2005 MWMC Financial Plan - Laserfiche WebLink

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Moody's has historically tracked national medians for several of these key ratios within the wastewater industry. In 1998-99, Moody's compiled U.S. wastewater industry fmancial ratio medians for five key ratios, but they have not, according to their staff, had the capacity to maintain that practice since that time. Nonetheless, the 1998-99 national medians still provide a good measure with which to compare those of MWMC. The five ratios for which Moody's compiled national medians are: • Operating Ratio (operating and maintenance expenses divided by total operating revenues) • Net Take Down (net revenues divided by gross revenue and income) • Debt Service Safety Margin (net revenues, less principal and interest requirements for year, divided by gross revenue and income) • Debt Service Coverage (net revenue divided by principal and interest requirements for Yew') . • Debt Ratio (net funded debt, divided by the sum of net fixed assets, plus net working capital) It is important to note that three of these ratios specifically take into account a utility's debt level, and all of the ratios can be significantly affected by the presence or lack of debt, the investment (or lack thereof) of the debt proceeds in the infrastructure plant, and the collection (or lack thereof) of revenues required to service the debt. Since MWMC currently carries no long-term debt, it would be misleading to compare MWMC's current ratios with the national medians. To create a meaningful comparison, staff developed a 10-year scenario in early 2003, and assumed a level of bonded debt in order to calculate these five important ratios. The existing 10- year Capital Improvement Plan was used to estimate level of expected investment and the 10- year Financial Forecast was modified to incorporate debt service. The scenario makes the following assumptions: • Beginning in FY 03/04, MWMC will obtain $22 million in bonded debt spread over 10 years. This, in combination with current revenues, would be sufficient to fund the projected capital improvement program over the 10-year horizon. • Repayment of the debt.would commence in FY 04/05. • $2.2 million of debt would be obtained annually each year for ten years, at five percent interest fora 20-year term. • Each year, $2 million of the debt proceeds would go directly to capital investment, $0.2 million would go to the Capital Reserve. • The approximately $7 million in the Capital Reserve would be spent by FY 07/08, supplementing debt proceeds and current revenues. However, as noted above, the Capital Reserve would continue to be replenished. • Over the 10-year horizon, approximately $55 million of MWMC's current revenues would be invested in capital improvements, while incurring the additional $22 million in debt (of which $2 million would accrue to the capital reserve over the 10-year time span). • The ratio of actual expenditures to budgeted expenditures is projected at 95 percent (historically they have run at greater than 90 percent). 2005 MWMC Financial Plan - Appendix I Page 26