Citi Global Markets Inc.

| Public Finance Division

Performance Update for Jefferson County, Alabama

May 12, 2015

Table of Contents
1. Overview of the County

2. Economic Development

3. Governance and Management

4. Financial Performance

5. Debt and Contingent Liabilities

14

6. Environmental Services (Sewer) Update

16

7. Conclusion

21

1. Overview of the County

Jefferson County at a Glance

Advantageously located at the intersection of I-65 and I-20/59 serving

as a regional economic center

Alabamas largest county, both in terms of population (660,793) and

employment (293,235)

Diverse economy with no reliance on any single industry or employer

Strong institutional presence embodied in Alabamas second largest

employer, the University of Alabama at Birmingham (UAB), which is the
fourth largest academic medical center in the U.S. - UAB ranks 21st
nationally in NIH funding and receives more research grant dollars
than all other colleges and universities in Alabama combined

Anchors the Birmingham metro area, whose GDP is greater than the
states next 3 largest metro areas, Mobile, Montgomery, and Huntsville,
combined

Home to the Innovation Depot, the largest technology business

incubator in the Southeast

Countys reported 2014 new residential permits (in dollars) greater than
58 of the states 67 counties combined - Represents 19.2% of the
states new residential permits with only 13.8% of the population

Overview of the County

Recent Accomplishments and Recognitions

Birmingham ranked 6th overall and 5th for economic development potential among the Top 10 mid-sized North, Central
and South American Cities of the Future - The Financial Times fDi Magazine, April 2015
Birmingham ranked #1 on list of Americas Next Hot Food Cities - Zagat, April 2015
Birminghams Railroad Park named among the Top 10 Parks that Revive Their City - USA Today, April 2015
Americas Most Affordable City - Forbes, March 2015
Top 20 Best Metro areas for Science, Technology, Engineering and Mathematics (STEM) Professionals - WalletHub,
January 2015
Birmingham selected as the host city for the 2021 World Games - more than 4,000 athletes from 100 countries and
tens of thousands of visitors to Jefferson County, creating a projected $256 million economic impact for the region January 2015
Top 10 Happiest Places to Work - Forbes, January 2015
Americas Best City for 2014 - Movoto, December 2014
Americas Best Cities for Global Trade - Global Trade, November 2014
Mountain Brook and Vestavia Hills named among the 50 Best Suburbs in the U.S. - Business Insider, October 2014
Hoover named as a Top 30 U.S. City to Live - 24/7 Wall St., September 2014
Birmingham selected as the host city for the 38th Annual Joint Meeting of the Southeast U.S./Japan and the JapanU.S. Southeast Associations - July 2014

Overview of the County

Rebirth of the City Center

Uptown Entertainment District

Regions Field - Baseballparks.coms 2013 Ballpark of the Year

2014 attendance increased 10% from the 2013 inaugural year
of the park

Award-winning Railroad Park

Named one of the Top 10 Best Downtowns of 2014 by Livibility.com

More than 1,300 condominium units planned or under construction

$30 million mixed use development in Midtown anchored by

a 34,000 square foot Publix grocery store

New historic building tax credits adopted by state legislature

spurring more than $200 million in local investment

Multiple concert venues with national and international acts

World-class restaurants, including several recognized by the

prestigious James Beard Foundation

Overview of the County

2. Economic Development

Well-Positioned for Growth

Geographically located in the Southeastern United States within a days

drive of 50% of the U.S. population - Alabama Department of Commerce

#4 State for Doing Business for 2014 - Area Development magazine

More than $300 million in capital investment already announced in 2015

The University of Alabama at Birmingham (UAB) is the states flagship

research university with more than $450 million in annual external funding

Five interstate highways and construction has begun on a 6th interstate,

the $3.2 billion Birmingham Northern Beltline, which will bring significant
economic development opportunities to Northern Jefferson County

Three tier-one railroads that can reach 78% of the nations population by rail
in two days or less

An international airport that can land a fully-fueled and fully-loaded Boeing

747

Tourism spending in the County increased 7.7% to $1.7 billion in 2014,

which includes visitors from 67 countries at the internationally-acclaimed
Barber Motorsports Park, recently recognized by Guinness World Records
as housing the largest motorcycle museum in the world last months Indy
Car race was televised in more than 100 countries around the world

Economic Development

Significant Amount of New Capital Investment

Confidence is evident in the quality and number of private sector investments expanding and locating into
Jefferson County.
Evonik Corporation, a multi-billion dollar German specialty chemical company that now employs more than
100 people in Birmingham, announced its first U.S. Innovation Center for research and development in
Birmingham - May 2014
Steris Corporation completed a $10 million capital investment for a global headquarters for its medical
specialty services division - October 2014
Oxford Pharmaceuticals announced a $29 million, 120,000 square-foot manufacturing facility in Birmingham,
which will employ a minimum of 200 employees when fully operational - November 2014
Dai-ichi Life entered U.S. insurance market through acquisition of Birminghams Protective Life for $5.7 billion
- February 2015
US Steel announced it will invest $277.5 million at its Fairfield Works plant - March 2015
$230 million state-of-the-art electronic arc furnace
$47.5 million plant to produce couplings that link tubing used in the energy industry
Marriott announced two new hotels in downtown Birmingham which will include a restaurant from James
Beard Foundation Award winner Chris Hastings - April 2015
Empire Building will redeveloped, at a cost of $27 million, into a 117-room hotel that will be part of Marriott's
luxury Autograph Collection brand
Former Alagasco Headquarters will be redeveloped, at a cost of $18 million, into a 120-room Marriott hotel
BBVA Compass completed a $13 million capital investment for a software development center - April 2015

Economic Development

Significant Improvement in Employment and Labor Market

Jefferson Countys February 2015 unemployment rate of 5.4% is less than state and national rates.
Jefferson
County

Statewide,
Seasonally Adj.

Civilian
Labor Force

Employment

Unemployment

Unemployment
Rate

February 2015

309,856

293,235

16,621

5.4%

February 2014

313,966

291,116

22,850

7.3%

February 2013

316,224

292,946

23,278

7.4%

February 2012

315,902

291,168

24,734

7.8%

February 2011

319,626

286,948

32,678

10.2%

February 2010

310,858

275,168

35,690

11.5%

Civilian
Labor Force

Employment

Unemployment

Unemployment
Rate

February 2015

2,139,801

2,016,508

123,293

5.8%

February 2014

2,147,787

1,992,854

154,933

7.2%

February 2013

2,156,557

1,997,662

158,895

February 2012

2,158,210

1,985,864

172,346

February 2011

2,209,834

1,986,137

February 2010

2,143,689

1,895,993

National,
Seasonally Adj.

Civilian
Labor Force

Employment

February 2015

157,002,000

148,297,000

8,705,000

5.5%

February 2014

155,688,000

145,301,000

10,387,000

6.7%

7.4%

February 2013

155,396,000

143,429,000

11,967,000

7.7%

8.0%

February 2012

154,739,000

141,911,000

12,828,000

8.3%

223,697

10.1%

February 2011

153,227,000

139,400,000

13,828,000

9.0%

247,696

11.6%

February 2010

153,694,000

138,581,000

15,113,000

9.8%

Unemployment

Unemployment Rate (%)

Unemployment Rate
14.0
12.0
10.0
8.0
6.0
4.0
Jan-10

Jan-11

Jefferson County, AL
*Source: Alabama Department of Labor

Economic Development

Jan-12

Jan-13

United States, Seasonally Adjusted

Jan-14
Statewide, Seasonally Adjusted

Unemployment
Rate

3. Governance and Management

Key Governance and Management Officials

All Five Commissioners Re-Elected in November 2014 Now exclusively the legislative and policy-making body

District 1: George Bowman

District 2: Sandra Little Brown

District 3: Jimmie Stephens

District 4: Joe Knight

District 5: David Carrington

Stable Management Team Now operating under the county manager form of government

Tony Petelos, County Manager

Carol Sue Nelson, County Attorney

George Tablack, Chief Financial Officer

Walter Jackson, Deputy County Manager for Human and Community Services

Dan Biles, Deputy County Manager for Infrastructure

Governance and Management

Management Activities
Commissions ongoing dedication and commitment to exit the Countys federal consent decrees on environmental and
employment practices, as well as to execute the Countys Bankruptcy Plan of Adjustment
Unified Commission emphasis on economic development and job creation
Commission implementing a formalized strategic planning process and department heads reviewing and refining
business processes
Human Resources Receiver putting systems in place for the County to exit the 32-year old consent decree on
employment practices
Possible 1-cent sales tax bill before the Alabama Legislature would provide the County the flexibility to refinance the
Countys school construction debt in order to address the Countys General Fund needs
First Fruits are earmarked for refinancing of the school construction debt, then:
$36.3 million to the Countys General Fund
$18.0 million divided pro rata among the Countys school systems
$3.6 million for community projects
$2.0 million for transit (reduced to $1.0 million after 10 years)
$500,000 to the Birmingham Zoo
Remainder to the Countys General Fund
As a side note, if the County does not receive a General Fund fix from the Alabama Legislature, the restoration of
needed public services and land acquisitions for economic development will be delayed

Governance and Management

4. Financial Performance

Ongoing Financial Improvements

Bankruptcy Exit, December 3, 2013
Structurally balanced budgets adopted and achieved since the Commission took office in 2010
FY14 Audit published ahead of schedule, less than six months after the year-end
Targeted 2015 Munis ERP software implementation date
Enhanced financial accounting and internal controls
Strengthened management and planning
Improved reporting of human resources hiring and promotion results

Financial Performance

Annual Assessed Valuation and Ad Valorem Taxes

Annual Assessed Valuation

Ad Valorem Tax Collections

Tax Year
Ending
Sept. 30
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

10,000

6,000
4,000
2,000
2005
2007
2009
Property and Public Utility Property

2011
2013
Motor Vehicles

Principal Ad Valorem Taxpayers Tax Year 2014

#
1
2
3
4
5
6
7
8
9
10

Company
Alabama Power Company
United States Steel Corporation
BellSouth Telecommunications LLC
Norfolk Southern Combined Rail
Affinity Hospital LLC
Alabama Gas Corporation
American Cast Iron Pipe Company
Hoover Mall Limited LP
Regions Bank
AT&T Services

Assessed Value and County Tax in $thousands

Assessed
Value
588,920
98,761
96,674
42,765
37,755
35,282
30,944
27,790
26,481
23,798

Total
Levy
Collected*
99.2%
100.0%
98.9%
99.5%
97.3%
98.3%
96.9%
98.8%
99.5%
99.5%

*Includes delinquent collections

County
Tax
7,950
1,333
1,305
577
510
476
418
375
358
321

County Ad Valorem Tax Revenue(1)

120
100

($millions)

($millions)

8,000

Current
Levy
Collected
98.2%
99.3%
98.4%
99.1%
96.5%
97.5%
95.7%
97.7%
98.1%
98.1%

80
60
40
20
2005

2006
(2)

2007

2008

2009

2010

2011

2012

2013

2014

Rural Roads (2.1 mills)

Public Buildings, Bridges and Roads (5.1 mills)

Sewer Tax (0.7 mills)

General Tax (5.6 mills)

(3)

(1) Figures do not include (i) ad valorem tax revenues from Motor Vehicles or (ii) ad valorem
tax revenues resulting from delinquent ad valorem collections.
(2) Approximately one half of the ad valorem tax revenue resulting from the Rural Roads tax
is returned to municipalities via a "Road Tax Distribution.
(3) Net of Amounts required to be deducted from the 5.6 mill tax proceeds for certain purposes.

10

Financial Performance

Trend in Sales and Use Taxes

General Sales and Use Tax Revenues have rebounded since the economic crisis and have grown by an average
of 3% annually since 2009.

105,000

100,000

($thousands)

95,000

90,000

85,000

80,000

75,000
2005

2006

2007

2008

2009

2010

Tax Amount Collected

11

Financial Performance

2011

2012

2013

2014

General Fund Financial Results

Audited 2013

Audited 2014

Revenues:
Taxes

84,848

91,327

Licenses & Permits

9,309

10,213

Intergovernmental

26,986

17,582

Charges For Services, Net

28,168

29,254

3,941

6,462

231

156

153,483

154,994

162,859

152,257

1,934

40

(7,829)

(6,696)

217

228

38

27

157,219

145,856

37,237

(798)

343

120

Surplus/(Deficit)

33,844

8,460

Fund Balances Beginning of Year

85,691

119,535

119,535

127,995

Miscellaneous
Interest and Investment Income
Total Revenues
Expenditures:
Current Expenditures
Capital Outlay
Indirect Expenses
Debt Service:
Principal Retirement
Interest and Fiscal Charges
Total Expenditures
Net Transfers
Other Financing Sources (Uses)

Fund Balances End of Year

Values are in $thousands

12

Financial Performance

Sewer Financial Results

Audited 2013

Audited 2014

Revenues:
Service Revenues
Taxes
Intergovernmental
Other Operating Revenue
Total Revenues

148,340

174,127

5,712

5,996

105

105

4,191

584

158,348

180,812

57,835

53,029

57,835

53,029

100,513

127,783

Expenditures:
Operating Expenses*
Total Expenditures
Net Revenue Available for Debt Service

Values are in $thousands

*Includes direct and indirect expense but excludes depreciation

13

Financial Performance

5. Debt and Contingent Liabilities

Debt Outstanding
Sewer Warrants
Senior Series 2013-A
Senior Series 2013-B2
Senior Series 2013-C2
Subordinate Series 2013-D
Subordinate Series 2013-E2
Subordinate Series 2013-F2

Type

Insurer

As of
9/30/14

As of
4/1/151

Current Interest
CAB
Convertible CAB
Current Interest
CAB
Convertible CAB

Assured
Assured
Assured
N/A
N/A
N/A

$ 395,005
57,906
158,380
810,915
53,569
345,435

$ 395,005
59,735
163,668
810,915
55,665
358,863

$1,821,210

$1,843,851

$ 43,890
45,675
42,250
4,225
41,650
4,165

$ 41,570
41,845
36,970
2,815
36,445
2,775

$181,855

$162,420

$449,820
105,500
110,790

$418,615
105,500
71,360

$666,110

$595,475

$69,425

$64,585

Total Sewer Warrants

General Obligation Warrants
Series 2003-A
Series 2004-A
Series 2013-A
Series 2013-B
Series 2013-C
Series 2013-D

Fixed
Fixed
Fixed
Fixed
Fixed
Fixed

National
National
N/A
N/A
N/A
N/A

Total General Obligation Warrants

School Warrants
Series 2004-A
Series 2005-A3
Series 2005-B

Fixed
Auction
VRDO

N/A
Ambac
Ambac

Total School Warrants

Bessemer Lease Warrants
Series 20064

Fixed

Ambac

1. Unaudited.
2. Outstanding principal amounts include accreted interest accrued on Capital Appreciation and Convertible Capital Appreciation Warrants.
3. Pursuant to the School Warrant Indenture, the County applied a credit for previous principal payments to the 1/1/15 scheduled mandatory redemption.
4. The County entered into a new Lease Agreement dated as of 1/1/13 whereby the Countys obligations under an original Lease Agreement were modified. Under the
new Lease Agreement, the Countys outstanding obligation was $106,564,690 as of 4/1/15.

14

Debt and Contingent Liabilities

Pension Update
The Countys Defined Benefit Plan currently has a funded ratio of 105.55% (FY2014 Audit, p. 74).

Defined Benefit Pension Plan

For the year ended September 30, 2014, the Commissions annual pension contribution of $6.588 million was equal to
the Commissions required and actual contribution
Fiscal
Year Ending

Actuarial
Valuation Date
10/1/2014
*Values in $thousands

15

Debt and Contingent Liabilities

Annual Pension
Cost (APC)

Percentage of APC
Contributed

Net
Pension Obligation

9/30/14

6,588

100%

9/30/13

6,893

100%

9/30/12

7,744

100%

Actuarial Value
of Assets
1,005,020

Actuarial Accrued
Liability (AAL)
Entry Age
952,158

Unfunded AAL
(UAAL)

Funded
Ratio

(52,862)

105.55%

Covered
Payroll
109,723

UAAL as a
Percentage of
Covered Payroll
-48.2%

6. Environmental Services (Sewer) Update

Environmental Services Department Overview and Update

Overview
The System serves twenty-three municipalities,
unincorporated Jefferson County and small portions of Shelby
and St. Clair Counties
The 440 square mile service area is characterized by gently
rolling topography and, due to the nature of the topography,
the infrastructure needed to collect and transmit sewage is
handled by a large gravity sewer network
The Countys wastewater collection and treatment system
consists of approximately 3,151 miles of sanitary sewer lines,
187 pump/lift stations, a septage receiving station, 80,991
manholes and 9 wastewater treatment plants (WWTPs)
Update
Rate increases in accordance with Plan of Adjustment; postbankruptcy sewer revenue ahead of projections
Proactively working with builders and other stakeholders to
establish revised policies, such as a low pressure system
policy, that will encourage growth of the sewer system
Non-residential accounts generate approximately 60% of total
sewer revenue
Even though ESDs Asset Management Program has reduced
dry-weather Sanitary Sewer Overflows (SSOs) by 40% over
five years, problems remain, but are being addressed
16

Environmental Services (Sewer) Update

Overview of Environmental Services Department Capital Needs

Capital needs benefit from improved information systems.
The County uses extensive data from its Asset Management Program to prioritize and evaluate capital project
requirements
All expenditures that meet the following criteria are considered capital expenditures:
Costs related to the addition or replacement of a component of a fixed asset
The asset has a value greater than $5,000
The asset has an estimated useful life greater than one year
The asset can be tracked and accounted for independently in the fixed asset records
Shifted sewer inspections from capital to operating expenses
Fleet, information technology and process expenditures are included in capital needs
Key short-term goals of the CIP are to fund projects and other capital expenditures needed to achieve complete
termination of the EPA Consent Decree
This includes projects and capital expenditures needed to further reduce Sewer System Overflows
CIP incorporates enhanced system O&M and prioritized capital project spending to reduce risks of regulatory noncompliance and enforcement actions

A primary benefit anticipated from the Asset Management Program is the transition from mostly corrective
maintenance when a critical asset fails to mostly preventive maintenance. This is anticipated to result in better, more
cost effective asset performance and higher levels of customer service by avoiding operational interruptions or
failures.

17

Environmental Services (Sewer) Update

Ten Year CIP (2014-2023)

At present, the CIP contemplates annual average capital investments of $76.5 million over the 10-year planning
horizon.
The Sewer Systems CIP is designed to:
Meet specific utility needs
Provide operational reliability
Achieve Consent Decree compliance and termination
Provide a platform for long-term sustainability, and
help ensure compliance with the Clean Water Act,
the Alabama Water Pollution Control Act, the
Countys NPDES permits and other regulatory and
customer service requirements
Under the Consent Decree, approximately 85% of the
pipeline work involved rehabilitation rather than
replacement
Significant and sustained investment in replacement
equipment and infrastructure will be required over the
10-year forecast period
Operating expenses have been less than previously forecast
primarily due to unfilled staff positions

The 10-year CIP is fully funded by existing funds

and pay-as-you-go funding from sewer system
revenues

18

Environmental Services (Sewer) Update

Projected Capital Improvement Program

Figures are in nominal $millions

Detailed Ten Year CIP (2014-2023)

Project Capital Expenditures, FY 2014-FY 2023 (Nominal Dollars)1,2

Project Category
Collection System Rehabilitation
Hydraulic Model & Capacity Assurance Support
Capital Equipment
Manhole Rehabilitation
IT Infrastructure & Services
Professional Engineering Services
Pump Station Upgrades
ROW Acquisition and Participation/Expansion Program
Sanitary Sewer & MH Repair and Replacement
SSO Abatement & Capacity Improvement Projects
WWTP Regulatory Compliance Projects
WWTP Repair, Replacement, & Renewal Projects
Total

1.
2.
3.

19

All numbers in $millions.

Dollars inflated at 3% per year beginning in FY 17.
Slight calculation discrepancies may exist due to rounding.

Environmental Services (Sewer) Update

2014
0.2
0.9
1.1
0.3
4.3
0.2
1.7
4.0
12.6

2015
6.4
0.9
4.3
1.1
2.7
0.1
13.0
3.8
3.6
2.3
38.2

2016
11.8
1.4
3.5
2.0
7.3
7.2
0.1
12.6
8.6
19.2
11.6
85.3

2017
5.2
1.4
2.6
1.8
1.8
4.6
4.5
0.5
10.7
14.9
24.0
42.7
114.7

2018
5.3
0.8
2.7
1.8
3.2
3.7
0.5
17.7
8.1
5.4
5.6
54.8

2019
5.5
0.2
2.7
1.9
3.3
3.8
0.5
14.4
8.0
13.5
10.9
64.8

2020
5.6
0.2
2.8
1.9
0.1
3.4
3.9
0.6
15.1
5.7
90.0
11.3
140.7

2021
5.8
0.2
2.9
2.0
0.7
3.5
4.1
0.6
15.2
8.3
52.9
11.6
107.7

2022
6.0
0.2
3.0
2.0
1.1
3.6
4.2
0.6
15.9
6.0
17.9
11.9
72.4

2023
6.1
0.2
3.1
2.1
1.0
3.7
4.3
0.6
16.1
6.1
18.4
12.3
74.2

Monthly Sewer Rate Comparison

A national rate survey of water and sewer bills across major metropolitan areas is published biannually, with the
most recent data available for calendar year 2014.
Jefferson Countys average residential sewer use is 6 CCFs (5.1 CCFs with the 15% watering credit) and the median
sewer use is 4 CCFs
Residential
(5 CCF)
Atlanta, GA
Seattle, WA
Knoxville, TN
Charleston, SC
Akron, OH
Portland, OR
Richmond, VA
Detroit, MI
Jefferson County, AL
Austin, TX
Jacksonville, FL
Cleveland, OH (NEORSD)
Fort Wright, KY
San Diego, CA
Lawrenceville, GA
New Orleans, LA
New York City, NY
Mobile, AL
Pensacola, FL
Washington, DC
Nashville, TN
San Juan, PR
Philadelphia, PA
Augusta, GA
Source: 2014 AWWA/RFC Water and Wastewater Rate Survey

20

Environmental Services (Sewer) Update

$63.06
$50.97
$47.50
$46.33
$45.72
$43.75
$43.65
$42.86
$42.50
$34.20
$33.96
$33.88
$33.45
$33.32
$31.59
$29.55
$28.46
$26.61
$23.70
$22.05
$21.84
$19.85
$19.46
$19.01

7. Conclusion

Conclusion and Summary of Key Points

County manager form of government
Birmingham metro areas GDP is greater than the states next 3 largest metro areas, Mobile, Montgomery, and
Huntsville, combined
Strong economic growth and renewed community optimism
Employment indicators exceeding state and national comparables
Improved financial results
Defined benefit plan at 105.55% (with assumed 7% return rate)
Audits back on schedule
Possible legislative fix for General Fund

21

Conclusion