HomeMy Public PortalAboutExhibit MSD 16W Due diligence questionnaire - direct loans DRAFTSTATE DIRECT LOAN
DUE DILIGENCE REQUEST FORM
(Governmental Participant)
The following information is requested from each participant (“Participant”) that is applying for financial
assistance from the Missouri Department of Natural Resources - Water Protection Program – Financial
Assistance Center. The information is also needed as part of the due diligence review required by federal and
state securities laws. It is necessary to obtain the following information for the Missouri Department of Natural
Resources to assess loan participant’s financial background information. By executing this questionnaire, the
Participant certifies that responses provided are true, correct, complete and do not contain material misstatements
or omissions.
If one of the following questions is not applicable, please indicate so. Attach additional sheets of paper, as
needed, or extend the form electronically, as needed, to answer the following questions. Return the completed
form to:
Joe Boland
Missouri Dept. of Natural Resources, WPP – FAC
P.O. Box 176
Jefferson City, MO 65102-0176
Phone: (573) 751-1192
Fax: (573) 751-9396
Please confirm that the following description of project to be financed with the State Direct Loan is accurate:
[insert project description from DNR’s FNSI]
PROJECT DESCRIPTION:
Purpose and Need: The Missouri River WWTP is being upgraded in phases in order to increase design flow
and wet weather capacity due to expected community growth as well as address maintenance issues due to the
age of the plant. The secondary treatment facilities will be expanded in order to match the recently upgraded
headworks and primary treatment capacities. This expansion will also allow for process flexibility as a result of
potential nutrient effluent limits in the future. In order to meet E. coli effluent limits by December 31, 2013,
disinfection will be added to the treatment plant.
Description of Project: The District is proposing an activated sludge treatment facility and six final clarifiers
for secondary treatment. The existing trickling filters and secondary clarifiers would be removed from service.
Ultraviolet (UV) disinfection is proposed to treat bacteria prior to discharging to the Missouri River.
Design Factors: The proposed secondary treatment expansion will have the capacity to treat 38 mgd at design
flow and 80 mgd at peak wet weather flow. The proposed facility is designed to meet average monthly effluent
limits of 30 milligrams per liter (mg/L) Carbonaceous Biochemical Oxygen Demand 30 mg/L Total Suspended
Solids, 10 mg/L Oil & Grease, and 206 colonies of E. coli per 100 milliliters of water (col/100mL).
Receiving Stream: The Missouri River WWTP will continue to discharge to the Missouri Rivers which is
designated for irrigation, livestock and wildlife watering, protection of warm water aquatic life, whole body
contact, secondary contact recreation, industrial, and drinking water supply.
6/16/2011
I. General Information
1. Legal Name of Participant: Metropolitan St. Louis Sewer District
Nature of governmental entity of the Participant (county, city, village, public water district, public
sewer district, or combination): Public Sewer District
Authorized Representative/Daily Contact Person:
Karl J. Tyminski
Address: 2350 Market Street St. Louis, MO 63103
Phone #: 314-768-6222
Fax #: 314-768-2701
E-mail: kjtymi@stlmsd.com
2. Does any member of the Participant's governing body or any of its key administrative personnel have a
potential conflict of interest regarding the project to be financed with the Direct Loan by reason of such
membership or position?
Yes
No
If yes, state whom and the nature of such conflict.
3. Date of Participant’s fiscal year end: June 30
4. Participant’s Taxpayer Identification Number: 43-6011991
5. Has the Participant ever defaulted on a bond issue?
Yes
No
If yes, please describe:
6. Does the Participant’s last annual audit include a finding that the Participant is in non-compliance with
any bond covenants contained in any bond ordinances or resolutions?
Yes
No
If yes, please describe:
7. Has the Participant ever failed to comply with any of the informational reporting responsibilities
contained in any financing document or instrument intended to comply with the requirements of Rule
15c2-12 of the Securities and Exchange Commission (regarding municipal securities disclosure)?
Yes
No
If yes, please describe:
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8. Participant’s local bond counsel:
Name: Gilmore Bell
Robert Ballsrud
One Metropolitan Square
211 N. Broadway – Suite 2350
St. Louis, MO 63102
Phone #: (314) 436-1000 Fax #: (314) 436-1166
E-mail: rballsrud@gilmorebell.com
Participant’s local bond counsel:
Name: White Coleman
Address: Dorothy White-Coleman
500 North Braodway, Suite 1300
St. Louis, MO 63102-2110
Phone #: (314) 621-7676 Fax #: (314) 621-0959
E-mail: whitecoleman@whitecoleman.net
9. Participant’s financial advisor, if any:
Name: ButcherMark with PFM as sub
Address: Roy Torkleson
1120 Avenue of the Americas 4th Floor
New York, NY 10036-6700
Phone #: (212) 719-2632
E-mail: rtorkleson@butchmark.com
II. Debt and Authorizing Information
1. What is the source of repayment of the Participant’s bonds securing the direct loan:
Combined Waterworks and Sewerage System Revenues
Waterworks System Revenues
Sewerage System Revenues
Unlimited Property Tax Revenues (General Obligation)
Capital Improvement Sales Tax Revenues (Bonds)
Capital Improvement Sales Tax Revenues (annual appropriation) [note – must also check another
box]
Other (describe):
2. Is there a limitation on the final maturity date for the Participant's bonds imposed by election or
ordinance?
Yes
No
If yes, please describe:
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2. Please attach a list of the Participant’s outstanding bonds that are secured by the same source of
revenues that will secure repayment of the direct loan indicated in II-1 above, showing outstanding
balance, source of payment, and principal and interest payable by fiscal year.
See the following excerpt from our financial statements
Original Balance Balance
Issuance June 30, June 30,Current
Amounts 2009 Additions Retirements 2010 Portion
Bonds and notes
payable:
Senior revenue bonds:
Series 2004A $175,000,000 $168,965,000 $ --$ 1,595,000 $167,370,000 $ 1,780,000
Series 2006C 60,000,000 60,000,000 ---- 60,000,000 --
Series 2008A 30,000,000 30,000,000 ---- 30,000,000 --
Series 2010B 85,000,000 --85,000,000 -- 85,000,000 --
Subordinate revenue
bonds:
Series 2004B 161,280,000 136,795,000 --6,685,000 130,110,000 6,465,000
Series 2005A 6,800,000 5,955,000 --290,000 5,665,000 270,417
Series 2006A 42,715,000 40,480,000 --2,060,000 38,420,000 1,911,250
Series 2006B 14,205,000 13,575,000 --640,000 12,935,000 595,833
Series 2008A/B 40,000,000 39,127,500 --1,752,500 37,375,000 1,760,000
Direct Loans
Series 2009A 23,000,000 --23,000,000 -- 23,000,000 470,700
Series 2010A 7,980,700 --7,980,700 -- 7,980,700 --
Totals: $645,980,700 $494,897,500 $115,980,700 $13,022,500 $597,855,700 $13,253,200
3. Describe the amount and type of any authorized but unissued bond debt for the type of bonds secured
by the same source of revenues that will secure repayment of the direct loan, including the bonds to be
issued in connection with this financing. The District currently has $129,019,300 0f unused
authorization remaining from the election of August, 2008 where a total of $275,000,000 was
authorized by the voters for waste water system revenue bonds. The District anticipates issuing
$52,000,000 in stand alone debt by April 15, 2011, taking a $37,000,000 direct loan from the
Missouri SRF program in either December, 2010 or January, 2011 and a $40,019,300 direct loan
from the Missouri SRF program in the spring of 2011 (April or May).
5. If sales tax is an anticipated source of repayment for the direct loan, list and describe all sales taxes
imposed by the Participant (including the sales tax described above as a source of repayment for this
financing): Not Applicable
Please provide a copy of the ballot authorizing such sales tax(es) and ordinance(s) establishing the sales
tax(es).
6. Does the Participant anticipate issuing any bonds simultaneously with or within one year after the bonds
to be issued by the Participant in connection with this direct loan?
Yes
No
If yes, please describe and provide an official statement, if available: Proposed $52 million Build
America Bonds or Revenue Bonds to be issued by April 15, 2011
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III. Project and Finance Structure Information
1. Expected Project Sources and Uses:
Description Direct Loan Other
Sources†
Total
Land and easement acquisition $1,825,899 $1,825,899
Planning and design $5,280,512 $5,280,512
Refinancing outstanding debt
Construction[1] $77,019,300 $50,878,224 $127,897,524
Contingency $6,025,430 $6,025,430
Capitalized interest[2]
Subtotal Construction Costs $77,019,300 $64,010,065 $141,029,365
Local bond counsel $47,900 $47,900
Local financial advisor $60,000 $60,000
Paying/Escrow Agent $1,000 $1,000
Master Trust Bond Expense[3] $222,000 $222,000
Program bond counsel[4] $6,000 $6,000
Subtotal Financing Costs $336,900 $336,900
TOTAL $77,356,200 $64,010,065 $141,366,265
† Participant funds or other financing source (e.g. DNR rural sewer grant)
[1] Includes construction engineering
[2] Non-standard – requires justification in 2. below
[3] 0.6% of Direct Loan Total
[4] Available from DNR Project Coordinator
2. Structure for Participant bonds:
Amortization Method: Standard - Level debt.
Non-standard: Provide proposed amortization and justification.
Are revenues available to pay interest on the Participant’s bonds from date of issuance?
Yes
No
If no, please describe special circumstances:
Will this financing utilize all remaining voter authorization?
Yes
No
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3. Anticipated Project Schedule: Please provide a separate project schedule for each project that will be
completed pursuant to a separate construction contract.
Event Projected Date (month/year)
Contract 1
Projected Date (month/year)
Contract 2
Advertising for Bids 10/26/10
Bid Opening 12/07/10
Construction Contract Award 02/24/11 (approx)
Initiation of Operations* 12/24/14 (approx)
Construction Completion 10/01/14 (approx)
Project Completion 06/01/15 (approx)
* “Initiation of operations” is not Project completion. It is the date upon which operations commence
or beneficial occupancy is achieved under a construction contract awarded in connection with this
financing.
Please add an additional page if the above table does not contain sufficient columns for the separate
projects to be financed by this direct loan.
4. Estimated Construction Draw Schedule. Note: Construction draws should equal the financial assistance
requested as shown in the Expected Sources and Uses (Construction Subtotal) (III.1. above). Please
provide a separate draw schedule for each of the contracts identified above.
Construction w/5% Contingency (Estimated)
FY 2011* FY 2012* FY 2013* FY 2014*
$134 Million $9,600,000 $56,400,000 $48,000,000 $20,000,000
*Assuming construction begins March 2011.
† Excludes DNR grants
5. Are sales tax revenues an anticipated source of repayment?
Yes
No
If yes, please furnish the following information:
Is there a tax increment financing district within the district/city that would capture a portion of the
sales tax revenues that are anticipated to be a source of repayment for the participant’s bonds?
6/16/2011 -6-
Collection data for the past five (5) fiscal years (and collections for current fiscal-year-to-date) for those
sales tax revenues available to pay debt service on the Participant’s bonds:
20__ $ N/A (fiscal-year-to-date)
20__ $ N/A
20__ $ N/A
20__ $ N/A
20__ $ N/A
20__ $ N/A
Rate of sales tax available: N/A
Permissible uses for the sales tax:
Restrictions on the use of sales tax: N/A
Sunset date for sales tax, if any: N/A
6. Note: Question 6 is applicable only if the Participant is refinancing outstanding notes/bonds with
the direct loan. NOT Refinancing
Does the project include a refinancing of outstanding notes or bonds?
Yes
No
If yes, please describe the bonds or notes to be refinanced, the amount of the proceeds that have been
spent, the amount of bonds or notes outstanding and the call date:
Are there any unexpended proceeds from the bonds or notes being refinanced?
Yes
No
If yes, please provide an expected disbursement schedule. (Include the last date on which any
remaining proceeds from the bonds or notes to be refinanced may be disbursed.)
Has DNR reviewed expenditures of the proceeds of the bonds or notes to be refinanced to determine if
such expenditures qualify as “eligible costs?”
Yes
No
Were these projects covered under a FNSI or a categorical exclusion?
Yes
No
If financing is being requested for the purpose of refunding outstanding notes or bonds, please provide a
copy of the resolution or ordinance authorizing the issuance of the bonds or notes to be refunded.
7. Are there any proposed leases or management contracts with or occupancy by nongovernmental entities
(other than contracts for janitorial, office equipment repair, billing or other services that are solely
incidental to the primary governmental function(s)) of the project financed with the proceeds of the
direct loan?
Yes
No
If yes, briefly describe:
6/16/2011 -7-
8. Will a nongovernmental entity use more than 5% of the project financed with the proceeds of the direct
loan?
Yes
No
If so, will such user receive treatment different than that afforded to a member of the general public, or
is the project designed in any way to accommodate the needs of such user? For this purpose, the term
“use” may include, among other things, ownership or the actual or beneficial use of property pursuant
to any number of other arrangements, such as a lease, a management, service or incentive payment
contract, a research agreement or certain other arrangements, such as a take or pay or other output-type
contract.
Yes
No
If yes, briefly describe the arrangements concerning such user. Include any special fee(s) to be charged
to such user that are outside the approved user charge ordinance:
IV. System Information and Revenues
1. Other than the project being financed with this direct loan, describe generally any plans to expand,
improve or equip the system within the next two years: MSD plans to spend approximately $150
million in FY 2011 and $100 million in FY 2012 to improve its system. The program consists of
the improvement and renewal of the collection system and treatment facilities, and the
elimination of local storm water flooding and erosion. The cost for expansion of the system is
borne by local developers with the system turned over to MSD for O & M, thus MSD has no
expansion costs.
2. Provide actual operating expenses of the system for the previous two (2) years and projected operating
expenses of the system for the current year and the next (4) fiscal years. Please do not include current
or anticipated debt service payments. Denote the year in which new project is to come on line.
Year Operating Expenses
FY08 (previous) $142,725,186
FY09 (previous) $138,971,881
FY10 (current) $145,598,505
FY11 (next) $149,986,447
FY12 (next) $151,486,311
FY13 (next) $154,516,038
_ FY14_(next) $157,606,358
6/16/2011 -8-
If system revenues are an anticipated source of repayment of the bonds securing the direct loan, please
provide the following information in connection with the Participant's system (or the portion of the
system from which the Participant anticipates drawing revenues to repay the direct loan):
Last five (5) fiscal years 2010 2009 2008 2007 * 2006 *
System Revenue $200,471,089 204,947,268 203,674,746 193,556,431 199,470,786
Investment Income 5,358,354 10,279,899 13,277,548 13,501,751 6,135,347
Other Income 4,226,840 5,025,394 5,306,631 7,391,655 5,988,302
Total Revenue 210,056,283 220,252,561 222,258,925 214,449,837 211,594,435
Operating Expenses (excl. depreciation) 145,598,505 138,971,881 142,725,186 138,089,529 131,909,717
Net Revenues available for DS 64,457,778 81,280,680 79,533,739 76,360,308 79,684,718
Annual Debt Service (existing) 29,946,469 33,971,107 26,334,791 24,329,929 19,242,832
Debt Service Coverage ** 34,511,309 47,309,573 53,198,948 52,030,379 60,441,886
Existing debt coverage required, if any: 1.25 for senior bonds. 1.15 For all bonds.
* includes storm water expenses
** excludes non recurring project costs
3. Ten (10) largest users and % of system use.
User User Charge % of Total User Charges
Anheuser-Busch Incorporated 5,518,959 2.71%
Washington University 1,309,287 0.64%
City of St. Louis 1,266,572 0.62%
Mallinckrodt, Inc. 1,250,530 0.61%
Boeing Co. 667,443 0.33%
Zoological Gardens 597,152 0.29%
Sigma-Aldrich 512,958 0.25%
BJC Health System 512,642 0.25%
Sensient Colors Inc. 462,261 0.23%
Cott Beverages, Inc. 438,501 0.22%
Has there been a 5% or greater change in the number of system users during the past two-year period?
Yes
No
If so, please explain.
6/16/2011 -9-
4. Identify system use (gallons per day) for billing purposes, actual billings, and collections for each of
last five (5) years. If the system is a combined waterworks and sewerage system, please provide the
following information separately for the waterworks and sewerage components of the combined system.
Year Collections as % of Billed WW Chgs Billed WW Chgs Collected
2010 97.43% $203,649,824 $198,413,235
2009 97.35% $206,957,535 $201,470,769*
2008 97.25% $201,156,814 $195,617,863*
2007 116.58% $163,506,126 $190,622,352*
2006 93.55% $197,608,100 $189,854,048*
*Restated from prior years reporting
5. Current and Proposed Rate Structure.
Please provide the Participant’s current rate structure and its effective date and any proposed new rate
structure and date of adoption for the same. If the Participant has a combined waterworks and sewer
system, the rate structure for both water and sewer users should be included.
Current Rate Proposed Rate
Schedule Effective Date Structure Date of Adoption
Residential users
Commercial users
Industrial users
Please provide a copy of the ordinance imposing the most recent rate increase in connection with the
current SRF financing. See attachment IV6A.
6. Please provide information on previous rate increases and effective dates within the last five (5) years.
See attachment IV6A.
7. Does the Participant's investment policy relative to funds of the system or otherwise securing the direct
loan comply with the State Treasurer’s model investment policy and any other state law requirements
(see www.treasurer.mo.gov/invest/policy2.doc model policy)?
8. Please provide a certificate or other evidence of insurance coverage against the risks of property and
casualty loss, public liability, and any other insurance maintained by the Participant, including type of
coverage, amount of coverage, annual premiums, name of insurer, and term.
9. Accompanying this document is: a matrix of insurance coverage for fiscal year 2011, certificate
of property insurance coverage for fiscal 2011 and certificate of other insurance coverage for
fiscal 2011.
V. Litigation and Other Proceedings
1. Provide a description of all contracts and commitments of the Participant under which any default has
occurred or is claimed to have occurred. We have no contracts or commitments where defaults have
occurred. From time to time there may be situations of mechanics liens where the District may
also be named but these liens are a matter between the contractor for the District and their
subcontractors.
6/16/2011 -10-
2. Describe (1) any pending or possible litigation and contractual disputes and (2) any consent decrees,
prospective judgments, writs, injunctions, court orders, settlement agreements or judgments, or
correspondence regarding the same, to which the Participant either is or has been a party within the past
three (3) years or that are threatened against the Participant. Supply copies of all letters concerning any
litigation against the Participant that have been provided by all legal counsel to the Participant’s
independent public accountants in connection with audit opinions for the last three (3) fiscal years.
See attachment V2A.
3. Has the Missouri Department of Natural Resources initiated or threatened any enforcement action
against the Participant with regard to the system?
Yes
No
If yes, please describe. US & State of Missouri v MSD
Case # 4:07-cv-1120-JCH
Allege Clean Water Violations
4. Is the Participant under an administrative or judicial compliance order?
Yes
No
If yes, please describe:
If yes, please describe.
US and State of Missouri v. Metropolitan St. Louis Sewer District; In the US District Court for the
Eastern District of Missouri; Case No. 07-1120. A lawsuit was filed by the Department of Justice on
behalf of the United States Environmental Protection Agency (“EPA”) for various alleged violations of
the Clean Water Act. The District has been the subject of several investigatory actions by EPA over the
past several years. Negotiations have been ongoing with EPA and the DNR regarding the sewer
collection system, both the combined system and the sanitary system, for several years. The Missouri
Coalition for the Environment (“MCE”) gave Notice of Intent to Sue the District under the citizen suit
provisions of the Clean Water Act. EPA and the DNR then brought the suit in June 2007, and MCE
moved to intervene. Intervention was granted in August 2007. In October 2007, the Court granted the
District’s motion to dismiss all of the plaintiffs’ claims for civil penalties attributable to any and all of
the District’s alleged violations of the Clean Water Act that occurred before June 11, 2002 from this
litigation. The suit is based on violations of the Clean Water Act as a result of overflows in the
combined and sanitary sewer systems causing pollutants to reach waters of the United States. There are
other counts involving violations of permit conditions. Also, the suit alleges that the District does not
have an approved Long-Term Control Program (“LTCP”) for the combined system. The District has
been working on these issues for several decades and has asked voters to approve bonds and rate
increases to rehabilitate and maintain the collection system. As required by its Charter, the District has
increased rates which will continue to fund the improvements sought by EPA and the DNR. In
September 2008, the Judge put in place a Stay while the parties mediate the issues.
William Zweig et al. v. Metropolitan Sewer District. This case was filed on July 18, 2008 and, as
amended, contends that Metropolitan Sewer District Ordinances No. 12560 and No. 12789, which
enacted increases in the District’s stormwater user charge based on the amount of impervious area on
the customer’s property, are unconstitutional. The lawsuit claims the ordinances violate the so-called
Hancock Amendment, Mo. Const. art. X, § 22(a), because the stormwater user charge is in reality a tax
that requires voter approval. The District’s Board of Trustees passed the ordinances in December 2007
and December 2008, respectively, without submitting them to the voters. The District contends the
stormwater user charge is not a tax and, thus, not subject to voter approval. The original plaintiff is a
District stormwater customer who seeks to represent a class of all the District stormwater customers. In
July 2009, two more plaintiff class representatives were added to the lawsuit. The lawsuit seeks (1) a
declaration that the stormwater user charge is unconstitutional, (2) a refund of all stormwater user
charges collected, and (3) payment of the plaintiffs’ costs, including attorneys’ fees.
6/16/2011 -11-
Trial was held April 13, 2010 through April 16, 2010. On July 9, 2010, the court handed down
Findings of Fact, Conclusions of Law, Judgment and Decree in the first phase of the bifurcated trial.
The Court declared the Stormwater User Charge is a tax under the Hancock Amendment. The second
phase of the trial was heard on October 6, 2010, to determine the amount, if any, to be refunded. The
judge has not yet issued a ruling on the second phase of the case. The District cannot predict with any
certainty at this time whether, or in what amount, the District may be required to make a refund. The
third phase, will determine the amount of plaintiffs’ counsel’s attorneys’ fees, to be paid by MSD out of
any refund awarded. Once the judge rules on phases 2 and 3, the case will be appealable.
The District has collected approximately $90,872,000 since it imposed the impervious charge in March
2008 until it suspended collections in August 2010. The District has resumed the collection of real and
personal property taxes as well as the previously voted on 24¢ per month per customer flat rate charge
for stormwater purposes. This is consistent with what the District did prior to imposing the stormwater
user charge.
The District is a defendant in various other matters of litigation. Of these matters, management and
District’s legal counsel do no anticipate any material effect on the June 30, 2010 and 2009 financial
statements.
5. Please provide any report or investigation made by any governmental agency or administrative
regulatory body concerning the Participant within the last five (5) years.
None in the last 5 years
VI. Requested Documents
Please provide a copy of the following:
1. All annual reports or audited financial statements and auditor’s reports, including any management
letters, for the Participant, and for the Participant’s system, if available, for the last two (2) fiscal years
(if available on a website, please indicate so and provide a web address).
http://www.stlmsd.com/aboutmsd/fiscal/annualreport
2. Any bond ordinances or resolutions adopted in connection with outstanding system revenue bonds or any
other document that contains restrictions on the use of system revenues. See attached ordinances in file
folder on the CD entitled Bond Indentures
3. All reports prepared by or for the Participant (including reports by inside or independent consultants) that
describe or evaluate the Participant or its system. Include all reports that detail future operating costs of
the system for the next five (5) years, such as any recent rate studies or operating budget or engineering
reports. Attached in the CD is a Feasibility Study report dated 10 31 2008
4. Any agreements relating to any grants and/or loans to the Participant relating to its system, including any
USDA Rural Development loans/grants and/or HUD Community Development Block Grants.
http://docs.stlmsd.com/OrdsRes/Docs/Ords/13024.pdf
5. The most recent official statement, if any, regarding a bond issue or other financing. See attached file in
the CD entitled Transcripts 2010B
6. One copy of this completed form, including supporting documentation, on a compact disk (CD) in
Acrobat Adobe (pdf) format.
6/16/2011 -12-
6/16/2011 -13-
Executed this 5th day of November, 2010 at 3:00 p.m.
Metropolitan St. Louis Sewer District
[Participant Name]
By:
Name: Karl J Tyminski
Title: Secretary-Treasurer