Loading...
HomeMy WebLinkAboutAgenda - Mail Packet - 2/10/2015 - Council Finance Committee & Ura Finance Committee Agenda - February 9, 2015Council Finance Committee & URA Finance Committee Agenda Planning Calendar 2015 RVSD 02.05.15 tg Feb. 9 TOPIC TIME WHO CFC Police Regional Training Facility 45 min J. Hutto M. Beckstead Climate Action Plan Financing 30 min J. Birks Woodward 2014 Rebates a. Woodward Rebate Review b. Possible Executive Session on Woodward Rebates 20 min J. Ping-Small Financial Comparative Data 15 min M. Beckstead URA Mar. 16 TOPIC TIME WHO CFC 2014 Investment Returns & Investment Policy 15 min H. Hall Utility Billing Transparency 30 min L. Rosenkowski Utility Plant Investment Fee 30 min L. Smith URA Annual Reappropriation Ordinance 15 min M. Beckstead Apr. 20 TOPIC TIME WHO CFC GERP Update John Voss URA May 18 TOPIC TIME WHO CFC Economic Health Policy 30 min J. Voss J. Birks URA 2014 URA Operational & Financial Update 30 min J. Birks T. Leeson Future Council Finance Committee Topics: • Review Special Improvement Districts • Auditors Report 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 February 9, 2015 10:00 a.m. to Noon CIC Room – City Hall Approval of the Minutes from the January 12, 2015 meeting 1. Police Regional Training Facility 45 minutes John Hutto Mike Beckstead 2. Climate Action Plan Financing 30 minutes Josh Birks 3. Woodward 2014 Rebates 20 minutes Jessica Ping-Small a. Woodward Rebate Review b. Possible Executive Session on Woodward Rebates 4. Financial Comparative Data 15 minutes Mike Beckstead Finance Administration 215 N. Mason Street 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6788 970.221.6782 - fax fcgov.com Council Audit & Finance Committee Minutes 01/12/15 10:00 a.m. to 12:00 Noon CIC Room Council Attendees: Ross Cunniff, Bob Overbeck, Mayor Karen Weitkunat Staff: Darin Atteberry, Mike Beckstead, Josh Birks, Tauny Gilmore, Bruce Hendee, Sam Houghteling, Jeff Mihelich, Lucinda Smith, John Voss, Others: Dale Adamy, Jason Licon-Airport, Kevin Jones-Chamber Approval of Minutes The December 15, 2014 minutes were amended to read that; the City should have funds set aside and allocated for the Fossil Creek irrigation system should it become a catastrophic event. The following sentence in the minutes was deleted; Ross said that, after the April election, the new Council should have a say on how these revenues are spent. Bob Overbeck motioned to approve the minutes; a second to the motion came from Mayor Weitkunat. The amended minutes were approved unanimously. Airport Financials Jason Licon presented an overview of the Fort Collins/Loveland Airport financials providing the following information: • Airport Statistical Snapshot & Comparables with Airports in the Region • Airport Funding & Its Financial Needs • Airport Investment Summary 2004-2013 • Operations & Maintenance Revenue Sources & Expenditures • Capital Revenue • 2015 Budget Appropriation The airport is a jointly owned and operated through the City of Fort Collins and the City of Loveland. Operations at the airport include on-site training for three flight schools including helicopter training, 2 local and transient general aviation, diverted flights, charters, corporate jets, military, fire, and medical transfers. The Fort Collins/Loveland airport receives revenue from federal and state grant monies, airport generated revenue, plus contributions from both the City of Fort Collins and the City of Loveland. Jason stated that starting in 2015 a reduction of revenue sources will impact the overall operation of the airport, noting a portion of this significant reduction in federal grant dollars is from $1 million dollars annually to $150,000 due to the declassification from a primary commercial service airport to a non- primary commercial service airport. Jason noted that all airports compete for dollars. Grants require a local match and must comply with federal grant regulations. FAA grants are 90 percent with a funding match of 10 percent. State grants are the same 90/10. Airport generated funding can come from: • Land and Building Leases • Privately Owned Hangars • Sales Tax and Fuel Flowage – a primary revenue source Jason provided an overall summary of the total airport investment from 2004 – 2013. $30,680,000 Total Airport Investment: • 57% Federal Contributions • 26% Airport Revenue • 11% State Contributions • 6% City Contributions Jason Licon’s presentation illustrated the 2015 Operations & Maintenance budget which includes snow removal, insurance, utilities, personnel, professional services, vehicle and equipment, maintenance, and administrative. Jason noted that the maintenance costs went up in 2015 because they are doing some of the work themselves, for example repairing crack seals. • Operations & Maintenance Expenditures = $845,000 The Council Finance Committee asked if fuel purchasing contract negotiations is possible and recommends having a dialogue about locking in fuel pricing when it is low, not only for the airport needs but for fuel purchasing needs for the City of Fort Collins fleet. Can a purchasing contract be set for two years at lower fuel rates? Mike Beckstead stated he would like to have the Council Finance Committee have a conversation about hedging and its complexity for clarification purposes. Jason Licon stated that the largest capital project is the runways. He noted that they are currently in good shape and have an estimated performance time of 20 years. He did state that the smaller taxi- ways and pavement to the hangars are not included in this estimation. The airport needs to have revenue for these paved areas from a capital project fund. 3 Ross Cunniff stated his concern for capital shortfall dollars. Jason noted that most airport fees are already written into their contracts however; he is optimistic that land leasing (example of a solar farm), generating more hangar space, and other opportunities can be developed. Jason outlined to the Council Finance Committee the 2015 budget appropriation which has a shared amount of equal contribution totaling $355,000 from the City of Fort Collins and the City of Loveland. Airport revenues and grants total $687,000. Climate Action Plan – Macro Financials Josh Birks stated that the premise of the Climate Action Plan is to develop necessary steps to reduce community greenhouse gas emissions through an accelerated timeline, efficiently and cost effectively. He noted today’s presentation to the Council Finance Committee would be an overview of the revised draft Climate Action Plan Financing Guiding Principles, and to seek the committee’s comments and/or suggestions. It was noted that on February 9th this committee will discuss in further detail, the framework of the guiding principles, and to evaluate if there is sufficient information provided for City Council consideration to discuss implementation and funding of the Plan at their February 17th meeting. Josh provided a draft set of guiding principles for future City investments in Climate Action Plan initiatives: • No significant adverse impact on the City’s balance sheet • No adverse impact on the City’s credit rating • The City’s investment should catalyze investment in strategies by end-users and the third parties • Internally the City’s priority is utility rate revenue before general fund revenue Josh identified potential funding mechanisms which may support implementation: • Business Financing/Private Sector/ Philanthropic • Individuals/Household • Government Financing/Grants • City Revenue Sources/Utility Josh outlined the financing needs and major outcome areas: • Buildings • Electric Supply • Road to Zero Waste/Land Use • Transportation The strategy is to invest in energy efficiency business models that will address the needs of businesses and individuals. The upfront investment has the capability to leverage a future return of savings. Feedback and wordsmith editing of the Guiding Principles for the Climate Action Plan Financing document was provided to Josh Birks from the Council Finance Committee: 4 • Mayor Weitkunat commented that she feels there are some missing key pieces that would enhance the understanding of the information provided. This would enable us to keep moving forward • The Committee acknowledged that there is always assumptions and risk involved with projected costs and savings that will change over the years ahead • Discussion from the Council Finance Committee included the question of how much debt would the City be willing to take on in their investment. How would borrowing impact/jeopardize the City’s AAA rating • Bob Overbeck asked for an outline of what a 25 year impact spreadsheet may look like. How many point differentials is there between AAA and AA rating. Mike Beckstead will provide more information • Mayor Weitkunat would like to include information on different levels of government investment i.e., federal, state, city • What does the public Transit infrastructure investment look like • Bob Overbeck asked what alternatives can be done now…recycling, etc. • Mayor Weitkunat stated that it is very important to include the Platte River Modeling Analysis Caveats. She would like this noted as related financial factors • Transparency needs to be included Josh Birks stated that he will incorporate updates, answers, case studies, and further strategies to the Climate Action Plan Financing materials for review and discussion at the next Council Finance Committee meeting on February 9th. The Council Finance Committee noted that we are moving in the right direction. Bruce Hendee wanted to publicly recognize the positive relationship between the City and Platte River Power Authority. They have been a great partner. Meeting Adjourned COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Chief Hutto – Police Chief Cory Christensen – Deputy Chief Mike Beckstead – CFO Date: February 9, 2015 SUBJECT FOR DISCUSSION – Regional Training Facility Design and Financials EXECUTIVE SUMMARY In preparation for the February 12 th joint Loveland and Fort Collins Council meeting, staff will review the proposed Regional Training Campus layout, financing and O&M assumptions to address and clarify council questions. Staff is continuing to develop a reduced capital/phased alternative. This work is not complete for this mailing however; staff will present the alternative on February 9 th . GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED BACKGROUND/DISCUSSION ATTACHMENTS Attachment 1 – Presentation 1 Police Training Facility February 9, 2015 2 2 Aerial looking NW at Range Building 3 3 Aerial looking NW at Campus 4 4 Proposed Plan Diagram 5 Capital Required 5 • Source of Cash: • Loveland - $6M CEF, $1.7M GF, $4.3M Tabor Reserve • Fort Collins - $1M GF, $11.1M COP Debt Anticipated Capital Spend Timing ($ millions) 2015 2016 2017 Total Loveland $ 1.0 $ 4.0 $ 7.0 $ 12.0 Fort Collins 1.0 4.1 7.0 12.1 Total $ 2.0 $ 8.1 $ 14.0 $ 24.1 6 • Anticipated Borrowing - $11M • Term - 20 years • Interest Rate - 4% • Annual Debt Service - $809k • Anticipated Structure: • Certificate of Participation • Require pledge of another City Asset • Considerations: • Training facility not considered an essential service • Facility on leased land • Facility co-owned by two municipalities • Complicated deal, but doable Financing 6 7 Training Facility Summary Financials 7 • Year 1 is Track only, Range & Class rooms online Year 2 • Market/Demand Opportunity assumes additional $150 rental income • Budget Savings within each department assumed to be transferred to facility Training Facility Operating Costs ($ 000's) Year 1 Year 2 Year 3 Year 4 Year 5 Revenue Class Charge to Outside User $ 73 $ 110 $ 114 $ 117 $ 121 Facility Rental 83 287 295 304 313 Total Revenue $ 156 $ 397 $ 409 $ 421 $ 434 Expenses Personnel 25 302 312 322 332 Operations, Supplies, Maint 52 303 303 318 319 Capital Reserve 33 105 106 107 108 Total Expense $ 110 $ 710 $ 721 $ 748 $ 760 Training Facility Income/(Loss) $ 47 $ (314) $ (312) $ (327) $ (326) Market/Demand Revenue Opportunity 148 153 157 162 Facility Income/(Loss) with Opportunity $ 47 $ (166) $ (159) $ (170) $ (164) Budget Savings Loveland 59 61 63 64 66 Budget Savings Fort Collins 77 79 82 84 87 Net Facility Income/(Loss) $ 183 $ (25) $ (15) $ (21) $ (11) 8 Training Capacity Utilized Training Prop Segments Capacity Segments Used Segments Rented % Used Driving Pursuit Speed Track 576 67 111 31% Driving Street Grid 576 139 109 43% Driving Skid Pad 576 49 132 31% K9 Training 576 60 10% Scenario Village 576 245 43% Pistol Range 576 315 67 66% Rifle Range 576 306 66 65% Sims / Shoot House 576 106 118 39% Obstacle Course 576 65 11% Mat Training Room 576 335 60 69% Class Room 1728 1314 104 82% • Training facility size driven by: • Optimal training class size – instructor to student • Optimal training scheduling impact on Police Services • 20 year growth projections of Police Services 9 Training Facility O&M Costs O&M Expenditures Year 1 Year 2 Year 3 Year 4 Year 5 Personnel - 3.25 FTEs $ 25 $ 302 $ 312 $ 322 $ 332 Utilities 7 97 100 103 107 Computers & Supplies 8 8 8 8 Instructional Supplies 5 5 5 5 Office/Audio/Tele Supplies 15 15 15 15 Range Maint & consumables 133 130 143 140 Track Maint & Consumable 45 45 45 45 45 Capital Reserve 33 105 106 107 108 Total Facility O&M $ 110 $ 710 $ 721 $ 748 $ 760 10 10 • Budget savings do not include productivity from reduced driving - $125k • Opportunity - additional $150 per segment of rental • Fort Collins budget impact driven by financing cost on $11M Budget Impact Training Facility Budget Impact ($ 000's) Year 1 Year 2 Year 3 Year 4 Year 5 Loveland Travel & Fee Savings $ 59 $ 61 $ 63 $ 64 $ 66 Fort Collins Travel & Fee Savings 77 79 82 84 87 Loveland Financing Cost $ - Fort Collins Financing Cost - @ 4% 20 yrs (809) (809) (809) (809) (809) Income/(Loss) w/o Opportunity - shared 33%/67% $ 47 $ (314) $ (312) $ (327) $ (326) Income/(Loss) with Opportunity - shared 33%/67% 47 (166) (159) (170) (164) Budget Impact - Loveland w/o Opportunity $ 74 $ (43) $ (41) $ (43) $ (41) Budget Impact - Fort Collins w/o Opportunity (701) (940) (937) (944) (941) Budget Impact - Loveland with Opportunity $ 74 $ 6 $ 10 $ 9 $ 12 Budget Impact - Fort Collins with Opportunity (701) (841) (835) (839) (833) 11 Alternative Comparison ($ millions) Initial Capital 20 Year Additional Operating NPV of Total Cashflow Regional Training w/o Rev Opportunity $ 24.1 $ 3.8 $ 26.3 Liberty Arms & Build Track 8.5 37.9 25.5 Adams County for All - 28.3 16.8 Alternatives • Combined analysis for both Loveland & Fort Collins • Adams County alternatives: • Not practical given inability to schedule time in late 2014 & all of 2015 • Does not include lost productivity associated with travel time 1 COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Lucinda Smith, Environmental Services Department Director Josh Birks, Economic Health Director Date: February 9, 2015 SUBJECT FOR DISCUSSION Climate Action Plan – Macro Financials EXECUTIVE SUMMARY The purpose of this work session is to present updated progress on the Climate Action Plan (CAP) economic analysis. The CAP being developed for consideration at the February 17, 2015 City Council meeting will provide a high level framework plan. The framework plan will set Fort Collins on the path to achieve reduction objectives that lead to carbon neutrality (a 100 percent reduction in net greenhouse gas emissions) by 2050. A key consideration in adopting the revised CAP is understanding potential economic impacts to the community, as well as how to fund the strategies and tactics included in the plan. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Does the committee feel that there is sufficient analysis to understand the premise that the strategies identified in the CAP framework can deliver long-term savings? 2. Does the Committee have any feedback on potential financing mechanisms? 3. Is there additional information that the Committee believes should be addressed if future work is undertaken to develop a CAP implementation plan for 2020? BACKGROUND/DISCUSSION Background In April 2014, City Council initiated an effort to develop an updated Climate Action Plan (CAP) that would outline the steps necessary to reduce community greenhouse gas (GHG) emissions:  20% below 2005 levels by 2020;  80% below 2005 by 2030; and  Carbon neutrality (a 100% reduction in net greenhouse gas emission) by the year 2050. Summary of Strategies With the help of the consulting team, the Climate Citizen Advisory Committee, and staff, a suite of broad strategy areas for reducing greenhouse gas emissions was developed. Assumptions 2 about the magnitude of emissions reduction potential in each strategy area was informed by best practice research, and discussions with local and national experts. The list of quantified strategies in the CAP framework is provided below, along with their relative contribution to total GHG reduction. If implemented to reach the targets embedded in the strategies, they would enable Fort Collins to nearly meet the GHG reduction objectives that City Council requested to be studied. Table 1. Draft CAP Feasibility Framework Strategies (Annual MTCO2e Reduced) Net Costs and Benefits of the Draft Plan The CAP framework analysis evaluates the aggregate costs of improvements identified in the strategies and the resulting energy and fuel savings and estimates the net cumulative cost or savings through the 2050 planning horizon. There are a variety of factors to consider in any financial analysis, from what financial discount rate to use to accounting for uncertainty in future costs and savings. These estimates should be viewed as preliminary. Tables 1 through 3 below shows a range of costs and savings estimates, based on varying discount rates and levels of uncertainty/risk as summarized below. Table 1. Preliminary Cumulative Costs/Savings Estimates with 5% Discount, with Cost of Carbon Applied 2020 2030 2040 2050 Emissions Reduction (% below 2005 baseline) 27% 72% 80% 86% Cumulative Implementation Cost ($M) -$600 -$2,000 -$2,800 -$3,300 Cumulative Cost Savings ($M) $300 $1,800 $4,000 $6,300 Net Cumulative Cash Flow ($M) -$300 -$200 $1,200 $3,000 2020 2030 2040 2050 Buildings: Boosting Efficiency, Comfort and Health 169,000 280,000 415,000 365,000 Build in Efficiency From the Start Make Existing Homes More Efficient Increase Efficiency in the Institutional, Commeica, and Industrial Sector Advanced Mobility: Making Transport Faster, More Convenient and Cleaner 31,000 113,000 154,000 182,000 Shift Land Use Patterns to Shorten Trips and Reduce the Need to Drive Drive Adoption of MultiModal Transport Accelerate Adoption of Fuel Efficient and Electric Vehicles Energy Supply and Delivery: The Shift to Renewable Energy Resources 43,000 717,000 677,000 539,000 Increase Utility-Scale Renewable Energy Supply Advance Residential and Commerical Solar Adoptiopn Shift Heating Loads to Geothermal, Biofuels, Combined Heat & Power, Electification Waste Reduction and Materials Regeneration 45,000 83,000 94,000 105,000 Road to Zero Waste Carbon Sequestration TOTAL REDUCTIONS (MT CO2e) 289,000 1,193,000 1,340,000 1,191,000 Estimated Percent below basline year of 2005 27%+ 72%+ 80%+ 86%+ 3 Table 2. Preliminary Cumulative Costs/Savings Estimates, 5% Discount, without Cost of Carbon Applied 2020 2030 2040 2050 Emissions Reduction (% below 2005 baseline) 25% 70% 79% 86% Cumulative Implementation Cost ($M) -$600 -$2,100 -$3,000 -$3,500 Cumulative Cost Savings ($M) $300 $1,700 $3,800 $6,000 Net Cumulative Cash Flow ($M) -$300 -$400 $800 $2,400 Table 3. Preliminary Cumulative Costs/Savings Estimates, adds 2.5% percent additional risk factor (most conservative) 2020 2030 2040 2050 Emissions Reduction (% below 2005 baseline) 25% 70% 79% 86% Cumulative Implementation Cost ($M) -$700 -$3,500 -$6,300 -$9,300 Cumulative Cost Savings ($M) $300 $2,500 $6,900 $13,600 Net Cumulative Cash Flow ($) -$400 -$1,000 $700 $4,300 Figure 1 below shows the annual cash flow and the net cumulative discounted costs/savings, indicating that net costs shift to net savings just after 2030. Figure 1. Preliminary Annual and Cumulative Cash Flow (5% discount, with cost of carbon) 4 Given the scale of estimated investment required by 2050, many wonder how the framework described in this plan can generate net savings by 2050 of $ 2-4 billion by 2050. There are three main components that drive these financial outcomes: • The savings are estimated based on projected savings in energy fuel costs. • The costs incurred through the plan are largely for up-front investments into infrastructure and efficiency equipment, investments that generate significant on-going savings from reduced fuel and energy use. • Escalating fuel costs amplify the projected savings, because for various reasons, energy costs less now than it will in the future. Costs and Savings Estimates Caveats The analysis underlying the CAP framework plan makes a good faith effort to estimate costs and savings. There are, however, a number of uncertainties that should be acknowledged, including: • Actual future energy costs may not follow the assumptions embedded in this analysis. The assumptions are based on predictions made by the U.S. Energy Information Administration.  Program and infrastructure cost estimates are based on recent averages and do not reflect the continuing drop in prices as technologies come to scale (especially solar PV), and may be over-estimated.  Some cost estimates were not included in this analysis because it is exceedingly difficult to estimates costs with any level of confidence now, given rapid evolution of technologies and market conditions. The following costs are not estimated on the distribution side: – Distribution system modeling – Infrastructure enhancements costs – Reliability sensitivity analysis – Energy storage options The following costs are not estimated on the generation system side: – Stranded fixed costs for the existing systems, such as decommissioning of coal units/ fuel supply agreements – New electric storage resources  The estimates do not include indirect benefits that can accrue from the proposed strategies, including: o Improved public heath resulting from more active modes of transportation (walking and bicycling); o Improved public health resulting from reductions in air pollution and emissions; 5 o Indirect economic and social benefits to the community through increased resiliency to predicated climate change impacts (e.g., increased flooding); o Job creation and resulting wages from Climate Action research and program implementation; o Indirect economic benefit to the community from increased investment in local power generation (e.g., increased solar and distributed energy installation). Questions Still to be Addressed Some questions remain unclarified in the analysis underlying the current CAP framework analysis. Two of those are regarding costs and savings estimates, discussed below. Cost and Savings to individuals/households or businesses Initially, staff anticipated being able to identify the costs and savings impacts of proposed strategies to the individual actors (household, business, etc.) In the relatively limited time available, it was not possible to make this assessment with any degree of accuracy because it would have required making assumptions about how these programs would be financed over time. Certain types of actions lend themselves to certain types of funding mechanisms. Clarity on the costs and savings associated with utility scale electric generation mix As requested by the City, Platte River has completed initial modeling under the IGA with the City. This process has revealed the complex nature of interdependencies between the Platte River modeled results and the CAP model. The results in this analysis represent a best approximation of anticipated carbon reductions and cost implications. We believe the results are directionally correct, but more work will need to be done in the future to more fully analyze options and associated costs for making large-scale changes to the electric generating system. Financing Opportunities The CAP framework explores a range of innovative financing methods already being used by other communities and businesses to address the near term investments required. A menu of available and existing funding mechanisms is included in the Attachment 1 (not an exhaustive list). Many of the available mechanisms achieve two essential goals: (a) spread the costs and benefits over time, and (b) provide greater access to individuals and benefits. These financing mechanisms can, in some cases, fundamentally change the flow of services and capital, represent potential new revenue streams and service models, and alter the ways different parties can benefit from the new goals. The mechanisms fall into three main categories:  Individual and Business Financing – These mechanisms provide access to borrowing or funds that individuals and businesses can use to make investments in energy efficiency, distributed power, and other similar investments. In general, these financing mechanism aid individuals and businesses in amortizing initial costs in improvements over time to reduce the upfront costs. In some cases, the government, whether it is municipal, county, or state, can aggregate the 6 investments into a larger pool to reduce borrowing costs (e.g., On-bill financing, Property Assessed Clean Energy Bonds or Tax Increment Financing).  Government Financing – These mechanisms involve the government borrowing funds, whether it is municipal, county, or state, directly to support investments in utility scale energy efficiency, solar rebates, transit infrastructure, and other similar investments. The intent is to use the borrowing power of the government to accelerate adoption of key strategies, reduce risk to private lenders of consumer lending programs, and make key investments in municipal infrastructure (e.g., public transit) to support carbon reduction goals. In many cases, the borrowing still requires a funding source to justify the debt which can range from the existing revenues (e.g., taxes and/or fees) available to the government to new revenues (e.g., new taxes and/or fees).  Other Sources of Funds – The last category captures a series of potential funding sources that do not logically fall into the other two categories. These may include new governmental revenue sources (e.g. User Fees, Development Exactions, and Public Benefit Funds) or donations from private parties interested in furthering carbon reduction goals. Financing Guiding Principles At the January 12, 2015 Council Finance Committee meeting, members provided comments on the draft CAP Financing Guiding Principles. These guiding principles provide a set of boundary conditions for the implementation of the plan with the goal of mitigation a portion of the risk inherent with the unknowns of a framework plan. Over time these qualitative statements could be translated into quantitative statements about. For example, the principles may eventually include specifics relative to the amount of debt the City would be willing to incur to support the carbon reduction goals. The updated draft of the Guiding Principles can be found in Attachment 2. Financial Checks and Balances There are a number of key checks and balances in the processes needed to implement CAP strategies that should serve to ensure that costs of future actions remain commensurate with community values. 1) Financing Guiding Principles - A set of guiding principles for investment is being developed as part of the framework plan. These guiding principles provide a set of boundary conditions for the implementation of the plan with the goal of mitigation a portion of the risk inherent with the unknowns of a framework plan. 2) City Council Review and Vetting of Individual Strategies - Any CAP strategy or program that requires City Council action will need to be independently designed to the operational level then discussed and vetted before Council consideration. 3) City Budget process - The City’s biennial budget process allocates City budget in a balanced way that considers a range of strategic objectives and community needs, and prioritizes decision accordingly. 4) CAP Update Process - The CAP itself will need to be reviewed periodically (at least every five years) to ensure that the latest technological innovations are being considered. ATTACHMENTS 1. Draft CAP Financing Guiding Principles 2. Overview of Financing Mechanisms 3. Cost of Carbon 4. Staff Presentation Council Finance Committee - January 12, 2015 1 Climate Action Plan: Financing Overview Direction Sought 2 1. Does the committee have comments/suggestions on the draft Climate Action Plan Financing Guiding Principles? 2. Does the committee feel that there is sufficient analysis to answer the question “Can the CAP be funded?” What additional information, if any, would be help to City Council and the committee in answering this question? 3 Scenario 1 2020 2030 2040 2050 % below 2005 baseline 25% 75% 86% 92% Net Cumulative Costs/Savings $292M cost $388 savings $2.8B Savings $7B Savings Avg. monthly cost/savings per resident $28 cost $13 savings $56 savings $98 savings 4 - Includes Cost of Carbon for all fuels - Includes 2.5% discount rate Scenario 1 * *Does not indicate the cash flow impact to households or businesses 5 Financing Overview • Primary Challenge: – Analysis shows savings from the proposed scenario between 2030 and 2040; continuing to 2050 – Financing can be used to access those savings to spread out the initial incremental costs; reducing the impact • Three Broad Financing Mechanism Categories: – Individual/Business – Government – Other • All approaches (excluding philanthropy and grants) require an entity to take on debt and use anticipated savings to repay Guiding Principals – City/Utility • No significant adverse impact on the City’s balance sheet • No adverse impact on the City’s credit rating • The City’s investment should catalyze investment in strategies by end-users and the third parties • Internally the City’s priority is utility rate revenue before general fund revenue 6 Guiding Principals – Consumer • Access to affordable energy and value-added services. • Feel happy and confident in the results of services provided. • Experience a streamlined purchase process. • Experience enhanced customer service. • An understanding of benefits versus costs that allows each user to make their own determination of value. 7 8 Borrower Category Financing Mechanism Likely Borrower Capital Providers Comments Individuals and Business Financing Savings This can be both revenue and financing Traditional bank loan or consumer lending (CCs) Fort Collins Citizen Banks or finance companies Not necessarily the best at doing this kind of financing Mortgage/Home Equity Fort Collins Citizen Banks or finance companies New build will rely on this significantly Purchase Power Agreements Fort Collins Citizens Third party developers They raise their own capital Energy Efficiency Loans Fort Collins Citizen Utility, banks or finance companies Often private market, 2013 saw successful secondary market in Pennsylvania, subsidized loans typically $4- 5K to consumers MEETS Small/Mid Commercial ESCOs They raise their own capital On-bill Financing (PPP) Fort Collins Citizen Utility reserves and third party investors Attracts private capital when combined with some form of public credit enhancement Property Assessed Clean Energy State then County authorized- Municipal opt-in Institutional investors In place in Colorado for both Residential and Commercial. Property attached county backed financing (low cost to municipality, affects debt) Tax Increment Financing (PPP) Municipality (to lend to developers) Municipal bond investors Need to designate certain geographies as special districts to qualify Linked Deposit Fort Collins Citizens CRA Bank Resources Below market rate investing 9 Financing Mechanism Likely Borrower Capital Providers Comments Government Financing General Obligation Municipal Municipal bond investors Can be a part of a General Obligation bond that also funds other items, typically passed by voters Green Bonds State/ Municipal/Compan ies Government and or private sector investors Could be used to raise funds to back other loan programs. Private companies also issue green bonds. QECBs State(to Municipalities) Federal government and institutional investors Low interest specifically targeted federally backed bond that can fund Energy Efficiency loans etc. (typically $500,000 at the state level) Social Impact Bonds Municipal Used for social purpose, e.g. Denver's for homelessness Loan Loss Reserve Fund (PPP) Municipal City funds – General Obligation Bonds if necessary, Philanthropy, Government Grants Typically 10% of a Loan program backed by City expands options in market for "riskier" loans. Debt Service reserves (PPP) Municipal City funds – – General Obligation Bonds if necessary Public Sector risk mitigation fund (typically 10% of projects/funds) Loan Guarantees (PPP) Federal/State to Municipal City funds – – General Obligation Bonds if necessary Risky for public agency Pooled bond financing Regional Working with other municipalities to get better rates/ more capital. Contribute towards shared debt service reserve of 5% of the principal. 10 Financing Mechanism Likely Borrower Capital Providers Comments City Revenue Sources Philanthropic N/A unless PRIs or MRIs Foundations PRIs, Foundations, Smart Growth Funds, etc. Leverage STAR User Fees Do not have to securitize Collected via special districts, tolls, etc. Other financing mechanisms listed would securitize these (Gos, Green Bonds) Development Exactions Do not have to securitize Fees charged to developers. Other financing mechanisms listed would securitize these (Gos, Green Bonds). Do not necessarily need to securitize. Utility Government Grants Department Of Energy, State of Colorado, Housing and Urban Development, etc. Public Benefit Funds Surcharge on Utility bills; would need structure and authorization. Can then be secured in the market if necessary. 11 What needs to be paid for? • Individuals/Businesses – Energy Efficiency Measures (existing buildings) – New Energy Efficiency Standards (new buildings) – Cost of Electricity – Distributed Solar – Individual Electric Vehicles and Charging Infrastructure 12 What needs to be paid for? • Government – Efficiency Programs – to encourage adoption of new measures – Solar Rebates – Upgrades/improvements to the local distribution system to handle distributed/renewable energy loads – Public Transit Infrastructure – Community Charging Infrastructure – especially on the local electric distribution system – Involvement in Lending Programs for Individuals/Businesses (Public Private Partnership) • Private Third Parties – Lending Program Costs (e.g., underwriting, defaults, marketing, etc.) Next Month’s Discussion Potential Items for next month’s discussion: • Refinement of the Analysis – Greater detail on cost impacts – Refined breakout of costs and benefits by outcome area • Financial Deep Dives – Case Studies of Other Communities and Financing Mechanisms • Potential Capacity of Financing Mechanisms compared to need for financing 13 Direction Sought 14 1. Does the committee have comments/suggestions on the draft Climate Action Plan Financing Guiding Principles? 2. Does the committee feel that there is sufficient analysis to answer the question “Can the CAP be funded?” What additional information, if any, would be help to City Council and the committee in answering this question? ATTACHMENT #1 D R A F T Guiding Principles for Climate Action Plan Financing February 3, 2015 City of Fort Collins: 1. No significant adverse impact on the City’s balance sheet 2. No adverse impact on the City’s credit rating 3. The City’s investment should catalyze investment in strategies by end-users and the third parties 4. Internally the City’s priority is utility rate revenue before general fund revenue Platte River Power Authority 1. Maintain Minimum Energy Reserve Margin of 15 percent 2. Achieve Renewables of 20 percent by 2020 3. Maintain Competitive Rates (Platte River should remain the lowest cost wholesale power provider located in Colorado) 4. Achieve CO2 Reduction of 20 percent by 2020, 35 percent by 2030, and 80 percent by 2050 Consumers / End Users 1. Access to affordable energy and value-added services. 2. Confidence in the energy efficiency results of services provided. 3. Experience a streamlined purchase process. 4. Experience enhanced customer service. 5. An understanding of benefits versus costs that allows each user to make their own determination of value. Businesses / End Users 1. Access to information and assistance to select the right investments. 2. Minimal impact to business operations. 3. Access to capital funds that do not negatively impact their own balance sheet. 4. Experience a streamlined purchase process. 5. Experience enhanced customer service. 6. Opportunities to partner with third parties to improve energy efficiency and reduce on-going costs. Private/Third Party Sources of Capital 1. Earn returns commensurate with level of risk assumed. 2. Recognition of the key role of capital providers in the implementation of the CAP. 3. Transparency in expectations of capital providers. 4. Recognition of the fixed costs associated with establishing financing programs, and the key role of scale in reducing the cost of capital. 5. Ensure that public sector commitments, if any, to support or scale programs are honored. 6. Cooperation on the part of local stakeholders to help address any barriers to the provision of capital or its timely repayment Attachment 2 – Overview of Funding Mechanisms Borrower Category Financing Mechanism How it Works Examples Comments Individuals and Business Financing Traditional Borrowing Customer applies for loan from traditional source; underwriting determines borrowing amount Bank loan, Consumer lending (Credit Cards), Mortgage/Home Equity Loans Require borrower to have capacity to borrow, reasonable credit rating, and/or collateral Savings Dependent Financing Customer applies for a loan with projected energy savings as the collateral; savings determine borrowing amount Energy Efficiency Loans, MEETS, On-Bill Financing Can be delivered by either the private market or through a utility (publicly or privately owned) Government Financing Direct Borrowing Governmental entity uses existing revenue, new revenue, or other collateral to borrow funds General Obligation Bonds, Green Bonds, QCEBs, Social Impact Bonds, Pooled Bond Financing The governmental entity is on the hook to repay borrowed funds; can relend funds to individual users or use the proceeds for governmental costs Public Private Partnership Governmental entity uses funds to enhance the credit rating of a private lender Loan Loss Reserves, Debt Service Reserves, Loan Guarantees Government uses its funds (from any Attachment 3. “Cost of Carbon” As used in the CAP modeling the “Cost of Carbon” is defined as an anticipated future cost that would be added to the price of greenhouse gas-emitting activities such as the burning of fossil fuel. This is in alignment with the IPCC’s fairly broad definition of carbon price (IPCC Glossary, 2007), as “Carbon price” What has to be paid to some public authority as a tax rate, or on some emission permit exchange for the emission of 1 metric tonne of CO2 into the atmosphere.” In the CAP model, the $/MTCO2 for electricity is provided by Platte River Power Authority through its consultant, Pace Global, shown as the black line in Figure 2 below Figure 1. Cost of Carbon for Electricy Emissions Used in the CAP Model For natural gas and transportation fuels, the CAP model applies a static $25/ MTCO2 emitted. February 9, 2015 COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Jessica Ping-Small, Revenue and Project Manager Mike Beckstead, Chief Financial Officer, Date: February 9, 2015 SUBJECT FOR DISCUSSION Appropriating General Fund Revenue for the purpose of rebating Development Fees, Capital Improvement Expansion Fees and Use Tax to Woodward, Inc., in support of their expansion at the corner of Lincoln Avenue and Lemay Avenue. EXECUTIVE SUMMARY This discussion is in preparation of the upcoming ordinance to appropriate approximately $2,113,851.99 of General Revenue Funds for a rebate of Development Fees, Capital Improvement Expansion Fees and Use Tax approved by City Council on April 2, 2013 (Ordinance 055, 2013); Vote: 6-1; Nay: Ohlson). The ordinance approved an agreement between the City, Downtown Development Authority (DDA), and Woodward, Inc. The agreement provides Business Investment Assistance for the relocation of Woodward’s headquarters as well as an expansion of their manufacturing and office facilities to a new location at the corner of Lincoln Avenue and Lemay Avenue. The project will retain or create between 1,400 and 1,700 primary jobs in the City. The City’s assistance includes a rebate of Use Tax, Development Fees, and Capital Improvement Fees. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED N/A BACKGROUND/DISCUSSION Agreement Summary On April 2, 2013, City Council passed an ordinance (Ordinance 055, 2013; Vote: 6-1; Nay: Ohlson) approving an Economic Development Project Agreement (“Agreement”) between the City, the DDA, and Woodward, Inc. The agreement specifies Woodward is eligible for a rebate in three areas: • Use Tax on Construction Materials and Eligible Equipment (up to 80%) • Development Fees (100%) • Capital Improvement Fees (up to 50%) February 9, 2015 Use Tax Woodward plans to invest approximately $169.1 million in new buildings and $50.5 million in new equipment as part of the Project. As outlined in the Agreement, City Council will rebate 80 percent of the use tax collected in connection with these investments. The use tax rebate on both Construction Materials and Eligible Equipment go beyond the general fund portion of the use tax rate. As a result, the general fund must bear the additional cost of the rebate to avoid impacting revenue associated with the dedicated use tax (e.g., Open Space, Street Maintenance, Building on Basics, and Keep Fort Collins Great). This additional cost will be backfilled from the revenue generated by indirect and induced economic impacts to the community. Development Fees As stated in the agreement, City Council will rebate 100 percent of the applicable Development Review Fees (e.g., Plan Check, and Base Building Permit Fee). Capital Improvement Fees As part of the Agreement, City Council will rebate 50 percent of the applicable Capital Expansion, Street Oversizing and Utility Plant Investment fees due for the Project . These fees are collected to offset the cost each new project imposes on the capital infrastructure within the City. As a result, the cost of the rebate must be backfilled from the revenue generated by indirect and induced economic impacts to the community. The backfilled revenue will make each capital fund whole. Employment Level Requirements The three rebate categories were offered with the stipulation that employment levels must reach or exceed 1,400 employees within the City by December 31, 2018. • If a rebate request is made prior to December 31, 2018, the City will withhold 40% of the rebate until set employment levels have been met. • If the target employment level is reached after December 31, 2018 but before December 31, 2020, Woodward will receive the retained 40 percent less $500,000 (combined between use tax and development fee rebates). • Woodward will not be entitled to the remaining 40 percent if the target level is not reached by December 31, 2020. Rebate Summary Rebate Schedule as agreed upon with Woodward February 9, 2015 • Two applications per year • Application 1 includes: • January through June Development Review and Capital Improvement Fees • Application 2 includes: • June through December Development Review and Capital Improvement Fees • January through December Use Tax Key Stipulations • Of the rebate amounts eligible, 40% will be withheld dependent on Woodward reaching the 1,400 employee mark by 12/31/18. • Use tax and Capital Expansion fees include a backfill requirement by the General Fund which will be accounted for at the time of appropriation. • 100% of the Capital Improvement Fee and Utility Plant Investment Fee rebate will be backfilled by the General Fund • 100% of the dedicated taxes will be backfilled by the General Fund • .25% Natural Areas • .25% Streets and Transportation • .25% Building on Basics Projects • .85% Keep Fort Collins Great • Rebate funds will be appropriated by City Council biannually as part of the rebate process. Current Rebate Due for Period July 1, 2014 – December 31, 2014 Total estimated rebate due of $2,113,851. *Use Tax Rebate only paid once per year. ATTACHMENTS Power Point Presentation 1 Woodward Rebate Council Finance Committee February 9, 2015 2 Woodward Rebate Summary • Rebates Allowed Per the Agreement  Use Tax on Construction Materials and Eligible Equipment (80%) –  Development Fees (100%)  Capital Improvement Fees & Utility PIFs (50%) Not Eligible – County use tax, mailings, etc. • Rebates Schedule as agreed upon w/Woodward 2 applications per year Application 1 – Covers January - June  Includes Development Review and Capital Improvement Fees Application 2 Includes:  June-December – Dev. Review and Cap. Imp. Fees  January-December – Use Tax 3 Woodward Rebate Summary • Key Stipulations Of the rebate amounts eligible, 40% will be withheld in escrow dependent on Woodward reaching the 1,400 employee mark by 12/31/18 Use tax and Capital Expansion fees include a backfill requirement by the General Fund  Accounted for at time of appropriation Rebate funds will be appropriated by City Council biannually as part of the rebate process 4 Estimated Current Rebate Due For Period July 1, 2014 – December 31, 2014 • Total Estimate Due: $2,113,851 • On City Council Agenda – March/April Rebate Payment (7/1/14-12/31/14) Development Fees 100% CIE Fees 50% Utility PIF 50% Use Tax 80%* Not Eligible for Rebate Total Total Fees Collected $493,274 730,608 $2,278,457 $1,906,599 $295,452 $5,704,391 Rebate Owed 493,274 365,304 1,139,228 1,525,279 N/A 3,523,086 Rebate Eligible for Payment - 60% 295,964 219,182 683,537 915,167 N/A 2,113,851 Rebate Holdback- 40% 197,309 146,121 455,691 610,111 N/A 1,409,234 Backfill Requirement** 0.00 365,304 1,139,228 632,063 N/A 2,136,596 *Use Tax Rebate only paid once per year - $1.9M reflects 12 months of fees collected ** Backfill Requirement based on full Rebate Owed 5 Project To Date First Rebate Payment (1/1/13-12/31/14) Development Fees 100% CIE Fees 50% Utility PIF 50% Use Tax 80% Not Eligible for Rebate Total Total Fees Collected $640,512 $730,608 $2,278,457 $1,906,599 $297,551 $5,853,729 Rebate Owed 640,512 365,304 1,139,228 1,525,279 N/A 3,670,325 Rebate Eligible for Payment - 60% 384,307 219,182 683,537 915,167 N/A 2,202,195 Rebate Holdback- 40% 256,205 146,121 455,691 610,111 N/A 1,468,130 Backfill Requirement 0.00 365,304 1,139,228 632,063 N/A 2,136,596 COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Mike Beckstead, CFO Date: 9 February 2015 SUBJECT FOR DISCUSSION – RubinBrown – Public Sector Financial Ratios EXECUTIVE SUMMARY RubinBrown LLP, an accounting/services group with a substantial practice in the Denver, Kansas City and St. Louis regions, annually reviews the CAFR and audited financial statements of municipalities with populations greater than 5,000. Financial ratios are aggregated for each region into Quartiles and Average allowing each municipality to assess by ratio their comparative position within the region. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Share Information only BACKGROUND/ ATTACHMENTS 1) RubinBrown ’14 Public Sector Stats 2) Denver Region summary with Fort Collins highlighted 3) Presentation 1 Front Range Financial Comparison February 9, 2015 2 2 • Financial Public Sector analysis by RubinBrown LLP • Contacted in early 2014 to provide FC financial information • 8th Survey conducted by RubinBrown • Information collected from 32 front range communities • Denver excluded • Data from Comprehensive Annual Financial Report or Audited Financials • Average population of Cities included – 76,000 • 18 Financial Ratios presented as Quartiles & Average • Charts attached show Fort Collins in Blue Overview 3 3 • Arvada • Aurora • Boulder • Brighton • Broomfield • Canon City • Castle Rock • Centennial • Cherry Hills • Colorado Springs Colorado Cities Included • Englewood • Erie • Evans • Fort Collins • Fountain • Golden • Greeley • Greenwood Village • Lafayette • Lakewood • Littleton • Lone Tree • Longmont • Louisville • Loveland • Northglenn • Parker • Thorton • Westminster • Wheat Ridge • Windsor 4 General / Liquidity / Debt Ratios 4 Fort Collins = 1st Break 2nd Med 3rd Break 4th GOVERNMENT-WIDE RATIOS General Ratios Change in net position as a percent of net assets (%) 7.2% 5.6% 2.9% 0.8% Revenue coverage ratio (times) 1.27 1.17 1.10 1.02 Unrestricted net position as a percent of total current year revenue (%) 73.0% 58.1% 41.1% 30.4% Accumulated depreciation as a percent of depreciable capital assets (%) 36.8% 43.1% 43.2% 48.6% Liquidity Ratio Liquidity ratio (times) 4.12 3.37 2.69 1.77 Debt Ratios Debt to assets leverage ratio (times) 0.06 0.07 0.09 0.12 Total debt per capita ($ per citizen) $193 $442 $969 Quartile 5 Revenue & Expense Ratios 5 Fort Collins = 1st Break 2nd Med 3rd Break 4th GOVERNMENT-WIDE RATIOS Quartile Revenue Ratios Tax revenues per capita ($ per citizen) $ 656 $ 811 $ 886 $ 1,095 Total grants, contributions and intergovernmental revenues as a percent of total revenues (%) 10.9% 14.7% 19.2% 31.9% Government-wide Expense Ratios Total expenses per capita ($ per citizen) $ 923 $ 1,100 $ 1,298 $ 1,462 Total general government (administration) expenses per capita ($ per citizen) $ 153 $ 227 $ 265 $ 298 Total public safety expenses per capita ($ per citizen) $ 243 $ 345 $ 374 $ 469 Total interest expenses per capita ($ per citizen) $ 4.88 $ 9.29 $ 15.77 $ 47.41 6 Financial Position Ratios 6 Fort Collins = 1st Break 2nd Med 3rd Break 4th GOVERNMENT-WIDE RATIOS Quartile GOVERNMENTAL FUND RATIOS Expenditure Ratios Debt service expenditures as a percent of total revenues (%) 2.3% 2.6% 6.0% 8.9% Capital outlay expenditures as a percent of total expenditures (%) 23.8% 18.9% 13.6% 8.0% GENERAL FUND RATIOS Financial Position Ratio Unrestricted fund balance as a percent of total revenues (%) 48.6% 32.8% 24.9% 15.7% Revenue Ratios Intergovernmental revenue as a percent of total revenue (%) 3.6% 6.5% 9.4% 9.9% Transfers in as a percent of total revenues and transfers in (%) 0.1% 1.8% 5.0% 7 • Fort Collins ranked within the 1st Quartile in: • Change in net position as % of net assets • Revenue coverage • Debt service as % of total revenues • Capital outlays as % of total expenditures – MAX influenced • Fort Collins ranked within the 2nd Quartile in: • Unrestricted net position as % of current revenue • Accumulated depreciation as % of depreciable assets • Liquidity • Debt to assets • Interest expense per capita Interpretation 7 • Conservative use of debt influenced many ratios • Recovering economy in 2013 improved net position and revenue • MAX grants and capital spending influenced several ratios 8 • Fort Collins ranked in the 3rd and 4th Quartile in: • Tax revenues per capita • Total grants & intergovernmental as % of total revenue – MAX • Total expenses per capita • Total general government expenses per capita • Total public safety expenses per capita • Unrestricted fund balance as % total revenues • Intergovernmental revenue as % of total revenue - MAX Interpretation 8 • FC ranked high on several ratios associated with revenues and spending per capita • Indicates citizens willingness to fund desired levels of service • MAX influenced on intergovernmental revenue in 2013 number of sources) to mitigate the risk to a private lender; enables greater capital access for the community and broader rate of utilization (wider credit scores and underwriting practices) Other Philanthropic A foundation provides funding to achieve a specific purpose PRIs, Foundations, Smart Growth Funds, etc. Leverage STAR Often tied to a very specific project or objective; depends on the foundation or donor Government Grants A governmental entity provides grant monies to achieve a specific objective Department Of Energy, State of Colorado, Housing and Urban Development, etc. Competitive funding source with no guarantee of award; amount depends on governmental entity and purpose