Financial Planning for Capital ImprovementsFinancial Planning for Financial Planning for Capital ImprovementsCapital Improvements

Doug BeanJanuary 24, 2007

Overview• Needs

• Priorities

• Process

• Financial PlanningFinancing

Cash Flows

Needs

• 10 Year Needs

• 5 Year CIP

• 1 Year Budget

Identifying Projects

• EngineeringMaster Plans– Capacity– Growth

Regulatory

Identifying Projects

• Land UseComprehensive PlansArea Plans

Identifying Projects

• PolicyCouncil PrioritiesAdvisory InputSpecial Needs

Identifying Projects

• PublicNeighborhoodsDevelopers

Criteria & Prioritization

• City• Internal

Qualifying Criteria• Maintain and improve current service levels

– Rehabilitation– Replacement and upgrades

• Support community objectives– Short term programs– Long range programs

• Environmental protection/regulatory– Federal– State– Local

Program Category: SewerProject Title: Street and Minor Sewer Main Extension

•Project provides for sewer service extensions to residential customers 1,000 feet or less from an existing sewer line per Council approved policy.•Project also provides for extensions when health hazards are created in association with septic tank deterioration, sewage demand beyond capacity, or when on-site disposal systems are constructed in unsuitable soil conditions.•Need is based on customer requests and on the presence of sewer health hazards.Project Description:

NotesCMU CIP Project Number: 99S04Account Number: 633.79Appropriations to Date: $98,700,000Estimated Balance June 30, 2005: $9,644,706

$31,500,000$5,800,000$5,800,000$5,800,000$5,800,000$8,300,000Total

$31,500,000$5,800,000$5,800,000$5,800,000$5,800,000$8,300,000Sewer Revenue Bonds

Revenues

$31,500,000$5,800,000$5,800,000$5,800,000$5,800,000$8,300,000Total

$0$0$0$0$0$0Equipment

$23,500,000$4,200,000$4,200,000$4,200,000$4,200,000$6,700,000Construction

$500,000$100,000$100,000$100,000$100,000$100,000Acquisition

$7,500,000$1,500,000$1,500,000$1,500,000$1,500,000$1,500,000Planning/ Design

Total 2008-092007-082006-072005-062004-05Costs

FY 06-10 Capital Investment Projects/Water

$179,601,000$34,250,000$16,360,000$69,250,000$14,960,000$44,781,000Water CIP Total

$1,000,000$1,000,000$0$0$0$0$0$0North Transit Corridor Improvements

$1,000,000$1,000,000$0$0$0$0$0$0East Transit Corridor Improvements

$1,500,000$1,500,000$0$0$0$0$0$0WM Relocated Wallace Neal Rd.

$4,000,000$4,000,000$0$0$0$0$0$02009 Annexation Areas Water

$3,500,000$3,500,000$0$0$0$0$0$0N Meck WTP Expansion 25 to 50 MGD

$8,000,000$8,000,000$0$0$0$0$410,000$3,600,000Northeast Water Transmission Main

$1,000,000$0$1,000,000$0$0$0$0$0Sam Furr Rd

$1,200,000$400,000 $400,000 $400,000 $0 $0 $2,450,000 $3,000,000 GIS Facilities Mapping

$44,000,000$0$0$44,000,000$0$0$0$02007 Annex. Area Water Mains

$100,000$0$50,000$0$50,000$0$212,000$415,000Fire Hydrant Installation/Replacement

$120,000$0$60,000$0$60,000$0$290,000$300,000Franklin to Vest- Raw/Finished WM ROW

5 Year TotalsFY10FY09FY08FY07FY06Estimated Bal

Prior ApproxProject Title

Financing

• Standard & Poor’s – AAA, P1

• Fitch – AAA, F1

• Moody’s – Aa1, P1

Transition From:

• General Obligation Bonds

• Revenue Bonds

• Commercial Paper(Construction Period Financing)

Sources of Capital Funds

$83,000/month/36 month construction

$1M/year/36 month construction

$3M/36 month construction

Example

3.55%4.53%4.15%Rates

ModerateLow/ModerateLowRisk

Cash Flow Month

Cash Flow Year100%Issue

Short (8+-mths)Long (20+yrs)Long (20+yrs)Term

NoNoYesVote

RatesRatesTaxCredit

Commercial Paper

RevenueG.O.

Water and Sewer Projection Summary 8 Year Financial Plan

$ 1,686,189 $ 1,419,245 $ 1,483,201$ 1,233,752 $ 1,289,747 Total outstanding debt(2)

35%34%35%35%45%As % of op. exp. and DS

$ 87,602 $ 85,307$ 80,077 $ 78,467 $ 91,403 Debt service/operating fund bal.

1.32 1.18 1.201.12 1.21 DS coverage - total

1.95 1.87 2.11 2.04 2.56 DS coverage - revenue bonds

47%52%51%53%48%DS as % of total revenue

$ 138,294 $ 142,667 $ 130,518 $ 129,047 $ 108,636 Total DS

44,544 52,186 56,325 57,941 57,044 Total G.O. and other DS

$ 93,749 $ 90,481 $ 74,194 $ 71,106 $ 51,592Total revenue bond DS(1)

$ 183,039$ 168,846 $ 156,179$ 144,961 $ 131,931Net income available for DS

110,079 105,413 100,949 96,67992,508 Total operating expenditures

$ 293,118 $ 274,260 $ 257,128 $ 241,640$ 224,439 Total revenue

1.00%1.00%1.00%1.00%-.06%% incr. in water sales volume

5.50%5. 50%5.50%6.25%6.43%% incr. in avg. residential bill

260,383 252,799 245,436 238,287 231,347 Number of water customers

$ 328,104 $ 309,440 $ 400,000 Revenue bond issues

$ 154,894 $ 328,104 $ 158,998 $ 309,440 $ 161,980Commercial paper balance (6/30)

21%11%13%16%4%PAYGO as % of total

$ 199,194$ 191,906 $ 185,298 $ 181,360 $ 181,545 Total

42,450 20,950 24,050 28,850 7,850 PAYGO

1,850 1,850 2,250 5,050 11,715 Debt - equipment L/P

$ 154,894$ 169,106 $ 158,998 $ 147,460 $ 161,980Debt - CP/revenue bonds

Capital program 2011 2010 2009 2008 2007

2007 2008 2009 2010 2011

Rate Covenant Test #1

Revenues $224,439,387 $241,640,375 $257,128,010 $274,259,842 $293,117,647

Less Current Expenses (92,507,943) (96,679,370) (100,949,189) (105,413,412) (110,078,541)

Less 120% of revenue bond debt service (61,910,783) (85,327,428) (89,032,348) (108,576,782) (112,499,326)

Less 100% of G.O. debt service, etc. (57,043,564) (57,940,687) (56,324,825) (52,186,368) (44,544,173)

Remainder $12,977,097 $1,692,889 $10,821,649 $8,083,280 $25,995,607

Required prior year Surplus Fund balance $0 $0 $0 $0 $0

Rate Covenant Test #2

Revenues $224,439,387 $241,640,375 $257,128,010 $274,259,842 $293,117,647

Less Current Expenses (92,507,943) (96,679,370) (100,949,189) (105,413,412) (110,078,541)

Less 110% of revenue bond debt service (56,751,551) (78,216,809) (81,612,986) (99,528,717) (103,124,383)

Less 100% of G.O. debt service, etc. (57,043,564) (57,940,687) (56,324,825) (52,186,368) (44,544,173)

Must not be less than zero $18,136,329 $8,803,508 $10,118,755 $17,131,345 $35,370,551

Debt service

Revenue bonds incl. CP interest $51,592,319 $71,106,190 $74,193,624 $90,480,652 $93,749,439

G.O. bonds, etc. 57,043,564 57,940,687 56,324,825 52,186,368 44,544,173

Total debt service $108,635,884 $129,046,878 $130,518,448 $142,667,020 $138,293,611

Debt service coverage ratio - all debt service 1.21 1.12 1.20 1.18 1.32

Debt service coverage ratio - revenue bonds 2.56 2.04 2.11 1.87 1.95

Debt service as a % of total revenue 48% 53% 51% 52% 47%

8 Year Financial Plan

Cash Flow

$15,034,251 11,444,664 $15,034,251 May-07

$13,996,338 26,478,915 $13,996,338 April-07

$14,896,400 40,475,253 $14,896,400 March-07

$15,075,900 55,371,653 $15,075,900 February-07

$16,877,233 70,447,552 $16,877,233 January-07

$17,692,733 87,324,785 $17,692,733 December-06

$18,799,733 105,017,518 $18,799,733 November-06

$20,863,043 123,817,250 $20,863,043 October-06

$17,986,393 144,680,293 $17,986,393 September-06

$18,069,140 162,666,686 $18,069,140 August-06

$15,854,665 180,735,825 $15,854,665 July-06

$15,016,028 196,590,490 200,000,000 $15,016,028 June-06

$16,599,651 11,606,518 $16,599,651 May-06

$18,004,243 28,206,169 $18,004,243 April-06

$16,993,287 46,210,411 $16,993,287 March-06

$18,752,597 63,203,698 $18,752,597 February-06

$21,110,933 81,956,296 $21,110,933 January-06

$18,922,645 103,067,229 $18,922,645 December-05

$21,682,618 121,989,874 $21,682,618 November-05

$24,860,380 143,672,492 $15,215,100 October-05

$22,427,867 158,887,592 $15,037,758 September-05

$25,378,038 173,925,350 $23,373,222 August-05

$22,178,205 197,298,572 $ 8,881,082 July-05

$23,125,690 206,179,654 200,000,000 $25,297,488 June-05

$19,852,786 31,477,142 $11,368,030 May-05

2,992,245 Balance Forward

ProjectedBond Funds AvailableBond SaleTotalTime Period

Cash Flow Changed

$15,534,251 (1,255,336)$15,534,251 May-07

$14,496,338 14,278,915 $14,496,338 April-07

$15,396,400 28,775,253 $15,396,400 March-07

$15,575,900 44,171,653 $15,575,900 February-07

$17,377,233 59,747,552 $17,377,233 January-07

$19,192,733 77,124,785 $19,192,733 December-06

$20,299,733 96,317,518 $20,299,733 November-06

$22,363,043 116,617,250 $22,363,043 October-06

$19,486,393 138,980,293 $19,486,393 September-06

$19,569,140 158,466,686 $19,569,140 August-06

$17,354,665 178,035,825 $17,354,665 July-06

$15,216,028 195,390,490 200,000,000 $15,216,028 June-06

$16,799,651 10,606,518 $16,799,651 May-06

$18,204,243 27,406,169 $18,204,243 April-06

$17,193,287 45,610,411 $17,193,287 March-06

$18,952,597 62,803,698 $18,952,597 February-06

$21,310,933 81,756,296 $21,310,933 January-06

$18,922,645 103,067,229 $18,922,645 December-05

$21,682,618 121,989,874 $21,682,618 November-05

$24,860,380 143,672,492 $15,215,100 October-05

$22,427,867 158,887,592 $15,037,758 September-05

$25,378,038 173,925,350 $23,373,222 August-05

$22,178,205 197,298,572 $ 8,881,082 July-05

$23,125,690 206,179,654 200,000,000 $25,297,488 June-05

$19,852,786 31,477,142 $11,368,030 May-05

2,992,245 Balance Forward

ProjectedBond Funds AvailableBond SaleTotalTime Period

Allocating Capital Costs to Customers

• Today’s Customers (Rates/Pay-Go)• New Customers (Capacity Fees)• Today’s and Future Customers

(Rates/Debt Service)

Conservation Rates

Water

2.98Variable Charge (per Ccf)1.80Fixed Charge (per account)

Sewer

1.66Non-Residential4.14- Block 32.10- Block 21.28- Block 1

ResidentialVariable Charge (per Ccf)

$1.80Fixed Charge (per account)

FY 2007Charge Type

Capacity Fees

$1,190Sewer

$355Water

FY 2007¾”Line

Capacity Fee Formula:

Net book value of asset

# of units of plant capacityX Average daily consumption