Budget Message / Highlights - Metropolitan Water Reclamation ...

METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO
2009 BUDGET
Budget Message / Highlights
cyclical increases and decreases in fund balances. The current level of short-term interest rates is anticipated to continue
through 2009. Interest income earned in any fund except the Reserve Claim Fund can be transferred to other funds.
Personal Property Replacement Tax (PPRT) revenue is estimated to decrease in 2009 to $42.7 million. As the PPRT is primarily a
tax on corporate income, it is expected to be similar to the 2008 level in parallel with the plateau in the state and national
economy. PPRT revenue is distributed first to fully fund the Retirement Fund, and subsequent receipts are distributed to other nondebt
funds. The calculation of PPRT allocation to the Retirement Fund was reviewed in 2006, and revised to eliminate a loss in
collections factor that is no longer applicable.
User Charge revenues have fluctuated in the $45 to $57 million dollar range over the last 10 years. Food Processing, Chemical
and Government segments of the local economy comprise the majority of large payers. Several large payers have closed over
the past several years; increased production and payments at many of the remaining industries have more than made up for the
closures. The 2008 revenues are estimated to be $57.0 million and are conservatively projected to decrease to $49.3 million in
2009.
Non-Referendum Bonding Authority
The District has authority to issue bonds without seeking voter approval via referendum through the year 2016. The initial Tax
Cap legislation (PA89-1) limited this non-referendum authority to only projects that were initiated prior to October 1, 1991.
Public Act 89-385 provided the District with the authority to issue non-referendum “limited bonds” for capital projects initiated
after October 1, 1991. However, it was limited to the District's 1994 debt service level of $141,463,920. Public Act 90-485 has
provided a further modification by authorizing the exclusion of debt for TARP projects from this debt service limit. With
inclusion of the levies for the 2004 State Revolving Fund series of bonds for non-TARP projects; Capital Improvement Bonds
Series D of December 2002 and the Series of July 2006; Refunding Bonds Series of May 2006 and Series of March 2007, there
is approximately $105.7 million annual debt service available under the 1994 debt service limit related to the tax levy year
2008.
Additional bond issues through 2016 will be used to finance capital projects identified through the “Master Plans” for
replacement, expansion and modernization of process facilities. Initial estimates and schedules for the projects were analyzed and
compared to bond issuance authority and funding availability. The bond issuance authority will generally accommodate the
proposed projects through 2016. Extension or increase in the authority will be necessary for additional projects that may be
required to meet more stringent NPDES permit discharge limits, including effluent disinfection, nutrient removal and
supplemental aeration.
Other Post Employment Benefits
The District provides and subsidizes health care benefits for its retirees. The Government Accounting Standards Board (GASB)
pronouncement 45 requires reporting of the future liability for maintaining these benefits. Following Board policy, the District
established an irrevocable trust late in 2007 for funding the future liability with the following operating parameters: a 50
percent funded level target, 50 years to reach funding level, $10 million funding in each of the first 5 years beginning in 2007
from the Corporate Fund, and an initial investment mixture of 50 percent equities and 50 percent bonds with a maximum limit
of 65 percent equities that allows for investment growth.
These assumptions set the accumulated unfunded OPEB obligation at approximately $443 million as of January 1, 2007. The
policies adopted by the District are cautious by design, and will provide ample opportunity for adjustment as experience is
gained through other public agencies. Future direction may also be changed significantly by national health care policies. The
passage of legislation in 2008 allows the Board of Commissioners to transfer interest earned on any moneys to the MWRD
Retirement Fund.
An initial contribution of $15 million was budgeted in 2007. Following establishment of the trust, additional funding of $10
million was placed in the OPEB trust for a total of $25 million. This additional funding was due to surpluses in the Human
Resources Department health insurance account and the deferral of projects and purchases in other departments. In 2008, $22
million was placed in the OPEB trust, $7 million funded by a transfer of earned investment interest from the Capital
Improvements Bond Fund. A contribution of $10 million is budgeted for 2009.
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