HomeMy Public PortalAboutExhibit MSD 16T 2008 Annual AuditExhibit MSD 16T
THE METROPOLITAN ST. LO UIS
SEWER DISTRICT
FI NANCIAL REPORT
( Audited)
Year Ended J une 30, 2008
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THE METROPOLITAN ST. LOUIS SEWE R DISTRICT
Table of Conte nts
June 30, 2008 and 2007
IN DEPENDENT AUDITORS' REPOR T
MANAGEMEN T'S DISCUSSION A ND ANAL YSIS
Page
1
3
FINANCIA L STA TEMEN TS
Statemen ts of Net Assets 14
Statements of Revenues, Ex penses, an d Changes in Net Assets 16
Statemen ts of Cash Flows 18
Notes to Finan cial Statemen ts 20
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Hochschild, Bloom & Company LLP
Certified Public Accountants
Consulta nts and A dvisors
INDEPENDENT AUDIT ORS' REP ORT
November 12, 2008
Board of Tru stees
THE METRO PO LITAN ST. LOU IS SEWER DISTRICT
We hav e audited the accompan yin g financial statements of the busi ness -type acti vities of THE
METRO POLITAN ST. LOU IS SEWER D ISTRICT (the District) as of and for the years e nded J une 30,
2008 and 2007, which collectively comprise the District's basic fi nancial stateme nts as listed in the table of
conten ts. These financial statements are the responsibility of the District's management. Our respo nsibility is
to express an opin ion on these finan cial statements based on our audits.
We con ducted our audits in accordance with U.S. ge nerally accepted auditing sta ndards and the st andards
applicable to financial audits con tained in Government Auditing Sta ndards, iss ued by the Comptroller Ge neral
of the U nited States. Those stan dards require that we plan and perform the a udits to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit incl udes
con sideration of internal con trol over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but no t for the purpose of expressing an opi nion on the effectiveness of the
D istrict's internal control over fin ancial reporting. Accordingly, we express no such opinio n. An audit also
includes ex amin in g, on a test basis, ev idence supporting the amo unts a nd disclosures in the fi nancial
statemen ts, assessing the accounting principles used and sig nificant estimates made by management, as well as
evaluating the ov erall financial statement presentation. We believe that our audits provide a reasonable basis
for o ur opinion.
In our opinion , the financial statements referred to above prese nt fairly, in all material respects, the respective
financial position of the busin ess -type activ ities as of June 30, 2008 and 2007, a nd the respecti ve changes in
financial po sition an d its cash flows for the years the n ended, in co nformity with U.S. generally accepted
accounting principles.
❑ 16100 C hester field Pa rkway West, Suite 125, Chesterfield, Missou ri 63017-4829, 636-532-9525, Fax 636-532-9055
❑ 1000 Washingto n Square, P. O. Box 1457, Wa shington, Missouri 63090-8457, 636-239-4785, Fax 636-239-5448
www.hbclp.co m POLARIS- Member: Po laris Inter national with Firms in Principal U .S. and Internatio nal Cities
If PXAIIOAAI
The managemen t's discussion and analysis is not a required part of the basic fi nancial statements but is
supplementary information requ ired by U. S. generally accepted accounting principles. We ha ve applied
certain limited procedures, which consisted prin cipally of inquiries of ma nageme nt regardi ng the methods of
measurement and presentation of the required supplementary i nformation. However, we did not audit the
in formation and express no o pinion on it.
In accordan ce with Government Auditing Standards, we have also issued our report dated No vember 12,
2008, on our con sideration of the District's in ternal co ntrol o ver fina ncial reporti ng a nd on o ur tests of its
co mpliance with certain prov isions of laws, regulations, c ontracts, and grant agreements and other matters.
The purpose of that report is to describe the scope of our testing of inter nal co ntrol o ver financial reporting
an d complian ce an d the resu lts of that testin g, and n ot to provide an opinion on the internal co ntrol over
financial reportin g or on compliance. That report is an integral part of an audit perf ormed in accordance with
Government Auditing Standards an d should be considered in assessi ng the results of our audits .
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CERTIFIED PU BLIC A CCOU NTANTS
2
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion and A nalysis
for the years en ded June 30, 2008 and 2007
The annu al report of The Metropolitan St. Lo uis Sewer District (the District) incl udes the independent auditors'
report, mana gement's discussion and analysis (MD &A), and the financial stateme nts accompanied by notes
essential to the u ser's understan ding of the fman cial statements.
Managemen t of the D istrict has prov ided this MD &A to be used in combin ation with the District's financial
statements. This narrativ e is intended to provide the reader with more i nsight into manageme nt's knowledge of
the transactions, ev ents, an d conditions reflected in the accompa nying fi na ncial statements and the fiscal policies
that govern the D istrict's operations.
2008 Financia l Highlights
➢ The D istrict placed $95. 7 million of capital assets into service d uring fisc al year 2008. This continued
high level of expansion and updatin g of the District's plant and system is related to the reg ulat ory
required Capital Improvement and Replacement Program (CIRP).
o Collection and pumping plant $ 79 .9 millio n
o Treatment and disposal plant and equipment $ 11.7 millio n
o General plant and equipment $ 3 .8 million
o Land $ 0.3 million
➢ Cash an d cash equivalents bala nces increased by $38 .1 million, while i nvestme nt balances decre ased by
$101.0 million from fiscal year 2007 to fiscal year 2008 . The o verall decrease is due to the significant
capital expenditures reflected by the increase in net capital assets and no new long-term debt.
➢ Total revenu es in creased $23. 0 million as a result of a wastewater rate increase effective January 1,
2008 an d the stormwater rate change effective March 1, 2008.
➢ Total expenses increased $37.8 million compared to the prior year . Depreciation expense increased
$9.2 million an d all other expenses increased $28.6 millio n.
2007 Financial Highlights
➢ The District placed $280.8 million of capital assets i nto service during fiscal 2007. This continued high
level of expansion and updatin g of the D istrict's plant and system is related to the reg ulatory required
Capital Improv ement and Repla cement Program (CIRP).
o Treatment and disposal plant and equipment $ 152 .8 million
o Collection and pumping plan t $ 124.1 million
o G eneral plant and equipment $ 3.9 milli on
➢ Cash and cash equivalents balances increased by $89.5 million, while i nvestment balances decreased by
$44.5 million, from fiscal year 2006 to fiscal year 2007 . The overall increase is due to the issuance of
Series 2006B and Series 2006C bonds. The high level of cash compared to i nvestme nt balances is due
to the more favorable short-term rates available to the District.
➢ Bonds and no tes payable balances, net of unamortized premium and issue costs, increased by $68.6
million in most part du e to the issuance of Series 2006B a nd Series 2006C bonds in the am ounts of
$14. 2 million and $60.0 million, respectively . Retirements of $8 .2 million and cha nges in the
un amortized premiu m balance and the balance of bond issuance costs netti ng to $2.6 million combine
fo r the remaining $5. 6 million in chan ge.
3
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
Man agemen t's Discussion and Analysis
for the years en ded June 30, 2008 a nd 2007
> Operating income declined by $12.5 million compared to prior year. The decline stems from lowered
billed v olu mes and higher o perating expenses.
> Inv estment income rose by $9.3 million due to favorable rates a nd larger investment balances .
Required Financial Statements
The fmancial statements presented by the management of the District include the Statements of Net Assets;
Statements of Revenu es, Expenses, and Changes in Net Assets; and Statements of Cash Flows. These statements
are prepared using the accrual basis of accou ntin g. This method of acco unti ng recognizes reve nues at the time
they are earned and ex penses when the related liability occurs. As a result of using this method of accounting, the
District's performance over the time period bein g reported is more easily determi nable.
The Statements of Net Assets prov ides a report of the D istrict's current, restricted, and other nonc urrent assets such as
cash, investments, receivables, an d property. A lso, the Statements ofNet Assets pro vides a summary of the District's
curren t, restricted, and n oncurrent liabilities, includin g contracts and accounts payable, deposits and accrued expe nses,
and bond and notes payable. The final section of the Statements ofNet Assets, the net assets sectio n, contai ns earni ngs
retained for use by the District. Increases or decreases in the net assets section may be indicati ve of an improvi ng or
declining fin ancial position. This statement provides the basis f or c omputing rate of return, evaluating the capital
structure of the District, and assessin g the liquidity and financial fle xibility of the District.
The Statements of Rev enues, Expenses, and Changes in Net Assets summarizes all of the year's re venues and
expen ses. This statement indicates ho w su ccessful the District w as at maintaining expenses below the level of
revenu es earn ed.
The Statements of Cash Flo ws accoun ts for the net change in cash and cash equi valents by summarizi ng cash
receipts and cash disbursements resulting from operating activities, noncapital financing acti vities, capital and
related financing activities, and in vestin g activities. This statement assists the user in determini ng the s ources of
cash coming in to the District, the items for which cash was e xpended, and the beginning and ending cash balance.
Financial A nalysis
The D istrict's fin ancial position improved over prior year, as evide nced by the increase in net assets of $87.3 million .
Income before contributions was $41. 7 millio n, while the District continues capacity expansio n and updati ng of the
District's plan t and system. Plans for maintaining the District's ability to meet future spending needs are discussed in
greater detail in the section of the MD &A entitled "Decisions Impacting the Future" .
4
THE METRO POLITAN ST. LO UIS SEWER DISTRICT
Management's Discussio n and Analysis
for the years ended June 30, 2008 and 2007
Con densed Fina ncial Statements and An alysis
The Metropolitan St. Louis Sewer District
Condensed Stateme nts of Net Assets
(000s)
2008 2007
A ssets:
Curren t, R estricted, and Other A ssets $ 531,030 $ 566,700
Capital Assets (net of accumulated
depreciation ) 2,126,442 2,004,792
Total assets 2,657,472 2,571,492
Liabilities:
Cu rrent Liabilities
Noncurrent Liabilities
Total liabilities
77,031 67,751
435,944 446,557
512,975 514,308
N et A ssets:
Invested in capital assets, net of
related debt 1,722,857 1,692,934
Restricted 97,422 85,447
U nrestricted 324,218 278,803
Total N et Assets $ 2,144,497 $ 2,057,184
2008 A na lysis
Increase
(Decrease)
2008-2007
($ 35,670)
121,650
85,980
9,280
(10,613)
(1,333)
29,923
11,975
45,415
$ 87,313
I ncrease
(Decrease)
2006 2007-2006
$ 523,948 $ 42,752
1,886,435 118,357
2,410,383 161,109
52,685 15,066
381,333 65,224
434,018 80,290
1,661,434 31,500
66,973 18,474
247,958 30,845
$ 1,976,365 $ 80,819
Total n et assets in creased $87. 3 million, or 4. 2%, over prior year . This change is d ue to an increase in total assets
of $86.0 million and a decrease in liabilities of $1.3 million.
Net capita l assets increased by $121. 6 million, while curre nt, restricted, and other assets decreased by $35.7
million. The increase in capital assets can be attributed to an increase in construction in progress of $83 .9
million , collection and pumping plant of $79.8 million, treatme nt and disposal pla nt and equipment of $6.0
million, gen eral plant and equipmen t of ($0.7) million, land of $0.1 million, and an offsetting increase in
accumulated depreciation of $47. 5 million. The decrease in current, restricted, and other assets is mostly
attributable to the net decrease in cash equ ivalents an d investments of $62.9 million as a result of spending in the
capital improvement an d replacement program. Additionally, the decline in i nvestment bala nces led to a decrease
in accrued in vestment income of $1. 5 million. The weakening in those assets is somewhat offset by a combined
increase of $11. 5 millio n in billed and unbilled sewer service charge receivables as a result of rate increases in
January and March 2008.
The change in to tal liabilities breaks down to a decrea se in noncurrent liabilities of $10 .6 million and an increase
in cu rren t liabilities of $9.3 million The decrease in noncurrent liabilities is the result of a decli ne in bonds and
notes payable. The District did n ot issu e any n ew long-term debt duri ng the 2008 fiscal year . Current liabilities
are up du e to increases in contracts and a ccou nts payable, deposits and accrued expenses, current portio n of bonds
and notes payable, an d retainage payable of $3. 3 million, $1 .6 millio n, $2 .4 milli on, and $2 .0 million,
respectively.
5
THE METROPOLITAN ST. LOUIS SEWE R DISTRICT
Management's Discussion and Analysis
for the years ended June 30, 2008 and 2007
2007 Analysis
Total net assets increased $80.8 million, or 4.1%, ov er prior year . This change is d ue to an increase in total assets
of $161.1 million and an increase in liabilities of $80.3 million .
N et capital assets in creased by $118. 4 million, while current, restricted, a nd other assets i ncreased by $42.8
million . The increase in capital assets can be attributed to an increase in treatment and disposal plant and
equ ipment of $152.8 million, collection and pumping plant of $123.7 millio n, general plant and eq uipme nt of
$1. 3 millio n, and offsettin g decrease in construction in progress of $116.5 million and an increase in accum ulated
depreciation of $43.0 million. The increase in current, restricted, and other assets is mostly attributable to the
increase in cash equ iv alents and investment of $45.0 million as a result of investi ng funds made a vailable by the
issuan ce of n ew debt.
The change in total liabilities breaks down to in creases in curre nt and noncurre nt liabilities of $15 .1 million and
$65.2 million , respectively. The increase in noncurrent liabilities is the result of the issuance of new debt.
Current liabilities are up in large part du e to an increase in contracts and accounts payable of $7 .3 million due to
the timing of some large construction progress payments. The curre nt portion of bo nds and notes payable also
contributed $3.7 million towards the $15. 1 million in crease. The remaini ng $4 .1 million is a combination of
deposits and accrued ex pen ses and retain age payable.
6
THE METROPOLITAN ST. L OUIS SEWER DISTRICT
Management's Discussio n and Analysis
for the years ended June 30, 2008 and 2007
The Metropolita n St. Lo uis Sewer District
Statements of Revenues, Expenses, and Cha nges in Net Assets
(000s)
2008 2007
Operatin g Revenues:
Sewer service charges $ 221,780 $ 198,993
Recovery of (provision for) doubtful
sewer service charge accoun ts (5,162) (4,194)
Licenses, permits, and other fees 4,346 6,031
Other 961 1,376
Total operatin g rev enues 221,925 202,206
N on operatin g Revenues:
Property taxes lev ied by the District 27,512 24,401
Investment income 17,477 16,946
Rent an d other income 529 878
To tal nonoperatin g reven ues 45,518 42,225
Total revenues 267,443 244,431
O perating Ex penses:
Pumping and treatment 44,531 37,848
Collection system maintenance 30,807 27,718
Engineerin g 5,851 8,864
Genera l and administrative 39,827 35,592
Water backup claims 7,439 3,608
Depreciation 54,934 45,721
Other 36,334 24,460
Total operating expenses 219,723 183,811
Nonoperatin g Expenses:
Capital improvemen t surcharge refund - 15
Net loss on disposal and sale of
utility plant 686 97
Non recurring projects and studies 1,017 3,999
In terest expen se 4,314 --
Total non operatin g ex penses 6,017 4,111
Total expenses 225,740 187,922
In come before C apital Contributions 41,703 56,509
Capital Contribu tions 45,610 24,310
Chan ge in Net Assets 87,313 80,819
Net Assets -Beginning of Year 2,057,184 1,976,365
N et Assets -End of Year $ 2,144,497 $ 2,057,184
Increase
( Decrease)
2008-2007
$ 22,787
(968)
(1,685)
(415)
19,719
3,111
531
(349)
3,293
23,012
6,683
3,089
(3,013)
4,235
3,831
9,213
11,874
35,912
(15)
589
(2,982)
4,314
1,906
37,818
(14,806)
21,300
6,494
80,819
$ 87,313
2006
$ 203,880
(3,161)
5,210
873
206,802
23,211
7,610
1,027
31,848
238,650
38,316
27,792
8,737
32,176
4,879
43,980
20,009
175,889
95
95
3,375
3,565
179,454
59,196
52,941
112,137
1,864,228
$ 1,976,365
I ncrease
( Decrease)
2007-2006
($ 4,887)
(1,033)
821
503
(4,596)
1,190
9,336
(149)
10,377
5,781
(468)
(74)
127
3,416
(1,271)
1,741
4,451
7,922
(80)
2
624
546
8,468
(2,687)
(28,631)
(31,318)
112,137
$ 80,819
7
THE METROPOL ITAN ST. LO UIS SEWER DISTRICT
Management's D iscussion and Analysis
for the years en ded June 30, 2008 and 2007
2008 Analysis
N et assets increased $87.3 million or $6. 5 million more than in the prior year. While re venues increased d ue to
the rate in creases that took affect during the year, expenses grew at a faster pace.
Total revenues increased $23.0 million largely due to an i ncrease in sewer service charges of $22.8 million
follo wing a January sanitary rate increase and a March stormwater rate change . Property tax revenues increased
$3. 1 million followin g a rise in the assessed v alue of real estate within the District's bou ndaries. Licenses,
permits, and other fees dropped $1.7 million as a result of a dramatic slow down in co nnection fees of $1.3
million. Chan ges in other reven ue categories were less noteworthy, a nd they netted to a decrease of $1.2 million
compared to prior year.
Operating expenses increased by $35. 9 million. Operating expenses increased in all areas e xcept engineering .
Other operating expen ses showed the largest increase. The $11 .9 millio n change was the res ult of more spending
on noncapital projects paid through special appropriations . Depreciation increased over last year by $9 .2 million
due to the increasing value of the District's capital assets. The $3.8 millio n rise in water backup and o vercharged
system claims expenses resulted from the large amou nts of rai n we inc urred thro ughout the spring. Pumpi ng and
treatment ex pense was also up in part due to heav y rains and floodi ng. The $6.7 million increase in pumping and
treatmen t can be partially attributed to escalating personnel levels associated with new stormwater initiatives .
2007 Analysis
Net assets increased $80.8 million or $31.3 million less than in the prior year . While income before capital
contributions remained very close to prior year levels, capital contrib utions declined significantly . Capital
con tributions declined by $28.6 million du e to a fall in the number of devel opments gifted to the District of $30.4
million offset partially by $1.8 million increase in grant revenues.
Total reven ues increased $5.8 million than ks to in creases in in vestment income of $9.3 million. Sewer service
charges declined by $4.9 million in comparison to prior year as a result of lower billed volumes. Other re venues,
such as property taxes and other revenue, netted to a $1.4 million increase in reven ue.
Operating expenses increased by $7. 9 million. Other expenses, ge neral a nd admi nistrati ve expenses, and
depreciation expense increased by $4.5 million, $2.1 million, a nd $1 .7 million, respecti vely. Increased spending
in combined sewer area and separate sewer area inflow and infiltration studies account for the $4 .5 million
increase in other expenses. General and administrativ e expenses increased in most part as a result of a laws uit
filed by the EPA an d the State of Missou ri for which the District booked a $1.0 million reserve for judgment a nd
claims settlement. Depreciation expen se rose most significantly as a res ult of the new treatment pla nt bei ng
capita lized in fiscal year 2007. Pumpin g and treatment, collectio n system maintena nce, and engineering expenses
netted a decrease of $0.4 millio n in operating expenses.
8
THE METROPOLITAN ST. L OUIS SEWER DISTRICT
Management's D iscussion and Analysis
for the years ended June 30, 2008 and 2007
The Metropolitan St. Louis Sewer District
Condensed Stateme nts of Cash Flows
(000s)
Cash flows from operatin g
activities
Cash flows from noncapital
financing activities
Cash flows from capital
an d related financing
activ ities
Cash flows from in vesting
activities
Net increase (decrease) in
cash an d cash equiv alents
Cash and cash equivalents
at beginn in g of year
Cash and Cash Equ ivalents
at End of Year
2008 Ana lysis
2008 2007
$ 60,195 $ 72,214
27,512 24,401
(169,917) (68,948)
120,352 61,784
38,142 89,451
192,540 103,089
$ 230,682 $ 192,540
Incre ase
(Decrease)
2008-2007
($ I2,019)
3,111
(100,969)
58,568
(51,309)
89,451
$ 38,142
2006
$ 69,033
23,211
(105,123)
49,380
36,501
66,588
$ 103,089
Increase
( Decrease)
2007-2006
$ 3,181
1,190
36,175
12,404
52,950
36,501
$ 89,451
Cash and cash equ ivalents en ded the year $38.1 million higher than the pre vio us year. Cash o utflows from
capital and related fmancin g activities were $169.9 million or $101 .0 million more than in the previo us year. The
large decline is due to the absen ce of any new bond proceeds in the fiscal year . Cash flows from operati ng
activities were a positive $60. 2 million, bu t they were short of fiscal year 2007 numbers by $12.0 milli on.
Offsettin g these declin es was a sign ifican t in crease in p ositi ve cash flows from investing activities of $58.6
million over prior yea r, or $120.3 million. The largest dri ver of the positive cash flows from in vestments was the
low reinvestment rate of maturin g inv estments. Also positive was the change in cash flows from noncapital
fin ancin g activities of $3.1 million over prior year levels, which amounts to $27 .5 million for fiscal year 2008.
2007 A na lysis
Cash and cash equivalen ts at the e nd of the year increased by $89 .5 million. The most significa nt increase
occurred in cash flows from capital and related financing activities. These cash outflows of $68 .9 million were
favorable to prior year by $36. 2 million, and they were most significantly affected by an increase in proceeds from
issu ance of debt and the prior year refund of the Clean Water Capital Improvement Trust F und. Also significant
was the cash flows from investing activities which were $61.8 million or $12.4 million more than in the pri or
year, as a result of increased investment balances an d a fa vorable rate e nvironment . Cash flows from operating
activities increased $3. 2 million over last year in large part d ue to a decline in payments to suppliers for goods
and services of $2. 9 million . Fin ally, the increase in cash flows from no ncapital financing activities is related to
the in crease in assessed property valu es resulting in increased tax re venue for the District.
9
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion and Analysis
for the years ended June 30, 2008 and 2007
Capital Assets
The Metropolitan St. Louis Sewer District
Capital Assets
Net of Depreciation (000s)
I ncrease I ncrease
(Decre ase) (Decrease)
2008 2007 2008-2007 2006 2007-2006
Lan d $ 27,070 $ 26,976 $ 94 $ 26,976 $ —
Construction inprogress 333,105 249,127 83,978 365,628 (116,501)
Treatmen t an d disposal plant and equipmen t 402,088 414,853 (12,765) 278,200 136,653
Collection an d pumpin g plant 1,347,861 1,297,710 50,151 1,200,494 97,216
G eneral plant and equ ipmen t 16,318 16,126 192 15,137 989
Total $ 2,126,442 $ 2,004,792 $ 121,650 $ 1,886,435 $118,357
2008 A nalysis
Total capital assets, net of depreciation, in creased $121 .6 million over prior year. Construction in progress
increased $84.0 million due to the large capital improvement and replacement program currently underway.
Collectio n and pumping increased $50.1 million and treatment on disposal decreased $12.8 million . Small
increases totaling $0.3 million in land and general plant and eq uipment round out the year's increase.
2007 Analysis
Total capital assets, net of depreciation, increased $118.4 million over prior year . Treatment and disposal plant
and equipmen t incurred the most significant change. It increased $136.6 million mostly due to the capitalization
of the District's newest treatment plan t. Also sign ificant is the decrease in c onstruction in progress of $116.5
million resulting from a new treatment plant placed into service offset by co ntinued high levels of CIRP spendi ng.
Collectio n and pumpin g plant increased by $97. 2 million due to the capitalization of the newest treatme nt plant.
General plant and equipmen t increased by $1.0 million.
For additional information related to the District's capital assets, see Note 4 to the financial statements.
10
THE METROPOLITA N ST. L OUIS SEWER DISTRICT
Managemen t's Discussion and Analysis
for the years ended June 30, 2008 and 2007
Long-term Debt
The Metropolitan St. Louis Sewer District
Lon g-term Debt
(000s)
Increase I ncrease
(Decrease) (Decrease)
2008 2007 2008-2007 2006 2007-2006
Revenu e Bon ds:
Series 2004A $ 170,485 $ 171,995 ($ 1,510) $ 173,500 $ (1,505)
Series 2004B 143,563 150,312 (6,749) 156,245 (5,933)
Series 2005A 6,240 6,520 (280) 6,800 (280)
Series 2006A 42,515 42,615 (100) 42,715 (100)
Series 2006B 14,205 14,205 -- 14,205
Series 2006C 60,000 60,000 -- 60,000
West Watson and Na nell 130 175 (45) 486 (311)
Ozark and Tablerock 81 94 (13) 116 (22)
Energy Lo an Pro gram 58 69 (11) 79 (10)
$ 437,277 $ 445,985 ($ 8,708) $ 379,941 $ 66,044
2008 An alysis
The District ended fiscal year 2008 with $437.3 millio n in long-term debt outstandi ng, consisting mai nly of
reven ue bonds. The decrease of $8. 7 million is a result of retirements througho ut the fiscal year .
2007 An alysis
The D istrict ended fiscal year 2007 with $446.0 million in long-term debt outstanding, consisting mainly of
reven ue bonds. The in crease of $66. 0 million is a result of new issues in the amount of $74.2 million a nd
retirements of $8. 2 million.
For additional in formation related to the District's long-term debt, see Note 7 to the financial statements.
Decision s Impacting the Future
The District will embark on the second phase of its multi decade wastewater capital impro veme nt program
utilizing the proceeds from the sale of a portion of the $275 million bonds a uthorized by the voters in Aug ust
2008. This phase of the pro gram includes the design and co nstr ucti on of $662 million of capital improvements
through 2012. These regulatory required projects include completio n of the Lemay Treatme nt Pla nt expansion,
pump statio n improv ements, and sewage co llection system replacement a nd rehabilitati on .
11
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion and Analysis
for the years ended June 30, 2008 and 2007
The District has suspen ded the collection of various taxes used to fund stormwater and wastewater projects a nd
has moved to a system of user fees based on wastewater and stormwater services provided to its customers . The
D istrict elected to discon tinue the assessment of approximately $24.4 million in taxes pre viously used for
stormwater fun ding an nually. Instead, a stormwater impervio us charge of 12-14 cents per hundred square feet
has been imposed (effective March 1, 2008) to gen erate approximately $36 .8 million in stormwater revenue
annu ally. The validity of this charge has been challenged in court and will hopefully be resolved over the coming
year.
The District will also respond to a lawsu it filed by the U.S. Enviro nmental Pr otection Agency and the Missouri
Department of Natural Resou rces. See note 14 for additional informati on regarding this litigation .
R equests for Information
This financial repo rt is designed to prov ide a gen eral overview of the District's fmances for all those with an
interest in the D istrict's fmances. Question s concern ing any of the informatio n pro vided in this report or req uests
for additional financial in formation should be addressed or e -mailed t o:
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
Tr,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Statements of Net Assets
June 30, 2008 and 2007
ASSETS
2008 2007
Current Assets:
Cash and cash equiv alents $ 133,456,288 $ 95,972,728
Investmen ts 65,650,294 71,798,626
Sewer service charges receiv able, less allowance of $3,552,000
in 2008 and $2,922,000 in 2007 34,441,336 27,030,264
Un billed sewer service charges receivable, less allowan ce of $412,000 19,733,172 15,599,712
in 2008 and $312,000 in 2007
Accrued income on in vestmen ts 1,324,699 1,930,779
Grants receivable 8,567 20,166
Other receiv ables, less allowan ce of $61,598 in 2008 an d
$27,853 in 2007 1,491,553 993,367
Su pplies inventory 7,483,866 7,437,689
Total current a ssets 263,589,775 220,783,331
Non current Assets:
Restricted Assets:
Cash and cash equivalents 97,225,855 96,567,056
Inv estments 56,345,903 144,068,098
A ccrued in come on inv estmen ts 463,452 1,365,985
Gran ts receiv able 61,271 —
154,096,481 242,001,139
Other Assets:
Lon g-term inv estments
Note receivable
96,809,501
16,533,870
103,915,078
113,343,371 103,915,078
Capital A ssets:
Depreciable:
Treatment and disposal plant an d equipment 728,496,863 722,541,939
Collection and pumpin g plant 1,810,225,223 1,730,404,446
G eneral plant and equ ipment 53,759,969 54,502,189
Less: A ccumulated depreciation
2,592,482,055 2,507,448,574
826,215,131 778,759,044
1,766,266,924 1,728,689,530
Nondepreciable:
Land 27,070,041 26,976,107
Constru ction in progress 333,105,564 249,126,873
Net capital assets 2,126,442,529 2,004,792,510
Total n on current assets 2,393,882,381 2,350,708,727
Tota l Assets
2,657,472,156 2,571,492,058
See the accompan ying notes to the finan cia l statements.
14
THE METROPOLITAN ST. L OUIS SEWER DISTRICT
LIABILITIES
2008 2007
Cu rren t Liabilities:
Contracts and accou nts payable 23,882,652 18,504,177
Deposits and accrued expen ses 22,797,213 21,250,259
R etainage payable 742,555 779,248
Curren t portion of bon ds and no tes payable 10,508,610 8,053,048
57,931,030 48,586,732
Curren t Liabilities —Payable From Restricted Assets:
Contracts and accounts payable 11,025,954 13,147,020
Retainage payable 8,073,672 6,017,551
19,099,626 19,164,571
Total cu rren t liabilities
77,030,656 67,751,303
N oncurrent Liabilities:
Deposits an d accrued expenses 5,201,546 4,434,462
Bonds an d notes payable 430,742,624 442,122,110
Total Liabilities
N ET ASSETS
435,944,170 446,556,572
512,974,826 514,307,875
N et Assets:
Invested in capital assets, net of related debt 1,722,856,756 1,692,933,825
R estricted for:
D ebt service 30,146,084 28,790,300
Subdistrict construction and improvement 67,276,286 56,657,281
Unrestricted 324,218,204 278,802,777
Total Net Assets
$ 2,144,497,330 $ 2,057,184,183
See the accompanying no tes to the financial statements.
15
THE METROPOLITA N ST. LOUIS SEWER DISTRICT
Sta tements of Revenues, Expenses, and Cha nges in Net Assets
for the years ended June 30, 2008 and 2007
2008 2007
Operating Reven ues:
Sewer service cha rges $ 221,780,399 $ 198,992,581
Recov ery of (provision for) doubtful sewer service
charge accounts (5,161,982) (4,193,703)
Licenses, permits, an d other fees 4,345,961 6,030,583
O ther 960,670 1,376,071
Total operatin g revenues 221,925,048 202,205,532
O perating Expenses:
Pumping an d treatment 44,531,011 37,848,292
Co llectio n system maintenance 30,807,310 27,718,099
Engineering 5,851,210 8,863,847
G eneral and administrativ e 39, 826,102 35,591,184
Water backup claims 7,439,436 3,608,165
Deprecia tio n 54,933,859 45,720,978
Other 36,334,129 24,459,942
Total operating expen ses 219,723,057 183,810,507
Operating Income
2,201,991 18,395,025
Nonopera ting Rev enues:
Property taxes lev ied by the D istrict 27,512,070 24,401,167
Investment income 17,476,621 16,946,145
Rent and o ther income 529,983 878,319
Total nono peratin g revenues 45,518,674 42,225,631
Nonoperating E xpenses:
Capita l improvement su rcharge refund — 15,000
N et loss on disposal and sale of capital assets 686,459 96,630
No nrecurring pro jects and studies 1,016,891 3,999,673
Interest expense 4,313,973 —
Total n onoperatin g expenses 6,017,323 4,111,303
Income before Ca pital Contributions
41,703,342 56,509,353
Capital Contribu tions:
Utility plan t con tributed 44,866,870 21,131,633
Grant reven ue 742,935 3,177,797
Total capital co ntributio ns 45,609,805 24,309,430
C ha nge in Net Assets
Net Assets -B eginning of Year
Net Assets -En d of Year
87,313,147 80,818,783
2,057,184,183 1,976,365,400
$ 2,144,497,330 $ 2,057,184,183
See the accompan ying n otes to the financial statements.
16
1-+
J
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
Sta tements of C ash Flows
for the yea rs ended June 30, 2008 and 2007
2008 2007
Cash flows from o pera tin g activities:
Received fro m cu stomers $ 211,084,856 $ 203,155,790
Paid to employees for services (61,370,039) (59,876,278)
Paid to suppliers for go ods and services (89,519,594) (71,065,344)
Net cash pro vided by operatin g activities 60,195,223 72,214,168
Cash flows provided by nonca pital finan cing activities:
Tax es lev ied
27,512,070 24,401,167
Cash flows from ca pital and related financing a ctiv ities:
Pro ceeds from capital grants 693,263 3,698,667
Clean Water Capital Improv emen t Surcharge refu nded — (15,000)
Proceeds from issuan ce of debt 155,000 77,190,257
Interest receiv ed on bon d proceeds to be used for capital improvements 6,718,124 9,327,708
Principal paid on debt (8,863,431) (8,160,308)
Interest and fees paid on debt (17,701,918) (16,518,429)
Paymen ts for capital assets (153,376,548) (134,588,843)
Proceeds from sale of capital assets 2,454,158 117,307
Miscellaneou s income 4,371 Net ca sh used in capital an d related financing activities (169,916,981) (68,948,641)
Cash flows from in vestin g activ ities:
Purchase of in vestments (266,027,512) (355,303,670)
Proceeds from sale an d maturity of in vestmen ts 370,802,423 401,621,990
Inv estmen t income 14,802,753 14,587,575
Proceeds from ren ts 774,383 878,319
Net cash pro vided by investing activities 120,352,047 61,784,214
Ne t In crease in Cash and Cash Equiv alents 38,142,359 89,450,908
Cash and Cash Equivalen ts at Beginning of Year 192,539,784 103,088,876
Cash a nd Cash Equiv alents at End of Year $ 230,682,143 $ 192,539,784
Noncash capital and inv esting activities:
Portion of utility plan t con tributed represen ted by:
Utility plant con tributed by other governmen ts and developers $ 44,866,870
Note receivable (16,721,443)
Other receivable (842,162)
Fair v alue investment adjustment gain (loss)
$ 21,131,633
$ 27,303,265 $ 21,131,633
$ 279,444 ($ 454,961)
See the accompanying n otes to the financial statements.
18
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
2008 2007
Recon ciliation of operating inco me to n et cash flows prov ided by
operatin g activ ities:
Operating in come $ 2,201,991 $ 18,395,025
Adjustments to reconcile operatin g in come to net cash
provided by operating activ ities:
Depreciation 54,933,859 45,720,978
Engin eering studies no t capitalized 9,915,365 —
Chan ge in opera ting assets an d liabilities:
(Increase) decrease in billed and u nbilled sewer service
charges receivable (11,544,532) 483,507
(Increase) decrease in other receivables 666,452 1,201,249
(Increase) decrease in supplies inven tory (46,177) 535,160
Increase (decrease) in con tracts and accoun ts payable 597,286 3,277,646
Increase (decrease) in deposits and accrued expenses 3,470,979 2,600,603
(
Net Ca sh Provided by Operating Activ ities
$ 60,195,223 $ 72,214,168
See the accompanying notes to the finan cial statements.
19
THE METRO POLITAN ST. LO UIS SEWER DISTRICT
N otes to Financial Statements
Jun e 30, 2008 and 2007
1. Organizatio n and Summary of Significant Acco unting Policies
Organ ization
The Metropolitan St. Louis Sewer District (the District) was a uthorized by the voters, established a nd
chartered un der the prov isions of the Con stitution of Missouri, as a municipal corporation and a political
su bdivision of the State. Upon creation in 1954, the District assumed responsibilities to provide f or the
construction, operation , and mainten ance of the sewer facilities within its defined bou ndaries . The District's
service area now comprises all of the City of St. Louis and most of St. Louis County. Subdistricts withi n the
District's total service area represen t separate geographic areas within which specific taxes are le vied for the
retiremen t of indebtedn ess issued to finan ce con struction of sanitary or stormwater facilities within the area
or to o pera te, maintain, or con struct improvemen ts within the subdistrict. The District also maintains all of
the publicly own ed stormwa ter sewers within its original boundaries and is continuing to accept maintenance
of the stormwater sewers in the remain der of its service area .
Pu rsu ant to prov isions of its charter and su bject to limitatio ns imposed by the Constit ution of Missouri, all
powers of the D istrict are v ested in a six -member Board of Trustees (the Board), three of whom are
appointed by the Mayor of the City of St. Louis and three of whom are appointed by the Co unty Exec utive
of St. Louis Co unty.
Reporting Entity
The D istrict defines its financial reportin g entity to include all component u nits for which the District's
govern ing body is finan cially accoun table. To be considered financially accou ntable, the organization must
be fiscally depen dent on the District and the District must either 1) be able to impose its will on the
organization or 2) the relationship mu st have the pote ntial for creati ng a financial be nefit or imp osing a
financial burden on the District.
Based on the forego ing, the District's fin ancial statements include all funds that are established under the
authority of the District's charter. There are no agencies, boards, commissions, or a uthorities that are
controlled by or dependent on the D istrict.
Measurement Focus, Basis of Accounting, and Fina ncial Statement Presentation
Throu ghout the yea r, the D istrict maintain s its detailed accounti ng records on the modified accrual basis of
accounting. In order to account for the tra nsactions related to certain subdistricts and restricted resources,
separate fund accounting records are maintained. For fina ncial rep orti ng purposes, the District reports its
operations as a single en terprise fu nd. A ccordingly, the acco unting records are converted to the accrual basis
of accounting and all interfu nd transaction s are eliminated. Under the accrual basis of acco unti ng, revenues
are recognized when earned and expen ses are recogni zed when the related liability is inc urred. The District's
measurement focus is on the flow of economic resources. U nbilled sewer service charge revenues are
accru ed by the District based on estimated billings for services provided thro ugh the e nd of the current fiscal
year.
20
THE METR OPOLITA N ST. LOUIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2008 and 2007
1. Organization and Summary of Significant Accounting P olicies (continued)
Measurement Focu s, Basis of Acco unting, and Financial Statement Prese ntatio n (continued)
Rev enues and expenses are divided into operating and nonoperating items . Operating reve nues generally
result from providing services in conn ectio n with the District's principal o ngoing operations. The pri ncipal
operating rev enues of the District are user fees, licenses, and permits for wastewater treatment services.
Operatin g expenses in clude the costs associated with the co nveyance and treatment of wastewater,
stormwater, administrative expenses, and depreciation on capital assets . All revenues and expenses not
meeting these definitions are reported as nonoperating re ven ues and e xpe nses.
The D istrict follows GA SB Statemen t No. 33, Accounting and Fi nancial Reporting f or Non - Exchange
Transac tion s (G ASB 33), which establishes accounting and financial reporting standards for non -e xchange
transactions involv ing finan cial or capital resources.
G ASB 33 groups non -exchange transactions into the following four classes, based upon their principal
cha ra cteristics: derived tax revenues, imposed non -e xchange revenues, government mandated non -e xchange
transactions, and voluntary non -exchan ge transactio ns. For the District, the following non -exchange
tran saction s are a pplicable.
The D istrict recognizes a ssets from imposed non -exchange revenue transactions in the peri od when an
enforceable legal claim to the a ssets arises or when the resources are recei ved, whichever occ urs first.
R evenues are recognized in the period when the reso urces are req uired to be used or the first period that use
is permitted. The District reco gnizes reven ues from property taxes, net of estimated refunds and estimated
un collectible amounts, in the period for which the taxes are levied . Imposed non -excha nge revenues also
inclu de licenses, permits, and other fees.
Intergov ernmental reven ues, represen ting grants and assistance received from other go vernme ntal units, are
gen erally recognized as revenues in the period when all eligibility requirements, as defined by G ASB 33,
have been met. Any resources received befo re eligibility requirements are met are reported as deferred
revenues.
When both restricted an d u nrestricted resources are available for use, it is the District's policy to use
restricted resou rces first, and then unrestricted resources as they are needed.
The D istrict follows all Governmen tal Accounting Standards Board (GASB) pronouncements as well as all
Financial Accou nting Standards Board (FASB) Statements and I nterpretatio ns, Accounting Pri nciple Board
Opinion s, and Accountin g Research Bulletins issued on or before No vember 30, 1989, unless those
pronoun cements conflict with or contradict GASB pro nou nceme nts. In addition, the District also applies all
FASB Statemen ts and In terpretations issu ed after No vember 30, 1989, except for those that conflict with or
contradict GASB pron ouncements.
21
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
N otes to Fin ancial Statements
Ju ne 30, 2008 and 2007
1. O rgan iza tion and Summary of Sign ificant Accounting Policies (continued)
Cash and Cash Equiv alen ts and Inv estments
The District's "cash and cash equivalents" consist of all highly liq uid i nvestments (i ncludi ng restricted
assets) with maturity dates of 89 days or less from the date acquired by the District. "Investme nts " consist
of those investments with maturity dates 90 days or greater at the time of purchase by the District.
Investmen ts are stated at fair valu e based u pon quoted market prices.
The D istrict's in vestmen t disclo sures follow GASB Statement No. 40, Dep osit a nd Inv estment Risk
Disclosures, an Amen dmen t of GASB Statement No. 3 (GASB 40). This standard's disclosure
requ irements addresses custodial credit risk, concentrations of credit risk, i nterest rate risk, a nd foreign
currency risk.
Capital Assets
Capital assets are valu ed at historical cost or estimated historical cost based in part upon a study performed
in 1981. Interest cost is capitalized as part of the historical cost of acquiring certain assets whe n the effect
of such capitalization is material to the financial statements. Interest is not capitalized on assets co nstructed
with co ntributions from other governmental sources. Depreciation is calc ulated on a straight-line basis over
the following estimated useful lives:
Treatment and disposal plant and equipment
Collection and pumping plant
General plant and equipment
10 to 50 years
10 to 100 years
3 to 50 years
When designing user charge rates, the D istrict in cludes fu nding f or replacement cost of assets, which may
differ from depreciation expense recorded for financial reporting purposes.
Norma l maintenance and repairs that do not add to the value of the asset or materially extend asset li ves are
not capitalized. Betterments are capitalized and depreciated over the remaining useful lives of the related
assets, as applicable. The District defin es capital assets as assets with an initial, individual cost of more
than $1,000 and an estimated useful life in excess of three years.
Capitaliz ation of Interest
Interest costs are capitalized as part of the co sts of capital assets during the peri od of co nstr uction based on
the related weighted av erage net borrowing costs incurred. Interest earned on temporary in vestme nts
acquired with the proceeds of such borrowed fu nds from the date of the borrowing u ntil the assets are ready
for their intended use is used to reduce the interest costs capitalized on the co nstructed assets. Interest is not
capitalized for outlays financed by capital grants (or other outside parties) externally restricted for the
acquisition of specified assets. In 2008 and 2007, the District capitali zed $6,516,384 and $10,095,195 of
net interest expense, respectiv ely.
22
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial St atements
Ju ne 30, 2008 and 2007
1. Organiz ation an d Summary of Sign ifican t Accounting Policies (continued)
Supplies Inventory
Supplies inventory consists of parts an d supplies to be used to operate and maintain treatme nt facilities and
v ariou s treatmen t -related equipment at the D istrict. This i nventory is stated at the l ower of cost or market,
determined on the average cost method. Expenses are recog ni zed when the in ventory is consumed.
Net Assets
Invested in capita l assets, net of related debt: This c omponent of net assets consists of c apital assets,
inclu din g restricted ca pital assets, net of accumulated depreciation and reduced by the outstanding debt that
is attributable to the acquisition, construction , or improveme nt of those assets .
R estricted: This component of n et a ssets consists of constrai nts placed on net assets use through external
constrain ts imposed by creditors, gran tors, co ntributors, laws, or regulations of other go vernme nts or
constraints imposed by law through con stitutional provisions or enabli ng legislation. Property taxes le vied
by the various subdistricts and other reven ues received for co nstruction in those subdistricts have also been
restricted for that use. Clean water capital improvement surcharges, sewer extensio n and co nnection fees,
grants, and other revenu es received for construction withi n certain subdistricts have been restricted for that
use. In addition , a portion of sanitary sewer charges have been restricted for the payme nt of principal and
interest on certain debt of the D istrict.
Un restricted net assets: This componen t of net assets co nsists of net assets that do not meet the definition of
restricted or inv ested in capital assets, net of related debt.
Capital Con tribu tions
Capital contribution s to the District represent gover nment gra nts a nd other aid used to fund capital projects.
In accordance with GASB 33, capital contributions are recog nized as revenue when the expenditure is made
a nd the amount becomes subject to claim for reimbursement .
Bond Issuan ce Costs/Bond Premiums and Discounts
Bond issuan ce co sts incu rred, as well as bond premi ums and discounts, and paid from the proceeds of
rev en ue bond issues are deferred and amortized using the straight-line method o ver the term of the bonds.
23
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
Jun e 30, 2008 and 2007
1. Organ ization and Summa ry of Significan t Accounting P olicies (continued)
Compensated Absen ces
Vacation
Under the terms of the District's personnel policies, employees are allowed to carry a maximum of 30 to
45 days of vacation (depending on length of service) from one calendar year to the ne xt. Since vacation
accru ed at year-end is expected to be u sed by the employee during the f ollowing fiscal year, the accru al is
reported as a component of curren t deposits and accrued e xpenses payable.
Sick Leave
Employees earn sick pa y benefits at accrual rates ranging from 10 days per year to 12 days per year
(dependin g on len gth of service). Unused sick leave can be carried over at year-e nd without limitation.
An employee retirin g from the District with five or more years of service, who has unused accrued sick
leav e remain ing, will be compen sated for that portion of unused accrued sick leave at the rate of 1-1/4%
for each year of District service. The D istrict has recorded a liability, which has been actuarially
determin ed to be equal to the accumu lated expense charge that will amorti ze the employees' be nefits over
their period of District service. The liability, included in current deposits and accrued expe nses payable,
includes v ested accumulated rights to receive sick leave benefits estimated to be paid within one year .
The portion of sick leave ex pected to be paid after o ne year is recorded as a compone nt of noncurrent
deposits and accrued expen ses payable.
Use of Estima tes
The preparation of fman cial statements in conformity with U .S. ge nerally accepted accounti ng pri nciples
requires man agemen t to make estimates and assumptions that affect the reported amo unts in the financial
statements. Actual results could differ from those estimates.
Reclassification s
Certain reclassification s hav e been made to the Ju ne 30, 2007 amounts in order to conform to the
presentation of the June 30, 2008 fin ancial statements.
24
THE METROPOLITAN ST. L OUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2008 and 2007
2. Deposits and Investments
With the approv al of the District's Bo ard of Tru stees, the Secretary -Treasurer is authorized to invest excess
cash in any investmen t authorized by the D istrict's charter . The District's investme nt policy conforms to the
inv estment policy gu idelines for the State of Missouri . The District's investment policy auth ori zes the
D istrict to invest in the following in struments: U.S. Treasury notes, certificates of deposit, obligations of
an y agency or in strumentality of the U.S., repurchase agreements, banker's acceptances, and commercial
paper rated in the three highest cla ssifications, for terms specified in the p olicy. At June 30, 2008 and 2007,
all of the District's investments were in compliance with the District's in vestment policy and charter .
In accordan ce with the District's in vestment policy, the District also in vests in mortgage -backed securities
such as collateralized mortgage obligations. These securities are reported at fair val ue and are based on the
cash flows from interest payments by the underlying m ortgages. As a res ult, they are se nsitive to
prepayments by mortgagees, which may resu lt from a decline in interest rates. For example, if interest rates
decline and homeowners refinance mortgages, thereby prepaying the mortgages underlying these securities,
the cash flow from interest payments is reduced and the value of these securities declines . Likewise, if
homeown ers pay on mortgages longer than anticipated, the cash flows are greater and the return on the initial
inv estment would be higher than an ticipated.
A summary of deposits and in vestments as of June 30, 2008 and 2007, is as follows:
2008 2007
Cost Fair Value Cost Fair Value
Deposits $ 86,352,544 $ 86,352,547 $ 105,918,805 $ 105,918,804
Repurchase agreements (co llateraliz ed) 18,148,622 18,148,622 18,583,974 18,583,974
U. S. Treasury an d A gen cy obligation s 215,735,890 216,407,597 323,030,205 322,418,113
Commercia l paper 111,835,020 112,167,778 64,800,645 64,956,887
Ban kers acceptance notes 16,366,512 16,411,297 442,914 443,808
$ 448,438,588 $ 449,487,841 $ 512,776,543 $ 512,321,586
In terest Ra te Risk
As of June 30, 2008 and 2007, the District had the following investme nts a nd maturities:
25
THE METRO POLITAN ST. LO UIS SEWER DISTRICT
Notes to Fina ncial Statements
June 30, 2008 and 2007
2. Deposits and In vestments (continu ed)
In terest Rate Risk (continued)
Investmen t T ype
2008
Fa ir V alue
Repu rchase agreements (collateralized) $ 18,148,622
Certificates of deposit 7,300,000
U .S. Treasuries 24,673,030
U.S. Agen cies 191,734,567
Commercial paper 112,167,778
Bankers acceptance notes 16,411,297
Total
$ 370,435,294
Weighted
Aver age
Maturity
(Years)
0 .00
0 .64
0.40
2.08
0.09
0.08
2007
Fair Value
$ 18,583,974
12,100,000
89,405,468
233,012,645
64,956,887
443,808
Weighted
A verage
Mat urity
( Years)
0.00
0.63
0 .36
1.82
0.04
0.01
1.20 $ 418,502,782 1.21
In accordan ce with the D istrict's inv estmen t po licy, the District will minimize the risk that the fair value of
debt securities in the portfolio will fall due to increases in general interest rates by:
1. Structuring the inv estment portfolio so that securities mature to meet cash req uirements for o ngoi ng
operation s, thereby avoidin g the need to sell securities on the open market prior to maturity; and
2. Investing operating funds primarily in short-term securities.
3. State la w limits the maximum sta ted maturities to five years on any investment from the date of
pu rchase.
Custodial/Credit Risk
The D istrict will min imize credit risk, the risk of loss due to failure of the security issuer or backer, by:
1. Prequalifying the fmancial institution s, broker/dealers, intermediaries, and ad visors with which the
District will do bu siness; and
2. D iversifying the portfolio so that potential losses on individual securities will be minimized.
In accordance with its investment policy, the District limits its investments in these investment types to the
top rating issued by N RSROs. As of June 30, 2008, the District's i nvestments in commercial paper were
rated Al by Standard & Poor's, F-1 by Fitch ratings, and P-1 by Moody's I nvestors Service . The District's
inv estments in repurchase agreemen ts carry the explicit guarantee of the U .S . Government. The District's
investments in U .S. agencies that do n ot carry the explicit guarantee of the U.S. government all carry a
rating assigned by Standard & Poor's of "AA A". All cash dep osits of the District were fully c ollateralized
with securities held by a third party fin an cial institution in the District's name.
26
THE METROPOLITA N ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
Jun e 30, 2008 and 2007
2. D eposits an d Investments (continued)
Concen tra tion of Credit Risk
The D istrict places no limit on the amoun t the District may invest in any one issuer with respect to U .S .
Treasury Secu rities an d colla teralized time and demand deposits. U.S. Governme nt agencies and
govern ment -sponsored enterprises a re limited to 60% of the portfolio; and c ollateralized repurchase agree-
ments are limited to 50% of the portfolio. U.S. Gover nment agency callable securities, commercial paper,
an d bankers' acceptances are limited to 30% of the portfolio, each . The following table lists investments in
issu ers that represent 5% or more of to tal inv estments at June 30, 2008 and 2007:
Percent of Total In vestments
Issuer
Federal H ome Loan Bank
Federal National Mortgage A ssociation
Federal Home Loan Mortgage Corporation
3. N ote Receivable
2008 2007
19 .0%
10.9
10 .3
23.8%
12 .4
6 .4
The D istrict has a n ote receivable with the City of Arnold, Missouri for its portion of the capital costs related
to a wastewater facility. The City also pays reasonable fees for operation and maintenance costs. The note
receivable will be paid ov er 30 years. At Jun e 30, 2008, future payments are as follows:
For the Years
Ending Jun e 30
2009 $ 1,650,750
2010 1,100,500
2011 1,100,500
2012 1,100,500
2013 1,100,500
2014 - 2018 5,502,500
2019 - 2023 5,502,500
2024 - 2028 5,502,500
2029 - 2032 4,952,222
Less: Amou nt representing in terest
27,512,472
10,791,029
$ 16,721,443
Classification in statemen t of net assets:
Cu rrent $ 187,573
Long-term 16,533,870
$ 16,721,443
27
THE METROPO LITAN ST. LOUIS SEWER DIST RICT
N otes to Financial Statements
June 30, 2008 and 2007
4. Change in Ca pital Assets
The following is a summary of capital assets changes for the fiscal years ended Ju ne 30, 2008 and
2007:
for the yea r ended Ju ne 30, 2008
Balan ce Balance
Jun e 30, 2007 Additio ns Deletio ns J une 30, 2008
Ca pital assets n ot bein g depreciated:
Land $ 26,976,107 $ 340,734 $ 246,800 $ 27,070,041
Construction in progress 249,126,873 148,772,276 64,793,585 333,105,564
Tota l capital assets not be ing depre ciated 276,102,980 149,113,010 65,040,385 360,175,605
Capital assets bein g deprecia ted:
Treatmen t an d disposal plan t
and equipment 722,541,939 11,718,894 5,763,970 728 ,496,863
Co llection and pu mpin g plan t 1,730,404,446 79,872,197 51,420 1,810,225,223
Ge neral plant and equ ipment 54,502,189 3,813,979 4,556,199 53,759,969
To ta l capita l assets being depreciated 2,507,448,574 95,405,070 10,371,589 2,592,482,055
Less: A ccumu lated depreciation:
Treatment a nd dispo sal plan t
and e qu ipment (307,688,932) (22,169,675) (3,449,343) (326,409,264)
Collection an d pumping plant (432,693,938) (29,721,609) (51,760) (462,363,787)
Gen eral plan t an d equipment (38,376,174) (3,042,574) (3,976,668) (37,442,080)
To tal a ccumulate d depreciatio n (778,759,044) (54,933,858) (7,477,771) (826 ,215,131)
To ta l capita l assets bein g depreciated, net
To tal Ca pital A ssets
1,728,689,530 40,471,212
2,893,818 1,766,266,924
$ 2,004,792,510 $ 189,584,222 $ 67,934,203 $ 2,126,442,529
for the year ended J une 30, 2007
Balance B ala nce
June 30, 2006 Additions Deletions June 30, 2007
Capital assets no t being depreciated:
Land $ 26,976,107 $ — $ — $ 26,976,107
Construction in progress 365,627,566 139 ,477,160 255,977,853 249,126,873
Tota l capital assets no t being depreciated 392,603,673 139,477,160 255,977,853 276,102,980
Capital assets be in g de preciated:
Treatmen t an d disposal plant
an d equipment 569,721,790 152,820,149 — 722,541,939
Collection and pumpin g plant 1,606,656, 767 124,123,202 375,523 1,730,404,446
Gen eral plan t an d e quipment 53,194,761 3,850,240 2,542,812 54,502,189
Total capita l assets bein g depreciated 2,229,573,318 280,793,591 2,918,335 2,507,448,574
Less: Accumu lated depreciatio n:
Treatment and dispo sal plant
and equipment (291,521,309) (16,167,623) — (307,688,932)
Collection a nd pumpin g plan t (406,163,408) (26,705,002) (174,472) (432,693,938)
General plant an d equ ipmen t (38,057,748) (2,848,351) (2,529,925) (38,376,174)
Total accu mu lated depreciatio n (735,742,465) (45,720,976) (2,704,397) (778,759,044)
Total capital asse ts being depreciate d, net 1, 493,830,853 235,072,615 213,938 1,728,689,530
Total Ca pital A ssets $ 1,886,434,526 $ 374,549,775 $ 256,191,791 $ 2,004,792,510
Additions for 2007 hav e been reclassed for the new treatme nt plant.
28
THE METRO PO LITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2008 and 2007
5. Property Tax
On or before May 1 of ea ch year, the District levies ad valorem taxes on all ta xable tangible property, real
and personal, within its bou nda ries based on assessed valuatio ns established by the City of St. Louis and St.
Louis County assessors. Tax rates va ry by subdistrict and p urpose . Taxes levied are used for operations
an d stormwater maintenance, debt service, a nd constructio n. Taxes are recorded as nonoperating revenues.
Property tax bills are mailed in October. They bec ome deli nque nt and represent a lien on the related
property if n ot paid by December 31. All property taxes are billed and collected by the City of St. Louis a nd
St. Louis Cou nty Collectors of Revenue and are distributed to the District monthly.
6. Short-term Debt
In D ecember 2007, the District issued Tax an d Revenue Anticipation Notes, Series 2007 A, in the amou nt of
$155,000. This debt was issued for finan cing of capital improvements to the River Des Peres Watershed.
On June 26, 2008, the District repaid the note plus $3,059 in interest at a rate of 3 .7% .
The following is a su mmary of cha nges in short-term debt for the year e nded Ju ne 30, 2008:
Ba la nce Balance
June 30, June 30,
2007 Additions Deletions 2008
Tax rev enue anticipation note $ -- $ 155,000 $ 155,000 $
7. Long-term Liabilities
The following is a summary of changes in the District's lo ng-term liabilities for the year e nded June 30,
2008:
29
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2008 and 2007
7. Lon g-term Liabilities (continued)
O riginal Balance Bal ance
Issuance June 30, June 30, Current
A moun ts 2007 Additi ons Retirements 2008 P ortion
Bon ds an d notes
payable:
Senior revenue bo nds:
Series 2004A $ 175,000,000 $ 171,995,000 $ — $ 1,510,000 $ 170,485,000 $ 1,520,000
Series 2006C 60,000,000 60,000,000 — — 60,000,000 —
Subordinate revenue
bonds:
Series 2004B 161,280,000 150,312,500 — 6,750,000 143,562,500 6,239,167
Series 2005A 6,800,000 6,520,000 — 280,000 6,240,000 261,250
Series 2006A 42,715,000 42,615,000 — 100,000 42,515,000 1,865,417
Series 2006B 14,205,000 14,205,000 — — 14,205,000 577,500
Missouri Department
of Natural Resources:
West Watson and
Nanell 535,600 174,894 — 45,233 129,661 21,548
Ozark and Table
Rock 374,680 93,970 — 12,800 81,170 13,000
Energy Loan Program 98,595 68, 866 — 10 ,398 58 ,468 10,728
$ 461,008,875 $ 445,985,230 $ — $ 8,708,431 437,276,799 $ 10,508,610
Add: U namortized
premium, net 10,017,883
Less: Bon d issue
costs, net (6,043,448)
$ 441,251,234
Deposits an d accrued
expenses:
Lan dfill closu re and
postclosu re costs $ 533,837 $ 38,146 $ — $ 571,983 $ —
Compen sated
absen ces 4,875,782 845,028 517,482 5,203,328 1,040,665
N et O PEB obligation — 466,900 — 466,900 —
$ 5,409,619 $ 1,350,074 $ 517,482 $ 6,242,211 $ 1,040,665
Wastewater System Revenue Bonds Payable
In Nov ember 2006, the District a utho rized and issued $60,000,000 of Wastewater System Revenue Bonds
Series 2006C (Series 2006C) for the purpose of providing funds to fina nce the i nitial phase of its capital
improvements and replacement program, in cluding constructi ng, repairing, and replacing new wastewater
facilities. These senior bonds have interest rates ranging from 4.125% to 5% and are payable in semia nnual
installments at varying a mounts through 2036. The revenue bonds do not c onstitute a legal debt or liability
for the District, the State of Missouri, or for any political subdivisio n thereof and do not c onstitute
indebtedness within the mean ing of any con stitutional or statutory debt limitatio n or restriction.
In May 2004, the District authoriz ed and issued $175,000,000 of Wastewater System Reve nue Bonds Series
2004A (Series 2004A ) for the pu rpose of providing fu nds to finance th e i niti al phase of its capital
improv ements an d replacemen t program, inclu ding constructing, repairing, and replaci ng new wastewater
30
THE METROPOLITAN ST. LOUIS SEWER DIST RICT
Notes to Fin ancial Statements
Jun e 30, 2008 and 2007
7. Lon g-term Liabilities (con tinu ed)
Wastewater System Revenue Bonds Payable (continued)
facilities. These senio r bon ds have interest rates ranging from 2% to 5% and are payable in semiannual
installments at varyin g amoun ts through 2034. The reve nue bonds do not constitute a legal debt or liability
fo r the D istrict, the State of Misso uri, or for any political subdi vision thereof a nd do not constit ute
indebtedn ess within the mean ing of an y constitution al or statutory debt limitation or restriction.
The issuance of the reven ue bonds does not obligate the District to levy any form of taxatio n therefore or to
make any appropriation for their payments in any fiscal year. The principal and i nterest on the bo nds are
ex pected to be paid from future wastewater revenues. The scheduled payment of the principal of and
interest on the Series 2006C an d 2004A Bonds maturing on May 1 when due are g uaranteed under a
fin an cial gua ra nty in su ran ce policy.
Water Pollu tio n Control and Drinking Water R evenue Bo nds Pay able
In Nov ember 2006, the State Environ mental Improvement and Energy Resources Authority (the Authority)
a uthorized and issued $22,105,000 of Water Pollution Control and Drinki ng W ater Reve nue Bo nds (State
Revolving Funds Programs) Series 2006B (Series 2006B) . The Series 2006B bo nds pro vided funds to
make loans to 7 Missou ri political subdivisions th at will be used to fina nce water pollution c ontrol and
drinking water projects. A portion of the proceeds of the Series 2006B bonds issued by the A uthority were
used to purchase su bordin ate Participant Revenue Bonds (Participant Bonds) authorized and issued by the
District in the aggregate principal amount of $14,205,000, the pr oceeds of which will be used for
constructing, repairing, and equippin g new and existing wastewater facilities. The District's Participant
Bon ds have interest rates ran ging from 4% to 5% and are payable in semiannual installments at v arying
amounts through 2030.
In May 2006, the Authority a uthorized and issu ed $87,505,000 of St ate Revolving Funds Programs Series
2006A (Series 2006A). The Series 2006A bonds pro vided f unds to make loans to 13 Missouri political
subdivisions that will be u sed to fin ance water pollutio n co ntrol a nd drinki ng water pr ojects. A portion of
the proceeds of the Series 2006A bon ds issued by the Authority were used to p urchase s ubordi nate
Participan t Bonds authorized an d issued by the District in the aggregate principal amou nt of $42,715,000,
the proceeds of which will be used for con structing, rep airi ng, a nd equippi ng new and existing wastewater
facilities. The D istrict's Participan t Bon ds have interest rates ranging from 3.5% to 4.5% and are payable in
semian nu al installments at varyin g a mounts through 2025.
In May 2005, the Authority authorized and issued $53,060,000 of State Revolving Funds Pr ograms Series
2005A (Series 2005A). The Series 2005A bonds provided funds to make loans to ten Missouri p olitical
subdivision s and o ne Misso uri nonprofit corporation that will be used to finance water poll ution control and
drin king water projects. A portion of the proceeds of the Series 2005A b onds issued by the A uthority wer e
used to purchase subordin ate Participant Bonds authorized and issued by the District in the aggregate
principal amount of $6,800,000, the proceeds of which will be used for c onstructing, repairing, and
equippin g new and existing wastewater facilities. The District's Participant Bonds ha ve interest rates
ranging from 3% to 5% and are payable in semiannual inst allments at varying amounts through 2026 .
31
THE METRO POLITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2008 and 2007
7. Lon g-term Lia bilities (continued)
Water Pollution Control and Drinking Water Revenue Bonds Payable (continued)
In May 2004, the Authority authorized and issued $179,780,000 of State Re volving F unds Programs Series
2004B (Series 2004B). The Series 2004B bonds provided funds to make loa ns to seven Misso uri political
subdivisions that will be used to finance water pollution control pr ojects. A porti on of the proceeds of the
Series 2004B bonds issued by the Authority were used to purchase subordinate Participa nt 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 fman ce the District's three water pollution control co nstruction projects o utlined in the agreement .
The District's Participant Bonds hav e in terest rates ranging from 2% to 5 .25% and are payable in
semiannual in stallmen ts at v arying amounts through 2027 .
The Series 2004B, 2005A, 2006A, a nd 2006B bonds do not constitute a leg al debt or li ability for the
District, the State of Missouri, or for any political subdivision thereof a nd do not constit ute indebtedness
within the meaning of any constitutional or statutory debt limitatio n or restriction. The issuance of the
Series 2004B, 2005A, 2006A, and 2006B bonds does not obligate the District to levy a ny form of ta xation
therefore or to make any appropriation for their payments in any fiscal year . The principal a nd interest on
the bon ds are expected to be paid from future wastewater revenues .
In connection with the District's issuance of the Participant Bonds, which were purchased with the proceeds
of the Series 2004B, 2005A , 2006A, and 2006B bonds issued by the Authority, the District participates in
the State R ev olving Loan Program established by the Missouri Department of Natural Resources ( DN R).
Mon ies from federal capitalization gran ts and state matching funds are used to fund a reserve account for
each participant.
As the District in curs approved capital expenses, the DNR reimburses the District for the expenses from the
bond proceeds account and deposits in a bond reserve fund in the District's name an additional 60% of the
expenditure amount for the Series 2004B bonds or 70% for the Series 2005A, 2006A, and 2006B bonds .
Interest earned from this reserve fund can be used by the District to fund interest payments on the bonds.
On the date of each payment of the principal amount of the District's Participant Bonds, the trustee transfers
from this reserve account to the master trustee an amount equal to 60% of the principal payment for the
Series 2004B bonds or 70% for the Series 2005A, 2006A, and 2006B bonds. The costs of operation and
maintenance of the wastewater treatment and sewerage facilities and the debt service is payable from
wastewater revenues.
In accordan ce with the Series 2006A, 2006B, 2005A, 2004A, and 2004B bond issua nces, the District's
ann ual net operating rev enues from wastewater acti vities, as defined in the agreement, coupled with
in vestments earnings must be at least 125% of the current portion ofprincipal and i nterest due on all senior
bonds and at least 115% of the curren t portion of princip al and interest due on all bonds. At June 30, 2008
and 2007, the D istrict was in co mpliance with this co venant.
32
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2008 and 2007
7. Long-term Liabilities (continued)
Prin cipal and Interest Requiremen ts on Reven ue Bonds Payable
The annu al principal and interest requirements to m aturity on reven ue bo nds payable o utstanding as of
Jun e 30, 2008 are as follows:
Wa stewa ter System Revenue Bonds Pay able/
Water Pollu tio n Control a nd Drinki ng Water
R ev enue Bonds P ayable
Years endin g June 30, Principal I nterest Total
2009 $ 10,463,334 $ 21,162,568 $ 31,625,902
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 12,450,833 19,220,904 31,671,737
2014-2018 70,421,250 87,195,801 157,617,051
2019-2023 87,087,500 68,558,881 155,646,381
2024-2028 88,630,416 45,763,444 134,393,860
2029-2033 91,635,000 24,216,400 115,851,400
2034-2036 41,115,000 3,555,750 44,670,750
Tota l $ 437,007,500 $ 330,436,758 $ 767,444,258
West Watson and Nan ell Loan Agreement
During fiscal year 2005, the DNR lo an ed $535,600 to the District . The West Watson and Nanell Loan
bears interest at a rate of 1. 5% and is payable through November 1, 2014 . The p urpose of this n ote is to
finance the plann ing, acquisition, constru ction , improvement, repair, rehabilitation, a nd extension of the
sewer system of a certain region al subdistrict. This note is classified as special assessme nt debt by the
D istrict; therefore, the principal and interest on this note will be rep aid from additional tax assessments on
property v alues within the subdistrict. The additional assessme nt to be p aid by the property owners is 54.78
cents per square foot over the next ten years, with i nterest accruing at a rate of 2 .5% per annum .
Ozark and Table Rock Loan A greement
Du ring fiscal year 2004, the D NR lo aned $374,680 to the District. The Ozark and Table Rock Loan bears
in terest at a rate of 1. 5% and is payable through November 1, 2013. The purp ose of this note is to finance
the planning, acquisition , construction, improvement, repair, rehabilitatio n, and extension of the sewer
system of a certain regional subdistrict. This note is classified as special assessme nt debt by the District;
therefore, the principal and in terest on this note will be repaid from additional ta x assessments on property
valu es within the subdistrict. The additional assessment to be p aid by the property owners is 61.2 cents per
square foot over the nex t ten years, with in terest accrui ng at a rate of 2.5% per a nnum.
33
THE METRO PO LITA N ST. LOUIS SEWER DISTRICT
N otes to Financial Stateme nts
June 30, 2008 and 2007
7. Long-term Liabilities (contin ued)
Principal and Interest Requirements on Ozark and T able Rock and West W atson and Nanell Loan
Agreements
The ann ual prin cipal an d in terest requirements to mat urity on the Ozark a nd Table Rock Loan Agreeme nt
and the West Watson and N an ell Loan Agreement outstanding as of June 30, 2008 are as follows:
Special Assessment Loan Agreements
Years endin g Ju ne 30,
Principal Interest
Total
2009 $ 34,548 $ 3,269 $ 37,817
2010 30,300 2,753 33,053
2011 30,900 2,231 33,131
2012 31,400 1,700 33,100
2013 32,000 1,163 33,163
2014-2015 51,683 785 52,468
Total $ 210,831 $ 11,901 $ 222,732
Energy Efficiency Leveraged N ote Payable
In April 2004, the D NR loaned $98,595 to the District . The Energy Efficie ncy Leveraged Note Payable
bears interest at a rate of 3.15% per annum and is payable through Aug ust 1, 2013. The purpose of this
note is to finance the design , acquisition , installation, and impleme ntation of energy conservation measures.
The principal and interest on this note will be repaid from wastewater revenues.
Prin cipal and Interest on En ergy Efficien cy Leveraged N ote Payable
The an nual principal and interest requirements to maturity on the Energy Efficiency Le veraged Note Payable
outstandin g as of June 30, 2008 are as follows:
Y ears ending Ju ne 30,
Energy Efficiency Lever aged Note Payable
Principal Interest
Total
2009 $ 10,728 $ 1,758 $ 12,486
2010 11,069 1,417 12,486
2011 11,420 1,066 12,486
2012 11,782 703 12,485
2013 12,157 350 12,507
2014 1,312 21 1,333
Total $ 58,468 $ 5,315 $ 63,783
34
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
Notes to Financial St atements
June 30, 2008 and 2007
7. Long-term Liabilities (con tinued)
Restricted Cash and Inv estments
The following trustee held accounts have been established in accordance with bond ordinances a nd financing
agreements that require receipts generated from operations be segregated and certai n reserve acco unts be
established:
Revenue Fu nd
The R ev enu e Fund will be used for the purpose of depositi ng wastewater operating re venues, pr ovidi ng
fun ds to pay for ex penses related to the operation a nd maintenance of the District, a nd fulfilling Sinki ng
Fun d requ irements in accordance with the bond ordina nces .
Sinking/Repayment Fu nds
The bond ordinances provide for deposits to and the use of monies in the Sinki ng Fund to be used for the
sole purpose of principal and interest payments on the b onds. Sufficient monies shall be paid in periodic
installmen ts from the R even ue Funds.
D ebt Service Fund
The D ebt Service Fu nd shall be u sed by the Trustee for the sole purpose of payi ng the pri ncip al of and
interest on the bonds, as and when the same become due.
Debt Service Reserve Fund
A fter in itial deposit of the amoun t required pursuant to the bond ordina nces and financing agreements of
the Series 2004A and 2006C bonds, mon ies in the Debt Service Reserve Fund shall be disbursed and
ex pen sed by the D istrict solely for the payment of the principal and interest on the bonds a nd notes to the
extent of an y deficiency in the Debt Service Fund for such purpose . The District may disb urse a nd
ex pend mon ies from the Debt Service R eserve F und for such purpose immediately. At June 30, 2008
a nd 2007, cash and inv estments in the Debt Service Reserve Fund totaled $23,753,674 and $22,378,626,
respectively.
Special Participan t Bond R eserve Accou nt
For the Series 2004B, 2005A, 2006A, and 2006B bonds, the District sh all deposit into the Special
Pa rticipant Bon d Reserve A ccou nt amounts in accordance with the bo nd ordina nce, if any, which shall be
disbursed and expen sed by the District so lely for the payme nt of the pri ncipal a nd interest on the
Participant Bonds to the extent of any deficiency in the Repayment Fund for such purpose. At Ju ne 30,
2008 and 2007, cash and investments in the Special Parti cip ant B ond Reserve Account held onbehalfof
the D istrict totaled $117,534,716 and $103,996,804, respectively . Monies in this account are not
co nsidered to be District funds. Howev er, interest earnings on this account may be used by the District
to reduce interest payments on the bonds outstanding .
35
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2008 and 2007
7. Long-term Lia bilities (continued)
R estricted Cash and Investments (con tinued)
R enewal and Extension Fund
All su ms a ccumulated and retained in the R enew al and E xte nsio n Fu nd shall be first used to pre vent
default in the payment of interest on or principal of the bonds when d ue and shall then be applied by the
District from time to time, as and when the District shall determine, for purposes p ursuant to the trust
indenture. No monies hav e been deposited in to this acco unt at June 30, 2008 and 2007 .
Project Funds
The Project Funds for all bond issuances outstandi ng will be used for the purpose of providing monies to
pay project costs. The proceeds from the bonds and notes, after a deposit into the Debt Service Reserve
Fu nd for the amou nts required pu rsuan t to the bo nd ordina nces and note agreements of just the Series
2004A and 2006C bonds, shall be deposited into the Project F und. At J une 30, 2008 and 2007, cash and
investments in the Project Funds totaled $28,503,635 and $87,496,017, respectively.
Rebate Funds
The bond ordin ances provide for the creation of a Rebate F und i nto which shall be deposited such
amou nts as are requ ired to be deposited therein purs uant to the arbitrage instructio ns regarding the
calcula tion and payment of rebate amounts due. The District d oes not have any rights in or cl aims to
such mon ey; provided, ho wever, an y funds remai ni ng in the Rebate F und after redemption and payment
of all bon ds and paymen t of any rebatable arbitrage amou nt, or provision ha vi ng been made therefore,
shall be remitted to the District. At Ju ne 30, 2008 and 2007, cash and in vestments in the Rebate Funds
totaled $2,210,557 and $1,422,616, respectively.
Administrative Fee Funds
The Administrative Fee Fun ds will be u sed for the payme nt of the Trustee's fees and other administrative
fees pursuan t to the note agreement. The Trustee shall immediately withdraw the fee amounts when due .
Monies held in this acco unt shall not be invested.
Fair Value of Financial In stru ments
The v alue of the District's long-term debt is estimated based on the curre nt rates offered to the District for
debt of the same remaining ma turities. The carrying amount a nd estimated f air value of the District's l ong-
term debt as of June 30, 2008 were $441,251,234 and $447,684,965, respectively. The carrying am ount
an d estimated fair v alu e of the D istrict's long-term debt as of June 30, 2007 were $450,175,158 and
$454,689,986, respectively.
36
THE METROPOLITAN ST. LOUIS SEWER DIST RICT
N otes to Financial Statements
June 30, 2008 a nd 2007
8. Board D esignated Unrestricted Net Assets
The Board has design ated certain amoun ts of the unrestricted net assets for the fiscal years ended Ju ne 30,
2008 and 2007. The details of these chan ges are:
Real Property
P urchase and
Impro vement Construction Total
Ba lances, Ju ne 30, 2006 $ 2,544,713 $ 203,544,388 $ 206,089,101
Additions:
Proceeds from bonds an d loan s — 77,190,257 77,190,257
Unspent prio r yea r bo nd proceeds, net of related
liabilities — 156,538,505 156,538,505
In vestmen t income 183,813 20,331,574 20,515,387
Grant revenu e — 179,930 179,930
Con nection fees — 907,215 907,215
Tran sfers fro m other accou nts — 44,460,640 44,460,640
Rent income 878,319 — 878,319
Total additio ns 1,062,132 299,608,121 300,670,253
D eductio ns:
Unused bond pro ceeds, net of related liabilities — 138,316,473 138,316,473
Ca pital asset additions — 117,585,378 117,585,378
O ther con tractual expenses 1,087,695 19,887,550 20,975,245
Clean water capital improv ement refu nd — 15,000 15,000
Total dedu ction s 1,087,695 275,804,401 276,892,096
Ba lan ces, Jun e 30, 2007 2,519,150 227,348,108 229,867,258
Addition s:
Proceeds from sale of capital assets 2,399,702 — 2,399,702
Un spen t prior year bon d proceeds, net of related
liabilities — 138,316,473 138,316,473
Inv estment income 161,093 15,284,339 15,445,432
Grant reven ue — 144,100 144,100
Connection fees — 517,947 517,947
Transfers from other accounts — 87,247,998 87,247,998
Ren t income 525,612 — 525,612
Miscellan eo us 92 4,371 4,463
Total a dditions 3,086,499 241,515,228 244,601,727
Deductions:
Un used bon d proceeds, net of related liabilities — 37,665,461 37,665,461
Capital asset additions — 125,280,163 125,280,163
Other contractual expen ses 1,877,646 29,317,166 31,194,812
Total dedu ction s 1,877,646 192,262,790 194,140,436
Bala nces, Jun e 30, 2008 $ 3,728,003 $ 276,600,546 $ 280,328,549
37
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
N otes to Financial Stateme nts
June 30, 2008 and 2007
9. Defined Benefit Pension Plan
Plan Description
The Metropolitan St. Louis Sewer District Employees' Pensi on Pla n (the Plan) is a noncontrib ut ory single
employer defined ben efit plan providing retirement benefits as well as death and disability benefits to
members. As a condition of employment, all full-time employees of the District are covered by the Plan.
The financial statements for the Plan are produced using the accrual basis of acc ounting. Under the accr ual
basis of accounting, revenues are recognized when earned and expenses are recognized when the related
liability is incurred. The Plan issues a publicly available financial report that incl udes fi nancial statements
an d required supplementary information. That report may be obtai ned by writing: The Metropolitan St.
Louis Sewer D istrict, 2350 Market Street, St. Louis, MO 63103-2555 .
The Plan, established on November 1, 1967, is amended from time to time by the District's B oard of
Tru stees, primarily to impro ve benefits to members. A Pe nsion Committee consisting of two members of
the District's Board of Tru stees, two elected employee members, and four members of the District's
management staff admin ister the Plan. A committee of the District's Board of Trustees, with the aid of an
investment advisor, rev iews and evaluates the Plan's in vestme nts and the related rates of return on a periodic
basis. The Plan is exempt from the requirements of the Employee Retirement I ncome Security Act of 1974
and, as su ch, is not subject to the Act's reporting requirements.
All benefits vest after five years of credited service. Members retiring at or after age 65 with fi ve or more
years credited service are entitled to a pension benefit. The Plan permits early retirement with reduced
benefits beginn in g at age 55 if the member has completed 60 mo nths of employment . A member whose
combined age and term of service is equal to 75 may retire early with unred uced benefits.
The annual benefit accrued by a member is equal to 1.45% of fi nal average earnings plus 0.40% of final
av erage earnings that are in excess of cov ered earnings multiplied by the period of years and months of
credited service not to ex ceed 35 years. A survivor's benefit for vested members who ha ve not yet reached
their normal retirement date or earned 75 points is provided for. The survi vor's benefit is equal to the
grea ter of 50% of the member's mon thly -accrued retirement benefit as of the date of death, or 15% of the
monthly earn ings and the member's monthly -accrued retirement be nefit actuarially red uced under the 100%
joint and surviv or annuity option. Members are also able to select a Conti ngent An nuity Pop -Up option.
This option allows the member to elect a surviv or annuity for life, with the pro vision that if the beneficiary
sho uld predecease the member, the benefit shall increase to the amou nt payable had the survivor option not
been selected.
Ordinance Number 10872, effectiv e Janu ary 1, 2001, further amended the Plan to exte nd the cost of livi ng
increases for retirees from a maximum of 30% to 45% of the original benefit.
Effective Au gust 1, 2004, Ordina nce No. 11781 amended the Plan to change the be nefit formul a to 1.7% of
final average earn ings plus 0.4% of fmal average earnings that are in e xcess of covered earni ngs multiplied
by the period of years and months of credited service not to exceed 35 years without including accrued sick
38
THE METROPOLITA N ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2008 and 2007
9. D efined B enefit Pension Plan (continued)
Plan Description (continu ed)
lea ve. Effectiv e July 1, 2007, Ordinance N o. 12395 amended the Pla n for members whose a nnual retirement
benefit , as of July 1, 2007, is determined to be higher under the formula using the defmition of "Final
A verage Earn in gs" in effect prior to August 1, 2004. Under the interim rule, if such a member retires on his
n ormal retirement date of or after July 1, 2007 and/or before June 1, 2009 (the "window period"), he m ay
elect to have his benefit determined u sing the 1.45%/0 .4% of final a verage earni ngs formula includi ng
accrued sick leav e or the 1.7%/0.4% of final average earnings formula witho ut using accrued sick lea ve.
The interim rule will not apply if at any time during the window peri od a member's benefit is determi ned to
be higher under the 1.7%/0.4% formula. Sick leave is paid out at 1.25% per year of service times the
amo unt of leav e accrued not to exceed $50,000 unless the employee accrued an amou nt greater than $50,000
as of July 1, 2004, and retires or dies while in active service prior to July 1, 2007. Als o, the Plan was
amended to pro vide the retiring member with a 10% partial lump sum payment option. The balance of the
distribution will be paid in accordan ce with any one of the other payment options available under the Pla n.
The retiremen t benefit payable to a member who retires after his or her normal retirement date is the greater
of a) the benefit that wou ld hav e been pa yable on the normal retireme nt date plus a special an nual retirement
benefit provided by the accumu lated value, at 4% per annum interest, of the monthly benefit that would have
been received prior to the postponed retirement d ate or b) the benefit determined as of the postponed
retirement date under the normal formu la.
Fun ding Policy
The District's employees do not contribute to the Plan. Ordina nces establishi ng the Plan provide for
actu arially determined annu al contribu tion s, paid solely by the District, that are sufficient to pay benefits
when due. The Entry Age Normal actuarial funding method is used to determi ne contributions.
Annua l Pen sion Cost
Contributio ns of $7,673,240 an d $6,847,278, excluding certain professio nal fees p aid by the District, were
made to the Plan during the Plan's calendar years ended December 31, 2007 and 2006, respectively. These
contributions were made in accordance with actuarially determined contrib utio n requireme nts based on
a ctuarial v alu ations performed at January 1, 2007 a nd 2006, respectively, and for 2007 co nsisted of a)
$5,617,087 normal cost plu s b) $1,520,811 amortization of the act uarial accr ued assets in excess of the
actuarial accru ed liability and prior changes c) multiplied by an i nterest factor of 1.075 .
The D istrict provides certain profession al 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 METROPOLITAN ST. LOUIS SEWER DISTRICT
N otes to Financial Statements
Jun e 30, 2008 a nd 2007
9. D efined Benefit Pension Plan (continued)
Significant actuarial assu mptions used in the va luati ons are as foll ows:
Latest valu ation date
Actuarial cost method
Amortization method
A mortization period
Asset valuation method
Post -retirement benefit increa ses
Inv estmen t rate of return
Projected salary increases
Social Secu rity wage base
(1) Includes inflation componen t of 3%
Three -Year Trend In formation
January 1, 2008
E ntry Age Normal
Level dollar closed
20 -year period
Three-year average of adjusted market values
CPI or 3% of current be nefit, or $50 maximum, if less
7 .5% per annum (1)
5.5% per annum (1)
4.5% per a nn um i ncrease (1)
Historical trend information abou t the District's participation in the Plan is presented below to help readers
a ssess the Plan's funding status on a going -concern basis and assess progress being made in acc umulating
assets to pay benefits when due.
Calendar
Year
2007
2006
2005
An nua l
Pen sio n
Cost (A PC)
$ 7,673,240
6,847,278
7,184,531
Percentage
of A PC
Contributed
Required Supplementary Information
Actu arial
Valuation
Date
01/01/2008
01/01/2007
01/01/2006
100%
100
100
Net Pension
Oblig ation
Schedule of Funding Progress (d oll ars in thousands)
Unfu nded
Entry Age Actuarial UAAL as a
Actuarial Actu arial Accrued Annual Perce ntage
Value Accrued Liability Funded Covered of Covered
of Assets Liability (UAAL) Ratio Payroll P ayroll
(1) (2) (1)-(2) (1)/(2) (3) (1-2)/(3)
$ 185,356 $ 195,834 ($ 10,478) 94.6% $ 43,640 (24.0%)
170,757 187,432 (16,675) 91.1 42,113 (39 .6)
158,321 177,630 (19,309) 89.1 40,144 (48.1)
40
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2008 a nd 2007
10. Deferred Compen sation Plan
The District offers its employees a D eferred Compensatio n Plan created in accordance with Internal Reven ue
Code Section 457. The D eferred Compensation Plan, a vailable to all District employees, permits them to
defer a portion of their salary un til future years. The deferred compensation is not available to employees
until termination, retiremen t, death, disability, or due to financial hardship as defined by the Deferred
Compen sa tion Plan.
The D eferred Compen sa tion Plan was amended and restated to comply with the Economic Growth and Tax
Relief Reconciliation Act of 2001 (the Act). The Act made significant changes to Section 457(b) of the
Internal Revenu e Code of 1986, as previou sly amended. The Deferred Compensation Plan assets are held in
trust for the exclusive benefit of participants and their beneficiaries under Section 1448 ofthe Sm all Business
Job Protec tion Act of 1996. As a result, the assets and liabilities of the Deferred Compensatio n Pla n are n ot
in clu ded in the a ccompanying fmancial statements.
The Deferred Compensatio n Plan issues a publicly available fmancial report that includes fmancial
statements an d required supplementary information . That report may be obtained by writing: The
Metropo litan St. Lou is Sewer D istrict, 2350 Market Street, St. Louis, MO 63103-2555 .
11. Post -Employmen t Benefits Other Than Pensions
Plan Description
As part of a total compensation package, the D istrict provides a single -employer defi ned benefithealth care pla n to
employees who retire from the District on or a fter age 62 and five years of service or whose age plus years of
service equal 75 points ("Rule of 75"). The D istrict p ays the monthly group health i ns urance premium for the
individual un til the retiree becomes eligible fo r Medicare at age 65 . In addition, there is a closed group of disabled
former employees who receive life in suran ce coverage from the District. The District's annual other post -
employment benefit (OPEB) cost (ex pense) is calculated based on the an nual required contribution ( ARC) of the
emplo yer, an amount actuarially determined in a ccordance with the parameters of GASB 45. The ARC represe nts
a level of funding that, ifpaid on an ongoing basis, is projected to co ver normal cost each year a nd to amorti ze any
un funded actuarial liabilities. The District's annu al OPEB cost for the current year and the related i nf ormatio n are
as follows:
Amortization of past service cost $ 731,300
No rmal cost 904,800
In terest to en d of fiscal year 73,600
A RC 1,709,700
Interest on net O PEB obligation --
Adjustmen t to ann ual required contribution
An nual OPEB cost 1,709,700
Con tribu tions made (1,242,800)
Increase in net OPEB obligation 466,900
N et OPEB obliga tion -begin ning of year
Net OPEB Obligation -End of Year $ 466,900
41
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
Notes to Financial Statements
Jun e 30, 2008 and 2007
11. Post -Employment Benefits O ther Than Pension s (conti nued)
Plan D escription (continued)
The Plan was established by District Ordinance, which assig ned the authority to establish and ame nd plan
benefit prov isions to the District.
The contribution requirements of the District and pla n members are established and maybe amended by the
D istrict.
In future years, three-year trend information will be prese nted . Fiscal year 2008 w as the ye ar of
implementation of GA SB 45 and the D istrict has elected to implement prospectively, therefore, prior year
compa rative fun din g progress is n ot availa ble.
R equired Supplemen tal Information
Schedule of Funding Progress (dollars in thousands)
Unfu nded
Entry A ge Act uarial UAAL as a
Actu ar ia l Actuar ia l Acc rued Percentage
Actuar ial Value Accru ed Liability Funded Covered of Covered
Valuation of Assets Liability (UAAL) Ratio P ayroll Payroll
Date (1) (2) (1)-(2) (1)/(2) (3) (1-2)/(3)
07/01/2007
$ — $ 21,938 ($ 21,938)
Schedule of Employer Contributions (dolla rs in thousands)
Year Annu al
Ended Required Contribution Percent
Jun e 30 Contr ibution Made Contributed
2008 $ 1,710 $ 1,243 73%
—% $ 43,640 (50.0%)
Significant actuarial a ssumption s u sed in the va luation are as foll ows:
Latest valuation date Jan uary 1, 2007
Discoun t rate 4.5% per annum
Amortiz ation period 30 -year period
Medical trend 10%
Payroll inflation 4.5% per ann um
Mortality 1983 Group A nnuity Mortality Table, Male Rates,
set back 6 years f or females
42
THE METROPO LITAN ST. LO UIS SEWER DISTRICT
N otes to Financial Statements
June 30, 2008 and 2007
11. Post -Employment Benefits Other Than Pen sions (continued)
Required Su pplemen tal Information (continued)
Turn over
Retirement
Fu ture Retiree Coverage
Fu ture D epen den t Care
12. Self -Insuran ce Pro grams
Termin ati ng Dis ability
Age Percent Perce nt
20 5.5% 0.056%
30 3.7 0 .064
40 1 .1 0.102
50 and o ver 0.311
Age
Rate
Before After
75 Poi nts 75 Points
55 1% 2%
56 2 4
57 2 5
58 2 6
59 3 8
60 4 10
61 5 15
62 5 35
63 5 20
64 5 25
65 100 100
90% of employees retiring prior to age 65 are assumed
to elect medical coverage
50% elect spo use co verage
0% dependent children coverage
The District is ex posed to various risks of loss related to torts; theft of, damage to, and destruction of assets;
errors an d o missio ns; injuries to employees; and nat ural disasters. The District has established a risk
managemen t program and retain s the risk related to officers', directors', and general liability; to its
o bligation to provide workers' compensation and medical and h ospitalizati on benefits to its employees; and
to pay wa ter backup claims to its customers. The estimated liabilities for payme nt of incurred (both reported
an d u nreported) bu t unpaid claims relating to these matters are included as a component of c urrent deposits
and accrued expenses, a nd as such are expected to be paid within one year of the date of the statement of net
assets. At Ju ne 30, 2008 and 2007, these liabilities amounted to $5,056,208 and $2,482,566, respectively.
43
THE METROPOLITA N ST. LOUIS SEWER DISTRICT
N otes to Fina ncial St atements
June 30, 2008 and 2007
12. Self -In surance Programs (con tinued)
The claims liabilities reported are based on the requirements of GASB Statement N o. 10, which requires that
a liability for claims be reported if information obtained prior to the issuance of the financial statements
indica tes it is pro bable that a liability has been incurred and the amount of the liability can be reaso nably
estimated. Changes in the balance of claims liabilities during fiscal 2008 and 2007 were as follows:
2008 2007
Liability, begin ning of year $ 2,482,566 $ 2,733,584
Current year claims an d changes in estimates 15,000,916 11,176,003
Claim payments (12,427,274) (11,427,021)
Lia bility, End of Y ear $ 5,056,208 $ 2,482,566
The District obtains periodic fu ndin g valuations from the third -party administrators managing the self-
insurance programs and adjusts the charges as required to maint ain the appropriate level of estimated claims
liability. The D istrict also maintains excess liability i nsurance coverage for workers' compe nsatio n and
medical and hospitalization claims; general liability; a nd water back up damage to customers' property.
The District purchases commercial in su rance for all other risks of loss. Settled claims ha ve not exceeded this
commercial coverage in any of the past three years.
13. Closure and Postclosure Care Costs
State and federal laws an d regulation s require the District to place a final co ver on its Prospect Hill Reclamation
Project lan dfill site when it stops acceptin g waste and to perform certain maintenance and monitoring functions at
the site for 30 yea rs a fter closu re. Although closure and postcl os ure care costs will be paid only near or after the
date that the landfill stops acceptin g waste, the D istrict reports a portion of these closure and postclos ure care costs
as an operating expense in each period based on landfill capacity used as of the end of the fiscal year. The
$571,983 an d $533,837 reported as landfill closure and postclosure care liabilities at June 30, 2008 and 2007,
respectively, represen t the cumulative amou nts reported at fiscal year-e nd based on the use of 79% and 75% ofthe
estimated capacity of the landfill for fiscal years ended 2008 and 2007, respectively. The District will recog nize
the remain ing estimated cost of closure and postclosure care of $152,585 at June 30, 2008 as the remaining
estimated capacity is filled. These amoun ts are based on what it would cost to perform all closure and postclosure
care in 2008. The District ex pects to close the landfill in the year 2012. Actual cost may be higher due to inflatio n,
changes in technology, or changes in regulation s.
The D istrict is required to demonstrate that it has the financial capability to cl ose the landfill 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 Misso uri Solid
Waste Managemen t Rules. The District has complied with the State's req uirement. The District recognizes
that estimates of closu re costs may change as a result of inflation, deflatio n, and/or changes in technology
and applicable laws and regulation s. If closure cost estimates change, the liability curre ntly reported on the
balance sheet will be adjusted accordin gly.
44
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
N otes to Financial St atements
June 30, 2008 and 2007
14. Co mmitments and Con tingencies
On or about July 29, 2002, the D istrict entered into a Settlement Agreement with Missouri Departme nt of
Natu ral Resources (MDNR), the Missou ri Clean Water Commission (Commission), and the Missouri
Attorn ey General regarding the Baumgartner Sewage Treatme nt Facility (Baumga rtner).
Previo usly, 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 the District with respect to cert ain alleged
past and contin uing violations of the Federal Water Pollution Control Act, 33 U.S.C . §§1251 et seq., the
Missou ri Clean Water Law §§644. 006, et seq., RSMo, and Misso uri State Operating Permits issued to
v ariou s sewage treatmen t facilities an d other facilities ow ned and operated by the District. An Amended
Con sent Judgment wa s entered by the circuit court on January 20, 1989.
Paragra ph X XIV of the Amended Consent Judgment further pro vided, in pertinent part, that the Amended
Con sent Judgmen t shall termin ate when the D istrict has achieved substantial compliance with the fi nal
effluent limita tions for the Bissell Poin t and Baumgartner Sewage Treatment Facilities for a period of one
year. One of the purposes of the Amended Consent Judgment was for the District to achieve and then
continue to achiev e compliance with its Missouri State Operating Permit effluent limitations at
Baumgartner.
U nder said settlemen t agreement the District agreed to take certain measures to achieve temporary
compliance with fecal coliform permit limits at B aumgartner. Ultimately, the District is to t ake the
Bau mgartn er lagoon offline on or before D ecember 31, 2006. This will be done by connecting the sewage
flow going to Bau mgartn er to a new Meramec wastewater treatment facility. F urthermore, the parties agreed
that the D istrict will complete closure of the Baumgartner lagoon pursuant to 10 CSR 20-6.010(12) within
24 months of taking the Bau mgartner la goo n offline. As of May 31, 2003, a mor atorium on further sewer
con nects to Baumgartn er will be enacted should the District be unable to meet ide ntified effluent limits .
In addition, should the District fail to meet any of the deadlines set out in the Settlement Agreement or
violate an y of the terms contained therein , the penalties f or each missed deadline could reach a maximum of
$10,000 per day, per v iolation.
The July 29, 2002 Settlemen t Agreement wa s modified on Ja nuary 3, 2007. In compliance with the
Modification to the July 29, 2002 Settlement Agreement the Ba umgartner lagoo n was taken offline on
March 1, 2007. On March 20, 2007 the Baumgartner Lag oon flows were permanently diverted to the Lower
Mera mec WWTP by way of the Baumgartner Tunnel. On March 28, 2007 the District ceased discharging
from the Baumgartner lagoon. Closure of the Baumgartner lagoo n bega n June 25, 2007 . The District will
complete closure of the Baumgartner lagoon pursuant to 10 CSR 20-6 .010(12) within 24 mo nths of taking
the Bau mgartner lagoon offline.
45
THE METROPOLITAN ST. LO UIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2008 and 2007
14. Commitments and Contin gencies (continued)
Since July 22, 2003, the D istrict's senior sta ff and Office of General Counsel have met n umero us times with
EPA and MDNR regarding alleged, un permitted discharges of untreated wastewater from combi ned sewer
overflows (CSOs) an d sanitary sewer overflows (SSOs) constitute violations of the Clean Water Act 33
U.S.C. §1311. The D istrict has presented the Capital Impro veme nt Plan to both organi zations for their
rev iew and con sideration.
On August 20, 2004, the District received a Section 308 letter from EPA Regi on VII, which is an official
request for information and documen ta tio n. On Janu ary 19, 2005, the District pro vided an initial response
to the Section 308 letter. The D istrict con tinues to submit deli verables required by the Sectio n 308 letter in
a timely manner. On September 22, 2006, the D istrict received a Sectio n 308 letter from EPA Region VII
focusing on the District's SSO program. The District submitted its respo nse on December 22, 2006.
Pursuan t to EPA's request additional clarification was provided on March 15, 2007.
On April 12, 2007, the Washington Un iv ersity School of Law, on behalf of the Missouri Coalition for the
Environmen t provided a Notice of Intent to the District, stati ng that it inte nds to file suit agai nst the District
for v iolations of the Federal Clean Water Act.
On May 22, 2007, the District received an Amended Administrative Order from EPA, requiring the p osting
of signs on all streams, creeks, dra ina ge ditches, and sw ales recei ving SS O discharges; notice to c ust omers;
notice on the website; an d a quarterly report. The District co nti nues to comply with the Amended
A dmin istrative Order from EPA.
On June 11, 2007, the EPA and the State of Missouri filed a laws uit agai nst the District, alleging that the
D istrict has violated the Clean Water Act and terms of its Nati onal Pollution Disch arge Elimination System
(NPDES) permits. On Augu st 29, 2007, the Missouri Co alition for the Environment was allowed to
intervene. Since the filing of the lawsuit, the parties have filed several motions. The parties collectively
agreed to take the case to mediation. All the parties the n submitted names of potential mediators a nd
collectively participated in phone interviews. The parties are in the fi nal stages of contracting with a
mediator.
By statute each day of an unlawful discharge represe nts a day of violation, a nd the Missouri Clean Water
Law prov ides for a civ il penalty with a maximum of $10,000 per day, per violatio n.
On July 18, 2008, a cla ss action suit, William Douglas Zweig v. the District, Cause No 08SL-CC03051,
was filed in St. Louis County Circuit Court. The plaintiff argues that the impositio n of the impervious
charge is a violation of A rticle X, Section 22(a) of the Missouri Co nstitution ( Hancock Amendment)
because a public vote was n ot taken. It is the District's positio n that the charge constit utes a user fee and as
such a vote is n ot required. The plain tiff liv es on a three plus acre lot and has a septic tank f or wastewater
service. He seeks to represent a cla ss of all D istrict stormwater c ustomers . The District's Bo ard of Trustees
approved an ordin ance in December 2007, approving the impervious method of charging for stormwater
services. The charges went into effect on March 1, 2008. The cha nge in charging was based on the amou nt
46
THE METROPOLITAN ST. L OUIS SEWER DISTRICT
Notes to Financial Statements
June 30, 2008 and 2007
14. Commitments and Contingen cies (continued)
of imperviou s area a customer had, rather than a nomi nal flat -rate charge and eliminated the ad valorem
property taxes. Nearly all properties pay the charge, including tax-exempt e ntities. The only exceptions are
highways and roadways; airport ru nways, taxiways; and railroad.
The District has entered in to con struction and other contracts amo unting to appr oximately $259,543,000 and
$227,458,000 at June 30, 2008 and 2007, respectively. Grants to be recei ved from various g overnme ntal agencies
and entities to partially offset the cost of the contract c ommitme nts amounted to approximately $588,000 and
$633,000 at June 30, 2008 and 2007, respectively.
At June 30, 2008, the District had $40,000,000 bonds a uthorized by the voters in February 2004, b ut unissued .
These bonds will continue to fund the first of fo ur phases of a 20 -year wastewater capital impro vement program .
15. Restricted Net A ssets
The government -wide statement of net assets reports $97,422,370 and $85,447,581 of restricted net assets
at June 30, 2008 an d 2007, respectively, of which $67,276,286 and $56,657,281 are restricted by enabling
legislation at June 30, 2008 and 2007, respectively.
16. Su bsequent Ev ents
In August 2008, the voters autho riz ed the District to issue $275,000,000 in re venue bonds. These bonds will fund
the seco nd of four phases of a 20 -year wastewater capital improvement program . The bonds will be repaid with
future reven ues deriv ed from operation s of its sa nitary sewer system .
On September 14, 2008 the St. Louis area was impacted by the remnants of Hurrica ne Ike, now Tropical
Depression Ike. The D istrict has total current reserves for its back up i nsurance pr ogram of approximately $11
million, and estimates that approximately 4,000 eligible claims will be processed associated with this e vent. The
District estimates its max imum exposure, net of in surance recovery, is $6 .6 million.
17. Fu ture A ccounting Pronouncemen t
GASB Statement No. 51, Accou nting a nd F inancial Reporting for I ntangible Assets ( GASB 51), establishes
stan dards for the measurement and recording the estimated historical cost for la nd associ ated with right-of-way
easemen ts. GASB 51 will be eff ective for the D istrict for the fiscal year ending Ju ne 30, 2010 . The District,
however, has no t yet completed its assessment of the stateme nt or the potential impact of the statement on its
financial position .
47
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