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Metropolitan Council

Metropolitan Council. Environmental Services. Capital Finance Plan. Presented to the Environment Committee August 24, 2010. Jason Willett, ES Finance Director. A Clean Water Agency. Capital Improvement Plan. 2011-2016 Capital Spending.

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Metropolitan Council

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  1. Metropolitan Council Environmental Services Capital Finance Plan Presented to the Environment Committee August 24, 2010 Jason Willett, ES Finance Director A Clean Water Agency

  2. Capital Improvement Plan 2011-2016 Capital Spending Total projected spending: $579 million (reduced 23% from prior CIP) (millions) 2

  3. Capital Spending History and projections CIP (millions) Adjusted to 2010 $s 1991-2009 Actual, 2010 Estimated, 2011-2016 Projected CIP 3

  4. CIP Comparison Next 6 years: 97 114 Last 10 years: 109 129 Last 40 years: 62 117 Average Annual Capital Spending: $M 2010 $M 4

  5. Sources of Capital Funding PFA Loans Council Bonds Pay-as-you-go Grants Local Financing (CVC & Cost Sharing) 5

  6. PFA Loans(Actual and Projected) (millions) Projected Actual through 2009, projected thereafter 6

  7. PFA Clean Water State Revolving Loan Program • 19 wastewater loan agreements 1989-2009 totaling $1.1 billion • Interest rates from 2.54% to 6.42% (2009 BAB loan rate was 1.84% after federal rebate) • PFA normally offers below market interest rates (150 basis points or 1.5% for $50M borrowed) • PFA pays underwriters’ discount (Council pays none) • Council pays limited costs of issuance 7

  8. Impact of Typical PFA Subsidy Typical $50 million loan ($ millions) Total Debt Present Service Value 4.0% Council bond $73.6 $50.0 2.5% PFA loan 64.1 43.6 Savings to ratepayers $9.5 $6.4 Bond underwriters discount $0.5 Cost of issuance saved $0.1 Total Present Value Savings $7.0 8

  9. PFA 2010 Refunding • PFA recently refunded 5 bonds for present value savings of $19.8 million • Part of bond proceeds was used for 5 MCES loans • Negotiated loan agreements provide that MCES gets a portion of savings • Savings to Council is $5.5 million present value • PFA will pay savings to Council by crediting debt service payments: • $2.4M in 2010 • $2.4M in 2011 • $0.9M in 2012 9

  10. Council Wastewater Bonds (millions) Actual & Projected Projected Actual through 2010, projected thereafter 10

  11. Council 2010 Refunding • PFA’s 1996 $40 million loan to Council had $16 million of principal remaining • Council issued G.O. bonds to refund this PFA loan in February 2010 • Original interest rate of 3.8% reduced to 1.2% • Total present value savings of $1.58 million was achieved; half ($790,883) credited to PFA 11

  12. Pay-As-You-Go (millions) Projected Favorable Variance Annual Budget SAC (Service Availability Charge) CRF (Capital Revolving Fund) 12

  13. Grants • ARRA: $8.2 million in 2009 • State Phosphorus: $0.5 million in 2009-2010 13

  14. Current Value Credits (CVCs) • CVCs are payments to local governments for wastewater facilities Council assumed ownership of, per MN Statute 473.511 • Balances owed after 7/1/10 payment: • Mendota Heights $131,878 • New Brighton $367,204 • Shoreview $13,360 • TOTAL $512,442 • 2016 is last year for payment of CVCs • 4.0% interest is paid on this debt • Existing CVC may be paid off: Council action pending 14

  15. Cost Sharing $ in thousands Brooklyn Elko New Maple Lakeville Park Market * Plymouth Grove Total 2010 $173 $123 $462 $78 $836 2011 $123 $18 $141 2012 $123 $18 $141 * $239,000 to be repaid over 20 years at 4.07% interest ($17,695/year). 15

  16. Summary Information • Summary of MCES Capital Finance Plan • Debt Service and Debt Outstanding • Comparative Data • Conclusions 16

  17. Pre-funded Debt Service • In prior years, some operating funds were transferred to a Debt Service Reserve Fund • Balance of $6.5 million at year-end 2009 • Fund not allowed to drop below 5% of annual debt service, which is currently $4.5 million 17

  18. Debt Service Adjustments Debt Existing Pre-funded Budgeted Service CVCs D.S. D.S. Increase 201090.0 .1 2.0 92.1 1.8% 201192.4 .1 0 92.5 .4% 201294.9 .1 0 95.0 2.7% 201398.9 .1 0 99.0 4.2% 2014 105.4 .1 (1.5) 104.0 5.1% 2015 112.4 .1 (1.5) 111.0 6.7% 2016 119.4 .1 (1.5) 118.0 6.3% ($ millions) 18

  19. Budgeted Debt Service History and projections 2001-2009 Actual Debt Service, projected thereafter 2010 Debt Service with 3% inflation (2010 dollars) (millions) Projected 19

  20. Debt Service Projections As a percent of annual budget* *Includes portion of debt service paid by SAC transfer; assumes O&M portion of budget increases 3% per year. 20

  21. Peer Agencies Debt Service as a % of budget* Washington, DC 19% Rochester, NY 21% Kansas City 25% Denver 26% Chicago 30% Memphis 32% Philadelphia 33% Indianapolis 34% San Diego 37% Cincinnati 37% Cleveland 40% Phoenix 40% Honolulu 41% Detroit 44% MCES 44% Columbus 48% Sacramento 52% Austin 53% Milwaukee 54% Trinity River TX 55% Nashville 58% King County WA 58% Louisville KY 58% New York 61% Miami 70% *2007 data from 2008 NACWA survey 21

  22. Outstanding Debt 2008 and 2009 are actual; other years projected Wastewater Council Bonds PFA Loans (millions) $1042 $1041 $1035 $1035 $1024 $993 $991 $958 $946 22

  23. Peer Agencies Debt per capita (person)* San Diego $43 Denver $79 Memphis $139 Chicago $279 Kansas City $283 MCES $343 Phoenix$354 Dallas/Ft Worth $415 Washington, DC $480 Philadelphia $530 Cleveland $543 Milwaukee $725 Miami $734 Detroit $738 Nashville $768 Cincinnati $789 Austin $1,085 Sacramento $1,154 New York $1,287 Columbus $1,572 Seattle $1,593 Honolulu $1,861 Louisville $1,872 *2007 data from 2008 NACWA survey 23

  24. Conclusions • Financing load is reasonable • Projected next financings needed: • $50M-$70M PFA loan late 2010 • $45M Council bonds late 2010 or early 2011 • PFA subsidies are important • Continued financing needs mean Council’s “Aaa” bond rating and G.O. backing also very important 24

  25. Next Steps • Today: Committee information & discussion • Sept-Oct: Council approves preliminary unified capital budget, authorized capital program and CIP (including Capital Financing Plan) • November: Public hearing • December: Council adoption 25

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