Utility Infrastructure Financing
Bryan A. Mantz, CMC, CGFM
Public Resources Management Group, Inc.
Utility, Rate, Financial and Management Consultants
FGFOA School of Government Finance - November 2015
AGENDA
 Major Issues Affecting Florida Utilities
 Establishing a Solid Business Foundation Based
on Best Management Practices
 Developing a Realistic Financial Plan
 Grant Funding Options
 Debt Financing Options
 Some Final Thoughts
 Questions and Discussion
2
The Utility Is Usually a Local Government’s
Largest “Business”
 Provides Essential Service on a Continual Basis
• Linked to Public Health and Safety
 Major Objective of Utility Business:
Customer Satisfaction
• Consider Long-Term Interests of Customers from
Operational, Service, and Financial Perspective
 Typically Accounted For in Enterprise Fund
• Used for Business-Type Activities Where
Government Sells Goods or Services to General
Public
• Usually Funded Primarily Through User Charges
3
Utilities Are Highly-Regulated By Outside Agencies
Regulatory Agencies for Florida Utilities:





Environmental Protection Agency
Florida Department of Environmental Protection
Water Management Districts
Department of Health
Private Utilities: Florida Public Service Commission
Consent Orders or Fines for Regulatory NonCompliance or Pollution
 Consent Orders Can Negatively Affect Credit Rating
 Florida Statute 401.121: FDEP Can Fine Up to
$10,000 Per Day for Major Violations
4
Major Issues Affecting Many Florida Utilities
 Substantial Renewal / Replacement Needs
• 50+ Year-Old Infrastructure
• Often “Out of Sight, Out of Mind”
• Costs to Replace Are Much Greater Than
Original Cost
 Capital Costs Continue to Increase
• Engineering News-Record (ENR)
Construction Cost Index Increases:
1-Year
= 2.1%
5-Year
= 2.5% Per Year
10-Year
= 3.1% Per Year
5
The Water and Wastewater Utility Industry Is
One of the Most Capital-Intensive Industries!
Substantial Capital Investment Required Per Dollar of
Revenue
Historically Under-Funded
American Society of Civil Engineers 2013 Report Card on
America’s Infrastructure: Grade of D (Poor) for Both Drinking
Water and Wastewater Systems
 Drinking Water Systems in Florida: Grade of C (Mediocre)
• Projected $16.4 Billion Needed to Maintain and Upgrade Systems
Over Next 20 Years
 Both Wastewater Systems and Stormwater Systems in Florida:
Grade of C (Mediocre)
• Projected $19.6 Billion Needed to Maintain and Upgrade Wastewater
Systems Over Next 20 Years
“If the nation fails to meet the investment needs of the next 20 years, it
risks reversing public health, environmental, and economic gains of the
6
past three decades.” – ASCE
Major Issues Affecting Many Florida Utilities (cont.)
 Alternative Water Supply
• Limits on Withdrawals from Current Freshwater Source
of Water Supply
– Existing Capacity May Need to Be Replaced
• Need to Invest in Additional (More Expensive)
Treatment Facilities
– Treatment Plants Withdrawing from Floridan Aquifer
(Brackish Water)
– Expansion of Reclaimed Water Facilities
• Portion of Potable Water Irrigation Required to Be
Replaced with Reclaimed Water
 Elimination of Ocean Outfalls
• May Require:
─ Reclaimed Water System Expansion
─ Deep Injection Well Construction
7
To Help Keep User Rates Reasonable and
Affordable , and to Enable Utility to Look Its Best
When Debt Financing, We Should Ensure That
We Have…
 Solid Utility Business Foundation Based on Best
Management Practices
 Realistic Financial Plan
8
Establishing a Solid Utility
Business Foundation Based on
Best Management Practices
9
Utility Best Management and Financial Practices
Discussed in Publications from Rating Agencies
 Moody’s
• “Rating Methodology for U.S. Municipal Utility Revenue
Debt”
• “Moody’s on Revenue Bonds: The Fundamentals of
Revenue Bond Credit Analysis”
 Standard and Poor’s
• “Public Finance Criteria Book”
• “U.S. Public Finance: Key Water and Sewer Utility Credit
Ratio Ranges”
 Fitch Ratings
• “Water and Sewer Revenue Bond Rating Guidelines”
• “Rating Criteria for Infrastructure and Project Finance”
Conforming With Utility Best Management Practices
Can Lead to Lower Rates Over the Long-Term
 Higher Credit Ratings and Lower Interest Rates When
Debt Financing
10
How Do Rating Agencies Evaluate Your Utility Business?
Water and Wastewater Revenue Bond Rating Considerations
Utility
Managers
Can
Control or
Influence
Many of
These
Factors
FITCH
10 C’s of Water / Sewer Revenue
Bond Analysis [*]
MOODY'S
Key Rating Factors
STANDARD & POOR'S
Key Rating Factors
Crew (Management)
Governance and Management
Quality
Management
Community Characteristics
Regulatory Risk
Economic Considerations
Customer Growth and
Concentration
Construction Risk
Financial Data/Capital Improvement
Plan
Capacity
System Size and Assessment Base
Rate Criteria
Compliance with Environmental
Laws and Regulations
Local Economy and Customer Base
Operational Characteristics
Capital Demands and Debt Policies
Strategic Focus
Legal Provisions
Covenants
System Demand and Capacity
Charges and Rate Affordability
Maintenance of Assets
Coverage and Financial
Regulatory Compliance
Cash and Balance Sheet
Considerations
Rates, Rate Structures and
Ratemaking Flexibility
Liquidity
[*] Subset of 4 general areas of revenue-supported rating criteria: governance and management, financial
11
profile and operating profile.
A Utility’s Credit Rating Is a Reflection of
Utility Management (*)
 Assessment of Financial Risk
 Utility Best Management Practices Help to Reduce
Implied Financial Risk
What Are the Management Practices of
Highly-Rated Utilities?
(*) Utility Management Includes Governing Body
12
Highly-Rated Utilities…
 Exhibit Practices That Maximize
Stability By Planning
─ The More Written and Adopted Policies,
Procedures and Plans, the Better!
(Rating Agencies Will Request Copies)
 Anticipate Future Regulatory and
Growth Demands
 Reliably Implement Steady Rate
Increases Over Time
 Have Liquidity to Meet Unexpected
Sales Shortfalls / Emergencies
It’s Never Too Late to Improve the
Utility Business Foundation!
13
Establishing the Utility Business Foundation
 Establish Business Principles
• Serve as Basis for Long-Term Decision Making
• Examples:
- Maintain Financial Creditworthiness
- Rates Affordable and Recover Full Cost of Service
- Comply With Regulations
- Uninterrupted Service
- Customer Satisfaction
 Adopt Long-Term Business Plan
• Expansion Plans
• Sustainability Plans
• Updated Every Few Years
 Adopt Formal Debt Management Policy
14
Establishing the Utility Business Foundation (cont.)
 Adopt Financial Policies and
Performance Measures
• Debt Service Coverage
- Should Exceed Minimum Required
(e.g., 150% “All-In” Coverage)
• Cash Reserve Policy
- Working Capital
(e.g., 120 Days of Operating Revenue)
- Capital Replacement Deposits Based on
Asset Management Plan or % of
Revenues
- Rating Agencies: Utility With Stronger
Financial Profile Might Have Days Cash
on Hand Equal to One Year or More
Days Cash on Hand = Unrestricted cash and
investments divided by operating expenditures
minus depreciation, divided by 365
15
Establishing the Utility Business Foundation (cont.)
 Adopt Financial Policies and
Performance Measures (cont.)
• Cash Reserve Policy (cont.)
- Could Establish Reserves for:
Rate Stabilization
Anticipated Changes in Regulations
Alternative Water Resource Funding
Emergencies / Catastrophic Events
• Benchmarking
- Medians By Rating, Location, Etc.
Published By Rating Agencies
16
Some Key Financial Ratios Used By Credit Rating
Agencies When Evaluating Utilities
 All-In Debt Service Coverage
• Definition: Revenues Available for Debt Service Divided
By Total Debt Service (Senior Plus Subordinate Lien)
• Measures Financial Margin to Meet Debt Obligations
• Fitch 2015 Water and Sewer Medians
All-In Debt Service Coverage:
Without Impact Fees
With Impact Fees
Net of Transfers Out
Minimum Projected
3-Year Historical Average
AAA-Rated
AA-Rated
A-Rated
All Credits
2.6
2.8
2.5
2.3
2.8
1.8
2.0
1.8
1.6
2.0
1.9
2.0
2.0
1.3
1.5
1.9
2.1
2.0
1.6
2.1
17
Some Key Financial Ratios Used By Credit Rating
Agencies When Evaluating Utilities (cont.)
 Senior Lien Debt Service Coverage
• Definition: Revenues Available for Debt Service Divided
By Senior Lien Debt Service
• Measures Financial Margin to Meet Senior Lien Debt
Obligations
• Fitch 2015 Water and Sewer Medians
Senior Lien Debt Service Coverage:
Without Impact Fees
With Impact Fees
Net of Transfers Out
Minimum Projected
3-Year Historical Average
AAA-Rated
AA-Rated
A-Rated
All Credits
4.0
4.4
3.7
3.6
4.3
2.3
2.5
2.2
1.9
2.5
2.1
2.4
2.3
1.5
2.0
2.4
2.4
2.4
2.0
2.6
18
Some Key Financial Ratios Used By Credit Rating
Agencies When Evaluating Utilities (cont.)
 Days Cash on Hand
• Definition: Unrestricted Cash and Investments Divided
By Operating Expenditures Minus Depreciation, Divided
By 365
• Measures Financial Flexibility to Pay Near-Term Financial
Obligations
- Utilities With Stronger Financial Profiles:
Days Cash on Hand Equal to One Year or More
• Fitch 2015 Water and Sewer Medians
Days Cash on Hand
AAA-Rated
481
AA-Rated
442
A-Rated
366
All Credits
432
19
Some Key Financial Ratios Used By Credit Rating
Agencies When Evaluating Utilities (cont.)
 Outstanding Long-Term Debt Per Customer
Outstanding Long-Term Debt Per Capita
• Definition: Principal Amount of Debt Outstanding Divided
By Number of Customers; Principal Amount of Debt
Outstanding Divided By Number of Persons in Service
Area
• Measures Debt Burden for Ratepayers
• Fitch 2015 Water and Sewer Medians
Long-Term Debt Per Customer:
Current
Projected Year 5
Long-Term Debt Per Capita:
Current
Projected Year 5
AAA-Rated
AA-Rated
A-Rated
All Credits
$1,259
1,341
$1,934
2,049
$2,218
2,423
$1,836
1,997
$349
323
$521
520
$473
741
$491
522
20
Some Key Financial Ratios Used By Credit Rating
Agencies When Evaluating Utilities (cont.)
 Free Cash as Percent of Depreciation
• Definition: Current Surplus Revenues After Payment of
Operating Expenses, Debt Service, and Operating
Transfers Out Divided By Current Year Depreciation
• Measures Annual Financial Capacity to Maintain Existing
Infrastructure at Current Level of Service from Existing
Cash Flows
- Utilities With Stronger Financial Profiles:
Free Cash as Percent of Depreciation ≥ 100%
• Fitch 2015 Water and Sewer Medians
Free Cash as Percent of Depreciation
AAA-Rated
117%
AA-Rated
94%
A-Rated
126%
All Credits
102%
21
Establishing the Utility Business Foundation (cont.)
Utility Rates
 Consider Revenue Stability
• Most Utility Costs Are Fixed
• Rating Agencies Prefer Greater Than 30% Cost Recovery
Through Base Charges
• HOWEVER, Raising Base Charges Does Not Encourage
Water Conservation
─ Supported By Studies Sponsored By Water Management
Districts
─ Florida Public Service Commission (FPSC), When Evaluating
Rate Applications From Private Utilities, Does Not Usually
Approve User Rates Under Which the Base Charges Recover
More Than 40% of System Costs
• In Florida, Water Management Districts Typically Require
Conservation Rate Structure Before Issuing Consumptive
Use Permits
22
Establishing the Utility Business Foundation (cont.)
Utility Rates (cont.)
 Consider Affordability (Hot Topic in Utility Industry)
• Rating Agencies: Affordable = Monthly Utility Bill for
Combined Water and Wastewater Service Not Higher Than
2% of Median Household Income of Service Area
─ 1% If Only One Service (Water or Wastewater)
• Median Household Income Metric Has Been Challenged as
Underestimating Effects of Rising Utility Bills on LowIncome, Fixed-Income and Renter-Occupied Households
23
Establishing the Utility Business Foundation (cont.)
Other Financial Considerations
 Best Management Practice Per Rating Agencies:
Limit Nonutility-Related Transfers to General Fund
• Utility Industry Is One of Most Capital-Intensive Industries
─ Substantial Amount of Capital (Often Secured Through Debt
Financing) Is Required to Provide Service
─ Should Reinvest in System
 Minimize Dependence on Fees Charged to New Growth
to Pay Debt
 Address Liabilities Associated With
Other Post-Employment Benefits
(OPEB)
24
Developing a
Realistic Financial Plan
25
Developing a Realistic Plan
 Establish Criteria to Prioritize Capital Program
Sample Criteria in Order of Priority:
• Public Health and Safety
─ Project Addresses Working and Public Health / Safety
Issues
• Regulatory Compliance
─ Project Promotes Regulatory and Contractual Compliance
• System Reliability
─ Project Reduces Risk and Consequences of Asset Failure
and Addresses Other Attributes of Asset Management
(Redundancy)
• Community / Customer Benefit
─ Project Addresses Service Issues Such as Pressure, Taste
/ Odor and Customer Satisfaction
• Sustainability
─ Project Will Result in Long-Term Cost Efficiencies and Has
Environmental “Green” Benefits
26
Developing a Realistic Plan (cont.)
 Is the Utility’s Capital Program:
• Necessary?
• Reasonable?
- Consider Capacity Utilization;
Unused Capacity Is Most Expensive
Capacity
• Attainable?
- IRS Arbitrage Rules:
All Bond Proceeds Must Be Spent Within 3 Years
- Historical Capital Spending Levels (Especially
for R&R Projects) Often a Good Indicator of
How Much Capital Program Can Actually Be
Executed
• Fundable?
27
Developing a Realistic Plan (cont.)
 Typical Capital Program Funding Sources:
• Issuance of Debt
• Revenues
-Charges for Service / Rates
-Reserves
• Capacity / Impact Fees, Assessments, and Other
Charges Collected from Growth
• Contributed Capital (e.g., Grants, Legislative
Budget Appropriation), Facilities, and Property
28
Grant Funding Options
for Utility
29
Grant Opportunities in Florida –
Small or Economically-Disadvantaged Communities
Florida Department of Environmental Protection (FDEP)
 Small Community Wastewater Facilities Grant
PURPOSE:
Planning, Designing, and Constructing Wastewater Collection,
Transmission, Treatment, or Disposal Facilities
WHO CAN APPLY:
Incorporated Municipality, Total Population ≤ 10,000,
Per Capita Income < State Average
CONSIDERATIONS:
Highest Priority to Projects Addressing Most Serious Risks to
Public Health, Are Necessary to Achieve Compliance, or Assist
Systems Most in Need Based on Affordability Index
30
Grant Opportunities in Florida –
Small or Economically-Disadvantaged Communities (cont.)
United States Department of Agriculture (USDA)
Rural Development
 Water and Waste Disposal Grants
PURPOSE:
Water and Wastewater Infrastructure
WHO CAN APPLY:
Rural Areas and Municipalities With Total Population ≤ 10,000
31
Grant Opportunities in Florida –
Small or Economically-Disadvantaged Communities (cont.)
Florida Department of Economic Opportunity
 Florida Small Cities Community Development Block Grant
(CDBG) Program
PURPOSE:
Housing and Community Development Activities, Including
Water and Wastewater Improvements, That:
– Provide Benefit to Low- and Moderate-Income Persons
– Eliminate Slum and Blight; or
– Address an Urgent Need (Serious or Immediate Threat to Local
Population)
WHO CAN APPLY:
Cities That Have Not Accepted Special Entitlement Status or
Have Opted Out of Urban Entitlement Program
Counties With < 200,000 Residents
32
Grant Opportunities in Florida – All Communities
Water Management Districts
 Cooperative Funding Program (Up to 50% of Cost)
PURPOSE:
Projects Related to Water Supply, Alternative Water
Supply (Including Reclaimed Water), Water
Conservation, Water Quality (e.g., Septic Tank
Removal), Stormwater / Flood Protection
WHO CAN APPLY:
Local Governments or Nonprofit Utilities in
Applicable Jurisdiction
33
Grant Opportunities in Florida – All Communities
Environmental Protection Agency
 319(h) Clean Water Act Federally-Funded Grant
 40% Match Requirement
 Can Take Up to 2 Years to Receive Funds
PURPOSE:
Nonpoint Source Pollution Abatement
WHO CAN APPLY:
State Agencies, Local Governments, Colleges /
Universities, Nonprofits, Public Utilities, State Water
Management Districts
Contact FDEP for More Information
34
Grant Opportunities in Florida – All Communities
Environmental Protection Agency
 Total Maximum Daily Load (TMDL) Grant
 Match Amount Must Be > Grant Amount
 25% of Match Must Be from Local Government
PURPOSE:
Reduce Pollutant Loadings from Urban Areas
WHO CAN APPLY:
Local Governments and State Water Management
Districts
Contact FDEP for More Information
35
Developing a Realistic Plan (cont.)
For Remaining Capital Needs, Should Balance Between
Debt Financing and Pay-As-You-Go Capital Funding
 Debt Financing
• Most Appropriate for Assets With Longer Service Lives (e.g.,
15 Years or More)
• As Part of Analysis, Consider Any Refinancing or Retirement
Opportunities for Existing Debt That Could Lead to Cost
Savings
 Pay-As-You-Go Capital Funding
• Appropriate for Assets With Shorter Service Lives (e.g., Less
than 15 Years)
• Routine Capital Expenditures
and Annual Renewals /
Replacements
CASHDEBT
FUND
• Ideally: Accrue Funds Based
on Asset Replacement
Schedule
36
Developing a Realistic Plan (cont.)
Why Debt Finance?
Advantages:
 Annual Cash Flow Reduced to Level of Debt Service Over
Debt Term
• Can Help Prevent “Rate Shock” to Existing Customers
 Funding Available Immediately
 Recovery of Capital Project Costs Spread Over Life of
Debt Instrument to Match Asset Utilization
(e.g., 30-Year Repayment Schedule, 30-Year Asset
Service Life)
• May Be Greater Fairness to Ratepayers
 If Utility Has Growth-Related Fees Such as Impact Fees,
Can Allow More Time for “Growth to Pay for Growth”37
Debt Financing Options
for Utility
(to be discussed with Utility’s Financial Advisor)
38
Considerations
 How Much Does the Utility Need?
 How Soon Does the Utility Need It?
 Single Project / Program to Be Funded or Multiple
Projects?
 Administrative Costs – Staff Time Required to Address
Reporting Requirements
• Could Also Outsource Reporting
 Availability of Funding and Probability That Financing
Could Be Secured Under the Desired Terms
 Level of Complexity of Debt Instrument
• Ease in Projecting Debt Payments for Financial
Planning Purposes
• Ease in Calculating Historical Coverage
39
Considerations (cont.)
 Borrowing Costs
• Interest Rate
• Issuance Costs
• Life Cycle Costs (Total Amount Paid During Debt
20-Year
30-Year
20-Year
Term)
Amount Borrowed
Clean Water SRF Loan
$10,000,000
Revenue Bonds
$10,000,000
Revenue Bonds
$10,000,000
Issuance Costs (% of Principal)
2.00%
4.00%
4.00%
Interest Rate
0.70%
4.06%
3.67%
Term (Years)
20
30
20
Annual Debt Service
Life Cycle Costs
$537,562
$582,521
$714,477
$10,751,230
$17,475,640
$14,289,547
 Political Climate for Raising Rates to Support Debt
(Could Consider Wrapping Debt Service, Capitalized
Interest, Line of Credit With Future Refinancing, Etc.)
40
Before Issuing / Incurring Debt:
 Adopt All Rate Increases Needed During Forecast Period
• Shows a Commitment By Regulators to Raise Rates When
Needed
• Many Debt Financing Options Require Demonstration That
Utility Can Repay Debt
 Consider Adopting Rate Indexing / Pass-Through
Clause to Annually Adjust Rates Automatically for
Inflation Without Formal Hearing
• Gives Rating Agencies More Assurance That Rates Will
Keep Up With Inflation
 To the Extent Possible, Incorporate Utility Best
Management and Financial Practices Into Any Bond
Resolution / Ordinance
• Binding Agreement Between Regulators and Bondholders
• Can Require Annual Renewal and Replacement Funding
41
• Can Make Utility System Closed-Loop
Conventional Financing: Bank Loans
 Term Loans
• Term Up to 20 Years
• Fixed or Variable Interest Rates
• Various Structuring Options
 Line of Credit
• Common Draw Period of Up to 5 Years
42
Conventional Financing: Revenue Bonds
 Revenue Bonds
• Repayment Pledged from Revenues of System
• Rate Covenant and Other Requirements
• Many Structuring Options
– Wrapped Debt
– Capitalized Interest
– Interest-Only Payments
Index
Rev. Bond
20-Bond
11-Bond
Current
4.06%
3.67%
3.19%
Previous
4.10%
3.71%
3.23%
Source for Bond Rates:
Weekly Indexes, http://www.bondbuyer.com
High
5.40%
5.03%
4.75%
Low
4.06%
3.29%
3.14%
43
Conventional Financing: General Obligation (G.O.) Bonds
AAA-RATED
 G.O. Bonds
• Repayment Pledged from Full Faith
•
•
•
•
and Credit of Local Government
Lower Interest Rates Than
Revenue Bonds
Many Structuring Options
Transfers from Enterprise Funds
Could Be Used to Make Bond
Payments
Typically Requires Referendum
Maturity
ISSUE
Range
National 10 Year
National 20 Year
National 30 Year
Florida
30 Year
Today
2.25%
3.15%
3.50%
3.50%
Last
Week
2.30%
3.20%
3.55%
3.50%
Today
2.75%
3.40%
3.65%
3.65%
Last
Week
2.80%
3.45%
3.70%
3.65%
AA-RATED
Maturity
ISSUE
Range
National 10 Year
National 20 Year
National 30 Year
Florida
30 Year
A-RATED
ISSUE
National
National
National
Florida
Source for Bond Yields:
http://www.fmsbonds.com/Market_Yields/index.asp
Today
2.05%
2.80%
3.00%
3.00%
Last
Week
2.10%
2.85%
3.05%
3.00%
Maturity
Range
10 Year
20 Year
30 Year
30 Year
44
Short- to Intermediate-Term: Florida Local Government
Finance Program
Administered by Florida Association of Counties
 Flexible, Low-Interest Program
•
•
•
•
Minimum $5,000,000; No Maximum
Term Up to 5 Years
No Prepayment Penalty
Current All-In Interest Rate: 1.22%
PURPOSE:
Finance Infrastructure and Capital Needs, Including:
─ Water and Wastewater Facilities
─ Landfills
WHO CAN APPLY:
All Florida Local Governments
45
Small and Economically-Disadvantaged Communities:
Water and Waste Disposal Loan Program
Administered by USDA
 Affordable Funding to Communities Unable to Secure
Commercial Credit on Reasonable Terms
• Term Up to Useful Life of Facility; Maximum 40 Years
• Current Interest Rate: 3.625%
PURPOSE:
Finance Acquisition, Construction, or Improvement of:
─
─
─
─
Drinking Water Sourcing, Treatment, Storage and Distribution
Sewer Collection, Transmission, Treatment, and Disposal
Solid Waste Collection, Disposal, and Closure
Stormwater
WHO CAN APPLY:
The Smaller and or More Financially-Distressed the Community,
the Higher the Prioritization Score
46
State Revolving Fund (SRF) Loan Program
Administered by FDEP
 Very Good “Default” Debt Financing Option
• 20-Year Standard Term
• Up to 30-Year Term If Financially Disadvantaged
Community
 Drinking Water Program
• Eligible Projects:
─ New Water Treatment / Supply Facilities
─ New Transmission and Distribution Facilities
─ Rehabilitation or Upgrade of Existing Facilities
 Clean Water (Wastewater and Stormwater) Program
• Eligible Projects:
─ New Wastewater Treatment / Disposal Facilities
─ New Collection and Transmission Facilities
─ Rehabilitation or Upgrade of Existing Facilities
─ Reclaimed / Reuse Water Facilities
─ Stormwater Projects Resulting in Water Quality Improvements
47
State Revolving Fund (SRF) Loan Program (cont.)
Advantages:
 Very Low, Below-Market Interest Rates
• Drinking Water: 60% of 20-Year G.O. Bond Index
• Clean Water: Affordability Factor Applied to 20-Year G.O. Bond
Index
 Disbursements as Needed During Period of Construction
 Payments Begin 6 Months After Project Is Online
• Capitalized Interest Through Period of Construction
• Allows More Time to Phase-In Rates to Level Needed to Support
Debt
 Subordinate Lien (Typically 115% Net Revenues Coverage
Requirement)
48
State Revolving Fund (SRF) Loan Program (cont.)
Disadvantages:
 Administrative / Reporting Requirements
• Can Outsource If In-House Resources Are Limited
 Available Funding May Be Limited (Fluctuates)
 Limited Debt Structuring Options
 Segment Caps May Not Be High Enough to
Accommodate Cash Flow Needs
• HOWEVER, Interim Financing Options Are Typically
Available (e.g., Florida Rural Water Association Financing
Program)
49
State Revolving Fund (SRF) Loan Program (cont.)
The Process:
 File Request for Inclusion Form
• Can Include Multiple Projects (Multiple SRF Loans Upon
Approval)
 File Facilities Plan / Business Plan / Planning Document
/ Capital Financing Plan With Supporting
Documentation
• Financial Information to Determine Ability to Repay Loan
and Meet Coverage Requirements
 After Being Placed on “Fundable” List, Submit Complete
Loan Application
50
Florida Municipal Loan Program (Bond Pool)
Administered by Florida League of Cities
 Minimum Loan Size: $3 Million
• Fixed Rate With Term Up to 30 Years
• Economies of Scale Can Result in Lower Interest Rates and
Lower Issuance Costs
 Eligible Projects:
•
•
•
•
Capital Projects
Renovations
Fixed Asset Additions
Refinancing of Existing Debt
 All Local Governments Can Apply
51
State Bond Loan Program (Pollution Control Bonds)
Administered by FDEP and State Board of Administration
 Most Practical Loan Size: ≥ $10 Million
• Projects Must Be Ready for Bidding When Loan Requested
• Proceeds Available on Cost-Incurred Basis
 Eligible Projects:
•
•
•
•
Water Supply and Distribution Facilities
Stormwater Control and Treatment Projects
Air and Water Pollution Control
Solid Waste Disposal Facilities
 Repayment of Bonds Pledged from Full Faith and Credit
of State
 Repayment Term Generally Representative of Project
Useful Life
52
State Bond Loan Program (Pollution Control Bonds)
(cont.)
Advantages:
 Possibly Lower Interest Rate Than What Local
Government Could Secure
 Low Issuance Costs
 Sizeable Loans Available
Disadvantages:
 Coverage Requirement of 1.33
 Time to Arrange for Loan: Financial Analysis, Bond
Validation, and Bond Marketing Activities Require
More Than Six Months to Complete
53
SOME FINAL THOUGHTS:
 Developing Financial Plan: Many Possibilities
(No Single “Right Answer”)
 Should Make Sure Any Financial Advice Is Objective
 Debt Financing Programs and Opportunities Continue to
Evolve
 May Not Be Able to Solve All Financial Issues at Once,
Especially If Utility Is “Playing Catch Up”
• May Need to Take Small Steps Over Time to Gradually
Build the Financial Position to an Optimal Level
 Financial Plan Should:
•
•
•
•
Be Reasonable and Affordable
Allow Utility to Accomplish Objectives
Promote Sustainability
Enable Utility to Meet Financial Targets (Without
Significantly Exceeding Them)
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SOME FINAL THOUGHTS (cont.):
 Should Ideally Build / Establish Long-Term History of
Following Plan and Meeting Targets
 For the Long-Term Interests of Customers, Operational
and Financial Planning – Including Ratemaking – Should
Be Proactive, Not Reactive
• Lower User Rates Over the Long-Term
• Balanced Debt Risk
• Higher Credit Rating When Debt Financing
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QUESTIONS AND DISCUSSION
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Thank You! If You Have Questions Regarding This
Presentation or Would Like Additional Information,
Please Contact:
Bryan A. Mantz, CMC, CGFM
Public Resources Management Group, Inc.
341 North Maitland Avenue, Suite 300
Maitland, Florida 32751
Phone:
407-628-2600
Email:
bmantz@prmginc.com
Website: www.prmginc.com
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