HomeMy Public PortalAbout2016 Audited Financial
THE METROPOLITAN ST. LOUIS
SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
Contents
Page
Independent Auditors’ Report........................................................................ 1 - 2
Management’s Discussion And Analysis ..................................................... 3 - 12
Financial Statements
Statements of Fiduciary Net Position ..............................................................13
Statements of Changes in Fiduciary Net Position ............................................14
Notes to Financial Statements .................................................................. 15 - 29
Required Supplementary Information Under GASB No. 67
Schedule of Changes in Net Pension Liability ................................................30
Schedule of Employer Contributions ...............................................................31
Actuarial Methods and Assumptions Used ......................................................32
Schedule of Annual Weighted Rate of Return on Investments .......................33
Statistical Section (Unaudited)
Performance and Net Position Value ...............................................................34
Revenues by Source and Total Employer Contributions .................................35
Expenses by Type and Total Benefit Payments ...............................................36
Member Count and Total Benefit Recipients ..................................................37
Top Ten Holdings by Investment Manager and Percentage Distribution........38
Schedule of Investment Manager and Advisor Fees ........................................39
Page 1
CliftonLarsonAllen LLP
CLAconnect.com
INDEPENDENT AUDITORS’ REPORT
Board of Trustees
The Metropolitan St. Louis Sewer District
St. Louis, Missouri
Report on the Financial Statements
We have audited the accompanying financial statements of The Metropolitan St. Louis Sewer District
Employees’ Pension Plan (the Plan), which comprise the statement of fiduciary net position as of
December 31, 2016, and the related statements of changes in fiduciary net position for the year then
ended, and the related notes to the financial statements.
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 audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States of
America. 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.
Board of Trustees
The Metropolitan St. Louis Sewer District
Page 2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
fiduciary net position of the Plan as of December 31, 2016, and the changes in fiduciary net position for
the year then ended, in accordance with accounting principles generally accepted in the United States
of America.
Other Matters
The financial statements of The Metropolitan St. Louis Sewer District Employees’ Pension Plan as of
December 31, 2015, were audited by predecessor auditors whose report dated August 16, 2016,
expressed an unmodified opinion on those financial statements.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis on pages 3 through 12 and pension plan schedules on pages
30 through 33 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 audits of the basic financial statements. However, we did not audit the information
and express no opinion on it.
Other Information
Our audit was conducted for the purpose of forming an opinion on the Plan’s financial statements. The
schedules included in the statistical section on pages 34 through 39, are presented for purposes of
additional analysis and are not a required part of the financial statements.
The schedules included in the statistical section are the responsibility of management and were derived
from and relate directly to the underlying accounting and other records used to prepare the financial
statements. Such information has been subjected to the auditing procedures applied in the audit of the
financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and other additional procedures in accordance
with auditing standards generally accepted in the United States of America. In our opinion, the
schedules included in the statistical section are fairly stated, in all material respects, in relation to the
financial statements as a whole.
CliftonLarsonAllen LLP
St. Louis, Missouri
August 29, 2017
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 3
MANAGEMENT’S DISCUSSION AND ANALYSIS
For The Years Ended December 31, 2016 and 2015
As management of The Metropolitan St. Louis Sewer District Employees’ Pension Plan (“Plan”), we
offer readers of the Plan’s financial statements this Management’s Discussion and Analysis
(“MD&A”) of the financial activities of the Plan for the years ended December 31, 2016 and 2015.
This MD&A is intended to supplement the Plan’s financial statements, and we encourage readers to
consider the information presented here in conjunction with those statements, which begin on page
13. The Plan is a noncontributory single employer defined benefit plan providing retirement benefits
as well as death and disability benefits to all full-time employees of The Metropolitan St. Louis
Sewer District (“District”) commencing service prior to January 1, 2011, the date entrance to the plan
was frozen.
OVERVIEW OF THE FINANCIAL STATEMENTS
The following MD&A is intended to serve as an introduction to the Plan’s financial statements. The
basic financial statements are:
1) Statements of Fiduciary Net Position
2) Statements of Changes in Fiduciary Net Position
3) Notes to Financial Statements
This report also contains required supplementary information to the basic financial statements, which
provides actuarial information for use in analyzing the status of the Plan, and includes:
1) Schedule of Changes in Net Pension Liability
2) Schedule of Employer Contributions
3) Actuarial Methods and Assumptions Used
4) Schedule of Annual Weighted Rate of Return on Investments
Certain revenues, expenses associated with administering the Plan, and other trend data are presented
immediately following the required supplementary information in the statistical section of this report.
The basic financial statements contained in this report are described below:
The Statements of Fiduciary Net Position are a point in time snapshot of account balances at
year-end. It reports the assets available for future payments to retirees, and any current
liabilities that are owed as of the statement date. The resulting net position value [assets
minus liabilities equal net position] represents the value of net position restricted for pension
benefits.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 4
The Statements of Changes in Fiduciary Net Position display the effect of the Plan’s
transactions that occurred during the year [additions minus deductions equal net increase
(decrease) in net position]. This net increase (decrease) in net position reflects the change in
the net position value of the Statements of Fiduciary Net Position from the prior year to the
current year. Both statements are in accordance with Governmental Accounting Standards
Board (“GASB”) Pronouncements.
The Notes to Financial Statements are an integral part of the financial statements and provide
additional information that is essential for a comprehensive understanding of the data
provided in the financial statements. These notes describe the accounting and administrative
policies under which the Plan operates, and provides additional levels of detail for selected
financial statement items. See Notes to Financial Statements beginning on page 15 of this
report.
Because of the long-term nature of a defined benefit pension plan, financial statements alone cannot
provide sufficient information to properly reflect the ongoing Plan perspective. Therefore, in addition
to the financial statements explained above, this financial report includes additional schedules entitled
“Required Supplementary Information Under GASB No. 67.”
The Schedule of Changes in Net Pension Liability (page 30) includes actuarial information
about the status of the Plan from an ongoing, long-term perspective and overall net position of
the Plan. The total pension liability is actuarially determined. A total pension liability in
excess of Plan fiduciary net position indicates that a net pension liability exists.
The Schedule of Employer Contributions (page 31) presents historical trend information
regarding the value of total annual contributions actuarially determined to be paid by the
District and the actual performance of the District in meeting this requirement.
Actuarial Methods and Assumptions Used and the Schedule of Annual Weighted Rate of
Return on Investments (pages 32 and 33) provide information regarding assumptions and
interest rates used in the actuarial calculations.
FINANCIAL HIGHLIGHTS 2016
Net position restricted for pension benefits totaled $251,010,031 as of December 31, 2016 for
an increase of $6,797,792 or 2.8% as compared with December 31, 2015. This increase in net
position primarily resulted from investment gains during the year offset by a 5.4% increase in
benefits paid to retirees and beneficiaries as employer contributions remained essentially flat
compared to the prior year.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 5
The Plan’s funding objective is to meet long-term benefit obligations to the extent possible.
As of December 31, 2016, the date of the latest actuarial valuation, the funded ratio of the
Plan, defined as the Plan’s fiduciary net position as a percentage of the actuarially determined
total pension liability, was 78.92%. In general, this means that for every dollar of pension
benefits due, the Plan has approximately $0.79 of net position available for payment. The
Plan’s funding ratio decreased by 3.36 percentage points as compared with the funding ratio
for December 31, 2015. The decrease in the funding ratio is due to Plan performance below
the assumed rate of return and an actuarial assumption change. For the December 31, 2016
actuarial valuation, the RP-2014 Mortality Tables were utilized while in prior years the RP-
2000 Mortality Tables were assumed. As a result of this change and the lower return on the
actuarial value of assets, the recommended contribution for the calendar year ending
December 31, 2017 is increasing to $12,328,093 or 21.5% over the recommended
contribution for the prior year of $10,145,562.
Additions to the Plan’s net position (page 14) increased from $8,261,503 for 2015 to
$22,152,288 for 2016, an increase of $13,890,785 or 168.1%, due primarily to an increase of
$14,776,074 in the appreciation of the fair value of the investments and an increase of
$88,544 in the employer contributions offset by a reduction of $1,034,603 in interest and
dividend income.
Benefits paid to retirees and beneficiaries (deductions from the Plan’s net position, page 14)
increased from $14,474,566 for 2015 to $15,260,904 for 2016, an increase of $786,338 or
5.4%.
Administrative expenses (deductions from the Plan’s net position, page 14) increased from
$90,519 for 2015 to $93,592 for 2016, an increase of $3,073 or 3.4%.
FINANCIAL HIGHLIGHTS 2015
Net position restricted for pension benefits totaled $244,212,239 as of December 31, 2015 for
a decrease of $6,303,582 or 2.5% as compared with December 31, 2014. This decrease
consists of a net investment loss of $1,809,875 and Plan payments and expenses net of
contributions of $4,493,707.
The Plan’s funding objective is to meet long-term benefit obligations to the extent possible.
As of December 31, 2015, the date of the 2015 actuarial valuation, the funded ratio of the
Plan, defined as the Plan’s fiduciary net position as a percentage of the actuarially determined
total pension liability, was 82.28%. In general, this means that for every dollar of pension
benefits due, the Plan has approximately $0.82 of net position available for payment. The
Plan’s funding ratio decreased by 3.98 percentage points as compared with the funding ratio
for December 31, 2014. The decrease in the funding ratio is primarily attributed to Plan
performance below the assumed rate of return resulting in a decrease in the Plan’s fiduciary
net position.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 6
Additions to the Plan’s net position (page 14) decreased from $17,749,266 for 2014 to
$8,261,503 for 2015, a decrease of $9,487,763 or 53.5% due primarily to a reduction of
$7,307,622 in the appreciation of the fair value of the investments, a reduction of $1,555,692
in interest and dividend income and a $611,468 reduction in the employer contributions.
Benefits paid to retirees and beneficiaries (deductions from the Plan’s net position, page 14)
increased from $13,394,219 for 2014 to $14,474,566 for 2015, an increase of $1,080,347 or
8.1%.
Administrative expenses (deductions from the Plan’s net position, page 14) increased from
$86,504 for 2014 to $90,519 for 2015, an increase of $4,015 or 4.6%.
ANALYSIS OF FINANCIAL ACTIVITIES
The Plan’s funding objective is to meet long-term benefit obligations through investment income and
contributions. Accordingly, the receipt of income from investments and employer contributions
provide the reserves needed to finance future retirement benefits.
Relative to the Public Plans peer group for 2016 and 2015, the Plan was up by 5.1% and down by
0.7%, respectively, which ranked in the 92nd and 73rd percentile for 2016 and 2015, respectively. Net
position restricted for pension benefits increased by $6,797,792 in 2016 and decreased by $6,303,582
in 2015. This net position is used to meet ongoing benefit obligation to the Plan’s participants and
their beneficiaries.
The Metropolitan St. Louis Sewer District’s (“District”) contributions into the Plan, as determined by
the Plan’s actuary, increased slightly for 2016 compared to 2015. The primary reason for the
increase was the return on the actuarial value of assets below the assumed rate of 7.0%.
Overall, the Plan remains adequately funded and any cumulative difference between actuarial
liabilities and assets is being amortized and funded over an appropriate period. It is important to
remember that the Plan’s funding is based on a long time horizon, where temporary ups and downs in
the market are expected. The more critical factor is that the Plan be able to meet an expected
earnings yield of 7.0% on average. Both the Plan’s investment performance and the rate of return on
actuarial value have averaged 2.4% over the last three years, which is below the actuarially assumed
investment rate of 7.0%. Since this year’s performance falls below the actuarially assumed
investment rate, it could result in additional contributions in upcoming years.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 7
Based upon the Plan’s actuarial computations under Statement No. 67 of the Governmental
Accounting Standards Board, the actuarially determined total pension liability increased from
$296,812,242 as of December 31, 2015 to $318,049,216 as of December 31, 2016. To calculate the
net pension liability, the Plan’s fiduciary net position is subtracted from the total pension liability.
Reducing the total pension liabilities by the $251,010,031 and $244,212,239 Plan fiduciary net
positions as of December 31, 2016 and 2015, respectively, results in net pension liabilities of
$67,039,185 and $52,600,003 as of December 31, 2016 and 2015, respectively. The existence of a
net pension liability means that additional future funding may be needed to reduce this liability.
FINANCIAL ANALYSIS
The condensed Statements of Fiduciary Net Position as compared to prior years are as follows:
2016 Change
2016 2015 Amount $
ASSETS
Investments at Fair Value 250,913,578$ 244,122,518$ 6,791,060$
Other Assets 245,903 242,367 3,536
Total Assets 251,159,481 244,364,885 6,794,596
LIABILITIES 149,450 152,646 (3,196)
NET POSITION RESTRICTED
FOR PENSION BENEFITS 251,010,031$ 244,212,239$ 6,797,792$
2015 Change
2015 2014 Amount $
ASSETS
Investments at Fair Value 244,122,518$ 250,217,335$ (6,094,817)$
Other Assets 242,367 468,493 (226,126)
Total Assets 244,364,885 250,685,828 (6,320,943)
LIABILITIES 152,646 170,007 (17,361)
NET POSITION RESTRICTED
FOR PENSION BENEFITS 244,212,239$ 250,515,821$ (6,303,582)$
December 31,
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 8
As previously noted, net position viewed over time may serve as a useful indicator of the Plan’s
financial position. At the close of calendar years 2016 and 2015, the assets of the Plan exceeded its
liabilities by $251,010,031 and $244,212,239, respectively, in net position restricted for pension
benefits. The net position is available to meet the Plan’s ongoing obligation to the Plan’s participants
and their beneficiaries.
Despite variations in the markets, management and the Plan’s actuary concur that the Plan remains in
a sound financial position to meet its obligations to the Plan’s participants and their beneficiaries.
The current financial position is the result of a successful investment program and prudent
management practices that have been in place for many years.
The condensed Statements of Changes in Fiduciary Net Position as compared to prior years are as
follows:
2016 Change
2016 2015 Amount $
ADDITIONS
Net Investment Income (Loss) 11,992,366$ (1,809,875)$ 13,802,241$
Employer Contributions 10,159,922 10,071,378 88,544
Total Additions 22,152,288 8,261,503 13,890,785
DEDUCTIONS
Benefits Paid to Retirees and Beneficiaries 15,260,904 14,474,566 786,338
Administrative Expenses 93,592 90,519 3,073
Total Deductions 15,354,496 14,565,085 789,411
NET INCREASE (DECREASE)6,797,792 (6,303,582) 13,101,374
NET POSITION RESTRICTED FOR
PENSION BENEFITS, January 1 244,212,239 250,515,821 (6,303,582)
NET POSITION RESTRICTED FOR
PENSION BENEFITS, December 31 251,010,031$ 244,212,239$ 6,797,792$
For the Years Ended
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 9
As noted above, the funds needed to finance retirement benefits are accumulated through the
collection of employer contributions and through earnings on investments (net of investment
expense). Total additions for the years ended December 31, 2016 and 2015, total $22,152,288 and
$8,261,503, respectively.
Additions to Plan assets for 2016 increased from 2015 due to the increase in the fair values of the
investments held by the Plan.
The Plan was created to provide retirement, survivor, and disability benefits to qualified members
and their beneficiaries. The cost of such programs includes recurring benefit payments as designated
by the Plan and the cost of administering the Plan.
As noted above, deductions for the year ended December 31, 2016 totaled $15,354,496, an increase
of 5.4% over 2015. The increase in benefits paid resulted primarily from an increase in the number
of retirees receiving benefits by 26 members or a 3.8% increase. Additions to Plan net position of
$22,152,288 exceeded deductions from Plan net position of $15,354,496 for the year ended
December 31, 2016. The Plan has consistently managed within its administrative expense budget,
with no material variances between planned and actual expenditures.
2015 Change
2015 2014 Amount $
ADDITIONS
Net Investment Income (Loss) (1,809,875)$ 7,066,420$ (8,876,295)$
Employer Contributions 10,071,378 10,682,846 (611,468)
Total Additions 8,261,503 17,749,266 (9,487,763)
DEDUCTIONS
Benefits Paid to Retirees and Beneficiaries 14,474,566 13,394,219 1,080,347
Administrative Expenses 90,519 86,504 4,015
Total Deductions 14,565,085 13,480,723 1,084,362
NET INCREASE (DECREASE)(6,303,582) 4,268,543 (10,572,125)
NET POSITION RESTRICTED FOR
PENSION BENEFITS, January 1 250,515,821 246,247,278 4,268,543
NET POSITION RESTRICTED FOR
PENSION BENEFITS, December 31 244,212,239$ 250,515,821$ (6,303,582)$
For the Years Ended
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 10
INVESTMENT PERFORMANCE - 2016
The following are a few characteristics and achievements for the Plan for the year ended
December 31, 2016:
The Plan ended the year with a net position of $251,010,031.
The Plan’s performance for the year was 5.1% compared to the policy benchmark index of
6.6%, and the average five-year return was 6.0% compared to the policy benchmark index of
6.4%.
The actual asset allocation is as follows:
2016 2015
Equities:
Domestic Large Cap Stocks 20.0 % 15 - 25 % 20.7 % 21.1 %
Domestic Small-Mid Cap Stocks 6.0 2 - 8 6.6 6.1
International Developed Markets Stocks 10.0 5 - 15 10.4 10.4
International Emerging Markets Stocks 4.0 2 - 8 3.9 3.1
Fixed Income:
Domestic Core Bonds 14.0 10 - 20 14.2 14.4
Domestic Core "Plus" Bonds 12.0 10 - 20 11.6 12.0
Global Bonds 9.0 4 - 14 8.8 8.8
Emerging Fixed Income — 0 - 7 — —
Opportunistic Credit — 0 - 5 — —
High Yield Bonds — 0 - 7 — —
Other:
Real Estate 5.0 0 - 10 6.4 6.2
Global Tactical — 0 - 12 — —
Market Neutral — 0 - 7 — —
Real Assets 5.0 0 - 10 — 3.1
Absolute Return — 0 - 7 — —
Hedge Funds 15.0 0 - 20 13.6 14.1
Cash Equivalents — — 3.8 0.7
Asset Class
Actual
Allowable
RangeTarget
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 11
All asset classes have been rebalanced when needed during the year in order to maintain a weighting
consistent with the strategic allocation ranges. Resolution 2986, effective August 2011, authorized
initial proposed targets and ranges. Resolution 3318, effective November 2016, authorized new
proposed targets and ranges that were implemented in 2016 and are reflected above. Resolution 3226
was adopted July 2015 and resolved that the codified document entitled “Metropolitan St. Louis
Sewer District, Statement of Investment Policy, Objectives and Operating Guidelines” including all
appendices represents the Investment Policy, Objectives and Operating Guidelines of the Employees’
Pension Plan.
Ordinance 13719, effective September 2013, authorized Pavilion to act as the Plan’s investment
consultant for the District and provide investment advisory services. Pavilion’s contract to act as the
Plan’s investment consultant for the District and to provide investment advisory services was
extended with Resolutions 3170, 3234 and 3298, which authorized the exercise of one-year renewal
options.
Overall asset class allocations changed moderately. Annual changes in asset allocation are the result
of relative asset class performance, redemptions from investments to pay benefits and Plan expenses,
contributions to new or existing investments, and regular rebalancing transactions. The largest
changes in sub-classes were due to the liquidation of the Real Assets investment. Those funds were
held in cash at year-end in preparation for additional funding into the Real Estate sub-class. While
some of the sub-classes were over target by varying percentage points, they were all still within the
target ranges. Resolution 2987, effective August 2011, authorized specific investment managers to
act on behalf of the Plan to actively manage specific investment types. Resolution 3068, effective
January 2013, amended the master list of authorized investment managers which was further
amended for individual investment managers by Resolutions 3138 (February 2014), 3183 (December
2014), 3209 (May 2015), 3221 (June 2015), 3308 (October 2016) and 3319 and 3320 (both in
November 2016).
FIDUCIARY RESPONSIBILITIES
The Board of Trustees and senior management are fiduciaries of the Plan and Trust. Fiduciaries are
charged with the responsibility of assuring that the assets of the Plan are used exclusively for the
benefit of the Plan’s participants and their beneficiaries.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Management’s Discussion And Analysis (Continued)
Page 12
REQUEST FOR INFORMATION
This financial report is designed to provide the Board of Trustees, our members, ratepayers,
investment managers, and creditors with an overview of the Plan’s finances and accountability for the
money received. Questions concerning any of the information provided in this report or requests for
additional financial information should be addressed to:
Tim Snoke, Secretary-Treasurer
The Metropolitan St. Louis Sewer District
2350 Market Street
St. Louis, MO 63103-2555
E-mail: tsnoke@stlmsd.com
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
See the accompanying Notes to Financial Statements. Page 13
STATEMENTS OF FIDUCIARY NET POSITION
2016 2015
ASSETS
Investments at Fair Value:
Mutual Funds 85,978,099$ 81,504,039$
Collective Investment Funds 85,448,895 92,901,411
Corporate Obligations 21,073,241 21,641,376
Domestic Common Stocks 17,264,512 16,364,200
Real Estate Investments 16,029,927 15,125,222
US Treasury and Agency Obligations 12,165,384 12,267,405
Money Market Funds 11,399,948 2,603,081
Municipal Obligations 872,406 1,044,415
Foreign Stocks 681,166 671,369
Total Investments 250,913,578 244,122,518
Receivables
Interest and Dividends Receivable 245,903 242,367
Total Receivables 245,903 242,367
Total Assets 251,159,481 244,364,885
LIABILITIES
Accrued Expenses 149,450 152,646
Total Liabilities 149,450 152,646
NET POSITION RESTRICTED FOR PENSION
BENEFITS 251,010,031$ 244,212,239$
December 31,
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
See the accompanying Notes to Financial Statements. Page 14
STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION
For the Years Ended
December 31,
2016 2015
ADDITIONS TO NET POSITION ATTRIBUTED TO:
Investment Income:
Net Appreciation (Depreciation) in Fair Value of Investments 9,913,748$ (4,862,326)$
Interest and Dividends 2,894,259 3,928,862
Total Investment Income (Loss) 12,808,007 (933,464)
Less - Investment Managers' and Advisors' Fees 815,641 876,411
Net Investment Income (Loss) 11,992,366 (1,809,875)
Employer Contributions 10,159,922 10,071,378
Total Additions 22,152,288 8,261,503
DEDUCTIONS FROM NET POSITION ATTRIBUTED TO:
Benefits Paid to Retirees and Beneficiaries 15,260,904 14,474,566
Administrative Expenses 93,592 90,519
Total Deductions 15,354,496 14,565,085
NET INCREASE (DECREASE)6,797,792 (6,303,582)
NET POSITION RESTRICTED FOR PENSION
BENEFITS, January 1 244,212,239 250,515,821
NET POSITION RESTRICTED FOR PENSION
BENEFITS, December 31 251,010,031$ 244,212,239$
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 15
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 And 2015
1. Summary of Significant Accounting Policies
The significant accounting policies applied by the Plan in the preparation of the
accompanying financial statements are summarized as follows:
Basis of Accounting
The accompanying financial statements have been prepared on the accrual basis of accounting
and adhere to U.S. Generally Accepted Accounting Principles as issued by the Governmental
Accounting Standards Board (“GASB”). GASB Statement No. 67, Financial Reporting for
Pension Plans – an amendment of GASB Statement No. 25 (“GASB No. 67”), was adopted
during the year ended December 31, 2014. GASB No. 67 addresses the accounting and
financial reporting requirements for pension plans. The requirements for GASB No. 67
require changes in presentation of the financial statements, notes to the financial statements
and required supplementary information. Significant changes include an actuarial calculation
of total and net pension liability/asset. It also includes comprehensive footnote disclosures
regarding the total pension liability, the sensitivity of the net pension liability/asset to the
discount rate, and increased investment activity disclosures. The implementation of GASB
No. 67 did not significantly impact the accounting for investment balances. The total pension
liability, determined in accordance with GASB No. 67, is presented in Note 6, Net Pension
Liability of the District, and in the Required Supplementary Information.
Estimates and Assumptions
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management and the Plan’s actuary to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of additions to
and deductions from net position during the reporting period. Actual results could differ from
those estimates.
Investment Valuation
The Plan’s investment assets, for which U.S. Bank, N.A., acts as trustee (“Trustee”), are
reported at fair value as determined and certified by the Trustee. Investments traded on a
national exchange are valued at reported sales prices. Investments that do not have an
established market are reported at estimated fair value. The money market fund is reported at
amortized cost, which approximates fair value.
Payment of Benefits
Benefits are recorded when paid.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 16
Recently Issued Accounting Standards
During calendar year 2016, the Plan implemented Governmental Accounting Standards Board
(“GASB”) Statement No. 72, Fair Value Measurement and Application. This Statement
supersedes selected paragraphs and footnotes and amends selected paragraphs in various
Statements of the Governmental Accounting Standards Board. The primary objective of this
Statement is to improve financial reporting by state and local governments by clarifying the
definition of fair value for financial reporting purposes, establishing general principles for
measuring fair value, providing additional fair value application guidance, and enhancing
disclosures about fair value measurements. The disclosures required by this Statement are
presented in Footnote 4, Fair Value Measurement and Application.
Subsequent Events
Management has evaluated subsequent events through August 29, 2017, the date the financial
statements were available for issue.
2. Description of Plan
The following brief description of The Metropolitan St. Louis Sewer District Employees’
Pension Plan (“Plan”) is provided for general information purposes only. Members should
refer to the Plan ordinance for more complete information.
General
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 Metropolitan St. Louis Sewer District (“District”) commencing service
prior to January 1, 2011, 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 Metropolitan St. Louis Sewer District Defined Contribution Plan and/or The
Metropolitan St. Louis Sewer District Deferred Compensation Plan and Trust. Current
employees with less than ten years of service on January 1, 2011 could also voluntarily elect
to transfer from the Plan and enter The Metropolitan St. Louis Sewer District Defined
Contribution Plan.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 17
Membership in the Plan consists of:
The District’s Board of Trustees, primarily to improve benefits to members, amends the Plan,
established on November 1, 1967. A Pension Committee consisting of two members of the
District’s Board of Trustees, two elected employee members and four members of the
District’s management staff administer the Plan, and thus the Pension Committee is also
known as the “Plan Administrator”. 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 (“Act”) and, as such, is not subject to the Act’s
reporting requirements.
Benefit Payments and Vesting
All benefits vest after five years of credited service. Members retiring at or after age 65 with
five or more years credited service are entitled to a pension benefit. The Plan permits early
retirement with reduced benefits beginning at age 55 if the member has completed five years
of employment. Ordinance No. 10664 provides for unreduced retirement benefits to any
member whose combined age and term of service is equal to 75.
Effective January 1, 1999, Ordinance No. 10491 amended the Plan benefits formula. The
annual benefit payable became 1.7% of final average earnings plus 0.4% of final average
earnings that are in excess of covered earnings multiplied by the period of years and months
of credited service not to exceed 35 years. Also, the annual reduction for early retirement was
revised from 5% to 2% prior to age 60 and from 2.5% to 1% after age 60.
Ordinance No. 10664, effective January 1, 2000, amended the Plan benefits formula to 1.45%
of final average earnings plus 0.4% of final average earnings that are in excess of covered
earnings multiplied by the period of years and months of credited service not to exceed 35
years. This ordinance also provided for a survivor’s benefit for vested members who have not
yet reached their normal retirement date or earned 75 points. The survivor’s benefit is the
greater of (a) 50% of the member’s monthly-accrued retirement benefit as of the date of
death, or (b) 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
For the Years Ended
December 31,
Increase
2016 2015 (Decrease)
Active plan members 626 665 (39)
Retirees and beneficiaries currently receiving benefits 717 691 26
Terminated members entitled to receive benefits 174 175 (1)
Total 1,517 1,531 (14)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 18
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. An employee retiring from the
District with five or more years of service will be compensated for any unused accrued sick
leave at the rate of 1.25% for each year of District service multiplied by the unused accrued
sick leave remaining at the employee’s current rate of pay. 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.
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.”
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.
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.
3. Cash and Investments
Categories of Asset Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of the Plan’s
investment in a single issuer. Pursuant to Resolution 3318, the Plan is authorized to invest in:
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 19
Equity Investments: Common stocks of corporations, mutual funds, or co-mingled
equity funds (Domestic and International, both within defined limits); however, the
investments in equities should not exceed 56% of total investments.
Fixed Income Investments: U.S. government and agency securities, corporate bonds,
debentures, notes, or other evidence of indebtedness assumed or guaranteed by
corporations (Domestic and International, both within defined limits); however, the
investment in fixed income should not exceed 73% of total investments.
Short-term Securities: Commercial paper, treasury bills, certificates of deposit, and/or
money market funds.
Real Estate Investments: Real estate investment trusts and multi-employer property
trusts; however, the investment in real estate should not exceed 10% of total
investments.
Hedge Funds, Global Tactical, Real Assets, Market Neutral, and Absolute Return
Investments: These investment strategies help diversify the investment portfolio.
These investments should not exceed 20%, 12%, 10%, 7% and 7% of total
investments, respectively.
The fair value of investments managed consisted of the following:
As of December 31,
2016 2015
Investments, at Fair Value
Mutual Funds 85,978,099$ 81,504,039$
Collective Investment Funds 85,448,895 92,901,411
Corporate Obligations 21,073,241 21,641,376
Domestic Common Stocks 17,264,512 16,364,200
Real Estate Investments 16,029,927 15,125,222
US Treasury and Agency Obligations 12,165,384 12,267,405
Money Market Funds 11,399,948 2,603,081
Municipal Obligations 872,406 1,044,415
Foreign Stocks 681,166 671,369
Total Investments 250,913,578$ 244,122,518$
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 20
Interest Rate Risk
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of
an investment. The Plan does not have a formal investment policy that limits investment
maturities as a means of managing its exposure to interest rates. The Plan had the following
debt securities and maturities:
The Plan will minimize the risk that the market value of securities in the portfolio will fall due
to changes in general interest rates by:
Structuring the investment portfolio so that securities mature to meet cash
requirements for benefit payments, thereby avoiding the need to sell securities on the
open market prior to maturity; and
As of December 31, 2016
Weighted
Average
Maturity
Investment Type Fair Value (in Years)
Corporate Obligations 21,073,241$ 4.33
U.S. Treasury and Agency Obligations 12,165,384 5.54
Municipal Obligations 872,406 2.92
Total 34,111,031$
Portfolio Weighted Average Maturity in Years 4.73
As of December 31, 2015
Weighted
Average
Maturity
Investment Type Fair Value (in Years)
Corporate Obligations 21,641,376$ 4.23
U.S. Treasury and Agency Obligations 12,267,405 5.31
Municipal Obligations 1,044,415 2.52
Total 34,953,196$
Portfolio Weighted Average Maturity in Years 4.55
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 21
Monitoring fixed income investment managers’ performances to be sure the fixed
income portion of the investment portfolio is managed to predetermined indexes.
Credit Risk
Investment credit risk is the risk that the issuer or other counterparty to an investment will not
fulfill its obligations. The Plan will minimize credit risk by:
Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisors
with which the Plan will do business; and
Diversifying the portfolio so that potential losses on individual securities will be
minimized.
The following tables provide information on the credit ratings associated with the Plan’s
investments in debt securities:
U.S. Treasury
S & P & Agency Municipal Corporate
Rating Obligations Obligations Obligations Total
AAA —$ —$ 4,023,496$ 4,023,496$
AA 12,165,384 573,724 1,647,962 14,387,070
A— — 4,771,139 4,771,139
BBB — 298,682 8,976,980 9,275,662
Not Rated — — 1,653,664 1,653,664
Total 12,165,384$ 872,406$ 21,073,241$ 34,111,031$
Credit Rating by Investment as of December 31, 2016
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 22
Investments Greater Than 5% Of Net Position Restricted For Pension Benefits
Investments that exceed 5% or more of net position restricted for pension benefits at
December 31, 2016 or 2015 are as follows:
4. Fair Value Measurement and Application
The Plan categorizes its fair value measurements within the fair value hierarchy established
by generally accepted accounting principles. The Plan had the following recurring fair value
measurements of invested assets as of December 31, 2016 and December 31, 2015:
U.S. Treasury
S & P & Agency Municipal Corporate
Rating Obligations Obligations Obligations Total
AAA —$ —$ 3,050,011$ 3,050,011$
AA 12,267,405 678,154 3,468,460 16,414,019
A— 366,261 6,001,510 6,367,771
BBB — — 8,200,975 8,200,975
Not Rated — — 920,420 920,420
Total 12,267,405$ 1,044,415$ 21,641,376$ 34,953,196$
Credit Rating by Investment as of December 31, 2015
December 31,
2016 2015
Prudential Core Plus Bond Fund 29,118,894$ 29,227,764$
Morgan Stanley International Equity Fund I 26,020,030 25,530,686
Brandywine Global Bond Opportunistic Fixed Income 21,990,783 21,586,226
Lighthouse Global Long/Short Fund Limited 18,155,711 18,117,254
Vanguard Institutional Index Fund 16,867,477 15,602,554
Entrust Capital Diversified Fund 16,183,507 16,363,940
UBS Trumbull Property Fund 16,029,927 15,125,222
Vanguard Windsor II 12,835,945 12,791,751
T. Rowe Price Inst. Large-Cap Core Growth * 12,600,942
* Denotes less than 5%.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 23
Investments Measured at Fair Value
Fair Value Measurements Using
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
Investments by Fair Value Level 12/31/2016 (Level 1) (Level 2) (Level 3)
Debt Securities:
Corporate Obligations 21,073,241$ —$ 21,073,241$ —$
US Treasury Notes and Bonds 10,511,013 10,511,013 — —
US Government Agency Obligations 1,654,371 — 1,654,371 —
Municipal Obligations 872,406 — 872,406 —
Core Plus Bond Commingled Trust Fund 29,118,894 — 29,118,894 —
Global Fixed Income Collective Trust Fund 21,990,783 — 21,990,783 —
Total Debt Securities 85,220,708 10,511,013 74,709,695 —
Equity Securities:
Domestic Equities 17,264,512 17,264,512 — —
International Equities 681,166 681,166 — —
Emerging Markets Fund 9,876,496 — 9,876,496 —
International Equity Fund 26,020,030 — 26,020,030 —
Small Cap Growth Fund 8,131,044 — 8,131,044 —
500 Index Fund 16,867,477 — 16,867,477 —
Large Cap Core Growth Fund 12,247,106 — 12,247,106 —
Large Cap Value Stock Fund 12,835,945 — 12,835,945 —
Total Equity Securities 103,923,776 17,945,678 85,978,098 —
Total Investments by Fair Value Level 189,144,484 28,456,691$ 160,687,793$ —$
Unfunded Redemption Redemption
Investments Measured at the Net Asset Value (NAV) Commitments Frequency Notice Period
Real Estate Funds (1)16,029,927 7,200,000$ Quarterly 60 Days
Global Long/Short Hedge Fund of Fund (2)18,155,711 — Monthly/Quarterly 90 Days/60 Days
Diversified Hedge Fund of Fund (3)16,183,508 — Quarterly 90 Days
Total Investments Measured at the Net Asset Value 50,369,146
Money Market at Amortized Cost 11,399,948
Total Investments at Fair Value 250,913,578$
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 24
(1) Real Estate Funds - The portfolio assets in this investment consist primarily of high-quality
real estate investments located in major markets throughout the U.S. and are diversified by
property type, geographic region and economic sector. The majority of the investments are
stable, primarily income-oriented properties. The fair values of the investments in this type
have been determined using the NAV per share (or its equivalent) of the investments.
Distributions from dispositions are reinvested as the underlying investments are liquidated.
(2) Global Long/Short Hedge Fund of Fund - Multi-manager fund of funds that invests
principally in global equity markets, combining long investments with short sales in the
Fair Value Measurements Using
Quoted Prices
in Active Significant
Markets for Other Significant
Identical Observable Unobservable
Assets Inputs Inputs
Investments by Fair Value Level 12/31/2015 (Level 1) (Level 2) (Level 3)
Debt Securities:
Corporate Obligations 21,641,376$ —$ 21,641,376$ —$
US Treasury Notes and Bonds 9,191,077 9,191,077 — —
US Government Agency Obligations 3,076,328 — 3,076,328 —
Municipal Obligations 1,044,415 — 1,044,415 —
Core Plus Bond Commingled Trust Fund 29,227,764 — 29,227,764 —
Global Fixed Income Collective Trust Fund 21,586,226 — 21,586,226 —
Total Debt Securities 85,767,186 9,191,077 76,576,109 —
Equity Securities:
Domestic Equities 16,364,200 16,364,200 — —
International Equities 671,369 671,369 — —
Emerging Markets Fund 7,495,925 — 7,495,925 —
International Equity Fund 25,530,686 — 25,530,686 —
Small Cap Growth Fund 7,482,180 — 7,482,180 —
500 Index Fund 15,602,554 — 15,602,554 —
Large Cap Core Growth Fund 12,600,942 — 12,600,942 —
Large Cap Value Stock Fund 12,791,751 — 12,791,751 —
Total Equity Securities 98,539,607 17,035,569 81,504,038 —
Total Investments by Fair Value Level 184,306,793 26,226,646$ 158,080,147$ —$
Unfunded Redemption Redemption
Investments Measured at the Net Asset Value (NAV) Commitments Frequency Notice Period
Real Estate Funds (1)15,125,222 —$ Quarterly 60 Days
Global Long/Short Hedge Fund of Fund (2)18,117,254 — Monthly/Quarterly 90 Days/60 Days
Diversified Hedge Fund of Fund (3)16,363,942 — Quarterly 90 Days
Diversified Inflation Hedge(4)7,606,226 — Monthly 10 Days
Total Investments Measured at the Net Asset Value 57,212,644
Money Market at Amortized Cost 2,603,081
Total Investments at Fair Value 244,122,518$
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 25
pursuit of opportunities in rising or declining markets. The fund of fund manager has the
ability to employ hedge fund managers that employ a variety of strategies within the
long/short strategy. The fair values of the investments in this type have been determined
using the NAV per share of the investments. Redemptions of greater than 90% of the
shareholder's shares are subject to an estimated 10% holdback to be paid promptly after the
completion of the Fund's year-end audit.
(3) Diversified Hedge Fund of Fund - Seeks return, long-term capital growth and
diversification through a combination of Managers trading a range of strategies, including, but
not limited to, hedging, distressed securities, arbitrage and special situations. The fair values
of the investments in this type have been determined using the NAV per share (or its
equivalent) of the investments. Shareholders shall have the right to redeem Shares having a
value of up to a maximum of 50% of the Net Asset Value of their shares, as of the close of
business on the last business day of any calendar quarter (the “Redemption Date”). Remaining
shares shall be redeemed on the next quarterly Redemption Date. Redemptions of greater
than 90% of the shareholder's shares are subject to an estimated 10% holdback to be paid
generally no later than 30 days after the completion of the Fund's year-end audit.
(4) Diversified Inflation Hedge - Seeks to provide strong relative performance versus broad
equity and fixed income markets during rising inflation environments. The Portfolio invests
in assets with linkages to general inflation and in sectors where supply and demand dynamics
are expected to lead to localized inflation pressures. The fair values of the investments in this
type have been determined using the NAV per share (or its equivalent) of the investments.
Redemptions of any number of Units from the Fund pursuant to notice received by the
Trustee at least ten (10) business days prior to such Valuation Date.
5. Contributions Required and Contributions Made
Ordinances establishing the Plan provide for actuarially determined annual contributions by
the District that are sufficient to pay benefits when due. The Entry Age Normal funding
method is used to determine contributions.
Contributions of $10,145,562 and $10,059,004, excluding certain professional fees paid by
the District, were made to the Plan in 2016 and 2015, respectively. These contributions were
made in accordance with actuarially determined contribution recommendations based on
actuarial valuations performed at December 31, 2015 and 2014, respectively, and consisted
of:
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 26
Certain professional fees, included in administrative expenses, are paid by the District and are
recognized as contributions to the Plan and totaled $14,360 and $12,374 for the years ended
December 31, 2016 and 2015, respectively. The District provides office space, utilities, and
other services to the Plan at no cost. Other costs of administering the Plan are financed from
Plan net position.
6. Net Pension Liability of the District
During the year ended December 31, 2014, the District implemented GASB Statement No. 67,
Financial Reporting for Pension Plans – an amendment of GASB Statement No. 25. The schedule
of net pension liability pursuant to the provisions of GASB Statement No. 67 as of December 31,
2016 and December 31, 2015 is as follows:
Actuarial Assumptions: The total pension liability was determined by an actuarial valuation
as of the measurement date (December 31), calculated based on the discount rate and actuarial
assumptions below for December 31, 2016 and December 31, 2015:
December 31,
2016 2015
Normal Cost 5,106,625$ 5,253,091$
Amortization of the Unfunded Actuarial Accrued Liability 4,375,209 4,147,847
Investment Rate of Return Factor of 7.0% 663,728 658,066
Current Year Contribution Due from the District
as Calculated by the Plan's Actuary 10,145,562$ 10,059,004$
Net Pension Liability
December 31,
2016 2015
Total Pension Liability 318,049,216$ 296,812,242$
Plan Fiduciary Net Position 251,010,031 244,212,239
Net Pension Liability 67,039,185$ 52,600,003$
Fiduciary Net Position as a Percentage of Total Pension Liability 78.92% 82.28%
Covered Payroll 42,054,815$ 43,344,502$
Net Pension Liability as a Percentage of Covered Payroll 159.41% 121.35%
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 27
December 31,
2016 2015
Inflation Rate 2.50% 2.50%
Projected Salary Increases 4.25% 4.25%
Investment Rate of Return 7.00% 7.00%
For the December 31, 2016 valuation, mortality rates were based on the RP-2014 Mortality for Employees and
Healthy Annuitants and the RP-2014 Disabled Mortality. For the December 31, 2015 valuation, mortality rates
were based on the RP-2000 Mortality for Employees and Healthy Annuitants and the RP-2000 Disabled Mortality.
Discount Rate
December 31,
2016 2015
Discount Rate 7.00% 7.00%
Long-Term Expected Rate of Return, Net of Investment Expense 7.00% 7.00%
Municipal Bond Rate N/A N/A
The plan's fiduciary net position was projected to be available to make all projected future benefit payments of
current active and inactive employees. Therefore, the discount rate for calculating the total pension liability is equal
to the long-term expected rate of return.
Long-Term Expected Rate of Return
Long-Term
Expected
Arithmetic
Target Real Rate
Asset Class Allocation of Return
Large Cap US Equity 20.0% 5.1%
Small Cap US Equity 6.0% 6.3%
Developed International Equity 10.0% 5.5%
Emerging Market Equity 4.0% 7.0%
Domestic Core Plus Fixed Income 26.0% 1.0%
Global Fixed Income 9.0% 0.7%
Hedge Funds 15.0% 2.8%
Real Estate 10.0% 4.3%
Assumed Inflation - Mean 2.5%
The long-term expected rate of return is assumed to be 7.0%.
The long-term expected rate of return is determined by adding expected inflation to expected long-term real
returns and reflecting expected volatility and correlation. The capital market assumptions as of December 31,
2016 are as follows:
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 28
Rate of Return
For the years ended December 31, 2016 and 2015, the annual money-weighted rate of return
on pension plan investments, net of pension plan investment expense, was 4.95% and -0.76%,
respectively. The money-weighted rate of return considers the changing amounts actually
invested during a period and weights the amount of pension plan investments by the
proportion of time they are available to earn a return during that period. External cash flows
are determined on a monthly basis and are assumed to occur at the beginning of each month.
External cash inflows are netted with external cash outflows, resulting in a net external cash
flow in each month. The money-weighted rate of return is calculated net of investment
expenses.
7. Risk Management
The Plan is exposed to various risks of loss related to natural disasters, errors and omissions,
loss of assets, torts, etc. The Plan has chosen to cover such losses through the purchase of
commercial insurance. There has been no material insurance claim filed or paid during the
past three fiscal years.
8. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to
various risks such as interest rate, market, and credit risks. Due to the level of risk associated
with certain investment securities, it is at least reasonably possible that changes in the values
of investment securities will occur in the near term and that such change could materially
affect the amounts reported in the Statements of Fiduciary Net Position.
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
1% Current 1%
Decrease Discount Rate Increase
6.00% 7.00% 8.00%
Total Pension Liability 354,929,286$ 318,049,216$ 286,796,023$
Plan Fiduciary Net Position 251,010,031 251,010,031 251,010,031
Net Pension Liability 103,919,255 67,039,185 35,785,992
The following presents the Net Pension Liability of the District, calculated using the discount rate of 7.00%, as
well as what the District's Net Pension Liability would be if it were calculated using a discount rate that is 1
percentage point lower (6.00%) or 1 percentage point higher (8.00%) than the current rate.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Notes To Financial Statements (Continued)
Page 29
Actuarial present value of accumulated Plan benefits are reported based on certain
assumptions pertaining to interest rates, inflation rates, and employee demographics, all of
which are subject to change. Due to uncertainties inherent in the estimations and assumptions
process, it is at least reasonably possible that changes in these estimates and assumptions in
the near term would be material to the financial statements.
9. Tax Status
The plan received a favorable determination letter from the Internal Revenue Service on
September 10, 2014, indicating the Plan and its underlying trust are qualified under Section
414(d) of the Internal Revenue Code. The Plan has not been amended since receiving the
determination letter.
REQUIRED SUPPLEMENTARY INFORMATION
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 30
REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB NO. 67
December 31,
Total Pension Liabilty 2016 2015 2014
Service cost 5,106,625$ 5,253,091$ 5,409,485$
Interest 20,609,223 20,198,502 19,900,507
Effect of economic/demographic gains or losses (882,851) (4,576,597) (3,667,991)
Effect of assumption changes or inputs 11,664,881 — 6,500,227
Benefit payments (15,260,904) (14,474,566) (13,387,127)
Net Change In Total Pension Liability 21,236,974 6,400,430 14,755,101
Total Pension Liability - Beginning 296,812,242 290,411,812 275,656,711
Total Pension Liability - Ending 318,049,216 296,812,242 290,411,812
Plan Fiduciary Net Position
Contributions - employer (including employer paid expenses) 10,159,922 10,071,378 10,682,846
Net investment income 11,992,366 (1,809,875) 7,066,420
Benefit payments (15,260,904) (14,474,566) (13,394,219)
Administrative expenses (93,592) (90,519) (86,504)
Net Change In Plan Fiduciary Net Position 6,797,792 (6,303,582) 4,268,543
Plan Fiduciary Net Position - Beginning 244,212,239 250,515,821 246,247,278
Plan Fiduciary Net Position - Ending 251,010,031 244,212,239 250,515,821
District’s Net Pension Liability - Ending 67,039,185$ 52,600,003$ 39,895,991$
Plan Fiduciary Net Position As A Percentage Of
Total Pension Liability 78.92% 82.28% 86.26%
Covered Employee Payroll 42,054,815$ 43,344,502$ 44,663,896$
The District's Net Pension Liability As A Percentage Of
Covered Employee Payroll 159.41% 121.35% 89.32%
Note: Schedule is intended to show information for 10 years. Additional years will be displayed as they become available.
Schedule of Changes in Net Pension Liability
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 31
REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB NO. 67 (Continued)
Schedule of Employer Contributions
Plan Year Actuarially Contribution Covered Contribution
Ending Determined Annual Deficiency Employee as a % of
December 31, Contribution Contribution (Excess) Payroll* Covered Payroll
2007 7,673,240$ 7,673,240$ —$ 43,640,000$ 17.58%
2008 7,425,602 7,425,602 — 48,077,000 15.45%
2009 8,859,535 8,859,535 — 52,267,000 16.95%
2010 10,306,739 10,306,739 — 51,703,000 19.93%
2011 10,969,154 10,969,154 — 49,432,000 22.19%
2012 11,737,168 11,737,168 — 48,333,000 24.28%
2013 11,391,287 11,391,287 — 46,600,000 24.44%
2014 10,675,321 10,675,321 — 44,663,896 23.90%
2015 10,059,004 10,059,004 — 43,344,502 23.21%
2016 10,145,562 10,145,562 — 42,054,815 24.12%
* Payroll as of prior December 31 Measurement Date.
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 32
REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB NO. 67 (Continued)
Valuation Timing
Actuarial Cost Method Entry Age Normal
Amortization Method
Level percent or level dollar Level dollar
Closed, open, or layered periods Layered, 20 year periods
Asset Valuation Method
Smoothing period 3 years
Inflation 2.50%
Salary Increases 4.25%
Investment Rate of Return 7.00%
Cost of Living Adjustments 2.50%, with 45.00%/$750 per month lifetime cap
Retirement Age Retirement rates are summarized in the 2017 Actuarial Valuation.
Turnover Turnover rates are summarized in the 2017 Actuarial Valuation.
Disability Disability rates are summarized in the 2017 Actuarial Valuation.
Mortality
The following actuarial methods and assumptions were used in the December 31, 2016 funding valuation. Please see the
valuation report dated May 16, 2017 for further details.
Actuarially determined contribution rates are calculated as of January 1 of
the fiscal year in which the contributions are reported.
Healthy Lives: RP-2014 Mortality for Employees and Healthy Annuitants,
male and female rates, with generational projection from 2006 based on
the MP-2016 improvement scale; Disabled Lives: RP-2014 Disability
Mortality, male and female rates.
Actuarial Methods and Assumptions Used
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 33
REQUIRED SUPPLEMENTARY INFORMATION UNDER GASB NO. 67 (Continued)
Money-Weighted Rate of Return
Plan Year
Ending Money-Weighted
December 31, Rate of Return
2007 N/A
2008 N/A
2009 N/A
2010 N/A
2011 N/A
2012 N/A
2013 N/A
2014 2.86%
2015 -0.76%
2016 4.95%
Schedule of Annual Weighted Rate of Return on Investments
Note: Schedule is intended to show information for 10 years. Additional years will be
displayed as they become available.
STATISTICAL SECTION (UNAUDITED)
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 34
STATISTICAL SECTION
For The Year Ended December 31, 2016
Net Position Value
(NPV) as of
Year December 31,
2007 191,382,492$ 10.8 %
2008 150,808,625 (21.2)
2009 179,219,472 18.8
2010 198,540,074 10.8
2011 200,340,622 1.9
2012 223,467,512 11.5
2013 246,247,278 10.2
2014 250,515,821 1.7
2015 244,212,239 (2.5)
2016 251,010,031 2.8
Total
Plan
Performance
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 35
STATISTICAL SECTION
For The Year Ended December 31, 2016
Net
Employer Investment
Year Contributions Income/(Loss) Total
2007 7,731,672$ 17.7 18,111,294$ 25,842,966$
2008 7,460,492 15.5 (38,697,159) (31,236,667)
2009 8,910,664 17.0 29,480,945 38,391,609
2010 10,347,592 20.0 19,597,109 29,944,701
2011 10,981,546 22.2 2,144,533 13,126,079
2012 11,742,410 24.3 23,391,578 35,133,988
2013 11,397,904 24.5 24,001,334 35,399,238
2014 10,682,846 23.9 7,066,420 17,749,266
2015 10,071,378 23.2 (1,809,875) 8,261,503
2016 10,159,922 24.2 11,992,366 22,152,288
Payroll
Revenues by Source
Employer
Contributions
as a Percentage
of Covered
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 36
STATISTICAL SECTION
For The Year Ended December 31, 2016
Benefit Administrative
Year Payments Expenses Total
2007 8,540,957$ 147,232$ 8,688,189$
2008 9,232,979 104,221 9,337,200
2009 9,832,606 148,157 9,980,763
2010 10,508,665 115,434 10,624,099
2011 11,233,668 91,863 11,325,531
2012 11,910,664 96,434 12,007,098
2013 12,537,990 81,482 12,619,472
2014 13,394,219 86,504 13,480,723
2015 14,474,566 90,519 14,565,085
2016 15,260,904 93,592 15,354,496
Expenses by Type
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 37
STATISTICAL SECTION
For The Year Ended December 31, 2016
Terminated
Members
Entitled to
Receive
Year Benefits Total
2007 504
1 198 811
2 1,513
2008 532
1 196 885
2 1,613
2009 550
1 192 938
2 1,680
2010 571
1 183 917
2 1,671
2011 596
1 183 838 1,617
2012 614
1 179 803 1,596
2013 636
1 179 761 1,576
2014 660
1 180 710 1,550
2015 691
1 175 665 1,531
2016 717
1 174 626 1,517
1 New Actuarial excludes individuals covered by insurance policy.
2 New Actuarial excludes members with less than six months of service.
Member Count
Benefits
Active Plan
Members
Retirees &
Beneficiaries
Currently
Receiving
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 38
STATISTICAL SECTION
For The Year Ended December 31, 2016
Market Percentage
Value as of of
Holding December 31, 2016 Plan
Income Research Management $ 35,632,939 14.2%
Prudential Core Plus Bond Fund 29,118,894 11.6%
Morgan Stanley International Equity Fund I 26,020,030 10.4%
Brandywine Global Bond Opportunistic Fixed Income 21,990,783 8.8%
Lighthouse Global Long/Short Fund Limited 18,155,711 7.2%
Vanguard Institutional Index Fund 16,867,477 6.7%
Entrust Capital Diversified Fund 16,183,507 6.4%
UBS Trumbull Property Fund 16,029,927 6.4%
Vanguard Windsor II 12,835,945 5.1%
T. Rowe Price Inst. Large-Cap Core Growth 12,247,106 4.9%
Totals $ 205,082,319 81.7%
Top Ten Holdings by Investment Manager
THE METROPOLITAN ST. LOUIS SEWER DISTRICT
EMPLOYEES’ PENSION PLAN
Page 39
STATISTICAL SECTION
For The Year Ended December 31, 2016
2016 2015
Investment Manager Fees:
UBS Global Real Estate $ 178,112 $ 162,669
Income Research & Management Inc. 123,200 127,142
Brandywine Global Investment Management, LLC 103,741 99,001
Holland Capital Management 78,811 93,731
Wellington Trust Company NA 70,366 79,954
Prudential Core Plus Bond Fund & Global Asset 88,746 66,509
Kennedy Capital Management, Inc. 68,624 65,589
Penn Capital Management — 41,362
Loomis / Sayles — 12,275
Total Investment Manager Fees 711,601 748,231
Advisor Fees:
Pavilion Advisory Group Inc.104,040 128,180
Total Advisor Fees 104,040 128,180
Total of All Fees $ 815,641 $ 876,411
Note: Some investment managers report investment income net of related expense.
The management fees of these investment managers are not reported in this table
because the fees are not readily separable from investment income.
Schedule of Investment Manager & Advisor Fees
For the Years Ended December 31,
Firm