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HomeMy Public PortalAboutExhibit MSD 9 - 2015 Comprehensive Annual Financial Report (CAFR)1 YEAR AGO - OLD N O R T H R A I NGARDEN THE METROPOLITANST. LOUIS SEWER DISTRICT COMPREHENSIVE ANNUALFINANCIALREPORT FISCAL YEAR ENDING JUNE 30, 2015 THE METROPOLITAN ST. LOUIS SEWER DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2015 AND 2014 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 - xii Organizational Chart ................................................................................................. xiii Certificate Of Achievement For Excellence In Financial Reporting .......................................................................................... xiv Part II - Financial Section: Independent Auditors’ Report .......................................................................... 1 - 3 Management’s Discussion And Analysis - Required Supplementary Information ........................................................................ 4 - 16 Basic Financial Statements Statements Of Net Position............................................................................ 17 - 18 Statements Of Revenues, Expense And Changes In Net Position ..................... 19 Statements Of Cash Flows ............................................................................. 20 - 21 Notes To Financial Statements ...................................................................... 22 - 79 Required Supplementary Information - Schedule Of Changes In Net Pension Liability And Related Ratios, Schedule Of Employer Contributions - Employees’ Pension Plan And Other Post-Employment Benefit Plan ..................................................... 80 - 81 Part III – Statistical Section: Net Position By Component .................................................................................. 82 Changes In Net Position ........................................................................................ 83 Operating Revenues By Source ............................................................................. 84 Operating Expenses ............................................................................................... 85 Non-Operating Revenues And Expenses .............................................................. 86 User Charge Rates ................................................................................................. 87 Sewer User Charges (Composite-Annual) ............................................................ 88 Number Of Customers By Type ............................................................................ 89 Ten Largest Customers ......................................................................................... 90 Ratios Of Outstanding Debt By Type ................................................................... 91 Computation Of Overlapping Debt ....................................................................... 92 Pledged Revenue Coverage ................................................................................... 93 Demographic And Economic Statistics ................................................................. 94 Principal Employers (St. Louis Metropolitan Area) ............................................ 95 Employment Level ................................................................................................. 96 Average Flow .......................................................................................................... 97 Operating And Capital Indicators ........................................................................ 98 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 13, 2015 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, 2015, 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, 2015. The Financial Section includes the independent auditors’ report, management’s discussion and analysis, and the District’s basic financial statements. The Statistical Section includes financial, economic, and demographic information, generally presented on a multi-year basis. The CAFR includes all funds of the District. The operations of these funds, as reflected in the financial statements, are under the control of the District’s governing body. The District has determined there were no other agencies or entities that met the established criteria for inclusion in the reporting entity. The Board of Trustees The Metropolitan St. Louis Sewer District ii Organization MSD was created in 1954 to provide a metropolitan-wide sewer system to serve the City of St. Louis and most of the more heavily populated areas of St. Louis County. Before MSD’s creation, the City of St. Louis, various municipalities, and private sewer companies provided sewer service that primarily included only collecting and transporting sewage from small geographic areas to nearby rivers and streams with little or no treatment. Most of the municipalities or private sewer companies serving the area did not have the jurisdictional authority or financial resources needed to eliminate health hazards from untreated sewage. When the District began operations, it took over the publicly owned wastewater and stormwater drainage facilities within its jurisdiction and began the construction of an extensive system of collector and interceptor sewers and treatment facilities. In 1977, voters approved the District’s annexation of a 270 square mile area of the lower Missouri River and lower Meramec River watersheds. The District purchased the Fee Fee Trunk Sewer Company and the Missouri Bottoms Sewer Company in 1978. MSD has since acquired other investor-owned or municipally operated systems. The District’s service area now encompasses 525 square miles including all 62 square miles of the City of St. Louis and 463 square miles of St. Louis County. The current population served by the District is approximately 1.3 million. MSD is organized pursuant to Article VI, Section 30 of the Missouri State Constitution that empowers the people of St. Louis County and the City of St. Louis “to establish a metropolitan district for functional administration of services common to the area.” MSD is the only district established pursuant to that section of the Missouri State Constitution. The Charter of MSD (“Plan”), approved by voters in 1954 and amended in 2000 and 2012, established the District. The Plan describes the District as “a body corporate, a municipal corporation, and a political subdivision of the state.” As a political subdivision of the state, MSD is comparable to a county or city, such as St. Louis County or the City of St. Louis. The Plan established the governing body of the District as a six-member Board of Trustees (“Board”) with three members appointed by the Mayor of St. Louis and three members appointed by the St. Louis County Executive. No more than two trustees from each area can be of the same political affiliation. The Board of Trustees The Metropolitan St. Louis Sewer District iii Unlike a corporation’s board of directors that is responsible solely to the stockholders who choose to invest in the corporation, MSD’s Board members are trustees of public property and public funds. They are responsible to all citizens within the District. According to the Plan, the Board enacts District ordinances, determines policies, and appoints the Executive Director, the Secretary-Treasurer, and the Internal Auditor. The Executive Director appoints all other District officials. Among its duties, the Board makes all appropriations, approves contracts for improvements, and engages an accounting firm to perform the annual independent audit of the District. The Plan prescribes other duties of the Board and grants numerous broad powers, subject to federal and state laws, to the District and the Board of Trustees. Among other things, the Plan outlines the following requirements or provisions: • Requires that MSD operate with a balanced budget; • Details how MSD can tax property and requires an annual public hearing on all taxes levied by the District; • Details how MSD can establish user charges; • Requires MSD to establish civil service rules and regulations governed by a Civil Service Commission; • Provides how the original boundaries of the District may be extended to include any area in St. Louis County; and • Requires MSD to approve all plans and designs for proposed construction, alteration, or reconstruction of sewer or drainage facilities within the District’s boundaries. The District is also governed by the Missouri State Constitution and various federal and state laws that among other requirements mandate the following: • MSD must hold permits for all sanitary discharges. These permits require a minimum of secondary treatment. • MSD must provide wastewater treatment in an area-wide manner to qualify for federal and state grants. • MSD must operate, maintain, and replace facilities to provide proper wastewater treatment or be subject to penalties and fines. • 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 2015 the primary source of funding for the operation and maintenance of MSD’s wastewater system was a user charge averaging $431.88 per year or $35.99 per month for a single-family residence. The District’s charges for residential wastewater service are tied to the amount of measured water usage during a winter quarter. For residential properties without water meters, the charges are based on housing attributes (such as the number of rooms, baths, and toilets) that correlate to water usage. That methodology is the same billing methodology used by the City of St. Louis Water Division for their non-metered properties. Multi-family residential and non- residential rates are proportionate to the single-family charge and are based on water consumption and the strength of the discharge. In Fiscal Year 2015, 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¢ cents per month per unit for multi-unit properties. MSD also receives some federal, state, and local grants to help defray the cost of constructing sewage treatment and drainage facilities and improvements. The District also charges fees for plan review, permits, construction inspection of new system development, and special discharges. The District charges a uniform connection fee in all service areas. The District, itself, may issue general obligation bonds and revenue bonds to finance the cost of improvements and extensions to the sewer system. The District also may issue, on behalf of each of its sub-districts, general obligation bonds, revenue bonds, or special assessment bonds. Major Initiatives Affecting The Financial Resources Of The District In June 2007 the District was sued by the Department of Justice on behalf of the United States Environmental Protection Agency (“EPA”) and the Missouri Department of Natural Resources (“DNR”) for various alleged violations of the Clean Water Act. The Missouri Coalition for the Environment joined the suit as an intervener in August 2007. After a lengthy mediation, a Consent Decree (“CD”) was entered by the Federal Court on April 27, 2012. This entry resolved all alleged violations. Compliance with the CD requires the District to implement a multi-decade, multi-billion dollar capital improvement program and rehabilitate significant portions of the existing wastewater sewer system. This effort will continue to be funded by a combination of rate increases and issuance of additional debt based on the completion of milestones defined in the CD. The Board of Trustees The Metropolitan St. Louis Sewer District v Integral to helping MSD’s rate payers understand the Consent Decree is MSD’s initiation of Project Clear. MSD Project Clear is a long-term effort by MSD, undertaken as part of the Consent Decree agreement with the U.S. Environmental Protection Agency and the Missouri Coalition for the Environment. Project Clear’s aims are to: • Improve water quality for everyone; • Solve problems for some of our customers created by the very nature and design of St. Louis’ wastewater system; • 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. The District’s Board of Trustees implemented an impervious based stormwater rate on March 1, 2008, replacing its prior funding mechanism of property taxes and user fees. On July 9, 2010, a circuit court of St. Louis County found this impervious rate to be unconstitutional under Missouri law. In response to this ruling, the Board suspended the impervious based stormwater rate and reinstituted the District’s stormwater property taxes and user fees, previously rolled back on a voluntary basis, as part of the stormwater rate plan. The District lost both of its subsequent appeals to the Appellate and Missouri Supreme Court negating the culmination of a 20-year effort to adequately fund much needed stormwater services for District rate payers. The impact of this court decision has resulted in a dramatic reduction in stormwater services being provided across the District with many customers receiving little or no stormwater services until an alternative funding source is identified. The 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 also recommended the establishment of a new District-wide tax structure to replace the multi-layered taxes now assessed on the real estate value of our customers’ property. These taxes have traditionally been used to fund stormwater services, including operations, maintenance, very limited capital projects, and regulatory compliance. However, this system of funding stormwater service has proven itself to be inequitable and does not cover the current costs of maintaining and operating a significant portion of the stormwater infrastructure MSD owns. The Rate Commission’s recommendation to the District’s proposal was received by the Board on August 5, 2015. On October 8, 2015, the Rate Commission’s recommendation was adopted by the Board of Trustees. The 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. As stated above, the District submitted a rate change proposal to the MSD Rate Commission in February 2015. Since February 2004, the voters of St. Louis have authorized the District to issue a total of $1.7 billion in wastewater revenue bonds. As of June 30, 2015, the District has issued $1.2 billion of the total authorization. The District’s long-term wastewater capital improvement program will continue to be funded through a combination of additional bonds and wastewater rate increases. The District is also upgrading its extensive billing and collection system to incorporate the latest utility technology. The new system will result in more efficient processes and the ability to continue to expand its customer outreach efforts. The new technology will provide state of the art capabilities to utilize the multiple ways now available to better communicate with its customers, understand their needs, and continue to align the District’s responsiveness accordingly. Full implementation of the system occurred on September 1, 2015. 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 Board of Trustees The Metropolitan St. Louis Sewer District vii 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 the meet those goals.) The CBA will support the development of initiatives that address these issues, both in terms of workforce and business ownership. To our knowledge, the CBA is the only one of its kind in the St. Louis region. Operations The Executive Director and his staff administer the operation and maintenance of the District’s collection and treatment systems. The District’s sanitary, stormwater, and combined sewer collection system includes more than 9,500 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 7 wastewater treatment facilities. These facilities treated an average flow of 327.5 million gallons per day (“MGD”) in fiscal 2015 compared to 273.8 MGD in fiscal 2014. The design capacity and average flow, by watershed, in MGD was as follows in fiscal 2015: MAJOR WATERSHED LEVEL OF TREATMENT NUMBER OF FACILITIES DESIGN CAPACITY AVERAGE FLOW FISCAL 2015 Mississippi River Secondary Two 417.00 245.0 Missouri River Secondary Two 78.00 51.3 Meramec River Secondary Three 42.75 31.2 Total Seven 537.75 327.5 The Board of Trustees The Metropolitan St. Louis Sewer District viii 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 5.9 percent in June 2015 and higher than the national unemployment rate of 5.5 percent for the same time period. MSD has its own internal barometers for measuring economic development within the District. These are listed below for fiscal 2015 and 2014: 2015 2014 Sewer Plan Reviews: Number of Plans Approved 529 487 Number of Miles of Sewers 22 36 Sewer Construction Permits: Number of Permits Issued 3,447 3,472 Number of Miles of Sewers 33 29 Customer Connections: Number of Connection Permits Issued 2,017 1,764 Connection Fee Revenue (in millions) $1.8 $1.5 Value of Sewers Dedicated to MSD by Developers (in millions) $12.3 $6.9 Over the years, the St. Louis economy has undergone a transformation from reliance on traditional manufacturing industries to those industries based on advanced technology and services. The St. Louis area is a center for health care, biotechnology, banking, finance, transportation, tourism, and education and has a strong and diverse manufacturing economy. The area has an abundance of energy, water, and sewerage facilities and can sustain future economic growth. The Board of Trustees The Metropolitan St. Louis Sewer District ix Financial Information Proprietary Operations. The current financial condition of MSD remains stable. The District realized a net operating income of $33.9 million in fiscal 2015 compared to a net operating income of $24.5 million the prior year. The increase is explained by an increase in sewer service revenue (as a result of rate increases) offset by an increase in operating expenses (primarily utility costs and depreciation). A more in depth analysis of the District’s financial position and the magnitude of the capital improvement and replacement program (“CIRP”) is provided in the Management’s Discussion and Analysis section that appears later in this report. Budgetary Controls. The District’s Plan requires MSD to submit a proposed budget to the Board by March 15th each year. After Board review, a final budget is approved in June. The District’s Plan also requires MSD to maintain budgetary controls and to adopt a balanced budget. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the appropriation process approved by the Board. The annual appropriated budget includes activities of the District’s operating and debt service funds. The Board adopts ordinances to appropriate funds for capital improvement expenditures at the time of the contract award and acceptance of any grant offers. Budgetary control is by Division and major expenditure category within the General Fund, each Debt Service Fund, and each capital improvement contract. The District utilizes an encumbrance accounting system in conjunction with internal variance and projection analysis to maintain budgetary control. Certain encumbrances carry over from one year to the next as approved by the Board during the budget process. Monthly and year-end financial reports are prepared in accordance with United States generally accepted accounting principles for Enterprise Funds. Adjustments are made to the accounting records, where necessary, to reflect the full accrual method of accounting. Under the full accrual method of accounting, revenues are recognized when earned and expenses are recorded as liabilities when incurred. Encumbrances and unearned capital and operating grants are eliminated under the full accrual method of accounting. These amounts are disclosed as commitments in the footnotes to the 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. The Board of Trustees The Metropolitan St. Louis Sewer District x 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, performs preventative maintenance on them, and maintains excess liability coverage. MSD maintains automobile and general 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; 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. The Board of Trustees The Metropolitan St. Louis Sewer District xi Internal Controls. District Management is responsible for designing, establishing, and maintaining an internal control system that protects District assets from loss, theft, or misuse and ensures that adequate accounting data is compiled to prepare financial statements in conformity with United States generally accepted accounting principles. Internal control systems are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived and that the evaluation of costs and benefits requires estimates and judgments by management. The District’s internal control system is subject to periodic evaluation by Management, the Board and the District’s independent accountants. Other Information Audit Requirements. The District’s Plan requires an annual audit by independent certified public accountants. The District’s CAFR includes a report on the District’s financial statements by the accounting firm of RubinBrown LLP. Besides meeting the requirements set forth in the Plan, the annual audit is also designed to meet the requirements of the 1996 amendments to the Federal Single Audit Act and the United States Office of Management and Budget (“OMB”) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. A Single Audit Report was issued for the year ended June 30, 2015. The financial statements of the Metropolitan St. Louis Sewer District Employees’ Pension Plan, Deferred Compensation Plan and Defined Contribution Plan are also audited annually. These audits were issued as of December 31, 2014 and are available to interested parties upon request. Awards. The Government Finance Officers Association of the United States and Canada (“GFOA”) awarded a Certificate of Achievement for Excellence in Financial Reporting to MSD for its CAFR for the fiscal year ended June 30, 2014. 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-seven consecutive years. We believe the current CAFR continues to conform to the GFOA’s high standards, as reflected in the Certificate of Achievement program requirements, and are submitting it again this year for consideration. The Board of Trustees The Metropolitan St. Louis Sewer District xii The District also received the GFOA’s Distinguished Budget Presentation award for its fiscal 2015 annual budget. The District has received this award for twenty-eight consecutive years. We believe the FY16 budget presentation continues to meet the GFOA’s high standards and submitted it August 26, 2015, for consideration. Marion M. Gee Director of Finance xiii ORGANIZATION (as of June 30, 2015) BOARD OF TRUSTEES Michael Yates, Chair; James Faul, Vice Chair; Bob Berry; Annette Mandel; Valerie Patton; Ruby Bonner OFFICE OF INTERNAL AUDITOR RATE COMMISSION Leonard P. Toenjes, Chair OFFICE OF SECRETARY TREASURER Tim R. Snoke Secretary/Treasurer CIVIL SERVICE COMMISSION William C. Duffe Tara Buckner Annette Adams EXECUTIVE DIRECTOR Brian L. Hoelscher/CEO FINANCE Marion M. Gee Director (Effective 9.8.15) OFFICE OF GENERAL COUNSEL Susan M. Myers General Counsel OPERATIONS Jonathon C. Sprague Director ENGINEERING Rich Unverferth Director OFFICE OF HUMAN RESOURCES Vicki L. Taylor Edwards Director INFORMATION SYSTEMS Barbara E. Mohn Director xiv Government Finance Officers Association Certificate of Achievement for Excellence In Financial Reporting Presented to Metropolitan St. Louis Sewer District, Missouri For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2014 Executive Directors/CEO Financial Section METROPOLITAN ST. LOUIS SEWER DISTRICT SERVICE AREAS Independent Auditors’ Report Board of Trustees The Metropolitan St. Louis Sewer District St. Louis, Missouri Report On The Financial Statements We have audited the accompanying financial statements of the business-type activities of The Metropolitan St. Louis Sewer District (the District) as of and for the years ended June 30, 2015 and 2014, and the related notes to the financial statements, which collectively comprise the District’s financial statements as listed in the table of contents. Management’s Responsibility For The Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Controller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Board of Trustees The Metropolitan St. Louis Sewer District Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities of the District as of June 30, 2015 and 2014, and the changes in financial position and cash flows thereof for the years then ended, in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 1 to the financial statements, the District adopted the provisions of Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions – An Amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date in fiscal year 2015. Our opinion is not modified with respect to these matters. 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 Employer Contributions and Schedule of Changes in Net Pension Liability and Related Ratios for the Employees’ Pension Plan, and Schedule of Funding Progress for the Other Post-Employment Benefit Plan, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Board of Trustees The Metropolitan St. Louis Sewer District Page 3 Other Information Our audit was conducted for the purpose of forming an opinion on the District’s basic financial statements. The introductory section and statistical section are presented for purposes of additional analysis and are not a required part of the financial statements. These sections have not been subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required By Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 13, 2015, on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance. October 13, 2015 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 4 MANAGEMENT’S DISCUSSION AND ANALYSIS For The Years Ended June 30, 2015 And 2014 The annual report of The Metropolitan St. Louis Sewer District (“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. 2015 Financial Highlights  The District increased capital assets by $128 million as a result of an increase in construction in process for $108.5 million and capital assets net of depreciation for $18.7 million.  The District placed $100.1 million of capital assets into service during fiscal year 2015. The continued high level of capitalization reflects the District’s work to meet long-term plans. Capitalized assets included: Collection and pumping plant $62.9 million Treatment and disposal plant and equipment $33.8 million General plant and equipment $2.4 million Land $1.0 million In conjunction with the new assets, accumulated depreciation increased by $65.1 million. During the year, the District implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions (Employer Reporting) (“GASB 68”). The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions, in particular updates to the financial statements pension-related liabilities and corresponding deferred outflows and inflows and these effects on net position. Non-current liabilities increased by $43.8 million or 3.9% as the District implemented GASB 68 resulting in recognizing the District’s net pension liability. Net deferred outflows and inflows increased $15.8 million or 156.2% primarily due to the implementation of GASB 68 resulting in various pension-related transactions. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 5 2014 Financial Highlights  The District increased current, restricted and other assets by $101.2 million as a result of inflows from bond proceeds and increased receivables from rising sewer rates.  The District placed $243.9 million of capital assets into service during fiscal year 2014. The continued high level of capitalization reflects the District’s work to meet long-term plans. Capitalized assets included: Treatment and disposal plant and equipment $173.5 million Collection and pumping plant $60.8 million Land $5.5 million General plant and equipment $4.1 million In conjunction with the new assets, accumulated depreciation increased by $59.8 million and construction in progress decreased $60.6 million.  The District issued one new senior bond for $150 million. Required Financial Statements The financial statements presented by the management of the District include the Statements of Net Position; Statements of Revenues, Expenses, and Changes in Net Position; and Statements of Cash Flows. These statements are prepared using the accrual basis of accounting. This method of accounting recognizes revenue at the time it is earned and expenses when the related liability is incurred. As a result of using this method of accounting, the District’s performance over the time period being reported is more easily determinable. The Statements of Net Position provide a report of the District’s current, restricted, and other non-current assets such as cash, investments, receivables, and property. Also, the Statements of Net Position provide a summary of the District’s current, restricted, and non-current liabilities, including contracts and accounts payable, deposits and accrued expenses, net pension liability, 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. These statements provide 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 METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 6 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 $10.2 million after the effect of GASB 68. The improvement is due to the increases in unrestricted funds of $17.6 million and restricted funds of $8.5 million. Unrestricted funds increased due to an increase in the change in net position or positive operating results. This increase was driven primarily by operating revenues increasing due to rate changes; however, this was offset by recognizing a net pension impact of $23.6 million. Restricted funds increased due to maintaining higher reserves in anticipation of increased debt service payments for FY16. These increases were offset by a decrease in net investment in capital assets of $16.0 million as more debt was incurred than capital created during 2015. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 7 Condensed Financial Statements and Analysis 2015 Analysis Current, restricted and other assets decreased $76.0 million or 10.8% in the current year. The decrease is predominately due to lower amounts of unrestricted and restricted cash and investments relative to 2014 when the District issued debt. This was offset slightly as unrestricted receivables increased due to higher sewer rates. Capital assets net of accumulated depreciation increased by $128.2 million or 4.6% in the current year as the result of continued high levels of construction and acquisition of assets by the District. Current liabilities increased by $14.0 million or 14.7%, due to an increase in the current portion of bonds and notes payable and deposits and accrued expenses. Increase Increase (Decrease) 2013 (Decrease) 2015 2014 2015-2014 As Restated 2014-2013 Assets: Current, restricted, and other assets 628,246$ 704,266$ (76,020)$ 603,104$ 101,162$ Capital assets (net of accumulated depreciation)2,891,569 2,763,413 128,156 2,659,806 103,607 Total Assets 3,519,815 3,467,679 52,136 3,262,910 204,769 Deferred Outflow of Resources:     Bonds and Notes Payable-Deferred Loss 9,599 10,108 (509) 10,618 (510)     Pension-related Outflows 19,210 — 19,210 — —           Total Deferred Outflow of Resources 28,809 10,108 18,701 10,618 (510) Liabilities: Current liabilities 109,153 95,196 13,957 89,432 5,764 Non-current liabilities 1,158,445 1,114,639 43,806 944,038 170,601 Total Liabilities 1,267,598 1,209,835 57,763 1,033,470 176,365 Deferred Inflow of Resources:     Pension-related Inflows 2,910 — 2,910 — —           Total Deferred Inflow of Resources 2,910 — 2,910 — — Net Position: Net investment in capital assets 1,829,394 1,845,394 (16,000) 1,877,692 (32,298) Restricted 151,292 142,764 8,528 111,066 31,698 Unrestricted 297,430 279,794 17,636 251,300 28,494 Total Net Position 2,278,116$ 2,267,952$ 10,164$ 2,240,058$ 27,894$ Condensed Statements of Net Position (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 8 Non-current liabilities increased by $43.8 million or 3.9% as the District implemented GASB 68 resulting in recognizing the District’s net pension liability. Net deferred outflows and inflows increased $15.8 million or 156.2% due to the implementation of GASB 68 resulting in various pension-related transactions. 2014 Analysis Current, restricted and other assets increased $101.2 million or 16.8% in the current year. The increase is predominately due to unrestricted and restricted cash and investments received as part of the issuance of debt in 2014. In addition, unrestricted receivables increased due to higher sewer rates and a lower allowance for sewer service charges. Capital assets net of accumulated depreciation increased by $103.6 million or 3.9% in the current year as the result of continued high levels of construction and acquisition of assets by the District. Current liabilities increased by $5.8 million or 6.4%, as the result of increases for new debt interest accrual and the accounting change related to accrued interest, as discussed in the Reclassification section of Footnote 1. Non-current liabilities increased by $170.6 million or 18.1% as the District issued $150 million in new senior debt with a premium. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 9 Increase Increase (Decrease) 2013 (Decrease) 2015 2014 2015-2014 As Restated 2014-2013 Operating Revenues: Sewer service charges 284,367$ 250,133$ 34,234$ 238,635$ 11,498$ Recovery (provision) for doubtful sewer service charge accounts (2,096) 7,210 (9,306) (2,655) 9,865 Licenses, permits, and other fees 6,657 6,563 94 2,731 3,832 Other 1,460 1,867 (407) 3,235 (1,368) Total Operating Revenues 290,388 265,773 24,615 241,946 23,827 Non-operating Revenues: Property taxes levied by the district 24,764 27,450 (2,686) 26,016 1,434 Investment income 3,001 2,967 34 1,057 1,910 Rent and other income 37 302 (265) 293 9 Total Non-operating Revenues 27,802 30,719 (2,917) 27,366 3,353 Total Revenues 318,190 296,492 21,698 269,312 27,180 Operating Expenses: Pumping and treatment 60,766 54,126 6,640 54,526 (400) Collection system maintenance 40,162 39,988 174 37,877 2,111 Engineering 10,954 12,184 (1,230) 12,020 164 General and administrative 48,551 45,661 2,890 41,485 4,176 Water backup claims 3,862 2,713 1,149 3,503 (790) Depreciation 78,641 74,087 4,554 70,030 4,057 Asset management 13,586 12,539 1,047 10,717 1,822 Total Operating Expenses 256,522 241,298 15,224 230,158 11,140 Non-operating Expenses: Net loss on disposal and sale of capital assets 1,421 5,248 (3,827) 796 4,452 Non-recurring projects and studies 12,317 3,493 8,824 4,676 (1,183) Interest expense 27,139 25,661 1,478 21,062 4,599 Total Non-operating Expenses 40,877 34,402 6,475 26,534 7,868 Total Expenses 297,399 275,700 21,699 256,692 19,008 Income Before Capital Grants And Contributions 20,791 20,792 (1) 12,620 8,172 Capital Grants And Contributions 12,997 7,102 5,895 17,535 (10,433) Change in Net Position 33,788 27,894 5,894 30,155 (2,261) Net Position - Beginning of Year 2,267,952 2,240,058 27,894 2,209,903 30,155 Effect of Adoption of GASB 68 (23,624) — (23,624) — — Net Position - Beginning of Year, As Restated 2,244,328 2,240,058 4,270 2,209,903 30,155 Net Position - End of Year 2,278,116$ 2,267,952$ 10,164$ 2,240,058$ 27,894$ Statements of Revenues, Expenses, and Changes in Net Position (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 10 2015 Analysis Net position increased $10.2 million after the restatement of net position due to GASB 68 or 0.4% over the prior year. Sewer service revenue increased as a result of rate increases. In Fiscal Year 2014 the methodology for calculating the provision for doubtful sewer service charges changed which resulted in an adjustment not repeated in Fiscal Year 2015. Operating expenses also increased primarily from various increases in operating costs and depreciation. Non-operating expenses also increased due to expenses related to non-recurring projects and studies. Total revenue increased by $24.6 million or 9.3%. Sewer service charges increased $34.2 million or 13.7% with the provision for doubtful accounts increasing by $9.3 million or 129.1% as explained above. Property tax revenue decreased by $2.7 million or 9.8% due to revenue recorded net of commission fees for collection from the County in FY15 compared to FY14. Total expenses increased by $21.7 million or 7.9%. Operating expenses increased by $15.2 million or 6.3%. This increase is a result of the following: • $6.6 million or 12.3% increase in pumping and treatment primarily related to increase in utility costs resulting from excessive rain. In addition, there was an increase in chemicals and supplies for the FY15 completion of in-house disinfection; • $4.6 million or 6.1% in additional depreciation due to new asset capitalization; • $2.9 million or 6.3% increase in general and administrative costs resulting from professional fees associated with the implementation of the new billing system, and IS professionals and associated costs related to an increase in collection efforts; • $1.2 million or 42.4% increase in water backup costs due to overcharged mains claims resulting from excessive rain in FY15; Non-operating expenses increased by $6.5 million or 18.8%. This increase is a result of the following: • $8.8 million or 252.6% increase in non-recurring projects and studies due primarily to Green Infrastructure projects; • $1.5 million or 5.8% increase in interest expense due primarily to the first full fiscal year for Series 2013B interest payments; • Offset by a decrease of $3.8 million or 72.9% in net loss on disposal and sale of capital assets due to an asset demolition in FY14 not repeated in FY15. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 11 2014 Analysis Net position increased $27.9 million or 1.2% over the prior year. Sewer service revenue increased as a result of rate increases. The provision for doubtful sewer service charges decreased due to the District’s use of new analytical tools leading the District to change its methodology in determining doubtful accounts. Operating expenses also increased primarily from various increases in operating costs. Interest expense also increased, as well as the loss on disposal. Total revenue increased by $27.2 million or 10.1%. Sewer service charges increased $11.5 million or 4.8% and the provision for doubtful accounts decreased by $9.9 million or 371.6% as explained above. Licenses, permits and other fees increased $3.8 million or 140.3% due primarily to an increase in waste haul permits. Investment income increased $1.9 million or 180.7% due to favorable market conditions. Property tax revenue increased by $1.4 million or 5.5% due to taxes collected from the prior year. Other revenue had a decrease of $1.4 million. Total expenses increased by $19.0 million or 7.4%. Operating expenses increased by $11.1 million or 4.8%. This increase is a result of the following: • $4.2 million or 10.1% increase in general administrative costs due to higher professional services primarily related to the upgrade in the District’s extensive billing and collection system. In addition, there were increases in worker’s compensation and general liability judgments and claims; • $4.1 million or 5.8% increase in depreciation costs due to new asset capitalization; • $2.1 million or 5.6% increase in collection system maintenance costs as a result of increased personnel costs, as well as inventory. The increase related to inventory included new process implemented for inventory obsolescence; • $1.8 million or 17.0% increase in asset management as the capital improvement fund was increased; • Offset by a decrease of $0.8 million or 22.6% in water backup due to a reduction in the claim reserve. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 12 Non-operating expenses increased by $7.9 million or 29.7%. This increase is a result of the following: • $4.6 million or 20.4% increase in interest expense due to the issuance of new senior and subordinate bonds; • $4.5 million or 559.7% increase in the loss on disposals due to the MO River Waste Water Treatment Plant expansion that included demolition of some plant assets resulting in a loss for those demolished assets; • Offset by a decrease of $1.2 million or 25.3% in non-recurring projects and studies. 2015 Analysis The District ended the year with $149.5 million in cash and cash equivalents or a decrease of $29.5 million from the prior year. Cash flows from operating activities increased by $34.6 million or 42.2% as a result of increased receipts from customers. Cash flows from non-capital financing activities decreased by $1.6 million or 6.0% due to less tax revenue collected. Cash flow from capital and related financing activities decreased by $200.2 million or 781.9% as the result of decreased bond proceeds and premiums received in FY15 compared to FY14 and payments for capital assets. Cash flows from investing activities increased by $140.5 million or 162.4%. The increase primarily stems from a net inflow of cash related to purchases and proceeds in investments in FY15, whereas FY14 had a net outflow. Increase Increase (Decrease)(Decrease) 2015 2014 2015-2014 2013 2014-2013 Cash flows from operating activities 116,430$ 81,864$ 34,566$ 84,882$ (3,018)$ Cash flows from non-capital financing activities 25,824 27,468 (1,644)23,014 4,454 Cash flows from capital and related financing activities (225,778) (25,597) (200,181)83,449 (109,046) Cash flows from investing activities 53,980 (86,487) 140,467 (168,410) 81,923 Net increase (decrease) in cash and cash equivalents (29,544) (2,752)(26,792) 22,935 (25,687) Cash and cash equivalents at beginning of year 179,003 181,755 (2,752)158,820 22,935 Cash And Cash Equivalents At End Of Year 149,459$ 179,003$ (29,544)$ 181,755$ (2,752)$ Condensed Statements of Cash Flows (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 13 2014 Analysis The District ended the year with $179.0 million in cash and cash equivalents or a decrease of $2.8 million from the prior year. Cash flows from operating activities decreased by $3.0 million or 3.6% as the result of increased outflows to suppliers for goods and services. Cash flows from non-capital financing activities increased by $4.5 million or 19.4% due to greater tax revenue collected, mainly from the prior year. Cash flow from capital and related financing activities decreased by $109.0 million or 130.7% as the result of decreased bond proceeds and premiums received in 2014 compared to 2013. Cash flows from investing activities increased by $81.9 million or 48.6%. The increase primarily stems from a decrease in the purchase of investments and an increase in the volume of maturities of investments. Capital Assets 2015 Analysis Total capital assets, net of depreciation, increased by $128.2 million or 4.6% over the prior year. Construction in progress contained the majority of the increase with net additions of $108.5 million or 36.2% consisting of $191.5 million in additions offset by $83.0 million placed into service. Collection and pumping plant increased $21.9 million or 1.3% with $62.9 million in additions offset by $39.6 million in additional depreciation and net disposals of $1.4 million. Treatment and disposal plant and equipment increased a net $1.7 million or 0.2% with $33.8 million in additions offset by $31.6 million in additional depreciation and net disposals of $.5 million. Land increased $1.0 million or 1.8% from the acquisition of easements and other land. General plant and equipment decreased $5.0 million or 15.3% primarily due to depreciation of existing assets. For more detailed information, see Note 4, Capital Assets, in the accompanying notes to the financial statements. Increase Increase (Decrease)(Decrease) 2015 2014 2015-2014 2013 2014-2013 Land 56,521$ 55,538$ 983$ 50,077$ 5,461$ Construction in progress 408,464 299,945 108,519 360,508 (60,563) Treatment and disposal plant and equipment 739,563 737,833 1,730 599,178 138,655 Collection and pumping plant 1,659,321 1,637,375 21,946 1,614,112 23,263 General plant and equipment 27,700 32,722 (5,022) 35,931 (3,209) Total 2,891,569$ 2,763,413$ 128,156$ 2,659,806$ 103,607$ Condensed Statements of Capital Assets (000's) Net of Depreciation THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 14 2014 Analysis Total capital assets, net of depreciation, increased by $103.6 million or 3.9% over the prior year. Treatment and disposal plant and equipment contained the majority of the increase with a net $138.7 million or 23.1% with $173.6 million in additions offset by $29.8 million in additional depreciation and net disposals of $5.1 million. Collection and pumping plant increased $23.3 million or 1.4% with $60.8 million in additions offset by $37.1 million in additional depreciation and net disposals of $.4 million. Land increased $5.5 million or 10.9% from the acquisition of thirteen different properties. General plant and equipment decreased $3.2 million or 8.9% primarily due to depreciation of existing assets. Construction in progress decreased $60.6 million or 16.8% consisting of $172.1 million in additions offset by $232.7 million placed into service. For more detailed information, see Note 4, Capital Assets, in the accompanying notes to the financial statements. Long-Term Debt Increase Increase (Decrease)(Decrease) 2015 2014 2015-2014 2013 2014-2013 Senior Revenue Bonds: Series 2004A —$ —$ —$ 2,375$ (2,375)$ Series 2006C 60,000 60,000 — 60,000 — Series 2008A 30,000 30,000 — 30,000 — Series 2010B 85,000 85,000 — 85,000 — Series 2011B 47,170 48,925 (1,755) 50,610 (1,685) Series 2012A 225,000 225,000 — 225,000 — Series 2012B 139,605 141,730 (2,125) 141,730 — Series 2013B 150,000 150,000 — — 150,000 Subordinate Revenue Bonds: Series 2004B 97,520 105,155 (7,635) 108,780 (3,625) Series 2005A 4,440 4,750 (310) 4,750 — Series 2006A 29,915 32,085 (2,170) 32,085 — Series 2006B 10,260 10,945 (685) 10,945 — Series 2008AB 29,320 31,140 (1,820) 32,040 (900) Missouri DNR: Series 2009A 18,564 19,589 (1,025) 20,093 (504) Series 2010A 6,947 7,299 (352) 7,472 (173) Series 2010C 31,644 33,224 (1,580) 33,999 (775) Series 2011A 38,974 39,769 (795) 31,963 7,806 Series 2013A 52,000 16,043 35,957 — 16,043 Energy Loan Program 151 166 (15) 225 (59) Total 1,056,510$ 1,040,820$ 15,690$ 877,067$ 163,753$ Condensed Statements of Long-Term Debt (000's) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 15 2015 Analysis The District ended fiscal year 2015 with $1.1 billion in long-term debt outstanding. The District did not issue any new senior bonds or new State Revolving Fund (“SRF”) Program bonds in FY15. For more detailed information, see Note 6, Long-Term Liabilities, in the accompanying notes to the financial statements. 2014 Analysis The District ended fiscal year 2014 with $1.0 billion in long-term debt outstanding. The District had one senior revenue bond addition this year, (Series 2013B) for $150.0 million. In addition, the District added a new SRF bond (Series 2013A) for $16.0 million and added $7.8 million to SRF Series 2011A. 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 the flow into 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. Unlike previous MSD programs, 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 $1.7 billion in wastewater revenue bonds. As of June 30, 2015, the District has issued $1.2 billion of the total authorization. The District’s long-term wastewater capital improvement and replacement program will continue to be funded through a combination of additional bonds and wastewater rate increases. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Management’s Discussion And Analysis (Continued) Page 16 The District is also upgrading its extensive billing and collection system to incorporate the latest utility technology. The new system will result in more efficient processes and the ability to continue to expand its customer outreach efforts. The new technology will provide state of the art capabilities to utilize the multiple ways now available to better communicate with its customers, understand their needs, and continue to align the District’s responsiveness accordingly. Full implementation of the system occurred on September 1, 2015. Requests For Information This financial report is designed to provide a general overview of the District’s finances for all those with an interest in the District’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed or e-mailed to: Marion M. Gee, Director of Finance The Metropolitan St. Louis Sewer District 2350 Market Street St. Louis, MO 63103-2555 314-768-6200 mgee@stlmsd.com THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 17 STATEMENTS OF NET POSITION Ended June 30, Assets 2015 2014 Current Assets Unrestricted Current Assets Cash and cash equivalents  73,930,739$ 95,037,786$ Investments                                          66,540,341 105,100,875 Sewer service charges receivable, less allowance of                   $52,847,355 in 2015 and $51,689,211 in 2014 49,975,078 46,563,727 Unbilled sewer service charges receivable, less allowance of       $442,012 in 2015 and $404,638 in 2014 22,169,181 20,231,912 Property taxes receivable, less allowance of $44,595 in 2015 and $515,097 in 2014 1,413,045 2,136,300 Accrued income on investments                        618,436 756,384 Other receivables                               1,650,498 1,057,452 Supplies inventory                                   6,360,539 6,223,099           Total Unrestricted Current Assets                            222,657,857 277,107,535 Restricted Current Assets Cash and cash equivalents 5,096,953 6,086,299 Investments                                          5,433,350 7,568,587           Total Restricted Current Assets                            10,530,303 13,654,886           Total Current Assets                            233,188,160 290,762,421 Non-Current Assets Restricted Assets Cash and cash equivalents  70,430,852 77,878,696 Investments                                          63,639,384 181,161,245 Long-term investments                                70,493,703 66,104,134 Property taxes receivable, less allowance of $21,956 in 2015 and $623,994 in 2014 511,835 848,360 Accrued income on investments 308,455 309,140           Total Restricted Non-Current Assets                            205,384,229 326,301,575 Other Assets Notes receivable                                     13,563,540 14,116,801 Long-term investments                                176,110,060 73,085,475 Total other assets                            189,673,600 87,202,276 Capital Assets Depreciable:        Treatment and disposal plant and equipment           1,214,483,762 1,184,278,860        Collection and pumping plant                         2,341,025,509 2,286,108,470        General plant and equipment                          92,198,891 93,600,648                                                             3,647,708,162 3,563,987,978        Less:  Accumulated depreciation                      1,221,123,113 1,156,057,471        Net depreciable assets       2,426,585,049 2,407,930,507 Non-depreciable:        Land                                                 56,520,708 55,537,816        Construction in progress                             408,463,554 299,944,922 Net capital assets                                2,891,569,311 2,763,413,245        Total Non-Current Assets                         3,286,627,140 3,176,917,096        Total Assets                               3,519,815,300 3,467,679,517 Deferred Outflow of Resources     Bonds and Notes Payable-Deferred Loss on Refunding 9,599,096 10,108,350      Pension-related Outflows 19,210,323 — Total Deferred Outflow of Resources                            28,809,419 10,108,350 For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 18 STATEMENTS OF NET POSITION (Continued) Ended June 30, Liabilities 2015 2014 Current Liabilities-Payable From Unrestricted Assets        Contracts and accounts payable                       34,082,818$ 30,795,756$        Deposits and accrued expenses                        37,559,072 33,336,518        Retainage payable                                    6,952,750 9,566,082        Current portion of bonds and notes payable           29,620,359 20,268,080   Total Current Liabilities-Payable From Unrestricted Assets 108,214,999 93,966,436 Current Liabilities-Payable From Restricted Assets        Contracts and accounts payable                       736,658 1,015,380        Retainage payable                                   201,441 214,063   Total Current Liabilities-Payable From Restricted Assets 938,099 1,229,443             Total Current Liabilities                       109,153,098 95,195,879        Non-Current Liabilities        Deposits and accrued expenses                        13,067,791 11,811,608        Net pension liability 39,895,991 —        Bonds and notes payable                              1,105,481,067 1,102,827,585             Total Non-Current Liabilities                       1,158,444,849 1,114,639,193                              Total Liabilities                     1,267,597,947 1,209,835,072 Deferred Inflow of Resources     Pension-related Inflows 2,910,142 —             Total Deferred Inflow of Resources 2,910,142 — Net Position        Net investment in capital assets 1,829,394,892 1,845,394,270        Restricted for:          Debt service                                       73,177,341 71,843,246          Subdistrict construction and improvement           78,114,762 70,920,910        Unrestricted                                         297,429,635 279,794,369 Total Net Position 2,278,116,630$ 2,267,952,795$   For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 19 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION 2015 2014   Operating Revenues     Sewer service charges                                   284,366,564$ 250,133,022$     Recovery (provision) of doubtful sewer service charge accounts (2,096,371) 7,210,322     Licenses, permits and other fees                       6,656,831 6,562,607     Other                                                   1,459,565 1,866,902     Total Operating Revenues                              290,386,589 265,772,853          Operating Expenses     Pumping and treatment                                   60,765,831 54,125,550     Collection system maintenance                           40,160,207 39,987,811     Engineering                                             10,953,900 12,184,007     General and administrative                              48,551,121 45,661,041     Water backup claims                                     3,862,390 2,713,168     Depreciation                                            78,641,259 74,087,207     Asset management                                               13,586,440 12,538,851     Total Operating Expenses                             256,521,148 241,297,635          Operating Income         33,865,441 24,475,218          Non-Operating Revenues     Property taxes levied by the District                   24,764,324 27,450,319     Investment income                                       3,000,591 2,966,549     Rent and other income                                   37,321 302,506     Total Non-Operating Revenues                          27,802,236 30,719,374          Non-Operating Expenses     Net loss on disposal and sale of capital assets         1,420,902 5,248,443     Non-recurring projects and studies                       12,317,488 3,492,667     Interest expense                                        27,138,546 25,661,127     Total Non-Operating Expenses                          40,876,936 34,402,237          Income Before Capital Grants And Contributions                       20,790,741 20,792,355          Capital Grants And Contributions     Utility plant contributed                               12,304,126 6,873,732     Grant revenue                                           692,628 228,748     Total Capital Grants And Contributions                          12,996,754 7,102,480          Change In Net Position 33,787,495 27,894,835   Net Position - Beginning Of Year, As Previously Stated     2,267,952,795 2,240,057,960 Effect of Adoption of GASB 68 (23,623,660) —   Net Position - Beginning Of Year, As Restated 2,244,329,135 2,240,057,960          Net Position - End Of Year                                    2,278,116,630$ 2,267,952,795$ 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 2015 2014 Cash Flows From Operating Activities Received from customers 285,114,625$ 251,198,137$ Paid to employees for services (94,150,602) (91,425,385) Paid to suppliers for goods and services (74,533,975) (77,909,148) Net Cash Provided By Operating Activities 116,430,048 81,863,604 Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collected 25,824,104 27,468,024 Cash Flows From Capital And Related Financing Activities Proceeds from capital grants 692,920 233,450 Proceeds from issuance of debt 35,956,725 173,411,628 Premium on sale of bonds — 9,937,121 Interest received on bond proceeds to be used for capital improvements 291,725 348,476 Principal paid on debt (20,268,080) (10,071,556) Interest and fees paid on debt (43,213,255) (37,522,184) Payments for capital assets (201,243,603) (163,882,733) Proceeds from sale of capital assets 390,173 345,039 Build America bond tax credit 1,614,982 1,603,658 Net Cash Provided By (Used In) Capital And Related Financing Activities (225,778,413) (25,597,101) Cash Flows From Investing Activities Purchase of investments (427,750,008) (627,117,753) Proceeds from sale and maturity of investments 475,727,441 535,352,043 Investment income 5,965,270 4,976,853 Proceeds from rents 37,321 302,506 Net Cash Provided By (Used In) Investing Activities 53,980,024 (86,486,351) Net Decrease In Cash And Cash Equivalents (29,544,237) (2,751,824) Cash And Cash Equivalents At Beginning Of Year 179,002,781 181,754,605 Cash And Cash Equivalents At End Of Year 149,458,544$ 179,002,781$ Non-Cash Capital And Investing Activities Capital asset additions included in accounts payable 19,226,222$ 18,928,794$ Utility plant contributed by other governments and developers 12,304,126 6,873,732 Fair value investment adjustment gain (loss)249,364 147,773 For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT See the accompanying notes to financial statements. Page 21 STATEMENTS OF CASH FLOWS (Continued) 2015 2014 Reconciliation Of Operating Income (Loss) To Net Cash Flows Provided By Operating Activities Operating Income (Loss) 33,865,441$ 24,475,218$ Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 78,641,259 74,087,207 Change in operating assets and liabilities: (Increase) decrease in billed and unbilled sewer service charges receivable (5,348,620) (15,006,001) (Increase) decrease in other receivables (593,338) (97,560) (Increase) decrease in supplies inventory (137,440) 398,793 Increase (decrease) in contracts and accounts payable 4,100,708 (6,122,709) Increase (decrease) in deposits and accrued expenses 5,929,890 4,128,656 Net increase (decrease) in pension-related liability, inflows & outflows (27,852) — Net Cash Provided By Operating Activities 116,430,048$ 81,863,604$ For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 22 NOTES TO THE FINANCIAL STATEMENTS 1. Organization And Summary Of Significant Accounting Policies Organization The Metropolitan St. Louis Sewer District (“District”) was authorized by the voters, established and chartered under the provisions of the Constitution of Missouri, as a municipal corporation and a political subdivision of the State of Missouri. Upon creation in 1954, the District assumed responsibilities to provide for the construction, operation, and maintenance of the sewer facilities within its defined boundaries. The District’s service area now comprises all of the City of St. Louis and most of St. Louis County. Subdistricts within the District’s total service area represent separate geographic areas within which specific taxes are levied for the retirement of indebtedness issued to finance construction of sanitary or stormwater facilities within the area or to operate, maintain, or construct improvements within the subdistrict. The District also maintains all of the publicly owned stormwater sewers within its original boundaries and is continuing to accept maintenance of the stormwater sewers in the remainder of its service area. Pursuant to provisions of its Charter and subject to limitations imposed by the Constitution of Missouri, all powers of the District are vested in a six-member Board of Trustees (“Board”), three of whom are appointed by the Mayor of the City of St. Louis and three of whom are appointed by the County Executive of St. Louis County. Reporting Entity The District defines its financial reporting entity to include all component units for which the District’s governing body is financially accountable. To be considered financially accountable, the component unit must be fiscally dependent on the District and the District must either 1) be able to impose its will on the component unit or 2) the relationship must have the potential for creating a financial benefit or imposing a financial burden on the District. Based on the foregoing, the District’s financial statements include all funds that are established under the authority of the District’s charter. There are no agencies, boards, commissions, or authorities that are controlled by or dependent on the District. KEMP COMPANY I, L.L.C. Notes To Financial Statements (Continued) See the accompanying notes to financial statements. Page 23 Measurement Focus, Basis Of Accounting And Financial Statement Presentation Throughout the year, the District maintains its detailed accounting records on the modified accrual basis of accounting. In order to account for the transactions related to certain subdistricts and restricted resources, separate fund accounting records are maintained. For financial reporting purposes, the District reports its operations as a single enterprise fund. Accordingly, the accounting records are converted to the accrual basis of accounting and all interfund transactions are eliminated. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recognized when the related liability is incurred. The District’s measurement focus is on the flow of economic resources. Revenues and expenses are divided into operating and non-operating items. Operating revenues generally result from providing services in connection with the District’s principal ongoing operations. The principal operating revenues of the District are user fees, licenses, and permits for wastewater treatment services. Operating expenses include the costs associated with the conveyance and treatment of wastewater, 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 (“GASB 33”), which establishes accounting and financial reporting standards for nonexchange transactions involving financial or capital resources. GASB 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 24 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 33, have been met. Any resources received where all requirements are met with the exception of the time requirement are recorded as deferred outflows. All other resources received before any other eligibility requirements are met are reported as unearned revenues. When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, and then unrestricted resources as they are needed. Cash And Cash Equivalents The District considers all highly liquid investments that are immediately available to the District to be cash equivalents. Investments The District accounts for its investments at fair value. Fair value is determined using quoted market prices. 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. Adoption Of New Accounting Standards During the year, the District implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions (Employer Reporting) (“GASB 68”). This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions, in particular bringing to the financial statements pension-related liabilities and corresponding deferred outflows and inflows and these effects on net position. In addition, the District implemented GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date in fiscal year 2015. This statement establishes accounting requirements related to certain pension contributions made by employers. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 25 The District’s adoption of GASB 68 in fiscal year 2015 resulted in restating the beginning balance of net position due to the recognition of a beginning net pension liability net of any deferred outflows of resources. The impact of this change on the District’s Statement of Net Position is as follows: July 1, July 1, 2014 2013 Net Position - Beginning Of Year, As Previously Stated     2,267,952,795$ 2,240,057,960$ Effect of Adoption of GASB 68: establishing a beginning net pension liability (23,623,660) — Net Position - Beginning Of Year, As Restated 2,244,329,135$ 2,240,057,960$ Restatement consists of: Net pension liability reported as a noncurrent liability at July 1, 2014 (29,409,433)$ Contributions made subsequent to the beginning net pension liability's measurement date of December 31, 2013 are reported as deferred outflows of resources 5,785,773 (23,623,660)$ Accounts Receivable Accounts receivable is composed primarily of charges to customers for wastewater and stormwater services. Receivables are reported at their gross values net of an allowance for uncollectible amounts. Unbilled sewer service charge revenues are accrued by the District based on estimated billings for services provided through the end of the current fiscal year. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 26 Capital Assets Capital assets are valued at historical cost or estimated historical cost based in part upon a study performed in 1981. Donated capital assets are recorded at fair value at the time the asset is considered operational. Interest cost is capitalized as part of the historical cost of acquiring certain assets when the effect of such capitalization is material to the financial statements. Interest is not capitalized on assets constructed with contributions from other governmental sources. Depreciation is calculated on a straight-line basis over the following estimated useful lives: Treatment and disposal plant and equipment 16 to 100 years Collection and pumping plant 20 to 100 years General plant and equipment 3 to 10 years When developing user charge rates, the District includes funding for replacement cost of assets, which may differ from depreciation expense recorded for financial reporting purposes. Normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Betterments are capitalized and depreciated over the remaining useful lives of the related assets, as applicable. Previously, the District defined capital assets as assets with an initial, individual cost of more than $1,000 and an estimated useful life in excess of three years. In April of 2010 the District updated this policy and as a result, an asset must now have an individual cost of more than $5,000 to be considered a capital asset. This change in policy does not have a retroactive effect on capital assets put in place before April 2010. 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 2015 and 2014, the District capitalized $11,502,639 and $10,838,482, respectively, of net interest expense. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 27 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 cost and expenses are recognized when the inventory is consumed. Net Position The District’s net position is calculated as follows: the net investment in capital assets component of net position consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the net outstanding debt that is attributable to the acquisition, construction, or improvement of those assets. The restricted component of net position consists of assets and liabilities regulated by external constraints imposed by creditors, grantors, contributors, laws, or regulations of other governments or constraints imposed by law through constitutional provisions or enabling legislation. Property taxes levied by the various subdistricts and other revenues received for construction in those sub- districts have also been restricted for that use. Sewer extension and connection fees, grants, and other revenues received for construction within certain sub- districts have been restricted for that use. In addition, a portion of sanitary sewer charges have been restricted for the payment of principal and interest on certain debt of the District. The unrestricted net position component of net position consists of net position that does not meet the definition of restricted or net investment in capital assets. The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 28 Deferred Outflow Of Resources And Deferred Inflow Of Resources In addition to assets, financial statements may report a separate section for deferred outflow of resources. Deferred outflow 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 outflow 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 items 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 inflow of resources. Deferred inflow of resources consists of the acquisition of net position that is applicable to a future reporting period and so will not be recognized as inflow of resources until then. Deferred inflow of resources related to receivables, when the corresponding revenues are unavailable, is reported in the governmental funds balance sheets. Deferred inflows of resources include federal reimbursements, cost reimbursements and other miscellaneous receivables and 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 33, capital contributions are recognized as revenue when the expenditure is made and the amount becomes subject to claim for reimbursement. Bond Premiums, Discounts And Issuance Costs In the District’s financial statements, bond premiums and discounts are amortized over the life of the bonds using the effective interest method. Bond issuance costs are expensed when incurred. Bonds and notes payable are reported net of the applicable bond premium or discount. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 29 Compensated Absences Vacation Under the terms of the District’s personnel policies, employees are allowed to carry a maximum of 30 to 45 days of vacation (depending on length of service) from one calendar year to the next. Since vacation accrued at year-end is expected to be used by the employee during the following fiscal year, the accrual is reported as a component of current deposits and accrued expenses payable. Sick Leave Employees earn sick pay benefits at accrual rates ranging from 10 days per year to 12 days per year (depending on length of service). Unused sick leave can be carried over at year-end without limitation. An employee retiring from the District with five or more years of service will be compensated for any unused accrued sick leave at the rate of 1.25% for each year of District service multiplied by the unused accrued sick leave remaining at the employee’s current rate of pay. The District has recorded a liability which has been actuarially determined to be equal to the accumulated expense charge that will amortize the employees’ benefits over their period of District service. The liability, included in current deposits and accrued expenses payable, includes vested accumulated rights to receive sick leave benefits estimated to be paid within one year. The portion of sick leave expected to be paid after one year is recorded as a component of non- current deposits and accrued expenses payable. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of The Metropolitan St. Louis Sewer District’s Employee Pension Plan (the Plan) and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Use Of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 30 2. Deposits And Investments Deposits At June 30, 2015 the reported amount of the District’s deposits was $42,838,260 and the bank balance was $50,312,948. Of the bank balance, $762,049 was covered by federal depository insurance; $49,550,899 was collateralized with securities held by a third party financial institution in the District’s name. In addition, the District has money market mutual funds of $13,971,481 held in a trusted escrow account for the State that will be used to make future bond payments. At June 30, 2014 the reported amount of the District’s deposits was $46,969,658 and the bank balance was $50,725,661. Of the bank balance, $537,812 was covered by federal depository insurance; $50,187,849 was collateralized with securities held by a third party financial institution in the District’s name. In addition, the District had money market mutual funds of $12,030,165 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 market value of 103%. Deposits in each bank are insured by the Federal Deposit Insurance Corporation (“FDIC”) in the amount of $250,000 for interest bearing accounts and noninterest bearing accounts. Investments With the approval of the District’s Board of Trustees, the Secretary-Treasurer is authorized to invest excess cash in any investment authorized by the District’s Charter. The District’s investment policy conforms to the investment policy guidelines for the State of Missouri. The District’s investment policy authorizes the District to invest in the following instruments: U.S. Treasury obligations, certificates of deposit, obligations of any agency or instrumentality of the U.S., repurchase agreements, bankers’ acceptances, and commercial paper, all according to terms specified in the policy. The District also has investments in money market mutual funds that hold securities approved by the District’s investment policy. At June 30, 2015 and 2014, all of the District’s investments were in compliance with the District’s investment policy and charter. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 31 A summary of deposits and investments as of June 30, 2015 and 2014 is as follows: Reconciliation to the financial statements: Investment Type Cost Fair Value Cost Fair Value Deposits 42,838,260$ 42,838,260$ 46,969,658$ 46,969,658$ Money market mutual funds 13,971,481 13,971,481 12,030,165 12,030,165 Certificates of deposit 100,000 100,000 100,000 100,000 U.S. Treasury and agency obligations 404,229,430 402,931,741 456,905,358 455,362,626 Commercial paper 71,781,633 71,833,900 97,513,315 97,560,650 Total 532,920,804$ 531,675,382$ 613,518,495$ 612,023,098$ 2015 2014 2015 2014 Cash and Cash Equivalents Unrestricted current 73,930,739$ 95,037,786$ Restricted current 5,096,953 6,086,299 Restricted non-current 70,430,852 77,878,696 Investments Unrestricted current 66,540,341 105,100,875 Restricted current 5,433,350 7,568,587 Restricted non-current 63,639,384 181,161,246 Long-term Investments Restricted non-current 70,493,703 66,104,134 Other 176,110,060 73,085,475 531,675,382$ 612,023,098$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 32 Interest Rate Risk As of June 30, 2015 and 2014, 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 reclass from long-term investment to cash. Weighted Weighted Average Average Maturity Maturity Investment Type Fair Value (Years) Fair Value (Years) Money market mutual funds 13,971,481$ 0.00 12,030,165$ 0.00 Certificates of deposit 100,000 1.72 100,000 2.72 U.S. Treasury obligations 287,004,218 1.30 285,468,272 1.33 U.S. agency obligations 115,927,523 1.38 169,894,354 1.40 Commercial paper 71,833,900 0.19 97,560,650 0.24 Total 488,837,122$ 1.15 565,053,441$ 0.96 20142015 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 33 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, 2015 and 2014, 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+” besides one short-term U.S. agency obligation that carried a rating of “A-1”+, with a value of $11,099,030 in FY14. Money market investments are rated as AAAm and Aaa-mf by S&P and Moody’s, respectively. Concentration Of Credit Risk The District’s investment policy places no limit on the amount the District may invest in any one issuer with respect to U.S. Treasury obligations and collateralized time and demand deposits. U.S. agency obligations and government-sponsored enterprises are limited to 60% of the portfolio, with no more than 30% of the total portfolio invested in securities of any one agency; and collateralized repurchase agreements are limited to 50% of the portfolio. U.S. agency callable securities are limited to 30% of the portfolio, and commercial paper and bankers’ acceptances are limited to 25% each, with no more than 5% of the total portfolio invested in any one issuer. The following table lists investments in issuers that represent 5% or more of total investments at June 30, 2015 and 2014: Issuer 2015 2014 Treasury Notes 58.8 50.7 Federal Home Loan Bank 9.3 6.1 Federal National Mortgage Association 3.6 10.1 Federal Home Loan Mortgage Corporation 11.0 9.7 Percent Of Total Investments THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 34 3. Note Receivable The District has a note receivable with the City of Arnold, Missouri (“City”) 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 new loans added during the 2013 fiscal year bear interest at 4.50% and 3.52%. The current portion of this note is contained in the other receivables line on the Statements of Net Position. The note receivable will mature in fiscal year 2033. At June 30, 2015, future payments are as follows: On July 16, 2015 the City of Arnold sold its sewer system to Missouri American Water Company (“MOAM”). As part of the sales agreement, MOAM agreed to pay the quarterly loan payments starting with the payment due June 30, 2015. This quarterly payment was paid by MOAM on July 9, 2015. 2016 1,443,370$ 2017 1,154,696 2018 1,154,696 2019 1,154,696 2020 1,154,696 2021-2025 5,773,479 2026-2030 5,773,479 2031-2033 2,873,190 20,482,302 Less: Amount representing interest 6,230,860 14,251,442$ Classification in Statement of Net Position: Current 687,901$ Non-current 13,563,541 Total 14,251,442$ 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, 2015 and 2014: Balance Balance June 30, 2014 June 30, 2015 Capital assets not being depreciated: Land 55,537,816$ 982,892$ —$ 56,520,708$ Construction in progress 299,944,922 191,548,710 83,030,078 408,463,554 Total capital assets not being depreciated 355,482,738 192,531,602 83,030,078 464,984,262 Capital assets being depreciated: Treatment and disposal plant and equipment 1,184,278,860 33,797,176 3,592,274 1,214,483,762$ Collection and pumping plant 2,286,108,470 62,947,593 8,030,554 2,341,025,509 General plant and equipment 93,600,648 2,365,107 3,766,864 92,198,891 Total capital assets being depreciated 3,563,987,978 99,109,876 15,389,692 3,647,708,162 Less: Accumulated depreciation: Treatment and disposal plant and equipment (446,446,188) (31,634,323) (3,159,807) (474,920,704)$ Collection and pumping plant (648,732,430) (39,645,122) (6,673,636) (681,703,916) General plant and equipment (60,878,853) (7,361,814) (3,742,174) (64,498,493) Total accumulated depreciation (1,156,057,471) (78,641,259) (13,575,617) (1,221,123,113) Total capital assets being depreciated, net 2,407,930,507 20,468,617 1,814,075 2,426,585,049 Total Capital Assets 2,763,413,245$ 213,000,219$ 84,844,153$ 2,891,569,311$ Balance Balance June 30, 2013 June 30, 2014 Capital assets not being depreciated: Land 50,076,644$ 5,461,172$ —$ 55,537,816$ Construction in progress 360,507,521 172,185,110 232,747,709 299,944,922 Total capital assets not being depreciated 410,584,165 177,646,282 232,747,709 355,482,738 Capital assets being depreciated: Treatment and disposal plant and equipment 1,027,055,525 173,558,583 16,335,248 1,184,278,860 Collection and pumping plant 2,226,256,235 60,764,222 911,987 2,286,108,470 General plant and equipment 92,176,648 4,066,119 2,642,119 93,600,648 Total capital assets being depreciated 3,345,488,408 238,388,924 19,889,354 3,563,987,978 Less: Accumulated depreciation: Treatment and disposal plant and equipment (427,877,724) (29,816,528) (11,248,064) (446,446,188) Collection and pumping plant (612,142,650) (37,117,725) (527,945) (648,732,430) General plant and equipment (56,245,762) (7,152,954) (2,519,863) (60,878,853) Total accumulated depreciation (1,096,266,136) (74,087,207) (14,295,872) (1,156,057,471) Total capital assets being depreciated, net 2,249,222,272 164,301,717 5,593,482 2,407,930,507 Total Capital Assets 2,659,806,437$ 341,947,999$ 238,341,191$ 2,763,413,245$ Additions Deletions 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. Tax rates vary by sub-district and purpose. Taxes levied are used for operations and stormwater maintenance, debt service, and construction. Taxes are recorded as non-operating revenues. Property tax bills are typically mailed in October. They become delinquent and represent a lien on the related property if not paid by December 31. All property taxes are billed and collected by the City of St. Louis and St. Louis County Collectors’ of Revenue and are remitted to the District monthly. In fiscal years 2015 and 2014, the District recorded revenue from property taxes in the amount of $24,764,324 and $27,450,319, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 37 6. Long-Term Liabilities The following is a summary of changes in the District’s long-term liabilities for the year ended June 30, 2015: Original Balance Balance Issuance June 30,June 30,Current Amounts 2014 Additions Retirements 2015 Portion Bonds and Notes Payable: Wastewater System Senior Revenue Bonds: Series 2006C 60,000,000$ 60,000,000$ —$ —$ 60,000,000$ —$ Series 2008A 30,000,000 30,000,000 — — 30,000,000 — Series 2010B 85,000,000 85,000,000 — — 85,000,000 — Series 2011B 52,250,000 48,925,000 — 1,755,000 47,170,000 1,845,000 Series 2012A 225,000,000 225,000,000 — — 225,000,000 5,000,000 Series 2012B 141,730,000 141,730,000 — 2,125,000 139,605,000 2,325,000 Series 2013B 150,000,000 150,000,000 — — 150,000,000 1,000,000 Water Pollution Control and Drinking Water Subordinate Revenue Bonds (State Revolving Funds Program): Series 2004B 161,280,000 105,155,000 — 7,635,000 97,520,000 7,870,000 Series 2005A 6,800,000 4,750,000 — 310,000 4,440,000 315,000 Series 2006A 42,715,000 32,085,000 — 2,170,000 29,915,000 1,965,000 Series 2006B 14,205,000 10,945,000 — 685,000 10,260,000 695,000 Series 2008A/B 40,000,000 31,140,000 — 1,820,000 29,320,000 1,845,000 Missouri Department of Natural Resources: Energy Loan Program — — — — — — Energy Loan Program 223,793 166,445 — 15,880 150,565 32,359 Series 2009A 23,000,000 19,589,300 — 1,025,700 18,563,600 1,049,400 Series 2010A 7,980,700 7,298,500 — 351,500 6,947,000 358,600 Series 2010C 37,000,000 33,224,000 — 1,580,000 31,644,000 1,620,000 Series 2011A 39,769,300 39,769,300 — 795,000 38,974,300 1,620,000 Series 2013A 52,000,000 16,043,275 35,956,725 — 52,000,000 2,080,000 1,168,953,793$ 1,040,820,820$ 35,956,725$ 20,268,080$ 1,056,509,465 29,620,359$ Add: Unamortized premium, net 78,591,961 Total Bonds and Notes Payable 1,135,101,426$ Net Pension Liability —$ 39,895,991$ —$ 39,895,991$ —$ Deposits and Accrued Expenses Landfill closure and post-closure costs 756,936$ 26,537$ —$ 783,473$ —$ Compensated absences 7,983,223 856,080 418,275 8,421,028 2,105,257 Net OPEB obligation 5,067,254 2,474,689 1,573,400 5,968,543 — Total Deposits and Accrued Expenses 13,807,413$ 3,357,306$ 1,991,675$ 15,173,044$ 2,105,257$ 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, 2014: 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. From the total voter authorization of $1,720,000,000, $518,000,000 has not been issued as of June 30, 2015. These funds were sought to enable the District to comply with federal and state clean water requirements. Original Balance Balance Issuance June 30,June 30, Current Amounts 2013 Additions Retirements 2014 Portion Bonds and Notes Payable: Wastewater System Senior Revenue Bonds: Series 2004A 175,000,000$ 2,375,000$ —$ 2,375,000$ —$ —$ 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 50,610,000 — 1,685,000 48,925,000 1,755,000 Series 2012A 225,000,000 225,000,000 — — 225,000,000 — Series 2012B 141,730,000 141,730,000 — — 141,730,000 — Series 2013B 150,000,000 — 150,000,000 — 150,000,000 2,125,000 Water Pollution Control and Drinking Water Subordinate Revenue Bonds (State Revolving Funds Program): Series 2004B 161,280,000 108,780,000 3,625,000 7,250,000 105,155,000 7,635,000 Series 2005A 6,800,000 4,750,000 305,000 305,000 4,750,000 310,000 Series 2006A 42,715,000 32,085,000 2,140,000 2,140,000 32,085,000 2,170,000 Series 2006B 14,205,000 10,945,000 675,000 675,000 10,945,000 685,000 Series 2008A/B 40,000,000 32,040,000 900,000 1,800,000 31,140,000 1,820,000 Missouri Department of Natural Resources: Energy Loan Program 98,595 1,312 — 1,312 — — Energy Loan Program 223,793 223,793 — 57,348 166,445 15,880 Series 2009A 23,000,000 20,093,400 498,400 1,002,500 19,589,300 1,025,700 Series 2010A 7,980,700 7,471,600 171,400 344,500 7,298,500 351,500 Series 2010C 37,000,000 33,999,000 765,000 1,540,000 33,224,000 1,580,000 Series 2011A 39,769,300 31,962,553 7,806,747 — 39,769,300 795,000 Series 2013A 52,000,000 — 16,043,275 — 16,043,275 — 1,344,052,388$ 877,066,658$ 182,929,822$ 19,175,660$ 1,040,820,820 20,268,080$ Add: Unamortized premium, net 82,274,845 Total Bonds and Notes Payable 1,123,095,665$ Deposits and accrued expenses: Landfill closure and postclosure costs 735,800$ 21,136$ —$ 756,936$ —$ Compensated absences 7,524,797 873,144 414,718 7,983,223 1,995,805 Net OPEB obligation 4,018,709 2,442,145 1,393,600 5,067,254 — Total Deposits and Accrued Expenses 12,279,306$ 3,336,425$ 1,808,318$ 13,807,413$ 1,995,805$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 39 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. 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 payments on the old and new debt) of $22,439,375. In August 2012, the District issued $225,000,000 of Wastewater System Revenue Bonds Series 2012A (“Series 2012A”). These bonds were issued pursuant to the June 2012 authorization: in this case for the purpose of constructing, repairing, replacing, and equipping new and existing District wastewater facilities. 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. These senior bonds have interest rates ranging from 3.0% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2032. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 40 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. 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 year 2013, the rate was 35%. On August 6, 2013, the District was notified that the subsidy percentage would be reduced to 32% for the 2013 fall payment and would be reduced to 32.5% after that. 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. These senior bonds have interest rates ranging from 5.1% to 5.3% and are payable in semiannual installments at varying amounts through May 1, 2038. 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. These senior bonds have interest rates ranging from 4.1% to 5.0% and are payable in semiannual installments at varying amounts through May 1, 2036. 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. These senior bonds had interest rates ranging from 2.0% to 5.0% and were payable in semiannual installments at varying amounts through May 1, 2034; however, in November 2012, there was a partial refunding of the Series 2004A bonds. As a result of this refunding, Series 2004A bonds were considered to be partially defeased and the semiannual installments were through May 1, 2014. The liability related to Series 2004A after May 1, 2014 has been paid. See the explanation for Series 2012B above for further information. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 41 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 scheduled payment of the principal of and interest on the outstanding Series 2006C and previously the 2004A Bonds are guaranteed under a financial guaranty insurance policy. Water Pollution Control And Drinking Water Revenue Bonds Payable In October 2008, the State Environmental Improvement and Energy Resources Authority (the 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 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. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 42 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 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. 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 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. The District’s Participant Bonds have interest rates ranging from 3.5% to 4.5% and are payable in semiannual installments at varying amounts through July 1, 2026. In May 2005, the Authority authorized and issued $53,060,000 of State Revolving Funds Programs Series 2005A (“Series 2005A”). The Series 2005A bonds provided funds to make loans to 10 Missouri political subdivisions and 1 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 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. 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 43 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 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. 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, and 2013A direct loans (pages 45-50) 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 DNR. Monies from federal capitalization grants and state matching funds are used to fund a reserve account for each participant. As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account and deposits in a bond reserve fund in the District’s name an additional 60% of the expenditure amount for the Series 2004B bonds or 70% for the Series 2005A, 2006A, and 2006B bonds or 100% for the Series 2008A/B bonds. Interest earned from this reserve fund 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 reserve account to the master trustee an amount equal to 60% of the principal payment for the Series 2004B bonds or 70% for the Series 2005A, 2006A, and 2006B bonds or 100% for the series 2008A/B bonds. The costs of operation and maintenance of the wastewater treatment and sewerage facilities and the debt service is payable from wastewater revenues. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 44 In accordance with the Series 2004A, 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds, 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, 2015 and 2014, 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, 2015 are as follows: Energy Efficiency Leveraged Note Payable In April 2004, the DNR loaned $98,595 to the District. The Energy Efficiency Leveraged Note Payable bore interest at a rate of 3.2% per annum and was payable through August 1, 2013. The purpose of this note was to finance the design, acquisition, installation, and implementation of energy conservation measures. The principal and interest on this note was paid from the energy savings from the projects or avoided costs resulting from the projects. There is no outstanding balance for principal and interest at June 30, 2015 or 2014. Years ending June 30,Principal Interest Total 2016 22,860,000$ 37,693,092$ 60,553,092$ 2017 26,140,000 37,047,706 63,187,706 2018 26,685,000 36,263,250 62,948,250 2019 27,475,000 35,553,513 63,028,513 2020 28,510,000 34,707,502 63,217,502 2021-2025 157,355,000 158,613,608 315,968,608 2026-2030 162,645,000 128,740,245 291,385,245 2031-2035 169,120,000 90,661,766 259,781,766 2036-2040 189,795,000 50,974,670 240,769,670 2041-2043 97,645,000 8,091,500 105,736,500 Total 908,230,000$ 618,346,852$ 1,526,576,852$ 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 45 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. As of June 30, 2015, the District completed the specific energy conservation projects and spent $199,489 of the $223,793 loan amount. The remaining $24,203 was returned to the DNR as a principal payment. 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, 2015 are as follows: State Of Missouri Direct Loan Series 2013A In October 2013, the State of Missouri Direct Loan Program issued to the District an amount totaling $52,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues. The District’s interest rate is 1.6% and is payable in semiannual installments at varying amounts through July 1, 2034. Years ending June 30, Principal Interest Total 2016 32,359$ 3,563$ 35,922$ 2017 33,173 2,749 35,922 2018 34,007 1,915 35,922 2019 34,863 1,059 35,922 2020 16,163 202 16,365 Total 150,565$ 9,488$ 160,053$ Energy Efficiency Leveraged Note Payable THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 46 Principal And Interest Requirements On State Of Missouri Direct Loan Series 2013A As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account and deposits the approved amount in a bond reserve fund. The District repays the loan at an interest rate of 1.6% based on the amount that has been borrowed. 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, 2015 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 $39,769,300 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues. The District’s interest rate is 1.5% and is payable in semiannual installments at varying amounts through January 1, 2034. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2011A As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account and deposits the approved amount in a bond reserve fund. The District repays the loan at an interest rate of 1.5% based on the amount that has been borrowed. All funds have been drawn on this loan. Years ending June 30,Principal Interest Total 2016 2,080,000$ 747,697$ 2,827,697$ 2017 2,134,000 765,545 2,899,545 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 2021-2025 12,459,000 2,756,660 15,215,660 2026-2030 14,171,000 1,732,761 15,903,761 2031-2035 14,414,000 568,199 14,982,199 Total 52,000,000$ 8,664,238$ 60,664,238$ State of Missouri Direct Loan Series 2013A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 47 The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2011A outstanding as of June 30, 2015 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 $37,000,000 for the purpose of improving, renovating, repairing, replacing and equipping the District’s Wastewater System. The principal and interest on the bonds are expected to be paid from future wastewater revenues. The District’s interest rate is 1.7% and is payable in semiannual installments at varying amounts through January 1, 2031. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2010C As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account and deposits the approved amount in a bond reserve fund. The District repays the loan at an interest rate of 1.7% based on the amount that has been borrowed. All funds have been drawn on this loan. Years ending June 30,Principal Interest Total 2016 1,620,000$ 586,273$ 2,206,273$ 2017 1,662,000 561,508 2,223,508 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 2021-2025 9,668,000 1,991,116 11,659,116 2026-2030 10,962,000 1,213,127 12,175,127 2031-2034 9,819,300 340,749 10,160,049 Total 38,974,300$ 6,222,188$ 45,196,488$ State of Missouri Direct Loan Series 2011A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 48 The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2010C outstanding as of June 30, 2015 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 $7,980,700 for the construction, improvement, renovation, repair, replacement and equipping of its wastewater system, under the authority of and in full compliance with the District’s Charter (“Plan”). The District’s interest rate is 1.5% and is payable in semiannual installments at varying amounts through July 1, 2031. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2010A As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account and deposits the approved amount in a bond reserve fund. The District repays the loan at an interest rate of 1.5% based on the amount that has been borrowed. All funds have been drawn on this loan. Years ending June 30,Principal Interest Total 2016 1,620,000$ 515,466$ 2,135,466$ 2017 1,663,000 488,582 2,151,582 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 2021-2025 9,701,000 1,554,968 11,255,968 2026-2030 11,027,000 706,563 11,733,563 2031 2,383,000 29,560 2,412,560 Total 31,644,000$ $ 4,592,353 $ 36,236,353 State of Missouri Direct Loan Series 2010C THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 49 The annual principal and interest requirements to maturity on the State of Missouri Direct Loan Series 2010A outstanding as of June 30, 2015 are as follows: State Of Missouri Direct Loan Series 2009A In October 2009, the DNR loaned $23,000,000 to the District. The State of Missouri Direct Loan Series 2009A bears interest at a rate of 1.5% per annum and is payable through January 1, 2030. The purpose of this note was to finance the designing, constructing, improving, renovating, repairing, replacing and equipping new and existing sewer facilities within the District. The principal and interest on the bonds are expected to be paid from future wastewater revenues. Principal And Interest Requirements On State Of Missouri Direct Loan Series 2009A As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account and deposits the approved amount in a bond reserve fund. The District repays the loan at an interest rate of 1.5% based on the amount that has been borrowed. All funds have been drawn on this loan. Years ending June 30,Principal Interest Total 2016 358,600$ 101,492$ 460,092$ 2017 366,000 96,161 462,161 2018 373,300 90,717 464,017 2019 380,900 85,164 466,064 2020 388,700 79,498 468,198 2021-2025 2,065,200 308,380 2,373,580 2026-2030 2,283,300 148,424 2,431,724 2031-2032 731,000 10,856 741,856 Total 6,947,000$ 920,692$ 7,867,692$ State of Missouri Direct Loan Series 2010A 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 2009A outstanding as of June 30, 2015 are as follows: In accordance with the Direct Loan Series 2009A, 2010A, 2010C, 2011A, and 2013A, 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, 2015 and 2014, the District was in compliance with this covenant. Wastewater System Cash And Investments The following accounts have been established in accordance with bond ordinances and financing agreements that require receipts generated from operations be segregated and certain reserve accounts be established: Revenue Fund The Revenue Fund will be used for the purpose of depositing wastewater and stormwater operating revenues, providing funds to pay for expenses related to the operation and maintenance of the District, and fulfilling Sinking Fund requirements in accordance with the bond ordinances. Sinking Fund The bond ordinances provide for deposits to and the use of monies in the Sinking Fund to be used for the sole purpose of principal and interest payments on the bonds. Sufficient monies shall be paid in periodic installments from the Revenue Fund. Debt Service Fund The Debt Service Fund shall be used by the Trustee for the sole purpose of paying the principal and interest on the bonds, as and when the same become due. Years ending June 30,Principal Interest Total 2016 1,049,400$ 267,206$ 1,316,606$ 2017 1,073,700 251,811 1,325,511 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 2021-2025 6,161,000 755,831 6,916,831 2026-2030 6,907,200 282,079 7,189,279 Total 18,563,600$ 2,216,298$ 20,779,898$ State of Missouri Direct Loan Series 2009A THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 51 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, 2015 and 2014, cash and investments in the Debt Service Reserve Fund totaled $57,664,537 and $55,911,516, respectively. Special Participant Bond Reserve Account For the Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds, the District shall deposit 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, 2015 and 2014, cash and investments in the Special Participant Bond Reserve Account held on behalf of the District totaled $113,155,635 and $121,443,013, respectively. Monies in this account are not considered to be District funds. However, interest earnings on this account may be 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, 2015. 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, 2015 and 2014, cash and investments in the Project Fund totaled $63,327,909 and $194,968,331, respectively. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 52 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, 2015 and 2014, cash and investments in the Rebate Fund totaled $230,318 and $231,909, 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 2043 at an approximate amount of $1.5 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 FY15 was $61.8 million with pledged revenues of $128.1 million. This provided a coverage ratio of 2.1 and represented 44.4% of all net operating revenues. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 53 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 December 31, 2010, 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 Defined Contribution Plan and/or the Deferred Compensation Plan. Current employees with less than ten years of service on this date could also voluntarily elect to transfer from the Pension Plan and enter the Defined Contribution Plan. Benefits provided. All benefits vest after five years of credited service. Members retiring at or after age 65 with five or more years credited service are entitled to a pension benefit. The Pension Plan permits early retirement with reduced benefits beginning at age 55 if the member has completed five years of employment. Ordinance No. 10664 provides for unreduced retirement benefits to any member whose combined age and term of service is equal to 75. Effective August 1, 2004, Ordinance No. 11781 amended the Pension Plan to change the benefit formula to 1.7% of final average earnings plus 0.4% of final average earnings that are in excess of covered earnings multiplied by the period of years and months of credited service not to exceed 35 years without including accrued sick leave. Sick leave is paid out at 1.25% per year of service times the amount of leave accrued. 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 54 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 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, 2014 and 2013, the following employees were covered by the benefit terms: Required Employer Contributions. The District’s employees do not contribute to the Pension Plan. Ordinances establishing the Pension Plan provide for actuarially determined annual contributions, paid solely by the District, that are sufficient to pay benefits when due. The Entry Age Normal actuarial funding method is used to determine contributions. Contributions of $10,359,139 and $11,850,000, excluding certain professional fees paid by the District, were made to the Pension Plan during the District’s fiscal years ended June 30, 2015 and 2014, respectively. These contributions were made in accordance with actuarially determined contribution requirements based on actuarial valuations performed at December 31, 2014 and 2013, respectively. Increase 2014 2013 (Decrease) Active plan members 710 761 (51) Retirees and beneficiaries currently receiving benefits 660 636 24 Terminated members entitled to receive benefits 180 179 1 Total 1,550 1,576 (26) For the Years Ended December 31, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 55 Net Pension Liability The net pension liability was measured as of December 31, 2014 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability in the December 31, 2014 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Mortality rates were based on the RP-2000 Healthy Annuitant Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale AA. The actuarial assumptions are based on prior and current year experiences. 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 as of December 31, 2014 are as follows: 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 Long-Term Expected Arithmetic Target Real Rate Asset Class Allocation of Return Domestic Equity 27% 7% International Equity 10% 8% Emerging Market Equities 3% 11% Global Fixed Income 35% 1% Absolute Return/HFOF 15% 6% Real Estate 5% 5% Real Assets 5% 5% Total 100% THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 56 Discount rate. The discount rate used to measure the total pension liability 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. 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: Changes in Net Pension Liability Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Changes in Net Pension Liability (a) (b) (a) - (b) Balances as of December 31, 2013 $275,656,711 $246,247,278 $29,409,433 Changes for the year: Service cost 5,409,485 5,409,485 Interest 19,900,507 19,900,507 Effect of economic/demographic gains or losses (3,667,991) (3,667,991) Effect of assumption changes or inputs * 6,500,227 6,500,227 Benefit payments (13,387,127) (13,387,127) — Employer contributions 10,675,321 (10,675,321) Net investment income 6,980,349 (6,980,349) Balances as of December 31, 2014 $290,411,812 $250,515,821 $39,895,991 * In order to better reflect anticipated future experience, the discount rate was decreased from 7.25% to 7.0% effective December 31, 2014 and the salary increase assumption was changed from 10.0% grading down to 4.50% over the first three years of service to 4.25% for all years. 1%Current 1% Decrease Discount Rate Increase (6.00%) (7.00%) (8.00%) Net pension liability 72,651,593$ 39,895,991$ 11,897,781$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 57 Pension plan fiduciary net position. Fiduciary net position is the market value of all plan assets. Total net pension liability is the plan’s 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 year ended June 30, 2015, the District recognized pension expense of a negative $27,850 after all deferred inflows and outflows of resources were accounted for. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Other amounts currently reported as deferred outflows of resources ($5,469,591) related to the District’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Payable To The Pension Plan At June 30, 2015, the District did not have outstanding contributions to the pension plan required for the year ended June 30, 2015. Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience —$ 2,910,142$ Changes of assumptions 5,157,205 — Net difference between projected and actual earnings 8,583,527 — Contributions made subsequent to measurement date 5,469,591 — Total 19,210,323$ 2,910,142$ Net Deferred Outflows of Resources Year ended June 30,: 2016 2,731,055$ 2017 2,731,055 2018 2,731,055 2019 2,637,425 10,830,590$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 58 8. Other Pension Plans Deferred Compensation Plan The District offers its employees a Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. The Deferred Compensation Plan, available to all District employees, permits them to defer a portion of their salary up to Internal Revenue Code limits. The District does not contribute to the Plan. The deferred compensation is not available to employees until termination, retirement, death, disability or due to financial hardship as defined by the Deferred Compensation Plan. The Deferred Compensation 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 Deferred Compensation 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 Deferred Compensation Plan are not included in the accompanying financial statements. The Deferred Compensation 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. Defined Contribution Plan The Defined Contribution Plan was established by the District’s Board of Trustees, through Ordinance 13180, which became effective January 1, 2011. The following employees are eligible to participate in the Plan: (i) employees first hired on or after January 1, 2011, and (ii) employees hired prior to January 1, 2011 who elect to terminate participation in the Pension Plan, effective as of April 1, 2011, in accordance with the provisions of such Pension Plan, and (iii) employees rehired on or after January 1, 2011 who are not eligible to accrue benefits under the Pension Plan. An employee shall become a participant in the Defined Contribution Plan (“DC Plan”) on the first day on which he performs an hour of service for the District. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 59 The District’s Board of Trustees, primarily to improve benefits to members, amends the DC Plan in all its respects. A pension committee consisting of two members of the District’s Board of Trustees, two elected employee members and four members of the District’s management staff administer the DC Plan. A committee of the District’s Board of Trustees, with the aid of an investment advisor, reviews and evaluates the DC Plan’s investments and the related rates of return on a periodic basis. This DC Plan is intended to provide a means whereby the District may provide retirement benefits to eligible employees and encourage such employees to establish a regular method of savings, thereby providing a measure of financial security for such employees and their beneficiaries upon retirement or in the event of death or disability. Employer Basic Contributions: For each payroll period, the District contributes an amount equal to 7% of the covered compensation earned during such period by each participant entitled to an allocation of such contribution. Employer Matching Contributions: For each payroll period, the District contributes an amount equal to 50% of the covered compensation of such participant withheld as an annual deferral (as defined in the Deferred Compensation Plan); provided that, before-tax contributions in excess of 4% of the covered compensation of the participant for the payroll period shall not be considered for purposes of Employer Matching Contributions. Employer Matching Contributions shall be up to the maximum amount of compensation that may be taken into account for the DC Plan year. In no event shall the sum of the employer contributions and employee contributions allocated to the account of a participant for the DC Plan year exceed the lesser of: (a) The amount specified in the applicable Internal Revenue Code, as adjusted annually for any applicable increases in the cost of living. (b) 100% of the participant’s compensation for such year. The compensation limit referred to in (b) shall not apply to any contribution from medical benefits after separation from service. The District’s contributions to the plan amounted to $1,003,944 and $742,851 for the years ended June 30, 2015 and 2014, respectively. Forfeitures were $108,383 and $3,974 for the years ended June 30, 2015 and 2014, respectively, and there were no liabilities outstanding as of June 30, 2015. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 60 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 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 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 provides a single-employer defined benefit health care plan to employees who retire from the District on or after age 62 and with five years of service or whose age plus years of service equal 75 points (“Rule of 75”). The District pays the monthly group health insurance premium for the individual until the retiree becomes eligible for Medicare at age 65. In addition, there is a closed group of disabled former employees who receive life insurance coverage from the District. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 61 While the actuarial report has prior version rates, updated rates received from the Human Resources Department for retirees beginning February 2015 are as follows: Coverage Tier Monthly Premium Retiree* $552.67 Retiree + Spouse $1,177.33 Retiree + Child $1,069.73 Family (1 child) $1,631.72 *The District pays the retiree’s premium for a retiree who retires after age 62 or after attaining 75 points. Eventually, affected retirees will have to pay up to 10% of the above premium. The District’s annual other post-employment benefit (“OPEB”) cost (expense) is calculated based on the annual required contribution (“ARC”) of the employer, an amount actuarially determined in accordance with the parameters of GASB 45 and in conjunction with Plan benefits currently in force. The actuarial valuations have been determined using estimated data provided by the District in combination with assumptions on the probability of future events, while also keeping an eye on long-term viability. These valuations are subject to continual revision as future actuarial measurements may differ significantly from current measurements due to the realization of new estimates and factors. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities. The District’s annual OPEB cost for the current year and the related information are as follows: Amortization of past service cost 908,300$ Normal cost 1,462,200 Interest to end of fiscal year 88,900 Annual Required Contribution (ARC) 2,459,400 Interest on net OPEB obligation 190,022 Adjustment to ARC (174,733) Annual OPEB cost 2,474,689 Contributions made (1,573,400) Increase in net OPEB obligation 901,289 Net OPEB obligation - beginning of year 5,067,254 Net OPEB obligation - end of year 5,968,543$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 62 The Plan was established by District Ordinance, which assigned the authority to establish and amend plan benefit provisions to the District. The contribution requirements of the District and plan members are established and may be amended by the District. The Plan does not issue a publicly available report. Trend Information As of June 30, 2015, the Plan was not funded. The actuarial accrued liability for benefits as of July 1, 2013, the latest actuarial valuation, was approximately $26,264,000, and there were no assets, resulting in an unfunded actuarial accrued liability (“UAAL”) of approximately $26,264,000. The covered payroll (annual payroll of active employees covered by the plan) in 2013 was approximately $60,238,000, and the ratio of the UAAL to covered payroll was 43.6%. The Schedule of Funding Progress, presented as RSI following the notes to the financial statements, presents trend information about whether the actuarial accrued liability for benefits is increasing or decreasing over time. Actuarial funding calculations of the Plan reflect a long-term perspective. The Plan’s actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Determined amounts are subject to continual revision as results are compared to past expectations and new estimates are made about the future. Significant actuarial assumptions used in the valuation are as follows: Latest valuation date July 1, 2013 Actuarial cost method Projected Unit Credit Discount rate 3.75% per annum Amortization method Level percentage of payroll amount, open Amortization period 30-year period Inflation rate 2.5% Investment Rate of Return 3.75% annual returns net of both administrative and investment expenses Health cost trend assumption Getzen Trend Model – 6.9% graded to 4.5% over 70 years Percentage of Fiscal Net OPEB Net OPEB Cost Net OPEB Year Cost Contributed Obligation 2015 2,474,689$ 63.6 5,968,543$ 2014 2,442,145 57.1 5,067,254 2013 2,132,454 71.0 4,018,709 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 63 Medical Trend: The healthcare trends used in this 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 3.75% per annum Mortality RP 2000 Mortality Table (employee and healthy annuitant tables), projected 5 years from the valuation date using Scale AA. Year Medical Year Medical 2013 2040 2014 5.7 2045 5.8 2015 5.4 2050 5.7 2016 5.4 2055 5.5 2017 5.6 2060 5.4 2018 5.5 2065 5.3 2020 5.5 2070 5.2 2025 5.5 2075 5.0 2030 6.5 2080 4.7 2035 6.7 4.5 6.9%6.1% 2083+ Years Of Attained Service Rate Age Rate 020 1 12.0 30 3.7 2 7.5 40 1.1 50+0.0 Select rates based on service. Ultimate rates based on attained age. Ultimate rates are from the Sarason T-1 Table above. 20.0%5.5% Termination Of Employment: Select Rates Ultimate Rates (0 to 4 years of service)(after 4 years of service) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 64 Future Retiree Coverage: 90.0% of eligible employees retiring prior to age 65 are assumed to elect medical coverage Future Dependent Care: 25.0% elect spousal coverage, 0.0% elect dependent children coverage 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, 2015 and 2014, these liabilities amounted to $4,317,384 and $2,923,884, respectively. Age Before 75 Points After 75 Points 55 56 2.0 10.0 57 2.0 10.0 58 2.0 10.0 59 3.0 10.0 60 4.0 15.0 61 5.0 15.0 62 20.0 35.0 63 10.0 25.0 64 20.0 25.0 65 100.0 100.0 Retirement - Rates Vary By Age 1.0% 10.0% Percent Becoming Age Disabled 20 30 0.064 40 0.102 50 0.311 Disability 0.056% THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 65 The claims liabilities reported are based on the requirements of GASB Statement No. 10, 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 2015 and 2014 were as follows: The District obtains periodic funding valuations from the third-party administrators managing the self-insurance programs and adjusts the charges as required to maintain the appropriate level of estimated claims liability. The District also maintains excess liability insurance coverage for workers' compensation and medical and hospitalization claims; general liability; and water backup damage to customers’ property. The District purchases commercial insurance for all other risks of loss. Settled claims have not exceeded this commercial coverage in any of the past three years. 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 period based on landfill capacity used as of the end of the fiscal year. The $783,473 and $756,936 reported as landfill closure and post- closure care liabilities at June 30, 2015 and 2014, respectively, represent the cumulative amounts reported at fiscal year-end based on the use of 96.7% and 94.7% of the estimated capacity of the landfill for fiscal years ended 2015 and 2014, respectively. The District will recognize the remaining estimated cost of closure and post-closure care of $26,536 at June 30, 2016 as the facility nears capacity. These amounts are based on what it would cost to perform all closure and post-closure care in 2015. 2015 2014 Liability - Beginning of Year 2,923,884$ 3,041,045$ Current year claims and changes in estimates 15,852,729 12,455,966 Claim payments (14,459,229) (12,573,127) Liability - End of Year 4,317,384$ 2,923,884$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 66 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 67 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 District was originally a defendant in five (5) different flooding cases related to the September 14, 2008, rain event precipitating from remnants of Hurricane Ike. These cases consisted of three (3) property damage cases and two (2) wrongful death cases. The defense costs associated with these cases has been covered by the District’s insurance carrier, with a reservation of rights. Of the five (5) cases, one (1) involves flooding of Maline Creek and the others involve flooding of the River Des Peres. All five (5) original cases are now closed; with the last one (a property damage case) settled in July 2015. In summation, two (2) of the four (4) cases resolved were voluntarily dismissed by the plaintiffs, another case was a property damage case which settled prior to 2015, and the wrongful death case settled prior to trial. Two new cases relating to flooding from Hurricane Ike were filed in July 2015. The District’s insurance carrier is again covering defense costs, with a reservation of rights. The District does not believe these two cases pose a significant liability. In addition to the above discussed flooding cases, on September 13, 2013, five (5) new property damage cases were filed against the District. These cases have yet to be served on the District. The District is a defendant in various other matters of litigation. Of these matters, management and District’s legal counsel do not anticipate any material effect on the June 30, 2015 and 2014 financial statements. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 68 Contingencies The District has entered into construction and other contracts amounting to $302,603,787 and $247,737,650 at June 30, 2015 and 2014, respectively. Grants to be received from various governmental agencies and entities to partially offset the cost of the contract commitments amounted to $34,228 and $726,856 at June 30, 2015 and 2014, respectively. The District had $518,000,000 in revenue bonds authorized by the voters but unissued as of both June 30, 2015 and 2014. 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 $151,292,103 and $142,764,156 of restricted net position at June 30, 2015 and 2014, respectively, of which $78,114,762 and $70,920,910 are restricted due to enabling legislation, as of June 30, 2015 and 2014, respectively. 14. Segment Information The District issued wastewater revenue bonds to finance wastewater infrastructure projects. The District accounts for both wastewater and stormwater activities in a single enterprise fund, but investors in those bonds rely solely on the revenue generated by the wastewater activities for repayment. Fiscal year 2015 and 2014 summary financial information for each business segment is presented below. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 69 The District’s adoption of GASB 68 in fiscal year 2015, as noted in the Adoption of New Accounting Standards section of Note 1, resulted in restating the beginning balance of net position due to the recognition of a beginning net pension liability. The impact of this change on the District’s Wastewater and Stormwater Segments’ Statements of Net Position, as presented in the Statements of Revenues, Expenses and Changes in Net Position is as follows: In fiscal year 2015 there was one restatement between Wastewater and Stormwater Segments. Stormwater Best Management Practices (“BMP”) deposits are collected to ensure proper BMP construction. In prior years these BMP deposits were presented on the Wastewater Segment Statements. In fiscal year 2015, the BMP deposits and corresponding cash and investment accounts were restated as Stormwater liabilities and assets. These restatements have no impact on the enterprise wide statements. FY 2015 Wastewater Stormwater Total   Net Position - Beginning Of Year, As Previously Stated      1,721,395,422$ 546,557,373$ 2,267,952,795$ Effect of Adoption of GASB 68: establishing a beginning net pension liability (20,045,508) (3,578,152) (23,623,660)   Net Position - Beginning Of Year,   As Restated      1,701,349,914$ 542,979,221$ 2,244,329,135$ Old Presentation of FY 2014 New Presentation of FY 2014 Statements of Net Position Statements of Net Position Wastewater Stormwater Total Wastewater Stormwater Total Current Assets:Current Assets: Unrestricted Current Assets Unrestricted Current Assets Cash and cash equivalents  91,820,149$ 3,217,637$ 95,037,786$ Cash and cash equivalents  89,968,468$ 5,069,318$ 95,037,786$ Investments                                          100,878,371 4,222,504 105,100,875 Investments                                          98,575,723 6,525,152 105,100,875 Total Unrestricted Current Assets 192,698,520$ 7,440,141$ 200,138,661$ Total Unrestricted Current Assets 188,544,191$ 11,594,470$ 200,138,661$ Other Assets:Other Assets:       Long-term investments                                70,161,237$ 2,924,238$ 73,085,475$        Long-term investments                                68,573,902$ 4,511,573$ 73,085,475$ Current Liabilities:Current Liabilities:       Deposits and accrued expenses                        33,336,518$ -$ 33,336,518$        Deposits and accrued expenses                        27,594,854$ 5,741,664$ 33,336,518$ Statements of Cash Flow Statements of Cash Flow Wastewater Stormwater Total Wastewater Stormwater Total Cash Flows From Operating Activities: Cash Flows From Operating Activities: Paid to suppliers for goods and services (60,318,262)$ (17,590,886)$ (77,909,148)$ Paid to suppliers for goods and services (62,169,943)$ (15,739,205)$ (77,909,148)$ Net Increase (Decrease) In Cash Net Increase (Decrease) In Cash And Cash Equivalents (1,405,263)$ (1,346,561)$ (2,751,824)$ And Cash Equivalents (3,256,944)$ 505,120$ (2,751,824)$ Cash And Cash Equivalents At End Of Year 154,405,496$ 24,597,285$ 179,002,781$ Cash And Cash Equivalents At End Of Year 152,553,815$ 26,448,966$ 179,002,781$ THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 70 A segment is an identifiable activity reported as a stand-alone entity for which one or more revenue bonds are outstanding. A segment has a specifically identifiable revenue stream pledged in support of the revenue bonds and has related expenses, gains and losses and assets and liabilities that are required by external parties to be accounted for separately. The wastewater system is the only reportable segment that meets the requirements of GASB Statement No. 34, Basic Financial Statements - and Management’s Discussion and Analysis - for State and Local Governments. The stormwater system is reported on for informational purposes only. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 71 Financial information as of and for the years ended June 30, 2015 and 2014 of the District’s Wastewater Segment is as follows: 2014 Assets 2015 (As Restated) Current Assets Unrestricted Current Assets Cash and cash equivalents  70,358,397$ 89,968,468$ Investments                                          62,592,570 98,575,723 Sewer service charges receivable, less allowance of                   $52,696,320 in 2015 and $51,398,281 in 2014 49,642,870 46,390,489 Unbilled sewer service charges receivable, less allowance of       $440,129 in 2015 and $402,335 in 2014 22,049,122 20,116,744 Accrued income on investments                        601,855 746,795 Other receivables                               1,650,498 1,057,452 Supplies inventory                                   6,360,539 6,223,099           Total Unrestricted Current Assets                            213,255,851 263,078,770 Non-Current Assets Restricted Assets Cash and cash equivalents  59,953,973 62,585,347 Investments                                          53,220,698 162,975,839 Long-term investments                                28,088,302 48,391,812 Property taxes receivable, less allowance of $634 in 2015      and $13,382 in 2014 (126,463) 26,294 Accrued income on investments                        216,287 259,601           Total Restricted Non-Current Assets                            141,352,797 274,238,893 Other Assets     Notes receivable                                     13,563,540 14,116,801 Long-term investments                                165,781,358 68,573,902             Total other assets                            179,344,898 82,690,703 Capital Assets     Depreciable:        Treatment and disposal plant and equipment           1,214,483,762 1,184,278,860        Collection and pumping plant                         1,727,606,247 1,678,492,307        General plant and equipment                          75,667,913 77,101,471                                                             3,017,757,922 2,939,872,638        Less:  Accumulated depreciation                      1,041,916,229 986,568,052        Net depreciable assets       1,975,841,693 1,953,304,586            Non-depreciable:        Land                                                 50,292,691 49,317,549        Construction in progress                             399,987,281 291,894,365           Net capital assets                                2,426,121,665 2,294,516,500                    Total Non-Current Assets                         2,746,819,360 2,651,446,096                  Total Assets                               2,960,075,211 2,914,524,866 Deferred Outflow of Resources:        Bonds and Notes Payable-Deferred Loss                                        9,599,096 10,108,350        Pension-related Outflows                                              16,300,636 —                  Total Deferred Outflow of Resources                        25,899,732 10,108,350 WASTEWATER SEGMENT STATEMENTS OF NET POSITION For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 72 2014 Liabilities 2015 (As Restated) Current Liabilities Contracts and accounts payable  34,058,044$ 30,764,638$ Deposits and accrued expenses 30,338,248 27,594,854 Retainage payable  6,952,750 9,566,082 Current portion of bonds and notes payable  29,620,359 20,268,080                                                             100,969,401 88,193,654 Current Liabilities-Payable From Restricted Assets Contracts and accounts payable  — 273,006 Retainage payable  156,538 131,941                                                             156,538 404,947             Total Current Liabilities                       101,125,939 88,598,601 Non-Current Liabilities Deposits and accrued expenses 13,067,791 11,811,608 Net Pension Liability 33,853,154 — Bonds and notes payable  1,105,481,067 1,102,827,585             Total Non-Current Liabilities                       1,152,402,012 1,114,639,193                         Total Liabilities                              1,253,527,951 1,203,237,794 Deferred Inflow of Resources:        Pension-related Inflows                                              2,469,358 —                  Total Deferred Inflow of Resources                        2,469,358 — Net Position Net investment in capital assets 1,363,947,246 1,376,497,525 Restricted for:       Debt service                                       73,177,341 71,843,246       Subdistrict construction and improvement           4,334,588 6,027,838 Unrestricted 288,518,459 267,026,813                  Total Net Position               1,729,977,634$ 1,721,395,422$ For The Years Ended June 30, WASTEWATER SEGMENT STATEMENTS OF NET POSITION (Continued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 73 2015 2014   Operating Revenues     Sewer service charges                                   282,957,325$ 248,762,503$     Recovery of (Provision for) doubtful sewer service charge accounts (2,229,949) 7,230,389     Licenses, permits, and other fees                       6,656,831 6,562,607     Other                                                   1,451,670 1,866,902     Total Operating Revenues                              288,835,877 264,422,401          Operating Expenses     Pumping and treatment                                   60,765,831 54,125,550     Collection system maintenance                           32,141,159 32,721,633     Engineering                                             4,589,048 5,569,007     General and administrative                              48,555,339 45,661,041     Water backup claims                                     3,862,390 2,713,168     Depreciation                                            68,289,230 63,757,854     Asset management                                               13,373,795 12,431,515     Total Operating Expenses                             231,576,792 216,979,768          Operating Income                    57,259,085 47,442,633          Non-Operating Revenues     Property taxes levied by the District                   (152,757) 16,629     Investment income                                       2,555,654 2,670,333     Rent and other income                                   37,321 302,506     Total Non-Operating Revenues                          2,440,218 2,989,468          Non-Operating Expenses     Net loss on disposal and sale of capital assets         1,026,567 5,203,319     Non-recurring projects and studies                       10,579,078 2,115,233     Interest expense                                        27,138,546 25,661,127     Total Non-Operating Expenses                          38,744,191 32,979,679          Income Before Capital Grants And Contributions                       20,955,112 17,452,422          Capital Grants And Contributions     Utility plant contributed                               6,979,980 3,390,795     Grant revenue                                           692,628 228,748     Total Capital Grants And Contributions                          7,672,608 3,619,543   Change In Net Position 28,627,720 21,071,965   Net Position - Beginning Of Year, As Previously Stated      1,721,395,422 1,700,323,457 Effect of Adoption of GASB 68 (20,045,508) —   Net Position - Beginning Of Year, As Restated      1,701,349,914 1,700,323,457          Net Position - End Of Year                                    1,729,977,634$ 1,721,395,422$ 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 74 2014 2015 (As Restated) Cash Flows From Operating Activities Received from customers 283,741,361$ 249,853,960$ Paid to employees for services (94,150,602) (91,425,385) Paid to suppliers for goods and services (66,614,057) (62,169,943) Net Cash Provided By Operating Activities 122,976,702 96,258,632 Cash Flows From Capital And Related Financing Activities Proceeds from capital grants 692,920 233,450 Proceeds from issuance of debt 35,956,725 173,411,628 Premium and (discounts) on sale of bonds — 9,937,121 Interest received on bond proceeds to be used for capital improvements 291,725 348,476 Principal paid on debt (20,268,080) (10,071,556) Interest and fees paid on debt (43,213,255) (37,522,184) Payments for capital assets (196,100,162) (158,323,507) Proceeds from sale of capital assets 301,443 273,138 Build America bond tax credit 1,614,982 1,603,658 Net Cash Provided By (Used In) Capital And Related Financing Activities (220,723,702) (20,109,776) Cash Flows From Investing Activities Purchase of investments (338,845,071) (544,430,180) Proceeds from sale and maturity of investments 408,929,979 460,116,950 Investment income 5,383,326 4,604,924 Proceeds from rents 37,321 302,506 Net Cash Provided By (Used In) Investing Activities 75,505,555 (79,405,800) Net Increase (Decrease) In Cash And Cash Equivalents (22,241,445) (3,256,944) Cash And Cash Equivalents At Beginning Of Year 152,553,815 155,810,759 Cash And Cash Equivalents At End Of Year 130,312,370$ 152,553,815$ Ended June 30, WASTEWATER SEGMENT STATEMENTS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 75 Financial information as of and for the years ended June 30, 2015 and 2014 of the District’s Stormwater Segment is as follows: 2014 Assets 2015 (As Restated) Current Assets Unrestricted Current Assets Cash and cash equivalents  3,572,342$ 5,069,318$ Investments                                          3,947,771 6,525,152 Sewer service charges receivable, less allowance of                   $151,035 in 2015 and $290,930 in 2014 332,208 173,238 Unbilled sewer service charges receivable, less allowance of       $1,883 in 2015 and $2,303 in 2014 120,059 115,168 Property taxes receivable, less allowance of $44,595 in 2015               and $515,097 in 2014 1,413,045 2,136,300 Accrued income on investments                        16,581 9,589           Total Unrestricted Current Assets                            9,402,006 14,028,765 Restricted Current Assets Cash and cash equivalents 5,096,953 6,086,299 Investments                                          5,433,350 7,568,587           Total Restricted Current Assets                            10,530,303 13,654,886           Total Current Assets                            19,932,309 27,683,651 Non-Current Assets Restricted Assets Cash and cash equivalents  10,476,879 15,293,349 Investments                                          10,418,686 18,185,406 Long-term investments                                42,405,401 17,712,322 Property taxes receivable, less allowance of $21,322 in 2015 and $610,612 in 2014 638,298 822,066 Accrued income on investments                        92,168 49,539           Total Restricted Non-Current Assets                            64,031,432 52,062,682 Other Assets Long-term investments                                10,328,702 4,511,573             Total other assets                            10,328,702 4,511,573 Capital Assets     Depreciable:        Collection and pumping plant                         613,419,262 607,616,163        General plant and equipment                          16,530,978 16,499,177                                                             629,950,240 624,115,340        Less:  Accumulated depreciation                      179,206,884 169,489,419        Net depreciable assets       450,743,356 454,625,921     Non-depreciable:        Land                                                 6,228,017 6,220,267        Construction in progress                             8,476,273 8,050,557           Net capital assets                                465,447,646 468,896,745                    Total Non-Current Assets                         539,807,780 525,471,000                         Total Assets                               559,740,089 553,154,651 Deferred Outflow of Resources:        Pension-related Outflows                                              2,909,687 —                  Total Deferred Outflow of Resources                        2,909,687 — STORMWATER SEGMENT STATEMENTS OF NET POSITION For The Years Ended June 30, THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 76 2014 Liabilities 2015 (As Restated)   Current Liabilities Contracts and accounts payable  24,774$ 31,118$ Deposits and accrued expenses  7,220,824 5,741,664                                                             7,245,598 5,772,782   Current Liabilities-Payable From Restricted Assets Contracts and accounts payable  736,658 742,374 Retainage payable  44,903 82,122                                                             781,561 824,496             Total Current Liabilities                       8,027,159 6,597,278          Non-Current Liabilities        Net Pension Liability                   6,042,837 —             Total Non-Current Liabilities                       6,042,837 —                              Total Liabilities                     14,069,996 6,597,278 Deferred Inflow of Resources:        Pension-related Inflows                                              440,784 —                  Total Deferred Inflow of Resources                        440,784 — Net Position Net investment in capital assets 465,447,646 468,896,745 Restricted for:       Subdistrict construction and improvement           73,780,174 64,893,072 Unrestricted 8,911,176 12,767,556                  Total Net Position 548,138,996$ 546,557,373$   For The Years Ended June 30, STORMWATER SEGMENT STATEMENTS OF NET POSITION (Continued) THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 77 2015 2014   Operating Revenues     Sewer service charges                                   1,409,239$ 1,370,519$     Recovery of (Provision for) doubtful sewer service charge accounts 133,578 (20,067)     Other                                                   7,895 —     Total Operating Revenues                              1,550,712 1,350,452   Operating Expenses     Collection system maintenance                           8,019,048 7,266,178     Engineering                                             6,364,852 6,615,000     General and administrative                              (4,218) —     Depreciation                                            10,352,029 10,329,353     Asset management                                               212,645 107,336     Total Operating Expenses                             24,944,356 24,317,867   Operating Income (Loss)                                         (23,393,644) (22,967,415)   Non-Operating Revenues     Property taxes levied by the District                   24,917,081 27,433,690     Investment income                                       444,937 296,216     Total Non-Operating Revenues                          25,362,018 27,729,906   Non-Operating Expenses     Net loss on disposal and sale of capital assets         394,335 45,124     Non-recurring projects and studies                       1,738,410 1,377,434     Total Non-Operating Expenses                          2,132,745 1,422,558   Income (Loss) Before Capital Grants And Contributions              (164,371) 3,339,933   Capital Grants And Contributions     Utility plant contributed                               5,324,146 3,482,937     Grant revenue                                           — —     Total Capital Grants And Contributions                          5,324,146 3,482,937   Change In Net Position 5,159,775 6,822,870   Net Position - Beginning Of Year, As Previously Stated      546,557,373 539,734,503 Effect of Adoption of GASB 68 (3,578,152) —   Net Position - Beginning Of Year, As Restated      542,979,221 539,734,503          Net Position - End Of Year                                    548,138,996$ 546,557,373$ 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 78 15. Subsequent Events In preparing these financial statements, the District has evaluated events and transactions for potential recognition or disclosure through October 17, 2015, the date the financial statements were available to be issued. On August 5, 2015, the IRS announced a decrease in the sequestration rate for refundable credit amounts submitted on IRS Form 8038-CP for qualified bonds from 7.3% to 6.8%. This will be effective for all refund payments processed from October 1, 2015 to September 30, 2016. Since the District participates in Build America Bonds, the District will receive 93.2% of the amount requested during its fiscal year of 2016. The District received 92.7% of the amount requested during fiscal year 2015. 2014 2015 (As Restated) Cash Flows From Operating Activities Received from customers 1,373,264$ 1,344,177$ Paid to suppliers for goods and services (7,919,918) (15,739,205) Net Cash Provided By Operating Activities (6,546,654) (14,395,028) Cash Flows Provided By Non-Capital Financing Activities Taxes levied and collected 25,824,104 27,468,024 Cash Flows From Capital And Related Financing Activities Payments for capital assets (5,143,441) (5,559,226) Proceeds from sale of capital assets 88,730 71,901 Net Cash Provided By (Used In) Capital And Related Financing Activities (5,054,711) (5,487,325) Cash Flows From Investing Activities Purchase of investments (88,904,937) (82,687,573) Proceeds from sale and maturity of investments 66,797,462 75,235,093 Investment income 581,944 371,929 Net Cash Provided By (Used In) Investing Activities (21,525,531) (7,080,551) Net Increase (Decrease) In Cash And Cash Equivalents (7,302,792) 505,120 Cash And Cash Equivalents At Beginning Of Year 26,448,966 25,943,846 Cash And Cash Equivalents At End Of Year 19,146,174$ 26,448,966$ Ended June 30, STORMWATER SEGMENT STATEMENTS OF CASH FLOWS For The Years THE METROPOLITAN ST. LOUIS SEWER DISTRICT Notes To Financial Statements (Continued) Page 79 On August 20, 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. The District’s interest rate is 1.22% and is payable in semiannual installments at varying amounts through January 1, 2035. As the District incurs approved capital expenditures, the DNR reimburses the District for the expenditures from the bond proceeds account and deposits the approved amount in a bond reserve fund. The District repays the loan at an interest rate of 1.22% based on the amount that has been borrowed. As of the date of this report, the outstanding loan balance was $553,500. The payment requirements to maturity will be determined after the debt is fully issued. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 80 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS June 30, 2015 Schedule of Changes in Net Pension Liability and Related Ratios In (000's) Fiscal Year Ending June 30, 2015 Total Pension Liability Service cost $5,409 Interest on total pension liability 19,901 Effect of plan changes 0 Effect of economic/demographic gains or (losses) (3,668) Effect of assumption changes or inputs 6,500 Benefit payments (13,387) Net change in total pension liability 14,755 Total pension liability - beginning 275,657 Total pension liability - ending (a) 290,412 Fiduciary Net Position Employer contributions $10,676 Member contributions 0 Investment income net of investment expenses 6,980 Benefit payments (13,387) Administrative expenses 0 Net change in plan fiduciary net position 4,269 Fiduciary net position - beginning 246,247 Fiduciary net position - ending (b) 250,516 Net pension liability - ending = (a) - (b) $39,896 Fiduciary net position as a % of total pension liability 86.26% Covered payroll $44,664 Net pension liability as a % of covered payroll 89.32% 1. Changes of Assumptions. In 2014, amounts reported as changes of assumptions resulted primarily from adjustments to the discount rate and employee rate increases. 2. This schedule will ultimately present ten years of information when available. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 81 REQUIRED SUPPLEMENTARY INFORMATION (Continued) EMPLOYEES’ PENSION PLAN AND POST-EMPLOYMENT BENEFIT PLAN June 30, 2015 Employees' Pension Plan Schedule of Employer Contributions Plan Year Actuarially Contribution Covered Contribution Ending Determined Annual Deficiency Employee as a % of December 31, Contribution Contribution (Excess) Payroll* Covered Payroll 2005 $7,184,531 $7,184,531 — $40,144,000 17.90% 2006 6,847,278 6,847,278 — 42,113,000 16.26% 2007 7,673,240 7,673,240 — 43,640,000 17.58% 2008 7,425,602 7,425,602 — 48,077,000 15.45% 2009 8,859,535 8,859,535 — 52,267,000 16.95% 2010 10,306,739 10,306,739 — 51,703,000 19.93% 2011 10,969,154 10,969,154 — 49,432,000 22.19% 2012 11,737,168 11,737,168 — 48,333,000 24.28% 2013 11,391,287 11,391,287 — 46,600,000 24.44% 2014 10,675,321 10,675,321 — 44,663,896 23.90% * Payroll as of prior December 31 Measurement Date Notes to Schedule Valuation date: Actuarially determined contribution rates are calculated as of January 1 of the fiscal year in which the contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age Amortization method Level dollar layered, 20 year periods Asset valuation method 3-year smoothing period Inflation 2.50% Salary increases 4.25%, average, including inflation Investment rate of return 7.00%, net of pension plan investment expense, including inflation Mortality In the 2015 actuarial valuation, assumed life expectancies were calculated using the RP-2000 Healthy Annuitant Mortality Table. Other Post-Employment Benefit Plan Schedule of Funding Progress In (000's) Unfunded Actuarial UAAL As A Actuarial Actuarial Accrued Percentage Actuarial Value Accrued Liability Funded Covered Of Covered Valuation Of Assets Liability (UAAL) Ratio Payroll Payroll Date (1)(2) (1)-(2) (1)/(2) (3) (1)-(2)/(3) 7/1/2013 —$ 26,264$ 26,264$ 0% 60,238$ 43.6 % 7/1/2011 — 24,103 24,103 0% 52,649 45.8 7/1/2009 — 24,412 24,412 0% 50,230 48.6 7/1/2007 — 21,938 21,938 0% 43,640 50.3 The Metropolitan St. Louis Sewer District Statistical Section This part of the District’s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the District’s overall financial health. Contents Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. Page Financial Trends These schedules contain trend information to help the reader understand how the District’s financial performance and well-being have changed over time…………………………………….............82 - 83 Revenue Capacity These schedules contain information to help the reader assess the District’s most significant local revenue sources, the user charge….………84 - 90 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…………….…...91 - 93 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………………………….……………..94 - 96 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……………………………………….……..97 - 98 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 82 2006 2007 2008 2009 2010 Net Position Net investment in capital assets 1,651,792$ 1,682,063$ 1,704,322$ 1,798,914$ 1,868,974$ Restricted 66,973 85,447 97,422 94,769 80,782 Unrestricted 247,958 278,803 324,218 293,934 257,894 Total Net Position 1,966,723$ 2,046,313$ 2,125,962$ 2,187,617$ 2,207,650$ 2011 2012 2013 2014 2015 Net Position Net investment in capital assets 1,915,233$ 1,928,200$ 1,877,692$ 1,845,394$ 1,829,394$ Restricted 94,926 106,693 111,066 142,764 151,292 Unrestricted 186,860 175,010 251,300 279,794 297,430 Total Net Position 2,197,019$ 2,209,903$ 2,240,058$ 2,267,952$ 2,278,116$ NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (000's) Fiscal Year Fiscal Year THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 83 Non-operating Income/(Loss)Change Fiscal Operating Operating Operating Revenue/ before Capital Capital in Net Year Revenues Expenses Income/(Loss) (Expense) Contributions Contributions Position 2006 206,803,022$ 175,889,536$ 30,913,486$ 25,966,334$ 56,879,820$ 53,069,364$ 109,949,184$ 2007 202,205,532 183,810,507 18,395,025 36,885,268 55,280,293 24,309,430 79,589,723 2008 221,925,048 225,145,882 (3,220,834) 37,259,517 34,038,683 45,609,805 79,648,488 2009 249,725,358 212,177,779 37,547,579 (2,885,959) 34,661,620 26,993,385 61,655,005 2010 246,587,174 228,778,874 17,808,300 (17,560,670) 247,630 19,786,012 20,033,642 2011 219,444,257 244,503,099 (25,058,842) 4,329,032 (20,729,810) 10,098,552 (10,631,258) 2012 225,999,720 216,307,965 9,691,755 1,370,329 11,062,084 9,658,857 20,720,941 2013 241,946,337 230,158,434 11,787,903 832,056 12,619,959 17,534,919 30,154,878 2014 265,772,853 241,297,635 24,475,218 (3,682,863) 20,792,355 7,102,480 27,894,835 2015 290,386,589 256,521,148 33,865,441 (13,074,700) 20,790,741 12,996,754 33,787,495 CHANGES IN NET POSITION LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 84 Fiscal Sewer Service Licenses, Permits, Year Charges, Net and Other Fees Other 2006 200,719,348$ 5,210,321$ 873,353$ 206,803,022$ 2007 194,798,878 6,030,583 1,376,071 202,205,532 2008 216,618,417 4,345,961 960,670 221,925,048 2009 244,699,964 3,475,283 1,550,111 249,725,358 2010 241,495,357 3,084,552 2,007,265 246,587,174 2011 214,653,310 2,976,253 1,814,694 219,444,257 2012 220,765,581 2,683,823 2,550,316 225,999,720 2013 235,980,065 2,731,497 3,234,775 241,946,337 2014 257,343,344 6,562,607 1,866,902 265,772,853 2015 282,270,193 6,656,831 1,459,565 290,386,589 OPERATING REVENUES BY SOURCE LAST TEN FISCAL YEARS Total Operating Revenues THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 85 Fiscal Employment Materials and Contracted Chemical Year Costs Utilities Supplies Services Supplies 2006 56,817,238$ 11,963,002$ 11,602,773$ 38,472,414$ 1,089,564$ 2007 58,731,260 11,362,805 12,335,366 40,879,286 1,260,789 2008 60,787,548 12,837,998 14,081,785 64,192,143 1,387,122 2009 70,475,293 12,587,699 14,855,989 48,783,447 1,589,650 2010 85,030,456 12,355,232 13,297,892 39,561,050 1,478,605 2011 84,264,583 14,170,680 11,010,962 42,854,613 1,415,826 2012 87,148,397 12,612,858 13,942,690 29,585,028 1,355,113 2013 91,939,437 14,533,557 10,355,992 31,133,523 1,455,725 2014 93,634,080 14,986,388 11,835,900 40,148,088 2,440,843 2015 96,832,265 16,500,052 17,596,766 46,020,308 3,964,165 Fiscal Year Insurance Other 2006 2,816,795$ 9,147,931$ 131,909,717$ 43,979,819$ 175,889,536$ 2007 2,915,236 10,604,787 138,089,529 45,720,978 183,810,507 2008 2,939,390 13,986,037 170,212,023 54,933,859 225,145,882 2009 2,746,119 13,769,203 164,807,399 47,370,379 212,177,779 2010 3,062,439 19,981,424 174,767,098 54,011,776 228,778,874 2011 2,578,316 21,353,854 177,648,834 66,854,265 244,503,099 2012 2,470,343 2,451,472 149,565,901 66,742,064 216,307,965 2013 2,696,416 8,013,944 160,128,594 70,029,840 230,158,434 2014 2,737,491 1,427,638 167,210,428 74,087,207 241,297,635 2015 2,791,622 (5,825,289) 177,879,889 78,641,259 256,521,148 OPERATING EXPENSES LAST TEN FISCAL YEARS Subtotal, Expenses before Depreciation Depreciation Total Operating Expenses THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 86 2006 2007 2008 2009 2010 Non-operating revenues Property taxes levied by the District 23,210,982$ 24,401,167$ 27,512,070$ 2,129,475$ 1,401,100$ Investment income 7,610,461 16,946,145 17,476,621 13,115,519 6,553,760 Rent and other income 1,026,547 878,319 529,983 214,674 265,004 Total non-operating revenues 31,847,990 42,225,631 45,518,674 15,459,668 8,219,864 Non-operating expenses Interest expense — — — 9,079,269 13,189,283 Clean Water Capital Improvement refund 95,372 15,000 4,313,973 — — Net loss on disposal and sale of capital assets 95,064 96,630 686,459 2,161,862 2,719,163 Non-recurring projects and studies 5,563,301 5,228,733 3,258,725 7,104,496 9,872,088 Total non-operating expenses 5,753,737 5,340,363 8,259,157 18,345,627 25,780,534 Net non-operating revenue (expense) 26,094,253$ 36,885,268$ 37,259,517$ (2,885,959)$ (17,560,670)$ 2011 2012 2013 2014 2015 Non-operating revenues Property taxes levied by the District 27,125,451$ 24,604,173$ 26,016,135$ 27,450,319$ 24,764,324$ Investment income 3,847,324 2,407,485 1,056,966 2,966,549 3,000,591 Rent and other income 442,968 294,591 293,159 302,506 37,321 Total non-operating revenues 31,415,743 27,306,249 27,366,260 30,719,374 27,802,236 Non-operating expenses Interest expense 7,971,088 16,365,309 21,062,474 25,661,127 27,138,546 Net loss on disposal and sale of capital assets 3,485,952 3,162,723 795,527 5,248,443 1,420,902 Non-recurring projects and studies 10,800,843 6,402,888 4,676,203 3,492,667 12,317,488 Legal claims 4,828,828 5,000 — — — Total non-operating expenses 27,086,711 25,935,920 26,534,204 34,402,237 40,876,936 Net non-operating revenue (expense) 4,329,032$ 1,370,329$ 832,056$ (3,682,863)$ (13,074,700)$ Fiscal Year NON-OPERATING REVENUES AND EXPENSES LAST TEN FISCAL YEARS Fiscal Year THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 87 Type of Monthly Charge Unmetered c Residential c Non-Residential Wastewater User Charge Base Charge 16.25$ 16.25$ 16.25$ Compliance Charge a Tier 1 9.00 Tier 2 43.55 Tier 3 92.75 Tier 4 136.00 Tier 5 179.25 Volume Charges per Ccf b — 2.82 2.82 per room 1.83 — — per water closet 6.88 — — per bath 5.73 — — per separate shower 5.73 — — Extra Strength Surcharges a SS over 300 ppm per ton — — 244.03 BOD over 300 ppm per ton — — 620.14 COD over 600 ppm per ton — — 310.07 Stormwater Service Charge per account: single residential unit 0.24 0.24 0.24 per account: multi-residential unit 0.18 0.18 0.18 Notes: a Applicable only to non-residential customers. b Ccf = Hundred cubic feet. c User charges for certain low income residential users will be 50 percent of the regular user charge. Source: Finance Department Metered USER CHARGE RATES As Of June 30, 2015 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 88 2006 a 2007 2008 b 2009 2010 c Residential: Single Family/Unit a 271.44$ 271.44$ 344.88$ 1 344.88$ 1 351.12$ Multi-Family/Unit a 228.00 228.00 299.76 299.76 305.04 Commercial/Industrial: Service Charge/Unit 248.28 248.28 457.20 457.20 486.60 Sanitary Sewer Usage Charge/100 CCF 1.81 1.81 1.88 1.88 1.92 Storm Sewer Usage Charge/100 sq. feet of impervious area — — — 0.12 0.14 Extra Strength Surcharges: Suspended Solids ("SS") over 300 parts per million/ton 218.90 218.90 218.90 218.90 218.90 Biological Oxygen Demand ("BOD") over 300 parts per million/ton 461.44 461.44 529.90 529.56 551.52 Chemical Oxygen Demand ("COD") over 600 parts per million/ton 230.72 230.72 264.85 264.78 275.76 2011d 2012 2013 e 2014 2015 Residential: Single Family/Unit a 333.60$ 347.64$ 379.56$ 421.08$ 434.76$ Multi-Family/Unit a 285.12 296.28 324.12 360.36 434.04 Commercial/Industrial: Service Charge/Unit 507.00 525.60 593.35 414.59 352.87 Sanitary Sewer Usage Charge/100 CCF 2.02 2.11 2.28 2.50 2.82 Storm Sewer Usage Charge/100 sq. feet of impervious area — — — — — Extra Strength Surcharges: Suspended Solids ("SS") over 300 parts per million/ton 222.62 231.35 231.35 231.35 244.03 Biological Oxygen Demand ("BOD") over 300 parts per million/ton 596.72 620.14 620.14 620.14 620.14 Chemical Oxygen Demand ("COD") over 600 parts per million/ton 298.36 310.07 310.07 310.07 310.07 Notes:1 Years 2008-2010 saw an impervious rate charge that averaged $36 per year per customer. This was discontinued in 2011.a Ordinance 12019, effective July 1, 2005, changed wastewater rates.b Ordinance 12561, effective January 1, 2008, changed wastewater rates. Ordinance 12560, changed stormwater rates, effective March 1, 2008.c Ordinance 12754, effective July 1, 2009, changed wastewater rates.d Ordinance 13021, effective July 1, 2010, changed wastewater rates through FY 2012.e Ordinance 13402, effective July 1, 2012, changed wastewater rates through FY 2016. Source: Finance Department Fiscal Year Fiscal Year SEWER USER CHARGES (COMPOSITE-ANNUAL) LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 89 Single Multi- Fiscal Family Family Non-Total Year Residential Residential Residential Accounts 2006 362,043 44,700 25,700 432,443 2007 362,569 44,875 25,647 433,091 2008 391,181 54,862 32,336 478,379 a 2009 388,791 51,441 32,161 472,393 a 2010 387,670 50,867 31,939 470,476 a 2011 362,739 43,471 24,702 430,912 b 2012 360,354 41,648 24,568 426,570 2013 359,243 41,117 24,441 424,801 2014 358,928 40,951 24,297 424,176 2015 359,317 41,131 24,389 424,837 Source: Finance Department a Due to the implementation of the impervious area charge in 2008, approximately 46,000 additional stormwater only accounts were billed each month. This charge was challenged and a court decision was entered on 7/9/10. Based on that decision the impervious charge was discontinued in FY '11. b The number of accounts were revised as stormwater accounts were underreported. NUMBER OF CUSTOMERS BY TYPE LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 90 Customer Amount % InBev Anheuser-Busch 5,320,535$ 1.88% Washington University 1,833,320 0.65% City of St. Louis 1,639,923 0.58% Mallinckrodt 1,140,542 0.40% Boeing Co.1,025,583 0.36% Sigma-Aldrich 1,018,054 0.36% GKN Aerospace N America Inc.874,295 0.31% Jost Real Estate 817,766 0.29% BJC HealthCare 729,819 0.26% Monsanto 708,875 0.25% Subtotal (10 largest)15,108,712 5.35% Balance from other customers 267,161,481 94.65% Grand totals 282,270,193$ 100.00% Customer Amount % Anheuser-Busch 8,192,292$ 4.08% Mallinckrodt 1,488,243 0.74% Washington University 1,350,620 0.67% City of St. Louis 1,077,451 0.54% Zoological Gardens 694,355 0.35% Chrysler Corporation 661,330 0.33% Sigma-Aldrich 609,368 0.30% ABC Dairy, Inc.546,200 0.27% Rockwood Pigments NA, Inc.545,495 0.27% St. Louis Coca-Cola Bottling Co.545,079 0.27% Subtotal (10 largest)15,710,433 7.83% Balance from other customers 185,008,915 92.17% Grand totals 200,719,348$ 100.00% Source: Budget Division after data is accumulated for the GFOA report Fiscal Year 2006 User Charges TEN LARGEST CUSTOMERS CURRENT YEAR AND NINE YEARS AGO User Charges Fiscal Year 2015 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 91 Unamortized As a Share Fiscal Subordinate Capital Premium, Debt of Personal Year Senior Subordinate Direct Loans Lease Loss, Net Amount Per Capita Income 2006 173,500,000$ 205,760,000$ 680,538$ —$ 1,597,984$ 381,538,522$ 282 0.37 2007 231,995,000 213,652,500 337,730 — 4,189,928 450,175,158 330 0.42 2008 230,485,000 206,522,500 269,299 — 3,974,435 441,251,234 324 0.67 2009 258,965,000 235,932,500 215,790 4,130,000 2,640,838 501,884,128 373 0.81 2010 342,370,000 224,505,000 31,017,371 7,263,687 1,457,910 606,613,968 446 1.00 2011 340,590,000 212,655,000 25,259,899 6,095,981 862,654 585,463,534 431 0.97 2012 390,880,000 200,692,500 63,727,722 3,096,139 5,805,206 664,201,567 484 1.09 2013 594,715,000 188,600,000 93,751,658 — 56,252,401 933,319,059 660 1.45 2014 740,655,000 184,075,000 116,090,820 — 82,274,845 1,123,095,665 852 1.86 2015 736,775,000 171,455,000 148,279,465 — 78,591,961 1,135,101,426 860 1.83 Notes: Calculation of "Per Capita" for 2011 through 2013 is based on estimated population levels. Calculation of "As a Share of Personal Income" for 2011 through 2013 is based on estimated income levels. In fiscal year 2012, a decision was made to discontinue considering SRF receivable amounts as liabilities. The liability is now recorded when the funds are received. Sources: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce, and the U.S. Census Bureau LAST TEN FISCAL YEARS Revenue Bonds Total RATIOS OF OUTSTANDING DEBT BY TYPE THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 92 Amount of Debt Percentage of Debt Governmental Unit Debt Outstanding within District Boundary within District Boundary City of St. Louis 23,010,000$ 23,010,000$ 100.0% St. Louis County 105,615,000 104,770,080 99.2 Municipalities 105,845,275 102,495,275 96.8 City of St. Louis School District 301,701,622 301,701,622 100.0 St. Louis County School Districts 1,300,921,604 1,285,891,204 98.8 Fire Districts 112,865,484 106,910,484 94.7 1,949,958,985$ 1,924,778,665 98.7% Total Direct Debt 1,135,101,426 Total Direct and Overlapping Debt 3,059,880,091$ 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, 2015 THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 93 Less: Operating Non- Expenses Net Fiscal Operating operating Gross (excluding Available Year Revenues Revenues Revenues depreciation) Revenues 2006 205,554,460$ 6,135,347$ 211,689,807$ 131,909,717$ 79,780,090$ 2007 200,963,085 13,501,751 214,464,836 138,089,529 76,375,307 2008 208,981,377 13,281,919 222,263,296 142,725,186 79,538,110 2009 209,972,662 10,283,104 220,255,766 138,971,881 81,283,885 2010 204,697,929 4,908,296 209,606,225 145,598,505 64,007,720 2011 217,011,360 3,202,219 220,213,579 160,572,145 59,641,434 2012 224,882,086 2,058,300 226,940,386 135,232,302 91,708,084 2013 240,597,715 956,664 241,554,379 146,372,419 95,181,960 2014 264,422,401 2,670,333 267,092,734 153,221,914 113,870,820 2015 288,835,877 2,555,654 291,391,531 163,287,562 128,103,969 Fiscal Coverage Year Principal Interest Total Ratio 2006 5,407,500$ 13,835,332$ 19,242,832$ 4.1 2007 7,817,500 16,512,429 24,329,929 3.1 2008 8,640,000 17,694,791 26,334,791 3.0 2009 12,110,000 17,503,892 29,613,892 2.7 2010 13,022,500 20,187,151 33,209,651 1.9 2011 14,576,800 20,140,021 34,716,821 1.7 2012 16,540,200 22,517,473 39,057,673 2.3 2013 18,749,700 31,191,190 49,940,890 1.9 2014 10,037,200 34,399,261 44,436,461 2.6 2015 20,252,200 41,596,192 61,848,392 2.1 Fiscal Coverage Year Principal Interest Total Ratio 2006 1,500,000$ 8,165,734$ 9,665,734$ 8.3 2007 1,505,000 9,369,084 10,874,084 7.0 2008 1,510,000 11,067,634 12,577,634 6.3 2009 1,520,000 11,677,272 13,197,272 6.2 2010 1,595,000 13,396,341 14,991,341 4.3 2011 1,780,000 15,467,269 17,247,269 3.5 2012 1,960,000 16,488,587 18,448,587 5.0 2013 3,805,000 24,451,656 28,256,656 3.4 2014 4,060,000 30,161,408 34,221,408 3.3 2015 3,880,000 34,472,415 38,352,415 3.3 PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS Senior and Subordinate Debt Service Senior Debt Service 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. THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 94 Per Personal Capita Total Fiscal Income Personal Labor Number of Year Populations (millions) Income City County State Force Households (1) 2006 1,347,691 57,660$ 42,784$ 7.5 5.1 5.0 723,627 551,388 2007 1,349,778 59,200 43,859 7.5 5.1 5.0 723,627 551,388 2008 1,348,462 62,135 46,079 7.9 5.9 6.0 690,006 551,388 2009 1,339,011 61,947 46,263 11.5 9.7 9.5 681,801 551,388 2010 1,356,289 60,792 44,822 12.3 9.4 9.3 682,165 551,388 2011 1,357,035 60,420 44,523 11.8 8.9 9.0 692,071 546,744 2012 1,360,085 60,283 44,323 9.7 6.9 7.0 672,945 546,744 2013 1,328,610 60,399 45,460 10.5 7.3 7.1 665,086 543,851 2014 1,318,610 60,968 46,237 9.6 6.9 6.6 666,200 543,991 2015 1,319,295 61,910 46,926 7.1 5.5 5.8 703,317 543,945 Notes: (1) The number of households was taken from http://quickfacts.census.gov/qfd/states/29000.html. The 2015 figure is based on 2013 data. The 2011-2012 figures are based on the 2010 census. Information for prior years are unavailable; therefore, the 2000 census information is used for the other years in this table. Sources: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce, and Missouri Economic Resource and Information Center (MERIC) Footnotes- http://www.bea.gov/regional/reis/scb.cfm http://www.missourieconomy.org/indicators/LAUS/default.aspx http://quickfacts.census.gov/qfd/states/29000.html DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Unemployment Rate Saint Louis THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 95 Percentage Percentage Employer Employees (1)of Total Rank Employees (1)of Total Rank BJC HealthCare 24,082 4% 1 21,814 3%1 Boeing, Integrated Defense Systems 15,000 2% 2 16,259 2%2 Washington University in St. Louis 14,170 2% 3 12,505 2%3 Scott Air Force Base 13,000 2% 4 SSM Healthcare 12,697 2% 5 11,905 2%4 Mercy 12,013 2% 6 8,699 1%7 Schnuck Markets, Inc.11,008 2% 7 10,700 2%5 Wal-Mart Stores Inc.10,550 2% 8 McDonald's Restaurants of St. Louis 9,500 1% 9 City of St. Louis 7,463 1% 10 7,632 1%9 United States Postal Service 7,916 1%8 SBC Southwestern Bell Missouri 9,920 2%6 Saint Louis University 7,108 1% 10 129,483 20%114,458 17% 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 2015 St. Louis Business Journal's Book of Lists 2006 Fiscal Year 2006Fiscal Year 2015 PRINCIPAL EMPLOYERS (ST. LOUIS METROPOLITAN AREA) CURRENT YEAR AND NINE YEARS AGO THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 96 Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Administrative 118 125 131 133 131 124 129 124 122 129 Office/Clerical 88 86 92 94 89 84 85 86 82 84 Plant Operation & Laboratory 233 234 239 237 249 241 244 249 252 236 Engineering & Technical 119 122 133 144 151 147 153 148 151 155 Sewer Construction & Maintenance 258 271 276 301 315 296 311 324 328 345 Total Employees 816 838 871 909 935 892 922 931 935 949 Source: Human Resources Department EMPLOYMENT LEVEL LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 97 Average Sewage Fiscal Treatment in Millions Year of Gallons per Day 2006 291.3 2007 313.4 2008 363.7 2009 394.7 2010 395.5 2011 370.6 2012 300.0 2013 326.7 2014 273.8 2015 327.5 Source: Operations Department AVERAGE FLOW LAST TEN FISCAL YEARS THE METROPOLITAN ST. LOUIS SEWER DISTRICT Page 98 2006 2007 2008 2009 2010 Miles of sewers 9,630 9,764 9,723 9,812 9,900 Number of treatment plants 8 8 7 7 7 Treatment capacity (MGD) a 413 426 428 423 423 Annual engineering maximum plant capacity (millions of gallons)150,745 155,490 154,395 154,395 154,395 Amount treated annually (millions of gallons)106,339 114,391 132,751 144,066 144,358 Unused capacity (millions of gallons)44,406 41,099 21,644 10,329 10,037 Percentage of capacity utilized 71% 74% 86% 93% 93% 2011 2012 2013 2014 2015 Miles of sewers 9,843 9,738 9,578 9,563 9,531 Number of treatment plants 7 7 7 7 7 Treatment capacity (MGD) a 528 528 528 533 538 Annual engineering maximum plant capacity (millions of gallons)192,629 192,629 192,629 194,454 196,279 Amount treated annually (millions of gallons)135,269 109,518 119,253 99,945 119,547 Unused capacity (millions of gallons)57,360 83,111 73,376 94,509 76,732 Percentage of capacity utilized 70% 57% 62% 51% 61% Sources: Operations Department and Engineering Department Note: a Million gallons per day. Fiscal Year Fiscal Year OPERATING AND CAPITAL INDICATORS LAST TEN FISCAL YEARS