C EPA
Training Materials
MUNIPAY:
A model to evaluate a municipality's
economic condition and its ability to afford
civil penalties, Superfund cleanups,
and pollution control expenditures
MUNIPA Y; Updated July 2002
-------
qSo-A- oz-on
-------
Confidentiality/Enforcement Sensitive Notice
The attached training materials contain enforcement sensitive and confidential information.
They are covered by one or more of the following Federal disclosure exemptions: attorney work-
product, deliberative processes privilege, and disclosure of enforcement techniques. You may use
these materials during the course, but you may not keep them unless your State is both legally
permitted and willing to protect this document from disclosure to outside parties. (E.g.. The State
of Wisconsin's laws make it almost impossible to protect a document such as this from disclosure.)
If you are not sure about your State's law on this issue, please take this document for a review by
your State's information law specialists immediately upon your return to your office. If your
information law specialists do not feel your State can adequately protect this document, please mail
it to the following address as soon as possible:
Jonathan D. Libber (2248-A)
U.S. EPA
1200 Pennsylvania Avenue, N.W.
Washington, DC 20460
Should you have any questions about this note or the EPA's concerns on disclosure, please contact
Jonathan Libber at libber.jonathan@epa.gov or 202-564-6102.
MUNIPA Y; Updated July 2002
-------
Table of Contents
Page No.
SECTION I: OVERVIEW OF MUNIPAY
What Is MUNIPAY 1-1
Municipal Financial Analysis 101 1-2
MUNTPAY's Analytical Approach 1-3
MUNIPAY's Analytical Focus 1-4
MUNIPAY in Settlement and Trial 1-5
SECTION II: USING THE MUNIPAY MODEL
Main Screen/Creating a Case II-1
Demographic Data Entry H-3
Financial Data Entry II-5
Creating Affordability Analysis Runs H-7
Optional Run Parameters II-9
Demographic Analysis 11-11
Calculating and Printing Affordability Analysis Runs 11-13
Affordability Analysis Details 11-15
SECTION III: GLOSSARY OF TERMS AND BIBLIOGRAPHY
SECTION IV: SAMPLE PROBLEMS
Overview of Sample Problems IV-1
Metropolis, Ohio IV-2
Colaville, Michigan IV-10
MUNIPA Y; Updated July 2002
-------
SECTION I:
OVERVIEW OF MUNIPAY
MUNIPA Y; Updated July 2002
-------
WHAT IS MUNIPAY?
The Municipal Ability to Pay Model is a computer program that runs in the Windows
operating environment, Windows 95 or higher (e.g., Windows 95, 98, or NT).
MUNIPAY evaluates municipalities and publicly owned utilities/authorities (e.g., drinking
water, wastewater), but not states, non-governmental not-for-profit entities, and privately
owned utilities. (Contact the EPA helpline see below for such cases.)
For evaluating ability-to-pay claims from businesses, use ABEL; for individuals, use
INDIPAY.
For calculating the economic benefit from pollution control noncompliance, use BEN; for
determining the after-tax net present value of Supplemental Environmental Project (SEP).,
use PROJECT.
All of these computer models are available from the EPA website; the address for
MUNIPAY is http://es.epa.gov/oeca/models/munipay.html
MUNIPAY is easy to use, especially with its many available forms of assistance:
A context-sensitive "help" feature within the model accessed through the F1 key
means that assistance is always only a keystroke away.
These Training Materials provide a "hands-on tour" through the model; the User's
Manual provides a more in-depth explanation of the model.
See Section III of these Training Materials for a glossary of perhaps-unfamiliar
terms, as well as a bibliography for further reading on municipal accounting and
finance.
EPA's enforcement economics helpline provides personal help from 8:00 a.m. to
6:00 p.m. (Eastern time) at 888-ECONSPT or benabel@indecon.com.
Jonathan Libber of EPA's Office of Enforcement and Compliance Assurance can
answer policy and legal questions at 202-564-6102, or libber.jonathan@epa.gov.
MUNIPAY performs two different types of analyses, examining both the sociodemographic
background of the community and the financial strength of the municipal government. The
two analyses require separate data entry, and you can therefore run one without the other.
1-1
MUNIPAY; Updated July 2002
-------
MUNICIPAL FINANCIAL ANALYSIS 101
Unlike the tax returns that are available for the other EPA ability-to-pay models (i.e., ABEL,
INDIPAY), no such standardized documents exist for municipalities; therefore MUNLPAY
provides its own Data Request Form.
Unlike a business, municipalities do not strive to maximize profits, but rather to provide
services in a cost-effective manner to their citizens and ratepayers.
Municipalities use "fund accounting" to monitor the flow of funds for different governmental
functions; this helps to assure the financial accountability of governmental entities.
Each individual fund is a fiscal and accounting entity with a self-balancing set of accounts
recording cash and other financial resources, together with all related liabilities and equity
balances, which are segregated for the purpose of carrying on specific activities or obtaining
certain objectives in accordance with special regulations, restrictions, or limitations.
An analysis of a municipality's funds must first determine which funds' resources can be
considered available to pay for the environmental expenditures.
Of the three basic fund categories, generally the resources of only two of these three
categories are available for environmental expenditures, and only certain individual funds
within those two categories are available, as follows:
Governmental Funds account for most of a municipality's functions. The General
Fund accounts for primary governmental functions, and is available to pay for
environmental expenditures. Other Governmental Funds are usually not available for
environmental expenditures: Special Revenue funds account for revenue sources
earmarked for legally restricted purpose (e.g., a municipality's share of state gas tax
proceeds for road improvement); Capital Projects funds account for a significant
acquisition or facility construction.
Proprietary Funds account for "business-type" activities, e.g., activities that receive
a significant portion of their funding through user charges. An Enterprise Fund
usually accounts for wastewater treatment, and therefore such a fund is available for
environmental expenditures related to a Clean Water Act case. Otherwise,
Proprietary Funds are typically not available for environmental expenditures.
Fiduciary Funds account for monies held or managed in an agent or fiduciary
capacity. For example, the municipality might maintain a pension trust fund for its
employees. These funds are unavailable for environmental expenditures.
1-2
MUNIPAY; Updated July 2002
-------
MUNIPAY'S ANALYTICAL APPROACH
MUMP AY performs two different types of analyses, examining both the sociodemographic
background of the community and the financial strength of the municipal government.
The two analyses require separate data entry, and you can therefore run one without the other.
The Demographic Comparison evaluates the municipality relative to state and national
norms, providing general background on the community, which can also be a factor in
modifying affordability analysis run parameters.
The Affordability Analysis first determines whether the municipality can apply any currently
available funds toward the environmental expenditures.
MUNIPAY sets aside a percentage of anticipated expenditures as a safety margin,
then assumes the remainder is available to pay for environmental expenditures.
This is a relatively straightforward calculation, and based upon recommended
practices for municipal financial management.)
The Affordability Analysis then (if necessary) determines how much additional debt the
municipality can take on to finance the environmental expenditures.
This analysis employs a multiple-constraint model to incorporate several tests for
debt capacity, which focus on both the municipal government's finances and
representative household burdens.
This relatively more complex calculation is based upon the approach of bond rating
agencies.
1-3
MUNI PA Y; Updated July 2002
-------
MUNIPAY'S ANALYTICAL FOCUS
MUNEPAY's focus varies slightly depending on which of the two municipality types you
select, corresponding to the different types of funds that may be relevant to the case.
MUMP AY runs its affordability analysis on financial data.
The affordability analysis usually involve the municipality's Governmental Funds,
i.e., the General Fund and the ability to raise General Obligation debt (backed by the
anticipated revenues from property taxes levied to cover general governmental
functions).
This corresponds to the "City/Town/Village" selection under the "entity type" entry.
For a Clean Water Act or Safe Water Drinking Act case, the data probably concern
both the General Fund and the working capital balance of the relevant Enterprise
Fund, and the ability to issues Revenue debt (backed by the anticipated revenues
from user fees charged for specific services rendered).
This corresponds to the "Enterprise Fund" selection under the "entity type" entry.
For an independent and publicly owned utility, select the "Enterprise Type" and
simply enter zero for the two General Fund financial data inputs.
For Superfund cases, sometimes an Enterprise Fund accounts for the municipal
landfill operations; for RCRA cases, sometimes an Enterprise Fund accounts for
activities related to the violation.
Both of these situations are fairly rare, and even if such an Enterprise Fund exists, an
analysis of the municipality's Governmental Funds may be more relevant.
For other types of local and regional governmental jurisdictions, contact the U.S. EPA
Helpline at 888-ECONSPT for guidance on MUMPAY's applicability.
MUNffAY is not for use with other types of not-for-profits, state governments, or privately
owned (yet publicly regulated) utilities.
1-4
MUMP A Y; Updated July 2002
-------
MUNIPAY IN SETTLEMENT AND TRIAL
Financial theory does not precisely define ability to pay. Although it does incorporate
quantitative analysis, determining ability to pay is an art rather than a science. An analyst
may use MUNIPAY, other analytical tools, and best professional judgement when the
defendant is a municipality.
Some of MUNIPAY's data inputs may be open to interpretation to reflect a municipality's
particular circumstances; similarly, MUNIPAY's default affordability analysis run
parameters are reasonable, but may be modified.
MUNIPAY has considerable flexibility and breadth, but is not universal; some governmental
jurisdictions may not be amenable to MUNIPAY's analysis, and some municipalities'
particular circumstances may require analysis outside MUNIPAY's scope.
MUNIPAY is only a screening tool for evaluating ability to pay claims; an expert is
necessary to provide independent financial analysis at trials or administrative hearings
(though MUNIPAY could be part of such analysis).
The Agency has no statutory or regulatory obligation to reduce a penalty for inability to pay,
and instead need only consider the ability to pay issue. If the violator has committed
egregious violations or it refuses to comply on a timely basis, then the Agency has the option
of seeking the full penalty regardless of the violator's financial condition.
For assistance in hiring an expert: on Superfund cases, contact Tracy Gipson at
gipson.tracy@epa.gov or 202-564-4236; on other cases, contact Jonathan Libber at 202-564-
6102 or libber.jonathan@epa.gov.
The burden of proof in court may fall on either the municipality or the enforcement agency
depending on the jurisdiction.
1-5
MUNIPA Y; Updated July 2002
-------
SECTION II:
USING THE MUNIPAY MODEL
II-7
MUNIPA Y; Updated July 2002
-------
MAIN SCREEN/CREATING A CASE
When you first open MUMP AY the main screen appears. From here you create cases and
runs. Tab and enter keys move you sequentially through the input areas, but you can also use
your mouse to input data in any order.
From here you can also access file, window, and help pull-down menus. These menus allow
you to open, close, create, save, or exit files (which are saved as "*.mun"), as well as modify
your printer setup (just as in most Windows applications).
The window menu allows you to shift between multiple open MUNIPAY cases.
To access help, use the help pull-down menu, or press F1 anytime.
The first three inputs on the case screen are municipality name, analyst name, and
office/agency. These appear on the bottom of result printouts but do not affect the present
value calculation. Municipality name and analyst name can be any length and include any
characters.
Municipality name is the name of the municipality that you are analyzing.
Choose office/agency (formerly EPA region) from a pull-down menu that lists all ten
regions, EPA headquarters, and "other," or type in your own entry.
Analyst name is usually the name of the person performing the analysis.
Two radio buttons allow you to choose between the two entity types: City/Town/Village and
Enterprise Fund; see page 1-2 for guidance on this selection.
Select the municipality's state from the pull-down menu listing all fifty states.
Buttons on bottom-left allow you to enter the Demographic Data and Financial Data screens.
Select "Print Data Request Form" from the pull-down menu at top of main screen to print
a copy of data request form.
Only once you have entered case inputs plus financial data can you create runs on the right-
hand side of the screen.
n-i
MUNIPA Y; Updated July 2002
-------
D
File Window ' Help
D & B
n-2 MUNIPA Y; Updated July 2002
-------
DEMOGRAPHIC DATA ENTRY
MUNIPAY requires you to enter certain U.S. Census data items for 1980 and 1990; the
municipality should provide all of the necessary information on the completed Data Request
Form. (Remember, the municipality is the one pressing the ability to pay claim, and is the
one most familiar with its own demographics, so requesting that it gather Census data on
itself is not unreasonable.)
If the municipality for some reason does not provide the data, you can obtain it from the
following sources.
U.S. Census data for 1980 is available at State Data Centers. A list of centers is available
from the U.S. Bureau of the Census at 301-457-4100.
U.S. Census data for 1990 is available at www.census.gov: click on the large "Search"
button, then click on "Place Search". The following screen will give you the opportunity
to type in the municipality's name. Select the correct municipality from the displayed list,
and click on its "STF3A" table button. Select the relevant census tables by checking the
boxes on the left side of the screen for each of the census titles for which you would like
information; the table below indicates which titles you will need. After you have checked
all of the necessary boxes, scroll to the top of the page and click "Submit". Finally, select
a format to view the data (HTML format, Tab-delimited format, or COD ATA format) and
press "Submit". You should now have the 1990 U.S. Census data for the municipality.
Census Designation & Descriptor
MUNIPAY Input
PI: Persons
Population
P13: Age
# of Persons age 18 & above
P13: Age
# of Persons above age 65 & above
P121: Ratio of Income to Poverty Level
# of Individuals Below 125% of Poverty
H61A: Median Value
Median Home Value
P80A: Median Household Income
Median Household Income
U.S. data for 2000 is still not available for all items that MUNIPAY requires. However, you
can supplement MUNIPAY's analysis with your own review of the'data that may be
available for the state in which the municipality is located.
D-3
MUNIPA Y; Updated July 2002
-------
Demographic Data
~
1980
Census Value
Population.
Number of Persons Age 18 and Above:
Number of Persons Age 65 and Above:
Number of Individuals Below 125% of Poverty:
Median Home Value:
Median Household Income:
10000000
3,000,000
1,000,000
1,000,000
$100,000
$70,000
1990
Census Value
11,000.000
8,800,000
1,100,000
1,100,000
$110,000
$77,000
OK.
Cancel
D-4
MUNIPA Y; Updated July 2002
-------
FINANCIAL DATA ENTRY
MUNIPAY requires financial data to determine whether the municipality can afford
compliance costs, a Superfund cleanup cost contribution, and/or a penalty payment.
The municipality should already have completed the corresponding section of the data
request form, which also includes explanations of the information sought for each entry.
(Select "Data Form" from the pull-down menu at the top of MUNIPAY's main screen to
print a copy of the data request form.)
MUNIPAY collects different types of financial data depending on the municipality's type,
so certain sections of the financial data entry screen will be grayed-out depending on which
entity type you specified on the main screen.
In addition to the data items below, the municipality should provide the last three years of
its annual audited financial statements, bond prospectuses, and budgets. Financial statements
and bond prospectuses for many cities are also available from commercial providers. (One
such provider is located on the internet at www.dpcdata.com.)
Section II provides a glossary of terms; also note the following tips for proper data entry.
Check that the municipality has provided market value of taxable property,
not assessed value (which can differ significantly from market value).
MUNIPAY will reject any figure for overall net debt that is less than direct
net debt, since overall net debt includes both the municipality's direct net
debt and the net debt of any underlying or overlapping jurisdictions.
Check the state limit box only if a state statute imposes limits upon municipal
debt; municipalities often impose debt and taxation limits upon themselves,
but that is political willingness to pay, not financial ability to pay.
For annual residential charges, enter what the average household (typically
defined as 90,000 gallons each year) pays each year. If consumption is not
metered, or if the case involves services other than water or wastewater (e.g.,
electricity), then enter the best estimate of average annual charge. If the
Enterprise Fund's operating revenues and expenses combine both water and
wastewater, then enter the combined charge, but double the default value for
"Max avg residential charge total as % of median household income" under
optional run parameters. [See page II-9.]
H-5
MUNIPA Y; Updated July 2002
-------
ii. Financial Data
El
General Fund-
Unreserved Balance:
8000000
Anticipated Expenditures Plus Net Transfers: |$100,000,000
$24,500,000
$100,000,000
- Governmental Funds for Crty/Town/Village
Annual Debt Payments:
Total Revenues:
Direct Net Debt: $40,000,000
0 verall N et D ebt: |$100,000,000
W State Debt Limit?
Amount of Limit: |$80,000,000
- City/T own/Village
Market Value of Taxable Property:
[$20000000000
Median Home Value: Year of Estimate'
| $100,000 11999
Population: 12,000,000
r I ncome
M edian H ousehold I ncome: Year of E stimate:
,000
1999
-Enterprise Fund
Current Asset:.
Current Liabilities-
Total Liabilities.
T otal Equity:
Annual Debf Payments'
Operating Revenues'
Operating Expenses
Anticipated Expenses Plus Net Transfers:
- System Information
Average Annual Residential Charge I i.e..
90,000 Gallons Consumption],
Serviced Households'
OK
Cancel
n-6
MUNIPA Y; Updated July 2002
-------
CREATING AFFORD ABILITY ANALYSIS RUNS
The right-hand side of the main screen is for managing affordability analysis runs: each case
can contain multiple runs, with run names in any format.
To add a run, enter run name under "New Run:" and press [Add],
To enter or edit data for a run, select its name and press [Enter/Edit].
To calculate a run, select its name and press [Calculate],
To copy a run, select its name and press [Copy].
To remove a run (permanently!), select its name and press [Remove],
MUNIPAY assumes that all of the following cost inputs are in current dollars:
Compliance Capital and One-Time Costs: sum of all capital investments
and one-time costs necessary for compliance (e.g., design and construction
costs for a wastewater treatment plant).
Compliance Annual Expenses: average yearly total of all annually
recurring expenses necessary for compliance (e.g., annual operation and
maintenance costs for a wastewater treatment plant, excluding interest, other
financing expense, or annualized capital recovery expense).
Superfund Cost Contribution: remediation liability expressed as a one-
time lump sum. (Cleanup costs under other remediation statutes should
generally be entered under the Compliance Costs category, although user can
always modify each expenditure category's priority and run parameters.)
Penalty Payment: total penalty demand as a one-time payment.
If you are seeking more than one type of environmental expenditure, you may wish to alter
the order of priority of expenditures.
MUNTPAY's default is to assume that compliance costs have highest priority,
followed by Superfund cost contributions, followed by penalty payment.
To alter the default hierarchy, click on each type of expenditure in turn, and
then click on the up or down arrow.
E-7
MUNI PA Y; Updated July 2002
-------
4. Midway: Test
Compliance Capital and One-time Costs:
Compliance Annual Costs:
Super fund Cost Contribution:
Penalty Payment
I $10,000,000
|$1,000,000
| $2,000,000
I $500,000
- Order of Priority for Expenditures:
Penalty 4-
OK | Options | Cancel |
D-8
MUNIPA Y; Updated July 2002
-------
OPTIONAL RUN PARAMETERS
Click [Options] on the run input screen to view or edit the optional run parameters.
Generally, you should not modify the default values unless you have a sound reason, or you
have consulted a Financial analyst.
Certain entries will be grayed-out, depending on the entity type that you specified on the
main screen.
For a detailed explanation of each run parameter, see Chapter 3 of the MUNIPAY User's
Manual, or press the F1 key for Help.
Common Inputs
Maturity Periods and Payment Schedule define the financing period for each category of
environmental expenditures; a longer period will lower the annual debt repayment burden but also
increase the total interest payments, with the net effect possibly increasing the affordability.
Interest Rate determines the annual debt service for financing a given amount over a given maturity
period; a lower interest rate may possibly increase the municipality's ability to pay.
Minimum General Fund Balance as a % of Anticipated Expenditures and Net Transfers
determines currently available funds; a higher value may possibly decrease ability to pay.
Citv / Town / Village
Maximum Debt Service Ratio, Maximum Overall-Net Debt: Property-Value Ratio, Maximum
Property Tax Increase all set caps on the municipality's debt, focusing on debt repayment, total debt
stock, and household taxes (respectively); higher values may possibly increase ability to pay.
Municipality w/ Enterprise Fund
Minimum Debt Service Coverage Ratio determines affordability in conjunction with the user charge
burden ratios, as it sets the Fund's user fees at a level sufficient to cover operating expenses with
excess left over to repay debt; a higher value may possibly decrease ability to pay.
Maximum Debt-to Equity Ratio sets a cap on the Fund's debt level relative to its equity; a higher
value may possibly increase ability to pay.
Maximum Average and Total User Charge Increase sets a cap on the Fund's debt repayment,
focusing on household burdens; higher values may possibly increase ability to pay.
Minimum Working Capital determines currently available funds; a higher value may possibly
decrease ability to pay.
II-9 MUNIPA Y; Updated July 2002
-------
Mi. Test: Optional Inputs
fa
¦ Common -
Bond maturity period for
compliance costs [vearsl
Note maturity period for
Superfund contribution fyearsl:
w
Penalty payment schedule [years]: 3
Interest Rate: 5 0%
Min General Fund balance as % of
anticipated expenditures + net transfers:
5 0%
- City/T own/Village -
Max debt service ratio: |25 0%
Max overall-net-debt:property-value ratio: 12 0%
Max property tax increase on median n
home as % of median income: '
- Municipality w/ Enterprise Fund
Mm debt service coverage ratio:
Max debt-to-equiiy ratio:
Max avg residential charge increaie
as % of median household income
Ma:-: avg residential charge total as
% of median household income.
Min Enterprise Fund working capital as X
of anticipated expense? + net transfers'
OK
Cancel .
n-io
MUNIPA Y; Updated July 2002
-------
DEMOGRAPHIC ANALYSIS
To perform a demographic analysis, click on the [Demographic Analysis] button at the
bottom of the main screen; MUNIPAY then displays a table for results.
To print your results (either to a printer or a file) click on the [Summary] button.
Unlike the Affordability Analysis, the Demographic Analysis does not produce a single point
estimate or assessment of the community's economic health; instead, it generates
comparisons with state and national norms for selected U.S. Census indicators.
The Demographic Analysis thus provides more general, background information on the
community than the Affordability Analysis's point estimate.
The Demographic Analysis can also aid the advanced user (i.e., an analyst familiar with
financial economics, especially pertaining to municipalities) in modifying the default
parameters for the Affordability Analysis. For example, a 25-percent debt service ratio might
be sustainable for a community with a solid resource base, but overly burdensome for a
community whose economic health appears to be deteriorating sharply.
The required inputs to the Affordability Analysis do include some demographic data (e.g.,
income, population, home value), so the affordability results will always reflect certain
aspects of the municipality's demographics.
For a detailed explanation of each comparison item, see Chapter 4 of the MUNIPA Y User's
Manual, or press the F1 key for Help.
Note that the items in the final column the municipality's "Change from 1980" are,
except for population, expressed in "% Pts." that represent the difference in the 1980 and
1990 percentages, not the percent difference. That is, if a municipality's "population below
18" increased from 10% to 14%, MUNIPAY will report an increase of 4% Pts. (i.e., 14-10,
not a 40-percent increase (i.e., {14-10}/! 0).
H-11
MUNIPA Y; Updated July 2002
-------
ii. Midway: Demogiaphic Analysis
Demographic Analysis
U S Census Indicator
U.S
1990
MA
1990
Midway
1990
Midway
Change
from 1980
Population
248,709,873
6,016,425
1,100,000
10 0%
Percent Population below 18
25 6%
22 5%
20 0%
0 0%
Pts
Percent Population 65 and above
12 6%
13 6%
10 0%
0 0%
Pts
Percent Individuals below 125% of Poverty
17 0%
11 6%
10 0%
0 0%
Pts
Median Home Value (MHV)
$79,100
$162,800
$110,000
....
MHV- Midway as % of MA
....
67 6%
-138 6%
Pts
Median Household Income (MHI)
$30,056
$36,952
$77,000
....
MHI- Midway as % of MA
....
....
208 4%
189 9%
Pts
U S Value
MA Value
Midway
Values
Data Incut Summary
1990
1990
1990
1980
Population
248,709,873
6,016,425
1,100,000
1,000,000
Number of Persons Age 18 and Above
185,105,441
4,663,350
880,000
800,000
Number of Persons Age 65 and Above
31,241,831
819,284
110,000
100,000
Number of Individuals Below 125% of Poverty
42,246,073
697,985
110,000
100,000
Median Home Value
$79,100
$162,800
$110,000
$100,000
Median Household Income
$30,056
$36,952
$77,000
$70,000
1980
Median Home Value
$48,500
Median Household Income
$17,575
Print
Summary
beta:
(* Printer
C File
Done .
n-12
MUN1PAY; Updated July 2002
-------
CALCULATING AND PRINTING AFFORD ABILITY ANALYSIS RUNS
Enter all case and financial inputs before calculating; to perform a calculation, select an
existing run from the list on the main screen and press [Calculate]. MUNIPAY will present
an affordability analysis summary, along with inputs and run parameters.
Use the scroll bar to view results that do not fit on the screen.
[Done] button returns you to main screen.
[Summary] button prints information from the results screen (i.e., economic benefit
result and summary of your inputs).
[Detail] button prints summary plus affordability analysis details and calculations.
[View Detail] button allows you to view affordability analysis details.
[Printer] and [File] buttons switch between print-to-printer and print-to-file modes.
If you have trouble printing your results (e.g., page orientation or paper type), try
modifying printer setup, accessible under file pull-down menu on main screen.
Three rows in the table correspond to types of environmental expenditures (in priority order).
First column displays the amount sought for each type of expenditure.
Next two columns display funds currently available for expenditures. (If analysis is
for City/Town/Village, then first of two columns will display zero.)
Following column displays funds available through financing.
Final column displays total available, adding together 2nd through 4th columns.
If the final column's amount is equal to the first column's amount, then the sought amount
is affordable within the specified run parameters; if the final column less than the first, then
the sought amount is not affordable within the specified parameters, and the final column is
the maximum affordable amount.
Breakdown for currently available funds calculation has two columns corresponding to
Enterprise Fund and General Fund.
First row displays most recent balance (i.e., user's entry for General Fund, and if
applicable the Enterprise Fund's excess of current assets over current liabilities).
Second row's recommended balance is equal to five percent (or some other value, if
the default value is modified) of anticipated expenses/expenditures for fund.
Third row's available amount is excess (if any) of first row over second.
This amount is then distributed among sought expenditures in order of their priority
(with default order being compliance, Superfund, then penalty).
The initial average user fees and final fees once the affordable expenditures are incurred are
also displayed for an Enterprise Fund (as potentially useful background information).
n-13
MUNIPA Y; Updated July 2002
-------
Midway: Affordability Summary
350
Affordability Summary
Expenditure Amount
Priority
Compliance
Superfund
Penalty
Sought
$10,000,000
$2,000,000
$500,000
Currently Available
Enteror. Fund General Fund
$0 $3,000,000
$0 $0
$0' $0
Available
Through
Financing
$7,000,000
$2,000,000
$112,697
Total
Affordable
Amount
$10,000,000
$2,000,000
$112,697
$1,000,000 in compliance annual costs are included in calculations
Currently Available Details User Fee Details
Most Recent Balance
Recommended Balance
Available
Enterpr Fund General Fund
N/A $8,000,000
N/A $5,000,000
$0 $3,000,000
Initial
N/A
Final
N/A
Financial Inputs
General Fund Unresen/ed Balance
Anticipated General Fund Expenditures Plus Net Transfers
Median Household Income. (Year of Estimate)
Annual Debt Payments
Total Revenues
Direct Net Debt:
Overall Net Debt
i 1
(1999)
$8,000,000
$100,000,000
$89,000
$24,500,000
$100,000,000"?
$40,000,000;
$100,000,000
iu
View Detail
Done
n-M
MUNIPA Y; Updated July 2002
-------
AFFORD ABILITY ANALYSIS DETAILS
To view this screen, click the (View Detail] button on the affordability summary screen.
The four rows correspond to different financial criteria; since different financial criteria apply
to different types of entities, rows will be different depending on selected entity type.
The first column displays the criteria's existing values, allowing the user to examine
municipality's current financial condition before financing environmental expenditures.
The second column displays the criteria's projected values if the municipality pays the full
amount of the expenditures (displayed in $1,000).
Some of the payment for the sought expenditures could derive from currently
available funds (as calculated on the previous screen), which is accounted for in the
calculations, even though the column headings for the sought and affordable amounts
display the total to be paid for by a combination of both sources (i.e., currently
available funds and future financing).
The calculations also account for any compliance annual expenses.
The third column displays the criteria's threshold values.
These values are either the default values or the user-specified values from the
optional run parameters screen.
The direct debt level threshold value for City/Town/Village is equal to the state limit,
which the municipality supplies on its data request form and the user enters in the
financial data screen.
If the threshold values exceed all the projected values for the sought amount, then it is
affordable: the final column for maximum affordable amount will repeat the second column.
If the projected values instead exceed any threshold values (as displayed in red), then the
sought amount is not affordable within the specified run parameters: the final column will
display values for a maximum affordable amount that is less than the sought amount.
MUNIPAY thereby employs a multiple-constraint model to determine affordability. Since
only one of these constraints will ultimately be the binding one, changing a default value
does not always have an impact on the affordability result, as many of the parameters will
be related to constraints that are not binding.
Two additional columns will follow for each additional sought expenditure, showing the
municipality's changed financial condition after financing these other expenditures. The
financial condition after financing each expenditure becomes a new "baseline" for analysis
of the hierarchy's next expenditure.
H-15
M UN IP A Y; Updated July 2002
-------
i«. Midway: Affoidability Detail
rTnTxl
Affordability Detail
Proi Value ¦»
$10,000k
A II figures are in thousands
Affordable
and already account for
Proi Value
Proi Value
Compliance +
funds currently available
$10,000k
$10,000k
$2,000k
annual compliance costs
Affordable
Affordable
Affordable
Proi Value
Proi Value
Compliance +
Compliance +
Superfund +
$10,000k
$10,000k
$2,000k
$2,000k
$500k
Existing
Threshold
Sought
Affordable
Sought
Affordable
Sought
CitWTown/Villaae Criteria
Value
Value
Compliance
Compliance
Superfund
Supertund
Penalty
Debt service ratio
24.5%
25 0%
24 6%
24 6%
25 0%
25 0%
25 1%_
Incremental property tax burden
N/A
1 00%
0 01%
~ 01%
0 01%
0 01%
0 01%
Net debt re state limit
$40 0m
$80 0m
$47 0m
$47 0m
$49 0m
$49 0m
$49 5m
Overall net debt property value
0 5%
12 0%
0 6%
0 5%
0 5%
0 5%"
0 5%
Calculation Details
Current CPI
170 9
MHI CPI
166 6
Current MHI
591,314
Expenditure 1
Expenditure 2
Expenditure 3
Debt required tor expenditure
$7,000,000
$2,000,000
$500,000
Financing period (years)
25
5
3
Interest Ratio
1 774
1 155
1 102
.~
«l 1
! Done
n-16
MUNIPAY; Updated July 2002
-------
¦Ai. Momoe: Allowability Detail
Affordability Detail
Proi Value ¦»
$39,954k
AII figures are in thousands
Affordable
and already account (or
Proi Value
Proi Value
Compliance +
funds currently available
$39,954k
$39,954k
$0k
- annua1 compliance costs
Affordable
Affordable
Affordable
Proi Value
Proi Value
Compliance +
Compliance +
Penalty +
$100,000k
$39,954k
$500k
iUK
suk
Existing
Threshold
Sought
Affordable
Sought
Affordable
Sought
Enterprise Fund Criteria
Value
Value
Compliance
Compliance
Penalty
Penalty
Superfund
Debt service coverage ratio
¦527%
110%
110%
110%
110%
110%
110%
User fee increase as % of MHI
N/A
I 00%
1 26%
0 71%
0 74%
0 71%
0 71%
User fee total as % of MHI
0 97%
2 00%
2 23%
1 69%
1 71%
1 69%
1 69%
Debt-to-equity ratio
42%
200%
438%
200%
202%
200%
200%""
Calculation Details
Current CPI
170 9
MHI CPI
166 6
Current MHI
$41,040
Expenditure 1
Expenditure 2
Expenditure 3
Debt required for expenditure
$99,961,344
$500,000
"$0
Financing period (years)
25
3
5
Interest Ratio
1 774
1 102
1 155
<1 1
7T
[^Done ,~i|
n-17
MUNIPAY; Updated July 2002
-------
SECTION III:
GLOSSARY OF TERMS AND BIBLIOGRAPHY
MUNI PA Y; Updated July 2002
-------
Phrases with underlining cross-reference other entries in the glossary. A bibliography for
further reading follows on the final page.
Assets
Financial representation of economic resources owned by an organization or individual.
Balance
A fund's excess of assets over liabilities. Portions of the fund balance may be restricted-
reserved. or designated.
Bond
A written promise of the issuer to pay a specified sum of money, called the face value or
principal amount, at a specified date or dates in the future, called the maturity date, together with
periodic interest at a specified rate.
Capital Projects Fund
A fund created for all resources used for the construction or acquisition of designated fixed
assets by a governmental unit except those financed by special assessment, proprietary, or fiduciary
funds.
Debt
An obligation resulting from the borrowing of money or from the purchase of goods and
services. Debts of governmental units include bonds, time warrants, notes, and floating debt.
Debt Service Fund
A fund established to account for the accumulation of resources for, and the payment of,
general obligation long-term debt principal and interest.
Debt Service Ratio
The ratio of annual debt repayments to revenues for a municipality's governmental funds.
Debt Service Coverage Ratio
The ratio of an Enterprise Fund's net income (i.e., operating revenues minus operating
expenses) to its annual debt repayments.
Designated Balance
The portion of a fund balance that is tentatively set aside for use in the future.
Direct Net Debt
Gross debt incurred directly in the name of the specific governmental unit, less debt fully
supported from enterprise fund revenues ("revenue debt! and short-term debt.
m-i
MUNIPAY; Updated July 2002
-------
Enterprise Fund
A fund established to finance and account for the acquisition, operation, and maintenance
of governmental facilities and services that are entirely or predominantly self-supported by user
charges; or where the governing body of the governmental unit has decided that periodic
determination of revenues earned, expenses incurred, and/or net income is appropriate. Government-
owned utilities (e.g., water, sewer, electricity) and hospitals are ordinarily accounted for by enterprise
funds.
Fiduciary Fund
Any fund held by a governmental unit in a fiduciary capacity, ordinarily as agent or trustee.
Flows
Processes occurring continuously through time, measured in units per time period. (Contrast
with stocks.1)
Fund
A fiscal and accounting entity with a self-balancing set of accounts recording cash and other
financial resources, together with all related liabilities, and residual equities or balances, and charges
therein, which are segregated for the purpose of carrying on specific activities or attaining certain
objectives in accordance with special regulations, restrictions, or limitations.
Fund Balance
The excess of assets of a fund over its liabilities.
General Fund
A fund used to account for all transactions of a governmental unit that are not accounted for
in another fund. The General Fund is used to account for the ordinary operations of a governmental
unit that are financed from taxes and other general revenues.
General Obligation Bond
Bonds for whose payment the full faith and credit of the issuing body are pledged. More
commonly, but not necessarily, general obligation bonds are considered to be those payable from
taxes and other general revenues. In some states these bonds are called Tax Supported Bonds.
Governmental Fund
A generic classification that refers to all funds other than proprietary and fiduciary funds.
Governmental fund-types includes the General Fund, special revenue funds, capital projects funds.
debt service funds, and special assessment funds.
Internal Service Fund
A fund established to finance and account for services and commodities furnished by a
designated department or agency to other departments and agencies within a single governmental
unit, or to other governmental units.
m-2
MUNI PA Y; Updated July 2002
-------
Millage
Rate at which property taxes are levied, typically expressed per thousand dollars of assessed
home value.
Liabilities
Debt or other legal obligations arising out of transactions in the past that must be liquidated,
renewed, or refunded at some future date.
Long-Term Debt
Debt with a maturity of more than one year after the date of issuance.
Note
A written, relatively short-term promise to repay a specified principal amount of money at
a specified date in the future, together with interest at a specified rate. Municipal notes usually
mature in less than five years.
Overall Net Debt
Direct net debt of the specific governmental unit plus the net debt of overlapping and
underlying units of government apportioned in accordance with property valuation. Although
overlapping and underlying debt is not a liability of the specific governmental unit, it is supported
by the same property tax base as the debt of the specific governmental unit, and therefore is an
important factor in the ability of that unit to issue additional debt.
Proprietary Fund
A fund established to account for self-sustaining or profit-oriented activities. Includes
enterprise funds and internal service funds.
Reserved Balance
The portion of a fund balance that is reserved either for inventories (representing non-liquid
resources) or for encumbrances, which are monies that have been appropriated for a purchase but
not yet expended.
Restricted Balance
The portion of a fund balance that is legally restricted to specified uses.
Revenue Debt
. Debt whose principal and interest are payable exclusively from the earnings of an enterprise
fund.
Short-Term Debt
Debt with a maturity of one year or less after the date of issuance. Short-term debt typically
takes the form of a note.
ffl-3
MUNIPA Y; Updated July 2002
-------
Special Assessment Fund
A fund established to account for the construction of improvements or provision of services
that are to be paid for, wholly or in part, from special assessments levied against benefitted property.
Special Revenue Fund
A fund established to account for revenues from specific taxes or other earmarked revenue
sources that by law are restricted to the financing of particular functions or activities of government.
Stocks
Accumulated quantities existing at a particular time, measured in terms of units with no time
dimension. (Contrast with flows. Also note that this meaning of the term "stocks" is not to be
confused with its meaning as a synonym for a company's equity shares.)
Bibliography for Further Reading
Berne, Robert and Richard Schramm, The Financial Analysis of Governments (1986).
Gauthier, Stephen J., An Elected Official's Guide to Fund Balance (Government Finance Officers
Association, 1991).
Government Finance Officers Association, Governmental Accounting, Auditing and Financial
Reporting (1994).
Groves, Sanford M. and Maureen Godsey Valente, Evaluating Financial Condition: A Handbook
for Local Government (1994).
The Handbook of Municipal Bonds and Public Finance, eds. Robert Lamb, James Leigland, and
Stephen Rappaport (1993).
Hay, Leon E. and Earl R. Wilson, Accounting for Governmental and Nonprofit Entities (1995).
Local Government Finance: Concepts and Practices, eds. John E. Petersen and Dennis R. Strachota
(1991).
Management Policies in Local Government Finance, eds. J. Richard Aronson and Eli Schwartz
(1987).
Martin, Joan K., Urban Financial Stress: Why Cities Go Broke (1982). '
Moody's Investors Services, Moody's on Municipals: An Introduction to Issuing Debt (1991).
Standard and Poor's Corporation, Municipal Finance Criteria (2000).
m-4
MUNIPA Y; Updated July 2002
-------
SECTION IV:
SAMPLE PROBLEMS
MUNIPA Y; Updated July 2002
-------
OVERVIEW OF SAMPLE PROBLEMS
This section contains two sample problems (labeled A and B).
For each sample problem, the first page provides you with a scenario and several
assignments.
The second page provides you with the completed data request form.
The third page then provides a brief explanation of the results, as well as helpful notes.
Succeeding pages show you the results in the form of MUNIPAY's summary printouts for
the different runs corresponding to all of that scenario's assignments.
When you start a sample problem, you should first create a new file for the case (i.e., using
the "Control-N" keystroke, or choosing "New" from the file pull-down menu, just as in any
standard Windows application).
Then, for each new assignment, create a new run. You can either start a run from scratch by
typing in its name in the space under the "New Run" heading on the main screen, or by
selecting a run for a prior assignment and clicking [Copy],
MUNIPA Y; Updated July 2002
-------
SAMPLE PROBLEM A: Metropolis, New York
Scenario
You may recall from the BEN computer model Sample Problems that Kryptonite Chemical,
Inc., a producer of chemical deterrents located in Metropolis, dumped 300 barrels of hazardous waste
in the forest behind its plant. Some of this hazardous waste was also "properly" (by the standards
of the time) disposed of in the small municipal landfill that Metropolis previously owned and
operated on the city outskirts.
Unfortunately, the municipality has legally inherited this legacy of a history of industrial
pollution. Specifically, the municipality is liable for a total of $2.2 million in Superfund cleanup
costs. Metropolis once maintained a special Landfill Fund to account for the finances of landfill
activities, but the landfill and hence the fund ceased activities many years ago.
Assignments
1. Using the completed Data Request Form on the next page, run the MUMP AY model to
determine Metropolis's ability to afford the sought $2.2 million in Superfund cleanup costs.
What is your conclusion?
2. The city's financial consultant, Bertor H. Rhufman, claims that the "snapshot" of the city's
financial position presented in its annual statements is not indicative of its year-long
performance. Specifically, the city experiences a significant mistiming between revenues
and expenditures, such that at the end of the fiscal year the General Fund unreserved ending
balance may appear excessive, but is needed throughout the upcoming fiscal year when
expenditures are incurred before revenues are received. You determine that a 35-percent
safety factor will cover this mistiming throughout the year. What is your new conclusion on
Metropolis's ability to afford the sought $2.2 million?
3. City Manager Clark Kent (who initially became involved in local politics through the
environmental society "Unknown Writers Insulted by Messy Pollution," i.e., U-WIMP)
claims that the citizenry will not stand for any further tax increases. Voter approval is
required for any property tax increases, yet any such approval to pay for environmental
expenditures is "impossible." How do you adjust your analysis?
IV-2
MUNIPA Y; Updated July 2002
-------
Municipality & State: Metropolis NY
1980 Census Value
1990 Census Value
Population
6,663
6,597
Number of Persons above age 18
4,797
4,816
Number of Persons above age 65
933
1,056
Number of Individuals Below 125% of Poverty
666
726
Median Home Value
540,300
545,300
Median Household Income
516,300
524,842
Common Financial Data
General Fund Unreserved Balance: (for most recent fiscal year; omit if
independent utility)
$663,854
Anticipated General Fund Expenditures Plus Net Transfers: (budgeted or
projected)
$1,978,730
Median Household Income: (either U.S. Census, or more recent estimate)
$24,842
Year of Estimate: (if U.S. Census, year should be 1989)
1989
City/Town Village Financial Data (i.e., Governmental Funds)
Annual Debt Payments: (sum of principal and interest payments for all
Governmental Funds)
$158,246
Total Revenues: (for all Governmental Funds, but exclude transfers between
funds)
$2,571,461
Direct Net Debt: (gross debt incurred in municipality's name, less short-term and
revenue debt)
$1,450,000
Overall Net Debt: (above + overlapping/underlying gov't units' debt apportioned
by property value)
$2,516,018
State Debt Limit: (attach calculations, or note if state imposes no such limit)
N/A
Market Value of Taxable Property: (attach calculations if converted from
assessed)
$148,619,450
Median Home Value: (either U.S. Census, or more recent estimate)
$45,300
Year of Estimate: (if U.S. Census, year should be 1990)
1990
Population: (either U.S. Census, or more recent estimate)
6,707
Enterprise Fund Financial Data
N/A
rv-3
MUNIPA Y; Updated July 2002
-------
SAMPLE PROBLEM A: Metropolis, New York
Solutions
1. Using the completed Data Request Form, run the MUNIPAY model to determine
Metropolis's ability to afford the sought $2.2 million in Superfund cleanup costs. What is
your conclusion?
Metropolis can afford to pay the sought $2.2 million. Specifically, $564,918 is currently
available through the city's General Fund, and an additional $1,635,083 is available
through future financing. The model printouts appear on the following two pages.
2. The city's financial consultant, Bertor H. Rhufman, claims that the "snapshot" of the city's
financial position presented in its annual statements is not indicative of its year-long
performance. Specifically, the city experiences a significant mistiming between revenues
and expenditures, such that at the end of the fiscal year the General Fund unreserved ending
balance may appear excessive, but is needed throughout the upcoming fiscal year when
expenditures are incurred before revenues are received. You determine that a 35-percent
safety factor will cover this mistiming throughout the year. What is your new conclusion on
Metropolis's ability to afford the sought $2.2 million?
Metropolis can still afford to pay the sought $2.2 million. Although funds are no longer
currently available, the entire amount is available through future financing. The revised
model printouts appear on the third and fourth pages after this one.
3. City Manager Clark Kent (who initially became involved in local politics through the
environmental society "Unknown Writers Insulted by Messy Pollution," i.e., U-WIMP)
claims that the citizenry will not stand for any further tax increases. Voter approval is
required for any property tax increases, yet any such approval to pay for environmental
expenditures is "impossible." How do you adjust your analysis?
This should not change your analysis, as this is not a limit imposed by some outside legal
entity (e.g., a state statute for debt levels), but rather the limit is self-imposed. In many states
voters must approve millage increases above a specified level. The willingness of voters to
approve such increases is unrelated to economic ability to pay, and is instead related to
political willingness to pay. Accordingly, such political issues, should they arise for a case,
are not related to the economic ability to pay environmental expenditures.
IV-4
Ml)NIP A Y; Updated July 2002
-------
Affr "ity Summary Available Total
Exp re Amount Currently Available Through ordable
Priority Sought Enterpr. Fund General Fund Financing Amount
Superfund $2,200,000 $0 $564,918 $1,635,083 $2,200,000
N/A $0 $0 $0 $0 $0
N/A $0 $0 $0 $0 $0
Currently Available Details User Fee Details
Enterpr. Fund General Fund Initial Final
Most Recent Balance N/A $663,854 N/A N/A
Recommended Balance N/A $98,937
Available $0 $564,918
Financial Inputs
General Fund Unreserved Balance: $663,854
Anticipated General Fund Expenditures Plus Net Transfers: $1,978,730
Median Household Income: (Year of Estimate) (1989) $24,842
Annual Debt Payments: $158,246
Total Revenues: $2,571,461
Direct Net Debt: $1,450,000
Overall Net Debt: $2,516,018
State Debt Limit: N
N/A N/A
Market Value of Taxable Property: (millions) $149
Median Home Value: $45,300
Year of Estimate: 1990
Population: 6,707
Run Parameters
Maturity periods/schedule for Compliance, Superfund, Penalty 25, 5, 3
Interest Rate: 6%
Min General Fund balance as % of anticipated expenditures + transfers: 5%
Max debt service ratio: 25%
Max overall-net-debt:property-value ratio: 12%
Max property tax increase on median home as % of median income: 1.0%
Case = Metropolis; Analyst = J. Analyst, Region 2; Run = $2.2 million cleanup; 6/4/2002
MUNIPAY v. 2.0, 2000.q; Page 1 of 2
-------
Afford- Detail
Proi Value
$2,200k
Proi. Value
$2,200k
All figures are in thousands
Affordable
Affordable
and already account for:
Proi Value
Proi. Value
Superfund +
Superfund +
~ funds currently available
$2,200k
$2,200k
$0k
$0k
Affordable
Affordable
Affordable
Affordable
Proi. Value
Proi. Value
Superfund +
Superfund +
N/A +
N/A +
$2,200k
$2,200k
$0k
$0k
$0k
$0k
Existing Threshold Sought
Affordable
Sought
Affordable
Sought
Affordable
Citv/Town/Villaae Criteria
Value Value SuDerfund
Superfund
N/A
N/A
N/A
N/A
Debt service ratio
6.2%
25.0%
18.3%
18.3%
18 3%
18 3%
18.3%
18.3%
Incremental property tax burden
N/A
1.00%
0.45%
0 45%
0.45%
0 45%
0 45%
0 45%
Net debt re: state limit
$1.5m
N/A
$3 1m
$3 1m
$3 1m
$3 1m
$3 1m
$3 1m
Overall net debt:property value
1.7%
12.0%
3.2%
2.8%
2.8%
2 8%
2 8%
2.8%
Calculation Details
Debt required for expenditure
Financing period (years)
Interest Ratio
Add'l debt service for sought exp
Calculations Specific to City/Town/Village
Max affordable debt:
Debt service ratio
Incremental property tax burden
Net debt re. state limit
Overall net debt property value
Multiple Constraint
cumulative new debt service
Expenditure 1
$1,635,083
5
1.171
$382,898
$2,759,283
$3,668,383
$1,635,083
$15,318,316
$1,635,083
$382,898
Current CPI: 170 9
MHI CPI. 124.0
Current MHI. $34,244
Expenditure 2
$0
3
1.112
$0
MHVCPI 130.7
Current MHV- $59,244
$710,261
$1,284,624
$0
$13,683,234
$0
$382,898
Expenditure 3
$0
3
1.112
$0
$710,261
$1,284,624
$13,683,234
$0
$382,898
Case = Metropolis; Analyst = J. Analyst, Region 2; Run = $2.2 million cleanup; 6/4/2002 MUNIPAY v. 2 0, 2000.q; Page 2 of 2
-------
Affr Mity Summary Available Total
Exp ire Amount Currently Available Through ordable
Priority Sought Enterpr. Fund General Fund Financing Amount
Superfund $2,200,000 $0 $0 $2,200,000 $2,200,000
N/A $0 $0 $0 $0 $0
N/A $0 $0 $0 $0 $0
Currently Available Details User Fee Details
Enterpr. Fund General Fund Initial Final
Most Recent Balance N/A $663,854 N/A N/A
Recommended Balance N/A $692,556
Available $0 $0
Financial Inputs
General Fund Unreserved Balance: $663,854
Anticipated General Fund Expenditures Plus Net Transfers: $1,978,730
Median Household Income: (Year of Estimate) (1989) $24,842
Annual Debt Payments: $158,246
Total Revenues: $2,571,461
Direct Net Debt: $1,450,000
Overall Net Debt: $2,516,018
State Debt Limit: N
N/A N/A
Market Value of Taxable Property: (millions) $149
Median Home Value: $45,300
Year of Estimate: 1990
Population: 6,707
Run Parameters
Maturity periods/schedule for Compliance, Superfund, Penalty 25, 5, 3
Interest Rate: 6%
Min General Fund balance as % of anticipated expenditures + transfers: 35%
Max debt service ratio: 25%
Max overall-net-debt:property-value ratio: 12%
Max property tax increase on median home as % of median income: 1.0%
Case = Metropolis; Analyst = J. Analyst, Region 2; Run = $2.2 million cleanup, 35% safety factor; 6/4/2002
MUNIPAY v. 2.0, 2000.q; Page 1 of 2
-------
Afford Detail
Proi. Value
$2,200k
Proi. Value
$2,200k
All figures are in thousands
Proi. Value
$2,200k
Affordable
Proi. Value
$2,200k
Affordable
Affordable
Superfund +
$0k
Affordable
Affordable
Superfund +
$0k
Affordable
Proi. Value
Proi. Value
Superfund +
Superfund +
N/A +
N/A +
$2,200k
$2,200k
$0k
$0k
$0k
$0k
Existing
Threshold
Sought
Affordable
Sought
Affordable
Sought
Affordable
Citv/Town/Villaae Criteria
Value
Value
Superfund
Superfund
N/A
N/A
N/A
N/A
Debt service ratio
6 2%
25.0%
21.8%
21.8%
21.8%
21.8%
21 8%
21.8%
Incremental property tax burden
N/A
1.00%
0 60%
0 60%
0.60%
0 60%
0 60%
0.60%
Net debt re. stale limit
$1.5m
N/A
$3 7m
$3 7m
$3 7m
$3.7m
$3 7m
$3.7m
Overall net debt property value
1.7%
12 0%
3 2%
3.2%
3.2%
3.2%
3.2%
3 2%
Calculation Details
Debt required for expenditure
Financing period (years)
Interest Ratio
Add'l debt service for sought exp.
Calculations Specific to City/Town/Village
Max affordable debt:
Debt service ratio
Incremental property tax burden
Net debt re: state limit
Overall net debt:property value
Multiple Constraint
cumulative new debt service
Expenditure 1
$2,200,000
5
1 171
$515,188
$2,759,283
$3,668,383
$2,200,000
$15,318,316
$2,200,000
$515,188
Current CPI. 170.9
MHI CPI 124.0
Current MHI. $34,244
Expenditure 2
$0
3
1.112
$0
MHVCPI 130.7
Current MHV: $59,244
$353,351
$927,713
Expenditure 3
$0
3
1.112
$0
$0
$13,118,316
$0
$515,188
$353,351
$927,713
$0
$13,118,316
$0
$515,188
Case = Metropolis; Analyst = J. Analyst, Region 2; Run = $2.2 million cleanup, 35% safety factor; 6/4/2002
MUNIPAY v. 2.0, 2000.q; Page 2 of 2
-------
SAMPLE PROBLEM B: Town of Colaville, Minneapolis
Scenario
You may recall from the BEN computer model Sample Problems that the town of Colaville
is a small community whose primary employer is a local soft drink producer, Crazy Cola, Inc.
Colaville's only water source is the Caffeine River. Recently Howard Cunningham and his family
moved to Colaville to open a new hardware store. Howard, one of the very few Colaville residents
not employed by the cola plant, did not receive the benefits of free cola that his undercompensated
peers did. Thus, the Cunninghams drank tap water. They quickly discovered that the tap water was
discolored and unusual tasting. Colaville's small population had become so reliant on Crazy Cola
for their drinking needs that they neglected to notice any defects in the town's drinking water. Upon
investigation, EPA officials found that Colaville was in violation of the Safe Drinking Water Act
requirements.
You are assigned to prepare the civil case against Colaville. An engineering firm, Potsie
Technologies, estimates that the necessary water treatment equipment will cost $1 million.
Additionally, it reports that annual costs to maintain the equipment will be $100,000.
Using EPA's BEN computer model (and after many mistaken keystrokes brought on by a
case of the "shakes" after drinking too much Crazy Cola), you have already calculated that Colaville
enjoyed an economic benefit of $200,000 from its noncompliance. Therefore, you would like to
assess a civil penalty at least equal to $200,000. Like most cities, Colaville uses a separate
Enterprise Fund to account for the activities of its water treatment plant.
Assignments
1. Using the completed Data Request Form on the next page, run the MUMP AY model to
determine Colaville's ability to afford the sought $200,000 penalty if it does not incur any
additional environmental expenditures. What is your conclusion?
2. Colaville's consultant, Dr. Arthur Fonzarelli, claims that the information on the Data Request
Form does not reflect the expenditures that the city will soon incur in compliance-related
upgrades to its water treatment plant, or the additional annual costs that Colaville will incur
in the future for continued compliance. Your highest priority is ensuring that Colaville can
first afford to comply the ability to pay a penalty is of secondary importance. What is
your new conclusion on Colaville ability to afford the sought environmental expenditures?
3. The Colaville Town Council claims that their caffeine-addled populace will stage mass
demonstrations if water rates are increased. How do you adjust your analysis?
IV-9
MUNIPAY; Updated July 2002
-------
Municipality & State: Colaville WI
1980 Census Value
1990 Census Value
Population
7,654
7,057
Number of Persons above age 18
5,809
5,455
Number of Persons above age 65
995
1,327
Number of Individuals Below 125% of Poverty
520
522
Median Home Value
$38,800
$54,600
Median Household Income
521,580
$34,069
Common Financial Data
General Fund Unreserved Balance: (for most recent fiscal year; omit if
independent utility)
$100,000
Anticipated General Fund Expenditures Plus Net Transfers: (budgeted or
projected)
$2,278,730
Median Household Income: (either U.S. Census, or more recent estimate)
$40,000
Year of Estimate: (if U.S. Census, year should be 1989)
1995
City/Town Village Financial Data (i.e., Governmental Funds)
N/A
Enterprise Fund Financial Data
Current Assets: (exclude any restricted assets)
$902,133
Current Liabilities: (exclude liabilities payable from restricted assets)
$643,007
Total Liabilities:
$5,574,007
Total Equity:
$3,679,310
Annual Debt Payments: (sum of principal and interest payments from Statement of
Cash Flows)
$200,000
Operating Revenues:
$1,179,511
Operating Expenses:
$900,000
Anticipated Expenses Plus Net Transfers: (budgeted or projected)
$950,000
Average Annual Residential Charge: (typically based on 90,000 gallons for
water/sewer)
$300
Serviced Households: Cif unknown, use number of households from U.S. Census)
2.913
IV-10
MUNIPA Y; Updated July 2002
-------
SAMPLE PROBLEM B: Town of Colaville, Minneapolis
Solutions
1. Using the completed Data Request Form, run the MUNIPAY model to determine Colaville's
ability to afford the sought 5200,000 penalty. What is your conclusion?
Colaville can afford to pay the sought $200,000. Specifically, the entire amount is currently
available from the city's Enterprise Fund working capital. The model printouts appear on
the next two pages.
2. Colaville's consultant, Dr. Arthur Fonzarelli, claims that the information on the Data Request
Form does not reflect the expenditures that the city will soon incur in compliance-related
upgrades to its water treatment plant, or the additional annual costs that Colaville will incur
in the future for continued compliance. Your highest priority is ensuring that Colaville can
first afford to comply the ability to pay a penalty is of secondary importance. What is
your new conclusion on Colaville ability to afford the sought environmental expenditures?
Colaville can still afford to pay the sought environmental expenditures, both the compliance
costs and the civil penalty. Specifically the entire amount is available through a combination
of currently available funds and future financing. The model printouts appear on the third
and fourth pages after this one.
3. The Colaville Town Council claims that their caffeine-addled populace will stage mass
demonstrations if water rates are increased. How do you adjust your analysis?
This should not change your analysis, as this is not a limit imposed by some outside legal
entity (e.g., a state statute for debt levels), but rather the limit is self-imposed. In many
communities considerable protest arises from proposed rate increases. The willingness of
ratepayers or city councils voters to accept such increases is unrelated to economic ability
to pay, and is instead related to political willingness to pay. Accordingly, such political
issues, should they arise for a case, are not related to the economic ability to pay
environmental expenditures.
IV-11
MUNIPA Y; Updated July 2002
-------
Afford ' :|ity Summary Available Total
Expi a Amount Currently Available Through rdable
Prio.,^ Sought Enterpr. Fund General Fund Financing Amount
Penalty $200,000 $200,000 $0 $0 $200,000
N/A $0 $0 $0 $0 $0
N/A $0 $0 $0 $0 $0
Currently Available Details User Fee Details
Enterpr. Fund General Fund Initial Final
Most Recent Balance $259,126 $100,000 $300 $285
Recommended Balance $47,500 $113,937
Available $211,626 $0
Financial Inputs
General Fund Unreserved Balance: $100,000
Anticipated General Fund Expenditures Plus Net Transfers: $2,278,730
Median Household Income: (Year of Estimate) (1995) $40,000
Current Assets: $902,133
Current Liabilities: $643,007
Total Liabilities: $5,574,007
Total Equity: $3,679,310
Annual Debt Payments: $200,000
Operating Revenues: $1,179,511
Operating Expenses: $900,000
Anticipated Expenses Plus Net Transfers: $950,000
Average Annual Residential Charge: 300
Serviced Households: 2,913
Run Parameters
Maturity periods/schedule for Compliance, Superfund, Penalty 25, 5, 3
Interest Rate: 6%
Min General Fund balance as % of anticipated expenditures + transfers: 5%
Min debt service coverage ratio: 110%
Max debt-to-equity ratio: 200%
Max avg user charge increase as % of median household income: 1.0%
Max avg user charge total as % of median household income: 2 0%
Min working capital as % of anticipated expenses + transfers: 5%
Case = Colaville; Analyst = J. Analyst, Region 5; Run = $200k Penalty; 6/4/2002
MUNIPAY v. 2.0, 2000.q; Page 1 of 2
-------
Affor y Detail
All figures are in thousands
and already account for:
- funds currently available
Enterprise Fund Criteria
Debt service coverage ratio
User fee increase as % of MHI
User fee total as % of MHI
Debt-to-equity ratio
Existing Threshold
Value Value
140%
N/A
0 67%
151%
110%
1.00%
2.00%
200%
Proi. Value
$200k
Sought
Penalty
110%
-0.03%
0 63%
151%
Proi. Value
$200k
Affordable
Penalty
110%
-0.03%
0.63%
151%
Proi Value
$200k
Affordable
Penalty +
$0k
Sought
N/A
110%
-0 03%
0.63%
151%
Calculation Details
Debt required for expenditure
Financing period (years)
Interest Ratio
Add'l debt service for sought exp.
Calculations Specific to Enterprise Fund
Per-hhold affordable user fee increase
Max affordable debt re: hhold user fees
Max affordable debt re' debt-to-equity ratio
Max affordable debt re: multiple constraint
res revenue increase: affordable (cumulative basis)
res. revenue increase: sought
Current CPI: 170.9
MHI CPI: 152.4
Current MHI: $44,864
Expenditure 1 Expenditure 2 Expenditure 3
$0 $0 $0
3 3 3
1.112 1.112 1 112
$0 $0 $0
Residential % of revenue: 74%
Add'l residential rev to cover existing debt ($44,092)
(lesser of max's for increased & total fees): $449
$4,472,261 $4,618,222 $4,618,222
$1,784,613 $1,784,613 $1,784,613
$0 $0 $0
$44,092 S44,092 $44,092
$44,092 $0 $0
Case = Colaville; Analyst = J. Analyst, Region 5; Run = $200k Penalty; 6/4/2002
Proi. Value
Proi. Value
$200k
$200k
Affordable
Affordable
Proi. Value
Penalty +
Penalty +
$200k
$0k
$0k
Affordable
Affordable
Affordable
Penalty +
N/A +
N/A +
$0k
$0k
$0k
Affordable
Sought
Affordable
N/A
N/A
N/A
110% 110% 110%
-0.03% -0.03% -0.03%
0.63% 0.63% 0.63%
151% 151% 151%
MUNIPAY v. 2.0, 2000.q; Page 2 of 2
-------
Affor' 'ity Summary Available Total
Exp Amount Currently Available Through rdable
Pr^ Sought Enterpr. Fund General Fund Financing amount
Compliance $1,000,000 $211,626 $0 $788,374 $1,000,000
Penalty $200,000 $0 $0 $200,000 $200,000
N/A $0 $0 $0 $0 $0
$100,000 in compliance annual costs are included in calculations.
Currently Available Details User Fee Details
Enterpr. Fund General Fund Initial Final
Most Recent Balance $259,126 $100,000 $300 $347
Recommended Balance $47,500 $113,937
Available $211,626 $0
Financial Inputs
General Fund Unreserved Balance: $100,000
Anticipated General Fund Expenditures Plus Net Transfers: $2,278,730
Median Household Income: (Year of Estimate) (1995) $40,000
Current Assets: $902,133
Current Liabilities: $643,007
Total Liabilities: $5,574,007
Total Equity: $3,679,310
Annual Debt Payments: $200,000
Operating Revenues: $1,179,511
Operating Expenses: $900,000
Anticipated Expenses Plus Net Transfers: $950,000
Average Annual Residential Charge: 300
Serviced Households: 2,913
Run Parameters
Maturity periods/schedule for Compliance, Superfund, Penalty 25, 5, 3
Interest Rate: 6%
Min General Fund balance as % of anticipated expenditures + transfers: 5%
Min debt service coverage ratio: 110%
Max debt-to-equity ratio: 200%
Max avg user charge increase as % of median household income: 1.0%
Max avg user charge total as % of median household income: 2.0%
Min working capital as % of anticipated expenses + transfers: 5%
Case = Colaville; Analyst = J. Analyst, Region 5; Run = $200k Penalty with compliance costs; 6/4/2002
MUNIPAY v. 2.0, 2000.q; Page 1 of 2
-------
Affoi y Detail
Proi Value
$1,000k
Proi. Value
$ 1,000k
All figures are in thousands
Affordable
Affordable
and already account for:
Proi. Value
Proi Value
Compliance +
Compliance +
- funds currently available
$1,000k
$1,000k
$200k
$200k
annual compliance costs
Affordable
Affordable
Affordable
Affordable
Proi Value
Proi. Value
Compliance +
Compliance +
Penalty +
Penalty +
$1,000k
$1,000k
$200k
$200k
$0k
$0k
Existing
Threshold
Sought
Affordable
Sought
Affordable
Sought
Affordable
Enterprise Fund Criteria
Value
Value
Compliance
Compliance
Penalty
Penalty
N/A
N/A
Debt service coverage ratio
140%
110%
110%
110%
110%
110%
110%
110%
User fee increase as % of MHI
N/A
1 00%
0.06%
0 06%
0.11%
0.11%
0.11%
0.11%
User fee total as % of MHI
0 67%
2.00%
0.73%
0 73%
0.77%
0 77%
0 77%
0.77%
Debt-to-equity ratio
151%
200%
173%
173%
178%
178%
178%
178%
Calculation Details
Debt required for expenditure
Financing period (years)
Interest Ratio
Add'l debt service for sought exp.
Calculations Specific to Enterprise Fund
Per-hhold affordable user fee increase
Max affordable debt re: hhold user fees
Max affordable debt re: debt-to-equity ratio
Max affordable debt re. multiple constraint
res revenue increase affordable (cumulative basis)
res revenue increase, sought
Current CPI: 170.9
MHI CPI: 152.4
Current MHI: $44,864
Expenditure 1 Expenditure 2 Expenditure 3
$788,374 $200,000 $0
25 3 3
1 864 1.112 1.112
$58,773 $74,131 $0
Residential % of revenue 74%
Add'l residential rev to cover existing debt: ($44,092)
(lesser of max's for increased & total fees)' $449
$21,016,314
$1,784,613
$788,374
$77,898
$77,898
$3,969,123
$996,239
$200,000
$138,313
$ 60,416
$3,769,123
$796,239
$0
$138,313
$0
Case = Colaville; Analyst = J. Analyst, Region 5; Run = $200k Penalty with compliance costs; 6/4/2002
MUNIPAY v. 2.0, 2000.q; Page 2 of 2
------- |