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Financial Report
Fiscal Year 2012
LETTER TO READERS
The St. Louis Metropolitan Sewer District (MSD) is pleased to share
with you our first Popular Financial Annual Report. This report, which
covers the fiscal year that ended June 30, 2012, is intended to
provide a non-technical look at our organization, explaining how we use the
funds entrusted to us to provide wastewater and stormwater management
services that protect the public’s health and safety, and preserve our region’s
waterways.
This report contains summary financial information pulled from the more detailed
information published in our Comprehensive Annual Financial Report.
While this report uses principles and guidelines consitent with Gen-
erally Accepted Accounting Principles (GAAP), it has been sim-
plified for general audiences and is not a GAAP-compliant
publication. Our Comprehensive Annual Financial Report and audited financial
statements are available at www.stlmsd.com. You may request a printed copy of this
detailed report by contacting 314-768-6200.
We hope you find the information presented here helpful. We welcome your
comments and suggestions for improving future issues.
Respectfully submitted,
Jeff Theerman Janice Zimmerman
Executive Director Director of Finance
OUR HISTORY
Efforts to control water pollution in the St. Louis area began back to the mid-1800s when
communities began building their own sewer systems. As was standard practice at the time,
these sewers transported sewage and stormwater away from neighborhoods and into the Mis-
sissippi River or smaller streams, often without treating it first.
By the mid-1900’s, our region’s waterways were becoming more and more polluted by this
untreated sewage. MSD was formed in 1954 to address the serious water quality issues the
region was facing. By 1980 it took the place of 79 individual sewer systems that formerly
served St. Louis City and 80% of St. Louis County.
Today MSD operates and maintains 9,649 miles of sewers that transport wastewater to one
of seven centralized plants for treatment before returning it to local waterways. We are also
responsible for eliminating the hundreds of points where a combination of rainwater and
wastewater discharge into area rivers and streams during and after rainstorms.
As our region’s clean water advocate, MSD has made significant improvements to the re-
gion’s water quality and watersheds in its 58-year history and will be making many more in
the years ahead.
ORGANIZATION
MSD is governed by a six-person Board of Trustees appointed by the St. Louis City Mayor
and the St. Louis County Executive. Our executive director reports to this Board, which sets
policy and adopts our annual budget. MSD’s Rate Commission, which is made up of repre-
sentatives from 15 local organizations, makes recommendations to the Board regarding all
proposed wastewater, stormwater and structure changes.
WHAT MSD DOES
Created under a provision of the Missouri State Constitution, MSD is actually two separate public
agencies, each with its own responsibilities and funding:
OUR MISSION:
To protect the public’s health, safety, and water environment by responsibly providing wastewater
and stormwater management.
Number of wastewater
treatment plants: Seven
Average Daily Wastewater treated: 300 million gallons
Sewers operated and maintained: 9,738 miles, including 2,980 miles of stormwater sewers,
4,741 miles of sanitary sewers, and 1,928 miles of com
bined sewers*
*Combined sewers handle both wastewater and stormwater flows.
Miles of sewers that have reached
the end of their useful life: 834 miles, including 524 miles that are more than 80
years old and 311 miles that are more than 120 years old
MSD’s wastewater collection system is the fourth largest
in he country -- roughly the same size as the wastewater
system in Los Angeles, which has more than twice the
population to support it.
No. of employees: 922
What it includes
“Used” water disposed
of in sinks, toilets, and
floor drains by house-
holds and businesses
Rain and property
drainage that is not
naturally absorbed in
the soil
Our primary responsibility
To collect this water and
treat it to high standards be-
fore safely returning it to our
region’s waterways
To collect this water and re-
turn it safely to our region’s
waterways untreated
WASTEWATER
MANAGEMENT
STORMWATER
MANAGEMENT
OUR CUSTOMERS
Our service area: MSD serves all of St. Louis City and 80 percent of St. Louis County,including all city
and county residents east of Highway 109.
No. of customers: Approximately 1.3 million, representing more than 425,000 accounts.
About two-thirds of our customers are in St. Louis County and one-third from the City
of St. Louis.
MSD’s 10 largest
customers in FY2012: 1. INBEV
2. Washington University
3. Mallinckrodt, Inc.
4. City of St. Louis
5. Cott Beverages, Inc.
6. St. Louis Zoo
7. BJC Health System
8. Boeing Co.
9. The Dial Corporation
10. Sigma-Aldrich
KEY FINANCIAL INFORMATION
Condensed Statements of Net Position (000s)
2012 2011
Assets:
Current, restricted, and other assets $ 407,731 $ 403,397
Capital assets (net of accumulated depreciation) 2,548,816 2,469,496
Total Assets 2,956,547 2,872,893
Liabilities:
Current liabilities 86,337 101,429
Non-current liabilities 651,916 574,445
Total Liabilities 738,253 675,874
Net Position:
Net investment in capital assets 1,936,590 1,915,233
Restricted 106,694 94,926
Unrestricted 175,010 186,860
Total Net Position $ 2,218,294 $ 2,197,019
What it tells you
A balance sheet is a financial statement that summarizes what MSD owns and owes, as well as our net worth at a given point
in time.
Our 2012 balance sheet shows that:
• MSD’s assets exceed liabilities by $2.22 billion.
• Overwhelmingly, MSD’s assets are in the form of capital assets. The $2.55 billion in capital assets is split into the five cat-
egories depicted in the pie chart.
• Of the $0.74 billion in liabilities, $0.66 billion are in the form of bonds and notes payable. An historic depiction of MSD’s
debt level is below.
What we own Long-term Obligations: What we owe
INCOME STATEMENT
Statements of Revenues, Expenses, and Changes in Net Position (000s)
What it tells you
An income statement summarizes the sources of MSD’s revenues and expenses. It also shows the net profit or loss incurred
over a specific period.
Our 2012 income statement shows that
• Sewer service charge revenue increased as a result of the scheduled rate increase that occurred in FY 2012.
• Suspension of the impervious area stormwater charges in the first month of FY 2011, resulted in an allowance for bad debt
charge of almost $2.4 million that was not necessary in FY 2012.
• Operating expenses were reduced by $28.2 million due to the elimination of $16.4 million in asset management expenses and
a reduction of water backup expenses by $6.9 million due to drought conditions.
Pumping and treatment, $49,005 Collection system maintenance, $36,695
Engineering, $8,544
General and
administrative, $33,180
Water backup claims, $2,050
Depreciation, $66,742
Asset management, $20,092
Other, $10,594
2012 2011
Operating Revenues:
Sewer service charges $227,677 $ 223,276
Provision for doubtful sewer
service charge accounts (6,911) (6,249)
Provision for uncollected
stormwater charge accounts — (2,374)
Licenses, permits, and other fees 2,684 2,976
Other 2,550 1,815
Total Operating Revenues 226,000 219,444
Non-operating Revenues:
Property taxes levied by the district 24,604 27,126
Investment income 2,407 3,847
Rent and other income 295 443
Total Non-operating Revenues 27,306 31,416
Total Revenues 253,306 250,860
Operating Expenses:
Pumping and treatment $49,005 50,532
Collection system maintenance $36,695 33,152
Engineering $8,544 12,486
General and administrative $33,180 36,075
Water backup claims $2,050 8,912
Depreciation $66,742 66,854
Asset management $20,092 36,492
Total Operating Expenses 216,308 244,503
2012 2011
Non-operating Expenses:
Net (gain) loss on disposal
and sale of capital assets 3,163 3,486
Non-recurring projects and studies 6,403 10,801
Legal Claims 5 4,829
Interest expense 15,811 7,971
Total Non-operating Expenses 25,382 27,087
Total Expenses 241,690 271,590
Income Before Capital
Grants And Contribution 11,616 (20,730)
Capital Grants And Contributions 9,659 10,099
Change in Net Position 21,275 (10,631)
Net Position - Beginning of Year 2,197,019 2,207,650
Net Position - End of Year $ 2,218,294 $ 2,197,019
EXPENSES:
Where the money goes
Chart of expenses by Department (Operations, Engineering, Other)
CASH FLOW STATEMENT
Condensed Statements of Cash Flows (000s)
2012 2011
Cash flows from operating activities $67,839 $56,676
Cash flows from non-capital financing activities $24,604 $27,125
Cash flows from capital and related financing activities ($91,085) ($141,136)
Cash flows from investing activities $12,903 $51,887
Net increase (decrease) in cash and cash equivalents $14,261 ($5,448)
Cash and cash equivalents at beginning of year $6,319 $11,767
Cash And Cash Equivalents At End Of Year $ 20,580 $6,319
What it tells you
A cash flow statement summarizes the cash coming in and out of an organization during a given period. In our case, it
shows that MSD has sufficient cash on hand to pay our bills.
• Cash flows from operating activities were positively impacted by the reduction in operating expenses related to asset
management and water backup claims.
• Cash flows from non-capital financing activities were negatively impacted by lower tax revenues, resulting from the
voluntary reduction of taxes in some subdistricts.
• Cash flows from capital and related financing activities reflect a positive change from the prior year due to new bond
revenues partially offset by increased spending on capital improvement and replacement projects.
• Cash flows from investing activities were unfavorable in comparison to the prior year due to the necessity to invest the
bond proceeds over and above maturities from existing investments.
PERFORMANCE AGAINST BUDGET
What it tells you
A performance against budget statement shows the link between the funds used to serve the public and the outcomes of
those services. In our case, it shows that MSD has been good stewards of the funds allocated to us:
• We have minimized increases to our operating budget and are controlling our pension expenses by moving new
employees to a defined contribution, rather than a defined benefit pension plan.
• Our debt service and capital requirements, however, are rising as we accelerate the pace of our capital improvement
program. Our $775 million in current debt will increase as we take on an additional $1.04 billion in debt over the next
four years.
$0 $100 $200 $300 $400
Budget
Actual
Millions
Actual Spending Vs. Budgeted Spending
CREDIT RATING
What it tells you
A credit rating provides an assessment of an organization’s credit worthiness, based
on its history of borrowing and repayment as well as its assets and liabilities. A poor
credit rating makes it more difficult to find financing and often results in higher inter-
est rates.
As the chart below illustrates, MSD has premium credit. We have demonstrated
to creditors and credit rating agencies our ability to manage large annual capital
plans. Our solid financial management, including close monitoring of our financial
performance, strong debt coverage and liquidity also contribute to these ratings.
FY 2011 FY 2012
Moody’s Aa2 Aa1
S&P AA+ AAA
Fitch AAA AA+
FY2012 PERFORMANCE ACCOMPLISHMENTS,
HURDLES & INITIATIVES
Consent Decree finalized
In August 2011, the U.S. Environmental Protection Agency announced an agree-
ment, also known as a Consent Decree, that formally defines our schedule for com-
pleting the Capital Improvement & Replacement Program we kicked off in 1992 to
eliminate nearly 800 overflows in our sewer system. The agreement calls for MSD
to spend an estimated $4.7 billion over the next 23 years to address the 350-plus
overflows that remain. Improvements totaling $1 billion are planned between now and
the end of 2016.
Fiscal Year Planned Investments in our Capital
Improvement & Replacement Program
2012 $119.2 million
2013 $240.8 million
2014 $234.2 million
2015 $233.7 million
2016 $210.7 million
TOTAL FIVE-YEAR PROGRAM $1.04 billion
PACE OF CONSTRUCTION ACCELERATES
Because the EPA agreement speeds up the timeline we originally
proposed, MSD began to speed the pace of construction in 2012.
Valued at $119 million, work performed during the fiscal year in-
cluded:
• projects for further disinfecting the water we discharge from all
seven of our treatment plants. Mandated by government regula-
tions, these improvements must be completed by Dec. 31, 2013.
• construction projects that address 50 specific sanitary sewer
overflows.
• a master plan for eliminating the remaining overflows. The final
plan is due to the EPA by Dec. 31, 2013.
• an operations & maintenance plan for cleaning, inspecting and
rehabilitating our entire sewer system to prevent overflows and basement backups.
• a Green Infrastructure Program aimed at using environmentally friendly solutions to reduce
overflows into the Mississippi River.
BOND ISSUE PASSES
In June 2012, voters approved a $945 million bond issue to help fi-
nance MSD’s capital program for the next four years. Without the
bonds, customer fees would have increased 123% on July 1, 2012
to generate the money needed for the $218 million in construction
planned inFY2013 alone. Instead, sewer bills went up 9% when
the new fiscal year began, in accordance with our Rate Commis-
sion’s recommendation. By 2015, rates will be 52 percent higher
than they are now.
LOCAL ECONOMY BENEFITS
Only design and construction firms that have a functioning office within MSD’s bounders are eligible
to participate in MSD’s capital program. Other pre-qualified firms can compete for smaller individual
projects each year, as well as other large-scale contracts to be awarded
in the future.
CUSTOMER SERVICE IMPROVES
Our goal is to respond to 90% of emergency calls within four
hours. In FY2012, we achieved an on-time percentage of 88%, up
from less than 60% a decade ago.
TREATMENT PLANTS WIN AWARDS
Again this year, the National Association of Clean Water Agencies
awarded Peak Performance Awards to all seven wastewater treat-
ment plants we operate. Six received Gold Awards and the seventh received a Silver Award.
MSD Fact: Maintenance-
related backups and over-
flows have hit a new low,
declining from 900 to 350
over the past two years.
MSD Fact: Even with the
latest rate increase, MSD’s
residential rates are lower
than the national average.
Source: National Association of
Clean Water Agencies
MSD Fact: Approximately
90 MSD employees are
involved in the Capital Im-
provement & Replacement
plan projects, half of whom
are engineers.
LOOKING AHEAD: FY2013 PLANS
Our goal: In the coming year, our goal is to remove stormwater from our sewers, some
of which are designed to carry wastewater from our homes and businesses, and others of
which are designed to carry both stormwater and wastewater. Excess storm water can
overwhelm our treatment plants and is a major source of sewer overflows into area rivers
and streams.
WE’LL BE ACCOMPLISHING THIS SEVERAL WAYS:
• Cleaning and lining sewers - We are in the fourth year of ongoing program to clear
roots, grease build-up, and other blockages from 17 million feet -- or roughly half -- of
our region’s sewer pipes. It takes three years to clean all these lines, after which we start
the cycle again. As we clean these sewers, we are also documenting their condition.
Those with cracks, leaks, and show other signs of structural instability will be lined with
a cured-in-place “pipe within a pipe” that can be installed without digging up the street
and restore the sewers to “like new” condition.
• Disconnecting downspouts - On many homes, downspouts from gutters direct stormwa-
ter into our region’s sanitary sewers. During heavy rainfall, this stormwater contributes
to overflows. In 2012, our crews will be contacting many homeowners to arrange to have
these downspouts disconnected so the water can drain into and be absorbed by the ground
before it can enter the sewers.
• Implementing “green” projects - People who live in areas where there are combined
sewers, that is, sewers that are designed to carry both stormwater AND wastewater, will
begin seeing other projects designed to minimize the amount of stormwater entering the
sewer. Many will involve environmentally “green” solutions that rely on plantings and
landscape design to soak up much of this runoff before it can enter the sewers.
• Completing buyouts - In FY2013, we’ll also begin the process of buying out hundreds
of property owners in portions of our region with combined sewers.
• Educating the community - You will be able to learn much more about how you, your
neighborhood, and your school or community group can support MSD’s efforts through
our outreach program we will be introducing in FY2013 and beyond.
Metropolitan St. Louis
Sewer District
2350 Market Street
St. Louis, Missouri 63103