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HomeMy Public PortalAboutFiscal Year 2018 Annual Comprehensive Financial Report (ACFR)COMPREHENSIVE ANNUALFINANCIAL REPORT FISCAL YEARS ENDED JUNE 30, 2018 AND 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT • ST. LOUIS, MISSOURI Construction of the Maline Creek Tunnel FEBRUARY 2017 DECEMBER 2017 AUGUST 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT ST. LOUIS, MISSOURI COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEARS ENDED JUNE 30, 2018 AND 2017 Report Prepared And Submitted By The Department of Finance Marion M. Gee Director Of Finance Contents Page Part I –Introductory Section: Letter Of Transmittal ...................................................................................................................i Organization Chart ...................................................................................................................xiv Certificate Of Achievement For Excellence In Financial Reporting .......................................xv Part II –Financial Section: Independent Auditors’Report .....................................................................................................1 Management’s Discussion And Analysis ....................................................................................3 Basic Financial Statements Statements Of Net Position ..................................................................................................16 Statements Of Revenues, Expenses, And Changes In Net Position ..................................18 Statements Of Cash Flows ...................................................................................................19 Notes To Financial Statements ............................................................................................21 Required Supplementary Information Schedule Of Changes In Net Pension Liability And Related Ratios .................................94 Schedule Of Employer Contributions To Employees’ Pension Plan ..................................95 Schedule Of Changes In Total OPEB Liability………………………………………….….…96 Part III –Statistical Section: Net Position By Component........................................................................................................97 Changes In Net Position .............................................................................................................98 Operating Revenues By Source ..................................................................................................99 Operating Expenses ..................................................................................................................100 Non-Operating Revenues And Expenses .................................................................................101 User Charge Rates ....................................................................................................................102 User Charge Revenues ..............................................................................................................103 Sewer User Charges (Composite-Annual)...............................................................................104 Number Of Customers By Type ...............................................................................................105 Ten Largest Customers .............................................................................................................106 Ratios of Outstanding Debt By Type .......................................................................................107 Computation Of Overlapping Debt ..........................................................................................108 Pledged Revenue Coverage .......................................................................................................109 Demographic And Economic Statistics ....................................................................................110 Principal Employers (St. Louis Metropolitan Area)................................................................111 Employment Level.....................................................................................................................112 Average Flow .............................................................................................................................113 Operating And Capital Indicators ............................................................................................114 Introductory Section Vision Statement Quality Service Always Mission Statement To protect the public’s health, safety, and water environment by responsibly providing wastewater and stormwater management Values Integrity Teamwork Excellence and Innovation The District Employees Customer Satisfaction Mission, Vision, Value statements are important elements of a strategic business plan. The Mission statement keeps the District focused on its essential activity, the Vision statement points to its ideal purpose, and the Value statement conveys the principles that must shape our actions. i October 12, 2018 The Board of Trustees The Metropolitan St. Louis Sewer District The Comprehensive Annual Financial Report (“CAFR”) of The Metropolitan St. Louis Sewer District (“MSD” or the “District”) for the fiscal year ended June 30, 2018, is submitted herewith.The District’s Finance Department prepared this report.The District is responsible for the accuracy of the data and the completeness and fairness of the presentation of the financial statements and other information presented herein. We believe the presentation is accurate in all material respects and includes all disclosures necessary to enable the reader to gain a reasonable understanding of the District’s financial activities.In the CAFR, the District’s financial activities are measured on a single enterprise fund basis where all funds of the District and its sub- districts are consolidated. The District’s CAFR includes an Introductory Section, a Financial Section, and a Statistical Section. The Introductory Section includes this transmittal letter, an organization chart as of June 30, 2018 which lists the District’s Board of Trustees, Rate Commission Chair, members of the Civil Service Commission, and management staff and the Government Finance Officers Association’s Certificate of Achievement For Excellence In Financial Reporting presented to the District for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2017. The Financial Section includes the independent auditors’ report, management’s discussion and analysis, and the District’s basic financial statements. The Statistical Section includes financial, economic, and demographic information, generally presented on a multi-year basis. The CAFR includes all funds of the District. The operations of these funds, as reflected in the financial statements, are under the control of the District’s governing body. The District has determined there were no other agencies or entities that met the established criteria for inclusion in the reporting entity. The Board of Trustees The Metropolitan St. Louis Sewer District ii Organization MSD was created in 1954 to provide a metropolitan-wide sewer system to serve the City of St. Louis and most of the more heavily populated areas of St.Louis County. Before MSD’s creation, the City of St. Louis, various municipalities, and private sewer companies provided sewer service that primarily included only collecting and transporting sewage from small geographic areas to nearby rivers and streams with little or no treatment. Most of the municipalities or private sewer companies serving the area did not have the jurisdictional authority or financial resources needed to eliminate health hazards from untreated sewage. When the District began operations, it took over the publicly owned wastewater and stormwater drainage facilities within its jurisdiction and began the construction of an extensive system of collector and interceptor sewers and treatment facilities. In 1977, voters approved the District’s annexation of a 270 square mile area of the lower Missouri River and lower Meramec River watersheds. The District purchased the Fee Fee Trunk Sewer Company and the Missouri Bottoms Sewer Company in 1978. MSD has since acquired other investor-owned or municipally operated systems. The District’s service area now encompasses 520 square miles including all 66 square miles of the City of St. Louis and 454 square miles of St. Louis County. The current population served by the District is approximately 1.3 million representing more than 426,000 accounts. MSD is organized pursuant to Article VI, Section 30 of the Missouri State Constitution that empowers the people of St. Louis County and the City of St. Louis “to establish a metropolitan district for functional administration of services common to the area.” MSD is the only district established pursuant to that section of the Missouri State Constitution. The Charter of MSD (“Plan”), approved by voters in 1954 and amended in 2000 and 2012, established the District. The Plan describes the District as “a body corporate, a municipal corporation, and a political subdivision of the state.” As a political subdivision of the state, MSD is comparable to a county or city, such as St.Louis County or the City of St. Louis. The Board of Trustees The Metropolitan St. Louis Sewer District iii The Plan established the governing body of the District as a six-member Board of Trustees (“Board”) with three members appointed by the Mayor of St. Louis and three members appointed by the St.Louis County Executive. Each Trustee shall be appointed for a term of four years. No Trustee shall serve more than two full consecutive terms plus any portion of an unexpired term. Provided, however, that each Trustee shall serve until his/her successor shall be appointed and qualified. No more than two trustees appointed from the City or County can be affiliated with the same political party. Unlike a corporation’s board of directors that is responsible solely to the stockholders who choose to invest in the corporation, MSD’s Board members are trustees of public property and public funds. They are responsible to all citizens within the District. According to the Plan, the Board enacts District ordinances, determines policies, and appoints the Executive Director, the Secretary-Treasurer, and the Internal Auditor. The Executive Director appoints all other District officials. Among its duties, the Board makes all appropriations, approves contracts for improvements, and engages an accounting firm to perform the annual independent audit of the District. The Plan prescribes other duties of the Board and grants numerous broad powers, subject to federal and state laws, to the District and the Board of Trustees. Among other things, the Plan outlines the following requirements or provisions: Requires that MSD operate with a balanced budget; Details how MSD can tax property and requires an annual public hearing on all taxes levied by the District; Details how MSD can establish user charges; Requires MSD to establish civil service rules and regulations governed by a Civil Service Commission; Provides how the original boundaries of the District may be extended to include any area in St. Louis County; and Requires MSD to approve all plans and designs for proposed construction, alteration, or reconstruction of sewer or drainage facilities within the District’s boundaries. The District is also governed by the Missouri State Constitution and various federal and state laws that among other requirements mandate the following: MSD must hold permits for all sanitary discharges.These permits require a minimum of secondary treatment; MSD must provide wastewater treatment in an area-wide manner to qualify for federal and state grants; The Board of Trustees The Metropolitan St. Louis Sewer District iv MSD must operate, maintain, and replace facilities to provide proper wastewater treatment or be subject to penalties and fines; and MSD must set user charge rates in compliance with the Federal Clean Water Act.These rates must be submitted to the Missouri Department of Natural Resources to receive future construction grants and to avoid the possibility of refunding past grants. During fiscal 2018 the primary source of funding for the operation and maintenance of MSD’s wastewater system was a user charge averaging $591.72 per year or $49.31 per month for a single-family residence. The District’s charges for residential wastewater service are tied to the amount of measured water usage during a winter quarter. For residential properties without water meters, the charges are based on housing attributes (such as the number of rooms, baths, and toilets) that correlate to water usage. That methodology is the same billing methodology used by the City of St.Louis Water Division for their non-metered properties. Multi-family residential and non- residential rates are proportionate to the single-family charge and are based on water consumption and the strength of the discharge. During fiscal 2018 the District’s stormwater system was funded through property taxes of 1.9¢ per one hundred dollars assessed valuation for stormwater regulatory activities and 9.7¢ per one hundred dollars assessed valuation for operations and maintenance of the District’s stormwater utility.The District also performs limited capital improvements with the revenues generated by the 9.7¢ tax. Prior to fiscal year 2017, the operation and maintenance of the District’s stormwater system was funded by a combination of property taxes and flat fee billing of 24¢ per month for residential and commercial properties and 18¢ per month per unit for multi- unit properties. On April 5, 2016, 62% of voters in MSD’s service area approved Proposition S which placed all MSD customers under the same property tax rates to fund stormwater services. The flat fee billings were eliminated. MSD also receives some federal, state, and local grants to help defray the cost of constructing sewage treatment and drainage facilities and improvements. The District also charges fees for plan review, permits, construction inspection of new system development, and special discharges. The District charges a uniform connection fee in all service areas. The District, itself, may issue general obligation bonds and revenue bonds to finance the cost of improvements and extensions to the sewer system. The District also may issue, on behalf of each of its subdistricts, general obligation bonds, revenue bonds, or special assessment bonds. The Board of Trustees The Metropolitan St. Louis Sewer District v Major Initiatives Affecting The Financial Resources Of The District Throughout MSD’s service area, there are hundreds of points where a combination of rainwater and wastewater discharges into local waterways from the wastewater sewer system during moderate to heavy rainstorms.These sewer overflow points act as relief valves when too much rainwater enters the sewer system, and without them, our community could experience thousands of basement backups and/or extensive street flooding.(Even with these overflows points, basement backups can easily number in the dozens or hundreds during particularly heavy rains).Depending on where sewer overflows are located within MSD’s system, they are classified as combined sewer overflows --or--constructed separate sewer overflows.Many of these overflows are a legacy of the way our wastewater systems were first built.Though most overflows predate the District’s creation in 1954, they are still MSD’s responsibility and efforts to address the problem must continue. Sewer overflows have been a significant focus of MSD’s work for many years. From 1992 to 2012, MSD spent approximately $2.7 billion to eliminate over 380 overflows.Today, our work to address sewer overflows and improve water quality continues through a Consent Decree that stems from a lawsuit filed against MSD by the State of Missouri and the United States Environmental Protection Agency (“EPA”) in June 2007.The State of Missouri and the EPA were later joined in the lawsuit by the Missouri Coalition for the Environment. After lengthy mediation, the EPA announced a settlement agreement in August 2011.On April 27, 2012, the United States District Court for The Eastern District of Missouri entered a Consent Decree, thus concluding the litigation.The Consent Decree calls for $4.7 billion in upgrades to the existing wastewater sewer system.Also known as MSD Project Clear, this work was originally scheduled to take place over 23 years; and addresses our community’s wastewater collection and treatment capabilities on a system-wide basis.The work is a mammoth undertaking that will benefit St. Louisans –and our environment –for generations to come. On June 22, 2018, a United States District Judge approved an amendment to the Consent Decree that extends the schedule from 23 years to 28 years.(Necessary approvals were also received from the State of Missouri on August 13, 2018.)The motivation behind the amendment is regulatory changes that compel MSD to accelerate certain projects that do not fall within the scope of the Consent Decree.The time extension will allow MSD to address new regulatory requirements in a fiscally responsible way, while better projecting and controlling needed rate increases.The impact on future rates will become clearer in FY2019 as MSD prepares for a planned wastewater rate proposal. The Board of Trustees The Metropolitan St. Louis Sewer District vi MSD submits rate proposals to an independent Rate Commission.The Rate Commission was established in 2000 through voter-approved amendments to MSD’s Charter.The commission is composed of 15 member organizations representing a broad cross-section of MSD customers and is meant to provide the public with a formal role in MSD’s rate setting process. Fiscal year 2018 funding of MSD activities was based on a rate proposal for both wastewater and stormwater that was submitted to the Rate Commission in February 2015.After thoroughly reviewing the proposal with assistance from its own team of experts working at its direction, the Rate Commission issued a recommendation to MSD’s Board of Trustees in July 2015.The Board formally accepted the recommendation in October 2015 and scheduled associated ballot referendums for voters to consider. On April 5, 2016, 76% of voters from within MSD’s service area approved Proposition Y, which authorizes the issuance of $900 million in bonds.The bond financing –which is to be used primarily for projects associated with the consent decree –helps lessen the steepness of needed rate increases for wastewater activities.For example, with the approval of Proposition Y, the average single family home’s monthly MSD bill gradually increases from $40.72 per month on July 1, 2015, to $60.44 per month on July 1, 2019.Without Proposition Y, that same bill would have increased to $95.13 per month on July 1, 2019. Combined with similar bond elections held in 2004, 2008, and 2012, voters residing within MSD’s service area have authorized a total issuance of $2.6 billion in wastewater revenue bonds.As of June 30, 2018, MSD has issued $1.9 billion of the total authorization.Consistent with past financing strategies, MSD anticipates funding future Consent Decree and other work related to the wastewater collection and treatment system through a combination of rate increases and voter approved bond issuances. Through the same April 5, 2016 vote that approved Proposition Y, 62% of voters in MSD’s service area also approved Proposition S.The approval of Proposition S puts all MSD customers under the same property tax rates to pay for stormwater service. In turn, all MSD customers will receive the same level of stormwater service. This process occurred gradually throughout MSD’s fiscal year 2017 (July 1, 2016, through June 30, 2017). Prior to July 1, 2016, MSD’s stormwater services were paid for through a variety of property taxes and a flat stormwater fee on each month's MSD bill.The amount of property taxes paid by an individual customer –and the stormwater service received – was dependent on where a customer lived.Thus, not all customers paid the same rates and not all customers received the same level of stormwater service. The Board of Trustees The Metropolitan St. Louis Sewer District vii Proposition S allowed MSD to rollback and eliminate several existing taxes; eliminate the stormwater fee; and, in lieu of these funding mechanisms, institute or leave in place two taxing districts that cover MSD’s entire service area. The overriding benefit of Proposition S is that customers are treated equally under the new system.This means that all customers are subject to the same tax rates and all customers receive the same level of stormwater services. With the approval of Proposition S and the implementation of a new funding structure for stormwater services, MSD has “fund balances” left over from the former taxing and fee system.These fund balances allow for a finite and limited four-year stormwater capital program of $67 million, starting in fiscal year 2017 (July 1, 2016, through June 30, 2017). However, this limited and set amount of money barely begins to address the overall need for stormwater projects throughout MSD’s service area.Thus –and as promised to the public –MSD staff proposed a Stormwater Capital Rate to its Rate Commission on February 26, 2018.The proposal calls for an impervious-area-based Stormwater Capital Rate to fund capital improvements to address localized flooding and erosion problems throughout MSD’s service area.As presented, the Stormwater Capital Rate would generate approximately $30 million annually to address and finance an estimated $562 million of flooding and erosion issues.The impact on the typical residential customer would be $2.25 per month. After thoroughly reviewing the proposal with assistance from its own team of experts working at its direction, the Rate Commission made a recommendation to MSD’s Board of Trustees in August 2018.Accordingly –and pursuant to MSD’s Charter – the Board considered the Rate Commission’s recommendation and accepted it in September 2018.If warranted, the Board will place a referendum for the Stormwater Capital Rate before voters from within MSD’s service area no earlier than April 2019.If approved by voters, MSD plans to implement the rate on January 1, 2020.However –and as MSD implements a Stormwater Capital Program –for the first 18 months that the new charge is in effect, MSD would only charge two-thirds of the rate.The full rate would then be charged starting on July 1, 2021. In late April 2017, and continuing into the first week of May, east-central Missouri received up to 11 inches of rain.As a result, the three major waterways within MSD’s service area – the Missouri, Mississippi, and Meramec Rivers –reached major flood levels.Several wastewater treatment plants sustained minor damages during this rain event and associated flooding.Sixteen pump stations also sustained significant damage.Additionally, MSD received 1,750 customer service complaints, of which approximately 800 were for basement backups.A reserve of $1.3 million was created for the basement backup complaints.Beyond the reserve, total costs to protect MSD The Board of Trustees The Metropolitan St. Louis Sewer District viii facilities or to make repairs associated with the rain event and flooding were approximately $1.5 million.MSD has submitted applications to the Federal Emergency Management Agency to recover a portion of these costs. For fiscal year 2018 (“FY18”), the Metropolitan St. Louis Sewer District (“District”) enforced two cost saving measures during the budget development process.The first measure was to limit discretionary wastewater operations and maintenance spending to FY17 budget levels.Non-discretionary items were defined as salary and wages and benefits for existing employees and existing vacancies.The second cost saving measure was to disallow acceleration of Consent Decree projects funded with sewer service charge revenues.Both of these cost saving measures were necessary to offset shortfalls in sewer service charge revenues experienced in FY17 and anticipated to continue throughout the current approved rate period which spans FY17 through FY20.Revenues projected in the District’s approved rate plan have not been realized in the most part due to lower water usage by our customers. Operations The Executive Director and his staff administer the operation and maintenance of the District’s collection and treatment systems. The District’s wastewater, stormwater, and combined sewer collection system includes more than 9,400 miles of pipe and channel and will grow larger over the long term due to new development. Some years may actually see a reduction in total miles of pipe. This is due to the replacement of inefficiently placed pipe with shorter, more direct lines of pipe. The District’s responsibilities for stormwater drainage range from cleaning and maintaining street inlets to operating and maintaining the floodwall pump stations along the Mississippi River. MSD currently operates seven wastewater treatment facilities. These facilities treated an average flow of 270.1 million gallons per day (“MGD”) in fiscal 2018 compared to 328.9 MGD in fiscal 2017. The design capacity and average flow, by watershed, in MGD was as follows in fiscal 2018: MAJOR WATERSHED LEVEL OF TREATMENT NUMBER OF FACILITIES DESIGN CAPACITY (MGD) AVERAGE FLOW FISCAL 2018 (MGD) Mississippi River Secondary Two 472.00 197.4 Missouri River Secondary Two 78.00 47.4 Meramec River Secondary Three 42.75 25.3 Total Seven 592.75 270.1 The Board of Trustees The Metropolitan St. Louis Sewer District ix In addition to construction initiated by the District to protect the public’s health and property from raw sewage and flooding, the District also provides various engineering- related design review and inspection services for the construction of wastewater and stormwater sewers by individuals, businesses, and municipalities in the community. Economic Conditions In The St. Louis Metropolitan Area As a rule, the District’s major revenue sources do not fluctuate with the local and national economy as much as local governments that depend on sales or income taxes for their major sources of revenue. The combined unemployment rate for the City of St.Louis and St.Louis County was 3.5%in June 2018 and lower than the national unemployment rate of 4.2%for the same time period. MSD has its own internal barometers for measuring economic development within the District. These are listed below for fiscal 2018 and 2017: 2018 2017 Sewer Plan Reviews: Number of Plans Approved 673 523 Number of Miles of Sewers 49 34 Sewer Construction Permits: Number of Permits Issued 3,769 3,740 Number of Miles of Sewers 125 24 Customer Connections: Number of Connection Permits Issued 2,178 1,891 Connection Fee Revenue (in millions)$1.4 $2.0 Value of Sewers Dedicated to MSD by Developers (in millions)$24.8 $6.8 Over the years, the St. Louis economy has undergone a transformation from reliance on traditional manufacturing industries to those industries based on advanced technology and services. The St.Louis area is a center for health care, biotechnology, banking, finance, transportation, tourism, and education and has a strong and diverse manufacturing economy. The area has an abundance of energy, water, and sewerage facilities and can sustain future economic growth. The Board of Trustees The Metropolitan St. Louis Sewer District x Financial Information Proprietary Operations.The current financial condition of MSD remains stable. The District realized a net operating income of $94.5 million in fiscal 2018 compared to a net operating income of $58.4 million the prior year. The increase in operating revenues of $34.8 million is explained by an increase in sewer service revenue as a result of rate increases and an increase in other revenues due to recording a reduction to water backup insurance recoveries in fiscal 2017.Operating expenses decreased $1.3 million due to a reduction in water backup claims primarily related to the flood that occurred in fiscal 2017 not repeated in fiscal year 2018,offset by an increase in expenditures with the collection system as well as pumping and treatment maintenance. A more in-depth analysis of the District’s financial position and the magnitude of the capital improvement and replacement program (“CIRP”) is provided in the Management’s Discussion and Analysis section that appears later in this report. Budgetary Controls.The District’s Plan requires MSD to submit a proposed budget to the Board by March 15th each year. After Board review, a final budget is approved in June. The District’s Plan also requires MSD to maintain budgetary controls and to adopt a balanced budget. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the appropriation process approved by the Board. The annual appropriated budget includes activities of the District’s operating and debt service funds. The Board adopts ordinances to appropriate funds for capital improvement expenditures at the time of the contract award and acceptance of any grant offers. Budgetary control is by Division and major expenditure category within the General Fund, each Debt Service Fund, and each capital improvement contract. The District utilizes an encumbrance accounting system in conjunction with internal variance and projection analysis to maintain budgetary control. Certain encumbrances carry over from one year to the next as approved by the Board during the budget process. Monthly and year-end financial reports are prepared in accordance with United States generally accepted accounting principles for Enterprise Funds. Adjustments are made to the accounting records, where necessary, to reflect the full accrual method of accounting. Under the full accrual method of accounting, revenues are recognized when earned and expenses are recorded as liabilities when incurred. Encumbrances and unearned capital and operating grants are eliminated under the full accrual method of accounting. These amounts are disclosed as commitments in the notes to financial statements. The Board of Trustees The Metropolitan St. Louis Sewer District xi Cash Management. In compliance with its Plan, the District invests temporarily idle funds in cash, cash equivalents and investments such as collateralized certificates of deposit, collateralized repurchase agreements, obligations of any agency of the United States, and United States Treasury instruments. The District utilizes competitive bidding for investment purchases and monitors market conditions daily. Risk Management. In-house staff and consultants jointly conduct risk management activities. MSD maintains third-party commercial insurance coverage for various risks while self-insuring for other risks and liabilities at levels customary for similar enterprises. The District maintains replacement cost property and casualty insurance with a policy limit of $1.25 billion on certain facilities and equipment that have an estimated replacement cost of $1.5 billion. The District assumes the risk of loss (including payment of water backup claims to its customers) on the majority of its underground pumping facilities and collection system. MSD is one of the few sewer districts in the country known to provide water backup claim coverage to its customers. The underground pumping facility and collection system assets have an estimated replacement cost of $9.9 billion. To minimize exposure to loss, the District inspects its facilities regularly and performs preventative maintenance on them. MSD maintains automobile,general liability and excess liability insurance. The District is self-insured for workers’ compensation and funds those costs through annual appropriations from the District’s general insurance fund. The District maintains reinsurance for workers’ compensation liabilities in excess of specified limits up to the statutory limit. Risk control activities include using a third-party claims administrator, maintaining a computerized claim tracking system, and annually reevaluating workers’ compensation cost. The District also has programs designed to promote safety in the workplace and employee wellness. The District provides group medical coverage for its employees and offers dependent medical coverage on a contributory basis through a self-insured plan. Effective February 1,2014, the District maintained stop loss coverage for specific claims exceeding $175,000 per year and for total annual claims greater than 125%of the annual claims estimate. The District provides its employees with contributory group dental insurance coverage and non-contributory life insurance and contributory optional life insurance coverage. The District also contributes $100 every fiscal year, up to a maximum of $300, to a vision care program for employees. Effective July 1, 2013, spouses were eligible to use the benefits; effective July 1, 2016, dependent children up to age 26 were eligible to use the benefits; however, the amount could not exceed the maximum amount of $300. The District reevaluates insurance coverage and providers annually by reevaluating medical insurance claims and health benefit costs. For most construction projects, insurance is obtained by the individual contractor and included in the contract price. The Board of Trustees The Metropolitan St. Louis Sewer District xii Internal Controls. District Management is responsible for designing, establishing, and maintaining an internal control system that protects District assets from loss, theft, or misuse and ensures that adequate accounting data is compiled to prepare financial statements in conformity with United States generally accepted accounting principles. Internal control systems are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and that the evaluation of costs and benefits requires estimates and judgments by management. The District’s internal control system is subject to periodic evaluation by Management, the Board and the District’s independent accountants. Other Information Audit Requirements. The District’s Plan requires an annual audit by independent certified public accountants. The District’s CAFR includes a report on the District’s financial statements by the accounting firm of CliftonLarsonAllen LLP. Besides meeting the requirements set forth in the Plan, the annual audit is also designed to meet the requirements of the 2013 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”) that was issued by the Office of Management and Budget (“OMB”). A Single Audit Report will be issued for the year ended June 30, 2018. The financial statements of The Metropolitan St. Louis Sewer District Employees’ Pension Plan, The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust and The Metropolitan St. Louis Sewer District Defined Contribution Plan are also audited annually. These audit reports were issued for the periods ending December 31, 2017 and 2016 and are available to interested parties upon request. Awards. The Government Finance Officers Association of the United States and Canada (“GFOA”) awarded a Certificate of Achievement for Excellence in Financial Reporting to MSD for its CAFR for the fiscal year ended June 30, 2017. The Certificate of Achievement is a prestigious national award that recognizes conformance with the highest standards for preparation of state and local government financial reports. To be awarded the Certificate of Achievement, a government unit must publish an easily readable and efficiently organized CAFR, the contents of which conform to program standards. The CAFR must satisfy both U.S. generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for one year only. The District has received a Certificate of Achievement for the last thirty consecutive years. We believe the current CAFR continues to conform to the GFOA’s high standards, as reflected in the Certificate of Achievement program requirements, and are submitting it again this year for consideration. The Board of Trustees The Metropolitan St. Louis Sewer District xiii The District also received the GFOA’s Distinguished Budget Presentation award for its fiscal 2018 annual budget. The District has received this award for thirty-one consecutive years. We believe the fiscal year 2019 budget presentation continues to meet the GFOA’s high standards and submitted it on July 5, 2018, for consideration. Marion M. Gee Director of Finance xiv ORGANIZATION (As of June 30, 2018) BOARD OF TRUSTEES James Faul, Chair; Rev. Ronald Bobo, Vice Chair; Freddie Dunlap; Annette Mandel; James I. Singer; Michael Yates OFFICE OF INTERNAL AUDITOR RATE COMMISSION Leonard P. Toenjes, Chair OFFICE OF SECRETARY TREASURER Tim R. Snoke Secretary/Treasurer CIVIL SERVICE COMMISSION Tara Buckner Annette Adams Daniel Gonzales EXECUTIVE DIRECTOR Brian L. Hoelscher/CEO FINANCE Marion M. Gee Director OFFICE OF GENERAL COUNSEL Susan M. Myers General Counsel OPERATIONS Jonathon C. Sprague Director ENGINEERING Rich Unverferth Director OFFICE OF HUMAN RESOURCES Vicki L. Taylor Edwards Director INFORMATION SYSTEMS Barbara E. Mohn Director xv Government Finance Officers Association Certificate Of Achievement For Excellence In Financial Reporting Presented to Metropolitan St. Louis Sewer District Missouri For its Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2017 Executive Directors/CEO Financial Section METROPOLITAN ST. LOUIS SEWER DISTRICT SERVICE AREAS CliftonLarsonAllen LL P CLAconnect.com (1) INDEPENDENT AUDITORS’REPORT Board of Trustees The Metropolitan St. Louis Sewer District St. Louis, Missouri Report on the Financial Statements We have audited the accompanying financial statements of the business-type activity of The Metropolitan St. Louis Sewer District (the District),as of and for the years ended June 30, 2018 and 2017, and the related notes to the financial statements,which collectively comprise the District’s financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of the District as of June 30, 2018 and 2017, and the changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Board of Trustees The Metropolitan St. Louis Sewer District (2) Emphasis of Matter During the fiscal year ended June 30, 2018, the District adopted the provisions of Governmental Accounting Standards Board (GASB)Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. As a result of the implementation of GASB No. 75, the District reported a restatement for the change in accounting principle (see Note 1). Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Schedule of Changes in Net Pension Liability and Related Ratios for the Employees’Pension Plan, Schedule of Employer Contributions to Employees’ Pension Plan and Schedule of Changes in Total OPEB Liability, as listed in the table of contents,be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the District’s basic financial statements. The introductory section and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements.These sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 12, 2018,on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the District’s internal control over financial reporting or on compliance.That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance. CliftonLarsonAllen LLP St Louis, Missouri October 12, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 3 MANAGEMENT’S DISCUSSION AND ANALYSIS For The Years Ended June 30, 2018 And 2017 The annual report of The Metropolitan St. Louis Sewer District (“MSD” or the “District”) includes the independent auditors’ report, management’s discussion and analysis (“MD&A”), and the financial statements accompanied by notes essential to the user’s understanding of the financial statements. Management of the District has provided this MD&A to be used in combination with the District’s financial statements.This narrative is intended to provide the reader with more insight into management’s knowledge of the transactions, events, and conditions reflected in the accompanying financial statements and the fiscal policies that govern the District’s operations. 2018 Financial Highlights The District increased capital assets by $194.0 million as a result of increases in construction in progress ($128.4 million), land ($2.6 million)and depreciable capital assets net of depreciation ($63.0 million). The District placed $149.0 million of capital assets into service during fiscal year 2018. The continued high level of capitalization reflects the District’s work to meet long-term plans. Capitalized assets included: Collection and pumping plant $139.0 million Treatment and disposal plant and equipment $3.4 million Land $2.6 million General plant and equipment $4.0 million The net increase to accumulated depreciation was $73.3 million which takes into consideration the recording of depreciation relating to new assets in addition to depreciation on existing assets, offset by the accumulated depreciation relieved for assets retired during the year. During the 2018 fiscal year, the District implemented Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (“GASB Statement No. 75”)which replaces the requirements of Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions (“GASB Statement No. 45”),as amended. This Statement improves accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or “OPEB”). This Statement also establishes standards for recognizing and measuring liabilities, deferred outflows and inflows of resources, and expense. The impact of THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 4 implementing GASB Statement No. 75 resulted in the District recording a $24.2 million total OPEB liability, recording a total of $1.3 million OPEB-related deferred outflows of resources, restating beginning net position by $14.1 million and calculating OPEB expense according to the new Statement. No assets are accumulated in a trust that meets the criteria of paragraph 4 of GASB Statement No. 75 to pay OPEB-related benefits. 2017 Financial Highlights The District increased capital assets by $200.2 million as a result of increases in construction in progress ($177.0 million), land ($1.0 million)and depreciable capital assets net of depreciation ($22.2 million). The District placed $105.3 million of capital assets into service during fiscal year 2017. The continued high level of capitalization reflects the District’s work to meet long-term plans.Capitalized assets included: Collection and pumping plant $60.7 million Treatment and disposal plant and equipment $39.6 million Land $1.0 million General plant and equipment $4.0 million In conjunction with the recording of additional depreciation relating to new assets, the net increase to accumulated depreciation was $75.4 million. During the year, the District implemented Governmental Accounting Standards Board Statement No. 77, Tax Abatement Disclosures (“GASB Statement No. 77”).This Statement requires disclosure of tax abatement information about (1) the District’s own tax abatement agreements and (2) those that are entered into by other governments and that reduce the District’s tax revenues.The requirements of this Statement improve financial reporting by giving users of financial statements essential information that has not been consistently or comprehensively reported to the public. In summary, the District has no direct tax abatement agreements but the effect of those entered into by the county and municipalities within the District’s boundary decreases the District’s tax revenues by $1.3 million. Required Financial Statements The financial statements presented by the management of the District include the Statements of Net Position; Statements of Revenues, Expenses, and Changes in Net Position; and Statements of Cash Flows.These statements are prepared using the accrual basis of accounting.This method of accounting recognizes revenue at the time it is earned and expenses when the related liability occurs.As a result of using this method of accounting, the District’s performance over the time period being reported is more easily determinable. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 5 The Statements of Net Position provide a report of the District’s current, restricted, and other non-current assets such as cash, investments, receivables, and capital assets. Also, the Statements of Net Position provide a summary of the District’s current, restricted, and non-current liabilities, including contracts and accounts payable, deposits and accrued expenses, pension and OPEB liabilities and bonds and notes payable.Deferred outflows and inflows, where applicable, are also included.The final section of the Statements of Net Position, the net position section, contains earnings retained for use by the District.Increases or decreases in the net position section may be indicative of an improving or declining financial position.This statement provides the basis for computing rate of return, evaluating the capital structure of the District, and assessing the liquidity and financial flexibility of the District. The Statements of Revenues, Expenses, and Changes in Net Position summarize all of the year’s revenue and expense.These statements indicate how successful the District was at maintaining expenses below the level of revenue earned. The Statements of Cash Flows account for the net change in cash and cash equivalents by summarizing cash receipts and cash disbursements resulting from operating activities, non-capital financing activities, capital and related financing activities, and investing activities.These statements assist the user in determining the sources of cash coming into the District, the items for which cash was expended, and the beginning and ending cash balances. Financial Analysis The District’s financial position improved in the current year, as evidenced by the increase in net position of $100.1 million after the effect of implementing GASB Statement No. 75. The improvement is due primarily to an increase in net investment in capital assets and unrestricted funds of $92.5 million and $13.3 million, respectively; offset by a decrease of $5.7 million in restricted funds. Net capital assets increased $194.0 million while debt related to the capital assets, net of the $115.6 million increase in unspent cash received upon the issuance of new senior debt (“Series 2017A”), only increased $101.7 million. The increase in construction-related liabilities of $0.6 million and the increase in debt referenced above of $101.7 million decreased net investment in capital assets while the deferred loss recognized on the partial refundings in fiscal 2018, net of the amortization of all deferred losses, of $0.8 million increased net investment in capital assets. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 6 Condensed Financial Statements and Analysis 2018 Analysis Current, restricted,and other assets increased $139.1 million or 18.7% in the current year. The increase is predominately due to an increase in cash and investments due to higher sewer rates charged,with a corresponding increase in cash collected from customers,and due to the unspent cash received on the senior debt issued in fiscal 2018. Capital assets net of accumulated depreciation increased by $194.0 million or 6.0% in the current year as the result of continued high levels of construction and acquisition of assets by the District. Current liabilities increased by $6.4 million or 4.8% due primarily to an increase in the current portion of bonds and notes payable and retainage held on capital projects which correlates with the increase in construction. Increase In crease June 30,June 30,(Decreas e)June 30,(Decrease) 2018 2017 2018-2017 2016 2017-2016 Assets: Current, restricted, and other assets 882,667$ 743,572$ 139,095$ 707,033$ 36,539$ Capital assets (net of accumulated depreciation)3,446,232 3,252,238 193,994 3,052,043 200,195 Total Assets 4,328,899 3,995,810 333,089 3,759,076 236,734 Deferred Outflows of Resources: Bonds and notes payable-Deferred loss on refunding 12,099 11,321 778 11,974 (653) Pension-related outflows 17,333 37,666 (20,333) 31,144 6,522 OPEB-related outflows 1,278 — 1,278 — —           Total Deferred Outfl ows of Resources 30,710 48,987 (18,277)43,118 5,869 Li ab ilities: Current liabilities 140,082 133,679 6,403 125,284 8,395 Non-current liabilities 1,722,146 1,515,345 206,801 1,344,141 171,204 Total Liabilities 1,862,228 1,649,024 213,204 1,469,425 179,599 Deferred Inflows of Resources : Pension-related inflows 6,065 4,605 1,460 5,712 (1,107)           Total Deferred In flows of Resources 6,065 4,605 1,460 5,712 (1,107) Net Position: Net investment in capital assets 1,968,740 1,876,249 92,491 1,809,386 66,863 Restricted 129,579 135,259 (5,680)136,547 (1,288) Unrestricted 392,997 379,660 13,337 381,124 (1,464) Total Net Position 2,491,316$ 2,391,168$ 100,148$ 2,327,057$ 64,111$ Condensed Statement s of Net Position (000's ) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 7 Non-current liabilities increased by $206.8 million or 13.6% primarily due to a $209.0 million increase in bonds and notes payable relating to the $343.3 million new senior and subordinate debt issued in fiscal 2018 and the related net increase in premiums on debt of $42.4 million, offset by $125.8 million advance refunding of existing debt and $50.9 million for fiscal 2019 senior and subordinate debt payments reclassified to current liabilities. In addition, non-current liabilities increased by $24.2 million as the District implemented GASB Statement No. 75 resulting in recognition of the District’s total OPEB liability. Decreases in the net pension liability of $18.7 million and in deposits and accrued expenses of $8.1 million for the removal of the net OPEB obligation previously recorded under GASB Statement No. 45 are the other components primarily accounting for the change in non-current liabilities. Net deferred outflows and inflows decreased $19.7 million or 44.5% due primarily to updates to various information provided by the District’s actuary such as economic/demographic gains or losses, assumption changes or inputs, and investment gains or losses related to the District’s net pension liability, offset by the establishment of the District’s OPEB-related outflows. 2017 Analysis Current, restricted,and other assets increased $36.5 million or 5.2% in the current year.The increase is predominately due to an increase in cash and investments due to higher sewer rates charged with increased collections and due to the unspent cash received on the senior debt issued in fiscal 2017. Capital assets net of accumulated depreciation increased by $200.2 million or 6.6% in the current year as the result of continued high levels of construction and acquisition of assets by the District. Current liabilities increased by $8.4 million or 6.7% due primarily to an increase in the current portion of bonds and notes payable and retainage held on capital projects which correlates with the increase in construction. Non-current liabilities increased by $171.2 million or 12.7% primarily due to $203.8 million relating to the senior and subordinate debt issued in fiscal 2017,offset by $42.7 million for fiscal 2018 senior debt payments reclassified to current liabilities and $5.3 million for premium amortization,and $14.4 million pertaining to the increase in the District’s net pension liability. Net deferred outflows and inflows increased $7.0 million or 18.6% due primarily to updates to various information provided by the District’s actuary such as economic/demographic gains or losses, assumption changes or inputs, and investment gains or losses. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 8 For the Fiscal For the Fiscal In crease For the Fiscal In crease Year Ended Year Ended (Decrea se)Year Ended (Decreas e) June 30, 2018 June 30, 2017 2018-2017 June 30, 2016 2017-2016 Operating Revenues : Sewer service charges 364,165$ 330,873$ 33,292$ 306,119$ 24,754$ Rec over y (provision) for doubtful sewer ser vice charge accounts (2,990) (2,513) (477) (4,107) 1,594 Licenses, per mits, and other fees 3,777 4,036 (259) 3,620 416 Other 3,359 1,095 2,264 14,226 (13,131) Total Operating Revenues 368,311 333,491 34,820 319,858 13,633 Non-oper ating Revenues: Property taxes levied by the district 33,749 32,458 1,291 25,671 6,787 Investment income 7,406 2,903 4,503 4,636 (1,733) Rent and other income 254 106 148 103 3 Total Non-operating Revenues 41,409 35,467 5,942 30,410 5,057 Total Revenues 409,720 368,958 40,762 350,268 18,690 Operating Exp enses : Pumping and treatment 60,735 60,203 532 59,100 1,103 Collection system maintenance 44,786 43,928 858 42,853 1,075 Engineer ing 11,218 11,290 (72) 10,998 292 General and adm inistrative 59,012 58,535 477 55,315 3,220 Water backup claims 1,557 5,035 (3,478) 7,631 (2,596) Deprec iation 81,326 81,194 132 83,984 (2,790) Asset management 15,131 14,893 238 13,215 1,678 Total Operating Exp en ses 273,765 275,078 (1,313) 273,096 1,982 Non-oper ating Exp enses: Net loss on disposal and sale of capital assets 1,834 673 1,161 325 348 Non-recurring projects and studies 9,296 7,459 1,837 11,000 (3,541) Interest expense 36,695 31,251 5,444 28,943 2,308 Total Non-operating Exp enses 47,825 39,383 8,442 40,268 (885) Total Exp enses 321,590 314,461 7,129 313,364 1,097 Income Before Capital Grants And Contributions 88,130 54,497 33,633 36,904 17,593 Capital Grants And Contributions 26,077 9,614 16,463 12,037 (2,423) Change in Net Position 114,207 64,111 50,096 48,941 15,170 Net Position - Beginning of Year, As Previously Stated 2,391,168 2,327,057 64,111 2,278,116 48,941 Effect of Adoption of GASB 75 (14,059) — (14,059) — — Net Position - Beginning of Year, As Restated 2,377,109 2,327,057 50,052 2,278,116 48,941 Net Position - End of Year 2,491,316$ 2,391,168$ 100,148$ 2,327,057$ 64,111$ Statements of Revenues, Exp enses, and Changes in Net Position (000's ) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 9 2018 Analysis Net position increased $100.1 million after the $14.1 million restatement decreased beginning net position due to GASB Statement No. 75 or 4.2% over the prior year. The largest impact to net position was the increase in sewer service charges revenue which increased due to rate increases. Total revenue increased by $40.8 million or 11.0%. Sewer service charges increased $33.3 million or 10.1% and the provision for doubtful accounts increased correspondingly by $0.5 million or 19.0%. Other operating revenue increased $2.3 million or 206.8% due to a reduction in insurance recoveries recorded in fiscal 2017 not repeated in fiscal 2018 and an increase in forfeited construction deposits. Investment income increased $4.5 million or 155.1% due to the increase in cash from unspent bond proceeds available to be invested and higher interest rates. Total expenses increased by $7.1 million or 2.3% resulting primarily from the increase in interest expense of $5.4 million or 17.4% due to the new Senior debt issued in December 2017. Operating expenses actually decreased $1.3 million or 0.5% with the largest decrease in water backup claims of $3.5 million or 69.1% due to fewer significant rain events in fiscal 2018. Total non-operating expenses, including the interest expense referenced above, increased $8.4 million or 21.4%. Capital grants and contributions increased $16.5 million or 171.2% with the majority of the increase resulting from capital contributions. The number of capital projects contributed to the District increased significantly in fiscal 2018 due to the improving economy and the average value per project also increased in fiscal 2018. 2017 Analysis Net position increased $64.1 million or 2.8% over the prior year.Sewer service revenue increased as a result of rate increases. Non-operating property taxes levied by the District also increased due to the establishment of one new taxing district covering the District’s entire service area which increased tax revenue. Total revenue increased by $18.7 million or 5.3%.Sewer service charges increased $24.8 million or 8.1% with the provision for doubtful accounts decreasing by $1.6 million or 38.8% due to increased collections.Other operating revenue decreased $13.1 million or 92.3% due to insurance recoveries in fiscal 2016 related to the December 2015 rain event not repeated in fiscal 2017.Non-operating property taxes increased $6.8 million or 26.4% as a result of the new taxing district referenced above. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 10 Total expenses increased slightly by $1.1 million or 0.4% with operating expenses increasing $2.0 million or 0.7% and non-operating expenses decreasing by $0.9 million or 2.2%.The largest operating expense increase was a $3.2 million or 5.8% increase in general and administrative costs primarily related to an increase in pension expense. 2018 Analysis The District ended the year with $34.4 million in cash and cash equivalents or a decrease of $13.7 million or 28.5% from the prior year. Cash flows from operating activities increased by $12.9 million or 8.7% as a result of increased receipts from customers offset by an increase in payments to suppliers for goods and services and an increase in payments to employees. Cash flows from non-capital financing activities increased by $1.2 million or 3.6%. Cash flow from capital and related financing activities decreased by $74.0 million or 50.5% due to decreased spending for capital assets, increased bond proceeds and premiums received in fiscal year 2018 compared to fiscal year 2017, offset by increased principal, interest,and fees paid on bonds. Cash flows from investing activities decreased by $100.6 million or 289.9%. The decrease primarily stems from a greater change in the purchase of investments than in the proceeds from sale and maturity of investments from fiscal 2017 to fiscal 2018. For the Fis cal For the Fis cal Increase For the Fis cal Increase Year Ende d Year Ended (Decrease)Year Ende d (Decrease) June 3 0, 2018 June 30, 2 017 2018-2017 June 30, 2016 2017-2016 Cash flows from operating activities 160,989$ 148,108$ 12,881$ 119,465$ 28,643$ Cash flows from no n-cap ital financing activities 33,181 32,013 1,168 25,583 6,430 Cash flows from capital and related financ ing activities (72,534)(146,484)73,950 (83,312)(63,172) Cash flows from investing activities (135,363)(34,720)(100,643)(74,347)39,627 Ne t increase (decrease) in cash and cash equivalents (13,727)(1,083)(12,644)(12,611)11,528 Cash and cash equi valents at be ginning o f year 48,113 49,196 (1,083)61,807 (12,611) Cash And C as h Eq uivalents At End O f Year 34,386$ 48,113$ (13,727)$ 49,196$ (1,083)$ Condens ed Stateme nts of Cash Flows (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 11 2017 Analysis The District ended the year with $48.1 million in cash and cash equivalents or a decrease of $1.1 million or 2.2% from the prior year.Cash flows from operating activities increased by $28.6 million or 24.0% as a result of increased receipts from customers.Cash flows from non-capital financing activities increased by $6.4 million or 25.1% due to the new District-wide tax levy. Cash flow from capital and related financing activities decreased by $63.1 million or 75.8% due to increased spending for capital assets, decreased bond proceeds and premiums received in fiscal year 2017 compared to fiscal year 2016 and increased interest and fees paid on bonds.Cash flows from investing activities increased by $39.6 million.The increase primarily stems from a greater increase in proceeds from sale and maturity of investments than in purchase of investments from fiscal 2016 to fiscal 2017. Capital Assets Incr ease Increase June 3 0,June 3 0,(Decrease)June 3 0,(Decrease) 2018 2017 2018-2017 2016 2017-2016 Land 73,262$ 70,695$ 2,567$ 69,702$ 993$ Construction in progress 836,105 707,739 128,366 530,734 177,005 Treatment and disposal plant and e quipment 705,377 736,367 (30,990) 729,884 6,483 Collection and p umping plant 1,810,357 1,716,004 94,353 1,697,795 18,209 General plant and equi pment 21,131 21,433 (302) 23,928 (2,495) T otal 3,446,232$ 3,252,238$ 193,994$ 3,052,043$ 200,195$ Conde ns ed State me nts of Capital As sets (000's) Net of D epreciation THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 12 2018 Analysis Total capital assets, net of accumulated depreciation, increased by $194.0 million or 6.0% over the prior year. Construction in progress contained the majority of the increase with net additions of $128.4 million or 18.1% consisting of $249.7 million in additions offset by $121.3 million of assets placed into service.The net increase in collection and pumping plant assets was $94.4 million or 5.5%, primarily for capitalization of assets including new and improved sewers, dedicated assets,and infrastructure repairs. Net treatment and disposal plant and equipment decreased $31.0 million or 4.2%due to no large projects being capitalized in fiscal 2018 to offset the depreciation charge for the year. Land increased $2.6 million or 3.6% due to the acquisition of easements and other land.General plant and equipment decreased $0.3 million or 1.4% primarily due to depreciation of existing assets. For more detailed information, see Note 4, Capital Assets, in the accompanying notes to the financial statements. 2017 Analysis Total capital assets, net of accumulated depreciation, increased by $200.2 million or 6.6% over the prior year.Construction in progress contained the majority of the increase with net additions of $177.0 million or 33.4% consisting of $269.3 million in additions offset by $92.3 million of assets placed into service.The net increase in collection and pumping plant assets was $18.2 million or 1.1%, primarily for capitalization of assets including new and improved sewers, dedicated assets,and infrastructure repairs.Net treatment and disposal plant and equipment increased $6.5 million or 0.9%, including costs incurred to replace incinerator scrubbers to meet new regulatory emission standards and to capitalize assets destroyed in the December 2015 flood.Land increased $1.0 million or 1.4% due to the acquisition of easements and other land.General plant and equipment decreased $2.5 million or 10.4% primarily due to depreciation of existing assets.For more detailed information, see Note 4, Capital Assets, in the accompanying notes to the financial statements. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 13 Long-Term Debt 2018 Analysis The District ended fiscal year 2018 with $1.5 billion in long-term debt outstanding. The District had one senior revenue bond addition this year (“Series 2017A”) for a total of $316.2 million of which $116.2 million was used to partially advance refund the Series 2011B, Series 2012A, Series 2013B, and Series 2015B. Premium related to the refunding received on the new Series 2017A and excess funds in the bond reserve account were also used to partially advance refund principal and interest on the four Series referenced above. In addition, the District withdrew $5.4 million, $3.4 million and $18.4 million in loan proceeds from the Series 2015A, Series 2016A and Series 2016B State Revolving Fund (“SRF”)bonds, respectively. These amounts represent new borrowings and do not reflect the principal payments made in fiscal 2018 on Series 2015A and Series 2016A. For more detailed information, see Note 6, Long-Term Liabilities, in the accompanying notes to the financial statements. Incr ease Incr ease June 3 0,June 3 0,(Decrease)June 3 0,(Decrease) 2018 2017 2018-2017 2016 2017-2016 Senior Re venue B onds : Se ries 2010B 85,000$ 85,000$ —$ 85,000$ —$ Se ries 2011B 18,055 43,410 (25,355) 45,325 (1,915) Se ries 2012A 159,340 214,700 (55,360) 220,000 (5,300) Se ries 2012B 131,935 134,710 (2,775) 137,280 (2,570) Se ries 2013B 116,615 146,000 (29,385) 149,000 (3,000) Se ries 2015B 192,810 221,355 (28,545) 223,855 (2,500) Se ries 2016C 147,295 150,000 (2,705) — 150,000 Se ries 2017A 316,175 — 316,175 — — Subordinate Re venue B onds : Se ries 2004B 73,190 81,545 (8,355) 89,650 (8,105) Se ries 2005A 3,465 3,800 (335) 4,125 (325) Se ries 2006A 23,315 25,600 (2,285) 27,950 (2,350) Se ries 2006B 8,140 8,860 (720) 9,565 (705) Se ries 2008AB 23,700 25,605 (1,905) 27,475 (1,870) Missouri D NR: Se ries 2009A 15,342 16,441 (1,099) 17,514 (1,073) Se ries 2010A 5,849 6,222 (373) 6,588 (366) Se ries 2010C 26,656 28,361 (1,705) 30,024 (1,663) Se ries 2011A 33,988 35,692 (1,704) 37,354 (1,662) Se ries 2013A 45,596 47,786 (2,190) 49,920 (2,134) Se ries 2015A 69,246 67,149 2,097 42,623 24,526 Se ries 2016A 3,094 147 2,947 — 147 Se ries 2016B 27,418 8,986 18,432 — 8,986 Energy Loan Program 51 68 (17) 118 (50) Total 1,526,275$ 1,351,437$ 174,838$ 1,203,366$ 148,071$ Conde ns ed State me nts of Long-Term D ebt (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 14 2017 Analysis The District ended fiscal year 2017 with $1.4 billion in long-term debt outstanding.The District had one senior revenue bond addition this year (“Series 2016C”) for $150.0 million.In addition, the District added two new State Revolving Fund (“SRF”)bonds (“Series 2016A” and “Series 2016B”) totaling $9.1 million and withdrew $27.0 million in proceeds from the Series 2015A SRF bond.For more detailed information, see Note 6, Long-Term Liabilities, in the accompanying notes to the financial statements. Decisions Impacting the Future Integral to helping MSD’s rate payers understand the Consent Decree (“CD”) with the U.S. Environmental Protection Agency, the State of Missouri,and the Missouri Coalition for the Environment,which settled a lawsuit for alleged violations of the Clean Water Act,was the initiation of MSD Project Clear. See Note 12, Commitments And Contingencies, for additional information regarding this litigation.The goal of MSD Project Clear is to help MSD’s rate payers have a clear understanding of MSD’s goals and objectives. MSD Project Clear consists of three main components: Getting The Rain Out which is focused on reducing excess stormwater from entering the sewer system infrastructure to help reduce basement back-ups and overflows; Performing Repair and Maintenance to the existing infrastructure to ensure it operates as well as possible for as long as possible,and Building System Improvements where needed to increase the capacity of the system. MSD Project Clear will greatly affect the daily lives of many of our rate payers and is needed to help the rate payer understand the individual and regional, as well as the immediate and long-term benefits of the program. Since February 2004, the voters in the District’s service area have authorized the District to issue a total of $2.6 billion in wastewater revenue bonds. As of June 30, 2018, the District has issued $1.9 billion of the total authorization. The District’s long- term wastewater capital improvement program will continue to be funded through a combination of additional bonds and wastewater rate increases. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 15 Requests For Information This financial report is designed to provide a general overview of the District’s finances for all those with an interest in the District’s finances.Questions concerning any of the information provided in this report or requests for additional financial information should be addressed or e-mailed to: Marion M. Gee, Director of Finance The Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, MO 63103-2555 314-768-6200 mgee@stlmsd.com THE METROPOLITAN ST.LOUIS SEWER DISTRICT See the accompanying notes to financial statements.Page 16 STATEMENTS OF NET POSITION Continued on Next Page June 30, Assets 2018 2017 Current Assets Unrestricted Current Assets Cash and cash equivalents  13,134,990$ 23,095,871$ Investments                                          303,522,982 280,288,468 Sewer service charges receivable, less allowance of $58,429,895 in 2018 and                   $56,654,014 in 2017 60,544,838 53,641,066 Unbilled sewer service charges receivable 29,140,461 26,513,717 Proper ty taxes receivable, less allowance of $22,544 in 2018 and $25,280 in 2017 689,128 835,213 Accrued income on investmen ts                        1,669,319 1,016,453 Other receivables, less allowance of $52,120 in 2018 and $119,264 in 2017                   4,495,551 4,707,358 Supplies inventory                                   8,109,878 7,671,206           Total Unrestricted Current Assets                            421,307,147 397,769,352        Restricted Current Assets Cash and cash equivalents 1,009,872 2,171,935 Investments                                          26,469,179 29,674,144 Other receivables                                    54,092 —           Total Restricted Current Assets                            27,533,143 31,846,079           Total Current Assets                            448,840,290 429,615,431 Non-Current Assets Restricted As sets Cash and cash equivalents  20,241,459 22,845,206 Investments                                          249,558,518 157,273,177 Long-ter m investm ents                                79,334,215 54,726,378 Proper ty taxes receivable, les s allowance of $45,453 in 2018 and $32,041 in 2017 1,379,842 1,139,195 Accrued income on investm en ts 474,478 361,052 Other receivables                                    — 69,694           Total Restricted Non-Current Assets                            350,988,512 236,414,702 Other Assets Notes receivable                                     11,814,529 12,425,336 Long-term investments                                71,023,440 65,116,013 Total Other Assets                            82,837,969 77,541,349 Capital Assets Depreciable:        Treatm en t and disposal plant and equipment           1,276,275,567 1,279,143,367        Collection and pum ping plant                         2,612,344,501 2,475,709,689        Gener al plant and equipment                          97,380,391 94,793,873                                                             3,986,000,459 3,849,646,929        Less:  Accumulated depr ec iation                      1,449,135,797 1,375,842,413        Net depr ec iable assets       2,536,864,662 2,473,804,516        Non-depr ec iable:        Land                                                 73,261,965 70,695,016        Con struction in pr ogress                             836,105,343 707,738,709 Net Capital Assets                                3,446,231,970 3,252,238,241        Total Non-Current Assets                         3,880,058,451 3,566,194,292        Total Assets                               4,328,898,741 3,995,809,723 Deferred Outflows of Resources Bonds and notes payable-Deferred loss on refunding                                   12,099,160 11,320,670 Pension-related outflows                                          17,332,857 37,665,786 OPEB-related ou tflows                                          1,278,437 — Total Deferred Outflows of Resources                            30,710,454 48,986,456 THE METROPOLITAN ST.LOUIS SEWER DISTRICT See the accompanying notes to financial statements.Page 17 STATEMENTS OF NET POSITION (Continued) June 30, Liabilities 2018 2017 Current Liabilities Current Liabilities-Payable From Unrestricted Assets Contracts and accounts payable 34,527,687$ 37,800,519$ Deposits and accrued expenses 38,885,341 39,646,015 Retainage payable 13,894,496 11,486,551 Current por tion of bonds and notes payable 50,942,663 42,733,909           Total Current Liabilities-Payable From Unrestricted Assets                           138,250,187 131,666,994 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable 1,100,845 1,264,997 Retainage payable 731,026 746,642           Total Current Liabilities-Payable From Restricted Assets                           1,831,871 2,011,639           Total Current Liabilities                         140,082,058 133,678,633        Non-Current Liabilities Deposits and accrued expenses                                  7,329,985 15,137,690 Net pension liability                                    48,388,938 67,039,185 Total OP EB liability                                   24,193,972 — Bon ds and notes payable                                         1,642,233,069 1,433,168,099 Total Non-Current Liab ilities                     1,722,145,964 1,515,344,974        Total Liabilities                        1,862,228,022 1,649,023,607 Deferred In fl ows of Resources Pension-related inflows                                          6,064,985 4,604,518 Total Defer red In flows of Resources                             6,064,985 4,604,518 Net Position Net investm en t in capital assets                                1,968,740,050 1,876,248,859 Res tricted for :                                 Debt service                      55,329,147 55,319,023        Subdistrict construction and improvement                74,249,353 79,940,036 Unrestricted            392,997,638 379,660,136 Total Net Position                     2,491,316,188$ 2,391,168,054$   THE METROPOLITAN ST.LOUIS SEWER DISTRICT See the accompanying notes to financial statements.Page 18 STATEMENTS OF REVENUES, EXPENSES,AND CHANGES IN NET POSITION 2018 2017   Operating Revenues     Sewer service charges                                   364,165,372$ 330,873,269$     Provision for dou btful sewer ser vice charge accounts (2,990,148) (2,513,743)     Licenses, permits and other fees                       3,777,200 4,036,362     Other                                                   3,359,053 1,095,101     Total Operating Revenues                              368,311,477 333,490,989          Operating Exp en ses     Pumping and treatmen t                                   60,735,056 60,203,037     Collection system maintenance                           44,785,482 43,928,161     Engineer ing                                             11,217,590 11,289,906     Gener al and adm inistrative                              59,012,162 58,534,411     Water backup claim s                                     1,557,385 5,035,020     Depr ec iation                                            81,326,342 81,194,391     Asset management                                               15,131,189 14,892,749     Total Operating Exp enses                             273,765,206 275,077,675          Operating Income         94,546,271 58,413,314          Non-Operating Revenues     Proper ty taxes levied by the District                   33,748,932 32,458,054     Investm en t income                                       7,405,957 2,902,624     Rent and other income                                   253,799 106,562     Total Non-Operating Revenues                          41,408,688 35,467,240          Non-Operating Exp enses     Net loss on disposal and sale of capital assets         1,833,908 673,044     Non-recurring pr oj ec ts and studies                       9,296,358 7,459,538     Interest expen se                                        36,695,083 31,250,777     Total Non-Operating Exp enses                          47,825,349 39,383,359          Income Before Capital Grants And Contributions                       88,129,610 54,497,195          Capital Grants And Contributions     Capi tal assets contributed                               24,799,116 6,807,147     Grant revenue                                           1,278,558 2,806,599     Total Capital Grants And Contributions                          26,077,674 9,613,746          Change In Net Position 114,207,284 64,110,941   Net Position - Beginning Of Year, As Previously Stated 2,391,168,054 2,327,057,113 Effect of Adoption of GASB 75 (14,059,150) — Net Position - Beginning Of Year, As Restated 2,377,108,904 2,327,057,113   Net Position - End Of Yea r                                    2,491,316,188$ 2,391,168,054$ For The Yea rs En ded June 30, THE METROPOLITAN ST.LOUIS SEWER DISTRICT See the accompanying notes to financial statements.Page 19 STATEMENTS OF CASH FLOWS Continued on Next Page 2018 2017 Cas h Flows From Operating Activities Received from customers 356,658,318$ 335,511,428$ Paid to employees for services (96,464,294) (94,029,453) Paid to supplie rs for goods and services (99,205,100) (93,373,554) Net Cas h Provided By Operating Activities 160,988,924 148,108,421 Cas h Flows Provide d By Non-Capital Finan cing Activities Taxe s levie d and colle cted 33,180,969 32,013,277 Cas h Flows From Capital And Related Finan cing Activities Proceeds from capital grant s 1,634,250 100,283 Proceeds from issuance of debt 227,157,189 185,520,681 Premium on sale of bonds 37,823,556 17,678,054 Princ ip al paid on debt (43,667,013) (38,076,770) Interest and fees paid on debt (60,603,135) (54,306,129) Payments for capital assets (236,673,660) (259,279,932) Proceeds from sale of capital assets 170,578 256,879 Build Americ a Bo nd tax credit 1,624,563 1,622,822 Net Cas h (Used In) Capi tal And Related Financing Activities (72,533,672) (146,484,112) Cas h Flows From Investing Activities Pur chase of investments (774,026,450) (524,918,097) Proceeds from sale and maturity of investments 630,795,000 483,199,458 Investment inc ome 7,614,739 6,891,027 Proceeds from rents 253,799 106,562 Net Cas h (Used In) Investing Activities (135,362,912) (34,721,050) Net (Decrease) In Cas h And Cash Equivalents (13,726,691) (1,083,464) Cas h And Cash Equivalents At Beginning Of Year 48,113,012 49,196,476 Cas h And Cash Equivalents At End Of Year 34,386,321$ 48,113,012$ Non-Cash Capital And Investing Activities Proceeds from debt issuance plac ed int o escrow to refund bonds 116,175,000$ —$ Princ ip al amount reduced and plac ed in escrow less reserve funds (124,825,675) — Capit al asset additions included in accounts payable 18,008,669 18,417,813 Capit al assets contribut ed by other government s and developers 24,799,116 6,807,147 Fair value investment adjustment gain 185,620 1,847,824 Grant revenue   (355,692) 2,706,316 For The Years Ended June 30, THE METROPOLITAN ST.LOUIS SEWER DISTRICT See the accompanying notes to financial statements.Page 20 STATEMENTS OF CASH FLOWS (Continued) 2018 2017 Reconciliation Of Ope rating I ncome To Net Cash Flows Provided By Operating Activities Operating Income 94,546,271$ 58,413,314$ Adjustments to reconcile operating income to net cash provided by operating activitie s: Depreciat io n 81,326,342 81,194,391 Non-recurring projects and studies (9,296,358) (7,459,538) Change in operating assets and liabilit ie s: (Increase) in bille d and unbille d sewer servic e char ges receivable (9,530,516) (5,400,724) Decrease in other receivable s 1,012,988 9,170,655 (Increase) in supplie s invent ory (438,672) (582,402) Decrease (increase) in pension-related outflows 20,332,929 (6,521,523) (Increase) in OPEB-related outflows (1,278,437) — Increase in contracts and account s payable 954,822 4,908,545 (Decrease) increase in deposits and accrued expenses (9,585,487) 1,053,871 (Decrease) increase in net pension liabilit y (18,650,247) 14,439,182 Increase in total OPEB liability 10,134,822 — (Decrease) increase in pension-related inf lo ws 1,460,467 (1,107,350) Net Cash Provide d By Operatin g Activities 160,988,924$ 148,108,421$ For The Years Ended June 30, THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 21 NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2018 AND 2017 1.Organization And Summary Of Significant Accounting Policies Organization The Metropolitan St. Louis Sewer District (“District”) was authorized by the voters, established and chartered under the provisions of the Constitution of Missouri as a municipal corporation and a political subdivision of the State of Missouri.Upon creation in 1954, the District assumed responsibilities to provide for the construction, operation, and maintenance of the sewer facilities within its defined boundaries.The District’s service area now comprises all of the City of St. Louis and most of St. Louis County.Subdistricts within the District’s total service area represent separate geographic areas within which specific taxes can be levied for the retirement of indebtedness issued to finance construction of wastewater or stormwater facilities within the area or to operate, maintain, or construct improvements within the subdistrict. The District also maintains all of the publicly owned stormwater sewers within its original boundaries and is continuing to accept maintenance of the stormwater sewers in the remainder of its service area. Pursuant to provisions of its Charter and subject to limitations imposed by the Constitution of Missouri, all powers of the District are vested in a six-member Board of Trustees (“Board”), three of whom are appointed by the Mayor of the City of St. Louis and three of whom are appointed by the County Executive of St.Louis County. Not more than two Trustees appointed from said City or County, as the case may be, shall be affiliated with the same political party. Reporting Entity The District defines its financial reporting entity to include all component units for which the District’s governing body is financially accountable.To be considered financially accountable, the component unit must be fiscally dependent on the District and the District must either 1) be able to impose its will on the component unit or 2) the relationship must have the potential for creating a financial benefit or imposing a financial burden on the District. Based on the foregoing, the District’s financial statements include all funds that are established under the authority of the District’s charter.There are no agencies, boards, commissions, or authorities that are controlled by or dependent on the District. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 22 Measurement Focus, Basis Of Accounting And Financial Statement Presentation The Governmental Accounting Standards Board (“GASB”) is the accepted standard-setting body for establishing accounting and financial reporting standards for U.S. state and local governments that follow generally accepted accounting principles (“GAAP”). As a political subdivision of the State of Missouri, the District follows GASB Pronouncements as codified under GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Throughout the year, the District maintains its detailed accounting records on a modified accrual basis of accounting. In order to account for the transactions related to certain subdistricts and restricted resources, separate fund accounting records are maintained. For financial reporting purposes, the District reports its operations as a single enterprise fund and the financial statements are prepared in conformity with accounting principles generally accepted in the United States of America as applied to government units. Accordingly, the accounting records are converted to the accrual basis of accounting and all interfund transactions are eliminated. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recognized when the related liability is incurred. The District’s measurement focus is on the flow of economic resources. Revenues and expenses are divided into operating and non-operating items. Operating revenues generally result from providing services in connection with the District’s principal ongoing operations. The principal operating revenues of the District are user fees, licenses, and permits for wastewater treatment services. Operating expenses include the costs associated with the conveyance and treatment of wastewater and stormwater, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting these definitions are reported as non-operating revenues and expenses.Non-recurring projects and studies (shown as non-operating expenses) consist of expenses related to unusual charges or losses that are unlikely to occur again in the formal course of business such as work related to federally declared disasters, projects originally intended to be capitalized that changed scope when a decision was made to no longer build an asset, and any non-reimbursed work performed on assets not owned or maintained by the District but is necessary to protect District owned assets or to mitigate a threat to the health and safety of the general public. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 23 The District follows GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions, which establishes accounting and financial reporting standards for nonexchange transactions involving financial or capital resources. GASB Statement No. 33 groups nonexchange transactions into the following four classes, based upon their principal characteristics: derived tax revenues, imposed nonexchange revenues, government-mandated nonexchange transactions, and voluntary nonexchange transactions. The District recognizes assets from imposed nonexchange revenue transactions in the period when an enforceable legal claim to the assets arises or when the resources are received, whichever occurs first. Revenues are recognized in the period when the resources are required to be used for the first period that use is permitted. The District recognizes revenues from property taxes, net of estimated refunds and estimated uncollectible amounts, in the period for which the taxes are levied. Imposed nonexchange revenues also include licenses, permits, and other fees. Intergovernmental revenues, representing grants and assistance received from other governmental units, are generally recognized as revenues in the period when all eligibility requirements, as defined by GASB Statement No. 33, have been met. Any resources received where all requirements are met with the exception of the time requirement are recorded as deferred inflows. All other resources received before any other eligibility requirements are met are reported as unearned revenues. Cash And Cash Equivalents The District considers highly liquid investments that have original maturity of less than 91 days to the District to be Cash Equivalents. Investments The District accounts for its investments at fair value.The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles pursuant to GASB Statement No. 72.The hierarchy is based on the valuation inputs used to measure the fair value of the asset.Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statements of Revenues, Expenses and Changes in Net Position. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 24 Restricted Cash, Cash Equivalents,And Investments Cash, cash equivalents,and investments that are externally restricted are classified as restricted assets.These assets are used to make debt service payments, maintain sinking or reserve funds, purchase or construct capital or other non-current assets or for other restricted purposes. Accounts Receivable Accounts receivable is composed primarily of charges to customers for wastewater services. Accounts are considered past due 30 days from the invoice date. Receivables are reported at their gross values net of an allowance for uncollectible amounts. This allowance for uncollectible amounts is based on historical collection experience. Unbilled sewer service charge revenues are accrued by the District based on estimated billings for services provided through the end of the current fiscal year. Capital Assets In order to measure long-term assets such as capital assets, including infrastructure, a study was performed in 1981 to value existing assets at historical cost or estimated historical cost. Capital assets acquired since that historical study are recorded at historical cost on the acquisition date. In accordance with GASB Statement No. 72, donated capital assets are recorded at acquisition value at the time the asset is considered operational. Interest cost is capitalized as part of the historical cost of acquiring certain assets when the effect of such capitalization is material to the financial statements. Interest is not capitalized on assets constructed with contributions from other governmental sources. Depreciation is calculated on a straight-line basis over the following estimated useful lives: Treatment and disposal plant and equipment 3 to 100 years Collection and pumping plant 7 to 100 years General plant and equipment 3 to 12 years When developing user charge rates, the District includes funding for replacement cost of assets, which may differ from depreciation expense recorded for financial reporting purposes. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 25 Normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Betterments are capitalized and depreciated over the remaining useful lives of the related assets, as applicable. The District defines capital assets as assets with an initial, individual cost between $5,000 and $15,000, depending on the asset category, and an estimated useful life in excess of three years. Costs incurred for capital construction and acquisition are carried in construction in progress until completion of the related projects. The major components of construction in progress are the costs incurred to construct new tunnels, storage facilities,and sewer lines, rehabilitate and separate existing sewer lines, and to make improvements to pump stations and treatment plants. Costs related to projects not pursued are expensed when terminated. Capitalization Of Interest Interest costs are capitalized as part of the costs of capital assets during the period of construction based on the related weighted average net borrowing costs incurred. Interest earned on temporary investments acquired with the proceeds of such borrowed funds,from the date of the borrowing until the assets are ready for their intended use,is used to reduce the interest costs capitalized on the constructed assets. Interest is not capitalized for outlays financed by capital grants (or other outside parties) externally restricted for the acquisition of specified assets. In fiscal 2018 and 2017, the District’s total net interest cost incurred on tax-exempt borrowings during the fiscal year was $48,114,072 and $44,057,337, respectively. Of this net interest cost, $17,494,620 and $18,040,989 was capitalized and $30,619,452 and $26,016,348 was expensed in fiscal 2018 and 2017, respectively. Supplies Inventory Supplies inventory consists of parts and supplies to be used to operate and maintain treatment facilities and various treatment-related equipment at the District.This inventory figure is netted against those materials and supplies deemed to be obsolete.All inventory is stated at weighted average cost and expenses are recognized when the inventory is consumed. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 26 Net Position One component of the District’s net position is the net investment in capital assets which consists of capital assets, including restricted capital assets, net of accumulated depreciation,reduced by the net outstanding debt and construction- related liabilities, including premiums and discounts on such debt,which is attributable to the acquisition, construction, or improvement of those assets.The outstanding debt is net of the cash and investments from the debt that has not yet been expended.Deferred losses on refundings are also included in the net investment in capital assets net position. The restricted component of net position consists of assets and liabilities regulated by external constraints imposed by creditors, grantors, contributors, laws, or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation.Property taxes levied by the various subdistricts and other revenues received for construction in those sub- districts have also been restricted for that use.Sewer extension and connection fees, grants, and other revenues received for construction within certain sub- districts have been restricted for that use.In addition, a portion of wastewater sewer charges have been restricted for the payment of principal and interest, including accrued interest, on certain debt of the District. The unrestricted net position component of net position consists of net position that does not meet the definition of restricted or net investment in capital assets. The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 27 Deferred Outflows Of Resources And Deferred Inflows Of Resources In addition to assets, financial statements may report a separate section for deferred outflows of resources. Deferred outflows of resources consists of the consumption of net position that is applicable to a future reporting period and so will not be recognized as an outflow of resources until then. Deferred outflows of resources related to refunding long-term debt is reported in the Statements of Net Position. A deferred bond-refunding amount results from the difference in the carrying value of refunded debt and its reacquisition price, and is amortized over the shorter of the life of the refunded or refunding debt. The pension related deferred outflows of resources represent contributions made to the plan between the measurement date of the pension obligations and the beginning of the next fiscal year as well as certain actuarial differences and changes that are amortized over future periods. The other postemployment benefit (“OPEB”)related deferred outflows of resources represent benefit payments made between the measurement date of the total OPEB liability and the beginning of the fiscal year following the measurement date and certain actuarial differences and changes that are amortized over future periods. In addition to liabilities, financial statements may report a separate section for deferred inflows of resources. Deferred inflows of resources consists of the acquisition of net position that is applicable to a future reporting period and so will not be recognized as an inflow of resources until then. The District’s deferred inflows of resources relate to certain changes in pension obligations that are amortized over future periods. Capital Contributions Capital contributions to the District represent government grants and other aid used to fund capital projects. In accordance with GASB Statement No. 33, capital contributions are recognized as revenue when the expenditure is made and the amount becomes subject to claim for reimbursement. Bonds, Bond Premiums, Discounts And Issuance Costs Bonds and notes payable are recorded at the principal amount outstanding and are reported net of any applicable bond premium or discount. In the District’s financial statements, bond premiums and discounts are amortized over the life of the bonds using the effective interest method. Bond issuance costs are expensed when incurred pursuant to GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. Bonds which have been advance refunded and in substance defeased, are not included in long-term debt and the related assets deposited in an irrevocable THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 28 trust with an escrow agent to provide for all future debt service payments on the refunded debt are not included in investments. Compensated Absences Vacation Under the terms of the District’s personnel policies, employees are allowed to carry a maximum of 30 to 45 days of vacation (depending on length of service) from one calendar year to the next. Since vacation accrued at year-end is expected to be used by the employee during the following fiscal year, the accrual is reported as a component of current deposits and accrued expenses payable. Sick Leave Employees earn sick pay benefits at accrual rates ranging from 10 days per year to 12 days per year (depending on length of service). Unused sick leave can be carried over at year-end without limitation. An employee retiring from the District with five or more years of service will be compensated for any unused accrued sick leave at the rate of 1.25% for each year of District service multiplied by the unused accrued sick leave remaining at the employee’s current rate of pay up to a maximum of $50,000. The District has recorded a liability which has been actuarially determined to be equal to the accumulated expense charge that will amortize the employees’ benefits over their period of District service. The liability, included in current deposits and accrued expenses payable, includes vested accumulated rights to receive sick leave benefits estimated to be paid within one year. The portion of sick leave expected to be paid after one year is recorded as a component of non-current deposits and accrued expenses payable. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, the fiduciary net position of The Metropolitan St.Louis Sewer District Employees’Pension Plan (“Plan”) and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan, which has a December 31 reporting period. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Use Of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 29 Income Tax Status The District is exempt from federal income tax under the Internal Revenue Code as a political subdivision of the State of Missouri. Adoption Of New Accounting Standards During fiscal year 2018, the District implemented GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (“GASB Statement No. 75”). This Statement replaces the requirements of Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions (“GASB Statement No. 45”), as amended. This Statement improves accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or “OPEB”). This Statement also establishes standards for recognizing and measuring liabilities, deferred outflows and inflows of resources, and expense. In addition, this Statement requires the identification of the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. The disclosures required by this Statement are presented in Footnote 9, Postemployment Benefits Other Than Pensions (“OPEB”), and new required supplementary information is also presented. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 30 The District’s adoption of GASB Statement No. 75 in fiscal year 2018 resulted in restating the beginning balance of net position due to the recognition of a beginning total OPEB liability, a beginning deferred outflow of resources for the amount paid by the District for OPEB subsequent to the measurement date of the beginning total OPEB liability but before the beginning of the District’s fiscal year and for the removal of the net OPEB obligation previously recorded based on GASB Statement No. 45. It was not practical to retroactively restate prior periods due to the implementation of GASB Statement No. 75 as the cost and time to develop the required actuarial calculations would be prohibitive. The cumulative effect of applying GASB Statement No. 75 and the resulting restatement of beginning net position on the District’s Statements of Net Position is detailed as follows: The following GASB Statements which became effective during fiscal year 2018 are not applicable to the District and there is no implementation impact on the District’s financial reporting at this time. •Statement No. 81,Irrevocable Split-Interest Agreements •Statement No. 85, Omnibus 2017 •Statement No. 86, Certain Debt Extinguishment Issues During fiscal year 2017, the District implemented GASB Statement No. 77, Tax Abatement Disclosures. This Statement requires disclosure of tax abatement information about (1) the District’s own tax abatement agreements and (2) those that are entered into by other governments and that reduce the District’s tax revenues. The requirements of this Statement improve financial reporting by July 1,July 1, 2017 2016 Net Position - Beginnin g Of Year, As Previously Stated 2,391,168,054$ 2,327,057,113$ Effect of Adoption of GASB 75 (14,059,150) — Net Position - Beginnin g Of Year, As Restated 2,377,108,904$ 2,327,057,113$ Effect of Adoption of GASB 75 - Res tatement Cons is ts Of To tal OPEB liabilit y reported as a noncurrent liabilit y at July 1, 2017 (22,838,813)$ Bene fit payments made subseque nt to the beginning total OPEB liabilit y's meas ur ement date of December 31, 2016 but before July 1, 2017 ar e reported as deferred outflows of resources 716,582 Remo val of GASB 45 ne t OPEB obligat io n balanc e as of July 1, 2017 8,063,081 Effect of Adoption of GASB 75 (14,059,150)$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 31 giving users of financial statements essential information that has not been consistently or comprehensively reported to the public. Disclosure of information about the nature and magnitude of tax abatements will make these transactions more transparent to financial statement users and as a result, users will be better equipped to understand (1) how tax abatements affect the District’s ability to raise resources and meet its financial obligations and (2) the impact those abatements have on the District’s financial position and economic condition. The disclosures required by this Statement are presented in Footnote 15, Tax Abatements. During fiscal year 2017, the District implemented GASB Statement No. 82, Pension Issues -an Amendment of GASB Statements No. 67, No. 68, and No. 73. This Statement requires the presentation of covered payroll in the schedules of pension required supplementary information and ratios that use that measure. The net pension liabilities and pension contributions are presented as a percent of covered payroll in the pension required supplementary information schedules. Recent Accounting Standards GASB has issued additional guidance that is not yet effective. The District is currently reviewing the provisions of the following GASB Statements to determine the impact of implementation in future periods. •Statement No. 83, Certain Asset Retirement Obligations (fiscal 2019) •Statement No. 84, Fiduciary Activities (fiscal 2020) •Statement No. 87, Leases (fiscal 2021) •Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements (fiscal 2019) •Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period (fiscal 2021) •Statement No. 90, Majority Equity Interests, an amendment of GASB Statements No. 14 and No. 61 (fiscal 2020) Reclassifications Prior period financial statement amounts may have been reclassified to conform to current period presentation. These reclassifications, if any, had no effect on the changes in net position or total net position. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 32 2.Deposits and Investments Deposits At June 30, 2018 the reported amount of the District’s deposits was $13,048,424 and the bank balance was $17,112,744. Of the bank balance, $1,013,392 was covered by federal depository insurance; $16,099,352 was collateralized with securities held by a third-party financial institution in the District’s name. In addition, the District has money market mutual funds of $18,849,126 held in a trusted escrow account for the State that will be used to make future bond payments. At June 30, 2017 the reported amount of the District’s deposits was $31,610,342 and the bank balance was $34,222,886. Of the bank balance, $1,003,427 was covered by federal depository insurance; $33,179,256 was collateralized with securities held by a third-party financial institution in the District’s name. In addition, the District had money market mutual funds of $16,502,670 held in a trusted escrow account for the State that will be used to make future bond payments. Custodial credit risk for deposits is the risk that, in the event of bank failure, the District’s deposits may not be returned to the District. The District’s investment policy complies with the provisions of state laws and requires collateralization on repurchase agreements, time certificates of deposit,and deposits with banking institutions with a fair value of 103%. Deposits in each bank are insured by the Federal Deposit Insurance Corporation (“FDIC”) in the amount of $250,000 for interest bearing accounts and noninterest bearing accounts. Investments With the approval of the District’s Board of Trustees, the Secretary-Treasurer is authorized to invest excess cash in any investment authorized by the District’s Charter. The District’s investment policy conforms to the investment policy guidelines for the State of Missouri. The District’s investment policy authorizes the District to invest in the following instruments: U.S. Treasury obligations, certificates of deposit, obligations of any agency or instrumentality of the U.S., repurchase agreements, bankers’ acceptances, and commercial paper, all according to terms specified in the policy. The District also has investments in money market mutual funds that hold securities approved by the District’s investment policy. At June 30, 2018 and June 30, 2017, all of the District’s investments were in compliance with the District’s investment policy and charter. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 33 A summary of deposits and investments as of June 30, 2018 and June 30, 2017 is as follows: Reconciliation to the financial statements: Investme nt Type Cost Fair Value Cost Fair Value Deposits 13,048,424$ 13,048,424$ 31,610,342$ 31,610,342$ Mone y Mar ket Mutual Fund s 18,849,126 18,849,126 16,502,670 16,502,670 U.S. Tr easury and Age ncy Obl igations 584,981,410 582,563,488 488,079,396 486,365,173 Comme rcial Paper 148,952,277 149,833,617 100,349,746 100,713,007 Total 765,831,237$ 764,294,655$ 636,542,154$ 635,191,192$ 2018 2017 2018 2017 Cash and Cash Equivalents Unrestricted Current 13,134,990$ 23,095,871$ Restricted Current 1,009,872 2,171,935 Restricted Non-Current 20,241,459 22,845,206 Inve stments Unrestricted Current 303,522,982 280,288,468 Restricted Current 26,469,179 29,674,144 Restricted Non-Current 249,558,518 157,273,177 Lo ng-Te rm Inve stments Restricted Non-Current 79,334,215 54,726,378 Other 71,023,440 65,116,013 764,294,655$ 635,191,192$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 34 Interest Rate Risk As of June 30, 2018 and 2017, the District had the following investments and maturities: In accordance with the District’s investment policy, the District will minimize the risk that the fair value of debt securities in the portfolio will fall due to increases in general interest rates by: 1.Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. 2.Investing operating funds primarily in short-term securities. 3.State law limits the maximum stated maturities to five years on any investment from the date of purchase. Long-Term Investments While the majority of the District’s portfolio is made up of short-term investments, the District also categorizes a sizeable amount as long-term under the categories discussed in Note 1, Organization and Summary of Significant Accounting Policies. The District is allowed to purchase long-term callable securities. These callable securities give the issuer the right to redeem at predetermined prices at a specific time prior to maturity. When a security is called, the District reflects an immediate reclassification from long-term investment to cash. Weighted Weighte d Average Ave rage Maturity Maturity Investme nt Type Fair Value (Years)Fair Value (Years) U.S. Tre asur y Obligations 264,811,868$ 0.29 189,636,435$ 0.19 U.S. Agency Obligations 317,751,620 0.57 296,728,738 0.67 Commercial Pape r 149,833,617 0.19 100,713,007 0.19 Total 732,397,105$ 0.39 587,078,180$ 0.43 2018 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 35 Custodial/Credit Risk The District will minimize credit risk for investments, the risk of loss due to failure of the security issuer or backer, by: 1.Prequalifying the financial institutions, broker/dealers, intermediaries, and advisors with which the District will do business. 2.Diversifying the portfolio so that potential losses on individual securities will be minimized. In accordance with its investment policy, the District limits its investments in these investment types to the top rating issued by Nationally Recognized Statistical Rating Organizations. As of June 30, 2018 and June 30, 2017, the District’s investments in commercial paper were rated A-1 by Standard & Poor’s (“S&P”) and P-1 by Moody’s Investors Service (“Moody’s”). The District’s investments in U.S. agency obligations that do not carry the explicit guarantee of the U.S. Government all carry a rating assigned by S&P of AA+or higher. Money market investments are rated as AAAm and Aaa-mf by S&P and Moody’s, respectively. Concentration of Credit Risk The District’s investment policy places no limit on the amount the District may invest in any one issuer with respect to U.S. Treasury obligations and collateralized time and demand deposits. U.S. Agency obligations and government-sponsored enterprises are limited to 60% of the portfolio, with no more than 30% of the total portfolio invested in securities of any one agency; and collateralized repurchase agreements are limited to 50% of the portfolio. U.S. Agency callable securities are limited to 30% of the portfolio, and commercial paper and bankers’ acceptances are limited to 25% each, with no more than 5% of the total portfolio invested in any one issuer. The following table lists investments in issuers that represent 5% or more of total investments at June 30, 2018 and June 30, 2017: Issuer 2018 2017 Tr easur y Notes 36.2 32.3 Fe deral Ho me Loan Bank 22.1 19.0 Fe deral National Mortgage Associat io n 8.2 12.2 Fe deral Ho me Loan Mo rtgage Corporation 6.4 11.7 Bank of Tokyo - Mitsubis hi UFJ 2.5 5.5 Total I nvestments Percent Of THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 36 Fair Value Measurement and Application The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles pursuant to GASB Statement No. 72,Fair Value Measurement and Application. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The District has the following recurring fair value measurements as of June 30, 2018 and 2017: Money Market Mutual Funds of $18.8 million and $16.5 million, respectively,are valued using a market approach to measuring fair value prices that considers relevant information generated by market transactions involving identical or similar assets or groups of assets. (Level 2 inputs) U.S. Treasury and Agency Obligations of $582.6 million and $486.4 million, respectively, are valued using a market approach to measuring fair value prices that considers relevant information generated by market transactions involving identical or similar assets or groups of assets.(Level 2 inputs) Commercial Paper of $149.8 million and $100.7 million, respectively, is valued using a market approach to measuring fair value prices that considers relevant information generated by market transactions involving identical or similar assets or group of assets. (Level 2 inputs) 3.Notes Receivable The District has a note receivable with Missouri American Water Company (“MOAM”)for its portion of the capital costs related to the Lower Meramec Wastewater Treatment Plant. The original loan bears interest at 4.35%, while the two loans added during fiscal year 2013 bear interest at 4.50% and 3.52%. The current portion of this note is included in the Unrestricted Other Receivables line on the Statements of Net Position. The note receivable will mature in fiscal year 2033. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 37 At June 30, 2018, future payments are as follows: At June 30, 2017, future payments were as follows: The District also has a note receivable due to its participation in the Contractor Loan Fund, a consortium of local organizations desiring to pool bank loans, private investment, and new market tax credits to provide access to capital for Minority and Women-owned Business Enterprise companies that are certified through a City of St. Louis agency. At June 30, 2018 and 2017, MSD’s note receivable related to the Contractor Loan Fund is $60,860 and $42,270, respectively. 2019 1,154,696$ 2020 1,154,696 2021 1,154,696 2022 1,154,696 2023 1,154,696 2024-2028 5,773,479 2029-2033 5,182,581 16,729,540 Le ss: Amount representing int erest 4,346,474 To tal Notes Receivable 12,383,066$ Classification in Statement of Net Positio n: Cur rent - Other receivable s 629,397$ Non-current - Notes receivable 11,753,669 To tal Notes Receivable 12,383,066$ 2018 1,154,696$ 2019 1,154,696 2020 1,154,696 2021 1,154,696 2022 1,154,696 2023-2027 5,773,479 2028-2032 5,773,479 2033 563,798 17,884,236 Le ss: Amo unt representing interest 4,898,251 To tal Notes Receivable 12,985,985$ Classif ic at io n in Statement of Net Positio n: Current - Other receivable s 602,919$ Non-current - Notes receivable 12,383,066 To tal Notes Receivable 12,985,985$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 38 4.Capital Assets The following is a summary of capital assets changes for the fiscal years ended June 30, 2018 and 2017: Balance Balance June 30, 2017 Ju ne 30, 2018 Capital assets not being depreciated: Land 70,695,016$ 2,566,949$ —$ 73,261,965$ Construction in progress 707,738,709 249,651,675 121,285,041 836,105,343 Total capital assets not being depr ec iated 778,433,725 252,218,624 121,285,041 909,367,308 Capital assets being depr ec iated: Treatmen t and disposal plant and equipm en t 1,279,143,367 3,402,355 6,270,155 1,276,275,567 Collec tion and pumping plant 2,475,709,689 138,979,030 2,344,218 2,612,344,501 Gener al plant and equipm ent 94,793,873 4,024,990 1,438,472 97,380,391 Total capital assets being depreciated 3,849,646,929 146,406,375 10,052,845 3,986,000,459 Less: Accumulated depr eciation: Treatm ent and disposal pl ant and equipment (542,776,176) (33,304,087) (5,181,551) (570,898,712) Collection and pum ping pl ant (759,705,775) (43,773,601) (1,491,925) (801,987,451) General plant and equipment (73,360,462) (4,248,654) (1,359,482) (76,249,634) Total accumulated depr eciation (1,375,842,413) (81,326,342) (8,032,958) (1,449,135,797) Total capital assets being depreciated, net 2,473,804,516 65,080,033 2,019,887 2,536,864,662 Total Capital Assets 3,252,238,241$ 317,298,657$ 123,304,928$ 3,446,231,970$ Addi tions Deletions Bal ance Balance Ju ne 30, 2016 June 30, 2017 Capital assets not being depr ec iated: Land 69,702,470$ 1,022,893$ 30,347$ 70,695,016$ Construction in progress 530,734,241 269,349,532 92,345,064 707,738,709 Total capital assets not being deprec iated 600,436,711 270,372,425 92,375,411 778,433,725 Capital assets being depreciated: Treatment and disposal plant and equipment 1,239,993,981 39,643,299 493,913 1,279,143,367 Col lection and pumping plant 2,419,647,020 60,677,011 4,614,342 2,475,709,689 Gener al plant and equipment 92,393,025 4,016,633 1,615,785 94,793,873 Total capital assets being depr ec iated 3,752,034,026 104,336,943 6,724,040 3,849,646,929 Less: Accumulated depr ec iation: Treatm ent and di sposal plant and equipment (510,110,382) (32,926,833) (261,039) (542,776,176) Collection and pu mping plant (721,852,339) (41,808,127) (3,954,691) (759,705,775) General plant and equipm ent (68,464,804) (6,459,431) (1,563,773) (73,360,462) Total accumulated depr eciation (1,300,427,525) (81,194,391) (5,779,503) (1,375,842,413) Total capital assets being depr ec iated, net 2,451,606,501 23,142,552 944,537 2,473,804,516 Total Capital Assets 3,052,043,212$ 293,514,977$ 93,319,948$ 3,252,238,241$ Addi tions Deletions THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 39 5.Property Tax On or before October 1 of each year, the District levies ad valorem taxes on all taxable tangible property, real and personal, within its boundaries based on assessed valuations established by the City of St. Louis and St. Louis County Assessors. Taxes levied are used for operations and stormwater maintenance, debt service, and construction. Taxes are recorded as non-operating revenues and recognized, net of estimated refunds and estimated uncollectible amounts, in the period for which the taxes are levied. Property tax bills are typically mailed in October. They become delinquent and represent a lien on the related property if not paid by December 31. All property taxes are billed and collected by the City of St.Louis and St.Louis County Collectors of Revenue and are remitted to the District monthly. On April 5, 2016, MSD customers voted to approve a stormwater service proposition whereby effective July 1, 2016, MSD roll backed and eliminated several existing taxes, eliminated the stormwater fee and, in lieu of these funding mechanisms, instituted or left in place two taxing districts that covered MSD’s entire service area. The overriding benefit of the stormwater proposition is that customers will be treated equally under the new system, meaning that all customers are subject to the same tax rates and all customers receive the same level of stormwater services. In fiscal years 2018 and 2017, the District recorded revenue from property taxes in the amount of $33,748,932 and $32,458,054, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 40 6.Long-Term Liabilities The following is a summary of changes in the District’s long-term liabilities for the year ended June 30, 2018: Original Balance Balance Issuance June 30,June 30,Current Amounts 2017 Additions Retirements 2018 Portion Bonds and Notes Payable: Wastewater System Se nior Revenue Bond s: Series 2010B 85,000,000$ 85,000,000$ —$ —$ 85,000,000$ —$ Series 2011B 52,250,000 43,410,000 — 25,355,000 18,055,000 2,110,000 Series 2012A 225,000,000 214,700,000 — 55,360,000 159,340,000 5,300,000 Series 2012B 141,730,000 134,710,000 — 2,775,000 131,935,000 3,095,000 Series 2013B 150,000,000 146,000,000 — 29,385,000 116,615,000 3,000,000 Series 2015B 223,855,000 221,355,000 — 28,545,000 192,810,000 2,675,000 Series 2016C 150,000,000 150,000,000 — 2,705,000 147,295,000 2,760,000 Series 2017A 316,175,000 — 316,175,000 — 316,175,000 3,415,000 Water Pollution Contro l and Drinking Water Subordinate Revenue Bonds (State Revolving Funds Program): Series 2004B 161,280,000 81,545,000 — 8,355,000 73,190,000 8,600,000 Series 2005A 6,800,000 3,800,000 — 335,000 3,465,000 345,000 Series 2006A 42,715,000 25,600,000 — 2,285,000 23,315,000 2,350,000 Series 2006B 14,205,000 8,860,000 — 720,000 8,140,000 740,000 Series 2008A/B 40,000,000 25,605,000 — 1,905,000 23,700,000 1,935,000 Missouri Department of Natural Resources: Energy Loan Program 223,793 68,135 — 17,110 51,025 34,863 Series 2009A 23,000,000 16,440,500 — 1,098,500 15,342,000 1,123,900 Series 2010A 7,980,700 6,222,400 — 373,300 5,849,100 380,900 Series 2010C 37,000,000 28,361,000 — 1,705,000 26,656,000 1,750,000 Series 2011A 39,769,300 35,692,300 — 1,704,000 33,988,300 1,747,000 Series 2013A 52,000,000 47,786,000 — 2,190,000 45,596,000 2,247,000 Series 2015A 75,000,000 67,148,734 5,363,265 3,265,999 69,246,000 3,344,000 Series 2016A 20,000,000 146,500 3,362,265 415,000 3,093,765 843,000 Series 2016B 75,500,000 8,986,258 18,431,658 — 27,417,916 3,147,000 1,939,483,793$ 1,351,436,827$ 343,332,188$ 168,493,909$ 1,526,275,106 50,942,663$ Add: Unamortized premium, net of d iscount 166,900,626 Total Bonds and Notes Payable 1,693,175,732$ Current Portion of Bonds and Notes Payable 50,942,663$ Non-Current Bonds and Notes Payable 1,642,233,069 Total Bonds and Notes Payable 1,693,175,732$ Net Pension Liability 67,039,185$ (18,650,247)$ —$ 48,388,938$ —$ Total OPEB Liability —$ 24,193,972$ —$ 24,193,972$ —$ Deposits and Accrued Expenses Landfill closure and postclosure costs 508,422$ 57,071$ —$ 565,493$ —$ Comp ensated absences 8,754,916 816,576 552,169 9,019,323 2,254,831 Net OPEB obligation 8,063,081 — 8,063,081 — — Total Deposits and Accrued Expenses 17,326,419$ 873,647$ 8,615,250$ 9,584,816$ 2,254,831$ Current Portion (Compensated absences) in Current Deposits and Accrued Expens es 2,254,831$ Non-Current Deposits and Accrued Expenses 7,329,985 Total Deposits and Accrued Expenses 9,584,816$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 41 The following is a summary of changes in the District’s long-term liabilities for the year ended June 30, 2017: Original Balance Balance Issuance June 30,June 30,Current Amounts 2016 Additions Retirements 2017 Portion Bonds and Notes Payable: Wastewater System Senior Revenue Bonds: Series 2010B 85,000,000$ 85,000,000$ —$ —$ 85,000,000$ —$ Series 2011B 52,250,000 45,325,000 — 1,915,000 43,410,000 2,010,000 Series 2012A 225,000,000 220,000,000 — 5,300,000 214,700,000 5,300,000 Series 2012B 141,730,000 137,280,000 — 2,570,000 134,710,000 2,775,000 Series 2013B 150,000,000 149,000,000 — 3,000,000 146,000,000 3,000,000 Series 2015B 223,855,000 223,855,000 — 2,500,000 221,355,000 2,575,000 Series 2016C 150,000,000 — 150,000,000 — 150,000,000 2,705,000 Water Pollution Control and Drinking Water Subo rdinate Revenue Bonds (State Revolving Funds Program): Series 2004B 161,280,000 89,650,000 — 8,105,000 81,545,000 8,355,000 Series 2005A 6,800,000 4,125,000 — 325,000 3,800,000 335,000 Series 2006A 42,715,000 27,950,000 — 2,350,000 25,600,000 2,285,000 Series 2006B 14,205,000 9,565,000 — 705,000 8,860,000 720,000 Series 2008A/B 40,000,000 27,475,000 — 1,870,000 25,605,000 1,905,000 Missouri Department of Natural Resources: Energy Loan Program 223,793 118,206 — 50,071 68,135 17,109 Series 2009A 23,000,000 17,514,200 — 1,073,700 16,440,500 1,098,500 Series 2010A 7,980,700 6,588,400 — 366,000 6,222,400 373,300 Series 2010C 37,000,000 30,024,000 — 1,663,000 28,361,000 1,705,000 Series 2011A 39,769,300 37,354,300 — 1,662,000 35,692,300 1,704,000 Series 2013A 52,000,000 49,920,000 — 2,134,000 47,786,000 2,190,000 Series 2015A 75,000,000 42,622,810 27,013,924 2,488,000 67,148,734 3,266,000 Series 2016A 20,000,000 — 146,500 — 146,500 415,000 Series 2016B 75,500,000 — 8,986,258 — 8,986,258 — 1,623,308,793$ 1,203,366,916$ 186,146,682$ 38,076,771$ 1,351,436,827 42,733,909$ Add: Unamortize d premium, ne t of discount 124,465,181 Total Bonds and Notes Payable 1,475,902,008$ Current Portion of Bonds and Notes Payable 42,733,909$ Non-Cur rent Bonds and Notes Payable 1,433,168,099 Total Bonds and Notes Payable 1,475,902,008$ Net Pension Liability 52,600,003$ 14,439,182$ —$ 67,039,185$ —$ Deposits and Accrued Expenses Landfill closure and postclosure costs 821,732$ (313,310)$ —$ 508,422$ —$ Comp ensated absences 8,497,114 812,994 555,192 8,754,916 2,188,729 Ne t OPEB obligation 7,003,477 2,576,404 1,516,800 8,063,081 — Total Deposits and Accrued Expens es 16,322,323$ 3,076,088$ 2,071,992$ 17,326,419$ 2,188,729$ Current Portion (Compensated absences) in Current Deposits and Accrued Expenses 2,188,729$ Non-Cur rent Deposits and Accrued Expenses 15,137,690 Total Deposits and Accrued Expens es 17,326,419$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 42 Wastewater System Revenue Bonds Payable In February 2004, the District received voter authorization for $500,000,000 of revenue bonds.In August 2008, the District received voter authorization for an additional $275,000,000 of revenue bonds.In June 2012, the District received voter authorization for another $945,000,000 of revenue bonds and finally, in April 2016, the District received voter authorization for another $900,000,000 of revenue bonds. From the total voter authorization of $2,620,000,000, $747,500,000 has not been issued as of June 30, 2018. These funds were sought to enable the District to comply with federal and state clean water requirements. In December 2017, the District issued $316,175,000 of Wastewater System Revenue Bonds Series 2017A (“Series 2017A”). These bonds were issued for two purposes: $116,175,000 was issued to partially advance refund the Series 2011B bonds maturing in fiscal years 2022 through 2029 totaling $23,345,000, the Series 2012A bonds maturing in fiscal years 2023 through 2032 totaling $50,060,000 (excludes $240,000 of the May 2030 principal payment due), the Series 2013B bonds maturing in fiscal years 2024 through 2029 totaling $26,385,000, and the Series 2015B bonds maturing in fiscal years 2026 through 2029 totaling $25,970,000. The remaining $200,000,000 was issued for the purpose of constructing, repairing, replacing, and equipping new and existing District wastewater facilities and as of June 30, 2018, $1,695,005 has been expended. Approximately $47,500,000 was issued pursuant to the June 2012 authorization and $152,500,000 was issued pursuant to the April 2016 authorization. A premium of $37,823,556 was received on the $200,000,000 portion of the Series 2017A. The 2017A senior bonds have interest rates ranging from 2.0% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2047. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 43 The Series 2017A refunding net proceeds of $141,343,662 (including a premium of $25,967,878 and additional proceeds of $1,220 and after payments of $428,483 in underwriting fees and $371,953 in issuance costs) and the $934,325 in excess debt service reserves the District contributed,were used to purchase U.S. government securities. These securities were deposited in an irrevocable trust with an escrow agent to provide for the future debt service payments defined above on the Series 2011B, Series 2012A, Series 2013B, and Series 2015B bonds. The sum of the $142,277,987 deposited into escrow and the earnings on the U.S. government securities will fund the $125,760,000 advanced refunded principal payments on their call dates (May 1, 2021 for Series 2011B, May 1, 2022 for Series 2012A, May 1, 2023 for Series 2013B, and May 1, 2025 for Series 2015B) and the interest thereon. Interest only payments of $3,008,512 were made from the escrow account in fiscal year 2018. All $125,760,000 debt defeased in substance to be paid from the escrow account remains outstanding as of June 30, 2018. As a result of placing the cash with an escrow agent in a trust, Series 2011B, Series 2012A, Series 2013B, and Series 2015B bonds were partially defeased and the related liability for those bonds were removed from the District’s financial statements in fiscal 2018. This advance refunding decreased total debt service payments over the next 14 years by $12,623,385, resulting in an economic gain (difference between the present values of the debt service requirements on the old and new debt adjusted for the additional cash paid) of $9,481,147. In December 2016, the District issued $150,000,000 of Wastewater System Revenue Bonds Series 2016C (“Series 2016C”). These bonds were issued pursuant to the June 2012 authorization; in this case for the purpose of construction, repairing, replacing, and equipping new and existing District wastewater facilities and as of June 30, 2018, $167,631,579 has been expended. A premium of $17,678,054 was received on the issuance of Series 2016C.These 2016C senior bonds have interest rates ranging from 2.0% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2046. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 44 In December 2015, the District issued $223,855,000 of Wastewater System Revenue Bonds Series 2015B (“Series 2015B”). These bonds were issued for two purposes: $73,855,000 was issued to advance refund the Series 2006C and Series 2008A bonds and $150,000,000 was issued pursuant to the June 2012 authorization; in this case for the purpose of constructing, repairing, replacing, and equipping new and existing District wastewater facilities. All funds from this issuance have been expended.These 2015B senior bonds have interest rates ranging from 3.0% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2045; however, in December 2017, there was an advance refunding of the non-refunding Series 2015B bonds for the years 2026 through 2029 totaling $25,970,000. As a result of this advance refunding, Series 2015B bonds are considered partially defeased. See the explanation for Series 2017A above for further information. The Series 2015B refunding net proceeds of $86,848,034 (including a premium of $13,623,487 and after payments of $337,848 in underwriting fees and $292,605 in issuance costs) and the $8,945,557 in excess debt service reserves the District contributed were used to purchase U.S. government securities. These securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the Series 2006C and Series 2008A bonds. All principal and interest payments on the advance refunded Series 2006C and Series 2008A bonds have been paid from escrow and no amounts remain outstanding on these bonds. As a result of placing the cash with an escrow agent in a trust, Series 2006C and Series 2008A bonds were defeased and the liability for those bonds were removed from the District’s financial statements in fiscal 2016. This refunding decreased total debt service payments over the next 22 years by $33,032,176, resulting in an economic gain (difference between the present values of the debt service requirements on the old and new debt adjusted for additional cash paid) of $14,544,866. In December 2013, the District issued $150,000,000 of Wastewater System Revenue Bonds Series 2013B (“Series 2013B”). These bonds were issued pursuant to the June 2012 authorization; in this case for the purpose of constructing, repairing, replacing, and equipping new and existing District wastewater facilities. All funds from this issuance have been expended. These senior bonds have interest rates ranging from 2.0% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2043; however, in December 2017, there was an advance refunding of the Series 2013B bonds for the years 2024 through 2029 totaling $26,385,000. As a result of this advance refunding, Series 2013B bonds are considered partially defeased. See the explanation for Series 2017A above for further information. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 45 In November 2012, the District issued $141,730,000 of Wastewater System Refunding Bonds Series 2012B (“Series 2012B”). These bonds were issued to advance refund the Series 2004A bonds maturing in fiscal years 2015 and thereafter. These 2012B senior bonds have interest rates ranging from 1.3% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2034. The Series 2012B’s net proceeds of $169,991,297 (including a premium of $29,613,138 and after payments of $761,593 in underwriting fees and $590,247 in issuance costs) were used to purchase U.S. government securities. These securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the bonds. All principal and interest payments on the advance refunded Series 2004A bonds have been paid from escrow and no amounts remain outstanding on these bonds. As a result of placing the cash with an escrow agent in a trust, Series 2004A bonds were partially defeased and the liability for those bonds related to a date after May 1, 2014 were removed from the District’s financial statements in fiscal 2013. This refunding decreased total debt service payments over the next 22 years by $28,601,189, resulting in an economic gain (difference between the present values of the debt service requirements on the old and new debt) of $22,439,375. In August 2012, the District issued $225,000,000 of Wastewater System Revenue Bonds Series 2012A (“Series 2012A”). These bonds were issued pursuant to the June 2012 authorization;in this case for the purpose of constructing, repairing, replacing, and equipping new and existing District wastewater facilities. All funds from this issuance have been expended. These senior bonds have interest rates ranging from 2.5% to 5.3% and are payable in semiannual installments at varying amounts through May 1, 2042; however, in December 2017, there was an advance refunding of the Series 2012A bonds for the years 2023 through 2032 totaling $50,060,000 (excludes $240,000 of the May 2030 principal payment due). As a result of this advance refunding, Series 2012A bonds are considered partially defeased. See the explanation for Series 2017A above for further information. In December 2011, the District issued $52,250,000 of Wastewater System Revenue Bonds Series 2011B (“Series 2011B”). These bonds were issued pursuant to the August 2008 authorization; in this case for the purpose of constructing, repairing, replacing, and equipping new and existing District wastewater facilities. All funds from this issuance have been expended. These senior bonds have interest rates ranging from 3.0% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2032; however, in December 2017, there was an advance refunding of the Series 2011B bonds for the years 2022 through 2029 totaling $23,345,000. As a result of this advance refunding, Series 2011B bonds are considered partially defeased. See the explanation for Series 2017A above for further information. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 46 In January 2010, the District issued $85,000,000 of Taxable Wastewater System Revenue Bonds (Build America Bonds – Direct Pay) Series 2010B (“Series 2010B”). These bonds were issued pursuant to the August 2008 authorization; in this case for the purpose of constructing, repairing, replacing, and equipping new and existing District wastewater facilities. All funds from this issuance have been expended. These senior bonds have an interest rate of 5.9% and are payable in semiannual installments at varying amounts through May 1, 2039. As Build America Bonds under The American Recovery and Reinvestment Act (“ARRA”) of 2009, the District receives a subsidy payment from the Federal government equal to a percentage of the interest paid. In fiscal years 2013 and prior, the rate was 35%. Beginning with refund payments processed on March 1, 2013 and annually beginning on October 1, 2013, the IRS has adjusted this rate as part of the sequestration. In fiscal year 2018 the subsidy percentage was 32.7% while for 2017 the subsidy percentage was 32.6%. In fiscal year 2019 the subsidy percentage is expected to be 32.8%. In November 2008, the District issued $30,000,000 of Wastewater System Revenue Bonds Series 2008A (“Series 2008A”) from the August 2008 authorization for the purpose of providing funds to finance the capital improvement and replacement program. All funds from this issuance have been expended. These senior bonds had interest rates ranging from 5.1% to 5.3% and were payable in semiannual installments at varying amounts through May 1, 2038; however, in December 2015, there was an advance refunding of the Series 2008A bonds. As a result of this refunding, Series 2008A bonds are considered to be defeased. See the explanation for Series 2015B above for further information. In November 2006, the District authorized and issued $60,000,000 of Wastewater System Revenue Bonds Series 2006C (“Series 2006C”) from the February 2004 authorization for the purpose of providing funds to finance the initial phase of its capital improvement and replacement program, including constructing, repairing, and replacing new wastewater facilities. All funds from this issuance have been expended. These senior bonds had interest rates ranging from 4.1% to 5.0% and were payable in semiannual installments at varying amounts through May 1, 2036; however, in December 2015, there was an advance refunding of the Series 2006C bonds. As a result of this refunding, Series 2006C bonds are considered to be defeased. See the explanation for Series 2015B above for further information. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 47 In May 2004, the District authorized and issued $175,000,000 of Wastewater System Revenue Bonds Series 2004A (“Series 2004A”) from the February 2004 authorization for the purpose of providing funds to finance the initial phase of its capital improvement and replacement program, including constructing, repairing, and replacing new wastewater facilities. All funds from this issuance have been expended. These senior bonds had interest rates ranging from 2.0% to 5.0% and were payable in semiannual installments at varying amounts through May 1, 2034; however, in November 2012, there was a partial refunding of the Series 2004A bonds. As a result of this refunding, Series 2004A bonds were considered to be partially defeased and the semiannual installments were paid through May 1, 2014. The liability related to Series 2004A after May 1, 2014 has been paid. See the explanation for Series 2012B above for further information. The revenue bonds do not constitute a legal debt or liability for the District, the State of Missouri, or for any political subdivision thereof and do not constitute indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. Revenue derived from the operations of the Wastewater System is pledged for the retirement of the outstanding Wastewater System Revenue Bonds listed above. Under the provisions of the bond indentures, the District covenants to establish rates for the services of the Wastewater System sufficient to fund operations, maintain reserves, and provide revenues to apply principal and interest on these bonds. The issuance of the revenue bonds does not obligate the District to levy any form of taxation or to make any appropriation for their payments in any fiscal year. The principal and interest on the bonds are expected to be paid from future wastewater revenues. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 48 Water Pollution Control And Drinking Water Revenue Bonds Payable In October 2008, the State Environmental Improvement and Energy Resources Authority (“Authority”) authorized and issued $69,435,000 of Water Pollution Control and Drinking Water Revenue Bonds (State Revolving Funds Programs) Series 2008A/B (“Series 2008A/B”). The Series 2008A/B bonds provided funds to issue loans to 14 Missouri political subdivisions that used the funds to finance water pollution control and drinking water projects. A portion of the proceeds of the Series 2008A/B bonds issued by the Authority were used to purchase subordinate Participant Revenue Bonds (“Participant Bonds”) authorized and issued by the District from the February 2004 authorization in the aggregate principal amount of $40,000,000, the proceeds of which were used for constructing, repairing, and equipping new and existing wastewater facilities. All funds from this issuance have been expended.The District’s Participant Bonds have interest rates ranging from 4.0% to 5.7% and are payable in semiannual installments at varying amounts through January 1, 2029. In November 2006, the Authority authorized and issued $22,105,000 of State Revolving Funds Programs Series 2006B (“Series 2006B”). The Series 2006B bonds provided funds to issue loans to 7 Missouri political subdivisions that used the funds to finance water pollution control and drinking water projects. A portion of the proceeds of the Series 2006B bonds issued by the Authority were used to purchase Participant Bonds authorized and issued by the District from the February 2004 authorization in the aggregate principal amount of $14,205,000, the proceeds of which were used for constructing, repairing, and equipping new and existing wastewater facilities. All funds from this issuance have been expended. The District’s Participant Bonds have interest rates ranging from 4.0% to 5.0% and are payable in semiannual installments at varying amounts through July 1, 2027. In May 2006, the Authority authorized and issued $87,505,000 of State Revolving Funds Programs Series 2006A (“Series 2006A”). The Series 2006A bonds provided funds to issue loans to 13 Missouri political subdivisions that used the funds to finance water pollution control and drinking water projects. A portion of the proceeds of the Series 2006A bonds issued by the Authority were used to purchase subordinate Participant Bonds authorized and issued by the District from the February 2004 authorization in the aggregate principal amount of $42,715,000, the proceeds of which were used for constructing, repairing, and equipping new and existing wastewater facilities. All funds from this issuance have been expended. The District’s Participant Bonds have interest rates ranging from 3.5% to 4.5% and are payable in semiannual installments at varying amounts through July 1, 2026. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 49 In May 2005, the Authority authorized and issued $53,060,000 of State Revolving Funds Programs Series 2005A (“Series 2005A”). The Series 2005A bonds provided funds to issue loans to 10 Missouri political subdivisions and one Missouri non-profit corporation that were used to finance water pollution control and drinking water projects. A portion of the proceeds of the Series 2005A bonds issued by the Authority were used to purchase subordinate Participant Bonds authorized and issued by the District from the February 2004 authorization in the aggregate principal amount of $6,800,000, the proceeds of which were used for constructing, repairing, and equipping new and existing wastewater facilities. All funds from this issuance have been expended. The District’s Participant Bonds have interest rates ranging from 3.0% to 5.0% and are payable in semiannual installments at varying amounts through July 1, 2026. In May 2004, the Authority authorized and issued $179,780,000 of State Revolving Funds Programs Series 2004B (“Series 2004B”). The Series 2004B bonds provided funds to issue loans to seven Missouri political subdivisions that were used to finance water pollution control projects. A portion of the proceeds of the Series 2004B bonds issued by the Authority were used to purchase subordinate Participant Bonds authorized and issued by the District from the February 2004 authorization in the aggregate principal amount of $161,280,000, the proceeds of which were used to finance the District’s three water pollution control construction projects outlined in the agreement. All funds from this issuance have been expended. The District’s Participant Bonds have interest rates ranging from 2.0% to 5.3% and are payable in semiannual installments at varying amounts through January 1, 2027. The Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds do not constitute a legal debt or liability for the District, the State of Missouri, or for any political subdivision thereof and do not constitute indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds and the Series 2009A, 2010A, 2010C, 2011A, 2013A, 2015A, 2016A, and 2016B direct loans (pages 51- 56)do not obligate the District to levy any form of taxation or to make any appropriation for their payments in any fiscal year. The principal and interest on the bonds are expected to be paid from future wastewater revenues. In connection with the District’s issuance of the Participant Bonds, which were purchased with the proceeds of the Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds, the District participates in the State Revolving Loan Program established by the Missouri Department of Natural Resources (“DNR”). Monies from federal capitalization grants and state matching funds are used to fund a bond reserve account for the participants. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 50 As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account and deposited in a bond reserve account,in the District’s name,an additional 60% of the expenditure amount for the Series 2004B bonds and 70% for the Series 2005A, 2006A, and 2006B bonds. For the Series 2008A/B bonds, 70% of the entire anticipated borrowed amount was deposited into this bond reserve account at the beginning of the loan versus as the expenditures were reimbursed. Interest earned from this bond reserve account can be used by the District to fund interest payments on the bonds. On the date of each payment of the principal amount of the District’s Participant Bonds, the trustee transfers from this bond reserve account to the master trustee account an amount equal to 60% of the principal payment for the Series 2004B bonds and 70% for the Series 2005A, 2006A, 2006B,and 2008A/B bonds. In accordance with the Master Bond Ordinance and the Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds’ ordinances, the District’s annual net operating revenues from wastewater activities, as defined in the agreement, coupled with investments earnings,must be at least 125% of the current year’s principal and interest due on all senior bonds and at least 115% of the current year’s principal and interest due on all bonds. At June 30, 2018 and 2017, the District was in compliance with this covenant. Principal And Interest Requirements On Revenue Bonds Payable The annual principal and interest requirements to maturity on revenue bonds payable outstanding as of June 30, 2018 are as follows: Years ending J une 3 0,Princip al Inte rest Total 2019 36,325,000$ 58,184,637$ 94,509,637$ 2020 37,655,000 57,042,709 94,697,709 2021 38,990,000 55,675,412 94,665,412 2022 39,775,000 54,325,261 94,100,261 2023 41,080,000 52,833,328 93,913,328 2024-2028 217,200,000 239,839,963 457,039,963 2029-2033 232,400,000 189,925,758 422,325,758 2034-2038 264,315,000 131,665,676 395,980,676 2039-2043 300,265,000 64,746,880 365,011,880 2044-2047 91,030,000 10,004,500 101,034,500 Total 1,299,035,000$ 914,244,124$ 2,213,279,124$ Wastewate r Sys te m Re venue B onds Payable/ Wate r Pollution Control and D rinking Water Re ve nue B onds Payab le THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 51 Energy Efficiency Leveraged Note Payable In February 2012, the DNR loaned $223,793 to the District. The Energy Efficiency Leveraged Note Payable bears interest at a rate of 2.5% per annum and is payable through February 1, 2020. The purpose of this note was to finance the design, acquisition, installation, and implementation of energy conservation measures. The principal and interest on this note will be paid from the energy savings from the projects or avoided costs resulting from the projects. Principal And Interest Requirements On Energy Efficiency Leveraged Note Payable The annual principal and interest requirements to maturity on the Energy Efficiency Leveraged Note Payable outstanding as of June 30, 2018 are as follows: State Of Missouri Direct Loan Series 2016B In December 2016, the State of Missouri Direct Loan Program issued to the District an amount totaling $75,500,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds are issued from the June 2012 authorization. The District’s interest rate is 1.2% and is payable in semiannual installments at varying amounts through July 1, 2037. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2016B As the District incurs approved capital expenditures,the DNR reimburses the District for the expenditures from the bond proceeds account. The District repays the loan at an interest rate of 1.2% based on the amount that has been borrowed. As of June 30, 2018 the outstanding loan balance was $27,417,916. The payment requirements to maturity will be determined after the debt is fully issued. Years ending J une 3 0,Pr incipal Inte rest Total 2019 34,863$ 1,059$ 35,922$ 2020 16,162 202 16,364 Total 51,025$ 1,261$ 52,286$ Ene rgy Efficie ncy Leveraged N ote Payab le THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 52 State Of Missouri Direct Loan Series 2016A In December 2016, the State of Missouri Direct Loan Program issued to the District an amount totaling $20,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds are issued from the June 2012 authorization. The District’s interest rate is 1.2% and is payable in semiannual installments at varying amounts through January 1, 2037. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2016A As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account. The District repays the loan at an interest rate of 1.2% based on the amount that has been borrowed. As of June 30, 2018 the outstanding loan balance was $3,093,765. After taking into consideration the $415,000 principal paid in fiscal year 2018, the balance to be borrowed is $16,491,235. The payment requirements to maturity will be determined after the debt is fully issued. State Of Missouri Direct Loan Series 2015A In August 2015, the State of Missouri Direct Loan Program issued to the District an amount totaling $75,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds are issued from the June 2012 authorization. The District’s interest rate is 1.2% and is payable in semiannual installments at varying amounts through January 1, 2035. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2015A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2015A outstanding as of June 30, 2018 are as follows: THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 53 State Of Missouri Direct Loan Series 2013A In October 2013, the State of Missouri Direct Loan Program issued to the District an amount totaling $52,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the June 2012 authorization. The District’s interest rate is 1.6% and is payable in semiannual installments at varying amounts through July 1, 2034. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2013A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2013A outstanding as of June 30, 2018 are as follows: Years ending J une 3 0,Pr incipal Inte rest Total 2019 3,344,000$ 834,452$ 4,178,452$ 2020 3,424,000 793,622 4,217,622 2021 3,505,000 751,605 4,256,605 2022 3,589,000 708,588 4,297,588 2023 3,674,000 664,546 4,338,546 2024 -2028 19,729,000 2,624,446 22,353,446 2029 -2033 22,302,000 1,351,858 23,653,858 2034 -2035 9,679,000 148,444 9,827,444 Total 69,246,000$ 7,877,561$ 77,123,561$ State of Mis souri D ir ect Loan Series 2015A Years ending J une 3 0,Pr incipal Inte rest Total 2019 2,247,000$ 698,089$ 2,945,089$ 2020 2,305,000 663,036 2,968,036 2021 2,365,000 627,076 2,992,076 2022 2,427,000 590,178 3,017,178 2023 2,490,000 552,319 3,042,319 2024 -2028 13,460,000 2,158,197 15,618,197 2029 -2033 15,309,000 1,052,101 16,361,101 2034 -2035 4,993,000 77,748 5,070,748 Total 45,596,000$ 6,418,744$ 52,014,744$ State of Mis souri D ir ect Loan Series 2013A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 54 State Of Missouri Direct Loan Series 2011A In November 2011, the State of Missouri Direct Loan Program issued to the District an amount totaling $39,769,300 for the purpose of improving, renovating, repairing, replacing,and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.5% and is payable in semiannual installments at varying amounts through January 1, 2034. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2011A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2011A outstanding as of June 30, 2018 are as follows: State Of Missouri Direct Loan Series 2010C In December 2010, the State of Missouri Direct Loan Program issued to the District an amount totaling $37,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.7% and is payable in semiannual installments at varying amounts through January 1, 2031. Years ending J une 3 0,Pr incipal Inte rest Total 2019 1,747,000$ 510,025$ 2,257,025$ 2020 1,792,000 483,304 2,275,304 2021 1,838,000 455,891 2,293,891 2022 1,884,000 427,778 2,311,778 2023 1,932,000 398,959 2,330,959 2024 -2028 10,425,000 1,536,097 11,961,097 2029 -2033 11,822,000 697,155 12,519,155 2034 2,548,300 29,113 2,577,413 Total 33,988,300$ 4,538,322$ 38,526,622$ State of Mis souri D ir ect Loan Series 2011A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 55 Principal And Interest Requirements On State Of Missouri Direct Loan Series 2010C As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2010C outstanding as of June 30, 2018 are as follows: State Of Missouri Direct Loan Series 2010A In January 2010, the State of Missouri’s Direct Loan Program -ARRA issued to the District an amount totaling $7,980,700 for the construction, improvement, renovation, repair, replacement and equipping of its wastewater system, under the authority of and in full compliance with the District’s Charter (“Plan”)and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.5% and is payable in semiannual installments at varying amounts through July 1, 2031. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2010A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. Years ending J une 3 0,Pr incipal Inte rest Total 2019 1,750,000$ 432,655$ 2,182,655$ 2020 1,795,000 403,590 2,198,590 2021 1,842,000 373,783 2,215,783 2022 1,890,000 343,192 2,233,192 2023 1,939,000 311,809 2,250,809 2024 -2028 10,476,000 1,059,020 11,535,020 2029 -2031 6,964,000 203,288 7,167,288 Total 26,656,000$ 3,127,337$ 29,783,337$ State of Mis souri D ir ect Loan Series 2010C THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 56 The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2010A outstanding as of June 30, 2018 are as follows: State Of Missouri Direct Loan Series 2009A In October 2009, the DNR loaned $23,000,000 to the District. The State of Missouri Direct Loan Series 2009A note bears interest at a rate of 1.5% per annum and is payable through January 1, 2030. The purpose of this note was to finance the designing, constructing, improving, renovating, repairing, replacing, and equipping of new and existing sewer facilities within the District. The principal and interest on the note are expected to be paid from future wastewater revenues and the note was issued from the August 2008 authorization. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2009A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account.All funds have been drawn on this loan. The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2009A outstanding as of June 30, 2018 are as follows: Years ending J une 3 0,Pr incipal Inte rest Total 2019 380,900$ 85,164$ 466,064$ 2020 388,700 79,498 468,198 2021 396,600 73,717 470,317 2022 404,600 67,817 472,417 2023 412,900 61,799 474,699 2024 -2028 2,193,500 214,340 2,407,840 2029 -2032 1,671,900 49,988 1,721,888 Total 5,849,100$ 632,323$ 6,481,423$ State of Mis souri D ir ect Loan Series 2010A Years ending J une 3 0,Pr incipal Inte rest Total 2019 1,123,900$ 219,915$ 1,343,815$ 2020 1,149,900 203,411 1,353,311 2021 1,176,500 186,526 1,363,026 2022 1,203,700 169,251 1,372,951 2023 1,231,600 151,575 1,383,175 2024 -2028 6,598,400 478,103 7,076,503 2029 -2030 2,858,000 52,456 2,910,456 Total 15,342,000$ 1,461,237$ 16,803,237$ State of Mis souri D ir ect Loan Series 2009A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 57 In accordance with the Direct Loan Series 2009A, 2010A, 2010C, 2011A, 2013A, 2015A, 2016A, and 2016B ordinances, the District’s annual net operating revenues from wastewater activities, as defined in the agreement, coupled with investments earnings must be at least 115% of the current year’s principal and interest due on all bonds. At June 30, 2018 and 2017, the District was in compliance with this covenant. Wastewater System Cash And Investments The following accounts have been established in accordance with bond ordinances and financing agreements that require receipts generated from operations be segregated and certain reserve accounts be established: Revenue Fund The Revenue Fund will be used for the purpose of depositing wastewater and stormwater operating revenues, providing funds to pay for expenses related to the operation and maintenance of the District, and fulfilling Sinking Fund requirements in accordance with the bond ordinances. Sinking Fund The bond ordinances provide for deposits to and the use of monies in the Sinking Fund to be used for the sole purpose of principal and interest payments on the bonds. Sufficient monies shall be paid in periodic installments from the Revenue Fund. Debt Service Fund The Debt Service Fund shall be used by the Trustee for the sole purpose of paying the principal and interest on the bonds, as and when the same become due. Debt Service Reserve Fund After initial deposit of the amount required pursuant to the bond ordinances and financing agreements of the Series 2004A, 2006C, 2008A, 2010B, 2011B, 2012A, and 2013B bonds, monies in the Debt Service Reserve Fund shall be disbursed and expended by the District solely for the payment of the principal and interest on the bonds and notes to the extent of any deficiency in the Debt Service Fund for such purpose. The District may disburse and expend monies from the Debt Service Reserve Fund for such purpose immediately. As of June 30, 2018 and 2017, cash and investments in the Debt Service Reserve Fund totaled $48,117,908 and $49,413,496, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 58 Series 2015B was issued without a debt service requirement and at that time $8,945,557 in excess debt service reserves along with part of the Series 2015B proceeds were used to advance refund Series 2006C and Series 2008A. Series 2016C was issued without a debt service requirement. Series 2017A was issued without a debt service requirement and at that time $934,325 in excess debt service reserves along with part of the Series 2017A proceeds were used to advance refund Series 2011B, Series 2012A, Series 2013B, and Series 2015B. Special Participant Bond Reserve Account For the Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds, the DNR deposited into the Special Participant Bond Reserve Account,amounts in accordance with the bond ordinances, which shall be disbursed and expensed by the District solely for the payment of the principal and interest on the Participant Bonds to the extent of any deficiency in the Sinking Fund for such purpose. At June 30,2018 and 2017, cash and investments in the Special Participant Bond Reserve Account held on behalf of the District totaled $86,670,343 and $95,878,616, respectively. Monies in this account are not considered to be District funds. However, interest earnings on this account are used by the District to reduce interest payments on the bonds outstanding. Renewal And Extension Fund All sums accumulated and retained in the Renewal and Extension Fund shall be first used to prevent default in the payment of principal and interest on the bonds when due and shall then be applied by the District for purposes pursuant to the trust indenture. No monies have been deposited into this account at June 30, 2018. Project Fund The Project Funds for all bond issuances outstanding will be used for the purpose of providing monies to pay project costs. The proceeds from the bonds and notes, after a deposit into the Debt Service Reserve Fund for the amounts required pursuant to the bond ordinances and note agreements of Series 2004A, 2006C, 2008A, 2010B, 2011B, 2012A, and 2013B bonds, shall be deposited into the Project Fund. At June 30, 2018 and 2017, cash and investments in the Project Fund totaled $235,843,731 and $120,226,233, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 59 Rebate Fund The bond ordinances provide for the creation of a Rebate Fund into which shall be deposited such amounts as are required to be deposited therein pursuant to the arbitrage instructions regarding the calculation and payment of rebate amounts due. The District does not have any rights in or claims to such money; provided, however, any funds remaining in the Rebate Fund after redemption and payment of all bonds and payment of any rebatable arbitrage amount, or provision having been made therefore, shall be remitted to the District. At June 30, 2018 and 2017, cash and investments in the Rebate Fund totaled $227,132 and $227,320, respectively. Administrative Fee Fund The Administrative Fee Fund will be used for the payment of the Trustee’s fees and other administrative fees pursuant to the note agreement. The Trustee has the ability to immediately withdraw the fee amounts when due. Monies held in this account shall not be invested. Pledged Revenues The District pledges revenues to ensure the repayment of all outstanding revenue bonds. These bonds’ proceeds are used for the District’s capital improvement and replacement program and their repayment comes from, and is collateralized by, the District’s wastewater revenues. These revenues are pledged through 2047 at an approximate amount of $2.2 billion. The proportion of future pledged revenues to future wastewater revenues is not estimable as annual total revenues fluctuate. Principal and interest paid out during fiscal year 2018 was $100.4 million with pledged revenues of $211.6 million. This provided a coverage ratio of 2.1 and pledged revenues represented 57.5% of all net operating revenues. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 60 7.Pension Plan General Information About The Pension Plan Pension Plan Description. The Metropolitan St. Louis Sewer District Employees’ Pension Plan (“Pension Plan”) is a noncontributory single employer defined benefit plan providing retirement benefits as well as death and disability benefits. As a condition of employment, all full-time employees of the District commencing service prior to January 1, 2011, were eligible to be covered by the Pension Plan. As of January 1, 2011, the Pension Plan was frozen to new employees. Instead, new employees of the District may participate in the The Metropolitan St. Louis Sewer District Defined Contribution Plan (“DC Plan”) and/or the The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust. Current employees with less than ten years of service on January 1, 2011 could also voluntarily elect to transfer from the Pension Plan and enter the DC Plan. Benefits Provided. All benefits vest after five years of credited service. Members retiring at or after age 65 with five or more years credited service are entitled to a pension benefit. The Pension Plan permits early retirement with reduced benefits beginning at age 55 if the member has completed five years of employment. Ordinance No. 10664 provides for unreduced retirement benefits to any member whose combined age and term of service is equal to 75. Effective August 1, 2004, Ordinance No. 11781 amended the Pension Plan to change the benefit formula to 1.7% of final average earnings plus 0.4% of final average earnings that are in excess of covered earnings multiplied by the period of years and months of credited service not to exceed 35 years without including accrued sick leave. For vested employees who retire or die while in active service, sick leave is paid out at 1.25% per year of service multiplied by the amount of the unused accrued sick leave remaining at the employee’s current rate of pay, up to a maximum of $50,000. Also, the Pension Plan was amended to provide the retiring member with a 10% partial lump sum payment option. The balance of the distribution will be paid in accordance with any one of the other payment options available under the Pension Plan. The retirement benefit payable to a member who retires after the normal retirement date is the greater of a) the benefit that would have been payable on the normal retirement date plus a special annual retirement benefit provided by the accumulated value, at 4% per annum interest, of the monthly benefit that would have been received prior to the postponed retirement date or b) the benefit determined as of the postponed retirement date under the normal formula. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 61 Effective August 27, 2011, Ordinance No. 13288 amended the Pension Plan to include the following: “Upon termination or complete discontinuance of contributions under the Plan, the rights of all Members to benefits accrued to the date of such termination or discontinuance shall be non-forfeitable, to the extent then funded.” Amounts in participants’ accounts are distributed upon retirement, death, disability, or termination of employment. The normal form of retirement benefit is either a lump sum payment or equal monthly installments. The Pension Plan reports financial data on a calendar year basis and issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing: The Metropolitan St. Louis Sewer District, 2350 Market Street, St. Louis, MO 63103-2555. Employees Covered by Benefit Terms. At December 31, 2017 and 2016, the financial reporting period of the Pension Plan, the following employees were covered by the benefit terms: Required Employer Contributions. The District’s employees do not contribute to the Pension Plan. Ordinances establishing the Pension Plan provide for actuarially determined annual contributions, paid solely by the District, that are sufficient to pay benefits when due. The Entry Age Normal actuarial funding method is used to determine contributions. Increase 2017 2016 (Decrease) Active plan membe rs 595 626 (31) Re tirees and beneficiar ie s cur rently receiving be ne fits 722 717 5 Te rminat ed membe rs ent itle d to receive benefits 178 174 4 Total 1,495 1,517 (22) For the Years Ended Dece mber 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 62 Contributions of $12,411,005 and $11,236,828, excluding certain professional fees paid by the District, were made to the Pension Plan during the District’s fiscal years ended June 30, 2018 and 2017, respectively. These contributions were made in accordance with actuarially determined contribution requirements based on actuarial valuations performed at December 31, 2017 and 2016, respectively. Net Pension Liability The net pension liability was measured as of December 31, 2017 and 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability in the December 31, 2017 and 2016 actuarial valuations were determined using the following actuarial assumptions, applied to all periods included in the measurement: Effective December 31, 2017 and 2016, for current employees, mortality rates were based on the RP-2014 Employees Mortality Table, male and female rates, with generational projection from 2006 based on the MP-2017 improvement scale and MP-2016 improvement scale (improvement scale updates published annually), respectively. For retirees, the RP-2014 Healthy Annuitant Mortality Table, male and female rates, with generational projection from 2006 based on the MP-2017 improvement scale was assumed for the December 31, 2017 valuation while the MP-2016 improvement scale was assumed for December 31, 2016. For disabled lives, the RP-2014 Disabled Mortality Table, male and female rates, was utilized for both the December 31, 2017 and 2016 valuations. The actuarial assumptions are based on prior and current year experiences. Inflat ion 2.50 percent Salar y Increases 4.25 percent, ave rage, inc lud ing inf lat ion Inve stment Rate of Return 6.90 percent, net of pension plan investment expense , including inflat io n for Decembe r 31, 2017 and 7.00%, ne t of pension plan inve stme nt expense, inc luding inf lat io n for Decembe r 31, 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 63 Long-Term Expected Rate of Return. The long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The capital market assumptions at December 31, 2017 and 2016 are as follows: Lon g-Term Expe cted Arithmetic Target Real Rate Asset Class Allocation of Return Lar ge Cap US Equity 25.0%4.5% Small Cap US Equit y 10.0%5.5% Develo ped Internat io nal Equit y 12.0%4.9% Emerging Markets Equit y 6.0%6.1% Domestic Core Plus Fixe d Income 14.0%1.5% Co re "Plus" Bonds 13.0%0.9% Glo bal Fixe d Income 8.0%0.7% Re al Estate 12.0%4.0% To tal 100.0% Lon g-Term Expe cted Arithmetic Target Real Rate Asset Class Allocation of Return Lar ge Cap US Equity 20.0%5.1% Small Cap US Equit y 6.0%6.3% Develo ped Internat io nal Equit y 10.0%5.5% Emerging Markets Equit y 4.0%7.0% Domestic Core Plus Fixe d Income 26.0%1.0% Glo bal Fixe d Income 9.0%0.7% Absolute Return/HFOF 15.0%2.8% Re al Estate 10.0%4.3% To tal 100.0% December 31, 2017 December 31, 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 64 Discount Rate. The discount rate used to measure the total pension liability at December 31, 2017 and 2016, was 6.90%and 7.00%, respectively. The Pension Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the discount rate for calculating the total pension liability is equal to the long-term expected rate of return. Increase (Decrease) Total Pension Plan Fiduciar y Net Pension Liability Net Position Liability Ch anges in Net Pension Liability (a)(b)(a) - (b) Balanc es as of December 31, 2016 318,049,216$ 251,010,031$ 67,039,185$ Change s for the year: Servic e cost 5,157,148 — 5,157,148 Interest 22,078,790 — 22,078,790 Effect of economic/demographic gains or losses (4,728,693)— (4,728,693) Effect of assumptio ns change s or inp uts 1,667,047 — 1,667,047 Bene fit payments (15,858,355)(15,858,355)— Emplo yer contributio ns — 12,328,093 (12,328,093) Net investment inc ome — 30,496,446 (30,496,446) Balanc es as of December 31, 2017 326,365,153$ 277,976,215$ 48,388,938$ Increase (Decrease) Total Pension Plan Fiduciar y Net Pension Liability Net Position Liability Ch anges in Net Pension Liability (a)(b)(a) - (b) Balanc es as of December 31, 2015 296,812,242$ 244,212,239$ 52,600,003$ Change s for the year: Servic e cost 5,106,625 — 5,106,625 Interest 20,609,223 — 20,609,223 Effect of economic/demographic gains or losses (882,851)— (882,851) Effect of assumptio ns change s or inp uts 11,664,881 — 11,664,881 Bene fit payments (15,260,904)(15,260,904)— Emplo yer contributio ns — 10,145,562 (10,145,562) Net investment inc ome — 11,913,134 (11,913,134) Balanc es as of December 31, 2016 318,049,216$ 251,010,031$ 67,039,185$ Changes in Net Pension Liability for the Year Ending Dece mber 31, 2016 Changes in Net Pension Liability for the Year Ending Dece mber 31, 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 65 Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the net pension liability calculated using the 6.90%discount rate for December 31, 2017 and the 7.00%discount rate for December 31, 2016, as well as what the District’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower or 1-percentage-point higher than the current rate for each year: Pension Plan Fiduciary Net Position. Fiduciary net position is the market value of all plan assets. Net pension liability is the plan’s total pension liability less its fiduciary net position, i.e., the plan’s unfunded accrued liability. Pension Expense And Deferred Outflows Of Resources And Deferred Inflows Of Resources Related To Pensions For the years ended June 30, 2018 and 2017, the District recognized pension expense of $15,554,154 and $18,047,137, respectively, after accounting for all deferred outflows and inflows of resources. The District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 1%Cu rrent 1% Decrease Dis cou nt Rate Increase (5.90%)(6.90%)(7.90%) Net Pension Liabilit y 85,063,996$ 48,388,938$ 17,214,436$ 1%Cu rrent 1% Decrease Dis cou nt Rate Increase (6.00%)(7.00%)(8.00%) Net Pension Liabilit y 103,919,255$ 67,039,185$ 35,785,992$ Dece mber 31, 2016 Dece mber 31, 2017 Deferred Deferred De ferred Deferred Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Differences between expected and actual experience —$ 6,064,985$ —$ 4,604,518$ Changes of assumptions 8,319,328 — 11,290,949 — Net difference between projected and actual earnings 2,332,690 — 19,776,909 — Co ntributio ns made subseque nt to measur ement date 6,680,839 — 6,597,928 — Total 17,332,857$ 6,064,985$ 37,665,786$ 4,604,518$ June 30, 2017June 30, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 66 In the years ending June 30, 2018 and 2017, amounts currently reported as deferred outflows of resources, $6,680,839 and $6,597,928 respectively, related to the District’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the years ended June 30, 2019 and 2018, respectively. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Payable To The Pension Plan At June 30, 2018 and 2017, the District did not have outstanding required contributions to the pension plan. 8.Other Retirement Plans Deferred Compensation Plan and Trust The District offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust (“Plan”), available to all District employees, permits them to defer a portion of their salary up to Internal Revenue Code limits. The District does not contribute to the Plan except where mandated by the Internal Revenue Service to compensate participants for lost deferral contributions. The deferred compensation is not available to employees until termination, retirement, death, disability or due to financial hardship as defined by the Plan. At June 30, 2018 and 2017, the District had outstanding liabilities owed to the Plan of $98,234 and $76,417, respectively. Net Deferrals of Resources Year ended June 30,: 2019 5,639,231$ 2020 3,510,320 2021 (1,946,158) 2022 (2,616,360) 4,587,033$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 67 The Plan was amended and restated to comply with the Economic Growth and Tax Relief Reconciliation Act of 2001 (“Act”). The Act made significant changes to Section 457(b) of the Internal Revenue Code of 1986, as previously amended. The Plan assets are held in trust for the exclusive benefit of participants and their beneficiaries under Section 1448 of the Small Business Job Protection Act of 1996. As a result, the assets and liabilities of the Plan are not included in the accompanying financial statements. The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing: The Metropolitan St. Louis Sewer District, 2350 Market Street, St.Louis, MO 63103-2555. Defined Contribution Plan The Metropolitan St. Louis Sewer District Defined Contribution Plan (“DC Plan”) was established by the District’s Board of Trustees, through Ordinance 13180, which became effective January 1, 2011. The following full time employees are eligible to participate in the DC Plan: (i) employees first hired on or after January 1, 2011, and (ii) employees hired prior to January 1, 2011 who elected to terminate participation in The Metropolitan St. Louis Sewer District Employees’ Pension Plan (“Pension Plan”), effective as of April 1, 2011, in accordance with the provisions of such Pension Plan, and (iii) employees rehired on or after January 1, 2011 who are not eligible to accrue benefits under the Pension Plan. An employee shall become a participant in the DC Plan on the first day on which he or she performs an hour of service for the District. The District’s Board of Trustees, primarily to improve benefits to members, amends the DC Plan in all its respects. A pension committee consisting of two members of the District’s Board of Trustees, two elected employee members and four members of the District’s management staff administer the DC Plan. A committee of the District’s Board of Trustees, with the aid of an investment advisor, reviews and evaluates the DC Plan’s investment options and the related rates of return on a periodic basis. This DC Plan is intended to provide a means whereby the District may provide retirement benefits to eligible employees and encourage such employees to establish a regular method of savings, thereby providing a measure of financial security for such employees and their beneficiaries upon retirement or in the event of death or disability. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 68 Employer Basic Contributions: For each payroll period, the District contributes an amount equal to 7% of the covered compensation earned during such period by each participant entitled to an allocation of such contribution. Employer Matching Contributions: For each payroll period, the District contributes an amount equal to 50% of the covered compensation of such participant withholding as an annual deferral (as defined in The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust)pursuant to The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust; provided that, before-tax contributions in excess of 4% of the covered compensation of the participant for the payroll period shall not be considered for purposes of Employer Matching Contributions. Employer Matching Contributions shall be up to the maximum amount of compensation that may be taken into account for the DC Plan year. In no event shall the sum of the employer contributions and employee contributions allocated to the account of a participant for the DC Plan year exceed the lesser of: (a)The amount specified in the applicable Internal Revenue Code, as adjusted annually for any applicable increases in the cost of living. (b) 100% of the participant’s compensation for such year. The compensation limit referred to in (b) shall not apply to any contribution from medical benefits after separation from service. The District’s contributions to the DC Plan amounted to $1,736,675 and $1,392,919 for the years ended June 30, 2018 and 2017, respectively. Forfeitures were $29,460 and $76,516,for the years ended June 30, 2018 and 2017, respectively, and there were $42,630 and $31,512 of liabilities outstanding as of June 30, 2018 and 2017, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 69 Vesting: As of any time before the normal retirement age of a participant, the first day of the month coinciding with or next following a person’s sixty-fifth birthday and completion of sixty months of continuous service (other than upon death or permanent disability), the vested percentage of the amounts credited to the participant’s employer basic contributions account shall be determined in accordance with the following schedule: Months Of Continuous Service Vested(Non- Forfeitable) Percentage Less than 12 0% 12 but less than 24 20% 24 but less than 36 40% 36 but less than 48 60% 48 but less than 60 80% 60 100% The Metropolitan St. Louis Sewer District Defined Contribution Plan issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing: The Metropolitan St. Louis Sewer District, 2350 Market Street, St.Louis, MO 63103-2555. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 70 9.Postemployment Benefits Other Than Pensions (“OPEB”) General Information About The OPEB Plan Plan Description. The District’s defined benefit OPEB plan, The Metropolitan St. Louis Sewer District Retiree Medical Coverage Plan (“Plan”), provides OPEB for all permanent full-time employees who retire from the District on or after age 62 with five years of service or whose age plus years of service equal 75 points (“Rule of 75”)as part of a total compensation package effective August 1, 2004 for general employees and, with respect for union members, the later of August 1, 2004 or the date of union ratification of a Memorandum of Understanding with respect to this Plan modification. The Plan is a single-employer defined benefit OPEB plan administered by the District. The Plan was established by Ordinance No. 9826 and became effective January 1, 1996. This ordinance has been repealed and new ordinances enacted in lieu thereof with Ordinance No. 13796, which was adopted on January 9, 2014,being the most current ordinance covering the Plan in its entirety. Ordinance No. 13796 was amended by Ordinance No. 14776, adopted on September 14, 2017, to require enrollment in Medicare Parts A and B when Plan members first become eligible for such Medicare programs due to disability in order to receive, or continue to receive, retiree medical benefits and to clarify that any retiree medical benefits under the Plan will be secondary to Medicare disability benefits in accordance with the Medicare secondary payor rules. The District offers two medical plan options, a traditional open access plan and a high deductible health plan, and both plans offer wellness rates for those employees who qualify. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. Benefits Provided. The Plan provides healthcare for qualified retirees and their dependents. The District pays the same amount of the monthly group health insurance premium for the qualified retiree as it would for an active single employee until the retiree becomes eligible for Medicare at age 65. In fiscal year 2018 the monthly amount the District paid towards the retiree’s premium was $580.25 for retirees qualifying for the wellness incentive. The $580.25 paid by the District equates to 85% of the traditional plan’s premium and 91% of the high deductible plan’s premium. For retirees not qualifying for the wellness incentive, the District pays $547.75 of the premium which equates to 80% for the traditional plan and 86% for the high deductible plan. The retiree pays 100% of the spousal, children,or family premium incremental increases in addition to the remaining 9-20% of the retiree’s total monthly premium. The Plan also provides life insurance coverage for a very small closed group of disabled former employees. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 71 The monthly premiums for both plans and coverage tiers are as follows: The ordinance establishing the Plan assigned the authority to establish and amend Plan benefit provisions to the District. The contribution requirements of the District and Plan members are established by the District and may be amended by the District. The Plan does not issue a publicly available report. Employees Covered by Benefit Terms. At June 30, 2017, the date as of which the actuarial valuation was performed, the following employees were covered by the benefit terms: Total Retiree OPEB Benefit Net Cost Coverage Tier Premium Paid by District to Retiree Tr aditional Plan wi th wellness inc entive Retiree 684.69$ 580.25$ 104.44$ Retiree + Spouse 1,458.58 580.25 878.33 Retiree + Child(ren)1,325.27 580.25 745.02 Retiree + Family 2,021.51 580.25 1,441.26 Tr aditional Plan with no wellne ss incentive Retiree 684.69 547.75 136.94 Retiree + Spouse 1,458.58 547.75 910.83 Retiree + Child(ren)1,325.27 547.75 777.52 Retiree + Family 2,021.51 547.75 1,473.76 High Deductible Plan wi th wellness inc entive Retiree 637.05 580.25 56.80 Retiree + Spouse 1,357.08 580.25 776.83 Retiree + Child(ren)1,233.05 580.25 652.80 Retiree + Family 1,880.84 580.25 1,300.59 High Deductible Plan wi th no wellness inc entive Retiree 637.05 547.75 89.30 Retiree + Spouse 1,357.08 547.75 809.33 Retiree + Child(ren)1,233.05 547.75 685.30 Retiree + Family 1,880.84 547.75 1,333.09 June 30, 2017 Inac tive employees or beneficiar ie s currently receiving be ne fit payment s 126 Inac tive employees entitled to but not yet receiving be ne fit payme nt s — Ac tive emplo yees 895 Total 1,021 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 72 Total OPEB Liability The District’s total OPEB liability of $24,193,972 was measured as of December 31, 2017. The District’s total OPEB liability was determined by an actuarial valuation as of the valuation date, June 30, 2017, and was calculated based on the discount rate and actuarial assumptions below, and was then projected forward to the measurement date. There have been no significant changes between the valuation date of June 30, 2017 and the reporting fiscal year-end date of June 30, 2018. Actuarial Assumptions and Other Inputs. The total OPEB liability in the June 30, 2017 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: The discount rate was based on the 20 Year Bond General Obligation Index. Mortality rates were based on the RP-2014 Mortality for Employees and Healthy Annuitants, with generational projection per Scale MP-2017 and Disabled Lives: RP-2014 Disabled Mortality, male and female rates. The actuarial assumptions are based on prior and current year experiences. The plan has not had a formal actuarial experience study performed. Inflat io n 2.50 percent He alt hc ar e cost trend rates 6.10 percent for 2017, gradually decreasing to an ult imat e rate of 4.00 percent for 2091 and beyond Salar y inc reases 4.25 percent, ave rage, inc lud ing inf lat io n Re tiree's shar e of benefit-relat ed 9-20 percent of projected health insuranc e premiums for costs retirees depending on plan sele cted (traditional or high deductible) and wellne ss qualif ic at io n Discount rate 3.44 percent THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 73 Changes in the Total OPEB Liability Changes of assumptions or other inputs reflect a change in the discount rate from 3.78%in 2016 to 3.44%in 2017. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate. The following presents the total OPEB liability of the District, calculated using the discount rate of 3.44%, as well as what the District’s total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.44%) or 1-percentage-point higher (4.44%) than the current discount rate. Change s in the Total OPEB Liability for the Year Endin g December 31, 2017 Total OPEB Liability Increase/ (Decrease) Balanc e as of Decembe r 31, 2016 22,838,813$ Change s for the year: Servic e cost 1,622,390 Interest on total OPEB liabilit y 894,674 Change s of benefit terms — Dif ferences between expected and actual experience — Change s of assumptions or other input s 438,058 Be ne fit payme nt s (1,599,963) Net change s 1,355,159 Balanc e as of Decembe r 31, 2017 24,193,972$ 1%Current 1% Decr ease Discou nt Rate Increase (2.44%)(3.44%)(4.44%) To tal OPEB Liabilit y 25,619,420$ 24,193,972$ 22,823,906$ De ce mb er 31, 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 74 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates. The following presents the total OPEB liability of the District, calculated using the current healthcare cost trend rates,as well as what the District’s total OPEB liability would be if it were calculated using healthcare cost trend rates that were 1-percentage-point lower (5.10%decreasing to 3.00%) or 1-percentage- point higher (7.10%decreasing to 5.00%) than the current healthcare cost trend rates of 6.10%decreasing to 4.00%. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2018, the District recognized OPEB expense of $2,557,327. At June 30, 2018, the District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: In the year ending June 30, 2018, an amount currently reported as deferred outflows of resources for $880,642 related to the District’s benefit payments subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the year ending June 30, 2019. Cu rrent Healthcare Cos t Trend 1% Decrease Rates 1% Increase (5.1% (6.1% (7.1% decreasing decreasing decreasing to 3.00%)to 4.00%)to 5.00%) To tal OPEB Liabilit y 21,894,452$ 24,193,972$ 26,898,217$ December 31, 2017 Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience —$ —$ Change s of assumptio ns or other input s 397,795 — Be ne fit payments made subsequent to measurement date 880,642 — Total 1,278,437$ —$ June 30, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 75 Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: 10.Self-Insurance Programs The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District has established a risk management program and retains the risk related to its obligation to provide workers' compensation and medical and hospitalization benefits to its employees; and to pay water backup claims to its customers. The estimated liabilities for payment of incurred (both reported and unreported) but unpaid claims relating to these matters are included as a component of current deposits and accrued expenses, and as such, are expected to be paid within one year of the date of the Statement of Net Position. At June 30, 2018 and 2017, these liabilities amounted to $4,026,003 and $4,461,069, respectively. The claims liabilities reported are based on the requirements of GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, which requires that a liability for claims be reported if information obtained prior to the issuance of the financial statements indicates it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Changes in the balance of claims liabilities during fiscal 2018 and 2017 were as follows: Net Deferrals of Resources Year ended June 30,: 2019 40,263$ 2020 40,263 2021 40,263 2022 40,263 2023 40,263 The reafter 196,480 397,795$ 2018 2017 2016 Liabilit y - Beginning of Year 4,461,069$ 4,076,994$ 4,317,384$ Cur rent year claims and changes in estimates 15,939,863 17,648,177 21,213,424 Claim payments (16,374,929)(17,264,102)(21,453,814) Liabilit y - End of Year 4,026,003$ 4,461,069$ 4,076,994$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 76 The District obtains periodic funding valuations from the third-party administrators managing the self-insurance programs and adjusts the charges as required to maintain the appropriate level of estimated claims liability. The District also maintains excess liability insurance coverage for workers' compensation and medical and hospitalization claims; general liability; and water backup damage to customers’ property. The District purchases commercial insurance for all other risks of loss. Settled claims have not exceeded this commercial coverage in any of the past three years. 11.Closure And Post-Closure Care Costs State and federal laws and regulations require the District to place a final cover on its Prospect Hill Reclamation Project landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for 30 years after closure. Although closure and post-closure care costs will be paid only near or after the date that the landfill stops accepting waste, the District reports a portion of these closure and post-closure care costs as an operating expense in each fiscal year. The $565,493 and $508,422 reported as landfill closure and post-closure care liabilities at June 30, 2018 and 2017, respectively, represent the cumulative amounts reported at fiscal year-end and represent 66.2% and 60.9% of the estimated closure and post-closure care costs of the landfill for fiscal years ended June 30, 2018 and 2017, respectively. These amounts are based on what it would cost to perform all closure and post-closure care in 2018 and 2017, respectively. The remaining disposal life estimate was calculated in 2009 and was estimated at eight years factoring in a future annual average disposal rate of 96,500 cubic yards. It was noted in the 2009 Black and Veatch study that this life could be extended further if the actual disposal rate is less than projected or alternative uses and off-site beneficial options for the incinerator ash are later developed. Since the actual average disposal rate has been less than 96,500 cubic yards, the landfill is not at capacity and MSD expects the landfill to be in use for another 10-15 years and the total capacity of the landfill and the available space as of 2017 was adjusted in 2017. In addition, a new survey of the landfill was performed in December of 2017 which increased the remaining capacity due to settlement and minor vehicle compaction. The District will continue to accrue the remaining estimated cost of closure and post-closure care annually. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 77 The District is required to demonstrate that it has the financial capability to close the landfill to the State of Missouri through the use of a financial test as specified in 10 CSR 80-2.030(4)(D)6 of the Missouri Solid Waste Management Rules. The District has complied with the State’s requirement. The District recognizes that estimates of closure costs may change as a result of inflation, deflation, and/or changes in technology and applicable laws and regulations. If closure cost estimates change, the liability currently reported on the Statements of Net Position will be adjusted accordingly. 12.Commitments And Contingencies United States And State Of Missouri V. Metropolitan St. Louis Sewer District; In The United States District Court For The Eastern District Of Missouri; Case No. 07-1120. A lawsuit was filed by the Department of Justice on behalf of the United States Environmental Protection Agency (“EPA”) for various alleged violations of the Clean Water Act.The suit was based on violations of the Clean Water Act as a result of overflows in the combined and wastewater sewer systems causing pollutants to reach waters of the United States.There were other counts involving violations of permit conditions.Prior to suit being filed, the District had been the subject of several investigatory actions by the EPA over several years. Negotiations had been ongoing with the EPA and the Missouri Department of Natural Resources (“DNR”) regarding the sewer collection system, both the combined system and the wastewater system, for several years.The Missouri Coalition for the Environment (“MCE”) gave Notice of Intent to Sue the District under the citizen suit provisions of the Clean Water Act.EPA and the DNR then brought the suit in June 2007, and MCE moved to intervene. Intervention was granted in August 2007.In October 2007, the Court granted the District’s motion to dismiss all of the plaintiffs’ claims for civil penalties attributable to any and all of the District’s alleged violations of the Clean Water Act that occurred before June 11, 2002. Also, the suit alleged that the District did not have an approved Long-Term Control Program (“LTCP”) for the combined system.The District had been working on these issues for several decades and had asked voters to approve bonds and rate increases to rehabilitate and maintain the collection system.As required by its Charter, the District had increased rates which continued to fund the improvements sought by the EPA and the DNR.In September 2008, the Judge put in place a Stay while the parties mediated the issues.Pursuant to MSD Ordinance No. 13277, MSD executed the Consent Decree (“CD”) on July 15, 2011.The CD was lodged with the court on August 4, 2011.An extended public comment period ended October 10, 2011. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 78 On April 27, 2012, the Court approved and entered the decree, thus concluding the litigation of this lawsuit.Although this litigation matter has concluded, MSD continues to work diligently to implement the CD. The CD requires the District to spend approximately $4.7 billion, in 2010 dollars, over a 23-year implementation period.Throughout this period improvements will be made to the District’s separate sewer system, combined sewer system, and wastewater treatment plants.The District continues to comply with the CD.On June 1, 2011, the State of Missouri approved Chapter 11, Chapter 12, and Appendix Q of the District’s Combined Sewer Overflow Long-Term Control Plan Updated Report, dated February 2011. On June 22, 2018, a United States District Judge approved an amendment to the CD to extend it by five years from a 23-year program to a 28-year program. Recent regulatory changes have compelled MSD to accelerate certain non-consent decree work. This amendment will allow MSD to meet these new regulatory requirements in a fiscally responsible way while better controlling rate increases over the coming years. Flooding Cases The remaining flooding cases related to the September 14, 2008 rain event are being covered by the District’s insurance carrier, with a reservation of rights. These cases appear to have a very low risk of liability to the District. Other Commitments and Contingencies The District is a defendant in various other matters of litigation.Of these matters, management and District’s legal counsel do not anticipate any material effect on the June 30, 2018 and 2017 financial statements. The District has entered into construction and other contracts amounting to approximately $440,000,000 at June 30, 2018, and through the audit report date. The District had $747,500,000 in revenue bonds authorized by the voters but unissued as of June 30, 2018.These funds were sought to enable the District to comply with federal and state clean water requirements. 13.Restricted Net Position The Statements of Net Position report $129,578,500 and $135,259,059 of restricted net position at June 30, 2018 and 2017, respectively, of which $74,249,353 and $79,940,036 are restricted due to enabling legislation, as of June 30, 2018 and 2017, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 79 14.Segment Information The District issued wastewater revenue bonds to finance wastewater infrastructure projects. The District accounts for both wastewater and stormwater activities in a single enterprise fund, but investors in those bonds rely solely on the revenue generated by the wastewater activities for repayment. Fiscal year 2018 and 2017 summary financial information for each business segment is presented below. The District’s adoption of GASB Statement No.75 in fiscal year 2018, as noted in the Adoption Of New Accounting Standards section of Note 1, resulted in restating the beginning balance of net position due to the recognition of a beginning total OPEB liability, a beginning deferred outflow of resources for the amount paid by the District for OPEB subsequent to the measurement date of the beginning total OPEB liability but before the beginning of the District’s fiscal year and for the removal of the net OPEB obligation previously recorded based on GASB Statement No. 45. The impact of this change on the District’s Wastewater and Stormwater Segment Statements’ net position, as presented in the Statements of Revenues, Expenses and Changes in Net Position is as follows: Wastewat er Stormwat er Total Net Position - Beginning Of Year, As Previously Stated 1,835,146,655$ 556,021,399$ 2,391,168,054$ Effect of Adoption of GASB 75 (11,020,906) (3,038,244) (14,059,150) Net Position - Beginning Of Year, As Restated 1,824,125,749$ 552,983,155$ 2,377,108,904$ Effect of Adoption of GASB 75 - Res tateme nt Consists Of To tal OPEB liabilit y reported as a noncurrent liability at July 1, 2017 (19,702,154)$ (3,136,659)$ (22,838,813)$ Benefit payme nts made subsequent to the beginning total OPEB liability's measureme nt date of December 31, 2016 but before July 1, 2017 ar e reported as deferred outflows of resources 618,167 98,415 716,582 Removal of GASB 45 net OPEB obligation balanc e as of July 1, 2017 8,063,081 — 8,063,081 Effect of Adoption of GASB 75 (11,020,906)$ (3,038,244)$ (14,059,150)$ Fiscal Year 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 80 A segment is an identifiable activity reported as a stand-alone entity for which one or more revenue bonds are outstanding. A segment has a specifically identifiable revenue stream pledged in support of the revenue bonds and has related expenses, gains and losses and assets, deferred outflows,liabilities and deferred inflows that are required by external parties to be accounted for separately. The wastewater system is the only reportable segment that meets the requirements of GASB Statement No. 34, Basic Financial Statements -and Management’s Discussion and Analysis -for State and Local Governments. The stormwater system is reported on for informational purposes only. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 81 Financial information as of and for the years ended June 30, 2018 and 2017 of the District’s Wastewater Segment is as follows: As sets 2018 2017 Current Assets Unrestricted Current Assets Cash and cash equivalents  12,544,280$ 21,932,648$ Investments                                          288,046,796 264,399,511 Sewer ser vice charges receivable, less allowance of                   $58,289,381 in 2018 and $56,490,989 in 2017 60,455,316 53,517,987 Unbilled sewer ser vice charges receivable 29,140,850 26,514,670 Property taxes receivable — (27,512) Accrued income on investments                        1,630,002 989,538 Other receivables, less allowance of  $52,120 in 2018                      and $119,264 in 2017 4,495,551 4,707,358 Supplies inventory                                   8,109,878 7,671,206           Total Unrestricted Current Assets                            404,422,673 379,705,406        Restricted Current Assets Other receivables                                      54,092 —           Total Restricted Current Assets                            54,092 —           Total Current Assets                            404,476,765 379,705,406 Non-Current Assets Restricted Assets Cash and cash equivalents  19,193,048 20,865,810 Investments                                          222,080,295 130,230,174 Long-term investments                                66,231,790 41,015,517 Property taxes receivable, less allowance of $133 in 2018 and $137 in 2017 (16,200) (5,266) Accrued income on investm ents                        232,053 192,210 Other receivables                                    — 69,694        Total Restricted Non-Current Assets                            307,720,986 192,368,139 Other Assets     Notes receivable                                     11,814,529 12,425,336 Long-term investments                                67,264,708 61,275,000             Total Other Assets                            79,079,237 73,700,336        Capital Assets     Depr ec iable:        Treatm ent and disposal pl ant and equipmen t           1,276,275,567 1,279,143,367        Collection and pumping plant                         1,966,893,455 1,843,121,463        General plant and equipm ent                          79,666,689 77,576,050                                                             3,322,835,711 3,199,840,880        Less:  Accumulated deprec iation                      1,241,579,256 1,177,505,880        Net depr eciable assets       2,081,256,455 2,022,335,000            Non-depreciable:        Land                                                 66,103,288 64,121,437        Construction in pr ogress                             815,408,534 691,631,657           Net Capital Assets                                2,962,768,277 2,778,088,094                    Total Non-Current Assets                         3,349,568,500 3,044,156,569                         Total Assets                               3,754,045,265 3,423,861,975 Deferred Outflows of Resources :        Bonds and notes payable-Deferred loss on refunding                                              12,099,160 11,320,670        Pension-related outflows                                              14,757,358 32,297,785        OPEB-related outflows                                              1,102,858 —                  Total Deferred Outflows of Resources                         27,959,376 43,618,455 WASTEWATER SEGMENT STATEMEN TS OF NET POSITION June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 82 Liabilities 2018 2017 Current Liabilities-Payable From Unrestricted Assets Contracts and accounts payable  34,518,350$ 37,780,519$ Deposits and accrued expenses 31,095,559 30,405,764 Retainage payable  13,893,951 11,486,006 Current por tion of bonds and notes payable  50,942,663 42,733,909 Total Current Liabilities-Payable From Unrestricted Assets 130,450,523 122,406,198 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable  265,865 28,257 Retainage payable  204,936 181,642 Total Current Liabilities-Payable From Restricted Assets 470,801 209,899             Total Current Liabilities                       130,921,324 122,616,097        Non-Current Liabilities Deposits and accrued expenses 7,329,985 15,137,690 Net pen sion liability 41,435,535 57,524,378 Total OPEB liability 20,871,199 — Bonds and notes payable  1,642,233,069 1,433,168,099             Total Non-Current Liabilities                       1,711,869,788 1,505,830,167                         Total Liabilities                              1,842,791,112 1,628,446,264 Deferred In flows of Resources :        Pension-related inflows                                              5,147,399 3,887,511                  Total Deferred In flows of Resources                         5,147,399 3,887,511 Net Position Net investment in capital assets 1,486,430,468 1,403,740,624 Restricted for:       Debt service                                       55,329,147 55,319,023       Subdistrict construction and improvement           3,709,735 4,207,767 Unrestricted 388,596,780 371,879,241                  Total Net Position               1,934,066,130$ 1,835,146,655$   June 30, WASTEW ATER SEGMENT STATEMEN TS OF NET POSITIO N (Con tinued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 83 2018 2017   Operating Revenues     Sewer ser vice charges                                   364,170,182$ 330,883,493$     Recover y of (pr ovision for ) doubtful sewer service charge accounts (3,009,705) (2,534,814)     Licenses, permits, and other fees                        3,777,200 4,036,362     Other                                                   3,355,085 1,084,636     Total Operating Revenues                              368,292,762 333,469,677          Operating Exp en ses     Pumping and treatm ent                                   60,735,056 60,203,037     Collection system maintenance                           29,266,441 33,476,510     Engineer ing                                             2,839,996 4,722,263     Gener al and adm inistrative                              57,984,124 57,289,501     Water backup claims                                     1,548,048 5,035,020     Deprec iation                                            71,366,228 71,128,893     Asset management                                               14,048,473 14,142,928     Total Operating Exp enses                             237,788,366 245,998,152          Operating Income                    130,504,396 87,471,525          Non-Operating Revenues     Proper ty taxes levied by the District                   2,565 28,555     Investm en t income                                       6,356,029 2,456,677     Rent and other income                                   253,799 106,562     Total Non-Operating Revenues                          6,612,393 2,591,794          Non-Operating Exp enses     Net loss on disposal and sale of capital assets         1,682,939 622,841     Non-recurring projects and studies                       6,510,082 5,886,163     Interest expense                                        36,695,083 31,250,777     Total Non-Operating Exp en ses                          44,888,104 37,759,781          Income Before Capital Grants And Contributions                       92,228,685 52,303,538          Capital Grants And Contributions     Capital assets contributed                               16,433,138 3,508,950     Grant revenue                                           1,278,558 2,806,599     Total Capital Grants And Contributions                          17,711,696 6,315,549   Change In Net Position 109,940,381 58,619,087   Net Position - Begi nning Of Yea r, As Previously Stated      1,835,146,655 1,776,527,568 Effect of Adoption of GASB 75 (11,020,906) —   Net Position - Begi nning Of Yea r, As Restated 1,824,125,749 1,776,527,568   Net Position - End Of Year                                    1,934,066,130$ 1,835,146,655$ WASTEW ATER SEGMENT STATEMEN TS OF REVENUES, EXPEN SES AND CHANGES IN NET POSITIO N For The Years En ded June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 84 2018 2017 Cash Flows From Operating Activities Received fr om customers 357,876,141$ 337,129,326$ Paid to employees for services (96,464,294) (94,029,453) Paid to suppliers for goods and services (70,486,503) (72,137,930) Net Cash Provided By Operating Activities 190,925,344 170,961,943 Cash Flows Provided By (Used In ) Non-Capital Financing Activities Taxes levied and collected (930) 74,474 Cash Flows From Capital And Related Financing Activities Proceeds from capital grants 1,634,250 100,283 Proceeds from issuance of debt 227,157,189 185,520,681 Premium on sale of bonds 37,823,556 17,678,054 Principal paid on debt (43,667,013) (38,076,770) Interest and fees paid on debt (60,603,135) (54,306,129) Payments for capital assets (225,481,370) (249,487,948) Proceeds from sale of capital assets 136,134 215,256 Build Am er ica Bond tax credit 1,624,563 1,622,822 Net Cash (Used In ) Capital And Related Financing Activities (61,375,826) (136,733,751) Cash Flows From Investing Activities Purchase of investments (672,970,851) (452,346,123) Proceeds from sale and maturity of investments 525,720,153 412,301,563 Investment income 6,387,181 5,846,652 Proceeds from rents 253,799 106,562 Net Cash (Used In ) In vesting Activities (140,609,718) (34,091,346) Net Increase (Decrease) In Cash And Cash Equivalents (11,061,130) 211,320 Cash And Cash Equivalen ts At Begi nning Of Year 42,798,458 42,587,138 Cash And Cash Equivalen ts At End Of Year 31,737,328$ 42,798,458$ En ded June 30, WASTEW ATER SEGMENT STATEM EN TS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 85 Financial information as of and for the years ended June 30, 2018 and 2017 of the District’s Stormwater Segment is as follows: Assets 2018 2017 Current Assets Unrestricted Current Assets Cash and cash equivalents  590,710$ 1,163,223$ Investments                                          15,476,186 15,888,957 Sewer service charges receivable, less allowance of                   $140,514 in 2018 and $163,024 in 2017 89,522 123,079 Unbilled sewer service charges receivable (389) (953) Proper ty taxes receivable, less allowance of $22,544 in 2018          and $25,280 in 2017 689,128 862,725 Accrued income on investments                        39,317 26,915        Total Unrestricted Current Assets                            16,884,474 18,063,946        Restricted Current Assets Cash and cash equivalents 1,009,872 2,171,935 Investments                                          26,469,179 29,674,144        Total Restricted Current Assets                            27,479,051 31,846,079  Total Current Assets                            44,363,525 49,910,025 Non-Current Assets Restricted Assets Cash and cash equivalents  1,048,411 1,979,396 Investments                                          27,478,223 27,043,003 Long-term investments                                13,102,425 13,710,861 Proper ty taxes receivable, less allowance of $45,320 in 2018 and $31,904 in 2017 1,396,042 1,144,461 Ac crued income on investm ents                        242,425 168,842        Total Restricted Non-Current Assets                            43,267,526 44,046,563 Other Assets Long-term investments                                3,758,732 3,841,013             Total Other Assets                            3,758,732 3,841,013        Capital Assets     Depr eciable:        Collection and pumping plant                         645,451,046 632,588,226        General plant and equipmen t                          17,713,702 17,217,823                                                             663,164,748 649,806,049        Less:  Ac cumulated depr eciation                      207,556,541 198,336,533        Net depr eciable assets       455,608,207 451,469,516            Non-depreciable:        Land                                                 7,158,677 6,573,579        Construction in progress                             20,696,809 16,107,052           Net Capital Assets                                483,463,693 474,150,147                    Total Non-Current Assets                         530,489,951 522,037,723                         Total Assets                               574,853,476 571,947,748        Deferred Outflows of Resources:        Pension-related outflows                                              2,575,499 5,368,001        OPEB-r elated outflows                                              175,579 —                  Total Deferred Outflows of Resources                        2,751,078 5,368,001 STORMWATER SEGMENT STATEMENTS OF NET POSITION Ju ne 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 86 Liabilities 2018 2017 Current Liabilities-Payable From Unrestricted Assets Contracts and accounts payable  9,337$ 20,000$ Deposits and accrued expenses  7,789,782 9,240,251 Retainage payable  545 545 Total Current Liabilities-Payable From Unrestricted Assets 7,799,664 9,260,796 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable  834,980 1,236,740 Retainage payable  526,090 565,000 Total Current Liabilities-Payable From Restricted Assets 1,361,070 1,801,740             Total Current Liabilities                       9,160,734 11,062,536        Non-Current Liabilities        Net pension liability                   6,953,403 9,514,807        Total OPEB liability                   3,322,773 —             Total Non-Current Liabilities                       10,276,176 9,514,807                          Total Liabilities                     19,436,910 20,577,343 Deferred In flows of Resources :        Pension-related inflows                                              917,586 717,007                  Total Deferred In flows of Resources                         917,586 717,007 Net Position Net investment in capital assets 482,309,582 472,508,235 Restricted for:       Subdistrict construction and improvement           70,539,618 75,732,269 Unrestricted 4,400,858 7,780,895                   Total Net Position 557,250,058$ 556,021,399$   June 30, STORMWATER SEGMENT STATEMEN TS OF NET POSITIO N (Con tinued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 87 2018 2017   Operating Revenues     Sewer ser vice charges                                   (4,810)$ (10,224)$     Recover y of (pr ov ision for ) doubtful sewer ser vice charge accounts 19,557 21,071     Other                                                   3,968 10,465     Total Operating Revenues                              18,715 21,312          Operating Exp enses     Collection system maintenance                           15,519,041 10,451,651     Engineer ing                                             8,377,594 6,567,643     Gener al and adm inistrative                              1,028,038 1,244,910     Water backup claim s                                     9,337 —     Depr ec iation                                            9,960,114 10,065,498     Asset management                                               1,082,716 749,821     Total Operating Exp enses                             35,976,840 29,079,523          Operating Income (Loss)                                         (35,958,125) (29,058,211)          Non-Operating Revenues     Proper ty taxes levied by the District                   33,746,367 32,429,499     Investment income                                       1,049,928 445,947     Total Non-Operating Revenues                          34,796,295 32,875,446          Non-Operating Exp en ses     Net loss on disposal and sale of capital assets         150,969 50,203     Non-recurring projects and studies                       2,786,276 1,573,375     Total Non-Operating Exp enses                          2,937,245 1,623,578          Income (Los s) Before Capital Contributions                       (4,099,075) 2,193,657          Capital Contributions     Capital assets contributed                               8,365,978 3,298,197     Total Capital Contributions                          8,365,978 3,298,197   Change In Net Position 4,266,903 5,491,854   Net Position - Begi nning Of Year, As Previously Stated 556,021,399 550,529,545 Effect of Adoption of GASB 75 (3,038,244) —   Net Position - Begi nning Of Year, As Restated      552,983,155 550,529,545          Net Position - End Of Year                                    557,250,058$ 556,021,399$ STORMWATER SEGMENT STATEMEN TS OF REVENUES, EXPEN SES AND CHANGES IN NET POSITIO N For The Years En ded June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 88 2018 2017 Cash Flows From Operating Activities Received from customers (1,217,823)$ (1,617,898)$ Paid to employees for services — — Paid to suppliers for goods and services (28,718,597) (21,235,624) Net Cash (Used In ) Operating Activities (29,936,420) (22,853,522) Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collec ted 33,181,899 31,938,803 Cash Flows From Capital And Related Fi nancing Act ivities Payments for capital assets (11,192,290) (9,791,984) Proceeds from sale of capital assets 34,444 41,623 Net Cash (Used In ) Capital And Related Financing Activities (11,157,846) (9,750,361) Cash Flows From Investing Activities Purchase of investm en ts (101,055,599) (72,571,974) Proceeds from sale and maturity of investments 105,074,847 70,897,895 Investment income 1,227,558 1,044,375 Net Cash Provided By (Used In ) Investing Activities 5,246,806 (629,704) Net (Decrea se) In Cash And Cash Equivalen ts (2,665,561) (1,294,784) Cash And Cash Equivalen ts At Begi nning Of Year 5,314,554 6,609,338 Cash And Cash Equivalen ts At End Of Yea r 2,648,993$ 5,314,554$ En ded June 30, STORMWATER SEGMENT STATEMEN TS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 89 15.Tax Abatements Tax abatements, as defined by Governmental Accounting Standards Board (“GASB”) Statement No. 77, Tax Abatement Disclosures (“GASB Statement No. 77”), are agreements between a government and an individual or entity in which the government promises to forgo tax revenues and the individual or entity promises to subsequently take a specific action that contributes to economic development or otherwise benefits the government or its citizens. This Statement requires disclosure of tax abatement information about (1) a reporting government’s own tax abatement agreements and (2) those that are entered into by other governments and that reduce the reporting government’s tax revenues. Since the District does not and has not entered into tax abatement agreements directly with any individuals or entities, the following estimates are from tax abatements entered into by other governments, specifically the county and municipalities within the District’s boundary, that have reduced the District’s tax revenues. Tax Abatements Entered Into By St. Louis County and Cities Located In St. Louis County The District’s property tax revenues were reduced through four programs that are utilized by cities located in St. Louis County and the County itself. Summaries of these four programs are as follows: Enhanced Enterprise Zone: provides real property tax abatements to new or expanding businesses in certain specified geographic areas designated by local governments and certified by the Missouri Department of Economic Development. Industrial Development Bonds: finances industrial development projects for private corporations, partnerships,and individuals. Land Clearance for Redevelopment Authority: assists with the redevelopment of blighted or insanitary areas for residential, recreational, commercial, industrial,or public uses. Urban Redevelopment Corporations: provides real property tax abatements to encourage the redevelopment of blighted areas by an eligible city or county. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 90 The amount of the District’s tax revenues that were abated by the county and cities initiating the programs are reported in the following tables. Land Enhanced Industrial Clearance for Urban St. Louis County Enterprise Development Redevelopme nt Redevelopm ent Total Tax or City Zones Bon ds Authority Corporations Abatements St Lo uis County —$ 110,522$ —$ 14,519$ 125,041$ Bellerive — 9,107 — — 9,107 Berkeley 408 — — — 408 Bridgeton — 62 — — 62 Brentwood — — — 7,585 7,585 Clayton — 20,872 — — 20,872 Edmundson — — — 8,911 8,911 Eureka — 199 — — 199 Ferguson — 3,711 — 582 4,293 Haze lwood 4,685 1,951 — 11,377 18,013 Kinloch 17,090 — — 5,571 22,661 Jennings — 347 — — 347 Maryland Heights — — — 473 473 Normandy — — — 2,979 2,979 Overland — — — 4,561 4,561 Richmond Heights — — — 4,888 4,888 Rock Hill — — — 2,578 2,578 Sunset Hills — — — 546 546 University City — — 6,726 112 6,838 Wellston — — — 501 501 Total Tax Abate ment s 22,183$ 146,771$ 6,726$ 65,183$ 240,863$ For the Year Ended June 30, 2018 Land Enhanced Industrial Clearance for Urban St. Louis County Enterprise Development Redevelopme nt Redevelopm ent Total Tax or City Zones Bon ds Authority Corporations Abatements St Lo uis County —$ 113,907$ —$ 25,167$ 139,074$ Bellerive — 21,873 — — 21,873 Berkeley 402 — — — 402 Brentwood — — — 12,657 12,657 Clayton — 21,527 — — 21,527 Edmundson — — — 9,416 9,416 Eureka — 195 — — 195 Ferguson — 3,637 — 509 4,146 Haze lwood 4,269 — — — 4,269 Jennings — 399 — — 399 Maryland Heights — — — 283 283 Normandy — — — 862 862 Overland — — — 4,637 4,637 Richmond Heights — — — 2,755 2,755 Rock Hill — — — 3,075 3,075 Sunset Hills — — — 1,140 1,140 Uni ve rsity City — — 6,436 108 6,544 Wellston — — — 484 484 Total Tax Abate ment s 4,671$ 161,538$ 6,436$ 61,093$ 233,738$ For the Year Ended June 30, 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 91 Tax Abatements Entered Into By St. Louis City The City of St. Louis offers a real estate tax abatement program as a development tool designed to assist developers, businesses,and individuals with renovation and new construction projects. The tax abatement freezes the tax assessment in improvements to property at the pre-development level. To be eligible for tax abatement, a significant investment must be made in the property; generally either new construction on vacant land or gut rehabilitation of an existing building. The application must be made before construction begins and the usual term for tax abatement is five to ten years. The amount of the District’s tax revenues calculated at the District’s tax rates of $.1159 and $.1190 per $100 of assessed value for fiscal 2018 and 2017, respectively,that were abated by St. Louis City are reported in the following tables. Reduced Unabated Tax Abated Tax Tax St. Louis City Values Revenue Values Revenue Revenue Residential 140,187,310$ 162,477$ 33,987,320$ 39,391$ 123,086$ Comme rcial 328,519,340 380,754 117,961,490 136,717 244,037 Total 468,706,650$ 543,231$ 151,948,810$ 176,108$ 367,123$ For the Year Ended June 30, 2018 Reduced Unabated Tax Abated Tax Tax St. Louis City Values Revenue Values Revenue Revenue Residential 127,828,700$ 152,116$ 38,634,150$ 45,975$ 106,141$ Comme rcial 300,655,380 357,780 139,647,230 166,180 191,600 Total 428,484,080$ 509,896$ 178,281,380$ 212,155$ 297,741$ For the Year Ended June 30, 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 92 Tax Increment Financing Utilized By St. Louis County, Cities Located in St. Louis County and St. Louis City Missouri’s Real Property Tax Increment Allocation Redevelopment Act enables cities to finance certain redevelopment costs with the revenue generated from (i) payments in lieu of real estate taxes, as measured by the net increase in assessed valuation resulting from redevelopment and (ii) a portion of the increase in other local tax revenue associated with new economic activity. When a tax increment financing (“TIF”) plan is adopted, real estate taxes in the redevelopment are frozen at their current level. By applying the real estate tax rate of all taxing districts having taxing power within the redevelopment area to the increased assessed valuation resulting from redevelopment, a tax “increment” is produced. The real estate tax increments are referred to as payments in lieu of taxes, or “PILOTs”, and are deposited in a special allocation fund. The estimated TIF incremental values and the District’s net reduced tax revenue resulting from the TIFs adopted in St. Louis County and the cities located in the County and adopted in the City of St. Louis are as follows: TI F TI F Incremental Reduced Incremental Reduced St. Lou is Coun ty or City Valu es Tax Revenues Values Tax Revenues St. Louis County and Cities Located in St. Louis County 555,120,680$ 643,385$ 433,333,020$ 518,266$ St. Louis County PILOTs Received — (41,338) — (13,569) St. Louis City 1,311,535,243 329,770 803,207,243 291,862 St. Louis City PILOTs Received — (5,268) — (313) Total 1,866,655,923$ 926,549$ 1,236,540,263$ 796,246$ June 30, 2018 For the Years Ended June 30, 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 93 In summary, the District’s total tax revenues reduced during fiscal 2018 and 2017 as a result of the programs of other governments are as follows: 16.Subsequent Events In preparing these financial statements, the District has evaluated events and transactions for potential recognition or disclosure through October 12, 2018, the date the financial statements were available to be issued. On June 21, 2018,the IRS announced a decrease in the sequestration rate for refundable credit amounts submitted on IRS Form 8038-CP for qualified bonds from 6.6% to 6.2%.This will be effective for all refund payments processed from October 1, 2018 to September 30, 2019. Since the District participates in Build America Bonds, the District will receive 93.8% of the amount requested during its fiscal year 2019. The District received 93.4% of the amount requested during fiscal year 2018. Reduced Reduced St. Louis County or City Tax Revenues Tax Revenues St . Lo uis County and Cities Located in St. Louis Co unty - Tax Abate me nts 240,863$ 233,738$ St . Lo uis City - Tax Abate me nts 367,123 297,741 St . Lo uis County and Cities Located in St. Louis Co unty - TIFs 602,047 504,697 St . Lo uis City - TIFs 324,502 291,549 Total Reduced Tax Revenues 1,534,535$ 1,327,725$ For the Years Ended June 30, 2018 June 30, 2017 THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 94 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS June 30, 2018 2017 2016 2015 2014 Total Pens io n Liability Se rvice cost 5,157$ 5,107$ 5,253$ 5,409$ Interest on to tal pe nsio n l iabi lity 22,079 20,609 20,199 19,901 Effect of plan changes — — — — Effect of economic/demographic gains or (losses)(4,729)(883)(4,577)(3,668) Effect of assumption c hange s or inputs 1,667 11,665 — 6,500 Benefit payments (15,858) (15,261) (14,475) (13,387) Net Change in Total Pension Liability 8,316 21,237 6,400 14,755 Total Pension Liability - Beginning 318,049 296,812 290,412 275,657 Total Pension Liability - Ending (a)326,365 318,049 296,812 290,412 Fiduciary Net Position Employer contributions 12,328 10,146 10,059 10,676 Membe r contributions — — — — Investment income net of investment expenses 30,496 11,913 (1,888)6,980 Benefit payments (15,858) (15,261) (14,475) (13,387) Administrative expenses — — — — Net Change in Plan Fiduciary Net Position 26,966 6,798 (6,304)4,269 Fiduciary Ne t Position - Beginning 251,010 244,212 250,516 246,247 Fiduciary Ne t Position - Ending (b)277,976 251,010 244,212 250,516 Net Pension Liability - Ending = (a) - (b)48,389$ 67,039$ 52,600$ 39,896$ Fiduciary Ne t Position as a % o f Total Pension Liability 85.17% 78.92%82.28%86.26% Covered Payroll 41,869$ 42,055$ 43,345$ 44,664$ Ne t Pe nsio n Liability as a % of Covered Payroll 115.57%159.41% 121.35%89.32% Note s to Sche dule: 1. Changes of Assumptio ns. The actuarial discount rate and the long-te rm e xpected rate of return were bo th reduced to 6.90% in 2017 w hile bo th rates were 7.00% in all prior years. In 2016, the amount reported as change of assumptions resulted from c hanging to the RP-2014 Mortality for Employees and Healthy Annuitants and Disabled Mortality tables, while the 2014 change resulted primarily from adjustments to the discount rate and employee rate increases. 2. This sche dule will ultimately present ten year s of information whe n avai labl e. Calendar Year Ending December 31, Schedule of Changes in N et Pension Liability and Re late d Ratios In (000's) THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 95 REQUIRED SUPPLEMENTARY INFORMATION (Continued) SCHEDULE OF EMPLOYER CONTRIBUTIONS TO EMPLOYEES’ PENSION PLAN June 30, 2018 Sche dule of Employer C ontrib utions To Employe es' Pe ns io n Plan Fiscal Year Actuarially Contribution Contribution Ending Determine d Annual Deficie ncy Covered as a % of June 30,Contribution Contribution (Excess)Payroll Covered Payroll 2015 10,359,139$ 10,359,139$ —$ 46,584,987$ 22.24% 2016 10,096,075 10,096,075 — 44,996,070 22.44% 2017 11,236,828 11,236,828 — 43,818,487 25.64% 2018 12,411,005 12,411,005 — 42,751,918 29.03% Notes to Sche dule: 1. This schedule will ultimately p resent ten year s o f information when avai lable . 2. Valuat ion Date: Actuarially determined contribution rates are calculated as of Januar y 1 of t he fiscal year in which the contributions are reported. Methods and assumptions use d to determine contribution rates: Actuar ial Cost Method:Entry Age No rmal Amortization Method:Level dollar laye red, 20 ye ar periods Asset Valuation Method:3-ye ar smoothing period Inflation:2.50% Salary Increases:4.25%, ave rage, including inflation Investment Rate of Return:6.90%, ne t of pension plan investment e xpe nse, i ncluding inflation for 2018 7.00%, ne t of pension plan investment e xpe nse, i ncluding inflation for al l years prior to 2018 Mortality:In the 2018 and 2017 ac tuarial val uations, assume d life expectanc ies we re calculated using the RP-2014 Emp loyee and Healthy Annuitant Mortality Table (with ge ne rational projections from 2006 base d on the mo st current MP improvement scale which is update d annually) and the RP-2014 Disabled Mortality Table. In the 2016 and 2015 ac tuarial valuations, assume d life expectancies were calculated using the RP-2000 Healthy Annuitant Mo rtality Table and the RP-2000 Disabled Mortality Tabl e. THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 96 REQUIRED SUPPLEMENTARY INFORMATION (Continued) SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY June 30, 2018 Calendar Year Ending December 31, 2017 Total O PEB Liability Se rvice cost 1,622$ Interest on total OPEB liability 895 Change s of be ne fit terms — Differences be tween e xpected and actual experience — Change s of assumptions o r other inputs 438 Benefit payme nts (1,600) Ne t change in total OPEB liability 1,355 To tal OPEB Liability - Beginning 22,839 To tal OPEB Liability - Ending 24,194$ Note s to Sche dule : 1. Change s of assumptions. Changes o f assumptions and o ther inputs reflect the e ffects o f changes in the d iscount rate eac h period. The following are the discount rates use d in e ac h p eriod: 2017 3.44% 2016 3.78% 2. No assets are accumulated in a trust that meets the criteria in p aragrap h 4 o f GASB State me nt No. 75 to pay related be nefits. 3. This schedule will ultimat ely present ten ye ars of information w hen available. 4. Contributions to the OPEB plan ar e not based on a me asure of pay so ac cordingly, no me asure of payroll is presented. Sche dule of Changes in Total OPEB Liab ility In (000's) Last 10 Cale ndar Ye ars Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The Metropolitan St. Louis Sewer District Statistical Section This part of the District’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the District’s overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the District’s financial performance and well-being have changed over time ..........................................97 – 98 Revenue Capacity These schedules contain information to help the reader assess the District’s most significant local revenue sources, the user charge ......................................................................................99 –106 Debt Capacity These schedules present information to help the reader assess the affordability of the District’s current levels of outstanding debt and the District’s ability to issue additional debt in the future .............................................................................107 –109 Demographic And Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the District’s financial activities take place ...........................................................................................110 – 112 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the District’s financial report relates to the services the District provides and the activities it performs ...............................................113 – 114 THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 97 2009 2010 2011 2012 2013 Net Position Net investment in capital assets 1,798,914$ 1,868,974$ 1,915,233$ 1,928,200$ 1,877,692$ Re stricted 94,769 80,782 94,926 106,693 111,066 Unrestricted 293,934 257,894 186,860 175,010 251,300 To tal Net Position 2,187,617$ 2,207,650$ 2,197,019$ 2,209,903$ 2,240,058$ 2014 2015 a 2016 a 2017 a 2018 a Net Position Net investment in capital assets 1,845,394$ 1,805,453$ 1,809,386$ 1,876,249$ 1,968,740$ Re stricted 142,764 142,445 136,547 135,259 129,578 Unrestricted 279,794 330,218 381,124 379,660 392,998 To tal Net Position 2,267,952$ 2,278,116$ 2,327,057$ 2,391,168$ 2,491,316$ a Years 2015 to current inc lude a change in the calc ulatio n of the net position components whic h is not reflected in year s prior. NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (000's) Fis cal Year Fis cal Year THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 98 Non-ope rating Income/(Loss)Change Fis cal Operating Operating Operating Revenue/before Capital Capital in Net Year Revenues Expe nses Income/(Los s)(Expe nses)Contributions Contributions Position 2009 249,725,358$ 212,177,779$ 37,547,579$ (2,885,959)$ 34,661,620$ 26,993,385$ 61,655,005$ 2010 246,587,174 228,778,874 17,808,300 (17,560,670) 247,630 19,786,012 20,033,642 2011 219,444,257 244,503,099 (25,058,842) 4,329,032 (20,729,810) 10,098,552 (10,631,258) 2012 225,999,720 216,307,965 9,691,755 1,370,329 11,062,084 9,658,857 20,720,941 2013 241,946,337 230,158,434 11,787,903 832,056 12,619,959 17,534,919 30,154,878 2014 265,772,853 241,297,635 24,475,218 (3,682,863) 20,792,355 7,102,480 27,894,835 2015 290,386,589 256,521,148 33,865,441 (13,074,700) 20,790,741 12,996,754 33,787,495 2016 319,857,731 273,095,705 46,762,026 (9,858,327) 36,903,699 12,036,784 48,940,483 2017 333,490,989 275,077,675 58,413,314 (3,916,119) 54,497,195 9,613,746 64,110,941 2018 368,311,477 273,765,206 94,546,271 (6,416,661) 88,129,610 26,077,674 114,207,284 CHANGES IN NET POSITION LA ST TE N FISCAL YEARS THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 99 OPERATING REVENUES BY SOURCE LAST TEN FISCAL YEARS Licenses, Fiscal Sewer Service Permits , and Year Charges, Net Other Fees Other 2009 244,699,964$ 3,475,283$ 1,550,111$ 249,725,358$ 2010 241,495,357 3,084,552 2,007,265 246,587,174 2011 214,653,310 2,976,253 1,814,694 219,444,257 2012 220,765,581 2,683,823 2,550,316 225,999,720 2013 235,980,065 2,731,497 3,234,775 241,946,337 2014 257,343,344 6,562,607 1,866,902 265,772,853 2015 282,270,193 6,656,831 1,459,565 290,386,589 2016 302,011,893 3,620,240 14,225,598 319,857,731 2017 328,359,526 4,036,362 1,095,101 333,490,989 2018 361,175,224 3,777,200 3,359,053 368,311,477 Total Operatin g Revenues THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 100 Fis cal Empl oyment Materials and Con tracted Chemical Year Costs Utilities Suppl ies Service s Su ppl ies 2009 70,475,293$ 12,587,699$ 14,855,989$ 48,783,447$ 1,589,650$ 2010 85,030,456 12,355,232 13,297,892 39,561,050 1,478,605 2011 84,264,583 14,170,680 11,010,962 42,854,613 1,415,826 2012 87,148,397 12,612,858 13,942,690 29,585,028 1,355,113 2013 91,939,437 14,533,557 10,355,992 31,133,523 1,455,725 2014 93,634,080 14,986,388 11,835,900 40,148,088 2,440,843 2015 96,832,265 16,500,052 17,596,766 46,020,308 3,964,165 2016 99,162,132 16,624,607 16,202,414 49,782,063 3,498,796 2017 99,357,213 16,771,366 14,453,871 51,197,293 3,569,449 2018 101,554,653 16,167,029 14,130,179 50,115,103 2,501,712 Fis cal Year Insurance Other 2009 2,746,119$ 13,769,203$ 164,807,400$ 47,370,379$ 212,177,779$ 2010 3,062,439 19,981,424 174,767,098 54,011,776 228,778,874 2011 2,578,316 21,353,854 177,648,834 66,854,265 244,503,099 2012 2,470,343 2,451,472 149,565,901 66,742,064 216,307,965 2013 2,696,416 8,013,944 160,128,594 70,029,840 230,158,434 2014 2,737,491 1,427,638 167,210,428 74,087,207 241,297,635 2015 2,791,622 (5,825,289) 177,879,889 78,641,259 256,521,148 2016 3,218,041 623,903 189,111,956 83,983,749 273,095,705 2017 3,293,267 5,240,825 193,883,284 81,194,391 275,077,675 2018 3,371,910 4,598,278 192,438,864 81,326,342 273,765,206 OPERATIN G EXPEN SES LAST TEN FISCAL YEARS Su btotal, Expe nses before Depreciation Depreciation Total Operatin g Expe nses THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 101 2009 2010 2011 2012 2013 Non-operating revenues Pr operty taxes levied by the District 2,129,475$ 1,401,100$ 27,125,451$ 24,604,173$ 26,016,135$ Investment inc ome 13,115,519 6,553,760 3,847,324 2,407,485 1,056,966 Rent and other inc ome 214,674 265,004 442,968 294,591 293,159 Total no n-operating revenues 15,459,668 8,219,864 31,415,743 27,306,249 27,366,260 Non-operating expenses Interest expense 9,079,269 13,189,283 7,971,088 16,365,309 21,062,474 Net loss on disposal and sale of capital assets 2,161,862 2,719,163 3,485,952 3,162,723 795,527 Non-recurring projects and studies 7,104,496 9,872,088 10,800,843 6,402,888 4,676,203 Le gal claims — — 4,828,828 5,000 — Total no n-operating expenses 18,345,627 25,780,534 27,086,711 25,935,920 26,534,204 Net non-operating revenue (expense)(2,885,959)$ (17,560,670)$4,329,032$ 1,370,329$ 832,056$ 2014 2015 2016 2017 2018 Non-operating revenues Pr operty taxes levied by the District 27,450,319$ 24,764,324$ 25,671,058$ 32,458,054$ 33,748,932$ Investment inc ome 2,966,549 3,000,591 4,635,866 2,902,624 7,405,957 Rent and other inc ome 302,506 37,321 102,865 106,562 253,799 Total no n-operating revenues 30,719,374 27,802,236 30,409,789 35,467,240 41,408,688 Non-operating expenses Interest expense 25,661,127 27,138,546 28,943,200 31,250,777 36,695,083 Net loss on disposal and sale of capital assets 5,248,443 1,420,902 324,513 673,044 1,833,908 Non-recurring projects and studies 3,492,667 12,317,488 11,000,403 7,459,538 9,296,358 Total no n-operating expenses 34,402,237 40,876,936 40,268,116 39,383,359 47,825,349 Net non-operating revenue (expense)(3,682,863)$ (13,074,700)$(9,858,327)$ (3,916,119)$ (6,416,661)$ Fis cal Ye ar NON-OPERATING REVENUES AND EXPENSES LAST TEN FISCAL YEARS Fis cal Year THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 102 Type of Monthly Charge Unmetered c Residential c Non-Residential Wastewat er User Char ge Base Char ge 21.52$ 21.52$ 21.52$ Complianc e Char ge a Tie r 1 — — 2.95 Tie r 2 — — 58.94 Tie r 3 — — 129.67 Tie r 4 — — 191.56 Tie r 5 — — 250.50 Volume Char ges per Ccf b — 3.97 3.97 per room 2.35 — — per wat er closet 8.76 — — per bat h 7.30 — — per separate shower 7.30 — — Ext ra Strength Surchar ge s a SS over 300 milligr ams per lit er — — 269.07 BOD over 300 milligr ams per lit er — — 671.63 COD over 600 milligr ams per lit er — — 335.82 Notes: a Applic able only to non-residential customers, Extra Strength Surchar ge s priced per ton b Ccf = Hund red cubic feet. c User char ge s for certain lo w inc ome residential users will be 50 percent of the regular user char ge . Source: Financ e Department USER CHARGE RATES As Of June 30, 2018 Metered THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 103 Fiscal Year Wastewater Charges Billed1 Wastewater Charge s Collected2 Collections as a % of Wastewater Charge s Billed 2009 207,801,047$ 197,892,342$ 95.23% 2010 204,248,506 198,138,619 97.01% 2011 213,503,732 203,520,769 95.32% 2012 222,425,957 217,396,623 97.74% 2013 233,882,795 233,877,875 99.99% 2014 245,555,628 241,549,548 98.37% 2015 279,555,881 275,049,684 98.39% 2016 300,803,084 299,932,808 99.71% 2017 326,663,167 322,829,334 98.83% 2018 359,628,200 351,107,233 97.63% Note: The table shows the amo unt of was tewat er user char ge revenue s whic h we re bille d and colle cted by the District for the las t ten fiscal ye ar s. 1 Wastewat er Char ge s Bille d inc lud es wastewat er user char ge revenue s bille d and accrued for the year. 2 Wastewat er Char ge s Colle cted inc lud es wastewat er user char ge revenue s colle cted for the current year and previo us years billings. USER CHARG E REVEN UES LAST TEN FISCAL YEARS THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 104 2009 2010 b 2011 c 2012 2013 d Resident ial: Single Family/Unit a 344.88$ 1 351.12$ 1 333.60$ 1 347.64$ 379.56$ Mult i-Family/Unit a 299.76 305.04 285.12 296.28 324.12 Co mmercial/Industrial: Service Charge/Unit 2 457.20 486.60 507.00 525.60 478.56 Sanitar y Sewer Usage Char ge per Ccf 1.88 1.92 2.02 2.11 2.28 Storm Sewer Usage Charge/100 sq. feet of impervious area 0.12 0.14 — — — Extra Strength Surcharge s: Suspended Solids ("SS") over 300 parts per million/ton 218.90 218.90 222.62 231.35 231.35 Biochemical Oxygen Demand ("BOD") over 300 parts per million/ton 529.56 551.52 596.72 620.14 620.14 Chemical Oxygen Demand ("COD") over 600 parts per million/ton 264.78 275.76 298.36 310.07 310.07 2014 2015 2016 2017 e 2018 Resident ial: Single Family/Unit a 421.08$ 434.76$ 491.52$ 535.08$ 591.72$ Mult i-Family/Unit a 360.36 434.04 490.80 492.00 544.08 Co mme rcial/Industrial: Servic e Char ge /Unit 2 412.56 348.12 296.80 336.69 363.53 Sanitar y Sewer Usage Char ge per Ccf 2.50 2.82 3.21 3.59 3.97 Storm Sewer Usage Charge/100 sq. feet of impervious area — — — — — Extra Strength Surcharge s: Suspended Solids ("SS") over 300 parts per million/ton 231.35 244.03 251.88 262.00 269.07 Biochemical Oxygen Demand ("BOD") over 300 parts per million/ton 620.14 620.14 632.38 654.00 671.63 Chemical Oxygen Demand ("COD") over 600 parts per million/ton 310.07 310.07 316.19 327.00 335.82 Notes: 1 Years 2009-2010 saw an impervious rate char ge that ave raged $36 per year per customer. This was discontinued in 2011. 2 Service Charge/Unit for Comme rcial/Industrial is calculated by using the sum of annualize d base charge and compliance char ge. Starting FY 2013, MSD implemented 5-tier Compliance Char ge Rat e Model, so the Servic e Char ge/Unit is based on calculated weighted average complianc e char ge . FY 2013, FY 2014 & FY 2015 Service Charge/Unit were adjusted to reflect the weighted ave rage compliance charge calculations. Prior to FY 2013, there was only one tier compliance charge. a Or dinance 12561, effective January 1, 2008, changed wastewat er rates. Ordinanc e 12560, changed stormwater rates, effective March 1, 2008. b Or dinance 12754, effective July 1, 2009, changed wastewater rates. c Ordinance 13021, effective July 1, 2010, changed wastewater rates through FY 2012. d Or dinance 13402, effective July 1, 2012, changed wastewater rates through FY 2016. e Or dinance 14395, effective July 1, 2016, changed wastewater rates through FY 2020. Source: Finance Department Fiscal Year Fiscal Year SEW ER USER CHARG ES (C OMPOSITE-ANNUAL) LAST TEN FISCAL YEARS THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 105 Sin gle Multi- Fis cal Family Family Non-Total Year Residential Residential Residential Accounts 2009 388,791 51,441 32,161 472,393 a 2010 387,670 50,867 31,939 470,476 a 2011 362,739 43,471 24,702 430,912 b 2012 360,354 41,648 24,568 426,570 2013 359,243 41,117 24,441 424,801 2014 358,928 40,951 24,297 424,176 2015 359,317 41,131 24,389 424,837 2016 356,926 41,585 24,001 422,512 2017 360,534 41,697 24,253 426,484 2018 360,957 41,355 24,296 426,608 Source: Financ e Department a Due to the implementation of the impervio us area char ge in 2008, approximat ely 46,000 additional stormwa ter only ac count s were bille d each month. This char ge was challe nged and a court decision was entered on 7/9/10. Based on that decision the impervio us char ge was discontinue d in FY 2011. b The number of accounts were revised as stormwater accounts were underreported. NUMBER OF CUSTOMERS BY TYPE LAST TEN FISCAL YEARS THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 106 Customer Amount % InBe v Anhe user-Bus ch 5,246,961$ 1.45% City of St. Louis 2,840,881 0.79% Washingt on Unve rsity 2,047,182 0.57% Sigma-Aldrich 1,398,158 0.39% Jo st Real Estate LLC 1,215,907 0.33% Missour i-Ame rican Water Co.1,212,638 0.33% St Louis University 1,186,675 0.33% BJC He alth System 1,082,621 0.30% The Boeing Co mpany 1,004,081 0.28% GKN Aerospace N America Inc.871,570 0.24% Subt otal (10 lar ge st)18,106,674 5.01% Balanc e from other customers 343,068,550 94.99% Gr and totals 361,175,224$ 100.00% Customer Amount % Anhe user-Busch 7,565,613$ 3.09% Mallinckrodt Inc.1,161,840 0.47% Washingt on University 1,112,168 0.45% City Of St. Louis 1,038,359 0.42% Chrysler Corporation 699,271 0.29% Bo eing Co.662,578 0.27% Sigma-Aldrich 532,352 0.22% BJC He alth System 527,376 0.22% Zo ological Gar dens 510,699 0.21% Sensient Colors Inc.486,380 0.20% Subt otal (10 lar ge st)14,296,636 5.84% Balanc e from other customers 230,403,328 94.16% Gr and totals 244,699,964$ 100.00% Source: Budget Divisio n after data is accumulat ed for the GFOA report Fis cal Year 2009 User Charges TEN LARGEST CUSTOMERS CURRENT YEAR AND NINE YEARS AGO User Charges Fis cal Year 2018 THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 107 Unamortized Fis cal Subordinate Capital Premium, Net Ye ar Se nior Subordinate Dir ect Loans Le as e of Discou nt Amount Per Capita 2009 258,965,000$ 235,932,500$ 215,790$ 4,130,000$ 2,640,838$ 501,884,128$ 373$ 0.81 % 2010 342,370,000 224,505,000 31,017,371 7,263,687 1,457,910 606,613,968 446 1.00 2011 340,590,000 212,655,000 25,259,899 6,095,981 862,654 585,463,534 431 0.97 2012 390,880,000 200,692,500 63,727,722 3,096,139 5,805,206 664,201,567 484 1.09 2013 594,715,000 188,600,000 93,751,658 — 56,252,401 933,319,059 660 1.45 2014 740,655,000 184,075,000 116,090,820 — 82,274,845 1,123,095,665 852 1.86 2015 736,775,000 171,455,000 148,279,465 — 78,591,961 1,135,101,426 860 1.83 2016 860,460,000 158,765,000 184,141,916 — 112,035,478 1,315,402,394 997 2.09 2017 995,175,000 145,410,000 210,851,827 — 124,465,181 1,475,902,008 1,127 2.33 2018 1,167,225,000 131,810,000 227,240,106 — 166,900,626 1,693,175,732 1,297 2.70 Notes: Calc ulation of "Per Capita" for 2011 through 2013 is based on estimated population le ve ls. Calc ulation of "As a Share of Personal Income" for 2011 t hrough 2013 is bas ed on estimated income levels. In FY 2012, a decision was made to discontinue considering SRF receivable amounts as liabilities. The liability is now recorded when the funds are received. Sources: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce, and the U.S. Census Bureau LAST TEN FISCAL YEARS Revenue Bonds RATIOS OF OUTSTANDING DEBT BY TYPE Total Income of Personal As a Share THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 108 Amount of Debt Percentage of Debt Governmental Unit Debt Outstanding within District Boundary within District Boundary City of St. Louis 33,060,000$ 33,060,000$ 100.0% St. Louis County 92,215,000 91,477,280 99.2 Municipalities 131,258,897 128,358,897 97.8 City of St. Louis School Dis trict 257,209,000 257,209,000 100.0 St. Louis County School Districts 1,499,314,407 1,478,531,007 98.6 Fir e Districts 111,382,644 100,302,644 90.1 2,124,439,948$ 2,088,938,828 98.3% Total Direct Debt 1,693,175,732 Total Direct and Overlap ping De bt 3,782,114,560$ Sources: City of St. Louis, Office of Comptroller St. Louis Count y, Department of Revenue St. Louis Public Schools, Financial/Treasurer Office Missouri Department of Education, School Finance Polle d Gove rnme nt s Polle d Fire Districts Note: A lthough the District comprises all of the St. Louis City and most of St. Louis C ounty, it does not entirely match the County's boundaries. T he calculation of overlapping debt is based on the percentage that a political jurisdiction's territory lies within the District's territory. These percentages are weighted against the debt outstanding thus providing the amount of debt within District Boundary. COMPUTATION OF OVERLAPPING DEBT As Of June 30, 2018 THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 109 Less: Operating Expenses (excluding Non-depr eciation,Net Fiscal Operating operating Gross GASB 68 &Available Year Revenues Revenues Revenues GASB 75)Revenues 2009 209,972,662$ 10,283,104$ 220,255,766$ 138,971,881$ 81,283,885$ 2010 204,697,929 4,908,296 209,606,225 145,598,505 64,007,720 2011 217,011,360 3,202,219 220,213,579 160,572,145 59,641,434 2012 224,882,086 2,058,300 226,940,386 135,232,302 91,708,084 2013 240,597,715 956,664 241,554,379 146,372,419 95,181,960 2014 264,422,401 2,670,333 267,092,734 153,221,914 113,870,820 2015 288,835,877 2,555,654 291,391,531 163,311,194 128,080,337 2016 318,463,297 3,894,305 322,357,602 168,258,133 154,099,469 2017 333,469,677 2,456,677 335,926,354 168,835,676 167,090,678 2018 368,292,762 6,356,029 374,648,791 163,026,313 211,622,478 Fiscal Cove rage Year Principal Interest Total Ratio 2009 12,110,000$ 17,503,892$ 29,613,892$ 2.7 2010 13,022,500 20,187,151 33,209,651 1.9 2011 14,576,800 20,140,021 34,716,821 1.7 2012 16,540,200 22,517,473 39,057,673 2.3 2013 18,749,700 31,191,190 49,940,890 1.9 2014 10,037,200 34,399,261 44,436,461 2.6 2015 20,252,200 41,596,192 61,848,392 2.1 2016 29,588,000 44,171,592 73,759,592 2.1 2017 38,026,700 51,333,869 89,360,569 1.9 2018 42,716,800 57,682,698 100,399,498 2.1 Fiscal Cove rage Year Principal Interest Total Ratio 2009 1,520,000$ 11,677,272$ 13,197,272$ 6.2 2010 1,595,000 13,396,341 14,991,341 4.3 2011 1,780,000 15,467,269 17,247,269 3.5 2012 1,960,000 16,488,587 18,448,587 5.0 2013 3,805,000 24,451,656 28,256,656 3.4 2014 4,060,000 30,161,408 34,221,408 3.3 2015 3,880,000 34,472,415 38,352,415 3.3 2016 10,170,000 36,211,319 46,381,319 3.3 2017 15,285,000 42,897,077 58,182,077 2.9 2018 18,365,000 49,558,285 67,923,285 3.1 Note: The methodology used to calculate the net available revenues and the coverage ratio was adj usted during fiscal year 2013 and all previous years were restated for comparative purposes. The 2013 change in methodology consisted of removing agency fees, pr ev iou sly reflected as a deduction from net available revenues, and now combining them with interest in the debt service section. Additionally, in fiscal years 2010 and 2011, the change in methodology consisted of removing the Build America Bond Tax Credit from the pledged revenue section and reapplying the credit to interest expense in the debt service section. This was made to ensure consistency with fiscal years 2012 and 2013. In fiscal 2017 the methodology was changed to exclude GASB non-cash transactions from the debt service coverage calculation. Fiscal years 2015 and 2016 have been adjusted to also exclude the GASB 68 non-cash pension expense. PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Senior and Subordinate Debt Service Se nior Debt Service THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 110 Per Personal Capita Total Fiscal Income Personal Labor Number of Year Populations (millions)Income City County State Force Households (1) 2009 1,339,011 61,947$ 46,263$ 11.5 9.7 9.5 681,801 551,388 2010 1,356,289 60,792 44,822 12.3 9.4 9.3 682,165 551,388 2011 1,357,035 60,420 44,523 11.8 8.9 9.0 692,071 546,744 2012 1,360,085 60,283 44,323 9.7 6.9 7.0 672,945 546,744 2013 1,328,610 60,399 45,460 10.5 7.3 7.1 665,086 543,851 2014 1,318,610 60,968 46,237 9.6 6.9 6.6 666,200 543,991 2015 1,319,295 61,910 46,926 7.1 5.5 5.8 703,317 543,945 2016 1,319,047 62,983 47,749 5.9 4.6 4.9 718,821 542,223 2017 1,309,985 63,295 48,317 4.7 3.7 4.9 692,644 541,394 2018 1,305,352 62,771 48,087 4.3 3.3 3.5 699,882 541,832 Notes: (1) The number of households was taken from http://www.census.gov/quickfacts/fact/table/US-MO, the 2018 figure is based on the 2012-2016 data. The 2017 figur e is based on 2011-2015 data. The 2016 figure (2010-2014). The 2015 figure is based on 2013 data. The 2011-2012 figures are based on the 2010. Information for prior years is unavailable ; therefore, the 2000 census informatio n is used for the other years in this table . Sources: Regional Ec onomic Informatio n System, Bureau of Economic Analysis, U.S. Department of Commerce, and Missouri Ec onomic Resource and Information Center (MERIC) Fo otnotes-ht tp://www.bea.gov/regional/reis/scb.cfm ht tp://www.misso ur ie conomy.org/ind icat ors https://www.census.gov/qui ckfacts/fact/table/US /PST045217 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Unempl oyment Rate Saint Louis THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 111 Percentage Percentage Empl oye r Empl oyees (1)of Total Rank Empl oyees (1)of Total Rank BJC He alt h System 28,975 4%1 23,533 4%1 Wal-Mart Stores Inc.22,290 3%2 14,300 2%3 Washington University in St. Louis 16,903 3%3 12,683 2%6 SSM Healt hc are 16,140 3%4 11,497 2%7 Me rcy 15,174 2%5 Bo eing Defense, Space & Security 13,707 2%6 16,000 3%2 Scott Air Force Base 12,600 2%7 13,520 2%4 United States Postal Servic e 12,000 2%8 13,110 2%5 Schnuc k Mar kets Inc.9,510 1%9 10,500 2%8 Ar chdiocese of St. Louis 8,800 1%10 St. John's Mercy Health Car e 9,288 2%9 Mc Do nalds 9,000 1%10 156,099 23%133,431 22% No tes: (1) Emp lo yees are for the St. Louis area whic h includes several count ie s not served by the District. Sources: St. Louis Busine ss Journal's Bo ok of Lists 2018 (as of Augus t 2018) St. Louis Busine ss Journal's Bo ok of Lists 2009 Fis cal Year 2009Fiscal Year 2018 PRINC IPAL EM PLO YERS (ST. LOUIS METRO POLITAN AREA) CURRENT YEAR AN D NINE YEARS AGO THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 112 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Administrative 133 131 124 129 124 122 129 126 131 129 Of fice/Cle rical 94 89 84 85 86 82 84 82 82 75 Plant Operation & Labo ratory 237 249 241 244 249 252 236 226 227 222 Engine ering & Technic al 144 151 147 153 148 151 155 152 151 150 Sewer Construction & Maintenanc e 301 315 296 311 324 328 345 358 360 365 To tal Employees 909 935 892 922 931 935 949 944 951 941 Source: Human Re sour ces Department EMPLOYMENT LEVEL LAST TEN FISCAL YEARS THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 113 Average Sewage Fis cal Treatme nt in Millions Year of Gallons per Day 2009 394.7 2010 395.5 2011 370.6 2012 300.0 2013 326.7 2014 273.8 2015 327.5 2016 335.2 2017 328.9 2018 270.1 Source: Operations Department AVERAGE FLOW LAST TEN FISCAL YEARS THE METROPOLITAN ST.LOUIS SEWER DISTRICT Page 114 2009 2010 2011 2012 2013 Mile s of sewers 9,812 9,900 9,843 9,738 9,578 Numbe r of treatment plants 7 7 7 7 7 Tr eatment capacity (MGD) a 423 423 528 528 528 Annual engine ering maximum plant capacity (millio ns of gallo ns)154,395 154,395 192,629 192,629 192,629 Amount treated annually (millio ns of gallo ns )144,066 144,358 135,269 109,518 119,253 Unused capacity (millio ns of gallo ns )10,329 10,037 57,360 83,111 73,376 Pe rcentage of capacity utilize d 93%93% 70% 57% 62% 2014 2015 2016 2017 2018 Mile s of sewers 9,563 9,531 9,700 9,400 9,400 Numbe r of treatment plants 7 7 7 7 7 Tr eatment capacity (MGD) a 533 538 538 593 593 Annual engine ering maximum plant capacity (millio ns of gallo ns)194,454 196,279 196,279 216,354 216,354 Amount treated annually (millio ns of gallo ns )99,945 119,547 122,366 120,033 96,534 Unused capacity (millio ns of gallo ns )94,509 76,732 73,913 96,321 119,820 Pe rcentage of capacity utilize d 51%61% 62% 55% 45% Sources: Operations Department and Engine ering De partment Note: a Millio n gallo ns per day. Fis cal Year Fis cal Year OPERATING AND CAPITAL INDICATORS LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT • ST. LOUIS, MO 2350 MARKET STREET, ST. LOUIS, MO 63103 WWW.STLMSD.COM • 314-768-6260