HomeMy Public PortalAboutExhibit MSD 52 - 2012 Audited Financial StatementsExhibit MSD 52
THE METROPOLITAN ST. LOUIS
SEWER DISTRICT
FINANCIAL STATEMENTS
JUNE 30, 2012 AND 2011
Contents
Page
Independent Auditors' Report 1 - 2
Management's Discussion Of Analysis 3 - 14
Financial Statements
Statements Of Net Position 15 - 16
Statements Of Revenues, Expense And
Changes In Net Position 17
Statements Of Cash Flows 18 - 19
Notes To Financial Statements 20 - 67
Required Supplementary Information
Required Supplementary Information - Schedule Of
Funding Progress - Employees' Pension Plan And Post
Employment Benefit Plan 68
a
RubinBrown
Ms. Janice Zimmerman
The Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, Missouri 63103
Dear Janice:
RubinBrown LIP
Certified Public Accountants
& Business Consultants
One North Brentwood
Saint Louis, MO 63105
314, 290.3300
'' 314.290.3400
W rubinbrown.com
E info@rubinbrown.com
Enclosed are your copies of the financial statements for The Metropolitan St. Louis
Sewer District as of June 30, 2012.
We appreciate the opportunity to be of service to you. If we may furnish you with
any additional information, please feel free to contact us.
Very truly yours,
RubinBrown LLP
Jeffrey B. Winter, CPA
Partner
Direct Dial Number: 314.290.3408
E maiL Jeff.winterrubinbrown.com
JBW:rss
Enclosures
BA KEPRtl�T I LLY
INTERNATIONAL
RubinBrown
Independent Auditors' Report
Board of Trustees
The Metropolitan St. Louis Sewer District
RubinBrown LLP
Certified Public Accountants
& Business Consultants
One North Brentwood
Saint Louis, MO 63105
314.290.3300
F 314.290.3400
W rubnbrown.com
E info@rubinbrown.com
We have audited the accompanying financial statements of the business -type activities
of The Metropolitan St. Louis Sewer District (the District) as of and for the year ended
June 30, 2012. These financial statements are the responsibility of the District's
management. Our responsibility is to express an opinion on these financial statements
based on our audit. The financial statements of the District, as of and for the year
ended June 30, 2011, were audited by other auditors, whose report dated November 8,
2011, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted in
the United States of America and the standards applicable to financial audits contained
in Government Auditing Standards, issued by the Comptroller General of the United
States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audit
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the respective financial position of the business -type activities of the District
as of June 30, 2012, and the respective changes in financial position and cash flows
thereof for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 1 to the financial statements, the District adopted the provisions of
GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources,
Deferred Inflows of Resources, and Net Position, in 2012.
.11F .......t'unbar .f
BAKER TILLY
INTERNATIONAL
Board of Trustees
The Metropolitan St. Louis Sewer District
In accordance with Government Auditing Standards, we have also issued our report
dated November 1, 2012, on our consideration of the District's internal control over
financial reporting and on our tests of its compliance with certain provisions of laws,
regulations, contracts, grant agreements and other matters. The purpose of that report
is to describe the scope of our testing of internal control over financial reporting and
compliance and the results of that testing and not to provide an opinion on the internal
control over financial reporting or on compliance. That report is an integral part of an
audit performed in accordance with Government Auditing Standards and should be
considered in conjunction with this report in considering the results of our audit.
Accounting principles generally accepted in the United States of America require that
the Management's Discussion and Analysis and the Schedule Of Funding Progress for
the Employees' Pension Plan and Other Post -Employment Benefit Plan, as listed in the
table of contents, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board, who considers it to be an essential part of
financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures
to the required supplementary information in accordance with auditing standards
generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries, the basic
financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide any assurance.
IkentielawnLLP
November 1, 2012
Page 2
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
MANAGEMENT'S DISCUSSION OF ANALYSIS
For The Years Ended June 30, 2012 And 2011
The annual report of The Metropolitan St. Louis Sewer District (the "District") includes
the independent auditors' report, management's discussion and analysis ("MD&A"), and
the financial statements accompanied by notes essential to the user's understanding of
the financial statements.
Management of the District has provided this MD&A to be used in combination with
the District's financial statements. This narrative is intended to provide the reader
with more insight into management's knowledge of the transactions, events, and
conditions reflected in the accompanying financial statements and the fiscal policies
that govern the District's operations.
2012 Financial Highlights
> The District placed $170.9 million of capital assets into service during fiscal year
2012. This high level of capitalization and construction is reflective of an
accelerated building program to meet the needs of the District. These capitalized
assets include:
Collection and pumping plant $112.1 million
Treatment and disposal plant and equipment $41.0 million
Land $9.1 million
General plant and equipment $8.7 million
In conjunction with the new assets, accumulated depreciation increased by $55.7
million.
> Contracts and accounts payable decreased by $18.2 million due to a decrease in
water back-up claims, a decrease in litigation claims and a decrease in
outstanding construction payables.
> Operating expenses declined by $28.2 million as the result of declines in asset
management costs as expenditures shifted to capital.
Page 3
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2011 Financial Highlights
> The District placed $300.9 million of capital assets into service during fiscal year
2011. This high level of capitalization occurred to more precisely reflect the
timing of placement into service of the District's plants and systems. These
capitalized assets include:
Treatment and disposal plant and equipment $236.9 million
Collection and pumping plant S34.8 million
General plant and equipment S17.9 million
Land $11.3 million
In conjunction with this capitalization of assets, the District increased
accumulated depreciation by $58.4 million.
> Cash and investments decreased by $52.6 million since the District's new debt
was issued as a line of credit requiring the District to spend down reserves. This
line of credit structure reflects the State's change in the administration of its
State Revolving Fund (SRF) program and does not impact the District's receipt of
future State bond funding.
> Contracts and accounts payable increased $23.7 million due to $4.3 million in
water backup claims from a failure of flood gates along the Mississippi River
associated with a severe rain event in June. New construction expenses incurred
late in the fiscal year also contributed to this increase.
> Operating revenue declined by $27.1 million and non -operating revenue
increased by $23.2 million. This resulted from the District's rescinding of its
impervious stormwater charge per a July 9, 2010 Court decision which declared
the charge unconstitutional. Property taxes were reinstated to partially replace
this stormwater funding.
Required Financial Statements
The financial statements presented by the management of the District include the
Statements of Net Position; Statements of Revenues, Expenses, and Changes in Net
Position; and Statements of Cash Flows. These statements are prepared using the
accrual basis of accounting. This method of accounting recognizes revenue at the time
it is earned and expense when the related liability occurs. As a result of using this
method of accounting, the District's performance over the time period being reported is
more easily determinable.
Page 4
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
The Statements of Net Position provide a report of the District's current, restricted, and
other non -current assets such as cash, investments, receivables, and property. Also, the
Statements of Net Position provide a summary of the District's current, restricted, and
non -current liabilities, including contracts and accounts payable, deposits and accrued
expenses, and bond and notes payable. Deferred outflows and inflows, where
applicable, will also be included. The final section of the Statements of Net Position,
the net position section, contains earnings retained for use by the District. Increases or
decreases in the net position section may be indicative of an improving or declining
financial position. This statement provides the basis for computing rate of return,
evaluating the capital structure of the District, and assessing the liquidity and financial
flexibility of the District.
The Statements of Revenues, Expenses, and Changes in Net Position summarize all of
the years' revenue and expense. These statements indicate how successful the District
was at maintaining expenses below the level of revenue earned.
The Statements of Cash Flows account for the net change in cash and cash equivalents
by summarizing cash receipts and cash disbursements resulting from operating
activities, non -capital financing activities, capital and related financing activities, and
investing activities. These statements assist the user in determining the sources of
cash coming into the District, the items for which cash was expended, and the
beginning and ending cash balance.
Financial Analysis
The District's financial position improved in the current year, as evidenced by the
increase in net position of $21.2 million. The main reason for the improvement is the
increase in capital assets of $79.3 million. The District continues capacity expansion
and updating of the District's plant and collection system. The District also incurred
new debt, increasing liabilities by a net of $62.4 million.
Page 5
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
Condensed Financial Statements and Analysis
Assets:
Current, restricted, and other assets
Capital assets (net of accumulated
depreciation)
Total Assets
Liabilities:
Current liabilities
Non -current liabilities
Total Liabilities
Net Position:
Net investment in capital assets
Restricted
Unrestricted
Total Net Position
2012 Analysis
Condensed Statements of Net Position
(000s)
Increase
(Decrease)
2012 2011 2012.2011 2010
$ 407,731
$ 403,397 $ 4,334 $ 461,022
2,648,816 2.469,496
2956,547 2,872,893
86,337 101,429
651,916 574,445
738.253 675,574^
1,936,590
106.694
175.010
1.915,233
94,926
186,860
79,320 2,411.877
83,654 2.572,599
(15,092) 75.512
77,471 589,737
62,379 665,249
21,357
11.768
(11.8449;;
1,868,974
80,782
257,894
$ 2.218,294 $ 2,197 019 $ 21.276 3 2,207,650
Increase
(Decrease)
2011-2010
$ (57,626)
57,619
(6)
25.917
(15,292)
10626
46.259
i 'r 1.034;$
$ (10,632)
Current restricted and other assets increased $4.3 million or 1.1% in the current year.
The increase is predominately due to the restricted cash and investments required as
part of the issuance of debt in 2012.
Capital assets net of accumulated depreciation increased by $79.3 million or 3.2% in the
current year as the result of continued high levels of construction and acquisition of
assets by the District.
Current liabilities decreased by $15.1 million or 14.8%, as the result of decreases in
contracts and accounts payable from the prior year water back-up claims payables and
the stormwater litigation costs.
Noncurrent liabilities increased by $77.5 million or 13.5% as the District issued $93.3
million in new debt and paid down existing debt.
2011 Analysis
Current restricted and other assets decreased by $57.6 million or 12.5% in the current
year. This change is due to the decrease in revenue from the suspension of the
impervious fee.
Page 6
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
Capital assets net of accumulated depreciation increased by $57.6 million or 2.4%
overall as the result of new projects in the current year.
Current liabilities increased by $25.9 million or 34.3% in the current year. The increase
is due to $4.3 million in liabilities for overland flooding resulting from a power outage,
$4.8 million from stormwater litigation costs and the remainder from increased
payables in connection with capital projects.
Noncurrent liabilities decreased by $15.3 million or 2.6% over the prior year as the
District paid down existing debt.
Page 7
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
Statements of Revenues, Expenses, and Changes in Net Position
(000s)
Operating Revenues:
Sewer service charges
Provision for doubtful
sewer service charge accounts
Provision for uncollected
stormwater charge accounts
Licenses, permits, and other fees
Other
Total Operating Revenues
Non -Operating Revenues:
Property taxes levied by the district 24,604 27,126 (2,522) 1,401
Investment income 2,407 3,847 (1,440) 6,554
Rent and other income 295 443 (148) 265
2012 2011
S 227,677 S 223,276
(6,911) (6,249)
(2,374)
2,684 2,976
2,550 1,815
226,000 219,444
Increase
(Decrease)
2012-2011
$ 4,401
(662)
2,374
(292)
735
6,555
2010
$ 251,683
(10,188)
3,085
2,007
246,587
Total Non -Operating Revenues 27,306 31,416 (4,110) 8,220
Total Revenues 253,306 250,860 2,445 254,807
Operating Expenses:
Pumping and treatment 49,005 50,532 (1,527) 47.266
Collection system maintenance 36,695 33,152 3,543 36,082
Engineering 8,544 12.486 (3,942) 15,773
General and administrative 33,180 36,075 (2,895) 39,237
Water backup claims 2,050 8,912 (6,862) 3,951
Depreciation 66,742 66,854 (112) 54,012
Asset management 20,092 36,492 (16,400) 32,458
Total Operating Expenses 216,308 244,503 (28,196) 228,779
Non -operating Expenses:
Net (gain) loss on disposal and sale of
capital assets 3,163 3,486 (323) 2,719
Non -recurring projects and studies 6,403 10,801 (4,398) 9,872
Legal claims 5 4,829 (4,824) -
Interest expense 15,811 7,971 7,840 13,189
Total Non -Operating Expenses 25,382 27,087 (1,704) 25.780
Total Expenses 241,690 271,590 (29,900) 254,559
Income Before Capital
Grants And Contribution 11,616 (20,730) 32,346 248
Capital Grants And Contributions 9,659 10,099 (440) 19,785
Change In Net Position 21,275 (10.631) 31,906 20.033
Net Position - Beginning Of Year 2,197,019 2,207,650 (10,631) 2,187,617
Net Position - End Of Year $ 2,218,294 $ 2,197,019 ` $ 21,275 $ 2,20 7,650
Increase
(Decrease)
2011-2010
$ (28,407)
3,939
(2, 374)
(109)
(192)
(27..143)
25,725
(2.707)
178
23,196
(3,947)
3,266
(2,930)
(3,287)
(3,162)
4,961
12,842
4,034
15,724
767
929
4,829
(5,218)
1,308
17,031
(20,978)
(9,686)
(30,664)
20,033
$ (10,631).
Page 8
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2012 Analysis
Net position increased by $21.3 million or 1.0% over the prior year. While revenue
increased slightly over the prior year, expenses decreased rapidly, as more District
resources were targeted toward capital projects.
Total revenue increased by $2.4 million or 1.0%. Sewer service charges increased $4.4
million and the provision for uncollected stormwater charges was eliminated as part of
the discontinuation of the stormwater impervious fee discussed below, increasing
operating revenue by $6.6 million. At the same time, property tax revenue decreased by
$2.5 million from decreases in property valuation. Investment income also declined by
$1.4 million as a result of low interest rates.
Total expenses decreased by $29.9 million or 11.0%. Operating expenses decreased by
$28.2 million. Asset management decreased $16 4 million as costs were eliminated and
water back-up claims decreased $6.9 million from the non -repetition of overland
flooding in the prior year. Non -operating expenses decreased by $1.7 million. Non-
recurring projects and studies decreased by $4.4 million and legal claims decreased by
$4.8 million from the prior year stormwater legal claim. Capital asset sale losses
declined by $0.3 million. Interest expenses increased by $7.8 million in connection with
new debt issuance.
2011 Analysis
Net position decreased by $10.6 million or $30.6% less than the prior year. While
revenue remained relatively flat expenses grew, at a slower pace than the prior year.
Total revenue decreased by $3.9 million or 1.5%. While the reinstatement of taxes
offset the decline in operating revenue, investment income declined by $2.7 million over
the prior year. The decline in investment income is the result of low interest rates
along with the decrease in funds available for investment.
Total expenses increased for the year by $17.0 million or 6.7%. Total operating costs
increased by 15.7 million or 6.9%, in large part due to claims for overland flooding and
an increase of $12.8 million or 23.8% in depreciation expense in connection with
additional assets placed into service. Non -operating expenses increased by $1.3 million
or 5.1% due in part to a $4.8 million legal claim cost in connection with the District's
impervious fee case.
Page 9
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
Cash flows from operating
activities
Cash flows from non -capital
financing activities
Cash flows from capital
and related financing
activities
Cash flows from investing
activities
Condensed Statements of Cash Flows
(000s)
2012 2011
67,839 S 56,676
24,604 27,125
(91,085) (141,136)
12,903 51,887
Net increase (decrease) in
cash and cash equivalents 14,261 (5,448)
Cash and cash equivalents
at beginning of year 6,319 11,767
Cash And Cash Equivalents
At End Of Year
2012 Analysis
S 20,580 S 6,319
Increase
(Decrease)
2012-2011
$ 11,163
(2,521)
50,051
(38,984 )
19,709
(5,448)
$ 1.4,261
2010
S 67,916
1,401
(81,406)
17, 399
5,310
6,457
11.767
Increase
(Decrease)
2011-2010
$ (11,240)
25,724
(59,730)
34,488
s.tb,75ts)
5,310
$ (5.448)
The District ended the year with $20.6 million in cash and cash equivalents or $14.3
million more than the prior year. Cash flows from operating activities increased by
$11.2 million as the result of the decrease in litigation and water backup costs noted
above. Cash flows from non -capital financing activities decreased by $2.5 million or
9.3% from a decrease in tax revenue. The decrease stems from both a decrease in
property values and also a decision by the District to eliminate some sub -district taxes
because of sufficient fund balance. Cash flow from capital and related financing
activities increased by $50.0 million as the result of new bond proceeds offset by
payments for capital improvement. Cash flows from investing activities declined by
$39.0 million or 75.1%. The decline mostly stems from less volume in the purchases
and maturities of investments. In FY11, there were less bond proceeds available for
reinvestment; instead maturities were used to fund capital expenditures. Finally, there
was a $0.9 million decline in investment income due to the economy's impact on interest
rates.
Page 10
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2011 Analysis
The District ended the year with $6.3 million in cash and cash equivalents or $5.4
million lower than the prior year. This was due to a decline in cash received from
customers of $24.5 million or 9.9% with the elimination of the impervious fee; partially
offset by a decrease in payments to suppliers of $17.4 million or 17.4%. Cash flow from
non -capital financing activities increased by $25.7 million as the result of the
reinstatement of taxes to fund stormwater activities. Cash flow from capital and
related financing activities decreased by $59.7 million or 73%, because the State of
Missouri Direct Loan Series Bond issuance for 2010 provides reimbursement of
expenditures, not loan proceeds. Investing activity proceeds provided $34.5 million as
investments were used to fund operating and capital activities.
Capital Assets
Land
Construction in progress
Treatment and disposal plant
and equipment
Collection and pumping plant
General plant and equipment
Total
2012 Analysis
Condensed Statements of Capital Assets
Net of Depreciation (000s)
Increase
(Decrease)
2012 2011 2012.2011 2010
46,027 $ 36,924
379,119 400,756
611,249
1,471,147
41.274
597,316
1,393,394
41,106
Increase
(Decrease)
2011-2010
$ 9,103 $ 28,129 t 8,795
(21,637) 570,602 (169,846)
13,933 394,826 202,490
77,753 1,393,152 242
168 25,168 15 938
$ 2,548,816 $ 2,469,496 $ 79,320 $ 2,411,877 $ 57.619
Total capital assets, net of depreciation, increased by $79 3 million over the prior year.
Collection and pumping plants contained the majority of the increase with $77 8 million
coming on-line this fiscal year. Construction in progress decreased by $21.6 million as
$159.6 million in constructed assets were moved into service. Treatment and disposal
plant and equipment increased by $13.9 million. Land contributed $9.1 million from
acquisition of easements and other land.
Page 11
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2011 Analysis
Total capital assets, net of depreciation, increased by $57.6 million over the prior year.
Construction in progress decreased by $169.8 million as $287.0 million in constructed
assets were placed into service. Treatment and disposal plant projects represented the
majority of new assets, $202.5 million. Land contributed $8.8 million to the increase
from the completion of grading projects. General plant and equipment also increased by
$15.9 million, partially as a result of the reclassification of office building assets from
treatment and disposal plant to general plant.
Long -Term Debt
Condensed Statements of Long -Term Debt
(000s)
2012 2011
Senior Revenue Bonds:
Series 2004A S 163,630 $ 165,590
Series 2006C 60,000 60,000
Series 2008A 30,000 30,000
Series 2010B 85,000 85,000
Series 2011B 52,250
Subordinate Revenue Bonds:
Series 2004B 115,960 123,055
Series 2005A 5,055 5,370
Series 2006A 34,225 36,335
Series 2006B 11,620 12,285
Series 2008AB 33,833 35,610
Missouri DNR:
Series 2009A 21,085 22,053
Series 2010A 5,880 2,852
Series 2010C 35,519 329
Series 2011A 1,007 -
Energy Loan Program 237 25
Oracle/Blue Heron 3,096 6,096
Total
2012 Analysis
$ 658,397 $ 584,600
Increase
(Decrease)
2012-2011
$ (1,960)
52,250
(7,095)
(315)
(2,110)
(665)
(1,777)
(968)
3,028
35,190
1,007
212
(3,0H0 ;
$ 73,797
2010
S 167,370
60,000
30,000
85,000
130,110
5,665
38,420
12,935
37,375
23,000
37
7,264
$ 597,176
Increase
(Decrease)
2011-2010
$ (1,780)
(7,0551
(2951
2,085)
(650)
(1,765)
2,852
329
(12)
(1,168)
$ (12,576)
The District ended fiscal year 2012 with $658.4 million in long-term debt outstanding.
The District had two bond additions this year, a senior revenue bond (Series 2011B) for
$52.3 million and an SRF Bond (2011A) for $1.0 million and added to SRF bonds 2010C
($35.2M) and 2010A ($3.OM).
Page 12
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2011 Analysis
The District ended fiscal year 2011 with $584.6 million in long-term debt outstanding,
consisting mainly of revenue bonds. The District had one bond addition this year
(Series 2010C) resulting in a minimal increase in long-term debt.
Decisions Impacting The Future
On July 7, 2011, the District entered into a Consent Decree (CD) with the U.S.
Environment Protection Agency and the Coalition for the Environment settling a
lawsuit for alleged violations of the Clean Water Act. Along with providing a schedule
for implementation of various system improvements and programs, the Consent Decree
also addressed all allegations made by the Plaintiffs in this action. The public comment
period ended October 10, 2011. The Court extended the stay of litigation until
November 18, 2011, with a joint status report due on November 25, 2011. The CD did
not become final until it was entered by the Federal Court on April 27, 2012. See note
12 for additional information regarding this litigation.
The District continued to implement the second phase of its multi decade wastewater
capital improvement replacement program (CIRP) utilizing the proceeds of a $275.0
million bond authorization granted by St. Louis voters in August 2008. The remainder
of this phase of the CIRP included the design and construction of $131.0 million of
capital improvements through 2012. These regulatory required projects included
completion of the Lemay Treatment Plant expansion, pump station improvements, and
sewage collection system replacement and rehabilitation. The next phase of the capital
program is reflected in the $1 billion of projects through FY16 in order to comply with
the CD.
At an election held on June 5, 2012, voters within the District approved the issuance by
the District of $945,000,000 in sewer system revenue bonds to enable the District to
comply with federal and state clean water requirements. The District may use the
proceeds of such revenue bonds for the purpose of constructing, repairing, replacing and
equipping new and existing District wastewater facilities. In August of 2012 the
District issued the first $225,000,000 in bonds under this authorization, which will fund
capital expenditures for the next two years.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
The District implemented an impervious area based stormwater rate in March 2008. In
conjunction, the District elected to discontinue the assessment of approximately $24.4
million per year in property taxes and flat fees previously used for stormwater funding.
The impervious stormwater rate structure in place throughout the 2010 fiscal year
generated 890.9 million in revenue for stormwater services across the St. Louis region.
On July 9, 2010, the Circuit Court of St. Louis County of Missouri ruled the impervious
rate unconstitutional. As a result, the District's Board of Trustees rescinded the
impervious based rate effective August 1, 2010. The elimination of the rate resulted in
an estimated 848.3 million loss in revenue anticipated to address stormwater issues
throughout the St. Louis region. The District reinstated the property taxes and flat fees
previously discontinued in order to provide a base level of stormwater services as
required by the District's Charter. Stormwater services were drastically reduced in
fiscal year 2011 and continued at reduced levels in fiscal year 2012. On May 29, 2012,
the District filed its Application directly to the Missouri Supreme Court requesting a
transfer. On June 1, 2012, the National Association of Clean Water Agencies was
allowed to file suggestions in support of the Application for Transfer. A decision is
pending as to whether the Supreme Court will hear this case. The potential
reinstatement of the stormwater impervious based rate is contingent upon the District's
current appeal.
Requests For Information
This financial report is designed to provide a general overview of the District's finances
for all those with an interest in the District's finances. Questions concerning any of the
information provided in this report or requests for additional financial information
should be addressed or e-mailed to:
Janice M. Zimmerman, Director of Finance
The Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103-2555
314-768-6200
j zimmer@stlmsd. com
Page 14
This page was intentionally left blank.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF NET POSITION
Assets
Current Assets
Cash
Pooled cash and investments
Investments
Sewer service charges receivable, less allowance of
$4,038,932 in 2012 and $4,087,758 in 2011
L' nbilled sewer service charges receivable, less allowance of
$362,806 in 2011 and 8326, 780 in 2011
Accrued income on investments
Other receivables
Supplies inventory
Total Current Assets
Non -Current Assets
Restricted Assets
Cash
Pooled cash and investments
Investments
Accrued income on investments
Other Assets
Notes receivable
Capital Assets
Depreciable:
Treatment and disposal plant and equipment
Collection and pumping plant
General plant and equipment
Less: Accumulated depreciation
Net depreciable assets
Non -depreciable:
Land
Construction in progress
Net capital assets
Total Non -Current Assets
Total Assets
For The Years
Ended June 30,
2012
2011
$ 15,322,804 $ 6,229,447
162, 269,011 190, 353,186
42,931,034 31,200,375
34,608,839
18,140, 324
436,251
928,832
6,301,034
35, 300, 022
16,338,975
759,812
757,176
6,961,285
280,938,129
287, 900, 2 78
5,256,795
72, 357, 560
34,495,472
266,592
89,487
69,042,313
31,133, 772
466,800
112,376,419
100, 732,372
14,417,074
14,764,507
1,011, 7 98,185
2,050.326,859
91,264,888
979,444,620
1,941,575,848
84, 858, 812
3,153,389, 932
1, 029, 720,453
3,005,879,280
974,063,867
2,123,669,479
2,031,815,413
46,026,763
379,119,335
36, 924,144
400, 756, 348
2,548,815,5 77
2,469, 495, 905
2,675,609,070
2,584, 992, 7 84
2,956,547,199
2,872,893,062
Page 15
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF NET POSITION (Continued)
Liabilities
Current Liabilities
Contracts and accounts payable
Deposits and accrued expenses
Retainage payable
Current portion of bonds and notes payable
Current Liabilities -Payable From Restricted Assets
Contracts and accounts payable
Retainage payable
Total Current Liabilities
Non -Current Liabilities
Deposits and accrued expenses
Bonds and notes payable
Total Non -Current Liabilities
Total Liabilities
Net Position
Net investment in capital assets
Restricted for:
Debt service
Subdistrict construction and improvement
Unrestricted
For The Years
Ended June 30,
2012
2011
$ 27,152,656 $
22,949,200
8,694,165
21,857,997
45,410,443
24,629,171
6,199,009
19,383,825
80,654,018 95,622,448
5,399,672
283,053
5,602,225
204,166
5,682, 725
5,806,391
86,336,743 101,428,839
9,572,545
642, 343, 570
8,365,378
566, 079,709
651,916,115 574,445,087
738,252,858 675,873,926
1, 936, 590, 862
39,892, 760
66,800,934
175,009,785
1,915,232,838
34, 395,643
60, 530,338
186,860,317
Total Net Position $ 2,218,294,341 $ 2,197,019,136
Page 16
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF REVENUES, EXPENSE AND CHANGES IN NET POSITION
For The Years
Ended June 30,
2012 2011
Operating Revenues
Sewer service charges $ 22 7,677,430 $ 223,275, 722
Provision for doubtful sewer service charge accounts (6,911,849) (6,248,681)
Provision for uncollected stormwater charge accounts (2,373,731)
Licenses, permits, and other fees 2,683,823 2,976,253
Other 2,550,316 1,814,694
Total Operating Revenues 225,999, 720 219,444,257
Operating Expenses
Pumping and treatment 49,005,251 50,532,451
Collection system maintenance 36,695,192 33,152,223
Engineering 8,543,316 12,485,664
General and administrative 33,180,189 36,075,000
Water backup claims 2,049,901 8,911,970
Depreciation 66,742,064 66,854,265
Asset management 20,092,052 36,491,526
Total Operating Expenses 216,307,965 244,503,099
Operating Income (Loss)
9,691,755 (25,058,842)
Non -Operating Revenues
Property taxes levied by the District 24,604,173 27,125,451
Investment income 2,407,485 3,847,324
Rent and other income 294,591 442,968
Total Non -Operating Revenues 27,306,249 31,415,743
Non -Operating Expenses
Net loss on disposal and sale of capital assets 3,162,723 3,485,952
Non -recurring projects and studies 6,402,888 10,800,843
Legal claims 5,000 4,828,828
Interest expense 15,811,045 7,971,088
Total Non -Operating Expenses 25,381,656 27,086,711
Income (Loss) Before Capital Grants And Contributions
11,616,348 (20,729,810)
Capital Grants And Contributions
Utility plant contributed 9,495,264 7,5 71,714
Grant revenue 163,593 2,526,838
Total Capital Grants And Contributions 9,658,857 10,098,552
Change In Net Position
Net Position - Beginning Of Year
Net Position - End Of Year
21,275,205 (10,631,258)
2,197,019,136 2,207,650,394
$ 2,218,294.341 $ 2.197.019,136
Page 17
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities
Received from customers
Paid to employees for services
Paid to suppliers for goods and services
Net Cash Provided By Operating Activities
Cash Flows Provided By Non -Capital Financing Activities
Taxes levied and collected
Cash Flows From Capital And Related Financing Activities
Proceeds from capital grants
Proceeds from issuance of debt
Premium and (discounts) on sale of bonds
Interest received on bond proceeds to be used for capital improvements
Principal paid on debt
Interest and fees paid on debt
Payments for capital assets
Proceeds from sale of capital assets
Build America bond tax credit
Net Cash Used In Capital And Related Financing Activities
Cash Flows From Investing Activities
Purchase of investments
Proceeds from sale and maturity of investments
Investment income
Proceeds from rents
Net Cash Provided By Investing Activities
Net Increase (Decrease) In Cash And Cash Equivalents
Cash And Cash Equivalents At Beginning Of Year
Cash And Cash Equivalents At End Of Year
Non -Cash Capital And Investing Activities
Capital asset additions included in accounts payable
Utility plant contributed by other governments and developers
Fair value investment adjustment gain (loss)
For The Years
Ended June 30,
2012 2011
$ 225,182,816 $ 224,167,793
(85,434,376) (85,069,139)
(71,909,584) (82,422,992)
67,838,856 56,675,662
24,604,173 27,125,451
164,164
93,347,308
6,104,835
141,569
(19, 551, 825)
(25, 391, 770)
(147, 723, 685)
82,464
1,742,160
2,533,168
4,539,018
666,548
(17, 515, 733)
(22, 386, 543)
(110,811,121)
96,658
1,742,160
(91, 084, 780)
(521, 656, 494)
529,712,780
4,551,539
294,591
(141,135,8451.
(691,222,800)
737,182,632
5,484,057
442,968
12,902,416
51,886,857
14,260,665
6,318,934
(5,447,875)
11, 766,809
$ 20,579,599 $ 6,318,934
$ 13,744,285 $ 25,234,187
9,495,264 7,571,714
(778,235) 267,028
Page 18
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF CASH FLOWS (Continued)
Reconciliation Of Operating Income (Loss) To Net Cash Flows
Provided By Operating Activities
Operating Income (Loss)
Adjustments to reconcile operating income (loss) to net cash
provided by operating activities:
Depreciation
Change in operating assets and liabilities:
(Increase) decrease in billed and unbilled sewer service
charges receivable
(Increase) decrease in other receivables
(Increase) decrease in supplies inventory
Increase (decrease) in contracts and accounts payable
Increase (decrease) in deposits and accrued expenses
For The Years
Ended June 30,
2012 2011
$ 9,691,755 $ (25,058,842)
66,742,064 66,854,265
(1,110,166)
(172,227)
660,251
(7,408,601)
(564,220)
4,074,425
74,063
(128, 783)
7,562,465
3,298,069
Net Cash Provided By Operating Activities $ 67,838,856 $ 56,675,662
Page 19
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
NOTES TO FINANCIAL STATEMENTS
1. Organization And Summary Of Significant Accounting
Policies
Organization
The Metropolitan St. Louis Sewer District (the District) was authorized by the
voters, established and chartered under the provisions of the Constitution of
Missouri, as a municipal corporation and a political subdivision of the State of
Missouri. Upon creation in 1954, the District assumed responsibilities to provide
for the construction, operation, and maintenance of the sewer facilities within its
defined boundaries. The District's service area now comprises all of the City of
St. Louis and most of St. Louis County. Subdistricts within the District's total
service area represent separate geographic areas within which specific taxes are
levied for the retirement of indebtedness issued to finance construction of
sanitary or stormwater facilities within the area or to operate, maintain, or
construct improvements within the subdistrict. The District also maintains all of
the publicly owned stormwater sewers within its original boundaries and is
continuing to accept maintenance of the stormwater sewers in the remainder of
its service area.
Pursuant to provisions of its charter and subject to limitations imposed by the
Constitution of Missouri, all powers of the District are vested in a six -member
Board of Trustees (the Board), three of whom are appointed by the Mayor of the
City of St. Louis and three of whom are appointed by the County Executive of
St. Louis County.
Reporting Entity
The District defines its financial reporting entity to include all component units
for which the District's governing body is financially accountable. To be
considered financially accountable, the component unit must be fiscally
dependent on the District and the District must either 1) be able to impose its
will on the component unit or 2) the relationship must have the potential for
creating a financial benefit or imposing a financial burden on the District.
Based on the foregoing, the District's financial statements include all funds that
are established under the authority of the District's charter. There are no
agencies, boards, commissions, or authorities that are controlled by or dependent
on the District.
Page 20
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Measurement Focus, Basis Of Accounting, And Financial Statement
Presentation
Throughout the year, the District maintains its detailed accounting records on
the modified accrual basis of accounting. In order to account for the transactions
related to certain subdistricts and restricted resources, separate fund accounting
records are maintained. For financial reporting purposes, the District reports its
operations as a single enterprise fund. Accordingly, the accounting records are
converted to the accrual basis of accounting and all interfund transactions are
eliminated. Under the accrual basis of accounting, revenues are recognized when
earned and expenses are recognized when the related liability is incurred. The
District's measurement focus is on the flow of economic resources. Unbilled
sewer service charge revenues are accrued by the District based on estimated
billings for services provided through the end of the current fiscal year.
Revenues and expenses are divided into operating and non -operating items.
Operating revenues generally result from providing services in connection with
the District's principal ongoing operations. The principal operating revenues of
the District are user fees, licenses, and permits for wastewater treatment
services. Operating expenses include the costs associated with the conveyance
and treatment of wastewater, stormwater, administrative expenses, and
depreciation on capital assets. All revenues and expenses not meeting these
definitions are reported as non -operating revenues and expenses.
The District follows GASB Statement No. 33, Accounting and Financial
Reporting for Non -Exchange Transactions (GASB 33), which establishes
accounting and financial reporting standards for non -exchange transactions
involving financial or capital resources.
GASB 33 groups non -exchange transactions into the following four classes, based
upon their principal characteristics: derived tax revenues, imposed non -exchange
revenues, government mandated non -exchange transactions, and voluntary non -
exchange transactions.
The District recognizes assets from imposed non -exchange revenue transactions
in the period when an enforceable legal claim to the assets arises or when the
resources are received, whichever occurs first. Revenues are recognized in the
period when the resources are required to be used for the first period that use is
permitted. The District recognizes revenues from property taxes, net of
estimated refunds and estimated uncollectible amounts, in the period for which
the taxes are levied. Imposed non -exchange revenues also include licenses,
permits, and other fees.
Page 21
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Intergovernmental revenues, representing grants and assistance received from
other governmental units, are generally recognized as revenues in the period
when all eligibility requirements, as defined by GASB 33, have been met. Any
resources received before eligibility requirements are met are reported as
unearned revenues.
When both restricted and unrestricted resources are available for use, it is the
District's policy to use restricted resources first, and then unrestricted resources
as they are needed.
The District follows all Governmental Accounting Standards Board (GASB)
pronouncements as well as all Financial Accounting Standards Board (FASB)
Statements and Interpretations, Accounting Principle Board Opinions, and
Accounting Research Bulletins issued on or before November 30, 1989, unless
those pronouncements conflict with or contradict GASB pronouncements. In
addition, the District also applies all FASB Statements and Interpretations
issued after November 30, 1989, except for those that conflict with or contradict
GASB pronouncements.
The District early adopted GASB Statement No. 63, Financial Reporting of
Deferred Outlaws of Resources, Deferred Inflows of Resources, and Net Position
during fiscal year 2012.
Cash And Cash Equivalents And Investments
For purposes of the Statements of Cash Flows, the District's "cash and cash
equivalents" consist of all highly liquid investments (including restricted assets)
with maturity dates of 89 days or less from the date acquired by the District.
"Investments" consist of those investments with maturity dates 90 days or
greater at the time of purchase by the District. Investments are stated at fair
value based upon quoted market prices.
Investments are reported at fair value, which is the amount at which an
investment could be exchanged in a current transaction between willing parties.
Fair value is determined based on quoted market prices. Adjustments necessary
to record investments at fair value are recorded in the statements of revenues,
expense, and changes in net position as increases or decreases in investment
income.
Accounts Receivable
Accounts receivable is composes primarily of charges to customers for wastewater
and stormwater services. Receivables are reported at their gross values net of an
allowance for uncollectible amounts.
Page 22
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Restricted Assets
Mandatory segregations of assets are presented as restricted assets. Such
segregations are required by bond agreements and other external parties.
Current liabilities payable from these restricted assets are so classified.
Capital Assets
Capital assets are valued at historical cost or estimated historical cost based in
part upon a study performed in 1981. Donated capital assets are recorded at fair
value at the time of the contribution to the District. Interest cost is capitalized as
part of the historical cost of acquiring certain assets when the effect of such
capitalization is material to the financial statements. Interest is not capitalized
on assets constructed with contributions from other governmental sources.
Depreciation is calculated on a straight-line basis over the following estimated
useful lives:
Treatment and disposal plant and
equipment 10 to 70 years
Collection and pumping plant 10 to 100 years
General plant and equipment 3 to 50 years
When designing user charge rates, the District includes funding for replacement
cost of assets, which may differ from depreciation expense recorded for financial
reporting purposes.
Normal maintenance and repairs that do not add to the value of the asset or
materially extend asset lives are not capitalized. Betterments are capitalized
and depreciated over the remaining useful lives of the related assets, as
applicable. Previously, the District defined capital assets as assets with an
initial, individual cost of more than $1,000 and an estimated useful life in excess
of three years. In April of 2010 the District updated this policy and as a result,
an asset must now have an individual cost of more than $5,000 to be considered a
capital asset. This change in policy does not have a retroactive effect on capital
assets put in place before April 2010.
Page 23
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Capitalization Of Interest
Interest costs are capitalized as part of the costs of capital assets during the
period of construction based on the related weighted average net borrowing costs
incurred. Interest earned on temporary investments acquired with the proceeds
of such borrowed funds from the date of the borrowing until the assets are ready
for their intended use is used to reduce the interest costs capitalized on the
constructed assets. Interest is not capitalized for outlays financed by capital
grants (or other outside parties) externally restricted for the acquisition of
specified assets. In 2012 and 2011, the District capitalized $7,412,451 and
$11,738,283 of net interest expense, respectively.
Supplies Inventory
Supplies inventory consists of parts and supplies to be used to operate and
maintain treatment facilities and various treatment -related equipment at the
District. This inventory is stated at the lower of cost or market, determined on
the average cost method. Expenses are recognized when the inventory is
consumed.
Net Position
The District's net position is calculated as follows: the net investment in capital
assets component of net position consists of capital assets, including restricted
capital assets, net of accumulated depreciation and reduced by the outstanding
debt that is attributable to the acquisition, construction, or improvement of those
assets.
The restricted component of net position consists of constraints placed on net
position through external constraints imposed by creditors, grantors,
contributors, laws, or regulations of other governments or constraints imposed by
law through constitutional provisions or enabling legislation. Property taxes
levied by the various subdistricts and other revenues received for construction in
those sub -districts have also been restricted for that use. Sewer extension and
connection fees, grants, and other revenues received for construction within
certain sub -districts have been restricted for that use. In addition, a portion of
sanitary sewer charges have been restricted for the payment of principal and
interest on certain debt of the District.
The unrestricted net position component of net assets consists of net assets that
do not meet the definition of restricted or invested in capital assets, net of related
debt.
Page 24
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Capital Contributions
Capital contributions to the District represent government grants and other aid
used to fund capital projects. In accordance with GASB 33, capital contributions
are recognized as revenue when the expenditure is made and the amount
becomes subject to claim for reimbursement.
Bond Issuance Costs/Bond Premiums And Discounts
Bond issuance costs incurred, as well as bond premiums and discounts, are paid
from the proceeds of revenue bond issues and are deferred and amortized using
the straight-line method over the term of the bonds.
Compensated Absences
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 next. Since vacation accrued at year-end is
expected to be used by the employee during the following fiscal year, the accrual
is reported as a component of current deposits and accrued expenses payable.
Sick Leave
Employees earn sick pay benefits at accrual rates ranging from 10 days per year
to 12 days per year (depending on length of service). Unused sick leave can be
carried over at year-end without limitation. An employee retiring from the
District with five or more years of service, who has unused accrued sick leave
remaining, will be compensated for that portion of unused accrued sick leave at
the rate of 1-1/4% for each year of District service. The District has recorded a
liability, which has been actuarially determined to be equal to the accumulated
expense charge that will amortize the employees' benefits over their period of
District service. The liability, included in current deposits and accrued expenses
payable, includes vested accumulated rights to receive sick leave benefits
estimated to be paid within one year. The portion of sick leave expected to be
paid after one year is recorded as a component of non -current deposits and
accrued expenses payable.
Use Of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements. Actual
results could differ from those estimates.
Page 25
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Reclassification
Certain amounts in prior year financial statements have been reclassified for
comparative purposes to conform with the presentation in the current year
financial statements.
2. Deposits And Investments
Deposits
At June 30, 2012 the reported amount of the District's deposits was $56,122,489
and bank balance was $54,926,226. Of the bank balance, $45,540,519 was
covered by federal depository insurance and $9,385,707 was collateralized with
securities held by a third party financial institution in the District's name.
At June 30, 2011, the reported amount of the District's deposits was $38,979,076
and the bank balance was $42,310,339. Of the bank balance, $42,220,762 was
covered by federal depository insurance and $89,577 was collateralized with
securities held by a third party financial institution in the District's name.
Custodial credit risk for deposits is the risk that, in the event of bank failure, the
District's deposits may not be returned to the District. The District's investment
policy complies with the provisions of state laws and requires collateralization on
repurchase agreements, time certificates of deposit and deposits with banking
institutions with a market value of 103 percent.
Deposits in each bank are insured by the Federal Deposit Insurance Corporation
(FDIC) in the amount of $250,000 for interest bearing accounts and unlimited
coverage for noninterest bearing accounts. The FDIC created the Temporary
Liquidity Guarantee Program. One element of that program provides for an
unlimited guarantee by the FDIC of funds held in an insured depository
institution in non -interest -bearing transaction deposit accounts through
December 31, 2012. This guarantee is over and above the $250,000 coverage on
all interest bearing deposit accounts.
Page 26
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Investments
With the approval of the District's Board of Trustees, the Secretary -Treasurer is
authorized to invest excess cash in any investment authorized by the District's
charter. The District's investment policy conforms to the investment policy
guidelines for the State of Missouri. The District's investment policy authorizes
the District to invest in the following instruments: U.S. Treasury obligations,
certificates of deposit, obligations of any agency or instrumentality of the U.S.,
repurchase agreements, bankers' acceptances, and commercial paper rated in the
three highest classifications, for terms specified in the policy. At June 30, 2012
and 2011, all of the District's investments were in compliance with the District's
investment policy and charter.
A summary of deposits and investments as of June 30, 2012 and 2011 is as
follows:
Investment Type
Deposits
Money Market Mutual Funds
Certificates of deposit
U.S. Treasury and agency
obligations
Commercial paper
Bankers' acceptance notes
Total
2012 2011
Cost Fair Value
$ 56,122,489
4,851,168
900,000
180,442,248
81,436,568
7,554,253
$ 56,122,489
4,851,168
900,000
181, 714,022
81,485,196
7,559,801
Cost Fair Value
$ 38,979,076
900,000
211, 886,113
67,890,245
6,288,960
$ 38,979,076
900,000
213,968,746
67, 909, 740
6,291,018
$ 331,306, 726 $ 332,632,676 $ 325,944,394 $ 328,048,580
Reconciliation to the financial statements:
Cash
Unrestricted
Restricted
Pooled cash and investments
Unrestricted
Restricted
Investments
Unrestricted
Restricted
2012
2011
$ 15,322,804 $
5.256, 795
162,269,011
72,357,560
42,931,034
34,495,472
6,229,447
89,487
190, 353,186
69,042,313
31,200,375
31,133,772
$ 332,632,676 $
328,048,580
Page 27
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Interest Rate Risk
As of June 30, 2012 and 2011, the District had the following investments and
maturities:
2012 2011
Weighted Weighted
Average Average
Maturity Maturity
Investment Type Fair Value (Years) Fair Value (Years)
Certificates of deposit $ 900,000 1.11 $ 900,000 0.60
U.S. Treasury obligations 50,229,767 0.78 36,390,289 0.91
U.S. agency obligations 131,484,255 2.25 177,578,457 2.24
Commercial paper 81,485,196 0.11 67,909,740 0.10
Bankers' acceptance notes 7,559,801 0.16 6,291,018 0.10
Total $ 271,659,019
1.28 $ 289,069,504 1.51
In accordance with the District's investment policy, 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 investment portfolio so that securities mature to meet cash
requirements for ongoing operations, thereby avoiding the need to sell
securities on the open market prior to maturity.
2. Investing operating funds primarily in short-term securities.
3. State law limits the maximum stated maturities to five years on any
investment from the date of purchase.
Custodial/Credit Risk
The District will minimize credit risk for investments, the risk of loss due to
failure of the security issuer or backer, by:
1. Prequalifying the financial institutions, broker/dealers, intermediaries,
and advisors with which the District will do business.
2. Diversifying the portfolio so that potential losses on individual securities
will be minimized.
Page 28
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In accordance with its investment policy, the District limits its investments in
these investment types to the top rating issued by Nationally Recognized
Statistical Rating Organizations. As of June 30, 2012 and 2011, the District's
investments in commercial paper were rated Al by Standard & Poor's and P-1 by
Moody's Investors Service. The District's investments in repurchase agreements
carry the explicit guarantee of the U.S. Government. The District's investments
in U.S. agency obligations that do not carry the explicit guarantee of the U.S.
Government all carry a rating assigned by Standard & Poor's of "AA+."
Concentration Of Credit Risk
The District places no limit on the amount the District may invest in any one
issuer with respect to U.S. Treasury obligations and collateralized time and
demand deposits. U.S. agency obligations and government -sponsored enterprises
are limited to 60% of the portfolio; and collateralized repurchase agreements are
limited to 50% of the portfolio. U.S. agency obligations are limited to 30% of the
portfolio, and commercial paper and bankers' acceptances are limited to 25%
each. The following table lists investments in issuers that represent 5% or more
of total investments at June 30, 2012 and 2011:
Issuer
Federal Home Loan Bank
Federal National Mortgage Association
Federal Home Loan Mortgage Corporation
Percent Of
Total. Investtnents
2012 2011
8.0
21.1
6.4
19.0
18.9
11.3
Page 29
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
3. Note Receivable
The District has a note receivable with the City of Arnold, Missouri (the "City")
bearing interest at 4.35% for its portion of the capital costs related to the Lower
Meramec Wastewater Treatment Plant. The current portion of this note is
contained in the other receivables line on the balance sheet. The note receivable
will be paid over 30 years. At June 30, 2012, future payments are as follows:
2013 $ 1,100,499
2014 1,100, 499
2015 1,100, 499
2016 1,100, 499
2017 1,100,499
2018-2022 5,502,494
2023-2027 5,502,494
2028-2032 5,502,494
2033 550,249
Less: Amount representing interest
Classification in Statement of Net Position:
22,560,226
7,682,391
$ 14,877.835
Current $ 460,761
Non -current 14,417,074
Total $ 14,877.835
Page 30
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
4. Capital Assets
The following is a summary of capital assets changes for the fiscal years ended
June 30, 2012 and 2011:
Capital assets not being depreciated:
Land
Construction in progress
Total capital assets not being depreciated
Capital assets being depreciated:
Treatment and disposal plant
and equipment
Collection and pumping plant
General plant and equipment
Total capital assets being depreciated
Less: Accumulated depreciation:
Treatment and disposal plant
and equipment
Collection and pumping plant
General plant and equipment
Total accumulated depreciation
Total capital assets being depreciated, net
Total Capital Assets
Capital assets not being depreciated:
Land
Construction in progress
Total capital assets not being depreciated
Capital assets being depreciated:
Treatment and disposal plant
and equipment
Collection and pumping plant
General plant and equipment
Total capital assets being depreciated
Less: Accumulated depreciation:
Treatment and disposal plant
and equipment
Collection and pumping plant
General plant and equipment
Total accumulated depreciation
Total capital assets being depreciated, net
Total Capital Assets
Balance
June 30, 2011
Additions
Balance
Reclass Deletions June 30, 2012
$ 36,924,144
400,756,348
437,680,492
$ 9,102,619 $
137. , 925, 986
14 7,028,605
$ — $ 46,026,763
— 159,562,999 379,119,335
- 159,562,999 425,146,098
979, 444,620
1,941,575,848
84, 858,812
3,005,879, 280
(382,129,043)
(548,181,682)
(43,753,142)
(974,063,867)
2,031,815,413
$ 2,469,495,905
Balance
June 30, 2010
41,013, 831
112,106,178
8,721,309
161,841,318
(26,025,377)
(32,259,885)
(8,456,802)
(66,742,064)
95,099,254
$ 242,127,859 $
Additions
$ 28,128,701 $ 11,342,554 $
570,602,108 117,135,980
598,730, 809 128,478,534
750,240, 748
1,914.386,404
64,195,139
2,725,822,291
236,903,865
34,816,152
17,922,435
289,642,452
8,660,266
- 3,355,167
2,315,233
- 14, 330, 666
(7,605,416)
- (1,261,130)
- (2,218, 932)
(11;085, 478)
- 3,245,188
- $ 162,808,187
1,011, 798,185
2,050, 326, 859
91, 264,888
3,153,389,932
(400,549,004)
(579,180,437)
(49,991,012)
(1,029,720,453)
2,123,669,479
$ 2,548,815,577
Balance
Reclass Deletions June 30t 2011
$ 2,547,111 $ 36,924,144
— 286,981,740 400,756,348
- 289,528,851 437,680,492
(6,851,394) 848,599
7,626,708
6,851,394 4,110,156
12,555,463
979,444,620
1,941,57e 5,848
84,858,812
3,005,879,280
(355,414,815)
(521,233,972)
(39,027,424)
(915,676,211)
1,813,146,060
$ 2,411,876,889
(28,782,937)
(31,129,153)
(6,942,175)
(66,854,265)
222,788,157
1,679,361 (389,348)
- (4,181,443)
(1,679,361) (3,895,818)
- (8,466,609)
- 4,116, 854
(382,129,043)
(548,181,682)
(43,753,142)
(974,063,867)
2,031,815,413
$ 351,266,721 $
— $ 293,647,705 8 2,469,495,905
Page 31
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
5. Property Tax
On or before October 1 of each year, the District levies ad valorem taxes on all
taxable tangible property, real and personal, within its boundaries based on
assessed valuations established by the City of St. Louis and St. Louis County
Assessors. Tax rates vary by sub -district and purpose. Taxes levied are used for
operations and stormwater maintenance, debt service, and construction. Taxes
are recorded as non -operating revenues. Property tax bills are mailed in October.
They become delinquent and represent a lien on the related property if not paid
by December 31. All property taxes are billed and collected by the City of
St. Louis and St. Louis County Collectors' of Revenue and are distributed to the
District monthly.
On June 12, 2008, pursuant to Ordinance 12661, the District set the property tax
rate at zero and began charging a stormwater service charge on March 1, 2008
based on the property's impervious area.
Only July 9, 2010, the St. Louis County Circuit Court declared that the
stormwater user charge was a tax that requires voter approval under the
Hancock Amendment I. In July, the District ceased charging customers for
stormwater usage and reenacted the property tax that was previously charged.
In fiscal years 2012 and 2011, the District recorded revenue from property taxes
in the amount of $24,604,173 and $27,125,451, respectively.
Page 32
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
6. Long -Term Liabilities
The following is a summary of changes in the District's long-term liabilities for
the year ended June 30, 2012:
Original
Issuance
Amounts
Balance
June 30,
2011 Additions
Retirements
Balance
June 30,
2012
Bonds and notes payable:
Wasterwater System Senior revenue bonds:
Series 2004A $ 175,000,000
Series 2006C 60,000,000
Series 2008A 30,000,000
Series 2010B 85,000,000
Series 2011B 52,250,000
Water Pollution Control And Drinking Water
Series 2004B 161,280,000
Series 2005A
Series 2006A
Series 2006B
Series 2008ArB
6,800,000
42,715,000
14,205,000
40,000,000
Missouri Department of Natural Resources:
Energy Loan Program 98,595
Energy Loan Program 223,793
Series 2009A 23,000,000
Series 2010A 7,980,700
Series 2010C 37,000,009
Series 2011A 39,769,300
Capital Lease:
Oracle.'Blue Heron
Add: Unamortized
premium, net
Less: Bond issue
costs, net
Total
Deposits and accrued
expenses:
Landfill closure and
postclosure costs
Compensated
absences
Net OPEB obligation
Total
12 000 000
$ 165,590,000 $
60,000,000
30,000,000
85,000,000
52,250,000
Current
Portion
$ 1,960,000 $ 163,630,000 S 2,165,000
60,000,000
30,000,000
55,000,000
52,250,000 1,640,000
Subordinate Revenue Bonds (State Revolving Loans Program):
123,055,000 7,095,000 115,960,000
5,055,000
5,370,000
36,335,000
12, 285,000
35,610,000
25,251
22,053, 200
2,552,447
329,000
223,793
3,195,942
36,6 71,000
1,006,572
315,000
2,110,000
665,000
1,777,500
11,783
968,700
168,000
1,481,000
6 095 982 — 2,999,842
$ 787,322,358 $ 584,600.580 $ 93,347,398 $ 19,551,525
$ 709,120
11,946 $
6,601,946 851,568 184,283
2,704,799 2,090,556 1,395,800
10,015,8,65 $ 2,954,070 $ 1,580,083
34, 225,000
11,620,000
33,832,500
13,468
223,793
21,084,500
5,860,389
35,519,000
1,006,572
7,180,000
305,000
2,140,000
675,000
1,792,500
12,157
991,100
341,100
1,520,000
3 096 140 3,096,140
658,396,362 $ 21,857,998
14,196,464
(8, 391,259)
$ 664,201,567
$ 721,066 $
7,269,231 1,817,307
3,399,555
11, 389,852 $ 1, 817,307
Page 33
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The following is a summary of changes in the District's long-term liabilities for
the year ended June 30, 2011:
Original Balance Balance
Issuance June 30, June 30, Current
Amounts 2010 Additions Retirements 2011 Portion
Bonds and notes payable:
Wasterwater System Senior revenue bonds:
Series 2004A $ 175,000,000 $ 167,370,000 $ $ 1,780,000 $ 165,590,000 $ 1,960,000
Series 2006C 60,000,000 60,000,000 60,000,000
Series 2008A 30,000,000 30,000,000 30,000,000
Series 2010B 85,000,000 85,000,000 — 85,000,000
Water Polluition Control And Drinking Water Subordiante Revenue Bonds (State Revolving Loans Program):
Series 2004B 161,280,000 130,110,000 7,055,000 123,055,000 7,095,000
Series 2005A 6,800,000 5,665,000 295,000 5,370,000 315,000
Series 2006A 42,715,000 38,420,000 2,085,000 36,335,000 2,110,000
Series 2006B 14,205,000 12,935,000 650,000 12,285,000 665,000
Series 2008AB 40,000,000 37,375,000 1,765,000 35,610,000 1,777,500
Missouri Department of Natural Resources:
Energy Loan Program 98,595 36,671 11,420 25,251 11,783
Series 2009A 23,000,000 23,000,000 946,800 22,053,200 968,700
Series 2010A 7,980,700 2,852,447 — 2,852,447
Series 2010C 37,000,000 — 329,000 329,000 1,481,000
Capital Lease:
Oracle/Blue Heron
Add: 1L7namortized
premium, net 8,699,649
Less: Bond issue
costs, net (7,836,995)
12,000,000 7,263 687 1,759,808 2,927,513 6,095,982 2,999,842
$ 695,079,295 $ 600,027,805 $ 2,088,809 $ 17,515,733 584,600,880 l 19,383,825
Total $ 585,463,534
Deposits and accrued
expenses:
Landfill closure and
postclosure costs $ 662,016 $ 47,104 $ — $ 709,120 $ —
Compensated
absences 6,279,402 860,880 538,336 6,601,946 1,650,487
Net OPEB obligation 1,924,162 2,162,237 1,381,600 2,704,799 —
Total $ 8,865,580 $ 3,070,221 $ 1,9 ,936 $ 10,015,865. $ 1,650,987
Wastewater System Revenue Bonds Payable
In February 2004, the District received voter authorization for $500,000,000 of
revenue bonds. In August 2008, the District received voter authorization for an
additional $275,000,000 of revenue bonds. In June 2012, the District received
voter authorization for $945,000,000 of revenue bonds. From the total voter
authorization of $1,720,000,000, $945,000,000 has not been issued as of June 30,
2012. These funds were sought to enable the District to comply with federal and
state clean water requirements.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In December 2011, the District issued $52,250,000 of Wastewater System
Revenue Bonds Series 2011B (Series 2011B). These bonds were issued pursuant
to the August 2008 authorization; in this case for the purpose of constructing,
repairing, replacing, and equipping new and existing District wastewater
facilities. These senior bonds have interest rates ranging from 3.0% to 5.0% and
are payable in semiannual installments at varying amounts through May 1,
2032. As Build America Bonds under The American Recovery and Reinvestment
Act of 2009, the District will receive a subsidy payment from the Federal
government equal to 35% of the interest paid.
In January 2010, the District issued S85,000,000 of Wastewater System Revenue
Bonds Series 2010B (Series 2010B). These bonds were issued pursuant to the
August 2008 authorization; in this case for the purpose of constructing, repairing,
replacing, and equipping new and existing District wastewater facilities. These
senior bonds have an interest rate of 5.9% and are payable in semiannual
installments at varying amounts through May 1, 2039.
In November 2008, the District issued $30,000,000 of Wastewater System
Revenue Bonds Series 2008A (Series 2008A) from the authorization for the
purpose of providing funds to finance the capital improvements and replacement
program. These senior bonds have interest rates ranging from 5.1% to 5.3% and
are payable in semiannual installments at varying amounts through May 1,
2038.
In November 2006, the District authorized and issued $60,000,000 of Wastewater
System Revenue Bonds Series 2006C (Series 2006C) for the purpose of providing
funds to finance the initial phase of its capital improvements and replacement
program, including constructing, repairing, and replacing new wastewater
facilities. These senior bonds have interest rates ranging from 4.1% to 5.0% and
are payable in semiannual installments at varying amounts through May 1,
2036.
In May 2004, the District authorized and issued $175,000,000 of Wastewater
System Revenue Bonds Series 2004A (Series 2004A) for the purpose of providing
funds to finance the initial phase of its capital improvements and replacement
program, including constructing, repairing, and replacing new wastewater
facilities. These senior bonds have interest rates ranging from 2.0% to 5.0% and
are payable in semiannual installments at varying amounts through May 1,
2034.
Page 35
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The revenue bonds do not constitute a legal debt or liability for the District, the
State of Missouri, or for any political subdivision thereof and do not constitute
indebtedness within the meaning of any constitutional or statutory debt
limitation or restriction. Revenue derived from the operations of the Wastewater
System is pledged for the retirement of the outstanding Wastewater System
Revenue Bonds listed below. Under the provisions of the bond indentures, the
District covenants to establish rates for the services of the Wastewater System
sufficient to fund operations, maintain reserves, and provide revenues to apply
principal and interest on these bonds.
The issuance of the revenue bonds does not obligate the District to levy any form
of taxation therefore or to make any appropriation for their payments in any
fiscal year. The principal and interest on the bonds are expected to be paid from
future wastewater revenues. The scheduled payment of the principal of and
interest on the Series 2006C and 2004A Bonds are guaranteed under a financial
guaranty insurance policy.
Water Pollution Control And Drinking Water Revenue Bonds Payable
In October 2008, the State Environmental Improvement and Energy Resources
Authority (the Authority) authorized and issued $69,435,000 of Water Pollution
Control and Drinking Water Revenue Bonds (State Revolving Funds Programs)
Series 2008A (Series 2008A/B). The Series 2008A/B bonds provided funds to
make loans to fourteen Missouri political subdivisions that will be used to finance
water pollution control and drinking water projects. A portion of the proceeds of
the Series 2008A/B bonds issued by the Authority were used to purchase
subordinate Participant Revenue Bonds (Participant Bonds) authorized and
issued by the District in the aggregate principal amount of $40,000,000, the
proceeds of which will be used for constructing, repairing, and equipping new and
existing wastewater facilities. The District's Participant Bonds have interest
rates ranging from 4.0% to 5.7% and are payable in semiannual installments at
varying amounts through January 1, 2029.
Page 36
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In November 2006, the Authority authorized and issued $22,105,000 of State
Revolving Funds Programs Series 2006B (Series 2006B). The Series 2006B
bonds provided funds to make loans to seven Missouri political subdivisions that
will be used to finance water pollution control and drinking water projects. A
portion of the proceeds of the Series 2006B bonds issued by the Authority were
used to purchase Participant Bonds authorized and issued by the District in the
aggregate principal amount of $14,205,000, the proceeds of which will be used for
constructing, repairing, and equipping new and existing wastewater facilities.
The District's Participant Bonds have interest rates ranging from 4.0% to 5.0%
and are payable in semiannual installments at varying amounts through July 1,
2027.
In May 2006, the Authority authorized and issued $87,505,000 of State Revolving
Funds Programs Series 2006A (Series 2006A). The Series 2006A bonds provided
funds to make loans to thirteen Missouri political subdivisions that will be used
to finance water pollution control and drinking water projects. A portion of the
proceeds of the Series 2006A bonds issued by the Authority were used to
purchase subordinate Participant Bonds authorized and issued by the District in
the aggregate principal amount of $42,715,000, the proceeds of which will be used
for constructing, repairing, and equipping new and existing wastewater facilities.
The District's Participant Bonds have interest rates ranging from 3.5% to 4.5%
and are payable in semiannual installments at varying amounts through July 1,
2026.
In May 2005, the Authority authorized and issued $53,060,000 of State Revolving
Funds Programs Series 2005A (Series 2005A). The Series 2005A bonds provided
funds to make loans to ten Missouri political subdivisions and one Missouri non-
profit corporation that will be used to finance water pollution control and
drinking water projects. A portion of the proceeds of the Series 2005A bonds
issued by the Authority were used to purchase subordinate 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 constructing, repairing, and
equipping new and existing wastewater facilities. The District's Participant
Bonds have interest rates ranging from 3.0% to 5.0% and are payable in
semiannual installments at varying amounts through July 1, 2026.
Page 37
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In May 2004, the Authority authorized and issued $179,780,000 of State
Revolving Funds Programs Series 2004B (Series 2004B). The Series 2004B
bonds provided funds to make loans to seven Missouri political subdivisions that
will be used to finance water pollution control projects. A portion of the proceeds
of the Series 2004B bonds issued by the Authority were used to purchase
subordinate Participant Bonds authorized and issued by the District in the
aggregate principal amount of $161,280,000, the proceeds of which will be used to
finance the District's three water pollution control construction projects outlined
in the agreement. The District's Participant Bonds have interest rates ranging
from 2.0% to 5.3% and are payable in semiannual installments at varying
amounts through January 1, 2027.
The Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds do not constitute a
legal debt or liability for the District, the State of Missouri, or for any political
subdivision thereof and do not constitute indebtedness within the meaning of any
constitutional or statutory debt limitation or restriction. The issuance of the
Series 2004B, 2005A, 2006A, 2006B, and 2008A/B bonds and the . Series 2009A,
2010A, 2010C, and 2010C direct loans do not obligate the District to levy any
form of taxation therefore or to make any appropriation for their payments in any
fiscal year. The principal and interest on the bonds are expected to be paid from
future wastewater revenues.
In connection with the District's issuance of the Participant Bonds, which were
purchased with the proceeds of the Series 2004B, 2005A, 2006A, 2006B, 2008A/B
bonds, the District participates in the State Revolving Loan Program established
by the Missouri Department of Natural Resources (the DNR). Monies from
federal capitalization grants and state matching funds are used to fund a reserve
account for each participant.
As the District incurs 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, 2006B bonds or
100% for the Series 2008A/B 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, 2006B bonds or 100% for the series 2008A/B bonds.
The costs of operation and maintenance of the wastewater treatment and
sewerage facilities and the debt service is payable from wastewater revenues.
Page 38
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In accordance with the Series 2004A, 2004B, 2005A, 2006A, 2006B, 2008AIB
bonds, the District's annual net operating revenues from wastewater activities,
as defined in the agreement, coupled with investments earnings must be at least
125% of the current portion of principal and interest due on all senior bonds and
at least 115% of the current portion of principal and interest due on all bonds. At
June 30, 2012 and 2011, the District was in compliance with this covenant.
Principal And Interest Requirements On Revenue Bonds Payable
The annual principal and interest requirements to maturity on revenue bonds
payable outstanding as of June 30, 2012 are as follows:
Wastewater System Revenue Bonds Payable/
Water Pollution Control And Drinking Water
Revenue Bonds Payable
Years Ending June 30,
2013
2014
2015
2016
2017
2018-2022
2023-2027
2028-2032
2033-2037
2038-2041
Total
Principal Interest
$ 15.897,500
16,477,500
16,930,000
17 ,925,000
18,49 7 ,500
104, 732,500
115, 795,000
117,127,500
123,385,000
44, 805,000
$ 591,572,500
$ 29,831,871
29,160, 856
28,444,299
27,649,424
26,801,361
119,506,114
91,677,999
63, 766, 475
33,798,013
3,789,888
$ 454,426,300
Total
45, 729,371
45,638,356
45,374,299
45,574,424
45,298,861
224,238,614
207,472,999
180,893,975
157.183,013
48, 594, 888
$ 1,045,998,800
Energy Efficiency Leveraged Note Payable
In April 2004, the DNR loaned $98,595 to the District. The Energy Efficiency
Leveraged Note Payable bears interest at a rate of 3.2% per annum and is
payable through August 1, 2013. The purpose of this note is to finance the
design, acquisition, installation, and implementation of energy conservation
measures. The principal and interest on this note is paid from the energy
savings from the projects or avoided costs resulting from the projects.
Page 39
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Principal And Interest Requirements On Energy Efficiency Leveraged
Note Payable
The annual principal and interest requirements to maturity on the Energy
Efficiency Leveraged Note Payable outstanding as of June 30, 2012 are as
follows:
Energy Efficiency Leveraged Note Payable
Years Ending June 30, Principal Interest Total
2013 $ 12,157 $ 329 $ 12,486
2014 1,311 21 1,332
Total $ 13,468 $ 350 $ 13,818
Energy Efficiency Leveraged Note Payable
In February 2012, the DNR loaned $223,793 to the District. The Energy
Efficiency Leveraged Note Payable bears interest at a rate of 2.5% per annum
and is payable through February 1, 2020. The purpose of this note is to finance
the design, acquisition, installation, and implementation of energy conservation
measures. The principal and interest on this note will be paid from the energy
savings from the projects or avoided costs resulting from the projects.
Principal And Interest Requirements On Energy Efficiency Leveraged
Note Payable
The annual principal and interest requirements to maturity on the Energy
Efficiency Leveraged Note Payable outstanding as of June 30, 2012 are as
follows:
Energy Efficiency Leveraged Note Payable
Years Ending June 30, Principal Interest
Total
2013 $ — $ — $ —
2014 32,402 3,520 35,922
2015 31,332 4,590 35,922
2016 32,120 3,802 35,922
2017 32,928 2,994 35,922
2018-2020 95,011 3,928 98,939
Total $ 223,793 $ 18,834 $ 242,627
Page 40
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
State Of Missouri Direct Loan Series 2009A
In October 2009, the DNR loaned $23,000,000 to the District. The State of
Missouri Direct Loan Series 2009A bears interest at a rate of 1.5% per annum
and is payable through January 1, 2030. The purpose of this note is to finance
the designing, constructing, improving, renovating, repairing, replacing and
equipping new and existing sewer facilities within the District. The principal
and interest on the bonds are expected to be paid from future wastewater
revenues. All funds have been drawn on this loan as of June 30, 2011.
In accordance with the Direct Loan Series 2009A, the District's annual net
operating revenues from wastewater activities, as defined in the agreement,
coupled with investments earnings must be at least 115% of the current portion
of principal and interest due on all bonds. At June 30, 2012 and 2011, the
District was in compliance with this covenant.
Principal And Interest Requirements On State Of Missouri Direct Loan
Series 2009A
As the District incurred approved capital expenses, the DNR reimbursed the
District for the expenses from the bond proceeds account and deposited the
approved amount in a bond reserve fund. The District repaid the bond at an
interest rate of 1.5% based on the amount that has been reimbursed. As of
June 30, 2010, the full $23,000,000 had been reimbursed.
The annual principal and interest requirements to maturity on the State of
Missouri Direct Loan Series 2009A outstanding as of June 30, 2012 are as
follows:
State Of Missouri Direct Loan Series 2009A
Years Ending June 30,
Principal Interest Total
2013 $ 991,100 S 304,236 $ 1,295,336
2014 1,014,000 289,684 1,303,684
2015 1,037,500 274,794 1,312,294
2016 1,061,500 259,560 1,321,060
2017 1,086,000 243,973 1,329,973
2018-2022 5,818,700 973,154 6,791,854
2023-2027 6,523,400 525,723 7,049,123
2028-2031 3,552,300 78,387 3,630,687
Total 8 21,084,500 $ 2,949,511 $ 24,034,011
Page 41
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
State Of Missouri Direct Loan Series 2010A
In January 2010, the State of Missouri's Direct Loan Program — ARRA issued to
the District an amount totaling $7,980,700 for the construction, improvement,
renovation, repair, replacement and equipping of its wastewater system, under
the authority of and in full compliance with the District's Charter (Plan). The
District's interest rate is 1.5% and is payable in semiannual installments at
varying amounts through July 1, 2031. Amounts drawn and outstanding at
June 30, 2012 and 2011 are $5,880,389 and $2,852,447, respectively.
In accordance with the Direct Loan Series 2010A, the District's annual net
operating revenues from wastewater activities, as defined in the agreement,
coupled with investments earnings must be at least 115% of the current portion
of principal and interest due on all bonds. At June 30, 2012 and 2011, the
District was in compliance with this covenant.
Principal And Interest Requirements On State Of Missouri Direct Loan
Series 2010A
As the District incurs approved capital expenses, the DNR reimburses the
District for the expenses from the bond proceeds account and deposits the
approved amount in a bond reserve fund. The District repays the bond at an
interest rate of 1.5% based on the amount that has been reimbursed. The
payment requirements to maturity will be determined after the debt is fully
issued.
State Of Missouri Direct Loan Series 2010C
In December 2010, the State of Missouri Direct Loan Program - ARRA issued to
the District an amount totaling $37,000,000 for the purpose of improving,
renovating, repairing, replacing and equipping the District's Wastewater System.
The principal and interest on the bonds are expected to be paid from future
wastewater revenues. The District's interest rate is 1.7% and is payable in
semiannual installments at varying amounts through January 1, 2031. Amounts
drawn and outstanding at June 30, 2012 and 2011 are $35,519,000 and $329,000,
respectively.
In accordance with the Direct Loan Series 2010C, the District's annual net
operating revenues from wastewater activities, as defined in the agreement,
coupled with investments earnings must be at least 115% of the current portion
of principal and interest due on all bonds. At June 30, 2011 and 2010, the
District was in compliance with this covenant.
Page 42
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Principal And Interest Requirements On State Of Missouri Direct Loan
Series 2010C
As the District incurred approved capital expenses, the DNR reimbursed the
District for the expenses from the bond proceeds account and deposited the
approved amount in a bond reserve fund. The District repaid the bond at an
interest rate of 1.7% based on the amount that has been reimbursed. As of
June 30, 2012, the full $37,000,000 had been reimbursed.
The annual principal and interest requirements to maturity on the State of
Missouri Direct Loan Series 2010C outstanding as of June 30, 2012 are as
follows:
State Of Missouri Direct Loan Series 2010C
Years Ending J
une 30, Principal
2013
2014
2015
2016
2017
2018-2022
2023-2027
2028-2032
Total
$ 1,520,000
1,560,000
1,600,000
1.641,000
1,684,000
9,098,000
10, 343, 000
8,073,000
Interest Total
8 579,835
554.590
528,685
502,120
474,862
1,940,086
1,144, 349
269,890
$ 35,519,000 $ 5,994,417
8 2,099,835
2,114,590
2,128, 685
2,143,120
2,158, 862
11,038.086
11,487,349
8,342,890
$ 41,513,417
State Of Missouri Direct Loan Series 2011A
In November 2011, the State of Missouri Direct Loan Program - ARRA issued to
the District an amount totaling $39,769,300 for the purpose of improving,
renovating, repairing, replacing and equipping the District's Wastewater System.
The principal and interest on the bonds are expected to be paid from future
wastewater revenues. The District's interest rate is 1.5% and is payable in
semiannual installments at varying amounts through January 1, 2034.
In accordance with the Direct Loan Series 2011A, the District's annual net
operating revenues from wastewater activities, as defined in the agreement,
coupled with investments earnings must be at least 115% of the current portion
of principal and interest due on all bonds. At June 30, 2012 the District was in
compliance with this covenant.
Page 43
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Principal And Interest Requirements On State Of Missouri Direct Loan
Series 2011A
As the District incurs approved capital expenses, the DNR reimburses the
District for the expenses from the bond proceeds account and deposits the
approved amount in a bond reserve fund. The District repays the bond at an
interest rate of 1.5% based on the amount that has been reimbursed. As of
June 30, 2012 the outstanding loan balance was $1,006,572. The payment
requirements to maturity will be determined after the debt is fully issued.
Master Equipment Lease / Purchase Agreement
In June 2009, the District entered into a lease purchase agreement in which the
District has received proceeds in the total amount of $12,000,000 in varying
installments. These proceeds were used to lease technology related to the
District's upgrade to a new enterprise system. The lease bears interest at a rate
of 3.2% and is payable through June 19, 2013, at which time the District has the
option to purchase the leased equipment.
Principal And Interest Requirements On Master Equipment
Lease/Purchase Agreement
Master Equipment Lease / Purchase Agreement
Years Ending June 30, Principal Interest Total
2013 $ 3,096,140 $ 53,316 $ 3,149,456
Restricted Cash And Investments
The following trustee held accounts have been established in accordance with
bond ordinances and financing agreements that require receipts generated from
operations be segregated and certain reserve accounts be established:
Revenue Fund
The Revenue Fund will be used for the purpose of depositing wastewater
operating revenues, providing funds to pay for expenses related to the operation
and maintenance of the District, and fulfilling Sinking Fund requirements in
accordance with the bond ordinances.
Sinking Fund
The bond ordinances provide for deposits to and the use of monies in the Sinking
Fund to be used for the sole purpose of principal and interest payments on the
bonds. Sufficient monies shall be paid in periodic installments from the Revenue
Fund.
Page 44
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Debt Service Fund
The Debt Service Fund shall be used by the Trustee for the sole purpose of
paying the principal and interest on the bonds, as and when the same become
due.
Debt Service Reserve Fund
After initial deposit of the amount required pursuant to the bond ordinances and
financing agreements of the Series 2004A, 2006C, 2008A, 2010B, and 2011B
bonds, monies in the Debt Service Reserve Fund shall be disbursed and expensed
by the District solely for the payment of the principal and interest on the bonds
and notes to the extent of any deficiency in the Debt Service Fund for such
purpose. The District may disburse and expend monies from the Debt Service
Reserve Fund for such purpose immediately. As of June 30, 2012 and 2011, cash
and investments in the Debt Service Reserve Fund totaled $34,861, 380 and
$31,223,261, respectively.
Special Participant Bond Reserve Account
For the Series 2004B, 2005A, 2006A, 2006B, and 2008AIB bonds, the District
shall deposit into the Special Participant Bond Reserve Account amounts in
accordance with the bond ordinance, which shall be disbursed and expensed by
the District solely for the payment of the principal and interest on the
Participant Bonds to the extent of any deficiency in the Sinking Fund for such
purpose. At June 30, 2012 and 2011, cash and investments in the Special
Participant Bond Reserve Account held on behalf of the District totaled
$137,354,308 and $148,274,220, respectively. Monies in this account are not
considered to be District funds. However, interest earnings on this account may
be used by the District to reduce interest payments on the bonds outstanding.
Renewal And Extension Fund
All sums accumulated and retained in the Renewal and Extension Fund shall be
first used to prevent default in the payment of principal and interest on the
bonds when due and shall then be applied by the District for purposes pursuant
to the trust indenture. No monies have been deposited into this account at
June 30, 2012 or 2011.
Page 45
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Project Fund
The Project Fund for all bond issuances outstanding 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 Fund for the amounts required
pursuant to the bond ordinances and note agreements of Series 2004A, 2006C,
2008A, 2010B, and 2011B bonds, shall be deposited into the Project Fund. At
June 30, 2012 and 2011, cash and investments in the Project Fund totaled
$51,976,851 and $31,200,465, respectively.
Rebate Fund
The bond ordinances provide for the creation of a Rebate Fund into which shall
be deposited such amounts as are required to be deposited therein pursuant to
the arbitrage instructions regarding the calculation and payment of rebate
amounts due. The District does not have any rights in or claims to such money;
provided, however, any funds remaining in the Rebate Fund after redemption
and payment of all bonds and payment of any rebatable arbitrage amount, or
provision having been made therefore, shall be remitted to the District. At
June 30, 2012 and 2011, cash and investments in the Rebate Fund totaled
$234,216 and $236,676, respectively.
Administrative Fee Fund
The Administrative Fee Fund will be used for the payment of the Trustee's fees
and other administrative fees pursuant to the note agreement. The Trustee shall
immediately withdraw the fee amounts when due. Monies held in this account
shall not be invested.
Fair Value Of Financial Instruments
The value of the District's long-term debt is estimated based on the current rates
offered to the District for debt of the same remaining maturities. The carrying
amount and estimated fair value of the District's long-term debt as of June 30,
2012 was $658,396,362 and $718,482,758, respectively. The carrying amount
and estimated fair value of the District's long-term debt as of June 30, 2011 was
$584,600,880 and $616,167,775, respectively.
Page 46
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
7. Pension Plan
Plan Description
The Metropolitan St. Louis Sewer District Employees' Pension Plan (the Plan) is
a noncontributory single employer defined benefit plan providing retirement
benefits as well as death and disability benefits. As a condition of employment,
all full-time employees of the District commencing service prior to December 31,
2010, were eligible to be covered by the Plan. As of January 1, 2011 the Plan was
frozen to new employees. Instead, new employees of the District may participate
in the defined contribution plan. Current employees with less than ten years of
service on this date could also voluntarily elect to transfer from the Plan and
enter the defined contribution plan. Of the 404 District employees with less than
ten years of service, twenty-three elected to leave the Plan.
The District's Board of Trustees, primarily to improve benefits to members,
amends the Plan, established on November 1, 1967. A Pension Committee
consisting of two members of the District's Board of Trustees, two elected
employee members and four members of the District's management staff
administer the Plan. A committee of the District's Board of Trustees, with the
aid of an investment advisor, reviews and evaluates the Plan's investments and
the related rates of return on a periodic basis. The Plan is exempt from the
requirements of the Employee Retirement Income Security Act of 1974 and, as
such, is not subject to the Act's reporting requirements.
All benefits vest after five years of credited service. Members retiring at or after
age 65 with five or more years credited service are entitled to a pension benefit.
The Plan permits early retirement with reduced benefits beginning at age 55 if
the member has completed five years of employment. Ordinance No. 10664
provides for unreduced retirement benefits to any member whose combined age
and term of service is equal to 75. Effective January 1, 1999, Ordinance No.
10491 amended the Plan benefits formula. The annual benefit payable became
1.7% of final average earnings plus 0.4% of final average earnings that are in
excess of covered earnings multiplied by the period of years and months of
credited service not to exceed 35 years. Also, the annual reduction for early
retirement was revised from 5% to 2% prior to age 60 and from 2.5% to 1% after
age 60.
Page 47
THE METROPOLITAN ST. LOWS SEWER DISTRICT
Notes To Financial Statements (Continued)
Ordinance No. 10664, effective January 1, 2000, amended the Plan benefits
formula to 1.45% of final average earnings plus 0.4% of final average earnings
that are in excess of covered earnings multiplied by the period of years and
months of credited service not to exceed 35 years. This ordinance also provided
for a survivor's benefit for vested members who have not yet reached their
normal retirement date or earned 75 points. The survivor's benefit is equal to the
greater of 50% of the member's monthly accrued retirement benefit as of the date
of death, or 15% of the monthly earnings and the member's monthly accrued
retirement benefit actuarially reduced under the 100% joint and survivor annuity
option. Members are also able to select a Contingent Annuity Pop -Up option.
This option allows the member to elect a survivor annuity for life, with the
provision that if the beneficiary should predecease the member, the benefit shall
increase to the amount payable had the survivor option not been selected.
Ordinance Number 10872, effective January 1, 2001, further amended the Plan
to extend the cost of living increases for retirees from a maximum of 30% to 45%
of the original benefit.
Effective August 1, 2004, Ordinance No. 11781 amended the Plan to change the
benefit formula to 1.7% of final average earnings plus 0.4% of final average
earnings that are in excess of covered earnings multiplied by the period of years
and months of credited service not to exceed 35 years without including accrued
sick leave. Sick leave is paid out at 1.25% per year of service times the amount of
leave accrued. Also, the Plan was amended to provide the retiring member with
a 10% partial lump sum payment option. The balance of the distribution will be
paid in accordance with any one of the other payment options available under the
Plan.
The retirement benefit payable to a member who retires after the normal
retirement date is the greater of a) the benefit that would have been payable on
the normal retirement date plus a special annual retirement benefit provided by
the accumulated value, at 4% per annum interest, of the monthly benefit that
would have been received prior to the postponed retirement date or b) the benefit
determined as of the postponed retirement date under the normal formula.
Effective August 27, 2011, Ordinance No. 13288 amended the Plan to include the
following: "Upon termination or complete discontinuance of contributions under
the Plan, the rights of all Members to benefits accrued to the date of such
termination or discontinuance shall be non -forfeitable, to the extent then
funded."
Page 48
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Amounts in participants' accounts are distributed upon retirement, death,
disability, or termination of employment. The normal form of retirement benefit
is either a lump sum payment or equal monthly installments.
The Plan issues a publicly available financial report that includes financial
statements and required supplementary information. That report may be
obtained by writing: The Metropolitan St. Louis Sewer District, 2350 Market
Street, St. Louis, MO 63103-2555.
Funding Policy
The District's employees do not contribute to the Plan. Ordinances establishing
the Plan provide for actuarially determined annual contributions, paid solely by
the District, that are sufficient to pay benefits when due. The Entry Age Normal
actuarial funding method is used to determine contributions.
Annual Pension Cost
Contributions of $10, 719,154 and $10,500,769, excluding certain professional fees
paid by the District, were made to the Plan during the District's fiscal years
ended June 30, 2012 and 2011, respectively. These contributions were made in
accordance with actuarially determined contribution requirements based on
actuarial valuations performed at December 31, 2011 and 2010, respectively, and
for 2011 consisted of a) $6,150,879 normal cost plus b) S4,052,985 amortization of
the actuarial accrued assets in excess of the unfunded actuarial accrued liability
and prior changes c) multiplied by an interest factor of 1.075.
The District provides certain professional fees, office space, utilities, and other
services to the Plan at no cost. Other costs of administering the Plan are
financed from plan net assets.
Significant actuarial assumptions used in the valuations are as follows:
Latest valuation date
Actuarial cost method
Amortization method
Amortization period
Asset valuation method
Post -retirement benefit increases
Investment rate of return
Projected salary increases
Social Security wage base
December 31, 2011
Entry Age Normal
Level dollar closed
20-year period
Three-year average of adjusted market values
CPI with maximum 3% of current benefit or $50/month,
and benefit increases lifetime maximum 45% in the
original benefit or S750/month
7.5% per annum (1)
4.5% - 10.0% per annum (1)
4.0% per annum increase (1)
Includes inflation component of 3.0%
Page 49
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Trend Information
Certain actuarial assumption changes were made and went into effect January 1,
2012. They are as follows:
• The assumed interest rate was decreased from 7.5% to 7.25%.
• A five-year projection was added to the healthy mortality assumption to
reflect expected future mortality improvements.
• The amount of assumed investment related expenses paid from the Trust
was decreased to reflect a more conservative interest rate assumption.
Historical trend information about the District's participation in the Plan is
presented below to help readers assess the Plan's funding status on a going -
concern basis and assess progress being made in accumulating assets to pay
benefits when due.
Annual
Pension Percentage Of Net Pension
Fiscal Year Cost (APC) APC Contributed Obligation
2012 $ 10, 719,154 100%
2011 10, 500, 769 100%
2010 9,583,137 100%
Funded Status And Funding Progress
As of January 1, 2012, the Plan was 80.7% funded. The actuarial accrued
liability for benefits was approximately $254,997,000, and the actuarial value of
assets was approximately $205,792,000, resulting in an unfunded actuarial
accrued liability (UAAL) of approximately $49,205,000. The covered payroll
(annual payroll of active employees covered by the plan) was approximately
$49,432,000, and the ratio of the UAAL to covered payroll was 99.5%.
The schedule of funding progress, presented as RSI following the notes to the
financial statements, presents multiyear trend information about whether the
actuarial value of plan assets are increasing or decreasing over time relative to
the actuarial accrued liability for benefits.
Page 50
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
8. Other Pension Plans
Deferred Compensation Plan
The District offers its employees a Deferred Compensation Plan created in
accordance with Internal Revenue Code Section 457. The Deferred
Compensation Plan, available to all District employees, permits them to defer a
portion of their salary. The deferred compensation is not available to employees
until termination, retirement, death, disability or due to financial hardship as
defined by the Deferred Compensation Plan.
The Deferred Compensation 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 Revenue Code of 1986,
as previously amended. The Deferred Compensation Plan assets are held in
trust for the exclusive benefit of participants and their beneficiaries under
Section 1448 of the Small Business Job Protection Act of 1996. As a result, the
assets and liabilities of the Deferred Compensation Plan are not included in the
accompanying financial statements.
The Deferred Compensation Plan issues a publicly available financial report that
includes financial statements and required supplementary information. That
report may be obtained by writing: The Metropolitan St. Louis Sewer District,
2350 Market Street, St. Louis, MO 63103-2555.
Defined Contribution Plan
The Plan is a defined contribution benefit plan established by the District's Board
of Trustees through Ordinance 13180 and became effective January 1, 2011. The
following employees are eligible to participate in the Plan: (i) employees first
hired on or after January 1, 2011, and (ii) employees hired prior to January 1,
2011 who elect to terminate participation in the Plan, effective as of April 1,
2011, in accordance with the provisions of such Pension Plan, and (iii) employees
rehired on or after January 1, 2011 who are not eligible to accrue benefits under
the Plan. An employee shall become a participant in the Plan on the first day on
which he performs an hour of service for the District.
The District's Board of Trustees, primarily to improve benefits to members,
amends the Plan in all its respects. A pension committee consisting of two
members of the District's Board of Trustees, two elected employee members and
four members of the District's management staff administer the Plan. A
committee of the District's Board of Trustees, with the aid of an investment
advisor, reviews and evaluates the Plan's investments and the related rates of
return on a periodic basis.
Page 51
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
This Plan is intended to provide a means whereby the District may provide
retirement benefits to eligible employees and encourage such employees to
establish a regular method of savings, thereby providing a measure of financial
security for such employees and their beneficiaries upon retirement or in the
event of death or disability.
The Defined Contribution Plan issues a publicly available financial report that
includes financial statements and required supplementary information. That
report may be obtained by writing: The Metropolitan St. Louis Sewer District,
2350 Market Street, St. Louis, MO 63103-2555.
Employer Basic Contributions: For each payroll period, the District contributes
an amount equal to 7% of the covered compensation earned during such period by
each participant entitled to an allocation of such contribution.
Employer Matching Contributions: For each payroll period, the District
contributes an amount equal to 50% of the covered compensation of such
participant withheld as an annual deferral (as defined in the Deferred
Compensation Plan); provided that, before -tax contributions in excess of 4% of
the covered compensation of the participant for the payroll period shall not be
considered for purposes of Employer Matching Contributions. Employer
Matching Contributions shall be up to the maximum amount of compensation
that may be taken into account for the Plan year.
In no event shall the sum of the employer contributions and employee
contributions allocated to the account of a participant for the Plan year exceed
the lesser of:
(a) The amount specified in the applicable Internal Revenue Code, as
adjusted annually for any applicable increases in the cost of living.
(b) 100% of the participant's compensation for such year.
The compensation limit referred to in (b) shall not apply to any contribution from
medical benefits after separation from service.
The District's contributions to the plan amounted to $254,433 and $100,946 for
the years ended June 30, 2012 and 2011, respectively.
Page 52
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Vesting: As of any time before the normal retirement age of a participant, the
first day of the month coinciding with or next following a person's sixty-fifth
birthday and completion of sixty months of continuous service (other than upon
death or permanent disability), the vested percentage of the amounts credited to
the participant's employer basic contributions account shall be determined in
accordance with the following schedule:
Months Of
Continuous Service
Less than 12
12 but less than 24
24 but less than 36
36 but less than 48
48 but less than 60
60
Vested (Non -Forfeitable)
Percentage
0%
20%
40%
60%
80%
100%
9. Post -Employment Benefits Other Than Pensions
Plan Description
As part of a total compensation package effective August 1, 2004 for general
employees and, with respect for union members, the later of August 1, 2004 or
the date of union ratification of a Memorandum of Understanding with respect to
this Plan modification, the District provides a single -employer defined benefit
health care plan to employees who retire from the District on or after age 62 and
with five years of service or whose age plus years of service equal 75 points ("Rule
of 75"). The District pays the monthly group health insurance premium for the
individual until the retiree becomes eligible for Medicare at age 65. In addition,
there is a closed group of disabled former employees who receive life insurance
coverage from the District.
Page 53
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Contributions for retirees are as follows:
Coverage Tier Monthly Premium
Retiree* $434.03
Retiree + Spouse $924.60
Retiree + Child $840.09
Family (1 child) $1,281.45
*The District pays the retiree's premium for a retiree who retires after age 62 or after attaining
75 points. Eventually, affected retirees will have to pay up to 10% of the above premium.
The District's annual other post -employment benefit (OPEB) cost (expense) is
calculated based on the annual required contribution (ARC) of the employer, an
amount actuarially determined in accordance with the parameters of GASB 45
and in conjunction with Plan benefits currently in force. The actuarial valuations
have been determined using estimated data provided by the District in
combination with assumptions on the probability of future events, while also
keeping an eye on long-term viability. These valuations are subject to continual
revision as future actuarial measurements may differ significantly from current
measurements due to the realization of new estimates and factors.
The ARC represents a level of funding that, if paid on an ongoing basis, is
projected to cover normal cost each year and to amortize any unfunded actuarial
liabilities. The District's annual OPEB cost for the current year and the related
information are as follows:
Amortization of past service cost $ 803,400
Normal cost 1,166,900
Interest to end of fiscal year 88,700
Annual Required Contribution (ARC) $ 2,059,000
Interest on net OPEB obligation $ 121,716
Adjustment to ARC (90,160)
Annual OPEB cost 2,090,556
Contributions made (1,395,800)
Increase in net OPEB obligation 694,756
Net OPEB obligation - beginning of year 2,704,799
Net OPEB obligation - end of year $ 3,399,555
Page 54
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The Plan was established by District Ordinance, which assigned the authority to
establish and amend plan benefit provisions to the District.
The contribution requirements of the District and plan members are established
and may be amended by the District.
Trend Information
Annual Post -
Employment Percentage
Fiscal Benefit Cost Of APBC Net OPEB
Year (APBC) Contributed Obligation
2012
2011
2010
$ 2,059,000
2,142,000
2,103,700
67.8
64.5
57.3
$ 3,399,555
2,704,799
1,924,162
As of June 30, 2012, the Plan was not funded. The actuarial accrued liability for
benefits as of July 1, 2011, the latest actuarial valuation was approximately
$24,103,000, and there were no assets, resulting in an unfunded actuarial
accrued liability (UAAL) of approximately $24,103,000. The covered payroll
(annual payroll of active employees covered by the plan) in 2011 was
approximately $52,649,000, and the ratio of the UAAL to covered payroll was
45.8%.
The schedule of funding progress, presented as RSI following the notes to the
financial statements, presents trend information about whether the actuarial
accrued liability for benefits is increasing or decreasing over time.
Actuarial funding calculations of the plan reflect a long-term perspective. The
plan's actuarial valuations involve estimates of the value of reported amounts
and assumptions about the probability of events far into the future. Determined
amounts are subject to continual revision as results are compared to past
expectations and new estimates are made about the future.
Significant actuarial assumptions used in the valuation are as follows:
Latest valuation date
Actuarial cost method
Discount rate
Amortization method
Amortization period
Inflation rate
Investment Rate of Return
Health cost trend assumption
July 1, 2011
Projected unit credit
4.5% per annum
Level Percentage of payroll amount, open
30-year period
3.0%
4.5% annual returns net of both administrative and
investment expenses
Getzen Trend Model — 7.6% graded to 4.7% over 70
years
Page 55
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Retirement - Rates Vary By Age
Age Before 75 Points After 75 Points
55 1.0% 10.0%
56 2.0 10.0
57 2.0 10.0
58 2.0 10.0
59 3.0 10.0
60 4.0 15.0
61 5.0 15.0
62 20.0 35.0
63 10.0 25.0
64 20.0 25.0
65 100.0 100.0
Disability
Percent
Becoming
A Disabled
20 0.056%
30 0.064
40 0.102
50 0.311
Future Retiree Coverage: 90.0% of eligible employees retiring prior to age 65 are assumed to
elect medical coverage
Future Dependent Care: 25.0% elect spouse coverage 0.0% dependent children coverage
10. Self -Insurance Programs
The District is exposed to various risks of loss related to torts; theft of, damage
to, and destruction of assets; errors and omissions; injuries to employees; and
natural disasters. The District has established a risk management program and
retains the risk related to its obligation to provide workers' compensation and
medical and hospitalization benefits to its employees; and to pay water backup
claims to its customers. The estimated liabilities for payment of incurred (both
reported and unreported) but unpaid claims relating to these matters are
included as a component of current deposits and accrued expenses, and as such
are expected to be paid within one year of the date of the statement of net assets.
At June 30, 2012 and 2011, these liabilities amounted to $2,575,977 and
$5,557,000, respectively.
Page 57
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Medical Trend:
Year Medical Year Medical
2011 7.6% 2040 5.4%
2012 6.9 2045 5.3
2013 6.3 2050 5.3
2014 6.0 2055 5.3
2015 6.0 2060 5.3
2016 6.0 2065 5.2
2020 5.9 2070 5.2
2025 5.8 2075 5.0
2030 5.8 2080 4.8
2035 5.7 2081-r 4.7
The healthcare trends used in this valuation are based on long term healthcare
trends generated by the Getzen Trend Model (the Model). The Model is the
result of research sponsored by the Society of Actuaries and completed by a
committee of economists and actuaries. This model is the current industry
standard for projecting long term medical trends. Inputs to the model are
consistent with the assumptions used in deriving the discount rate used in the
valuation.
Payroll inflation
Mortality
4.5% per annum
RP 2000 Mortality Table (employee and healthy
annuitant tables)
Termination Of Employment:
Select Rates
(0 to 4 years of service)
Years Of
Service Rate
Ultimate Rates
(after 4 years of service)
Attained
Age
Rate
0 20.0% 20 5.5%
1 12.0 30 3.7
2 7.5 40 1.1
50- 0.0
Select rates based on service.
Ultimate rates based on attained age.
Ultimate rates are from the Samson T-1 Tabie above.
Page 56
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The claims liabilities reported are based on the requirements of GASB Statement
No. 10, Accounting and Financial Reporting and Risk Financing and Related
Insurance Issues, which requires that a liability for claims be reported if
information obtained prior to the issuance of the financial statements indicates it
is probable that a liability has been incurred and the amount of the liability can
be reasonably estimated. Changes in the balance of claims liabilities during
fiscal 2012 and 2011 were as follows:
Liability, beginning of year
Current year claims and changes
in estimates
Claim payments
Liability, End Of Year
2012
2011
$ 5,557,000
9,350,602
(12,331,625)
$ 4,713,013
12,163,124
(11,319,137)
$ 2,575,977 $ 5,557,000
The District obtains periodic funding valuations from the third -party
administrators managing the self-insurance programs and adjusts the charges as
required to maintain the appropriate level of estimated claims liability. The
District also maintains excess liability insurance coverage for workers'
compensation and medical and hospitalization claims; general liability; and
water backup damage to customers' property.
The District purchases commercial insurance for all other risks of loss. Settled
claims have not exceeded this commercial coverage in any of the past three years.
Page 58
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
11. Closure And Post -Closure Care Costs
State and federal laws and regulations require the District to place a final cover
on its Prospect Hill Reclamation Project landfill site when it stops accepting
waste and to perform certain maintenance and monitoring functions at the site
for 30 years after closure. Although closure and post -closure care costs will be
paid only near or after the date that the landfill stops accepting waste, the
District reports a portion of these closure and post -closure care costs as an
operating expense in each period based on landfill capacity used as of the end of
the fiscal year. The $721,066 and 8709,120 reported as landfill closure and post -
closure care liabilities at June 30, 2012 and 2011, respectively, represent the
cumulative amounts reported at fiscal year-end based on the use of 93.8% and
92.2% of the estimated capacity of the landfill for fiscal years ended 2012 and
2011, respectively. The District will recognize the remaining estimated cost of
closure and post -closure care of $59,731 at June 30, 2016 as the facility nears
capacity. These amounts are based on what it would cost to perform all closure
and post -closure care in 2012.
The District is required to demonstrate that it has the financial capability to
close the landfill to the State of Missouri through the use of a financial test as
specified in 10 CSR 80-2.030(4)(D)6 of the Missouri Solid Waste Management
Rules. The District has complied with the State's requirement. The District
recognizes that estimates of closure costs may change as a result of inflation,
deflation, and/or changes in technology and applicable laws and regulations. If
closure cost estimates change, the liability currently reported on the balance
sheet will be adjusted accordingly.
Page 59
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
12. Commitments And Contingencies
United States And State Of Missouri V. Metropolitan St. Louis Sewer
District; In The US District Court For The Eastern District Of Missouri;
Case No. 07-1120
A lawsuit was filed in June 2007 by the Department of Justice on behalf of the
United States Environmental Protection Agency ("EPA") for various alleged
violations of the Clean Water Act. The suit is based on violations of the Clean
Water Act as a result of overflows in the combined and sanitary sewer systems
causing pollutants to reach waters of the United States. There are other counts
involving violations of permit conditions. The District has been the subject of
several investigatory actions by EPA since June 2007. Negotiations have been
ongoing with the EPA and the Department of Natural Resources ("DNR")
regarding the sewer collection system, both the combined system and the
sanitary system, for several years. The Missouri Coalition for the Environment
("MCE") gave Notice of Intent to Sue the District under the citizen suit provisions
of the Clean Water Act. EPA and the DNR then brought the suit in June 2007,
and MCE moved to intervene. Intervention was granted in August 2007. In
October 2007, the Court granted the District's motion to dismiss all of the
plaintiffs' claims for civil penalties attributable to any and all of the District's
alleged violations of the Clean Water Act that occurred before June 11, 2002.
Also, the suit alleges that the District does not have an approved Long -Term
Control Program ("LTCP") for the combined system. The District has been
working on these issues for several decades and has asked voters to approve
bonds and rate increases to rehabilitate and maintain the collection system. As
required by its Charter, the District has increased rates which will continue to
fund the improvements sought by the EPA and the DNR. In September 2008, the
Judge put in place a Stay while the parties mediated the issues. Pursuant to
MSD Ordinance No. 13277, the District executed the Consent Decree ("CD") on
July 15, 2011. The CD was lodged with the court on August 4, 2011. An
extended public comment period ended October 10, 2011.
Page 60
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
On January 23, 2011, the Plaintiffs, excluding the State of Missouri, filed a
Motion to Enter the Proposed Consent Decree. That same day the State of
Missouri filed a Motion to Dismiss their Claims without Prejudice. On
January 17, 2012, the District filed a Motion to Support the State of Missouri's
Motion only if conditions were imposed. On February 9, 2012, the State filed a
Motion opposing the conditions proposed by the District. On April 27, 2012, the
Court entered the decree, thus concluding the litigation of this lawsuit. On that
same day the Court entered a Memorandum and Order regarding the State of
Missouri's Motion to Dismiss its Claims. The Court realigned the State of
Missouri as a defendant and reaffirmed the August 3, 2009, decision by the
Eighth Circuit Court of Appeals that the State had waived its sovereign
immunity. Although this litigation matter has concluded, the District is working
diligently to implement the Consent Decree. The Consent Decree requires the
District to spend approximately $4.7 billion, in 2011 dollars, over a 23-year
implementation period. Throughout this period improvements will be made the
District's separate sewer system, combined sewer system and wastewater
treatments plants. The District's first report was submitted on May 24, 2012.
On June 1, 2011, the State of Missouri approved Chapter 11, Chapter 12, and
Appendix Q of the District's Combined Sewer Overflow Long -Term Control Plan
Updated Report, dated February 2011.
William Zweig et al. v. Metropolitan Sewer District
This case was filed on July 18, 2008 and, as amended, contends that the
Metropolitan Sewer District Ordinances No. 12560 and No. 12789, which enacted
increases in the District's stormwater user charge based on the amount of
impervious area on the customer's property, are unconstitutional. The lawsuit
claims the ordinances violate the so-called Hancock Amendment, Mo. Const. art.
X, § 22(a), because the stormwater user charge is in reality a tax that requires
voter approval. The District's Board of Trustees passed the ordinances in
December 2007 and December 2008, respectively, without submitting them to the
voters. The District contends the stormwater user charge is not a tax and, thus,
not subject to voter approval. The original plaintiff is a District stormwater
customer who seeks to represent a class of all the District stormwater customers.
In July 2009, two more plaintiff class representatives were added to the lawsuit.
The lawsuit seeks (1) a declaration that the stormwater user charge is
unconstitutional, (2) a refund of all stormwater user charges collected, and (3)
payment of the plaintiffs' costs, including attorneys' fees.
Page 61
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Trial was held April 13, 2010 through April 16, 2010. On July 9, 2010, the court
handed down Findings of Fact, Conclusions of Law, Judgment and Decree in the
first phase of the bifurcated trial. The Court declared the Stormwater User
Charge is a tax under the Hancock Amendment. The second phase of the trial
was heard on October 6, 2010, to determine the amount, if any, to be refunded.
The amount of a full refund would be approximately $87 million; a partial refund
for the additional amount collected under the user charge would amount to
approximately $35 million. The judge ruled on November 29, 2010, that no
refund would be issued by the District. The third phase, to determine the
amount of Plaintiffs' counsel's attorneys' fees, to be paid by the District, was
heard on January 18, 2011. On February 4, 2011, the judge awarded Plaintiffs
counsel $4.8 million in attorney's fees and expenses. The record on appeal was
filed July 20, 2011, with the Court of Appeals, Eastern District of Missouri. The
attorney's fees and expenses were paid into escrow on September 9, 2011, and
will remain in escrow pending finality of the litigation.
The Court of Appeals heard oral argument on March 6, 2012. On March 27,
2012, the Appellate Court Ruling upheld the Trial Court's decision that the
stormwater fee is a tax and that no refund was due, and reversed the application
of a multiplier on attorney's fees. On April 11, 2012, the District filed a Motion
for Rehearing by the Appellate Court and an Application for Transfer to the
Missouri Supreme Court. The Appellate Court denied both. On May 29, 2012,
the District filed its Application directly to the Missouri Supreme Court
requesting a transfer. On June 1, 2012, the National Association of Clean Water
Agencies was allowed to file suggestions in support of our Application for
Transfer. On October 30, 2012, the Missouri Supreme Court accepted transfer of
the case. The Supreme Court will accept written briefs and hear oral arguments
from the parties. A final decision is expected to be rendered in 9 to 12 months.
Flooding Cases
The District is the defendant in five (5) different flooding cases related to the
September 14, 2008, rain event precipitating from remnants of Hurricane Ike.
These cases consist of three (3) property damage cases and two (2) wrongful
death cases. The defense costs associated with these cases are expected to be
covered by the District's insurance carrier. Of the five (5) cases, one (1) involves
flooding of Maline Creek and the others involve flooding of the River Des Peres.
These cases are in various stages of discovery. The estimated possible loss varies
for each case and is dependent upon the value of the property. The property
value losses have not been determined at this time and no written demands have
been received at this time for the wrongful death cases. The first trial setting is
scheduled for October 2012.
Page 62
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Contingencies
The District has entered into construction and other contracts amounting to
$195,950,700 and $212,296,069 at June 30, 2012 and 2011, respectively. Grants
to be received from various governmental agencies and entities to partially offset
the cost of the contract commitments amounted to $6,113 and $154,237 at June 30,
2012 and 2011, respectively.
As of June 30, 2012, the District had received voter authorization for $945,000,000
of revenue bonds which have remained unissued and on August 23, 2012,
S225,000,000 of these bonds have been issued. These funds were sought to
enable the District to comply with federal and state clean water requirements.
The District is a defendant in various other matters of litigation. Of these
matters, management and District's legal counsel do not anticipate any material
effect on the June 30, 2012 and 2011 financial statements.
13. Restricted Net Position
The government -wide Statements of Net Position reports S106,693,694 and
$94,925,981 of restricted net position at June 30, 2012 and 2011, respectively, of
which $66,800,934 and $60,530,338 are restricted due to enabling legislation, as
of June 30, 2012 and 2011, respectively.
14. Segment Information
The District issued wastewater revenue bonds to finance wastewater
infrastructure projects. The District accounts for both wastewater and
stormwater activities in a single enterprise fund, but investors in those bonds
rely solely on the revenue generated by the wastewater activities for repayment.
Fiscal Year 2012 summary financial information for each business segment is
presented below_
Page 63
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In 2011, the construction in progress account was segmented based on the
information that was available at the time. In 2012, more accurate information
became available regarding the segmentation of the projects in the construction
in progress account. The result of this is a $7,286,877 reallocation of net capital
assets for fiscal year 2011 from wastewater to stormwater. Unrestricted pooled
cash has also been restated due to a variation in segmenting procedures. The
result of this is a $1,526,201 reallocation of total current assets from wastewater
to stormwater. These restatements have no impact on the enterprise wide
statements.
A segment is an identifiable activity reported as a stand alone entity for which
one or more revenue bonds are outstanding. A segment has a specifically
identifiable revenue stream pledged in support of the revenue bonds and has
related expenses, gains and losses and assets and liabilities that are required by
external parties to be accounted for separately. The wastewater system is the
only reportable segment that meets the requirements of GASS Statement No. 34,
Basic Financial Statements - and Management's Discussion and Analysis - for
State and Local Governments. The stormwater system is reported on for
informational purposes only.
Condensed financial information as of and for the years ended June 30, 2012 and
2011 of the District's Wastewater Segment is as follows:
Wastewater Segment
Condensed Statement Of Net Position
Total current assets
Total restricted assets
Total other assets
Net capital assets (as restated)
Total Assets
Total current liabilities
Total current restricted liabilities
Total long-term liabilities
Total Liabilities
Net investment in capital assets
Restricted net position
Unrestricted net position
Total Net Position
2012
2011
(As Restated)
$ 277,304,683
53,080,013
14,417,074
2,070,542,089
$ 280,134,902
46,036, 519
14,764,507
1,994,612,256
2,415,343,859
2,335,548,184
79,066,606
6,318
651, 916,115
730,989,039
95,574,254
85,769
574,445,087
670,105,110
1,458,317,374
53,073,695
172,963,751
1,440,349,188
45,950,750
179,143,136
$ 1,684,354,820 $ 1,665,443,074
Page 64
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Condensed Statement Of Revenues,
Expenses, And Changes In Net Positions
Operating revenues
Depreciation expense
Other operating expenses
Operating Income (Loss)
Total nonoperating revenues
Total nonoperating expenses
Non -Operating Income (Loss)
Capital contributions
Change in net position
Net position - Beginning of year (as restated)
Net Position - End Of Year
2011
2012 (As Restated)
$ 224,882,086
56,460,108
135,232,302
S 217,011,360
56,403,291
160,572,145
33,189,676
2,370,178
20,231,541
35,924
3,651,021
20,035,529
(17,861,363)
3,583,433
18,911, 746
(16,384, 508)
5,342,555
(11,006,029)
1,665,443,074 1,676,449,103
$ 1,684,354,820 $ 1,665,443,074
Condensed Statement Of Cash Flows
Operating activities
Noncapital financing activities
Capital and related financing activities
Investing
Increase in cash
Cash And Cash Equivalents - Beginning Of Year
Cash And Cash Equivalents - End Of Year
$ 79,439,669
17,287
(78,270,837)
8,183, 657
$ 64,382,661
5,833
(130,523,071)
60,686,702
9,369,776 (5,447,875)
6,318,934 11,766,809
$ 15,688,710 $ 6,318,934
Page 65
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Condensed financial information as of and for the years ended June 30, 2012 and
2011 of the District's Stormwater Segment is as follows:
Stormwater Segment
Condensed Statement Of Net Position
Total current assets
Total restricted assets
Net capital assets (as restated)
Total Assets
Total current liabilities
Total current restricted liabilities
Total long-term liabilities
Total Liabilities
Net investment in capital assets
Restricted net position
Unrestricted net position
Total Net Position
2011
2012 (As Restated)
$ 3,633,446
59,296,406
478,273,488
$ 7,765,376
54,695,853
474,883,649
541,203,340
1,587,412
5,676,407
537,344,878
48,194
5,720,622
7,263,819
478,273,488
53,619,999
2,046,034
5,768,816
474,883,650
48,975,231
7,717,181
$ 533,939,521 $ 531,576,062
Condensed Statement Of Revenues,
Expenses, And Changes In Net Positions
Operating revenues
Depreciation expense
Other operating expenses
Operating Income (Loss)
Total nonoperating revenues
Total nonoperating expenses
Non -Operating Income (Loss)
Capital contributions
Change in net position
Net position - Beginning of year (as restated)
Net Position - End Of Year
$ 1,117,634
10,281,956
14,333,599
$ 2,432,897
10,450,974
17,076,689
(23,497,921) (25,094,766)
24,936,071
5,150,115
27,764,722
7,051,182
19,785,956
20,713,540
6,075,424
4,755,997
2,363,459
531,576,062
374,771
531,201,291
$ 533,939,521 $ 531,576,062
Condensed Statement Of Cash Flows
Operating activities
Noncapital financing activities
Capital and related financing activities
Investing
Increase in cash
Cash And Cash Equivalents - Beginning Of Year
Cash And Cash Equivalents - End Of Year
$ (11,600,813)
24,586,886
(12,813,943)
4,718,759
$ (7,706,999)
27,119,618
(10, 612,774)
(8,799,845)
4,890,889
$ 4,890,889'
$
Page 66
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
15. Subsequent Events
In preparing these financial statements, the District has evaluated events and
transactions for potential recognition or disclosure through November 1, 2012,
the date the financial statements were available to be issued.
As of June 30, 2012, the District had received voter authorization for
$945,000,000 of revenue bonds which have remained unissued and on August 23,
2012, $225,000,000 of these bonds have been issued. These funds were sought to
enable the District to comply with federal and state clean water requirements.
On October 23, 2012, the District's Board of Trustees approved the issuance of
$141,730,000 of Wastewater System Revenue Bonds, Series 2012B. The bond
proceeds will be used to advance refund the Series 2004A Bonds maturing in the
years 2015 and thereafter. The closing date for the bonds is scheduled for
November 14, 2012.
Page 67
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
REQUIRED SUPPLEMENTARY INFORMATION
EMPLOYEES' PENSION PLAN AND POST -EMPLOYMENT BENEFIT PLAN
June 30, 2012
Employees' Pension Plan
Schedule Of Funding Progress
in (000s)
Unfunded
Entry Age Actuarial UAAL As A
Actuarial Actuarial Accrued Annual Percentage
Actuarial Value Accrued Liability Funded Covered Of Covered
Valuation Of Assets Liability (UAAL) Ratio Payroll Payroll
Date (1) (2) (1)-(2) (1)/(2) (3) (1)-(2)/(3)
12/31/2011 $ 205,792 $ 254,997 $ (49,205) 80.7% $ 49,432 99.5%
12/31/2010 189,012 231,599 (42,587) 81.6 51,703 82.4
12/31/2009 185,753 223,063 (37,310) 83.3 52,267 71.4
12/31/2008 183,679 212,066 (28,387) 86.6 48,077 59.0
12/31/2007 185,356 195,834 (10,478) 94.6 43,640 24.0
12/31/2006 170,757 187,432 (16,675) 91.1 42,113 39.6
Post -Employment Benefit Plan
Schedule of Funding Progress
in (000s)
Unfunded
Actuarial UAAL As A
Actuarial Actuarial Accrued Percentage
Actuarial Value Accrued Liability Funded Covered Of Covered
Valuation Of Assets Liability (UAAL) Ratio Payroll Payroll
Date (1) (2) (1)-(2) (1)1(2) (3) (1)-(2)1(3)
7/1/2011 $ 24,103 $ 24,103 0% $ 52,649 45.8%
7/1/2009 24,412 24,412 0% 50,230 48.6
7/1/2007 21,938 21,938 0% 43,640 50.3
Page 68
II)