Massachusetts Water Resources Authority MWRA Fiscal Year 2016 Proposed Current Expense Budget March 2015
Fiscal Year 2016 Fiscal Year 2016 Year of Milestones • Bond Resolution Changes become effective – Reserves Release • Pension Fund achieves virtual Full Funding • Other Post Employment Benefits (OPEB) • New England Fertilizer Company (NEFCO) 15
Fiscal Year 2016 - Milestones Bond Resolution changes become effective – Reserves Release • Debt Service Reserves • Community Obligation and Revenue Enhancement (CORE) • Renewal and Replacement Reserve (RRR) 16
Fiscal Year 2016 - Milestones Pension Fund achieves virtual Full Funding • 95% Funded ratio 1/1/2015 anticipated • Other Post Employment Benefits (OPEB) • Staff to recommend OPEB Trust • Shift to funding OPEB 17
Fiscal Year 2016 - Milestones New England Fertilizer Company (NEFCO) • Contract Expires December 2015 • Negotiations are complete • Over the five-year term, expenses are expected to decrease by $1.25M 18
Mission “Sustainable and Predictable” 19
Mission - Sust ainable and Pre redict able Assesment Increases 6% 5% 4% 3% 2% 1% 0% 20
Historical Spending Chart Major Budget Elements $800,000,000.00 $700,000,000.00 $600,000,000.00 $500,000,000.00 Total Indirect Costs $400,000,000.00 Total Direct Costs Total Debt Service $300,000,000.00 Total Operating Costs $200,000,000.00 $100,000,000.00 $- 21
Mission - Sust ainable and Pre redict able Causes of volatility • Current Debt Profile • Repayment structure aligned with Debt Service Assistance • Increasing Debt Service “Debt Management Agency” 22
Outstanding Debt Outstanding Debt History $7,000,000,000 $6,000,000,000 $5,000,000,000 $4,000,000,000 $3,000,000,000 $2,000,000,000 $1,000,000,000 $0 23
Debt % is growing Debt Service as % of Total Budget 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 24
FY16 Proposed Current Expense Budget (CEB) FY16 Current Expense Budget Direct Expense 31.6% Debt Service 61.6% Indirect Expense 6.7% 25
Debt Challenge Ways to address the Debt Service challenge • Defeasance • Use of Bond Resolution Reserves Release • Use of Reserves • Rate Stabilization Fund • Bond Redemption Fund • Tactical Issuance – Repayment Structure • Control Capital Spending 26
FY16 Proposed Current Expense Budget (CEB) FY16 Current Expense Budget Direct Expense 31.6% Debt Service 61.6% Indirect Expense 6.7% 27
CEB Budget Structure • Direct Expenses • Indirect Expenses • Debt Service Expenses 28
CEB Budget Structure Direct Expenses Other 16% Chemicals 4% Energy & Utilities Personnel 11% 56% Maintenance 13% 29
Direct Expenses Comparison Direct Expenses Comparison FY15 -FY16 $ in Millions Wages and Salaries Maintenance Energy and Utilities Other Services Fringe Benefits FY15 Chemicals Professional Services FY16 Other Materials Overtime Workers' Compensation Training and Meetings $- $20 $40 $60 $80 $100 $120 30
FY16 Proposed Current Expense Budget (CEB) Highlights – Direct Expenses • 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. 31
CEB Budget Structure – I ndirect Expenses Indirect Expenses Other 9% Insurance 4% Watershed/PILOT Retirement Fund 59% 28% 32
I ndirect Expenses Comparison Indirect Expenses Comparison FY15 -FY16 $ in Millions Watershed/PILOT Retirement Fund OPEB/Additional Pension Deposit FY15 HEEC FY16 Insurance Mitigation Addition to Reserves $- $5 $10 $15 $20 $25 $30 33
FY16 Proposed Current Expense Budget (CEB) Highlights – Indirect Expenses • 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. 34
CEB Budget Structure Debt Service Expenses Other 6% State Revolving Fund 18% Senior & Subordinate Debt 76% 35
Debt Service Expenses Comparison Debt Services Expenses Comparison FY15 -FY16 $ in Millions Senior Debt Subordinate Debt SRF FY15 Current Revenue For Capital FY16 Local Water Pipeline Capital Lease Core Fund Deposit $- $100 $200 $300 36
FY16 Proposed Current Expense Budget (CEB) Highlights – Debt Service Expenses • Variable Rate Debt Assumption 3.25%; • Required CORE Fund Deposit $6.7M; • Bond Redemption $3.5M; and • No Debt Service Assistance. 37
FY16 Proposed Current Expense Budget (CEB) Revenue • Non Rate Revenue • Investment Income • Rate Revenue Requirement (Assessments) 38
Planning Estimate Assumptions Assumptions • 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 39
Effects on Assessments Assessment Increase Forecast Comparison 6.5% 6.5% 5.1% 4.6% 4.9% 4.4% 4.3% 4.1% 4.1% 3.9% FY 16 FY 17 FY 18 FY 19 FY 20 FY15 FY16 40
FY16 Proposed Current Expense Budget (CEB) Challenges / Opportunities • Short-Term Market Rates • Variable Rate Debt • Investments • Regulatory Changes • System Expansion • Utility Pricing 41
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 42
FY16 Current Expense Budget Closing Thank You 43
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