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Exhibit MSD 10 - 2016 Comprehensive Annual Financial Report (CAFR)COMPREHENSIVE ANNUALFINANCIAL REPORTTHE METROPOLITAN ST. LOUIS SEWER DISTRICTST. LOUIS, MISSOURI FISCAL YEARENDINGJUNE 30, 2016 Small Grants Rainscaping Program: Rain Garden at Ranken Technical College THE METROPOLITAN ST. LOUIS SEWER DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEARS ENDING JUNE 30, 2016 AND 2015 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 - xiv Organizational Chart .................................................................................................. xv Certificate Of Achievement For Excellence In Financial Reporting .......................................................................................... xvi Part II - Financial Section: Independent Auditors’ Report .......................................................................... 1 - 3 Management’s Discussion And Analysis - Required Supplementary Information ........................................................................ 4 - 17 Basic Financial Statements Statements Of Net Position............................................................................ 18 - 19 Statements Of Revenues, Expenses And Changes In Net Position ................... 20 Statements Of Cash Flows ............................................................................. 21 - 22 Notes To Financial Statements ...................................................................... 23 - 83 Required Supplementary Information - Schedule Of Changes In Net Pension Liability And Related Ratios, Schedule Of Employer Contributions - Employees’ Pension Plan And Other Post-Employment Benefit Plan Schedule of Funding Progress ....... 84 - 85 Part III – Statistical Section: Net Position By Component .................................................................................. 86 Changes In Net Position ........................................................................................ 87 Operating Revenues By Source ............................................................................. 88 Operating Expenses ............................................................................................... 89 Non-Operating Revenues And Expenses .............................................................. 90 User Charge Rates ................................................................................................. 91 User Charge Revenues .......................................................................................... 92 Sewer User Charges (Composite-Annual) ............................................................ 93 Number Of Customers By Type ............................................................................ 94 Ten Largest Customers ......................................................................................... 95 Ratios Of Outstanding Debt By Type ................................................................... 96 Computation Of Overlapping Debt ....................................................................... 97 Pledged Revenue Coverage ................................................................................... 98 Demographic And Economic Statistics ................................................................. 99 Principal Employers (St. Louis Metropolitan Area) .......................................... 100 Employment Level ............................................................................................... 101 Average Flow ........................................................................................................ 102 Operating And Capital Indicators ...................................................................... 103 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 17, 2016 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, 2016, 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, lists of the District’s Board of Trustees, Rate Commission Chair, members of the Civil Service Commission, management staff, and an organization chart as of June 30, 2016. 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 525 square miles including all 62 square miles of the City of St. Louis and 463 square miles of St. Louis County. The current population served by the District is approximately 1.3 million. 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. No more than two trustees from each area can be of the same political affiliation. 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 2016 the primary source of funding for the operation and maintenance of MSD’s wastewater system was a user charge averaging $488.64 per year or $40.72 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. In fiscal year 2016, 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. 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 sub-districts, general obligation bonds, revenue bonds, or special assessment bonds. Major Initiatives Affecting The Financial Resources Of The District In June 2007 the District was sued by the Department of Justice on behalf of the United States Environmental Protection Agency (“EPA”) and the Missouri Department of Natural Resources (“DNR”) for various alleged violations of the Clean Water Act. The Missouri Coalition for the Environment joined the suit as an intervener in August 2007. After a lengthy mediation, a Consent Decree (“CD”) was entered by the Federal Court on April 27, 2012. This entry resolved all alleged violations. Compliance with the CD requires the District to implement a multi-decade, multi-billion dollar capital improvement program and rehabilitate significant portions of the existing wastewater sewer system. This effort will continue to be funded by a combination of rate increases and issuance of additional debt based on the completion of milestones defined in the CD. The Board of Trustees The Metropolitan St. Louis Sewer District v Integral to helping MSD’s rate payers understand the Consent Decree is MSD’s initiation of Project Clear. MSD Project Clear is a long-term effort by MSD, undertaken as part of the Consent Decree agreement with the U.S. Environmental Protection Agency and the Missouri Coalition for the Environment. Project Clear’s aims are to:  Improve water quality for everyone;  Solve problems for some of our customers created by the very nature and design of St. Louis’ wastewater system; and  Provide clear, up-to-date information to the public about Consent Decree activities. MSD Project Clear focuses on three categories of work: Get the rain out; Repair and maintain; and Build system improvements. Get the rain out focuses on preventing excess stormwater from entering the sewer system through a variety of project types, including downspout disconnections, and rainscaping. Repair and maintain continues the work MSD has done to repair, maintain, and renew the existing sewer system, on a faster timeline. Build system improvements involves new construction of wastewater management structures, including deep underground tunnels and above-ground storage tanks. In December 2015, a prolonged period of rainfall occurred from the early morning hours of December 26th to the evening of December 28th. The St. Louis area received a range of 6 to 12 inches of precipitation, with an average of 9 inches of rain falling over the three days. This rainfall impacted area rivers, causing severe flooding throughout the region. The Meramec River reached record flood levels at 44.1’ - eclipsing the level reached during the Great Flood of 1993 - causing flooding and damage at three MSD treatment plants. MSD crews and contractors worked around the clock to bring the Grand Glaize and Fenton Wastewater Treatment Plants back online as soon as possible and to repair damage to the Missouri River Wastewater Treatment Plant. The Board of Trustees The Metropolitan St. Louis Sewer District vi In addition to the damage sustained at the three treatment plants, the District received approximately 3,000 calls for service during the rain event and subsequent flooding. MSD crews responded accordingly. MSD saw 1,382 basement backups due to overcharged mains, meaning that during the rain event, more water entered the system than it could handle. MSD also verified 263 basement backups due to blocked mains, meaning that flood debris prevented water from flowing through the mains. An additional 350 calls were related to street flooding, to which MSD crews also responded. About 1,000 service calls were overland flooding and stormwater. Overland flooding is unrelated to the operations of the sewer system. To date, MSD has sustained an estimated $25 million dollars in overall expenses and damages due to the rain and flood event. Insurance and disaster assistance from the Federal Emergency Management Agency (“FEMA”) and other governmental agencies are expected to cover the majority of these losses. However, it is not yet possible to determine exact numbers as MSD is in the process of submitting claims to FEMA and its insurance carrier. The District’s Board of Trustees implemented an impervious based stormwater rate on March 1, 2008, replacing its prior funding mechanism of property taxes and user fees. On July 9, 2010, a circuit court of St. Louis County found this impervious rate to be unconstitutional under Missouri law. In response to this ruling, the Board suspended the impervious based stormwater rate and reinstituted the District’s stormwater property taxes and user fees, previously rolled back on a voluntary basis, as part of the stormwater rate plan. The District lost both of its subsequent appeals to the Appellate and Missouri Supreme Court negating the culmination of a 20-year effort to adequately fund much needed stormwater services for District rate payers. The impact of this court decision has resulted in a dramatic reduction in stormwater services being provided across the District with many customers receiving little or no stormwater services until an alternative funding source is identified. The District submitted a rate change proposal to the MSD Rate Commission on February 26, 2015. The proposal recommended an increase in MSD’s wastewater rates in order to adequately fund the work required by the Consent Decree. The proposal also recommended the establishment of a new District-wide tax structure to replace the multi-layered taxes now assessed on the real estate value of our customers’ property. These taxes have traditionally been used to fund stormwater services, including operations, maintenance, very limited capital projects, and regulatory compliance. The Rate Commission’s recommendation to the District’s proposal was received by the Board on August 5, 2015. On October 8, 2015, the Rate Commission’s recommendation was adopted by the Board of Trustees. The Board of Trustees The Metropolitan St. Louis Sewer District vii The Rate Commission was established in the District’s Plan by amendment in 2000. Beginning in 2002, the District began submitting rate increase proposals to the MSD Rate Commission to fund its operations and multi-decade capital infrastructure improvement program. The District submits rate increase proposals to the Rate Commission as needed in accordance with the Plan. Since February 2004, the voters of St. Louis have authorized the District to issue a total of $2.6 billion in wastewater revenue bonds. As of June 30, 2016, the District has issued $1.4 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. On April 5, 2016, MSD presented two initiatives to voters that reside within MSD’s service area. Proposition Y: Wastewater Bond Authorization Per an agreement with the U.S. Environmental Protection Agency and the Missouri Coalition for the Environment, MSD must implement $1.5 billion in wastewater projects from July 1, 2016 through June 30, 2020. Similar to what MSD has done in the past (2004, 2008, and 2012), an option for financing wastewater projects was presented to voters on April 5, 2016, versus paying for the projects strictly through increased rates. Seventy six percent of voters in MSD’s service area approved Proposition Y and the issuance of $900 million in bonds. The bond financing – which is to be used exclusively for projects associated with the agreement – will help lessen the steepness of rate increases over the next few years. For example, with the approval of Proposition Y, the average single family home’s monthly MSD bill will eventually increase from $40.72 per month on July 1, 2015, to $60.44 per month on July 1, 2019. Without Proposition Y, that same bill would have increased to $95.13 per month on July 1, 2019. Proposition S: Stormwater Funding & Service Equalization Through the same April 5, 2016, election, 62% of voters in MSD’s service area also approved Proposition S. The approval of Proposition S puts all MSD customers under the same property tax rates to pay for stormwater service. In turn, all MSD customers will receive the same level of stormwater service. This process will occur gradually throughout MSD’s fiscal year 2017 (July 1, 2016 through June 30, 2017). Prior to July 1, 2016, MSD’s stormwater services were paid for through a variety of property taxes and a flat stormwater fee on each month's MSD bill. The amount of property taxes paid by an individual customer – and the stormwater service received – The Board of Trustees The Metropolitan St. Louis Sewer District viii was dependent on where a customer lived. Thus, not all customers paid the same rates and, not all customers received the same level of stormwater service. Proposition S allows MSD to rollback and eliminate several existing taxes; eliminate the stormwater fee; and, in lieu of these funding mechanisms, institute or leave in place two taxing districts that cover MSD’s entire service area. The overriding benefit of Proposition S is that customers will be treated equally under the new system. This means that all customers are subject to the same tax rates and all customers receive the same level of stormwater services. One tax structure for everyone means some customers will receive a reduction in what they pay annually to MSD; some customers will essentially pay the same annually to MSD; and other customers will see an increase in what they pay to MSD. With the approval of Proposition S and the implementation of a new funding structure for stormwater services, MSD will have “fund balances” left over from the former taxing and fee system. These fund balances will allow for a finite and limited four-year stormwater capital program of $67 million, starting in fiscal year 2017 (July 1, 2016 through June 30, 2017). However, this limited and set amount of money barely begins to address the overall need for stormwater projects throughout MSD’s service area. The development of a funding solution for longer term stormwater projects began in 2016. Any proposed solution is subject to future review by the Rate Commission, approval by the Board of Trustees, and a vote of MSD customers. The District completed an extensive upgrade of its billing and collection system in fiscal year 2016. The updated system resulted in more efficient processes and the ability to continue to expand customer outreach efforts. Full implementation of the system occurred on September 1, 2015. In 2013, MSD completed a Disparity Study to identify any disparities in the District’s expenditure of public funds when compared to the availability of minority and women owned firms. The study also examined the number of minorities and women working on MSD projects compared to the racial and gender composition of workers available to work on MSD projects. Procurement and contractual changes based on the study’s findings were put into place in August 2013. The Disparity Study also made recommendations for other activities the District should consider as part of a successful Diversity Program. The Board of Trustees The Metropolitan St. Louis Sewer District ix To help implement some of the recommendations, MSD developed a Community Benefits Agreement (“CBA”). A CBA is a formal agreement between MSD and community organizations that establishes a framework for addressing issues in workforce training, business development, and other areas that often act as obstacles in developing a diverse labor pool and contracting community. (In short, it’s one thing to have inclusion goals, but it’s another to have a program that helps develop the capacity to meet those goals.) The CBA will support the development of initiatives that address these issues, both in terms of workforce and business ownership. To our knowledge, the CBA is the only one of its kind in the St. Louis region. Operations The Executive Director and his staff administer the operation and maintenance of the District’s collection and treatment systems. The District’s sanitary, stormwater, and combined sewer collection system includes more than 9,700 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 335.2 million gallons per day (“MGD”) in fiscal 2016 compared to 327.5 MGD in fiscal 2015. The design capacity and average flow, by watershed, in MGD was as follows in fiscal 2016: MAJOR WATERSHED LEVEL OF TREATMENT NUMBER OF FACILITIES DESIGN CAPACITY AVERAGE FLOW FISCAL 2016 Mississippi River Secondary Two 417.00 249.3 Missouri River Secondary Two 78.00 53.2 Meramec River Secondary Three 42.75 32.7 Total Seven 537.75 335.2 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 sanitary and stormwater sewers by individuals, businesses, and municipalities in the community. The Board of Trustees The Metropolitan St. Louis Sewer District x 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 4.9 percent in June 2016 and lower than the national unemployment rate of 5.1 percent for the same time period. MSD has its own internal barometers for measuring economic development within the District. These are listed below for fiscal 2016 and 2015: 2016 2015 Sewer Plan Reviews: Number of Plans Approved 613 529 Number of Miles of Sewers 38 22 Sewer Construction Permits: Number of Permits Issued 4,546 3,447 Number of Miles of Sewers 30 33 Customer Connections: Number of Connection Permits Issued 2,165 2,017 Connection Fee Revenue (in millions) $1.7 $1.8 Value of Sewers Dedicated to MSD by Developers (in millions)$11.3 $12.3 Over the years, the St. Louis economy has undergone a transformation from reliance on traditional manufacturing industries to those industries based on advanced technology and services. The St. Louis area is a center for health care, biotechnology, banking, finance, transportation, tourism, and education and has a strong and diverse manufacturing economy. The area has an abundance of energy, water, and sewerage facilities and can sustain future economic growth. The Board of Trustees The Metropolitan St. Louis Sewer District xi Financial Information Proprietary Operations. The current financial condition of MSD remains stable. The District realized a net operating income of $46.8 million in fiscal 2016 compared to a net operating income of $33.9 million the prior year. The increase is explained by an increase in sewer service revenue (as a result of rate increases) and insurance recoveries due to the December 2015 rain event offset by an increase in operating expenses (primarily water backup and other costs related to the flooding in December 2015 and depreciation). A more in-depth analysis of the District’s financial position and the magnitude of the capital improvement and replacement program (“CIRP”) is provided in the Management’s Discussion and Analysis section that appears later in this report. Budgetary Controls. The District’s Plan requires MSD to submit a proposed budget to the Board by March 15th each year. After Board review, a final budget is approved in June. The District’s Plan also requires MSD to maintain budgetary controls and to adopt a balanced budget. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the appropriation process approved by the Board. The annual appropriated budget includes activities of the District’s operating and debt service funds. The Board adopts ordinances to appropriate funds for capital improvement expenditures at the time of the contract award and acceptance of any grant offers. Budgetary control is by Division and major expenditure category within the General Fund, each Debt Service Fund, and each capital improvement contract. The District utilizes an encumbrance accounting system in conjunction with internal variance and projection analysis to maintain budgetary control. Certain encumbrances carry over from one year to the next as approved by the Board during the budget process. Monthly and year-end financial reports are prepared in accordance with United States generally accepted accounting principles for Enterprise Funds. Adjustments are made to the accounting records, where necessary, to reflect the full accrual method of accounting. Under the full accrual method of accounting, revenues are recognized when earned and expenses are recorded as liabilities when incurred. Encumbrances and unearned capital and operating grants are eliminated under the full accrual method of accounting. These amounts are disclosed as commitments in the notes to financial statements. The Board of Trustees The Metropolitan St. Louis Sewer District xii Cash Management. In compliance with its Plan, the District invests temporarily idle funds in cash, cash equivalents and investments such as collateralized certificates of deposit, collateralized repurchase agreements, obligations of any agency of the United States, and United States Treasury instruments. The District utilizes competitive bidding for investment purchases and monitors market conditions daily. Risk Management. In-house staff and consultants jointly conduct risk management activities. MSD maintains third-party commercial insurance coverage for various risks while self-insuring for other risks and liabilities at levels customary for similar enterprises. The District maintains replacement cost property and casualty insurance with a policy limit of $1.25 billion on certain facilities and equipment that have an estimated replacement cost of $1.5 billion. The District assumes the risk of loss (including payment of water backup claims to its customers) on the majority of its underground pumping facilities and collection system. MSD is one of the few sewer districts in the country known to provide water backup claim coverage to its customers. The underground pumping facility and collection system assets have an estimated replacement cost of $9.9 billion. To minimize exposure to loss, the District inspects its facilities regularly and performs preventative maintenance on them. MSD maintains automobile, general liability and excess liability insurance. The District is self-insured for workers’ compensation and funds those costs through annual appropriations from the District’s general insurance fund. The District maintains reinsurance for workers’ compensation liabilities in excess of specified limits up to the statutory limit. Risk control activities include using a third-party claims administrator, maintaining a computerized claim tracking system, and annually reevaluating medical insurance claims and health benefit costs. 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. The Board of Trustees The Metropolitan St. Louis Sewer District xiii 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 RubinBrown LLP. Besides meeting the requirements set forth in the Plan, the annual audit is also designed to meet the requirements of the 2013 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”) that was issued by the Office of Management and Budget (“OMB”). A Single Audit Report was issued for the year ended June 30, 2016. 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, 2015 and 2014 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, 2015. 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. The Board of Trustees The Metropolitan St. Louis Sewer District xiv 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 twenty-eight 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 2016 annual budget. The District has received this award for twenty-nine consecutive years. We believe the fiscal year 2017 budget presentation continues to meet the GFOA’s high standards and submitted it on August 29, 2016, for consideration. Marion M. Gee Director of Finance xv ORGANIZATION (as of June 30, 2016) BOARD OF TRUSTEES Michael Yates, Chair; James Faul, Vice Chair; Rev. Ronald Bobo; Ruby Bonner; Annette Mandel; James I. Singer OFFICE OF INTERNAL AUDITOR RATE COMMISSION Leonard P. Toenjes, Chair OFFICE OF SECRETARY TREASURER Tim R. Snoke Secretary/Treasurer CIVIL SERVICE COMMISSION Tara Buckner Annette Adams Daniel Gonzales EXECUTIVE DIRECTOR Brian L. Hoelscher/CEO FINANCE Marion M. Gee Director OFFICE OF GENERAL COUNSEL Susan M. Myers General Counsel OPERATIONS Jonathon C. Sprague Director ENGINEERING Rich Unverferth Director OFFICE OF HUMAN RESOURCES Vicki L. Taylor Edwards Director INFORMATION SYSTEMS Barbara E. Mohn Director xvi 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, 2015 Executive Directors/CEO Financial Section METROPOLITAN ST. LOUIS SEWER DISTRICT SERVICE AREAS 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 activities of The Metropolitan St. Louis Sewer District (the District) as of and for the years ended June 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise the District’s financial statements as listed in the table of contents. Management’s Responsibility For The Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 Controller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Board of Trustees The Metropolitan St. Louis Sewer District Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities of the District as of June 30, 2016 and 2015, and the changes in financial position and cash flows thereof for the years then ended, in accordance with accounting principles generally accepted in the United States of America. Change In Accounting Principle As discussed in Note 1 to the financial statements, the District adopted the provisions of Governmental Accounting Standards Board Statement No. 72, Fair Value Measurement and Application in fiscal year 2016. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Schedule of Changes in Net Pension Liability and Related Ratios for the Employees’ Pension Plan, Employees’ Pension Plan Schedule of Employer Contributions and Schedule of Funding Progress for the Other Post-Employment Benefit Plan, 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. Board of Trustees The Metropolitan St. Louis Sewer District Page 3 Other Information Our audit was conducted for the purpose of forming an opinion on 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 financial statements. These sections have not been subjected to the auditing procedures applied in the audit of the 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 17, 2016, 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 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 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. October 17, 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 4 MANAGEMENT’S DISCUSSION AND ANALYSIS For The Years Ended June 30, 2016 And 2015 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. 2016 Financial Highlights  The District increased capital assets by $160.5 million as a result of an increase in construction in progress for $122.3 million, in land for $13.2 million and in depreciable capital assets net of depreciation for $25.0 million.  The District placed $123.6 million of capital assets into service during fiscal year 2016. The continued high level of capitalization reflects the District’s work to meet long-term plans. Capitalized assets included: Collection and pumping plant $80.0 million Treatment and disposal plant and equipment $25.9 million Land $13.3 million General plant and equipment $4.4 million In conjunction with the new assets, the net increase to accumulated depreciation was $79.3 million. During the year, the District implemented Governmental Accounting Standards Board (“GASB”) Statement No. 72, Fair Value Measurement and Application. The primary objective of this Statement is to improve financial reporting by state and local governments by clarifying the definition of fair value for financial reporting purposes, establishing general principles for measuring fair value, providing additional fair value application guidance, and enhancing disclosures about fair value measurements. The impact of adopting GASB Statement No. 72 is minimal as all material investments have been and are valued at fair value. No restatement is required as no changes were made to the prior year financial statements in order to comply with the new Statement. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 5 2015 Financial Highlights  The District increased capital assets by $128.2 million as a result of an increase in construction in progress for $108.5 million, in land for $1.0 million, and in depreciable capital assets net of depreciation for $18.7 million.  The District placed $100.1 million of capital assets into service during fiscal year 2015. The continued high level of capitalization reflects the District’s work to meet long-term plans. Capitalized assets included: Collection and pumping plant $62.9 million Treatment and disposal plant and equipment $33.8 million General plant and equipment $2.4 million Land $1.0 million In conjunction with the new assets, the net increase to accumulated depreciation was $65.1 million. During the year, the District implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions (Employer Reporting). The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions, in particular updates to the financial statements pension- related liabilities and corresponding deferred outflows and inflows and these effects on net position. Non-current liabilities increased by $43.8 million or 3.9% as the District implemented GASB Statement No. 68 resulting in recognizing the District’s net pension liability. Net deferred outflows and inflows increased $15.8 million or 156.2% primarily due to the implementation of GASB Statement No. 68 resulting in various pension- related transactions. Required Financial Statements The financial statements presented by the management of the District include the Statements of Net Position; Statements of Revenues, Expenses, and Changes in Net Position; and Statements of Cash Flows. These statements are prepared using the accrual basis of accounting. This method of accounting recognizes revenue at the time it is earned and expenses when the related liability occurs. As a result of using this method of accounting, the District’s performance over the time period being reported is more easily determinable. The Statements of Net Position provide a report of the District’s current, restricted, and other non-current assets such as cash, investments, receivables, and property. 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, and bonds and notes payable. Deferred outflows and inflows, where applicable, are also included. The final section of the Statements of Net Position, the THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 6 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 balance. Financial Analysis The District’s financial position improved in the current year, as evidenced by the increase in net position of $48.9 million. The improvement is due to the increases in unrestricted funds of $42.3 million and net investment in capital assets of $11.8 million. Unrestricted funds increased $23.6 million from fiscal year 2015 due to the GASB Statement No. 68 reduction to net position in fiscal year 2015 and increased $29.4 million as operating revenues increased due to rate changes and due to the insurance recoveries recorded as a result of the December 2015 rain event; however, these increases were partially offset by an increase in operating expenses of $11.2 million (excluding depreciation) due partially to increased costs related to the December 2015 flooding. While debt increased at an amount greater than the capital to which it relates, the unspent cash received upon the issuance of the new senior debt (“Series 2015B”) accounts for the net increase in the net position’s net investment in capital assets. The unrestricted funds and net investment in capital asset increases were offset by a decrease in restricted funds of $5.2 million resulting primarily from the use of excess bond reserve funds to partially advance refund existing debt. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 7 Condensed Financial Statements and Analysis 2016 Analysis Current, restricted and other assets increased $78.8 million or 12.5% in the current year. The increase is predominately due to an increase in cash and investments due to higher sewer rates charged and collected and due to the unspent cash received on the senior debt issued in fiscal 2016. In addition, receivables recorded for insurance recoveries due to the December 2015 rain event increased current, restricted and other assets. Capital assets net of accumulated depreciation increased by $160.5 million or 5.5% in the current year as the result of continued high levels of construction and acquisition of assets by the District. Increase Increase Fiscal Year Fiscal Year (Decrease) Fiscal Year (Decrease) 2016 2015 2016-2015 2014 2015-2014 Assets: Current, restricted, and other assets 707,033$ 628,246$ 78,787$ 704,266$ (76,020)$ Capital assets (net of accumulated depreciation)3,052,043 2,891,569 160,474 2,763,413 128,156 Total Assets 3,759,076 3,519,815 239,261 3,467,679 52,136 Deferred Outflow of Resources:     Bonds and Notes Payable-Deferred Loss 11,974 9,599 2,375 10,108 (509)     Pension-related Outflows 31,144 19,210 11,934 — 19,210           Total Deferred Outflow of Resources 43,118 28,809 14,309 10,108 18,701 Liabilities: Current liabilities 125,284 109,153 16,131 95,196 13,957 Non-current liabilities 1,344,141 1,158,445 185,696 1,114,639 43,806 Total Liabilities 1,469,425 1,267,598 201,827 1,209,835 57,763 Deferred Inflow of Resources:     Pension-related Inflows 5,712 2,910 2,802 — 2,910           Total Deferred Inflow of Resources 5,712 2,910 2,802 — 2,910 Net Position: Net investment in capital assets 1,841,178 1,829,394 11,784 1,845,394 (16,000) Restricted 146,105 151,292 (5,187) 142,764 8,528 Unrestricted 339,774 297,430 42,344 279,794 17,636 Total Net Position 2,327,057$ 2,278,116$ 48,941$ 2,267,952$ 10,164$ Condensed Statements of Net Position (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 8 Current liabilities increased by $16.1 million or 14.8% due to an increase in the current portion of bonds and notes payable, contracts and accounts payable and retainage held on capital projects. Non-current liabilities increased by $185.7 million or 16.0% due to the senior and subordinate debt issued in fiscal 2016, offset partially by the advance refunding of existing debt, and the increase in the District’s net pension liability resulting from the implementation of GASB Statement No. 68 in fiscal year 2015. Net deferred outflows and inflows increased $11.5 million or 44.4% due primarily to the cumulative effect of the implementation in fiscal year 2015 of GASB Statement No. 68 resulting in various pension-related transactions. 2015 Analysis Current, restricted and other assets decreased $76.0 million or 10.8% in fiscal 2015. The decrease is predominately due to lower amounts of unrestricted and restricted cash and investments relative to 2014 when the District issued debt. This was offset slightly as unrestricted receivables increased due to higher sewer rates. Capital assets net of accumulated depreciation increased by $128.2 million or 4.6% in fiscal 2015 as the result of continued high levels of construction and acquisition of assets by the District. Current liabilities increased by $14.0 million or 14.7%, due to an increase in the current portion of bonds and notes payable and deposits and accrued expenses. Non-current liabilities increased by $43.8 million or 3.9% as the District implemented GASB Statement No. 68 resulting in recognizing the District’s net pension liability. Net deferred outflows and inflows increased $15.8 million or 156.2% due to the implementation of GASB Statement No. 68 resulting in various pension-related transactions. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 9 Increase Increase Fiscal Year Fiscal Year (Decrease) Fiscal Year (Decrease) 2016 2015 2016-2015 2014 2015-2014 Operating Revenues: Sewer service charges 306,119$ 284,367$ 21,752$ 250,133$ 34,234$ Recovery (provision) for doubtful sewer service charge accounts (4,107) (2,096) (2,011) 7,210 (9,306) Licenses, permits, and other fees 3,620 6,657 (3,037) 6,563 94 Other 14,226 1,460 12,766 1,867 (407) Total Operating Revenues 319,858 290,388 29,470 265,773 24,615 Non-operating Revenues: Property taxes levied by the district 25,671 24,764 907 27,450 (2,686) Investment income 4,636 3,001 1,635 2,967 34 Rent and other income 103 37 66 302 (265) Total Non-operating Revenues 30,410 27,802 2,608 30,719 (2,917) Total Revenues 350,268 318,190 32,078 296,492 21,698 Operating Expenses: Pumping and treatment 59,100 60,766 (1,666) 54,126 6,640 Collection system maintenance 42,853 40,162 2,691 39,988 174 Engineering 10,998 10,954 44 12,184 (1,230) General and administrative 55,315 48,551 6,764 45,661 2,890 Water backup claims 7,631 3,862 3,769 2,713 1,149 Depreciation 83,984 78,641 5,343 74,087 4,554 Asset management 13,215 13,586 (371) 12,539 1,047 Total Operating Expenses 273,096 256,522 16,574 241,298 15,224 Non-operating Expenses: Net loss on disposal and sale of capital assets 325 1,421 (1,096) 5,248 (3,827) Non-recurring projects and studies 11,000 12,317 (1,317) 3,493 8,824 Interest expense 28,943 27,139 1,804 25,661 1,478 Total Non-operating Expenses 40,268 40,877 (609) 34,402 6,475 Total Expenses 313,364 297,399 15,965 275,700 21,699 Income Before Capital Grants And Contributions 36,904 20,791 16,113 20,792 (1) Capital Grants And Contributions 12,037 12,997 (960) 7,102 5,895 Change in Net Position 48,941 33,788 15,153 27,894 5,894 Net Position - Beginning of Year 2,278,116 2,267,952 10,164 2,240,058 27,894 Effect of Adoption of GASB 68 — (23,624) 23,624 — (23,624) Net Position - Beginning of Year, As Restated 2,278,116 2,244,328 33,788 2,240,058 4,270 Net Position - End of Year 2,327,057$ 2,278,116$ 48,941$ 2,267,952$ 10,164$ Statements of Revenues, Expenses, and Changes in Net Position (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 10 2016 Analysis Net position increased $48.9 million or 2.1% over the prior year. Sewer service revenue increased as a result of rate increases. Other operating revenue increased due to the insurance recoveries recorded related to the December 2015 rain event. Operating expenses also increased primarily from various increases in operating costs, costs related to the December 2015 rain event, GASB Statement No. 68 pension expense and depreciation. Total revenue increased by $32.1 million or 10.1%. Sewer service charges increased $21.8 million or 7.6% with the provision for doubtful accounts increasing by $2.0 million or 95.9% due to increased receivables. Other operating revenue increased $12.8 million or 874.4% as explained above. Total expenses increased by $16.0 million or 5.4%. Operating expenses increased by $16.6 million or 6.5%. This increase is primarily the result of the following:  $6.8 million or 13.9% increase in general and administrative costs primarily related to an increase in the GASB Statement No. 68 pension expense. In addition, costs incurred by the District related to the December 2015 rain event are recorded in the General Insurance Fund in the general and administrative operating expense line;  $5.3 million or 6.8% increase in additional depreciation due to new asset capitalization;  $3.8 million or 97.6% increase in water backup costs resulting from the historic flooding in December 2015. Non-operating expenses decreased by $0.6 million or 1.5%. 2015 Analysis Net position increased $10.2 million after the restatement of net position due to GASB Statement No. 68 or 0.4% over the prior year. Sewer service revenue increased as a result of rate increases. In fiscal year 2014 the methodology for calculating the provision for doubtful sewer service charges changed which resulted in an adjustment not repeated in fiscal year 2015. Operating expenses also increased primarily from various increases in operating costs and depreciation. Non-operating expenses also increased due to expenses related to non-recurring projects and studies. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 11 Total revenue increased by $21.7 million or 7.3%. Sewer service charges increased $34.2 million or 13.7% with the provision for doubtful accounts increasing by $9.3 million or 129.1% as explained above. Property tax revenue decreased by $2.7 million or 9.8% due to revenue recorded net of commission fees for collection from the County in fiscal year 2015 compared to fiscal year 2014. Total expenses increased by $21.7 million or 7.9%. Operating expenses increased by $15.2 million or 6.3%. This increase is a result of the following:  $6.6 million or 12.3% increase in pumping and treatment primarily related to increase in utility costs resulting from excessive rain. In addition, there was an increase in chemicals and supplies for the fiscal year 2015 completion of in-house disinfection;  $4.6 million or 6.1% increase in additional depreciation due to new asset capitalization;  $2.9 million or 6.3% increase in general and administrative costs resulting from professional fees associated with the implementation of the new billing system, and IS professionals and associated costs related to an increase in collection efforts;  $1.2 million or 42.4% increase in water backup costs due to overcharged mains claims resulting from excessive rain in fiscal year 2015; Non-operating expenses increased by $6.5 million or 18.8%. This increase is a result of the following:  $8.8 million or 252.6% increase in non-recurring projects and studies due primarily to Green Infrastructure projects;  $1.5 million or 5.8% increase in interest expense due primarily to the first full fiscal year for Series 2013B interest payments;  Offset by a decrease of $3.8 million or 72.9% in net loss on disposals and sale of capital assets due to an asset demolition in fiscal year 2014 not repeated in fiscal year 2015. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 12 2016 Analysis The District ended the year with $49.2 million in cash and cash equivalents or a decrease of $12.6 million from the prior year. Cash flows from operating activities increased by $11.2 million or 9.6% as a result of increased receipts from customers. Cash flows from non-capital financing activities decreased by $0.2 million or 0.9% due to less tax revenue collected. Cash flow from capital and related financing activities increased by $134.3 million or 59.5% as the result of increased bond proceeds and premiums received in fiscal year 2016 compared to fiscal year 2015. Cash flows from investing activities decreased by $160.7 million or 186.1%. The decrease primarily stems from a net outflow of cash related to purchases and proceeds in investments in fiscal year 2016, whereas fiscal year 2015 had a net inflow. In fiscal year 2016, cash and cash equivalents include only investments with original maturities less than 91 days. Under the new policy, investments with an original maturity of greater than 90 days remain as investments until they mature and the cash is received. The retroactive change resulted in $90.1 million, $87.7 million and $120.0 million from cash and cash equivalents to investments in fiscal year 2016, 2015, and 2014, respectively. Increase Increase Fiscal Year Fiscal Year (Decrease)Fiscal Year (Decrease) 2016 2015 2016-2015 2014 2015-2014 Cash flows from operating activities 127,665$ 116,430$ 11,235$ 81,864$ 34,566$ Cash flows from non-capital financing activities 25,583 25,824 (241) 27,468 (1,644) Cash flows from capital and related financing activities (91,512) (225,778) 134,266 (25,597) (200,181) Cash flows from investing activities (74,347) 86,331 (160,678) (75,473) 161,804 Net increase (decrease) in cash and cash equivalents (12,611) 2,807 (15,418) 8,262 (5,455) Cash and cash equivalents at beginning of year 61,807 59,000 2,807 50,738 8,262 Cash And Cash Equivalents At End Of Year 49,196$ 61,807$ (12,611)$ 59,000$ 2,807$ Condensed Statements of Cash Flows (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 13 2015 Analysis The District ended the year with $61.8 million in cash and cash equivalents or an increase of $2.8 million from the prior year. Cash flows from operating activities increased by $34.6 million or 42.2% as a result of increased receipts from customers. Cash flows from non-capital financing activities decreased by $1.6 million or 6.0% due to less tax revenue collected. Cash flow from capital and related financing activities decreased by $200.2 million or 782.0% as the result of decreased bond proceeds and premiums received in fiscal year 2015 compared to fiscal year 2014. Cash flows from investing activities increased by $161.8 million or 214.4%. The increase primarily stems from a net inflow of cash related to purchases and proceeds in investments in fiscal year 2015, whereas fiscal year 2014 had a net outflow. Capital Assets Increase Increase (Decrease) (Decrease) 2016 2015 2016-2015 2014 2015-2014 Land 69,702$ 56,521$ 13,181$ 55,538$ 983$ Construction in progress 530,734 408,464 122,270 299,945 108,519 Treatment and disposal plant and equipment 729,884 739,563 (9,679) 737,833 1,730 Collection and pumping plant 1,697,795 1,659,321 38,474 1,637,375 21,946 General plant and equipment 23,928 27,700 (3,772) 32,722 (5,022) Total 3,052,043$ 2,891,569$ 160,474$ 2,763,413$ 128,156$ Condensed Statements of Capital Assets (000's) Net of Depreciation THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 14 2016 Analysis Total capital assets, net of depreciation expense, increased by $160.5 million or 5.5% over the prior year. Construction in progress contained the majority of the increase with net additions of $122.3 million or 29.9% consisting of $231.8 million in additions offset by $109.5 million placed into service. Collecting and pumping plant increased $38.5 million or 2.3% primarily for capitalization of assets including dedicated assets and infrastructure repairs. Land increased $13.2 million or 23.3% including $12.4 million land reclass from Lower Meramec treatment plant asset and $0.8 million from the acquisition of easements and other land. Treatment and disposal plant and equipment decreased a net $9.7 million or 1.3% with $25.5 million increase in additions offset by $35.2 million in additional depreciation partially driven by Lower Meramec treatment plant asset reclass in February 2016 resulting in a $12.4 million decrease in treatment plant assets which was reclassified to land and an increase of $3.2 million in additional depreciation. General plant and equipment decreased $3.8 million or 13.6% primarily due to depreciation of existing assets. For more detailed information, see Note 4, Capital Assets, in the accompanying notes to financial statements. 2015 Analysis Total capital assets, net of depreciation expense, increased by $128.2 million or 4.6% over the prior year. Construction in progress contained the majority of the increase with net additions of $108.5 million or 36.2% consisting of $191.5 million in additions offset by $83.0 million placed into service. Collection and pumping plant increased $21.9 million or 1.3% primarily for capitalization of assets including dedicated assets and infrastructure repairs. Treatment and disposal plant and equipment increased a net $1.7 million or 0.2% with $30.2 million in additions offset by $28.5 million in additional depreciation. Land increased $1.0 million or 1.8% from the acquisition of easements and other land. General plant and equipment decreased $5.0 million or 15.3% primarily due to depreciation of existing assets. For more detailed information, see Note 4, Capital Assets, in the accompanying notes to financial statements. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 15 Long-Term Debt 2016 Analysis The District ended fiscal year 2016 with $1.2 billion in long-term debt outstanding. The District had one senior revenue bond addition this year (“Series 2015B”) for a total of $223.9 million of which $73.9 million was used to partially advance refund the Series 2006C and the Series 2008A debt. Premium received on the new Series 2015B and excess funds in the bond reserve account were used to advance refund the remaining principal and interest on the Series 2006C and the Series 2008A debt. In addition, the District added a new State Revolving Fund (“SRF”) bond (“Series 2015A”) for $42.6 million. For more detailed information, see Note 6, Long-Term Liabilities, in the accompanying notes to financial statements. Increase Increase (Decrease) (Decrease) 2016 2015 2016-2015 2014 2015-2014 Senior Revenue Bonds: Series 2006C —$ 60,000$ (60,000)$ 60,000$ —$ Series 2008A — 30,000 (30,000) 30,000 — Series 2010B 85,000 85,000 — 85,000 — Series 2011B 45,325 47,170 (1,845) 48,925 (1,755) Series 2012A 220,000 225,000 (5,000) 225,000 — Series 2012B 137,280 139,605 (2,325) 141,730 (2,125) Series 2013B 149,000 150,000 (1,000) 150,000 — Series 2015B 223,855 — 223,855 — — Subordinate Revenue Bonds: Series 2004B 89,650 97,520 (7,870) 105,155 (7,635) Series 2005A 4,125 4,440 (315) 4,750 (310) Series 2006A 27,950 29,915 (1,965) 32,085 (2,170) Series 2006B 9,565 10,260 (695) 10,945 (685) Series 2008AB 27,475 29,320 (1,845) 31,140 (1,820) Missouri DNR: Series 2009A 17,514 18,564 (1,050) 19,589 (1,025) Series 2010A 6,588 6,947 (359) 7,299 (352) Series 2010C 30,024 31,644 (1,620) 33,224 (1,580) Series 2011A 37,354 38,974 (1,620) 39,769 (795) Series 2013A 49,920 52,000 (2,080) 16,043 35,957 Series 2015A 42,623 — 42,623 — — Energy Loan Program 118 151 (33) 166 (15) Total 1,203,366$ 1,056,510$ 146,856$ 1,040,820$ 15,690$ Condensed Statements of Long-Term Debt (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 16 2015 Analysis The District ended fiscal year 2015 with $1.1 billion in long-term debt outstanding. The District did not issue any new senior bonds or new SRF bonds in fiscal year 2015 but did add $36.0 million to SRF Series 2013A. For more detailed information, see Note 6, Long-Term Liabilities, in the accompanying notes to 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 and the Missouri Coalition for the Environment, which settled a lawsuit for alleged violations of the Clean Water Act, was the initiation of Project Clear. See Note 12, Commitments And Contingencies, for additional information regarding this litigation. The goal of Project Clear is to help MSD’s rate payers have a clear understanding of MSD’s goals and objectives. Project Clear consists of three main components:  Getting The Rain Out which is focused on reducing the sewer system infrastructure to help reduce basement back-ups and overflows;  Performing Repair and Maintenance to the existing infrastructure to ensure it operates as well as possible for as long as possible; and  Building System Improvements where needed to increase the capacity of the system. Project Clear will greatly affect the daily lives of many of our rate payers. Project Clear 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 of St. Louis have authorized the District to issue a total of $2.6 billion in wastewater revenue bonds. As of June 30, 2016, the District has issued $1.4 billion of the total authorization. The District’s long-term wastewater capital improvement program will continue to be funded through a combination of additional bonds and wastewater rate increases. The District also upgraded its extensive billing and collection system to incorporate the latest utility technology. The new system will result in more efficient processes and the ability to continue to expand its customer outreach efforts. The new technology will provide state of the art capabilities to utilize the multiple ways now available to better communicate with its customers, understand their needs, and continue to align the District’s responsiveness accordingly. Full implementation of the system occurred on September 1, 2015. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 17 Requests For Information This financial report is designed to provide a general overview of the District’s finances for all those with an interest in the District’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed or e-mailed to: Marion M. Gee, Director of Finance The Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, MO 63103-2555 314-768-6200 mgee@stlmsd.com THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 18 STATEMENTS OF NET POSITION June 30, Assets 2016 2015 Current Assets Unrestricted Current Assets Cash and cash equivalents  26,934,021$ 34,101,094$ Investments                                          166,147,564 106,369,986 Sewer service charges receivable, less allowance of                   $55,728,507 in 2016 and $53,205,047 in 2015 50,025,233 49,975,078 Unbilled sewer service charges receivable 24,728,826 22,169,181 Property taxes receivable, less allowance of $39,127 in 2016 and $44,595 in 2015 1,265,106 1,413,045 Accrued income on investments                        805,879 618,436 Other receivables, less allowance of $98,460 in 2016                        and $32,962 in 2015 10,184,895 1,650,498 Supplies inventory                                   7,088,804 6,360,539           Total Unrestricted Current Assets                            287,180,328 222,657,857 Restricted Current Assets Cash and cash equivalents 2,065,003 1,859,493 Investments                                          13,393,010 8,670,810           Total Restricted Current Assets                            15,458,013 10,530,303           Total Current Assets                            302,638,341 233,188,160 Non-Current Assets Restricted Assets Cash and cash equivalents  20,197,452 25,846,754 Investments                                          134,209,021 108,223,482 Long-term investments                                69,479,563 70,493,703 Property taxes receivable, less allowance of $22,419 in 2016 and $21,956 in 2015 724,886 511,835 Accrued income on investments 300,628 308,455           Total Restricted Non-Current Assets                            224,911,550 205,384,229 Other Assets Notes receivable                                     12,999,370 13,563,540 Long-term investments                                166,483,086 176,110,060 Total Other Assets                            179,482,456 189,673,600 Capital Assets Depreciable:        Treatment and disposal plant and equipment           1,239,993,981 1,214,483,762        Collection and pumping plant                         2,419,647,020 2,341,025,509        General plant and equipment                          92,393,025 92,198,891                                                             3,752,034,026 3,647,708,162        Less:  Accumulated depreciation                      1,300,427,525 1,221,123,113        Net depreciable assets       2,451,606,501 2,426,585,049 Non-depreciable:        Land                                                 69,702,470 56,520,708        Construction in progress                             530,734,241 408,463,554 Net Capital Assets                                3,052,043,212 2,891,569,311        Total Non-Current Assets                         3,456,437,218 3,286,627,140        Total Assets                               3,759,075,559 3,519,815,300 Deferred Outflows of Resources     Bonds and notes payable-Deferred loss on refunding 11,973,700 9,599,096      Pension-related outflows 31,144,263 19,210,323 Total Deferred Outflows of Resources                            43,117,963 28,809,419 THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 19 STATEMENTS OF NET POSITION (Continued) June 30, Liabilities 2016 2015 Current Liabilities-Payable From Unrestricted Assets        Contracts and accounts payable                       37,420,758$ 34,082,818$        Deposits and accrued expenses                        38,958,762 37,559,072        Retainage payable                                    9,119,490 6,952,750        Current portion of bonds and notes payable           38,059,873 29,620,359   Total Current Liabilities-Payable From Unrestricted Assets 123,558,883 108,214,999 Current Liabilities-Payable From Restricted Assets        Contracts and accounts payable                       1,286,539 736,658        Retainage payable                                   438,547 201,441   Total Current Liabilities-Payable From Restricted Assets 1,725,086 938,099             Total Current Liabilities                       125,283,969 109,153,098        Non-Current Liabilities        Deposits and accrued expenses                        14,198,048 13,067,791        Net pension liability 52,600,003 39,895,991        Bonds and notes payable                              1,277,342,521 1,105,481,067             Total Non-Current Liabilities                       1,344,140,572 1,158,444,849                              Total Liabilities                     1,469,424,541 1,267,597,947 Deferred Inflow of Resources     Pension-related inflows 5,711,868 2,910,142             Total Deferred Inflow of Resources 5,711,868 2,910,142 Net Position        Net investment in capital assets 1,841,178,265 1,829,394,892        Restricted for:          Debt service                                       66,328,378 73,177,341          Subdistrict construction and improvement           79,776,581 78,114,762        Unrestricted                                         339,773,889 297,429,635 Total Net Position 2,327,057,113$ 2,278,116,630$   THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 20 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION 2016 2015   Operating Revenues     Sewer service charges                                   306,118,545$ 284,366,564$     Provision for doubtful sewer service charge accounts (4,106,652) (2,096,371)     Licenses, permits and other fees                       3,620,240 6,656,831     Other                                                   14,225,598 1,459,565     Total Operating Revenues                              319,857,731 290,386,589          Operating Expenses     Pumping and treatment                                   59,099,820 60,765,831     Collection system maintenance                           42,853,337 40,160,207     Engineering                                             10,997,619 10,953,900     General and administrative                              55,315,372 48,551,121     Water backup claims                                     7,631,197 3,862,390     Depreciation                                            83,983,749 78,641,259     Asset management                                               13,214,611 13,586,440     Total Operating Expenses                             273,095,705 256,521,148          Operating Income         46,762,026 33,865,441          Non-Operating Revenues     Property taxes levied by the District                   25,671,058 24,764,324     Investment income                                       4,635,866 3,000,591     Rent and other income                                   102,865 37,321     Total Non-Operating Revenues                          30,409,789 27,802,236          Non-Operating Expenses     Net loss on disposal and sale of capital assets         324,513 1,420,902     Non-recurring projects and studies                       11,000,403 12,317,488     Interest expense                                        28,943,200 27,138,546     Total Non-Operating Expenses                          40,268,116 40,876,936          Income Before Capital Grants And Contributions                       36,903,699 20,790,741          Capital Grants And Contributions     Utility plant contributed                               11,271,085 12,304,126     Grant revenue                                           765,699 692,628     Total Capital Grants And Contributions                          12,036,784 12,996,754          Change In Net Position 48,940,483 33,787,495   Net Position - Beginning Of Year, As Previously Stated     2,278,116,630 2,267,952,795 Effect of Adoption of GASB 68 — (23,623,660)   Net Position - Beginning Of Year, As Restated 2,278,116,630 2,244,329,135          Net Position - End Of Year                                    2,327,057,113$ 2,278,116,630$ For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 21 STATEMENTS OF CASH FLOWS 2016 2015 Cash Flows From Operating Activities Received from customers 307,087,452$ 285,114,625$ Paid to employees for services (94,386,428) (94,150,602) Paid to suppliers for goods and services (85,035,869) (74,533,975) Net Cash Provided By Operating Activities 127,665,155 116,430,048 Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collected 25,583,025 25,824,104 Cash Flows From Capital And Related Financing Activities Proceeds from capital grants 22,649 692,920 Proceeds from issuance of debt 192,622,808 35,956,725 Premium on sale of bonds 26,727,475 — Interest received on bond proceeds to be used for capital improvements — 291,725 Principal paid on debt (38,565,916) (20,268,080) Interest and fees paid on debt (47,582,180) (43,213,255) Payments for capital assets (227,194,869) (201,243,602) Proceeds from sale of capital assets 834,701 390,173 Build America bond tax credit 1,623,694 1,614,982 Net Cash Provided By (Used In) Capital And Related Financing Activities (91,511,638) (225,778,412) Cash Flows From Investing Activities Purchase of investments (414,418,954) (422,750,555) Proceeds from sale and maturity of investments 333,435,010 503,079,743 Investment income 6,533,672 5,965,270 Proceeds from rents 102,865 37,321 Net Cash Provided By (Used In) Investing Activities (74,347,407) 86,331,779 Net Decrease In Cash And Cash Equivalents (12,610,865) 2,807,519 Cash And Cash Equivalents At Beginning Of Year 61,807,341 58,999,822 Cash And Cash Equivalents At End Of Year 49,196,476$ 61,807,341$ Non-Cash Capital And Investing Activities Proceeds from debt issuance placed into escrow to refund bonds 73,855,000$ —$ Principal amount reduced and placed in escrow less reserve funds (81,054,443) — Capital asset additions included in accounts payable 24,337,151 19,226,222 Utility plant contributed by other governments and developers 11,271,085 12,304,126 Fair value investment adjustment gain 1,763,059 249,364 For The Years Ended June 30, Continued on Next Page THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 22 STATEMENTS OF CASH FLOWS (Continued) 2016 2015 Reconciliation Of Operating Income (Loss) To Net Cash Flows Provided By Operating Activities Operating Income (Loss) 46,762,026$ 33,865,441$ Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 83,983,749 78,641,259 Change in operating assets and liabilities: Increase in billed and unbilled sewer service charges receivable (2,609,800) (5,348,620) Increase in other receivables (7,749,740) (593,338) Increase in supplies inventory (728,265) (137,440) Increase in contracts and accounts payable 2,564,950 4,100,708 Increase in deposits and accrued expenses 1,870,437 5,929,890 Net increase (decrease) in pension-related liability, inflows & outflows 3,571,798 (27,852) Net Cash Provided By Operating Activities 127,665,155$ 116,430,048$ For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 23 NOTES TO FINANCIAL STATEMENTS 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 are levied for the retirement of indebtedness issued to finance construction of sanitary 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. 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 24 Measurement Focus, Basis Of Accounting And Financial Statement Presentation Throughout the year, the District maintains its detailed accounting records on the 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. 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. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 25 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 outflows. All other resources received before any other eligibility requirements are met are reported as unearned revenues. When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, and then unrestricted resources as they are needed. 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. In fiscal year 2016 the District changed the investment policy to only include investments with original maturity of less than 91 days in the Cash Equivalents category from all liquid investments included in Cash Equivalents in the past year. 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. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 26 Accounts Receivable Accounts receivable is composed primarily of charges to customers for wastewater and stormwater services. Receivables are reported at their gross values net of an allowance for uncollectible amounts. Unbilled sewer service charge revenues are accrued by the District based on estimated billings for services provided through the end of the current fiscal year. Capital Assets In order to measure long-term assets such as capital assets, including infrastructure, a study was performed in 1981 to value existing assets at historical cost or estimated historical cost. Capital assets acquired since that historical study are recorded at historical cost on the acquisition date. In accordance with GASB Statement No. 72, donated capital assets are recorded at acquisition value at the time the asset is considered operational. Interest cost is capitalized as part of the historical cost of acquiring certain assets when the effect of such capitalization is material to the financial statements. Interest is not capitalized on assets constructed with contributions from other governmental sources. Depreciation is calculated on a straight-line basis over the following estimated useful lives: Treatment and disposal plant and equipment 16 to 100 years Collection and pumping plant 20 to 100 years General plant and equipment 3 to 10 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 of more than $5,000 and an estimated useful life in excess of three years. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 27 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 2016 and 2015, the District’s total interest cost incurred on tax-exempt borrowings during the fiscal year was $37,475,123 and $35,613,319, respectively. Of this net interest cost, $14,733,405 and $11,502,639 was capitalized and $22,741,718 and $24,110,680 was expensed in 2016 and 2015, 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 The District’s net position is calculated as follows: the net investment in capital assets component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the net outstanding debt, including premiums and discounts on such debt, that is attributable to the acquisition, construction, or improvement of those assets. 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 sanitary sewer charges have been restricted for the payment of principal and 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 METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 28 The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. Deferred Outflow Of Resources And Deferred Inflow 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 statement of net position. A deferred bond refunding amount results from the difference in the carrying value of refunded debt and its reacquisition price, and is amortized over the shorter of the life of the refunded or refunding debt. The pension related deferred outflows of resources represent contributions made to the plan between the measurement date of the pension obligations and the end of the fiscal year as well as 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. Deferred inflows of resources relate to certain changes in pension obligations that are amortized over future periods. Capital Contributions Capital contributions to the District represent government grants and other aid used to fund capital projects. In accordance with GASB Statement No. 33, capital contributions are recognized as revenue when the expenditure is made and the amount becomes subject to claim for reimbursement. Bond Premiums, Discounts And Issuance Costs 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. Bonds and notes payable are reported net of the applicable bond premium or discount. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 29 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. The District has recorded a liability which has been actuarially determined to be equal to the accumulated expense charge that will amortize the employees’ benefits over their period of District service. The liability, included in current deposits and accrued expenses payable, includes vested accumulated rights to receive sick leave benefits estimated to be paid within one year. The portion of sick leave expected to be paid after one year is recorded as a component of non- current deposits and accrued expenses payable. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about 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. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Use Of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 30 Adoption Of New Accounting Standards During fiscal year 2016, the District implemented GASB Statement No. 72, Fair Value Measurement and Application. This Statement supersedes selected paragraphs and footnotes and amends selected paragraphs in various Statements of the Governmental Accounting Standards Board. The primary objective of this Statement is to improve financial reporting by state and local governments by clarifying the definition of fair value for financial reporting purposes, establishing general principles for measuring fair value, providing additional fair value application guidance, and enhancing disclosures about fair value measurements. The District accounts for investments at fair value by using quoted market prices which materially matches the new GASB Statement No. 72. No restatement was required. The disclosures required by this Statement are presented in Footnote 2, Deposits and Investments. During fiscal year 2015, the District implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions (Employer Reporting). This Statement replaced the requirements of GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of GASB Statement No. 50, Pension Disclosures. The primary objective of this Statement was to improve accounting and financial reporting by state and local governments for pensions, in particular bringing to the financial statements pension-related liabilities and corresponding deferred outflows and inflows and these effects on net position. In addition, the District implemented GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date in fiscal year 2015. This statement established accounting requirements related to certain pension contributions made by employers. The District’s adoption of GASB Statement No. 68 in fiscal year 2015 resulted in restating the beginning balance of net position due to the recognition of a beginning net pension liability net of any deferred outflows of resources. The impact of this change on the District’s Statement of Net Position was as follows: THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 31 2. Deposits And Investments Deposits At June 30, 2016 the reported amount of the District’s deposits was $33,734,360 and the bank balance was $37,603,299. Of the bank balance, $865,854 was covered by federal depository insurance; $36,653,652 was collateralized with securities held by a third party financial institution in the District’s name; and $83,793 represents cash equivalent funds in a prime money market fund. In addition, the District has money market mutual funds of $15,462,116 held in a trusted escrow account for the State that will be used to make future bond payments. At June 30, 2015 the reported amount of the District’s deposits was $42,838,260 and the bank balance was $50,312,948. Of the bank balance, $762,049 was covered by federal depository insurance; $49,550,899 was collateralized with securities held by a third party financial institution in the District’s name. In addition, the District had money market mutual funds of $13,971,481 held in a trusted escrow account for the State that was used to make future bond payments. July 1, 2014   Net Position - Beginning Of Year,   As Previously Stated     2,267,952,795$ Effect of Adoption of GASB 68: Establishing a Beginning Net Pension Liability (23,623,660)   Net Position - Beginning Of Year, As Restated 2,244,329,135$ Restatement consists of: Net Pension Liability reported as a noncurrent liability at July 1, 2014 (29,409,433)$ Contributions made subsequent to the beginning net pension liability's measurement date of December 31, 2013 are reported as deferred outflows of resources 5,785,773 (23,623,660)$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 32 Custodial credit risk for deposits is the risk that, in the event of bank failure, the District’s deposits may not be returned to the District. The District’s investment policy complies with the provisions of state laws and requires collateralization on repurchase agreements, time certificates of deposit and deposits with banking institutions with a fair value of 103%. Deposits in each bank are insured by the Federal Deposit Insurance Corporation (“FDIC”) in the amount of $250,000 for interest bearing accounts and noninterest bearing accounts. Investments With the approval of the District’s Board of Trustees, the Secretary-Treasurer is authorized to invest excess cash in any investment authorized by the District’s Charter. The District’s investment policy conforms to the investment policy guidelines for the State of Missouri. The District’s investment policy authorizes the District to invest in the following instruments: U.S. Treasury obligations, certificates of deposit, obligations of any agency or instrumentality of the U.S., repurchase agreements, bankers’ acceptances, and commercial paper, all according to terms specified in the policy. The District also has investments in money market mutual funds that hold securities approved by the District’s investment policy. At June 30, 2016 and 2015, all of the District’s investments were in compliance with the District’s investment policy and charter. A summary of deposits and investments as of June 30, 2016 and 2015 is as follows: Investment Type Cost Fair Value Cost Fair Value Deposits $ 33,734,360 $ 33,734,360 42,838,260$ 42,838,260$ Money Market Mutual Funds 15,462,116 15,462,116 13,971,481 13,971,481 Certificates of Deposit 100,000 100,000 100,000 100,000 U.S. Treasury and Agency Obligations 495,637,069 496,034,377 404,229,430 402,931,741 Commercial Paper 53,478,311 53,577,867 71,781,633 71,833,900 Total 598,411,856$ 598,908,720$ 532,920,804$ 531,675,382$ 2016 2015 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 33 Reconciliation to the financial statements: Interest Rate Risk As of June 30, 2016 and 2015, 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. 2016 2015 Cash and Cash Equivalents Unrestricted Current 26,934,021$ 34,101,094$ Restricted Current 2,065,003 1,859,493 Restricted Non-Current 20,197,452 25,846,754 Investments Unrestricted Current 166,147,564 106,369,986 Restricted Current 13,393,010 8,670,810 Restricted Non-Current 134,209,021 108,223,482 Long-Term Investments Restricted Non-Current 69,479,563 70,493,703 Other 166,483,086 176,110,060 598,908,720$ 531,675,382$ Weighted Weighted Average Average Maturity Maturity Investment Type Fair Value (Years)Fair Value (Years) Money Market Mutual Funds 15,462,116$ 0.00 13,971,481$ 0.00 Certificates of Deposit 100,000 0.72 100,000 1.72 U.S. Treasury Obligations 252,489,204 0.39 287,004,218 1.30 U.S. Agency Obligations 243,545,173 0.73 115,927,523 1.38 Commercial Paper 53,577,867 0.24 71,833,900 0.19 Total 565,174,360$ 1.03 488,837,122$ 1.15 2016 2015 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 34 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 reclass from long-term investment to cash. 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, 2016 and 2015, the District’s investments in commercial paper were rated “A-1” by Standard & Poor’s (“S&P”) and “P-1” by Moody’s Investors Service (“Moody’s”). The District’s investments in U.S. agency obligations that do not carry the explicit guarantee of the U.S. Government all carry a rating assigned by S&P of “AA+” except for five short- term U.S. agency obligations that carry a rating of “A-1+”, with a value of $4,543,869 in fiscal year 2016. Money market investments are rated as “AAAm” and “Aaa-mf” by S&P and Moody’s, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 35 Concentration Of Credit Risk The District’s investment policy places no limit on the amount the District may invest in any one issuer with respect to U.S. Treasury obligations and collateralized time and demand deposits. U.S. agency obligations and government-sponsored enterprises are limited to 60% of the portfolio, with no more than 30% of the total portfolio invested in securities of any one agency; and collateralized repurchase agreements are limited to 50% of the portfolio. U.S. agency callable securities are limited to 30% of the portfolio, and commercial paper and bankers’ acceptances are limited to 25% each, with no more than 5% of the total portfolio invested in any one issuer. The following table lists investments in issuers that represent 5% or more of total investments at June 30, 2016 and 2015: 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. 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, 2016:  Money Market Mutual Funds of $15.5 million 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 $495.6 million 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) Issuer 2016 2015 Treasury Notes 45.9 58.8 Federal Home Loan Bank 20.6 9.3 Federal National Mortgage Association 10.5 3.6 Federal Home Loan Mortgage Corporation 11.3 11.0 Percent Of Total Investments THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 36  Commercial Paper of $53.6 million 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) 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 contained in the Other Receivables line on the Statements of Net Position. The note receivable will mature in fiscal year 2033. At June 30, 2016, future payments are 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, 2016, MSD’s note receivable related to the Contractor Loan Fund is $13,385. 2017 1,154,696$ 2018 1,154,696 2019 1,154,696 2020 1,154,696 2021 1,154,696 2022-2026 5,773,479 2027-2031 5,773,479 2032-2033 1,718,495 19,038,933 Less: Amount representing interest 5,475,392 13,563,541$ Classification in Statement of Net Position: Current 577,556$ Non-current 12,985,985 Total 13,563,541$ 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, 2016 and 2015: Balance Balance June 30, 2015 June 30, 2016 Capital assets not being depreciated: Land 56,520,708$ 13,261,762$ 80,000$ 69,702,470$ Construction in progress 408,463,554 231,846,707 109,576,024 530,734,241 Total capital assets not being depreciated 464,984,262 245,108,469 109,656,024 600,436,711 Capital assets being depreciated: Treatment and disposal plant and equipment 1,214,483,762 25,920,471 410,251 1,239,993,981 Collection and pumping plant 2,341,025,509 80,022,506 1,400,995 2,419,647,020 General plant and equipment 92,198,891 4,374,911 4,180,777 92,393,025 Total capital assets being depreciated 3,647,708,162 110,317,888 5,992,023 3,752,034,026 Less: Accumulated depreciation: Treatment and disposal plant and equipment (474,920,704) (35,577,561) (387,883) (510,110,382) Collection and pumping plant (681,703,916) (40,728,438) (580,015) (721,852,339) General plant and equipment (64,498,493) (7,677,750) (3,711,440) (68,464,804) Total accumulated depreciation (1,221,123,113) (83,983,749) (4,679,338) (1,300,427,525) Total capital assets being depreciated, net 2,426,585,049 26,334,139 1,312,686 2,451,606,501 Total Capital Assets 2,891,569,311$ 271,442,609$ 110,968,709$ 3,052,043,212$ Additions Deletions Balance Balance June 30, 2014 June 30, 2015 Capital assets not being depreciated: Land 55,537,816$ 982,892$ —$ 56,520,708$ Construction in progress 299,944,922 191,548,710 83,030,078 408,463,554 Total capital assets not being depreciated 355,482,738 192,531,602 83,030,078 464,984,262 Capital assets being depreciated: Treatment and disposal plant and equipment 1,184,278,860 33,797,176 3,592,274 1,214,483,762 Collection and pumping plant 2,286,108,470 62,947,593 8,030,554 2,341,025,509 General plant and equipment 93,600,648 2,365,107 3,766,864 92,198,891 Total capital assets being depreciated 3,563,987,978 99,109,876 15,389,692 3,647,708,162 Less: Accumulated depreciation: Treatment and disposal plant and equipment (446,446,188) (31,634,323) (3,159,807) (474,920,704) Collection and pumping plant (648,732,430) (39,645,122) (6,673,636) (681,703,916) General plant and equipment (60,878,853) (7,361,814) (3,742,174) (64,498,493) Total accumulated depreciation (1,156,057,471) (78,641,259) (13,575,617) (1,221,123,113) Total capital assets being depreciated, net 2,407,930,507 20,468,617 1,814,075 2,426,585,049 Total Capital Assets 2,763,413,245$ 213,000,219$ 84,844,153$ 2,891,569,311$ 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. Tax rates vary by sub-district and purpose. Taxes levied are used for operations and stormwater maintenance, debt service, and construction. Taxes are recorded as non-operating revenues. 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 2016 and 2015, the District recorded revenue from property taxes in the amount of $25,671,058 and $24,764,324, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 39 6. Long-Term Liabilities The following is a summary of changes in the District’s long-term liabilities for the year ended June 30, 2016: Original Balance Balance Issuance June 30, June 30, Current Amounts 2015 Additions Retirements 2016 Portion Bonds and Notes Payable: Wastewater System Senior Revenue Bonds: Series 2006C 60,000,000$ 60,000,000$ —$ 60,000,000$ —$ —$ Series 2008A 30,000,000 30,000,000 — 30,000,000 — — Series 2010B 85,000,000 85,000,000 — — 85,000,000 — Series 2011B 52,250,000 47,170,000 — 1,845,000 45,325,000 1,915,000 Series 2012A 225,000,000 225,000,000 — 5,000,000 220,000,000 5,300,000 Series 2012B 141,730,000 139,605,000 — 2,325,000 137,280,000 2,570,000 Series 2013B 150,000,000 150,000,000 — 1,000,000 149,000,000 3,000,000 Series 2015B 223,855,000 — 223,855,000 — 223,855,000 2,500,000 Water Pollution Control and Drinking Water Subordinate Revenue Bonds (State Revolving Funds Program): Series 2004B 161,280,000 97,520,000 — 7,870,000 89,650,000 8,105,000 Series 2005A 6,800,000 4,440,000 — 315,000 4,125,000 325,000 Series 2006A 42,715,000 29,915,000 — 1,965,000 27,950,000 2,350,000 Series 2006B 14,205,000 10,260,000 — 695,000 9,565,000 705,000 Series 2008A/B 40,000,000 29,320,000 — 1,845,000 27,475,000 1,870,000 Missouri Department of Natural Resources: Energy Loan Program 223,793 150,565 — 32,359 118,206 33,173 Series 2009A 23,000,000 18,563,600 — 1,049,400 17,514,200 1,073,700 Series 2010A 7,980,700 6,947,000 — 358,600 6,588,400 366,000 Series 2010C 37,000,000 31,644,000 — 1,620,000 30,024,000 1,663,000 Series 2011A 39,769,300 38,974,300 — 1,620,000 37,354,300 1,662,000 Series 2013A 52,000,000 52,000,000 — 2,080,000 49,920,000 2,134,000 Series 2015A 75,000,000 — 42,622,810 — 42,622,810 2,488,000 1,467,808,793$ 1,056,509,465$ 266,477,810$ 119,620,359$ 1,203,366,916 38,059,873$ Add: Unamortized premium, net 112,035,478 Total Bonds and Notes Payable 1,315,402,394$ Current Portion of Bonds and Notes Payable 38,059,873$ Non-Current Bonds and Notes Payable 1,277,342,521 Total Bonds and Notes Payable 1,315,402,394$ Net Pension Liability 39,895,991$ 12,704,012$ —$ 52,600,003$ —$ Deposits and Accrued Expenses Landfill closure and post-closure costs 783,473$ 38,259$ —$ 821,732$ —$ Compensated absences 8,421,028 825,228 749,142 8,497,114 2,124,274 Net OPEB obligation 5,968,543 2,554,734 1,519,800 7,003,477 — Total Deposits and Accrued Expenses 15,173,044$ 3,418,221$ 2,268,942$ 16,322,323$ 2,124,274$ Current Portion of Deposits and Accrued Expenses 2,124,274$ Non-Current Deposits and Accrued Expenses 14,198,048 Total Deposits and Accrued Expenses 16,322,323$ 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, 2015: Original Balance Balance Issuance June 30, June 30, Current Amounts 2014 Additions Retirements 2015 Portion Bonds and Notes Payable: Wastewater System Senior Revenue Bonds: Series 2006C 60,000,000$ 60,000,000$ —$ —$ 60,000,000$ —$ Series 2008A 30,000,000 30,000,000 — — 30,000,000 — Series 2010B 85,000,000 85,000,000 — — 85,000,000 — Series 2011B 52,250,000 48,925,000 — 1,755,000 47,170,000 1,845,000 Series 2012A 225,000,000 225,000,000 — — 225,000,000 5,000,000 Series 2012B 141,730,000 141,730,000 — 2,125,000 139,605,000 2,325,000 Series 2013B 150,000,000 150,000,000 — — 150,000,000 1,000,000 Water Pollution Control and Drinking Water Subordinate Revenue Bonds (State Revolving Funds Program): Series 2004B 161,280,000 105,155,000 — 7,635,000 97,520,000 7,870,000 Series 2005A 6,800,000 4,750,000 — 310,000 4,440,000 315,000 Series 2006A 42,715,000 32,085,000 — 2,170,000 29,915,000 1,965,000 Series 2006B 14,205,000 10,945,000 — 685,000 10,260,000 695,000 Series 2008A/B 40,000,000 31,140,000 — 1,820,000 29,320,000 1,845,000 Missouri Department of Natural Resources: Energy Loan Program 223,793 166,445 — 15,880 150,565 32,359 Series 2009A 23,000,000 19,589,300 — 1,025,700 18,563,600 1,049,400 Series 2010A 7,980,700 7,298,500 — 351,500 6,947,000 358,600 Series 2010C 37,000,000 33,224,000 — 1,580,000 31,644,000 1,620,000 Series 2011A 39,769,300 39,769,300 — 795,000 38,974,300 1,620,000 Series 2013A 52,000,000 16,043,275 35,956,725 — 52,000,000 2,080,000 1,168,953,793$ 1,040,820,820$ 35,956,725$ 20,268,080$ 1,056,509,465 29,620,359$ Add: Unamortized premium, net 78,591,961 Total Bonds and Notes Payable 1,135,101,426$ Current Portion of Bonds and Notes Payable 29,620,359$ Non-Current Bonds and Notes Payable 1,105,481,067 Total Bonds and Notes Payable 1,135,101,426$ Net Pension Liability —$ 39,895,991$ —$ 39,895,991$ —$ Deposits and Accrued Expenses Landfill closure and post-closure costs 756,936$ 26,537$ —$ 783,473$ —$ Compensated absences 7,983,223 856,080 418,275 8,421,028 2,105,253 Net OPEB obligation 5,067,254 2,474,689 1,573,400 5,968,543 — Total Deposits and Accrued Expenses 13,807,413$ 3,357,306$ 1,991,675$ 15,173,044$ 2,105,253$ Current Portion of Deposits and Accrued Expenses 2,105,253$ Non-Current Deposits and Accrued Expenses 13,067,791 Total Deposits and Accrued Expenses 15,173,044$ 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. 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, $1,193,000,000 has not been issued as of June 30, 2016. These funds were sought to enable the District to comply with federal and state clean water requirements. 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 and as of June 30, 2016, $83,305,619 has been expended. A premium of $26,727,475 was received on the $150,000,000 portion of Series 2015B. 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. 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 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. The sum of the $95,793,591 deposited into escrow and the earnings on the U.S. government securities will fund the $90 million in principal payments outstanding at June 30, 2016 relating to the Series 2006C and Series 2008A bonds on their May 1, 2017 call date and the interest thereon. Interest only payments of $2,267,218 were made from escrow in fiscal year 2016. 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 financial statements. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 42 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. In November 2012, the District issued $141,730,000 of Wastewater System Refunding Bonds Series 2012B (“Series 2012B”). These bonds were issued to advance refund the Series 2004A Bonds maturing in fiscal years 2015 and thereafter. These 2012B senior bonds have interest rates ranging from 1.3% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2034. The Series 2012B’s net proceeds of $169,991,297 (including a premium of $29,613,138 and after payments of $761,593 in underwriting fees and $590,247 in issuance costs) were used to purchase U.S. government securities. These securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the bonds. As a result, Series 2004A bonds were partially defeased and the liability for those bonds related to a date after May 1, 2014 were removed from the financial statements. This refunding decreased total debt service payments over the next 22 years by $28,601,189, resulting in an economic gain (difference between the present values of the debt service requirements on the old and new debt) of $22,439,375. In August 2012, the District issued $225,000,000 of Wastewater System Revenue Bonds Series 2012A (“Series 2012A”). These bonds were issued pursuant to the June 2012 authorization; in this case for the purpose of constructing, repairing, replacing, and equipping new and existing District wastewater facilities. All funds from this issuance have been expended. These senior bonds have interest rates ranging from 2.5% to 5.3% and are payable in semiannual installments at varying amounts through May 1, 2042. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 43 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 2016 and fiscal year 2015, the subsidy percentage was 32.6% and 32.4%, respectively. In fiscal year 2017 the subsidy percentage is again expected to be 32.6%. In November 2008, the District issued $30,000,000 of Wastewater System Revenue Bonds Series 2008A (“Series 2008A”) from the August 2008 authorization for the purpose of providing funds to finance the capital improvement and replacement program. All funds from this issuance have been expended. These senior bonds had interest rates ranging from 5.1% to 5.3% and were payable in semiannual installments at varying amounts through May 1, 2038; however, in December 2015, there was an advance refunding of the Series 2008A bonds. As a result of this refunding, Series 2008A bonds are considered to be defeased. See the explanation for Series 2015B above for further information. In November 2006, the District authorized and issued $60,000,000 of Wastewater System Revenue Bonds Series 2006C (“Series 2006C”) from the February 2004 authorization for the purpose of providing funds to finance the initial phase of its capital improvement and replacement program, including constructing, repairing, and replacing new wastewater facilities. All funds from this issuance have been expended. These senior bonds had interest rates ranging from 4.1% to 5.0% and were payable in semiannual installments at varying amounts through May 1, 2036; however, in December 2015, there was an advance refunding of the Series 2006C bonds. As a result of this refunding, Series 2006C bonds are considered to be defeased. See the explanation for Series 2015B above for further information. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 44 In May 2004, the District authorized and issued $175,000,000 of Wastewater System Revenue Bonds Series 2004A (“Series 2004A”) from the February 2004 authorization for the purpose of providing funds to finance the initial phase of its capital improvement and replacement program, including constructing, repairing, and replacing new wastewater facilities. All funds from this issuance have been expended. These senior bonds had interest rates ranging from 2.0% to 5.0% and were payable in semiannual installments at varying amounts through May 1, 2034; however, in November 2012, there was a partial refunding of the Series 2004A bonds. As a result of this refunding, Series 2004A bonds were considered to be partially defeased and the semiannual installments were through May 1, 2014. The liability related to Series 2004A after May 1, 2014 has been paid. See the explanation for Series 2012B above for further information. The revenue bonds do not constitute a legal debt or liability for the District, the State of Missouri, or for any political subdivision thereof and do not constitute indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. Revenue derived from the operations of the Wastewater System is pledged for the retirement of the outstanding Wastewater System Revenue Bonds listed above. Under the provisions of the bond indentures, the District covenants to establish rates for the services of the Wastewater System sufficient to fund operations, maintain reserves, and provide revenues to apply principal and interest on these bonds. The issuance of the revenue bonds does not obligate the District to levy any form of taxation or to make any appropriation for their payments in any fiscal year. The principal and interest on the bonds are expected to be paid from future wastewater revenues. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 45 Water Pollution Control And Drinking Water Revenue Bonds Payable In October 2008, the State Environmental Improvement and Energy Resources Authority (“Authority”) authorized and issued $69,435,000 of Water Pollution Control and Drinking Water Revenue Bonds (State Revolving Funds Programs) Series 2008A/B (“Series 2008A/B”). The Series 2008A/B bonds provided funds to issue loans to 14 Missouri political subdivisions that used the funds to finance water pollution control and drinking water projects. A portion of the proceeds of the Series 2008A/B bonds issued by the Authority were used to purchase subordinate Participant Revenue Bonds (“Participant Bonds”) authorized and issued by the District from the February 2004 authorization in the aggregate principal amount of $40,000,000, the proceeds of which were used for constructing, repairing, and equipping new and existing wastewater facilities. All funds from this issuance have been expended. The District’s Participant Bonds have interest rates ranging from 4.0% to 5.7% and are payable in semiannual installments at varying amounts through January 1, 2029. In November 2006, the Authority authorized and issued $22,105,000 of State Revolving Funds Programs Series 2006B (“Series 2006B”). The Series 2006B bonds provided funds to issue loans to 7 Missouri political subdivisions that used the funds to finance water pollution control and drinking water projects. A portion of the proceeds of the Series 2006B bonds issued by the Authority were used to purchase Participant Bonds authorized and issued by the District from the February 2004 authorization in the aggregate principal amount of $14,205,000, the proceeds of which were used for constructing, repairing, and equipping new and existing wastewater facilities. All funds from this issuance have been expended. The District’s Participant Bonds have interest rates ranging from 4.0% to 5.0% and are payable in semiannual installments at varying amounts through July 1, 2027. In May 2006, the Authority authorized and issued $87,505,000 of State Revolving Funds Programs Series 2006A (“Series 2006A”). The Series 2006A bonds provided funds to issue loans to 13 Missouri political subdivisions that used the funds to finance water pollution control and drinking water projects. A portion of the proceeds of the Series 2006A bonds issued by the Authority were used to purchase subordinate Participant Bonds authorized and issued by the District from the February 2004 authorization in the aggregate principal amount of $42,715,000, the proceeds of which were used for constructing, repairing, and equipping new and existing wastewater facilities. All funds from this issuance have been expended. The District’s Participant Bonds have interest rates ranging from 3.5% to 4.5% and are payable in semiannual installments at varying amounts through July 1, 2026. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 46 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 make 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 make 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 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 and 2015A direct loans (pages 48-53) do not obligate the District to levy any form of taxation or to make any appropriation for their payments in any fiscal year. The principal and interest on the bonds are expected to be paid from future wastewater revenues. In connection with the District’s issuance of the Participant Bonds, which were purchased with the proceeds of the Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds, the District participates in the State Revolving Loan Program established by the Missouri Department of Natural Resources (“DNR”). Monies from federal capitalization grants and state matching funds are used to fund a bond reserve account for the participants. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 47 As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account and deposited in a bond reserve account, in the District’s name, an additional 60% of the expenditure amount for the Series 2004B bonds and 70% for the Series 2005A, 2006A, and 2006B bonds. For the Series 2008A/B bonds, 70% of the entire anticipated borrowed amount was deposited into this bond reserve account at the beginning of the loan versus as the expenditures were reimbursed. Interest earned from this bond reserve account can be used by the District to fund interest payments on the bonds. On the date of each payment of the principal amount of the District’s Participant Bonds, the trustee transfers from this bond reserve account to the master trustee account an amount equal to 60% of the principal payment for the Series 2004B bonds and 70% for the Series 2005A, 2006A, 2006B and 2008A/B bonds. In accordance with the Master Bond Ordinance and the Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds’ ordinances, the District’s annual net operating revenues from wastewater activities, as defined in the agreement, coupled with investments earnings, must be at least 125% of the current year’s principal and interest due on all senior bonds and at least 115% of the current year’s principal and interest due on all bonds. At June 30, 2016 and 2015, the District was in compliance with this covenant. Principal And Interest Requirements On Revenue Bonds Payable The annual principal and interest requirements to maturity on revenue bonds payable outstanding as of June 30, 2016 are as follows: Years ending June 30, Principal Interest Total 2017 28,640,000$ 43,546,831$ 72,186,831$ 2018 29,260,000 42,683,954 71,943,954 2019 30,150,000 41,871,217 72,021,217 2020 31,295,000 40,918,206 72,213,206 2021 32,375,000 39,810,805 72,185,805 2022-2026 179,320,000 181,313,888 360,633,888 2027-2031 178,250,000 145,441,284 323,691,284 2032-2036 189,860,000 101,899,479 291,759,479 2037-2041 230,325,000 56,261,902 286,586,902 2042-2045 89,750,000 7,702,500 97,452,500 Total 1,019,225,000$ 701,450,066$ 1,720,675,066$ 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 48 Energy Efficiency Leveraged Note Payable In February 2012, the DNR loaned $223,793 to the District. The Energy Efficiency Leveraged Note Payable bears interest at a rate of 2.5% per annum and is payable through February 1, 2020. The purpose of this note was to finance the design, acquisition, installation, and implementation of energy conservation measures. The principal and interest on this note will be paid from the energy savings from the projects or avoided costs resulting from the projects. Principal And Interest Requirements On Energy Efficiency Leveraged Note Payable The annual principal and interest requirements to maturity on the Energy Efficiency Leveraged Note Payable outstanding as of June 30, 2016 are as follows: 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 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, 2016 the outstanding loan balance was $42,622,810. The payment requirements to maturity will be determined after the debt is fully issued. Years ending June 30, Principal Interest Total 2017 33,173$ 2,749$ 35,922$ 2018 34,007 1,915 35,922 2019 34,863 1,059 35,922 2020 16,163 202 16,365 Total 118,206$ 5,925$ 124,131$ Energy Efficiency Leveraged Note Payable THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 49 State Of Missouri Direct Loan Series 2013A In October 2013, the State of Missouri Direct Loan Program issued to the District an amount totaling $52,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the June 2012 authorization. The District’s interest rate is 1.6% and is payable in semiannual installments at varying amounts through July 1, 2034. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2013A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2013A outstanding as of June 30, 2016 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 $39,769,300 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.5% and is payable in semiannual installments at varying amounts through January 1, 2034. Years ending June 30, Principal Interest Total 2017 2,134,000$ 765,422$ 2,899,422$ 2018 2,190,000 732,251 2,922,251 2019 2,247,000 698,089 2,945,089 2020 2,305,000 663,036 2,968,036 2021 2,365,000 627,076 2,992,076 2022-2026 12,785,000 2,562,290 15,347,290 2027-2031 14,540,000 1,511,692 16,051,692 2032-2035 11,354,000 356,562 11,710,562 Total 49,920,000$ 7,916,418$ 57,836,418$ State of Missouri Direct Loan Series 2013A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 50 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, 2016 are as follows: State Of Missouri Direct Loan Series 2010C In December 2010, the State of Missouri Direct Loan Program issued to the District an amount totaling $37,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.7% and is payable in semiannual installments at varying amounts through January 1, 2031. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2010C As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. Years ending June 30, Principal Interest Total 2017 1,662,000$ 561,485$ 2,223,485$ 2018 1,704,000 536,086 2,240,086 2019 1,747,000 510,025 2,257,025 2020 1,792,000 483,304 2,275,304 2021 1,838,000 455,891 2,293,891 2022-2026 9,913,000 1,843,236 11,756,236 2027-2031 11,242,000 1,045,448 12,287,448 2032-2034 7,456,300 200,418 7,656,718 Total 37,354,300$ 5,635,893$ 42,990,193$ State of Missouri Direct Loan Series 2011A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 51 The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2010C outstanding as of June 30, 2016 are as follows: State Of Missouri Direct Loan Series 2010A In January 2010, the State of Missouri’s Direct Loan Program - ARRA issued to the District an amount totaling $7,980,700 for the construction, improvement, renovation, repair, replacement and equipping of its wastewater system, under the authority of and in full compliance with the District’s Charter (“Plan”) and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.5% and is payable in semiannual installments at varying amounts through July 1, 2031. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2010A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. Years ending June 30, Principal Interest Total 2017 1,663,000$ 488,559$ 2,151,559$ 2018 1,705,000 460,969 2,165,969 2019 1,750,000 432,655 2,182,655 2020 1,795,000 403,590 2,198,590 2021 1,842,000 373,783 2,215,783 2022-2026 9,953,000 1,393,871 11,346,871 2027-2031 11,316,000 523,438 11,839,438 Total 30,024,000$ $ 4,076,865 $ 34,100,865 State of Missouri Direct Loan Series 2010C THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 52 The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2010A outstanding as of June 30, 2016 are as follows: State Of Missouri Direct Loan Series 2009A In October 2009, the DNR loaned $23,000,000 to the District. The State of Missouri Direct Loan Series 2009A note bears interest at a rate of 1.5% per annum and is payable through January 1, 2030. The purpose of this note was to finance the designing, constructing, improving, renovating, repairing, replacing and equipping of new and existing sewer facilities within the District. The principal and interest on the note are expected to be paid from future wastewater revenues and the note was issued from the August 2008 authorization. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2009A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. Years ending June 30, Principal Interest Total 2017 366,000$ 96,156$ 462,156$ 2018 373,300 90,717 464,017 2019 380,900 85,164 466,064 2020 388,700 79,498 468,198 2021 396,600 73,717 470,317 2022-2026 2,107,100 277,661 2,384,761 2027-2031 2,329,600 114,460 2,444,060 2032 246,200 1,822 248,022 Total 6,588,400$ 819,195$ 7,407,595$ State of Missouri Direct Loan Series 2010A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 53 The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2009A outstanding as of June 30, 2016 are as follows: In accordance with the Direct Loan Series 2009A, 2010A, 2010C, 2011A, 2013A and 2015A 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, 2016 and 2015, 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 2017 1,073,700$ 251,746$ 1,325,446$ 2018 1,098,500 236,045 1,334,545 2019 1,123,900 219,915 1,343,815 2020 1,149,900 203,411 1,353,311 2021 1,176,500 186,526 1,363,026 2022-2026 6,303,500 665,364 6,968,864 2027-2030 5,588,200 186,020 5,774,220 Total 17,514,200$ 1,949,027$ 19,463,227$ State of Missouri Direct Loan Series 2009A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 54 Debt Service Reserve Fund After initial deposit of the amount required pursuant to the bond ordinances and financing agreements of the Series 2004A, 2006C, 2008A, 2010B, 2011B, 2012A, and 2013B bonds, monies in the Debt Service Reserve Fund shall be disbursed and expended by the District solely for the payment of the principal and interest on the bonds and notes to the extent of any deficiency in the Debt Service Fund for such purpose. The District may disburse and expend monies from the Debt Service Reserve Fund for such purpose immediately. As of June 30, 2016 and 2015, cash and investments in the Debt Service Reserve Fund totaled $49,575,170 and $57,664,537, respectively. Series 2015B was issued without a debt service requirement and at that time $8,945,557 in excess debt reserves along with part of the Series 2015B proceeds were used to advance refund Series 2006C and Series 2008A. 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, 2016 and 2015, cash and investments in the Special Participant Bond Reserve Account held on behalf of the District totaled $104,751,185 and $113,155,635, respectively. Monies in this account are not considered to be District funds. However, interest earnings on this account are used by the District to reduce interest payments on the bonds outstanding. Renewal And Extension Fund All sums accumulated and retained in the Renewal and Extension Fund shall be first used to prevent default in the payment of principal and interest on the bonds when due and shall then be applied by the District for purposes pursuant to the trust indenture. No monies have been deposited into this account at June 30, 2016. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 55 Project Fund The Project Funds for all bond issuances outstanding will be used for the purpose of providing monies to pay project costs. The proceeds from the bonds and notes, after a deposit into the Debt Service Reserve Fund for the amounts required pursuant to the bond ordinances and note agreements of Series 2004A, 2006C, 2008A, 2010B, 2011B, 2012A, and 2013B bonds, shall be deposited into the Project Fund. At June 30, 2016 and 2015, cash and investments in the Project Fund totaled $92,563,751 and $63,327,909, 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, 2016 and 2015, cash and investments in the Rebate Fund totaled $228,797 and $230,318, respectively. Administrative Fee Fund The Administrative Fee Fund will be used for the payment of the Trustee’s fees and other administrative fees pursuant to the note agreement. The Trustee has the ability to immediately withdraw the fee amounts when due. Monies held in this account shall not be invested. Pledged Revenues The District pledges revenues to ensure the repayment of all outstanding revenue bonds. These bonds’ proceeds are used for the District’s capital improvement and replacement program and their repayment comes from, and is collateralized by, the District’s wastewater revenues. These revenues are pledged through 2045 at an approximate amount of $1.7 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 2016 was $82.7 million with pledged revenues of $151.0 million. This provided a coverage ratio of 2.0 and represented 47.4% of all net operating revenues. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 56 7. Pension Plan General Information About The Pension Plan Pension Plan Description. The Metropolitan St. Louis Sewer District Employees’ Pension Plan (“Pension Plan”) is a noncontributory single employer defined benefit plan providing retirement benefits as well as death and disability benefits. As a condition of employment, all full-time employees of the District commencing service prior to January 1, 2011, were eligible to be covered by the Pension Plan. As of January 1, 2011, the Pension Plan was frozen to new employees. Instead, new employees of the District may participate in the The Metropolitan St. Louis Sewer District Defined Contribution Plan (“DC Plan”) and/or the The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust. Current employees with less than ten years of service on January 1, 2011 could also voluntarily elect to transfer from the Pension Plan and enter the DC Plan. Benefits Provided. All benefits vest after five years of credited service. Members retiring at or after age 65 with five or more years credited service are entitled to a pension benefit. The Pension Plan permits early retirement with reduced benefits beginning at age 55 if the member has completed five years of employment. Ordinance No. 10664 provides for unreduced retirement benefits to any member whose combined age and term of service is equal to 75. Effective August 1, 2004, Ordinance No. 11781 amended the Pension Plan to change the benefit formula to 1.7% of final average earnings plus 0.4% of final average earnings that are in excess of covered earnings multiplied by the period of years and months of credited service not to exceed 35 years without including accrued sick leave. 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. 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 57 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, 2015 and 2014, 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 $10,096,075 and $10,359,139, excluding certain professional fees paid by the District, were made to the Pension Plan during the District’s fiscal years ended June 30, 2016 and 2015, respectively. These contributions were made in accordance with actuarially determined contribution requirements based on actuarial valuations performed at December 31, 2015 and 2014, respectively. Increase 2015 2014 (Decrease) Active plan members 665 710 (45) Retirees and beneficiaries currently receiving benefits 691 660 31 Terminated members entitled to receive benefits 175 180 (5) Total 1,531 1,550 (19) For the Years Ended December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 58 Net Pension Liability The net pension liability was measured as of December 31, 2015 and 2014 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, 2015 and 2014 actuarial valuations were determined using the following actuarial assumptions, applied to all periods included in the measurement: Mortality rates were based on the RP-2000 Healthy Annuitant Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale AA and the RP-2000 Disability Mortality Table for Males or Females. 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 7.00 percent, net of pension plan investment expense, including inflation THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 59 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, 2015 and 2014 are as follows: Long-Term Expected Arithmetic Target Real Rate Asset Class Allocation of Return Large Cap US Equity 20.0% 7.1% Small Cap US Equity 6.0% 8.1% International Equity 10.0% 7.7% Emerging Market Equity 4.0% 9.9% Core Bonds 26.0% 1.2% Global Fixed Income 9.0% 1.3% Absolute Return/HFOF 15.0% 3.2% Real Estate 5.0% 5.4% Real Assets 5.0% 3.5% Total 100.0% Long-Term Expected Arithmetic Target Real Rate Asset Class Allocation of Return Domestic Equity 27.0% 7.1% International Equity 10.0% 7.6% Emerging Market Equities 3.0% 10.8% Global Fixed Income 35.0% 0.8% Absolute Return/HFOF 15.0% 5.6% Real Estate 5.0% 4.9% Real Assets 5.0% 5.0% Total 100.0% December 31, 2015 December 31, 2014 Discount Rate. The discount rate used to measure the total pension liability at December 31, 2015 and 2014, was 7.00 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 60 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, 2014 290,411,812$ 250,515,821$ 39,895,991$ Changes for the year: Service cost 5,253,091 5,253,091 Interest 20,198,502 20,198,502 Effect of economic/demographic gains or losses (4,576,597) (4,576,597) Benefit payments (14,474,566) (14,474,566) — Employer contributions 10,059,004 (10,059,004) Net investment income (1,888,020) 1,888,020 Balances as of December 31, 2015 296,812,242$ 244,212,239$ 52,600,003$ 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, 2013 $275,656,711 $246,247,278 $29,409,433 Changes for the year: Service cost 5,409,485 5,409,485 Interest 19,900,507 19,900,507 Effect of economic/demographic gains or losses (3,667,991) (3,667,991) Effect of assumption changes or inputs * 6,500,227 6,500,227 Benefit payments (13,387,127) (13,387,127) — Employer contributions 10,675,321 (10,675,321) Net investment income 6,980,349 (6,980,349) Balances as of December 31, 2014 $290,411,812 $250,515,821 $39,895,991 * In order to better reflect anticipated future experience, the discount rate was decreased from 7.25% to 7.0% effective December 31, 2014 and the salary increase assumption was changed from 10.0% grading down to 4.50% over the first three years of service to 4.25% for all years. Changes in Net Pension Liability for the Year Ended December 31, 2015 Changes in Net Pension Liability for the Year Ended December 31, 2014 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 61 Sensitivity of the Net Pension Liability to Changes in the Discount Rate. The following presents the net pension liability calculated using the 7.00 percent discount rate, as well as what the District’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.00 percent) or 1-percentage-point higher (8.00 percent) than the current rate: 1% Current 1% Decrease Discount Rate Increase (6.00%) (7.00%) (8.00%) Net Pension Liability 85,662,163$ 52,600,003$ 24,315,305$ 1% Current 1% Decrease Discount Rate Increase (6.00%) (7.00%) (8.00%) Net Pension Liability 72,651,593$ 39,895,991$ 11,897,781$ December 31, 2015 December 31, 2014 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, 2016 and 2015, the District recognized pension expense of $3,571,798 and negative $27,850, respectively, after accounting for all deferred outflows and inflows of resources. The District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Deferred Deferred Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Differences between expected and actual experience —$ 5,711,868$ —$ 2,910,142$ Changes of assumptions 3,814,183 — 5,157,205 — Net difference between projected and actual earnings 21,823,418 — 8,583,527 — Contributions made subsequent to measurement date 5,506,662 — 5,469,591 — Total 31,144,263$ 5,711,868$ 19,210,323$ 2,910,142$ June 30, 2016 June 30, 2015 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 62 In the years ending June 30, 2016 and 2015, amounts currently reported as deferred outflows of resources, $5,506,662 and $5,469,591, respectively, related to the District’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017 and 2016, respectively. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Payable To The Pension Plan At June 30, 2016 and 2015, the District did not have outstanding required contributions to the pension plan. 8. Other Retirement Plans Deferred Compensation Plan and Trust The District offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust (“Plan”), available to all District employees, permits them to defer a portion of their salary up to Internal Revenue Code limits. The District does not contribute to the Plan. The deferred compensation is not available to employees until termination, retirement, death, disability or due to financial hardship as defined by the Plan. Net Deferred Outflows of Resources Year ended June 30,: 2017 5,560,476$ 2018 5,560,476 2019 5,466,846 2020 3,337,935 19,925,733$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 63 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 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 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 investments 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. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 64 Employer Matching Contributions: For each payroll period, the District contributes an amount equal to 50% of the covered compensation of such participant withholding as an annual deferral (as defined in The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust) pursuant to The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust; provided that, before-tax contributions in excess of 4% of the covered compensation of the participant for the payroll period shall not be considered for purposes of Employer Matching Contributions. Employer Matching Contributions shall be up to the maximum amount of compensation that may be taken into account for the DC Plan year. In no event shall the sum of the employer contributions and employee contributions allocated to the account of a participant for the DC Plan year exceed the lesser of: (a) The amount specified in the applicable Internal Revenue Code, as adjusted annually for any applicable increases in the cost of living. (b) 100% of the participant’s compensation for such year. The compensation limit referred to in (b) shall not apply to any contribution from medical benefits after separation from service. The District’s contributions to the plan amounted to $1,297,704 and $1,003,944 for the years ended June 30, 2016 and 2015, respectively. Forfeitures were $45,109 and $108,383 for the years ended June 30, 2016 and 2015, respectively, and there were no liabilities outstanding as of June 30, 2016. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 65 Vesting: As of any time before the normal retirement age of a participant, the first day of the month coinciding with or next following a person’s sixty-fifth birthday and completion of sixty months of continuous service (other than upon death or permanent disability), the vested percentage of the amounts credited to the participant’s employer basic contributions account shall be determined in accordance with the following schedule: Months Of Continuous Service Vested(Non- Forfeitable) Percentage Less than 12 0% 12 but less than 24 20% 24 but less than 36 40% 36 but less than 48 60% 48 but less than 60 80% 60 100% The Metropolitan St. Louis Sewer District Defined Contribution Plan issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing: The Metropolitan St. Louis Sewer District, 2350 Market Street, St. Louis, MO 63103-2555. 9. Post-Employment Benefits Other Than Pensions Plan Description The District’s only post-employment benefit provides a single-employer defined benefit health care plan (“Plan”) to 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 District pays the same portion of the monthly group health insurance premium for the qualified retiree as it would for an active employee until the retiree becomes eligible for Medicare at age 65. In fiscal year 2016 the portion the District paid was 85% of the retiree only premium for the period July 1, 2015 through January 31, 2016 and 80% for the period February 1, 2016 through June 30, 2016. In addition, there is a closed group of disabled former employees who receive life insurance coverage from the District. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 66 The District periodically contracts for an actuarial valuation of the Plan and the latest actuarial valuation was performed as of July 1, 2015. While the actuarial report has the February 2015 monthly medical premium rates, updated rates received from the Human Resources Department for retirees, which are the same rates for active employees, beginning February 2016 are as follows: Premiums for retirees are as follows: Coverage Tier Monthly Premium Retiree* $620.70 Retiree + Spouse $1,322.26 Retiree + Child(ren) $1,201.41 Family $1,832.58 *The District pays 80% of the retiree’s premium for a retiree who retires after age 62 with five years of service or after attaining 75 points. The retiree pays 20% of the individual retiree premium above plus 100% of the spousal, children or family premium incremental increases. The District’s annual other post-employment benefit (“OPEB”) cost (expense) is calculated based on the annual required contribution (“ARC”) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, and in conjunction with Plan benefits currently in force. The actuarial valuations have been determined using estimated data provided by the District in combination with assumptions on the probability of future events, while also keeping an eye on long-term viability. These valuations are subject to continual revision as future actuarial measurements may differ significantly from current measurements due to the realization of new estimates and factors. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and the amortization of any unfunded actuarial accrued liabilities. The District’s annual OPEB cost for fiscal year 2016 and 2015 and the related information are as follows: THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 67 The Plan was established by District Ordinance which assigned the authority to establish and amend Plan benefit provisions to the District. The contribution requirements of the District and Plan members are established and may be amended by the District. The Plan does not issue a publicly available report. Trend Information: As of June 30, 2016 and 2015, the Plan was not funded. The actuarial accrued liability for benefits as of July 1, 2015, the latest actuarial valuation, was approximately $25,308,300, and there were no assets, resulting in an unfunded actuarial accrued liability (“UAAL”) of approximately $25,308,300. The covered payroll (annual payroll of active employees covered by the Plan) in 2015 was approximately $66,958,077, and the ratio of the UAAL to covered payroll was 37.8%. 2016 2015 Amortization of Past Service Cost 935,300$ 908,300$ Normal Cost 1,524,000 1,462,200 Interest to End of Fiscal Year 92,200 88,900 Annual Required Contribution ("ARC") 2,551,500 2,459,400 Interest on Net OPEB Obligation 223,820 190,022 Adjustment to ARC (220,586) (174,733) Net Annual OPEB Cost 2,554,734 2,474,689 Actual Contribution (1,519,800) (1,573,400) Increase in Net OPEB Obligation 1,034,934 901,289 Net OPEB Obligation - Beginning of Year 5,968,543 5,067,254 Net OPEB Obligation - End of Year 7,003,477$ 5,968,543$ Percentage of Net Annual Fiscal Net Annual Actual OPEB Cost Net OPEB Year OPEB Cost Contribution Contributed Obligation 2016 2,554,734$ 1,519,800$ 59.5 7,003,477$ 2015 2,474,689 1,573,400 63.6 5,968,543 2014 2,442,145 1,393,600 57.1 5,067,254 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 68 The Schedule of Funding Progress, presented as required supplementary information following these notes to financial statements, presents trend information about whether the actuarial accrued liability for benefits is increasing or decreasing over time. Actuarial funding calculations of the Plan reflect a long-term perspective. The Plan’s actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Determined amounts are subject to continual revision as results are compared to past expectations and new estimates are made about the future. Significant actuarial assumptions used in the valuation are as follows: Latest Valuation Date: July 1, 2015 Actuarial Cost Method: Projected Unit Credit Discount Rate: 3.75% per annum Amortization Method: Level Percentage of Payroll Amount, Open Amortization Period: 30 years Inflation Rate: 2.50% Payroll Growth Rate: 3.00% Investment Rate of Return: 3.75% annual returns, net of both administrative and related investment expenses Health Cost Trend Assumption: Getzen Trend Model – 6.90% graded to 4.50% over 67 years Medical Trend: The healthcare trends used in the valuation are based on long-term healthcare trends generated by the Getzen Trend Model (“Model”). The Model is the result of research sponsored by the Society of Actuaries and completed by a committee of economists and actuaries. This Model is the current industry standard for projecting long-term medical trends. Inputs to the Model are consistent with the assumptions used in deriving the discount rate used in the valuation. Year Medical Year Medical 2015 2045 2016 6.40 2050 5.80 2017 5.60 2055 5.60 2018 5.30 2060 5.50 2019 5.30 2065 5.10 2020 5.30 2070 4.60 2025 5.30 2075 4.60 2030 6.80 2080 4.60 2035 6.80 2082+ 4.50 2040 6.20 6.90% 5.90% THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 69 Payroll Inflation 3.00% per annum Healthy Mortality RP 2000 Mortality Table (employee and healthy annuitant tables), projected 5 years from the valuation date using Scale AA. Disabled Mortality RP 2000 Disabled Mortality Table Future Retiree Coverage: 90% of eligible employees retiring prior to age 65 are assumed to elect medical coverage under the Plan. Future Dependent Coverage: 25% elect spouse coverage and it is assumed that no dependent children are covered in retirement. Years Of Attained Service Rate Age Rate 020 112.00 30 3.70 27.50 40 1.10 50+ 0.00 Select Rates based on years of service. Ultimate Rates based on attained age. Ultimate Rates are from the Sarason T-1 Table. Termination Of Employment: Select Rates Ultimate Rates (0 to 4 years of service) (after 4 years of service) 20.00% 5.50% Age Before 75 Points After 75 Points 55 56 2.0 10.0 57 2.0 10.0 58 2.0 10.0 59 3.0 10.0 60 4.0 15.0 61 5.0 15.0 62 20.0 35.0 63 10.0 25.0 64 20.0 25.0 65 100.0 100.0 Retirement - Rates Vary By Age 1.0% 10.0% Percent Becoming Age Disabled 20 30 0.064 40 0.102 50 0.311 Disability 0.056% THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 70 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, 2016 and 2015, these liabilities amounted to $4,076,993 and $4,317,384, respectively. The claims liabilities reported are based on the requirements of GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, which requires that a liability for claims be reported if information obtained prior to the issuance of the financial statements indicates it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Changes in the balance of claims liabilities during fiscal 2016 and 2015 were as follows: The District obtains periodic funding valuations from the third-party administrators managing the self-insurance programs and adjusts the charges as required to maintain the appropriate level of estimated claims liability. The District also maintains excess liability insurance coverage for workers' compensation and medical and hospitalization claims; general liability; and water backup damage to customers’ property. The District purchases commercial insurance for all other risks of loss. Settled claims have not exceeded this commercial coverage in any of the past three years. 2016 2015 Liability - Beginning of Year 4,317,384$ 2,923,884$ Current year claims and changes in estimates 21,213,424 15,852,729 Claim payments (21,453,814) (14,459,229) Liability - End of Year 4,076,994$ 4,317,384$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 71 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 $821,732 and $783,473 reported as landfill closure and post-closure care liabilities at June 30, 2016 and 2015, respectively, represent the cumulative amounts reported at fiscal year-end and represent 100.0% and 96.7% of the estimated closure and post-closure care costs of the landfill for fiscal years ended 2016 and 2015, respectively. These amounts are based on what it would cost to perform all closure and post-closure care in 2016. The remaining disposal life estimate was calculated in 2009 and was estimated at eight years factoring in a future annual average disposal rate of 96,500 cubic yards. It was noted in the 2009 Black and Veatch study that this life could be extended further if the actual disposal rate is less than projected or alternative uses and off-site beneficial options for the incinerator ash are later developed. Since the actual average disposal rate has been less than 96,500 cubic yards, the landfill is not at capacity and MSD expects the landfill to be in use for another 10-15 years. The District will continue to accrue the remaining estimated cost of closure and post-closure care annually. 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 Statement of Net Position will be adjusted accordingly. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 72 12. Commitments And Contingencies United States And State Of Missouri V. Metropolitan St. Louis Sewer District; In The United States District Court For The Eastern District Of Missouri; Case No. 07-1120. A lawsuit was filed by the Department of Justice on behalf of the United States Environmental Protection Agency (“EPA”) for various alleged violations of the Clean Water Act. The suit was based on violations of the Clean Water Act as a result of overflows in the combined and sanitary sewer systems causing pollutants to reach waters of the United States. There were other counts involving violations of permit conditions. The District had been the subject of several investigatory actions by EPA over the past several years. Negotiations had been ongoing with the EPA and the Missouri Department of Natural Resources (“DNR”) regarding the sewer collection system, both the combined system and the sanitary system, for several years. The Missouri Coalition for the Environment (“MCE”) gave Notice of Intent to Sue the District under the citizen suit provisions of the Clean Water Act. EPA and the DNR then brought the suit in June 2007, and MCE moved to intervene. Intervention was granted in August 2007. In October 2007, the Court granted the District’s motion to dismiss all of the plaintiffs’ claims for civil penalties attributable to any and all of the District’s alleged violations of the Clean Water Act that occurred before June 11, 2002. Also, the suit alleged that the District did not have an approved Long-Term Control Program (“LTCP”) for the combined system. The District had been working on these issues for several decades and had asked voters to approve bonds and rate increases to rehabilitate and maintain the collection system. As required by its Charter, the District had increased rates which continued to fund the improvements sought by the EPA and the DNR. In September 2008, the Judge put in place a Stay while the parties mediated the issues. Pursuant to MSD Ordinance No. 13277, MSD executed the Consent Decree (“CD”) on July 15, 2011. The CD was lodged with the court on August 4, 2011. An extended public comment period ended October 10, 2011. On April 27, 2012, the Court approved and entered the decree, thus concluding the litigation of this lawsuit. Although this litigation matter has concluded, MSD continues to work diligently to implement the CD. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 73 The CD requires the District to spend approximately $4.7 billion, in 2010 dollars, over a 23-year implementation period. Throughout this period improvements will be made to the District’s separate sewer system, combined sewer system, and wastewater treatment plants. The District continues to comply with the CD. On June 1, 2011, the State of Missouri approved Chapter 11, Chapter 12, and Appendix Q of the District’s Combined Sewer Overflow Long-Term Control Plan Updated Report, dated February 2011. Flooding Cases The remaining flooding cases related to the September 14, 2008 rain event are being covered by the District’s insurance carrier, with a reservation of rights. These cases appear to have a very low risk of liability to the District. 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, 2016 and 2015 financial statements. Contingencies The District has entered into construction and other contracts amounting to $354,141,397 and $302,603,787 at June 30, 2016 and 2015, respectively. Grants to be received from various governmental agencies and entities to partially offset the cost of the contract commitments amounted to $12,090 and $34,228 at June 30, 2016 and 2015, respectively. The District had $1,193,000,000 and $518,000,000 in revenue bonds authorized by the voters but unissued as of June 30, 2016 and 2015, respectively. These funds were sought to enable the District to comply with federal and state clean water requirements. 13. Restricted Net Position The Statements of Net Position report $146,104,959 and $151,292,103 of restricted net position at June 30, 2016 and 2015, respectively, of which $79,776,581 and $78,114,762 are restricted due to enabling legislation, as of June 30, 2016 and 2015, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 74 14. Segment Information The District issued wastewater revenue bonds to finance wastewater infrastructure projects. The District accounts for both wastewater and stormwater activities in a single enterprise fund, but investors in those bonds rely solely on the revenue generated by the wastewater activities for repayment. Fiscal year 2016 and 2015 summary financial information for each business segment is presented below. A segment is an identifiable activity reported as a stand-alone entity for which one or more revenue bonds are outstanding. A segment has a specifically identifiable revenue stream pledged in support of the revenue bonds and has related expenses, gains and losses and assets and liabilities that are required by external parties to be accounted for separately. The wastewater system is the only reportable segment that meets the requirements of GASB Statement No. 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments. The stormwater system is reported on for informational purposes only. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 75 Financial information as of and for the years ended June 30, 2016 and 2015 of the District’s Wastewater Segment is as follows: Assets 2016 2015 Current Assets Unrestricted Current Assets Cash and cash equivalents  25,577,264$ 31,943,006$ Investments                                          157,349,756 101,007,961 Sewer service charges receivable, less allowance of                   $55,537,161 in 2016 and $53,052,032 in 2015 49,733,852 49,642,870 Unbilled sewer service charges receivable 24,607,682 22,049,122 Accrued income on investments                        780,051 601,855 Other receivables, less allowance of $98,460 in 2016                               and $32,962 in 2015 10,184,895 1,650,498 Supplies inventory                                   7,088,804 6,360,539           Total Unrestricted Current Assets                            275,322,304 213,255,851 Non-Current Assets Restricted Assets Cash and cash equivalents  17,009,874 21,857,289 Investments                                          113,535,586 91,317,382 Long-term investments                                32,736,862 28,088,302 Property taxes receivable, less allowance of $164 in 2016      and $634 in 2015 5,318 (126,463) Accrued income on investments                        144,289 216,287        Total Restricted Non-Current Assets                            163,431,929 141,352,797 Other Assets     Notes receivable                                     12,999,370 13,563,540 Long-term investments                                156,994,123 165,781,358             Total Other Assets                            169,993,493 179,344,898 Capital Assets     Depreciable:        Treatment and disposal plant and equipment           1,239,993,981 1,214,483,762        Collection and pumping plant                         1,798,181,091 1,727,606,247        General plant and equipment                          75,752,926 75,667,913                                                             3,113,927,998 3,017,757,922        Less:  Accumulated depreciation                      1,111,825,269 1,041,916,229        Net depreciable assets       2,002,102,729 1,975,841,693            Non-depreciable:        Land                                                 63,374,303 50,292,691        Construction in progress                             519,044,798 399,987,281           Net Capital Assets                                2,584,521,830 2,426,121,665                    Total Non-Current Assets                         2,917,947,252 2,746,819,360                  Total Assets                               3,193,269,556 2,960,075,211 Deferred Outflows of Resources:        Bonds and notes payable-Deferred loss                                          11,973,700 9,599,096        Pension-related Outflows                                              26,520,052 16,300,636                  Total Deferred Outflows of Resources                        38,493,752 25,899,732 WASTEWATER SEGMENT STATEMENTS OF NET POSITION June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 76 Liabilities 2016 2015 Current Liabilities Contracts and accounts payable  37,396,996$ 34,058,044$ Deposits and accrued expenses 29,325,752 30,338,248 Retainage payable  9,118,945 6,952,750 Current portion of bonds and notes payable  38,059,873 29,620,359                                                             113,901,566 100,969,401 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable  36,495 — Retainage payable  156,537 156,538                                                             193,032 156,538             Total Current Liabilities                       114,094,598 101,125,939 Non-Current Liabilities Deposits and accrued expenses 14,198,048 13,067,791 Net Pension Liability 44,732,007 33,853,154 Bonds and notes payable  1,277,342,521 1,105,481,067             Total Non-Current Liabilities                       1,336,272,576 1,152,402,012                         Total Liabilities                              1,450,367,174 1,253,527,951 Deferred Inflow of Resources:        Pension-related Inflows                                              4,868,566 2,469,358                  Total Deferred Inflow of Resources                        4,868,566 2,469,358 Net Position Net investment in capital assets 1,373,656,883 1,363,947,246 Restricted for:       Debt service                                       66,328,378 73,177,341       Subdistrict construction and improvement           4,371,001 4,334,588 Unrestricted 332,171,306 288,518,459                  Total Net Position               1,776,527,568$ 1,729,977,634$ June 30, WASTEWATER SEGMENT STATEMENTS OF NET POSITION (Continued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 77 2016 2015   Operating Revenues     Sewer service charges                                   304,684,984$ 282,957,325$     Recovery of (Provision for) doubtful sewer service charge accounts (4,062,990) (2,229,949)     Licenses, permits, and other fees                       3,620,240 6,656,831     Other                                                   14,221,063 1,451,670     Total Operating Revenues                              318,463,297 288,835,877          Operating Expenses     Pumping and treatment                                   59,099,820 60,765,831     Collection system maintenance                           33,291,567 32,141,159     Engineering                                             3,523,227 4,589,048     General and administrative                              54,802,220 48,555,339     Water backup claims                                     7,631,197 3,862,390     Depreciation                                            73,782,843 68,289,230     Asset management                                               12,968,747 13,373,795     Total Operating Expenses                             245,099,621 231,576,792          Operating Income                    73,363,676 57,259,085          Non-Operating Revenues     Property taxes levied by the District                   (17,525) (152,757)     Investment income                                       3,894,305 2,555,654     Rent and other income                                   102,865 37,321     Total Non-Operating Revenues                          3,979,645 2,440,218          Non-Operating Expenses     Net loss on disposal and sale of capital assets         309,877 1,026,567     Non-recurring projects and studies                       9,342,338 10,579,078     Interest expense                                        28,943,200 27,138,546     Total Non-Operating Expenses                          38,595,415 38,744,191          Income Before Capital Grants And Contributions                       38,747,906 20,955,112          Capital Grants And Contributions     Utility plant contributed                               7,036,329 6,979,980     Grant revenue                                           765,699 692,628     Total Capital Grants And Contributions                          7,802,028 7,672,608   Change In Net Position 46,549,934 28,627,720   Net Position - Beginning Of Year, As Previously Stated      1,729,977,634 1,721,395,422 Effect of Adoption of GASB 68 — (20,045,508)   Net Position - Beginning Of Year, As Restated      1,729,977,634 1,701,349,914          Net Position - End Of Year                                    1,776,527,568$ 1,729,977,634$ 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 78 2016 2015 Cash Flows From Operating Activities Received from customers 304,602,849$ 283,741,361$ Paid to employees for services (94,386,428) (94,150,602) Paid to suppliers for goods and services (70,500,534) (66,614,057) Net Cash Provided By Operating Activities 139,715,887 122,976,702 Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collected (86,140) — Cash Flows From Capital And Related Financing Activities Proceeds from capital grants 22,649 692,920 Proceeds from issuance of debt 192,622,808 35,956,725 Premium and (discounts) on sale of bonds 26,727,475 — Interest received on bond proceeds to be used for capital improvements — 291,725 Principal paid on debt (38,565,916) (20,268,080) Interest and fees paid on debt (47,582,180) (43,213,255) Payments for capital assets (216,933,464) (196,100,162) Proceeds from sale of capital assets 681,101 301,443 Build America bond tax credit 1,623,694 1,614,982 Net Cash Provided By (Used In) Capital And Related Financing Activities (81,403,833) (220,723,702) Cash Flows From Investing Activities Purchase of investments (360,630,035) (332,640,382) Proceeds from sale and maturity of investments 285,557,144 427,154,335 Investment income 5,530,955 5,383,326 Proceeds from rents 102,865 37,321 Net Cash Provided By (Used In) Investing Activities (69,439,071) 99,934,600 Net Increase (Decrease) In Cash And Cash Equivalents (11,213,157) 2,187,600 Cash And Cash Equivalents At Beginning Of Year 53,800,295 51,612,695 Cash And Cash Equivalents At End Of Year 42,587,138$ 53,800,295$ Ended June 30, WASTEWATER SEGMENT STATEMENTS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 79 Financial information as of and for the years ended June 30, 2016 and 2015 of the District’s Stormwater Segment is as follows: Assets 2016 2015 Current Assets Unrestricted Current Assets Cash and cash equivalents  1,356,757$ 2,158,088$ Investments                                          8,797,808 5,362,025 Sewer service charges receivable, less allowance of                   $191,346 in 2016 and $153,015 in 2015 291,381 332,208 Unbilled sewer service charges receivable 121,144 120,059 Property taxes receivable, less allowance of $39,127 in 2016               and $44,595 in 2015 1,265,106 1,413,045 Accrued income on investments                        25,828 16,581        Total Unrestricted Current Assets                            11,858,024 9,402,006 Restricted Current Assets Cash and cash equivalents 2,065,003 1,859,493 Investments                                          13,393,010 8,670,810        Total Restricted Current Assets                            15,458,013 10,530,303  Total Current Assets                            27,316,037 19,932,309 Non-Current Assets Restricted Assets Cash and cash equivalents  3,187,578 3,989,465 Investments                                          20,673,435 16,906,100 Long-term investments                                36,742,701 42,405,401 Property taxes receivable, less allowance of $22,255 in 2016 and $21,322 in 2015 719,568 638,298 Accrued income on investments                        156,339 92,168        Total Restricted Non-Current Assets                            61,479,621 64,031,432 Other Assets Long-term investments                                9,488,963 10,328,702             Total Other Assets                            9,488,963 10,328,702 Capital Assets     Depreciable:        Collection and pumping plant                         621,465,929 613,419,262        General plant and equipment                          16,640,099 16,530,978                                                             638,106,028 629,950,240        Less:  Accumulated depreciation                      188,602,256 179,206,884        Net depreciable assets       449,503,772 450,743,356     Non-depreciable:        Land                                                 6,328,167 6,228,017        Construction in progress                             11,689,443 8,476,273           Net capital assets                                467,521,382 465,447,646                    Total Non-Current Assets                         538,489,966 539,807,780                         Total Assets                               565,806,003 559,740,089 Deferred Outflow of Resources:        Pension-related Outflows                                              4,624,211 2,909,687                  Total Deferred Outflow of Resources                        4,624,211 2,909,687 STORMWATER SEGMENT STATEMENTS OF NET POSITION June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 80 Liabilities 2016 2015 Current Liabilities Contracts and accounts payable  23,762$ 24,774$ Deposits and accrued expenses  9,633,010 7,220,824 Retainage payable  545 —                                                             9,657,317 7,245,598 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable  1,250,044 736,658 Retainage payable  282,010 44,903                                                             1,532,054 781,561             Total Current Liabilities                       11,189,371 8,027,159        Non-Current Liabilities        Net Pension Liability                   7,867,996 6,042,837             Total Non-Current Liabilities                       7,867,996 6,042,837                          Total Liabilities                     19,057,367 14,069,996 Deferred Inflow of Resources:        Pension-related Inflows                                              843,302 440,784                  Total Deferred Inflow of Resources                        843,302 440,784 Net Position Net investment in capital assets 467,521,382 465,447,646 Restricted for:       Subdistrict construction and improvement           75,405,580 73,780,174 Unrestricted 7,602,583 8,911,176                   Total Net Position 550,529,545$ 548,138,996$   June 30, STORMWATER SEGMENT STATEMENTS OF NET POSITION (Continued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 81 2016 2015   Operating Revenues     Sewer service charges                                   1,433,561$ 1,409,239$     Recovery of (Provision for) doubtful sewer service charge accounts (43,662) 133,578     Other                                                   4,535 7,895     Total Operating Revenues                              1,394,434 1,550,712   Operating Expenses     Collection system maintenance                           9,561,770 8,019,048     Engineering                                             7,474,392 6,364,852     General and administrative                              513,152 (4,218)     Depreciation                                            10,200,906 10,352,029     Asset management                                               245,864 212,645     Total Operating Expenses                             27,996,084 24,944,356   Operating Income (Loss)                                         (26,601,650) (23,393,644)   Non-Operating Revenues     Property taxes levied by the District                   25,688,583 24,917,081     Investment income                                       741,561 444,937     Total Non-Operating Revenues                          26,430,144 25,362,018   Non-Operating Expenses     Net loss on disposal and sale of capital assets         14,636 394,335     Non-recurring projects and studies                       1,658,065 1,738,410     Total Non-Operating Expenses                          1,672,701 2,132,745   Income (Loss) Before Capital Contributions                       (1,844,207) (164,371)   Capital Contributions     Utility plant contributed                               4,234,756 5,324,146     Total Capital Contributions                          4,234,756 5,324,146   Change In Net Position 2,390,549 5,159,775   Net Position - Beginning Of Year, As Previously Stated      548,138,996 546,557,373 Effect of Adoption of GASB 68 — (3,578,152)   Net Position - Beginning Of Year, As Restated      548,138,996 542,979,221          Net Position - End Of Year                                    550,529,545$ 548,138,996$ 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 82 15. Subsequent Events In preparing these financial statements, the District has evaluated events and transactions for potential recognition or disclosure through October 17, 2016, the date the financial statements were available to be issued. 2016 2015 Cash Flows From Operating Activities Received from customers 2,484,603$ 1,373,264$ Paid to employees for services — — Paid to suppliers for goods and services (14,535,335) (7,919,918) Net Cash Provided By Operating Activities (12,050,732) (6,546,654) Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collected 25,669,165 25,824,104 Cash Flows From Capital And Related Financing Activities Payments for capital assets (10,261,405) (5,143,441) Proceeds from sale of capital assets 153,600 88,730 Net Cash Provided By (Used In) Capital And Related Financing Activities (10,107,805) (5,054,711) Cash Flows From Investing Activities Purchase of investments (53,788,919) (90,110,173) Proceeds from sale and maturity of investments 47,877,866 75,925,408 Investment income 1,002,717 581,944 Net Cash Provided By (Used In) Investing Activities (4,908,336) (13,602,821) Net Increase (Decrease) In Cash And Cash Equivalents (1,397,708) 619,918 Cash And Cash Equivalents At Beginning Of Year 8,007,046 7,387,128 Cash And Cash Equivalents At End Of Year 6,609,338$ 8,007,046$ Ended June 30, STORMWATER SEGMENT STATEMENTS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 83 In December 2015, MSD facilities were damaged due to a flood that resulted from the St. Louis area receiving a range of 6 to 12 inches of precipitation. To date, MSD has sustained an estimated $25 million dollars in overall expenses and damages due to the rain and flood event. Insurance and disaster assistance from the Federal Emergency Management Agency (“FEMA”) and other governmental agencies are expected to cover the majority of these losses. However, it is not yet possible to determine exact numbers as MSD is in the process of submitting claims to FEMA and its insurance carrier. FEMA has authorized potential reimbursements of approximately $6 million of which MSD has received $80,670 in fiscal year 2017. The fiscal year 2016 financial statements included a $743,561 accrual for FEMA approved funding. The insurance recovery receivable recorded at June 30, 2016 was approximately $8 million dollars of which $3 million was received through October 17, 2016. Work is ongoing to mitigate and replace damaged items. On April 5, 2016, MSD customers voted to approve a stormwater service proposition whereby effective July 1, 2016, MSD will begin to rollback and eliminate several existing taxes, will eliminate the stormwater fee and, in lieu of these funding mechanisms, institute or leave in place two taxing districts that cover MSD’s entire service area. The overriding benefit of the stormwater proposition is that customers will be treated equally under the new system, meaning that all customers are subject to the same tax rates and all customers receive the same level of stormwater services. On July 12, 2016, MSD received notification from the U.S. Environmental Protection Agency that the Federal Grant XP-97704601 was being decreased $12,090 effective July 12, 2016 and MSD submitted a Final Status Report on August 22, 2016. These funds are no longer available to partially offset the cost of the contract commitments existing at June 30, 2016. On August 3, 2016, the IRS announced an increase in the sequestration rate for refundable credit amounts submitted on IRS Form 8038-CP for qualified bonds from 6.8% to 6.9%. This will be effective for all refund payments processed from October 1, 2016 to September 30, 2017. Since the District participates in Build America Bonds, the District will receive 93.1% of the amount requested during its fiscal year 2017. The District received 93.2% of the amount requested during fiscal year 2016. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 84 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS June 30, 2016 Schedule of Changes in Net Pension Liability and Related Ratios In (000's) 2016 2015 Total Pension Liability Service cost $5,253 $5,409 Interest on total pension liability 20,199 19,901 Effect of plan changes — — Effect of economic/demographic gains or (losses) (4,577) (3,668) Effect of assumption changes or inputs — 6,500 Benefit payments (14,475) (13,387) Net Change in Total Pension Liability 6,400 14,755 Total Pension Liability - Beginning 290,412 275,657 Total Pension Liability - Ending (a) 296,812 290,412 Fiduciary Net Position Employer contributions 10,059 10,676 Member contributions — — Investment income net of investment expenses (1,888) 6,980 Benefit payments (14,475) (13,387) Administrative expenses — — Net Change in Plan Fiduciary Net Position (6,304) 4,269 Fiduciary Net Position - Beginning 250,516 246,247 Fiduciary Net Position - Ending (b) 244,212 250,516 Net Pension Liability - Ending = (a) - (b) $52,600 $39,896 Fiduciary Net Position as a % of Total Pension Liability 82.28% 86.26% Covered Payroll $43,345 $44,664 Net Pension Liability as a % of Covered Payroll 121.35% 89.32% Notes to Schedule: 1. Changes of Assumptions. In 2014, amounts reported as changes of assumptions resulted primarily from adjustments to the discount rate and employee rate increases. 2. This schedule will ultimately present ten years of information when available. Fiscal Year Ending June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 85 REQUIRED SUPPLEMENTARY INFORMATION (Continued) EMPLOYEES’ PENSION PLAN AND POST-EMPLOYMENT BENEFIT PLAN June 30, 2016 Employees' Pension Plan Schedule of Employer Contributions Plan Year Actuarially Contribution Covered Contribution Ending Determined Annual Deficiency Employee as a % of December 31, Contribution Contribution (Excess) Payroll* Covered Payroll 2006 $6,847,278 $6,847,278 — $42,113,000 16.26% 2007 7,673,240 7,673,240 — 43,640,000 17.58% 2008 7,425,602 7,425,602 — 48,077,000 15.45% 2009 8,859,535 8,859,535 — 52,267,000 16.95% 2010 10,306,739 10,306,739 — 51,703,000 19.93% 2011 10,969,154 10,969,154 — 49,432,000 22.19% 2012 11,737,168 11,737,168 — 48,333,000 24.28% 2013 11,391,287 11,391,287 — 46,600,000 24.44% 2014 10,675,321 10,675,321 — 44,663,896 23.90% 2015 10,059,004 10,059,004 — 43,344,502 23.21% * Payroll as of prior December 31 Measurement Date Notes to Schedule: Valuation Date: Actuarially determined contribution rates are calculated as of January 1 of the fiscal year in which the contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial Cost Method: Entry Age Normal Amortization Method: Level dollar layered, 20 year periods Asset Valuation Method: 3-year smoothing period Inflation: 2.50% Salary Increases: 4.25%, average, including inflation Investment Rate of Return: 7.00%, net of pension plan investment expense, including inflation Mortality: In the 2016 actuarial valuation, assumed life expectancies were calculated using the RP-2000 Healthy Annuitant Mortality Table and the RP-2000 Disabled Mortality Table. Other Post-Employment Benefit Plan Schedule of Funding Progress In (000's) Unfunded Actuarial UAAL As A Actuarial Actuarial Accrued Percentage Actuarial Value Accrued Liability Funded Covered Of Covered Valuation Of Assets Liability (UAAL) Ratio Payroll Payroll Date (1) (2) (1)-(2) (1)/(2) (3) (1)-(2)/(3) 7/1/2015 —$ 25,308$ 25,308$ 0% 66,958$ 37.8 % 7/1/2013 — 26,264 26,264 0% 60,238 43.6 7/1/2011 — 24,103 24,103 0% 52,649 45.8 7/1/2009 — 24,412 24,412 0% 50,230 48.6 7/1/2007 — 21,938 21,938 0% 43,640 50.3 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 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. 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…………………………………….............86 - 87 Revenue Capacity These schedules contain information to help the reader assess the District’s most significant local revenue sources, the user charge….………88 - 95 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…………….…...96 - 98 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………………………….…………….99 - 101 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……………………………………….……102 - 103 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 86 2007 2008 2009 2010 2011 Net Position Net investment in capital assets 1,682,063$ 1,704,322$ 1,798,914$ 1,868,974$ 1,915,233$ Restricted 85,447 97,422 94,769 80,782 94,926 Unrestricted 278,803 324,218 293,934 257,894 186,860 Total Net Position 2,046,313$ 2,125,962$ 2,187,617$ 2,207,650$ 2,197,019$ 2012 2013 2014 2015 2016 Net Position Net investment in capital assets 1,928,200$ 1,877,692$ 1,845,394$ 1,829,394$ 1,841,178$ Restricted 106,693 111,066 142,764 151,292 146,105 Unrestricted 175,010 251,300 279,794 297,430 339,774 Total Net Position 2,209,903$ 2,240,058$ 2,267,952$ 2,278,116$ 2,327,057$ NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (000's) Fiscal Year Fiscal Year THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 87 Non-operating Income/(Loss) Change Fiscal Operating Operating Operating Revenue/ before Capital Capital in Net Year Revenues Expenses Income/(Loss) (Expenses) Contributions Contributions Position 2007 202,205,532$ 183,810,507$ 18,395,025$ 36,885,268$ 55,280,293$ 24,309,430$ 79,589,723$ 2008 221,925,048 225,145,882 (3,220,834) 37,259,517 34,038,683 45,609,805 79,648,488 2009 249,725,358 212,177,779 37,547,579 (2,885,959) 34,661,620 26,993,385 61,655,005 2010 246,587,174 228,778,874 17,808,300 (17,560,670) 247,630 19,786,012 20,033,642 2011 219,444,257 244,503,099 (25,058,842) 4,329,032 (20,729,810) 10,098,552 (10,631,258) 2012 225,999,720 216,307,965 9,691,755 1,370,329 11,062,084 9,658,857 20,720,941 2013 241,946,337 230,158,434 11,787,903 832,056 12,619,959 17,534,919 30,154,878 2014 265,772,853 241,297,635 24,475,218 (3,682,863) 20,792,355 7,102,480 27,894,835 2015 290,386,589 256,521,148 33,865,441 (13,074,700) 20,790,741 12,996,754 33,787,495 2016 319,857,731 273,095,705 46,762,026 (9,858,327) 36,903,699 12,036,784 48,940,483 CHANGES IN NET POSITION LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 88 Licenses, Fiscal Sewer Service Permits, and Year Charges, Net Other Fees Other 2007 194,798,878$ 6,030,583$ 1,376,071$ 202,205,532$ 2008 216,618,417 4,345,961 960,670 221,925,048 2009 244,699,964 3,475,283 1,550,111 249,725,358 2010 241,495,357 3,084,552 2,007,265 246,587,174 2011 214,653,310 2,976,253 1,814,694 219,444,257 2012 220,765,581 2,683,823 2,550,316 225,999,720 2013 235,980,065 2,731,497 3,234,775 241,946,337 2014 257,343,344 6,562,607 1,866,902 265,772,853 2015 282,270,193 6,656,831 1,459,565 290,386,589 2016 302,011,893 3,620,240 14,225,598 319,857,731 OPERATING REVENUES BY SOURCE LAST TEN FISCAL YEARS Total Operating Revenues THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 89 Fiscal Employment Materials and Contracted Chemical Year Costs Utilities Supplies Services Supplies 2007 58,731,260$ 11,362,805$ 12,335,366$ 40,879,286$ 1,260,789$ 2008 60,787,548 12,837,998 14,081,785 64,192,143 1,387,122 2009 70,475,293 12,587,699 14,855,989 48,783,447 1,589,650 2010 85,030,456 12,355,232 13,297,892 39,561,050 1,478,605 2011 84,264,583 14,170,680 11,010,962 42,854,613 1,415,826 2012 87,148,397 12,612,858 13,942,690 29,585,028 1,355,113 2013 91,939,437 14,533,557 10,355,992 31,133,523 1,455,725 2014 93,634,080 14,986,388 11,835,900 40,148,088 2,440,843 2015 96,832,265 16,500,052 17,596,766 46,020,308 3,964,165 2016 99,162,132 16,624,607 16,202,414 49,782,063 3,498,796 Fiscal Year Insurance Other 2007 2,915,236$ 10,604,787$ 138,089,529$ 45,720,978$ 183,810,507$ 2008 2,939,390 13,986,037 170,212,023 54,933,859 225,145,882 2009 2,746,119 13,769,203 164,807,399 47,370,379 212,177,779 2010 3,062,439 19,981,424 174,767,098 54,011,776 228,778,874 2011 2,578,316 21,353,854 177,648,834 66,854,265 244,503,099 2012 2,470,343 2,451,472 149,565,901 66,742,064 216,307,965 2013 2,696,416 8,013,944 160,128,594 70,029,840 230,158,434 2014 2,737,491 1,427,638 167,210,428 74,087,207 241,297,635 2015 2,791,622 (5,825,289) 177,879,889 78,641,259 256,521,148 2016 3,218,041 623,903 189,111,956 83,983,749 273,095,705 OPERATING EXPENSES LAST TEN FISCAL YEARS Subtotal, Expenses before Depreciation Depreciation Total Operating Expenses THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 90 2007 2008 2009 2010 2011 Non-operating revenues Property taxes levied by the District 24,401,167$ 27,512,070$ 2,129,475$ 1,401,100$ 27,125,451$ Investment income 16,946,145 17,476,621 13,115,519 6,553,760 3,847,324 Rent and other income 878,319 529,983 214,674 265,004 442,968 Total non-operating revenues 42,225,631 45,518,674 15,459,668 8,219,864 31,415,743 Non-operating expenses Interest expense — — 9,079,269 13,189,283 7,971,088 Clean Water Capital Improvement refund 15,000 4,313,973 — — — Net loss on disposal and sale of capital assets 96,630 686,459 2,161,862 2,719,163 3,485,952 Non-recurring projects and studies 5,228,733 3,258,725 7,104,496 9,872,088 10,800,843 Legal claims — — — — 4,828,828 Total non-operating expenses 5,340,363 8,259,157 18,345,627 25,780,534 27,086,711 Net non-operating revenue (expense) 36,885,268$ 37,259,517$ (2,885,959)$ (17,560,670)$ 4,329,032$ 2012 2013 2014 2015 2016 Non-operating revenues Property taxes levied by the District 24,604,173$ 26,016,135$ 27,450,319$ 24,764,324$ 25,671,058$ Investment income 2,407,485 1,056,966 2,966,549 3,000,591 4,635,866 Rent and other income 294,591 293,159 302,506 37,321 102,865 Total non-operating revenues 27,306,249 27,366,260 30,719,374 27,802,236 30,409,789 Non-operating expenses Interest expense 16,365,309 21,062,474 25,661,127 27,138,546 28,943,200 Net loss on disposal and sale of capital assets 3,162,723 795,527 5,248,443 1,420,902 324,513 Non-recurring projects and studies 6,402,888 4,676,203 3,492,667 12,317,488 11,000,403 Legal claims 5,000 — — — — Total non-operating expenses 25,935,920 26,534,204 34,402,237 40,876,936 40,268,116 Net non-operating revenue (expense) 1,370,329$ 832,056$ (3,682,863)$ (13,074,700)$ (9,858,327)$ Fiscal Year NON-OPERATING REVENUES AND EXPENSES LAST TEN FISCAL YEARS Fiscal Year THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 91 Type of Monthly Charge Unmetered c Residential c Non-Residential Wastewater User Charge Base Charge 18.25 18.25 18.25 Compliance Charge a Tier 1 2.15 Tier 2 44.50 Tier 3 94.80 Tier 4 139.00 Tier 5 183.15 Volume Charges per Ccf b — 3.21 3.21 per room 2.09 — — per water closet 7.83 — — per bath 6.53 — — per separate shower 6.53 — — Extra Strength Surcharges a SS over 300 ppm per ton — — 251.88 BOD over 300 ppm per ton — — 632.38 COD over 600 ppm per ton — — 316.19 Stormwater Service Charge per account: single residential unit 0.24 0.24 0.24 per account: multi-residential unit 0.18 0.18 0.18 Notes: a Applicable only to non-residential customers. 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, 2016 Metered THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 92 Fiscal Year Wastewater Charges Billed 1 Wastewater Charges Collected 2 Collections as a % of Wastewater Charges Billed 2007 192,676,922$ 189,346,856$ 98.27% 2008 203,646,332 195,452,994 95.98% 2009 207,801,047 197,892,342 95.23% 2010 204,248,506 198,138,619 97.01% 2011 213,503,732 203,520,769 95.32% 2012 222,425,957 217,396,623 97.74% 2013 233,882,795 233,877,875 99.99% 2014 245,555,628 241,549,548 98.37% 2015 279,555,881 275,049,684 98.39% 2016 300,803,084 299,932,808 99.71% 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 93 2007 2008 a 2009 2010 b 2011c Residential: Single Family/Unit a 271.44$ 344.88$ 344.88$ 1 351.12$ 1 333.60$ 1 Multi-Family/Unit a 228.00 299.76 299.76 305.04 285.12 Commercial/Industrial: Service Charge/Unit 2 245.40 457.20 457.20 486.60 507.00 Sanitary Sewer Usage Charge per Ccf 1.81 1.88 1.88 1.92 2.02 Storm Sewer Usage Charge/100 sq. feet of impervious area — — 0.12 0.14 — Extra Strength Surcharges: Suspended Solids ("SS") over 300 parts per million/ton 218.90 218.90 218.90 218.90 222.62 Biological Oxygen Demand ("BOD") over 300 parts per million/ton 461.44 529.90 529.56 551.52 596.72 Chemical Oxygen Demand ("COD") over 600 parts per million/ton 230.72 264.85 264.78 275.76 298.36 2012 2013 d 2014 2015 2016 Residential: Single Family/Unit a 347.64$ 379.56$ 421.08$ 434.76$ 491.52$ Multi-Family/Unit a 296.28 324.12 360.36 434.04 490.80 Commercial/Industrial: Service Charge/Unit 2 525.60 478.56 412.56 348.12 296.80 Sanitary Sewer Usage Charge per Ccf 2.11 2.28 2.50 2.82 3.21 Storm Sewer Usage Charge/100 sq. feet of impervious area — — — — — Extra Strength Surcharges: Suspended Solids ("SS") over 300 parts per million/ton 231.35 231.35 231.35 244.03 251.88 Biological Oxygen Demand ("BOD") over 300 parts per million/ton 620.14 620.14 620.14 620.14 632.38 Chemical Oxygen Demand ("COD") over 600 parts per million/ton 310.07 310.07 310.07 310.07 316.19 Notes: 1 Years 2008-2010 saw an impervious rate charge that averaged $36 per year per customer. This was discontinued in 2011.2 Service Charge/Unit for Commerical/Industrial is calculated by using the sum of annualized base charge and compliance charge. Starting FY2013, MSD implemented 5-tier Compliance Charge Rate Model, so the Service Charge/Unit is based on calculated weighted average compliance charge. FY2013, FY2014 & FY2015 Service Charge/Unit were adjusted to reflect the weighted average compliance charge calculations. Prior to FY2013, there was only one tier compliance charge. a Ordinance 12561, effective January 1, 2008, changed wastewater rates. Ordinance 12560, changed stormwater rates , effective March 1, 2008. b Ordinance 12754, effective July 1, 2009, changed wastewater rates.c Ordinance 13021, effective July 1, 2010, changed wastewater rates through FY 2012.d Ordinance 13402, effective July 1, 2012, changed wastewater rates through FY 2016. Source: Finance Department Fiscal Year Fiscal Year SEWER USER CHARGES (COMPOSITE-ANNUAL) LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 94 Single Multi- Fiscal Family Family Non- Total Year Residential Residential Residential Accounts 2007 362,569 44,875 25,647 433,091 2008 391,181 54,862 32,336 478,379 a 2009 388,791 51,441 32,161 472,393 a 2010 387,670 50,867 31,939 470,476 a 2011 362,739 43,471 24,702 430,912 b 2012 360,354 41,648 24,568 426,570 2013 359,243 41,117 24,441 424,801 2014 358,928 40,951 24,297 424,176 2015 359,317 41,131 24,389 424,837 2016 356,926 41,585 24,001 422,512 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 '11. b The number of accounts were revised as stormwater accounts were underreported. NUMBER OF CUSTOMERS BY TYPE LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 95 Customer Amount % InBev Anheuser-Busch 5,428,513$ 1.80% City of St. Louis 2,697,436 0.89% Washington Unversity 1,613,905 0.53% Bridgeton Landfill LLC 1,597,732 0.53% Sigma-Aldrich 1,149,118 0.38% Mallinckrodt 756,826 0.25% Jost Real Estate 736,728 0.24% Sensient Colors Inc 729,584 0.24% BJC HealthCare 725,948 0.24% Monsanto 725,861 0.24% Subtotal (10 largest) 16,161,651 5.35% Balance from other customers 285,850,242 94.65% Grand totals 302,011,893$ 100.00% Customer Amount % Anheuser-Busch 7,748,781$ 3.98% Mallinckrodt Inc. 1,861,938 0.96% Washington University 812,536 0.42% Zoological Gardens 772,108 0.40% Sigma-Aldrich 641,540 0.33% St. Louis Coca-Cola Bottling Co. 637,326 0.33% Rockwood Pigments NA, Inc. 592,840 0.30% Chrysler Corporation 545,368 0.28% Sensient Colors Inc. 516,200 0.26% City of St. Louis 503,653 0.26% Subtotal (10 largest) 14,632,290 7.51% Balance from other customers 180,166,588 92.49% Grand totals 194,798,878$ 100.00% Source: Budget Division after data is accumulated for the GFOA report Fiscal Year 2007 User Charges TEN LARGEST CUSTOMERS CURRENT YEAR AND NINE YEARS AGO User Charges Fiscal Year 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 96 Unamortized As a Share Fiscal Subordinate Capital Premium, debt of Personal Year Senior Subordinate Direct Loans Lease loss, net Amount Per Capita Income 2007 231,995,000$ 213,652,500$ 337,730$ —$ 4,189,928$ 450,175,158$ 330 0.42 2008 230,485,000 206,522,500 269,299 — 3,974,435 441,251,234 324 0.67 2009 258,965,000 235,932,500 215,790 4,130,000 2,640,838 501,884,128 373 0.81 2010 342,370,000 224,505,000 31,017,371 7,263,687 1,457,910 606,613,968 446 1.00 2011 340,590,000 212,655,000 25,259,899 6,095,981 862,654 585,463,534 431 0.97 2012 390,880,000 200,692,500 63,727,722 3,096,139 5,805,206 664,201,567 484 1.09 2013 594,715,000 188,600,000 93,751,658 — 56,252,401 933,319,059 660 1.45 2014 740,655,000 184,075,000 116,090,820 — 82,274,845 1,123,095,665 852 1.86 2015 736,775,000 171,455,000 148,279,465 — 78,591,961 1,135,101,426 860 1.83 2016 860,460,000 158,765,000 184,141,916 — 112,035,478 1,315,402,394 997 2.09 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 fiscal year 2012, a decision was made to discontinue considering SRF receivable amounts as liabilities. The liability is now recorded when the funds are received. Sources: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce, and the U.S. Census Bureau LAST TEN FISCAL YEARS Revenue Bonds Total RATIOS OF OUTSTANDING DEBT BY TYPE THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 97 Amount of Debt Percentage of Debt within within Governmental Unit Debt Outstanding District Boundary District Boundary City of St. Louis 16,795,000$ 16,795,000$ 100.0% St. Louis County 101,310,000 100,499,520 99.2 Municipalities 89,607,953 86,402,953 96.4 City of St. Louis School District 298,119,000 298,119,000 100.0 St. Louis County School Districts 1,413,594,262 1,397,300,622 98.8 Fire Districts 107,099,039 99,578,034 93.0 2,026,525,254$ 1,998,695,129 98.6% Total Direct Debt 1,315,402,394 Total Direct and Overlapping Debt 3,314,097,523$ 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 COMPUTATION OF OVERLAPPING DEBT As Of June 30, 2016 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 terriroty. These percentages are weighted against the debt outstanding thus providing the amount of debt within District Boundary. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 98 Less: Operating Non- Expenses Net Fiscal Operating operating Gross (excluding Available Year Revenues Revenues Revenues depreciation) Revenues 2007 200,963,085$ 13,501,751$ 214,464,836$ 138,089,529$ 76,375,307$ 2008 208,981,377 13,281,919 222,263,296 142,725,186 79,538,110 2009 209,972,662 10,283,104 220,255,766 138,971,881 81,283,885 2010 204,697,929 4,908,296 209,606,225 145,598,505 64,007,720 2011 217,011,360 3,202,219 220,213,579 160,572,145 59,641,434 2012 224,882,086 2,058,300 226,940,386 135,232,302 91,708,084 2013 240,597,715 956,664 241,554,379 146,372,419 95,181,960 2014 264,422,401 2,670,333 267,092,734 153,221,914 113,870,820 2015 288,835,877 2,555,654 291,391,531 163,287,562 128,103,969 2016 318,463,297 3,894,305 322,357,602 171,316,778 151,040,824 Fiscal Coverage Year Principal Interest Total Ratio 2007 7,817,500$ 16,512,429$ 24,329,929$ 3.1 2008 8,640,000 17,694,791 26,334,791 3.0 2009 12,110,000 17,503,892 29,613,892 2.7 2010 13,022,500 20,187,151 33,209,651 1.9 2011 14,576,800 20,140,021 34,716,821 1.7 2012 16,540,200 22,517,473 39,057,673 2.3 2013 18,749,700 31,191,190 49,940,890 1.9 2014 10,037,200 34,399,261 44,436,461 2.6 2015 20,252,200 41,596,192 61,848,392 2.1 2016 29,588,000 44,171,592 73,759,592 2.0 Fiscal Coverage Year Principal Interest Total Ratio 2007 1,505,000$ 9,369,084$ 10,874,084$ 7.0 2008 1,510,000 11,067,634 12,577,634 6.3 2009 1,520,000 11,677,272 13,197,272 6.2 2010 1,595,000 13,396,341 14,991,341 4.3 2011 1,780,000 15,467,269 17,247,269 3.5 2012 1,960,000 16,488,587 18,448,587 5.0 2013 3,805,000 24,451,656 28,256,656 3.4 2014 4,060,000 30,161,408 34,221,408 3.3 2015 3,880,000 34,472,415 38,352,415 3.3 2016 10,170,000 36,211,319 46,381,319 3.3 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. Senior and Subordinate Debt Service PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Senior Debt Service THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 99 Per Personal Capita Total Fiscal Income Personal Labor Number of Year Populations (millions) Income City County State Force Households (1) 2007 1,349,778 59,200$ 43,859$ 7.5 5.1 5.0 723,627 551,388 2008 1,348,462 62,135 46,079 7.9 5.9 6.0 690,006 551,388 2009 1,339,011 61,947 46,263 11.5 9.7 9.5 681,801 551,388 2010 1,356,289 60,792 44,822 12.3 9.4 9.3 682,165 551,388 2011 1,357,035 60,420 44,523 11.8 8.9 9.0 692,071 546,744 2012 1,360,085 60,283 44,323 9.7 6.9 7.0 672,945 546,744 2013 1,328,610 60,399 45,460 10.5 7.3 7.1 665,086 543,851 2014 1,318,610 60,968 46,237 9.6 6.9 6.6 666,200 543,991 2015 1,319,295 61,910 46,926 7.1 5.5 5.8 703,317 543,945 2016 1,319,047 62,983 47,749 5.9 4.6 4.9 718,821 542,223 Notes: (1) The number of households was taken from http://quickfacts.census.gov/qfd/states/29000.html. The 2016 figure is based on 2010-2014 data. The 2015 figure is based on 2013 data. The 2011-2012 figures are based on the 2010 census. Information for prior years are 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.missourieconomy.org/indicators/LAUS/default.aspx http://quickfacts.census.gov/qfd/states/29000.html Unemployment Rate Saint Louis DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 100 Percentage Percentage Employer Employees (1)of Total Rank Employees (1)of Total Rank BJC HealthCare 24,182 4% 1 23,001 3% 1 Wal-Mart Stores Inc. 22,006 3% 2 13,005 2% 5 SSM Healthcare 15,949 2% 3 12,582 2% 6 Washington University in St. Louis 14,692 2% 4 12,423 2% 7 Boeing Defense, Space & Security 14,617 2% 5 16,000 2% 2 Mercy 13,715 2% 6 0% Scott Air Force Base 13,000 2% 7 13,331 2% 3 Schnuck Markets Inc. 10,897 2% 8 10,700 2% 8 Archdiocese of St. Louis 10,460 2% 9 AT & T 10,015 1% 10 9,442 1% 9 United States Postal Service 13,304 2% 4 St. John's Mercy Health Care 8,642 1% 10 149,533 22% 132,430 20% 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 2016 (as of May 2016) St. Louis Business Journal's Book of Lists 2007 Fiscal Year 2007Fiscal Year 2016 PRINCIPAL EMPLOYERS (ST. LOUIS METROPOLITAN AREA) CURRENT YEAR AND NINE YEARS AGO THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 101 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Administrative 125 131 133 131 124 129 124 122 129 126 Office/Clerical 86 92 94 89 84 85 86 82 84 82 Plant Operation & Laboratory 234 239 237 249 241 244 249 252 236 226 Engineering & Technical 122 133 144 151 147 153 148 151 155 152 Sewer Construction & Maintenance 271 276 301 315 296 311 324 328 345 358 Total Employees 838 871 909 935 892 922 931 935 949 944 Source: Human Resources Department EMPLOYMENT LEVEL LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 102 Average Sewage Fiscal Treatment in Millions Year of Gallons per Day 2007 313.4 2008 363.7 2009 394.7 2010 395.5 2011 370.6 2012 300.0 2013 326.7 2014 273.8 2015 327.5 2016 335.2 Source: Operations Department AVERAGE FLOW LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 103 2007 2008 2009 2010 2011 Miles of sewers 9,764 9,723 9,812 9,900 9,843 Number of treatment plants 8 7 7 7 7 Treatment capacity (MGD) a 426 428 423 423 528 Annual engineering maximum plant capacity (millions of gallons) 155,490 154,395 154,395 154,395 192,629 Amount treated annually (millions of gallons) 114,391 132,751 144,066 144,358 135,269 Unused capacity (millions of gallons) 41,099 21,644 10,329 10,037 57,360 Percentage of capacity utilized 74% 86% 93% 93% 70% 2012 2013 2014 2015 2016 Miles of sewers 9,738 9,578 9,563 9,531 9,700 Number of treatment plants 7 7 7 7 7 Treatment capacity (MGD) a 528 528 533 538 538 Annual engineering maximum plant capacity (millions of gallons) 192,629 192,629 194,454 196,279 196,279 Amount treated annually (millions of gallons) 109,518 119,253 99,945 119,547 122,366 Unused capacity (millions of gallons) 83,111 73,376 94,509 76,732 73,913 Percentage of capacity utilized 57% 62% 51% 61% 62% Sources: Operations Department and Engineering Department Note:a Million gallons per day. Fiscal Year Fiscal Year OPERATING AND CAPITAL INDICATORS LAST TEN FISCAL YEARS