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Home My WebLink AboutAgenda - Mail Packet - 9/19/2017 - Council Finance & Audit Committee Agenda - September 18, 2017Finance Administration 215 N. Mason 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6788 970.221.6782 - fax fcgov.com AGENDA Council Finance & Audit Committee September 18, 2017 10:00 am - noon CIC Room - City Hall Approval of Minutes from the August 29P th P Council Finance meeting. 1. Annual Adjustment Ordinance 20 minutes L. Pollack 2. Natural Gas Franchise Agreement 20 minutes A. Gavaldon J. Duval 3. Occupation Tax Category Changes 20 minutes T. Smith Council Finance Committee & URA Finance Committee Agenda Planning Calendar 2017 RVSD 08/30/17 mnb Sep 18 Annual Adjustment Ordinance 20 min L. Pollack Natural Gas Franchise Agreement 20 min A. Gavaldon J. Duval Occupation Tax Category Changes 20 min T. Smith URA Oct 16 Financial Mgmt Policy Updates – Budget, Investment, Fund Balance, PAB 30 min J. Voss I25 / Prospect Funding & CDOT IGA 30 min M. Jackson Housing Affordability Task Force – Policy Recommendation 30 min S. Beck-Ferkiss BFO Revenue Allocation Methodology 30 min L. Pollack URA Nov 20 KFCG Renewal Discussion 30 min G. Sawyer Utility CIP & LTFP Review 60 min L. Smith Audit Response Follow-Up 20 min T. Storin URA Dec 18 URA Whitewater Park 20 min P. Rowe Future Council Finance Committee Topics: County IGA – URA TIF Evaluation Process Phase II Fee Discussions – Development Review Fees & Wet Utilities Future URA Committee Topics: Annual URA District Updates – Anticipate memo format Finance Administration 215 N. Mason 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6788 970.221.6782 - fax fcgov.com Finance Committee Minutes 08/29/17 2:00 - 4:30 pm Colorado River Community Room – 222 Laporte Council Attendees: Mayor Wade Troxell, Ross Cunniff, Ken Summers, Bob Overbeck Staff: Darin Atteberry, Mike Beckstead, Jeff Mihelich, John Duval, Travis Storin, John Voss, Tiana Smith, Lawrence Pollack, Andres Gavaldon, Joanne Cech, Noelle Currell, Teresa Roche, Carrie Daggett, John Duval, Laurie Kadrich, Mark Jackson, Tom Leeson , Bob Adams, Kurt Ravenschlag, Lance Smith, Josh Birks, Jackson Brockway, Patrick Rowe, Lindsay Ex, Cassie Archuleta, Mike Calhoon, Dawna Gorkowski, Janice Saeger, Carol Webb, Mark Kempton, Jason Graham, Link Mueller, Victoria Shaw, Greg Yeager, Kevin Cronin, Susie Gordon, Beth Sowder, Kurt Friesen, Ken Mannon, Vincent Kitch, Wendy Bricher, Alyssa Johnson, Mary Evans, Jen Barna, John Stokes, Mark Sears, Kathleen Lane, Patty Netherton Others: Kevin Jones (Chamber of Commerce), Dale Adamy (Citizen), Joe Kropinski, (Waters Edge), Mary Ann McGeady (McGeady Becher, PC), Bill Swalling (Waters Edge), Jim Birdsall (TBG Group) Meeting called to order at 2:00 pm Ken Summers moved to approve Minutes for the July 11P th P Council Finance Meeting. Ross Cunniff seconded the motion. A. 2017 Revenue & Contingency Plan Update Mike Beckstead, CFO SUBJECT FOR DISCUSSION Follow up to contingency planning discussion 2 60% of $800K is General Fund - revenue behind by $571K Spending by category is under budget - not anticipating having to make changes in the 2017 budget - changes will focus on 2018 We are proposing a $2M reduction in ongoing expenditures for 2018 to Council. Ross Cunniff; I recommend to stay the course - $4.4M is a nice buffer in case we fall backwards but it doesn’t look like it will happen. Mayor Troxell; let’s keep our eyes on this. How do we report back to Council? Darin has been talking with Council Members during 1:1s Continue to report back and if something comes up / changes then we can go to Council ACTION ITEM: Requested a memo or 1-2 slides to summarize 2018 revisions. Rebundle these materials summarizing the feedback we received from the Council Finance Committee 3 B. 2018 Budget Revision Recommendations Lawrence Pollack, Budget Director EXECUTIVE SUMMARY The purpose of this agenda item is to familiarize and seek feedback from the Council Finance Committee on the City Manager’s recommended revisions to the 2018 Budget before the recommendations are reviewed at the September 26 Council Work Session. Based on direction from Council, the 2018 Budget Revisions will be combined with the previously adopted 2017-18 Biennial Budget. The 2018 Annual Budget Appropriation Ordinance is scheduled for 1st Reading on October 17 and 2nd Reading on November 7. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED - What questions or feedback does the Council Finance Committee have on the City Manager’s Recommended Revisions to the 2018 Budget? - Does the Council Finance Committee support moving forward with bringing the 2018 Budget Revisions to the full City Council? BACKGROUND/DISCUSSION OVERVIEW: The 2018 Budget Revisions include both 1) reductions to 2018 ongoing expenses to align them with a decreased 2018 Sales Tax forecast and 2) additional Offers primarily funded by available one-time revenue. The following are key objectives which the 2018 Budget Revision recommendations are intended to address: • Matching appropriations for ongoing expenditures to current ongoing revenue estimates or uncontrollable cost overruns • Council priorities • Fiduciary responsibilities & fund balance requirements • High-priority projects and other needs not known at the time of the adoption of the 2017-18 Budget The recommended 2018 Budget Revisions meet these goals. Recommended revisions to the 2018 Budget must also meet one of the following criteria: • The request is specifically directed by the City Manager or City Council • The request is related to a previously approved Offer where either unanticipated revenue shortfalls or unforeseen expenses are significantly impacting the delivery of that program or service REVENUE: Overall, most City revenues are coming in at, or above, the 2017 budget except for Sales Tax and revenue generated by the Municipal Court. Although total revenue for 2017 is on track to support 2017 expenses, the 2017 Sales Tax base, upon which 2018 growth is calculated, will be lower than budgeted. 2018 Sales Tax growth is still forecasted at 3%, but since that is on a lower base it is necessary for the City to reduce ongoing expenses in 2018 to align with the 4 reduced forecast for 2018 Sales Tax revenue. The decreased forecast for Sales Tax revenue primarily impacts the General Fund and Keep Fort Collins Great (KFCG) Fund; but also impacts the funds associated with the three dedicated quarter-cent sales tax initiatives. Additionally, the reduced revenue forecast from Municipal Court operations requires additional reductions in 2018 ongoing expenses. The Municipal Court revenue is all within the General Fund. Use Tax continues to be strong in 2017; but due to economic uncertainties, the forecast for 2018 remains at $22M. For Property Tax, the City has been notified by Larimer County that the City’s distribution is anticipated to be about $2.5M higher in 2018. One-third of that amount is ongoing revenue to the City with the balance being available for one-time uses in 2018. In 2019, the remaining two-thirds will go to the Poudre Fire Authority per the IGA with the City. Fund balances are also strong with non-restricted reserves available to fund one-time expenses. Overall, modest revenue growth is still forecasted for 2018. 3 numbers that are very similar $4.4M shortfall in 2017 turns in $4.5M shortfall in 2018 We have a contingency of $4.4M - proposing use of $1M of contingency reserve fund Property Tax; $800K of additional ongoing revenue in 2018 will offset some of sales tax shortfall Shortfall in Muni Court - issues of waiving costs for defendants and caseload Ken Summers; regarding the proposed $186K reduction in Police Services. Dispatch is a big concern (hiring/ training/retention is always a challenge). Vehicle repair and reduction in training. Greg Yeager and Kevin Cronin; the majority of the reduction is more IT related but categorized under Dispatch- and involves our use of a transcription service. This has helped us with backlog. $120K elimination of a contractor but will not impact our ability to do our job. Regarding cuts in training - no actual reduction in training but finding creative ways to bypass some travel expenses. Ross Cunniff; Railroad crossings - do we anticipate that the Railroad would be doing these repairs? Do we get reimbursed If we go ahead and do the work? Mark Jackson; the railroad does not move at the same speed in repair work - it is their obligation to pay for those repairs – we are responding to the importance to our citizens of the condition of our streets / crossings. Our fallback position is that we have this money set aside - Laurie Kadrich; It is not my understanding that we have asked for reimbursement We began to budget and didn’t ask for reimbursement – incentive is to get the work done. Doesn’t preclude if we do move forward in this way – using what we have saved up and seek reimbursement. Ross Cunniff; we could reach an agreement with them before doing additional repair work – temporary loan to the Railroad – better outcome Ross Cunniff; Why the reduction of $20K for Timberline Recycling Mike Beckstead; we estimated $330K and it is coming in less 5 Mike Beckstead; we trying to do this at a process level - to not go through BFO process every year. Only if Council wants it or it is an emerging priority. If not, they need to wait for the regular budget cycle in a year Ross Cunniff; Natural Areas / Parks - encampment cleaning offer is important Lawrence Pollack; conditions are changing and our #1 concern is for the safety of our employees Not prudent from a safety perspective to put our employees at risk- this offer is for a 3P rd P party that does this type of work to provide that service - John Stokes; most of this activity is occurring in Natural Areas and Parks - we are substituting the 3P rd P party contractor for our own staff for the work that we are doing now dealing with hazardous materials. New factor is Fentanyl and Synthetic Opioids - there have been incidents around the country where a person came in contact with a granular amount and become addicted. Ken Summers; regarding the $65K for City Fund Foundation consultant to set up the organizational structure Darin Atteberry; it is to fund donor relations and beyond that - a person who is closely connected in the community and is already doing work for us this year - we believe this will be a great return on investment for this - we have not operationalized this yet Mike Beckstead; Council Work Session - we hadn’t engaged the public yet – got a call from a donor the next morning – need for outreach to donors so they can understand what we are trying to do before we even get started – this consultant is well connected is helping to get the list of donors – explain what we are trying to do – coordinate the relationship with the community before we even launch. We used $25K for activity in 2017 and are trying to budget for 2018. Work is going on behind the scenes. Darin Atteberry; an example - we were asking a donor for $1M and somebody else with the City was asking for $15K for a projector – we need to leverage our resources - we have learned a lot from CSU. I believe the initial seed money in 2017 is a smart play to get us to think differently. Operationalize in 2018. In the next budget cycle we will have a better feel for how we want to do this long term. We are learning from it. Ken Summers; $650K grants for Climate Action Plan - I am concerned that we have a department that is making painful cuts if we have money - if we have $150K to help us meet a 2020 Carbon Plan – to me that would be a cut that wouldn’t be so painful. Darin Atteberry; where the dollars get spent is Council’s prerogative. Important part of this discussion is the ongoing and one time dollars. We wouldn’t use one time dollars to fund police demands / parks / etc. - we are very careful about this. Regarding programs around CAP - I know you have concerns - Council has adopted a vision and we are marching toward accomplishing that vision - we take the goals that Council has set very seriously - If Council adopts a vision -we are going to put a plan together to address that vision. Police Services - if you look back 10-15 years at Public Safety it will show that has been a top priority at the expense of other services. If Craig or Kevin said this is a huge problem for us –we are going to bring that to Council. We are not going to catch you off guard – if there is an impact on direct services you are going to know about it. 6 Ken Summers; CAP is fine - if you are looking at areas that stood out to me and I wanted to bring it up in light of other adjustments being made. ACTION ITEM: Ross Cunniff asked if Council chose not to use the $1M from the $4.4M reserve - what additional cuts would be needed? Help Council understand if using the $1M is the right thing to do include the risks. Darin Atteberry and Mayor Troxell; we are good for the September 26P th P working session C. Metro District Policy Josh Birks, Economic Health Office Director Tom Leeson, Community Development and Neighborhood Services Director SUBJECT FOR DISCUSSION Metropolitan District Policy Discussion EXECUTIVE SUMMARY A number of development projects are currently considering the use of a metropolitan district (“metro district”) to offset various infrastructure, public improvement costs, and to achieve other development outcomes. Many of these requests are for projects where a majority or significant component of the development includes residential. The current Metropolitan District Policy (“Policy”) adopted by City Council discourages residential projects from using this public finance tool. Additionally, there are other Policy elements that Council may want to revisit. Staff proposes three potential options for the Council Finance Committee to consider: • Status Quo – No changes to the current policy; • Refine – Make adjustments/incremental changes to existing policy; • Overhaul – Wholesale changes to existing policy to update and align with community goals and priorities. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED • What does the committee want to achieve with the City’s Metropolitan District Policy? • What input/direction does the committee have with regard to the Policy amendment/update options (status quo, refinement, or overhaul)? Council Work Session scheduled for October 20th BACKGROUND/DISCUSSION Metro districts are a preferred public financing tool used to pay for public infrastructure and/or services which the municipality is not able or unwilling to provide, or provide in a reasonable time frame, address challenging site conditions, and/or allow for unique and amenitized development. More broadly, the tool may be used to further community specific objectives through private development, such as a specific form of land use pattern, sustainability goals, and other community goals. The following is a list of potential community benefits that may be achieved with metro districts: Discussion; Current Policy Highlights / Possible Refinement / updates; 7 90 Commercial / 10 Residential ratio Focused on largely commercial - maybe go to 80/20 or 75/25 Mill Levy Cap of 40 50 Mil Cap is more common in the market Limitations on Debt Josh Birks; challenges of current policy; we have 10-12 potential applications for projects that don’t currently comply with the policy - so one of the challenges is that Staff and Council would become involved in reviewing each application with a deviation or exception or we can look at changing our policy to provide greater guidance and therefore answer some of the questions out there. The idea for the policy overhaul option is to step back and focus specifically on outcomes that we want to achieve with this particular tool within the community. Including certain land use patterns and sustainability goals – to enhance overall opportunities and outcomes. Regardless of the path Council directs, we are looking at adjustments to fees we charge to recover our costs for this as well as other process improvements. Mike Beckstead; example is the I25 / Prospect Exchange and how we fund the $19M – we are working with the property owners and they are committed - one of the things they are asking for are metro districts for each of four corners –when they develop they are looking for metro districts to help with some of the infrastructure / non -potable water systems - this is an example of 4 of the 10 potential applications Josh is talking about - this could have an impact on our ability to craft a program - this is a near term conversation that we hope to take to closure later this year because of an IGA commitment we need to make to CDOT by December. In the northeast quadrant, we are seeing more primarily residential requests - would include non-potable water systems to use for irrigation which reduces the need to have treated water by as much as 40% along with energy and emissions savings. Mayor Troxell; I like the idea of aligning our tools to our seven outcome areas. Tom Leeson; relatively easy to align - in some cases it may be broader than a single outcome area but easy to guide to the outcome areas. Mike Beckstead; at a minimum, we should tie to a strategic objective inside of each outcome area - that would line up well. Mayor Troxell; our policy should align with our general direction as a community - some inherent goodness in bringing these things together. ACTION ITEM: Ross Cunniff; requested to review AISs for previous Metro District items. Why was the 2008 policy adopted? Has the state law evolved since 2008? This information is being provided via a SAR which is being addressed by Josh Birks. Ross Cunniff; 2008 was in the middle of the housing boom / bust cycle and there were metro districts in other states and in Colorado that abused their authority in ways that led to very expensive and very unsustainable development patterns. Josh Birks; In reviewing the materials-it seems the very similar reason that we are now talking about changing the tool to achieve certain outcomes - before that time the city was steering clear of metro districts - we started 8 to see some value in the tool - similar situation now as in 2008 - we have been using the policy and have an opportunity to evaluate the use of this tool in helping us achieve broader outcomes for the city. Carrie Daggett; there have been a couple of changes which are more the mechanics of forming a district and not related to financial standards. The election issue has been addressed in litigation and then in statute – related to the nature of the ownership interest required in order to be eligible to vote in the district. Josh Birks; in the late 80’s or early 90’s there were 875 total special and metro districts in Colorado. A dozen of them had significant defaults. One change since then is that they had an unlimited tax bond so the service plan required that the mil levy was adjusted to service the debt every year – Now, the bonds that are issued are limited tax bonds – limited to whatever the mill levy is. Ross Cunniff; How does this show up on a homeowner’s tax bill? Josh Birks; as a separate line item - Special District Ross Cunniff; tweaks on the residential side – a clear disclosure to the homeowners that this is an assessment related to their presence in a special district and not related to City of Fort Collins for clarity. Also, concern is that this will absorb some of citizen’s tolerance for taxation - it will reduce the appetite of the electorate to approve a Transport tax for example - Make sure folks understand that they are buying into this voluntarily. One more concern relates to housing affordability - property tax – owners get an additional assessment on top of property tax - investigations into land use in terms of the amount of multi-family housing - most will be rental by the typical parameters and renters are not eligible voters. Carrie Daggett; residents are eligible to vote as are non-resident owners Ross Cunniff; I am not ready to jump head first into a complete overhaul but I do think some tweaks may be in order to bring this into alignment. Bob Overbeck; affordable housing – we tried to do that with the Foothills Mall we didn’t get that outcome Make sure we don’t say we are going to do it and fall short. Think there is off balance sheet risk and we need a column for that - if all fails what would be the risk - there is also credit risk here - we need to recognize all risks. Darin Atteberry; that issue came up at LPT - what are some of the downsides / risks to the city entering in this type of relationship? Do you Mike or Carrie have a sense about off ledger risk? Is there actually a financial risk here? If you have a predominantly residential metro district and it goes belly up - you have a neighborhood without finished streets (infrastructure not in place) residents will be coming to Council for assistance - Political Risk. Mike Beckstead; Fudiciary Risk - on balance sheet - legally on the hook for some obligation - the mall as an example - our only obligation in the transaction is the sales tax pledge we made - If the mall was not built we would not have any formal legal liability. Political Risk – as stated by Darin Credit Rating Risk - I don’t have a good answer but would want to reach out and have that conversation with the credit reporting agencies – I don’t think so but want to confirm 9 Bob Overbeck; Are there any pending court cases regarding special districts that might have impact? John Duval; the landmark case - ownership interest - didn’t have the right to vote – that is on appeal to the Colorado Supreme Court - Carrie Daggett; that is about the mechanics / governance Ken Summers; ok with me to approach this from an overhaul perspective. If Council decides that is not tenable then a refined tweaked process – look more broadly and then narrow approach if needed ACTION ITEM Mayor Troxell; put 3-4 scenarios together as it could be applied and explore the risk questions. Darin Atteberry; to John or Carrie - are metro districts authorized to behave like an HOA design / architectural standards? John Duval; they can act as an enforcement arm of the community - provide security and trash services as well as architectural control. This is becoming more common - an HOA may still be created - one of the benefits is that you can write off the dues that you pay to support that service - benefit as you don’t have to pay taxes like you do on your HOA due Tom Leeson; funding many of those same services an HOA would provide. Ken Summers; more of the evolutionary process of getting a district established - how control is transferred from developers to the homeowners (HOA), who is making the decisions and the issues that arise. Looking at it more broadly wouldn’t hurt - we could always reign it in. Josh Birks; Work Session on October 20P th P - our intent is to have very specific policy language for changes for Council’s review. D. Waters’ Edge Metro District Policy Tom Leeson, Community Development and Neighborhood Services Director Patrick Rowe, Redevelopment Coordinator SUBJECT FOR DISCUSSION Waters’ Edge Metropolitan District Service Plan Consideration EXECUTIVE SUMMARY The purpose of this item is to consider the Waters’ Edge Metropolitan District Nos. 1-5 Service Plan. The intent of the proposed Waters’ Edge Metropolitan District Nos. 1-5 (collectively, the “Metro Districts”) is to finance, construct, operate and maintain a number of improvements within the Waters’ Edge development, including: a non-potable water irrigation system, parks and recreation amenities (notably a community center and a sustainability center), and other resident amenities. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 10 • Does the committee support taking the Waters’ Edge metropolitan district service plan proposal to the full council for its consideration? • What input/direction does the committee have with regard to this service plan proposal? BACKGROUND/DISCUSSION Project Description Actual Communities, Inc. (the “Developer”) has proposed an amenity-rich, active-adult targeted development project called Waters’ Edge. The development covers 235 acres and is planned to include 848 dwelling units and the potential for up to 70,000 sq ft of commercial in the form of a neighborhood center (the “Project”). The Project is located between Douglas Road and Richards Lake Road on either side of Turnberry Road (see location map, Attachment 1). The Project will feature a mix of housing types (patio homes, townhomes, condominium and single family homes), significant open space, parks, a neighborhood commercial center, and plans for three community centers, with the aim of creating an inclusive development that allows residents to remain in their homes as long as possible. The Project is anticipated to be constructed in four separate phases through the year 2026. The first phase of the project is located on the west side of Turnberry, referred to as Waters’ Edge West, and was approved by the City’s Planning and Zoning Board on March 16, 2017. Plans for the eastern phase will be developed and submitted to the City at a future date. The developer proposes the use of metropolitan districts to finance, construct, and operate those improvements authorized by the service plan and specified in Attachment 2, the key elements of which are summarized below: Waters’ Edge West Preliminary Infrastructure Plan Non-potable water irrigation system $1,714,166 Community Center $3,500,000 Sustainability Center $1,500,000 Landscaping (plantings – ½ of which are considered enhancement) $1,313,885 Waters’ Edge East Preliminary Infrastructure Plan Non-potable water irrigation system $1,997,000 Health, Wellness and Senior Center $7,000,000 Rehabilitate Windsor No. 8 Ditch $2,000,000 Landscaping (plantings – ½ of which are considered enhancement) $1,531,000 Service Plan Overview (the service plan is included as Attachment 3): • UPurposeU: To finance, construct, operate and maintain a number of improvements within the Waters’ Edge development, including: a non-potable water irrigation system, parks and recreation amenities (notably a community center and a sustainability center), and other resident amenities. • UEstimated Cost of Improvements in Infrastructure Preliminary Development PlanU: Phase 1at $12,481,233 and Phase 2 at $19,167,118; the total between Phase 1 and Phase 2 is $31,648,351. • UMill Levy CapU: 100 mills total (projected at 50 mills debt and 50 mills operating). 11 • UMultiple Districts / Construction Phasing / BuildoutU: Five separate districts, including one (1) management district and four (4) financing districts for the purpose of phasing the financing and construction. Financing District 2 corresponds with Waters’ Edge West, the first phase. The remaining Financing Districts 3 through 5 are located within Waters’ Edge East and will be configured according to the size and configuration of future development phases. • UProject Assessment at BuildoutU: $30,893,997 (year 2026). • UGovernanceU: Governance of the districts is expected to be controlled by the developer through build-out, which is defined as the completion of the public/district improvements. The primary governance of all the Metro Districts will be consolidated into a a metro district authority created by intergovernmental agreement between the Metro Districts, as authorized by state law (C.R.S. Section 29-1-203.5) (the “Metro District Authority”). Following build-out, as per the service plan, control of the districts must reside with the residents and property owners of the districts; as build-out is occurring, residents and property owners will gradually have representation as they are elected to each district and incorporated into the authority board. • UFeesU: The district may impose and collect fees, rates, tolls, penalties, or charges, as a source of revenue for payment of covenant enforcement and/or operation and maintenance. UDevelopment FeesU: Any development fee shall only be imposed for the repayment of debt and capital costs for residential units. Development fees cannot exceed $2,500 for a single-family residential unit and $1,750 for a multi-family residential unit. No development fee can be collected from property owned by an owner or tenant following the issuance of a certificate of occupancy. Discussion: Mike Beckstead recused himself due to location of the Waters Edge Development Jeff Mihelich will chair during this presentation Deviations from Current Policy; 90% Commercial / this is 90% by Residential assessed value Current Max Mill levy is 40 – they are targeting 100 Mill Cap (50 for debt service / 50 for operating) Planning to use metro district in lieu of an HOA - Debt be issued within 15 years with a maturity of no more than 30 years -as a phased development - they want no limitation Current policy requires on-going Council approval to end - intentionally want this district to exist into perpetuity since it takes the place of an HOA Max Debt limitation – they are requesting 2x debt capacity - more typical convention – we are still confirming Ross Cunniff; would like for you to run the numbers before Tuesday - Patrick; the numbers are included in the AIS but will be presented in detail on Tuesday Mayor Troxell; paint the picture on potable water - does it have some sort of retention storage area and a pumping system? Tom Leeson; water system for all of the landscaping – they have extensive open space and landscaping trails so they don’t want to use potable water. Many of these proposals they are targeting include amenity characteristics that go above and beyond what the land use code required but are aligned with many of our goals as a city. Mayor Troxell; similar to the Mountain Vista plan - aspirational design. 12 Ken Summers; why 5 metro districts? John Duval; they are doing this to accommodate the phasing of the development; Metro District #2 is the first phase of development; Metro District #1 is called the controlling district which will control operations of all metro districts and be the ultimate governing authority - representatives from each district on this board The other 3 are small right now but as the property to the east develops- they will expand as financing districts – they impose the tax. This is the first time I have seen the creation of a separate governmental entity - authority that is going to control all 5 districts. The districts are more financial - property tax - created by IGA to operate and pay the debt. Tom Leeson; they are looking at a 20-25 year buildout - financial plan projects 2026 -1P st P phase has been approved - they have not submitted for the eastern part ACTION ITEM: Ken Summers; there is an allowance for a merger or consolidation of the 5 districts - would like to know the benefits / advantages of creating multiple districts instead of one. John Duval; will be one consolidated service plan that governs all metro districts - each will have their own board and have separate elections - they will appoint their members to the governing authority which will control all operations. It would be good to ask the applicant why they need it to be in so many districts. Tom Leeson; they are hoping to make the election cycle and they are scheduled for 1P st P reading of service plan on September 5P th P - there will be opportunity to have conversations directly with the applicant then. Patrick Rowe; regarding the multiple district question - due to phasing of development - planning to have commercial on east side so will need a separate district to accommodate mil levy for commercial district - 3 financing districts - Mayor Troxell; we had a site visit - there is a sustainability center on the abandoned well site and they list some notions of what they are providing; compost collection, solar charging, electric mowing, etc. Is this a complete list? Is there geo thermal? Design time? Tom Leeson; sustainability center has these elements but more of an education system Mayor Troxell; higher and better uses of sustainability practices – waste energy – might be indicative of what could be possible Patrick Rowe; they want to use the center to highlight the new energy economy and to draw contrast - which is why they put it on the site of the abandoned well ACTION ITEMS: Bob Overbeck; Can we quantify the risk? Bob Overbeck; Traffic issues? Open Space - are they looking to possibly tap into our open space tax initiative? Tom Leeson; Traffic Issues - no impact - traffic was analyzed through our normal review process. All was flushed out and reviewed through at least the first phase of the project. We will have someone from traffic at Council on 13 Tuesday. Tom Leeson; Open space - all would be privately developed and maintained Bob Overbeck; Is this the cart before the horse as this is coming before the policy discussion? Tom Leeson; the developer is on a timeline - the 1P st P phase is approved and they would like to start construction. They have been trying to get us to look at this policy for over a year and it has taken us this long to get to this point for various reasons. No fault on their part. Bob Overbeck; Thinking ahead – is there any consideration of having a police substation or office out there? Darin Atteberry; if the projection of 30K new residents becomes a reality - it is likely we will be talking about a substation - we have a downtown substation and the campus west connections center. This is not our policing deployment strategy but this could be tested as part of City Plan over the next couple of years Council Finance supports taking this to the full Council for consideration. E. Co-Generation Project Jason Graham, Water Reclamation and Biosolids (WRB) Manager Carol Webb, Water Resources and Treatment Operations Manager SUBJECT FOR DISCUSSION Request for additional funding for the Biogas to Co-Gen Project at Drake Water Reclamation Facility (DWRF) EXECUTIVE SUMMARY This item is before the Council Finance Committee to request an additional $1.7M from Wastewater Fund reserves to design and construct the Biogas to Co-Gen project at DWRF. Prior approved appropriations include the 2016 mid-cycle Climate Action Plan (CAP) budget revision request for $3.5M and the 2017 Budget for Outcomes (BFO) offer for $440K (a total of $3.94M), however an additional $1.7M in funds are needed to complete the project within the recommended project scope. The Biogas to Co-Gen project has been discussed and conceptualized since 2014. These initial discussions produced budget estimates based on minimal design and limited project team understanding of successfully completing a waste to energy projects such as Biogas to Co-Gen. However, as the project has progressed, the project team has fine-tuned the design and identified associated costs that previously were not known. For example, further evolution of the design identified additional needs and associated costs with site work as well as additional mechanical and electrical work. The current estimated cost to complete the preferred project option is $5.6M. Utility staff is confident in this project budget which is based on 50% design plus current 90% design drawings under review. In addition, staff has determined there is a sufficient Utilities business case to complete the Biogas to Co-Gen project, even at a total project cost of $5.6M. This determination is based on several factors (outlined in the discussion below), including that the project was included in the Wastewater Master Plan and Capital 14 Improvement Plan, leverages a key public/private partnership with Woodward Governor, and improves public image by eliminating waste flaring during normal operations. An alternative to the preferred project scope has also been identified. The adjusted scope would cost a total of $4.76M and would require an appropriation of an additional $830K instead of $1.7M. This option provides the City with a waste to energy project but limits future waste to energy opportunities as well as reduces both Woodward and City operational flexibility and redundancy. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED 1. Does the Council Finance Committee support bringing an additional appropriation request to City Council for their approval? 2. If so, does Council Finance Committee support an additional appropriation of $1.7M? 3. Is there a request to bring this item to a work session prior to City Council? 4. What comments does the Council Finance Committee have on the rationale for the request? Jason Graham; working with Woodward - there were some gaps in our forecast - quickly realized we needed additional appropriation of $1.7M which covers a preferred option - 4 engines purchased - 2 would be operational at this time. Alternative Option - 2 engines Carol Webb; we still need $830K additional for the 2 engine option Mike Beckstead; if you went with the alternative option - we could come back in and purchase 2 engines later – food waste decision Carol Webb; we could save about $500K by purchasing / installing all 4 engines now - risk that Woodward would not partner with us Carol Webb; preferred option - worst case scenario - assuming we would not take on any additional waste It does show worst case – benefits - we can fully leverage our partnership with Woodward now But – we know today we would use the capacity of the 2 engines Jason Graham; If we get approval – we would take it to the Water Board in September / October Wastewater funding is in good financial position to fund this - We have some long range capital improvements we need to make but they are further out than 10 years Mayor Troxell; I think this initially started out as a pilot learning and it has turned into a major project - I think it has changed to take on a different scope - you are presenting the new scope with the expenditures associated with it. Jason Graham; originally it was based on the Schneider initiative. As we have evolved we have improved with estimating - the benefits are the potential of the project going forward and the partnership with Woodward Darin Atteberry; this has been a very difficult one - Jason and team have been troopers and the rules have change and the ultimate vison has changed, evolved and matured – excited – 15 Scope has changed to such an extent - I struggle with has this project scope changed to the extent that it is a new project? If we delayed a decision due to these changes would it jeopardize the Woodward partnership Jason Graham; It wouldn’t kill it – we mentioned a 6 month delay and their response was that they would be disappointed but they are committed. Mayor Troxell; I am leaning toward the 2 engine option - they are providing some buy down Engine savings for the 2 engines Jason Graham; that size of system would not allow us to have future food waste – would be limited in that but we would take care of the flare. We would be able to partnership with Woodward. We would lose some redundancy – the Flare would have to be there for maintenance when we took the engines down. They currently send people to China to look at these things – if here Mayor Troxell; –have we fully explored the 4 engine option with Woodward Are there some purchasing issues that have created barriers in the partnership Jason Graham; I have talked with Gerry Paul (Purchasing) we can make that happen Mayor Troxell; I am at the non preferred or bringing it forward as a an alternative to organic or in combination. There are alternatives to flaring where we don’t need this as a solution. Flaring is crazy to see today – public image concern for us. Maybe we pull back and zoom out a little bit - Ken Summers; short term / long term - 2 engines would take care of some immediate needs Jason Graham; 2 engines would take care of what we currently use Ken Summers; alternative option as a way to move the ball down the field - what kind of technology - are they working on these areas? Bio gas is a huge area of R&D - is the two could do more purchased later - have more ROI - We are kind of rolling the dice – I am certainly open to putting it to the Water Board and the Council A good discussion to have Darin Atteberry; which of these options? We say to Council - I don’t feel like we are ready If there is more information and a better understanding - From the Woodward CEO down - better vetting of the ultimate vision – I know 6 months is tough - We are not going to bring this forward but we will do that off line as a separate appropriation - don’t think it needs to wait until the next 2 year budget process If we push this thing forward now - Why would you go with the smaller / ROI? The chance of the preferred option – better chances if we give it a couple more months Carolyn Mitchell; the timeline is emerging. the next 2 years is decision making timeframe for food scraps Carol Webb; learning about the passion around this issue - we feel a commitment - we want to make an informed decision Mayor Troxell; economic development in our community - fully monetize Woodward involvement 16 Value proposition - what skin do they have in the game? Foundation and other things play a role in how do we monetize these partnerships - actually shared risk / shared investment/ shared outcomes – these experiences are not to be lost - these are important – thank you to this team Darin Atteberry; I think we are really close - we want Woodward to be playing and innovating in this space - using us as a working lab Meeting Adjourned at 4:40 pm September 18, 2017 Page 1 COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Mike Beckstead, Chief Financial Officer Lawrence Pollack, Budget Director Date: September 18, 2017 SUBJECT FOR DISCUSSION First Reading of Ordinance No. , 2017, Appropriating Unanticipated Revenue and Prior Year Reserves in Various City Funds and Authorizing the Transfer of Appropriated Amounts between Funds or Projects. EXECUTIVE SUMMARY The purpose of this Annual Adjustment Ordinance is to combine dedicated and unanticipated revenues or reserves that need to be appropriated before the end of the year to cover the related expenses that were not anticipated and, therefore, not included in the 2017 annual budget appropriation. The unanticipated revenue is primarily from fees, charges, rents, contributions and grants that have been paid to City departments to offset specific expenses. GENERAL DIRECTION SOUGHT • What questions or feedback does the Council Finance Committee have on the 2017 Annual Adjustment Ordinance? • Does the Council Finance Committee support moving forward with bringing the 2017 Annual Adjustment Ordinance to the full City Council? BACKGROUND/DISCUSSION This Ordinance appropriates unanticipated revenue and prior year reserves in various City funds, and authorizes the transfer of appropriated amounts between funds and/or projects. The City Charter permits the City Council to appropriate unanticipated revenue received as a result of rate or fee increases or new revenue sources, such as grants and reimbursements. The City Charter also permits the City Council to provide, by ordinance, for payment of any expense from prior year reserves. Additionally, it authorizes the City Council to transfer any unexpended appropriated amounts from one fund to another upon recommendation of the City Manager, provided that the purpose for which the transferred funds are to be expended remains unchanged; the purpose for which they were initially appropriated no longer exists; or the proposed transfer is from a fund or capital project account in which the amount appropriated exceeds the amount needed to accomplish the purpose specified in the appropriation ordinance. If these appropriations are not approved, the City will have to reduce expenditures previously appropriated even though revenue and reimbursements have been received to cover those expenditures. The table below is a summary of the expenses in each fund that make up the increase in requested appropriations. Also included are transfers between funds and/or projects which do not increase net appropriations, but per the City Charter, require City Council approval to make the transfer. A table with the specific use of prior year reserves appears at the end of the AIS. September 18, 2017 Page 2 Funding Unanticipated Revenue Prior Year Reserves Transfers between Funds TOTAL General Fund $590,677 $597,161 $0 $1,187,838 Sales & Use Tax Fund 0 511,398 0 511,398 Capital Projects Fund 177,503 0 0 177,503 Light & Power Fund 3,500,000 0 0 3,500,000 Natural Areas Fund 70,000 0 511,398 581,398 Storm Water Fund 123,262 0 0 123,262 Transportation Fund 25,000 500,000 0 525,000 Water Fund 229,613 0 0 229,613 GRAND TOTAL $4,716,055 $1,608,559 $511,398 $6,836,012 A. GENERAL FUND 1. Fort Collins Police Services (FCPS) has received revenue from various sources which are being requested for appropriation to cover the related expenditures. A listing of these items follows: a. $4,500 – 2017 Click It or Ticket (aka Seatbelt) Grant - In 2017 Police Services was awarded a Click it or Ticket grant from the Colorado Department of Transportation to pay for officers to work overtime to conduct enforcement activities. b. $12,000 – 2017 High Visibility Impaired Driving Enforcement (HVE) Grant – In 2017 Police Services was awarded a High Visibility Impaired Driving Enforcement grant from the Colorado Department of Transportation to pay for overtime for DUI enforcement during specific holiday time periods. c. $8,000 – 2017 Law Enforcement Assistance Funds (LEAF) Grant - In 2017 Police Services was awarded a Law Enforcement Assistance Fund (LEAF) grant from the Colorado Department of Transportation to pay for overtime for DUI enforcement. d. $500 – 2017 Victim Assistance and Law Enforcement (VALE) Grant - In 2017 Fort Collins Police received a supplemental award of $500 to cover the travel costs associated with the Colorado Organization for Victim Assistance (COVA) conference in October. e. $20,000 – Campus West Connections Facility - FCPS paid for the cost to renovate the new Campus West Connections facility. Since this will be a shared facility, CSU will be reimbursing the City of Fort Collins for some of the setup expenses. f. $19,660 – Revenue from Hosted Classes - While providing training, FCPS will rent additional seats for training to other law enforcement agencies. These class fees help offset some of the total training costs. g. $262,795 – Police Overtime Reimbursement - Police Services helps schedule security and traffic control for large events. Since these events are staffed by officers outside of their normal duties, officers are paid overtime. The organizations that request officer presence are billed for the costs of the officers' overtime. 2017 activities included CSU football games, Tour de Fat, Brew Fest, New West Fest and other events. Additionally, FCPS partners with Larimer County to staff events at The Ranch. h. $111,996 – Sale of Police records and other miscellaneous revenue - FCPS received revenue from the sale of Police reports along with other miscellaneous revenue. September 18, 2017 Page 3 FROM: Unanticipated Revenue (2017 Seatbelt Grant) $4,500 FROM: Unanticipated Revenue (2017 HVE Grant) $12,000 FROM: Unanticipated Revenue (2017 LEAF Grant) $8,000 FROM: Unanticipated Revenue (2017 VALE Grant) $500 FROM: Unanticipated Revenue (Campus West) $20,000 FROM: Unanticipated Revenue (Miscellaneous Revenue) $394,451 FOR: 2017 Seatbelt Grant $4,500 FOR: 2017 HVE Grant $12,000 FOR: 2017 LEAF Grant $8,000 FOR: 2017 VALE Grant $500 FOR: Campus West Renovation $20,000 FOR: Police Services $394,451 2. This request is to appropriate $477,727 to cover the payment of 2016 Manufacturing Equipment Use Tax rebates (MUTR) made in 2017. In accordance with Chapter 25, Article II, Division 5, Manufacturing Equipment Use Tax Rebates were paid out in July 2017. The rebate program was established to encourage investment in new manufacturing equipment by local firms. Vendors have until December 31st of the following year to file for the rebate. This item appropriates the use tax funds to cover the payment of the rebates. FROM: Prior Year Reserves (Manufacturing Use Tax Rebate) $477,727 FOR: Manufacturing Use Tax Rebates $477,727 3. Environmental Services sells radon test kits at cost as part of its program to reduce lung cancer risk from in-home radon exposure. This appropriation would use test kit sales revenue for the purpose of restocking radon test kits. FROM: Unanticipated Revenue (from radon kit sales) $6,462 FOR: Radon Test Kits $6,462 4. This request is intended to cover expenses related to land bank property maintenance needs for 2017. As expenses vary from year-to-year, funding is requested annually mid-year to cover these costs. Expenses for 2017 include general maintenance of properties, raw water and sewer expenses, electricity and other as applicable. FROM: Prior Year Reserves (Land Bank Reserve) $11,850 FOR: Land Bank Expenses $11,850 5. The Fort Collins Convention and Visitors Bureau (FCCVB) has been awarded an $87,764 grant from the Colorado Welcome Center through the State of Colorado. These funds will be disbursed by the State of Colorado and directed through the City of Fort Collins, pursuant to State of Colorado requirements, then paid to the FCCVB. The grant period will run from July 1, 2017 through June 30, 2018. FROM: Unanticipated Revenue (grant) $87,764 FOR: Fort Collins Convention and Visitors Bureau $87,764 6. The City received one metropolitan district application for its review and consideration. As per City policy, the application was accompanied by a non-refundable application fee of $2,000 and a deposit of $10,000 to be utilized for the reimbursement of staff, legal and consultant expenses. In order for the funds to be used as such they must be appropriated by City Council. September 18, 2017 Page 4 FROM: Unanticipated Revenue $12,000 FOR: Reimbursement of staff, legal and consultant expenses $12,000 7. The Parks department received a donation for the 4P th P of July Fireworks. This request appropriates the donation for the 4th of July celebration at City Park. FROM: Unanticipated Revenue $25,000 FOR: 4P th P of July Celebration $25,000 8. The Municipal Court is requesting the use of reserves due to an increase in Court-Appointed Defense Counsel costs. These additional funds are needed due to unanticipated expenses (over and above the budgeted amount) for legal services provided by private attorneys appointed as counsel for indigent defendants on misdemeanor cases. The Court is obligated by law to make these appointments. The number of appointments being made has increased significantly due to a change in state law that occurred after our budget offers for 2017-2018 had been submitted. FROM: Prior Year Reserves (General Fund) $42,584 FOR: Court-Appointed Defense Counsel costs $42,584 9. The Community and Public Involvement Office (CPIO) has received a Fort Collins Public Media Comcast Grant. In accordance with section 9.5 (A) of the current cable franchise, Comcast is obligated to provide a one-time grant of $20,000 for streaming equipment and technology to FC Public Media. This grant has been received and equipment will be purchased this year. FROM: Unanticipated Revenue (grant) $20,000 FOR: Fort Collins Public Media equipment & technology $20,000 10. This request is for the annual transfer from the General Fund to the Parking Fund for the City- paid portion of City employee garage parking permits. This transfer was overlooked during the 2017- 2018 BFO budget load process. FROM: Prior Year Reserves (General Fund) $65,000 FOR: Transfer to Parking Fund $65,000 B. SALES AND USE TAX FUND 1. The sales and use tax revenue received in 2016 was higher than projected and existing appropriations were not adequate to make the full transfer from the Sales and Use Tax Fund to the Natural Areas Fund for the one quarter cent Natural Areas tax. Adjustments to other funds are not needed because the tax revenues are recorded directly into those funds. This item appropriates additional funds in the amount of $511,398 from prior year reserves for transfer from the Sales and Use Tax Fund to the Natural Areas Fund. FROM: Prior Year Reserves (Sales & Use Tax Fund) $511,398 FOR: Transfer to Natural Areas Fund $511,398 C. CAPITAL PROJECTS FUND 1. As part of the Underpass Overlay at Foothills Parkway and College Avenue Project, additional funds have been received from the Colorado Department of Transportation (CDOT). The unanticipated September 18, 2017 Page 5 revenue is related to construction of the underpass at Foothills Parkway and College Avenue as part of the redevelopment of Foothills Mall. These revenues and the associated cost are for completing the overlay of South College Avenue, which was completed by CDOT in 2016. A portion of the overlay was delayed due to the underpass project, and these funds will reimburse the Foothills Mall developer for those costs. FROM: Unanticipated Revenue (Contributions in Aid) $100,000 FOR: Completion of overlay of South College Ave as related to the $100,000 construction of the underpass at Foothills Parkway and College Avenue 2. As part of the North College Avenue Pedestrian Connection Project, additional funds have been received from a developer. As a part of recent development on North College repayment funds were received from the developer for their local street obligation for the improvements that were completed by the City. Generally, these funds go back into the nearest capital project on the same corridor. The funds are necessary to complete the North College Pedestrian Connection Project. FROM: Unanticipated Revenue (Contributions in Aid) $77,503 FOR: Construction of Pedestrian Connections on North College Avenue $77,503 D. LIGHT & POWER FUND 1. Based on the current trend of spending on purchased power Light & Power will need an additional $3.5M for 2017 to cover the purchases from Platte River Power Authority. This additional cost will be covered by revenues which will be collected from customers for their consumption of electric services. FROM: Unanticipated Revenue (fees) $3,500,000 FOR: Purchased Power $3,500,000 E. NATURAL AREAS FUND 1. The sales and use tax revenue received in 2016 was higher than projected and existing appropriations were not adequate to make the full transfer from the Sales and Use Tax Fund to the Natural Areas Fund for the one quarter cent Natural Areas tax. (See Sales & Use Tax Fund Item #B1) This item appropriates funds in the amount of $511,398 transferred from the Sales and Use Tax Fund to the Natural Areas Fund for Land Conservation expenses. FROM: Unanticipated Revenue (transfer from another fund) $511,398 FOR: Natural Areas Expenses $511,398 2. The Natural Areas Department has been awarded a grant of $20,000 from the Defenders of Wildlife. This grant will be used to expand our current bison range pasture at Soapstone Natural Area. FROM: Unanticipated Revenue (grant) $20,000 FOR: Bison range pasture expansion Soapstone Natural Areas $20,000 3. The Natural Areas Department received a donation of $50,000 from Sarah Peacock. This donation will be used to expand our current bison range pasture at Soapstone Natural Area. FROM: Unanticipated Revenue (donation) $50,000 FOR: Bison range pasture expansion Soapstone Natural Areas $50,000 September 18, 2017 Page 6 4. The Natural Areas Department is requesting a transfer of funds from a lapsing account to a non- lapsing Capital Project account. The appropriations for the shop expansion in the 2017-18 offer #86.6 were budgeted to the Natural Areas Fund instead of the Capital Projects Fund (amount $123,750). In addition, this request moves funds loaded on 12/31/16 and from the PO Carryforward to the correct Capital projects fund ($231,465). The expenses were already moved to the correct business unit. There will be no increase in appropriations for this request, it is a transfer only. FROM: Existing appropriation Natural Areas Facility Ops (Lapsing) $355,215 FOR: Shop expansion project in the Capital Projects Fund (Non-lapsing) $355,215 F. STORM WATER FUND 1. The Utility Drainage System Division received unanticipated funds relating to an insurance reimbursement in order to replace a camera van in the amount of $123,262 FROM: Unanticipated Revenue (insurance reimbursement) $123,262 FOR: Replacement of a camera van $123,262 G. TRANSPORTATION SERVICES FUND 1. As part of the Fort Collins Bike Share Program, Kaiser Permanente committed to sponsoring the program at $25,000 for one year, with the possibility of renewing for a second year. This is the second year funding. This $25,000 contribution will support a one-year sponsorship of 5 accessible bike share bikes and 10 bike docking stations through Zagster Inc., in addition to a bike share equity pilot program, and rider incentive programming. FROM: Unanticipated Revenue (grant) $25,000 FOR: FC Bike Share Program $25,000 2. The 2017 snow budget has nearly been depleted due to the extremely cold conditions in January, an ice storm in February, and a late spring storm in May that resulted in a significant branch cleanup operation. Overall, there have been nine storms so far in 2017 with 25 inches of snow. Extremely cold temperatures require more deicer material to keep the roads safe, which drives up the cost of snow operations significantly. Extensive snow and ice cutting was required due to the weather pattern where daytime thawing and nighttime freezing caused ice dams, ice potholes, and build-up in gutters causing drain blockages. Additional funding of $500,000 is requested to provide snow removal services during the winter months from October through December 2017. FROM: Prior Year Reserves $500,000 FOR: Snow Removal $500,000 H. WATER FUND 1. The Utilities Water Resources Division rents water after first meeting the needs of its customers and other City departments. This adjustment would allocate the unanticipated revenue to offset the expense in the Water Resources Division. Rental revenue equaled $428,321 and the expense to transfer the water was $229,613. Only the expense of $229,613 is being requested (as this was not budgeted for) to be appropriated with the additional $198,708 going back to the water fund as revenue. FROM: Unanticipated Revenue $229,613 FOR: Water Supply Projects $229,613 September 18, 2017 Page 7 FINANCIAL / ECONOMIC IMPACTS This Ordinance increases total City 2017 appropriations by $6,836,012. Of that amount, this Ordinance increases General Fund 2017 appropriations by $1,187,838 including use of $597,161 in prior year reserves. Funding for the total City appropriations is $4,716,055 from unanticipated revenue, $1,608,559 from prior year reserves and $511,398 transferred from other funds. The following is a summary of the items requesting prior year reserves: ATTACHMENTS Attachment #1 – Presentation to Council Finance Committee Item # Fund Use Amount A2 General Manufacturing Equipment Use Tax Rebate $477,727 A4 General Land Bank Property Maintenance 11,850 A8 General Court-Appointed Defense Counsel 42,584 A10 General Transfer for City-paid portion of City employee garage parking permits 65,000 B1 Sales & Use Tax Transfer of 2016 sales tax revenue for Natural Areas 511,398 G2 Transportation Snow Removal 500,000 Total Use of Prior Year Reserves: $1,608,559 Council Finance Committee – September 18, 2017 2017 Annual Adjustment Ordinance Mike Beckstead - CFO Attachment #1 2017 Annual Adjustment Ordinance 2 The recommended 2017 Annual Adjustment Ordinance is intended to address: • 2017 unanticipated revenues (e.g. grants) • Appropriation of unassigned reserves to fund unanticipated expenditures associated with approved 2017 appropriations • Should be routine and non-controversial • Items approved by the ordinance need to be spent within fiscal/calendar year 2017 3 City-wide Ordinance No. , 2017 increases total City 2017 appropriations by $6,836k • This Ordinance increases General Fund 2017 appropriations by $1,188k including the use of $597k in prior year reserves • $478k of that is for the Manufacturer’s Use Tax Rebate • Funding for the total City appropriations is: o $4,716k from additional revenue o $1,609k from prior year reserves o $511k transferred between funds 2017 Annual Adjustment Ordinance 4 Summary of 2018 Adjustments by Fund Funding (values in $k) Unanticipated Revenue Prior Year Reserves Transfers between Funds TOTAL General Fund $591 $597 $0 $1,188 Sales & Use Tax Fund 0 511 0 511 Capital Projects Fund 178 0 0 178 Light & Power Fund 3,500 0 0 3,500 Natural Areas Fund 70 0 511 581 Storm Water Fund 123 0 0 123 Transportation Fund 25 500 0 525 Water Fund 230 0 0 230 GRAND TOTAL $4,716 $1,609 $511 $6,836 5 2017 Annual Adjustment Ordinance Guidance Requested: • What questions or feedback does the Council Finance Committee have on the 2017 Annual Adjustment Ordinance? • Does the Council Finance Committee support moving forward with bringing the 2017 Annual Adjustment Ordinance to the full City Council? COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Andres Gavaldon Date: 18 September, 2017 SUBJECT FOR DISCUSSION Natural Gas Franchise Agreement direction EXECUTIVE SUMMARY For Council’s review, the City Attorney’s Office and staff along with Xcel Counsel have developed a Franchise Agreement for natural gas that could replace the City’s current Occupational Tax. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Does CFC support moving forward with a Natural Gas Franchise Agreement in conjunction with KFCG renewal efforts? BACKGROUND/DISCUSSION Reference attached Fort Collins Franchise Agreement Reference attached memo dated July 1 2015 Reference attached memo dated Nov 3, 2014 ATTACHMENTS Attachment 1 –Fort Collins Franchise Agreement (Draft) 8 24 17.doc Attachment 2 – memo dated July 1, 2015 Attachment 3 – memo dated Nov 3, 2014 FRANCHISE AGREEMENT BETWEEN THE CITY OF FORT COLLINS, COLORADO AND PUBLIC SERVICE COMPANY OF COLORADO ARTICLE 1 DEFINITIONS ARTICLE 2 GRANT OF FRANCHISE ARTICLE 3 CITY POLICE POWERS ARTICLE 4 FRANCHISE FEE ARTICLE 5 ADMINISTRATION OF FRANCHISE ARTICLE 6 SUPPLY, CONSTRUCTION, AND DESIGN ARTICLE 7 RELIABILITY ARTICLE 8 COMPANY PERFORMANCE OBLIGATIONS ARTICLE 9 BILLING AND PAYMENT ARTICLE 10 USE OF COMPANY FACILITIES ARTICLE 11 UNDERGROUNDING OF OVERHEAD FACILITIES ARTICLE 12 PURCHASE OR CONDEMNATION ARTICLE 13 MUNICIPALLY PRODUCED UTILITY SERVICE ARTICLE 14 ENVIRONMENT AND CONSERVATION ARTICLE 15 TRANSFER OF FRANCHISE ARTICLE 16 CONTINUATION OF UTILITY SERVICE ARTICLE 17 INDEMNIFICATION AND IMMUNITY ARTICLE 18 BREACH ARTICLE 19 AMENDMENTS ARTICLE 20 EQUAL OPPORTUNITY ARTICLE 21 MISCELLANEOUS i UTABLE OF CONTENTS 34TARTICLE 1 DEFINITIONS34T ...................................................................................................... 1 34T§1.134T 34T“City”34T ....................................................................................................................... 1 34T§1.234T 34T“Clean Energy”34T ........................................................................................................ 1 34T§1.334T 34T“Company”.34T ............................................................................................................. 1 34T§1.434T 34T“Company Facilities”.34T .............................................................................................. 1 34T§1.534T 34T“Council” or “City Council”.34T ................................................................................... 1 34T§1.634T 34T“Energy Conservation”34T ............................................................................................ 1 34T§1.734T 34T“Energy Efficiency” t.34T.............................................................................................. 1 34T§1.834T 34T“Force Majeure”34T ...................................................................................................... 1 34T§1.934T 34T“Gross Revenues”34T .................................................................................................... 1 34T§1.1034T 34T“Industry Standards”34T ................................................................................................ 2 34T§1.1134T 34T“Open Space”34T ........................................................................................................... 2 34T§1.1534T 34T“Parks”34T ..................................................................................................................... 2 34T§1.1634T 34T“Private Project”.34T ..................................................................................................... 2 34T§1.1734T 34T“Public Project”.34T ...................................................................................................... 2 34T§1.1834T 34T“Public Utilities Commission” or “PUC”34T ................................................................ 3 34T§1.1934T 34T“Public Utility Easement” or “PUE”.34T ...................................................................... 3 34T§1.2034T 34T“Relocate,” “Relocation,” or “Relocated”.34T .............................................................. 3 34T§1.2134T 34T“Renewable Energy Resources”34T .............................................................................. 3 34T§1.2234T 34T“Residents”.34T ............................................................................................................. 3 34T§1.2334T 34T“Streets” or “City Streets”34T ....................................................................................... 3 34T§1.2434T 34T“Supporting Documentation”34T .................................................................................. 3 34T§1.2534T 34T“Tariffs”.34T .................................................................................................................. 3 34T§1.2634T 34T“Utility Service”.34T ..................................................................................................... 3 34TARTICLE 2 GRANT OF FRANCHISE34T ................................................................................... 4 34T§2.134T 34TGrant of Franchise.34T .................................................................................................. 4 34T§2.234T 34TConditions and Limitations.34T ..................................................................................... 5 34T§2.334T 34TEffective Date and Term..34T ........................................................................................ 5 34TARTICLE 3 CITY POLICE POWERS34T ..................................................................................... 5 34T§3.134T 34TPolice Powers34T ........................................................................................................... 5 34T§3.334T 34TCompliance with Laws34T ............................................................................................ 6 34T§3.434T 34TIndustry Standards.34T .................................................................................................. 6 34TARTICLE 4 FRANCHISE FEE34T ................................................................................................ 6 34T§4.134T 34TFranchise Fee.34T .......................................................................................................... 6 34T§4.234T 34TRemittance of Franchise Fee.34T .................................................................................. 7 34T§4.334T 34TFranchise Fee Payment Not in Lieu of Permit or Other Fees34T .................................. 8 34TARTICLE 5 ADMINISTRATION OF FRANCHISE34T............................................................... 9 34T§5.134T 34TCity Designee34T ........................................................................................................... 9 34T§5.234T 34TCompany Designee34T .................................................................................................. 9 34T§5.334T 34TCoordination of Work.34T ............................................................................................. 9 ii 34TARTICLE 6 SUPPLY, CONSTRUCTION, AND DESIGN34T .................................................. 10 34T§6.134T 34TPurpose34T .................................................................................................................. 10 34T§6.234T 34TSupply34T .................................................................................................................... 10 34T§6.334T 34TCharges to the City for Service to City Facilities.. ................................................ 34T10 34T§6.434T 34TRestoration of Service.34T ........................................................................................... 10 34T§6.534T 34TObligations Regarding Company Facilities.34T .......................................................... 10 34T§6.634T 34TAs-Built Drawings.34T ................................................................................................ 11 34T§6.734T 34TExcavation and Construction34T ................................................................................. 12 34T§6.834T 34TRestoration34T ............................................................................................................. 12 34T§6.934T 34TRelocation of Company Facilities.34T ........................................................................ 13 34T§6.1034T 34TNew or Modified Service Requested by City34T ........................................................ 15 34T§6.1134T 34TService to New Areas34T ............................................................................................ 15 34T§6.1234T 34TCity Not Required to Advance Funds34T .................................................................... 15 34T§6.1334T 34TTechnological Improvements34T ................................................................................ 15 34TARTICLE 7 RELIABILITY34T .................................................................................................... 16 34T§7.134T 34TReliability34T .............................................................................................................. 16 34T§7.234T 34TFranchise Performance Obligations34T ....................................................................... 16 34T§7.334T 34TReliability Reports34T ................................................................................................. 16 34TARTICLE 8 COMPANY PERFORMANCE OBLIGATIONS34T .............................................. 16 34T§8.134T 34TNew or Modified Service to City Facilities34T ........................................................... 16 34T§8.234T 34TAdjustments to Company Facilities34T ....................................................................... 17 34T§8.334T 34TThird Party Damage Recovery.34T ............................................................................. 17 34TARTICLE 9 BILLING AND PAYMENT34T............................................................................... 18 34T§9.134T 34TBilling for Utility Services.34T .................................................................................... 18 34T§9.234T 34TPayment to City34T ..................................................................................................... 18 34TARTICLE 10 PURCHASE OR CONDEMNATION34T ............................................................. 19 34T§10.134T 34TMunicipal Right to Purchase or Condemn.34T ............................................................ 19 34TARTICLE 11 MUNICIPALLY PRODUCED UTILITY SERVICE34T ...................................... 19 34T§11.134T 34TMunicipally Produced Utility Service.34T .................................................................. 19 34TARTICLE 12 ENVIRONMENT AND CONSERVATION34T ................................................... 19 34T§12.134T 34TEnvironmental Leadership34T ..................................................................................... 19 34T§12.234T 34TConservation34T .......................................................................................................... 20 34T§12.334T 34TContinuing Commitment..34T ..................................................................................... 21 34T§12.434T 34TPUC Approval34T ....................................................................................................... 21 34TARTICLE 13 TRANSFER OF FRANCHISE34T ......................................................................... 21 34T§13.134T 34TConsent of City Required34T ...................................................................................... 21 34T§13.234T 34TTransfer Fee34T ........................................................................................................... 21 34TARTICLE 14 CONTINUATION OF UTILITY SERVICE34T.................................................... 21 34T§14.134T 34TContinuation of Utility Service34T .............................................................................. 21 iii 34TARTICLE 15 INDEMNIFICATION AND IMMUNITY34T ....................................................... 22 34T§15.134T 34TCity Held Harmless34T ................................................................................................ 22 34T§15.234T 34TImmunity34T ................................................................................................................ 22 34TARTICLE 16 BREACH34T .......................................................................................................... 23 34T§16.134T 34TChange of Tariffs34T ................................................................................................... 23 34T§16.234T 34TBreach.34T ................................................................................................................... 23 34TARTICLE 17 AMENDMENTS34T .............................................................................................. 24 34T§17.134T 34TProposed Amendments34T .......................................................................................... 24 34T§17.234T 34TEffective Amendments34T .......................................................................................... 24 34TARTICLE 18 EQUAL OPPORTUNITY34T ................................................................................ 24 34T§18.134T 34TEconomic Development34T ......................................................................................... 24 34T§18.234T 34TEmployment.34T .......................................................................................................... 25 34T§18.334T 34TContracting.34T............................................................................................................ 25 34T§18.434T 34TCoordination34T .......................................................................................................... 26 34TARTICLE 19 MISCELLANEOUS34T ......................................................................................... 26 34T§19.134T 34TNo Waiver34T .............................................................................................................. 26 34T§19.234T 34TSuccessors and Assigns34T ......................................................................................... 26 34T§19.334T 34TThird Parties34T ........................................................................................................... 26 34T§19.434T 34TNotice34T ..................................................................................................................... 27 34T§19.534T 34TExamination of Records34T......................................................................................... 28 34T§19.634T 34TConfidential or Proprietary Information.34T ............................................................... 29 34T§19.734T 34TList of Utility Property34T ........................................................................................... 29 34T§19.834T 34TPUC Filings34T ........................................................................................................... 29 34T§19.934T 34TInformation34T ............................................................................................................ 29 34T§19.1034T 34TPayment of Taxes and Fees.34T .................................................................................. 30 34T§19.1134T 34TConflict of Interest34T ................................................................................................. 30 34T§19.1234T 34TCertificate of Public Convenience and Necessity34T .................................................. 30 34T§19.1334T 34TAuthority34T ................................................................................................................ 30 34T§19.1434T 34TSeverability34T ............................................................................................................ 30 34T§19.1534T 34TForce Majeure34T ........................................................................................................ 30 34T§19.1634T 34TEarlier Franchises Superseded34T ............................................................................... 31 34T§19.1734T 34TTitles Not Controlling34T ............................................................................................ 31 34T§19.1834T 34TApplicable Law34T ...................................................................................................... 31 34T§19.1934T 34TPayment of Expenses Incurred by City in Relation to Franchise Agreement34T ....... 31 34T§19.2034T 34TCosts of Compliance with Franchise34T ..................................................................... 31 34T§19.2134T 34TConveyance of City Streets or Other City Property34T .............................................. 31 34T§19.2234T 34TAudit34T ...................................................................................................................... 31 34T Signature Page34T .................................................................................................................... 32 1 ARTICLE 1 DEFINITIONS For the purpose of this franchise agreement (“Franchise”), the following words and phrases shall have the meaning given in this Article. When not inconsistent with context, words used in the present tense include the future tense, words in the plural include the singular, and words in the singular include the plural. The word “shall” is mandatory and “may” is permissive. Words not defined in this Article shall be given their common and ordinary meaning. §1.1 “City” refers to the City of Fort Collins, a home rule municipality in the State of Colorado. §1.2 “Clean Energy” means energy produced from Renewable Energy Resources, eligible energy sources, and by means of advanced technologies that cost-effectively capture and sequester carbon emissions produced as a by-product of power generation. For purposes of this definition, “cost” means all those costs as determined by the PUC. §1.3 “Company” refers to Public Service Company of Colorado, a Colorado corporation, and an Xcel Energy company and its successors and assigns including affiliates or subsidiaries that undertake to perform any of the obligations under this Franchise. §1.4 “Company Facilities” refers to all facilities of the Company reasonably necessary or desirable to provide gas service into, within and through the City, including but not limited to plants, works, systems, transportation and distribution structures and systems, lines, equipment, pipes, mains, conduit, underground lines, gas compressors, meters, meter reading devices, communication and data transfer equipment, control equipment, gas regulator stations, as well as all associated appurtenances. §1.5 “Council” or “City Council” refers to and is the governing body of the City. §1.6 “Energy Conservation” means the decrease in energy requirements of specific customers during any selected time period, resulting in a reduction in end-use services. §1.7 “Energy Efficiency” means the decrease in energy requirements of specific customers during any selected period with end-use services of such customers held constant. §1.8 “Force Majeure” means the inability to undertake an obligation of this Franchise due to a cause that could not be reasonably anticipated by a party or is beyond its reasonable control after exercise of best efforts to perform, including but not limited to fire, strike, war, riots, terrorist acts, acts of governmental authority, acts of God, floods, epidemics, quarantines, labor disputes, unavailability or shortages of materials or equipment or failures or delays in the delivery of materials. Neither the City nor the Company shall be in breach of this Franchise if a failure to perform any of the duties under this Franchise is due to a Force Majeure condition. §1.9 “Gross Revenues” refers to those amounts of money that the Company receives from the sale of gas within the City under rates authorized by the Public Utilities Commission, as well as from the transportation of gas to its customers within the City, as adjusted for refunds, net write-offs of uncollectible accounts, corrections, or regulatory adjustments. Regulatory adjustments include, 2 but are not limited to, credits, surcharges, refunds, and pro-forma adjustments pursuant to federal or state regulation. “Gross Revenues” shall exclude any revenues from the sale or transportation of gas to the City. §1.10 “Industry Standards” refers to standards developed by government agencies and generally recognized organizations that engage in the business of developing utility industry standards for materials, specifications, testing, construction, repair, maintenance, manufacturing, and other facets of the electric and gas utility industries. Such agencies and organizations include, but are not limited to the U.S. Department of Transportation, the Federal Energy Regulatory Commission (FERC), the Pipeline and Hazardous Materials Safety Administration (PHMSA), the Colorado Public Utilities Commission, the American National Standards Institute (ANSI), the American Society for Testing and Materials (ASTM), the Pipeline Research Council International, Inc. (PRCI), the American Society of Mechanical Engineers (ASME), the Gas Technology Institute (GTI), and the National Fire Protection Association (NFPA). §1.11 “Open Space” refers to privately-owned property protected by real covenant, or publicly- owned property protected by covenant and/or designated by ordinance or resolution of the City Council, which covenant or designation designates the property for use as one (1) or more of the following: a natural area not open to the public; a community buffer; a wildlife corridor and habitat area; a wetland; a view corridor; agricultural land; an area of archeological, historical, geologic or topographic significance; an area containing significant renewable and/or nonrenewable natural resources; and/or other undesignated, typically non-irrigated, undeveloped land uses. Open Space shall not include Parks. §1.14 “Other City Property” refers to the surface, the air space above the surface and the area below the surface of any property owned by the City or directly controlled by the City due to the City’s real property interest in the same or hereafter owned by the City, that would not otherwise fall under the definition of “Streets,” but which provides a suitable location for the placement of Company Facilities as specifically approved in writing by the City. Other City Property does not include Public Utility Easements. §1.15 “Parks” refers to land area owned by the City, either independently or with another governmental or quasi-governmental entity, that is developed and maintained for active or passive recreational use and is open for the general public’s use and enjoyment; which, by way of example only, may include public playfields, courts, and other recreation facilities, or may include greenways, water features, picnic areas, or natural areas. §1.16 “Private Project” refers to any project which is not covered by the definition of Public Project. §1.17 “Public Project” refers to (1) any public work or improvement within the City that is wholly owned by the City; or (2) any public work or improvement within the City where fifty percent (50%) or more of the funding is provided by any combination of the City, the federal government, the State of Colorado, or any Colorado county, but excluding all entities established under Title 32 of the Colorado Revised Statutes, except for the East Larimer County Water District, the Fort Collins-Loveland Water District, the South Fort Collins Sanitation District, the West Fort Collins Water District, the Boxelder Sanitation District, the Cherry Hills Sanitation District and the Sunset Water District, but only to the extent that the projects undertaken by any of the foregoing entities are necessary to provide water or sanitation services to the City or to Residents of the City. 3 §1.18 “Public Utilities Commission” or “PUC” refers to the Public Utilities Commission of the State of Colorado or other state agency succeeding to the regulatory powers of the Public Utilities Commission. §1.19 “Public Utility Easement” or “PUE” refers to any platted easement over, under, or above public or private property, expressly dedicated to, and accepted by, the City for the use of public utility companies for the placement of utility facilities, including but not limited to Company Facilities. “Public Utility Easement” shall not include easements within Streets. §1.20 “Relocate,” “Relocation,” or “Relocated” refers to the definition assigned such terms in Section 6.9.A of this Franchise. §1.21 “Renewable Energy Resources” means wind, solar, and geothermal resources; energy produced from biomass from nontoxic plant matter consisting of agricultural crops or their byproducts, urban wood waste, mill residue, slash, or brush, or from animal wastes and products of animal wastes, or from methane produced at landfills or as a by-product of the treatment of wastewater residuals; new hydroelectricity with a nameplate rating of ten (10) megawatts or less; and hydroelectricity in existence on January 1, 2005, with a nameplate rating of thirty (30) megawatts or less; fuel cells using hydrogen derived from a Renewable Energy Resource; and recycled energy produced by a generation unit with a nameplate capacity of not more than fifteen (15) megawatts that converts the otherwise lost energy from the heat from exhaust stacks or pipes to electricity and that does not combust additional fossil fuel, and includes any eligible renewable energy resource as defined in §40-2-124(1)(a), C.R.S., as the same shall be amended from time to time. §1.22 “Residents” refers to all persons, businesses, industries, governmental agencies, including the City, and any other entity whatsoever, presently located or to be hereinafter located, in whole or in part, within the territorial boundaries of the City. §1.23 “Streets” or “City Streets” refers to the surface, the air space above the surface and the area below the surface of any City-dedicated or City-maintained streets, alleys, bridges, roads, lanes, access easements, and other public rights-of-way within the City, which are primarily used for vehicle traffic. Streets shall not include Public Utility Easements and Other City Property. §1.24 “Supporting Documentation” refers to all information reasonably required or needed in order to allow the Company to design and construct any work performed under the provisions of this Franchise. Supporting Documentation may include, but is not limited to, construction plans, a description of known environmental issues, the identification of critical right-of-way or easement issues, the final recorded plat for the property, the date the site will be ready for the Company to begin construction, the date gas service and meter set are needed, and the name and contact information for the City’s project manager. §1.25 “Tariffs” refer to those tariffs of the Company on file and in effect with the PUC or other governing jurisdiction, as amended from time to time. §1.26 “Utility Service” refers to the sale of gas to Residents by the Company under rates and Tariffs approved by the PUC, as well as the delivery of gas to Residents by the Company. 4 ARTICLE 2 GRANT OF FRANCHISE §2.1 Grant of Franchise. A. UGrantU. The City hereby grants to the Company, subject to all conditions, limitations, terms, and provisions contained in this Franchise, the non-exclusive right to make reasonable use of City Streets, Public Utility Easements (as applicable) and Other City Property: (1) to provide Utility Service to the City and to its Residents under the Tariffs; and (2) to acquire, purchase, construct, install, locate, maintain, operate, upgrade and extend into, within and through the City all Company Facilities reasonably necessary for the sale, storage, purchase, exchange, transportation, transmission and distribution of Utility Service within and through the City. B. UNew Company Facilities in Other City Property, Excluding Parks and Open SpaceU. For all Other City Property that is not a Park or Open Space, the City’s grant to the Company of the right to locate Company Facilities in, on, over or across such Other City Property shall be subject to: (1) the Company already having or first receiving from the City approval of the location of such Company Facilities, in the City’s reasonable discretion; and (2) the terms and conditions of the use of such Other City Property shall be governed by this Franchise as may be reasonably supplemented to account for the unique nature of such Other City Property; by way of illustration and example only, the City may want to condition the use of Other City Property that is a golf course upon the Company not constructing Company Facilities in fairways or greens or during peak golf season. Nothing in this subsection B shall modify or extinguish pre-existing Company property rights. Further, this paragraph shall not prohibit the Company from modifying, replacing or upgrading Company Facilities already located in Parks or Open Space in accordance with the terms and conditions of the City license agreement, permit or other agreement that granted the Company the right to use such Other City Property or, if there is no such license agreement, permit or other agreement, in accordance with this Franchise. C. New Company Facilities in Other City Property that are Parks or Open Space. The City’s grant to the Company of the right to locate Company Facilities in, on, over or across Other City Property that is a Park or Open Space shall be subject to (1) the Company’s already having or first receiving from the City a revocable license, permit or other agreement approving the location of such Company Facilities, which the City may grant or deny in its sole discretion; and (2) the terms and conditions of such revocable license agreement, permit or other written agreement. Nothing in this subsection C shall modify or extinguish pre-existing Company property rights. Further, this paragraph shall not prohibit the Company from modifying, replacing or upgrading Company Facilities already located in Parks or Open Space in accordance with the terms and conditions of the City license agreement, permit or other agreement that granted the Company the right to use such Parks or Open Space or, if there is no such license agreement, permit or other agreement, in accordance with this Franchise. 5 §2.2 Conditions and Limitations. A. UScope of FranchiseU. The grant of this Franchise shall extend to all areas of the City as it is now or hereafter constituted that are within the Company’s PUC-certificated service territory; however, nothing contained in this Franchise shall be construed to authorize the Company to engage in activities other than the provision of Utility Service. B. USubject to City UsageU. The Company’s right to make reasonable use of City Streets and Other City Property to provide Utility Service to the City and its Residents under this Franchise is subject to and subordinate to any City usage of said Streets and Other City Property. C. UPrior Grants Not RevokedU. This grant and Franchise is not intended to revoke any prior license, grant, or right to use the Streets, Other City Property or Public Utility Easements and such licenses, grants or rights of use are hereby affirmed. D. UFranchise Not ExclusiveU. The rights granted by this Franchise are not, and shall not be deemed to be, granted exclusively to the Company, and the City reserves the right to make or grant a franchise to any other person, firm, or corporation. E. UMutual Reservation of Rights Concerning Public Utility Easements.U Subject to the rights expressly granted to the Company in subsection 2.1 and in other provisions of this Agreement concerning its non-exclusive right to make reasonable use of Public Utility Easements, nothing in this Agreement shall be construed to be a waiver by the City or the Company of any rights, interests, causes of action or claims that either may have under the law concerning the use of Public Utility Easements. §2.3 Effective Date and Term. This Franchise shall take effect on ___________, (the “Effective Date”) and shall supersede any prior franchise grants to the Company by the City. This Franchise shall terminate on ____________, unless extended by agreement of the parties. ARTICLE 3 CITY POLICE POWERS §3.1 Police Powers. The Company expressly acknowledges the City’s right to adopt, from time to time, in addition to the provisions contained herein, such laws, including Charter provisions, ordinances and regulations, as it may deem necessary in the exercise of its governmental powers. If the City considers making any substantive changes in its local codes or regulations that in the City’s reasonable opinion will significantly impact the Company’s operations in the City’s Streets, Public Utility Easements and Other City Property, it will make a good faith effort to advise the Company of such consideration; provided, however, that lack of notice shall not be justification for the Company’s non- compliance with any applicable local requirements. §3.2 URegulation of Streets and Other City Property.U The Company expressly acknowledges the City’s right to enforce regulations concerning the Company’s access to or use of the Streets and Other City Property. In addition, the Company acknowledges the City’s right 6 to require the Company to obtain permits for work in Streets, Other City Property and Public Utility Easements. §3.3 Compliance with Laws. The Company shall promptly and fully comply with all laws, regulations, permits and orders lawfully enacted by the City. Nothing herein provided shall prevent the Company from legally challenging or appealing the enactment or applicability of any laws, regulations, permits and orders enacted by the City. To the extent that the Company believes that any City regulations, permits and orders are inconsistent with Industry Standards, the City agrees to meet with the Company upon the Company’s written request for consideration of the matters at issue within a reasonable period of time. §3.4 Industry Standards. In enacting laws and regulations and issuing permits that affect the Company’s access to or use of the Streets, Other City Property and Public Utility Easements, the City agrees, without limiting the City’s police powers, to make good faith efforts to make its regulations and permit conditions consistent with Industry Standards to the extent practicable, and the Company agrees to make good faith efforts to advise the City of Industry Standards that affect the Company’s operations within the City. In addition, without limiting the City’s police power, the City will take into consideration any input from the Company on new regulations and permit conditions that the Company believes unnecessarily increase its cost of operations within the City. ARTICLE 4 FRANCHISE FEE §4.1 Franchise Fee. A. UFeeU. In consideration for this Franchise, which provides the certain terms related to the Company’s use of City Streets, Public Utility Easements and Other City Property, which are valuable public properties acquired and maintained by the City at the expense of its Residents, and in recognition of the fact that the grant to the Company of this Franchise is a valuable right, the Company shall pay the City a sum equal to three percent (3%) of all Gross Revenues (the “Franchise Fee”). To the extent required by law, the Company shall collect the Franchise Fee from a corresponding surcharge upon City Residents who are customers of the Company. B. UObligation in Lieu of FeeU. In the event that the Franchise Fee specified herein is declared void for any reason by a court of competent jurisdiction, unless prohibited by law, the Company shall be obligated to pay the City, at the same times and in the same manner as provided in this Franchise, an aggregate amount equal to the amount that the Company would have paid as a Franchise Fee as partial consideration for use of the City Streets, Public Utility Easements and Other City Property. Such payments shall be made in accordance with applicable provisions of law. Further, to the extent required by law, the Company shall collect the amounts agreed upon through a surcharge upon Utility Service provided to City Residents who are customers of the Company. 7 C. UChanges in Utility Service IndustriesU. The City and the Company recognize that utility service industries are the subject of restructuring initiatives by legislative and regulatory authorities, and are also experiencing other changes as a result of mergers, acquisitions, and reorganizations. Some of such initiatives and changes may have an adverse impact upon the Franchise Fee revenues provided for herein. In recognition of the length of the term of this Franchise, the Company agrees that in the event of any such initiatives or changes and to the extent permitted by law, upon receiving a written request from the City, the Company will cooperate with and assist the City in making reasonable modifications of this Franchise in an effort to provide that the City receives an amount in Franchise Fees or some other form of compensation that is the same amount of Franchise Fees paid to the City as of the date that such initiatives and changes adversely impact Franchise Fee revenues. D. UUtility Service Provided to the CityU. No Franchise Fee surcharge shall be charged to the City for Utility Service provided directly or indirectly to the City for its own consumption, unless otherwise directed by the City in writing and in a manner consistent with Company policy. §4.2 Remittance of Franchise Fee. A. URemittance ScheduleU. Franchise Fee revenues shall be remitted by the Company to the City as directed by the City in monthly installments not more than thirty (30) days following the close of each month. B. UCorrection of Franchise Fee PaymentsU. In the event that either the City or the Company discovers that there has been an error in the calculation of the Franchise Fee payment to the City, either party shall provide written notice of the error to the other party. Subject to the following sentence, if the party receiving written notice of the error does not agree with the written notice of error, that party may challenge the written notice of error pursuant to Section 4.2.D of this Franchise; otherwise, the error shall be corrected in the next monthly payment. However, if the error results in an overpayment of the Franchise Fee to the City, and said overpayment is in excess of Five Thousand Dollars ($5,000.00), correction of the overpayment by the City shall take the form of a credit against future Franchise Fees and shall be spread over the same period the error was undiscovered or the City may make a full refund payment to the Company. If such period would extend beyond the term of this Franchise, the Company may elect to require the City to provide it with a full refund instead of a credit, with such refund to be spread over the same period the error was undiscovered, even if the refund will be paid after the termination date of this Franchise. All Franchise Fee underpayments shall be corrected in the next monthly payment, together with interest computed at the rate set by the PUC for customer security deposits held by the Company, from the date when due until the date paid. Subject to the terms of the Tariffs, in no event shall either party be required to fund or refund more than five(5) years of any overpayment or underpayment made as a result of a Company error which occurred more than five (5) years prior to the discovery of the error. 8 C. UAudit of Franchise Fee PaymentsU. (1) At the request of the City, every three (3) years commencing at the end of the third year of this Franchise, the Company shall conduct an internal audit, in accordance with the Company’s auditing principles and policies that are applicable to gas utilities that are developed in accordance with the Institute of Internal Auditors, to investigate and determine the correctness of the Franchise Fee paid to the City. Such audit shall be limited to the previous three (3) calendar years. The Company shall provide a written report to the City Manager summarizing the audit procedures followed along with any potential findings. (2) If the City disagrees with the results of the audit, and if the parties are not able to informally resolve their differences, the City may conduct its own audit at its own expense, in accordance with generally accepted auditing principles applicable to gas utilities, and the Company shall cooperate by providing the City’s auditor with non- confidential information that would be required to be disclosed under applicable state sales and use tax laws and applicable PUC rule and regulations. (3) If the results of a City audit conducted pursuant to subsection C(2) concludes that the Company has underpaid the City by two percent (2%) or more, in addition to the obligation to pay such amounts to the City, the Company shall also pay all reasonable costs of the City’s audit. The Company shall not be responsible for the costs of the City’s audit when the underpayment is caused by errors from information provided by an entity certified by the Colorado Department of Revenue as a “hold harmless entity” or other similar entity recognized by the Colorado Department of Revenue. D. UFee DisputesU. Either party may challenge any written notification of error as provided for in Section 4.2.B of this Franchise by filing a written notice to the other party within thirty (30) days of receipt of the written notification of error. The written notice shall contain a summary of the facts and reasons for the party’s notice. The parties shall make good faith efforts to resolve any such notice of error before initiating any formal legal proceedings for the resolution of such error. E. UReportsU. To the extent allowed by law, upon written request by the City, but not more than once per year, the Company shall supply the City with the names and addresses of registered gas suppliers and brokers of natural gas that utilize Company Facilities to sell or distribute natural gas in Colorado. The Company shall not be required to disclose any confidential or proprietary information. §4.3 Franchise Fee Payment Not in Lieu of Permit or Other Fees. Payment of the Franchise Fee does not exempt the Company from any other lawful tax or fee imposed generally upon persons doing business within the City, except that the Franchise Fee provided for herein shall be in lieu of or a credit against any City occupation, occupancy or similar tax or fee in existence on the Effective Date of this Franchise Agreement for the use of City Streets, Public Utility Easements and Other City Property under the terms set forth in this Franchise. 9 ARTICLE 5 ADMINISTRATION OF FRANCHISE §5.1 City Designee. The City Manager shall designate in writing to the Company an official having full power and authority to administer this Franchise. The City Manager may also designate one or more City representatives to act as the primary liaison with the Company as to particular matters addressed by this Franchise and shall provide the Company with the names and telephone numbers of said City representatives. The City Manager may change these designations by providing written notice to the Company. The City’s designee shall have the right, at all reasonable times, to inspect any Company Facilities in City Streets and Other City Property. §5.2 Company Designee. The Company shall designate a representative to act as the primary liaison with the City and shall provide the City with the name, address, and telephone number for the Company’s representative under this Franchise. The Company may change its designation by providing written notice to the City. The City shall use this liaison to communicate with the Company regarding Utility Service and related service needs for City facilities. §5.3 Coordination of Work. A. The Company agrees to coordinate its activities in City Streets, Public Utility Easements and Other City Property with the City. The City and the Company will meet biannually upon the written request of the City designee to exchange their respective short-term (three years or less) and long-term (more than three years) forecasts and/or work plans for construction and other similar work which may affect City Streets, Other City Property and PUEs, including but not limited to any planned City Streets paving projects. The City and Company shall hold such meetings as either deems necessary to exchange additional information with a view toward coordinating their respective activities in those areas where such coordination may prove beneficial and so that the City will be assured that all applicable provisions of this Franchise, applicable building and zoning codes, and applicable City air and water pollution regulations are complied with, and that aesthetic and other relevant planning principles have been given due consideration. B. In addition to the foregoing meetings, the Company and the City agree to use good faith efforts to provide notice to one another whenever: (a) the Company initiates plans to significantly upgrade its infrastructure within the City; (b) third party applicants within the City initiate private land uses and projects requiring a significant installation of gas utility infrastructure; or (c) the City initiates a Public Project that requires significant upgrade to future gas utility development by the Company, in order to allow for mutual City and Company input and consultation for beneficial coordination of activities. 10 ARTICLE 6 SUPPLY, CONSTRUCTION, AND DESIGN §6.1 Purpose. The Company acknowledges the critical nature of the municipal services performed or provided by the City to the Residents that require the Company to provide prompt and reliable Utility Service and the performance of related services for City facilities. The City and the Company wish to provide for certain terms and conditions under which the Company will provide Utility Service and perform related services for the City in order to facilitate and enhance the operation of City facilities. They also wish to provide for other processes and procedures related to the provision of Utility Service to the City. §6.2 Supply. Subject to the jurisdiction of the PUC, the Company shall take all reasonable and necessary steps to provide a sufficient supply of gas to Residents at the lowest reasonable cost consistent with reliable supplies. §6.3 24TUCharges to the City for Service to City FacilitiesU. No charges to the City by the Company for Utility Service (other than gas transportation which shall be subject to negotiated contracts) shall exceed the lowest charge for similar service or supplies provided by the Company to any other similarly situated customer of the Company. The parties acknowledge the jurisdiction of the PUC over the Company’s regulated intrastate gas rates. All charges to the City shall be in accord with the Tariffs. §6.4 Restoration of Service. A. UNotificationU. The Company shall provide to the City daytime and nighttime telephone numbers of a designated Company representative from whom the City designee may obtain status information from the Company on a twenty-four (24) hour basis concerning interruptions of Utility Service in any part of the City. B. URestorationU. In the event the Company’s gas system within the City, or any part thereof, is partially or wholly destroyed or incapacitated, the Company shall use due diligence to restore such system to satisfactory service within the shortest practicable time, or provide a reasonable alternative to such system if the Company elects not to restore such system. §6.5 Obligations Regarding Company Facilities. A. UCompany FacilitiesU. All Company Facilities within City Streets and Other City Property shall be maintained in good repair and condition. B. UCompany Work within the CityU. All work within City Streets and Other City Property performed or caused to be performed by the Company shall be done: (1) in a high-quality manner that is in accordance with Industry Standards; (2) in a timely and expeditious manner; (3) in a manner that reasonably minimizes inconvenience to the public; 11 (4) in a cost-effective manner, which may include the use of qualified contractors; and (5) in accordance with all applicable laws, ordinances and regulations. C. UNo Interference with City FacilitiesU. Company Facilities shall not unreasonably interfere with any City facilities, including without limitation electric facilities, water facilities, sanitary and storm sewer facilities, communications facilities, or other City uses of the Streets, Public Utility Easements or Other City Property. Company Facilities shall be installed and maintained in City Streets and Other City Property so as to reasonably minimize interference with other property, trees, and other improvements and natural features in and adjoining the Streets and Other City Property in light of the Company’s obligation under Colorado law to provide safe and reliable utility facilities and services. In addition, Company Facilities shall be located or relocated in manner that satisfies all applicable City standards and Industry Standards for separation from existing and planned City facilities. D. UPermit and InspectionU. The installation, renovation, and replacement of any Company Facilities in the City Streets or Other City Property by or on behalf of the Company shall be subject to permit, inspection and approval by the City in accordance with applicable laws. Such permitting, inspection and approval may include, but shall not be limited to, the following matters: location of Company Facilities, cutting and pruning of trees and shrubs and disturbance of pavement, sidewalks and surfaces of City Streets or Other City Property; provided, however, the Company shall have the right to cut, prune, and/or remove vegetation in accordance with its standard vegetation management requirements and procedures. The Company agrees to cooperate with the City in conducting inspections and shall promptly perform any remedial action lawfully required by the City pursuant to any such inspection. E. UComplianceU. Subject to the provisions of Section 3.3, the Company and all of its contractors shall comply with the requirements of applicable municipal laws, ordinances, regulations, permits, and standards lawfully adopted, including but not limited to requirements of all building and zoning codes, and requirements regarding curb and pavement cuts, excavating, digging, and other construction activities. The Company shall use commercially reasonable efforts to require that its contractors and subcontractors working in City Streets or Other City Property hold the necessary licenses and permits required by law. §6.6 As-Built Drawings. A. Within thirty (30) days after written request of the City designee, but no sooner than fourteen (14) days after project completion, the Company shall commence its internal process to permit the Company to provide, on a project by project basis, as-built drawings of any Company Facility installed within the City Streets or Other City Property or contiguous to the City Streets or Other City Property. The Company shall 12 provide the requested documents no later than forty-five (45) days after it commences its internal process. B. If the requested information must be limited or cannot be provided pursuant to regulatory requirements or Company Tariffs, the Company shall promptly notify the City of such restrictions. The City reserves the right to challenge the Company’s position. The City acknowledges that the requested as-built drawings are confidential information of the Company and the Company asserts that disclosure to members of the public would be contrary to the public interest. Accordingly, the City shall deny the right of inspection of the Company’s confidential information as set forth in C.R.S. §24-72-204(3)(a)(IV), as may be amended from time to time. If an Open Records Act request is made by any third party for confidential or proprietary information that the Company has provided to the City pursuant to this Franchise, the City will notify the Company of the request and shall allow the Company to defend such request at its sole expense, including filing a legal action in any court of competent jurisdiction to prevent disclosure of such information. In any such legal action the Company shall join the person requesting the information and the City. In no circumstance shall the City provide to any third-party confidential information provided by the Company pursuant to this Franchise without first conferring with the Company. Provided the City complies with the terms of this Section, the Company shall defend, indemnify and hold the City harmless from any claim, judgment, costs or attorney fees incurred in participating in such proceeding. C. As used in this Section, as-built drawings refers to hard copies of the facility drawings as maintained in the Company’s business records and shall not include information maintained in the Company’s geographical information system. However, once the Company has developed the capability to create digital or electronic versions of its as-built drawings, the Company agrees to provide those versions to the City. The Company shall not be required to create drawings or data that do not exist at the time of the request. §6.7 Excavation and Construction. Subject to Section 3.3, the Company shall be responsible for obtaining, paying for, and complying with all applicable permits, in the manner required by the laws, ordinances, and regulations of the City. Although the Company shall be responsible for obtaining and complying with the terms of such permits, when performing Relocations requested by the City under Section 6.9 of this Franchise, the City will not require the Company to pay the fees charged for such permits. Upon the Company submitting a construction design plan, the City shall promptly and fully advise the Company in writing of all requirements for restoration of affected City Streets and Other City Property in advance of Company’s excavation projects in those areas, based upon the design submitted, if the City’s restoration requirements are not addressed in publicly available standards. §6.8 Restoration. Subject to the provisions of Section 6.5.D, when the Company does any work in or affecting City Streets or Other City Property, it shall, at its own expense, promptly remove any obstructions placed thereon or therein by the Company and within a reasonable period of time restore such City Streets or Other City Property to a condition that is substantially the same as existed before the work, and that meets applicable City 13 standards. If weather or other conditions do not permit the complete restoration required by this Section, the Company may with the approval of the City, temporarily restore the affected City Streets and Other City Property, provided that such temporary restoration is not at the City’s expense and provided further that the Company promptly undertakes and completes the required permanent restoration when the weather or other conditions no longer prevent such permanent restoration. Upon the request of the City, the Company shall restore the Streets and Other City Property to a better condition than existed before the Company work was undertaken, provided that the City shall be responsible for any incremental costs of such restoration not required by then-current City standards, and provided the City seeks and/or grants, as applicable, any additional required approvals. If the Company fails to promptly restore City Streets or Other City Property as required by this Section, and if, in the reasonable discretion of the City immediate action is required for the protection of public health, safety or welfare, the City may restore such Streets or Other City Property or remove the obstruction therefrom; provided however, City actions do not interfere with Company Facilities. The Company shall be responsible for the actual cost incurred by the City to restore such City Streets or Other City Property or to remove any obstructions therefrom. In the course of its restoration of City Streets, Public Utility Easements or Other City Property under this Section, the City shall not perform work on Company Facilities unless specifically authorized by the Company in writing on a project-by-project basis and subject to the terms and conditions agreed to in such authorization. §6.9 Relocation of Company Facilities. A. URelocation ObligationU. The Company shall temporarily or permanently remove, relocate, change or alter the position of any Company Facility (collectively, “Relocate(s),” “Relocation(s),” or “Relocated”) in (i) City Streets or (ii) in Other City Property at no cost or expense to the City whenever the City determines such Relocation is necessary for the completion of any Public Project. In the case of Relocation that is necessary for the completion of any Public Project in a Public Utility Easement that is not in a City Street or Other City Property (to the extent the City is not requesting a relocation for service to the City as a customer of the Company), the Company shall not be responsible for any relocation costs. For all Relocations, the Company and the City agree to cooperate on the location and Relocation of the Company Facilities in the City Streets or Other City Property in order to achieve Relocation in the most efficient and cost-effective manner possible. Notwithstanding the foregoing, once the Company has Relocated any Company Facility at the City’s direction, if the City requests that the same Company Facility be Relocated within two (2) years, the subsequent Relocation shall not be at the Company’s expense. Nothing provided herein shall prevent the Company from recovering its Relocation costs and expenses from third parties. B. UPrivate ProjectsU. Subject to Section 6.9.F, the Company shall not be responsible for the expenses of any Relocation required by Private Projects, and the Company has the right to require the payment of estimated Relocation expenses from the party causing, or responsible for, the Relocation before undertaking the Relocation. 14 C. URelocation PerformanceU. The Relocations set forth in Section 6.9.A of this Franchise shall be completed within a reasonable time, not to exceed one hundred twenty (120) days from the later of the date on which the City designee requests, in writing, that the Relocation commence, or the date when the Company is provided all Supporting Documentation. The Company shall notify the City within twenty (20) days of receipt of the request it the Supporting Documentation is insufficient to complete the project. The Company shall receive an extension of time to complete a Relocation where the Company’s performance was delayed due to Force Majeure or the failure of the City to provide adequate Supporting Documentation. The Company has the burden of presenting evidence to reasonably demonstrate the basis for the delay. Upon written request of the Company, the City may also grant the Company reasonable extensions of time for good cause shown and the City shall not unreasonably withhold or condition any such extension. D. UCity Revision of Supporting Documentation.U Any revision by the City of Supporting Documentation provided to the Company that causes the Company to substantially redesign and/or change its plans regarding Company Facility Relocation shall be deemed good cause for a reasonable extension of time to complete the Relocation under this Franchise. E. UCompletionU. Each such Relocation shall be complete only when the Company actually Relocates the Company Facilities, restores the Relocation site in accordance with Section 6.7 of this Franchise or as otherwise agreed with the City, and removes from the site or properly abandons on site all unused Company Facilities, equipment, material and other impediments. Any abandonment of Company Facilities as contemplated in this section shall comply with Industry Standards. F. UScope of ObligationU. Notwithstanding anything to the contrary in this Franchise, the Company shall not be required to Relocate any Company Facilities from property (a) owned by the Company in fee; or (b) in which the Company has a property right, grant or interest, including without limitation an easement but excluding Public Utility Easements, which are addressed in Section 6.9.A. G. UUnderground RelocationU. Underground Company Facilities shall be Relocated underground. Above ground Company Facilities shall be Relocated above ground unless the Company is paid for the incremental amount by which the underground cost would exceed the above ground cost of Relocation. H. UCoordinationU. (1) When requested in writing by the City designee or the Company, representatives of the City and the Company shall meet to share information regarding anticipated projects which will require Relocation of Company Facilities in City Streets and Other City Property. Such meetings shall be for the purpose of minimizing conflicts where possible and to facilitate coordination with any reasonable timetable established by the City for any Public Project. 15 (2) The City shall make reasonable best efforts to provide the Company with one (1) year’s advance notice of any planned Street repaving. The Company shall make reasonable best efforts to complete any necessary or anticipated repairs or upgrades to Company Facilities that are located underneath the Streets within the one-year period if practicable. I. UProposed Alternatives or ModificationsU. Upon receipt of written notice of a required Relocation, the Company may propose an alternative to or modification of the Public Project requiring the Relocation in an effort to mitigate or avoid the impact of the required Relocation of Company Facilities. The City shall in good faith review the proposed alternative or modification. The acceptance of the proposed alternative or modification shall be at the discretion of the City. In the event the City accepts the proposed alternative or modification, the Company agrees to promptly compensate the City for all additional costs, expenses or delay that the City reasonably determines resulted from the implementation of the proposed alternative. §6.10 New or Modified Service Requested by City. The conditions under which the Company shall install new or modified Utility Service to the City as a customer shall be governed by this Franchise and the Company’s Tariffs and the Tariffs shall control in the event of a conflict. §6.11 Service to New Areas. If the territorial boundaries of the City are expanded during the term of this Franchise, the Company shall, to the extent permitted by law, extend service to Residents in the expanded area at the earliest practicable time if the expanded area is within the Company’s PUC-certificated service territory. Service to the expanded area shall be in accordance with the terms of the Tariffs and this Franchise, including the payment of Franchise Fees. §6.12 City Not Required to Advance Funds. Upon receipt of the City’s authorization for billing and construction, the Company shall install Company Facilities to provide Utility Service to the City as a customer, without requiring the City to advance funds prior to construction. The City shall pay for the installation of Company Facilities once completed in accordance with the Tariffs. Notwithstanding anything to the contrary, the provisions of this Section to allow the City to not advance funds prior to construction shall apply unless prohibited by PUC rules or the Tariffs. The parties agree that as of the date of execution of this Agreement, Company Tariff Sheet R120 governs the terms of installation of Company Facilities for the City and allows installation of Company Facilities without the City advancing funds prior to construction. §6.13 Technological Improvements. The Company shall use its best efforts to incorporate, as soon as practicable, technological advances in its equipment and service within the City when such advances are technically and economically feasible and are safe and beneficial to the City and its Residents. 16 ARTICLE 7 RELIABILITY §7.1 Reliability. The Company shall operate and maintain Company Facilities efficiently and economically, in accordance with Industry Standards, and in accordance with the standards, systems, methods and skills consistent with the provision of adequate, safe and reliable Utility Service. §7.2 Franchise Performance Obligations. The Company recognizes that, as part of its obligations and commitments under this Franchise, the Company shall carry out each of its performance obligations in a timely, expeditious, efficient, economical and workmanlike manner. §7.3 Reliability Reports. Upon written request, the Company shall provide the City with a report regarding the reliability of Company Facilities and Utility Service. ARTICLE 8 COMPANY PERFORMANCE OBLIGATIONS §8.1 New or Modified Service to City Facilities. In providing new or modified Utility Service to City facilities, the Company agrees to perform as follows: A. UPerformanceU. The Company shall complete each project requested by the City within a reasonable time. The parties agree that a reasonable time shall not exceed one hundred eighty (180) days from the date upon which the City designee makes a written request and provides the required Supporting Documentation for all Company Facilities, including a copy to the Area Manager as designated in Section 21.4 below. Provided that the City provides the Company’s designated representative with a copy of the Supporting Documentation, the Company shall notify the City within twenty (20) days of receipt of the request if the Supporting Documentation is sufficient to complete the project. The Company shall be entitled to an extension of time to complete a project where the Company’s performance was delayed due to Force Majeure. Upon request of the Company, the City designee may also grant the Company reasonable extensions of time for good cause shown and the City shall not unreasonably withhold any such extension. B. UCity Revision of Supporting DocumentationU. Any revision by the City of Supporting Documentation provided to the Company that causes the Company to substantially redesign and/or substantially change its plans regarding new or modified service to City facilities shall be deemed good cause for a reasonable extension of time to complete the Relocation under this Franchise. C. UCompletion/RestorationU. Each such project shall be complete only when the Company actually provides the service installation or modification required, restores the project site in accordance with the terms of this Franchise or as otherwise agreed with the City and removes from the site or properly abandons on site any unused Company Facilities, equipment, material and other impediments. “Unused” for purposes of this 17 Franchise shall mean that the Company is no longer using the Company Facilities in question and has no plans to use the Company Facilities in the foreseeable future. §8.2 Adjustments to Company Facilities. The Company shall perform adjustments to Company Facilities that are consistent with Industry Standards, including manhole rings and other appurtenances in Streets and Other City Property, to accommodate City Street maintenance, repair and paving operations at no cost to the City. In providing such adjustments to Company Facilities, the Company agrees to perform as follows: A. UPerformanceU. The Company shall complete each requested adjustment within a reasonable time, not to exceed thirty (30) days from the date upon which the City makes a written request and provides to the Company all information reasonably necessary to perform the adjustment. The Company shall be entitled to an extension of time to complete an adjustment where the Company’s performance was delayed due to Force Majeure. Upon request of the Company, the City may also grant the Company reasonable extensions of time for good cause shown and the City shall not unreasonably withhold any such extension. B. UCompletion/RestorationU. Each such adjustment shall be complete only when the Company actually adjusts and, if required, readjusts, Company Facilities to accommodate City operations in accordance with City instructions following City maintenance, repair or paving operations. C. UCoordinationU. As requested by the City or the Company, representatives of the City and the Company shall meet regarding anticipated Street maintenance operations which will require such adjustments to Company Facilities in Streets or Other City Property. Such meetings shall be for the purpose of coordinating and facilitating performance under this Section. §8.3 Third Party Damage Recovery. A. UDamage to Company InterestsU. If any individual or entity damages any Company Facilities, to the extent permitted by law the City will notify the Company of any such incident of which it has knowledge and will provide to the Company within a reasonable time all pertinent information within its possession regarding the incident and the damage, including the identity of the responsible individual or entity. B. UDamage to Company Property for which the City is ResponsibleU. If any individual or entity damages any Company Facilities for which the City is obligated to reimburse the Company for the cost of the repair or replacement, to the extent permitted by law, the Company will notify the City of any such incident of which it has knowledge and will provide to the City within a reasonable time all pertinent information within its possession regarding the incident and the damage, including the identity of the responsible individual or entity. C. UMeetingU. The Company and the City agree to meet periodically upon written request of either party for the purpose of developing, implementing, reviewing, improving and/or modifying mutually beneficial procedures and methods for the efficient 18 gathering and transmittal of information useful in recovery efforts against third parties for damaging Company Facilities. ARTICLE 9 BILLING AND PAYMENT §9.1 Billing for Utility Services. A. UMonthly BillingU. Unless otherwise provided in the Tariffs, the rules and regulations of the PUC, or the Public Utility Law, the Company shall render bills monthly to the offices of the City for Utility Service and other related services for which the Company is entitled to payment. B. UAddress for BillingU. Billings for service rendered during the preceding month shall be sent to the person(s) designated by the City and payment for same shall be made as prescribed in this Franchise and the applicable Tariffs. C. USupporting DocumentsU. To the extent requested by the City, the Company shall provide all billings and any underlying Supporting Documentation reasonably requested by the City in an editable and manipulatable electronic format that is acceptable to the Company and the City. D. UAnnual MeetingsU. The Company agrees to meet with the City designee on a reasonable basis at the City’s request, but no more frequently than once a year, for the purpose of developing, implementing, reviewing, and/or modifying mutually beneficial and acceptable billing procedures, methods, and formats which may include, without limitation, electronic billing and upgrades or beneficial alternatives to the Company’s current most advanced billing technology, for the efficient and cost effective rendering and processing of such billings submitted by the Company to the City. §9.2 Payment to City. In the event the City determines after written notice to the Company that the Company is liable to the City for payments, costs, expenses or damages of any nature, and subject to the Company’s right to challenge such determination, the City may deduct all monies due and owing the City from any other amounts currently due and owing the Company. Upon receipt of such written notice, the Company may request a meeting between the Company’s designee and a designee of the City to discuss such determination. The City agrees to attend such a meeting. As an alternative to such deduction and subject to the Company’s right to challenge, the City may bill the Company for such assessment(s), in which case, the Company shall pay each such bill within thirty (30) days of the date of receipt of such bill unless it challenges the validity of the charge. If the Company challenges the City determination of liability, the City shall make such payments to the Company for Utility Service received by the City pursuant to the Tariffs until the challenge has been finally resolved. 19 ARTICLE 10 PURCHASE OR CONDEMNATION §10.1 Municipal Right to Purchase or Condemn. A. URight and Privilege of CityU. The right and privilege of the City to construct, own and operate a municipal utility, and to purchase pursuant to a mutually acceptable agreement or condemn any Company Facilities located within the territorial boundaries of the City, and the Company’s rights in connection therewith, as set forth in applicable provisions of the City Charter and of the constitution, statutes and case law of the State of Colorado relating to the acquisition of public utilities, are expressly recognized. The City shall have the right, within the time frames and in accordance with the procedures set forth in such provisions, to condemn Company Facilities, land, rights-of-way and easements now owned or to be owned by the Company located within the territorial boundaries of the City. In the event of any such condemnation, no value shall be ascribed or given to the right to use City Streets or Other City Property granted under this Franchise in the valuation of the property thus condemned. B. UNotice of Intent to Purchase or CondemnU. The City shall provide the Company no less than one (1) year’s prior written notice of its intent to purchase or condemn Company Facilities. Nothing in this Section shall be deemed or construed to constitute a consent by the Company to the City’s purchase or condemnation of Company Facilities, nor a waiver of any Company defenses or challenges related thereto. ARTICLE 11 MUNICIPALLY PRODUCED UTILITY SERVICE §11.1 Municipally Produced Utility Service. A. UCity ReservationU. The City expressly reserves the right to engage in providing natural gas as a utility service to the full extent permitted by law. B. UFranchise Not To Limit City’s RightsU. Nothing in this Franchise prohibits the City from becoming an aggregator of natural gas utility service or from selling natural gas as a utility service to customers should it be permissible under law. ARTICLE 12 ENVIRONMENT AND CONSERVATION §12.1 Environmental Leadership. The City and the Company agree that sustainable development, environmental excellence and innovation shall form the foundation of the Utility Service provided by the Company under this Franchise. The Company shall continue to cost- effectively monitor its operations to mitigate environmental impacts; shall meet or exceed the requirements of environmental laws, regulations and permits; shall invest in cost- effective environmentally-sound technologies; shall consider environmental issues in its 20 planning and decision-making; and shall support environmental research and development projects and partnerships in our communities through various means, including but not limited to corporate giving and employee involvement. The Company shall continue to explore ways to reduce water consumption at its facilities and to use recycled water where feasible. On or before December 1 of each year, the Company shall provide the City a written report describing its progress in carbon reduction and other environmental efforts, and the parties shall meet at a mutually convenient time and place for a discussion of such. In meeting its obligation under this Section, the Company is not precluded from providing existing internal and external reports that may be used for other reporting requirements. §12.2 Conservation. The City and the Company recognize and agree that Energy Conservation programs offer opportunities for the efficient use of energy and possible reduction of energy costs. The City and the Company further recognize that creative and effective Energy Conservation solutions are crucial to sustainable development. The Company recognizes and shares the City’s stated objectives to advance the implementation of cost- effective Energy Efficiency and Energy Conservation programs that direct opportunities to residential and non-residential customers to manage more efficiently their use of energy and thereby create the opportunity to reduce their energy bills. The Company commits to offer programs that attempt to capture market opportunities for cost-effective Energy Efficiency improvements such as municipal specific programs that provide cash rebates for efficient heating, energy design programs to assist architects and engineers to incorporate energy efficiency in new construction projects, and recommissioning programs to analyze existing systems to optimize performance and conserve energy according to current and future demand side management (“DSM”) programs. In doing so, the Company recognizes the importance of (i) implementing cost-effective programs the benefits of which would otherwise be lost if not pursued in a timely fashion; and (ii) developing cost-effective programs for the various classes of the Company’s customers, including low-income customers. The Company shall advise the City and its Residents of the availability of assistance that the Company makes available for investments in Energy Conservation through newspaper advertisements, bill inserts and Energy Efficiency workshops and by maintaining information about these programs on the Company’s website. Further, the Company will designate a conservation representative to act as the primary liaison with the City who will provide the City with information on how the City may take advantage of reducing energy consumption in City facilities and how the City may participate in Energy Conservation and Energy Efficiency programs sponsored by the Company as provided in the Tariffs. As such, the Company and the City commit to work cooperatively and collaboratively to identify, develop, implement and support programs offering creative and sustainable opportunities to Company customers and Residents, including low-income customers and Residents. The Company agrees to help the City participate in Company programs and when opportunities exist to partner with others, such as the State of Colorado, the Company will help the City pursue those opportunities. To assist the City in pursuing such opportunities, the Company shall, upon request of the City, provide the City usage data in aggregate form that the City can use in pursuing such opportunities provided the same is not prohibited from disclosure under applicable Tariffs or PUC rules. 21 §12.3 Continuing Commitment. It is the express intention of the City and the Company that the collaborative effort provided for in this Article continue for the entire term of this Franchise. The City and the Company also recognize, however, that the programs identified in this Article may be for a limited duration and that the regulations and technologies associated with Energy Conservation are subject to change. Given this variability, the Company agrees to maintain its commitment to sustainable development and Energy Conservation for the term of this Franchise by continuing to provide leadership, support and assistance, in collaboration with the City, to identify, develop, implement and maintain new and creative programs similar to the programs identified in this Franchise in order to help the City achieve its environmental goals. §12.4 PUC Approval. Nothing in this Article shall be deemed to require the Company to invest in technologies or to incur costs that it has a good faith belief the PUC will not allow the Company to recover through the ratemaking process. ARTICLE 13 TRANSFER OF FRANCHISE §13.1 Consent of City Required. The Company shall not transfer or assign any rights under this Franchise to an unaffiliated third party, except by merger with such third party, or, except when the transfer is made in response to legislation or regulatory requirements, unless the City approves such transfer or assignment in writing. The City may impose reasonable conditions upon the transfer, but Approval of the transfer or assignment shall not be unreasonably withheld, conditioned or delayed. Except as referenced above, any transfer or assignment by the Company of any or all of its rights and obligations under this Franchise without the City’s required prior written consent shall be deemed null and void and of no effect. §13.2 Transfer Fee. In order that the City may share in the value this Franchise adds to the Company’s operations, any transfer or assignment of rights granted under this Franchise requiring City approval, as set forth herein, shall be subject to the condition that the Company shall promptly pay to the City a transfer fee in an amount equal to the proportion of the City’s then-population provided Utility Service by the Company to the then-population of the City and County of Denver provided Utility Service by the Company multiplied by one million dollars ($1,000,000.00). Except as otherwise required by law, such transfer fee shall not be recovered from a surcharge placed only on the rates of Residents. ARTICLE 14 CONTINUATION OF UTILITY SERVICE §14.1 Continuation of Utility Service. In the event this Franchise is not renewed at the expiration of its term or is terminated for any reason, and the City has not provided for alternative utility service, the Company shall have no obligation to remove any Company Facilities 22 from Streets, Public Utility Easements or Other City Property or discontinue providing Utility Service unless otherwise ordered by the PUC, and shall continue to provide Utility Service within the City until the City arranges for utility service from another provider. The City acknowledges and agrees that the Company has the right to use Streets, Other City Property and Public Utility Easements during any such period. The Company further agrees that it will not withhold any temporary Utility Services necessary to protect the public. The City agrees that in the circumstances of this Article, the Company shall be entitled to monetary compensation as provided in the Tariffs and the Company shall be entitled to collect from Residents and, upon the City’s compliance with applicable provisions of law, shall be obligated to pay the City, at the same times and in the same manner as provided in this Franchise, an aggregate amount equal to the amount which the Company would have paid as a Franchise fee as consideration for use of the City’s Streets and Other City Property. Only upon receipt of written notice from the City stating that the City has adequate alternative utility service for Residents and upon order of the PUC shall the Company be allowed to discontinue the provision of Utility Service to the City and its Residents. ARTICLE 15 INDEMNIFICATION AND IMMUNITY §15.1 City Held Harmless. The Company shall indemnify, defend and hold the City harmless from and against claims, demands, liens and all liability or damage of whatsoever kind on account of or directly arising from the grant of this Franchise, the exercise by the Company of the related rights, but in both instances only to the extent caused by the Company, and shall pay the costs of defense plus reasonable attorneys’ fees. The City shall (a) give prompt written notice to the Company of any claim, demand or lien with respect to which the City seeks indemnification hereunder; and, (b) unless in the City’s judgment a conflict of interest may exist between the City and the Company with respect to such claim, demand or lien, shall permit the Company to assume the defense of such claim, demand, or lien with counsel reasonably satisfactory to the City. If such defense is assumed by the Company, the Company shall not be subject to liability for any settlement made without its consent. If such defense is not assumed by the Company or if the City determines that a conflict of interest exists, the parties reserve all rights to seek all remedies available in this Franchise against each other. Notwithstanding any provision hereof to the contrary, the Company shall not be obligated to indemnify, defend or hold the City harmless to the extent any claim, demand or lien arises out of or in connection with any negligent or intentional act or failure to act of the City or any of its officers, agents or employees or to the extent that the City is acting in its capacity as a customer of record of the Company. §15.2 Immunity. Nothing in this Section or any other provision of this Franchise shall be construed as a waiver of the notice requirements, defenses, immunities and limitations of liability the City may have under the Colorado Governmental Immunity Act (§24-10-101, C.R.S., et. seq.) or of any other defenses, immunities, or limitations of liability available to the City by law. 23 ARTICLE 16 BREACH §16.1 Change of Tariffs. The City and the Company agree to take all reasonable and necessary actions to assure that the terms of this Franchise are performed. The Company reserves the right to seek a change in its Tariffs, including but not limited to the rates, charges, terms, and conditions of providing Utility Service to the City and its Residents, and the City retains all rights that it may have to intervene and participate in any such proceedings. §16.2 Breach. A. UNotice/Cure/RemediesU. Except as otherwise provided in this Franchise, if a party (the “Breaching Party”) to this Franchise fails or refuses to perform any of the terms or conditions of this Franchise (a “Breach”), the other party (the “Non-Breaching Party”) may provide written notice to the Breaching Party of such Breach. Upon receipt of such notice, the Breaching Party shall be given a reasonable time, not to exceed thirty (30) days in which to remedy the Breach or, if such Breach cannot be remedied in thirty (30) days, such additional time as reasonably needed to remedy the Breach, but not exceeding an additional thirty (30) day period, or such other time as the parties may agree. If the Breaching Party does not remedy the Breach within the time allowed in the notice, the Non-Breaching Party may exercise the following remedies for such Breach: (1) specific performance of the applicable term or condition to the extent allowed by law; and (2) recovery of actual damages from the date of such Breach incurred by the Non-Breaching Party in connection with the Breach, but excluding any special, punitive or consequential damages. B. UTermination of Franchise by CityU. In addition to the foregoing remedies, if the Company fails or refuses to perform any material term or condition of this Franchise (a “Material Breach”), the City may provide written notice to the Company of such Material Breach. Upon receipt of such notice, the Company shall be given a reasonable time, not to exceed sixty (60) d1Ta1Tys in which to remedy the Material Breach or, if such Material Breach cannot be remedied in sixty (60) days, such additional time as reasonably needed to remedy the Material Breach, but not exceeding an additional sixty (60) day period, or such other time as the parties may agree. If the Company does not remedy the Material Breach within the time allowed in the notice, the City may, in its sole discretion, terminate this Franchise. This remedy shall be in addition to the City’s right to exercise any of the remedies provided for elsewhere in this Franchise. Upon such termination, the Company shall continue to provide Utility Service to the City and its Residents (and shall continue to have associated rights and grants needed to provide such service) until the City makes alternative arrangements for such service and until otherwise ordered by the PUC and the Company shall be entitled to collect from Residents and, upon the City complying with applicable provisions of law, shall be obligated to pay the City, at the 24 same times and in the same manner as provided in this Franchise, an aggregate amount equal to the amount which the Company would have paid as a Franchise Fee as consideration for use of the City Streets and Other City Property. Unless otherwise provided by law, the Company shall be entitled to collect such amount from Residents. C. UCompany Shall Not Terminate FranchiseU. In no event does the Company have the right to terminate this Franchise. D. UNo Limitation.U Except as provided herein, nothing in this Franchise shall limit or restrict any legal rights or remedies that either party may possess arising from any alleged Breach of this Franchise. ARTICLE 17 AMENDMENTS §17.1 Proposed Amendments. At any time during the term of this Franchise, the City or the Company may propose amendments to this Franchise by giving thirty (30) days written notice to the other of the proposed amendment(s) desired, and both parties thereafter, through their designated representatives, will, within a reasonable time, negotiate in good faith in an effort to agree upon mutually satisfactory amendment(s). However, nothing contained in this Section shall be deemed to require either party to consent to any amendment proposed by the other party. §17.2 Effective Amendments. No alterations, amendments or modifications to this Franchise shall be valid unless executed in writing by the parties, which alterations, amendments or modifications shall be adopted with the same formality used in adopting this Franchise, to the extent required by law. Neither this Franchise nor any term herein may be changed, modified or abandoned, in whole or part, except by an instrument in writing, and no subsequent oral agreement shall have any validity whatsoever. Any amendment of the Franchise shall become effective only upon the approval of the PUC, if such PUC approval is required. ARTICLE 18 EQUAL OPPORTUNITY §18.1 Economic Development. The Company is committed to the principle of stimulating, cultivating and strengthening the participation and representation of persons of color, women and members of other under-represented groups within the Company and in the local business community. The Company believes that increased participation and representation of under-represented groups will lead to mutual and sustainable benefits for the local economy. The Company is committed also to the principle that the success and economic well-being of the Company is closely tied to the economic strength and vitality of the diverse communities and people it serves. The Company believes that contributing to the development of a viable and sustainable economic base among all Company customers is in the best interests of the Company and its shareholders. 25 §18.2 Employment. A. UProgramsU. The Company is committed to undertaking programs that identify, consider and develop persons of color, women and members of other under-represented groups for positions at all skill and management levels within the Company. B. UBusinessesU. The Company recognizes that the City and the business community in the City, including women and minority owned businesses, provide a valuable resource in assisting the Company to develop programs to promote persons of color, women and members of under-represented communities into management positions, and agrees to keep the City regularly advised of the Company’s progress by providing the City a copy of the Company’s annual affirmative action report upon the City’s written request. C. URecruitmentU. In order to enhance the diversity of the employees of the Company, the Company is committed to recruiting diverse employees by strategies such as partnering with colleges, universities and technical schools with diverse student populations, utilizing diversity-specific media to advertise employment opportunities, internships, and engaging recruiting firms with diversity-specific expertise. D. UAdvancementU. The Company is committed to developing a world-class workforce through the advancement of its employees, including persons of color, women and members of under-represented groups. In order to enhance opportunities for advancement, the Company will offer training and development opportunities for its employees. Such programs may include mentoring programs, training programs, classroom training and leadership programs. E. UNon-DiscriminationU. The Company is committed to a workplace free of discrimination based on race, color, religion, national origin, gender, age, military status, sexual orientation, marital status, or physical or mental disability or any other protected status in accordance with all federal, state or local laws. The Company shall not, solely because of race, creed, color, religion, gender, sexual orientation, marital status, age, military status, national origin or ancestry, or physical or mental disability, refuse to hire, discharge, promote, demote or discriminate in matters of compensation, against any person otherwise qualified. F. UBoard of DirectorsU. The Company shall identify and consider women, persons of color and other under-represented groups to recommend for its Board of Directors, consistent with the responsibility of boards to represent the interests of the Shareholders, customers and employees of the Company. §18.3 Contracting. A. UContractsU. It is the Company’s policy to make available to minority and women owned business enterprises and other small and/or disadvantaged business enterprises the maximum practical opportunity to compete with other service providers, contractors, 26 vendors and suppliers in the marketplace. The Company is committed to increasing the proportion of Company contracts awarded to minority and women owned business enterprises and other small and/or disadvantaged business enterprises for services, construction, equipment and supplies to the maximum extent consistent with the efficient and economical operation of the Company. B. UCommunity OutreachU. The Company agrees to maintain and continuously develop contracting and community outreach programs calculated to enhance opportunity and increase the participation of minority and women owned business enterprises and other small and/or disadvantaged business enterprises to encourage economic vitality. The Company agrees to keep the City regularly advised of the Company’s programs. C. UCommunity DevelopmentU. The Company shall maintain and support partnerships with local chambers of commerce and business organizations, including those representing predominately minority owned, women owned and disadvantaged businesses, to preserve and strengthen open communication channels and enhance opportunities for minority owned, women owned and disadvantaged businesses to contract with the Company. §18.4 Coordination. City agencies provide collaborative leadership and mutual opportunities or programs relating to City based initiatives on economic development, employment and contracting opportunity. The Company agrees to review Company programs and mutual opportunities responsive to this Article with these agencies, upon their request, and to collaborate on best practices regarding such programs and coordinate and cooperate with the agencies in program implementation. ARTICLE 19 MISCELLANEOUS §19.1 No Waiver. Neither the City nor the Company shall be excused from complying with any of the terms and conditions of this Franchise by any failure of the other, or any of its officers, employees, or agents, upon any one or more occasions, to insist upon or to seek compliance with any such terms and conditions. §19.2 Successors and Assigns. The rights, privileges, and obligations, in whole or in part, granted and contained in this Franchise shall inure to the benefit of and be binding upon the Company, its successors and assigns, to the extent that such successors or assigns have succeeded to or been assigned the rights of the Company pursuant to Article 15 of this Franchise. Upon a transfer or assignment pursuant to Article 15, the Company shall be relieved from all liability from and after the date of such transfer, except as otherwise provided in the conditions imposed by the City in authorizing the transfer or assignment and under state and federal law. §19.3 Third Parties. Nothing contained in this Franchise shall be construed to provide rights to third parties. 27 §19.4 Notice. Both parties shall designate from time to time in writing representatives for the Company and the City who will be the persons to whom notices shall be sent regarding any action to be taken under this Franchise. Notice shall be in writing and forwarded by certified mail, reputable overnight courier or hand delivery to the persons and addresses as hereinafter stated, unless the persons and addresses are changed at the written request of either party, delivered in person or by certified mail. Notice shall be deemed received (a) three (3) days after being mailed via the U.S. Postal Service, (b) one (1) business day after mailed if via reputable overnight courier, or (c) upon hand delivery if delivered by courier. Until any such change shall hereafter be made, notices shall be sent as follows: To the City: City Manager 300 LaPorte Ave. P.O. Box 580 Fort Collins, Colorado 80522 With a copy to: City Attorney 300 LaPorte Ave. P.O. Box 580 Fort Collins, Colorado 80522 To the Company: Regional Vice President, Customer and Community Relations Public Service Company of Colorado P.O. Box 840 Denver, Colorado 80201 With a copy to: Legal Department Public Service Company of Colorado P.O. Box 840 Denver, Colorado 80201 and Area Manager Public Service Company of Colorado 1500 6P th P Ave Greeley, Colorado 80632 28 Any request involving any audit specifically allowed under this Franchise shall also be sent to: Audit Services Public Service Company of Colorado P.O. Box 840 Denver, Colorado 80201 §19.5 Examination of Records. The parties agree that any duly authorized representative of the City shall have access to and the right to examine any books, documents, papers, and records of the Company reasonably related to the Company’s compliance with the terms and conditions of this Franchise. Information shall be provided within thirty (30) days of any written request. Any books, documents, papers, and records of the Company in any form that are requested by the City, that contain confidential information shall be conspicuously identified as “confidential” or “proprietary” by the Company. In no case shall any privileged communication be subject to examination by the City pursuant to the terms of this Section. “Privileged Communication” means any communication that would not be discoverable due to the attorney client privilege or any other privilege that is generally recognized in Colorado, including but not limited to the work product doctrine. The work product doctrine shall include information developed by the Company in preparation for PUC proceedings. (1) The City will maintain the confidentiality of the information by keeping it under seal and segregated from information and documents that are available to the public; (2) The information shall be used solely for the purpose of determining the Company’s compliance with the terms and conditions of this Franchise; (3) The information shall only be made available to City employees and consultants who represent in writing that they agree to be bound by the provisions of this subsection; (4) The information shall be held by the City for such time as is reasonably necessary for the City to address the Franchise issue(s) that generated the request, and shall be returned to the Company when the City has concluded its use of the information. The parties agree that in most cases, the information should be returned within one hundred twenty (120) days. However, in the event that the information is needed in connection with any action that requires more time, including, but not necessarily limited to litigation, administrative proceedings and/or other disputes, the City may maintain the information until such issues are fully and finally concluded. 29 §19.6 Confidential or Proprietary Information. If an Open Records Act (§§24-72-201 et seq. C.R.S.) request is made by any third party for confidential or proprietary information that the Company has provided to the City pursuant to this Franchise, the City will promptly notify the Company of the request and shall allow the Company to defend such request at its sole expense, including filing a legal action in any court of competent jurisdiction to prevent disclosure of such information. In any such legal action the Company shall join the person requesting the information and the City. In no circumstance shall the City provide to any third party confidential information provided by the Company pursuant to this Franchise without first conferring with the Company. The Company shall defend, indemnify and hold the City harmless from any claim, judgment, costs or attorney fees incurred in participating in such proceeding. Unless otherwise agreed between the parties, the following information shall not be provided by the Company: confidential employment matters, specific information regarding any of the Company’s customers, information related to the compromise and settlement of disputed claims including but not limited to PUC dockets, information provided to the Company which is declared by the provider to be confidential, and which would be considered confidential to the provider under applicable law. §19.7 List of Utility Property. The Company shall provide the City, upon request not more than once every two (2) years, a list of electric and gas utility-related real property owned in fee by the Company within the County in which the City is located. The list shall include the legal description of the real property, and where available on the deed, the physical street address. If the physical address is not available on the deed, if the City requests the physical address of the real property described in this Section 19.7, to the extent that such physical street address is readily available to the Company, the Company shall provide such address to the City. All such records must be kept for a minimum of three (3) years or such shorter duration if required by Company policy. §19.8 PUC Filings. Upon written request by the City, the Company shall provide the City non- confidential copies of all applications, advice letters and periodic reports, together with any accompanying non-confidential testimony and exhibits, filed by the Company with the Public Utilities Commission. Notwithstanding the foregoing, notice regarding any gas filings that may affect Utility Service rates in the City shall be sent to the City upon filing. §19.9 Information. Upon written request, the Company shall provide the City Manager or the City Manager’s designee with: A. A copy of the Company’s or its parent company’s consolidated annual financial report, or alternatively, a URL link to a location where the same information is available on the Company’s website; B. Maps or schematics indicating the location of specific Company Facilities (subject to City executing a confidentiality agreement as required by Company policy), including gas or electric lines, located within the City, to the extent those maps or schematics are in existence at the time of the request and related to an ongoing project within the City. The Company does not represent or warrant the accuracy of any such maps or schematics; and 30 C. A copy of any report required to be prepared for a federal or state agency detailing the Company’s efforts to comply with federal and state air and water pollution laws. §19.10 Payment of Taxes and Fees. A. UImpositionsU. Except as otherwise provided herein, the Company shall pay and discharge as they become due, promptly and before delinquency, all taxes, assessments, rates, charges, license fees, municipal liens, levies, excises, and imposts, whether general or special, or ordinary or extraordinary, of every name, nature, and kind whatsoever, including all governmental charges of whatsoever name, nature, or kind, which may be levied, assessed, charged, or imposed, or which may become a lien or charge against this Franchise (“Impositions”), provided that the Company shall have the right to contest any such Impositions and shall not be in breach of this Section so long as it is actively contesting such Impositions. B. UCity LiabilityU. The City shall not be liable for the payment of late charges, interest or penalties of any nature other than pursuant to applicable Tariffs. §19.11 Conflict of Interest. The parties agree that no official, officer or employee of the City shall have any personal or beneficial interest whatsoever in the services or property described herein and the Company further agrees not to hire or contract for services any official, officer or employee of the City to the extent prohibited by law, including ordinances and regulations of the City. §19.12 Certificate of Public Convenience and Necessity. The City agrees to support the Company’s application to the PUC to obtain a Certificate of Public Convenience and Necessity to exercise its rights and obligations under this Franchise. §19.13 Authority. Each party represents and warrants that except as set forth below, it has taken all actions that are necessary or that are required by its ordinances, regulations, procedures, bylaws, or applicable law, to legally authorize the undersigned signatories to execute this Franchise on behalf of the parties and to bind the parties to its terms. The persons executing this Franchise on behalf of each of the parties warrant that they have full authorization to execute this Franchise. The City acknowledges that notwithstanding the foregoing, the Company requires a Certificate of Public Convenience and Necessity from the PUC in order to operate under the terms of this Franchise. §19.14 Severability. Should any one or more provisions of this Franchise be determined to be unconstitutional, illegal, unenforceable or otherwise void, all other provisions nevertheless shall remain effective; provided, however, to the extent allowed by law, the parties shall forthwith enter into good faith negotiations and proceed with due diligence to draft one or more substitute provisions that will achieve the original intent of the parties hereunder. §19.15 Force Majeure. Neither the City nor the Company shall be in breach of this Franchise if a failure to perform any of the duties under this Franchise is due to Force Majeure, as defined herein. 31 §19.16 Earlier Franchises Superseded. This Franchise shall constitute the only franchise between the City and the Company related to the furnishing of Utility Service, and it supersedes and cancels all former franchises between the parties hereto. §19.17 Titles Not Controlling. Titles of the paragraphs herein are for reference only, and shall not be used to construe the language of this Franchise. §19.18 Applicable Law. Colorado law shall apply to the construction and enforcement of this Franchise. The parties agree that venue for any litigation arising out of this Franchise shall be in the District Court for Larimer County, State of Colorado. §19.19 Payment of Expenses Incurred by City in Relation to Franchise Agreement. The Company shall pay for expenses reasonably incurred by the City for the adoption of this Franchise, limited to the publication of notices, publication of ordinances, and photocopying of documents and other similar expenses. §19.20 Costs of Compliance with Franchise. The parties acknowledge that PUC rules, regulations and final decisions may require that costs of complying with certain provisions of this Franchise be borne by customers of the Company who are located within the City. §19.21 Conveyance of City Streets or Other City Property. In the event the City vacates, releases, sells, conveys, transfers or otherwise disposes of a City Street or Other City Property in which Company Facilities are located, the City shall reserve an easement in favor of the Company over that portion of the Street or Other City Property in which such Company Facilities are located. The Company and the City shall work together to prepare the necessary legal description to effectuate such reservation. For the purposes of Section 6.8.A of this Franchise, the land vacated, released, sold, conveyed, transferred or otherwise disposed of by the City shall no longer be deemed to be a Street or Other City Property from which the City may demand the Company temporarily or permanently Relocate Company Facilities at the Company’s expense. §19.22 Audit. For any audits specifically allowed under this Franchise, such audits shall be subject to the applicable Tariff and PUC rules and regulations. Audits in which the auditor is compensated on the basis of a contingency fee arrangement shall not be permitted. (Signature page follows.) 32 IN WITNESS WHEREOF, the parties have caused this Franchise to be executed as of the ______ day of _______________, 2017. CITY OF FORT COLLINS ATTEST: ____________________________________ _______________________________ Mayor, City of Fort Collins Clerk, City of Fort Collins APPROVED AS TO FORM: _______________________________ Deputy City Attorney, City of Fort Collins PUBLIC SERVICE COMPANY OF COLORADO, a Colorado corporation By:_________________________________ Jerome Davis, Regional Vice President, Customer and Community Relations STATE OF COLORADO ) )SS. COUNTY OF DENVER ) The foregoing instrument was acknowledged before me this _ day of ___________, 2017 by Jerome Davis, Regional Vice President, Customer and Community Relations of Public Service Company of Colorado, a Colorado corporation. WITNESS MY HAND AND OFFICIAL SEAL. Notary Public My Commission expires: ______________ (SEAL) Natural Gas Franchise - Sept 18, 2017 Background 2 • Exploration of a Natural Gas Franchise is an initiative within Revenue Diversification discussions • Council Finance Committee discussion Sept 21, 2015 • CFC direction was to continue exploration of Franchise Fee • Staff reviewed latest municipality franchise agreements from neighboring cities. Current iteration incorporates those improvements and accepted legal language. • Xcel Counsel and City Attorney’s Office along with staff negotiated current iteration of Franchise Agreement Occupational Tax vs. Franchise Fee 3 Current vs Future State org charts xxx..pptm September 2015 Occupational Tax • TABOR election required • Citizen vote required to change • Tax set in 1987 at $455k per year • Tax Revenue fixed and does not grow with inflation or population Franchise Fee • Can be established by Council via Ordinance • Franchise rate set as % of gross revenue • Fee revenue increases with volume • 3% rate estimated at $1.2M per year ($755k more than current) • Customer service driven by PUC Customer service issues governed by PUC and are not commonly addressed in franchise agreements. Benefits 4 Current vs Future State org charts xxx..pptm September 2015 • Franchise Fee can be revenue neutral with KFCG renewal • Revenue increase of $.8M per year would lower KFCG renewal from .85% to .82% • Agreement could be signed in conjunction with community KFCG renewal discussions • Partnership language has been included that helps address energy conservation (see Article 12 Environment and Conservation) • Communication on programs through newspaper, bill inserts and website • Conservation representative designated as primary liaison • Aggregate data availability for partnership opportunities • Construction coordination improvements • Notification of construction projects and relocation standards • Negotiated Franchise Master Agreement has been reviewed by City stakeholders and secures current powers granted by the City Code • General Police Powers • Regulation of Rights of Way • Regulation of Public Places (parks, easements, etc.) Legal Steps for Franchise 5 Current vs Future State org charts xxx..pptm September 2015 1. Charter authorizes the City council to approve franchises by ordinance after conducting a public hearing 2. Notice of Public Hearing required in Coloradoan for 3 weeks prior to hearing 3. Public Hearing cannot be held until affidavit proving #2 is presented 4. Notice must include: • Date of council meeting • Name of applicant for franchise • Franchise rights being applied for • Time and terms upon which franchise is being proposed Natural Gas Franchise 6 Current vs Future State org charts xxx..pptm September 2015 Request direction from Council Finance Committee Does CFC support moving forward with a Natural Gas Franchise Agreement in conjunction with KFCG renewal efforts? COUNCIL FINANCE COMMITTEE AGENDA ITEM SUMMARY Staff: Tiana Smith Date: September 18, 2019 SUBJECT FOR DISCUSSION Changes to Liquor Occupation Tax Categories EXECUTIVE SUMMARY The Colorado General Assembly has added three new liquor license categories. City Code allows for liquor occupation taxes to be charged to these liquor licensed businesses, and the Code contains a schedule of specific license categories. City Staff is recommending that City Code be updated to include these new types of license categories. GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED Are there any concerns from Council regarding the recommended changes to City Code that need to be addressed before bringing the ordinance forward to City Council? BACKGROUND/DISCUSSION The City charges an occupation tax on businesses that sell at retail any fermented malt beverage, malt, special malt, vinous or spirituous liquors in addition to license fees that these businesses must pay to the City annually. The amount of tax charged is listed in Code Section 3-76(b) according to the category of license the business holds. The Colorado General Assembly adopted new legislation that created three new types of liquor licenses, which qualifying businesses in the City may apply for. The new types are a vintner's restaurant license, a lodging and entertainment license, and a distillery pub license. Because these new licenses are not now specifically identified in the occupation tax schedule in Section 3-76(b), an ordinance is being proposed by staff to amend Section 3-76(b) to add these new license types. Under the current version of Section 3-76(b), future businesses seeking any of the new license types would likely apply for a hotel and restaurant license. Section 3-76(b) currently imposes a $1,600 occupation tax on hotel and restaurant licensees. The occupation tax rate for the three new license types is proposed to be set at $1600, so the effective cost to the licensees would be the same. City staff worked with the City Attorney’s Office and determined that because businesses that may qualify for the new license categories would be charged the same amount of $1,600, this is not a new tax policy, nor does it have any impact on the net revenues the City will collect from these taxes. If the General Assembly adds new categories in the future, staff will again work with the City Attorney’s Office to address any legal concerns. ATTACHMENTS Power point presentation- Liquor Occupation Tax Categories Recommended Changes to Liquor Occupation Tax Categories Tiana Smith Revenue and Project Manager 1 Background Current State: per City Code, specific categories of businesses that are licensed to sell liquor are also charged a liquor occupation tax based on their type of business. What’s changed: 3 new categories of license have been added by the Colorado General Assembly that aren’t currently specified in City Code. Business that would qualify for the new State categories would be subject to the City’s occupation tax under existing categories in the Code. Staff is proposing adding these 3 categories to the Code. What’s the issue? Is this a change in tax policy directly causing a net revenue gain or does it create a new tax to be collected? 2 Bottom Line • Businesses that will fall under these new categories are already currently licensed under other categories • Cost remains the same- $1,600 per year • This is not a change in tax policy or tax collected 3 New Categories Vintner's restaurant license A lodging and entertainment license Distillery pub license Old Category Tavern Council Finance Direction • Are there any concerns with the recommendation from City Staff regarding adding the new categories to City Code? • Is the Council Finance Committee in support of Staff bringing an ordinance forward with the new categories? 4 Next Steps  If Council Finance doesn’t have concerns, an ordinance adding these license types to City Code will be brought forward.  In the future, if the State adds categories for liquor establishments, City Staff will work with City Attorney’s office to determine if there are tax policy/revenue implications. 5