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Metropolitan Council. Environmental Services. Capital Finance Plan. Presented to the Environment Committee August 25, 2009. Jason Willett, ES Finance Director. A Clean Water Agency. Capital Improvement Plan. 2010-2019 Capital Spending. (millions). Total projected spending: $1.3 billion.

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Metropolitan Council

Environmental Services

Capital Finance Plan

Presented to the Environment Committee

August 25, 2009

Jason Willett, ES Finance Director

A Clean Water Agency


Capital Improvement Plan

2010-2019 Capital Spending

(millions)

Total projected spending: $1.3 billion

2


CIP Comparison

  • 10 years 2009-2018 was $1.4 billion

  • 9 years 2010-2018 was $1.3 billion

  • 9 years 2010-2018 is $1.1 billion

  • 10 years 2010-2019 is $1.3 billion

Current

CIP

Proposed

CIP

3


Key Assumptions

  • 2009 capital spending of $99.5 million

  • 2010-2019 CIP of $1.3 billion

  • $80M PFA loan 2009 and $8M principal forgiven from ARRA funds, $50 million/yr PFA $ available thereafter

  • Interest rates: 2.07% weighted average for 2009 PFA loan (2.45% for ARRA portion and 1.83% for BAB portion net of 35% IRS rebate)

  • $1 million Pay-as-You-Go financing from operating budget in 2010 and 2011 increased $2M/year thereafter

  • New Reserve Capacity methodology as proposed

  • Council bonds and PFA loans all secured by “general obligation” of region

4


Capital Spending

History and projections

CIP

(millions)

Adjusted to 2009 $s

1990-2008 Actual, 2009 Estimated, 2010-2019 Projected CIP

5


Budgeted Debt Service

History and projections

2000-2008 Actual Debt Service, projected thereafter

2009 Debt Service with 3% inflation

(millions)

Projected

6


Pre-funded Debt Service

  • In prior years, some Operating Funds were transferred to a Debt Service Reserve Fund

  • Balance of $8 million at year-end 2008, and forecast at $6.7 million at year-end 2009

  • Fund will not be allowed to drop below 5% of annual debt service, or approximately $4-$5 million

7


Current Value Credits (CVCs)

  • CVCs are payments to local governments for wastewater facilities that Council assumed ownership of, per MN Statute 473.511

  • Balances owed as of 12/31/08:

    • Burnsville$79,683

    • Columbia Heights $56,051

    • Mendota Heights $177,808

    • New Brighton $471,621

    • Shoreview$17,156

    • TOTAL $802,319

  • 2016 is last year for payment of CVCs

8


Debt Service Adjustments

$ in millions

DebtExistingPre-fundedBudgeted

Service CVCs D.S.D.S.Increase

200991.9.2 (1.6)90.53.8%

201092.0.1 092.11.8%

201193.9.1 094.02.0%

201296.4.1 (0.4)96.12.2%

2013 102.8.1(0.6)102.36.5%

2014111.1.1 (1.0) 110.2 7.7%

2015 121.0 .1 0 121.1 9.9%

9


PFA Loans(Actual and Projected)

(in millions)

Projected

Actual through 2009, projected thereafter

10


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% (prior to the 2009 loans)

  • PFA normally offers below market interest rates (150 basis points or 1.5% for $50m borrowed).

  • PFA pays underwriters’ discount (we pay none)

  • We pay limited costs of issuance

11


Impact of Typical PFA Subsidy

Typical $50 million loan

($ in millions)

Total DebtPresent

ServiceValue

4.5% Council bond$76.9$50.0

3.0% PFA loan67.243.7

Savings to ratepayers$ 9.7$ 6.3

Bond underwriters discount saved$ 0.5

Cost of issuance saved$ 0.1

Total Present Value Savings$ 6.9*

*Savings = $8.3 million for an $80 million conventional loan.

12


Projected Savings

NPV NPV

Proposed Funding: Cost*Savings

$8.2 million of principal forgiveness $0

$30.6M ARRA loan @2.45%$25.8

$49.4M BABs @1.84%$39.3

$88.2M cost (in Net Present Value*) $65.1

Cost of conventional PFA loan for $88.2m:

(102.5 basis point discount, or 3.305%) $80.5 $15.4

Cost of $88.2M Council Bonds @4.33%: $88.2 $23.1

*At 4.33% discount rate.


Council Wastewater Bonds (Actual and Projected)

(in millions)

Projected

Actual through 2008, projected thereafter

13


Pay-As-You-Go

(in millions)

Projected

Favorable Variance

Annual Budget

SAC (Service Availability Charge)

CRF (Capital Revolving Fund)

14


Outstanding Debt

Projected ( and 2007 and 2008 actual)

(in millions)

Wastewater

Council Bonds

PFA

Loans

$1220

$1208

$1201

$1150

$1086

$967

$888

16


Debt Service Projections

As a percent of Annual Budget*

*Assumes the O&M portion of the budget increases 3% per year.

Includes the portion of debt service paid by SAC transfer.

17


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

18


Conclusions

  • Financing load is reasonable

  • Projected next financings needed:

    • $50M PFA loan late 2010 or early 2011

    • $60-80M Council bonds late 2009 or early 2010

  • PFA subsidies are quite important

  • Continued financing needs mean that Council’s “Aaa” bond rating is also important

19


Next Steps

  • Today:Committee information & discussion

  • September:Council approves preliminary Unified Capital Budget, Authorized Capital Program and CIP (including Capital Financing Plan)

  • November:Public hearing

  • December:Council adoption

20


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