MWRA Fiscal Year 2016 Proposed Current Expense Budget March 2015 - - PowerPoint PPT Presentation

Massachusetts Water Resources Authority

MWRA Fiscal Year 2016 Proposed Current Expense Budget

March 2015

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Fiscal Year 2016

• Bond Resolution Changes become effective – Reserves Release
• Pension Fund achieves virtual Full Funding
• Other Post Employment Benefits (OPEB)
• New England Fertilizer Company (NEFCO)

Fiscal Year 2016 Year of Milestones

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Fiscal Year 2016 - Milestones

• Debt Service Reserves
• Community Obligation and Revenue Enhancement (CORE)
• Renewal and Replacement Reserve (RRR)

Bond Resolution changes become effective – Reserves Release

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Fiscal Year 2016 - Milestones

• 95% Funded ratio 1/1/2015 anticipated
• Other Post Employment Benefits (OPEB)
• Staff to recommend OPEB Trust
• Shift to funding OPEB

Pension Fund achieves virtual Full Funding

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Fiscal Year 2016 - Milestones

• Contract Expires December 2015
• Negotiations are complete
• Over the five-year term, expenses are expected to decrease by

$1.25M New England Fertilizer Company (NEFCO)

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Mission

“Sustainable and Predictable”

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Mission - Sust ainable and Pre

redict able

0% 1% 2% 3% 4% 5% 6%

Assesment Increases

Historical Spending Chart

21 $- $100,000,000.00 $200,000,000.00 $300,000,000.00 $400,000,000.00 $500,000,000.00 $600,000,000.00 $700,000,000.00 $800,000,000.00

Major Budget Elements

Total Indirect Costs Total Direct Costs Total Debt Service Total Operating Costs

Mission - Sust ainable and Pre

redict able

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• Current Debt Profile
• Repayment structure aligned with Debt Service

Assistance

• Increasing Debt Service

“Debt Management Agency” Causes of volatility

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Outstanding Debt

$0 $1,000,000,000 $2,000,000,000 $3,000,000,000 $4,000,000,000 $5,000,000,000 $6,000,000,000 $7,000,000,000

Outstanding Debt History

Debt % is growing

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20% 25% 30% 35% 40% 45% 50% 55% 60% 65%

Debt Service as % of Total Budget

FY16 Proposed Current Expense Budget (CEB)

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Direct Expense 31.6% Indirect Expense 6.7%

Debt Service 61.6% FY16 Current Expense Budget

Debt Challenge

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• Defeasance
• Use of Bond Resolution Reserves Release
• Use of Reserves
• Rate Stabilization Fund
• Bond Redemption Fund
• Tactical Issuance – Repayment Structure
• Control Capital Spending

Ways to address the Debt Service challenge

FY16 Proposed Current Expense Budget (CEB)

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Direct Expense 31.6% Indirect Expense 6.7%

Debt Service 61.6% FY16 Current Expense Budget

CEB Budget Structure

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• Direct Expenses
• Indirect Expenses
• Debt Service Expenses

CEB Budget Structure

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Personnel 56% Maintenance 13% Energy & Utilities 11% Chemicals 4% Other 16%

Direct Expenses

Direct Expenses Comparison

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$- $20 $40 $60 $80 $100 $120

Training and Meetings Workers' Compensation Overtime Other Materials Professional Services Chemicals Fringe Benefits Other Services Energy and Utilities Maintenance Wages and Salaries

Direct Expenses Comparison FY15 -FY16

$ in Millions

FY15 FY16

FY16 Proposed Current Expense Budget (CEB)

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• Wages and Salaries $99.2M – Budgeted Positions: 1,170; 5

fewer than FY15;

• Maintenance $28.6M – in line with FY14 Actual Spending;
• Utilities - $24.9M – increases for electricity pricing;
• Other Services - $23.4M – mainly for NEFCo contract and

Leases; and

• Fringe Benefits of $19.0M – mainly for Health Insurance.

Highlights – Direct Expenses

CEB Budget Structure – I ndirect Expenses

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Watershed/PILOT 59% Retirement Fund 28% Insurance 4% Other 9%

Indirect Expenses

I ndirect Expenses Comparison

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$- $5 $10 $15 $20 $25 $30

Addition to Reserves Mitigation Insurance HEEC OPEB/Additional Pension Deposit Retirement Fund Watershed/PILOT

Indirect Expenses Comparison FY15 -FY16

$ in Millions

FY15 FY16

FY16 Proposed Current Expense Budget (CEB)

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• Watershed Program for operating, PILOT and debt $28.1M;
• Pension Fund required contribution $8.2M;
• Additional Payment to Pension (OPEB) $5.1M;
• HEEC contract $1.9M; and
• Addition to Operating Reserve Fund $962K.

Highlights – Indirect Expenses

CEB Budget Structure

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Senior & Subordinate Debt 76% State Revolving Fund 18% Other 6%

Debt Service Expenses

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Debt Service Expenses Comparison

$- $100 $200 $300

Core Fund Deposit Capital Lease Local Water Pipeline Current Revenue For Capital SRF Subordinate Debt Senior Debt

Debt Services Expenses Comparison FY15 -FY16

$ in Millions

FY15 FY16

FY16 Proposed Current Expense Budget (CEB)

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• Variable Rate Debt Assumption 3.25%;
• Required CORE Fund Deposit $6.7M;
• Bond Redemption $3.5M; and
• No Debt Service Assistance.

Highlights – Debt Service Expenses

FY16 Proposed Current Expense Budget (CEB)

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• Non Rate Revenue
• Investment Income
• Rate Revenue Requirement (Assessments)

Revenue

Planning Estimate Assumptions

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• Direct Expenses Inflation
• Indirect Expenses Inflation
• Capital Spending Levels
• Variable and Fixed Debt Interest Rates
• Investment Income Interest Rates
• Level of Pension/OPEB Funding
• Use of Reserves

Assumptions

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Effects on Assessments

FY 16 FY 17 FY 18 FY 19 FY 20 4.3% 5.1% 4.9% 4.6% 6.5% 4.1% 3.9% 4.1% 4.4% 6.5%

Assessment Increase Forecast Comparison

FY15 FY16

FY16 Proposed Current Expense Budget (CEB)

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• Short-Term Market Rates
• Variable Rate Debt
• Investments
• Regulatory Changes
• System Expansion
• Utility Pricing

Challenges / Opportunities

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FY16 Current Expense Budget Next Steps

• Transmit Proposed Budget to Advisory Board for 60 day

review

• Reconvene Long-Term Rates Management Committee
• Public Hearings
• Staff will present Draft Final Budget in June

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FY16 Current Expense Budget Closing

Thank You