Capital Sources and Uses
Borrowed Capital
MSD utilizes a variety of financial instruments to pay for the capital program. They are:
- Bond sale proceeds
- Low-interest loan programs
- Grant programs that do not need to be repaid
The figure at right shows the proportion of funds received from each of these three sources. They include:
- $149.8 million in bond sale proceeds.
- $5 million from the American Recovery and Reinvestment Act of 2009 (ARRA). These federal stimulus funds are considered “principal forgiveness loans” (grants) that do not need to be repaid.
- $5.8 million in a low-interest loan from the State of Ohio’s existing Water Pollution Control Loan Fund (WPCLF) for the Little Miami Treatment Plant improvements. MSD has 20 years to repay the loan, at interest rates ranging between 0 and 3.7 percent.
- The figure at right does not include a $78 million low-interest loan from WPCLF (at an interest rate of 3.25 percent), for two large improvement projects at the Mill Creek Wastewater Treatment Plant, which treats the majority of the utility’s wastewater. This loan was issued in 2009, but was not officially awarded until January 2010.
Compared to commercial bank loans, these instruments offer lower interest rates, thereby lowering the “cost of capital”and ultimately reducing costs for MSD’s ratepayers. For example, the WPCLF loans carry interest rates that are lower than current bond market rates.
For 2010 and 2011, MSD is in the process of requesting loans from the State of Ohio and the federal government for planning, design, and construction activities for approximately 22 projects and for overall wet weather program management and support services, for a total of $200 million. MSD will continue to utilize these state and federal programs in the coming years.
Annual Capital Expenditures
Borrowed capital is used to fund MSD’s annual capital expenditures, which include costs associated with the planning, design, and construction of the wet weather projects, the asset management program, and building new sewers where requested by customers (assessment projects). In addition, MSD spends capital on supplemental environmental projects required by the federal Consent Decree. The figure at left shows the breakdown of capital expenditures by category.
Note: Click figures for larger views.