Progressive Planning for Financially Robust Water Systems

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1 Canadian Water Network: Blue Cities 2017 Progressive Planning for Financially Robust Water Systems May 17, 2017 CITY OF ATLANTA Kasim Reed, Mayor Kishia L. Powell, Commissioner 5/25/2017 1

2 Discussion I. DWM Overview II. Financial Background III. Challenges and Mitigation Strategies IV. Financial Resiliency 5/25/2017 2

3 Delivers 100 MG of drinking water per day Treats 188 MG of wastewater per day 1.2M Customers Served $546M FY 2017 Operating Budget $1.22B 5-YR Capital Improvement Program WATER SYSTEM WASTEWATER SYSTEM WATERSHED PROTECTION 3,028 miles of pipeline 62,204 valves 24,385 fire hydrants 18 pump stations 3 water treatment plants 1,900 miles of pipeline 47,327 manholes 22 pump stations 4 water reclamation centers 2 water quality control facilities 603 miles of pipe 47,351 inlets 2,349 culverts 6,175 outlets 14 drainage basins

4 Background Atlanta region is expected to grow from 5.5M to 8M over next 20 YRs Clean Water obligations includes two consent decrees 1st entered in 1998; $2B investment resulted in 80% sewer spill reduction 2 nd entered in 1999; city pursued extension to 2027 Stormwater: Phase 1 MS4; Program needs estimated at $40M annually, no sustainable funding source Drinking Water obligations Maintain safe drinking water compliance at three facilities $350M Water Supply Program Reduce 30% water loss City raised rates by 250% over a decade to comply with Consent Decrees 10-YR CIP is $2.5B 5/25/2017 4

5 Financial Background Increased Debt Capacity To meet Consent Decree requirements long term debt increased from $500 million to $3.5 billion from 1998 to 2009 Limited capacity for additional long term debt Outstanding Debt Levels Sr. Debt Service Payments Revenue Bonds GEFA Commercial Paper Capital Leases $3.50 $ $ $2.00 $ $1.00 $ $0.00 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 ' '98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16 Note: Fiscal years are 12-month periods beginning July 1 and ending June 30. Fiscal year 2006 is a six month period beginning January 5/25/2017 1, 2006 and ending June 30, Fiscal year is a 12-month period beginning January 1 and ending December 31. Sr. Debt payments includes portions of interest paid in conjunction with 2015 refinancing. 5

6 Historical Residential Bill Impacts City of Atlanta- Department of Watershed Management Combined Water and Wastewater Bills: 8 CCF User FY 2008 thru FY 2016 Water Sewer $ $ $ $ $ $80.00 $60.00 $40.00 $20.00 $0.00 Rate Increases $44.42 $30.98 $44.93 $44.93 $49.42 $13.44 $18.95 $18.95 $20.72 $22.67 $24.79 $31.27 $35.03 $38.07 $42.64 $42.64 $42.64 $42.64 $ % 0.0% 10.0% $ % $59.81 $ % 27.5% 12.5% 12.5% 12.0% 0.0% 0.0% 0.0% 0.0% 5/25/ $85.79 $96.52 $ $ $ $ $ FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16

7 Challenges Affordability Concerns 30% of households fall below annual income of $25k 24.2% of households in Atlanta are at or below the MHI 3rd highest rates in the Country Increasing block rate structure (3 tiers; an aggressive water conservation measure) Average monthly bill for a family of four is $150 vs $50/month national average Affordability issues are impacting about 50% of Atlanta households A greater percentage of the City s families are considered cost burdened (or paying more than 30% of their income for housing) 5/25/2017 7

8 Mitigation Rate Stabilization Events In 2004 a 1% Municipal Options Sales Tax ( MOST ) was approved by voters for retail sales and use occurring in the incorporated city limits of Atlanta. Purpose: to assist in funding water and sewer system CIP In 2012, DWM was granted a 13-year extension on its second consent decree The extension allowed the Department to exercise fiscal balance across all infrastructure types (water, wastewater and stormwater.) 5/25/2017 8

9 Benefits of MOST Shares costs of maintaining and improving system regionally Daytime population increased to over 1.2 million Approximately 20% of DWM s annual funding Strong Local Support: (Over 75% of the vote) Limit future rate increases for water/sewer rate payers Contributes to funding $1.2 billion CIP Program 10% of MOST proceeds authorized for SW capital projects 5/25/2017 9

10 Historical MOST Revenues Approximately $1.25 billion collected since inception $140.0 Projection $130.0 $ in Millions $120.0 $110.0 $100.0 $90.0 $127.9 $117.1 $109.1 $110.0 $115.1 $118.8 $124.3 $131.6 $132.2 $132.0 $80.0 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY /25/

11 Impact to Credit Ratings Longer term rating concerns exist regarding the potential loss of a major revenue source for system operations (S&P) WHAT COULD MOVE THE RATING DOWN.Failure to renew MOST in 2016 (Moody s) Bond Upgrades Water and Wastewater Revenue Bonds Ratings Agency Moody s Standard & Poor s 2011 A1 A 2013 Aa3 (Stable) A+(Stable) 2015 Aa3 (Stable) AA- (Stable) 2017 Aa2 (Stable) AA- (Stable) 5/25/

Financial Resiliency DWM Strategic Plan Serves as a roadmap to become a leading public water utility Seven priorities serve as key drivers in achieving the goals and objectives of the utility

12 Financial Resiliency DWM Strategic Plan Serves as a roadmap to become a leading public water utility Seven priorities serve as key drivers in achieving the goals and objectives of the utility Informs a course of action for disciplined decision making and implementation of critical programs and initiatives that shape the future of DWM Prioritize the allocation of funding 5/25/

13 Financial Resiliency Goals: Responsibly manage the full life-cycle costs of the utility Establish and maintain an effective balance between long-term debt, asset value, operating revenues and O&M expenditures Predictable rates that meet community and regulatory expectations while adequate to invest in current and future needs Objectives: Ensure efficient and cost effective access to the capital markets Maximize incoming revenue under existing rates by reducing A/R balance, non-revenue water Increase participation in current customer affordability programs Utilize additional funding sources for capital projects: Renew Municipal Options Sales Tax Establish Stormwater Utility Low Cost Borrowing (GEFA & WIFIA) Public Private Partnerships Revenue from nutrient recovery Innovative financing approach for Watershed-scale improvement program 5/25/

CITY. September 4, Financial Planning Model. model by. rate plan. in July we tested. LESLIE WARD City Auditor (404)

CITY. September 4, Financial Planning Model. model by. rate plan. in July we tested. LESLIE WARD City Auditor (404) LESLIE WARD City Auditor lward1@atlantaga.gov AMANDA NOBLE Deputy City Auditor anoble@atlantaga.gov CITY OF ATLAA NTA CITY AUDITOR S OFFICE 68 MITCHELL STREET SW, SUITE 12100 ATLANTA, GEORGIA 30303-0312