Loading...
HomeMy Public PortalAboutFiscal Year 2012 Popular Annual Financial ReportPopular Annual 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