HomeMy Public PortalAboutExhibit MSD 54 - 2014 Audited Financial StatementsExhibit MSD 54
THE METROPOLITAN ST. LOUIS
SEWER DISTRICT
FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
IT
.E:iTa E:i 11
Contents
Page
Independent Auditors' Report 1 - 2
Management's Discussion Of Analysis 3 - 15
Financial Statements
Statements Of Net Position 16 - 17
Statements Of Revenues, Expense And
Changes In Net Position 18
Statements Of Cash Flows 19 - 20
Notes To Financial Statements 21 - 76
Required Supplementary Information
Required Supplementary Information - Schedule Of
Funding Progress - Employees' Pension Plan And Post
Employment Benefit Plan 77
h
RubinBrown
Independent Auditors' Report
Board of Trustees
The Metropolitan St. Louis Sewer District
St. Louis, Missouri
Report On The Financial Statements
RubinBrown LIP
Certified Public Accountants
& Business Consultants
One North Brentwood
Saint Louis, MO 63105
T 314.290.3300
F 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, 2014
and 2013, 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.
me.cenn.m immix, .1
BAKER TTLLY
INTERNATIONAL
The 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, 2014
and 2013, 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.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, the District adopted the provisions of
Governmental Accounting Standards Board Statement No. 65, Items Previously Reported as
Assets and Liabilities, in fiscal year 2014. Our opinion is not modified with respect to this
matter.
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, 2014, 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.
LLP
October 17, 2014
Page 2
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
For The Years Ended June 30, 2014 And 2013
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.
2014 Financial Highlights
➢ The District increased current, restricted and other assets by $101.2 million as a
result of inflows from bond proceeds and increased receivables from slight
increase in sewer rates.
> The District placed $243.9 million of capital assets into service during fiscal year
2014. The continued high level of capitalization reflects the District's work to
meet long-term plans per the EPA consent decree entered into August 14, 2011.
Capitalized assets included:
Treatment and disposal plant and equipment $173.5 million
Collection and pumping plant $60.8 million
Land $5.5 million
General plant and equipment $4.1 million
In conjunction with the new assets, accumulated depreciation increased by $59.8
million and construction in progress decreased $60.6 million.
> The District issued one new senior bond for $150 million.
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 slight
increase in sewer rates and improved collection activities.
> The District placed $200.6 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 per the EPA consent decree entered into August 2011.
Capitalized assets included:
Collection and pumping plant $178.4 million
Treatment and disposal plant and equipment $15.5 million
Land $4.0 million
General plant and equipment $2.7 million
Page 3
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
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.
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 year's revenue and expense. These statements indicate how successful the District
was at maintaining expenses below the level of revenue earned.
The Statements of Cash Flows account for the net change in cash and cash equivalents
by summarizing cash receipts and cash disbursements resulting from operating
activities, non -capital financing activities, capital and related financing activities, and
investing activities. These statements assist the user in determining the sources of
cash coming into the District, the items for which cash was expended, and the
beginning and ending cash balance.
Page 4
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
Financial Analysis
The District's financial position improved in the current year, as evidenced by the
increase in net position of $27.9 million. The improvement is due to the increases in
restricted funds of $31.7 million and unrestricted funds of $28.5 million. Restricted
funds increased due to maintaining higher reserves for debt service and unrestricted
funds increased due to an overall positive change in net position. This was offset by a
decrease in net investment in capital assets of $32.3 million as more debt was incurred
than capital created during 2014.
Condensed Financial Statements and Analysis
Condensed Statements of Net Position
(000s)
lnnereaee • "Increase
2013 (Decrease) a 2012 (Decrease)
2014 As Restated 2014-2013 As Restated - 2013-2012
Assets:
Current, restricted, and other assets $ 704,266 $ 603,104 .$ 101,162 . $ 407,731 . $ 195;373 ,
Capital assets (net of accumulated _
depreciation) 2,763,413 2,659,806 108;607: 2,548,816 . 110,990
Total Assets 3,467,679 3,262,910 204,769 , 2,956,547 •306,368
Deferred Outflow of Resources:
Bonds and Notes Payable -Deferred
Loss on Refunding 10,108 10,618 (510)
Total Deferred Outflow of
Resources 10,108 10,618 .. . (510);
.(510)
(51.0):
Liabilities:
Current liabilities 95,196 89,432 `5,764 86,337 •3,09$
Non -current liabilities 1,114,639 944,038 :. 170,601 . 660,307 , 283,731
Total Liabilities 1,209,835 1,033,470 .176,365 ; 746,644 286,$20
Net Position:
Net investment in capital assets 1,845,394 1,877,692 • .(32,298).. 1,928,200 (50,508)
Restricted 142,764 111,066 31,E 106,693 4,373:
Unrestricted 279,794 251,300 •28,.494 175,010 76,290
Total Net Position $ 2,267,952 $ 2,240,058 $ 27,894 , $ 2,209,903 $ , 30,155 '1
Page 5
THE METROPOLITAN ST. LOUTS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2014 Analysis
Current, restricted and other assets increased $101.2 million or 16.8% in the current
year. The increase is predominately due to unrestricted and restricted cash and
investments received as part of the issuance of debt in 2014. In addition, unrestricted
receivables increased due to higher sewer rates and a lower allowance for sewer service
charges.
Capital assets net of accumulated depreciation increased by $103.6 million or 3.9% in
the current year as the result of continued high levels of construction and acquisition of
assets by the District.
Current liabilities increased by $5.8 million or 6.4%, as the result of increases for new
debt interest accrual and the accounting change related to accrued interest, as
discussed in the Reclassification section of Note 1 to the financial statements.
Non -current liabilities increased by $170.6 million or 18.1% as the District issued $150
million in new senior debt with a premium.
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 $111.0 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 $283.7 million or 43.0% as the District issued $225
million in new senior debt with premium.
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
2013 (Decrease) 2012 .(Decrease)
2014 As Restated 2014-2013 ; As Restated 2613-2012
Operating Revenues:
Sewer service charges $ 250,133 $ 238,635 ,• $ 11,49$ ` $ 227,677 , $ ' 10,968
Provision for doubtful
sewer service charge accounts 7,210 (2,655) 9,865 (6,911) 4,256
Licenses, permits, and other fees 6,563 2,731 3,832. 2,684 47
Other 1,867 3,235 (1,368) 2,550 6$$
Total Operating Revenues 265,773 241,946 23,827 226,000 15946
Non -operating Revenues:
Property taxes levied by the district 27,450 26,016 1,434 . 24,604 .1,412
Investment income 2,967 1,057 1,910 , 2,407 '.(1,$50)
Rent and other income 302 293 9 , 295 - _ )
Total Non -operating Revenues 30,719 27,366 3,3531 27,306 -60
Total Revenues 296,492 269,312 27,180 ; 253,306 6,006 1
Operating Expenses: -
Pumping and treatment 54,126 54,526 ' (400) 49,005 . 5,521
Collection system maintenance 39,988 37,877 2,111 36,695 '• . 1,182
Engineering 12,184 12,020 - 164 8,544 • 3,476 i
General and administrative 45,661 41,485 . 4,176 i 33,180 ' '8,305
Water backup claims 2,713 3,503 (790) 2,050 •1,453 '
Depreciation 74,087 70,030 4,067 ; 66,742 ,8,288';
Asset management 12,539 10,717 •1,822 1 20,092 . (9,375)
Total Operating Expenses 241,298 230,158 11,140 216,308 13,E
Non -operating Expenses:
Net (gain) loss on disposal and sale of
capital assets 5,248 796 4,452E 3,163 (,367)
Non -recurring projects and studies 3,493 4,676 (4163)6,403 (1,727),
Legal Claims - - 5 '
Interest expense 25,661 21,062 4,599 . 16,365 " 4,607'
Total Non -operating Expenses 34,402 26,534 'T,868 , 25,936 8
Total Expenses 275,700 256,692 19,00$ 242,244 14,448 .;
Income Before Capital
Grants And Contribution 20,792 12,620 8,172 11,062 ..1,558
Capital Grants And Contributions 7,102 17,535 (10,433) 9,659 7,876 •
Change in Net Position 27,894 30,155 (2,261): 20,721 9,434 -
Net Position - Beginning of Year 2,240,058 2,209,903 - 30,155 • 2,189,182 • 20,721`'
Net Position -End of Year $ 2,267,952 $ 2,240,058 $ 27,894 ' $ 2,209,903 $ 30,156
Page 7
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2014 Analysis
Net position increased $27.9 million or 1.2% over the prior year. Sewer service revenue
increased as a result of rate increases. The provision for doubtful sewer service charges
decreased due to the District's use of new analytical tools leading the District to change
its methodology in determining doubtful accounts. Operating expenses also increased
primarily from various increases in operating costs. Interest expense also increased, as
well as the loss on disposal.
Total revenue increased by $27.2 million or 10.1%. Sewer service charges increased
$11.5 million or 4.8% and the provision for doubtful accounts decreased by $9.9 million
or 371.6% as explained above. Licenses, permits and other fees increased $3.8 million
or 140.3% due primarily to an increase in waste haul permits. Investment income
increased $1.9 million or 180.7% due to favorable market conditions. Property tax
revenue increased by $1.4 million or 5.5% due to taxes collected from the prior year.
Other revenue had a decrease of $1.3 million.
Total expenses increased by $19.0 million or 7.4%. Operating expenses increased by
$11.1 million or 4.8%. This increase is a result of the following:
• $4.2 million or 10.1% increase in general administrative costs due to higher
professional services primarily related to the upgrade in. the District's extensive
billing and collection system. In addition, there were increases in worker's
compensation and general liability judgments and claims;
• $4.1 million or 5.8% increase in depreciation costs due to new asset
capitalization;
• $2.1 or 5.6% increase in collection system maintenance costs as a result of
increased personnel costs, as well as inventory. The increase related to inventory
included new process implemented for inventory obsolescence;
• $1.8 million or 17.0% increase in asset management as the capital improvement
fund was increased;
• Offset by a decrease of $0.8 million or 22.6% in water backup due to a reduction
in the claim reserve.
Non -operating expenses increased by $7.9 million or 29.7%. This increase is a result of
the following:
• $4.6 million or 20.4% increase in interest expense due to the issuance of new
senior and subordinate bonds;
• $4.5 million or 559.7% increase in the loss on disposals due to the MO River
Waste Water Treatment Plant expansion that included demolition of some plant
assets resulting in a loss for those demolished assets;
• Offset by a decrease of $1.2 million or 25.3% in non -recurring projects and
studies.
Page 8
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2013 Analysis
Net position increased $30.1 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 increases 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 $14.4 million or 5.9%.
Operating expenses increased by $1 R._8 million or6►.4%. This increase la of the
increase is a result 1.11C
following:
• $8.3 million or 25% increase in general and administrative costs primarily as the
result of a large insurance reimbursement in FY12 that was not repeated in
FY13;
• $6.7 million or 7.8% increase in combined pumping and collection costs as a
result of increased personnel costs, costs related to heavy spring rains, and
equipment repair and replacement;
• $1.5 million or 70.9% increase in water backup claims due to more claims over
the prior year when drought conditions limited flooding claims;
• $3.5 million or 40.7% increase in engineering costs due primarily to personnel
costs related to non -capital, asset management projects;
• $3.3 million or 4.9% increase in depreciation costs due to new asset
capitalization;
• Offset by a decrease of $9.4 million or 46.7% in asset management as costs were
eliminated.
Non -operating expenses increased by $0.6 million or 1.6%. This increase is a result of
the following:
• $4.7 million or 28.7% increase in interest expense offset by $4.1 million or 42.8%
decreases in combined losses on disposal of assets and non -recurring projects
and studies.
Page 9
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
Condensed Statements of Cash Flows
(000s)
2014 2013
Cash flows from operating
activities $ 81,864 $ 84,882
Cash flows from non -capital
financing activities 27,468 23,014
Cash flows from capital
and related financing
activities (25,597) 83,449
Cash flows from investing
activities (86,487) (168,410)
Net increase (decrease) in
cash and cash equivalents
(2,752) 22,935
Cash and cash equivalents
at beginning of year 181,755 158,820
Cash And Cash Equivalents
At End Of Year $ 179,003 $ 181,755
Increase
(Decrease)
2014-2013
$ E3,01
4,454
(109,046)
81,923
(25,687)
22,935
$ (2,752)
2012
$ 67,839
24,604
(91,085)
60,540
61,898
96.922
158,820
Increase
(Decrease)
2013.2012
. 17,043
(1,590)
.174,534
(228, 950)
(38,)
61,898
$ 22,935
2014 Analysis
The District ended the year with $179.0 million in cash and cash equivalents or a
decrease of $2.8 million from the prior year. Cash flows from operating activities
decreased by $3.0 million or 3.6% as the result of increased outflows to suppliers for
goods and services. Cash flows from non -capital financing activities increased by $4.5
million or 19.4% due to greater tax revenue collected, mainly from the prior year. Cash
flow from capital and related financing activities decreased by $109.0 million or 130.7%
as the result of decreased bond proceeds and premiums received in 2014 compared to
2013. Cash flows from investing activities increased by $81.9 million or 48.6%. The
increase primarily stems from a decrease in the purchase of investments and an
increase in the volume of maturities of investments.
Page 10
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
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.
Capital Assets
Condensed Statements of Capital Assets
Net of Depreciation (000s)
2014 2013
Land $ 55,538
Construction in progress 299,945
Treatment and disposal plant
and equipment 737,833
Collection and pumping plant 1,637,375
General plant and equipment 32,722
Total
2014 Analysis
Increase.
(Decrease)
22014,2013
Increase
(Decrease)
2012 2013.2012
$ 50,077 $ . 6,46.1 . $ 46,027 $ ..4,060
360,508 (60,563)• 379,119 (18,61]).
599,178 138;655 611,249 (12,071)
1,614,112 23,263 . 1,471,147 142;965
.
35,931 .(3,209), 41,274 (5,343)
2,763,413 $ 2,659,806
$ 10a,607 ; $ 2,548,816 $ 110,990
Total capital assets, net of depreciation, increased by $103.6 million or 3.9% over the
prior year. Treatment and disposal plant and equipment contained the majority of the
increase with a net $157.2 million or 15.3% with 173.5 million additions offset by $16.3
retirements this fiscal year. Collection and pumping plant increased $59.9 million or
2.7% primarily for capitalization of assets including dedicated assets and infrastructure
repairs. Land increased $5.5 million or 10.9% from the acquisition of thirteen different
properties. General plant and equipment increased $1.4 million or 1.5% primarily due
to the purchase of vehicles. Construction in progress decreased $60.6 million or 16.8%
as constructed assets were placed in service. For more detailed information, see Note 4,
capital assets, in the accompanying notes to the financial statements.
Page 11
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2013 Analysis
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.
Long -Term Debt
The Metropolitan St. Louis Sewer District
Condensed Statements of Long -Term Debt
(000s)
2014 2013
Senior Revenue Bonds:
Series 2004A S - S 2,375
Series 2006C 60,000 60,000
Series 2008A 30,000 30,000
Series 2010B 85,000 85.000
Series 2011B 48,925 50,610
Series 2012A 225,000 225,000
Series 2012B 141,730 141,730
Series 201313 150,000
Subordinate Revenue Bonds:
Series 2004B 105,155 108,780
Series 2005A 4,750 4.750
Series 2006A 32,085 32.085
Series 2006E 10,945 10,945
Series 2008A13 31.140 32,040
Missouri DNR:
Series 2009A 19,589 20,093
Series 2010A 7.299 7,472
Series 2010C 33,224 33,999
Series 2011A 39.769 31,963
Series 2013A 16,043 -
Energy Loan Program 166 225
Oracle/Blue Heron
Total
$ 1,040,820 $ 877,067
Increase
(Decrease)
2014-2013
$ (2,375)
(1,685).
150,000
(3,625)
(a)
(000)
(504)
(173)
(776)
7,806
16,043
(59)
.$ 163,753
2012
$ 163,630
60,000
30,000
85,000
52,250
115,960
5,055
34,225
11,620
33,833
21,085
5,880
35,519
1,007
237
3,096
$ 658,397
Increase
(Decrease)
2013-2012
t (153,2551
`(i,6407
225,000
141,730
(7;180)
(306)
.(2,140)
.(675)
{1,.793•)
lit - i 2 .
r1,692
(1,520)
30,956
(12)
'(3,096)
$ 218,670
Page 12
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
2014 Analysis
The District ended fiscal year 2014 with $1,041 million in long-term debt outstanding.
The District had one bond addition this year, a senior revenue bond (Series 2013B) for
$150.0 million. In addition, the District added a new SRF bond (Series 2013A) for $16.0
million and added to SRF bonds 2009A ($.5M), 2010A ($.2M), 2010C ($.8M), and 2011A
($7.8M). For more detailed information, see Note 6, long-term liabilities, in the
accompanying notes to the financial statements.
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 ($31.0M). For more detailed
information, see Note 6, long-term liabilities, in the accompanying notes to the financial
statements.
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.
Integral to helping MSD's rate payers understand the Consent decree is MSD's
initiation of Project Clear. The goal of Project Clear is to help MSD's rate payers have a
clear understanding of MSD's goals and objectives. Project Clear consists of three main
components:
• Getting The Rain Out which is focused on reducing the sewer system
infrastructure to help reduce basement back-ups and overflows;
• Performing Repair and Maintenance to the existing infrastructure to ensure it
operates as well as possible for as long as possible, and
• Building System Improvements where needed to increase the capacity of the
system.
Page 13
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
Unlike previous MSD programs, Project Clear will greatly affect the daily lives of many
of our rate payers. Project Clear is needed to help the rate payer understand the
individual and regional, as well as the immediate and long term, benefits of the
program.
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. This authorization has now seen three
issuances of bonds; in August 2012 of $225,000,000, October 2013 of $52,000,000, and
December 2013 of $150,000,000. These funds are restricted and can only be used to
fund capital expenditures.
The District is also upgrading its extensive billing and collection system to incorporate
the latest utility technology. The new system will result in more efficient processes and
the ability to continue to expand its customer outreach efforts. The new technology will
provide 21st century capabilities to utilize the multiple ways now available to better
communicate with its customers understand their needs and continue to align the
District's responsiveness accordingly. Full implementation of the system is expected by
the summer of 2015.
The District's Board of Trustees implemented an impervious based stormwater rate on
March 1, 2008 replacing its prior funding mechanism of property taxes and user fees.
The impervious based stormwater rate was again increased on January 1, 2009. On
July 9, 2010, a circuit court of St. Louis County found this impervious rate to be
unconstitutional, as implemented, under Missouri law. In response to this ruling, the
Board suspended the impervious based stormwater rate and reinstituted the District's
stormwater property taxes and user fees previously rolled back on a voluntary basis as
part of the stormwater rate plan. The District lost both its subsequent appeals to the
Appellate and Missouri Supreme Court negating the culmination of a 20-year effort to
adequately fund much needed stormwater services for District ratepayers. The impact
of this court decision has resulted in a dramatic reduction in stormwater services being
provided across the District with many customers receiving little or no stormwater
services until an alternative funding source is identified.
Page 14
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Management's Discussion And Analysis (Continued)
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/CFO
The Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103-2555
314-768-6200
jzimmer@stlmsd.com
Page 15
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF NET POSITION
Assets
Current Assets
Unrestricted Current Assets
Cash and cash equivalents
Investments
Sewer service charges receivable, less allowance of
$3,991,589 in 2014 and $3,819,791 in 2013
Unbilled sewer service charges receivable, less allowance of
$404,638 in 2014 and $351,645 in 2013
Property taxes receivable, less allowance of $515,097 in 2014
Accrued income on investments
Other receivables
Supplies inventory
Total Unrestricted Current Assets
Restricted Current Assets
Cash and cash equivalents
Investments
Total Restricted Current Assets
Total Current Assets
Non -Current Assets
Restricted Assets
Cash and cash equivalents
Investments
Long-term investments
Property taxes receivable, less allowance of $623,992 in 2014
Accrued income on investments
Total Restricted Non -Current Assets
Other Assets
Notes receivable
Long-term investments
Total other assets
Capital Assets
Depreciable:
Treatment and disposal plant and equipment
Collection and pumping plant
General plant and equipment
Less: Accumulated depreciation
Net depreciable assets
Non -depreciable:
Land
Construction in progress
Net capital assets
Total Non -Current Assets
Total Assets
Deferred Outflow of Resources
Bonds and Notes Payable -Deferred Loss on Refunding
Total Deferred Outflow of Resources
For The Years
Ended June 30,
2013
2014 (As Restated)
$ 95,037,786 4 91,333,756
105,100,875 68,975,608
46,563,727 34,207,405
20,231.912 17,582,233
2,136,300 . 2,325, 743
756.384 830,906
1,057,452 964,595
6,223,099 6,621,892
277,107.535 222,842,138
6,086,299 3,652,344
7,568,587 3,201,720
13,654,886 6.854.064
290,762,421 229,696,202
77,878,696 86,768,505
181,161,245 97,580,234
66,104,134 80,865,957
848,360 676,622
309,140 178,775
326,301,575 266,070,093
14,116,801 14,640,552
73.085,475 92,697.236
87,202,2 76 107.337.788
1,184,278,860 1,027,055,525
2,286,108,470 2,226,256,235
93.600.648 92,176,648
3,563,987,978
1,156,05 7,4 71
3,345,488,408
1,096,266.136
2,407,930.507 2,249,222,272
55,537,816
299,944.922
50,076,644
360,507,520
2,763,413,245 2.659.806,436
3,176,917,096 3,033,214,317
3,467,679,517 3,262,910,519
10,108,350 10,617,604
10.108,350 10,617,604
See the accompanying notes to financial statements.
Page 16
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,
2014
2013
(As Restated)
30,795,756 $ 32,258,712
33,336,518 27,268,022
9,566,082 9,749,687
20,268,080 19,435,714
93,966,436 88,712,135
1,015,380 504,746
214,063 215,334
1,229,443 720,080
95,195,879 89,432,215
11,811,608
1,102,827,585
10,398,107
933,639,841
1,114,639,193
944,037,948
1,209,835,072
1,033,470,163
1,845,394,270
71,843,246
70,920,910
279,794,369
1,877,692,035
47,140,132
63,925,875
251,299,918
$ 2,267,952,795
$ 2,240,057,960
See the accompanying notes to financial statements.
Page 17
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF REVENUES, EXPENSES AND
CHANGES IN NET POSITION
Operating Revenues
Sewer service charges
Recovery (provision) of 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
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, As Previously Stated
Effect of Adoption of GASB 65
Net Position - Beginning Of Year, As Restated
Net Position - End Of Year
For The Years
Ended June 30,
2013
2014 (As Restated)
$ 250,133,022 $ 238,634,709
7,210,322
6,562,607
1,866,902
(2,654,644)
2,731,497
3,234,775
265,772,853 241,946,337
54,125,550
39,987,811
12,184,007
45,661,041
2,713,168
74,087,207
12,538,851
54,526,256
37,876,932
12,019,666
41,485,255
3,503,220
70,029,840
10,717,265
241,297,635 230,158,434
24,475,218
27,450,319
2,966,549
302,506
11,787,903
26,016,135
1,056,966
293,159
30,719,3 74
27,366,260
5,248,443
3,492,667
25,661,127
34,402,237
20,792,355
795,527
4,676,203
21,062,474
26,534,204
12,619,959
6,873,732
228,748
17,510,735
24,184
7,102,480
17,534,919
27,894,835
2,240,057,960
30,154,878
2,218,294,341
(8,391,259)
2,240,057,960 2,209,903,082
$ 2,267,952,795 $ 2,240,057,960
See the accompanying notes to financial statements.
Page 18
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 Used In Investing Activities
Net Increase (Decrease) In Cash And Cash Equivalents
Cash And Cash Equivalents At Beginning Of Year
Cash And Cash Equivalents At End Of Year
Non -Cash Capital And Investing Activities
Capital asset additions included in accounts payable
Utility plant contributed by other governments and developers
Fair value investment adjustment gain (loss)
Refunding - debt issued 2012B (See Note 6)
Debt refunded 2004A (See Note 6)
For The Years
Ended June 30,
2014
2013
$ 251,198,137
(91,425,385)
(77,909,148)
81,863,604
27,468,024
$ 242,341,372
(92,818,922)
(64,640,786)
84,881,664
23,013,770
233,450
173,411,628
9,937,121
348,476
(10,071,556)
(37,522,184)
(163,882,733)
345,039
1,603,658
(25,597,101)
(627,117,753)
535,352,043
4,976,853
302,506
(86,486,351)
(2,751,824)
181,754,605
24,639
257,888,292
35,097,262
250,753
(21,857,996)
(35,117,398)
(154,847,862)
269,073
1,742,160
83,448,923
(671,031,454)
497,314,140
5,014,629
293,159
(168,409,526)
22,934,831
158,819,774
$ 179,002,781
$ 18,928,794
6,873,732
147,773
$ 181,754,605
$ 15,362,389
17,510,735
(3,140,483)
141, 730,000
(161,255,000)
See the accompanying notes to financial statements.
Page 19
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
STATEMENTS OF CASH FLOWS (Continued)
Reconciliation Of Operating Income (Loss) To Net Cash Flows
Provided By Operating Activities
Operating Income (Loss)
Adjustments to reconcile operating income (loss) to net cash
provided by operating activities:
Depreciation
Change in operating assets and liabilities:
(Increase) decrease in billed and unbilled sewer service
charges receivable
Increase in other receivables
(Increase) decrease in supplies inventory
Decrease in contracts and accounts payable
Increase in deposits and accrued expenses
Net Cash Provided By Operating Activities
For The Years
Ended June 30,
2014 2013
$ 24,475,218
74,087,207
(15,006,001)
(97,560)
398,793
(6,122,709)
4,128,656
$ 11,787,904
70,029,840
959,525
(91,259)
(320,858)
(1,109,475)
3,625,987
$ 81,863,604 $
84,881,664
See the accompanying notes to financial statements.
Page 20
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
NOTES TO FINANCIAL STATEMENTS
1. Organization And Summary Of Significant Accounting Policies
Organization
The Metropolitan St. Louis Sewer District (the District) was authorized by the
voters, established and chartered under the provisions of the Constitution of
Missouri, as a municipal corporation and a political subdivision of the State of
Missouri. Upon creation in 1954, the District assumed responsibilities to provide
for the construction, operation, and maintenance of the sewer facilities within its
defined boundaries. The District's service area now comprises all of the City of
St. Louis and most of St. Louis County. Subdistricts within the District's total
service area represent separate geographic areas within which specific taxes are
levied for the retirement of indebtedness issued to finance construction of
sanitary or stormwater facilities within the area or to operate, maintain, or
construct improvements within the subdistrict. The District also maintains all of
the publicly owned stormwater sewers within its original boundaries and is
continuing to accept maintenance of the stormwater sewers in the remainder of
its service area.
Pursuant to provisions of its charter and subject to limitations imposed by the
Constitution of Missouri, all powers of the District are vested in a six -member
Board of Trustees (the Board), three of whom are appointed by the Mayor of the
City of St. Louis and three of whom are appointed by the County Executive of
St. Louis County.
Reporting Entity
The District defines its financial reporting entity to include all component units
for which the District's governing body is financially accountable. To be
considered financially accountable, the component unit must be fiscally
dependent on the District and the District must either 1) be able to impose its
will on the component unit or 2) the relationship must have the potential for
creating a financial benefit or imposing a financial burden on the District.
Based on the foregoing, the District's financial statements include all funds that
are established under the authority of the District's charter. There are no
agencies, boards, commissions, or authorities that are controlled by or dependent
on the District.
Page 21
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 22
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 accounts in prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current year financial
statements. The District had two main areas of reclassifications within the
financial statements.
Page 23
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The first new presentation affected numerous asset lines as well as two liability
lines and the net position section. The District's review of GASB Statement No.
62, Codification of Accounting and Financial Reporting Guidance Contained in
Pre -November 30, 1989 FASB and AICPA Pronouncements (GASB 62),
paragraphs 30 & 31 resulted in the District reclassifying the following:
• Reclassified the District -wide Stormwater Fund out of Non -current Restricted
Assets and placed into Current Unrestricted Assets as well as out of Current
Liabilities Payable from Restricted Assets and placed into Current Liabilities.
This was due to the determination of ordinance 13274 having no intent to
restrict these funds and nearly all intended expenditures are operational, not
capital in nature.
• Reclassified the Stormwater Operations and Maintenance Fund out of Non-
current Restricted Assets and placed into Current Restricted Assets. This
was due to the determination of ordinance 13274 stating a restriction of using
funds solely for "existing public stormwater facilities." in addition, nearly all
intended expenditures are to be operational, not capital, in nature.
• The presentation of unspent bond proceeds changed from Current Restricted
Assets and is now presented in Non -current Restricted Assets. This was due
to the determination that these funds are to be disbursed for the construction
and/or acquisition of non -current assets resulting in the assets being
categorized as non -current. All expenditures are capital not operational, in
nature.
Page 24
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The reclassification presented in the 2013 financial statements is as follows:
Old Presentation of FY 2013
Current Assets:
Unrestricted Current Assets:
Cash and cash equivalents
Investments
Accrued income on investments
Restricted Current Assets:
Cash and cash equivalents
Investments
Non -current Assets:
Restricted Assets:
Cash and cash equivalents
Investments
Long-term investments
Accrued income on investments
Other Assets
Long-term investments
Current Liabilities:
Contracts and accounts payable
Current Liabilities
Payable From Restricted Assets:
Contracts and accounts payable
Grand Total
Net Position:
Restricted for:
Subdistrict construction and improvement
Unrestricted
New Presentation of FY 2013
Current Assets:
Unrestricted Current Assets:
$ 84,400,724 Cash and cash equivalents
67,190,638 Investments
807,682 Accrued income on investments
152,398,994
69,449,837
79,625,995
149,075,832
27,904,044
22,940,929
83,261,867
202,049
184,808,389
90,301,826
Restricted Current Assets:
Cash and cash equivalents
Investments
Non -current Assets:
Restricted Assets:
Cash and cash equivalents
Investments
Long-term investments
Accrued income on investments
Other Assets
Lang -term investments
$ 91,333,756
68,975,608
830,906
161,140,270
3,662,344
3,201,720
6,854,064
86,768,505
97,580,234
80,865,957
178,775
266,898,471
92,697,236
Current Liabilities:
27,421,384 Contracts and accounts payable 32,258,712
5,342.074
Current Liabilities
Payable From Restricted Assets:
Contracts and accounts payable
504.746
$ 493,321.583 Grand Total $ 493,321,583
$ 70,225,288
245,000,561
Net Position:
Restricted for:
Subdistrict construction and improvement
Unrestricted
$ 63,925,875
251,299,919
Grand Total $ 315,225,794 Grand Total $ 315,225,794
The second presentation change relates to the District's classification of principal
and interest payments. All of the District's subordinate debt requires monthly
escrow deposits to be made for semiannual/annual principal and interest
payments due on either January 1st or July 1st.. In prior years, the principal
liability was reduced and interest expense was recognized at the time each
monthly escrow deposit was recorded. In order to align outstanding long-term
debt on the District's Statement of Net Position with bank account balances, the
District now records a reduction to the liability only when the actual principal
payments are made to the bond holders. In addition, the subordinate bonds'
interest is accrued and an expense is recognized when interest is due. This
change represents a change in accounting practice and has been retroactively
adopted and balances have been restated as of July 1, 2012. This change had no
retroactive effect on net position.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Adoption of New Accounting Standards
During the year, the District implemented GASB Statement No. 65, Items
Previously Reported as Assets and Liabilities (GASB 65), which amends or
supersedes the accounting and financial reporting guidance for certainitems
previously required to be reported as assets or liabilities. The objective is to
either properly classify certain items that were previously reported as assets and
liabilities as deferred outflows of resources or deferred inflows of resources or
recognize certain items that were previously reported as assets and liabilities as
outflows of resources (expenses) or inflows of resources (revenues). Under GASB
65, bond issuance costs will now be expensed as incurred, instead of being
amortized over the term of the bond.
The implementation of GASB 65 also resulted in the reclassification of the
unamortized portion of bond refunding losses related to the District's 2012B
refunding issue. These amounts are now reported as Deferred Outflows of
Resources instead of as a reduction of Bonds Payable as shown below:
Account
New Classification Amount
Deferred Loss on refunding (previously included
in bonds payable, net) Deferred outflows of resources
Bond issuance costs (the unamortized portion
was previously reported as an asset)
$ 10,617,604
Outflow of resources 9,138,892
The District's adoption of GASB 65 in fiscal year 2014 has been applied
retroactively to fiscal year 2012 to reflect the expensing of bond issuance costs.
The impact of this change on the District's Statement of Net Position is as
follows:
Net position, beginning of year,
as previously reported
Effect of change in accounting related
to bond issuance costs
Net position, end of year,
as restated
June 30, 2013 June 30, 2012
$ 2,249,196,853 $ 2,218,294,341
(9,138,893) (8,391,259)
g 2,240,057,960 $ 2,209,903,082
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 26
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 2014 and 2013, the District capitalized $10,838,482 and
$12,305,615, respectively, of net interest expense.
Page 27
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 figure is netted against those materials and supplies
deemed to be obsolete. All 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.
The District first applies restricted resources when an expense is incurred for
purposes for which both restricted and unrestricted net position is available.
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.
Page 28
TFIE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Bond Issuance Costs
Bond issuance costs incurred are paid from the proceeds of revenue bond issues.
Due to GASB 65, bond issue costs are now expensed when incurred, whereas
previously they were deferred and amortized using the straight-line method over
the term of the bonds. For more detail, please refer to the section entitled
"Adoption of New Accounting Standards."
Compensated Absences
Vacation
Under the terms of the District's personnel policies, employees are allowed to
carry a maximum of 30 to 45 days of vacation (depending on length of service)
from one calendar year to the next. Since vacation accrued at year-end is
expected to be used by the employee during the following fiscal year, the accrual
is reported as a component of current deposits and accrued expenses payable.
Sick Leave
Employees earn sick pay benefits at accrual rates ranging from 10 days per year
to 12 days per year (depending on length of service). Unused sick leave can be
carried over at year-end without limitation. An employee retiring from the
District with five or more years of service, who has unused accrued sick leave
remaining, will be compensated for that portion of unused accrued sick leave at
the rate of 1-1/4% for each year of District service. The District has recorded a
liability, which has been actuarially determined to be equal to the accumulated
expense charge that will amortize the employees' benefits over their period of
District service. The liability, included in current deposits and accrued expenses
payable, includes vested accumulated rights to receive sick leave benefits
estimated to be paid within one year. The portion of sick leave expected to be
paid after one year is recorded as a component of non -current deposits and
accrued expenses payable.
Use Of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements. Actual
results could differ from those estimates.
Page 29
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
2. Deposits And Investments
Deposits
At June 30, 2014 the reported amount of the District's deposits was $46,969,658
and the bank balance was $50,725,661. Of the bank balance, $537,812 was
covered by federal depository insurance; $50,187,849 was collateralized with
securities held by a third party financial institution in the District's name. In
addition, the District has money market mutual funds of $12,030,165 held in a
trusted escrow account for the State that will be used to make future bond
payments.
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.
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%.
Deposits in each bank are insured by the Federal Deposit Insurance Corporation
(FDIC) in the amount of $250,000 for interest bearing accounts and noninterest
bearing accounts.
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, all
according to terms specified in the policy. The District also has investments in
money market mutual funds that hold securities approved by the District's
investment policy. At June 30, 2014 and 2013, all of the District's investments
were in compliance with the District's investment policy and charter.
Page 30
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
A summary of deposits and investments as of June 30, 2014 and 2013 is as
follows:
Investment Type
Deposits
Money Market Mutual Funds
Certificates of deposit
U.S. Treasury and agency
obligations
Commercial paper
Total
2014
2013
Cost Fair Value
Cost Fair Value
$ 46,969,658 $
12,030,165
100,000
456,905,358
97,513,315
46,969,658 $
12,030,165
100,000
455,362,626
97,560,650
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
$ 613,518,495 $ 612,023,098 $ 526,841,780 $ 525,075,360
Reconciliation to the financial statements:
Cash and Cash Equivalents
Unrestricted current
Restricted current
Restricted noncurrent
Investments
Unrestricted current
Restricted current
Restricted noncurrent
Long-term Investments
Restricted noncurrent
Other
2014
2013
$ 95,037,786 $
6,086,299
77,878,696
105,100,875
7,568,587
181,161,246
66,104,134
73,085,475
91,333,756
3,652,344
86,768,505
68,975,608
3,201,720
97,580,234
80,865,957
92,697,236
$ 612,023,098 $ 525,075,360
Page 31
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Interest Rate Risk
As of June 30, 2014 and 2013, the District had the following investments and
maturities:
2014 2013
Investment Type Fair Value
Weighted
Average
Maturity
(Years)
Fair Value
Weighted
Average
Maturity
(Years)
Money market mutual 5 12,030,165 0.00 $ 4,857,117 0.00
Certificates of deposit 100,000 2.72 200,000 2.07
L.S. Treasury obligations 285,468,272 1.33 188,141,798 0.65
U.S. agency obligations 169,894,354 1.40 198,715,721 2.05
Commercial paper 97,560,650 0.24 95,378,870 0.19
Total S 565,053,441
0.96
8 487,293,506
1.13
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.
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 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.
Page 32
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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, 2014 and 2013, the District's
investments in commercial paper were rated A-1 by Standard & Poor's (S&P) and
P-1 by Moody's Investors Service (Moody's). 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 S&P of "AA+" besides one short-term
U.S. agency obligation that carries a rating of "A 1+", with a value of
$11,099,030. Money market investments are rated as AAAm and Aaa-mf by S&P
and Moody's, respectively.
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, with no
more than 30% of the total portfolio invested in securities of any one agency; and
collateralized repurchase agreements are limited to 50% of the portfolio. U.S.
agency callable securities are limited to 30% of the portfolio, and commercial
paper and bankers' acceptances are limited to 25% each, with no more than 5% of
the total portfolio invested in any one issuer. The following table lists
investments in issuers that represent 5% or more of total investments at June 30,
2014 and 2013:
Issuer
Treasury Notes
Federal Home Loan Bank
Federal National Mortgage Association
Federal Home Loan Mortgage Corporation
Percent Of
Total Investments
2014 2013
50.7
6.1
10.1
9.7
35.8
13.3
13.1
10.1
Page 33
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
3. Note Receivable
The District has a note receivable with the City of Arnold, Missouri (the "City")
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 fiscal year 2033. At
June 30, 2014, future payments are as follows:
2015 $ 1,154,696
2016 1,154,696
2017 1,154,696
2018 1,154,696
2019 1,154,696
2020-2024 5,773,479
2025-2029 5,773,479
2030-2033 4,027,886
Less: Amount representing interest
Classification in Statement of Net Position:
21,348,324
6,701,534
$ 14,646,790
Current $ 529,989
Non -current 14,116,801
Total $ 14,646,790
Page 34
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
4. Capital Assets
The following is a summary
June 30, 2014 and 2013:
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 depredation:
Treatment and disposal plant
and equipment
Collection and pumping plant
General plant and equipment
Total accumulated depreciation
Total capital assets being depreciated, net
Total Capital Assets
Capital assets not being depreciated:
Land
Construction in progress
Total capital assets not being depreciated
Capital assets being depreciated:
Treatment and disposal plant
and equipment
Collection and pumping plant
General plant and equipment
Total capital assets being depreciated
Less: Accumulated depreciation:
Treatment and disposal plant
and equipment
Collection and pumping plant
General plant and equipment
Total accumulated depreciation
Total capital assets being depreciated, net
Total Capital Assets
of capital assets changes for the fiscal years ended
Balance
June S0, 2013 Additions
Deletions
Balance
June 30, 2014
$ 50,076,644 $
360,507,521
410,584,165
5,461,172 $ —
172,185,110 232,747,709
177,646,282 232,747,709
$ 55,537,816
299,944,922
355,482,738
1,027,055,525
2,226,256,235
92,176,648
173,558,583
60,764,222
4,066,119
16,335,248
911,987
2,642,119
1,184,278,860
2,286,108,470
93,600,648
3,345,488,408
238,388,924
19,889,354
3,563,987,978
(427,877,724)
(612,142,650)
(56,245,762)
(1,096,266,136)
2,249,222,272
$ 2,659,806,437
(29,816,528)
(37,117,725)
(7,152,954)
(74,087,207)
164,301,717
$ 341,947,999
(11,248,064)
(527,945)
(2,519,863)
(14,295,872)
5,593,482
$ 238,341,191
(446,446,188)
(648, 732,430)
(60,878,853)
(1,156,057,471)
2,407,930,507
$ 2,763,413,245
Balance
June 30, 2012
Additions
Balance
Deletions June 80, 2013
$ 46,026,763
379,119,335
$ 4,049,881 $ —
160,031,402 178,643,216
$ 50,076,644
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
3,153,389,932
15,479,009
178,420,467
2,747,756 •
196,647,232
221,669
2,491, 091
1,835,996
4,548,756
1,027,055,525
2,226,256,235
92,176,648
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)
(8,067,593)
(70,029,840)
126,617,392
(221,669)
(1,449,645)
(1,812,843)
(3,484,157)
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
Page 35
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 2014 and 2013, the District recorded revenue from property taxes in
the amount of $27,450,319 and $26,016,135, respectively.
Page 36
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, 2014:
Original
Issuance
Amounts
Bonds and notes payable:
Wastewater System Senior Revenue Bonds:
Series 2004A $ 175,000,000
Series 2006C 60,000,000
Series 2008A 90,000,000
Series 2010B 85,000,000
Series 2011E 52,250,000
Series 2012A 225,000,000
Series 2012B 141,730,000
Series 2018B 150,000,000
Water Pollution Control and Drinking Water
Series 2004B 161,280,000
Series 2005A
Series 2006A
Series2006B
Series 2008AJB
6,800,000
42,715,000
14,205,000
40,000,000
Missouri Department of Natural Resources:
Energy Loan Program 98,595
Energy Loan Program
Series 2009A
Series 2010A
Series 2010C
Series 2011A
Series2013A
223,793
23,000,000
7,980,700
37,000,000
39,769,300
52,000,000
Balance
June 80,
2013 Additions Retirements
2,375,000 $
60,000,000
30,000,000
86,000,000
50,610,000
225,000,000
141,730,000
Subordinate Revenue
108,780,000
4,750,000
32,085,000
10,945,000
32,040,000
1,312
223,799
20,093,400
7,471,600
33,999,000
31,962,553
— $ 2,375,000
1,685,000
150,000,000
Balance
June 30,
2014
Bonds (State Revolving Loans Program):
3,625,000 7,250,000
305,000
2,140,000
675,000
900,000
498,400
171,400
765,000
7,806,747
16,043,275
305,000
2,140,000
675,000
1,800,000
1,312
57,348
1,002,500
344,500
1,540,000
$ 1,344,052,388 $ 877,066,658 $ 182,929,822 $ 19,175,680
Add:
Unamortized premium, net
Total .
Deposits and accrued expenses:
Landfill closure and postelosure
costs
Compensated absences
Net OPEB obligation
Total
$ 736,800
7,524,797
4,018,709
$ 12,279,306
a..-
$
21,136 $
873,144
2,442,145
414,718
1,393,600
$
60,000,000
30,000,000
85,006,000
48,925,000
225,000,000
141,730,000
150,000,000
105,155,000
4,750,000
32,086,000
10,945,000
31,140,000
165,445
19,589,300
7,298,500
33,224,000
39,769,300
16,043,275
Current
Portion
1,755,000
2,125,000
7,635,000
310,000
2,170,000
085,000
1,820,000
16,880
1,025,700
351,500
1,580,000
795,000
1,040,820,820 $ 20,268,080
82,274,845
$ 1,123,095,665
a
$ 766,936
7,983,223
5,067,254
$ 3,336,425 $ 1,808,318 $
$ 1,995,805
13,807,413 $ 1,995,805
Page 37
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, 2013:
Original
Issuance
Amounts
Bonds and notes payable:
Wastewater System Senior Revenue Bonds:
Series 2004A $ 176,000,000
Series 2006C 60,000,000
Series 2008A 30,000,000
Series 2010B 85,000,000
Series 2011B 52,250,000
Series 2012A 225,000,000
Series 2012E 141,780,000
Balance
June 30,
2012
Additions Retirements
$ 163,630,000 $
60,000,000
30,000,000
85,000,000
52,250,000
225,000,000
141,730,000
Balance
June 30,
2013
Current
Portion
$ 161,255,000 $ 2,375,000 $ 2,375,000
60,000,000
30,000,000 —
- 85,000,000
1,640,000 50,610,000 1,685,000
- 225,000,000
- 141,730,000
Water Pollution Control and Drinlang Water Subordinate Revenue Bonds (State Revolving Loan8 Program):
Series 2004B 161,250,000 115,960,000
Series 2005A
Series 2006A
Series 2006B
Series 2008A/B
6,800.000
42,715,000
14,205,600
40,000,000
Missouri Department of Natural Resources:
Energy Loan Program 98,595
Energy Loan Program
Series 2009A
Series 2010A
Series 2010C
Series2011A
Capital Lease:
Oracle/Blue Heron
223,793
23,000,000
7,980,700
37,000,000
39,769,900
5,055,000
34,225,000
11,620,000
33,532,500
13,468
223,793
21,084,500
5,880,359
35,619,000
1,006,672
7,184,000
305,000
— 2,140,000
— 675,000
— 1,792,500
1,992,311
90,955.981
12,156
991,100
341,100
1,520,000
12,000,000 3,096,140 3,096,140
1,154,052,358 $ 658,396,362
Add:
tinamortized premium, net
Total
Deposits and accrued expenses:
Landfill closure and pastclosure
costs
Compensated absences
Net OPEB obligation
Total
$ 399,618,292 5 180,947,996
108,780,000
4,750,000
92,095,000
10,945,000
32,040,000
1,312
223,793
20,093,400
7,471,600
33,999,000
31,962,553
7,442,500
310,000
2,172,500
685,000
1,610,000
1,312
32,402
1,014,000
348,000
1,560,000
877,066,658 $ 19,435, 714
76,008,897
$ 953,075,555
$ 721,066 $ 14,734 S -. $ 735,800 $ —
7.269,231 553.572 596,306 7,524,797 1,881,199
3,399.555 2,132,454 1,513,300 4,018,709 —
$ 11,889,852 $ 3,001,060 3 2,111,606 $ 12,279,306 $ 1,881,199
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 $1,720,00.0,000, $518,000,000 has not been issued as of
June 30, 2014. These funds were sought to enable the District to comply with
federal and state clean water requirements.
Page 38
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
In December 2013, the District issued $150,000,000 of Wastewater System
Revenue Bonds Series 2013B (Series 2013B). 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 2.0% to 5.0% and
are payable in semiannual installments at . varying amounts through May 1,
2043.
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 fiscal 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 were removed
from the financial statements. This refunding decreased 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.
Page 39
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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 year 2013, the rate was 35%. On August 6, 2013, the
District was notified that the subsidy percentage would be reduced to 32% for the
2013 fall payment and would be reduced to 32.5% after that.
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 were through May 1, 2014. The liability related to Series 2004A
after May 1, 2014 has been paid. See the explanation for Series 2012B above for
further information.
Page 40
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The revenue bonds do not constitute a legal debt or liability for the District, the
State of Missouri, or for any political subdivision thereof and do not constitute
indebtedness within the meaning of any constitutional or statutory debt
limitation or restriction. Revenue derived from the operations of the Wastewater
System is pledged for the retirement of the outstanding Wastewater System
Revenue Bonds listed 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.
The issuance of the revenue bonds does not obligate the District to levy any form
of taxation therefore or to make any appropriation for their payments in any
fiscal year. The principal and interest on the bonds are expected to be paid from
future wastewater revenues. The scheduled payment of the principal of and
interest on the 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 2008AB bonds provided funds to
make loans to 14 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
were used for constructing, repairing, and equipping new and existing
wastewater facilities. The District's Participant Bonds have interest rates
ranging from 4.0% to 5.7% and are payable in semiannual installments at
varying amounts through January 1, 2029.
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 7 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 were 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 41
THE METROPOLITAN ST. LOUTS 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 were 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 10 Missouri political subdivisions and 1 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 were 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 7 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 were used to finance the
District's 3 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 42
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, 2011A, and 2013A direct loans (pages 45-49) 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, and
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, and 2006B bonds
or 100% for the Series 2008A/B bonds. Interest earned from this reserve fund
can be used by the District to fund interest payments on the bonds.
On the date of each payment of the principal amount of the District's Participant
Bonds, the trustee transfers from this reserve account to the master trustee an
amount equal to 60% of the principal payment for the Series 2004B bonds or 70%
for the Series 2005A, 2006A, and 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, and 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, 2014 and 2013, the District was in compliance with this covenant.
Page 43
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Principal and Interest Requirements on Revenue Bonds Payable
The annual principal and interest requirements to maturity on revenue bonds
payable outstanding as of June 30, 2014 are as follows:
Wastewater System Revenue Bonds Payable/
Water Pollution Control and Drinking Water
Revenue Bonds Payable
Years ending June 30,
Principal
Interest Total
2015 8 16,500,000 $ 38,069,320 $ 54,569,320
2016 22,860,000 37,686,773 60,546,773
2017 26,140,000 37,045,964 63,185,964
2018 26,685,000 36,261,508 62,946,508
2019 27,475,000 35,551,771 63,026,771
2020-2024 152,370,000 163,716,411 316,086,411
2025-2029 163,275,000 135,379,245 298,654,245
2030-2034 169,245,000 98,711,550 267,956,550
2035-2039 181,595,000 58,929,505 240,524,505
2040-2043 138,585,000 15,020,750 153,605,750
Total 8 924,730,000 $ 656,372,797 $ 1,581,102,797
Energy Efficiency Leveraged Note Payable
In April 2004, the DNR loaned $98,595 to the District. The Energy Efficiency
Leveraged Note Payable bore interest at a rate of 3.2% per annum and was
payable through August 1, 2013. The purpose of this note was to finance the
design, acquisition, installation, and implementation of energy conservation
measures. The principal and interest on this note was paid from the energy
savings from the projects or avoided costs resulting from the projects. There is no
outstanding balance for principal and interest at June 30, 2014.
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 was to finance
the design, acquisition, installation, and implementation of energy conservation
measures. As of June 30, 2014, the District completed the specific energy
conservation projects and spent $199,489 of the $223,793 loan amount. The
remaining $24,203 was 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.
Page 44
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Principal and Interest Requirements on Energy Efficiency Leveraged
Note Payable
The annual principal and interest requirements to maturity on the Energy
Efficiency Leveraged Note Payable outstanding as of June 30, 2014 are as
follows:
Energy Efficiency Leveraged Note Payable
Years ending June 30, Principal Interest
Total
2015 $ 15,880 $ 2,081 $ 17,961
2016 32,359 3,563 35,922
2017 33,173 2,749 35,922
2018 34,007 1,915 35,922
2019 34,863 1,059 35,922
2020 16,163 202 16,365
Total $ 166,445 $ 11,569 $ 178,014
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 was 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.
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.
Page 45
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 2009A outstanding as of June 30, 2014 are as
follows:
State of Missouri Direct Loan Series 2009A
Years ending June 30, Principal Interest Total
2015 S 1,025,700 $ 282,268 $ 1,307,968
2016 1,049,400 267,220 1,316,620
2017 1,073, 700 251,811 1,325,511
2018 1,098,500 236,045 1,334,545
2019 1,123,900 219,915 1,343,815
2020-2024 6,021,700 844,253 6,865,953
2025-2029 6,751,100 381,212 7,132,312
2030-2031 1,445,300 15,856 1,461,156
Total
S 19,589,300 S 2,498,580
22,U6'l,t3tbU
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.
The annual principal and interest requirements to maturity on the State of
Missouri Direct Loan Series 2010A outstanding as of June 30, 2014 are as
follows:
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.
Page 46
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
State of Missouri Direct Loan Series 2010A
Years ending June 30, Principal Interest
Total
2015 $ 351,500 $ 106,722 $ 458,222
2016 358,600 101,495 460,095
2017 366,000 96,161 462,161
2018 373,300 90,717 464,017
2019 380,900 85,164 466,064
2020-2024 2,024,100 338,488 2,362,588
2025-2029 2,237,900 181,712 2,419,612
2030 -2032 1,206,200 26,958 1,233,158
Total $ 7,298,500 $ 1,027,417 $ 8,325,917
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.
The annual principal and interest requirements to maturity on the State of
Missouri Direct Loan Series 2010C outstanding as of June 30, 2014 are as
follows:
State of Missouri Direct Loan Series 2010C
Years ending June 30,
Principal Interest
Total
2015 $ 1,580,000 $ 541,700 2,121,700
2016 1,620,000 515,485 2,135,485
2017 1,663,000 488,582 2,151,582
2018 1,705,000 460,969 2,165,969
2019 1,750,000 432,655 2,182,655
2020-2024 9,455,000 1,711,982 11,166,982
2025-2029 10,748,000 885,052 11,633,052
2030-2031 4,703,000 97,647 4,800,647
Total $ 33,224,000
6,134,072 $ 38,358,072
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%a and is payable in
semiannual installments at varying amounts through January 1, 2034.
Page 47
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Principal and Interest Requirements on State of Missouri Direct Loan
Series 2011A
As the District incurs approved capital expenses, the DNR reimburses the
District for the expenses from the bond proceeds account and deposits the
approved amount in a bond reserve fund. The District repays the bond at an
interest rate of 1.5% based on the amount that has been borrowed. All funds have
been drawn on this loan.
The annual principal and interest requirements to maturity on
Missouri Direct Loan Series 2011A outstanding as of June 30,
follows:
State of Missouri Direct
Loan Series 2011A
the State of
2014 are as
Years ending June 30, Principal
2015
2016
2017
2018
2019
2020-2024
2025-2029
2030-2034
795,000
1,620,000
1,662,000
1,704,000
1,747,000
9,428,000
10,690,000
12,123,300
Total $ 39,769,300
Interest Total
$ 604,491
586,291
561,508
536,086
510,025
2,135,334
1,376,641
516,321
ti,b`Lti,tiy
8 1,399,491
2,206,291
2,223,508
2,240,086
2,257,025
11,563,334
12,066,641
12, 639,621
6 4ti,o b,997
State of Missouri Direct Loan Series 2013A
In October 2013, the State of Missouri Direct Loan Program - ARRA issued to the
District an amount totaling $52,000,000 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 1.6% and is payable in
semiannual installments at varying amounts through July 1, 2034.
In accordance with the Direct Loan Series 2009A, 2010A, 2010C, 2011A, and
2013A, 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, 2014 and 2013, the District was in compliance with this covenant.
Page 48
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Principal and Interest Requirements on State of Missouri Direct Loan
Series 2013A
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 1.6% based on the amount that has been borrowed. As of
June 30, 2014 the outstanding loan balance was $16,043,275. The payment
requirements to maturity will be determined after the debt is fully issued.
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 and
stormwater operating revenues, providing funds to pay for expenses related to
the operation and maintenance of the District, and fulfilling Sinking Fund
requirements in accordance with the bond ordinances.
Sinking Fund
The bond ordinances provide for deposits to and the use of monies in the Sinking
Fund to be used for the sole purpose of principal and interest payments on the
bonds. Sufficient monies shall be paid in periodic installments from. the Revenue
Fund.
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 2013B 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, 2014 and
2013, cash and investments in the Debt Service Reserve Fund totaled
$57,168,703 and $46,962,390, respectively.
Page 49
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, 2014 and 2013, cash and investments in the Special
Participant Bond Reserve Account held on behalf of the District totaled
$121,443,013 and $129,456,509, 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, 2014.
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, 2012A, and 2013B bonds, shall be deposited into the
Project Fund. At June 30, 2014 and 2013, cash and investments in the Project
Fund totaled $194,968,331 and $160,339,298, 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, 2014 and 2013, cash and investments in the Rebate Fund totaled
$231,909 and $234,238, respectively.
Page 50
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 has
the ability to 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,
2014 was $1,040,820,820 and $1,149,783,801, respectively. 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.
7. Pension Plan
Plan Description
The Metropolitan St. Louis Sewer District Employees' Pension Plan (the Plan) is
a noncontributory single employer defined benefit plan providing retirement
benefits as well as death and disability benefits. As a condition of employment,
all full-time employees of the District commencing service prior to December 31,
2010, were eligible to be covered by the Plan. As of January 1, 2011 the Plan was
frozen to new employees. Instead, new employees of the District may participate
in the defined contribution plan. Current employees with less than ten years of
service on this date could also voluntarily elect to transfer from the Plan and
enter the defined contribution plan.
The District's Board of Trustees, primarily to improve benefits to members,
amended 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 51
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, 200U, 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 52
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 $11,850,000 and $11,564,228, excluding certain professional fees
paid by the District, were made to the Plan during the District's fiscal years
ended June 30, 2014 and 2013, respectively. These contributions were made in
accordance with actuarially determined contribution requirements based on
actuarial valuations performed at December 31, 2013 and 2012, respectively, and
for 2013 consisted of a) $6,062,646 normal cost plus b) $4,558,601 amortization of
the actuarial accrued assets in excess of the unfunded actuarial accrued liability
and prior changes c) multiplied by an interest factor of 1.0725.
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.
Page 53
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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, 2013
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
4.5% - 10.0% per annum
4.0% per annum increase
Includes inflation component of 2.75%
Trend Information
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.
Fiscal Year
2014
2013
2012
Annual
Pension Percentage Of Net Pension
Cost (APC) APC Contributed Obligation
$ 11,850,000
11,564,228
10,719,154
100%
100%
100%
S
Funded Status And Funding Progress
As of January 1, 2014, the Plan was 86.1% funded. The actuarial accrued
liability for benefits was approximately $275,657,000, and the actuarial value of
assets was approximately $237,433,000, resulting in an unfunded actuarial
accrued liability (UAAL) of approximately $38,224,000. The covered payroll
(annual payroll of active employees covered by the plan) was approximately
$46,600,000, and the ratio of the UAAL to covered payroll was 82.0%.
The schedule of funding progress, presented as RSI following the notes to the
financial statements, presents multiyear trend information about whether the
actuarial value of plan assets are increasing or decreasing over time relative to
the actuarial accrued liability for benefits.
Page 54
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
8, Other Pension Plans
Deferred Compensation Plan
The District offers its employees a Deferred Compensation Plan created in
accordance with Internal Revenue Code Section 457. The Deferred
Compensation Plan, available to all District employees, permits them to defer a
portion of their salary 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.
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.
Page 55
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
This Plan is intended to provide a means whereby the District may provide
retirement benefits to eligible employees and encourage such employees to
establish a regular method of savings, thereby providing a measure of financial
security for such employees and their beneficiaries upon retirement or in the
event of death or disability.
The Defined Contribution Plan issues a publicly available financial report that
includes financial statements and required supplementary information. That
report may be obtained by writing: The Metropolitan St. Louis Sewer District,
2350 Market Street, St. Louis, MO 63103-2555.
Employer Basic Contributions: For each payroll period, the District contributes
an amount equal to 7% of the covered compensation earned during such period by
each participant entitled to. an allocation of such contribution.
Employer Matching Contributions: For each payroll period, the District
contributes an amount equal to 50% of the covered compensation of such
participant withheld as an annual deferral (as defined in the Deferred
Compensation Plan); provided that, before -tax contributions in excess of 4% of
the covered compensation of the participant for the payroll period shall not be
considered for purposes of Employer Matching Contributions. Employer
Matching Contributions shall be up to the maximum amount of compensation
that may be taken into account for the Plan year.
In no event shall the sum of the employer contributions and employee
contributions allocated to the account of a participant for the Plan year exceed
the lesser of:
(a) The amount specified in the applicable Internal Revenue Code, as
adjusted annually for any applicable increases in the cost of living.
(b) 100% of the participant's compensation for such year.
The compensation limit referred to in (b) shall not apply to any contribution from
medical benefits after separation from service.
The District's contributions to the plan amounted to $742,851 and $523,670 for
the years ended June 30, 2014 and 2013, respectively.
Page 56
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Vesting: As of any time before the normal retirement age of a participant, the
first day of the month coinciding with or next following a person's sixty-fifth
birthday and completion of sixty months of continuous service (other than upon
death or permanent disability), the vested percentage of the amounts credited to
the participant's employer basic contributions account shall be determined in
accordance with the following schedule:
Months Of
Continuous Service
Less than 12
12 but less than 24
24 but less than 36
36 but less than 48
48 but less than 60
60
Vested(Non-Forfeitable)
Percentage
0%
20%
40%
60%
80%
100%
9. Post -Employment Benefits Other Than Pensions
Plan Description
As part of a total compensation package effective August 1, 2004 for general
employees and, with respect for union members, the later of August 1, 2004 or
the date of union ratification of a Memorandum of Understanding with respect to
this Plan modification, the District provides a single -employer defined benefit
health care plan to employees who retire from the District on or after age 62 and
with five years of service or whose age plus years of service equal 75 points ("Rule
of 75"). The District pays the monthly group health insurance premium for the
individual until the retiree becomes eligible for Medicare at age 65. In addition,
there is a closed group of disabled former employees who receive life insurance
coverage from the District.
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.
Page 57
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The District's annual other post -employment benefit (OPEB) cost (expense) is
calculated based on the annual required contribution (ARC) of the employer, an
amount actuarially determined in accordance with the parameters of GASB 45
and in conjunction with Plan benefits currently in force. The actuarial valuations
have been determined using estimated data provided by the District in
combination with assumptions on the probability of future events, while also
keeping an eye on long-term viability. These valuations are subject to continual
revision as future actuarial measurements may differ significantly from current
measurements due to the realization of new estimates and factors.
The ARC represents a level of funding that, if paid on an ongoing basis, is
projected to cover normal cost each year and to amortize any unfunded actuarial
liabilities. The District's annual OPEB cost for the current year and the related
information are as follows:
Amortization of past service cost
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
Net OPEB obligation - end of year
$ 875,500
1,462,200
87,700
2,425,400
150,702
(133,957)
2,442,145
(1.393 600)
1,048,545
4,018,709
$ 5,067,254
The Plan was established by District Ordinance, which
rict.
establish and amend plan benefit provisions to the Dist
The contribution requirements of the District and plan
and may be amended by the District. The Plan does not
report.
assigned the authority to
members are established
issue a publicly available
Page 58
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Trend Information
Fiscal
Year
2014
2013
2012
Net OPEB
Cost
$ 2,442,145
2,132,454
2,090, 556
Percentage of
Net OPEB Coat Net OPEB
Contributed Obligation
57.1
71.0
66,8
$ 5,067,254
4,018,709
3,399,556
As of June 30, 2014, the Plan was not funded. The actuarial accrued liability for
benefits as of July 1, 2013, the latest actuarial valuation, was approximately
$26,264,000, and there were no assets, resulting in an unfunded actuarial
accrued liability (UAAL) of approximately $26,264,000. The covered payroll
(annual payroll of active employees covered by the plan) in 2013 was
approximately $60,238,000, and the ratio of the UAAL to covered payroll was
43.6%.
The schedule of funding progress, presented as RSI following the notes to the
financial statements, presents trend information about whether the actuarial
accrued liability for benefits is increasing or decreasing over time.
Actuarial funding calculations of the Plan reflect a long-term perspective. The
Plan's actuarial valuations involve estimates of the value of reported amounts
and assumptions about the probability of events far into the future. Determined
amounts are subject to continual revision as results are compared to past
expectations and new estimates are made about the future.
Significant actuarial assumptions used in the valuation are as follows:
Latest valuation date
Actuarial cost method
Discount rate
Amortization method
Amortization period
Inflation rate
Investment Rate of Return
Health cost trend assumption
July 1, 2013
Projected Unit Credit
3.75% per annum
Level percentage of payroll amount, open
30-year period
2.5%
3.75% annual returns net of both administrative and
investment expenses
Getzen Trend Model — 6.9% graded to 4.5% over 70
years
Page 59
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Medical Trend:
Year Medical Year Medical
2013 6.9% 2040 6.1%
2014 5.7 2045 5.8
2015 5.4 2050 5.7
2016 5.4 2055 5.5
2017 5.6 2060 5.4
2018 5.5 2065 5.3
2020 5.5 2070 5.2
2025 5.5 2076 5.0
2030 6.5 2080 4.7
2035 6.7 2083+ 4.5
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
Select Rates
(0 to 4 years of service)
Years Of
Service Rate
3.75% per annum
RP 2000 Mortality Table (employee and healthy
annuitant tables).
Termination Of Employment:
Ultimate Rates
(after 4 years of service)
Attained
Age
Rate
0 20.0% 20 5.5%
1 12.0 30 3.7
2 7.5 40 1.1
50+ 0.0
Select rates based on service.
Ultimate rates based on attained age.
Ultimate rates are from the Sarason T-1 Table above.
Page 60
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Retirement - Rates Vary By Age
Age Before 75 Points After 75 Points
55 1.0% 10.0%
56 2.0 10.0
57 2.0 10.0
58 2.0 10.0
59 3.0 10.0
60 4.0 15.0
61 5.0 15.0
62 20.0 35.0
63 10.0 25.0
64 20.0 25.0
65 100.0 100.0
Disability
Age
Percent
Becoming
Disabled
20 0.056%
30 0.064
40 0.102
50 0.311
Future Retiree Coverage: 90.0% of eligible employees retiring prior to age 65 are assumed to
elect medical coverage
Future Dependent Care: 25.0% elect spouse coverage 0.0% dependent children coverage
10. Self -Insurance Programs
The District is exposed to various risks of loss related to torts; theft of, damage
to, and destruction of assets; errors and omissions; injuries to employees; and
natural disasters. The District has established a risk management program and
retains the risk related to its obligation to provide workers' compensation and
medical and hospitalization benefits to its employees; and to pay water backup
claims to its customers. The estimated liabilities for payment of incurred (both
reported and unreported) but unpaid claims relating to these matters are
included as a component of current deposits and accrued expenses, and as such
are expected to be paid within one year of the date of the statement of net assets.
At June 30, 2014 and 2013, these liabilities amounted to $2,923,884 and
$3,041,045, respectively.
Page 61
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
The claims liabilities reported are based on the requirements of GASB Statement
No. 10, 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
2014 and 2013 were as follows:
2014 2013
Liability, beginning of year $ 3,041,045 $ 2,575,977
Current year claims and changes in estimates 12,455,966 12,547,715
Claim payments (12,573,127) (12,082,647)
Liability, end of year $ 2,923,884 $ 3,041,045
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 $756,936 and $735,800 reported as landfill closure and post -
closure care liabilities at June 30, 2014 and 2013, respectively, represent the
cumulative amounts reported at fiscal year-end based on the use of 94.7% and
92.1% of the estimated capacity of the landfill for fiscal years ended 2014 and
2013, respectively. The District will recognize the remaining estimated cost of
closure and post -closure care of $42,273 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 2014.
Page 62
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
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 Statement of
Net Position will be adjusted accordingly.
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 Missouri Department of Natural Resources
("MDNR") 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.
Page 63
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
On April 27, 2012, the Court approved and entered the decree, thus concluding
the litigation of this lawsuit. Although this litigation matter has concluded, MSD
continues to work 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 continues to comply with the CD. 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.
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 one (1) case remains open. The remaining
case is a property damage case. Two (2) of the four (4) cases resolved were
voluntarily dismissed by the plaintiffs, another case was a property damage case
which settled, and the wrongful death case settled prior to trial. In addition to the
above discussed flooding cases, on September 13, 2013, five (5) new property damage
cases were filed against the District. These cases have yet to be served on the
District.
Contingencies
The District has entered into construction and other contracts amounting to
$247,737,650 and $213,088,826 at June 30, 2014 and 2013, respectively. Grants
to be received from various governmental agencies and entities to partially offset
the cost of the contract commitments amounted to $726,856 and $5,658 at
June 30, 2014 and 2013, respectively. The District had $518,000,000 and
$720,000,000 in revenue bonds authorized by the voters as of June 30, 2014 and
2013, respectively, but unissued. These funds were sought to enable the District
to comply with federal and state clean water requirements.
The District is a defendant in various other matters of litigation. Of these
matters, management and District's legal counsel do not anticipate any material
effect on the June 30, 2014 and 2013 financial statements.
Page 64
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
13. Restricted Net Position
The Statements of Net Position report $142,764,156 and $111,066,007 of
restricted net position at June 30, 2014 and 2013, respectively, of which
$70,920,910 and $63,925,875 are restricted due to enabling legislation, as of June
30, 2014 and 2013, respectively.
14. Segment Information
The District issued wastewater revenue bonds to finance wastewater
infrastructure projects. The District accounts for both wastewater and
stormwater activities in a single enterprise fund, but investors in those bonds
rely solely on the revenue generated by the wastewater activities for repayment.
Fiscal year 2014 and 2013 summary financial information for each business
segment is presented below.
Certain accounts in prior year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current year financial
statements. Please refer to the Reclassifications section of Footnote 1 for specific
details.
The reclassification presented in the 2013 segment financial statements is as
follows:
Page 65
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Old Presentation of FY 2013 New Presentation of FY 2018
Wastewater S:srwas- Total Was:swam: Rkrnwater 'iota:
Currant Assets: Current Assn:
Unrestricted Current Mee's: Unrestricted °savant Assets:
Cash and math equivelonte $ 83,202,960 9 1,197,764 9 84,400,724 Cash end cash equivalents $ 89.2.02,98C $ 8,180,796 $ 21,333,756
Investments 88,140,663 1,049,225 67,180,628 Investments =,147, 659 2,884,965 68,975,608
Accrued in®e an investments 207,632 — 807,682 Accrued income on investments 5.:7,822 23,274 830,906
150,151,245 2,247,749 152,386,994 161,101.246 10,989,1126 161,140,270
Restricted Current Meets: Retaliated Current Assets:
Cash and ash eqMvalent.. 69,449,897 — 69,449,837 Cash and crib equivalents — 8,662,344 3,852,844
bivestmente 79,886,996 — 79,626,996 investments — 8,201,720 3.201,720
149,075,932 — 149,076,832 — 8,254,064 6,854,064
Non -current Assets: Non -current &seta,
Restricted Assent Restricted Meets:
Cash end ceah equivalents 3,157,982 24,746,082 27,90.1,044 Cull andmah equivalents 72,607,799 14,160,706 96,769,506
Investments 5,640,709 17,400,220 22,940,929 Investments 85,188,704 12,411,520 97,590,234
Long-term jn tmouta 69,910,456 28,350,911 83,261,367 Long-term investments 69,210,456 20,855,501 80,865,967
Accrued income on investments t16,818 86,281 202,049 Awed income on investment. 116,818 81,967 178,776
88,726,945 66,582,444 184,308,399 217,991,777 47,591,694 265,398,471
Other Assets Other &eats
Long-term tnvstmenta 88,892,768 1,408,088 90,301,826 Long-term investments 88,992,768 3,804,478 92,297,238
Current liabilities: Current Liabilities:
Contracts end account. payable 27,238,153 183,231 27,421,984 Contracts and accolade payable 27,415,729 4,242,983 22,258,712
Current Liabilities Current Liabilities
Payable From Reetrinted Arita: Payable From Restricted Amnia:
Contracts end ocaunta payable — 5,342,074 6,342,074 Contracts and amounts payable — 504,746 504,746
Grand Total $ 429,807,627 $ 83,718,958 $ 493,321,583 Grand Total 429,430 051 9 63,991,682 $ 493,321592
Net P:e_u _:
Net Preitiott
Reetriatedtc:: 1eB•rc:aL f.::
Sls3etrint :ozan-:r_r.. tn1:nyr temant $ 9,449,942 $ 60,775,267 $ 70,222,233 Sr.crieC.1 ocrs—patine andcaprovesae: $ 8,449,946 $ 64,475,929 $ 62,926,875
Unrestricted 239,094,779 5,906,789 246,000,561 Unrestcte3 238,744,940 12,564,979 261,299,918
Grand Total 6 249.644,725 9 89,66.,s69 9 312.226,704 9re=4 Total 9 248,194,898 $ 67,089,908 8 81,6,225,704
The District has restated fiscal year 2013 due to changes mandated by GASB 65.
Please refer to the Adoption of New Accounting Standards section of Note 1 for
specific details.
The restatement, related to GASB 65, presented in the 2013 segment financial
statements impacts solely the wastewater segment and is as follows:
Page 66
THE METROPOLITAN ST. LOi7IS SEWER DISTRICT
Notes To Financial Statements (Continued)
Old Presentation of FY 2013
Deferred Outflow of Resources:
Bonds and notes payable -deferred loss
Total Deferred Outflow of Resources
Non -current Liabilities:
Bonds and notes payable, net of
cost of issuance
Grand Total
Non -operating Expenses:
Interest expense
Wastewater
$
913,883,345
913,883,345
New Presentation of FY 2013
Deferred Outflow of Resources:
Bonds and notes payable -deferred loss
Total Deferred Outflow of Resources
Non -current Liabilities:
Bonds and notes payable
. $ 913,888.345 Grand Total
Total Change
Non -operating Expenses:
$ 20,814,841 Interest expense
Wastewater
$ 10,617,604
10,617,604
933,639,841
933,639,841
$ 923,022,237
$ 9,138,892,
$ 21,062,474
Fiscal 2013 change
Amortization reversed $ (471,995)
Cost of issuance 3,447,827
Refunded cost of issuance (2.228,199)
Total fiscal 2013 change 747 66333
Prior year adjustments 8,391,259
Total Change $ 9,138,892
In addition to the restatements identified above, there were two restatements
between Wastewater and Stormwater Segments. Both the sewer service charges
(SSC) receivable and contracts and accounts payable (A/P) for fiscal year 2013
and the sewer service charge prepaid balance recorded to contracts and accounts
payable (A/P) and fiscal year 2013 Net Position - Beginning of Year (BOY) have
been restated due to a variation in segmenting procedures. These restatements
have no impact on the enterprise wide statements.
Page 67
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Old Presentation an' 2013 i L NewPresentation of FY 201a
C.. ra=t AM:ot,:
Unresttr?cted Current Assets-
SSC receivet-e
Current Liati_itit:es:
Cunt:meta and AP
Net. Position - BOY
Wastewater Stormwater Total Wastewater a... water
Current Asada:
Utwest-ricted Current Assets:
34, 7,495 $ — 8 34,257,405 SSC r'ere_vahte
Currant 1-iatiiiSea:
27,255,153 $ 183,231 $ 27,421,384 Con'saccs and A'P
Radius of Contracts and AIP
from Restricted to Unrestricted
$ 34, 55,142 $ 172,263 $ 34,207,405
8 27,415,729 $ 5,655 $ 27,421,384
— 4,887,828 4.457,828
Grand Total $ 27,415,729 $ 4,842,983 8 32,258,712
j 1,584,854,623 $ 533,559.521 $ 2218294,341 Net Pasitcn-BOY $ 1,675,613,722 $ 534,289,860 $ 2,209,903,082
COI Pr or period adjustments
also included is New
Preeentaticn cfTY 2613 Net
Position- BOY 8,391,259 8,391,259
Effect of aeq:aen2 restatement
Old Pceaentatira of FY 2013
Net Posit an - BOY
545,659 ("a49,?32i
$ 1,684,354,820 $ 538,939,521 $ 2,218,294.341
A segment is an identifiable activity reported as a stand-alone entity for which
one or more revenue bonds are outstanding. A segment has a specifically
identifiable revenue stream pledged in support of the revenue bonds and has
related expenses, gains and losses and assets and liabilities that are required by
external parties to be accounted for separately. The wastewater system is the
only reportable segment that meets the requirements of GASB Statement No. 34,
Basic Financial Statements - and Management's Discussion and Analysis - for
State and Local Governments. The stormwater system is reported on for
informational purposes only.
Page 68
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Financial information as of and for the years ended June 30, 2014 and 2013 of
the District's Wastewater Segment is as follows:
WASTEWATER SEGMENT
STATEMENTS OF NET POSITION
Assets
Current Assets
Unrestricted Current Assets
Cash and cash equivalents
Investments
Sewer service charges receivable, less allowance of
$3,972,449 in 2014 and $3,799,414 in 2013
Unbilled sewer service charges receivable, less allowance of
$402,335 in 2014 and $349,448 in 2013
Accrued income on investments
Other receivables
Supplies inventory
Total Unrestricted Current Assets
Non -Current Assets
Restricted Assets
Cash and cash equivalents
Investments
Long-term investments
Property taxes receivable, less allowance of $13,382 in 2014
and $13,382 in 2013
Accrued income on investments
Total Restricted Non -Current Assets
Other Assets
Notes receivable
Long-term investments
Total other assets
Capital Assets
Depreciable:
Treatment and disposal plant and equipment
Collection and pumping plant
General plant and equipment
Less: Accumulated depreciation
Net depreciable assets
Non -depreciable:
Land
Construction in progress
Net capital assets
Total Non -Current Assets
Total Assets
Deferred Outflow of Resources
Bonds and Notes Payable -Deferred Loss on Refunding
Total Deferred Outflow of Resources
For The Years
Ended June 30,
2014
2013
(As Restated)
F. 91,820,149
100,878,871
46,390,489
20,116,744
746,795
1,057,452
6,223,099
267,233,099
$ 83,202,960
66,140,653
34,035,142
17,472,360
807,632
964,595
6,621,892
209,245,234
62,585,847
162,975,839
48,391,812
26,294
259,601
274,238,893
14,116,801
70,161,237
84,278,038
72,607,799
85,166,704
59,910,456
9,667
116,818
217,811,444
14,640,552
88,892,758
103,533,310
1,184,278,860
1,678,492,307
77,101,471
2,939,872,638
986,568,052
1,953,304,586
49,317,549
291,894,365
2,294,516,500
1,027,055,525
1,623,517,635
75,880,114
2,726,453,274
936,679,376
1,789,773,898
44,433,883
352,895,060
2,187,102,841
2,653,033,431
2,508,447,595
2,920,266,530
10,108,350
10,108,350
2,717,692,829
10,617,604
10,617,604
Page 69
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial. Statements (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
Ended June 30,
2013
2014 (As Restated)
30,764,638 $
33,336,518
9,566,082
20,268,080
93,935,318
273,006
131,941
404,947
94,340,265
11,811,608
1,102,827,585
27,415,729
27,268,022
9,746,267
19,435,714
83,865,732
83,296
83,296
83.949,028
10,398,107
933,639,841
1,114,639,193 944,037,948
1,208,979,458 1,027,986,976
1,376,497,525
71,843,246
6,027,838
267,026,813
1,404,988,440
47,140,132
9,449,946
238,744,939
$ 1,721.395,422 $ 1,700,323.457
Page 70
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
WASTEWATER SEGMENT
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
For The Years
Ended June 30,
2013
2014 (As Restated)
Operating Revenues
Sewer service charges $ 248,762,503 $ 237,296,436
Recovery of (Provision for) doubtful sewer service charge accounts 7,230,389 (2,636,455)
Licenses, permits, and other fees 6,562,607 2,731,497
Other 1,866,902 3,206,237
Total Operating Revenues 264,422,401 240,597,715
Operating Expenses
Pumping and treatment 54,125,550 54,526,256
Collection system maintenance 32,721,633 31,094,470
Engineering 5,569,007 5,391,136
General and administrative 45,861,041 41,485,255
Water backup claims 2,713,168 3,503,220
Depreciation 63,757,854 59,688,021
Asset management 12,431,515 10,372,082
Total Operating Expenses 216,979,768 206,060,440
Operating Income
47,442,633 34,537,275
Non -Operating Revenues
Property taxes levied by the District 16,629 49,236
Investment income 2,670,333 956,664
Rent and other income 302,506 293,159
Total Non Operating Revenues 2,989,468 1,299,059
Non -Operating Expenses
Net loss on disposal and sale of capital assets 5,203,319 270,109
Non -recurring projects and studies 2,115,233 2,521,722
Interest expense 25,661,127 21,0622474
Total Non -Operating Expenses 32,979,679 23,854,305
Income Before Capital Grants And Contributions 17,452,422 11,982,029
Capital Grants And Contributions
Utility plant contributed 3,390,795 12,727,706
Grant revenue 228,748 --
Total Capital Grants And Contributions 3,619,543 12,727,706
Change In Net Position 21,071,965 24,709,735
Net Position - Beginning Of Year, As Previously Stated 1,700,323,457 1,684,354,820
Effect of Adoption of GASB 65 — (8,391,259)
Effect of Segment Restatement — (349,839)
Net Position - Beginning Of Year, As Restated 1,700,32,3,457 1,675,613,722
Net Position - End Of Year $ 1,721,395,422 $ 1.700,323,457
Page 71
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
WASTEWATER SEGMENT
STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities
Received from customers
Paid to employees for services
Paid to suppliers for goods and services
Net Cash Provided By Operating Activities
Cash Flows Provided By Non -Capital Financing Activities
Taxes levied and collected
Cash Flows From Capital And Related Financing Activities
Proceeds from capital grants
Proceeds from issuance of debt
Premium and (discounts) on sale of bonds
Interest received on bond proceeds to be used for capital improvements
Principal paid on debt
Interest and fees paid on debt
Payments for capital assets
Proceeds from sale of capital assets
Build America bond tax credit
Net Cash 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 (Decrease) In Cash And Cash Equivalents
Cash And Cash Equivalents At Beginning Of Year
Cash And Cash Equivalents At End Of Year
For The Years
Ended June 30,
2013
2014 (As Restated)
$ 249,853,960 $ 240,618,941
(91.425,385) (92,818,922)
(60,318,262) (51,457,724)
98,110.313 96,342,295
39,569
233,450 455
173,411,628 257,888,292
9,937,121 35,097,262
348,476 250,753
(10,071,556) (21,857,996)
(37,522.184) (35,117,398)
(158,323,507) (151,321,500)
273,138 225,258
1,603.658 1, 742,160
(20,109,776) 86,907,286
(544,430,180) (611,440,175)
460,116,950 451,665,623
4,604.924 4,636,501
302.506 293,159
(79,405,800) (154,844,892)
(1,405,263) 28,444,258
155,810,759 127, 366, 501
$ 154.405.496 $ 1555.810,759
Page 72
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
Financial information as of and for the years ended June 30, 2014 and 2013 of
the District's Stormwater Segment is as follows:
STORMWATER SEGMENT
STATEMENTS OF NET POSITION
Assets
Current Assets
Unrestricted Current Assets
Cash and cash equivalents
Investments
Sewer service charges receivable, less allowance of
$19,140 in 2014 and $20,377 in 2013
Unbilled sewer service charges receivable, less allowance of
$2,303 in 2014 and $2,197 in 2013
Property taxes receivable, less allowance of $515,097 in 2014
and $590,868 in 2013
Accrued income on investments
Total Unrestricted Current Assets
Restricted Current Assets
Cash and cash equivalents
Investments
Total Restricted Current Assets
Total Current Assets
Non -Current Assets
Restricted Assets
Cash and cash equivalents
Investments
Long-term investments
Property taxes receivable, less allowance of $610,610 in 2014
and $347,278 in 2013
Accrued income on investments
Total Restricted Non -Current Assets
Other Assets
Long-term investments
Total other assets
Capital Assets
Depreciable:
Collection and pumping plant
General plant and equipment
Less: Accumulated depreciation
Net depreciable assets
Non -depreciable:
Land
Construction in progress
Net capital assets
Total Non -Current Assets
Total Assets
For The Years
Ended June 30,
201E
2014 (As Restated)
$ 3,217,637 $ 8,130,796
4,222,504 2,834,955
173,238
115,168
2,136,300
9,589
172,263
109,873
2,325,743
23,274
9,874,436
6,086,299
7,568,587
13,596,904
3,652,344
3,201,720
13,654,886
6,854,064
23,529,322
20,450,968
15,293,349
18,185,406
17,712,322
822,066
49,539
14,160,706
12,413,530
20,955,501
666,955
61,957
52,062,682
48,258,649
2,924,238
3,804,478
2,924,238
3,804,478
607,616,163
16,499,177
602,738,600
16,296,534
624,115,340
169,489,419
619,035,134
159,586,760
454,625,921
459,448,374
6,220,267
8,050,557
468,896,745
5,642,761
7,612,460
472,703,595
523,883,665 524,766,722
547,412,987 545,217,690
Page 73
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
STORMWATER SEGMENT
STATEMENTS OF NET POSITION (Continued)
For The Years
Ended June 30,
2013
2014 (As Restated)
Liabilities
Current Liabilities
Contracts and accounts payable $ 31,118 $ 4,842,983
Retainage payable — 3,420
31,118 4,846,403
Current Liabilities -Payable From Restricted Assets
Contracts and accounts payable 742,374
Retainage payable 82,122
Total Current Liabilities
824.496
504,746
132,038
636.784
855,614 5,483,187
Net Position
Net investment in capital assets 468,896,745 472, 703,595
Restricted for:
Subdistrict construction and improvement 64,893,072 54,475,929
Unrestricted 12,767,556 12,554,979
Total Net Position $ 546,557,373 $ 539.734,503
Page 74
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
STORMWATER SEGMENT
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
Operating Revenues
Sewer service charges
Recovery of (Provision for) doubtful sewer service charge accounts
Other
Total Operating Revenues
Operating Expenses
Collection system maintenance
Engineering
Depreciation
Asset management
Total Operating Expenses
Operating Income (Loss)
Non -Operating Revenues
Property taxes levied by the District
Investment income
Total Non -Operating Revenues
Non -Operating Expenses
Net loss on disposal and sale of capital assets
Non -recurring projects and studies
Total Non -Operating Expenses
Income (Loss) 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, As Previously Stated
Effect of Segment Restatement
Net Position - Beginning Of Year, As Restated
Net Position - End Of Year
For The Years
Ended June 30,
2013
2014 (As Restated)
$ 1,370,519
(20,067)
$ 1,338,273
(18,189)
28,538
1,350,452 1,348,622
7,266,178
6,615,000
10,329,363
107,336
6,782,462
6,628,530
10,341,819
345,183
24,317,867 24,097,994
(22,967,415) (22,749,372)
27,433,690
296,216
25,966,899
100,302
27,729,906 26,067,201
45,124
1,377,434
525,418
2,154,481
1,422,558 2,679,899
3,339,933 637,930
3,482,937
4,783,029
24,184
3,482,937
4,807,213
6,822,870
5,445,143
539,734,503
533,939,521
349,839
539,734,503
534,289,360
$ 546.557.373 •$ 539,734.503
Page 75
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
Notes To Financial Statements (Continued)
STORMWATER SEGMENT
STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities
Received from customers
Paid to suppliers for goods and services
Net Cash Provided By Operating Activities
For The Years
Ended June 30,
2013
2014 (As Restated)
S 1,344,17 7
(17.590,886)
$ 1,722,431
(13,183,062)
(16,246,709)
(11,460,631)
Cash Flows Provided By Non -Capital Financing Activities
Taxes levied and collected 27,468,024
Cash Flows From Capital And Related Financing Activities
Proceeds from capital grants
Payments for capital assets
Proceeds from sale of capital assets
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
Net Cash Provided By (Used In) Investing Activities
Net Increase (Decrease) In Cash And Cash Equivalents
Cash And Cash Equivalents At Beginning Of Year
Cash And Cash Equivalents At End Of Year
(5,559,226)
71,901
22,9 7 4,201
24,184
(3,526,362)
43,815
(5,487,325)
(3,458,363)
(82,687,573)
75,235,093
371,929
(59,591,279)
45,648,517
378,128
(7,080,551)
(13,564,634)
(1,346,561)
25,943,846
(5,509,427)
31,453,273
$ 24,597,285
$ 25,943.846
15. Subsequent Events
In preparing these financial statements, the District has evaluated events and
transactions for potential recognition or disclosure through October 17, 2014, the
date the financial statements were available to be issued.
Page 76
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
REQUIRED SUPPLEMENTARY INFORMATION
EMPLOYEES' PENSION PLAN AND POST -EMPLOYMENT BENEFIT PLAN
June 30, 2014
Actuarial
Valuation
Date
12/31/2013
12/31/2012
12/31/2011
12/31/2010
12/31/2009
12/31/2008
Employees' Pension Plan
Schedule of Funding Progress
In (000s)
Entry Age
Actuarial Actuarial
Value Accrued
Of Assets Liability
(1) (2)
$ 237,433 $ 275,657
221,144 266,371
205,792 254,997
189,012 231,599
185,753 223,063
183,679 212,066
Actuarial
Actuarial Value
Valuation Of Assets
Date (1)
7/1/2013 $
7/1/2011
7/1/2009
7/1/2007
Unfunded
Actuarial
Accrued Annual
Liability Funded Covered
(UAAL) Ratio Payroll
(1)-(2) (1)/(2) (3)
(38,224) 86.1 $ 46,600
(45,227) 83.0 48,333
(49,205) 80.7 49,432
(42,587) 81.6 51,703
(37,310) 83.3 52,267
(28,387) 86.6 48,077
Post -Employment Benefit Plan
Schedule of Funding Progress
In (000s)
Unfunded
Actuarial
Actuarial Accrued
Accrued Liability
Liability (UAAL)
(2) (1)-(2)
26,264 $ 26,264
24,103 24,103
24,412 24,412
21,938 21,938
Funded
Ratio
(1)/(2)
0%
0%
0%
0%
Covered
Payroll
(3)
$ 60,238
52,649
50,230
43,640
UAAL As A
Percentage
Of Covered
Payroll
(1)-(2)/(3)
82.0 %
93.6
99.5
82.4
71.4
59.0
UAAL As A
Percentage
Of Covered
Payroll
(1)-(2)/(3)
43.6 %
45.8
48.6
50.3
Page 77
III
'II ;
Ill
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II
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III
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