HomeMy Public PortalAboutExhibit MSD 16R 2006 Annual AuditExhibit MSD 16R
THE METROPOLITAN ST . LO UIS
SEWER DISTRICT
FI NANCI AL REP ORT
( Audited)
Year E nded J une 30, 2006
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
Table of Co nte nts
Ju ne 30, 2006 a nd 2005
INDEPEN DEN T AU DITORS' REPO RT
MANAG EMENT'S D ISCU SSION AND A NALYSIS
Page
1
3
FIN ANCIAL STA TEMEN TS
Statemen ts of Net Assets 14
Statemen ts of Revenu es, Ex pen ses, an d Changes in Net Assets 16
Statemen ts of Cash Flows 18
Notes to Fin an cial Statements 20
Hochschild, Bloom & Company LLP
Certified Public Accountants
Co nsultants and A dviso rs
IN DEPEN DENT AUDITORS' REPORT
September 15, 2006
Board of Tru stees
THE METR OPO LITAN ST. LO UIS SEWER DISTRICT
We hav e au dited the basic fin an cial statemen ts of THE METROP OLIT AN ST. LOUIS SEWER
DISTR ICT (the District) as of and for the year then ended June 30, 2006, as listed in the accompanying
table of contents. These fin an cial statemen ts are the responsibility of the District's management. Our
responsibility is to express an opin ion on these financial stateme nts based on our audits . The financial
statements of the District as of Jun e 30, 2005 were audited by other auditors whose report dated Septem-
ber 2, 2005, expressed an unqualified opinion on those statements.
We conducted ou r au dit in accordan ce with U .S. generally accepted auditi ng sta ndards and the standards
applicable to financial au dits con tain ed in Government Auditing Standards, iss ued by the Comptroller
General of the United States. Those standards require that we plan and perform the a udits to obtain rea-
son able assuran ce about whether the finan cial statements are free of material misstatement . An audit
in clu des consideration of internal con trol ov er financial reporting as a basis for designing audit proce-
dures that are appropriate in the circu mstan ces, but not for the purpose of expressing an opini on on the
effectiveness of the District's internal control over fina ncial reporting. Accordingly, we express no such
opinion. An au dit also inclu des ex amin ing, on a test basis, evide nce supporti ng the amou nts and disclo-
su res in the financial statemen ts, assessing the accounting principles used and significa nt estimates made
by mana gement, as well as ev aluating the overall financial statement presentation. We believe that our
audit provides a reason able basis for ou r opinion.
In ou r opinion, the financial statements referred to above present fairly, in all material respects, the fi-
nan cial position of the D istrict as of June 30, 2006, and the results of its operations and its cash flows for
the year then en ded in conformity with U.S. generally accepted accou nting principles .
❑ 16100 Che ster fie ld Parkwa y West, Suite 125, Chesterfield, Missouri 63017-4829, 636-532-9525, F ax 636-532-9055
❑ 1000 Washingto n Squa re, P.O. Box 1457, Wa shington, Missouri 63090-8457, 636-239-4785, Fax 636-239-5448
www.hbc lp.co m rotaRIS' Member: Polaris International with Firms in Pri ncipal U.S. and Internati on al Citi es
I N T W A T I O X,
The management's discu ssion an d analysis is not a req uired part of the basic financial statements b ut is
supplementary information required by U.S. generally accepted acco unting principles. We ha ve applied
certain limited pro cedures, which consisted principally of i nquiries of manageme nt regarding the meth-
ods of measurement and presentation of the required s uppleme ntary information. However, we did not
au dit the in formation and express no opin ion on it.
In accordan ce with Government Auditing Sta ndards, we have also issued our report dated September 15,
2006 on ou r consideration of the District's internal control o ver financial reporti ng a nd on o ur tests of its
compliance with certain provisions of laws, regulations, contracts, a nd gra nt agreeme nts and other mat-
ters. The purpose of that report is to describe the scope of o ur testi ng of internal control o ver financial
reporting and compliance an d the results of that testing, and not to provide an opinion on the internal
con trol ov er fin an cial reportin g or on compliance. That report is an integral part of an a udit performed
in accordan ce with Governmen t Auditing Sta nda rds and should be considered in assessi ng the res ults of
ou r audits.
ty �)�P
CER TIFIED PUBLIC A CCOUN TAN TS 12"---
2
THE METROPOLITAN ST. LOUIS SEWER DIST RICT
Man agement's Discussion and Analysis
for the year ended June 30, 2006
The annu al report of The Metropolitan St. Lou is Sewer District (the District) i ncludes the independe nt audi-
tors' report, man agement's discu ssion an d analysis (MD& A), and the fi nancial statements accompanied by
notes essential to the u ser's understanding of the financial statements.
Man agement of the District has prov ided this MD &A to be used in combi nation with the District's financial
statements. This na rrative is intended to provide the reader with more insight int o management's k nowledge of
the transaction s, even ts, and conditions reflected in the accompa nying fi nancial statements and the fiscal poli-
cies that govern the D istrict's operations.
2006 Fin ancial H ighlights
> Net capital assets increased by $143.8 million due to continued high le vels of spe nding related to the
regulatory required Capital Improvement and Replacement Program (CIRP).
o Collection and pumping plan t $ 92.1 million
o Construction in progress (CIP) $ 90.0 million
o Treatment and disposal plant and equipment $ 2.9 million
o General plan t and equipment $ 1.0 million
o Land $ 0.1 million
o Less: Change in accu mu lated depreciatio n $ 42 .3 millio n
➢ Cash and cash equivalents balan ces increased by $36 .5 million, while in vestme nt bala nces decreased
by $41.1 million, from fiscal year 2005 to fiscal year 2006. The shift from longer -term investments to
cash and cash equivalents occu rred as a result of the c urrent i nterest rate environment in which an in-
verted yield cu rve makes short-term investments more attractive than long-term i nvestme nts a nd to
provide sufficient liquid assets to fund the CIRP .
> Bon ds and notes payable balances, net of unamortized premium and iss ue costs, increased by $37.6
million in most part du e to the issuan ce of Series 2006A bo nds in the amo unt of $42.7 million . Re-
tirements of $5. 5 million and changes in the unamortized premi um bala nce and the bala nce of bond
issuance costs nettin g to $0. 4 million combine for the remai ning $5 .1 million in change.
> Capital contributions in creased by $36.7 millio n d ue to the tra nsfer of assets related to 293 develop-
ments in fiscal year 2006 versu s 194 in fiscal year 2005.
> Operating revenu es increased by $17.8 million or 9.4% as a result of the rate incre ase that took affect
in July 2005.
2005 Fina ncial Highlights
> Cash and cash equivalents balances decreased by $158 .0 millio n, while i nvestment balances in-
creased by $111.5 million, from fiscal year 2004 to fiscal year 2005 due to bo nd proceeds held as
cash in 2004 being invested in 2005.
➢ Net capital assets increased by $116. 5 million d ue to increased levels of spending related to the CIRP.
o Con struction in progress (CIP) $ 83.8 million
o Collection an d pumping plant $ 77 .0 million
o Treatment and disposal plant an d equipme nt $ (0.1) million
o Gen eral plant and equ ipment $ 1.9 million
3
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion and A nalysis
for the year en ded J une 30, 2006
o Land $ (3.0) million
o Less: Change in accumu lated depreciation $ 43.1 millio n
➢ Operating revenues increased $31.0 million or 19 .6% as a result of the rate increase that took affect in
Ju ly 2004. The in creased rev enue is the driving force behind the $26.6 million operati ng i ncome
achieved in fiscal year 2005, which was a significant improvement over the $7.4 million operating in-
come in fiscal year 2004.
> Clean water capital improvement surcharge refund payable increased from zero in fiscal year 2004 to
$5.7 million in fiscal year 2005 reflecting the refund to c ustomers scheduled to be iss ued in No vem-
ber 2005.
Required Fina ncial Statements
The financial statemen ts presented by the man agement of the District i nclude a Statement of Net Assets;
Statement of Revenu es, Expen ses, an d Changes in Net Assets; and Statement of Cash Flows. These stateme nts
are prepared using the accrual basis of accounting. This method of accou nting recognizes reve nues at the time
they are earned an d expen ses when the related liability occurs . As a result of using this method of accounting,
the D istrict's performance over the time period being reported is more easily determinable .
The Statement ofNet Assets prov ides a report of the District's c urre nt, restricted, and other no ncurrent assets such as
cash, investments, receivables, an d property. Also, the Stateme nt of Net Assets provides a summary ofthe District's
current, restricted, and n oncu rrent liabilities, including contracts and accounts payable, deposits a nd accrued ex-
pen ses, and bond an d notes payable. The fin al section ofthe Stateme nt ofNet Assets, the net assets section, co ntains
earnin gs retained for use by the District. In creases or decreases in the net assets section m ay be indicative of an im-
prov in g or declining fmancial position. This statemen t provides the basis for comp uti ng rate of return, eval uating the
capital structure of the District, and assessin g the liquidity and financial flexibility of the District .
The Statemen t of Reven ues, Expenses, and Changes in Net Assets s ummarizes all of the year's reven ues a nd
expenses. This statement in dicates how successful the District was at maintaining expenses below the le vel of
revenues earned.
The Statemen t of Cash Flows accoun ts for the net change in cash and cash equivale nts by summarizing cash re-
ceipts an d cash disbu rsemen ts resulting from operating activities, noncapital fmancing activities, capital and re-
lated fman cin g activities, and inv esting activities. This stateme nt assists the user in determining the sources of
cash coming into the District, the items for which cash was expe nded, a nd the beginning and e ndi ng cash balance .
Fin ancial A nalysis
The ov erall finan cial condition of the District is stron g as indicated by the increase in net assets over the past year .
The District had income before capital con tribu tions of $60.6 million in fiscal year 2006, c ompared to $43 .6 millio n
in 2005 an d $35.3 million in 2004. Plans for maintain ing the District's ability to meet future spending needs are dis-
cussed in greater detail in the section of the MD&A entitled "Decisio ns Impacti ng the Future ."
4
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussio n a nd Analysis
for the year ended Ju ne 30, 2006
Con densed Fin ancial Statemen ts an d Analysis
The Metropolitan St. Lo uis Sewer District
Condensed Stateme nt of Net Assets
(000s)
Increase Increase
(Decrease) (Decrease)
2006 2005 2006-2005 2004 2005-2004
Cu rren t, Restricted, and Other Assets $ 523,948 $ 523,666 $ 282 $ 562,503 $ (38,837)
Capital Assets (net of accumulated
deprecia tion ) 1,886,435 1,742,683 143,752 1,626,139 116,544
Total assets 2,410,383 2,266,349 144,034 2,188,642 77,707
Cu rrent Liabilities 52,685 57,115 (4,430) 41,606 15,509
Noncurrent Liabilities 381,333 345,006 36,327 341,237 3,769
Total liabilities 434,018 402,121 31,897 382,843 19,278
N et Assets
Invested in capital assets, net of
related debt 1,652,348 1,625,673 26,675 1,589,612 36,061
Restricted 273,062 193,803 79,259 163,592 30,211
Unrestricted 50,955 44,752 6,203 52,595 (7,843)
Total Net Assets
2006 Analysis
$ 1,976,365 $ 1,864,228
$ 112,137
$ 1,805,799 $ 58,429
Total net assets increased $112.1 million, or 6. 0%, over prior year. This cha nge is the result of an incre ase in
total assets of $144.0 million and an increase in liabilities of $31 .9 millio n.
Net capital a ssets increased by $143. 8 million in fiscal year 2006 from fiscal year 2005 accounting for the
ov erwhelming majority of the change in total assets. Curre nt, restricted, a nd other assets acco unt for the other
$0.2 million of the $144. 0 million dollar in crease. The cha nge in net capital assets can be attributed to an in-
crease in collection and pumping plan t of $92.1 million and an increase in constr uction in progress of $90.0
million with an offsetting in crease in accumu lated depreciatio n of $42.3 millio n. The remai ning increase of
$4. 0 million is a combination of treatmen t and disposal plant and equipment, ge neral pla nt and eq uipme nt, a nd
lan d.
The change in total liabilities of $31. 9 million is representati ve of an increase in n oncurrent liabilities of $36.3
million an d a decrease of curren t liabilities of $4.4 millio n. No ncurrent liabilities increased by $36.3 million
almost exclusiv ely du e to the issu an ce of Series 2006A bonds thro ugh the state revolvi ng fund (SRF) in the
amount of $42.7 million. The retiremen t of bonds totali ng $5 .5 million, less a net change in unamortized pre-
mium an d accretion of bond issu ance costs of $0. 4 millio n, and a $1.7 million change in the c urrent portio n of
bon ds payable combine to offset the $42.7 million and account for the cha nge in n oncurrent bonds and notes
payable. An in crease in deposits an d accrued ex penses of $0 .4 million rounds o ut the varia nce in noncurrent
liabilities from fiscal year 2005 to fiscal year 2006.
5
THE METRO PO LITAN ST. LOUIS SEWE R DISTRICT
Man agemen t's Discussion and A nalysis
for the year en ded J une 30, 2006
2005 An alysis
Total n et assets increased $58. 4 million , or 3.2%, over prior year . This cha nge is the result of an increase in
total assets of $77.7 million and an increase in liabilities of only $19.3 million.
Cu rrent, restricted, an d other assets decreased by $38.8 million from prior year . Most of this decrease is attrib-
utable to restricted assets. Restricted assets decreased $33.1 million below prior year as a result of CIRP
spending. The restricted assets affected were cash and cash equivalents, which decreased $152.0 milli on, in-
v estments increased $118.5 million, and accrued in come on investments i ncreased $1.2 million . In addition to
the decreases caused by CIRP, gran ts receivable fell by $0.8 millio n.
Net capital assets in creased by $116.5 million du e to increased levels of spendi ng for CIRP. Contributing fac-
tors include an in crease in CIP of $83.8 million, an increase in collectio n and p umping plant assets of $77.0
million, an increase in general plant an d equipment of $1.9 millio n, a decrease in land of $3.0 million, a de-
crea se in treatment and disposal plant equipment of $0.1 million, and an increase in accumulated depreciation
of $43.1 million.
The $19.3 million in crease in liabilities represen ts a 5% change o ver the prior year. One factor to co nsider is
the $5.7 million clean water capital improvement surcharge ref und payable that did not exist in the prior year .
This refun d, planned for payment in Nov ember 2005, represe nts the unused clean water capital impro vement
surcharge rev enues. Bonds and n otes payable increased $6 .1 million. Contracts a nd accou nts payable in-
creased by $5.7 million ov er prior year. Retainage payable increased by $2 .9 millio n due to the increased level
of CIR P projects, and deposits and accrued ex pen ses decreased a total of $1 .1 million.
6
THE METROPO LITAN ST. LOUIS SEWE R DIST RICT
Management's Discussion a nd Analysis
for the year ended June 30, 2006
The Metropolitan St. Lo uis Sewer District
Statemen ts of Rev enu es, Ex penses, and Changes in Net Assets
(000s)
I ncrease Increase
( Decrease) (Decrease)
2006 2005 2006-2005 2004 2005-2004
Operatin g R evenu es:
Sewer service charges $ 203,880 $ 183,513 $ 20,367 $ 150,519 $ 32,994
Recovery of (provision for) dou btful
service charge accou nts (3,161) (1,546) (1,615) 385 (1,931)
Licen ses, permits, and other fees 5,210 6,549 (1,339) 6,297 252
Other 873 478 395 770 (292)
Total operating rev en ues 206,802 188,994 17,808 157,971 31,023
N onoperating Revenues:
Property taxes lev ied by the District 23,211 22,016 1,195 21,744 272
Investment income 7,610 5,502 2,108 2,060 3,442
Recovery of doubtful clean water capital
improvemen t su rcharge accounts -- -- 116 (116)
Grant reven ue 1,425 1,553 (128) 7,787 (6,234)
Other 1,027 1,038 (11) 1,010 28
Total n onoperating revenues 33,273 30,109 3,164 32,717 (2,608)
Total rev en ues 240,075 219,103 20,972 190,688 28,415
Operating Expenses:
Pumping and treatment 38,316 35,514 2,802 30,788 4,726
Collection system maintenance 27,792 25,225 2,567 23,408 1,817
Engineering 8,737 6,851 1,886 6,728 123
Gen eral an d administrative 37,055 37,047 8 40,199 (3,152)
Depreciation 43,980 44,443 (463) 42,592 1,851
Other 20,009 13,294 6,715 6,878 6,416
Total operating ex penses 175,889 162 ,374 13,515 150,593 11,781
Nonoperating Expenses:
Capital improv emen t su rcharge refun d 95 5,667 (5,572) 5,667
Net loss on disposal and sale of
u tility plan t 95 3,139 (3,044) 548 2,591
Nonrecurrin g projects and stu dies 3,375 4,292 (917) 4,027 265
Other -- -- -- 184 (184)
Total non operating ex penses 3,565 13,098 (9,533) 4,759 8,339
Total expenses 179,454 175,472 3,982 155,352 20,120
In come before capital contributions 60,621 43,631 16,990 35,336 8,295
Capital con tribution s 51,516 14,798 36,718 28,643 (13,845)
Change in net assets 112,137 58,429 53,708 63,979 (5,550)
Net assets -beginning of year 1,864,228 1,805,799 58,429 1,741,820 63,979
Net Assets -End of Year $1,976,365 $1,864,228 $ 112,137 $1,805,799 $ 58,429
7
THE METROPO LITA N ST. LOUIS SEWER DISTRICT
Managemen t's Discussio n and A nalysis
for the year ended J une 30, 2006
2006 Analysis
Net assets in creased $112. 1 million which was $53. 7 million o ver 2005 . The largest contributing factor in the
increase in net assets is the in creased level of capital contrib utio ns . In fiscal year 2006, capital contributions
totaled $51.5 million while in fiscal year 2005 they were $14.8 millio n. This change accou nts for $36.7 mil-
lion of the total chan ge in net assets, and is a result of a larger number of de velopme nts being gifted to the Dis-
trict.
A nother significant factor in the $53.7 million in crease in net assets over 2005 was the increase in sewer ser-
v ice charge rev enu es totalin g $20.4 million as a resu lt of the rate increase that took affect in July of 2005.
Operating expen ses in creased by $13.5 million or 8. 3% over prior year . The largest increase in operating ex-
penses occurred in other operating expen ses in the amount of $6.7 millio n. This increase is a result of greater
spen din g on in frastructure repair an d data collection projects. Additionally, pumping and treatme nt, collection
system maintenan ce, an d engineering expen ses in creased by $2.8 million, $2 .6 million, a nd $1.9 millio n, re-
spectively, while depreciation ex pense decreased by $0.5 million.
Nonoperating expenses decreased by $9. 5 million or 72.8% over prior year . The decrease can be attributed to
the capital improvemen t surcharge refund. $5. 7 million of the refund was expensed in fiscal year 2005, while
only $0. 1 million was charged in fiscal year 2006. The other major co ntributing factor to the $9 .5 million de-
crease is a drop in the net loss on disposal and sale of utility plant in the amount of $3.0 milli on. In fiscal year
2005, land va lu ed at over $3. 0 million was gifted to the City of Maplewood.
2005 Analysis
Operating rev enu es increased $31. 0 million from 2004 to 2005. A rate increase in July 2004 caused the
change. During the fiscal year, the District's operating expenses i ncreased $11 .8 millio n to $162.4 millio n
primarily due to a $6.4 million rise in other operatin g expe nses. Other operating expenses increased due to an
increased lev el of in frastru cture repair and data collection projects. Pumping a nd treatment expenses experi-
enced an in crease of $4.7 million , collection system mainte na nce expenses i ncreased $1.8 million, depreciation
increased $1. 9 million, and general and administrative expenses decreased $3.2 million. The final result was
an operating in come of $26.6 million in 2005. This was an increase of $19 .2 millio n or 261% over the operat-
in g in come of $7.4 million that was recorded in 2004.
Net income from nonoperating activ ities fell $10.9 million from prior year levels due to se veral factors. Grant
revenu e declined $6.2 million as the grant funding for the Meramec treatme nt pla nt was f ully utilized a nd the
availability of state stormwater grant mon ey ended. A refund of approximately $5.7 million of the u nused
clean water capital improvement surcharge is scheduled for November of 2005, and in vestme nt inc ome in-
creased by $3.4 million as a result of higher investment balances a nd improving market co nditions. The major
reason for an increase in the net loss on disposal an d sale of utility plant of $2.6 million is due to the gifting of
land costing $3. 0 million to the City of Maplewood to be used as a park . The land was p urchased as part of a
flood mitigatio n project.
8
THE METRO PO LITAN ST. LOUIS SEWER DISTRICT
Man agement's Discussion and Analysis
for the yea r ended June 30, 2006
The Metropo litan St. L ouis Sewer District
Co ndensed Statement of Cash Flows
(000s)
Increase Increase
( Decrease) (Decre ase)
2006 2005 2006-2005 2004 2005-2004
Cash flows from operating
activities $ 69,033 $ 71,563 $ (2,530) $ 45,189 $ 26,374
Cash flows from nonca pital
financing activities 23,211 22,016 1,195 21,744 272
Cash flows from capital
and related financing
activ ities (105,123) (145,635) 40,512 261,115 (406,750)
Cash flows from investing
activ ities 49,380 (105,948) 155,328 (144,063) 38,115
N et increase (decrease) in
cash and cash equivalents 36,501 (158,004) 194,505 183,985 (341,989)
Cash an d cash equivalents
at beginning of year 66,588 224,592 (158,004) 40,607 183,985
Cash and Cash Equiv alen ts
at End of Y ear $ 103,089 $ 66,588 $ 36,501 $ 224,592 $(158,004)
2006 Analysis
The net increase in cash and cash equivalents experienced a $194 .5 millio n increase in relation to fiscal year
2005. The most sign ificant reason for that increase is the cash flow from investing activities. In fiscal year
2006, cash flow from investing activ ities was a positive $49.4 million while in fiscal year 2005 the District had
a negative cash flow from investing activities of $105.9 million. Bo nd proceeds originally co nverted to lo ng-
term inv estmen ts have been conv erted to cash to cover CIRP e xpenses a nd to take advantage of better interest
rates on short-term investments.
Cash outflows from capital an d related finan cin g activities increased by $40.5 million in fiscal year 2006. In
fiscal year 2006, the D istrict's proceeds from issuance of debt i ncreased by $35 .6 million. Payments for capital
improvements decreased by $14.8 million , principal and interest a nd fees paid on debt increased by a com-
bin ed $3.7 million, cash refun ded for the clean water capital impro vement s urcharge i ncreased by $5 .8 million,
and proceeds from capital gran ts and sale of utility plant declined by a net of $0.4 millio n.
2005 A nalysis
Cash flows from operating activities increased $26. 4 million during fiscal year 2005 . The rate cha nge effective
in Ju ly 2004 increased funds received from customers by $32 .7 millio n, which was partially offset by a $6 .6
million increase in paymen ts for goods an d services. Payme nts to employees for ser vices decreased by $0 .2
million.
9
THE METRO POLITA N ST. LOUIS SEWE R DISTRICT
Managemen t's Discussion and Analysis
for the year ended June 30, 2006
Cash flows from capital and related financing activities decreased by $406.8 millio n from fiscal year 2004 to
fiscal year 2005. Proceeds from the issuance of debt declined by $400 .8 millio n, or 98%, while payments for
capital improvements in creased by $51. 5 million, reflecti ng the higher level of CIRP spendi ng compared to the
prior year.
Cash flows from inv esting activ ities were a negative $105.9 million in fiscal year 2005 and a negati ve $144.1
million in fiscal year 2004. In both years, the cash outflow for the purchase of i nvestme nts e xceeded infl ows
from the sale and maturity of in vestments. The net outflow was greater in fiscal year 2004 than in fiscal year
2005 as a result of the large amount of bon d proceeds that were received and in vested in fiscal year 2004 .
Capital Assets
The Metropolitan St. Lo uis Sewer District
Capital Assets
Net of Depreciation (000s)
Increase Increase
(Decrease) ( Decrease)
2006 2005 2006-2005 2004 2005-2004
Lan d $ 26,976 $ 26,912 $ 64 $ 29,888 $ (2,976)
Construction in progress 365,628 275,615 90,013 191,769 83,846
Trea tmen t an d disposal plant and equipmen t 278,200 290,262 (12,062) 305,977 (15,715)
Collection an d pu mpin g plant 1,200,494 1,134,222 66,272 1,081,597 52,625
Gen eral plan t and equipment 15,137 15,671 (534) 16,908 (1,237)
Total $ 1,886,435 $ 1,742,682 $ 143,753 $ 1,626,139 $ 116,543
2006 Ana lysis
Total capital asset, net of depreciation, increased $143.8 million over prior year. The most significant i ncrease
was to construction in progress, which rose by $90.0 millio n. Collectio n and p umpi ng plant also increased by
a sign ificant amount of $66. 3 million in large part due to the increase in contributed assets. Treatment and dis-
posal plant and equipment decreased by $12.1 million as depreciation outpaced additions in this asset category.
Finally, gen eral plant an d equipmen t decreased by $0.5 millio n in relation to the prior year, and land i ncreased
by less than $0.1 million .
2005 A nalysis
The District's total capital assets, n et of depreciation, increased $116 .5 million o ver the pri or year. The most
sign ificant change was an increase in con struction in pr ogress of $83.8 million. Another significant change
was an increase in collection an d pum ping plant assets of $52.6 million, net of depreciation. Additions to col-
lection and pumpin g plant con sisted of $62.1 million in constructed assets, $14.8 million in contributed assets,
and $0.2 million in purchased assets, while disposals and depreciation t otaled $0 .1 million a nd $24.4 million,
respectively. A decrease in land of $3. 0 million is a result of gifting land p urchased for flood mitigation pur-
poses to the City of Maplewood for u se as a park. Treatme nt and disposal plant a nd equipment assets fell
$15.7 million due to $0. 1 million in additions, $0. 2 million in disposals, and net depreciation of$15.6 millio n.
10
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
Managemen t's Discussio n and A nalysis
for the year ended Ju ne 30, 2006
General plant and equipment assets fell $1.2 million resulti ng from additio ns of $3 .0 millio n, disposals of $1.1
million, an d net depreciation of $3. 1 million.
For additio nal information related to the District's capital assets, see Note 4 to the fi nancial statements.
Long-term Debt
The Metropolitan St. Louis Sewer District
Long-term Debt
(000s)
I ncrease
( Decrease)
2006 2005 2006-2005
2004
Increase
(Decrease)
2005-2004
Rev en ue Bonds:
Series 2004A $ 173,500 $ 175,000 $ (1,500) $ 175,000 $
Series 2004B 156,245 160,152 (3,907) 161,280 (1,128)
Series 2005A 6,800 6 ,800 -- 6,800
Series 2006A 42,715 -- 42,715 --
West Watson and Nan ell 486 536 (50) -- 536
Ozark and Tablerock 116 147 (31) 375 (228)
Energy Loan Program 79 89 (10) 98 (9)
$ 379,941 $ 342,724 $ 37,217
2006 Analysis
$ 336,753 $ 5,971
The District en ded fiscal year 2006 with $379.9 million in lo ng-term debt o utsta nding, consisting mainly of
revenue bonds. The increase of $37.2 million is a result of new issues in the amount of $42.7 millio n and re-
tiremen ts of $5.5 million.
2005 A nalysis
At the en d of 2005, the District had $342. 7 million of long-term debt outstandi ng, consisting mainly of revenue
bonds. The in crease of $6.0 million is du e to n ew issuances of $7.3 million and retirements of $1.3 million.
The issu ance of 2006 and 2005 debt helped to fund the first phase of the District's CIRP .
For additional information related to the District's long-term debt, see Note 5 to the fina ncial statements.
Decisions Impacting the Fu tu re
In the u pcomin g fiscal year, the District intends to issue the remaining $114 .2 million in bonds previously ap-
proved by the voters in February 2004. These bon ds will conti nue to fund the first of four phases of a 20 -year
wastewater capital improvemen t program projected to total $3.7 billio n in expe nditures. The remaining phases
are expected to be funded throu gh a combination of additional bonds, if appro ved by the voters, and additional
rate in creases.
11
THE METRO PO LITA N ST. LO UIS SEWER DISTRICT
Management's D iscussi on a nd Analysis
for the year ended Ju ne 30, 2006
The District also plan s to address the cu rrent lack of funding to adeq uately support the operation a nd mai nte-
nance of the St. Louis R egion's existing stormwater infrastructure . The District intends to recommend a
change in stormwater funding by modifying the cu rrent monthly 24¢ per c ustomer fixed charge to a variable
charge based on impervious area. A combin ed rate proposal addressi ng both the wastewater and stormwater
funding issues will be su bject to rev iew by the District's Board of Trustees a nd Rate Commission. The District
anticipates submittin g a formal fun ding proposal for consideration by the third q uarter of fiscal year 2007 .
In addition to these major fundin g in itiatives, the District will also be embarking on the impleme ntation of the
first year of a multi -year strategic technology plan. This comprehensi ve pla n is based on a year long re view of
all District technology systems and business processes d uring the past fiscal year and is designed to dramati-
cally improve conn ectivity and in teraction between District Departme nts, increase overall District efficiency,
and en hance customer service for all District ratepayers.
Requests for Info rmatio n
This financial report is designed to provide a general overview of the District's finances for all those with an
interest in the D istrict's fin an ces. Question s concerning any of the information pro vided in this report or re-
qu ests for additional finan cial information should be addressed to:
The Metropolitan St. Louis Sewer District
D irector of Finance
2350 Market Street
St. Louis, MO 63103-2555
12
CI
THE METRO POLITAN ST. LOUIS SEWER DISTRICT
Statements of Net Assets
Jun e 30, 2006 and 2005
ASSETS
2006 2005
Current Assets:
Cash and cash equivalents $ 11,919,000 ( $ 10,624,709
In vestments 8,701,028 ' 5,844,714
Sewer service charges receiv able, less allowan ce of $2,906,000
in 2006 and $2,451,000 in 2005 27,151,790' 23,835,183
Un billed sewer service charges receivable, less allowance of $326,000 15,961,693' 14,323,829
in 2006 and $305,000 in 2005
Accrued in come on investments 241,174 / 182,936
Grants receivable 10,434/ 410,662
Other receiv ables, less allowance of $6,934 in 2006 and
$32,473 in 2005 1,945,845 ' 946,812
Supplies inventory 7,972,849' 8,039,067
73,903,813 ' 64,207,912
N oncurrent Assets:
Restricted Assets:
Cash an d cash equivalen ts 91,169,876 / 55,963,332
Investments 346,775,935 ' 387,428,934
A ccrued income on investments 2,721,930 ' 2,471,441
Grants receivable 530,602 / 1,492,997
Other receivables 54,161 / 53,754
441,252,504 447,410,458
Other Assets:
Long-term inv estmen ts
8,792,859 / 12,047,814
Capital A ssets:
Depreciable:
Treatment an d disposal plan t an d equipment 569,721,790 566,802,423
Collection and pu mping plan t 1,606,656,767 1,514,563,636
General plan t and equ ipmen t 53,194,761 52,201,691
2,229,573,318 2,133,567,750
Less: Accumulated depreciation 735,742,465 693,412,288
1,493,830,853 1,440,155,462
Nondeprecia ble:
Land 26,976,107 / 26,911,933
Construction in progress 365,627,566 ' 275,615,002
Net capital assets
Total n on current assets
Total Assets
1,886,434,526 1,742,682,397
2,336,479,889 2,202,140,669
2,410,383,702 2,266,348,581
See the accompanying n otes to the financial statements.
14
THE METRO POLITAN ST. LOUIS SEWER DISTRICT
LIABILITIES
2006 2005
Current Liabilities:
Contracts and accounts payable $ 8,623,266 ' $ 9,665,837
Deposits an d accrued expenses 16,518,268' 16,481,847
Retain age payable 33,970 197,572
25,175,504 26,345,256
Cu rren t Liabilities --Payable From Restricted Assets:
Contracts and accounts payable 15,685,704- 14,899,449
Deposits an d accrued expen ses 2,411,785 / 1,392,523
R etain age payable 5,052,722 6,108,025
Clean Water Capital Improvement Surcharge refund -- 5,667,330
Current po rtion of bonds an d notes payable 4,359,578 / 2,702,568
27,509,789 30,769,895
Total current liabilities
52,685,293 57,115,151
Noncurrent Liabilities:
Deposits and accrued ex penses 4,154,065/ 3,765,893
Bonds an d notes payable 377,178,944 ' 341,239,433
Total Liabilities
NET ASSETS
381,333,009 345,005,326
434,018,302 402,120,477
Inv ested in capital assets, n et of related debt 1,652,348,133 1,625,672,653
R estricted for:
D ebt service 20,198,822 15,493,176
Real property purchase and improvemen t 2,544,713 2,774,628
Su bdistrict constru ction and improv ement 46,774,026 43,735,215
Construction 203,544,388 131,800,378
Unrestricted 50,955,318 44,752,054
Total N et A ssets
$ 1,976,365,400 $ 1,864,228,104
See the acco mpanyin g notes to the fmancial statements.
15
THE METRO PO LITAN ST. LOUIS SEWER DISTRICT
Statemen ts of Revenu es, Ex penses, and Cha nges in Net Assets
for the years ended June 30, 2006 and 2005
2006 2005
Operating R evenu es:
Sewer service charges $ 203,880,320 $ 183,512,398
Recovery of (provision for) doubtful sewer serv ice
charge accounts (3,160,972) (1,545,971)
Licenses, permits, and other fees 5,210,321 6,549,221
Other 873,353 478,025
Total operatin g rev enues 206,803,022 188,993,673
Operating Expenses:
Pu mping and treatment t 38,316,092 35,514,218
Collection system maintenance 27,791,675 25,225,163
Engineering 8,737,413 6,850,679
General and administrative 37,055,565 37,046,813
Depreciation 43,979,819 44,442,903
Other 20,008,972 13,294,119
To tal operating ex penses 175,889,536 162,373,895
Operating Income
30,913,486 26,619,778
N onoperating Rev enues:
Pro perty tax es lev ied by the D istrict 23,210,982 22,015,870
Investmen t in co me 7,610,461 5,501,708
Grant rev enu e 1,424,920 1,552,839
Other 1,026,547 1,038,074
Total nonoperating revenu es 33,272,910 30,108,491
Nonoperating Expenses:
Capital improvement surcharge refun d 95,372 5,667,330
N et lo ss on disposal an d sa le
of utility plant 95,064 3,138,531
Nonrecurring projects an d studies 3,375,189 4,291,874
Total nono peratin g expen ses 3,565,625 13,097,735
In come before capital contributions 60,620,771 43,630,534
Capital Con tribution s 51,516,525 14,798,951
Change in Net Assets 112,137,296 58,429,485
Net Assets -Beginnin g of Year 1,864,228,104 1,805,798,619
Net Assets -End of Year $ 1,976,365,400 $ 1,864,228,104
See the accompan yin g notes to the fin ancial statements.
16
LI
THE METROPO LITA N ST. LOUIS SEWER DISTRICT
Statements of Cash Flows
for the years en ded June 30, 2006 and 2005
2006 2005
Cash flows from operating activities:
Received from customers
Paid to employees for services
Paid to suppliers for goods and services
Net cash provided by operating activities
Cash flows provided by noncapital financing activities:
Tax es levied
$ 201,059,008
(58,033,022)
(73,992,802)
$ 184,049,092
(54,002,673)
(58,483,089)
69,033,184 71,563,330
23,210,982 22,015,870
Cash flows from capital and related financing activities:
Proceeds from capital grants 2,142,401 2,829,296
Clean Water Capital Improvement Surcharge refunded (5,762,702)
Proceeds from sale of utility plan t 223,313 35,618
Proceeds from issuance of debt 43,193,659 7,567,844
Prin cipal paid on debt (5,498,061) (1,365,276)
Interest an d fees paid on debt (13,848,925) (14,299,185)
Payments for capital improvements (125,572,530) (140,402,733)
Net cash used in capital and related fin ancing activities (105,122,845) (145,634,436)
Cash flows from in vesting activities:
Purchase of investments (224,477,577) (366,502,840)
Proceeds from sale and maturity of inv estments 263,696,471 253,728,335
Inv estmen t in come 9,134,073 5,788,168
Proceeds from ren ts 1,026,547 1,038,074
Net cash provided by (u sed in ) in vesting activities 49,379,514 (105,948,263)
N et increase (decrease) in cash an d cash equ ivalents
Cash and cash equivalents at beginn in g of year
Cash an d Cash Equivalents at End of Y ear
N oncash capital and inv esting activities:
Utility plan t co ntributed by o ther governments and developers
Fair v alu e inv estmen t adju stmen t
See the accompanying notes to the financial statements .
36,500,835 (158,003,499)
66,588,041 224,591,540
$ 103,088,876 $ 66,588,041
$ 51,516,525 $ 14,798,951
$ (1,549,223) $ (1,220,574)
18
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2006 2005
Reconciliation of operating income to n et cash flows
from operating activities:
Operating in come $ 30,913,486 $ 26,619,778
Adju stmen ts to reconcile o perating in come to n et cash
provided by operating activities:
Depreciation 43,979,819 44,442,903
Change in o perating assets and liabilities:
(In crease) decrease in billed and un billed sewer service
charges receivable (4,954,471) (4,874,855)
(Increase) decrease in other receivables (999,033) (600,129)
(Increase) decrease in supplies in ven tory 66,218 (1,689,505)
Increase (decrease) in con tracts and accoun ts payable (1,416,690) 8,859,975
Increase (decrease) in deposits and accrued expenses 1,443,855 (1,194,837)
Net Cash Prov ided by Operating A ctivities
$ 69,033,184 $ 71,563,330
See the accompanying notes to the fin an cial statements.
19
THE METROPOLITAN ST. LOUIS SEWER DIST RICT
Notes to Fin ancial Stateme nts
Ju ne 30, 2006 a nd 2005
1. Organization an d Su mmary of Significant Accounting Policies
Organiz ation
The Metropolitan St. Louis Sewer District (the District) was authorized by the voters, established and
chartered un der the provisions of the Constitution of Misso uri, as a mu nicipal corporatio n and a political
subdivision of the State. Upon creation in 1954, the District ass umed respo nsibilities to provide f or the
con struction, o peration , and mainten ance of the sewer facilities within its defi ned boundaries. The Dis-
trict's service area now comprises all of the City of St. Louis a nd most of St . Lo uis Co unty . Subdistricts
within the District's total service area represent separate geographic areas withi n which specific ta xes are
lev ied for the retirement of in debtedn ess issued to fi nance constr uction of sa nitary or stormwater facilities
within the area or to operate, main tain, or construct impr ovements withi n the s ubdistrict. The District also
main tains all of the publicly owned stormwater sewers withi n its origi nal boundaries and is co ntinuing to
accept maintenan ce of the stormwater sewers in the remainder of its service area.
Pursuant to prov ision s of its charter and subject to limitations imposed by the Constitution of Miss ouri, all
po wers of the District are vested in a six -member Board of Trustees (the Board), three of whom are ap-
pointed by the Mayor of the City of St. Louis and three of whom are appointed by the Cou nty Executive
of St. Louis Coun ty.
Reporting Entity
The D istrict defines its finan cial reportin g en tity to incl ude all component units for which the District's
gov erning body is financially accountable. To be co nsidered financially accountable, the orga nization
mu st be fiscally depen den t on the District and the District must either 1) be able to impose its will on the
organization or 2) the relation ship mu st have the potential for creating a financial benefit or imposing a
finan cial burden on the D istrict.
Based on the foregoin g, the District's financial stateme nts i ncl ude all funds that are established under the
authority of the D istrict's charter. There are no agencies, boards, commissions, or authorities that are con-
trolled by or dependen t on the District.
Measurement Focus, Basis of A ccou nting, an d Fina ncial Stateme nt Prese ntation
Throu ghout the year, the District main tains its detailed acco unting rec ords on the modified accrual basis
of accoun ting. In order to account for the tran sactio ns related to certain subdistricts and restricted re-
sources, separate fun d accountin g records are maintained. For financial reporting purposes, the District
reports its operation s as a single enterprise fund. Accordingly, the accounting records are con verted to the
accrual basis of accoun tin g and all in terfund transactions are elimi nated . U nder the accr ual basis of ac-
counting, revenu es are recognized when earned and expenses are recognized whe n the related liability is
in curred. The District's measu rement focu s is on the flow of eco nomic resources, since income determi-
20
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Fin ancial Stateme nts
June 30, 2006 a nd 2005
1. Organization and Summary of Significant Accounting P olicies (c ontinued)
Measuremen t Focu s, Basis of Accoun ting, and Financial Statement Presentation (co ntinued)
nation an d capital main ten ance are critical. U nbilled sewer service charge re venues are accrued by the
District based on estimated billings for services provided thro ugh the end of the c urrent fiscal year .
Revenu es and expen ses are div ided into operating a nd nonoperati ng items. Operating revenues generally
result from prov iding services in con nection with the District's principal ongoing operations. The pri nci-
pal operating rev enues of the District are user fees, licenses, and permits for wastewater treatment ser-
vices. Operating expenses include the costs associated with the co nveyance and treatme nt of wastewater,
stormwater, admin istrativ e expenses, and depreciation on capital assets . All revenues a nd expenses not
meeting these definition s are reported as nonoperating revenues and expenses .
The D istrict follows GA SB Statement No. 33, Accou nting and Financi al Reporti ng f or Non - Exchange
Tra nsa ction s (GASB 33), which establishes accounting and fi nancial reporti ng sta ndards for no n -
ex chan ge transactions inv olving financial or capital res ources.
G ASB 33 groups nonex change tran sactions into the following four classes, based upon their principal
characteristics: deriv ed tax rev enu es, imposed nonexchange re ve nues, go vernme nt mandated non -
exchange transaction s, and volun tary n on exchange transactions . For the District, the following no n -
ex change transaction s are applicable.
The D istrict recognizes assets from imposed nonexchange revenue tra nsactions in the period when an en-
forceable legal claim to the assets arises or when the resources are received, whichever occ urs first.
Revenues are recognized in the period when the resources are req uired to be used or the first period that
use is permitted. The D istrict reco gn izes rev enues from property taxes, net of estimated refunds and esti-
mated un collectible amou nts, in the period for which the taxes are le vied. Imposed nonexchange reve-
nues also include licenses, permits, and other fees.
Intergov ernmental rev enu es, representing grants and assistance received from other governmental units,
are generally recognized as rev enues in the period whe n all eligibility req uireme nts, as defi ned by GASB
33, have been met. A ny resou rces receiv ed before eligibility requireme nts are met are reported as de-
ferred revenues.
When both restricted and unrestricted resources are available for use, it is the District's policy to use re-
stricted resources first, and then unrestricted resources as they are needed.
21
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Stateme nts
June 30, 2006 and 2005
1. Organization an d Summary of Significan t Accounting Policies (co ntinued)
Measurement Focu s, Basis of A ccoun ting, an d Financial Statement Presentatio n (conti nued)
Du ring 2005, the D istrict adopted G ASB Statement No. 40, Deposit and I nvestment Risk Disclos ures, an
Amen dmen t of G ASB Statemen t No. 3 (GASB 40). The adoption of GASB 40 modifies certain financial
statement disclosures requiremen ts. The n ew standard enha nces the deposit and investment risk disclo-
sures by updating the cu stodial credit risk disclosure requirements of GASB 3 and addressing other com-
mon risks, in cludin g concentrations of credit risk, i nterest rate risk, and foreign currency risk. The im-
plementation of GASB 40 had no effect on financial statement amounts.
The D istrict follows all G overnmental Accou nting Standards Board ( GASB) pronou ncements as well as
all Fin ancial Accoun ting Standards Board (FASB) Statements and Interpretations, Acco unti ng Principle
Board Opinions, and A ccou ntin g Research Bulletins issued on or before November 30, 1989, u nless those
pronoun cemen ts conflict with or con tradict GA SB pronouncements . In additio n, the District also applies
all FASB Statemen ts and Interpretations issued after No vember 30, 1989, e xcept for those that conflict
with or contradict GASB pron ouncements.
Cash and Cash Equivalen ts an d In vestments
The D istrict's " cash and cash equ ivalents" consist of all highly liquid investments (includi ng restricted assets)
with maturity dates of 89 days or less from the date acq uired by the District . "I nvestments" consist of those
investments with maturity dates 90 days or greater at the time of purchase by the District . I nvestments are
stated at fair valu e based u pon quoted market prices.
Clean Water Capital Improv ement Surcharge
In conn ection with the Con sent Decree, on August 2, 1988, the voters within the District approved a sched-
ule of capital improvement surcharges to be added to each c ustomer's user charge .
The collections from the surcharges, as well as investment income and proceeds from various grants, are fi-
nancing u pgrades to certa in sewage treatmen t facilities and other capital improveme nts required by the Fed-
eral Clean Water A ct and the Missouri Clean Water Law (required projects). The ballot pr oposition stated
that all surcharges, inv estment income, an d grant proceeds collected were to be deposited in a Clean Water
Capital Improvemen t Trust Fu nd (the Trust Fund). All funds of the Trust Fu nd are incl uded in the fmancial
statemen ts of the District. The District issues a publicly available fina ncial report on the Trust F und that in-
cludes financial statemen ts an d supplemen tary information. That report may be obtai ned by writing: The
Metropolitan St. Louis Sewer District, 2350 Market Street, St . Louis, MO 63103-2555.
The D istrict was en titled to lev y an d collect the su rcharges until one of the followi ng three eve nts occ urred: 1)
the cu mulative collections totaled $436,000,000; 2) the inte nded constr uctio n and impro veme nts were com-
plete; or 3) u ntil D ecember 31, 1995, regardless of whether the construction was complete or whether the c um u-
lative collection s totaled $436,000,000. The su rcharge was eliminated in April 1995 . This was made possible
22
THE METROPO LITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Stateme nts
Jun e 30, 2006 and 2005
1. Organization and Summary of Significant Accounting P olicies (contin ued)
Clean Water Capital Improvement Su rcharge (conti nued)
by fav orable construction bids, higher than expected investment earnings, and increased federal and state grant
participation. In January 1997, the District refun ded approximately $25 million to its customers. In 1998, the
District determined that approximately $9.2 million would also be available for refund to customers.
In 1999, the District identified additional projects to be completed reducing the amo unt available for re-
fund. In 2005, the District identified all remaining allowable projects to be completed. The District re-
fu nded $5,762,702 from the Trust Fund to its customers d uring 2006.
Capital Assets
Capital assets are valued at historical cost or estimated historical cost based in part upon a study per-
formed in 1981. Interest cost is capitalized as part of the historical cost of acquiring certain assets when
the effect of such capitalization is material to the fina ncial stateme nts. Interest is not capitalized on assets
co nstructed with contributions from other governmental sources. Depreciation is calculated on a
stra ight-line basis o ver the following estimated useful lives:
Treatment and disposal plant an d equipment
Collection and pumping plant
G eneral plant an d equ ipment
10 to 50 years
10 to 100 years
3 to 50 years
When designing user charge rates, the District includes funding for replacement cost of assets, which may
differ from depreciation ex pense recorded for financial reporting purposes .
Normal main tenan ce an d repairs that do not add to the value of the asset or materially exte nd asset li ves
are not capitalized. Betterments are capitalized and depreciated over the remaini ng useful li ves of the re-
lated assets, as applicable. The District defines capital assets as assets with an initial, individual cost of
more than $1,000 and an estimated useful life in excess of three years .
Capitalization of Interest
In terest 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 ear ned on temporary in vestments
acquired with the proceeds of such borrowed funds from the date of the borrowing u ntil the assets are
ready for their intended use is u sed to reduce the interest costs capitalized on the constructed assets. I n-
terest is not capitalized for outlays financed by capital grants (or other outside parties) exter nally restricted
for the acquisition of specified assets. In 2006 a nd 2005, the District capitalized $8,182,438 and
$8,358,236 of net interest expense, respectively.
23
THE METROPOLITAN ST. LOUIS SEWER DIST RICT
Notes to Financial Statements
June 30, 2006 and 2005
1. Organization an d Summary of Sign ificant Accounti ng Policies (co ntin ued)
Su pplies Inv entory
Su pplies inventory con sists of parts and su pplies to be used to operate and maintain treatment facilities
an d various treatment -related equipment at the District. This inventory is stated at the lower of cost or
market, determin ed on the av erage cost method. Expenses are recognized when the inventory is co n-
sumed.
Net Assets
Invested in capital assets, n et of related debt: This component of net assets consists of capital assets, in-
cluding restricted capital assets, n et of accumu lated depreciation and reduced by the outstanding debt that
is attribu table to the acquisition, construction, or improveme nt of those assets.
R estricted: This compon ent of n et assets con sists of co nstraints placed on net asset use through external
con strain ts imposed by creditors, grantors, contributors, laws, or regulations of other go ver nme nts or con-
straints imposed by law throu gh constitu tional provisions or enabli ng legislation. Restricted net assets
represen t those portions of equ ity set aside for specific p urposes. Proceeds from the sale of real property
no lo nger necessary in the operation of the D istrict and rental income fr om District -owned properties have
been restricted for the pu rchase and improv ement of real property and e xpenses related to the use of 2350
Market Street. Property taxes levied by the various s ubdistricts and other reven ues received for construc-
tion in those su bdistricts have also been restricted for that use. Clea n water capital impr ovement sur-
charges, sewer ex ten sion and con nection fees, grants, and other re venues received for construction within
certain su bdistricts have been restricted for that use . In addition, a portio n of sanitary sewer charges ha ve
been restricted for the paymen t of principal and interest on certain debt of the District.
Unrestricted n et assets: This componen t of n et assets consists of net assets that do not meet the defmition
of restricted or in vested in capital assets, n et of rel ated debt.
Capital Con tribu tion s
Capital contributions to the D istrict represent government gra nts and other aid used to fund capital pr o-
jects. In accordan ce with G ASB 33, capital contrib utio ns are recognized as re venue whe n the expenditure
is made and the amoun t becomes subject to claim for reimb urseme nt .
Bond Issuance Costs/Bond Premiu ms and Discounts
Bond issuance costs incurred, as well as bond premiums a nd discou nts, and paid from the proceeds of
reven ue bond issues are deferred and amortized usi ng the straight-li ne method o ver the term of the bo nds.
24
THE METRO POLITAN ST. LO UIS SEWE R DISTRICT
Notes to Financial Statements
Ju ne 30, 2006 and 2005
1. Organ ization and Summary of Significant Accounti ng Policies (continued)
Compen sated Absen ces
Vacation
Under the terms of the D istrict's personnel policies, empl oyees are allowed to carry a maxim um of 30
to 45 days of vacation (depending on length of service) from one calendar year to the next. Since va-
cation accru ed at year-en d is expected to be used by the employee d uring the following fiscal year, the
accrual is repo rted as a compon ent of current deposits a nd accrued expe nses payable.
Sick Leave
Employees earn sick pay benefits at accru al rates ranging from 10 days per year to 12 days per year
(depending on length of service). Unused sick leave can be carried o ver at year-end without limita-
tion . An employee retiring from the District with five or more years of ser vice, who h as unused ac-
crued sick leave remaining, will be compensated for that portion of unused accr ued sick leave at the
rate of 1-1/4% for each year of D istrict service. The District has recorded a liability, which h as bee n
actu arially determined to be equ al to the accumulated expense charge that will amortize the employees'
ben efits over their period of District service. The liability, included in c urrent deposits and accrued
expenses payable, inclu des v ested accu mulated rights to receive sick lea ve benefits estimated to be
paid within one year. The portion of sick leave expected to be paid after o ne year is recorded as a
componen t of noncurrent deposits an d accrued e xpenses payable .
U se of Estimates
The preparation of fin ancial statements in conformity with U.S. ge nerally accepted acco unting principles
requires man agemen t to make estimates and assumptions that affect the reported amou nts in the financial
statements. Actual resu lts could differ from those estimates.
Reclassification of Prior Year
The fin ancial statemen ts for the year en ded June 30, 2005, co ntain a reclassification of la ndfill closure
and postclosure costs from a curren t liability to a long-term liability, allowance for uncollectible sewer
service charges, and a portion of invested capital assets, net of related debt to restricted net assets for
comparability pu rposes. These reclassifications had no effect on the total net assets of the District .
25
THE METRO POLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2006 and 2005
2. Deposits and In vestmen ts
With the approval of the District's Board of Trustees, the Secretary -Treas urer is a uthorized to in vest excess
cash in any investmen t authorized by the District's charter. The District's investme nt policy conforms to the
investment policy guidelines for the State of Missouri . The District's investment policy authorizes the Dis-
trict to invest in the following instruments: U.S. Treasury notes, certificates of deposit, obligations of a ny
agency or instrumentality of the U.S. , repurchase agreeme nts, banker's acceptances, and commercial paper
rated in the three highest classificatio ns, for terms specified in the policy. At J une 30, 2006 and 2005, all of
the District's investments were in compliance with the District's investme nt policy a nd charter.
In accordance with the District's investment policy, the District also invests in mortgage -backed sec urities
such as collateralized mortgage obligations. These securities are reported at fair value and are based on
the cash flows from interest payments by the un derlying m ortgages . As a result, they are sensiti ve to pre-
payments by mortgagees, which may resu lt from a decline in i nterest rates. For example, if interest rates
declin e and homeowners refinance mortgages, thereby prepayi ng the mortgages underlying these sec uri-
ties, the cash flow from interest payments is reduced and the val ue of these sec urities decli nes . Likewise,
if homeowners pay on mortgages longer than anticipated, the cash flows are greater and the return on the
initial investment would be higher than an ticipated .
A su mmary of deposits and in vestments as of June 30, 2006 a nd 2005, is as follows:
2006 2005
Cost Fair Value Cost Fair Val ue
Deposits $ 60,784,313 $ 60,784,313 $ 13,217,342 $ 13,217,342
Repurchase agreements (collateral-
ized) 9,074,525 9,074,525 17,923,038 17,923,038
U .S. Treasury an d Agen cy obliga-
tio ns 370,388,893 366,358,187 396,743,935 395,119,629
Commercial paper 31,023,546 31,141,673 45,574,411 45,649,494
$ 471,271,277 $ 467,358,698 $ 473,458,726 $ 471,909,503
26
THE METRO POLITAN ST. LOUIS SEWE R DIST RICT
N otes to Financial Stateme nts
June 30, 2006 and 2005
2. Deposits and Inv estments (contin ued)
In terest Rate R isk
As of Jun e 30, 2006, the District had the follo wing investme nts and maturities:
Weighted A verage Maturity
Investment Type
Fair Val ue Mat urity (years)
Repurchase agreements (collateralized) $ 9,074,525 0 .00
Certificates of deposit 11,200,000 0 .33
U. S. Treasuries 116,409,742 0 .24
U. S. Agen cies 249,948,445 1.37
Commercial paper 31,141,673 0 .11
Tota l
$ 417,774,385 .93
The District will minimize the risk that the fair value of debt securities in the portfolio will fall due to i n-
creases in gen eral interest rates by:
1. Structuring the investment portfolio so that securities mature to meet cash requirements for ongo-
in g operation s, thereby avoiding the n eed to sell securities on the open market prior to maturity,
and
2. In vesting operatin g funds primarily in short-term securities .
3. State law limits the max imum stated maturities to five years on a ny investment from the date of
purchase.
Custodial/Credit Risk
The District will minimize credit risk, the risk of loss d ue to failure of the security issuer or backer, by:
1. Prequalifying the fman cial institutions, broker/dealers, i ntermediaries, and advisors with which the
D istrict will do bu siness; and
2. D iversifying the portfolio so that potential losses on indi vidual sec urities will be minimized.
In accordance with its in vestmen t policy, the District limits its investme nts in these i nvestment types to
the top ratin g issued by NRSROs. As of Jun e 30, 2006, the District's investments in commercial paper
were rated Al by Standard & Poor's, F-1 by Fitch ratings, a nd P-1 by Moody's Investors Service. The
District's in vestmen ts in U.S. Agencies and repurchase agreeme nts all carry the explicit g uara ntee of the
U.S. Governmen t. A ll cash deposits of the D istrict were fully collateralized with sec urities held by a third
party finan cial in stitution in the District's name.
27
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
N otes to Fin ancial Statements
Jun e 30, 2006 a nd 2005
2. Deposits and Inv estments (continued)
Concen tration of Credit R isk
The District places no limit on the amount the District may invest in any one iss uer with respect to U .S.
Treasury Securities and collateralized time and demand deposits. U.S . Gover nment agencies and go v-
ernmen t -sponsored enterprises are limited to 60% of the portfolio; and collateralized repurchase agree-
ments are limited to 50% of the portfolio. U.S. Government agency callable securities, commercial paper,
and bankers' acceptan ces are limited to 30% of the portfolio, each. The following table lists in vestme nts
in issuers that represent 5% or more of total investments at J une 30, 2006:
Issuer
Federal Ho me Loan Bank
Federal Home Loan Mortgage Corporation
Federal National Mortgage Association
3. Property Tax
Perce nt
of Total
I nvestme nts
24.1%
7 .3%
18.8%
On or before May 1 of each year, the D istrict levies ad valorem taxes on all taxable tangible pr operty, real
and personal, within its boun daries based on assessed val uations established by the City of St . Louis and
St. Louis Cou nty assessors. Tax rates vary by subdistrict a nd purpose . Taxes le vied are used for opera-
tions and stormwater maintenance, debt service, and constr uction . Taxes are recorded as nonoperating
rev enues. Property tax bills are mailed in October. They become delinquent and represent a lien on the
related property if n ot paid by December 31. All property taxes are billed and collected by the City of
St. Louis and St. Louis Coun ty Collectors of Revenue and are distrib uted to the District monthly.
4. Chan ge in Capital Assets
The followin g is a su mmary of capital assets cha nges for the fiscal years ended Ju ne 30, 2006 and
June 30, 2005:
28
THE METROPOLITAN ST. L OUIS SEWER DISTRICT
N otes to Financial Statements
Jun e 30, 2006 a nd 2005
4. Change in Capital Assets (contin ued)
Ba lance Balance
Jun e 30, 2005 Additions Deletions June 30, 2006
Capital assets not being depreciated:
Land $ 26,911,933 $ 64,174 $ -- $ 26,976,107
Construction in progress 275,615,002 134,326,899 44,314,335 365,627,566
Tota l ca pital assets not being depreciated 302,526,935 134,391,073 44,314,335 392,603,673
Capital assets being depreciated:
Treatmen t and disposal plant
and equipment 566,802,423 3,490,424 571,057 569,721,790
Collectio n and pumping plant 1,514,563,636 92,156,109 62,978 1,606,656,767
General plan t and equipment 52,201,691 2,327,055 1 ,333,985 53,194,761
Total ca pital assets bein g depreciated 2,133,567,750 97,973,588 1,968,020 2,229 ,573,318
Less: Accumulated depreciation :
Treatment an d disposa l plant
and equipment (276,540,194) (15,309,480) (328,365) (291,521,309)
Collection and pumping plant (380,341,905) (25,882,705) (61,202) (406,163,408)
General plan t and equ ipment (36,530,189) (2,787,635) (1,260,076) (38 ,057,748)
Total accumulated deprecia tion (693,412,288) (43,979,820) (1,649,643) (735,742,465)
Total capital assets being depreciated, net 1, 440,155,462 53,993,768 318,377 1,493,830,853
Tota l Ca pital Assets
$ 1,742,682,397 $ 188,384,841
$ 44,632,712 $ 1,886,434,526
Balance Bala nce
Jun e 30, 2004 Additions Deletions J une 30, 2005
Capital asse ts no t being depreciated:
Lan d $ 29, 887,872 $ 97,282 $ 3,073,221 $ 26,911,933
Construction in progress 191, 769,427 147,322,627 63,477,052 275,615,002
Total capital assets not bein g depreciated 221,657,299 147,419,909 66 ,550,273 302,526,935
Capital assets being depreciated:
Treatment and disposal plan t
and equipment 566,876,959 110,851 185,387 566,802,423
Collection and pumping plant 1,437,525,264 77,141,920 103,548 1 ,514,563,636
G en eral plant an d e quipment 50,295,189 2,964,373 1 ,057,871 52,201,691
Total capital assets being depreciated 2, 054,697,412 80,217,144 1,346,806 2,133,567,750
Less: A ccumulated deprec iatio n:
Treatment and disposal plan t
and equipment (260,899,518) (15,824,532) (183 ,856) (276,540,194)
Collection an d pumping plant (355,928,728) (24,439,479) (26,302) (380,341,905)
Gen eral plant and equipment (33,387,017) (4,178,892) (1,035,720) (36,530,189)
Total accu mulated depreciation (650,215,263) (44,442,903) (1,245 ,878) (693,412,288)
Tota l capital assets being depreciated, n et 1,404,482,149 35,774,241 100,928 1,440,155 ,462
Total Capital A ssets
5. Long-term Liabilities
$ 1,626,139,448 $ 183,194,150 $ 66,651,201 $ 1 ,742,682,397
The following is a summary of changes in the District's long-term liabilities for the year e nded June 30,
2006:
29
THE METRO PO LITAN ST. LOUIS SEWE R DISTRICT
N otes to Fin ancial Statements
Ju ne 30, 2006 and 2005
5. Long-term Liabilities (continu ed)
Bonds and notes
payable:
R ev en ue bonds:
Series 2004A
Series 2004B
Series 2005A
Series 2006A
Missouri Departmen t
of N atu ral Resources:
Ozark and Table
Original
Issuance
Amounts
$ 175,000,000
161,280,000
6,800,000
42,715,000
Balance Balance
July 1, June 30,
2005 Additions Retirements 2006
$ 175,000,000
160,152,500
6,800,000
42,715,000
$ 1,500,000 $ 173,500,000
3,907, 500 156,245,000
- 6,800,000
42,715,000
Rock 374,680 146,787 30,693
Energy Loan Program 98,595 88,712 9,768
West Watson and
N anell 535,600 535,600
Add: Un amortized
premium, net
Less: Bond issue
costs, net
Deposits and accrued
expenses:
Landfill closu re and
postclosure costs
Compensated
absences
116,094
78,944
50,100 485,500
$ 386,803,875 $ 342,723,599 $ 42,715,000 $ 5,498,061
Current
Portio n
$ 1,505,000
2,780,000
13,700
10,078
50,800
379,940,538 $ 4,359,578
7,090,569
(5,492 ,585)
$ 381,538,522
$ 470,256 $ 28,165 $ $ 498,421
4,119,547 782,904 332,896 4,569,555
$ 4,589,803 $ 811,069 $ 332,896 $ 5,067,976
Wastewater System Revenu e Bonds Payable
913,911
$ 913,911
In May 2004, the District authorized and issu ed $175,000,000 of Wastewater System Reve nue Bonds Se-
ries 2004A (Series 2004A ) for the purpose of providing funds to finance the initial phase of its capital
improv emen ts and replacement program, inclu ding constructi ng, repairi ng, and replacing new wastewater
facilities. These senior bonds have interest rates ranging from 2% to 5% and are payable in semian nual
in stallments at v aryin g amounts through 2034. The re ve nue b onds do not constitute a legal debt or liabil-
ity for the District, the State of Missouri, or for any political subdivisio n thereof and do not constitute in-
debtedness within the meaning of an y constitutional or statutory debt limitatio n or restriction . The iss u-
ance of the rev enu e bonds does not obligate the District to levy any form of taxation therefore or to make
30
THE METRO PO LITAN ST. LOUIS SEWE R DISTRICT
Notes to Fin ancial Statements
June 30, 2006 and 2005
5. Lon g-term Liabilities (continu ed)
Wastewater System Rev enue Bonds Payable (continued)
an y appropriation for their paymen ts in an y fiscal year. The principal and i nterest on the bonds are e x-
pected to be paid from future wastewater revenues. The scheduled payment of the principal of and inter-
est on the Series 2004A Bonds matu rin g on May 1 when d ue are guaranteed under a financial guaranty
in suran ce policy.
Water Pollution Con trol and Drin king Water Revenue Bonds Payable
In May 2006, the State Environmental Improvement a nd Energy Resources Authority (the Authority) a u-
tho rized and issued $87,505,000 or Water Pollution Co ntrol and Drinki ng Water Re ven ue Bonds (State
R evolving Funds Programs) Series 2006A (Series 2006 A). The Series 2006 A bonds provided funds to
make loans to 13 Missou ri political su bdiv ision s that will be used to finance water poll ution control and
drinkin g water projects. A portion of the proceeds of the Series 2006 A bonds issued by the Authority
were used to purchase subordin ate Participant Reve nue Bo nds (Participant Bonds) authorized and issued
by the D istrict in the aggregate principal amount of $42,715,000, the proceeds of which will be used for
con structing, repa iring, and equippin g n ew and existi ng wastewater facilities . The District's Participant
Bonds have interest rates ran ging from 3.5% to 4.5% and are payable in semiannual i nstallme nts at vary-
ing amounts through 2025.
In May 2005, the Au thority authorized and issu ed $53,060,000 of Water Pollutio n Co ntrol a nd Dri nking
Water R ev enue Bonds (State Revolv in g Fun ds Programs) Series 2005A (Series 2005A) . The Series
2005A bo nds provided fu nds to make loans to ten Missouri political s ubdi visions and o ne Missouri no n-
profit corporation that will be u sed to fin ance water poll ution control and dri nking water projects . A por-
tion of the proceeds of the Series 2005A bonds issued by the Authority were used to p urchase Participa nt
Bonds authorized an d issu ed by the District in the aggregate principal amou nt of $6,800,000, the proceeds
of which will be used for constructin g, repairin g, and eq uipping new and e xisting wastewater facilities.
The District's Participant Bonds have interest rates ranging from 3% to 5% and are payable in semian nual
installments at v arying amounts throu gh 2026.
In May 2004, the A uthority au tho rized an d issued $179,780,000 of Water Pollution Control a nd Drinki ng
Water Rev enu e Bonds (State R ev olving Funds Programs) Series 2004B (Series 2004B). The Series
2004B bon ds provided fun ds to make loans to seve n Misso uri political subdivisio ns that will be used to
fin ance water pollution control projects. A portion of the proceeds of the Series 2004B bonds issued by
the Au tho rity were used to purchase Participan t Bonds authori zed and issued by the District in the aggre-
gate principal amou nt of $161,280,000, the proceeds of which will be used to finance the District's three
water pollution control con struction projects outlined in the agreement . The District's Participant Bonds
have interest rates ran ging from 2% to 5.25% and are payable in semian nual i nstallments at varying
amou nts throu gh 2027.
31
THE METRO PO LITAN ST. LO UIS SEWER DISTRICT
N otes to Fin ancial Statements
Jun e 30, 2006 and 2005
5. Lon g-term Liabilities (contin ued)
Water Pollution Control an d Drin king Water R even ue Bonds Payable (co ntin ued)
The Series 2004B, 2005A, and 2006A bonds do not co nstitute a legal debt or liability for the District, the
State of Misso uri, or for any political su bdivision thereof and do not co nstit ute indebtedness within the
mean in g of any constitutional or statutory debt limitation or restriction. The issuance of the Series 2004B,
2005A, and 2006A bonds does n ot obligate the District to le vy any form of taxatio n therefore or to make
any appropriation for their paymen ts in an y fiscal year. The pri ncipal a nd interest on the bonds are ex-
pected to be paid from fu tu re wastewater revenues .
In connection with the District's issu ance of the Participant Bo nds, which were purchased with the pro-
ceeds of the Series 2004B, Series 2005A, an d 2006A bo nds issued by the A uthority, the District partici-
pates in the State Revolving Loan Program established by the Missouri Department of Nat ural Resources
(D NR). Monies from federal capitalization grants and state matching fu nds are used to fund a reserve ac-
count for each participant. As the D istrict incu rs approved capital expe nses, the DN R reimb urses the Dis-
trict for the expenses from the bond proceeds account and deposits in a bond reserve fund in the District's
name an additional 60% of the expen diture amount for the Series 2004B bo nds or 70% for the Series
2005A and Series 2006A bonds. Interest earned from this reserve f und can be used by the District to fund
interest payments on the bon ds. On the date of each payment of the principal amo unt of the District's
Participant Bonds, the trustee transfers from this reser ve account to the master trustee an amount equal to
60% of the principal payment for the Series 2004B bonds or 70% for the Series 2005 A and Series 2006A
bonds. The costs of operation and mainten ance of the wastewater treatment and sewerage facilities and
the debt service is payable from wastewater revenues.
In accordance with the Series 2006A , Series 2005A, Series 2004A, a nd Series 2004B bo nd iss uances, the
D istrict's annu al net operating rev enu es from wastewater activities, as defined in the agreement, coupled
with investments earnings mu st be at least 125% of the current portion of principal and i nterest due on all
senior bon ds an d at least 115% of the cu rren t portion of principal and interest d ue on all bonds . At
Jun e 30, 2006 an d 2005, the District was in compliance with this cove nant.
Principal an d Interest R equirements on R ev enue Bonds Payable
The an nual principal an d interest requirements to maturity on reven ue bonds payable outstanding as of
June 30, 2006 are as follows:
32
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2006 and 2005
5. Lon g-term Liabilities (continued)
Principal an d Interest Requirements on R ev enue Bonds Payable (Continued)
Wastewater System Revenue Bonds Payable/
Water Pollution Con trol and Drinking Water
Revenue Bonds Payable
Years ending June 30, Principal Interest Total
2007 $ 4,285,000 $ 17,619,860 $ 21,904,860
2008 8,195,000 17,965,355 26,160,355
2009 9,095,000 17,639,655 26,734,655
2010 10,255,000 17,226,599 27,481,599
2011 11,160,000 16,793,806 27,953,806
2012-2016 60,925,000 76,203,129 137,128,129
2017-2021 75,445,000 60,292,900 135,737,900
2022-2026 93,345,000 39,808,819 133,153,819
2027-2031 63,005,000 20,052,869 83,057,869
2032-2034 43,550,000 4,425,750 47,975,750
Total $ 379,260,000 $ 288,028,742 $ 667,288,742
West Watson an d N anell Loan A greemen t
Du ring fiscal year 2005, the Department of N atural Resources loaned $535,600 to the District. The West
Watson and Nan ell Loan bears interest at a rate of 1 .5% and is payable thro ugh November 1, 2014 . The
purpose of this note is to fin an ce the planning, acquisitio n, construction, improvement, repair, rehabilita-
tion, and exten sion of the sewer system of a certain regional subdistrict . This note is classified as special
assessment debt by the D istrict; therefore, the princip al and interest on this note will be repaid from addi-
tion al tax assessments on property valu es within the subdistrict. The additional assessment to be paid by
the property own ers is 54.78 cents per square foot over the next ten years, with interest accruing at a rate
of 2.5% per an nu m.
Ozark and Table Rock Loan A greement
During fiscal year 2004, the Department of Natural Resources loaned $374,680 to the District. The
O zark an d Table R ock Loan bears interest at a rate of 1.5% a nd is payable through November 1, 2013 .
The purpose of this note is to fin ance the planning, acq uisitio n, constructio n, improvement, repair, reha-
bilitation, and ex tension of the sewer system of a certain regio nal subdistrict. This note is classified as
special assessmen t debt by the District; therefore, the principal and interest on this note will be repaid
from additional tax assessments on property values within the subdistrict. The additio nal assessme nt to be
33
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2006 and 2005
5. Long-term Liabilities (con tin ued)
Ozark and Table Rock Loan A greemen t (continued)
paid by the property owners is 61.2 cents per square foot over the next ten years, with interest accruing at
a rate of 2.5% per ann um.
Prin cipal and In terest R equiremen ts on Ozark and Table Rock and West Watso n and Na nell Loa n
Agreements
The ann ual principal and in terest requirements to mat urity on the Ozark and Table Rock Loan Agreement
and the West Watson and Nanell Loan A greement o utstanding as of Ju ne 30, 2006 are as follows:
Special Assessment Loan Agreeme nts
Years endin g Jun e 30,
Prin cipal Interest
Total
2007 $ 64,500 $ 8,540 $ 73,040
2008 65,600 7,564 73,164
2009 66,500 6,574 73,074
2010 67,500 5,569 73,069
2011 68,500 4,549 73,049
2012-2015 268,994 7,801 276,795
Total $601,594 $40,597 $642,191
Energy Efficiency Leveraged Note Payable
In April 2004, the Department of Natural Resources loaned $98,595 to the District . The Energy Effi-
ciency Leveraged No te Payable bears interest at a rate of 3 .15% per an num and is payable thro ugh August
1, 2013. The purpose of this note is to fin ance the design, acquisition, installation, and implementati on of
energy conservation measures. The principal and interest on this note will be repaid from wastewater
revenues.
Prin cipal and Interest on Energy Efficiency Leveraged Note Payable
The ann ual principal and in terest requiremen ts to maturity on the Energy Efficiency Le veraged Note Pay-
able outstandin g as of Jun e 30, 2006 are as follows:
34
THE METROPOLITAN ST. LOUIS SEWER DIST RICT
Notes to Financial Statements
June 30, 2006 and 2005
5. Long-term Liabilities (continu ed)
Principal an d Interest on Energy Efficiency Leveraged Note Payable (co ntinued)
En ergy Efficiency Leveraged Note Payable
Years endin g June 30,
2007
2008
2009
2010
2011
2012-2014
Principal Interest
$ 10,078
10,398
10,728
11,069
11,420
25,251
$ 2,408
2,088
1,758
1,417
1,066
1,053
Total
$ 12,486
12,486
12,486
12,486
12,486
26,304
Total $78,944 $9,790 $88,734
Restricted Cash and Investments
The followin g trustee held accou nts have been established in accorda nce with bond ordi nances and fi-
n an cing agreemen ts that requ ire receipts generated from operations be segregated a nd certain reserve ac-
coun ts be established:
Revenu e Fu nd
The R even ue Fund will be u sed for the purpose of depositing wastewater operating re venues, provid-
ing fu nds to pay for expenses related to the operatio n and maintena nce of the District, and fulfilling
Sinking Fund requirements in acco rdance with the bo nd ordinances .
Sinkin g/Repayment Fu nds
The bond ordin ances prov ide for deposits to and the use of monies in the Sinking Fund to be used for
the sole purpose of prin cipal and in terest payments on the bo nds . Sufficie nt monies shall be paid in
periodic installments from the R even ue Funds.
D ebt Service Fu nd
The Debt Service Fun d shall be u sed by the Trustee for the sole purpose of paying the principal of and
interest on the bon ds, as an d when the same become due.
35
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Fin ancial Stateme nts
June 30, 2006 and 2005
5. Long-term Liabilities (continu ed)
Restricted Cash an d Investments (con tinu ed)
D ebt Service Reserve Fun d
A fter in itial deposit of the amount requ ired pursuant to the bond ordi nances a nd fina ncing agreeme nts
of the Series 2004A bonds, monies in the Debt Ser vice Reser ve Fund shall be disb ursed and expensed
by the District solely for the payment of the principal a nd interest on the bonds and notes to the extent
of any deficiency in the D ebt Service Fund for such purpose. The District may disb urse and expe nd
mon ies from the Debt Service Reserve Fun d for such purpose immediately. At Ju ne 30, 2006 and
2005, cash and investments in the Debt Service Reserve Fund totaled $20,101,437 a nd $15,415,733,
respectiv ely.
Special Participant Bond Reserve Account
For the Series 2004B, Series 2005A, an d Series 2006A bo nds, the District shall deposit into the Spe-
cial Participant Bond Reserve A ccou nt amounts in accordance with the bond ordi nance, if any, which
shall be disbursed and expensed by the D istrict solely for the payment of the principal and i nterest on
the Participant Bon ds to the exten t of any deficiency in the Repayment Fund f or such p urpose. At
Jun e 30, 2006 and 2005, cash an d in vestments in the Special Participant Bond Reserve Account held
on behalf of the D istrict totaled $80,982,438 and $45,769,030, respectively. Monies in this acc ou nt
are not considered to be District fu nds. Ho wever, interest earnings on this acco unt may be used by the
D istrict to reduce interest payments on the bonds outsta ndi ng.
R enewal and Exten sion Fund
All sums accumulated an d retained in the Renewal And Extensio n Fund shall be first used to pre vent
default in the paymen t of in terest on or principal of the bonds whe n d ue and shall then be applied by
the District from time to time, as and when the District shall determine, for p urposes pursuant to the
trust Indentu re. No mon ies hav e been deposited i nto this account at Ju ne 30, 2006 and 2005.
Project Fu nds
The Project Fun ds for all bon d issuan ces o utstanding will be used for the purpose of pro viding mo nies
to pay project costs. The proceeds fro m the bonds a nd notes, after a deposit into the Debt Service Re-
serve Fu nd for the amounts required pursu ant to the bond ordina nces and note agreements of j ust the
Series 2004A bon ds, shall be deposited in to the Project Fund . At J une 30, 2006 and 2005, cash a nd
inv estmen ts in the Project Fun ds total $170,405,547 and $230,779,983, respectively .
36
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Statements
Jun e 30, 2006 and 2005
5. Long-term Liabilities (continued)
Restricted Cash an d In vestments (continued)
R ebate Fun ds
The bon d ordinances provide for the creation of a Rebate Fund into which shall be deposited such
amounts as are requ ired to be deposited therein pursuant to the arbitrage instructio ns regarding the
calculation and payment of rebate amo un ts due. The District does not ha ve any rights in or claims
to such money; prov ided, however, any funds remaining in the Rebate Fu nd after redemption a nd
payment of all bon ds and payment of any rebatable arbitrage amo unt, or pro visio n having bee n
made therefore, shall be remitted to the D istrict. At Ju ne 30, 2006, cash and investments in the Re-
bate Funds total $502,675. No monies were deposited into these accounts at June 30, 2005 .
Administrative Fee Fu nds
The Admin istrative Fee Fun d will be used for the payment of the Trustee's fees and other administra-
tive fees pursu ant to the note agreemen t. The Trustee shall immediately withdraw the fee amo unts
when du e. Monies held in this accou nt shall not be invested.
Fair Value of Financial Instruments
The v alue of the District's long-term debt is estimated based on the current rates offered to the District for
debt of the same remaining maturities. The carrying amount and estimated fair value of the District's
long-term debt as of June 30, 2006 were $381,538,522 and $388,317,214, respectively . The carryi ng
amou nt and estimated fair valu e of the District's long-term debt as of J une 30, 2005 were $343,942,001
an d $357,579,126, respectively.
6. Changes in Restricted Net A ssets
Details of chan ges in restricted net assets for the fiscal years e nded J une 30, 2006 and 2005, are:
THE METROPOLITAN ST. LOUIS SEWE R DISTRICT
Notes to Fin ancial Statements
June 30, 2006 and 2005
6. Chan ges in R estricted Net A ssets (continu ed)
Restricted by Enabling Legislatio n
Real Property S ubdistrict
Purchase and Co nstr uction
D ebt Service Impro vement a nd Improvement Construction Total
Balances, June 30, 2004
$ 15,116,114 $ 2,664,238 $ 40,035,096 $ 105,776,289 $ 163,591,737
Additions:
Proceeds from bonds and loans 7,032,244 7,032,244
U nspen t prior year bond proceeds 301,309,136 301,309,136
Property taxes levied by the
District 17,875 -- 10,218,924 -- 10,236,799
Investment income 377,062 96,994 1,145,065 9,322,438 10,941,559
Gran t rev enue -- -- 79,681 492,266 571,947
Connection fees -- -- 431,648 431,648
Tran sfers from other accounts 15,551,069 -- 73,458,690 89,009,759
Other -- 1,038,074 -- 1,038,074
Total additions 15,946,006 1,135,068 11,443,670 392,046,422 420,571,166
D eductions:
Unused bon d proceeds 226,932,257 226,932,257
Principal payments on long-term
debt 1,127,500 — 1,127,500
Interest payments 14,423,569 -- -- 14,423,569
Capital asset additions -- -- 7,411,253 118,704,329 126,115,582
Other contractual expenses 1,024,678 332,298 11,752,348 13,109,324
Clean Water Capital Improv ement
R efund -- 5,667,330 5,667,330
Transfers to other accounts 17,875 2,966,069 2,983,944
Total deductions 15,568,944 1,024,678 7,743,551 366,022,333 390,359,506
Balances, June 30, 2005
15,493,176 2,774,628 43,735,215 131,800,378 193,803 ,397
A dditions:
Proceeds from bon ds and loans 43,193,659 43,193,659
Unspent prior year bond proceeds 226,932,257 226,932,257
Property tax es levied by the
District 5,111 -- 10,793,675 -- 10,798,786
Investment income 375,740 86,043 1,475,114 11,375,498 13,312 ,395
G rant revenu e -- -- 33,765 396,777 430,542
Connection fees -- -- 402,187 402,187
Transfers from other accoun ts 23,572,172 -- 63,264,585 86,836,757
Other -- 1,026,547 — — 1,026,547
Total addition s 23,953,023 1,112,590 12,302,554 345,564,963 382,933,130
Deductions:
Unused bon d proceeds 147,452,130 147,452,130
Principal payments on long-term
debt 5,407,500 5,407,500
Interest payments 13,834,766 -- -- 13,834,766
Capital asset additions — -- 8,492,063 110,564,678 119,056,741
O ther con tractual ex penses 1,342,505 771,680 15,708,773 17,822,958
Clean Water Capital Improvement
Refund -- 95,372 95,372
Transfers to other accounts 5,111 -- 5,111
Total deduction s 19,247,377 1,342,505 9,263,743 273,820,953 303,674,578
Balan ces, June 30, 2006
$ 20,198,822 $ 2,544,713
$ 46,774,026 $ 203,544,388 $ 273,061,949
38
THE METRO POLITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2006 and 2005
7. D efined Ben efit Pension Plan
Plan D escription
The Metropolitan St. Louis Sewer D istrict Employees' Pe nsion Plan (the Plan) is a noncontributory single
employer defined benefit plan prov iding retirement benefits as well as death and disability benefits to
members. As a con dition of employment, all full-time employees of the District are covered by the Plan .
The fmancial statements for the Plan are produced using the accrual basis of accounting. Under the ac-
crual basis of accountin g, rev enues are recognized when earned a nd expenses are rec ognized when the re-
lated liability is incurred. The Plan issues a publicly available fina ncial report that includes financial
statements an d required su pplementary information. That report may be obtained by writing: The Metro-
politan St. Louis Sewer District, 2350 Market Street, St. Louis, MO 63103-2555.
The Plan, established on November 1, 1967, is amended from time to time by the District's Board of
Trustees, primarily to improve benefits to members. A Pensio n Committee co nsisting of two members of
the District's Board of Trustees, two elected employee members, and four members of the District's man-
agement staff admin ister the Plan. A committee of the District's Board of Trustees, with the aid of an i n-
v estment adv isor, rev iews and evaluates the Plan's i nvestments a nd the related rates of return on a peri-
odic basis. The Plan is exempt from the requ irements of the Employee Retirement I ncome Security Act
of 1974 and, as such, is not subject to the Act's reporting requirements.
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 Pla n permits early retirement with reduced
ben efits begin ning at age 55 if the member has completed 60 months of empl oyment . A member whose
combined age and term of service is equal to 75 may retire early with unreduced benefits .
The annual ben efit accrued by a member is equal to 1.45% of final a verage earnings plus 0.40% of final
average earnings that are in excess of covered earni ngs m ultiplied by the period of years a nd mo nths of
credited service n ot to exceed thirty-five years. A survivor's benefit for vested members who have not yet
reached their normal retiremen t date or earn ed 75 points is provided for. The survi vor's benefit is equal
to the greater of 50% of the member's monthly -accrued retirement be nefit as of the date of death, or 15%
of the mo nthly earn ings and the member's monthly -accr ued retireme nt benefit actuarially reduced u nder
the 100% joint an d surviv or annuity option. Members are also able to select a Conti nge nt A nn uity Pop -
Up option . This option allows the member to elect a survivor annuity for life, with the provision that if
the beneficiary should predecease the member, the benefit shall increase to the amo unt payable had the
su rvivor option not been selected.
Ordin ance Nu mber 10872, effectiv e Janu ary 1, 2001, further ame nded the Plan to exte nd the cost of liv-
ing increases for retirees from a maximum of 30% to 45% of the original benefit.
39
THE METRO PO LITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Stateme nts
June 30, 2006 and 2005
7. D efined Ben efit Pen sion Plan (continued)
Plan Description (continued)
Effective A ugu st 1, 2004, O rdinance N o. 11781 amended the pla n to change the benefit formula to 1.70%
of final average earnings plus 0. 40% of final average ear ni ngs that are in excess of covered ear ni ngs mul-
tiplied by the period of years and months of credited service not to e xceed thirty-five years witho ut includ-
ing accrued sick leave. A member who retires between Aug ust 1, 2004 and July 1, 2007 is entitled to se-
lect the greater of the above or the benefit calculated under the 1 .45%/1.85% be nefit form ula i ncludi ng
accru ed sick leave. Sick leave is paid out at 1.25% per year of service times the amo unt of leave accrued .
Also, the Plan was amended to prov ide the retiring member with a 10% partial l ump sum payme nt option.
The balan ce of the distribution will be paid in accordance with a nyone of the other payment optio ns avail-
able un der the Plan.
The retiremen t benefit payable to a member who retires after his or her normal retirement date is the
greater of a) the benefit that would have been payable on the normal retireme nt date plus a special an nual
retirement benefit provided by the accu mulated value, at 4% per ann um interest, of the monthly benefit
that would hav e been received prior to the postponed retirement date or b) the be nefit determined as of
the postponed retirement date un der the normal formula.
Funding Policy
The District's employees do n ot contribute to the Plan. Ordina nces establishi ng the Pla n provide for ac-
tuarially determined annual con tribution s, paid solely by the District, that are sufficient to pay benefits
when due. The En try A ge Normal actuarial funding method is used to determine contributions.
Annu al Pension Cost
Con tributions of $7,184,531 an d $6,775,520, excluding certai n professio nal fees paid by the District,
were made to the Plan during the Plan's calendar years e nded December 31, 2005 and 2004, respecti vely.
These con tribu tion s were made in accordance with actuarially determi ned contributio n requireme nts
based on actuarial valuations performed at January 1, 2005 and 2004, respectively, a nd for 2005 consisted
of a) $4,576,505 n ormal cost plu s b) $2,106,780 amortization of the actuarial accr ued assets in excess of
the actu arial a ccrued liability an d prior changes c) m ultiplied by an inflation factor of 1.075 .
The District provides certain profession al fees, office space, utilities, a nd other services to the Plan at no
cost. O ther costs of administering the Plan are financed from plan net assets.
40
THE METRO POLITA N ST. LOUIS SEWER DISTRI CT
Notes to Financial Statements
Jun e 30, 2006 a nd 2005
7. D efin ed Benefit Pen sion Plan (con tin ued)
Significant actuarial assu mptions used in the v aluati ons are as f oll ows:
Latest valuation date
A ctu arial cost method
A mortization method
A mortization period
Asset v aluation method
Post -retirement benefit increases
Inv estment rate of return
Projected salary in creases
Social Security wage base
(1) Inclu des inflation compon ent of 4.0%
Three -Year Trend In formation
Ja nuary 1, 2006
E ntry Age Normal
Level dollar closed
20 -year peri od
Three-year average of adj usted market val ues
3 .0% of curre nt benefit, or $50, if less
7.5% per annum (1)
5 .5% per a nn um (1)
4.5% per ann um increase (1)
Historical tren d information about the District's participation in the Plan is prese nted below to help read-
ers a ssess the Plan's funding status on a goin g -concern basis and assess progress bei ng made in accumu-
latin g assets to pay ben efits when due.
Calendar
Y ear
2005
2004
2003
Ann ual
Pension
Cost (APC)
$ 6,980,026
6,384,774
5,385,572
Percentage
of APC
Contributed
Net Pensio n
Obligation
100%
100
100
R equired Supplementary Information (un audited)
Actu arial
Valuation
Date
Schedule of Funding Progress (dollars in thousands)
(Unfu nded)
Entry Age Actu arial (UAAL) as a
A ctuarial A ctuarial Accrued Annual Percentage
Value Accru ed Liability Funded Co vered of Covered
of Assets L ia bility (U AAL) Ratio Payroll Payroll
(1) (2) (1)-(2) (1)/(2) (3) (1-2)/(3)
01/01/06 $ 158,321 $ 177,630 $ (19,309) 89.1% $ 40,144 (48 .1)%
01/01/05 142,986 168,237 (25,251) 85 .0 39,382 (64 .1)
01/01/04 133,966 159,444 (25,478) 84 .0 37,637 (67 .7)
41
THE METROPOLITA N ST. LOUIS SEWER DISTRICT
Notes to Financial Stateme nts
June 30, 2006 and 2005
8. Deferred Compen sation Plan
The District offers its employees a deferred compensation plan created in accordance with Inter nal Reve-
nue Code Section 457. The deferred compensation plan, available to all District employees, permits them
to defer a portion of their salary until future years. The deferred compensation is not a vailable to employ-
ees un til termination, retiremen t, death, disability, or due to financial hardship as defined by the Plan.
The Deferred Compensation Plan was amended and restated to comply with the Ec onomic Growth and
Tax R elief Reconciliation Act of 2001 (the Act). The Act made significant changes to Section 457(b) of
the Intern al Rev enu e Code of 1986, as prev iously ame nded . Plan assets are held in trust for the exclusive
benefit of participants and their beneficiaries u nder Section 1448 of the Small Busi ness Job Protectio n Act
of 1996. As a result, the assets an d liabilities of the Deferred Compensation Plan are not i ncl uded in the
accompanyin g financial statemen ts.
The Deferred Compen sation Plan issu es a publicly a vailable financial report that i ncludes fina ncial state-
men ts and required supplementary information. That report may be obtai ned by writing: The Metropoli-
tan St. Louis Sewer District, 2350 Market Street, St. Louis, MO 63103-2555.
9. Post -Employment Health Care Ben efits
In addition to providin g pension ben efits, the D istrict pro vides p ost -employment health care be nefits, in
accordance with District policy, to employees who elect early retirement from the District or who retire
from the District on or after attaining age 62. As of June 30, 2006 and 2005, 109 a nd 105 retirees, re-
spectiv ely, met the eligibility requirements. The District pays the mo nthly group health insurance pre-
mium for the individu al until the retiree becomes eligible for Medicare at age 65. Duri ng fiscal 2006 and
2005, ex penses of $444,648 and $363,249, respectively, were recog nized for post -retirement health care
premiu ms as those premiums were paid.
10. Self -Insu rance Programs
The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of as-
sets; errors and omissions; inju ries to employees; and nat ural disasters. The District has established a risk
management program and retains the risk related to officers', directors', and general liability; to its obliga-
tion to provide workers' compensation an d medical a nd hospitalization benefits to its employees; and to
pay water backup claims to its cu stomers. The estimated liabilities for payme nt of i ncurred (both reported
and un reported) bu t unpaid claims relating to these matters are incl uded as a compo nent of curre nt depos-
its and accrued expen ses, and as such are ex pected to be paid within o ne year of the date of the statement
of net assets. At Jun e 30, 2006 and 2005, these liabilities amo unted to $2,733,584 a nd $3,050,225, re-
spectively.
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 iss uance of the fi nancial state-
ments in dicates it is probable that a liability has bee n i ncurred and the amount of the liability can be rea-
42
THE METROPO LITAN ST. L OUIS SEWER DISTRICT
Notes to Financial Stateme nts
Jun e 30, 2006 and 2005
10. Self -In su rance Programs (continued)
sonably estimated. Changes in the balance of claims liabilities during fiscal 2006 and 2005 were as fol-
lows:
2006 2005
Liability, beginning of year $ 3,050,225 $ 3,227,973
Current year claims and changes in estimates 10,959,988 15,383,529
Claim paymen ts (11,276,629) (15,561,277)
Liability, End of Year
$ 2,733,584 $ 3,050,225
The D istrict obtain s periodic fun ding v alu ations from the third -party administrators managing the self-
insurance programs and adjusts the charges as req uired to maintain the appropriate level of estimated
claims liability. The D istrict also main tains excess liability ins urance coverage for workers' compensation
and medical an d ho spitalization claims; general liability; and water backup damage to customers' prop-
erty.
The D istrict purchases commercial insuran ce for all other risks of loss . Settled claims ha ve not exceeded
this commercial coverage in any of the past three years.
11. Closure and Postclosure Care Costs
State and federal laws and regulations requ ire the District to place a fi nal cover on its Prospect Hill Reclamation
Project landfill site when it stops acceptin g waste and to perform certain maintenance a nd mo nitori ng functions
at the site for 30 years after closure. Although closure a nd postclos ure 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 a nd p ostcl osure
care costs as an operating expense in each period based on la ndfill capacity used as of the e nd of the fiscal year .
The $498,421 and $470,256 reported as landfill closure a nd postclosure care liabilities at June 30, 2006 and
2005, respectively, represent the cumulative amounts reported at fiscal year-end based on the use of 75% and
75% of the estimated capacity of the landfill for fiscal years ended 2006 and 2005, respectively. The District
will reco gn ize the remaining estimated cost of closure and postclosure care of $168,984 at J une 30, 2006 as the
remain in g estimated capacity is filled. These amounts are based on what it wo uld cost to perform all closure
and postclosure care in 2006. The District ex pects to close the landfill in the year 2012 . Actual cost may be
higher due to inflation , changes in technology, or changes in regulatio ns.
The District is required to demon strate that it has the financial capability to close the landfill to the State
of Missouri throu gh the u se of a finan cial test as specified in 10 CSR 80-2.030(4)(D)6 of the Missouri
Solid Waste Management Rules. The D istrict has complied with the State's req uirement. The District
recognizes that estimates of clo sure costs may change as a res ult of i nflation, deflation, and/or changes in
technology and applicable laws an d regulation s. If clos ure cost estimates change, the liability c urrently
reported on the balance sheet will be adjusted accordingly.
43
THE METRO PO LITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2006 and 2005
12. Commitments and Contingencies
On or abou t July 29, 2002, the District entered into a Settlement Agreeme nt with Misso uri Department ofNatu-
ral Resources (MDNR), the Missouri Clean Water Commission (Commission), and the Missouri Attor ney Gen-
eral regarding the Baumgartner Sewage Treatmen t Facility (Baumgartner).
Prev iously, the State filed the case of State of Missouri ex rel . William L. Webster, et al . v. The Metropolita n St.
Louis Sewer District, No. 864-0025 0, against the District with respect to certai n alleged past a nd conti nuing vio-
lation s of the Federal Water Pollution Control Act, 33 U.S.C. §§1251 et seq., the Missouri Clea n Water Law
§644. 006, et seq., RSMo, an d Missouri State Operating Permits issued to vario us sewage treatment facilities
and other facilities owned and operated by the D istrict . An Amended Consent Judgment was entered by the
Circuit Cou rt on January 20, 1989.
Paragraph XX IV of the Amen ded Con sent Judgment further provided, in pertinent part, that the Amended Con-
sent Judgment shall terminate when the District has achie ved substa ntial compliance with the fi nal effl ue nt limi-
tations for the Bissell Point Facility and Bau mgartner for a period of one year . One of the p urposes of the
Amended Consent Judgmen t was for the District to achieve and then continue to achie ve compliance with its
Missouri State Operating Permit effluen t limitations at Baumgartner .
Un der said settlement agreement the District agreed to take certain measures to achieve temporary compliance
with fecal coliform permit limits at Baumgartner. Ultimately, the District is to take the Ba umgartner lagoo n off-
lin e on or before D ecember 31, 2006. This will be done by connecti ng the sewage flow going to Baumgart ner
to a new Meramec Wastewater Treatment Facility. Furthermore, the parties agreed that the District will com-
plete closure of the Baumgartn er lagoon pursuant to 10 CSR 20-6 .010(12) within 24 months of taking the
Baumgartner lagoon offline. As of May 31, 2003, a moratorium on further sewer co nnects to Baumgartner will
be enacted should the District be unable to meet identified effluent limits.
In addition, shou ld the D istrict fail to meet an y of the deadli nes set out in the Settlement Agreeme nt or violate
an y of the terms contained therein, the penalties for each missed deadline could reach a ma ximum of $10,000
per day, per violation.
The District is the current owner of a piece of property located adjace nt to the Great Lakes Container Corpora-
tion Superfund Site and the Bissell Facility. As part of the Great Lakes Container Corporation S uperfund clean
up, the En viron men tal Protection A gency (EPA) remo ved approximately 800 buried drums from the District's
property. The total cost of the site clean up was $9,127,244, distributed among se veral respo nsible parties. As
the cu rrent owner of the property, the District's assigned share of the total was $365,090. On August 14, 2002
the U. S. Department of Ju stice confirmed an agreement in principle with the District.
Un der this agreemen t in principle, the D istrict was to pay $230,000 in e xcha nge for contribution protectio n un-
der the Comprehen siv e Environ men tal Response, Compensation, and Liability Act (CERCLA) a nd a covenant
not to su e for past respon se costs. Appropriate monies were set aside from the fiscal year 2002 budget to pay
said fine. The consent decree was rev iewed by D OJ, EPA -Region 7, a nd M DNR, and timely placed in the Fed-
eral Register for comments.
44
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2006 and 2005
12. Commitments and Contin gencies (contin ued)
On N ovember 19, 2003, the proposed consen t decree was filed with the U .S . District Co urt for the Easter n Dis-
trict for Missouri. Subsequen tly, on March 30, 2004, co-defenda nt Mallinckrodt, Inc. intervened in the case ar-
guing primarily that the District's settlement was not fair and reasonable u nder the totality ofthe facts presented.
On August 11, 2004, D OJ's an d the District's Motion to Support the consent decree was heard by the Court.
The Court granted said Motion on September 9, 2004. Based upon entry of the Co nse nt Decree, the District
wired a paymen t to DOJ for $230,000 on October 8, 2004.
On October 7, 2004 co-defendant Mallinckrodt, Inc. filed a Motion to Alter the Judgment Based on Newly Dis-
cov ered Evidence. This Motion was denied by the Court on December 22, 2004. On January 25, 2005 Mal-
lin ckrodt Inc. filed a R ule 60(b)(3) Motion for Relief from Judgment . On February 1, 2005 the Court denied
this Motion. On February 17, 2005 Mallinckrodt, Inc . appealed to the U.S . Co urt of Appeals. The District,
DOJ, an d Mallinckrodt, In c. submitted briefs on June 13, 2005 . On March 6, 2006 the U .S. Co urt of Appeals
affirmed the D istrict Cou rt's rulin g to deny Mallinckrodt, I nc.'s motion .
EPA an d MDNR are con siderin g in itiating legal action against the District on the grounds that alleged, u nper-
mitted discharges of u ntreated wastewater from combi ned sewer overflows (CSO's) and sanitary sewer over-
flows (SSO 's) con stitute violations of the Clean Water Act 33 U .S.C . § 1311 . At this time the District's se nior
staff and Office of G eneral Coun sel are in preliminary discussio ns with EPA and MDNR and ha ve presented
the District's Capital Improvement Plan to both organizations for their review and consideratio n. By statute
each day of an u nlawful discharge represents a day of violation, a nd the Missouri Clea n Water Law pro vides for
a civil penalty with a maximum of $10,000 per day, per violation. C urrently, no lawsuits have bee n filed in this
matter. Since July 22, 2003, the D istrict has met a number of times with EPA, DOJ, a nd D OJ's technical con-
sultant. On A ugust 20, 2004, the District received a Sectio n 308 letter from EP A Region VII, which is an offi-
cial request for information an d documen tation . On January 19, 2005 the District provided an i nitial respo nse to
the Section 308 letter. The D istrict continues to submit deliverables required by the Section 308 letter in a
timely manner.
The D istrict has been named as a defen dant in several other lawsuits, some of which seek s ubstantial damages.
In the opinion of District managemen t, non e of these lawsuits will have a material impact on the fina ncial posi-
tion of the District.
The District has en tered into construction an d other contracts amounting to approximately $215,070,115 and
$169,691,000 at Jun e 30, 2006 and 2005, respectively. Grants to be received from various go vernme ntal agen-
cies an d entities to partially off set the cost of the contract commitments amo unted to appro ximately $772,000
and $2,990,000 at Jun e 30, 2006 an d 2005, respectively.
At Ju ne 30, 2006, the D istrict had $114,205,000 bonds authori zed, but uniss ued . These bonds will conti nue to
fun d the first of four phases of a 20 -year wastewater capital improvement program.
45
THE METRO PO LITA N ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
Ju ne 30, 2006 and 2005
13. Fu tu re Accoun ting Pron ou ncements
GA SB Statemen t No. 43, Financia l Reporting for Postemployment Benefit Pl ans Other Than Pe nsi on Plans
(GASB 43), and GASB Statement No. 45, Accounting and Fin ancial Reporti ng by Empl oyers for Postem-
ploymen t Benefits O ther Tha n Pen sion Plans (GASB 45), establish accounti ng and financial reporting stan-
dards for postemployment benefits other than pensions. As part of a total compensation package, many gov-
ernmen ts offer postemploymen t ben efit plans other than pe nsions such as healthcare, life ins urance, and so
forth. GASB 43 establishes uniform financial reporting sta ndards for other postemployment be nefit ( OPEB)
plans and applies to OPEB trust fun ds in cluded in the fina ncial reports of plan spo nsors or employers, as well as
in stan d-alon e finan cial reports. GA SB 45 establishes sta ndards for the meas ureme nt, recognition, and display
of OPEB expense/ex penditures and related liabilities (assets), note disclosures, and, if applicable, required sup-
plementary information in the financial reports of state and local go vernment employers . GASB 43 will be ef-
fective for the District for the fiscal year ending June 30, 2007, a nd G ASB 45 will be effecti ve for the District
for the fiscal year en din g June 30, 2008. Man agement of the District has not yet completed its assessment ofthe
statemen t.
46