HomeMy Public PortalAbout2020B Credit Presentation_Final_10-30-2020 (1)The Metropolitan St. Louis Sewer DistrictCredit PresentationNovember 2, 2020
Participants1MSD ParticipantsBrian Hoelscher, P.E., Executive DirectorTim Snoke, Secretary-TreasurerMarion M. Gee, Director of FinanceSusan M. Myers, General CounselRichard Unverferth, P.E., Director of EngineeringJohn Strahlman, Assistant Secretary-TreasurerFinance Team ParticipantsBethany Pugh & Matthew Schnackenberg, PFM Financial Advisors LLC - Co-Municipal AdvisorTionna Pooler, Independent Public Advisors, LLC - Co-Municipal Advisor
Table of Contents2COVID-19 ResponseI. Capital Improvement and Replacement Program (CIRP) Update and Funding PlanII. Financial Performance UpdateIII. Summary of Credit StrengthsAppendixI. Overview and GovernanceII. Review of Regulatory Compliance and Program
COVID-19 Response3Due to COVID-19 pandemic, on March 16, 2020, the Board of Trustees unanimously approved postponing Proposition Y Vote which was supposed to be held April 7, 2020On March 23, 2020, the Mayor of St. Louis and the St. Louis County Executive issued Stay-at-Home orders for the District service areaMSD was exempted as an essential businessMany MSD service providers and contractors are exempted as essential businessesImmediate changes have been implemented to improve employee and stakeholder safety and reduce operating costs while continuing to provide high quality customer servicePotential impacts to revenue are being evaluatedRate increase of 1.5% postponed until October 1, 2020Impact of local orders and Federal stimulus package on delinquencies and collection activityRoughly 30% of MSD User Charge revenue comes from commercial customersIn FY21 commercial revenues are expected to be 16% under the FY21 budget while residential revenues are expected to meet the FY21 budget
III. CAPITAL IMPROVEMENT AND REPLACEMENT PROGRAM (CIRP) UPDATE AND FUNDING PLAN4
CIRP Appropriations: 2017-2020Wastewater CIRP appropriations for the years 2017 through 2020 were just under $1.1 billion with over $2 billion total CIRP funded 2013 through 2020Allocation of 2017-2020 CIRP Projects:–$526 Million for the elimination of Sanitary Sewer Overflows–$297 Million for system renewal and capacity projects–$209 Million for the reduction and control of Combined Sewer Overflows–$62 Million for treatment plant improvements5Fiscal Year Program Level2017 Actual $263,000,0002018 Actual $286,000,0002019 Actual $290,000,0002020 Actual $255,000,000Total 4-Year Program $1,094,000,000
CIRP Appropriations Planned: 2021-2024Allocation of 2021-2024 CIRP Projects:–25% of the Total 4-Year Program for the elimination of Sanitary Sewer Overflows–32% of the Total 4-Year Program for system renewal and capacity projects–13% of the Total 4-Year Program for the reduction and control of Combined Sewer Overflows–30% of the Total 4-Year Program for treatment plant improvements6Fiscal Year Program Level2021 Estimate $365,000,0002022 Estimate $340,000,0002023 Estimate $457,000,0002024 Estimate $487,000,000Total 4-Year Program $1,649,000,000
CIRP Funding—Debt and CashExcess unrestricted cash may be available for PAYGO in later years7CIRP Debt Cash % Debt % Cash2004 - 2020 $2,951,699,133 $2,086,573,565 $865,125,568 71% 29%Actual ActualFY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 SubtotalCash to CIRP $130,524,075 $124,120,789 $171,475,899 $139,469,027 $135,687,070 $135,850,495 $837,127,355CIRP Needs $281,950,803 $237,180,744 $332,062,407 $338,577,847 $453,931,542 $503,587,104 $2,147,290,447Cash as % CIRP 46% 52% 52% 41% 30% 27% 39%Planned PAYGO
Plan of FinancingBorrowing $120MM in par to fund capital improvements to meet EPA requirementsEstimated Project Fund Deposit of $151MMThirty-year amortization with level debt service on a fiscal year basisThe Bonds are on parity with the other Senior Lien Bonds of the District.8
Existing Debt Service and Savings9Notes(1)Net of BABs subsidy(2) Includes fees associated with the loansSubordinate Debt AggregateYear EndedPrincipalInterest(1)Debt ServiceDebt Service(2)Debt Service6/30/2021 $ 26,630,000 $ 50,874,515 $ 77,504,515 $ 37,952,319 $ 115,456,834 6/30/2022 26,925,000 50,006,547 76,931,547 38,815,542 115,747,089 6/30/2023 28,090,000 49,312,360 77,402,360 39,302,990 116,705,349 6/30/2024 28,985,000 48,601,074 77,586,074 40,521,291 118,107,365 6/30/2025 30,310,000 47,390,860 77,700,860 40,599,839 118,300,699 6/30/2026 34,920,000 45,957,337 80,877,337 37,245,934 118,123,270 6/30/2027 39,195,000 44,265,713 83,460,713 30,643,930 114,104,643 6/30/2028 41,905,000 42,350,183 84,255,183 26,973,522 111,228,705 6/30/2029 43,475,000 40,557,852 84,032,852 26,186,792 110,219,644 6/30/2030 47,800,000 38,688,237 86,488,237 23,809,668 110,297,905 6/30/2031 49,405,000 36,600,672 86,005,672 22,444,159 108,449,831 6/30/2032 51,205,000 34,592,087 85,797,087 19,863,210 105,660,297 6/30/2033 49,905,000 32,526,292 82,431,292 19,706,936 102,138,228 6/30/2034 51,825,000 30,407,279 82,232,279 19,800,960 102,033,239 6/30/2035 51,240,000 28,198,686 79,438,686 15,590,631 95,029,317 6/30/2036 53,415,000 25,831,380 79,246,380 8,961,796 88,208,176 6/30/2037 56,555,000 23,455,594 80,010,594 8,996,303 89,006,897 6/30/2038 58,970,000 21,101,684 80,071,684 5,384,523 85,456,207 6/30/2039 64,060,000 18,655,899 82,715,899 3,013,761 85,729,660 6/30/2040 68,386,670 15,917,644 84,304,314 3,023,092 87,327,406 6/30/2041 70,971,789 13,322,874 84,294,663 3,032,439 87,327,101 6/30/2042 73,674,513 10,625,969 84,300,482 1,480,263 85,780,744 6/30/2043 38,684,921 7,747,407 46,432,328 - 46,432,328 6/30/2044 30,443,095 5,985,137 36,428,232 - 36,428,232 6/30/2045 31,814,121 4,622,576 36,436,697 - 36,436,697 6/30/2046 27,183,085 3,196,634 30,379,719 - 30,379,719 6/30/2047 18,935,078 1,902,142 20,837,219 - 20,837,219 6/30/2048 6,665,191 1,022,028 7,687,219 - 7,687,219 6/30/2049 6,928,521 757,448 7,685,969 - 7,685,969 6/30/2050 3,760,166 481,804 4,241,969 - 4,241,969 6/30/2051 3,875,227 366,743 4,241,969 - 4,241,969 6/30/2052 3,993,809 248,161 4,241,969 - 4,241,969 6/30/2053 4,116,019 125,950 4,241,969 - 4,241,969 Total 1,224,247,204$ 775,696,767$ 1,999,943,971$ 473,349,898$ 2,473,293,869$ Senior Debt
Outstanding and Planned Bonds Under Existing Voted Authority10*Drawn down amount as of October 1, 2020(1) The $5,620,000 Series 2021A Bonds, along with funds on hand, will refund $11,395,000 of the Series 2011B Bonds on May 3, 2021.(2) The $39,845,000 Series 2022A Bonds, along with funds on hand, will refund $31,345,000 of the Series 2012A Bonds and $23,500,000 of the Series 2012B Bonds on May 3, 2022.(3) The $23,040,000 Series 2023A Bonds, along with funds on hand, will refund $31,775,000 of the Series 2013B Bonds on May 1, 2023.(4) The $133,560,000 Series 2025A Bonds will refund $152,805,000 of the Series 2015B Bonds on May 1, 2025.Date Series TermNew Money Par IssuedRefunding Par IssuedPar OutstandingFully Refunded Senior Bonds265,000,000$ -$ -$ Outstanding04/28/04 2004B (SRF) 20 Year, Fixed 161,280,000 - 55,730,000 05/19/05 2005A (SRF) 20 Year, Fixed 6,800,000 - 2,765,000 04/27/06 2006A (SRF) 20 Year, Fixed 42,715,000 - 18,550,000 11/28/06 2006B (SRF) 20 Year, Fixed 14,205,000 - 6,650,000 10/28/08 2008B (SRF) 20 Year, Fixed 40,000,000 - 19,795,000 10/21/09 2009A (SRF) 20 Year, Fixed 23,000,000 - 13,068,200 12/15/09 2010A (SRF) 21 Year, Fixed 7,980,700 - 5,079,500 01/28/10 2010B 30 Year, Fixed 85,000,000 - 85,000,000 12/21/10 2010C (SRF) 20 Year, Fixed 37,000,000 - 23,111,000 11/17/11 2011A (SRF) 22 Year, Fixed 39,769,300 - 30,449,300 12/22/11 2011B 30 Year, Fixed 52,250,000 - 13,725,000 8/23/12 2012A 30 Year, Fixed 225,000,000 - 45,620,000 11/14/12 2012B 20 Year, Fixed - 141,730,000 41,525,000 10/31/13 2013A (SRF) 20 Year, Fixed 52,000,000 - 41,044,000 12/18/13 2013B 30 Year, Fixed 150,000,000 - 42,380,000 8/19/15 2015A (SRF) 20 Year, Fixed 75,000,000 - 60,736,000*12/15/15 2015B 30 Year, Fixed 150,000,000 73,855,000 168,950,000 12/22/16 2016A (SRF) 20 Year, Fixed 20,000,000 - 17,443,000*12/22/16 2016B (SRF) 20 Year, Fixed 75,500,000 - 64,200,522*12/20/16 2016C 30 Year, Fixed 150,000,000 - 141,695,000 12/14/17 2017A 30 Year, Fixed 200,000,000 116,175,000 309,240,000 12/19/18 2018A (WIFIA) 35 Year, Fixed 47,722,204 - 261,480*12/28/18 2018B (SRF) 22 Year, Fixed 25,267,000 - 21,105,321*9/24/19 2019A (SRF) 22 Year, Fixed 23,952,000 - 9,738,521*12/4/19 2019B 29 Year, Fixed 52,130,000 - 52,130,000 12/4/19 2019C 18 Year, Fixed - 276,260,000 276,260,000 9/16/20 2020A 22 Year, Fixed 22,000,000 163,000*Planned12/17/20 2020B 29 Year, Fixed 120,000,000 - - Forward Refundings5/3/21Series 2021A(1)11 Year, Fixed - - - 5/3/22Series 2022A(2)17 Year, Fixed - - - 5/1/23Series 2023A(3)16 Year, Fixed - - - 5/1/25Series 2025A(4)18 Year, Fixed - - - Total 1,898,571,204$ 608,020,000$ 1,566,414,844$
IV. FINANCIAL PERFORMANCE UPDATE11
User Charge Revenue AdjustmentsThe FY2021 - FY2024 rate adjustments are projected to impact wastewater revenues as follows:12Fiscal Year2020 2021 2022 2023 2024User Charge Revenues10.3% -2.5% 5.9% 5.3% 3.8%
Historical Coverage13Notes: 1. District covenants to set rates that ensure that Net Operating Revenues will equal at least 125% of Debt Service Requirement on all Senior Bonds and 115% of the Debt Service Requirement on all outstanding debt for the year of computation 2. The methodology used to calculate the net available revenues and the coverage ratio was adjusted during fiscal year 2013 and all previous years were restated for comparative purposes. The 2013 change in methodology consisted of removing agency fees, previously reflected as a deduction from net available revenues, and now combining them with interest in the debt service section. Additionally, in fiscal years 2010 and 2011, the change in methodology consisted of removing the Build America Bond Tax Credit from the pledged revenue section and reapplying the credit to interest expense in the debt service section. This was made to ensure consistency with fiscal years 2012 and 2013. In fiscal 2017 the methodology was changed to exclude GASB non-cash transactions from the debt service calculation. Fiscal years 2015 and after have been adjusted to also exclude the GASB 68 non-cash pension expense and fiscal year 2018 and after have been adjusted to exclude GASB 75 non-cash OPEB expense.Fiscal YearNet Available Revenues Principal Interest TotalTotal Senior Debt ServiceTotal Coverage RatioSenior Coverage Ratio2011 59,641,434 14,576,800 20,140,021 34,716,821 17,247,269 1.7 3.52012 91,708,084 16,540,200 22,517,473 39,057,673 18,448,587 2.3 5.02013 95,181,961 18,749,700 31,191,190 49,940,890 28,256,656 1.9 3.42014 113,870,820 10,037,200 34,399,261 44,436,461 34,221,408 2.6 3.32015 128,080,337 20,252,200 41,596,192 61,848,392 38,352,415 2.1 3.32016154,099,469 29,588,000 44,171,592 73,759,592 46,381,319 2.1 3.32017167,090,678 38,026,700 51,333,869 89,360,569 58,182,077 1.9 2.92018211,622,478 42,716,800 57,682,698 100,399,498 67,923,285 2.1 3.12019244,962,650 50,907,800 63,224,915 114,132,715 77,941,363 2.1 3.12020276,344,219 52,587,600 59,932,607 112,520,207 75,660,403 2.5 3.7Total Debt Service
Projected Coverage14*Reflects GASB 68 and GASB 75 expense adjustmentActual Actual Projected Projected Projected Projected2019 2020 2021 2022 2023 2024Net Revenue* 244,962,649$ 276,344,219$ 249,257,121$ 264,951,368$ 283,246,283$ 298,507,415$ Debt ServiceBecoming Due in Each Fiscal YearSenior Lien Bonds77,941,363 75,660,403 81,420,735 86,180,214 93,725,307 107,209,900Total Debt114,132,715 112,520,207 119,373,054 124,995,756 136,507,297 157,941,116CoverageSenior Bonds3.1x 3.7x 3.1x 3.1x 3.0x 2.8xTotal Debt2.1x 2.5x 2.1x 2.1x 2.1x 1.9xFiscal Year Ending June 30Projected Coverage from Rate Proposal 2020 2021 2022 2023 2024Senior Bonds 3.4x 3.2x 3.1x 2.9x 2.6xTotal Debt 2.2x 2.1x 2.1x 1.9x 1.8x
Trend LiquidityLiquidity is expected to remain well in excess of 365 days through the 2020 planning period, both with and without the inclusion of long-term investments. CIRP appropriations for the years 2015 through 2020 were above $1 billion.15Note: Reflects GASB 68 pension expense adjustmentKey Liquidity Ratios2015 2016 2017 2018 2019 2020Cash and Investments (No Long-Term Unrestricted) $132,950,967 $182,927,020 $286,332,159 $300,591,076 $241,181,876 $317,158,516Days Cash on Hand/Liquidity Ratio 297 397 619 673 516 658Cash and Investments (Adds Long Term Unrestricted)$298,732,325 $339,921,143 $347,607,159 $367,855,784 $409,831,492 $467,823,163Days Cash on Hand/Liquidity Ratio 668 737 751 824 877 971Net Working Capital (No Long-Term Unrestricted) $141,906,809 $199,480,611 $300,033,117 $324,914,813 $267,032,645 $347,713,632Working Capital Ratio/Days Working Capital 317 433 649 727 571 722Net Working Capital (Adds Long-Term Unrestricted) $307,688,167 $356,474,734 $361,308,117 $392,179,521 $435,682,261 $498,378,279Working Capital Ratio/Days Working Capital 688 773 781 878 932 1034Fiscal Year Ending June 30
Long-Term Investment Portfolioas of September 30, 202016Product Type Callable Bond Face Value Market Value Coupon Rate Moody's Maturity Date DurationTNOTES Non-Callable Bond $ 8,000,000 $ 8,117,813 1.500% AA+ 31-OCT-2021 1.07 FHLB Non-Callable Bond 10,000,000 10,340,270 2.500% AA+ 11-MAR-2022 1.42 FHLB Non-Callable Bond 3,000,000 3,102,081 2.500% Aaa 11-MAR-2022 1.42 FFCB Non-Callable Bond 5,000,000 5,123,970 1.850% Aaa 14-MAR-2022 1.44 FFCB Non-Callable Bond 10,000,000 10,247,940 1.850% Aaa 14-MAR-2022 1.44 FFCB Non-Callable Bond 3,815,000 3,909,589 1.850% Aaa 14-MAR-2022 1.44 FFCB Non-Callable Bond 10,000,000 10,247,940 1.850% Aaa 14-MAR-2022 1.44 FFCB Non-Callable Bond 7,000,000 7,173,558 1.850% Aaa 14-MAR-2022 1.44 FAMCA Non-Callable Bond 8,000,000 8,239,864 1.950% AA+ 21-JUN-2022 1.70 TNOTES Non-Callable Bond 6,000,000 6,171,328 1.625% AA+ 31-AUG-2022 1.89 TNOTES Non-Callable Bond 6,000,000 6,171,328 1.625% AA+ 31-AUG-2022 1.89 FFCB Non-Callable Bond 7,500,000 7,694,378 1.500% AA+ 06-SEP-2022 1.91 FFCB Non-Callable Bond 1,500,000 1,538,876 1.500% AA+ 06-SEP-2022 1.91 FHLB Non-Callable Bond 3,000,000 3,107,115 2.000% Aaa 09-SEP-2022 1.91 TNOTES Non-Callable Bond 6,000,000 6,193,594 1.750% AA+ 30-SEP-2022 1.97 FHLB Non-Callable Bond 3,485,000 3,613,171 2.000% Aaa 30-SEP-2022 1.97 FHLB Non-Callable Bond 5,000,000 5,183,490 1.875% Aaa 09-DEC-2022 2.15 FHLB Non-Callable Bond 5,000,000 5,251,715 2.500% Aaa 09-DEC-2022 2.14 FHLB Non-Callable Bond 2,000,000 2,123,450 2.750% AA+ 10-MAR-2023 2.37 TNOTES Non-Callable Bond 14,000,000 14,938,438 2.750% AA+ 30-APR-2023 2.49 TNOTES Non-Callable Bond 5,000,000 5,335,156 2.750% AA+ 30-APR-2023 2.49 TNOTES Non-Callable Bond 10,000,000 10,831,250 2.875% AA+ 31-OCT-2023 2.95 FHLB Non-Callable Bond 750,000 763,556 1.625% Aaa 20-DEC-2021 1.21 TNOTES Non-Callable Bond 1,000,000 1,023,203 2.000% Aaa 31-DEC-2021 1.24 TNOTES Non-Callable Bond 1,375,000 1,408,999 2.125% Aaa 31-DEC-2021 1.24 TNOTES Non-Callable Bond 750,000 774,434 2.375% AA+ 15-MAR-2022 1.44 TNOTES Non-Callable Bond 250,000 250,898 0.375% Aaa 31-MAR-2022 1.50 TNOTES Non-Callable Bond 1,000,000 1,024,180 1.750% AA+ 31-MAR-2022 1.48 TNOTES Non-Callable Bond 750,000 770,625 1.750% AA+ 15-JUN-2022 1.69 TNOTES Non-Callable Bond 1,500,000 1,542,305 1.750% Aaa 30-JUN-2022 1.73 Total Face Value176,730,000$ Average Face Value2,995,424$ Average Days to Maturity770.34 Average Duration2.07
Long-Term Investment Portfolio (cont’d)as of September 30, 202017Product Type Callable Bond Face Value Market Value Coupon Rate Moody's Maturity Date DurationTNOTES Non-Callable Bond $ 750,000 $ 770,098 1.500% AA+ 15-SEP-2022 1.93 TNOTES Non-Callable Bond 975,000 1,001,127 1.500% AA+ 15-SEP-2022 1.93 TNOTES Non-Callable Bond 630,000 646,882 1.500% Aaa 15-SEP-2022 1.93 TNOTES Non-Callable Bond 750,000 774,609 1.625% AA+ 15-DEC-2022 2.17 TNOTES Non-Callable Bond 960,000 1,002,825 2.125% Aaa 31-DEC-2022 2.20 TNOTES Non-Callable Bond 1,500,000 1,566,914 2.125% Aaa 31-DEC-2022 2.20 TNOTES Non-Callable Bond 750,000 756,621 0.500% AA+ 15-MAR-2023 2.44 TNOTES Non-Callable Bond 1,000,000 1,008,828 0.500% AA+ 15-MAR-2023 2.44 TNOTES Non-Callable Bond 1,000,000 1,033,750 1.500% AA+ 31-MAR-2023 2.46 FHLMC Non-Callable Bond 575,000 614,319 2.750% Aaa 19-JUN-2023 2.63 TNOTES Non-Callable Bond 1,500,000 1,550,391 1.375% Aaa 30-JUN-2023 2.70 TNOTES Non-Callable Bond 175,000 180,414 1.250% AA+ 31-JUL-2023 2.78 FHLMC Non-Callable Bond 1,300,000 1,300,975 0.250% Aaa 24-AUG-2023 2.89 TNOTES Non-Callable Bond 1,750,000 1,813,574 1.375% AA+ 30-SEP-2023 2.95 TNOTES Non-Callable Bond 750,000 777,246 1.375% AA+ 30-SEP-2023 2.95 TNOTES Non-Callable Bond 1,500,000 1,600,898 2.250% Aaa 31-DEC-2023 3.15 TNOTES Non-Callable Bond 750,000 800,449 2.250% AA+ 31-DEC-2023 3.15 TNOTES Non-Callable Bond 2,750,000 2,935,840 2.125% AA+ 31-MAR-2024 3.39 TNOTES Non-Callable Bond 750,000 800,684 2.125% AA+ 31-MAR-2024 3.39 TNOTES Non-Callable Bond 1,000,000 1,067,578 2.125% AA+ 31-MAR-2024 3.39 TNOTES Non-Callable Bond 750,000 793,535 1.750% AA+ 30-JUN-2024 3.64 TNOTES Non-Callable Bond 500,000 529,023 1.750% Aaa 30-JUN-2024 3.64 FNMA Non-Callable Bond 750,000 818,393 2.625% AA+ 06-SEP-2024 3.75 TNOTES Non-Callable Bond 975,000 1,024,969 1.500% AA+ 30-SEP-2024 3.89 TNOTES Non-Callable Bond 750,000 798,223 1.750% AA+ 31-DEC-2024 4.11 TNOTES Non-Callable Bond 1,000,000 1,064,297 1.750% Aaa 31-DEC-2024 4.11 TNOTES Non-Callable Bond 2,000,000 2,023,125 0.500% AA+ 31-MAR-2025 4.45 TNOTES Non-Callable Bond 215,000 217,486 0.500% AA+ 31-MAR-2025 4.45 TNOTES Non-Callable Bond 2,000,000 2,023,125 0.500% Aaa 31-MAR-2025 4.45 Total Face Value176,730,000$ Average Face Value2,995,424$ Average Days to Maturity770.34 Average Duration2.07
Pension Fund UpdateMSD offers a defined benefit plan providing retirement, death and disability benefits to full-time employees commencing service prior to December 31, 2010 (plan is not accepting new entrants)As of December 31, 2019, MSD’s key statistics are as follows:–493 active plan members–$290.9 million Actuarial Value of Assets –$63.1 million in unfunded liability, up from $58.2 million as of December 31, 2018 –Actuarial Value of Assets/Actuarial Accrued Liability decreased slightly to 82.2% as of December 31, 2019, versus 82.6% as of December 31, 2018In 2019 MSD lowered its assumed rate of return from 6.90% to 6.75%As of December 31, 2019 the market value of assets is $296.2MMEffective January 1, 2011, MSD offers a defined contribution plan for current employees with less than 10 years of service as of December 31, 2010, and all new employees commencing service on or after January 1, 2011–As of December 2019, the plan has 540 participants and $13.0 million in assets18
OPEB ConsiderationsMSD’s total OPEB unfunded accrued liability as of December 31, 2019, the latest actuarial valuation, was $23.2 million, assuming a 2.74% return on investment (Report by Milliman, Inc. dated July 2019)–MSD 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 122 individuals in this group (as of 12/31/2019) –MSD has continued to elect a Pay-Go approach to assure flexibility in future benefits. 19
V. SUMMARY OF CREDIT STRENGTHS20
MSD Credit StrengthsConsistently Strong Financial Performance–The District has maintained healthy liquidity levels–Consistently strong coverage levels–Proactive management of pension and OPEB obligations mitigate future liabilitiesSuccessful Rate Proposal and Rate Commission Process–The District Board of Trustees accepted the Rate Commission’s recommendations for FY2021-FY2024–The District has strong historical success approving bond referendums On Time and On Budget Implementation of Consent Decree–All related litigation settled–Over $2 billion in projects to be funded through 2021–Strong relationship with Regulators21
Financing Schedule22Date ActivityWeek of November 2 Rating CallsNovember 13 Ratings ReleasedNovember 19 Post Preliminary Official StatementDecember 3 Pricing of the BondsDecember 17 Bond Closing
Contact Phone/EmailTim Snoke, Secretary-Treasurer(314) 768 6222tsnoke@stlmsd.comJohn Strahlman, Assistant Secretary-Treasurer(314) 768 6225jstrahlman@stlmsd.comBethany Pugh, Managing Director – PFM(440) 239 7070pughb@pfm.comMatthew Schnackenberg, Director - PFM(612) 371 3771schnackenbergm@pfm.comTionna Pooler, President - IPA(816) 521 6844tionna@ipamuni.comContact Information23
APPENDIX24
I. OVERVIEW AND GOVERNANCE25
Authority and GovernanceEstablished and chartered in 1954 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–A Civil Service Commission serves in an advisory position regarding personnel, administrative, and civil service matters and hears appeals of disciplinary actions–Revenue Bonds are issued pursuant to referendum approval of a majority of voters–Charter changes also subject to majority approval of voters26
Organization27Board of TrusteesCivil ServiceCommissionSecretary-TreasurerInternal AuditorRateCommissionExecutiveDirectorGeneral CounselHumanResourcesFinanceInformationSystemsEngineeringOperations
Management Team LeadershipBrian Hoelscher, P.E., Executive Director–Assumed executive leadership position in March 2013–Twenty years prior experience at MSD, most recently as Director of Engineering–Previous responsibilities included oversight of Capital Improvement and Replacement Program (CIRP)–Part of four-member MSD staff leadership team that negotiated terms of the final EPA Consent DecreeTim Snoke, Secretary-Treasurer–Assumed the Secretary-Treasurer position in May 2014–Twenty-one years prior experience at Ralcorp Holdings, Inc.–Holds a BSc. Business Administration from Valparaiso University and a Masters of Business Administration from St. Louis UniversityMarion Gee, Director of Finance–Assumed the Director of Finance position in September 2015–Previously served as Assistant Finance Director for the City of San Antonio and before that as Finance Director at Louisville Metropolitan Sewer District for eleven years–Certified Public Accountant with a BSc. in Business Administration and a Masters of Business Administration from University of Louisville28
Management Team LeadershipSusan M. Myers, General Counsel–Assumed the General Counsel role in April 2011–Started at the District as in-house counsel in 2001–Served as an environmental engineer for two years with EPA Region VII in RCRA Permitting and for nine years on a billion dollar Department of Energy Superfund Clean-up project–Part of four member MSD staff leadership team that negotiated terms of the final EPA Consent Decree Richard Unverferth, P.E., Director of Engineering–Assumed engineering leadership position in May 2013–Twenty-nine years prior experience at MSD in engineering, as well as leadership role in long-term planning group–Extensive familiarity with District CIRP and operations–Responsible for developing background data for MSD position in EPA Consent Decree negotiationsJohn Strahlman, Assistant Secretary-Treasurer–Assumed the Assistant Secretary-Treasurer position in January 2015–Prior experience includes treasury management positions at Metropolitan Pier and Exposition Authority in Chicago and at the Cook County Treasurer’s office–Holds a BSc. Public Finance from Indiana University and a Masters of Business Administration from DePaul University29
Service AreaIncludes 520 square miles pursuant to 1977 referendum and subsequent annexationIncludes the City of St. Louis and 90 other cities, including approximately 87% of St. Louis CountyServes a population of 1.3 millionEncompasses five watershed areas30
System ProfileIn FY20 MSD treated an average daily flow of 368 MGD, operating seven treatment facilities. The average daily flow over the past five years is 340 MGD The System serves approximately 427,000 wastewater accounts, 94% of which are single- and multi-family residential customers31Approximately 80% of customer accounts are in St. Louis County, with the balance of 20% in the City of St. Louis Ten largest customers contribute approximately 4.5% of user charges as indicated to the right:FY 2020Customers User Charges % TotalInBev Anheuser-Busch $5,651,108 1.33%Washington University 2,476,315 0.59%The City of St. Louis 2,408,502 0.57%Sigma-Aldrich 1,660,289 0.39%Sensient Colors Inc. 1,197,204 0.28%BJC Health System 1,195,080 0.28%Missouri-American Water Co. 1,181,175 0.28%Jost Real Estate LLC 1,125,016 0.26%The Boeing Company 1,089,987 0.26%GKN Aeropsace N America Inc. 1,080,998 0.25%Total $19,065,674 4.49%
MSD Wins Top National AwardsIn 2020, MSD received several NACWA Peak Performance Awards recognizing public wastewater treatment facilities for outstanding environmental compliance in the 2019 calendar year:–The “Platinum Performance Award” honors member agencies for outstanding 100% compliance over a five-year or more consecutive periodFenton, Lower Meramec (perfect compliance for 12 consecutive years)Missouri River Treatment Plants (perfect compliance for 6 consecutive years)Grand Glaze Treatment Plants–The “Gold Performance Award” honors facilities with one year 100% complianceBissel Treatment Plant earned Gold honors–The “Silver Performance Award” honors facilities with five or less violations per yearLemay and Coldwater Creek Treatment plants earned Silver honors32
MSD Wins Top National AwardsThe District has been recognized with the Government Finance Officers Association’s (GFOA) Distinguished Budget Presentation Award every year since 1987, the certificate of Achievement for Excellence in Financial Reporting every year since 1988. The District also received the GFOA’s Award for Outstanding Achievement in Popular Annual Financial Reporting every year since 2012, the first year MSD provided a submittal for review33
FY2021-FY2024 Rate Commission and Proposal ProcessThe Rate Commission was established in 2000, by voter-approved amendments to the District’s CharterThe 15-member Rate Commission is required to review the District’s rate proposal, seek public feedback, and submit recommendations to the District’s Board of TrusteesThe year-long process included the selection of Rate and other Consultants as well as the development of a comprehensive Rate Proposal submitted by the District to the Commission in March 2019Other key milestones include:–Rate Proposal presented – March 2019–Community briefings – March through April 2019–Technical Conferences (Testimony) – April through June 2019–Public Hearings- May through July 2019–Rate Recommendation Report submitted – August 2019–Recommendation Report accepted by the Board of Trustees - October 2019–Board of Trustees adopted the ordinance approving the rate for fiscal year 2021 on June 11, 2020. Rates were effective as of October 1, 2020.34
FY2021-FY2024 Rate Commission and Proposal ProcessPer charter, rates must be consistent with laws and regulation; provide for adequate systems, facilities and services; be consistent with and not violate any covenant or provision related to indebtedness; impose a fair and reasonable burden on all ratepayersDistrict’s metric targets consistent with highly rated creditsProposal substantively accepted by Rate Commission, including credit Recommended rates (2020 rates from 2015 Rate Commission)For more information and supporting documents: https://msdprojectclear.org/about/rate-commission/35Typical Bill for Single Family Residence using 6ccf/monthRate % ChangeFY 2020 $55.57 10.6%FY 2021 $56.40 1.5%FY 2022 $58.33 3.4%FY 2023 $60.36 3.5%FY 2024 $62.59 3.7%
II. REVIEW OF REGULATORY COMPLIANCE AND PROGRAM36
Regulatory Compliance—Consent Decree37Consent Decree entered April 27, 2012–Consent Decree drives the majority of the long term investment in the sewer system–Estimated more than $5 billion of capital system improvements over an original 23 year period –Five year time extension granted by EPA, lessening financial impacts–Over $1.4 Billion in capital expenditures from 2013 through 2019–Substantial operational commitment is aimed at reducing overflows and building backupsDistrict’s long-term planning means Consent Decree obligations are well defined–The Combined Sewer Overflow Long Term Control Plan was approved in 2011, and provides parameters for about a third of the capital program–The Sanitary Sewer Overflow Master Plan was approved in 2014, and provides a schedule and milestones for elimination of overflow structures, accounting for about a third of the program–The balance of Consent Decree obligations, wastewater system asset renewal, along with other regulatory requirements, accounts for the rest of the programConsent Decree Amendment June 22, 2018–Extended to 28 year program–Allows delivery of regulatory-required, non-consent decree work without placing an additional financial burden on ratepayers–Delays the start of some CSO tunnels while expediting the solids handling project–Added $20M in Green Infrastructure
Regulatory Compliance—Accomplishments38Since entering the Consent Decree in 2012, MSD has successfully delivered the capital program, met milestones, and satisfied all reporting requirementsAccomplishments include:–Submitted and received approval on multiple program plans for sewer system operations and maintenance, and implemented the approved Capacity, Management, Operations, and Maintenance (CMOM) program–Completed $1.6 million Supplemental Environmental Projects program obligation–Submitted and received approval of the Sanitary Sewer Overflow Master Plan–Met first five-year milestone for SSO removals; removed 92 Sanitary Sewer Overflow structures–Completed two major Combined Sewer Overflow system milestones with the completion of the Lemay Redundant Force Main and Lemay Treatment Plant Secondary Expansion–Rehabilitated, repaired, or replaced over 1,000 miles of the sewer system –Received EPA approval for the 2015 $100 Million CSO Volume Reduction Green Infrastructure Program Plan, and implementation is over 20% complete.
Regulatory Compliance—Program Notes and the Future 39Program Notes–The 2017 to 2020 capital program was under budget–The capital program for 2021 includes 170 projects split about evenly between design and construction efforts–The District has demonstrated the ability to manage large annual capital programs within budget–The District’s focus on budgetary controls and operational efficiencies have successfully contained total Operations and Maintenance costsThe Future Program–Continued compliance with the Consent Decree and other regulatory requirements–Continued construction to enable removal of Sanitary Sewer Overflow structures–Over the next four years, the District will complete a majority of planned neighborhood scale projects and transition to larger regional projects, such as tunnel and tank storage facilities–Continued wastewater system asset renewal–Fluidized bed incinerators at Bissell and Lemay treatment facilities