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Metropolitan Council

Metropolitan Council. Environmental Services. Use of MCES Wastewater Operating Reserves. Presented to the Environment Committee July 13, 2010. Jason Willett, MCES Finance Director. A Clean Water Agency. M.S. 473.517 subd.1. Allocated costs may include amount for:

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Metropolitan Council

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  1. Metropolitan Council Environmental Services Use of MCES Wastewater Operating Reserves Presented to the Environment Committee July 13, 2010 Jason Willett, MCES Finance Director A Clean Water Agency

  2. M.S. 473.517 subd.1 • Allocated costs may include amount for: • Reserve or contingency fund • Cash flow management fund* *Must not exceed 5% of Council’s total waste control operating budget.

  3. Council Policy 3-8 • Target Fund Balance • Intended to • Help operating fund/unit meet cash flow needs • Ensure adequate protection for unanticipated events • Targets are benchmarks, not absolutes • Environmental Services: 10% of annual budgeted operating expenses

  4. Operating Reserves Year-end 2009 $26.9M Contingency Reserve Balance $0.0M Working Capital Reserve TOTAL Operating Reserve $26.9M

  5. 2010 Reserve Changes Year-end 2010 ($2.0M) 2010 Budget ($0.1M) Adopted Budget Amendment ? Contingencies 2010 Surplus (estimated) $0.0-$2.0M Total 2010 Change ($2.1)-$2.0M 2010 Forecast Balance $24.8-28.9M

  6. Target Balance Total Budget 2010 $212.1M 2010 MCES Budget Debt Service, PAYG(operations part of MCES budget) -$92.1M $120.0M x 10% Council Target for MCES $12.0M Reserves Over Target: $12.8 million-$16.9 million

  7. Ideas for Use • Future rate mitigation • Other post-employment benefit (OPEB) reserve for MCES liability • Pay as you go (PAYG) for wastewater capital projects • Current value credit payoff • Special project funding OR • Retain for confidence-building and cash flow management

  8. Contingency Reserve Usage Planned Use for Rate Mitigation 20112012201320142015 $2.5M $2M $2M $1M $1M = $8.5M

  9. OPEB Liability • OPEB = Other Post-Employment Benefits (non-pension) • Explicit health benefit versus implicit health benefit • Accounting vs. Funding • 2010 Actuarial study results soon

  10. OPEB Funding Impacts on Future Budgets • Council funding policy: • At minimum fund retiree premiums and normal cost • Normal costs accumulated in segmented fund (invested at State Board Investment) • Account balances (Transit, ES, RA) • Year after full funding estimated for division reimbursement (i.e., budget impact)

  11. PAYG for Capital Projects (millions) Proposed Favorable Variance Annual Budget SAC (Service Availability Charge) CRF (Capital Revolving Fund)

  12. PAYG Impacts on Future Debt Service $73,111 of avoided debt service per year for 20 years (@ 4% interest) $1 million PAYG Scalable: i.e., $2 million PAYG is twice the avoided debt service

  13. Current Value Credit Payoff • Regionalization of local facilities per M.S. 473.511 (4) • 12/31/09 balance: $619,599* • Columbia Heights, Mendota Heights, New Brighton, Shoreview • 2010 payments: $107,157* • 12/31/10 balance: $512,442* • 4% interest *principal only

  14. Other • Special project funding • E.g., technology upgrade • Other ideas? • Discussion

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