AGENDA ITEM SUMMARY September 5, 2017 City Council

Transcription

1 Agenda Item 22 AGENDA ITEM SUMMARY September 5, 2017 City Council STAFF Donnie Dustin, Water Resources Manager Carol Webb, Water Resources/Treatmnt Opns Mgr Lance Smith, Utilities Strategic Finance Director Eric Potyondy, Legal SUBJECT Second Reading of Ordinance No. 116, 2017, Amending Chapter 26 of the Code of the City of Fort Collins to Make Various Changes Related to the Raw Water Requirements, to Hereinafter Be Known as the Water Supply Requirements. EXECUTIVE SUMMARY This Ordinance, adopted on First Reading on August 22, 2017, by a vote of 6-1 (Nays: Overbeck) amends the Utilities Raw Water Requirements (RWR). The RWR are a dedication of water rights or cash-in-lieu (CIL) of water rights to ensure that adequate water supply and associated infrastructure are available to serve the water needs of development. The three main changes are decreasing the amount of RWR, increasing the CIL rate and moving to a cash-focused system. These changes will increase development costs in the Utilities water service area, but are necessary for meeting the water needs of that development. The draft ordinance has been revised to clarify the proposed implementation date of January 1, 2018, with such changes being: on page 1 in a new whereas clause; on page 8 as a new sentence in Code Section (b); and a new Section 14 of the ordinance. Staff has also corrected minor rounding errors in some of the values listed in the Ordinance. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading, with a revised implementation date for the proposed changes of January 1, 2018, (as opposed to April 1, 2018, as previously proposed). BACKGROUND / DISCUSSION In addition to the material provided on First Reading about changes to the Utilities Raw Water Requirements (RWR) and the associated cash-in-lieu (CIL) rate, the following information was requested for Second Reading: 1. Show raw water costs in Wellington and Timnath 2. Provide rationale for recommended implementation date of changes a. Include financial impacts 3. Integrate implementation dates in Ordinance. Raw Water Costs The Towns of Wellington and Timnath were contacted for their raw water fees. On April 25, 2017, Wellington adopted revised raw water fees for all development types. Water service in Timnath is provided through the Fort Collins-Loveland Water District (FCLWD). Using these raw water development fees, the following table Item # 22 Page 1

2 Agenda Item 22 shows a comparison of raw water costs for typical development types for Utilities, Wellington and Timnath. The table indicates that even with the proposed RWR and CIL rate changes, Utilities will have lower raw water costs than Wellington and Timnath (except for larger commercial taps). Table 1 - Typical Development Raw Water Costs for Fort Collins Utilities, Wellington and Timnath Proposed FCLWD/ Development Type Utilities Wellington Timnath Single-Family (4 bed, 6K sq.ft. lot) $9,000 $ 19,300 $ 25,000 Multi-Family (100 units, 3.4 acres) $389,700 $ 1,928,600 $ 1,000,000 Commercial 0.75-inch tap $15,000 $ 19,300 $ 25,000 Commercial 1.0-inch tap $37,800 $ 33,900 $ 62,500 Rationale for Recommended Implementation Dates After considering the City Council discussion at the First Reading of this Ordinance, staff has revised its recommended implementation date of the proposed changes from April 1, 2018 to January 1, Staff believes that a January 1, 2018 implementation date balances the need for a fair and smooth transition, while minimizing the loss in RWR fees collected that occurs with delayed implementation. The following are details and rationale for implementing on January 1, It is highly recommended that the changes to the RWR schedules and CIL rate changes occur simultaneously. o It is NOT recommended to phase in the CIL rate change, since implementing the RWR decreases without appropriate CIL rate increases would result in less revenue than is currently received under the current RWR/CIL rate system. Utilities staff needs time to integrate the proposed changes into its development fee process computer systems. o A January 1, 2018 implementation date will provide adequate time to allow for this transition. As part of the outreach on the proposed changes, the development community expressed concern for switching costs during development of ongoing projects that have been costed at the current RWR and CIL rate. o A January 1, 2018 implementation date will provide a reasonable amount of time to reach out to developers in the City s development review process about the changes and allow a reasonable window of time for developments in progress to meet the current RWR at the current CIL rate. Developers currently in the City s development review process can meet the RWR at any time between the start of the process and prior to receiving a building permit (the RWR must be satisfied to receive the permit). Similar outreach was provided under a similar timescale for the City s Capital Expansion Fees that were adopted by City Council on June 6, 2017 and will be implemented on October 1, As discussed in the AIS for the First Reading of this Ordinance, the proposed changes will affect existing commercial customers that have an annual water allotment through an increased surcharge rate that is applied to their water use over their allotment. o Utilities staff has started, but would like additional time to conduct focused outreach to existing customers who consistently exceed their annual water allotment. In particular, Utilities water conservation staff has started contacting these customers individually about ways to reduce their use and/or increase their water allotment by meeting additional RWR before the proposed CIL rate increases take effect. Item # 22 Page 2

3 Agenda Item 22 Given the individual attention required for these customers, a January 1, 2018 implementation date will provide some time to allow for this outreach. o Annual water allotments are based on water use during a calendar year (January through December), which coincides well with an implementation date of January 1, An implementation date other than January 1 would mean that the revised surcharge rate would not take effect until the following January 1. Financial Impacts of Delayed Implementation Delaying the implementation of the RWR and CIL rate changes will result in less RWR fees being collected over the delay period. In the last 3 years, the amount of RWR met has averaged about 800 AF. Assuming this average will continue for the next year and that all RWR (under both the current and proposed systems) was met with cash only (no credits or water rights), the reduction in fees collected would be approximately: 3-month delay ~$871,000 6-month delay ~$1.7 million 1-year delay ~$3.5 million Any shortfalls in impact fees collected would fall upon the ratepayers through future water rate increases. However, given the long planning horizon for water development, delayed implementation shortfalls in impact fees received could be stretched out over time and be fairly insignificant. There may be additional reductions in collection of RWR fees via existing customers that might increase their water allotments (as explained above) if those customers decided to increase their allotment before implementation of the increased CIL rate. However, it is hard to estimate the financial impact since allotment increases are typically rare and these customers are not required to increase their allotments in order to continue their water use. Integration of Delayed Implementation Date in Ordinance The Ordinance has been revised to include a recital and specific section that calls out the implementation date, which is currently recommended as January 1, If necessary, the date of implementation can be adjusted to a different date as approved by City Council. ATTACHMENTS 1. First Reading Agenda Item Summary, August 22, 2017 (w/o attachments) (PDF) 2. Powerpoint presentation (PDF) Item # 22 Page 3

4 ATTACHMENT 1 Agenda Item 3 AGENDA ITEM SUMMARY August 22, 2017 City Council STAFF Donnie Dustin, Water Resources Manager Carol Webb, Water Resources/Treatmnt Opns Mgr Lance Smith, Utilities Strategic Finance Director Eric Potyondy, Legal SUBJECT First Reading of Ordinance No. 116, 2017, Amending Chapter 26 of the Code of the City of Fort Collins to Make Various Changes Related to the Raw Water Requirements, to Hereinafter Be Known as the Water Supply Requirements. EXECUTIVE SUMMARY The purpose of this item is to consider adoption of various changes to the Utilities Raw Water Requirements (RWR). The RWR are a dedication of water rights or cash-in-lieu (CIL) of water rights to ensure that adequate water supply and associated infrastructure are available to serve the water needs of development. The three main changes are decreasing the amount of RWR, increasing the CIL rate and moving to a cash-focused system. These changes will increase development costs in the Utilities water service area, but are necessary for meeting the water needs of that development. Following direction given at the February 14, 2017 City Council work session, staff has conducted additional outreach and addressed City Council questions. This item was presented on July 11, 2017 to the Council Finance Committee, which recommended the item be considered for adoption by the entire City Council. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. The following is a summary of the proposed changes: Adjust the RWR schedules to reflect recent (lower) water use o Use number of bedrooms for indoor component of residential schedule Increase the Cash-in-Lieu ( CIL ) rate to $16,700 per acre-foot of RWR Accept cash, existing City-issued water certificates and credits, North Poudre Irrigation Company ( NPIC ) shares, and Colorado-Big Thompson Project ( CBT ) units for RWR satisfaction o No longer allow dedication of other water rights Review and adjust (if necessary) the CIL rate biennially Review and adjust (if necessary) the RWR schedules every 5 to 7 years Implement RWR and CIL rate changes on April 1, 2018 Rename the RWR as the Water Supply Requirements BACKGROUND / DISCUSSION The Raw Water Requirements ( RWR ) are a dedication of water rights or cash-in-lieu of water rights ( CIL ) to ensure that adequate water supply and associated infrastructure are available to serve the water needs of development (including re-development needing increased water service). Changes to the RWR and CIL rate have not been made for many years. Item # 3 Page 1

5 Agenda Item 3 Staff presented the proposed changes to the RWR and CIL rate at the February 14, 2017 City Council work session. The material provided for that work session, which contains more detailed information on the background and proposed changes, is included as Attachment 1. Council direction was to consider delayed implementation of the changes, provide information about the impact on rates to delaying or not implementing the changes, conduct additional public outreach (including to the general public), orient new Councilmembers on the related issues, and provide justification for contingencies embedded in the CIL rate. Water Service Areas in Fort Collins The City of Fort Collins Utilities ( Utilities ) water service area covers the central portion of Fort Collins. As the City continues to grow into the Growth Management Area, much of this growth will be outside the Utilities water service area, and will instead be in the service areas of the surrounding water districts (mostly the East Larimer County Water District and the Fort Collins-Loveland Water District ( Districts )). Water service for much of this growth will thus be provided by the Districts. The attached map shows these service areas (Attachment 2). Although regional water collaboration discussions are ongoing with the Districts and direction or potential outcomes of those discussions have yet to be determined, any proposed changes to the RWR and CIL rate will only apply to water service from Utilities and within the Utilities water service area. This does not preclude future changes to the RWR and CIL rate for water service from Utilities based on potential outcomes of the regional discussions or from the Districts modifying their respective water dedication requirements. Current Raw Water Requirements (RWR) The RWR starts with determining the amount of RWR that must be provided to Utilities, which are generally based on water use and development type. Once the amount of RWR is determined, it can currently be met by: Dedication of acceptable water rights (mostly local ditch company shares); A payment of cash-in-lieu of water rights (currently $6,500 per acre-foot of RWR); Turning over City-issued water certificates or credits. Future Development and Water Use Changes The amount of RWR needed to meet Utilities future water supply needs includes calculating the projected amount of future water use from new and redevelopment and then determining the water rights and/or facilities needed to meet that projected use, and adjusting the RWR to acquire the necessary supplies and/or facilities. The Utilities water service area population is projected to grow by about 45,000 people by the year 2065 (from the current service area population of about 133,000 to about 178,000). Based on the current RWR schedules, this projected growth is estimated to provide about 11,900 acre-feet of additional RWR that will be turned in to Utilities. However, water use has significantly changed since the current RWR schedules were developed. The current RWR schedules are based on a 1983 study. Utilities staff analyzed 10 years ( ) of monthly water billing data. Due in great part to successful conservation efforts, water consumption for almost every customer category has decreased from the amount required under the current RWR calculations. In addition, the analyses suggest that the best models for predicting water consumption for both single-family and multi-family residential developments are those based on lot size and number of bedrooms. Suggested RWR Adjustments Given the changes in water use from the expected amount per the current RWR calculations, staff recommends that the RWR calculations be adjusted to reflect the information provided above. Making these changes will reduce the overall projected amount of expected RWR the Utilities will receive in the next 50 years from about 11,900 acre-feet to about 7,700 acre-feet. More specifically, it is recommended the RWR calculations be changed to the following: Item # 3 Page 2

6 Agenda Item 3 = 1.92 x Single Family/Duplex RWR (acre-feet) [ x Lot size (sq. ft.) ] + [ 12,216.9 x Bedrooms (#) ] [ 325,851 (gallons/acre-foot) ] = 1.92 x Multi-Family (> 2 units) RWR (acre-feet) [ x Lot size (sq. ft.) ] + [ 13,592.8 x Bedrooms (#) ] [325,851 (gallons/acre-foot) ] Commercial RWR (acre-feet) = ¾-inch tap: inch tap: ½-inch tap: inch tap: 7.91 > 2-inch tap: case-by-case Water Supply Needs and Other Costs for Increasing Firm Yield Utilities projects the need for new infrastructure and some additional water rights to increase the Utilities firm yield by about 7,800 acre-feet in order to meet projected future growth in the water service area by Alone, acquiring the new infrastructure and water rights would not provide adequate water supplies needed for those future customers without use of the existing water supply system. As explained in the previous material (Attachment 1), a buy-in component was added to consider the total value of the water supply system that new development will need. The following briefly lists these components and their projected costs/value in 2017 dollars: $63.9M: Infrastructure (mostly additional storage, e.g., Halligan Water Supply Project) $25.5M: Future water rights (requires storage to be effective) $40.5M: Value of existing portfolio to be utilized by new development Combining these costs provides the total current cost to increase the firm yield for new development (or redevelopment) of approximately $129.9 million. Cash-in-Lieu (CIL) Rate Changes As explained in the previous material (Attachment 1), staff developed a hybrid CIL rate approach that uses the total costs to increase the firm yield and divides this amount by the additional provided. Cash Focus Considerations CIL Rate (Hybrid Approach): $129.9M (cost to increase firm yield) / 7,800 acre-feet (increased firm yield) = $16,700 per acre-foot of RWR It is imperative that the RWR become a cash focused system. This would mean no longer accepting water rights to meet the RWR, except for CBT units and NPIC shares that come with storage that provide year-round use and firm yield. Existing City-issued water certificates, as well as credits from previously-satisfied RWR, will still be accepted. Cash will allow focus on acquiring additional storage capacity, agility to acquire specific water rights, and flexibility to pursue other (potentially regionally collaborative) water supply options. It should be noted that the conversion factor for water rights accepted by the City are currently set by the Water Board. Under the proposed changes, the Water Board would no longer have this function because the conversion factors would be set forth in the City Code. For NPIC shares, the current Water Board-approved Item # 3 Page 3

7 Agenda Item 3 conversion factor was revised from 5 acre-feet per share to 4-acre feet per share. This recognizes that each NPIC share includes 4 CBT units, which is the main value of these shares to the Utilities. Commercial Surcharges Commercial taps that have met the RWR since the mid-1980s have also received an equivalent water allotment. After a customer s total annual water use goes over that allotment in a given calendar year, their water bill includes a surcharge rate applied to all water use over the allotment (along with the standard water rate). The current surcharge rate is $3.06 per 1,000 gallons (for use over the annual allotment). Funds collected via this surcharge are used to acquire additional water supplies that compensate for the use over what was initially provided. The proposed increases to the CIL rate will increase the surcharge rate to $7.86 per 1,000 gallons. Allotments can be increased closer to actual use by meeting additional RWR. Since the change to the surcharge rate is significant, Utilities staff is conducting focused outreach to existing customers who consistently exceed their annual allotment. In particular, Utilities water conservation staff is contacting these customers about ways to reduce their use. Also, upon final adoption of the RWR/CIL rate changes by City Council and assuming a delayed implementation of those changes, these customers will be alerted to the opportunity to increase their allotments before the proposed CIL rate increases take effect. Future RWR/CIL Adjustments It is recommended that the CIL rate be reviewed every two years, as a part of the other City biennial fee review process, and adjusted as needed to reflect changes such as construction or water rights costs. It is also recommended that the RWR schedules should be reviewed every 5 to 7 years and changed if necessary, since changes to average water use are usually the result of long-term water conservation. Previous Council Requests Council had the following requests for additional information at the February 14, 2017 work session, which are followed by staff responses: Please provide justification for the contingencies used in the proposed changes. o A 25 percent contingency was added to the infrastructure and water right components of the projected costs that were part of the proposed CIL rate. The main cost in the infrastructure component is based on the estimated cost of the Halligan Water Supply Project. However, the City may get a permit for an alternative project that could be up to 2.5 times the cost of enlarging Halligan Reservoir. The cost of the future water rights component are based on current market values and the contingency considers potential inflation of these rights. CBT units cost about four times their cost 6 years ago. Given these examples, Utilities staff believes the 25 percent contingency is justified (if not conservatively low). Please orient new Councilmembers on these issues if Council action is delayed until after the April (2017) municipal elections. o Councilmember Summers was briefed on these changes (along with many other Utilities items) by the Utilities Executive Director in late June In addition, as a member of the Council Finance Committee, Mr. Summers was oriented at the July 11, 2017 meeting when this topic was discussed. CITY FINANCIAL IMPACTS Although the amount of RWR is being decreased, the significant increase in the CIL rate will result in overall cost increases for all types of development in the Utilities water service area. However, these cost increases are necessary to ensure an adequate water supply to serve new development. Even with these increases, however, Utilities RWR costs will remain one of the lowest when compared with other local water providers. Item # 3 Page 4

8 Agenda Item 3 Council had the following requests related to City financial impacts at the February 14, 2017 work session, which are followed by staff responses: Staff should consider delayed implementation of the changes on the order of 6 to 12 months, and should define the impacts of this schedule. o Delaying the implementation of the RWR and CIL rate changes can be done, but doing so would result in less RWR fees being collected over the delay period. In the last 3 years, the amount of RWR met has averaged about 800 AF. Assuming this average will continue for the next year or two, then the reduction in RWR fees collected could be significant. If all RWR (under both the current and proposed systems) was met with cash only (no credits or water rights), the reduction in fees collected would be approximately $1.7 million every 6 months or about $3.5 million per year. Any shortfalls would fall upon the ratepayers through future rate increases. A $3.5 million annual shortfall would represent 12% of the 2016 annual water fund operating revenues of $29.7 million. Staff should provide information about the impact on ratepayers from not making these changes and how rates have changed over time. o There are two main changes to the RWR/CIL rate system that effect the revenues generated. First, the proposed decreases in overall RWR to be satisfied are to recognize lower water use as a result of long-term water conservation. Not making the RWR changes would create a disconnect between current data regarding the amount of water that is actually being used and the amount of water being required by the RWR. Therefore, if the RWR is decreased, but the CIL rate remains at $6,500 per acre-foot of RWR, the reduction in RWR fees collected over the next 50 years would be about $49 million. This shortfall would fall upon the ratepayers through future rate increases, which could be significant. o Utilities water rate increases have varied over past years. More recently, Utilities has advocated for gradual, but consistent rate increases to avoid large, unexpected ones (which might be needed if the proposed changes to the RWR/CIL rate are not made). BOARD / COMMISSION RECOMMENDATION At its July 20, 2017 meeting, the Water Board recommended adoption of the proposed changes in a six by a vote of 6-2. The two opposing votes believed that the $40.5 million buy-in component of the proposed CIL rate was too low and that it should be higher to more accurately reflect the value of the Utilities existing water supply portfolio that new development will have access to use. (Attachment 3) The proposed changes were also presented to the Affordable Housing Board (AHB). The AHB provided a letter to Utilities asking for exceptions to these changes (Attachment 4) which briefly entailed either (1) freezing the current CIL rates for qualified affordable housing developments (QAHD), (2) phase in changes and apply to QAHD last, and (3) lock CIL rates for QAHD at the beginning of the development process. Making these types of changes would result in lost Utilities impact fees that would need to be made up through increases to Utilities water rates, which is counter to the Utilities enterprise fund operations by using enterprise funds to subsidize affordable housing. For this reason, Utilities does not have the authority to implement this request. Utilities staff is committed to being part of an internal City task force organized by the Social Sustainability Department to consider affordable housing issues. The task forces will discuss the issues presented in the AHB letter, along with similar changes for other Utilities impact fees. Potential changes can then be presented to the AHB and City Council once they are more thoroughly developed. Staff also presented to the following boards/commissions: Economic Advisory Commission the Commission was generally supportive of the proposed changes Natural Resources Advisory Board the Board was generally supportive of the proposed changes, with some members advocating for a higher CIL rate. Item # 3 Page 5

9 Agenda Item 3 PUBLIC OUTREACH Utilities staff has presented the proposed RWR and CIL rate changes to key stakeholders including local ditch companies (from which Utilities has historically accepted shares), the Fort Collins Chamber of Commerce, the Northern Colorado Home Builders Association, Utilities key accounts, several individual affected developers and water right holders, and various discussions with the Districts. As requested by City Council at the February 14, 2017 work session, Utilities staff attempted to conduct general public outreach via focus groups on how Utilities assess water impact fees for new development and how it might affect water rates. Out of 100 randomly-selected customers that were contacted (from a larger pool of customers that had previously agreed to be contacted for surveys and focus groups), only one agreed to attend. Therefore, the focus groups were cancelled. The City s Financial Services staff has convened a Fee Working Group, which includes members of the public via City Board and Commission members (including a Water Board member), that will meet over the next several months to discuss all development fees (including the RWR and CIL rate). Input Received The following summarizes various input received during the outreach process, followed by staff reactions or adjustments made to the proposed changes to address the input: Concern about the increased costs to housing in Fort Collins. o Although these changes will increase the cost of new housing in Fort Collins, the proposed changes are needed to provide an adequate water supply to this new development. Even with the overall increase in water costs for new development in the Utilities service area, these costs will still be lower than most in the region. The buy-in component of the CIL rate is like paying for something twice; where does that revenue get used? o The $40.5 million buy-in component of the CIL rate considers the future customer s use of a portion of the existing water supply system. Only acquiring the projected infrastructure and water rights needs explained above would not provide enough water supplies to support the projected growth. They need to use portions of the existing water supply system. The revenue generated from this portion will reduce future costs associated with upkeep of the water supply system and ensures that a portion of the Utilities Water Fund reserves are replenished for water system improvements that help to reduce future rate increases for all customers by offsetting the impacts from development. No longer accepting local ditch company shares will devalue those shares. o The ditch shares historically accepted by Utilities have always been and will continue to be available for purchase by others (including the City), which should help to maintain their value. Recently, the East Larimer County Water District (or ELCO, which serves the northeast potion of the City s GMA) began accepting several of the ditch company shares that were historically accepted by Utilities. This concern of devaluation was focused on shares of the Pleasant Valley and Lake Canal Company (PVLC), which is not accepted by ELCO or other known water providers. Utilities staff projects the need for some additional PVLC shares and shareholders can contact staff if they wish to sell their shares. Utilities would intend to purchase them at a fair market value. o While staff recognizes that this change may impact the market value of these water rights (local ditch shares) in the near term, the use of such rights to meet the RWR for development has only been minimal in recent years. Moreover, as the Utilities approaches build out of its water service area, it is imperative that the final additions to the water rights portfolio are strategically made through targeted purchases of certain water rights. The proposed changes will increase costs for projects that are already in the development process. o Developers typically consider the total cost of a development with the water (and other) fees that are in place before they acquire permits and start construction, particularly for commercial and multi-family developments which are typically built in a short time period and sold as one Item # 3 Page 6

10 Agenda Item 3 project (versus single family homes, which an entire development can take years to build and the home prices can adjust with the fees). Some developers requested a delayed implementation to avoid these types of cost impacts. According to the Planning Department, it takes approximately 9 to 12 months from a first submittal to a final development plan - at which point the RWR can be assessed and met (or paid). Given that these changes were initially presented to City Council on February 14, 2017 (and thus made public) and staff s recommendation is to delay implementation until April 1, 2018, this should provide adequate time for developments that started in early 2017 to meet the RWR under the current system and CIL rate. No longer accepting water rights will injure developers that have collected them for planned developments that are early in the City s process. o Some developers have submitted a large overall development plan ( ODP ) to the City that has multiple phases of development that might takes several years to build out. Also, some developers have started development that take longer than the typical 9-12 months to get through the City approval process. These developers may have collected water rights (local ditch shares) for these projects, but are not yet at the stage of development to turn them in to meet the RWR. Discontinuing acceptance of water rights would burden the developers that have planned accordingly. In order to prevent this type of burden, staff has included provisions to allow dedication of these water rights under the following set of conditions: Developer shows proof of starting the development and ownership of shares for the development to be dedicated prior to February 14, 2017; Transfer of water rights to the City occurs prior to January 1, 2019; and The dedicated water rights shall not be transferred to another property (in case of changes to the development). ATTACHMENTS 1. Work Session Agenda materials, February 14, 2017 (PDF) 2. Fort Collins Area Water Districts Map (PDF) 3. Water Board minutes, July 20, 2017 (draft) (PDF) 4. Affordable Housing Board, April 19, 2017 (PDF) 5. Council Finance Committee minutes, July 11, 2017 (draft) (PDF) 6. Powerpoint presentation (PDF) Item # 3 Page 7

11 ATTACHMENT 2 City Council September 5, 2017 Changes to the Utilities Raw Water Requirements Donnie Dustin, P.E., Water Resources Manager 1

12 Staff Recommendations 1. Adjust RWR schedules based on recent use Residential based on # of bedrooms 2. Increase CIL rate to $16,700/AF of RWR 3. Cash focused system Continue accepting CBT and credits 4. Periodically adjust CIL, RWR 5. Implement all changes January 1, Water Supply Requirements 2

13 Council Follow-Up Show similar costs for Wellington and Timnath Provide rationale for recommended implementation date Include financial impacts Integrate implementation dates in Ordinance 3

14 Water Supply Costs for a Typical Single Family Home in Northern Colorado FCLWD/Timnath $25,000 ELCO $20,300 Wellington $19,300 Greeley $14,000 NWCWD $13,500 Loveland $12,600 Hybrid Approach $9,000 Status Quo $4,300 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 Cost, rounded to nearest $100 ($) 44

15 Water Supply Costs for 1" Commercial Taps in Northern Colorado Loveland $111,500 ELCO $103,100 Greeley $68,000 FCLWD/Timnath $62,500 Hybrid Approach $37,800 Wellington $33,900 NWCWD $31,700 Status Quo $19,500 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 Cost, rounded to nearest $100 ($) 55

16 Delayed Implementation Recommend RWR and CIL rate changes occur together Phasing could result in less fees collected than under current system Implementation options: October 1, 2017 (immediate) January 1, 2018 (3-month delay): recommended April 1, 2018 (6-month delay) October 1, 2018 (1 year delay) 6

17 Rationale for January 1, 2018 Implementation Time for integrating changes into computer systems Allows finishing current projects at current costs Time for outreach to commercial customers using over their annual water allotments Surcharge rate increase for use over allotments 7

18 Potential Impact Fee Loss Potential loss from delayed implementation 3-months: ~$871,000 6-months: ~$1.7M loss 1-year: ~$3.5M loss Fee loss made up by future rate increases Shortfalls stretched out over time would result in minimal increases 8

19 Ordinance Ordinance revised to include January 1, 2018 implementation date Can be adjusted to date approved by City Council 9

20 10

21 ORDINANCE NO.116, 2017 OF THE COUNCIL OF THE CITY OF FORT COLLINS AMENDING CHAPTER 26 OF THE CODE OF THE CITY OF FORT COLLINS TO MAKE VARIOUS CHANGES RELATED TO THE RAW WATER REQUIREMENTS, TO HEREINAFTER BE KNOWN AS THE WATER SUPPLY REQUIREMENTS WHEREAS, the City Council is empowered and directed by Article XII, Section 6, of the City Charter to fix, establish, maintain, and provide for the collection of such rates, fees, or charges for utility services furnished by the City as will produce revenues sufficient to pay the costs, expenses, and other obligations of the water utility, as set forth therein; and WHEREAS, the City owns and operates a water utility that provides treated water service to customers with its service area; and WHEREAS, through various water supply furnishing or development programs, the City has historically required that persons desiring new or increased water service from the water utility, among other things, furnish or otherwise provide to the City certain rights to use water or payments of cash-in-lieu thereof in order to offset the impacts of the requested water service, which requirements are currently set forth in Sections , , , , and of the Code of the City of Fort Collins as the raw water requirements ( RWR ), and referenced in Sections 2-436, 26-74, 26-94, , , and ; and WHEREAS, City staff has historically reviewed the water supply furnishing or development requirements periodically to ensure that the rights to use water and cash payments received by the City are sufficient; and WHEREAS, City staff has completed a comprehensive and thorough review of the RWR and has determined that various changes thereto are necessary to ensure that, among other things, the impacts of new and increased water service are offset and that the water utility has sufficient water supplies and infrastructure to serve customers of the water utility with an adequate level of service; and WHEREAS, the City Manager and City staff have recommended to the City Council that the following changes be made, which include, but are not limited to, renaming the RWR as the Water Supply Requirements and changing the functions of the Water Board to no longer include determination of raw water conservation factors; and WHEREAS, the City Manager and City staff have recommended to the City Council that the following changes go into effect as of January 1, 2018, among other reasons, in order to provide adequate time for staff and the public to prepare for the changes. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS, as follows: -1-

22 Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That Section of the Code of the City of Fort Collins is hereby amended to read as follows: Sec Creation and purposes.... (b) The purposes of the Board shall be to advise the City Council in matters pertaining to water, wastewater and stormwater utility policy issues and to act as a quasijudicial body relating to certain matters. These matters shall include, without limitation, the following:... (2) To act as a quasi-judicial body relating to floodplain regulation variances, stormwater fee disputes, and storm drainage design criteria variances; Section 3. That Section of the Code of the City of Fort Collins is hereby amended to read as follows: Sec Conditions for granting permits. A permit will be granted if all of the following conditions are met:... (3) The new or additional use of water will not adversely impact water users within the City limits and the applicant has satisfied all water supply requirements imposed by this Article;... Section 4. That Section of the Code of the City of Fort Collins is hereby amended to read as follows: Sec Individual service lines for each building required.... (4) Plant investment fees, water supply requirements and any other applicable charges required in connection with the additional building to which service is to be provided shall be remitted as provided in this Article. For a carriage house, additional plant investment fees and water supply requirements, as well as monthly meter rates and any other water-related charges, shall be determined based on the addition of a new dwelling unit on the property; and -2-

23 ... Section 5. That Section of the Code of the City of Fort Collins is hereby amended to read as follows: Sec Schedule D, miscellaneous fees and charges. The following fees and service charges shall be paid by water users, whether inside or outside the City limits: (a) Connection fees and service charges shall be as set forth in Subsection (b). (b) The fire hydrant fees and charges shall be as follows: (1) For installation of meter Per meter $43.00 (2) For removal of meter Per meter $43.00 (3) For daily rental for meter and fittings Per meter $8.60 (4) For water service A deposit may be required in the amount of the charges for the anticipated water usage and rental. Per 1,000 gallons $ (c) The fees and requirements for water supply shall be as follows (1) To satisfy Water Supply Requirement (WSR) with cash payments (2) Excess water use surcharge assessed on commercial and irrigation taps when water use is in excess of the applicable annual allotment Per acre-foot of WSR $16, Per 1,000 gallons $7.86 (3) The annual water allotment, based on the minimum WSR shall be as follows: Meter Size (inches) Annual Allotment (gallons/ year) -3-

24 ¾ 294,050293, ,250739,680 1½ 1,539,0601,538, ,577,6102,577,480 Above 2 325,851 gallons per acre foot of WSR... Section 6. That Section of the Code of the City of Fort Collins is hereby amended to read as follows: Sec Grant of water rights; required. All owners of premises requesting original water service from the City shall, before being granted a water service permit, satisfy the assessed Water Supply Requirements (WSR) as determined in this Division without cost to the City. The WSR is as provided in this Division. Section 7. That Section of the Code of the City of Fort Collins is hereby amended to read as follows: Sec Water Supply Requirement (WSR); residential service. (a) Residential service for WSR shall include single-family, duplex, mobile home, and multi-family dwelling units. (1) For residential service to single family, duplex, and mobile home dwelling units, the formula to calculate the WSR shall be: WSR = 1.92 x [(7.048 x Lot Size) + (12,216.9 x Bedrooms)] / 325,851 Where: WSR = Water Supply Requirement in acre-feet. Lot Size = Area of the parcel for which water service is requested, in square feet, excluding public street rights-of-way, City-maintained tracts and rights-of-way, ditches, railways or other areas typically maintained by persons other than the owner of the premises or an agent of the owner. Bedrooms Number of bedrooms on the parcel for which water service is requested, as determined by the City. -4-

25 (2) For residential service to multi-family dwelling units (greater than 2 dwelling units), the formula to calculate the WSR shall be: WSR = 1.92 x [(9.636 x Lot Size) + (13,592.8 x Bedrooms)] / 325,851 Where: WSR = Water Supply Requirement in acre-feet. Lot Size = Area of the parcel for which water service is requested, in square feet, excluding public street rights-of-way, City-maintained tracts and rights-of-way, ditches, railways or other areas typically maintained by persons other than the owner of the premises or an agent of the owner. Bedrooms Number of bedrooms on the parcel for which water service is requested. (b) In the event an applicant applying for a residential water service permit has, prior to March 1, 1984, surrendered water rights or otherwise satisfied the requirements of the City under an earlier water supply furnishing or development program, then the WSR for that property will be considered satisfied under this Section. Section 8. That Section of the Code of the City of Fort Collins is hereby amended to read as follows: Sec Water Supply Requirement (WSR); nonresidential service. (a) Nonresidential service for WSR shall apply to all services not included in the residential category and shall include, without limitation, all service to customers for: commercial; industrial; public entity; group housing, such as nursing homes, fraternities; hotels and motels; and mixed-use purposes. (b) The minimum WSR for water meters up to two and zero tenths (2.0) inches in diameter are as follows: Meter Size (inches) RWR (acre-feet) ¾ (c) The WSR for customers requiring a meter larger than two and zero tenths (2.0) inches, and for customers requiring two (2) or more meters, shall be determined by multiplying the applicant's estimate of peak annual use, or the total annual allotment for the meter or meters, whichever is greater, by one and ninety-two one-hundredths (1.92), provided that such estimate is first approved and accepted by the Utilities Executive Director. -5-

26 (d) Upon application for a water service permit after March 1, 1984, each applicant who is a nonresidential user shall be assigned an annual allotment of water equal to the greater of: the WSR as determined pursuant to this Section; any WSR that was satisfied at the time of application for nonresidential water service; any increased annual allotment pursuant to Subsection (g) below; and the volume of the water furnishing requirement of the City under an earlier water supply furnishing or development program, as determined by the City. When a user uses more water than the annual allotment, as determined by monthly billing records in a given calendar year, an Excess Water Use Surcharge in the amount prescribed in will be assessed on the volume of water used in excess of the annual allotment. (e) In the case where existing water service to a property is being changed or a new water service permit is being issued, the utility shall assign an annual allotment and credit the nonresidential user towards the new water service permit as follows. If an annual allotment has been assigned, the credit towards the new water service shall be for the amount of the annual allotment for the property. If the existing credit towards the new water service is greater than the annual allotment to be assigned for the new water service permit, no cash refund or water certificates issued by the City shall be provided to the applicant. If no annual allotment has been assigned, the credit towards the new water service shall be the amount prescribed in for the existing meters serving the property. The credit authorized under this subsection is not transferrable. (f) In the event an applicant applying for a nonresidential water service permit has, prior to March 1, 1984, surrendered water rights or otherwise satisfied the requirements of the City under an earlier water supply furnishing or development program, then the minimum WSR for that property shall be considered satisfied under this Section. However, such nonresidential user shall be subject to the Excess Water Use Surcharge when the annual allotment is exceeded. (g) A nonresidential user may increase said user's annual allotment by submitting, in addition to the minimum required, water rights, water certificates issued by the City, or cash in the amount prescribed in for each acre-foot of WSR. Such submission shall raise the user's annual allotment by the amount of equivalent water rights submitted in acre-feet divided by one and ninety-two one-hundredths (1.92). Any increase of a user s annual allotment will be applied to subsequent billing and other matters and shall not be applied retroactively. (h) Notwithstanding any other provisions of this Division, water certificates issued by the City under the Agreement, dated May 10, 1971, between the City and the Josh Ames Ditch Company, shall be subject to the following: (1) If such certificates are used to meet the WSR upon the annexation of land into the City, each certificate shall be accepted by the City as fulfilling the WSR in the ratio of one certificate for each one-eighth (1/8) acre of land annexed, and if nonresidential service to the annexed land is requested, an annual allotment shall be imposed that is equal to the applicant s estimate of peak annual use on the -6-

27 annexed land, provided that such estimate does not exceed the amount of water, as determined by the Utilities Executive Director, that can reasonably be delivered through the number and size of taps in the water service permit issued for the annexed land, that such estimate is based on the applicant s documented intended use(s) of the annexed land, and that such estimate is first approved and accepted by the Utilities Executive Director. For the purposes of this subsection, upon the annexation of land into the City refers to the one hundred (100) day period beginning on the day the ordinance of annexation is approved by Council on second reading.... (i) Applicants seeking a temporary water connection under Subsection (e)(1) shall meet the modified WSR as set forth in this Subsection and Subsection (a)(4) and shall be assigned an annual allotment as set forth in this Subsection. The RWR modified WSR for such applicants shall be three times the maximum estimated amount of water that would be applied to the subject native vegetation during one irrigation season, as determined by the Utilities Executive Director. The annual allotment shall for such applicants shall be the maximum estimated amount of water that would be applied to the subject native vegetation during one irrigation season, as determined by the Utilities Executive Director. Section 9. That Section of the Code of the City of Fort Collins is hereby amended to read as follows: Sec Water Supply Requirement (WSR); satisfaction. (a) The WSR imposed pursuant to this Division may be satisfied by one (1) or more of the following methods: (1) Transfer to the City the following rights to be accepted at the following rates: Colorado-Big Thompson units North Poudre Irrigation Company shares 1.0 acre foot per unit 4.0 acre feet per share (2) Submittal to the City water certificates issued by the City. The value of each certificate shall be as stated on the face of the certificate and pursuant to (h), if and to the extent applicable. (3) Payment of cash in the amount prescribed in for each acre-foot of WSR. (4) For applicants seeking a temporary water connection under Subsection (e)(1), payment of cash to Utilities in the amount stated for water service in (b)(4). -7-

28 (5) Transfer to the City of the rights identified in this Subsection (5), provided that the applicant meets the requirements of this Subsection (5). On or before January 1, 2019, the applicant must submit an application for a water service permit together with a request to submit rights to meet the WSR pursuant to this Subsection (5), which shall include proof, to the satisfaction of the Utilities Executive Director, that the applicant: has owned the rights intended to be transferred to the City since February 14, 2017; has been pursuing plans to develop property in the Utilities water service area as evidenced a complete application for an overall development plan, project development plan, change of use, or major amendment submitted to the City on or before February 14, 2017; and acquired said rights for the purpose of meeting the City s water furnishing requirements for said property as set forth in an affidavit. If such a request is approved, the rights approved to satisfy the WSR for said property shall not be transferred to another property. The water rights that may be transferred to the City pursuant to Subsection (5) and the conversion factors are as follows: Arthur Irrigation Company shares Colorado-Big Thompson units Larimer County Canal No. 2 Irrigating Company shares New Mercer Ditch Company shares North Poudre Irrigation Company shares Pleasant Valley and Lake Canal Company shares Warren Lake Reservoir Company shares acre feet per share 1.0 acre foot per unit acre feet per shares acre feet per share 4.0 acre feet per share acre feet per share 10 acre feet per share (b) If there is a change in the WSR between the date on which a completed application for a water service permit is received by the City and the date on which the WSR is satisfied and paid in full, the WSR in effect at the time of full satisfaction and payment shall apply. The satisfaction of the minimum WSR shall be made no later than the time of issuance of the water service permit. An owner of water rights or water certificates issued by the City may submit them to the City, together with an application for a water service permit, and will be credited accordingly in whole or in part, on the assessed WSR on such application for a water service permit. Once the water certificate issued by the City and water right have been designated to satisfy the WSR, or the requirements of the City under an earlier water supply furnishing or development program for water service, for a particular premises, they shall not be transferred to another property. (c) In no case shall the fact that a portion of a property was previously served with City water excuse the WSR when new water service is requested for other portions of the same property. In the event that a water user is required to apply for an additional water service permit under the provisions of this Article for premises already connected to the water utility, the user shall also be required to satisfy any increase in the assessment of WSR that results from the change in use or status, prior to the issuance of the new permit. -8-