HomeMy Public PortalAboutExhibit MSD 16S 2007 Annual AuditExhibit MSD 16S
THE METR OP OLITAN ST. LOUIS
SEWER DIST RICT
FINANCI AL REP ORT
(Audited)
Year E nded June 30, 2007
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THE METROPO LITAN ST. L OUIS SEWER DISTRICT
Table of Contents
June 30, 2007 and 2006
Page
INDEPEN DENT AU DITO RS' REPORT 1
MA NA GEMEN T'S DISCUSSION AN D ANALYSIS 3
FINA NCIA L STA TEMENTS
Statements of Net Assets 14
Statements of Rev en ues, Expen ses, and Changes in Net Assets 16
Statemen ts of Cash Flows 18
Notes to Fin an cial Statements 20
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Hochschild, Bloom & Company LLP
Ce rtified Public A cco unta nts
Co nsultants and Advisors
INDEPENDENT AUDIT ORS' REPO RT
October 9, 2007
Board of Trustees
THE METR OPO LITAN ST. LO UIS SEWER DISTRICT
We have audited the basic fin an cial statements of THE METR OP OLIT AN ST . L OUIS SEWER
DISTRICT (the District) as of Jun e 30, 2007 and 2006 and for the years then ended, as listed in the accom-
pan ying table of conten ts. These fin an cial statements are the responsibility of the District's management.
Our respon sibility is to express an opin ion on these fi nancial statements based on our audits .
We conducted ou r audits in accordance with U .S. generally accepted a uditi ng standards a nd the standards
applicable to finan cial au dits contained in G overnment Auditing Standards, issued by the Comptroller Ge n-
eral of the United States. Those standards require that we plan and perform the audits to obtain reaso nable
assu ran ce about whether the finan cial statements are free of material misstatement. An audit includes co n-
sideration of internal control over financial reporti ng as a basis for designing audit procedures that are ap-
propriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
District's internal con trol ov er finan cial reporting. Accordi ngly, we e xpress no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial state-
men ts, assessing the accou nting prin ciples used and significant estimates made by management, as well as
ev aluatin g the overall financial statemen t presentation . We believe that our audits provide a reasonable basis
for our opin ion .
In our o pin ion, the financial statements referred to above present fairly, in all material respects, the fina ncial
position of the D istrict as of June 30, 2007 and 2006, and the results of its operatio ns and its cash flows for
the years then ended, in conformity with U .S. generally accepted accounting principles.
The management's discussion and analysis is not a required part of the basic fina ncial statements but is sup-
plemen tary information requ ired by U.S. generally accepted accou nti ng principles . We have applied certai n
limited procedures, which con sisted principally of inquiries of management regarding the methods of meas-
u rement and presentation of the required supplementary information . However, we did not audit the infor-
mation and ex press no opinion on it.
❑ 16100 Chesterfield Pa rkway West, Suite 125, Chesterfield, Missouri 63017-4829, 636-532-9525, Fax 636-532-9055
❑ 1000 Washington Square, P.O. Box 1457, Wa shington, Missouri 63090-8457, 636-239-4785, Fax 636-239-5448
www.hbclp.co m rotARIS- Member: Polaris Internation al with Firms in Principal U.S. and Int ernational Cities
In accordan ce with Govern men t Auditing Standards, we have also issued our report dated October 9, 2007
on our consideration of the D istrict's in ternal control over fi na ncial reporting and on our tests of its compli-
ance with certain provision s of laws, regu lations, contracts, and grant agreements a nd other matters. The
purpose of that report is to describe the scope of our testing of inter nal control over fina ncial reporting and
complian ce and the results of that testing, and not to provide an opinion on the internal co ntrol over fi nancial
reportin g or on compliance. That report is an integral part of an audit performed in accorda nce with Gov-
ern ment Auditin g Standards and should be considered in assessing the res ults of o ur audits .
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CERTIFIED PUBLIC ACCOUN TA NTS
2
THE METROPO LITAN ST. L OUIS SEWER DISTRICT
Management's Discussion and Analysis
for the years ended June 30, 2007 and 2006
The ann ual report of The Metropolitan St. Lou is Sewer District (the District) includes the independent audi-
tors' report, managemen t's discussion and analysis (MD&A), and the financial statements accompanied by
notes essential to the user's u nderstanding of the financial statements.
Management of the District has provided this MD &A to be used in combi nation with the District's fmancial
statements. This narrative is in tended to prov ide the reader with more insight into management's knowledge of
the transactions, even ts, and conditions reflected in the accompanying fmancial statements and the fiscal poli-
cies that govern the D istrict's operations.
2007 Financial Highlights
➢ Net capital assets increased by $118. 4 million due to conti nued high le vels of spe nding related to the
regulatory required Capital Improvement and Replacement Program (CIRP).
o Treatment an d disposal plant an d equipment $ 221.7 million
o Less: Construction in progress (CIP) $ 116.5 millio n
o Collection and pumping plant $ 54.9 million
o General plant an d equ ipmen t $ 1.3 million
o Less: Change in accumulated depreciation $ 43.0 million
D. Cash and cash equivalents balances in creased by $89.5 million, while investment balances decreased
by $44. 5 million, from fiscal year 2006 to fiscal year 2007 . The overall increase is due to the iss u-
ance of Series 2006B an d Series 2006C bonds. The high level of cash compared to investment bal-
ances is due to the more fa vorable short-term rates a vailable to the District.
D. Bon ds an d notes payable balances, net of unamortized premi um a nd issue costs, increased by $68.6
million in most part du e to the issuance of Series 2006B and Series 2006C bonds in the amounts of
$14.2 million and $60.0 million respectively. Retirements of $8.2 million and changes in the unam-
ortized premiu m balan ce an d the balance of bo nd issuance costs netting to $2.6 million c ombine for
the remaining $5.6 million in chan ge.
➢ Operating income declined by $12.5 million compared to prior year . The decli ne stems from lowered
billed volumes an d higher operating expenses.
➢ Inv estment income rose by $9. 3 million due to favorable rates and larger in vestment balances .
2006 Finan cial Highlights
D. Net capital assets increased by $143. 8 million due to continued high levels of spendi ng related to the
CIRP.
o Collection an d pumpin g plant $ 92.1 million
o Construction in progress (CIP) $ 90.0 million
o Treatment and disposal plant and equipment $ 2.9 million
o General plant and equipment $ 1.0 million
o Land $ 0.1 million
o Less: Chan ge in accumulated depreciation $ 42 .3 million
➢ Cash and cash equiv alents balan ces increased by $36.5 million, while i nvestment balances decreased
by $41. 1 million , from fiscal year 2005 to fiscal year 2006 . The shift from longer -term investments to
cash and cash equ ivalen ts occurred as a result of the curre nt interest rate e nviro nment in which an in -
3
THE METROPOLITA N ST. LOUIS SEWE R DIST RICT
Ma nagement's Discussion and Analysis
for the years ended June 30, 2007 and 2006
verted yield curve makes short-term inv estments more attractive than long-term in vestments a nd to
provide su fficient liquid assets to fund the CIRP.
> Bonds an d n otes payable balances, net of unamortized premium and issue costs, increased by $37.6
million in most part due to the issuance of Series 2006 A bonds in the am ount of $42.7 million. Re-
tirements of $5.5 million and changes in the unamortized premium balance and the balance of bond
issuance costs netting to $0.4 million combine for the remaining $5.1 millio n in cha nge .
> Capital contributio ns increased by $36.7 million due to the transfer of assets related to 293 develop-
ments in fiscal year 2006 versus 194 in fiscal year 2005.
> Operating reven ues increased by $17.8 million or 9.4% as a result of the rate increase that took affect
in July 2005.
Required Financial Statements
The financial statements presented by the management of the District i ncl ude the Stateme nts of Net Assets;
Statements of Revenues, Expenses, and Changes in Net Assets; and Statements of Cash Flows . These state-
ments are prepared using the accrual basis of accoun ting. This method of acco unti ng recognizes revenues at
the time they are earned and ex penses when the related liability occurs . As a result of using this method of
accou nting, the District's performance over the time period being reported is more easily determinable .
The Statemen ts of Net Assets provides a report of the District's current, restricted, and other noncurrent assets such as
cash, in vestments, receivables, an d property. Also, the Statements of Net Assets pro vides a summary of the District's
current, restricted, an d non curren t liabilities, inclu ding contracts and accounts payable, deposits and accrued ex-
penses, and bond and notes payable. The final section of the Statements of Net Assets, the net assets section, co ntains
earnings retain ed for use by the District. Increases or decreases in the net assets sectio n maybe i ndicative of an im-
provin g or declin ing financial position. This statement provides the basis for computing rate of return, e val uating the
capital structure of the District, an d assessin g the liqu idity and fmancial flexibility of the District.
The Statements of R evenues, Ex penses, and Changes in Net Assets summarizes all of the year's revenues and
expenses. This statement indicates how successful the District was at maintaining expenses below the level of
reven ues earn ed.
The Statements of Cash Flows accounts for the net change in cash and cash equivalents by summarizing cash re-
ceipts and cash disbursements resulting from operating acti vities, noncapital fmancing activities, capital a nd re-
lated finan cing activities, and inv esting activities. This statement assists the user in determining the sources of
cash comin g into the District, the items for which cash was expe nded, and the begin ning and ending cash balance .
Financial Analysis
The overall financial condition of the District is strong as i ndicated by the increase in net assets over the past year.
The D istrict had income befo re capital contributions of $56 .5 million in fiscal year 2007, compared to $59 .2 million
in 2006 and $42. 1 million in 2005. Plans for maintaining the District's ability to meet future spending needs are dis-
cussed in greater detail in the section of the MD&A en titled " Decisions Impacti ng the Future."
4
THE METROPOLITAN ST. L OUIS SEWER DISTRICT
Management's D iscussion and Analysis
for the years ended June 30, 2007 and 2006
Con den sed Finan cial Statemen ts and A nalysis
The Metropolitan St . Louis Sewer District
Condensed Statements of Net Assets
(000s)
Increase Increase
( Decrease) (Decrease)
2007 2006 2007-2006 2005 2006-2005
Assets:
Cu rrent, Restricted, and Other A ssets $ 566,700 $ 523,948 $ 42,752 $ 523,666 $ 282
Capital Asse ts (net of accu mulated
depreciation) 2,004,792 1,886,435 118,357 1,742,683 143,752
Total assets 2,571,492 2,410,383 161,109 2,266,349 144,034
Liabilities:
Current Liabilities 68,285 52,685 15,600 57,115 (4,430)
Noncurren t Liabilities 446,023 381,333 64,690 345,006 36,327
Total liabilities 514,308 434,018 80,290 402,121 31,897
N et Assets:
Investe d in capital asse ts, net of
related debt 1,723,093 1,652,348 70,745 1,625,673 26,675
R estricted 276,069 273,062 3,084 193,803 79,259
Un restricted 58,022 50,955 6,990 44,752 6,203
Total Net Assets
2007 Analysis
$ 2,057,184
$ 1,976,365 $ 80,819
$ 1,864,228 $ 112,137
Total n et assets in creased $80.8 million , or 4. 1%, over prior year. This change is due to an increase in total
assets of $161.1 million and an increase in liabilities of $80.3 million .
Net capital assets increased by $118.4 million , while curre nt, restricted, a nd other assets increased by $42.8
million. The increase in capital assets can be attributed to an increase in treatment a nd disposal plant of $221.7
million, collection and pu mping plant of $54.9 million, general plant and equipment of $1.3 million, and off-
settin g decrease in construction in progress of $116.5 million a nd an increase in accumulated depreciation of
$43.0 million. The in crease in current, restricted, and other assets is mostly attrib utable to the i ncrease in cash
equivalents an d investment of $45. 0 million as a result of i nvesti ng funds made available by the issuance of
new debt.
The change in total liabilities breaks down to in creases in curre nt and noncurrent liabilities of $15 .6 million
and $64.7 million , respectiv ely. The increase in n on current liabilities is the result of the issua nce of new debt .
Current liabilities are up in large part du e to an increase in contracts and accou nts payable of $7.3 million due
to the timin g of some large con struction progress payments . The c urrent portion of bonds and notes payable
also contributed $3.7 million towards the $15. 6 million increase. The remaining $4 .6 million is a combination
of deposits and accrued ex penses and retainage payable.
5
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion and Analysis
for the years ended June 30, 2007 a nd 2006
2006 Analysis
Total net assets increased $112.1 million, or 6. 0%, over prior year. This change is the result of an increase in
total assets of $144. 0 million an d an increase in liabilities of $31.9 million.
N et capital assets increased by $143.8 million in fiscal year 2006 from fiscal year 2005 acco unting for the
ov erwhelming majority of the change in total assets. Current, restricted, and other assets accou nt for the other
$0.2 million of the $144.0 million dollar increase. The change in net capital assets can be attrib uted to an i n-
crease in collection and pumping plant of $92.1 million and an increase in construction in progress of $90.0
million with an offsetting increase in accumulated depreciation of $42 .3 million. The remaining increase of
$4.0 million is a combination of treatment and disposal pla nt and equipme nt, general plant and equipment, a nd
land.
The change in total liabilities of $31.9 million is representati ve of an increase in noncurre nt liabilities of $36.3
million and a decrease of current liabilities of $4. 4 million. Noncurrent liabilities increased by $36 .3 million
almost exclusively due to the issuance of Series 2006A bonds through the state revolvi ng fu nd (SRF) in the
amount of $42.7 million. The retirement of bonds totaling $5 .5 million, less a net change in unamortized pre-
miu m and accretion of bond issu ance costs of $0.4 million, a nd a $1.7 million change in the current portion of
bonds payable combine to offset the $42.7 million and account for the change in noncurrent bonds and notes
payable. An increase in deposits and accrued expenses of $0.4 million rounds out the variance in noncurrent
liabilities from fiscal year 2005 to fiscal year 2006.
6
THE METROPO LITAN ST. LO UIS SEWER DISTRICT
Management's D iscussion and Analysis
for the years ended June 30, 2007 and 2006
The Metropolitan St. Louis Sewer District
Sta tements of Revenues, Ex penses, and Changes in Net Assets
(000s)
I ncrease Increase
( Decrease) (Decrease)
2007 2006 2007-2006 2005 2006-2005
Operatin g Rev enu es:
Sewer service charge s $ 198,993 $ 203,880 ($ 4,887) $ 183,513 $ 20,367
Re cove ry of (provision for) doubtful
sewer service charge accounts (4,194) (3,161) (1,033) (1,546) (1,615)
Licenses, permits, and other fees 6,031 5,210 821 6,549 (1,339)
Other 1,376 873 503 478 395
To tal operating rev enu es 202,206 206,802 (4,596) 188,994 17,808
Nonoperating Revenues:
Property taxe s levied by the District 24,401 23,211 1,190 22,016 1,195
Inv estment in come 16,946 7,610 9,336 5,502 2,108
Rent income 878 1,027 (149) 1,038 (11)
Total nonoperating revenues 42,225 31,848 10,377 28,556 3,292
Total rev enues 244,431 238,650 5,781 217,550 21,100
Operating Expenses:
Pumping and treatmen t 37,848 38,316 (468) 35,514 2,802
Collection system mainte nance 27,718 27,792 (74) 25,225 2,567
Engineering 8,864 8,737 127 6,851 1,886
Gen eral and administrative 39,200 37,055 2,145 37,047 8
Depreciation 45,721 43,980 1,741 44,443 (463)
Other 24,460 20,009 4,451 13,294 6,715
Total operating expenses 183,811 175,889 7,922 162,374 13,515
Nonoperating Expen ses:
Capital improvement surcharge refund 15 95 (80) 5,667 (5,572)
Net loss on disposal an d sale of
utility plan t 97 95 2 3,139 (3,044)
N onrecurring projects and studies 3,999 3,375 624 4,292 (917)
To tal n ono perating expenses 4,111 3,565 546 13,098 (9,533)
Total expenses 187,922 179,454 8,468 175,472 3,982
In come before Capital Con tributions 56,509 59,196 (2,687) 42,078 17,118
Capital Con tribu tio ns 24,310 52,941 (28,631) 16,351 36,590
Change in N et Assets 80,819 112,137 (31,318) 58,429 53,708
Net A ssets -Beginning of Year 1,976,365 1,864,228 112,137 1,805,799 58,429
N et Assets -End of Year $ 2,057,184 $ 1,976,365 $ 80,819 $ 1,864,228 $ 112,137
7
THE METROPO LITA N ST. LOUIS SEWER DISTRICT
Mana gement's Discussion and Analysis
for the years ended June 30, 2007 and 2006
2007 Analysis
N et assets increased $80.8 million or $31.3 million less than in the prior year . While i ncome before capital
contributions remained very close to prior year levels, capital contrib utions declined significa ntly. Capital co n-
tributions declined by $28.6 million due to a fall in the number of developme nts gifted to the District of $30.4
million offset partially by $1. 8 million in crease in grant revenues.
Total revenues increased $5.8 million thanks to in creases in i nvestment income of $9.3 million. Sewer ser vice
charges declined by $4. 9 million in comparison to prior year as a result of lower billed volumes. Other reve-
nues, such as property taxes and other revenue, netted to a $1.4 milli on increase in revenue.
Operating ex penses increased by $7.9 million. Other expenses, ge neral a nd administrative expenses, and de-
preciation ex pense increased by $4.5 million, $2.1 million, a nd $1.7 million, respectively. Increased spe nding
in combined sewer area and separate sewer area inflow and infiltration studies account for the $4.5 million in-
crease in other expen ses. General and administrativ e expe nses increased in most part as a result of a lawsuit
filed by the EPA and the State of Missouri for which the District booked a $1.0 milli on reserve for judgme nt
and claims settlement. Depreciation ex pense rose most significantly as a result of the new treatment plant be-
ing capitalized in fiscal year 2007. Pu mping and treatme nt, collection system mai nte nance, and engi neering
ex penses netted a decrease of $0. 4 million in operating expenses.
2006 Analysis
Net assets increased $112. 1 million, which was $53.7 million over 2005 . The largest co ntributi ng factor in the
increase in net assets is the increased lev el of capital contributions . In fiscal year 2006, capital contributions
totaled $52. 9 million while in fiscal year 2005 they were $16.4 million. This change accounts for $36.5 mil-
lion of the total change in net assets, and is a result of a larger number of de velopme nts being gifted to the Dis-
trict.
An other significant factor in the $53.7 million increase in net assets over 2005 was the increase in sewer ser-
vice charge revenu es totaling $20.4 million as a result of the rate increase that took affect in July of 2005.
Operating expenses increased by $13.5 million or 8.3% over prior year. The largest increase in operating e x-
penses occurred in other operating ex penses in the amount of $6.7 million. This increase is a result of greater
spen ding on infrastructu re repair and data collection projects. Additionally, pumping and treatment, collection
system maintenance, and engineering expen ses increased by $2.8 million, $2.6 million, and $1.9 million, re-
spectively, while depreciation ex pense decreased by $0.5 milli on .
Nonoperating expen ses decreased by $9.5 million or 72.8% over prior year. The decrease can be attributed to
the capital improvemen t su rcharge refun d. $5. 7 million of the refu nd was expensed in fiscal year 2005, while
only $0.1 million was charged in fiscal year 2006. The other major contributing fact or to the $9.5 million de-
crease is a drop in the net loss on disposal and sale of utility plant in the am ount of $3.0 million . In fiscal year
2005, land v alued at ov er $3.0 million was gifted to the City of Maplewood .
8
THE METROPOLITAN ST. L OUIS SEWER DISTRICT
Management's Discussion and Analysis
for the years en ded June 30, 2007 and 2006
The Metropolitan St. Louis Sewer District
Condensed Statements of Cash Fl ows
(000s)
I ncrease Increase
(Decre ase) (Decrease)
2007 2006 2007-2006 2005 2006-2005
Cash flows from operating
activities $ 72,214 $ 69,033 $ 3,181 $ 71,563 ($ 2,530)
Cash flows from noncapital
financing activ ities 24,401 23,211 1,190 22,016 1,195
Cash flows from capital
and related finan cin g
activities (68,948) (105,123) 36,175 (145,635) 40,512
Cash flows fro m inv estin g
activities 61,784 49,380 12,404 (105,948) 155,328
N et increase (decrease ) in
cash and cash equivalen ts 89,451 36,501 52,950 (158,004) 194,505
Cash and cash equ ivalents
at be ginnin g of year
Cash and Cash Equ iv alen ts
at End of Y ea r
2007 Analysis
103,089 66,588 36,501 224,592 (158,004)
$ 192,540 $ 103,089 $ 89,451 $ 66,588 $ 36,501
Cash and cash equivalents at the end of the year increased by $89 .5 millio n. The most significant i ncrease oc-
curred in cash flows from capital and related financing acti vities. These cash o utflows of $68 .9 million were
favorable to prior year by $36.2 million, an d they were most significantly affected by an increase in proceeds
from issuance of debt an d the prior year refund of the Clean Water Capital Improvement Trust Fund. Also
significant was the cash flows from investin g activities which were $61 .8 million or $12.4 million more than in
the prior year, as a result of increased investment balances a nd a fa vorable rate en vironment. Cash flows from
operating activities increased $3. 2 million over last year in large part due to a decline in payments to suppliers
for goods an d services of $2. 9 million. Finally, the increase in cash flows from noncapital financing activities
is related to the in crease in assessed property values resulting in increased ta x revenue for the District.
2006 Analysis
The net increase in cash and cash equ iv alen ts experienced a $194.5 millio n increase in relatio n 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 in vesting activities was a positive $49.4 millio n while in fiscal year 2005 the District had
a negativ e cash flow from in vesting activ ities of $105.9 million . Bond proceeds originally converted to long-
term investments hav e been con verted to cash to cov er CIRP expenses a nd to take advantage of better i nterest
rates on sho rt-term investments.
9
THE METR OPOLITAN ST. LOUIS SEWER DIS TRIC T
Management's Discussion and Analysis
for the years ended June 30, 2007 and 2006
Cash ou tflows from capital and related financing activities increased by $40 .5 million in fiscal year 2006. In
fiscal year 2006, the D istrict's proceeds from issuance of debt increased by $35.6 million. Payments for capital
improvements decreased by $14.8 million, principal and interest and fees paid on debt i ncreased by a com-
bin ed $3. 7 million , cash refunded for the clean water capital improvement surcharge increased by $5 .8 million,
and proceeds from capital grants and sale of utility plant declined by a net of $0 .4 million.
Capital Assets
The Metropolitan St. Lo uis Sewer District
Capital Assets
Net of D epreciation (000s)
I ncrease I ncrease
(Decrease) (Decrease)
2007 2006 2007-2006 2005 2006-2005
Land $ 26,976 $ 26,976 $ -- $ 26,912 $ 64
Con struction in progress 249,127 365,628 (116,501) 275,615 90,013
Treatment and disposal plant and equipment 483,762 278,200 205,562 290,262 (12,062)
Co llection and pumping plant 1,228,821 1,200,494 28,327 1,134,222 66,272
General plant and equ ipment 16,107 15,137 970 15,671 (534)
Total $ 2,004,793 $ 1,886,435 $ 118,358 $ 1,742,682 $ 143,753
2007 Analysis
Total capital assets, net of depreciation, increased $118.4 millio n over prior year . Treatment and disposal plant
an d equipment incurred the most significant change. It increased $205.6 million mostly d ue to the capitaliza-
tion of the D istrict's newest treatment plant. Also significant is the decrease in construction in progress of
$116. 5 million resultin g from a new treatment plant placed i nto service offset by co nti nued high levels of CIRP
spen din g. Collection and pumping plant increased by $28 .3 million or $38.0 million less tha n it had in prior
year as a result of lower levels of contributed capital assets, and general plant and equipment increased by $1 .0
million.
2006 A nalysis
Total capital assets, net of depreciation, increased $143 .8 million over prior year. The most significant in-
crease was to construction in progress, which rose by $90 .0 million . Collection and pumping plant also in-
creased by a significant amount of $66.3 million in large part due to the increase in contributed assets. Treat-
ment and disposal plant and equipment decreased by $12.1 million as depreciation o utpaced additio ns in this
asset category. Finally, general plant an d equipment decreased by $0.5 millio n in relation to the prior year, a nd
land increased by less than $0.1 million.
For addition al information related to the District's capital assets, see Note 3 to the fmancial statements .
10
THE METRO PO LITA N ST. LOUIS SEWER DISTRICT
Management's D iscussion and A nalysis
for the years ended June 30, 2007 and 2006
Long-term Debt
The Metropolitan St. Louis Sewer District
Long-term Debt
(000s)
Increase Increase
( Decrease) (Decrease)
2007 2006 2007-2006 2005 2006-2005
Revenu e Bonds:
Series 2004A $ 171,995 $ 173,500 $ (1,505) $ 175,000 $ (1,500)
Series 2004B 150,312 156,245 (5,933) 160,152 (3,907)
Series 2005A 6,520 6,800 (280) 6,800 --
Series 2006A 42,615 42,715 (100) -- 42,715
Series 2006B 14,205 -- 14,205 --
Series 2006C 60,000 -- 60,000 --
West Watson and Nanell 175 486 (311) 536 (50)
Ozark and Tablerock 94 116 (22) 147 (31)
Energy Loan Program 69 79 (10) 89 (10)
$ 445,985 $ 379,941 $ 66,044 $ 342,724 $ 37,217
2007 Analysis
The D istrict ended fiscal year 2007 with $446. 0 million in long-term debt outstanding, consisting mainly of
revenue bonds. The increase of $66.0 million is a result of new issues in the amou nt of $74.2 million and re-
tirements of $8. 2 million.
2006 Analysis
The D istrict ended fiscal year 2006 with $379.9 million in long-term debt outstandi ng, co nsisti ng mai nly of
rev enue bonds. The increase of $37.2 million is a result of new issues in the amo unt of $42 .7 million and re-
tiremen ts of $5.5 million.
For addition al information related to the D istrict's long-term debt, see Note 5 to the fmancial statements.
Decisions Impacting the Future
In the upcoming fiscal year, the D istrict intends to begin the wet weather expansion of the Lemay treatment
plant and begin the second phase of its multi -decade wastewater capital improvement and replacement pro-
gram. Both of these efforts will be funded primarily on a pay -as -you go basis and supplemented as necessary
by the remain ing $40. 0 million proceeds of the $500 million in bo nds authorized by St. Louis voters in Febru-
ary 2004.
The D istrict will begin implemen tation of an ex panded stormwater maintenance and infrastructure improve-
men t program in fiscal year 2008. This sto rmwater initiative is possible due to the adoption of new stormwater
rate stru cture based on customer impervious area which will yield a projected additional $28 million o ver the
11
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Ma nagement's Discussion and Analysis
for the years ended June 30, 2007 and 2006
nex t 5 years. This fun ding will prov ide a projected total of $92 million in stormwater improvements by fiscal
year 2012.
The D istrict will also respond to a lawsuit filed on June 11, 2007 by the U .S . En vironme ntal Protectio n Agency
and the Missouri Department of Natural Resources. See Note 12 for additional informatio n regarding this liti-
gation.
Requ ests for Information
This financial report is design ed to provide a general overview of the District's fina nces for all those with an
in terest in the District's fmances. Questions concerning any of the information provided in this report or re-
qu ests for additional finan cial information should be addressed or e -mailed to:
Janice M. Zimmerman, Director of Finance
The Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103-2555
or
jzimmer@stlmsd. com
12
CA
i
THE METRO PO LITAN ST. LO UIS SEWER DISTRICT
Statements of Net Assets
June 30, 2007 and 2006
ASSETS
2007 2006
Current Assets:
Cash and cash equ iv alents $ 22,545,737 $ 11,919,000
Investments 9,806,705 8,701,028
Sewer service charges receiv able, less allowance of $2,922,000
in 2007 and $2,906,000 in 2006 27,030,264 27,151,790
Unbilled sewer service charges receivable, less allowan ce of $312,000 15,599,712 15,961,693
in 2007 and $326,000 in 2006
A ccrued income on inv estments 302,762 241,174
Grants receiv able 20,166 10,434
Other receivables, less allowance of $27,853 in 2007 and
$6,934 in 2006 744,596 1,945,845
Su pplies inventory 7,437,689 7,972,849
Total current assets 83,487,631 73,903,813
N oncurren t Assets:
Restricted Assets:
Cash and cash equivalents 169,994,047 91,169,876
Inv estments 295,587,011 346,775,935
A ccrued income on investments 2,994,002 2,721,930
Gran ts receivable 530,602
Other receivables 248,771 54,161
468,823,831 441,252,504
Other Assets:
Long-term inv estments
14,388,086 8,792,859
Capital Assets:
Deprecia ble:
Treatment and dispo sal plant and equipment 791,451,221 569,721,790
Collection and pumping plant 1,661,514,054 1,606,656,767
General plant and equipmen t 54,483,299 53,194,761
Less: Accumulated depreciation
1,728,689,530 1,493,830,853
Nondepreciable:
Land 26,976,107 26,976,107
Construction in progress 249,126,873 365,627,566
N et capita l assets 2,004,792,510 1,886,434,526
Total non current assets 2,488,004,427 2,336,479,889
2,507,448,574 2,229,573,318
778,759,044 735,742,465
Total Assets
2,571,492,058 2,410,383,702
See the accompan ying n otes to the finan cial statements .
14
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
LIABILITIES
t
i
2007 2006
Current Liabilities:
Contracts an d accounts payable 13,123,349 8,623,266
Deposits and a ccrued expe nses 17,616,037 16,518,268
Retainage payable 23,768 33,970
30,763,154 25,175,504
Current Liabilities --Payable From Restricted A ssets:
Contracts and accou nts payable 18,527,848 15,685,704
Deposits and a ccrued expenses 3,634,222 2,411,785
Retainage payable 6,773,031 5,052,722
Current po rtio n of bon ds and n otes payable 8,053,048 4,359,578
Total cu rrent liabilities
36,988,149 27,509,789
67,751,303 52,685,293
No ncurren t Liabilities:
Deposits an d accrued ex penses 4,434,462 4,154,065
Bonds and notes payable 442,122,110 377,178,944
Total Liabilities
N ET ASSETS
446,556,572 381,333,009
514,307,875 434,018,302
N et Assets:
Invested in capital assets, net of related debt 1,723,093,113 1,652,348,133
Restricted for:
Debt serv ice 28,790,300 20,198,822
Real property purchase and improvement 2,519,150 2,544,713
Subdistrict construction and improvement 56,657,281 46,774,026
Construction 188,102,445 203,544,388
Unrestricted 58,021,894 50,955,318
Total N et A ssets
$ 2,057,184,183 $ 1,976,365,400
See the accompanying notes to the financial statements.
15
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Statements of Rev enues, Ex penses, and Changes in Net Assets
for the years ended June 30, 2007 and 2006
2007 2006
Operating Revenu es:
Sewer service charges $ 198,992,581 $ 203,880,320
Recovery of (prov isio n for) dou btful sewer service
charge accounts (4,193,703) (3,160,972)
Licenses, permits, and other fees 6,030,583 5,210,321
Other 1,376,071 873,353
To ta l ope rating rev enue s 202,205,532 206,803,022
Operating Expenses:
Pumping and treatment 37,848,292 38,316,092
Collection system maintenance 27,718,099 27,791,675
Engineering 8,863,847 8,737,413
General and admin istrativ e 39,199,349 37,055,565
Depreciation 45,720,978 43,979,819
Other 24,459,942 20,008,972
Total operating ex pen ses 183,810,507 175,889,536
Operating Income 18,395,025 30,913,486
N onoperating Reven ues:
Property taxes lev ied by the District 24,401,167 23,210,982
Investment income 16,946,145 7,610,461
Rent income 878,319 1,026,547
Total non operating reven ues 42,225,631 31,847,990
Nonoperating Expen ses:
Capital improvement surcharge refund 15,000 95,372
N et loss on disposal and sale
of utility plan t 96,630 95,064
Nonrecurring projects and studies 3,999,673 3,375,189
Total n onoperating expenses 4,111 ,303 3,565,625
Income before Capital Con tribu tions
56,509,353 59,195,851
Capital Con tribution s:
U tility plant contributed 21,131,633 51,516,525
Grant revenu e 3,177,797 1,424,920
Total capital con tribu tion s 24,309,430 52,941,445
Chan ge in Net Assets
Net Assets -Beginnin g of Y ear
Net Assets -End of Y ear
80,818,783 112,137,296
1,976,365,400 1,864,228,104
$ 2,057,184,183 $ 1,976,365,400
See the accompanying notes to the fin ancial statements .
16
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Statements of Cash Flows
for the yea rs ended June 30, 2007 and 2006
2007 2006
Cash flows from operating activities:
Receiv ed from customers $ 203,155,790 $ 201,059,008
Paid to employee s for services (59,876,278) (58,033,022)
Paid to su pplie rs for goods and services (71,065,344) (73,992,802)
Net cash prov ided by operating activ ities 72,214,168 69,033,184
Cash flows prov ided by non capita l fin ancing activities:
Tax es lev ied
24,401,167 23,210,982
Cash flows from capital and related financing activities:
Proceeds from capital grants 3,698,667 2,142,401
Clean water capital improvement surcharge refunded (15,000) (5,762,702)
Proceeds from issuance of debt 77,190,257 43,193,659
Principal paid on debt (8,160,308) (5,498,061)
Interest and fees paid on debt (7,190,721) (13,848,925)
Payments for capital assets (134,588,843) (125,572,530)
Proceeds from sale of u tility plant 117,307 223,313
N et cash used in ca pital and relate d finan cing activities (68,948,641) (105,122,845)
Cash flo ws from investin g activ ities:
Purchase of inv estments (355,303,670) (224,477,577)
Proceeds from sale and maturity of investmen ts 401,621,990 263,696,471
In vestmen t income 14,587,575 9,134,073
Proceeds from rents 878,319 1,026,547
Net cash provided by in vesting activities 61,784,214 49,379,514
Net Increase in Cash and Cash Equivalents 89,450,908 36,500,835
Cash and Cash Equ iv alen ts at Begin nin g of Year 103,088,876 66,588,041
Cash and Cash Equ iv alents at End of Y ear $ 192,539,784 $ 103,088,876
Noncash capital and investin g activities:
Utility plant contributed by other gov ernments and developers
Fair v alu e in vestment adju stment
$ 21,131,633 $ 51,516,525
($ 454,961) ($ 1,549,223)
See the accompanying notes to the fin ancial statements.
18
THE METROPO LITA N ST. L OUIS SEWER DISTRICT
2007 2006
(
Reconciliation of operating in come to net cash flows prov ided by
operating activities:
Operating income $ 18,395,025 $ 30,913,486
Adjustments to recon cile operatin g income to n et cash
provided by operating activ ities:
Depreciation 45,720,978 43,979,819
Change in operating assets an d liabilities:
(Increase) decrease in billed an d unbilled sewer service
charges receivable 483,507 (4,954,471)
(In crease) decrease in o the r receivables 1,201,249 (999,033)
(In crease ) decrease in supplies inv en tory 535,160 66,218
Incre ase (decrease) in contracts and accounts payable 3,277,646 (1,416,690)
In cre ase (dec rease) in deposits and accrued expen ses 2,600,603 1,443,855
Net Cash Provided by Operatin g Activities
$ 72,214,168 $ 69,033,184
See the accompanyin g notes to the financial statements.
19
THE METRO PO LITAN ST. L OUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
1. Organization and Summary of Sign ificant Accounting Policies
Organization
The Metropolitan St. Lou is Sewer D istrict (the District) was a uthorized by the voters, established a nd
chartered under the prov isions of the Constitution of Missouri, as a municipal corporation a nd a political
subdiv ision of the State. Upon creation in 1954, the District assumed responsibilities to provide for the
con struction, operation, and maintenan ce of the sewer facilities within its defined boundaries. The Dis-
trict's serv ice area now comprises all of the City of St. Louis and most of St. Louis County. Subdistricts
within the D istrict's total serv ice area represent separate geographic areas within which specific taxes are
levied for the retirement of indebtedness issued to finance constr uction of sa nitary or stormwater facilities
within the area or to operate, maintain , or construct improvements within the subdistrict . The District also
main tains all of the publicly own ed stormwater sewers within its original boundaries a nd is contin uing to
accept maintenance of the stormwater sewers in the remainder of its service area.
Pu rsu ant to provision s of its charter an d subject to limitati ons imposed by the Constitution of Missouri, all
powers 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 County Executi ve
of St. Louis County.
Reporting Entity
The D istrict defines its financial reporting en tity to include all component units for which the District's
governing body is financially accountable. To be co nsidered financially accou ntable, the organization
must be fiscally dependent on the D istrict and the District must either 1) be able to impose its will on the
organization or 2) the relationship must hav e the potential for creating a financial benefit or imposing a
finan cial bu rden on the D istrict.
Based on the foregoin g, the District's fin ancial statements include all funds that are established under the
authority of the D istrict's charter. There are no age ncies, boards, commissions, or authorities that are co n-
trolled by or dependent on the District.
Measu rement Focus, Basis of Accoun ting, and Fina ncial Stateme nt Presentation
Throughout the year, the District maintain s its detailed accounting records on the modified accrual basis
of accoun ting. In order to account for the transactions related to certain subdistricts and restricted re-
sources, separate fund accou nting records are maintai ned. For fma ncial reporting purposes, the District
reports its operations as a single enterprise fun d. Accordingly, the acco unting records are co nverted to the
accrual basis of accounting and all interfund transactions are eliminated . Under the accrual basis of ac-
counting, rev enues are recognized when earned and expenses are recog nized when the related liability is
incu rred. The District's measurement focus is on the flow of economic resources . Unbilled sewer
20
THE METRO PO LITAN ST. L OUIS SEWER DIST RICT
N otes to Financial Statements
June 30, 2007 and 2006
1. Organization and Summary of Significant A ccounting Policies (continued)
Measu rement Focus, Basis of A ccounting, and Financial Statement Presentation (conti nued)
service charge revenues are accrued by the District based on estimated billings for services provided
through the end of the current fiscal year.
Rev en ues and ex pen ses are divided in to operating and nonoperating items. Operating reven ues ge nerally
resu lt from providing services in connection with the District's pri ncipal ongoing operations. The princi-
pal operating revenues of the District are user fees, licenses, and permits for wastewater treatment ser-
vices. Operating expenses include the costs associated with the conveyance a nd treatment of wastewater,
stormwater, administrative expen ses, and depreciation on capital assets. All re venues and e xpe nses not
meeting these defmitions are reported as n onoperati ng revenues and e xpenses.
The D istrict follo ws GASB Statemen t No. 33, Acco unting and Fi nancial Reporting f or No n -Exchange
Transa ctio ns (GA SB 33), which establishes acco unti ng and fma ncial reporting standards for non -
exchange transactions involving fmancial or capital resources .
GASB 33 groups nonexchan ge transactions into the following four classes, based upo n their principal
characteristics: derived tax revenues, imposed none xchange reven ues, government mandated no n -
exchange transactions, and v oluntary nonexchange transactions . For the District, the following non -
exchange transactions are applicable.
The District recognizes assets from imposed nonexchange re venue transactions in the period when an en-
forceable legal claim to the assets arises or when the resources are recei ved, whichever occurs first.
Reven ues are recognized in the period when the reso urces are required to be used or the first period that
use is permitted. The District recognizes rev enues from property taxes, net of estimated refunds and esti-
mated uncollectible amounts, in the period for which the taxes are levied. Imposed nonexchange re ve-
n ues also in clude licenses, permits, and other fees.
Intergovern mental reven ues, representing grants and assista nce received from other governmental units,
are gen erally recognized as rev enu es in the period when all eligibility requirements, as defined by G ASB
33, have been met. A ny resou rces received before eligibility requirements are met are reported as de-
ferred rev enues.
When both restricted and un restricted resources are available for use, it is the District's policy to use re-
stricted resou rces first, and then unrestricted resources as they are needed.
21
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
1. Organ ization and Summary of Significant Accounti ng Policies (continued)
Measurement Focus, Basis of Accounting, an d Financial Statement Presentation (continued)
The D istrict follows all Governmental Accou nting Standards Board (GASB) pronounceme nts as well as
all Financial Accounting Standards Board (FA SB) Statements and Interpretations, Acco unting Pri nciple
Board Opinions, and Accounting R esearch Bulletins iss ued on or before November 30, 1989, unless those
pro nouncements conflict with or contradict GASB pronouncements . In additio n, the District also applies
all FASB Statements and Interpretations issu ed after No vember 30, 1989, except for those that co nflict
with or con tradict GASB pronouncemen ts.
Cash and Cash Equ ivalents an d Investments
The District's " cash and cash equivalents" consist of all highly liquid in vestments (including restricted assets)
with maturity dates of 89 days or less from the date acquired by the District. "Investments " consist of those
investments with maturity dates 90 days or greater at the time of p urchase by the District . Investments are
stated at fair valu e based upon quoted market prices .
The District's inv estmen t disclosu res follow GASB Stateme nt No. 40, Deposit and Investme nt RiskDis-
closures, an Amendment of G ASB Statement No. 3 (GASB 40). This sta ndard's disclos ure requirements
addresses custodial credit risk, concentrations of credit risk, interest rate risk, and foreign currency risk.
Clean Water Capital Improvement Surcharge
In connection with the Consent D ecree, on August 2, 1988, the voters within the District appr oved a sched-
u le of capital improvement surcharges to be added to each customer's user charge.
The collections from the su rcharges, as well as investment income and proceeds from vario us grants, are fi-
nancing upgrades to certain sewage treatmen t facilities and other capital impro veme nts req uired by the Fed-
eral Clean Water Act and the Missouri Clean Water Law (req uired projects). The ballot proposition stated
that all surcharges, investment income, and grant proceeds collected were to be deposited in a Clea n Water
Capital Improvement Tru st Fund (the Trust Fund). All funds of the Trust Fund are included in the financial
statemen ts of the D istrict. The D istrict issu es a publicly available fmancial report on the Trust Fund that i n-
cludes fmancial statemen ts and supplementary information. That report may be obtained by writing: The
Metropolitan St. Louis Sewer District, D irector of Finance, 2350 Market Street, St. L ouis, MO 63103-2555 .
The District was entitled to lev y and collect the su rcharges until one of the following three eve nts occurred: 1)
the cu mulative collections totaled $436,000,000; 2) the intended construction a nd improvements were com-
plete; or 3) until December 31, 1995, regardless of whether the construction was complete or whether the
22
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
1. Organization and Summary of Significant Accounting Policies (continued)
Clean Water Capital Improvement Surcharge (continued)
cumulativ e collections totaled $436,000,000. The surcharge was eliminated in April 1995 . This was made pos-
sible by favorable construction bids, higher than expected investment earnings, a nd increased federal and state
grant participation. In Janu ary 1997, the District refunded appro ximately $25 million to its c ustomers . In 1998,
the District determined that approximately $9.2 millio n wo uld also be a vailable for refund to customers.
In 1999, the District identified additional projects to be completed reducing the amount available for re-
fund. In 2005, the District identified all remaining allowable projects to be completed. The District re-
funded $15,000 and $5,762,702 from the Trust Fund to its c ustomers during 2007 and 2006, respecti vely .
Capital Assets
Capital assets are v alued at historical cost or estimated historical cost based in part upon a study per-
formed in 1981. In terest cost is capitalized as part of the historical cost of acquiring certain assets when
the effect of such capitalization is material to the financial stateme nts . I nterest is not capitalized on assets
constructed with contributions from other governmental sources. Depreciation is calculated on a
straight-line basis ov er the following estimated useful lives:
Treatment and disposal plant and equipme nt
Collectio n an d pumping plant
General plan t and equipment
10 to 50 years
10 to 100 years
3 to 50 years
When designing u ser charge rates, the District includes funding for replacement cost of assets, which may
differ from depreciatio n expense recorded for financial reporting purposes .
Normal main ten ance and repairs that do not add to the value of the asset or materially e xtend asset lives
are not capitalized. Betterments are capitalized and depreciated over the remaining useful lives of the re-
lated assets, as applicable. The D istrict defines capital assets as assets with an initial, indi vidual cost of
more than $1,000 an d an estimated useful life in e xcess of three years.
Capitalization of Interest
Interest costs are capitalized as part of the costs of capital assets during the period of co nstruction based
on the related weighted average net borrowing costs incurred . Interest earned on temporary investments
acquired with the proceeds of su ch borrowed funds from the date of the borrowing until the assets are
ready for their intended use is used to reduce the interest costs capitalized on the constructed assets. In-
terest is not capitaliz ed for outlays financed by capital grants (or other outside parties) externally restricted
for the acquisition of specified assets. In 2007 and 2006, the District capitalized $10,095,195 and
$8,182,438 of net interest expen se, respectiv ely.
23
THE METROPOLITA N ST. LOUIS SEWE R DIST RICT
N otes to Financial Statements
June 30, 2007 and 2006
1. Organization and Summary of Significant A ccounting Policies (continued)
Supplies Inventory
Supplies inven tory con sists of parts and supplies to be used to operate and maintain treatment facilities
and various treatment -related equ ipment at the District. This inve ntory is stated at the lower of cost or
market, determined on the av erage cost method. Expenses are recognized when the inventory is con-
sumed.
Net Assets
Invested in capital assets, net of related debt: This component of net assets c onsists of capital assets, in-
cluding restricted capital assets, net of accumulated depreciation and reduced by the outstanding debt that
is attributable to the acquisition, con struction, or improvement of those assets .
R estricted: This compon ent of net assets consists of constraints placed on net asset use through external
con straints imposed by creditors, gran tors, contributors, laws, or regulations of other governments or con-
strain ts imposed by law through constitution al pro visions or enabling legislation. Restricted net assets
represent those portions of equity set aside for specific purposes. Proceeds fr om the sale of real property
no longer necessary in the operation of the District and rental income from District -owned properties have
been restricted for the pu rchase and improvement of real property and expenses related to the use of 2350
Market Street. Property tax es levied by the various subdistricts a nd other reven ues received for construc-
tion in those subdistricts hav e also been restricted for that use. Clean water capital improvement sur-
charges, sewer extension and connection fees, grants, and other revenues received for construction within
certain subdistricts have been restricted for that use . In addition, a portion of sanitary sewer charges have
been restricted for the payment of principal and interest on certai n debt of the District .
U nrestricted net assets: This component of net assets consists of net assets that do not meet the definition
of restricted or inv ested in capital assets, net of related debt .
Capital Contribu tion s
Capital contributions to the District represent government grants and other aid used to f und capital pro-
jects. In accordance with GASB 33, capital contributions are recognized as revenue when the expenditure
is made an d the amount becomes subject to claim for reimb ursement .
Bond Issuance CostsBond Premiu ms an d Discounts
Bond issuance costs incurred, as well as bond premiums and discounts, and paid from the proceeds of
revenue bon d issues are deferred an d amortized using the straight-li ne method over the term of the bo nds.
24
THE METROPO LITAN ST. LOUIS SEWER DISTRICT
Notes to Financial St atements
June 30, 2007 and 2006
1. Organ ization and Summary of Sign ificant A ccounti ng Policies (continued)
Compensated Absences
Vacation
Under the terms of the District's person nel policies, employees are allowed to carry a maximum of 30
to 45 days of vacation (depen ding on length of service) from one calendar year to the next. Since va-
cation accrued at year-en d is expected to be used by the employee during the following fiscal year, the
accrual is reported as a component of current deposits a nd accrued expe nses payable .
Sick Leav e
Employees earn sick pay ben efits at accru al rates ranging from 10 days per year to 12 days per year
(depending on length of service). U nu sed sick leave can be carried over at year-end without limita-
tion. An employee retiring from the District with fi ve or more years of service, who has unused ac-
cru ed sick leav e remainin g, will be compensated for that portio n of u nused accrued sick leave at the
rate of 1-1/4% for each year of District service. The District has recorded a liability, which has been
actu arially determined to be equal to the accumulated e xpense charge that will amortize the employees'
benefits over their period of D istrict service. The liability, included in current deposits and accrued
expenses payable, in clu des v ested accumulated rights to receive sick leave benefits estimated to be
paid within one year. The portion of sick leave e xpected to be paid after one year is recorded as a
componen t of noncurrent depo sits and accrued expenses payable.
Use of Estimates
The preparation of financial statemen ts in con formity with U.S. ge nerally accepted accounting principles
requires man agement to make estimates an d assumptions that affect the reported amounts in the financial
statements. A ctual results could differ from those estimates.
2. Deposits and Investments
With the approv al of the District's Board of Trustees, the Secretary -Treas urer is authorized to invest excess
cash in any investment authorized by the District's charter. The District's in vestment policy conforms to the
inv estment policy guidelines for the State of Missouri. The District's in vestment policy authorizes the Dis-
trict to invest in the fo llowing instruments: U.S. Treas ury notes, certificates of deposit, obligations of any
agency or in strumentality of the U.S. , repurchase agreements, banker's acceptances, and commercial paper
rated in the three highest classifications, for terms specified in the policy . At J une 30, 2007 and 2006, all of
the District's inv estmen ts were in compliance with the District's i nvestment policy and charter .
25
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2007 and 2006
2. Deposits and Investmen ts (contin ued)
In accordance with the D istrict's investment policy, the District also invests in mortgage -backed securities
such as collateralized mortgage obligations. These securities are reported at fair value and are based on
the cash flows from in terest payments by the underlying mortgages. As a result, they are sensiti ve to pre-
payments by mortgagees, which may result from a decli ne in interest rates. For example, if interest rates
decline and homeowners refinance mortgages, thereby prepayi ng the mortgages u nderlying these securi-
ties, the cash flow from interest paymen ts is reduced and the value of these sec urities declines. Likewise,
if homeowners pay on mortgages longer than anticipated, the cash flows are greater and the return on the
initial inv estment would be higher than anticipated.
A summary of deposits and inv estments as of June 30, 2007 and 2006, is as follows:
2007 2006
Deposits
Repu rchase agreements (collateralized)
U. S. T reasury and Age ncy o bligations
Commercial paper
Bankers acceptan ce n otes
Interest Rate Risk
Cost Fair Value
Cost Fair Value
$ 105,918,805 $ 105,918,805 $ 60,784,313 $ 60,784,313
18,583,974 18,583,974 9,074,525 9,074,525
323,030,205 322,418,113 370,388,893 366,358,187
64,800,645 64,956,887 31,023,546 31,141,673
442,914 443,808 -- --
$ 512,776,543 $ 512,321,587
$ 471,271,277 $ 467,358,698
As of June 30, 2007 and 2006, the District had the following investments and maturities:
2007
Inv estmen t Type Fair Value
Repu rchase agreements (collateralized) $ 18,583,974
Certificates of deposit 12,100,000
U. S. Treasuries 89,405,468
U.S. Agencies 233,012,645
Commercial paper 64,956,887
Ban kers acceptance notes 443,808
Total
$ 418,502,782
Weighted
Average
Mat urity
( Years)
0 .00
0.63
0 .36
1 .82
0 .04
0.01
2006
Fair Value
$ 9,074,525
11,200,000
116,409,742
249,948,445
31,141,673
$ 417,774,385
Weighted
A verage
Maturity
(Years)
0 .00
0 .33
0 .24
1 .37
0 .11
0 .00
1 .21 0.93
The D istrict will minimize the risk that the fair value of debt securities in the portfolio will fall due to in-
creases in gen eral interest rates by:
26
THE METRO PO LITA N ST. LOUIS SEWER DISTRICT
Notes to Fin ancial Statements
Jun e 30, 2007 a nd 2006
2. Deposits and Investmen ts (contin ued)
Interest Rate Risk (continu ed)
1. Structurin g the investment portfolio so that securities mature to meet cash requirements for o ngo-
ing operatio ns, thereby avoiding the need to sell securities on the open market prior to maturity;
and
2. Investing operating funds primarily in short-term securities.
3. State law limits the max imum stated maturities to fi ve years on any in vestment from the date of
purchase.
Custodial/Credit Risk
The D istrict will minimize credit risk, the risk of loss due to failure of the security issuer or backer, by:
1. Prequalifying the financial institutions, broker/dealers, i ntermediaries, and advisors with which the
D istrict will do bu siness; and
2. Div ersifying the portfolio so that potential losses on individual securities will be minimized .
In accordance with its inv estment policy, the D istrict limits its investments in these investme nt types to
the top rating issued by N RSR Os. As of June 30, 2007, the District's investments in commercial paper
were rated Al by Stan dard & Poor's, F-1 by Fitch ratings, and P-1 by Moody's In vestors Service . The
D istrict's investments in repu rchase agreemen ts carry the e xplicit guarantee of the U.S. Go ver nment. The
District's investments in U .S. agencies that do not carry the explicit g uarantee of the U.S. government all
carry a rating assigned by Standard & Poor's of "AAA" . All cash deposits of the District were fully col-
lateralized with securities held by a third party fina ncial institution in the District's name.
Con centration of Credit Risk
The D istrict places no limit on the amoun t the District may in vest in any one issuer with respect to U.S.
Treasury Securities and collateralized time and demand deposits . U.S. Go vernme nt agencies and gov-
ernmen t -sponso red enterprises are limited to 60% of the portfolio; and collateralized repurchase agree-
ments are limited to 50% of the portfolio. U.S. Government age ncy callable securities, commercial paper,
and bankers' acceptances are limited ited to 30% of the portfolio, each. The following table lists investments
in issuers that represent 5% or more of total investments at June 30, 2007 and 2006:
Perce nt of Total Investments
Issuer
Federal Home Loan Ban k
Federal Nation al Mo rtgage Association
Federal Ho me Loan Mortgage Corporation
2007 2006
23 .8%
12 .4
6.4
24 .1
18 .8
7.3
27
THE METR OPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
3. Change in Capital Assets
The following is a su mmary of capital assets changes for the fiscal years e nded Ju ne 30, 2007 a nd
June 30, 2006:
for the year e nded J une 30, 2007
Balance Balance
Jun e 30, 2006 Additions Deletions June 30, 2007
Capital assets not being depreciated:
Land $ 26,976,107 $ -- $ -- $ 26,976,107
Construction in progress 365,627,566 139,477,160 255,977,853 249,126,873
To tal capital assets n ot being depreciated 392,603,673 139,477,160 255,977,853 276,102,980
Capital assets bein g depreciated:
Treatment and disposal plant
and equ ipment
Collection and pumping plant
General plant an d equipment
Total capital assets being depreciated
Less: A ccumulated depreciation :
Treatment and disposal plant
an d equipmen t
Collection and pumpin g plan t
General plant and equipment
Total accumulated depreciation
Total capital assets being depreciated, net
569,721,790 221,729,431 -- 791,451,221
1,606,656,767 55,232,810 375,523 1,661,514,054
53,194,761 3,831,350 2,542,812 54,483,299
2,229,573,318 280,793,591
2,918,335 2,507 ,448,574
(291,521,309) (16,167,623) --
(406,163,408) (26,705,002) (174,472)
(38,057,748) (2,848,351) (2,529,925)
(735,742,465) (45,720,976) (2,704,397)
1,493,830,853 235,072,615 213,938
Total Capital Assets $ 1,886,434,526 $ 374,549,775 $ 256,191,791
for the yea r end ed Ju ne 30, 2006
Balance Bala nce
June 30, 2005 Additio ns Deletions June 30, 2006
(307,688,932)
(432,693,938)
(38,376,174)
(778,759,044)
1,728,689,530
$ 2,004,792,510
Capital assets n ot 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
To tal capital assets no t being depreciated 302,526,935 134,391,073 44,314,335 392,603,673
Capital assets bein g depreciated:
Tre atment and disposal plant
and equipment 566,802,423 3,490,424 571,057 569,721,790
Collection an d pumping plant 1,514,563,636 92,156,109 62,978 1,606,656,767
General plant and equipment 52,201,691 2,327,055 1,333,985 53,194,761
Total capital assets being depreciated 2,133,567,750 97,973,588 1,968,020 2,229,573,318
Less: A ccumulated depreciation:
Treatment an d disposal plant
an d equ ipmen t (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)
G eneral plant an d equipmen t (36,530,189) (2,787,635) (1,260,076) (38,057,748)
Total accumulated depreciation (693,412,288) (43,979,820) (1,649,643) (735,742,465)
Total capital assets bein g depreciated, net 1,440,155,462 53,993,768 318,377 1,493,830,853
T otal Capital A ssets
$ 1,742,682,397 $ 188,384,841 $ 44,632,712 $ 1,886,434,526
28
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial St atements
June 30, 2007 and 2006
4. Property Tax
On or before May 1 of each year, the District levies ad valorem ta xes on all ta xable tangible property, real
and personal, within its boundaries based on assessed valuations established by the City of St. Louis and
St. Lou is Cou nty assessors. Tax rates v ary by subdistrict and purpose. Ta xes levied are used for opera-
tion s an d stormwater maintenance, debt service, and construction . Taxes are recorded as nonoperating
revenues. Property tax bills are mailed in October. They become delinquent and represent a lien on the
related property if not paid by December 31. All property ta xes are billed and collected by the City of
St. Louis and St. Louis Cou nty Collectors of Revenue and are distributed to the District monthly.
5. Long-term Liabilities
The following is a summary of chan ges in the District's long-term liabilities for the year ended Ju ne 30,
2007:
Bonds and n otes
payable :
Rev enu e bonds:
Series 2004A
Series 2004B
Series 2005A
Series 2006A
Series 2006B
Series 2006C
Missou ri Department
of Natural Resou rces:
West Watson and
Nanell
Ozark an d Table
Rock
Energy Loan Program
Add: Unamo rtized
premiu m, net
Less: Bond issue
costs, net
De posits and accrued
expen ses:
Landfill closu re and
postclosu re costs
Compen sated
absences
Origin al
Issuan ce
Amounts
$ 175,000,000
161,280,000
6,800,000
42,715,000
14,205,000
60,000,000
Balance
Ju ly 1,
2006 Additions Retirements
$ 173,500,000
156,245,000
6,800,000
42,715,000
535,600 485,500
374,680 116,094
98,595 78,944
$ - $ 1,505,000
5,932,500
280,000
-- 100,000
14,205,000 --
60,000,000
$ 461,008,875 $ 379,940,538 $ 74,205,000
Bala nce
June 30,
2007
$ 171,995,000
150,312,500
6,520,000
42,615,000
14,205,000
60,000,000
Current
Portion
$ 1,510,000
6,150,416
256,667
91,667
310,606 174,894 21,100
22,124 93,970 12,800
10,078 68,866 10,398
$ 8,160,308 445,985,230 $ 8,053,048
$ 498,421 $ 35,416 $
4,569,555 804,480 498,253
$ 5,067,976 $ 839,896 $ 498,253
10,514,133
(6,324,205)
$ 450,175,158
$ 533,837 $
4,875,782 975,157
$ 5,409,619 $ 975,157
29
THE METROPOLITAN ST. LO UIS SEWE R DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
5. Long-term Liabilities (continued)
Wastewater System R ev enue Bonds Payable
In November 2006, the District authorized and issued $60,000,000 of Wastewater System Revenue
Bonds Series 2006C (Series 2006C) fo r the purpose of providing funds to fmance the initial phase of its
capital improvements and replacement program, including c onstructi ng, repairing, and replaci ng new
wastewater facilities. These senior bonds have interest rates ra nging from 4.125% to 5% and are payable
in semian nual installmen ts at varyin g amoun ts through 2036 . The revenue bonds do not constitute a legal
debt or liability for the District, the State of Missouri, or for any political subdivision thereof and do not
con stitute indebtedness within the meaning of any constitutional or statutory debt limitation or restriction.
In May 2004, the District authorized an d issued $175,000,000 of Wastewater System Reve nue Bonds Se-
ries 2004A (Series 2004A ) for the pu rpose of providing funds to fmance the initial phase of its capital
improvements and replacement program, in cluding co nstructing, repairing, and replacing new wastewater
facilities. These senior bon ds have in terest rates ra nging from 2% to 5% and are payable in semia nnual
installments at varying amounts through 2034. The revenue bonds do not constitute a legal debt or liabil-
ity for the District, the State of Missouri, or for any political subdi vision thereof a nd do not co nstitute i n-
debtedn ess within the meaning of an y constitu tional or statutory debt limitation or restriction .
The issuance of the rev enu e bonds does not obligate the District to levy any form of taxation therefore or
to make any appropriation for their payments in any fiscal year. The principal and interest on the bo nds
are expected to be paid from future wastewater revenues . The sched uled payment of the principal of and
interest on the Series 2006C and 2004A Bonds maturing on May 1 whe n d ue are guara nteed under a fi-
n ancial guaranty insu rance policy.
Water Pollution Control and Drinking Water Revenue Bonds Payable
In November 2006, the State Env ironmen tal Improvement and Energy Resources Authority (the Author-
ity) authorized an d issued $22,105,000 of Water Pollution Control a nd Drinki ng Water Reve nue Bonds
(State Revolv in g Fu nds Programs) Series 2006B (Series 2006B) . The Series 2006B bonds provided
funds to make loans to 7 Missouri political su bdivisio ns that will be used to fmance water pollution con-
trol and drinking water projects. A portion of the proceeds of the Series 2006B bonds issued by the Au-
thority were used to purchase subordinate Participant Revenue B onds (Participant Bonds) authorized and
issu ed by the D istrict in the aggregate principal amount of $14,205,000, the proceeds of which will be
used for constructin g, repairing, an d equipping new and existing wastewater facilities. The District's Par-
ticipant Bonds hav e interest rates ranging from 4% to 5% and are payable in semiannual installments at
varyin g amounts through 2030.
In May 2006, the A uthority au thorized and issu ed $87,505,000 of State Revolvi ng Funds Programs Series
2006A (Series 2006A). The Series 2006A bonds provided funds to make loans to 13 Missouri political
subdivisions that will be used to fmance water pollution control and drinking water projects.
30
THE METR OPO LITA N ST. L OUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
5. Lon g-term Liabilities (continu ed)
Water Pollution Control and D rin kin g Water Revenue Bonds Payable (conti nued)
A portion of the proceeds of the Series 2006A bonds iss ued by the Auth ority were used to purchase sub-
ordinate Participant Bonds au thorized an d issued by the District in the aggregate principal amount of
$42,715,000, the proceeds of which will be used for constructing, repairing, and equipping new and exist-
ing wastewater facilities. The D istrict's Participant Bonds have i nterest rates rangi ng from 3.5% to 4 .5%
and are payable in semiannu al in stallments at varying amounts through 2025.
In May 2005, the Authority authorized and issued $53,060,000 of State Revol ving Funds Programs Series
2005A (Series 2005A). The Series 2005A bon ds pro vided funds to make loans to ten Missouri political
subdiv isions an d one Missouri nonprofit corporatio n that will be used to finance water pollution control
and drinkin g water projects. A portion of the proceeds of the Series 2005 A bo nds issued by the Authority
were used to purchase Participant B onds authorized and issued by the District in the aggregate pri ncipal
amount of $6,800,000, the proceeds of which will be used for constructing, repairing, and eq uipping new
and existing wastewater facilities. The D istrict's Participant Bonds have interest rates ranging from 3% to
5% and are payable in semiannu al in stallments at varying amounts through 2026.
In May 2004, the Authority authorized and issu ed $179,780,000 of State Revol vi ng Funds Programs Se-
ries 2004B (Series 2004B). The Series 2004B bonds pro vided fu nds to make loans to seven Missouri po-
litical subdivisions that will be used to fmance water pollution control projects . A portion of the proceeds
of the Series 2004B bonds issued by the Authority were used to purchase Participant Bonds authorized
and issued by the District in the aggregate principal amou nt of $161,280,000, the proceeds of which will
be used to fmance the District's three water pollution control co nstruction projects outlined in the agree-
ment. The D istrict's Participant Bonds have interest rates ranging from 2% to 5.25% a nd are payable in
semiannu al installmen ts at varying amounts through 2027.
The Series 2004B, 2005A, 2006A, and 2006B bonds do not constitute a legal debt or liability for the Dis-
trict, the State of Missouri, or for any political subdivisio n thereof and do not constitute indebted ness
within the meaning of any constitutional or statutory debt limitation or restriction. The issuance of the Se-
ries 2004B, 2005A, 2006A , and 2006B bonds does not obligate the District to levy any form of taxation
therefore or to make any appropriation for their payments in any fiscal year . The principal and interest on
the bonds are expected to be paid from future wastewater revenues .
In connection with the District's issuance of the Participant Bonds, which were purchased with the pro-
ceeds of the Series 2004B, Series 2005A , 2006A, a nd 2006B bonds issued by the A uthority, the District
participates in the State R ev olving Loan Program established by the Missouri Department of Natural Re-
sou rces (DNR ). Monies from federal capitalization grants and state matching funds are used to fund a re-
serv e account for each participant.
31
THE METROPOLITA N ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
5. Long-term Liabilities (continu ed)
Water Pollution Con trol and Drinking Water Revenue Bonds Payable (continued)
As the District incu rs approved capital expenses, the DNR reimburses the District for the e xpenses from
the bon d proceeds account an d deposits in a bond reser ve fund in the District's name an additional 60%
of the expen diture amount for the Series 2004B bonds or 70% for the Series 2005 A, Series 2006A, and
Series 2006B bon ds. Interest earn ed from this reserve fu nd can be used by the District to f und interest
payments on the bonds.
On the date of each payment of the principal amount of the District's Participant Bo nds, the tr ustee trans-
fers from this reserve account to the master trustee an amount eq ual to 60% of the pri ncipal payment for
the Series 2004B bonds or 70% for the Series 2005A, Series 2006A, and Series 2006B bonds . The costs
of operation an d maintenance of the wastewater treatment and sewerage facilities and the debt service is
payable from wastewater rev enues.
In accordance with the Series 2006A, Series 2006B, Series 2005A, Series 2004 A, and Series 2004B bond
issuances, the District's ann ual n et operatin g reve nues from wastewater activities, as defined in the
agreement, coupled with investments earnings must be at least 125% of the current portion of principal
an d interest due on all senior bonds and at least 115% of the c urrent portion of principal and interest d ue
on all bonds. At June 30, 2007 and 2006, the District was in compliance with this covenant .
Prin cipal and In terest Requiremen ts on Reven ue Bonds Payable
The ann ual prin cipal and interest requ irements to maturity on re venue bonds payable outstanding as of
June 30, 2007 are as follows:
Wastewater System Revenue B onds Payable/
Water Pollution Control and Drinking Water
R ev enue Bonds Payable
Years ending June 30, Principal Interest Tot al
2008 $ 8,008,750 $ 21,565,882 $ 29,574,632
2009 11,094,583 21,162,568 32,257,151
2010 11,209,167 20,736,911 31,946,078
2011 11,857,500 20,278,719 32,136,219
2012 12,137,500 19,747,380 31, 884,880
2013-2017 67,582,917 90,303,843 157,886,760
2018-2022 83,516,667 72,662,463 156,179,130
2023-2027 91,550,416 50,444,300 141,994,716
2028-2032 87,465,000 28,483,575 115,948,575
2033-2036 61,225,000 6,617,000 67,842,000
Total $ 445,647,500 $ 352,002,641 $ 797,650,141
32
THE METRO PO LITA N ST. L OUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
5. Lon g-term Liabilities (con tinued)
West Watson an d Nanell Loan Agreement
Du ring fiscal year 2005, the D NR loaned $535,600 to the District . The West Watso n and Nanell Loan
bears in terest at a rate of 1. 5% and is payable through No vember 1, 2014. The purpose of this note is to
fmance the planning, acquisition, construction, improvement, repair, rehabilitation, and extension of the
sewer system of a certain regional subdistrict. This note is classified as special assessment debt by the
District; therefore, the prin cipal and interest on this note will be repaid from additional tax assessme nts on
property values within the subdistrict. The additional assessme nt to be paid by the property owners is
54.78 cents per square foot over the next ten years, with interest accruing at a rate of 2 .5% per annum.
Ozark an d Table Rock Loan A greement
During fiscal year 2004, the DNR loaned $374,680 to the District. The Ozark and Table Rock Loan bears
interest at a rate of 1. 5% and is payable throu gh November 1, 2013. The purpose of this note is to fma nce
the plan ning, acquisition, construction, improvement, repair, rehabilitation, and e xte nsion of the sewer
system of a certain region al subdistrict. This note is classified as special assessment debt by the District;
therefore, the principal an d in terest on this note will be repaid from additional tax assessments on property
v alues within the su bdistrict. The additional assessment to be paid by the property owners is 61 .2 cents
per square foot over the next ten years, with in terest accr ui ng at a rate of 2 .5% per annum.
Principal and In terest Requirements on Ozark and Table Rock a nd West Watson and Nanell Loan
Agreements
The an nu al principal and interest requirements to maturity on the O zark and Table Rock Loan Agreement
and the West Watson and Nanell Loan Agreement o utstandi ng as of Ju ne 30, 2007 are as follows:
Special Assessment Loan Agreeme nts
Years ending Jun e 30, Prin cipal Interest Total
2008 $ 33,900 $ 3,779 $ 37,679
2009 34,100 3,269 37,369
2010 34,600 2,753 37,353
2011 35,100 2,231 37,331
2012 35,600 1,700 37,300
2013-2015 95,564 1,948 97,512
To tal $ 268,864 $ 15,680 $ 284,544
33
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
5. Long-term Liabilities (contin ued)
Energy Efficiency Leveraged Note Payable
In April 2004, the DNR loaned $98,595 to the District . The E nergy Efficiency Le veraged Note Payable
bears interest at a rate of 3.15% per an num an d is payable through Aug ust 1, 2013. The purpose of this
note is to finance the design, acquisition, installation, and implementation of e nergy conservatio n meas-
ures. The principal and interest on this note will be repaid from wastewater reven ues.
Prin cipal and Interest on Energy Efficiency Leveraged Note Payable
The ann ual principal and interest requirements to maturity on the Energy Efficie ncy Leveraged Note Pay-
able outstanding as of June 30, 2007 are as follows:
Energy Efficiency Leveraged Note Pay able
Years ending Ju ne 30,
Principal I nterest
Total
2008 $ 10,398 $ 2,088 $ 12,486
2009 10,728 1,758 12,486
2010 11,069 1,417 12,486
2011 11,420 1,066 12,486
2012 11,783 703 12,486
2013-2014 13,468 350 13,818
Total $ 68,866 $ 7,382 $ 76,248
Restricted Cash and Investments
The following trustee held accoun ts have been established in accordance with bo nd ordi nances a nd fi-
nancing agreemen ts that requ ire receipts gen erated from operations be segregated and certain reserve ac-
counts be established:
R ev enue Fund
The Revenue Fun d will be used for the purpose of depositing wastewater operating reven ues, pro vid-
ing funds to pay for expen ses related to the operation and maintenance of the District, and fulfilling
Sinking Fund requirements in accordance with the bond ordinances .
Sinking/R epayment Fun ds
The bond ordinances provide for deposits to and the use of monies in the Sinking Fund to be used for
the sole pu rpose of principal and interest payments on the bo nds. Sufficient monies shall be paid in
periodic in stallments from the Revenue Funds.
34
THE METRO POLITAN ST. LOUIS SEWE R DISTRICT
No tes to Financial Statements
Ju ne 30, 2007 and 2006
5. Long-term Liabilities (continued)
R estricted Cash and In vestments (continued)
D ebt Serv ice Fund
The Debt Service Fund shall be used by the Trustee for the sole purpose of payi ng the principal of and
in terest on the bonds, as and when the same become due .
Debt Service Reserve Fund
A fter in itial deposit of the amount required pursuant to the bond ordinances and financing agreeme nts
of the Series 2004A bonds and 2006C bonds, monies in the Debt Ser vice Reserve Fund shall be dis-
bu rsed and expensed by the District solely for the payment of the principal and interest on the bonds
and n otes to the extent of any deficiency in the Debt Ser vice Fu nd for such purpose . The District may
disburse an d expend monies from the D ebt Service Reserve Fund for s uch p urpose immediately . At
June 30, 2007 and 2006, cash and investments in the Debt Service Reserve Fund totaled $22,378,626
an d $15,770,431, respectively.
Special Participan t Bond R eserve Accoun t
For the Series 2004B, Series 2005A, Series 2006A, and Series 2006B bonds, the District shall deposit
into the Special Participant Bon d R eserve A ccount amounts in accordance with the bond ordinance, if
any, which shall be disbursed and expensed by the District solely for the payment of the principal and
interest on the Participan t Bonds to the ex tent of any deficiency in the Repayment Fund for such p ur-
pose. At June 30, 2007 an d 2006, cash an d investments in the Special Participant Bond Reser ve Ac-
count held on behalf of the District totaled $103,996,804 and $80,982,438, respectively . Monies in
this account are not considered to be District funds. Howe ver, interest earnings on this account may
be used by the District to reduce interest payments on the bonds outsta nding .
Renewal and Extension Fun d
All sums accumulated and retain ed in the Renewal And Extension F und shall be first used to prevent
default in the payment of interest on or principal of the bonds when due and shall then be applied by
the D istrict from time to time, as and when the District shall determine, for p urposes pursuant to the
trust indenture. No monies have been deposited into this account at June 30, 2007 and 2006 .
35
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
5. Long-term Liabilities (continu ed)
Restricted Cash an d Inv estments (con tinued)
Project Funds
The Project Fun ds for all bond issuances ou tstanding will be used for the purpose of providing monies
to pay project costs. The proceeds from the bonds and notes, after a deposit into the Debt Service Re-
serve Fund for the amounts required pursuant to the bond ordinances and note agreements of just the
Series 2004A and Series 2006C bon ds, shall be deposited into the Project Fund . At June 30, 2007 a nd
2006, cash and investments in the Project Funds totaled $87,496,017 and $170,405,547, respecti vely .
Rebate Fu nds
The bond ordinances provide for the creation of a Rebate Fund into which shall be deposited such
amounts as are required to be deposited therein pursuant to the arbitrage instr uctio ns regarding the
calculation and payment of rebate amounts due. The District d oes not have any rights in or claims
to such mo ney; provided, however, any funds remaining in the Rebate Fund after redemption and
payment of all bonds and payment of any rebatable arbitrage amount, or pro visio n ha ving been
made therefore, shall be remitted to the District. At June 30, 2007 a nd 2006, cash and i nvestments in
the R ebate Funds totaled $0 and $502,675, respecti vely.
Administrativ e Fee Funds
The Administrative Fee Fun ds will be used for the payment of the Trustee's fees and other administra-
tive fees pursuant to the note agreement. The Trustee shall immediately withdraw the fee amounts
when due. Monies held in this account shall not be in vested .
Fair Value of Finan cial In strumen ts
The value of the District's long-term debt is estimated based on the current rates offered to the District for
debt of the same remaining matu rities. The carrying amount and estimated fair val ue of the District's
long-term debt as of June 30, 2007 were $450,175,158 and $454,689,986, respectively. The carryi ng
amount and estimated fair v alue of the D istrict's long-term debt as of Ju ne 30, 2006 were $381,538,522
and $388,317,214, respectively.
36
THE METRO POLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
6. Changes in R estricted Net Assets
Details of changes in restricted n et assets for the fiscal years ended June 30, 2007 and 2006, are:
Restricted by E nabling Legislation
Balances, Jun e 30, 2005
Additions:
Proceeds fro m bonds and loans
Unspent prior year bon d proceeds
Property taxes levied by the
District
In vestment income
Grant revenue
Connection fees
Transfers from other accounts
Proceeds from ren ts
Total addition s
Dedu ctions:
Un used bond proceeds
Principal paymen ts on lo ng-term
debt
Interest payments
Capital asset addition s
Other contractu al expen ses
Clean Water Capital hnprovement
R efun d
Transfers to other accoun ts
Total dedu ctions
Bala nces, June 30, 2006
Additions:
Proceeds from bonds and loans
Unspent prior yea r bond proce eds
Property taxes levied by the
D istrict
Inv estmen t income
Gran t revenu e
Conne ctio n fees
Transfers from other accounts
Proceeds from rents
Total additio ns
D eduction s:
Unu sed bond proceeds
Principa l payments on lon g-term
debt
Interest pa yments
Capital asset additions
Other con tractual ex pen ses
Clean Water Capital Improv ement
Refun d
Transfers to other accounts
To ta l deduction s
Real Property
P urchase a nd
Debt Serv ice Improvement
$ 15,493,176
5,111
375,740
23,572,172
23,953,023
5,407,500
13,834,766
5,111
19,247,377
20,198,822
5,351
1,002,270
31,951,019
32,958,640
7,817,500
16,512,429
31,882
5,351
24,367,162
Subdistrict
Co nstruction
a nd Improvement Constructio n
$ 2,774,628 $ 43,735,215
86,043
1,026,547
1,112,590
1,342,505
1,342,505
2,544,713
183,813
878,319
1,062,132
1,087,695
1,087,695
10,793,675
1,475,114
33,765
12,302,554
8,492,063
771,680
9,263,743
46,774,026
11,269,726
3,444,394
2,271,782
16,985,902
6,137,279
965,368
7,102,647
Total
$ 131,800,378 $ 193,803,397
43,193,659
226,932,257
11,375,498
396,777
402,187
63,264,585
345,564,963
147,452,130
110,564,678
15,708,773
95,372
273,820,953
203,544,388
77,190,257
147,452,130
20,331,574
179,930
907,215
44,460,640
290,521,746
168,475,761
117,585,378
19,887,550
15,000
43,193,659
226,932,257
10,798,786
13,312,395
430,542
402,187
86,836,757
1,026,547
382,933,130
147,452,130
5,407,500
13,834,766
119,056,741
17,822,958
95,372
5,111
303,674,578
273,061,949
77,190,257
147,452,130
11,275,077
24,962,051
2,451,712
907,215
76,411,659
878,319
341,528,420
168,475,761
7,817,500
16,512,429
123,722,657
21,972,495
15,000
5,351
305,963,689 338,521,193
Balan ces, June 30, 2007 $ 28,790,300 $ 2,519,150 $ 56,657,281 $ 188,102,445 $ 276,069,176
37
THE METR OPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
7. D efined Benefit Pension Plan
Plan Description
The Metropolitan St. Louis Sewer District Employees' Pension Plan (the Plan) is a noncontrib utory single
employer defined ben efit plan providing retirement benefits as well as death and disability benefits to
members. As a condition of employment, all fu ll-time employees of the District are covered by the Plan.
The fman cial statemen ts for the Plan are produced using the accrual basis of accounting . Under the ac-
crual basis of accou nting, rev en ues are recognized whe n earned and expenses are recognized when the re-
lated liability is incu rred. The Plan issu es a publicly available financial report that includes fmancial
statements and required supplementary 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 N ov ember 1, 1967, is ame nded from time to time by the District's Board of
Tru stees, primarily to improve benefits to members. A Pension Committee consisting of two members of
the District's Board of Trustees, two elected employee members, and four members of the District's ma n-
agement staff administer the Plan. A committee of the District's Board of Trustees, with the aid of an in-
vestment adv isor, reviews and evaluates the Plan's investme nts and the related rates of ret urn on a peri-
odic basis. The Plan is exempt from the requirements of the Employee Retirement Income Sec urity Act
of 1974 and, as such, is not subject to the A ct's reporti ng requirements.
A ll 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 Plan permits early retirement with reduced
benefits beginning at age 55 if the member has completed 60 months of employment. A member whose
combined age and term of service is equ al to 75 may retire early with unred uced benefits.
The an nual benefit accrued by a member is equ al to 1.45% of fmal a verage earnings plus 0.40% of final
average earnings that are in ex cess of covered earnings multiplied by the period of years and months of
credited serv ice not to ex ceed 35 years. A survi vor's benefit for vested members who have not yet
reached their normal retirement date or earned 75 points is provided for. The s urvivor's benefit is equal
to the greater of 50% of the member's monthly -accrued retirement benefit as of the date of death, or 15%
of the monthly earnings and the member's monthly -accrued retirement be nefit actuarially reduced under
the 100% joint and survivor an nuity option. Members are also able to select a Co ntingent An nuity Pop -
Up option. This option allows the member to elect a survivor a nnuity for life, with the provision that if
the beneficiary should predecease the member, the benefit shall i ncrease to the amount payable had the
surv iv or optio n not been selected.
Ordinance Number 10872, effective Jan uary 1, 2001, further ame nded the Plan to extend the cost of li v-
ing increases for retirees from a maximum of 30% to 45% of the original benefit .
Effective Augu st 1, 2004, Ordinance No. 11781 amended the Plan to change the benefit formula to
1.70% of final average earnings plus 0.40% of fmal a verage earnings that are in e xcess of covered earn-
in gs multiplied by the period of years and months of credited service not to exceed 35 years without in -
38
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
7. D efined Benefit Pension Plan (contin ued)
Plan Description (continued)
eluding accrued sick leav e. Effectiv e July 1, 2007, Ordinance No. 12395 amended the Plan f or members
whose annual retiremen t benefit , as of July 1, 2007, is determined to be higher u nder the formula using
the definition of "Final A verage Earnin gs" in effect prior to August 1, 2004. Under the i nterim rule, if
such a member retires on his no rmal retirement date of or after July 1, 2007 and or before June 1, 2009
(the "window period"), he may elect to have his benefit determined using the 1 .45%/0.40% of final aver-
age earnings formula including accrued sick leave or the 1 .70%/0.40% of final a verage earnings formula
without using accrued sick leave. The interim rule will not apply if at any time during the window period
a member's ben efit is determined to be higher under the 1 .70%/0.40% formula . Sick lea ve is paid out at
1.25% per year of service times the amount of leave accrued not to exceed $50,000 u nless the employee
accrued an amou nt greater than $50,000 as of July 1, 2004, a nd retires or dies while in acti ve service prior
to July 1, 2007. Also, the Plan was amended to provide the retiring member with a 10% partial lump sum
payment option. The balan ce of the distribu tion will be paid in accordance with any one of the other pay-
ment options available under the Plan.
The retirement 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 ann ual
retiremen t benefit provided by the accumulated value, at 4% per annum interest, of the monthly benefit
that wo uld have been received prior to the postponed retirement date or b) the be nefit determined as of
the postpon ed retirement date u nder the normal form ula.
Fundin g Policy
The District's employees do not contribute to the Plan . Ordinances establishing the Plan provide for ac-
tuarially determined an nual contribu tion s, paid solely by the District, that are s ufficient to pay benefits
when due. The Entry Age Normal actuarial funding method is used to determine contributio ns .
A nnual Pension Cost
Contribution s of $6,847,278 and $7,184,531, excluding certain professional fees paid by the District,
were made to the Plan during the Plan's calen dar years ended December 31, 2006 and 2005, respectively.
These contributions were made in accordance with actuarially determined contribution requirements
based on actuarial valuations performed at January 1, 2006 and 2005, respectively, and for 2006 consisted
of a) $4,660,812 normal cost plus b) $1,708,749 amortization of the actuarial accrued assets in excess of
the actuarial accrued liability and prior changes c) multiplied by an i nterest factor of 1 .075.
The D istrict provides certain professional fees, office space, utilities, and other services to the Plan at no
cost. Other costs of administering the Plan are fina nced from plan net assets .
39
THE METRO POLITAN ST. L OUIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2007 and 2006
7. Defined Benefit Pension Plan (continued)
Significant actu arial assumptions used in the valuations are as follows:
Latest valuation date
Actuarial cost method
Amortization method
Amortization period
Asset valuation method
Post -retiremen t ben efit increases
Inv estment rate of retu rn
Projected salary increases
Social Security wage base
(1) Includes inflatio n compon ent of 4%
Three -Y ear Trend Information
January 1, 2007
Entry Age Normal
Level dollar closed
20 -year period
Three-year a verage of adj usted market values
3.0% of current benefit, or $50, if less
7 .5% per annum (1)
5.5% per annum (1)
4.5% per annum increase (1)
Historical trend in formation abou t the District's participation in the Plan is prese nted below to help read-
ers assess the Plan's funding status on a going -concern basis and assess progress bei ng made in acc um u-
lating assets to pay benefits when due.
Calendar
Year
2006
2005
2004
Annua l
Pensio n
Cost (APC)
$ 6,847,278
7,184,531
6,775,520
Percentage
of APC
Contributed
Net Pension
Obligation
Required Supplementary Information
Actuarial
Valu ation
Date
01/01/2007
01/01/2006
01/01/2005
100%
100
100
Schedu le of Funding Progress (dollars in tho usands)
(U nfu nded)
Entry Age Actuarial
Actuarial A ctuarial Accr ued Annual
V alue A ccrued Liability Funded C overed
of Assets Liability (U AAL) Ratio Payroll
(1) (2) (1)-(2) (1)/(2) (3)
$ 170,757 $ 187,432 ($ 16,675) 91 .1% $ 42,113
158,321 177,630 (19,309) 89 .1 40,144
142,986 168,237 (25,251) 85 .0 39,382
( UAAL) as a
Percentage
of Co vered
Payroll
(1-2)1(3)
(39.6)%
(48.1)
(64 .1)
40
THE METROPOLITA N ST. L OUIS SEWER DISTRICT
Notes to Financi al Statements
June 30, 2007 and 2006
8. Deferred Compen sation Plan
The District offers its employees a D eferred Compensation Pla n created in accordance with Internal Reve-
nue Code Section 457. The D eferred Compen sation Plan, available to all District employees, permits them
to defer a portion of their salary un til futu re years. The deferred compensation is not available to employ-
ees un til termin ation, retirement, death, disability, or due to fmancial hardship as defined by the Deferred
Compensation Plan.
The D eferred Compensation Plan was amended and restated to comply with the Economic Growth and
Tax R elief R econ ciliation Act of 2001 (the Act). The Act made significa nt changes to Section 457(b) of
the In ternal R ev enue Code of 1986, as previously amended . The Deferred Compensatio n Plan assets are
held in trust for the exclusiv e benefit of participants and their beneficiaries under Sectio n 1448 of the
Small Business Job Protection Act of 1996. As a res ult, the assets and liabilities of the Deferred Compen-
sation Plan are not included in the accompanying fina ncial statements.
The Deferred Compensation Plan issues a publicly available fmancial report that i ncludes fma ncial state-
ments and required supplemen tary information. That report may be obtained by writing: The Metropoli-
tan St. Lou is Sewer District, 2350 Market Street, St. Louis, MO 63103-2555 .
9. Post -Employment H ealth Care Benefits
In addition to providing pen sion benefits, the D istrict provides post -employment health care be nefits, in
accordance with District policy, to employees who elect early retireme nt from the District or who retire
from the District on or after attaining age 62. As of June 30, 2007 and 2006, 109 and 109 retirees, re-
spectively, met the eligibility requirements. The District pays the monthly group health insurance pre-
mium for the indiv idual until the retiree becomes eligible for Medicare at age 65 . During fiscal 2007 and
2006, expenses of $527,352 and $444,648, respecti vely, were recog nized for post -retirement health care
premiums as those premiums were paid.
10. Self -Insuran ce Programs
The District is ex posed to various risks of loss related to torts; theft of, damage to, a nd destruction of as-
sets; errors and omissions; injuries to employees; and natural disasters . The District has established a risk
man agement program and retains the risk related to officers', directors', a nd general liability; to its obliga-
tion to prov ide workers' compensation and medical and hospitalization be nefits to its employees; and to
pay wa ter backup claims to its customers. The estimated liabilities for payment of i ncurred (both reported
and unreported) but unpaid claims relating to these matters are i ncluded as a component of current depos-
its and accrued expen ses, and as such are expected to be paid withi n o ne year of the date of the statement
of net assets. At June 30, 2007 an d 2006, these liabilities amounted to $2,482,566 and $2,733,584, re-
spectively.
41
THE METROPOLITAN ST. L OUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2007 and 2006
10. Self -Insurance Programs (continued)
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 issua nce of the fma ncial state-
ments indicates it is probable that a liability has been inc urred a nd the amount of the liability can be rea-
son ably estimated. Changes in the balance of claims liabilities during fiscal 2007 a nd 2006 were as fol-
lows:
2007 2006
Liability, beginning of year $ 2,733,584 $ 3,050,225
Current year claims and changes in estimates 11,176,003 10,959,988
Claim payments (11,427,021) (11,276,629)
Liability, En d of Year
$ 2,482,566 $ 2,733,584
The D istrict obtains periodic fu nding valuations from the third -party administrators managing the self-
in surance programs and adjusts the charges as required to mai ntain the appropriate level of estimated
claims liability. The District also maintain s excess liability ins urance coverage for workers' compensation
and medical and hospitalization claims; general liability; and water backup damage to customers' prop-
erty.
The D istrict purchases commercial insurance 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 Postclosu re Care Costs
State and federal laws and regulation s require the District to place a final co ver on its Prospect Hill Reclamation
Project landfill site when it stops accepting waste and to perform certain maintenance a nd mo nitoring functio ns
at the site for 30 years after closu re. Although closure and postclosure care costs will be paid only near or after
the date that the landfill stops accepting waste, the District reports a portion of these closure and postclosure
care costs as an operating expen se in each period based on landfill capacity used as of the end of the fiscal year .
The $533,837 and $498,421 reported as landfill closure and postclosure care liabilities at June 30, 2007 and
2006, respectively, represent the cu mulative amounts reported at fiscal year-end based on the use of 75% and
75% of the estimated capacity of the landfill for fiscal years e nded 2007 and 2006, respectively . The District
will recogniz e the remaining estimated cost of closure and postclosure care of $177,081 at June 30, 2007 as the
remainin g estimated capacity is filled. These amounts are based on what it wo uld cost to perform all closure
an d postclosure care in 2007. The D istrict expects to close the landfill in the year 2012. Actual cost may be
higher due to inflation, changes in technology, or changes in regulations .
The D istrict is required to demonstrate that it has the fmancial capability to close the la ndfill to the State
of Missouri through the use of a financial test as specified in 10 CS R 80-2.030(4)( D)6 of the Missouri
Solid Waste Man agement Rules. The District has complied with the State's req uireme nt . The District
recognizes that estimates of closure costs may change as a res ult of i nflation, deflation, and/or changes in
42
THE METROPOLITAN ST. LOUIS SEWE R DISTRICT
Notes to Financial Statements
Jun e 30, 2007 and 2006
11. Closure and Postclosure Care Costs (continued)
technology and applicable laws and regulations. If closure cost estimates change, the liability currently
reported on the balan ce sheet will be adjusted accordingly .
12. Commitmen ts and Contingencies
On or about July 29, 2002, the D istrict entered into a Settlement Agreement with Missouri Department of
Natural Resources (MD NR), the Missouri Clean Water Commission (Commission), a nd the Missouri At-
torney G eneral regarding the Baumgartn er Sewage Treatment Facility (Baumgartner).
Prev iously, the State filed the case of State of Missouri ex rel . William L. Webster, et al. v. The Metro-
politan St. Louis Sewer District, No. 864-00250, against MSD with respect to certain alleged past and
co ntinuing v iolation s of the Federal Water Pollution Co ntrol Act, 33 U. S.C. §§1251 et seq., the Missouri
Clean Water Law §§ 644. 006, et seq. , R SMo , and Missouri State Operating Permits issued to various
sewage treatment facilities and other facilities owned and operated by MSD . An Amended Co nsent
Judgment was entered by the circuit court on January 20, 1989 .
Paragraph XXIV of the Amended Consent Ju dgment further provided, in pertine nt part, that the Amended
Consent Ju dgment shall terminate when MSD has achieved substa ntial compliance with the fmal effl uent
limitations for the Bissell Point and Baumgartner Sewage Treatment Facilities for a period of one year .
One of the pu rposes of the Amended Consent Judgment was for MS D to achieve and the n continue to
achieve compliance with its Missouri State Operati ng Permit effluent limitatio ns at Baumgart ner.
Under said settlement agreement the District agreed to take certain measures to achieve temporary com-
pliance with fecal coliform permit limits at Baumgartner . Ultimately, the District is to take the
Bau mgartn er lagoon offline on or before December 31, 2006. This will be do ne by con necting the sew-
age flow going to Baumgartner to a new Meramec Wastewater treatme nt facility. Furthermore, the parties
agreed that MSD will complete closure of the Baumgartner lagoon pursuant to 10 CS R 20-6 .010(12)
within 24 months of taking the Baumgartn er lagoo n offline . As of May 31, 2003, a moratorium on fur-
ther sewer connects to Baumgartner will be enacted should the District be unable to meet identified efflu-
ent limits.
In addition , shou ld the District fail to meet any of the deadlines set out in the Settlement Agreement or
violate any of the terms contained therein , the penalties for each missed deadline could reach a maximum
of $10,000 per day, per violation.
The July 29, 2002 Settlement Agreemen t was modified on January 3, 2007. In complia nce with the
Modification to the July 29, 2002 Settlement Agreement the Baumgart ner Lagoon was take n offline on
March 1, 2007. The District will complete closure of the Baumgartner lagoon pursua nt to 10 CSR 20-
6.010(12) within 24 mon ths of takin g the Baumgartner lagoon offline.
43
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2007 and 2006
12. Commitmen ts an d Con tingencies (con tinued)
Since July 22, 2003, the District's sen ior staff and Office of General Counsel have met numero us times
with EPA and MDNR regarding alleged, unpermitted discharges of untreated wastewater from combined
sewer overflows (CSO's) and sanitary sewer overflows (SSO's) constitute violations of the Clean Water
Act 33 U .S.C. § 1311. The District has presented the Capital Impro veme nt Plan to both organizations for
their review and consideration.
On Au gust 20, 2004, MSD receiv ed a Section 308 letter from EPA Region VII, which is an official re-
quest for information and documentation. On January 19, 2005 MSD provided an initial resp onse to the
Section 308 letter. The District continues to submit deliverables required by the Section 308 letter in a
timely man ner. On September 22, 2006, MSD received a Sectio n 308 letter from EP A Regio n VII focus-
in g on MSD 's SSO program. MSD submitted its response on December 22, 2006. Pursuant to EPA's
request additional clarification was provided on March 15, 2007 .
On April 12, 2007, the Washington University School of Law, on behalf of the Missouri Coalition for the
Env ironmen t provided a Notice of Inten t to MSD, stating that it i ntends to file s uit against MS D for viola-
tion s of the Federal Clean Water Act.
On May 22, 2007 the MSD received an A mended Administrative Order from EP A, requiring the posting
of sign s on all streams, creeks, drainage ditches, and swales receiving SSO discharges; notice to custom-
ers; n otice on the website; and a qu arterly report.
On Ju ne 11, 2007 the EPA and the State of Missouri filed a laws uit against MSD, alleging that MS D has
v iolated the Clean Water Act and terms of its NPDES permits .
By statu te each day of an u nlawful discharge represents a day of violation, and the Missouri Clea n Water
Law provides for a civil pen alty with a max imum of $10,000 per day, per violation. The District recorded
a reserv e for judgment and claims settlement of $1,000,000 at June 30, 2007.
The District has entered into construction and other contracts amounting to appr oximately $227,458,000
and $215,070,000 at June 30, 2007 and 2006, respectively . Grants to be recei ved from various gover n-
mental agen cies and entities to partially offset the cost of the contract commitments amo unted to ap-
proximately $633,000 and $772,000 at June 30, 2007 and 2006, respectively.
At June 30, 2007, the District had $40,000,000 bonds authorized, but unissued . These bonds will contin ue to
fund the first of four phases of a 20 -year wastewater capital impro veme nt program .
13. Future Accounting Pronouncements
GASB Statement No. 45, Accountin g and Financial Reporting by Employers for Postemployment Benefits
Other Tha n P ension Plans (GA SB 45), establishes standards for the measureme nt, recog nition, and display of
other post -employment ben efits (OPEB) ex pense/expenditures a nd related liabilities (assets), note disclosures,
44
THE METR OPOLITAN ST. L OUIS SEWER DISTRICT
N otes to Financial Statements
Jun e 30, 2007 and 2006
13. Fu ture A ccounting Pronou ncements (continued)
an d, if applicable, required su pplemen tary in formation in the fmancial reports of state and local go ver nment
employers. As part of a total compensation package, the District provides health care benefits OPEB to em-
ployees who elect early retirement from the District or who retire from the District on or after age 62 . GASB 45
will be effectiv e for the D istrict fo r the fiscal year endi ng June 30, 2008. Accordingly, the District's net OPEB
obligation is cu rrently zero. In fiscal year 2008, the District's unfunded accrued liability maybe appro ximately
$25,500,000 (activ e participan ts $18,000,000 and retired participants $7,500,000), assuming a 5% return on in-
vestment. The ann ual required contributio n is estimated to be $2,500,000 and is equal to the normal cost
($900,000) plus an amortization (max imum of 30 years) of the u nfunded act uarial liability ($1,600,000) . The
District, however, has not yet completed its assessme nt of the statements or the potential impact of the state-
ments on its fmancial liability and, therefore, this estimate is subject to change.
45
1