HomeMy WebLinkAboutAgenda - Mail Packet - 6/21/2016 - Council Finance Committee And Ura Finance Committee Agenda - June 20, 2016Council Finance Committee & URA Finance Committee
Agenda Planning Calendar 2016
RVSD 06/02 mnb
June 20
Hourly Positions to Classified 25 min J. Miller
Utility Long Term Financial Plans – Rates and Debt Alternatives for CIPs 45 min L. Smith
Airport Strategic Plan Funding 20 min J. Licon
Street Oversizing Fees 30 min D. Klingner
URA
July 18
2015 Audit Review 20 min K. Smith
Benefits - Historical Forecast Accuracy & Possible Plan Changes 30 min K. Hess
T. Storin
Colorado Care Ballot Initiative 30 min R. Shannon
Career Progression & Compensation 30 min J. Heckman
URA
Aug 15
Natural Areas – Financial Review 40 min J. Stokes
Capital Expansion Fee Update 30 min T. Smith
2015 Year End Financial Summary 30 min T. Storin
Foundation Creation 20 min N. Johnson
URA
Sep 19
URA
Future Council Finance Committee Topics:
Parking Garage Financing
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
June 20, 2016
9:30 - 11:30 am
CIC Room - City Hall
Approval of the Minutes from the June 1, 2016 meeting
1. Hourly Positions to Classified 25 minutes J. Miller
2. Utility Long Term Financial Plans - Rates and Debt Alternatives for CIPs
45 minutes L. Smith
3. Airport Strategic Plan Funding 20 minutes J. Licon
4. Street Oversizing Fees 30 minutes D. Klingner
UOTHER BUSINESS
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
06/01/2016
7:00 - 9:00 am
CIC Room
Council Attendees: Mayor Wade Troxell, Gerry Horak, Ross Cunniff
Staff: Darin Atteberry, Jeff Mihelich, Carrie Daggett, Mike Beckstead, Chief John Hutto,
Jerry Schiager, Mike Trombley, Craig Horton, Erik Martin, John Duvall, Travis
Storin, John Voss, Lance Smith, Chris Donegon, Seth Lorson, Kurt Ravenschlag,
Carolyn Koontz
Others:
Jim Manire, FirstSouthwest
Meeting started at 7:04 am
UAPPROVAL OF MINUTES
Ross Cunniff made a motion to approve the May 16, 2016 Council Finance Committee minutes. Gerry
Horak made a second to the motion. The minutes were approved unanimously.
A. UResourcing Police Services in a Growing Community
Chief John Hutto, Jerry Schiager and Craig Horton
EXECUTIVE SUMMARY
This is a presentation and discussion about staffing Police Services for the future. We will answer the
basic question, “How many officers will we need as the community grows?” Police Services has been
working on a data-driven staffing analysis project for over two years. As part of this project, the
needed number of police officers is identified, and efficiencies in deployment and scheduling have
been achieved. In addition to presenting a durable methodology for staffing Police Services,
information about the impacts of future annexations and revenue source changes will be explained.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE
Does Council support the methodologies presented for determining the appropriate staffing levels for
Police Services?
Data driven analysis is best methodology - solid data
Process started in 2014 - working with consultant
2
Consultant’s first response was that we have enough officers but need to look at how to improve
scheduling and deployment.
Schedule efficiency - challenging - used call curve to build schedule.
Went from 7 to 10 districts with approximately 10% of calls in each district
Added 12 hour shifts and distributed differently 40% of officers work 12 hour shifts
Future Planning
Need to add 4-5 officers per year to address incremental projected population growth.
It takes 1 year to 18 months to train and onboard one officer.
Conditions for a perfect storm in 3-5 years;
• East Mulberry Annexation (3-5 years) potential 20% increase in calls right away
• 40FTEs are currently funded by KFCG which sunsets in 2020
• Forecasted population increase from 158k to 255k
Gerry Horak asked how many officers are assigned to the East Mulberry Annexation area?
Jerry Schiager responded; 2-4 officers, 10 deputies working that area overall.
Darin Atteberry asked if the numbers in the presentation were what Cameron used.
Jerry Schiager responded that he was in fact using Cameron’s slides.
Darin Atteberry said that he had a conversation with the county manager last week re the Mulberry
Corridor Annexation. When annexation happens the county is going to have a cost savings but no
reduction in revenue. Darin is interested in discussing a potential change in revenue. We need to
understand what their staffing levels are right now as we want to capture some of that revenue. We
will have 3 years for council to choose to annex or not - time to study costs, do benefit analysis.
Gerry Horak suggested that we could try to get a URA agreement with them (moving to the future).
URA analysis with original numbers. Example is Mall Redevelopment which was significantly over
stated $12M - really more in the $3m range.
Darin Atteberry commented that the work that has been done is phenomenal. Chief Hutto has wanted
to get this in front of the council for some time. UGreat work between City Planning and Police Services -
well done.
Big takeaways - we are pretty good shape - recommend budget to keep up with growth –
Mayor Troxell commented; I appreciate the thoughtful and thorough data driven approach.
It was decided that the data driven approach is best.
Next Step: Council Working Session scheduled for June 28P
th
3
B. UDowntown Parking
Seth Lorson, City Planner
Kurt Ravenschlag, Parking Services Manager
EXECUTIVE SUMMARY
City investment is needed in order to implement the parking recommendations from the Downtown
Plan. Staff is requesting an appropriation to invest in a parking data-collection system. The requested
appropriation would come from the funds already assigned in the general fund budget balance from
the 2015-16 budget for an on-street paid parking pilot. Also, staff is anticipating submitting a 2017-18
budget offer to invest in on-street paid parking technology.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Does the Committee support the implementation of a parking data-collection system in Downtown?
Recommendation;
• Data collection system – turnover data tracked for individual parking spots
• 1500 spaces in downtown- $500K from assigned General Fund reserves
Considerations:
• Sense of lack of available parking
• 2 hour limit can cause issues
• Moving car - not creating block space - 2 hour shuffle - high occupancy zones - leave the zone
Charge when demand is higher - extend 2 hour time limit to the evenings.
• Communicate location of current parking availability
• Paid parking - people don’t want us to shock the system
Gaining informed consent - people are warming up to idea - do not shock the system - work
with DBA - implement in a seamless way
• Employees using spots close to business that could be used by customers
• Tickets/ fees for downtown don’t provide funding to grow parking infrastructure. Feedback we
received from business owners included to go ahead and charge if that revenue is going to create
more spaces.
Meet multiple objectives
1) Demand management
2) Funds to pay for parking structures
3 types of sensors
In ground - would be most cost effective for us
Cameras - this might be a more effective approach for some areas
Newer technologies including above ground sensors
4
Ross Cunniff commented; it would be helpful for council to have data on the different technologies
including costs. We must be deliberate and transparent about what we are going to do.
Gerry Horak asked if Susan Kirkpatrick would be attending working session. She will be in attendance.
Mayor Troxell said that he met with a small startup technology company (in very early stages) and one
of the applications they discussed was related to parking- smart city, integrating parking management
with other applications such as street lights with multi-function sensors. Let’s get data as far as what
the sensor enables in a broader sense, investing in infrastructure that can be utilized in a broader way.
Parking is going to be an issue as it relates to the stadium. Different from traffic flow to Hughes, will be
a scramble to find spots on game day at new stadium. How can technology be utilized related to
getting to parking for high demand events such as game days?
Ross Cunniff added that it might be a good idea to partner with CSU.
Handicap spots - How are those handled? Currently we have issues with turnover as there is no time
restriction for disabled permit holders. The team envisions putting sensors in all stalls including
Handicapped. They are currently talking with the Northern Hotel property management company
regarding possible approaches for their tenants including permits for structures. They are working
with social sustainability and hoping to find a sponsor to help instead of a code change to put time
restrictions in place for handicapped parking.
Gerry Horak asked; what is the problem we are trying to solve? Let’s break this into phases.
Trying to improve accessibility of downtown;
Need to approach this with multiple strategies
Current and projected demand
Add inventory to downtown to keep pace with projected growth
Need to manage more effectively
Ross Cunniff suggested possibly using signage like the train signs to let people know that ‘parking is full’
Next Step: Council Work Session scheduled for June 14P
th
C. UWastewater Bond Refinancing
John Voss, Controller
EXECUTIVE SUMMARY: The current market conditions are favorable to refinance the 2009
Wastewater Revenue Bonds and achieve a savings of $2.4 million. Closing is expected to occur on
August 18, 2016.
5
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Does CFC support the refinancing and projected timeline?
Mike Beckstead summarized;
• $31m (20 year) bond was initiated in 2009 to build Mulberry water reclamation facility and it is
now time to refinance.
• Plan is for this to go to Council for first reading on 7/5, then second reading on 7/19, out for
competitive bid on 8/2 with actual transaction occurring later in August
• $24.4m outstanding
• $20.8m is eligible for refinancing – we think we can get 2.11% rate
• If we waited 2 ½ years we could save an additional $398K, if interest rates do not change
• We are recommending we move forward now because of the possibility of rising interest rates
Ultimately the rate will be what the market is in August
We can’t predict it - function of the market - $2.1M savings will stay inside of waste water utility
Recommending competitive bid process
Greely just went through this and got a 1.74 rate
Council Finance Committee concurred with the recommendation and schedule moving this forward to
the Council.
D. U2015 Year End Fund Balances
John Voss, Travis Sorin
SUBJECT FOR DISCUSSION: Status of Fund Balances and Working Capital
EXECUTIVE SUMMARY:
The attached presentation gives a status of fund balances and working capital as of yearend 2015 for
each Fund across the City. The cash within each Fund is broken down into various categories that
define the degree of restricted, committed, assigned or unassigned cash within each fund.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
None, this is an update for Council Finance Committee.
BACKGROUND/DISCUSSION
To aid in answering the question of what funding is available to support emerging issues and initiatives
in the next budget cycle. In each fund the balances are shown vertically by the accounting
classifications. The amounts are then additionally categorized into Appropriated, Available with
Constraints, and Available for Nearly Any Purpose.
6
Appropriated, Minimum Policy or Scheduled is comprised of minimum fund balances established by
policy, funds from the 2015 balance that have been appropriated in 2016, and amounts for projects
specifically identified by voters. An example of the later is Community Capital Improvements Plan (aka
BOB 2.0).
Available with Constraints are those balances available for appropriation but within defined
constraints. An example is 4P
th
P of July donations. They are restricted for that purpose, but still
available for appropriation.
Available for Nearly Any Purpose are balances that are available for appropriation at the discretion of
the City Council.
Mike Beckstead said there are 2 takeaways
1) Fund balanced stayed relatively flat in 2015 compared with 2014
2) BFO cycle - we anticipate having approximately $8m of unassigned General Fund reserves
available to support 2017/18 BFO initiatives in the current budget cycle.
Mike added; for clarity funds have not been set aside for the possible purchase of land or for the
additional costs of the Lincoln Ave improvements
Darin Atteberry commented that the land purchase will be discussed with council soon.
Regarding the Lincoln Ave. improvements, the first phase (lower level street scape) has been funded
and will start soon. We have until next spring to decide if we want to do the full roll out.
Darin - DDA dollars could be used for future expansion and could reimburse for the build out.
It will be helpful when Woodward executes on Phases 3 and 4.
Mike added that we appropriated $2.3M to support debt obligations if Woodward doesn’t do Phases 3
and 4 - when they do go forward with these next two phases, the $2.3M can be released and made
available for other needs.
Ross Cunniff commented that during his last listening session, a citizen asked about disaster
preparedness, if we were prepared to deal with a flood like Loveland experienced?
UOTHER BUSINESS:
Meeting Adjourned at 9:04 am
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Kelly DiMartino, Assistant City Manager
Janet Miller, Assistant HR Director
Date: June 20, 2016
SUBJECT FOR DISCUSSION (a short title)
Hourly Employee Administrative Adjustment
EXECUTIVE SUMMARY (a brief paragraph or two that succinctly summarizes important
points that are covered in more detail in the body of the AIS.)
As part of the 2017-2018 budget planning process, the City’s HR department is proposing a
change to move 156 current Hourly positions to Classified jobs. The estimated cost is $2.5M.
These positions have been identified as resources essential for meeting ongoing service needs.
This proposal is responsive to recent changes associated with federal healthcare reform, a need to
better align employment categories to avoid legal pitfalls, increasing competition for skilled
workers and a desire to position the City to attract and retain talent.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
(Work session questions should be designed to gather direction from Council without requiring
Councilmembers to make a decision.)
The purpose is to inform Councilmembers of the proposal prior to finalizing the recommended
budget and address Council questions.
BACKGROUND/DISCUSSION (details of item – History, current policy, previous Council
actions, alternatives or options, costs or benefits, considerations leading to staff conclusions, data
and statistics, next steps, etc.)
ATTACHMENTS (numbered Attachment 1, 2, 3,…)
Attachment 1: PowerPoint Presentation in pdf format
1
Hourly Employee Administrative Adjustment
Janet Miller, Asst. HR Director
Kelly DiMartino, Asst. City Manager
June 20, 2016
Workforce Overview
Global & U.S. talent shortage
Priority - Attracting, retaining, engaging qualified workers
• Global employers reporting difficulties hiring employees (2015 -
38%) highest since period leading up to 2008 economic recession
(Manpower Group)
• 4 of 10 government orgs anticipate turnover levels of 20% or more
within next 5 years (IPMA-HR)
City 2015 Annual Turnover = 11%, nearly double that of 2013
2
Workforce Shortage
Preparation and Impact
• U.S. - 45% of orgs are unprepared to meet talent needs of the future
(Human Capital Institute)
Aging workforce: 10,000 people turn 65 year old every day
Retaining Millennials: Currently outnumber Baby Boomers and will
comprise 75% of workforce by 2025 (Pew Research Center)
• 43% of U.S. employers say talent shortages having negative impact on
ability to meet customer needs
3
City of Fort Collins – Talent Picture
World Class Service for a
World Class Community
• People = Service
• Personnel account for approx 30% of total City
budget
• Increasing demand for City services
• Community population growth (2,900 residents / yr)
• Potential Impacts
• Deliver on organization priorities and achieve goals
• Hire & retain qualified workers = Compete for talent
• Manage business continuity and risk
• Maintain talent pipeline
4
Current City Workforce
Hourly vs. Classified Employee
5
HOURLY CLASSIFIED
$ Budget Authorized, budgeted FTE
Full or part-time Full or part-time
Benefits – Medical Only if full-
time
Benefits – Medical, Dental,
Retirement, Life, STD/LTD
Personal Leave, Holiday Vacation, Sick, Holiday
At-Will Due Process Rights
Proposed Action
Specific Workforce Challenge
• Address history of adding Hourly positions to meet ongoing service needs
• Support and sustain workforce needed to deliver City Priorities
• More accurately account for workforce required to provide ongoing service
• Align City position classifications with Healthcare reform requirements
• Eliminate Full-time Hourly classification
Recommended Administrative Adjustment
6
Workforce Classifications
7
1279,
54%
24, 1% 57, 2%
1007,
43%
City Employee Headcount
May 2016
Classified
Unclassified Mgmt
Contractual
Hourly
Full-time Hourly
(30+hrs/week)
202, 8.5% of total ees
Variable
(<30 hrs/wk, seasonal)
845, 35% of total ees
RECOMMENDATION
8
BFO Offers – Administrative Adjustment
• 156 Full-time Hourly positions moved to Classified
• Estimated Total Cost
• $2.5 M
- 1.5M Salary, $850K Benefits ***
• One-time fix
• Competitive process to fill positions
Position Types
9
Maintenance Technician
Utility Worker
Line / Groundworker
Customer Service Representative
Laboratory Worker
Equipment Operator
Traffic Control Supervisor
PC Support Specialist
Wellness Program Specialist
Crew Leader
Estimated Cost by Fund
10
FUND 2017 2018
General Fund $818 $835
Keep Fort Collins Great Fund $125 $129
Natural Areas Fund $213 $219
Cutlural Services & Facilities Fund $74 $76
Recreation Fund $261 $269
Cemeteries Fund $21 $21
Museum Fund $56 $57
Transit Services Fund $19 $19
Transportation Services Fund $275 $283
Light & Power Fund $52 $54
Water Fund $184 $189
Stormwater Fund $111 $113
Equipment Fund $7 $7
Self Insurance Fund $14 $14
Data and Communications Fund $82 $84
Benefits Fund $17 $17
Utility Customer Service & Admin Fund $150 $154
TOTAL $2,480 $2,543
Alignment
11
Proposed
Administrative
Adjustment
Mission, Vision,
Values
World-class Service
to Meet Community
Needs
Strategic
Priorities
Improve Key HR
Processes
Develop Total Reward
System
BFO Outcomes
Improve customer
service
Improve core HR
systems
Strategic Plan
Attract / Retain Best
and Brightest
Generate Trust &
Transparency
Adjustment Benefits
Equity
• Minimize potential legal and regulatory difficulties
• Healthcare reform definitions / potential for misclassification
• Non-medical benefits
Attraction and Retention
• Better equip City for sustaining long-term talent needs
Position Creep
• Full-time positions planned, controlled and budgeted
12
13
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Lance Smith, Utilities Strategic Financial Director
Date: June 20, 2016
SUBJECT FOR DISCUSSION Utilities 2016 Strategic Financial Plan Update
EXECUTIVE SUMMARY
The purpose of this agenda item is to provide the Council Finance Committee with an update on
the 2016 Utilities Strategic Financial Plan as a follow up to the discussion on April 18, 2016 on
each utility’s Capital Improvement Plan (CIP). As stated in that Agenda Item Summary:
“Each of these plans [CIPs] is projecting substantial capital investment being needed for each
utility over the next decade. Because the projected levels of investment are not achievable
through current operating revenues alone it will be necessary to further analyze the best means of
achieving these operational needs without negatively impacting the financial integrity of the
utilities while maintaining affordable utilities to the community. This analysis and the long term
Utilities Strategic Financial Plan will be the focus of the follow up discussion in a few months.”
Recommendations for achieving the capital investments proposed in the CIPs while maintaining
the financial health of each utility, along with the bond rating, through modest rate adjustments
are discussed below and in the presentation. With the exception of the Stormwater Fund, the
recommendation achieves these objectives within the next decade. The Stormwater CIP will
require 15 years to complete the work targeted within the next decade in order to achieve these
objectives.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does the Council Finance Committee support the Utilities Strategic Financial Planning
recommendations?
BACKGROUND/DISCUSSION
At the April 18, 2016 Council Finance Committee the “Utilities Capital Improvement Plan and
Strategic Financial Plan Update” outlined the full planning process for capital projects beginning
with the Master Planning efforts, including the prioritized CIPs and how the process continues
with the Strategic Financial Plan being developed. That discussion showed why none of the
utility funds have adequate Available Reserves P0F
1
P to achieve the proposed capital projects over
1 Available Reserves are the portion of the Fund Balance that is not necessary to meet Bond covenants or the City’s
Minimum Reserve Financial Policy, and is not currently appropriated for another purpose.
the coming decade. Thus it will be necessary to adjust rates and consider issuing debt before
considering also delaying some of the capital projects beyond 10 years.
Several Next Steps were identified then which are being discussed herein. The Next Steps were
to:
1. Incorporate the 10 year capital projections into the long term financial model for each
utility
2. Perform scenario analyses to understand cash vs. debt funding impacts on rates, reserves,
debt capacity and the financial position of each Enterprise Fund
3. Develop recommendations on rate increases and debt issuances to meet the expected
needs of the Fund
UIncorporate the 10 Year CIP into Financial Models
Since the meeting in April, the capital investment projections for 2017-2026 have been entered
into a long term financial planning model for each utility. This model considers a 21 year
horizon (2006 – 2026) beginning 10 years ago and projecting forward 10 years from today. The
10 years of historical analysis provides the basis for the 10 year forward projection for each
revenue and expense.
UPerform Scenario Analyses
There are several financial mechanisms available to cover the incremental capital investments.
Any Available Reserves can be appropriated to the specific capital projects ensuring their
adequate funding. Any operating income will increase the Available Reserves. Rate
adjustments provide a direct way to increase operating income. Available Reserves can also be
increased by issuing debt through revenue bonds. The balance between these mechanisms is the
objective of the stochastic model.
The financial model has several financial objectives:
• Maintaining adequate Operating Income and Reserve Minimums are necessary.
• It is preferred that the City maintain, if not improve, its bond rating wherever possible
including the Utility Enterprise Funds.
• Rate spikes are undesirable because of the impact such adjustments can have on
residential and commercial customers.
An order of preference is necessary when considering rates, Available Reserves and Debt in the
model. Because rate adjustments provide the most direct communication with ratepayers that
costs are increasing, rate adjustments were considered first by themselves. This is consistent
with the assumption that rate adjustments will always be a consideration. Then because the CIP
was prioritized to respect that prioritization it is necessary to also consider debt in the sources
available to increase the Available Reserves. Lastly, adjustments to the capital investment over
the next decade were considered if it just is not financially feasible to respect the prioritization of
the CIP.
1. Scenario 1 – This scenario first considers if it is possible to complete the proposed capital
projects within the next 10 years (2017 – 26) by only adjusting rates and not issuing any
new debt. If this is achievable with modest rate adjustments then this is the
recommended path for that specific utility.
2. Scenario 2 – This scenario acknowledges that it may not be possible to achieve the
objectives through Scenario 1 and considers also issuing debt to raise of the necessary
capital. If this is achievable through manageable debt service costs and modest rate
adjustments then it is the recommendation.
3. Scenario 3 – This scenario is considered when there is no combination of modest rate
adjustments and serviceable debt issuances to achieve the capital projects and maintain
the financial health of the utility. In this scenario adjustments to the 10 year capital spend
are considered – either smoothing out the capital spend evenly across those 10 years or
extending the time horizon out beyond 10 years.
UDevelop Recommendations
Light & Power
The projected 10 Year CIP includes $90M of new capital needs for the anticipated system
demands over the decade. This represents a 10-15% increase over the previous decade’s capital
investment.
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
501 - Light & Power Fund
Operational Technology & Fiber
Annexations
New Capacity
Substation Improvements
Distribution System Improvements
Ave. Capital Investment 2017-26
Historical Ave Capital 2006-15
Such a change from recent history should be manageable through modest rate increases alone.
The dashboard below shows how this is viable. The upper left corner is a chart showing
potential annual rate increases as being less than 5%. The upper right corner is a chart showing
the annual operating income for the fund. Each Enterprise is expected to have adequate
operating income. The bottom right corner shows a chart of the total outstanding principal debt.
In this analysis no additional debt was issued and the outstanding debt is fully retired in 2020.
The bottom left corner shows the Available Reserves. Here the capital investment drops off
significantly in the last few years resulting in an increased operating income which results in the
Available Reserves building up quickly. This analysis will be updated every two years to
monitor if any adjustments are necessary.
Recommendation: Scenario 1 will allow for the additional capital needs through modest rate
adjustments without the anticipated need of issuing debt over the coming decade.
Water
The Water Enterprise Fund has a CIP with $160M which represents twice the historical average
annual spend has been.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Rate Increase
($5,000,000)
($2,500,000)
$0
$2,500,000
$5,000,000
$7,500,000
$10,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
This utility also has low Available Reserves which limits short term financial agility. The CIP
also ramps up quickly which together make it infeasible to have modest rate adjustments alone
(Scenario 1) and achieve the operational needs for the CIP. The dashboard below shows the
negative Available Reserves and large rate increases. The build-up of Available Reserves may
make it necessary to adjust rates downward as well in the last few years.
Next, issuing debt along with modest rate increases was considered. This Scenario (Scenario 2)
does result in a feasible path. However, as the dashboard below shows, operating income
remains negative.
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
502 - Water Fund Environmental Services
Water Resources
Water Distribution
Water Production
Ave. Capital Investment 2017-26
Historical Ave Capital 2006-15
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
($10,000,000)
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0% Rate Increase
Next it was assumed that the annual capital spend over the coming decade can be smoothed to
near the average annual spend each year (Scenario 3). This change respects the prioritization in
the CIP and accomplishes the same infrastructure in 2026 as the CIP. The dashboard below
shows how this change reduces the amount of debt needing to be issued from $55-70M to $50-
60M and results in positive operating income.
Recommendation: Scenario 3 (immediately above) which will accomplish the financial
objectives while completing the CIP over the coming decade.
Wastewater
The slight reduction in the estimated capital investment over the coming decade compared to the
previous decade is the result of the Mulberry rebuild.
($5,000,000)
($3,000,000)
($1,000,000)
$1,000,000
$3,000,000
$5,000,000
$7,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0% Rate Increase
($5,000,000)
($3,000,000)
($1,000,000)
$1,000,000
$3,000,000
$5,000,000
$7,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
The minor change in the average annual capital investment should be manageable through rate
adjustments alone. This Fund also has healthy Available Reserves allowing for more financial
agility if needed in an emergency. The dashboard below shows how Scenario 1 is sufficient to
meet the operational needs and maintain the current levels of service.
The bottom left corner shows a sizable build-up of Available Reserves over the next decade.
This is intentional to address new nutrient removal and temperature regulations driven capital
projects in 2027-30 estimated to cost $60-80M in addition to ongoing system renewal.
Recommendation: Modest rate adjustments should be sufficient to cover capital investment in
the next decade without the need to issue additional debt for this fund.
Stormwater
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
503 - Wastewater Fund
Environmental Services
Wastewater Collection
Water Reclamation
Ave. Capital Investment 2017-26
Historical Ave Capital 2006-15
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
2.0%
4.0%
6.0%
8.0%
The Stormwater Enterprise Fund has spent just over $5M per year on capital investments in the
previous decade. The 2017-26 CIP requires just over $15M per year or 3 times the current rate
of investment.
This utility has low Available Reserves which limits the financial agility of the utility in the short
term. The CIP is also heavily focused on the first 5 years ($71M invested in 2017-21 and $29M
in 2022-26). Together these challenges make it infeasible to address the CIP goals through rates
alone. The dashboard below for this Scenario (Scenario 1) shows that Available Reserves
immediately turn negative and operating income jumps with the large rate adjustments.
Rate adjustments are not effective in the situation this utility is in with high operating income,
low Available Reserves, and annual operating revenues of just $15M, or the same amount of
capital investment requested per year although it is tightly focused on 4 years in the middle.
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
504 - Stormwater Fund Boxelder Basin Stormwater
Authority
Stream Rehabilitation
Minor Capital
Major Capital
Ave. Capital Investment 2017-26
Historical Ave Capital 2006-15
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
($30,000,000)
($25,000,000)
($20,000,000)
($15,000,000)
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0% Rate Increase
Rates and debt (Scenario 2) are shown in the dashboard below. Available Reserves are not
sufficient even with the very large debt issuance ($80-90M within the first 5 years) and 10% rate
increases.
Next it was considered how the CIP could be modified while respecting the prioritization of the
investments. Because the increase in the average annual capital investment is increasing so
much from $5M to $15M per year smoothing the investment evenly over the 10 years is not
going to be adequate. Instead stretching the timeline from 10 years out to 15 years was
considered (Scenario 3). The dashboard below shows how effective this approach is at achieving
the financial objectives albeit over a longer time period.
Recommendation: Scenario 3 which reduces the near term debt issuance down from $80-90M to
$40-50M by extending the time horizon out 5 years to 2031.
UWhere Are We In the Planning Process?
As the CIPs are incorporated into developing the 2016 Utilities Strategic Financial Plan there is a
need for some back and forth discussions between the Utility Executive Director, Operations
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
$100,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0% Rate Increase
$0
$1,000,000
$2,000,000
Managers and Finance around what may be a manageable adjustment to the annual capital
investment while maintaining the current levels of service being provided to the community.
This is where we are at now in the whole planning process.
The Scenario Analyses suggested the preferred financial strategy to the CIP. Now the
Operations Managers need to consider what this approach would mean in terms of impacts to the
current levels of service and what may be adjustable or not. Subsequent modeling efforts may be
needed if the preferred financial strategy is not operationally feasible.
On the version of the process map presented in April shown below the red loop represents where
we are currently at in the planning process:
UConclusion
The 2016 CIPs included significant increases in anticipated capital investments for two of the
utilities over the previous decade’s investment level. These two utilities also are the same two
utilities with low Available Reserves. Managing the financial health of these two utilities, Water
and Stormwater, while maintaining the current levels of service will require rate adjustments,
debt issuances and some adjustments to the CIPs.
The other two utilities, Light & Power and Wastewater, are expecting modest rate adjustments
may be necessary over the next 10 years, but there is not expected to be a need to issue debt in
these two utilities over the next decade.
Utility
Available
Reserves (in $M)
2015 Operating
Expenses (in $M)
Days Cash on Hand in
Available Reserves
Capital Spend
2006-15 (in $M)
Capital Spend
2017-26 (in $M)
% Increase /
(Decrease)
Light & Power 16.4 38.8 154 80.5 85 5.6%
Water 4.4 23.3 69 73.9 152.1 105.8%
Wastewater 18.5 15.8 427 87.7 84.8 -3.3%
Stormwater 4.1 9.9 151 56.3 156.5 178.0%
Staff will continue to keep the Council Finance Committee and the entire City Council informed of the
biannual updates and other changes to the Utilities Strategic Financial Plan. The 2016 Utilities Strategic
Financial Plan will be published once the current iterative step between Finance and Operations is agreed
upon within the next few months.
ATTACHMENTS
Attachment 1 – CFC Presentation for June 20, 2016
Attachment 2 – CFC AIS on “Utilities Capital Improvement Plans and Strategic Financial Plan
Update” from April 18, 2016
1
Utilities Strategic Financial Plan & Recommendations
Lance Smith, Utilities Strategic Finance Director
6-20-16
Purpose and Direction Sought
Objective:
• Continue the discussion from April 18th
on the Strategic Financial Planning
efforts for Utilities
• Provide an overview of the financial model assumptions and analysis
• Recommend strategic path forward to meet 10 year operational and financial
objectives
Direction Sought:
• Does the Council Finance Committee support the Utilities Strategic Financial
Planning recommendations?
2
Utilities Planning Process
3
Assess Operational
Needs / Risks
Determine Optimal
Solutions &
Mitigations
Identify Anticipated
Capital Projects
Over Planning
Horizon
Establish Capital
Project Prioritization
Criteria
Determine Relative
Weighting of Criteria
Prioritize Projects
with Criteria
Review Financial
Position of Each
Utility
Determine Capital
Investment
Capacities
Recommend
Financial Strategy to
Achieve
Operational
Objectives
Master
Planning
Capital
Improvement
Planning (CIP)
Strategic
Financial
Planning
Next Steps
As Presented at CFC April 18th
• Analyzing the anticipated capital expenses into the long
term financial models
• Perform scenario analyses to understand cash vs. debt
funding impacts on rates, reserves, debt capacity and the
financial position of each Enterprise Fund
• Develop recommendations on rate increases and debt
issuances to meet the expected needs of the Fund
4
Model & Assumptions
Utilities Strategic Financial Plan
Model
• Looks back 10 years and forward 10 years
• Incorporates capital planning
• Utilizes Available Reserves to recognize prior commitments
Assumptions
• O&M inflation based on historical trend
• PRPA wholesale rate increases based on 5/10/16 forecast
5
Objectives
Utilities Strategic Financial Plan
Objectives
• Maintain adequate reserve balances such that:
• Meet Minimum Reserves Policy
• Reserves and revenues adequate to cover near term capital
requirements
• Maintain current credit ratings for each Enterprise Fund and the City
• Avoid rate spikes by limiting rate increases to no more than 5%
annually
6
Model Scenarios
Utilities Strategic Financial Plan
• Scenario 1: No debt; rates adjusted as needed; capital expenses as
in CIP
• Scenario 2: Debt is considered; rates are modestly increased; capital
expenses as in CIP
• Scenario 3: Debt is considered; rates are modestly increased; capital
expenses are smoothed and / or the timeframe extended to
complete capital expenses.
7
8
Light & Power Enterprise Fund
Light & Power Fund CIP
9
2015 Operating Revenue not used for Purchased Power expense was $27.1M
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
501 - Light & Power Fund
Operational Technology & Fiber
Annexations
New Capacity
Substation Improvements
Distribution System Improvements
Ave. Capital Investment 2017-26
Historical Ave Capital 2006-15
Light & Power Shortfall
10
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Light & Power Available Reserves
2017 - 2026
Light & Power
Scenario 1 – Rates Only
11
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Rate Increase
($5,000,000)
($2,500,000)
$0
$2,500,000
$5,000,000
$7,500,000
$10,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
Light & Power
Recommendation
12
Recommended Strategy: Scenario 1
• Capital needs achievable through modest rate increases
• Operating Income and Available Reserves remain healthy
• No debt issuance is necessary
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Rate Increase 2-5% 2-4% 2-4% 2-4% 2-4% 2-4% 2-4% 2-4% 2-4% 2-4%
* Rate increases may change depending on what PRPA needs each year.
Light & Power Potential Rate Drivers
13
Rate Increase 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
PRPA 3.0% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9%
L&P Operations 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1%
L&P Capital Needs 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1%
Income Qualified Rate 1%
CAP Initiatives 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1% 0-1%
Total Not to Exceed 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%
14
Water Enterprise Fund
Water Fund CIP
15
2015 Operating Revenue was $27.7M
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
502 - Water Fund Environmental Services
Water Resources
Water Distribution
Water Production
Ave. Capital Investment 2017-26
Historical Ave Capital 2006-15
($100,000,000)
($80,000,000)
($60,000,000)
($40,000,000)
($20,000,000)
$0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Water Available Reserves
2017 - 2026
Water Shortfall
16
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
($10,000,000)
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0% Rate Increase
Water
Scenario 1 – Rates Only
17
Water
Scenario 1 – Rates Only
18
• CIP not achievable through modest rate increases alone
• Available Reserves are too low
• Uncertainty of Halligan impacts near term capital needs
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Rate Increase 0.0% 1.0% 25.0% 28.0% 6.0% 1.0% 1.0% 0.0% 1.0% 1.0%
*$160M of capital work is expected to be needed between 2017 and 2026 NOT including Halligan.
Water
Scenario 2 – Rates and Debt
19
($5,000,000)
($3,000,000)
($1,000,000)
$1,000,000
$3,000,000
$5,000,000
$7,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0% Rate Increase
Water
Scenario 2 – Rates and Debt
20
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Rate Increase 0-3% 0-3% 0-3% 0-3% 3-5% 3-5% 3-5% 3-5% 3-5% 3-5%
Debt Issuance $35-40M $20-30M $3-5M
*$160M of capital work is expected to be needed between 2017 and 2026 NOT including Halligan.
• Capital needs achievable through modest rate increases and
debt issuance
• Available Reserves are healthy
• Operating Income slightly insufficient
• $55-70M debt issuance is necessary in near term
Water
Scenario 3 – Rates, Debt and Timeline
21
($5,000,000)
($3,000,000)
($1,000,000)
$1,000,000
$3,000,000
$5,000,000
$7,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0% Rate Increase
Water
Recommendation
22
Recommended Strategy: Scenario 3
• Capital needs achievable through modest rate increases, debt
issuances and smoothing capital spend over 10 year horizon
• Available Reserves are healthy but not excessive
• Operating Income is positive
• Debt issuance is less than Scenario 2
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Rate Increase 0-5% 1-5% 1-3% 1-3% 3-5% 3-5% 3-5% 3-5% 3-5% 3-5%
Debt Issuance $30M $20-30M $3-5M
*$160M of capital work is expected to be needed between 2017 and 2026 NOT including Halligan.
Wastewater Enterprise Fund
23
Wastewater Fund CIP
24
2015 Operating Revenue was $22.1M
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
503 - Wastewater Fund
Environmental Services
Wastewater Collection
Water Reclamation
Ave. Capital Investment 2017-26
Historical Ave Capital 2006-15
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Wastewater Available Reserves
2017 - 2026
Wastewater Shortfall
25
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0% Rate Increase
Wastewater
Scenario 1 – Rates Only
26
Wastewater Recommendation
27
Recommended Strategy: Scenario 1
• Capital needs in CIP are met with modest rate increases
• Operating Income and Available Reserves remain healthy
• No debt issuance is necessary
• Regulatory driven nutrient removal estimated to require $60-80M in
2027-30
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Rate Increase 1-3% 1-3% 1-3% 1-3% 1-3% 0-3% 0-3% 0-3% 0-3% 0-3%
* $80M of capital work is expected to be needed between 2017 and 2026.
Stormwater Enterprise Fund
28
Stormwater Fund CIP
29
2015 Operating Revenue was $15.0M
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
504 - Stormwater Fund Boxelder Basin Stormwater
Authority
Stream Rehabilitation
Minor Capital
Major Capital
Ave. Capital Investment 2017-26
Historical Ave Capital 2006-15
($120,000,000)
($100,000,000)
($80,000,000)
($60,000,000)
($40,000,000)
($20,000,000)
$0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Stormwater Available Reserves
2017 - 2026
Stormwater Shortfall
30
Stormwater
Scenario 1 – Rates Only
31
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
($30,000,000)
($25,000,000)
($20,000,000)
($15,000,000)
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0% Rate Increase
Stormwater
Scenario 2 – Rates and Debt
32
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
$100,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0% Rate Increase
Stormwater
Scenario 2 – Rates and Debt
33
• CIP not achievable through modest rate increases and debt
issuance
• Available Reserves are still negative in some years
• $80-90M debt issuance is necessary in near term
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Rate Increase 0.0% 0.0% 0.0% 10.0% 10.0% 0.0% 10.0% 7.9% 0.0% 10.0%
Debt Issuance $35-40M $45-50M $15-20M
*$156M of capital work is expected to be needed between 2017 and 2026.
Stormwater
Scenario 3 – Rates, Debt and Timeline
34
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0% Rate Increase
Stormwater
Recommendation
35
Recommended Strategy: Scenario 3
• CIP is achievable over 15 years rather than 10 years
• Operating Income and Available Reserves remain healthy
• $40-50M debt issuance is necessary in near term
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Rate Increase 0-3% 0-3% 0-3% 0-3% 0-3% 0-3% 0-3% 0-3% 0-3% 0-3%
Debt Issuance $20-25M $20-25M $5-10M
*$156M of capital work is expected to be needed between 2017 and 2031.
Utility-wide Summary of Recommendations
36
Recommendations
37
Manage the operational and capital needs for each Enterprise Fund
as follows:
• Light & Power – Modest rate adjustments
• Water – Rate adjustments less than 5% annually, debt issuance
$50-60M and spreading the CIP more evenly over the 10 years
• Wastewater – Modest rate adjustments
• Stormwater – Minimal rate adjustments, debt issuances $40-50M
and spreading the CIP over 15 years rather than 10 years
Purpose and Direction Sought
Objective:
• Continue the discussion from April 18th
on the Strategic Financial Planning
efforts for Utilities
• Provide an overview of the financial model assumptions and analysis
• Recommend strategic path forward to meet 10 year operational and financial
objectives
Direction Sought:
• Does the Council Finance Committee support the Utilities Strategic Financial
Planning recommendations?
38
39
1
Utilities 2016 Capital Improvement Plans
and
Strategic Financial Plan Update
Financial Plan Update
AIS and Presentation
from April 18, 2016 CFC
Attachment 2
WORK SESSION
AGENDA ITEM SUMMARY TEMPLATE
Staff: Lance Smith, Utilities Strategic Financial Director
SUBJECT FOR DISCUSSION – Utilities 2016 Capital Improvement Plans and Strategic Financial Plan
Update
UEXECUTIVE SUMMARY
The purpose of this agenda item is to provide the Council Finance Committee with an overview of the
planning processes underway within Fort Collins Utilities. The 2016 Capital Improvement Plans (CIPs)
and the process behind them are outlined. The resulting investment projections set the stage for a follow
up discussion in a few months on the long term Utilities Strategic Financial Plan.
The 2016 CIPs have been prioritized in a consistent, quantitative process for the water, wastewater and
stormwater utilities. The 2016 CIP for the electric utility is based largely on a 20 year load assessment
completed earlier this year with Leidos. It is expected that the quantitative prioritization process will be
utilized for the electric utility ahead of the next budget cycle.
Each of these plans is projecting substantial capital investment being needed for each utility over the next
decade. Because the projected levels of investment are not achievable through current operating
revenues alone it will be necessary to further analyze the best means of achieving these operational
needs without negatively impacting the financial integrity of the utilities while maintaining affordable
utilities to the community. This analysis and the long term Utilities Strategic Financial Plan will be the
focus of the follow up discussion in a few months.
UGENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does the Council Finance Committee support proceeding with the analysis and publication of a
long term Utilities Strategic Financial Plan for each utility within the next few months?
2. Does the Council Finance Committee support the Utilities Strategic Financial Plan assumptions?
UBACKGROUND/DISCUSSION
The capital investment required to operate and maintain each of the four utility services provided by the
City to the community requires a long planning horizon and consistent needs assessment and
prioritization in order to ensure that the levels of service established are sustained well into the future.
This process begins with periodically developing and updating Operational Master Plans for each utility.
These plans assess current infrastructure for needs and risks and review expected growth and regulatory
requirements. The Master Plans generate a list of recommended capital projects over the planning
horizon which are then included in the Capital Improvement Plans. The Utility Asset Management
program has developed a rigorous process to identify and prioritize necessary capital investments. This
prioritized list includes the annual capital investment which becomes an input into the long term Strategic
Financial Plan. The financial position of each utility is also reviewed in this step with the output being a
recommended path forward which may involve rate adjustments and future debt issuances in order to
achieve the operational objectives and needs of each utility.
UCapital Improvement Plans
UCapital Improvement Plan Prioritization Process
The list of projects identified through the Master Planning process serve as a basis for the Capital
Improvement Plans (CIPs) being presented here. These projects are prioritized through the process
outlined in the following flow diagram:
Assess Operational
Needs / Risks
Determine Optimal
Solutions &
Mitigations
Identify Anticipated
Capital Projects Over
Planning Horizon
Establish Capital
Project Prioritization
Criteria
Determine Relative
Weighting of Criteria
Prioritize Projects with
Criteria
Review Financial
Position of Each Utility
Determine Capital
Investment
Capacities
Recommend
Financial Strategy to
Achieve Operational
Objectives
Master
Planning
Capital
Improvement
Planning
Strategic
Financial
Planning
Confirm
Prioritization
Criteria
Prioritization
Criteria Rating
Confirm List of
Projects
Rate Projects
Against Criteria
First Prioritized
List of Projects
Review & Adjust if
Necessary
Final List of
Prioritized
Projects
CPRC Review of
Framework &
Projects
Allocate Capital
Dollars to Projects
Determine
Schedule Based
This process involves many stakeholders throughout the Utilities organization from field and facility staff
to the Executive Director. Throughout the Master Planning and CIP development quantitative analysis is
utilized in the assessment of all capital projects. Industry benchmarking, engineering analysis, and Asset
Management Plans are incorporated wherever possible in the processes.
In 2014, a Capital Project Review Committee (CPRC) was created within the Utilities Service Area to
review the project prioritization prior to budget offers being submitted for the Budgeting for Outcomes
process. The CPRC is composed of the following positions:
• Executive Director
• Utilities Strategic Finance Director
• Water Resources Treatment Operations Manager
• Water Engineering & Field Services Manager
• Light & Power Operations Manager
The CPRC is responsible for reviewing and approving the capital project prioritization for each enterprise
fund prior to submitting funding requests to the City’s bi-annual Budgeting for Outcomes (BFO) process.
The process outlined above was first utilized for the 10 year CIPs for the three wet utilities in 2014. This
process has been utilized again for the 2016 CIPs for these utilities. While significant progress has been
made in socializing asset management in the electric utility, there was first a need to complete a 20 year
load and capacity study for the electric distribution system before implementing such a process in 2016.
For the 2016 electric utility CIP preliminary allocations were made to asset categories for system renewal,
known annexations were scheduled and the system capacity additions identified the Leidos study were
included. It is fully expected that the process outlined above will be utilized for the electric utility ahead of
the next budget cycle.
The CPRC has reviewed and approved the initial 2016 Capital Improvement Plans for each of the four
utilities. While the 10 year assessment of available capital may require a change in the timing of some
capital investments over the next few months as the Strategic Financial Plans are finalized, the most
immediate capital needs will be submitted through the Budgeting For Outcomes process for the 2017-18
City Budget.
The prioritization criteria identified and weighted by management and a group of subject matter experts
from the water, wastewater and stormwater utilities are:
Relative Weights
Operational Objectives 502 - Water Fund
503 - Wastewater
Fund
504 - Stormwater
Fund
Safety 38% 36% 52%
Regulatory Compliance 29% 24%
Reliability 13% 24% 22%
Sustainability 4% 9% 16%
Customer Satisfaction 7% 7% 10%
Product Quality 9%
Given the City’s commitment to safety and regulatory compliance, these two criteria were weighted the
most heavily in the project prioritization followed by reliability. The relatively low ranking of customer
satisfaction and product quality reflect the previous efforts in both of these categories and the confidence
that both will remain strong into the future mainly through operational practices rather than capital
investments.
U10 Year Capital Projections
The 10 year CIP for the Light & Power Fund consists of projects needed to provide adequate substation
and distribution capacity to developing areas of the City, anticipated annexations including the Mulberry
Corridor, operational technology improvements and system renewal of existing substations and
underground distribution assets.
The Mulberry Annexation is expected to cost this utility $15M in asset acquisition and integration costs
over several years with some of the preliminary work potentially starting as soon as 2018 ahead of the
annexation itself to minimize acquisition costs. Two new substations will also be required in 2022 and
2023.
The 10 year CIP for the Water Fund includes the construction of the Halligan Reservoir in 2019-20, an
additional treated water storage facility in 2022 and significant renewal costs for the Poudre Pipeline in
the Poudre Canyon potentially starting in 2018. It also includes significant investment in the distribution
system throughout the City as the renewal rate for the distribution assets is increased. Significant
investment has been made in the Water Treatment Facility since its expansion in 1999 allowing for more
attention to be given to the source of supply and distribution systems over the coming decade.
501 - Light & Power
Project or Program 2017 2018 2019 2020 2021
Substation Improvements $ 445,000 $ 590,000 $ 750,000 $ 620,000 $ 605,000
Distribution System Improvements $ 2,950,000 $ 2,536,000 $ 2,843,000 $ 3,452,000 $ 3,263,000
New Capacity $ 4,654,000 $ 3,628,000 $ 1,034,000 $ 1,770,000 $ 2,970,000
Annexations $ 140,000 $ 3,015,000 $ 3,000,000 $ 3,000,000 $ 3,000,000
Operational Technology & Fiber $ 3,150,000 $ 2,027,000 $ 159,000 $ 161,000 $ 163,000
Total $ 11,339,000 $ 11,796,000 $ 7,786,000 $ 9,003,000 $ 10,001,000
Project or Program 2022 2023 2024 2025 2026
Substation Improvements $ 440,000 $ 440,000 $ 440,000 $ 315,000 $ -
Distribution System Improvements $ 1,785,000 $ 1,839,000 $ 1,894,000 $ 1,950,000 $ 2,008,000
New Capacity $ 7,550,000 $ 13,370,000 $ 3,304,000 $ - $ -
Annexations $ 3,000,000 $ - $ - $ - $ -
Operational Technology & Fiber $ 165,000 $ 167,000 $ 169,000 $ 171,000 $ 173,000
Total $ 12,940,000 $ 15,816,000 $ 5,807,000 $ 2,436,000 $ 2,181,000
The 10 year CIP for the Wastewater Fund consists of increased funding for replacement of the collection
system assets over the next decade and some significant investments in asset improvements over the
next few years at the Water Reclamation Facility. Not shown below are the expected costs associated
with additional nutrient removal regulations that are anticipated just beyond the next decade but which are
anticipated to cost between $70-90M soon thereafter. This expense will be included in the financial
analysis incorporating this CIP.
The 10 year CIP for the Stormwater Fund reflects several large infrastructure projects yet to be built,
including over $100M in a 4 year timespan (2019-2022). It is unlikely that the financial position of this
utility will accommodate such spend over 4 years so further analysis will need to be completed and the
operational impacts of delaying some of this investment analyzed further.
502 - Water
Division 2017 2018 2019 2020 2021
Water Production $ 4,046,000 $ 12,821,000 $ 3,174,000 $ 2,535,000 $ 1,000,000
Water Distribution $ 6,957,000 $ 4,610,000 $ 4,537,000 $ 6,483,000 $ 6,757,000
Water Resources $ 553,000 $ 555,000 $ 13,135,000 $ 14,417,000 $ 2,680,000
Environmental Services $ 1,455,000 $ 1,350,000 $ 50,000 $ 50,000 $ 50,000
Total $ 13,011,000 $ 19,336,000 $ 20,896,000 $ 23,485,000 $ 10,487,000
Division 2022 2023 2024 2025 2026
Water Production $ 16,771,000 $ 3,395,000 $ 14,031,000 $ 1,000,000 $ 1,000,000
Water Distribution $ 6,315,000 $ 7,311,000 $ 7,251,000 $ 7,251,000 $ 7,251,000
Water Resources $ 216,000 $ 222,000 $ 228,000 $ 237,000 $ 183,000
Environmental Services $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
Total $ 23,352,000 $ 10,978,000 $ 21,560,000 $ 8,538,000 $ 8,484,000
503 - Wastewater
Division 2017 2018 2019 2020 2021
Water Reclamation $ 7,810,000 $ 10,880,000 $ 5,733,000 $ 3,540,000 $ 3,050,000
Wastewater Collection $ 2,050,000 $ 2,570,000 $ 3,202,000 $ 3,048,000 $ 2,907,000
Environmental Services $ 355,000 $ 30,000 $ 50,000 $ 50,000 $ 50,000
Total $ 10,215,000 $ 13,480,000 $ 8,985,000 $ 6,638,000 $ 6,007,000
Division 2022 2023 2024 2025 2026
Water Reclamation $ 3,050,000 $ 2,050,000 $ 2,050,000 $ 2,259,500 $ 5,362,000
Wastewater Collection $ 3,383,000 $ 3,276,000 $ 3,889,000 $ 4,123,000 $ 3,980,000
Environmental Services $ 50,000 $ 50,000 $ 50,000 $ 50,000 $ 50,000
Total $ 6,483,000 $ 5,376,000 $ 5,989,000 $ 6,432,500 $ 9,392,000
UOperating Revenues Available for Capital Investment
Each utility collects operating revenues through monthly charges to its ratepayers. These revenues are
used to operate and maintain each utility including making capital investments in system renewal and
improvements. The chart below looks at the 2015 realized operating revenues for each of the four utilities
and highlights the amount of operating revenue that was available for such capital investments.
The asterisk denotes that for the electric utility the portion of the operating revenue that is necessary to
pay for the purchased power expenses from Platte River and the portion of the Payments In-Lieu of
Taxes (PILOTs) associated with this expense have been removed to show how the remaining portion of
the operating revenues available to Utilities was allocated. This represents 77% of the total operating
revenues collected from electric customers, or $90.4M of the $117.5M total operating revenue. Platte
River allocates those revenues across many of the same categories separately.
Category 2017 2018 2019 2020 2021
Major Capital $ 5,750,000 $ 6,510,000 $ 25,500,000 $ 22,750,000 $ 24,050,000
Minor Capital $ 1,400,000 $ 1,500,000 $ 1,600,000 $ 1,700,000 $ 1,800,000
Boxelder Basin Stormwater Authority $ 350,000 $ 350,000 $ 350,000 $ 350,000 $ 350,000
Stream Rehabilitation $ 350,000 $ 1,400,000 $ 800,000 $ 850,000 $ 900,000
Total $ 7,850,000 $ 9,760,000 $ 28,250,000 $ 25,650,000 $ 27,100,000
Category 2022 2023 2024 2025 2026
Major Capital $ 17,950,000 $ 6,250,000 $ 5,750,000 $ 3,750,000 $ 4,280,000
Minor Capital $ 1,900,000 $ 2,000,000 $ 2,100,000 $ 2,200,000 $ 2,300,000
Boxelder Basin Stormwater Authority $ 350,000 $ 350,000 $ 350,000 $ 350,000 $ 350,000
Stream Rehabilitation $ 950,000 $ 1,000,000 $ 1,050,000 $ 1,100,000 $ 1,150,000
Total $ 21,150,000 $ 9,600,000 $ 9,250,000 $ 7,400,000 $ 8,080,000
33%
46%
35%
19%
19%
11%
10%
15%
9%
11%
7%
5%
7%
12%
13%
27%
6%
5%
6%
16%
10% 15%
30% 34%
0%
20%
40%
60%
80%
100%
Light & Power * Water Wastewater Stormwater
2015 Expenses as % of Operating Revenues
Operating Revenues
Available for Capital
Energy Services
PILOTs
Debt Service
Other Transfers
CS&A
UShortfall of Forecasted Operational Revenues and Development Fees
As the chart above shows, within each Enterprise Fund’s operating revenues there is some capacity to
make capital investment in infrastructure. This is appropriate and necessary to ensure that infrastructure
that has aged beyond its useful life can be renewed. Development fees, or Plant Investment Fees (PIFs),
are also collected as new development occurs within the utility service area. PIFs cover both the
additional cost of connecting the new customers to the existing infrastructure and the portion of existing or
new capacity that will be utilized by the new customers. As the tables above from the CIPs show, capital
investments can vary significantly more than operating revenues from one year to the next.
PIFs also fluctuate significantly from one year to the next. Debt service varies over time as debt is
incurred or retired. Operational expenses also vary year over year depending on the amount of proactive
replacement versus reactive replacement being done. For these reasons a ten year average is
considered when estimating future availability of operating revenues and PIFs for capital investment.
The tables below show how on a year by year basis the portion of operating revenues available for capital
investments and the average annual PIFs are not sufficient to meet the projected capital investments
needed for the utilities even when the current cash reserves are fully utilized above the minimum required
reserves per City Financial Policies. A modest growth in operating expenses of 1.5% is assumed year
over year which is why the amount available through operating revenues decreases over the 10 years.
The first two tables show the electric utility has sufficient capacity within its existing rates and cash
reserve to support the capital investment needed for the first 6 years assuming no other appropriations
are made for use of the reserves.
10 Year Average Operating
Revenues Available for Capital $5,000,000 $3,600,000 $3,000,000 $4,600,000
10 Year Average PIF Revenues
Available for Capital $3,400,000 $4,000,000 $2,900,000 $700,000
10 Year Average Total
Revenues Available for Capital $8,400,000 $7,600,000 $5,900,000 $5,300,000
501 - L&P Fund 2017 2018 2019 2020 2021
Capital Investment from CIP $ 11,340,000 $11,800,000 $7,790,000 $9,000,000 $10,000,000
Available through Operating Revenues
& PIFs
$8,400,000 $8,270,000 $8,150,000 $8,030,000 $7,910,000
Annual Excess / (Shortfall) ($2,940,000) ($3,530,000) $360,000 ($970,000) ($2,090,000)
Available Working Capital $15,000,000 $12,060,000 $8,530,000 $8,890,000 $7,920,000
Running Shortfall $12,060,000 $8,530,000 $8,890,000 $7,920,000 $5,830,000
501 - L&P Fund 2022 2023 2024 2025 2026
Capital Investment from CIP $12,940,000 $15,820,000 $5,810,000 $2,440,000 $2,180,000
Available through Operating Revenues
& PIFs
$7,790,000 $7,670,000 $7,560,000 $7,440,000 $7,330,000
Annual Excess / (Shortfall) ($5,150,000) ($8,150,000) $1,750,000 $5,000,000 $5,150,000
Available Working Capital $5,830,000 $680,000 ($7,470,000) ($5,720,000) ($720,000)
Running Shortfall $680,000 ($7,470,000) ($5,720,000) ($720,000) $4,430,000
The next two tables look at the water utility. Because there is little unappropriated reserves currently
available in this utility, the current rates are not sufficient to meet the anticipated capital needs in 2017.
Over the next decade the shortfall is estimated to be $86M.
The wastewater utility has a significant unappropriated reserve which will allow it to support the capital
investments needed though the first 5 years without a need for a rate adjustment. However, anticipated
new regulatory requirements for nutrient removal and temperature thresholds are expected to require an
additional $60-70M just beyond the ten year planning horizon. This represents an anticipated capital
investment equivalent to 3 years of operating revenue.
502 - Water Fund 2017 2018 2019 2020 2021
Capital Investment from CIP $ 13,010,000 $19,340,000 $20,900,000 $23,490,000 $10,490,000
Available through Operating Revenues
& PIFs
$ 7,600,000 $7,490,000 $7,370,000 $7,260,000 $7,150,000
Annual Excess / (Shortfall) ($5,410,000) ($11,850,000) ($13,530,000) ($16,230,000) ($3,340,000)
Available Working Capital $3,000,000 ($2,410,000) ($14,260,000) ($27,790,000) ($44,020,000)
Running Shortfall ($2,410,000) ($14,260,000) ($27,790,000) ($44,020,000) ($47,360,000)
502 - Water Fund 2022 2023 2024 2025 2026
Capital Investment from CIP $23,350,000 $10,980,000 $21,560,000 $8,540,000 $8,480,000
Available through Operating Revenues
& PIFs
$7,050,000 $6,940,000 $6,840,000 $6,730,000 $6,630,000
Annual Excess / (Shortfall) ($16,300,000) ($4,040,000) ($14,720,000) ($1,810,000) ($1,850,000)
Available Working Capital ($47,360,000) ($63,660,000) ($67,700,000) ($82,420,000) ($84,230,000)
Running Shortfall ($63,660,000) ($67,700,000) ($82,420,000) ($84,230,000) ($86,080,000)
503 - Wastewater Fund 2017 2018 2019 2020 2021
Capital Investment from CIP $ 10,220,000 $13,480,000 $8,990,000 $6,640,000 $6,010,000
Available through Operating Revenues
& PIFs
$ 5,900,000 $5,810,000 $5,720,000 $5,640,000 $5,550,000
Annual Excess / (Shortfall) ($4,320,000) ($7,670,000) ($3,270,000) ($1,000,000) ($460,000)
Available Working Capital $17,000,000 $12,680,000 $5,010,000 $1,740,000 $740,000
Running Shortfall $12,680,000 $5,010,000 $1,740,000 $740,000 $280,000
503 - Wastewater Fund 2022 2023 2024 2025 2026
Capital Investment from CIP $6,480,000 $5,380,000 $5,990,000 $6,430,000 $9,390,000
Available through Operating Revenues
& PIFs
$5,470,000 $5,390,000 $5,310,000 $5,230,000 $5,150,000
Annual Excess / (Shortfall) ($1,010,000) $10,000 ($680,000) ($1,200,000) ($4,240,000)
Available Working Capital $280,000 ($730,000) ($720,000) ($1,400,000) ($2,600,000)
Running Shortfall ($730,000) ($720,000) ($1,400,000) ($2,600,000) ($6,840,000)
The stormwater utility has such a modest unappropriated reserve balance that the capital investment
needed in 2017 immediately produces a funding shortfall.
UIs Growth Paying Its Own Way?
Given the forecasted shortfall for capital investment it is reasonable to ask if growth is paying for itself.
Each Enterprise Fund assesses PIFs based on the actual cost of connecting new customers including the
amount of system capacity being allocated to those customers. The determination of what is included in
and how the PIFs are calculated is through a cost of service model similar to the cost of service models
that are updated every two years for existing ratepayers. The PIF model utilized by the three wet utilities
was last reviewed by an outside entity in 2009 and is based on industry best principles. In 2016 a
consultant is being contracted to review and modify as necessary the existing Light & Power PIF model.
The intention of all of the utilities’ PIF models is that growth is paying its own way.
It is important, however, to recognize that capacity is normally built ahead of the new development
requiring such capacity. This is done to both ensure that adequate capacity exists so as to not be a
barrier to economic growth and because capacity is usually added in larger amounts than a single new
customer may need so as to realize the economies of scale for such large capital investments. For
example, the Water Treatment Facility was last expanded in 1999 to its present treatment capacity. This
capacity is expected to be sufficient to serve all customers even through buildout of the water utility’s
service territory. That expansion was paid for through existing cash reserves, the portion of operating
revenues available for capital investment and revenue bonds. As new customers are connected to the
water system the PIFs assessed to those customers will recover the amounts paid by existing customers
for the portion of that capital investment now being allocated to the new customers.
504 - Stormwater Fund 2017 2018 2019 2020 2021
Capital Investment from CIP $ 7,850,000 $9,760,000 $28,250,000 $25,650,000 $27,100,000
Available through Operating Revenues
& PIFs
$ 5,300,000 $5,220,000 $5,140,000 $5,070,000 $4,990,000
Annual Excess / (Shortfall) ($2,550,000) ($4,540,000) ($23,110,000) ($20,580,000) ($22,110,000)
Available Working Capital $2,000,000 ($550,000) ($5,090,000) ($28,200,000) ($48,780,000)
Running Shortfall ($550,000) ($5,090,000) ($28,200,000) ($48,780,000) ($70,890,000)
504 - Stormwater Fund 2022 2023 2024 2025 2026
Capital Investment from CIP $21,150,000 $9,600,000 $9,250,000 $7,400,000 $8,080,000
Available through Operating Revenues
& PIFs
$4,910,000 $4,840,000 $4,770,000 $4,700,000 $4,630,000
Annual Excess / (Shortfall) ($16,240,000) ($4,760,000) ($4,480,000) ($2,700,000) ($3,450,000)
Available Working Capital ($70,890,000) ($87,130,000) ($91,890,000) ($96,370,000) ($99,070,000)
Running Shortfall ($87,130,000) ($91,890,000) ($96,370,000) ($99,070,000) ($102,520,000)
UNext Step: Strategic Financial Planning
UEstimated Rate Increases Required to Avoid Issuing Debt
Each of the four utilities show a shortfall in available funding for the needed capital investment at some
point over the next decade with the water and stormwater utilities each showing a shortfall in every year.
This is only the initial step in developing the Strategic Financial Plan. While it does show that there will
need to be rate increases and debt issuances over the coming decade in order to achieve the capital
investment necessary, a reasonable path forward will be developed for each utility and presented to the
City Council for further consideration.
The next table shows the amount of annual rate increase that would be necessary to meet these
shortfalls year by year for each utility. This assumes there is no debt issuance for any utility and
operational expenses increases with inflation at 1.5% annually. Because capital investments fluctuate
from one year to the next, rate decreases are also necessary from year to year to avoid building up
excessive reserves. While the average annual rate change only exceeds 6% for the wastewater utility
and the net 10 year rate increases are relatively small, the year over year volatility would not be
acceptable to our community.
URelative Rate Increases
Fort Collins citizens and businesses benefit from the low cost of utility services along with many
neighboring communities. Through long term planning and prudent operations, the City has maintained
these competitive rates through a rate philosophy of gradual, modest rate adjustments. Below is a table
comparing the recent rate increases of several neighboring communities to those of Fort Collins Utilities.
Utility 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
10 Yr Ave Annual
Rate Change
Light & Power -38% 81% -11% 4% 3% 9% 8% -25% -11% -1% 2%
Water 8% 29% 4% 6% -28% 39% -27% 32% -29% 0% 4%
Wastewater -53% 179% -14% -8% -2% 2% -4% 3% 2% 12% 12%
Stormwater 4% 26% 97% -7% 4% -16% -37% -2% -9% 4% 6%
2014 2015 2016 2014 2015 2016
Ft Collins 2.0% 1.9% 3.2% 4.0% 0.0% 0.0%
Loveland 8.4% 0.9% 5.5% 19.0% 13.1% 9.0%
Longmont 8.2% 4.9% 0.0% 4.5% 0.0% 7.0%
Greeley 5.8% 6.6% -4.4% 7.9% 3.7% 0.7%
Boulder 5.8% 6.6% -4.4% 3.0% 3.9% 4.7%
Colorado Springs 0.0% 3.7% 5.7% 11.2% 11.7% 0.0%
Electric Water
Relative rate increases can be misleading if not put into context of actual charges. The table below
shows the actual charges for a typical residential customer.
2014 2015 2016 2014 2015 2016
Ft Collins 3.0% 3.0% 3.0% 0.0% 0.0% 0.0%
Loveland 3.9% 11.1% 21.7% 0.0% 9.6% 9.6%
Longmont 16.7% 16.4% 15.1% 0.0% 68.0% 0.0%
Greeley -2.1% -0.7% 3.4% 0.0% 14.6% 0.0%
Boulder 5.0% 1.2% 27.5% 3.0% 2.9% 75.0%
Colorado Springs 0.0% 0.0% 0.0% N/A N/A N/A
Wastewater Stormwater
2016 2016 2016 2016 2016
Ft Collins $ 68.21 $ 43.57 $ 35.07 $ 14.26 $ 161.11
Loveland $ 67.01 $ 34.00 $ 25.43 $ 12.48 $ 138.92
Longmont $ 63.25 $ 31.47 $ 33.63 $ 13.05 $ 141.40
Greeley $ 79.67 $ 51.35 $ 20.62 $ 6.45 $ 158.09
Boulder $ 79.67 $ 35.84 $ 29.08 $ 13.46 $ 158.05
Colorado Springs $ 85.46 $ 77.82 $ 31.27 N/A $ 194.55
Electric Water Wastewater Stormwater Total
UDebt Schedules
Given the anticipated funding shortfall to meet the expected capital investments required in the Enterprise
Funds over the next decade and the variable nature of such capital investments, it will be necessary from
time to time to issue revenue bonds in a prudent manner to minimize rate adjustments and still ensure
that adequate capacity exists for new development and existing assets are renewed as needed to
maintain the level of service and reliability expected by our community. Below are the annual debt
service costs for all current debt by Enterprise Fund. The annual debt service costs depend on both the
term of the debt issuance (typically 10 or 20 years) and the interest rate which in turn depends on the
bond rating at issuance. Just for some context, a $10M debt issuance may cost $700-900K annually for a
20 year term or $1.1-1.3M for a 10 year term.
The Light & Power Fund issued its first debt in many years in 2010 to pay for the portion of the Advanced
Meter Fort Collins project not covered through the matching federal grants. This debt has a current bond
rating of AA- and will be retired in 2020.
The Water Fund has a longer history of issuing debt for capital investment. In part because the size of
some of the capital projects can exceed several years of operating revenue, making it difficult to have
sufficient cash reserves for such large investments. The Water Enterprise Fund debt has a current bond
rating of AAA. As the chart shows this Fund has carried significant debt service costs in the recent past
and most of this debt will be retired over the next few years.
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Annual Debt Service
501 - Light & Power Fund
The Wastewater Enterprise Fund has issued several 20 year bonds. The bond rating for the Wastewater
utility is currently AA+.
The Stormwater Fund has issued debt to support the initial build-out of the stormwater infrastructure. The
bond rating for the Stormwater Fund is AA+, as well. The debt service costs for this Fund will be reduced
over the next few years as existing debt is retired. This will modestly increase the amount of operating
revenue available for either new debt service or directly for capital investments.
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Annual Debt Service
502 - Water Fund
2002 GO WATER
2009 WATER
2008 WATER
1998 WATER
2003 WATER SUBORD
1997 WATER
1999 WATER
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Annual Debt Service
503 - Wastewater Fund
2010 SEWER
2009 SEWER
2005 SEWER
1992 SEWER
UConclusion
As shown there will be a need for considerable capital investment in each of the utility services in the
coming decade. This is not unexpected given the growth of our community and the high levels of service
required to support its economic development and sustainability. The low utility rates and high level of
customer satisfaction are the results of City Leadership, both past and present, showing tremendous
foresight and commitment to these municipal services and to the planning, operational and customer
focused efforts of City staff. This update to the Council Finance Committee is intended to maintain this
tradition through a long term Utilities Strategic Financial Plan.
Staff will continue the analysis from inputting the capital needs into the long term financial models for
each utility. These capital investment needs along with the projected trends in operational costs and
uncertainties in revenue and expense projections will be modeled to understand the rate implications and
need for debt issuances over the next decade. The model inputs, methodology and outputs will then be
presented to the Council Finance Committee within a few months including a recommended path for each
utility for the 2017-18 City Budget being considered by the City Manager and the Mayor and City Council.
UAttachments
Light & Power Enterprise Fund Capital Improvement Plan
Water Enterprise Fund Capital Improvement Plan
Wastewater Enterprise Fund Capital Improvement Plan
Stormwater Enterprise Fund Capital Improvement Plan
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Annual Debt Service
504 - Stormwater Fund
2011 STORMWATER
2007B STORMWATER
2007A
STORMWATER
2002 STORMWATER
REFUND
Council Finance Committee – Utilities 2016 Capital
Improvement Plans and Strategic Financial Plan
Lance Smith, Utilities Financial Planning Director
04/18/16
Purpose and Direction Sought
Objective:
• Review CIP process and prioritization criteria
• Review the 2016 Ten Year Capital Improvement Plans
• Review future funding requirements & considerations
• Outline next steps
Direction Sought:
• Does the Council Finance Committee support proceeding with analysis of a
long term Utilities Strategic Financial Plan?
• Does the Council Finance Committee support the Utilities Strategic Financial
Planning assumptions?
2
How do the Capital Improvement Plans (CIPs) and
Strategic Financial Plan (SFP) fit into the Utilities
planning process?
3
Utilities Planning Process
4
Assess Operational
Needs / Risks
Determine Optimal
Solutions &
Mitigations
Identify Anticipated
Capital Projects
Over Planning
Horizon
Establish Capital
Project Prioritization
Criteria
Determine Relative
Weighting of Criteria
Prioritize Projects
with Criteria
Review Financial
Position of Each
Utility
Determine Capital
Investment
Capacities
Recommend
Financial Strategy to
Achieve
Operational
Objectives
Master
Planning
Capital
Improvement
Planning
Strategic
Financial
Planning
We are here now
CIP Team Members
Senior Operations Managers
Strategic Finance Director
Division Managers
Engineers
Asset Manager
Field & Facility Staff
5
Capital Improvement
Planning Process
Inputs Used
Master Plans
Asset Management Plans
System Operations Knowledge
Metrics from Industry
Engineering Analyses
Regulatory Requirements
• Objectives chosen based on
Effective Utility Management
• Those objectives are
represented in the Utility
Scorecard
6
Capital Improvement
Planning Process
7
Capital Improvement
Planning Process
8
Relative Weights
Operational Objectives 502 - Water Fund
503 - Wastewater
Fund
504 - Stormwater
Fund
Safety 38% 36% 52%
Reliability 13% 24% 22%
Regulatory Compliance 29% 24%
Sustainability 4% 9% 16%
Customer Satisfaction 7% 7% 10%
Product Quality 9%
Total: 100% 100% 100%
Capital Improvement
Planning Process
What are the capital needs for the next 10 years as
identified in the Capital Improvement Plans?
9
Light & Power Fund
CIP Major Projects
10
New Capacity
Projects
Annexations Replacement
Projects
Operational
Technology
New circuits Mulberry Corridor
(anticipate some asset
replacement ahead of
actual asset acquisition)
Distribution System Mapping system
conversion
New duct banks Leistikow Substations Automated
Distribution
Management System
New substations in
2022 & 2023
Arapahoe Bend Fiber Optics
Fiber Optic
Management
Software
Riverwalk CMMS
Implementation
Light & Power Fund CIP
11
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
501 - Light & Power Fund Operational Technology
& Fiber
Annexations
New Capacity
Substation Improvements
Distribution System
Improvements
2015 Operating Revenue not used for Purchased Power expense was $27.1M
Water Fund
CIP Major Projects
12
Water Distribution Water Production Water Resources
Increase in renewal rate for
a sustainable system
Safety Projects Halligan Reservoir
2019-2020
Focus in downtown area Poudre Canyon Pipeline
Evaluation & Rehabilitation
Additional Treated Water
Storage
Removal of chlorine gas for
disinfection
Water Fund CIP
13
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
502 - Water Fund Environmental Services
Water Resources
Water Distribution
Water Production
2015 Operating Revenue was $27.7M
Wastewater Fund
CIP Major Projects
14
Wastewater Collection Water Reclamation
Increase in renewal rate for sustainable
system
Replacement of aging equipment and
infrastructure
Focus in downtown area Preparation for regulatory requirements for
nutrient removal
Study to determine source of excess flow in
the collection system
Nutrient projects are currently scheduled
for 2027.
Wastewater Fund CIP
15
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
503 - Wastewater Fund
Environmental Services
Wastewater Collection
Water Reclamation
2015 Operating Revenue was $22.1M
Stormwater Fund
CIP Major Projects
16
Stormwater Capital Projects
Replacement of existing infrastructure
Rehabilitation of streams in Fort Collins
Buildout of major flood conveyance infrastructure
1. Magnolia Street Outfall – 2 phases
2. Oak Street Outfall
3. Myrtle Street
Stormwater Fund CIP
17
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Annual Capital Investment
504 - Stormwater Fund
Boxelder Basin Stormwater
Authority
Stream Rehabilitation
Minor Capital
Major Capital
2015 Operating Revenue was $15.0M
Funding requirements and considerations
18
Capital Investment
from Operating Revenues
19
33%
46%
35%
19%
19%
11%
10%
15%
9%
11%
7%
5%
7%
12%
13%
27%
6%
5%
6%
16%
10% 15%
30% 34%
0%
20%
40%
60%
80%
100%
Light & Power * Water Wastewater Stormwater
2015 Expenses as % of Operating Revenues
Operating Revenues
Available for Capital
Energy Services
PILOTs
Debt Service
Other Transfers
CS&A
Operations
* Purchased Power expenses, PILOTs associated with it and the necessary operating revenue for this expense have been removed for this table.
Capital Investment
from Operating Revenues
20
10% 15%
30% 34%
0%
20%
40%
60%
80%
100%
Light & Power * Water Wastewater Stormwater
2015 Expenses as % of Operating Revenues
Operating Revenues
Available for Capital
$5,000,000 $3,600,000 $3,000,000 $4,600,000
10 Yr Ave Operating Revenues
Available for Capital
$3,400,000 $4,000,000 $2,900,000 $700,000
10 Yr Ave PIF Revenues
Available for Capital
$8,400,000 $7,600,000 $5,900,000 $5,300,000
10 Yr Ave Total Revenues
Available for Capital
Variability of PIFs
21
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Plant Investment Fees Collected 2006-2015
L&P
Water
Wastewater
Stormwater
If we maintain the existing utility rates and allow
operating expenses to increase with inflation (1.5%
annually), how would funding all projects as
outlined impact fund balances?
22
Light & Power Shortfall
23
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Light & Power Available Reserves
2017 - 2026
($100,000,000)
($80,000,000)
($60,000,000)
($40,000,000)
($20,000,000)
$0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Water Available Reserves
2017 - 2026
Water Shortfall
24
($10,000,000)
($5,000,000)
$0
$5,000,000
$10,000,000
$15,000,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Wastewater Available Reserves
2017 - 2026
Wastewater Shortfall
25
($120,000,000)
($100,000,000)
($80,000,000)
($60,000,000)
($40,000,000)
($20,000,000)
$0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Stormwater Available Reserves
2017 - 2026
Stormwater Shortfall
26
Rate increases will be necessary to fully implement
the CIPs.
How do recent rate adjustments compare to other
communities?
27
8.4% 8.2%
6.6% 6.6%
-4.4% -4.4%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Ft Collins Loveland Longmont Greeley Boulder Colorado
Springs
Annual Electric Rate Adjustments
2014 2015 2016
Residential Electric Increases
28
Xcel Energy serves Greeley and Boulder and has a Power Cost Adjustment
factor which was reduced in 2016 due to low natural gas prices
19.0%
11.2%
13.1%
11.7%
0.0%
5.0%
10.0%
15.0%
20.0%
Ft Collins Loveland Longmont Greeley Boulder Colorado
Springs
Annual Water Rate Adjustments
2014 2015 2016
Residential Water Increases
29
Residential Wastewater Increases
30
21.7%
27.5%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Ft Collins Loveland Longmont Greeley Boulder Colorado
Springs
Annual Wastewater Rate Adjustments
2014 2015 2016
Residential Stormwater Increases
31
68.0%
75.0%
0.0%
20.0%
40.0%
60.0%
80.0%
Ft Collins Loveland Longmont Greeley Boulder
Annual Stormwater Rate Adjustments
2014 2015 2016
Residential Utility Rate Comparison
32
2016 2016 2016 2016 2016
Ft Collins $ 68.21 $ 43.57 $ 35.07 $ 14.26 $ 161.11
Loveland $ 67.01 $ 34.00 $ 25.43 $ 12.48 $ 138.92
Longmont $ 63.25 $ 31.47 $ 33.63 $ 13.05 $ 141.40
Greeley $ 79.67 $ 51.35 $ 20.62 $ 6.45 $ 158.09
Boulder $ 79.67 $ 35.84 $ 29.08 $ 13.46 $ 158.05
Colorado Springs $ 85.46 $ 77.82 $ 31.27 N/A $ 194.55
Electric Water Wastewater Stormwater Total
Given the rate philosophy of modest and gradual
adjustments, what are the next steps in addressing
the anticipated shortfalls that would result from
implementing the CIPs?
33
Next Steps
Utilities Strategic Financial Plan
• Analyzing the anticipated capital expenses into the long
term financial models
• Perform scenario analyses to understand cash vs. debt
funding impacts on rates, reserves, debt capacity and the
financial position of each Enterprise Fund
• Develop recommendations on rate increases and debt
issuances to meet the expected needs of the Fund
34
Assumptions
Utilities Strategic Financial Plan
• Maintain adequate reserve balances
• Maintain current credit ratings for each Enterprise Fund and the City
• Avoid rate spikes by limiting rate increases to no more than 5% annually
• Adjust rates if:
• Previous 3 years have negative operating income
• Debt coverage ratio is less than 2.0
• Working Capital is forecasted to be below minimum required reserve within
5 years
• Issue debt if:
• Capital expenses are forecasted to exceed available reserves over the
next 5 years
35
Purpose and Direction Sought
Objective:
• Review CIP process and prioritization criteria
• Review the 2016 Ten Year Capital Improvement Plans
• Review future funding requirements & considerations
• Outline next steps
Direction Sought:
• Does the Council Finance Committee support proceeding with analysis of a
long term Utilities Strategic Financial Plan?
• Does the Council Finance Committee support the Utilities Strategic Financial
Planning assumptions?
36
37
Back-Up
38
When will existing debt be retired?
39
Light & Power Debt Schedule
40
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Annual Debt Service
501 - Light & Power Fund
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Annual Debt Service
502 - Water Fund
2002 GO WATER
2009 WATER
2008 WATER
1998 WATER
2003 WATER SUBORD
1997 WATER
1999 WATER
Water Debt Schedule
41
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Annual Debt Service
503 - Wastewater Fund
2010 SEWER
2009 SEWER
2005 SEWER
1992 SEWER
Wastewater Debt Schedule
42
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Annual Debt Service
504 - Stormwater Fund
2011 STORMWATER
2007B STORMWATER
2002 STORMWATER
REFUND
2002 STORMWATER
2001 STORMWATER
Stormwater Debt Schedule
43
How do the expected levels of capital investment
compare to historical investment levels?
44
Light & Power
Historical Capital Investment
45
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 10 Yr
Ave
501 - Light & Power Capital Investments
New Appropriations
Capital Spent
10 Yr CIP Ave (2017-2026)
Water
Historical Capital Investment
46
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 10 Yr
Ave
502 - Water Capital Investments
New Appropriations
Capital Spent
10 Yr CIP Ave (2017-2026)
Wastewater
Historical Capital Investment
47
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 10 Yr
Ave
503 - Wastewater Capital Investments
New Appropriations
Capital Spent
10 Yr CIP Ave (2017-2026)
Stormwater
Historical Capital Investment
48
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 10 Yr
Ave
504 - Stormwater Capital Investments
New Appropriations
Capital Spent
10 Yr CIP Ave (2017-2026)
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Jason Licon, Airport Director
Date: 6-20-16
SUBJECT FOR DISCUSSION
Airport Supplementary Appropriation Request
EXECUTIVE SUMMARY
The City Council approved Northern Colorado Regional Airport’s Strategic Plan is a guiding
document that prioritizes goals and tactics for Northern Colorado Regional Airport Commission
and Staff. Included in the plan are five goals including: 1) protecting the Airport from non-
compatible land use within the airport influence area, 2) creation of a more sustainable business
model, 3) encouragement of private investment, 4) revising the Airport’s governance structure,
and 5) rebranding the Airport and enhancing communications and public engagement.
Strategic goals that have been achieved include the revision of the Airport’s governance
structure, and the investigation and reporting of land use adjacent to the Airport including the
protections that exist from residential encroachment. The strategic goals that remain focus on
the financial and social sustainability aspects of the Airport and require additional refinement
and resources. The Airport’s current resources are used to maintain federal regulatory standards
and general operations and maintenance. The additional funding being requested will be used to
assist with the achievement of remaining strategic objectives including the addition of a staff
position tasked with business development and marketing, and creating a communications and
marketing plan. Additional work includes the clarification of the Airport’s market potential,
updating the Airport’s business plan, and creation of systems that will enhance productivity,
streamline decision making, and enhance financial leveraging opportunities from Federal and
State resources for future Airport capital and operational needs.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Provide direction on the proposed appropriation of Airport reserve funds in order to achieve
remaining strategic plan objectives.
BACKGROUND/DISCUSSION (details of item – History, current policy, previous Council
actions, alternatives or options, costs or benefits, considerations leading to staff conclusions, data
and statistics, next steps, etc.)
The Northern Colorado Regional Airport Commission has approved a staff recommended work
plan designed to help achieve strategic goals within the Council approved Airport Strategic Plan.
These goals are:
• Create a sustainable business model
• Encourage private investment
• Rebrand the Airport and more productively engage the public
In order achieve these goals and to continue providing the operational support for basic airport
functions, additional resources are required. The estimated costs to achieve said goals is
$165,000 for 2016 from airport funding reserves. The Airport’s reserve fund is used for capital
projects including providing grant matching funding and general maintenance and repair of
infrastructure ineligible for Federal or State funding. The unassigned balance of the Airport’s
reserve fund is $1.7 million, and the appropriation that will be requested from City Council will
be $82,500 from each City owner. The Airport’s budget is approved and appropriated by both
City Councils and requires a supplemental appropriation to utilize.
ATTACHMENT
Fort Collins Finance Committee Presentation 6-20-16
Airport Supplementary Funding
Appropriation Request
Airport Strategic Plan
• The Strategic Plan was approved and adopted by both City
Councils in 2015.
• The plan has five primary components, two that have been
accomplished:
1. Protect against encroachment from non-compatible land uses
2. Create a sustainable business model with potential revenue streams and
financing
3. Encourage immediate private investment
4. Revise the Airport governance structure and authority for the governing
board
5. Rebrand the Airport and more productively engage the public
Request & Desired Outcome
• A work plan was created and approved by the Airport Commission to
accomplish the remaining strategic plan goals
• Request is to appropriate $165,000 from the Airport reserve fund
• Existing budget will not include resources to achieve goals and in order
to do so requires additional funding support
• Additional cost will require additional funding requests of the Cities to
cover estimated expenses
• 2017 - $82,500 from each
• 2018 - $65,000 from each
• Supplemental funding will be reduced over time as a result of goal
accomplishment according to financial forecasting
Estimated Cost Detail
2016 2017 2018
Business development and marketing FTE $ 40,000 $ 100,000 $ 100,000
Clarify market & potential $ 20,000
Triad TTF agreement resolution $ 20,000
Business plan update $ 15,000
Create communications & PR plan $ 35,000
Create marketing displays $ 10,000
Rebranding including airport signage $ 40,000
Advertising & event marketing $ 20,000 $ 30,000 $ 30,000
Total Ongoing Costs $ 60,000 $ 130,000 $ 130,000
Total One-Time Costs $ 105,000 $ 35,000 $ -
Total $ 165,000 $ 165,000 $ 130,000
Goals to be Accomplished
• Add an additional staff member that will be tasked specifically on
Airport development and marketing
• Clarify the Airport’s market potential for aviation and non-aviation
use
• Rebrand the Airport and create a communications and public
relations plan to be used for marketing & public engagement
• Create resolution to the existing through the fence agreement
• Update the 2009 Airport business plan
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Rick Richter, Director of Infrastructure Services
Dean Klingner, Capital Projects Manager
Matt Baker, Street Oversizing Program Manager
Date: June 20, 2016
SUBJECT FOR DISCUSSION
Transportation Capital Expansion Fee (Street Oversizing) Assessment
EXECUTIVE SUMMARY
This is the second Council Finance Committee meeting for this item. The City of Fort Collins
has retained TischlerBise, Inc. as a consultant to assist the City with the assessment of its
existing Transportation Capital Expansion Fee Program (Street Oversizing Capital Expansion
Fee Program).
At the November 18P
th
P 2015 Finance Committee Meeting, staff highlighted the process of
updating the base assumptions and data used to calculate impact transportation impact fees. The
proposed changes to the program presented:
• Changing the name from “Street Oversizing” to “Transportation Capital Expansion Fee”
• Using Vehicle Miles Travelled (VMT) as the basis for determining impact, instead of
trips generated.
• Transportation impact fees to be assessed by dwelling size instead of unit type, similar to
how all other Capital Expansion fees are assessed. Capital Expansion Fees in general are
perceived to affect the affordability of homes, and staff recognizes the sensitivity of fee
increases.
• Simplify the transportation impact fee schedule from 43 categories of use to only a
handful; Residential (by size of unit) and two broad categories for commercial and
industrial.
Staff has now developed proposed fee rates based on the new methodology for consideration.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
• Are there any questions or concerns about the adjustments being considered to the
Transportation Capital Expansion fees?
Are there any comments regarding the idea of further increasing the fee to capture
development impacts on capacity improvements, such as intersections, roundabouts, and
traffic signal improvements?
The methodology of the existing Street Oversizing Program uses trips to determine impact.
Since individual trips from commercial and industrial uses are about 3 times the trips from
residential, they pay a proportionally higher amount in fees.
The new methodology of the Transportation Capital Expansion Fee adds length of trip as a
variable into the calculation. Vehicle Miles Travelled (VMT) is a more accurate measure of
impacts to capacity of the street network. Under the new methodology, residential trips are
longer, so residential uses would pay proportionally higher amount in fees.
The total amount of fees collected would remain the same for the base calculation under either
methodology.
A primary difference in the new methodology is that it is based on the capacity of the street
network, not just street improvements adjacent to new development. This would allow some
capacity improvements related to development, such as intersection improvements, to be
included in the fee. This would expand the capture of development related impacts. Adding these
additional improvements would increase the fees and the amount of the fee collection by 4% to
20%. This additional fee increase would provide a partial funding source for intersection
improvements which would help congestion at critical intersections impacted by development.
The current Street Oversizing model (based on specific improvements) required an annual
contribution from the City’s General Fund to for regional growth trips complete the funding for
developer constructed roadways. With the new capacity based model, development capacity is
not tied to specific roadway improvements, so the City’s General Fund contribution would no
longer be needed to augment the construction. Instead, the regional and background capacity
funding would need to be appropriated on a project by project basis.
Implementation would significantly lower the commercial fees, while significantly raising the
residential fees. Staff suggests phasing in the new fees over a three year period to help mitigate
any adverse effects to home builders and affordability.
BACKGROUND The City of Fort Collins charges new developments Capital Expansion Fees
for their proportionate share of the cost of new capital facilities required to serve them. The
Street Oversizing Capital Expansion Fee is a one-time impact fee on development, and is used to
mitigate the impacts of new development on the transportation network. The Street Oversizing
Capital Expansion Fee Program has been a stable long term funding source for the construction
of capital transportation infrastructure in newly-developing areas. The Street Oversizing impact
fee program was originally adopted in 1979, with revisions in 1986, 1993, 1997, 2000, 2003, and
2006. Periodic recalculations and inflation adjustments of the Street Oversizing fee schedule
ensure that fee revenues will be sufficient to pay for the cost of eligible improvements. However,
as the City of Fort Collins begins to approach build out if its Growth Management Area, it is
prudent to assess and update the program to continue the long term success of the program to
fund development impacts to the City’s transportation network. City Council has directed staff to
review the Street Oversizing Capital Expansion Fee Program as the appropriate basis for
assessing the cost of transportation improvements to developments based on their proportional
impacts.
In 1997, the City adopted Section 3.7.3 of the Land Use Code - Adequate Public Facilities
Ordinance (APF) in order to establish an ongoing mechanism that ensured that public facilities
and services needed to support development are available concurrently with the impacts of such
development. The Adequate Public Facilities Ordinance is supported, in part, by the Street
Oversizing Program. However, the Street Oversizing Program cannot fund improvements that
are not directly related to mitigating development impacts such as existing deficiencies, regional
growth need, etc. Solutions to transportation APF problems often require funding from multiple
sources including the General Fund and Street Oversizing.
ATTACHMENTS
Transportation Capital Expansion Fee Assessment
City of Fort Collins Engineering
Roadway CIP Plan
Transportation Capital Improvements Plan
Unfunded Capital
Street Oversizing Fees
GF Contribution
2
November 18, 2015 Council Finance Committee
• Changing the name from “Street Oversizing” to “Transportation
Capital Expansion Fee”
• Using Vehicle Miles Travelled (VMT) as the basis for determining
impact, instead of trips generated.
• Simplify the transportation impact fee schedule from 43 categories of
use to only a handful; Residential (by size of unit) and two broad
categories for commercial and industrial.
3
• Are there any questions or concerns about the adjustments
being considered to the Transportation Capital Expansion fees?
Any comments regarding the idea of further increasing the fee to
capture development impacts on capacity improvements, such
as intersections , roundabouts, and traffic signal improvements?
4
General Direction Sought:
Fee Calculation Formula
5
Total cost of improvements necessary
to serve new development
Total Trip increase
from new development
= Cost to Add One Trip to
Transportation Network
Trip Generation of Building or
Project (from TIS or ITE Manual)
Cost to Add One Trip
to Transportation Network
Trip Adjustment Factor to Account
for Pass-by and Diverted Link Trips
X
X
= Street Oversizing Fee
Unit Cost
6
Vehicle Miles of Travel (VMT)
per
Development Unit
Average Weekday Vehicle Trip Ends
per
Development Unit
multiplied by
Trip Rate Adjustment
multiplied by
Average Miles per Trip
multiplied by
Trip Length Adjustment
Growth Cost
per
VMT
Ten-Year Growth Cost of Transportation
Improvements
divided by
Ten-Year VMT Increase
7
8
1997-2015 2016
Cost per Trip Cost per Vehicle Miles of Travel
National Average Trip Rates per Household Custom Average Trip Rates per Housing Unit by
Dwelling Size
Plan-Based Method for Lane Miles, RR Grade
Separations and Multimodal Improvements
Incremental Expansion Method for Lane Miles; Plan-
Based for Multimodal and Intersection
Improvements
9
High Range TCEF
10
Low Range TCEF
11
Operations
on Available
Capital
Review &
Approval of
Prioritization
Budget Offers
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000 Operating Income
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0% Rate Increase
10.0%
12.0%
14.0% Rate Increase
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Outstanding Debt
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026
Available Reserves
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0% Rate Increase