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Financial and Revenue Strategies for Climate Work PresentationClimate Funding Strategy & the CAP Tax Feb. 22, 2022 Our Global Situation: The Climate Crisis is Intensifying "a code red for humanity. The alarm bells are deafening, and the evidence is irrefutable". UN Secretary-General António Guterres •The Science is Clear •Urgent climate action required •Cities must prepare for climate impacts •New society-wide targets are needed •Reduce emissions 70% by 2030 from a 2018 baseline •Become a net-zero positive city by 2035 •Become a carbon positive city by 2040 •Prepare for significant investments with focus on resilience at the local level A New Approach to Climate Action Both what, where and how we do it 3 Energy Systems Material Consumption Ecosystems Policy-Law Culture & Norms Knowledge-Tech 4 Economy/ Markets CO24 Pillars of the System Driving Climate Change A Broader Scope of Climate Action Priorities Mitigation, Adaptation & Resilience, and Equity Climate action must be grounded in three overarching objectives: Climate Mitigation Adaptation & Climate Resilience Equity Scale of Investment Low -End Estimate (Annual) High-End Estimate (Annual) Social Cost of Carbon $54.9 Million1 68.7 Million2 Comparison to other Communities $12 Million $33 Million Big Moves Cost Estimate $10.5 Million $15.1 Million [1 Based on $42.23 per metric ton of carbon. In 2020, Boulder emitted 1.3 million metric tons of carbon dioxide. [2]Based on $52.85 per metric ton of carbon emitted. In 2020, Boulder emitted 1.3 million metric tons of carbon dioxide. City Organization Climate and Resilience Investments Dedicated Climate Centric Efforts Integrated Across All Departments Focus Tonight Ongoing through Budgeting and Master Planning Major source of revenue for climate work is expiring Funding Category Funding Source Annual Revenue Expiration Date Voter -Approved Tax CAP Tax $1.8 M March 2023 Utility Occupation Tax –Climate Initiatives Portion $2.1 M December 2025 General Fund Transfers via Taxes Trash Tax $1.8 M No Expiration Solar Grants ~ $50,000 No Expiration Fees Environmental Impact Offset Fund ~ $400,000 No Expiration Disposable Bag Fee ~ $180,000 No Expiration How have CAP dollars been used? Direct energy efficiency assistance to homeowners, business and landlords Steel in the ground: Investments in local solar generation Regulation and Codes Transit Electrification: City Fleet and City-Owned Charging Stations Policy and Regulatory Reform Partnership and International Collaboration 25-30% more efficient new buildings >5 MW of new solar 1,200 businesses and 5,000 homes upgraded $ millions in savings Saved >30 million kWh/ year >$7.5 M in rebates and grants Future Funding Options Options for Consideration this Year Extend existing CAP Tax Replace both the CAP and UOT taxes with a new climate-oriented tax Other Options Considered Natural gas tax Vehicle fee Property tax Financial Impacts: CAP Tax Today SECTOR Tax Rate In 2007 (Per KWH)Tax Rate (2009 -Present) (Per KWH)Average Annual Tax Residential $0.0022 $0.0049 $27 (per household) Commercial $0.0004 $0.0009 $86 (per customer) Industrial $0.0002 $0.0003 $128 (per customer) Financial Impacts: UOT Today SECTOR Tax Rate (% tax on utility bill)Average Annual Tax Residential ~1.6%$16 (per household) Commercial ~1.6%$156 (per customer) Industrial ~1.6%$577 (per customer) NOTE: Tax rate varies based on what is necessary to collect the required revenue based on ongoing sales. Emissions vs. Revenues Residential Commercial Industrial GREENHOUSE GAS EMISSIONS Residential Commercial Industrial CAP TAX REVENUES Residential Commercial Industrial UOT REVENUES Staff Recommendation •Replace both CAP and UOT with a new Climate Tax •Tax on combined electricity and gas bills •$5 million target •Preserves and accelerates energy-related efforts, in particular equity and resilience •Enhances natural climate solutions and climate forecasting •Bonding capacity •Accelerate action through forward funding •Opportunity for capital investment •Ongoing tax through 2040 •Allows for fund raising through bonding and private capital leverage (e.g., revolving loans) •Ties expiration to goal dates Annual Financial Impacts: New Climate Tax Per Customer Current (CAP + UOT) Proposed Climate Tax @ $3.9 million (current $ levels) Proposed Climate Tax @ $5 million (25% increase) Proposed Climate Tax @ $8 million (~double) Residential $43 $30 $38 $61 Commercial $241 $292 $375 $600 Industrial $705 $1,084 $1,390 $2,224 Addressing Inequities …Using the racial equity instrument to inform strategies, including: •Adjusting the tax structure such that commercial and industrial businesses contribute a more equitable share based on their emissions •Exempting current recipients of energy assistance (LEAP) funding from paying the tax •Developing a rebate mechanism for qualifying low-income residents and possibly certain types of businesses who cannot be directly excluded from paying the tax •Prioritizing investments going forward Tariff -Based Financing Electrification Systems Change: Energy Systems 17 Healthy Buildings Systems Change: Natural Climate Solutions 18 Local Level Actions: COOL BOULDER Campaign Regional Actions: Equity-Centered Urban Forestry Scale-up National Actions: 2030 Targets •Plant 20,000 trees •Regenerate 5,000 acres •Absorb 40,000,000 gals water/yr •Capture 50,000 mtCO2/yr $2.5 Billion Federal Line Item For Urban Forestry Expansion! 70 + Cities & Counties Natural Climate Solutions Working Group Systemic Resilience Developing Climate Change Decision Support Tools Across Multiple Risks and Multiple Departments: Wildfire Drought Urban Heat Extremes Flooding Water Supply Biodiversity Loss Partners & Collaborators Scale of Investment Low -End Estimate (Annual) High-End Estimate (Annual) Social Cost of Carbon $54.9 Million1 68.7 Million2 Comparison to other Communities $12 Million $33 Million Big Moves Cost Estimate $10.5 Million $15.1 Million [1 Based on $42.23 per metric ton of carbon. In 2020, Boulder emitted 1.3 million metric tons of carbon dioxide. [2]Based on $52.85 per metric ton of carbon emitted. In 2020, Boulder emitted 1.3 million metric tons of carbon dioxide. The Process •Feb. 2: Environmental Advisory Board (EAB) •Feb. 16: Financial Strategy Committee (FSC) •Feb. 22: Study Session •Issue Introduction •Staff Recommendation •May 10:Ballot Item Study Session •Summer 2022:Iterate ballot item, Engagement •August/September:Council finalizes ballot item •November:Municipal Election Community Engagement Process Phase 1: Targeted Outreach to Specific Customer Classes •February through May 2022 Phase 2: Voter Information: Climate work, CAP Tax Benefits •May through August 2022 Phase 3: Community Consultation on “Big Moves” Questions for Council 1.Does Council support the staff recommendation for a new Climate Tax that replaces the combination of the current UOT and CAP tax? 2.Does Council support and/or have questions about staff’s proposal to increase overall revenues and collect a new Climate Tax through 2040? 3.What would be helpful for council to know to determine whether to support advancing a Climate Tax as a 2022 ballot item? 4.Does Council have any guidance for staff related to scoping the broader city role and associated revenue needs? BACKUP SLIDES Economic/Financial Systems and Land Use Cost-of -carbon budge�ng and other mechanisms to internalize the costs of climate impacts into both city and community economic transac�ons. Economic Systems Building and land use codes that are informed by and that advance climate jus�ce, mi�ga�on and resilience goalsLand Use Scaling up Action Energy Systems: Examples of Big Moves Enhanced weatheriza�on and electrifica�on; Low -to-no -cost solar; Workforce development Just Energy Transi�on Building codes and voluntary programs to ensure every new building is built to have the lowest carbon footprint possible and all buildings are improved over �me High Performing, Healthy Buildings New and innova�ve program models to close the community’s emissions gap ; Increased local genera�on and storage Clean Electricity Supply Programs and services to support transporta�on electrifica�on and infrastructure development, with emphasis on those that enable solu�ons for currently underserved segments of the community Clean Mobility Solu�ons Circular Materials: Examples of Big Moves Minimize single-use plas�cs Maximize local reuse and repair Support market development for recyclable materials Consumer Goods Support market development for construc�on waste Require low-carbon construc�on materialsBuilt Environment Minimize food waste community-wide Maximize high quality compost/biochar produc�on Maximize local u�liza�on of compost/biochar Organic Materials (Biomass/trees/ food waste) Natural Climate Solu�ons: Examples of Big Moves Major urban forestry-as climate ac�on campaign to fill available tree plan�ng areas with appropriate species.Cool Boulder Land management strategies and ac�ons designed to increase both carbon and water capture and enhance the ecosystem-based services cri�cal to buffer climate extremes Cool and Absorbent Landscapes Locally scaled climate change projec�ons and processes to aid in planning for climate changeCommunity Climate Change Projec�ons Support systems change in local government climate ac�on through building a knowledge and best prac�ces en�ty that accelerates the development of natural climate solu�ons. Urban Drawdown Ini�a�ve/Natural Climate Solu�ons Ini�a�ves (UDI) Scale of Investments to Achieve Systemic Climate Impacts—Social Cost of Carbon Social Cost of Carbon Emissions Estimator-Boulder, CO Community DATA INPUTS Current Emissions -tonnes CO2e (2020)1,373,552 Population 105,000 Per Capita emissions -tons/person (Scope 1 + 2)13.1 Per Capita emissions -tons/person (Scope 1 + 2 + 3)26.2 Annual Social Cost of Carbon--Community @$40/ton (Canada-2021)$54,942,080 @ $50/ton (Canada-2022)$68,677,600 @ $80/ton (Canada-2024)$109,884,160 @ $170/ton (Canada-2030)$233,503,840