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Fiscal Year 2019 Comprehensive Annual Financial Report (CAFR)THE METROPOLITAN ST. LOUIS SEWER DISTRICT • ST. LOUIS, MISSOURI FENTON WASTEWATERTREATMENT PLANT COMPREHENSIVE ANNUALFINANCIAL REPORT FISCAL YEARS ENDED JUNE 30, 2019 AND 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT ST. LOUIS, MISSOURI COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEARS ENDED JUNE 30, 2019 AND 2018 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 ................................................................................................................... xiii Certificate Of Achievement For Excellence In Financial Reporting ...................................... xiv 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 ................................ 93 Schedule Of Employer Contributions – Employees’ Pension Plan ................................... 94 Schedule Of Changes In Total OPEB Liability .................................................................. 95 Part III – Statistical Section: Net Position By Component ................................................................................................ 96 Changes In Net Position ...................................................................................................... 97 Operating Revenues By Source ........................................................................................... 98 Operating Expenses ............................................................................................................. 99 Non-Operating Revenues And Expenses .......................................................................... 100 User Charge Rates ............................................................................................................. 101 User Charge Revenues....................................................................................................... 102 Sewer User Charges (Composite-Annual) ........................................................................ 103 Number Of Customers By Type ........................................................................................ 104 Ten Largest Customers...................................................................................................... 105 Ratios of Outstanding Debt By Type ................................................................................ 106 Computation Of Overlapping Debt ................................................................................... 107 Pledged Revenue Coverage ................................................................................................ 108 Demographic And Economic Statistics ............................................................................. 109 Principal Employers (St. Louis Metropolitan Area) ........................................................ 110 Employment Level ............................................................................................................. 111 Average Flow ...................................................................................................................... 112 Operating And Capital Indicators .................................................................................... 113 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 9, 2019 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, 2019 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, 2019 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, 2018. 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 approximately 427,000 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 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. The Board of Trustees The Metropolitan St. Louis Sewer District iii 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; • 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. The Board of Trustees The Metropolitan St. Louis Sewer District iv During fiscal 2019 the primary source of funding for the operation and maintenance of MSD’s wastewater system was a user charge averaging $602.76 per year or $50.23 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 2019 the District’s stormwater system was funded through property taxes of 1.9¢ per one hundred dollars assessed valuation for stormwater regulatory activities and 9.8¢ 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 9.8¢ 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, over 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. 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 The Board of Trustees The Metropolitan St. Louis Sewer District v 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 $6 billion in upgrades to the existing wastewater sewer system (in 2018 dollars). 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. 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. In March 2019, the Rate Commission received a wastewater rate proposal from staff for fiscal years 2021 – 2024. The wastewater rate proposal seeks to fund a four-year, $1.58 billion capital improvement program to meet regulatory and system improvement needs. The Board of Trustees The Metropolitan St. Louis Sewer District vi After thoroughly reviewing the proposal, with assistance from its own team of experts working at its direction, the Rate Commission held a series of public hearings to garner ratepayers’ feedback on the proposed rates. The Commission approved a resolution and Rate Recommendation Report with proposed increases for fiscal years 2021 – 2024 with or without bonding. The table below depicts recommended rate increases proposed by MSD staff and the Rate Commission. The Rate Commission submitted its Rate Recommendation Report to the Board on August 16, 2019. The Rate Commission chair briefed the Board of Trustees on their report on September 12, 2019. If approved by the Board, voters will decide in Spring 2020 or Spring 2021 whether to authorize the District to issue an additional $500 million in bonds. Changes to rates would be effective July 1, 2020. Combined with similar bond elections held in 2004, 2008, 2012 and 2016, voters residing within MSD’s service area have authorized a total issuance of $2.6 billion in wastewater revenue bonds. As of June 30, 2019, 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. On April 5, 2016 over 62% of voters in MSD’s service area approved Proposition S. The approval of Proposition S placed 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. With the approval of Proposition S and the implementation of a new funding structure for stormwater services, FY 21 FY 22 FY 23 FY 24 MSD Staff Proposal 1.9% 3.8% 3.8% 3.8% Rate Commission Proposal 1.5% 3.4% 3.5% 3.7% MSD Staff Proposal 1.9% 15.1% 17.1% 13.1% Rate Commission Proposal 1.5% 15.4% 17.1% 13.0% Increase with Bond Authorization Increase without Bond Authorization The Board of Trustees The Metropolitan St. Louis Sewer District vii MSD had “fund balances” left over from the former taxing and fee system. However, this limited and set amount of money barely begins to address the overall need for stormwater projects throughout MSD’s service area. In February 2018, staff submitted a Stormwater Capital Rate to the Rate Commission calling for an impervious-area-based Stormwater Capital Rate to fund capital improvements to address localized flooding and erosion problems throughout MSD’s service area. After thoroughly reviewing the proposal, 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. In April 2019, voters rejected the proposal, thus no districtwide funding is available for stormwater capital projects. Prior to Proposition S in 2016, the District collected additional personal property taxes in 18 taxing subdistricts throughout the service area. These taxing subdistricts are formally called OMCI or Operation, Maintenance, and Construction Improvement Funds and are generally located west of the City of St. Louis and east of I-270. Each OMCI subdistrict was authorized to levy a tax up to $.10 per $100 of assessed property valuation, and all taxes collected in the subdistricts had to be spent within the taxing district boundaries. Customers who did not live within an OMCI subdistrict did not pay this tax and did not receive the associated services. Following the passage of Proposition S in 2016, the Board of Trustees set the tax rates in the OMCI subdistricts to zero. The district is currently in discussion with municipalities and community stakeholders within those OMCI subdistricts to determine if there is a desire to resume levying those taxes so the District could construct projects to address flooding and erosion control within the subdistricts. 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; however, the District has been able to manage this revenue shortfall by reducing expenses. The Board of Trustees The Metropolitan St. Louis Sewer District viii 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 396.4 million gallons per day (“MGD”) in fiscal 2019 compared to 270.1 MGD in fiscal 2018. Significant rain events in fiscal 2019 contributed to the increase in average flow when compared to fiscal 2018. The design capacity and average flow, by watershed, in MGD was as follows in fiscal 2019: MAJOR WATERSHED LEVEL OF TREATMENT NUMBER OF FACILITIES DESIGN CAPACITY (MGD) AVERAGE FLOW FISCAL 2019 (MGD) Mississippi River Secondary Two 472.00 304.70 Missouri River Secondary Two 78.00 52.00 Meramec River Secondary Three 42.75 39.70 Total Seven 592.75 396.40 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 percent in June 2019 and lower than the national unemployment rate of 3.7 percent for the same time period. The Board of Trustees The Metropolitan St. Louis Sewer District ix MSD has its own internal barometers for measuring economic development within the District. These are listed below for fiscal 2019 and 2018: 2019 2018 Sewer Plan Reviews: Number of Plans Approved 514 673 Number of Miles of Sewers 46 49 Sewer Construction Permits: Number of Permits Issued 3,792 3,769 Number of Miles of Sewers 24 125 Customer Connections: Number of Connection Permits Issued 2,384 2,178 Connection Fee Revenue (in millions) $0.9 $1.2 Value of Sewers Dedicated to MSD by Developers (in millions) $16.6 $24.8 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. Financial Information Proprietary Operations. The current financial condition of MSD remains stable. The District realized a net operating income of $110.4 million in fiscal 2019 compared to a net operating income of $94.5 million the prior year. The increase in operating revenues of $32.8 million is explained by an increase in sewer service revenue as a result of rate increases. Operating expenses increased $16.9 million due primarily to increases in pension expenses to comply with Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions (Employer Reporting) (“GASB 68”), additional wastewater backup claims due to the occurrence of several significant rain events, increases in billing and collection expenses and the recording of additional depreciation expense. 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. The Board of Trustees The Metropolitan St. Louis Sewer District x 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. 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. The Board of Trustees The Metropolitan St. Louis Sewer District xi 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 percent 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. 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. The Board of Trustees The Metropolitan St. Louis Sewer District xii 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, 2019. 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, 2018 and 2017 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, 2018. 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-one 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 District also received the GFOA’s Distinguished Budget Presentation award for its fiscal 2019 annual budget. The District has received this award for thirty-two consecutive years. We believe the fiscal year 2020 budget presentation continues to meet the GFOA’s high standards and submitted it on July 2, 2019, for consideration. Marion M. Gee Director of Finance xiii ORGANIZATION (As of June 30, 2019) BOARD OF TRUSTEES Michael Yates, Chair; Annette Mandel, Vice Chair; James Faul; James I. Singer; Freddie Dunlap; 1 vacant position (1) OFFICE OF INTERNAL AUDITOR RATE COMMISSION Leonard P. Toenjes, Chair OFFICE OF SECRETARY TREASURER Tim R. Snoke Secretary/Treasurer CIVIL SERVICE COMMISSION Annette Adams Daniel Gonzales 1 vacant position (2) EXECUTIVE DIRECTOR Brian L. Hoelscher/CEO FINANCE Marion M. Gee Director OFFICE OF GENERAL COUNSEL Susan M. Myers General Counsel OPERATIONS Bret A. Berthold Director ENGINEERING Rich Unverferth Director OFFICE OF HUMAN RESOURCES Tracey Coleman Director INFORMATION SYSTEMS Jonathon C. Sprague Director (1) Amy Fehr was appointed to the Board of Trustees on 9-6-19 (2) Rev. Michael F. Jones, Sr. was appointed to the Civil Service Commission on 7-5-19 xiv 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, 2018 Executive Directors/CEO Financial Section METROPOLITAN ST. LOUIS SEWER DISTRICT SERVICE AREAS (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, 2019 and 2018, 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 opinions 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 opinions. Board of Trustees The Metropolitan St. Louis Sewer District (2) Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activity of the District as of June 30, 2019 and 2018, and the respective 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. 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 opinions 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 9, 2019,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 results 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. a CliftonLarsonAllen LLP St. Louis, Missouri October 9, 2019 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 3 MANAGEMENT’S DISCUSSION AND ANALYSIS For The Years Ended June 30, 2019 And 2018 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. 2019 Financial Highlights  The District increased capital assets by $185.5 million as a result of increases in construction in progress ($120.2 million), land ($1.0 million) and depreciable capital assets net of depreciation ($64.3 million).  The District placed $150.2 million of capital assets into service during fiscal year 2019. The continued high level of capitalization reflects the District’s work to meet long-term plans. Capitalized assets included: Collection and pumping plant $140.6 million General plant and equipment $6.9 million Treatment and disposal plant and equipment $1.7 million Land $1.0 million The net increase to accumulated depreciation was $76.6 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 2019 fiscal year, the District implemented Governmental Accounting Standards Board Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowing and Direct Placements (“GASB Statement No. 88”). This Statement amends Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, paragraph 119 and Statement No. 38, Certain Financial Statement Note Disclosures, paragraphs 10 and 12. The primary objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. The requirements of this Statement will improve financial reporting by THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 4 providing users of financial statements with essential information that currently is not consistently provided. 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 General plant and equipment $4.0 million Treatment and disposal plant and equipment $3.4 million Land $2.6 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 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. 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 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 5 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 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 $129.2 million. The improvement is due primarily to an increase in net investment in capital assets, debt service funds and unrestricted funds of $94.8 million, $2.9 million and $36.6 million, respectively; offset by a decrease of $5.1 million in subdistrict construction and improvement funds. Net capital assets increased $185.5 million while debt related to the capital assets increased $22.7 million and when netted with the $109.4 million decrease in unspent cash proceeds received upon the issuance of senior debt in 2018, net debt decreased net investment in capital assets $86.7 million. The increase in construction-related liabilities of $3.2 million and the amortization of the deferred loss of $0.8 million also decreased net investment in capital assets. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 6 Condensed Financial Statements and Analysis 2019 Analysis Current, restricted and other assets decreased $61.6 million or 7.0% in the current year. The decrease is predominately due to a decrease in investments offset by an increase in cash due to higher sewer rates charged and maturity of investments. Capital assets net of accumulated depreciation increased by $185.5 million or 5.4% in the current year as the result of continued high levels of construction and acquisition of assets by the District. Current liabilities increased by $9.9 million or 7.1% due primarily to an increase in deposits and accrued expenses and retainage held on capital projects which correlate with the increase in construction. Increase Increase June 30, June 30,(Decrease)June 30,(Decrease) 2019 2018 2019-2018 2017 2018-2017 Assets: Current, restricted, and other assets 821,030$ 882,667$ (61,637)$ 743,572$ 139,095$ Capital assets (net of accumulated depreciation)3,631,716 3,446,232 185,484 3,252,238 193,994 Total Assets 4,452,746 4,328,899 123,847 3,995,810 333,089 Deferred Outflows of Resources: Bonds and notes payable-Deferred loss on refunding 11,343 12,099 (756) 11,321 778 Pension-related outflows 34,238 17,333 16,905 37,666 (20,333) OPEB-related outflows 1,246 1,278 (32) — 1,278           Total Deferred Outflows of Resources 46,827 30,710 16,117 48,987 (18,277) Liabilities: Current liabilities 149,991 140,082 9,909 133,679 6,403 Non-current liabilities 1,723,830 1,722,146 1,684 1,515,345 206,801 Total Liabilities 1,873,821 1,862,228 11,593 1,649,024 213,204 Deferred Inflows of Resources: Pension-related inflows 4,341 6,065 (1,724) 4,605 1,460 OPEB-related inflows                                          887 — 887 — —           Total Deferred Inflows of Resources 5,228 6,065 (837)4,605 1,460 Net Position: Net investment in capital assets 2,063,519 1,968,740 94,779 1,876,249 92,491 Restricted 127,414 129,579 (2,165) 135,259 (5,680) Unrestricted 429,591 392,997 36,594 379,660 13,337 Total Net Position 2,620,524$ 2,491,316$ 129,208$ 2,391,168$ 100,148$ Condensed Statements of Net Position (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 7 Non-current liabilities increased by $1.7 million or 0.1% primarily due to a $26.0 million increase in net pension liability, offset by $24.3 million net decrease in bonds and notes payable. The net decrease in bonds and notes payable is comprised of a $52.6 million decrease for fiscal 2020 senior and subordinate debt payments reclassified to current liabilities and a $7.0 million decrease in unamortized premium net of discount offset by a $35.3 million increase in new debt. Net deferred outflows and inflows increased $17.0 million or 68.8% 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 or total OPEB liability. 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. 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 $19.7 million or 44.5% due primarily to updates to various information provided by the District’s actuary such as economic/demographic gains or losses, assumption changes or inputs, and investment gains or losses related to the District’s net pension liability, offset by the establishment of the District’s OPEB-related outflows. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 8 For the Fiscal For the Fiscal Increase For the Fiscal Increase Year Ended Year Ended (Decrease)Year Ended (Decrease) June 30, 2019 June 30, 2018 2019-2018 June 30, 2017 2018-2017 Operating Revenues: Sewer service charges 399,929$ 364,165$ 35,764$ 330,873$ 33,292$ Recovery (provision) for doubtful sewer service charge accounts (4,349) (2,990) (1,359) (2,513) (477) Licenses, permits, and other fees 3,063 3,777 (714) 4,036 (259) Other 2,478 3,359 (881) 1,095 2,264 Total Operating Revenues 401,121 368,311 32,810 333,491 34,820 Non-operating Revenues: Property taxes levied by the District 34,108 33,749 359 32,458 1,291 Investment income 16,699 7,406 9,293 2,903 4,503 Rent and other income 301 254 47 106 148 Total Non-operating Revenues 51,108 41,409 9,699 35,467 5,942 Total Revenues 452,229 409,720 42,509 368,958 40,762 Operating Expenses: Pumping and treatment 63,197 60,735 2,462 60,203 532 Collection system maintenance 45,617 44,786 831 43,928 858 Engineering 11,447 11,218 229 11,290 (72) General and administrative 67,462 59,012 8,450 58,535 477 Water backup claims 5,600 1,557 4,043 5,035 (3,478) Depreciation 83,640 81,326 2,314 81,194 132 Asset management 13,755 15,131 (1,376) 14,893 238 Total Operating Expenses 290,718 273,765 16,953 275,078 (1,313) Non-operating Expenses: Net loss on disposal and sale of capital assets 971 1,834 (863) 673 1,161 Non-recurring projects and studies 15,628 9,296 6,332 7,459 1,837 Interest expense 33,082 36,695 (3,613) 31,251 5,444 Total Non-operating Expenses 49,681 47,825 1,856 39,383 8,442 Total Expenses 340,399 321,590 18,809 314,461 7,129 Income Before Capital Grants And Contributions 111,830 88,130 23,700 54,497 33,633 Capital Grants And Contributions 17,378 26,077 (8,699) 9,614 16,463 Change in Net Position 129,208 114,207 15,001 64,111 50,096 Net Position - Beginning of Year, As Previously Stated 2,491,316 2,391,168 100,148 2,327,057 64,111 Effect of Adoption of GASB 75 — (14,059) 14,059 — (14,059) Net Position - Beginning of Year, As Restated 2,491,316 2,377,109 114,207 2,327,057 50,052 Net Position - End of Year 2,620,524$ 2,491,316$ 129,208$ 2,391,168$ 100,148$ Statements of Revenues, Expenses, and Changes in Net Position (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 9 2019 Analysis Net position increased $129.2 million or 5.2% 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 $42.5 million or 10.4%. Sewer service charges increased $35.8 million or 9.8% and the provision for doubtful accounts increased correspondingly by $1.4 million or 45.5%. Other operating revenue decreased $0.9 million or 26.2% due to a reduction in forfeited construction deposits. Investment income increased $9.3 million or 125.5% due to the increase in unrealized gain and purchase interest gain. Total expenses increased by $18.8 million or 5.8% resulting primarily from the increase in operating expenses. Operating expenses increased $17.0 million or 6.2% with the largest increase in general and administrative expense of $8.5 million or 14.3% due to higher pension expense and costs related to system upgrades and water backup claims of $4.0 million or 259.7% due to spring flooding and pump station failures. Non-operating expenses increased $1.9 million or 3.9% with a large increase in non-recurring projects and studies of $6.3 million or 68.1% due primarily to the increase in green infrastructure expenditures and treatment plant concrete repairs offset by interest expense decrease of $3.6 million or 9.8% due to more interest capitalized to large capital projects. Capital grants and contributions decreased $8.7 million or 33.4% with the majority of the decrease resulting from capital contributions as the number of capital projects contributed to the District decreased significantly in fiscal 2019. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 10 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. 2019 Analysis The District ended the year with $56.8 million in cash and cash equivalents for an increase of $22.4 million or 65.0% from the prior year. Cash flows from operating activities increased by $24.2 million or 15.1% 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 $0.7 million or 2.0%. Cash flow from capital and related financing activities For the Fiscal For the Fiscal Increase For the Fiscal Increase Year Ended Year Ended (Decrease)Year Ended (Decrease) June 30, 2019 June 30, 2018 2019-2018 June 30, 2017 2018-2017 Cash flows from operating activities 185,226$ 160,989$ 24,237$ 148,108$ 12,881$ Cash flows from non-capital financing activities 33,850 33,181 669 32,013 1,168 Cash flows from capital and related financing activities (310,046) (72,534) (237,512) (146,484)73,950 Cash flows from investing activities 113,338 (135,363) 248,701 (34,720) (100,643) Net increase (decrease) in cash and cash equivalents 22,368 (13,727)36,095 (1,083) (12,644) Cash and cash equivalents at beginning of year 34,386 48,113 (13,727)49,196 (1,083) Cash And Cash Equivalents At End Of Year 56,754$ 34,386$ 22,368$ 48,113$ (13,727)$ Condensed Statements of Cash Flows (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 11 decreased by $237.5 million or 327.4% due primarily to $229.8 million decrease in bond proceeds and premiums received in fiscal year 2019 compared to fiscal year 2018 and $11.8 million increase in principal, interest and fees paid on bonds, offset by $5.4 million decrease in spending for capital assets. Cash flows from investing activities increased by $248.7 million or 183.7%. The increase primarily stems from more investments maturing than purchased in fiscal 2019 while the opposite occurred in fiscal 2018 – more investments were purchased than matured. 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 increased by $74.0 million or 50.5% due to decreased spending for capital assets, offset by an increase in bond proceeds and premiums received in fiscal year 2018 compared to fiscal year 2017, and increased principal, interest and fees paid on bonds. Cash flows from investing activities decreased by $100.6 million or 289.9%. The decrease primarily stems from a greater change in the purchase of investments than in the proceeds from sale and maturity of investments from fiscal 2017 to fiscal 2018. Capital Assets Condensed Statements of Capital Assets Net of Depreciation (000's) Increase Increase June 30, June 30,(Decrease)June 30,(Decrease) 2019 2018 2019-2018 2017 2018-2017 Land 74,274$ 73,262$ 1,012$ 70,695$ 2,567$ Construction in progress 956,321 836,105 120,216 707,739 128,366 Treatment and disposal plant and equipment 660,732 694,390 (33,658) 727,949 (33,559) Collection and pumping plant 1,916,993 1,821,344 95,649 1,724,422 96,922 General plant and equipment 23,396 21,131 2,265 21,433 (302) Total 3,631,716$ 3,446,232$ 185,484$ 3,252,238$ 193,994$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 12 2019 Analysis Total capital assets, net of accumulated depreciation, increased by $185.5 million or 5.4% over the prior year. Construction in progress contained the majority of the increase with net additions of $120.2 million or 14.4% consisting of $244.0 million in additions offset by $123.8 million of assets placed into service. The net increase in collection and pumping plant assets was $95.6 million or 5.3%, primarily for capitalization of assets including new and improved sewers, dedicated assets and infrastructure repairs. Land increased $1.0 million or 1.4% due to the acquisition of easements and other land. General plant and equipment increased $2.3 million or 10.7% primarily due to fleet replacements and plant upgrades. These increases are offset by net treatment and disposal plant and equipment decrease of $33.7 million or 4.8% due to no large projects being capitalized in fiscal 2019 to offset the depreciation charge for the year. For more detailed information, see Note 4, Capital Assets, in the accompanying notes to the financial statements. 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 $96.9 million or 5.6%, primarily for capitalization of assets including new and improved sewers, dedicated assets and infrastructure repairs. Net treatment and disposal plant and equipment decreased $33.6 million or 4.6% 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 $0.3 million or 1.4% primarily due to depreciation of existing assets. For more detailed information, see Note 4, Capital Assets, in the accompanying notes to the financial statements. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 13 Long-Term Debt Increase Increase June 30, June 30,(Decrease)June 30,(Decrease) 2019 2018 2019-2018 2017 2018-2017 Senior Revenue Bonds: Series 2010B 85,000$ 85,000$ —$ 85,000$ —$ Series 2011B 15,945 18,055 (2,110) 43,410 (25,355) Series 2012A 154,040 159,340 (5,300) 214,700 (55,360) Series 2012B 128,840 131,935 (3,095) 134,710 (2,775) Series 2013B 113,615 116,615 (3,000) 146,000 (29,385) Series 2015B 190,135 192,810 (2,675) 221,355 (28,545) Series 2016C 144,535 147,295 (2,760) 150,000 (2,705) Series 2017A 312,760 316,175 (3,415) — 316,175 Water Infrastructure Finance & Innovation Act (WIFIA) Bonds: Series 2018A 262 — 262 — — Subordinate Revenue Bonds: Series 2004B 64,590 73,190 (8,600) 81,545 (8,355) Series 2005A 3,120 3,465 (345) 3,800 (335) Series 2006A 20,965 23,315 (2,350) 25,600 (2,285) Series 2006B 7,400 8,140 (740) 8,860 (720) Series 2008AB 21,765 23,700 (1,935) 25,605 (1,905) Missouri DNR: Series 2009A 14,218 15,342 (1,124) 16,441 (1,099) Series 2010A 5,468 5,849 (381) 6,222 (373) Series 2010C 24,906 26,656 (1,750) 28,361 (1,705) Series 2011A 32,241 33,988 (1,747) 35,692 (1,704) Series 2013A 43,349 45,596 (2,247) 47,786 (2,190) Series 2015A 65,902 69,246 (3,344) 67,149 2,097 Series 2016A 13,129 3,094 10,035 147 2,947 Series 2016B 45,583 27,418 18,165 8,986 18,432 Series 2018B 2,880 — 2,880 — — Energy Loan Program 16 51 (35) 68 (17) T otal 1,510,664$ 1,526,275$ (15,611)$ 1,351,437$ 174,838$ Condensed Statements of Long-Term Debt (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 14 2019 Analysis The District ended fiscal year 2019 with $1.5 billion in long-term debt outstanding. The District added one new Water Infrastructure Finance and Innovation Act (“WIFIA”) bond (“Series 2018A”) totaling $0.3 million. In addition, the District added one new State Revolving Fund (“SRF”) bond (“Series 2018B”) totaling $2.9 million and the District withdrew $10.9 million and $21.3 million in loan proceeds from the Series 2016A and Series 2016B SRF bonds, respectively. These amounts represent new borrowings and do not reflect the principal payments made in fiscal 2019 on Series 2016A and Series 2016B. For more detailed information, see Note 6, Long-Term Liabilities, in the accompanying notes to the financial statements. 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. 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 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 15 • 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, 2019, the District has issued $1.9 billion of the total authorization. The District’s long-term wastewater capital improvement program will continue to be funded through a combination of additional bonds and wastewater rate increases. Requests For Information This financial report is designed to provide a general overview of the District’s finances to interested parties. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed or e-mailed to: Marion M. Gee, Director of Finance The Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, MO 63103-2555 314-768-6200 mgee@stlmsd.com THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 16 STATEMENTS OF NET POSITION Continued on Next Page June 30, Assets 2019 2018 Current Assets Unrestricted Current Assets Cash and cash equivalents  33,303,010$ 13,134,990$ Investments                                          219,636,085 303,522,982 Sewer service charges receivable, less allowance of $61,739,562 in 2019 and                   $58,429,895 in 2018 66,032,777 60,544,838 Unbilled sewer service charges receivable 31,773,136 29,140,461 Property taxes receivable, less allowance of $9,806 in 2019 and $22,544 in 2018 479,914 689,128 Accrued income on investments                        1,927,804 1,669,319 Other receivables, less allowance of $22,118 in 2019 and $52,120 in 2018     5,331,693 4,495,551 Supplies inventory                                   8,306,515 8,109,878           Total Unrestricted Current Assets                            366,790,934 421,307,147        Restricted Current Assets Cash and cash equivalents 1,747,847 1,009,872 Investments                                          15,117,921 26,469,179 Other receivables                                    115,556 54,092           Total Restricted Current Assets                            16,981,324 27,533,143           Total Current Assets                            383,772,258 448,840,290 Non-Current Assets Restricted Assets Cash and cash equivalents  21,703,207 20,241,459 Investments                                          152,079,763 249,558,518 Long-term investments                                73,020,492 79,334,215 Property taxes receivable, less allowance of $20,954 in 2019 and $45,453 in 2018 1,355,724 1,379,842 Accrued income on investments 536,365 474,478           Total Restricted Non-Current Assets                            248,695,551 350,988,512 Other Assets Notes receivable                                     11,156,415 11,814,529 Long-term investments                                177,405,293 71,023,440 Total Other Assets                            188,561,708 82,837,969 Capital Assets Depreciable:        Treatment and disposal plant and equipment           1,277,635,246 1,276,275,567        Collection and pumping plant                         2,749,946,498 2,612,344,501        General plant and equipment                          99,318,349 97,380,391                                                             4,126,900,093 3,986,000,459        Less:  Accumulated depreciation                      1,525,779,330 1,449,135,797        Net depreciable assets       2,601,120,763 2,536,864,662        Non-depreciable:        Land                                                 74,274,584 73,261,965        Construction in progress                             956,321,065 836,105,343 Net Capital Assets                                3,631,716,412 3,446,231,970        Total Non-Current Assets                         4,068,973,671 3,880,058,451        Total Assets                               4,452,745,929 4,328,898,741 Deferred Outflows of Resources Bonds and notes payable-Deferred loss on refunding                                   11,342,745 12,099,160 Pension-related outflows                                          34,238,270 17,332,857 OPEB-related outflows                                          1,246,327 1,278,437 Total Deferred Outflows of Resources                            46,827,342 30,710,454 THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 17 STATEMENTS OF NET POSITION (Continued) June 30, Liabilities 2019 2018 Current Liabilities Current Liabilities-Payable From Unrestricted Assets Contracts and accounts payable 36,098,219$ 34,527,687$ Deposits and accrued expenses 43,703,869 38,885,341 Retainage payable 15,855,232 13,894,496 Current portion of bonds and notes payable 52,603,763 50,942,663           Total Current Liabilities-Payable From Unrestricted Assets                           148,261,083 138,250,187 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable 801,529 1,100,845 Retainage payable 928,645 731,026           Total Current Liabilities-Payable From Restricted Assets                           1,730,174 1,831,871           Total Current Liabilities                         149,991,257 140,082,058        Non-Current Liabilities Deposits and accrued expenses                                  7,352,522 7,329,985 Net pension liability                                    74,396,737 48,388,938 Total OPEB liability                                   24,164,395 24,193,972 Bonds and notes payable                                         1,617,916,402 1,642,233,069 Total Non-Current Liabilities                     1,723,830,056 1,722,145,964        Total Liabilities                        1,873,821,313 1,862,228,022 Deferred Inflows of Resources Pension-related inflows                                          4,341,116 6,064,985 OPEB-related inflows                                          886,686 — Total Deferred Inflows of Resources                            5,227,802 6,064,985 Net Position Net investment in capital assets                                2,063,518,988 1,968,740,050 Restricted for:                                 Debt service                      58,262,631 55,329,147        Subdistrict construction and improvement                69,150,974 74,249,353 Unrestricted            429,591,563 392,997,638 Total Net Position                     2,620,524,156$ 2,491,316,188$   THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 18 STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION 2019 2018   Operating Revenues     Sewer service charges                                   399,929,150$ 364,165,372$     Provision for doubtful sewer service charge accounts (4,349,247) (2,990,148)     Licenses, permits and other fees                       3,063,458 3,777,200     Other                                                   2,477,778 3,359,053     Total Operating Revenues                              401,121,139 368,311,477          Operating Expenses     Pumping and treatment                                   63,197,081 60,735,056     Collection system maintenance                           45,616,891 44,785,482     Engineering                                             11,446,900 11,217,590     General and administrative                              67,461,720 59,012,162     Water backup claims                                     5,600,419 1,557,385     Depreciation                                            83,639,843 81,326,342     Asset management                                               13,754,655 15,131,189     Total Operating Expenses                             290,717,509 273,765,206          Operating Income         110,403,630 94,546,271          Non-Operating Revenues     Property taxes levied by the District                   34,107,619 33,748,932     Investment income                                       16,699,153 7,405,957     Rent and other income                                   301,446 253,799     Total Non-Operating Revenues                          51,108,218 41,408,688          Non-Operating Expenses     Net loss on disposal and sale of capital assets         970,825 1,833,908     Non-recurring projects and studies                       15,628,590 9,296,358     Interest expense                                        33,082,384 36,695,083     Total Non-Operating Expenses                          49,681,799 47,825,349          Income Before Capital Grants And Contributions                       111,830,049 88,129,610          Capital Grants And Contributions     Capital assets contributed                               16,635,468 24,799,116     Grant revenue                                           742,451 1,278,558     Total Capital Grants And Contributions                          17,377,919 26,077,674          Change In Net Position 129,207,968 114,207,284   Net Position - Beginning Of Year, As Previously Stated 2,491,316,188 2,391,168,054 Effect of Adoption of GASB 75 — (14,059,150) Net Position - Beginning Of Year, As Restated 2,491,316,188 2,377,108,904   Net Position - End Of Year                                    2,620,524,156$ 2,491,316,188$ For The Years Ended 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 2019 2018 Cash Flows From Operating Activities Received from customers 395,246,801$ 356,658,318$ Paid to employees for services (101,374,404) (96,464,294) Paid to suppliers for goods and services (108,646,478) (99,205,100) Net Cash Provided By Operating Activities 185,225,919 160,988,924 Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collected 33,850,110 33,180,969 Cash Flows From Capital And Related Financing Activities Proceeds from capital grants 130,670 1,634,250 Proceeds from issuance of debt 35,149,238 227,157,189 Premium on sale of bonds — 37,823,556 Principal paid on debt (50,942,662) (43,667,013) Interest and fees paid on debt (65,117,717) (60,603,135) Payments for capital assets (231,228,233) (236,673,660) Proceeds from sale of capital assets 331,346 170,578 Build America Bond tax credit 1,630,662 1,624,563 Net Cash Provided By (Used In) Capital And Related Financing Activities (310,046,696) (72,533,672) Cash Flows From Investing Activities Purchase of investments (649,590,176) (774,026,450) Proceeds from sale and maturity of investments 752,424,000 630,795,000 Investment income 10,275,355 7,614,739 Proceeds from rents 229,231 253,799 Net Cash Provided By (Used In) Investing Activities 113,338,410 (135,362,912) Net Increase (Decrease) In Cash And Cash Equivalents 22,367,743 (13,726,691) Cash And Cash Equivalents At Beginning Of Year 34,386,321 48,113,012 Cash And Cash Equivalents At End Of Year 56,754,064$ 34,386,321$ Statements of Net Position Classification Current Assets - Unrestricted Cash and cash equivalents 33,303,010$ 13,134,990$ Current Assets - Restricted Cash and cash equivalents 1,747,847 1,009,872 Non-Current Assets - Restricted Cash and cash equivalents 21,703,207 20,241,459 Statements of Net Position Total Cash And Cash Equivalents 56,754,064$ 34,386,321$ Non-Cash Capital And Investing Activities Proceeds from debt issuance placed into escrow to refund bonds —$ 116,175,000$ Principal amount reduced and placed in escrow less reserve funds — (124,825,675) Capital asset additions included in accounts payable 18,871,621 18,008,669 Capital assets contributed by other governments and developers 16,635,468 24,799,116 Fair value investment adjustment loss (gain)(6,621,441) 185,620 Grant revenue  742,451 1,172,306 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) 2019 2018 Reconciliation Of Operating Income To Net Cash Flows Provided By Operating Activities Operating Income 110,403,630$ 94,546,271$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 83,639,843 81,326,342 Non-recurring projects and studies (15,628,590) (9,296,358) Change in operating assets and liabilities: (Increase) in billed and unbilled sewer service charges receivable (8,120,614) (9,530,516) Decrease in other receivables 954,005 1,012,988 (Increase) in supplies inventory (196,637) (438,672) Decrease (increase) in pension-related outflows (16,905,413) 20,332,929 Decrease (increase) in OPEB-related outflows 32,110 (1,278,437) Increase in contracts and accounts payable 382,247 954,822 (Decrease) increase in deposits and accrued expenses 5,524,299 (9,585,487) (Decrease) increase in net pension liability 26,007,799 (18,650,247) (Decrease) increase in total OPEB liability (29,577) 10,134,822 (Decrease) increase in pension-related inflows (1,723,869) 1,460,467 Increase in OPEB-related inflows 886,686 — Net Cash Provided By Operating Activities 185,225,919$ 160,988,924$ For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 21 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019 AND 2018 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 Acquired capital assets 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. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 25 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 2019 and 2018, the District’s total net interest cost incurred on tax-exempt borrowings during the fiscal year was $47,228,368 and $48,114,072, respectively. Of this net interest cost, $19,476,685 and $17,494,620 was capitalized and $27,751,683 and $30,619,452 was expensed in fiscal 2019 and 2018, 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. 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 METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 26 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. 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 liabilities 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 and OPEB obligations that are amortized over future periods. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 27 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 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 28 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. 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 2019, the District implemented GASB Statement No. 88, Certain Disclosures Related to Debt, Including Direct Borrowing and Direct Placements (“GASB Statement No. 88”). This Statement amends Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, paragraph 119 and Statement No. 38, Certain Financial Statement Note Disclosures, paragraphs 10 and 12. The primary objective of this Statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. The requirements of this Statement will improve financial reporting by providing users of financial statements with essential information that currently is not consistently provided. This Statement requires that additional essential information related to debt be disclosed in notes to financial statements, including unused lines of credit; assets pledged as collateral for the debt; and terms specified in debt agreements related to significant events of default with finance-related consequences, significant termination events with finance-related consequences, and significant subjective acceleration clauses. The disclosures required by this Statement are presented in Note 6, Long-Term Liabilities. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 29 The following GASB Statement which became effective during fiscal year 2019 is not applicable to the District and there is no implementation impact on the District’s financial reporting at this time. • Statement No. 83, Certain Asset Retirement Obligations 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 Note 9, Postemployment Benefits Other Than Pensions (“OPEB”), and new required supplementary information is also presented. 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 Revenues, Expenses, and Changes in Net Position is detailed as follows: THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 30 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. 84, Fiduciary Activities (fiscal 2020) • Statement No. 87, Leases (fiscal 2021) • 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) • Statement No. 91, Conduit Debt Obligations (fiscal 2022) 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. July 1, 2017 Net Position - Beginning Of Year, As Previously Stated 2,391,168,054$ Effect of Adoption of GASB 75 (14,059,150) Net Position - Beginning Of Year, As Restated 2,377,108,904$ Effect of Adoption of GASB 75 - Restatement Consists Of Total OPEB liability reported as a noncurrent liability at July 1, 2017 (22,838,813)$ Benefit payments made subsequent to the beginning total OPEB liability's measurement date of December 31, 2016 but before July 1, 2017 are reported as deferred outflows of resources 716,582 Removal of GASB 45 net OPEB obligation balance 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 2. Deposits and Investments Deposits At June 30, 2019 the reported amount of the District’s deposits was $26,062,172 and the bank balance was $32,463,138. Of the bank balance, $1,060,057 was covered by the Federal Deposit Insurance Corporation (“FDIC”); $31,403,081 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 $19,225,251 held in a trusted escrow account for the State that will be used to make future bond payments. 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 the Federal Deposit Insurance Corporation (“FDIC”); $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. 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. Deposits in each bank are insured by the FDIC in the amount of $250,000 for interest bearing accounts and noninterest bearing accounts. The District’s investment policy complies with the provisions of state laws and requires collateralization on repurchase agreements, time certificates of deposit and deposits with banking institutions, not covered by the FDIC, and the collateralization level shall be 103% and shall be based on the market value of the pledged collateral. Investments The Secretary-Treasurer is authorized to invest, with the approval of the Board, funds not immediately needed for the purpose to which said funds are applicable, in the same manner as the state treasurer may invest funds of the State of Missouri pursuant to Section 15, Article IV of the Constitution of Missouri, as amended from time to time. The District’s investment policy conforms to the investment policy guidelines for the State of Missouri. The District’s investment policy authorizes the District to invest in the following instruments: U.S. Treasury obligations, certificates of deposit, obligations of any agency or instrumentality of the U.S., repurchase agreements, bankers’ acceptances, and commercial paper, all according to terms specified in the policy. The District also has investments in money market mutual funds that hold securities approved by the District’s investment policy. At June 30, 2019 and June 30, 2018, all of the District’s investments were in compliance with the District’s investment policy and charter. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 32 A summary of deposits and investments as of June 30, 2019 and June 30, 2018 is as follows: Reconciliation to the financial statements: Investment Type Cost F air Value Cost Fair Value Deposits 26,062,172$ 26,062,172$ 13,048,424$ 13,048,424$ Money Market Mutual Funds 19,225,251 19,225,251 18,849,126 18,849,126 U.S. Treasury and Agency Obligations 499,933,657 503,997,289 584,981,410 582,563,488 Commercial Paper 143,707,677 144,728,906 148,952,277 149,833,617 Total 688,928,757$ 694,013,618$ 765,831,237$ 764,294,655$ 20182019 2019 2018 Cash and Cash Equivalents Unrestricted Current 33,303,010$ 13,134,990$ Restricted Current 1,747,847 1,009,872 Restricted Non-Current 21,703,207 20,241,459 Investments Unrestricted Current 219,636,085 303,522,982 Restricted Current 15,117,921 26,469,179 Restricted Non-Current 152,079,763 249,558,518 Long-Term Investments Restricted Non-Current 73,020,492 79,334,215 Other 177,405,293 71,023,440 Total 694,013,618$ 764,294,655$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 33 Interest Rate Risk As of June 30, 2019 and 2018, 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 Weighted Average Average Maturity Maturity Investment Type Fair Value (Years)Fair Value (Years) U.S. Treasury Obligations 166,467,925$ 0.48 264,811,868$ 0.64 U.S. Agency Obligations 337,529,364 1.38 317,751,620 1.05 Commercial Paper 144,728,906 0.18 149,833,617 0.19 Total 648,726,195$ 0.88 732,397,105$ 0.73 2019 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 34 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, 2019 and June 30, 2018, 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 collateralized time and demand deposits. U.S. Treasury obligations are not limited. 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, 2019 and June 30, 2018: Issuer 2019 2018 Treasury Notes 25.7 36.2 Federal Home Loan Bank 16.1 22.1 Tennessee Valley Association 11.0 2.6 Federal Farm Credit Funding Corp 9.1 2.2 Federal National Mortgage Association 5.8 8.2 Federal Home Loan Mortgage Corporation 5.1 6.4 Federal Agriculture Mortgage Association 5.0 1.8 Total Investments Percent Of THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 35 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, 2019 and 2018: • Money Market Mutual Funds of $19.2 million and $18.8 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 $504.0 million and $582.6 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 $144.7 million and $149.8 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 groups 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 36 At June 30, 2019, future payments are as follows: At June 30, 2018, 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, 2019 and 2018, MSD’s note receivable related to the Contractor Loan Fund is $59,786 and $60,860, respectively. 2020 1,154,696$ 2021 1,154,696 2022 1,154,696 2023 1,154,696 2024 1,154,696 2025-2029 5,773,479 2030-2033 4,027,886 15,574,845 Less: Amount representing interest 3,821,176 Total Notes Receivable 11,753,669$ Classification in Statement of Net Position: Current - Other receivables 657,040$ Non-current - Notes receivable 11,096,629 Total Notes Receivable 11,753,669$ 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 Less: Amount representing interest 4,346,474 Total Notes Receivable 12,383,066$ Classification in Statement of Net Position: Current - Other receivables 629,397$ Non-current - Notes receivable 11,753,669 Total Notes Receivable 12,383,066$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 37 4. Capital Assets The following is a summary of capital assets changes for the fiscal years ended June 30, 2019 and 2018: Note to Schedules: The Accumulated depreciation numbers (Balance June 30, 2017, Additions and Balance June 30, 2018) for both the Treatment and disposal plant and equipment and Collection and pumping plant categories were adjusted with offsetting amounts to properly reflect depreciation and accumulated depreciation in the correct categories. Balance Balance June 30, 2018 June 30, 2019 Capital assets not being depreciated: Land 73,261,965$ 1,012,619$ —$ 74,274,584$ Construction in progress 836,105,343 244,064,243 (123,848,521) 956,321,065 Total capital assets not being depreciated 909,367,308 245,076,862 (123,848,521) 1,030,595,649 Capital assets being depreciated: Treatment and disposal plant and equipment 1,276,275,567 1,727,943 (368,264) 1,277,635,246 Collection and pumping plant 2,612,344,501 140,626,577 (3,024,580) 2,749,946,498 General plant and equipment 97,380,391 6,864,804 (4,926,846) 99,318,349 Total capital assets being depreciated 3,986,000,459 149,219,324 (8,319,690) 4,126,900,093 Less: Accumulated depreciation: Treatment and disposal plant and equipment (581,885,579) (35,374,280) 356,361 (616,903,498) Collection and pumping plant (791,000,584) (43,873,740) 1,920,449 (832,953,875) General plant and equipment (76,249,634) (4,391,822) 4,719,499 (75,921,957) Total accumulated depreciation (1,449,135,797) (83,639,842) 6,996,309 (1,525,779,330) Total capital assets being depreciated, net 2,536,864,662 65,579,482 (1,323,381) 2,601,120,763 Total Capital Assets 3,446,231,970$ 310,656,344$ (125,171,902)$ 3,631,716,412$ Additions Deletions Balance Balance June 30, 2017 June 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 depreciated 778,433,725 252,218,624 (121,285,041) 909,367,308 Capital assets being depreciated: Treatment and disposal plant and equipment 1,279,143,367 3,402,355 (6,270,155) 1,276,275,567 Collection and pumping plant 2,475,709,689 138,979,030 (2,344,218) 2,612,344,501 General plant and equipment 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 depreciation: Treatment and disposal plant and equipment (551,194,569) (35,872,561) 5,181,551 (581,885,579) Collection and pumping plant (751,287,382) (41,205,127) 1,491,925 (791,000,584) General plant and equipment (73,360,462) (4,248,654) 1,359,482 (76,249,634) Total accumulated depreciation (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$ Additions Deletions THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 38 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 stormwater operations and 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. In fiscal years 2019 and 2018, the District recorded revenue from property taxes in the amount of $34,107,619 and $33,748,932, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 39 6. Long-Term Liabilities The following is a summary of changes in the District’s long-term liabilities for the year ended June 30, 2019: Original Balance Balance Issuance June 30,June 30,Current Amounts 2018 Additions Retirements 2019 Portion Bonds and Notes Payable: Wastewater System Senior Revenue Bonds: Series 2010B 85,000,000$ 85,000,000$ —$ —$ 85,000,000$ —$ Series 2011B 52,250,000 18,055,000 — 2,110,000 15,945,000 2,220,000 Series 2012A 225,000,000 159,340,000 — 5,300,000 154,040,000 5,300,000 Series 2012B 141,730,000 131,935,000 — 3,095,000 128,840,000 3,390,000 Series 2013B 150,000,000 116,615,000 — 3,000,000 113,615,000 3,250,000 Series 2015B 223,855,000 192,810,000 — 2,675,000 190,135,000 2,785,000 Series 2016C 150,000,000 147,295,000 — 2,760,000 144,535,000 2,840,000 Series 2017A 316,175,000 316,175,000 — 3,415,000 312,760,000 3,520,000 Water Infrastructure Finance and Innovation Act (WIFIA) Bonds: Series 2018A 47,722,204 — 261,480 — 261,480 — Water Pollution Control and Drinking Water Subordinate Revenue Bonds (State Revolving Funds Program): Series 2004B 161,280,000 73,190,000 — 8,600,000 64,590,000 8,860,000 Series 2005A 6,800,000 3,465,000 — 345,000 3,120,000 355,000 Series 2006A 42,715,000 23,315,000 — 2,350,000 20,965,000 2,415,000 Series 2006B 14,205,000 8,140,000 — 740,000 7,400,000 750,000 Series 2008A/B 40,000,000 23,700,000 — 1,935,000 21,765,000 1,970,000 Missouri Department of Natural Resources: Energy Loan Program 223,793 51,025 — 34,862 16,163 16,163 Series 2009A 23,000,000 15,342,000 — 1,123,900 14,218,100 1,149,900 Series 2010A 7,980,700 5,849,100 — 380,900 5,468,200 388,700 Series 2010C 37,000,000 26,656,000 — 1,750,000 24,906,000 1,795,000 Series 2011A 39,769,300 33,988,300 — 1,747,000 32,241,300 1,792,000 Series 2013A 52,000,000 45,596,000 — 2,247,000 43,349,000 2,305,000 Series 2015A 75,000,000 69,246,000 — 3,344,000 65,902,000 3,424,000 Series 2016A 20,000,000 3,093,765 10,878,299 843,000 13,129,064 861,000 Series 2016B 75,500,000 27,417,916 21,311,710 3,147,000 45,582,626 3,217,000 Series 2018B 25,267,000 — 2,880,349 — 2,880,349 — 2,012,472,997$ 1,526,275,106$ 35,331,838$ 50,942,662$ 1,510,664,282 52,603,763$ Add: Unamortized premium, net of discount 159,855,883 Total Bonds and Notes Payable 1,670,520,165$ Current Portion of Bonds and Notes Payable 52,603,763$ Non-Current Bonds and Notes Payable 1,617,916,402 Total Bonds and Notes Payable 1,670,520,165$ Net Pension Liability 48,388,938$ 26,007,799$ —$ 74,396,737$ —$ Total OPEB Liability 24,193,972$ (29,577)$ —$ 24,164,395$ —$ Deposits and Accrued Expenses Landfill closure and postclosure costs 565,493$ 53,891$ —$ 619,384$ —$ Compensated absences 9,019,323 808,146 849,952 8,977,517 2,244,379 Net OPEB obligation — — — — — Total Deposits and Accrued Expenses 9,584,816$ 862,037$ 849,952$ 9,596,901$ 2,244,379$ Current Portion (Compensated absences) in Current Deposits and Accrued Expenses 2,244,379$ Non-Current Deposits and Accrued Expenses 7,352,522 Total Deposits and Accrued Expenses 9,596,901$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 40 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 Senior Revenue Bonds: 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 Control 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 discount 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$ —$ Compensated 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 Expenses 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 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, $674,510,796 has not been issued as of June 30, 2019. 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, 2019, $115,667,763 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 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 $6,017,025 were made from the escrow account in fiscal year 2019. All $125,760,000 debt defeased in substance to be paid from the escrow account remains outstanding as of June 30, 2019. As a result of placing the cash with an escrow agent in a trust, Series 2011B, Series 2012A, Series 2013B, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 42 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. All funds from this issuance have 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. 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. The original $60,000,000 2006C bonds were issued pursuant to the February 2004 authorization and the original $30,000,000 2008A bonds were issued pursuant to THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 43 the August 2008 authorization. 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. 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 $169,991,298 (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. The original $175,000,000 2004A bonds were issued pursuant to the February 2004 authorization. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 44 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. 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 2019 the subsidy percentage was 32.8% while for 2018 the subsidy percentage was 32.7%. In fiscal year 2020 the subsidy percentage is expected to be 32.9%. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 45 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. 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% THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 46 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. 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 7 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 METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 47 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, 2016B and 2018B direct loans (pages 49-55) 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. 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 District’s Master Bond Ordinance No. 11713, adopted April 22, 2004, 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, 2019 and 2018, the District was in compliance with this covenant. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 48 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, 2019 are as follows: Water Infrastructure Finance and Innovation Act (WIFIA) Series 2018A In December 2018, the Environmental Protection Agency (“EPA”) issued to the District an amount totaling $47,722,204 for the purpose of constructing the Deer Creek Sanitary Tunnel Pump Station and Sanitary Sewers Project. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds are issued from the April 2016 authorization. The Series 2018A bonds are not subordinated. The District’s interest rate is 3.06% and is payable in semiannual installments at varying amounts through May 1, 2053. Principal And Interest Requirements on Water Infrastructure Finance and Innovation Act Series 2018A As the District incurs approved capital expenditures, the EPA reimburses the District for the expenditures from the bond proceeds account. The District repays the loan at an interest rate of 3.06% based on the amount that has been borrowed. As of June 30, 2019 the outstanding loan balance was $261,480. The payment requirements to maturity will be determined after the debt is fully issued. Years ending June 30,Principal Interest Total 2020 37,655,000$ 57,029,166$ 94,684,166$ 2021 38,990,000 55,659,732 94,649,732 2022 39,775,000 54,309,582 94,084,582 2023 41,080,000 52,817,649 93,897,649 2024 42,295,000 51,342,758 93,637,758 2025-2029 218,025,000 230,741,846 448,766,846 2030-2034 239,465,000 178,620,137 418,085,137 2035-2039 276,175,000 119,489,730 395,664,730 2040-2044 266,260,000 50,311,550 316,571,550 2045-2047 62,990,000 5,453,000 68,443,000 Total 1,262,710,000$ 855,775,150$ 2,118,485,150$ Wastewater System Revenue Bonds Payable/ Water Pollution Control and Drinking Water Revenue Bonds Payable THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 49 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 July 1, 2019. 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, 2019 are as follows: State Of Missouri Direct Loan Series 2018B In December 2018, the State of Missouri Direct Loan Program issued to the District an amount totaling $25,267,000 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 April 2016 authorization. The District’s interest rate is 1.38% and is payable in semiannual installments at varying amounts through January 1, 2041. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2018B 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 1.38% based on the amount that has been borrowed. As of June 30, 2019 the outstanding loan balance was $2,880,349. The payment requirements to maturity will be determined after the debt is fully issued. State Of Missouri Direct Loan Series 2016B In December 2016, the State of Missouri Direct Loan Program issued to the District an amount totaling $75,500,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The Years ending June 30,Principal Interest Total 2020 16,163$ 202$ 16,365$ Total 16,163$ 202$ 16,365$ Energy Efficiency Leveraged Note Payable THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 50 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, 2019 the outstanding loan balance was $45,582,626. After taking into consideration the $3,147,000 principal paid in fiscal 2019, the balance to be borrowed is $26,770,374. The payment requirements to maturity will be determined after the debt is fully issued. 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, 2019 the outstanding loan balance was $13,129,064. After taking into consideration the $1,258,000 principal paid in fiscal 2018 and 2019, the balance to be borrowed is $5,612,936. The payment requirements to maturity will be determined after the debt is fully issued. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 51 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, 2019 are as follows: State Of Missouri Direct Loan Series 2013A In October 2013, the State of Missouri Direct Loan Program issued to the District an amount totaling $52,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the June 2012 authorization. The District’s interest rate is 1.6% and is payable in semiannual installments at varying amounts through July 1, 2034. Years ending June 30,Principal Interest Total 2020 3,424,000$ 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 3,762,000 619,455 4,381,455 2025-2029 20,220,000 2,382,264 22,602,264 2030-2034 22,833,000 1,078,163 23,911,163 2035 4,895,000 44,866 4,939,866 Total 65,902,000$ 7,043,109$ 72,945,109$ State of Missouri Direct Loan Series 2015A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 52 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, 2019 are as follows: State Of Missouri Direct Loan Series 2011A In November 2011, the State of Missouri Direct Loan Program issued to the District an amount totaling $39,769,300 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.5% and is payable in semiannual installments at varying amounts through January 1, 2034. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2011A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2011A outstanding as of June 30, 2019 are as follows: Years ending June 30,Principal Interest Total 2020 2,305,000$ 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 2,555,000 513,476 3,068,476 2025-2029 13,811,000 1,948,211 15,759,211 2030-2034 15,708,000 813,277 16,521,277 2035 1,688,000 13,082 1,701,082 Total 43,349,000$ 5,720,655$ 49,069,655$ State of Missouri Direct Loan Series 2013A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 53 State Of Missouri Direct Loan Series 2010C In December 2010, the State of Missouri Direct Loan Program issued to the District an amount totaling $37,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.7% and is payable in semiannual installments at varying amounts through January 1, 2031. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2010C As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2010C outstanding as of June 30, 2019 are as follows: Years ending June 30,Principal Interest Total 2020 1,792,000$ 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 1,982,000 369,403 2,351,403 2025-2029 10,690,000 1,376,641 12,066,641 2030-2034 12,123,300 516,321 12,639,621 Total 32,241,300$ 4,028,297$ 36,269,597$ State of Missouri Direct Loan Series 2011A Years ending June 30,Principal Interest Total 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 1,989,000 279,609 2,268,609 2025-2029 10,748,000 885,052 11,633,052 2030-2031 4,703,000 97,647 4,800,647 Total 24,906,000$ 2,694,682$ 27,600,682$ State of Missouri Direct Loan Series 2010C THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 54 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. The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2010A outstanding as of June 30, 2019 are as follows: State Of Missouri Direct Loan Series 2009A In October 2009, the DNR loaned $23,000,000 to the District. The State of Missouri Direct Loan Series 2009A note bears interest at a rate of 1.5% per annum and is payable through January 1, 2030. The purpose of this note was to finance the designing, constructing, improving, renovating, repairing, replacing and equipping of new and existing sewer facilities within the District. The principal and interest on the note are expected to be paid from future wastewater revenues and the note was issued from the August 2008 authorization. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2009A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. Years ending June 30,Principal Interest Total 2020 388,700$ 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 421,300 55,657 476,957 2025-2029 2,237,900 181,712 2,419,612 2030-2032 1,206,200 26,958 1,233,158 Total 5,468,200$ 547,158$ 6,015,358$ State of Missouri Direct Loan Series 2010A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 55 The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2009A outstanding as of June 30, 2019 are as follows: In accordance with the Direct Loan Series 2009A, 2010A, 2010C, 2011A, 2013A, 2015A, 2016A, 2016B and 2018B 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, 2019 and 2018, 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. Years ending June 30,Principal Interest Total 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 1,260,000 133,491 1,393,491 2025-2029 6,751,100 381,212 7,132,312 2030 1,445,300 15,856 1,461,156 Total 14,218,100$ 1,241,322$ 15,459,422$ State of Missouri Direct Loan Series 2009A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 56 Debt Service Reserve Fund After initial deposit of the amount required pursuant to the bond ordinances and financing agreements of the Series 2010B, 2011B, 2012A, 2012B 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, 2019 and 2018, cash and investments in the Debt Service Reserve Fund totaled $50,460,508 and $48,117,908, respectively. Series 2015B was issued without a debt service reserve fund 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 reserve fund requirement. Series 2017A was issued without a debt service reserve fund requirement and at that time $934,325 in excess debt service reserves along with part of the Series 2017A proceeds were used to partially advance refund Series 2011B, Series 2012A, Series 2013B and Series 2015B. Series 2018A was issued without a debt service reserve fund requirement. 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, 2019 and 2018, cash and investments in the Special Participant Bond Reserve Account held on behalf of the District totaled $77,260,600 and $86,670,343, 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 57 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, 2019. 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 2010B, 2011B, 2012A, 2012B and 2013B bonds, shall be deposited into the Project Fund. At June 30, 2019 and 2018, cash and investments in the Project Fund totaled $126,410,864 and $235,843,731, respectively. 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, 2019 and 2018, cash and investments in the Rebate Fund totaled $229,164 and $227,132, 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 58 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 $2.1 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 2019 was $114.1 million with pledged revenues of $245.0 million. This provided a coverage ratio of 2.1 and pledged revenues represented 61.1% of all net operating revenues. Direct Borrowings and Direct Placements The District did not have any bonds and notes from direct borrowings or direct placements in the fiscal years ending June 30, 2019 and 2018. In addition, the District had no unused lines of credit and had no assets pledged as collateral for notes from direct borrowings and direct placements in the fiscal years ending June 30, 2019 and 2018. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 59 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 Metropolitan St. Louis Sewer District Defined Contribution Plan (“DC Plan”) and/or 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 60 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, 2018 and 2017, 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. Contributions of $12,609,689 and $12,411,005, excluding certain professional fees paid by the District, were made to the Pension Plan during the District’s fiscal years ended June 30, 2019 and 2018, respectively. These contributions were made in accordance with actuarially determined contribution requirements based on actuarial valuations performed at December 31, 2018 and 2017, respectively. Increase 2018 2017 (Decrease) Active plan members 545 595 (50) Retirees and beneficiaries currently receiving benefits 748 722 26 Terminated members entitled to receive benefits 181 178 3 Total 1,474 1,495 (21) For the Years Ended December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 61 Net Pension Liability The net pension liability was measured as of December 31, 2018 and 2017 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, 2018 and 2017 actuarial valuations were determined using the following actuarial assumptions, applied to all periods included in the measurement: Effective December 31, 2018 and 2017, 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-2018 improvement scale and MP-2017 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-2018 improvement scale was assumed for the December 31, 2018 valuation while the MP-2017 improvement scale was assumed for December 31, 2017. For disabled lives, the RP-2014 Disabled Mortality Table, male and female rates, was utilized for both the December 31, 2018 and 2017 valuations. The actuarial assumptions are based on prior and current year experiences. Inflation 2.50 percent Salary Increases 4.25 percent, average, including inflation Investment Rate of Return 6.90 percent, net of pension plan investment expense, including inflation for December 31, 2018 and 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 62 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, 2018 and 2017 are as follows: Discount Rate. The discount rate used to measure the total pension liability at December 31, 2018 and 2017, was 6.90 percent. 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. Long-Term Expected Arithmetic Target Real Rate Asset Class Allocation of Return Large Cap US Equity 25.0%4.0% Small Cap US Equity 10.0%4.5% Developed International Equity 12.0%5.0% Emerging Markets Equity 6.0%5.7% Domestic Fixed Income 27.0%1.2% Global Fixed Income 8.0%4.3% Real Estate 12.0%3.0% Total 100.0% Long-Term Expected Arithmetic Target Real Rate Asset Class Allocation of Return Large Cap US Equity 25.0%4.5% Small Cap US Equity 10.0%5.5% Developed International Equity 12.0%4.9% Emerging Markets Equity 6.0%6.1% Domestic Core Plus Fixed Income 14.0%1.5% Core "Plus" Bonds 13.0%0.9% Global Fixed Income 8.0%0.7% Real Estate 12.0%4.0% Total 100.0% December 31, 2018 December 31, 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 63 Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Changes in Net Pension Liability (a)(b)(a) - (b) Balances as of December 31, 2017 326,365,153$ 277,976,215$ 48,388,938$ Changes for the year: Service cost 5,238,812 — 5,238,812 Interest 22,306,950 — 22,306,950 Effect of economic/demographic gains or losses (2,041,843)— (2,041,843) Effect of assumptions changes or inputs — — — Benefit payments (16,911,759) (16,911,759)— Employer contributions — 12,493,916 (12,493,916) Net investment income — (12,997,796) 12,997,796 Balances as of December 31, 2018 334,957,313$ 260,560,576$ 74,396,737$ Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Changes in Net Pension Liability (a)(b)(a) - (b) Balances as of December 31, 2016 318,049,216$ 251,010,031$ 67,039,185$ Changes for the year: Service 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 assumptions changes or inputs 1,667,047 — 1,667,047 Benefit payments (15,858,355) (15,858,355)— Employer contributions — 12,328,093 (12,328,093) Net investment income — 30,496,446 (30,496,446) Balances as of December 31, 2017 326,365,153$ 277,976,215$ 48,388,938$ Changes in Net Pension Liability for the Year Ending December 31, 2017 Changes in Net Pension Liability for the Year Ending December 31, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 64 Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the net pension liability calculated using the 6.90 percent discount rate for December 31, 2018 and December 31, 2017, 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, 2019 and 2018, the District recognized pension expense of $19,988,206 and $15,554,154, respectively, after accounting for all deferred outflows and inflows of resources. The District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 1%Current 1% Decrease Discount Rate Increase (5.90%) (6.90%) (7.90%) Net Pension Liability 111,394,809$ 74,396,737$ 42,914,274$ 1%Current 1% Decrease Discount Rate Increase (5.90%) (6.90%) (7.90%) Net Pension Liability 85,063,996$ 48,388,938$ 17,214,436$ December 31, 2017 December 31, 2018 Deferred Deferred Deferred Deferred Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Differences between expected and actual experience —$ 4,341,116$ —$ 6,064,985$ Changes of assumptions 3,895,543 — 8,319,328 — Net difference between projected and actual earnings 23,546,115 — 2,332,690 — Contributions made subsequent to measurement date 6,796,612 — 6,680,839 — Total 34,238,270$ 4,341,116$ 17,332,857$ 6,064,985$ June 30, 2018June 30, 2019 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 65 In the years ending June 30, 2019 and 2018, amounts currently reported as deferred outflows of resources, $6,796,612 and $6,680,839, 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, 2020 and 2019, 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, 2019 and 2018, 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, 2019 and 2018, the District had outstanding liabilities owed to the Plan of $124,996 and $98,234, respectively. Net Deferrals of Resources Year ended June 30,: 2020 9,285,541$ 2021 3,829,063 2022 3,591,978 2023 6,393,960 23,100,542$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 66 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. All assets of the DC Plan are the sole property of the DC Plan and are not subject to the claims of creditors of the District and the assets and liabilities of the DC Plan are not included in the accompanying financial statements. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 67 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. Upon a participant’s severance from service, the unvested amount credited to his/her individual account shall be forfeited and credited to the Employer Basic Contributions account and shall be used to reduce future Employer Basic Contributions. If a participant is rehired before incurring two consecutive years break in service, the amount previously forfeited will be restored. If rehired after two consecutive years of break in service, the amounts previously forfeited will not be restored. 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 and the amount credited to the participant’s Employer Matching Contributions Account shall be fully vested at all times. 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 $2,069,859 and $1,736,675 for the years ended June 30, 2019 and 2018, respectively. Forfeitures were $46,347 and $29,460, for the years ended June 30, 2019 and 2018, respectively, and the balances in the prepaid forfeitures account as of June 30, 2019 and 2018 were $13 and $890, respectively. At June 30, 2019 and 2018, the District had outstanding liabilities owed to the DC Plan of $56,997 and $42,630, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 68 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: 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. 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. 15109 covering defined contribution retirees and Ordinance No. 15110 covering defined benefit retirees, both of which were adopted on February 14, 2019, being the most current ordinances covering the Plan in its entirety. 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 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 Notes To Financial Statements (Continued) Page 69 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 2019 and 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 $547.75 of the premium which equates to 80% for the traditional plan and 86% for the high deductible plan. The retiree pays 100% of the spousal, children or family premium incremental increases in addition to the remaining 9-20% of the retiree’s total monthly premium. The Plan also provides life insurance coverage for a very small closed group of disabled former employees. The monthly premiums for both plans and coverage tiers are as follows: Total Retiree OPEB Benefit Net Cost Coverage Tier Premium Paid by District to Retiree Traditional Plan with wellness incentive Retiree 684.69$ 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 Traditional Plan with no wellness 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 with wellness incentive 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 with no wellness incentive 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 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 70 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, 2019 and 2018, the following employees were covered by the benefit terms: June 30, 2019 June 30, 2018 Inactive employees or beneficiaries currently receiving benefit payments 120 120 Inactive employees entitled to but not yet receiving benefit payments — — Active employees 935 952 Total 1,055 1,072 Total OPEB Liability The District’s total OPEB liability, measured as of December 31, 2018 and December 31, 2017 was $24,164,395 and $24,193,972, respectively. The District’s total OPEB liabilities were determined by an actuarial valuation as of the valuation date, June 30, 2017, and were calculated based on the discount rate and actuarial assumptions below, and were then projected forward to the measurement dates. There have been no significant changes between the valuation date of June 30, 2017 and the reporting fiscal year end dates of June 30, 2019 and June 30, 2018. Actuarial Assumptions and Other Inputs. The total OPEB liabilities based on the June 30, 2017 actuarial valuation were determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified: Inflation 2.50 percent Healthcare cost trend rates 5.90 percent for 2018, gradually decreasing to an ultimate rate of 4.00 percent for 2091 and beyond 6.10 percent for 2017, gradually decreasing to an ultimate rate of 4.00 percent for 2091 and beyond Salary increases 4.25 percent, average, including inflation Retiree's share of benefit- related costs 9-20 percent of projected health insurance premiums for retirees depending on plan selected (traditional or high deductible) and wellness qualification Discount rate 4.10 percent for December 31, 2018 measurement date 3.44 percent for December 31, 2017 measurement date THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 71 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-2018 for December 31, 2018 measurement date and Scale MP-2017 for December 31, 2017 measurement date and Disabled Lives: RP-2014 Disabled Mortality, male and female rates for both measurement dates. The actuarial assumptions are based on prior and current year experiences. The plan has not had a formal actuarial experience study performed. Changes in the Total OPEB Liability Changes of assumptions or other inputs reflect a change in the discount rate from 3.44 percent in 2017 to 4.10 percent in 2018. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate. The following presents the total OPEB liability of the District as of December 31, 2018, calculated using the discount rate of 4.10%, 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 (3.10%) or 1-percentage-point higher (5.10%) than the current discount rate. Changes in the Total OPEB Liability for the Years Ending Increase (Decrease) December 31, 2018 December 31, 2017 Total OPEB Liability Beginning Balance 24,193,972$ 22,838,813$ Changes for the year: Service cost 1,780,999 1,622,390 Interest on total OPEB liability 864,738 894,674 Changes of assumptions or other inputs (986,538)438,058 Benefit payments (1,688,776)(1,599,963) Net changes (29,577)1,355,159 Total OPEB Liability Ending Balance 24,164,395$ 24,193,972$ 1%Current 1% Decrease Discount Rate Increase (3.10%)(4.10%) (5.10%) Total OPEB Liability 25,636,528$ 24,164,395$ 22,759,445$ December 31, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 72 The following presents the total OPEB liability of the District as of December 31, 2017, 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. Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates. The following presents the total OPEB liability of the District as of December 31, 2018, 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 (4.90% decreasing to 3.00%) or 1-percentage-point higher (6.90% decreasing to 5.00%) than the current healthcare cost trend rates of 5.90% decreasing to 4.00%. The following presents the total OPEB liability of the District as of December 31, 2017, 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%. 1%Current 1% Decrease Discount Rate Increase (2.44%)(3.44%) (4.44%) Total OPEB Liability 25,619,420$ 24,193,972$ 22,823,906$ December 31, 2017 Current Healthcare Cost Trend 1% Decrease Rates 1% Increase (4.9% (5.9% (6.9% decreasing decreasing decreasing to 3.00%) to 4.00%) to 5.00%) Total OPEB Liability 21,668,741$ 24,164,395$ 27,109,050$ December 31, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 73 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the years ended June 30, 2019 and 2018, the District recognized OPEB expense of $2,586,148 and $2,557,327, respectively. At June 30, 2019 and 2018, the District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: In the years ending June 30, 2019 and 2018, amounts currently reported as deferred outflows of resources, $888,795 and $880,642 respectively, related to the District’s benefit payments subsequent to the measurement date will be recognized as a reduction of the total OPEB liability in the years ended June 30, 2020 and 2019, respectively. Current Healthcare Cost Trend 1% Decrease Rates 1% Increase (5.1% (6.1% (7.1% decreasing decreasing decreasing to 3.00%) to 4.00%) to 5.00%) Total OPEB Liability 21,894,452$ 24,193,972$ 26,898,217$ December 31, 2017 Deferred Deferred Outflows of Inflows of Resources Resources Changes of assumptions or other inputs 357,532$ 886,686$ Benefit payments made subsequent to measurement date 888,795 — Total 1,246,327$ 886,686$ Deferred Deferred Outflows of Inflows of Resources Resources Changes of assumptions or other inputs 397,795$ —$ Benefit payments made subsequent to measurement date 880,642 — Total 1,278,437$ —$ June 30, 2019 June 30, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 74 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, 2019 and 2018, these liabilities amounted to $7,920,684 and $4,026,003, respectively. The claims liabilities reported are based on the requirements of GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, which requires that a liability for claims be reported if information obtained prior to the issuance of the financial statements indicates it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Changes in the balance of claims liabilities during fiscal 2019, 2018, and 2017 were as follows: Net Deferrals of Resources Year ended June 30,: 2020 (59,589)$ 2021 (59,589) 2022 (59,589) 2023 (59,589) 2024 (59,589) Thereafter (231,209) (529,154)$ 2019 2018 2017 Liability - Beginning of Year 4,026,003$ 4,461,069$ 4,076,994$ Current year claims and changes in estimates 19,320,396 15,939,863 17,648,177 Claim payments (15,425,715) (16,374,929) (17,264,102) Liability - End of Year 7,920,684$ 4,026,003$ 4,461,069$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 75 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 $619,384 and $565,493 reported as landfill closure and post-closure care liabilities at June 30, 2019 and 2018, respectively, represent the cumulative amounts reported at fiscal year-end and represent 71.2% and 66.2% of the estimated closure and post-closure care costs of the landfill for fiscal years ended June 30, 2019 and 2018, respectively. These amounts are based on what it would cost to perform all closure and post-closure care in 2019 and 2018, 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 9-11 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 76 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. On April 27, 2012, the Court entered the consent decree (“CD”) involving the Environmental Protection Agency, Missouri Department of Natural Resources, Missouri Coalition for the Environment and The Metropolitan St. Louis Sewer District (“MSD”). The CD required 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. 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. The District continues to comply with the CD. 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, 2019 and 2018 financial statements. The District has entered into construction and other contracts amounting to approximately $510,000,000 at June 30, 2019, and through the audit report date. The District had $674,510,796 in revenue bonds authorized by the voters but unissued as of June 30, 2019. These funds were sought to enable the District to comply with federal and state clean water requirements. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 77 13. Restricted Net Position The Statements of Net Position report $127,413,605 and $129,578,500 of restricted net position at June 30, 2019 and 2018, respectively, of which $69,150,974 and $74,249,353 are restricted due to enabling legislation, as of June 30, 2019 and 2018, respectively. 14. Segment Information The District issued wastewater revenue bonds to finance wastewater infrastructure projects. The District accounts for both wastewater and stormwater activities in a single enterprise fund, but investors in those bonds rely solely on the revenue generated by the wastewater activities for repayment. Fiscal year 2019 and 2018 summary financial information for each business segment is presented below. The District’s adoption of GASB Statement No. 75 in fiscal year 2018, as noted in the Adoption Of New Accounting Standards section of Note 1, resulted in restating the beginning balance of net position due to the recognition of a beginning total OPEB liability, a beginning deferred outflow of resources for the amount paid by the District for OPEB subsequent to the measurement date of the beginning total OPEB liability but before the beginning of the District’s fiscal year and for the removal of the net OPEB obligation previously recorded based on GASB Statement No. 45. The impact of this change on the District’s Wastewater and Stormwater Segment Statements’ net position, as presented in the Statements of Revenues, Expenses and Changes in Net Position is as follows: Wastewater Stormwater Total Net Position - Beginning Of Year, As Previously Stated 1,835,146,655$ 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 - Restatement Consists Of Total OPEB liability reported as a noncurrent liability at July 1, 2017 (19,702,154)$ (3,136,659)$ (22,838,813)$ Benefit payments made subsequent to the beginning total OPEB liability's measurement date of December 31, 2016 but before July 1, 2017 are reported as deferred outflows of resources 618,167 98,415 716,582 Removal of GASB 45 net OPEB obligation balance 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 78 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 79 Financial information as of and for the years ended June 30, 2019 and 2018 of the District’s Wastewater Segment is as follows: Assets 2019 2018 Current Assets Unrestricted Current Assets Cash and cash equivalents  32,084,339$ 12,544,280$ Investments                                          209,097,537 288,046,796 Sewer service charges receivable, less allowance of                   $61,613,442 in 2019 and $58,289,381 in 2018 65,960,589 60,455,316 Unbilled sewer service charges receivable 31,773,363 29,140,850 Accrued income on investments                        1,869,825 1,630,002 Other receivables, less allowance of  $22,118 in 2019                    and $52,120 in 2018  5,331,693 4,495,551 Supplies inventory                                   8,306,515 8,109,878           Total Unrestricted Current Assets                            354,423,861 404,422,673        Restricted Current Assets Other receivables                                      115,556 54,092           Total Restricted Current Assets                            115,556 54,092           Total Current Assets                            354,539,417 404,476,765 Non-Current Assets Restricted Assets Cash and cash equivalents  19,561,186 19,193,048 Investments                                          133,552,809 222,080,295 Long-term investments                                45,067,528 66,231,790 Property taxes receivable, less allowance $0 for 2019 and $133 in 2018 (18,019) (16,200) Accrued income on investments                        193,262 232,053        Total Restricted Non-Current Assets                            198,356,766 307,720,986 Other Assets     Notes receivable                                     11,156,415 11,814,529 Long-term investments                                168,649,616 67,264,708             Total Other Assets                            179,806,031 79,079,237        Capital Assets     Depreciable:        Treatment and disposal plant and equipment           1,277,635,246 1,276,275,567        Collection and pumping plant                         2,092,478,890 1,966,893,455        General plant and equipment                          82,305,964 79,666,689                                                             3,452,420,100 3,322,835,711        Less:  Accumulated depreciation                      1,309,151,371 1,241,579,256        Net depreciable assets       2,143,268,729 2,081,256,455            Non-depreciable:        Land                                                 66,853,796 66,103,288        Construction in progress                             931,353,208 815,408,534           Net Capital Assets                                3,141,475,733 2,962,768,277                    Total Non-Current Assets                         3,519,638,530 3,349,568,500                         Total Assets                               3,874,177,947 3,754,045,265 Deferred Outflows of Resources:        Bonds and notes payable-Deferred loss on refunding                                              11,342,745 12,099,160        Pension-related outflows                                              28,929,459 14,757,358        OPEB-related outflows                                              1,075,940 1,102,858                  Total Deferred Outflows of Resources                        41,348,144 27,959,376 WASTEWATER SEGMENT STATEMENTS OF NET POSITION June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 80 Liabilities 2019 2018 Current Liabilities-Payable From Unrestricted Assets Contracts and accounts payable  36,091,535$ 34,518,350$ Deposits and accrued expenses 35,444,449 31,095,559 Retainage payable  15,855,232 13,893,951 Current portion of bonds and notes payable  52,603,763 50,942,663 Total Current Liabilities-Payable From Unrestricted Assets 139,994,979 130,450,523 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable  — 265,865 Retainage payable  237,442 204,936 Total Current Liabilities-Payable From Restricted Assets 237,442 470,801             Total Current Liabilities                       140,232,421 130,921,324        Non-Current Liabilities Deposits and accrued expenses 7,352,522 7,329,985 Net pension liability 63,238,325 41,435,535 Total OPEB liability 20,846,404 20,871,199 Bonds and notes payable  1,617,916,402 1,642,233,069             Total Non-Current Liabilities                       1,709,353,653 1,711,869,788                         Total Liabilities                              1,849,586,074 1,842,791,112 Deferred Inflows of Resources:        Pension-related inflows                                              3,702,250 5,147,399        OPEB-related inflows                                              743,324 —                  Total Deferred Inflows of Resources                        4,445,574 5,147,399 Net Position Net investment in capital assets 1,574,725,932 1,486,430,468 Restricted for:       Debt service                                       58,262,631 55,329,147       Subdistrict construction and improvement           1,991,530 3,709,735 Unrestricted 426,514,350 388,596,780                  Total Net Position               2,061,494,443$ 1,934,066,130$   June 30, WASTEWATER SEGMENT STATEMENTS OF NET POSITION (Continued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 81 2019 2018   Operating Revenues     Sewer service charges                                   399,932,002$ 364,170,182$     Recovery of (provision for) doubtful sewer service charge accounts (4,360,646) (3,009,705)     Licenses, permits, and other fees                       3,063,458 3,777,200     Other                                                   2,474,310 3,355,085     Total Operating Revenues                              401,109,124 368,292,762          Operating Expenses     Pumping and treatment                                   63,197,081 60,735,056     Collection system maintenance                           29,309,082 29,266,441     Engineering                                             1,153,099 2,839,996     General and administrative                              65,630,150 57,984,124     Water backup claims                                     5,435,759 1,548,048     Depreciation                                            73,522,926 71,366,228     Asset management                                               12,790,959 14,048,473     Total Operating Expenses                             251,039,056 237,788,366          Operating Income                    150,070,068 130,504,396          Non-Operating Revenues     Property taxes levied by the District                   (1,857) 2,565     Investment income                                       14,438,669 6,356,029     Rent and other income                                   301,446 253,799     Total Non-Operating Revenues                          14,738,258 6,612,393          Non-Operating Expenses     Net loss on disposal and sale of capital assets         869,490 1,682,939     Non-recurring projects and studies                       14,095,510 6,510,082     Interest expense                                        33,082,384 36,695,083     Total Non-Operating Expenses                          48,047,384 44,888,104          Income Before Capital Grants And Contributions                       116,760,942 92,228,685          Capital Grants And Contributions     Capital assets contributed                               9,924,920 16,433,138     Grant revenue                                           742,451 1,278,558     Total Capital Grants And Contributions                          10,667,371 17,711,696   Change In Net Position 127,428,313 109,940,381   Net Position - Beginning Of Year, As Previously Stated      1,934,066,130 1,835,146,655 Effect of Adoption of GASB 75 — (11,020,906)   Net Position - Beginning Of Year, As Restated 1,934,066,130 1,824,125,749   Net Position - End Of Year                                    2,061,494,443$ 1,934,066,130$ WASTEWATER SEGMENT STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 82 2019 2018 Cash Flows From Operating Activities Received from customers 394,747,976$ 357,876,141$ Paid to employees for services (101,374,404) (96,464,294) Paid to suppliers for goods and services (79,155,315) (70,486,503) Net Cash Provided By Operating Activities 214,218,257 190,925,344 Cash Flows Provided By (Used In) Non-Capital Financing Activities Taxes levied and collected 3,942 (930) Cash Flows From Capital And Related Financing Activities Proceeds from capital grants 130,670 1,634,250 Proceeds from issuance of debt 35,149,238 227,157,189 Premium on sale of bonds — 37,823,556 Principal paid on debt (50,942,662) (43,667,013) Interest and fees paid on debt (65,117,717) (60,603,135) Payments for capital assets (221,248,644) (225,481,370) Proceeds from sale of capital assets 279,867 136,134 Build America Bond tax credit 1,630,662 1,624,563 Net Cash (Used In) Capital And Related Financing Activities (300,118,586) (61,375,826) Cash Flows From Investing Activities Purchase of investments (551,116,152) (672,970,851) Proceeds from sale and maturity of investments 647,477,312 525,720,153 Investment income 9,214,193 6,387,181 Proceeds from rents 229,231 253,799 Net Cash (Used In) Investing Activities 105,804,584 (140,609,718) Net Increase (Decrease) In Cash And Cash Equivalents 19,908,197 (11,061,130) Cash And Cash Equivalents At Beginning Of Year 31,737,328 42,798,458 Cash And Cash Equivalents At End Of Year 51,645,525$ 31,737,328$ Ended June 30, WASTEWATER SEGMENT STATEMENTS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 83 Financial information as of and for the years ended June 30, 2019 and 2018 of the District’s Stormwater Segment is as follows: Assets 2019 2018 Current Assets Unrestricted Current Assets Cash and cash equivalents  1,218,671$ 590,710$ Investments                                          10,538,548 15,476,186 Sewer service charges receivable, less allowance of                   $126,120 in 2019 and $140,514 in 2018 72,188 89,522 Unbilled sewer service charges receivable (227) (389) Property taxes receivable, less allowance of $9,806 in 2019          and $22,544 in 2018 479,914 689,128 Accrued income on investments                        57,979 39,317        Total Unrestricted Current Assets                            12,367,073 16,884,474        Restricted Current Assets Cash and cash equivalents 1,747,847 1,009,872 Investments                                          15,117,921 26,469,179        Total Restricted Current Assets                            16,865,768 27,479,051  Total Current Assets                            29,232,841 44,363,525 Non-Current Assets Restricted Assets Cash and cash equivalents  2,142,021 1,048,411 Investments                                          18,526,954 27,478,223 Long-term investments                                27,952,964 13,102,425 Property taxes receivable, less allowance of $20,954 in 2019 and $45,320 in 2018 1,373,743 1,396,042 Accrued income on investments                        343,103 242,425        Total Restricted Non-Current Assets                            50,338,785 43,267,526 Other Assets Long-term investments                                8,755,677 3,758,732             Total Other Assets                            8,755,677 3,758,732        Capital Assets     Depreciable:        Collection and pumping plant                         657,467,608 645,451,046        General plant and equipment                          17,012,385 17,713,702                                                             674,479,993 663,164,748        Less:  Accumulated depreciation                      216,627,959 207,556,541        Net depreciable assets       457,852,034 455,608,207            Non-depreciable:        Land                                                 7,420,788 7,158,677        Construction in progress                             24,967,857 20,696,809           Net Capital Assets                                490,240,679 483,463,693                    Total Non-Current Assets                         549,335,141 530,489,951                         Total Assets                               578,567,982 574,853,476        Deferred Outflows of Resources:        Pension-related outflows                                              5,308,811 2,575,499        OPEB-related outflows                                              170,387 175,579                  Total Deferred Outflows of Resources                        5,479,198 2,751,078 STORMWATER SEGMENT STATEMENTS OF NET POSITION June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 84 Liabilities 2019 2018 Current Liabilities-Payable From Unrestricted Assets Contracts and accounts payable  6,684$ 9,337$ Deposits and accrued expenses  8,259,420 7,789,782 Retainage payable  — 545 Total Current Liabilities-Payable From Unrestricted Assets 8,266,104 7,799,664 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable  801,529 834,980 Retainage payable  691,203 526,090 Total Current Liabilities-Payable From Restricted Assets 1,492,732 1,361,070             Total Current Liabilities                       9,758,836 9,160,734        Non-Current Liabilities        Net pension liability                   11,158,412 6,953,403        Total OPEB liability                   3,317,991 3,322,773             Total Non-Current Liabilities                       14,476,403 10,276,176                          Total Liabilities                     24,235,239 19,436,910 Deferred Inflows of Resources:        Pension-related inflows                                              638,866 917,586        OPEB-related inflows                                         143,362 —                  Total Deferred Inflows of Resources                        782,228 917,586 Net Position Net investment in capital assets 488,793,056 482,309,582 Restricted for:       Subdistrict construction and improvement           67,159,444 70,539,618 Unrestricted 3,077,213 4,400,858                   Total Net Position 559,029,713$ 557,250,058$   June 30, STORMWATER SEGMENT STATEMENTS OF NET POSITION (Continued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 85 2019 2018   Operating Revenues     Sewer service charges                                   (2,852)$ (4,810)$     Recovery of (provision for) doubtful sewer service charge accounts 11,399 19,557     Other                                                   3,468 3,968     Total Operating Revenues                              12,015 18,715          Operating Expenses     Collection system maintenance                           16,307,809 15,519,041     Engineering                                             10,293,801 8,377,594     General and administrative                              1,831,570 1,028,038     Water backup claims                                     164,660 9,337     Depreciation                                            10,116,917 9,960,114     Asset management                                               963,696 1,082,716     Total Operating Expenses                             39,678,453 35,976,840          Operating Income (Loss)                                         (39,666,438) (35,958,125)          Non-Operating Revenues     Property taxes levied by the District                   34,109,476 33,746,367     Investment income                                       2,260,484 1,049,928     Total Non-Operating Revenues                          36,369,960 34,796,295          Non-Operating Expenses     Net loss on disposal and sale of capital assets         101,335 150,969     Non-recurring projects and studies                       1,533,080 2,786,276     Total Non-Operating Expenses                          1,634,415 2,937,245          Income (Loss) Before Capital Contributions                       (4,930,893) (4,099,075)          Capital Contributions     Capital assets contributed                               6,710,548 8,365,978     Total Capital Contributions                          6,710,548 8,365,978   Change In Net Position 1,779,655 4,266,903   Net Position - Beginning Of Year, As Previously Stated 557,250,058 556,021,399 Effect of Adoption of GASB 75 — (3,038,244)   Net Position - Beginning Of Year, As Restated      557,250,058 552,983,155          Net Position - End Of Year                                    559,029,713$ 557,250,058$ STORMWATER SEGMENT STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 86 2019 2018 Cash Flows From Operating Activities Received from customers 498,825$ (1,217,823)$ Paid to suppliers for goods and services (29,491,163) (28,718,597) Net Cash (Used In) Operating Activities (28,992,338) (29,936,420) Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collected 33,846,168 33,181,899 Cash Flows From Capital And Related Financing Activities Payments for capital assets (9,979,589) (11,192,290) Proceeds from sale of capital assets 51,479 34,444 Net Cash (Used In) Capital And Related Financing Activities (9,928,110) (11,157,846) Cash Flows From Investing Activities Purchase of investments (98,474,024) (101,055,599) Proceeds from sale and maturity of investments 104,946,688 105,074,847 Investment income 1,061,162 1,227,558 Net Cash Provided By (Used In) Investing Activities 7,533,826 5,246,806 Net Increase (Decrease) In Cash And Cash Equivalents 2,459,546 (2,665,561) Cash And Cash Equivalents At Beginning Of Year 2,648,993 5,314,554 Cash And Cash Equivalents At End Of Year 5,108,539$ 2,648,993$ Ended June 30, STORMWATER SEGMENT STATEMENTS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 87 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 88 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 Redevelopment Redevelopment Total Tax or City Zones Bonds Authority Corporations Abatements St Louis County —$ 121,961$ —$ 3,176$ 125,137$ Bellerive — 7,094 — — 7,094 Bridgeton — 768 — — 768 Brentwood — — — 7,652 7,652 Clayton — 21,044 — — 21,044 Edmundson — — — 9,752 9,752 Eureka — 198 — — 198 Ferguson — 3,673 — 587 4,260 Hazelwood 2,264 947 — 40,501 43,712 Kinloch 17,022 — — 24,092 41,114 Jennings — 274 — — 274 Maplewood — — — 8,349 8,349 Maryland Heights — — — 3,818 3,818 Normandy — — — 3,008 3,008 Overland — — — 4,631 4,631 Richmond Heights — — — 4,928 4,928 Rock Hill — — — 2,658 2,658 Sunset Hills — — — 551 551 University City — — 6,827 112 6,939 Wellston — — — 505 505 Total Tax Abatements 19,286$ 155,959$ 6,827$ 114,320$ 296,392$ For the Year Ended June 30, 2019 Land Enhanced Industrial Clearance for Urban St. Louis County Enterprise Development Redevelopment Redevelopment Total Tax or City Zones Bonds Authority Corporations Abatements St Louis 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 Hazelwood 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 Abatements 22,183$ 146,771$ 6,726$ 65,183$ 240,863$ For the Year Ended June 30, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 89 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 $.1170 and $.1159 per $100 of assessed value for fiscal 2019 and 2018, respectively, that were abated by St. Louis City are reported in the following tables. Reduced Unabated Tax Abated Tax Tax St. Louis City Values Revenue Values Revenue Revenue Residential 170,087,710$ 199,003$ 35,565,190$ 41,611$ 157,392$ Commercial 331,824,840 388,235 126,055,310 147,485 240,750 Total 501,912,550$ 587,238$ 161,620,500$ 189,096$ 398,142$ For the Year Ended June 30, 2019 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$ Commercial 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 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 90 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: TIF TIF Incremental Reduced Incremental Reduced St. Louis County or City Values Tax Revenues Values Tax Revenues St. Louis County and Cities Located in St. Louis County 480,084,710$ 561,699$ 555,120,680$ 643,385$ St. Louis County PILOTs Received — (5,307) — (41,338) St. Louis City 1,308,525,243 325,396 1,311,535,243 329,770 St. Louis City PILOTs Received — (83,074) — (5,268) Total 1,788,609,953$ 798,714$ 1,866,655,923$ 926,549$ June 30, 2019 For the Years Ended June 30, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 91 In summary, the District’s total tax revenues reduced during fiscal 2019 and 2018 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 9, 2019, the date the financial statements were available to be issued. On July 9, 2019, the IRS announced a decrease in the sequestration rate for refundable credit amounts submitted on IRS Form 8038-CP for qualified bonds from 6.2% to 5.9%. This will be effective for all refund payments processed from October 1, 2019 to September 30, 2020. Since the District participates in Build America Bonds, the District will receive 94.1% of the amount requested during its fiscal year 2020. The District received 93.8% of the amount requested during fiscal year 2019. On September 24, 2019, the State of Missouri Direct Loan Program issued to the District an amount totaling $23,952,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues. The District’s interest rate is 0.98% and is payable in semiannual installments at varying amounts through July 1, 2042. Reduced Reduced St. Louis County or City Tax Revenues Tax Revenues St. Louis County and Cities Located in St. Louis County - Tax Abatements 296,392$ 240,863$ St. Louis City - Tax Abatements 398,142 367,123 St. Louis County and Cities Located in St. Louis County - TIFs 556,392 602,047 St. Louis City - TIFs 242,322 324,502 Total Reduced Tax Revenues 1,493,248$ 1,534,535$ For the Years Ended June 30, 2019 June 30, 2018 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 92 As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account and deposits the approved amount in a bond reserve fund. The District repays the loan at an interest rate of 0.98% based on the amount that has been borrowed. As of the date of this report, the outstanding loan balance was $174,712. The payment requirements to maturity will be determined after the debt is fully issued. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 93 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS June 30, 2019 Calendar Year Ending December 31, 2018 2017 2016 2015 2014 Total Pension Liability Service cost 5,239$ 5,157$ 5,107$ 5,253$ 5,409$ Interest on total pension liability 22,307 22,079 20,609 20,199 19,901 Effect of plan changes — — — — — Effect of economic/demographic gains or (losses)(2,042) (4,729)(883) (4,577) (3,668) Effect of assumption changes or inputs — 1,667 11,665 — 6,500 Benefit payments (16,912) (15,858) (15,261) (14,475) (13,387) Net Change in Total Pension Liability 8,592 8,316 21,237 6,400 14,755 Total Pension Liability - Beginning 326,365 318,049 296,812 290,412 275,657 Total Pension Liability - Ending (a)334,957 326,365 318,049 296,812 290,412 Plan Fiduciary Net Position Employer contributions 12,494 12,328 10,146 10,059 10,676 Member contributions — — — — — Investment income net of investment expenses (12,998) 30,496 11,913 (1,888) 6,980 Benefit payments (16,912) (15,858) (15,261) (14,475) (13,387) Administrative expenses — — — — — Net Change in Plan Fiduciary Net Position (17,416) 26,966 6,798 (6,304) 4,269 Plan Fiduciary Net Position - Beginning 277,976 251,010 244,212 250,516 246,247 Plan Fiduciary Net Position - Ending (b)260,560 277,976 251,010 244,212 250,516 Net Pension Liability - Ending = (a) - (b)74,397$ 48,389$ 67,039$ 52,600$ 39,896$ Fiduciary Net Position as a % of Total Pension Liability 77.79% 85.17% 78.92% 82.28% 86.26% Covered Payroll 39,437$ 41,869$ 42,055$ 43,345$ 44,664$ Net Pension Liability as a % of Covered Payroll 188.65% 115.57% 159.41% 121.35% 89.32% Notes to Schedule: 1. Changes of Assumptions. The actuarial discount rate and the long-term expected rate of return were both reduced to 6.90% in 2017 while both rates were 7.00% in all prior years. In 2016, the amount reported as change of assumptions resulted from changing 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 schedule will ultimately present ten years of information when available. Schedule of Changes in Net Pension Liability and Related Ratios In (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 94 REQUIRED SUPPLEMENTARY INFORMATION (Continued) SCHEDULE OF EMPLOYER CONTRIBUTIONS TO EMPLOYEES’ PENSION PLAN June 30, 2019 Schedule of Employer Contributions To Employees' Pension Plan F iscal Year Actuarially Contribution Contribution Ending Determined Annual Deficiency 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% 2019 12,609,689 12,609,689 — 38,166,848 33.04% Notes to Schedule: 1. This schedule will ultimately present ten years of information when available. 2. Valuation Date: Actuarially determined contribution rates are calculated as of January 1 of the fiscal year in which the contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial Cost Method:Entry Age Normal Amortization Method:Level dollar layered, 20 year periods Asset Valuation Method:3-year smoothing period Inflation:2.50% Salary Increases:4.25%, average, including inflation Investment Rate of Return:6.90%, net of pension plan investment expense, including inflation for 2018 7.00%, net of pension plan investment expense, including inflation for all years prior to 2018 Mortality:In the 2019, 2018 and 2017 actuarial valuations, assumed life expectancies were calculated using the RP-2014 Employee and Healthy Annuitant Mortality Table (with generational projections from 2006 based on the most current MP improvement scale which is updated annually) and the RP-2014 Disabled Mortality Table. In the 2016 and 2015 actuarial valuations, assumed life expectancies were calculated using the RP-2000 Healthy Annuitant Mortality Table and the RP-2000 Disabled Mortality Table. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 95 REQUIRED SUPPLEMENTARY INFORMATION (Continued) SCHEDULE OF CHANGES IN TOTAL OPEB LIABILITY June 30, 2019 Calendar Year Ending December 31, 2018 2017 Total OPEB Liability Service cost 1,781$ 1,622$ Interest on total OPEB liability 865 895 Changes of assumptions or other inputs (987) 438 Benefit payments (1,689)(1,600) Net change in total OPEB liability (30)1,355 Total OPEB Liability - Beginning 24,194 22,839 Total OPEB Liability - Ending 24,164$ 24,194$ Notes to Schedule: 1. Changes of assumptions and other inputs reflect the effects of changes in the discount rate each period. The following are the discount rates used in each period: 2018 4.10% 2017 3.44% 2016 3.78% 2. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75 to pay related benefits. 3. This schedule will ultimately present ten years of information when available. 4. Contributions to the OPEB plan are not based on a measure of pay so accordingly, no measure of payroll is presented. In (000's) Schedule of Changes in Total OPEB Liability 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 .......................................... 96 – 97 Revenue Capacity These schedules contain information to help the reader assess the District’s most significant local revenue sources, the user charge ...................................................................................... 98 – 105 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 ............................................................................. 106 – 108 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 ........................................................................................... 109 – 111 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 ............................................... 112 – 113 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 96 2010 2011 2012 2013 2014 Net Position Net investment in capital assets 1,868,974$ 1,915,233$ 1,928,200$ 1,877,692$ 1,845,394$ Restricted 80,782 94,926 106,693 111,066 142,764 Unrestricted 257,894 186,860 175,010 251,300 279,794 Total Net Position 2,207,650$ 2,197,019$ 2,209,903$ 2,240,058$ 2,267,952$ 2015 a 2016 a 2017 a 2018 a 2019 a Net Position Net investment in capital assets 1,805,453$ 1,809,386$ 1,876,249$ 1,968,740$ 2,063,519$ Restricted 142,445 136,547 135,259 129,579 127,414 Unrestricted 330,218 381,124 379,660 392,997 429,591 Total Net Position 2,278,116$ 2,327,057$ 2,391,168$ 2,491,316$ 2,620,524$ a Years 2015 to current include a change in the calculation of the net position components which is not reflected in years prior. NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (000's) Fiscal Year Fiscal Year THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 97 Non-operating Income/(Loss) Capital Change Fiscal Operating Operating Operating Revenue/before Capital Grants and in Net Year Revenues Expenses Income/(Loss)(Expenses)Contributions Contributions Position 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 2019 401,121,139 290,717,509 110,403,630 1,426,419 111,830,049 17,377,919 129,207,968 CHANGES IN NET POSITION LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 98 OPERATING REVENUES BY SOURCE LAST TEN FISCAL YEARS Licenses, Fiscal Sewer Service Permits, and Year Charges, Net Other Fees Other 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 2019 395,579,903 3,063,458 2,477,778 401,121,139 Total Operating Revenues THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 99 Fiscal Employment Materials and Contracted Chemical Year Costs Utilities Supplies Services Supplies 2010 84,049,800$ 12,355,232$ 11,331,222$ 33,342,027$ 1,478,605$ 2011 84,284,762 14,148,746 11,329,023 44,011,352 1,415,826 2012 87,098,037 12,634,274 12,737,240 26,056,481 1,355,113 2013 91,960,314 14,534,075 12,249,397 33,670,887 1,455,725 2014 93,542,222 14,986,387 11,097,857 36,875,093 2,440,843 2015 96,759,245 16,499,964 12,651,008 41,500,864 3,964,165 2016 102,458,574 16,624,434 11,838,551 48,450,272 3,498,796 2017 106,441,619 16,783,922 12,170,738 46,502,512 3,569,449 2018 105,555,411 16,154,516 11,005,087 48,390,986 2,501,712 2019 114,570,104 16,896,093 12,446,227 52,496,518 3,667,207 Fiscal Year Insurance Other 2010 3,196,628$ 29,013,584$ 174,767,098$ 54,011,776$ 228,778,874$ 2011 2,557,850 19,901,275 177,648,834 66,854,265 244,503,099 2012 2,470,343 7,214,413 149,565,901 66,742,064 216,307,965 2013 2,696,416 3,561,780 160,128,594 70,029,840 230,158,434 2014 2,737,491 5,530,535 167,210,428 74,087,207 241,297,635 2015 2,791,622 3,713,021 177,879,889 78,641,259 256,521,148 2016 3,218,041 3,023,288 189,111,956 83,983,749 273,095,705 2017 3,293,267 5,121,777 193,883,284 81,194,391 275,077,675 2018 3,371,910 5,459,242 192,438,864 81,326,342 273,765,206 2019 3,819,449 3,182,068 207,077,666 83,639,843 290,717,509 Note: Balances in all years have been restated to accurately reflect expenses in the appropriate category. The majority of the changes are increases to Employment Costs and Other and decreases to Materials and Supplies and Contracted Services. OPERATING EXPENSES LAST TEN FISCAL YEARS Subtotal, Expenses before Depreciation Total Operating ExpensesDepreciation THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 100 2010 2011 2012 2013 2014 Non-operating revenues Property taxes levied by the District 1,401,100$ 27,125,451$ 24,604,173$ 26,016,135$ 27,450,319$ Investment income 6,553,760 3,847,324 2,407,485 1,056,966 2,966,549 Rent and other income 265,004 442,968 294,591 293,159 302,506 Total non-operating revenues 8,219,864 31,415,743 27,306,249 27,366,260 30,719,374 Non-operating expenses Interest expense 13,189,283 7,971,088 16,365,309 21,062,474 25,661,127 Net loss on disposal and sale of capital assets 2,719,163 3,485,952 3,162,723 795,527 5,248,443 Non-recurring projects and studies 9,872,088 10,800,843 6,402,888 4,676,203 3,492,667 Legal claims — 4,828,828 5,000 — — Total non-operating expenses 25,780,534 27,086,711 25,935,920 26,534,204 34,402,237 Net non-operating revenue (expense)(17,560,670)$ 4,329,032$ 1,370,329$ 832,056$ (3,682,863)$ 2015 2016 2017 2018 2019 Non-operating revenues Property taxes levied by the District 24,764,324$ 25,671,058$ 32,458,054$ 33,748,932$ 34,107,619$ Investment income 3,000,591 4,635,866 2,902,624 7,405,957 16,699,153 Rent and other income 37,321 102,865 106,562 253,799 301,446 Total non-operating revenues 27,802,236 30,409,789 35,467,240 41,408,688 51,108,218 Non-operating expenses Interest expense 27,138,546 28,943,200 31,250,777 36,695,083 33,082,384 Net loss on disposal and sale of capital assets 1,420,902 324,513 673,044 1,833,908 970,825 Non-recurring projects and studies 12,317,488 11,000,403 7,459,538 9,296,358 15,628,590 Total non-operating expenses 40,876,936 40,268,116 39,383,359 47,825,349 49,681,799 Net non-operating revenue (expense)(13,074,700)$ (9,858,327)$ (3,916,119)$ (6,416,661)$ 1,426,419$ NON-OPERATING REVENUES AND EXPENSES LAST TEN FISCAL YEARS Fiscal Year Fiscal Year THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 101 Type of Monthly Charge Unmetered c Residential c Non-Residential Wastewater User Charge Base Charge 23.83$ 23.83$ 23.83$ Compliance Charge a Tier 1 — — 3.05 Tier 2 — — 60.89 Tier 3 — — 133.96 Tier 4 — — 197.91 Tier 5 — — 258.79 Volume Charges per Ccf b — 4.40 4.40 per room 2.61 — — per water closet 9.70 — — per bath 8.08 — — per separate shower 8.08 — — Extra Strength Surcharges a Suspended Solids ("SS") over 300 milligrams per liter — — 277.03 Biochemical Oxygen Demand ("BOD") over 300 — — 691.50 milligrams per liter Chemical Oxygen Demand ("COD") over 600 milligrams — — 345.76 per liter Notes: a Applicable only to non-residential customers, Extra Strength Surcharges priced per ton b Ccf = Hundred cubic feet c User charges for certain low income residential users will be 50 percent of the regular user charge Source: Finance Department USER CHARGE RATES As Of June 30, 2019 Metered THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 102 Fiscal Year Wastewater Charges Billed1 Wastewater Charges Collected2 Collections as a % of Wastewater Charges Billed 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% 2019 394,518,583 386,033,225 97.85% Note: The table shows the amount of wastewater user charge revenues which were billed and collected by the District for the last ten fiscal years. 1 Wastewater Charges Billed includes wastewater user charge revenues billed and accrued for the year. 2 Wastewater Charges Collected includes wastewater user charge revenues collected for the current year and previous years billings. USER CHARGE REVENUES LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 103 2010 a 2011 b 2012 2013 c 2014 Residential: Single-Family/Unit 3 351.12$ 1 333.60$ 1 347.64$ 379.56$ 421.08$ Multi-Family/Unit 305.04 285.12 296.28 324.12 360.36 Commercial/Industrial: Service Charge/Unit 2 486.60 507.00 525.60 478.56 412.56 Sanitary Sewer Usage Charge per Ccf 1.92 2.02 2.11 2.28 2.50 Storm Sewer Usage Charge/100 sq. feet of impervious area 0.14 — — — — Extra Strength Surcharges: SS over 300 parts per million/ton 218.90 222.62 231.35 231.35 231.35 BOD over 300 parts per million/ton 551.52 596.72 620.14 620.14 620.14 COD over 600 parts per million/ton 275.76 298.36 310.07 310.07 310.07 2015 2016 2017 d 2018 2019 Residential: Single-Family/Unit 3 434.76$ 491.52$ 535.08$ 591.72$ 602.76$ Multi-Family/Unit 434.04 490.80 492.00 544.08 602.76 Commercial/Industrial: Service Charge/Unit 2 348.12 296.80 336.69 363.53 395.42 Sanitary Sewer Usage Charge per Ccf 2.82 3.21 3.59 3.97 4.40 Storm Sewer Usage Charge/100 sq. feet of impervious area — — — — — Extra Strength Surcharges: SS over 300 parts per million/ton 244.03 251.88 262.00 269.07 277.03 BOD over 300 parts per million/ton 620.14 632.38 654.00 671.63 691.50 COD over 600 parts per million/ton 310.07 316.19 327.00 335.82 345.76 Notes: 1 Years 2009-2010 saw an impervious rate charge that averaged $36 per year per customer. This was discontinued in 2011. 2 Service Charge/Unit for Commercial/Industrial is calculated by using the sum of annualized base charge and compliance charge. Starting FY 2013, MSD implemented 5-tier Compliance Charge Rate Model, so the Service Charge/Unit is based on calculated weighted average compliance charge. FY 2013, FY 2014 & FY 2015 Service Charge/Unit were adjusted to reflect the weighted average compliance charge calculations. Prior to FY 2013, there was only one tier compliance charge. 3 Based on average usage of a typical single-family during the fiscal year listed. a Ordinance 12754, effective July 1, 2009, changed wastewater rates. b Ordinance 13021, effective July 1, 2010, changed wastewater rates through FY 2012. c Ordinance 13402, effective July 1, 2012, changed wastewater rates through FY 2016. d Ordinance 14395, effective July 1, 2016, changed wastewater rates through FY 2020. Source: Finance Department SEWER USER CHARGES (COMPOSITE-ANNUAL) LAST TEN FISCAL YEARS Fiscal Year Fiscal Year THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 104 Single-Multi- Fiscal Family Family Non-Total Year Residential Residential Residential Accounts 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 2019 361,288 41,288 24,095 426,671 Source: Finance Department a Due to the implementation of the impervious area charge in 2008, approximately 46,000 additional stormwater only accounts were billed each month. This charge was challenged and a court decision was entered on 7/9/10. Based on that decision the impervious charge was discontinued in FY 2011. b The number of accounts were revised as stormwater accounts were underreported. Note: Total accounts listed above are as of June 30 for each fiscal year listed. NUMBER OF CUSTOMERS BY TYPE LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 105 Customer Amount % InBev Anheuser-Busch 5,380,744$ 1.36% City of St. Louis 2,626,558 0.67% Washington Unversity 2,109,156 0.53% Sigma-Aldrich 1,674,339 0.42% The Boeing Company 1,251,265 0.32% Jost Real Estate LLC 1,085,769 0.27% BJC Health System 1,036,583 0.26% St Louis University 1,033,565 0.26% Missouri-American Water Co.1,015,558 0.26% GKN Aerospace N America Inc.891,863 0.23% Subtotal (10 largest)18,105,400 4.58% Balance from other customers 377,474,503 95.42% Grand totals 395,579,903$ 100.00% Customer Amount % Anheuser-Busch 5,518,959$ 2.29% Washington University 1,309,287 0.54% City of St Louis 1,266,572 0.52% Mallinckrodt Inc 1,250,530 0.52% Boeing Co.667,443 0.28% Zoological Gardens 597,152 0.25% Sigma-Aldrich 512,958 0.21% BJC Health System 512,642 0.21% Sensient Colors Inc.462,261 0.19% Cott Beverages Inc 438,501 0.18% Subtotal (10 largest)12,536,305 5.19% Balance from other customers 228,959,052 94.81% Grand totals 241,495,357$ 100.00% User Charges TEN LARGEST CUSTOMERS CURRENT YEAR AND NINE YEARS AGO Fiscal Year 2019 User Charges Fiscal Year 2010 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 106 Unamortized Fiscal Subordinate Capital Premium, Net Year Senior Subordinate Direct Loans Lease of Discount Amount Per Capita 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 2019 1,145,131,480 117,840,000 247,692,802 — 159,855,883 1,670,520,165 1,285 2.65 Notes: Calculation of "Per Capita" for 2011 through 2013 is based on estimated population levels. Calculation of "As a Share of Personal Income" for 2011 through 2013 is based 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 Income (%) RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Total Revenue Bonds As a Share of Personal THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 107 Amount of Debt Percentage of Debt within within Governmental Unit Debt Outstanding District Boundary District Boundary City of St. Louis 74,565,000$ 74,565,000$ 100.0% St. Louis County 87,375,000 86,676,000 99.2 Municipalities 125,162,376 122,587,376 97.9 City of St. Louis School District 231,121,477 231,121,477 100.0 St. Louis County School Districts 1,621,799,535 1,602,981,175 98.8 Fire Districts 133,413,236 124,365,407 93.2 2,273,436,624$ 2,242,296,435 98.6% Total Direct Debt 1,670,520,165 Total Direct and Overlapping Debt 3,912,816,600$ Sources: City of St. Louis, Office of Comptroller St. Louis County, Department of Revenue St. Louis Public Schools, Financial/Treasurer Office Missouri Department of Education, School Finance Polled Governments Polled Fire Districts Note: Although the District comprises all of the St. Louis City and most of St. Louis County, it does not entirely match the County's boundaries. The 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, 2019 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 108 Less: Operating Expenses (excluding Non-depreciation, Net Fiscal Operating operating Gross GASB 68 &Available Year Revenues Revenues Revenues GASB 75)Revenues 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 2019 401,109,124 14,438,669 415,547,793 170,585,143 244,962,650 Fiscal Coverage Year Principal Interest Total Ratio 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 2019 50,907,800 63,224,915 114,132,715 2.1 Fiscal Coverage Year Principal Interest Total Ratio 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 2019 22,355,000 55,586,363 77,941,363 3.1 Note: The methodology used to calculate the net available revenues and the coverage ratio was adjusted during fiscal year 2013 and all previous years were restated for comparative purposes. The 2013 change in methodology consisted of removing agency fees, previously 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 year 2017 the methodology was changed to exclude GASB non-cash transactions from the debt service coverage calculation. PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Senior and Subordinate Debt Service Senior Debt Service THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 109 Per Personal Capita Total Fiscal Income Personal Labor Number of Year Populations (millions)Income City County State Force Households (1) 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 2019 1,299,783 63,008 48,476 4.3 3.3 3.3 699,494 542,048 Notes: (1) The number of households was taken from http://www.census.gov/quickfacts/fact/table/US-MO, the 2019 figure is based on the 2013-2017 data. The 2018 figure is based on the 2012-2016 data. The 2017 figure 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 2010 data. Information for prior years is unavailable; therefore, the 2000 census information is used for the other years in this table. Sources: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce, and Missouri Economic Resource and Information Center (MERIC) Footnotes-http://www.bea.gov/regional/reis/scb.cfm http://www.meric.mo.gov/regional-profiles/st-louis https://www.census.gov/quickfacts/fact/table/US/PST045217 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Unemployment Rate Saint Louis THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 110 Percentage Percentage Employer Employees (1)of Total Rank Employees (1)of Total Rank BJC Health System 28,516 4%1 23,592 4%1 Mercy 23,011 3%2 Washington University in St. Louis 17,442 3%3 13,167 2%3 Boeing Defense, Space & Security 14,566 2%4 16,000 3%2 SSM Health 13,500 2%5 12,367 2%4 Scott Air Force Base 13,000 2%6 11,242 2%5 Schnuck Markets Inc.10,702 2%7 10,700 2%7 Archdiocese of St. Louis 10,000 1%8 City of St. Louis 7,368 1%9 St. Louis University 7,221 1%10 Wal-Mart Stores Inc 10,800 2%6 United States Postal Service 10,249 2%8 St. John's Mercy Health Center 9,793 1%9 McDonald's 9,000 1%10 145,326 21%126,910 21% Total Employment 674,783 100%613,467 100% Notes: (1) Employees are for the St. Louis area which includes several counties not served by the District. Sources: St. Louis Business Journal's Book of Lists 2019 (as of April 2019) St. Louis Business Journal's Book of Lists 2010 PRINCIPAL EMPLOYERS (ST. LOUIS METROPOLITAN AREA) CURRENT YEAR AND NINE YEARS AGO Fiscal Year 2019 Fiscal Year 2010 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 111 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 112 Average Sewage Fiscal Treatment in Millions Year of Gallons per Day 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 2019 396.4 Source: Operations Department AVERAGE FLOW LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 113 2010 2011 2012 2013 2014 Miles of sewers 9,900 9,843 9,738 9,578 9,563 Number of treatment plants 7 7 7 7 7 Treatment capacity (MGD) a 423 528 528 528 533 Annual engineering maximum plant capacity (millions of gallons)154,395 192,629 192,629 192,629 194,454 Amount treated annually (millions of gallons)144,358 135,269 109,518 119,253 99,945 Unused capacity (millions of gallons)10,037 57,360 83,111 73,376 94,509 Percentage of capacity utilized 93% 70% 57% 62% 51% 2015 2016 2017 2018 2019 Miles of sewers 9,531 9,700 9,400 9,400 9,400 Number of treatment plants 7 7 7 7 7 Treatment capacity (MGD) a 538 538 593 593 593 Annual engineering maximum plant capacity (millions of gallons)196,279 196,279 216,354 216,354 216,354 Amount treated annually (millions of gallons)119,547 122,366 120,033 96,534 144,754 Unused capacity (millions of gallons)76,732 73,913 96,321 119,820 71,600 Percentage of capacity utilized 61% 62% 55% 45%67% Sources: Operations Department and Engineering Department Note:a Million gallons per day. Fiscal Year Fiscal Year OPERATING AND CAPITAL INDICATORS LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICTST. LOUIS, MO 2350 MARKET STREET, ST. LOUIS, MO 63103 WWW.STLMSD.COM • 314-768-6260