HomeMy Public PortalAboutExhibit MSD 53 - 2013 Audited Financial StatementsExhibit MSD 53
THE METROPOLITAN ST. LOUIS
SEWER DISTRICT
FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
Wise
Contents
Page
Independent Auditors' Report 1 - 2
Management's Discussion And Analysis 3 - 13
Financial Statements
Statements Of Net Position 14 - 15
Statements Of Revenues, Expenses And Changes In
Net Position 16
Statements Of Cash Flows 17 - 18
Notes To Financial Statements 19 - 70
Required Supplementary Information
Required Supplementary Information - Schedule Of
Funding Progress - Employees' Pension Plan And
Post Employment Benefit Plan 71
RubinBrown"
Independent Auditors' Report
Board of Trustees
The Metropolitan St. Louis Sewer District
St. Louis, Missouri
Report On The Financial Statements
RubinBrown LLP
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
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 years ended
June 30, 2013 and 2012, and the related notes to the financial statements, which
collectively comprise the District's financial statements as listed in the table of contents.
Management's Responsibility For The Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United
States of America; this includes the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our
audits. We conducted our audits 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 Controller 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 from material misstatement.
An audit involves performing procedures to. obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditors'
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
Ina.o.neeM nx,kn of
BAKER TILLY
INTERNATIONAL
Board of Trustees
The Metropolitan St. Louis Sewer District
Opinion
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the business -type activities of the District as of June 30,
2013 and 2012, and the changes in financial position and cash flows thereof for the years
then ended, in accordance with accounting principles generally accepted in the United
States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
Management's Discussion and Analysis and Schedule of Funding Progress for the Employees'
Pension Plans 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.
Other Reporting Required By Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
October 17, 2013, 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 and 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 in considering the District's internal
control over financial reporting and compliance.
IkriirAgcust LL P
October 17, 2013
Page 2
TIE METROPOLITAN ST. LOUIS SEWER DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
For The Years Ended June 30, 2013 And 2012
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.
2013 Financial Highlights
> The District increased current, restricted and other assets by $195.4 million as
the result of inflows from bond proceeds and increased revenue from rising sewer
rates and improved collection activities.
> The District placed $196.6 million of capital assets into service during fiscal year
2013. The continued high level of capitalization reflects the District's work to
meet long-term plans. Capitalized assets included:
Collection and pumping plant $178.4 million
Treatment and disposal plant and equipment $15.4 million
Land $4.0 million
General plant and equipment $2.7 million
In conjunction with the new assets, accumulated depreciation increased by $66.5
million and construction in progress decreased $18.6 million.
> The District issued one new senior bond for $225 million and refunded an
existing bond with favorable interest reduction.
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
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
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 backup 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.
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 expenses 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.
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.
Page 4
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
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 $30.9 million. The main reason for the improvement is the
increase in unrestricted funds of $70 0 million as the District has increased the use of
bond funding for capital projects. Net investment in capital assets decreased by $49.8
million as more debt was incurred than capital created during 2013.
Condensed Financial. Statements and Analysis
Condensed Statements of Net Position
(000s)
Increase Increase
(Decrease) (Decrease)
2018 2012 ,2013.2012 _ 2011 2012.2011
Assets:
Current, restricted, and other assets $ 603,104 $ 407,731 $ 195,373 $ 403,397 $ 4,334
Capital assets (net of accumulated
depreciation) 2,659,806 2,548,816 110,990 • 2,469,496 79,320
Total Assets 3,262,910 2,956,547 806,363 ° 2,872,893 83,654
Liabilities:
Current liabilities 89,432 86,337 3,095 101,429 (15,092)
Non -current 'abilities 924,281 651,916 272,365 ' 574,445 77,471
Total Liabilities 1,013,713 738,253 ?75,460 675,874 .g2,379
Net Position:
Net investment in capital assets 1,886,831 1,936,590 (49,759) 1,915,233 ', 21,357
Restricted 117,365 106,694 10,671 : 94,926 11,768
Unrestricted 245,001 175,010 69,991 186,860 (11,850)
Total Net Position $ 2,249,197 $ 2,218,294 .$ 30;903 $ 2,197,019 $ 21,275�
Page 5
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2013 Analysis
Current restricted and other assets increased $195.4 million or 47.9% in the current
year. The increase is predominately due to the restricted cash and investments
received as part of the issuance of debt in 2013, used to fund more of the capital
program.
Capital assets net of accumulated depreciation increased by 8111.0 million or 4.4% in
the current year as the result of continued high levels of construction and acquisition of
assets by the District.
Current liabilities increased by $3.1 million or 3.6%, as the result of increases in
deposits and accrued expenses from water backup claims and additional interest
accruals on new debt.
Non -current liabilities increased by $272.4 million or 41.8% as the District issued $225
million in new senior debt with premium.
2012 Analysis
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 14.9%, as the result of decreases in
contracts and accounts payable from the prior year water backup claims payables and
the stormwater litigation costs.
Non -current liabilities increased by $77.5 million or 13.5% as the District issued $93.3
million in new debt and paid down existing debt.
Page 6
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
Statements of Revenues, Expenses, and Changes in Net Position
(000s)
Increase : Increase
(Decrease); (Decrease)
2013 2012 2013.2012; 2011 2012-2011•
Operating Revenues:
Sewer service charges $ 238,635 $ 227,677 $ 10,958 ` $ 223,276 $ 4,401
Provision for doubtful
sewer service charge accounts (2,655) (6,911) 4,256 ; (6,249) , (662)
Provision for uncollected
stormwater charge accounts - (2,374) 2,374
Licenses, permits, and other fees 2,731 2,684 „ 47 2,976 (292):
Other 3,235 2,550 68� 1,815 ,'.735 i
Total Operating Revenues 241,946 226,000 I5 946 ' 219,444 6 CBS'
Non -operating Revenues:
Property taxes levied by the district 26,017 24,604 1,413 ; 27,126 (2,522)
Investment income 1,057 2,407 (1,$50): 3,847 (1,440)
Rent and other income 293 295 .. . (2) 443 (148)•
Total Non -operating Revenues 27,367 27,306 61 31,416 . (4,110).
Total Revenues 269,313 253,306 18,007 ' 250,860 2,446 .
Operating Expenses:
Pumping and treatment 54,526 49,005 5,521 50,532 (1,527)
Collection system maintenance 37,877 36,695 1,182 ' 33,152 3,543
Engineering 12,020 8,544 3,476 12,486 (3,942)E
General and administrative 41,485 33,180 £1,305 36,075 (2,895);
Water backup claims 3,503 2,050 1,453 8,912 (6,862)
Depreciation 70,030 66,742 3,288 66,854 (3.12);
Asset management 10,717 20,092 • . (9,375)' 36,492 (16,400)'
Total Operating Expenses 230,158 216,308 18,850 ' 244,503 (28,195)'.
Non -operating Expenses:II
Net loss on disposal and sale of
capital assets 796 3,163 (2,9.$7)! 3,486 • • (323)•
Non -recurring projects and studies 4,676 6,403 (1,727), 10,801 (4,398)
Legal Claims - 5 (5) 4,829 (4824)
Interest expense 20,315 15,511 ,504 7,971 7,840
Total Non -operating Expenses 25,787 25,382 405 27,087 (1705):
Total Expenses 255,945 241,690 ..EL.5. i 271,590 (29,900)
Income Before Capital Grants
And Contributions 13,368 11,616 1,752 (20,730) 32,346
Capital Grants And Contributions 17,535 9,659 7,876 e 10,099 ; (440)
Change in Net Position 30,903 21,275 9,628 : (10,631) • 31,906 ,
Net Position - Beginning of Year 2,218,294 2,197,019 21,275 2,207,650 (10,631):
Net Position - End of Year $ 2,249,197 2 218 294 $ 30,903 $ 2,197,019 $ 21,275
Page 7
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2013 Analysis
Net position increased by $30.9 million or 1.4% over the prior year. Sewer service
revenue increased as a result of rate increases and improved collection over the prior
year, expenses also increased primarily from some increases in operating costs as well
as increased water backup claims from the prior year.
Total revenue increased by $16.0 million or 6.3%. Sewer service charges increased
$11.0 million and the provision for doubtful accounts decreased by $4.3 million or 61.6%
as part of the increased collection activities. Property tax revenue increased by $1.4
million from increased in property valuation. Other revenue increased by $0.7 million
due to projects completed for the City of Arnold. Investment income declined by $1.4
million or 56.1% due to changing market conditions
Total expenses increased by $14.3 million or 5.9%. Operating expenses increased by
$13.8 million. General and administrative costs increased by $8.3 million primarily as
the result of a large insurance reimbursement in FY12 that was not repeated in FY13.
Operations increased by $6.7 million or 7.8% as a result of increased personnel costs,
costs related to heavy spring rains, equipment repair and replacement. Water backup
claims increased $1.5 million from increased claims over the prior year when drought
conditions limited flooding claims. Engineering costs increased by $3.5 million or 40.7%
primarily due to personnel costs related to non -capital, asset management projects.
Depreciation costs increased by $3.3 million in conjunction with new asset
capitalization. Asset management decreased $9.4 million as costs were eliminated.
Non -operating expenses increased by $0.4 million or 1.6% as the result of increased
interest expense countered by decreased costs of both losses on disposal of assets and
non -recurring projects and studies.
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.
Page 8
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
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 backup 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.
Condensed Statements of Cash Flows
(000s)
Increase
(Decrease)
2013 _ 2012 2013-2012
Cash flows from operating
activities $ 84,882
Cash flows from non -capital
financing activities 23,014
Cash flows from capital
and related financing
activities 83,449
Cash flows from investing
activities (168,410) 60 540 (228y950)
Net increase (decrease) in
cash and cash equivalents
Cash and cash equivalents
at beginning of year
Increase
(Decrease)
2011 2012-2011
$ 67,839 $ 17,043.: $ 56,676 $ 1.1,163 1
24,604 (1,590) 27,125 , (2,521);
(91,085) . .174,534 , (141,136) : 50,051 i
25,355 35,185
3�.
22,935 61,898 (38,963) (31,980) 93,878
158,820 96,922 61,898 ; 128,902 (31,9809
Cash And Cash Equivalents
At End Of Year $ 181,755 $ 158,820 $ 22,935 $ 96,922 $ 61,898
2013 Analysis
The District ended the year with $181 8 million in cash and cash equivalents or $22.9
million more than the prior year. Cash flows from operating activities increased by
$17.0 million or 25.1% as the result of increased sewer service charge revenue noted
above. Cash flows from non -capital financing activities decreased by $1.6 million or
6.5% from a decrease in tax revenue collected. The decrease stems from both a decrease
in property tax collection and 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 $174.5 million or 191.6% as the result of new bond proceeds
partially offset by payments for capital improvement. Cash flows from investing
activities decreased by $229.0 million or 378.2%. The decrease primarily stems from
the volume of purchases and maturities of investments.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2012 Analysis
The District ended the year with $158.8 million in cash and cash equivalents or $61.9
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 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 $50.1 million as the result of new bond proceeds offset by payments for
capital improvement. Cash flows from investing activities increased by $35.2 million.
The increase mostly stems from the volume in the purchases and maturities of
investments.
Capital Assets
Land
Construction in progress
Treatment and disposal plant
and equipment
Collection and pumping plant
General plant and equipment
Total
2013 Analysis
Condensed Statements of Capital Assets
Net of Depreciation (000s)
2013 2012
50,077 $ 46,027
360,508 379,119
599,178
1,614,112
35,931
611,249
1,471,147
41,274
$ 2,659,806 $ 2,548,816
Increase
(Decrease)
2013-2012
$ 4,050
(19,611)
(12,071.)
142,965
(5;343)
$ 110,990
2011
$ 36,924
400,756
597,316
1,393,394
41,106
$ 2,469,496
Increase
(Decrease)
2012-2011
$ 9,103
(21,637)
13,933
77,753
168
$ 79,320
Total capital assets, net of depreciation, increased by $111.0 million over the prior year.
Collection and pumping plants contained the majority of the increase with $143.0
million coming on-line this fiscal year. Land increased $4.0 million from the acquisition
of easements and other land. Construction in progress decreased by $18.6 million as
constructed assets were moved into service. Treatment and disposal plant and
equipment decreased by $12.1 million as the District's plants depreciated. General
plant and equipment decreased by $5.3 primarily due to depreciation of existing assets.
For more detailed information, see Note 4, capital assets, in the accompanying notes to
the financial statements.
Page 10
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2012 Analysis
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.
Long -Term Debt
The Metropolitan St. Louis Sewer District
Condensed Statements of Long -Term Debt
(000s)
Increase -Increase-
(Decrease)' (Decrease)
2013 2012 2013-2012 2011 2012-2011 '
Senior Revenue Bonds:
Series 2004A $ 2,375 $ 163,630
Series 2006C 60,000 60,000
Series 2008A 30,000 30,000
Series 2010B 85,000 85,000
Series 2011E 50,610 52,250
Series 2012A 225,000
Series 2012B 141,730
Subordinate Revenue Bonds:
Series 2004B
Series 2005A
Series 2006A
Series 2006B
Series 2008AB
Missouri DNR:
Series 2009A
Series 2010A
Series 2010C
Series 2011A
Energy Loan Program
Oracle/Blue Heron
$ (161,255)
(1,640),
225,000 -
' 1.41,730 -
$ 165,590 $ (1,960;
60,000 .
30,000 - •
-
85,000 --
52,250
108,780 115,960 (7,180) 123,055 (7,095)
4,750 5,055 (305). 5,370 (315):
32,085 34,225 (2,140)'. 36,335 ; (2,110)
10,945 11,620 (675) 12,285 (665)•
32,040 33,833 (1;793). 35,610 (1,777).
i
20,093 21,085 (992) 22,053 (968)'.
7,472 5,880 1,592 •• 2,852 .3,028
33,999 35,519 (1,520)- 329 35,190:
31,963 1,007 30,356 - 1,007
225 237 .•(12) 25 212 '
- 3,096 (3,096)! 6,096 ' (3,000)'
Total $ 877,067 $ 658,397 $ 218,670 $ 584,600 • $ 73,797
Page 11
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2013 Analysis
The District ended fiscal year 2013 with $877.1 million in long-term debt outstanding.
The District had two bond additions this year, a senior revenue bond (Series 2012A) for
$225.0 million and a refunding of 2004A for $141.7 million (Series 2012B). In addition,
the District added to SRF bonds 2010A ($1.9M) and 2011A ($31.OM). For more detailed
information, see Note 6, long-term liabilities, in the accompanying notes to the financial
statements.
2012 Analysis
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).
Decisions Impacting The Future
On July 7, 2011, the District entered into a Consent Decree (CD) with the U.S.
Environmental 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 CD 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 next phase of the capital program 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, funding capital expenditures for
the current year and next year.
Page 12
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 $90.9 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 $48.3 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 have continued at reduced levels since. On May 29, 2012, MSD
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. On May 21, 2013 the Missouri
Supreme Court heard oral arguments. The District is currently awaiting their ruling.
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
jzimmerC stlmsd. coin
Page 13
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF NET POSITION
Assets
For The Years
Ended June 30,
2013 2012
Current Assets
Unrestricted Current Assets
Cash and cash equivalents $ 84,400,724 $ 104,532,663
Investments 67,190,638 12,228,539
Sewer service charges receivable, Less allowance of
$3,819,791 in 2013 and 84,038.932 in 2012 34,207,405 34,608,839
Unbilled sewer service charges receivable, less allowance of
$351,645 in 2013 and $362,806 in 2012 17,582,233 18,140,324
Property taxes receivable, less allowance of $590,868 in 2013 2,325,743
Accrued income on investments 807,632 436,251
Other receivables 964,595 928,832
Supplies inventory 6,621,892 6,301,034
Total Unrestricted Current Assets 214.100,862 17 7,176,482
Restricted Current Assets
Cash and cash equivalents 69,449,837 12, 709,234
Investments 79,625,995 39,253,780
Total Restricted Current Assets 149,0 75,832 51,963,014
Total Current Assets 363,176,694 229.139.496
Non -Current Assets
Restricted Assets
Cash and cash equivalents 27,904,044 41,577,877
Investments 22.940,929 20,573,626
Long-term investments 83,261,367 49,958,324
Property taxes receivable, less allowance of $360,660 in 2013 676,622
Accrued income on investments 202,049 266,592
Total Restricted Non -Current Assets 134,985,011 112,376,419
Other Assets
Notes receivable 14,640,552 14,417,074
Long-term investments 90,301,826 51,798,633
Total other assets 104,942,378 66,215,707
Capital Assets
Depreciable:
Treatment and disposal plant and equipment 1,027,055,525 1,011.798,185
Collection and pumping plant 2,226,256,235 2.050,326,859
General plant and equipment 92,176,648 91,264,888
3,345,488,408 3,153,389,932
Less: Accumulated depreciation
Net depreciable assets
1,096,266,136 1,029,720.453
2,249,222,272 2,123,669.479
Non -depreciable:
Land 50,076.644 46,026,763
Construction in progress 360,507,521 379,119,335
Net capital assets 2,659,806,437 2,548,815,577
Total Non -Current Assets
Total Assets
2.899,733,826 2,727,407,763
3.262,910,520 2,956,547,199
See the accompanying notes to financial statements. Page 14
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
Total Net Position
For The Years
Ended June 30,
2013
2012
$ 27,421,384 $
27,268,022
9,749,687
19,435,714
27,152,656
22,949,200
8,694,165
21,857,997
83,874,807
80,654,018
5,342,074
215,334
5,399,672
283,053
5,557,408
5,682,725
89,432,215
86,336,743
10,398,107
913,883,345
9,572,545
642,343,570
924,281,452
651,916,115
1,013,713,667
738,252,858
1,886,830,927
47,140,132
70,225,233
245,000,561
1,936,590,862
39,892,760
66,800,934
175,009,785
$ 2,249,196,853
$ 2,218,294,341
See the accompanying notes to financial statements.
Page 15
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF REVENUES, EXPENSES AND
CHANGES IN NET POSITION
Operating Revenues
Sewer service charges
Provision for doubtful sewer service charge accounts
Licenses, permits and other fees
Other
Total Operating Revenues
Operating Expenses
Pumping and treatment
Collection system maintenance
Engineering
General and administrative
Water backup claims
Depreciation
Asset management
Total Operating Expenses
Operating Income
Non -Operating Revenues
Property taxes levied by the District
Investment income
Rent and other income
Total Non -Operating Revenues
Non -Operating Expenses
Net loss on disposal and sale of capital assets
Non -recurring projects and studies
Legal claims
Interest expense
Total Non -Operating Expenses
Income Before Capital Grants And Contributions
Capital Grants And Contributions
Utility plant contributed
Grant revenue
Total Capital Grants And Contributions
Change In Net Position
Net Position - Beginning Of Year
Net Position - End Of Year
For The Years
Ended June 30,
2018
2012
$ 238,634,709 $
(2,654,644)
2,731,497
3,234,775
227,6 7 7,430
(6,911,849)
2,683,823
2,550,316
241,946,337
225,999,720
54,526,256
37,8 76,932
12,019,666
41,485,255
3,503,220
70,029,840
10,717 ,264
49,005,251
36,695,192
8,543,316
33,180,189
2,049,901
66, 742,064
20,092,052
230,158,433 216,307,965
11, 787,904
26,016,135
1,056,966
293,159
9,691,755
24,604,173
2,407,485
294,591
27,366,260
27,306,249
795,527
4,676,203
20.314,841
3,162,723
6,402,888
5,000
15,811,045
25,786,571
25,381,656
13,367,593
11,616,348
17,510,735
24,184
9,495,264
163,593
17,534,919
9,658,857
30,902,512
2,218,294,341
$ 2,249,196,853
21,275,205
2,197,019,136
$ 2,218,294,341
See the accompanying notes to financial statements.
Page 16
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 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 Provided By (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 (Used In) Investing Activities
Net Increase 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,
2013
2012
$ 242,841,372 $
(92,818,922)
(64,640,786)
84,881,664
225,182,816
(85,434,376)
(71,909,584)
67,838,856
23,013,770
24,604,173
24,639
257,888,292
35,097,262
250,753
(21,857,996)
(35,117,398)
(154,847,862)
269,073
1,742,160
164,164
93,347,308
6,104,835
141,569
(19,551,825)
(25,391,770)
(147, 723,685)
82,464
1,742,160
83,448,923
(91,084,780)
(671,031,454)
497,314,140
5,014,629
293,159
(222,515,358)
278,208,830
4,551,539
294,591
(168,409,526)
60,539,602
22,934,831
158,819,774
$ 181,754,605
61,897,851
96,921,923
$ 158,819,774
$ 15,362,389
17,510,735
(3,140,483)
$ 13, 744,285
9,495,264
(778,235)
See the accompanying notes to financial statements.
Page 17
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF CASH FLOWS (Continued)
Reconciliation Of Operating Income To Net Cash Flows
Provided By Operating Activities
Operating Income
Adjustments to reconcile operating income 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 in other receivables
(Increase) decrease in supplies inventory
Decrease in contracts and accounts payable
Increase (decrease) in deposits and accrued expenses
Net Cash Provided By Operating Activities
For The Years
Ended June 30,
2013
2012
$ 11,787,904 $ 9,691,755
70,029,840
959,525
(91,259)
320,858)
(1,109,475)
3,625,987
66,742,064
(1,110,166)
(172,227)
660,251
(7,408,601)
(564,220)
$ 84,881,664 S 67,838,856
See the accompanying notes to financial statements.
Page 18
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.
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 Nonexchange Transactions (GASB 33), which establishes
accounting and financial reporting standards for nonexchange 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 nonexchange
revenues, government mandated nonexchange transactions, and voluntary
nonexchange 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 nonexchange revenues also include licenses, permits, and other
fees.
Page 20
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.
Cash And Cash Equivalents
The District considers all highly liquid investments that are immediately
available to the District to be cash equivalents.
Investments
The District accounts for its investments at fair value. Fair value is determined
using quoted market prices. Changes in unrealized gain (loss) on the carrying
value of investments are reported as a component of investment income in the
statements of revenues, expenses and changes in net position.
Restricted Cash, Cash Equivalents And Investments
Cash, cash equivalents and investments that are externally restricted are
classified as restricted assets. These assets are used to make debt service
payments, maintain sinking or reserve funds, purchase or construct capital or
other non -current assets or for other restricted purposes.
Reclassifications
Certain amounts in prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current year financial
statements. More specifically, in 2013, the District created new categories for
cash and investments, to enhance transparency and facilitate greater
understanding of the District's cash and investment position.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In prior years, the statement of net position contained the categories cash, pooled
cash and investments, and investments. The District now divides these assets
into the categories cash and cash equivalents, investments, and long-term
investments. Cash and cash equivalents have maturities of 90 days or less,
investments mature between 91-365 days, and long-term investments mature
after 365 days. The reclassification presented in the 2012 financial statements is
as follows:
New Categories in FY 2012
Unrestricted Current Assets
Cash and cash equivalents
Investments
Restricted Current Assets
Cash and cash equivalents
Investments
$ 104,532,663
12,228,539
116,761,202
12,709,234
39,253,780
Non -Current, Restricted Assets
Cash and cash equivalents
Investments
Long-term investments
51,963,014
41,577,877
20,573,626
49,958,324
Old Categories in FY 2012
Current Assets
Cash
Pooled cash and investments
Investments
$ 15,322,804
162,269,011
42,931,034
Non -Current, Restricted Assets
Cash
Pooled cash and investments
Investments
220,522,849
5,256,795
72,357,560
34,495,472
112,109,827 $ 112,109,827
Non -Current Other Assets
Long-term investments S 51,798,633
The presentation of Restricted and Unrestricted Assets has changed from prior
years to reflect the net position for unspent bond proceeds from recent debt issues
restricted solely for sanitary construction projects. Previously, these balances
were presented in the pooled cash and investments category as Unrestricted
Current Assets. These are now presented in a new category as Restricted
Current Assets.
Accounts Receivable
Accounts receivable is composed 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)
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.
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 2013 and 2012, the District capitalized $12,305,615 and
$7,412,451, respectively, of net interest expense.
Page 23
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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 cost and 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 position consists of net position
that does not meet the definition of restricted or net investment in capital assets.
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.
Page 24
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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.
2. Deposits And Investments
Deposits
At June 30, 2013, the reported amount of the District's deposits was $37,781,854
and the bank balance was $40,154,696. Of the bank balance, $585,749 was
covered by federal depository insurance and $39,568,947 was collateralized with
securities held by a third party financial institution in the District's name.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
At June 30, 2012, the reported amount of the District's deposits was $56,122,489
and the 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.
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%.
Effective January 1, 2013, deposits in each bank are insured by the Federal
Deposit Insurance Corporation (FDIC) in the amount of $250,000 for interest -
bearing accounts and non -interest -bearing accounts. Prior to January 1, 2013,
deposits in non -interest -bearing accounts were fully insured.
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. The District also has
investments in money market mutual funds. This investment and the related
interest represent an escrow account for potential legal fees. At June 30, 2013 and
2012, 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, 2013 and 2012 is . as
follows:
Investment Type
Deposits
Money Market Mutual Funds
Certificates of deposit
U.S. Treasury and agency
obligations
Commercial paper
Bankers' acceptance notes
2013
Coat Fair Value
37,781,854
4,857,117
200,000
388,684,118
95,318,691
$ 37, 781,854
4,857,117
200,000
386,857,519
95,378,870
Total $ 526,841,780 $ 525,075,360
2012
Cost Fair Value
S 56,122,489
4,851,168
900,000
$ 56,122,489
4,851,168
900,000
180,442,248 181,714,022
81,436,568 81,485,196
7,554,253 7,559,801
3 331,306,726 $ 332,632,676
Page 26
THE METROPOLITAN ST. LOUTS SEWER DISTRICT
Notes To Financial Statements (Continued)
Reconciliation to the financial statements:
Cash and Cash Equivalents
Unrestricted current
Restricted current
Restricted non -current
Investments
Unrestricted current
Restricted current
Restricted non -current
Long-term Investments
Restricted non -current
Other
2013
2012
$ 84,400,724
69,449,837
27,904,044
67,190,638
79,625,995
22,940,929
83,261,367
90,301,826
$ 104,532,663
12,709,234
41,577,877
12,228,539
39,253,780
20,573,626
49,958,324
51,798,633
$ 525,075,360 $ 332,632,676
Interest Rate Risk
As of June 30, 2013 and 2012, the District had the following investments and
maturities:
Investment Type
Money market mutual
Certificates of deposit
U.S. Treasury obligations
U.S. agency obligations
Commercial paper
Bankers' acceptance notes
Total
2013
Fair Value
$ 4,857,117
200,000
188,141,798
198,715,721
95,378,870
Weighted
Average
Maturity
(Years)
0.00
2.07
0.65
2.05
0.19
0.00
2012
Fair Value
$ 4,851,168
900,000
50,229,767
131,484,255
81,485,196
7,559,801
Weighted
Average
Maturity
(Years)
0.00
1.11
0.78
2.25
0.11
0.16
$ 487,293,506 1.13 $ 276,510,187 1.28
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.
Page 27
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Long -Term Investments
While the majority of the District's portfolio is made up of short-term
investments, the District also categorizes a sizeable amount as long-term under
the categories discussed in Note 1. A large portion of the District's long-term
investments are considered callable securities. These callable securities give the
issuer the right to redeem at predetermined prices at a specific time prior to
maturity. When a security is called, the District reflects an immediate reclass
from long-term investment to cash.
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.
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, 2013 and 2012, 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 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+." The District's investment in money
market mutual funds carries a rating assigned by Standard & Poor's of Al.
Page 28
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Concentration Of Credit Risk
The District's investment policy 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,
2013 and 2012:
Issuer
Percent Of
Total Investments
2013 2012
Treasury Notes 35.4 10.5
Federal Home Loan Bank 13.3 9.7
Federal National Mortgage Association 13.1 25.7
Federal Home Loan Mortgage Corporation 10.1 7.8
3. Note Receivable
The District has a note receivable with the City of Arnold, Missouri (the "City")
for its portion of the capital costs related to the Lower Meramec Wastewater
Treatment Plant. The original loan bears interest at 4.35%, while the two new
loans added during the 2013 fiscal year bear interest of 4.50% and 3.52%. The
current portion of this note is contained in the other receivables line on the
statement of net position. The note receivable will mature in 2033. At June 30,
2013, future payments are as follows:
2014 $ 1,148,340
2015 1,154,696
2016 1,154,696
2017 1,154,696
2018 1,154,696
2019-2023 5,773,479
2024-2028 5,773,479
2029-3033 5,182,582
Less: Amount representing interest
Classification in Statement Of Net Position:
22,496,664
7,348,531
$ 15,148,133
Current $ 507,581
Non -Current 14,640,552
Total $ 15,148,133
THE METROPOLITAN ST. LOUIS SEWER D1S't RiC T
Notes To Financial Statements (Continued)
4. Capital Assets
The following is a summary of capital assets changes for the fiscal years ended
June 30, 2013 and 2012:
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, 2012
Additions
Balance
Deletions June 30, 2013
$ 46,026,763 $ 4,049,881 $ — S 50,076,644
379,119,335 160,031,402 17 8,643,216 360,507,521
425,146,098
164,081,283
178,643,216
410,584,165
1,011,798,185
2,050,326,859
91.264,888
15,479,009
178,420,467
2,747,756
221,669 1,027, 055,525
2,491,091 2,226,256,235
1,835,996 92,176,648
3,153,389,932
196,647,232
4,548,756 3,345,488,408
(400,549,004)
(579,180,437)
(49,991,012)
(1,029,720,453)
2,123,669,479
(27,550,389)
(34,411,858)
(8,06 7 ,593)
(70,029,840)
126,617,392
(221,669)
(1,449,645)
(1,812,843)
(3,484,1572
1,064,599
(427,877,724)
(612,142,650)
(56,245,762)
(1,096,266,136)
2,249,222,272
$ 2,548,815,577 $ 290,698,675 $ 179,707,815 $ 2,659,806,437
Balance
June 30, 2011
Additions
Balance
Deletions June 30, 2012
Capital assets not being depreciated:
Land $ 36,924,144
Construction in progress 400,756,348
Total capital assets not being depreciated 437,680,492
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
979,414,620
1,941,575,848
84,858, 812
3,005,879,280
S 9,102,619
137,925.986
147,028,6055
41.013,831
112,106,178
8.721,309
161,841,318
S -- $ 46,026, 763
159,562,999 379,119,335
159,562,999 425,146,098
8,660,266
3,355,167
2,315,233
14,330,666
1,011,798,185
2,050,326,859
91,264,888
3,153,389,932
(382,129,043)
(548,181,682)
(43,753,142)
(974,063,867)
2,031,815,413
(26,025,377)
(32,259,885)
(8,456,802:
(66,742,064)
95,099.254
(7,605,416)
(1,261,130)
(2.218,932)
(11,085,478)
3,245,188
(400.549,004)
(579,180,437)
(49,991,012)
(1,029,720,453
2,123,669,479
$ 2,469.495,905
S 242,127,859
$ 162,808,187
$ 2,545,815,577
Page 30
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 2013 and 2012, the District recorded revenue from property taxes
in the amount of $26,016,135 and $24,604,173, respectively.
Page 31
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, 2013:
Original Balance Balance
Issuance June 30, June 30, Current
Amounts 2012 Additions Retirements 2013 Portion
Bonds and notes payable:
Wastewater System
Senior Revenue
Bonds:
Series 2004A 3 175,000,000 $ 163,630,000 $ ; 161,266,000 6 2,375,000 $ 2,375,000
Series 2006C 60,000.000 60,000,000 60.000.000
Series 2008A 30,040,000 30,000,000 — 30,000,000
Series 2010B 95,000,000 95,000,000 — 95,000,000 —
Series 2011E 52,250,000 52,250.000 1,640,000 50,610,000 1,685,000
Series 2012A 225,000,000 225,000,000 225,000,000
Series 2012B 141,730,000 — 141,730,000 — 141,730,000
Water Pollution Control
and Drinking Water
Subordinate Revenue
Bonds (State Revolving
Loans Program):
Series 2004B 161,280,000 115,960,000 — 7,180,000 108,780,000 7,442,500
Series 2005A 6,800,000 5,055,000 305,000 4,750,000 310,000
Series 2006A 42,715,000 34,225,000 2.140.000 32,085,000 2,172,500
Series 2006B 14,205,000 11,620,000 — 675,000 10,945,000 685,000
Series 2008A/B 40,000.000 33.932,50G 1,792.500 32,040,000 1,910,000
Missouri Department
of Natural Resources:
Energy Loan Program 98,595 13,468 — 12,156 1,312 1,312
Energy Loan Program 223,793 223,793 — — 223.793 32,402
Series 2009A 23,000,000 21.064,500 — 991,100 20,093,400 1,014,000
Series 2010A 7,980,700 5,880,389 1,932.311 341,100 7,471,600 348,000
Series 2010C 97,000,000 35,519,000 — 1,520,000 33,999,000 1,560,000
Series 2011A 99,760,300 1,006,572 30,955,981 — 31.962,553 —
Capital Lease:
Oracle/Blue Heron
12,000,000 3,096,140 — 3,096,140
$ 1,154,052,369 $ 6588,396,362 $ 399,618,292 $ 180,947;996 877,066,658 $ 19,435,714
Add:
Unamortized premium, net 76,008,897
Less:
Deferred loss on refunding (10,617,604)
Bond issue costs, net (9,138,892)
Total $ 933,319,059
Deposits and accrued
expenses:
Landfill closure and
pcstc:osure costs 8 721,066 $ 14,734 $ — c 735,800 $ —
Compensated
absences 7,269,231 853,872 595,306 7,524,797 1,981,199
Net OPEB obligation 3,399,5555 2,132,454 1,513,300 4,018,709 —
Total $ 11,989,852 $ 3,001,060 $ 2,111,606 $ 12,279,306 $ 1,881.199
Page 32
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, 2012:
Original
Issuance
_ Amounts
Bonds and notes payable:
Wastewater System
Senior Revenue
Bonds:
Series 2004A $
Series 2006C
Series 2008A
Series 2010E
Series 2011E
Water Pollution Control
and Drinking Water
Subordinate Revenue
Bonds (State Revolving
Loans Program):
Series 2004)3
Series 2005A
Series 2006A
Series 2006B
Series 2008A/B
Missouri Department
of Natural Resources:
Energy Loan Program
Energy Loan Program
Series 2009A
Series 2010A
Series 2010C
Series 2011A
Capital Lease:
OraclelBlue Heron
Add: Unamortiaed
premium, net
Less: Bond issue
costs, net
Total
175,000,000
60,000,000
90,000,000
85,000,000
52,250,000
161,280,000
6,800,000
42,715,000
14,205,000
40,000,000
98,595
223,793
28,000,000
7,980,700
37,000,000
39,769,300
12 000,000
$$ 78
Balance
June 30,
2011
Additions Retirements
$ 165,590,000 $
60,000,000
30,000,000
95,000,000
123,055,000
5,370,000
36,395,000
12,285,003
35,610,000
25,251
22,053,200
2,852,447
329,000
52,250,090
223,793
3,195,942
36,671,000
1,006,572
Balance
June 30,
2012
Current
Portion
$ 1,960,000 $ 163,630,000 $ 2,165,000
60,000,000
30,000,000
85,000,000-
52,250,000
7,095,000
315,000
2,110,000
665,000
1,777,500
11,783
968,700
168,000
1,481,000
115,960,000
5,055,000
34,225,000
11,620,000
33,832,500
13,468
223,798
21,084,500
5,880,989
35,519,000
1,006,672
1,640,000
7,180,000
305,000
2,140,000
675,000
1,792,500
12,157
991,100
341,100
1,520,000
6,005,982 — 2,999,942 1096140 3,096,140
$ 684,600,880 $ 93 347,907 $, 19,551,825 , 658,896,962 $ 21.857.997
14,196,464
(8,391.259),
$ 869,201,567
Deposits and accrued
expanses:
Landfill closure and
poeklosure costs $ 709,120 $ 11,946 $ — $ 721,066 $
Compensated
absences 6,601,946 851,568 184,283 7,269,231 1,817,907
Net OPI1B obligation 2304,799 2.090.556 1,395,800 3,399,555 —
Total $ 10,015,E $ 2.954.070 $ 1.580.088 , $ 11,389.86 $ 1.817.807
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 another $945,000,000 of revenue bonds. From the total
voter authorization of $1,720,000,000, $720,000,000 has not been issued as of
June 30, 2013. These funds were sought to enable the District to comply with
federal and state clean water requirements.
Page 33
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In November 2012, the District issued $141,730,000 of Wastewater System
Revenue Bonds Series 2012B (Series 2012B). These bonds were issued pursuant
to the June 2012 authorization: in this case to advance refund the Series 2004A
Bonds maturing in years 2015 and thereafter. These 2012B senior bonds have
interest rates ranging from 1.3% to 5.0% and are payable in semiannual
installments at varying amounts through May 1, 2034. The Series 2012B's net
proceeds of $169,991,297 (including a premium of $29,613,138 and after
payments of $761,593 in underwriting fees and $590,247 in issuance costs) were
used to purchase U.S. government securities. These securities were deposited in
an irrevocable trust with an escrow agent to provide for all future debt service
payments on the bonds. As a result, Series 2004A bonds were partially defeased
and the liability for those bonds related to a date after May 1, 2014 have been
removed from the financial statements. This refunding decreases total debt
service payments over the next 22 years by $28,601,189, resulting in an economic
gain (difference between the present values of the debt service payments on the
old and new debt) of $22,439,375.
In August 2012, the District issued $225,000,000 of Wastewater System Revenue
Bonds Series 2012A (Series 2012A). These bonds were issued pursuant to the
June 2012 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 2.5% to 5.3% and are payable in
semiannual installments at varying amounts through May 1, 2042.
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.
In January 2010, the District issued $85,000,000 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. As Build America Bonds
under The American Recovery and Reinvestment Act of 2009, the District
receives a subsidy payment from the Federal government equal to a percentage of
the interest paid. In fiscal years 2013 and 2012, the rate was 35%. Subsequent
to year end, the District was notified the subsidy percentage would be reduced to
32% beginning in fiscal year 2014.
Page 34
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In November 2008, the District issued $30,000,000 of Wastewater System
Revenue Bonds Series 2008A (Series 2008A) from the August 2008 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 had interest rates ranging from 2.0% to 5.0% and
were payable in semiannual installments at varying amounts through May 1,
2034; however, in November 2012, there was a partial refunding of the Series
2004A bonds. As a result of this refunding, Series 2004A bonds are considered to
be partially defeased. The original senior bonds had semiannual installments
through May 1, 2034 but as a result of the refunding the semiannual
installments are now through May 1, 2014. The liability related to Series 2004A
after May 1, 2014 has been removed from the financial statements. See the
explanation for Series 2012B above for further information.
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 above. 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.
Page 35
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The issuance of the revenue bonds does not obligate the District to levy any form
of taxation 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 outstanding 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 2008AB (Series 2008A/B). The Series 2008A/B bonds provided funds to
make loans to fourteen Missouri political subdivisions that were used to finance
water pollution control and drinking water projects. A portion of the proceeds of
the Series 2008AB 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% to 5.7% and are payable in semiannual installments at
varying amounts through January 1, 2029.
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 were
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.
Page 36
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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 13 Missouri political subdivisions that were 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 were 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.
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
were 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_
Page 37
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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 2011A direct loans (pages 40-43) 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
Bons], 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.
In accordance with the Series 2004A, 2004B, 2005A, 2006A, 2006B, 2008A/B
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, 2013 and 2012, the District was in compliance with this covenant.
Page 38
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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, 2013 are as follows:
Wastewater System Revenue Bonds Payable/
Water Pollution Control and Drinking Water
Revenue Bonds Payable
Years Ending June 30, Principal Interest Total
2014 $ 16,480,000 $ 38,591,403 $ 55,071,404
2015 16,440,000 37,849,836 54,289,836
2016 22,395,000 37,086,774 59,481,774
2017 23,242,500 36,050,811 59,293,311
2018 23,917,500 34,942,274 58,859,774
2019-2023 131,842,500 157,224,025 289,066,525
2024-2028 134,072,500 124,050,926 258,123,426
2029-2033 138,132,500 91,899,861 230,032,361
2034-2038 141,660,000 57,583,323 199,243,323
2039-2042 135,132,500 17,287,550 152,420,050
Total $ 783,315,000 $ 632,566t783 $ 1,415,881,783
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.
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, 2013 are as
follows:
Energy Efficiency Leveraged Note Payable
Years Ending June 30, Principal Interest Total
2014 $ 1,312 $ 21 $ 1,332
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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. As of June 2013, the District has completed the specific energy
conservation projects and spent $199,489 of the $223,793 loan amount. The
remaining $24,203 will be returned to the DNR as a principal payment. 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, 2013 are as
follows:
Energy Efficiency Leveraged Note Payable
Years Ending June 30, Principal
Interest Total
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 33,756 2,166 35,922
2019-2020 61,254 1,762 63,017
Total S 223,793 $ 18,834 S 242,627
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.
Page 40
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Principal And Interest Requirements On State Of Missouri Direct Loan
Series 2009A
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 borrowed. All funds
have been drawn on this loan.
The annual principal and interest requirements to maturity on the State of
Missouri Direct Loan Series 2009A outstanding as of June 30, 2013 are as
follows:
State of Missouri Direct Loan Series 2009A
Years Ending June 30, Principal Interest Total
2014
2015
2016
2017
2018
2019-2023
2024-2028
2029-2031
Total
$ 1,014,000
1,037,600
1,061,500
1,086,000
1,111,100
6,963,300
6,674,300
2 155 700
$ 20,093,400
$ 289,684
274,794
259,560
243,973
228,026
887,712
429,934
31,592
$ 1,303,684
1,312,294
1,321,060
1,329,973
1,339,126
6,841,012
7,104,234
2,187,292
$ 2,645,275 $ 22,738,675
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.
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 borrowed. All funds
have been drawn on this loan.
Page 41
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The annual principal and interest requirements to maturity on the State of
Missouri Direct Loan Series 2010A outstanding as of June 30, 2013 are as
follows:
State of Missouri Direct Loan Series 2010A
Years Ending June 30, Principal Interest
Total
2014 $ 348,000 $ 109,299 $ 457,299
2015 355,000 104,122 459,122
2016 362,300 98,842 461,142
2017 369,600 93,452 463,052
2018 377,100 87,955 465,055
2019-2023 2,003,800 353,316 2,357,116
2024-2028 2,215,600 198,108 2,413,708
2029-2032 1,440,200 37,616 1,477,816
Total $ 7,471,600 $ 1,082,710 $ 8,554,310
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.
Principal And Interest Requirements On State Of Missouri Direct Loan
Series 2010C
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 1.7% based on the amount that has been borrowed. All funds
have been drawn on this loan.
Page 42
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The annual principal and interest requirements to maturity on the State of
Missouri Direct Loan Series 2010C outstanding as of June 30, 2013 are as
follows:
State of Missouri Direct Loan Series 2010C
Years Ending June 30, Principal
Interest Total
2014 $ 1,560,000 $ 554,590 $ 2,114,590
2015 1,600,000 528,685 2,128,685
2016 1,641,000 502,120 2,143,120
2017 1,684,000 474,862 2,158,862
2018 1,727,000 446,903 2,173,903
2019-2023 9,335,000 1,788,996 11,123,996
2024-2028 10,611,000 972,593 11,583,593
2029-2032 5,841,000 145,835 5,986,835
Total $ 33,999,000 $ 52.414,584 $ 39,413,584
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 2009A, 2010A, 2010C and 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, 2013 and
2012, the District was in compliance with this covenant.
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 borrowed. As of
June 30, 2013 the outstanding loan balance was $31,962,553. The payment
requirements to maturity will be determined after the debt is fully issued.
Page 43
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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 was payable through June 19, 2013, at which time the District has
the option to purchase the leased equipment.
Wastewater System Cash And Investments
The following 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 tar 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.
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, 2011B, 2012A,
and 2012B 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, 2013 and
2012, cash and investments in the Debt Service Reserve Fund totaled
$46,962,390 and $34,861,380, respectively.
Page 44
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Special Participant Bond Reserve Account
For the Series 2004B, 2005A, 2006A, . 2006B, and 2008A/B 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, 2013 and 2012, cash and investments in the Special
Participant Bond Reserve Account held on behalf of the District totaled
$129,456,509 and $137,354,308, 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, 2013.
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, 2011B, and 2012A bonds, shall be deposited into the Project Fund.
At June 30, 2013 and 2012, cash and investments in the Project Fund totaled
$160,339,298 and $51,976,851, 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, 2013 and 2012, cash and investments in the Rebate Fund totaled
$234,238 and $234,216, respectively.
Page 45
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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,
2013 was $877,066,658 and $950,947,897, respectively. The carrying amount
and estimated fair value of the District's long-term debt as of June 30, 2012 was
$658,396,362 and $733,956,055, respectively.
7. Pension Plan
Plan Description
The Metropolitan St. Louis Sewer District Employees' Pension Plan (the Plan) is
a non-contributory 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 District's Defined Contribution Plan and/or the Deferred Compensation
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.
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.
Page 46
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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.
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.
Page 47
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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."
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 $11,564,228 and $10,719,154, excluding certain professional fees
paid by the District, were made to the Plan during the District's fiscal years
ended June 30, 2013 and 2012, respectively. These contributions were made in
accordance with actuarially determined contribution requirements based on
actuarial valuations performed at December 31, 2012 and 2011, respectively, and
for 2012 consisted of a) $6,195,693 normal cost plus b) $4,748,053 amortization of
the unfunded actuarial accrued liability and prior changes c) multiplied by an
interest factor of 1.0725.
Page 48
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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, 2012
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 $750/month
7.25% per annum (1)
4.5% - 10.0% per annum (1)
4.0% per annum increase (1)
Includes inflation component of 3.0%
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
2013
2012
2011
$ 11,564,228
10,719,154
10,500,769
100%
100%
100%
Page 49
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Funded Status And Funding Progress
As of January 1, 2013, the Plan was 83.0% funded. The actuarial accrued
liability for benefits was approximately $266,371,000, and the actuarial value of
assets was approximately $221,144,000, resulting in an unfunded actuarial
accrued liability (UAAL) of approximately $45,227,000. The covered payroll
(annual payroll of active employees covered by the plan) was approximately
$48,333,000, and the ratio of the UAAL to covered payroll was 93.6%.
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.
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 up to Internal Revenue Code limits. The District does not
contribute to the Plan. 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.
Page 50
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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 Pension 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 Pension 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.
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.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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 $523,670 and $254,433 for
the years ended June 30, 2013 and 2012, respectively.
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
Vested(Non-Forfeitable)
Percentage
Less than 12 0%
12 but less than 24 20%
24 but less than 36 40%
36 but less than 48 60%
48 but less than 60 80%
60 100%
Page 52
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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.
Contributions for retirees are as follows:
Coverage Tier Monthly Premium
Retiree* $478.98
Retiree + Spouse $1,020.35
Retiree + Child $927.09
Family (1 child) $1,414.15
*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.
Page 53
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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
Normal cost
Interest to end of fiscal year
Annual Required Contribution (ARC)
Interest on net OPEB obligation
Adjustment to ARC
Annual OPEB cost
Contributions made
Increase in net OPEB obligation
Net OPEB obligation - beginning of year
$ 839,500
1,166,900
90,300
S 2,096,700
8 152,980
(117 ,226)
2,132,454
(1,513,300)
619,154
3,399,555
Net OPEB obligation - end of year $ 4,018,709
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
Fiscal
Year
2013
2012
2011
Annual
Required
Contribution
(ARC)
$ 2,096,700
2,059,000
2,142, 000
Percentage
Of ARC
Contributed
72.2
67.8
64.5
Net OPEB
Obligation
$ 4,018,709
3,399,555
2,704,799
As of June 30, 2013, 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%.
Page 54
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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
Medical Trend:
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
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+ 4.7
Page 55
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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 Ultimate Rates
(0 to 4 years of service) (after 4 years of service)
Years Of Attained
Service Rate 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 Sarason T-1 Table above.
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
Page 56
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Disability
Percent
Becoming
Age Disabled
20
30
40
50
0.056%
0.064
0.102
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
position. At June 30, 2013 and 2012, these liabilities amounted to $3,041,045
and $2,575,977, respectively.
The claims liabilities reported are based on the requirements of GASB Statement
No. 10, which requires that a liability for claims be reported if information
obtained prior to the 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
2013 and 2012 were as follows:
Liability, beginning of year
Current year claims and changes in estimates
Claim payments
Liability, end of year
2013
2012
$ 2,575,977
12,547,715
(12,082,647)
$ 5,557,000
9,350,602
(12,331,625)
$ 3,041,045
$ 2,575,977
Page 57
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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.
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 $735,800 and $721,066 reported as landfill closure and post -
closure care liabilities at June 30, 2013 and 2012, respectively, represent the
cumulative amounts reported at fiscal year-end based on the use of 94.3% and
92.4% of the estimated capacity of the landfill for fiscal years ended 2013 and
2012, respectively. The District will recognize the remaining estimated cost of
closure and post -closure care of $44,202 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 2013.
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 statements
of net position will be adjusted accordingly.
Page 58
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 United States District Court For The Eastern District Of
Missouri; Case No. 07-1120.
A lawsuit was filed 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 over the past several years. 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, MSD 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.
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 CD. That same day the State of Missouri filed a
Motion to Dismiss their Claims without Prejudice. On January 17, 2012, MSD
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 MSD. 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, MSD is working diligently to implement the CD.
The CD requires the District to spend approximately $4.7 billion, in 2010 dollars,
over a 23-year implementation period. Throughout this period improvements
will be made to the District's separate sewer system, combined sewer system, and
wastewater treatment 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
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 60
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 MSD. The third phase, to determine the amount of
Plaintiffs' counsel's attorneys' fees, to be paid by MSD, was heard on January 18,
2011. On February 4, 2011, the judge awarded Plaintiff's 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, MSD 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, MSD 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 May 21, 2013 the
Missouri Supreme Court heard oral arguments. The District is currently
awaiting their ruling.
Flooding Cases
The District was originally a defendant in five (5) different flooding cases related to
the September 14, 2008, rain event precipitating from remnants of Hurricane Ike.
These cases consisted of three (3) property damage cases and two (2) wrongful death
cases. The defense costs associated with these cases has been covered by the
District's insurance carrier, with a reservation of rights. Of the five (5) cases, one (1)
involves flooding of Maline Creek and the others involve flooding of the River Des
Peres. Of the five (5) original cases, only two (2) cases remain. The remaining cases
are one (1) wrongful death and one (1) property damage case. Two (2) of the three
(3) cases resolved were voluntarily dismissed by the plaintiffs and the other case
was a property damage case which settled. Subsequent to June 30, 2013, five (5)
new property damage cases were filed against the District.
Page 61
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
For The Years
Ended June 30,
2013 2012
Cash Flows From Operating Activities
Received from customers $ 1,722,431 $ 1,170,326
Paid to suppliers for goods and services (13,183,062) (12,771,139)
Net Cash Provided By Operating Activities (11,460,631) (11,600,813)
Cash Flows Provided By Non -Capital Financing Activities
Taxes levied and collected
22,974,201 24,586.887
Cash Flows From Capital And Related Financing Activities
Proceeds from capital grants 24,184 —
Payments for capital assets (3,526,362) ;12,813,943)
Proceeds from sale of capital assets 43,815 Net Cash Used In Capital And Related Financing Activities ;3,458,363: (12,813,943)
Cash Flows From Investing Activities
Purchase of investments (59,591,279) (30,941,951;
Proceeds from sale and maturity of investments 45,646,517 45,598,720
Investment income 376,128 445,672
Net Cash Provided By (Used In)Investing Activities (13,564,634) 18,102,441
Net Increase (Decrease) In Cash And Cash Equivalents (5,509,427) 18,274,572
Cash And Cash Equivalents At Beginning Of Year 31,453,273 13,178,701
Cash And Cash Equivalents At End Of Year $ 25,943,646 g 31.453.273
15. Subsequent Events
In preparing these financial statements, the District has evaluated events and
transactions for potential recognition or disclosure through October 17, 2013, the
date the financial statements were available to be issued.
Page 70
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
REQUIRED SUPPLEMENTARY INFORMATION
EMPLOYEES' PENSION PLAN AND POST -EMPLOYMENT BENEFIT PLAN
June 30, 2013
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)1(2) (3) (1)-(2)/(3)
12/31/2012 $ 221,144 $ 266,371 (45,227) 83.0 $ 48,333 93.6 %
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
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)/(2) (3) (1)-(2)/(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 71
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