Budget Message / Highlights - Metropolitan Water Reclamation ...

Five-Year Financial Forecast, 2009-2013 October 21, 2008
portion of the projected net assets will remain unappropriated to protect the down-side of possible economic swings, and provide
for a fiscally responsible fund balance.
With the planned construction of new facilities that will require significant amounts of new energy, aggressive conservation
efforts and alternative energy generation have been pursued at existing facilities to minimize the cost impact. In this forecast,
substantially increased energy costs are evident in 2008 and balanced against reduced consumption as we realize the benefits
of these modernization projects. The unit cost for electricity rose 37 percent on January 2, 2007 when a 1957 agreement with
Com Ed expired. With the deregulation of the electrical supply industry, the District entered into an agreement with Peoples
Energy Corporation for electrical generation, while Com Ed continues local power delivery.
Natural gas costs have been increasingly volatile in the recent past. Attempts to stabilize natural gas cost, such as with spot
market purchases, will be pursued in the future. Natural gas purchases along with captured digester gas have provided for
stable and consistent needs. “Master Plan” projects are expected to increase digester gas production and reduce purchases.
Overall biosolids disposal costs are competitive due to favorable local markets. A contract to handle approximately 30
percent of the solids stream at Stickney, via an alternative biosolids facility, was awarded in 2001 with operations expected to
begin in late 2008. Once this facility is operational, it is anticipated that the District will recognize a net increase of
approximately $11 to $13 million per year in costs to process and utilize biosolids. This increase reflects both operating and
capital costs. Operating costs are indexed to the CPI and natural gas prices, while the capital costs are fixed. The project,
however, is specifically designed to provide the District with alternative markets for biosolids that do not compete with
current utilization outlets, thus avoiding the potential for volatile costs associated with a single outlet.
Capital Improvements Bond and Construction Funds
The Capital Improvements Bond Fund
CAPITAL PROGRAM EXPENDITURES
accounts for all resources, principally
Sewer Plant Tarp CIBF Cash Balance
bond proceeds and construction
grants, used for the construction of
$600,000
capital facilities. Bond sales
$500,000
supporting the Capital Improvements
Bond Fund are projected to be $350
$400,000
million in 2009 and 2011. These bond
$300,000
sales will provide a sufficient level of
$200,000
available funds to continue the
$100,000
District’s capital improvements
program including the construction of
$0
the Tunnel and Reservoir /CUP Plan
(Chicago Underflow Plan). By law the District may separate the funding of its projects into Limited and Unlimited Bonds.
Unlimited Bond sales of $100 million are planned for 2009 and 2011. This funding will be used in conjunction with Federal
appropriations from the Army Corps of Engineers to support a major portion of the McCook and Thornton CUP reservoir
projects.
The District has agreements with the U.S. Department of Agriculture, and the Army Corps of Engineers to share the funding
costs of the CUP reservoirs. In the past year, the District has also had language inserted into the Water Resources
Development Act calling for reimbursement of funds for these projects. Due to the current Federal Fiscal climate,
reimbursements are not expected in the near future and not included in this projection.
$ Thousands
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
The Construction Fund is used to finance modernization and rehabilitation project costs, and is funded primarily through the
annual property tax levies. Appropriations for this fund lapse at year-end and uncompleted projects must be reappropriated.
During the years, 2009 through 2013 appropriations will decline as major rehabilitation and expansion work expands in the
Capital Improvements Bond Fund (CIBF).
The District has initiated a major plan to determine its future needs and establish long-range rehabilitation plans for plant
facilities that will improve the air and water environment. This effort, called the Master Plan, will provide a long-range road
map to improve treatment processes, reduce energy costs, improve the quality of biosolids produced on site, improve pumping
capacities of the plants, and better accommodate future construction projects.
Initial estimates and schedules have been analyzed and compared to bond issuance authority and funding availability. As
illustrated in the graph to the above, the cash balance in the CIBF (solid line) will generally accommodate the proposed
projects (stacked bars) through 2016. This is when the District’s non-referendum bonding authority expires. Extension of the
authority (dashed line) is necessary for additional projects including nutrient removal or effluent disinfection.
67
67