metropolitan council

Metropolitan CouncilEnvironmental Services

A Clean Water Agency

Presented to the Environment Committee

August 24, 2010

Capital Finance Plan

Jason Willett, ES Finance Director




MCES

Capital Improvement Plan

2011-2016 Capital Spending

Total projected spending: $579 million (reduced 23% from prior CIP)

(millions)

2




MCES

Capital Spending

$0

$25

$50

$75

$100

$125

$150

$175

$200

'91 '93 '95 97 99 '01 '03 '05 '07 '09 '11 '13 '15

History and projections

(millions)

Adjusted to 2010 $s

1991-2009 Actual, 2010 Estimated, 2011-2016 Projected CIP

CIP

3




MCES

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




MCES

Sources of Capital Funding

1. PFA Loans

2. Council Bonds

3. Pay-as-you-go

4. Grants

5. Local Financing (CVC & Cost Sharing)

5




MCES

$0

$20

$40

$60

$80

$100

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15

(millions)

Actual through 2009, projected thereafter

PFA Loans(Actual and Projected)

Projected

6




MCES 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

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MCES

Impact of Typical PFA Subsidy

Typical $50 million loan

Total Debt PresentService 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

($ millions)

8




MCES

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

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MCES

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15

(millions)

Actual through 2010, projected thereafter

Projected

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Council Wastewater Bonds

Actual & Projected




MCES

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

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MCES

(millions)

SAC (Service Availability Charge) CRF (Capital Revolving Fund)

$0

$5

$10

$15

$20

$25

$30

$35

$40

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15

Favorable Variance Annual Budget

Pay-As-You-Go

Projected

12




MCES

Grants

ARRA: $8.2 million in 2009

State Phosphorus: $0.5 million in 2009-2010

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MCES

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

pending14




MCES

Brooklyn Elko New Maple Lakeville Park Market * Plymouth Grove Total

2010 $173 $123 $462 $78 $836

2011 $123 $18 $141

2012 $123 $18

$141

$ in thousands

Cost Sharing

15

* $239,000 to be repaid over 20 years at 4.07% interest ($17,695/year).




MCES

Summary Information

Summary of MCES Capital Finance Plan Debt Service and Debt Outstanding Comparative Data Conclusions

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MCES

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

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MCES

Debt Existing Pre-funded BudgetedService CVCs D.S. D.S. Increase

2010 90.0 .1 2.0 92.1 1.8%

2011 92.4 .1 0 92.5 .4%

2012 94.9 .1 0 95.0 2.7%

2013 98.9 .1 0 99.0 4.2%

2014 105.4 .1 (1.5) 104.05.1%

2015 112.4 .1 (1.5) 111.0 6.7%

2016 119.4 .1 (1.5) 118.0 6.3%

($ millions)

Debt Service Adjustments

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MCES

Budgeted Debt Service

2001-2009 Actual Debt Service, projected thereafter

2010 Debt Service with 3% inflation (2010 dollars)

History and projections

(millions)

Projected

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MCES

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.

Debt Service Projections

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MCES

Cincinnati 37%

Cleveland 40%

Phoenix 40%

Honolulu 41%

Detroit 44%

MCES 44%

Columbus 48%

Sacramento 52%

Austin 53%

Debt Service as a % of budget*

*2007 data from 2008 NACWA survey

Washington, DC 19%

Rochester, NY 21%

Kansas City 25%

Denver 26%

Chicago 30%

Memphis 32%

Philadelphia 33%

Indianapolis 34%

San Diego 37%

Milwaukee 54%

Trinity River TX 55%

Nashville 58%

King County WA 58%

Louisville KY 58%

New York 61%

Miami 70%

Peer Agencies

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MCES

Outstanding Debt

WastewaterCouncil Bonds

PFALoans

$946$958 $991$1042 $1041 $1035

2008 and 2009 are actual; other years projected

$1035

22

(millions)

$993 $1024




MCES

San Diego $43

Denver $79

Memphis $139

Chicago $279

Kansas City $283

MCES $343

Phoenix $354

Dallas/Ft Worth $415

Washington, DC $480

Debt per capita (person)*

*2007 data from 2008 NACWA survey

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

Peer Agencies

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MCES

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

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MCES

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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