HomeMy Public PortalAboutExhibit MSD 16U 2009_Credit_Presentation_Final_12-17-09Our 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 District2009 Credit Rating Presentation2009 Credit Rating Presentation
ParticipantspMSD ParticipantsJeffrey Theerman, P.E., Executive DirectorRandy E. Hayman, General CounselKarl J Tyminski CPA Secretary-TreasurerKarl J. Tyminski, CPA, SecretaryTreasurerJanice M. Zimmerman, Director of FinanceFinance 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.•The Mayor of St Louis and the St Louis County Executive each appoint threeThe Mayor of St. Louis and the St. Louis County Executive each appoint three trustees.•A Rate Commission review proposed changes to rates and charges and 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 2009, the MSD service area included92citiesMSD Service Area serves a population of 1.4 millionarea included 92cities and unincorporated areas. • 1977 referendum and subsequent annexation enlarged service area to 525 square miles.• Service area encompasses five watershed areas.•Area includes the City of St. ea c udes e C y o SLouis and 91 other cities, including approximately all of St. Louis County.Treatment Plants6
MSD Organizational 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.Permitted2008Plant Permitted Design Flow (MGD) 2008 Actual Flow (MGD) Watershed Service Area Bi ll P i150 0153 9Bi ll P iBissell Point 150.0153.9Bissell PointLemay 167.0 145.3 River Des Peres Coldwater Creek 40.0 30.4 Coldwater Creek Missouri River 28.0 28.9 Missouri RiverFenton 6.8 5.2 Lower Meramec Grand Glaize 21.0 16.6 Lower Meramec Lower Meramec 15.0 14.3 Lower Meramec Total422 8394 6Total 422.8394.6 8
Profile of Customers Approximately 65% of customer billings are in St. Louis County, with 35% in the City of St. Louis.Fiscal Year EdiSingleFilMultiFilCil/TtlEnding FamilyFamilyCommercial/TotalJune 30 ResidentialResidentialIndustrial Customers2000 351,367 45,348 25,918 422,633 2001 352,656 45,074 25,779 423,509 2002353 16644 58125 664423 4112002 353,16644,58125,664423,4112003 353,935 44,632 25,672 424,239 2004 356,069 44,969 25,806 426,844 2005 356,805 44,506 25,581 426,892 2006 362,043 44,700 25,700 432,443,,,,2007 362,569 44,875 25,647 433,091 2008 391,181 54,862 32,336 478,379 2009 388,791 51,441 32,161 472,393 * Due to the implementation of the impervious area charge, approximately 46,000 additional stormwater-only accounts are billed each month.9Source: The District.
Largest Customers gFY 2009FY 2009Customers User Charges % Total INBEV (Anheuser-Busch) $7,565,613 3.09% Mallinckrodt Inc1161840047%Mallinckrodt Inc 1,161,8400.47% Washington University 1,112,168 0.45% City Of St Louis 1,038,359 0.42% Chrysler Corporation* 699,271 0.29% Bi C662 578027%Boeing Co. 662,5780.27% Sigma-Aldrich 532,352 0.22% BJC Health System 527,376 0.22% Zoological Gardens 510,699 0.21% Sensient Colors Inc. 486,380 0.20% Subtotal $14,296,636 5.83% Total All Customers $244,699,964 * Chrysler Corporation has closed the St. Louis plant as of the end of FY 2009. 10Source: The District.
MSD C it lMSD Capital Improvement & Replacement Program11Replacement Program
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.– MSD moved to a mediation process in early 2009.–Current litigation limits discussion.g•Educate local and Congressional stakeholders regarding the environmental and financial impacts of regulatory requirements.–MSD is collaborating with other urban systems to lobby Congressional representatives modifications of affordability metrics.•Continue to invest in the Capital Improvement Program (“CIRP”). pp g( )“MSD’s mission is to provide exceptional quality in sanitary sewage collection and treatment and storm water management to protect the public’s health and safety.”public s health and safety.12
Planning for Long Term Capital Programgg pgSeptember 2009Mediated SolutionLong-termControl PlanSubmittedInformal DiscussionScopeTime FrameMediationMSD/EPAAffordability2008 & PriorMarch through CurrentLitigation2010?13
CIRP Investment Accomplishments•Projects completed or in progress in 2004 through 2010:p– Increasing Wastewater Treatment Capacity; – Finish construction of a new waste water treatment plant;Iftt i tt d CbidS Ofl (CSO)–Infrastructure improvements to reduce Combined Sewer Overflows (CSOs); and– Infrastructure improvements to reduce Sanitary Sewer Overflows (SSOs); •Total investment at approximately $1 billion.14
Projects to be Financed by 2010B BAB Issue•Total estimated cost of projects that will use BABs and cash funding is $105 711 000:jy$105,711,000:– $55 million or 52% earmarked for projects that will help eliminate sanitary sewer overflows,–$22 million or 21% earmarked for treatment plant upgrade and renovation projects,– $15 million or 14% earmarked for general systems renewal projects,$–$7 million or 7% earmarked for the reduction of Combined Sewer Overflows, and– $7 million or 6% earmarked for disinfection projects to improve water quality.15
CIRP Investment Planned: 2011 – 2012•Total investment for years 2011 through 2012 approximately $374 million.•Projects planned through 2012 total include the following:– Infrastructure improvements to reduce Combined Sewers Overflows (CSOs);–Infrastructure improvements to reduceSanitary Sewer Overflows (SSOs);Infrastructure improvements to reduceSanitary Sewer Overflows (SSOs); – Plant Improvements – Missouri River Plant;– Plant Improvements – Lemay Plant;– Collection systems renewal and replacement activity;– Disinfection projects designed to improve water quality;–Upgrade and integration of Enterprise System; andUpgrade and integration of Enterprise System; and– Planning and CMOM Activity.16
Proposed 2011-2012 Projectspj•Significant Projects planned for the remainder of the Phase II CIRP Program:– Secondary expansion at the Missouri River Treatment Plant with estimated cost through 2012Treatment Plant with estimated cost through 2012 of $50 million, with an additional $64 million planned in the next rate cycle. Project will be funded $78 million by SRF loan and remainder in cash.– Disinfection projects at the Coldwater, Bissell, Lower Meramec and Lemay plants will cost ypapproximately $82 million, to be funded by either additional revenue bonds or cash.–SSO relief, estimated to cost $108 million andSSO relief, estimated to cost $108 million and funded by a mix of bonds and cash.– Stormwater projects will total $38 million and will be cash funded by a separate revenue stream17be cash funded by a separate revenue stream.
Funding Strategy•Strong Pay-Go component, targeted at 40% to 50% of program costs.ggy•Debt Plan seeks to maximize use of subsidized State Revolving Fund Loans.– SRF Debt is issued as subordinate debt.CIRP Projects Funding% Debt vs. Pay Go200420101 002 812 826$Db735 000 000$53%2004-20101,002,812,826$ Debt735,000,000$ 53%2011-2012 374,000,000$ Pay Go 641,812,876(a) 47%Total Projects1,376,812,826$ 1,376,812,826$ 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.(a) Pay Go component assumes the use of $38 million of either storm water or tax funding.18
Rate Commission Recommendations & ScheduleThe Rate Commission’s March 21, 2008, “Rate Recommendation Report” details recommendations for Wastewater and Stormwater rate increases to fund CIRP projects through 2012•Supports a $660 million CIRP projects through 2012Pl f Fi i l d b th PGdBdfund CIRP projects through 2012.•Plan of Finance includes both Pay-Go and Bonds•Recommends rate changes that result in projected user revenue increases of:– 3.2% in 2009– 1.7% in 2010–4 2% in 20114.2% in 2011– 4.0% in 2012V t f d A t 5 2008 th i d $275 illi i b d•Vote referendum August 5, 2008, authorized $275 million in new revenue bond authority.•MSD anticipates initiating a new Rate Commission dialogue in 2011 to fund 19projects beginning in 2013.
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 $168,965,00004/28/04 2004B (EIERA) 20 Year, Fixed 161,280,000 136,795,00005/19/05 2005A (EIERA) 20 Year, Fixed 6,800,000 5,955,00004/27/06 2006A (EIERA) 20 Year, Fixed 42,715,000 40,480,00011/28/062006B (EIERA)20 Year Fixed14 205 00013 575 00011/28/062006B (EIERA)20 Year, Fixed14,205,00013,575,00011/28/06 2006C 30 Year, Fixed 60,000,000 60,000,00010/28/08 2008A 30 Year, Fixed 30,000,000 30,000,00010/28/08 2008B (EIERA) 20 Year, Fixed 40,000,000 39,127,50010/21/09 2009 (EIERA) 20 Year, Fixed 23,000,000 23,000,00012/15/09 2009 ARRA Loan 21 Year, Fixed 7,980,700 7,980,700,,,,,Planned01/28/10 2010B 30 Year, Fixed 85,000,000Total:$645,980,700 $525,878,20020Remaining Authorization: $129 million
Update of Financial Pf21Performance
Finance Department – Performance Focus•Annual “Zero-Based” budget development process.Dbddldi B&Il–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.gggg– In-depth Board review through series of Finance Committee meetings.•Budget monitoring process enhances budget performance– Monthly budget variance reports are reviewed by Senior Management Team.– Quarterly budget performance reports are reviewed by Finance & Audit Committee.P ti h t b d d bt di ti•Proactive approach to bad debt remediation– FY 2009 provision for delinquencies increased to $9.7 M from $5.2 M in FY 2008.–Comprehensive strategy to both optimize bad debt collections and assist ratepayersComprehensive strategy to both optimize bad debt collections and assist ratepayers meet user charge obligations.•Pension & OPEB Obligations22–Commitment to responsibly manage and reduce liabilities.
Payment Delinquencies & Bad Debt RemediationInitiatives directed at payment delinquencies– Current program offers payment discount to qualified low-income homeowners.Assistance to lowincome tenants will be explored–Assistance to low-income tenants will be explored.– Consideration will be given to reducing late payment charges to lessen delinquency growth.– MSD Call center will take a more proactive customer follow-up to establish customer payment plans to address delinquencies.Bad Debt Remediation– Collection agency utilization has proven effective.– Utilization of collection agencies may be expanded to address a higher volume of accounts.Additional use of outside law firms to pursue unresolved delinquencies is under consideration–Additional use of outside law firms to pursue unresolved delinquencies is under consideration.– Other initiations under consideration:– Outsourcing and/or sale of liens related to delinquent accounts.Cditb ti fdli i–Credit bureau reporting of delinquencies.– Discussion with water providers of water shut off triggers.– Discussion with governmental partners concerning MSD payment triggers for construction permits.23
Pension Fund UpdateMSD offers a defined benefit plan providing retirement, death and disability benefits tllfllti lto all full-time employees.As of December 31, 2008:–885 active participants–885 active participants– $184.7 million acturarial value of assets– $28.4 million in unfunded liability– Funded ratio of 86.6% in 2008, down from 94.6% in 2007MSD remains committed to meeting the unfunded liability over ten years.24
OPEB ConsiderationsOPEB 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 to $21 9The 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 the monthlyMSD 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 $1,014,700. 25
Historic Debt Coverage from Pledged RevenuesHistoric Debt Coverage from Pledged RevenuesFY05 FY06 FY07FY08(2)FY09Operating RevenuesSewer -Service Charges$180,732,026$199,470,786$193,556,431$203,674,746$204,947,268Audited(1)g$,,$,,$,,$,,$,,Other Operating Revenues 7,027,2466,083,6747,406,6545,306,6315,025,394Total Operating Revenue$187,759,272 $205,554,460 $200,963,085 $208,981,377 $209,972,662Investment Income $4,356,643 $6,135,347 $13,501,751 $13,277,548 $10,279,899Other 0004,3713,205Total Pledged Revenues $192,115,915 $211,689,807 $214,464,836 $222,263,296 $220,255,766Operating Expenses $117,930,992 $131,909,717 $138,089,529 $137,302,360 $134,136,731Non-Recurring Projects & Studies 9,959,2043,470,5614,014,6731,016,8914,778,877Total Expenses$127,890,196 $135,380,278 $142,089,202 $138,319,251 $138,915,608Net Pledged Revenues Available for Debt$64,225,719 $76,309,529 $72,375,634 $83,944,045 $81,340,158Senior Debt ServiceSeries 2004A $8,052,321 $9,665,734 $9,640,734 $9,615,634 $9,587,884Series 2006C 0 0 1,233,350 2,902,000 2,902,000Series 2008A 0 0 0 0 707,389 Subtotal $8,052,321 $9,665,734 $10,874,084 $12,517,634 $13,960,806Subordinate Debt ServiceSeries 2004B (EIERA)2,624,276 6,370,755 9,684,010 10,373,643 11,134,993(),,,,,,,,,,Series 2005A (EIERA) 0 67,605 111,674 425,239 422,967Series 2006A (EIERA) 0 0 404,639 913,454 911,965Series 2006B (EIERA) 0 0 0 192,932 171,970Series 2008B (EIERA) 0 0 0 0 0Series 2009 (EIERA) 0 0 0 0 0 Subtotal $2,624,276 $6,438,360 $10,200,323 $11,905,268 $12,641,895Notes:Total Debt Service$10,676,597 $16,104,094 $21,074,406 $24,422,902 $26,602,701Net Revenue After Debt (Available for CIRP)$53,549,122 $60,205,435 $51,301,228 $59,521,143 $54,737,457Senior Debt Coverage 7.98 X 7.89 X 6.66 X 6.71 X 5.83 XTotal Debt Coverage 6.02 X 4.74 X 3.43 X 3.44 X 3.06 X261From District Report on Agreed-Upon Procedures for Years Ending June 30, 2005, through 200922008 operating expenses have been reset to report wastewater expenses solely. Stormwater expenses have been removed.
Projected Debt Service on $85 Million 2010 Bonds jFiscal Current Projected Less: TotalYear End Outstanding Debt 2010 Subsidy Projected Debt6/30/2010 $25,523,237 $2,496,875 ($873,906) $27,146,2056/30/2011 32,634,995 4,993,750 (1,747,813) 35,880,932 6/30/201233 267 7104 993 750(1 747 813)36 513 647Annual debt service requirements with the6/30/201233,267,710 4,993,750 (1,747,813) 36,513,647 6/30/2013 33,471,673 4,993,750 (1,747,813) 36,717,610 6/30/2014 33,553,656 4,993,750 (1,747,813) 36,799,593 6/30/2015 33,905,610 4,993,750 (1,747,813) 37,151,547 6/30/2016 33,821,491 4,993,750 (1,747,813) 37,067,428 6/30/2017 34,342,692 4,993,750 (1,747,813) 37,588,629 requirements with the Series 2010 Bonds are projected to max at $39 million in 2025 then,,,,(,,),,6/30/2018 34,412,742 4,993,750 (1,747,813) 37,658,679 6/30/2019 34,629,062 4,993,750 (1,747,813) 37,874,999 6/30/2020 34,822,564 4,993,750 (1,747,813) 38,068,501 6/30/2021 35,006,702 4,993,750 (1,747,813) 38,252,640 6/30/2022 35,383,766 4,993,750 (1,747,813) 38,629,703 6/30/202335 398 9594 993 750(1 747 813)38 644 897million in 2025 then decline as debt is retired.6/30/202335,398,959 4,993,750 (1,747,813) 38,644,897 6/30/2024 35,599,460 4,993,750 (1,747,813) 38,845,398 6/30/2025 35,788,437 4,993,750 (1,747,813) 39,034,374 6/30/2026 35,732,480 4,993,750 (1,747,813) 38,978,418 6/30/2027 32,894,854 4,993,750 (1,747,813) 36,140,791 6/30/202830,115,1894,993,750(1,747,813)33,361,1276/30/202830,115,189 4,993,750 (1,747,813) 33,361,127 6/30/2029 29,204,801 4,993,750 (1,747,813) 32,450,739 6/30/2030 29,387,137 4,993,750 (1,747,813) 32,633,075 6/30/2031 29,296,989 4,993,750 (1,747,813) 32,542,927 6/30/2032 27,292,648 4,993,750 (1,747,813) 30,538,585 6/30/2033 27,299,828 4,993,750 (1,747,813) 30,545,765 6/30/2034 27,301,553 4,993,750 (1,747,813) 30,547,490 6/30/2035 15,134,890 14,993,750 (1,747,813) 28,380,828 6/30/2036 14,658,700 14,406,250 (1,542,188) 27,522,763 6/30/2037 5,066,763 23,818,750 (1,336,563) 27,548,950 6/30/2038 5,081,288 22,643,750 (925,313) 26,799,725 6/30/2039-26 468 750(514 063)25 954 688276/30/2039 26,468,750 (514,063) 25,954,688 6/30/2040 - - - - Total $850,029,871 $224,678,125 ($48,887,344) $1,025,820,652
Projected Debt Service – New Money Bonds through 2012through 2012•$78.0 million Series 2011SRF Bonds•$51.0 million Series 2012 Wastewater System Revenue BondsSubordinate DebtSenior DebtYear Ended Outstanding Series 2012 Total Outstanding Series 2011 TotalJune 30Debt Service(1)Debt ServiceSenior DebtDebt ServiceDebt ServiceSub. Debt201015,778,488$15,778,488$11,367,718$-$11,367,718$Subordinate DebtSenior Debt201015,778,488$ 15,778,488$11,367,718$ $ 11,367,718$2011 17,538,606 17,538,606 18,342,326 - 18,342,326 2012 17,660,756 17,660,756 18,852,891 5,205,000 24,057,891 2013 17,797,156 2,832,933 20,630,089 18,920,454 5,206,500 24,126,954 2014 17,929,216 2,615,015 20,544,231 18,870,377 5,202,400 24,072,777 2015 18,080,154 2,615,015 20,695,169 19,071,394 5,205,750 24,277,144 2016 18,215,554 2,615,015 20,830,569 18,851,875 5,206,250 24,058,125 2017 18,371,354 2,615,015 20,986,369 19,217,276 5,203,900 24,421,176 2018 18,526,354 2,615,015 21,141,369 19,132,325 5,203,700 24,336,025 2019 18,720,898 2,615,015 21,335,913 19,154,102 5,205,500 24,359,602 28
SfCditStth29Summary of Credit Strengths
MSD Credit Strengthsg•Proactive leadership has MSD well-positioned to meet current and future capital infrastructure needs.capital infrastructure needs.– Continued efforts to reshape regulatory requirements that drive scope and cost of future projects.– Well-conceived CIRP provides $1.4 billion in completed and budgeted projects through 2012.–Mediation process with EPA ongoing.pgg•Solid financial management further enhances bondholder security.– Close monitoring of financial performance, collections actions, contribute to strong budget performance.– Manageable pension and OPEB obligations.Strong debt coverage & substantial Pay Go commitment to long term CIRP–Strong debt coverage & substantial Pay Go commitment to long term CIRP.– Additional rate increases approved for FY 2011 and 2012.•Strong stakeholder support affirmed by 2008 Rate Commission action and30Strong stakeholder support affirmed by 2008 Rate Commission action and August 5, 2008, Bond Referendum.
MSD Financing SchedulegSchedule*ActivityDecember 15-18 Rating agency callsJanuary 5 Ratings releasedJanuary 6 Print and distribute POSJanuary 14 Pricing of bondsJanuary 27 & 28 Close and deliver funds*Tentative ScheduleTentative Schedule31
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.com32