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Home My Public Portal AboutOfficial Statement Series 2019B&C $328.4 MMNEW ISSUE Ratings Book-Entry Only S&P: AAA Fitch: AA+ See “RATINGS” herein In the opinion of Gilmore & Bell, P.C. and White Coleman & Associates, LLC, Co-Bond Counsel to the District (as defined herein), under existing law and assuming continued compliance with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”), the interest on the Series 2019B Bonds (as defined herein) (1) is excludable from gross income for federal income tax purposes, and is not an item of tax preference for purposes of the federal alternative minimum tax, and (2) is exempt from income taxation by the State of Missouri. The Series 2019B Bonds have not been designated as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code. The interest on the Series 2019C Bonds (as defined herein) is included in gross income for federal income tax purposes and is not exempt from State of Missouri income taxation. See the section herein captioned “TAX MATTERS” and the forms of opinion of Co-Bond Counsel attached hereto as Appendix E. $52,130,000 The MeTropoliTan ST. louiS SEWER DISTRIcT Wastewater System Revenue Bonds Series 2019B $276,260,000 The MeTropoliTan ST. louiS SEWER DISTRIcT Taxable Wastewater System Refunding Revenue Bonds Series 2019c Dated: Date of Delivery Due: As shown on the inside cover pages The Wastewater System Revenue Bonds, Series 2019B (the “Series 2019B Bonds”) will be issued by The Metropolitan St. Louis Sewer District (the “District”) to provide funds to (a) pay a portion of the costs of the Series 2019B Project (as defined herein), and (b) pay the Costs of Issuance (as defined herein) of the Series 2019B Bonds. The Taxable Wastewater System Refunding Revenue Bonds, Series 2019C (the “Series 2019c Bonds”, together with the Series 2019B Bonds, collectively, the “Series 2019B&c Bonds”) will be issued by the District to provide funds to (a) refund the Refunded Bonds (as defined herein), and (b) pay the Costs of Issuance of the Series 2019C Bonds. The Series 2019B&C Bonds will be secured by a pledge of certain revenues of the District as further described herein under the section captioned “SEcURITY AND SOURcES OF PAYMENT FOR THE SERIES 2019B&c BONDS.” The Series 2019B&C Bonds are issuable only as fully-registered bonds and when issued will be registered in the name of Cede & Co., as registered owner and nominee for The Depository Trust Company (“DTc”), New York, NY. See the section herein captioned “THE SERIES 2019B&c BONDS – Book-Entry Only System.” Principal of the Series 2019B&C Bonds is payable to the registered owners of the Series 2019B&C Bonds as set forth on the inside cover pages of this Official Statement. Interest on the Series 2019B&C Bonds is payable semiannually on May 1 and November 1 of each year, beginning on May 1, 2020. UMB Bank, N.A. is serving as Bond Registrar and Paying Agent (each as defined herein). The Series 2019B&c Bonds and the interest thereon are limited obligations of the District payable solely from the pledged revenues, as defined herein, on a parity with the District’s outstanding prior Senior Bonds (as defined herein). The Series 2019B&c Bonds and the interest thereon shall not constitute a general or moral obligation of the District nor a debt, indebtedness or obligation of, or a pledge of the faith and credit of, the District or the State of Missouri (the “State” or “Missouri”) or any political subdivision thereof, within the meaning of any constitutional, statutory or charter provision whatsoever. Neither the faith and credit nor the taxing power of the District, the State or any political subdivision thereof is pledged to the payment of the principal of, premium, if any, or interest on the Series 2019B&c Bonds or other costs incident thereto. The District has no authority to levy any taxes to pay the Series 2019B&c Bonds. Neither the members of the Board of Trustees of the District nor any person executing the Series 2019B&c Bonds shall be personally liable on the Series 2019B&c Bonds by reason of the issuance thereof. The Series 2019B&C Bonds are subject to optional and mandatory redemption as described herein. See the section herein captioned “THE SERIES 2019B&c BONDS – Redemption Provisions.” Maturities, Principal Amounts, Interest Rates, Yields, Prices and cUSIP Numbers are shown on the inside cover pages This cover page contains certain information for quick reference only and is not a summary of the issue. Investors must read this entire official Statement, including the appendices hereto, to obtain information essential to the making of an informed investment decision. See “riSK FaCTorS” herein for a discussion of certain risks and other considerations associated with an investment in the Series 2019B&c Bonds. The Series 2019B&C Bonds are offered when, as and if issued by the District and accepted by the group of Underwriters shown below, subject to prior placement, withdrawal or modification of the offer without notice and subject to the approval of their validity by Gilmore & Bell, P.C., St. Louis, Missouri, and White Coleman & Associates, LLC, St. Louis, Missouri, Co-Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed upon for the District by its General Counsel and by its Disclosure Counsel, Armstrong Teasdale LLP, St. Louis, Missouri. Certain legal matters will be passed upon for the Underwriters by their co-counsel, Thompson Coburn LLP, St. Louis, Missouri, and Richard G. Hughes & Associates, LLC, St. Louis, Missouri. It is expected that the Series 2019B&C Bonds will be available for delivery through the facilities of DTC in New York, NY on or about December 4, 2019. citigroup Barclays Fidelity capital Markets Loop capital Markets Morgan Stanley Raymond James Stern Brothers The date of this Official Statement is November 19, 2019. $52,130,000 The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds Series 2019B MATURITY SCHEDULE Series 2019B Serial Bonds Maturity (May 1) Principal Amount Interest Rate Yield Price CUSIP1 2021 $ 835,000 5.000% 1.130% 105.390% 592481 KH7 2022 880,000 5.000 1.150 109.117 592481 KJ3 2023 920,000 5.000 1.180 112.723 592481 KK0 2024 970,000 5.000 1.240 116.080 592481 KL8 2025 1,015,000 5.000 1.280 119.377 592481 KM6 2026 1,070,000 5.000 1.370 122.196 592481 KN4 2027 1,120,000 5.000 1.450 124.849 592481 KP9 2028 1,175,000 5.000 1.540 127.188 592481 KQ7 2029 1,235,000 5.000 1.660 128.980 592481 KR5 2030 1,300,000 5.000 1.750c 128.078 592481 KS3 2031 1,365,000 5.000 1.830c 127.282 592481 KT1 2032 1,430,000 5.000 1.880c 126.787 592481 KU8 2033 1,500,000 5.000 1.930c 126.295 592481 KV6 2034 1,575,000 5.000 1.970c 125.903 592481 KW4 2035 1,655,000 5.000 2.010c 125.512 592481 KX2 2036 1,740,000 5.000 2.050c 125.123 592481 KY0 2037 1,825,000 5.000 2.090c 124.735 592481 KZ7 2038 1,915,000 5.000 2.120c 124.445 592481 LA1 2039 2,015,000 5.000 2.150c 124.156 592481 LB9 Series 2019B Term Bonds $11,680,000 Term Bond due May 1, 2044; Interest Rate: 5.000%; Yield: 2.250%c; Price: 123.198%; CUSIP No. 592481 LC71 $14,910,000 Term Bond due May 1, 2049; Interest Rate: 5.000%; Yield: 2.310%c; Price: 122.628%; CUSIP No. 592481 LD51 _______________________________ c Yield to the first optional par call date of May 1, 2029. 1CUSIP is a registered trademark of The American Bankers Association. CUSIP data is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of the American Bankers Association, and are included solely for the convenience of the registered owners. Neither the District nor the Underwriters nor the Co-Municipal Advisors shall be responsible for the selection of CUSIP numbers nor do the District nor the Underwriters nor the Co-Municipal Advisors make any representation as to the correctness of such numbers on the Series 2019B&C Bonds or as indicated herein. $276,260,000 The Metropolitan St. Louis Sewer District Taxable Wastewater System Refunding Revenue Bonds Series 2019C MATURITY SCHEDULE Series 2019C Serial Bonds Maturity (May 1) Principal Amount Interest Rate Yield Price CUSIP1 2021 $ 1,515,000 1.824% 1.824% 100.000% 592481 LE3 2022 1,545,000 1.917 1.917 100.000 592481 LF0 2023 1,570,000 2.000 2.000 100.000 592481 LG8 2024 1,605,000 2.050 2.050 100.000 592481 LH6 2025 1,635,000 2.191 2.191 100.000 592481 LJ2 2026 1,675,000 2.291 2.291 100.000 592481 LK9 2027 1,710,000 2.414 2.414 100.000 592481 LL7 2028 12,185,000 2.514 2.514 100.000 592481 LM5 2029 12,485,000 2.564 2.564 100.000 592481 LN3 2030 12,810,000 2.614 2.614 100.000 592481 LP8 2031 17,610,000 2.714 2.714 100.000 592481 LQ6 2032 19,055,000 2.814 2.814 100.000 592481 LR4 2033 13,630,000 2.864 2.864 100.000 592481 LS2 2034 14,020,000 2.914 2.914 100.000 592481 LT0 Series 2019C Term Bonds $20,355,000 Term Bond due May 1, 2038; Interest Rate: 3.159%; Yield: 3.159%; Price: 100.000%; CUSIP No. 592481 LU71 $142,855,000 Term Bond due May 1, 2045; Interest Rate: 3.259%; Yield: 3.259%; Price: 100.000%; CUSIP No. 592481 LV51 _______________________________ 1CUSIP is a registered trademark of The American Bankers Association. CUSIP data is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of the American Bankers Association, and are included solely for the convenience of the registered owners. Neither the District nor the Underwriters nor the Co-Municipal Advisors shall be responsible for the selection of CUSIP numbers nor do the District nor the Underwriters nor the Co-Municipal Advisors make any representation as to the correctness of such numbers on the Series 2019B&C Bonds or as indicated herein. THE METROPOLITAN ST. LOUIS SEWER DISTRICT BOARD OF TRUSTEES Michael Yates, Chair Annette Mandel, Vice Chair James Faul, Member James I. Singer, Member Freddie Dunlap, Member Amy Fehr, Member ADMINISTRATION Brian L. Hoelscher, P.E., Executive Director Tim R. Snoke, Secretary-Treasurer John Strahlman, Assistant Secretary-Treasurer Susan M. Myers, General Counsel Marion M. Gee, Director of Finance Richard Unverferth, P.E., Director of Engineering Tracey Coleman, Director of Human Resources Bret A. Berthold, P.E., Director of Operations Jonathon C. Sprague, P.E., Director of Information Systems ADVISORS AND CONSULTANTS Co-Bond Counsel Gilmore & Bell, P.C. White Coleman & Associates, LLC St. Louis, Missouri St. Louis, Missouri Co-Municipal Advisors PFM Financial Advisors LLC Independent Public Advisors, LLC Cleveland, Ohio Kansas City, Missouri Disclosure Counsel Armstrong Teasdale LLP St. Louis, Missouri Co-Underwriters’ Counsel Thompson Coburn LLP Richard G. Hughes & Associates, LLC St. Louis, Missouri St. Louis, Missouri Financial Feasibility Consultant Raftelis Financial Consultants, Inc. Kansas City, Missouri ____________________________ REGARDING USE OF THIS OFFICIAL STATEMENT ____________________________ THE SERIES 2019B&C BONDS HAVE NEITHER BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS ANY DOCUMENT BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON EXEMPTIONS CONTAINED IN SUCH ACTS. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATIONS OF THE DISTRICT AND THE TERMS OF THE OFFERING. THE SERIES 2019B&C BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT. ANY REPRESENTATION TO THE CONTRARY MAY BE A CRIMINAL OFFENSE. IN CONNECTION WITH THE OFFERING OF THE SERIES 2019B&C BONDS, THE UNDERWRITERS MAY OVER ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 2019B&C BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The Underwriters have provided the following sentence for inclusion in this Official Statement: The Underwriters have reviewed the information in this Official Statement in accordance with and as part of their respective responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriters do not guarantee the accuracy or completeness of such information. No dealer, broker, salesman or other person has been authorized by the District, the Underwriters or the Co-Municipal Advisors to give any information or to make any representations with respect to the Series 2019B&C Bonds other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Official Statement neither constitutes an offer to sell nor the solicitation of an offer to buy nor shall there be any sale of the Series 2019B&C Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been furnished by the District and other sources which are believed to be reliable, but such information is not guaranteed as to accuracy or completeness and is not to be construed as a representation by the Co- Municipal Advisors or the Underwriters. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of fact. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that the information herein is correct as of any time subsequent to its date. References to website addresses presented herein are for informational purposes only and may be in the form of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such websites and the information or links contained therein are not incorporated into, and are not part of, this Official Statement. ____________________________ CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS IN THIS OFFICIAL STATEMENT ____________________________ Certain statements included or incorporated by reference in this Official Statement constitute “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “anticipate,” “project,” “budget” or other similar words. Forward-looking statements include, but are not limited to, certain statements under the section in this Official Statement captioned “RISK FACTORS” and certain statements contained in the Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series 2019B in Appendix D hereto. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. NEITHER THE DISTRICT NOR ANY OTHER PARTY PLANS TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING STATEMENTS IF OR WHEN THEIR EXPECTATIONS, OR EVENTS, CONDITIONS OR CIRCUMSTANCES UPON WHICH SUCH STATEMENTS ARE BASED OCCUR EXCEPT AS DESCRIBED IN THE SECTION HEREIN CAPTIONED “CONTINUING DISCLOSURE.” ____________________________ INFORMATION CONCERNING OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS OUTSIDE THE UNITED STATES OF AMERICA ____________________________ THE INFORMATION UNDER THIS CAPTION HAS BEEN FURNISHED BY THE UNDERWRITERS, AND THE DISTRICT (REFERRED TO IN THESE LEGENDS AS THE “ISSUER”) MAKES NO REPRESENTATION AS TO THE ACCURACY OR ADEQUACY OF THE INFORMATION UNDER THIS CAPTION. REFERENCES UNDER THIS CAPTION TO “BONDS” OR “SECURITIES” MEAN THE SERIES 2019B&C BONDS OFFERED HEREBY, AND REFERENCES TO THE “UNDERWRITERS” MEAN THE UNDERWRITERS AND THE INITIAL PURCHASERS. NOTICE TO INVESTORS IN THE EUROPEAN ECONOMIC AREA (“EEA”) THIS OFFICIAL STATEMENT IS NOT A PROSPECTUS FOR THE PURPOSES OF EUROPEAN COMMISSION REGULATION 809/2004 OR EUROPEAN COMMISSION DIRECTIVE 2003/71/EC (AS AMENDED, INCLUDING BY EUROPEAN COMMISSION DIRECTIVE 2010/73/EU, AS APPLICABLE) (THE “PROSPECTUS DIRECTIVE”). IT HAS BEEN PREPARED ON THE BASIS THAT ALL OFFERS OF THE BONDS WILL BE MADE PURSUANT TO AN EXEMPTION UNDER ARTICLE 3 OF THE PROSPECTUS DIRECTIVE, AS IMPLEMENTED IN MEMBER STATES OF THE EEA, FROM THE REQUIREMENT TO PRODUCE A PROSPECTUS FOR SUCH OFFERS. THIS OFFICIAL STATEMENT IS ONLY ADDRESSED TO AND DIRECTED AT PERSONS IN MEMBER STATES OF THE EEA WHO ARE “QUALIFIED INVESTORS” WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE AND ANY RELEVANT IMPLEMENTING MEASURE IN EACH MEMBER STATE OF THE EEA (“QUALIFIED INVESTORS”). THIS OFFICIAL STATEMENT MUST NOT BE ACTED ON OR RELIED ON IN ANY SUCH MEMBER STATE OF THE EEA BY PERSONS WHO ARE NOT QUALIFIED INVESTORS. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS OFFICIAL STATEMENT RELATES IS AVAILABLE ONLY TO QUALIFIED INVESTORS IN ANY MEMBER STATE OF THE EEA AND WILL NOT BE ENGAGED IN WITH ANY OTHER PERSONS. NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED KINGDOM THIS OFFICIAL STATEMENT HAS NOT BEEN APPROVED FOR THE PURPOSES OF SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (“FSMA”) AND DOES NOT CONSTITUTE AN OFFER TO THE PUBLIC IN ACCORDANCE WITH THE PROVISIONS OF SECTION 85 OF THE FSMA. THIS OFFICIAL STATEMENT IS FOR DISTRIBUTION ONLY TO, AND IS DIRECTED SOLELY AT, PERSONS IN THE UNITED KINGDOM THAT ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE WHO ARE ALSO (I) INVESTMENT PROFESSIONALS, AS SUCH TERM IS DEFINED IN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED (THE “FINANCIAL PROMOTION ORDER”) OR (II) HIGH NET WORTH ENTITIES, AND OTHER PERSONS TO WHOM IT MAY LAWFULLY BE COMMUNICATED, FALLING WITHIN ARTICLE 49(2)(A) TO (D) OF THE FINANCIAL PROMOTION ORDER (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “RELEVANT PERSONS”). THIS OFFICIAL STATEMENT IS DIRECTED ONLY AT RELEVANT PERSONS AND MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS, INCLUDING IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA APPLIES TO THE ISSUER. THIS OFFICIAL STATEMENT AND ITS CONTENTS ARE CONFIDENTIAL AND SHOULD NOT BE DISTRIBUTED, PUBLISHED OR REPRODUCED (IN WHOLE OR IN PART) OR DISCLOSED BY RECIPIENTS TO ANY OTHER PERSONS IN THE UNITED KINGDOM. IN THE UNITED KINGDOM, ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS OFFICIAL STATEMENT RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. ANY PERSON WHO IS NOT A RELEVANT PERSON SHOULD NOT ACT OR RELY ON THIS OFFICIAL STATEMENT OR ANY OF ITS CONTENTS. NOTICE TO PROSPECTIVE INVESTORS IN HONG KONG THE BONDS (EXCEPT FOR BONDS WHICH ARE A “STRUCTURED PRODUCT” AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE (CAP. 571 OF THE LAWS OF HONG KONG) (“SECURITIES AND FUTURES ORDINANCE”)) MAY NOT BE OFFERED OR SOLD IN HONG KONG BY MEANS OF ANY DOCUMENT OTHER THAN (I) IN CIRCUMSTANCES WHICH DO NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE (CAP. 32 OF THE LAWS OF HONG KONG) (“COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE”) OR (II) TO “PROFESSIONAL INVESTORS” AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE AND ANY RULES MADE THEREUNDER, OR (III) IN OTHER CIRCUMSTANCES WHICH DO NOT RESULT IN THE DOCUMENT BEING A “PROSPECTUS” AS DEFINED IN THE COMPANIES (WINDING UP AND MISCELLANEOUS PROVISIONS) ORDINANCE, AND NO ADVERTISEMENT, INVITATION OR DOCUMENT RELATING TO THE BONDS MAY BE ISSUED OR MAY BE IN THE POSSESSION OF ANY PERSON FOR THE PURPOSE OF ISSUE (IN EACH CASE WHETHER IN HONG KONG OR ELSEWHERE), WHICH IS DIRECTED AT, OR THE CONTENTS OF WHICH ARE LIKELY TO BE ACCESSED OR READ BY, THE PUBLIC OF HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE SECURITIES LAWS OF HONG KONG) OTHER THAN WITH RESPECT TO BONDS WHICH ARE OR ARE INTENDED TO BE DISPOSED OF ONLY TO PERSONS OUTSIDE HONG KONG OR ONLY TO “PROFESSIONAL INVESTORS” AS DEFINED IN THE SECURITIES AND FUTURES ORDINANCE AND ANY RULES MADE THEREUNDER. NOTICE TO INVESTORS IN SWITZERLAND THE BONDS MAY NOT BE PUBLICLY OFFERED IN SWITZERLAND AND WILL NOT BE LISTED ON THE SIX SWISS EXCHANGE (“SIX”) OR ON ANY OTHER STOCK EXCHANGE OR REGULATED TRADING FACILITY IN SWITZERLAND. THIS OFFICIAL STATEMENT HAS BEEN PREPARED WITHOUT REGARD TO THE DISCLOSURE STANDARDS FOR ISSUANCE PROSPECTUSES UNDER ART. 652A OR ART. 1156 OF THE SWISS CODE OF OBLIGATIONS OR THE DISCLOSURE STANDARDS FOR LISTING PROSPECTUSES UNDER ART. 27 FF. OF THE SIX LISTING RULES OR THE LISTING RULES OF ANY OTHER STOCK EXCHANGE OR REGULATED TRADING FACILITY IN SWITZERLAND. NEITHER THIS OFFICIAL STATEMENT NOR ANY OTHER OFFERING OR MARKETING MATERIAL RELATING TO THE BONDS OR THE OFFERING MAY BE PUBLICLY DISTRIBUTED OR OTHERWISE MADE PUBLICLY AVAILABLE IN SWITZERLAND. NONE OF THIS OFFICIAL STATEMENT OR ANY OTHER OFFERING OR MARKETING MATERIAL RELATING TO THE OFFERING, THE ISSUER OR THE BONDS HAVE BEEN OR WILL BE FILED WITH OR APPROVED BY ANY SWISS REGULATORY AUTHORITY. IN PARTICULAR, THIS OFFICIAL STATEMENT WILL NOT BE FILED WITH, AND THE OFFER OF THE BONDS WILL NOT BE SUPERVISED BY, THE SWISS FINANCIAL MARKET SUPERVISORY AUTHORITY (“FINMA”), AND THE OFFER OF BONDS HAS NOT BEEN AND WILL NOT BE AUTHORIZED UNDER THE SWISS FEDERAL ACT ON COLLECTIVE INVESTMENT SCHEMES (“CISA”). ACCORDINGLY, INVESTORS DO NOT HAVE THE BENEFIT OF THE SPECIFIC INVESTOR PROTECTION PROVIDED UNDER THE CISA. NOTICE TO INVESTORS IN SINGAPORE THIS OFFICIAL STATEMENT HAS NOT BEEN AND WILL NOT BE REGISTERED AS A PROSPECTUS WITH THE MONETARY AUTHORITY OF SINGAPORE. ACCORDINGLY, THIS OFFICIAL STATEMENT AND ANY OTHER DOCUMENT OR MATERIAL USED IN CONNECTION WITH THE OFFER OR SALE, OR INVITATION FOR SUBSCRIPTION OR PURCHASE, OF THE BONDS MAY NOT BE CIRCULATED OR DISTRIBUTED, NOR MAY THE BONDS BE OFFERED OR SOLD, OR BE MADE THE SUBJECT OF AN INVITATION FOR SUBSCRIPTION OR PURCHASE, WHETHER DIRECTLY OR INDIRECTLY, TO PERSONS IN SINGAPORE OTHER THAN (I) TO AN INSTITUTIONAL INVESTOR AS DEFINED IN SECTION 4A OF THE SECURITIES AND FUTURES ACT (CHAPTER 289 OF SINGAPORE) (THE “SFA”) PURSUANT TO SECTION 274 OF THE SFA, (II) TO A RELEVANT PERSON PURSUANT TO SECTION 275(1), OR ANY PERSON PURSUANT TO SECTION 275(1A), AND IN ACCORDANCE WITH THE CONDITIONS SPECIFIED IN SECTION 275, OF THE SFA; OR (III) OTHERWISE PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF, ANY OTHER APPLICABLE PROVISION OF THE SFA. WHERE THE BONDS ARE SUBSCRIBED OR PURCHASED UNDER SECTION 275 OF THE SFA BY A RELEVANT PERSON THAT IS: (A) A CORPORATION (WHICH IS NOT AN ACCREDITED INVESTOR (AS DEFINED IN SECTION 4A OF THE SFA)) THE SOLE BUSINESS OF WHICH IS TO HOLD INVESTMENTS AND THE ENTIRE SHARE CAPITAL OF WHICH IS OWNED BY ONE OR MORE INDIVIDUALS, EACH OF WHOM IS AN ACCREDITED INVESTOR; OR (B) A TRUST (WHERE THE TRUSTEE IS NOT AN ACCREDITED INVESTOR) WHOSE SOLE PURPOSE IS TO HOLD INVESTMENTS AND EACH BENEFICIARY OF THE TRUST IS AN INDIVIDUAL WHO IS AN ACCREDITED INVESTOR, SECURITIES (AS DEFINED IN SECTION 239(1) OF THE SFA) OF THAT CORPORATION OR THE BENEFICIARIES’ RIGHTS AND INTEREST (HOWSOEVER DESCRIBED) IN THAT TRUST SHALL NOT BE TRANSFERRED WITHIN 6 MONTHS AFTER THAT CORPORATION OR THAT TRUST HAS ACQUIRED THE BONDS PURSUANT TO AN OFFER MADE UNDER SECTION 275 OF THE SFA EXCEPT: (I) TO AN INSTITUTIONAL INVESTOR OR TO A RELEVANT PERSON AS DEFINED IN SECTION 275(2) OF THE SFA, OR TO ANY PERSON ARISING FROM AN OFFER REFERRED TO IN SECTION 275(1A) OR SECTION 276(4)(I)(B) OF THE SFA; (II) WHERE NO CONSIDERATION IS OR WILL BE GIVEN FOR THE TRANSFER; (III) WHERE THE TRANSFER IS BY OPERATION OF LAW; (IV) AS SPECIFIED IN SECTION 276(7) OF THE SFA; OR (V) AS SPECIFIED IN REGULATION 32 OF THE SECURITIES AND FUTURES (OFFERS OF INVESTMENTS) (SHARES AND DEBENTURES) REGULATIONS 2005 OF SINGAPORE. NOTICE TO PROSPECTIVE INVESTORS IN TAIWAN THE OFFER OF THE BONDS HAS NOT BEEN AND WILL NOT BE REGISTERED OR FILED WITH, OR APPROVED BY, THE FINANCIAL SUPERVISORY COMMISSION OF TAIWAN AND/OR OTHER REGULATORY AUTHORITY OF TAIWAN PURSUANT TO RELEVANT SECURITIES LAWS AND REGULATIONS, AND THE BONDS MAY NOT BE OFFERED, ISSUED OR SOLD IN TAIWAN THROUGH A PUBLIC OFFERING OR IN CIRCUMSTANCES WHICH CONSTITUTE AN OFFER WITHIN THE MEANING OF THE SECURITIES AND EXCHANGE ACT OF TAIWAN THAT REQUIRES THE REGISTRATION OR FILING WITH OR APPROVAL OF THE FINANCIAL SUPERVISORY COMMISSION OF TAIWAN. THE BONDS MAY BE MADE AVAILABLE OUTSIDE TAIWAN FOR PURCHASE BY INVESTORS RESIDING IN TAIWAN (EITHER DIRECTLY OR THROUGH PROPERLY LICENSED TAIWAN INTERMEDIARIES), BUT MAY NOT BE OFFERED OR SOLD IN TAIWAN EXCEPT TO QUALIFIED INVESTORS VIA A TAIWAN LICENSED INTERMEDIARY. ANY SUBSCRIPTIONS OF BONDS SHALL ONLY BECOME EFFECTIVE UPON ACCEPTANCE BY THE ISSUER OR THE RELEVANT DEALER OUTSIDE TAIWAN AND SHALL BE DEEMED A CONTRACT ENTERED INTO IN THE JURISDICTION OF INCORPORATION OF THE ISSUER OR RELEVANT DEALER, AS THE CASE MAY BE, UNLESS OTHERWISE SPECIFIED IN THE SUBSCRIPTION DOCUMENTS RELATING TO THE BONDS SIGNED BY THE INVESTORS. i TABLE OF CONTENTS INTRODUCTION ................................................................... 1 Purpose of the Official Statement .................................... 1 The District ...................................................................... 1 Purpose of and Authority for the Series 2019B&C Bonds ..................................................... 2 Security and Sources of Payment for the Series 2019B&C Bonds ..................................................... 2 Other Indebtedness .......................................................... 5 Continuing Disclosure Information .................................. 5 Additional Information .................................................... 5 THE SERIES 2019B&C BONDS ............................................ 6 General ............................................................................ 6 Redemption Provisions .................................................... 7 Effect of Notice of Redemption ..................................... 10 Book-Entry Only System ............................................... 11 Registration, Transfer and Exchange of Series 2019B&C Bonds ................................................... 13 Persons Deemed Owners of Series 2019B&C Bonds .................................................................... 13 SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2019B&C BONDS .......................................... 14 General .......................................................................... 14 Pledged Revenues .......................................................... 14 Pro Forma Statement of Pledged Revenues and Debt Service Coverage .......................................... 16 Flow of Funds ................................................................ 18 Rate Covenant ................................................................ 21 Senior and Subordinate Bonds ....................................... 22 Other Indebtedness ........................................................ 22 PLAN OF FINANCE ............................................................. 22 Purpose of and Authority for the Series 2019B&C Bonds ................................................... 22 Estimated Sources and Uses of Funds............................ 23 DEBT SERVICE SCHEDULE .............................................. 25 THE DISTRICT ..................................................................... 26 General ................................................................................... 26 Organization and Management ...................................... 27 Board of Trustees ........................................................... 28 Administration ............................................................... 28 The System .................................................................... 30 Employees and Employee Relations .............................. 30 Economic Conditions in the District .............................. 31 Security .......................................................................... 31 Insurance ........................................................................ 31 THE CIRP .............................................................................. 32 General .......................................................................... 32 Historical Capital Improvement Expenditures ............... 32 Financing Plans for the CIRP ........................................ 33 Total Capital Expenditures under CIRP ......................... 34 Capital Finance Plans Contemplated Under Consent Decree ..................................................... 34 FINANCIAL OPERATIONS OF THE DISTRICT ............... 36 General .......................................................................... 36 Budget and Appropriation Process................................. 36 Finance Department ....................................................... 36 Fund Structure ............................................................... 37 Basis of Accounting ....................................................... 37 Financial Statements ...................................................... 38 Cash and Investments .................................................... 38 MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW .................................................................. 38 2019 Financial Audit ..................................................... 38 2018 Financial Audit ..................................................... 39 Sewer Rates and Revenues ............................................. 40 Other Sources of Revenue .............................................. 41 Rate Commission and Rate Setting Process ................... 41 Billing and Collections ................................................... 43 Rate Increases ................................................................ 44 Historical and Projected Sewer Rates and Charges .................................................................. 45 Customer Accounts ........................................................ 48 Largest User Charge Customers ..................................... 48 User Charge Revenues ................................................... 48 Outstanding Indebtedness .............................................. 49 Employee Benefits ......................................................... 51 Other Post-Employment Benefits ................................... 52 Tax Limitation Amendment – Hancock Amendment ........................................................... 52 REGULATORY REQUIREMENTS ..................................... 52 General ........................................................................... 52 Regulatory Matters – Consent Decree ............................ 53 RISK FACTORS .................................................................... 53 Factors Affecting the District ......................................... 54 Summary Financial Information .................................... 55 Certain Bankruptcy Risks............................................... 55 Secondary Markets and Prices ....................................... 55 Risk of Taxability of Series 2019B Bonds ..................... 55 Risk of Audit of Series 2019B Bonds ............................ 56 Limited Obligations ....................................................... 56 Loss of Premium Upon Early Redemption ..................... 56 LITIGATION ......................................................................... 56 TAX MATTERS .................................................................... 56 Tax Status of the Series 2019B Bonds – Opinion of Co-Bond Counsel ................................ 57 Series 2019B Bonds – Other Tax Consequences ........................................................ 57 Tax Status of the Series 2019C Bonds ........................... 58 Series 2019C Bonds – Other Tax Consequences to U.S. Beneficial Owners .............. 59 Series 2019C Bonds – Other Tax Consequences to Non-U.S. Beneficial Owners ................................................................... 61 LEGAL MATTERS ............................................................... 64 RATINGS .............................................................................. 64 CONTINUING DISCLOSURE .............................................. 65 UNDERWRITING ................................................................. 66 CERTAIN RELATIONSHIPS ............................................... 67 FINANCIAL FEASIBILITY CONSULTANT ...................... 67 VERIFICATION OF MATHEMATICAL CALCULATIONS ......................................................... 67 CO-MUNICIPAL ADVISORS .............................................. 67 INDEPENDENT AUDITORS ............................................... 67 MISCELLANEOUS ............................................................... 68 APPENDIX A Independent Auditors’ Report, Management’s Discussion and Analysis and Basic Financial Statements of The Metropolitan St. Louis Sewer District for the Fiscal Years ended June 30, 2019 and 2018 APPENDIX B Information Regarding the District’s Service Area APPENDIX C Definitions and Summaries of Certain Provisions of the Bond Ordinance and the Continuing Disclosure Agreement APPENDIX D Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series 2019B APPENDIX E Forms of Opinions of Co-Bond Counsel 1 OFFICIAL STATEMENT $52,130,000 The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds Series 2019B $276,260,000 The Metropolitan St. Louis Sewer District Taxable Wastewater System Refunding Revenue Bonds Series 2019C INTRODUCTION The following introductory information is not a summary of this Official Statement. It is only a brief description of, and is qualified by and subject in all respects to more complete and detailed information contained elsewhere in, this Official Statement, including the cover page and appendices hereto and the documents described herein. The order and placement of materials in this Official Statement, including the appendices hereto, are not to be deemed a determination of relevance, materiality or relative importance. This Official Statement, including the cover page and appendices, should be considered in its entirety. The offering of the Series 2019B&C Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not otherwise defined herein, including in Appendix C – “DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE BOND ORDINANCE AND THE CONTINUING DISCLOSURE AGREEMENT”, have the meanings set forth in the Bond Ordinance, as defined below. Purpose of the Official Statement The purpose of this Official Statement is to set forth certain information concerning The Metropolitan St. Louis Sewer District (the “District”), a body corporate, municipal corporation and political subdivision organized and existing under the laws of the State of Missouri (the “State” or “Missouri”), and the District’s Charter (Plan), approved by the voters of The City of St. Louis, Missouri (the “City”) and St. Louis County, Missouri (the “County”) at a special election on February 9, 1954, as amended, and approved by the voters of the City and the County at special elections on November 7, 2000 and June 5, 2012 (collectively and as amended, the “Charter”), the $52,130,000 principal amount of Wastewater System Revenue Bonds, Series 2019B (the “Series 2019B Bonds”) and the $276,260,000 principal amount of Taxable Wastewater System Refunding Revenue Bonds, Series 2019C (the “Series 2019C Bonds”, together with the Series 2019B Bonds, collectively, the “Series 2019B&C Bonds”) to be issued by the District. See the sections herein captioned “THE DISTRICT” and “THE SERIES 2019B&C BONDS.” The District The District was created in 1954 to provide a metropolitan-wide system of wastewater treatment and sanitary sewerage facilities for the collection, treatment and disposal of sewage to serve the City and most of the more heavily populated areas of the County. 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. The District’s service area now encompasses approximately 520 square miles, including approximately all 66 square miles of the City and approximately 454 square miles (approximately 87%) of the County. The current population served by the District is approximately 1.3 million. A map of the District’s service area is included on the back cover hereof. See the sections herein captioned “THE DISTRICT”, “THE CIRP”, “FINANCIAL OPERATIONS OF THE DISTRICT”, “MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW” and “REGULATORY REQUIREMENTS”. 2 Purpose of and Authority for the Series 2019B&C Bonds At a special election held on April 5, 2016, District voters approved the issuance by the District of $900,000,000 in sewer system revenue bonds (the “Current Authorization”). The Current Authorization enables the District to comply with federal and State clean water requirements. The District may use the proceeds of such sewer system revenue bonds for the purpose of designing, constructing, improving, renovating, repairing, replacing and equipping new and existing District sewer and drainage facilities and systems. The District previously issued bonds in a par amount of $249,441,204 from the Current Authorization, consisting of $152,500,000 of the Series 2017A Bonds representing a portion of the project portion of the Series 2017A Bonds, $47,722,204 of the Series 2018A Bond (each as defined herein), $25,267,000 of the District’s Subordinate Wastewater System Revenue Bonds (State of Missouri – Direct Loan Program), Series 2018B and $23,952,000 of the District’s Subordinate Wastewater System Revenue Bonds (State of Missouri – Direct Loan Program), Series 2019A. After the issuance of the Series 2019B&C Bonds, the remaining amount of the Current Authorization will be $598,428,796. No other bonds have been issued from the Current Authorization. The District will issue the Series 2019B&C Bonds pursuant to the Current Authorization and the Master Bond Ordinance No. 11713 (the “Master Bond Ordinance”) that was adopted by the Board of Trustees of the District (the “Board”) on April 22, 2004, as supplemented by Ordinance No. 15311 (the “2019B Ordinance”) and as supplemented by Ordinance No. 15312 (the “2019C Ordinance”, together with the Master Bond Ordinance and the 2019B Ordinance are collectively referred to herein as, the “Bond Ordinance”). Pursuant to the Current Authorization and the Master Bond Ordinance, as supplemented by the 2019B Ordinance, the District will issue the Series 2019B Bonds to provide funds to (a) pay a portion of the costs of the Series 2019B Project (as defined herein), and (b) pay the Costs of Issuance (as defined in Appendix C to this Official Statement) of the Series 2019B Bonds. Pursuant to the Current Authorization and the Master Bond Ordinance, as supplemented by the 2019C Ordinance the District will issue the Series 2019C Bonds to provide funds to (a) refund a portion of the District’s Series 2012A Bonds, Series 2012B Bonds, Series 2013B Bonds and Series 2015B Bonds (each as defined herein and collectively the bonds to be refunded are defined herein as the “Refunded Bonds”), and (b) pay the Costs of Issuance of the Series 2019C Bonds. For more information, see the sections herein captioned “THE CIRP” and “PLAN OF FINANCE - Purpose of and Authority for the Series 2019B&C Bonds” (which also includes the outstanding principal amounts of the Refunded Bonds as of November 1, 2019). A description of the Series 2019B&C Bonds is contained in this Official Statement under the caption “THE SERIES 2019B&C BONDS.” All references to the Series 2019B&C Bonds are qualified in their entirety by the definitive form thereof and the provisions with respect thereto in the Bond Ordinance, as applicable. Security and Sources of Payment for the Series 2019B&C Bonds General. The Series 2019B&C Bonds are sewer system revenue bonds secured by and payable from certain revenues of the District received from operation of its sanitary sewer system (as further defined herein, the “System”) on a parity with the prior outstanding series of bonds (the “Prior Senior Bonds”) issued by the District as shown in the following table. 3 Name of Issue Series Designation Issue Date Original Principal Amount Outstanding Principal Amount as of Nov. 1, 2019 Taxable Wastewater System Revenue Bonds (Build America Bonds – Direct Pay), Series 2010B (“Series 2010B Bonds”) 01/28/2010 $85,000,000 $85,000,000 Wastewater System Revenue Bonds, Series 2011B (“Series 2011B Bonds”) 12/22/2011 $52,250,000 $15,945,000 Wastewater System Revenue Bonds, Series 2012A (“Series 2012A Bonds”)* 08/23/2012 $225,000,000 $154,040,000 Wastewater System Refunding Revenue Bonds, Series 2012B (“Series 2012B Bonds”)* 11/14/2012 $141,730,000 $128,840,000 Wastewater System Revenue Bonds, Series 2013B (“Series 2013B Bonds”)* 12/18/2013 $150,000,000 $113,615,000 Wastewater System Improvement and Refunding Revenue Bonds, Series 2015B (“Series 2015B Bonds”)* 12/15/2015 $223,855,000 $190,135,000 Wastewater System Revenue Bonds, Series 2016C (“Series 2016C Bonds”) 12/20/2016 $150,000,000 $144,535,000 Wastewater System Improvement and Refunding Revenue Bonds, Series 2017A (“Series 2017A Bonds”) 12/14/2017 $316,175,000 $312,760,000 Wastewater System Revenue Bond (WIFIA - Deer Creek Sanitary Tunnel Pump Station and Sanitary Relief Project), Series 2018A (“Series 2018A Bond”) 12/19/2018 $47,722,204** $261,479.86 ______________________ * Denotes Prior Senior Bonds, a portion of each series of which will be refunded by the Series 2019C Bonds. Outstanding Principal amounts are as of November 1, 2019 and therefore include the principal amounts to be refunded by the Series 2019C Bonds. ** The Series 2018A Bond was issued in a principal amount of not to exceed $47,722,204 of which $261,479.86 has been drawn on as of November 1, 2019. 4 Collectively, the Series 2019B&C Bonds, any Outstanding Prior Senior Bonds and any additional Bonds then Outstanding issued with a right to payment and secured by a lien on a parity therewith are referred to herein as the “Senior Bonds.” The Senior Bonds are also secured by amounts in the Renewal and Extension Fund (as defined herein). See the section herein captioned “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2019B&C BONDS.” The Series 2019B&C Bonds and the interest thereon are limited obligations of the District, payable solely from the Pledged Revenues, as defined herein, on a parity with the other Senior Bonds. The Series 2019B&C Bonds and the interest thereon shall not constitute a general or moral obligation of the District nor a debt, indebtedness, or obligation of, or a pledge of the faith and credit of, the District, the State or any political subdivision thereof, within the meaning of any constitutional, statutory or charter provision whatsoever. Neither the faith and credit nor the taxing power of the District, the State, or any political subdivision thereof is pledged to the payment of the Principal of, premium, if any, or interest on the Series 2019B&C Bonds or other costs incident thereto. The District has no authority to levy any taxes to pay the Series 2019B&C Bonds. Neither the members of the Board nor any person executing the Series 2019B&C Bonds shall be liable personally on the Series 2019B&C Bonds by reason of the issuance thereof. Pledged Revenues. The Series 2019B&C Bonds are sewer system revenue bonds secured by a pledge of certain revenues of the System, referred to herein as “Pledged Revenues.” See the sections herein captioned “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2019B&C BONDS – Pledged Revenues” and “ – Flow of Funds” and “FINANCIAL OPERATIONS OF THE DISTRICT” for further discussion of the specific District revenues constituting Pledged Revenues under the Bond Ordinance. Renewal and Extension Fund. The Bond Ordinance establishes a Renewal and Extension Fund into which the District may deposit a portion of the Pledged Revenues. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2019B&C BONDS – Flow of Funds - Deposits to and Uses of Moneys in the Renewal and Extension Fund.” Series 2019B&C Bonds Not Secured by the Debt Service Reserve Account. The Bond Ordinance also establishes a Debt Service Reserve Account for the Senior Bonds, excluding any Senior SRF Bonds (as defined in Appendix C to this Official Statement) and Senior Uncovered Bonds. “Senior Uncovered Bonds” means all series of Senior Bonds, other than Senior SRF Bonds, with respect to which the District has specified pursuant to a Series Ordinance (as defined in Appendix C to this Official Statement) that such series of Senior Bonds will not be secured by the Debt Service Reserve Account. The Series 2019B&C Bonds are Senior Uncovered Bonds and therefore are not secured by the Debt Service Reserve Account. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2019B&C BONDS − Flow of Funds − Deposits to and Uses of Moneys in the Debt Service Reserve Account.” Additional Bonds. The Bond Ordinance authorizes the District to issue additional Bonds thereunder which may be either “Senior Bonds” or “Subordinate Bonds,” subject to certain requirements of the Bond Ordinance. The Bond Ordinance defines “Senior Bonds” as Bonds that have a right to payment and are secured by a lien on a parity with the Outstanding Senior Bonds and any additional Bonds issued on a parity (except with respect to any Credit Facility which may be available only to one or more series of Senior Bonds and except that Senior SRF Bonds and Senior Uncovered Bonds are not secured by the Debt Service Reserve Account) with respect to the Pledged Revenues. The Master Bond Ordinance defines “Subordinate Bonds” as Bonds, including Subordinate SRF Bonds (as defined in Appendix C to this Official Statement), issued with a right to payment from the Pledged Revenues and secured by a lien on the Pledged Revenues expressly junior and subordinate to the Senior 5 Bonds. The Series 2019B&C Bonds and any other Senior Bonds or Subordinate Bonds issued by the District previously or in the future under the Master Bond Ordinance are referred to herein collectively as the “Bonds.” See “DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE BOND ORDINANCE AND THE CONTINUING DISCLOSURE AGREEMENT” in Appendix C hereto for a discussion of the requirements that must be satisfied under the Master Bond Ordinance prior to the issuance of additional Bonds thereunder. Other Indebtedness There are twenty-four series of Outstanding Bonds previously issued by the District (not including the Series 2019B&C Bonds), which are payable from Pledged Revenues of the System for the purpose of financing or refinancing the cost of designing, constructing, improving, renovating, repairing, replacing and equipping new and existing District wastewater facilities. As of November 1, 2019, the aggregate principal amount of Senior Bonds Outstanding is $1,145,131,480. In addition to the nine series of outstanding Senior Bonds (not including the Series 2019B&C Bonds), the District has five additional series of outstanding Subordinate Bonds payable from Pledged Revenues on a subordinate basis to the Senior Bonds outstanding in the aggregate principal amount of $114,320,000 that were purchased by the State Environmental Improvement and Energy Resources Authority of the State of Missouri (the “Authority”) through the Missouri State Revolving Fund Program (the “SRF Program”) of the Authority and the Missouri Department of Natural Resources (“DNR”). The District also has ten additional series of Outstanding Bonds payable from Pledged Revenues on a subordinate basis to the Senior Bonds, which are outstanding as of November 1, 2019 in the aggregate principal amount of $252,361,900.56 under the State’s Direct Loan Program, which were issued as Subordinate Bonds under the Master Bond Ordinance and the applicable Series Ordinances. For additional information on the fifteen series of Subordinate Bonds (collectively, the “Subordinate SRF Bonds”), see the section herein captioned “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2019B&C BONDS – Other Indebtedness”. Continuing Disclosure Information At the time of issuance of the Series 2019B&C Bonds, the District will enter into a Disclosure Dissemination Agent Agreement dated as of December 1, 2019 (the “Continuing Disclosure Agreement”) with Digital Assurance Certification, L.L.C. (“DAC”), under which the District will designate DAC as Disclosure Dissemination Agent (as defined in Appendix C to this Official Statement). Pursuant to the Continuing Disclosure Agreement, the District will covenant to provide certain financial and operating information with respect to the District on an on-going basis and notice of certain events in accordance with Rule 15c2-12 promulgated by the United States Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time (“Rule 15c2- 12”). These covenants have been made in order to assist the Underwriters (as defined herein) in complying with Rule 15c2-12. See the section herein captioned “CONTINUING DISCLOSURE” and “DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE BOND ORDINANCE AND THE CONTINUING DISCLOSURE AGREEMENT” in Appendix C hereto. Additional Information Appendix A to this Official Statement contains the Independent Auditors’ Report, Management’s Discussion and Analysis and Basic Financial Statements of the District for the Fiscal Years ended June 30, 2019 and 2018. Appendix B to this Official Statement contains certain information regarding the service area of the District. Appendix C to this Official Statement includes definitions of certain capitalized terms used in this Official Statement and summaries of certain provisions of the Bond Ordinance and the Continuing Disclosure Agreement. Appendix D to this Official Statement contains the 6 Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series 2019B prepared on behalf of the District with respect to the Series 2019B&C Bonds (the “Feasibility Report”). Appendix E to this Official Statement contains the proposed forms of the opinions that are anticipated to be rendered by Co-Bond Counsel at the time of delivery of the Series 2019B&C Bonds. Brief descriptions of the Series 2019B&C Bonds, the Bond Ordinance and the District are included in this Official Statement. Such descriptions, information and summaries provided herein do not purport to be comprehensive or definitive. All references herein to any documents are qualified by the terms of such documents in their entirety. Until the issuance and delivery of the Series 2019B&C Bonds, copies of the documents described herein may be obtained from the District. After delivery of the Series 2019B&C Bonds, copies of such documents will be available for inspection at the corporate trust office of UMB Bank, N.A. in St. Louis, Missouri, as the Paying Agent under the Bond Ordinance (the “Paying Agent”). THE SERIES 2019B&C BONDS General The Master Bond Ordinance authorizes the issuance of Bonds thereunder from time to time in one or more series substantially in the form set forth in the related Series Ordinance. The 2019B Ordinance further authorizes the execution, issuance and delivery of a series of Bonds thereunder and under the Master Bond Ordinance to be designated as “The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series 2019B” in the aggregate principal amount of $52,130,000 which series of Bonds shall be executed, issued and delivered under, and secured by, the Master Bond Ordinance and the 2019B Ordinance. The 2019C Ordinance further authorizes the execution, issuance and delivery of a series of Bonds thereunder and under the Master Bond Ordinance to be designated as “The Metropolitan St. Louis Sewer District Taxable Wastewater System Refunding Revenue Bonds, Series 2019C” in the aggregate principal amount of $276,260,000 which series of Bonds shall be executed, issued and delivered under, and secured by, the Master Bond Ordinance and the 2019C Ordinance. Additional Senior Bonds and Subordinate Bonds may also be issued from time to time as provided in, and subject to the limitations set forth in, the Master Bond Ordinance, the 2019B Ordinance and the Series 2019C Ordinance, as applicable. See “DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE BOND ORDINANCE AND THE CONTINUING DISCLOSURE AGREEMENT” in Appendix C hereto. The Series 2019B&C Bonds shall be issued in fully registered form in the denomination of $5,000 each or integral multiples thereof and shall be dated the date of delivery thereof. Each Series 2019B&C Bond shall be numbered in a convenient manner, established by UMB Bank, N.A. in St. Louis, Missouri (the “Bond Registrar”), and shown on the Bond Register. The Series 2019B&C Bonds shall bear interest at the rates per annum set forth on the inside cover pages hereof, computed on the basis of a 360-day year consisting of twelve 30-day months, payable on May 1, 2020, and semiannually thereafter on May 1 and November 1 of each year and shall mature in the principal amounts as set forth on the inside cover pages hereof, unless earlier called for redemption. So long as any of the Series 2019B&C Bonds are in book-entry form, the Principal, redemption premium, if any, and interest on such Series 2019B&C Bonds are payable by check or draft mailed, or wire transfer, to Cede & Co. as Registered Owner thereof and will be redistributed by DTC and the 7 participants as described below under “Book-Entry Only System.” So long as Cede & Co. is the registered owner of the Series 2019B&C Bonds, as nominee of DTC, references herein to the Bondowners, Owners or Registered Owners shall mean Cede & Co., as aforesaid, and shall not mean the Beneficial Owners (herein defined) of the Bonds. Redemption Provisions Optional Redemption of Series 2019B Bonds. At the District’s option, the Series 2019B Bonds or portions thereof maturing on May 1, 2030 and thereafter may be called for redemption and payment prior to their stated maturity on May 1, 2029, and thereafter, in whole or in part on any date in such order of maturity as shall be determined by the District at the redemption price of 100% of the principal amount thereof plus accrued interest thereon to the redemption date. Mandatory Sinking Fund Redemption of Series 2019B Bonds. The Series 2019B Bonds maturing in the years 2044 and 2049 are Term Bonds and are subject to mandatory redemption prior to maturity on May 1 in each of the years set forth below (each a “mandatory redemption date”), at 100% of the principal amount thereof plus accrued interest to the redemption date, without premium: Series 2019B Bonds Maturing May 1, 2044 Year Principal Amount 2040 $2,115,000 2041 2,220,000 2042 2,330,000 2043 2,445,000 2044+ 2,570,000 _____________ +Final maturity Series 2019B Bonds Maturing May 1, 2049 Year Principal Amount 2045 $2,700,000 2046 2,830,000 2047 2,975,000 2048 3,125,000 2049+ 3,280,000 _____________ +Final maturity The District shall redeem such an aggregate Principal amount of the Series 2019B Bonds that are Term Bonds at a redemption price equal to the Principal amount thereof plus the interest due thereon to the mandatory redemption date. Optional Redemption of Series 2019C Bonds (Par Call). At the District’s option, the Series 2019C Bonds or portions thereof maturing on May 1, 2030 and thereafter may be called for redemption and payment prior to their stated maturity on May 1, 2029, and thereafter, in whole or in part on any date in such order of maturity as shall be determined by the District at the redemption price of 100% of the principal amount thereof plus accrued interest thereon to the redemption date. Optional Redemption of Series 2019C Bonds (Make-Whole Call). At the District’s option, the Series 2019C Bonds are subject to redemption prior to maturity on any date prior to May 1, 2029, in 8 whole or in part, and if in part from such maturities and interest rates as shall be determined by the District on any Business Day at a redemption price equal to the greater of: (A) the principal amount of such Series 2019C Bonds to be redeemed, or (B) the sum of the present values of the remaining scheduled payments of principal and interest on such Series 2019C Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date such Series 2019C Bonds are to be redeemed, discounted to the date of redemption of such Series 2019C Bonds to be redeemed on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (defined below) plus 20 basis points plus accrued interest on such Series 2019C Bonds being redeemed to the date fixed for redemption. The make whole optional redemption price of any Series 2019C Bonds to be redeemed will be calculated by an independent accounting firm, investment banking firm or financial advisor (the “Calculation Agent”) retained by the District at the District’s expense. The Paying Agent and the District may rely on the Calculation Agent’s determination of the make whole optional redemption price and will not be liable for such reliance. The District shall confirm and transmit the redemption price as so calculated on such dates and to such parties as shall be necessary to effectuate such redemption. “Treasury Rate” means, as of any make-whole redemption date for a Series 2019C Bond, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity, excluding inflation indexed securities (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the call notice date or, if such statistical release is no longer published, any publicly available source of similar market data) most nearly equal to the Make Whole Period (defined below); provided, however, that if the Make Whole Period is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used. The Treasury Rate will be determined by the Calculation Agent. “Make Whole Period” means the period between the redemption date of the Series 2019C Bonds to be redeemed pursuant to the make-whole optional redemption and the stated maturity date of the Series 2019C Bonds to be redeemed. Mandatory Sinking Fund Redemption of Series 2019C Bonds. The Series 2019C Bonds maturing in the years 2038 and 2045 are Term Bonds and are subject to mandatory redemption prior to maturity on May 1 in each of the years set forth below (each a “mandatory redemption date”), at 100% of the principal amount thereof plus accrued interest to the redemption date, without premium: Series 2019C Bonds Maturing May 1, 2038 Year Principal Amount 2036 $6,575,000 2037 6,780,000 2038+ 7,000,000 _____________ +Final maturity 9 Series 2019C Bonds Maturing May 1, 2045 Year Principal Amount 2040 $40,290,000 2041 41,595,000 2042 42,955,000 2043 6,485,000 2044 5,670,000 2045+ 5,860,000 _____________ +Final maturity The District shall redeem such an aggregate Principal amount of the Series 2019C Bonds that are Term Bonds at a redemption price equal to the Principal amount thereof plus the interest due thereon to the mandatory redemption date. Selection of Bonds to be Redeemed; Redemption Among Series. If less than all of the Bonds of like maturity of any series shall be called for redemption, the particular Bonds, or portions of Bonds, to be redeemed shall be selected by the Paying Agent in such equitable manner as the Paying Agent may determine. The portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the Principal amount of $5,000 or an integral multiple thereof, and, in selecting portions of such Bonds for redemption, the District shall treat each such Bond as representing that number of Bonds which is obtained by dividing the Principal of such Bond to be redeemed in part by $5,000. Subject to the redemption provisions of any Series Ordinance, the District in its discretion may redeem the Bonds of any series, or a portion of the Bonds of any such series, before it redeems the Bonds of any other series. Within any particular series, any redemption of Bonds shall be effected in the manner provided in the Master Bond Ordinance and in any Series Ordinance. Selection of Series 2019C Bonds to be Redeemed. The District will designate which maturities of the Series 2019C Bonds are to be redeemed. If the Series 2019C Bonds are not registered in book-entry only form, any redemption of less than all of a maturity of the Series 2019C Bonds shall be effected by the Paying Agent on a pro-rata basis subject to minimum authorized denominations. If less than all of the Series 2019C Bonds of like maturity shall be called for redemption, the particular Series 2019C Bonds, or portions of Series 2019C Bonds, to be redeemed shall be selected by the Paying Agent in such equitable manner as the Paying Agent may determine. So long as DTC or a successor securities depository is the sole registered owner of the Series 2019C Bonds, if less than all of the Series 2019C Bonds of a maturity are called for prior redemption, the particular Series 2019C Bonds or portions thereof to be redeemed shall be selected on a “Pro Rata Pass-Through Distribution of Principal” basis in accordance with DTC procedures, provided that, so long as the Series 2019C Bonds are held in book-entry form, the selection for redemption of such Series 2019C Bonds will be made in accordance with the operational arrangements of DTC then in effect that at issuance provided for adjustment of the principal by a factor provided pursuant to DTC operational arrangements. If the Paying Agent does not provide the necessary information and identify the redemption as on a Pro Rata Pass-Through Distribution of Principal basis, the Series 2019C Bonds shall be selected for redemption by lot in accordance with DTC procedures. Redemption allocations made by DTC, the Direct Participants or such other intermediaries that may exist between the District and the beneficial owners are to be made on a “Pro Rata Pass-Through Distribution of Principal” basis as described above. If the DTC operational arrangements do not allow for the redemption of the Series 2019C Bonds on a Pro Rata Pass-Through Distribution of Principal basis as described above, then the Series 2019C Bonds will be selected for redemption by lot in accordance with DTC procedures. 10 Notice of Redemption. Unless waived by any registered owner of Bonds to be redeemed and except as may be otherwise provided in a Series Ordinance, official notice of any such redemption shall be given by the Bond Registrar on behalf of the District by mailing a copy of an official redemption notice by first class mail, at least 30 days and not more than 60 days prior to the date fixed for redemption to the registered owner of the Bond or Bonds to be redeemed at the address shown on the Bond Register or at such other address as is furnished in writing by such registered owner to the Bond Registrar. All official notices of redemption shall be dated, shall contain the complete official name of the Bond issue, and shall state: (1) the redemption date; (2) the redemption price; (3) the interest rate and maturity date of the Bonds being redeemed; (4) if less than all the Outstanding Bonds are to be redeemed, the Bond numbers, and, when part of the Bonds evidenced by one Bond certificate are being redeemed, the respective Principal amounts of such Bonds to be redeemed; (5) that on the redemption date the redemption price will become due and payable upon each such Bond or portion thereof called for redemption and that interest thereon shall cease to accrue from and after such date; and (6) the place where such Bonds are to be surrendered for payment of the redemption price (which place of payment shall be the principal payment office of the Paying Agent or at such other office designated by the Paying Agent for such purpose) and the name, address, and telephone number of a person or persons at the Paying Agent who may be contacted with respect to the redemption. Any notice of redemption of any Bonds may specify that the redemption is contingent upon the deposit of moneys with the Paying Agent in an amount sufficient to pay the redemption price (which price shall include the redemption premium, if any) of all the Bonds or portions of Bonds which are to be redeemed on that date. Prior to any redemption date, the District shall deposit with the Paying Agent an amount of money sufficient to pay the redemption price of all the Bonds or portions of Bonds which are to be redeemed on that date. For so long as DTC is effecting book-entry transfers of the Bonds, the Bond Registrar shall provide the notices specified in the Bond Ordinance to DTC. It is expected that DTC shall, in turn, notify its participants and that the participants, in turn, will notify or cause to be notified the Beneficial Owners. Any failure on the part of DTC or a participant, or failure on the part of a nominee of a Beneficial Owner of a Bond (having been mailed notice from the Bond Registrar, a participant or otherwise) to notify the Beneficial Owner of the Bond so affected, shall not affect the validity of the redemption of such Bond. Any defect in any notice of redemption shall not affect the validity of proceedings for redemption of the Bonds. Effect of Notice of Redemption Official notice of redemption having been given in the manner and under the conditions provided in the Bond Ordinance and moneys for payment of the redemption price being held by the Paying Agent as provided in the Bond Ordinance, the Bonds or portions of Bonds called for redemption shall, on the redemption date designated in such notice, become and be due and payable at the redemption price provided for redemption of such Bonds or portions of Bonds on such date, and from and after such date interest on the Bonds or portions of Bonds called for redemption shall cease to accrue, such Bonds or portions of Bonds shall cease to be entitled to any lien, benefit, or security under the Bond Ordinance, and the owners of such Bonds or portions of Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. Upon surrender for partial redemption of any Bond, there shall be prepared for and delivered to the registered owner a new Bond or Bonds of the same series, maturity, and interest rate in the amount of the unpaid Principal. 11 Book-Entry Only System The Series 2019B&C Bonds are available in book-entry only form. Purchasers of the Series 2019B&C Bonds will not receive certificates representing their interests in the Series 2019B&C Bonds. Ownership interests in the 2019B&C Bonds will be available to purchasers only through a book-entry system (the “Book-Entry System”) maintained by DTC, New York, NY. The information provided immediately below concerning DTC and the Book-Entry Only System, as it currently exists, has been obtained from DTC and is not guaranteed as to accuracy or completeness by, and is not to be construed as a representation by, the District. The District makes no assurances that DTC, Direct Participants, Indirect Participants or other nominees of the Beneficial Owners will act in accordance with the procedures described herein or in a timely manner. General. DTC, New York, NY, will act as securities depository for the Series 2019B&C Bonds. The Series 2019B&C Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Series 2019B&C Bond certificate will be issued for each maturity of the Series 2019B&C Bonds, each in the aggregate principal amount of such maturity, and will be deposited with the Paying Agent as DTC’s “FAST Agent.” DTC and Participants. DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has an S&P Global Ratings’ rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Ownership Interests. Purchases of Series 2019B&C Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Series 2019B&C Bonds on DTC’s records. The ownership interest of each actual purchaser of each Series 2019B&C Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Series 2019B&C Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests 12 in the Series 2019B&C Bonds, except in the event that use of the Book-Entry System for the Series 2019B&C Bonds is discontinued. Transfers. To facilitate subsequent transfers, all Series 2019B&C Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Series 2019B&C Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2019B&C Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series 2019B&C Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Notices. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Series 2019B&C Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Series 2019B&C Bonds, such as redemptions, tenders, defaults and proposed amendments to the Series 2019B&C Bond documents. For example, Beneficial Owners of the Series 2019B&C Bonds may wish to ascertain that the nominee holding the Series 2019B&C Bonds for their benefit has agreed to obtain and transmit notice to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Series 2019B&C Bonds within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. Voting. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Series 2019B&C Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Series 2019B&C Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Payments of Principal, Redemption Price and Interest. Redemption proceeds, distributions, and dividend payments on the Series 2019B&C Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts, upon DTC’s receipt of funds and corresponding detail information from the District or the Paying Agent on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor the Paying Agent, nor the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 13 Discontinuation of Book-Entry Only System. DTC may discontinue providing its services as depository with respect to the Series 2019B&C Bonds at any time by giving reasonable notice to the Paying Agent or the District. Under such circumstances, in the event that a successor depository is not obtained, Series 2019B&C Bond certificates are required to be printed and delivered. The Direct Participant holding a majority position in the Series 2019B&C Bonds may decide to discontinue use of the system of book-entry transfer through DTC (or a successor securities depository). In that event, Series 2019B&C Bond certificates will be printed and delivered to DTC. The information above concerning DTC and DTC’s book-entry system has been obtained from DTC and is not guaranteed as to accuracy or completeness by and is not to be construed as a representation by the District. The District does not make any assurance that DTC, Direct Participants, Indirect Participants or other nominees of the Beneficial Owners will act in accordance with the procedures described above or in a timely manner. Registration, Transfer and Exchange of Series 2019B&C Bonds The Paying Agent has been appointed the Bond Registrar and as such shall maintain the Bond Register for the registration and transfer of Series 2019B&C Bonds as provided in the Bond Ordinance, as applicable. Any Series 2019B&C Bond may be transferred only upon the books kept for the registration and transfer of Series 2019B&C Bonds upon surrender thereof to the Paying Agent duly endorsed for transfer or accompanied by a written instrument of transfer duly executed by the registered owner or his attorney or legal representative in such form as shall be satisfactory to the Paying Agent. Upon any such transfer, the District shall execute and the Paying Agent shall authenticate and deliver in exchange for such Series 2019B&C Bond a new fully registered Series 2019B&C Bond or Series 2019B&C Bonds, registered in the name of the transferee, of any denomination or denominations authorized by the Bond Ordinance. Any Series 2019B&C Bond, upon surrender thereof at the principal corporate trust office of the Paying Agent together with a written instrument of transfer duly executed by the registered owner or his attorney or legal representative in such form as shall be satisfactory to the Paying Agent, may at the option of the registered owner thereof, be exchanged for an equal aggregate principal amount of Series 2019B&C Bonds of the same series and maturity and bearing interest at the same rate. In all cases in which Series 2019B&C Bonds shall be exchanged or transferred, the District shall execute and the Paying Agent shall authenticate and deliver, at the earliest practicable time, Series 2019B&C Bonds in accordance with the provisions of the Bond Ordinance, as applicable. All Series 2019B&C Bonds surrendered in any such exchange or transfer shall forthwith be cancelled by the Paying Agent. The District or the Paying Agent may charge the Bondholder requesting the same for every such exchange or transfer of Series 2019B&C Bonds sufficient to reimburse it for any tax or other governmental charge required to be paid with respect to such exchange or transfer, and such charge shall be paid before any such new Series 2019B&C Bond shall be delivered. Persons Deemed Owners of Series 2019B&C Bonds The person in whose name any Series 2019B&C Bond shall be registered as shown on the Bond Register required to be maintained by the Paying Agent shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of and redemption premium, if any, and interest on any such Series 2019B&C Bond shall be made only to or upon the order of the Registered Owner thereof or his legal representative. All such payments shall be valid and effectual to 14 satisfy and discharge the liability upon such Series 2019B&C Bond, including the interest thereon, to the extent of the sum or sums so paid. SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2019B&C BONDS General The Series 2019B&C Bonds are sewer system revenue bonds secured by and payable from Pledged Revenues on a parity with the District’s Outstanding Senior Bonds and any other Senior Bonds issued under the terms of the Master Bond Ordinance. The Senior Bonds are also secured by amounts on deposit in the Renewal and Extension Fund and, except with respect to Senior Uncovered Bonds, the Debt Service Reserve Account. The Series 2019B&C Bonds are Senior Uncovered Bonds and therefore are not secured by the Debt Service Reserve Account. The Series 2019B&C Bonds and the interest thereon are limited obligations of the District payable solely from the Pledged Revenues on a parity with the other Senior Bonds. The Series 2019B&C Bonds and the interest thereon shall not constitute a general or moral obligation of the District nor a debt, indebtedness or obligation of, or a pledge of the faith and credit of, the District or the State or any political subdivision thereof, within the meaning of any constitutional, statutory or charter provision whatsoever. Neither the faith and credit nor the taxing power of the District, the State or any political subdivision thereof is pledged to the payment of the Principal of, premium, if any, or interest on the Series 2019B&C Bonds or other costs incident thereto. The District has no authority to levy any taxes to pay the Series 2019B&C Bonds. Neither the members of the Board nor any person executing the Series 2019B&C Bonds shall be liable personally on the Series 2019B&C Bonds by reason of the issuance thereof. Pledged Revenues Pursuant to the Master Bond Ordinance, the District has pledged all Pledged Revenues to the payment of the Principal of, premium, if any, and interest on all Bonds issued thereunder. Such pledge is for the equal and proportionate benefit and security of the District’s Outstanding Senior Bonds and any other Senior Bonds issued under the terms of the Master Bond Ordinance regardless of the time or times of their issuance or maturity. In the Master Bond Ordinance, the District covenants that it will not issue obligations of any kind or nature payable from, or with a lien on, the Pledged Revenues or any part thereof having priority over or, except as permitted in the Master Bond Ordinance for the issuance of Senior Bonds, on a parity with the Series 2019B&C Bonds. Notwithstanding the foregoing, the Master Bond Ordinance permits the issuance of Subordinate Bonds secured by the Pledged Revenues on a subordinate basis to the Senior Bonds. “Pledged Revenues” means (a) Net Operating Revenues (as defined herein) of the System (as defined in the directly below paragraph), (b) Investment Earnings (as defined in the Bond Ordinance as all interest received on and profits derived from investments of moneys in all funds and accounts of the District other than investments derived from or with respect to (i) stormwater revenues, as described below, (ii) all funds and accounts established in connection with SRF Bonds and (iii) obligations issued by the District on behalf of any of its subdistricts), (c) Hedge Receipts and (d) all moneys paid or required to be paid into, and all moneys and securities on deposit from time to time in, the funds and accounts specified in the Bond Ordinance, but excluding any amounts required in the Bond Ordinance to be set aside pending, or used for, rebate to the United States of America government pursuant to Section 148(f) of the Internal Revenue Code of 1986, as amended (the “Code”), including, but not limited to, amounts in the Rebate Fund created in the Bond Ordinance. 15 The Bond Ordinance defines the “System” as the sanitary sewer system of the District, as it now exists and as it may be added to, extended, improved and equipped, either from the proceeds of the Bonds or from any other sources at any time, including without limitation, (a) all sanitary sewers, all combined sewers, all pumping stations, all wastewater treatment plants, and all equipment used in connection therewith, all facilities for the collection, treatment and disposal of sewage and wastewater, including industrial wastes, and (b) all other facilities or property of any nature or description, real or personal, tangible or intangible, owned or used by the District in the collection, treatment and disposal of sewage. The Bond Ordinance defines “Net Operating Revenues” as all Operating Revenues, after provision for payment of all Expenses of Operation and Maintenance. The Bond Ordinance defines “Operating Revenues” as all income and revenue of any nature derived from the operation of the System, including periodic wastewater billings, service charges, other charges for wastewater service and the availability thereof (other than any special assessment proceeds), connection or tap fees (whether accounted for as revenues or as contributed capital), net proceeds from business interruption insurance, the principal of gifts, bequests, contributions, grants and donations available to pay debt service of Bonds, and any amounts deposited in escrow in connection with the acquisition, construction, remodeling, renovation and equipping of facilities to be applied during the period of determination to pay interest on Bonds. The Bond Ordinance expressly excludes the following from the definition of Operating Revenues: (1) any profits or losses on the early extinguishment of debt or on the sale or other disposition, not in the ordinary course of business, of investments or fixed or capital assets, and local, state or federal grants or other moneys received for the payment of Expenses of Operation and Maintenance (See Appendix C for definition of “Expenses of Operation and Maintenance”), (2) local, state, or federal grants, loans (including Government Loans), capital improvement contract payments, or other moneys received for capital improvements to the System, (3) Investment Earnings, (4) any stormwater charges (referred to herein as the “Stormwater Service Charges”) and (5) any property tax revenues. Although revenues from the Stormwater Service Charge are not included in Operating Revenues and thus are not available for payment of debt service on any Bonds issued under the Bond Ordinance, including the Series 2019B&C Bonds, such revenues are accounted for and included in the amount of Operating Revenues identified in the Independent Auditor’s Report and Financial Statements included as Appendix A to this Official Statement. The schedule of Pledged Revenues shown on the following page was prepared to show the amount of Pledged Revenues available historically to pay debt service on the Bonds. [Remainder of page intentionally left blank] 16 WASTEWATER SEGMENT SCHEDULE OF PLEDGED REVENUES For the Fiscal Years Ended June 30, 2015 Through 20191 (In Thousands) 2015 2016 2017 2018 2019 Operating Revenues Sewer service charges2 $282,957 $304,685 $330,883 $364,171 $399,932 Recovery (provision) of doubtful sewer services charge account (2,230) (4,062) (2,534) (3,010) (4,361) Licenses, permits and other fees 6,657 3,620 4,036 3,777 3,063 Other 1,452 14,221 1,085 3,355 2,474 Total Operating Revenues $288,836 $318,464 $333,470 $368,293 $401,109 Nonoperating Revenues3 Investment income $2,556 $3,894 $2,457 $6,356 $14,439 Total Operating and Nonoperating Revenues $291,392 $322,358 $335,926 $374,649 $415,548 Operating Expenses Pumping and treatment $60,766 $59,100 $60,203 $60,735 $63,197 Collection system maintenance 32,141 33,292 33,477 29,266 29,309 Engineering 4,589 3,523 4,722 2,840 1,153 General and administrative 48,580 51,744 51,256 54,588 58,699 Water backup claims 3,862 7,631 5,035 1,548 5,436 Asset Management 13,374 12,969 14,143 14,048 12,791 Total Operating Expenses $163,311 $168,258 $168,836 $163,026 $170,585 Total Expenses $163,312 $168,259 $168,835 $163,026 $170,585 Pledged Revenues $128,080 $154,099 $167,091 $211,622 $244,963 Senior Bond Debt Service $38,352 $46,381 $58,182 $67,923 $77,941 Subordinate Bond Debt Service 23,496 27,379 31,178 32,476 36,192 Total Debt Service2 $61,848 $73,760 $89,361 $100,399 $114,133 Senior Bond Debt Coverage Ratio 3.3x 3.3x 2.9x 3.1x 3.1x Total Debt Service Coverage Ratio 2.1x 2.1x 1.9x 2.1x 2.1x ______________________ Source: District 1 For the purposes of this Official Statement figures have been rounded. 2 These numbers are based on the District’s year end audited financial statements and may differ from the historical numbers shown on Page 17 hereof and Table 9 of the Feasibility Report. These differences are due to presentation requirements for auditing purposes. 3 Audited figures exclude Build America Bond federal subsidy payments from nonoperating revenues and reduce the total annual debt service figure by the corresponding amount. Pro Forma Statement of Pledged Revenues and Debt Service Coverage The following table shows actual wastewater revenues and expenditures and debt service coverage for Fiscal Year 2019 and pro forma statements(1) showing projected wastewater revenues and expenditures and debt service coverage on existing and anticipated revenue bonds during the current Fiscal Year and the next four Fiscal Years. 17 COMPARISON OF PROJECTED PLEDGED REVENUES AND PROJECTED DEBT SERVICE COVERAGE(1)(2) FY 2019 Actual FY 2020 Projected FY 2021 Projected FY 2022 Projected FY 2023 Projected FY 2024 Projected User Charge Revenue $392,320,783 $436,558,237 $444,443,064 $460,556,043 $477,091,823 $495,258,179 Other Miscellaneous Revenue Other Operating Revenue(3) 7,865,362 4,428,400 4,806,981 5,160,542 5,558,069 6,004,056 Connection Fee Revenue 922,979 1,308,000 1,321,080 1,334,291 1,347,634 1,361,110 Subtotal Other Miscellaneous Revenue $8,788,341 $5,736,400 $6,128,061 $6,494,833 $6,905,702 $7,365,166 Interest Income – Operating and Capital $14,438,669 $10,345,302 $8,689,947 $8,866,747 $8,865,405 $9,576,044 Total Wastewater Revenue $415,547,793 $452,639,939 $459,261,072 $475,917,623 $492,862,930 $512,199,389 Gen. Fund Operating Expenses $156,514,816 $169,834,496 $176,143,995 $180,155,670 $186,270,637 $191,227,068 Other Operating Expenses 14,070,328 9,839,888 18,161,068 14,401,765 15,023,034 14,718,106 Subtotal Operating Expenses $170,585,144 $179,674,385 $194,305,063 $194,557,436 $201,293,671 $205,945,174 Net Revenue Available for Debt Service $244,962,649 $272,965,554 $264,956,009 $281,360,187 $291,569,259 $306,254,216 Actual and Projected Debt Service (Payments To Bondholders) Senior Bonds(4) $77,941,363 $79,146,919 $84,005,094 $91,349,302 $98,304,576 $109,121,807 Subordinate SRF Bonds 36,191,352 38,125,131 41,088,555 45,413,349 52,400,170 60,099,093 Total Projected Debt Service $114,132,715 $117,272,050 $125,093,649 $136,762,651 $150,704,746 $169,220,900 Total Projected Senior Debt Coverage 3.14x 3.45x 3.15x 3.08x 2.97x 2.81x Total Projected Coverage for all Debt 2.15x 2.33x 2.12x 2.06x 1.93x 1.81x _________ Source: Feasibility Report (1) See Appendix D – Feasibility Report page D-32 for detailed discussion of principal assumptions upon which projections are based. (2) For the purposes of this Official Statement figures have been rounded. (3) Includes interest earned from the Missouri American Water Loan and the City of Arnold, Missouri. (4) Does not include lower debt service after 2019 refunding. 18 Flow of Funds Funds and Accounts. The Bond Ordinance establishes or ratifies the establishment of the following funds and accounts and provides that the moneys deposited in such funds and accounts are held by U.S. Bank, N.A., St. Louis, Missouri, as the depository (the “Depository”) for the account of the District, in trust for the purposes set forth in the Bond Ordinance: (1) The Metropolitan St. Louis Sewer District Wastewater Revenue Fund (the “Revenue Fund”); (2) The Metropolitan St. Louis Sewer District Wastewater Sinking Fund (the “Sinking Fund”), and within such Sinking Fund a Payments Account and a Debt Service Reserve Account; (3) The Metropolitan St. Louis Sewer District Wastewater Renewal and Extension Fund (the “Renewal and Extension Fund”); (4) The Metropolitan St. Louis Sewer District Wastewater Rebate Fund (the “Rebate Fund”), and within such Rebate Fund a Series 2019B Rebate Account; and (5) The Metropolitan St. Louis Sewer District Wastewater Project Fund (the “Project Fund”), and within such Project Fund a Series 2019B Project Account and a Series 2019B&C Costs of Issuance Account. In addition to the funds described directly above, the Escrow Agreement (as defined herein) establishes the “2019 Escrow Fund for The Metropolitan St. Louis Sewer District, Wastewater System Revenue Bonds” (the “Escrow Fund”) to be held and administered by the Escrow Agent (as defined herein) in accordance with the provisions of the Escrow Agreement. Deposits to and Uses of Moneys in the Revenue Fund. The Bond Ordinance requires that the District deposit all Operating Revenues into the Revenue Fund from time to time as and when received. The Bond Ordinance also requires that the District apply moneys in the Revenue Fund, prior to the occurrence and continuation of an Event of Default under the Bond Ordinance, in the following order of priority: (1) to pay Expenses of Operation and Maintenance; (2) to deposit into the Sinking Fund the amounts required by the Bond Ordinance, as described below under the heading captioned “Deposits to and Uses of Money in the Sinking Fund”; (3) to make Replenishment Payments (as defined herein) to the Debt Service Reserve Account and to pay to any Credit Facility Provider any amounts due under any Credit Facility Agreement, including Additional Interest; (4) to deposit into the Rebate Fund the amounts required by the Bond Ordinance; (5) to pay any amounts due any Reserve Account Credit Facility Provider pursuant to a Reserve Account Credit Facility Agreement; (6) to deposit the amounts required to be deposited into the funds and accounts created by any Series Ordinance authorizing the issuance of Subordinate Bonds, for the purpose of paying Principal of (whether at maturity, upon mandatory redemption or as otherwise required by a Series Ordinance 19 relating to Subordinate SRF Bonds) and interest on Subordinate Bonds, making Hedge Payments under Subordinate Hedge Agreements, and accumulating reserves for such payments; (7) to make Accumulation Payments to the Debt Service Reserve Account in accordance with the Bond Ordinance; and (8) to pay any amounts required to be paid with respect to any Other System Obligations. In addition to, and after, the deposits described above, the District may from time to time deposit into the Renewal and Extension Fund any moneys and securities held in the Revenue Fund in excess of 45 days’ estimated Expenses of Operation and Maintenance. If at any time the amounts in any account of the Sinking Fund are less than the amounts required by the Bond Ordinance, and there are not on deposit in the Renewal and Extension Fund available moneys sufficient to cure any such deficiency, as described herein under the subsection captioned “Deposits to and Uses of Moneys in the Renewal and Extension Fund,” then the District shall withdraw from the funds and accounts of the District relating to Subordinate Bonds which are not Subordinate SRF Bonds and deposit in such account of the Sinking Fund, as the case may be, the amount necessary (or all the moneys in such funds and accounts, if less than the amount required) to make up such deficiency. Deposits to and Uses of Moneys in the Sinking Fund. After the District deposits all Operating Revenues into the Revenue Fund and applies such moneys to pay Expenses of Operation and Maintenance, then the Master Bond Ordinance provides for deposits to and uses of moneys in the accounts and subaccounts in the Sinking Fund as follows: Payments Account – General. Sufficient moneys shall be paid in periodic installments from the Revenue Fund into the Payments Account for the purpose of paying the Principal of and interest (excluding Additional Interest) on the Senior Bonds as they become due and payable and for the purpose of making Hedge Payments under Senior Hedge Agreements. Amounts held in the Payments Account shall be used solely to pay interest (excluding Additional Interest) and Principal of the Senior Bonds as the same become due and payable (whether at maturity or upon redemption) and to pay Hedge Payments under Senior Hedge Agreements when due. As of the date of this Official Statement, there are no Senior Hedge Agreements in effect. Interest. Except as otherwise provided in any Series Ordinance authorizing Senior SRF Bonds, on or before the 30th day preceding each Interest Payment Date for Senior Bonds (or, in the case of Senior Bonds bearing interest at a Variable Rate, on or before the Business Day preceding each Interest Payment Date), the District shall deposit in the Payments Account an amount which, together with any other moneys already on deposit therein and available to make such payment and, in the case of Senior SRF Bonds, anticipated investment earnings on reserve funds held by a bond trustee relating to such Senior SRF Bonds, is not less than the interest (excluding Additional Interest) coming due on such Senior Bonds on such Interest Payment Date. The District shall also deposit and continue to deposit all Hedge Receipts under Senior Hedge Agreements in the Payments Account from time to time as and when received. Principal. Except as otherwise provided in any Series Ordinance authorizing Senior SRF Bonds, on or before the 30th day preceding each Principal Maturity Date for Senior Bonds, the District shall deposit in the Payments Account an amount which, together with any other moneys already on deposit therein and available to make such payment, is not less than the Principal coming due on such Senior Bonds on such Principal Maturity Date. 20 Hedge Payments. On or before the 30th day preceding each payment date for Hedge Payments under Senior Hedge Agreements, the District shall deposit in the Payments Account an amount which, together with any other moneys already on deposit therein and available to make such payment, is not less than such Hedge Payments coming due on such payment date. Application of Moneys in Payments Account. No further payments need be made into the Payments Account whenever the amount available in the Payments Account, if added to the amount then in the Debt Service Reserve Account (without taking into account any amount available to be drawn on any Reserve Account Credit Facility), is sufficient to retire all Senior Bonds then Outstanding and to pay all unpaid interest accrued and to accrue prior to such retirement. No moneys in the Payments Account shall be used for or applied to the optional purchase or redemption of Senior Bonds prior to maturity unless: (i) provision shall have been made for the payment of all the Senior Bonds; or (ii) such moneys are applied to the purchase and cancellation of Senior Bonds which are subject to mandatory redemption on the next mandatory redemption date, which falls due within 12 months, such Senior Bonds are purchased at a price not more than would be required for mandatory redemption, and such Senior Bonds are cancelled upon purchase; or (iii) such moneys are applied to the purchase and cancellation of Senior Bonds at a price less than the amount of Principal which would be payable on such Senior Bonds, together with interest accrued through the date of purchase, and such Senior Bonds are cancelled upon purchase; or (iv) such moneys are in excess of the then required balance of the Payments Account and are applied to redeem a part of the Senior Bonds Outstanding on the next succeeding redemption date for which the required notice of redemption may be given. Deposits to and Uses of Moneys in the Debt Service Reserve Account. The Bond Ordinance provides that with respect to Senior Bonds which are not Senior Uncovered Bonds that the Debt Service Reserve Account will be funded in an amount equal to the Debt Service Reserve Requirement for the Senior Bonds which are not Senior Uncovered Bonds. The Bond Ordinance requires that the District deposit into the Debt Service Reserve Account the amounts specified in the Series Ordinances with respect to Senior Bonds. Notwithstanding the foregoing, there shall be no deposit into the Debt Service Reserve Account with respect to any SRF Bonds or Senior Uncovered Bonds nor shall the Debt Service Reserve Account secure any SRF Bonds or Senior Uncovered Bonds. The Series 2019B&C Bonds are Senior Uncovered Bonds and therefore are not secured by the Debt Service Reserve Account. Whenever for any reason the amount in the Payments Account is insufficient to pay all interest or Principal becoming due on the Senior Bonds within the next seven days (or, in the case of Senior Bonds bearing interest at a Variable Rate, on the next Business Day), the District shall make up any deficiency by transfers first from the Renewal and Extension Fund and second from the funds and accounts of the District relating to Subordinate Bonds which are not Subordinate SRF Bonds. Whenever, on the date that such interest or Principal is due, there are insufficient moneys in the Payments Account available to make such payment on Senior Bonds (except with respect to Senior SRF Bonds and Senior Uncovered Bonds which are not secured by the Debt Service Reserve Account), the District shall, without further instructions, apply so much as may be needed of the moneys in the Debt Service Reserve Account to prevent default in the payment of such interest or Principal, with priority to interest payments. Whenever by reason of any such application or otherwise (other than required Accumulation Payments, as required in the Bond Ordinance) the amount remaining to the credit of the Debt Service Reserve Account is less than the amount then required to be in the Debt Service Reserve Account, such deficiency shall be remedied by monthly deposits (“Replenishment Payments”) from the Revenue Fund, to the extent funds are available in the Revenue Fund for such purpose after all required transfers set forth above have been made. The District may elect to satisfy in whole or in part the Debt Service Reserve Requirement by means of a Reserve Account Credit Facility, subject to certain requirements as set forth in the Bond 21 Ordinance. See “DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE BOND ORDINANCE AND THE CONTINUING DISCLOSURE AGREEMENT” in Appendix C hereto. Deposits to and Uses of Moneys in the Renewal and Extension Fund. All sums accumulated and retained in the Renewal and Extension Fund shall be used first to prevent default in the payment of interest on or Principal of the Senior Bonds when due and then shall be applied by the District from time to time, as and when the District shall determine, to the following purposes and, prior to the occurrence and continuation of an Event of Default, in the order of priority determined by the District in its sole discretion: (a) for the purposes for which moneys held in the Revenue Fund may be applied pursuant to the Bond Ordinance and as described above; (b) to pay any amounts which may then be due and owing under any Hedge Agreement (including termination payments, fees, expenses, and indemnity payments); (c) to pay any governmental charges and assessments against the System or any part thereof which may then be due and owing; (d) to make acquisitions, betterments, extensions, repairs, or replacements or other capital improvements (including the purchase of equipment) to the System deemed necessary by the District (including payments under contracts with vendors, suppliers, and contractors for the foregoing purposes); (e) to acquire Senior Bonds by redemption or by purchase in the open market at a price not exceeding the callable price as provided and in accordance with the terms and conditions of the Bond Ordinance, which Senior Bonds may be any of the Senior Bonds, prior to their respective maturities, and when so used for such purposes the moneys shall be withdrawn from the Renewal and Extension Fund and deposited into the Payments Account for the Senior Bonds to be so redeemed or purchased; and (f) for any other purpose of the District. Rate Covenant The Bond Ordinance provides that the District shall continuously own, control, operate, and maintain the System in an efficient and economical manner and on a revenue producing basis and shall at all times prescribe, fix, maintain, and collect rates, fees, and other charges for the services, facilities, and commodities furnished by the System fully sufficient at all times to: (1) provide for 100% of the Expenses of Operation and Maintenance and for the accumulation in the Revenue Fund of a reasonable reserve therefor; and (2) produce Net Operating Revenues in each Fiscal Year which, together with Investment Earnings: (a) will equal at least 125% of the Debt Service Requirement on all Senior Bonds then Outstanding for the year of computation and 115% of the Debt Service Requirement on all Bonds then Outstanding for the year of computation; (b) will enable the District to make all required payments, if any, into the Debt Service Reserve Account and the Rebate Fund and to any Credit Facility Provider, any Reserve Account Credit Facility Provider, and any Qualified Hedge Provider; (c) will enable the District to accumulate an amount to be held in the Renewal and Extension Fund which, in the judgment of the District, is adequate to meet the costs of major renewals, replacements, repairs, additions, betterments, and improvements to the System, necessary to keep the same in good operating condition or as is required by any governmental agency having jurisdiction over the System; and (d) will remedy all deficiencies in required payments into any of the funds and accounts established under the Bond Ordinance from prior Fiscal Years. 22 If the District fails to prescribe, fix, maintain, and collect rates, fees, and other charges, or to revise such rates, fees, and other charges, in accordance with these provisions of the Bond Ordinance, the owners of not less than 25% in aggregate Principal amount of the Bonds then Outstanding, without regard to whether any Event of Default shall have occurred, may institute and prosecute in any court of competent jurisdiction an appropriate action to compel the District to prescribe, fix, maintain, or collect such rates, fees, and other charges, or to revise such rates, fees, and other charges, in accordance with the requirements of the Bond Ordinance. Senior and Subordinate Bonds Upon satisfaction of certain conditions, the Bond Ordinance permits the District, for specified purposes, to issue additional Senior Bonds without express limit as to principal amount, which will be equally and ratably secured on a parity basis with the Series 2019B&C Bonds and Outstanding Prior Senior Bonds under the Bond Ordinance. The Debt Service Requirement, as defined in the Bond Ordinance, which is used in the calculation of the additional bonds test, allows the District to take into account the anticipated receipt of U.S. Treasury Interest Subsidy payments to arrive at a net debt service figure with respect to the Series 2010B Bonds issued as “Build America Bonds.” The District may issue additional Senior Bonds in the future to finance part of the cost of capital improvements identified in the District’s Capital Improvement & Replacement Program (the “CIRP”). See the section herein captioned “THE CIRP.” The Bond Ordinance also permits the District to issue Subordinate Bonds which would be secured by a lien on the Pledged Revenues that would be junior and subordinate to the Series 2019B&C Bonds and any other Senior Bonds. See “DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE BOND ORDINANCE AND THE CONTINUING DISCLOSURE AGREEMENT” in Appendix C hereto. Other Indebtedness The Series 2019B&C Bonds are sewer system revenue bonds secured by and payable from Pledged Revenues on a parity with the Prior Senior Bonds. The District has also issued fifteen series of outstanding Subordinate Bonds. See the section herein captioned “MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW – Outstanding Indebtedness - Other Outstanding Debt” for a summary of the outstanding long-term debt of the District. For more information on the District’s long- term liabilities, see Note 6 in the District’s Notes to Financial Statements contained in Appendix A to this Official Statement. PLAN OF FINANCE Purpose of and Authority for the Series 2019B&C Bonds As previously discussed herein, at a special election held on April 5, 2016, voters within the District approved the Current Authorization. The Current Authorization enables the District to comply with federal and State clean water requirements. The District may use the proceeds of such sewer system revenue bonds for the purpose of designing, constructing, improving, renovating, repairing, replacing and equipping new and existing District wastewater facilities. The District will issue the Series 2019B Bonds to (a) pay a portion of the costs of the Series 2019B Project as described below under the heading “THE CIRP − Capital Finance Plans Contemplated Under Consent Decree”, and (b) pay the Costs of Issuance of the Series 2019B Bonds. The District will issue the Series 2019C Bonds to (a) refund the Refunded Bonds, and (b) pay the Costs of Issuance of the Series 2019C Bonds. 23 The Refunded Bonds consist of (i) the Series 2012A Bonds maturing in the year 2042, outstanding in the aggregate principal amount of $103,120,000, (ii) the Series 2012B Bonds maturing in the years 2028 through 2034, inclusive, except the 2031 maturity bearing interest at the rate of 2.75%, outstanding in the aggregate principal amount of $83,925,000, (iii) the Series 2013B Bonds maturing in the years 2031, 2032, 2038 and 2043, outstanding in the aggregate principal amount of $67,985,000, and (iv) a portion of the Series 2015B Bonds maturing in the year 2045, outstanding in the aggregate principal amount of $18,400,000. The District has elected to refund the Refunded Bonds pursuant to the provisions of the Master Bond Ordinance, the Series 2012A Ordinance, the Series 2012B Ordinance, the Series 2013B Ordinance and the Series 2015B Ordinance. A portion of the proceeds of the Series 2019C Bonds will be deposited into the Escrow Fund established under an Escrow Trust Agreement dated as of December 1, 2019 (the “Escrow Agreement”), between the District and UMB Bank, N.A., as Escrow Agent (the “Escrow Agent”), and will be used by the Escrow Agent to pay the costs of refunding the Refunded Bonds. The Series 2012A Bonds and the Series 2012B Bonds being refunded will be redeemed on May 1, 2022; the Series 2013B Bonds being refunded will be redeemed on May 1, 2023; and the Series 2015B Bonds being refunded will be redeemed on May 1, 2025; all at a redemption price of par plus redemption premium, if any, and accrued interest to the respective redemption dates pursuant to the Master Bond Ordinance and the Series Ordinances authorizing the issuance of each series of Refunded Bonds. Estimated Sources and Uses of Funds The following table summarizes the anticipated sources and uses of funds in connection with the issuance of the Series 2019B Bonds: Sources of Funds Par amount of Series 2019B Bonds $52,130,000.00 Plus Original Issue Premium 12,059,976.80 Total: $64,189,976.80 Uses of Funds Deposit to Series 2019B Project Account $63,814,012.41 Costs of Issuance1 375,964.39 Total: $64,189,976.80 __________ 1 Includes Underwriters’ discount. [Remainder of page intentionally left blank] 24 The following table summarizes the anticipated sources and uses of funds in connection with the issuance of the Series 2019C Bonds: Sources of Funds Par amount of Series 2019C Bonds $276,260,000.00 Release from Debt Service Reserve Account 26,045,141.79 Total: $302,305,141.79 Uses of Funds Deposit to Escrow Fund under Escrow Agreement $300,519,359.34 Costs of Issuance1 1,785,782.45 Total: $302,305,141.79 __________ 1 Includes Underwriters’ discount. [Remainder of page intentionally left blank] 25 DEBT SERVICE SCHEDULE The following table sets forth the debt service requirements for all Outstanding Prior Senior Bonds, the Series 2019B&C Bonds, the Subordinate Bonds and total debt service on all System revenue bonds. Year Ending June 30 Debt Service on Outstanding Prior Senior Bonds(1) Debt Service on Series 2019B&C Bonds Debt Service on Subordinate Bonds(2) Total Debt Service 2020 $ 71,246,848.38 $ 4,457,586.32 $37,780,130.50 $ 113,484,565.20 2021 64,552,561.30 13,266,537.96 37,922,004.59 115,741,103.85 2022 64,152,882.87 13,272,154.36 39,374,849.39 116,799,886.62 2023 64,501,481.53 13,263,536.72 39,833,492.60 117,598,510.85 2024 64,393,857.35 13,271,136.72 40,480,816.88 118,145,810.95 2025 64,441,351.88 13,264,734.22 40,569,628.21 118,275,714.31 2026 67,609,401.88 13,273,161.36 37,239,495.91 118,122,059.15 2027 70,199,651.88 13,266,287.12 27,389,040.41 110,854,979.41 2028 60,561,401.88 23,699,007.72 26,096,510.65 110,356,920.25 2029 60,344,151.88 23,693,926.82 26,207,006.03 110,245,084.73 2030 62,688,614.44 23,702,061.42 23,125,527.24 109,516,203.10 2031 57,838,464.44 28,167,208.02 21,280,574.76 107,286,247.22 2032 56,666,064.44 29,131,022.62 19,660,700.26 105,457,787.32 2033 59,262,976.94 23,168,314.92 19,752,261.91 102,183,553.77 2034 59,064,326.94 23,167,951.72 18,554,397.28 100,786,675.94 2035 70,698,026.94 8,740,658.92 11,424,961.50 90,863,647.36 2036 63,928,471.44 15,317,908.92 8,979,831.10 88,226,211.46 2037 64,697,389.44 15,313,204.68 8,383,220.50 88,393,814.62 2038 64,753,909.44 15,317,774.48 3,009,730.50 83,081,414.42 2039 74,615,004.44 8,100,894.48 3,018,548.80 85,734,447.72 2040 35,914,169.38 48,390,144.48 3,027,391.20 87,331,705.06 2041 35,913,319.38 48,381,343.36 2,256,856.40 86,551,519.14 2042 35,915,719.39 48,384,762.32 1,483,309.40 85,783,791.11 2043 35,918,969.38 10,513,358.86 - 46,432,328.24 2044 26,938,469.38 9,489,762.70 - 36,428,232.08 2045 26,940,219.38 9,496,477.40 - 36,436,696.78 2046 26,939,219.39 3,440,500.00 - 30,379,719.39 2047 17,393,219.38 3,444,000.00 - 20,837,219.38 2048 4,241,969.39 3,445,250.00 - 7,687,219.39 2049 4,241,969.38 3,444,000.00 - 7,685,969.38 2050 4,241,969.38 - - 4,241,969.38 2051 4,241,969.39 - - 4,241,969.39 2052 4,241,969.39 - - 4,241,969.39 2053 4,241,969.31 - - 4,241,969.31 Totals: $1,553,541,961.03 $523,284,668.62 $496,850,286.02 $2,573,676.915.67 _________________ (1) Excludes the debt service on the Refunded Bonds. Debt service figures are reduced by a 33% federal interest rate subsidy on the District’s Series 2010B Bonds for the year 2020 through 2029 and by a 35% federal interest rate subsidy thereafter. Such subsidy may be changed or eliminated at any point in the future. (2) Amounts are net of trustee fees, DNR fees and reserve fund earnings. 26 THE DISTRICT General The District is organized pursuant to Article VI, Section 30 of the Missouri Constitution which empowers the people of the County and the City “to establish a metropolitan district for functional administration of services common to the area included therein.” The District is the only special district in the State established pursuant to that section of the Missouri Constitution. The Charter established the District. The District was created to provide a metropolitan-wide system of wastewater treatment and sanitary sewerage facilities for the collection, treatment and disposal of sewage to serve the City and most of the more heavily populated areas of the County. Before the District’s creation, the City, various municipalities in the County 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 in 1956 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 in the County. The District purchased the Fee Fee Trunk Sewer Company and the Missouri Bottoms Sewer Company in 1978. The District has since acquired other investor-owned or municipally-operated systems. The District operates the fourth largest wastewater treatment system in the United States of America. The District’s service area now encompasses approximately 520 square miles including approximately all 66 square miles of the City and approximately 454 square miles (approximately 87%) of the County. Only the far western section of the County is not served by the District. The District provides sanitary sewer collection and treatment and stormwater management to a current population of approximately 1.3 million. As of June 30, 2019, the District served approximately 427,000 accounts, including approximately 361,000 single family residences, approximately 41,000 multi-family apartments and condos, and approximately 24,000 commercial/industrial businesses. For further description of the District’s service area, see the service area map located on the back cover of this Official Statement. For certain economic and demographic information regarding the City and the County, see Appendix B to this Official Statement. The Charter describes the District as “a body corporate, a municipal corporation and a political subdivision of the state.” The District’s Charter was amended in 2000 in order to update the District’s procedures and improve its operations. The amendments provided additional flexibility and structure to several aspects of District operations, including (1) establishment of an independent 15-member Rate Commission to review adjustments to the District’s wastewater and stormwater charges before the Board acts on them; (2) authorization for the District to issue revenue bonds on a District-wide basis and lowering the margin required for passage of both revenue and general obligation bonds to be consistent with the Missouri Constitution; (3) requiring a mandatory rotation of outside auditors every five years and the appointment of an internal auditor; (4) requiring a periodic independent management audit; and (5) permitting the investment of the District’s funds in the same manner as authorized by the Missouri Constitution for the investment of State funds. Other amendments to the Charter include (1) limiting the term of (a) Board trustees to two full consecutive terms plus any portion of an unexpired term (provided, however, that a Board trustee shall serve until his/her successor shall be appointed and qualified), and (b) commissioners on the three-member civil service commission (the “Civil Service Commission”) to two terms plus any portion of an unexpired term (provided, however, that each commissioner shall serve until 27 his/her successor shall be appointed and qualified), (2) requiring the publication of Board vacancies, and (3) requiring the Board to make a written report to the Mayor and Board of Alderman of the City and to the County Executive and County Council of the County on an annual basis. Eight additional amendments to the Charter were approved by voters at the special election held on June 5, 2012. The approved changes (1) remove the actual boundaries of the District from the Charter so that boundary changes do not require Charter amendment and are kept by the Office of the Secretary-Treasurer; (2) streamline the process of forming subdistricts; (3) more clearly delineate the District’s responsibility for stormwater management; (4) allow use of electronic media, or such other form of communication as may be required by Missouri law; (5) provide that the budget include a list of capital projects to be undertaken; (6) allow the District to use the design-build approach for projects; (7) provide that each Rate Commission representative organization shall serve until its successor shall be appointed and qualified; and (8) support gender neutrality. The Charter requires the District to adopt a continuing five-year strategic and operating plan on an annual basis. The strategic and operating plan states the District’s objectives for the succeeding five years and includes objective targets against which the District’s performance in meeting these objectives is measured. The District is subject to the provisions of the Federal Water Pollution Control Act, as amended, 33 U.S.C. 1251 et seq. (commonly referred to and defined herein as the, “Clean Water Act”), the stated objective of which is to restore and maintain the chemical, physical, and biological integrity of the nation’s waters. The District is also subject to the Missouri Clean Water Law, Sections 644.006 through 644.141 of the Revised Statutes of Missouri, as amended (the “Missouri Clean Water Law”), and other laws and regulations. The regulatory requirements are administered by the United States Environmental Protection Agency (“EPA”) through the DNR. See the section herein captioned “REGULATORY REQUIREMENTS”. Organization and Management General. The Charter established the Board as the governing body of the District. The Board is composed of six members, with three members appointed by the Mayor of the City and three members appointed by the County Executive of the County. No more than two trustees from each area can be of the same political affiliation. According to the Charter, 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 officers. 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 Board’s standing committees include Audit, Finance, Pension, Program Management and Stakeholder Relations. Administration of district-wide operations is by the executive staff under the direct supervision of the Executive Director. The Civil Service Commission serves in an advisory position regarding personnel administration and civil service matters, and hears appeals of disciplinary actions. The 15-member Rate Commission, an advisory body established pursuant to the amendments to the Charter adopted on November 7, 2000 (the “Rate Commission”) makes recommendations to the Board regarding all proposed changes in wastewater rates, stormwater rates and tax rates or regarding changes in structure to the foregoing. See the section herein captioned “MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW – Rate Commission and Rate Setting Process”. 28 Board of Trustees The current members of the Board are as stated below. Name Current Term Expires Michael Yates, Chair March 15, 2022 Annette Mandel, Vice Chair March 15, 2020 James Faul, Member March 15, 2021 James I. Singer, Member March 15, 20171 Freddie Dunlap, Member March 15, 2022 Amy Fehr, Member March 15, 2024 _____________________ 1 Pursuant to Section 5.010 of the District’s Charter, members continue to serve until a successor is appointed. Set forth below is certain biographical information on the members of the Board. Michael Yates, Chair (St. Louis County). Mr. Yates recently retired as a business representative for the Operating Engineers Local 148 and has served on the Board since January 17, 2012. Annette Mandel, Vice Chair (St. Louis City). Ms. Mandel is an attorney with the law firm of Mandel & Mandel, L.L.P and a former mayor of the City of Creve Coeur, Missouri. She has served on the Board since April 13, 2012. James Faul (St. Louis City). Mr. Faul is an attorney with the law firm of Hartnett Gladney Hetterman, L.L.C. Mr. Faul has served on the Board since April 17, 2013. James I. Singer (St. Louis County). Mr. Singer is a partner in the law firm of Schuchat, Cook & Werner. Mr. Singer has served on the Board since January 12, 2016. Freddie Dunlap (St. Louis City). Mr. Dunlap is a former City administrator, having served most recently as the City Assessor. Mr. Dunlap has served on the Board since January 1, 2018. Amy Fehr (St. Louis County). Ms. Fehr is an attorney with the law firm of Capes, Sokol, Goodman & Sarachan, P.C. She has served on the Board since September 6, 2019. Administration Management of the District is provided by a management team that reports to the Board, including an Executive Director, Secretary-Treasurer, Assistant Secretary-Treasurer, Internal Auditor, General Counsel, and Directors of Finance, Engineering, Human Resources, Operations and Information Systems. Set forth below is certain biographical information regarding selected members of the executive management staff of the District. Brian Hoelscher, P.E., Executive Director. Mr. Hoelscher served as the District’s Director of Engineering for more than nine years before his appointment as Executive Director on March 27, 2013. As the Director of Engineering, he was responsible for the delivery of the District’s CIRP as well as other environmental and regulatory duties. Mr. Hoelscher held several other management positions in the District’s engineering department prior to his tenure as Director of Engineering. Before joining the District in May 1995, Mr. Hoelscher served as the St. Louis area office manager for consulting engineers Consoer, Townsend, Envirodyne Engineers of Missouri, Inc. (now AECOM). Mr. Hoelscher has a Bachelor of Science in Chemical Engineering from Washington University in St. Louis, and is licensed as a professional engineer in Missouri and Illinois. 29 Tim R. Snoke, Secretary-Treasurer. Mr. Snoke joined the District as Secretary-Treasurer in May 2014. Before becoming Secretary-Treasurer, he spent 21 years at the former Ralcorp Holdings, Inc. in various finance and treasury management positions, most recently as Assistant Treasurer. Mr. Snoke holds a Bachelor of Science degree in Business Administration from Valparaiso University and a Masters of Business Administration from Saint Louis University. John Strahlman, Assistant Secretary-Treasurer. Mr. Strahlman was hired by the District in January 2015. His previous experience includes treasury management positions at Metropolitan Pier and Exposition Authority in Illinois, and at the Cook County, Illinois Treasurer’s office. He holds a Bachelor of Science degree in Public Finance from Indiana University and a Masters of Business Administration from DePaul University. Susan M. Myers, General Counsel. Ms. Myers has been employed by the District as in-house counsel since 2001 and was promoted to General Counsel in 2011. Prior to joining the District, she served as an environmental engineer for two years with EPA Region VII in RCRA Permitting and for nine years on a billion dollar Department of Energy Superfund clean-up project. Ms. Myers earned her law degree from the Saint Louis University School of Law and a Bachelor of Science in Geological Engineering from the University of Missouri-Rolla (currently Missouri University of Science and Technology). Marion M. Gee, Director of Finance. Mr. Gee was hired by the District in September 2015. Mr. Gee most recently served as Assistant Finance Director for the City of San Antonio, Texas. He previously served as the Finance Director for the Louisville Metropolitan Sewer District for 11 years. Mr. Gee is a certified public accountant and has a Bachelor of Science in Business Administration and a Masters of Business Administration, both from the University of Louisville. Richard Unverferth, P.E., Director of Engineering. Mr. Unverferth has served as the District’s Director of Engineering since May 2013. Prior to his current position, he held numerous positions in the District’s Engineering and Operations departments. Mr. Unverferth has a Bachelor of Science in Civil Engineering from the University of Missouri-Rolla (currently Missouri University of Science and Technology), and is a licensed professional engineer in Missouri. Tracey Coleman, Director of Human Resources. Ms. Coleman has served as the Director of Human Resources at the District since 2018. Before her promotion to her current position, Ms. Coleman was the Manager of Training and Organizational Development at the District. Before joining the District, she held positions at Laclede Gas, Edward Jones, HealthLink and A.G. Edwards. Ms. Coleman received her Master’s Degree from Webster University and a Chancellor’s Certification in Database Technology from the University of Missouri-St. Louis. Bret A. Berthold, P.E., Director of Operations. Mr. Berthold was named the District’s Director of Operations in December 2018. Mr. Berthold joined the District in April 2009 as the Operation Division Manager at the Bissell Point Wastewater Treatment Plant and transitioned to the Assistant Director of Operations position in September 2011. Before joining the District, Mr. Berthold held several positions at Spectrum Brands, Inc. Mr. Berthold received a Bachelor of Science in Mechanical Engineering from Missouri University of Science and Technology (formerly, University of Missouri – Rolla) and a Masters of Business Administration from Webster University. Jonathon C. Sprague, P.E., Director of Information Systems. Mr. Sprague has been the Director of Information Systems for the District since December 2018. Before his promotion to his current position, he joined the District in May 2005 as Assistant Director of Operations and became the District’s Director of Operations in 2007. Mr. Sprague has a Bachelor of Science in Electrical Engineering from 30 The University of Akron and a Masters of Business Administration from the College of William and Mary. The System The District owns and operates the System, which consists of sanitary, stormwater and combined collection sewers, pumping stations, and wastewater treatment facilities in its service area. The District provides sewer collection, pumping and treatment services within three major watersheds located within the District’s service area, including the Mississippi River watershed, the Missouri River watershed and the Meramec River watershed. In addition, the District provides a variety of other services, including sanitary sewer maintenance, stormwater sewer maintenance, floodwater control, monitoring of industrial waste, issuance of pretreatment discharge permits, engineering design and specification, construction of sewer lines, plan review and approvals, issuance of connection permits, public education and customer service. Collection and Trunk Sewers. As of October 10, 2019, the District owns and maintains 9,347 miles of collection and trunk sewers and force mains, ranging in size from six inches to 29 feet in diameter. They are classified as one of three types: wastewater, storm or combined. Sanitary sewers accommodate household and industrial waste. Storm sewers carry rainwater and surface water runoff. Combined sewers carry both types of waste. The System currently includes approximately 4,698 miles of wastewater sewers and force mains, approximately 2,979 miles of stormwater sewers and force mains, and approximately 1,670 miles of combined sewers that handle both wastewater and stormwater flows. Maintenance of the System is controlled and conducted out of three regional facilities. Pumping Stations and Force Mains. The District currently owns and maintains 279 pumping stations and 134 miles of force mains (which are included in the sewer system totals above). Pump station and force main support is divided into three geographic regions under a pump station manager. All pump stations are maintained regularly and monitored continuously by telemetry. Of the 279 stations, 38 are floodwall (overflow regulation and wet weather relief tank stations), 4 are stormwater and the remaining 237 are wastewater and combined sewage pump stations which move the flow of wastewater through the wastewater system and into District treatment plants. Wastewater Treatment Facilities. The District currently owns and operates seven wastewater treatment facilities. These facilities treated an average flow of 331 million gallons of wastewater per day for the District’s previous five Fiscal Years 2015 to 2019. The Bissell Point and Lemay wastewater treatment plants are the District’s two largest plants. Both of these plants serve the Mississippi River watershed. The Coldwater Creek and Missouri River wastewater treatment plants service the Missouri River watershed. The remaining wastewater treatment plants serve the Meramec River watershed. Employees and Employee Relations The District had 1,027 budgeted positions for Fiscal Year 2019, of which 952 are filled. Approximately 63% of the District’s employees within the Operations Department are represented by one of five unions: American Federation of State, County and Municipal Employees; Bricklayers; International Brotherhood of Electrical Workers; International Union of Operating Engineers; and Service Employees International. The District considers its employee relations to be excellent. The District entered into new collective bargaining agreements in 2016, which extend through June 30, 2020. Negotiations for the next collective bargaining agreements are expected to begin in the first quarter of 2020. Salary increases between FY 2019 and FY 2022 average 3% annually. The District also retains private companies and consultants from time to time to supplement and expand its existing staffing resources. 31 Economic Conditions in the District Generally, the District’s major revenue sources do not fluctuate with the local and national economies as much as local governments that depend on sales or income taxes for their major sources of revenue. The District uses several measures to forecast economic development in the District. Such factors are listed below for Fiscal Years 2015 through 2019: 2015 2016 2017 2018 2019 Sewer Plan Reviews: Number of Plans Approved 529 613 524 673 514 Number of Miles of Sewers 22 38 34 49 46 Sewer Construction Permits: Number of Permits Issued 3,447 4,546 4,523 3,769 3,792 Number of Miles of Sewers 33 30 23 25 24 Customer Connections: Number of Connection Permits Issued 2,017 2,165 2,490 2,178 2,384 Connection Fee Revenue $1,808,160 $1,691,032 $2,076,413 $1,249,104 $922,979 Value of Sewers Dedicated to the District by Developers $12,304,126 $11,271,085 $6,807,147 $24,800,000 $16,600,00 _________ Source: District Over the years, the City and County’s economies have each undergone a transformation from reliance on traditional manufacturing industries to those industries based on advanced technology and service. The St. Louis area is a center for health care, banking, finance, transportation, tourism, and education and has a strong and diverse manufacturing economy. The combined unemployment rate for the City and County was 3.5% in June 2019, which was lower than the national unemployment rate of 3.7% for the same time period. For more information on economic and demographic trends in the City and the County, see Appendix B hereto. Security The System is subject to safety and security inspections on a continuing basis by the District. All treatment plants are maintained as secure facilities with fences, locked gates and electronic surveillance equipment. The District does not represent that any existing or additional safety or security measures will be adequate in the event that terrorist activities are directed at the System. Further, damage to components of the System could have a material adverse impact on the District’s expenditures for repairs to the System. Insurance The District maintains third-party commercial insurance coverage for various risks while self-insuring for other risks and liabilities. Presently commercial insurance coverage is maintained for officers’, directors’ and general liability, property, boiler and machinery, excess flood, combined liability, cyber liability, business auto liability, excess liability, excess workers’ compensation, public entity fiduciary liability, crime, major facility pollution liability and sewer backup (blocked line and overcharged line). Such policies contain liability limits, deductions and retentions that management of the District believes to be customary for similar enterprises. Total premiums for third-party insurance coverage for Fiscal Year 2019 were $3,813,207, an approximately 7% increase from Fiscal Year 2018. 32 In addition, the District has established a risk management program and self-insures a portion of the risk related to its obligation to provide workers’ compensation and medical and hospitalization benefits to its employees and water backup claims of its customers. The estimated liabilities for payment of incurred (both reported and unreported) but unpaid claims relating to these matters are included in the District’s financial statements as a component of current deposits and accrued expenses. As of June 30, 2019 and 2018, these liabilities amounted to $7,920,684 and $4,026,003, respectively. 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. For more information regarding the District’s self-insurance program, see Note 10, Self-Insurance Programs, to the District’s Notes to Financial Statements contained in Appendix A to this Official Statement. The District has taken several actions to mitigate cyber threats and the business disruptions associated therewith, including enhancing the District’s security in relation to cyber threats. The District has reorganized its Information Technology Department to include a security division with two full time security specialists and has hired a Chief IT Security Officer that is shared with other government service providers. The focus of these new hires is to improve the District’s cybersecurity tools, operating procedures and incident response protocols. The District has also added security and disaster recovery initiatives to its Fiscal Year 2020 strategic plan. These actions provide for additional resources for monitoring and provide for disaster recovery to help prevent and minimize the risk of a cybersecurity incident. THE CIRP General The District developed the CIRP in 2004 which identifies proposed expenditures by the District for capital improvements to the District’s sewer facilities over the next several decades. The general objectives of the CIRP are to meet federal and State requirements and District policy regarding water pollution control, to provide a satisfactory level of service to users of the District’s sewer system, including reduction of building back-ups, and to continue the District’s program to rehabilitate its infrastructure system. The CIRP addresses the District’s infrastructure capital improvement projects involving the construction, repair, replacement and upgrade of sanitary and combined sewers, force mains, pump stations, tanks, tunnels, treatment plants, and stormwater sewers. The District has designated the portion of the CIRP improvements agreed to under the Consent Decree (as defined herein), hereinafter defined, as “Project Clear.” Project Clear has an estimated cost of over $5 billion dollars. As of November 1, 2019, the District has met all requirements related to Project Clear dictated by the Consent Decree within mandated deadlines and within budget. Historical Capital Improvement Expenditures Before 2004, the District financed substantially all of the capital improvements to its facilities from available revenues on a “pay-as-you-go” basis. Since Fiscal Year 2004 the District has paid for more than $2.2 billion in capital improvements through a combination of debt financing and “pay-as-you-go” financing. Since the District began implementation of the CIRP in 2004, the District has completed project improvements in the following categories: • increasing wastewater treatment capacity; • increasing quality of treatment levels to meet new regulations; • finishing construction of a new wastewater treatment plant; • improving infrastructure to reduce combined sewer overflows; • improving infrastructure to reduce sanitary sewer overflows; and • rehabilitating and replacing aging infrastructure. 33 Financing Plans for the CIRP There are two primary funding sources for financing the capital improvements identified in the CIRP: (1) debt, including certain Bonds issued under the Bond Ordinance; and (2) available Operating Revenues on a “pay-as-you-go” basis. The District will use the proceeds of previously issued Bonds, a portion of the proceeds of the Series 2019B Bonds and any Bonds issued by the District in the future under the Bond Ordinance to finance the infrastructure projects identified in the CIRP. The voters approved the issuance of $1,720,000,000 of sewer system revenue bonds, all of which have been issued in furtherance of the CIRP, at special elections held on February 3, 2004, August 5, 2008 and on June 5, 2012 (the “Prior Authorizations”, together with the Current Authorizations being referred to herein as, the “Authorizations”). As previously discussed herein, at a special election held on April 5, 2016, voters within the District approved the Current Authorization in furtherance of the CIRP. After the issuance of the Series 2019B&C Bonds, the remaining amount of the Current Authorization will be $598,428,796. The following table sets forth voter approval percentages at the special election for each Authorization. Year of Election Percentage in Favor of Each Authorization 2004 68% 2008 75% 2012 85% 2016 76% Some of the major projects constructed in part or in whole with proceeds of the Prior Authorizations were the Lower Meramec Treatment Plant, $177,000,000; Coldwater Creek Treatment Plant Improvements, $61,000,000; Missouri River Treatment Plant Rehab and Improvements, $52,000,000; Grand Glaize Plant Improvements, $35,000,000; CSO/SSO Collection System Improvements, $80,000,000; Lemay Treatment Plant Improvements, $40,000,000; Maline Creek CSO BP 051 & 052 Local Storage, $86,000,000; Lemay Pump Station No. 1 Redundant Force Main, $25,000,000; Coldwater Sanitary Relief Section B, C, and D Wet Weather Storage Facility Tank C, $20,000,000; Lemay WWTP Secondary Improvements, $15,000,000; Missouri River WWTP Secondary Treatment Expansion and Disinfection, $20,000,000; Maplewood – Blendon Combined Sewer Relief, $11,000,000; Bissell & Lemay WWTP Incinerator Scrubber Replacement, $8,000,000; and FF-11 Fee Fee Creek Sanitary Relief, $7,000,000. Some of the major projects to be constructed in part or in whole with the proceeds of the Current Authorization include: Lower Meramec River System Improvements – Baumgartner to Fenton WWTF Tunnel, $210,000,000; Deer Creek Sanitary Tunnel (Clayton Road to RDP), $150,000,000; Maline Creek CSO BP 051 & 052 Local Storage Facility, $86,000,000; DC-02 & DC-03 Sanitary Relief (Brentwood Boulevard to Conway Road) Phases II, III, and IV, $72,000,000; Lemay No. 3 Pump Station and Force Main, $40,000,000; Gravois Trunk Sanitary Storage Facility (Pardee Ln and Pardee Rd), $35,000,000; and Upper Maline Trunk Sanitary Relief Phase IV Section A, $18,000,000. 34 Total Capital Expenditures under CIRP The following table sets forth the District’s historic capital improvement expenditures for improvements to the System for Fiscal Years 2010 through 2019, including expenditures funded both by Bond proceeds and on a “pay-as-you-go” basis: Fiscal Year Ending June 30 Capital Improvement Expenditures 2010 $116,125,747 2011 99,958,334 2012 134,909,742 2013 151,321,500 2014 158,323,507 2015 196,100,162 2016 216,933,464 2017 249,487,948 2018 225,481,370 2019 221,248,644 Total: $1,769,890,418 ___________________ Source: District Capital Finance Plans Contemplated Under Consent Decree The District is currently constructing a multi-billion dollar, multi-decade CIRP to update and rehabilitate District’s aging wastewater collection and treatment system. The Board has approved a budget that identifies proposed appropriations by the District for wastewater capital improvements of approximately $335 million during the District’s Fiscal Year ending June 30, 2020, for a portion of the projects that are included in the CIRP. The District estimates that the cost of the CIRP for the period of Fiscal Year 2020 through Fiscal Year 2022 will be approximately $1 billion. Approximately 40% of the total major capital improvement expenditures for Fiscal Year 2020 to Fiscal Year 2022 are anticipated to be funded from operating revenues and the drawdown of available fund balances and the remaining approximately 60% is expected to be funded by the issuance of additional debt, including the Series 2019B Bonds, pursuant to the Current Authorization as further described herein. The District’s capital program in Fiscal Year 2020 includes more than 100 projects, a portion of which will be financed with the proceeds of the Series 2019B Bonds (the “Series 2019B Project”), “pay- as-you-go” revenues of the System and future financings under the Bond Ordinance. Among these projects, some of which are multi-year efforts, are the following projects which are budgeted at $5 million or more in Fiscal Year 2020: 35 Project Name Task Description Budget DEER CREEK SANITARY TUNNEL (CLAYTON RD TO RDP) Construction (Supplemental Appropriation) $38,000,000 CAULKS CREEK FORCEMAIN (RIVER VALLEY RD TO L-52) Construction $15,000,000 DEER CREEK SANITARY TUNNEL (CLAYTON RD TO RDP) – PUMP STATION Construction $15,000,000 LEMAY NO. 3 PUMP STATION AND FORCE MAIN Construction $14,000,000 DC-02 & DC-03 SANITARY RELIEF (BRENTWOOD BLVD TO CONWAY RD) PHASE III AND PHASE IV Construction $13,000,000 CONSTRUCTION MANAGEMENT SERVICES - TANK/TREATMENT/PUMP STATION FACILITIES Professional Services $10,400,000 GRAVOIS TRUNK (WHITECLIFF TO RDP) SANITARY REHABILITATION (FANNIE AVE TO PARDEE LANE) Construction (Supplemental Appropriation) $10,000,000 MALINE CREEK CSO BP 051 & 052 LOCAL STORAGE FACILITY (CHAIN OF ROCKS DR TO CHURCH DR) Construction (Supplemental Appropriation) $8,200,000 KINGSLAND SANITARY STORAGE FACILITY (ENGELHOLM) Construction, Design-Build $8,000,000 GRAVOIS TRUNK SANITARY STORAGE FACILITY (PARDEE LN AND PARDEE RD) Construction (Supplemental Appropriation) $7,100,000 INFRASTRUCTURE REPAIRS (WASTEWATER) (2020) Work Order Repair Costs (Capital) $7,000,000 MISSISSIPPI FLOODWALL ORS PUMP STATIONS REHABILITATION PHASE II Construction, Design-Build $7,000,000 BISSELL & LEMAY WWTF FLUIDIZED BED INCINERATORS Design Services $6,000,000 BADEN CITYSHED MITIGATION BASINS (CALVARY, FREDERICK, PARTRIDGE AND TILLIE) Construction $6,000,000 BISSELL POINT WWTF MAIN SUBSTATION SWITCHGEAR AND MCC REPLACEMENT Construction $6,000,000 BISSELL - COLDWATER - MISSOURI - MERAMEC PUBLIC I/I REDUCTION (2020) CONTRACT C Construction $5,900,000 BISSELL - COLDWATER - MISSOURI - MERAMEC PUBLIC I/I REDUCTION (2020) CONTRACT A Construction $5,700,000 CAULKS CREEK FORCEMAIN REHABILITATION Construction (Supplemental Appropriation) $5,600,000 JEFFERSON BARRACKS TUNNEL CONSOLIDATION SEWERS Construction $5,180,000 82ND STREET TO I-170 SANITARY RELIEF (UR-08, UR-09) Construction (Supplemental Appropriation) $5,100,000 Source: District Other planned CIRP improvements in Fiscal Years 2020 through 2022 expected to be included in the approximately $1 billion of capital projects during this timeframe include: • infrastructure improvements to reduce combined sewer overflows; • infrastructure improvements to eliminate sanitary sewer overflows; • collection systems renewal and replacement activity; and • planning and capacity, management, operation and maintenance activity. See Appendix D – “FEASIBILITY REPORT – CIRP Financing” for a summary of the projected CIRP Financing Plan for Fiscal Years 2021 through 2024. 36 FINANCIAL OPERATIONS OF THE DISTRICT General The District is supported by various taxes and user charges imposed on taxpayers and users of its facilities within its boundaries. The District has the power, subject to voter approval, to issue general obligation bonds, District-wide revenue bonds, sub-district revenue bonds, or special assessment bonds. The Executive Director is responsible for preparing the annual budget of the District and is responsible for drawing warrants to meet the financial obligations of the District. The Executive Director appoints the Director of Finance, who is responsible for assisting the Executive Director in preparing the annual budget, maintaining the accounting records of the District, and certifying that all warrants are proper and valid under the District’s Charter. The Secretary-Treasurer is appointed by the Board and is responsible for custody of the funds of the District and investing the funds of the District pursuant to the Charter of the District and State law. Budget and Appropriation Process The Executive Director of the District is responsible for preparing the District’s annual budget. Not later than the fifteenth day of March in each year, the Executive Director must submit to the Board a budget for the ensuing year. The Charter requires that the Board adopt the budget no later than June 30. In the event that the Board does not pass a new budget by June 30, the prior year’s budget continues in force until the Board adopts a new budget. The proposed budget is available for public inspection and the District conducts public hearings on the proposed budget prior to its adoption. On or before the thirtieth day of June in each Fiscal Year the Board determines the amount of taxes that will be required during the next succeeding Fiscal Year to pay the principal of and interest on general obligation bonds issued and certain costs of operations, maintenance, construction and improvements. At this time, there are no general obligation bonds outstanding. The budget provides a complete financial plan for the budget year for all District funds. In no event can the total amount of expenditures for the budget year from any fund exceed the estimated revenues to be actually received plus any unencumbered balance or less any deficit estimated for the beginning of the budget year. After submittal of the budget to the Board, the Board must hold a public hearing at least 21 days before adoption of the budget in order to obtain public comment on the proposed budget. The Board instituted “zero-based budgeting” in the development of the District’s annual budget. This budgeting process breaks the District’s budget into two distinct sections: (i) a base budget representing the cost to run basic operations and (ii) an incremental budget representing initiatives that are tied directly to the District’s Strategic Business and Operating Plan. Both sections undergo multiple reviews to ensure that planned expenditures are justified and appropriate for the supported business activity. For the incremental budget, an expenditure cannot be justified solely by a like expenditure in a previous year; the expenditure has to clearly support a business objective from the District’s Strategic Business and Operating Plan. The use of zero-based budgeting has played a strong part in helping to keep key areas of the District’s budget at or below the rate of annual inflation. Finance Department The Finance Department is enhancing its efforts to substantially reduce its portfolio of accounts receivable, using a combination of internal collection efforts, liens and service shut-off. In addition, a portion of the District’s billing and past-due collections has been outsourced to several outside vendors (collection agencies and law firms). These agencies and firms focus on collecting overdue sewer bills 37 from rate payers and during Fiscal Year 2019 they collected approximately $29.5 million on behalf of the District. The Government Finance Officers Association of the United States of America and Canada has honored the District for excellence in budgeting, financial accounting and full disclosure. In 2019, for the 32nd consecutive year, the District earned the Distinguished Budget Presentation Award, the highest form of recognition in governmental budgeting. In 2019, for the 31st consecutive year, the District also received the Certificate of Achievement for Excellence in Financial Reporting, the highest recognition in governmental accounting and financial reporting. Fund Structure The General Fund was established to provide for the ordinary operations of the District. Since 1978, all operation and maintenance has been funded out of the General Fund. The General Fund receives revenues from ad valorem property taxes levied on all property, real and personal, within the District’s boundaries based on assessed valuations established by the City and County assessors. Tax rates vary by subdistrict and purpose, and are levied in accordance with the Charter of the District. The District discontinued levying real and personal property taxes after Fiscal Year 2008 as a result of the impervious stormwater charge which it began collecting in March 2008. The District rescinded its stormwater impervious charge as a result of a July 9, 2010 court decision which declared the charge unconstitutional. Property taxes were reinstated effective December 31, 2010, to partially replace this stormwater funding. On April 5, 2016, a special election was held in which 62% of voters in the District’s service area approved Proposition S. The approval of Proposition S put all District customers under the same property tax rates to pay for stormwater service and, in turn, all District customers would receive the same level of stormwater service. This process occurred gradually throughout Fiscal Year 2017. Proposition S allows the District to rollback and eliminate several existing taxes, eliminate the stormwater fee and, in lieu of these funding mechanisms, institute or leave in place two taxing districts that cover the District’s entire service area; however, stormwater revenues do not constitute Pledged Revenues securing and payable to the Series 2019B&C Bonds. Currently, a main source of income for the General Fund is a wastewater user charge. The General Fund also receives miscellaneous income from a number of sources, and reimbursement of engineering services provides other non-operating funds. The District’s Revenue Funds consist of the Wastewater Revenue Fund and the Stormwater Revenue Fund. Wastewater user charge revenues are deposited into the Wastewater Revenue Fund and revenues from the District’s stormwater service charge are deposited into the Stormwater Revenue Fund. The District also maintains two emergency funds − the Wastewater Emergency Fund and the Stormwater Emergency Fund. These funds were created for the purpose of providing funding for emergency work or repairs requiring prompt attention in the operation and maintenance of the District. The work or repairs are of such a nature as to be non-measureable in the budgeting and appropriation of annual revenues. District policy requires minimum balances of $500,000 and $250,000 be maintained in the Wastewater Emergency Fund and the Stormwater Emergency Fund, respectively. As of June 30, 2019, the Wastewater Emergency Fund and the Stormwater Emergency Fund had fund balances of $3,592,562 and $2,266,805, respectively. Basis of Accounting Throughout a Fiscal 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 District’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America as 38 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. Financial Statements The accounts of the District are audited annually by an independent firm of certified public accountants. The accounting firm of CliftonLarsonAllen LLP served the District as auditor for the Fiscal Year ended June 30, 2019. The District’s audited financial statements for the Fiscal Year ended June 30, 2019, which includes audited financial statements for the Fiscal Year ended June 30, 2018, are attached hereto as Appendix A. Cash and Investments The following table shows the historic cash and investments for the previous five Fiscal Years. FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Unrestricted Cash & Investments (Current) $132,950,967 $182,927,020 $286,332,159 $300,591,076 $241,181,876 Total Unrestricted Cash & Investments $298,732,325 $339,921,143 $347,607,159 $367,855,784 $409,831,492 Days Cash on Hand (No Long-Term Unrestricted) 297 397 619 673 516 Days Cash on Hand (Adds Long-Term Unrestricted) 668 737 751 824 877 MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW For the Years Ended June 30, 2019 and 2018 The Comprehensive Annual Financial Report of 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 the 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 the management’s knowledge of the transactions, events, and conditions reflected in the financial statements and certain of the fiscal policies that govern the District’s operations. 2019 Financial Audit The District’s financial position improved in Fiscal Year 2019, 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 Fiscal Year 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. 39 Current, restricted and other assets decreased $61.6 million or 7.0% in Fiscal Year 2019. 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 Fiscal Year 2019 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. 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 Year 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. The District ended the Fiscal Year 2019 with $56.8 million in cash and cash equivalents for an increase of $22.4 million or 65.0% from Fiscal Year 2018. 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 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 Year 2019 while the opposite occurred in Fiscal Year 2018 – more investments were purchased than matured. Total capital assets, net of accumulated depreciation, increased by $185.5 million or 5.4% over Fiscal Year 2018. 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 District’s Notes to Financial Statements contained in Appendix A to this Official Statement. See also Appendix A for a more in-depth analysis of the District’s financial position. 2018 Financial Audit Current, restricted and other assets increased $139.1 million or 18.7% in Fiscal Year 2018. 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 Year 2018. Capital assets net of accumulated depreciation increased by $194.0 million or 6.0% in Fiscal Year 2018 as the result of continued high levels of construction and acquisition of assets by the District. Current liabilities in Fiscal Year 2018 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 in Fiscal Year 2018 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 Year 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 Year 2019 senior and subordinate debt payments reclassified to 40 current liabilities. In addition, non-current liabilities increased by $24.2 million in Fiscal Year 2018 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 in Fiscal Year 2018. The District ended Fiscal Year 2018 with $34.4 million in cash and cash equivalents or a decrease of $13.7 million or 28.5% from Fiscal Year 2017. Cash flows from operating activities increased by $12.9 million or 8.7% in Fiscal Year 2018 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% in Fiscal Year 2018. 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% in Fiscal Year 2018. 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 Year 2017 to Fiscal Year 2018. In Fiscal Year 2018, total capital assets, net of accumulated depreciation, increased by $194.0 million or 6.0% over Fiscal Year 2017. 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 Year 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. See also Appendix A for a more in-depth analysis of the District’s financial position. Sewer Rates and Revenues The primary source of funding for the operation and maintenance of the System is a user charge. The following table shows the typical bill amount for a single family residence using 7 centum cubic-feet per month with the rates approved by the Board for the year indicated and the percentage increase in such charge over the prior year: Fiscal Year Monthly Rate Percentage Change 2016 $40.72 13.14% 2017 44.59 9.50 2018 49.31 10.59 2019 54.63 10.79 2020 60.44 10.64 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 its non- metered properties. Multi-family residential and commercial and industrial rates are proportionate to the single-family charge and are based on water consumption and the strength of the discharge. 41 Other Sources of Revenue The District has other sources of revenue not securing and pledged to the repayment of the Series 2019B&C Bonds. Real and personal property taxes are levied by the District. The District discontinued levying real and personal property taxes after Fiscal Year 2008 as a result of the impervious stormwater charge which it began collecting in March 2008; however, the District suspended collection of the impervious stormwater charge and resumed collection of real and personal property taxes in Fiscal Year 2011 as a result of the July 9, 2010 court decision concerning the impervious stormwater charge in which the court determined that the impervious stormwater charge was in violation of the Hancock Amendment. See page 104 of the District’s Comprehensive Annual Financial Statements included as Appendix A to this Official Statement for a discussion of the impervious stormwater charge. In Fiscal Year 2019, the total real and personal property taxes levied for stormwater was $33.3 million. On April 5, 2016, a special election was held in which 62% of voters in the District’s service area approved Proposition S. The approval of Proposition S put all District customers under the same property tax rates to pay for stormwater service and, in turn, all District customers would receive the same level of stormwater service. This process occurred gradually throughout Fiscal Year 2017. Proposition S allows the District to rollback and eliminate several existing taxes, eliminate the stormwater fee and, in lieu of these funding mechanisms, institute or leave in place two taxing districts that cover the District’s entire service area; however, stormwater revenues do not constitute Pledged Revenues securing and payable to the Series 2019B&C Bonds. The District 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 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 or revenue bonds. The issuance of general obligation bonds, payable from a general tax levy on all taxable property within the District or a subdistrict, requires the approval of either a four-sevenths or two-thirds majority of the voters voting at an election held in the District or subdistrict, as the case may be. General obligation bonds outstanding cannot exceed five percent of the assessed valuation of the area benefitted. At this time, there are no general obligation bonds outstanding. Subdistricts may also issue revenue bonds, payable from user charges (which do not constitute Pledged Revenues) after a similar procedure, but require only a simple majority vote. Rate Commission and Rate Setting Process General. The District’s Rate Commission reviews and makes recommendations to the Board regarding all proposed changes in wastewater rates, stormwater rates and tax rates or change in the structure of any of the foregoing. Upon receipt of a rate change notice from the District pursuant to the Charter, the Rate Commission recommends changes in rates to the Board that will be necessary to pay interest and principal falling due on bonds issued to finance assets of the District, the costs of operation and maintenance and such amounts as may be required to cover emergencies and anticipated delinquencies. The Rate Commission has reviewed and recommended all rate increases that were approved by the Board since August 2003. The Board accepted the 2015 Rate Commission’s recommendation report on October 8, 2015. On June 9, 2016, the Board adopted Ordinance 14395, approving the rates for Fiscal Years 2017, 2018, 2019, and 2020. 42 On March 4, 2019, the District submitted a rate change proposal for Fiscal Years 2021-2024 to go through the Rate Commission review process. The rate change proposal included recommended changes to the District’s revenues and expenses. See “Rate Increases”, below, for a discussion on the status of the acceptance of the proposal. Membership. The Rate Commission consists of one representative from each of fifteen organizations within the District, each of which have been identified and designated by the Board as a “Rate Commission Representative Organization.” The organizations selected by the Board are diverse and represent residential customers, commercial and industrial customers, environmental interests, labor interests, community and neighborhood organizations and nonprofit organizations. The previous Rate Commission Representative Organizations were as follows: Missouri Coalition for the Environment Missouri Industrial Energy Consumers North County Incorporated St. Louis County Municipal League Engineers Club of St. Louis League of Women Voters of St. Louis The Mound City Bar Association Missouri Botanical Garden Associated General Contractors of St. Louis Education Plus City of Ladue, Missouri Home Builders Association St. Louis Council of Construction Consumers Greater St. Louis Labor Council Lutheran Senior Services Term of Membership. Pursuant to Section 7.240 of the Charter, each Rate Commission Representative Organization selected by the Board shall have the right to designate a Rate Commission Delegate to the Rate Commission for a term of six (6) years or completion of any unexpired term. The Board shall designate organizations within the District to succeed such Rate Commission Representative Organization, provided, however, that each Rate Commission Representative Organization shall serve until its successor shall be appointed and qualified. Nothing herein shall bar a Rate Commission Representative Organization from being named to successive terms. Rate Setting Process. Pursuant to the Charter, whenever the District proposes or recommends a change in rates, it shall give written notice (“Rate Change Notice”) to the Board and the Rate Commission. Upon receipt of a Rate Change Notice and after review of same, the Rate Commission shall cause at least one public hearing to be held on the record regarding the proposed rate change. The Rate Commission shall issue its rate recommendation report (“Rate Commission Report”) to the Board and to the public no later than 120 days after receipt of a Rate Change Notice. If the Board accepts the Rate Commission Report or if the Board is deemed to have accepted a Rate Commission Report as set forth in the Charter, the Board enacts an ordinance consistent with the Rate Commission Report. The Board may reject, or fail to accept, the Rate Commission Report only upon a finding that such report does not conform to the requirements of the Charter. No ordinance to effect a change in rates shall be introduced for adoption under the Charter prior to the earlier of 45 days after receipt of the Rate Commission Report or 45 days after the date on which the Rate Commission Report is due. 43 Pursuant to the Charter, any change in a rate recommended to the Board by the Rate Commission must be accompanied by a statement of the Rate Commission that the proposed rate change and all portions thereof: (1) is consistent with constitutional, statutory or common law as amended from time to time; (2) enhances the District’s ability to provide adequate sewer and drainage systems and facilities, or related services; (3) is consistent with and not in violation of any covenant or provision relating to any outstanding bonds or indebtedness of the District; (4) does not impair the ability of the District to comply with applicable Federal or State laws or regulations as amended from time to time; and (5) imposes a fair and reasonable burden on all classes of rate payers. Billing and Collections The District bills residential and commercial customers monthly for sewer service charges. As previously described herein (See first paragraph under Sewer Rates and Revenues, above), sewer bills are calculated upon several different bases, including the amount of water used each quarter, the winter quarter usage only or, when water meters are not in use, the structure of the building. For customers whose bills are based upon water usage, the District purchases data from the three water agencies serving the metropolitan area: the St. Louis City Water Division, Missouri-American Water Company and Kirkwood Water. In the City, most single family homes and smaller multi-unit buildings are not equipped with water meters. There are also a small number of properties in the County that use well water. When no water meter reading is available, the District calculates the bill based on the attributes of the structure, including the number of rooms, toilets, baths and separate showers. Single family residential properties that have water meters are billed based on the winter quarter water usage. The winter quarter is defined as the 3-month water meter reading taken in February, March or April. With each July sewer bill the service charges are calculated on a 91-day prorated amount using the previous winter quarter water meter reading. The monthly usage remains the same until the following July, when the process is repeated. For single-family customers who have limited income, the District offers a Customer Assistance program. For eligible customers, the monthly sewer bill is reduced by 50% each month. Commercial and multi-unit properties are billed based on the amount of water used each quarter or, in a few cases, each month. The District’s monthly bill is based on one-third of the prior quarter’s reading and remains the same amount for three months. The process is repeated for the next three months. In the case of commercial properties, there is an additional compliance charge on each month’s bill and the bill may include a surcharge for difficult to treat industrial waste or there may be a reduction factor, based on water used in processing and not entering the sewer system. Multi-unit property owners also have the option of being billed on the winter quarter reading or on each quarter reading. 44 Rate Increases Pursuant to the rate review and setting procedures discussed under the caption “Rate Commission and Rate Setting Process” above, the District submitted to the Rate Commission a request to increase wastewater user charge rates. A Wastewater Rate Change (the “Rate Change”) was presented to the Rate Commission on March 4, 2019. The Rate Commission then initiated proceedings to provide for the submission of written testimony, technical conferences, discovery procedures, a public hearing and post hearing briefs. Pursuant to the Charter, the Rate Commission is required to submit a rate recommendation to the District’s Board of Trustees upon conclusion of its deliberations. On August 16, 2019, the Rate Commission submitted its recommendation to the Board. In that report the Rate Commission found that the Rate Change is necessary to pay (i) interest and principal due on bonds issued to finance assets of the District, (ii) the costs of operation and maintenance of the System, and (iii) such amounts as may be required to cover emergencies and anticipated delinquencies. The Rate Commission recommended rates to the Board for Fiscal Years 2021, 2022, 2023, and 2024. The Board accepted the Rate Commission’s recommendation on October 10, 2019. The Board is expected to introduce and approve an ordinance setting rates consistent with such report in early 2020. [Remainder of page intentionally left blank] 45 Historical and Projected Sewer Rates and Charges The following table sets forth the wastewater sewer user charge rates in effect on July 1 for Fiscal Years 2016 through 2020. Effective Effective Effective Effective Effective Type of Monthly Charge July 1, 2015 (FY 2016) Actual July 1, 2016 (FY 2017) Actual July 1, 2017 (FY 2018) Actual July 1, 2018 (FY 2019) Actual July 1, 2019 (FY 2020) Current Base Charge ($/Bill) Billing & Collection Charge $ 3.70 $ 5.44 $ 6.02 $ 6.67 $ 7.38 System Availability Charge 14.55 14.02 15.50 17.16 18.97 Total Base Charge (Residential) $ 18.25 $ 19.46 $ 21.52 $ 23.83 $ 26.35 Compliance Charge ($/Bill) Tier 1 $ 2.15 $ 2.86 $ 2.95 $ 3.05 $ 3.14 Tier 2 44.50 57.20 58.94 60.89 62.61 Tier 3 94.80 125.84 129.67 133.96 137.75 Tier 4 139.00 185.90 191.56 197.91 203.49 Tier 5 183.15 243.10 250.50 258.79 266.10 Total Non-Residential Service Charge $ 20.40 $ 22.32 $ 24.47 $ 26.88 $ 29.49 Volume Charge Metered ($/Ccf) $ 3.21 $ 3.59 $ 3.97 $ 4.40 $ 4.87 Unmetered ($/Bill per fixture) Per Room 2.09 2.12 2.35 2.61 2.89 Per Water Closet 7.83 7.92 8.76 9.70 10.72 Per Bath 6.53 6.60 7.30 8.08 8.93 Per Separate Shower 6.53 6.60 7.30 8.08 8.93 Extra Strength Surcharges ($/ton) Suspended Solids over 300 mg/l $251.88 $ 262.00 $ 269.07 $ 277.03 $ 283.87 Biological Oxygen Demand over 300 mg/l $632.38 $ 654.00 $ 671.63 $ 691.50 $ 708.56 Chemical Oxygen Demand over 600 mg/l $316.19 $ 327.00 $ 335.82 $ 345.76 $ 354.30 ________________________ Source: Feasibility Report except for the “Total Non-Residential Service Charge” information, which was provided by the District. Key: Ccf = hundred cubic feet (approx. 748 gallons); mg/l = milligram per liter The recommended Rate Change is for a term of four years, Fiscal Years 2021 through 2024. The Rate Commission Report states that the record of proceedings supports a finding that the District’s CIRP would allow the District to meet the near-term capital improvements needs through 2024. The Rate Commission further believed that the Rate Change and/or the issuance of debt are required to comply with the Consent Decree. See “REGULATORY REQUIREMENTS – Regulatory Matters – Consent Decree” herein. The following table sets forth the current sewer rates and the rate increases recommended by the Rate Commission and accepted by the Board on October 10, 2019, as to Fiscal Years 2021 through 2024. 46 The Board is expected to introduce and approve an ordinance in early 2020 imposing these rates for Fiscal Years 2021 through 2024. See “Rate Commission and Rate Setting Process” herein. [Remainder of page intentionally left blank] 47 Type of Monthly Charge Effective July 1, 2019 (FY 2020) Current Effective July 1, 2020 (FY 2021) Proposed Effective July 1, 2021 (FY 2022) Proposed Effective July 1, 2022 (FY 2023) Proposed Effective July 1, 2023 (FY 2024) Proposed Base Charge ($/Bill) Billing & Collection Charge $ 7.38 $ 5.11 $ 5.29 $ 5.48 $ 5.68 System Availability Charge 18.97 21.29 22.02 22.78 23.61 Total Base Charge $ 26.35 $ 26.40 $ 27.31 $ 28.26 $ 29.29 Compliance Charge ($/Bill) Tier 1 $ 3.14 $ 4.44 $ 4.55 $ 4.71 $ 4.85 Tier 2 62.61 62.16 63.64 65.80 67.67 Tier 3 137.75 133.20 136.37 140.99 144.98 Tier 4 203.49 177.60 181.83 187.98 193.30 Tier 5 266.10 222.00 227.29 234.98 241.63 Volume Charge Metered ($/Ccf) $ 4.87 $ 5.00 $ 5.17 $ 5.35 $ 5.55 Unmetered ($/Bill) Per Room $ 2.89 $ 2.95 $ 3.06 $ 3.17 $ 3.29 Per Water Closet 10.72 11.02 11.40 11.80 12.23 Per Bath 8.93 9.19 9.51 9.84 10.20 Per Separate Shower 8.93 9.19 9.51 9.84 10.20 Extra Strength Surcharges ($/ton) Suspended Solids over 300 mg/l $ 283.87 $ 302.67 $ 321.47 $ 332.35 $ 341.76 Biochemical Oxygen Demand over 300 mg/l 708.56 812.94 917.32 948.34 975.18 Chemical Oxygen Demand over 600 mg/l 354.30 406.47 458.66 474.17 487.59 _________ Source: Feasibility Report Key: Ccf = hundred cubic feet (approx. 748 gallons); mg/l = milligram per liter [Remainder of page intentionally left blank] 48 Customer Accounts The District imposes a user charge on all customers that use its system of sewers, treatment plants and other facilities. The number of customers per category of accounts is as follows: Number of Customers by Type Last Ten Fiscal Years Fiscal Year Single Family Residential Multi- Family Residential Commercial/ Industrial Total Accounts1 2010 387,670 50,867 31,939 470,476 2011 362,739 43,471 24,702 430,912 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: District 1 These numbers are based on the District’s year-end financial statements and may differ from the historical numbers shown on Table 4 of the Feasibility Report. These differences are due to presentation requirements for auditing purposes. Largest User Charge Customers The following table lists the District’s ten largest wastewater user charge customers for the Fiscal Year ended June 30, 2019: Customer User Charges Percent of Total Anheuser-Busch InBev $5,380,744 1.36% The City of St. Louis, Missouri 2,626,558 0.67% Washington University in St. Louis 2,109,156 0.53% Sigma-Aldrich 1,674,339 0.42% The Boeing Company 1,251,265 0.32% Jost Real Estate, L.L.C. 1,085,769 0.27% BJC HealthCare 1,036,583 0.26% Saint Louis University 1,033,565 0.26% Missouri-American Water Co. 1,015,558 0.26% GKN Aerospace 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% __________________________ Source: District User Charge Revenues The following table shows the amount of wastewater user charge revenues which were billed and collected by the District for the Fiscal Years ended June 30, 2010 through June 30, 2019: 49 Collections as a Fiscal Wastewater Wastewater % of Wastewater Year Charges Billed Charges Collected 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 2014 233,882,795 245,555,628 233,877,875 241,549,548 99.99% 98.37% 2015 2016 2017 279,555,881 300,803,084 326,663,167 275,049,684 299,932,808 322,829,334 98.39% 99.71% 98.83% 2018 359,628,200 351,107,233 97.63% 2019 394,518,583 386,033,225 97.85% __________________________ Source: District Outstanding Indebtedness General Obligation Indebtedness. As of the date of this Official Statement, the District has no outstanding general obligation indebtedness on either a District-wide or subdistrict basis. [Remainder of page intentionally left blank] 50 Other Outstanding Debt. The District ended Fiscal Year 2019 with approximately $1.51 billion in long-term sewer system revenue bond debt outstanding. The following table summarizes the outstanding long-term debt for the District at the end of Fiscal Years 2017, 2018, and 2019: Total Long-Term Debt Outstanding (000s) 2017 2018 2019 Prior Senior Bonds: Series 2010B $85,000 $85,000 $85,000 Series 2011B 43,410 18,055 15,945 Series 2012A* 214,700 159,340 154,040 Series 2012B (Refunding of Series 2004A)* 134,710 131,935 128,840 Series 2013B* 146,000 116,615 113,615 Series 2015B*(Refunding of Series 2006C and Series 2008A) 221,355 192,810 190,135 Series 2016C 150,000 147,295 144,535 Series 2017A -316,175 312,760 Series 2018A1 -- 261 Subordinate SRF Bonds: Series 2004B 81,545 73,190 64,590 Series 2005A 3,800 3,465 3,120 Series 2006A 25,600 23,315 20,965 Series 2006B 8,860 8,140 7,400 Series 2008B 25,605 23,700 21,765 Series 2009A 16,441 15,342 14,218 Series 2010A 6,222 5,849 5,468 Series 2010C 28,361 26,656 24,906 Series 2011A 35,692 33,988 32,241 Series 2013A 47,786 45,596 43,349 Series 2015A2 67,149 69,246 65,902 Series 2016A3 147 3,094 13,129 Series 2016B4 8,986 27,418 45,583 Series 2018B5 -- 2,880 Series 2019A6 -- - Bonds No Longer Outstanding Series 2006C - - - Series 2008A -- Non-Bond Related Debt: - Energy Loan Program 68 51 16 TOTALS: $1,351,437 $1,526,275 $1,510,664 _______________________________ Source: District * Denotes Prior Senior Bonds, a portion of each series of which will be refunded by the Series 2019C Bonds. 1 This series was issued in an original principal amount of not to exceed $47,722,204, of which $261,479.86 has been drawn as of November 1, 2019. 2 This series was issued in an original principal amount of not to exceed $75,000,000, of which $64,200,000 has been drawn as of November 1, 2019. 3 This series was issued in an original principal amount of not to exceed $20,000,000, of which $14,607,772 has been drawn as of November 1, 2019 4 This series was issued in an original principal amount of not to exceed $75,500,000, of which $55,849,080 has been drawn as of November 1, 2019. 5 This series was issued in an original principal amount of not to exceed $25,267,000, of which $7,472,837 has been drawn as of November 1, 2019. 6 This series was issued in an original principal amount of not to exceed $23,952,000, of which $174,712 has been drawn as of November 1, 2019. 51 Employee Benefits The District currently maintains three pension plans for its employees: (i) a noncontributory single employer defined benefit plan (the “Defined Benefit Plan”) providing retirement benefits as well as death and disability benefits to all full-time District employees commencing services prior to December 31, 2010, (ii) a defined contribution plan (the “Defined Contribution Plan”) and (iii) a deferred compensation plan (the “Deferred Compensation Plan”). A Pension Committee (consisting of two members of the District’s Board, two elected employee members and four members of the District’s management staff) administers the Defined Benefit Plan. The Defined Benefit Plan is exempt from the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) and, as such, is not subject to ERISA’s reporting requirements. As a noncontributory plan, the District’s employees do not contribute to the Defined Benefit Plan. Ordinances establishing the Defined Benefit Plan provide for actuarially determined annual contributions, paid solely by the District, that are sufficient to pay benefits when due. Contributions of $12,609,689 and $12,411,025, excluding certain professional fees paid by the District, were made to the Defined Benefit Plan during the District’s Fiscal Year ending 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. For 2019, the actuarially determined contribution consists of (a) $5,238,812 normal cost plus (b) $7,001,606 amortization of the actuarial accrued assets in excess of the actuarial accrued liability and prior changes (c) multiplied by an inflation factor of 1.02%, which totals $12,493,916. For 2018, the actuarially determined contribution consists of (a) $5,157,148 normal cost plus (b) $6,364,434 amortization of the actuarial accrued assets in excess of the actuarial accrued liability and prior changes (c) multiplied by an inflation factor of 1.07%, which totals $12,328,093. In the 2019 valuation, the number of active members included in the valuation decreased from 595 to 545 and the number of retirees and beneficiaries increased from 722 to 748. The Funded Ratio for December 31, 2018, is 82.6%, down 0.60% from the period ended December 31, 2017. The District provides certain professional fees, office space, utilities, and other services to the Defined Benefit Plan at no cost. Other costs of administering the Defined Benefit Plan are financed from plan net assets. For more information regarding the District’s Defined Benefit Plan, see Note 7, Pension Plan, in the District’s Notes to Financial Statements contained in Appendix A to this Official Statement. Effective January 1, 2011, the District started the Defined Contribution Plan for all new hires. Current employees with less than 10 years of service on December 31, 2010, could voluntarily elect to transfer from the Defined Benefit Plan into the Defined Contribution Plan. The Defined Contribution Plan provides a basic contribution of 7% of employee annual earnings and provides a matching contribution of 50% of the first 4% of earnings the employee defers into the Deferred Compensation Plan. (This is a maximum matching contribution of 2% of earnings.) Employees decide upon the investment of these contributions and investment earnings from funds offered by Vanguard. Initial participation consisted of twenty-three employees who transferred balances totaling $70,869 from the Defined Benefit Plan. At December 31, 2018, the Defined Contribution Plan consisted of 459 participants with account balances just over $8.6 million in net position. For more information regarding the District’s Defined Contribution Plan, see Note 8, Other Retirement Plans at Defined Contribution Plan, in the District’s Notes to Financial Statements contained in Appendix A to this Official Statement. The District also offers its employees the Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. The Deferred Compensation Plan, available to all District employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until separation from service, or in special approved circumstances due to financial hardship as defined by the Deferred Compensation Plan. Plan assets are held in trust for the exclusive benefit of participants and their beneficiaries. As a result, the assets and liabilities of the 52 Deferred Compensation Plan are not included in the District’s financial statements. For more information regarding the District’s Deferred Compensation Plan, see Note 8 in the District’s Notes to Financial Statements contained in Appendix A to this Official Statement. Other Post-Employment Benefits The District pays 80% to 91% of the monthly group health insurance premium for the individual until the retiree becomes eligible for Medicare. During Fiscal Years 2019 and 2018, expenses of $2,586,148 and $2,557,327, respectively, were recognized for post-retirement health care premiums as those premiums were paid. The District’s total OPEB liability at June 30, 2019 and 2018, respectively, were $24,164,395 and $24,193,972. It is estimated that for the Fiscal Year ending June 30, 2019, the District’s unfunded accrued liability will be approximately $24 million assuming a 6.90% return on investment. For more information regarding the District’s OPEB plans, see Note 9 in the District’s Notes to Financial Statements contained in Appendix A to this Official Statement. Also see the section herein captioned “FINANCIAL OPERATIONS OF THE DISTRICT – Selected Financial Data of the District.” Tax Limitation Amendment – Hancock Amendment An amendment to the Missouri Constitution (the “Hancock Amendment”) limits the rate of increase and the total amount of taxes on property which may be imposed in any year, and the limit may not be exceeded without voter approval. Provisions are included in the amendment for rolling back tax rates to produce an amount of revenues equal to that of the previous year if the definition of the tax base is changed or if property is reassessed. The tax levy on the assessed valuation of new construction is exempt from this limitation. The Hancock Amendment also requires a political subdivision of the State to seek voter approval in order to increase any “tax, license or fee” over existing rates. A Missouri court has held that the District’s current wastewater user charge structure does not constitute a “tax, license or fee” for purposes of the Hancock Amendment’s voter approval requirements. Since the Series 2019B&C Bonds are approved by the voters, the Hancock Amendment does not prohibit an increase in the District’s wastewater user charges to pay debt service on the Series 2019B&C Bonds. REGULATORY REQUIREMENTS General The District is subject to the provisions of the (a) Clean Water Act, the stated objective of which is to restore and maintain the chemical, physical, and biological integrity of the nation’s waters, (b) the Missouri Clean Water Law, and (c) other laws and regulations. The regulatory requirements are administered by the EPA through DNR. The District is currently not subject to the federal Safe Drinking Water Act, as amended, 42 U.S.C. 300f et seq., which is also administered by the EPA. The Clean Water Act imposes several permit and regulatory requirements on wastewater treatment systems. Public sewage treatment plant owners and operators such as the District are required to provide secondary treatment as established by federal regulation for all wastewater discharge from treatment plants into waters of the United States of America. Under the Clean Water Act, states also establish water quality standards, classifying water body uses, and pollutant control criteria to protect those uses. All sewage system discharges require National Pollutant Discharge Elimination System (“NPDES”) permits specifying the permissible pollutant levels in wastewater effluent discharged from the plants. In addition to secondary treatment requirements for publicly-owned treatment plants, all 53 discharges from plants and combined sewer overflows (“CSO”) may be subject to additional stringent controls (which are then incorporated into NPDES permits) if such discharges are required to achieve the water quality standards established by the state pursuant to federal regulations. Under State law, the State also requires treatment plants to obtain state surface water discharge permits, which, in the discretion of EPA and DNR, may be issued jointly with the NPDES permit. Major wastewater treatment systems also must adopt and enforce pretreatment regulations for industries and other non-domestic sources discharging into sewers. Treatment plants are also subject to Clean Water Act and State regulations governing sludge use and disposal. The Clean Water Act is enforced by EPA through administrative orders and procedures. Violations may be the basis for federal lawsuits brought on EPA’s behalf by the U.S. Department of Justice or by private citizens. Regulatory Matters – Consent Decree In 2007, the Department of Justice filed suit on behalf of the EPA against the District for various alleged violations of the Clean Water Act. The District had been the subject of several investigatory actions by EPA over the prior several years. The District, EPA, DNR, represented by the Missouri Attorney General, and an environmental group allowed to intervene in the lawsuit engaged in several years of litigation. In 2011, the District and the EPA negotiated the Consent Decree (the “Consent Decree”) that resulted in settlement and dismissal of the original lawsuit. See Note 12, Commitments and Contingencies, in the District’s Notes to Financial Statements contained in Appendix A to this Official Statement for additional information regarding this litigation. The District’s Board adopted Ordinance No. 13277 at its June 29, 2011, meeting that authorized the District’s Executive Director and General Counsel to sign the Consent Decree. Under the Consent Decree, the District agreed to spend over $5 billion dollars over the next 23 years to implement various system improvements and programs designed to eliminate or reduce overflows from the combined and separate sewer system in order to improve water quality and protect human health and the environment. Most of the improvements enumerated in the Consent Decree were already addressed in the District’s long-term over $5 billion dollars CIRP. The State did not agree to sign the Consent Decree in its present form. However, all parties, including the State, accepted language in a motion filed with the U.S. District Court for the Eastern District of Missouri (the “Court”) in August 2011, which indicated that there were no issues remaining to be resolved in the proceedings. On August 4, 2011, the Consent Decree was lodged with the Court. An extended public comment period ended October 10, 2011. On April 27, 2012, the Court entered the Consent Decree, thus concluding the litigation of this lawsuit. On that same day the Court entered a Memorandum and Order which realigned the State as a defendant and reaffirmed a 2009 decision by the Eighth Circuit Court of Appeals that the State had waived its sovereign immunity. Although this litigation matter has concluded, the District is working diligently to implement the Consent Decree on schedule. On June 22, 2018, the Court approved an amendment to the Consent Decree to extend it by five years from a 23-year program to a 28-year program. This amendment to the Consent Decree allows the District to deliver an accelerated schedule of regulatorily required non-Consent Decree work without placing an additional financial burden on the District’s ratepayers. RISK FACTORS The following is a discussion of certain risks and other considerations that should be considered in conjunction with all other information contained in this Official Statement, including the Appendices hereto, by prospective investors in evaluating the Series 2019B&C Bonds. Such discussion is not, and is 54 not intended to be, exhaustive and should not be considered as a comprehensive or exhaustive discussion of risks or other considerations which may be relevant to an investment in the Series 2019B&C Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such considerations. There can be no assurance that other risk factors not discussed herein will not become material in the future. Factors Affecting the District One or more of the following factors or events, or the occurrence of other unanticipated factors or events, could adversely affect the District’s operations and financial performance to an extent indeterminable at this time. Changes in Management or Policies. Changes in key management personnel or policies of the District could adversely affect the financial performance of the District. Future Economic Conditions. Increased unemployment or other adverse economic conditions or changes in the demographics of the District; an inability to control expenses in periods of inflation and difficulties in increasing charges could adversely affect the District’s financial performance. For more information on the District’s rate setting process see “MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW – Rate Commission and Rate Setting Process.” Insurance Claims. Increases in the cost of the District’s insurance coverages and the amounts paid in settlement of claims not covered by insurance could adversely affect the financial performance of the District. Organized Labor Efforts. Certain employees of the District’s Operations Department are represented by collective bargaining units. Labor disputes with these collective bargaining units could result in adverse labor actions or increased labor costs. Environmental Regulation. Sewer utilities are subject to continuing environmental regulation. Federal, state and local standards and procedures that regulate the environmental impact of water or sewer utilities are subject to change. These changes may arise from continuing legislative, regulatory and judicial action regarding such standards and procedures. Consequently, there is no assurance that facilities in operation will remain subject to the regulations currently in effect, will always be in compliance with further regulations or will always be able to obtain all required operating permits. An inability to comply with environmental standards could result in reduced operating levels and fines. Legislative, regulatory, administrative or enforcement actions involving environmental controls could also adversely affect the operation of the System. For example, if property of the District is determined to be contaminated by hazardous materials, the District could be liable for significant clean-up costs even if it were not responsible for the contamination. Natural Disasters/Climate. The occurrence of natural disasters, such as tornados, earthquakes, floods or droughts, could damage the facilities of the District, interrupt services or otherwise impair operations and the ability of the District to produce revenues. Terrorist Attacks. Although potential terrorist attacks could temporarily disrupt wastewater treatment service, the District has taken and continues to take precautions to minimize this risk, but does not represent that any existing or additional safety or security measures will be adequate in the event that terrorist activities are directed at the System. 55 Miscellaneous Factors. The sewer industry in general has experienced, or may in the future experience, problems including (a) the effects of inflation on the costs of operation of facilities, (b) increased financing requirements coupled with the increased cost and uncertain availability of capital, and (c) compliance with rapidly changing environmental, safety and licensing regulations and requirements. Summary Financial Information Certain summarized historical financial information and certain projected revenues and expenditures of the District are summarized in this Official Statement and its appendices. There can be no assurance that the financial results achieved by the District in the future will be similar to historical results or the projections contained herein. Such future results will vary from historical results, and actual variations may be material. Information as to the projected figures and the assumptions upon which they are based are contained in this Official Statement and its appendices. No assurance can be given that assumptions used in preparing projected revenues are accurate including, but not limited to, those as to water usage volume, operating and maintenance expenses, and the stability of the customer base. Significant variations in such assumptions may affect the actual operating and financial results. Therefore, the historical operating results of the District’s System contained in this Official Statement cannot be viewed as a representation that the District will be able to generate sufficient revenues in the future to make timely payment of principal of, redemption premium, if any, and interest on the Series 2019B&C Bonds. Certain Bankruptcy Risks The remedies available to the owners of the Series 2019B&C Bonds upon an event of default under the Bond Ordinance, as applicable are in many respects dependent upon judicial actions that are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, including specifically the United States Bankruptcy Code, 11 U.S.C. §§ 101, et seq. the remedies provided in the Bond Ordinance may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Series 2019B&C Bonds will be qualified as to the enforceability of the various legal instruments by limitations imposed by general principles of equity and by bankruptcy, reorganization, insolvency or other similar laws, affecting the rights of creditors generally. Secondary Markets and Prices The Underwriters will not be obligated to repurchase any of the Series 2019B&C Bonds and no representation is made concerning the existence of any secondary market for the Series 2019B&C Bonds. No assurance can be given that any secondary market will develop following the completion of the offering of the Series 2019B&C Bonds, and no assurance can be given that the initial offering prices for the Series 2019B&C Bonds will continue for any time period. Risk of Taxability of Series 2019B Bonds For information with respect to events occurring subsequent to issuance of the Series 2019B&C Bonds that may require that interest on such Series 2019B Bonds be included in gross income for purposes of federal income taxation, see the caption “TAX MATTERS” in this Official Statement. 56 Risk of Audit of Series 2019B Bonds The Internal Revenue Service (the “Service”) has established an ongoing program to audit tax- exempt obligations to determine whether interest on such obligations should be included in gross income for federal income tax purposes. Owners of the Series 2019B Bonds are advised that, if the Service does audit such Series 2019B Bonds, under current Service procedures, at least during the early stages of an audit, the Service will treat the District as the taxpayer, and the owners of such Series 2019B Bonds may have limited rights to participate in the audit. Public awareness of any audit could adversely affect the market value and liquidity of Series 2019B Bonds during the pendency of the audit, regardless of the ultimate outcome thereof. Limited Obligations The Series 2019B&C Bonds are limited obligations of the District, payable solely from the Pledged Revenues generated from the operation of the System. The Series 2019B&C Bonds and the interest thereon shall not constitute a general or moral obligation of the District nor a debt, indebtedness, or obligation of, or a pledge of the faith and credit of, the District, the State or any political subdivision thereof, within the meaning of any constitutional, statutory or charter provision whatsoever. The taxing power of the District, the State or any political subdivision is not pledged to the payment of the Series 2019B&C Bonds or the interest thereon. The District has no authority to levy any taxes to pay the Series 2019B&C Bonds. Loss of Premium Upon Early Redemption Purchasers of the Series 2019B&C Bonds at a price in excess of their principal amount should consider the fact that the Series 2019B&C Bonds are subject to redemption at a redemption price equal to their principal amount plus accrued interest under certain circumstances. See “THE SERIES 2019B&C BONDS – Redemption Provisions.” LITIGATION Except as described in the “REGULATORY REQUIREMENTS – Regulatory Matters – Consent Decree” above, as of the date hereof, to the knowledge of the District there is no legal action, suit, proceeding, inquiry or investigation at law or in equity before or by any court, public board or body for which the District has been served with process or official notice or threatened against or affecting the District or any reasonable basis therefor, wherein an unfavorable decision, ruling or finding would adversely affect the transaction contemplated by this Official Statement or the validity of the Series 2019B&C Bonds, the Bond Ordinance, or any agreement or instrument to which the District is a party and which is used or contemplated for use in the transactions contemplated by this Official Statement, and no member, employee or agent of the District has been served with any legal process regarding such litigation or other proceeding. TAX MATTERS The following is a summary of the material federal and State of Missouri income tax consequences of holding and disposing of the Series 2019B Bonds and the Series 2019C Bonds. This summary is based upon laws, regulations, rulings and judicial decisions now in effect, all of which are subject to change (possibly on a retroactive basis). This summary does not discuss all aspects of federal income taxation that may be relevant to investors in light of their personal investment circumstances or describe the tax consequences to certain types of owners subject to special treatment under the federal income tax laws (for example, dealers in securities or other persons who do not hold the Series 2019B 57 Bonds or the Series 2019C Bonds as a capital asset, tax-exempt organizations, individual retirement accounts and other tax deferred accounts, and foreign taxpayers), and, except for the income tax laws of the State of Missouri, does not discuss the consequences to an owner under any state, local or foreign tax laws. The summary does not deal with the tax treatment of persons who purchase the Series 2019B Bonds or the Series 2019C Bonds in the secondary market. Prospective investors are advised to consult their own tax advisors regarding federal, state, local, foreign and other tax considerations of holding and disposing of the Series 2019B Bonds and the Series 2019C Bonds. Tax Status of the Series 2019B Bonds – Opinion of Co-Bond Counsel Opinion of Co-Bond Counsel Regarding the Series 2019B Bonds In the opinion of Gilmore & Bell, P.C. and White Coleman & Associates, LLC, Co-Bond Counsel to the District, under the law existing as of the issue date of the Series 2019B Bonds: Federal and State of Missouri Tax Exemption. The interest on the Series 2019B Bonds is excludable from gross income for federal income tax purposes and is exempt from income taxation by the State of Missouri. Alternative Minimum Tax. Interest on the Series 2019B Bonds is not an item of tax preference for purposes of computing the federal alternative minimum tax. Bank Qualification. The Series 2019B Bonds have not been designated as “qualified tax-exempt obligations” for purposes of Section 265(b)(3) of the Code. Co-Bond Counsel’s opinions are provided as of the date of the original issue of the Series 2019B Bonds, subject to the condition that the District comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Series 2019B Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The District has covenanted to comply with all of these requirements. Failure to comply with certain of these requirements may cause the inclusion of interest on the Series 2019B Bonds in gross income for federal and State of Missouri income tax purposes retroactive to the date of issuance of the Series 2019B Bonds. Co-Bond Counsel is expressing no opinion regarding other federal, state or local tax consequences arising with respect to the Series 2019B Bonds but has reviewed the discussion under the heading “TAX MATTERS”. Series 2019B Bonds – Other Tax Consequences Original Issue Premium. For federal income tax purposes, premium is the excess of the issue price of a Series 2019B Bond over its stated redemption price at maturity. The issue price of a Series 2019B Bond is generally the first price at which a substantial amount of the Series 2019B Bonds of that maturity have been sold to the public. Under Section 171 of the Code, the purchaser of that Series 2019B Bond must amortize the premium over the term of that Series 2019B Bond using constant yield principles, based on the purchaser’s yield to maturity. As premium is amortized, the owner’s basis in that Series 2019B Bond and the amount of tax-exempt interest received will be reduced by the amount of amortizable premium properly allocable to the owner. This will result in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes on sale or disposition of that Series 2019B Bond prior to its maturity. Even though the owner’s basis is reduced, no federal income tax deduction is allowed. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium. 58 Sale, Exchange or Retirement of Series 2019B Bonds. Upon the sale, exchange or retirement (including redemption) of a Series 2019B Bond, an owner of the Series 2019B Bond generally will recognize gain or loss in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale, exchange or retirement of the Series 2019B Bond (other than in respect of accrued and unpaid interest) and such owner’s adjusted tax basis in the Series 2019B Bond. To the extent a Series 2019B Bond is held as a capital asset, such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the Series 2019B Bond has been held for more than 12 months at the time of sale, exchange or retirement. Reporting Requirements. In general, information reporting requirements will apply to certain payments of principal, interest and premium paid on the Series 2019B Bonds, and to the proceeds paid on the sale of the Series 2019B Bonds, other than certain exempt recipients (such as corporations and foreign entities). A backup withholding tax will apply to such payments if the owner fails to provide a taxpayer identification number or certification of foreign or other exempt status or fails to report in full dividend and interest income. The amount of any backup withholding from a payment to an owner will be allowed as a credit against the owner’s federal income tax liability. Collateral Federal Income Tax Consequences. Prospective purchasers of the Series 2019B Bonds should be aware that ownership of the Series 2019B Bonds may result in collateral federal income tax consequences to certain taxpayers, including, without limitation, financial institutions, property and casualty insurance companies, individual recipients of Social Security or Railroad Retirement benefits, certain S corporations with “excess net passive income,” foreign corporations subject to the branch profits tax, life insurance companies, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry or have paid or incurred certain expenses allocable to the Series 2019B Bonds. Co-Bond Counsel expresses no opinion regarding these tax consequences. Purchasers of Series 2019B Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2019B Bonds, including the possible application of state, local, foreign and other tax laws. Tax Status of the Series 2019C Bonds Introduction. The following discussion summarizes certain material U.S. federal income tax considerations generally applicable to the purchase, ownership, and disposition of the Series 2019C Bonds by the Beneficial Owners thereof. The discussion is limited to the tax consequences to the initial Beneficial Owners of the Series 2019C Bonds who purchase the Series 2019C Bonds at the issue price, within the meaning of Section 1273 of the Code. The discussion does not address the tax consequences to subsequent purchasers of the Series 2019C Bonds, including but not limited to the impact of the so-called “market discount” rules set forth in Sections 1276-1278 of the Code. The discussion does not purport to be, and is not, a complete analysis of all of the potential U.S. federal income tax consequences relating to the purchase, ownership, and disposition of the Series 2019C Bonds. For example, the discussion does not address any state, local, non-U.S., U.S. federal estate, or U.S. federal gift tax consequences. The U.S. federal income taxation with respect to an investment in the Series 2019C Bonds is complex and may involve, among other things, significant issues as to the timing, character, source, and allocation of gains and losses. The discussion is necessarily general and is not intended to be applicable to all categories of purchasers, some of which, such as banks, thrifts, insurance companies, regulated investment companies, real estate mortgage investment conduits, dealers and traders in securities that elect to mark to market their securities portfolios, Beneficial Owners who do not own the Series 2019C Bonds as capital assets, and Non-U.S. Beneficial Owners (as hereinafter defined) classified for U.S. federal income tax purposes as “controlled foreign corporations,” “passive foreign investment companies,” “personal holding companies,” or “expatriates,” may be subject to special rules. The 59 discussion also does not address the special rules applicable to purchasers who hold the Series 2019C Bonds as part of a hedge, straddle, conversion, constructive ownership or constructive sale transaction, or other risk reduction transaction. The discussion assumes the Series 2019C Bonds are held as capital assets within the meaning of Section 1221 of the Code. The discussion is based on the Code, Treasury Regulations issued under the Code (the “Treasury Regulations”), administrative rulings, and judicial decisions as in effect at the time this Official Statement is being written, all of which are subject to change (possibly with retroactive effect) or different interpretations. No assurance can be given that future legislation, administrative guidance, administrative rulings, or judicial decisions will not modify the conclusions set forth herein. The actual tax and financial consequences of the ownership or sale of the Series 2019C Bonds will vary depending upon each Beneficial Owner’s circumstances. The legislation commonly referred to as the “Tax Cuts and Jobs Act” (“2017 Tax Reform Act”) significantly changed the U.S. taxation of individuals, sole proprietorships, corporations, and pass-through entities. Most provisions in the 2017 Tax Reform Act which apply to individuals are set to expire on December 31, 2025, which means U.S. federal income tax law as applied to individuals reverts back to the law as it existed prior to the effectiveness of the 2017 Tax Reform Act. Although this section of the Official Statement summarizes certain key changes made by the 2017 Tax Reform Act and explains, where appropriate, how an expiration of those provisions may affect Beneficial Owners, it is not intended to be an exhaustive discussion of those provisions. Nomenclature. This section uses certain nomenclature to distinguish between the tax treatment applicable to different types of Beneficial Owners. For purposes of this discussion, a “U.S. Beneficial Owner” is a Beneficial Owner of a Series 2019C Bond that, for U.S. federal income tax purposes, is: (i) a citizen or resident of the United States of America (as such residency is determined for U.S. federal income tax purposes); (ii) a corporation, or an entity treated as a corporation for U.S. federal income tax purposes, in either case created or organized in or under the laws of the United States of America or of any political subdivision thereof; (iii) an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust, the administration of which is subject to the primary supervision of a court within the United States of America and which has one or more United States of America persons (as described in Section 7701(a)(30) of the Code) with the authority to control all substantial decisions of the trust, or a trust that has a valid election in effect under applicable Treasury Regulations to be treated as a United States of America person (as described in Section 7701(a)(30) of the Code). For purposes of this discussion, a “Non-U.S. Beneficial Owner” is a person that is not a United States of America person (as described in Section 7701(a)(30) of the Code). No Federal or State of Missouri Tax Exemption. The interest on the Series 2019C Bonds is included in gross income for federal income tax purposes, in accordance with an owner’s normal method of accounting, and is not exempt from income taxation by the State of Missouri. No Opinions. Co-Bond Counsel is expressing no opinion regarding federal, state, local, or foreign tax consequences arising with respect to the Series 2019C Bonds. Beneficial Owners of Series 2019C Bonds should consult their tax advisors as to the applicability of these tax consequences and other federal income tax consequences of the purchase, ownership and disposition of the Series 2019C Bonds, including the possible application of state, local, foreign and other tax laws. Series 2019C Bonds – Other Tax Consequences to U.S. Beneficial Owners In General. Interest received or accrued, as well as any gain or loss on the sale, exchange, redemption, or other disposition of the Series 2019C Bonds, will not be exempt from U.S. federal income 60 tax in the hands of a U.S. Beneficial Owner. Instead, subject to the more detailed discussion in this section, interest received or accrued on the Series 2019C Bonds will be taxable to a U.S. Beneficial Owner at ordinary income tax rates and any gain on the sale, exchange, redemption, or other disposition of a Series 2019C Bond generally will be taxable to the U.S. Beneficial Owner at the tax rates applicable to capital gains. The U.S. federal income tax consequences to a U.S. Beneficial Owner may also be affected if a U.S. Beneficial Owner acquires a Series 2019C Bond at a discount or at a premium. If a partnership, or an entity taxable as a partnership, holds the Series 2019C Bonds, then the U.S. federal income tax treatment of a partner generally will depend upon the status of the partner and the tax status of the partnership. Partners of partnerships holding the Series 2019C Bonds should consult their own tax advisors with respect to the U.S. federal income tax treatment of the purchase, ownership, and disposition of the Series 2019C Bonds. Stated Interest. Stated interest on the Series 2019C Bonds will be taxable to a U.S. Beneficial Owner as ordinary income and generally at the time the interest is received or accrued in accordance with the U.S. Beneficial Owner’s method of accounting for U.S. federal income tax purposes. Original Issue Discount. For federal income tax purposes, original issue discount (“OID”) is the excess of the stated redemption price at maturity of a Series 2019C Bond over its issue price. The issue price of a Series 2019C Bond is the first price at which a substantial amount of the Series 2019C Bonds of that maturity have been sold to the public. If the original issue discount on a Series 2019C Bond is more than a de minimis amount (generally ¼ of 1% of the stated redemption price at maturity of the Series 2019C Bond multiplied by the number of complete years to its maturity date), then that Series 2019C Bond will be treated as issued with original issue discount. The amount of original issue discount that accrues to a U.S. Beneficial Owner of a Series 2019C Bond during any accrual period generally equals (1) the issue price of that Series 2019C Bond, plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (2) the yield to maturity on that Series 2019C Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), minus (3) any interest payable on that Series 2019C Bond during that accrual period. The amount of original issue discount accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be included in gross income for federal income tax purposes, and will increase a U.S. Beneficial Owner’s tax basis in that Series 2019C Bond. Prospective investors should consult their own tax advisors concerning the calculation and accrual of original issue discount. Original Issue Premium. For federal income tax purposes, premium is the excess of the issue price of a Series 2019C Bond over its stated redemption price at maturity. The issue price of a Series 2019C Bond is generally the first price at which a substantial amount of the Series 2019C Bonds of that maturity have been sold to the public. Under Section 171 of the Code, a U.S. Beneficial Owner of a Series 2019C Bond having bond premium may elect to amortize the premium over the term of the Series 2019C Bond using constant yield principles, based on the purchaser’s yield to maturity. A U.S. Beneficial Owner of a Series 2019C Bond amortizes bond premium by offsetting the qualified stated interest allocable to an accrual period with the bond premium allocable to that accrual period. This offset occurs when the U.S. Beneficial Owner takes the qualified stated interest into income under the U.S. Beneficial Owner’s regular method of accounting. If the premium allocable to an accrual period exceeds the qualified stated interest for that period, the excess is treated by the U.S. Beneficial Owner as a deduction under Section 171(a)(1) of the Code. As premium is amortized, a U.S. Beneficial Owner’s basis in the Series 2019C Bond will be reduced by the amount of amortizable bond premium properly allocable to the U.S. Beneficial Owner. Prospective investors should consult their own tax advisors concerning the calculation and accrual of bond premium. 61 Principal Payments. Subject to certain exceptions (including the special rules for de minimis OID described under the Original Issue Discount section above), principal payments on the Series 2019C Bonds generally will constitute a tax-free return of capital that will reduce a U.S. Beneficial Owner’s adjusted tax basis in the Series 2019C Bond to which the principal payment relates. Sale, Exchange, Redemption, or Other Disposition. If a U.S. Beneficial Owner of a Series 2019C Bond sells, exchanges, redeems, or otherwise disposes of the Series 2019C Bond, then the U.S. Beneficial Owner will recognize capital gain or loss equal to the difference between the amount realized on the sale, exchange, redemption, or other disposition (other than amounts representing accrued but unpaid interest, which amounts will be treated as a payment of interest) and the U.S. Beneficial Owner’s adjusted tax basis in the Series 2019C Bond. The U.S. Beneficial Owner’s adjusted tax basis of a Series 2019C Bond generally will equal the U.S. Beneficial Owner’s cost of acquiring such bond, increased by any OID previously included by the U.S. Beneficial Owner in income with respect to such bond, and decreased by the amount of any bond premium previously amortized with respect to such bond and by the amount of principal payments received by the U.S. Beneficial Owner with respect to such bond. Further, if the District establishes a legal defeasance of any Series 2019C Bond, that Series 2019C Bond may be deemed to be retired and “reissued” for U.S. federal income tax purposes as a result of the defeasance. Effect of Recent Changes in U.S. Tax Laws. Under the 2017 Tax Reform Act, a U.S. Beneficial Owner that uses an accrual method of accounting for U.S. federal income tax purposes and prepares an “applicable financial statement” (within the meaning of Section 451 of the Code) generally would be required to include certain amounts in income no later than the time such amounts are reflected on such financial statements. This rule generally is effective for tax years beginning on or after January 1, 2018, but for debt instruments issued with OID, this rule is effective for tax years beginning on or after January 1, 2019. The application of this rule may require the accrual of income earlier than would be the case under the general tax rules previously discussed for certain U.S. Beneficial Owners. Prospective purchasers should consult their own tax advisors regarding the potential applicability of these rules to their ownership and disposition of the Series 2019C Bonds. Series 2019C Bonds – Other Tax Consequences to Non-U.S. Beneficial Owners In General. The United States of America currently taxes the worldwide income of United States of America citizens, resident aliens, and domestic corporations without regard to whether the income arose from a transaction or activity that originated outside its geographic borders. Nonresident aliens and foreign corporations are generally taxed in the same manner as United States of America citizens, resident aliens, and domestic corporations on income that is effectively connected with a trade or business in the United States of America. Stated differently, foreign persons are subject to United States of America tax on any income that is effectively connected with the conduct of a trade or business in the United States of America. Different rules apply when the income is not effectively connected with a trade or business in the United States of America. For example, income not effectively connected with a trade or business in the United States of America, but which is fixed, determinable, annual or periodical, generally is taxed at a rate equal to thirty percent (30%), unless a lower rate applies pursuant to United States of America law or an applicable income tax treaty. Pursuant to Sections 1441 and 1442 of the Code, tax due on fixed, determinable, annual or periodical income is generally required to be withheld from each payment made to the foreign person and remitted by the withholding agent to the U.S. Department of the Treasury. In general, interest (including OID) is fixed, determinable, annual or periodical income, and as such, interest (including OID) is typically subject to U.S. withholding tax, unless an exception applies. Pursuant to Sections 871(h) and 881(c) of the Code, so-called “portfolio interest” is exempt from U.S. withholding 62 tax. Prospective purchases should consult their own tax advisors regarding the potential applicability of the “portfolio interest” exemption from United States of America withholding tax. Payments of Interest. Subject to the discussion below under the headings “FATCA” and “Backup Withholding and Information Reporting,” payments of interest (including OID) with respect to a Series 2019C Bond held by a Non-U.S. Beneficial Owner generally may not be subject to United States of America withholding tax, provided that the statement requirement set forth in Section 871(h) or Section 881(c) of the Code (each described below) has been fulfilled with respect to such Non-U.S. Beneficial Owner. Payments of Principal. Subject to the discussion below under the headings “FATCA” and “Backup Withholding and Information Reporting,” payments of principal with respect to a Series 2019C Bond held by a Non-U.S. Beneficial Owner generally may not be subject to United States of America withholding tax. Sale, Exchange, Redemption, or Other Disposition. Subject to the discussion below under the headings “FATCA” and “Backup Withholding and Information Reporting,” a Non-U.S. Beneficial Owner generally will not be subject to U.S. withholding tax on gain realized from the sale, exchange, redemption, or other disposition of a Series 2019C Bond, unless: (i) such Non-U.S. Beneficial Owner is an individual who is present in the United States of America for 183 or more days in the taxable year of such sale, exchange, redemption, or other disposition and certain other conditions are met; or (ii) such gain is effectively connected with the conduct by the Non-U.S. Beneficial Owner of a trade or business in the United States of America (and, under certain income tax treaties, is attributable to a United States of America permanent establishment maintained by such Non-U.S. Beneficial Owner). Further, if the District establishes a legal defeasance of any Series 2019C Bond, that Series 2019C Bond may be deemed to be retired and “reissued” for United States of America federal income tax purposes as a result of the defeasance. Required Certifications to Obtain Exemption from Withholding. Sections 871(h) and 881(c) of the Code require that, in order for a Non-U.S. Beneficial Owner to obtain the above-described exemptions from United States of America withholding tax, either the Non-U.S. Beneficial Owner or a securities clearing organization, bank, or other financial institution that holds customers’ securities in the ordinary course of its trade or business (“Financial Institution”) and that is holding the Series 2019C Bond on behalf of such Non-U.S. Beneficial Owner, must file a statement with the District, its paying agent, or other applicable withholding agent to the effect that the Non-U.S. Beneficial Owner is not a United States of America person (as defined in Section 7701(a)(30) of the Code). Such requirement will be met if the Non-U.S. Beneficial Owner: (i) provides his, her, or its name and address; (ii) certifies under penalties of perjury that he, she, or it is not a United States of America person (as defined in Section 7701(a)(30) of the Code); and (iii) so certifies on the appropriate IRS Form, which is IRS Form W-8BEN for an individual, Form W-8BEN-E for an entity, Form W-8EXP for a foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a United States of America possession, or any successor form. Such requirement will also be met if any Financial Institution holding the Series 2019C Bond on behalf of the Non-U.S. Beneficial Owner files a statement with the District, its paying agent, or other applicable withholding agent to the effect that it has received such a statement from the Non-U.S. Beneficial Owner (and furnishes the District, its paying agent, or other applicable withholding agent with a copy thereof). In addition, in the case of Series 2019C Bonds held by a foreign intermediary (other than a “qualified intermediary”) or a foreign partnership (other than a “withholding foreign partnership”), the foreign intermediary or partnership, as the case may be, generally must provide a properly executed IRS Form W- 8IMY (or successor form) and attach thereto an appropriate certification by each foreign beneficial owner or payee. A certificate is generally effective only with respect to payments of interest (including OID) 63 made to the certifying Non-U.S. Beneficial Owner after issuance of the certificate in the calendar year of its issuance and the two immediately succeeding calendar years. Thus, Non-U.S. Beneficial Owners will be required to provide these certifications more than once. Non-U.S. Beneficial Owners Engaged in a Trade or Business in the United States. If a Non- U.S. Beneficial Owner is engaged in a trade or business in the United States of America, and if interest (including OID) or gain realized on the sale, exchange, redemption, or other disposition of a Series 2019C Bond is effectively connected with the conduct of such trade or business, then the Non-U.S. Beneficial Owner, although exempt from United States of America withholding tax, generally will be subject to regular United States of America federal income tax on such effectively connected income or gain in the manner as if it were a U.S. Beneficial Owner. In addition, if such Non-U.S. Beneficial Owner is a foreign corporation, it may be subject to a branch profits tax equal to thirty percent (30%) (or such lower rate provided by an applicable treaty) of its effectively connected earnings and profits for the taxable year, subject to certain adjustments. Interest income (including OID) or gain that is effectively connected with a trade or business in the United States of America will not be subject to withholding tax if the Non-U.S. Beneficial Owner provides a properly executed IRS Form W-8ECI (or successor form) to the District, its paying agent, or other applicable withholding agent in order to claim an exemption from withholding tax. Effect of Not Providing the Required Exemption Certificate. A Non-U.S. Beneficial Owner who does not satisfy the exemption requirements is generally subject to United States of America withholding tax on payments of interest (including OID). Foreign Account Tax Compliance Act (FATCA). The Foreign Account Tax Compliance Act (“FATCA”) generally imposes United States of America withholding tax on interest payments and gross proceeds of the sale, exchange, redemption, or other disposition of the Series 2019C Bonds paid to certain foreign financial institutions (which is broadly defined for this purpose to generally include most non-United States of America banks and investment funds) and certain other non-United States of America entities, unless certain disclosure and due diligence requirements related to financial accounts held by United States of America, taxpayers or by foreign entities in which United States of America taxpayers hold substantial ownership interests are satisfied. A foreign financial institution or other entity that is subject to FATCA, but which fails to meet the requirements imposed by FATCA, generally will be subject to a United States of America withholding tax with respect to any “withholdable payments.” For this purpose, withholdable payments generally include United States of America-source payments otherwise subject to nonresident withholding tax (e.g., United States of America-source interest, including OID) and the entire gross proceeds from the sale, exchange, redemption, or other disposition of any debt instruments of United States of America issuers, even if the payment would otherwise not be subject to United States of America nonresident withholding tax (e.g., because the proceeds are a capital gain). Thus, if a Beneficial Owner is a foreign financial institution or other entity that is subject to FATCA, but that institution or entity does not comply with FATCA, then such Beneficial Owner would be subject to a thirty percent (30%) United States of America withholding tax. An intergovernmental agreement between the United States of America and an applicable non-United States of America country may modify these requirements. The District will not pay any additional amounts in respect of any amounts withheld, including pursuant to FATCA, and Beneficial Owners or beneficial owners of the Series 2019C Bonds will have no recourse against the District. Backup Withholding and Information Reporting. There will be reported annually to the IRS, and to each Beneficial Owner, the amount of interest (including OID) paid on, or the proceeds from the sale, exchange, redemption, or other taxable disposition of, the Series 2019C Bonds and the amount withheld for United States of America federal income tax purposes, if any, for each calendar year, except 64 as to certain exempt recipients, such as corporations, tax-exempt organizations, qualified pension and profit sharing trusts, individual retirement accounts, or nonresident aliens who provide an appropriate certification as to their tax status. Each Beneficial Owner, other than a Beneficial Owner who is not subject to the foregoing reporting requirements, will be required to provide, under penalties of perjury, a certificate containing its name, its address, its correct United States of America federal taxpayer identification number, and a statement that the Beneficial Owner is not subject to back-up withholding. If any Beneficial Owner fails to provide the required certification, or if there are other related compliance failures, then there will be withheld amounts at a prescribed rate from the interest otherwise payable to the Beneficial Owner or the proceeds from the sale, exchange, redemption, or other taxable disposition of the Series 2019C Bonds, and the withheld amounts will be remitted to the U.S. Department of the Treasury and credited against the Beneficial Owner’s United States of America federal income tax liability. In addition, Beneficial Owners will be required to provide to the District or designated agents all information, documentation, or certifications acceptable to the District or its agents to permit compliance with tax reporting obligations under applicable law, including any applicable cost basis reporting obligations. Non-U.S. Beneficial Owners should consult their own tax advisors with respect to the possible applicability of United States of America withholding and other taxes with respect to their holding the Series 2019C Bonds. State, Local, and Foreign Taxes. Beneficial Owners of Series 2019C Bonds may be subject to state, local, or foreign taxes with respect to an investment in the Series 2019C Bonds. In light of the potential impact of state, local, and foreign taxes (including the limitations on deductibility of state, and local taxes imposed by the 2017 Tax Reform Act), prospective investors are urged to consult their tax advisors with respect to the state, local and foreign tax consequences of an investment in the Series 2019C Bonds. LEGAL MATTERS Certain legal matters incident to the authorization, issuance, sale and delivery of the Series 2019B&C Bonds are subject to the approval of Gilmore & Bell, P.C., St. Louis, Missouri, and White Coleman & Associates, LLC, St. Louis, Missouri, Co-Bond Counsel, whose approving legal opinions will be delivered with the Series 2019B&C Bonds in substantially the form of Appendix E hereto. Certain other legal matters will be passed on for the District by its General Counsel and by its Disclosure Counsel, Armstrong Teasdale LLP, St. Louis, Missouri. Certain legal matters will be passed upon for the Underwriters by their co-counsel, Thompson Coburn LLP, St. Louis, Missouri, and Richard G. Hughes & Associates, LLC, St. Louis, Missouri. The various legal opinions to be delivered concurrently with the delivery of the Series 2019B&C Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed therein. By rendering a legal opinion, the opinion giver does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or of the future performance of parties to such transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction. RATINGS S&P Global Ratings, a Standard & Poor’s Financial Services LLC business and Fitch Ratings, Inc. (collectively, the “Rating Agencies”) have assigned the Series 2019B Bonds the ratings of “AAA” and “AA+,” respectively, based on each Rating Agency’s evaluation of the creditworthiness of the District. The Rating Agencies have assigned the Series 2019C Bonds the ratings of “AAA” and “AA+,” respectively, based on each Rating Agency’s evaluation of the creditworthiness of the District. Such ratings reflect only the views of the Rating Agencies at the time such ratings are given, and the 65 Underwriters, Co-Municipal Advisors and the District make no representation as to the appropriateness of such ratings. An explanation of the significance of such ratings may be obtained only from the Rating Agencies. The District has furnished the Rating Agencies with certain information and materials relating to the Series 2019B&C Bonds and the District that have not been included in this Official Statement. Generally, rating agencies base their ratings on the information and materials so furnished and on investigations, studies and assumptions by the rating agencies. There is no assurance that a particular rating will be maintained for any given period of time or that it will not be lowered or withdrawn entirely if, in the judgment of the agency originally establishing such rating, circumstances so warrant. Neither the District, nor the Co-Municipal Advisors nor the Underwriters have undertaken any responsibility to bring to the attention of the holders of the Series 2019B&C Bonds any proposed revision or withdrawal of a rating of the Series 2019B&C Bonds, as applicable, or to oppose any such proposed revision or withdrawal. Any revision or withdrawal of a rating could have an adverse effect on the market price and marketability of the Series 2019B&C Bonds, as applicable. Securities ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. CONTINUING DISCLOSURE Pursuant to the Continuing Disclosure Agreement, under which the District has designated DAC as Disclosure Dissemination Agent, the District has covenanted for the benefit of the holders and beneficial owners of the Series 2019B&C Bonds to provide, or cause to be provided, certain financial information and operating data relating to the District to certain parties by not later than 180 days following the end of the District’s Fiscal Year (the “Annual Report”), commencing with the report for the Fiscal Year ending June 30, 2020, and to provide notices of the occurrence of certain enumerated events, if material. The Annual Report and any notices of material events will be submitted by the Disclosure Dissemination Agent on behalf of the District with the Municipal Securities Rulemaking Board (“MSRB”) through its Electronic Municipal Market Access system (“EMMA”) pursuant to Rule 15c2-12. EMMA is an internet-based, online portal for free investor access to municipal bond information, including offering documents, material event notices, real-time municipal securities trade prices and education resources available at www.emma.msrb.org. Nothing contained on EMMA relating to the District or the Series 2019B&C Bonds is incorporated by reference in this Official Statement. These covenants have been made in order to assist the Underwriters in complying with Rule 15c2-12. The specific nature of the information to be contained in the Annual Report and in the notices of material events is summarized in “DEFINITIONS AND SUMMARIES OF CERTAIN PROVISIONS OF THE BOND ORDINANCE AND THE CONTINUING DISCLOSURE AGREEMENT” in Appendix C hereto. During the previous five years, the District believes it has materially complied with its continuing disclosure undertakings to provide financial and operating information required by Rule 15c2-12. The Disclosure Dissemination Agent has only the duties specifically set forth in the Continuing Disclosure Agreement. The Disclosure Dissemination Agent’s obligation to deliver the information at the times and with the contents described in the Continuing Disclosure Agreement is limited to the extent that the District has provided such information to the Disclosure Dissemination Agent as required by the Continuing Disclosure Agreement. The Disclosure Dissemination Agent has no duty with respect to the content of any disclosures or notice made pursuant to the terms of the Continuing Disclosure Agreement. The Disclosure Dissemination Agent has no duty or obligation to review or verify any information in the Annual Report, the District’s audited financial statements, a Notice Event (as defined in the Continuing 66 Disclosure Agreement), or any other information, disclosures or notices provided to it by the District and shall not be deemed to be acting in any fiduciary capacity for the District, the holders of the Series 2019B&C Bonds or any other party. The Disclosure Dissemination Agent has no responsibility for the District’s failure to report to the Disclosure Dissemination Agent a Notice Event or a duty to determine the materiality thereof. The Disclosure Dissemination Agent shall have no duty to determine, or liability for failing to determine, whether the District has complied with the Continuing Disclosure Agreement. The Disclosure Dissemination Agent may conclusively rely upon certifications of the District at all times. UNDERWRITING The Series 2019B&C Bonds are being purchased for reoffering by the group of underwriters shown on the cover page hereof (collectively, the “Underwriters”), pursuant to a purchase contract between the District and the Underwriters (the “Purchase Contract”). The Purchase Contract provides that the Underwriters shall purchase all, but not less than all, of the Series 2019B Bonds at the aggregate purchase price of $63,990,432.37, which amount is equal to the principal amount of the Series 2019B Bonds of $52,130,000.00, less underwriters’ discount of $199,544.43, plus original issue premium of $12,059,976.80. The Purchase Contract provides that the Underwriters shall purchase all, but not less than all, of the Series 2019C Bonds at the aggregate purchase price of $275,196,960.86, which amount is equal to the principal amount of the Series 2019C Bonds of $276,260,000.00, less underwriters’ discount of $1,063,039.14. Morgan Stanley & Co. LLC, an underwriter of the Series 2019B&C Bonds, has entered into a retail distribution arrangement with its affiliate Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the Series 2019B&C Bonds. Stern Brothers & Co., an underwriter of the Series 2019B&C Bonds, has entered into agreements (each, a “Stern Brothers Agreement”) with 280 Securities LLC (“280 Securities”) and BNY Mellon Capital Markets, LLC (“BNYMCM”) for the distribution of certain municipal securities offerings at the original issue price. Pursuant to each Stern Brothers Agreement, Stern Brothers & Co. may sell the Series 2019B&C Bonds to 280 Securities and BNYMCM and will share a portion of its selling concession compensation with each, as applicable. The Underwriters may offer and sell the Series 2019B&C Bonds to certain dealers (including dealers depositing the Series 2019B&C Bonds into investment trusts) and others at prices lower than the public offering price stated on the inside cover pages hereof. The initial public offering price may be changed from time to time by the Underwriters. The Underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, principal investment, hedging, financing and brokerage activities. Certain of the Underwriters and their respective affiliates have, from time to time, performed, and may in the future perform various investment banking for the District for which they received or will receive customary fees and expenses. In the ordinary course of their various business activities, the Underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities), and financial instruments (which may include bank loans and/or credit 67 default swaps) for their own account and for the accounts of their customers. Such investment and securities activities may involve securities and instruments of the District. CERTAIN RELATIONSHIPS White Coleman & Associates, LLC has represented certain of the Underwriters in transactions unrelated to the issuance of the Series 2019B&C Bonds, but is not representing any of the Underwriters in connection with the issuance of the Series 2019B&C Bonds. Armstrong Teasdale LLP and Thompson Coburn LLP each represent the District in certain matters unrelated to the issuance of the Series 2019B&C Bonds. FINANCIAL FEASIBILITY CONSULTANT The District has retained Raftelis Financial Consultants, Inc., to serve as the Financial Feasibility Consultant to the District in connection with the issuance of the Series 2019B&C Bonds. See Appendix D – “Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series 2019B”. VERIFICATION OF MATHEMATICAL CALCULATIONS The accuracy of the mathematical computations (i) of the adequacy of the maturing principal amounts of the United States of America Government Obligations, together with the interest income thereon and uninvested cash, if any, to pay when due the principal of and redemption premium, if any, and interest on the Refunded Bonds; and (ii) relating to the yields related to the United States of America Government Obligations, will be verified by Samuel Klein and Company, Certified Public Accountants. Such verification of arithmetical accuracy and mathematical computations shall be based upon information and assumptions supplied by the Co-Municipal Advisors and on interpretations of the Code, provided by Co-Bond Counsel. CO-MUNICIPAL ADVISORS PFM Financial Advisors LLC, Cleveland, Ohio, and Independent Public Advisors, LLC, Kansas City, Missouri, have served as Co-Municipal Advisors to the District in connection with the Series 2019B&C Bonds, relative to a plan of financing and assisting the District in drafting certain portions of this Official Statement for the sale of the Series 2019B&C Bonds. The Co-Municipal Advisors have participated in the compilation and editing of this Official Statement. The Co-Municipal Advisors have not, however, independently verified the factual information contained in this Official Statement nor have they conducted an investigation of the affairs of the District for the purpose of determining the accuracy or completeness of any of the information contained herein. The Co-Municipal Advisors have relied on the diligence and accuracy of the District which has certified that this Official Statement contains no material misstatement or omission of information. INDEPENDENT AUDITORS The Independent Auditors Report, Management’s Discussion and Analysis and Basic Financial Statements of the District for the Fiscal Years ended June 30, 2019 and 2018 included in Appendix A of this Official Statement has been audited by CliftonLarsonAllen LLP. 68 MISCELLANEOUS The references, excerpts and summaries of all documents referred to herein do not purport to be complete statements of the provisions of such documents, and reference is made to all such documents for full and complete statements of all matters of fact relating to the Series 2019B&C Bonds, the security for the payment of the Series 2019B&C Bonds and the rights of the owners thereof. During the period of the offering, copies of drafts of such documents may be examined at the offices of the Co-Municipal Advisors; following delivery of the Series 2019B&C Bonds, copies of such documents may be examined at the corporate trust office of the Paying Agent in St. Louis, Missouri. The information contained in this Official Statement has been compiled from official and other sources deemed to be reliable, and while not guaranteed as to completeness or accuracy, is believed to be correct as of this date. It is anticipated that CUSIP identification numbers will be printed on the Series 2019B&C Bonds, but neither the failure to print such numbers on any Series 2019B&C Bonds nor any error in printing of such numbers will constitute cause for a failure or refusal by the purchaser thereof to accept delivery of and pay for any Series 2019B&C Bonds. The attached appendices are integral parts of this Official Statement and must be read together with all of the foregoing statements. The closing documents will include a certificate by the proper official or officer of the District that, to the best of his knowledge and belief at the time of the acceptance of the delivery of the Series 2019B&C Bonds, this Official Statement and any information furnished by the District supplementary thereto did not and do not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made in light of the circumstances under which they were made, not misleading in any material respect. Any statement made in this Official Statement involving matters of opinion or of estimates, whether or not expressly so stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the information presented herein since the date hereof. This Official Statement is not to be construed as a contract or agreement between the District, the Paying Agent, or the Underwriters and the purchasers or Owners of any Series 2019B&C Bonds. This Official Statement has been authorized and approved by the District. For purposes of compliance with Rule 15c2-12, this Official Statement constitutes an official statement of the District that has been deemed final by the District as of its date except for the omission of no more than the information permitted by Rule 15c2-12. The Official Statement has been duly executed and delivered on its behalf by the officials or officers signing below. By: /s/ Brian L. Hoelscher, P.E. Executive Director By: /s/ Tim R. Snoke Secretary-Treasurer APPENDIX A Independent Auditors’ Report, Management’s Discussion and Analysis and Basic Financial Statements of The Metropolitan St. Louis Sewer District for the Fiscal Years ended June 30, 2019 and 2018 [THIS PAGE INTENTIONALLY LEFT BLANK] THE METROPOLITAN ST. LOUIS SEWER DISTRICT • ST. LOUIS, MISSOURI FENTON WASTEWATER TREATMENT PLANT COMPREHENSIVE ANNUAL FINANCIAL 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. ! 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 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 1,460 887 — 887 — — 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 $1.9 billion of the total authorization. The District’s long-term wastewater capital improvement program will continue to be funded through a combination of additional bonds and wastewater rate increases. Requests For Information This financial report is designed to provide a general overview of the District’s finances to interested parties. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed or e-mailed to: Marion M. Gee, Director of Finance The Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, MO 63103-2555 314-768-6200 mgee@stlmsd.com THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 16 STATEMENTS OF NET POSITION Continued on Next Page June 30, Assets 2019 2018 Current Assets Unrestricted Current Assets 33,303,010$ 13,134,990$ 219,636,085 303,522,982 $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 1,927,804 1,669,319 5,331,693 4,495,551 8,306,515 8,109,878 366,790,934 421,307,147 Restricted Current Assets Cash and cash equivalents 1,747,847 1,009,872 15,117,921 26,469,179 115,556 54,092 16,981,324 27,533,143 383,772,258 448,840,290 Non-Current Assets Restricted Assets 21,703,207 20,241,459 152,079,763 249,558,518 73,020,492 79,334,215 Property taxes receivable, less allowance of $20,954 in 2019 and $45,453 in 2018 1,355,724 1,379,842 Accrued income on investments 536,365 474,478 248,695,551 350,988,512 Other Assets 11,156,415 11,814,529 177,405,293 71,023,440 188,561,708 82,837,969 Capital Assets Depreciable: 1,277,635,246 1,276,275,567 2,749,946,498 2,612,344,501 99,318,349 97,380,391 4,126,900,093 3,986,000,459 1,525,779,330 1,449,135,797 2,601,120,763 2,536,864,662 Non-depreciable: 74,274,584 73,261,965 956,321,065 836,105,343 3,631,716,412 3,446,231,970 4,068,973,671 3,880,058,451 4,452,745,929 4,328,898,741 Deferred Outflows of Resources 11,342,745 12,099,160 34,238,270 17,332,857 1,246,327 1,278,437 46,827,342 30,710,454 THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 17 STATEMENTS OF NET POSITION (Continued) June 30, Liabilities 2019 2018 Current Liabilities Current Liabilities-Payable From Unrestricted Assets Contracts and accounts payable 36,098,219$ 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 50,942,663 148,261,083 138,250,187 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable 801,529 1,100,845 Retainage payable 928,645 731,026 1,730,174 1,831,871 149,991,257 140,082,058 Non-Current Liabilities 7,352,522 7,329,985 74,396,737 48,388,938 24,164,395 24,193,972 1,617,916,402 1,642,233,069 1,723,830,056 1,722,145,964 1,873,821,313 1,862,228,022 Deferred Inflows of Resources 4,341,116 6,064,985 886,686 — 5,227,802 6,064,985 Net Position 2,063,518,988 1,968,740,050 58,262,631 55,329,147 69,150,974 74,249,353 429,591,563 392,997,638 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 399,929,150$ 364,165,372$ (4,349,247) (2,990,148) 3,063,458 3,777,200 2,477,778 3,359,053 401,121,139 368,311,477 63,197,081 60,735,056 45,616,891 44,785,482 11,446,900 11,217,590 67,461,720 59,012,162 5,600,419 1,557,385 83,639,843 81,326,342 13,754,655 15,131,189 290,717,509 273,765,206 110,403,630 94,546,271 34,107,619 33,748,932 16,699,153 7,405,957 301,446 253,799 51,108,218 41,408,688 970,825 1,833,908 15,628,590 9,296,358 33,082,384 36,695,083 49,681,799 47,825,349 111,830,049 88,129,610 16,635,468 24,799,116 742,451 1,278,558 17,377,919 26,077,674 129,207,968 114,207,284 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 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) 185,620 742,451 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 $250,000 for interest bearing accounts and noninterest bearing accounts. The District’s investment policy complies with the provisions of state laws and requires collateralization on repurchase agreements, time certificates of deposit and deposits with banking institutions, not covered by the FDIC, and the collateralization level shall be 103% and shall be based on the market value of the pledged collateral. Investments The Secretary-Treasurer is authorized to invest, with the approval of the Board, funds not immediately needed for the purpose to which said funds are applicable, in the same manner as the state treasurer may invest funds of the State of Missouri pursuant to Section 15, Article IV of the Constitution of Missouri, as amended from time to time. The District’s investment policy conforms to the investment policy guidelines for the State of Missouri. The District’s investment policy authorizes the District to invest in the following instruments: U.S. Treasury obligations, certificates of deposit, obligations of any agency or instrumentality of the U.S., repurchase agreements, bankers’ acceptances, and commercial paper, all according to terms specified in the policy. The District also has investments in money market mutual funds that hold securities approved by the District’s investment policy. At June 30, 2019 and June 30, 2018, all of the District’s investments were in compliance with the District’s investment policy and charter. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 32 A summary of deposits and investments as of June 30, 2019 and June 30, 2018 is as follows: Reconciliation to the financial statements: Investment Type Cost Fair Value Cost Fair Value Deposits 26,062,172$ 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 a ssigned 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 32,084,339$ 12,544,280$ 209,097,537 288,046,796 $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 1,869,825 1,630,002 5,331,693 4,495,551 8,306,515 8,109,878 354,423,861 404,422,673 Restricted Current Assets 115,556 54,092 115,556 54,092 354,539,417 404,476,765 Non-Current Assets Restricted Assets 19,561,186 19,193,048 133,552,809 222,080,295 45,067,528 66,231,790 Property taxes receivable, less allowance $0 for 2019 (18,019) (16,200) 193,262 232,053 198,356,766 307,720,986 Other Assets 11,156,415 11,814,529 168,649,616 67,264,708 179,806,031 79,079,237 Capital Assets 1,277,635,246 1,276,275,567 2,092,478,890 1,966,893,455 82,305,964 79,666,689 3,452,420,100 3,322,835,711 1,309,151,371 1,241,579,256 2,143,268,729 2,081,256,455 66,853,796 66,103,288 931,353,208 815,408,534 3,141,475,733 2,962,768,277 3,519,638,530 3,349,568,500 3,874,177,947 3,754,045,265 Deferred Outflows of Resources: 11,342,745 12,099,160 28,929,459 14,757,358 1,075,940 1,102,858 41,348,144 27,959,376 WASTEWATER SEGMENT STATEMENTS OF NET POSITION June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 80 Liabilities 2019 2018 Current Liabilities-Payable From Unrestricted Assets 36,091,535$ 34,518,350$ Deposits and accrued expenses 35,444,449 31,095,559 15,855,232 13,893,951 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 — 265,865 237,442 204,936 Total Current Liabilities-Payable From Restricted Assets 237,442 470,801 140,232,421 130,921,324 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 1,617,916,402 1,642,233,069 1,709,353,653 1,711,869,788 1,849,586,074 1,842,791,112 Deferred Inflows of Resources: 3,702,250 5,147,399 743,324 — 4,445,574 5,147,399 Net Position Net investment in capital assets 1,574,725,932 1,486,430,468 Restricted for: 58,262,631 55,329,147 1,991,530 3,709,735 Unrestricted 426,514,350 388,596,780 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 399,932,002$ 364,170,182$ (4,360,646) (3,009,705) 3,063,458 3,777,200 2,474,310 3,355,085 401,109,124 368,292,762 63,197,081 60,735,056 29,309,082 29,266,441 1,153,099 2,839,996 65,630,150 57,984,124 5,435,759 1,548,048 73,522,926 71,366,228 12,790,959 14,048,473 251,039,056 237,788,366 150,070,068 130,504,396 (1,857) 2,565 14,438,669 6,356,029 301,446 253,799 14,738,258 6,612,393 869,490 1,682,939 14,095,510 6,510,082 33,082,384 36,695,083 48,047,384 44,888,104 116,760,942 92,228,685 9,924,920 16,433,138 742,451 1,278,558 10,667,371 17,711,696 127,428,313 109,940,381 1,934,066,130 1,835,146,655 Effect of Adoption of GASB 75 — (11,020,906) 1,934,066,130 1,824,125,749 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 1,218,671$ 590,710$ 10,538,548 15,476,186 $126,120 in 2019 and $140,514 in 2018 72,188 89,522 Unbilled sewer service charges receivable (227) (389) and $22,544 in 2018 479,914 689,128 57,979 39,317 12,367,073 16,884,474 Restricted Current Assets Cash and cash equivalents 1,747,847 1,009,872 15,117,921 26,469,179 16,865,768 27,479,051 29,232,841 44,363,525 Non-Current Assets Restricted Assets 2,142,021 1,048,411 18,526,954 27,478,223 27,952,964 13,102,425 Property taxes receivable, less allowance of $20,954 in 2019 and $45,320 in 2018 1,373,743 1,396,042 343,103 242,425 50,338,785 43,267,526 Other Assets 8,755,677 3,758,732 8,755,677 3,758,732 Capital Assets 657,467,608 645,451,046 17,012,385 17,713,702 674,479,993 663,164,748 216,627,959 207,556,541 457,852,034 455,608,207 7,420,788 7,158,677 24,967,857 20,696,809 490,240,679 483,463,693 549,335,141 530,489,951 578,567,982 574,853,476 Deferred Outflows of Resources: 5,308,811 2,575,499 170,387 175,579 5,479,198 2,751,078 STORMWATER SEGMENT STATEMENTS OF NET POSITION June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 84 Liabilities 2019 2018 Current Liabilities-Payable From Unrestricted Assets 6,684$ 9,337$ 8,259,420 7,789,782 — 545 Total Current Liabilities-Payable From Unrestricted Assets 8,266,104 7,799,664 Current Liabilities-Payable From Restricted Assets 801,529 834,980 691,203 526,090 Total Current Liabilities-Payable From Restricted Assets 1,492,732 1,361,070 9,758,836 9,160,734 Non-Current Liabilities 11,158,412 6,953,403 3,317,991 3,322,773 14,476,403 10,276,176 24,235,239 19,436,910 Deferred Inflows of Resources: 638,866 917,586 143,362 — 782,228 917,586 Net Position Net investment in capital assets 488,793,056 482,309,582 Restricted for: 67,159,444 70,539,618 Unrestricted 3,077,213 4,400,858 559,029,713$ 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 (2,852)$ (4,810)$ 11,399 19,557 3,468 3,968 12,015 18,715 16,307,809 15,519,041 10,293,801 8,377,594 1,831,570 1,028,038 164,660 9,337 10,116,917 9,960,114 963,696 1,082,716 39,678,453 35,976,840 (39,666,438) (35,958,125) 34,109,476 33,746,367 2,260,484 1,049,928 36,369,960 34,796,295 101,335 150,969 1,533,080 2,786,276 1,634,415 2,937,245 (4,930,893) (4,099,075) 6,710,548 8,365,978 6,710,548 8,365,978 1,779,655 4,266,903 557,250,058 556,021,399 Effect of Adoption of GASB 75 — (3,038,244) 557,250,058 552,983,155 559,029,713$ 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 Fiscal 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 m illigrams — — 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 com pliance 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 Bu reau 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 (m illions 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 DISTRICT ST. LOUIS, MO 2350 MARKET STREET, ST. LOUIS, MO 63103 WWW.STLMSD.COM • 314-768-6260 APPENDIX B Information Regarding the District’s Service Area [THIS PAGE INTENTIONALLY LEFT BLANK] B-1 INFORMATION REGARDING THE DISTRICT’S SERVICE AREA The Series 2019B&C Bonds are special, limited obligations of the District and are not obligations of The City of St. Louis, Missouri (the “City”), St. Louis County, Missouri (the “County”), the State of Missouri (the “State”), or any political subdivision of the City, the County or the State. The Series 2019B&C Bonds are payable solely from the revenues described in this Official Statement. As described elsewhere in this Official Statement, the service area of the District consists of the City and most of the County. The following information regarding the City and the County has been obtained from sources that the District believes to be reliable, but should not be construed as an indication that the Series 2019B&C Bonds are payable from any source other than the revenues of the District described in this Official Statement. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2019B&C BONDS,” “THE DISTRICT,” and “THE CIRP” in this Official Statement. Such information is not guaranteed as to accuracy or completeness by the Underwriters and is not to be construed as a representation by the Underwriters. The Underwriters have not verified this information. No representation is made by the Underwriters as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date as to which such information is provided. The delivery of this Official Statement, including this Appendix B, is not intended to create any implication that there has been no change in the affairs of the District, the City or the County since the date hereof or that the information contained or incorporated by reference in this Appendix B is correct as of any time subsequent to its date. THE SERVICE AREA As more fully described in this Official Statement under the caption “THE DISTRICT - General”, the District was created in 1954 pursuant to Article VI, Section 30 of the State Constitution, which empowers the people of the City and the County “to establish a metropolitan district or districts for the functional administration of services common to the area included therein.” The District provides a metropolitan-wide system of wastewater treatment and sanitary sewerage facilities for the collection, treatment and disposal of sewage within the City and most of the more heavily populated areas of the County. When the District began operations, it took over the publicly-owned wastewater and stormwater drainage facilities within its then-existing jurisdiction and began the construction of an extensive system of collector and interceptor sewers and treatment facilities. In subsequent years, voters have approved the District’s annexation of a 270 square mile area of the lower Missouri River and lower Meramec River watersheds in the County, and the District purchased various investor-owned or municipally-operated systems serving areas of the County. The District’s service area now encompasses approximately 520 square miles, including all of the City’s approximately 66 square miles and approximately 454 square miles (approximately 87%) of the County. A map showing the District’s current service area appears on the back cover of this Official Statement. The current population served by the District is approximately 1.3 million. The City of St. Louis, Missouri The history of the City dates to 1764 when Pierre Laclède and Auguste Chouteau selected the site as a fur trading post due in large part to its proximity to the confluence of the Mississippi and Missouri Rivers. The City was incorporated in 1823, and its current boundaries were established in 1876, when voters approved separation from the County and establishment of a home rule charter. The City is a constitutional charter city not a part of any county, and exists under and pursuant to its Charter and the laws of the State. The eastern boundary of the City is formed by the Mississippi River, and the City is bordered on the north, west and south by the County. The City occupies approximately 66 square miles, all of which lie within the service area of the District. B-2 St. Louis County, Missouri The County was formed by a proclamation of Governor William Clark on October 1, 1812, nine years before Missouri attained statehood in 1821. In 1876, by vote of the entire county (which at the time included both City and County), the City separated itself from the County. The City of Clayton, Missouri is the County seat and located in the east central part of the County. Approximately sixty-six percent of the land area of the County is occupied by 89 self-governing municipalities, containing approximately two-thirds of the County’s population. The remaining unincorporated area comes under the direct jurisdiction of the County government. The County is a constitutional charter county operating and existing under its Charter and the laws of the State. The County covers an area of approximately 524 square miles, approximately 454 square miles of which lie within the service area of the District. ECONOMIC AND DEMOGRAPHIC DATA Population The City and the County are a part of the St. Louis, Missouri-Illinois Metropolitan Statistical Area (the “St. Louis MSA”), comprised of: the City, the County, and the counties of Franklin, Jefferson, Lincoln, St. Charles, and Warren in Missouri; the counties of Bond, Calhoun, Clinton, Jersey, Macoupin, Madison, Monroe and St. Clair in Illinois; and a portion of the City of Sullivan located in Crawford County, Missouri. According to the U.S. Census Bureau, the population patterns for the City, the County, and the St. Louis MSA have been as stated directly below. City County St. Louis MSA(1) Percentage Percentage Percentage Year Population Change(2) Population Change(2) Population Change(2) 2000 348,189 - 1,016,315 - 2,698,687 - 2010 319,294 -8.30% 999,954 -1.61% 2,787,701 +3.30% 2011 319,294 0.00 999,961 0.00 2,793,811 +0.22 2012 319,387 +0.03 1,000,742 +0.08 2,796,903 +0.11 2013 318,459 -0.29 1,000,471 -0.03 2,800,154 +0.12 2014 317,395 -0.33 1,000,588 +0.01 2,804,862 +0.17 2015 315,878 -0.48 1,001,213 +0.06 2,808,330 +0.12 2016 312,389 -1.10 998,025 -0.32 2,807,002 -0.05 2017 307,866 -1.45 996,648 -0.14 2,805,850 -0.04 2018 302,838 -1.63 996,945 +0.03 2,805,465 -0.01 _____________________ Source: U.S. Census Bureau Population for the years 2000 and 2010. Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2018 of the U.S. Census Bureau, Population Division for the years 2010 through 2018 (1) Washington County, Missouri was removed from the St. Louis MSA statistics effective retroactively to the 2010 Census. (2) Percentages are rounded to the nearest hundredth. [The remainder of this page is intentionally left blank.] B-3 The largest municipalities within the District’s service area are as follows: Population Population Population Municipality 2010 2000 1990 St. Louis (City) 319,294 348,189 396,685 Florissant 52,158 50,497 51,206 Chesterfield 47,484 46,802 37,991 University City 35,371 37,428 40,087 Ballwin 30,404 31,283 21,816 Kirkwood 27,540 27,324 27,291 Maryland Heights 27,472 25,756 25,407 Hazelwood 25,703 26,206 15,512 Webster Groves 22,995 23,230 23,097 Ferguson 21,203 22,406 22,286 ______________ Source: Missouri Census Data Center Employment The below table sets forth information relating to the average composition of non-farm employment in the City and the County for the years 1990, 2000, and 2010. City Employment County Employment Private Employment: 1990 2000 2010 1990 2000 2010 Manufacturing 48,675 35,503 36,243 118,736 87,687 29,431 Agriculture 631 N/A N/A 5,072 6,931 279 Mining 234 N/A N/A 1,241 1,227 801 Construction 9,977 10,067 11,903 34,149 45,746 49,020 Transportation, Communication and Utilities 27,154 25,951 18,622 38,254 51,152 26,599 Wholesale Trade 19,399 15,224 15,691 42,228 46,961 28,334 Retail Trade 36,083 29,934 17,222 121,977 134,854 135,148 Finance, Insurance and Real Estate 28,422 25,436 13,738 62,176 77,300 79,435 Services 99,547 109,830 134,345 215,147 279,413 342,429 Total Private Employment 270,122 252,951 183,081 638,980 731,271 507,530 Governmental Employment 51,100 47,092 32,051 53,783 59,826 55,402 Total 321,222 300,043 215,132 692,763 791,097 562,932 ___________________ Source: U.S. Department of Commerce, Bureau of Economic Analysis; Missouri State Census Data Center [The remainder of this page is intentionally left blank.] B-4 The below table sets forth the total labor force, number of employed and unemployed workers in the City and the County, for 2009 through 2018. City(1) County(1) Labor Force Labor Force Year Employed Unemployed Total Employed Unemployed Total 2009 139,938 18,505 158,443 468,644 46,207 514,851 2010 145,882 18,956 164,838 487,113 47,758 534,871 2011 147,357 16,983 164,340 492,327 41,897 534,224 2012 146,972 13,896 160,868 491,787 34,282 526,069 2013 146,058 13,330 159,388 490,219 32,633 522,852 2014 148,789 12,411 161,200 499,383 31,066 530,449 2015 151,051 9,726 160,777 512,366 24,754 537,120 2016 152,364 8,686 161,050 516,815 22,604 539,419 2017 147,475 6,866 154,341 508,197 18,113 526,310 2018 147,800 5,878 153,678 509,324 15,801 525,125 _________________________________________ (1) Figures are annual averages based on estimates and are not seasonally adjusted. Source: Missouri Local Area Unemployment Statistics (LAUS) as produced by Missouri Economic Resource and Information Center (MERIC) in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics The below table sets forth unemployment rates for the City, County, State and the United States of America (the “Country”) for 2010 through 2019. Unemployment Rates Fiscal Year City(1)County(1)State (1)Country(2) 2010 12.3% 9.4% 9.3% 9.7% 2011 11.8 8.9 9.0 9.2 2012 9.7 6.9 7.0 8.5 2013 10.5 7.3 7.1 7.7 2014 9.6 6.9 6.6 6.7 2015 7.1 5.5 5.8 5.6 2016 5.9 4.6 4.9 4.9 2017 4.7 3.7 4.9 4.6 2018 4.3 3.3 3.5 4.1 2019 4.3 3.3 3.3 3.7 _______________________________________ (1) Source: District Comprehensive Annual Financial Report Fiscal Years Ended June 30, 2019 and 2018 (2) Source: United States Department of Labor, Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, Seasonally Adjusted [The remainder of this page is intentionally left blank.] B-5 Principal Employers The below table sets forth the names and approximate number of employees of principal employers within the St. Louis area as of April 2019. St. Louis MSA Principal Employers Company Nature of Business Approximate Number of Employees(1) BJC HealthCare Healthcare 28,516 Mercy Healthcare 23,011 Washington University in St. Louis Education 17,442 The Boeing Company Manufacturing 14,566 SSM Health Healthcare 13,500 Scott Air Force Base Government 13,000 Schnuck Markets Inc. Retail 10,702 Archdiocese of St. Louis Religious 10,000 The City of St. Louis, Missouri Government 7,368 Saint Louis University Education 7,221 ____________________ Source: District Comprehensive Annual Financial Report Fiscal Years Ended June 30, 2019 and 2018, citing to the St. Louis Business Journal’s Book of Lists 2019 (as of April 2019) (1) Employees are for the St. Louis area, which includes several counties not served by the District. [The remainder of this page is intentionally left blank.] B-6 Per Capita Personal Income The below table presents per capita personal income for the District, the State and the Country for the years 2010 through 2019, the latest date for which such information is available. District State(2)Country(3) Year(1) Per Capita Personal Income Per Capita Personal Income Per Capita Personal Income 2010 $44,822 $36,830 $40,517 2011 44,523 38,339 42,709 2012 44,323 40,124 44,581 2013 45,460 40,320 44,816 2014 46,237 41,767 47,036 2015 46,926 43,090 48,961 2016 47,749 44,324 49,861 2017 48,317 45,742 51,868 2018 48,087 47,740 54,420 2019 48,476 49,190 56,179 _______________________________________ Source: District Comprehensive Annual Financial Report Fiscal Years Ended June 30, 2019 and 2018, citing to Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce, and Missouri Economic Resource and Information Center (MERIC); and Federal Reserve Bank of St. Louis and U.S. Bureau of Economic Analysis, Per Capita Personal Income in Missouri and Personal Income Per Capita, retrieved from FRED, Federal Reserve Bank of St. Louis, October 24, 2019. (1) Figures are presented on a fiscal-year basis for the District and on a calendar-year basis for the State and the Country. (2) Figures for 2010-2018 are based on the seasonally adjusted average annual rate, average annual frequency. Figures for 2019 are based on the seasonally adjusted annual rate, average semiannual frequency as of on or about September 26, 2019. (3) Figures for 2010-2018 are based on the seasonally adjusted average annual rate, average annual frequency. Figures for 2019 are based on the seasonally adjusted annual rate, average semiannual frequency as of on or about September 26, 2019. *** APPENDIX C Definitions and Summaries of Certain Provisions of the Bond Ordinance and the Continuing Disclosure Agreement [THIS PAGE INTENTIONALLY LEFT BLANK] C-1 The following is a brief summary of certain provisions of the Master Bond Ordinance adopted by the District on April 22, 2004, as supplemented by the Ordinance adopted by the District on November 14, 2019 authorizing the issuance of the Series 2019B Bonds and by the Ordinance adopted by the District on November 14, 2019 authorizing the issuance of the Series 2019C Bonds (collectively, the “Bond Ordinance”). This summary is not to be considered as a full statement of the provisions of such documents and is qualified by reference to and is subject to the complete Bond Ordinance, copies of which may be obtained from PFM Financial Advisors, LLC or Independent Public Advisors, LLC, as Co- Financial Advisors to the District. After delivery of the Series 2019B Bonds and the Series 2019C Bonds, copies of such documents will be available for inspection at the corporate trust office of the Paying Agent in St. Louis, Missouri or at such other office as shall be designated by the Paying Agent. DEFINITIONS The definitions of certain words and terms used in this Official Statement with respect to the Series 2019B Bonds and the Series 2019C Bonds are set forth below: “Accumulation Payments” shall have the meaning ascribed therefor under the caption “Sinking Fund – Debt Service Reserve Account” in this Appendix C. “Additional Interest” means, for any period during which any Pledged Bonds are owned by a Credit Facility Provider pursuant to a Credit Facility or Credit Facility Agreement, the amount of interest accrued on such Pledged Bonds at the Pledged Bond Rate less the amount of interest which would have accrued during such period on an equal Principal amount of Bonds at the Bond Rate. “Annual Budget” means the annual budget of the District relating to the System (which shall include all costs, obligations and expenses properly allocable to the System), as amended or supplemented in accordance with established procedures of the District, adopted or in effect for a particular Fiscal Year. “Bond Counsel” means any firm of nationally recognized bond counsel experienced in matters relating to tax-exempt financing, appointed by the District. “Bond Ordinance” means the Master Bond Ordinance adopted by the Board of Trustees of the District on April 22, 2004, the Ordinance adopted by the Board of Trustees of the District on November 14, 2019 authorizing the issuance of the Series 2019B Bonds and the Ordinance adopted by the Board of Trustees of the District on November 14, 2019 authorizing the issuance of the Series 2019C Bonds, as the same may from time to time be modified, supplemented or amended by Supplemental Ordinances. “Bond Rate” means the rate of interest per annum payable on specified Bonds other than Pledged Bonds. “Bond Register” means the books for the registration, transfer and exchange of Bonds maintained by the Bond Registrar. “Bond Registrar” means any bank or trust company designated as such by the District in the Bond Ordinance with respect to any of the Bonds. Such Bond Registrar shall perform the duties required of the Bond Registrar in the Bond Ordinance. UMB Bank, N.A. has been designated as Bond Registrar for the Bonds; provided, however, that in connection with the issuance of any SRF Bonds, the District shall appoint such separate Bond Registrar designated by the issuer of the SRF Bonds. C-2 “Bondholder” means the registered owner of one or more Bonds. “Bonds” means any revenue bonds authorized by and authenticated and delivered pursuant to the Bond Ordinance, including the Series 2019B Bonds, the Series 2019C Bonds, any other Senior Bonds, and any Subordinate Bonds. “Business Day” means a day other than a Saturday, Sunday or holiday on which the Paying Agent, Bond Registrar or applicable Credit Facility Provider is scheduled in the normal course of its operations to be open to the public for conduct of its banking operations. “Charter” means the District’s Charter (Plan) approved by the voters of the City of St. Louis, Missouri and St. Louis County, Missouri on February 9, 1954 and amended on November 7, 2000 and on June 5, 2012, and as further amended from time to time in accordance with its terms. “Chief Financial Officer” means the individual presently holding the office of Secretary-Treasurer of the District or the individual presently holding the office of Assistant Secretary-Treasurer of the District, and any successors who might hereafter hold either such office, and any individual, body or authority to whom or to which may hereafter be delegated by law the duties, powers, authority, obligations or liabilities of either such office. “Chief Officer” means the individual presently holding the office of Executive Director or Acting Executive Director of the District as appointed by the Governing Body and any successor who might hereafter hold such office, and any individual, body or authority to whom or which may hereafter be delegated by law the duties, powers, authority, obligations or liabilities of such office. “Code” means the Internal Revenue Code of 1986, as amended, and the applicable regulations of the Treasury Department proposed or promulgated thereunder. “Consultant” means an independent engineer or utility consultant or firm of independent engineers or utility consultants experienced in the planning and management of wastewater systems and having a nationally recognized reputation for such work. “Continuing Disclosure Agreement” means (i) with respect to the Series 2019B Bonds and the Series 2019C Bonds, the Disclosure Dissemination Agent Agreement dated as of December 1, 2019 between the District and Digital Assurance Certification, L.L.C., as Dissemination Agent, as amended from time to time in accordance with its terms, in substantially the form attached as an exhibit to the Bond Ordinance, and (ii) with respect to any other series of Bonds, the continuing disclosure agreement relating to such series of Bonds, as amended from time to time in accordance with its terms. “Costs,” with respect to any Project, means the total cost, paid or incurred, to study, plan, design, finance, acquire, construct, reconstruct, renovate, repair, replace, equip, install, or otherwise develop such Project and shall include, but shall not be limited to, the following costs and expenses relating to such Project and the reimbursement to the District for any such items previously paid by the District: (i) the cost of all lands, real or personal properties, rights, easements, and franchises acquired; (ii) the cost of all machinery and equipment, financing charges, and interest prior to and during construction and for six months after completion of construction; C-3 (iii) the cost of the acquisition, construction, reconstruction or installation of such Project; (iv) the cost of engineering, architectural, development and supervisory services, fiscal agents’ and legal expenses, plans and specifications, and other expenses necessary or incident to determining the feasibility or practicability of any Projects, administrative expenses, and such other expenses as may be necessary or incident to any financing by Bonds; (v) the cost of placing such Project in operation; (vi) the cost of condemnation of property necessary for such construction and operation; (vii) Costs of Issuance; and (viii) any other costs which may be incident to such Project. “Costs of Issuance” means issuance costs with respect to the Bonds, including but not limited to the following: underwriters’ spread (whether realized directly or derived through purchase of Bonds at a discount below the price at which they are expected to be sold to the public), management fee and expenses; Credit Facility fees and Reserve Account Credit Facility fees; counsel fees (including Bond Counsel, underwriter’s counsel, District’s counsel, as well as any other specialized counsel fees incurred in connection with the borrowing); financial advisor fees of any financial advisor to the District incurred in connection with the issuance of the Bonds; rating agency fees; escrow agent and paying agent fees; accountant fees and other expenses related to issuance of the Bonds; printing costs (for the Bonds and of the preliminary and final official statement relating to the Bonds); and fees and expenses of the District incurred in connection with the issuance of the Bonds. “Credit Facility” means any letter of credit, insurance policy, guaranty, surety bond, standby bond purchase agreement, line of credit, revolving credit agreement, or similar obligation, arrangement, or instrument issued by a bank, insurance company, or other financial institution which is used by the District to perform one or more of the following tasks: (i) enhancing the District’s credit by assuring owners of any of the Bonds that Principal of and interest on such Bonds will be paid promptly when due; (ii) providing liquidity for the owners of Bonds through undertaking to cause Bonds to be bought from the owners thereof when submitted pursuant to an arrangement prescribed by a Series Ordinance; or (iii) remarketing any Bonds so submitted to the Credit Facility Provider (whether or not the same Credit Facility Provider is remarketing the Bonds). The term Credit Facility shall not include a Reserve Account Credit Facility. “Credit Facility Agreement” means an agreement between the District and a Credit Facility Provider pursuant to which the Credit Facility Provider issues a Credit Facility and may include the promissory note or other instrument evidencing the District’s obligations to a Credit Facility Provider pursuant to a Credit Facility Agreement. The term Credit Facility Agreement shall not include a Reserve Account Credit Facility Agreement. “Credit Facility Provider” means any issuer of a Credit Facility then in effect for all or part of the Bonds. The term Credit Facility Provider shall not include any Reserve Account Credit Facility Provider. Whenever in the Bond Ordinance the consent of the Credit Facility Provider is required, such consent shall only be required from the Credit Facility Provider whose Credit Facility is issued with respect to the series of Bonds for which the consent is required. C-4 “Debt Service Requirement” means the total Principal and interest coming due on Senior Bonds, or all Bonds, as applicable, whether at maturity or upon mandatory redemption, in any specified period; provided, however, that (i) Debt Service Requirement with respect to SRF Bonds shall mean the net amount of Principal and interest coming due on such SRF Bonds after taking into account any so- called “SRF Subsidy” (i.e., the amount of anticipated investment earnings which will accrue on any reserve account relating to the SRF Bonds and which will reduce the debt service payments of the District with respect to such SRF Bonds), and (ii) Debt Service Requirement with respect to Bonds issued as “build America bonds” shall mean the net amount of Principal and interest coming due on such Bonds after taking into account the anticipated receipt of U.S. Treasury Interest Subsidy payments on such Bonds. If any Bonds Outstanding or proposed to be issued shall bear interest at a Variable Rate, the interest coming due in any specified future period shall be determined as if the Variable Rate in effect at all times during such future period equaled the average of the BMA Municipal Bond Index (formerly PSA Municipal Bond Index) for the prior 5 calendar years, or any successor index as certified by a Financial Advisor. With respect to any Bonds secured by a Credit Facility, Debt Service Requirement shall include (i) any upfront or periodic commission or commitment fee obligations with respect to such Credit Facility, (ii) the outstanding amount of any Reimbursement Obligation owed to the applicable Credit Facility Provider and interest thereon, (iii) any Additional Interest owed on Pledged Bonds to a Credit Facility Provider, and (iv) any remarketing agent fees. With respect to any Hedged Bonds, the interest on such Hedged Bonds during any Hedge Period and for so long as the provider of the related Hedge Agreement has not defaulted on its payment obligations thereunder shall be calculated by adding (x) the amount of interest payable by the District on such Hedged Bonds pursuant to their terms and (y) the amount of Hedge Payments payable by the District under the related Hedge Agreement and subtracting (z) the amount of Hedge Receipts payable by the provider of the related Hedge Agreement at the rate specified in the related Hedge Agreement; provided, however, that to the extent that the provider of any Hedge Agreement is in default thereunder, the amount of interest payable by the District on the related Hedged Bonds shall be the interest calculated as if such Hedge Agreement had not been executed. In determining the amount of Hedge Payments or Hedge Receipts payable or receivable for any future period which are not fixed throughout the Hedge Period (i.e., which are variable), such Hedge Payments or Hedge Receipts for any period of calculation (the “Determination Period”) shall be computed by assuming that the variables comprising the calculation (e.g., indices) applicable to the Determination Period are equal to the average of the actual variables which were in effect (weighted according to the length of the period during which each such variable was in effect) for the most recent twelve-month period immediately preceding the date of calculation for which such information is available (or shorter period if such information is not available for a twelve-month period). The Principal of and interest on Bonds and Hedge Payments shall be excluded from the determination of Debt Service Requirement to the extent that (1) the same were or are expected to be paid with amounts on deposit on the date of calculation (or Bond proceeds to be deposited on the date of issuance of proposed Bonds) in the Project Fund, the Sinking Fund or a similar fund for Subordinate Bonds or (2) cash or non-callable Government Securities are on deposit in an irrevocable escrow or trust account in accordance with the provisions of the Bond Ordinance (or a similar escrow or trust account for Subordinate Bonds) and such amounts (including, where appropriate, the earnings or other increment to accrue thereon) are required to be applied to pay Principal or interest and are sufficient to pay such Principal or interest. “Debt Service Reserve Account” means the account by that name within the Sinking Fund established in the Bond Ordinance. “Debt Service Reserve Requirement” means an amount determined from time to time by the District as a reasonable reserve for the payment of Principal of and interest on Senior Bonds which are not Senior SRF Bonds or Senior Uncovered Bonds. On the date of issue of a series of Senior Bonds, this amount shall be the least of (a) 10% of the stated Outstanding Principal amount of the Senior Bonds which are not Senior SRF Bonds or Senior Uncovered Bonds, (b) the maximum annual Principal and C-5 interest requirements (taking into account the anticipated receipt of U.S. Treasury Interest Subsidy payments on the Series 2010B Bonds) on the Senior Bonds which are not Senior SRF Bonds or Senior Uncovered Bonds (determined as of the issue date of each series of Senior Bonds which are not Senior SRF Bonds or Senior Uncovered Bonds), or (c) 125% of the average annual Principal and interest requirements (taking into account the anticipated receipt of U.S. Treasury Interest Subsidy payments on the Series 2010B Bonds) on the Senior Bonds which are not Senior SRF Bonds or Senior Uncovered Bonds (determined as of the issue date of each series of Senior Bonds which are not Senior SRF Bonds or Senior Uncovered Bonds). The District may in its sole discretion change, reduce or increase this amount from time to time by Supplemental Ordinance, but in no event may the District reduce this amount (A) below the greater of (1) while the Series 2010B Bonds, the Series 2011B Bonds, the Series 2012A Bonds, the Series 2012B Bonds or the Series 2013B Bonds are Outstanding, the least of (x) the aggregate of 10% of the stated Outstanding Principal amounts of the Series 2010B Bonds, the Series 2011B Bonds, the Series 2012A Bonds, the Series 2012B Bonds and the Series 2013B Bonds, (y) the aggregate of the maximum annual Principal and interest requirements on the Series 2010B Bonds, the Series 2011B Bonds, the Series 2012A Bonds, the Series 2012B Bonds and the Series 2013B Bonds (taking into account the anticipated receipt of U.S. Treasury Interest Subsidy payments on the Series 2010B Bonds) (determined as of their respective issue dates), or (z) the aggregate of 125% of the average annual Principal and interest requirements on the Series 2010B Bonds, the Series 2011B Bonds, the Series 2012A Bonds, the Series 2012B Bonds and the Series 2013B Bonds (taking into account the anticipated receipt of U.S. Treasury Interest Subsidy payments on the Series 2010B Bonds) (determined as of their respective issue dates), or (2) 50% of the average annual Debt Service Requirement with respect to Senior Bonds (other than Senior SRF Bonds and Senior Uncovered Bonds) in the then current or any succeeding Fiscal Year, and (B) unless each Rating Agency indicates in writing to the District that such reduction will not, by itself, result in a reduction or withdrawal of its current Rating on the Senior Bonds. If the aggregate initial offering price of a series of Bonds to the public is less than 98% or more than 102% of par, such offering price shall be used in lieu of the stated Principal amount. Notwithstanding anything in the Bond Ordinance to the contrary, (1) when all or a portion (the “Refunding Portion”) of a series of Senior Bonds is issued to refund a portion of a series of Outstanding Senior Bonds (the “Refunded Series”), the annual Principal and interest requirements to be used for purposes of clauses (b), (c), (A)(1)(y) and (A)(1)(z) above shall not include both the Principal and interest requirements of the Refunding Portion and the Refunded Series, but instead shall be, as between the Refunding Portion and the Refunded Series, the one that, when added to the Principal and interest requirements for all other Senior Bonds included in such computation, results in the greatest aggregate amount; (2) in no event shall the deposit to the Debt Service Reserve Requirement for each series of Senior Bonds exceed an amount permitted for a reasonably required reserve fund under the Code; and (3) the Debt Service Reserve Requirement, if any, in connection with any Senior SRF Bonds or any Subordinate Bonds, including Subordinate SRF Bonds, shall be as provided in the Series Ordinance authorizing the issuance of such Senior SRF Bonds or such Subordinate Bonds. “Depository” means the depository of each fund established under the Bond Ordinance, and any successor depository of such fund hereafter designated by the District from time to time by Supplemental Ordinance. The Depository for the Senior Bonds is U.S. Bank, N.A., St. Louis, Missouri. “District” means The Metropolitan St. Louis Sewer District, a body corporate, a municipal corporation and a political subdivision duly created and existing under the laws of the State, and any successor thereto. “DTC” means The Depository Trust Company, New York, New York, or its nominee, or its successors and assigns, or any other depository performing similar functions under the Bond Ordinance. C-6 “Escrow Agent” means UMB Bank, N.A., St. Louis, Missouri, and any successors or assigns. “Escrow Agreement” means the Escrow Trust Agreement dated as of December 1, 2019 between the District and the Escrow Agent, in substantially the form attached as an exhibit to the Bond Ordinance. “Escrow Fund” means the fund by that name established pursuant to the Escrow Agreement. “Escrowed Securities” means the securities described in the Escrow Agreement which will be delivered to and deposited in the Escrow Fund. “Event of Default” means any of the events defined as such in the Bond Ordinance. “Expenses of Operation and Maintenance” means all expenses reasonably incurred in connection with the operation, maintenance and repair of the System, including salaries, wages, the cost of materials and supplies, rentals of leased property, if any, management fees, payments to others for the treatment and disposal of sewage, the cost of audits and periodic Consultant’s reports, Paying Agent’s and Bond Registrar’s fees and expenses, payment of premiums for insurance required by the Bond Ordinance and other insurance which the District deems prudent to carry on the System and its operations and personnel, obligations (other than for borrowed money or for rents payable under capital leases) incurred in the ordinary course of business, liabilities incurred by endorsement for collection or deposit of checks or drafts received in the ordinary course of business, short-term obligations incurred and payable within a particular Fiscal Year, other obligations or indebtedness incurred for the purpose of leasing (pursuant to a true or operating lease) equipment, fixtures, inventory or other personal property, and, generally, all expenses, exclusive of interest on the Bonds and depreciation or amortization, which under accounting principles generally accepted for municipal utility purposes are properly allocable to operation and maintenance; however, only such expenses as are reasonable and necessary or desirable for the proper operation and maintenance of the System shall be included. “Expenses of Operation and Maintenance” also includes the District’s obligations under any contract with any other political subdivision or public agency or authority of one or more political subdivisions pursuant to which the District undertakes to make payments measured by the expenses of operating and maintaining any facility which constitutes part of the System and which is owned or operated in part by the District and in part by others. “Financial Advisor” means an investment banking or financial advisory firm, commercial bank, or any other Person who or which is appointed by the District for the purpose of passing on questions relating to the availability and terms of specified types of Bonds and is actively engaged in and, in the good faith opinion of the District, has a favorable reputation for skill and experience in underwriting or providing financial advisory services in respect of similar types of securities. “Fiscal Year” means the 12-month period used by the District for its general accounting purposes, as it may be changed from time to time. The Fiscal Year at the time the Bond Ordinance was adopted begins on July 1 and ends on June 30 of the immediately following calendar year. “Fitch” means Fitch, Inc. or, if such corporation is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency as may be designated in writing by the District. At the time the Bond Ordinance was adopted, the notice address of Fitch is One State Street Plaza, New York, New York 10004. “Forecast Period” means a period of three consecutive Fiscal Years commencing with the Fiscal Year in which any proposed Senior Bonds are to be issued. C-7 “Governing Body” means the Board of Trustees of the District and any predecessor or successor in office to such present body, and any Person to whom or which may hereafter be delegated by law the duties, powers, authority, obligations, or liabilities of the present body, either in whole or in relation to the System. “Government Loans” means loans to the District by the government of the United States or the State, or by any department, authority or agency of either, for the purpose of acquiring, constructing, reconstructing, improving, bettering or extending any part of the System. “Government Obligations” means (a) direct obligations of the United States of America for the full and timely payment of which the full faith and credit of the United States of America is pledged or (b) obligations issued by a person controlled or supervised by and acting as an instrumentality of the United States of America, the full and timely payment of the principal of and the interest on which is fully and unconditionally guaranteed as a full faith and credit obligation of the United States of America (including any securities described in (a) or (b) issued or held in book-entry form on the books of the Department of the Treasury of the United States of America), which obligations, in either case, (i) are not subject to redemption or prepayment prior to maturity except at the option of the holder of such obligations and (ii) may include U.S. Treasury Trust Receipts. “Hedge Agreement” means, without limitation, (i) any contract provided by a Qualified Hedge Provider known as or referred to or which performs the function of an interest rate swap agreement, currency swap agreement, forward payment conversion agreement, or futures contract; (ii) any contract provided by a Qualified Hedge Provider providing for payments based on levels of, or changes or differences in, interest rates, currency exchange rates, or stock or other indices; (iii) any contract provided by a Qualified Hedge Provider to exchange cash flows or payments or series of payments; (iv) any type of contract provided by a Qualified Hedge Provider called, or designed to perform the function of, interest rate floors, collars, or caps, options, puts, or calls, to hedge or minimize any type of financial risk, including, without limitation, payment, currency, rate, or other financial risk; and (v) any other type of contract or arrangement provided by a Qualified Hedge Provider that the District determines is to be used, or is intended to be used, to manage or reduce the cost of any Bonds, to convert any element of any Bonds from one form to another, to maximize or increase investment return, to minimize investment return risk, or to protect against any type of financial risk or uncertainty. “Hedge Contingency Payments” means amounts payable by the District pursuant to any Hedge Agreement as termination payments, fees, expenses and indemnity payments. “Hedge Payments” means amounts payable by the District pursuant to any Hedge Agreement, other than Hedge Contingency Payments. “Hedge Period” means the period during which a Hedge Agreement is in effect. “Hedge Receipts” means amounts payable by any provider of a Hedge Agreement pursuant to such Hedge Agreement, other than termination payments, fees, expenses and indemnity payments. “Hedged Bonds” means any Bonds for which the District shall have entered into a Hedge Agreement. “Independent Certified Public Accountant” means a certified public accountant, or a firm of certified public accountants, who or which is “independent” as that term is defined in Rule 101 and related interpretations of the Code of Professional Ethics of the American Institute of Certified Public C-8 Accountants, of recognized standing, who or which does not devote his or its full time to the District (but who or which may be regularly retained by the District). “Interest Payment Date” means each date on which interest is to become due on any Bonds, as established in the Series Ordinance for such Bonds, and with respect to the Series 2019B Bonds and the Series 2019C Bonds, shall be as specified in the Bond Ordinance. “Investment Earnings” means all interest received on and profits derived from investments of moneys in all funds and accounts of the District other than investments derived from or with respect to (a) stormwater revenues, (b) all funds and accounts established in connection with SRF Bonds and (c) obligations issued by the District on behalf of any of its subdistricts. “Maximum Annual Debt Service” means the maximum amount of Debt Service Requirements as computed for the then current or any future Fiscal Year. “Net Operating Revenues” means Operating Revenues, after provision for payment of all Expenses of Operation and Maintenance. “Operating Revenues” means all income and revenue of any nature derived from the operation of the System, including periodic wastewater billings, service charges, other charges for wastewater service and the availability thereof (other than any special assessment proceeds), connection or tap fees (whether accounted for as revenues or as contributed capital), net proceeds from business interruption insurance, the principal of gifts, bequests, contributions, grants and donations available to pay debt service of Bonds, and any amounts deposited in escrow in connection with the acquisition, construction, remodeling, renovation and equipping of facilities to be applied during the period of determination to pay interest on Bonds, but excluding (a) any profits or losses on the early extinguishment of debt or on the sale or other disposition, not in the ordinary course of business, of investments or fixed or capital assets, and local, state or federal grants or other moneys received for the payment of Expenses of Operation and Maintenance, (b) local, state, or federal grants, loans (including Government Loans), capital improvement contract payments, or other moneys received for capital improvements to the System, (c) Investment Earnings, (d) any stormwater charges and (e) any property tax revenues. “Other System Obligations” means obligations of any kind, including but not limited to, Government Loans, general obligation bonds, revenue bonds, capital leases, installment purchase agreements, or notes (but excluding Bonds and related obligations to Credit Facility Providers, Reserve Account Credit Facility Providers and Qualified Hedge Providers), incurred or issued by the District to finance or refinance the cost of acquiring, constructing, reconstructing, improving, equipping, bettering, or extending any part of the System. “Outstanding” means, when used in reference to Bonds, all Bonds which have been duly authenticated and delivered under the Bond Ordinance, with the exception of (a) Bonds in lieu of which other Bonds have been issued under agreement to replace lost, mutilated, stolen, or destroyed obligations, (b) Bonds surrendered by the owners in exchange for other Bonds under the Bond Ordinance, and (c) Bonds for the payment of which provision has been made in accordance with the Bond Ordinance. “Paying Agent” means any bank or trust company, including any successors and assigns thereof, authorized by the District in the Bond Ordinance to pay the Principal of, premium, if any, or interest on any Bonds on behalf of the District. Such Paying Agent shall perform the duties required of the Paying Agent in the Bond Ordinance. UMB Bank, N.A. is designated as Paying Agent for the Series 2010B Bonds, the Series 2011B Bonds, the Series 2012A Bonds, the Series 2012B Bonds, the Series 2013B C-9 Bonds, the Series 2015B Bonds, the Series 2016C Bonds, the Series 2017A Bonds, the Series 2019B Bonds and the Series 2019C Bonds. “Payments Account” means the account by that name within the Sinking Fund established in the Bond Ordinance. “Permitted Investments” means obligations in which the District is permitted to invest moneys of the District pursuant to applicable law, which have (or are collateralized by obligations which have) a Rating by any Rating Agency which is equal to or greater than the third highest long-term Rating of such Rating Agency, or which bears (or are collateralized by obligations which bear) the second highest short- term Rating of such Rating Agency. As of the date of adoption of the Master Bond Ordinance, obligations in which the District is permitted to invest proceeds of Bonds are described in Section 7.020 of the Charter. “Person” or “person” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, body, authority, government, or agency or political subdivision thereof. “Pledged Bond” means any Bond purchased and held by a Credit Facility Provider pursuant to a Credit Facility Agreement. A Bond shall be deemed a Pledged Bond only for the actual period during which such Bond is owned by a Credit Facility Provider pursuant to a Credit Facility Agreement. “Pledged Bond Rate” means the rate of interest payable on Pledged Bonds, as may be provided in a Credit Facility or Credit Facility Agreement. “Pledged Revenues” means Net Operating Revenues, Investment Earnings, Hedge Receipts, and all moneys paid or required to be paid into, and all moneys and securities on deposit from time to time in, the funds and accounts specified in the Bond Ordinance, but excluding any amounts required in the Bond Ordinance to be set aside pending, or used for, rebate to the United States government pursuant to Section 148(f) of the Code, including, but not limited to, amounts in the Rebate Fund. “Principal” means, with respect to a Current Interest Bond, the principal amount of such Bond. “Principal Maturity Date” means each date on which Principal is to become due on any Bonds, by maturity or mandatory sinking fund redemption, as established in the Series Ordinance for such Bonds. “Project” means the acquisition, construction, reconstruction, improvement, betterment, extension or equipping of the System, in whole or in part, with the proceeds of a series of Bonds, including, but not limited to, the Series 2019B Project. “Project Fund” means the fund by that name established in the Bond Ordinance. “Purchase Contract” means (i) with respect to the Series 2019B Bonds and the Series 2019C Bonds, the Purchase Contract between the District and the Underwriter of the Series 2019B Bonds and the Series 2019C Bonds and, (ii) with respect to any additional Bonds, the Purchase Contract between the District and the Underwriter relating to such series of Bonds. “Qualified Hedge Provider” means an entity whose senior unsecured long term obligations, financial program rating, counterparty rating, or claims paying ability, or whose payment obligations under the related Hedge Agreement are absolutely and unconditionally guaranteed by an entity whose senior unsecured long term obligations, financial program rating, counterparty rating, or claims paying C-10 ability, are rated either (i) at least as high as the third highest Rating of each Rating Agency, but in no event lower than any Rating on the related Hedged Bonds at the time of execution of the Hedge Agreement, or (ii) in any such lower Rating which each Rating Agency indicates in writing to the District will not, by itself, result in a reduction or withdrawal of its Rating on the related Hedged Bonds that is in effect prior to entering into the Hedge Agreement. An entity’s status as a “Qualified Hedge Provider” is determined only at the time the District enters into a Hedge Agreement with such entity and shall not be redetermined with respect to that Hedge Agreement. “Rating” means a rating in one of the categories by a Rating Agency, disregarding pluses, minuses, and numerical gradations. “Rating Agencies” or “Rating Agency” means Fitch and S&P or any successors thereto and any other nationally recognized credit rating agency then maintaining a rating on any Bonds at the request of the District. If at any time a particular Rating Agency does not have a rating outstanding with respect to the relevant Bonds, then a reference to Rating Agency or Rating Agencies shall not include such Rating Agency. “Rebate Fund” means the fund by that name established in the Bond Ordinance. “Record Date” means, with respect to any semiannual Interest Payment Date, the 15th day of the calendar month immediately preceding such Interest Payment Date, and any record dates designated by the District in a Series Ordinance. “Refunded Bonds” means, collectively, those certain maturities of the Series 2012A Bonds, the Series 2012B Bonds, the Series 2013B Bonds and the Series 2015B Bonds, being refunded with the proceeds of the Series 2019C Bonds. “Reimbursement Obligation” means the obligation of the District to directly reimburse any Credit Facility Provider for amounts paid by such Credit Facility Provider under a Credit Facility, whether or not such obligation to so reimburse is evidenced by a promissory note or other similar instrument. “Renewal and Extension Fund” means the fund by that name established in the Bond Ordinance. “Replenishment Payments” shall have the meaning ascribed therefor in under the caption “Sinking Fund – Debt Service Reserve Account” in this Appendix C. “Reserve Account Credit Facility” means any letter of credit, insurance policy, line of credit, or surety bond, together with any substitute or replacement therefor, if any, complying with the provisions of the Bond Ordinance, thereby fulfilling all or a portion of the Debt Service Reserve Requirement. “Reserve Account Credit Facility Agreement” means any agreement between the District and a Reserve Account Facility Provider relating to the issuance of a Reserve Account Credit Facility, as such agreement may be amended from time to time. “Reserve Account Credit Facility Provider” means any provider of a Reserve Account Credit Facility. “Revenue Fund” means the fund by that name established in the Bond Ordinance. C-11 “Senior Bonds” means the Series 2010B Bonds, the Series 2011B Bonds, the Series 2012A Bonds, the Series 2012B Bonds, the Series 2013B Bonds, the Series 2015B Bonds, the Series 2016C Bonds, the Series 2017A Bonds, the Series 2018A Bond, the Series 2019B Bonds, the Series 2019C Bonds and any Bonds, including Senior SRF Bonds and Senior Uncovered Bonds, issued with a right to payment and secured by a lien on a parity with the Series 2010B Bonds, the Series 2011B Bonds, the Series 2012A Bonds, the Series 2012B Bonds, the Series 2013B Bonds, the Series 2015B Bonds, the Series 2016C Bonds, the Series 2017A Bonds, the Series 2018A Bond, the Series 2019B Bonds and the Series 2019C Bonds (except with respect to any Credit Facility which may be available only to one or more series of Senior Bonds and except that Senior SRF Bonds and Senior Uncovered Bonds shall not be secured by the Debt Service Reserve Account) pursuant to the Bond Ordinance. “Senior Hedge Agreements” means Hedge Agreements relating to Hedged Bonds which are Senior Bonds. “Senior SRF Bonds” means SRF Bonds which are Senior Bonds. “Senior Uncovered Bonds” means all series of Senior Bonds, other than Senior SRF Bonds, with respect to which the District has specified pursuant to a Series Ordinance authorizing such series of Senior Bonds that such series of Senior Bonds will not be secured by the Debt Service Reserve Account. “Series 2019B Bonds” means the District’s Wastewater System Revenue Bonds, Series 2019B, in the original aggregate Principal amount of $52,130,000 authorized under the Bond Ordinance. “Series 2019B Project” means the project as particularly described in plans and specifications on file from time to time with the District. “Series 2019B Project Account” means the account by that name within the Project Fund established in the Bond Ordinance “Series 2019B Rebate Account” means the account by that name within the Rebate Fund established in the Bond Ordinance. “Series 2019B&C Costs of Issuance Account” means the account by that name within the Project Fund established in the Bond Ordinance. “Series 2019C Bonds” means the District’s Taxable Wastewater System Refunding Revenue Bonds, Series 2019C, in the aggregate Principal amount of $276,260,000 authorized under the Bond Ordinance. “Series Ordinance” means a bond ordinance or bond ordinances of the District (which may be supplemented by one or more bond ordinances) to be adopted prior to and authorizing the issuance and delivery of any series of Bonds. The Master Bond Ordinance shall constitute a Master Bond Ordinance for Senior Bonds and Subordinate Bonds. Such a bond ordinance as supplemented shall establish the date or dates of the pertinent series of Bonds, the schedule of maturities of such Bonds, whether any such Bonds will be capital appreciation bonds, the name of the purchaser(s) of such series of Bonds, the purchase price thereof, the rate or rates of interest to be borne thereby, whether fixed or variable, the interest payment dates for such Bonds, the terms and conditions, if any, under which such Bonds may be made subject to redemption (mandatory or optional) prior to maturity, the form of such Bonds, and such other details as the District may determine. C-12 “Sinking Fund” means the fund by that name established in the Bond Ordinance. “SRF Bonds” means such Bonds or other obligations issued in connection with the District’s participation in the Missouri State Revolving Fund Program of the Missouri Department of Natural Resources and the State Environmental Improvement and Energy Resources Authority, which SRF Bonds may be Senior SRF Bonds or Subordinate SRF Bonds. “Standard and Poor’s” or “S&P” means S&P Global Ratings, a division of S&P Global Inc., or, if such corporation is dissolved or liquidated or otherwise ceases to perform securities rating services, such other nationally recognized securities rating agency as may be designated in writing by the District. At the time the Master Bond Ordinance was adopted, the notice address of S&P is 25 Broadway, New York, New York 10004. “State” means the State of Missouri. “Subordinate Bonds” means Bonds, including Subordinate SRF Bonds, issued with a right to payment from the Pledged Revenues and secured by a lien on the Pledged Revenues expressly junior and subordinate to the Senior Bonds. “Subordinate Hedge Agreements” means Hedge Agreements relating to Hedged Bonds which are Subordinate Bonds. “Subordinate SRF Bonds” means SRF Bonds which are Subordinate Bonds. “Supplemental Ordinance” means (a) any Series Ordinance and (b) any modification, amendment, or supplement to the Master Bond Ordinance other than a Series Ordinance. “System” means the sanitary sewer system of the District, as it now exists and as it may be hereafter added to, extended, improved and equipped, either from the proceeds of the Bonds or from any other sources at any time hereafter, including, without limitation, (a) all sanitary sewers, all combined sewers, all pumping stations, all wastewater treatment plants, and all equipment used in connection therewith, all facilities for the collection, treatment and disposal of sewage and wastewater, including industrial wastes, and (b) all other facilities or property of any nature or description, real or personal, tangible or intangible, now or hereafter owned or used by the District in the collection, treatment and disposal of sewage. The District may own a partial interest in any sanitary sewer facility, the remaining interest in which may be owned by or on behalf of a political subdivision of the State or any agency or authority thereof. In case of such ownership, the rights and interests possessed by the District in such facility shall be included as part of the System. “Tax-Exempt Bonds” means any Bonds the interest on which has been determined, in an opinion of Bond Counsel, to be excludable from the gross income of the owners thereof for federal income tax purposes. “Underwriter” means (i) with respect to the Series 2019B Bonds and the Series 2019C Bonds, Citigroup Global Markets Inc., as representative of the original purchasers of the Series 2019B Bonds and the Series 2019C Bonds, and (ii) with respect to any additional series of Bonds, the underwriter(s) specified in the Series Ordinance authorizing such series of Bonds. “U.S. Treasury Trust Receipts” means receipts or certificates which evidence an undivided ownership interest in the right to the payment of portions of the principal of or interest on obligations described in clauses (a) or (b) of the term Government Obligations, provided that such obligations are C-13 held by a bank or trust company organized under the laws of the United States acting as custodian of such obligations, in a special account separate from the general assets of such custodian. “U.S. Treasury Interest Subsidy” means any interest subsidy paid by the United States Treasury to the District. “Variable Rate” means a rate of interest applicable to Bonds, other than a fixed rate of interest which applies to a particular maturity of Bonds, so long as that maturity of Bonds remains Outstanding. FUNDS AND ACCOUNTS The District establishes or ratifies the establishment of the following funds and accounts, and the moneys deposited in such funds and accounts shall be held in trust for the purposes set forth in the Bond Ordinance: (a) The Metropolitan St. Louis Sewer District Wastewater Revenue Fund (the “Revenue Fund”), to be held by the Depository for the account of the District. (b) The Metropolitan St. Louis Sewer District Wastewater Sinking Fund (the “Sinking Fund”), to be held by the Depository for the account of the District, and within said Sinking Fund a Payments Account and a Debt Service Reserve Account. (c) The Metropolitan St. Louis Sewer District Wastewater Renewal and Extension Fund (the “Renewal and Extension Fund”), to be held by the Depository for the account of the District. (d) The Metropolitan St. Louis Sewer District Wastewater Rebate Fund (the “Rebate Fund”), to be held by the Depository for the account of the District, and within said Rebate Fund a Series 2019B Rebate Account. (e) The Metropolitan St. Louis Sewer District Wastewater Project Fund (the “Project Fund”), to be held by the Depository for the account of the District, and within said Project Fund a Series 2019B Project Account and a Series 2019B&C Costs of Issuance Account. Each account listed above shall be held within the fund under which it is created. The District reserves the right, in its sole discretion, to create additional subaccounts or to abolish any subaccounts within any account from time to time. In addition to the funds described above, the Escrow Agreement establishes the Escrow Fund to be held and administered by the Escrow Agent in accordance with the provisions of the Escrow Agreement. Revenue Fund The District shall deposit and continue to deposit all Operating Revenues in the Revenue Fund from time to time as and when received. Moneys in the Revenue Fund shall be applied by the District from time to time to the following purposes and, prior to the occurrence and continuation of an Event of Default, in the following order of priority: (1) to pay Expenses of Operation and Maintenance, (2) to deposit into the Sinking Fund the amounts required by the Bond Ordinance and described below under C-14 the caption “FUNDS AND ACCOUNTS – Sinking Fund,” (3) to make Replenishment Payments to the Debt Service Reserve Account and to pay to any Credit Facility Provider any amounts due under a Credit Facility Agreement, including Additional Interest, in accordance with the Bond Ordinance and described below under the caption “FUNDS AND ACCOUNTS – Sinking Fund – Debt Service Reserve Account,” (4) to deposit into the Rebate Fund the amounts required by the Bond Ordinance, (5) to pay any amounts due any Reserve Account Credit Facility Provider pursuant to the Reserve Account Credit Facility Agreement, (6) to deposit the amounts required to be deposited into the funds and accounts created by any Series Ordinance authorizing the issuance of Subordinate Bonds, for the purpose of paying Principal of (whether at maturity, upon mandatory redemption or as otherwise required by a Series Ordinance relating to Subordinate SRF Bonds) and interest on Subordinate Bonds, making Hedge Contingency Payments under Senior Hedge Agreements, making Contingency Payments under Senior Hedge Agreements, making Hedge Payments and making Hedge Contingency Payments under Subordinate Hedge Agreements, and accumulating reserves for such payments, (7) to make Accumulation Payments to the Debt Service Reserve Account in accordance with the Bond Ordinance and described below under the caption “FUNDS AND ACCOUNTS – Sinking Fund – Debt Service Reserve Account,” and (8) to pay any amounts required to be paid with respect to any Other System Obligations. In addition to, and after, the deposits described above, the District may from time to time deposit into the Renewal and Extension Fund any moneys and securities held in the Revenue Fund in excess of 45 days’ estimated Expenses of Operation and Maintenance. Any money withdrawn from the funds and accounts described in clause (6) above relating to Subordinate Bonds for use in making payments described in said clause (6) shall be released from the lien of the Bond Ordinance. If at any time the amounts in any account of the Sinking Fund are less than the amounts required by the Bond Ordinance, and there are not on deposit in the Renewal and Extension Fund available moneys sufficient to cure any such deficiency, then the District shall withdraw from the funds and accounts of the District relating to Subordinate Bonds and deposit in such account of the Sinking Fund, as the case may be, the amount necessary (or all the moneys in such funds and accounts, if less than the amount required) to make up such deficiency. Sinking Fund Payments Account-General. Sufficient moneys shall be paid in periodic installments from the Revenue Fund into the Payments Account for the purpose of paying the Principal of and interest (excluding Additional Interest) on the Senior Bonds as they become due and payable and for the purpose of making Hedge Payments under Senior Hedge Agreements. Amounts held in the Payments Account shall be used solely to pay interest (excluding Additional Interest) and Principal of the Senior Bonds as the same become due and payable (whether at maturity or upon redemption) and to pay Hedge Payments under Senior Hedge Agreements when due. Amounts held in the Payments Account shall not be used to pay Additional Interest. Interest. Except as otherwise provided in any Series Ordinance authorizing Senior SRF Bonds, on or before the 30th day preceding each Interest Payment Date for Senior Bonds (or, in the case of Senior Bonds bearing interest at a Variable Rate, on or before the Business Day preceding each Interest Payment Date), the District shall deposit in the Payments Account an amount which, together with any other moneys already on deposit therein and available to make such payment and, in the case of Senior SRF Bonds, anticipated investment earnings on reserve funds held by a bond trustee relating to such Senior SRF Bonds, is not less than the interest (excluding Additional Interest) coming due on such Senior Bonds on such Interest Payment Date. The District shall also deposit and continue to deposit all Hedge Receipts under Senior Hedge Agreements in the Payments Account from time to time as and when received. C-15 Principal. Except as otherwise provided in any Series Ordinance authorizing Senior SRF Bonds, on or before the 30th day preceding each Principal Maturity Date for Senior Bonds, the District shall deposit in the Payments Account an amount which, together with any other moneys already on deposit therein and available to make such payment, is not less than the Principal coming due on such Senior Bonds on such Principal Maturity Date. Hedge Payments. On or before the 30th day preceding each payment date for Hedge Payments under Senior Hedge Agreements, the District shall deposit in the Payments Account an amount which, together with any other moneys already on deposit therein and available to make such payment, is not less than such Hedge Payments coming due on such payment date. Application of Moneys in Payments Account. No further payments need be made into the Payments Account whenever the amount available in the Payments Account, if added to the amount then in the Debt Service Reserve Account (without taking into account any amount available to be drawn on any Reserve Account Credit Facility), is sufficient to retire all Senior Bonds then Outstanding and to pay all unpaid interest accrued and to accrue prior to such retirement. No moneys in the Payments Account shall be used or applied to the optional purchase or redemption of Senior Bonds prior to maturity unless: (i) provision shall have been made for the payment of all of the Senior Bonds; or (ii) such moneys are applied to the purchase and cancellation of Senior Bonds which are subject to mandatory redemption on the next mandatory redemption date, which falls due within 12 months, such Senior Bonds are purchased at a price not more than would be required for mandatory redemption, and such Senior Bonds are cancelled upon purchase; or (iii) such moneys are applied to the purchase and cancellation of Senior Bonds at a price less than the amount of Principal which would be payable on such Senior Bonds, together with interest accrued through the date of purchase, and such Senior Bonds are cancelled upon purchase; or (iv) such moneys are in excess of the then required balance of the Payments Account and are applied to redeem a part of the Senior Bonds Outstanding on the next succeeding redemption date for which the required notice of redemption may be given. Debt Service Reserve Account. With respect to Senior Bonds which are not Senior Uncovered Bonds, there shall be deposited into the Debt Service Reserve Account the amounts specified in Series Ordinances with respect to Senior Bonds. Notwithstanding the foregoing, there shall be no deposit into the Debt Service Reserve Account with respect to any SRF Bonds or Senior Uncovered Bonds nor shall the Debt Service Reserve Account secure any SRF Bonds or Senior Uncovered Bonds. After the issuance of any Senior Bonds, the increase in the amount of the Debt Service Reserve Requirement resulting from the issuance of such Senior Bonds shall be accumulated, to the extent not covered by deposits from Bond proceeds or funds on hand, over a period not exceeding 61 months from the date of delivery of such Senior Bonds in monthly deposits (“Accumulation Payments”), none of which is less than 1/60 of the amount to be accumulated. The balance of the Debt Service Reserve Account shall be maintained at an amount equal to the Debt Service Reserve Requirement (or such lesser amount that is required to be accumulated in the Debt Service Reserve Account in connection with the periodic accumulation to the Debt Service Reserve Requirement after the issuance of Senior Bonds or upon the failure of the District to provide a substitute Reserve Account Credit Facility in certain events). There shall be transferred from the Revenue Fund on a pro rata basis (1) to the Debt Service Reserve Account the amount necessary to restore, as further described below, the amount of cash and securities in the Debt Service Reserve Account to an amount equal to the difference between (a) the Debt Service Reserve Requirement (or such lesser monthly amount that is required to be deposited into the Debt Service Reserve Account after the issuance of Senior Bonds or upon the failure of the District to provide a substitute Reserve Account Credit Facility in certain events) and (b) the portion of the required balance of the Debt Service Reserve Account satisfied by means of a Reserve Account Credit Facility, and (2) to any Reserve Account Credit Facility Provider the amount necessary to reinstate any Reserve Account Credit Facility which has been drawn down. Whenever for any reason the amount in the Payments Account is insufficient to pay all C-16 interest or Principal becoming due on the Senior Bonds within the next seven days (or, in the case of Senior Bonds bearing interest at a Variable Rate, on the next Business Day), the District shall make up any deficiency by transfers first from the Renewal and Extension Fund and second from the funds and accounts of the District relating to Subordinate Bonds which are not Subordinate SRF Bonds. Whenever, on the date that such interest or Principal is due, there are insufficient moneys in the Payments Account available to make such payment, the District shall, without further instructions, apply so much as may be needed of the moneys in the Debt Service Reserve Account to prevent default in the payment of such interest or Principal, with priority to interest payments. Whenever by reason of any such application or otherwise (other than required Accumulation Payments), the amount remaining to the credit of the Debt Service Reserve Account is less than the amount then required to be in the Debt Service Reserve Account, such deficiency shall be remedied by monthly deposits (“Replenishment Payments”) from the Revenue Fund, to the extent funds are available in the Revenue Fund for such purpose after all required transfers set forth above have been made. The District may elect to satisfy in whole or in part the Debt Service Reserve Requirement by means of a Reserve Account Credit Facility, subject to the following requirements: (A) the Reserve Account Credit Facility Provider must have a credit rating issued by a Rating Agency not less than the then current Rating on the related series of Senior Bonds (or, in the case of a series of Senior Bonds supported by a Credit Facility, the underlying rating on such Senior Bonds); (B) the District shall not secure any obligation to the Reserve Account Credit Facility Provider by a lien equal to or superior to the lien granted to the related series of Senior Bonds; (C) each Reserve Account Credit Facility shall have a term of at least one (1) year (or, if less, the remaining term of the related series of Senior Bonds) and shall entitle the District to draw upon or demand payment and receive the amount so requested in immediately available funds on the date of such draw or demand; (D) the Reserve Account Credit Facility shall permit a drawing by the District for the full stated amount in the event (i) the Reserve Account Credit Facility expires or terminates for any reason prior to the final maturity of the related series of Senior Bonds, and (ii) the District fails to satisfy the Debt Service Reserve Requirement by the deposit to the Debt Service Reserve Account of cash, obligations, a substitute Reserve Account Credit Facility, or any combination thereof, on or before the date of such expiration or termination; (E) if the Rating issued by the Rating Agency to the Reserve Account Credit Facility Provider is withdrawn or reduced below the Rating assigned to the related series of Senior Bonds immediately prior to such action by the Rating Agency, the District shall provide a substitute Reserve Account Credit Facility within sixty (60) days after such rating change, and, if no substitute Reserve Account Credit Facility is obtained by such date, shall fund the Debt Service Reserve Requirement in not more than twenty-four (24) equal monthly deposits commencing not later than the first day of the month immediately succeeding the date representing the end of such sixty (60) day period; (F) if the Reserve Account Credit Facility Provider commences any insolvency proceedings or is determined to be insolvent or fails to make payments when due on its obligations, the District shall provide a substitute Reserve Account Credit Facility within sixty (60) days thereafter, and, if no substitute Reserve Account Credit Facility is obtained by such date, shall fund the Debt Service Reserve Requirement in not more than twenty-four (24) equal monthly deposits commencing not later than the first day of the month immediately succeeding the date representing the end of such sixty (60) day period; and (G) the prior written consent of the Credit Facility Provider, as to the provider and the structure of the Reserve Account Credit Facility, shall be obtained by the District. If the events described in either clauses (E) or (F) above occur, the District shall not relinquish the Reserve Account Credit Facility at issue until after the Debt Service Reserve Requirement is fully satisfied by the provision of cash, obligations, or a substitute Reserve Account Credit Facility or any combination thereof. Any amount received from the Reserve Account Credit Facility shall be deposited directly into the Payments Account, and such deposit shall constitute the application of amounts in the Debt Service Reserve Account. Repayment of any draw-down on the Reserve Account Credit Facility (other than repayments which reinstate the Reserve Account Credit Facility) and any interest or fees due the Reserve Account Credit Facility Provider under such Reserve Account Credit Facility shall be secured by a lien on the C-17 Pledged Revenues subordinate to payments into the Sinking Fund and the Rebate Fund and payments to any Credit Facility Provider securing Senior Bonds. Any such Reserve Account Credit Facility shall be pledged to the benefit of the owners of all of the Senior Bonds. The District reserves the right, if it deems it necessary in order to acquire such a Reserve Account Credit Facility, to amend the Bond Ordinance without the consent of any of the owners of the Bonds in order to grant to the Reserve Account Credit Facility Provider such additional rights as it may demand, provided that such amendment shall not, in the written opinion of Bond Counsel filed with the District, impair or reduce the security granted to the owners of Senior Bonds or any of them. The Series 2019B Bonds and the Series 2019C Bonds are Senior Uncovered Bonds and therefore are not secured by the Debt Service Reserve Account. Renewal and Extension Fund In addition to the deposits to be made to the Renewal and Extension Fund pursuant to the Bond Ordinance, the District shall deposit in the Renewal and Extension Fund all termination payments received under any Hedge Agreements. All sums accumulated and retained in the Renewal and Extension Fund shall be used first to prevent default in the payment of interest on or Principal of the Senior Bonds when due and then shall be applied by the District from time to time, as and when the District shall determine, to the following purposes and, prior to the occurrence and continuation of an Event of Default, in the order of priority determined by the District in its sole discretion: (a) for the purposes for which moneys held in the Revenue Fund may be applied under the Bond Ordinance, (b) to pay any amounts which may then be due and owing under any Hedge Agreement (including termination payments, fees, expenses, and indemnity payments), (c) to pay any governmental charges and assessments against the System or any part thereof which may then be due and owing, (d) to make acquisitions, betterments, extensions, repairs, or replacements or other capital improvements (including the purchase of equipment) to the System deemed necessary by the District (including payments under contracts with vendors, suppliers, and contractors for the foregoing purposes), (e) to acquire Senior Bonds by redemption or by purchase in the open market at a price not exceeding the callable price as provided and in accordance with the terms and conditions of the Bond Ordinance, which Senior Bonds may be any of the Senior Bonds, prior to their respective maturities, and when so used for such purposes the moneys shall be withdrawn from the Renewal and Extension Fund and deposited into the Payments Account for the Senior Bonds to be so redeemed or purchased and (f) for any other purpose of the District. Payments for the purposes set forth in clause (e) of the preceding sentence are not “required payments” for purposes of the District’s rate covenant set forth in the Bond Ordinance. Rebate Fund The District shall calculate, from time to time, as required in order to comply with the provisions of Section 148(f) of the Code, the amounts required to be rebated (including penalties) to the United States and shall deposit or cause to be deposited into the Rebate Fund any and all of such amounts promptly following a determination of any such amount. The District shall direct the Depository of the Rebate Fund to keep all moneys held therein invested in Permitted Investments. To the extent and at the times required in order to comply with Section 148(f) of the Code, the District may withdraw funds from the Rebate Fund for the purpose of making rebate payments (including penalties) to the United States as required by Section 148(f) of the Code. Except as otherwise specifically provided in the Bond Ordinance, moneys in the Rebate Fund may not be withdrawn from the Rebate Fund for any other purpose. C-18 All earnings on investments held in the Rebate Fund shall be retained in the Rebate Fund and shall become part of the Rebate Fund. Moneys held in the Rebate Fund, including the Investment Earnings thereon, if any, shall not be subject to a pledge in favor of the owners of the Bonds under the Bond Ordinance and may not be used to pay amounts due on the Bonds or under any Credit Facility Agreements or Hedge Agreements or amounts required for the operation, maintenance, enlargement, or extension of the System. Project Fund The District shall establish within the Project Fund a separate account for each Project. Except as may be otherwise provided in the Series Ordinance authorizing the issuance of SRF Bonds, moneys in the Project Fund shall be held by the Depository, or such other bank as may from time to time be designated by the District, and applied to the payment of the Costs of the Project, or for the repayment of advances made for that purpose in accordance with and subject to the provisions and restrictions set forth in the Bond Ordinance. The District covenants that it will not cause or permit to be paid from the Project Fund any sums except in accordance with such provisions and restrictions; provided, however, that any moneys in the Project Fund not presently needed for the payment of current obligations during the course of construction may be invested in Permitted Investments maturing not later than (i) the date upon which such moneys will be needed according to a schedule of anticipated payments from the Project Fund filed with the District by the Consultant in charge of the Project or (ii) in the absence of such schedule, 36 months from the date of purchase, in either case upon written direction of the District. Any such investments shall be held by the Depository, in trust, for the account of the Project Fund until maturity or until sold, and at maturity or upon such sale the proceeds received therefrom including accrued interest and premium, if any, shall be immediately deposited by the Depository in the Project Fund and shall be disposed of in the manner and for the purposes provided in the Bond Ordinance. At such time as the Depository is furnished with a certificate from the Chief Financial Officer stating that all Costs of Issuance have been paid, and in any case not later than 6 months after the date of issuance of the Series 2019B Bonds and Series 2019C Bonds, the Depository shall transfer any remaining proceeds of the Series 2019B Bonds in the Series 2019B&C Costs of Issuance Account to the Series 2019B Project Account of the Project Fund and any remaining proceeds of the Series 2019C Bonds in the Series 2019B&C Costs of Issuance Account to the Payments Account of the Sinking Fund. Moneys in each separate account in the Project Fund shall be used for the payment or reimbursement of the Costs of the Project for which such account was established as provided in the Bond Ordinance. All payments from the Project Fund shall be made upon draft except as provided in the Bond Ordinance, signed by an officer of the District properly authorized to sign on its behalf, but before such officer shall sign any such draft, there shall be filed with the Depository a requisition for such payment, in substantially the form attached as an exhibit to the Bond Ordinance, stating each amount to be paid and the name of the person to whom payment is due, and certifying: (a) That an obligation in the stated amount has been incurred by the District and that the same is a proper charge against the Project Fund and has not been paid and stating that the bill or statement of account for such obligation, or a copy thereof, is on file in the office of the District; C-19 (b) That the signer has no notice of any vendor’s, mechanic’s, or other liens or rights to liens, chattel mortgages, or conditional sales contracts which should be satisfied or discharged before such payment is made; and (c) That such requisition contains no item representing payment on account of any retained percentages which the District is, at the date of any such certificate, entitled to retain. In the event the United States government or government of the State, or any department, authority, or agency of either, agrees to allocate moneys to be used to defray any part of the Cost of any Project upon the condition that the District appropriate a designated amount of moneys for such purpose, and it is required of the District that its share of such cost be deposited in a special account, the District shall have the right to withdraw any sum so required from the Project Fund by appropriate transfer and deposit the same in a special account for that particular Project; provided, however, that all payments thereafter made from such special account shall be made only in accordance with the requirements set forth in the Bond Ordinance. Withdrawals for investment purposes only may be made by the Depository to comply with written directions from the District without any requisition other than such direction. For each series of Bonds, the District shall, when a Project has been completed, and may, when a Project has been substantially completed, file with the Depository a certificate signed by the Chief Financial Officer estimating what portion of the funds remaining in the separate account relating to such Project will be required by the District for the payment or reimbursement of the Costs of such Project. The Chief Financial Officer shall attach to his or her certificate a certificate of the supervising engineer certifying that such Project has been completed or substantially completed, as the case may be, in accordance with the plans and specifications therefor and approving the estimates of the Chief Financial Officer with respect to the portion of funds in the account required for Costs of the Project. Such funds that will not be used shall be (1) transferred to the Payments Account and used to redeem Bonds of the related series on the next redemption date or to pay Principal of such Bonds on the next Principal Maturity Date, or (2) transferred to the Payments Account and used to pay interest on Bonds of the related series, provided that the District shall first obtain an opinion of Bond Counsel to the effect that, under existing law, the application of such moneys to pay interest on such Bonds (a) is allowed under State law, and (b) if such Bonds are Tax-Exempt Bonds, will not, by itself and without more, adversely affect the exclusion from gross income for federal income tax purposes of interest payable on such Bonds. When all moneys have been withdrawn or transferred from any separate account within the Project Fund in accordance with the provisions of the Bond Ordinance, such separate account shall terminate and cease to exist. DEPOSITS AND INVESTMENTS All moneys in the funds and accounts established under the Bond Ordinance, except those funds and accounts created by a Series Ordinance in connection with the issuance of SRF Bonds, shall be held by the District in one or more Depositories qualified for use by the District. Uninvested moneys shall, at least to the extent not guaranteed by the Federal Deposit Insurance Corporation, be secured to the fullest extent required by the laws of the State for the security of public funds. Moneys in the funds and accounts established under the Bond Ordinance, except those funds and accounts created by a Series Ordinance in connection with the issuance of SRF Bonds, shall be invested and reinvested in Permitted Investments bearing interest at the highest rates reasonably available (except to the extent that a restricted yield is required or advisable under Section 148 of the Code) and containing C-20 such maturities as are deemed suitable by the District; provided, however, that without the prior written consent of the Credit Facility Provider, investments of moneys in the Debt Service Reserve Account shall not have maturities extending beyond five years. Investment of moneys in funds and accounts created by a Series Ordinance in connection with the issuance of SRF Bonds shall be as set forth in such Series Ordinance. Investment Earnings in each fund and account (except the Debt Service Reserve Account) shall be retained therein. Investment Earnings from the investment of moneys in the Debt Service Reserve Account shall be retained in the Debt Service Reserve Account at all times the balance is less than the Debt Service Reserve Requirement; thereafter and at all times the balance of the Debt Service Reserve Account is equal to or greater than the Debt Service Reserve Requirement, such Investment Earnings shall be deposited in the Payments Account. The Series Ordinance authorizing the issuance of any Subordinate Bonds shall specify any maturity limitations and allocations of Investment Earnings on investments of moneys in the funds and accounts relating to such Subordinate Bonds. Moneys in each of such funds shall be accounted for as a separate and special fund apart from all other District funds, provided that investments of moneys therein may be made in a pool of investments together with other moneys of the District so long as sufficient Permitted Investments in such pool, not allocated to other investments of contractually or legally limited duration, are available to meet the requirements of the foregoing provisions. All investments made under the Bond Ordinance shall, for purposes of the Bond Ordinance, be valued at fair market value on the 45th day (or the next succeeding Business Day if such 45th day is not a Business Day) prior to each Interest Payment Date. The valuation of the investment of moneys in funds and accounts created by a Series Ordinance in connection with the issuance of SRF Bonds shall be as set forth in such Series Ordinance. MAINTENANCE OF SYSTEM The District covenants that it will enforce reasonable rules and regulations governing the System and the operation thereof, that it will operate the System in an efficient and economical manner and will at all times maintain the System in good repair and in sound operating condition, that it will make all necessary repairs, renewals, and replacements to the System, and that it will comply with all valid acts, rules, regulations, orders, and directions of any legislative, executive, administrative, or judicial body applicable to the System and the District’s operation thereof. RATE COVENANT See the heading “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS – Rate Covenant.” INSURANCE With respect to the System, the District will carry adequate public liability, fidelity and property insurance, such as is maintained by similar utilities as the System. C-21 The District shall indemnify itself against the usual hazards incident to the construction of any Project, and without in any way limiting the generality of the above, shall: (a) require each construction contractor and each subcontractor to furnish a bond, or bonds, of such type and in amounts adequate to assure the faithful performance of their contracts and the payment of all bills and claims for labor and material arising by virtue of such contracts; and (b) require each construction contractor or the subcontractor to maintain at all times until the completion and acceptance of the Project adequate compensation insurance for all of their employees and adequate public liability and property damage insurance for the full and complete protection of the District from any and all claims of every kind and character which may arise by virtue of the operations under their contracts, whether such operations be by themselves or by anyone directly or indirectly for them, or under their control. All such policies shall be for the benefit of and made payable to the District and shall be on deposit with the District; provided, however, the District may elect to be a self-insurer with respect to any risks for which insurance is required under the Bond Ordinance. The cost of such insurance may be paid as an Expense of Operation and Maintenance. All moneys received for losses under any such insurance policies, except public liability policies, are pledged by the District as security for the Bonds until and unless such proceeds are paid out in making good the loss or damage in respect of which such proceeds are received, either by repairing the property damaged or replacing the property destroyed or by depositing the same in the Renewal and Extension Fund. Adequate provision for making good such loss and damage shall be made within 120 days from the date of the loss. Insurance proceeds not used in making such provision shall be deposited in the Renewal and Extension Fund on the expiration of such 120-day period. Such insurance proceeds shall be payable to the District by appropriate clause to be attached to or inserted in the policies. NO SALE, LEASE OR ENCUMBRANCE; EXCEPTIONS Except as expressly permitted in the Bond Ordinance, the District irrevocably covenants, binds, and obligates itself not to sell, lease, encumber, or in any manner dispose of the System as a whole or in part until all of the Bonds and all interest thereon shall have been paid in full or provision for payment has been made in accordance with the Bond Ordinance. The District shall have and reserves the right to sell, lease, or otherwise dispose of any of the property comprising a part of the System in the following manner, if any one of the following conditions exists: (i) such property is not necessary for the operation of the System; (ii) such property is not useful in the operation of the System; (iii) such property is not profitable in the operation of the System; or (iv) the disposition of such property will be advantageous to the System and will not adversely affect the security for the Bondholders. All proceeds of any such sale, lease or other disposition shall be deposited in the Renewal and Extension Fund. Prior to any such sale, lease or other disposition, there shall be filed with the District: (i) an opinion of Bond Counsel to the effect that such sale, lease or other disposition will not adversely affect the extent to which interest on any Tax-Exempt Bonds is excluded from gross income for federal income tax purposes (provided that such opinion shall not be required if the Chief Financial Officer determines that such portion of the System was not financed with the proceeds of any Tax-Exempt Bonds); and (ii) an opinion of a Consultant expressing the view that such sale, lease or other disposition will not result in any diminution of Net Operating Revenues to the extent that in any future Fiscal Year the Net Operating Revenues and Investment Earnings will be less than (A) 125% of the Maximum Annual Debt Service Requirement on all Senior Bonds to be Outstanding after such sale, lease or other disposition or (B) 115% of the Maximum Annual Debt Service Requirement on all Bonds to be Outstanding after such sale, lease C-22 or other disposition. In reaching this conclusion, the Consultant shall take into consideration such factors as the Consultant may deem significant, including (i) anticipated diminution of Operating Revenues, (ii) anticipated increase or decrease in Expenses of Operation and Maintenance attributable to the sale, lease or other disposition, and (iii) reduction in the annual Debt Service Requirement attributable to the application of the proceeds of such sale, lease or other disposition to the provision for payment of Bonds theretofore Outstanding. Such sale, lease or other disposition may include a partial interest in a sanitary sewer facility owned or to be owned in whole or in part by the District. The District reserves the right to transfer the System as a whole to any political subdivision or authority or agency of one or more political subdivisions of the State to which may be delegated the legal authority to own and operate the System, or any portion thereof, on behalf of the public, and which undertakes in writing, filed with the District, the District’s obligations under the Bond Ordinance, provided that there shall be first filed with the District: (i) an opinion of Bond Counsel to the effect that such sale will not adversely affect the extent to which interest on any Tax-Exempt Bonds is excluded from gross income for federal income tax purposes; and (ii) an opinion of a Consultant expressing the view that such transfer will not result in any diminution of Net Operating Revenues to the extent that in any future Fiscal Year the Net Operating Revenues and Investment Earnings will be less than (A) 125% of the Maximum Annual Debt Service Requirement on all Senior Bonds to be Outstanding after such transfer or (B) 115% of the Maximum Annual Debt Service Requirement on all Bonds to be Outstanding after such transfer. In reaching this conclusion, the Consultant shall take into consideration such factors as the Consultant may deem significant, including any rate schedule adopted by the transferee political subdivision, authority, or agency. Upon receipt of an opinion of Bond Counsel to the effect that such action will not adversely affect the extent to which interest on any Tax-Exempt Bonds is excluded from gross income for federal income tax purposes, the District may enter into such management contracts and sale/leaseback agreements as the District may deem appropriate, and such management contracts and sale/leaseback agreements shall not constitute a sale, lease or other disposition within the meaning of the Bond Ordinance. ENFORCEMENT OF CHARGES AND CONNECTIONS Except as otherwise determined in accordance with District policy and provided that such action or inaction will not materially impair the rights of the Bondholders, the District shall compel the prompt payment of rates, fees, and charges imposed for service rendered on every lot or parcel connected with the System, and to that end will vigorously enforce all of the provisions of any resolution or ordinance of the District having to do with sanitary sewer connections and with sanitary sewer charges, and all of the rights and remedies permitted the District under law. The District expressly covenants and agrees that such charges will be enforced and promptly collected to the full extent permitted by law, including the requirement for the making of reasonable deposits by customers of the System to the extent required by the District and the securing of injunctions against the disposition of sewage or industrial waste into the System by any premises delinquent in the payment of such charges. None of the facilities or services afforded by the System will be furnished to any user without a reasonable charge being made therefor. C-23 ANNUAL BUDGET The District agrees to adopt an Annual Budget for the System for each Fiscal Year in compliance with the Charter and the rate covenants as stated in the Bond Ordinance. BOOKS AND AUDITS The District will install and maintain proper books, records and accounts for the System according to standard accounting practices for the operation of facilities comparable to the System. Annual audits will be made by a certified public accountant. SENIOR AND SUBORDINATE LIEN BONDS No Prior Lien Bonds nor Senior Bonds Except as Permitted in the Bond Ordinance All Senior Bonds shall have complete parity of lien on the Pledged Revenues despite the fact that any of the Senior Bonds may be delivered at an earlier date than any other of the Senior Bonds. The District may issue Senior Bonds in accordance with the Bond Ordinance, but the District shall issue no other obligations of any kind or nature payable from or enjoying a lien on the Pledged Revenues or any part thereof having priority over or, except as permitted in the Bond Ordinance, on a parity with the Senior Bonds. Refunding Bonds Any or all of the Senior Bonds may be refunded prior to maturity, upon redemption in accordance with their terms, or with the consent of the owners of such Senior Bonds, and the refunding Bonds so issued shall constitute Senior Bonds, if: (a) The District shall have obtained a report from an Independent Certified Public Accountant or a Financial Advisor demonstrating that the refunding will reduce the total debt service payments on Outstanding Senior Bonds on a present value basis. (b) As an alternative to, and in lieu of, satisfying the requirements of paragraph (a) above, all Outstanding Senior Bonds are being refunded under arrangements which immediately result in making provision for the payment of the refunded Bonds. (c) The requirements described in paragraphs (e) and (g) below under the caption “SENIOR AND SUBORDINATE LIEN BONDS – Senior Bonds”) are met with respect to such refunding Bonds. Senior Bonds Bonds (including refunding Bonds which do not meet the requirements of the Bond Ordinance described above under the caption “SENIOR AND SUBORDINATE LIEN BONDS – Refunding Bonds”) may also be issued on a parity with the Outstanding Senior Bonds and any Senior Bonds hereafter issued pursuant to a Series Ordinance, and the Bonds so issued shall constitute Senior Bonds, if all of the following conditions are satisfied: C-24 (a) There shall have been filed with the District either: (i) a report by an Independent Certified Public Accountant to the effect that the historical Net Operating Revenues and Investment Earnings for a period of 12 consecutive months of the most recent 18 consecutive months prior to the issuance of the proposed Senior Bonds were equal to at least (A) 125% of the Maximum Annual Debt Service Requirement on all Senior Bonds which will be Outstanding immediately after the issuance of the proposed Senior Bonds and (B) 115% of the Maximum Annual Debt Service Requirement on all Bonds which will be Outstanding immediately after the issuance of the proposed Senior Bonds, or (ii) a report by a Consultant to the effect that the forecasted Net Operating Revenues and Investment Earnings for each Fiscal Year in the Forecast Period are expected to equal at least (A) 125% of the Maximum Annual Debt Service Requirement on all Senior Bonds which will be Outstanding immediately after the issuance of the proposed Senior Bonds and (B) 115% of the Maximum Annual Debt Service Requirement on all Bonds which will be Outstanding immediately after the issuance of the proposed Senior Bonds. The report by the Independent Certified Public Accountant that is required by the Bond Ordinance and described in subparagraph (i) above may contain pro forma adjustments to historical Net Operating Revenues equal to 100% of the increased annual amount attributable to any revision in the schedule of rates, fees, and charges for the services, facilities, and commodities furnished by the System, adopted prior to the date of delivery of the proposed Senior Bonds and not fully reflected in the historical Net Operating Revenues actually received during such 12-month period. Such pro forma adjustments shall be based upon a report of a Consultant as to the amount of Operating Revenues which would have been received during such 12-month period had the new rate schedule been in effect throughout such 12- month period. The report by the Consultant that is required by the Bond Ordinance and described in subparagraph (ii) above may not take into consideration any rate schedule to be imposed in the future, unless such rate schedule has been adopted by ordinance of the Governing Body. Such rate schedule adopted by ordinance may contain, however, future effective dates. (b) The District shall have received, at or before issuance of the Senior Bonds, a report from an Independent Certified Public Accountant to the effect that the payments required to be made into each account of the Sinking Fund have been made and the balance in each account of the Sinking Fund is not less than the balance required by the Bond Ordinance as of the date of issuance of the proposed Senior Bonds. (c) Except with respect to Senior SRF Bonds, the Series Ordinance authorizing the proposed Senior Bonds must either (a) state that the proposed Senior Bonds are Senior Uncovered Bonds and thus not secured by the Debt Service Reserve Account or (b) require (i) that the amount to be accumulated and maintained in the Debt Service Reserve Account be increased to not less than 100% of the Debt Service Reserve Requirement computed on a basis which includes all Senior Bonds which will be Outstanding immediately after the issuance of the proposed Senior Bonds and (ii) that the amount of such increase be deposited in such account on or before the date and at least as fast as specified in the Bond Ordinance. (d) The Series Ordinance authorizing the proposed Senior Bonds must require the proceeds of such proposed Senior Bonds to be used solely to make capital improvements to the C-25 System, to fund interest on the proposed Senior Bonds, to acquire existing or proposed sanitary sewer utilities, to refund other obligations issued for such purposes (whether or not such refunding Bonds satisfy the requirements of the Bond Ordinance described above under the caption “SENIOR AND SUBORDINATE LIEN BONDS – Refunding Bonds”), and to pay expenses incidental thereto and to the issuance of the proposed Senior Bonds. (e) If any Senior Bonds would bear interest at a Variable Rate, the Series Ordinance under which such Senior Bonds are issued shall provide a maximum rate of interest per annum which such Senior Bonds may bear. (f) The Chief Officer shall have certified, by written certificate dated as of the date of issuance of the Senior Bonds, that the District is in compliance with all requirements of the Bond Ordinance. (g) The District shall have received an opinion of Bond Counsel, dated as of the date of issuance of the Senior Bonds, to the effect that the Series Ordinance and any related Supplemental Ordinance authorizing the issuance of Senior Bonds have been duly adopted by the District. Subordinate Bonds Bonds may also be issued on a subordinate basis to the Outstanding Senior Bonds and any Senor Bonds hereafter issued pursuant to a Series Ordinance, and the Bonds so issued shall constitute Subordinate Bonds, if all of the following conditions are satisfied: (a) There shall have been filed with the District either: (i) a report by an Independent Certified Public Accountant to the effect that the historical Net Operating Revenues and Investment Earnings for a period of 12 consecutive months of the most recent 18 consecutive months prior to the issuance of the proposed Subordinate Bonds were equal to at least (A) 125% of the Maximum Annual Debt Service Requirement on all Senior Bonds which will be Outstanding immediately after the issuance of the proposed Subordinate Bonds and (B) 115% of the Maximum Annual Debt Service Requirement on all Bonds which will be Outstanding immediately after the issuance of the proposed Subordinate Bonds, or (ii) a report by a Consultant to the effect that the forecasted Net Operating Revenues and Investment Earnings for each Fiscal Year in the Forecast Period are expected to equal at least (A) 125% of the Maximum Annual Debt Service Requirement on all Senior Bonds which will be Outstanding immediately after the issuance of the proposed Subordinate Bonds and (B) 115% of the Maximum Annual Debt Service Requirement on all Bonds which will be Outstanding immediately after the issuance of the proposed Subordinate Bonds. The report by the Independent Certified Public Accountant that is required by the Bond Ordinance and described in subparagraph (i) above may contain pro forma adjustments to historical Net Operating Revenues equal to 100% of the increased annual amount attributable to any revision in the schedule of rates, fees, and charges for the services, facilities, and commodities furnished by the System, adopted prior to the date of delivery of the proposed Subordinate Bonds and not fully reflected in the historical Net Operating Revenues actually received during such 12-month period. Such pro forma adjustments shall be based upon a report of a Consultant as to the amount of Operating Revenues which C-26 would have been received during such 12-month period had the new rate schedule been in effect throughout such 12-month period. The report by the Consultant that is required by the Bond Ordinance and described in subparagraph (ii) above may not take into consideration any rate schedule to be imposed in the future, unless such rate schedule has been adopted by ordinance of the Governing Body. Such rate schedule adopted by ordinance may contain, however, future effective dates. (b) The Series Ordinance authorizing the Subordinate Bonds shall provide that such Subordinate Bonds shall be junior and subordinate in lien and right of payment to all Senior Bonds Outstanding at any time. (c) The Series Ordinance authorizing the Subordinate Bonds shall establish funds and accounts for the moneys to be used to pay debt service on the Subordinate Bonds, to pay Hedge Payments under Subordinate Hedge Agreements, and to provide reserves therefor. (d) The requirements of the Bond Ordinance described in paragraphs (d), (e) and (g) above under the caption “SENIOR AND SUBORDINATE LIEN BONDS – Senior Bonds” are met with respect to such Subordinate Bonds (as if such Bonds constituted Senior Bonds). In the event of any insolvency or bankruptcy proceedings, and any receivership, liquidation, reorganization, or other similar proceedings in connection therewith, relative to the District or to its creditors, as such, or to its property, and in the event of any proceedings for voluntary liquidation, dissolution, or other winding up of the District, whether or not involving insolvency or bankruptcy, the owners of all Senior Bonds then Outstanding and related Qualified Hedge Providers shall be entitled to receive payment in full of all Principal and interest due on all such Senior Bonds in accordance with the provisions of the Bond Ordinance and related Hedge Payments in accordance with the provisions of the Senior Hedge Agreements before the owners of the Subordinate Bonds or related Qualified Hedge Providers are entitled to receive any payment from the Pledged Revenues or the amounts held in the funds and accounts created under the Bond Ordinance on account of Principal of, premium, if any, or interest on the Subordinate Bonds or Hedge Payments under Subordinate Hedge Agreements. In the event that any of the Subordinate Bonds are declared due and payable before their expressed maturities because of the occurrence of an Event of Default (under circumstances when the provisions of preceding paragraph are not be applicable), no owners of Subordinate Bonds or related Qualified Hedge Providers may receive any accelerated payment from the Pledged Revenues or the amounts held in the funds and accounts created under the Bond Ordinance of Principal of, premium, if any, or interest on the Subordinate Bonds or Hedge Payments under Subordinate Hedge Agreements, until the owners of all Senior Bonds Outstanding and related Qualified Hedge Providers have received timely payment when due of all Principal of and interest on all such Senior Bonds and all Hedge Payments under related Senior Hedge Agreements. If any Event of Default shall have occurred and be continuing (under circumstances when the provisions of second preceding paragraph are not applicable), the owners of all Senior Bonds then Outstanding and related Qualified Hedge Providers shall be entitled to receive payment in full of all Principal and interest then due on all such Senior Bonds and all Hedge Payments under related Senior Hedge Agreements before the owners of the Subordinate Bonds or related Qualified Hedge Providers are entitled to receive any Payment from the Pledged Revenues or the amounts held in the funds and accounts created under the Bond Ordinance of Principal of, premium, if any, or interest on the Subordinate Bonds or Hedge Payments under Subordinate Hedge Agreements. C-27 The obligations of the District to pay to the owners of the Subordinate Bonds the Principal of, premium, if any, and interest thereon in accordance with their terms and to pay Hedge Payments to related Qualified Hedge Providers in accordance with the terms of the Subordinate Hedge Agreements shall be unconditional and absolute. Nothing in the Bond Ordinance shall prevent the owners of the Subordinate Bonds or related Qualified Hedge Providers from exercising all remedies otherwise permitted by applicable law or under the Bond Ordinance or the Subordinate Hedge Agreements upon default thereunder, subject to the rights contained in the Bond Ordinance of the owners of Senior Bonds and related Qualified Hedge Providers to receive cash, property, or securities otherwise payable or deliverable to the owners of the Subordinate Bonds and related Qualified Hedge Providers, and any Series Ordinance authorizing Subordinate Bonds may provide that, insofar as a trustee or paying agent for the Subordinate Bonds is concerned, the foregoing provisions shall not prevent the application by such trustee or paying agent of any moneys deposited with such trustee or paying agent for the purpose of the payment of or on account of the Principal of, premium, if any, and interest on such Subordinate Bonds and Hedge Payments under Subordinate Hedge Agreements if such trustee or paying agent did not have knowledge at the time of such application that such payment was prohibited by the foregoing provisions. Any series of Subordinate Bonds and related Subordinate Hedge Agreements may have such rank or priority with respect to any other series of Subordinate Bonds and related Subordinate Hedge Agreements as may be provided in the Series Ordinance authorizing such series of Subordinate Bonds and may contain such other provisions as are not in conflict with the provisions of the Bond Ordinance. Accession of Subordinate Bonds and Related Subordinate Hedge Agreements to Senior Status By proceedings authorizing all or any Subordinate Bonds, the District may provide for the accession of such Subordinate Bonds and related Subordinate Hedge Agreements to the status of complete parity with the Senior Bonds and related Senior Hedge Agreements if, as of the date of accession, the conditions of the Bond Ordinance described in subparagraphs (a), (e) and (f) above under the caption “SENIOR AND SUBORDINATE LIEN BONDS – Senior Bonds” are satisfied, on a basis which includes all Outstanding Senior Bonds and such Subordinate Bonds, and if on the date of accession: (a) the Debt Service Reserve Account contains an amount equal to the Debt Service Reserve Requirement computed on a basis which includes all Outstanding Senior Bonds and such Subordinate Bonds (but which excludes, in the case of both Outstanding Senior Bonds and such Subordinate Bonds, any SRF Bonds and Senior Uncovered Bonds); and (b) the Payments Account contains the amount which would have been required to be accumulated therein on the date of accession if the Subordinate Bonds had originally been issued as Senior Bonds. Credit Facilities and Hedge Agreements In connection with the issuance of any Bonds under the Bond Ordinance, the District may obtain or cause to be obtained one or more Credit Facilities providing for payment of all or a portion of the Principal of, premium, if any, or interest due or to become due on such Bonds, providing for the purchase of such Bonds by the Credit Facility Provider, or providing funds for the purchase of such Bonds by the District. In connection therewith the District shall enter into Credit Facility Agreements with such Credit Facility Providers providing for, among other things, (i) the payment of fees and expenses to such Credit Facility Providers for the issuance of such Credit Facilities; (ii) the terms and conditions of such Credit Facilities and the Bonds affected thereby; and (iii) the security, if any, to be provided for the issuance of such Credit Facilities. The District may secure any Credit Facility by an agreement providing for the C-28 purchase of the Bonds secured thereby with such adjustments to the rate of interest, method of determining interest, maturity, or redemption provisions as are specified by the District in the applicable Series Ordinance. The District may in a Credit Facility Agreement agree to directly reimburse such Credit Facility Provider for amounts paid under the terms of such Credit Facility, together with interest thereon; provided, however, that no Reimbursement Obligation shall be created for purposes of the Bond Ordinance until amounts are paid under such Credit Facility. Any such Reimbursement Obligation shall be deemed to be a part of the Bonds to which the Credit Facility relates which gave rise to such Reimbursement Obligation, and references to Principal and interest payments with respect to such Bonds shall include Principal and interest (except for Additional Interest and Principal amortization requirements with respect to the Reimbursement Obligation that are more accelerated than the amortization requirements for the related Bonds, without acceleration) due on the Reimbursement Obligation incurred as a result of payment of such Bonds with the Credit Facility. All other amounts payable under the Credit Facility Agreement (including any Additional Interest and Principal amortization requirements with respect to the Reimbursement obligation that are more accelerated than the amortization requirements for the related Bonds, without acceleration) shall be fully subordinate to the payment of debt service on the related class of Bonds. Any such Credit Facility shall be for the benefit of and secure such Bonds or portion thereof as specified in the applicable Series Ordinance. In connection with the issuance of any Bonds or at any time thereafter so long as such Bonds remain Outstanding, the District may enter into Hedge Agreements with Qualified Hedge Providers, and no other providers, with respect to any Bonds. The District shall authorize the execution, delivery, and performance of each Hedge Agreement in a Supplemental Ordinance, in which it shall designate the related Hedged Bonds. The District’s obligation to pay Hedge Payments may be secured by a pledge of, and lien on, the Pledged Revenues on a parity with the lien created by the Bond Ordinance to secure the related Hedged Bonds, or may be subordinated in lien and right of payment to the payment of the Bonds, as determined by the District. Other Obligations The District expressly reserves the right, at any time, to adopt one or more other bond ordinances and reserves the right, at any time, to issue any other obligations not secured by the amounts pledged under the Bond Ordinance. DEFAULT AND ENFORCEMENT Events of Default An “Event of Default” shall mean the occurrence of any one or more of the following: (a) failure to pay the Principal or redemption price of any Bond when the same shall become due and payable, either at maturity or by proceedings for redemption or otherwise; or (b) failure to pay any installment of interest on any Bond when and as such installment of interest shall become due and payable; or (c) default shall be made by the District in the performance of any obligation in respect to the Debt Service Reserve Account and such default shall continue for 30 days thereafter; or (d) the District shall (1) admit in writing its inability to pay its debts generally as they become due, (2) file a petition in bankruptcy or take advantage of any insolvency act, (3) make an C-29 assignment for the benefit of its creditors, (4) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property, or (5) be adjudicated a bankrupt; or (e) a court of competent jurisdiction shall enter an order, judgment, or decree appointing a receiver of the System or any of the funds or accounts established in the Bond Ordinance, or of the whole or any substantial part of the District’s property, or approving a petition seeking reorganization of the District under the federal bankruptcy laws or any other applicable law or statute of the United States of America or the State, and such order, judgment, or decree shall not be vacated or set aside or stayed within 60 days from the date of the entry thereof; or (f) under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of any of the funds or accounts established in the Bond Ordinance, or of the whole or any substantial part of the District’s property, and such custody or control shall not be terminated or stayed within 60 days from the date of assumption of such custody or control; or (g) the District shall fail to perform any of the other covenants, conditions, agreements, and provisions contained in the Bonds or in the Bond Ordinance (other than the covenant in the Bond Ordinance relating to continuing disclosure) on the part of the District to be performed, and such failure shall continue for 90 days after written notice specifying such failure and requiring it to be remedied shall have been given to the District by the owners of not less than, or a Credit Facility Provider securing not less than, 25% in aggregate Principal of the Bonds then Outstanding; provided, however, if the failure stated in such notice can be corrected, but not within such 90-day period, the District shall have 180 days after such written notice to cure such default if corrective action is instituted by the District within such 90-day period and diligently pursued until the failure is corrected; or (h) (1) an Event of Default relating to the non-payment of the Principal or redemption price or installment of interest shall occur under any Series Ordinance or (2) an Event of Default, other than as described in clause (h)(1) shall occur under any Series Ordinance; or (i) failure by any Credit Facility Provider to pay the purchase price of Bonds under any Credit Facility then in effect; or (j) delivery to the District by a Credit Facility Provider of written notice stating that an “Event of Default” has occurred under any Credit Facility Agreement; or (k) delivery to the District by a Qualified Hedge Provider of written notice stating that an “event of default” has occurred under any Senior Hedge Agreement. Remedies Upon the happening and continuance of any Event of Default described in clauses (a), (b) and (h)(1) above under the caption “Events of Default” as to any Senior Bond, then and in every such case, upon the written declaration of the owners of more than 50% in aggregate Principal of all Senior Bonds then Outstanding or upon the written demand of a Credit Facility Provider securing more than 50% in aggregate Principal of the Senior Bonds then Outstanding, the Principal of all Senior Bonds then Outstanding shall become due and payable immediately, together with the interest accrued thereon to the date of such acceleration, at the place of payment provided therein, and interest on the Senior Bonds shall cease to accrue after the date of such acceleration, anything in the Bond Ordinance or in the Senior Bonds to the contrary notwithstanding. With respect to any Senior Bonds secured by a Credit Facility, only the C-30 applicable Credit Facility Provider may give written demand to declare the Principal of and accrued interest on such Senior Bonds to be immediately due and payable. Upon the happening and continuance of any Event of Default described in clause (i) above under the caption “Events of Default”, then and in every such case, upon the written declaration of the owners of more than 50% in aggregate Principal of the Senior Bonds of the affected series then Outstanding, the Principal of all Senior Bonds of the affected series then Outstanding shall become due and payable immediately, together with the interest accrued thereon to the date of such acceleration, at the place of payment provided therein, and interest on the Senior Bonds of the affected series shall cease to accrue after the date of such acceleration, anything in the Bond Ordinance or in the Senior Bonds of the affected series to the contrary notwithstanding. Upon the happening and continuance of any Event of Default described in clause (k) above under the caption “Events of Default”, then and in every such case, upon the written declaration of the owners of more than 50% in aggregate Principal of the Senior Bonds of the affected series then Outstanding, the Principal of all Senior Bonds of the affected series then Outstanding shall become due and payable immediately, together with the interest accrued thereon to the date of such acceleration, at the place of payment provided therein, and interest on the Senior Bonds of the affected series shall cease to accrue after the date of such acceleration, anything in the Bond Ordinance or in the Senior Bonds of the affected series to the contrary notwithstanding. Notwithstanding the foregoing, with respect to any Senior Bonds secured by a Credit Facility, only the applicable Credit Facility Provider may give written demand to declare the Principal of and accrued interest on such Senior Bonds to be immediately due and payable. Upon any declaration of acceleration under the Bond Ordinance, the District shall immediately draw under the applicable Credit Facility to the extent permitted by the terms thereof that amount which, together with other amounts on deposit under the Bond Ordinance, shall be sufficient to pay the Principal of and accrued interest on the related Senior Bonds so accelerated. The above provisions, however, are subject to the condition that if, after the Principal of the Senior Bonds shall have been so accelerated, all arrears of interest upon such Bonds, and interest on overdue installments of interest at the rate on such Bonds, shall have been paid by the District, the Principal of such Bonds which has matured (except the Principal of any Bonds not then due by their terms except as provided above) have been paid, and the District shall also have performed all other things in respect to which it may have been in default under the Bond Ordinance, and, if applicable, each Credit Facility Provider shall have reinstated the Credit Facility in the full amount available to be drawn thereunder by written notice to the District, then, in every such case, the owners of more than 50% in aggregate Principal of all Senior Bonds then Outstanding by written notice to the District, may waive such default and its consequences and such waiver shall be binding upon the District and upon all owners of the Bonds; but no such waiver shall extend to or affect any subsequent default or impair any right or remedy consequent thereon. Notwithstanding the foregoing, as long as the applicable Credit Facility Provider shall not then continue to dishonor draws under the Credit Facility, no Event of Default with respect to the related Senior Bonds may be waived without the express written consent of such Credit Facility Provider. Upon the happening and continuance of any Event of Default, any owner of Senior Bonds then Outstanding affected by the Event of Default or a duly authorized agent for such owner may proceed to protect and enforce its rights and the rights of the owners of Senior Bonds by such of the following remedies as it shall deem most effectual to protect and enforce such rights: (1) by mandamus or other suit, action, or proceeding at law or in equity, enforce all rights of the owners of Senior Bonds, including the right to require the appointment of a receiver C-31 for the System or to exercise any other right or remedy provided by the Constitution and laws of the State and the Charter and to require the District to perform any other covenant or agreement contained in the Bond Ordinance; (2) by action or suit in equity, require the District to account as if it were the trustee of an express trust for the owners of the Senior Bonds; (3) by action or suit in equity, enjoin any acts or things which may be unlawful or in violation of the rights of the owners of the Senior Bonds; or (4) by pursuing any other available remedy at law or in equity or by statute. In the enforcement of any remedy under the Bond Ordinance, owners of Senior Bonds shall be entitled to sue for, enforce payment on, and receive any and all amounts then or during any default becoming, and at any time remaining, due from the District for Principal, redemption premium, interest, or otherwise, under any provision of the Bond Ordinance or of the Senior Bonds, and unpaid, with interest on overdue payments at the rate or rates of interest specified in such Senior Bonds, together with any and all costs and expenses of collection and of all proceedings under the Bond Ordinance and under such Senior Bonds, without prejudice to any other right or remedy of the owners of Senior Bonds, and to recover and enforce a judgment or decree against the District for any portion of such amounts remaining unpaid, with interest, costs, and expenses, and to collect from any moneys available for such purpose, in any manner provided by law, the moneys adjudged or decreed to be payable. If no Senior Bonds are then Outstanding or if no Event of Default with respect to any Senior Bonds has then occurred and is continuing, in the enforcement of any remedy under the Bond Ordinance, owners of Subordinate Bonds shall be entitled to sue for, enforce payment on, and receive any and all amounts then or during any default becoming, and at any time remaining, due from the District for Principal, redemption premium, interest, or otherwise, under any provision of the Bond Ordinance or of the Subordinate Bonds, and unpaid, with interest on overdue payments at the rate or rates of interest specified in such Subordinate Bonds, together with any and all costs and expenses of collection and of all proceedings under the Bond Ordinance and under such Subordinate Bonds, without prejudice to any other right or remedy of the owners of Subordinate Bonds, and to recover and enforce a judgment or decree against the District for any portion of such amounts remaining unpaid, with interest, costs, and expenses, and to collect from any moneys available for such purpose, in any manner provided by law, the moneys adjudged or decreed to be payable. Nothing in this paragraph is intended to diminish the rights of the owners of Subordinate Bonds described in clauses (1) through (4) above. No remedy conferred upon or reserved to the Bondholders is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given under the Bond Ordinance or now or hereafter existing at law or in equity or by statute. Application of Moneys After Default If an Event of Default occurs and shall not have been remedied, the District or a receiver appointed for the purpose shall apply all Pledged Revenues (except with respect to the Debt Service Reserve Account which does not secure Subordinate Bonds, Senior SRF Bonds and Senior Uncovered Bonds) as follows and in the following order of priority: C-32 (a) Expenses of Receiver and Paying Agent and Bond Registrar - to the payment of the reasonable and proper charges, expenses, and liabilities of any receiver and the Paying Agent and Bond Registrar under the Bond Ordinance; (b) Expenses of Operation and Maintenance and Renewals and Replacements - to the payment of all reasonable and necessary Expenses of Operation and Maintenance and major renewals and replacements to the System; (c) Principal or Redemption Price, Interest, and Hedge Payments Relating to Senior Bonds - to the payment of the interest and Principal or redemption price then due on the Senior Bonds and Hedge Payments then due under Senior Hedge Agreements, as follows: (i) Unless the Principal of all the Senior Bonds shall have become due and payable, all such moneys shall be applied as follows: first: To the payment to the persons entitled thereto of all installments of interest then due on the Senior Bonds, in the order of the maturity of such installments (with interest on defaulted installments of interest at the rate or rates borne by the Senior Bonds with respect to which such interest is due, but only to the extent permitted by law), and, if the amount available shall not be sufficient to pay in full any particular installment, then to the payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any discrimination or preference. If some of the Senior Bonds bear interest payable at different intervals or upon different dates and if at any time moneys from the Debt Service Reserve Account must be used to pay any such interest, the moneys in the Debt Service Reserve Account shall be applied (to the extent necessary) to the payment of all interest becoming due on the dates upon which such interest is payable to and including the next succeeding semiannual Interest Payment Date specified for the Senior Bonds. After such date, moneys in the Debt Service Reserve Account plus any other moneys available in the Payments Account shall be set aside for the payment of interest on Senior Bonds of each class (a class consisting of all Senior Bonds payable as to interest on the same dates) pro rata among Senior Bonds of the various classes on a daily basis so that there shall accrue to each owner of a Senior Bond throughout each Fiscal Year the same proportion of the total interest payable to such owner of a Senior Bond as shall so accrue to every other owner of a Senior Bond during such Fiscal Year. second: To the payment of the Hedge Payments due under any Senior Hedge Agreements pursuant to their terms. third: To the payment to the persons entitled thereto of the unpaid Principal of any of the Senior Bonds which shall have become due at maturity or upon mandatory redemption prior to maturity (other than Senior Bonds called for redemption for the payment of which moneys are held pursuant to the provisions of the Bond Ordinance), in the order of their due dates, with interest upon such Senior Bonds from the respective dates upon which they became due, and, if the amount available shall not be sufficient to pay in full Senior Bonds due on any particular date, together with such interest, then to the payment first of such interest, ratably according to the amount of such interest due on such date, and then to the payment of such Principal, ratably according to the amount of such Principal due on such date, to the persons entitled thereto without any C-33 discrimination or preference. If some of the Senior Bonds mature (including mandatory redemption prior to maturity as a maturity) upon a different date or dates, and if at any time moneys from the Debt Service Reserve Account must be used to pay any such Principal becoming due, the moneys in the Debt Service Reserve Account not required to pay interest under paragraph first above shall be applied to the extent necessary to the payment of all Principal becoming due on the dates upon which such Principal is payable to and including the final annual Principal Maturity Date specified for the Senior Bonds. After such date, moneys in the Debt Service Reserve Account not required to pay interest plus any other moneys available in the Payments Account shall be set aside for the payment of Principal of Senior Bonds of each class (a class consisting of all Senior Bonds payable as to Principal on the same date) pro rata among Senior Bonds of the various classes which mature or must be redeemed pursuant to mandatory redemption prior to maturity throughout each Fiscal Year in such proportion of the total Principal payable on each such Senior Bond as shall be equal among all classes of Senior Bonds maturing or subject to mandatory redemption within such Fiscal Year. fourth: To the payment of the redemption premium on and the Principal of any Senior Bonds called for optional redemption pursuant to their terms. (ii) If the Principal of all the Senior Bonds shall have become due and payable, all such moneys shall be applied to the payment of the Principal and interest then due and unpaid upon the Senior Bonds, with interest thereon as aforesaid, and due and unpaid Hedge Payments under Senior Hedge Agreements, without preference or priority of Principal over interest or Hedge Payments or of interest over Principal or Hedge Payments, or of Hedge Payments over Principal or interest, or of any installment of interest over any other installment of interest, or of any Senior Bond over any other Senior Bonds, or of any such Hedge Payment over any other such Hedge Payment, ratably, according to the amounts due respectively for Principal, interest, and Hedge Payments, to the persons entitled thereto without any discrimination or preference. Rights of Credit Facility Provider Notwithstanding any other provision of the Bond Ordinance, in the event that the District shall draw under a Credit Facility any amount for the payment of Principal of or interest on any Bonds, then upon such payment the related Credit Facility Provider shall succeed to and become subrogated to the rights of the recipients of such payments and such Principal or interest shall be deemed to continue to be unpaid and Outstanding for all purposes and shall continue to be fully secured by the Bond Ordinance until the Credit Facility Provider, as successor and subrogee, has been paid all amounts owing in respect of such subrogated payments of Principal and interest. Such rights shall be limited and evidenced by having the District note the Credit Facility Provider’s rights as successor and subrogee on its records, and the District shall, upon request, deliver to the Credit Facility Provider (i) in the case of interest on the Bonds, an acknowledgment of the Credit Facility Provider’s ownership of interest to be paid on the Bonds specifying the amount of interest owed, the period represented by such interest, and the CUSIP numbers of the Bonds on which such interest is owed and (ii) in the case of Principal of the Bonds, either the Bonds themselves duly assigned to the Credit Facility Provider or new Bonds registered in the name of the Credit Facility Provider or in such other name as the Credit Facility Provider shall specify. Whenever moneys become available for the payment of any interest then overdue, the Credit Facility Provider shall be treated as to interest owed to it as and as if it had been the Bondholder of the Bonds upon which such interest is payable on any special record date therefor. C-34 No Obligation to Levy Taxes Nothing contained in the Bond Ordinance shall be construed as imposing on the District any duty or obligation to levy any taxes either to meet any obligation incurred in the Bond Ordinance or to pay the Principal of or interest on the Bonds. DEFEASANCE Except as otherwise provided in any Series Ordinance with respect to Bonds secured by a Credit Facility, Bonds for the payment or redemption of which sufficient moneys or sufficient Government Obligations shall have been deposited with the Paying Agent or the Depository of the Sinking Fund (whether upon or prior to the maturity or the redemption date of such Bonds) shall be deemed to be paid and no longer Outstanding under the Bond Ordinance; provided, however, that if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been duly given as provided in the Bond Ordinance or firm and irrevocable arrangements shall have been made for the giving of such notice; and, provided, further, that Bonds bearing interest at a Variable Rate shall not be deemed to have been paid and discharged within the meaning of the Bond Ordinance unless the interest rate payable on such Bonds is calculated at the maximum interest rate specified for such Bonds to the earlier of the first tender or redemption date. Government Obligations shall be considered sufficient for purposes of the Bond Ordinance only: (i) if such Government Obligations are not callable by the issuer of the Government Obligations prior to their stated maturity; and (ii) if such Government Obligations fall due and bear interest in such amounts and at such times as will assure sufficient cash to pay currently maturing interest and to pay Principal and redemption premiums, if any, when due on the Bonds without rendering the interest on any Tax-Exempt Bonds includable in gross income of any owner thereof for federal income tax purposes. The District may at any time surrender to the Bond Registrar for cancellation by it any Bonds previously authenticated and delivered under the Bond Ordinance which the District may have acquired in any manner whatsoever. All such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. SUPPLEMENTAL ORDINANCES Supplemental Ordinances Not Requiring Consent of Bondholders The District, from time to time and at any time, subject to the conditions and restrictions in the Bond Ordinance, may adopt one or more Supplemental Ordinances which thereafter shall form a part of the Bond Ordinance, for any one or more or all of the following purposes: (a) To add to the covenants and agreements of the District in the Bond Ordinance other covenants and agreements thereafter to be observed or to surrender, restrict, or limit any right or power reserved in the Bond Ordinance to or conferred upon the District (including but not limited to the right to issue Senior Bonds); (b) To make such provisions for the purpose of curing any ambiguity, or of curing, correcting, or supplementing any defective provision contained in the Bond Ordinance, or in regard to matters or questions arising under the Bond Ordinance, as the District may deem necessary or desirable and not inconsistent with the Bond Ordinance; C-35 (c) To subject to the lien and pledge of the Bond Ordinance additional revenues, receipts, properties, or other collateral; (d) To evidence the appointment of successors to any Depository, Paying Agent, or Bond Registrar; (e) To modify, amend, or supplement the Bond Ordinance in such manner as to permit the qualification of the Bond Ordinance under the Trust Indenture Act of 1939 or any federal statute hereinafter in effect, and similarly to add to the Bond Ordinance such other terms, conditions, and provisions as may be permitted or required by such Trust Indenture Act of 1939 or any similar federal statute; (f) To make any modification or amendment of the Bond Ordinance required in order to make any Bonds eligible for acceptance by DTC or any similar holding institution or to permit the issuance of any Bonds or interests therein in book-entry form; (g) To modify any of the provisions of the Bond Ordinance in any respect if such modification shall not become effective until after the Bonds Outstanding immediately prior to the effective date of such Supplemental Ordinance shall cease to be Outstanding and if any Bonds issued contemporaneously with or after the effective date of such Supplemental Ordinance shall contain a specific reference to the modifications contained in such subsequent proceedings; (h) Subject to the provisions of the Bond Ordinance relating to the Project Fund, to modify the provisions of the Bond Ordinance with respect to the disposition of any moneys remaining in the Project Fund upon the completion of any Project; (i) To increase the size or scope of the System, to add other utilities to the System, to create additional subaccounts or to abolish any subaccounts within any account, or to change the amount of the Debt Service Reserve Requirement, but not below the amount specified in such definition; (j) To modify the Bond Ordinance to permit the qualification of any Bonds for offer or sale under the securities laws of any state in the United States of America; (k) To modify the Bond Ordinance to provide for the issuance of Senior Bonds or Subordinate Bonds, and such modification may deal with any subjects and make any provisions which the District deems necessary or desirable for that purpose; (l) To make such modifications in the provisions of the Bond Ordinance as may be deemed necessary by the District to accommodate the issuance of capital appreciation bonds or Bonds which bear interest at a Variable Rate; and (m) To modify any of the provisions of the Bond Ordinance in any respect (other than a modification of the type described below under the caption “SUPPLEMENTAL ORDINANCES – Supplemental Ordinances Requiring Consent of Bondholders”) requiring the unanimous written consent of the Bondholders); provided that for (i) any Outstanding Bonds which are assigned a Rating and which are not secured by a Credit Facility providing for the payment of the full amount of Principal and interest to be paid thereon, each Rating Agency shall have given written notification to the District that such modification will not cause the then applicable Rating on any Bonds to be reduced or withdrawn, and (ii) any Outstanding Bonds which are secured by Credit Facilities providing for the payment of the full amount of the C-36 Principal and interest to be paid thereon, each Credit Facility Provider shall have consented in writing to such modification. Any Supplemental Ordinance of the District may modify the provisions of the Bond Ordinance in such a manner, and to such extent and containing such provisions, as the District may deem necessary or desirable to effect any of the purposes stated above. As used in the Bond Ordinance, the term “modify” shall mean “modify, amend, or supplement” and the term “modification” shall mean “modification, amendment, or supplement.” Supplemental Ordinances Requiring Consent of Bondholders With the consent (evidenced as provided in the Bond Ordinance) of the owners of not less than a majority in aggregate Principal of the Outstanding Bonds of each class (senior and subordinate), voting separately by class, the District may from time to time and at any time adopt a Supplemental Ordinance for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Bond Ordinance or of any Supplemental Ordinance; provided, however, that no such Supplemental Ordinance shall: (1) extend the maturity date or due date of any mandatory sinking fund redemption with respect to any Bond Outstanding under the Bond Ordinance; (2) reduce or extend the time for payment of Principal of, redemption premium, or interest on any Bond Outstanding under the Bond Ordinance; (3) reduce any premium payable upon the redemption of any Bond under the Bond Ordinance or advance the date upon which any Bond may first be called for redemption prior to its stated maturity date; (4) give to any Senior Bond or Senior Bonds (or related Senior Hedge Agreements) a preference over any other Senior Bond or Senior Bonds (or related Senior Hedge Agreements); (5) permit the creation of any lien or any other encumbrance on the Pledged Revenues having a lien equal to or prior to the lien created under the Bond Ordinance for the Senior Bonds; (6) reduce the percentage of owners of senior or subordinate classes of Bonds required to approve any such Supplemental Ordinance; or (7) deprive the owners of the Bonds of the right to payment of the Bonds or from the Pledged Revenues (except as otherwise provided herein with respect to the Debt Service Reserve Account), without, in each case, the consent of the owners of all the affected Bonds then Outstanding. No amendment may be made under the Bond Ordinance which affects the rights or duties of any Credit Facility Provider securing any of the Bonds or any Qualified Hedge Provider under any Hedge Agreement without its written consent. If the District intends to enter into or adopt any Supplemental Ordinance as described in this caption, the District shall mail, by registered or certified mail, to the registered owners of the Bonds at their addresses as shown on the Bond Register, a notice of such intention along with a description of such Supplemental Ordinance not less than 30 days prior to the proposed effective date of such Supplemental Ordinance. The consents of the registered owners of the Bonds need not approve the particular form of wording of the proposed Supplemental Ordinance, but it shall be sufficient if such consents approve the substance thereof. Failure of the owner of any Bond to receive the notice required in the Bond Ordinance shall not affect the validity of any Supplemental Ordinance if the required number of owners of the Bonds of each class shall provide their written consent to such Supplemental Ordinance. Notwithstanding any provision of the Bond Ordinance to the contrary, upon the issuance of a Credit Facility to secure any Bonds and for the period in which such Credit Facility is outstanding, the Credit Facility Provider may have the consent rights of the owners of the Bonds which are secured by such Credit Facility pertaining to some or all of the amendments or modifications of the Bond Ordinance, to the extent provided in the applicable Series Ordinance. Notwithstanding the foregoing, if a Credit Facility Provider is granted the consent rights of the owners of any Bonds in a Series Ordinance and refuses to exercise such consent rights, either affirmatively or negatively, then the registered owners of the Bonds secured by the related Credit Facility may exercise such consent rights. C-37 Notice of Supplemental Ordinances The District shall cause the Bond Registrar to mail a notice by registered or certified mail to the registered owners of all Bonds Outstanding, at their addresses shown on the Bond Register or at such other address as has been furnished in writing by such registered owner to the Bond Registrar, setting forth in general terms the substance of any Supplemental Ordinance which has been adopted and approved. * * * C-38 SUMMARY OF THE CONTINUING DISCLOSURE AGREEMENT The following is a summary of certain provisions and covenants contained in the Continuing Disclosure Agreement. Such summary does not purport to be a complete statement of the terms of the Continuing Disclosure Agreement and accordingly is qualified in its entirety by reference thereto and is subject to the full text thereof. Definitions In addition to the definitions set forth in the Continuing Disclosure Agreement, the following capitalized terms shall have the following meanings: “Annual Filing Date” means the date, set in the Continuing Disclosure Agreement, by which the Annual Report is to be filed with the MSRB. “Annual Financial Information” means annual financial information as such term is used in paragraph (b)(5)(i) of the Rule and specified in the Continuing Disclosure Agreement. “Annual Report” means an Annual Report containing Annual Financial Information described in and consistent with the Continuing Disclosure Agreement. “Audited Financial Statements” means the annual financial statements (if any) of the District for the prior fiscal year, certified by an independent auditor as prepared in accordance with generally accepted accounting principles or otherwise, as such term is used in paragraph (b)(5)(i)(B) of the Rule and as specified in the Continuing Disclosure Agreement. “Certification” means a written certification of compliance signed by the Disclosure Representative stating that the Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure delivered to the Disclosure Dissemination Agent is the Annual Report, Audited Financial Statements, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure required to be submitted to the MSRB under the Continuing Disclosure Agreement. A Certification shall accompany each such document submitted to the Disclosure Dissemination Agent by the District and shall include the full name of the Bonds and the 9-digit CUSIP numbers for all Bonds to which the document applies. “Disclosure Dissemination Agent” means Digital Assurance Certification, L.L.C., acting in its capacity as Disclosure Dissemination Agent (“DAC”) under the Continuing Disclosure Agreement, or any successor Disclosure Dissemination Agent designated in writing by the District pursuant to the Continuing Disclosure Agreement. “Disclosure Representative” means the Secretary-Treasurer of the District or his or her designee, or such other person as the District shall designate in writing to the Disclosure Dissemination Agent from time to time as the person responsible for providing Information to the Disclosure Dissemination Agent. “Failure to File Event” means the District’s failure to file an Annual Report on or before the Annual Filing Date. “Financial Obligation” as used in the Continuing Disclosure Agreement is defined in the Rule, as may be amended, as (i) a debt obligation; (ii) derivative instrument entered into in connection with, or C-39 pledged as a security or a source of payment for, an existing or planned debt obligation; or (iii) guarantee of (i) or (ii). The term “Financial Obligation” shall not include municipal securities as to which a final official statement has been provided to the MSRB consistent with the Rule. “Force Majeure Event” means: (i) acts of God, war, or terrorist action; (ii) failure or shut-down of the Electronic Municipal Market Access system maintained by the MSRB; or (iii) to the extent beyond the Disclosure Dissemination Agent’s reasonable control, interruptions in telecommunications or utilities services, failure, malfunction or error of any telecommunications, computer or other electrical, mechanical or technological application, service or system, computer virus, interruptions in Internet service or telephone service (including due to a virus, electrical delivery problem or similar occurrence) that affect Internet users generally, or in the local area in which the Disclosure Dissemination Agent or the MSRB is located, or acts of any government, regulatory or any other competent authority the effect of which is to prohibit the Disclosure Dissemination Agent from performance of its obligations under this Disclosure Agreement. “Holder” means any person (a) having the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries) or (b) treated as the owner of any Bonds for federal income tax purposes. “Information” means, collectively, the Annual Reports, the Audited Financial Statements, the Notice Event notices, the Failure to File Event notices, the Voluntary Event Disclosures and the Voluntary Financial Disclosures. “MSRB” means the Municipal Securities Rulemaking Board, or any successor thereto, established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934. “Notice Event” means any of the events enumerated in paragraph (b)(5)(i)(C) of the Rule and listed in the Continuing Disclosure Agreement. “Obligated Person” means any person, including the District, who is either generally or through an enterprise, fund, or account of such person committed by contract or other arrangement to support payment of all, or part of the obligations on the Bonds (other than providers of municipal bond insurance, letters of credit, or other liquidity facilities). “Official Statement” means that Official Statement prepared by the District in connection with the Bonds. “Rule” means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. “Voluntary Event Disclosure” means information of the category specified in any of subsections (e)(vi)(1) through (e)(vi)(10) of Section 2 of the Continuing Disclosure Agreement that is accompanied by a Certification of the Disclosure Representative containing the information prescribed by Section 7(a) of the Continuing Disclosure Agreement. “Voluntary Financial Disclosure” means information of the category specified in any of subsections (e)(vii)(1) through (e)(vii)(9) of Section 2 of the Continuing Disclosure Agreement that is accompanied by a Certification of the Disclosure Representative containing the information prescribed by Section 7(b) of the Continuing Disclosure Agreement. C-40 Provision of Annual Reports The District shall provide, annually, an electronic copy of the Annual Report and Certification to the Disclosure Dissemination Agent, not later than the Annual Filing Date. Promptly upon receipt of an electronic copy of the Annual Report and the Certification, the Disclosure Dissemination Agent shall provide an Annual Report to the MSRB not later than 180 days after the end of each fiscal year of the District, commencing with the fiscal year ending June 30, 2020. Such date and each anniversary thereof is the Annual Filing Date. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in the Continuing Disclosure Agreement. If on the fifteenth (15th) day prior to the Annual Filing Date, the Disclosure Dissemination Agent has not received a copy of the Annual Report and Certification, the Disclosure Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by e-mail) to remind the District of its undertaking to provide the Annual Report. Upon such reminder, the Disclosure Representative shall either (i) provide the Disclosure Dissemination Agent with an electronic copy of the Annual Report and the Certification) no later than two (2) business days prior to the Annual Filing Date, or (ii) instruct the Disclosure Dissemination Agent in writing that the District will not be able to file the Annual Report within the time required under the Continuing Disclosure Agreement, state the date by which the Annual Report for such year will be provided and instruct the Disclosure Dissemination Agent to immediately send a Failure to File Event notice to the MSRB in substantially the form specified in the Continuing Disclosure Agreement. If the Disclosure Dissemination Agent has not received an Annual Report and Certification by 10:00 a.m. Eastern time on the Annual Filing Date (or, if such Annual Filing Date falls on a Saturday, Sunday or holiday, then the first business day thereafter) for the Annual Report, a Failure to File Event shall have occurred and the Issuer irrevocably directs the Disclosure Dissemination Agent to immediately send a Failure to File Event notice to the MSRB in substantially the form specified in the Continuing Disclosure Agreement. If Audited Financial Statements of the District are prepared but not available prior to the Annual Filing Date, the District shall, when the Audited Financial Statements are available, provide at such time an electronic copy to the Disclosure Dissemination Agent, accompanied by a Certification for filing with the MSRB. The District may adjust the Annual Filing Date upon change of its fiscal year by providing written notice of such change and the new Annual Filing Date to the Disclosure Dissemination Agent, Paying Agent (if any) and the MSRB, provided that the period between the existing Annual Filing Date and new Annual Filing Date shall not exceed one year. Content of Annual Reports Each Annual Report shall contain Annual Financial Information with respect to the District, including the information provided in the Official Statement under the headings: “MANAGEMENT’S DISCUSSION AND ANALYSIS - Historical and Projected Sewer Rates and Charges,” “- Customer Accounts,” “- Largest User Charge Customers,” and “ – User Charge Revenues.” Each Annual Report shall include Audited Financial Statements prepared as described in the Official Statement. If Audited Financial Statements are not available, then, unaudited financial statements, prepared in accordance with generally accepted accounting principles or alternate accounting principles as described in the Official Statement will be included in the Annual Report. C-41 Any or all of the items listed above may be included by specific reference from other documents, including official statements of debt issues with respect to which the District is an Obligated Person (as defined by the Rule), which have been previously filed with each of the Securities and Exchange Commission or available on the MSRB Internet Website. If the document incorporated by reference is a final official statement, it must be available from the MSRB. The District will clearly identify each such document so incorporated by reference. Reporting of Notice Events The occurrence of any of the following events with respect to the Bonds constitutes a Notice Event: 1. Principal and interest payment delinquencies; 2. Non-payment related defaults, if material; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5. Substitution of credit or liquidity providers, or their failure to perform; 6. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds; 7. Modifications to rights of Bondholders, if material; 8. Bond calls, if material, and tender offers; 9. Defeasances; 10. Release, substitution, or sale of property securing repayment of the Bonds, if material; 11. Rating changes; 12. Bankruptcy, insolvency, receivership or similar event of the Obligated Person; For the purposes of the event described in this subsection, the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an Obligated Person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Obligated Person, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Obligated Person. C-42 13. The consummation of a merger, consolidation, or acquisition involving an Obligated Person or the sale of all or substantially all of the assets of the Obligated Person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material; 14. Appointment of a successor or additional trustee or the change of name of a trustee, if material; 15. Incurrence of a Financial Obligation of an Obligated Person, if material, or agreement to covenants, events of default, remedies, priority rights, or other similar terms of a Financial Obligation of an Obligated Person, any of which affect security holders, if material; and 16. Default, event of acceleration, termination event, modification of terms, or other similar events under the terms of a Financial Obligation of an Obligated Person, any of which reflect financial difficulties. The District shall, in a timely manner not later than nine business days after its occurrence, notify the Disclosure Dissemination Agent in writing of the occurrence of a Notice Event. Such notice shall instruct the Disclosure Dissemination Agent to report the occurrence and shall be accompanied by a Certification. Such notice or Certification shall identify the Notice Event that has occurred, include the text of the disclosure that the District desires to make, contain the written authorization of the District for the Disclosure Dissemination Agent to disseminate such information, and identify the date the District desires for the Disclosure Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event). The Disclosure Dissemination Agent is under no obligation to notify the District or the Disclosure Representative of an event that may constitute a Notice Event. In the event the Disclosure Dissemination Agent so notifies the Disclosure Representative, the Disclosure Representative will within two business days of receipt of such notice (but in any event not later than the tenth business day after the occurrence of the Notice Event, if the District determines that a Notice Event has occurred), instruct the Disclosure Dissemination Agent that either (i) a Notice Event has not occurred and no filing is to be made or (ii) a Notice Event has occurred and the Disclosure Dissemination Agent is to report the occurrence pursuant to the Continuing Disclosure Agreement, together with a Certification. Such Certification shall identify the Notice Event that has occurred, include the text of the disclosure that the District desires to make, contain the written authorization of the District for the Disclosure Dissemination Agent to disseminate such information, and identify the date the District desires for the Disclosure Dissemination Agent to disseminate the information (provided that such date is not later than the tenth business day after the occurrence of the Notice Event). If the Disclosure Dissemination Agent has been instructed by the District to report the occurrence of a Notice Event, the Disclosure Dissemination Agent shall promptly file a notice of such occurrence with the MSRB in accordance with the Continuing Disclosure Agreement. Voluntary Filings The District may instruct the Disclosure Dissemination Agent to file a Voluntary Event Disclosure or a Voluntary Financial Disclosure with the MSRB, from time to time pursuant to a Certification of the Disclosure Representative. C-43 Nothing in the Continuing Disclosure Agreement shall be deemed to prevent the District from disseminating any other information through the Disclosure Dissemination Agent using the means of dissemination set forth in the Continuing Disclosure Agreement or including any other information in any Annual Report, Audited Financial Statement, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure, in addition to that required by the Continuing Disclosure Agreement. If the District chooses to include any information in any Annual Report, Audited Financial Statement, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure in addition to that which is specifically required by the Continuing Disclosure Agreement, the District shall have no obligation under the Continuing Disclosure Agreement to update such information or include it in any future Annual Report, Audited Financial Statement, Notice Event notice, Failure to File Event notice, Voluntary Event Disclosure or Voluntary Financial Disclosure. Termination of Reporting Obligation The obligations of the District and the Disclosure Dissemination Agent under the Continuing Disclosure Agreement shall terminate with respect to the Bonds upon the legal defeasance, prior redemption or payment in full of all of the Bonds, when the District is no longer an Obligated Person, or upon delivery by the Disclosure Representative to the Disclosure Dissemination Agent of an opinion of counsel experienced in federal securities laws to the effect that continuing disclosure is no longer required. Disclosure Dissemination Agent The District has appointed Digital Assurance Certification, L.L.C. (“DAC”) as exclusive Disclosure Dissemination Agent under the Continuing Disclosure Agreement. The District may, upon thirty days written notice to the Disclosure Dissemination Agent, replace or appoint a successor Disclosure Dissemination Agent. Upon termination of DAC’s services as Disclosure Dissemination Agent, whether by notice of the District or DAC, the District agrees to appoint a successor Disclosure Dissemination Agent or, alternately, agrees to assume all responsibilities of Disclosure Dissemination Agent under the Continuing Disclosure Agreement for the benefit of the Holders of the Bonds. Notwithstanding any replacement or appointment of a successor, the District shall remain liable to the Disclosure Dissemination Agent until payment in full for any and all sums owed and payable to the Disclosure Dissemination Agent. The Disclosure Dissemination Agent may resign at any time by providing thirty days’ prior written notice to the District. Remedies in Event of Default In the event of a failure of the District or the Disclosure Dissemination Agent to comply with any provision of the Continuing Disclosure Agreement, the Holders’ rights to enforce the provisions of the Continuing Disclosure Agreement shall be limited solely to a right, by action in mandamus or for specific performance, to compel performance of the parties’ obligation under the Continuing Disclosure Agreement. Any failure by a party to perform in accordance with the Continuing Disclosure Agreement shall not constitute a default on the Bonds or under any other document relating to the Bonds, and all rights and remedies shall be limited to those expressly stated in the Continuing Disclosure Agreement. Amendment; Waiver Notwithstanding any other provision of the Continuing Disclosure Agreement, the District and the Disclosure Dissemination Agent may amend the Continuing Disclosure Agreement and any provision of the Continuing Disclosure Agreement may be waived, if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws acceptable to both the District and the Disclosure C-44 Dissemination Agent to the effect that such amendment or waiver does not materially impair the interests of Holders of the Bonds and would not, in and of itself, cause the undertakings in the Continuing Disclosure Agreement to violate the Rule if such amendment or waiver had been effective on the date of the Continuing Disclosure Agreement but taking into account any subsequent change in or official interpretation of the Rule; provided neither the District or the Disclosure Dissemination Agent shall be obligated to agree to any amendment modifying their respective duties or obligations without their consent thereto. Notwithstanding the preceding paragraph, the Disclosure Dissemination Agent shall have the right to adopt amendments to the Continuing Disclosure Agreement necessary to comply with modifications to and interpretations of the provisions of the Rule as announced by the Securities and Exchange Commission from time to time by giving not less than 20 days written notice of the intent to do so together with a copy of the proposed amendment to the District. No such amendment shall become effective if the District shall, within 10 days following the giving of such notice, send a notice to the Disclosure Dissemination Agent in writing that it objects to such amendment. * * * APPENDIX D Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series 2019B [THIS PAGE INTENTIONALLY LEFT BLANK] Appendix D Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series 2019B [This Page Intentionally Left Blank] 3013 Main Street Kansas City, MO 64108 www.raftelis.com November 19, 2019 Board of Trustees The Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, MO 63103-2555 Raftelis Financial Consultants, Inc. (“Raftelis”) is submitting herewith the Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series 2019B prepared at the request of The Metropolitan St. Louis Sewer District (“District”) in connection with the issuance of its Wastewater System Revenue Bonds, Series 2019B (the “Series 2019B Bonds”). The purpose of the report is to summarize findings of studies performed by Raftelis related to the wastewater system of the District (“System”). The report provides a financial feasibility analysis of the District’s Capital Improvement and Replacement Program (“CIRP”) as it relates to the issuance of the Series 2019B Bonds. The report also addresses other technical and financial issues that affect the operation of the System and the District’s ability to issue and repay wastewater revenue bonds issued during the study period of fiscal years 2020 through 2024. The District’s fiscal year ends on June 30 of each year. In preparing the report, Raftelis has examined the financial operations of the District through reviews of financial reports, operating and capital budgets, and other statistical and financial information as well as through discussions with the District’s management and financial staff. We have performed various financial tests and analyses necessary to support our findings and opinions. In the development of the forecast of future financial operations summarized in the report, Raftelis has made certain assumptions with respect to conditions, events, and circumstances which may occur in the future. The methodologies utilized in performing our studies follow generally accepted industry practice. While Raftelis believes such assumptions are reasonable and attainable for the purpose of forecasting the District’s future operations, the actual results may differ materially from the forecasts as influenced by the conditions, events, and circumstances which actually occur. Subject to the limitations set forth herein, the report is based on information not within the control of Raftelis. Raftelis has not been requested to make an independent analysis, to verify the accuracy of information provided to us, or to render independent judgment of the validity of information provided by others. As such, Raftelis cannot, and does not, guarantee the accuracy thereof to the extent that such information, data, or opinions were based on information provided by others. Page 2 November 19, 2019 D-2 Use of the report, or any information contained therein, by a third party shall constitute a waiver and release of Raftelis from and against all claims and liability, including, but not limited to, liability for special, incidental, indirect, or consequential damages in connection with such use. In addition, to the extent permitted by applicable law, use of the report, or any information contained therein by a third party (other than the underwriters of the Series 2019B Bonds), shall constitute an agreement to defend and indemnify Raftelis from and against any claims and liability, including, but not limited to, liability for special, incidental, indirect, or consequential damages in connection with such use. The benefit of such releases, waivers, or limitations of liability shall extend to the related companies and subcontractors of any tier of Raftelis and the directors, officers, partners, employees, and agents of all released or indemnified parties. Raftelis shall have no liability to a third party for any losses or damages arising from or in any way related to this report and/or the information contained therein. Such express waiver of liability by the third party shall include all claims that the third party may allege in connection with Raftelis’ report including, but not limited to, breach of contract, breach of warranty, strict liability, negligence, and/or negligent misrepresentation. Our principal findings and opinions, which are discussed more fully in the report, are as follows: Wastewater System Financing The District has developed a detailed CIRP required to meet regulatory requirements, maintain the integrity of the System, and continue to address water quality issues. During the five-year study period (“study period”) the District plans to spend approximately $2 billion on major capital improvements to the System. As shown in Table 2 of the report, capital program requirements are projected to be funded from a combination of available funds on hand, senior and subordinate revenue bond proceeds, annual operating revenues, grants and contributions and interest income. Approximately 37 percent of total major capital improvement expenditures are anticipated to be funded from operating revenues and the drawdown of available fund balances and the remaining approximately 63 percent will be debt financed. Less than one percent of major capital improvements are anticipated to be financed by grants and contributions and interest earned on construction funds. The average number of wastewater customers served by the District during fiscal year 2019 was approximately 427,100. Slight increases in the number of customers are projected during the study period based on analysis of historical trends. District revenue is derived principally from charges for wastewater service. The existing schedule of wastewater rates has been in effect since July 1, 2019. The Board adopted these wastewater rates on June 9, 2016 by Ordinance 14395. Page 3 November 19, 2019 D-3 The District has nine senior revenue bond issues currently outstanding (excluding the Series 2019B Bonds and the District’s Taxable Wastewater System Refunding Revenue Bonds, Series 2019, which are being issued contemporaneously with the Series 2019B Bonds) and fifteen subordinate series of revenue bonds issued under the state’s revolving fund program (“SRF”) and Department of Natural Resources Direct Loan program currently outstanding. The nine senior revenue bonds include a loan with the United States Environmental Protection Agency under the Water Infrastructure Finance and Innovation Act (“WIFIA”) loan program in December 2018. The District’s previous bond authorizations from elections on February 3, 2004 ($500 million), August 5, 2008 ($275 million), and June 5, 2012 ($945 million) have been fully utilized. Four debt issues totaling $249.4 million have been made from the District’s bond authorization of $900 million approved by voters on April 5, 2016. After issuance of the Series 2019B Bonds the District will have $598 million of remaining bond authorization approved by voters on April 5, 2016. The proceeds of the Series 2019B Bonds will be used to pay a portion of the costs of the District’s CIRP and pay the costs of issuance of the 2019B Bonds. The Master Bond Ordinance adopted by the Board on April 22, 2004, as supplemented and amended by ordinances adopted by the Board for each bond issue, including the ordinance adopted by the Board for the Series 2019B Bonds (the “Bond Ordinance”), establishes covenants between the District and bondholders and various terms and conditions related to the Bonds. The cash flow analysis of projected wastewater utility revenue and revenue requirements presented in Table 9 of the report shows that projected revenues, including projected revenue increases, will be sufficient to fund the operation and maintenance of the System, provide debt service coverage in excess of the requirements of the Bond Ordinance and continue full funding of the CIRP. Based on the financial projections and analyses presented in the report, it is our opinion that the District will be able to adequately finance the CIRP, meet all known cash requirements of the System, and comply with all Bond Ordinance financial and rate covenants during the study period. Bond Covenant Compliance The proposed wastewater charges for fiscal years 2020 through 2024 will allow the District to issue additional revenue bonds within the study period as currently anticipated and make needed improvements and replacements of the System. Indicated debt service coverage levels are above the minimum Bond Ordinance requirements. The additional bonds test required for the issuance of the Series 2019B Bonds has been met. Page 4 November 19, 2019 D-4 Conclusion Based on the financial study performed by Raftelis related to the System, we believe that the District’s organizational structure, planned CIRP, and financing plans are sound for purposes of supporting the Series 2019B Bonds and subsequent bonds required to support the full implementation of the CIRP for the 2020 through 2024 fiscal years. The summary statements presented in this letter do not address all of the issues examined and described in the full report. Accordingly, the findings and conclusions presented herein should not be considered complete except in the context of the detailed descriptions and information contained in the report. We appreciate the opportunity to be of service to the District in this important matter. Very truly yours, RAFTELIS FINANCIAL CONSULTANTS, INC. Thomas A. Beckley Senior Manager The Metropolitan St. Louis Sewer District Contents D-5 Contents Page Introduction ........................................................................................................................... D-6 Purpose .............................................................................................................................. D-6 Scope ................................................................................................................................. D-6 Raftelis Financial Consultants' Qualifications .................................................................. D-7 Wastewater System Financing .............................................................................................. D-8 Capital Improvement and Replacement Program ............................................................. D-8 CIRP Financing ............................................................................................................... D-10 Wastewater Service Charges .......................................................................................... D-12 Wastewater Service Charge Components ................................................................... D-12 Other Charges and Fees .............................................................................................. D-14 Revenues ......................................................................................................................... D-15 Customer Growth ........................................................................................................ D-15 Wastewater Volumes .................................................................................................. D-16 Wastewater Revenues Under Projected Rates ............................................................ D-18 Other Operating Revenues .......................................................................................... D-19 Revenue Requirements ................................................................................................... D-20 Operation and Maintenance Expense .......................................................................... D-20 Routine Capital Improvements ................................................................................... D-22 Cash Financing of Capital Improvements ................................................................... D-22 Debt Service ................................................................................................................ D-22 Operating Reserve Allowance ........................................................................................ D-24 Financial Analysis ........................................................................................................... D-24 Wastewater Bill Comparison .......................................................................................... D-27 Bond Covenant Compliance ............................................................................................... D-29 Rate Covenants ............................................................................................................... D-29 Reasonable Charges ........................................................................................................ D-29 Adequate Maintenance ................................................................................................... D-30 Additional Bonds Tests ................................................................................................... D-30 Principal Assumptions ........................................................................................................ D-33 The Metropolitan St. Louis Sewer District Wastewater System Financing D-6 Report on the Financial Feasibility of The Metropolitan St. Louis Sewer District Wastewater System Revenue Bonds, Series 2019B Introduction The Metropolitan St. Louis Sewer District (“District”) is responsible for providing wastewater and stormwater services for the City of St. Louis, Missouri (“City”) and most of St. Louis County, Missouri (“County”). In order to continue to improve and expand its wastewater system (“System”) and maintain compliance with state and federal regulations, the District has developed a major capital improvement and replacement program (“CIRP”). In order to provide for equitable recovery of capital financing costs from existing and future wastewater customers, the District plans to partially finance System improvements through the issuance of long-term debt. The remainder of the funds required to finance the CIRP will be obtained from annual operating revenues, interest income, grants and contributions, and funds on hand. Revenue bonds are issued pursuant to the District’s Charter, which was approved by the voters of the City and the County at a special election held on February 4, 1954 and amended at special elections held on November 7, 2000 and June 5, 2012 (“Charter”). All bonds are issued under the provisions of the Master Bond Ordinance adopted by the Board of Trustees (“Board”) on April 22, 2004, as supplemented and amended by ordinances adopted by the Board for each bond issue including the ordinance expected to be adopted by the Board on November 14, 2019 (the “Bond Ordinance”) for the Wastewater System Revenue Bonds, Series 2019B (the “Series 2019B Bonds”). Purpose The purpose of this report is to summarize findings of the financial feasibility study performed by Raftelis Financial Consultants, Inc. (“Raftelis”) related to the System and independently assess the financial feasibility of the District’s issuance of the Series 2019B Bonds. This report addresses financial issues that affect the operation of the System and the District’s ability to issue and repay wastewater revenue bonds. Scope This report addresses the organization and management of the District. Also included are the results of analyses related to existing and future financial requirements of the System based on a review of financial reports, ordinances, budgets and other information. Information The Metropolitan St. Louis Sewer District Wastewater System Financing D-7 from these documents was supplemented through meetings and conversations with key District representatives. Projections of revenue and revenue requirements of the System are shown in this report for a study period that includes fiscal years 2020 through 2024. Evaluation of the financial feasibility of the Series 2019B Bonds is based upon a review of historical financial information provided by the District, an examination of revenue and expenditure projections by District staff and Raftelis, and the preparation of cash flow analyses examining projected System operation and capital programming financing through fiscal year 2024. The level of debt service coverage for the Series 2019B Bonds and subsequent bonds projected to be issued through fiscal year 2024 is determined and compared with requirements of the Bond Ordinance. Raftelis Financial Consultants' Qualifications Raftelis was founded in 1993 and has grown to become one of the largest and most respected utility financial, rate, and management consulting firms in the nation. Raftelis has experience providing these services to hundreds of utilities across the country and abroad. Raftelis staff has provided bond feasibility reports for dozens of utilities throughout the United States for billions of dollars in bonds. Raftelis currently has a professional staff of over 100 consultants located in seventeen offices throughout the United States providing financial and management consulting services to municipal water and wastewater utilities. Raftelis is a Registered Municipal Advisor with the Securities and Exchange Commission and the Municipal Securities Rulemaking Board. Raftelis has been working with the District since 2007 as the Consultant to the Rate Commission and was selected by the District in 2012 and 2017 to provide bond feasibility and rate consulting services to the District for a five-year period. The Metropolitan St. Louis Sewer District Wastewater System Financing D-8 Wastewater System Financing The general objectives of the District’s wastewater CIRP are to provide the facilities necessary to meet federal and state requirements, maintain the integrity of the System, and provide satisfactory levels of service and performance to customers. To accomplish these objectives, the District must have sufficient operating revenues and adequate funding for CIRP projects. The District uses proceeds of revenue bonds along with wastewater service charge revenues, grants, other revenues and available fund balances to meet the costs of the ongoing CIRP. Capital Improvement and Replacement Program Table 1 presents a summary of the projected CIRP for fiscal years 2020 through 2024. These costs were obtained from the District’s supplemental budget documents and other data provided by District staff. The costs for projects benefiting special assessment districts are not included in Table 1 since they are fully funded by subdistrict tax revenues and thus do not impact the magnitude of the proposed bonds or required revenue increases. Metropolitan St. Louis Sewer District Wastewater System Financing D-9 Table 1: Capital Improvement & Replacement ProgramFiscal Year Ending June 302019 - 2024Capital Improvement and Replacement Progam Needs FY 2019FY 2020FY 2021FY 2022FY 2023FY 2024TotalActual Budget Projected (1) Projected (1) Projected (1) Projected (1)1. Asset Management - Capacity34,076,000$ 41,923,308$ 112,421,324$ 157,559,290$ 108,524,936$ 102,850,743$ 557,355,600$ 2. Asset Management - Renewal35,080,000 46,490,426 38,697,125 20,356,695 16,000,094 35,558,913 192,183,252 3. Cityshed14,751,000 9,336,947 26,442,859 22,236,141 18,443,810 2,607,119 93,817,876 4. Combined Sewer Overflow26,585,000 37,976,044 20,709,340 33,302,375 44,937,697 34,819,217 198,329,673 5. Districtwide10,593,789 11,326,429 14,460,977 14,263,687 15,573,771 15,410,768 81,629,421 6. Other50,000 (44,034) (69,890) (12,184) (518) - (76,625) 7. Sanitary Sewer Overflow (2)162,097,500 159,323,009 152,512,684 71,582,467 80,306,077 41,580,028 667,401,765 8. Treatment Plants (3)6,422,000 21,301,765 31,263,225 71,674,635 166,934,349 226,742,948 524,338,924 9.Subtotal: CIRP289,655,289$ 327,633,895$ 396,437,645$ 390,963,105$ 450,720,216$ 459,569,736$ 2,314,979,887$ 10. Less: Capital Funded in O&M (Asset Management) (12,790,959) (9,727,869) (10,748,699) (10,855,175) (11,647,245) (11,322,418)$ (67,092,365) 11. Less: Non-recurring Projects & Studies(5,402,440) (9,223,454) (8,567,302) (8,861,820) (8,777,901) (9,129,015) (49,961,932) 12. Less: Project Liquidations13. Plus: Capitalized Internal Labor10,488,913 10,803,580 8,758,000 9,020,740 9,291,362 9,570,103 57,932,698 14.Total: CIRP Needs (4)281,950,803$ 319,486,152$ 385,879,645$ 380,266,851$ 439,586,432$ 448,688,405$ 2,255,858,288$ (1) Projected CIRP amounts include 2.75% inflation from the estimated costs in FY 2018 dollars.(2) The investment is driven by Consent Decree requirements to eliminate at least 85% of all constructed SSO's by 12/31/2023.(3) The investment is necessary to repair aging infrastructure and to meet regulatory requirements.(4) CIRP costs for FY 2019 represent new appropriations approved in that year, and FY 2020 through FY 2024 represent estimated appropriations adjusted for inflation and net of prior years’ unspent appropriations released for future use. The Metropolitan St. Louis Sewer District Wastewater System Financing D-10 Table 3 Capital Improvement and Replacement Program The proposed CIRP is primarily focused on collection system improvements projects to meet the District’s Consent Decree requirements that include an estimated $667 million to eliminate sanitary sewer overflows and $198 million to reduce or eliminate combined sewer overflows. About $749 million is earmarked for system improvements throughout the District that includes asset management and collection system improvements. Improvements related to existing treatment plants are expected to cost about $524 million during the five-year study period. CIRP Financing Table 2 presents the proposed CIRP financing plan and summarizes the projected source and application of funds over the five-year study period. This plan reflects the recommendations of the Rate Commission and anticipates that proposed capital improvements will be financed from a combination of bond proceeds, annual operating revenues, and interest income. Interest income earned on invested capital improvement funds is available to meet capital improvement expenditures. Interest earnings recognize an assumed 0.50 percent average annual interest rate on funds maintained in the construction account. Line 10 indicates the estimated interest income earned on capital improvement program balances. D-11 Metropolitan St. Louis Sewer District Wastewater System Financing t Table 2: Capital Improvement & Replacement Program Financing PlanFiscal Year Ending June 302019 - 2024FY 2019FY 2020FY 2021FY 2022FY 2023FY 2024TotalActual Projected Projected Projected Projected ProjectedSources of Funds1. Beginning Year Balance (1)246,392,481$ 189,978,208$ 142,639,119$ 114,753,524$ 55,788,091$ 2,903,395$ 752,454,818$ 2. Revenue Bond Proceeds (2)- 64,189,977 138,513,852 93,895,364 144,567,675 266,163,859 707,330,726 3. Cash Financing of Construction (PAYGO) 130,524,075 121,366,038 169,500,000 116,500,000 111,000,000 109,000,000 757,890,113 4. State Revolving Loan Proceeds (2)25,267,000 69,952,000 35,000,000 95,000,000 115,000,000 55,000,000 395,219,000 5. WIFIA Loan47,460,160 - - - - - 47,460,160 6. Capitalized Internal Labor10,488,913 10,803,580 8,758,000 9,020,740 9,291,362 9,570,103 57,932,698 7. Commercial Paper- - - - - - - 8. Line of Credit- - - - - - - 9. Grants & Contributions742,451 657,040 685,899 716,027 747,480 780,317 4,329,215 10. Interest Income11,218,167 6,010,000 7,050,000 7,660,000 8,190,000 8,880,000 49,008,167 11.Subtotal: Available Funds472,093,246$ 462,956,843$ 502,146,870$ 437,545,655$ 444,584,608$ 452,297,674$ 2,771,624,897$ Uses of Funds12. Major Capital Improvements(281,950,803)$ (319,486,152)$ (385,879,645)$ (380,266,851)$ (439,586,432)$ (448,688,405)$ (1,807,169,883)$ 13. Issuance Costs(164,236) (831,572) (1,513,702) (1,490,713) (2,094,781) (2,832,953) (6,095,004) 14. Commercial Paper & Line of Credit Payments- - - - - - - 15.Subtotal: Uses of Funds(282,115,039)$ (320,317,724)$ (387,393,347)$ (381,757,564)$ (441,681,213)$ (451,521,358)$ (1,813,264,887)$ 16.End of Year Balance189,978,208$ 142,639,119$ 114,753,524$ 55,788,091$ 2,903,395$ 776,316$ (1) Includes balance in Sanitary Replacement Fund, Project Bond Funds, WW OMCI and Construction Funds, Capital Improvement Surcharge Fund, and the Bond Place Special Taxing Subdistrict Fund. (2) Issuance costs are included in the total proceeds shown. The Metropolitan St. Louis Sewer District Wastewater System Financing D-12 Wastewater Service Charges Table 3 presents a summary of the District-wide charges imposed by the District since the beginning of fiscal year 2014 as well as the proposed charges for the forecast period. Wastewater Service Charge Components The current wastewater rates were adopted on June 9, 2016 and became effective on July 1, 2016, with a schedule of rate increases to take effect on July 1 of 2016, 2017, 2018 and 2019. These rates are part of the fifth set of rates to go through the Rate Commission review procedures mandated by the Charter. A new wastewater rate change proposal was submitted to the Rate Commission on March 4, 2019. Under this proposal wastewater bills for typical residential customers were projected to increase by about 3 percent per year in fiscal years 2021 through 2024. The Rate Commission completed its deliberations and submitted a Rate Recommendation Report to the Board of Trustees on August 16, 2019. The Rate Commission proposed changes to certain assumptions that impact revenues and operation and maintenance expenditures and those changes have been incorporated into this feasibility report. The Board accepted the Rate Commission’s Report on October 10, 2019 and this report assumes that the Board of Trustees will adopt the accepted recommendations as they have in the past. The rates consist of a monthly base charge, a uniform volume charge, and extra strength surcharges for biochemical oxygen demand (“BOD”) in excess of 300 milligrams per liter (“mg/l”) or chemical oxygen demand (“COD”) in excess of 600 mg/l, and suspended solids (“SS”) in excess of 300 mg/l. The base charge includes a billing and collection charge component and a system availability charge component that are applicable to all customer classes. A compliance charge is applied to non-residential customers, in addition to the base charge, to recover monitoring and pretreatment program related costs. As a part of the 2011 Rate Commission proceedings, the District further differentiated the compliance charge into tiers to better reflect the cost of providing these services to different non-residential customers served by the District. D-13 Metropolitan St. Louis Sewer District Wastewater System Financing Table 3. Historical and Projected Wastewater Rates Fiscal Year Ending June 30FY 2014FY 2015FY 2016FY 2017FY 2018FY 2019FY 2020FY 2021FY 2022FY 2023FY 2024Actual Actual Actual Actual Actual Actual Current Proposed Proposed Proposed ProposedBase Charge ($/Bill)Billing & Collection Charge3.45$ 3.55$ 3.70$ 5.44$ 6.02$ 6.67$ 7.38$ 5.11$ 5.29$ 5.48$ $ 5.68System Availability Charge11.40$ 12.70$ 14.55$ 14.02$ 15.50$ 17.16$ 18.97$ 21.29$ 22.02$ 22.78$ $ 23.61Total: Base Charge 14.85$ 16.25$ 18.25$ 19.46$ 21.52$ 23.83$ 26.35$ 26.40$ 27.31$ 28.26$ $ 29.29Compliance Charge ($/Bill) (b)Tier 116.00$ 9.00$ 2.15$ 2.86$ 2.95$ 3.05$ 3.14$ 4.44$ 4.55$ 4.71$ $ 4.85Tier 241.85$ 43.55$ 44.50$ 57.20$ 58.94$ 60.89$ 62.61$ 62.16$ 63.64$ 65.80$ $ 67.67Tier 389.15$ 92.75$ 94.80$ 125.84$ 129.67$ 133.96$ 137.75$ 133.20$ 136.37$ 140.99$ $ 144.98Tier 4130.70$ 136.00$ 139.00$ 185.90$ 191.56$ 197.91$ 203.49$ 177.60$ 181.83$ 187.98$ $ 193.30Tier 5172.25$ 179.25$ 183.15$ 243.10$ 250.50$ 258.79$ 266.10$ 222.00$ 227.29$ 234.98$ $ 241.63Volume ChargeMetered ($/Ccf)2.50$ 2.82$ 3.21$ 3.59$ 3.97$ 4.40$ 4.87$ 5.00$ 5.17$ 5.35$ $ 5.55Unmetered ($/Bill)Per Room1.63$ 1.83$ 2.09$ 2.12$ 2.35$ 2.61$ 2.89$ 2.95$ 3.06$ 3.17$ $ 3.29Per Water Closet6.10$ 6.88$ 7.83$ 7.92$ 8.76$ 9.70$ 10.72$ 11.02$ 11.40$ 11.80$ $ 12.23Per Bath5.08$ 5.73$ 6.53$ 6.60$ 7.30$ 8.08$ 8.93$ 9.19$ 9.51$ 9.84$ $ 10.20Per Separate Shower5.08$ 5.73$ 6.53$ 6.60$ 7.30$ 8.08$ 8.93$ 9.19$ 9.51$ 9.84$ $ 10.20Extra Strength Surcharges ($/ton) (b)Suspended Solids over 300 mg/l231.35$ 244.03$ 251.88$ 262.00$ 269.07$ 277.03$ 283.87$ 302.67$ 321.47$ 332.35$ 341.76$ Biochemical Oxygen Demand over 300 mg/l 620.14$ 620.14$ 632.38$ 654.00$ 671.63$ 691.50$ 708.56$ 812.94$ 917.32$ 948.34$ 975.18$ Chemical Oxygen Demand over 600 mg/l 310.07$ 310.07$ 316.19$ 327.00$ 335.82$ 345.76$ 354.30$ 406.47$ 458.66$ 474.17$ 487.59$ Ccf = hundred cubic feet (approx. 748 gallons)mg/l = milligram per liter The Metropolitan St. Louis Sewer District Wastewater System Financing D-14 Other Charges and Fees In addition to the normal and excess strength wastewater service charges, the District also imposes a number of other charges to meet cost related to growth and system operations. The District imposes District-wide sewer system connection fees per Ordinance 14854 adopted in 2018. Under this system of capital recovery charges, new customers buy into the wastewater system so that they are on an equal equity basis with customers having similar service requirements. The current charge is based on a unit equity value of $2.73 per gallon of wastewater per day attributed to each new customer. For all single family residential customers, the sewer system connection fee is $1,126. For non-residential customers, the charge varies from $1,126 for customers served by a 5/8 or 3/4-inch water meter to $65,493 for customers served by a 10-inch water meter. A $0.08 per gallon charge for septage or other wastewater hauled to the Bissell Wastewater Treatment Plant is imposed on all permitted waste haulers that serve customers having septic tanks, cesspools, private treatment facilities, or customers otherwise not connected to the District’s sewer system per Ordinance 12716, adopted on August 14, 2008. Costs incurred for sampling and testing wastewater samples from industrial users are recovered by a system of wastewater monitoring fees. These fees are typically published in ordinances updating the wastewater service charges. A number of engineering and service fees are also applied to reimburse the District for various services such as plan review, construction permits, construction related inspections, machine taps, project bid fees, provision of blueprint and microfilm copies, and permitting pretreatment customers. The Metropolitan St. Louis Sewer District Wastewater System Financing D-15 Revenues District revenue is derived primarily from charges for wastewater service, including revenues from extra strength surcharges. Other sources of income include dedicated subdistrict assessments, connection fees, waste hauler permits, industrial monitoring charges, various engineering fees, interest earnings, late charges and other operating income. Customer Growth Table 4 presents a summary of the historical and projected average number of wastewater customers served by the District. All customer projections are based on an analysis of historic growth patterns by customer class during the past five years. As indicated by Table 4, the number of metered customers is projected to increase from 349,700 in 2019 to 351,403 in 2024 and the number of unmetered customers is projected to increase from 77,400 in 2019 to 78,105 in 2024. The total number of customer accounts is expected to increase at an average rate of 0.1 percent per year over the study period. Table 4. Historical and Projected Average Customer Accounts Fiscal Year Ending June 30 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Actual Projected Projected Projected Projected Projected Metered Customers 1. Single Family 304,900 305,205 305,510 305,816 306,122 306,428 2. Multi-Family 20,600 20,682 20,765 20,848 20,931 21,015 3. Non-Residential 24,200 24,152 24,104 24,056 24,008 23,960 4.Subtotal: Metered Customers 349,700 350,039 350,379 350,720 351,061 351,403 Unmetered Customers 5. Single Family 56,600 56,657 56,714 56,771 56,828 56,885 6. Multi-Family 20,800 20,883 20,967 21,051 21,135 21,220 7. Non-Residential - - - - - - 8.Subtotal: Unmetered Customers 77,400 77,540 77,681 77,822 77,963 78,105 Total Customer Accounts 9. Single Family 361,500 361,862 362,224 362,587 362,950 363,313 10. Multi-Family 41,400 41,565 41,732 41,899 42,066 42,235 11. Non-Residential 24,200 24,152 24,104 24,056 24,008 23,960 12.Total: Customer Accounts 427,100 427,579 428,060 428,542 429,024 429,508 13.% Change 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% The Metropolitan St. Louis Sewer District Wastewater System Financing D-16 Wastewater Volumes Table 5 presents a summary of historical and projected contributed or billed wastewater volumes. Billed wastewater volume is the amount of wastewater flow contributed to the System by residential and non-residential customers. The determination of contributed wastewater volume for unmetered residential customers is based on an analysis of customers with similar characteristics using statistical methods and was updated in the past two years for the most recent Rate Change Proposal. The indicated unit volumes which became effective on July 1, 2016 are shown along with the current allowance below: 14.5 gallons per day (“gpd”) for each room 54.2 gpd for each water closet 45.2 gpd for each bath or separate shower Billable wastewater volumes for all single family customers with metered water usage are determined on the basis of water billed during the period best equated to contributed wastewater volume. For District customers, this period is from January 15 through April 30. Billed wastewater volume for non-residential customers is equal to actual metered water usage less exemption allowances for any water that does not enter the sewer system. Multifamily customers are either billed based on actual annual water usage or the average annual water usage established during the best equated period for wastewater contribution, depending on the billing method selected by each multifamily customer. The selected billing basis is permanent and cannot be changed. Projected volumes are based on the recognition of historical billing volumes and trends. Also considered are projections of numbers of customers and average historic billed volume per customer. The Metropolitan St. Louis Sewer District Wastewater System Financing D-17 Table 7 Historical an Table 5. Historical and Projected Contributed Wastewater Volumes (Ccf) Fiscal Year Ending June 30 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Actual Projected Projected Projected Projected Projected Metered Customers 1. Single Family 20,869,408 20,542,620 20,196,292 19,855,854 19,521,207 19,192,251 2. Multi-Family 8,037,326 8,198,761 8,362,659 8,529,835 8,700,354 8,874,283 3. Non-Residential 21,271,053 21,526,306 21,784,622 22,046,037 22,310,589 22,578,316 4.Subtotal: Metered Customers 50,177,787 50,267,687 50,343,573 50,431,726 50,532,150 50,644,850 Unmetered Customers 5. Single Family 6,273,423 6,288,779 6,282,760 6,276,749 6,270,742 6,264,743 6. Multi-Family 4,059,313 4,053,257 4,037,544 4,021,898 4,006,315 3,990,796 7. Non-Residential - - - - - - 8.Subtotal: Unmetered Customers 10,332,735 10,342,036 10,320,304 10,298,647 10,277,057 10,255,539 Total Contributed Wastewater Volume 9. Single Family 27,142,831 26,831,399 26,479,052 26,132,603 25,791,949 25,456,994 10. Multi-Family 12,096,639 12,252,018 12,400,203 12,551,733 12,706,669 12,865,079 11. Non-Residential 21,271,053 21,526,306 21,784,622 22,046,037 22,310,589 22,578,316 12.Total: Contributed Volumes 60,510,522 60,609,723 60,663,877 60,730,373 60,809,207 60,900,389 13.% Change 0.2% 0.1% 0.1% 0.1% 0.1% The Metropolitan St. Louis Sewer District Wastewater System Financing D-18 Wastewater Revenues Under Projected Rates A summary of historical revenues for fiscal year 2019 and projected wastewater revenues under approved and recommended rates for fiscal years 2020 through 2024 is presented in Table 6. Projected billed wastewater revenues do not include allowances for bad debt, refunds or billing adjustments. These billing adjustments are included with other operating revenues in Table 7. Other Operating Revenues Projected other wastewater utility revenues are presented in Table 7. These revenues are grouped in the same manner as summarized in the District’s budget documents. All of these revenues are used to offset operating costs. The District anticipates receiving contributions from Missouri American Water for a share of capacity in the Lower Meramec River Wastewater Treatment Plant. This revenue averaged approximately $1 million in FY 2018 and FY 2019 and District staff estimates that this revenue will average about $1.4 million per year for FY 2020-2024. Table 8 Historical and Projected Billed Wastewater Service Revenue Table 6. Historical and Projected Wastewater Revenues under Approved and Recommended Rates Fiscal Year Ending June 30 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Actual Projected Projected Projected Projected Projected Metered 1. Residential 237,507,195$ 265,381,898$ 244,474,079$ 252,064,194$ 260,088,800$ 268,982,935$ Non-Residential 2. Normal Strength 104,959,335 115,366,444 119,485,324 124,852,430 130,590,901 136,901,521 3. Extra Strength 5,630,899 6,198,691 6,288,346 6,897,564 7,045,199 7,157,842 4.Subtotal: Metered Customers 348,097,429$ 386,947,033$ 370,247,749$ 383,814,188$ 397,724,900$ 413,042,298$ Unmetered 5. Residential 44,223,353$ 49,611,204$ 74,195,315$ 76,741,855$ 79,366,923$ 82,215,881$ Total Wastewater Revenues 6. Residential 281,730,548$ 314,993,102$ 318,669,394$ 328,806,050$ 339,455,722$ 351,198,817$ 7. Non-Residential 110,590,234 121,565,135 125,773,670 131,749,994 137,636,100 144,059,362 8.Total: Wastewater Revenues 392,320,783$ 436,558,237$ 444,443,064$ 460,556,043$ 477,091,823$ 495,258,179$ 9.% Change - 11.3% 1.8% 3.6% 3.6% 3.8% The Metropolitan St. Louis Sewer District Wastewater System Financing D-19 Table 7. Projected Other Wastewater Operating Revenues Fiscal Year Ending June 30 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Actual Projected Projected Projected Projected Projected Other Operating Revenue 1. Billing Adjustments (1)6,548,828$ 4,325,400$ 4,713,411$ 5,136,250$ 5,597,044$ 6,099,203$ 2. Bad Debt Provision (4,349,247) (5,385,600) (5,520,240) (5,727,249) (5,942,021) (6,164,847) Other Fees 3. Construction Inspection Fees 748,249$ 636,000$ 636,000$ 636,000$ 636,000$ 636,000$ 4. Waste Hauler Fees 577,754 835,000 835,000 835,000 835,000 835,000 5. All Other Fees (2)707,502 597,500 597,500 597,500 597,500 597,500 6.Subtotal: Other Fees 2,033,505$ 2,068,500$ 2,068,500$ 2,068,500$ 2,068,500$ 2,068,500$ 7. Miscellaneous Revenues (3)3,632,276 3,420,100 3,545,310 3,683,041 3,834,545 4,001,200 8.Subtotal: Other Operating Revenue 7,865,362$ 4,428,400$ 4,806,981$ 5,160,542$ 5,558,069$ 6,004,056$ 9. Other Non-Operating Revenue (4)(669,379) 521,000 521,000 521,000 521,000 521,000 10. Connection Fee Revenue 922,979 1,308,000 1,321,080 1,334,291 1,347,634 1,361,110 11.Total: Other Miscellaneous Revenue 8,118,962$ 6,257,400$ 6,649,061$ 7,015,833$ 7,426,702$ 7,886,166$ % Change -22.9% 6.3% 5.5% 5.9% 6.2% (1) Includes late charges, refunds, adjustments, lien interest and fees, and other adjustments. (2) Includes plan review fees, submittal fees, monitoring cost fees, pretreatment discharge permits, and all other fees. (3) Includes reimbursements, reimbursable engineering and maintenance, Missouri American contributions, and all other miscellaneous reven (4) Includes rental income, clean water surcharge, and sale of fixed assets. The Metropolitan St. Louis Sewer District Wastewater System Financing D-20 Revenue Requirements The revenue required to provide for the continued operation of the District must be sufficient to meet the cash requirements for System operation. Revenue requirements include (1) total System operation and maintenance expenses; (2) expenditures for routine and major capital improvements met directly from revenues; (3) total System debt service (consisting of principal and interest payments); and (4) provision for an adequate operating reserve. Projections of the cash requirements to meet these System expenditures for the period of 2020 through 2024 from the rates approved by the Board for fiscal year 2020 and recommended to the Board for fiscal years 2021 through 2024 are presented in this section. Operation and Maintenance Expense Operation and maintenance expense includes the total annual salaries and wages of District personnel, costs for materials and supplies, fuel and electrical power costs and other costs such as employee benefits, insurance, and contract services. Since these costs are an ongoing annual obligation of the District, they are met from wastewater and stormwater operating revenues as they are incurred. Wastewater related operation and maintenance expense for fiscal year 2019 are actual results while fiscal years 2020 through 2024 are based on the fiscal year 2020 budget using the escalation rates as documented in the most recent Rate Change Proposal. The Metropolitan St. Louis Sewer District Wastewater System Financing D-21 Routine Capital Improvements Expenditures for routine annual capital improvements include those costs that tend to be routinely incurred each year for normal replacements such as vehicles and office equipment, and minor improvements or repairs. Since the costs of these improvements are a continuing expense to be met each year, the District appropriately finances these expenditures from current wastewater revenues. These expenditures are included in the District's annual budgets as Capital Outlay costs. Cash Financing of Capital Improvements In addition to cash financing routine capital improvements, the District partially finances major capital improvements on a cash or pay-as-you-go basis. The District is expected to continue to cash finance all routine capital improvements and a portion of the CIRP. The amount of projected cash financing of the major capital improvement program was previously identified on Line 3 of Table 2. Debt Service The District issued its first District-wide series of revenue bonds in April 2004 and additional Senior Bonds were issued in November 2006, November 2008, January 2010, December 2011, August 2012, November 2012, December 2013, December 2015, December 2016, December 2017, and December 2018, with the 2010 issue being issued under the Build America Bond federally subsidized program and the 2018A WIFIA loan with the EPA that is on parity with the District’s Senior Bonds. Total Parity Debt issued to date totals $1,656,732,000 as indicated by the adjoining table. The District has also issued fifteen subordinate series of revenue bonds through the Missouri State Revolving Fund (“SRF”) and Department of Natural Resources Direct Loan program. The total amount of Subordinate Bonds issued to date is $644,469,000. Additional revenue bonds are assumed to have 30-year terms and with an assumed true interest rate of approximately Series Amount Revenue Bonds 2004A (1) (4) 175,000,000$ 2006C (2) (4) 60,000,000 2008A (2) (4) 30,000,000 2010B 85,000,000 2011B (3) 52,250,000 2012A (3) 225,000,000 2012B (1) 141,730,000 2013B (3) 150,000,000 2015B (2) (3) 223,855,000 2016C 150,000,000 2017A (3) 316,175,000 2018A 47,722,204 Total 1,656,732,204$ State Revolving Fund Loans 2004B 161,280,000$ 2005A 6,800,000 2006A 42,715,000 2006B 14,205,000 2008B 40,000,000 2009A 23,000,000 2010A 7,980,700 2010C 37,000,000 2011A 39,769,300 2013A 52,000,000 2015A 75,000,000 2016A 20,000,000 2016B 75,500,000 2018B 25,267,000 2019A 23,952,000 Total 644,469,000$ Existing Debt Issues (1) The Series 2012B Bonds partially refunded the Series 2004A Bonds. (2) The Series 2015B Bonds refunded the Series 2006C and 2008A Bonds. (3) The Series 2017A Bonds partially refunded the 2011B, 2012A, 2013B, and 2015B bonds. (4) The Series 2004A, 2006C, and 2008A have been fully paid. The Metropolitan St. Louis Sewer District Wastewater System Financing D-22 3.34 percent for issuances in fiscal years 2020 through 2024. Additional revenue bonds issued as part of the SRF loan program are expected to have 20-year terms and a net effective annual interest and administration cost of about 2.25 percent per year to 3.00 percent per year. Table 9 presents debt service in two ways: by Payments to Sinking Fund, which is used for modeling the District's cash flow in Table 10, and Payments to Bondholders, which is used to determine coverage in accordance with the District's bond covenants. The Payments to Bondholders for FY 2019 through FY 2024 shown in Table 8 was provided by the District's co-Financial Advisor, PFM Financial Advisors, LLC. The scheduling of the proposed revenue bond issues and SRF loans reflects current planning considerations, as recognized for purposes of this report. This is not intended to preclude the possible modification or rescheduling of issues, if desirable, due to market conditions, local financing policy, or other practical considerations. Table 8. Projected Debt Service Requirements Fiscal Year Ending June 30 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Actual Budget Projected Projected Projected Projected Payments to Sinking Fund Revenue Bonds Existing 77,962,008$ 78,123,917$ 78,198,040$ 77,923,075$ 78,185,172$ 78,085,875$ Projected - 1,637,904 7,197,283 14,483,402 21,610,090 33,774,908 Subtotal: Revenue Bonds 77,962,008$ 79,761,821$ 85,395,323$ 92,406,477$ 99,795,262$ 111,860,782$ SRF Loans Existing 37,673,555$ 38,029,639$ 38,270,893$ 39,541,794$ 40,040,602$ 40,629,964$ Projected - 1,775,150 4,280,650 9,130,714 16,395,602 18,931,239 Subtotal: SRF Loans 37,673,555$ 39,804,789$ 42,551,543$ 48,672,508$ 56,436,204$ 59,561,203$ Total: Debt Service to Sinking Fund 115,635,563$ 119,566,610$ 127,946,866$ 141,078,985$ 156,231,466$ 171,421,985$ Payments to Bondholders Revenue Bonds Existing 77,941,363$ 78,082,598$ 78,224,061$ 77,824,383$ 78,172,982$ 78,065,357$ Projected - 1,064,321 5,781,033 13,524,919 20,131,594 31,056,449 Subtotal: Revenue Bonds 77,941,363$ 79,146,919$ 84,005,094$ 91,349,302$ 98,304,576$ 109,121,807$ SRF Loans Existing 36,191,352$ 37,780,131$ 37,922,005$ 39,374,849$ 39,833,493$ 40,480,817$ Projected - 345,000 3,166,550 6,038,500 12,566,678 19,618,276 Subtotal: SRF Loans 36,191,352$ 38,125,131$ 41,088,555$ 45,413,349$ 52,400,170$ 60,099,093$ Total: Debt Service to Bondholders 114,132,715$ 117,272,050$ 125,093,649$ 136,762,651$ 150,704,746$ 169,220,900$ The Metropolitan St. Louis Sewer District Wastewater System Financing D-23 Operating Reserve Allowance The operating reserve allowance is a recommended balance to accommodate fluctuations in annual revenues and expenditures. The existing revenue bond covenants require the District to maintain a minimum balance equal to 45 days of operation and maintenance expense. For this report, an operating reserve allowance equal to 60 days or about 16.4 percent of annual operating expense is assumed to be maintained, as provided by the current budget. Operating expense, as routinely presented in the District's annual budgets, is equal to the sum of operation and maintenance expense and routine annual capital improvements. The operating reserve for wastewater operations is projected to decrease to about $36.6 million in fiscal year 2024. Financial Analysis A pro forma cash flow statement showing projected wastewater revenues and revenue requirements for the District during the study period is presented in Table 9. System revenues must be at least sufficient to finance the costs of operation and maintenance expense, routine annual capital improvements, and debt service costs on existing and proposed debt, while maintaining adequate operating reserve funds and complying with all revenue bond debt service coverage requirements. Annual revenues can also be used to finance a portion of the major capital improvement program. Table 9 presents annual wastewater revenues and expenditures under the District’s approved or recommended rates for the study period. Line 1 of Table 9 shows projected revenue under the approved or recommended rates for each year of the study period. The Metropolitan St. Louis Sewer District Wastewater System Financing D-24 Table 9. Comparison of Projected Wastewater Revenue with Projected Revenue Requirements Fiscal Year Ending June 30 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Actual Projected Projected Projected Projected Projected Wastewater Revenue 1 User Charge Revenue 392,320,783$ 436,558,237$ 444,443,064$ 460,556,043$ 477,091,823$ 495,258,179$ Other Miscellaneous Revenue 2. Other Operating Revenue (1)7,865,362$ 4,428,400$ 4,806,981$ 5,160,542$ 5,558,069$ 6,004,056$ 3. Connection Fee Revenue 922,979 1,308,000 1,321,080 1,334,291 1,347,634 1,361,110 4.Subtotal: Other Miscellaneous Revenue 8,788,341$ 5,736,400$ 6,128,061$ 6,494,833$ 6,905,702$ 7,365,166$ 5. Interest Income - Operating and Capital 14,438,669 10,345,302 8,689,947 8,866,747 8,865,405 9,576,044 6.Total: Wastewater Revenue 415,547,793$ 452,639,939$ 459,261,072$ 475,917,623$ 492,862,930$ 512,199,389$ Operating Expenses 7. General Fund Operating Expenses 156,514,816$ 169,834,496$ 176,143,995$ 180,155,670$ 186,270,637$ 191,227,068$ 8. Other Operating Expenses 14,070,328 9,839,888 18,161,068 14,401,765 15,023,034 14,718,106 9.Subtotal: Operating Expenses (O&M)170,585,144$ 179,674,385$ 194,305,063$ 194,557,436$ 201,293,671$ 205,945,174$ 10.Net Revenue Available for Debt Service 244,962,649$ 272,965,554$ 264,956,009$ 281,360,187$ 291,569,259$ 306,254,216$ Debt Service (Payments to Sinking Fund) Revenue Bonds (2) 11. Existing 77,962,008$ 78,123,917$ 78,198,040$ 77,923,075$ 78,185,172$ 78,085,875$ 12. Projected - 1,637,904 7,197,283 14,483,402 21,610,090 33,774,908 13.Subtotal: Revenue Bonds 77,962,008$ 79,761,821$ 85,395,323$ 92,406,477$ 99,795,262$ 111,860,782$ SRF Loans 14. Existing 37,673,555$ 38,029,639$ 38,270,893$ 39,541,794$ 40,040,602$ 40,629,964$ 15. Projected - 1,775,150 4,280,650 9,130,714 16,395,602 18,931,239 16.Subtotal: SRF Loans 37,673,555$ 39,804,789$ 42,551,543$ 48,672,508$ 56,436,204$ 59,561,203$ 17.Total: Debt Service 115,635,563$ 119,566,610$ 127,946,866$ 141,078,985$ 156,231,466$ 171,421,985$ Other Revenues and Expenditures 18. Other Non-Operating Revenue (669,379)$ 521,000$ 521,000$ 521,000$ 521,000$ 521,000$ 19. Routine Annual Capital Improvements 3,387,531 6,458,852 6,594,488 6,732,972 6,874,365 7,018,727 20. Cash Financing of Capital Improvements (3) 141,742,242 127,376,038 176,550,000 124,160,000 119,190,000 117,880,000 21. Non-recurring Projects & Studies 5,402,440 9,223,454 8,567,302 8,861,820 8,777,901 9,129,015 22. Commercial Paper & Line of Credit Payments - - - - - - 23.Subtotal: Other Expenditures 150,532,213$ 143,058,345$ 191,711,790$ 139,754,792$ 134,842,266$ 133,506,742$ 24.Net Annual Balance (4)(21,874,507)$ 10,861,599$ (54,181,646)$ 1,047,410$ 1,016,527$ 1,325,489$ 25. Beginning Balance (5)98,441,078$ 76,566,571$ 87,428,170$ 33,246,524$ 34,293,935$ 35,310,462$ 26. Ending Balance (5)76,566,571 87,428,170 33,246,524 34,293,935 35,310,462 36,635,950 Debt Service (Payments to Bondholders) 27. Revenue Bonds (2) 77,941,363$ 79,146,919$ 84,005,094$ 91,349,302$ 98,304,576$ 109,121,807$ 28. SRF Loans 36,191,352 38,125,131 41,088,555 45,413,349 52,400,170 60,099,093 29.Total: Debt Service 114,132,715$ 117,272,050$ 125,093,649$ 136,762,651$ 150,704,746$ 169,220,900$ Debt Service Coverage 30. Revenue Bonds 3.14 3.45 3.15 3.08 2.97 2.81 31. Total Debt 2.15 2.33 2.12 2.06 1.93 1.81 (1) Includes interest earned from the Missouri American Water Loan and City of Arnold. (2) Does not include lower debt service after 2019 refunding. (3) Includes return of interest to capital funds. (4) Net Annual Balance is Net Revenue Available for Debt Service (Line 10) less Debt Service and Other Expenditures (Lines 17 a nd 23) plus Other Non-Operating Revenue (Line 18) (5) Includes funds set aside for a minimum operating reserve equal to 60 days of operating expenses. The Metropolitan St. Louis Sewer District Wastewater System Financing D-25 As indicated on Lines 2 and 3 of Table 9, other operating revenue and connection fee revenue, previously projected in Table 7, are available for the wastewater system. Projected revenue from District-wide connection fees are expended as part of the cash financing of major improvements line item (Line 20), which is the sum of Line 3 and Line 10 of Table 2. Interest income that is available from restricted or reserve funds for operating purposes is shown on Line 5 of Table 9. Interest income is estimated based on a 1.0 percent annual interest rate applied to the average beginning and end of year fund balances. A slightly higher rate of 1.2 percent is assumed for funds held in the revenue bond reserve fund to reflect the ability to invest these funds for a longer term. Total revenue available for wastewater utility operations is shown on Line 6 of Table 9. Total operation and maintenance expense for the wastewater system, is shown on Lines 7 and 8 of Table 9. Line 10 shows the estimated net revenue remaining after deducting total projected operation and maintenance expense (Line 9) from total wastewater revenue (Line 6). This net wastewater revenue is available or pledged for debt service coverage purposes. Debt service requirements on existing and projected revenue bonds and SRF loans are presented on Lines 11 through 17. This debt financing program will provide a mechanism to spread the costs of major capital improvements over a portion of their useful lives and more equitably recover these costs from both current and future users of the improvements. Line 18 of Table 9 shows other non-operating revenue of the wastewater utility, previously shown on Line 9 of Table 7. Line 19 of Table 9 shows the total amount of routine annual improvements which are completely financed by annual revenues. Funds used to finance a portion of the major capital improvement program are reported as a cost on Line 20 of Table 9 and as a source of funds on Line 3 of Table 2. The net annual balance of annual revenues less expenditures is presented on Line 24. Lines 25 and 26 of Table 9 show the projected combined beginning and ending cash balances of the wastewater utility for each year of the study period exclusive of the targeted operating reserve balances. District staff provided information regarding the unencumbered balance of funds available at the beginning of fiscal year 2020. The Metropolitan St. Louis Sewer District Wastewater System Financing D-26 Wastewater Bill Comparison Table 10 presents a comparison of typical wastewater service bills under approved and recommended rates for fiscal years 2021 through 2024 for various billable wastewater volumes and customer types. As indicated in the table, the monthly wastewater bill for the average metered residential customer contributing 6 Ccf of wastewater per month will increase by 1 percent in 2021 with additional increases averaging 3.5 percent in FY 2022 through 2024. T Table 11 presents the results of a rate survey of the 50 largest U.S. cities based on published rates as of October 2019. St. Louis’ rates have risen more quickly than some of the other large cities in this survey, resulting in above average residential charges while the commercial charges are still below average for the representative customers. Table 10. Typical Bill Comparison Fiscal Year Ending June 30 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Actual Current Proposed Proposed Proposed Proposed Wastewater Bills Single Family Residential (Metered) 1. 1 Ccf per month $ 28.23 $ 31.22 $ 31.40 $ 32.48 $ 33.61 $ 34.84 2. 5 Ccf per month $ 45.83 $ 50.70 $ 51.40 $ 53.16 $ 55.01 $ 57.04 3. 6 Ccf per month $ 50.23 $ 55.57 $ 56.40 $ 58.33 $ 60.36 $ 62.59 4. 10 Ccf per month $ 67.83 $ 75.05 $ 76.40 $ 79.01 $ 81.76 $ 84.79 5. 15 Ccf per month $ 89.83 $ 99.40 $ 101.40 $ 104.86 $ 108.51 $ 112.54 6. 20 Ccf per month $ 111.83 $ 123.75 $ 126.40 $ 130.71 $ 135.26 $ 140.29 Multi-Family Residential (Metered) 7. 20 Ccf per month $ 111.83 $ 123.75 $ 126.40 $ 130.71 $ 135.26 $ 140.29 8. 40 Ccf per month $ 199.83 $ 221.15 $ 226.40 $ 234.11 $ 242.26 $ 251.29 9. 60 Ccf per month $ 287.83 $ 318.55 $ 326.40 $ 337.51 $ 349.26 $ 362.29 Non-Residential (Normal Strength Wastewater) 10. 70 Ccf per month $ 334.88 $ 370.39 $ 380.84 $ 393.76 $ 407.47 $ 422.64 11. 100 Ccf per month $ 466.88 $ 516.49 $ 530.84 $ 548.86 $ 567.97 $ 589.14 12. 160 Ccf per month $ 730.88 $ 808.69 $ 830.84 $ 859.06 $ 888.97 $ 922.14 Non-Residential (Excess Strength Wastewater) (1) 13. 70 Ccf per month $ 538.43 $ 579.43 $ 593.27 $ 618.49 $ 639.80 $ 661.54 14. 100 Ccf per month $ 694.64 $ 750.34 $ 771.16 $ 804.56 $ 832.32 $ 860.96 15. 160 Ccf per month $ 982.86 $ 1,067.35 $ 1,099.05 $ 1,145.73 $ 1,185.34 $ 1,226.89 (1) The 70, 100, and 160 Ccf bills assume excess strength of 150, 200, and 250 mg/l, respectively, of suspended solids and BOD. The Metropolitan St. Louis Sewer District Wastewater System Financing D-27 Table 11 - Survey of Typical Monthly Wastewater Bill - 50 Largest US Cities Meter Size 5/8"5/8"3/4"1"2" Gallons 4488 5984 11221 74805 7480500 Ccf 6.0 Rank 8.0 Rank 15.0 Rank 100.0 Rank 10000.0 Rank Population Rank ($)($)($)($)($) Albuquerque 32 NM 13.08 49 16.45 49 28.22 44 174.10 44 17,128.35 43 Arlington 50 TX 34.26 26 41.36 26 66.24 34 378.84 29 35,620.11 29 Atlanta 40 GA 63.06 6 108.08 3217.94 11,551.59 1 156,882.56 1 Austin 14 TX 54.67 9 79.64 6 149.22 5679.80 9 66,960.78 10 Baltimore 21 MD 60.63 7 76.59 7 139.77 6838.22 5 79,950.09 7 Boston 22 MA 37.32 22 59.71 16 111.97 9746.48 7 74,647.91 8 Charlotte 17 NC 34.67 25 44.65 22 79.58 24 519.92 18 49,966.94 17 Chicago 3 IL 53.61 10 61.57 11 89.43 18 427.73 27 39,829.73 26 Cleveland 45 OH 48.63 13 62.72 10 112.05 8711.01 8 70,472.66 9 Colorado Springs 41 CO 30.48 31 35.50 36 53.07 38 305.63 36 27,530.63 37 Columbus 15 OH 30.47 32 39.21 30 69.80 27 441.25 23 47,104.25 21 Dallas 9 TX 28.84 34 36.85 33 66.69 33 316.90 35 30,773.36 35 Denver 26 CO 32.56 27 39.31 29 69.10 29 368.16 31 33,835.68 31 Detroit 18 MI 41.15 16 53.67 17 99.29 13 634.98 11 62,628.72 13 El Paso 19 TX 28.71 35 32.83 39 47.25 40 243.62 41 20,700.73 40 Fort Worth 16 TX 30.14 33 38.02 32 65.90 35 267.80 39 25,728.30 38 Fresno 34 CA 25.75 43 25.75 43 25.75 45 197.30 43 19,730.00 42 Houston 4 TX 47.72 14 59.91 15 102.59 11 621.36 14 60,980.21 14 Indianapolis 12 IN 49.64 12 59.93 14 98.27 14 361.46 32 33,993.88 30 Jacksonville 11 FL 38.11 18 46.06 21 84.12 19 530.88 17 47,969.60 20 Kansas City 37 MO 66.34 4 82.02 5 136.90 71,116.20 4 109,026.20 4 Las Vegas 30 NV 20.50 44 20.50 45 20.50 49 - - Long Beach 36 CA 9.67 51 10.39 51 12.89 51 46.86 48 3,650.46 48 Los Angeles 2 CA 30.66 30 40.88 27 76.65 25 511.00 20 51,100.00 16 Louisville 27 KY 37.48 21 44.37 23 68.46 30 431.02 26 41,444.32 25 Memphis 20 TN 10.17 50 13.57 50 25.44 47 169.58 45 16,958.29 45 Mesa 38 AZ 26.76 37 29.98 42 44.96 41 219.07 42 20,066.33 41 Miami 44 FL 25.82 42 38.48 31 82.79 22 632.86 13 80,795.01 6 Milwaukee 28 WI 14.02 48 16.48 48 25.12 48 132.36 47 12,359.09 47 Minneapolis 48 MN 31.06 28 39.48 28 71.85 26 435.50 24 42,146.40 23 Nashville 25 TN 26.58 38 36.06 35 83.25 21 466.69 22 33,707.66 33 New York City 1 NY 38.04 19 50.72 18 95.10 15 634.00 12 63,400.00 12 Oakland 47 CA 14.84 47 17.38 47 25.55 46 133.62 46 12,667.02 46 Oklahoma City 31 OK 26.27 41 33.02 38 56.64 37 343.40 33 33,743.09 32 Omaha 42 NB 54.68 8 60.88 12 82.58 23 264.24 40 17,099.09 44 Philadelphia 5 PA 26.89 36 33.38 37 57.77 36 337.44 34 32,492.90 34 Phoenix 6 AZ 19.34 46 24.29 44 41.60 42 267.87 38 24,754.53 39 Portland 29 OR 66.48 3 88.64 4 166.20 41,130.40 3 109,080.00 3 Raleigh 43 NC 38.54 17 47.60 20 84.08 20 478.64 21 45,377.95 22 Sacramento 35 CA 19.85 45 19.85 46 19.85 50 - - San Antonio 7 TX 26.38 39 36.44 34 67.96 31 434.04 25 41,626.31 24 San Diego 5 CA 36.75 23 43.95 24 69.14 28 392.05 28 37,687.33 27 San Fransisco 13 CA 85.47 2 113.23 2210.39 3831.19 6 82,902.19 5 San Jose 10 CA 63.48 5 73.07 8 92.26 16 545.58 16 48,185.67 19 Seattle 23 WA 86.88 1 115.84 1217.20 21,448.00 2 144,800.00 2 Tucson 33 CZ 34.77 24 42.03 25 67.44 32 375.90 30 36,303.00 28 Tulsa 46 OK 47.53 15 60.83 13 107.38 10 678.17 10 66,524.21 11 Virginia Beach 39 VA 30.81 29 30.81 41 30.81 43 39.32 117.98 Washington 24 DC 37.93 20 49.93 19 92.01 17 602.28 15 60,003.77 15 Wichita 49 KS 26.34 40 31.95 40 51.59 39 290.03 37 28,074.89 36 St. Louis MO 50.23 11 65.31 9 99.40 12 516.49 19 48,729.49 18 Median 34.26 41.36 71.85 431.02 39,829.73 Average 37.53 47.63 81.57 474.92 46,024.66 (a) Las Vegas and Virginia Beach Commercial Rates are based on the type of business and number of fixtures. Each customer will have a different rate. (b) Oklahoma City Rates are based on a meter multiplier. This must be combined with the base rate in order to bet an exact bill . (c ) Sacramento's commerical sewer rate is charged based on a factor associated with square footage, not consumption as in our analysis. (d) Half of Washington's combined Water and Sewer Metering Fee is included. (e) Median Household Income estimate for each City (does not include any outside city areas served) from the United States Cens us Bureau, American Factfinder "2013-2017 American Community Survey 5-Year Estimates". Residential Non-Residential Small Medium Large Commercial Industrial The Metropolitan St. Louis Sewer District Bond Covenant Compliance D-28 Bond Covenant Compliance Rate Covenants The majority of all District wastewater and stormwater revenues are deposited into and accounted for by separate wastewater and stormwater operating funds. Portions of these revenues are transferred to the General Fund, as required, to pay each utility’s portion of operation and maintenance expense and routine capital expenditures. Section 6.1 of the Master Bond Ordinance requires the District to operate the System on a revenue producing basis and at all times to prescribe, fix, maintain, and collect rates, fees, and other charges for the services, facilities, and commodities furnished by the System fully sufficient at all times to pay annual operation and maintenance expense, provide a reasonable operating reserve, produce net revenues in each fiscal year equal to at least 1.25 times the Debt Service Requirement on all Senior Bonds currently outstanding and 1.15 times the Debt Service Requirement on all Bonds then outstanding and accumulate sufficient funds to meet the costs of major renewals, replacements, repairs, additions, betterments, and improvements to the System to keep it in good working condition. In addition, Section 3.020(16) of the Charter requires the District to establish fair and reasonable schedules of charges and Section 7.130 of the Charter requires a balanced budget. Based on a detailed analysis of the System’s revenue and revenue requirements, as presented in the Wastewater System Financing section of this report, the District will continue to meet the rate covenant requirements after issuance of the Series 2019B Bonds. In addition, the existing wastewater rates in effect for fiscal year 2020 and the rates recommended for fiscal years 2021, 2022, 2023, and 2024 are projected to provide sufficient user charge revenues, together with other available revenue sources, to meet all projected revenue requirements related to the proposed CIRP and remain in compliance with the rate covenants throughout the study period. Reasonable Charges Section 6.7 of the Master Bond Ordinance requires that: “None of the facilities or services afforded by the System will be furnished to any user without a reasonable charge being made therefor.” Current and future rates for the System are based on detailed cost of service analyses to provide reasonable assurance that each customer class pays its proportionate share of the costs required to provide utility service. All users of the System are required to pay their Capitalized terms are defined in the Bond Ordinance. The Metropolitan St. Louis Sewer District Bond Covenant Compliance D-29 proportionate share of operating and maintenance expenses in compliance with the Master Bond Ordinance requirement and Federal user charge requirements. No free service is being provided by the District. Adequate Maintenance Section 6.2 of the Bond Ordinance requires the District to operate the System in an efficient and economical manner and maintain the System at all times in good repair and sound operating condition. The System has historically been adequately maintained and found to be in good working order. Although costs are considered reasonable and result in rates comparable to similar sized utilities, the District is continuously looking at ways to reduce costs and keep utility rates as low as possible. Additional Bonds Tests In order to issue additional revenue bonds on parity with prior Senior Bonds, the District must have sufficient revenues to meet either a preceding year or ensuing year additional bonds coverage test. Section 5.3 of the Master Bond Ordinance requires historical Net Operating Revenues and Investment Earnings (“net revenues”) for a period of 12 consecutive months of the most recent 18 consecutive months prior to the issuance of the proposed Senior Bonds to be at least equal to (i) 1.25 times the Maximum Annual Debt Service Requirement on all Senior Bonds which will be Outstanding immediately after the issuance of the proposed Senior Bonds, and (ii) 1.15 times the Maximum Annual Debt Service Requirement on all Bonds which will be Outstanding immediately after the issuance of the proposed Senior Bonds. For the ensuing year additional bonds test, the Master Bond Ordinance requires the forecasted net revenues for each fiscal year in the Forecast Period (the three consecutive fiscal years commencing with the fiscal year in which any proposed Senior Bonds are to be issued) to be at least (i) 1.25 times the Maximum Annual Debt Service Requirement on all Senior Bonds that will be Outstanding immediately after the issuance of the proposed Senior Bonds, and (ii) 1.15 times the Maximum Annual Debt Service Requirement on all Bonds which will be Outstanding immediately after the issuance of the proposed Senior Bonds. Revenue adjustments are allowed for the preceding year test for any rate increase enacted prior to the delivery date of the proposed Senior Bonds and not fully reflected in the historical Net Operating Revenues actually received during the 12-month period. A similar adjustment is allowed for the ensuing year test if the rates were actually adopted by ordinance prior to issuance of the bonds. Without a future rate adjustment provision for the ensuing year test, the normal inflationary increases in operation and maintenance expenses could outpace the revenues obtained from a relatively stable customer base such that future net revenues and ensuing year debt service coverage may significantly decrease towards the end of the Forecast The Metropolitan St. Louis Sewer District Bond Covenant Compliance D-30 Period. This may require the District to enact multiple year rate increases prior to issuance of the bonds, set rates at a current year debt service coverage level of 1.50 times the Debt Service Requirement or higher to account for the expected coverage deterioration, or only rely on the historic year test to issue additional Senior Bonds. The Master Bond Ordinance also specifies additional bond tests for the issuance of any Subordinate Bonds. These tests are identical to the additional Senior Bond tests. The District has never defaulted on any District-wide or subdistrict revenue bond payment and is expected to be able to issue additional revenue bonds throughout the study period. Table 12 presents the results of the rate covenant and additional bond coverage tests during the study period and projects revenue based on the recommended rate increases through 2024. As indicated by Line 4 of Table 12, the indicated annual rate covenant coverage ranges from 2.81 times annual debt service to 3.45 times annual senior lien debt service, exceeding the 1.25 minimum requirement. Likewise, the additional bond coverage levels for Senior Bonds, as shown on Lines 11 and 16 of Table 12, exceed their 1.25 minimum requirements throughout the study period. Coverage indicated for total debt is also above the 1.15 minimum requirement throughout the study period, as shown on Lines 12 and 17 of Table 12. Lines 19 and 20 present the ensuing year additional bonds test as calculated for the Series 2019B Bonds and does not consider the potential impact of future rate increases or bond issues. The District is in compliance with the ensuing year additional bonds test as the senior lien coverage exceed 1.25 times and total debt coverage exceed 1.15 times in each of the next three years. The Metropolitan St. Louis Sewer District Bond Covenant Compliance D-31 a Table 12. Debt Service Coverage under Projected Revenue Levels Fiscal Year Ending June 30 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Actual Budget Projected Projected Projected Projected Rate Covenant Coverage 1. Projected Net Revenue (1)244,962,649$ 272,965,554$ 264,956,009$ 281,360,187$ 291,569,259$ 306,254,216$ Projected Debt Service to Bondholders (2) 2. Senior Lien Bonds 77,941,363$ 79,146,919$ 84,005,094$ 91,349,302$ 98,304,576$ 109,121,807$ 3. Total Debt (3)114,132,715$ 117,272,050$ 125,093,649$ 136,762,651$ 150,704,746$ 169,220,900 Debt Service Coverage Levels 4. Senior Lien Bonds (4)3.14 3.45 3.15 3.08 2.97 2.81 5. Total Debt (5)2.15 2.33 2.12 2.06 1.93 1.81 Additional Parity Test Coverage Projected Maximum Annual Debt Service (6) 6. Senior Lien Bonds 86,842,258$ 90,293,758$ 98,787,758$ 104,546,508$ 113,409,008$ 129,727,758$ 7. Total Debt 118,682,480 122,123,730 133,478,420 141,461,063 156,508,313 180,485,808 Preceding Year Test 8. Net Revenue for Prior Fiscal Year 215,631,803$ 244,962,649$ 272,965,554$ 264,956,009$ 281,360,187$ 291,569,259$ 9. Net Revenue Adjustment (7)22,964,787 25,721,078 6,005,242 9,008,504 9,706,926 10,496,493 10. Adjusted Net Revenue 238,596,590$ 270,683,727$ 278,970,796$ 273,964,514$ 291,067,114$ 302,065,752$ Preceding Year Debt Service Coverage Levels 11. Senior Lien Bonds (8)2.75 3.00 2.82 2.62 2.57 2.33 12. Total Debt (9)2.01 2.22 2.09 1.94 1.86 1.67 Ensuing Year Test 13. Net Revenue for Ensuing Fiscal Year 272,965,554$ 264,956,009$ 281,360,187$ 291,569,259$ 306,254,216$ 338,974,527$ 14. Net Revenue Adjustment (10)- - - - - - 15. Adjusted Net Revenue 272,965,554$ 264,956,009$ 281,360,187$ 291,569,259$ 306,254,216$ 338,974,527$ Ensuing Year Debt Service Coverage Levels 16. Senior Lien Bonds (11)3.14 2.93 2.85 2.79 2.70 2.61 17. Total Debt (12)2.30 2.17 2.11 2.06 1.96 1.88 Ensuing Year Additional Bonds Test - Current Issue 18. Net Revenue for Ensuing Year (13)184,450,583$ 223,501,140$ 259,457,617$ 19. Senior Lien Bonds (13)2.04 2.48 2.87 20. Total Debt (13)1.51 1.83 2.12 (1) Net revenue as shown on Line 10 of Table 9. Includes the impact of approved rate increases each year. (2) Projected actual payments to of principal and interest from the sinking fund to bondholders. (3) Includes senior revenue bonds and subordinate debt obligations. (4) Line 1 / Line 2. The Bond Ordinance requires net revenue to equal or exceed 1.25 times actual senior lien debt service. (5) Line 1 / Line 3. The Bond Ordinance requires net revenue to equal or exceed 1.15 times actual total debt service. (6) Maximum future debt service for all series of revenue bonds issued in previous years or during the current fiscal year. (7) Adjustment for revenues increases to be fully operative July 1 of the current fiscal year as allowed by the Bond Ordinance. (8) Line 10 / Line 6. The Bond Ordinance requires adjusted net revenue for the preceding fiscal year to equal or exceed 1.25 times the maximum annual debt service on all then outstanding senior lien obligations. (9) Line 10 / Line 7. The Bond Ordinance requires adjusted net revenue for the preceding fiscal year to equal or exceed 1.15 times the maximum annual debt service on all then outstanding debt obligations. (10) Adjustment for revenues increases not permitted for ensuing year coverage test unless already adopted by the Board. (11) Line 15 / Line 6. The Bond Ordinance requires net revenue for the ensuing three fiscal years to equal or exceed 1.25 times the maximum annual debt service on all then outstanding senior lien revenue bonds. (12) Line 15 / Line 7. The Bond Ordinance requires net revenue for the ensuing three fiscal years to equal or exceed 1.15 times the maximum annual debt service on all then outstanding bonds. (13) The test for the currently proposed issue considers the next three fiscal years, with adjustments for future rate increases adopted by the Board. The Metropolitan St. Louis Sewer District Principal Assumptions D-32 Principal Assumptions In conducting our analyses and in forming an opinion of future operations summarized in this report, Raftelis has made certain assumptions with respect to conditions, events, and circumstances that may occur in the future. The methodology utilized by Raftelis in performing the analysis follows generally accepted practices for such projections. Such assumptions and methodologies are summarized in this report and are reasonable and appropriate for the purpose for which they are used. While we believe the assumptions are reasonable and the projection methodology valid, actual results may differ materially from those projected, as influenced by the conditions, events, and circumstances that actually occur. The principal assumptions used in the forecast of future operations are as follows: 1. In preparation of this report, Raftelis has relied on certain historical, financial, and statistical data supplied by District staff. While such data is considered reliable, Raftelis has not independently verified the detailed accuracy of such data. 2. The District’s estimates of content, scheduling, and cost of the capital improvement program present a reasonable projection of the future construction program and complies with the initial terms of the Consent Decree. 3. Billed wastewater volume will continue to decrease but will level off towards the end of the study period. 4. Debt service for the revenue bonds proposed to be issued, including the Series 2019B Bonds, will be approximately as estimated as of the date of this report 5. The District will maintain a minimum operating reserve balance at all times that is at least equal to 60 days of operating expenditures. 6. There will be no material changes in federal and state laws or regulations that would adversely impact the District’s ability to secure tax-exempt financing for its System, place more stringent limitations on wastewater effluent discharges, materially increase the cost of constructing or operating the wastewater system, or otherwise adversely impact operations of the System. 7. The general economy that impacts System costs and users’ capabilities to pay wastewater service charges will remain relatively stable at current conditions. APPENDIX E Forms of Opinions of Co-Bond Counsel [THIS PAGE INTENTIONALLY LEFT BLANK] E-1 FORM OF OPINION OF CO-BOND COUNSEL (SERIES 2019B BONDS) Gilmore & Bell, P.C., St. Louis, Missouri, and White Coleman & Associates, LLC, St. Louis, Missouri, Co-Bond Counsel, propose to issue their approving opinions upon the issuance of the Series 2019B Bonds in substantially the following form: The Metropolitan St. Louis Sewer District St. Louis, Missouri Citigroup Global Markets Inc., as representative of the Underwriters Chicago, Illinois Re: $52,130,000 The Metropolitan St. Louis Sewer District, Wastewater System Revenue Bonds, Series 2019B Ladies and Gentlemen: We have acted as co-bond counsel in connection with the issuance by The Metropolitan St. Louis Sewer District (the “District”), of the above-captioned bonds (the “Series 2019B Bonds”). In this capacity, we have examined the District’s Charter, the law and the certified proceedings, certifications and other documents that we deem necessary to render this opinion. The Series 2019B Bonds are issued pursuant to Master Bond Ordinance No. 11713 adopted by the Board of Trustees of the District on April 22, 2004, as supplemented by Ordinance No. 15311 adopted by the Board of Trustees of the District on November 14, 2019 (collectively, the “Bond Ordinance”). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Bond Ordinance. Regarding questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based on and subject to the foregoing, we are of the opinion, under existing law, as follows: 1. The Series 2019B Bonds have been duly authorized, executed and delivered by the District and are valid and legally binding limited obligations of the District, payable solely from the Pledged Revenues of the District’s sanitary sewer system, after providing for the costs of operation and maintenance thereof. The Series 2019B Bonds do not constitute general obligations of the District nor do they constitute an indebtedness of the District within the meaning of any constitutional, statutory or charter provision, limitation or restriction, and the taxing power of the District is not pledged to the payment of the Series 2019B Bonds. 2. The Bond Ordinance has been duly adopted by the Board of Trustees of the District and constitutes a valid and legally binding obligation of the District enforceable against the District. The Bond Ordinance creates a valid lien on the revenues and other funds pledged by the Bond Ordinance for E-2 the security of the Series 2019B Bonds on a parity with any Senior Bonds issued or to be issued as provided under the Bond Ordinance. 3. The interest on the Series 2019B Bonds (i) is excludable from gross income for federal income tax purposes, (ii) is exempt from income taxation by the State of Missouri, and (iii) is not an item of tax preference for purposes of computing the federal alternative minimum tax. The opinions set forth in this paragraph are subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the “Code”) that must be satisfied subsequent to the issuance of the Series 2019B Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The District has covenanted to comply with all of these requirements. Failure to comply with certain of these requirements may cause the interest on the Series 2019B Bonds to be included in gross income for federal and State of Missouri income tax purposes retroactive to the date of issuance of the Series 2019B Bonds. The Series 2019B Bonds have not been designated as “qualified tax-exempt obligations” for purposes of Section 265(b) of the Code. We express no opinion regarding the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Series 2019B Bonds (except to the extent, if any, stated in the Official Statement). Further, we express no opinion regarding the perfection or priority of the lien on revenues or other funds pledged under the Bond Ordinance or tax consequences arising with respect to the Series 2019B Bonds other than as expressly set forth in this opinion. The rights of the owners of the Series 2019B Bonds and the enforceability of the Series 2019B Bonds and the Bond Ordinance may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally and by equitable principles, whether considered at law or in equity, and their enforcement may be subject to the exercise of judicial discretion in appropriate cases. This opinion is given as of its date, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law that may occur after the date of this opinion. Very truly yours, E-3 FORM OF OPINION OF CO-BOND COUNSEL (SERIES 2019C BONDS) Gilmore & Bell, P.C., St. Louis, Missouri, and White Coleman & Associates, LLC, St. Louis, Missouri, Co-Bond Counsel, propose to issue their approving opinions upon the issuance of the Series 2019C Bonds in substantially the following form: The Metropolitan St. Louis Sewer District St. Louis, Missouri Citigroup Global Markets Inc., as representative of the Underwriters Chicago, Illinois Re: $276,260,000 The Metropolitan St. Louis Sewer District, Taxable Wastewater System Refunding Revenue Bonds, Series 2019C Ladies and Gentlemen: We have acted as co-bond counsel in connection with the issuance by The Metropolitan St. Louis Sewer District (the “District”), of the above-captioned bonds (the “Series 2019C Bonds”). In this capacity, we have examined the District’s Charter, the law and the certified proceedings, certifications and other documents that we deem necessary to render this opinion. The Series 2019C Bonds are issued pursuant to Master Bond Ordinance No. 11713 adopted by the Board of Trustees of the District on April 22, 2004, as supplemented by Ordinance No. 15312 adopted by the Board of Trustees of the District on November 14, 2019 (collectively, the “Bond Ordinance”). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Bond Ordinance. Regarding questions of fact material to our opinion, we have relied upon the certified proceedings and other certifications of public officials furnished to us without undertaking to verify the same by independent investigation. Based on and subject to the foregoing, we are of the opinion, under existing law, as follows: 1. The Series 2019C Bonds have been duly authorized, executed and delivered by the District and are valid and legally binding limited obligations of the District, payable solely from the Pledged Revenues of the District’s sanitary sewer system, after providing for the costs of operation and maintenance thereof. The Series 2019C Bonds do not constitute general obligations of the District nor do they constitute an indebtedness of the District within the meaning of any constitutional, statutory or charter provision, limitation or restriction, and the taxing power of the District is not pledged to the payment of the Series 2019C Bonds. 2. The Bond Ordinance has been duly adopted by the Board of Trustees of the District and constitutes a valid and legally binding obligation of the District enforceable against the District. The Bond Ordinance creates a valid lien on the revenues and other funds pledged by the Bond Ordinance for E-4 the security of the Series 2019C Bonds on a parity with any Senior Bonds issued or to be issued as provided under the Bond Ordinance. We express no opinion regarding tax consequences arising with respect to the Series 2019C Bonds. We express no opinion regarding the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Series 2019C Bonds (except to the extent, if any, stated in the Official Statement). Further, we express no opinion regarding the perfection or priority of the lien on revenues or other funds pledged under the Bond Ordinance. The rights of the owners of the Series 2019C Bonds and the enforceability of the Series 2019C Bonds and the Bond Ordinance may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights generally and by equitable principles, whether considered at law or in equity, and their enforcement may be subject to the exercise of judicial discretion in appropriate cases. This opinion is given as of its date, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may come to our attention or any changes in law that may occur after the date of this opinion. Very truly yours, THE METROPOLITAN ST. LOUIS SEWER DISTRICT • WASTEWATER SySTEM REvENUE BONDS, SERIES 2019B AND TAxABLE WASTEWATER SySTEM REfUNDINg REvENUE BONDS, SERIES 2019C!( !( !( #* #* #* #* #* #* #* §¨¦44 §¨¦55 §¨¦64 §¨¦70 §¨¦270 §¨¦170 §¨¦255 §¨¦44 §¨¦70 §¨¦64 §¨¦270 §¨¦55 C LAYTON BALLASPAGE NEW HALLS FERRYWI LDHORS ECREEKDELMAR LUCAS N HUNTS T ALBANS LAD U E LACLEDE STATIONU S HIGHWAY6 6 E A R T H CITYWOODS MILLHANLEYPA G E HANLEYFO R E S T P A R K OLIVE MO109GRAVO I SMO364MO100 T EL E G RAPHMO30MO141 WATSON S T C H A R L E S R O C K LEM A Y F E R R Y TESSONFER R YLEWISNCLARKCLARKSONCHIPPEWA R IV ERVIEWNATURAL B RID G E MAN C H E S T E R MANCHESTER MO370 MO3 4 0 £¤67 £¤67 MINTERT SULPHUR GRAND GLAIZE Lemay Fenton Coldwater Grand Glaize Lower Meramec Bissell Point Missouri River LEMAYLEMAY MISSOURI RIVERMISSOURI RIVER BISSELL POINTBISSELL POINT COLDWATERCOLDWATER LOWER MERAMECLOWER MERAMEC ¶ SERVICE AREAS ST. CHARLES COUNTY ST. CLAIR COUNTY MADISON COUNTY LEGEND #*TREATMENT PLANTS !(MAINTENANCE YARDS ST. LOUIS COUNTY MSD BOUNDARY BISSELL POINT COLDWATER LEMAY MISSOURI RIVER LOWER MERAMEC The Metropolitan St. Louis Sewer District JEFFERSON COUNTYFRANKLIN COUNTYMiles of Pipe & Force Mains: (as of 06/30/2019) Sanitary Sewers = 4,700 Miles Storm Sewers = 3,000 Miles Combined Sewers = 1,700 Miles Total = 9,400 Miles