HomeMy WebLinkAboutAgenda - Mail Packet - 12/20/2016 - Council Finance & Audit Committee Agenda - December 19, 2016Finance Administration
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AGENDA
Council Finance & Audit Committee
December 19, 2016
9:30 - 11:30 am
CIC Room - City Hall
Approval of Minutes from the November 21
st
Council Finance and URA meetings
1. Future Utility Debt Requirements - Water & Stormwater 45 minutes L. Smith
2. Utility Plant Investment Fee Updates 45 minutes L. Smith
3. Audit Findings Response Review 20 minutes T. Storin
OTHER BUSINESS
1) Xcel Franchise update
Council Finance Committee & URA Finance Committee
Agenda Planning Calendar 2016
RVSD 12/13 mnb
Dec 15
Broadband Review – Financial, Economic, Social 90 min
A. Gavaldon
J. Birks
S. Kendall
URA
Dec 19
Future Utility Debt Requirements – Water & Stormwater 45 min L. Smith
Utility Plant Investment Fee Updates 45 min L. Smith
Audit Findings Response Review 20 min T. Storin
URA
Jan 23
Revenue Diversification Outreach Update 30 min T. Smith
Water – Raw Water Fee or CIL 30 min C. Webb
Utility Time of Use Rate Pilot Results 30 min L. Smith
Water’s Edge Residential Metro District 30 min T. Leeson
J. Birks
URA
Feb 27
City Foundation
URA
Future Council Finance Committee Topics:
Strategy Map Metrics Review – QI 2017
Parking Garage Financing – QII 2017
BFO Discussion – one-time and on-going funding guardrails
County IGA – URA TIF Evaluation Process
Future URA Committee Topics:
Annual URA District Updates
Finance Administration
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2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
Council Audit & Finance Committee
Minutes
11/21/16
9:30 - 11:30 am
CIC Room
Council Attendees: Mayor Wade Troxell, Ross Cunniff, Gerry Horak
Staff: Darin Atteberry, Jeff Mihelich, Mike Beckstead, Travis Storin, Jackson Brockway, John
Voss, Andres Gavaldon, John Duval, Noelle Currell, John Stokes, Mark Sears, Barb Brock
Brad Yatabe, Kurt Friesen and Carolyn Koontz
Others: Dale Adamy (citizen), Kevin Jones (Chamber of Commerce), Joe Piesman, David
Tweedale and Vicky McLane from the Land Conservation & Stewardship Board
Meeting called to order at 9:44 am
Gerry Horak moved to approve the minutes for the October 17th meeting. Ross Cunniff seconded the motion.
Minutes were approved unanimously.
A. Natural Areas Budget Review
John Stokes, Natural Areas Director
Mark Sears, Natural Areas Manager
Barb Brock, Natural Areas Financial Coordinator
EXECUTIVE SUMMARY
The purpose of this discussion is to review the City’s Natural Areas Department budget. Key topics that will be
covered include: 1) long-term budget projections, including a description of how the Department manages the
spending requirements of the ballot initiatives; 2) fund allocations to programs; 3) internal administrative
charges and certain capital expenses. This memo provides a high-level overview of these topics.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1) What additional information or analysis would be helpful to the Finance Committee?
2) Are there questions, concerns or advice?
BACKGROUND/DISCUSSION
Funding Sources and the Blue/Green Split
The Natural Areas Department receives the vast majority of its funding from the County’s Help Preserve Open
Space Tax the City’s Open Space Yes Sales Tax.
Open Space Yes (OSY) ballot language requires that 80% of revenues be spent for land and water conservation
and restoration activities. The remaining 20% (or less) may be spent on capital improvements or operations.
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Help Preserve Open Space (HPOS) is more flexible and may be spent on conservation or capital and operations
activities.
To help track spending categories, staff characterizes funds as “green” or “blue”. Green funds are allocated to
land conservation and restoration activities. Blue funds may be spent on any work of the Department but serve
as the foundation for operation and capital activities. To meet the spending requirements of OSY, staff manages
towards the 2030 end date of the OSY ballot. To date, green spending has exceeded the 80% OSY requirement
by approximately $10.5 million. The exceedance has been achieved by using blue dollars for land acquisition.
Staff’s approach is a soft landing in 2030 whereby the 80% requirement will be exceeded by a comfortable
margin.
Action Items / Discussion;
Use different color for text on pie chart slides for higher contrast.
Add a revenue slide showing only where the money is coming from
Add a slide showing a chart going out to 2030 - include the plan to get there - helpful to have longer timeframe
and overall spending on a slide
Gerry Horak; would be good to have a more specific understanding of the overall allocations - how is this done
overall and what is the logic for this one verses another one
Ross Cunniff; would be helpful to include historical and projected at some reasonable land cost per acre – part
of the equation - challenges we would have buying similar levels of land in 2030
Gerry Horak; staff approach - is there a policy position
John Stokes; the ballot language requires it - we have to spend 80% by 2030 - $5m can go up and down
Internal Charges and Capital Expenditures
Total internal charges $415k annually
.5 FTE of a City Attorney
1.5 FTE in Real Estate Services
And infrastructure
Gerry Horak; a concern has been voiced by citizens and members of your board regarding Natural Area funds
being treated (allocations) differently from other SAs
Mike Beckstead; Natural Areas treated the same as all other Service Areas
Utilities pays for certain things as an example based on their unique needs (heavier need = more allocation)
Gerry Horak; we don’t have the data for allocations - it would be helpful for both the Land Conservation Board
and Council
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Ross Cunniff; closer analog would be the Capital type taxes - Natural Areas is not a fee driven enterprise like
Utilities or Golf - Natural Areas is more citizen initiated and voter approved
Darin Atteberry; to Ross Cunniff’s point - historically the practice has been that even though it was established
via a tax it has been treated as an enterprise
Ross Cunniff; does this include city administrative costs? Have we considered the magnitude of opportunity -
consciously chosen not to go after opportunity of Capital Impact fees for Natural Areas (alternative funding for
the future)? It would be interesting to hear how that might be structured - Natural Areas as part of the city’s
asset portfolio. Would it be possible to just pencil it out?
Mike Beckstead: that hasn’t come up in revenue diversification discussions - we haven’t explored
Darin Atteberry; does this group want us to pursue this? 2 prongs 1) can that be done legally? Natural areas as
a potential capital expansion fee and 2) what are the ramifications (financial implications) of that?
Gerry Horak; this would be something to look at - first blush - a one page memo - What would you do for other
type of assets?
Mike Beckstead; if we did it - What would the fee look like? We could take a look at that for 2017.
Mayor Troxell; make sure we understand the question- it could potentially reduce the tax
Mike Beckstead; for clarification - a combination of what the fee revenue would be and what would a potential
tax offset be if we have such a fee.
Gerry Horak; what does it look like past 2030 if there was no tax?
John Stokes; we haven’t done that analysis - if the tax were to be renewed the 80% requirement would need to
change. The County changed their taxes – more money for operations
John Stokes; back up slide showing acres conserved per capita over time - spike in 2004 due to acquisition of
Soapstone Prairie Natural Area and Bobcat Ridge Natural Area –we have added some area since they -
population continues to grow - 42k acres now - another 20k acres - 30 square miles - I don’t see that happening -
our focus has been in and around the edges of the City of Fort Collins and that was explicit in our Master Plan
and was what Council directed us to do.
Ross Cunniff; I agree - unfair to use Soapstone or Bobcat Ridge as a precedent for planning - basis - we have
discussed this - what if we did a general statement of in and around the City of Fort Collins - what would that
look like as area conserved per capita over time?
John Stokes; we could probably go back to 2003 and take a look - take out the two big chunks (Soapstone and
Bobcat Ridge).
Ross Cunniff; so that becomes a more reasonable value based metric - we would like to get to more metric
based.
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John Stokes; we keep a rolling tally of how we spend our green money - 50% for land conservation funds out the
door every 3 years – sometimes it carries over because year to year we don’t know if a deal is going to happen
or not
Gerry Horak; does the county money have spending constraints?
John Stokes; it can be spent on anything our Master Plan contemplates.
Gerry Horak; looking long term - some financial considerations - if we don’t want to go for a tax what are we
going to do over the next 30 or 40 years? What level are you anticipating? What are you assumptions for the
future for the maintenance and operations? (The county did this analysis)
John Stokes; Natural Areas Master Plan
Mayor Troxell; would be interested in looking at how it plays into other strategic areas of the city such as;
Nature in the City, urban farming activity – how does this play into that?
John Stokes; that is contemplated in our projections - urban farming - lots of interesting stuff starting to
germinate there
Gerry Horak; I want to thank you for the quarterly updates you are providing to Council regarding acquisitions -
this information is very helpful. Does the Land Conservation Stewardship Board look at finances?
John Stokes; not much but the Board has looked at finances in the past - this is a perfect segway for our next
meeting in January.
Mayor Troxell; I want to share a kudo from the State Division of Natural Resources (DNR) - had a conversation
with someone on the street saying what a joy is it to work with you and your staff.
Next Steps;
Council Working Session in late January
B. Proposed Business Assistance Agreement in support of Project 1601
Josh Birks, Economic Health and Redevelopment Director
SUBJECT FOR DISCUSSION
A proposed Business Assistance Agreement in support of Project 1601.
EXECUTIVE SUMMARY
The purpose of this item is to present the Council Finance Committee with a proposed Business Assistance
Agreement (the “Agreement”) between the City of Fort Collins (the “City”) and Project 1601. The project will
include the retrofit of an existing building in the community allowing for the addition of Advance Manufacturing
sector jobs. The project will include upgrades to the existing building’s mechanical equipment resulting in
reduced energy consumption thereby reducing the carbon footprint of the building.
The proposed Agreement provides assistance in the following forms: (1) a use tax rebate on manufacturing
equipment purchased as part of the retrofit; (2) a business personal property tax rebate on the same
equipment, (3) a use tax rebate on construction materials purchased as part of the retrofit, (4) extension of an
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existing utilities rebate program designed to encourage energy efficiency, and (5) investment in public
infrastructure adjacent to the project to improve public safety and access. Items #1, #2, and #3 above relate to
revenues the City would not otherwise collect if the retrofit did not occur in the City. The value of the
assistance package is estimated at $1.1 million. Therefore, the leverage per public dollar invested through the
Agreement is approximately $32:$1.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does Committee feel additional information is needed to fully evaluate the proposed Agreement?
2. Does the Committee feel the proposed Agreement is ready for consideration by the full City Council?
Project Description
The project proposes to retrofit an existing building to include significant upgrade to the façade and HVAC
equipment (the “Project”). The retrofit will support the creation of jobs by supporting the strategic growth of an
existing Advance Manufacturing sector business in the northern Colorado region.
Public Benefit
The Project meets numerous City Strategic Plan objectives, City Plan objectives, and Economic Health Strategic Plan
objectives.
Action Items;
This project adheres to our framework and is focused on primary jobs with salary equal to county average
(mean) wage or better
Project 1601 - Description
Retrofit of an existing building
• Upgrade to façade and HVAC equipment
• Will lead to a significant reduction in energy consumption
Advanced Manufacturing sector
Infill and Redevelopment Site
• Avoids the need to utilize raw land at the edge of the city
Touches a number of our plans and has a significant public benefit
City Strategic Plan - vitality of certain business districts
Energy conservation and transportation improvements
City Plan objectives
Economic Health - support job creation
Economic Health Strategic Plan
Public improvements
Engaging the business community in carbon reduction
Financial Assistance Overview
The opportunity to retrofit an existing building will support the continued growth of an existing Advanced
Manufacturer in the region. This expansion will include the addition of new jobs to the community (assistance is
based only on net new employees added) as well as additional private investment in the community. The proposed
Project will generate significant positive economic impacts to the community (See Economic Impact Analysis
Overview). As a result, the City Council will consider a Business Assistance Agreement (the “Agreement”) providing
the following forms of assistance: (1) a use tax rebate on manufacturing equipment purchased as part of the retrofit;
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(2) a business personal property tax rebate on the same equipment, (3) a use tax rebate on construction materials
purchased as part of the retrofit, (4) extension of an existing utilities rebate program designed to encourage energy
efficiency, and (5) investment in public infrastructure adjacent to the project to improve public safety and access.
The value of the Agreement is estimated at $1.1 million, summarized in Table 1 below. Therefore, the leverage per
public dollar invested through the Agreement is approximately $32:$1.
• Total Estimated Assistance - $1.1 million
• Use Tax & Business Personal Property Tax subject to employment performance
• Utility Rebates subject to energy conservation performance
• Public Improvements
• Existing Use Tax Rebate Program netted
To clarify - this is the 2.25% non-dedicated general fund rate (none of the dedicated rate is included in this
rebate)
Depreciation equally over 10 years - as we learn more about the equipment we may want to accelerate the
depreciation as we did with Avago (equipment was so high tech) it was depreciated over a 3 year schedule.
Utility Performance Rebate program already exists within Utilities for HVAC and lighting equipment -
traditionally the program has caps - we are asking Council to consider in this assistance package is removing
those caps for this project so we can achieve the greatest amount of energy conservation (achieve best benefit)
Ross Cunniff; there are 2 caps on these programs; the per property cap and the Overall total $ cap
Amount
Use Tax Rebate
Construction Materials $337,500
Eligible Equipment $112,500
Total Use Tax Rebate $450,000
Business Personal Propert Tax Rebate $41,000
Utility Performance Rebates $130,000
Value of Public Improvements (Est.) $550,000
Subtotal Assistance Value $1,171,000
Less Existing Rebate Programs ($75,000)
Net Value of Assistance
$1,096,000
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Josh Birks; we plan to ask Council if they would be willing to consider providing assistance that exceeds the cap
due to use of an existing building - public improvement adjacent to the site
There are some public improvements that are being contemplated adjacent to the site that are considered
Beneficial to the adjacent property owners - have shown full value of these improvements.
Josh Birks; we have within the Code today a manufacturing use tax rebate in the code - we figured out the value
of that program for this company which is approx. $75 (limited to eligible equipment) - they could access the
$75k today without Council taking action.
Retained Revenue
Use Tax $277,500
BPP $41,000
KFCG was not charged on eligible manufacturing equipment
Ross Cunniff; there is a better way to show this instead of as a negative number - line that includes less existing
rebate program
Josh Birks; I will update that before the Council presentation
Employment Thresholds
Estimated
Total Tax
Retained
Revenue
Tax
Rebate
Construction Materials $577,500 $240,000 $337,500
Eligible Equipment $150,000 $37,500 $112,500
Subtotal $727,500 $277,500 $450,000
Less Exisitng Rebate Program ($75,000)
Total Assistance Package Value $375,000
Threshold Amount Percent
100 Net New Jobs $ 150,000 31%
200 Net New Jobs $ 300,000 61%
300 Net New Jobs $ 450,000 92%
350 Net New Jobs $ 491,000 100%
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Josh Birks; The assistance will be accrued as they add jobs to our community / economy. For each job they add
they will receive approximately $1,500 of the use tax assistance- they are not allowed to request it until they
reach a defined job creation threshold
They will provide us with payroll activity data which will be back verified with the Quarterly Census Employment
Wages (QCEW) – we will be looking for jobs that are new to this site that are not part of the company’s jobs in
the broader region. We will also be requiring that as they hit each threshold that all of the jobs the average
wage exceed County mean currently approximately $51k
Josh Birks; I will confirm and have the specific existing mean salary for the Council presentation
The state uses ‘mean’ not the median in terms of performance in their assistance packages - we have not in the
past used a wage level in conjunction to a job creation number - we think this is a positive evolution of how we
put these packages together.
Mike Beckstead; clarifying existing agreement - to make sure the jobs are not counted in both agreements
Josh Birks; concerned that if we share too much information we won’t preserve the confidentiality of the
company’s name - suffice to say when we say net new jobs - we mean at this site and in support of these
strategic initiatives
Ross Cunniff; the verification and audit side is key to me
Josh Birks; the agreement gives us the ability to request and inspect a number of different kind of documents -
We will be triggering off of strategic jobs being added in new lines of business other than their current regional
activities. We want to make sure we have adequate audit potential to access documentation.
Economic & Fiscal Impacts
Amount
Construction (One-Time)
Jobs 312
Earnings $18,502,963
Average Earnings per Job $59,362
Operations (On-Going) *
Jobs 1,616
Earnings $52,053,554
Average Earnings per Job $32,211
* NOTE: Represents total change in earnings during the
first year of full employment
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There will be some construction jobs - 312 jobs during period of construction
For the full Council presentation we will have the staff report and the sustainability assessment report.
We are still getting specifics on the energy conservation / savings as well but will have that data for the full
Council presentation.
Ross Cunniff; taking a triple bottom line analysis is not there yet - net inflow of population as a result of this
redevelopment, impact on housing costs - I believe that the cost of housing is largely driven by supply &
demand and market forces in the city - we will have fewer resources to address parts of the policy solution for
affordable housing, the environmental aspects of ozone, impact on the natural areas / parks from the
additional population, some clarity around what capital fees they would be paying and how those factor in, are
they paying any transportation fee, I assume they are paying utility fees - some Council members have been
frustrated at data they are not able to get
Josh Birks; because it is a retrofit of an existing building I think a lot of the capital expansions fees don’t apply
because the use isn’t changing significantly. In the conversations we have had thus far - we have been operating
under the assumptions that most of the Capital Expansion fees won’t apply based on our code (building permit
to modify an existing)
Ross Cunniff; My preference would be if a company wants us to provide assistance that they should be aware
that they are in the public arena and that their name will be made public once it gets to a certain point -
deliberation by the city’s public boards - but that said, I will honor their request at this point -
Ross Cunniff; would like to understand where the intersections improvements would have been - the
opportunity cost for doing these sooner vs other areas and try to compare the use tax rebate that we are talking
about with other projects such as Avago and Forney - for example with Forney we helped them out with their
sewer infrastructure - they moved anyway - we don’t have the benefits of the city limits we thought we would
have
Josh Birks; it was not transferrable from the site so Forney by moving from the sites forfeited the benefit.
Josh Birks; I can tell you that looking at all assistance packages excluding things like the tax increment
Use tax rebates we have been closer to $7800 per job in assistance - this is closer to $1500 on the use tax rebate
side up to $3k when you include utility rebates so we are significantly below that mean / average of the other
assistance packages we have provided.
Amount
Additional Benefits $19,920,531
Additional Costs (15,132,760)
Net Benefits $4,787,711
Present Value of Net Benefits * $3,658,901
* NOTE: Analysis assumes a 5 percent discount rate
over a 10-year analysis period.
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Ross Cunniff; that contextual data would be helpful – before we create the next Strategic Plan- it feels like we
are still operating like we are in the depths of the great recession and we are chasing after jobs. Council’s
priority question is what should our policy be (bigger picture, later as we evolve), the actual costs and benefits- I
remain concerned about growth in Fort Collins – reasonable, modest incentive package
The use of an existing building and the energy aspects are good - more data showing the rebate / use tax is
modest compared with other projects - don’t want to create the expectation among companies that want to
redevelop or come in that we will always grant you a use tax rebate. Fairness issue
Gerry Horak; how do we factor in things like being on the transportation corridor with bus service – one of the
focuses we are trying to do with Transit is to provide people ways to get to jobs and home - redeveloping sites -
how does that fit in with our transportation policies and 365 day service?
Josh Birks; so the current framework talks about categories of evaluation criteria that we would use - I think
Transportation is one of them.
Gerry Horak; looking at the CHFA model Colorado housing folks use - the criteria to make it - transportation
based - if you don’t meet the criteria then you don’t qualify - Where should we really invest our funds?
Objective criteria have their advantages; you have to meet A B C and D to even be considered. We have to look
at the transit issue if we are serious about that.
Mayor Troxell; from a workforce perspective, advanced manufacturing is important / key for Fort Collins.
As our community, we want to provide a cross section of businesses that provide a variety of different job
opportunities and types - pressure on real estate right now - Northern Colorado housing discussion last week –
robust discussion – bringing several things to light and challenging our state representatives to address at a state
level - areas in our community that are in a transition and that is part of any dynamic community where there is
always an evergreen element that is affordable - just maybe not in Old Town now - the reuse is important
component of this project - I think this is ready to come to full Council for consideration.
Josh Birks will provide a memo in the interim to the members with the additional information as requested.
Next Steps;
Not going to Work Session with this item
Scheduled to go to Council on December 6th - the company name and location will be disclosed at that time.
Final numbers including energy conservation will also be included in the AIS for the full Council Meeting
C. Financial Policies Update - Revenue and Debt
John Voss, Controller
EXECUTIVE SUMMARY The Revenue and Debt Policies have not been updated since 2013. No changes are
recommended to the Debt Policy. Changes recommended to the Revenue Policy relate to TABOR and the recent
need for voter approval to keep the excess revenue associate with KFCG.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Concur with recommended changes?
Recommend bringing the City Council December 21, 2016?
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Policies up for Review
• Financial Management Policy 2 - Revenue
• Financial Management Policy 5 - Debt
Both were last modified and reviewed in 2013
Mike Beckstead; we are in the first round of the review and the updates- we are bringing 2 policies today -
Revenue and Debt - we are on a rotating 3 year cycle - in 2017 we will look at 3 more - 9 polices so each will be
reviewed periodically - John Voss will talk us through the proposed changes to the revenue policy which are
largely TABOR driven. Not much changing in the Debt policy.
John Voss; it was asked in the past that we put these out on fcgov which we have done and we will match the
external and internal website information to include; the date last reviewed and date last changed.
Policy 2 - Revenue
1. Limitations (TABOR)
2. Revenue Review, Objectives and Monitoring
3. Fees
4. Sales & Use Tax Distribution
5. Private Contributions
Recommend new sections that relate to TABOR, clarify several areas and delete a few redundant items
2.1 Limitations under TABOR
Add section C. TABOR Notice for New Tax or Tax Increase
• Develop revenue forecasts that are reasonable and factor in the implications of over collection.
• Review these forecasts with the appropriate leadership staff.
Add section D. Monitor New Tax Revenue
• Staff will monitor actual revenue against the forecast revenue disclosed in the TABOR notice.
• In the second year, confirm actual revenue to forecast and determine if any action is needed.
Add section E. TABOR Legislation and Judicial Decisions
• When such matters are discovered affecting the City, staff will confer to determine what actions, if any, the
City should take in response.
Add section F. Maintain Records of ‘Fiscal Year Spending’
• Calculate annually
• Maintain supporting records for at least 6 years
• Document which agencies, funds and revenues qualify under TABOR
2.2 C. Targets
• Currently no policy is set
• Recommend removing section
2.2 D. Monitoring Revenue Sources
• Set clearer standard
2.4 Sales & Use Tax Distribution
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• Update listing of Sales & Use Tax portions
• Note that this section of policy is informational
• Add reference to City Code Chapter 25 for details on:
o Rate
o Taxable transactions
o Permitted uses
o Term of tax, if applicable
John Voss; 2.4 We want to keep it brief and add that all details are included in Chapter 25 of the Code - so as
not to include duplicative information and to reduce the number of documents we need to update
Ross Cunniff; one key thing we should do after a tax is approved is to make it a policy that we always review the
collections vs projections.
Mike Beckstead; I want to monitor it during the year as well as do a formal closeout - where did we land relative
to the forecast and what if anything needs to happen next?
Gerry Horak; can we add under 2.1 that there will be a report sent to City Manager and Council so it is clear and
Council is aware?
Mike Beckstead; that is our intent and we can certainly modify the second bullet under D to include that a
report will sent to Council.
John Voss; since we debruced in 1997 this has not be happening - now if we get a new tax we need those for
reference points for the TABOR notice at that time and the rebates and revenue forecasts.
Gerry Horak; so documenting what method is used and include which agencies, funds and revenues qualify
under TABOR
John Voss; we will document which agencies, which funds are in and which are out
Policy 7 - DEBT
A. Purpose and Use of Debt
B. Types of Debt and Financing Arrangements
C. Debt Structure and Terms
D. Refinancing Debt
E. Debt Limitations and Capacity
F. Debt Issuance Process
We don’t have any recommended changes
John Voss; we want to ask if we are ready to go to Council the 2nd week in December
Gerry Horak; I say yes and I appreciate the effort that has been put into getting these policies clearly
documented and tightened up
Mayor Troxell; I agree – good work
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Mike Beckstead; we have created an on line place for all Financial Policies
Ross Cunniff; I like the process
Mike Beckstead; we will bring this forward to Council and look for adoption on consent.
D. Anheuser-Busch Park and Recreation District Dissolution
Travis Storin, Accounting Director
Brad Yatabe, Assistant City Attorney
Kurt Friesen, Director of Park Planning
EXECUTIVE SUMMARY
Legal counsel from Anheuser-Busch contacted the City Attorney’s Office in August 2016 to seek the City’s
consent in the dissolution of a park and recreation district formed in 2008. The Board of Directors believes the
overhead costs of administering the district do not justify the benefits as originally anticipated.
State statute permits to dissolve without conducting an election if: A) the City Council and district board both
consent and B) the district does not carry any outstanding financial obligations. Without Council consent, it is
presumed that the District will conduct an election for which they would be the sole voter.
District Formation
• Approved via Resolution 2008-089; 18-acre District is wholly owned by Anheuser-Busch
• Consists of wildlife habitat area and softball field
• Authorized to impose a small mill levy of 5-10 mills for operations, in addition to user fees
• Original intention for district formation was for 1) legal protection, 2) preservation of facilities, and 3) ability
to pursue funding resources unavailable to private entities
Request for Dissolution
• District Board believes original purposes are no longer needed and overhead costs do not justify the legal
benefits
• CO Revised Statutes allow for dissolution without an election if:
A) District has no financial obligations or outstanding bonds, and
B) The District Board and Council both consent
• A-B anticipates land to still be used as ballfield and park
Implications to City
• No financial impact to City; A-B is solely responsible for paying operating costs of district
• No impact to Parks operations
Gerry Horak; I am good with this - why did it come to us?
Darin Atteberry; this came to the sub-committee when it was originally initiated -
- will the fields go away?
Travis Storin: the fields will not go away and they will continue to be open to the public
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Ross Cunniff; were there financial considerations/ projections made in 2008 when this was adopted that we
need to know about or Council should know about?
Mike Beckstead; we reviewed the original AIS with Kurt Friesen and Mike Calhoun and we didn’t see anything of
substance when this was originally brought forward. This came to me via the CAO - I use the Council Finance as a
way to vet things before we go to Council.
Ross Cunniff; is there any record of public comment from 2008? Would be good to include that as well as the in
the packet.
Mike Beckstead; we will include the AIS from 2008 in the Council packet and any public comments.
Mayor Troxell; there is some ability for public use - is there signage to indicate that?
This is in the city - I have heard some concerns from residents in the NE part of the community regarding parks
and how we are not servicing them. For example, Richards Lake – we are not going to plant some trees – water
issues, etc. I am wondering if we could get some commitment to Parks in the NE part of our community through
this discussion funded in part by InBev / AB.
Darin Atteberry; there is a community park and a neighborhood park scheduled up there-
the concerns that have been expressed include some neighbors who have wanted us to put trees in - we aren’t
ready to do that yet as we don’t have a neighborhood park design - Kurt or Travis - do you see any opportunity
for leverage?
Kurt Friesen; if we have a facility open for public use than it is available and can be continued to be used as it is
today so I see that as the opportunity.
Mike Beckstead; They had two options to dissolve; 1) they could take it to a ballot and they would be the single
property owner that would vote for it or 2) the resolution route being less costly and more expedient than a
vote so not sure what our leverage would be.
Mayor Troxell; as part of commitment to community - why did we enter into this in 2008? I was on the Council
then and I vaguely remember – the intent - how do we service the NE part of the community (facilities and
parks)?
Mike Beckstead; they came to us in 2008 to form this district around the liability question - we said yes to that
process and now they are saying that the liability question is not a concern to them. We will explore if there is
anything in the way of a commitment that could be had
Ross Cunniff; I see in the documentation - the non-developed area was not a legal liability issue - would like to
understand the history and have this information in the Council packet to review.
Mayor Troxell; I would offer the opportunity as a good corporate citizen - consider improvement of parks in the
NE part such as Richards Lake - getting some movement there - I think it is a rather weak argument as to why we
can’t plant some trees - do some initial planning as to where trees should be - not the full plan but would
facilitate planting some trees today will have benefits when the park is finished out.
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OTHER BUSINESS:
Mike Beckstead; Council involvement in Broadband - site visits are coming up
November 29-30th Cedar Falls, IA and Wilson, NC
December 7th Chattanooga, TN
Looking for Council’s direction and thinking - see if there is any interest.
Gerry Horak; let’s give Council members an opportunity to go - see if there is any interest
Or schedule a separate trip later on if people want to go - good to hear things directly - not to change the
current schedule - just to give the folks who ultimately make the decision and recommendation to the
community a chance to hear the same information.
Darin Atteberry; I will talk with Ray and Gino as they are the only two I have not talked with - I will let Mike know
what they say.
Mike Beckstead; we would like to schedule a 90 minute Special Council Finance Committee meeting to get into
detail of Broadband to be scheduled after the site visits and before the December 20th Council Work Session
Gerry Horak; looking at where we are headed - when staff has developed a recommendation to provide or ask
Council members if they are interested in going to visit any city which is closest to the recommended model for
feedback and direction.
Darin Atteberry; there is a Council Work Session on December20th - if they give direction at that Work Session to
move forward with a retail model - pretty quick turnaround time
Ross Cunniff; what is the timing of the next Economic Development meeting?
Josh Birks; the next Economic Development Board meeting - they are scheduled for the 3rd Wednesday of the
month - this topic is not currently on our agenda - we certainly could add it in January depending on what timing
makes sense
Darin Atteberry; to Josh - if you could get this added to the agenda that would be great as this is a significant
conversation
Darin Atteberry; Gerry mentioned to me that it would be good to encourage any Council Members who want to
attend that special Finance Committee meeting. Darin will contact them.
Ross Cunniff; my other business items has to do with the Fees discussion – it looks like the Work Session is
scheduled for the last day in March – I am wondering if we could pull this forward so this Council could take
action if we decide to.
Mike Beckstead; we are still doing an inventory of all fees across the city - reviewing all fees a week from today –
when I get a chance to look at all fees and which should they be updated as part of a single event per year - I will
have a better answer for you after that conversation - that was put in as a placeholder and we will certainly
move that forward when I have a chance to learn more.
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Darin Atteberry; the goal is to get this done before the end of Q1 2017 - to have some resolution
Meeting adjourned by Mayor Troxell
Finance Administration
215 N. Mason
2nd Floor
PO Box 580
Fort Collins, CO 80522
970.221.6788
970.221.6782 - fax
fcgov.com
URA Committee
Minutes
11/21/16
11:30 am - 12:30 pm
CIC Room
Council Attendees: Mayor Wade Troxell, Ross Cunniff, Gerry Horak
Staff: Darin Atteberry, Jeff Mihelich, Mike Beckstead, John Duval, Jackson Brockway, Tyler
Marr, Josh Birks, Patrick Rowe and Carolyn Koontz
Others: Dale Adamy, Kevin Jones
Meeting called to order at 11:40 am
Staff: Josh Birks, Economic Health Office Director
Patrick Rowe, Redevelopment Program Coordinator
Josh Birks; this is our first annual review - would like to know if this is the information you want to see or what
additional information you would be interested in reviewing. Also, in the future we will make sure to bring the
review to the URA Finance Committee prior to the Budget Review. The Budget review took place last week but
we will make sure that scheduling is in the inverse in the future.
Patrick Rowe; House Bill #1348 was effective January 1, 2016 but is not applicable until there is a triggering
event. Doesn’t talk about how the special districts pick their representative - did clean up a few things in last
cycle - PSD did name a representative, County - spoke with Linda Hoffman and they have not gone through the
process to determine a designate, Library District has interest
URA Board - you had asked us to invite the URA Board - I think this only add one board member from Poudre
School District – a couple questions
How do you want to move forward in regards to URA meetings?
And a triggering event - are we looking for a triggering event?
Mike Beckstead; I am hearing there should be a Council Work Session meeting so we are all clear on where we
are headed - that is the first meeting which we need to resource with information about what others might be
doing and what a triggering event might be - the authority of the URA Board vs the Council -
Then when we are clear on where we are going we schedule a multiple entity meeting
Darin Atteberry; Mike and I have the county wide URA meeting on December 2nd - maybe we should ask to add
this as an agenda item since most districts will be there (Schools, Health) will be a public meeting all could
attend - I have meeting with Linda Hoffman and will mention this
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Darin Atteberry to Mayor Troxell, Gerry and Ross; since this hasn’t been a point of discussion I am curious to
know your thoughts
Gerry Horak; I am smart enough to know I don’t enough right now - need to go back - no preconceived notion –
need to learn more
Mayor Troxell; it aids in the communications with the county particularly -
Darin Atteberry; I will share with Linda today - see what she is hearing from their board
SUBJECT FOR DISCUSSION Urban Renewal Authority Annual Update
EXECUTIVE SUMMARY
The purpose of this item is to provide an annual Urban Renewal Authority (URA) update. The update focuses on
the three tax increment financing (TIF) districts in addition to the broader authority.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Does the committee have input or comment on the proposed 2017 URA strategies?
BACKGROUND/DISCUSSION
The Fort Collins URA is comprised of two plan areas –the North College Plan Area and the Midtown Plan Area – and
three TIF districts which reside within the two plan areas –the North College TIF district, the Prospect South TIF
district, and the Foothills TIF district (Attachment 1 & 2). The URA derives property tax increment from all three
districts in addition to sales tax increment from the Foothills TIF district, with increment proceeds obligated and
spent within each respective district.
2016 – Fort Collins URA
With the dramatic reduction in the size of the Midtown Plan Area that was undertaken in late 2015 in response to
the URA Reform Bill (House Bill 2015-1348), no new plan areas, and with the North College TIF/Plan Area drawing
nearer to its 25-year term, in general the URA saw a continued low level of new activity. That said, staff continues to
look for appropriate new plan area opportunities (the former Kmart site is one such area that drew interest and
consideration in 2016).
North College TIF District
The North College TIF District was formed in 2005, with its first collection in 2006 and its last scheduled collection in
2031.
Activities:
• URA Applications
o Hickory Commons – An industrial and live-work development consisting of two (2) 11,000 square foot
industrial buildings and one (1) 7-unit live/work condo building. The URA provided support of up to
$74,211 for regional Stormwater improvements (approved late 2015)
o Lyric Cinema Café – Relocation and expansion of the Lyric Cinema Café to 1209 N. College Ave. The
expanded Lyric Cinema will feature three screens, 500 seats, a full restaurant, and a bike-in outdoor
venue. The Lyric is seeking $209,000 in URA support to apply towards Stormwater improvements and
landscaping (Pending; URA Finance Committee review for November 21, 2016).
• Redevelopment Agreement Compliance
o Aspen Heights – Actively reviewing invoices and documentation of eligible expense prior to beginning
reimbursement (awaiting final submittal from developer/owner)
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o Rocky Mountain Innosphere – Engaged in finalizing staff review of eligible expenses with the aid of
outside expertise in preparation of the refinancing to take place in early 2017
Strategies:
• Finish Strong North College – At nearly half term, the value of the Tax Increment Financing (TIF) revenue
stream is diminishing, making significant investment in renewal projects more challenging. As such, the URA
wants to optimize the use of TIF during the remaining life of the plan area to address remaining blight
conditions and redevelopment opportunities. Staff proposes engaging with an economic development /
planning consultant to develop a strategic investment plan for the URA North College Plan Area.
Specifically, this would involve examining infrastructure deficiencies, other development constraints, and
catalytic/high value investment opportunities.
• North College West Side Regional Stormwater – The east side of North College Avenue has employed a
regional detention and water quality approach (the Northeast College Corridor Outfall) that supports
development outcomes in the area. The west side of North College currently lacks a regional approach and
arguably has greater challenges given the smaller average lot sizes and long-narrow lot configuration. Staff
is presently exploring the potential of a regional detention and water quality approach that is similar to that
on the east side. If the City’s internal analysis indicates value in such an approach, staff may recommend
using some portion of URA funds to support additional planning of such an approach.
• EPA Site Assessment Grant – The City received an Environmental Protection Agency grant in the amount of
$500,000 for environmental site assessment work in support of redeveloping brownfield sites. This grant
has been targeted for the North College area as well as the northern periphery of Old Town. City Staff is
actively seeking private participants to make use of this grant in support of redevelopment outcomes and
environmental cleanup. The City has use of this grant until fall 2018.
Josh Birks; this was the first year we were supposed to make a payment to Aspen Heights but they have not
provided the required documentation so we could verify expense so no payment has been made.
West Side Regional Stormwater approach - west side of College - same approach as was used on east side of
College being proposed - currently in value proposition phase - when we complete our staff assessment we will
reach out to vet. Both Hickory Commons and Lyric are on the west side of College and their packages
encompass Stormwater.
EPA Site Assessment Grant targeted for North College - $500k
3 year grant - nearly completed first year of grant - we continue to reach out to the brokerage and development
communities to identify good uses of the grant money that is available to us
Financial Highlights/Summary:
2016 Budget 2017 Budget 2017 H/(L) 2016
Revenues $ 1,537,520 $ 4,055,709 $ 2,518,189
Operating Expenses $ 286,133 $ 287,503 $ $ 1,370
Debt Service $ 1,078,461 $ 3,580,600 $ 2,502,139
Total Expenses $ 1,364,594 $ 3,868,103 $ 2,503,509
North College District
Comparison of 2016 Budget with Current 2017 Budget
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• Tax increment collections continue to show modest increases as forecast.
• 2017 includes the anticipated Rocky Mountain Innosphere loan repayment, which in turn will be applied to
the loan the City made to the URA for the same purpose.
• Positive fund balance throughout the life of the district sufficient to discharge all planned obligations and
debt service.
For 2015, we closed with a $520K positive fund balance
Estimate for 2016 is $700K positive fund balance
Sum of money is meaningful and could be put to good use
Gerry Horak; west side North College - storm drainage project is a big limiter to what can be done
Are we taking a look at figuring out a way - property owners have to do part - there is currently no
Project to tie into so they are wondering if they can do something early and then repayments to it -
Natural Areas may be interested in properties on the back side by the river – explore how can we deal with this
issue, improving by providing trails, water. That is a policy question for Council input.
Current status of staff analysis - will it be more cost effective for individual site owners to buy in a larger regional
solution / solve on their sites – it is looking good that the answer will be yes – then the next step will be
designing that system - part of the role that the URA could play - acting as financier - some early actions like
what was done with Necco - helping to fund the acquisition of the 10 acres for major Stormwater retention /
detention pond – it is early and we don’t know what the system looks like yet -
If we stay on the path we are on right now and assuming a modest increase in annual property tax collections
there could be a potential of a $5M fund balance
Gerry Horak; how to proceed - path to move ahead - is there a need for a Council work session on this?
Josh Birks; Last Tuesday the URA Board approved us using a portion of the fund balance to invest in what we are
calling the ‘Finishing Strong’ strategy. There are the essential questions for the study and we can engage an
outside consultant if we need help looking at Stormwater issues or others
The future fund balance we are looking at today is based on the mill levy as it stands today not post
That is a question we need to answer as we move forward in terms of cash flow, what impact it has positive or
negative.
Ross Cunniff; confirming that one of the options is returning the fund balance to the tax payers.
Josh Birks; that is an option if we have met all of our objectives
Darin Atteberry; Josh - can you confirm that the highest priority is the Stormwater issue for west side of North
College?
Josh Birks; yes, in addition the issue of the small and fractured ownership / small parcels in the area as opposed
to on the east side we have more large parcels
Mike Beckstead; connection from College to Blue Spruce is funded - east of that is major and unfunded
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Darin Atteberry; where is that in the Stormwater master plan? If that is scheduled in next 3-5 years maybe you
are not looking at surplus URA dollars
Josh Birks; what we are talking about is a new capital asset that was not previously contemplated within our
Stormwater Master Plan - we don’t have a district wide solution on the west side currently in the master plan
but we are talking about building out a solution that could then be put in the prioritization - equipped and
funded with potential URA dollars
Patrick Rowe; there is a Stormwater Plan on the west side but it is scoped to deal with flooding issues and not
development issues - more likely an increase in capacity in the system
Gerry Horak; what role cold Natural Areas play? What is going to happen as a follow up to this discussion?
Mike Beckstead; I am hearing that we need to develop a long term view of URA north with a lot of these options
and topics in discussion and we need to come back and have another dialog
Prospect South TIF District
The Prospect South TIF District was formed in 2012, with its first collection in 2013 and its last scheduled collection
in 2038.
Activities:
• URA Applications
o 2105 S. College (proposed – withdrawn) – A market rate apartment project proposed for a site located
just north of Whole Foods. Size of increment request and market rate aspect of project resulted in staff
recommendation of greater public benefits or reduced increment request
• Redevelopment Agreement Compliance
o Capstone – Distributed the final reimbursement payment in mid-2016 based on leasing activity and
other performance aspects of the redevelopment agreement
Strategies:
• Continued Engagement (Property Owners/Developer Community) – Staff will continue to engage with the
brokerage and developer community – with an emphasis on under-utilized property and recent retail
transfers – in order to be opportunistic and engage in development outcomes consistent with City plans and
policy.
Financial Highlights/Summary:
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• Tax increment collections continue to show modest increases as forecast.
• Fund balance projection in 2016 is $217,034. The fund balance remains positive throughout the life of the
district sufficient to discharge all obligations and debts.
City share-back of rate differential
Projections - it will be paid back 2 ½ years before close out of the district
Mike Beckstead; this is significant as we had a $1.7M gap - was down to $1.1m but appears the additional
revenue growth has closed the gap
Foothills TIF District
The Foothills TIF District was formed in 2014, with its first collection in 2015 and its last scheduled collection in 2040.
Activities:
• Pedestrian Underpass – Staff continued to work with the developer to finalize design, construction timing,
and manage cost overruns for the project
• Monitoring Leasing Activity – Staff met with the developer periodically throughout the year to discuss
leasing activity and review construction progress – the last building on site (excluding the residential) is
under-construction now
• Redevelopment Agreement Compliance – Working with outside consultant to ensure sustainability and
other agreement requirements are complied with. Report will be produced upon completion of project.
Financial Highlights/Summary:
• The Foothills TIF district acts as a pass-through entity for the funds it collects.
2016 Budget 2017 Budget 2017 H/(L) 2016
Revenues $ 450,185 $ 463,312 $ $ 13,127
Operating Expenses $ 20,759 $ 23,259 $ 2,500
Debt Service $ 365,102 $ 369,551 $ 4,449
Total Expenses $ 385,861 $ 392,810 $ 6,949
Prospect South District
Comparison of 2016 Budget with Current 2017 Budget
2016 Budget 2017 Budget 2017 H/(L) 2016
Revenues $ 1,139,145 $ 4,078,120 $ $ 2,938,975
Operating Expenses $ - $ 13,979 $ $ 13,979
Debt Service $ 1,139,145 $ 4,053,867 $ 2,914,722
Total Expenses $ 1,139,145 $ 4,067,846 $ 2,928,701
Comparison of 2016 Budget with Current 2017 Budget
Foothills District
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• A modest administrative charge will be withheld from property tax increment to offset staff and
administrative costs to the Urban Renewal Authority
Approximately $130,000 exceeding the current program cap of $50,000 by $80,000. The proposed Agreement would
contemplate asking City Council to providing additional funding to support these rebates. That additional funding
would be subject to annual appropriation. A separate appropriation ordinance will be considered by City Council
when the rebates are due.
Public Improvements
As a result of the Project, the City will invest in public improvements adjacent to the site. These projects will provide
benefit to the Project as well as address traffic flow and public safety issues previously identified in the area. These
improvements will facilitate a new point of access to the Project site enabling safer access for employees and
shipments. Therefore, the value of these improvements has been included in the estimate of the total value of the
Agreement. However, a portion of the improvements have been desired by the adjacent property owners for years.
For this reason, the City is making the investment in these improvements.
Economic Impact Analysis Overview
The Project will generate economic impacts during construction and operations. The construction activities will
generate one-time impact for construction workers and businesses in the area. The on-going operations of the firm
will create annual economic impacts, employing workers in the community and supporting economic activity
throughout the region.
The draft economic impact analysis (See Attachment 1) estimates the one-time impacts from construction will be
approximately 312 jobs with $18.5 million in new earnings for average earnings of $59,362 per job. In addition, the
analysis estimates the facility will support over 1,600 total workers, both employed on-site and throughout the
community due to increased economic activity, with total estimated earnings of $52.1 million, see Table 5. These
estimates assume that all on-going jobs on site will be new to the community and not transfers from existing
business operations in the region.
Pedestrian Underpass to be completed – winter (after the first of the year) is the target – with overlay
completed in the Spring - there is a path that connects all the way to McClellan (old alignment of the Larimer
canal #2) and follows the canal along the north side and comes up to street level at Foothills Parkway. Also
moving the existing pedestrian bridge so if you are heading southbound you will be able to continue to do that.
The Foothills district functions a bit differently from the others in that whatever increments it collects it remits
to the Metro District.
Mike Beckstead; we are working on an analysis to present at a December 13th Mall Redevelopment Committee -
Given the current leasing activity and when we think it will be fully leased as well as the impact on sales tax
pledge and revenue.
Ross Cunniff; there is a myth out there that is the leasing doesn’t meet sales tax pledge levels the city will have
to use general fund
Mike Beckstead; that is a myth - our only obligation is above the $1.8m on the 2.25 rate
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Gerry Horak; think it would be helpful to the Council if we have a few speaking points - a high level summary of
what is happening - current status (implications from the paper are that it is falling apart)
Mike Beckstead; we will get a memo to Council on that
Mayor Troxell; the affordable housing is moving along
Josh Birks; yes, the first 200 housing units should be ready for occupancy next summer with other units
following.
B. North College Urban Renewal Authority TIF Application - Lyric Cinema
Josh Birks, Economic Health Director
Patrick Rowe, Interim Redevelopment Project Coordinator
Owner, Ben Mosier present
EXECUTIVE SUMMARY
The Lyric Cinema Café (applicant) located at 300 E. Mountain Avenue proposes to relocate to 1209 N. College
Avenue a location within the North College Tax Increment Financing (TIF) District. The applicant wishes to
expand and construct a new theater facility. The applicant has submitted an application requesting tax
increment financing (TIF) assistance to enable the project to occur. The application requests $209,000 from the
North College TIF district. If approved, the TIF would be provided as a reimbursement for Stormwater
improvement costs (including a detention pond) and landscaping costs. The TIF assistance would be paid out
over time based on actual increment collected from the project, in keeping with URA policy.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does the URA Finance Committee concur with staff’s recommended reimbursement approach (terms and
timeline)?
2. Does the URA Finance Committee have questions, comments, or concerns that should be addressed before
this item is presented to the URA Board?
3. Is there support for the inclusion of an additional reimbursement request (right-of-way repay)?
BACKGROUND/DISCUSSION
The Fort Collins URA received an application for TIF assistance from the owner/operator of the Lyric Cinema
Café requesting support of a proposed relocation of the Lyric Cinema Café to 1209 N. College Avenue
(Attachment 1, Location Map). The proposed development is located on a vacant parcel of land that is
approximately 1.6 acres in size. The development will consist of a 10,000 square foot cinema center with a full
restaurant and a bike-in outdoor theater venue. It will grow the Lyric from a 135 seat capacity theater to a three
screen 500 seat capacity theater.
The TIF request is for a maximum of $209,000 for the reimbursement of costs related to Stormwater and
landscaping improvements as follows:
Eligible Cost Amount
Stormwater Improvements (including detention pond) $149,603
Stormwater Contingency (10%) $14,960
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Landscaping $44,437
TOTAL $209,000
Tax Increment Summary
The information below is derived from a Larimer County Assessor’s Office estimate of the increment to be
generated.
Estimated Annual Property Tax Increment* $38,981
Total Increment Generated Over District Life $506,755
Requested TIF $209,000
Requested TIF as percentage of estimated generated TIF 41.24%
*The estimate of annual property tax increment was provided by Larimer County
Financial Review (“But-For” Analysis)
The URA engaged a third party financial review firm to evaluate the applicant’s financials and perform analysis
to evaluate the need for URA support. The analysis undertaken by Economic and Planning Systems, Inc. (EPS)
concluded an ROI without TIF assistance of 9% and an ROI with TIF assistance of 10%. It should be noted that
these returns are based on a lower theater occupancy assumption than what the applicant provided to the URA.
This lower occupancy assumption is supported by recent market analysis that EPS conducted in Lincoln, NE and
is in keeping with EPS’s expectations of a reduction in occupancy as the theater grows from 135 seats to 500
seats.
Additionally, the applicant’s bank has represented and provided letter documentation indicating that the URA
funds are critical to the applicant’s loan application.
Project Benefit
Staff recognizes a number of benefits in enabling the Lyric Cinema Café project and would highlight the
following:
• Development of a challenging site that is located within a challenging development area. Several
challenges relate to Stormwater, access limitations, and the site’s grade relative to adjacent property.
• Development of the site and the installation of Stormwater improvements and the dedication of rear
access can benefit future developments in the immediate area.
• Unique and creative destination in North College that has the potential to draw new interest to the area.
• Expansion of a local business, resulting in new employment, commerce and activity in the area.
City Plan, EH 1.1. Supports Job Creation
The project grows an existing business and will result in additional job creation.
City Plan, Principle EH 3: The City will support local, unique, and creative businesses.
The business is a unique, creative, and local and many would argue an important destination in Fort
Collins.
North College Urban Renewal Plan, LU 2.1 Complementary Uses. Different attractions ‘across the river’.
The project has a great potential to provide an attraction to the area.
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North College Urban Renewal Plan, FAD 2.1 Seek Leverage Opportunities. Set the state for additional
development.
In addressing site conditions for Stormwater and making a dedication of right-of-way for the Mason
Street alignment, the project is facilitating future development.
Proposed Terms
The following TIF assistance structure is proposed:
• Assistance will be provided as a reimbursement upon project completion for up to $209,000 of eligible
costs. The property owner must submit appropriate documentation to verify such costs were incurred.
• The reimbursement will be paid over time based on actual tax increment collected from the project.
• The URA will pay 65% of the annual increment collected to the property owner each year, until the
reimbursement obligation is paid in full or expiration of the TIF district, whichever occurs first.
Location - 1.6 acre vacant lost across the street from Jax
Existing conditions - small lot sizes - no rear access road - some Stormwater issues - site specific - site sits low -
Stormwater shallow outfall on College - larger detention areas - site bounded by a railroad spur to the north -
single shared access to the site on the south side
Lyric Cinema Café – Expansion/Relocation
• Three screen / 500 seat theater operation
• Full restaurant
• Bike-in outdoor venue
Applicant looking for artistic component - something that would be a show piece
Site Plan;
URA Request
Reimbursement of Stormwater detention pond and improvements, and landscaping costs up to an amount of
$209,000 (paid over time as collected).
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TIF Summary;
Eligible Costs v. TIF Generation
Third Party Financial Analysis
Note: Third party reviewer relied on a lower occupancy rate than provided by applicant in materials. Lower rate was
supported by recent market study. Return was highly sensitive to occupancy rate.
Complete analysis is included in today’s packet - differential - highly sensitive to occupancy rate
This was a requirement and condition for financing for the loan - they were required to pledge the TIF financing -
they have a letter from the bank stating that if this is not approved the loan will not be approved
Project Benefits
• Unique and creative destination
• Expansion of local business
• Development of challenging site
• Improvements benefit other future developments
• City Plan Connections
• EH 1.1 Supports job creation
• EH 3.3 Support of local and creative
• Policy CPR 2.2 Build Identity
• North College Corridor Plan
• LU 2.1 Complimentary Uses. Different attractions ‘across the river’.
• FAD 2.1 Seek Leverage Opportunities. Set stage for additional development…
Additional Reimbursement Request
• Additional reimbursement request of $45,000 to reimburse right-of-way repay requirement associated with
North College Improvement Project.
Total TIF request $254K and this amount is within the parameters that we are comfortable with
Reimbursement Structure
• Reimbursement of up to $209,000 (or $254,000) of eligible costs.
• Applicant receives 65% of increment collection until reimbursement amount paid (9-years of estimated
payments).
Key Reimbursement Points
• Applicant must complete project and eligible improvements before receiving reimbursement payment.
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• URA may pre-pay the reimbursement at any time.
• Reimbursement payments based on percentage of actual collections.
Josh Birks; we have done this in other instances, for example, the package we did with Jax was in part to fund
repayment of right of way to Jerome which is a road that has yet to be constructed in addition to some minor
façade reimbursement
Gerry Horak; how did this get missed or not included?
Patrick; my understand in talking with transportation planning was that this was included in the development
notes early only in the conversations with the applicant and their consultants - there wasn’t much detail
regarding development fees -more up to applicant to do due diligence
Josh Birks; the development agreement has to be finalized to move forward - that was when the item resurfaced
Ross Cunniff; how many properties has an existing right of pay payments outstanding?
Josh Birks; great question - we don’t have that information today but will provide as part of packet
Gerry Horak; financials didn’t include $45K so how do we look at those to make sure the right numbers are
included (city fees).
Josh Birks; they use the fee information that is published on our website
Gerry Horak; how are we going to do that - repays are not unusual in the parts of the city we are trying to
redevelop - how do we do our due diligence?
Jeff Mihelich; we are aware and have recorded those
Josh Birks; we will improve the process
Gerry Horak; we did projections for revenue –we should also verify costs
Ross Cunniff; if the Lyric goes out of business and the property remains vacant for some time and the values
decline - that is accounted for in the fact that we only do 50%
Josh Birks; if entity is sold or goes out of business - the repay can only be transferred based on approval of URA
Board
Ross Cunniff; I am ok with projected TIF with an ask for the 50% payment terms
Gerry Horak; I think the use is great - I took a walk up North College - this use is substantially different from all
other uses on the west side of the street - gets folks to go to North College for some other reason is a great use
of the funds
Next Step:
Will bring forward to Council and URA Board on January 3, 2017
URA Meeting Adjourned by Mayor Wade Troxell at 12:36 pm
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COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Lance Smith, Utilities Strategic Financial Director
Date: December 19, 2016
SUBJECT FOR DISCUSSION: Future Utility Debt Requirements – Water & Stormwater
EXECUTIVE SUMMARY
The purpose of this agenda item is to continue the discussion with the Council Finance
Committee which began in April with the 2016 Capital Improvement Plans (CIPs). This
discussion comes after the 2017 rate ordinances which were required more for the 10 year
financial plan as discussed in June than the 2017-18 budgets. In June the recommended paths
forward for the Water and Stormwater Enterprise Funds involved the issuance of debt over the
coming decade as well as modest rate adjustments. The expected use and timing of the debt
financing is presented here for further direction from the Council Finance Committee.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does the Council Finance Committee support keeping these near term debt issuances in
the Utilities Strategic Financial Planning recommendations and coming back with an
updated analysis in 12-18 months?
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
1
to achieve the proposed capital projects over the
coming decade.
At the June 20, 2016 Council Finance Committee the “Utilities 2016 Strategic Financial Plan
Update” outlined how each of the utility funds could finance the capital improvements necessary
to continue providing the current operational levels of service in the future through gradual,
modest rate adjustments and debt issuances. Specifically, the Water and Stormwater Enterprise
Funds will require issuing debt over the coming decade to achieve the operational objectives
while maintaining the financial health of these Funds.
Water Enterprise
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 Water Enterprise Fund has a CIP with $160M which represents twice the historical average
annual spend.
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
and achieve the operational needs through the CIP.
By smoothing the annual capital investment over the coming decade a recommended financial
path was developed which respects the prioritization in the CIP and accomplishes the same
infrastructure in 2026 as the CIP. The dashboard below shows how the forecasted rate
adjustments and debt issuances result in positive operating income for the Enterprise without
requiring large (> 5%) rate adjustments or the buildup of excessive Available Reserves.
$-
$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)
($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
The table above shows the need to issue $30M of debt in 2018. The actual amount may be less
than $30M because it depends on what is found in the Poudre pipeline assessment and the
Halligan permitting process. While there is some uncertainty at this point as to exactly how
much debt may be needed some issuance will be necessary. For purposes of discussion here
$18M of debt is assumed to be issued in 2018 for appropriation in the 2019-20 budget. The chart
below shows the historical debt service and how it is anticipated to be much lower over the next
decade than the previous decade.
Stormwater Enterprise
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.
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.
This utility also 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.
After some analysis it was determined that it will be necessary to reduce the average annual
capital investment by extending the time frame for the initial buildout of the stormwater
infrastructure from 10 to 15 years. The dashboard below shows how effective this approach is at
achieving the financial objectives albeit over a longer time period.
$-
$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
$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
The table above shows the need to issue $20-25M of debt in 2018. This will allow for the
funding of the Magnolia Street Outfall Phase 1 and the Plum Corridor work to be done in 2019.
The chart below shows the historical debt service and how it compares to what is projected for
the next decade.
Conclusion
Staff will continue to keep the Council Finance Committee and the entire City Council informed
of the biennial updates and any other changes to the Utilities Strategic Financial Plan.
ATTACHMENTS
Attachment 1 – AIS on “Utilities Capital Improvement Plans and Strategic Financial Plan
Update” from April 18, 2016
Attachment 2 – CFC AIS on “Utilities 2016 Strategic Financial Plan Update” from June 20, 2016
Attachment 3 – PowerPoint presentation for this discussion
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.
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
EXECUTIVE 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.
GENERAL 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?
BACKGROUND/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.
Capital Improvement Plans
Capital 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.
10 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
Operating 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
Shortfall 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.
Is 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)
Next Step: Strategic Financial Planning
Estimated 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.
Relative 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
Debt 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
Conclusion
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.
Attachments
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
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
1
to achieve the proposed capital projects over the
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.
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
Incorporate 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.
Perform 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.
Develop 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.
Where 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:
Conclusion
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
Future Utility Debt Requirements
Lance Smith, Utilities Strategic Finance Director
12-19-16
Purpose and Direction Sought
Objective:
• Continue the discussion from April 18th
and June 20th
on the Strategic Financial
Planning efforts for Utilities
• Provide an overview of the anticipated need for debt in the Water and
Stormwater Funds
Direction Sought:
• Does the Council Finance Committee support keeping these near term debt
issuances in the Utilities Strategic Financial Planning recommendations and
staff coming back with an updated analysis in 12-18 months?
2
3
Water Enterprise Fund
Water Fund CIP
4
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
Water
Scenario 3 – Rates, Debt and Timeline
5
($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
6
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.
Water Debt Schedule
7
Stormwater Enterprise Fund
8
Stormwater Fund CIP
9
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
Stormwater
Scenario 3 – Rates, Debt and Timeline
10
$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
11
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.
Stormwater Debt Schedule
12
Purpose and Direction Sought
Objective:
• Continue the discussion from April 18th
and June 20th
on the Strategic Financial
Planning efforts for Utilities
• Provide an overview of the anticipated need for debt in the Water and
Stormwater Funds
Direction Sought:
• Does the Council Finance Committee support keeping these near term debt
issuances in the Utilities Strategic Financial Planning recommendations and
staff coming back with an updated analysis in 12-18 months?
13
14
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Lance Smith, Utilities Strategic Financial Director
SUBJECT FOR DISCUSSION – Electric Plant Investment Fees
EXECUTIVE SUMMARY
The purpose of this agenda item is to provide the Council Finance Committee with an overview of the
current electric plant investment fees (PIFs) and review proposed changes to the current approach. The
current method utilizes a planning model that is based on greenfield development. As the city
experiences more redevelopment this current method fails to adequately assign capital costs to this new
load. Staff proposes a change in methodology that uses actual system value to assign costs to new
loads. This change would make the electric PIFs methodology consistent with the water and wastewater
utilities.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does the Council Finance Committee support the change in methodology for the electric PIFs?
BACKGROUND/DISCUSSION
In 2016 Fort Collins Utilities hired NewGen Strategies to survey how PIFs are collected by other electric
utilities and to provide assistance building a revised PIF model to allocate capital costs to new load on the
system. This effort was led by Scott Burnham. Scott’s expertise includes financial feasibility, cost of
service and rate design analysis, asset valuation, and restructuring for electric utilities. Scott leads and
manages rate studies, acquisition, privatization, and competitive assessment engagements for NewGen’s
clients.
Current Model
The current PIF is calculated by utilizing a system planning model that was originally developed in early
1980’s and has been updated serval times to reflect changes in system design standards and policy.
This underlying model assumes a certain system design and allocates the costs of this system design
based on the square footage, the linear footage that abuts the public right of way, and demand (kilowatt
or kW) of the new development. These components of the current electric PIF calculations for residential
and commercial/industrial customers are explained as follows:
Residential
1) Square footage charge. This applies to the total area of a development, excluding dedicated
streets and City owned park land. This charge pays for base (minimum) main feeder lines
and local distribution circuits to general load areas. This includes related electrical equipment
such as fuses and switches. The model for this is based on a main feeder circuit
encompassing a 4 square mile area.
2) Front Footage Charge. This fee applies to all footage of property adjacent to dedicated City
streets within a development, regardless of which side the primary line etc. is on, including
that which is adjacent to open space and detention ponds. This pays for installation of
primary lines, vaults, installation of distribution transformers (not the transformer itself), and
switchgear on adjacent dedicated streets. Also included in this fee is a charge to pay for
installation of streetlights along City streets.
3) Dwelling unit charge. This fee is based on the anticipated electric load (kW) of each dwelling
unit. This pays for the proportional share of augmented main feeder lines required over the
base main feeder system, and a proportional share of the substation and distribution
transformers.
Commercial/Industrial
1) Square Footage charge. Same as residential above.
2) Front Footage charge. This fee applies to all footage of property adjacent to dedicated City
streets within a development, regardless of which side the primary line etc. is on, including
that which is adjacent to open space and detention ponds. This pays for the installation of
primary lines and vaults on adjacent dedicated streets. Also included in this fee is a charge to
pay for installation of streetlights along City streets. The commercial/industrial front footage
charges are higher than residential due to more 3 phase lines, switchgear etc., and a higher
lighting level is required for commercial.
3) Capacity. This charge is based on total amps of service capacity (NOT fuse size), and pays
for:
a. Augmented main feeder lines required over the base main feeder system (see
Square Footage above).
b. The distribution transformer(s) and the development’s proportionate share of the
substation transformer.
The current method has several challenges. The costs for these components (square footage, front
footage, and dwelling units/capacity) are calculated through the use of visual basic code (VBA) to access
databases that contain assembly information and cost data. As a result, it is cumbersome to update
these calculations if changes need to be made to the underlying planning model. For example, it is
difficult to modify the calculations so that the model includes mixed use developments or higher density
developments. Additionally, the planning model has difficulty assigning costs for capital work required for
redevelopment, such as adding a circuit for additional load.
Proposed Model
As a result of the trend toward higher density developments and redevelopments, and the dynamic nature
of the electric system in general, staff recommends changing the methodology of the PIF model to
address the concerns raised above. The proposed methodology is based on the “buy-in” method for PIFs
outlined by the American Water Works Association (AWWA) and is conceptually similar with the PIF
models for the water and wastewater utilities. This method takes the value of the utilized electric system,
i.e. the amount of the system that is needed to serve the current load and no more, and divides this dollar
value by the current kilowatt (kW) demand. This calculation results in the $/kW rate that was used to
build the current system to meet the current demand. New load on the system would buy into the electric
system at this $/kW rate. This simplifies the calculation and administration of the electric PIFs.
In addition to these simplifications, the proposed methodology also uses actual data to allocate costs
instead of a planning model. Demands, non-coincident peaks (NCP), for the residential and
commercial/industrial customer classes are calculated from AMI data and are used to allocate the system
costs proportionally to each class based on the class NCP. This allocation method provides a different
$/kW buy in rate for each of these classes and is consistent with standard cost allocation practices in
utility rate making. Due to the large variation in demands from the commercial class a sliding scale was
implemented for the $/kW rate for commercial customers, as the load from a commercial customer
increases the buy in rate increases as well to allocate the additional system costs required to serve large
loads.
Lastly, this proposed method is flexible and adapts to changes in development by using actual system
values and actual demands as opposed to the current method.
Comparison of the Model Results
Customer Type Example Load kW
Existing
PIF ($)
Proposed
PIF ($)
Difference
($)
Percent
Change
Residential Single
Family
150 Amp, 6000 sq. ft., 60
linear ft.
9 2,342 1,425 (917) -39%
Large Commercial
Building
600 Amp, 480Volt, 3 phase,
40,000 sq. ft., 175 linear ft.
185
43,830 71,244 27,415 63%
Commercial - Three
Phase Office
200 Amp, 208Volt, 3 phase,
40,000 sq. ft., 175 linear ft.
27
13,824 9,672 (4,152) -30%
Commercial - Single
Phase Office
200 Amp, 240 Volt, 1 phase,
40,000 sq. ft., 175 linear ft.
18
12,133 6,357 (5,776) -48%
CONCLUSION
Staff recommends changing the electric PIFs as proposed and seeks guidance on bringing the proposed
changes forward to Council. The next step is to present the proposed new model to the Council at the
January 10, 2017 Work Session and then to ring this forward with all of the fees at the February 14, 2017
Council Work Session for direction on when and how to implement the new fees.
Attachments
1. Presentation
2. Memorandum from NewGen Strategies & Solutions on the new model
December 19, 2016
PROPOSED PLANT INVESTMENT FEE MODEL REVISIONS
Fort Collins Utilities - Council Finance Committee
1
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Agenda
• What is a Plant Investment Fee (PIF)?
• Existing PIF structure
– Platte River Power Authority (PRPA) comparison
– Other utilities
• Proposed PIF changes
– American Water Works Association (AWWA)
Manual
• Impacts to development community
• Recommendations
2
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Plant Investment Fee (PIF)
• What is a PIF?
– Electric capacity fee, development fee, impact
fee
– Fee charged to development to recover
impacts of being added to the system
– Common in water / wastewater industry
– Some type of fee typical for electric utilities
• May be recovered via monthly charges on bill
3
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Plant Investment Fee (PIF)
• Why does Fort Collins have a PIF?
– “Greenfield” development necessitated this in
the past
– Supports “Growth pays for Growth”
• Chapter 26 section 473(b) of Code
– Able to assign specific costs to serve new
load
4
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Plant Investment Fee (PIF)
• Why are we changing the PIF?
– Fort Collins PIF based on older growth
assumptions
– Model is complex, challenging to update
– Cumbersome to administer
– Need to reflect new realities of the system
and development in the community
5
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Existing PIF Structure
• Residential Fee Structure
– Square Foot Charge ($/sq. ft.)
– Front Foot Charge (Linear - $/ft.)
– Dwelling Unit Charge ($/dwelling)
• Commercial Fee Structure
– Square Foot Charge ($/sq. ft.)
– Front Foot Charge ($/ft.)
– Capacity Fee (estimated usage $/kW)
6
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Existing PIF Structure
• “Electric Capacity Fee”
– $5.5 M in revenues through November 2016
– Average $5 M in revenues over last 5 years
7
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Existing PIF Structure
• Existing fee
– Assumes “greenfield” development
– Includes reduction “factor” for Commercial
• 50% of the panel size
• New development / re-development
– Occurs in areas of “re-development”
– City close to “build-out”
– Recognizes capacity paid through previous
PIF for re-development
8
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Existing PIF Structure – Other Utilities
• PRPA utilities
– Longmont
– Loveland
– Estes Park
• Colorado Utilities
– Colorado Springs
– Xcel Energy (IOU)
– United Power (Coop)
– PVREA
• Provo, Utah
– Similar to proposed “system value” fee
9
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Proposed PIF
• “Buy-In Method”
• Results in similar charges by other PRPA
members
• Methodology for electric utilities
– Similar to approach by Provo, UT
• Equivalent to existing capacity “value”
– $/kW basis
– Different for Residential / Commercial
10
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Current vs Proposed PIF Structure
• Residential Fee Structure
– Current
• PIF = [($/ft2
) x ft2
] + [($/LF) x LF] + [($ / du) x #du]
– Proposed
• PIF = [$/kW]res
X kW
• Commercial Fee Structure
– Current
• PIF = [($/ft2
) x ft2
] + [($/LF) x LF] + [($ / kW) x kW]
– Proposed
• PIF = [$/kW]com
X kW
11
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Proposed PIF
+ System replacement cost (investment)
- Adjusted for portion “utilized”
- Adjusted for debt service (recovered in rates)
= System Value for PIF
• Allocated by demand to residential and commercial customers
• PIF Rate ($/kW) based on total demand by class
– Residential PIF fee by anticipated demand (kW)
– Commercial PIF by amperage and voltage
12
System Value $ 197,753,000 (1) PIF Rate ($/kW)
Residential Share $89,351,500 $172.95
Commercial Share $108,401,500 $398.30 (2)
(1) System Value subject to further review
(2) Average rate, see sliding scale
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Impacts to Development Community
Example PIF Charges (1)
13
(1) Note: Rounded
Customer Type Example Load
kW
Existing
PIF ($)
Proposed
PIF ($)
Difference
($)
Percent
Change
Residential Single Family 150 Amp, 6000 sq. ft.,
60 linear ft.
9 2,342 1,425 (917) (39%)
Large Commercial Building 600 Amp, 480 Volt, 3 phase,
40,000 sq. ft., 175 linear ft.
185 43,830 71,244 27,415 63%
Commercial – Three Phase Office 200 Amp, 208 Volt, 3 phase,
40,000 sq. ft., 175 linear ft.
27 13,824 9,672 (4,152) (30%)
Commercial – Single Phase Office 200 Amp, 240 Volt, 1 phase,
40,000 sq. ft., 175 linear ft.
18 12,133 6,357 (5,776) (48%)
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Impacts to Development Community
Example PIF Charges
14
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Recommendations/Direction
15
• Recommendation
– Adopt updated modeling approach for PIF
based on “buy-in” method
• Direction sought
– What options should be presented to council
• Phase in approach?
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Questions?
Scott Burnham | NewGen Strategies & Solutions, LLC
Executive Consultant
Office: (720) 259-1762 | Mobile: (303) 902-9174
sburnham@newgenstrategies.net
16
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Commercial PIF – Implementation Options
Charges by Demand
17
Commercial
by kW Secondary ($/kW) Secondary Total ($) Primary ($/kW) Primary Total ($)
Installation Size
10 $350.68 $3,507 $230.94 $2,309
30 $363.84 $10,915 $239.60 $7,188
50 $369.96 $18,498 $243.63 $12,182
70 $373.99 $26,179 $246.29 $17,240
90 $377.00 $33,930 $248.27 $22,344
200 $386.56 $77,312 $254.57 $50,913
400 $394.86 $157,945 $260.03 $104,013
600 $399.72 $239,831 $263.23 $157,938
800 $403.16 $322,531 $265.50 $212,399
1,000 $405.84 $405,837 $267.26 $267,259
2,000 $414.14 $828,276 $272.73 $545,452
3,000 $418.99 $1,256,983 $275.92 $827,772
4,000 $422.44 $1,689,758 $278.19 $1,112,771
5,000 $425.11 $2,125,560 $279.95 $1,399,764
NEWGEN STRATEGIES AND SOLUTIONS, LLC
Commercial PIF – Implementation Options
Charges by Amperage
18
Voltage 208 240 208 240 480
Amps Single Phase Single Phase Three Phase Three Phase Three Phase
10 $178 $206 $314 $364 $747
30 $555 $644 $980 $1,137 $2,330
50 $942 $1,092 $1,664 $1,929 $3,951
70 $1,335 $1,548 $2,356 $2,732 $5,595
90 $1,731 $2,008 $3,056 $3,544 $7,255
200 $3,955 $4,585 $6,977 $8,089 $16,551
400 $8,095 $9,385 $14,278 $16,551 $33,848
600 $12,307 $14,267 $21,700 $25,154 $51,426
800 $16,564 $19,201 $29,202 $33,848 $69,187
1,000 $20,855 $24,175 $36,762 $42,610 $87,083
2,000 N/A N/A $75,139 $87,083 $177,893
3,000 N/A N/A $114,125 $132,260 $270,110
Memorandum
Economics | Strategy | Stakeholders | Sustainability
www.newgenstrategies.net
225 Union Boulevard
Suite 305
Lakewood, CO 80228
Phone: (720) 633-9514
To: Justin Fields and Randy Reuscher
From: Scott Burnham
Date: December 14, 2016
Re: Revised PIF Model and Review
The City of Fort Collins (the City), and Fort Collins Utilities (referred to herein as the Utility or Utilities)
retained NewGen Strategies and Solutions, LLC (NewGen) to assist with the review, development, and
implementation of a revised electric Plant Investment Fee (PIF) model. The existing PIF model collects
funds from developers for the costs associated with the necessary improvements to serve new electric
load. The existing model and process to determine the PIF is cumbersome to update and is based on a
historic approach that does not necessarily reflect changes that have occurred within the City in recent
years. NewGen and Utilities have developed an updated PIF model that addresses these issues. The
purpose of this memorandum is to provide a detailed description of the issues facing Utilities with respect
to recovering its system investments and the methodology proposed for the revised PIF model.
Background
Like most utilities in the country, the Utility currently charges fees to developers to extend or expand
existing electric service to new customers and/or new load. The Utility charges developers for the
materials and the associated installation labor costs required to provide electricity to the new load. Some
of the materials required are considered “on‐site” (this is equipment unique to the customer, such as
service drops to the customer’s premise). “Off‐site” equipment is that which is located further from the
customer premise and includes items such as switch gear, conductor, and other distribution system
equipment. The Utility currently bills the customer directly for the costs of the on‐site equipment and
labor. The off‐site equipment and labor form the basis for the existing PIF charge.
Fees similar to the PIF are common in the water and wastewater utility industry. Given the large fixed
costs associated with the installation of conveyance structures and associated pumping stations, these
costs have been quantified and charged to new development by most water and wastewater utilities in
the country. In fact, the Utility has existing water and wastewater PIF charges that are based on the value
of the investments it has made to provide these services. Such fees have historically been less common
for electric utilities, as costs of expanding and maintaining the electric system have typically been
recovered through the sale of electricity to the end users (via an energy or $/kilowatt hour (kWh) charge.)
This approach results in all customers paying for the costs of new development. However, many electric
utilities do have some type of investment fee recovery mechanism, which may be referred to as a line
extension policy, electric service connection fees, customer / electrical connection charge, electrical
connection fee, account initiation charge, system development charge, or impact fee. By charging the
developer an upfront fee, the utility is able to ensure that new development is paying all, or at least a
portion, of the costs of being added to the system.
Memorandum
Justin Fields and Randy Reuscher
December 14, 2016
Page 2
NewGen PIF Model Memo_12142016
Existing Model / Load Growth
The existing Utility electric PIF model was designed for a period of infrastructure growth primarily driven
by “greenfield” or newly developed areas. As the City has grown, the potential locations for greenfield
development have decreased and more development is occurring in areas of existing infrastructure (such
as buildings, roads, City‐services, etc.). These “brownfield” or “redevelopment” areas may or may not
require updated or additional electric infrastructure on behalf of the Utility to serve the new load. When
a redevelopment requires no additional infrastructure to be served, there is no PIF charge.
This change in development patterns within the City has resulted in increased density, including
multi‐story commercial / residential developments, as well as other high‐load applications. The result is
that the existing electric system as a whole requires a variety of investment in capital improvements to
maintain reliability and serve the increased load. However, the existing PIF methodology does not
adequately recover the Utility’s costs or reflect the value associated with these system‐wide capital
improvements. Because of the method in which the existing PIF is calculated, the result is that the PIF
charge is not consistent with the City’s stated policy objective of having “growth pay for growth”.
Proposed Model
NewGen and the Utility have jointly developed a proposed PIF model designed to recover system costs
associated with the existing system. The proposed model is consistent with the Utility’s approach for its
water and wastewater impact fees, and is based, in part, on guidance provided by the American Water
Works Association (AWWA). The proposed PIF model utilizes a system value approach that recognizes
the use of the system by existing customers as the basis for the PIF for new load. This approach suggests
that the costs associated with load growth for future customers is similar to the average, or embedded,
costs of the system. New customers are “buying‐in” to the existing system via the PIF charge. The model
determines a PIF based on a $/kilowatt ($/kW) charge for residential and combined “general service”
applications (the Utility’s three general service customer classes will have the same $/kW PIF charges).
The system value was determined by the Utility utilizing a replacement cost approach. This system value
was reduced by the outstanding debt, which is included in the retail rates and is intended to recover a
certain portion of the fixed costs of the system. As the Utility invests in the system via its Capital
Improvement Plan (CIP), as well as other non‐capital (equipment that is expensed) programs, the system
value will be updated on an annual basis. The load (kW) is the existing peak load (or demand) of the
respective class (residential or combined general service). Additional detail on the methodology utilized
to develop the proposed PIF is provided in the attached Appendix A‐1. The system value and class loads
are then used to arrive at a $/kW charge for each customer class.
Memorandum
Justin Fields and Randy Reuscher
December 14, 2016
Page 3
NewGen PIF Model Memo_12142016
Study Results
The results of the proposed model PIF charges compared to the existing PIF charges by example loads for
each customer class is provided is provided in Table 1 below:
Table 1
Example PIF Charges
Customer
Class Group Example Load Existing PIF Proposed PIF Difference
Residential 150 amp, 6,000 sq. ft.,
60 linear ft., 9 kW
$2,342 $1,425 ($917)
General Service 600 amp, 480 v, 3 phase,
40,000 sq. ft., 175 linear ft.,
166 kW
$43,800 $71,244 $27,415
*Note: Rounded
The differences in the existing and proposed PIF charges reflect the differences between the investment
costs to be collected. The proposed approach is based on allocating the utilized capacity within the
existing system on a $/kW basis by class to future load. The existing PIF model is based on an outdated
concept relative to costs for infrastructure required to serve four square miles based on a planning model
(which is why the example load in Table 1 includes the square feet and linear feet of the new
development). The existing PIF methodology does not recognize the changes in development, such as
increased density, mixed use projects, and changes in customer demands, or the changes in capital
required to serve these projects. The proposed PIF methodology recognizes these changes and is based
on a methodology whereby “growth pays for growth.” This approach is consistent with industry best
practices in the water / wastewater utilities and is becoming increasingly adopted in the electric utility
industry (see Appendix A‐2 for a review of other electric utility approaches to similar fees, and Appendix
A‐3 for details on the Utility’s existing PIF structure).
Summary
The existing PIF model and charges have served the City and Utilities well during a period of expanding its
services and greenfield growth. However, in recent years the growth in the City has turned inward,
resulting in redevelopment and higher load density projects and applications. The result is that the
Utility’s PIF model needs to be updated to reflect these realities and to recover infrastructure costs
associated with the entire system, not just the costs defined by the City over 20 years ago. This proposed
change in the PIF model methodology will serve the City by collecting the portion of historic costs invested
to build the excess capacity of the existing system. Further, the proposed changes will allow the City to
better align its PIF methodology with its policy objectives of having growth pay for growth.
Appendix A-1
The City imposes an impact fee on developer’s requesting water and wastewater utility services. The
structure for these fees has been in place since approximately 2006. These impact fees are designed to
recover costs associated with the capacity of their entire utility system, as well as selected improvements
Memorandum
Justin Fields and Randy Reuscher
December 14, 2016
Page 4
NewGen PIF Model Memo_12142016
associated with their capital improvement plans. This approach follows the guidance provided by AWWA,
as described in detail below. Utilities indicated that the existing water/wastewater impact fee structure
is preferred to the existing electric impact fee structure as it is easier to update, does not require detailed
modeling results from other Utilities departments, and is defensible.
AWWA Approach
As indicated above, the Utility’s water/wastewater fees follow the guidance provided in the AWWA M1
manual. The M1 manual is recognized as the industry best practices and provides details on the modeling
methodologies. The M1 manual describes several mechanisms for the development of System
Development Charges (SDC) for one‐time charges paid by a new water system customer for system
capacity. The following is a summary of the AWWA approaches, as well as how they may apply to the
Utility’s electric PIF development.
The calculation of the SDC is, in very basic terms, the total value of each utility function divided by the
appropriate units (in the AWWA manual, the units are typically gallons) to develop a per unit charge. The
AWWA methods include the Buy‐In Method, the Incremental Cost Method, and the Combined Cost
Approach. The Buy‐In Method is typically used where there is sufficient capacity in the existing system to
meet both near‐term and long‐term needs. Utilizing this approach allows a developer to “buy” a
proportional share of capacity at the value of the existing facilities. This approach is based on the principle
of achieving capital equity between existing and new customers. The value of the existing system can
either be at a depreciated original cost or a replacement cost. Using replacement costs reflects the cost
of providing new expansion capacity to customers as if the capacity was added at the time the new
customer connected to the system.
Proposed PIF Approach for Fort Collins
Working with Utility staff, NewGen has developed a revised approach to the electric PIF model. Looking
ahead toward build‐out of the City, the Utility expects to see more growth in areas of redevelopment as
the City’s “greenfield” areas disappear. Additionally, the Utility believes that the capacity of the existing
systems (with some CIP and other non‐capital investments) can meet the load of these redevelopment
areas. Thus a Buy‐In approach was developed for the Utility’s new PIF model. This approach has been
incorporated into a revised electric PIF fee model, iterations of which have been provided to Utilities for
review. The following provides a summary of the methodology employed to develop and the mechanisms
used within the revised PIF model.
Existing System Valuation – the model relies on an estimate of the valuation of the existing
electric system, based on input from Utilities. This valuation represents a replacement cost
approach, which was provided by Utilities and was not independently validated. As Utilities
implements its Asset Management System, it will be important to update the Existing System
Valuation in the revised PIF model accordingly.
Credit for Outstanding Debt Principal – the model includes a line item for the outstanding debt
principal associated with financing for the existing system value. This line serves as a credit to the
total system value for PIF. This line item follows the guidance provided by the AWWA M1 manual
and ensures that the debt issued for the existing system is recovered fully from retail rates (and
not the PIF).
Memorandum
Justin Fields and Randy Reuscher
December 14, 2016
Page 5
NewGen PIF Model Memo_12142016
System Usage Data – the model utilizes the Non‐Coincident Peak (NCP) of the system (and
customer classes) by which the total system investment is divided. The NCP is the sum of each
customer class’ NCP, which represents the peak demand (in kW) for that class whenever it occurs.
System / Customer Class – the revised PIF develops a unit fee ($/kW) based on the entire system
as determined by customer classes (residential and commercial).
Appendix A-2
NewGen has developed a detailed comparison of how other utilities recover fixed costs through PIF
charges and/or other comparable mechanisms. For this comparison we have reviewed the practices of
the other Platte River Power Authority (PRPA) members (Loveland, Longmont, and Estes Park).
Additionally, we have reviewed the practices of selected municipal, investor‐owned and cooperative
utilities in Colorado and other states.
Platte River Power Authority Members
The three other PRPA members vary in their approach to comparable PIF charges. Both Loveland and
Longmont have fee structures in place; however, Estes Park does not. The Longmont fee structure is
based on the amperage rating of the customer’s panel, as well as type of service (Residential, Commercial)
to determine the Electric Community Investment fee. Proceeds from this fee are dedicated to growth
related electric utility capital improvement projects. The Longmont fee ranges from $310 to $1,858 for
residential applications and $619 to $128,546 for commercial applications.
The City of Loveland has a Plant Investment Fee that varies by customer class. Their PIF provides for the
“additional electric transmission, substation and distribution facilities made necessary by the extension
of electric service to new connections”. For residential applications, the fee is $1,450 for service size of
150 amps or less and $1,860 for service size of greater than 150 amps. For commercial applications, the
Loveland PIF varies by each class, but is based on the energy utilized on a monthly basis (monthly bill) and
ranges from $0.00587 to $0.00570 per kWh. Rather than collecting all of the costs of new development
upfront, Loveland collects it through monthly charges. For a commercial (general service) customer with
a peak demand of 166 kW and usage of 60,000 kWh/month, the fee would be approximately $4,200/year.
The City of Loveland has recently proposed a new rate schedule, which includes an increase to its PIF by
approximately 4%.
Other Industry Approaches
NewGen conducted a review of selected utility development charges for this assignment. There does not
appear to be an “industry standard” for service fees for development. However, most utilities have some
type of line extension policy that provides customers with a detailed assessment of the costs to be
incurred for additional service. Some of the utilities provide a credit either in the form of a Construction
Allowance or a revenue credit over a certain period of time, based on future sales. Additionally, most
utilities offer some form of rebate to original applicants who install facilities that are subsequently utilized
by new customers (within a specific period of time).
Memorandum
Justin Fields and Randy Reuscher
December 14, 2016
Page 6
NewGen PIF Model Memo_12142016
This review included an assessment of these types of charges within the State of Colorado (for municipal,
cooperative, and investor owned electric utilities), as well as selected utilities in Utah and California.
Table A‐2 provides a summary of the findings from our review:
Table A-2
Summary of Findings
Name Utility
Type
Fee Type PIF Year Refund
Period
Comments
United Power (Coop) Co-op $/Extension by
Class
$/amp, per
phase
2004 5-year Overhead standard
Public Service
Company of Colorado
(Xcel Energy)
IOU $/Customer or
$/kW
N/A 2014 10-year Construction Allowance;
Fee’s based on COS;
Overhead standard.
Colorado Springs Municipal Revenue
Guarantee
N/A 2016 5-Year Overhead standard. Fees
for Underground in tariff
by length, type, customer
Poudre Valley REA
(Coop)
Co-op $/kVA System
Capacity
2016 5-Year Contribution In Aid
required; fee for larger
service
Provo City Municipal $/kVa Impact Fee 2008 N/A Fee by Amp (Service
Size) and service phase /
voltage
Individual Results
United Power (Cooperative)
United Power (United) is a cooperative that is served wholesale power by Tri‐State Generation and
Transmission (Tri‐State). United has several fees for Residential and Non‐Residential (Commercial and
Industrial) customer types that are based on its costs for designing line extensions for future service. In
addition to the design fees, United charges a “Subdivision Line Extension” fee based on per extension plus
a per lot charge. United also charges a Plant Investment Fee that is $150 per 100 amps, which is intended
to recover current or future increases in United’s transmission or distribution system plan investment
necessitated by Line Extensions and/or new loads. United does not include any cost sharing for joint
trenching, whereby an underground trench designed for an electric line or facility may be shared with
another utility (communications, water, wastewater, etc.). However, United does include a provision in
its policy that allows for a proportional refund to original applicants if future applicants connect to an
existing line extension within a five‐year period.
Xcel Energy (IOU)
Public Service Company of Colorado (aka Xcel Energy), an investor‐owned utility (IOU), provides a
construction allowance to customers requiring a line extension that is based in part on the allocated costs
per customer for various components derived from its most recent cost of service (COS) filing with the
Memorandum
Justin Fields and Randy Reuscher
December 14, 2016
Page 7
NewGen PIF Model Memo_12142016
applicants can obtain a partial refund for new applicants utilizing the line extensions paid by the original
applicants.
Xcel defines two types of line extension: A Service Lateral portion and a Distribution portion. The Service
Lateral is for facilities installed by Xcel between its distribution line and the point of delivery for the
customer, which provides service exclusively for the individual customer’s use. The Service Lateral
investment charge is similar to the “on‐site” Building Site Fee charged by Utilities (See Appendix A‐3),
subject to the construction allowance. The construction allowance is derived from the gross, embedded,
lateral plant investment per customer, as indicated in the Company’s most recent rate filing.
Distribution line extension facilities include primary and secondary distribution lines, transformer costs,
and all appurtenant facilities, excepting service laterals necessary to supply service to the applicant. The
construction allowance is derived from the gross, embedded distribution plant investment per customer
(or per kilowatt demand, for demand customers).
Xcel identifies some extensions as “uneconomic”, to which a construction allowance is not applicable, and
applicants are required to pay all construction costs. Uneconomic extensions are those greater than 0.5
miles from existing facilities or those for which a construction allowance would be less than 8% of the
total construction costs.
Xcel provides tariff pricing for its construction allowance that differentiates by Service Lateral and
Distribution portion by class type: Residential, Commercial and Industrial, and Lighting. Such pricing is
then differentiated by rate schedules within retail classes. The Service Lateral portion is a fixed allowance
and the Distribution portion is based on future load ($/kW, depending on rate schedule).
Colorado Springs
Colorado Springs Utilities (CSU), a municipally‐owned utility, defines their line extension policy in terms
of utility and customer provisions and service limitations as applied to primary and main distribution lines.
CSU installs, owns, and maintains the equipment for line extensions, based on an overhead service drop
(service line) to a customer’s premises. No PIF is charged upfront, instead the associated costs are
socialized across the rate class through on‐going monthly charges. Customers are required to pay in the
form of a contribution in aid‐of‐construction if they wish to underground these facilities, which varies by
linear foot depending on length and type of line and customer class (single phase primary, three‐phase
main line for residential and non‐residential) per CSU’s tariff schedule. Customers pay a design fee to CSU
for the proposed facilities, as well as for inspection and connection services.
CSU requires a revenue guarantee or deposit for three‐phase main line extensions greater than 0.5 miles
long. If the revenues anticipated in each year, over a five‐year period, are less than 30% of the total cost,
CSU may bill the customer for the revenue shortfall. CSU uses the five‐year period to determine if
additional customers to an existing extension would result in a reduction in deposits to existing customers.
If additional customers result in a greater deposit, it will result in a separate new extension.
Poudre Valley REA (Cooperative)
Poudre Valley REA (PVREA) is a cooperative served by Tri‐State in areas adjacent to the City of Fort Collins.
PVREA has a line extension policy that provides for service to new customers in its service territory. Costs
are paid by the applicant based on the costs of constructing, installing, or upgrading the line extension
Memorandum
Justin Fields and Randy Reuscher
December 14, 2016
Page 8
NewGen PIF Model Memo_12142016
and facilities necessary to serve the new load. The costs paid are considered “Contribution‐in‐Aid‐of‐
Construction” (CAIC), and including all costs to PVREA and its power supplier (Tri‐State). The CAIC does
not include additional capacity, size or strength in excess of what is actually necessary to meet the
requirements of the applicant. However, if the applicant’s requested level of service exceeds 50 kVA (1
phase), 100 kVA (2 phase), or 150 kVA (3 phase), PVREA imposes an additional charge of $5.00 / kVA.
Additionally, PVREA may impose a fixed charge per month per customer for new service in sparsely
populated areas. Residential customers are eligible for rebates for a period of five years depending on
the number of additional customers utilizing the previous investments made.
Provo City (Municipal)
Provo City, Utah, is a municipal electric provider that charges an impact fee in a fashion similar to the PIF
fee Utility employs for its water utility. Provo’s impact fee is based on the current value of selected assets
(transmission and substation facilities), as well as the projected value of the improvements (from their
capital plan) for these assets. Provo does not provide a credit for past contributions and the value is not
adjusted for existing debt (as its debt is related to generation and non‐impact fee facilities). Provo
determines the average fee on a dollar per kW (estimated demand) and then applies a diversity factor
and a utilization factor. The diversity factor applied reflects the ratio of the systems actual peak demand
to the sum of the individual customer peak demands. The utilization factor is applied to the customer’s
panel size (where they take service) as it relates to actual usage (rated capacity of the customer’s panel
compared to demand utilized by the customer). Both the diversity factor and the utilization factor serve
to reduce the value of the impact fee. Provo publishes its fee schedule as a range by service (voltage and
phase) and the requested rating of a customers’ panel (in amperage).
California Utilities
The big three investor owned utilities in California (Pacific Gas & Electric, Southern California Edison, and
San Diego Gas & Electric) all have similar line extension policies. The applicant is typically responsible for
excavation, substructures and conduits and protective structures, or the utility may charge the applicant
for such work. The utility will furnish and install cables, switches, transformers, and other distribution
facilities. The utilities will complete a line extension without charge, provided the total cost is not greater
than the construction allowance. The allowance is based on the ratio of the net revenues from the
customer to a cost of service factor, which is defined in their rate filings. The current allowance for
residential line extensions ranges from approximately $2,400 to $3,400, depending on the utility.
Municipal utilities in California vary in their approach to line extension fees. Most municipal utilities have
some cost sharing between the applicant and the utility, either through a construction allowance (Los
Angeles Department of Water and Power), a flat fee for certain types and lengths of distribution
equipment investment (Glendale Water and Power), or charges for specific construction related costs,
such as trenching, conduits or backfilling (Sacramento Municipal Utility District).
Appendix A-3 - Existing PIF and Related Charges for Fort Collins
The Utility charges fees to developers of electric load that reflect the actual costs associated with
development. There are currently two types of fees specific for residential and commercial electric
customers. These fees are referred to as an Electric Capacity Fee and a Building Site Charge.
Memorandum
Justin Fields and Randy Reuscher
December 14, 2016
Page 9
NewGen PIF Model Memo_12142016
The Electric Capacity Fee for Residential applications includes a Square Footage Charge, a Front Footage
Charge, a Dwelling Unit Charge and a Primary Service Charge (typically, Residential customers do not apply
for primary service, so this charge is not always applicable). These charges all recover costs associated
with new service as well as a proportional share of existing investments associated with the new load.
The commercial application of the Electric Capacity Fee has a similar Square Footage Charge, Front
Footage Charge, and a Capacity charge (based on transformer costs).
The residential Building Site Charge is based on an “average” length of service from the transformer to
the electric meter. The commercial Building Site Charge includes a Primary Service Charge, and a
Transformer installation charge (in a commercial application, the customer is responsible for installing
secondary service equipment). These are referred to as “on‐site charges” and are not considered part of
the PIF.
Only the Square Footage Charge, the Front Footage Charge and the Capacity Charge (for commercial
customers) are considered in the Utility’s calculation of its PIF. Collectively, these “off‐site” charges are
referred to as Electric Capacity Fees. The “on‐site” charges (collectively the Building Site Charges) are
unique to each property and include specific equipment requested in the application, and as such are not
included in the commercial PIF.
For ease of understanding, Table A‐3 provides a summary of the applicable charges and fees for the
Utilities. The Electric Capacity Fees are considered in the calculation of the PIF fee, as indicated in bold
below.
Table A-3
Fort Collins Light and Power Development Charges
Customer Type Fee Type Fee
Residential Electric Capacity Fee Square Footage Charge
Electric Capacity Fee Front Footage Charge
Electric Capacity Fee Dwelling Unit Charge
Building Site Charge Primary Service Charge*
Building Site Charge Secondary Service Charge
Commercial Electric Capacity Fee Square Footage Charge
Electric Capacity Fee Front Footage Charge
Electric Capacity Fee Capacity
Building Site Charge Primary Service Charge
Building Site Charge Transformer
Note: Additional charges may apply for unusual circumstances, as determined by Utilities. Only the
Electric Capacity Fees are included in the Utilities Plant Investment Fee. * Primary Service Charge
is typically not applicable to Residential (see text).
COUNCIL FINANCE COMMITTEE
AGENDA ITEM SUMMARY
Staff: Travis Storin, Accounting Director
Date: December 19, 2016
SUBJECT FOR DISCUSSION
City response to findings included in:
• Independent Auditors’ Report on 2015 Financial Statements
• Independent Auditors’ Report on Compliance for Major Federal Programs
EXECUTIVE SUMMARY
In July 2016, RSM presented the Report to the City Council. This report covered the audit of the
basic financial statements and compliance of the City of Fort Collins for year-end December 31,
2015.
The City received unqualified or “clean” opinions for both reports. Incidental to these audits,
McGladrey identified certain control deficiencies that they recommend we rectify prior to the
2016 audit. All deficiencies identified were of the lowest severity on a scale of one to three.
City staff has implemented process improvements throughout 2016 to respond to these seven
control deficiencies. Corrective action is already either in motion or complete in all cases.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Staff seeks input on areas of priority or concern, other than those established in this Report to the
City Council, for matters of recordkeeping and/or the City’s internal control environment.
BACKGROUND/DISCUSSION
Every year the City is required to be audited in compliance with Government Auditing
Standards. McGladrey finalized its financial statement audit on June 14, 2016 and compliance
report on June 14, 2016 and the firm reported the results of the audit to those charged with
governance.
Subsequent to the auditor’s communication, City Staff responds at CFC with its proposed plan
for addressing any findings.
ATTACHMENTS
1. 2015 Audit Response.pptx
2. Report to the City Council (soft copy only, distributed originally at July CFC)
Corrective Actions: 2015 Auditor Findings
Travis Storin, Accounting Director
12-19-16
2
Summary of 2015 Fiscal Year Audit
• Unqualified/clean opinion of Financial
Statements
• Unqualified/clean opinion on Compliance
with Major Federal Programs (Single
Audit)
• Received 30th
consecutive GFOA
Certificate of Achievement for Excellence
in Financial Reporting
• Two control deficiencies identified;
corrective action is in motion and
implementation is complete
Audit Findings Terminology
3
Control
Deficiency
(2)
• Least severe finding
• The design or operation of a control does not allow management or employees to prevent, or
detect and correct misstatements during the normal course of their duties
Significant
Deficiency
(0)
• A deficiency, or combination of deficiencies, that is less severe than a material weakness yet
important enough to merit attention by those responsible for oversight of financial reporting
• Remains on our audit reports for two years and defaults City to “high risk auditee” status
Material
Weakness
(0)
• Most severe finding
• A deficiency, or combination of deficiencies, such that there is a reasonable possibility that a
material misstatement of the City’s financial statements will not be prevented, or detected
and corrected, on a timely basis
• Jeopardizes whether a “clean”, or unqualified, audit opinion is issued
4
Deficiency #1: Cash Reconciliations
Audit Finding:
“… Cash reconciliations provided during the audit had unreconciled differences between the bank
statements and general ledger…We recommend the City establish procedures to prepare and
review cash reconciliations timely and accurately to reconcile the bank balance to the book
balance with no significant unreconciled differences”
Staff Discussion:
• Carryover finding from prior year; at time City Staff had successfully reconciled 24 of our 25
cash and investment accounts.
• Remaining account was a large deposit account where virtually all City receipts are processed.
• Deficiency can be attributed to a period of substantial staff turnover.
5
Deficiency #1: Cash Reconciliations
Staff Response Actions:
• Process has been restored and improved substantially
• All of 2016 transactions are reconciled; clean-up work remains in researching 2014-2015
transactions; anticipate completion in time for next audit in Spring 2017
• Process improvements have reduced the cycle time from approximately 3 weeks every month
to 2-3 workdays per month while improving accuracy. Improvements include:
• New process heavily leverages Excel-based analytical tools
• Revised bank deposit procedures are a critical enabler of the new process
• Work is documented in detail and multiple staff are trained to back up one another
Bank
Deposits
Ledger
Batches
Bank
Deposits
Ledger
Batches
Formerly Many-to-Many Now One-to-One
6
Deficiency #2: FTA Grant Programs
Audit Finding:
“… The City does not have an adequate process to reconcile expenditure accruals
recorded in the general ledger against the Schedule of Expenditures of Federal
Awards (SEFA). As a result, FTA expenditures were reported on the 2015 SEFA that
belonged on the 2014 SEFA, consistent with the financial statements …”
7
Deficiency #2: FTA Grant Programs
Staff Discussion:
• Carryover finding from prior year, 2014 report had already been issued when
deficiency was identified, thus Q4 expenditures of 2014 were included on 2015
SEFA to “catch-up” the life-to-date activity and correct the deficiency before the
2016 fiscal year ends.
• Expect deficiency to be resolved for year-end 2016.
2013
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
SEFA as filed (Based on Timing of
Reimbursement Request)
SEFA Compliance Reporting Period
(Had City prepared w/ correct dates)
2014 Compliance Report 2015 Compliance Report 2016 Compliance Report
Quarter in which Expenditures
were Incurred
2014 2015 2016
Closing Remarks and Council Discussion
8
City of Fort Collins, Colorado
Report to the City Council
June 14, 2016
555 17th St
Suite 1000
Denver, CO 80202
T +1 303 298 6400
F +1 303 298 6401
www.rsmus.com
June 14, 2016
To the Honorable Mayor and
Members of the City Council and City Manager
City of Fort Collins, Colorado
Fort Collins, Colorado
We are pleased to present this report related to our audit of the basic financial statements of the City of
Fort Collins, Colorado (the City) for the year ended December 31, 2015. This report summarizes certain
matters required by professional standards to be communicated to you in your oversight responsibility for
the City’s financial reporting process.
This report is intended solely for the information and use of the City Council and management and is not
intended to be, and should not be, used by anyone other than these specified parties. It will be our
pleasure to respond to any questions you have about this report. We appreciate the opportunity to
continue to be of service to the City of Fort Collins, Colorado.
Contents
Required communications 1-2
Summary of significant accounting estimates 3-5
Summary of uncorrected misstatements 6-7
Recently issued accounting standards 8-9
Exhibit A—Significant written communications between management and our firm
Representation letter
Control deficiency letter
1
Required Communications
Generally accepted auditing standards (AU-C 260, The Auditor’s Communication with Those Charged
with Governance) require the auditor to promote effective two-way communication between the auditor
and those charged with governance. Consistent with this requirement, the following summarizes our
responsibilities regarding the financial statement audit as well as observations arising from our audit that
are significant and relevant to your responsibility to oversee the financial reporting process.
Area Comments
Our Responsibilities With
Regard to the Financial
Statement Audit
Our responsibilities under auditing standards generally accepted in
the United States of America, Government Auditing Standards issued
by the Comptroller General of the United States, and provisions of the
Uniform Guidance and OMB’s Compliance Supplement have been
described to you in our arrangement letter dated March 10, 2016. Our
audit of the financial statements does not relieve management or
those charged with governance of their responsibilities which are also
described in that letter.
Overview of the Planned
Scope and Timing of the
Financial Statement Audit
We have issued a separate communication regarding the planned
scope and timing of our audit and have discussed with you our
identification of and planned audit response to significant risks of
material misstatement.
Accounting Policies and
Practices
Preferability of Accounting Policies and Practices
Under generally accepted accounting principles, in certain
circumstances, management may select among alternative
accounting practices. In our view, in such circumstances,
management has selected the preferable accounting practice.
Adoption of, or Change in, Accounting Policies
Management has the ultimate responsibility for the appropriateness of
the accounting policies used by the City. In the current year, the City
adopted the following Governmental Accounting Standards Board
(GASB) Statement:
GASB Statement No. 68, Accounting and Financial Reporting for
Pensions.The primary objective of this Statement is to improve
accounting and financial reporting by state and local governments
for pensions. The adoption of this Statement required the City to
recognize its long-term obligation for pension benefits related to
the General Employees’ Retirement Plan (GERP) as a liability
within their financial statements, as well as, to more
comprehensively and comparably measure the annual costs of
pension benefits. This statement also enhances the accountability
and transparency through revised and new note disclosures and
required supplementary information.
As a result of implementing this new Statement, the City restated
(reduced) its beginning net position of the governmental activities,
business-type activities, each major enterprise fund and the
aggregate remaining fund information to record a net pension liability
relating to GERP by $2.5 million and $5.9 million for governmental
activities and business-type activities, respectively.
2
Area Comments
Significant or Unusual Transactions
We did not identify any significant or unusual transactions or
significant accounting policies in controversial or emerging areas for
which there is a lack of authoritative guidance or consensus.
Management’s Judgments and Accounting Estimates
Summary information about the process used by management in
formulating particularly sensitive accounting estimates and about our
conclusions regarding the reasonableness of those estimates is in the
attached Summary of Significant Accounting Estimates.
Audit Adjustments There were no audit adjustments proposed by us that were made to
the original trial balance presented to us to begin our audit.
Uncorrected Misstatements Uncorrected misstatements are summarized in the attached Summary
of Uncorrected Misstatements.
Disagreements With
Management
We encountered no disagreements with management over the
application of significant accounting principles, the basis for
management’s judgments on any significant matters, the scope of the
audit, or significant disclosures to be included in the financial
statements.
Consultations With Other
Accountants
We are not aware of any consultations management had with other
accountants about accounting or auditing matters.
Significant Issues
Discussed With
Management
No significant issues arising from the audit were discussed with or
were the subject of correspondence with management.
Significant Difficulties
Encountered in Performing
the Audit
We did not encounter any significant difficulties in dealing with
management during the audit.
Accounting
Pronouncements
Please refer to the attachment for new accounting pronouncements
that have been recently issued that may affect the City’s financial
statements in future periods.
Report on Internal Control
Over Financial Reporting
and on Compliance and
other Matters Based on an
Audit of Financial
Statements Performed in
Accordance with
Government Auditing
Standards
We have separately issued a report on internal control over financial
reporting and on compliance and other matters based on our audit of
the financial statements and major awards, as required by the
Government Auditing Standards and the Uniform Guidance. This
communication is included within the compliance report of the City for
the year ended December 31, 2015.
Significant Written
Communications Between
Management and Our Firm
Copies of significant written communications between our firm and the
3
Summary of Significant Accounting Estimates
Accounting estimates are an integral part of the preparation of financial statements and are based upon
management’s current judgment. The process used by management encompasses their knowledge and
experience about past and current events and certain assumptions about future events. You may wish to
monitor throughout the year the process used to determine and record these accounting estimates. The
following describes the significant accounting estimates reflected in the City’s December 31, 2015 basic
financial statements.
Estimate
Accounting Policy
Management’s
Estimation Process
Basis for Our
Conclusions on
Reasonableness of
Estimate
Depreciable Useful
Life of Capital Assets
The depreciable useful
life of capital assets is
set at the estimated
useful life of the related
asset.
The determination is
made at the time the
asset is placed into
service and involves
various judgments and
assumptions based on
prior experience.
We tested the propriety
of information
underlying
management’s
estimates. Based on our
procedures, we
concluded that
management’s
estimates are
reasonable.
Incurred But Not
Reported (IBNR)
Property Liability,
Worker’s
Compensation, Health
Dental and Vision
The City records an
estimated reserve for
workers’ compensation
and other risk
management liabilities
based on actual and
estimated claims
outstanding as of year-
end, and calculations
performed by a
specialist and include
numerous assumptions
and estimates.
The assumption factors
4
Estimate
Accounting Policy
Management’s
Estimation Process
Basis for Our
Conclusions on
Reasonableness of
Estimate
Allowance for
Doubtful Accounts
The allowance for
doubtful accounts is
based on
management’s estimate
of collectability of
identified receivables,
as well as aging of
customer accounts.
The allowance is
adjusted as information
and specific accounts
become available. The
City also compares
current allowance
amounts to prior-year
collection or write-off
experience.
We tested the
underlying information
supporting this
allowance, including the
most recent aging
reports and collection
experience. We
concluded that
management’s estimate
is reasonable.
Net Pension Liability The City’s net pension
liability and related
deferred inflows and
outflows of resources
and pension expenses
from the General
Employees’ Retirement
Plan are recorded in the
financial statements in
accordance with GASB
Statement No. 68.
The City uses an
actuary to calculate the
net pension
liability/asset and
expense based on
assumptions and
estimates established
by the Plan’s Board and
management from past
history and investment
returns. City
5
Estimate
Accounting Policy
Management’s
Estimation Process
Basis for Our
Conclusions on
Reasonableness of
Estimate
Assets Held for Sale The assets held for sale
are recorded at the
lower of cost or fair
value.
The assets held for sale
are initially recorded at
cost and evaluated by
management on an
annual basis for any
declines in the value of
the property based on
fair value. Fair value is
the sale price of the
property when it
eventually sells, less
selling costs.
We tested the
underlying information
supporting this estimate
and concluded that the
estimate and the
process used by
management is
reasonable.
Modified Approach
Infrastructure
The City has elected to
use the “Modified
Approach” as defined
by GASB Statement No.
34 for infrastructure
reporting for its streets
pavement system.
These assets are not
required to be
depreciated, but the
City is required to
estimate the annual
amount to maintain and
preserve the assets at
the established
condition assessment
level.
The City’s pavement
management program
conducts condition
assessment surveys on
a three-year cycle.
Based on the
information obtained for
these surveys, the City
6
Summary of Uncorrected Misstatements
During the course of our audit, we accumulated uncorrected misstatements that were determined by
management to be immaterial, both individually and in the aggregate, to the basic financial statements
and to the related basic financial statement disclosures. Following is a summary of those differences.
Governmental Activities Assets Liabilities Net Position Revenue Expense
Description:
Carryover impact from previous years $ - $ - $ 1,154,000 $ (1,041,000) $ (113,000)
Current misstatement, factual:
Overstatement of current year expenses
from capital asset correcting entry - - 325,000 - (325,000)
To correct the unreconciled bank to book
cash balances 352,000 - - (244,000) (108,000)
Subtotal $ 352,000 $ - 1,479,000 $ (1,285,000) $ (546,000)
Effect of current year passed adjustments on
net position (1,831,000)
Total $ (352,000)
Aggregate Remaining Fund Information Assets Liabilities
Fund Balance/
Net Position Revenue
Expense/
Expenditure
Description:
Carryover impact from previous years $ - $ - $ 401,000 $ (288,000) $ (113,000)
Current misstatement, factual:
To correct the unreconciled bank to book
cash balances 352,000 - - (244,000) (108,000)
Subtotal $ 352,000 $ - 401,000 $ (532,000) $ (221,000)
Effect of current year passed adjustments on
fund balance (753,000)
Total $ (352,000)
Business-Type Activities Assets Liabilities Net Position Revenue Expense
Description:
Carryover impact from previous years $ - $ - $ (164,000) $ - $ 164,000
Current misstatement, factual:
Correction of errors recorded in prior years
relating to inappropriately capitalized
interest for the Halligan Water Supply Project - - 962,000 - (962,000)
Entry to record capitalized interest 1,646,000 - - - (1,646,000)
Subtotal $ 1,646,000 $ - 798,000 $ - $ (2,444,000)
Effect of current year passed adjustments on
net position (2,444,000)
Total $ (1,646,000)
Debit (Credit) to Correct the Misstatements
Debit (Credit) to Correct the Misstatements
Debit (Credit) to Correct the Misstatements
7
Summary of Uncorrected Misstatements (Continued)
Water Fund Assets Liabilities Net Position Revenue Expense
Description:
Carryover impact from previous years $ - $ - $ (164,000) $ - $ 164,000
Current misstatement, factual:
Correction of errors recorded in prior years
relating to inappropriately capitalized
interest for the Halligan Water Supply Project - - 962,000 - (962,000)
Entry to record capitalized interest 460,000 - - - (460,000)
Subtotal $ 460,000 $ - 798,000 $ - $ (1,258,000)
Effect of current year passed adjustments on
net position (1,258,000)
Total $ (460,000)
Light and Power Fund Assets Liabilities Net Position Revenue Expense
Description:
Carryover impact from previous years $ - $ - $ - $ - $ -
Current misstatement, factual:
Entry to record capitalized interest 448,000 - - - (448,000)
Subtotal $ 448,000 $ - - $ - $ (448,000)
Effect of current year passed adjustments on
net position (448,000)
Total $ (448,000)
Wastewater Fund Assets Liabilities Net Position Revenue Expense
Description:
Carryover impact from previous years $ - $ - $ - $ - $ -
Current misstatement, factual:
Entry to record capitalized interest 477,000 - - - (477,000)
Subtotal $ 477,000 $ - - $ - $ (477,000)
Effect of current year passed adjustments on
net position (477,000)
Total $ (477,000)
Storm Drainage Fund Assets Liabilities Net Position Revenue Expense
Description:
Carryover impact from previous years $ - $ - $ - $ - $ -
Current misstatement, factual:
Entry to record capitalized interest 261,000 - - - (261,000)
Subtotal $ 261,000 $ - - $ - $ (261,000)
Effect of current year passed adjustments on
net position (261,000)
Total $ (261,000)
Debit (Credit) to Correct the Misstatements
Debit (Credit) to Correct the Misstatements
Debit (Credit) to Correct the Misstatements
Debit (Credit) to Correct the Misstatements
8
Recently Issued Accounting Standards
The GASB has issued several statements not yet implemented by the City. The City’s management has
not yet determined the effect these statements will have on the City’s financial statements. However, the
City plans to implement all standards by the required dates. The standards which will impact the City are
as follows:
GASB Statement
No. 75, Accounting
and Financial
Reporting for
Postemployment
Benefits Other Than
Pensions
This Statement, issued June 2015, will be effective for the City beginning with its
fiscal year ending December 31, 2018. The Statement replaces the requirements
of GASB Statement No. 45, Accounting and Financial Reporting by Employers
for Postemployment Benefits Other Than Pensions and requires governments to
report a liability on the face of the financial statements for the OPEB they provide
and outlines the reporting requirements by governments for defined benefit
OPEB plans administered through a trust, cost-sharing OPEB plans administered
through a trust and OPEB not provided through a trust. The Statement also
requires governments to present more extensive note disclosures and required
supplementary information about their OPEB liabilities. Some governments are
legally responsible to make contributions directly to an OPEB plan or make
benefit payments directly as OPEB comes due for employees of other
governments. In certain circumstances, called special funding situations, the
Statement requires these governments to recognize in their financial statements
a share of the other government’s net OPEB liability.
GASB Statement
No. 77, Tax
Abatement
Disclosures
This Statement, issued August 2015, will be effective for the City beginning with
its fiscal year ending December 31, 2016. The requirements of this Statement
improve financial reporting by giving users of financial statements essential
information that is not consistently or comprehensively reported to the public at
present. Disclosure of information about the nature and magnitude of tax
abatements will make these transactions more transparent to financial statement
users. As a result, users will be better equipped to understand (1) how tax
abatements affect a government’s future ability to raise resources and meet its
financial obligations and (2) the impact those abatements have on a
government’s financial position and economic condition.
GASB Statement
No. 79, Certain
External Investment
Pools and Pool
Participants
This Statement, issued December 2015, will be effective for the City beginning
with its fiscal year ending December 31, 2016. This Statement will enhance
comparability of financial statements among governments by establishing
specific criteria used to determine whether a qualifying external investment pool
may elect to use an amortized cost exception to fair value measurement. Those
criteria will provide qualifying external investment pools and participants in those
pools with consistent application of an amortized cost-based measurement for
financial reporting purposes. That measurement approximates fair value and
mirrors the operations of external investment pools that transact with participants
at a stable net asset value per share.
GASB Statement
No. 80, Blending
Requirements for
9
GASB Statement
No. 82, Pension
Issues – an
amendment of
GASB Statements
No. 67, No. 68, and
No. 73
This Statement, issued March 2016, will be effective for the City beginning with
its fiscal year ending December 31, 2017. The requirements of this Statement
will improve financial reporting by enhancing consistency in the application of
financial reporting requirements to certain pension issues.
Exhibit A—Significant Written Communications between Management
and Our Firm
555 17th St
Suite 1000
Denver, CO 80202
T +1 303 298 6400
F +1 303 298 6401
www.rsmus.com
June 14, 2016
To the Honorable Mayor and
Members of the City Council and City Manager
City of Fort Collins, Colorado
In planning and performing our audit of the financial statements of the City of Fort Collins, Colorado (the
City) as of and for the year ended December 31, 2015, in accordance with auditing standards generally
accepted in the United States of America, we considered the City’s internal control over financial reporting
(internal control) as a basis for designing audit procedures that are appropriate in the circumstances for
the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing
an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion
on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct misstatements on a timely basis. A deficiency in design exists when (a) a control
necessary to meet the control objective is missing, or (b) an existing control is not properly designed so
that, even if the control operates as designed, the control objective would not be met. A deficiency in
operation exists when a properly designed control does not operate as designed or when the person
performing the control does not possess the necessary authority or competence to perform the control
effectively.
A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is
a reasonable possibility that a material misstatement of the entity’s financial statements will not be
prevented, or detected and corrected, on a timely basis.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less
severe than a material weakness, yet important enough to merit attention by those charged with
governance.
Following are descriptions of other identified deficiencies in internal control that we determined did not
constitute significant deficiencies or material weaknesses:
Cash Reconciliations
The City did not reconcile all bank accounts in a timely manner throughout the year ending December 31,
2015. Cash reconciliations provided during the audit had unreconciled differences between the bank
statements and general ledger of approximately $352,000. We recommend the City establish procedures
to prepare and review cash reconciliations timely and accurately to reconcile the bank balance to the
book balance with no significant unreconciled differences.
City of Fort Collins, Colorado
June 14, 2016
Page 2
Reconciliation of Federal Transit Administration (FTA) grant expenditures
During 2015, the City performed monthly reconciliations of the FTA drawdowns requested/received to the
amounts recorded in the general ledger. The City utilized these drawdown requests to populate the year-
end schedule of expenditures of federal awards (SEFA). The City does not have an adequate process in
place however, for also reconciling expenditure accruals recorded in the general ledger subsequent to
year-end, to the SEFA to ensure these expenditure accruals are recorded properly in the SEFA. As a
result of this, FTA expenditures were reported on the 2015 SEFA that should have been reported on the
2014 SEFA, consistent with the expenditure recognition in the financial statements. We recommend the
City develop an adequate process to reconcile year-end expenditure accruals to the SEFA to verify that
federal expenditures for the FTA grants are reported in the proper period.
This communication is intended solely for the information and use of management, City Council, others
within the City, and is not intended to be and should not be used by anyone other than these specified
parties.
Certain Component
Units – an
Amendment of
GASB Statement
No. 14
This Statement, issued January 2016, will be effective for the City beginning with
its fiscal year ending December 31, 2017. The objective of this Statement is to
improve financial reporting by clarifying the financial statement presentation
requirement for certain component units. This Statement establishes an
additional blending requirement for the financial statement presentation of
component units. This Statement applies to all state and local governments. This
Statement applies to component units that are organized as not-for-profit
corporations in which the primary government is the sole corporate member. This
Statement does not apply to component units included in the financial reporting
entity pursuant to the provision of Statement No. 39. This Statement amends
Statement No. 14.
uses a pavement
condition index (PCI)
which is a nationally
recognized index, in
order to compute the
estimate.
We tested the
underlying information
supporting this estimate
and concluded that the
estimate and the
process used by
management is
reasonable.
management reviews
the actuarial results and
considers the
appropriateness of the
assumptions used by
the Plan.
We analyzed
management’s
methodology, tested the
underlying data,
obtained the calculation
and actuarial report and
had an internal
specialist review the
significant assumptions
and conclusions. We
concluded that the
process used by
management and the
estimates are
reasonable.
Other
Postemployment
Benefit Plan (OPEB)
Assumptions
The difference between
the annual required
contribution and actual
contributions is
recorded as a liability in
the government-wide
and proprietary fund
financial statements of
the City.
The City utilizes the
services of an actuary
to determine the City’s
annual required
contribution.
Management and the
actuary determines the
appropriateness of the
actuarial assumptions to
be utilized. The
actuary’s calculation is
reviewed and approved
by management.
We tested the
information provided to
the actuary and
obtained the actuarial
valuation report. We
believe the estimates
and processes used by
management of the City
are reasonable.
to estimate the year-end
liabilities include
historical experience,
general market
experience and claims
lag timing. An actuary is
hired by the City to
compute the year-end
estimate and the results
are reviewed by
management.
We tested the
information provided to
the actuary and
obtained the actuarial
reports. We believe the
process used by
management of the City
and the estimates are
reasonable.
Fair Value of
Investments
The City records its
investments at the
estimated fair value.
Investment securities
are based on quoted
market prices.
We tested the
proprietary of
information underlying
management’s
estimates, including the
use of a third-party
independent pricing
source. Based on our
procedures, we
conclude that
management’s estimate
is reasonable.
management of the City, including the representation letter provided
to us by management, are attached as Exhibit A.
Colorado Public Utilities Commission. The company allows for a 10‐year period in which original
$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
Operations
on Available
Capital
Review &
Approval of
Prioritization
Budget Offers