Monday, June 13, 2011

MMSD's fiscal condition: downstream accomplishments, upstream challenges

This morning, the Public Policy Forum released a comprehensive asessment of the Milwaukee Metropolitan Sewerage District (MMSD). This is the fourth in a series of reports analyzing the financial condition of major Milwaukee area local governments. It finds that while MMSD has experienced few of the financial difficulties experienced by others, it faces difficult long-term issues nonetheless.

The report uses the same fiscal monitoring methodology employed previously for reports on Milwaukee County, the City of Milwaukee, and MATC. It examines fiscal trends, compares MMSD with other wastewater treatment agencies nationally, and analyzes emerging fiscal challenges.

The good news is that MMSD’s decision in the late 1990s to outsource most of its operations has greatly reduced operating budget pressures and risk, while its capital program has benefited from careful planning and prudent debt management practices. In fact, as measured by commonly used fiscal indicators, MMSD enjoys sound fiscal health and appears well-positioned for the future.

A closer look, however, also reveals that the cost to maintain the existing sewer system and achieve MMSD’s water quality goals could amount to many billions of dollars, and that the district may struggle to identify the means to fund both basic infrastructure repairs and watershed planning strategies.

Key findings from the report include:

  • MMSD’s well-funded reserve accounts and long-term operations contract with Veolia Water, as well as its user-based revenue structure, provide a level of operating budget stability not enjoyed by most local governments.

  • The net value of MMSD’s capital assets is nearly $3.5 billion, which means the district’s residents have invested more in MMSD’s property, plant and capital equipment than in the facilities of Milwaukee County, the City of Milwaukee and MATC combined.

  • National data show MMSD's sewage and treatment capacity offers greater protection from sewage overflows than most other districts and provides higher-quality effluent discharges. MMSD also ranks high in comparisons on operating efficiency.

  • After decades of aggressive capital spending, MMSD’s capital projects will decline significantly under the district’s six-year capital financing plan in order to stabilize a rise in debt service expenditures. Project funding may be further affected by state budget actions. Those developments may hamper MMSD’s efforts to work with local municipalities to reduce stormwater runoff and infiltration and inflow from laterals on private property.

The report explains that completion of the Deep Tunnel and its extensions allows MMSD to shift its focus to broader priorities, including provision of technical support and financial assistance to repair deteriorating private sewer laterals, and provision of funding for “green” projects aimed at reducing stormwater runoff, which is now the major source of regional water pollution.

Increased policy flexibility also may bring increased conflict, however, particularly over the question of who should pay. For example, there are more than 3,000 miles of private property laterals within the district, and the district’s efforts to partner with municipalities to improve infrastructure on private property raise new questions about the financial responsibility of both local governments and individual homeowners for repair costs.

The full report - which was made possible through grant funding by the Northwestern Mutual Foundation - can be accessed here. A media release is available here.

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