Budget Message / Highlights - Metropolitan Water Reclamation ...

Five-Year Financial Forecast, 2009-2013 October 21, 2008
EXPENDITURES: DEPARTMENTAL GUIDELINES AND METHODOLOGY
The Budget Office asked each department to project its needs for the years 2009 – 2013. These projections were made before
the actual 2009 Departmental Budget requests were finalized and may not precisely match 2009 budget requests. The
projections were made in current dollars, then inflated based on the most recently provided inflation factors from the Illinois
Commission on Government Forecasting and Accountability. These were applied to reflect market forecasts for material and
service expenditures appropriate to our industry. The Human Resources Department directly projected health and life
insurance costs based on current multi-year agreements and industry trends. Electricity was adjusted for rate changes due to
industry deregulation and current multi-year agreements.
REVENUE AND FINANCING ASSUMPTIONS
Key assumptions made in the projections of revenues and tax rates are:
• Short term fluctuations in commodities such as lumber, chemicals, and metals should have little impact over the long
term. Over the long term, these costs will be viewed as normal cost increases in tandem with an economy that will
continue with modest growth trends for the projection period.
• Tax collections will be 96.5 percent of what is levied - allowing for loss in collections, Property Tax Appeals Board
(PTAB) decisions, Circuit Court decisions, and other tax refunds.
• The annual Equalized Assessed Valuation (EAV) projection is based on the actual 2007 amount as provided by the
Cook County Clerk plus a 2.0 percent increase, compounded annually.
• The estimated annual tax levy increase for the aggregate funds controlled by the Tax Cap is based on projections of
available funding, increases in the CPI and allowable adjustments to EAV for new property of 1.2 percent annually.
• The planned sale of capital improvement bonds, assumed to be 20 year level payment, will occur as follows:
Year Limited Bonds Unlimited Bonds
2009 $ 300 million $ -
2010 $ 300 million $ 80 million
2012 $ 300 million $ 20 million
2013 $ 150 million $ -
• Bond and Interest Fund levy estimates are based on a 6 percent interest rate on bond issues.
• The District will receive between $44 and $49 million annually in State Revolving Fund loans.
• Operating Fund Balances will be no less than 12.5 percent of Appropriations.
APPROPRIATION FORECASTS
Total District appropriations are expected to range from $942.0 to $1,712.7 million for the period 2009 – 2013, and are
summarized in the exhibit on page 68, and detailed in Table I on page 69. The year to year variation is largely due to the
schedule for awards on major capital projects. Changes and explanations within the various District funds are as follows:
Corporate Fund
The Corporate Fund, the District's general fund, includes all appropriations for day-to-day operations. Appropriations for the
fund are expected to increase an average of 1.9 percent annually from 2009 – 2013. This relative stability of appropriations is
attributed to the planned growth of operations, offset by changes in the work force. Annual average increases greater than the
general price index are anticipated for health care, contracted solids disposal, and energy.
The increasing cost of providing health care benefits, specifically prescription drugs, HMO premiums and other indemnity
costs for current employees and retirees is being addressed through revisions in health plans requiring greater employee
contributions, and phased in over several years. The District continues to evaluate alternatives to deal with this trend in a
manner that is fair and equitable to all parties. The Board’s policy direction for funding the Other Post Employment Benefits
(OPEB) liability is addressed with an appropriation of $10 million in 2009 and $10 million annually 2010 through 2013.
A fund balance within the $45 to $55 million range is viewed by District management and the financial markets as necessary to
maintain financial stability and sustain us through economic uncertainties. The beginning 2009 fund balance is projected to be
higher, but reflects the planned draw down over a few years. While user charges, investment income, sewer permits, and Personal
Property Replacement Tax income have benefited from the economy the last few years, these revenues are expected to fall in
2009 due to rising energy costs, inflation, contraction in the real estate market, and the general decline in the overall economy. A
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