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HomeMy Public PortalAboutExhibit MSD 51- 2013 Rating Agency PresentationMetropolitan St. Louis Sewer District Credit Presentation November 7, 2013 Exhibit MSD 51 2 Participants MSD Participants Brian L. Hoelscher, P.E., Executive Director Brenda A. Schaefer, Secretary-Treasurer Susan M. Myers, General Counsel Janice M. Zimmerman, Director of Finance Richard Unverferth, P.E., Director of Engineering Finance Team Participants Bethany Pugh, Jeanne Vanda, Public Financial Management - Co-Financial Advisor Tionna Pooler, Independent Public Advisors - Co-Financial Advisor Don Wilbon, JP Morgan, Lead Underwriter 3 Table of Contents Overview & Governance Review of Regulatory & Litigation Issues CIRP Update and 2013 Funding Plan Financial Performance Update Summary of Credit Strengths 4 Overview & Governance 5 Established 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. •Revenue Bonds are issued pursuant to referendum approval of a majority of voters. •Charter changes also subject to majority approval of voters. Authority & Governance Organization 6 Board of Trustees Rate Commission Civil Service Commission Internal Auditor Secretary- Treasurer Executive Director Finance Information Systems Engineering Human Resources General Counsel Operations = New Management Management Team Leadership Changes 7 Brian Hoelscher, P.E., Executive Director •Assumed executive leadership position in March, 2013 •Eighteen 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 Decree Brenda A. Schaefer, CTP, Secretary-Treasurer •Assumed financial leadership position in November, 2012 •Licensed as a Certified Treasury Professional (CTP) •Prior experience as Corporate Director-Treasury of major St. Louis based healthcare provider •20 years in corporate leadership roles focusing on cash management, investment and debt functions Richard Unverferth, P.E., Director of Engineering •Assumed engineering leadership position in May, 2013 •Twenty-six 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 negotiations Service Area 8 Treatment Plants Includes 525 square miles pursuant to 1977 referendum and subsequent annexation. Includes the City of St. Louis and 91 other cities, including approximately 90% of St. Louis County. Serves a population of 1.3 million. Encompasses 5 watershed areas. 9 MSD currently provides secondary treatment for an average daily flow of 356 MGD, operating seven treatment facilities. The System serves approximately 425,000 wastewater customers, most of which (94%) are single- and multi-family residential customers. System Profile Approximately 64% of customer billings are in St. Louis County, with the balance of 36% in the City of St. Louis. Ten largest customers contribute approximately 6% of user charges as indicated to the right: FY 2013 Customers User Charges % Total InBev (Anheuser-Busch Inc.)5,715,199 2.42% Washington University 1,475,706 0.62% Mallinckrodt, Inc.1,405,103 0.59% City of St. Louis 1,030,029 0.44% St. Louis University Hospital 1,028,812 0.44% Sigma-Aldrich 735,691 0.31% Boeing 720,564 0.30% Sensient Colors Inc.702,801 0.30% Saint Louis Zoo 663,673 0.28% Prairie Farms Dairy 590,349 0.25% Total 14,067,927 5.95% 10 In 2012, MSD received the NACWA Excellence in Management Gold Award. The program acknowledges the significant achievements of NACWA member agencies in the utility management arena. Honorees have implemented and sustained, for a continuous three-year period, successful programs that address the range of management challenges faced by public clean water utilities in today’s competitive environment. In 2013, MSD received several NACWA Peak Performance Awards recognizing public wastewater treatment facilities for outstanding environmental compliance in the 2012 calendar year: •The top “Platinum Performance Award” honors member agency facilities for outstanding 100% compliance over a five-year or more consecutive period. –Missouri River treatment plant (six consecutive years) –Fenton and Lower Meramec plants (five consecutive years) •The “Gold Performance Award” honors facilities with one year 100% compliance. –Coldwater Creek, Bissell Point, Lemay, and Grand Glaize plants earned Gold Honors MSD Wins Top National Association of Clean Water Agency (NACWA) Awards 11 Review of Regulatory & Litigation Issues 12 Clean Water Act & Stormwater Litigation The U.S. District Court for the Eastern District of Missouri (the “Court”) resolved outstanding Clean Water Act litigation. •On April 27, 2012, the Court entered the Consent Decree which had been lodged on August 4, 2011, with no substantive changes after the public comment period. •The Court realigned the State of Missouri as a defendant and reaffirmed the August 3, 2009 decision by the Eighth Circuit Court of Appeals that the State had waived its sovereign immunity. Update on Stormwater Litigation due to 2012 actions •A ruling March 27, 2012 by the Court of Appeals affirmed the Trial Court’s decision that the stormwater fee is a tax, that no refund was due, and reversed the application of a multiplier on attorney’s fees, significantly reducing MSD’s financial liability to an estimated $2.5 million for attorney’s fees. •The Missouri Supreme Court accepted the case on transfer in October 2012. Oral arguments were heard on May 21, 2013. We are awaiting the decision. 13 Scope of Consent Decree Consent Decree substantially aligns with the direction and plan initiated by MSD. •Projects implemented over 23 years estimated at $4.7 Billion in 2010 dollars, with approximately $1 Billion in expenditures from 2012 through 2016; •Operating funds committed to a substantial Capacity, Management, Operations and Maintenance (“CMOM”) Program is aimed at preventing overflows and building backups; •MSD has demonstrated ability to manage large annual capital projects on budget and on time. MSD’s long term planning means costs are better defined than other programs •MSD’s CSO Long Term Control Plan was approved June 1, 2011, and provides solid cost parameters for about 40% of the capital program; •The April 27, 2012 Consent Decree defines another 20% of costs; and •The SSO Master Plan, to be completed by December 2013, will provide a road map for the remaining 40% of program costs. 14 Consent Decree Implementation – Accomplishments Since the entry of the Consent Decree in April 2012, MSD has successfully completed numerous milestones and reporting requirements for the Consent Decree. •Submitted and received approval on multiple program plans for sewer system operations and maintenance. •Successful completion of major capital projects and sewer system improvements. •Completed approximately $37.6 million of sewer system rehabilitation. •Implemented approved CMOM program for sewer system maintenance. Consent Decree Implementation - Future As MSD moves forward with its consent decree implementation several key factors will impact the overall program: The mandated non-capital portion of the program paid by operating funds has grown in scope, with strong potential for substantial long-term savings in reducing and preventing system overflows & building backups. •Projects included in this category are future project planning, sewer system inspection (CCTV), sewer rehabilitation and lining, and Combined Sewer Overflow volume reduction projects (Green Infrastructure Solutions) •The 2014 thru 2016 annual costs grew from $11.3 million $18.5 million due to strong community response to Green Infrastructure Solutions Program. •Early sewer inspection results indicate a system in relatively better condition than anticipated thus reducing future rehabilitation costs •MSD’s focus on budgetary controls and operational efficiencies have successfully contained Total Operations and Maintenance costs, allowing additional funds to flow to PAYGO financing of the CIRP The favorable construction bid environment has enabled MSD to accommodate added regulatory scope while staying within CIRP budget. •$46 million in 13 projects were added in 2012 and 2013, with total projects yet delivered within original budget •District remains confident that 2012-2016 CIRP will be delivered on time and within budget 15 16 CIRP Update and 2013 Funding Plan 17 CIRP Investment Planned: 2012 – 2016 Total CIRP Appropriations for years 2012 through 2016 is estimated at approximately $1.1 Billion. Fiscal Year Program Level 2012 Actual $ 119,184,000 2013 Actual $ 184,451,000 2014 $ 245,223,000 2015 $ 313,621,000 2016 $ 266,632,000 Total 5 Year Program $ 1,129,111,000 18 Allocation of 2012 – 2016 CIRP Projects $159.6 Million for the reduction and control of CSOs $596.8 Million for the elimination of SSOs $212.2 Million for system projects $160.5 Million for treatment plant improvements 19 Series 2013B Bonds will fund approximately $150 million in projects planned for Fiscal Year 2014. •Construct collection system improvements to reduce combined sewer overflows eliminate sanitary sewer overflows, and reduce building backups. •Initial design work on storage tunnels, storage tanks, and relief sewers to improve system capacity. •Construct further improvements to the Lemay plant’s secondary treatment system. Project planning anticipates next new money bond issue in Fall, 2014 $150 Million Series 2013B Bond Projects CIRP Funding – Debt and PAYGO 20 CIRP Debt Cash % Debt % Cash 2004-2012 1,263,851,800$ 753,278,387$ 510,373,413$ 60%40% FY 2013 FY 2014 FY 2015 FY 2016 Subtotal PAYGO Directly to CIRP 24,200,001$ 25,000,000$ 26,208,000$ 40,000,000$ Asset Management Projects 10,372,081$ 16,275,000$ 16,598,000$ 18,999,000$ Capitalized Internal Labor 10,989,822$ 11,595,087$ 11,916,927$ 12,131,603$ Total Planned PAYGO 45,561,904$ 52,870,087$ 54,722,927$ 71,130,603$ 224,285,521$ CIRP Appropriations 184,451,000$ 245,223,000$ 313,621,000$ 266,632,000$ 1,009,927,000$ PAYGO as % CIRP 25%22%17%27%22% Planned PAYGO 2013 - 2016 Unrestricted cash grows •Unrestricted cash is expected to grow from FY 2013 levels. •Excess Unrestricted Cash may be available for PAYGO in later years. 21 Series 2013B Projected Debt Service Series 2013B is amortized over 30 years, level debt structure with a weighted average life of 19.1 years. Fiscal Year End Principal Interest Debt Service 5/1/2014 - 2,812,500 2,812,500 5/1/2015 - 7,500,000 7,500,000 5/1/2016 1,000,000 7,500,000 8,500,000 5/1/2017 3,000,000 7,450,000 10,450,000 5/1/2018 3,000,000 7,300,000 10,300,000 5/1/2019 3,000,000 7,150,000 10,150,000 5/1/2020 3,145,000 7,000,000 10,145,000 5/1/2021 3,305,000 6,842,750 10,147,750 5/1/2022 3,470,000 6,677,500 10,147,500 5/1/2023 3,640,000 6,504,000 10,144,000 5/1/2024 3,825,000 6,322,000 10,147,000 5/1/2025 4,015,000 6,130,750 10,145,750 5/1/2026 4,215,000 5,930,000 10,145,000 5/1/2027 4,425,000 5,719,250 10,144,250 5/1/2028 4,650,000 5,498,000 10,148,000 5/1/2029 4,880,000 5,265,500 10,145,500 5/1/2030 5,125,000 5,021,500 10,146,500 5/1/2031 5,380,000 4,765,250 10,145,250 5/1/2032 5,650,000 4,496,250 10,146,250 5/1/2033 5,930,000 4,213,750 10,143,750 5/1/2034 6,230,000 3,917,250 10,147,250 5/1/2035 6,540,000 3,605,750 10,145,750 5/1/2036 6,865,000 3,278,750 10,143,750 5/1/2037 7,210,000 2,935,500 10,145,500 5/1/2038 7,570,000 2,575,000 10,145,000 5/1/2039 7,950,000 2,196,500 10,146,500 5/1/2040 8,345,000 1,799,000 10,144,000 5/1/2041 8,765,000 1,381,750 10,146,750 5/1/2042 9,205,000 943,500 10,148,500 5/1/2043 9,665,000 483,250 10,148,250 Total 150,000,000 143,215,250 293,215,250 22 Outstanding & Planned Bonds Under Existing Voted Authority Date Series Term Par Issued Par Outstanding Outstanding 05/06/04 2004A 30 Year, Fixed $175,000,000 $2,375,000 04/28/04 2004B (EIERA)20 Year, Fixed 161,280,000 112,405,000 05/19/05 2005A (EIERA)20 Year, Fixed 6,800,000 4,750,000 04/27/06 2006A (EIERA)20 Year, Fixed 42,715,000 32,085,000 11/28/06 2006B (EIERA)20 Year, Fixed 14,205,000 10,945,000 11/28/06 2006C 30 Year, Fixed 60,000,000 60,000,000 10/28/08 2008A 30 Year, Fixed 30,000,000 30,000,000 10/28/08 2008B (EIERA)20 Year, Fixed 40,000,000 32,940,000 10/21/09 2009A (EIERA)20 Year, Fixed 23,000,000 20,093,400 12/15/09 2010A Direct Loan 21 Year, Fixed 7,980,700 7,471,600 01/28/10 2010B 30 Year, Fixed 85,000,000 85,000,000 12/21/10 2010C Direct Loan 20 Year, Fixed 37,000,000 33,999,000 11/17/11 2011A Direct Loan 22 Year, Fixed 39,769,300 39,769,300 12/22/11 2011B 30 Year, Fixed 52,250,000 50,610,000 08/23/12 2012A 30 Year, Fixed 225,000,000 225,000,000 11/14/12 2012B 20 Year, Fixed 141,730,000 141,730,000 10/31/13 2013A Direct Loan 20 Year, Fixed 52,000,000 52,000,000 Planned Dec. 2013 2013B 30 Year, Fixed 150,000,000 150,000,000 Total:$1,343,730,000 $1,091,173,300 Projected Debt Service through 2016 Rate Period 23 Notes: (1) Includes BABs subsidy. (2) Through FY2016. (3) Maximum senior debt service (including Series 2013B and projected future debt service through 2016 rate period) of $81.6 million in Fiscal Year 2030. (4) Include fees associated with the loans. (5) Maximum total debt service (including Series 2013B and projected future debt service through 2016 rate period) of $102.6 million in Fiscal Year 2022. Year Ended Outstanding Net Series 2013B Future Senior Total Senior Total Future Sub.Total Sub.Total Projected June 30 Debt Service(1)Debt Service Debt Service(2)Net Debt (3)Sub. Debt (4)Debt Service(2)Debt Service Debt Service(5) 2014 31,566,761 2,812,500 34,379,261 21,138,514 21,138,514 55,517,775 2015 31,104,863 7,500,000 4,750,000 43,354,863 23,187,926 23,187,926 66,542,789 2016 36,243,363 8,500,000 14,125,000 58,868,363 26,377,931 424,000 26,801,931 85,670,293 2017 36,473,113 10,450,000 19,750,000 66,673,113 26,719,641 1,765,030 28,484,671 95,157,783 2018 36,363,738 10,300,000 20,700,000 67,363,738 26,608,113 3,251,220 29,859,333 97,223,071 2019 36,458,550 10,150,000 23,210,000 69,818,550 26,603,740 3,790,220 30,393,960 100,212,510 2020 36,422,250 10,145,000 25,679,500 72,246,750 26,591,661 3,790,154 30,381,815 102,628,565 2021 36,308,500 10,147,750 25,689,000 72,145,250 26,555,792 3,790,124 30,345,915 102,491,165 2022 36,271,000 10,147,500 25,699,750 72,118,250 26,726,042 3,791,074 30,517,116 102,635,366 2023 36,206,250 10,144,000 25,710,750 72,061,000 26,517,528 3,790,955 30,308,483 102,369,483 2024 35,850,950 10,147,000 25,716,000 71,713,950 26,497,468 3,790,699 30,288,167 102,002,117 2025 35,871,750 10,145,750 25,734,750 71,752,250 26,462,203 3,790,274 30,252,477 102,004,727 2026 39,033,550 10,145,000 25,745,250 74,923,800 22,989,956 3,790,578 26,780,534 101,704,334 2027 42,667,250 10,144,250 25,751,750 78,563,250 16,264,285 3,790,564 20,054,849 98,618,099 2028 43,466,325 10,148,000 25,773,250 79,387,575 12,451,259 3,790,163 16,241,422 95,628,997 2029 43,241,325 10,145,500 25,782,750 79,169,575 11,512,228 3,790,298 15,302,526 94,472,101 2030 45,682,975 10,146,500 25,799,500 81,628,975 7,545,152 3,789,898 11,335,050 92,964,025 2031 45,308,625 10,145,250 25,811,750 81,265,625 7,512,453 3,789,918 11,302,371 92,567,996 2032 45,100,588 10,146,250 25,828,250 81,075,088 6,012,032 3,790,226 9,802,259 90,877,346 2033 40,711,118 10,143,750 25,847,250 76,702,118 6,009,301 3,790,750 9,800,051 86,502,168 2034 40,518,893 10,147,250 25,867,000 76,533,143 6,009,620 3,789,430 9,799,050 86,332,193 2035 37,500,030 10,145,750 25,880,750 73,526,530 1,709,860 3,789,221 5,499,081 79,025,611 2036 37,535,822 10,143,750 25,907,000 73,586,572 - 3,255,950 3,255,950 76,842,522 2037 38,302,803 10,145,500 25,923,250 74,371,553 - 1,697,410 1,697,410 76,068,963 2038 38,355,648 10,145,000 25,948,000 74,448,648 - - - 74,448,648 2039 38,412,880 10,146,500 25,968,750 74,528,130 - - - 74,528,130 2040 37,866,000 10,144,000 25,993,500 74,003,500 - - - 74,003,500 2041 37,865,500 10,146,750 26,019,750 74,032,000 - - - 74,032,000 2042 37,868,250 10,148,500 26,045,000 74,061,750 - - - 74,061,750 2043 - 10,148,250 26,071,750 36,220,000 - - - 36,220,000 2044 - - 26,102,250 26,102,250 - - - 26,102,250 2045 - - 12,883,500 12,883,500 - - - 12,883,500 Senior Debt Subordinate Debt 24 Financial Performance Update 25 13.97 13.97 13.97 13.97 16.87 20.58 22.38 22.38 25.74 25.74 26.26 27.56 28.73 31.39 34.85 38.81 43.93 0 10 20 30 40 50 2000 2002 2004 2006 2008 2010 2012 2014 2016Residential Bill -$/Mo. Fiscal Year Historic and Projected Residential Bills Adopted Rate Adjustments, Historic & Projected Average Monthly Bill Relative to NACWA National Average Source: National Association of Clean Water Agencies (NACWA) NACWA National Average MSD Projected Average Monthly Bill Rate adjustments adopted June 14, 2012 are projected to increases revenues as follows: Fiscal Year 2012 2013 2014 2015 2016 Percentage Increase 1.53%6.77%8.89%10.30%12.13% 26 Historical Coverage TOTAL NET TOTAL SENIOR FISCAL SENIOR PLEDGED COVERAGE COVERAGE YEAR PRINCIPAL INTEREST TOTAL DEBT SERVICE REVENUES RATIO RATIO 2004 N/A 924,164 924,164 - 50,485,005 54.6 54.6 2005 6,800,000 14,799,402 21,599,402 8,052,321 74,184,923 3.4 9.2 2006 5,407,500 13,835,332 19,242,832 9,665,734 79,780,090 4.1 8.3 2007 7,817,500 16,512,429 24,329,929 10,874,084 76,375,307 3.1 7.0 2008 8,640,000 17,694,791 26,334,791 12,577,634 79,538,110 3.0 6.3 2009 12,110,000 17,503,892 29,613,892 13,197,272 81,283,885 2.7 6.2 2010 13,022,500 20,187,151 33,209,651 14,991,341 64,007,720 1.9 4.3 2011 14,576,800 20,140,021 34,716,821 17,247,269 59,641,434 1.7 3.5 2012 16,540,200 22,956,366 39,496,566 18,449,572 91,708,084 2.3 5.0 2013 18,749,700 31,436,995 50,186,695 28,238,846 95,181,961 1.9 3.4 PLEDGED REVENUE COVERAGE TOTAL DEBT SERVICE Note: 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. 27 Projected Coverage Actual Actual Projected Projected Projected 2012 2013 2014 2015 2016 Net Revenue 91,708,084 95,181,961 100,392,916 117,190,194 141,743,819 Debt Service Becoming Due in Each Fiscal Year Senior Lien Bonds 18,449,572 28,238,846 34,379,261 43,354,863 58,868,363 Total Debt 39,496,566 50,186,694 55,517,775 66,542,789 85,670,293 Coverage Senior Bonds 4.97x 3.37x 2.92x 2.70x 2.41x Total Debt 2.32x 1.90x 1.81x 1.76x 1.65x 2012 Projected Coverage Senior Bonds 4.40x 2.99x 2.84x 2.55x 2.39x Total Debt 2.15x 1.73x 1.77x 1.67x 1.68x Fiscal Year Ending June 30 28 Trend of Liquidity 2010 2011 2012 2013 Key Liquidity Ratios Cash and Investments (No Long-Term Unrestricted)N/A N/A $114,403,797 $149,343,613 Days Cash on Hand / Liquidity Ratio N/A N/A 309 372 Cash and Investments (Adds Long-Term Unrestricted)$180,468,976 $190,716,229 $165,246,915 $238,236,371 Days Cash on Hand / Liquidity Ratio 452 434 446 594 Net Working Capital (No Long-Term Unrestricted)N/A N/A $117,289,942 $145,165,055 Working Capital Ratio /Days Working Capital N/A N/A 317 362 Net Working Capital (Adds Long-Term Unrestricted)$191,974,679 $216,350,301 $168,133,060 $234,057,813 Working Capital Ratio /Days Working Capital 481 492 454 584 Fiscal Year Ending June 30 Liquidity (with long-term investments) is expected to remain well in excess of 365 days through 2016 planning period. 29 Long-Term Investment Portfolio (as of June 30, 2013) Product Type Callability Face Value Market Value Coupon Moody's Maturity Date Duration TNOTES Non-Callable Bond 9,500,000$ 9,541,969.86$ ‭ 0.625‬15-Jul-14 1.05 FNMA Non-Callable Bond 4,000,000 4,059,276.00 ‭ 1.500‬Aaa 8-Sep-14 1.20 TNOTES Non-Callable Bond 10,000,000 10,004,687.50 ‭ 0.250‬Aaa 15-Sep-14 1.22 FNMA Non-Callable Bond 10,000,000 10,143,520.00 ‭ 1.500‬Aaa 14-Oct-14 1.30 TNOTES Non-Callable Bond 1,000,000 1,000,312.50 ‭ 0.250‬Aaa 15-Dec-14 1.47 TNOTES Non-Callable Bond 5,000,000 5,001,562.50 ‭ 0.250‬Aaa 15-Dec-14 1.47 FFCB Callable Bond 10,000,000 9,990,757.00 ‭ 0.480‬Aaa 23-Jul-15 2.07 FNMA Callable Bond 2,000,000 1,994,637.80 ‭ 0.500‬Aaa 22-Oct-15 2.32 FHLB Callable Bond 11,000,000 10,958,468.40 ‭ 0.400‬Aaa 23-Oct-15 2.32 FHLMC Callable Bond 5,000,000 4,971,137.00 ‭ 0.450‬Aaa 15-Jan-16 2.55 FNMA Callable Bond 12,000,000 11,942,415.60 ‭ 0.550‬Aaa 26-Feb-16 2.67 FNMA Callable Bond 6,429,000 6,387,630.03 ‭ 0.500‬Aaa 28-Mar-16 2.75 FHLB Callable Bond 5,000,000 4,963,717.50 ‭ 0.700‬Aaa 27-Dec-16 3.50 90,929,000$ 90,960,091.69$ FNMA Callable Bond 8,050,000$ 8,010,687.83$ ‭ 0.625‬Aaa 29-Apr-16 2.84 CD Non-Callable Bond 100,000 100,000.00 ‭ 1.440‬Aaa 19-Mar-17 3.73 FHLMC Callable Bond 12,000,000 11,793,242.40 ‭ 1.000‬Aaa 27-Sep-17 4.25 FHLMC Callable Bond 6,605,000$ 6,486,757.29$ ‭ 1.250‬Aaa 27-Jun-18 5.00 Long Term (+365)117,684,000 117,350,779.21 Long-term Inv. Unrestricted Callability Avg. Days to Maturity Avg. Yrs. Duration Mod. Duration to 1st Call 59,636,092.52 Callable 947.71 2.60 1.86 Callable 78,084,000 77,499,450.85 30,665,733.48 Non-Callable 467.67 1.28 1.28 Non Callable 39,600,000 39,851,328.36 90,301,826.00 Total Total Long Term 117,684,000 117,350,779.21 30 Pension Fund Update MSD 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, 2011 MSD lowered its actuarial assumed rate of return from 7.50% to 7.25% with key statistics as of January 1, 2013 as follows: •803 active plan members •$221.1 million actuarial value of assets •$45.2 million in unfunded liability, down from $49.2 million as of January 1, 2012 •Funded ratio of 83.0% as of January 1, 2013, up from 80.7% January 1, 2012 Effective 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, 2012 the plan has 134 participants and $650 thousand in assets 31 OPEB Considerations  MSD’s total OPEB unfunded accrued liability as of June 30, 2014 has been estimated at approximately $26.0 million, assuming a 3.25% return on investment (Report by Milliman, Inc. dated November 2013). •The initial projected liability of $76 million (based on a 2006 study) has been significantly reduced to $26.0 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 monthly health claims on an ongoing basis for pre-age 65 retirees. There are 136 individuals in this group. •MSD has continued to elect a Pay-Go approach to assure flexibility in future benefits. The current recognized liability is $4,018,709. 32 Summary of Credit Strengths 33 MSD Credit Strengths The EPA Consent Decree brings definition to the scope and timeframe for future investment and is consistent with MSD’s long term planning efforts. •Proactive leadership has MSD well positioned to successfully implement the capital program mandated by the Consent Decree. •Proven ability to effectively manage large annual capital plans. Strong stakeholder support again affirmed by 2011 Rate Commission recommendations and June 5, 2012 Bond Referendum that provide funding for initial Consent Decree projects •$1.0 billion in projects funded through 2016 with affordable rate structure. Experienced management further enhances bondholder security. •Close monitoring of financial performance contribute to strong budget performance. •Shift to a defined contributions plan moderates future pension obligation while changes to benefits reduces OPEB obligations. •Actual debt coverage is strong and has exceeded 2012 projections while liquidity is anticipated to remain well in excess of 365 days, metrics consistent with premium credit. 34 Tentative Financing Schedule Date Activity November 7 Rating Agency Meetings Week of November 11/18 Release of Ratings Week of November 13/20 Electronic Distribution of POS Week of December 2 Pricing of the Bonds Week of December 16 Close and Deliver Funds 35 MSD Contact Information Phone/Email Brian L. Hoelscher, P.E., Executive Director 314-768-6245 blhoel@stlmsd.com Brenda A. Schaefer, CPA, Secretary-Treasurer 314-768-6222 bshaefer@stlmsd.com Susan Myers, General Counsel 314-768-6366 smyers@stlmsd.com Janice M. Zimmerman, Director of Finance 314-768-6299 jzimmer@stlmsd.com Richard Unverferth, Director of Engineering 314-768-6204 rlunve@stlmsd.com MSD Staff