notice of special meeting des moines metropolitan

NOTICE OF SPECIAL MEETING

Des Moines Metropolitan Wastewater Reclamation Authority Board

Tuesday, March 2, 2021 @ 12:00 P.M.

MEETING LOCATION:

ADMINISTRATION BUILDING

WASTEWATER RECLAMATION FACILITY

3000 VANDALIA ROAD

DES MOINES, IOWA

Iowa Code Section 21.4 requires that each Des Moines Metropolitan Wastewater Reclamation

Authority meeting shall be held at a place reasonably accessible to the public and at a time

reasonably convenient to the public, unless for good cause such a place or time is impossible or

impracticable. Given Section One of the Governor’s February 5, 2021 Proclamation strongly

encouraging vulnerable Iowans to limit participation in gatherings of any size and any purpose

during the COVID19 outbreak and further given Section 108 the Governor’s February 5, 2021

Proclamation suspending the regulatory provisions of Iowa Code §§ 21.8, 26.12, and 414.12, or

any other statute imposing a requirement to hold a public meeting or hearing, the Des Moines

Metropolitan Wastewater Reclamation Authority has determined that a meeting at a physical

place is impossible or impracticable and all Board meetings for the time being will be conducted

electronically with the public allowed to attend per the instructions on this agenda. Meeting

minutes will continue to be provided per the WRA’s normal course of business.

The Des Moines Metropolitan Wastewater Reclamation Authority Board will be participating via

the information provided below:

The public can participate by using the information below

REMOTE PARTICIPATION INFORMATION

Please click this URL to join https://dmmwra.webex.com/dmmwra/j.php?MTID=md17528116db6235395bef505988dd135

Meeting Number:177 696 9069

or Dial: +1 (855) 749-4750

Meeting Number: 177 696 9069

AGENDA ITEM 1: Call to Order ITEM 2: Roll Call ITEM 3: Approving Agenda as Presented and/or as Amended ITEM 4: Public Comment

ITEM 5: Resolution Directing Sale of Sewer Revenue Refunding Bonds, Series 2021A

https://dmmwra.webex.com/dmmwra/j.php?MTID=md17528116db6235395bef505988dd135

OTHER ITEMS ITEM 6: Other Business

ITEM 8: Adjourn

The Des Moines Metropolitan Wastewater Reclamation Authority Board Meetings are open to all

individuals regardless of disability. To better serve you, please notify us at least three business days

in advance when possible at 515-323-8000 should special accommodations be required.

***Next Regular Meeting Scheduled for***

1:30 PM, Tuesday, March 16, 2021

Administration Building, Wastewater Reclamation Facility

3000 Vandalia Road, Des Moines, IA 50317

Staff Summary

Agenda Date: March 2, 2021

SUBJECT—

Resolution Directing Sale of Sewer Revenue Refunding Bonds, Series 2021A

RECOMMENDED ACTION—

WRA Board approval of the sale.

FISCAL IMPACT—

This item will reduce debt service interest payments in future budgets.

BACKGROUND—

The Finance Committee met December 7, 2020, to consider the refunding of Series 2013B bonds in order

to lower the interest payments and debt service cost for the remaining term of the bonds. Series 2013B

was issued to advance refund the Sewer Revenue Bonds, Series 2004B dated November 17, 2004. The

Series 2004B originally had a 30-year term. WRA’s municipal advisor (PFM) presented a refunding

presentation to the Finance Committee; the Committee recommended proceeding with the refunding

transaction with a goal of reducing debt service.

Series 2013B was sold May 2, 2013, for $56,420,000 and dated June 5, 2013. On June 1, 2021 WRA will

call for full redemption $41,935,000 of principal scheduled to mature between June 1, 2022 and June 1,

2034. The interest rates on the Series 2013B range from 3.00% to 4.00%. The refunding Series 2021A of

approximately $42,195,000 will mature June 1, 2034. This issue will decrease the amount of annual

collection from communities in fiscal years 2023 to 2034.

The WRA directed that advertisement for sale of sewer revenue bonds for March 2, 2021 and approved

electronic bidding procedures at the February 16, 2021 WRA Board meeting. The WRA will open bids at

9:00 AM on March 2, 2021, and the results will be shared at the Special Board meeting at 12:00 PM on

March 2, 2021 at the Wastewater Reclamation Facility and online through an electronic meeting.

Agenda Item

5

Summary:

Des Moines Metropolitan WastewaterReclamation Authority, Iowa;Water/Sewer

Primary Credit Analyst:

Chloe S Weil, San Francisco + 1 (415) 371 5026; [email protected]

Secondary Contact:

Alexandra Rozgonyi, Centennial + 1 (303) 721 4824; [email protected]

Table Of Contents

Rating Action

Stable Outlook

Credit Opinion

Related Research

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT FEBRUARY 23, 2021 1

Summary:

Des Moines Metropolitan WastewaterReclamation Authority, Iowa; Water/Sewer

Credit Profile

US$42.195 mil swr rev rfdg bnds ser 2021 due 06/01/2034

Long Term Rating AA/Stable New

Des Moines Metro WasteWtr Reclamation Auth swr

Unenhanced Rating AA(SPUR)/Stable Affirmed

Des Moines Metro WasteWtr Reclamation Auth swr rev rfdg bnds

Long Term Rating AA/Stable Affirmed

Many issues are enhanced by bond insurance.

Rating Action

S&P Global Ratings assigned a 'AA' long-term rating to the Des Moines Metropolitan Wastewater Reclamation

Authority, Iowa's approximately $42.2 million series 2021A sewer revenue refunding bonds. At the same time, we

affirmed our 'AA' rating on the authority's existing revenue debt. The outlook is stable.

The bonds are being issued to refund $41.9 million of outstanding series 2013B bonds for debt service savings. The

bonds will be on parity with $444.16 million of outstanding bonds and state loans. Even with planned borrowings over

the next five years, total debt is expected to remain below the authority's $675 million debt limit.

The bonds are secured by net revenue of the water reclamation authority. Each participating community's pledge of

revenue for operations and maintenance (O&M) of authority facilities is on parity with the pledge for operations of its

local sewer collection system. For debt service on authority-issued debt, each participating community's revenue

pledge is on parity "as nearly practicable" in that authority debt service must be included in local rate covenants and

additional bonds tests, although no debt service reserve fund (DSRF) for authority debt is held at the local level. In

addition to debt issued by the authority, each individual participating community is still able to issue debt secured by

net revenues of its own sewer system for improvements to its local collection and pumping facilities that feed into the

authority's infrastructure.

We understand that the authority will fund a DSRF for the series 2021A bonds funded at maximum annual debt

service. Should a draw on the DSRF fund occurs, the authority is required to notify all member communities and to

levy charges on all nondefaulting members (if the defaulting member is unable to pay its share) in proportion to their

usage sufficient to restore the DSRF. S&P Global Ratings also expects that, in the unlikely event that all participants

except its two largest participants (Des Moines and West Des Moines) defaulted on their obligations, these two

systems could shoulder the additional authority debt service together in proportion to their usage.


Credit overview

The authority provides wastewater conveyance and treatment services to 17 participating communities that together

serve a population of approximately 483,000. For the year 2020, member flows were as follows: Des Moines (49.6%),

West Des Moines (11.3%), Ankeny (10.1%), Urbandale Sanitary Sewer District (7.2%), and Altoona (3.9%), with the

remainder spread across the 12 smaller participating communities. Since 2004, the city of Des Moines has served as

the authority's operating contractor.

Credit strengths center on the authority's continued progress implementing a long-term control plan for preventing

and reducing combined sewer overflows into the Des Moines River as well as the new revenue stream (expected to

approach $5 million annually) from the production and sale of renewable natural gas as a result of recent upgrades to

the authority's anaerobic digestors. We also believe the credit quality of the two leading system users is consistent with

the current rating level. Additional credit stability is provided by the authority's improved financial metrics and

well-defined financial plans. The authority's all-in coverage in 2020 was healthy at 1.35x as calculated by S&P Global

Ratings.

We believe the primary near-term risks to the authority's credit profile center on its rising cost of service and the

potential ramifications of those increased costs to our assessment of the participating communities' market position

assessment. We consider the authority's service rates to be relatively low, but current projections indicate cost of

service increases of 7%-9% per annum over the upcoming five-year period as it funds its capital improvement plan

(CIP), which could pressure overall affordability, especially if household incomes do not rise commensurately.

Although the customer base has some concentration in commodities, food processing and manufacturing, there is no

indication that any of the city's leading customers will be reducing their demand for the authority's services over the

upcoming two-year period. Moreover, the customer base is very diverse, with the top 10 users providing only 2% of

total flows in fiscal 2020. To date, the service area (in aggregate) has not been adversely affected by COVID-19 and the

pandemic. We understand the authority's cybersecurity controls are currently overseen by the city of Des Moines. A

formal city-wide cybersecurity risk management policy and procedure has not been developed at this time, which we

consider a potential credit risk.

The ratings further reflect our view of the following credit factors:

• Strong step-up provisions of the wholesale system, providing for the levy of additional charges on nondefaulting

members should nonpayment by a member community impair debt service payments;

• The credit quality and ability of Des Moines and West Des Moines and their ability to absorb additional projected

debt service if other member defaults occur. Both maintain sound financial metrics;

• Well-defined reserve policies that provide ample near-term cushion should fiscal imbalances occur: a $10 million

emergency repair and replacement reserve, a $1 million equipment reserve, a $1.775 million insurance reserve, and

a $8.6 million working-capital reserve. Total unrestricted cash, including designated reserves totaled $24.9 million,

(397 days' cash) at the end of fiscal 2020, which is strong, in our view;

• High outstanding leverage (measured by a current debt-to-capitalization ratio, which exceeds 100%) and relatively

sizable CIP to be funded with a mix of state loans and cash on hand. The authority has forecasted approximately

$384.3 million in capital projects through 2032 to complete the $526 million included in the current WRA


Summary: Des Moines Metropolitan Wastewater Reclamation Authority, Iowa; Water/Sewer

Agreement. Near and mid-term projects center on conveyance system projects and anticipated nutrient removal

projects, while the longer plan also includes improvements to the secondary treatment system at the wastewater

treatment facility. The authority currently anticipates executing an additional $252.5 million of state loans by 2025,

resulting in annual debt service rising to about $44.5 million from $27 million today; and

• A deep and diverse service area economy in Polk County.

We consider the authority's treatment capacity adequate, with the facility designed to treat a maximum monthly

average of 134 million gallons per day (mgd) with an average daily flow of about 56 mg in 2020. The participant

members of the authority adjust their own rates. The authority typically provides three-to-five years of debt look-ahead

for the participants so they can plan their own rate schedule for their retail customers.

While we believe the authority has adequately disclosed its upcoming cost increases to its participating communities,

there could be downward rating pressure if the largest participants' financial position were to significantly deteriorate

as the authority addresses its identified capital needs.

Environmental, social, and governance factors

We think the authority's direct environmental risks are substantial, given that it is subject to deadline-certain regulatory

mandates to reduce the number of sewage backups and untreated sewage overflows that enter the Des Moines River.

Like many others, the authority is also engaged in an ongoing plan to modernize and rehabilitate the system, offsetting

significant aging infrastructure. Flood risk is reduced in the city of Des Moines by a 21.5-mile levee system that is

inspected by Army Corps of Engineers annually. The city is currently in the process of implementing a multi-phase

levee improvement project. We understand that key authority assets are located outside of critical flood risk areas.

While not currently a credit risk, in our view, persistent negative public sentiment or rising political

pressure--especially should decisionmakers' willingness and ability to raise rates in a rising cost of service

environment--would adversely affect our view of the authority's governance practices.

We generally believe there are increased public health and safety risks due to the pandemic, although the influence of

the pandemic on authority revenue have been limited to date. Although the early approval of a number of vaccines is a

positive development, we consider the approval of vaccines merely the first step toward a return to social and

economic normality; equally critical is the widespread availability of effective immunization, which could come by

mid-2021. As the situation evolves, we will update our assumptions and estimates accordingly.

Stable Outlook

Downside scenario

We could take a negative rating action if authority or participant financial metrics decline from current projections due

to a loss of revenue attributable to the pandemic, increased operating expenses or capital needs, or a delay in planned

rate increases.

Upside scenario

While we believe the primary participants' credit quality is sound, S&P Global Economics projects credit conditions

may not fully return to pre-pandemic levels until 2022. Therefore, we do not anticipate raising the ratings during the



outlook horizon. In addition, further limiting consideration for upside potential include the outstanding consent decree

and high authority leverage.

Credit Opinion

The Des Moines metropolitan statistical area (MSA) serves as a national center for the insurance industry and as a

regional finance, health care, and service center. Des Moines is Iowa's largest city. The MSA serves as a major center

for the insurance industry, home to the headquarters of 50 insurance companies and regional offices of more than 100

firms. As the state capital and Polk County seat, Des Moines also has a lot of government sector jobs, which stabilizes

the employment base. The weight-averaged unemployment rate of the counties was low at 2.8% in 2019, peaked at

12.7% in April 2020, and has since declined to 3.6% in December 2020. Incomes, in our view, are good, with median

household and per capita effective buying income at 108% of the nation's levels for 2019.

Related Research

Through The ESG Lens 2.0: A Deeper Dive Into U.S. Public Finance Credit Factors, April 28, 2020

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed

to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for

further information. Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating

action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column.




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U.S. PUBLIC FINANCE

CREDIT OPINION24 February 2021

Contacts

Ryan Quakenbush +1.312.706.9963Associate Lead [email protected]

Eric Harper +1.312.706.9972VP-Senior [email protected]

CLIENT SERVICES

Americas 1-212-553-1653

Asia Pacific 852-3551-3077

Japan 81-3-5408-4100

EMEA 44-20-7772-5454

Des Moines Metro. Wwtr. Reclam. Auth., IAUpdate to credit analysis

SummaryDes Moines Metropolitan Wastewater Reclamation Authority, IA ('WRA', Aa3) has a strongcredit profile that benefits from serving the growing state capital region, healthy financessupported by strong liquidity, and an adequate albeit narrow debt service coverage. Thesystem has elevated leverage that will remain high given substantial future capital needs tomaintain, expand, and remain in regulatory compliance.

Credit strengths

» Large service area encompassing the Des Moines metropolitan area

» Strong system liquidity

» Step up provision requiring participating communities to replenish the debt servicereserve within 90 days in the event a member cannot meet its debt service allocation

Credit challenges

» Below average debt service coverage

» Sizable future capital needs

Rating outlookOutlooks are generally not assigned to local governments with this amount of debt.

Factors that could lead to an upgrade

» Improved debt service coverage

» Lower system leverage

Factors that could lead to a downgrade

» Weakening debt service coverage

» Substantial decline in liquidity

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBM_1267285

https://www.moodys.com/credit-ratings/Des-Moines-Metro-Wwtr-Reclam-Auth-IA-credit-rating-807879480/summary

MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE

Key indicators

Des Moines Metro. Wwtr. Reclam. Auth., IA

System Characteristics

Asset Condition (Net Fixed Assets / Annual Depreciation) 29 years

System Size - O&M (in $000s) $22,908

Service Area Wealth: MFI % of US median .84%

Legal Provisions

Rate Covenant (x) 1.00

Debt Service Reserve Requirement DSRF funded at lesser of standard 3-prong test (Aa)

Management

Rate Management Aa

Regulatory Compliance and Capital Planning Aa

Financial Strength

2016 2017 2018 2019 2020

Operating Revenue ($000) $45,410 $46,719 $48,529 $52,027 $55,166

System Size - O&M ($000) $20,785 $21,444 $21,598 $20,746 $22,908

Net Revenues ($000) $25,493 $25,784 $27,853 $33,257 $34,370

Net Funded Debt ($000) $321,688 $323,667 $328,957 $366,073 $385,966

Annual Debt Service ($000) $23,063 $20,807 $24,918 $24,300 $28,436

Annual Debt Service Coverage (x) 1.1x 1.2x 1.1x 1.4x 1.2x

Cash on Hand 350 days 356 days 308 days 376 days 397 days

Debt to Operating Revenues (x) 7.1x 6.9x 6.8x 7.0x 7.0x

Source: Moody's Investors Service, WRA audited financials

ProfileThe Des Moines Metropolitan Wastewater Reclamation Authority is a regional two-tier utility which joins 17 member communities forthe purpose of wastewater conveyance and treatment. The communities of Ankeny, Altoona, Bondurant, Clive, Cumming, Des Moines,Greenfield Plaza Sanitary Sewer District, Johnston, Norwalk, Pleasant Hill, Polk City, Polk County, Urbandale Sanitary Sewer District,Urbandale-Windsor Heights Sanitary Sewer District, Warren County, Waukee and West Des Moines constitute the service area of theWRA. In 2020, the City of Grimes joined as a non-voting participating community and will become a participating community in 2022with a seat on the Board. The WRA was established on July 1, 2004 and is managed by a WRA Director and governed by the WRABoard, consisting of 21 appointed members from the 17 constituent communities.

Detailed credit considerationsService area and customer baseWRA will continue to benefit from the Des Moines metro area as it continues to experience significant growth in valuation andpopulation as it is the economic center of the state. The WRA originated on July 1, 2004 and is now comprised of 17 membercommunities, which collectively serve a customer base of approximately 525,000 residents. Des Moines is the largest member,producing 49.6% of the total flow over the last 3 years, and is the state capital and regional trade and financial center. The variedemployment opportunities in the region continune to demonstrate economic strength. The system's service area wealth, as measuredby Des Moines, is below the national average at 83.6%; however, the median family income ranges between each member community.

System components include 125 miles of sanitary sewer, equalization basins, lift stations and the system's treatment facility. Thesystem's asset condition as calculated by Moody's is 29 years. The WRA was designed to support maximum monthly hydraulic capacityof 134 million gallons per day (mgd) and a peak hydraulic capacity of 200 mgd.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 24 February 2021 Des Moines Metro. Wwtr. Reclam. Auth., IA: Update to credit analysis


Debt service coverage and liquidityWRA's financial performance is expected to remain stable given conservative budgeting, member communities that remain committedto service debt, and expectations of solid growth in net revenues. Debt service coverage for fiscal 2020 was 1.2x, slightly lower thansimilarly rated peers. Favorably, net revenues of the system have increased each year dating back to at least fiscal 2009, and continuedgrowth will likely result in stable coverage. Although no specific rate covenant exists for the bonds, the WRA Agreement requireseach member to set rates and charges to provide sufficient revenue, together with other funds or sources of revenue that may beappropriated for such purpose that will produce at least 110% of the amount necessary to pay the participating communities allocatedshare of WRA debt service as well as local debt obligations

LiquidityWRA's liquidity is strong and expected to remain strong. At the end of fiscal 2020, the system had $24.9 million in liquidity, or a veryhealthy 397 days' cash on hand.

Debt and legal covenantsWRA's debt is expected to remain elevated given substantial debt it plans to issue over the coming years. Total debt is expected to beincreased to over $600 million by fiscal 2024, which would over 11x fiscal 2020 revenue. WRA has a debt capacity of $675 million.

The legal provisions are satisfactory and provide bondholders with adequate legal protections, though they lack a traditional ratecovenant or additional bonds test. The WRA Agreement requires each member to set rates and charges to provide sufficient revenue,together with other funds or sources of revenue that may be appropriated for such purpose that will produce at least 110% of theamount necessary to pay the participating communities allocated share of WRA debt service as well as local debt obligations. The debtservice reserve fund is cash funded with the lesser of the three-pronged test. No debt service reserve fund exists for the WRA's staterevolving fund (SRF) debt; however, a debt service reserve fund of $6.4 million, equivalent to MADS, is funded for its non-SRF debt.

The WRA Agreement is long term, expiring in 2064, and it prohibits members from withdrawing from the WRA while any bonds issuedduring the time the member was participating are still outstanding. Further incentive for members to remain in good standing withthe WRA is their lack of an equity interest. Withdrawing from the WRA is a forfeit of all reversionary interest and no compensation orequity interest would be provided.

Legal securityThe bonds are secured by a first lien on the WRA's pledged revenues, which are largely derived from operations and maintenance(O&M) and debt service payments made to the WRA by its member municipalities. The bonds benefit from a step-up provision in theevent that one of the participating communities does not meet its allocated share of debt service. The step up provision requires theremaining participating communities to replenish the debt reserve fund within 90 days, with each community's share based on itsshare of flows.

Debt structureWRA's debt structure consists of $72 million of senior lien revenue bonds and $372 million of senior SRF loans. Ten-year principalamortization is 47.2%.

Debt-related derivativesWRA is not a party to any debt-related derivatives.

Pensions and OPEBEmployees of the utility system, like most city employees, participate in the Iowa Public Employees Retirement System (IPERS), astatewide cost-sharing defined benefit pension plan. WRA's pension is a direct allocation of the City of Des Moines.

ESG considerationsEnvironmentalEnvironmental considerations are not a material credit factor for WRA. However, Polk County, where the majority of communitymembers are located is susceptible to high heat stress and medium stress compared to counties nationally for water and extremerainfall. The WRA consistently is in compliance with local and national regulations. WRA is also currently in the process of remaining incompliance with local nutrient limits and continued compliance with regulations is a part of the WRA's capital improvement plan.



SocialThe system provides an essential public service that is critical to community health and well-being. The overall system's median familyincome is below the national average at 83%. The Des Moines metropolitan area continues to experience population growth as it is theeconomic engine and state capital.

GovernanceThe WRA was established on July 1, 2004 and is managed by a WRA Director and governed by the WRA Board, consisting of 21appointed members from the 17 constituent communities. Each member community sets their own individual rates and must ensurethey meet debt service obligations. The City of Des Moines serves as the operating contractor, with a contract through June 2024 withautomatic one-year renewals.



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WRA Board Resolution No. 21 - _______ Agenda Item Number

Date: March 2, 2021 _________5_______

RESOLUTION DIRECTING SALE OF SEWER REVENUE

REFUNDING BONDS, SERIES 2021A

WHEREAS, pursuant to published notice in accordance with Iowa Code Chapter 75, bids

have been received at public sale for the Bonds described as follows and the best bid as adjusted

per the Terms of Offering is determined to be the following:

SEWER REVENUE REFUNDING BONDS, SERIES 2021A:

Bidder: _________________________ of _________________________

The terms of award:

Final Par Amount as adjusted: $____________________

Purchase Price as adjusted: $____________________

True Interest Rate: ____________________%

True Interest Cost: $____________________

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF THE

DES MOINES METROPOLITAN WASTEWATER RECLAMATION AUTHORITY:

Section 1. That the bid for the Bonds as above set out is hereby determined to be the best

and most favorable bid received and, said Bonds are hereby awarded as described above.

Section 2. That the statement of information for Bond bidders and the form of contract

for the sale of the Bonds are hereby approved, and the Chairperson and Secretary are authorized

to execute the purchase contract on behalf of the WRA.

Section 3. That the notice of the sale of the Bonds heretofore given and all acts of the

WRA Treasurer and Operating Contractor staff done in furtherance of the sale of said Bonds are

hereby ratified and approved.

WRA Board Resolution No. 21 - _______ Agenda Item Number

Date: March 2, 2021 _________5_______

Moved by: __________________________________________ to adopt.

01833842-1\14149-067

AGENCY ACTION YEAS NAYS PASS ABSENT

Moritz

Willey

Perry

McKenzie

McCoy

Goode

Gatto

Cownie

Westergaard

Selby

J. Sanders

Lester

Kurovski

Huisman

Giovannetti

Sassatelli

Garvey

Moerman

Hadden

Smith

TOTAL MOTION CARRIED APPROVED

Paul Moritz, Chair

CERTIFICATE

I, Michael McCoy, Secretary of the Board of the Des Moines Metropoli tan Wastewater Reclamation Authority (WRA), hereby cert ify that at a meeting of the WRA Board, he ld on the above date , among other proceedings the above was adopted. IN WITNESS WHEREOF, I have hereunto set my hand the day and year f irst ab ove written.

________________________________________, Secretary

notice of special meeting des moines metropolitan

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