Sustainable Funding Gap (May 2023)

What is sustainable about spending money you don’t have?  A Finance 101 primer.

At its April 25 work session, the Fort Collins City Council considered, once again, how to label our problem of adopting plans we haven’t the revenue to pay for.  Now referred to as “Sustainable Funding”, the conversation is beginning to narrow in on potential funding mechanisms and a timeline for when to ask citizens for more money.  As a refresher, various plans, priorities and funding restrictions that have been adopted over the years would cost an additional $46M annually, if at least partially implemented.  The real number is at least 2x, but tacitly, even the most ardent cheerleaders are grudgingly accepting that certain elements of the various objectives lie beyond our means.   You can read more about the issue here.

The outcome of the most recent discussion reiterates what we already know: covering the costs of implementing the Transportation, Recreation, Housing, and Climate plans will not entail cost reductions elsewhere in the budget; there is no way to avoid the ballot box; voters are not likely to approve all the “revenue enhancements” as one large package, so it must be staged over successive election cycles; and, low-income residents will be spared as much as possible.

Rather than regurgitating the entire enterprise, three revenue components exemplify the path our leaders hope for us to follow as related to energy use:

  • Maximizing the franchise fee paid by Xcel Energy for the convenience of utilizing roadway and other public easements for the placement of natural gas lines. The current fee charged to ratepayers is equal to 1.07% of their gas bill.  The proposal is to raise the fee to the maximum of 3.0%, or an estimated $80 per year for the average commercial customer.  No public vote is required.
  • Instituting a Utility Occupation Tax, which would require a public vote, is a somewhat novel concept imported from the City of Boulder. This would levy an additional 4.5% tax on gas utility ratepayers for the “privilege of delivering natural gas to customers”. The annual cost to the average commercial/industrial customer is estimated to be $186, or a whopping $3,255 for customers that negotiate separate gas delivery contracts – ostensibly, to save money.
  • Instituting a Large Emitter Fee, which would also require a public vote, would levy a tax on private-sector companies subject to EPA monitoring and reporting of greenhouse gas emissions, or 25 metric tons of CO2 emissions annually. There are two such businesses, Anheuser-Busch and Broadcom.  Interestingly, the large emitter list includes Platte River Power Authority, Larimer County (landfill), and Colorado State University, but even the City recognizes it can’t tax other public entities.  Initially, the tax is expected to deliver $4.8M annually.

Additional options are also on the table in Fort Collins. Learn more here.

Unfortunately, Council is wrestling with a recurring long-term revenue need by leaning on short- to mid-term sources.  Starting at the federal level and at every governmental level down the line, the use of natural gas is under assault.  By 2030, gas appliances in the home will be made unavailable. Commercial use will be largely limited to industrial purposes and maybe restaurants. This means related tax and fee revenue will decline considerably over time.  Yet, the need for funding will not only continue, but costs are likely to outpace inflation based upon the proclivity of budget overruns for public projects.

However, the Large Emitter Fee proposal is especially frustrating. Both companies continue to institute actual emission reductions – not merely purchasing credits – that have resulted in dramatic reductions since 2010.  Council was provided graphs that show Broadcom will fall below the 25MT threshold by 2028, with AB crossing in 2030 based upon their current trajectory.  Poof! There goes that source.

Essentially, recent City councils have taken out a 99-year mortgage just as they head into retirement.  Perhaps it’s time to demand our leaders have a basic understanding of financial principles before they commit our community to new burdens.


Source: Fort Collins Area Chamber of Commerce
May 2023


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