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Metropolitan Council

Metropolitan Council. Environmental Services. PFA Loan Negotiations. Presented to the Environment Committee July 14, 2009. Jason Willett, Finance Director. A Clean Water Agency. State Revolving Loan Program. MCES’s historical involvement Active in program since 1989

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Metropolitan Council

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  1. Metropolitan Council Environmental Services PFA Loan Negotiations Presented to the Environment Committee July 14, 2009 Jason Willett, Finance Director A Clean Water Agency

  2. State Revolving Loan Program • MCES’s historical involvement • Active in program since 1989 • 18 separate prior loan agreements • $965 million of prior loans to date • Interest rates from 2.54% (2004) to 6.42% (1991)

  3. Revolving Loan Program Loan agreements issued to date ($s in millions)

  4. Capital Project Expenses Actual and projected source of funding* ($s in thousands) *Excludes capital expenses paid out of the operating budget Key: PFA = Public Facilities Authority Loan; SAC = Sewer Service Availability Charge; CRF = Capital Revolving Fund; PAYG = Pay-as-you-go

  5. Conventional PFA Subsidy • For the first $50 million, 150 basis points (1.5 percentage points) • Adjusted downward by 1.25 basis points for each additional $1 million borrowed, resulting in a 112.5 basis point discount for $80 million borrowed • No underwriter’s discount • Limited costs of issuance

  6. Conventional Loan Savings $80-million loan ($ in millions) Total Debt Present Service Value 4.35% Council bond $121.4 $80.0 3.23% (est.) PFA loan 109.8 72.3 Savings to ratepayers $ 11.6 $ 7.6 Underwriters discount saved $ .5 Cost of issuance saved $ .1 Total Present Value Savings $ 8.2

  7. Tentative Loan 1 withARRA Grants • Five capital projects eligible for partial grants = “principal forgiveness” under the American Reconstruction and Recovery ACT (ARRA) • Three of these projects qualified under the base program and two under the Green Infrastructure program • Additional project restrictions: • Federal prevailing wage • Buy American provision • Reporting requirements • Remainder of loan will be 150 basis points less than a market interest rate scale

  8. Loan 1 (in millions) Principal Loan ProjectForgivenessRemainder Blue Lk Int. $2.0 $8.0 Blue Lk Plant 2.0 8.0 SSP Forcemain 2.0 8.0 Blue Lk Solids 2.0 (green) 6.0 MWWTP Tunnel Lts 0.2 (green) 0.6 Total $8.2 $30.6 Nominal amount of Loan 1 = $38.8 million

  9. Tentative Loan 2: Build America Bonds—ARRA Financing • Build America Bonds (BABs) will be used to finance cash flow of the remaining PFA eligible projects; a loan of $49.4 million is projected • BABs are taxable but receive federal rebate 35% of the interest cost • PFA rules for taxable loan: interest rate based on Aa tax-exempt + 20 basis points

  10. Loan 2 Savings (in millions) Extended savings from BABs compared to conventional PFA loan*: $6.4 million $5.3 million (net present value) Note: Interest rate to be set the week of July 27 *Per Springsted Inc.

  11. Tentative Total Savings NPV Savings 1.5% discount on $80 million loan $10.1 ARRA Principal Forgiveness Base Program $6.0 Green Infrastructure $2.2 Build America Bonds Increment. $5.3 Total Savings vs. Council Bonding $23.6 (in millions)

  12. Questions, Concerns

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