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Capital Finance Alternatives for the St. Mary's County Metropolitan Commission PowerPoint Presentation
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Capital Finance Alternatives for the St. Mary's County Metropolitan Commission
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  1. Capital Finance Alternatives for the St. Mary's County Metropolitan Commission John J. Boland, Ph.D., P.E. was contracted by the Metropolitan Commission to study the rate structures used to pay for the Capital Improvements that are necessary to replace, upgrade and expand the public water and wastewater systems in St. Mary’s county. The final version of his study was presented to the MetCom Commissioners at the December 9th, 2004 meeting where it was approved and the staff was given direction to move forward with implementing the program.

  2. The Metropolitan Commission Staff recognized that there are several issues impacting how Capital Improvements for the public water and wastewater systems are currently funded: • 1. An inequity exists in the current rate structure that has some customers paying a very high benefit assessment charges while some pay very little to no charges at all. • The cost of new projects is increasing due to lack of Federal Grant programs that used to pay for all or a large portion of the projects and the increasing cost of materials, equipment and construction. • 3. There is no funding source specifically identified to replace failed or aging system components.

  3. A method to provide funds to reduce the cost of providing service to new developments is needed: • a) to enable growth to take place in designated growth areas in the county; • b) to allow customer growth to stay ahead of increases in operating costs by spreading the costs over a larger customer base; • c) to give MetCom a convenient source of capital to assist with the development of growth in the county.

  4. Capital Cost Categories • Service Area Expansion: Extensions of water and sewer lines and other local facilities, undertaken for the primary purpose of serving new customers • System Improvement: • Central Facility Expansion: Projects which increase the volumetric capacity of water production, wastewater treatment, & other central facilities. These projects have the dual purpose of providing capacity for new customers and increasing service reliability for existing customers. • Upgrading/Replacement: Projects which increase the level of treatment, improve system efficiency, or replace deteriorated or outmoded facilities.

  5. Assumptions Regarding Existing Benefit Assessment System • An Effective Date for the new financing system will be selected (e.g., 1 Jul 06) • All (1) front-foot and EDU charges assessed prior to the Effective Date, (2) Water Supply and Storage Fees, and (3) Sewer Treatment Capacity Charges will terminate as of the Effective Date. • After the Effective Date, all existing and new debt service will be financed by a new system of capital charges.

  6. Existing Debt Service - Water

  7. Existing Debt Service - Sewer

  8. Water Capital Improvement Budget FY 2004-2009 18 Jan 05

  9. Existing & Planned Debt Service - Water [18 Jan 05 Capital Improvement Budget]

  10. Sewer Capital Improvements Budget FY 2004-2009 18 Jan 05

  11. Sewer Capital Improvements Budget FY 2004-2009 18 Jan 05

  12. Existing & Planned Debt Service - Sewer [18 Jan 05 Capital Improvement Budget]

  13. Projection of New Connections: FY06-FY10 [EDUs based on FY04 data and FY03-FY04 growth]

  14. Projection of Water Production: FY03-FY10

  15. Alternative Financing Many utility companies incorporate the capital cost of expansion and replacement into their service charges and all customers share equally by paying a uniform rate. Some examples are SMECO, Verizon and Washington Gas.

  16. Calculations of Charges • All calculations are based on readily available data; additional data may lead to revisions in the charge levels. • System expansion costs, in particular, may be significantly higher than assumed in these examples. • Assessments are shown as five-year levelized amounts. • Lump sum Capital Contributions are calculated individually for each year.

  17. Assessment + Capital Contribution • Service charges unchanged (recover O&M costs) • All customers pay “Uniform” EDU-based assessment to recover System Improvement Costs • Water assessment: $2.58/EDU/month • Sewer assessment: $9.04/EDU/month • All new customers pay Capital Contribution/EDU at time of connection to recover Service Area Expansion costs FY06 FY07 FY08 FY09 FY10 Water 534.57 636.79 585.26 581.60 582.09 Sewer 1,725.42 2,501.32 3,081.29 3,427.96 6,073.27 (ESTIMATED AND SUBJECT TO CHANGE)

  18. Impact on Average Metered Water-Only Customer (Results are in $/EDU/month, based on FY05 averages, and do not include Capital Contributions) [18 Jan 05 Capital Improvement Budget] Avg. $/mo Current Financing Policy 14.85 Proposed Financing Policy 17.43 (ESTIMATED AND SUBJECT TO CHANGE)

  19. Impact on Average Sewer-Only Customer (Results are in $/EDU/month, based on FY05 averages, and do not include Capital Contribution) [18 Jan 05 Capital Improvement Budget] Avg. $/mo Current Financing Policy 33.06 Proposed Financing Policy 31.36 (ESTIMATED AND SUBJECT TO CHANGE)

  20. Impact on Average Water+Sewer Customer (Results are in $/EDU/month, based on FY05 averages, and do not include Capital Contribution) [18 Jan 05 Capital Improvement Budget] Avg. $/mo Current Financing Policy 45.37 Proposed Financing Policy 46.25 (ESTIMATED AND SUBJECT TO CHANGE)

  21. Impact on Average 1-EDU Unconnected Property (Results are in $/EDU/month, based on FY05 averages, and do not include Capital Contribution) [18 Jan 05 Capital Improvement Budget] Water Sewer Current Financing Policy 0.00 10.74 2.58 9.04 Proposed Financing Policy (ESTIMATED AND SUBJECT TO CHANGE)

  22. CURRENT Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 73.12 Total $ 110.29 PROPOSED Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 11.62 Total $ 48.79 Sanitary District 1 (Wicomico Shores)Water & Sewer CustomerMonthly Average Bill (ESTIMATED AND SUBJECT TO CHANGE)

  23. CURRENT Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 14.49 Total $ 51.66 PROPOSED Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 11.62 Total $ 48.79 Sanitary District 3 (Leonardtown)Water & Sewer CustomerMonthly Average Bill (ESTIMATED AND SUBJECT TO CHANGE)

  24. CURRENT Water Service 0 Sewer Service 22.32 S. Debt Serv. 10.35 Total $ 32.67 PROPOSED Water Service 0 Sewer Service 22.32 S. Debt Serv. 9.04 Total $ 31.36 Sanitary District 3 (Leonardtown)Sewer Only CustomerMonthly Average Bill (ESTIMATED AND SUBJECT TO CHANGE)

  25. CURRENT Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 15.98 Total $ 53.15 PROPOSED Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 11.62 Total $ 48.79 Sanitary District 5 (Tall Timbers/St. George’s Island)Water & Sewer CustomerMonthly Average Bill (ESTIMATED AND SUBJECT TO CHANGE)

  26. CURRENT Water Service 0 Sewer Service 22.32 S. Debt Serv. 34.24 Total $ 56.56 PROPOSED Water Service 0 Sewer Service 22.32 S. Debt Serv. 9.04 Total $ 31.36 Sanitary District 5 (Sheehan/St. George’s Beach)Sewer Only CustomerMonthly Average Bill (ESTIMATED AND SUBJECT TO CHANGE)

  27. CURRENT Water Service 0 Sewer Service 22.32 S. Debt Serv. 18.85 Total $ 41.17 PROPOSED Water Service 0 Sewer Service 22.32 S. Debt Serv. 9.04 Total $ 31.36 Sanitary District 6 (Airedele Rd.)Sewer Only CustomerMonthly Average Bill (ESTIMATED AND SUBJECT TO CHANGE)

  28. CURRENT Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 5.01 Total $42.18 PROPOSED Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 11.62 Total $ 48.79 Sanitary District 8 (Lexington Park)Water & Sewer CustomerMonthly Average Bill (ESTIMATED AND SUBJECT TO CHANGE)

  29. CURRENT Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 42.65 Total $ 79.82 PROPOSED Water Service 14.85 Sewer Service 22.32 W./S. Debt Serv. 11.62 Total $ 48.79 Sanitary District 8 (Lexington Park)Water & Sewer CustomerHigher Front Foot Assessment Bill (ESTIMATED AND SUBJECT TO CHANGE)

  30. All Water Only customers (3,200) do not currently pay a debt service charge. With this proposed rate structure they will start paying a $2.58 per month debt service charge billed in addition to the service charges they now pay. (ESTIMATED AND SUBJECT TO CHANGE)

  31. In Summary Cost are increasing and funds are not available through Federal Grant programs as they were in the past. The older water and sewer infrastructure in St. Mary’s County is nearing or at the end of its life expectancy and needs replacement. There is an inequity in the debt service charges paid by customers on the public water and/or sewer system even though all receive the same basic water and/or sewer service. The number of customers served must continue to grow so that the operational costs can be spread over a larger base to maintain a level of affordability in service charges billed to the water and sewer customers. MetCom believes that establishment of a uniform debt service charge, similar to the uniform service charge established 12 years ago, is the best way to accomplish these objectives.

  32. Implementation Schedule MetCom was established and is governed by state legislation and any changes to assessment methods require legislative action. Our goal is to have a Bill introduced in the Fall 2005 session to make the changes necessary to adopt Uniform Debt Service charges for all public water and sewer customers in St. Mary’s county. This Public Hearing is part of the process and we will be asking for your questions and input at the end of this presentation. The County Commissioners will be advised of the actions proposed and their input and questions will be addressed. Delegate John Bohannon is working with our staff on the process so the amendments can be submitted during next year’s session. If all goes as planned, the Governor will sign the Bill in June of 2006 and the new fees will be effective starting in July of 2006.

  33. COMMENTS QUESTIONS