Kentucky Infrastructure Authority Projects for November 2017 Capital Projects Meeting

Transcription

1 Kentucky Infrastructure Authority Projects for November 2017 Capital Projects Meeting Fund A Loan Loan # Borrower Loan Amount County A Regional Water Resource Agency (Increase) $ 8,007,500 Daviess Fund B Loan Loan # Borrower Loan Amount County B Elkhorn Water District $ 850,000 Franklin Page 1 of 1

2 EXECUTIVE SUMMARY Reviewer Melissa Rife KENTUCKY INFRASTRUCTURE AUTHORITY Date December 6, 2017 FUND A, FEDERALLY ASSISTED WASTEWATER KIA Loan Number A (Increase) REVOLVING LOAN FUND WRIS Number SX BORROWER BRIEF DESCRIPTION REGIONAL WATER RESOURCE AGENCY DAVIESS COUNTY This request is for a $725,000 increase to a previously approved loan in the amount of $7,282,500. The new total loan amount is $8,007,500. The need for the loan increase is due to actual bids being higher than estimated. Original Project Description: Phase I of this project involves the construction of a pump station and force mains to redistribute flow that has been diverted from the Combined Sewer System that was temporarily redirected to the east plant. This project will divert that flow to the Max Rhoads Wastewater Treatment Plant. This project also reduces the need for future expansion at the East Wastewater Treatment Plant because it allows for redirection for some of the flow from this facility as well. This project is a part of, and will aid RWRA in, its long term goal of separating additional sanitary and storm sewer systems from the Combined Sewer System, which is part of RWRA's CSO program. Phase II of this project will provide sewer service to unsewered homes/properties within the Airport/Bittel Road area west of the Highway 60 Bypass. PROJECT FINANCING PROJECT BUDGET RD Fee % Actual % Fund A Loan $8,007,500 Administrative Expenses $18,750 RWRA General Funds 151,706 Legal Expenses 31,364 Land, Easements 120,342 Eng - Design / Const 6.5% 4.8% 364,450 Eng - Insp 3.2% 1.1% 82,500 Construction 7,276,426 Contingency 265,374 TOTAL $8,159,206 TOTAL $8,159,206 REPAYMENT Rate 1.75% Est. Annual Payment $492,266 Term 20 Years 1st Payment 6 Mo. after first draw PROFESSIONAL SERVICES Engineer Phillip Benton Hanson Bond Counsel Dinsmore & Shohl, LLP PROJECT SCHEDULE Bid Opening Jul-17 Construction Start Nov-17 Construction Stop Jul-19 DEBT PER CUSTOMER Existing $937 Proposed $1,463 OTHER DEBT See Attached RESIDENTIAL RATES Users Avg. Bill Current 30,430 $34.46 (for 4,000 gallons) REGIONAL COORDINATION This project is consistent with regional planning recommendations. CASHFLOW Cash Flow Before Debt Service Debt Service Cash Flow After Debt Service Coverage Ratio Audited ,637,664 2,787,456 1,850, Audited ,348,344 2,957,026 2,391, Audited ,968,775 3,177,474 4,791, Projected ,849,650 2,894,190 4,955, Projected ,144,240 2,905,542 5,238, Projected ,336,546 3,327,006 5,009, Projected ,518,995 3,913,621 4,605, Projected ,682,708 4,504,910 4,177,

3 Reviewer: Melissa Rife Date: December 6, 2017 Loan Number: A Increase KENTUCKY INFRASTRUCTURE AUTHORITY WASTEWATER REVOLVING LOAN FUND (FUND A) REGIONAL WATER RESOURCE AGENCY, DAVIESS COUNTY PROJECT REVIEW SX I. PROJECT DESCRIPTION The Regional Water Resource Agency is requesting an increase of $725,000 to an existing Fund A loan in the amount of $7,252,500 which was approved by the board on June 4, 2015 for the Southwest Master Pump Station and Airport Bittel Road project. The new total loan amount is $8,007,500. The need for the loan increase is due to actual bids being higher than estimated. The increase will continue the original purpose of the project. Phase I involves the construction of a pump station and force mains to redistribute flow that has been diverted from the Combined Sewer System that was temporarily redirected to the east plant. Flow will now be diverted to the Max Rhoads Wastewater Treatment Plant. This project also reduces the need for future expansion at the East Wastewater Treatment Plant because it allows for redirection for some of the flow from this facility as well. This project is a part of, and will aid RWRA in its long term goal of separating additional sanitary and storm sewer systems from the Combined Sewer System, which is part of RWRA's CSO program. Phase II will provide sewer service to unsewered homes/properties within the Airport/Bittel Road area west of the Highway 60 Bypass. II. PROJECT BUDGET Total Administrative Expenses $ 18,750 Legal Expenses 31,364 Land, Easements 120,342 Engineering Fees - Design 295,450 Engineering Fees - Construction 69,000 Engineering Fees - Inspection 82,500 Construction 7,276,426 Other 265,374 Total $ 8,159,206

4 III. PROJECT FUNDING Amount % Fund A Loan $ 8,007,500 98% RWRA General Funds 151,706 2% Total $ 8,007, % IV. KIA DEBT SERVICE Construction Loan $ 8,007,500 Less: Principal Forgiveness 0 Amortized Loan Amount $ 8,007,500 Interest Rate 1.75% Loan Term (Years) 20 Estimated Annual Debt Service $ 476,251 Administrative Fee (0.20%) 16,015 Total Estimated Annual Debt Service $ 492,266 V. PROJECT SCHEDULE Bid Opening July 2017 Construction Start November 2017 Construction Stop July 2019 VI. CUSTOMER COMPOSITION AND RATE STRUCTURE A) Customers Customers Current Residential 27,557 Commercial 2,8730 Total 30,430

5 B) Rates Current Prior Prior Date of Last Rate Increase 07/01/16 01/01/16 07/01/15 Minimum $ $ $ *minimum in 2015 included 750 gallons Each additional 1,000 gallons Environmental Improvement Charge Cost for 4,000 gallons $ $ $ Increase % 6.2% Affordability Index (Rate/MHI) 1.1% RWRA has rate adjustments planned through All rate increases have been included in this analysis VII. DEMOGRAPHICS Based on current Census data from the American Community Survey 5-Year Estimate , the Utility s service area population was 40,774 with a Median Household Income (MHI) of $38,690. The median household income for the Commonwealth is $43,740. The project will qualify for a 1.75% interest rate. Population Unemployment Year City % Change County % Change Date Rate ,450 85,949 June % , % 87, % June % , % 91, % June % , % 96, % June % Current 59, % 99, % Cumulative % 8.9% 16.0% VIII CAPITALIZATION GRANT EQUIVALENCIES 1) Green Project Reserve - This project qualifies for Green Project Reserve (GPR) funding for $8,007,500. The breakdown of the GPR to the respective green categories is listed below: a. Green Infrastructure - $8,007,500 2) Additional Subsidization This project does not qualify for additional subsidization.

6 IX. FINANCIAL ANALYSIS Financial information was obtained from the audited financial statements for the years ended 06/30/14 through 06/30/16. The non-cash impact of GASB 68, Accounting and Financial Reporting for Pensions, has been removed from fiscal 2016 operating expenses ($576,572). Percentage references in the History section below are based on whole dollar amounts and not the rounded amounts presented HISTORY Revenues increased approximately 22% from $16.1 million to $19.6 million from 2014 to 2016 while operating expenses increased 5.5% from $12.0 million to $12.6 million. Cash flow available for debt service was $4.6 million, $5.3 million, and $8 million in 2014, 2015, 2016 respectively, while the debt coverage ratio was 1.7, 1.8, and 2.5. The balance sheet reflects a current ratio of 2.6, debt to equity ratio of 0.8, and 33.1 days sales in accounts receivable. PROJECTIONS Projections are based on the following assumptions: 1) Revenues will increase according to the rate plan established by RWRA through ) Operating expenses will increase 2% annually for inflation. 3) Debt service coverage is 2.2 in 2020 when principal and interest repayments begin. Based on the pro forma assumptions, the utility shows adequate cash flow to repay the KIA Fund A loan. REPLACEMENT RESERVE The current replacement reserve account of $2,500,000 is adequate to cover reserves for all KIA loans. No additional reserves will be required as a result of this loan. X. DEBT OBLIGATIONS Outstanding Maturity 2007 Bonds $ 670, Bonds 240, Bonds 250, Bonds 815, Bonds 930,

7 Outstanding Maturity KIA A ,912, KIA A ,325, KIA A , KIA A ,625, KIA A , KIA A ,336, KIA A , KIA A , KIA A , City of Owensboro (JSA Improvements) 715,947 TBD KIA A (i/a/o $8,007,500) 0 TBD KIA A (i/a/o $1,425,000) 0 TBD KIA A (i/a/o $3,566,001) 0 TBD KIA A P&D (i/a/o $415,000) 0 TBD KIA A PTP Loan (i/a/o $200,000) 0 TBD KIA B (i/a/o $500,000) 0 TBD KIA B (i/a/o $485,000) 0 TBD KIA A (i/a/o $4,180,262) 0 TBD KIA A (i/a/o $2,047,000) 0 TBD KIA A (i/a/o $5,619,274) 0 TBD Total $ 28,531,967 XI. CONTACTS Legal Applicant Name Address Regional Water Resource Agency 1722 Pleasant Valley Road Owensboro, KY Daviess Joseph G. Schepers, Executive Director County Authorized Official Phone schepersjg@rwra.org Project Administrator Name Green River Area Development District Address 300 GRADD Way Owensboro, KY Contact Phone Brad Alley bradalley@gradd.com

8 Consulting Engineer Name Phillip Benton Hanson Firm HDR Engineering, Inc. Address 2517 Sir Barton Way Lexington, KY Phone XII. RECOMMENDATIONS KIA staff recommends approval of the loan with the standard conditions.

9 REGIONAL WATER RESOURCE AGENCY FINANCIAL SUMMARY (June YEAR END) Balance Sheet Audited Audited Audited Projected Projected Projected Projected Projected Assets Current Assets 6,600,476 8,684,574 10,735,081 10,753,203 11,327,073 11,869,227 12,370,564 12,827,944 Other Assets 72,739,995 73,766,013 75,927,345 75,964,569 85,328,356 95,386, ,424,362 99,144,304 Total 79,340,471 82,450,587 86,662,426 86,717,772 96,655, ,256, ,794, ,972,248 Liabilities & Equity Current Liabilities 3,613,418 4,069,830 4,120,209 4,179,741 4,235,008 4,296,125 4,357,996 4,444,866 Long Term Liabilities 28,153,489 33,887,218 34,208,359 33,001,834 39,274,247 46,957,422 50,099,090 47,399,090 Total Liabilities 31,766,907 37,957,048 38,328,568 37,181,575 43,509,255 51,253,547 54,457,086 51,843,956 Net Assets 47,573,564 44,493,539 48,333,858 49,536,197 53,146,174 56,002,482 58,337,840 60,128,292 Cash Flow Revenues 16,121,783 17,687,562 19,642,314 20,349,895 20,901,808 21,356,584 21,806,752 22,243,539 Operating Expenses 11,960,694 12,711,388 12,613,885 12,866,163 13,123,486 13,385,956 13,653,675 13,926,749 Other Income 476, , , , , , , ,918 Cash Flow Before Debt Service 4,637,664 5,348,344 7,968,775 7,849,650 8,144,240 8,336,546 8,518,995 8,682,708 Debt Service Existing Debt Service 2,787,456 2,957,026 3,177,474 2,894,190 2,905,542 3,327,006 3,667,488 4,012,644 Proposed KIA Loan , ,266 Total Debt Service 2,787,456 2,957,026 3,177,474 2,894,190 2,905,542 3,327,006 3,913,621 4,504,910 Cash Flow After Debt Service 1,850,208 2,391,318 4,791,301 4,955,460 5,238,698 5,009,540 4,605,374 4,177,798 Ratios Current Ratio Debt to Equity Days Sales in Accounts Receivable Months Operating Expenses in Unrestricted Cash Debt Coverage Ratio /8/2017 5:53 PM, FinancialsPresentation

10 EXECUTIVE SUMMARY Reviewer Meili Sun KENTUCKY INFRASTRUCTURE AUTHORITY Date October 5, 2017 FUND B, INFRASTRUCTURE KIA Loan Number B REVOLVING LOAN FUND WRIS Number WX BORROWER BRIEF DESCRIPTION ELKHORN WATER DISTRICT FRANKLIN COUNTY This project will reconstruct the booster pump station, replace 6,600 linear feet of distribution pipeline located on Jones Lane, refurbish an existing elevated water storage tank, replace a master meter, and install approximately 500 automatic radio read meters and associated equipment. PROJECT FINANCING PROJECT BUDGET RD Fee % Actual % Administrative Expenses $0 Fund B Loan $850,000 Legal Expenses 1,000 Elkhorn Water District 30,000 Land, Easements 60,000 Planning 10,000 Eng - Design / Const 10.1% 10.0% 53,770 Eng - Insp 7.2% 7.0% 37,400 Construction 471,200 Equipment 182,800 Contingency 63,830 TOTAL $880,000 TOTAL $880,000 REPAYMENT Rate 2.75% Est. Annual Payment $57,238 Term 20 Years 1st Payment 6 Mo. after first draw PROFESSIONAL SERVICES Engineer Warner A. Broughman III & Associates Bond Counsel Dinsmore & Shohl, LLP PROJECT SCHEDULE Bid Opening Mar-18 Construction Start May-18 Construction Stop Oct-18 DEBT PER CUSTOMER Existing $246 Proposed $1,738 OTHER DEBT OTHER STATE-FUNDED PROJECTS LAST 5 YRS See Attached See Attached RESIDENTIAL RATES Users Avg. Bill Current 562 $27.65 (for 4,000 gallons) Additional 0 $27.65 (for 4,000 gallons) REGIONAL COORDINATION This project is consistent with regional planning recommendations. CASHFLOW Cash Flow Before Debt Service Debt Service Cash Flow After Debt Service Coverage Ratio Audited ,218 4,006 23, Audited ,604 21,076 (12,472) 0.4 Audited ,297 12,623 14, Projected ,323 12,466 18, Projected ,666 12,556 37, Projected ,251 69,864 12, Projected ,889 69,912 9, Projected ,480 69,788 7,

11 Reviewer: Meili Sun Date: October 5, 2017 Loan Number: B KENTUCKY INFRASTRUCTURE AUTHORITY INFRASTRUCTURE REVOLVING LOAN FUND (FUND B) ELKHORN WATER DISTRICT, FRANKLIN COUNTY PROJECT REVIEW WX I. PROJECT DESCRIPTION The Elkhorn Water District is requesting a Fund B loan in the amount of $850,000 for their Capital Improvements Project. This project will elevate and rebuild the booster pump station for flood protection and replace 6,600 linear feet of 4 inch asbestos concrete distribution pipeline located on Jones Lane with 8 inch PVC line. It will also paint and refurbish both interior and exterior of an over 40 year old elevated water storage tank, replace a master meter as requested by the Frankfort Plant Board, as well as install approximately 500 automatic radio read water meters and associated equipment. Elkhorn Water District provides services to approximately 562 customers. They purchase their water exclusively from the Frankfort Plant Board. Their rates are regulated by the Kentucky Public Service Commission. II. PROJECT BUDGET Administrative Expenses Legal Expenses $ 1,000 Land, Easements 60,000 Planning 10,000 Engineering Fees - Design / Const 53,770 Engineering Fees - Inspection 37,400 Construction 471,200 Equipment 182,800 Contingency 63,830 Total $880,000 III. PROJECT FUNDING Amount % KIA Fund B Loan $850,000 97% Elkhorn Water District 30,000 3% Total $880,000

12 IV. KIA DEBT SERVICE Amortized Loan Amount $ 850,000 Interest Rate 2.75% Loan Term (20 Years) 20 Estimated Annual Debt Service $ 55,538 Administrative Fee (0.20%) 1,700 Annual Debt Service $ 57,238 V. PROJECT SCHEDULE Bid Opening March,2018 Construction Start May 2018 Construction Stop October 2018 VI. RATE STRUCTURE A. Customers Customers Current Residential 553 Commercial 9 Industrial 0 Total 562 B. Water Rates Charges to Customers Proposed Current Prior 11/15/17 02/14/17 11/18/14 Minimum (First 2,000 gallons) $17.02 $15.47 $14.93 Next 3,000 gallons Cost for 4,000 gallons $30.42 $27.65 $26.57 Increase % 10.0% 4.1% Affordability Index (Rate/MHI) 0.6% 0.5% Frankfort Plant Board Wholesale Water Rates Proposed Current Prior 11/01/17 11/01/16 11/01/15 Average Volume in Gallons 65,339,000 65,339,000 65,339,000 Estimated Cost $166,615 $160,081 $153,5475 Increase % 4.1% 4.3%

13 VII. DEMOGRAPHICS Based on current Census data from the American Community Survey 5-Year Estimate , the Utility s service area population was 1,488 with a Median Household Income (MHI) of $62,291. The median household income for the Commonwealth is $43,740. The project will qualify for a 2.75% interest rate. Population County Unemployment Year County % Change Date Rate ,830 June % , % June % , % June % , % June % Current 49, % Cumulative % 19.0% VIII. FINANCIAL ANALYSIS Financial information was obtained from the audited financial statements for the years ended December 31, 2014 through December 31, Percentage references in the History section below are based on whole dollar amounts and not the rounded amounts presented. HISTORY Total revenues increased by 17% from $ 262,447 in 2014 to $306,931 in Operating expenses went up by 18.8% for the same time period. The Elkhorn Water District purchases water exclusively from the Frankfort Plant Board. The wholesale water rate has gone up from $2.25 to $2.45 per 1,000 gallons since November 12, The debt coverage ratio was 6.8, 0.4, and 2.2 for 2014, 2015, and 2016 respectively. The balance sheet reflects a current ratio of 6.8, a debt to equity ratio of 0.5, days sales in accounts receivable of 30.8, and months of operating expenses in unrestricted cash of 7.1.

14 PROJECTIONS Projections are based on the following assumptions: 1) Revenues reflect a proposed 10% rate increase in 2018 as well as an 11% or $37,000 increase in ) Water purchase cost will go up 4.3% in 2017 and 3.4% in 2018 due to previously approved wholesale rates by PSC. 3) Operating expenses other than water purchase cost will increase 2% for inflation. 4) Debt service coverage is 1.2 in 2019 when full annual principal and interest repayments begin. Based on the proforma assumptions, the utility shows adequate cash flow to repay the KIA Fund B loan. REPLACEMENT RESERVE The annual replacement cost is 5% ($42,000) of the final amount borrowed to be funded annually ($2,100) each December 1 over 20 years and maintained for the life of the loan. IX. DEBT OBLIGATIONS Outstanding Maturity USDA Rural Development Bonds $138, Total $138,200 X. CONTACTS Legal Applicant/Project Administrator Name Elkhorn Water District Address P.O. Box 67 Frankfort, KY County Franklin Authorized Official Michael Dudgeon, Chairman Phone (502) mdudgeon@ihlic.com

15 Consulting Engineer Name Warner Broughman Firm Warner A. Broughman III & Associates Address 3161 Custer Drive, Suite 6 Lexington, KY Phone (859) wabiii@prodigy.net XI. RECOMMENDATIONS KIA staff recommends approval of the loan with the standard conditions.

16 ELKHORN WATER DISTRICT FINANCIAL SUMMARY (DECEMBER YEAR END) Balance Sheet Audited Audited Audited Projected Projected Projected Projected Projected Assets Current Assets 172, , , , , , , ,755 Other Assets 412, , , ,928 1,072,841 1,022, , ,580 Total 585, , , ,217 1,406,440 1,371,840 1,331,730 1,289,335 Liabilities & Equity Current Liabilities 25,661 37,436 40,540 41,651 42,751 43,851 45,051 46,351 Long Term Liabilities 151, , , , , , , ,800 Total Liabilities 176, , , ,451 1,013,251 1,007,651 1,001, ,151 Net Assets 408, , , , , , , ,184 Cash Flow Revenues 262, , , , , , , ,032 Operating Expenses 235, , , , , , , ,893 Other Income Cash Flow Before Debt Service 27,218 8,604 27,297 31,323 49,666 82,251 79,889 77,480 Debt Service Existing Debt Service 4,006 21,076 12,623 12,466 12,556 12,626 12,674 12,550 Proposed KIA Loan ,238 57,238 57,238 Total Debt Service 4,006 21,076 12,623 12,466 12,556 69,864 69,912 69,788 Cash Flow After Debt Service 23,212 (12,472) 14,674 18,857 37,110 12,387 9,977 7,692 Ratios Current Ratio Debt to Equity Days Sales in Accounts Receivable Months Operating Expenses in Unrestricted Cash Debt Coverage Ratio /29/2017 2:14 PM, FinancialsPresentation