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Home My WebLink AboutPP-Financial Plan 7-Adoption 05-10-20MWMC Regional Wastewater Program MWMC 2019 Financial Plan Adoption Resolution 19-09 MWMC’s Independent Financial Advisor Duncan Brown, Senior Managing Consultant PFM Financial Advisors LLC Duncan works in the Portland office, and is connected to a larger PFM team in Seattle Duncan, the financial advisor, reviewed the entire document and provided comments and input. In addition, he provided updates to refresh appendices I and II: I – Credit Worthiness in the US Public WW Sector II – Summary of Capital Financing Options Meg replaced Appendix III – Governmental Finance Officers Association (GFOA) – Best Practice Adopting Financial Policies dated 2012 (most current) replacing the 2001 version. 1 5/10/2019 2019 Financial Plan 2019 Financial Plan updates the 2005 Financial Plan – 14 years Financial Plan Updates - pages 1- 6 Introduction and Purpose Scope and Methodology Financing History The proposed 2019 Financial Plan updates the 2005 Financial Plan (14-years). When looking back on the 2005 Financial Plan update, that Plan took into consideration the 2004 Facilities Plan and future funding needs to meet permit requirement – Which resulted in the issuance of the 2006 and 2008 Revenue Bonds. The 2019 Financial Plan updates and refreshes components of the 2005 Plan. Keeping in mind that with a future NPDES Permit renewal, we would have specific permit requirements, that would likely result in an update to the Facilities Plan and associated funding needs. At that time, the 2019 Financial Plan would likely be updated based on permit requirements and identified funding needs. Updates – pages 1-6 Minor narrative updates including additions/deletions were incorporated into the first 6-pages with a focus on “linking” existing and historical information to the 2019 Financial Plan 2 5/10/2019 2019 Financial Plan Financial Plan Updates - pages 7-10 Twenty-Year Financing Needs Financing Options Evaluation and Financing Strategies Financial Soundness and Future Financing Capability Katherine 20-yr Financing Needs – Page 7 We added information on the 2006 and 2008 bond refunding and replacement with the Series 2016 Revenue Bonds, and the we added CWSRF loans as a funding source that supported the Capital Improvement Program Financing Options and Strategies - Page 8 Added “Debt Financing – In situations where grant funding is not available and pay-as-you-go alternatives are either not appropriate or not available, the Commission will consider debt financing options, including:” Page 9 added last sentence “Prior to issuing any debt, the Commission shall determine the source(s) of repayment (i.e., user fees, system development charges, and/or other revenues).” Financial Soundness & Future Financing Capability - Page 10 Refreshed and condensed narrative; removed references to the “MWMC’s 20-year project list” Added narrative a the bottom of page 10 regarding the MWMC’s credit rating agency assessment and AA rating Page 10 references Appendix I – which was updated by the Duncan, the contract Financial Advisor 3 5/10/2019 2019 Financial Plan Financial Plan Updates – pages 12-13 Policy F5 - Reserve Policies F5a) Working Capital Reserve F5b) Operating Reserve F5d) Equipment Replacement Reserve F5h) Bond Reserve F5j) Insurance Reserve Page 12 of the FP F5a) Working Capital Reserve is set at a minimum of $200,000 for the City of Springfield, and $700,000 for the City of Eugene. (was previously listed as $500,000 for Eugene) F5b) Operating Reserve, when preparing annual budgets, is set at two months of the operating expenditure budget. two months = 16-17% (was previously 8%-10%) F5d) Equipment Replacement Reserve: The annual contribution is set so that all projected replacements will be funded over the expected life of the assets (was previously funded over a 20-year period) F5h) NOTE: Reserve funds are not typically required for AA category essential service utilities these days A Bond Reserve if/when required by investors, shall be sufficient to provide assurances to bond holders that adequate revenue coverage will be provided for future debt service payments. F5j) Insurance Reserve – “Addition” set at a target of $1,500,000 in the adopted budget. 4 5/10/2019 2019 Financial Plan Financial Plan Updates – pages 16-18 Policy R – User Rates and SDCs R2) Moved former R3 up to R2 R3) References a credit rating of A+ or higher Discussion on mobile waste hauler program: …rates are set on a “cost of services” basis Policy A – Asset Management A3 – Equipment Replacement Reserve – Original cost over $10,000, and useful life greater than 1-yr Katherine Page 16-17 of the FP User rates and mobile waste hauler program Rate setting methodology = cost of service basis Page 18 Asset Management Type of equipment, dollar amounts and years 5 5/10/2019 2019 Financial Plan Technical Appendices – pages 19-13 Appendix I – Credit Worthiness Appendix II – Capital Financing Options Appendix III – Adopting Financial Policies GFOA Best Practices Appendix IV – Investment & Portfolio Polices Katherine Page 20- of the FP Duncan, the financial advisor, reviewed the entire document and provided comments and input. In addition, he provided updates to refresh appendices I and II: I – Credit Worthiness in the US Public WW Sector II – Summary of Capital Financing Options Meg replaced Appendix III – Governmental Finance Officers Association (GFOA) – Best Practice Adopting Financial Policies dated 2012 (most current) replacing the 2001 version. IV – pending further review and update by the Springfield Finance Director and the State of Oregon 6 5/10/2019 Questions, Input and Comments Discussion The MWMC and the regional partners are committed to providing services in a manner that will achieve, sustain, and promote balance between community, environmental, and economic needs while meeting customer service expectations Katherine 7 5/10/2019 Katherine Bishop ESD Program Manager City of Springfield kbishop@springfield-or.gov 8 5/10/2019 5/10/2019 9 5/10/2019 10 2019 Financial Plan Financial Plan Policy Updates: Asset Management Policies A2) Equipment Replacement Reserve - narrative A3) ER Reserve – dollar amounts and years Major Rehabilitation - defined Rehabilitation of facilities and infrastructure Funded from capital reserves to extend the useful life of the asset Roof replacements, industrial coatings, and resurfacing or crack/fog sealing of air drying beds Katherine Page 18 of the FP July 2018 meeting - Based on discussion and input from the Commission, staff included language changes and revised dollar amounts and years Asset Management: Major Rehabilitation definition 11 5/10/2019 Previous Policy Discussion Financial Plan Policy: Investment Policies Policy 11) Increased amount of the FDIC insured from $100,000 to $250,000 to align with law passed in 2008 and made permanent in 2010. Policy 12) Updated language to align with City updated policy wording emphasizing Safety and Diversity, Liquidity and Yield. Policies 11 and 12 on page 14 of the FP include changes to bring the policy in alignment with current information. Federal Deposit Insurance Corporation or FDIC Background: In Oct 2008 the FDIC protection limits for the FDIC insured accounts was raised from $100,000 to $250,000. The new limit was intended to drop back to $100,000 per depositor. Until it was extended and then made permanent in July 2010, with the passage of the Wall Street Reform and Consumer Protection Act signed by President Obama. The MWMC/SPR Finance Officer - Bob Duey updated the Investment and Portfolio Policies for the City/MWMC. Given that the MWMC funds are managed by Springfield, the MWMC Financial Plan includes the same investment policies. 12 5/10/2019 Current Policy Review Financial Plan Policy: Sewer User Rates and SDC policies Policy R4) MWMC rate structures shall be sufficient to fully fund reserves, comply with bond covenants and cover the costs of constructing, operating, rehabilitating, maintaining an un-enhanced credit rating of A+ or greater for Commissions bonds. Page 16 of the 2005 Financial Plan Current bond rating from Standard & Poor’s is AA Scale goes best to worst: AAA AA+ AA AA- A+ A A- 13 5/10/2019 Current Policy Review Financial Plan Policy: Sewer User Rates and SDC policies Policy R7 Costs of services (direct and indirect) provided to any public or private organizations by the RWP shall be recovered through appropriate fees or charges. Discussion) Historically, cCosts for administering the mobile waste hauler program were are recovered through rates set on the basis of cost recovery and-state wide market comparisons of market rates. In 2004, the Commission changed its policy and chose to escalate mobile waste hauler rates by the same rate as other user rates. Page 17 of the Financial Plan At one point in time we were escalating according to user rate percentage increases, but have gone back to a cost recovery method with comparisons of market rates. The mobile waste hauler program is under the Eugene side of the regional program. Eugene staff (John Huberd) provided input on this policy. The outcome of the next COS evaluation will come to the Commission along with user rates discussions anticipated in March/April of 2019. 14 5/10/2019 Next Steps Financial Plan Policy Review: Update Narrative from 2005 Plan to 2019 Plan Introduction and Purpose Scope and Methodology MWMC Financing History Financing Options and Strategies Katherine Thereafter, in terms of the “scope” of the FP update, staff plans to update the first 10-11 pages from the 2005 FP to “link” existing/historical information to the 2019 FP 15 5/10/2019 Next Steps (concurrently) Financial Plan review by the MWMC’s: Financial Advisor Bond Counsel 2019 Financial Plan adoption by the Commission Planning for February 8, 2019 The technical appendices were reviewed and written in large part by the advisors and we will get updates from them. Financial Advisor Western Financial Group - Portland PFM Financial Advisors – Portland (Municipal Advisor) Q1 - Kieu-Oanh Nguyen – leaving as of yearend Duncan Brown replacing her. Bond Counsel Hawkins Delafield & Wood LLP - Portland Gulgun Mersereau Harvey Rogers FP adoption via a resolution of the Commission 16 5/10/2019 17 5/10/2019