Storm Water Improvements Financial Presentation November 27, 2017 - - PowerPoint PPT Presentation

Storm Water Improvements Financial Presentation November 27, 2017

Presentation Topics

• Sewer Fund History
• Storm Water Management Project Alternatives
• Financing and Repayment Options
• Future Projected Cost of Village Services

2

Financial Disclaimer

• All figures contained in this presentation are projections and will change
• ver time
• Due to the number of variables that may impact project timing, the

financial analysis in this presentation is based on 2017 dollars and does not account for construction inflation

– Assuming construction begins in 2020 and is completed by 2023, total project costs are estimated to increase 10 - 14%

• As the Village narrows its options, the financial analysis will be updated

to be more precise in regards to project phasing and the impact of construction inflation

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Sewer Fund History

• The Village implemented the sewer user fee in 1990 at $0.22 per 100 cubic feet as it

initiated a series of sewer improvements recommended by an appointed Sewer Commission

• The Sewer Fund operates as an enterprise fund, meaning that a fee is charged to users
• f the systems to pay for the associated services

– All activities necessary to operate the Village’s sewer services are accounted for in this fund, including administration, operations, maintenance, financing and related debt service, billing and collections

• The sewer user fee, the sole revenue source for all

sewer improvements in Wilmette, is assessed based

• n water consumption (1 unit = 100 cubic feet)
• The existing Sewer User Fee is $4.24/unit
• 73% of the existing sewer fee pays for capital

improvements

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Sewer Fund History

• The following table identifies the history of improvements to the

Village’s sewer systems since 1990

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Year Combined System (East of Ridge) Separate System (West of Ridge) Both Systems 1992 - 1998 39,726,922 17,133,695 2001 - 2006 3,496,004 2,408,561 2007 - 2010 2,044,456 1,108,130 5,108,380 2012 142,211 1,190,121 2013 942,547 1,313,097 892,793 2014 3,839,508 980,862 2015 18,939,507 1,120,000 2016 105,801 1,100,000 Total 46,209,929 42,581,949 12,800,717

Sewer system investments are adjusted for inflation (2017 dollars)

Sewer Fund History

• Based on completed sewer improvements since 1990, the following chart depicts future debt service

requirements in the Sewer Fund:

6 $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043

Sewer Fund History

• The following chart depicts the history of the Sewer User Fee and its impact on the median sewer bill (21

units per quarter) since its implementation in 1990:

• Based on existing debt service, continued use of IEPA loans to fund lining of the sewer system, and planned

Storm Water Pumping Station improvements, a $1.00 rate increase is projected in Fiscal Year 2033

– The $1 increase does not include any of the storm water projects under consideration – This would be an $84 increase to the annual median sewer bill in 2033

7 $- $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 1985 1990 1995 2000 2005 2010 2015 2020

Sewer Rate History $356/year $160/year $18/year

Storm Water Management Project Alternatives

The four projects under consideration by the Village include:

• 1. Relief Sewer Improvements ($80M - $95M)

– Construction of 8 miles of new relief storm sewer

• 2. Reduced Relief Sewer Imp. + Neighborhood Storage ($70M - $80M)

– Reduced conveyance plus neighborhood storage in Kenilworth Gardens

• 3. Reduced Relief Sewer Improvements ($55M - $65M)

– Reduced conveyance

• 4. Neighborhood Storage ($48M - $55M)

– Neighborhood storage at Thornwood Park, Centennial Park, and the Community Rec Center

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Project Alternatives Average Annual Debt Service

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$80 $70 $55 $48 $95 $80 $65 $55

$- $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Relief Sewer Reduced Relief Sewer + Storage Reduced Relief Sewer Neighborhood Storage

Millions

Project Cost (High and Low Estimates)

Low High

$4.9 $4.3 $3.4 $2.9 $5.8 $4.9 $3.9 $3.4

$- $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 Relief Sewer Reduced Relief Sewer + Storage Reduced Relief Sewer Neighborhood Storage

Millions

Average Annual Debt Service (High and Low Estimates)

Low High

Note: The Village’s financial advisor prepared projected annual debt service expenditures for each of the projects under consideration (in 2017 dollars), using a 4.0% interest rate and maintenance of the Village’s Aaa bond rating.

Project Alternatives Construction Inflation

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$91 +$11 $79 +$9 $62 +$7 $53 +$5 $108 +$13 $91 +$11 $73 +$8 $60 +$5

$- $20 $40 $60 $80 $100 $120 Relief Sewer Reduced Relief Sewer + Storage Reduced Relief Sewer Neighborhood Storage

Millions

Project Cost w/ Inflation (High and Low Estimates)

Low High

$6.6 $3.4

$- $1 $2 $3 $4 $5 $6 $7 Relief Sewer Neighborhood Storage

Millions

Annual Debt Service w/ Inflation $4.24 $7.19 $10.04

$- $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 Current Rate Neighborhood Storage Low Est Relief Sewer High Est

Sewer Rates & Impact to Median Bill

$356/yr +$248/yr +$487/yr

Assumes 3% inflation and construction beginning in 2020

Financing Options

• Given the cost of the projects under consideration, the Village would need to issue

30-year debt to fund the storm water improvements

• The Village would issue General Obligation (GO) Debt, meaning that it would be

backed by the full faith and credit of the Village

– Issuing GO debt reduces the overall financing costs as compared to issuing other types of debt such as revenue debt

• Moody’s has indicated that a large GO issuance for the storm water project would

most likely not adversely impact the Village’s Aaa credit rating provided the Village has identified a repayment source other than the property tax

– If the State imposes a property tax freeze, the Village may not be able to issue GO Debt and may see a downgrade in its bond rating, possibly requiring issuance of revenue debt and increasing borrowing costs

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Repayment Options

• The

following repayment methods are presented for the Village Board’s consideration: – Sewer User Fee

• Historically utilized to fund sewer system improvements

– Storm Water Utility Fee

• This would be a new fee based on impervious surface coverage of each parcel
• To maintain a Aaa bond rating, the Village will need to demonstrate that this is a stable,

reliable funding source prior to issuing debt

– Property Taxes

• Moody’s has indicated that relying on the property tax would likely lead to a bond rating

downgrade

• The Sewer Fund is a utility/enterprise fund, like the Water Fund; property taxes are

historically not used to subsidize or operate utility funds

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Repayment Option- Sewer User Fee Median Household Cost Increase (High and Low Estimate)

$356 $356 $356 $356 $356 $356 $356 $356 +$210 +$252 +$189 +$210 +$126 +$168 +$84 +$126 +$101 +$126 +$97 +$101 +$84 +$88 +$101 +$84 +$55 +$50 +$34 +$55 +$38 +$38 +$34 +$38

$- $100 $200 $300 $400 $500 $600 $700 $800 $900 2018 2019 2030 2040

Relief Sewer +$366 +$428 $320 $366 $248 +$294 +$219 +248 Reduced Relief Sewer + Storage Reduced Relief Sewer Neighborhood Storage

Repayment Option- Storm Water Utility

• A storm water utility fee is based on each property’s

impervious surface area and its impact on the storm water system

• In Winnetka, impervious surface area is calculated as an

Equivalent Runoff Unit (ERU)

– One ERU equals 3,400 square feet of impervious surface area

• This is the amount of the normalized average impervious area in Winnetka
• The fee is assessed in fractions of ERUs

– The fee is $21.83 per ERU per month in Winnetka

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Repayment Option- Storm Water Utility

• The Village of Winnetka hired a consulting engineer to conduct

a storm water utility feasibility study and to subsequently implement the fee (total cost of $162,000)

• The consultants made a series of recommendations and

comments, including the following:

– Assume 12 - 18 months to design and implement the fee – Consider a credit program for non-residential properties to provide for a reduction in the fee for properties that provide on-site storm water management which exceeds village requirements – Consider implementing a financial incentive (reimbursement program, not a credit) for residential properties to implement best practices (funded by the village) – No exemptions for other units of government or tax exempt properties – Create an appeals process to handle property owner appeals

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Repayment Option- Property Taxes

• The Village’s portion of a resident’s total property tax bill is approximately 12% and the

average total residential property tax bill is $14,700 (Village portion is $1,720)

• Moody’s has indicated that use of the property tax to repay debt associated with a

storm water project would likely lead to a downgrade of the Village’s Aaa rating

• Historically, the property tax has been utilized to pay debt service for projects relating

to general government and infrastructure, such as: – Facility improvements (other than the water plant) – Road and alley reconstruction and resurfacing – Large fire apparatus

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Repayment Option Impact on Property Tax Bill (Low & High Estimates)

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$2,180 27% $2,125 24% $2,045 19% $2,020 16% $2,265 32% $2,180 27% $2,090 22% $2,045 19%

$- $500 $1,000 $1,500 $2,000 $2,500

Relief Sewer Reduced Relief Sewer + Storage Reduced Relief Sewer Neighborhood Storage

Existing average Village share of the property tax: $1,720

Projected Future Expenses- All Funds

• There are a number of known, significant projects and
• bligations that will require financial investment over the next

30 years, including:

– Sewer Lining & Storm Water Pumping Station Electrical Improvements – Water Plant & Distribution System Improvements – Property Taxes- Operations & Public Safety Pension Contributions – Maturing General Fund Debt (Police Station & Road Program)

• The following slides will discuss these investments in more

detail and identify projected future costs to taxpayers

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Projected Future Expenses Sewer System

Sewer Lining

• The Village intends to continue lining the sewer systems at an annual cost of

$820,000 to be funded through IEPA Low Interest Loans Electrical Improvements

• The Storm Water Pumping Station (SWPS) will require $1.2 million in electrical

improvements in 2020 Sewer User Fee Impact

• A $1.00 Sewer User Fee increase ($84 median increase annually) will be required in

2033

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Projected Future Expenses Water System Improvements

• Annual 3% water rate increases are anticipated for the forseeable future

(median increase of $6.75 each year)

• The increases will maintain existing service levels, fund previously

incurred debt service and finance the following essential projects:

20

Projected Future Expenses Property Tax Levy

Public Safety Pensions

• Due to State mandated pension benefits, an additional $4.4M in public safety

contributions (91% increase) is anticipated over the course of the next 22 years

– Public safety pension contributions are projected to increase from $4.9M in 2018 to $9.3M in 2040

General Operating Expenses

• Assumptions assume low, but consistent growth in operating expenses moving forward

in order to maintain existing police/fire/public works service levels Tax Levy Impact

• The annual tax levy increase, excluding debt service, is projected to be 3 - 4% which is

consistent with the Village’s tax levy increases since 2009

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Projected Future Expenses Maturing General Fund Debt

• The Village has designated a use for approximately $3.3M of tax levy

capacity created by declining debt service requirements beginning in 2026

• Under a plan considered by the Village Board in 2016, the Village will be

able to address the following critical funding matters without increases or decreases in the property tax levy:

– The Police Station is scheduled for reconstruction in 2026 at an estimated cost of $20-25 million ($1.3M - $1.8M in projected annual debt service) – The annual road program will realize enhanced funding, for a total program of $3.5M - $4M per year, to significantly reduce the percentage of streets in fair and poor condition

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Projected Future Cost of Village Services

• The following table projects the cost of Village services over time, taking into account the known
• bligations on the previous slides

– Note that unanticipated expenses, state and federal mandates, weather, and performance of the economy will change these figures over time

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$1,720 $220 $278 $355 $355 $4,175 $535 $585 $659 $869

$- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500

Property Tax Bill (3% annual inc.) Water Bill (3% annual inc.) Refuse Fee (2.5% annual inc.) Sewer Bill w/ Neighborhood Storage ($48M) Sewer Bill w/ Relief Sewer ($95M) 2017 2047

+$2,455 +143% Existing Cost of Village Services: $2,574 Cost of Services in 30 Years: $5,734 Cost of Services in 30 Years + Storm Water Improvements: $5,954 - $6,164 + $315 + 143% + $307 + 110% + $304 + 86% + $514 + 145%