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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. 2010-2019 Capital Spending. (millions). Total projected spending: $1.3 billion.

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Metropolitan Council

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  1. Metropolitan Council Environmental Services Capital Finance Plan Presented to the Environment Committee August 25, 2009 Jason Willett, ES Finance Director A Clean Water Agency

  2. Capital Improvement Plan 2010-2019 Capital Spending (millions) Total projected spending: $1.3 billion 2

  3. 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

  4. 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

  5. Capital Spending History and projections CIP (millions) Adjusted to 2009 $s 1990-2008 Actual, 2009 Estimated, 2010-2019 Projected CIP 5

  6. Budgeted Debt Service History and projections 2000-2008 Actual Debt Service, projected thereafter 2009 Debt Service with 3% inflation (millions) Projected 6

  7. 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

  8. 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

  9. Debt Service Adjustments $ in millions Debt Existing Pre-funded Budgeted Service CVCs D.S. D.S. Increase 200991.9 .2 (1.6) 90.5 3.8% 201092.0 .1 0 92.1 1.8% 201193.9 .1 0 94.0 2.0% 201296.4 .1 (0.4) 96.1 2.2% 2013 102.8 .1 (0.6) 102.3 6.5% 2014 111.1 .1 (1.0) 110.2 7.7% 2015 121.0 .1 0 121.1 9.9% 9

  10. PFA Loans(Actual and Projected) (in millions) Projected Actual through 2009, projected thereafter 10

  11. 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

  12. Impact of Typical PFA Subsidy Typical $50 million loan ($ in millions) Total Debt Present Service Value 4.5% Council bond $76.9 $50.0 3.0% PFA loan 67.2 43.7 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

  13. 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.

  14. Council Wastewater Bonds (Actual and Projected) (in millions) Projected Actual through 2008, projected thereafter 13

  15. Pay-As-You-Go (in millions) Projected Favorable Variance Annual Budget SAC (Service Availability Charge) CRF (Capital Revolving Fund) 14

  16. Outstanding Debt Projected ( and 2007 and 2008 actual) (in millions) Wastewater Council Bonds PFA Loans $1220 $1208 $1201 $1150 $1086 $967 $888 16

  17. 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

  18. 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

  19. 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

  20. 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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