Agenda. 4. Affordable Housing Assignment Peer Utilities Development Charges and Affordable Housing Programs

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1 Utilities Policy Advisory Committee (UPAC) Wednesday, June 6, :00 a.m. 11:30 a.m. Blue River Board Room 5th Floor, Plaza of the Rockies, South Tower, 121 S. Tejon Agenda 1. Call to Order 2. Approval of May 2, 2018 UPAC Meeting Minutes Decision 3. Affordable Housing Assignment Stakeholder Input: Greccio Housing, The Aspen Institute 4. Affordable Housing Assignment Peer Utilities Development Charges and Affordable Housing Programs 5. Affordable Housing Assignment Current Policy and Program Analysis 6. Affordable Housing Assignment Draft Policy Recommendations, Recommendation Paper Outline, Next Steps Discussion Discussion Discussion Discussion 7. General Discussion and Citizen Comment Discussion 8. Adjournment Decision Next Meeting: Wednesday, July 11, 2018, 8:00 a.m. 10:30 a.m. Note: UPAC Bylaws, Rule 6: Customer and Public Comment: (b) At the discretion of the Chair, or the majority of the Committee Members present, customers and members of the public will be allowed to comment or ask questions concerning items discussed at regular meetings or concerning matters discussed at special meetings. Comments or questions by individuals will be limited to five minutes each, and all customer or public comments will not exceed twenty minutes on any agenda item unless time is extended by the Chair or majority of the Committee Members present. 1

2 MINUTES Utilities Policy Advisory Committee (UPAC) Meeting Colorado Springs Utilities Wednesday, May 2, 2018, 8:00 a.m. Blue River Board Room Plaza of the Rockies, South Tower, 5 th Floor, 121 S. Tejon Street Committee Members present: Chair Rich Kramer; Vice Chair Rex Adams; Gary Burghart; Scott Harvey; Joe Mark; Alternate Member Reggie Ash and Alternate Member Larry Barrett Committee Members Excused: Balu Bhayani and James Colvin Staff Members present: Dave Grossman and Sorimar Brown Others present: Howard Brooks, Chief Executive Officer, The Energy Resource Center; Cindy Aubrey, Chief Executive Officer, Pikes Peak United Way; Amanda McDermith, Call Center Supervisor, Pikes Peak United Way; Nathan Clyncke, Executive Director, Rocky Mountain Community Land Trust; Jeff White, Chief Operations Officer, Pikes Peak Habitat for Humanity; Mike Burks, Director of Maintenance, Colorado Springs Housing Authority; Paul Spencer, Maintenance Supervisor, Colorado Springs Housing Authority; Steve Posey, HUD Program Administrator, Community Development Division 1. Call to Order Chair Rich Kramer called the meeting to order at 8:02 a.m. 2. Approval of Minutes Committee Member Joe Mark moved to approve the minutes of the April 4, 2018 meeting of the Utilities Policy Advisory Committee. Committee Member Rex Adams seconded the motion. The motion passed unanimously. 3. Affordable Housing Assignment Stakeholder Input Chair Kramer introduced the guest speakers presenting on the current affordable housing assignment. Pikes Peak United Way Ms. Cindy Aubrey, Chief Executive Officer, Pikes Peak United Way discussed her organization and current affordable housing issues. Ms. Aubrey asked for continued support from Colorado Springs Utilities so that Pikes Peak United Way can continue to serve those in the community that need assistance with referrals to other agencies. 2

3 Ms. Amanda McDermith, Call Center Supervisor, Pikes Peak United Way provided some insight on the number of calls Pikes Peak United Way receives, the type of calls received, and populations in greatest need. Ms. McDermith said that more affordable housing is needed with possible incentives and emergency funding to allow for more assistance in the community. Ms. Aubrey described the new Freedom Springs Project that is currently being developed by Pikes Peak United Way to allow for permanent affordable housing for homeless veterans. Ms. McDermith stated that funding often times comes from nonprofit organizations, FEMA funds, and churches. She stated that the community is very supportive and donates what they can, especially to those who help administer Project COPE funds. Energy Resource Center Mr. Howard Brooks, Chief Executive Officer, Energy Resource Center presented information on resources that are offered to assist low income and senior families make their home more energy efficient. He stated that affordable housing is a big issue in our community, and there is a relationship between the amount of energy being wasted and affordable housing. Mr. Brooks suggested incentives be provided for landlords to weatherize their homes. Rocky Mountain Land Trust Mr. Nathan Clyncke, Executive Director, Rocky Mountain Community Land Trust; described his role with Rocky Mountain Community Land Trust and discussed how the program helps provide permanent homes for low-income families. Mr. Clyncke offered solutions including permanent deferment of development charges, demand side management for non-profits, and continued support from the Community Focus Fund. Habitat for Humanity Mr. Jeff White, Chief Operations Officer, Pikes Peak Habitat for Humanity, described his role with Pikes Peak Habitat for Humanity and discussed how the program helps build permanent affordable energy efficient homes. Mr. White suggested that Colorado Springs Utilities continue to defer development charges for affordable housing. Colorado Springs Housing Authority Mr. Mike Burks, Director of Maintenance, Colorado Springs Housing Authority and Mr. Paul Spencer, Maintenance Supervisor, Colorado Springs Housing Authority presented information on housing programs and the current units provided in Colorado Springs. 3

4 Suggested Utilities-related Solutions for affordable housing: Relief on development charges Energy conservation and rebate programs Support for solar power Housing and Building Association of Colorado Springs Mr. Kevin Walker, Public Policy Chair, Housing and Building Association of Colorado Springs (HBA) described the HBA s mission of promoting policies that allow for the production of safe and affordable housing, and enhancing the environment for the housing and building industry in El Paso County. Mr. Walker discussed the HBA s strategic priorities, technical committees and utility barriers to affordable housing including items related to project feasibility limits and deposits for gas service, hydrant valves, water use during construction, inconsistent installations, easement corridors, joint trenching, placement of gas meter, curb stop distance, and gas service line standards. UCCS Economic Forum Dr. Tatiana Bailey, Director, UCCS Economic Forum, University of Colorado - Colorado Springs presented information on housing affordability in El Paso County, Colorado and nationwide. Discussion Items Demographics Home prices and home ownership State and local housing picture United States housing ownership rates Millennials and housing Who can afford a home in Colorado Springs? Average salaries Apartment leasing trends and affordability Lack of affordable housing Solutions require innovative thinking Alternate Member Reggie Ash departed at 10:29 a.m. 4. Affordable Housing Assignment Initial Observations Mr. Dave Grossman, Strategic Planning and Governance Supervisor, presented initial observations on the affordable housing assignment. Vice Chair Rex Adams commented that there appears to be two issues that have been presented; how does the community increase affordable housing stock and how we keep existing homes affordable? 4

5 Mr. Steve Posey, HUD Program Administrator, Community Development Division recommended that the Committee attempt to find ways to increase incentives for nonprofit and for-profit builders and increase demand side management programs. Mr. Posey also suggested exploring incentives for high density affordable housing. Chair Kramer commented about the possibility of broadening Colorado Springs Utilities programs like HEAP that would not only focus on incentives for homeowners but for rental properties also. Committee Member Scott Harvey suggested a matrix for tracking UPAC s recommended changes that may impact various customer categories and stakeholders. Vice Chair Adams recommended exploring incentives for volunteerism that supports affordable housing. 5. Affordable Housing Assignment - Upcoming Meeting Topics, Next Steps Mr. Grossman presented information on the upcoming meeting topics, and the next steps for the assignment with finalization of the assignment in July. 6. General Discussion and Citizen Comment Citizen, Walter Lawson commented on the overwhelming problem of affordable housing, especially with millennials and the elderly. 7. Adjournment A motion for adjournment of the meeting was made. The motion was seconded and passed unanimously. The meeting was adjourned at 11:32 a.m. Next Meeting: Wednesday, June 6, :00 a.m. 10:30 a.m. 5

6 Affordable Housing Assignment Development Charges, Program Analysis, Observations and Draft Recommendations Utilities Policy Advisory Committee June 6, Electricity Natural Gas Water Wastewater

7 Affordable Housing Assignment Scope Explore barriers for development of affordable housing within Colorado Springs Utilities domain over the next 4-6 months for the 2019 budget. Also identify what is outside existing Utilities structure for the future. 7 Electricity Natural Gas Water Wastewater

8 Discussion Items Development Charges Peer utilities affordable housing programs Colorado Springs Utilities current affordable housing programs analysis Draft assignment observations Current policy Draft policy recommendations Assignment recommendation paper outline Next steps 8 Electricity Natural Gas Water Wastewater

9 Current Development Charges Summary Purpose: Recover existing and forecasted system infrastructure costs Modified Equity Buy-in methodology, an industry accepted practice Outside City charges are 50% higher than inside City charges Recent action taken to lower Development Charges 2017 meter capacity ratio approved for all meters greater than ¾ inch Lowered the WDC for meter sizes greater than 4 inch Lowered the WWDC for meter sizes greater than ¾ inch 2018 added WDC lot sizes less than 1,500 square feet for both Inside City and Outside City Limits 9 Electricity Natural Gas Water Wastewater

10 Development Charge Comparison $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $- Residential Water and Wastewater Development Charges - 3/4" Meter Colo Springs $11,160 Wastewater Water Based on 2016 data and average lot size. (7,000 8,999 square feet for Colorado Springs Utilities). 10 Electricity Natural Gas Water Wastewater

11 Development Charge Comparison $250,000 Commercial Water and Wastewater Development Charges - 2" Meter $200,000 $150,000 $100,000 Colo Springs $63,436 $50,000 $- Based on 2016 data. Wastewater Water 11 Electricity Natural Gas Water Wastewater

12 Development Charge Portion of Total Construction Costs Single Family Residential Example Assume affordable housing project cost of $250,000 Avg. Lot Size (7,000 8,999 square feet) - WDC and WWDC = $11, % of total project or $11,160 per door Avg. Lot Size (3,000 4,999 square feet) - WDC and WWDC = $9, % of total project or $9,137 per door Multifamily Example Assume 65 unit affordable housing project with total cost of $14 M Water and Wastewater Development Charge for two-inch meter = $63, % of total project or $975 per door 12 Electricity Natural Gas Water Wastewater

13 Colorado Springs Utilities Current Affordable Housing Fee Deferral Program Overview Deferral, primarily for 5 years, of Water and Wastewater Development Charges Housing that is designated for households earning 80% or less of the area median income (AMI). Colorado Springs AMI = $76,000. Must meet affordable housing and conservation criteria First-come, first-serve basis Total deferred not to exceed 5% of previous year s total Development Charges for water and wastewater Program has low participation 13 Electricity Natural Gas Water Wastewater

14 Colorado Springs Utilities Current Affordable Housing Fee Deferral Program History of Participation Deferral Projects: Electricity Natural Gas Water Wastewater

15 Colorado Springs Utilities Current Affordable Housing Fee Deferral Program Conservation Criteria 7 points are needed to qualify 15 Electricity Natural Gas Water Wastewater

16 Colorado Springs Utilities Current Affordable Housing Fee Deferral Program 16 Electricity Natural Gas Water Wastewater

17 Peer Utility Programs Findings New Housing Stock Energy Efficiency Utility Allowance providing incentive to affordable housing new-build with high efficiency products (San Diego) Line extension cost waiver - as a percent of affordable housing (Austin) Development Charge waiver for affordable housing up to 1500 units per year (Austin) Cost sharing infrastructure for infill with affordable housing (Salt Lake City) Reduced Development Charge by 25% for AH development (Charleston) Multifamily Energy Assistance Program gives additional boost on DSM incentives for affordable housing projects (PNM Albuquerque) 2018 Internet-based research included 25 regional and peer utilities 17 Electricity Natural Gas Water Wastewater

18 Peer Utility Programs Findings Existing Housing Most utilities have income qualified bill payment solutions and energy efficient retrofit programs consistent with Project COPE, LEAP and HEAP Free home energy audit and consulting (several) Low income qualified rates (several) Disconnect avoidance (several) Nonprofit grant funding for low income / AH with a focus on high-energy demands, such as shelters and safe houses (Xcel) Grant funding for income-qualified, multifamily facilities that need energyefficiency improvements (Xcel) 2018 Internet-based research included 25 regional and peer utilities 18 Electricity Natural Gas Water Wastewater

19 Demand Side Management (DSM) Home Efficiency Assistance Program (HEAP) Supports affordable housing goals Partnership with the Energy Resource Center Addresses critical life safety issues (carbon monoxide leaks) Focuses on long-term permanent reduction in energy use and utilities bill There is significant need and demand for this low income program Most of the DSM value occurs for the organization in the natural gas service 19

20 Demand Side Management (DSM) Home Efficiency Assistance Program (HEAP) Savings Return on Investment In 2017, 135 customers benefited from HEAP energy and water retrofits 5% of the DSM budget currently allocated to HEAP program For every dollar invested, the HEAP program provides $1.80 return in energy and water savings DSM programs provide a weighted average return of about $3.50 With increasingly stringent building codes regulating new construction, majority of future savings may come from improving efficiency of existing housing stock Complexities of extending program to renter-occupied households 20

21 Community Focus Fund Grants Analysis The Community Focus Fund (CFF) program was established in 1997 to support employee volunteerism and financial assistance to local nonprofits and educational institutions. Grants are given for program or project support to organizations according to CFF charter/guidelines. The CFF steering committee, composed of employees from across the organization, is responsible for management of the program. Program Criteria: 501(c) 3 nonprofits or educational institutions Organizations within the Springs Utilities service territory or in communities significantly impacted by business operations Grant must address one of seven focus areas identified in CFF charter Per Utilities Board direction, 2018 strategic focus areas: Energy efficiency, wise water use Prepared and diverse workforce pool STEM education Environment - watershed management Customer stability/sustainability Affordable housing and economic development 21

22 CFF Grant Process and 2018 Funding Nonprofits complete an on-line application for funding requests according to program guidelines. Application deadline is December. Applications initial screening by the CFF Program Manager Applications reviewed and evaluated by CFF steering committee members according to multiple criteria Committee determines grant amounts and recipients Final review and approval by the Strategy External Affairs Officer 2018 CFF grants total funding awarded $256,000 $50,350 for low-income affordable housing improvements including energy & water efficiency = 20% of total funding Includes $15,000 to Energy Resource Center for the Crisis Emergency Program $30,500 for transitional housing programs = 12% of total funding 22

23 Draft Assignment Observations Affordable housing is a priority for the community There is a shortage of affordable housing inventory and not enough dwelling units are expected to be built in coming years to fill the gap Supporting affordable housing aligns with Colorado Springs Utilities Strategic Objectives Development Charges for new housing stock and keeping utility bills low for existing dwellings are the two areas that Colorado Springs Utilities can support affordable housing. Current policy allows for deferment of development charges, grants and material donations, Project COPE funding, and energy and water savings programs for affordable housing Recent changes to Tariffs and Utilities Rules and Regulations provide support for affordable housing Colorado Springs Utilities Development Charges are among the lowest among Front Range cities Improving the energy and water efficiency of existing housing stock reduces housing costs (Proposed new observations since the May 2 UPAC meeting are in blue) 23

24 Draft Assignment Observations All construction-related costs including utility charges, standards and regulations contribute to the overall cost of new housing stock DSM in HEAP-eligible homes provides a return on investment comparable to typical homes Current DSM programs benefit owner-occupied households only Colorado Springs Utilities current affordable housing programs are comparable to peer utility programs Utility expenses are included in what is considered total housing costs Nearly a quarter of owner-occupied households spend 30% or more of their household income on total housing costs Nearly half of rental households spend 30% or more of their household income on total housing costs Best practice is to help lower the monthly utility bill rather than providing a one time incentive (Proposed new observations since the May 2 UPAC meeting are in blue) 24

25 Excellence in Governance Policy Utilities Board Instructions to the Chief Executive Officer - Community Investment (I-13) The Chief Executive Officer shall direct that Colorado Springs Utilities is responsive to community needs and values by maintaining and communicating a strong community presence that significantly contributes to the citizens quality of life. Accordingly, the CEO shall: 1. Maintain a community involvement plan that is in alignment with Colorado Springs Utilities strategic objectives and that provides a benefit to the citizens and customers. 2. Encourage and support employee volunteerism within the communities served by Colorado Springs Utilities. 3. Communicate to customers and provide student and adult education programs on the safe and efficient use of utility services. 4. Allow philanthropic support of community-oriented organizations only in the service territories or localities impacted by Colorado Springs Utilities operations. 5. Only allow funding of community-oriented organizations that complete an application describing how the funds will be used in alignment with Colorado Springs Utilities strategic objectives. 6. Allow funding of community-oriented organizations with Political Action Committees (PACs) only if they demonstrate independent PAC revenue and decision-making. 7. Consider partnerships with other funding entities to leverage resources and maximize impact. 8. Inform the community of the enterprise s corporate citizenship and employee volunteerism. 9. Develop programs intended to support affordable housing within the City. 25

26 Excellence in Governance Policy Community Investment (I-13) Guidelines (Proposed Policy Guidelines recommendations in red) Affordable Housing 1. Recommend tariffs and implement procedures to allow deferral of the immediate impact of system extension and development charges on affordable housing projects consistent with the City s Affordable Housing Program that meet specified energy and water conservation criteria. The programs shall include recovery of the carrying cost of any deferrals to not create an adverse financial impact on other customers. Any current year fee deferrals shall not, in aggregate, exceed five percent (5%) of the previous year s total development charges. 2. Develop and promote energy and water savings audit and installation programs for low-income households. Allocate 7 percent of the total 2019 Demand Side Management budget to support the Home Energy Assistance Program. Allocate 10 percent to support the program in 2020 and future years. 26

27 Excellence in Governance Policy Community Investment (I-13) Guidelines (Proposed Policy Guidelines recommendations in red) Community Support 1. Allow the expenditure of no more than 0.1 percent of budgeted operating revenues on direct monetary support of community-oriented economic development and charitable organizations. 2. Maintain an allocation of at least 20 percent of Community Focus Fund grant dollars to non-profits in support of affordable housing. 3. Provide up to $500,00 annually, to match customer donations to the Project COPE (Citizens Option to Provide Energy) utilities bill assistance program. 27

28 (Proposed recommendations in red) Affordable Housing Additional Recommendations 1. Analyze the feasibility of extending the HEAP program to renter-occupied households 2. Analyze the feasibility of including multi-family residences in DSM programs 3. Continue to work with the building industry to streamline approval processes, proactively communicate rationale behind standards, eliminate standards that no longer provide value and offer alternative solutions within the boundaries of Tariffs, URRs, and City Code 28

29 Potential Recommendations and Financial Impact Assumes 10 affordable housing projects in a year, each with a 2-inch meter Potential Recommendation Assumption Example Estimated Required Change to Development Charge Rate for Non- Affordable Housing Projects 1. Waive Development Charges for Affordable Housing Projects 2. Waive 50% of the Development Charges for Affordable Housing Projects 3. Waive the recovery of carrying costs for affordable housing Development Charge deferments $634,360 waived 3% increase $317,180 waived 1.5% increase $28,500 waived (Program A2) 0.14% increase 29

30 Draft Recommendation Paper Outline 1. Executive Summary 2. Assignment Scope 3. Background 4. Considerations 5. Current Policies and Programs 6. Stakeholder Input 7. Observations 8. Concepts Considered But Not Recommended 9. Policy Recommendations 10. Additional Recommendations 11. About the Utilities Policy Advisory Committee 30

31 Upcoming Meeting Topics and Next Steps July 11 UPAC Meeting Finalize policy and guideline recommendations Finalize assignment white paper and presentation to Utilities Board July 18 Utilities Board Meeting Present assignment recommendations to Utilities Board 31