Finance Committee Meeting FY19 Strategic Business and Operating Plan and Preliminary Budget Review April 3, 2018 1
Finance Committee Meeting FY19 Strategic Business Operating Plan and Preliminary Budget Review I. Strategic Business and Operating Plan (SBOP) II. FY19 Preliminary Budget III. Preliminary Budget Compared to Rate Commission Report IV. Next Steps and Questions 2
FY19 FY23 Strategic Business and Operating Plan Prepared in accordance with Section 5.110 of the Charter of the Metropolitan St. Louis Sewer District 3
Strategic Business and Operating Plan VISION STATEMENT Quality Service Always MISSION STATEMENT To protect the public s health, safety, and water environment by responsibly providing wastewater and stormwater management. 4
Strategic Business and Operating Plan VALUES Integrity Acting ethically at all times, treating everyone with honesty, fairness and respect. Teamwork Working together to accomplish our mission with open communication, trust respect and diversity. Innovation Embracing continuous improvement and new solutions to achieve excellence. Employees Developing successful, responsible and safety conscious employees and acknowledging their contributions. Customers Building strong relationships by keeping our commitments, providing excellent service and being transparent in everything we do. 5
Strategic Business and Operating Plan GOALS A. Deliver consistent, high quality customer service; B. Comply with all legal and regulatory requirements and schedules; C. Minimize customer rate increases; and D. Be accountable to the St. Louis community. 6
Strategic Business and Operating Plan STRATEGIES 1. Educate and partner with stakeholders to build support; 2. Manage the District s costs and revenues to optimize financial impacts; 3. Integrate and improve the District s business processes; 4. Promote appropriate standards through proactive regulatory and legislative involvement; 5. Address customer and regulatory needs through a comprehensive infrastructure management program; 6. Create a learning and business oriented culture based on competency and accountability. 7
FY19 Preliminary Budget 8
FY19 Preliminary Balanced Budget FY19 Total Revenue ($$s in millions) Wastewater User Charges $403.3 Stormwater User Charges 0.0 Revenue Bonds 190.0 Stormwater Taxes 33.3 Investment and Other Income 11.9 Use of Fund Balances 91.3 Total District Revenue $729.8 FY19 Total Expense ($$s in millions) Operating Budget $210.4 CIRP 397.3 Debt Service 122.1 Total District Expenses $729.8 9
FY19 Preliminary Budget Key Points I. The General Fund budget includes: A. $2.7 million increase for Salaries & FICA excluding incremental budgets (includes 3.07% avg. wage increase.) Includes elimination of 3 positions. B. $2.2 million in incremental budgets tied to the SBOP, including 13 additional positions of which the majority is primarily related to provide for and support the growing CIRP. C. 5.0% or $9.5 million overall increase from FY18 II. Includes a Total CIRP budget of $397.3 million. III. Assumes the issuance of $190 million of additional bonds. IV. The budget was developed to align with the July 2015 Rate Commission Report. 1 0
FY19 Preliminary Budget - Revenue ($$s in millions) 1 1
FY19 Budgeted Revenue by Major Category ($$s in millions) FY18 - $648.3 FY19 - $729.8 $81.5 M or 13% Increase 1 2
Schedule of Residential User Rates Wastewater FY18 FY19 % Change Effective Date 7/1/17 7/1/18 Average Monthly Residential Bill (7 Ccf) $ 49.31 $ 54.63 11% 1 3
FY19 Preliminary Total Budget Expenses ($$s in millions) Total = $729.8 Total CIRP Budget is $397.3, 54% of total Total Operating Budget is $210.4, 29% of total 1 4
FY19 Budget Operating Expense Components Wastewater General Fund 166,662,345 Improvement Fund 50,519 Wastewater Emergency Fund Water Backup Fund 4,425,300 General Insurance Fund 6,089,400 Construction Funds 6,949,481 Total Wastewater 184,177,045 Stormwater OMCI Funds 26,235,464 Total Operating Expenses 210,412,509 1 5
FY19 Budgeted Operating Expense by Major Category ($$s in millions) FY18 - $200.1 FY19 - $210.4 $10.3 M or 5% Increase 1 6
FY19 General Fund Budget By Department CHANGE FY19 FY18 $ % Civil Service Commission $ 10,000 $ 10,000 $ - 0.0% Rate Commission 595,508 594,304 1,204 0.2% Secretary-Treasurer (includes Board of Trustees) 3,318,517 1,899,735 1,418,782 74.7% Executive Director 3,596,589 3,403,911 192,678 5.7% General Counsel 3,153,946 2,601,943 552,003 21.2% Human Resources 8,286,447 8,799,956 (513,509) -5.8% Finance 20,977,478 20,300,675 676,803 3.3% Information Systems 14,927,653 13,963,301 964,352 6.9% Engineering 26,834,817 26,063,223 771,594 3.0% Operations 115,483,973 112,280,592 3,203,381 2.9% Total Departments $ 197,184,927 $ 189,917,640 $ 7,267,289 3.8% Incrementals 2,212,785 0 2,212,785 Total General Fund Operating Budget $ 199,397,712 $ 189,917,640 $ 9,480,074 5.0% Energy Loan Debt Service 36,000 35,900 100 Total General $ 199,433,712 $ 189,953,540 $ 9,480,174 5.0% 1 7
FY19 Incremental Budget Summary Department Purpose FTE Change Budget Information Systems Engineering Executive Director Replace end of life assets ($471K); Implement updated enterprise disaster recovery strategy ($257K); Add 1 I.T. Specialist II Network Engineer ($80K) Add 6 FTE's, Staffing Requirements Required to Meet Consent Decree- 1 Civil Engineer, 2 Resident Inspector, 3 Const. Inspector Seniors. Increase support related to Project Clear. 1 FTE in Public Information to replace contractual services ($91K), and 4 FTE's in Diversity for compliance inspections on larger CIRP ($231K). 1 $807,436 6 $516,034 5 $322,064 Finance Planning and preliminary design work on billing system for stormwater capital rate ($299K); Space planning and cubicle moves to accommodate growth in Diversity and Engineering ($100K). 0 $398,600 Human Resources Implement Oracle Position Control 0 $100,000 Operations Add 1 Bricklayer for increased workload related to Prop S funding. 1 $68,631 Total General Fund Incremental 13 $2,212,765 *Stormwater Incremental Budgets = $298,600 1 8
878 FY19 District Funded Positions 1,021 Total 969 981 981 FTE Change 936 Position Title +1 Public Information Specialist +1 Diversity Office Associate 956 963 976 +1 Diversity Construction Supervisor +2 MWBE Compliance Inspector +1 I.T. Specialist II Network Engineer +1 Bricklayer +1 Civil Engineer Senior +2 Resident Inspector +3 Construction Inspector Senior -1 Accountant II -2 Mail Associate Messenger +10 Net Change 1 9
Current Projection to Rate Report Fiscal Years 17 20 Current Projection * Rate Model Difference Revenue: Wastewater Service Charges $ 1,539,473,139 $ 1,580,322,154 $ (40,849,015) Taxes 131,891,221 119,191,666 12,699,555 Other 45,781,826 17,361,112 28,420,714 Total Revenue $ 1,717,146,186 $ 1,716,874,932 $ 271,254 Expense: Operating Expense and Routine Capital $ 807,179,888 $ 848,030,866 $ (40,850,978) Debt Service Expense 450,105,096 477,221,633 (27,116,537) Total Wastewater CIRP 1,411,316,810 1,462,971,194 (51,654,384) Stormwater and Other CIRP 77,666,962 70,883,514 6,783,448 Total Expense $ 2,746,268,757 $ 2,859,107,207 $ (112,838,451) Net Income / (Loss) $ (1,029,122,571) $ (1,142,232,275) $ 113,109,705 Bond Proceeds (Net of COI) 976,968,359 1,098,525,098 (121,556,739) Bond Proceeds (Net of COI) Total Expense Total Revenue Change in Fund Balance $ (52,154,211) $ (43,707,177) $ (8,447,034) Current Projection * Rate Model Current Projection * Rate Model Current Projection * Rate Model $ $1,000 $2,000 $3,000 * Current Projection = FY17 Actual + FY18 Forecast + FY19 Proposed Budget + FY20 Projected 11.1% Favorable 3.9% Favorable 0.0% Favorable Millions Wastewater Service Charges - Billed volumes are declining much faster than anticipated in the Rate Report, especially for residential accounts. Taxes Property taxes are higher than anticipated. Other Approximately $14 million of the difference is related to lower than expected bad debt provision. Most of the rest is higher than anticipated Connection Fees. Operating Expenses and Routine Capital Personnel Services for the District are anticipated to be $11.8 million lower than the rate model in the first two years of this rate cycle due mostly to vacancies. Supplies are projected to show a savings of $14.1 million from rate model levels. Utilities are projected to finish $1.9 million less than the rate model, and Contractual Services are projected to be $40.6 million under rate model predictions. Debt Service Expense Borrowing over the 4-year period is projected to be $121.5 million less than anticipated. Lower CIRP expenditures and avoidance of required reserves both contribute to the lower borrowing level, while lower than anticipated interest rates further keep this expense down. Wastewater CIRP Most of the projected savings can be attributed to favorable bids on a few large projects. Stormwater and Other CIRP Project costs projected in the rate proposal were lower than actual bids. Bond Proceeds - Lower CIRP expenditures and avoidance of required reserves both contribute to the lower borrowing level. 2 0
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FY 2019 CIRP Program Summary Type of Project Number Budget Wastewater Construction 65 273,673,000 Wastewater Engineering 83 65,892,000 Stormwater Construction 31 17,368,000 Stormwater Engineering 9 5,180,000 New Project Appropriations Subtotal: 188 362,113,000 Continued Wastewater 9 33,850,000 Continued Stormwater 1 1,300,000 Continued Project Appropriations Subtotal: 10 35,150,000 PROJECT APPROPRIATION TOTALS: 198 397,263,000 2 2
FY 2019 CIRP New Wastewater & Stormwater Projects 6% 94% Stormwater $22.5 M 40 Projects Wastewater $339.6 M 148 Projects Total Budget $362.1 M Total Number of New Projects 188 2 3
FY 2019 CIRP New Wastewater Project Funding 4% Treatment Plants 8 Projects $12.3 M 77% County 93 Projects $260.8 M 11% City 8% City/County 18 Projects 29 Projects $38.0 M Total Number of Project Appropriations 148 Total Budget $339.6 M $28.5 M 2 4
4% General Fund: 16 Projects $14.9 M 7% OMCI/Special Funds: 42 Projects $25.6 M FY 2019 CIRP Funding Sources Total Number of Project Appropriations 188 Total Budget $362.1 M 89% Sanitary Replacement Fund: 130 Projects $321.6 M 2 5
FY 2019 CIRP Engineering & Construction - New 20% Engineering 92 Projects $71.1 M 80% Construction 96 Projects $291.0 M Total Number of Project Appropriations 188 Total Budget $362.1 M 2 6
FY 2019 CIRP Continued Projects Wastewater Coordination with Others / Construction Phasing 7 Easement Acquisition / Condemnation 2 Projects in Design / Major Scope Changes 0 Stormwater Coordination with Others 0 Easement Acquisition / Condemnation 0 Projects in Design / Major Scope Changes 1 Total: 10 2 7
FY 2019 CIRP Contingency Projects Type of Project Number Budget Wastewater 23 121,845,000 Stormwater 21 9,562,000 Phased Funding 9 125,200,000 Project Totals: 53 256,607,000 2 8
FY 2019 CIRP New Project Allocations Type of Project Number % Budget Asset Management Renewal 16 11 39,190,000 Cityshed 9 4 15,317,000 CSO 12 8 29,935,000 SSO 79 64 231,916,000 Treatment Plant 8 4 12,252,000 Districtwide 24 3 10,955,000 Stormwater 40 6 22,548,000 TOTALS: 188 100 362,113,000 2 9
FY 2019 CIRP Program Highlights Asset Management Renewal Renewal of existing District infrastructure (assets) such as sewer lines, manholes, and pump stations. Renewal is required because of deterioration due to ageing infrastructure, and can take the form of partial repairs, rehabilitation, or full replacement depending on the condition of the asset. Rehabilitation and/or replacement of four pump stations within the collection system. 3 0
FY 2019 CIRP Program Highlights Cityshed Projects designed and constructed to mitigate the effects of wet weather surcharging and overland flooding of the combined sewer system. Primarily in the City of St. Louis. Types of projects include property buyouts, basin and relief sewer construction. Construct the Jennings Station Road / North Baden Basin project. 3 1
FY 2019 CIRP Program Highlights CSO Projects in the combined sewer area that are intended to reduce or control Combined Sewer Overflow (CSO), a discharge from the combined sewer system at a point prior to the headworks of a wastewater treatment facility. The majority of MSD s CSOs are along the River Des Peres and the Mississippi River. Continue construction of the Maline Creek CSO Storage Facility project. 3 2
FY 2019 CIRP Program Highlights SSO Projects to reduce and eliminate Sanitary Sewer Overflow (SSO) in the separate sanitary sewer system. An SSO is any release of wastewater from the separate sewer collection system prior to a treatment facility. Construct 53,000 feet of sanitary sewer, and 13,000 feet of storm sewer to facilitate the removal of private I/I. Work will result in the removal of up to 11 constructed SSOs. 3 3
FY 2019 CIRP Program Highlights Treatment Plant Projects planned at one of the 7 existing wastewater treatment facilities within the District. Projects are required to renew ageing infrastructure, improve safety or efficiency, or to improve treatment processes due to changing regulations or permit requirements. Construction of a redundant sludge acceptance system at the Bissell Wastewater Treatment Plant. 3 4
FY 2019 CIRP Program Highlights Districtwide Projects are general projects that are required to deliver support activities for the CIRP and meet Consent Decree requirements. These projects are not site specific, and typically occur throughout the District. CCTV inspection and physical inspection of 700,000 feet of sewers. 3 5
FY 2019 CIRP Program Highlights Stormwater Projects that address localized structure and yard flooding and erosion issues driven by storm events throughout the District. Projects also provide for repairs and rehabilitation of the existing stormwater infrastructure within the District. Stormwater projects are a business line funded separately from wastewater projects. Construct improvements to reduce flooding at 28 structures, 18 streets, and 58 yard locations, and address erosion at 30 properties. 3 6
FY19 SBOP and Preliminary Budget Review Q & A 3 7
FY19 Next Steps 3 8
FY19 Budget Meeting Schedule * FY19 SBOP and Preliminary Budget Finance Committee Meeting Review (including CIRP) April 3, 2018; 8:00 a.m. Publication of Public Hearing Notice April 19, 2018 (The notice will be published in the St. Louis Post-Dispatch, St. Louis American, St. Louis Business Journal, and on the MSD Internet Site) FY19 Budget Follow-up Discussion Budget Introduction Public Hearing Budget Adoption Finance Committee Meeting May 1, 2018; Time: TBD Board of Trustee Meeting May 10, 2018; 5:00 p.m. After Board of Trustee Meeting (Finding of Fact Committee) May 10, 2018; 6:00 p.m. Board of Trustee Meeting June 14, 2018; 5:00 p.m. * All meetings held at 2350 Market Street, Room 109 3 9