November 23, 2017

MetCom Costs Held Below National Averages

MetCom waterline
Posted for St. Mary’s County Metropolitan Commission

In pivotal customer cost comparisons, St. Mary’s County Metropolitan Commission stood out as holding costs below the national averages.

The Davenport Public Finance released, earlier this year, the first Debt Capacity Study of St. Mary’s County and the Metropolitan Commission since 1999. The study gave St. Mary’s County Metropolitan Commission a positive report.

Davenport Public Finance provides financial advisory and underwriting services to the public sector and not for profit issuers in the Mid-Atlantic region and has one of the largest and most experienced staff of public finance professionals in the region. Davenport is St. Mary’s County’s financial adviser.

The Davenport study compared MetCom costs to customers favorably against similarly sized peers across the United States. Key measurements employed by the study are MetCom costs to the customer, debt management, and strength of liquidity.

The details examined in the financial and debt profile of MetCom costs are based on several key points including:

Outstanding long term debt per customer.
Annual combined customer bill versus median household income.
Operating margins.
Debt service coverage.
Cash liquidity.

MetCom scored well in each of these key points and Davenport commented that MetCom’s debt profile was strong, in part due to its “strong operations and management.” Additionally, MetCom was found to have solid operating margins in line with its peers, it was praised for a debt burden similar to that of peer utilities, and for its quick debt amortization.

The annual customer bill versus household median income was slightly below that of the national medians, in spite of the fact that the water and sewer industry is a “capital intensive operation” in the words of Davenport consultants. Further strengthening the findings demonstrating MetCom’s solid debt profile, the number of customers (the rate base) is smaller than the peer utilities in the study’s comparisons. This means MetCom’s costs are lower even though it distributes its total costs among a smaller population.

Davenport concluded that MetCom operates “at a level consistent with a solid AA rated Utility Enterprise Operation.” Further, due to MetCom’s “strong financial, management and debt track record,” the utility has the capability to explore other potentially more efficient and flexible financing mechanisms as well as possibly issuing standalone bonds to finance projects.

The Executive Summary for MetCom begins on page four of the study, which can be accessed here. The remainder of the MetCom report resumes on page 29 of the study.

The 2015 report from Davenport Public Finance was presented to St. Mary’s County Commissioners April 12, 2015. To watch video of the April 21, 2015 Commissioners of St. Mary’s begin here, choose Commissioners of St. Mary’s County, and select Videos, April 21, 2015, from the drop-down menu.

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