Budget Message / Highlights - Metropolitan Water Reclamation ...

METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO
2009 BUDGET
CAPITAL FUNDS
The Capital Funds of the District are the Capital Improvements Bond Fund and the Construction Fund. These funds are used to
account for the acquisition of capital facilities. The District's major functions of sewage collection and treatment, solids
processing, solids utilization, and flood control are capital intensive, requiring significant investments in infrastructure. The
national priority of environmental protection, coupled with the District's prime mission of protecting the Lake Michigan
drinking water supply from pollution, drives the capital program for the District. National, state, and local priorities drive joint
efforts by making grants and other funding assistance available to the District to financially support our program.
The Capital Improvements Bond Fund is used to provide resources from grants, bonds, and other sources to design and
construct major capital facilities that are structures of permanent duration. The 2009 appropriations request is $932.9 million
compared to $743.4 million in 2008. The appropriation varies by the scheduled awards of major projects.
The Capital Improvements Bond Fund balance sheet (page 98) estimates the net assets appropriable for 2009 at ($410.8) million
and $32.5 million for 2008. The sale of bonds in 2009 is subject to the financing requirements of current projects and the new
projects appropriated. The amount of authorized but unissued bonds is currently $600 million and this level of authority allows
the District to proceed with the award of multi-year contracts, then sell bonds as cash flow requirements demand during the
course of the project. The Capital Improvements Bond Fund balance sheet shows an estimated negative net assets appropriable
for 2009. This is a result of accounting for the full value of the contract award as a liability, without recognizing the bonds to be
sold during the course of the projects to meet financial needs. An obligation basis of budgetary accounting is used for this fund.
Liabilities are recognized as the total value of all project awards at the time of award, even though cash disbursements are made
over several future years.
Since 1969, the District has sold approximately $4.7 billion in bonds in order to support its capital program. The District is
authorized to issue $150 million in nonreferendum Capital Improvements Bonds in any one year, plus amounts unissued from
the prior three years. Bonds for State Revolving Fund loans are excluded. At December 31, 2008, the amount of authorized but
unissued bonds will be $600 million. The District’s non-referendum bond sale authority was extended to 2016 by State Statute
in 2002 and the annual debt issuance authorization was increased from $100 million to $150 million in 2003. The Five-Year
Forecast on pages 64 - 76 presents detailed projections of the financial aspects of the capital program into the future.
Property tax limitation laws enacted in Illinois had significant impacts on the future funding of the District’s capital program
through bond sales. Under Public Act 89-1, the District's nonreferendum bond authority was restricted to finance only projects
initiated prior to October 1, 1991, which generally covers only Tunnel and Reservoir Plan (TARP) projects. However, Public
Acts 89-385 and 90-485 provided additional nonreferendum authority to the District by authorizing the issuance of ‘‘limited tax
bonds.’’ Limited bonds can be issued to the extent that any new debt when combined with existing debt service does not exceed
the debt service extension base established by these Acts, which for the District is $141.5 million. These ‘‘limited tax bonds’’
allow the District to issue nonreferendum debt for projects initiated after October 1, 1991 and exclude debt associated with the
TARP program and other projects initiated prior to that date from the extension base. There will be sufficient authorization to
issue bonds to meet our capital program into the future.
The State of Illinois Revolving Loan Fund (SRF) provides low-interest loans to finance qualifying projects and upon project
completion, District bonds are issued at the same low-interest rate. The current interest rate for new loans to the District is 2.50
percent. The District has authorized the sale of $348.3 million in SRF bonds as of June 2007. Several projects are currently
financed through state revolving fund loans. The District expects to receive an allocation of at least $30 million annually from
state revolving fund loans in the future. For 2009, $33.4 million in State Revolving Fund loans is budgeted to fund plant
projects.
For 2009, no grant revenue is anticipated for the Capital Improvements Bond Fund. In 2002, $4.8 million in grant revenue was
received for the Thornton Transitional Reservoir. The District has been very successful in obtaining grant funding in the past,
and future grants or appropriations are being pursued for the TARP program at the Federal level through the Energy and Water
Development Appropriations, and the Water Resources Development Act.
The Construction Fund is a property-tax-supported fund designed to provide resources for capital projects for which long-term
bond funding is not desirable or is not available. This fund is intended for pay-as-you-go capital projects to perform major
rehabilitation of facilities, extending their useful life. The funding mechanism for this is a working cash fund that provides loans
in anticipation of tax collections. The liabilities for contracts not completed during a fiscal year are reappropriated in the next
year. Net assets appropriable therefore fluctuate based on the value of contract liabilities carried forward to the next year.
The 2009 tax levy planned for the Construction Fund is $11.4 million. There was no tax levy in 2008. Appropriations have
increased by $3.4 million from 2008 to 2009. This increased appropriation level reflects the anticipated expenditures for
existing projects and the appropriations required to fund projects with 2009 award dates.
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