1. Metropolitan Council Environmental Services A Clean Water Agency Presented to the Environment Committee August 25, 2009 Capital Finance Plan Jason Willett, ES Finance Director

2. Capital Improvement Plan 2010-2019 Capital Spending Total projected spending: $1.3 billion (millions) 2

3. CIP Comparison 10 years 2009-2018 was $1.4 billion 9 years 2010-2018 was $1.3 billion 9 years 2010-2018 is $1.1 billion 10 years 2010-2019 is $1.3 billion 3 Proposed CIP Current CIP

4. Key Assumptions 2009 capital spending of $99.5 million 2010-2019 CIP of $1.3 billion $80M PFA loan 2009 and $8M principal forgiven from ARRA funds, $50 million/yr PFA $ available thereafter Interest rates: 2.07% weighted average for 2009 PFA loan (2.45% for ARRA portion and 1.83% for BAB portion net of 35% IRS rebate) $1 million Pay-as-You-Go financing from operating budget in 2010 and 2011 increased $2M/year thereafter New Reserve Capacity methodology as proposed Council bonds and PFA loans all secured by general obligation of region 4

5. Capital Spending History and projections (millions) Adjusted to 2009 $s 1990-2008 Actual, 2009 Estimated, 2010-2019 Projected CIP CIP 5

6. Budgeted Debt Service 2000-2008 Actual Debt Service, projected thereafter 2009 Debt Service with 3% inflation History and projections (millions) Projected 6

7. Pre-funded Debt Service In prior years, some Operating Funds were transferred to a Debt Service Reserve Fund Balance of $8 million at year-end 2008, and forecast at $6.7 million at year-end 2009 Fund will not be allowed to drop below 5% of annual debt service, or approximately $4-$5 million 7

8. Current Value Credits (CVCs) CVCs are payments to local governments for wastewater facilities that Council assumed ownership of, per MN Statute 473.511 Balances owed as of 12/31/08: Burnsville$79,683 Columbia Heights $56,051 Mendota Heights $177,808 New Brighton $471,621 Shoreview$17,156 TOTAL $802,319 2016 is last year for payment of CVCs 8

9. DebtExistingPre-fundedBudgeted Service CVCs D.S.D.S.Increase 200991.9.2 (1.6)90.53.8% 201092.0.1 092.11.8% 201193.9.1 094.02.0% 201296.4.1 (0.4)96.12.2% 2013 102.8.1(0.6)102.36.5% 2014111.1.1 (1.0) 110.2 7.7% 2015 121.0.1 0 121.1 9.9% $ in millions Debt Service Adjustments 9

10. (in millions) Actual through 2009, projected thereafter PFA Loans (Actual and Projected) Projected 10

11. PFA Clean Water State Revolving Loan Program 19 wastewater loan agreements 1989-2009 totaling $1.1 billion Interest rates from 2.54% to 6.42% (prior to the 2009 loans) PFA normally offers below market interest rates (150 basis points or 1.5% for $50m borrowed). PFA pays underwriters discount (we pay none) We pay limited costs of issuance 11

12. Impact of Typical PFA Subsidy Typical $50 million loan Total DebtPresent ServiceValue 4.5% Council bond$76.9$50.0 3.0% PFA loan67.243.7 Savings to ratepayers$ 9.7$ 6.3 Bond underwriters discount saved$ 0.5 Cost of issuance saved$ 0.1 Total Present Value Savings$ 6.9* ($ in millions) 12 *Savings = $8.3 million for an $80 million conventional loan.

13. Projected Savings NPV NPV Proposed Funding: Cost* Savings $8.2 million of principal forgiveness $0 $30.6M ARRA loan @2.45%$25.8 $49.4M BABs @1.84%$39.3 $88.2M cost (in Net Present Value*) $65.1 Cost of conventional PFA loan for $88.2m: (102.5 basis point discount, or 3.305%) $80.5 $15.4 Cost of $88.2M Council Bonds @4.33%: $88.2 $23.1 *At 4.33% discount rate.

14. (in millions) Actual through 2008, projected thereafter Council Wastewater Bonds (Actual and Projected) Projected 13

15. (in millions) SAC (Service Availability Charge)CRF (Capital Revolving Fund) Favorable VarianceAnnual Budget Pay-As-You-Go Projected 14

16. Outstanding Debt Wastewater Council Bonds PFA Loans $967 $888 $1086 $1150 $1208 $1220 Projected ( and 2007 and 2008 actual) $1201 16 (in millions)

17. As a percent of Annual Budget* *Assumes the O&M portion of the budget increases 3% per year. Includes the portion of debt service paid by SAC transfer. Debt Service Projections 17

18. Debt per capita (person)* *2007 data from 2008 NACWA survey San Diego $43 Denver$79 Memphis$139 Chicago$279 Kansas City$283 MCES$343 Phoenix$354 Dallas/Ft Worth$415 Washington, DC$480 Philadelphia$530 Cleveland$543 Milwaukee$725 Miami$734 Detroit$738 Nashville $768 Cincinnati$789 Austin$1,085 Sacramento$1,154 New York$1,287 Columbus $1,572 Seattle$1,593 Honolulu$1,861 Louisville$1,872 Peer Agencies 18

19. Conclusions Financing load is reasonable Projected next financings needed: $50M PFA loan late 2010 or early 2011 $60-80M Council bonds late 2009 or early 2010 PFA subsidies are quite important Continued financing needs mean that Councils Aaa bond rating is also important 19

20. Next Steps Today:Committee information & discussion September:Council approves preliminary Unified Capital Budget, Authorized Capital Program and CIP (including Capital Financing Plan) November:Public hearing December:Council adoption 20