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Home My WebLink AboutAgenda - Mail Packet - 1/28/2014 - Council Finance Committee Agenda - January 27, 2014Council Finance Committee & URA Finance Committee Agenda Planning Calendar 2014 RVSD 1/23/14 kw Jan. 27 TOPIC TIME WHO CFC Utilities Building Financing 10 min M. Beckstead Parks Maintenance and Trail Funding 45 min M. Heffernan Transportation Maintenance Fee Discussion 30 min M. Beckstead Grocery Tax and Utility Rebates: 2013 report 30 min J. Ping-Small K. Wiggett URA Feb. 10 TOPIC TIME WHO CFC Sustainable Purchasing Update 30 min G. Paul Briefing on Forming a Parking Fund 15 min R. Hensley J. Voss TIF – Exempt Tax Districts Analysis 30 min M. Beckstead URA Union Place 30 min T. Leeson Mar. 17 TOPIC TIME WHO CFC PFA IGA Revenue Allocation Formula 30 min M. Beckstead T. Demint 2013 Financial Highlights 45 min J. Voss Policy Review – Reserve/Fund Balances 30 min J. Voss URA Apr. 21 TOPIC TIME WHO CFC General Policy Review 5 min J. Voss Fund Policies 5 min J. Voss Use Tax Rebate modification 30 min J. Ping-Small J. Birks URA Future Council Finance Committee Topics: • Fund Balance Update - Q2 • Capital Improvement Funds Policy Review • General Policy Review • Review Special Improvement Districts • Budget Policy Review 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 January 27, 2014 10:00 to noon CIC Room – City Hall Approval of the Minutes from the December 16, 2013 meeting 1. Utilities Building Financing Update 10 minutes M Beckstead 2. Parks Maintenance and Trail Funding 45 minutes M. Heffernan 3. Transportation Maintenance Fee Discussion 30 minutes M. Beckstead 4. Grocery Tax and Utility Rebates: 2013 Report 30 minutes J. Ping-Small K. Wiggett 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 12/16/13 10:00 to 12:00 CIC Room Council Attendees: Mayor Karen Weitkunat, Bob Overbeck, Ross Cunniff Staff: Darin Atteberry, Mike Beckstead, Josh Birks, Chris Donegon, Susie Gordon, Bruce Hendee, Tom Leeson, Mindy Pfleiger, Lucinda Smith, John Voss, Katie Wiggett Others: Dale Adamy, Kevin Jones (Chamber of Commerce) Approval of the Minutes Mayor Karen Weitkunat moved to approve the revised minutes from the October 21 meeting and the minutes from the November 18 meeting. Bob Overbeck seconded the motion. Minutes approved unanimously. Rescheduling January’s Meeting Mike Beckstead asked the Committee to consider moving the meeting scheduled for January 13 to January 27 due to a conflict on the 13th. Darin Atteberry said that he will not be able to make the January 27 meeting, however, the committee could move forward with the planned topics without him. Council Finance will meet at 10 a.m. on January 27, 2014. Road to Zero Waste – How Much Will it Cost? Bruce Hendee explained that Staff brought the “Road to Zero” project to council at the November 26 work session. Since then, Staff has worked with a consulting team to prepare a pro-forma that shows an annualized budget through 2025. Though still a work in progress, Staff brought the pro-forma and plan to the Finance Committee for feedback before the December 17 council meeting. Lucinda Smith noted that several ideas expressed in the Road to Zero Waste Plan have financial impacts to the community, including both new City programs that would be funded through BFO or a new fee and private sector projects such as a regional composting facility, regional construction and demolition (C&D) facility, and a glass sorting plant. At the work session, Council asked for a projection of cost for the Plan. The pro-forma projects cost using an 11-12 year implementation timeframe. It is based on charging a $.65/month fee to households and businesses ($7.80/year). While a fee is staff’s preferred mechanism, other possible funding sources are being looked at. 2 The capital costs for the necessary facilities are estimated to be:  Composting - $7-9 million  Construction and demolition (C&D) - $5-7 million  Reuse - $500,000 TOTAL: $12.5 - $16.5 million These investments, along with the rest of the policies and programs recommended in this Plan, would contribute significantly to recovering the $6.5 million value of materials from the Fort Collins community that gets buried in regional landfills every year. Lucinda explained that the alternative to these investments is spending $20-$80 million on a new landfill once the Larimer County landfill closes in approximately 12 to 15 years. In Summary, Lucinda noted that the estimated cost per household and businesses in the 11-12 years would be $69/year. This is a very low cost compared to the cost of not implementing the program. Darin Atteberry said that, from Council feedback, it is clear that we deeply support the “Road to Zero Waste” initiative. However, the “how to” still needs more work. Staff should be very direct about the fact that the Larimer County landfill will close in the near future. We also need to know what are local partners are doing in anticipation of future landfill needs. Finally, Darin emphasized the importance of communicating to the private sector that the City is not planning to complete with them; we appreciate their work and want to help them continue to grow. Lucinda said that one of staff’s major strategies is to create a regional plan. Also, the City’s major role in implementing “Zero Waste” will be to create interest and provide incentive—not to complete with services currently offered by private businesses. Bob Overbeck asked, since the City will always need a landfill, what will the City’s options be once Larimer’s is closed. Susie answered that there is another nearby landfill that the City could use. Larimer County could also create a new one. Bob asked if staff has contacted any secondary market people about the possibilities if we move forward with this plan. Susie answered that they have not yet, but they know who the major players are. The Mayor asked Staff to get more concrete numbers on what the cost of a new County landfill would be to the City and what the cost would be to existing private companies and give Council a comparison of current costs to the Plan’s cost. The Mayor also asked Staff to highlight a 2020 goal; the current plan goes out into the 2030s. It would help to see an inter-term goal. Lucinda said that the Plan would be entirely implemented by 2020, making a 2020 goal easy to outline. Ross Cunniff asked that Staff give a clearer picture of how this plan will affect the individual in Fort Collins. If the City or County has to build a new landfill, some of that cost will probably be passed off to the individual through such things as curbside pickup fees. There is no doubt of the plan’s benefit to the environment, but we still need to see the cost. Darin asked Staff to work on creating a graphic for the data that the average citizen can relate to, a graphic that can communicate at a glance the benefit and cost of the plan. Bob Overbeck noted that it would also be informative to look at how much waste was added to the landfill due to recent natural disasters. 3 Audit Findings and Recommendations: Status of Corrective Actions John Voss said that in McGladrey’s July 2013 Report to City Council, McGladrey identified a few deficiencies in internal control and compliance. Staff has since prepared responses to all items listed in each of the reports. Only two items remain unresolved: 1. Administering Federal Awards – this is related to reporting in the CDBG program. The City agrees with McGladrey’s recommendation. Discussions are in process between HUD and the Sustainability Service Area Director on how to resolve this. Though not yet completely resolved, Staff anticipates its complete resolve before the next audit. 2. Community Development Block Grant – The City charges payroll costs to the grant based on estimated allocations determined during the budget process—OMB Circular A-87 requires at a minimum that the City perform a budget to actual comparison on an annual basis to ensure actual time spent working on the grant. The City has not been performing the comparison. Staff agrees with the recommendation, but is still considering how to do the time reporting/budget comparison. Ross asked if Staff had an estimate time on when they would have a process for payroll time tracking. John Voss answered that it will definitely be resolved in 2014. Ross also noted that Staff has done a lot of work in grants compliance. Mike agreed, explaining that in 2012, Staff rewrote the Procurement Manual to ensure compliance with Federal purchases. Staff also filled a Grants Compliance position in April 2013. The Grants Compliance Coordinator has created a Policy and Process for grants, worked with ELT and SIT, and has created several trainings for Staff in 2014. The process for getting grants has been centralized and has become very prescriptive. Financial Management Policy Overview Mike Beckstead explained that Staff has been reengineering our Finance policies to improve transparency, to ensure ongoing fiscal stability and consistency, and to provide guidance and direction in decision making. Staff has prepared a webpage on CityNet for City employees to have easy access to the policies and procedures listed with their last modified date. The policies are divided into “Financial Management Policies – Approved by City Council,” “URA Financial Management Policies – Approved by City Council/URA Board,” and “Financial Management Policies – Approved by City Manager or CFO.” Mike said that the Finance Committee will review one or two policies a quarter until all have been updated. Then each will be reviewed every 3 years in a cycle. Ross asked that the information on the internal mock up webpage be put on fcgov.com so it can be open to the public. Staff will have this information put on the external webpage. 1 Utility Funds – Available Cash Preliminary Estimated 2013 Cash & Investments 2012 Available Working Capital 2013 Available Working Capital Project Share Existing Project Budget Needed Funding Light & Power $ 48.9 $ 15.9 $ 25.7 $ 10.0 $ 4.6 $ 5.4 Water 66.2 4.5 10.2 5.0 - 5.0 Wastewater 33.2 11.5 17.6 2.5 - 2.5 Storm Drainage 20.9 2.5 4.7 2.5 - 2.5 $ 169.3 $ 34.4 $ 58.2 $ 20.0 $ 4.6 $ 15.4 in millions January 27, 2014 COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Marty Heffernan, Director of Community Services SUBJECT FOR DISCUSSION Funding for Trails and New Park Maintenance EXECUTIVE SUMMARY Council consideration of a new capital expansion fee for trails was postponed in favor of exploring various trail funding options, including redirecting all Conservation Trust (Lottery) funding to trail construction. A significant portion of Conservation Trust funding has been used for park and trail maintenance since 2001. Funding to maintain our parks has primarily been provided by the General Fund. Information is presented on upcoming new park development, and maintenance funding. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Is Council interested in exploring additional funding for new trail development? 2. Does Council have a preference for one or more of the trail funding options presented? 3. Does Council have concerns with current plans to fund new park maintenance? BACKGROUND/DISCUSSION TRAILS The City has 34 miles of paved trails and 23 underpasses with a value of $39 million. Current plans add 31 miles of new trail and 10 underpasses at a cost of ~$23 million. Funding to build the trail system has come primarily from Conservation Trust (Lottery) proceeds pursuant to Council Resolution 83-173. In 2001, due to budget shortfalls, a significant portion of ConTrust funds were redirected to park and trail maintenance. Currently, $735,000 of ConTrust funds are used for maintenance. ConTrust has provided ~$1.4 million annually in 2012 and 2013 with $665,000 going to trail development. Natural Areas has provided $350,000 for trail development since 2003 but this funding may not be available after 2014 due to Natural Areas funding needs. The City has about $6 million for trail development in 2014 and 2015. This includes reserves, grants, and ConTrust and Natural Areas funding for this time period. All of this funding will be expended in 2014 and 2015 on six major trail projects. Most of the projects have been in the planning stages for several years with the timing of construction tied to grants, approvals from the Railroad or coordination with other projects. Consequently, in 2016 the City will have 26 January 27, 2014 miles of trail to build at a cost of over $17 million with $665,000 in annual funding. This means it will take 27 years (2014 to 2040) to complete the trail system unless additional funding for trails is provided. One option to increase trail funding is to redirect all ConTrust funding to trail development. This provides ~$1.4 million annually and builds out the trail system in 14 years. It requires the replacement of $735,000 for park and trail maintenance annually. Replacement funds could be provided by a new Park Maintenance Fee of ~$1 per month. The fee could be assessed through the Utility billing system. Funding could also be provided by the General Fund. Another trail funding option is the creation of a capital expansion fee for trails. We have capital expansion fees for neighborhood and community parks and for other capital infrastructure. The fee is a one-time assessment on new residential dwellings of ~$700. It is anticipated to provide about $500,000 annually, depending on the pace of residential development. New trails are needed to serve new residential developments, so this is a method for growth to pay for infrastructure needed to serve our growing population. Funding from the fee ($500,000) coupled with current ConTrust trail funding ($665,000) would provide $1.165 million annually for trail development, which builds out the trail system in 17 years (2014 to 2030). Additional trail funding could be provided by continuing Natural Area funding for trails ($350,000) if the County quarter cent tax for open space is extended. The County tax will end in 2018 unless it is continued by the voters. The County is planning to present this question to the voters in November of this year. If the County tax is not extended, Natural Areas will need their trail funding for operations. Even if the County tax is extended, Natural Areas could have difficulty building infrastructure for new natural areas it may acquire if the contribution to trails continues. Nearly all of the County funding is used for operations and 80% of the City quarter cent tax for Natural Areas must be used for land acquisition or restoration. Providing one-time funding to build out of the trail system is another option. Dedicating 5 to 10 million dollars to trail development would allow trail construction to continue at a rapid pace. With $5 million and current ConTrust funding, the system could be completed in 20 years instead of 27. With $10 million the trail system could be completed in 13 years. PARK MAINTENANCE Funding to build our park system is provided by capital expansion fees for neighborhood and community parks. The City builds a neighborhood park to serve a square mile of residential development and a community park to serve a four square mile area. Our parks are well distributed throughout the community. We have 44 neighborhood parks and six community parks comprising 875 acres of developed parkland. Funding to maintain our parks comes primarily from the General Fund ($3,661,521). General Fund support for park maintenance has not increased since 2006. Park maintenance is also funded with KFCG dollars ($725,847), with fee revenue from rentals ($304,110) and with ConTrust funding ($573,924). Trails are also maintained with ConTrust funds ($161,076) so ConTrust funding to maintain both parks and trails is $735,000. January 27, 2014 Park capital expansion fees will fund construction of 10 new neighborhood parks and 3 new community parks over the next 15 years as the community grows. Maintenance funding for the next 4 neighborhood parks, which will be developed between 2016 and 2019, will be provided by KFCG. Average annual maintenance costs for these neighborhood parks is ~$35,000 per park. Park maintenance is an ongoing expense so if KFCG sunsets, an alternative funding source will be needed. The Southeast Community Park, located south of Fossil Ridge H.S., is being designed now with construction scheduled for 2015/2016. Ongoing maintenance funding for this park (~$370,000 annually) will be needed beginning in 2017. One-time start-up funding for tools and equipment will be needed in 2016. Staff will be requesting the start-up funding from the General Fund in the 2015/2016 budget process. New parks are provided to serve our growing population and a larger population should produce additional General Fund revenue. An alternative funding source to maintain the Southeast Community Park and future new parks is a park maintenance fee. ATTACHMENTS 1. PowerPoint Presentation 1 FUNDING TRAILS AND NEW PARK MAINTENANCE 2 BUILDING OUR TRAIL SYSTEM 3 BUILDING OUR TRAIL SYSTEM • The City has 34 miles of paved trails and 23 underpasses with a value of $39 million. • Current plans add 31 miles of new trail and 10 underpasses at a cost of ~$23 million. • Funding to build the trail system has come primarily from Conservation Trust (Lottery) proceeds, pursuant to Council Resolution 83-173. 4 BUILDING OUR TRAIL SYSTEM • In 2001, due to budget shortfalls, a significant portion of ConTrust funds were redirected to park and trail maintenance. Currently $735,000 of ConTrust funds are used for maintenance. • ConTrust has provided ~$1.4 million annually in 2012 and 2013 with $665,000 going to trail development. • To help offset the loss of ConTrust funds, Natural Areas (NA) has contributed ~$350,000 to trail development since 2003. This funding may not be available after 2014 due to NA funding needs. 5 BUILDING OUR TRAIL SYSTEM All trail funding (~$6 million), which includes reserves, will be expended by 2015. Projects include: • Shields Street Trail to Trilby ($1 million Xcel funds) • Fossil Creek Trail--Trilby east of Lemay ($900,000) • Poudre Trail--Lemay/Mulberry relocation ($900,000) • Poudre Trail at I-25 ($1.5 million) • Fossil Creek Trail--College to Shields ($1.5 million) • Poudre Trail--spur to Lincoln Jr. High ($350,000) In 2016 we will have over 26 miles of trail to build at a cost of over $17 million with $665,000 in annual funding = 27 year build out 6 TRAIL FUNDING OPTIONS 7 OPTION 1: Redirect all Conservation Trust Funding to Trail Development • Provides ~$1.4 million annually • Builds out trail system in 14 years (2014 to 2027) • Requires replacement of $735,000 for park and trail maintenance annually • Replacement funds could be provided by a new park maintenance fee of ~$1 per month or by the General Fund 8 OPTION 2: Create a Trail Capital Expansion Fee • Similar to our park capital expansion fees • One-time assessment (~$700) on new residential dwellings • Provides ~$500,000 annually • With existing ConTrust funding ($665,000) provides $1.165 million for trail development • Builds out trail system in 17 years (2014 to 2030) 9 OPTION 3: Continue Natural Areas Funding for Trails • Only affordable if the County ¼ cent for Natural Areas is extended • Provides $350,000 annually • With existing ConTrust funding provides $1.015 million for trail development • Builds out trail system in 19 years • If combined with a trail impact fee (Option 2) builds out trail system in 13 years • Could delay infrastructure improvements (parking lots, restrooms) for newly acquired natural areas 10 OPTION 4: One-Time Trail Funding • Dedicate one-time funding ($5 to $10 million) to trail development • Possible funding sources are BOB 2 or reserves • Current BOB 2 trail offer is for $2 million but could be increased • With current ConTrust funding builds out trail system in 13 to 20 years 11 MAINTAINING NEW PARKS 12 MAINTAINING NEW PARKS • Funding to build our park system is provided by capital expansion fees for neighborhood and community parks • The City builds a neighborhood park for every square mile of residential development and a community park to serve every four square miles • We have 44 neighborhood parks and six community parks comprising 875 acres of developed parks 13 MAINTAINING NEW PARKS Funding to maintain our parks comes primarily from the General Fund supplemented by KFCG, Conservation Trust and fee revenue. Funding for 2013: • General Fund $3,661,521* • KFCG 725,847 • ConTrust 573,924** • Fees 304,110 • Total $5,265,402 *Same amount of funding provided since 2006 **$161,076 of ConTrust is used for trail maintenance 14 MAINTAINING NEW PARKS • Parks capital expansion fees will fund construction of ten (10) new neighborhood parks and three (3) new community parks over the next 15 years • Maintenance funding for the next four (4) neighborhood parks (which will be developed between 2016 and 2019) will be provided by KFCG. Annual maintenance cost for these neighborhood parks averages $35,000 per park • Park maintenance is an ongoing expense, so if KFCG sunsets, an alternative funding source will be needed 15 MAINTAINING NEW PARKS • The SE Community Park (located south of Fossil Ridge H.S.) is being designed now with construction scheduled for 2015/2016. • Ongoing maintenance funding for this park (~$370,000) will be needed beginning in 2017 with equipment funding needed in 2016. • Additional General Fund money for new park maintenance will not be needed until 2020, assuming KFCG funding continues COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Jessica Ping-Small, Revenue and Project Manager Mike Beckstead, Chief Financial Officer Mark Jackson, PDT Deputy Director SUBJECT FOR DISCUSSION: Street Maintenance Fee EXECUTIVE SUMMARY Street maintenance is currently funded primarily from 3 sources: • General fund contributions • KFCG sales tax • A Designated ¼ cent sales tax that will sunset December 31, 2015 A Street Maintenance Fee (SMF) was discussed by Council Finance at the October 21, 2013 and November 18, 2013 meetings. At the request of Council, the fee is being presented for further discussion. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Council direction on the preferred alternative to support street maintenance a) Ask voters to continue the 1/4 cent tax prior to its expiration in 2015 b) Implement a Street Maintenance Fee BACKGROUND/DISCUSSION Please refer to attachment #2 from the November 18, 2013 Council Finance meeting which includes a complete synopsis of the proposed street maintenance fee. ATTACHMENTS 1) Power Point Presentation 2) CFC Street Maintenance AIS 11-18-13 1 Street Maintenance Fee Council Finance Committee January 27, 2014 2 Recap • Fee Analysis is complete • Item presented/discussed at Council Finance October and November of 2013 • Based on discussion, staff’s understanding was to move forward with the tax renewal 3 Street Maintenance Revenue KFCG made it possible to maintain a LOS B or Good. Without the ¼ cent or KFCG, street maintenance would fall behind quickly. $2.3 $2.7 $3.5 $3.3 $1.6 $1.6 $1.9 $1.9 $1.9 $1.9 $1.9 $1.9 $5.6 $5.8 $5.5 $5.2 $5.6 $5.8 $6.6 $6.6 $6.7 $6.9 $6.2 $7.4 $7.4 $7.5 $7.7 $7.9 $8.0 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017* Funding in Millions of Dollars SMP Funding by Source Other Funding 1/4 Cent Street Maintenance Tax Keep Fort Collins Great (KFCG) *Projected 4 Street Maintenance Fee – Examples Use Annual Fee Manufacturing $2,527 Manufacturing $32,768 Old Town Restaurant $458 Large Retail $22,691 Fast Food $10,334 Grocery Store $33,874 Office $135 Residential $36 High traffic retail and industrial land uses will see the most impact. 5 Street Maintenance Fee A SMF is a stable revenue source yet impactful to the business community. Tax Fee Pros Pros Perception of Accountability Reliable – No expiration Everyone pays – including visitors Fee is paid by trip generators Cons Cons It expires – (could change that) Perception that businesses carry the burden Regressive Perception that visitors get a free pass Very impactful to small businesses 6 Question For Council • Which option does Council support as the preferred alternative for street maintenance funding? Option 1 - Continue the 1/4 cent tax Option 2 - Implement a Street Maintenance Fee COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Jessica Ping-Small, Revenue and Project Manager Mike Beckstead, Chief Financial Officer Mark Jackson, PDT Deputy Director SUBJECT FOR DISCUSSION: Street Maintenance Fee EXECUTIVE SUMMARY Street maintenance is currently funded primarily from 3 sources: • General fund contributions • KFCG sales tax • A Designated ¼ cent sales tax that will sunset December 31, 2015 Although the ¼ cent sales tax initiatives have been supported multiple times by citizens since originally established in 1990, 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 to promote revenue diversification and provide more certainty in the revenue used to support a basic service. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Council direction on the preferred alternative to support street maintenance a) Ask voters to continue the 1/4 cent tax prior to its expiration in 2015 b) Implement a Street Maintenance Fee BACKGROUND/DISCUSSION Problem Statement Fort Collins has historically funded Street Maintenance services primarily through a renewable, ten year quarter-cent sales tax. These revenues, combined with some General Fund and now Keep Fort Collins Great sales tax dollars, together provide the services and materials needed to maintain our street system at a “Good” condition, level of service B (LOS B). Proponents of this model argue that the ten year sunset clause and voter-required renewal builds accountability into the service, and that the community has never yet failed to renew the tax. Inherent in this funding model however, is the risk that a tax is not renewed by the voters, thus placing critical core community services at risk. The street system is the City’s largest asset investment, and failure to maintain the investment will cost many millions extra in repair and rebuild expenses, as well as affect travel, commerce and access for the community. Street Maintenance Revenue Street Maintenance is primarily funded by sales tax. The designated ¼ cent sales tax and Keep Fort Collins Great (KFCG) contribute the majority of the funding. The general fund also contributes a portion of the revenue to street maintenance. Current Funding Sources: A portion of the rationale behind the Keep Fort Collins Great sales tax initiative was to fund critical services such as street maintenance. The current revenue base, including both the designated ¼ cent and KFCG, allows the City to maintain our streets to meet citizen expectations. Street Maintenance Program Summary The Street Maintenance Program (SMP) provides management of the overall street network and maintains safe and accessible street pavement, sidewalks, curbs and gutters. Proactive street maintenance will save millions of dollars over time Maintenance treatments implemented with the SMP efforts include: • Surface treatments (a thin surface membrane paired with crack sealing to seal out water and prevent oxidation; performed on roads in Good condition) • Overlays (new asphalt surface intended to correct ride and seal the road; performed on roads in Fair condition) • Reconstruction (removal of the old pavement down to the soil and replace with new asphalt; performed on roads in Poor and Very Poor condition) All maintenance treatments include repairs of existing curb, gutter, sidewalks and pedestrian access ramps and cross pans. SMP budgets are not used to add missing sidewalks. $2.3 $2.7 $3.5 $3.3 $1.6 $1.6 $1.9 $1.9 $1.9 $1.9 $1.9 $1.9 $5.6 $5.8 $5.5 $5.2 $5.6 $5.8 $6.6 $6.6 $6.7 $6.9 $6.2 $7.4 $7.4 $7.5 $7.7 $7.9 $8.0 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 2006 2007 2008 2009 2010 2011 2012 2013* 2014* 2015* 2016* 2017* Funding in Millions of Dollars SMP Funding by Source Other Funding 1/4 Cent Street Maintenance Tax Keep Fort Collins Great (KFCG) *Projected Street Maintenance Program Assessment The Street Maintenance Program uses state of the art Deighton software and standardized pavement conditions collected by third party contractors to project the future condition of the road system. The system includes thirteen million square yards of pavement with a replacement value of a half billion dollars. The computer program recommends potential treatment strategies for the road system and then prepares a cost/benefit evaluation to optimize the individual treatments for a given budget scenario. These budget options produce a projected average pavement condition for the system over time. The City of Fort Collins has set a goal to maintain the average condition as Good or LOS B. Our current budget is sufficient to maintain this goal. Street Maintenance Costs: This graphic has been used to show the importance of investing early in the ongoing maintenance as opposed to deferring maintenance until much more costly repairs or even road replacement is necessary. Strategic, prioritized maintenance of the street system is good stewardship of public resources and maximizes the usable life of our roads. $6-$8 HERE 2012 Pavement Conditions The above graph shows the condition distribution by road class and for the entire roadway system. The improved Pavement Conditions Index for arterial roads reflects our commitment on those roads for the past two years. Miles of Maintenance Funded by ¼ Cent Sales Tax This graphic shows the relationship between the ¼ cent Street Maintenance Program sales tax and the program’s overall ability to maintain the City street network. Prior to the passage of KFCG, the program was almost entirely dependent on the ¼ cent tax. In 2013, the street maintenance program performed maintenance on 138 total lane miles. The breakdown is as follows: arterial roadways -55.3, local roads 82.7. If the ¼ cent sales tax is not renewed, the street maintenance program will be reduced to 81 lane miles (41% reduction). There will also be an increase in street deficiencies including pot holes and a reduced LOS. Every road performs differently based on the soils, traffic loading and environmental conditions. The expected life cycle of a properly designed road is 20 years. Roads constructed prior to these standards can vary widely. Routine maintenance of roads in good to fair condition can extend the life of the road to 40 years. The maintenance cycle SMP currently uses is 10 to 12 years. We are currently addressing 138 lane miles of road or approximately 38 centerline miles. Maintaining the current funding level will ensure the following: • Overall pavement conditions will be maintained at a LOS B • Potholes, crack sealing and other ongoing street maintenance will be maintained at current levels • Ongoing systematic street maintenance results in safer travel for cars, buses, bikes and pedestrians and lower vehicle repair costs to citizens Street Maintenance Fee Summary 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 therefore the ordinance did not pass second reading. Fee 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 as an alternative to asking voters to renew the ¼ cent sales tax approved by voters in 2005 that expires at the end of 2015. The fee would be assessed based on a flat fee for residential residents and on trip generation non- residential properties. The fee would 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 the “Trip Generation Methodology.” This methodology estimates 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: The fee structure table is the output of the trip generation methodology. Staff took the estimated revenue needed and applied a trip generation formula by land use to generate the fee. The table shows the fee per acre by land use, the total revenue by land use and the percent that the land use contributes to the total. From a business perspective, high traffic retail and retail which generate the most trips will pay a higher percentage of the overall fee. Residential users are also assessed a fee based on trip generation which equates to an estimated $2.99 per month per unit. The table also includes estimates for consideration if institutional organizations are exempted from the SMF and the potential for a rebate. If rebates for low income citizens and a waiver of 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 institutional organizations were included in the fee structure, the general fund would need to offset the lost revenue of approximately $1M. This table illustrates the street maintenance fee using average lot sizes. For example, a fast food restaurant would incur an annual fee of $10,300 whereas a restaurant in Old Town would have an annual fee of $460. As the table illustrates, the fee is more impactful for businesses that 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 generate more traffic and less so for low traffic businesses. It is logical to assume that the business owners will pass the fee to their customers through their cost of goods or services. Pros and Cons Analysis Tax Fee Pros Pros Perception of Accountability Reliable – No expiration Everyone pays – including visitors Fee is paid by trip generators Cons Cons It expires – (could change that) Perception that businesses carry the burden Regressive Perception that visitors get a free pass Very impactful to small businesses General Fund fee waiver back fill possibility Both the tax and fee have strengths and weaknesses. The primary weakness of the current ¼ cent tax is that it expires which makes it unstable. The fee has the strength of stability but it can be very impactful to the business community. Revenue Policy Analysis In addition to the pros and cons, staff analyzed the tax vs. fee as they relate to the City’s Revenue Principles which are scheduled for final adoption by City Council on December 3, 2013. The principles are part of an effort to create a foundation for staff and City Council to make revenue decisions. The following table is provided as a visual for how the fee vs. tax align with the principles. Principle Fee Expiring Tax Permanent Tax Maintain a diverse revenue base X Maintain a stable revenue base X X Cultivate revenue sources that are equitable among all economic levels X As appropriate, the burden of the cost of services will be fairly placed on those using the services. X Generate adequate revenue to maintain service levels X X X Maintain healthy reserves. N/A N/A N/A Additional Considerations: If City Council chooses to continue the SMF fee discussion, the following items will need additional consideration: • Significant public outreach/education o A full public engagement process will need to occur to engage stakeholders and educate citizens • Exemption for Institutional (churches, schools, government) o The SMF revenue from institutions is estimated at $760k, if an institutional exemption is considered, the revenue would need to be made up – most likely from the General Fund. • Utility billing fee and actual retail space on bill • Rebate Program o A rebate program, similar to the sales tax on food and utility rebates would need to be considered for low income residents • Delinquency Issues o Because the SMF would be placed on the monthly utility bill, additional discussions will need to occur regarding collections Triple Bottom Line Analysis Summary: Staff completed a triple bottom line analysis of the fee vs. tax discussion. Included is a summary of the discussion. The full analysis is included as an attachment. • Solutions Needed; there is a clear and present need for a tax or fee for street maintenance. o The current tax sunsets in 2015 and is not adequate to meet public expectations o The physical need for maintenance has grown past current revenue streams o These two problems are additive • Primary flaws identified; o Fee fatigue has been identified as a substantive community concern o Construction fatigue from 2012/2013 may frustrate a public if funding is raised for more maintenance • Stakeholder engagement; critical and difficult o Business needs and public expectations may be in direct conflict o Both a fee and tax will likely result in passing direct or indirect costs to the public o Visitors and tourists are stakeholders that may be difficult to engage Conclusions Maintaining the street system is a critical component of the City’s infrastructure. For the City to maintain a “Good” LOS B pavement rating, the current revenue levels need to be continued. Sales tax has been a consistent and reliable funding source for the past few decades; however, sales tax as a funding source is not without risks. Sales tax is variable and the expiring model of funding street maintenance, a core service, puts the ongoing funding in jeopardy. A street maintenance fee (SMF), although a stable and ongoing alternative funding method for a core service, can be negatively impactful to certain industries and does not directly account for the impact of visitors to our street system. Next Steps The fee will be discussed at the City Council Work Session on November 26, 2013. ATTACHMENTS 1) Power Point Presentation 2) Benchmark Data 3) Triple Bottom Line Analysis and Synthesis January 27, 2014 COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Jessica Ping-Small, Revenue and Project Manager Katie Wiggett, Finance Administrative Assistant SUBJECT FOR DISCUSSION Sales Tax on Food, Property Tax/Rental and Utility Rebate Program Update EXECUTIVE SUMMARY The Finance Department currently administers three rebate programs for low income, senior and disabled residents. The rebates are for Property Tax, Utilities and Sales Tax on Food which were created in 1972, 1975 and 1985 respectively. In May of 2012, City Council approved changes to the ordinances which improved consistency among the rebates, allowed an increased number of residents to qualify for the Property Tax and Utility Rebate and simplified the process for applicants. The Sales Tax on Food Rebate was also updated from $40 to $54. The Rebate amount was updated to $55 per person in 2013 and will continue to be adjusted annually according to the Denver-Boulder-Greeley Consumer Price Index for Urban Consumers. The number or rebates issued in 2012 increased 13% over 2011. Staff continued to increase outreach efforts which resulted in a 2% increase in 2013. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED None, update to the Council Finance Committee. BACKGROUND/DISCUSSION History Property Tax Rebate • Established in 1972 for low income senior (65 and over) residents • Expanded in 1980 to include low income disabled residents • Eligible property owners are entitled to a refund of all City property taxes paid in the preceding year • Eligible renters are entitled to a rebate of 1.44% of rental payments for property on which City property taxes were paid • The 1.44% rebate for renters was the percentage of total rent at the time that resulted in a rebate amount equal to that of property owners which was calculated at $33.33 in 1972. • Income eligibility level updated in 2012 to 50% of the area median income (AMI) as reported by HUD on an annual basis January 27, 2014 Utility Rebate • Established in 1975 for low income senior residents • Program applies to applicants who hold an account with the City of Fort Collins utilities • Amount of refund is based on average monthly residential consumption of water, wastewater, stormwater and electric service updated annually • Income eligibility level updated in 2012 to 50% of the area median income (AMI) as reported by HUD on an annual basis Sales Tax on Food Rebate • Established in 1984 and rebate amount set at $25 per person in eligible household • Income eligibility level updated in 2005 to 50% of the area median income (AMI) as reported by HUD on an annual basis • In 2005 per Council direction, staff researched and recommended changes to the income level for the Sales Tax on Food Rebate only. The goal was to increase the number of households that qualified • Rebate amount updated to $55 per person in 2013 2013 Rebate Summary Total Applications Received 1347 Total Qualified Applications Processed 1304 Average Rebate Amount $156 Total Food Tax Rebate $144,265 Total Property Tax/Rental Rebate 23,264 Total Utility Rebate 35,743 Total Rebate for 2013 $203,272 Year # of Rebates Issued Total Rebate Amount Average Rebate Amount 2013 1304 $203,2723 $156 2012 1273 $223,621 $176 2011 1126 $138,654 $123 2010 1101 $142,510 $122 2009 1284 $157,146 $122 The number or rebates issued in 2012 increased 13% over 2011. Improvements to the program and an increased level of outreach were key factors to the rise in participation. In addition to the increased program consistency, staff worked to simplify the application and make it more dynamic. In 2013, a continued expansion in outreach efforts grew the program by an additional 2%. January 27, 2014 2013 Outreach • Translated the application into Spanish to help reach a larger demographic and made a telephone translating service available to applicants • Distributed over 2,500 applications to low income PSD elementary schools in their Back- to-School packets • Articles in the Coloradoan, in City News and a News Bulletin on Cable 14 • Partnerships with local agencies such as the Larimer Food Bank, Volunteers of America, Larimer Health and Human Services, etc. • Provided on-site help at the DMA and Senior Center • Application forms distributed to the Senior Center, Aztlan Center, Utility Billing Office and the Workforce Center as well as to several senior living apartment clubhouses • Provided applications and advertising posters to the Villages low-income apartments • Applications mailed out to all applicants from the prior year • City webpage with downloadable application in English and Spanish • Information in the Senior Voice and available through United Way’s 211 Goals for 2014 • Continue with proven outreach strategies • Look for more effective ways to partner with PSD for targeted outreach • Develop strategy for better reaching Spanish-speaking community • Increase on-site application assistance at low income housing • Increased partnership with non-profits to advertise the program • Partner with the Social Sustainability Service Area to increase community outreach ATTACHMENTS Power Point Presentation 1 2013 Rebate Program Update Sales Tax on Food Property Tax / Rental Utilities Council Finance Committee January 27, 2014 2 Program Overview Sales Tax on Food Rebate: • Established in 1984 – Rebate to lower income citizens • $55 per eligible household member –updated annually Property Tax/Rental Rebate: • Established in 1972 – Rebate to senior and disabled lower income citizens • City portion of applicants property tax levy OR • 1.44% of rental payment for year Utility Rebate: • Established in 1975 - Rebate to senior and disabled lower income citizens • Based on billing data for average monthly consumption for water, wastewater, stormwater and electric service 3 Program Qualifications All Programs: • Fort Collins Residency – prior year up to application date • US Citizenship • Proof of ID required for all household members 18 years old or older Sales Tax on Food Rebate: • Income – 50% of the Local Area Median Income per household size Property Tax / Rental Rebate: • 65 or over or Disabled • Income – 50% of the Local Area Median Income per household size Utility Rebate: • 65 or over or Disabled • Customer of Fort Collins utility • Income – 50% of the Local Area Median Income per household size 4 2013 Rebate Program Improvements • Revamped application to be more streamlined and dynamic • Application translated into Spanish and translating service made available to applicants • Partnered with PSD during “Back to School” Program • Partnered with the Villages to promote program • Increased on-site application assistance Improvements Aimed to Increase Awareness and Participation 5 2013 Rebate Summary Total Applications Received 1347 Total Qualified Applications Processed 1304 Average Rebate Per Application $156 Total Food Tax Rebate $144,265 Total Property Tax/Rent $23,264 Total Utility Rebate $35,743 Total Rebate For 2013 $203,272 Year # Qualified Applicants Total Rebate Amt Average Rebate Amt 2012 1273 $223,621 $176 2011 1126 $138,654 $123 2010 1101 $142,510 $129 2009 1284 $157,146 $122 Rebates issued in 2013 increased 2% over 2012 6 2013 Advertising and Promotion • Article in the Coloradoan and Bulletin on Chanel 14 • Partnership with the Villages Apartment Buildings, Volunteers of America and other Senior Housing • Webpage with downloadable application on City Website in English and Spanish • Application forms distributed to the Senior Center, Aztlan Center, Utility Billing office, and the Workforce Center • Information published in local newsletters such as Aspen Club and Senior Voice 7 2013 Advertising and Promotion • Partnership with local agencies to assist in distributing information: • Larimer Food Bank • Volunteers of America • Homelessness Prevention • Workforce Center • Larimer Health and Human Services Department • Provided on site help at the DMA Plaza and Senior Center • Distributed application at six elementary schools in August – over 2,500 applications distributed PSD outreach and partnering with low-income and Senior housing were effective outreach methods in 2013. 8 2013 Recap and Goals for 2014 • Outcome of 2013 Program Improvements: • Title VI Compliance through translation services • Increased awareness and participation by partnering agencies and the public • 2% increase in rebates issued • Goals for 2014: • Continue with proven outreach strategies • Look for more effective ways to partner with PSD for targeted outreach • Develop strategy for better reaching Spanish-speaking community • Increase on-site application assistance at low income housing • Increased partnership with non-profits to advertise the program