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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

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

Capital Improvement Plan

2010-2019 Capital Spending

(millions)

Total projected spending: $1.3 billion

2


Cip comparison

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

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

Capital Spending

History and projections

CIP

(millions)

Adjusted to 2009 $s

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

5


Budgeted debt service

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

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

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

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

PFA Loans(Actual and Projected)

(in millions)

Projected

Actual through 2009, projected thereafter

10


Pfa clean water state revolving loan program

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

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Impact of typical pfa subsidy

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.

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Projected savings

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

Council Wastewater Bonds (Actual and Projected)

(in millions)

Projected

Actual through 2008, projected thereafter

13


Pay as you go

Pay-As-You-Go

(in millions)

Projected

Favorable Variance

Annual Budget

SAC (Service Availability Charge)

CRF (Capital Revolving Fund)

14


Outstanding debt

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

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

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

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Conclusions

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

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

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