HomeMy WebLinkAbout22-Water Department
CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
lpt: Water
Subject: Receive and File - Annual Audit of the Water
Department's Water and Sewer Utilities for the fiscal year
ending June 30, 2008
From: Stacey R. Aldstadt, General Manager
Date: 1/28/2009
M&CC Meeting Date: 31212009
Synopsis of Previous Council Action:
Similar action taken each year following completion of the annual Audit Report
Recommended motion:
'at the Mayor and Council receive and file the Annual Audit of the Water Department's Water and Sewer Utilities for
....fe fiscal year ending June 30, 2008.
Signa~ (U~
Contact person: Stacev R. Aldstadt. General Manaaer
Phone:
384-5091
Supporting data attached:
Yes Ward:
FUNDING REQUIREMENTS:
Amount: NIA
Source: (Acct. No.) Water DeDartment
(Acct. DescriDtion)
Finance:
Council Notes:
75-0262
Agenda Item No. 22..
3-2-0'
CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
STAFF REPORT
Subject:
Annual Audit of the Water Department's Water and Sewer Utilities for the fiscal year ending
June 30, 2008.
Background:
The firm of Mayer Hoffman McCann PC, has completed the Annual Audit of the Water
Department's Water and Sewer Utilities for the fiscal year ending June 30, 2008. This report
was presented to and accepted by the Board of Water Commissioners at their meeting of
January 20, 2009.
Financial Impact:
None.
Recommendation:
That the Mayor and Common council receive and file the completed Annual Audit of the Water
Department's Water and Sewer Utilities for the fiscal year ending June 30, 2008.
MUNICIPAL WATER DEPARTMENT OF THE
CITY OF SAN BERNARDINO, CALIFORNIA
Financial Statements
Year ended June 30, 2008
(This page intentionally left blank.)
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALlFORNIA
Financial Statements
Year ended June 30, 2008
TABLE OF CONTENTS
Paae
FINANCIAL SECTION
Independent Auditors' Report
Management's Discussion and Analysis
Basic Financial Statements:
Statement of Net Assets
Statement of Revenues, Expenses, and Changes in Net Assets
Statement of Cash Flows
Notes to Basic Fmancial Statements
1
5
14
17
18
20
SUPPLEMENTARY INFORMATION
Other Information:
Board of Water Commissioners and Organization 51
Schedule of Insurance Coverage 52
Schedule of Water System Demographics 55
Schedule of Water Production 58
Schedule of Water Rates 57
Schedule of Sundry Water Statistical Data 58
Schedule of Service Area and Customers 60
Schedule of Sewer Rates and Statistics 61
Schedule - 1992 Certificates of Participation, San Bernardino
Public Safety Authority 64
Schedule - 1998 Refunding Sewer Revenue Certificates of Participation,
San Bernardino Public Safety Authority 65
Bond Schedule - General Obligation Waterworks Bonds, Series C 66
Report on Compliance and Other Matters and on Internal Control over
Financial Reporting Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards 67
"-~
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"_""
Maver Hoffman McCann F~C.
An Independent CPA Firm
i ClJ';Wr:20 (~o'J;::~!'nrt,':'-r;"~ ~><';:l'/~:::_)S ,:~,~:,.k;,
12301 Dupont Drive, Suite 200
Irvine. California 92612
949-474-2020 ph
949-263-5520 fx
www.mhm.pc.com
Board of Water Commissioners
MUnicipal Water Department of the City of
San Bernardino, California
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying financial statements of each major fund of the Municipal
Water Department of the City of San Bernardino ("Department"), as of and for the year ended
June 30, 2008, which collectively comprise the Department's basic financial statements, as
listed in the table of contents. These financial statements are the responsibility of the
management of the Department. Our responsibility is to express opinions on these financial
statements based on our audit. The prior year summarized partial comparative information has
been derived from the financial statements of the Department for the year ended June 30, 2007
and. in our report dated January 4, 2008. we expressed an unqualified opinion on those
financial statements
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and discl.osures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
As discussed in Note 1, the financial statements present only the financial. activities of the
Department and are not intended to present fairly, in all material respects, the financial position
of the City of San Bernardino, California, and the results of its operations and cash flows of its
proprietary fund types, in conformity with accounting principles generally accepted in the United
States of America.
In our opinion, the financial statements referred to above present fairly, in all material respects.
the financial position of the Department, as of June 30, 2008, and the respective changes in
financial position and cash flows of the Department for the year then ended in conformity with
accounting principles generally accepted in the United States of America
As described further in note 7 to the financial statements, the Department changed its method of
accounting for post employment benefits for fiscal years ending on or after June 30, 2008.
Board of Water Commissioners
Municipal Water Department of the City of
San Bernardino, California
Page Two
The information identified in the accompanying table of contents as management's discussion
and analysis is not a required part of the basic financial statements, but is supplementary
information required by accounting principles generally accepted in the United States of
America. We have applied certain limited procedures, which consisted principally of inquiries of
management regarding the methods of measurement and presentation of the required
supplementary information. However, we did not audit the information and express no opinion
on it.
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise the Department's basic financial statements. The schedules listed in the
table of contents as supplementary information are presented for purposes of additional
analysis and are not a required part of the basic financial statements. These schedules have
not been subjected to the auditing procedures applied in the audit of the basic financial
statements and, accordingly, we express no opinion on them.
In accordance with Government Auditing Standards, we have also issued a report dated
December 20. 2008 on our consideration of the Department's internal control over financial
reporting and our tests of its compliance with certain provisions of laws, regulations, contracts,
grant agreements. and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing,
and not to provide an opinion on the internal control over financial reporting or on compliance.
That report is an integral part of an audit performed in accordance with Governmenf Auditing
Standards and should be considered in assessing the results of our audit.
hI'..,- ~,.;.c..-_ r>7 .~~L.
Irvine, California
January 20, 2009
2
MANAGEMENT'S DISCUSSION AND ANALYSIS
3
-
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4
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2008 and 2007
(in thousands)
-,-
As management of the San Bernardino Municipal Water Department (Department), a
department of the City of San Bernardino, California (City), we offer the readers of the
Department's financial statement a narrative overview and analysis of the financial
statements for the fiscal years ended June 30, 2008. The Department operates the
water system for the City and sewer treatment for the City, the City of Loma Linda,
California, and portions of the area served by East Valley Water District. We encourage
the readers to consider the information presented here in conjunction with the
accompanying financial statements. All amounts, unless otherwise indicated, are
expressed in thousands of dollars.
Financial highlights
The Department is comprised of two major operating funds; the water utility and the
sewer utility. The assets of the Department exceeded its liabilities at the close of fiscal
years 2008 and 2007 by $248,054 and $238,367, respectively. Of these amounts,
$32,305 and $22.890 respectively; were available to meet the Department's ongoing
obligations to creditors and customers (the unrestricted net assets). The Department's
net assets have increased by $9,687 and $16,136 respectively. Unrestricted net assets
represent 58% and 46% of annual operating expenses for fiscal years 2008 and 2007,
respectively.
Overview of the financial statements
This discussion and analysis letter is intended to serve as an introduction to the
Department's financial statements. The Department operation is accounted for as an
enterprise fund of the City. These financial statements include the activities of the
Department and provide comparative information for the preceding two fiscal years.
Information regarding citywide financial results is available in the City's Comprehensive
Annual Financial Report.
The Department's firlarlcial statements are comprised of two components: 1) firlancia1
statements, arld 2) notes to the finarlcial statemerlts. Included as part of the firlarlcial
statements are the balance sheets, statemerlt of reverlues, expenses and changes in
net assets, and statements of cash flow.
The balance sheets present the assets and liabilities with the difference reported as net
assets. Over time, irlcreases or decreases in net assets may serve as a useful indicator
of the improvement in or deterioration of the financial condition of the Departmerlt.
The statements of revenues, expenses and changes in fund assets present information
indicating how the Department's net assets have changed during the most recent two
fiscal years. Results of operations are recorded using the accrual basis of accounting,
whereby transactions are reported as underlying events occur, regardless of the timing
of cash flows. Thus, revenues and expenses are reported in these statements for some
items that will result in cash flow in future fiscal periods.
The statemerlt of cash flows presents the flows of cash and cash equivalents during the
last fiscal years, including certain restricted amounts.
The notes to the financial statements provide additiorlal information essential to the full
understanding of the data provided in the financial statements.
,~_.
5
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2008 and 2007
(in thousands)
Water Utility:
Financial analvsis
As noted earlier, net assets may serve over time as a useful indicator of an entities'
financial position. The water utility's assets exceed liabilities by $148,064 and 5138,303
at June 30, 2008 and 2007, respectively.
Over 88% of the water utility's net assets are represented by its investment in capital
assets, such as wells, reservoirs, treatment facilities and the distribution system; less
any related outstanding debt used to acquire those assets. The water utility utilizes
these assets to provide service to customers. Therefore, these assets are not available
for future spending. Resources necessary to repay the outstanding debt is funded by
other sources, such as operations.
Approximately 6% of the water utility's net assets represent resources that are subject to
external restrictions on how they may be used. These restrictions are for items such as
debt repayment and other iegally restricted purposes.
The remainder represents the unrestricted portion which may be used to meet the water
utility's ongoing obligations to creditors and customers.
Condensed statements of net assets
2008 2007 2006
Assets:
Current and other assets $ 97,561 91,461 91,573
Net utility plant 143.254 130,861 115,269
Total assets $ 240.815 222,322 206,842
Liabilities:
Long-term liabilities, net $ 83,672 75,269 76.034
Current liabilities 9,078 8,750 8,087
Total liabilities $ 92,750 84,019 84,121
Invested in capital assets, net $ 129,943 122,081 106,036
Restricted 8,407 11,294 8,720
Unrestricted 9,714 4,928 7,965
. ~sets at Y~end_ -$ _148.064 1.38 303 122.721
Assets
Total assets of the water utility as of June 30, 2008 and 2007 were $240,815 and
$222,322, respectively, representing an increase of $18,493. Net capital assets
increased $9,761, comprised of an increase in the internal Investment in capital assets
of $7.862, and an increase in unrestricted cash of $4,786, partially offset by a reduction
in restricted funds of $2,887.
6
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2008 and 2007
(in thousands)
Liabilities
Total liabilities as of June 30, 2008 and 2007 were $92,750 and S84,019, respectively.
representing an increase of $8,731. Most significantly, the water utility obtained a
second $10,000 note from the California Infrastructure and Economic Development
Bank to fund improvements in the City's northwest expansion.
Net assets
Total net assets as of June 30, 2008 and 2007 were 5248,054 and 5238,367,
respectively, representing and increase of $9,686. Net assets invested in capital, net of
debt, increased $3,347 due to continued expansion and refurbishment of water
transmission and distribution infrastructure and sewer treatment facilities.
The water utility's statement of revenues, expenses and changes in net assets are for
the years ended June 30 are summarized as follows:
2008 2007 2006
Revenues:
Sale of water $ 25,295 26,244 19,703
Other operating revenues 2,042 1,988 2,058
Investment income 1,613 1,181 401
Non operating income (net) 2.459 2.467 3,151
Capital contributions 11,398 11,931 13,766
Total revenue $ 42,807 43,965 39,079
Expenses:
Operations & maintenance $ 15.4 70 14,862 22,874
Administration 12.494 9,143 8,477
Depreciation 4,490 4,065 . 3,482
Interest expense 592 313 366
Total expense S 33,046 28,383 25,199
Changes in net assets S 9,761 15,582 13.880
Net assets at beginning of year 138.303 122,721 108,841
N~sejsatve?r~nd uL-....148 064 . . 13lU.03 u1G~1
Revenues
Total revenues for fiscal year ended June 30, 2008 are S42,807 compared with $43,965
in fiscal year 2007. The decrease of $1,158 is due in part to lower water sales and a
decrease in capital contributions caused by the slow-down in the local economy.
Expenses
Total expenses for fiscal year ended June 30, 2008 are $33,046 as compared with
$28,383 in fiscal year 2007. The increase of $4,662 is a result of numerous variances
including a one-time recognition of prior unapplied overhead costs ($1,339), recognition
of GASB 45 future medical retirement benefits ($973) and an increase in supplemental
water purchases ($741).
7
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2008 and 2007
(in thousands)
Transfers
Transfers to the City's General Fund. as defined by City Charter. are equal to a
maximum of 10.% of water service revenues of the prior fiscal year. Water service
revenues include revenue from the sale of water and other fees and services.
Capital assets
Description:
Land and easements $
Wells and pumping plant
Distribution
Plant and facilities
Other capital
Construction work in process
Total capital assets $
Accumulated depreciation
~~_~Lf?oital a.?,sets
20.0.8
2,945
61,989
1 0.0.,339
2,317
13,189
15,445
196,224
( 52,970.)
.. $,,143,254
20.0.7
2,945
48,220.
73,377
1,930.
12,261
41,651
180.,384
( 49,523)
_ 1.3.0.,8..61
20.0.6
2,945
47,194
65,938
1,627
11,821
34,368
163,893
( 48.624)
1Ui.,~
The water utility is involved in an aggressive expansion effort developing the
"Verdemont" area in northwestern San Bernardino. In addition, the utility must replace
century old infrastructure.
Lana-term debt and coveraae
Description:
Net profit
Add back:
- Depreciation
- Amortization
- Interest expense
Other fees
- Gain! (loss) on assets
20.0.8
$ (1,636)
4,490.
- 0. -
592
- 0. -
532
20.0.7 20.0.6
3,650. 114
4,0.65 3,482
28 37
313 366
.0.- - 0.-
( 37) ( 694)
8,0.19 3,30.5
777 777
777 777
79 79
856 856
10..3 x 4.3 x
9,3~ ~9X
Cash available
Senior debt
- CIEDB
Total senior debt
Subordinate debt
Aggregate P & I (c) $
Senior debt coverage (a)! (b)
hOOrfl~Q'illlil.QE;!. (all (e).
(a)
$ 3,978
Manaaement overview
Regional and state-wide drought conditions have created a high demand/low supply
paradigm for water resources. Recent legal decisions involving endangered species
(b)
$
932
932
75
1,0.0.7
4.3 x
4..0.1L-...
8
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 3D, 2008 and 2007
(in thousands)
have exacerbated this low supply condition. Management has been actively pursuing
political strategies to augment water suppiy, including preparation of planning and
environmental documents for a recycled water recharge project However, the only
source of additional supply at this time is imported water and the costs for imported
water have increased and will continue to increase, without any doubt, into the future.
The water utility actively encourages conservation measures and has embarked in the
last 3 years on a progressively more aggressive conservation program. At this time, the
utility has implemented the last of a three-year water rate increase. It is expected that
the utility will pursue additional rate increases in the near future to support increases in
costs for imported water, increasing costs for oil and gas products and electricity, the
rehabilitation of aging infrastructure and increasing costs related to maintaining,
improving, retaining and training human resources.
Sewer Utility:
Financial analvsis
The sewer utility's assets exceed liabilities by $99,989 and $100,065 at June 30, 2008
and 2007, respectively. Over 66% of the sewer utility's net assets are represented by its
investment in capital assets, such as production, distribution and treatment facilities, less
any related outstanding debt used to acquire those assets. The sewer utility utilizes
these assets to provide service to customers. Therefore, these assets are not available
for future spending. Resources necessary to repay the outstanding debt is funded by
other sources, such as operations.
Approximately 16% of the sewer utility's net assets represent resources that are subject
to external restrictions on how they may be used. These restrictions are for items such
as debt repayment and other legally restricted purposes.
The remainder represents the unrestricted portion which may be used to meet the
Department's ongoing obligations to creditors and customers.
Condensed statements of net assets
2008 2007 2006
Assets:
Current and other assets $ 42.362 41,564 41,007
Net utility plant 101,763 105,396 109,126
Total assets $ 144,125 146,960 150,133
Liabilities:
Long-term liabilities, net $ 35,493 39,154 43.036
Current liabilities 8,643 7,741 7,587
Total liabilities $ 44,136 46,895 50,623
Invested in capital assets. net $ 66,282 66,116 66,079
Restricted 15,798 15,986 16,139
Unrestricted 17,909 17,963 17,292
lieLass~ts~13t \'lW .~n_d_ S . 99,9?9 .10.o.Q6~ .. ~.!;J!;J"Q1Q ~~
'>-.
9
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2008 and 2007
(in thousands)
"'...,.".
Assets
Total assets as of June 30, 2008 and 2007 were $144,125 and $146,960, respectively,
representing a decrease of $2,835. "Net utility plant" decreased as existing plant's
depreciation exceeded new plant recorded as assets.
Liabilities
Tota/liabilities as of June 30, 2008 and 2007 were $44,136 and $46,895, respectively,
representing a decrease of $2,759. The sewer utility continues to payoff notes and
certificates of participation without incurring additional debt for construction. Accounts
payable increased due in part to the recognition of the unfunded annual required
contribution for pension costs as required by GASB 45 (see footnote 7 to the audited
financial statements).
Net assets
Total net assets as of June 30. 2008 and 2007 were $99,989 and $100.065,
respectively, representing a decrease of $76. Slight increases in invested capital were
offset by minor decreases in restricted and unrestricted assets.
The sewer utility's statement of revenues, expenses and changes in net assets are for
the years ended June 30 are summarized as follows:
2008 2007 2006
Revenues:
Sewer charges $ 20,010 20,083 19,492
Other operating revenues 838 919 871
Investment income 2,320 1,906 662
Non operating income (net) ( 93) ( 65) ( 572)
Capital contributions 1.865 2,974 4,664
Total revenueS 24,940 25,817 25,117
Expenses:
Operations & maintenance $ 4,319 3,181 2,937
Administration 13,465 13,522 12,249
Depreciation 5,364 5,338 5.332
Non recurring expense - 0 - 1,200 -0-
I nterest expense 1,868 2,021 2,164
Total expense $ 25,016 25,262 22,682
Changes in net assets ( 76) 555 2,435
Net assets at beginning of year 100,065 99,510 97,075
NeLass.~ts at.Y.e.9.LeJ1,t$ 9jl 981l 100. 065 ..-9S.~1 0
Revenues
Total revenues for fiscal year ended June 30, 2008 are $24,940 compared with $25,817
in fiscal year 2007. The decrease of $877 is largely due to a decrease in capital
contributions caused by the slow-down in the local economy.
10
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2008 and 2007
(In thousands)
Expenses
Total expenses for fiscal year ended June 30, 200B are $25,016 as compared with
$25,262 In fiscal year 2007. The decrease of $246 results from the elimination of a one-
time non-recurring expense in 2007 of $1,200, offset by recognition of prior unapplied
overhead costs and the GASB 45 future medical retirement benefits.
IranstEl.!~
Transfers to the City's General Fund, as defined by City Charter, are equal to a
maximum of 10% of water service revenues of the prior fiscal year. Sewer revenues are
not included in the calculation.
Capital assets
Description:
Land and easements $
Wells and pumping plant
Building, plant and facilities
Other capital
Construction work in process
Total capital assets $
Accumulated depreciation
~~~..~_e1...@lljtaJ_a~!>e.&__.$
2008
12,471
3,192
152,736
6,469
6,176
181,044
( 79,281)
10J,76.3
2007
12,471
3,192
151,901
6,451
5,340
179,355 .
( 73,959)
105.3.96
2006
12,471
3,192
150,874
6,190
5.048
177,775
( 68,649)
.109....J26
The RIX expansion has been delayed as an alternate project at WRP utilizing new
technology, with a smaller footprint, is under review.
LonQ-term debt and coveraQe
2008 2007 2006
Net profit $ ( 1,940) ( 2,420) ( 2,229)
Add back:
- Depreciation 5,364 5,338 5,331
- Amortization 38 44 46
- Interest expense 1,868 2,021 2,164
- Other fees 1,865 2,974 4,664
- Gain/ (loss) on assets 4 2 475
Cash available (d) $ 7,199 7,959 10,451
Senior debt
- COPS 3,285 3.285 3,249
Total senior debt (e) $ 3,285 3,285 3,249
Subordinate debt 2,494 2,494 2,494
Aggregate P & I (f) $ 5,779 5,779 5,743
Senior debt coverage (d)/ (e) 2.2x 2.4 x 3.2 x
~_ _~.9rE!gate CQvE!faoe 19.}/ (f) j,3 x 1 4 x . 1.ll.-x_
11
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2008 and 2007
(in thousands)
ManaClement overview
The sewer utility IS authorized to increase rates by 5% in each of the next two years.
The sewer utility is working with the water utility toward a 30% design and environmental
review for a tertiary expansion at the Chandler Water Reclamation Facility. which would
provide both Title 22 and "super clean" recycled water. The tertiary-treated recycled
water would be used to irrigate City parks and green areas, roadside medians, golf
courses and potential private facilities, while the "super clean" recycled water would be
used to recharge the groundwater basin.
Requests for information:
The financial report is designed to provide a general overview of the Department's
financial condition. Questions concerning any information provided in this report or
requests for additional financial information should be addressed to the Director of
Finance, City of San Bernardino Municipal Water Department, P.O, Box 710, San
Bernardino, CA 92402.
,.~-,
12
'-
BASIC FINANCIAL STATEMENTS
13
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Statement of Net Assets
June 30. 2008
"-~- (With comparative totals for 2007)
Water Sewer Interfund Totals
Utility Utility Eliminations 2008 2007
Assets
Current assets:
Cash and investments (note 2) 10,356,164 17,754,200 28,110,364 21,739.242
Accounts receivable, net 4,531,841 2,497.222 7,029.063 6.822,509
Due from other entities 1,621,707 454,403 2,076,110 1.019.813
Interfund receivable 292.786 (292.786)
Related parties receivable (note 8) 417.031 659,515 1,076,546 968.025
Inventory 1,474,300 1,474,300 1.637,686
Prepaid expenses 86,681 1,059,809 1,146,490 1,085,185
Total current assets 18,780.510 22,425,149 (292,786) 40.912,873 33,272,460
Noncurrent assets:
Restricted assets:
Cash and investments (note 2):
Resbicted for debt service 27,971 3,473,858 3,501,829 3,601.512
Restricted for capital-related fees 8,406,696 15.798,337 24,205.033 27,280,333
Restricted for consumer deposits 2.533.998 2.533,998 2.393.628
Restricted for consent decree (note 12) 2.215,690 2.215.690 2,109.594
Guaranteed investment contract (note 12) 17.545,260 17,545,260 16,717,733
Interest receivable 950.624 80,765 1,031,389 946,460
Prepaid insurance - consent decree (note 12) 41,457,912 41,457.912 44,173.868
Note proceeds held by state 5,642,389 5,842,389 934.000
Total restricted assets 78,780,540 19,352.960 98,133,500 98,157,128
Notes receivable 785.250
Capital assets (note 3):
Land and easements 2,944,972 12,470,740 15,415,712 15,415,712
Construction in progress 15,444,722 6,175,601 21,620,323 46,990,596
Water rights, wells and pumping plants 61,989,083 3,192,218 65.181,301 51,412,484
Distribution systems 100,339,018 100,339,018 73,376,986
Building, plants and store yards 2,317,596 152,735,608 155,053,204 153,830,516
Tools and equipment 2,631.120 3,180,067 5.811,187 5,778.903
Fleet and rolling stock 3,582,883 1.190.602 4,773,485 4,667,220
Office leasehold improvements 2,190,680 2,190,680 1.919,987
Office, computer, engineering
equipment 3,271,254 1,177.852 4,449,106 4,269,289
Radio and interoffice communication
equipment 283,802 99,138 382,940 382,940
Telemetry systems and equipment 994,462 628,699 1,623,161 1.268,369
Miscellaneous 233,534 193,015 426,549 426,549
Less accumulated depreciation and
amortization (52,969,570) (79,281.007) (132,250,577) (123,482,229)
Total capital assets (net of
aCCl:Imulated depreciation
and amortization) 143,253,556 101,762,533 245,016,089 236.257,322
Other assets:
Debt issue costs, net 223,267 223,267 261,344
Deferred call premium 361,573 361,573 403,698
Total other assets 584,840 584,840 665,042
Total noncurrent assets 222,034,096 121,700,333 343,734,429 335,864,742
Total assets 240.814,606 144.125,482 (292,786) 384,847,302 369,137.202
(Continued)
14
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Statement of Net Assets
(Continued)
Water Sewer Interfund Totals
Utility Utility Eliminations 2008 2007
Liabilities ~md net assets
Liabilities:
Current liabilities:
Accounts payable 4,386,597 2,526,590 6,913,167 5,603,024
Interfund payable 292,786 (292.786)
Related parties payable (note 8) 681,323 183,750 865,073 856,347
Accrued expenses 1,271 35,218 36,489 40,148
Accrued compensation 788,112 337.326 1,125,438 1,131,574
Claims payable (note 10) 318,074 73,294 391,368 437.089
Consumer deposits 854.969 854,969 1,677,804
Current portion of compensated
absences (note 5) 959,695 483,983 1,443,678 1,400,128
Current portion of leases payable (note 5) 76,794 76,794 73.843
Current portion of notes payable (note 5) 472,312 1,985,182 2,457,494 2,374.256
Current portion of certificates of
participation (note 5) 2,102,242 2,102,242 1,986,720
Current portion of bonds payable (note 5) 10,000 10,000 10.000
Current portion of OPES obligation 301,100 40,900 342,000
Accrued interest payable 227,848 581,836 809,684 756,015
Total current liabilities 9,078,095 8,643,107 (292,786) 17,428,416 16,346,948
Noncurrent liabilities:
Consumer deposits 2.582.506 2,582.506 2,454,703
Compensated absences (note 5) 471,690 48.285 519.975 701 ,206
Deferred revenue - consent decree (note 12) 62,055,217 62,055.217 63,901,948
Leases payable (note 5) 19,642 19,642 96.626
Notes payable (note 5) 17,766,240 13,109,179 30,895,419 23,353,763
Certificates of participation (note 5) 21,757,488 21,757,488 23,859,730
Bonds payable (note 5) 45,000 45,000 55,000
OPEB obligation (note 7) 711,900 578,100 1,290,000
Total noncurrent liabilities 83,672,195 35,493,052 119,165.247 114,422.976
Total liabilities 92,750,290 44,136,159 (292,786) 136,593,663 130,769,924
Net assets (note 13):
Invested in capital assets, net of related
debt 130,610,364 66,282,300 196,892,664 188.196,495
Restricted for:
Capital-related fees 8,406,696 15,798,337 24.205,033 27,280,333
Unrestricted 9.047,256 17,908,686 26.955,942 22,890,450
Total net assets $ 148,064,316 $ 99,989,323 248,053,639 238,367,278
See accompanying notes to basic financiai statements.
'''-
15
(This page intentionally left blank)
-
16
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Statement of Revenues, Expenses, and Changes in Net Assets
Year ended June 30. 2008
(With comparative totals for the year ended June 30, 2007)
Waler Sewer
Ulili1L- Utility
Operating revenues:
Charges for services $ 25,295.534 20,009,959
Other operating revenues 2,041.559 838,025
Total operating revenues 27,337,093 20,847.984
Operating expenses:
Administration and customer service 7,890,971
Engineering, operations, and distribution
administration 912,657 1,797,130
Plant operations 7,629.602 9,589,827
Maintenance 1,813,310 3,136,509
Environmental control 703,880
Distribution 3,621,228
Engineering 2,405.221 32,336
General, administration, and overhead 3,689,648 2,521,809
Depreciation and amortization (note 3) 4,490,464 5,364,048
Total operating expenses 32,453,101 23,147,539
Operating income (loss) (5,116,008) (2,299.555)
Non-operating revenues (expenses):
Investment income 1,613.192 2,319,570
Rental income 95,818 29,425
Noncapital grant funds 2,715,957
Gain (loss) on asset disposition (531,528) (3,784)
Interest expense and fiscal charges (592,182) (1.868.033)
Colton road Improvements
Amortization of issuance costs (38,077)
Other 178,348 (80,118)
Total non-operating revenues (expenses) 3,479,605 358,983
Net profit (loss) (1,636,403) (1,940,572)
Capital contributions:
Capital grants
Acquisition fees 2,895,970
Capacity fees 3,527,254 1,693,502
Contributed capital assets 4,974,723
Other capital restricted fees 171,887
Total capital contributions 11 ,397,947 1,865,389
Net assets:
Balance at beginning of year 138,302.772 100,064,506
Balance at end of year $ 148,084,316 99,989,323
Interfund Tolals
Eliminations 2008 2007
(42,410) 45,263,083 46,289,997
( 1 ,385,256) 1,494,328 1,625.002
(1,427,666) 46,757,411 47,914,999
(100)
(1,345,145)
(14,709)
(28,826)
(38,886)
(1.427,666)
17
See accompanying notes to basic financial statements.
-
MUNICIPAL WATER DEPARTMENT OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Statement of Casn Flows
"-...... Year Ended June 30. 2008
(With comparati'/e totals tor 2007)
Totals
Water Sewer 2008 2007
Cash flows from operating actlVltles
Cash received from custoners $ 27.181354 20.941.234 48.122.588 48.979,761
Rental income 95,818 29.425 125,243 112,045
Nonoperating miscellaneous revenue (expenses) (353,180) (84,472) (437652) 69,918
SeUleme1t 900,000
Cash paid to employees for services (18618,968) (3,468,313) (22,087,281 ) (19,431,222)
Cash paid to suppliers of goods and services (7991,612) (14,164,625) 122,156,237) (19,889,591)
Net cash provIded by operating activities 313,412 3,253,249 3,566,661 10,740,911
Cash flows from noncapital financing activities
Collection on notes receivable 785.250 785,250
Consent decree insurance drawdowns 2.715,957 2.715,957 2,300,151
Construction of road to fiX facility (1,200,000)
Net cash provided by noncapital financmg activities 3,501.207 3,501,207 11,200,000)
CaSh flows from capital and related financing activities
Capital fees received 6,423,224 1,865,389 8,288,613 8,958,877
Drawdown on CIEDM loan 4,357,611 4,357,611
Grant proceeds received 38,723
Cash paid to acquire fixed assets (12,489,362) (819,679) {13,309,041) (15,117,337) .
Pnnclpal paid en capital-related debt (541,079) (3,623,275) (4,364,354) (4,285,086)
Interest paid on capital-related debt (485,626) 11,655515) (2,341,141) (2,586,837)
Net cash prOVided by (used fOr) capital and related
financing activities (2,735,232) (4,633,080) (7,368,312) (12,991,460)
Cash flows from :nvesting. actiVities
Interest received 1,528,263 2,319570 3,847,833 3,074.160
Net cash provided by investing actlvnies 1,528,263 2,319.570 3,847,833 3,074,160
Net increase In cash 2,607650 939 739 3,547,389 1,923,762
Cash and cash equivalents at beginning of year 20,932,869 32,612.798 53,545,667 51,621,905
Cash and cash equivalents at end of year $ 23,540,519 33,552,537 57,093,056 53,545,667
""-'
18
MUNICIPAL WATER DEPARTMENT OF THE CITY OF SAN BERNARDINO. CALIFORNIA
Statement of Cash Flows
,- (Continued)
Totals Totals
Water Sewer 2008 2007
ReconCIliation of cash and cash equivalents to amounts
reported ,::m the balance sheet
Reported on the balance sheet.
Cash and investments $ 10,356164 17754200 28110,364 21739,242
Restricted assets 78,780.540 19352,960 98.133.500 98,157.128
Less restricted assets not meeting the definition of
cash eauivalents'
Investment agreements (3473,858) (3473,858) (3 578,642)
Government investment contract (17,545,260) (17,545,260) (16,717,733)
Interest receivable (950,624) (80,765) (1.031,389) (946460)
PrepaId insurance - consent decree 141457,912) (41,457,912) (44,173,868)
Note proceeds held by state 15,642,389) (5642389) (934,000)
Cash and cash equivalents at end of year $ 23,540,519 33552,537 57093,056 53,545,667
Reconciliation of operating Income to net cash
provided by (used for) operating activi:ies:
Operating income $ (5.116,006) (2299,555) (7,415,563) 1876,027)
DeiJrecla:iof! ard amortizatIon 4490,464 5364048 9.854.512 9403,400
Rental Income 95,818 29.425 125,243 112,045
Settlement 900,000
Gain (loss) on asset disposition 1531,528) (3,784) (535,312) 35,340
Other receipts (expenses) 178,348 180Y8} 98,230 34,578
Adjustments:
(Increase) decrease in accounts receivable 1283,542} 76.988 (206,554) (498,422)
(Increase) decrease in due from other entities (970.716) (85581) (1.056,297) 777 ,204
(Increase) decrease In lnterfund receivable (148,459) (148,459) (58.192)
{Increase) decrease in related parties receivable (61,905) (46,616) (108.521) (293,785)
(Increase) decrease in inventory 163,386 163,386 72,224
(Increase) decrease In prepaid expenses (72,158) 10,853 (61,305) 83,802
(Increase) decrease in note proceeds held by state 934,000 934,000
(Increase) decrease in other assets 581,386 (910.902) (329.516) (234,825)
Increase (decrease) in accounts payable 1,163,478 488,685 1.652,163 611,424
Increase (decrease) in interfund payable 148,459 148,459 58,192
Increase (decrease) in related parties payable 5,968 2.756 8,726 164.453
Increase (decrease) in accrued expenses 127) 13632) 13659) 26,584
Increase (decrease) in accrued compensation (80,854) (62.953) (143,817) (21,373)
Increase (decrease) in claims payable 193,375) 47.654 (45)21) 77 ,838
Increase (decrease) in consumer deposits. current (822,265) 1570) (822,835) (240,086)
Increase (decrease) in consumer deposits - noncurrent 127,803 127,803 234,841
(Increase) decrease in OPES obligation 711,900 711.900
(lncrease) decrease in prepaid insurance - consent decree 41.698 41,698 3,001
Increase (decrease) in deferred revenue 368,695
Net cash provided by operating activities $ 313,412 2,675,149 2,988,561 10,740,911
Noncash investing, capital, and financing activities:
Capital assets constructed by developers
4,974,723
4,974,723
5,907,230
See accompanying notes to basic financial statements.
'.-
19
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
Year ended June 30, 2008
(1) Summarv of Siqnificant Accountinq Policies
Reportinq Entitv
The Municipal Water Department of the City of San Bernardino, California ("the
Department") is governed under the Charter of the City of San Bernardino. A Board of
Water Commissioners who is appointed by the Mayor and approved by the City Council
of the City of San Bernardino has certain limited powers with respect to the Department.
The Department has no separate organizing document and is a part of the legal entity of
the City of San Bernardino. The Department of the City of San Bernardino operates two
enterprise funds: the Water Utility Enterprise Fund (Water Utility) and the Sewer Utility
Enterprise Fund (Sewer Utility). The Water Utility also provides administrative services
and contracted services to the Sewer Utility. The accounting policies of the Department
conform to generally accepted accounting principles (GMP) as applicable to
governments.
The preparation of these financial statements requires management to make estimates
and assumptions. Those estimates and assumptions affect the reported amounts of
assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets
and liabilities. Actual results could differ from those estimates. Management also
determines the accounting principles to be used in the preparation of the financial
statements. A description of the significant accounting policies employed in the
preparation of these financial statements follows:
Fund Accountinq
The accounts of the Department are organized and operated on the basis of funds. A
fund is an independent fiscal and accounting entity with a self-balancing set of accounts.
Fund accounting segregates funds according to their intended purpose and uses them to
aid management in demonstrating compliance with finance-related legal and contractual
provisions. The Department's financial statements include only enterprise funds, which
are a proprietary fund type. Enterprise funds are used to account for those operations
that are financed and operated in a manner similar to private business or where the.
Board of Water Commissioners has decided that the determination of revenues eamed,
costs incurred and/or net income is necessary for management accountability.
Basis of Accountinq
Proprietary funds are accounted for on the fiow of economic resources measurement
focus and use the accrual basis of accounting. Under this method, revenues are
recorded when earned and expenses are recorded at the time liabilities are incurred.
The Department applies all applicable GASB pronouncements in accounting and
reporting for its proprietary operations and applicable F ASBs that occurred prior to
November 30,1989.
20
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(1) Summary of Siqnificant Accountinq Policies (Continued)
Cash and Investments
Investments are reported in the accompanying balance sheet at fair value, except for
certain certificates of deposit and investment contracts that are reported at cost because
they are not transferable and they have terms that are not affected by changes in market
interest rates.
Changes in fair value that occur during a fiscal year are recognized as investment
income reported for that fiscal year. Investment income includes interest earnings,
changes in fair value and any gains or losses realized upon the liquidation or sale of
investments.
Cash for the Department is pooled with the City of San Bernardino for investment
purposes in order to maximize interest earnings. Such earnings are credited to the
various funds within the City of San Bernardino based upon average monthly cash
balances. The investment policies and the associated risk factors as they relate to the
Department are included in the City's Comprehensive Annual Financial Report.
For the purpose of the statement of cash flows, cash and cash equivalents include all
highly liquid investments (including restricted assets) with maturity of three months or
less when purchased.
Receivables
Trade receivables are shown net of an allowance for uncollectible accounts based on
management's estimate.
Interfund Receivables and Pavables
Transactions between funds that are representative of lending/borrowing arrangements
outstanding at the end of the fiscal year are referred to as either "interfund
receivables/payables" (Le., the current portion of interfund loans) or "advances to/from
other funds" (Le., the non-current portion of interfund loans). All interfund transactions
are eliminated for financial reporting purposes.
Inventories
Inventories are valued at the lower of cost, using the average-cost method, or market.
-
21
.,~,~<
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(1) Summarv of Sionificant Accountinq Policies (Continued)
Restricted Assets
Various resources of the Department are limited as to their use by law or by certificates
of participation and bond covenants and are classified on the balance sheet as restricted
assets. Proceeds of the certificates of participation and bonds are restricted for the
construction of water and sewer system improvements and for repayments.
Assessments collected from property owners are restricted for the payment of bond
principal and interest Also, fees imposed on new real estate development are restricted
by law for the construction of capital improvements that benefit the development
projects.
Issuance Costs and Discount
Issuance costs, discounts, and deferred funding charges for certificates of participation
and bonds payable are being amortized using the effective interest rate method over the
term of the related certificate or bond or the straight-line method which approximates the
effective interest method.
Capital Assets
Property, plant, equipment and water rights are recorded at cost The Department's
policy is to capitalize all property having a value of $5,000 or more and a life expectancy
of 3 years or more. Major outlays for capital assets and improvements are capitalized as
projects are constructed. Material interest incurred during the construction phase is
reflected in the capitalized value of the asset constructed, net of interest earned on the
invested proceeds over the same period, if any. Overhead costs are capitalized at the
rate of 28.9% for labor/benefits, 10% for materials/supplies, 2% for significant contracts
and are reflected in the capitalized value of the asset constructed. Depreciation has
been provided for using the straight-line method over the estimated useful lives of the
related assets. Useful lives for depreciation purposes are as follows:
Wells, pumping plants, reservoirs, and distribution system
Interceptor lines
Disposal plant
Leasehold improvements
Shops, offices, stores, and yards
Tools and equipment
Office equipment
Communication equipment
Computer equipment
Automotive equipment
8 to 50 years
50 years
35 to 50 years
5 to 25 years
10 to 20 years
4 to 20 years
5 to 20 years
8 to 10 years
3 to 5 years
3 to 15 years
22
'"-
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO. CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(1) Summary of Siqnificant Accountinq Policies (Continued)
Capital Assets (Continued)
Equipment leased under capital leases is recorded at cost, and amortization has been
provided for using the straight-line method over the estimated useful life. Amortization is
included in depreciation expense.
Compensated Absences
Employees gain a vested right to accumulated unpaid vacation based on years of
service but cannot accumulate more than two years of accrued vacation. Once each
fiscal year, employees with at least three weeks of accrued vacation have the option of
receiving payment at their regular rate of pay for up to two weeks of regular paid
vacation. Employees' vacation benefits are recognized as a liability of the Department.
Sick leave is accumulated without limit for each employee at the rate of 3.7 hours per
pay period. Leave with pay is provided when employees are absent for health reasons.
Upon termination employees are entitled to 25 percent of accumulated sick leave with
five years of service and a minimum of 480 hours of accumulated sick leave. Upon
retirement or death, employees are entitled to 50 percent of accumulated sick leave up
to a maximum of 1,152 hours. Accrued sick leave benefits are recognized as a liability
of the Department.
Classification of Revenues and Expenses
Proprietary funds distinguish operating revenues and expenses from non-operating
items. Operating revenues and expenses generally resulf from providing services and
producing and delivering goods in connection with a proprietary fund's principal ongoing
operations. The principal operating revenues of the Department's enterprise funds are
charges to customers for services. The Department recognizes the collection of fees to
connect new customers to the system as operating revenues. Operating expenses for
the enterprise funds include the cost of services, administrative expenses, and
depreciation on capital assets. All revenues and expenses not meeting this definition
are reported as non-operating revenues and expenses.
Capital contributions consist of contributed capital assets and special charges that are
legally restricted for capital expenditures by state law or by the Board of Water
Commissioners action that established those charges.
Interfund Eliminations
The interfund eliminations column represents entries made to eliminate interfund income
and expenditure transactions between the water and sewer funds for the purposes of
consolidated financial statements.
.-
23
~-
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(1) Summarv of Sionificant Accountinq Policies (Continued)
Comparative Data
Prior year data has been included where practical for comparison purposes only. The
prior year data does not represent a complete presentation in accordance with
accounting principles in the United States of America.
Certain minor reclassifications of prior year data have been made in order to enhance
their comparability with current year figures.
(2) Cash and Investments
Cash and investments as of June 30, 2008 are classified in the accompanying financial
statements as follows:
Cash and investments
Cash and investments for debt service
Cash and investments for capital-related fees
Cash and investments for consumer deposits
Cash and investments for consent decree
Guaranteed investment contract
$28,110,364
3,501,829
24,205,033
2,533,998
2,215,690
17.545.260
Total cash and investments
$.II!.112" 174
Cash and investments as of June 30, 2008 consist of the following:
Total cash and investments
$ 5,700
44,856
3,473,858
74.587.760
$78.112174
Cash on hand
Demand deposits
Deposits with financial institutions
Investments
.-
24
-.-
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(2) Cash and Investments (Continued)
Investments Authorized bv the California Government Code and the Entity's Investment
Policv
The table below identifies the investment types that are authorized for the Department by
the California Government Code (or the Department's investment policy, where more
restrictive). The table also identifies certain provisions of the California Government
Code (or the Department's investment policy, where more restrictive) that address
interest rate risk, credit risk, and concentration of credit risk. This table does not address
investments of debt proceeds held by bond trustee that are governed by the provisions
of debt agreements of the Department, rather than the general provisions of the
California Government Code or the Department's investment poiicy.
Authorized by Maximum Maximum
Investment Types Investment Maximum Percentage Investment
Authorized bv State Law Policv Maturitv. of Portfoiio. In One Issuer.
Local Agency Bonds No 5 years None None
U.S. Treasury Obligations Yes 5 years None None
U.S. Agency Securities Yes 5 years None None
Banker's Acceptances Yes 180 days 40% 30%
Commercial Paper Yes 270 days 25% 10%
Negotiable Certificates of Deposit Yes 5 years 30% None
Repurchase Agreements No 1 year None None
Reverse Repurchase Agreements No 92 days 20% of base value None
Medium-Term Notes Yes 5 years 30% None
Mutual Funds No N/A 20% 10%
Money Market Mutual Funds Yes N/A 20% 10%
Mortgage Pass-Through Securities Yes 5 years 20% None
County Pooled Investment Funds No N/A None None'
Local Agency Investment Fund Yes N/A None None
JPA Pools (other investment pools) No N/A None None
Guaranteed Investment Contract Yes N/A None None
. Based on state law requirements or investment policy requirements, whichever is more
restricllve.
The Board of Water Commissioners has also authorized the investment of Consent
Decree (see note 12) funds in the state Local Agency Investment Fund (LAIF) and in
guaranteed investment contracts (GICs) with maturities in excess of five years.
25
",.,-
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(2) Cash and Investments (Continued)
Investments Authorized bv Debt Aoreements
Investment of debt proceeds held by bond trustee are governed by provisions of the debt
agreements, rather than the general provisions of the California Government Code or
the Department's investment policy. The table below identifies the investment types that
are authorized for investments held by bond trustee. The table also identifies certain
provisions of these debt agreements that address interest rate risk, credit risk, and
concentration of credit risk.
Maximum
Authorized Maximum Percentage Investment
Investment Tvpe Maturitv Allowed In One Issuer
U.S. Treasury Obligations None None None
U.S. Agency Securities None None None
Banker's Acceptances 180 days None None
Commercial Paper 270 days None None
Money Market Mutual Funds N/A None None
Repurchase Agreements 270 days None None
Investment Contracts 30 yea rs None None
Disclosures Relatino to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the
fair value of an investment. Generally. the longer the maturity of an investment, the
greater the sensitivity of its fair value to changes in market interest rates. One of the
ways that the Department manages its exposure to interest rate risk is by purchasing a
combination of shorter term and longer term investments and by timing cash flows from
maturities so that a portion of the portfolio is maturing or coming close to maturity evenly
over time as necessary to provide the cash flow and liquidity needed for operations.
26
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(2) Cash and Investments (Continued)
Disclosures RelatinG to Interest Rate Risk (Continued)
Information about the sensitivity of the fair values of the Department's investments
(including investments held by bond trustee) to market interest rate fluctuations is
provided by the following table that shows the distribution of the Department's
investments by maturity:
Investment Tvpe
Equity in City
investment pool
State investment pool
Guaranteed
investment contract
Held by bond trustee:
Federal agency
securities
Investment Agreement
Total
~,-
Total
RemaininG MaturinG (in Months)
12 Months 13 to 24 25 to 60 More Than
Or Less Months Months 60 Months
$54,352,952 54,352,952
2.215,690 2,215,690
17,545,260
108 108
3.473.750
$77,587220 56.5682~
=-_- __ 21 01~.010
3.473.750
27
17,545,260
"",._,
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO. CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(2) Cash and Investments (Continued)
Disclosures Relatino to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation
to the holder of the investment This is measured by the assignment of a rating by a
nationally recognized statistical rating organization. Presented below is the minimum
rating required by (where applicable) the California Government Code, the Department's
investment policy, or debt agreements, and the actual rating as of year end for each
investment type.
Investment Tvpe
Equity in City
investment pool
State investment pool
Guaranteed
investment contract
Held by bond trustee:
Federal agency
securities
Investment Agreement
Total
Total
Minimum
Legal
Ratino
Ratino as of Year End
Not
AAA AA Rated
$54,352,952
2,215,690
17,545,260
N/A
N/A
N/A
54,352,952
2,215,690
17,545.260
108
3.473.750
$Li)'i87 nl.Q
108
1.Q8
3.473.750
77.587,65.2
Concentration of Credit Risk
The investment policy of the Department contains no limitations on the amount that can
be invested in anyone issuer beyond that stipulated by the California Government Code.
Investments in anyone issuer (other than U.S. Treasury securities, mutual funds, and
investment pools) that represent 5% or more of total Department investments are as
follows:
Issuer Investment Tvpe
AIG Match Funding Corporation Guaranteed Investment Contract
Reported
Amount
$17,545,260
28
-..-
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(2) Cash and Investments (Continued)
Custodial Credit Risk
Custodial credit risk for deposits (including bank investment contracts) is the risk that, in
the event of the failure of a depository financial institution, a government will not be able
to recover its deposits or will not be able to recover collateral securities that are in the
possession of an outside party. The custodial credit risk for investments is the risk that,
in the event of the failure of the counterparty (e.g.. broker-dealer) to a transaction, a
government will not be able to recover the value of its investment or collateral securities
that are in the possession of another party. The California Government Code requires
that a financial institution secure deposits made by state or local .governmental units by
pledging securities in an undivided collateral pool held by a depository regulated under
state law (unless so waived by the governmental unit).
The market value of the pledged securities in the collateral pool must equal at least
110% of the total amount deposited by the public agencies. California law also allows
financial institutions to secure the Department's deposits by pledging first trust deed
mortgage notes having a value of 150% of the secured public deposits.
For investments identified herein as held by bond trustee, the bond trustee selects the
investment under the terms of the applicable trust agreement, acquires the investment,
and holds the investment on behalf of the reporting government.
Investment in State Investment Pool
The Department is a voluntary participant in the Local Agency Investment Fund (LAIF)
that is regulated by the California Government Code under the oversight of the
Treasurer of the State of California. The fair value of the Department's investment in this
pool is reported in the accompanying financial statements at amounts based upon the
Department's pro-rata share of the fair value provided by LAIF for the entire LAIF
portfolio (in relation to the amortized cost of that portfolio). The balance available for
withdrawal. is based on the accounting records maintained by LAIF, which are recorded
on an amortized cost basis.
29
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(3) Caoital Assets
Capital asset activity for the year ended June 30, 2008 is as follows:
Balance at Balance at
~, 2007 Additions Deletions June 30. 2008
Capital projects, not being depreciated:
Land and easements $ 15,415,712 15,415,712
Construction in progress 46 990 .596 15.696,441 141.066.714) 21.620.323
Total capital assets. not being depreciated 62.406.308 15.696441 141 066714) 37 036 035
Capital assets, being depreciated:
Water rights, wells and pumping plants 51,412,484 14,437,324 (668,507) 65.181,301
Distribution systems 73,376,986 27,615,503 (653,471) 100,339.018
Building, plants and store yards 153,830,516 1 ,251 ,278 (28,590) 155,053,204
Tools and equipment 5,778,903 89.561 (57,277) 5,811,187
Fleet and rolling stock 4.667,220 305,607 (199,342) 4.773,485
Office leasehold improvements 1.919,987 270,693 2.190.680
Office, computer, engineering equipment 4,269,289 183,372 (3,555) 4,449,106
Radio and interoffice communication equip 382,940 382,940
Telemetry system and equipment 1,268,369 415,261 (60,469) 1,623,161
Miscellaneous 426,549 426.549
Total capital assets, being depreciated 297 333 243 44 .568 .599 (1.671211) 340.230.631
Less accumulated depreciation for:
Water rights, wells and pumping plants (22.124,295) (1,908,499) 182,546 (23.850,248)
Distribution systems (21,987,039) (1,693,421) 636,992 (23.043,468)
Building, plants and store yards (68,664,680) (4,859.695) 30,129 (73,494,246)
Tools and equipment (3,569,774) (300,793) 37,545 (3,833,022)
Fleet and rolling stock (2,746,948) (354.249) 177,523 (2,923,674)
Office leasehold improvements (208,493) (133,985) (342,478)
Office, computer and engineering equipment (3.138.087) (349,370) 1,737 (3,485,720)
Radio and interoffice computer equipment (283,646) (12,318) (295.964)
Telemetry system and equipment (506,005) (229,859) 19,692 (716,172)
Miscellaneous (253 262) (12.323) (265585)
Total accumulated depreciation (123.482.229) (9854 512) 1.086.164 (132.250.577)
Total capital assets, being depreciated, net 173.851.014 34.714.087 1585.047) 207.980.054
Net property, plant and equipment ~~A~:?Z.~~ !?Q__4__LQ.5__~1 w.g!?1.1~) ~-2,9J~~~
30
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(3) Capital Assets (Continued)
Significant project commitments as of June 30, 2008 are as follows:
Cumulative
Expenditures
Project Amount as of June Unexpended
Proiect Description Number Authorized 30. 2008 Commitments
Waler Fund
Palm avenue pump station 10340 2.610,000 262,397 2,347,603
Magnolia pump station 10341 1,827.000 219,030 1,607,970
Caltrans 215 freeway 10352 2,775,000 1,460,610 1,314,390
widening
Palm avenue reservoir #3 10463 3.900.000 _ 5.839 3,894.161
Totals lL.L12 OQ,Q 1,.947 876 9.,,121,1.201
Sewer Fund
RIX faCility expansion 00038 8,000,000 2,269,616 5,730,384
Cogeneration 00062 5,537,303 3,688,745 1,848,558
Digester gas treatment 2.071 ,000 ~,071.000
Totals t5~liQe,3Q3 ~..92e.32J ~.64~.2
(4) Operatino Leases
Other
Funding
Sources
2,455,731
1,719,918
1,533.669
W.~"3jJ~
1,146,077
lJ,,~
The Department leases office space from the City of San Bernardino under a
noncancellable operating lease that terminates on March 31, 2012. Effective December
15, 2008, the Department entered into a lease with Superior Homes LLC for office and
warehouse space for a term of ten years. The following is.a schedule of minimum lease
payments as of June 30, 2008:
For the vear endino June 30
Office and Warehouse Space
Water Sewer Total
296,942 21,479 318,421
415,907 21,479 437,386
415,907 21,479 437,386
415.907 16.004 431.911
li5.44 66~ lill.ill L625 104
Rent expense was $177,826 for the periods ending June 30, 2008 and 2007.
2009
2010
2011
2012
'~,
31
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Lonq.Term Debt
The following is a summary of changes in long-term debt obligations for the year ended
June 30, 2008:
Amounts Amounts Due
Balance at Balance at Due Within Beyond
July 1 2007 Additions Reductions June 30 2008 One Year One Year
Compensated absences $ 2.101,334 (137,681) 1,963,653 1,443,678 519,975
Lease payable 170,468 (74,032) 96.436 76,794 19,642
Notes payable 25,728,019 10,000,000 (2.375,106) 33,352,913 2.457.494 30,895.419
Certificates of
Participation 26.045.000 (2,010,000) 24,035,000 2,125,000 21,910,000
Less deferred amounts.
Unamortized discounts (198,550) 23,280 (175,270) (22,758) (152,512)
Bonds payable 65,000 (10,000) 55,000 10,000 45,000
OPES obli9atlon 1 632,000 1 632 000 342 000 1 290 000
S~~911 271 11 632JlQQ (4 58 :i,~.3Jl) 60 95~ 732 6 432 208 54.:;Z~
Lease/Purchase Pavable
California First Leasing Corporation
Maturity date: 2009
Interest rate: 3.68%
Repayment provisions: Quarterly principal and interest
Payments of $19,822.20
Balance
Less current portion
$96,436
(76.794)
Long-term portion
$19642
On December 28, 2004, the Department entered into a master equipment
lease/purchase agreement with California First Leasing Corporation for furniture and
equipment for the 5th Floor Remodeling Project, in the amount of $363.000. The furniture
and equipment are pledged as collateral for the term of lease/purchase agreement
32
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Lona-Term Debt (Continued)
Notes Pavable
California Infrastructure and Economic Development Bank
Maturity date: 2022
Interest rate: 3.34%
Repayment provisions: Annual principal and interest
payments ranging from $776,905 to $750,319
Balance
California Infrastructure and Economic Development Bank
Maturity date: 2026
Interest rate: 2.71 %
Repayment provisions: Annual principal and interest
payments ranging from $733,438 to $702,091
Balance
San Bemardino Valley Municipal Water District
Original amount: $5,084,729
Maturity date: 2013
Interest rate: 7.25%
Repayment provisions: Annual principal and interest
payments of $456,250
Balance
State Water Resources Control Board (SWRCB)
Original amount: $4,015,216
Maturity date: 2011
Interest rate: 3.3%
Repayment provisions: Annual principal and interest
payments of $279.293
Balance
State Water Resources Control Board (SWRCB)
Original amount: $25,978,599
Maturity date: 2016
Interest rate: 2.8%
Repayment provisions: Annual principal and interest
payments of$1,758,901
Balance
Total notes payable
Less current portion
Long-term portion
33
$8,258.552
10,000,000
1,858,259
785,383
12,450,719
33,352,913
(2,457,494)
UQ.Jl95 41~
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Lonq-Term Debt (Continued)
On March 18. 2004, the California Infrastructure and Economic Development Bank
(CIEDB) issued its Infrastructure State Revolving Fund Revenue Bonds to provide
funding for a portion of the costs of Phases I and II of the Water System Reliability
Schedule of Improvements including transmission mains, booster stations, and a
reservoir. Installment Sale Agreement No. 02-027 between the Department and the
CIEDB was pledged as security for the bonds. The Department sets aside water
revenues to make installment payments on the bonds as due.
The State Revolving Fund loans between the State Water Resources Control Board and
the Santa Ana Watershed Authority provided funding for the construction qf the San
Bernardino/Colton Rapid Infiltration Extraction (RIX) Project. The loan agreements were
amended in April 2001 to transfer the loan obligations to the successors in interest,
being the City of San Bernardino Board of Water Commissioners, and the City of Colton.
The loans require the Department to establish a Wastewater Capital Reserve Sinking
Fund (WCRF) for expansion, major repair or replacement of wastewater treatment works
at one-half of one percent of the total loan amount over a period of ten years. The
Department has decided to use the revenues of the Sewer Utility Fund towards
repayment of the loans.
Certificates of Participation
Interest
Rates
Issue
Date
Maturity
Date
Original
Amount
Annual
Principal
Installments
Balance
1998 Refinancing Sewer 3.95%
to
5.00%
1998
2017
$36,230,000 $1,505,000
to
53.220,000 524,035.000
Less current portion
payable from restricted assets
deferred unamortized discount
(2,125,000)
22.758
12,102.242\
Long-term portion
payable from restricted assets
deferred unamortized discount
Long-term portion, net of unamortized
discount
21,910,000
(152.512)
.$2J.Z5~~
It has been determined that the amount of $131,378 was due under Internal Revenue
Code Section 148(f)(4)(B) for the temporary investments of the 1998 Refinancing Sewer
Revenue Certificates of Participation and for arbitrage rebate.
-
34
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Lona-Term Debt (Continued)
In 1998, the Department refinanced the acquisition and construction of certain capital
improvements which were originally financed by the 1992 Sewer Certificates of
Participation, dated February 1, 1992. The refinancing was accomplished by issue of
the 1998 Refunding Sewer Revenue Certificates of Participation in the amount of
$36.230,000. The proceeds of the 1998 Certificates were invested and used to pay
interest on the 1998 issue until February 1, 2001. The 1992 Certificates were called on
February 1, 2001 at a prepayment premium of two percent The funds from the 1998
issue were used to payoff the 1992 Certificates. The Department will now begin paying
the installment payments on the 1998 Certificates from the net revenues on the Sewer
System.
The Department has covenanted that it will budget amounts sufficient to make all
installment payments due. .
The required reserve for the 1998 Refunding Sewer Revenue Certificates of Participation
is $2,125,000. As of June 30, 2008, the reserve was fully funded.
Costs related to the issuance of the 1998 Certificates have been paid out of the proceeds
of the issue.
Less current portion payable from
restricted assets
Long-term portion
(10,000)
~4:;; OOQ .
The Department has covenanted to set aside Water revenues to make installment
payments on the Bonds as due. A financial guaranty insurance policy has been issued,
and accordingly, no cash reserve balance is required to be established.
'---
35
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Lonq-Term Debt (Continued)
The annual requirements to amortize long-term debt subsequent to June 30, 2008 are
as follows:
June 30 Princioal Interest Total
Lease payable 2009 76,794 2,495 79,289
2010 19.592 180 19.822
96.436 2,675 99.111
Notes payable 2009 2,457,494 1,110,873 3,568,367
2010 2,982,806 1,016,581 3,999,387
2011 3,085,118 911,227 3,996,344
2012 2,913,058 801,067 3,714,125
2013 3,014,053 688,959 3,703,012
2014-2018 10,543,163 2,160,442 12,703,604
2019-2022 5,702,007 885,406 6,587,413
2023-2026 2.655.214 166.498 2.821.712
33.352.913 7.741.053 41.093.967
Certificates of participation 2009 2,125,000 1,174,555 3,299,555
2010 2,240,000 1,078,930 3,318,930
2011 2,365,000 973,650 3,338,650
2012 2,510,000 855,400 3,365,400
2013 2,650,000 736,175 3,386,175
2014-2016 12.145.000 1.561.813 13.706.813
24.035.000 6.380.523 30.415.523
Bonds payable 2009 10,000 4,263 14,263
2010 10,000 3,488 13,488
2011 10.000 2,713 12,713
2012 10,000 1,938 11,938
2013 15,000 1.163 16.163
55.000 13.565 68.565
$57 539.3..49 14137.816 71 ,677.166
36
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Lona-Term Debt (Continued)
Compensated Absences
The Department's policies relating to compensated absences are described in note 1.
This liability, amounting to $1.963,653 and $2,101,334 at June 30, 2008 and June 30,
2007, respectively, will be paid in future years from future resources from the water and
sewer funds.
(6) Defined Benefit Pension Plan
Qualified employees are covered under a multiple-employer contributory retirement plan
maintained by an agency of the State. of California, California Public Employees'
Retirement System (PERS).
Plan Description
The Department is a part of the City of San Bernardino. The City contributes to PERS,
an agent multiple-employer public employee retirement system defined benefit pension
plan administered by PERS. All employees who work 1.000 hours or more are eligible to
participate. The plan provides retirement and disability benefits, annual cost-of-living
adjustments, and death benefits to plan members and beneficiaries. Benefit provisions
are established by state statutes, as legislatively amended, within the Public Employees'
Retirement Law. PERS issues a separate comprehensive annual financial report that
includes financial statements and required supplementary information. Copies of the
PERS annual financial report may be obtained from the PERS Executive Office, 400 "Po
Street, Sacramento, California 95814. PERS also issues a separate report on the
actuarial valuation of the plan of the City of San Bernardino. which is available at the
Department. Additional information regarding the City's participation in PERS can be
found in the City's financial statements.
(7) Postemplovment Benefits other than Pensions
Plan Description: The Department administers a single-employer defined benefit
healthcare plan which provides medical insurance benefits to eligible retirees and their
spouses in accordance with various labor agreements. The Department reports the
financial activity of the plan as a trust fund, and no separate financial report is prepared.
37
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(7) Postemplovment Benefits other than Pensions, (Continued)
Eligibility: Employees are eligible for retiree health benefits if they retire from the
Department on Dr after age 50 with at least 5 years Df service, and are eligible fDr a
PERS pension. Membership Df the plan cDnsisted Df the following at June 30, 2008, the
date of the latest actuarial valuation:
Retirees and beneficiaries receiving benefits
Terminated plan members entitled to but
not yet receiving benefits
Active plan members
Total
83
o
240
323
Funding PD/icy: The contribution requirements of plan members and the Department are
established and may be amended by the Board of Water CDmmissioners. The required
contribution is based on projected pay-as-you-go financing requirements, with an
additional amount to prefund benefits as determined annually by the Board of Water
Commissioners. For fiscal year 2007-08, the Department contributed $632,000 to the
plan, including $632,000 for current premiums (100% of total premiums). Plan members
receiving benefits contributed $146,000 (apprDximately 6.2% of tDtal premiums) through
their required contribution. The Department pays up to the entire cost of health benefits
fDr eligible retirees and their spDuses until age 65 subject tD the City's vesting schedule.
Annual OPEB Cost and Net OPEB Obligation. The Department's annual Dther
postemployment benefit (OPES) cost (expense) is calculated based on the annual
required contribution of the employer (ARC), an amount actuarially determined in
accordance with the parameters of GASS Statement 45. The ARC represents a level of
funding that, if paid on an DngDing basis, is projected to cover normal cost each year and
amortize any unfunded actuarial liabilities (or funding excess) not to exceed thirty years.
The following table shows the components of the Department's annual OPES cost for
the year, the amount actually contributed to the plan, and changes in the Department's
net OPES obligation:
The Department's annual OPEB cost, the percentage of annual OPES cost contributed
to the plan, and the net OPES obligation for 2008 and the two preceding years were as
follows:
38
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(7) Postemplovment Benefits other than Pensions. (Continued)
Year Annual AnnualOPEB OPEB
Ended OPEB Cost Cost Contributed Obligation
6/30/06 N/A N/A N/A
6/30/07 N/A N/A N/A
6/30/08 $2,264,000 72.1% $1,632,000
Actuarial valuations of an ongoing plan involve estimates of the value of reported
amounts and assumptions about the probability of occurrence of events far into the
future. Examples include assumptions about future employment, mortality, and the
healthcare cost trend. Amounts determined regarding the funded status of the plan and
the annual required contributions of the employer are subject to continual revision as
actual results are compared with past expectations and new estimates are made about
the future. The schedule of funding progress, presented as required supplementary
information following the notes to the financial statements, presents multi-year trend
information about whether the actuarial value of plan assets is increasing or decreasing
over time relative to the actuarial accrued liabilities for the benefits.
Actuaria/ Methods. and Assumptions. Projections of benefits for financial reporting
purposes are based on the substantive plan (the plan as understood by the employer
and the plan members) and include the types of benefits provided at the time of each
valuation and the historical pattern of sharing of benefit costs between employer and
plan members to that point The actuarial methods and assumptions used include
techniques that are designed to reduce the effects of short-term volatility in actuarial
accrued liabilities and the actuarial assets, consistent with the long-term perspective of
the calculations.
.>~_..
39
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
( Continued)
(7) Postemplovment Benefits other than Pensions, (Continued)
The actuarial cost method used for determining the benefit obligations is the Entry Age
Normal Cost Method. The actuarial assumptions included a 5.0 percent investment rate
of return, which is the assumed rate of the expected long-term investment returns on
plan assets calculated based on the funded level of the plan at the valuation date, and
an annual healthcare cost trend rate between 9.5-10.9 percent initially, reduced by
decrements of between 0.65-.080% per year to an ultimate rate of 4.5 percent after the
tenth year. Both rates included a 3.0 percent inflation assumption. The UAAL is being
amortized as a level percentage of projected payroll over 30 years. It is assumed the
Department's payroll will increase 3.25% per year.
. ,,-'
SCHEDULE OF FUNDING PROGRESS
Actuarial
Accrued UAAL as a
Actuaria Liability Unfunded Percentage of
Actuarial Value of (AAL)- AAL Funded Covered Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payrolt
Date L!!l L!!l (b-a) laIb) 1Q) Cb.a)/c}
6/30/08 $0 $26,190,000 $26,190.000 0% $13,169,000 198.9%
SCHEDULE OF EMPLOYER CONTRIBUTIONS
Ended Required Percentage
.June 30 Contribution Contributed
2006 N/A N/A
2007 N/A N/A
2008 $2.264.000 27.9%
40
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(8) Related Partv Transactions
Following is a summary of transactions and balances with the City of San Bernardino
and its various departments as of and for the years ended June 30, 2008 and 2007:
Receipts
Citv of San Bernardino
Revenue from water charges
Revenue from sewer charges
Revenue from geothermal charges
Billing and collection charges - refuse
Billing and collection charges - storm drain
Cost reimbursement
Reimbursement - sale of land
Interest income
Economic Development Aqencv
Revenue from geothermal charges
Total receipts from related parties
Payments
Citv of San Bernardino
10% water revenue
Sewer collection system maintenance
Worker's compensation - administration charges
Printing services
Postage
City Hall rent
Phone charges
Refuse disposal service
Civil service/human resources
Legal services
Data processing services
Police & Fire Protection
Revenue transfer - land sale
Cost reimbursement
Other services
Miscellaneous charges
Total payments to related parties
41
2008 2007
$ 151,015 206.809
57,466 70,201
13,750 12,142
197,258 197,570
5;242 5,469
1,000 1,000
804,881 58.894
2,416,738 1,995,670
617 483
~~. HI.il67 2.,.548236
2008 2007
$2,368,049 2,373,013
3,036,221 3,073,405
177,469 172,961
2,319 5,396
10,757 10,500
177,826 177,826
131,109 130,774
74,595 73,081
170.700 156,000
176,000 170,890
659,455 510,499
500,000 500,000
0 3,090
96,922 40,859
5.142 5,722
60 233
$]:.58~6o,~~1 I,'tQ4,249
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(8) Related Partv Transactions (Continued)
Receivables
The receivables to the City of San Bernardino are classified within the Statement of Net
Assets as follows:
Related party receivable
Accounts receivable, net
Due from other entities
2008
$1,076,546
49,903
53.837
$1.180.286
Total receivables from related parties
2007
968,025
51,601
37.674
1,057 300
Payables
The payables to the City of San Bernardino are classified within the Statement of Net
Assets as follows:
Related party payable
Accounts payable
Claims payable (note 10)
2008
$ 865,073
1,052,441
391.368
:!i2 3Q8,8~f
Total payables to related parties
2007
856,347
1,231,869
437.089
2.525.3J.L5
The Department collects and transmits to the City of San Bernardino ten percent of
collections on gross water revenue and one hundred percent of collections on sewer
collection system maintenance charges from Sewer Utility customers. These remittances
are included in the related party payments shown above.
(9) Joint Venture
West End Water Development. Treatment and Conservation Joint Powers Authority
On August 15, 1990, the City of San Bernardino joined the West End Water
Development, Treatment and Conservation Joint Powers Authority (WEJPA) as a
financing vehicle for construction of water facilities. A separate three-member Board
consisting of one representative from each agency's governing body governs the
WEJPA. The Departments' investment in the joint venture is included in the property,
plant, and equipment of the Department. The financial statements of WEJPA are
available at West Valley Water District, 855 West Base Line, Rialto, California 92736.
The joint venture is not experiencing fiscal stress.
42
......-.
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(9) Joint Venture, (Continued)
San Bernardino Public Safetv Authoritv
On April 1, 1968, the City of San Bernardino and the County of San Bernardino formed
the San Bernardino Public Safety Authority (PSA), a joint powers authority, as a
financing vehicle to construct (1) public safety buildings and (2) improvements to the
wastewater treatment plant
According to the original joint powers agreement, title to the PSA-constructed
wastewater treatment facility will automatically vest in the City with the residual cash
being transferred to the City after the bonds are repaid, A separate Board consisting of
three members, one appointed by the San Bernardino City Council and two members
appointed by the San Bernardino County Board of Supervisors, governs PSA Effective
with the transfer of the Sewer Utility to the Department, all the assets and activities of
PSA related to the wastewater treatment plant were also transferred to the Department
pursuant to the enabling resolution of October 1973 and are included in the property,
plant, and equipment of the Sewer Utility, The financial statements of PSA are available
at the Clerk of the Board of Supervisors, County of San Bernardino, 385 N, Arrowhead
Avenue, 2"" Floor, San Bernardino, California 92402, The joint venture is not
experiencing fiscal stress,
Colton/San Bernardino Reqional Tertiarv Treatment and Water Reclamation Authoritv
On August 2, 1994, the City of San Bernardino, through the Department, formed a joint
powers authority with the City of Colton to construct, operate, use, and maintain tertiary
wastewater treatment, disposal, and water reclamation systems, including the Regional
Rapid Infiltration and Extraction Facility (RIX), The Colton/San Bernardino Regional
Tertiary Treatment and Water Reclamation Authority is governed by a separate Board
consisting of four members, two of whom are appointed by the City of San Bernardino
through the Department's Board of Water Commissioners and two appointed by the City
Council of the City of Colton, Construction of the project was administered by the Santa
Ana Watershed Project Authority (SAWPA) and was substantially completed during
1996, Administration and operation of the project was turned over to the Colton/San
Bernardino Regional Tertiary Treatment and Water Reclamation Authority at that time,
Each of the cities, San Bernardino and Colton, has an undivided interest in the real
property and any related debt of the RIX project based on a split of 80 percent and 20
percent, respectively, The Departments' investment in the joint venture is included in the
property, plant, and equipment of the Department The financial statements are available
at the Department The joint venture is not experiencing fiscal stress,
-
43
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(10) Construction and Other Sionificant Commitments
Commitments
Commitments in the form of signed contracts for costs to complete construction projects
or other improvements amounted to $5,730,384 and $6,370,307 at June 30, 2008 and
June 30, 2007, respectively,
Risk Manaoement
The Department's risk management activities are recorded in both of the utility funds,
Significant losses are covered by commercial insurance for all major events except
workers' compensation, for which the Department retains risk of loss in conjunction with
the City of San Bernardino's risk management program for workers' compensation, For
insured events, there have been no significant reductions in insurance coverage,
Settlement amounts have not exceeded insurance coverage for the current year or the
three prior years,
Workers' Comoensation Claims Liabilities
The Department records an estimated liability for workers' compensation, Claims
liabilities are based on estimates of the ultimate cost of reported claims (including future
claim adjustment expenses) and an estimate for claims incurred but not reported based
on historical experience, Workers' compensation unpaid claims liabilities are not
discounted,
The following represents the changes in approximate aggregate liabilities for the
Department for the year ended June 30, 2008:
Total
Claims payable, June 30, 2008
$437,089
97,058
(142,779)
$;J~1 ~68
Liability balance, July 1, 2007
Claims and changes in estimates
Claim payments
44
" "'"'v_
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(10) Construction and Other Sionificant Commitments (Continued)
The following represents the changes in approximate aggregate liabilities for the
Department for the year ended June 30, 2007:
Total
Liability balance, July 1, 2006
Claims and changes in estimates
Claim payments
$359,251
207,205
(129,367)
Claims payable, June 30, 2007
l4.3 7 L08~
(11 ) Continoencies
Federal and State Grants
Amounts received or receivable from grant agencies are subject to audit and adjustment
by grantor agencies, principally the federal and state governments, Any disallowed
claims, including amounts already collected, may constitute a liability of the Department
The amount, if any, of expenditures which may be disallowed by the grantor c,annot be
determined at this time although the Department expects such amounts, if any, to be
immaterial.
(12) Consent Decree
In 1996, the City of San Bernardino ("City") filed a complaint against the United States of
America, Department of the Army ("Army") to recover damages, response costs and
other available remedies relating to contamination alleged to have originated at a World
War II Army installation known as Camp Ono, In March 2005, the United States District
Court, Central District, entered judgment, in the form of a consent decree (Consent
Decree), in the matter of City of San Bernardino v, United States of America, The
consent decree settles the City's and the State's claims arising from the groundwater
contamination allegedly caused by the Army, The Consent Decree contains a number of
provisions obligating the City (through the Municipal Water Department) to operate and
maintain the Newmark Groundwater Superfund site ("Site"), The Site consists of two
operable units, the Newmark Operable Unit and the Muscoy Operable Unit The
Newmark Operable Unit was declared operational and functional in 1998,
"~,-
45
'-,.
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(12) Consent Decree
In 1996; the City of San Bernardino ("City") filed a complaint against the United States of
America, Department of the Army ("Army") to recover damages, response costs and
other available remedies relating to contamination alleged to have originated at a World
War II Army installation known as Camp Ono, In March 2005, the United States District
Court, Central District, entered judgment, in the form of a Consent Decree (Consent
Decree), in the matter of City of San Bernardino v, United States of America, The
Consent Decree settles the City's and the State's claims arising from the groundwater
contamination allegedly caused by the Army, The Consent Decree contains a number of
provisions obligating the City (through the Municipal Water Department of the City of San
Bernardino ("Department")) to operate and maintain the Newmark Groundwater
Superfund site ("Site"), The Site consists of two operable units, the Newmark Operable
Unit and the Muscoy Operable Unit The Newmark Operable Unit was declared
operational and functional in 1998, In September 2007, the Muscoy Operable Unit was
declared operational and functional.
The Consent Decree provided for a payment of $69 million from the Army to the City for
performance of the work outlined in the Consent Decree, Upon entry of the Consent
Decree, the City, through the Department, received title to all facilities constructed by the
United States Environmental Protection Agency (EPA) for the Site and agreed to operate
and maintain the groundwater extraction and treatment system for a period of 50 years,
The $69 million dollar payment consisted of $59 million for operation and maintenance
and $10 million for the construction of certain capital facilities that would be required in
the future, The funds are subject to strict limitations, contained in the COnsent Decree,
as to how the money may be spent
Pursuant to the Consent Decree. $10 million, including interest earned, has been set
aside to be used only for (i) funding construction of treatment and directly related
transmission systems that expand the Department's capacity to deliver potable water,
and (ii) funding work performed by the Department to complete construction of the
Muscoy Operable Unit extraction system, These "capital facility" funds may not be used
for costs incurred to operate, maintain, repair or retrofit components of the site extraction
or treatment systems constructed by EPA.
46
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(13) Net Assets
The following is a detailed breakdown of net assets,
Total capital assets (net of accumulated
depreciation and accumulated amortization)
Less related debt:
Notes payable
Water bonds payable
Certificates of participation
Add back:
Portion of debt offsetting debt service reserves
Note proceeds hold by state
Total invested in capital assets, net of related
debt
Restricted Net Assets" Capital related fees
Unrestricted Net Assets
Total Net Assets
Amounts restricted for debt service is calculated as follows:
Cash and investments with fiscal agent restricted
for debt service
Less portion of debt offsetting unexpended debt
proceeds held in the debt service amounts
.-"'
47
Water
$27,971
(27.971)
~ "
Sewer
3.473,858
(3.473.858)
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(14) Subsequent Events
A number of financial institutions have reported financial difficulties as an indirect result
of delinquencies associated with home mortgages, The full ramifications of this are not
determinable at this time and it is not possible to determine with certainty all of the
institutions that might be impacted by current market conditions, nor the market
conditions that might exist at the time that investments might be liquidated, if liquidated
prior to maturity,
As discussed further in Note 12 ("Consent Decree"), on March 17, 2006. the Department
entered into a Guaranteed Investment Contract with AIG Match Funding Corporation,
The Department invested $16,482,039 of excess consent decree funds into an interest
bearing Escrow Fund investment with an interest rate of 4,95% per annum, These funds
were invested to pay for the costs associated with the water facilities defined in the
Consent Decree for the years 2035-2056, An additional $50 million was used to
purchase a blended insurance policy to provide a financial vehicle that provides cost cap
coverage for the first 30 years those expenses,
Subsequent to June 30, 2008, AIG has experienced financial difficulties, Although
specific concerns have not been raised with respect to the insurance programs of AIG,
the terms of the Guaranteed Investment Contract only provide the Department with the
position of a secured creditor with respect to an AIG bankruptcy, Given this concern, on
October 9, 2008, the Department negotiated and accepted a "payout" of the Guaranteed
Investment Contract in the amount 01.$18,661,876 which represented the principal and
accrued interest as of that date, The City is currently holding these funds in anticipation
of reinvestment into an appropriate long-term investment vehicle,
48
SUPPLEMENTARY INFORMA TION
49
(This page intentionally left blank)
50
""-....
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Board of Water Commissioners and Organization
As of June 30, 2008
MA VOR OF THE CITY OF SAN BERNARDINO
Patrick J, Morris
BOARD OF WATER COMMISSIONERS
Name
Office
Toni Callicott
B, Warren Cocke
Louis A, Fernandez
Judith W Battey
Norine I. Miller
President
Commissioner
Commissioner
Commissioner
Commissioner
ADMINISTRATION
Stacey R Aldstadt
General Manager
Robin L Ohama
Deputy General Manager
Matthew H, Litchfield, PE
Director, Water Utility
John A Perry, PE
Director, Water Reclamation
Don Shackelford
Director, Finance
Valerie K, Housel
Director, Environmental
And Regulatory Compliance
ORGANIZATION
The City of San Bernardino Municipal Water Department was formed in 1904 under the Charter
of the City of San Bernardino, The Department is governed by the Board of Water
Commissioners who are appointed by the Mayor of the City of San Bernardino, The Charter
gives the Board of Water Commissioners semi-autonomous authority to govern the Department
independent of the City Council. The Department operates two enterprise funds: the Water
Utility Enterprise Fund and the Sewer Utility Enterprise Fund, Water service encompasses the
City, with the exception of the east end, which is served by the East Valley Water District.
Sewer service encompasses all of the City of San Bernardino, East Valley Water District, City of
Loma Linda, the former Norton Air Force Base and Patton State Hospital.
51
MUNICIPAL WATER DEPARTMENT OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Schedule of Insurance Coverage
As of June 30, 2008
Insurance coverage for the Department at June 30, 2008 is summarized below'
Multiple insurance companies and policies; all-risk property coverage, including
earthquake and flood - July 1, 2007, tc;> July 1, 2008
Primary limit:
Commonwealth Insurance Company, Policy #USS2118
Excess limits:
Catlin Insurance Company, Poiicy #SJC2003
Lloyds of London, Policy #DP6501 08
Lloyds of London, Policy #DP650108
Landmark American Insurance Company, Policy #LHD414755
Pacific Indemnity Company, Policy #78357989; boiler and machinery
Coverage - July 1, 2007 to July 1, 2008
Per occurrence limit
American Alternative Insurance Co" Policy #SDISSP9152180-01; general
Liability, including bodily injury and property damage, personal injury and
Advertising injury, professional liability and wrong acts-
October 30, 2007 to October 30, 2008
Bodily injury and property damage
Per occurrence
Aggregate
Damages to premises rented to you
Anyone premises
Personal injury and advertising injury
Per person
Aggregate
Employee benefrts liability
Per person
Aggregate
Professional liability
Per claim
Aggregate
Wrongful acts
Per claim
Aggregate
American Alternative Insurance Co" Policy #SDISSA8052089-02; business
Automobile coverage - October 30, 2007 to October 30, 2008
Owned automobile liability limit
Hired/non-owned automobile liability
Hired car physical damage
Uninsured motorist liability
Medical
52
$10,000,000
5,000,000
5,000,000
10,000,000
95000,000
25,000,000
1,000,000
3,000,000
1,000,000
1,000,000
3,000,000
1,000,000
3,000,000
1,000,000
3,000,000
1,000,000
3,000,000
1,000,000
1,000,000
50,000
1,000,000
5,000
MUNICIPAL WATER DEPARTMENT OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Schedule of Insurance Coverage (Continued)
As of June 30, 2008
Multiple insurance companies and policies; excess liability coverage -
October 30, 2007 to October 30, 2008
Primary limit:
American Alternative Ins, Co" Policy # SDISSX9250792-01
Excess limits:
St Paul Surplus Lines Co" Policy #QY01225460
10,000,000
10,000,000
American International Specialty Lines, Policy # 26738997; pollution
Liability - October 30,2004 to October 30, 2009 (each incident/aggregate)
Third-Party Claims, On-site Bodily Injury and Property Damage
Third-Party Claims, Off-site Clean-Up Resulting from New Conditions
Third-Party Claims, Off-site Bodily Injury and Property Damage
Third-Party Claims, Resulting from Transported Cargo
5,000,000
5,000,000
5,000,000
5,000,000
National Union, Policy #2642385; employment practices liability-
October 30, 2007 to October 30, 2008
2,000,000
Hartford Fire Insurance Company, Policy #83BPEEG2769; crime
coverage's; - March 15,2008 to October 30,2009
Employee theft (each incident)
Theft, disappearance and destruction
500,000
500,000
American International Specialty Lines, Policy #7783901; pollution
Legal liability clean-up cost cap - September 28, 2004 to March 23. 2035
Coverage A - Legal liability for pollution conditions 25,000,000
Coverage B - Consent decree required clean-up 150,000,000
The Department is self-insured through the City of San Bernardino for workers' compensation
liability and material damage to rolling stock,
..........'
53
(This page intentionally left blank)
54
Water utilIZation (shown in cubic feet)
Water sold to dtrect customers
Water sold to other agencies
Water sold to or used by City
Loss and other factors
Total water sold, used or lost
Loss and other factors percentage
'-
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO, CALIFORNIA
Schedule of Water System Demographics
Water Production/Utilization (Cubic Feet)
2007 -2008
1,914,684,000
362,858,972
74,856,597
2,352,399,569
220169,231
2,572.568,800
8 558%
55
2006-2007
1,979,377300
424,271.042
90,022.904
2,493,671,246
240,610,084
2,734,281,330
8 800%
2005-2006
1,891,121,000
208,657,743
75,753,797
2,175,532,540
153,875,410
2,329,407,950
6,606%
Summary of total water
production and purchased cost
Total production. purchases. and
supplemental
Production and pumping expenses
Salaries & benefits
Employee relaled expenses
Office relaled expenses
Cor1iracl se;vices
Permits & lees
Utilities
Materials & supplies
::ouipmcnl
Cllemicai & carbon
Sub-total
Water stock assessmeris
Supplementa! water purchases
Water extraction fees
Total expense beiore depreciatio!1
Deprecia:ion of plant facilities
Totals
Summary of costs per acre foot
Acre feet
Cost per acre feel for direct operating costs
Cost per acre feet 'or assessment, purchases
and extraction fees
Cost per acre feet for depreCiation
T eta! cos1 per acre feet
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO, CALIFORNIA
SCHEDULE OF W/\TER PRODUCTION
JJne 30, 2008
2007-2006 2006-2007 2005.2006
Total Water Total Water Total Water
Per 1,000 Per 1,000 Per 1,000
Amount Cubic Feet Amount Cubic Feet Amount Cubic Feet
2,572.569 2.734,281 2,329.408
$1,359,697 $0.52854 $1.236.416 $0.45219 $1.117.263 $0.47963
10.181 o 00396 18,430 0.00674 11.194 0,00481
29.599 0.01151 26,690 0.00976 19,820 0.00851
11,221 0_00410 7.743 0.00332
51.686 0.02009 102,279 0.03741 49,243 0.02114
4,273,914 1_65134 4,803,782 1.75687 3.706,065 159099
31.137 0_01210 22.105 000808 48,148 0,02067
139.928 0.05439 73.101 002674 51.957 0_02231
732,931 G.28490 543,460 0,19876 373522 0.15035
56.629,073 2.57683 $6.837,484 2.50065 $5.384,955 2.3~ 173
105.990 0,04120 34.550 0_01264 9,062 :),00389
670,00G 0.26044 261,000 0,11205
27,161 0.01056 14,968 0,00547
$7,432.224 $2_88903 56,887,003 $251876 $5,655.017 $2.42767
3,396.226 1.32017 3,016.056 1.10305 2.536.417 1.08887
$10,828.450 $4_20920 $9,903,059 $3_62181 $8191.434 $3.51653
59.058_058 62,770455 53,475.849
$112,25 $108.93 $'100.70
$13.60 $0,79 $5.05
$57.51 $4805 $47.43
$183,36 $157.77 S ~ 5318
56
MUNICIPAL WATER DEPARTMENT OF THE CITV OF
SAN BERNARDINO, CALIFORNIA
SCHEDULE OF WATER RATES
Rates are summarized as follows:
Sinalo and Multiole Familv DwellinQ Units. Commercial, Landscape and Industrial Users
Meter
Size
Minimum Monthly Charge
Effective Dates
July 1, 2007 July 1, 2008
5iB"
3/4"
1"
1-li2"
2"
3"
4"
6"
B"
10"
12"
$8.59
S11,47
S13,71
524,60
534.36
S5B 43
599,19
5178,57
S267,84
533480
S401,62
5688
51184
514,16
525,41
S35,49
56035
5102,46
5184,47
S27667
5345,84
541506
All water usage, excep! m~i1iclpa!. will be billed at the rate of $0.94 and $0.97 per 100 cubic feet effective July 1. 2007.
and July 1. 2008, respectively with no minimum allowance
Elevation Zone Charae
Zone
1
2
3
4
5
6
Charge per 100 cubic feet
SO 00
$006
5014
$0.21
50,12
$0,12
SO 00
5006
5015
5021
$013
$013
This charge is based on the identified delivery costs associated with a specific elevation zone
Assessment Districts
All water usage furnished for use by the City of San Bernardino for landscape assessment districts or funded from
other than the City's General Fund will be billed at the rate of $030 and $031 per 100 cubic feet effective July 1, 2007,
and July 1,2008, respectively,
Municipal Water Users
Water furnished for municipal use to the City of San Bernardino shall be exempt from all water service charges as long as
water usage does not exceed 110 percent of the fiscal year 1994/1995 water usage. Water usage in excess of thiS
amount is charged at $0288 per 100 cubic foot.
Enerqv Surcharqe
Effective July 5, 2001, all consumption, except municipal, shall be charged $0.05 per cubic foot to offset the increased
power costs to the entire service territory.
These rates were approved by the Board of Water Commissioners on February 20, 2007.
"-
57
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
'........ SAN BERNARDINO, CALIFORNIA
Schedule af Sundry Water Statistical Data
2007 -2008 2006-2007
Production Percent Production Percent
Pumping Plants in Cubic Feet Production In Cubic Feet Production
Anti! Plant 7,230,500 0.28% 3,228,400 0,120/1.,
Baseline & Cahfornia Well 13,181,800 0,52% 13,730,300 0,52%
Cajon Boulevard Plant 180,770,100 7,10% 183,006,100 6.90%
Cajon Pass & Vincent Wells 27,090,300 1.06% 10,725,600 0.41%
Oevil Canyon Plant 97,533,700 3,83% 148,230,130 5,60%
EPA Wells - Newmark au 658,427,200 25,85% 656,297,800 24.78%
EPA Wells - Muscoy au 544,411,900 21,38% 533,951,600 20,17%
40th Street Well 1,030,100 0,04% 1,757,700 0.07%
Gilbert Street Well 61,852,400 2.43% 62,571,700 2,36%
IVDA Well #11 2,909,300 0.11% 1,985,500 007%
Kenwood Wells 146,497,800 5.75% 144,349,100 5.45%
LeRoy Street Well 34,819,700 1.37% 45,795,300 1.73%
Lynwood Well 49,079,300 1.93% 61,583,900 2.33%
Lytle Creek Plant 14,934,300 0,59% 17,428,200 0,66%
Mallory Well 11,402,900 0.45% 35,684,900 1.35%.
Mill & "0" Streets \Nell 18,743,500 0,74% 19,501,400 0,74%
Newmark Plant 183,678,000 7.21% 168,064,900 6.35%
19th Street Plant 84,608,100 3.32% 71.438,800 2,70%
Olive & Garner Well 56,468,700 2.22% 63,649,600 2,40%
Perris Hill Plant 130,900 0.01% 5,858,600 0.22%
7th Street Well 2,217,500 0,09% 7,003,400 0,26%
Sierra Way & 16th Street Wells 86,170,100 3.38% 44,616,500 1.69%
10th & "J" Street Well 70,158,900 2,76% 91,265,200 3.45%
30th & Mountain View Wells 92,911,700 3,65% 130,756,000 4,94%
27th Street Well 20,881,000 0,82% 26,624,700 1,01%
Waterman Avenue Plant 79,205,900 3.11% 98,441,900 3,72%
Total Water Produced 2,546,345,600 100.00% 2,647,547,230 100,00%
Purchased water.
East Valley Water District 26,223,200 86,734,100
Total Water Production 2,572,568,800 100,00% 2,734,281,330 100,00%
.~
58
2005-2006 2004-2005 2003-2004
Production Percent Production Percent Production Percent
In Cubic Feet Production In Cubic Feet Production in Cubic Feet Production
94,600 0,00% 33.443,800 163% 82,571,200 3,79%
4,058,500 018% 12.249,100 0,60%.1 20,784,900 0,950;0
156,173,000 7.00% 114,021,100 5,54% 98,009.400 4,50%
1,568,900 0,07% 26,840,000 1.30% 38,443,100 1.76%
87,633,950 3,93% 94,388,390 4,59% 123,324,880 5,66%
670,111,400 30,06% 576,392,400 28.02% 565,447,170 25,93%
577,040,000 25,89% 133,156,900 6.47%, 0 0.00%
1,311,500 0.06% 1,505,100 0.07% 1,676,100 0,08%
12,634,000 0.57% 43,913,100 2.14% 83,912,300 '3.85%
0 Q,OO'Jjo 0 0.00% 0 0.00%
159,946,600 7.18% 153,162100 7.45% 166,971,400 7,66%
23,716,800 1.06% 59,151,700 2.88%, 60,969,500 2,80%
34,866,600 1.56% 38,705,300 1.88% 53,509,860 2.45%
0 0,00% 5,509,700 0.27% 31,152,100 1.43%
35,182}00 1.58%1 35,523,100 1.730/0 21,317,100 0,98%
18,456,300 0.83% 20,305.400 0.990/0 14,140,800 0,65%
122,521,500 5.50% 148,870,200 7.24% 158,321,800 7.26%
69,559,800 3.12% 129,585,600 630% 132,848,000 609%
41,192,200 1,85% 96,972,900 4.71% 115,058,398 5,28%
6,814,300 0.31% 17,526,200 0.85% 17,280,200 0.79%
3,916,700 0,18% 5,186,600 0.25% 37,796,200 1.73%
210,000 0.01% 166,100 0.01% 205,100 0,01%
67,220,600 3,02% 98,420,900 4.79% 129,074,500 5.92%
66,308,800 2.97% 116,906,300 5,68% 122,995,600 5,64%
14,396,300 0,65% 27,794,700 1.35% 31,616,500 1.45%
54,028,000 2.42% 67,056,200 3.26% 72,891,380 3,34%
2,228,963,050 100.00'(, 2,056,752,890 100,00% 2,180,317,488 10000%
100,444,900 73,492,900 55,962,500
2,329,407,950 100,00% 2,130,245,790 100,00% 2,236,279,988 100,00%
59
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO, CALIFORNIA
WATER UTILITY
Schedule of Service Area and Customers
Number of Active Connections by Classification of User
as of June 30, 2004 through June 30, 2008
User Type 2008 2007 2006 2005 2004
Single family residential 34,316 34,842 34,900 34,360 34,075
Multiple family residential 2,834 2,913 2,922 2,930 2,929
Commercial/institutional 4,003 3,954 3,847 3,812 3,761
Other 1,820 1,755 1,572 1.299 1,223
Total all users, active 42,973 43,464 43,241 42,401 41,988
Revenue by Class of User
Fiscal Year 2007 -2008
Fiscal Year Percentage of
User Class Revenue Annual Revenue
Single family residential S 13,419,093 55,63%
Multiple family residential 3,419,696 14.18%
Commercial/industrial 5,765,993 23,90%
Other and unmetered 1,518693 6,30%
Total all users $ 24,123,475 100%
Largest users: The System had no customer accounting for more than three percent of the
revenues for the fiscal year 2007-2008
60
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO, CALIFORNIA
Schedule of Sewer Rates and Staflstics
Regional Facilities Collection
and Treatment System Total monthly
Classification Charge Charge City Charge
Rates effective as of July 1, 2004
Residential $14,50 per month $3.45 per month 17,95/
month/unit
Commercial"
Multi-family, mobll home parks SO,83/HCF SO 33/HCF $1.16/HCF
(4 or more units) + $2,00/month + $100/month + $3.00/mo
Retail, commercial, light industrial $170/HCF SO 33/HCF S203/HCF
(non-office, bakeries. markets, theaters. dry cleaners) + S2,00/month + S1,00/month + S3,00/mo
Auto repair, car wash S1,17/HCF SO.33/HCF S1.50/HCF
+ S200/month + $1 ,OO/month + S3,00/mo
Offices, motels (without restaurants) $1,32/HCF $0 33/HCF S1,65/HCF
+ S200lmonth + $100lmonth + S3.00/mo
Restaurants, hotels S184/HCF SO 33/HCF S2,171HCF
(hOlel/mOlels with restaurants) + $200/month + S100/month + $3.00/mo
Laundromats S1.15/HCF SO 33/HCF $1.48/HCF
+ $2,,00/month + StOO/month + S3,00/mo
Hospitals, convalescent homes $0,84/HCF SO,33/HCF S1,17/HCF
+ S2.00/month + S1,00/month + S3,OO/mo
Schools, churches, nursey schools, SO,62/HCF SO,33/HCF SO,95/HCF
daycares + $2,00/month + 51 ,OO/month + S3,00/mo
Industry S816, 10/MG DF SO.33/HCF
S264,91/1,OOO LBS BOO + $1 ,OO/month
$577.4 1 /1. 000 LBS SS
The last rate change prior to July 1, 2004 occurred in June 1995,
'-
61
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO, CALIFORNIA
Schedule of Sewer Rates and Statistics, (Continued)
June 30, 2008
Residential Nonresidential Total
Number of connections
City of San Bernardino 32,058 5.491 37,549
East Valley Water District 17,956 1,159 19,115
City of Lama Linda 4.407 576 4,983
54.421 7.226 61,647
Annual billings
City of San Bernardino 56,197,816 56,570,125 $12,767,941
East Valley Water District 3,221,455 2,213,946 5.435,401
City of Lama Linda 767,075 1,011,795 1,778,870
$10,186,346 59 795,866 519,982,212
62
June 30, 2007 June 30, 2006
Residential Nonresidential Tolal ResIdential Nonresidential Tolal
32,367 5,528 37,895 31,523 5.401 36,924
18,085 1,160 19,245 18,005 1,160 19,165
4,567 584 5,151 4,493 584 5,077
55,019 7.272 62,291 54,021 7,145 61,166
$6,238,570
3,231,282
728,111
$6,654,231
2,252,260
950,227
$12,892,801
5.483,542
1,678,338
$6,021.449
3,184.223
728,713
$6.448,117
2,171,095
910,116
$12,469,566
5,355.318
1,638,829
$10,197,963
$9,856,718
$20,054,681
$9,934.385
$9.529,328
$19.463,713
~_.
63
.........~.
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Schedule -1992 Certificates of Participation
San Bernardino Public Safety Authority
June 30, 2008
EARLY PAY OFF
Dunng Fiscal Year 2001, the 1992 Certificates of Participation were retired by an early call and payoff
The total principal amount of 534,805,000 was paid off February 1, 2001,
An early call premium of $674,000 was incurred due to this transaction, This amount will be amortized
annually In the amount of $42,125 over a sixteen year period.
The unamortized discount balance of $141,841 will continue to be amortized annually in the amount of
516,520 with the final payment of 59,681 due February 1, 2017
Funds used for the Primary Hydraulic Reliability Project, remodel of the administration laboratory building
and design of 3A secondary treatment
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64
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Schedule - 1998 Refunding Sewer Revenue Certificates of Participation
San Bernardino Public Safety Authority
June 30, 2008
Principal
Principal Unamortized Payments Interest
Date Due Payments Discounts (Net) Interest Total Rate
8/1/2008 587,278 587,278 4,50%
2/1/2009 2,125,000 6,238 2,118,762 587,278 2,706,040 4,50%
8/1/2009 539.465 539.465 4,70%
2/1/2010 2,240,000 5,687 2,234,313 539.465 2,773.778 4,70%
8/1/2010 486,825 486,825 5,00%
2/1/2011 2,365,000 5,105 2,359,895 486,825 2,846,720 5,00%
8/1/2011 427,700 427.700 4,75%
2/1/2012 2,510,000 4.492 2,505,508 427,700 2,933,208 4,75%
8/1/2012 368,088 368,088 4,85%
2/1/2013 2,650,000 3,840 2,646,160 368,088 3,014,248 4,85%
8/1/2013 303,825 303,825 4,75%
2/1/2014 2,805,000 3,152 2,801,848 303,825 3,105,673 4,75%
8/1/2014 237,206 237,206 5,25%
2/1/2015 2,965,000 2.424 2,962,576 237,206 3,199,782 5,25%
8/1/2015 159,375 159,375 5,00%
2/1/2016 3155,000 1,655 3,153,345 159,375 3,312,720 5,00%
8/1/2016 80,500 80,500 5,00%
2/1/2017 3,220,000 836 3,219,164 80,500 3,299,664 5,00%
$ 24,035,000 S 33.429 $ 24,001,571 $ 6,380,524 S 30,382,095
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65
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Bond Schedule - General Obligation Waterworks Bonds, Series C
June 30, 2008
Principal Interest
Date Due Payments Interest Total Rate
9/1/2008 2,131 2.131 7,75%
3/112009 10,000 2,131 12.131 775%
9/1/2009 1,744 1.744 7,75%
3/1/2010 10,000 1,744 11,744 7,75%
9/1/2010 1,356 1,356 7,75%
3/1/2011 10,000 1,356 11,356 7,75%
9/1/2011 969 969 7,75%
3/1/2012 10,000 969 10,969 7,75%
9/1/2012 580 580 7,75%
3/1/2013 15,000 580 15,580 7,75%
$ 55,000 $ 13,560 $ 68,560
Bonds related to water system improvements for South San Bernardino Water Disttict,
which was acquired by the Department in 1991,
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66
Mayer Hoffman McCann
An InCeoendent CPA Fir'11
C;o!irz;..;d :::;';.;:~'.;:snr~r~i:nr~' f~-S';"'Jf ~~..
2301 Dupont Drive, Suite 200
Irvine, California 92612
949,474-2020 ph
: 949-263-5520 fx
I www.mhm-pc.com
Board of Water Commissioners
Municipal Water Department of the City of
San Bernardino, California
REPORT ON COMPLIANCE AND OTHER MATTERS AND ON
INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN
AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
We have audited the financial statements of the Municipal Water Department of the City
of San Bernardino ("Department"), as of and for the year ended June 30, 2008, which
collectively comprise the Department's basic financial statements and have' issued our
report thereon, dated January 20, 2008, We conducted our audit in accordance with
auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States,
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Department's financial
statements are free of material misstatement, we performed tests of its compliance with
certain provisions of laws, regulations, contracts and grant agreements. noncompliance
with which could have a direct and material effect On the determination of financial
statement amounts, However, providing an opinion on compliance with those provisions
was not an objective of our audit and, accordingly, we do not express such an opinion,
The results of our tests disclosed nO instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards,
Internal Control Over Financial Reportino
In planning and performing our audit, we considered the Department's internal control
over financial reporting as a basis for desi9ning our auditing procedures for the purpose
of expressing our opinions on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the Department's internal control over
financial reporting, Accordingly, we do not express an opinion on the effectiveness of
the Department's internal control over financial reporting,
A COntrol deficiency exists when the desig n or operation of a Control does not allow
management or employees, in the normal course of performing their assigned functions,
to prevent or detect misstatements on a timely basis, A significant deficiency is defined
,'-....
67
Board of Water Commissioners
Municipal Water Department of the City of San Bernardino, California
Page Two
to be a control deficiency, or combination of control deficiencies, that adversely affects
the District's ability to initiate, authorize, record, process or report financial data reliably
in accordance with generally accepted accounting principles such that there is more than
a remote likelihood that a misstatement of the District's financial statements that is more
than inconsequential Will not be prevented or detected by the District's internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies,
that results in more than a remote likelihood that a material misstatement of the financial
statements will not be prevented or detected by the Department's internal control is
defined to be a control deficiency, or combination of control deficiencies, that adversely
affects the District's ability to initiate, authorize, record, process, or report financial data
reliably in accordance with generally accepted accounting principles such that there is
more than a remote likelihood that a misstatement of the District's financial statements
that is more than inconsequential will not be prevented or detected by the District's
internal control.
Our consideration of the internal control over financial reporting was for the limited
purpose described in the first paragraph of this section and would not necessarily
disclose all deficiencies in internal control that might be significant deficiencies or
material weaknesses We did not identify any deficiencies in internal control over
financial reporting that we consider to be material weaknesses, as defined above,
This report is intended solely for the information and use of the Board of Water
Commissioners, and management of the Department and is not intended to be and
should not be used by anyone other than these specified parties,
h1.."_I,,tp~-... fi"I..a..-/.c.
Irvine, California
January 20, 2009
68