HomeMy Public PortalAboutMSD Series 2019B&C Investor PresentationThe Metropolitan St. Louis
Sewer District
Investor Presentation
$322,680,000*
$52,550,000* Wastewater System Revenue Bonds, Series 2019B
$270,130,000* Taxable Wastewater System Refunding Revenue Bonds, Series 2019C
November 8, 2019
*Preliminary; subject to change.
Disclaimer
This Investor Presentation is provided as of November 8,2019 for a proposed offering by The Metropolitan St.Louis Sewer District
(the “District”or “MSD”)of its Wastewater System Revenue Bonds,Series 2019B (the “Series 2019B Bonds”)&Taxable Wastewater
System Refunding Revenue Bonds, Series 2019C (the “Series 2019C Bonds”, together with the Series 2019B Bonds, the “Series
2019B&C Bonds”).If you are viewing this presentation after November 8,2019,there may have been events that occurred
subsequent to such date that would have a material adverse effect on the financial information that is presented herein, and neither
MSD nor Citigroup Global Markets Inc.(the “Underwriter”),as Representative of the Underwriters, has undertaken any obligation to
update this Investor Presentation.All market prices,financial data and other information provided herein are not warranted as to
completeness or accuracy and are subject to change without notice.
This Investor Presentation is provided for your information and convenience only.Any investment decisions regarding the Series
2019B&C Bonds should only be made after a careful review of the complete Preliminary Official Statement, dated November 8,2019.
By accessing this Investor Presentation,you agree not to duplicate, copy, download,screen capture, electronically store,or record
this Investor Presentation, nor to produce, publish, or distribute this Investor Presentation in any form whatsoever.
This Investor Presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of any security or
other financial instrument, including the Series 2019B&C Bonds, or to adopt any investment strategy. Any offer or solicitation with
respect to the Series 2019B&C Bonds will be made solely by means of the Preliminary Official Statement and Official Statement,
which describe the actual terms of such Series 2019B&C Bonds.In no event shall the Underwriter or MSD be liable for any use by
any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions
from,the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in
any transaction mentioned herein.The Underwriter makes no representations as to the legal,tax,credit, or accounting treatment of
any transactions mentioned herein, or any other effects such transactions may have on you and your affiliates or any other parties to
such transactions and their respective affiliates.You should consult with your own advisors as to such matters and the consequences
of the purchase and ownership of the Series 2019B&C Bonds.Nothing in these materials constitutes a commitment by the
Underwriter or any of their affiliates to enter into any transaction.No assurance can be given that any transaction mentioned herein
could in fact be executed. Past performance is not indicative of future returns,which will vary.Transactions involving the Series
2019B&C Bonds may not be suitable for all investors.You should consult with your own advisors as to the suitability of the Series
2019B&C Bonds for your particular circumstances.Clients should contact their salesperson at,and execute transactions through, an
entity of the Underwriter or other syndicate member entity qualified in their home jurisdiction unless governing law permits otherwise.
1
Transaction Summary
___________________________
* Preliminary, subject to change.
Issues Wastewater System Revenue Bonds, Series 2019B
Taxable Wastewater System Refunding Revenue Bonds, Series 2019C
Par Amount*Series 2019B: $52,550,000
Series 2019C: $270,130,000
Security
The 2019B&C Bonds are revenue bonds secured by and payable from certain revenues of
The Metropolitan St. Louis Sewer District (the “District” or “MSD”) received from operation of
its sanitary sewer system (the “System”) on a parity with nine prior series of Senior Bonds
(Series 2010B, Series 2011B, Series 2012A, Series 2012B, Series 2013B, Series 2015B,
Series 2016C, Series 2017A and Series 2018A Bond)
Use of Bond
Proceeds
Pay a portion of the costs of certain additions, extensions, and improvements to the System
Refund a portion of the District’s outstanding Senior Bonds
Pay costs of issuance
Tax Status Series 2019B: Federal tax-exempt and State of Missouri tax-exempt
Series 2019C: No Federal or State of Missouri tax-exemption
Structure*Series 2019B: Fixed rate bonds due May 1, 2021 through 2049
Series 2019C: Fixed rate bonds due May 1, 2021 through 2044
Optional Redemption*Series 2019B: To be determined
Series 2019C: To be determined
Credit Ratings Standard and Poor’s: AAA (Stable)
Fitch: AA+ (Stable)
Underwriting Syndicate Citigroup, Barclays, Fidelity Capital Markets, Loop Capital Markets, Morgan Stanley, Raymond
James, Stern Brothers
Pricing Date*Retail order period: Monday, November 18, 2019
Institutional order period: Tuesday, November 19, 2019
Closing Date*Monday, December 4, 2019
2
Overview of the District
Owns and operates sanitary, stormwater, and
combined collection sewers, pumping stations, and
wastewater treatment facilities
Service area is 520 square miles encompassing The
City of St. Louis and most of St. Louis County
Approximately 87% of MSD customers are in St.
Louis County
Service area encompasses three major
watershed areas
Provides wastewater treatment and stormwater
management for 1.3 million people, making it the
fourth-largest wastewater treatment system in the
United States
District is an independent entity and its Board of
Trustees has the ultimate authority to set rates
In FY 2019, operating revenues totaled $400 million
with approximately $3.9 billion in assets
MSD is an essential service provider covering a large service area
= Facilities
3
___________________________
Sources: Series 2019B&C Preliminary Official Statement; District Comprehensive Annual Financial Report (Fiscal Years Ended June 30, 2019 and 2018).
Authority, Governance, and Organization
Strong and experienced management team continues to focus on budgetary controls and operational
efficiencies
Board of Trustees
Governs MSD and includes three members appointed
by the Mayor of the City of St. Louis and three
members appointed by the St. Louis County Executive
Rate Commission
Reviews and makes recommendations to
the Board of Trustees regarding all
proposed rate changes and tax rates
Civil Service Commission
Serves in an advisory position regarding
personnel administration and
civil service matters
Internal Auditor Secretary-Treasurer
General Counsel Executive Director
Information
Systems OperationsEngineeringFinanceHuman
Resources
4
System Facilities
MSD operates and maintains:
9,347 miles of collection and trunk sewers and force mains
279 pumping stations
Seven wastewater treatment facilities treating an average daily flow of 331 million gallons per day (“MGD”)
Total System capacity of approximately 593 MGD; average daily flow comprises 56% of total capacity
Largest plants are Bissell Point and Lemay, both serving the Mississippi River watershed
The System recently withstood two 100-year flood events in 2015 and 2017 with minimal damage or service interruption
The District’s facilities are currently in compliance with all environmental regulations
The System has ample wastewater treatment capacity
___________________________
Sources: Series 2019B&C Preliminary Official Statement; District Comprehensive Annual Financial Report (Fiscal Years Ended June 30, 2019 and 2018).
5
Broad and Strengthening Regional Economy
Declining Unemployment Rates
Stable Population Base
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2013 2014 2015 2016 2017 2018
(000s)City of St. Louis St. Louis County
Rising Per Capita Income
$40,000
$42,000
$44,000
$46,000
$48,000
$50,000
2013 2014 2015 2016 2017 2018 2019
District Service AreaHigher Education
Washington
University
St. Louis
University
Corporations
The Boeing
Company
Schnuck Markets
Inc.
Healthcare
BJC HealthCare
Mercy
SSM Health
Government
City of St. Louis
St. Louis County
Regional Employers
4.3%
3.3%
4.1%
0
2
4
6
8
10
12
2012 2013 2014 2015 2016 2017 2018
(%)St. Louis, MO (City)St. Louis, MO (County)U.S.
___________________________
Source: Appendix B of Series 2019B&C Preliminary Official Statement.
6
0.57%1.06%1.65%2.07%1.89%2.16%
97.0%95.3%
97.7%
100.0%
98.4%98.4%99.7%98.8%97.6%97.9%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Stable and Diverse Customer Base
The System serves approximately 426,671 wastewater
accounts, 94% of which are single-or multi-family
residential
Ten largest customers contribute only 4.6% of total user
charges
FY 2019 collections as a percent of charges billed was
97.9% and has averaged over 98.1% for the last 10 years
despite rate increases
___________________________
Source: Series 2019B&C Preliminary Official Statement.
0
100,000
200,000
300,000
400,000
500,000
2015 2016 2017 2018 2019
Single Family Residential Multi-Family Residential
Commercial/Industrial
10-Largest Customers by User Charge (FY 2019)User Charge Collections (FY 2010-2019)
Customer
User
Charges
% of
Total
Anheuser-Busch InBev $5,380,744 1.36%
The City of St.Louis, Missouri 2,626,558 0.67%
Washington University in St.Louis 2,109,156 0.53%
Sigma-Aldrich 1,674,339 0.42%
The Boeing Company 1,251,265 0.32%
Jost Real Estate,L.L.C.1,085,769 0.27%
BJC HealthCare 1,036,583 0.26%
Saint Louis University 1,033,565 0.26%
Missouri-American Water Co.1,015,558 0.26%
GKN Aerospace 891,863 0.23%
Subtotal (10 largest)$18,105,400 4.58%
Other customers $377,474,503 95.42%
Total $395,579,903 100.00%
Customers by Type (FY 2015-2019)
7
Elimination of
SSOs
$346mm
22.1%
System
Renewal and
Capacity
Projects
$592mm
37.7%
Reduction and
Control of
CSOs
$134mm
8.5%
Treatment
Plant
Improvements
$497mm
31.7%
Total: $1.6 billion
FY 2021-2024 CIRP
MSD is executing a long-term and programmatic plan to meet the $5 billion1, 28-year Consent Decree. With the initial
phase of the CIRP successfully completed, the FY 2021-2024 CIRP is expected to deliver $1.7 billion in capital projects
CIRP Sources (FY 2021-24)
340
360
380
400
420
440
460
2021 2022 2023 2024
($mm)
CIRP Needs FY 2021-24 CIRP Uses (FY 2021-24)
MSD entered into a Consent Decree with the EPA in 2012 with the primary goal of reducing combined and sanitary sewer over flows and building backups
On June 22, 2018, a United States District Judge approved an amendment to the Consent Decree that extends the schedule from 23 years to 28 years
Consent Decree is the primary driver of the District’s long-term Capital Improvement and Replacement Plan (“CIRP”)
Since entering into the Consent Decree, MSD has successfully delivered approximately $1.48 billion in projects
Pay-as-you-go funding is expected to fund a larger share of FY 2021-2024 projects compared to FY 2017-2020
Major projects to be completed in the FY 2021-2024 CIRP are primarily focused on:
Collection system improvements projects to meet the District’s Consent Decree requirements to eliminate sanitary sewer overflows and reduce or eliminate
combined sewer overflows
System improvements throughout the District that include asset management and collection system improvements
Improvements related to existing treatment plants
Bond Funded
$943mm
65.1%
Pay-Go
$506mm
34.9%
___________________________
Sources: MSD; Series 2019B&C Preliminary Official Statement; Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series
2019B.
9
Rate Schedule
The District’s autonomous Board of Trustees has a strong history of approved rate increases to meet
MSD’s operating and capital needs
___________________________
Sources: MSD; Series 2019B&C Preliminary Official Statement; Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series
2019B.
Rate Autonomy
Board of Trustees has consistently demonstrated its
willingness and ability to raise rates as needed
No approvals from City or County governments
are required
The 15-member Rate Commission provides the
Board of Trustees with feedback and rate
recommendations, but the Board of Trustees has
ultimate authority to set rates
Rate History
The Board of Trustees has consistently approved
rate increases, an average of 11% annually from FY
2013 to FY 2020
Board of Trustees accepted a new rate schedule in
October 2019 for FY 2021-2024
The Board is expected to introduce and approve
an ordinance setting rates consistent with the
Rate Commission’s report in early 2020
Rate Affordability
After accounting for the rate schedule, residential
rates remain competitive compared to other major
wastewater systems subject to consent decrees
Bill for Single Family Residence (7CCF/month)
$29.11 $32.35 $35.99 $40.72 $44.59 $49.31
$54.63 $60.44
$0
$15
$30
$45
$60
$75
2013 2014 2015 2016 2017 2018 2019 2020
Average Monthly Bill for Cities Under Consent Decrees (8CCF)
$0
$40
$80
$120
$160
Median
10
MSD Financial Results and Projections
MSD Financial Results and Coverage –Actual and Projected ($000s)
Actual Projected
Fiscal Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Total revenues (A)$291,392 $322,358 $335,926 $374,649 $415,548 $452,640 $459,261 $475,917 $492,863 $512,199
Total expenses (B)1 163,312 168,259 168,835 163,026 170,585 179,674 194,305 194,557 201,294 205,945
Net revenues available for debt service
(C=A-B)128,080 154,099 167,091 211,622 244,963 272,966 264,956 281,360 291,569 306,254
Senior debt service (D)38,352 46,381 58,182 67,923 77,941 79,150 84,018 91,357 98,317 109,129
Subordinate debt service (E)23,496 27,379 31,178 32,476 36,192 38,125 41,088 45,413 52,400 60,099
Total outstanding debt service (F=D+E)61,848 73,760 89,361 100,399 114,133 117,275 125,106 136,770 150,717 169,228
Senior debt service coverage (C/D)3.3x 3.3x 2.9x 3.1x 3.1x 3.4x 3.2x 3.1x 3.0x 2.8x
Combined debt service coverage (C/F)2.1x 2.1x 1.9x 2.1x 2.1x 2.3x 2.1x 2.1x 1.9x 1.8x
MSD forecasts steady financial growth and debt service coverage, consistent with the past, and has
substantial debt service capacity to meet future capital borrowings
The District’s additional bonds test and rate covenant establishes that Net Revenues available for debt service will equal at
least 1.25x of senior debt service and 1.15x of total debt service
Management’s policy target is 2.50x and 1.80x for senior and total debt service coverage, respectively
___________________________
1Excludes Depreciation and Expenses related to GASB 68 and 75
Sources: MSD; Series 2019B&C Preliminary Official Statement; Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series
2019B.
11
Historically Strong Financial Performance
$289 $318 $333 $368 $401
0
50
100
150
200
250
300
350
400
450
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
($mm)
Operating Revenues (Last Five Fiscal Years)
___________________________
1Excludes Depreciation and Expenses related to GASB 68 and 75
Sources: Series 2019B&C Preliminary Official Statement.
Operating Expenses (Last Five Fiscal Years)1
Unrestricted Cash & Investments (Last Five Fiscal Years)Debt Service Coverage (Last Five Fiscal Years)
$163 $168 $169 $163 $171
0
20
40
60
80
100
120
140
160
180
200
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
($mm)
$299 $340 $348 $368 $410668737751825877
0
200
400
600
800
1000
0
100
200
300
400
500
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
(Days)($mm)
Total Unrestricted Cash & Investments
Days Cash on Hand (Including Long-Term Unrestricted Assets)
3.3x 3.3x
2.9x 3.1x 3.1x
2.1x 2.1x 1.9x 2.1x 2.1x
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
(x)
Senior Debt Service Coverage Combined Debt Service Coverage
12
$0
$2
$4
$6
$8
$10
$12
$14
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Annual Contribution ($mm)
Conservatively Managed Pension and OPEB Plans
As of December 31, 2018, MSD’s defined benefit plan (the
“Plan”) had 545 active plan members and an Actuarial
Accrued Liability of $58.2 million (82.6% funded)
Effective December 31, 2010, MSD closed the Plan to
new entrants and shifted all future employees to a
defined contribution plan
Current employees with less than 10 years of service as of
December 31, 2010, and all new employees commencing
service on or after January 1, 2011 participate in a defined
contribution plan
Pension Fund
Benefit provides healthcare for qualified retirees until the retiree becomes eligible for Medicare at age 65
OPEB is paid on a pay-as-you-go basis to ensure flexibility in future benefits
MSD’s total OPEB unfunded accrued liability as of June 30, 2019 is estimated to be approximately $24 million
OPEB Update
___________________________
Source: Series 2019B&C Preliminary Official Statement; District Comprehensive Annual Financial Report (Fiscal Years Ended June 30, 2019 and 2018); Metropolitan St. Louis Sewer District
Employees’ Pension Plan Financial Statements, December 31, 2018 and 2017.
Historical Pension Payments
Pre-Reforms
($mm)
13
Bond Provisions and Covenants
The Series 2019B&C Bonds will be issued with a
senior lien on the Pledged Revenues of the System
The Series 2019B&C Bonds will not be secured
by the Debt Service Reserve Account
Net Operating Revenues include service charges and
other revenues, net of operating expenses
Amounts on deposit in the Sinking Fund used to
pay principal and interest on Senior Bonds
Senior and total debt service coverage levels were
3.1x and 2.1x, respectively, in FY 2019
Rate covenant requires 1.25x senior and 1.15x total
debt service coverage
Additional bonds test for parity debt also requires 1.25x
senior and 1.15x total debt service coverage
After making deposits shown in the accompanying flow
of funds, MSD may deposit excess revenues into the
Renewal and Extension Fund
MSD Customer Base
Revenue Fund
First
Second
Fourth
Operating Revenues
Third
Fifth
Sixth
Seventh
Eighth
Operations and Maintenance
Sinking Fund
Rebate Fund
Debt Service Reserve Account
(Replenishment Payments)
Reserve Account Credit
Facility Provider Payments
Subordinate Obligations
Debt Service Reserve Account
(Accumulation Payments)
Other System Obligations
Flow of Funds
The Master Bond Ordinance provides bondholders with strong protections
14
Conservative Debt Portfolio
MSD has $1.14 billion of outstanding
Senior Bonds and $409.5 million of
outstanding Subordinate Bonds as of
November 1, 2019
Subordinate Bonds purchased by
the State of Missouri through the
Missouri State Revolving Fund
Program and Direct Loan Program
Debt portfolio is 100% fixed rate, with
no exposure to variable rate debt or
interest rate derivatives
Outstanding Debt Service (FYE 6/30)
___________________________
Note: Does not account for the proposed Series 2019B&C Bonds or the potential refunding of the Refunded Bonds.
0
20
40
60
80
100
120
140
2020 2023 2026 2029 2032 2035 2038 2041 2044 2047 2050 2053
($mm)Senior Lien Subordinate Lien
Senior Bonds
Debt Pay-Down
10-Year: 25%
20-Year: 63%
Senior Lien
74%
Subordinate
Lien (SRF
Bonds and
Direct Loans)
26%
Lien Composition
Fixed
Rate
100%
Interest Rate Mode
15
MSD Credit Strengths
S&P: AAA (Stable)
Fitch: AA+ (Stable)
High-Grade and
Stable Credit
Ratings
Sole provider of wastewater treatment and stormwater management to 1.3 million
residents in the St. Louis metropolitan area
Service area supported by a large, stable, and diverse regional economy
Essential
Service
Monopoly in a
Broad Service
Area
Since entering into the Consent Decree, successfully met milestones and satisfied all
regulatory requirements
Continues to exceed goals relating to budget and timelines, management and
engineering efficiencies
Demonstrated
Ability to
Deliver CIRP
On-Time and
Under-Budget
MSD is independent and has ultimate authority over rates and charges and budget
Rates are affordable and are projected to remain so
Consistent with prior MSD referendums, voters overwhelmingly approved $900 million
bond authorization in 2016 to continue funding the CIRP
Successful
Rate Setting
Process and
Strong Public
Support
Strong management focuses on conservative budgeting and operational efficiencies
Debt service coverage remains above management’s 2.50x senior and 1.80x total for
senior and subordinate targets; strong liquidity with 877 days cash on hand
Manageable pension and OPEB obligations
Consistently
Strong
Financial
Performance
16
Plan of Finance
The District is planning to issue approximately
$322.6 million in par as part of its Series 2019B&C
plan of finance
Series 2019B Bonds are being issued:
To fund approximately $63.8 million of the costs
of certain additions, extensions, and
improvements to the System
With a 30-year level debt service structure
The Series 2019C Bonds are being issued:
To taxably advance refund certain maturities of
the Series 2011B, 2012A, 2012B, 2013B, and
2015B Bonds*
To generate level or uniform annual savings
The Series 2019B&C Bonds will be issued as fixed
rate, Senior Bonds and will not be secured by the
Debt Service Reserve Account
___________________________
Source: Series 2019B&C Preliminary Official Statement.
*Preliminary, subject to change.
17
Proposed Amortization Schedule*
Year (5/1)2019B (Tax-Exempt)Year (5/1)2019C (Taxable)
2021 845,000 2021 1,260,000
2022 885,000 2022 1,285,000
2023 930,000 2023 1,305,000
2024 975,000 2024 1,330,000
2025 1,025,000 2025 1,360,000
2026 1,075,000 2026 1,385,000
2027 1,130,000 2027 1,420,000
2028 1,185,000 2028 11,885,000
2029 1,245,000 2029 12,170,000
2030 1,310,000 2030 12,480,000
2031 1,375,000 2031 11,865,000
2032 1,440,000 2032 13,155,000
2033 1,515,000 2033 13,525,000
2034 1,590,000 2034 13,915,000
2035 1,670,000
2036 1,755,000
2037 1,840,000
2038 1,930,000
2039 2,030,000 Term 2039 27,250,000
Term 2044 11,770,000 Term 2044 144,540,000
Term 2049 15,030,000
Transaction Timeline and Contact Information
Date Event
November 8, 2019 Electronic Distribution of POS & Investor Presentation
November 18-19, 2019 Retail and Institutional Pricing
December 4, 2019 Closing
Contact Information
MSD Financial Advisors Senior Manager -Citigroup
Tim Snoke, Secretary-Treasurer
(314) 768-6222
tsnoke@stlmsd.com
Bethany Pugh (PFM)
(440) 863-5820
pughb@pfm.com
Samantha Costanzo
(312) 876-3564
samantha.costanzo@citi.com
John Strahlman,Asst. Secretary-Treasurer
(314) 768-6225
jstrahlman@stlmsd.com
Tionna Pooler (Independent Public Advisors)
(816) 521-6844
tpooler@independentpublicadvisors.com
Robert Mellinger
(312) 876-3555
robert.a.mellinger@citi.com
November 2019
S M T W T F S
27 28 29 30 31 1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30
Holiday Transaction Date
December 2019
S M T W T F S
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31 1 2 3 4
18