HomeMy Public PortalAboutExhibit MSD 67N Credit_PresentationsTable of Contents
Item No. Document
5‐12 Finance Committee Presentation, February 2004
Credit Presentation, Series 2004A
Credit Presentation, Series 2006C
Credit Presentation, Series 2008A
$150,000,000M t lit St L iMetropolitan St. Louis Sewer DistrictSewer Revenue BondsSewer Revenue BondsMetropolitan St. Louis Sewer DistrictFi C itt P t tiPublic Financial Management2600 GFinance Committee PresentationFebruary 10, 20042600 Grand AvenueTerrace Place Suite 214Des Moines, IA 50312
TifDi iTopics for Discussion1Review Plan of Finance for $500 000 000 Sewer Revenue Bonds1.Review Plan of Finance for $500,000,000 Sewer Revenue Bonds2.Review debt issuance process2.Review debt issuance process3. Review status of planning initiatives2
Plan of Finance for$$500,000,000 Sewer Revenue Bonds•Structure, term, and timing of multiple series of bondsStructure, term, and timing of multiple series of bonds•SRF leverage•Bond covenants3
Plan of FinanceKey ConsiderationsPlan of Finance—Key Considerations•Construction schedule substantially drives bond sale schedule–Current projections and forecast of bond issues–Arbitrage management considerationsMSD h ld ti i EIERA SRF th it•MSD should optimize EIERA SRF authority–Consideration of leverage options–Seek additional authority but plan conservatively–Seek additional authority but plan conservatively •Trustees will preserve flexibility to modify & direct plan of finance–Future competitive vs. negotiated sale opportunitiespg pp–Future use of variable rate vs. fixed rate debt–Retain ability to respond to market opportunities4
Pl f FiBdSt tPlan of Finance—Bond Structure•Structure, term & timing–$150 million Series 2004A BondsAffirm total par amountFixed rate level debt service 30year termFixed rate, level debt service, 30-year term–$90 to $140 million Series 2004B (SRF) Bonds70% vs. 50% subsidy considerations70% vs. 50% subsidy considerationsAffirm recommendation to leverage 50% subsidy–$210 million (amount dependent on 2004 SRF) Series 2006 Bonds•Timing subject to construction schedule and market opportunitiesAssume fixed rate; variable rate discretion remainsCompetitive vs. negotiated sale process to be determined by Trustees at a later date5
Plan of Finance—SRF Subsidy ConsiderationsSRF Subsidy Considerations•Option One: Issue entire $140 million with the EIERA for a 50% rate subsidy–Average rate under option one is estimated at 2.35%•Option Two: Issue $90 million with the EIERA for a 70% rate subsidy, and issue an additional $50 million at either current market rates, or in the future.$,–Assuming the additional $50 million is issued under current rates, the estimated average rate for the $140 million is 2.47%.–Current long-term rates are at historic lows; strong likelihood of higher rates in the future–If done at a later date, MSD would need to initiate the IUP process to pseek approval for the additional $50 million at a 70% subsidy•Recommendation –MSD should maximize current SRF bond amount at 50% subsidy6
Plan of Finance—Consideration of Master Bond OrdinanceConsideration of Master Bond OrdinanceThe Master Bond Ordinance establishes a contract between MSD and bondholders that e tends thro gh final mat rit of the bondsbondholders that extends through final maturity of the bonds.Debt ServiceMaster Bond Ordinance7
Plan of Finance—Consideration of Master Bond OrdinanceConsideration of Master Bond OrdinanceMaster Bond Ordinance covenants must provide bondholder protection (which increases marketability of bonds) while not undulyprotection (which increases marketability of bonds) while not unduly constraining MSD from implementing its CIRP.Key covenantsRecommendationsKey covenants •Debt Reserve•Rate CovenantsRecommendations•Fully funded, potential surety•1.25 times maximum annual debt•Parity Bond•Subordinate Bonds•1.25 times maximum annual debt•1.15 times maximum annual debt8
Debt Issuance ProcessDi l d l l d t ti•Disclosure and legal documentationC ditd t ti db di l ti•Credit documentation and bond insurance evaluationDl tdil tti f kti l•Development and implementation of marketing planPii fMSDS R B d•Pricing of MSD Sewer Revenue Bonds9
Debt Issuance Process—Disclosure and Legal DocumentationDisclosure and Legal Documentation•Preliminary official statement–Provides description of MSD–Contains financial information–Identifies bondholder risks–Summarizes bond covenants and other contracts•Master Bond Ordinance–Establishes contract between MSD and bondholders–Establishes terms for issuance of additional debt10
Debt Issuance Process—Disclosure and Legal DocumentationDisclosure and Legal Documentation•Bond Trustee Agreement–Specifies Trustee (designated bank) responsibilities regarding restricted funds and payments to bondholders•Agreement Among Underwriters (AAU)Etblih i iti dt f ll ti fb d d–Establishes priorities and terms for allocation of bonds, and banker compensation•Bond Purchase Agreement–Contract between MSD and lead banker establishing final debt gterms–Affirms accuracy of disclosure material11
Debt Issuance Process—Credit DocumentationCredit agencies will assign credit rating to MSD debt based on their analysts’ evaluation of MSD’s ability and willingness to pay debt in full and on time.Credit Documentation–Economic conditions and trends•Local economy, demographics, and customer mix–Legal and governmental constraints•Rate commission process, Master Bond Ordinance–Debt management considerations•Amount, structure, term of debtDemonstrated financial performance–Demonstrated financial performance•History of financial operations, reserves–Management responseManagement response•Demonstrated ability to direct financial performance and promptly respond to fiscal challenges12•Use of financial “Best Practices”
Debt Issuance Process—B d i ill b l d•Bond insurer provides guarantee of payment to bondholders in hffiBond insurance will be evaluatedexchange for up-front premiumCf f•Cost of premium driven by perception of risk and underlying credit ratings•Final bond insurance decision based on financial analysis of interest savings generated13
Debt Issuance Process—Marketing PlanMarketing Plan•Marketing strategy led by banking team–Maximize sale of MSD bonds to retail buyers Individuals•Individuals–Establish broad demand from institutional buyersy•Insurance companies, bond funds, trust accounts, ticorporations14
Debt Issuance Process—Marketing Plan•Marketing Plan ComponentsMarketing Plan–Internet “road show”•PowerPoint with audio commentarycommentary–Investor meetings and presentationPromotions & advertisements–Promotions & advertisements15
Pricing of MSD Sewer Revenue BondsgAn aggressive pre-marketing effort will facilitate a successful pricing.Municipal Yield Curves as of 02/06/2004•Benchmark yield established•Comparable credits analyzedMunicipal Yield Curves as of 02/06/2004"AAA" INSURED "AA" "A" "BAA" "LOW" "HIGH"2005 1.05% 1.09% 1.10% 1.22% 1.72% 3.00% 4.50%2006 1.39% 1.47% 1.45% 1.62% 2.14% 3.50% 5.00%2007 1.69% 1.78% 1.77% 1.96% 2.48% 3.75% 5.00%2008 2.05% 2.15% 2.13% 2.34% 2.87% 4.00% 5.00%2009235%246%245%268%3 21%425%5 00%•Market timing coordinated20092.35%2.46%2.45%2.68%3.21%4.25%5.00%2010 2.59% 2.71% 2.69% 2.94% 3.46% 4.50% 5.00%2011 2.83% 2.95% 2.93% 3.18% 3.70% 4.65% 5.00%2012 3.07% 3.19% 3.17% 3.42% 3.94% 4.75% 5.00%2013 3.28% 3.40% 3.38% 3.63% 4.15% 4.75% 5.00%2014 3.45% 3.57% 3.55% 3.80% 4.34% 4.75% 5.00%2015358%370%368%393%4 47%470%4 95%20153.58%3.70%3.68%3.93%4.47%4.70%4.95%2016 3.70% 3.82% 3.80% 4.05% 4.59% 4.70% 4.95%2017 3.82% 3.94% 3.92% 4.16% 4.70% 4.70% 4.90%2018 3.93% 4.05% 4.03% 4.27% 4.81% 4.70% 4.90%2019 4.03% 4.15% 4.13% 4.37% 4.90% 4.70% 4.85%2020 4.12% 4.24% 4.22% 4.46% 4.98% 4.70% 4.85%2021421%433%431%455%5 05%465%4 85%20214.21%4.33%4.31%4.55%5.05%4.65%4.85%2022 4.29% 4.40% 4.38% 4.62% 5.10% 4.60% 4.80%2023 4.36% 4.47% 4.45% 4.67% 5.15% 4.50% 4.80%2024 4.42% 4.52% 4.51% 4.70% 5.18% 4.40% 4.65%2025 4.45% 4.55% 4.54% 4.73% 5.21% 4.40% 4.65%2026 4.48% 4.58% 4.57% 4.76% 5.25% 4.40% 4.65%20274.49%4.59%4.58%4.77%5.26%4.40%4.65%20274.49%4.59%4.58%4.77%5.26%4.40%4.65%2028 4.50% 4.60% 4.59% 4.78% 5.27% 4.40% 4.65%2029 4.51% 4.61% 4.60% 4.79% 5.28% 4.40% 4.65%2030 4.52% 4.62% 4.61% 4.80% 5.29% 4.40% 4.65%2031 4.53% 4.63% 4.62% 4.81% 5.30% 4.40% 4.65%2032 4.54% 4.64% 4.63% 4.82% 5.31% 4.40% 4.65%2033 4.54% 4.64% 4.63% 4.82% 5.31% 4.40% 4.65%162034 4.54% 4.64% 4.63% 4.82% 5.31% 4.40% 4.65%
Review status of planning initiativespg•Engineering feasibility study•Debt Management Policy•Long-term plan of finance•Bond sale scheduleMetropolitan St. Louis Sewer DistrictFinance Plan17
Metropolitan St. Louis Sewer DistrictCredit PresentationMoody’s Investors ServiceOur MissionProvide exceptional quality in sanitary sewage collection and treatment and storm water management to protect the public’s health and safety.
2ParticipantsMSD ParticipantsRobert J. Baer, Chair, Board of TrusteesJeffrey Theerman, Acting Executive DirectorRandy E. Hayman, General CounselBrian Hoelscher, Director of EngineeringJanice M. Zimmerman, Director of FinanceKarl J. Tyminski, Secretary-TreasurerGene F. Rhodes, Interim Internal AuditorFinance Team ParticipantsJeanne Vanda, Public Financial Management—Financial AdvisorCurtis Robinson, TKG & Associates—Financial AdvisorEric Cowan, Banc of America Securities—Senior BankerRobert Ballsrud, Gilmore & Bell—Bond Counsel
3Table of Contents•History of the Metropolitan St. Louis Sewer District •MSD Today•The MSD Capital Improvement and Replacement Program•The Plan of Finance•MSD Financial Performance & Management•Summary of Credit Strengths•Schedule of Implementation of Financing Plan
4History of MSD
5MSD was established and chartered pursuant to a special election to provide for wastewater and stormwater services in the City of St. Louis and most of the then developed areas of St. Louis County.•Governance vested in a six member Board of Trustees• The Mayor of St. Louis and the St. Louis County Executive each appoint three trustees.• Original service area encompassed 230 square miles•95% of sewage in thearea went untreatedin 1954• MSD began operating in1956, assuming control ofall existing publicly ownedwastewater & stormwaterdrainage facilitiesMSD was established as a special district in 1954
6MSD’s first bonds• 1956 through 1961 various bond issues were used to finance construction of sewers by MSD• In 1962 a voter referendum authorized issuance of $95 million ingeneral obligation bonds. ─Bonds financed Bissell Point and Lemay treatment plants and the Mississippi River Interceptor.─The 1962 MSD bond authorization was the then largest clean waterbond issuance in the United States.
7In 1984 MSD authorized the issuance of $60 million in revenue bonds but litigation successfully challenged the validity of the bonds under the 1954 District Plan. The rate ordinance was also challenged.•To resolve the challenge to rates, a district-wide referendum was held March 8, 1988, with voters approving new district-wide user charges.•To ensure funding to meet EPA Consent Decree requirements an August 8, 1988 referendum earned voter approval for temporary (7-year) capital improvement surcharges using a flat rate for residential customers.•In 1992 a revenue neutral rate adjustment was successfully challenged in the courts. •Charges collected were refunded pursuant to settlement.•In 1993 volume based user rates were also challenged, but upheld by the Court of Appeals which found that the rates were user fees, not taxes, and exempt from the Hancock Amendment.Hancock Amendment litigation clouded rate setting and debt authority beginning in the 1980s
8Referendum voters again affirmed support for MSD, approving four separate charter changes to clarify debt authority and strengthen accountability. Key 2000 Plan amendments:•Established a Rate Commission to review proposed rate changes and advised the MSD Board of Trustees on rate issues;•Set the term limits for the members of the MSD trustees;•Required rotation of auditors every five years and formalized the position of Internal Auditor, who reports to the Trustees;•Changed the parameters for investment of funds;•Required the completion of a Management Audit every five years and the preparation of a continuing Five-Year Strategic Plan;•Authorized the issuance of district-wide revenue bonds to fund capital projects, subject to a simple majority voter approval requirement; and •Provided for the sale of bonds by negotiation, as well as by competitive saleMSD voters approved charter changes by over 65% on all measures.A November 2000 referendum resolved debt authority and amended the Charter.
9Despite funding challenges, MSD has undertaken substantial investment in capital infrastructure. FY Year Ending MSD Payments for Capital Improvements Utility Plant contributed By Other Government And Developers 1991 $64,861,816 $11,944,422 1992 102,921,414 15,515,369 1993 82,213,698 14,548,443 1994 78,317,078 26,764,164 1995 52,312,831 29,882,441 1996 80,204,291 33,749,530 1997 85,308,899 26,600,666 1998 80,204,292 33,749,530 1999 72,882,901 28,822,383 2000 67,024,301 26,892,707 2001 50,653,501 16,779,451 2002 70,687,845 19,904,597 2003 91,124,792 21,887,964 Subtotal $978,717,659 $307,041,667 Total $1,285,759,326 Source: MSD Annual Financial Statements
10In 2004, the MSD service area includes 92 cities, and unincorporated areas. MSD Service Area serves a population of 1.4 million•1977 referendum enlarged service area to 524 square miles•Service area encompasses five watershed areas•Area includes the City of St. Louis and 91 other cities including approximately 85% of St. Louis CountyTreatment Plants
11MSD’s Organizational ChartBoard of TrusteesRateCommissionCivil ServiceCommissionInternal AuditorSecretary-TreasurerExecutive DirectorFinanceInformationSystemsEngineeringOperationsHumanResourcesAssistant ExecutiveDirectorGeneral Counsel
12MSD’s commitment to customer service & accountability is reflected in multiple initiatives•Development of Strategic Operating Plan•Customer Satisfaction Surveys•Cross-training of MSD Personnel•Development of Debt ManagementPolicy•Development of Long-Term Planof Finance•Development of Ethics Policy
13Strategic Business Plan•2001 joint effort of the staff, Trustees, & Citizens Group•Establishes five Strategic Goals•Goals supported by objectives and action plan•Senior managers responsible for implementation•Plan Goals1.To deliver effective & dependable wastewater & stormwater services to the citizens of the District.2.To earn the community’s trust, understanding, and support.3.To utilize the District’s resources appropriately & efficiently.4.To create a sustainable & effective organizational environment that is open, effective, & supportive ofall employees of volunteers.5.To make the protection, beautification, & enhancement of the regions water environment among the community’s highest priorities.
14Customer Satisfaction Survey•Customer satisfaction surveys are undertaken annually.–Monitors customer reaction to MSD performanceover time–Facilitates identification of customer service problems•MSD receives high ratings in public awareness, overall performance and professionalism•Senior management is reviewing opportunities to more effectively utilize the annual survey as part of the action strategy to implement the strategic plan goals.
15MSD StaffingOver the last ten years MSD has reduced personnel by operating more efficiently and by selective outsourcing.949921898901930930903866841813010020030040050060070080090010001994199519961997199819992000200120022003Fiscal YearAdminOffice/ClericalPlant Oper. & Lab.Eng, & Tech.Sewer Const. & Maint.Based on actual positions
16MSD currently provides secondary treatment for an average daily flow of 320 MGD, operating eight treatment facilities.MSD Facilities--Treatment Plants* To be closed in 2006** Lower Meramec Plant to be reconstructed with initial capacity at 15 MGD; expansion capacity at 56 MGD Plant Permitted Design Flow (MGD) 2003 Actual Flow (MGD) Watershed Service Area Bissell Point 150.00 139.0 Bissell Point Coldwater 40.00 25.0 Coldwater Grand Glaize 16.00 17.0 Lower Meramec Fenton 3.75 3.5 Lower Meramec Baumgartner 4.00* 6.5 Lower Meramec Lower Meramec 4.00** 3.5 Lower Meramec Missouri River 28.00 29.0 Missouri River Lemay 167.00 110.0 River Des Peres
17MSD Facilities– Collection System•9,300 total miles of sewers•4,600 miles of sanitary sewers•1,900 miles of combined sewers•2,800 miles of storm sewers•267 pump stations DDiidd yyoouu kknnooww tthhaatt tthheerree aarree 99,,330000 mmiilleess ooff sseewweerrss aanndd ssttoorrmm cchhaannnneellss uunnddeerr tthhee aarreeaa wwiitthhiinn tthhee bboouunnddaarriieess ooff tthhee MMeettrrooppoolliittaann SStt.. LLoouuiiss SSeewweerr DDiissttrriicctt?? TThhaatt iiss eennoouugghh ttoo ggoo aaccrroossss tthhee UUnniitteedd SSttaatteess 22 ¼¼ ttiimmeess..
18Profile of Customers Fiscal Single Multi-Family Year Ending Family Residential Commercial/ Total June 30 Residential Accounts Units Industrial Accounts 1994 346,222 48,520 149,356 26,572 421,314 1995 348,727 47,522 132,854 26,513 422,762 1996 350,660 47,839 132,720 26,444 424,943 1997 351,983 47,265 130,060 26,289 425,537 1998 348,605 46,154 127,780 26,030 420,789 1999 349,759 45,787 126,580 25,939 421,485 2000 351,367 45,348 125,371 25,918 422,633 2001 352,656 45,074 124,531 25,779 423,509 2002 353,166 44,581 123,813 25,664 423,411 2003 353,935 44,632 123,933 25,672 424,239 _________________ Source: The District.
19City vs. County- Breakdown of Accounts2004 Total Accounts23%77%County AccountsCity Accounts2004 Customer Billings36%64%County CustomerBillingsCity CustomerBillingsData reflects February 2004 billings; average fluctuations in monthly billings is 0.2%
20Largest Customers Percent Customer User Charges of Total Anheuser-Busch Companies, Inc. $ 4,483,060 3.61% Mallinckrodt, Inc. 1,072,131 0.86% Saint Louis Zoo 943,262 0.76% Chrysler Corporation 824,086 0.66% Washington University 688,801 0.55% Sigma Chemical Co. 508,207 0.41% BJC Health Systems 479,609 0.39% Boeing Company 306,780 0.25% ASTARIS 291,347 0.23% St. Louis City 268,115 0.22% Total: $ 9,865,398 7.94% Source: The District. *As of June 30, 2003*
21MSD Capital Improvement & Replacement Program (“CIRP”)
22Regulatory and Health & Safety Issues•MDNR administrative order requires Baumgartner Lagoon to be taken off-line by December 31, 2006.–Re-construction of Lower Meramecwill expand plant treatment capacityand replace Baumgartner•Combined Sewer Overflow (CSO’s) –Objective is to reduce & controlCSO’s•Sanitary Sewer Overflows (SSO’s)–Objective is to eliminate SSO’sthrough CIRP
23In 2001 MSD initiated a comprehensive Programming Planning effort to expand the traditional CIRP and identify and prioritize capital infrastructure needs for a eighteen year planning framework.The 2002 Program Plan completed by a consortium led by Sverdrup/Kwame/Metcalf & Eddy provides the framework for future capital infrastructure investment. Program planning study objectives were as follows:•Identify regulatory issues that impactproject planning priorities;•Through hydraulic modeling, evaluateexisting MSD Planned CIRP Projects;•Identify additional system needs aboveMSD Planned CIRP Projects; and•Develop optimum CIRP based on factorssuch as regulatory compliance, cost,schedule, system need and project benefits.Program Planning
24The 2002 Program Plan identified and prioritized $3.7 billion inwastewater system projects.Treatment PlantsBissell Point$20.5Coldwater Creek45.2Lower Meramec226.2Missouri River42.1River Des Peres279.7Total$613.72002 Program PlanSSOProjects $2,369.2CSOProjects $750.0TotalProjects $3,732.9$ Dollars in millions
25Phase I CIRP projects prioritized for appropriation in FY 04, 05and 06 total $647.1 million.Service AreaFY 2004FY 2005FY 2006TotalBissell Point$14,600,000 $34,500,000 $70,900,000 $120,000,000Coldwater15,000,000 24,900,000 30,000,000 69,900,000Lower Meramec101,200,000 49,900,000 20,900,000 172,000,000Missouri River10,300,000 59,000,000 23,400,000 92,700,000River Des Peres32,900,00043,700,000115,900,000192,500,000Total$174,000,000 $212,000,000 $261,100,000 $647,100,000CIRP Phase I projectsCIRP projects prioritize regulatory compliance and protection of public health and safety.Source: MSD CIIRP appropriated costs
26CIRP Phase I Projects
27The Lower Meramec River WWTP project is a key priority to address wastewater treatment capacity needs in the Phase I CIRP•Construction of new 15 MGD WWTP (ultimate 56 MGD capacity) •Lower Meramec will expand capacity and replace current facilities– Baumgartner will be off-line in 2006•$216 million Phase I investment– Plant & Baumgartner Tunnel•Plant will be operational inlate 2006.
28Other priority Phase I CIRP projects•$127 million for SSO Projects •$183 for CSO Projects•$111 million for Coldwater, Fenton, Grand Glaize, Missouri River & Lemay plant upgrades•$40 million for otherprojects
29Rate Commission•Supported a $833 million five-year CIRP•Supported the wastewater rate changeproposal that included increases of:– 19% in 2003– 21% in 2004– 16% in 2005•Supported a referendum for $500 millionin revenue bonds May 19, 2003 Report•Recommended adjustments to rates based on schedule changesThe Rate Commission has assumed an active role in guiding the Phase I funding plan and reviewing proposed rates and chargesOctober 25, 2002 Report
30Plan of Finance
31District voters again demonstrated strong support for MSD with a 68% majority vote on February 3, 2004 to authorize the issuance of $500 million in revenue bonds to fund a portion of Phase I CIRP projects.MSD’s plan of finance is focused on ensuring that funds are available as needed to finance project costs, while achieving the lowest long-term cost of money for ratepayers. Bonds are planned as follows:•$175,000,000 Series 2004A Wastewater System Revenue Bonds» 30 year, fixed rate bonds sold through negotiation» Anticipate pricing week of April 19•$161,670,000 Series 2004B State Environmental Improvement and Energy Resources Authority (State of Missouri) Water Pollution Control Revenue Bonds» Clean Water SRF Program- -Issuance May 2004» 20 year, fixed rate bonds; interest rate subsidy at 50% of market•$163,330,000 Series 2006 Wastewater System Revenue Bonds» Structure and timing to be finalized» Projections assume 30-year fixed rate bondsPublic Support
32Annual debt service requirements for the Phase I CIRP financing are projected at $29,300,000 annually.Projected Debt Service on Phase I BondsFiscal Series 2004A Series 2004B Series 2006Total Less DSRFTotal NetYear EndDebt ServiceDebt ServiceDebt ServiceDebt ServiceEarningsDebt Service06/30/05 7,859,111 10,375,637 - 18,234,748 (746,100) 17,488,648 06/30/06 9,304,803 10,375,207 - 19,680,010 (756,609) 18,923,401 06/30/07 9,303,443 10,375,835 8,010,201 27,689,479 (1,377,725) 26,311,754 06/30/08 9,302,698 10,375,019 10,990,201 30,667,918 (1,377,725) 29,290,193 06/30/09 9,306,510 10,375,245 10,988,151 30,669,906 (1,377,725) 29,292,180 06/30/10 9,300,286 10,377,992 10,990,504 30,668,782 (1,377,725) 29,291,056 06/30/11 9,304,971 10,375,136 10,989,566 30,669,673 (1,377,725) 29,291,947 06/30/12 9,304,526 10,375,179 10,991,365 30,671,069 (1,377,725) 29,293,343 06/30/13 9,303,871 10,377,815 10,992,157 30,673,842 (1,377,725) 29,296,117 06/30/14 9,303,554 10,374,614 10,990,062 30,668,230 (1,377,725) 29,290,504 06/30/15 9,303,694 10,376,314 10,989,442 30,669,450 (1,377,725) 29,291,724 06/30/16 9,304,094 10,377,678 10,991,262 30,673,033 (1,377,725) 29,295,308 06/30/17 9,304,906 10,374,405 10,990,497 30,669,807 (1,377,725) 29,292,082 06/30/18 9,300,956 10,376,553 10,991,607 30,669,115 (1,377,725) 29,291,389 06/30/19 9,307,279 10,373,942 10,989,667 30,670,888 (1,377,725) 29,293,162 06/30/20 9,303,102 10,376,226 10,989,215 30,668,543 (1,377,725) 29,290,817 06/30/21 9,303,471 10,377,781 10,989,574 30,670,826 (1,377,725) 29,293,100 06/30/22 9,302,999 10,373,563 10,989,602 30,666,164 (1,377,725) 29,288,438 06/30/23 9,306,299 10,373,212 10,988,112 30,667,622 (1,377,725) 29,289,897 06/30/24 9,303,211 10,377,061 10,989,402 30,669,673 (1,377,725) 29,291,947 06/30/25 19,678,835 - 10,991,990 30,670,824 (1,377,725) 29,293,099 06/30/26 19,681,245 - 10,990,512 30,671,757 (1,377,725) 29,294,031 06/30/27 19,680,977 - 10,989,383 30,670,360 (1,377,725) 29,292,635 06/30/28 19,677,660 - 10,987,817 30,665,477 (1,377,725) 29,287,752 06/30/29 19,681,098 - 10,990,778 30,671,875 (1,377,725) 29,294,150 06/30/30 19,679,252 - 10,987,428 30,666,680 (1,377,725) 29,288,954 06/30/31 19,680,549 - 10,987,568 30,668,117 (1,377,725) 29,290,392 06/30/32 19,677,930 - 10,989,768 30,667,698 (1,377,725) 29,289,973 06/30/33 19,679,562 - 10,987,591 30,667,153 (1,377,725) 29,289,428 06/30/34- - 10,989,864 10,989,864 (621,116) 10,368,748 06/30/35- - 10,989,864 10,989,864 (621,116) 10,368,748 06/30/36- - 10,992,120 10,992,120 (27,514,325) (16,522,205) Totals 361,750,888 207,514,413 326,715,262 895,980,563 (67,457,851) 828,522,712
33The Plan of Finance for the $647 million in Phase I CIRP projects includes both Pay-Go as well as debt funding components.Plan of Finance- Capital Improvement Program FinancingSource: Black & Veatch Engineering Feasibility Study 2004 Fiscal Year Ending June 30, Line ________________________________________________________ 2004 - 2008 No Description 2004 2005 2006 2007 2008 Total ____ ______________________ ________ ________ ________ ________ ________ ________ $ $ $ $ $ $ Source of Funds 1 Beginning of Year Balance 23,684,100 260,031,600 125,981,800 32,205,500 22,080,300 23,684,100 2 Short-Term Debt Financing 69,506,800 69,506,800 3 Revenue Bond Proceeds 175,000,000 0 163,330,000 0 0 338,330,000 4 State Revolving Loan Proceeds 161,670,000 0 0 0 0 161,670,000 5 Cash Financing of Construction 42,500,000 59,000,000 61,000,000 63,000,000 65,000,000 290,500,000 6 Grants & Contributions (a) 5,000,000 5,000,000 5,000,000 2,500,000 2,500,000 20,000,000 7 Interest Income 3,025,200 5,492,900 3,425,600 2,374,800 2,188,700 16,507,200 __________ __________ __________ __________ __________ __________ 8 Total Funds Available 480,386,100 329,524,500 358,737,400 100,080,300 91,769,000 920,198,100 Application of Funds 9 Major Capital Improvements 174,000,000 160,036,000 313,091,000 78,000,000 78,000,000 803,127,000 10 Repay Short-Term Loan 26,164,300 43,506,700 69,671,000 11 Issuance Costs 4,590,200 0 2,450,000 0 0 7,040,200 12 Revenue Bond Reserve Fund 15,600,000 0 10,990,900 0 0 26,590,900 __________ __________ __________ __________ __________ __________ 13 Total Application of Funds 220,354,500 203,542,700 326,531,900 78,000,000 78,000,000 906,429,100 14 End of Year Fund Balance 260,031,600 125,981,800 32,205,500 22,080,300 13,769,000 13,769,000 (a) Does not consider possible contributions from the City of Arnold to reserve capacity in the Lower Meramec River Wastewater Treatment Plant.
34The phased adjustments to MSD rates and charges implemented by the Board of Trustees provide strong debt service coverage for the planned $500 million revenue bonds and will fund Pay-Go CIRP projects through FY 08.Plan of Finance- Strong Debt CoverageFive Year Projection of Cash FlowPledged Revenues Exclude Stormsewer Charges and Non-Operating RevenuesProjectionsFY04 FY05 FY06 FY07 FY08Revenues & ExpensesOperating RevenuesSewer-Service Charges (Net of Stormwater)150,671,358 185,331,900 202,890,500 202,669,400 202,450,000Other Operating Revenue1,398,0001,411,1001,423,9001,436,8001,449,600Total Operating Revenue152,069,358 186,743,000 204,314,400 204,106,200 203,899,600Investment Income-Reserve Funds1,375,300 2,021,800 2,335,200 2,678,500 2,700,200Investment Income- Operations160,900243,200347,700404,900271,200Total Pledged Revenues153,605,558 189,008,000 206,997,300 207,189,600 206,871,000Operating Expenses:Operations and Maintenance Expense101,008,200105,917,900109,381,000113,494,700117,752,800Total Operating Expenses101,008,200 105,917,900 109,381,000 113,494,700 117,752,800Net Pledged Revenues Available for Debt52,597,358 83,090,100 97,616,300 93,694,900 89,118,200Debt Service2003 EIERA Note164,2000000Series 2004A0 7,859,111 9,304,803 9,303,443 9,302,698Series 2004B0 10,375,637 10,375,207 10,375,835 10,375,019Series 20060008,010,20110,990,201Total Debt Service164,200 18,234,748 19,680,010 27,689,479 30,667,918Net Revenue After Debt52,433,158 64,855,352 77,936,290 66,005,421 58,450,282Routine Annual Improvements2,617,400 2,696,000 2,777,000 2,860,300 2,946,200Additions to Operating Reserve615,000436,900517,400535,600554,400Net Revenues Available for CIRP49,200,758 61,722,452 74,641,890 62,609,521 54,949,682Debt Coverage4.56 X 4.96 X 3.38 X 2.91 X
35MSD Rate Affordability Comparison City Single Family User (monthly) Single Family User (annually) % of Median Household Income Medium % of Median Household Income Larger Medium Larger Medium Larger St. Louis $19.55 $32.95 $234.60 $395.40 0.864% 1.456% St. Louis County 19.55 32.95 234.60 395.40 0.464% 0.782% Kansas City 17.95 32.05 215.40 384.60 0.579% 1.034% Milwaukee 20.05 36.75 240.60 441.00 0.747% 1.369% Minneapolis 32.80 65.60 393.60 787.20 1.037% 2.073% Austin 32.98 68.68 395.76 824.16 0.927% 1.930% Nashville 36.13 84.85 433.56 1,018.20 1.105% 2.595% Boston 38.75 78.15 465.00 937.80 1.173% 2.366% Notes: St. Louis rates for single family users reflects rate adjustments for July 1, 2005 Data for other cities extracted from Black & Veach 2004 Engineering and Financial Feasibility Study Median Household Income obtained from 2000 Census Data Medium users reflect 7,500 gallons per month and larger users 20,000 gallons
36The Master Bond Ordinance provides strong security provisions for bondholders.• Fully funded debt reserve for MSD bonds, excluding EIERA SRF debt–Provision for surety bond in the future• A rate covenant at 1.25X senior and 1.15X subordinate debt• An additional bonds test for parity debt at 1.25X and 1.15X for subordinate debtMaster Bond OrdinanceRevenueFundO&M (First)Sinking Fund(Second)RebateFund(Third)Principal &InterestOperatingRevenuesFund DSRF(Fourth)Sub. Debt(Fifth)Flow of FundsR&E,Other (Sixth)
37MSD Financial Performance & Management
38Finance Department Initiatives –Billing and Collections • Implementing new state-of-the-art billing and collection technology.- Implementation targeted for completion May 3, 2004.- Benefits: increased processing efficiencies, reduced billing errors, improved cash flows• Increased collection of delinquent customer accounts.- Increased use of outside collection agencies.- Collections agency results up 116% compared to same period last year.- Addressing delinquencies sooner due to more stringent collection process.- Hired new Collection Manager with 15 years executive experience in the collection industry.- Developed collection performance measures. Primary measure, “Daily Receivables Outstanding (DRO)” improved 15% from 52 days to 44 days compared to same period last year.- Increased use of liens. Liens filed through 3/12/04 increased over 2800% compared to same periodlast year.- Actively pursuing water and sewer service shut-off capabilities as added collection leverage.
39• Developed new reporting formats focused on District strategic goals.- Internal Financial Report put into monthly production as of January 31, 2004. Report includes: 1. Analysis of actual trends for Balance Sheet, Profit and Loss, and Cash flows2. Summary analysis of monthly budget variances focusing on net budget overage exposure.3. Flow of Funds4. Projected cash flows5. Glossary of Financial Terms • Redesigned Annual Budget Process.- Focus shifted to zero-based from percent over prior year’s budget.- Department budgets developed in two components: Base and Incremental.- Base budgets reflect core operational costs only.- Incremental budgets represent cost of new strategic initiatives aligned with District goals.- Budget to be reviewed in-depth by Board through a series of three focused Finance Committeemeetings.Resulting Base Operating BudgetsPreliminary2002-032003-042004-05Base Budget$116.0M$114.7M $113.9MChange($1.3M)($0.8M)Finance Department Initiatives –Reporting Improvements
40Finance Department Initiatives –Budget Monitoring•Formal budget variance accountability process implemented.– Senior Management receive month budget variance reports each month end.– Summary budget variances are reviewed at each monthly Senior Managementmeeting.– Director of Finance reviews and presents budget variances to Executive Directoreach month.– Senior Management required to prepare and submit written explanation of budgetvariances each quarter end.
41Treasury Activities – Assets Under ManagementMetropolitan St. Louis Sewer DistrictInvestment Balances Last 16.7 Years February 29, 2004$0$50$100$150$200$250$300Jun-88Dec-88Jun-89Dec-89Jun-90Dec-90Jun-91Dec-91Jun-92Dec-92Jun-93Dec-93Jun-94Dec-94Jun-95Dec-95Jun-96Dec-96Jun-97Dec-97Jun-98Dec-98Jun-99Dec-99Jun-00Dec-00Jun-01Dec-01Jun-02Dec-02Jun-03Dec-03Feb-04June 1988 through Feb 2004Millions16.7 Year Averge $175.6 $ 268$ 71
42Treasury Activities -- Resources•Investment Policy– Policy prioritizes preservation of principal, followed by liquidity and yield– Provides guidelines for asset allocation– Establishes benchmarks to measure performance•Resources– Bloomberg Financial – All fixed income services– Portia Investment Tracking System– Multiple Broker Economic Reports and ForecastsThe office of Secretary-Treasurer directs investment of MSD Funds, with one full-time professional dedicated to managing invested funds.
43Treasury Activities – Strategic Considerations• Investment Approach– Pursue passive investment strategy– Continuously monitor portfolio for policy compliance and performance– Provide daily web updates of portfolio activity• CIRP Investments– Pro-active coordination of engineering, finance and accounting information– Continuous communication with contractors• Pursue Education and Training– Level One CFA completed by Secretary-Treasurer– Periodic external review of treasury operations to ensure best practices
44Pension ProgramMSD offers a defined benefit plan providing retirement, death and disability benefits to all full-time employees.As of December 31, 2003787 active and 628 inactive participants$137,137,782 in assetsDecember 2002, unfunded accrued liability( $20,622,000)December 2003, unfunded accrued ($26,285,000) estimated unauditedInvestment Advisor: New England Pension Consulting, contractexpires June 30, 2008
45Internal Controls and Audit FunctionsStaffing:Three internal auditors with 90 years combined experienceKey Milestones:1988: Internal Audit Department established1995: Trustees established Audit Committee- Two Trustees and up to three outside professionals- Provides direction for internal and external audit activities2000: Charter amendment formalized Internal Audit Reporting Relationship2001: Price Waterhouse Coopers performs a co-sourced risk assessment of MSD- Set 56 auditable areas in four major divisions- Established internal audit rotation of one to three years2002: State Audit Report2003: State Audit Follow-up
46Internal Controls and Audit FunctionsRecent Accomplishments• Billing and Collections Audit• Environmental Compliance & Management Systems Review• Audit Committee Charter and Sarbanes-Oxley• IT General Controls Review• Fiscal year Financials• M/WBE Goals Compliance Audit• Overhead Charges for design contracts• Implementing Business Conduct Alert-lineCurrent and Future In-House Audits• Physical Inventory of Fixed Assets and Equipment•Payroll• Public Affairs Expenditures• Workers Compensation Plan and Payments• Treasury Management Operations• Special Requests
47Summary of MSD credit position•Long history of strong voter support for MSD initiatives •Stable and diversified customer base – 77% of all accounts in St. Louis County•MSD has taken aggressive action to improve financial management and controls– Strategic Operating Plan– Streamlined senior management– Finance Department initiatives•Well-conceived Program Plan provides road map for completion of CIRP– Commitment to substantial Pay-Go funding•Affordable rates are in place to fund the CIRP beyond the $647 million Phase I projects
48MSD Financing ScheduleSchedule*ActivityMarch 15-18Meetings with Rating AgenciesMarch 19-25Follow-up with Rating AgenciesMarch 26Release of RatingsApril 1Board of Trustees authorize POSApril 2POS DistributedApril 5-16Pre-MarketingApril 20-21PricingApril 22Board of Trustees authorize BPAMay 6Closing and Delivery*Tentative Schedule
49MSD Contact InformationMSD StaffPhone/EmailJeffrey L. Theerman, P.E., Acting Executive Director 314-768-6224jthee@stlmsd.comKarl J. Tyminski, C.P.A., Secretary-Treasurer314-768-6222kjtymi@stlmsd.comJanice M. Zimmerman, Director of Finance314-768-6299jzimmer@stlmsd.comRandy E. Hayman, General Counsel314-768-6209rhayman@stlmsd.comGene F. Rhodes, C.I.A., Acting Internal Auditor314-768-6281gfrhod@stlmsd.comBrian L. Hoelscher, P.E., Director of Engineering314-768-6204blhoel@stlmsd.com
Metropolitan St. Louis Sewer DistrictCredit PresentationOur MissionProvide exceptional quality in sanitary sewage collection and treatment and storm water management to protect the public’s health and safety.
2ParticipantsMSD ParticipantsDavid B. Rosenberg, Finance Committee Chair, Board of TrusteesJeffrey Theerman, Executive DirectorRandy E. Hayman, General CounselKarl J. Tyminski, Secretary-TreasurerJanice M. Zimmerman, Director of FinanceBrian Hoelscher, Director of EngineeringFinance Team ParticipantsJeanne Vanda, Public Financial Management—Financial AdvisorMarco Listrom, Valdés and Moreno—Financial AdvisorBrian Cookson, Valdés and Moreno—Financial Advisor
3Table of Contents•Overview of the Metropolitan St. Louis Sewer District •The MSD Capital Improvement and Replacement Program (“CIRP”)•Update of Financial Performance •Moving Forward to Phase IIof CIRP•Summary of Credit Strengths
4Overview of MSD
5MSD was established and chartered pursuant to a special election to provide for wastewater and stormwater services in the City of St. Louis and most of St. Louis County.•Governance is vested in a six member Board of Trustees.• The Mayor of St. Louis and the St. Louis County Executive each appoint three trustees.• A Rate Commission reviews proposed changes to rates and charges and makes recommendations to Trustees.• Revenue Bonds are issued pursuant to referendum approval of majority of voters.MSD was established as a special district in 1954
6In 2006, the MSD service area includes 92 cities, and unincorporated areas. MSD Service Area serves a population of 1.4 million•1977 referendum and subsequent annexation enlarged service area to 525 square miles•Service area encompasses five watershed areas•Area includes the City of St. Louis and 91 other cities including approximately 85% of St. Louis CountyTreatment Plants
7MSD’s Organizational ChartBoard of TrusteesRateCommissionCivil ServiceCommissionInternal AuditorSecretary-TreasurerExecutive DirectorFinanceInformationSystemsEngineeringHumanResourcesGeneral CounselOperations
8MSD StaffingOver the last ten years MSD has reduced personnel by operating more efficiently and by selective outsourcing.Based on actual positions898901930930903866841813799801010020030040050060070080090010001996 1997 1998 1999 2000 2001 2002 2003 2004 2005Fiscal YearAdminOffice/ClericalPlant Oper. & Lab.Eng, & Tech.Sewer Const. & Maint.
9MSD currently provides secondary treatment for an average daily flow of 315 MGD, operating eight treatment facilities.* Baumgartner plant to close by December 31, 2006** Meramec Lagoon will be replaced with the Lower Meramec Plant which will have an initial capacity of 15MGD; expansion capacity to 56 MGD*** To be phased out with expansion capacity at Lower MeramecPlantMSD Facilities--Treatment PlantsPermittedDesign Flow(MGD)2005ActualFlow(MGD)WatershedService AreaBissell Point150.0123.0 Bissell PointColdwater40.024.0 ColdwaterGrand Glaize16.0*** 17.0 Lower MeramecFenton3.8***3.8 Lower MeramecBaumgartner4.0*7.4 Lower MeramecMeramec Lagoon3.6 **3.9 Lower MeramecMissouri River28.029.0 Missouri RiverLemay167.0107.0 River Des Peres
10MSD Facilities– Collection System•9,630 total miles of sewers•4,741 miles of sanitary sewers•1,928 miles of combined sewers•2,961 miles of storm sewers•294 pump stationsDDiiddyyoouukknnoowwtthhaatttthheerreeaarree99,,363300mmiilleessooffsseewweerrssaannddssttoorrmmcchhaannnneellssuunnddeerrtthheeaarreeaawwiitthhiinntthheebboouunnddaarriieessoofftthheeMMeettrrooppoolliittaannSStt..LLoouuiissSSeewweerrDDiissttrriicctt??TThhaattiisseennoouugghhttooggooaaccrroosssstthheeUUnniitteeddSSttaatteess22¼¼ttiimmeess..
11Profile of CustomersSource: The District.Fiscal Single MultiYear Ending Family Family Commercial/ TotalJune 30ResidentialResidentialIndustrialCustomers1996 350,660 47,839 26,444 424,9431997 351,983 47,265 26,289 425,5371998 348,605 46,154 26,030 420,7891999 349,759 45,787 25,939 421,4852000 351,367 45,348 25,918 422,6332001 352,656 45,074 25,779 423,5092002 353,166 44,581 25,664 423,4112003 353,935 44,632 25,672 424,2392004 356,069 44,969 25,806 426,8442005 356,805 44,506 25,581 426,8922006 362,043 44,700 25,700 432,443
12City vs. County- Breakdown of Accounts2006 Total Accounts77.5%22.5%County AccountsCity Accounts2006 Customer Billings65.1%34.9% County BillingsCity Billings
13Largest CustomersSource: The District.FY 2005CustomersUser Charges% TotalAnheuser-Busch Inc.6,803,995 3.74%Mallinckrodt Inc.1,985,401 1.09%Washington University1,306,720 0.72%Zoological Gardens709,049 0.39%Chrysler Corporation684,877 0.38%Boeing Company679,444 0.37%City of St. Louis624,699 0.34%Sigma Chemical Company611,368 0.34%Sensient Colors Inc.591,443 0.33%St. Louis University588,4600.32%Total14,585,456 8.02%
14MSD Capital Improvement & Replacement Program
15In 2001 MSD initiated a comprehensive Programming Planning effort to expand the traditional CIRP and identify and prioritize capital infrastructure needs for a twenty year planning framework.The 2002 Program Plan completed by a consortium led by Sverdrup/Kwame/Metcalf & Eddy provides the framework for future capital infrastructure investment. Program planning study objectives were as follows:•Identify regulatory issues that impactproject planning priorities;•Through hydraulic modeling, evaluateexisting MSD Planned CIRP Projects;•Identify additional system needs aboveMSD Planned CIRP Projects; and•Develop optimum CIRP based on factorssuch as regulatory compliance, cost,schedule, system need and project benefits.Preliminary Program Planning
16The 2002 Program Plan identified and prioritized $3.7 billion (2002 dollars) in wastewater system projects.Treatment PlantsBissell Point$20.5Coldwater Creek45.2Lower Meramec226.2Missouri River42.1River Des Peres279.7Total$613.72002 Program PlanSSOProjects $2,369.2CSOProjects $750.0TotalProjects $3,732.9$ Dollars in millions
17Regulatory, Health & Safety Issues Drive Phase IProjects•Expansion of Wastewater Treatment Capacity– Expand wet weather treatment capacity at all major treatment facilities– MDNR administrative order requires Baumgartner Lagoon to be taken off-line by December 31, 2006.– Construction of Lower Meramecwill expand plant treatment capacityand replace Baumgartner.•Combined Sewer Overflow (CSO’s) – Objective is to reduce & controlCSO’s•Sanitary Sewer Overflows (SSO’s)– Objective is to eliminate SSO’sthrough CIRP
18The Lower Meramec WWTP project is the key priority to address Phase ICIRP wastewater treatment needs.•Construction of new 15 MGD WWTP (ultimate 56 MGD capacity) •Lower Meramec will expand capacity and replace other facilities over time.•$231 million Phase Iinvestment– Plant & Baumgartner Tunnel•Plant is expected to be online in late December 2006.
19Phase ICIRP projects by type (2002 dollars)•$327 million for treatment capacity, including Meramec, Coldwater, Fenton, Grand Glaize, Missouri River & Lemay plant upgrades•$127 million for SSO Projects •$183 for CSO Projects•$40 million for otherprojects
20District voters demonstrated strong support for MSD with a 68% majority vote on February 3, 2004 to authorize the issuance of $500 million in revenue bonds to fund a portion of Phase ICIRP projects.MSD’s plan of finance is focused on ensuring that funds are available as needed to finance project costs, while achieving the lowest long-term cost of money for ratepayers. Bonds issued and planned are as follows:Date SeriesTermPar Issued Par OutstandingOutstanding05/06/04 2004Public SupportA30 Year, Fixed $175,000,000 $173,500,00004/28/04 2004B (EIERA) 20 Year, Fixed161,280,000 159,025,00005/19/05 2005A (EIERA) 20 Year, Fixed6,800,000 6,800,00004/27/06 2006A (EIERA) 20 Year, Fixed42,715,000 42,715,000Projected11/28/06 2006B (EIERA) 20 Year, Fixed14,205,00011/28/06 2006C30 Year, Fixed60,000,000Total:$460,000,000 $382,040,000Remaining AuthorizationMulti-modal Commercial Paper $40,000,000
21Update of Financial Performance
22Annual debt service requirements for the Phase ICIRP financing are projected from $22-$28 million through 2028, then declines as debt is retired.The debt projections to the right to do not include the remaining $40 million in bond authorization, anticipated FY08.Projected Debt Service on Phase IBondsFiscalCurrent Projected Projected Total TotalYear EndOutstanding Debt2006B (SRF)2006C (Rev)ProposedProjected Debt6/30/2007$19,841,056 $192,932 $1,285,307 $1,478,239 $21,319,2956/30/200821,327,970 171,970 2,570,614 2,742,583 24,070,5536/30/200922,057,808 850,387 2,570,614 3,421,001 25,478,8096/30/201023,011,138 852,050 2,570,614 3,422,663 26,433,8016/30/201123,691,611 848,535 2,570,614 3,419,149 27,110,7606/30/201223,670,446 849,772 2,570,614 3,420,386 27,090,8326/30/201323,681,728 850,614 2,570,614 3,421,227 27,102,9556/30/201423,764,584 851,019 2,570,614 3,421,633 27,186,2176/30/201524,112,697 850,946 2,570,614 3,421,560 27,534,2566/30/201624,024,527 850,386 2,570,614 3,420,999 27,445,5276/30/201724,546,779 849,327 2,570,614 3,419,941 27,966,7196/30/201824,610,914 847,761 2,570,614 3,418,374 28,029,2886/30/201924,822,187 850,680 2,570,614 3,421,294 28,243,4806/30/202025,013,618 848,086 2,570,614 3,418,700 28,432,3176/30/202125,198,678 849,992 2,570,614 3,420,606 28,619,2836/30/202225,565,138 846,402 2,570,614 3,417,016 28,982,1536/30/202325,575,034 847,369 2,570,614 3,417,982 28,993,0166/30/202425,773,818 847,863 2,570,614 3,418,477 29,192,2956/30/202525,959,666 847,917 2,570,614 3,418,530 29,378,1966/30/202625,892,801 847,524 2,570,614 3,418,137 29,310,9396/30/202719,051,536 846,678 6,570,614 7,417,292 26,468,8286/30/202815,992,300 845,374 6,922,614 7,767,987 23,760,2876/30/202915,989,8500 6,926,870 6,926,870 22,916,7206/30/203015,991,7500 6,921,954 6,921,954 22,913,7046/30/203115,990,2500 6,927,788 6,927,788 22,918,0386/30/203215,992,5000 6,923,438 6,923,438 22,915,9386/30/203315,991,7500 6,929,352 6,929,352 22,921,1026/30/203415,991,5000 6,929,627 6,929,627 22,921,1276/30/203500 10,864,000 10,864,000 10,864,0006/30/203600 10,432,000 10,432,000 10,432,000Totals $613,133,634 $17,343,585 $126,475,216 $143,818,801 $756,952,436
23The Master Bond Ordinance provides strong security provisions for bondholders.• Fully funded debt reserve for MSD bonds, excluding EIERA SRF debt– Provision for surety bond in the future• A rate covenant at 1.25X senior and 1.15X subordinate debt• An additional bonds test for parity debt at 1.25X and 1.15X for subordinate debtMaster Bond OrdinanceRevenueFundO&M (First)Sinking Fund(Second)RebateFund(Third)Principal &InterestOperatingRevenuesFund DSRF(Fourth)Sub. Debt(Fifth)Flow of FundsR&E,Other (Sixth)
24The increases to MSD rates and charges implemented through July 1, 2006 provide strong debt service coverage for the planned $500 million revenue bonds and fund Pay-Go CIRP projects through FY08.The figures to the right exclude the anticipated $40 million final Phase Idebt authorization, as well as any rate adjustments that may be recommended by the rate commission.Plan of Finance- Strong Debt CoverageAudited1Projected2FY04 FY05 FY06 FY07 FY08Operating RevenuesSewer -Service Charges$149,672,393 $180,732,026 $199,470,786 $195,104,100 $194,360,300Other Operating Revenues7,067,1347,027,2466,083,6749,200,8009,456,900Total Operating Revenue$156,739,527 $187,759,272 $205,554,460 $204,304,900 $203,817,200Investment Income$1,630,215 $4,356,643 6,135,347 $4,606,900 $4,700,800Other115,763(5,667,330)(95,372)Total Pledged Revenues$158,485,505 $186,448,585 $211,594,435 $208,911,800 $208,518,000Operating Expenses$108,000,500 $117,930,992 $131,909,717 $123,874,300 $120,441,200Non-Recurring Projects & Studies4,211,0114,291,8743,375,1896,209,6006,457,300Total Expenses$112,211,511 $122,222,866 $135,284,906 $130,083,900 $126,898,500Net Pledged Revenues Available for Debt$46,273,994 $64,225,719 $76,309,529 $78,827,900 $81,619,500Senior Debt ServiceSeries 2004A$0 $8,052,321 $9,665,734 $9,640,734 $9,615,634Series 2006C0001,285,3072,570,614 Subtotal$0 $8,052,321 $9,665,734 $10,926,041 $12,186,247Subordinate Debt ServiceSeries 2004B (EIERA)0 2,624,276 6,370,755 9,684,010 10,373,643Series 2005A (EIERA)00 67,605 111,674 425,239Series 2006A (EIERA)000 404,639 913,454Series 2006B (EIERA)000192,932171,970 Subtotal$0 $2,624,276 $6,438,360 $10,393,255 $11,884,306Total Debt Service$0 $10,676,597 $16,104,094 $21,319,295 $24,070,553Net Revenue After Debt$46,273,994 $53,549,122 $60,205,435 $57,508,605 $57,548,947Net Revenues Available for CIRP$42,062,983 $49,257,248 $56,830,246 $51,299,005 $51,091,647Senior Debt Coverage7.98 X 7.89 X 7.21 X 6.70 XTotal Debt Coverage6.02 X 4.74 X 3.70 X 3.39 XNotes:1From District Report on Agreed-Upon Procedures for Year Ended June 30, 20062Adapted from Black & Veatch Report on the Engineering & Financial Feasibility for the District, 2006.
25MSD Rate Affordability Comparison% Median % Median MonthlyAnnual Household HouseholdSingle Family User Single Family User Income IncomeJurisdictionMediumLargerMediumLargerMediumLargerSt. Louis $26.00 $44.10 $312.00 $529.20 1.01% 1.71%St. Louis County 26.00 44.10312.00 529.20 0.57% 0.98%Minneapolis 20.00 40.00 240.00 480.00 0.55% 1.10%Kansas City 20.12 35.92 241.44 431.04 0.57% 1.01%Milwaukee 21.82 40.01 261.84 480.12 0.64% 1.17%Nashville 36.13 84.85 433.56 1,018.20 1.33% 3.12%Boston39.70 80.32 476.40 963.84 1.14% 2.30%Austin40.26 82.93 483.12 995.16 1.20% 2.47%Notes:St. Louis rates for single family users reflects rate adjustments through July 1, 2006Data for other cities extracted from Black & Veatch 2006 Engineering and Financial Feasibility StudyMedian Household Income estimates obtained from 2005 Census DataMedium users reflect 7,500 gallons per month and larger users 15,000 gallons
26Collection Agency Performance-Dollars Collected as of September 30, 2006Total Collections:–Actual FY03 - $4,378,185–Actual FY04 - $9,770,314–Actual FY05 - $16,371,265–Actual FY06 - $14,407,773–Projected FY07 - $20,128,828 *Annualized Collection Rate:–Actual FY03 – 22.98%–Actual FY04 – 39.8%–Actual FY05 – 59.7%–Actual FY06 – 51.51% –Projected FY07 – 61.41%* Achievement of FY07 Projection would represent a $3.8 million or 23% increase over record collection achieved in FY05.
27Pension Fund UpdateMSD offers a defined benefit plan providing retirement, death and disability benefits to all full-time employees.As of December 31, 2005:– 795 active participants– $158,321,308 in assets– $19.3 million in unfunded liabilityMSD has developed an aggressive plan to fund the actuarial contributions required to meet the unfunded liability over ten years.– FY 2006-07 is third year of funding plan– Unfunded liability has declined from $25.3 million as of December 2004
28OPEB ConsiderationsMSD’s total OPEB liability has been estimated at approximately $76 million by Milliman Consultants & Actuaries (draft schedules as of October 15, 2006)•Total liability may be reduced by a change in benefits offered to existing and future retirees age 65 and over.Next steps:•Staff review of final OPEB report•Identification and analysis of alternative liability and funding scenarios•Development of recommendations for Trustee consideration– Targeted consideration by Trustees in early 2007
29Moving Forward to Phase IIof CIRP
30Planning for Phase IICIRPCoordination With Phase IResultsDetailed System Condition Assessments•Adjustments in project priorities and schedule•Adjustments in scope of projects–Better information leads to different project solutions–Ongoing dialogue with MDNR and EPA continuously clarifies priorities
31Proposed Phase IIProjectsPhase IIprojects complete plant capacity projects initiated in Phase Iand shift focus to SSO and CSO construction initiatives.•Complete wastewater treatment plant wet weather capacity projects initiated in Phase I, such as Lemay WWTP Wet Weather Expansion•Construct Missouri River WWTP Secondary Expansion, and disinfection at Missouri River and Coldwater Treatment Plants•Continue multi-year effort to rebuild major trunk sewer lines, such as the Deer Creek, Coldwater Creek, and Gravois Creek Trunk Sewer Relief projects•CSO Elimination, such as the CSO-McKnight Rd, CSO-Olive & I-170, and the CSO-Page Avenue outfall removal projects•Continue control and removal of SSOs and CSOs throughout the combined and separate systems•Planning for Phase III
32Rate Commission Recommendations & Schedule•Supports a $891 million Phase IICIRP through 2011•Plan of Finance includes both Pay-Go and Bonds•Recommends rate changes that include increases of:– 15% in 2008– 13% in 2009– 10% in 2010– 7% in 2011•Supports a 2007 referendum proposal for $300 millionin new revenue bond authorityThe Rate Commission will begin consideration of MSD’s proposed Phase IIrate change recommendations in January 2007.MSD Phase IIRecommendations
33Black and Veatch sources and uses with new rates
34Black and Veatch projected cash flow and coverageNotes:(a) Existing wastewater rates effective July 1, 2005.(b) Transitional support of the stormwater program during conversion of tax based to user charge based revenues.(c) Debt service on SRF Loans are net of the state’s interest subsidy.(d) Does not include funds set asude for a minimum operating reserve equal to 60 days of operating expenses.(e) Payment to Bondholders per Table 3-9, paid through Sinking Fund.(f) The Bond Ordinance requires net revenue to equal or exceed 125 percent of actual debt service.(g) The Bond Ordinance requires net revenue to equal or exceed 115 percent of actual debt service.
35Summary of Credit Strengths
36MSD Credit Strengths•Long history of strong voter support for MSD initiatives•Stable and diversified customer base •Strong financial management – Active management strategy to collect past due accounts and long term delinquencies– Implementation of plan to fund pension obligation– Close monitoring of monthly financial performance•Well-conceived Program Plan provides road map for completion of CIRP– Key Phase Ipriority – Lower Meramec treatment plant near completion– Ongoing evaluation to develop the best project solutions to meet needs– Commitment to substantial Pay-Go funding•Strong bondholder security provisions– Affordable rates provide strong debt service coverage
37MSD Financing ScheduleSchedule*ActivityOctober 19-20Rating agency callsNovember 2Print and distribute POSNovember 9Trustee MeetingNovember 15-16Pricing of bondsNovember 28Close and deliver funds*Tentative Schedule
38MSD Contact InformationMSD StaffPhone/EmailJeffrey L. Theerman, P.E., Executive Director314-768-6224jthee@stlmsd.comRandy E. Hayman, General Counsel314-768-6209rhayman@stlmsd.comKarl J. Tyminski, CPA, Secretary-Treasurer314-768-6222kjtymi@stlmsd.comJanice M. Zimmerman, Director of Finance314-768-6299jzimmer@stlmsd.comBrian L. Hoelscher, P.E., Director of Engineering314-768-6204blhoel@stlmsd.com
Our MissionProvide exceptionalProvide exceptional quality in sanitary sewage collection and treatment andand treatment and storm water management to protect the public’s pphealth and safety.Metropolitan St. Louis Sewer DistrictCredit Rating PresentationCredit Rating Presentation
ParticipantspMSD ParticipantsJeffrey Theerman, P.E., Executive DirectorRandy E. Hayman, General CounselKarl J TyminskiCPA Secretary-TreasurerKarl J. Tyminski, CPA, SecretaryTreasurerJanice M. Zimmerman, Director of FinanceBrian Hoelscher, P.E., Director of EngineeringVicki L. Taylor Edwards, Director of Human ResourcesBarbara Mohn, Director of Information SystemsJonathan Sprague PE Director of OperationsJonathan Sprague, P.E., Director of OperationsRobert Breig, Assistant Secretary-TreasurerFinance Team ParticipantsJeanne Vanda, Public Financial Management—Financial AdvisorMarco Listrom, Valdés and Moreno—Financial Advisor2Matt Schnackenberg, Public Financial Management—Financial Advisor
Table of ContentsTable of Contents •Overview of the Metropolitan St. Louis Sewer DistrictOverview of the Metropolitan St. Louis Sewer District •The MSD Capital Improvement and Replacement Program (“CIRP”)•Update of Financial Performance •Summary of Credit Strengths3
4Overview of MSD
MSD was established as a special district in 1954MSD was established and chartered pursuant to a special election to provide for wastewater and stormwater services in the City of St. Louis and most of St. pyLouis County.•Governance is vested in a six member Board of Trustees.•TheMayor of St Louis and the St Louis County Executive each•The Mayor of St. Louis and the St. Louis County Executive each appoint three trustees.•A Rate Commission reviews proposed changes to rates and charges and makes recommendations to Trusteesand makes recommendations to Trustees.•Revenue Bonds are issued pursuant to referendum approval of majority of voters.5
MSD Service Area serves a population of 1.4 millionIn 2008, the MSD service area includes92citiesMSD Service Area serves a population of 1.4 millionarea includes 92cities, and unincorporated areas. •1977 referendum and1977 referendum and subsequent annexation enlarged service area to 525 square miles.q•Service area encompasses five watershed areas.•Area includes the City fSt L i d91of St. Louis and 91 other cities including approximately 85% of St LouisCountyTreatment Plants6St. Louis County.
MSDOrganizational ChartMSD Organizational ChartBoard of TrusteesRateCivil ServiceRateCommissionCommissionInternalSecretary-Internal AuditorTreasurerExecutive DirectorGeneral CounselFinanceInformationSystemsEngineeringHumanResourcesOperations7
MSD Facilities--Treatment PlantsMSD currently provides secondary treatment for an average daily flow of 330 MGD, operating seven treatment facilities. MSD maintainsof 330 MGD, operating seven treatment facilities. MSD maintains approximately 9,650 miles of sewer pipe.2008 PlantPermitted Design Flow (MGD)Actual Flow(MGD)Watershed Service Area150.0 144.3167.0 130.840 026 1Plant(MGD)(MGD)Service AreaBissell PointBissell PointLemayRiver Des PeresCld C kCld C k40.026.128.0 28.06.8 5.1Coldwater CreekColdwater CreekMissouri River Missouri RiverFenton Lower Meramec16.0 15.815.013.7422.8 363.8Grand Glaize Lower MeramecLower Meramec Lower MeramecTotal8Total
Profile of CustomersApproximately 65% of customer billings are in St. Louis County, with 35% in the City of St. Louis.Fiscal Single MultiYear Ending Family Family Commercial/TotalJune 30ResidentialResidentialIndustrialCustomers1998 348,605 46,154 26,030 420,7891999 349,759 45,787 25,939 421,4852000 351,367 45,348 25,918 422,6332001 352,656 45,074 25,779 423,5092002 353,166 44,581 25,664 423,4112003 353,935 44,632 25,672 424,2392004 356,069 44,969 25,806 426,8442005 356,805 44,506 25,581 426,8922006 362,043 44,700 25,700 432,4432007 362,569 44,875 25,647 433,0912008 362,427 44,605 25,583 432,6159Source: The District.
Largest Customers gFY 2008CustomersUser Charges%TotalCustomersUser Charges% TotalAnheuser-Busch $7,029,150 3.24%Mallinckrodt Inc 1,685,617 0.78%Washington University994,016 0.46%City Of St Louis811,8930.37%City Of St Louis811,8930.37%Chrysler Corporation 811,706 0.37%Zoological Gardens 784,423 0.36%Sigma-Aldrich 674,920 0.31%Rockwood Pigments Na Inc 624,807 0.29%g,St Louis Coca-Cola Bottling Co 536,315 0.25%Sensient Colors Inc. 532,339 0.25%Subtotal $14,485,186 6.68%Total All Customers $216,893,542,,10Source: The District.
MSD C it lMSD Capital Improvement & Replacement Program11Replacement Program
Planning for Long Term Capital Costs•Long term cost for Overflow Control Plan projects are not well definedgg p– $4 Billion+ Current Cost Estimate•EPA regulatory requirements will drive ultimate costs.12
MSD Approach to Long-Term Planning•Engage EPA in process to develop clarity in regulatory requirements and scope of projects to be requiredpp ggscope of projects to be required.– Current litigation limits discussion.•Educate local and Congressional stakeholders regarding the environmental gggand financial impacts of regulatory requirements.– MSD is collaborating with other urban systems to lobby Congressional representatives modifications of affordability metricsrepresentatives modifications of affordability metrics.•Continue to invest in the Capital Improvement Program (“CIRP”). “MSD’s mission is to provide exceptional quality in sanitary sewage collection and treatment and storm water management to protect the bli ’ h lth d f t ”public’s health and safety.”13
CIRP Investment: 2004 though 2013•Projects completed in 2004 through 2008 address the following:g– Increasing Wastewater Treatment Capacity; – Combined Sewers Overflows (CSOs);SitS O fl (SSO)d–Sanitary Sewer Overflows (SSOs); and– Total investment at approximately $822 million.•Projectsplanned through2013total include the following:Projects planned through 2013 total include the following:– Sanitary Sewer Overflows (SSOs);– Plant Improvements – Missouri River Plant;– Plant Improvements – Lemay Plant;– Planning and CMOM Activity;– Upgrade and integration of Enterprise System; and– Total investment in years 2008 through 2013 at approximately $660 million.14
Proposed 2008-2013 ProjectspjProjects planned for 2008-2013 complete plant capacity projects initiated in2004and shift focus to SSO and CSO construction initiativesin 2004 and shift focus to SSO and CSO construction initiatives.•Complete wastewater treatment plant wet weather capacity projects initiated in 2004, such as Lemay WWTP Wet Weather Expansion.•Construct Missouri River WWTP Secondary Expansion, and disinfection at Missouri River and Coldwater Treatment Plants.•Continue multi-year effort to rebuild major trunk sewer lines, such as the Deer Creek, Coldwater Creek, and Gravois Creek Trunk Sewer Relief projects.•CSO Elimination, such as the CSO-McKnight Rd, CSO-Olive & I-170, and the CSO-Page Avenue outfall removal projects.•Continue control and removal of SSOs and CSOs throughout the combined and separate systems.15
Funding Strategy•Strong Pay-Go component, targeted at 40% to 50% of program costs.ggy•Debt Plan seeks to maximize use of subsidized State Revolving Fund Loans.– SRF Debt is issued as subordinate debt.CIRP Projects Funding% Debt vs. Pay Go2004-2008 822,000,000$ Debt 775,000,000$ 52%2008-2013 660,000,000$ Pay Go 707,000,000$ 48%Total Projects1,482,000,000$ 1,482,000,000$ MSD voters have demonstrated support for this strategy in two separate b d f d h i i $775 illi i W Sbond referendums authorizing $775 million in Wastewater System Revenue Bonds.16
Rate Commission Recommendations &ScheduleRate Commission Recommendations & ScheduleThe Rate Commission’s March 21, 2008 “Rate Recommendation R”dil difW dSReport” details recommendations for Wastewater and Stormwater rate increases to fund CIRP projects through 2013.•Supports a $660 million CIRP projects through 2013•Plan of Finance includes both Pay-Go and Bonds•Recommends rate changes that include increases of:–2.4% in 20092.4% in 2009– 4.7% in 2010– 4.3% in 2011•Vote referendum August 5, 2008 authorized $275 million in new revenue bond authority.17y
MSD Rate Affordability Comparisonyp% Median % Median MonthlyAnnualHousehold HouseholdSingle Family User Single Family User Income IncomeJurisdictionMediumLargerMediumLargerMediumLargerSt Lo i$26 00$44 10$312 00$529 20101%171%St. Louis$26.00$44.10$312.00$529.201.01%1.71%St. Louis County 26.00 44.10 312.00 529.20 0.57% 0.98%Minneapolis 21.00 42.00 252.00 504.00 0.58% 1.15%pKansas City 22.95 40.95 275.40 491.40 0.65% 1.15%Milwaukee 11.67 19.77 140.04 237.24 0.34% 0.58%Nashville 36.13 84.85 433.56 1,018.20 1.33% 3.12%Bt45 2492 03542 881 104 36130%2 64%Boston45.2492.03542.881,104.361.30%2.64%Austin 46.69 94.16 560.28 1,129.92 1.39% 2.81%Notes:St. Louis rates for single family users reflects rate adjustments through June 30, 2009Data for other cities extracted from Black & Veatch 2008 Engineering and Financial Feasibility StudyMedian Household Income estimates obtained from 2005 Census DataMedium users reflect 7,500 gallons per month and larger users 15,000 gallons18,g p g ,g
Public SupportDistrict voters have demonstrated strong referendum support for MSD:•February 3, 2004—68% approval for the issuance of $500 million in revenue bonds; ppy,pp $ ;•August 5, 2008—76% approval for the issuance of $275 million in revenue bonds.MSD’s plan of finance is focused on ensuring that funds are available as needed to finance project costs, while achieving the lowest long-term cost of money for ratepayers. Bonds issued and planned are as follows:Date Series Term Par Issued Par OutstandingOutstanding05/06/04 2004A 30 Year, Fixed $175,000,000 $170,485,00004/28/04 2004B (EIERA) 20 Year, Fixed 161,280,000 147,160,00005/19/05 2005A (EIERA)20 Year, Fixed 6,800,000 6,520,000(),,,,,04/27/06 2006A (EIERA) 20 Year, Fixed 42,715,000 42,515,00011/28/06 2006B (EIERA) 20 Year, Fixed 14,205,000 14,205,00011/28/06 2006C 30 Year, Fixed 60,000,000 60,000,000PlannedPlanned10/28/08 2008A 30 Year, Fixed 30,000,00010/28/08 2008B (EIERA) 20 Year, Fixed 40,000,000Total:$530,000,000 $440,885,00019Remaining Authorization: $245 million
Update of Financial Pf20Performance
Finance Department--Performance Focus•Annual “Zero-Based” budget development process–Department budgets developed in two components: Base & Incremental.Department budgets developed in two components: Base & Incremental.– Departmental Base budgets reflect core operational costs only.– Incremental Budgets detail cost of strategic initiatives aligned with District goals.– In-depth Board review through series of Finance Committee meetings.•Budget monitoring process enhances budget performance.Mthlbdt i t i dbSiM tT–Monthly budget variance reports are reviewed by Senior Management Team.– Quarterly budget performance reports are reviewed by Finance & Audit Committee.•2008 Rate Commission actions further facilitate budget performance & flexibility.gp y– Working capital reserve target increased from 45 to 60 days.– New stormwater impervious charge implemented that will result in phase-out of tt ti tftttiwastewater enterprise support of stormwateroperations.•Pension & OPEB Obligations–Commitment to manage and reduce liabilities has proven results21Commitment to manage and reduce liabilities has proven results.
Collection Agency Performance-Dollars Collected as of June 30, 2008Total Collections:Total Collections:–Actual FY04 - $9,770,314–Actual FY05 - $16,371,265$–Actual FY06 -$14,407,774–Actual FY07 - $19,696,216–Actual FY08 - $18,573,814Annualized Collection Rate:–Actual FY04 – 39.8%–Actual FY05 – 59.7%–Actual FY06 – 51.51%–Actual FY07 – 57.49% –Actual FY08 – 48.41%22
Pension Fund UpdateMSD offers a defined benefit plan providing retirement, death and disability benefits tllfllti lto all full-time employees.As of December 31, 2007:–811 active participants–811 active participants– $185,356,497 in assets– $10.5 million in unfunded liabilityMSD has developed an aggressive plan to fund the actuarial contributions required to meet the unfunded liability over ten years.FY 200809 i fifth f f di l–FY 2008-09 is fifth year of funding plan– Unfunded liability has declined from $25.3 million as of December 200423
OPEB ConsiderationsMSD’s total OPEB unfunded accrued liability has been estimated at $approximately $21.9 million , assuming a 4.5% return on investment, by Milliman, Inc. (Report dated July 30, 2008).•The initial projected liability of $76 million has been significantly reduced toThe initial projected liability of $76 million has been significantly reduced to $21.9 million by a change in benefits offered to existing and future retirees age 65 and over.•MSD is partially funding the OPEB liability through the payment of theMSD is partially funding the OPEB liability through the payment of the monthly health claims on an ongoing basis for pre-age 65 retirees. There are 109 individuals in this group.•MSD has continued to elect a Pay Go approach to assure flexibility in futureMSD has continued to elect a Pay Go approach to assure flexibility in future benefits. The current recognized liability is $466,900.24
Projected Debt Service on$70 Million 2008BondsProjected Debt Service on $70 Million 2008 BondsFiscal Current Projected Projected Total TotalYear End Outstanding Debt 2008A (Rev) 2008B (SRF) Proposed Projected Debt6/30/2009 $22,462,929 $763,533 -$ $763,533 $23,226,4626/30/201026 763 5261 518 6302 441 8463 960 47630 724 002Annual debt service requirements with the 6/30/201026,763,526 1,518,630 2,441,846 3,960,476 30,724,002 6/30/2011 27,445,661 1,518,630 2,383,583 3,902,213 31,347,875 6/30/2012 27,420,981 1,518,630 2,381,844 3,900,474 31,321,455 6/30/2013 27,433,500 1,518,630 2,381,261 3,899,891 31,333,391 6/30/2014 27,517,198 1,518,630 2,382,176 3,900,806 31,418,004 6/30/2015 27,865,716 1,518,630 2,384,537 3,903,167 31,768,882 6/30/201627 777 4741 518 6302 383 8183 902 44831 679 922qSeries 2008A and Series 2008B Bonds are projected from $30-$33 6/30/201627,777,474 1,518,630 2,383,818 3,902,448 31,679,922 6/30/2017 28,299,164 1,518,630 2,380,161 3,898,791 32,197,955 6/30/2018 28,362,241 1,518,630 2,383,519 3,902,149 32,264,390 6/30/2019 28,571,947 1,518,630 2,383,718 3,902,348 32,474,295 6/30/2020 28,766,298 1,518,630 2,380,490 3,899,120 32,665,417 6/30/2021 28,948,764 1,518,630 2,378,950 3,897,580 32,846,344 million through 2026, then declines as debt is retired.6/30/2022 29,317,130 1,518,630 2,379,734 3,898,364 33,215,494 6/30/2023 29,323,436 1,518,630 2,382,888 3,901,518 33,224,955 6/30/2024 29,523,187 1,518,630 2,379,074 3,897,704 33,420,892 6/30/2025 29,709,529 1,518,630 2,378,341 3,896,971 33,606,500 6/30/2026 29,642,718 1,518,630 2,380,761 3,899,391 33,542,110 6/30/202726 801 0601 518 6302 381 1933 899 82330 700 8846/30/202726,801,060 1,518,630 2,381,193 3,899,823 30,700,884 6/30/2028 24,020,978 1,518,630 2,379,592 3,898,222 27,919,200 6/30/2029 24,014,974 1,518,630 2,380,912 3,899,542 27,914,516 6/30/2030 23,173,250 3,913,630 - 3,913,630 27,086,880 6/30/2031 23,166,750 3,914,868 - 3,914,868 27,081,618 6/30/2032 23,170,550 3,914,388 - 3,914,388 27,084,938 6/30/203323 171 2503 911 8333 911 83327 083 0836/30/203323,171,250 3,911,833 - 3,911,833 27,083,083 6/30/2034 23,170,750 3,913,215 - 3,913,215 27,083,965 6/30/2035 11,000,000 3,913,050 - 3,913,050 14,913,050 6/30/2036 10,500,000 3,913,975 - 3,913,975 14,413,975 6/30/2037 - 5,766,500 - 5,766,500 5,766,500 6/30/2038 - 5,672,975 - 5,672,975 5,672,975 256/30/2039 - - - - - Total $717,340,962 $69,970,566 $47,688,399 $117,658,965 $834,999,927
Projected Debt Service--New Money Bonds through 2013through 2013•$52.8 million Series 2010 SRF Bonds$89 0 illi S i 2011 W t t S t R B d•$89.0 million Series 2011 Wastewater System Revenue Bonds•$37.2 million Series 2011 SRF Bonds•$46.0 million Series 2013 Wastewater System Revenue Bonds•$20.0 million Series 2013 SRF BondsSubordinate DebtSenior DebtYear Ended Outstanding Series 2011 Series 2013Total Outstanding Series 2010 Series 2011 Series 2013TotalJune 30Debt Service(1)Debt ServiceDebt ServiceSenior DebtDebt Service(2)Debt ServiceDebt ServiceDebt ServiceSub. Debt2009 12,489,884$ -$ -$ 12,489,884$ 9,973,045$ -$ -$ -$ 9,973,045$ 2010 12,523,084 - - 12,523,084 14,240,442 - - - 14,240,442 201112 660 234--12 660 23414 785 4273 868 785--18 654 212201112,660,234 12,660,234 14,785,427 3,868,785 18,654,212 2012 12,782,384 4,279,461 - 17,061,844 14,638,597 3,868,396 2,744,405 - 21,251,398 2013 12,918,784 4,668,503 - 17,587,286 14,514,717 3,869,693 2,743,875 - 21,128,285 2014 13,050,844 4,668,503 2,181,625 19,900,972 14,466,354 3,870,973 2,742,427 1,477,979 22,557,733 2015 13,201,781 4,668,503 2,379,955 20,250,239 14,663,934 3,871,900 2,742,415 1,474,662 22,752,911 2016 13,337,181 4,668,503 2,379,955 20,385,639 14,440,293 3,867,737 2,743,974 1,475,078 22,527,082 2017 13,492,981 4,668,503 2,379,955 20,541,439 14,806,183 3,868,507 2,741,962 1,473,544 22,890,196 2018 13,647,981 4,668,503 2,379,955 20,696,439 14,714,260 3,868,693 2,746,244 1,475,212 22,804,409 (1) Includes Series 2008A Bonds(2)I l d S i 2008B B d26(2)Includes Series 2008B Bonds
Master Bond OrdinanceThe Master Bond Ordinance provides strong securityMaster Bond OrdinanceFlow of Fundsprovides strong security provisions for bondholders.• Fully funded debt OperatingRevenuesreserve for MSD bonds, excluding EIERA SRF debt.RevenueFund– Provision for surety bond in the future• A rate covenant at O&M Sinking FundRebateFundDSRFFundSub. DebtR&E,Oth1.25X senior and 1.15X subordinate debt.(First)(Second)Fund(Third)Principal &Fund(Fourth)(Fifth)Other (Sixth)• An additional bonds test for parity debt at 1.25X and 1.15X for Principal &Interest275ad 5 osubordinate debt.
Historic Debt Coverage from Pledged RevenuesHistoric Debt Coverage from Pledged RevenuesFY04 FY05 FY06 FY07 FY08Operating RevenuesAudited(1)Operating RevenuesSewer -Service Charges $149,672,393 $180,732,026 $199,470,786 $193,556,431 $203,949,871Other Operating Revenues 7,067,1347,027,2466,083,6747,406,6546,169,790Total Operating Revenue$156,739,527 $187,759,272 $205,554,460 $200,963,085 $210,119,661Investment Income $1,630,215 $4,356,643 $6,135,347 $13,501,751 $12,893,874Other 115,763(5,667,330)(95,372)(15,000)4,372Total Pledged Revenues $158,485,505 $186,448,585 $211,594,435 $214,449,836 $223,017,907Operating Expenses $108,000,500 $117,930,992 $131,909,717 $138,089,529 $164,789,198Non-Recurring Projects & Studies 4,211,0114,291,8743,375,1893,999,6731,016,891Total Expenses$112,211,511 $122,222,866 $135,284,906 $142,089,202 $165,806,089Net Pledged Revenues Available for Debt$46,273,994$64,225,719$76,309,529$72,360,634$57,211,818g$, ,$, ,$, ,$, ,$, ,Senior Debt ServiceSeries 2004A $0 $8,052,321 $9,665,734 $9,640,734 $9,615,634Series 2006C 0 0 0 1,233,350 2,902,000 Subtotal $0 $8,052,321 $9,665,734 $10,874,084 $12,517,634Subordinate Debt ServiceSubordinate Debt ServiceSeries 2004B (EIERA) 0 2,624,276 6,370,755 9,684,010 10,373,643Series 2005A (EIERA) 0 0 67,605 111,674 425,239Series 2006A (EIERA) 0 0 0 404,639 913,454Series 2006B (EIERA) 0 0 0 0 192,932 Subtotal $0 $2,624,276 $6,438,360 $10,200,323 $11,905,268Total Debt Service$0 $10,676,597 $16,104,094 $21,074,406 $24,422,902Net Revenue After Debt$46,273,994 $53,549,122 $60,205,435 $51,286,228 $32,788,916Net Revenues Available for CIRP$42,062,983 $49,257,248 $56,830,246 $47,286,555 $31,772,025Senior Debt Coverage 7.98 X 7.89 X 6.65 X 4.57 XTotal Debt Coverage602X474X343X234X28Notes:(1)From District Report on Agreed-Upon Procedures for Years Ending June 30, 2004 through 2008Total Debt Coverage6.02 X4.74 X3.43 X2.34 X
Black and Veatch sources and uses with new rates29
Black and Veatch projected cash flow and coveragecash flow and coverageNotes:(a) Existing wastewater rates effective January 1, 2008.(b) Transitional support of thestormwater(b) Transitional support of the stormwaterprogram during conversion of tax based to user charge based revenues.(c) Debt service on SRF Loans are net of the state’s interest subsidy.the state s interest subsidy.(d) Does not include funds set aside for a minimum operating reserve equal to 60 days of operating expenses.(e) Payment to Bondholders per Table 10, paid through Sinking Fund.(f) The Bond Ordinance requires net revenue to equal or exceed 125 percent of tldbt iactual debt service.(g) The Bond Ordinance requires net revenue to equal or exceed 115 percent of actual debt service.30
SfCditStth31Summary of Credit Strengths
MSD Credit Strengths g•Strong stakeholder support affirmed by 2008 Rate Commission action and August 5, 2008 Bond Referendum.August 5, 2008 Bond Referendum.•Proactive leadership has MSD well positioned to meet current and future capital infrastructure needs.– Ongoing dialogue with EPA to define long-term capital commitments.– Active efforts to reshape regulatory requirements that drive scope and cost of future projects.pj– Well-conceived CIRP provides $1.48 billion in completed and budgeted projects 2004 through 2013.•Solid financial management further enhances bondholder security.– Close monitoring of financial performance, collections actions, contribute to strong budget performance.ggp– Manageable pension and OPEB obligations.– Strong debt coverage & substantial Pay Go commitment to long term CIRP.32
MSD Financing SchedulegSchedule*ActivitySeptember 26 Rating agency callsOctober 3 Ratings releasedOctober 8 Print and distribute POSOctober 15 Pricing of bondsOctober 29 Close and deliver funds*Tentative ScheduleTentative Schedule33
MSD Contact InformationMSD StaffPhone/EmailMSD StaffPhone/EmailJeffrey L. Theerman, P.E., Executive Director 314-768-6224jthee@stlmsd.comRandy E. Hayman, General Counsel 314-768-6209rhayman@stlmsd.com Karl J. Tyminski, CPA, Secretary-Treasurer314-768-6222Karl J. Tyminski, CPA, SecretaryTreasurer3147686222kjtymi@stlmsd.comJanice M. Zimmerman, Director of Finance 314-768-6299jzimmer@stlmsd.comBrian L. Hoelscher, P.E., Director of Engineering 314-768-6204blh l@ tl dblhoel@stlmsd.com34