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HomeMy WebLinkAboutRFP - 8842 EPIC 3RD PARTY CAPITALRFP 8842 EPIC 3 rd Party Capital Page 1 of 11 REQUEST FOR PROPOSAL 8842 EPIC 3RD PARTY CAPITAL The City of Fort Collins is requesting proposals from qualified firms to engage one or more firms to provide capital in support of the ongoing EPIC Loan program (asa "On-Bill Financing"). Potential firms include banks, credit unions, investment funds and foundations. As part of the City’s commitment to Sustainable Purchasing, proposals submission via email is preferred. Proposals shall be submitted in a single Microsoft Word or PDF file under 20MB and e-mailed to: purchasing@fcgov.com. If electing to submit a hard copy proposal we require one (1) hard copy and one (1) electronic copy on a jump drive to be received at the City of Fort Collins' Purchasing Division, 215 North Mason St., 2nd floor, Fort Collins, Colorado 80524. Proposals must be received before 3:00 p.m. (our clock) on December 21, 2018 and referenced as Proposal No. 8842. If delivered, they are to be sent to 215 North Mason Street, 2nd Floor, Fort Collins, Colorado 80524. If mailed, the address is P.O. Box 580, Fort Collins, 80522-0580. Please note, additional time is required for bids mailed to the PO Box to be received at the Purchasing Office. The City encourages all Disadvantaged Business Enterprises (DBEs) to submit proposals in response to all requests for proposals. No individual or business will be discriminated against on the grounds of race, color, sex, or national origin. It is the City’s policy to create a level playing field on which DBEs can compete fairly and to ensure nondiscrimination in the award and administration of all contracts. All questions should be submitted, in writing via email, to Gerry Paul, Purchasing Director at gspaul@fcgov.com, with a copy to Project Manager, John Phelan, Senior Manager, Mechanical Engineer at jphelan@fcgov.com, no later than 5:00 PM MST (our clock) on December 10, 2018. Please format your e-mail to include: RFP 8842 EPIC 3rd Party Capital in the subject line. Questions received after this deadline may not be answered. Responses to all questions submitted before the deadline will be addressed in an addendum and posted on the Rocky Mountain E-Purchasing System webpage. Rocky Mountain E-Purchasing System hosted by Bidnet A copy of the RFP may be obtained at http://www.bidnetdirect.com/colorado/city-of-fort-collins. This RFP has been posted utilizing the following Commodity Code(s): 94625 Banking Services 94656 Investment Management Services 94660 Loan Administration Financial Services Purchasing Division 215 N. Mason St. 2nd Floor PO Box 580 Fort Collins, CO 80522 970.221.6775 970.221.6707 fcgov.com/purchasing RFP 8842 EPIC 3 rd Party Capital Page 2 of 11 Public Viewing Copy: The City is a governmental entity subject to the Colorado Open Records Act, C.R.S. §§ 24-72-200.1 et seq. (“CORA”). Any proposals submitted hereunder are subject to public disclosure by the City pursuant to CORA and City ordinances. Firms may submit one (1) additional complete proposal clearly marked “FOR PUBLIC VIEWING.” In this version of the proposal, the Firm may redact text and/or data that it deems confidential or proprietary pursuant to CORA. Such statement does not necessarily exempt such documentation from public disclosure if required by CORA, by order of a court of appropriate jurisdiction, or other applicable law. Generally, under CORA trade secrets, confidential commercial and financial data information is not required to be disclosed by the City. Proposals may not be marked “Confidential” or ‘Proprietary’ in their entirety. All provisions of any contract resulting from this request for proposal will be public information. New Firms: The City requires new Firms receiving awards from the City to fill out and submit an IRS form W-9 and to register for Direct Deposit (Electronic) payment. If needed, the W-9 form and the Firm Direct Deposit Authorization Form can be found on the City’s Purchasing website at www.fcgov.com/purchasing under Firm Reference Documents. Please do not submit with your proposal. Sales Prohibited/Conflict of Interest: No officer, employee, or member of City Council, shall have a financial interest in the sale to the City of any real or personal property, equipment, material, supplies or services where such officer or employee exercises directly or indirectly any decision-making authority concerning such sale or any supervisory authority over the services to be rendered. This rule also applies to subcontracts with the City. Soliciting or accepting any gift, gratuity favor, entertainment, kickback or any items of monetary value from any person who has or is seeking to do business with the City of Fort Collins is prohibited. Collusive or Sham Proposals: Any proposal deemed to be collusive or a sham proposal will be rejected and reported to authorities as such. Your authorized signature of this proposal assures that such proposal is genuine and is not a collusive or sham proposal. The City of Fort Collins reserves the right to reject any and all proposals and to waive any irregularities or informalities. Utilization of Award by Other Agencies: The City of Fort Collins reserves the right to allow other state and local governmental agencies, political subdivisions, and/or school districts to utilize the resulting award under all terms and conditions specified and upon agreement by all parties. Usage by any other entity shall not have a negative impact on the City of Fort Collins in the current term or in any future terms. Sincerely, Gerry Paul Purchasing Director RFP 8842 EPIC 3 rd Party Capital Page 3 of 11 I. SCOPE OF PROPOSAL Introduction The City of Fort Collins is requesting proposals from one or more qualified firms to provide capital in support of the ongoing EPIC Loan program (aka “On-Bill Financing”). Potential firms include banks, credit unions, investment funds and foundations. Fort Collins has ambitious goals for energy efficiency, renewable energy and greenhouse gas emissions reductions. See the City’s Energy Policy at: www.fcgov.com/utilities/img/site_specific/uploads/Fort_Collins_2015_Energy_Policy.pdf; and Climate Action Plan at: www.fcgov.com/environmentalservices/pdf/cap-framework-2015.pdf Meeting these objectives will require customers undertake comprehensive efficiency improvements, particularly for older less energy efficient rental properties, owner-occupied homes and small businesses, to drive savings in both electricity and natural gas. An ongoing and attractive financing structure to support energy efficiency retrofits will be a critical element for success moving forward. The EPIC Loan Program is designed to balance the programmatic objectives and financial requirements of the City of Fort Collins, while also meeting the needs and expectations of capital providers and utilities customers. The name EPIC comes from an element of the efficiency program, whereby homes receive an Energy Performance Improvement Certificate. However, for the purposes of implementation, the program is simply known as the EPIC. Anticipated Financial Structure EPIC currently provides financing to Fort Collins Utilities (Utilities) residential and small business customers to improve the energy and water efficiency of existing buildings, including renewable energy projects, such as roof-mounted solar systems. However, most projects are expected to focus on more basic energy efficiency upgrading, such as air sealing, improved insulation and windows. Once a Fort Collins Utilities homeowner or small business elects to finance a project with a participating energy efficiency contractor, the EPIC fund provides the funds for the project, which are disbursed to the contractor by an existing third-party loan originator. Loan payments are then serviced on the customer’s monthly utility bill by the Utilities department directly, which in addition to energy efficiency loans also provides electricity, water, wastewater and stormwater services to area residents and small businesses. EPIC loan capital comes from a “stack” of resources provided by entities external to the City of Fort Collins. The current stack is comprised of low interest loans and grant funds, not taxpayer or ratepayer reserves. The purpose of this RFP is to seek additional sources of capital to be able to offer a continuing source of funds (e.g. a revolving loan fund) to meet increasing customer demand for energy efficiency financing. The City may award to one or more qualified firms. Fort Collins Utilities will be the borrower and guarantor of the funds from prospective capital providers, and Fort Collins Utilities will in turn service the repayments to its capital lenders using repayment obligations from customers to Utilities. In this on-bill financing model, prospective capital providers will not RFP 8842 EPIC 3 rd Party Capital Page 4 of 11 be originating loans to, or otherwise engaging directly with, Utilities customers. Instead, capital providers will lend or grant funds to the City, and the City will undertake and / or oversee loan underwriting, origination and collections. Capital providers will therefore have recourse to the EPIC fund and repayments for funds borrowed, but not to individual Utilities customers (Figure 1). a) Figure 1: Capital and Repayment Structure b) Program Objectives Proposed capital sources for the EPIC Loan program need to align with the following high- level objectives: • Attractive: The loan program must be able to provide attractive loan terms to customers, specifically attractive interest rates. • Scalable: The program must be scalable in support of Fort Collins ambitious energy goals. It is anticipated that Fort Collins will upgrade thousands of homes in the coming years. • Simple: the implementation and administration of the program must be as simple as possible for all parties, including customers, Utilities and the capital partner(s). Potential Size of Loan Portfolio During the On-Bill Financing Version 1 (OBF1.0) period from July 2015 to February 2017, the rate of loan activity was equivalent to approximately 120 loans and $1M annually. The scaling of goals associated with the EPIC Loan program are to complete a minimum of 1,000 projects by the end of 2021. Based on typical project needs, this would require up to $10M of capital be available. With a range of loan terms from 3 to 20 years, the expectation for a breakdown of necessary 3rd party capital amounts and terms would be: Loan Term Percentage of Portfolio 3-5 years 20% 5-10 years 30% 10-20 years 50% c) Potential Financial Solution Utilities intends to create a sustainable cycle of loans and repayments similar in concept to a revolving loan fund. There are a range of structures which could be successful, based upon standard financial structures, with regular P&I and / or balloon payments, to be determined. For example, loan and / or grant capital tied to Community Reinvestment Act (CRA) obligations for area banks are a potentially viable option for lending capital, as the Capital source Utilities Customers RFP 8842 EPIC 3 rd Party Capital Page 5 of 11 EPIC loan program will be targeting older rental properties where many low and moderate- income households live (e.g. LMI census tracts), among other eligible Utilities customers. Flexible structures which minimize the need for the City to carry non-deployed debt capital, such as lines of credit versus term loans, are encouraged. In all cases, Fort Collins Utilities would be the borrower, with the 3rd party funds being loaned to customers by the City. Fort Collins Utilities would be responsible for the repayment to the capital provider. In turn, Utilities customers carry the obligation for repayment of loans to the City via their utility bill. Note: The Utility department has various code-specified tools for recourse of delinquent Utility bills that makes the risk profile for the EPIC loan portfolio extremely low. Any proposed solution must also consider all applicable Colorado statutes. Fort Collins Utilities recognizes that this proposed financing model is unique for a municipal-owned utility, and as such we are committed to working with responsive applicants to “co-create” a viable and scalable financing model that is workable and beneficial for all parties. For the purposes of this RFP, the presumed model will include: • Capital to be provided as a line of credit, program related investment (PRI) or other vehicle(s) that minimize interest carrying costs to the City related to capital access. • All program funding, including lending capital and repayments, will be accounted for in a manner under which the recourse for capital providers will be limited to the loan enterprise fund. This may take the form of a separate Fort Collins Utilities enterprise fund which will be independent of existing enterprise funds. II. PROPOSAL CONTENTS Respondents must provide a complete description of any proposed solution, defining the following key characteristics: • Legal name of the lender and the primary contact person • Proposed value, structure and terms of capital • The City requires that capital be available in terms/maturities that correspond with those offered by the City to its customers, currently (3, 5, 7, 10, 15, or 20-year terms) • Interest Rates – the proposal should provide a single, fixed interest rate for each maturity offered. If the submitted interest rate is subject to change periodically, please explain the method and frequency, including an applicable formula or indexed calculation. • Roles and responsibilities • Description of how proposed structure would operate in alignment with all state and local laws and requirements. • The City requires a prepayment option without penalty in the event a utilities customer prepays their loan. RFP 8842 EPIC 3 rd Party Capital Page 6 of 11 • Conditions or Covenants – Provide a list of all conditions, covenants, terms or restrictions which would be included in your commitment to provide financing for the EPIC loan program. The City may reject proposals based on specific conditions or covenants requested by the lender, including conditions or covenants which may be considered “usual and customary” by the prospective lender. III. OTHER DETAILS Anticipated Schedule The following represents the City’s target schedule for the RFP. The City reserves the right to amend the target schedule at any time. • RFP issuance: November 29, 2018 • Question deadline: 5:00 PM MST on December 10, 2018 • Proposal due date: 3:00 MST (our clock) on December 21, 2018 • Interviews (tentative): TDB • Award of Contract (tentative): January 2019 Interviews In addition to submitting a written proposal, the top-rated Firms may be interviewed by the project team and/or asked to meet with the team to obtain clarification on the details of the proposal, explore alternative capital structures, and the conditions or covenants proposed. Subcontractors Firms will be responsible for identifying any subcontractors in their proposal. Please note that the City will contract solely with the awarded Firm; therefore subcontractors will be the responsibility of the Firm. Proposal Format Please limit the total length of your proposal to a maximum of twenty-five (25) double sided or fifty (50) single sided 8 ½ x 11” pages (excluding cover pages, table of contents, dividers and Firm Statement form). Font shall be a minimum of 10 Arial and margins are limited to no less than .5” for sides and top/bottom. Extended page sizes, such as 11” x 17”, count as a single page. Please, no embedded documents. Proposals that do not conform to these requirements may be rejected. Laws and Regulations The Firm agrees to comply fully with all applicable local, State of Colorado and Federal laws and regulations and municipal ordinances. RFP 8842 EPIC 3 rd Party Capital Page 7 of 11 IV. REVIEW AND ASSESSMENT CRITERIA Proposal and Interview Criteria Firms will be evaluated on the following criteria. These criteria will be the basis for review and assessment of the written proposals and optional interview session. At the discretion of the City, interviews of the top-rated Firms may be conducted. WEIGHTING FACTOR CRITERIA 25% Firm’s alignment with the EPIC Capital program objectives 25% Conditions and covenants 25% Interest rates and other cost factors 25% Proposed value Reference Evaluation Criteria Prior to award, the City may check references and negative responses from references may impact the award determination. V. EXTERNAL PROFESSIONAL SUPPORT The City has retained the law firm of Butler Snow LLP, who will prepare and/or review the necessary documents. Butler Snow will deliver an opinion to the effect that the obligations of the City in connection with the financial structure are valid and binding. Hilltop Securities Inc. will act as financial advisor to the City. VI. ADDITIONAL BACKGROUND INFORMATION EPIC LOAN PROGRAM To achieve community energy and climate goals, as adopted by City Council, a “reboot” and upgrade of the original approach has been implemented – and renamed EPIC Loans. The EPIC program will: • Materially contribute to the City’s energy and climate objectives, particularly the 2030 goals. Research and analysis contained herein indicates that OBF2.0 will be a critical factor in the City’s likelihood of achieving CAP goals; • Expand equitable participation of low and moderate-income households in energy efficiency and renewable energy programs, in part by emphasizing the targeting of older, energy inefficient rental properties; • Establish a scalable Public-Private Partnership (PPP) social impact model that incents the private sector and residents to upgrade aging building stock in an affordable, cost effective manner; • Spur the start, strengthening and/or expansion of new and existing energy efficiency related businesses and jobs in Fort Collins; RFP 8842 EPIC 3 rd Party Capital Page 8 of 11 • Obtain non-recourse, private-sector debt capital to fund new energy efficiency loans for homes and businesses. In short, the EPIC loan program addresses key social, environmental and economic needs of the City by offering a program that supports our climate, equity and inclusion, and economic health goals. Existing Loan Capital Resources Fort Collins Utilities is currently offering EPIC loans to customers based on the following sources of capital: • $100,000 from the Champion cities phase of the 2018 Bloomberg Mayors Challenge. • Fort Collins was notified on October 29, 2018 of being awarded $1M as a winning city in the national Bloomberg Mayors Challenge. • $1.2M funding from the Colorado Energy Office ($200,000 grant and $1,000,000 low interest loan), in support of Fort Collins development of an On-bill Financing Toolkit for deployment in up to four additional Colorado communities. Each of the other communities will be eligible for up to $1M loans from the Energy Office. EPIC Program Information EPIC provides residential and small commercial utility customers with low-cost financing for energy efficiency, solar photovoltaic, and water conservation improvements to support Fort Collins Utilities (Utilities) efficiency and conservation efforts and the outcomes adopted in City policies and plans, such as the CAP, Energy Policy and Water Efficiency Plan. Formerly known as the Home Efficiency Loan Program (HELP), HELP was established by Fort Collins City Council Ordinance No. 033, 2012, which revised language in Chapter 26 of the Fort Collins Municipal Code (Municipal Code) to enable Utilities to provide financing and on-bill servicing of loans for energy efficiency, water efficiency and renewable energy projects. The HELP started as an on-bill financing (OBF) program providing loans to Utilities customers for energy and water efficiency projects and renewable energy systems which are serviced on the utility bill. The original HELP program initiated over 135 loans for a total of $1,600,000. The original source of capital was reserve funds from the Fort Collins Light & Power utility. The program was modeled after other successful OBF programs and is most succinctly described as a loan program which is serviced by Utilities on customer’s monthly bills. Customers qualify based on their bill payment history and credit score, eligible projects are defined by Utilities incentive programs, and the loans are currently secured via a Uniform Commercial Code (UCC) lien filing recorded with Larimer County. Municipal Code changes adopted by Council in 2012 authorize Utilities to provide financing services to meet the program deliverables. A key element of the program is that the loan payments are treated like any other element of a customer’s bill (e.g., electricity, water, wastewater and storm water). With such treatment, loan payments are not differentiated from other billed utility services, in each service is billed as a “single” utility bill receivable. RFP 8842 EPIC 3 rd Party Capital Page 9 of 11 Utilities normal and customary practices for non-payment apply, up to and including service disconnection. Utilities also has established lien rights under Section 26-718 of the Municipal Code for collection of any past due amounts at a property’s time of sale, known as a “perpetual lien”. The program uses pre-existing standard capabilities of the Utilities billing system. Customer qualification and loan closing services are provided in partnership with a third party financial services partner. The EPIC product guideline is included in Exhibit B – Product Sample Guide as an example of the loan process. Fort Collins Utilities Energy and Water Programs EPIC supports several Utilities efficiency programs, which define eligible projects and provide quality assurance. Utilities has offered a best practices home efficiency program since 2010. Now branded under Efficiency Works – Home (EW – Home), the program provides a comprehensive audit, rebates, a contractor network and personalized advising. Over 2,000 homes have received improvements in the areas of insulation and air sealing, heating and cooling systems and windows. Project qualifications for EPIC loans are identical to those for rebates under EW – Home. This ensures that the project for each loan has the documentation of meeting required efficiency levels and installation standards, and that the participating contractors have agreed to the quality assurance requirements. The standard path for the EW-Home rebate program involves the rebates being paid directly to the customers. For solar photovoltaic systems, Utilities similarly has rebate application and verification processes which ensure that the systems are properly sized, installed by qualified contractors and verified to operate according to interconnection standards. For water service line projects, Utilities reviews each project plan to ensure compliance with all codes and standards. HELP Program Activity and Information • HELP was launched in January 2013, loan activity was slow through mid-2015, after which time it ramped up significantly (see chart in Exhibit A – HELP Program Activity). • In February 2017, when the final OBF1.0 loan was funded, total program loan production was over $1.75M (see chart in Exhibit A). • The median term was 10 years. • Average loan amount was $8,900. • All loans to date have been for single family homes. Small business customers are also eligible for the program (based on ownership of the property), but no loans have been completed to date. • Interest rates have varied since the program’s inception: o 2013 – 5.25% to 6.25% based on customer qualifications and loan term o 2014 – 5.0% or 6.0% based on customer qualifications o February 2015 to May 2016 – 2.5% for all loans and terms RFP 8842 EPIC 3 rd Party Capital Page 10 of 11 o June 2016 to October 2016 – 4.0% for all loans and terms EPIC Loan Processes At a high level, the process relating to the efficiency and loan programs is: • An efficiency audit or assessment is conducted on the home by the EW- Home advisor/auditor. • Opportunities for improved health, safety, comfort, and energy efficiency are identified. Costs are provided for each measure, and savings are estimated in either a package presentation made by the auditor, or in an audit report generated and sent to the owner by the advisor. In the EW-Home streamlined path costs and estimated savings are provided by the program advisor. In the standard path, costs are developed and presented in proposals by the participating contractors. • An energy audit is also required for the rooftop solar program. The solar system specifications are submitted to the solar program coordinator for loan approval. • If desired, the homeowner can choose to pursue an EPIC loan, as follows: o Customer makes application for a loan to financial services provider o Loan terms are generally described below in EPIC Loan Characteristics below o Upon approval, the homeowner and contractor(s) coordinate the timing and completion of the project o Upon notification that the project and all inspections are complete, loan funds are disbursed to contractors (by financial services provider) o A UCC lien filing is completed with Larimer County for the loan (by financial services provider). o Closing documents are provided from financial services provider to the Utilities Billing Department staff to set up the loan in the billing software o Loan payments are added to the customer’s monthly utility services bill. RFP 8842 EPIC 3 rd Party Capital Page 11 of 11 EPIC LOAN CHARACTERISTICS Attribute Notes Retail Interest Rates Allowable range from 2.5-10% per proposed rate ordinance. A 4% interest rate is in place as of August 2018. The rates will be revised annually, beginning in Q1 2019 to be 3.49% for 3 and 5 year terms, 3.99% for 7 and 10 year terms and 4.49% for 15 and 20 year terms. These interest rates are subject to change based on the available capital costs. Customer Qualification Minimum six-month good bill payment history and a FICO Credit score minimum (previously 640) Fees $25 for the application, $199 to $400 for closing (depending on loan amount), $11 for recording, $26 for removing and re-recording the UCC lien to accommodate subordination requests. Recording UCC lien filing recorded with Larimer County Loan term 3, 5, 7, 10, 15, or 20 years selected by applicant and based on measure type Customer Eligibility Residential single family (detached), townhome properties (attached), small business customers (by owner), and rental properties (by owner)