Massachusetts Water Resources Authority MWRA Fiscal Year 2020 Proposed Current Expense Budget March 21, 2019
FY20 Proposed CEB Rates Management Strategy Sustainable and Predictable Assessments Multi-Year Approach 2
Budget Drivers For Multi-Year Planning • Capital Finance Expenses • Existing Expenses and Revenue – Inflation, Changes • Long-Term Liabilities 3
Historical Budgeted Spending $900 $797.0 Total Indirect Costs $800 Total Direct Costs Total Capital Finance Costs $700 Total Operating Costs $600 $497.6 $500 $ s in millions $400 $300 $248.8 $200 $100 $50.7 $- 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 4
Defeasance Strategy Before and After Defeasance $600,000,000 $550,000,000 $500,000,000 Debt Service Budget $450,000,000 $400,000,000 $350,000,000 $300,000,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Fiscal Year Before Defeasance After Defeasance 5
New HEEC Cable in place Dec 2019 2020 2021* 2022* 2023* 2024* 2025* Projected HEEC Payments $4.4 $4.6 $5.6 $5.7 $6.0 $7.1 Expense Changes - HEEC *includes offset of HEEC Reserve totaling $6.5 million FY19 FY20 FY21 FY22 FY23 FY24 Projected HEEC Expense $1.4 $4.4 $5.2 $6.3 $6.4 $6.7 Net of $6.5 reserve Amounts in millions 6
Long-Term Liabilities FY19 FY20 FY21 FY22 FY23 FY24 Pension Funding Schedule $7.0 $7.3 $7.6 $8.0 $8.3 $8.7 FY19 FY20 FY21 FY22 FY23 FY24 OPEB Funding Schedule $5.6 $6.0 $6.1 $6.1 $6.2 $6.2 Amounts in millions 7
CEB Budget Structure • Direct Expenses • Indirect Expenses • Capital Finance Expenses • Non-Rate Revenue • Rate Revenue 8
FY20 Proposed Current Expense Budget (CEB) FY20 Proposed Current Expense Budget Direct Expense $248.8 31% Capital Financing $497.6 63% Indirect Expense $50.7 6% 9
CEB Budget Highlights – Direct Expenses Direct Expenses • Wages, Salaries, Overtime ($s in millions) & Fringe Benefits: Reflects Other Wages, Salaries, $39.9 collective bargaining and Overtime & Fringe 16% tunnel redundancy staff Benefits $139.7 Chemicals 56% • Chemicals: $1.2M increase $12.1 5% • Utilities: $1.3M increase Energy & Utilities $24.2 • 10% Maintenance: $.5M increase Maintenance $32.8 13% 10
Chemicals Historical & Projected Chemical Cost $3.5 $3.0 $2.5 $s in millions $2.0 $1.5 $1.0 $0.5 $0.0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Proposed Sodium Hypochlorite Ferric Chloride Activated Carbon 11
Utilities Electricity Diesel Fuel $/kWh $/gal $0.125 $3.50 $0.120 $3.00 $0.115 $2.50 $ per kWh $0.110 $2.00 $/gal $0.105 $1.50 $0.100 $1.00 $0.095 $0.50 $0.090 $0.00 12
Health Insurance Health Insurance FY11-FY20 $20 $19.0 $18.9 $18.6 $17.5 $16.5 $15.8 $15.7 $15.2 $15.1 $16 $15.1 $s in millions $12 $8 $4 $0 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 13
CEB Budget Structure – Indirect Expenses Indirect Expenses ($s in millions) Retirement • Pension Fund: 95% funded Funding $7.3 14% OPEB Funding • OPEB Contribution: 50% of $6.0 Actuarially Determined Contribution 12% • HEEC Cable: New cable coming HEEC Payment $4.4 online in FY20 9% Watershed/PILOT • Insurance Watershed & PILOT: $0.79m $27.2 $2.1 increase 54% 4% Other $3.7 7% 14
CEB Budget Structure – Capital Finance Expenses Capital Financing • ($s in millions) Variable Rate Debt Assumption: 3.75%, 25 bp increase Subordinate Debt, $170.6 • Assumes $15.0M defeasance in FY19 State Revolving Fund, $93.1 • $1M increase to Current Revenue for Capital • Senior Debt, $4.9 prepayment of debt Other, $29.1 $204.7 15
Interest Rates MWRA All-In Cost of Variable Rate Debt 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% July-10 July-11 July-12 July-13 July-14 July-15 July-16 July-17 July-18 16
FY20 Non-Rate Revenue Non-Rate Revenue ($s in millions) • Investment Income: Short-term assumption increasing 50 bp Investment Income from 1.75% to 2.25% $15.5 51% Other Revenue $5.6 • Other revenue: Reduction due 19% to demand response and RPS programs • Other User Charges: Reduction related to Entrance Fees and Other User Water Treatment Residuals Charges $9.2 30% 17
Actual and Forecasted Rate Revenue Changes MWRA Combined Utilities Historical and Projected Rate Revenue Changes 5.0% Projected Actual 4.0% 3.7% 3.6% 3.5% 3.5% 3.4% 3.4% 3.3% 3.3% 3.3% 3.2% 3.1% 3.0% 2.0% 1.0% 0.0% FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 18
Actual and Forecasted Rate Revenue Changes by Utility MWRA Water & Sewer Utilities Historical and Projected Rate Revenue Changes 9.0% Projected Actual 7.7% 8.0% 7.0% 6.0% 5.0% 3.9% 3.9% 3.7% 3.7% 3.7% 4.0% 3.6% 3.6% 3.5% 3.5% 3.5% 3.5% 3.5% 3.4% 3.4% 3.3% 3.1% 3.1% 3.0% 2.9% 2.9% 3.0% 2.0% 1.4% 1.0% 0.0% FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 Water Utility Sewer Utility 19
FY20 Current Expense Budget Next Steps • Transmit Proposed Budget to Advisory Board for 60 day review (review and briefings in process) • Public Hearing • MWRA Board Hearing • Staff will present Draft Final Budget in May • Staff anticipate FY20 Budget adoption in June 20
Thank You 21
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