
of a particular deal, the type of improvements supported by public financing and/or the public
benefit provided.
Applicability:
This policy applies to Fort Collins Urban Renewal Authority.
Authorized by:
Tax Increment Financing Parameters
URA Financial Policy 1.1 – TIF Parameters
1.1-2
1.2 TIF Parameters
URA Assistance Purpose: Create URA Assistance Purpose: Enhance
Element
Lump Sum
Payment
Pay Over Time
Lump Sum
Payment
Pay Over Time
Max % TIF
Commitment
Available to
Support Project
75%* 90%** 75%* 75%
TIF Payment
Calculation
Fixed $
Commitment
(a) % of Actual
Annual Tax
Increment
collected
(b) Fixed Annual
$ Commitment
Fixed $
Commitment
(a) % of Actual
Annual Tax
Increment
collected
(b) Fix Annual
$ Commitment
URA Cost of
Capital
Borrowing Costs:
-City Interagency
Loan Policy
-Bank Loan
Underwriting Req.
-Other: Section 108
standards
N/A
Borrowing Costs:
-City Interagency
Loan Policy
-Bank Loan
Underwriting Req.
-Other: Section 108
standards
N/A
Developer Cost
Capital
N/A
-Negotiated
-Limited by the Max
% TIF Commitment
Available
Tax Increment Financing Parameters
URA Financial Policy 1.1 – TIF Parameters
1.1-3
a. In the first year if actual TIF comes in lower than the Estimate of Value, the actual
TIF reimbursed will be prorated based on the actual TIF received.
b. In the first year, if actual TIF comes in higher than the Estimate of Value, the TIF
reimbursed will be based on the original Estimate of Value calculation.
c. The actual TIF paid does not grow with inflation. Once established in (b) above, it
stays constant. Once established by (a), it can grow to equal (b) but not exceed
(b).
Definitions
Create: When existing conditions on a site make private market rate redevelopment impractical (i.e.,
environmental contamination or insufficient infrastructure) so providing TIF assistance removes
financial barriers and helps to create a project that would not otherwise happen.
Enhance: When conditions on a site are such that the likely market rate redevelopment outcome is not
consistent with goals for Targeted Redevelopment and Infill Areas. In these cases, providing TIF
assistance changes the scope of a project so that it conforms, or exceeds identified objectives in City
Plan.
Getting Help
Please contact the Director of Economic Health with any questions at 970.221.6324.
N/A
-Negotiated
-Limited by the Max
% TIF Commitment
Available
% TIF
Contribution
relative to Total
Project Cost
25% 15%
*Includes borrowing costs
**Max % TIF Commitment on Future Prospect South projects limited to 75%
1.3 General Procedures:
A. The Larimer County Estimate of Value provided to the developer/property owner shall
be utilized for estimating future tax increment collections associated with a project. There
shall be no annual appreciation applied to the estimate.
B. Growth Estimate in cash flow analysis will be held at 0%
C. Cash flows shall be based on absolute dollars and NPV. The discount rate used shall equal
the URA cost of capital.
D. The term of a City loan to the URA shall be based on the estimated TIF stream. The term
shall be minimized to the greatest extent possible given the estimated cash flow.
E. The minimum time to process the request for payment from the development will be 90
calendar days.
F. In the pay over-time as a Fixed Annual $ Commitment as described in (b) above:
Returned
to City
Base &
Dedicated
Sales Tax
Oct 16th
EPIC,
Voter
.25% Choices 95
Capital Program,
Voter Approved
.25% BCC Natural
Areas and Parks,
Voter Approved
.25% BCC
Streets &
Transportation,
.25% Street
Maintenance,
Voter Approved
.25% BOB Community
Enhancments, Voter
Approved
.25% City
Natural Areas,
Voter Approved
.25%Pavement
Management,
Voter Approved
.25% Open Space, Yes,
Voter Approved
.85% KFCG