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Exhibit MSD 11 - 2017 Comprehensive Annual Financial Report (CAFR)Malin e C r e e k Stora g e F a c i l i t y Const r u c t i o n COMPREHENSIVE ANNUALFINANCIAL REPORTFISCAL YEARS ENDED JUNE 30, 2017 and 2016 THE METROPOLITANST. LOUISSEWER DISTRICT ST. LOUIS, MISSOURI THE METROPOLITAN ST. LOUIS SEWER DISTRICT ST. LOUIS, MISSOURI COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEARS ENDED JUNE 30, 2017 AND 2016 Report Prepared And Submitted By The Department of Finance Marion M. Gee Director Of Finance Contents Page Part I – Introductory Section: Letter Of Transmittal ...................................................................................................................i Organization Chart ....................................................................................................................xii Certificate Of Achievement For Excellence In Financial Reporting......................................xiii Part II –Financial Section: Independent Auditors’ Report .....................................................................................................1 Management’s Discussion And Analysis ....................................................................................3 Basic Financial Statements Statements Of Net Position..................................................................................................16 Statements Of Revenues, Expenses, And Changes In Net Position..................................18 Statements Of Cash Flows ...................................................................................................19 Notes To Financial Statements............................................................................................21 Required Supplementary Information Schedule Of Changes In Net Pension Liability And Related Ratios .................................87 Schedule Of Employer Contributions – Employees’ Pension Plan ....................................88 Schedule Of Funding Progress – Other Post-Employment Benefit Plan..........................88 Part III – Statistical Section: Net Position By Component........................................................................................................89 Changes In Net Position.............................................................................................................90 Operating Revenues By Source..................................................................................................91 Operating Expenses ....................................................................................................................92 Non-Operating Revenues And Expenses...................................................................................93 User Charge Rates ......................................................................................................................94 User Charge Revenues................................................................................................................95 Sewer User Charges (Composite-Annual) .................................................................................96 Number Of Customers By Type .................................................................................................97 Ten Largest Customers...............................................................................................................98 Ratios of Outstanding Debt By Type .........................................................................................99 Computation Of Overlapping Debt ..........................................................................................100 Pledged Revenue Coverage.......................................................................................................101 Demographic And Economic Statistics....................................................................................102 Principal Employers (St. Louis Metropolitan Area)................................................................103 Employment Level.....................................................................................................................104 Average Flow.............................................................................................................................105 Operating And Capital Indicators............................................................................................106 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, 2017 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, 2017, 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, 2017. The Financial Section includes the independent auditors’ report, management’s discussion and analysis, and the District’s basic financial statements. The Statistical Section includes financial, economic, and demographic information, generally presented on a multi-year basis. The CAFR includes all funds of the District. The operations of these funds, as reflected in the financial statements, are under the control of the District’s governing body. The District has determined there were no other agencies or entities that met the established criteria for inclusion in the reporting entity. The Board of Trustees The Metropolitan St. Louis Sewer District ii Organization MSD was created in 1954 to provide a metropolitan-wide sewer system to serve the City of St. Louis and most of the more heavily populated areas of St. Louis County. Before MSD’s creation, the City of St. Louis, various municipalities, and private sewer companies provided sewer service that primarily included only collecting and transporting sewage from small geographic areas to nearby rivers and streams with little or no treatment. Most of the municipalities or private sewer companies serving the area did not have the jurisdictional authority or financial resources needed to eliminate health hazards from untreated sewage. When the District began operations, it took over the publicly owned wastewater and stormwater drainage facilities within its jurisdiction and began the construction of an extensive system of collector and interceptor sewers and treatment facilities. In 1977, voters approved the District’s annexation of a 270 square mile area of the lower Missouri River and lower Meramec River watersheds. The District purchased the Fee Fee Trunk Sewer Company and the Missouri Bottoms Sewer Company in 1978. MSD has since acquired other investor-owned or municipally operated systems. The District’s service area now encompasses 520 square miles including all 66 square miles of the City of St. Louis and 454 square miles of St. Louis County. The current population served by the District is approximately 1.3 million. 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 appointed from the City or County can be affiliated with the same political party. The Board of Trustees The Metropolitan St. Louis Sewer District iii Unlike a corporation’s board of directors that is responsible solely to the stockholders who choose to invest in the corporation, MSD’s Board members are trustees of public property and public funds. They are responsible to all citizens within the District. According to the Plan, the Board enacts District ordinances, determines policies, and appoints the Executive Director, the Secretary-Treasurer, and the Internal Auditor. The Executive Director appoints all other District officials. Among its duties, the Board makes all appropriations, approves contracts for improvements, and engages an accounting firm to perform the annual independent audit of the District. The Plan prescribes other duties of the Board and grants numerous broad powers, subject to federal and state laws, to the District and the Board of Trustees. Among other things, the Plan outlines the following requirements or provisions: !Requires that MSD operate with a balanced budget; !Details how MSD can tax property and requires an annual public hearing on all taxes levied by the District; !Details how MSD can establish user charges; !Requires MSD to establish civil service rules and regulations governed by a Civil Service Commission; !Provides how the original boundaries of the District may be extended to include any area in St. Louis County; and !Requires MSD to approve all plans and designs for proposed construction, alteration, or reconstruction of sewer or drainage facilities within the District’s boundaries. The District is also governed by the Missouri State Constitution and various federal and state laws that among other requirements mandate the following: !MSD must hold permits for all sanitary discharges. These permits require a minimum of secondary treatment; !MSD must provide wastewater treatment in an area-wide manner to qualify for federal and state grants; !MSD must operate, maintain, and replace facilities to provide proper wastewater treatment or be subject to penalties and fines; and !MSD must set user charge rates in compliance with the Federal Clean Water Act. These rates must be submitted to the Missouri Department of Natural Resources to receive future construction grants and to avoid the possibility of refunding past grants. The Board of Trustees The Metropolitan St. Louis Sewer District iv During fiscal 2017 the primary source of funding for the operation and maintenance of MSD’s wastewater system was a user charge averaging $535.08 per year or $44.59 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. Prior to fiscal year 2017, the operation and maintenance of the District’s stormwater system was funded by a combination of property taxes and flat fee billing of 24¢ per month for residential and commercial properties and 18¢ per month per unit for multi- unit properties. On April 5, 2016, 62% of voters in MSD’s service area approved Proposition S which placed all MSD customers under the same property tax rates to fund stormwater services. The flat fee billings were eliminated. MSD also receives some federal, state, and local grants to help defray the cost of constructing sewage treatment and drainage facilities and improvements. The District also charges fees for plan review, permits, construction inspection of new system development, and special discharges. The District charges a uniform connection fee in all service areas. The District, itself, may issue general obligation bonds and revenue bonds to finance the cost of improvements and extensions to the sewer system. The District also may issue, on behalf of each of its subdistricts, general obligation bonds, revenue bonds, or special assessment bonds. 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 late April 2017 and continuing into the first week of May, the District received up to 11 inches of rain in portions of its service area. The Missouri and Mississippi Rivers reached major flood levels; however, neither river exceeded the protection levels provided by levees or flood walls. The Meramec River also experienced record flooding which caused water levels to exceed levee heights. The District’s wastewater treatment plants sustained minor damages during this rain event; however, sixteen pump stations were damaged. MSD received 1,750 customer calls resulting in approximately 800 water backup claims with a reserve of approximately $1.3 million. Total costs to protect the District’s facilities during the rain event or to make repairs afterwards are estimated at approximately $1.5 million. The District has submitted applications to the Federal Emergency Management Agency to recover a portion of this cost. 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. The Board of Trustees The Metropolitan St. Louis Sewer District vi 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 set rates for the District for a four-year period which covered fiscal year 2017 through fiscal year 2020. The proposal also recommended the establishment of the aforementioned District-wide tax structure to replace the multi-layered taxes previously 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. 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, 2017, the District has issued $1.7 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. 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. 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. The Board of Trustees The Metropolitan St. Louis Sewer District vii 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 9,400 miles of pipe and channel and will grow larger over the long term due to new development. Some years may actually see a reduction in total miles of pipe. This is due to the replacement of inefficiently placed pipe with shorter, more direct lines of pipe. The District’s responsibilities for stormwater drainage range from cleaning and maintaining street inlets to operating and maintaining the floodwall pump stations along the Mississippi River. MSD currently operates seven wastewater treatment facilities. These facilities treated an average flow of 328.9 million gallons per day (“MGD”) in fiscal 2017 compared to 335.2 MGD in fiscal 2016. The design capacity and average flow, by watershed, in MGD was as follows in fiscal 2017: MAJOR WATERSHED LEVEL OF TREATMENT NUMBER OF FACILITIES DESIGN CAPACITY (MGD) AVERAGE FLOW FISCAL 2017 (MGD) Mississippi River Secondary Two 472.00 245.4 Missouri River Secondary Two 78.00 50.7 Meramec River Secondary Three 42.75 32.8 Total Seven 592.75 328.9 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. Economic Conditions In The St. Louis Metropolitan Area As a rule, the District’s major revenue sources do not fluctuate with the local and national economy as much as local governments that depend on sales or income taxes for their major sources of revenue. The combined unemployment rate for the City of St. Louis and St. Louis County was 3.9 percent in June 2017 and lower than the national unemployment rate of 4.4 percent for the same time period. The Board of Trustees The Metropolitan St. Louis Sewer District viii MSD has its own internal barometers for measuring economic development within the District. These are listed below for fiscal 2017 and 2016: 2017 2016 Sewer Plan Reviews: Number of Plans Approved 523 613 Number of Miles of Sewers 34 38 Sewer Construction Permits: Number of Permits Issued 3,740 4,546 Number of Miles of Sewers 24 30 Customer Connections: Number of Connection Permits Issued 1,891 2,165 Connection Fee Revenue (in millions) $2.0 $1.7 Value of Sewers Dedicated to MSD by Developers (in millions)$6.8 $11.3 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. Financial Information Proprietary Operations. The current financial condition of MSD remains stable. The District realized a net operating income of $58.4 million in fiscal 2017 compared to a net operating income of $46.8 million the prior year. The increase in operating revenues of $11.6 million is explained by an increase in sewer service revenue as a result of rate increases, in conjunction with a lower provision for doubtful sewer service charges (bad debt), offset by a reduction related to the insurance recoveries recorded in fiscal 2016. Operating expenses increased $2.0 million due to an increase in annual pension expense offset by a reduction in water backup claims primarily related to the flood that occurred in fiscal 2016. A more in-depth analysis of the District’s financial position and the magnitude of the capital improvement and replacement program (“CIRP”) is provided in the Management’s Discussion and Analysis section that appears later in this report. The Board of Trustees The Metropolitan St. Louis Sewer District ix Budgetary Controls. The District’s Plan requires MSD to submit a proposed budget to the Board by March 15th each year. After Board review, a final budget is approved in June. The District’s Plan also requires MSD to maintain budgetary controls and to adopt a balanced budget. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the appropriation process approved by the Board. The annual appropriated budget includes activities of the District’s operating and debt service funds. The Board adopts ordinances to appropriate funds for capital improvement expenditures at the time of the contract award and acceptance of any grant offers. Budgetary control is by Division and major expenditure category within the General Fund, each Debt Service Fund, and each capital improvement contract. The District utilizes an encumbrance accounting system in conjunction with internal variance and projection analysis to maintain budgetary control. Certain encumbrances carry over from one year to the next as approved by the Board during the budget process. Monthly and year-end financial reports are prepared in accordance with United States generally accepted accounting principles for Enterprise Funds. Adjustments are made to the accounting records, where necessary, to reflect the full accrual method of accounting. Under the full accrual method of accounting, revenues are recognized when earned and expenses are recorded as liabilities when incurred. Encumbrances and unearned capital and operating grants are eliminated under the full accrual method of accounting. These amounts are disclosed as commitments in the notes to financial statements. Cash Management.In compliance with its Plan, the District invests temporarily idle funds in cash, cash equivalents and investments such as collateralized certificates of deposit, collateralized repurchase agreements, obligations of any agency of the United States, and United States Treasury instruments. The District utilizes competitive bidding for investment purchases and monitors market conditions daily. Risk Management.In-house staff and consultants jointly conduct risk management activities. MSD maintains third-party commercial insurance coverage for various risks while self-insuring for other risks and liabilities at levels customary for similar enterprises. The District maintains replacement cost property and casualty insurance with a policy limit of $1.25 billion on certain facilities and equipment that have an estimated replacement cost of $1.5 billion. The District assumes the risk of loss (including payment of water backup claims to its customers) on the majority of its underground pumping facilities and collection system. MSD is one of the few sewer districts in the country known to provide water backup claim coverage to its customers. The underground pumping facility and collection system assets have an estimated replacement cost of $9.9 billion. To minimize exposure to loss, the District inspects its facilities regularly and performs preventative maintenance on them. The Board of Trustees The Metropolitan St. Louis Sewer District x 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. For most construction projects, insurance is obtained by the individual contractor and included in the contract price. Internal Controls.District Management is responsible for designing, establishing, and maintaining an internal control system that protects District assets from loss, theft, or misuse and ensures that adequate accounting data is compiled to prepare financial statements in conformity with United States generally accepted accounting principles. Internal control systems are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and that the evaluation of costs and benefits requires estimates and judgments by management. The District’s internal control system is subject to periodic evaluation by Management, the Board and the District’s independent accountants. Other Information Audit Requirements. The District’s Plan requires an annual audit by independent certified public accountants. The District’s CAFR includes a report on the District’s financial statements by the accounting firm of CliftonLarsonAllen LLP. The Board of Trustees The Metropolitan St. Louis Sewer District xi Besides meeting the requirements set forth in the Plan, the annual audit is also designed to meet the requirements of the 2013 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”) that was issued by the Office of Management and Budget (“OMB”). A Single Audit Report will be issued for the year ended June 30, 2017. 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 ended December 31, 2016 and 2015 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, 2016. The Certificate of Achievement is a prestigious national award that recognizes conformance with the highest standards for preparation of state and local government financial reports. To be awarded the Certificate of Achievement, a government unit must publish an easily readable and efficiently organized CAFR, the contents of which conform to program standards. The CAFR must satisfy both U.S. generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for one year only. The District has received a Certificate of Achievement for the last twenty-nine 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 2017 annual budget. The District has received this award for thirty consecutive years. We believe the fiscal year 2018 budget presentation continues to meet the GFOA’s high standards and submitted it on July 25, 2017, for consideration. Marion M. Gee Director of Finance xii ORGANIZATION (As of June 30, 2017) BOARD OF TRUSTEES James Faul, Chair; Rev. Ronald Bobo, Vice Chair; Ruby Bonner; Annette Mandel; James I. Singer; Michael Yates OFFICE OF INTERNAL AUDITOR RATE COMMISSION Leonard P. Toenjes, Chair OFFICE OF SECRETARY TREASURER Tim R. Snoke Secretary/Treasurer CIVIL SERVICE COMMISSION Tara Buckner Annette Adams Daniel Gonzales EXECUTIVE DIRECTOR Brian L. Hoelscher/CEO FINANCEMarion M. Gee Director OFFICE OF GENERAL COUNSEL Susan M. MyersGeneral Counsel OPERATIONS Jonathon C. SpragueDirector ENGINEERING Rich Unverferth Director OFFICE OF HUMAN RESOURCES Vicki L. Taylor Edwards Director INFORMATION SYSTEMS Barbara E. Mohn Director xiii 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, 2016 Executive Directors/CEO Financial Section METROPOLITAN ST. LOUIS SEWER DISTRICT SERVICE AREAS CliftonLarsonAllen LLP CLAconnect.com (1) INDEPENDENT AUDITORS’ REPORT Board of Trustees The Metropolitan St. Louis Sewer District St. Louis, Missouri Report on the Financial Statements We have audited the accompanying financial statements of the business-type activity of The Metropolitan St. Louis Sewer District, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District’s financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities of The Metropolitan St. Louis Sewer District as of June 30, 2017, and the changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Board of Trustees The Metropolitan St. Louis Sewer District (2) 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. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise The Metropolitan St. Louis Sewer District’s basic financial statements. The introductory section and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. These sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. The 2016 financial statements of The Metropolitan St. Louis Sewer District were audited by other auditors whose report dated October 17, 2016, expressed an unmodified opinion on those statements. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 17, 2017, on our consideration of The Metropolitan St. Louis Sewer District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the result of that testing, and not to provide an opinion on the effectiveness of Metropolitan St. Louis Sewer District’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Metropolitan St. Louis Sewer District’s internal control over financial reporting and compliance. ! CliftonLarsonAllen LLP St Louis, Missouri October 17, 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 3 MANAGEMENT’S DISCUSSION AND ANALYSIS For The Years Ended June 30, 2017 And 2016 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. 2017 Financial Highlights The District increased capital assets by $200.2 million as a result of increases in construction in progress ($177.0 million), land ($1.0 million) and depreciable capital assets net of depreciation ($22.2 million). The District placed $105.3 million of capital assets into service during fiscal year 2017. The continued high level of capitalization reflects the District’s work to meet long-term plans. Capitalized assets included: Collection and pumping plant $60.7 million Treatment and disposal plant and equipment $39.6 millionLand $1.0 million General plant and equipment $4.0 million In conjunction with the recording of additional depreciation relating to new assets, the net increase to accumulated depreciation was $75.4 million. During the year, the District implemented Governmental Accounting Standards Board (“GASB”) Statement No. 77, Tax Abatement Disclosures. This Statement requires disclosure of tax abatement information about (1) the District’s own tax abatement agreements and (2) those that are entered into by other governments and that reduce the District’s tax revenues. The requirements of this Statement improve financial reporting by giving users of financial statements essential information that has not been consistently or comprehensively reported to the public. In summary, the District has no direct tax abatement agreements but the effect of those entered into by the county and municipalities within the District’s boundary decreases the District’s tax revenues by $1,326,394. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 4 2016 Financial Highlights The District increased capital assets by $160.5 million as a result of increases in construction in progress ($122.3 million), land ($13.2 million) and depreciable capital assets net of depreciation ($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 recording of additional depreciation relating to 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. Required Financial Statements The financial statements presented by the management of the District include the Statements of Net Position; Statements of Revenues, Expenses, and Changes in Net Position; and Statements of Cash Flows. These statements are prepared using the accrual basis of accounting. This method of accounting recognizes revenue at the time it is earned and expenses when the related liability occurs. As a result of using this method of accounting, the District’s performance over the time period being reported is more easily determinable. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 5 The Statements of Net Position provide a report of the District’s current, restricted, and other non-current assets such as cash, investments, receivables, and 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 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 $64.1 million. The improvement is due primarily to an increase in net investment in capital assets of $66.9 million. Net capital assets increased $200.2 million while debt related to the capital assets, net of the $27.7 million increase in unspent cash received upon the issuance of new senior debt (“Series 2016C”), only increased $132.8 million. The decrease in construction-related liabilities of $0.2 million increased net investment in capital assets while the increase in debt of $132.8 million and the amortization of the deferred losses recognized upon refundings of $0.7 million decreased net investment in capital assets. The net investment in capital asset increase was offset by a decrease in unrestricted and restricted funds of $1.5 million and $1.3 million, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 6 Condensed Financial Statements and Analysis 2017 Analysis Current, restricted and other assets increased $36.5 million or 5.2% in the current year. The increase is predominately due to an increase in cash and investments due to higher sewer rates charged with increased collections and due to the unspent cash received on the senior debt issued in fiscal 2017. Capital assets net of accumulated depreciation increased by $200.2 million or 6.6% in the current year as the result of continued high levels of construction and acquisition of assets by the District. Current liabilities increased by $8.4 million or 6.7% due primarily to an increase in the current portion of bonds and notes payable and retainage held on capital projects which correlates with the increase in construction. Increase Increase June 30, June 30, (Decrease) June 30, (Decrease) 2017 2016 2017-2016 2015 2016-2015 Assets: Current, restricted, and other assets 743,572$ 707,033$ 36,539$ 628,246$ 78,787$ Capital assets (net of accumulated depreciation)3,252,238 3,052,043 200,195 2,891,569 160,474 Total Assets 3,995,810 3,759,076 236,734 3,519,815 239,261 Deferred Outflow of Resources: NNN Bonds and Notes Payable-Deferred Loss 11,321 11,974 (653) 9,599 2,375 NNN Pension-related Outflows 37,666 31,144 6,522 19,210 11,934 BBBBBBBBB Total Deferred Outflow of Resources 48,987 43,118 5,869 28,809 14,309 Liabilities: Current liabilities 133,679 125,284 8,395 109,153 16,131 Non-current liabilities 1,515,345 1,344,141 171,204 1,158,445 185,696 Total Liabilities 1,649,024 1,469,425 179,599 1,267,598 201,827 Deferred Inflow of Resources: NNN Pension-related Inflows 4,605 5,712 (1,107) 2,910 2,802 BBBBBBBBB Total Deferred Inflow of Resources 4,605 5,712 (1,107)2,910 2,802 Net Position: Net investment in capital assets 1,876,249 1,809,386 66,863 1,805,453 3,933 Restricted 135,259 136,547 (1,288)142,445 (5,898) Unrestricted 379,660 381,124 (1,464)330,218 50,906 Total Net Position 2,391,168$ 2,327,057$ 64,111$ 2,278,116$ 48,941$ Condensed Statements of Net Position (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 7 Non-current liabilities increased by $171.2 million or 12.7% primarily due to $203.8 million relating to the senior and subordinate debt issued in fiscal 2017 offset by $42.7 million for fiscal 2018 senior debt payments reclassified to current liabilities and $5.3 million for premium amortization and $14.4 million pertaining to the increase in the District’s net pension liability. Net deferred outflows and inflows increased $7.0 million or 18.6% due primarily to updates to various information provided by the District’s actuary such as economic/demographic gains or losses, assumption changes or inputs, and investment gains or losses. 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. The St. Louis area received a range of 6 to 12 inches of precipitation, with an average of 9 inches of rain falling over three days in December 2015. This rainfall impacted area rivers, causing flooding and damage at three MSD treatment plants. Capital assets net of accumulated depreciation increased by $160.5 million or 5.5% as the result of continued high levels of construction and acquisition of assets by the District. 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 an increase in the District’s net pension liability. Net deferred outflows and inflows increased $11.5 million or 44.4% due primarily to updates to various information provided by the District’s actuary such as economic/demographic gains or losses, assumption changes or inputs, and investment gains or losses related to the pension. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 8 For the Fiscal For the Fiscal Increase For the Fiscal Increase Year Ended Year Ended (Decrease) Year Ended (Decrease) June 30, 2017 June 30, 2016 2017-2016 June 30, 2015 2016-2015 Operating Revenues: Sewer service charges 330,873$ 306,119$ 24,754$ 284,367$ 21,752$ Recovery (provision) for doubtful sewer service charge accounts (2,513) (4,107) 1,594 (2,096) (2,011) Licenses, permits, and other fees 4,036 3,620 416 6,657 (3,037) Other 1,095 14,226 (13,131) 1,460 12,766 Total Operating Revenues 333,491 319,858 13,633 290,388 29,470 Non-operating Revenues: Property taxes levied by the district 32,458 25,671 6,787 24,764 907 Investment income 2,903 4,636 (1,733) 3,001 1,635 Rent and other income 106 103 3 37 66 Total Non-operating Revenues 35,467 30,410 5,057 27,802 2,608 Total Revenues 368,958 350,268 18,690 318,190 32,078 Operating Expenses: Pumping and treatment 60,203 59,100 1,103 60,766 (1,666) Collection system maintenance 43,928 42,853 1,075 40,162 2,691 Engineering 11,290 10,998 292 10,954 44 General and administrative 58,535 55,315 3,220 48,551 6,764 Water backup claims 5,035 7,631 (2,596) 3,862 3,769 Depreciation 81,194 83,984 (2,790) 78,641 5,343 Asset management 14,893 13,215 1,678 13,586 (371) Total Operating Expenses 275,078 273,096 1,982 256,522 16,574 Non-operating Expenses: Net loss on disposal and sale of capital assets 673 325 348 1,421 (1,096) Non-recurring projects and studies 7,459 11,000 (3,541) 12,317 (1,317) Interest expense 31,251 28,943 2,308 27,139 1,804 Total Non-operating Expenses 39,383 40,268 (885) 40,877 (609) Total Expenses 314,461 313,364 1,097 297,399 15,965 Income Before Capital Grants And Contributions 54,497 36,904 17,593 20,791 16,113 Capital Grants And Contributions 9,614 12,037 (2,423) 12,997 (960) Change in Net Position 64,111 48,941 15,170 33,788 15,153 Net Position - Beginning of Year 2,327,057 2,278,116 48,941 2,267,952 10,164 Effect of Adoption of GASB 68 — — — (23,624) 23,624 Net Position - Beginning of Year, As Restated 2,327,057 2,278,116 48,941 2,244,328 33,788 Net Position - End of Year 2,391,168$ 2,327,057$ 64,111$ 2,278,116$ 48,941$ Statements of Revenues, Expenses, and Changes in Net Position (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 9 2017 Analysis Net position increased $64.1 million or 2.8% over the prior year. Sewer service revenue increased as a result of rate increases. Non-operating property taxes levied by the District also increased due to the establishment of one new taxing district covering the District’s entire service area which increased tax revenue. Total revenue increased by $18.7 million or 5.3%. Sewer service charges increased $24.8 million or 8.1% with the provision for doubtful accounts decreasing by $1.6 million or 38.8% due to increased collections. Other operating revenue decreased $13.1 million or 92.3% due to insurance recoveries in fiscal 2016 related to the December 2015 rain event not repeated in fiscal 2017. Non-operating property taxes increased $6.8 million or 26.4% as a result of the new taxing district referenced above. Total expenses increased slightly by $1.1 million or 0.4% with operating expenses increasing $2.0 million or 0.7% and non-operating expenses decreasing by $0.9 million or 2.2%. The largest operating expense increase was a $3.2 million or 5.8% increase in general and administrative costs primarily related to an increase in pension expense. 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, 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 10 Total expenses increased by $16.0 million or 5.4%. Operating expenses increased by $16.6 million or 6.5%. This increase was primarily the result of the following: !$6.8 million or 13.9% increase in general and administrative costs primarily related to an increase in 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 $0.6 million or 1.5%. For the Fiscal For the Fiscal Increase For the Fiscal Increase Year Ended Year Ended (Decrease) Year Ended (Decrease) June 30, 2017 June 30, 2016 2017-2016 June 30, 2015 2016-2015 Cash flows from operating activities 156,259$ 127,665$ 28,594$ 116,430$ 11,235$ Cash flows from non-capital financing activities 32,013 25,583 6,430 25,824 (241) Cash flows from capital and related financing activities (154,634) (91,512) (63,122) (225,778) 134,266 Cash flows from investing activities (34,721) (74,347) 39,626 86,331 (160,678) Net increase (decrease) in cash and cash equivalents (1,083) (12,611) 11,528 2,807 (15,418) Cash and cash equivalents at beginning of year 49,196 61,807 (12,611) 59,000 2,807 Cash And Cash Equivalents At End Of Year 48,113$ 49,196$ (1,083)$ 61,807$ (12,611)$ Condensed Statements of Cash Flows (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 11 2017 Analysis The District ended the year with $48.1 million in cash and cash equivalents or a decrease of $1.1 million or 2.2% from the prior year. Cash flows from operating activities increased by $28.6 million or 22.4% as a result of increased receipts from customers. Cash flows from non-capital financing activities increased by $6.4 million or 25.1% due to the new District-wide tax levy. Cash flow from capital and related financing activities decreased by $63.1 million or 69.0% due to increased spending for capital assets, decreased bond proceeds and premiums received in fiscal year 2017 compared to fiscal year 2016 and increased interest and fees paid on bonds. Cash flows from investing activities increased by $39.6 million. The increase primarily stems from a greater increase in proceeds from sale and maturity of investments than in purchase of investments from fiscal 2016 to fiscal 2017. 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. During fiscal year 2016, the District changed its reporting methodology so that investments with an original maturity of greater than 90 days remain as investments until they mature and the cash is received. As a result, cash and cash equivalents include only investments with original maturities less than 91 days. The retroactive change resulted in $90.1 million, $87.7 million and $120.0 million being reclassified from cash and cash equivalents to investments in fiscal year 2016, 2015, and 2014, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 12 Capital Assets 2017 Analysis Total capital assets, net of accumulated depreciation, increased by $200.2 million or 6.6% over the prior year. Construction in progress contained the majority of the increase with net additions of $177.0 million or 33.4% consisting of $269.3 million in additions offset by $92.3 million of assets placed into service. The net increase in collection and pumping plant assets was $18.2 million or 1.1%, primarily for capitalization of assets including new and improved sewers, dedicated assets and infrastructure repairs. Net treatment and disposal plant and equipment increased $6.5 million or 0.9%, including costs incurred to replace incinerator scrubbers to meet new regulatory emission standards and to capitalize assets destroyed in the December 2015 flood. Land increased $1.0 million or 1.4% due to the acquisition of easements and other land. General plant and equipment decreased $2.5 million or 10.4% primarily due to depreciation of existing assets. For more detailed information, see Note 4, Capital Assets, in the accompanying notes to the financial statements. 2016 Analysis Total capital assets, net of accumulated depreciation, 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 of assets placed into service. Collection and pumping plant assets increased $38.5 million or 2.3% primarily due to the capitalization of assets including dedicated assets and infrastructure repairs. Land increased $13.2 million or 23.3% including a $12.4 million land reclassification from the Lower Meramec treatment plant asset in February 2016 and $0.8 million from the acquisition of easements and other land. Increase Increase June 30, June 30, (Decrease) June 30, (Decrease) 2017 2016 2017-2016 2015 2016-2015 Land 70,695$ 69,702$ 993$ 56,521$ 13,181$ Construction in progress 707,739 530,734 177,005 408,464 122,270 Treatment and disposal plant and equipment 736,367 729,884 6,483 739,563 (9,679) Collection and pumping plant 1,716,004 1,697,795 18,209 1,659,321 38,474 General plant and equipment 21,433 23,928 (2,495) 27,700 (3,772) Total 3,252,238$ 3,052,043$ 200,195$ 2,891,569$ 160,474$ Condensed Statements of Capital Assets (000's) Net of Depreciation THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 13 Treatment and disposal plant and equipment decreased a net $9.7 million or 1.3% with a net $25.5 million increase in additions offset by $35.2 million in additional depreciation. The $25.5 million net increase includes a $12.4 million decrease due to the land reclassification referenced above and the $3.2 million depreciation impact of the reclassification is included in the $35.2 million additional depreciation. General plant and equipment decreased $3.8 million or 13.6% primarily due to depreciation of existing assets. For more detailed information, see Note 4, Capital Assets, in the accompanying notes to the financial statements. Long-Term Debt Increase Increase June 30, June 30, (Decrease) June 30, (Decrease) 2017 2016 2017-2016 2015 2016-2015 Senior Revenue Bonds: Series 2006C —$ —$ —$ 60,000$ (60,000)$ Series 2008A — — — 30,000 (30,000) Series 2010B 85,000 85,000 — 85,000 — Series 2011B 43,410 45,325 (1,915) 47,170 (1,845) Series 2012A 214,700 220,000 (5,300) 225,000 (5,000) Series 2012B 134,710 137,280 (2,570) 139,605 (2,325) Series 2013B 146,000 149,000 (3,000) 150,000 (1,000) Series 2015B 221,355 223,855 (2,500) — 223,855 Series 2016C 150,000 — 150,000 — — Subordinate Revenue Bonds: Series 2004B 81,545 89,650 (8,105) 97,520 (7,870) Series 2005A 3,800 4,125 (325) 4,440 (315) Series 2006A 25,600 27,950 (2,350) 29,915 (1,965) Series 2006B 8,860 9,565 (705) 10,260 (695) Series 2008AB 25,605 27,475 (1,870) 29,320 (1,845) Missouri DNR: Series 2009A 16,441 17,514 (1,073) 18,564 (1,050) Series 2010A 6,222 6,588 (366) 6,947 (359) Series 2010C 28,361 30,024 (1,663) 31,644 (1,620) Series 2011A 35,692 37,354 (1,662) 38,974 (1,620) Series 2013A 47,786 49,920 (2,134) 52,000 (2,080) Series 2015A 67,149 42,623 24,526 — 42,623 Series 2016A 147 — 147 — — Series 2016B 8,986 — 8,986 — — Energy Loan Program 68 118 (50) 151 (33) Total 1,351,437$ 1,203,366$ 148,071$ 1,056,510$ 146,856$ Condensed Statements of Long-Term Debt (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 14 2017 Analysis The District ended fiscal year 2017 with $1.4 billion in long-term debt outstanding. The District had one senior revenue bond addition this year (“Series 2016C”) for $150.0 million. In addition, the District added two new State Revolving Fund (“SRF”) bonds (“Series 2016A” and “Series 2016B”) totaling $9.1 million and withdrew $27.0 million in proceeds from the Series 2015A SRF bond. For more detailed information, see Note 6, Long-Term Liabilities, in the accompanying notes to the financial statements. 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”) totaling $42.6 million. For more detailed information, see Note 6, Long-Term Liabilities, in the accompanying notes to the financial statements. Decisions Impacting the Future Integral to helping MSD’s rate payers understand the Consent Decree (“CD”) with the U.S. Environmental Protection Agency 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 excess stormwater from entering the sewer system infrastructure to help reduce basement back-ups and overflows; !Performing Repair and Maintenance to the existing infrastructure to ensure it operates as well as possible for as long as possible, and !Building System Improvements where needed to increase the capacity of the system. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 15 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, 2017, the District has issued $1.7 billion of the total authorization. The District’s long-term wastewater capital improvement program will continue to be funded through a combination of additional bonds and wastewater rate increases. Requests For Information This financial report is designed to provide a general overview of the District’s finances for all those with an interest in the District’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed or e-mailed to: Marion M. Gee, Director of Finance The Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, MO 63103-2555 314-768-6200 mgee@stlmsd.com THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 16 STATEMENTS OF NET POSITION June 30, Assets 2017 2016 Current Assets Unrestricted Current Assets Cash and cash equivalentsN 23,095,871$ 26,934,021$ InvestmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 280,288,468 166,147,564 Sewer service charges receivable, less allowance of NNNNNNNNNNNNNNNNN $56,654,014 in 2017 and $55,728,507 in 2016 53,641,066 50,025,233 Unbilled sewer service charges receivable 26,513,717 24,728,826 Property taxes receivable, less allowance of $25,280 in 2017 and $39,127 in 2016 835,213 1,265,106 Accrued income on investmentsNNNNNNNNNNNNNNNNNNNNNNN 1,016,453 805,879 Other receivables, less allowance of $119,264 in 2017 NNNNNNNNNNNNNNNNNNNNNN and $98,460 in 2016 4,707,358 10,184,895 Supplies inventoryNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 7,671,206 7,088,804 BBBBBBBBB Total Unrestricted Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 397,769,352 287,180,328 Restricted Current Assets Cash and cash equivalents 2,171,935 2,065,003 InvestmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 29,674,144 13,393,010 BBBBBBBBB Total Restricted Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 31,846,079 15,458,013 BBBBBBBBB Total Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 429,615,431 302,638,341 Non-Current Assets Restricted Assets Cash and cash equivalentsN 22,845,206 20,197,452 InvestmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 157,273,177 134,209,021 Long-term investmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 54,726,378 69,479,563 Property taxes receivable, less allowance of $32,041 in 2017 and $22,419 in 2016 1,139,195 724,886 Accrued income on investments 361,052 300,628 Other receivablesNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 69,694 — BBBBBBBBB Total Restricted Non-Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 236,414,702 224,911,550 Other Assets Notes receivableNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 12,425,336 12,999,370 Long-term investmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 65,116,013 166,483,086 Total Other AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 77,541,349 179,482,456 Capital Assets Depreciable: NNNNNN Treatment and disposal plant and equipmentNNNNNNNNNN 1,279,143,367 1,239,993,981 NNNNNN Collection and pumping plantNNNNNNNNNNNNNNNNNNNNNNNN 2,475,709,689 2,419,647,020 NNNNNN General plant and equipmentNNNNNNNNNNNNNNNNNNNNNNNNN 94,793,873 92,393,025 NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 3,849,646,929 3,752,034,026 NNNNNN Less:N Accumulated depreciationNNNNNNNNNNNNNNNNNNNNN 1,375,842,413 1,300,427,525 NNNNNN Net depreciable assetsNNNNNN 2,473,804,516 2,451,606,501 Non-depreciable: NNNNNN LandNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 70,695,016 69,702,470 NNNNNN Construction in progressNNNNNNNNNNNNNNNNNNNNNNNNNNNN 707,738,709 530,734,241 Net Capital AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 3,252,238,241 3,052,043,212 NNNNNN Total Non-Current AssetsBBBBBBBBBBBBBBBBBBBBBBBB 3,566,194,292 3,456,437,218 NNNNNN Total AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 3,995,809,723 3,759,075,559 Deferred Outflows of Resources NNN Bonds and notes payable-Deferred loss on refunding 11,320,670 11,973,700 N NN Pension-related outflows 37,665,786 31,144,263 Total Deferred Outflows of ResourcesBBBBBBBBBBBBBBBBBBBBBBBBBBB 48,986,456 43,117,963 THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 17 STATEMENTS OF NET POSITION (Continued) June 30, Liabilities 2017 2016 Current Liabilities-Payable From Unrestricted Assets NNNNNN Contracts and accounts payableNNNNNNNNNNNNNNNNNNNNNN 37,800,519$ 37,420,758$ NNNNNN Deposits and accrued expensesNNNNNNNNNNNNNNNNNNNNNNN 39,646,015 38,958,762 NNNNNN Retainage payableNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 11,486,551 9,119,490 NNNNNN Current portion of bonds and notes payableNNNNNNNNNN 42,733,909 38,059,873 B Total Current Liabilities-Payable From Unrestricted Assets 131,666,994 123,558,883 Current Liabilities-Payable From Restricted Assets NNNNNN Contracts and accounts payableNNNNNNNNNNNNNNNNNNNNNN 1,264,997 1,286,539 NNNNNN RetainageNpayableNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 746,642 438,547 B Total Current Liabilities-Payable From Restricted Assets 2,011,639 1,725,086 BBBBBBBBBBB Total Current LiabilitiesBBBBBBBBBBBBBBBBBBBBBB 133,678,633 125,283,969 NNNNNN Non-Current Liabilities NNNNNN Deposits and accrued expensesNNNNNNNNNNNNNNNNNNNNNNN 15,137,690 14,198,048 NNNNNN Net pension liability 67,039,185 52,600,003 NNNNNN Bonds and notes payableNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 1,433,168,099 1,277,342,521 BBBBBBBBBBB Total Non-Current LiabilitiesBBBBBBBBBBBBBBBBBBBBBB 1,515,344,974 1,344,140,572 NNNNNN BBBBBBBBBBBBBBBBBBBBB Total LiabilitiesBBBBBBBBBBBBBBBBBBBB 1,649,023,607 1,469,424,541 Deferred Inflow of Resources NNN Pension-related inflows 4,604,518 5,711,868 BBBBBBBBBBB Total Deferred Inflow of Resources 4,604,518 5,711,868 Net Position NNNNNN Net investment in capital assets 1,876,248,859 1,809,386,175 NNNNNN Restricted for: NNNNNNNN Debt serviceNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 55,319,023 55,364,013 NNNNNNNN Subdistrict construction and improvementNNNNNNNNNN 79,940,036 81,182,753 NNNNNN UnrestrictedNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 379,660,136 381,124,172 Total Net Position 2,391,168,054$ 2,327,057,113$ N THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 18 STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION 2017 2016 B Operating Revenues NNN Sewer service chargesNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 330,873,269$ 306,118,545$ NNN Provision for doubtful sewer service charge accounts (2,513,743) (4,106,652) NNN Licenses, permits and other feesNNNNNNNNNNNNNNNNNNNNNN 4,036,362 3,620,240 NNN OtherNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 1,095,101 14,225,598 BBB Total Operating RevenuesBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 333,490,989 319,857,731 NNNNNN B Operating Expenses NNN Pumping and treatmentNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 60,203,037 59,099,820 NNN Collection system maintenanceNNNNNNNNNNNNNNNNNNNNNNNNNN 43,928,161 42,853,337 NNN EngineeringNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 11,289,906 10,997,619 NNN General and administrativeNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 58,534,411 55,315,372 NNN Water backup claimsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 5,035,020 7,631,197 NNN DepreciationNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 81,194,391 83,983,749 NNN Asset managementNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 14,892,749 13,214,611 BBB Total Operating ExpensesBBBBBBBBBBBBBBBBBBBBBBBBBBBB 275,077,675 273,095,705 NNNNNN B Operating IncomeBBBBBBBB 58,413,314 46,762,026 NNNNNN B Non-Operating Revenues NNN Property taxes levied by the DistrictNNNNNNNNNNNNNNNNNN 32,458,054 25,671,058 NNN Investment incomeNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 2,902,624 4,635,866 NNN Rent and other incomeNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 106,562 102,865 BBB Total Non-Operating RevenuesBBBBBBBBBBBBBBBBBBBBBBBBB 35,467,240 30,409,789 NNNNNN B Non-Operating Expenses NNN Net loss on disposal and sale of capital assetsNNNNNNNN 673,044 324,513 NNN Non-recurring projects and studiesNNNNNNNNNNNNNNNNNNNNNN 7,459,538 11,000,403 NNN Interest expenseNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 31,250,777 28,943,200 BBB Total Non-Operating ExpensesBBBBBBBBBBBBBBBBBBBBBBBBB 39,383,359 40,268,116 NNNNNN B Income Before Capital Grants And ContributionsBBBBBBBBBBBBBBBBBBBBBB 54,497,195 36,903,699 NNNNNN B Capital Grants And Contributions NNN Utility plant contributedNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 6,807,147 11,271,085 NNN Grant revenueNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 2,806,599 765,699 BBB Total Capital Grants And ContributionsBBBBBBBBBBBBBBBBBBBBBBBBB 9,613,746 12,036,784 NNNNNN B Change In Net Position 64,110,941 48,940,483 B Net Position - Beginning Of Year 2,327,057,113 2,278,116,630 NNNNNN B Net Position - End Of YearBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 2,391,168,054$ 2,327,057,113$ For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 19 STATEMENTS OF CASH FLOWS Continued on Next Page 2017 2016 Cash Flows From Operating Activities Received from customers 341,958,578$ 307,087,452$ Paid to employees for services (94,528,620) (94,386,428) Paid to suppliers for goods and services (91,171,051) (85,035,869) Net Cash Provided By Operating Activities 156,258,907 127,665,155 Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collected 32,013,277 25,583,025 Cash Flows From Capital And Related Financing Activities Proceeds from capital grants 100,283 22,649 Proceeds from issuance of debt 185,520,681 192,622,808 Premium on sale of bonds 17,678,054 26,727,475 Interest received on bond proceeds to be used for capital improvements — — Principal paid on debt (38,076,770) (38,565,916) Interest and fees paid on debt (54,306,129) (47,582,180) Payments for capital assets (267,222,460) (227,194,869) Proceeds from sale of capital assets 48,920 834,701 Build America bond tax credit 1,622,822 1,623,694 Net Cash Provided By (Used In) Capital And Related Financing Activities (154,634,599) (91,511,638) Cash Flows From Investing Activities Purchase of investments (524,918,096) (414,418,954) Proceeds from sale and maturity of investments 483,199,458 333,435,010 Investment income 6,891,027 6,533,672 Proceeds from rents 106,562 102,865 Net Cash Provided By (Used In) Investing Activities (34,721,049) (74,347,407) Net Decrease In Cash And Cash Equivalents (1,083,464) (12,610,865) Cash And Cash Equivalents At Beginning Of Year 49,196,476 61,807,341 Cash And Cash Equivalents At End Of Year 48,113,012$ 49,196,476$ 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 18,417,813 24,337,151 Utility plant contributed by other governments and developers 6,807,147 11,271,085 Fair value investment adjustment gain 1,847,824 1,763,059 Grant revenueNN 2,706,316 743,050 For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 20 STATEMENTS OF CASH FLOWS (Continued) 2017 2016 Reconciliation Of Operating Income To Net Cash Flows Provided By Operating Activities Operating Income 58,413,314$ 46,762,026$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 81,194,391 83,983,749 Change in operating assets and liabilities: (Increase) in billed and unbilled sewer service charges receivable (5,400,724) (2,609,800) (Increase) decrease in other receivables 8,636,127 (7,749,740) (Increase) in supplies inventory (582,402) (728,265) Increase in contracts and accounts payable 5,810,997 2,564,950 Increase in deposits and accrued expenses 1,376,895 1,870,437 Increase in net pension liability 14,439,182 12,704,012 (Decrease) increase in pension-related inflows (1,107,350) 2,801,726 (Increase) in pension-related outflows (6,521,523) (11,933,940) Net Cash Provided By Operating Activities 156,258,907$ 127,665,155$ For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 21 NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 1. Organization And Summary Of Significant Accounting Policies Organization The Metropolitan St. Louis Sewer District (“District”) was authorized by the voters, established and chartered under the provisions of the Constitution of Missouri as a municipal corporation and a political subdivision of the State of Missouri. Upon creation in 1954, the District assumed responsibilities to provide for the construction, operation, and maintenance of the sewer facilities within its defined boundaries. The District’s service area now comprises all of the City of St. Louis and most of St. Louis County. Subdistricts within the District’s total service area represent separate geographic areas within which specific taxes can be levied for the retirement of indebtedness issued to finance construction of 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 22 Measurement Focus, Basis Of Accounting And Financial Statement Presentation Throughout the year, the District maintains its detailed accounting records on a modified accrual basis of accounting. In order to account for the transactions related to certain subdistricts and restricted resources, separate fund accounting records are maintained. For financial reporting purposes, the District reports its operations as a single enterprise fund. 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 23 Intergovernmental revenues, representing grants and assistance received from other governmental units, are generally recognized as revenues in the period when all eligibility requirements, as defined by GASB Statement No. 33, have been met. Any resources received where all requirements are met with the exception of the time requirement are recorded as deferred inflows. All other resources received before any other eligibility requirements are met are reported as unearned revenues. 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. 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 24 Accounts Receivable Accounts receivable is composed primarily of charges to customers for wastewater and stormwater services. In fiscal year 2016 the stormwater sewer service charge was $.24 per month for a single residential unit and $.18 per month per unit for multi-residential units. Beginning in fiscal year 2017, with the voter approval of one taxing district covering the entire MSD service area, these stormwater sewer service charges were eliminated. 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 3 to 100 years Collection and pumping plant 7 to 100 years General plant and equipment 3 to 12 years When developing user charge rates, the District includes funding for replacement cost of assets, which may differ from depreciation expense recorded for financial reporting purposes. Normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Betterments are capitalized and depreciated over the remaining useful lives of the related assets, as applicable. The District defines capital assets as assets with an initial, individual cost 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 25 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 2017 and 2016, the District’s total net interest cost incurred on tax-exempt borrowings during the fiscal year was $44,057,337 and $37,475,123, respectively. Of this net interest cost, $18,040,989 and $14,733,405 was capitalized and $26,016,348 and $22,741,718 was expensed in 2017 and 2016, respectively. Supplies Inventory Supplies inventory consists of parts and supplies to be used to operate and maintain treatment facilities and various treatment-related equipment at the District. This inventory figure is netted against those materials and supplies deemed to be obsolete. All inventory is stated at weighted average cost and expenses are recognized when the inventory is consumed. Net Position One component of the District’s net position is the net investment in capital assets which consists of capital assets, including restricted capital assets, net of accumulated depreciation, reduced by the net outstanding debt and construction- related liabilities, including premiums and discounts on such debt, which is attributable to the acquisition, construction, or improvement of those assets. The outstanding debt is net of the cash and investments from the debt that has not yet been expended. Deferred losses on refundings are also included in the net investment in capital assets net position. The 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, including accrued interest, on certain debt of the District. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 26 The unrestricted net position component of net position consists of net position that does not meet the definition of restricted or net investment in capital assets. The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. The net position components in the 2016 financial statements have been reclassified to conform to the 2017 presentation. These reclassifications do not affect total net position as previously reported. 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. The District’s deferred inflows of resources relate to certain changes in pension obligations that are amortized over future periods. Capital Contributions Capital contributions to the District represent government grants and other aid used to fund capital projects. In accordance with GASB Statement No. 33, capital contributions are recognized as revenue when the expenditure is made and the amount becomes subject to claim for reimbursement. 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 27 Compensated Absences Vacation Under the terms of the District’s personnel policies, employees are allowed to carry a maximum of 30 to 45 days of vacation (depending on length of service) from one calendar year to the next. Since vacation accrued at year-end is expected to be used by the employee during the following fiscal year, the accrual is reported as a component of current deposits and accrued expenses payable. Sick Leave Employees earn sick pay benefits at accrual rates ranging from 10 days per year to 12 days per year (depending on length of service). Unused sick leave can be carried over at year-end without limitation. An employee retiring from the District with five or more years of service will be compensated for any unused accrued sick leave at the rate of 1.25% for each year of District service multiplied by the unused accrued sick leave remaining at the employee’s current rate of pay up to a maximum of $50,000. The District has recorded a liability which has been actuarially determined to be equal to the accumulated expense charge that will amortize the employees’ benefits over their period of District service. The liability, included in current deposits and accrued expenses payable, includes vested accumulated rights to receive sick leave benefits estimated to be paid within one year. The portion of sick leave expected to be paid after one year is recorded as a component of non-current deposits and accrued expenses payable. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, the fiduciary net position of The Metropolitan St. Louis Sewer District Employees’ Pension Plan (“Plan”) and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan, which has a December 31 reporting period. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Use Of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 28 Adoption Of New Accounting Standards During fiscal year 2017, the District implemented GASB Statement No. 77, Tax Abatement Disclosures. This Statement requires disclosure of tax abatement information about (1) the District’s own tax abatement agreements and (2) those that are entered into by other governments and that reduce the District’s tax revenues. The requirements of this Statement improve financial reporting by giving users of financial statements essential information that has not been consistently or comprehensively reported to the public. Disclosure of information about the nature and magnitude of tax abatements will make these transactions more transparent to financial statement users and as a result, users will be better equipped to understand (1) how tax abatements affect the District’s ability to raise resources and meet its financial obligations and (2) the impact those abatements have on the District’s financial position and economic condition. The disclosures required by this Statement are presented in Footnote 15, Tax Abatements. During fiscal year 2016, the District implemented GASB Statement No. 72, Fair Value Measurement and Application. This Statement superseded selected paragraphs and footnotes and amended 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 GASB Statement No. 72. The disclosures required by this Statement are presented in Footnote 2, Deposits and Investments. 2. Deposits and Investments Deposits At June 30, 2017 the reported amount of the District’s deposits was $31,610,342 and the bank balance was $34,222,886. Of the bank balance, $1,003,427 was covered by federal depository insurance; $33,179,256 was collateralized with securities held by a third party financial institution in the District’s name. In addition, the District has money market mutual funds of $16,502,670 held in a trusted escrow account for the State that will be used to make future bond payments. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 29 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. 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. 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 $250,000 for interest bearing accounts and noninterest bearing accounts. Investments With the approval of the District’s Board of Trustees, the Secretary-Treasurer is authorized to invest excess cash in any investment authorized by the District’s Charter. The District’s investment policy conforms to the investment policy guidelines for the State of Missouri. The District’s investment policy authorizes the District to invest in the following instruments: U.S. Treasury obligations, certificates of deposit, obligations of any agency or instrumentality of the U.S., repurchase agreements, bankers’ acceptances, and commercial paper, all according to terms specified in the policy. The District also has investments in money market mutual funds that hold securities approved by the District’s investment policy. At June 30, 2017 and 2016, all of the District’s investments were in compliance with the District’s investment policy and charter. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 30 A summary of deposits and investments as of June 30, 2017 and 2016 is as follows: Reconciliation to the financial statements: Investment Type Cost Fair Value Cost Fair Value Deposits 31,610,342$ 31,610,342$ 33,734,360$ 33,734,360$ Money Market Mutual Funds 16,502,670 16,502,670 15,462,116 15,462,116 Certificates of Deposit — — 100,000 100,000 U.S. Treasury and Agency Obligations 488,079,396 486,365,173 495,637,069 496,034,377 Commercial Paper 100,349,746 100,713,007 53,478,311 53,577,867 Total 636,542,154$ 635,191,192$ 598,411,856$ 598,908,720$ 2017 2016 2017 2016 Cash and Cash Equivalents Unrestricted Current 23,095,871$ 26,934,021$ Restricted Current 2,171,935 2,065,003 Restricted Non-Current 22,845,206 20,197,452 Investments Unrestricted Current 280,288,468 166,147,564 Restricted Current 29,674,144 13,393,010 Restricted Non-Current 157,273,177 134,209,021 Long-Term Investments Restricted Non-Current 54,726,378 69,479,563 Other 65,116,013 166,483,086 635,191,192$ 598,908,720$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 31 Interest Rate Risk As of June 30, 2017 and 2016, the District had the following investments and maturities: In accordance with the District’s investment policy, the District will minimize the risk that the fair value of debt securities in the portfolio will fall due to increases in general interest rates by: 1. Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. 2. Investing operating funds primarily in short-term securities. 3. State law limits the maximum stated maturities to five years on any investment from the date of purchase. Long-Term Investments While the majority of the District’s portfolio is made up of short-term investments, the District also categorizes a sizeable amount as long-term under the categories discussed in Note 1, Organization and Summary of Significant Accounting Policies. The District is allowed to purchase long-term callable securities. These callable securities give the issuer the right to redeem at predetermined prices at a specific time prior to maturity. When a security is called, the District reflects an immediate reclassification from long-term investment to cash. Weighted Weighted Average Average Maturity Maturity Investment Type Fair Value (Years) Fair Value (Years) Certificates of Deposit —$ — 100,000$ 0.72 U.S. Treasury Obligations 189,636,435 0.19 252,489,204 0.39 U.S. Agency Obligations 296,728,738 0.67 243,545,173 0.73 Commercial Paper 100,713,007 0.19 53,577,867 0.24 Total 587,078,180$ 0.43 549,712,244$ 0.53 2017 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 32 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, 2017 and 2016, the District’s investments in commercial paper were rated A-1 by Standard & Poor’s (“S&P”) and P-1 by Moody’s Investors Service (“Moody’s”). The District’s investments in U.S. agency obligations that do not carry the explicit guarantee of the U.S. Government all carry a rating assigned by S&P of AA+ or higher. Money market investments are rated as AAAm and Aaa-mf by S&P and Moody’s, respectively. Concentration of Credit Risk The District’s investment policy places no limit on the amount the District may invest in any one issuer with respect to U.S. Treasury obligations and collateralized time and demand deposits. U.S. agency obligations and government-sponsored enterprises are limited to 60% of the portfolio, with no more than 30% of the total portfolio invested in securities of any one agency; and collateralized repurchase agreements are limited to 50% of the portfolio. U.S. agency callable securities are limited to 30% of the portfolio, and commercial paper and bankers’ acceptances are limited to 25% each, with no more than 5% of the total portfolio invested in any one issuer at the time of purchase. The following table lists investments in issuers that represent 5% or more of total investments at June 30, 2017 and 2016: Issuer 2017 2016 Treasury Notes 32.3 45.9 Federal Home Loan Bank 19.0 20.5 Federal National Mortgage Association 12.2 10.4 Federal Home Loan Mortgage Corporation 11.7 11.3 Bank of Tokyo - Mitsubishi UFJ 5.5 2.7 Percent Of Total Investments THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 33 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, 2017: !Money Market Mutual Funds of $16.5 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 $486.4 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) !Commercial Paper of $100.7 million is valued using a market approach to measuring fair value prices that considers relevant information generated by market transactions involving identical or similar assets or group of assets. (Level 2 inputs) 3. Notes Receivable The District has a note receivable with Missouri American Water Company (“MOAM”) for its portion of the capital costs related to the Lower Meramec Wastewater Treatment Plant. The original loan bears interest at 4.35%, while the two loans added during fiscal year 2013 bear interest at 4.50% and 3.52%. The current portion of this note is contained in the Unrestricted Other Receivables line on the Statements of Net Position. The note receivable will mature in fiscal year 2033. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 34 At June 30, 2017, 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, 2017, MSD’s note receivable related to the Contractor Loan Fund is $42,270. 2018 1,154,696$ 2019 1,154,696 2020 1,154,696 2021 1,154,696 2022 1,154,696 2023-2027 5,773,479 2028-2032 5,773,479 2033 563,798 17,884,236 Less: Amount representing interest 4,898,251 12,985,985$ Classification in Statement of Net Position: Current 602,919$ Non-current 12,383,066 Total 12,985,985$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 35 4. Capital Assets The following is a summary of capital assets changes for the fiscal years ended June 30, 2017 and 2016: Balance Balance June 30, 2016 June 30, 2017 Capital assets not being depreciated: Land 69,702,470$ 1,022,893$ 30,347$ 70,695,016$ Construction in progress 530,734,241 269,349,532 92,345,064 707,738,709 Total capital assets not being depreciated 600,436,711 270,372,425 92,375,411 778,433,725 Capital assets being depreciated: Treatment and disposal plant and equipment 1,239,993,981 39,643,299 493,913 1,279,143,367 Collection and pumping plant 2,419,647,020 60,677,011 4,614,342 2,475,709,689 General plant and equipment 92,393,025 4,016,633 1,615,785 94,793,873 Total capital assets being depreciated 3,752,034,026 104,336,943 6,724,040 3,849,646,929 Less: Accumulated depreciation: Treatment and disposal plant and equipment (510,110,382) (32,926,833) (261,039) (542,776,176) Collection and pumping plant (721,852,339) (41,808,127) (3,954,691) (759,705,775) General plant and equipment (68,464,804) (6,459,431) (1,563,773) (73,360,462) Total accumulated depreciation (1,300,427,525) (81,194,391) (5,779,503) (1,375,842,413) Total capital assets being depreciated, net 2,451,606,501 23,142,552 944,537 2,473,804,516 Total Capital Assets 3,052,043,212$ 293,514,977$ 93,319,948$ 3,252,238,241$ Additions Deletions 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 408,463,554 231,846,711 109,576,024 530,734,241 Total capital assets not being depreciated 464,984,262 245,108,473 109,656,024 600,436,711 Capital assets being depreciated: Treatment and disposal plant and equipment 1,214,483,762 25,920,470 410,251 1,239,993,981 Collection and pumping plant 2,341,025,509 80,022,507 1,400,996 2,419,647,020 General plant and equipment 92,198,891 4,374,910 4,180,776 92,393,025 Total capital assets being depreciated 3,647,708,162 110,317,887 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) (3,711,439) (68,464,804) Total accumulated depreciation (1,221,123,113) (83,983,749) (4,679,337) (1,300,427,525) Total capital assets being depreciated, net 2,426,585,049 26,334,138 1,312,686 2,451,606,501 Total Capital Assets 2,891,569,311$ 271,442,611$ 110,968,710$ 3,052,043,212$ Additions Deletions THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 36 5. Property Tax On or before October 1 of each year, the District levies ad valorem taxes on all taxable tangible property, real and personal, within its boundaries based on assessed valuations established by the City of St. Louis and St. Louis County Assessors. Taxes levied are used for operations and stormwater maintenance, debt service, and construction. Taxes are recorded as non-operating revenues. Property tax bills are typically mailed in October. They become delinquent and represent a lien on the related property if not paid by December 31. All property taxes are billed and collected by the City of St. Louis and St. Louis County Collectors’ of Revenue and are remitted to the District monthly. On April 5, 2016, MSD customers voted to approve a stormwater service proposition whereby effective July 1, 2016, MSD roll backed and eliminated several existing taxes, eliminated the stormwater fee and, in lieu of these funding mechanisms, instituted or left in place two taxing districts that covered MSD’s entire service area. The overriding benefit of the stormwater proposition is that customers will be treated equally under the new system, meaning that all customers are subject to the same tax rates and all customers receive the same level of stormwater services. In fiscal years 2017 and 2016, the District recorded revenue from property taxes in the amount of $32,458,054 and $25,671,058, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 37 6. Long-Term Liabilities The following is a summary of changes in the District’s long-term liabilities for the year ended June 30, 2017: Original Balance Balance Issuance June 30, June 30, Current Amounts 2016 Additions Retirements 2017 Portion Bonds and Notes Payable: Wastewater System Senior Revenue Bonds: Series 2010B 85,000,000$ 85,000,000$ —$ —$ 85,000,000$ —$ Series 2011B 52,250,000 45,325,000 — 1,915,000 43,410,000 2,010,000 Series 2012A 225,000,000 220,000,000 — 5,300,000 214,700,000 5,300,000 Series 2012B 141,730,000 137,280,000 — 2,570,000 134,710,000 2,775,000 Series 2013B 150,000,000 149,000,000 — 3,000,000 146,000,000 3,000,000 Series 2015B 223,855,000 223,855,000 — 2,500,000 221,355,000 2,575,000 Series 2016C 150,000,000 — 150,000,000 — 150,000,000 2,705,000 Water Pollution Control and Drinking Water Subordinate Revenue Bonds (State Revolving Funds Program): Series 2004B 161,280,000 89,650,000 — 8,105,000 81,545,000 8,355,000 Series 2005A 6,800,000 4,125,000 — 325,000 3,800,000 335,000 Series 2006A 42,715,000 27,950,000 — 2,350,000 25,600,000 2,285,000 Series 2006B 14,205,000 9,565,000 — 705,000 8,860,000 720,000 Series 2008A/B 40,000,000 27,475,000 — 1,870,000 25,605,000 1,905,000 Missouri Department of Natural Resources: Energy Loan Program 223,793 118,206 — 50,071 68,135 17,109 Series 2009A 23,000,000 17,514,200 — 1,073,700 16,440,500 1,098,500 Series 2010A 7,980,700 6,588,400 — 366,000 6,222,400 373,300 Series 2010C 37,000,000 30,024,000 — 1,663,000 28,361,000 1,705,000 Series 2011A 39,769,300 37,354,300 — 1,662,000 35,692,300 1,704,000 Series 2013A 52,000,000 49,920,000 — 2,134,000 47,786,000 2,190,000 Series 2015A 75,000,000 42,622,810 27,013,924 2,488,000 67,148,734 3,266,000 Series 2016A 20,000,000 — 146,500 — 146,500 415,000 Series 2016B 75,500,000 — 8,986,258 — 8,986,258 — 1,623,308,793$ 1,203,366,916$ 186,146,682$ 38,076,771$ 1,351,436,827 42,733,909$ Add: Unamortized premium, net of discount 124,465,181 Total Bonds and Notes Payable 1,475,902,008$ Current Portion of Bonds and Notes Payable 42,733,909$ Non-Current Bonds and Notes Payable 1,433,168,099 Total Bonds and Notes Payable 1,475,902,008$ Net Pension Liability 52,600,003$ 14,439,182$ —$ 67,039,185$ —$ Deposits and Accrued Expenses Landfill closure and postclosure costs 821,732$ (313,310)$ —$ 508,422$ —$ Compensated absences 8,497,114 812,994 555,192 8,754,916 2,188,729 Net OPEB obligation 7,003,477 2,576,404 1,516,800 8,063,081 — Total Deposits and Accrued Expenses 16,322,323$ 3,076,088$ 2,071,992$ 17,326,419$ 2,188,729$ Current Portion (Compensated absences) in Current Deposits and Accrued Expenses 2,188,729$ Non-Current Deposits and Accrued Expenses 15,137,690 Total Deposits and Accrued Expenses 17,326,419$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 38 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 of discount 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 2,124,275 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$ 2,124,275$ Current Portion (Compensated absences) in Current Deposits and Accrued Expenses 2,124,275$ 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 39 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, $947,500,000 has not been issued as of June 30, 2017. These funds were sought to enable the District to comply with federal and state clean water requirements. In December 2016, the District issued $150,000,000 of Wastewater System Revenue Bonds Series 2016C (“Series 2016C”). These bonds were issued pursuant to the June 2012 authorization; in this case for the purpose of construction, repairing, replacing, and equipping new and existing District wastewater facilities and as of June 30, 2017 $46,235,069 has been expended. A premium of $17,678,054 was received on the issuance of Series 2016C. These 2016C senior bonds have interest rates ranging from 2.0% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2046. 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, 2017, the $150,000,000 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 METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 40 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 funded the $90 million in principal payments and $4,534,435 in interest paid in fiscal 2017 relating to the Series 2006C and Series 2008A bonds. As a result of placing the cash with an escrow agent in a trust, Series 2006C and Series 2008A bonds were defeased and the liability for those bonds were removed from the 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. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 41 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. 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 both fiscal years 2017 and 2016, the subsidy percentage was 32.6%. In fiscal year 2018 the subsidy percentage is expected to be 32.7%. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 42 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. In May 2004, the District authorized and issued $175,000,000 of Wastewater System Revenue Bonds Series 2004A (“Series 2004A”) from the February 2004 authorization for the purpose of providing funds to finance the initial phase of its capital improvement and replacement program, including constructing, repairing, and replacing new wastewater facilities. All funds from this issuance have been expended. These senior bonds had interest rates ranging from 2.0% to 5.0% and were payable in semiannual installments at varying amounts through May 1, 2034; however, in November 2012, there was a partial refunding of the Series 2004A bonds. As a result of this refunding, Series 2004A bonds were considered to be partially defeased and the semiannual installments were paid through May 1, 2014. The liability related to Series 2004A after May 1, 2014 has been paid. See the explanation for Series 2012B above for further information. The revenue bonds do not constitute a legal debt or liability for the District, the State of Missouri, or for any political subdivision thereof and do not constitute indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. Revenue derived from the operations of the Wastewater System is pledged for the retirement of the outstanding Wastewater System Revenue Bonds listed above. Under the provisions of the bond indentures, the District covenants to establish rates for the services of the Wastewater System sufficient to fund operations, maintain reserves, and provide revenues to apply principal and interest on these bonds. The issuance of the revenue bonds does not obligate the District to levy any form of taxation or to make any appropriation for their payments in any fiscal year. The principal and interest on the bonds are expected to be paid from future wastewater revenues. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 43 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 44 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, 2015A, 2016A, and 2016B direct loans (pages 46 through 52) 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 45 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, 2017 and 2016, 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, 2017 are as follows: Years ending June 30, Principal Interest Total 2018 31,965,000$ 49,529,044$ 81,494,044$ 2019 32,910,000 48,659,417 81,569,417 2020 34,135,000 47,623,606 81,758,606 2021 35,330,000 46,402,605 81,732,605 2022 36,730,000 45,237,980 81,967,980 2023-2027 198,650,000 205,143,637 403,793,637 2028-2032 203,690,000 163,065,487 366,755,487 2033-2037 219,875,000 112,776,211 332,651,211 2038-2042 276,975,000 58,758,239 335,733,239 2043-2046 70,325,000 7,549,250 77,874,250 Total 1,140,585,000$ 784,745,476$ 1,925,330,476$ 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 46 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, 2017 are as follows: State Of Missouri Direct Loan Series 2016B In December 2016, the State of Missouri Direct Loan Program issued to the District an amount totaling $75,500,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds are issued from the June 2012 authorization. The District’s interest rate is 1.2% and is payable in semiannual installments at varying amounts through July 1, 2037. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2016B As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account. The District repays the loan at an interest rate of 1.2% based on the amount that has been borrowed. As of June 30, 2017 the outstanding loan balance was $8,986,258. The payment requirements to maturity will be determined after the debt is fully issued. Years ending June 30, Principal Interest Total 2018 17,109$ 852$ 17,961$ 2019 34,863 1,059 35,922 2020 16,163 202 16,365 Total 68,135$ 2,113$ 70,248$ Energy Efficiency Leveraged Note Payable THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 47 State Of Missouri Direct Loan Series 2016A In December 2016, the State of Missouri Direct Loan Program issued to the District an amount totaling $20,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds are issued from the June 2012 authorization. The District’s interest rate is 1.2% and is payable in semiannual installments at varying amounts through January 1, 2037. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2016A As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account. The District repays the loan at an interest rate of 1.2% based on the amount that has been borrowed. As of June 30, 2017 the outstanding loan balance was $146,500. The payment requirements to maturity will be determined after the debt is fully issued. State Of Missouri Direct Loan Series 2015A In August 2015, the State of Missouri Direct Loan Program issued to the District an amount totaling $75,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds are issued from the June 2012 authorization. The District’s interest rate is 1.2% and is payable in semiannual installments at varying amounts through January 1, 2035. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2015A As the District 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, 2017 the outstanding loan balance was $ 67,148,734. After taking into consideration the $2,488,000 principal paid in fiscal 2017, the balance to be borrowed is $5,363,266. The payment requirements to maturity will be determined after the debt is fully issued. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 48 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, 2017 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 $39,769,300 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.5% and is payable in semiannual installments at varying amounts through January 1, 2034. Years ending June 30, Principal Interest Total 2018 2,190,000$ 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 2,427,000 590,178 3,017,178 2023-2027 13,118,000 2,362,843 15,480,843 2028-2032 14,920,000 1,284,857 16,204,857 2033-2035 8,214,000 192,665 8,406,665 Total 47,786,000$ 7,150,995$ 54,936,995$ State of Missouri Direct Loan Series 2013A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 49 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, 2017 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 $37,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.7% and is payable in semiannual installments at varying amounts through January 1, 2031. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2010C As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. Years ending June 30, Principal Interest Total 2018 1,704,000$ 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 1,884,000 427,778 2,311,778 2023-2027 10,166,000 1,691,600 11,857,600 2028-2032 11,528,000 873,491 12,401,491 2033-2034 5,033,300 96,233 5,129,533 Total 35,692,300$ 5,074,408$ 40,766,708$ State of Missouri Direct Loan Series 2011A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 50 The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2010C outstanding as of June 30, 2017 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 $7,980,700 for the construction, improvement, renovation, repair, replacement and equipping of its wastewater system, under the authority of and in full compliance with the District’s Charter (“Plan”) and the bonds were issued from the August 2008 authorization. The District’s interest rate is 1.5% and is payable in semiannual installments at varying amounts through July 1, 2031. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2010A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. Years ending June 30, Principal Interest Total 2018 1,705,000$ 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 1,890,000 343,192 2,233,192 2023-2027 10,211,000 1,228,590 11,439,590 2028-2031 9,168,000 345,527 9,513,527 Total 28,361,000$ 3,588,306$ 31,949,306$ State of Missouri Direct Loan Series 2010C 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 2010A outstanding as of June 30, 2017 are as follows: State Of Missouri Direct Loan Series 2009A In October 2009, the DNR loaned $23,000,000 to the District. The State of Missouri Direct Loan Series 2009A note bears interest at a rate of 1.5% per annum and is payable through January 1, 2030. The purpose of this note was to finance the designing, constructing, improving, renovating, repairing, replacing and equipping of new and existing sewer facilities within the District. The principal and interest on the note are expected to be paid from future wastewater revenues and the note was issued from the August 2008 authorization. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2009A As the District incurred approved capital expenditures, the DNR reimbursed the District for the expenditures from the bond proceeds account. All funds have been drawn on this loan. Years ending June 30, Principal Interest Total 2018 373,300$ 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 404,600 67,817 472,417 2023-2027 2,149,900 246,319 2,396,219 2028-2032 2,128,400 79,808 2,208,208 Total 6,222,400$ 723,040$ 6,945,440$ State of Missouri Direct Loan Series 2010A 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 2009A outstanding as of June 30, 2017 are as follows: In accordance with the Direct Loan Series 2009A, 2010A, 2010C, 2011A, 2013A, 2015A, 2016A, and 2016B ordinances, the District’s annual net operating revenues from wastewater activities, as defined in the agreement, coupled with investments earnings must be at least 115% of the current year’s principal and interest due on all bonds. At June 30, 2017 and 2016, 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. Years ending June 30, Principal Interest Total 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 1,203,700 169,251 1,372,951 2023-2027 6,449,300 572,803 7,022,103 2028-2030 4,238,700 109,330 4,348,030 Total 16,440,500$ 1,697,281$ 18,137,781$ State of Missouri Direct Loan Series 2009A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 53 Debt Service Fund The Debt Service Fund shall be used by the Trustee for the sole purpose of paying the principal and interest on the bonds, as and when the same become due. Debt Service Reserve Fund After initial deposit of the amount required pursuant to the bond ordinances and financing agreements of the Series 2004A, 2006C, 2008A, 2010B, 2011B, 2012A, and 2013B bonds, monies in the Debt Service Reserve Fund shall be disbursed and expended by the District solely for the payment of the principal and interest on the bonds and notes to the extent of any deficiency in the Debt Service Fund for such purpose. The District may disburse and expend monies from the Debt Service Reserve Fund for such purpose immediately. As of June 30, 2017 and 2016, cash and investments in the Debt Service Reserve Fund totaled $49,413,496 and $49,575,170, respectively. Series 2016C was issued without a debt service requirement. 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, 2017 and 2016, cash and investments in the Special Participant Bond Reserve Account held on behalf of the District totaled $95,878,616 and $104,751,185, 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, 2017. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 54 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, 2017 and 2016, cash and investments in the Project Fund totaled $120,226,233 and $92,563,751, 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, 2017 and 2016, cash and investments in the Rebate Fund totaled $227,320 and $228,797, 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 2046 at an approximate amount of $1.9 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 2017 was $89.4 million with pledged revenues of $167.1 million. This provided a coverage ratio of 1.9 and represented 50.1% of all net operating revenues. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 55 7. Pension Plan General Information About The Pension Plan Pension Plan Description. The Metropolitan St. Louis Sewer District Employees’ Pension Plan (“Pension Plan”) is a noncontributory single employer defined benefit plan providing retirement benefits as well as death and disability benefits. As a condition of employment, all full-time employees of the District commencing service prior to January 1, 2011, were eligible to be covered by the Pension Plan. As of January 1, 2011, the Pension Plan was frozen to new employees. Instead, new employees of the District may participate in The Metropolitan St. Louis Sewer District Defined Contribution Plan (“DC Plan”) and/or The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust. Current employees with less than ten years of service on January 1, 2011 could also voluntarily elect to transfer from the Pension Plan and enter the DC Plan. Benefits Provided. All benefits vest after five years of credited service. Members retiring at or after age 65 with five or more years credited service are entitled to a pension benefit. The Pension Plan permits early retirement with reduced benefits beginning at age 55 if the member has completed five years of employment. Ordinance No. 10664 provides for unreduced retirement benefits to any member whose combined age and term of service is equal to 75. Effective August 1, 2004, Ordinance No. 11781 amended the Pension Plan to change the benefit formula to 1.7% of final average earnings plus 0.4% of final average earnings that are in excess of covered earnings multiplied by the period of years and months of credited service not to exceed 35 years without including accrued sick leave. For vested employees, sick leave is paid out at 1.25% per year of service multiplied by the amount of the unused accrued sick leave remaining at the employee’s current rate of pay, up to a maximum of $50,000. Also, the Pension Plan was amended to provide the retiring member with a 10% partial lump sum payment option. The balance of the distribution will be paid in accordance with any one of the other payment options available under the Pension Plan. The retirement benefit payable to a member who retires after the normal retirement date is the greater of a) the benefit that would have been payable on the normal retirement date plus a special annual retirement benefit provided by the accumulated value, at 4% per annum interest, of the monthly benefit that would have been received prior to the postponed retirement date or b) the benefit determined as of the postponed retirement date under the normal formula. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 56 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, 2016 and 2015, 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 $11,236,828 and $10,096,075, excluding certain professional fees paid by the District, were made to the Pension Plan during the District’s fiscal years ended June 30, 2017 and 2016, respectively. These contributions were made in accordance with actuarially determined contribution requirements based on actuarial valuations performed at December 31, 2016 and 2015, respectively. Increase 2016 2015 (Decrease) Active plan members 626 665 (39) Retirees and beneficiaries currently receiving benefits 717 691 26 Terminated members entitled to receive benefits 174 175 (1) Total 1,517 1,531 (14) For the Years Ended December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 57 Net Pension Liability The net pension liability was measured as of December 31, 2016 and 2015 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, 2016 and 2015 actuarial valuations were determined using the following actuarial assumptions, applied to all periods included in the measurement: Effective December 31, 2016, for current employees, mortality rates were based on the RP-2014 Employees Mortality Table, male and female rates, with generational projection from 2006 based on the MP-2016 improvement scale. For the December 31, 2015 valuation, the assumption was the RP-2000 Employees Mortality Table, male and female rates, projected five years from the valuation date using Scale AA. For retirees, the RP-2014 Healthy Annuitant Mortality Table, male and female rates, with generational projection from 2006 based on the MP-2016 improvement scale was assumed for the December 31, 2016 valuation while the RP-2000 Healthy Annuitant Mortality Table, male and female rates, projected five years from the valuation date using Scale AA was assumed for December 31, 2015. For disabled lives, the RP-2014 Disabled Mortality Table, male and female rates, was utilized for the current valuation and the RP-2000 Disabled Mortality Table, male and female rates, was the assumption in the previous valuation. 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 58 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, 2016 and 2015 are as follows: Long-Term Expected Arithmetic Target Real Rate Asset Class Allocation of Return Large Cap US Equity 20.0% 5.1% Small Cap US Equity 6.0% 6.3% Developed International Equity 10.0% 5.5% Emerging Markets Equity 4.0% 7.0% Domestic Core Plus Fixed Income 26.0% 1.0% Global Fixed Income 9.0% 0.7% Absolute Return/HFOF 15.0% 2.8% Real Estate 10.0% 4.3% Total 100.0% 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% Developed International Equity 10.0% 7.7% Emerging Markets Equity 4.0% 9.9% Domestic Core Plus Fixed Income 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% December 31, 2015 December 31, 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 59 Discount Rate.The discount rate used to measure the total pension liability at December 31, 2016 and 2015, 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. 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, 2015 296,812,242$ 244,212,239$ 52,600,003$ Changes for the year: Service cost 5,106,625 — 5,106,625 Interest 20,609,223 — 20,609,223 Effect of economic/demographic gains or losses (882,851) — (882,851) Effect of assumptions changes or inputs 11,664,881 — 11,664,881 Benefit payments (15,260,904) (15,260,904) — Employer contributions — 10,145,562 (10,145,562) Net investment income — 11,913,134 (11,913,134) Balances as of December 31, 2016 318,049,216$ 251,010,031$ 67,039,185$ 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$ Changes in Net Pension Liability for the Year Ending December 31, 2015 Changes in Net Pension Liability for the Year Ending December 31, 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 60 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: 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, 2017 and 2016, the District recognized pension expense of $6,810,309 and $3,571,798, respectively, after accounting for all deferred outflows and inflows of resources. The District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: 1% Current 1% Decrease Discount Rate Increase (6.00%) (7.00%) (8.00%) Net Pension Liability 103,919,255$ 67,039,185$ 35,785,992$ 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$ December 31, 2015 December 31, 2016 Deferred Deferred Deferred Deferred Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Differences between expected and actual experience —$ 4,604,518$ —$ 5,711,868$ Changes of assumptions 11,290,949 — 3,814,183 — Net difference between projected and actual earnings 19,776,909 — 21,823,418 — Contributions made subsequent to measurement date 6,597,928 — 5,506,662 — Total 37,665,786$ 4,604,518$ 31,144,263$ 5,711,868$ June 30, 2016June 30, 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 61 In the years ending June 30, 2017 and 2016, amounts currently reported as deferred outflows of resources, $6,597,928 and $5,506,662, respectively, related to the District’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the years ended June 30, 2018 and 2017, respectively. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Payable To The Pension Plan At June 30, 2017 and 2016, the District did not have outstanding required contributions to the pension plan. 8. Other Retirement Plans Deferred Compensation Plan and Trust The District offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust (“Plan”), available to all District employees, permits them to defer a portion of their salary up to Internal Revenue Code limits. The District does not contribute to the Plan except where mandated by the Internal Revenue Service to compensate participants for lost deferral contributions. The deferred compensation is not available to employees until termination, retirement, death, disability or due to financial hardship as defined by the Plan. Net Deferrals of Resources Year ended June 30,: 2018 9,176,693$ 2019 9,083,063 2020 6,954,152 2021 1,249,432 26,463,340$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 62 The Plan was amended and restated to comply with the Economic Growth and Tax Relief Reconciliation Act of 2001 (“Act”). The Act made significant changes to Section 457(b) of the Internal Revenue Code of 1986, as previously amended. The Plan assets are held in trust for the exclusive benefit of participants and their beneficiaries under Section 1448 of the Small Business Job Protection Act of 1996. As a result, the assets and liabilities of the Plan are not included in the accompanying financial statements. The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained by writing: The Metropolitan St. Louis Sewer District, 2350 Market Street, St. Louis, MO 63103-2555. Defined Contribution Plan The Metropolitan St. Louis Sewer District Defined Contribution Plan (“DC Plan”) was established by the District’s Board of Trustees, through Ordinance 13180, which became effective January 1, 2011. The following full time employees are eligible to participate in the DC Plan: (i) employees first hired on or after January 1, 2011, and (ii) employees hired prior to January 1, 2011 who elected to terminate participation in The Metropolitan St. Louis Sewer District Employees’ Pension Plan (“Pension Plan”), effective as of April 1, 2011, in accordance with the provisions of such Pension Plan, and (iii) employees rehired on or after January 1, 2011 who are not eligible to accrue benefits under the Pension Plan. An employee shall become a participant in the DC Plan on the first day on which he or she performs an hour of service for the District. The District’s Board of Trustees, primarily to improve benefits to members, amends the DC Plan in all its respects. A pension committee consisting of two members of the District’s Board of Trustees, two elected employee members and four members of the District’s management staff administer the DC Plan. A committee of the District’s Board of Trustees, with the aid of an investment advisor, reviews and evaluates the DC Plan’s 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 63 Employer Basic Contributions: For each payroll period, the District contributes an amount equal to 7% of the covered compensation earned during such period by each participant entitled to an allocation of such contribution. Employer Matching Contributions: For each payroll period, the District contributes an amount equal to 50% of the covered compensation of such participant withholding as an annual deferral (as defined in The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust) pursuant to The Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust; provided that, before-tax contributions in excess of 4% of the covered compensation of the participant for the payroll period shall not be considered for purposes of Employer Matching Contributions. Employer Matching Contributions shall be up to the maximum amount of compensation that may be taken into account for the DC Plan year. In no event shall the sum of the employer contributions and employee contributions allocated to the account of a participant for the DC Plan year exceed the lesser of: (a) The amount specified in the applicable Internal Revenue Code, as adjusted annually for any applicable increases in the cost of living. (b) 100% of the participant’s compensation for such year. The compensation limit referred to in (b) shall not apply to any contribution from medical benefits after separation from service. The District’s contributions to the DC Plan amounted to $1,392,919 and $1,291,061 for the years ended June 30, 2017 and 2016, respectively. Forfeitures were $76,516 and $45,621, for the years ended June 30, 2017 and 2016, respectively, and there were $31,512 and $22,655 of liabilities outstanding as of June 30, 2017 and 2016, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 64 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 offers two medical plan options, a traditional open access plan and a high deductible health plan, and both plans offer wellness rates for those employees who qualify. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 65 The District pays the same amount of the monthly group health insurance premium for the qualified retiree as it would for an active employee qualifying for the wellness rates until the retiree becomes eligible for Medicare at age 65. In fiscal year 2017 the amount the District paid was 85% to 91% of the retiree only premium depending on the plan selected by the retiree. In addition, there is a closed group of disabled former employees who receive life insurance coverage from the District. 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 2017 are as follows: Premiums for retirees selecting the traditional plan are as follows: Coverage Tier Monthly Premium Retiree* $684.69 Retiree + Spouse $1,458.58 Retiree + Child(ren) $1,325.27 Family $2,021.51 *The District pays approximately 85% to 91% of the retiree’s premium for a retiree who retires after age 62 with five years of service or after attaining 75 points. The retiree pays the remaining percentage of the individual retiree premium above plus 100% of the spousal, children or family premium incremental increases. The District’s annual other post-employment benefit (“OPEB”) cost (expense) is calculated based on the annual required contribution (“ARC”) of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, and in conjunction with Plan benefits currently in force. The actuarial valuations have been determined using estimated data provided by the District in combination with assumptions on the probability of future events, while also keeping an eye on long-term viability. These valuations are subject to continual revision as future actuarial measurements may differ significantly from current measurements due to the realization of new estimates and factors. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 66 The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and the amortization of any unfunded actuarial accrued liabilities. The District’s annual OPEB cost for fiscal year 2017 and 2016 and the related information are as follows: The Plan was established by District Ordinance which assigned the authority to establish and amend Plan benefit provisions to the District. The contribution requirements of the District and Plan members are established and may be amended by the District. The Plan does not issue a publicly available report. Trend Information: 2017 2016 Amortization of Past Service Cost 963,300$ 935,300$ Normal Cost 1,524,000 1,524,000 Interest to End of Fiscal Year 93,300 92,200 Annual Required Contribution ("ARC")2,580,600 2,551,500 Interest on Net OPEB Obligation 262,630 223,820 Adjustment to ARC (266,826) (220,586) Net Annual OPEB Cost 2,576,404 2,554,734 Actual Contribution (1,516,800) (1,519,800) Increase in Net OPEB Obligation 1,059,604 1,034,934 Net OPEB Obligation - Beginning of Year 7,003,477 5,968,543 Net OPEB Obligation - End of Year 8,063,081$ 7,003,477$ Percentage of Net Annual Fiscal Net Annual Actual OPEB Cost Net OPEB Year OPEB Cost Contribution Contributed Obligation 2017 2,576,404$ 1,516,800$ 58.9 8,063,081$ 2016 2,554,734 1,519,800 59.5 7,003,477 2015 2,474,689 1,573,400 63.6 5,968,543 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 67 As of June 30, 2017 and 2016, 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%. 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: 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 68 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. 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 Years Of Attained Service Rate Age Rate 020 1 12.00 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% THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 69 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. 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, 2017 and 2016, these liabilities amounted to $4,461,069 and $4,076,994, respectively. The claims liabilities reported are based on the requirements of GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, which requires that a liability for claims be reported if information obtained prior to the issuance of the financial statements indicates it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Changes in the balance of claims liabilities during fiscal 2017 and 2016 were as follows: Percent Becoming Age Disabled 20 30 0.064 40 0.102 50 0.311 Disability 0.056% 2017 2016 2015 Liability - Beginning of Year 4,076,994$ 4,317,384$ 2,923,884$ Current year claims and changes in estimates 17,648,177 21,213,424 15,852,729 Claim payments (17,264,102) (21,453,814) (14,459,229) Liability - End of Year 4,461,069$ 4,076,994$ 4,317,384$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 70 The District obtains periodic funding valuations from the third-party administrators managing the self-insurance programs and adjusts the charges as required to maintain the appropriate level of estimated claims liability. The District also maintains excess liability insurance coverage for workers’ compensation and medical and hospitalization claims; general liability; and water backup damage to customers’ property. The District purchases commercial insurance for all other risks of loss. Settled claims have not exceeded this commercial coverage in any of the past three years. 11. Closure And Post-Closure Care Costs State and federal laws and regulations require the District to place a final cover on its Prospect Hill Reclamation Project landfill site when it stops accepting waste and to perform certain maintenance and monitoring functions at the site for 30 years after closure. Although closure and post-closure care costs will be paid only near or after the date that the landfill stops accepting waste, the District reports a portion of these closure and post-closure care costs as an operating expense in each fiscal year. The $508,422 and $821,732 reported as landfill closure and post-closure care liabilities at June 30, 2017 and 2016, respectively, represent the cumulative amounts reported at fiscal year-end and represent 60.9% and 100% of the estimated closure and post-closure care costs of the landfill for fiscal years ended June 30, 2017 and 2016, respectively. These amounts are based on what it would cost to perform all closure and post-closure care in 2017 and 2016, respectively. The remaining disposal life estimate was calculated in 2009 and was estimated at eight years factoring in a future annual average disposal rate of 96,500 cubic yards. It was noted in the 2009 Black and Veatch study that this life could be extended further if the actual disposal rate is less than projected or alternative uses and off-site beneficial options for the incinerator ash are later developed. Since the actual average disposal rate has been less than 96,500 cubic yards, the landfill is not at capacity and MSD expects the landfill to be in use for another 10-15 years and the total capacity of the landfill and the available space was adjusted in 2017. The District will continue to accrue the remaining estimated cost of closure and post-closure care annually. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 71 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. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 72 On April 27, 2012, the Court approved and entered the decree, thus concluding the litigation of this lawsuit. Although this litigation matter has concluded, MSD continues to work diligently to implement the CD. The CD requires the District to spend approximately $4.7 billion, in 2010 dollars, over a 23-year implementation period. Throughout this period improvements will be made to the District’s separate sewer system, combined sewer system, and wastewater treatment plants. The District continues to comply with the CD. On June 1, 2011, the State of Missouri approved Chapter 11, Chapter 12, and Appendix Q of the District’s Combined Sewer Overflow Long-Term Control Plan Updated Report, dated February 2011. Flooding Cases The remaining flooding cases related to the September 14, 2008 rain event are being covered by the District’s insurance carrier, with a reservation of rights. These cases appear to have a very low risk of liability to the District. Other Commitments and Contingencies The District is a defendant in various other matters of litigation. Of these matters, management and District’s legal counsel do not anticipate any material effect on the June 30, 2017 and 2016 financial statements. The District has entered into construction and other contracts amounting to approximately $488,000,000 at June 30, 2017, and through the audit report date. The District had $947,500,000 in revenue bonds authorized by the voters but unissued as of June 30, 2017. 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 $135,259,059 and $136,546,766 of restricted net position at June 30, 2017 and 2016, respectively, of which $79,940,036 and $81,182,753 are restricted due to enabling legislation, as of June 30, 2017 and 2016, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 73 14. Segment Information The District issued wastewater revenue bonds to finance wastewater infrastructure projects. The District accounts for both wastewater and stormwater activities in a single enterprise fund, but investors in those bonds rely solely on the revenue generated by the wastewater activities for repayment. Fiscal year 2017 and 2016 summary financial information for each business segment is presented below. A segment is an identifiable activity reported as a stand-alone entity for which one or more revenue bonds are outstanding. A segment has a specifically identifiable revenue stream pledged in support of the revenue bonds and has related expenses, gains and losses, assets and liabilities, and deferred inflows and outflows of resources that are required by external parties to be accounted for separately. The wastewater system is the only reportable segment that meets the requirements of GASB Statement No. 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments.The stormwater system is reported on for informational purposes only. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 74 Financial information as of and for the years ended June 30, 2017 and 2016 of the District’s Wastewater Segment is as follows: Assets 2017 2016 Current Assets Unrestricted Current Assets Cash and cash equivalentsN 21,932,648$ 25,577,264$ InvestmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 264,399,511 157,349,756 Sewer service charges receivable, less allowance of NNNNNNNNNNNNNNNNN $56,490,989 in 2017 and $55,537,161 in 2016 53,517,987 49,733,852 Unbilled sewer service charges receivable 26,514,670 24,607,682 Property taxes receivable (27,512) — Accrued income on investmentsNNNNNNNNNNNNNNNNNNNNNNN 989,538 780,051 Other receivables, less allowance of $119,264 in 2017NNNNNNNNNNNNNNNNNNNNNNNNNNNNN and $98,460 in 2016 4,707,358 10,184,895 Supplies inventoryNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 7,671,206 7,088,804 BBBBBBBBB Total Unrestricted Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 379,705,406 275,322,304 Non-Current Assets Restricted Assets Cash and cash equivalentsN 20,865,810 17,009,874 InvestmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 130,230,174 113,535,586 Long-term investmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 41,015,517 32,736,862 Property taxes receivable, less allowance ofN$137 in 2017NNNNN and $164 in 2016 (5,266) 5,318 Accrued income on investmentsNNNNNNNNNNNNNNNNNNNNNNN 192,210 144,289 Other receivablesNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 69,694 — BBBBBBBTotal Restricted Non-Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 192,368,139 163,431,929 Other Assets NNN Notes receivableNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 12,425,336 12,999,370 Long-term investmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 61,275,000 156,994,123 BBBBBBBBBBB Total Other AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 73,700,336 169,993,493 Capital Assets NNN Depreciable: NNNNNN Treatment and disposal plant and equipmentNNNNNNNNNN 1,279,143,367 1,239,993,981 NNNNNN Collection and pumping plantNNNNNNNNNNNNNNNNNNNNNNNN 1,843,121,463 1,798,181,091 NNNNNN General plant and equipmentNNNNNNNNNNNNNNNNNNNNNNNNN 77,576,050 75,752,926 NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 3,199,840,880 3,113,927,998 NNNNNN Less:N Accumulated depreciationNNNNNNNNNNNNNNNNNNNNN 1,177,505,880 1,111,825,269 NNNNNN Net depreciable assetsNNNNNN 2,022,335,000 2,002,102,729 NNNNNN NNN Non-depreciable: NNNNNN LandNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 64,121,437 63,374,303 NNNNNN Construction in progressNNNNNNNNNNNNNNNNNNNNNNNNNNNN 691,631,657 519,044,798 BBBBBBBBB Net Capital AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 2,778,088,094 2,584,521,830 BBBBBB BBBBBBBBBBB Total Non-Current AssetsBBBBBBBBBBBBBBBBBBBBBBBB 3,044,156,569 2,917,947,252 BBBBBBBBBBBBBBBB Total AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 3,423,861,975 3,193,269,556 Deferred Outflows of Resources: NNNNNN Bonds and notes payable-Deferred loss on refundingNNNNNNNNNNNNNNNNNNNNNNNNNN 11,320,670 11,973,700 NNNNNN Pension-related outflowsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 32,297,785 26,520,052 BBBBBBBBBBBBBBBB Total Deferred Outflows of ResourcesBBBBBBBBBBBBBBBBBBBBBBB 43,618,455 38,493,752 WASTEWATER SEGMENT STATEMENTS OF NET POSITION June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 75 Liabilities 2017 2016 Current Liabilities-Payable From Unrestricted Assets Contracts and accounts payableN 37,780,519$ 37,396,996$ Deposits and accrued expenses 30,405,764 29,325,752 Retainage payableN 11,486,006 9,118,945 Current portion of bonds and notes payableN 42,733,909 38,059,873 Total Current Liabilities-Payable From Unrestricted Assets 122,406,198 113,901,566 Current Liabilities-Payable From Restricted Assets Contracts and accounts payableN 28,257 36,495 Retainage payableN 181,642 156,537 Total Current Liabilities-Payable From Restricted Assets 209,899 193,032 BBBBBBBBBBB Total Current LiabilitiesBBBBBBBBBBBBBBBBBBBBBB 122,616,097 114,094,598 Non-Current Liabilities Deposits and accrued expenses 15,137,690 14,198,048 Net pension liability 57,524,378 44,732,007 Bonds and notes payableN 1,433,168,099 1,277,342,521 BBBBBBBBBBB Total Non-Current LiabilitiesBBBBBBBBBBBBBBBBBBBBBB 1,505,830,167 1,336,272,576 BBBBBB BBBBBBBBBBBBBBBB Total LiabilitiesBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1,628,446,264 1,450,367,174 Deferred Inflow of Resources: NNNNNN Pension-related inflowsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 3,887,511 4,868,566 BBBBBBBBBBBBBBBB Total Deferred Inflow of ResourcesBBBBBBBBBBBBBBBBBBBBBBB 3,887,511 4,868,566 Net Position Net investment in capital assets 1,403,740,624 1,343,078,478 Restricted for: NNNNNNDebt serviceNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 55,319,023 55,364,013 NNNNNNSubdistrict construction and improvementNNNNNNNNNN 4,207,767 4,564,033 Unrestricted 371,879,241 373,521,044 BBBBBBBBBBBBBBBB Total Net PositionBBBBBBBBBBBBBB 1,835,146,655$ 1,776,527,568$ June 30, WASTEWATER SEGMENT STATEMENTS OF NET POSITION (Continued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 76 2017 2016 B Operating Revenues NNN Sewer service chargesNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 330,883,493$ 304,684,984$ NNN Recovery of (provision for) doubtful sewer service charge accounts (2,534,814) (4,062,990) NNN Licenses, permits, and other feesNNNNNNNNNNNNNNNNNNNNNN 4,036,362 3,620,240 NNN OtherNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 1,084,636 14,221,063 BBB Total Operating RevenuesBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 333,469,677 318,463,297 NNNNNN B Operating Expenses NNN Pumping and treatmentNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 60,203,037 59,099,820 NNN Collection system maintenanceNNNNNNNNNNNNNNNNNNNNNNNNNN 33,476,510 33,291,567 NNN EngineeringNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 4,722,263 3,523,227 NNN General and administrativeNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 57,289,501 54,802,220 NNN Water backup claimsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 5,035,020 7,631,197 NNN DepreciationNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 71,128,893 73,782,843 NNN Asset managementNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 14,142,928 12,968,747 BBB Total Operating ExpensesBBBBBBBBBBBBBBBBBBBBBBBBBBBB 245,998,152 245,099,621 NNNNNN B Operating IncomeBBBBBBBBBBBBBBBBBBB 87,471,525 73,363,676 NNNNNN B Non-Operating Revenues NNN Property taxes levied by the DistrictNNNNNNNNNNNNNNNNNN 28,555 (17,525) NNN Investment incomeNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 2,456,677 3,894,305 NNN Rent and other incomeNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 106,562 102,865 BBB Total Non-Operating RevenuesBBBBBBBBBBBBBBBBBBBBBBBBB 2,591,794 3,979,645 NNNNNN B Non-Operating Expenses NNN Net loss on disposal and sale of capital assetsNNNNNNNN 622,841 309,877 NNN Non-recurring projects and studiesNNNNNNNNNNNNNNNNNNNNNN 5,886,163 9,342,338 NNN Interest expenseNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 31,250,777 28,943,200 BBB Total Non-Operating ExpensesBBBBBBBBBBBBBBBBBBBBBBBBB 37,759,781 38,595,415 NNNNNN B Income Before Capital Grants And ContributionsBBBBBBBBBBBBBBBBBBBBBB 52,303,538 38,747,906 NNNNNN B Capital Grants And Contributions NNN Utility plant contributedNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 3,508,950 7,036,329 NNN Grant revenueNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 2,806,599 765,699 BBB Total Capital Grants And ContributionsBBBBBBBBBBBBBBBBBBBBBBBBB 6,315,549 7,802,028 B Change In Net Position 58,619,087 46,549,934 B Net Position - Beginning Of Year 1,776,527,568 1,729,977,634 NNNNNN B Net Position - End Of YearBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1,835,146,655$ 1,776,527,568$ 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 77 2017 2016 Cash Flows From Operating Activities Received from customers 338,695,092$ 304,602,849$ Paid to employees for services (94,528,620) (94,386,428) Paid to suppliers for goods and services (70,142,894) (70,500,534) Net Cash Provided By Operating Activities 174,023,578 139,715,887 Cash Flows Provided By (Used In) Non-Capital Financing Activities Taxes levied and collected 74,474 (86,140) Cash Flows From Capital And Related Financing Activities Proceeds from capital grants 100,283 22,649 Proceeds from issuance of debt 185,520,681 192,622,808 Premium and (discounts) on sale of bonds 17,678,054 26,727,475 Principal paid on debt (38,076,770) (38,565,916) Interest and fees paid on debt (54,306,129) (47,582,180) Payments for capital assets (252,375,421) (216,933,464) Proceeds from sale of capital assets 41,093 681,101 Build America bond tax credit 1,622,822 1,623,694 Net Cash Provided By (Used In) Capital And Related Financing Activities (139,795,387) (81,403,833) Cash Flows From Investing Activities Purchase of investments (452,346,122) (360,630,035) Proceeds from sale and maturity of investments 412,301,563 285,557,144 Investment income 5,846,652 5,530,955 Proceeds from rents 106,562 102,865 Net Cash Provided By (Used In) Investing Activities (34,091,345) (69,439,071) Net Increase (Decrease) In Cash And Cash Equivalents 211,320 (11,213,157) Cash And Cash Equivalents At Beginning Of Year 42,587,138 53,800,295 Cash And Cash Equivalents At End Of Year 42,798,458$ 42,587,138$ Ended June 30, WASTEWATER SEGMENT STATEMENTS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 78 Financial information as of and for the years ended June 30, 2017 and 2016 of the District’s Stormwater Segment is as follows: Assets 2017 2016 Current Assets Unrestricted Current Assets Cash and cash equivalentsN 1,163,223$ 1,356,757$ InvestmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 15,888,957 8,797,808 Sewer service charges receivable, less allowance of NNNNNNNNNNNNNNNNN $163,024 in 2017 and $191,346 in 2016 123,079 291,381 Unbilled sewer service charges receivable (953) 121,144 Property taxes receivable, less allowance of $25,280 in 2017NNNNNNNNNNNNNN and $39,127 in 2016 862,725 1,265,106 Accrued income on investmentsNNNNNNNNNNNNNNNNNNNNNNN 26,915 25,828 BBBBBBBTotal Unrestricted Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 18,063,946 11,858,024 Restricted Current Assets Cash and cash equivalents 2,171,935 2,065,003 InvestmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 29,674,144 13,393,010 BBBBBBBTotal Restricted Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 31,846,079 15,458,013 BTotal Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 49,910,025 27,316,037 Non-Current Assets Restricted Assets Cash and cash equivalentsN 1,979,396 3,187,578 InvestmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 27,043,003 20,673,435 Long-term investmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 13,710,861 36,742,701 Property taxes receivable, less allowance of $31,904 in 2017 and $22,255 in 2016 1,144,461 719,568 Accrued income on investmentsNNNNNNNNNNNNNNNNNNNNNNN 168,842 156,339 BBBBBBBTotal Restricted Non-Current AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 44,046,563 61,479,621 Other Assets Long-term investmentsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 3,841,013 9,488,963 BBBBBBBBBBB Total Other AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBB 3,841,013 9,488,963 Capital Assets NNN Depreciable: NNNNNN Collection and pumping plantNNNNNNNNNNNNNNNNNNNNNNNN 632,588,226 621,465,929 NNNNNN General plant and equipmentNNNNNNNNNNNNNNNNNNNNNNNNN 17,217,823 16,640,099 NNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 649,806,049 638,106,028 NNNNNN Less:N Accumulated depreciationNNNNNNNNNNNNNNNNNNNNN 198,336,533 188,602,256 NNNNNN Net depreciable assetsNNNNNN 451,469,516 449,503,772 NNN Non-depreciable: NNNNNN LandNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 6,573,579 6,328,167 NNNNNN Construction in progressNNNNNNNNNNNNNNNNNNNNNNNNNNNN 16,107,052 11,689,443 BBBBBBBBB Net Capital AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 474,150,147 467,521,382 NNNNNN BBBBBBBBBBB Total Non-Current AssetsBBBBBBBBBBBBBBBBBBBBBBBB 522,037,723 538,489,966 NNNNNN BBBBBBBBBBBBBBBB Total AssetsBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 571,947,748 565,806,003 Deferred Outflow of Resources: NNNNNN Pension-related outflowsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 5,368,001 4,624,211 BBBBBBBBBBBBBBBB Total Deferred Outflow of ResourcesBBBBBBBBBBBBBBBBBBBBBBB 5,368,001 4,624,211 STORMWATER SEGMENT STATEMENTS OF NET POSITION June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 79 Liabilities 2017 2016 Current Liabilities-Payable From Unrestricted Assets Contracts and accounts payableN 20,000$ 23,762$ Deposits and accrued expensesN 9,240,251 9,633,010 Retainage payableN 545 545 Total Current Liabilities-Payable From Unrestricted Assets 9,260,796 9,657,317 Current Liabilities-Payable From Restricted Assets Contracts and accounts payableN 1,236,740 1,250,044 Retainage payableN 565,000 282,010 Total Current Liabilities-Payable From Restricted Assets 1,801,740 1,532,054 BBBBBBBBBBB Total Current LiabilitiesBBBBBBBBBBBBBBBBBBBBBB 11,062,536 11,189,371 NNNNNN Non-Current Liabilities NNNNNN Net pension liabilityNNNNNNNNNNNNNNNNNN 9,514,807 7,867,996 BBBBBBBBBBB Total Non-Current LiabilitiesBBBBBBBBBBBBBBBBBBBBBB 9,514,807 7,867,996 BBBBBB BBBBBBBBBBBBBBBBBBTotal LiabilitiesBBBBBBBBBBBBBBBBBBBB 20,577,343 19,057,367 Deferred Inflow of Resources: NNNNNN Pension-related inflowsNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 717,007 843,302 BBBBBBBBBBBBBBBB Total Deferred Inflow of ResourcesBBBBBBBBBBBBBBBBBBBBBBB 717,007 843,302 Net Position Net investment in capital assets 472,508,235 466,307,697 Restricted for: NNNNNNSubdistrict construction and improvementNNNNNNNNNN 75,732,269 76,618,720 Unrestricted 7,780,895 7,603,128 BBBBBBBBBBBBBBBBB Total Net Position 556,021,399$ 550,529,545$ N June 30, STORMWATER SEGMENT STATEMENTS OF NET POSITION (Continued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 80 2017 2016 B Operating Revenues NNN Sewer service chargesNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN (10,224)$ 1,433,561$ NNN Recovery of (provision for) doubtful sewer service charge accounts 21,071 (43,662) NNN OtherNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 10,465 4,535 BBB Total Operating RevenuesBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 21,312 1,394,434 B Operating Expenses NNN Collection system maintenanceNNNNNNNNNNNNNNNNNNNNNNNNNN 10,451,651 9,561,770 NNN EngineeringNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 6,567,643 7,474,392 NNN General and administrativeNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 1,244,910 513,152 NNN DepreciationNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 10,065,498 10,200,906 NNN Asset managementNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 749,821 245,864 BBB Total Operating ExpensesBBBBBBBBBBBBBBBBBBBBBBBBBBBB 29,079,523 27,996,084 B Operating IncomeB(Loss)BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB (29,058,211) (26,601,650) NNNNNN B Non-Operating Revenues NNN Property taxes levied by the DistrictNNNNNNNNNNNNNNNNNN 32,429,499 25,688,583 NNN Investment incomeNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 445,947 741,561 BBB Total Non-Operating RevenuesBBBBBBBBBBBBBBBBBBBBBBBBB 32,875,446 26,430,144 B Non-Operating Expenses NNN Net loss on disposal and sale of capital assetsNNNNNNNN 50,203 14,636 NNN Non-recurring projects and studiesNNNNNNNNNNNNNNNNNNNNNN 1,573,375 1,658,065 BBB Total Non-Operating ExpensesBBBBBBBBBBBBBBBBBBBBBBBBB 1,623,578 1,672,701 B Income (Loss) Before Capital ContributionsBBBBBBBBBBBBBBBBBBBBBB 2,193,657 (1,844,207) B Capital Contributions NNN Utility plant contributedNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN 3,298,197 4,234,756 BBB Total Capital ContributionsBBBBBBBBBBBBBBBBBBBBBBBBB 3,298,197 4,234,756 B Change In Net Position 5,491,854 2,390,549 B Net Position - Beginning Of Year 550,529,545 548,138,996 B Net Position - End Of YearBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 556,021,399$ 550,529,545$ 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 81 2017 2016 Cash Flows From Operating Activities Received from customers 3,263,486$ 2,484,603$ Paid to suppliers for goods and services (21,028,157) (14,535,335) Net Cash Provided By (Used In) Operating Activities (17,764,671) (12,050,732) Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collected 31,938,803 25,669,165 Cash Flows From Capital And Related Financing Activities Payments for capital assets (14,847,039) (10,261,405) Proceeds from sale of capital assets 7,827 153,600 Net Cash Provided By (Used In) Capital And Related Financing Activities (14,839,212) (10,107,805) Cash Flows From Investing Activities Purchase of investments (72,571,974) (53,788,919) Proceeds from sale and maturity of investments 70,897,895 47,877,866 Investment income 1,044,375 1,002,717 Net Cash Provided By (Used In) Investing Activities (629,704) (4,908,336) Net Increase (Decrease) In Cash And Cash Equivalents (1,294,784) (1,397,708) Cash And Cash Equivalents At Beginning Of Year 6,609,338 8,007,046 Cash And Cash Equivalents At End Of Year 5,314,554$ 6,609,338$ Ended June 30, STORMWATER SEGMENT STATEMENTS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 82 15. Tax Abatements Tax abatements, as defined by Governmental Accounting Standards Board (“GASB”) Statement No. 77, Tax Abatement Disclosures (“GASB 77”), are agreements between a government and an individual or entity in which the government promises to forgo tax revenues and the individual or entity promises to subsequently take a specific action that contributes to economic development or otherwise benefits the government or its citizens. This Statement requires disclosure of tax abatement information about (1) a reporting government’s own tax abatement agreements and (2) those that are entered into by other governments and that reduce the reporting government’s tax revenues. Since the District does not and has not entered into tax abatement agreements directly with any individuals or entities, the following estimates are from tax abatements entered into by other governments, specifically the county and municipalities within the District’s boundary, that have reduced the District’s tax revenues. Tax Abatements Entered Into By St. Louis County and Cities Located In St. Louis County The District’s property tax revenues were reduced through four programs that are utilized by cities located in St. Louis County and the County itself. Summaries of these four programs are as follows: Enhanced Enterprise Zone: provides real property tax abatements to new or expanding businesses in certain specified geographic areas designated by local governments and certified by the Missouri Department of Economic Development. Industrial Development Bonds: finances industrial development projects for private corporations, partnerships and individuals. Land Clearance Redevelopment Authority: assists with the redevelopment of blighted or insanitary areas for residential, recreational, commercial, industrial or public uses. Urban Redevelopment Corporations: provides real property tax abatements to encourage the redevelopment of blighted areas by an eligible city or county. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 83 The amount of the District’s tax revenues that were abated by the county and cities initiating the programs are reported in the following table. For disclosure purposes, since the data is not available from St. Louis County for the District’s fiscal year 2016, the amount for fiscal year 2017 is estimated to also be the amount for fiscal year 2016. Tax Abatements Entered Into By St. Louis City The City of St. Louis offers a real estate tax abatement program as a development tool designed to assist developers, businesses and individuals with renovation and new construction projects. The tax abatement freezes the tax assessment in improvements to property at the pre-development level. To be eligible for tax abatement, a significant investment must be made in the property; generally either new construction on vacant land or gut rehabilitation of an existing building. The application must be made before construction begins and the usual term for tax abatement is five to ten years. The amount of the District’s tax revenues calculated at the District’s tax rate of $.119 per $100 of assessed value that were abated by St. Louis City are reported in the following table. For disclosure purposes, since the data is not available from St. Louis City for the District’s fiscal year 2016, the amount for fiscal year 2017 is estimated to also be the amount for fiscal year 2016. Land Enhanced Industrial Clearance for Urban St. Louis County Enterprise Development Redevelopment Redevelopment Total Tax or City Zones Bonds Authority Corporations Abatements St Louis County —$ 113,907$ —$ 25,167$ 139,074$ Bellerive — 21,873 — — 21,873 Berkeley 402 — — — 402 Brentwood — — — 12,657 12,657 Clayton — 21,527 — — 21,527 Edmundson — — — 9,416 9,416 Eureka — 195 — — 195 Ferguson — 3,637 — 509 4,146 Hazelwood 4,269 — — — 4,269 Jennings — 399 — — 399 Maryland Heights — — — 283 283 Normandy — — — 862 862 Overland — — — 4,637 4,637 Richmond Heights — — — 2,755 2,755 Rock Hill — — — 3,075 3,075 Sunset Hills — — — 1,140 1,140 University City — — 6,436 108 6,544 Wellston — — — 484 484 Total Tax Abatements 4,671$ 161,538$ 6,436$ 61,093$ 233,738$ For the Years Ended June 30, 2017 and 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 84 Tax Increment Financing Utilized By St. Louis County, Cities Located in St. Louis County and St. Louis City Missouri’s Real Property Tax Increment Allocation Redevelopment Act enables cities to finance certain redevelopment costs with the revenue generated from (i) payments in lieu of real estate taxes, as measured by the net increase in assessed valuation resulting from redevelopment and (ii) a portion of the increase in other local tax revenue associated with new economic activity. When a tax increment financing (“TIF”) plan is adopted, real estate taxes in the redevelopment are frozen at their current level. By applying the real estate tax rate of all taxing districts having taxing power within the redevelopment area to the increased assessed valuation resulting from redevelopment, a tax “increment” is produced. The real estate tax increments are referred to as payments in lieu of taxes, or “PILOTs”, and are deposited in a special allocation fund. Reduced Unabated Tax Abated Tax Tax St. Louis City Values Revenue Values Revenue Revenue Residential 127,828,700$ 152,116$ 38,634,150$ 45,975$ 106,141$ Commercial 300,655,380 357,780 139,647,230 166,180 191,600 Total 428,484,080$ 509,896$ 178,281,380$ 212,155$ 297,741$ For the Years Ended June 30, 2017 and 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 85 The estimated TIF incremental values and the District’s net reduced tax revenue resulting from the TIFs adopted in St. Louis County and the cities located in the County and adopted in the City of St. Louis are as follows: In summary, the District’s total tax revenues reduced during fiscal 2017 and 2016 as a result of the programs of other governments are as follows: TIF TIF Incremental Reduced Incremental Reduced St. Louis County or City Values Tax Revenues Values Tax Revenues St. Louis County and Cities Located in St. Louis County 433,333,020$ 518,266$ 401,072,910$ 380,751$ St. Louis County PILOTs Received — (13,569) — (10,396) St. Louis City 755,714,993 291,862 751,214,993 195,346 St. Louis City PILOTs Received — (1,644) — (313) Total 1,189,048,013$ 794,915$ 1,152,287,903$ 565,388$ June 30, 2017 For the Years Ended June 30, 2016 Reduced Reduced St. Louis County or City Tax Revenues Tax Revenues St. Louis County and Cities Located in St. Louis County - Tax Abatements 233,738$ 233,738$ St. Louis City - Tax Abatements 297,741 297,741 St. Louis County and Cities Located in St. Louis County - TIFs 504,697 370,355 St. Louis City - TIFs 290,218 195,033 Total Reduced Tax Revenues 1,326,394$ 1,096,867$ For the Years Ended June 30, 2017 June 30, 2016 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 86 16. Subsequent Events In preparing these financial statements, the District has evaluated events and transactions for potential recognition or disclosure through October 17, 2017, the date the financial statements were available to be issued. On August 2, 2017, the IRS announced a decrease in the sequestration rate for refundable credit amounts submitted on IRS Form 8038-CP for qualified bonds from 6.9% to 6.6%. This will be effective for all refund payments processed from October 1, 2017 to September 30, 2018. Since the District participates in Build America Bonds, the District will receive 93.4% of the amount requested during its fiscal year 2018. The District received 93.1% of the amount requested during fiscal year 2017. In April 2017 the Missouri Clean Water Commission voted to approve setting the clean water SRF annual loan administrative fee to one-half percent (.5%) effective April 5, 2017 for all new direct loans and effective January 1, 2018 for all existing direct loans currently paying one percent (1.0%). This change impacts six of the District’s existing SRF direct loans – Series 2010C, Series 2011A, Series 2013A, Series 2015A, Series 2016A and Series 2016B. The District’s Series 2009A and Series 2010A were currently paying one-half percent. The District’s Board of Trustees on September 14, 2017 approved ordinances to amend the definition of “Administrative Fee” in the previous ordinances that authorized the impacted SRF direct loans to incorporate the reduction in the annual loan administrative fee. The change in the loan administrative fee to one-half percent from one percent will reduce financing costs. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 87 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS June 30, 2017 Schedule of Changes in Net Pension Liability and Related Ratios In (000's) 2016 2015 2014 Total Pension Liability Service cost 5,107$ 5,253$ 5,409$ Interest on total pension liability 20,609 20,199 19,901 Effect of plan changes — — — Effect of economic/demographic gains or (losses) (883) (4,577) (3,668) Effect of assumption changes or inputs 11,665 — 6,500 Benefit payments (15,261) (14,475) (13,387) Net Change in Total Pension Liability 21,237 6,400 14,755 Total Pension Liability - Beginning 296,812 290,412 275,657 Total Pension Liability - Ending (a)318,049 296,812 290,412 Fiduciary Net Position Employer contributions 10,146 10,059 10,676 Member contributions — — — Investment income net of investment expenses 11,913 (1,888) 6,980 Benefit payments (15,261) (14,475) (13,387) Administrative expenses — — — Net Change in Plan Fiduciary Net Position 6,798 (6,304) 4,269 Fiduciary Net Position - Beginning 244,212 250,516 246,247 Fiduciary Net Position - Ending (b) 251,010 244,212 250,516 Net Pension Liability - Ending = (a) - (b)67,039$ 52,600$ 39,896$ Fiduciary Net Position as a % of Total Pension Liability 78.92% 82.28% 86.26% Covered Payroll 42,055$ 43,345$ 44,664$ Net Pension Liability as a % of Covered Payroll 159.41% 121.35% 89.32% Notes to Schedule: 1. Changes of Assumptions. In 2016, amount reported as change of assumptions resulted from changing to RP-2014 Mortality for Employees and Healthy Annuitants and Disabled Mortality tables, while the 2014 change resulted primarily from adjustments to the discount rate and employee rate increases. 2. This schedule will ultimately present ten years of information when available. Calendar Year Ending December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 88 REQUIRED SUPPLEMENTARY INFORMATION (Continued) EMPLOYEES’ PENSION PLAN AND POST-EMPLOYMENT BENEFIT PLAN June 30, 2017 Employees' Pension Plan Schedule of Employer Contributions Fiscal Year Actuarially Contribution Contribution Ending Determined Annual Deficiency Covered as a % of June 30, Contribution Contribution (Excess) Payroll* Covered Payroll 2015 10,359,139$ 10,359,139$ —$ 44,004,199$ 23.54% 2016 10,096,075 10,096,075 — 42,699,659 23.64% 2017 11,236,828 11,236,828 — 41,402,545 27.14% * Estimated payroll from July 1 through June 30 based on calendar year covered payroll. Notes to Schedule: 1. This schedule will ultimately present ten years of information when available. 2. Valuation Date: Actuarially determined contribution rates are calculated as of January 1 of the fiscal year in which the contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial Cost Method: Entry Age Normal Amortization Method: Level dollar layered, 20 year periods Asset Valuation Method: 3-year smoothing period Inflation: 2.50% Salary Increases: 4.25%, average, including inflation Investment Rate of Return: 7.00%, net of pension plan investment expense, including inflation Mortality: In the 2017 actuarial valuation, assumed life expectancies were calculated using the RP-2014 Employee and Healthy Annuitant Mortality Table and the RP-2014 Disabled Mortality Table. In the 2016 and 2015 actuarial valuations, assumed life expectancies were calculated using the RP-2000 Healthy Annuitant Mortality Table and the RP-2000 Disabled Mortality Table. 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 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The Metropolitan St. Louis Sewer District Statistical Section This part of the District’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the District’s overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the District’s financial performance and well-being have changed over time..........................................89 – 90 Revenue Capacity These schedules contain information to help the reader assess the District’s most significant local revenue sources, the user charge........................................................................................91 – 98 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...............................................................................99 – 101 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...........................................................................................102 – 104 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 ...............................................105 – 106 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 89 2008 b 2009 b 2010 b 2011 b 2012 b Net Position Net investment in capital assets 1,704,322$ 1,798,914$ 1,868,974$ 1,915,233$ 1,928,200$ Restricted 97,422 94,769 80,782 94,926 106,693 Unrestricted 324,218 293,934 257,894 186,860 175,010 Total Net Position 2,125,962$ 2,187,617$ 2,207,650$ 2,197,019$ 2,209,903$ 2013 b 2014 b 2015 a 2016 a 2017 a Net Position Net investment in capital assets 1,877,692$ 1,845,394$ 1,805,453$ 1,809,386$ 1,876,249$ Restricted 111,066 142,764 142,445 136,547 135,259 Unrestricted 251,300 279,794 330,218 381,124 379,660 Total Net Position 2,240,058$ 2,267,952$ 2,278,116$ 2,327,057$ 2,391,168$ a Years 2015 to current include a change in the calculation of the net position components which is not reflected in years prior. NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (000's) Fiscal Year Fiscal Year THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 90 Non-operating Income/(Loss) Change Fiscal Operating Operating Operating Revenue/ before Capital Capital in Net Year Revenues Expenses Income/(Loss) (Expenses) Contributions Contributions Position 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 2017 333,490,989 275,077,675 58,413,314 (3,916,119) 54,497,195 9,613,746 64,110,941 CHANGES IN NET POSITION LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 91 Licenses, Fiscal Sewer Service Permits, and Year Charges, Net Other Fees Other 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 2017 328,359,526 4,036,362 1,095,101 333,490,989 OPERATING REVENUES BY SOURCE LAST TEN FISCAL YEARS Total Operating Revenues THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 92 Fiscal Employment Materials and Contracted Chemical Year Costs Utilities Supplies Services Supplies 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 2017 99,357,213 16,771,366 14,453,871 51,197,293 3,569,449 Fiscal Year Insurance Other 2008 2,939,390$ 13,986,037$ 170,212,023$ 54,933,859$ 225,145,882$ 2009 2,746,119 13,769,203 164,807,400 47,370,379 212,177,779 2010 3,062,439 19,981,424 174,767,098 54,011,776 228,778,874 2011 2,578,316 21,353,854 177,648,834 66,854,265 244,503,099 2012 2,470,343 2,451,472 149,565,901 66,742,064 216,307,965 2013 2,696,416 8,013,944 160,128,594 70,029,840 230,158,434 2014 2,737,491 1,427,638 167,210,428 74,087,207 241,297,635 2015 2,791,622 (5,825,289) 177,879,889 78,641,259 256,521,148 2016 3,218,041 623,903 189,111,956 83,983,749 273,095,705 2017 3,293,267 5,240,825 193,883,284 81,194,391 275,077,675 OPERATING EXPENSES LAST TEN FISCAL YEARS Subtotal, Expenses before Depreciation Depreciation Total Operating Expenses THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 93 2008 2009 2010 2011 2012 Non-operating revenues Property taxes levied by the District 27,512,070$ 2,129,475$ 1,401,100$ 27,125,451$ 24,604,173$ Investment income 17,476,621 13,115,519 6,553,760 3,847,324 2,407,485 Rent and other income 529,983 214,674 265,004 442,968 294,591 Total non-operating revenues 45,518,674 15,459,668 8,219,864 31,415,743 27,306,249 Non-operating expenses Interest expense — 9,079,269 13,189,283 7,971,088 16,365,309 Clean Water Capital Improvement refund 4,313,973 — — — — Net loss on disposal and sale of capital assets 686,459 2,161,862 2,719,163 3,485,952 3,162,723 Non-recurring projects and studies 3,258,725 7,104,496 9,872,088 10,800,843 6,402,888 Legal claims — — — 4,828,828 5,000 Total non-operating expenses 8,259,157 18,345,627 25,780,534 27,086,711 25,935,920 Net non-operating revenue (expense) 37,259,517$ (2,885,959)$ (17,560,670)$ 4,329,032$ 1,370,329$ 2013 2014 2015 2016 2017 Non-operating revenues Property taxes levied by the District 26,016,135$ 27,450,319$ 24,764,324$ 25,671,058$ 32,458,054$ Investment income 1,056,966 2,966,549 3,000,591 4,635,866 2,902,624 Rent and other income 293,159 302,506 37,321 102,865 106,562 Total non-operating revenues 27,366,260 30,719,374 27,802,236 30,409,789 35,467,240 Non-operating expenses Interest expense 21,062,474 25,661,127 27,138,546 28,943,200 31,250,777 Net loss on disposal and sale of capital assets 795,527 5,248,443 1,420,902 324,513 673,044 Non-recurring projects and studies 4,676,203 3,492,667 12,317,488 11,000,403 7,459,538 Total non-operating expenses 26,534,204 34,402,237 40,876,936 40,268,116 39,383,359 Net non-operating revenue (expense) 832,056$ (3,682,863)$ (13,074,700)$ (9,858,327)$ (3,916,119)$ Fiscal Year NON-OPERATING REVENUES AND EXPENSES LAST TEN FISCAL YEARS Fiscal Year THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 94 Type of Monthly Charge Unmetered c Residential c Non-Residential Wastewater User Charge Base Charge 19.46$ 19.46$ 19.46$ Compliance Charge a Tier 1 — — 2.86 Tier 2 — — 57.20 Tier 3 — — 125.84 Tier 4 — — 185.90 Tier 5 — — 243.10 Volume Charges per Ccf b — 3.59 3.59 per room 2.12 — — per water closet 7.92 — — per bath 6.60 — — per separate shower 6.60 — — Extra Strength Surcharges a SS over 300 ppm per ton — — 262.00 BOD over 300 ppm per ton — — 654.00 COD over 600 ppm per ton — — 327.00 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, 2017 Metered THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 95 Fiscal Year Wastewater Charges Billed1 Wastewater Charges Collected2 Collections as a % of Wastewater Charges Billed 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% 2017 326,663,167 322,829,334 98.83% 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 96 2008 a 2009 2010 b 2011 c 2012 Residential: Single Family/Unit a 344.88$ 344.88$ 1 351.12$ 1 333.60$ 1 347.64$ Multi-Family/Unit a 299.76 299.76 305.04 285.12 296.28 Commercial/Industrial: Service Charge/Unit 2 457.20 457.20 486.60 507.00 525.60 Sanitary Sewer Usage Charge per Ccf 1.88 1.88 1.92 2.02 2.11 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 218.90 218.90 218.90 222.62 231.35 Biochemical Oxygen Demand ("BOD") over 300 parts per million/ton 529.90 529.56 551.52 596.72 620.14 Chemical Oxygen Demand ("COD") over 600 parts per million/ton 264.85 264.78 275.76 298.36 310.07 2013 d 2014 2015 2016 2017 e Residential: Single Family/Unit a 379.56$ 421.08$ 434.76$ 491.52$ 535.08$ Multi-Family/Unit a 324.12 360.36 434.04 490.80 535.08 Commercial/Industrial: Service Charge/Unit 2 478.56 412.56 348.12 296.80 336.69 Sanitary Sewer Usage Charge per Ccf 2.28 2.50 2.82 3.21 3.59 Storm Sewer Usage Charge/100 sq. feet of impervious area — — — — — Extra Strength Surcharges: Suspended Solids ("SS") over 300 parts per million/ton 231.35 231.35 244.03 251.88 262.00 Biochemical Oxygen Demand ("BOD") over 300 parts per million/ton 620.14 620.14 620.14 632.38 654.00 Chemical Oxygen Demand ("COD") over 600 parts per million/ton 310.07 310.07 310.07 316.19 327.00 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 Commercial/Industrial is calculated by using the sum of annualized base charge and compliance charge. Starting FY 2013, MSD implemented 5-tier Compliance Charge Rate Model, so the Service Charge/Unit is based on calculated weighted average compliance charge. FY 2013, FY 2014 & FY 2015 Service Charge/Unit were adjusted to reflect the weighted average compliance charge calculations. Prior to FY 2013, there was only one tier compliance charge. 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.e Ordinance 14395, effective July 1, 2016, changed wastewater rates through FY 2020. Source: Finance Department Fiscal Year Fiscal Year SEWER USER CHARGES (COMPOSITE-ANNUAL) LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 97 Single Multi- Fiscal Family Family Non- Total Year Residential Residential Residential Accounts 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 2017 360,534 41,697 24,253 426,484 Source: Finance Department a Due to the implementation of the impervious area charge in 2008, approximately 46,000 additional stormwater only accounts were billed each month. This charge was challenged and a court decision was entered on 7/9/10. Based on that decision the impervious charge was discontinued in FY 2011. b The number of accounts were revised as stormwater accounts were underreported. NUMBER OF CUSTOMERS BY TYPE LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 98 Customer Amount % InBev Anheuser-Busch 5,165,348$ 1.57% City of St. Louis 2,320,129 0.71% Washington Unversity 2,042,936 0.62% Sigma-Aldrich 1,214,683 0.37% St Louis University 1,102,130 0.34% BJC HealthCare 941,584 0.29% Hermann Oak Leather 899,699 0.27% GKN Aerospace 844,002 0.26% The Boeing Company 809,434 0.25% Mallinckrodt 802,947 0.24% Subtotal (10 largest) 16,142,892 4.92% Balance from other customers 312,216,634 95.08% Grand totals 328,359,526$ 100.00% Customer Amount % Anheuser-Busch 7,029,150$ 3.24% Mallinckrodt Inc. 1,685,617 0.78% Washington University 994,016 0.46% City Of St. Louis 811,893 0.37% Chrysler Corporation 811,706 0.37% Zoological Gardens 784,423 0.36% Sigma-Aldrich 674,920 0.31% Rockwood Pigments Na Inc. 624,807 0.29% St. Louis Coca-Cola Bottling Co. 536,315 0.25% Sensient Colors Inc. 532,339 0.25% Subtotal (10 largest) 14,485,186 6.68% Balance from other customers 202,133,231 93.32% Grand totals 216,618,417$ 100.00% Source: Budget Division Fiscal Year 2008 User Charges TEN LARGEST CUSTOMERS CURRENT YEAR AND NINE YEARS AGO User Charges Fiscal Year 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 99 Unamortized As a Share Fiscal Subordinate Capital Premium, Net of Personal Year Senior Subordinate Direct Loans Lease of Discount Amount Per Capita Income 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 2017 995,175,000 145,410,000 210,851,827 — 124,465,181 1,475,902,008 1,127 2.33 Notes: Calculation of "Per Capita" for 2011 through 2013 is based on estimated population levels. Calculation of "As a Share of Personal Income" for 2011 through 2013 is based on estimated income levels. In FY 2012, a decision was made to discontinue considering SRF receivable amounts as liabilities. The liability is now recorded when the funds are received. Sources: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce, and the U.S. Census Bureau LAST TEN FISCAL YEARS Revenue Bonds Total RATIOS OF OUTSTANDING DEBT BY TYPE THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 100 Amount of Debt Percentage of Debt Governmental Unit Debt Outstanding within District Boundary within District Boundary City of St. Louis 37,345,000$ 37,345,000$ 100.0% St. Louis County 96,850,000 96,075,200 99.2 Municipalities 122,514,491 119,459,491 97.5 City of St. Louis School District 277,879,000 277,879,000 100.0 St. Louis County School Districts 1,422,120,584 1,407,479,144 99.0 Fire Districts 103,382,568 96,395,273 93.2 2,060,091,643$ 2,034,633,108 98.8% Total Direct Debt 1,475,902,008 Total Direct and Overlapping Debt 3,510,535,116$ Sources: City of St. Louis, Office of Comptroller St. Louis County, Department of Revenue St. Louis Public Schools, Financial/Treasurer Office Missouri Department of Education, School Finance Polled Governments Polled Fire Districts Note: Although the District comprises all of the St. Louis City and most of St. Louis County, it does not entirely match the County's boundaries. The calculation of overlapping debt is based on the percentage that a political jurisdiction's territory lies within the District's territory. These percentages are weighted against the debt outstanding thus providing the amount of debt within District Boundary. COMPUTATION OF OVERLAPPING DEBT As Of June 30, 2017 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 101 Less: Operating Expenses (excluding Non- depreciation Net Fiscal Operating operating Gross & GASB 68 Available Year Revenues Revenues Revenues pension exp) Revenues 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 2,555,654 291,391,531 163,311,194 128,080,337 2016 318,463,297 3,894,305 322,357,602 168,258,133 154,099,469 2017 333,469,677 2,456,677 335,926,354 168,835,676 167,090,678 Fiscal Coverage Year Principal Interest Total Ratio 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 2.1 2017 38,026,700 51,333,869 89,360,569 1.9 Fiscal Coverage Year Principal Interest Total Ratio 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 2017 15,285,000 42,897,077 58,182,077 2.9 Note: The methodology used to calculate the net available revenues and the coverage ratio was adjusted during fiscal year 2013 and all previous years were restated for comparative purposes. The 2013 change in methodology consisted of removing agency fees, previously reflected as a deduction from net available revenues, and now combining them with interest in the debt service section. Additionally, in fiscal years 2010 and 2011, the change in methodology consisted of removing the Build America Bond Tax Credit from the pledged revenue section and reapplying the credit to interest expense in the debt service section. This was made to ensure consistency with fiscal years 2012 and 2013. In fiscal 2017 the methodology was changed to exclude GASB non-cash transactions from the debt service coverage calculation. Fiscal years 2015 and 2016 have been adjusted to also exclude the GASB 68 non-cash pension expense. PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Senior and Subordinate Debt Service Senior Debt Service THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 102 Per Personal Capita Total Fiscal Income Personal Labor Number of Year Populations (millions) Income City County State Force Households (1) 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 6.0 4.7 4.9 709,825 542,223 2017 1,309,985 63,322 48,338 4.7 3.7 4.9 692,644 541,394 Notes: (1) The number of households was taken from http://www.census.gov/quickfacts/fact/table/US-MO. The 2017 figure is based on 2011-2015 data. The 2016 figure (2010-2014). The 2015 figure is based on 2013 data. The 2011-2012 figures are based on the 2010. census. Information for prior years is unavailable; therefore, the 2000 census information is used for the other years in this table. Sources: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce, and Missouri Economic Resource and Information Center (MERIC) Footnotes- http://www.bea.gov/regional/reis/scb.cfm http://www.missourieconomy.org/indicators/LAUS/default.aspx KWWSTXLFNIDFWVFHQVXVJRYTIGVWDWHVKWPO DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Unemployment Rate Saint Louis THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 103 Percentage Percentage Employer Employees (1)of Total Rank Employees (1)of Total Rank BJC HealthCare 28,351 4% 1 23,378 4% 1 Wal-Mart Stores Inc. 22,290 3% 2 13,400 2% 4 Washington University in St. Louis 15,818 2% 3 12,390 2% 6 SSM Healthcare 14,926 2% 4 12,102 2% 7 Mercy 14,195 2% 5 Boeing Defense, Space & Security 14,000 2% 6 16,000 2% 2 Scott Air Force Base 13,000 2% 7 13,433 2% 3 Schnuck Markets Inc. 9,956 1% 8 11,000 2% 8 AT & T 9,000 1% 9 8,990 1% 9 Archdiocese of St. Louis 8,780 1% 10 United States Postal Service 12,700 2% 5 St. John's Mercy Health Care 8,876 1% 10 150,316 20% 132,269 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 2017 (as of May 2017) St. Louis Business Journal's Book of Lists 2008 Fiscal Year 2008Fiscal Year 2017 PRINCIPAL EMPLOYERS (ST. LOUIS METROPOLITAN AREA) CURRENT YEAR AND NINE YEARS AGO THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 104 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Administrative 131 133 131 124 129 124 122 129 126 131 Office/Clerical 92 94 89 84 85 86 82 84 82 82 Plant Operation & Laboratory 239 237 249 241 244 249 252 236 226 227 Engineering & Technical 133 144 151 147 153 148 151 155 152 151 Sewer Construction & Maintenance 276 301 315 296 311 324 328 345 358 360 Total Employees 871 909 935 892 922 931 935 949 944 951 Source: Human Resources Department EMPLOYMENT LEVEL LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 105 Average Sewage Fiscal Treatment in Millions Year of Gallons per Day 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 2017 328.9 Source: Operations Department AVERAGE FLOW LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 106 2008 2009 2010 2011 2012 Miles of sewers 9,723 9,812 9,900 9,843 9,738 Number of treatment plants 7 7 7 7 7 Treatment capacity (MGD) a 428 423 423 528 528 Annual engineering maximum plant capacity (millions of gallons) 154,395 154,395 154,395 192,629 192,629 Amount treated annually (millions of gallons) 132,751 144,066 144,358 135,269 109,518 Unused capacity (millions of gallons) 21,644 10,329 10,037 57,360 83,111 Percentage of capacity utilized 86% 93% 93% 70% 57% 2013 2014 2015 2016 2017 Miles of sewers 9,578 9,563 9,531 9,700 9,400 Number of treatment plants 7 7 7 7 7 Treatment capacity (MGD) a 528 533 538 538 593 Annual engineering maximum plant capacity (millions of gallons) 192,629 194,454 196,279 196,279 216,354 Amount treated annually (millions of gallons) 119,253 99,945 119,547 122,366 120,033 Unused capacity (millions of gallons) 73,376 94,509 76,732 73,913 96,321 Percentage of capacity utilized 62% 51% 61% 62% 55% Sources: Operations Department and Engineering Department Note:a Million gallons per day. Fiscal Year Fiscal Year OPERATING AND CAPITAL INDICATORS LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT2350 MARKET STREET, ST. LOUIS, MO 63103WWW.STLMSD.COM - 314-768-6260