HomeMy WebLinkAbout21- Water CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
From: Stacey R.Aldstadt, General Manager Subject: Receive and File—Annual Audit of the a er
Department's Water and Sewer Utilities for the fiscal year
Dept: Water ending June 30, 2009.
Date: 1/25/2010 M&CC Meeting Date: 2/16/2010
Synopsis of Previous Council Action:
Similar action taken each year following completion of the annual Audit Report
Recommended motion:
That the Mayor and Council receive and file the Annual Audit of the Water Department's Water and Sewer Utilities for
the fiscal year ending June 30, 2009.
Signature
Contact person: Stacey R.Aldstadt, General Manager Phone: 384-5091
Supporting data attached: Yes Ward:
FUNDING REQUIREMENTS: Amount: N/A
Source:(Acct. No.) Water Department
(Acct. Description)
Finance:
Council Notes:
75-0262 Agenda Item No. ZI
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, 2009.
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, 2009. This report
was presented to and accepted by the Board of Water Commissioners at their meeting of
January 19, 2010.
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, 2009.
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1
1
MUNICIPAL WATER DEPARTMENT OF THE
' CITY OF SAN BERNARDINO, CALIFORNIA
FINANCIAL STATEMENTS
tYear ended June 30, 2009
t
1
1
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
FINANCIAL STATEMENTS
Year ended June 30, 2009
TABLE OF CONTENTS
FINANCIAL SECTION Paqe
Independent Auditors' Report 1
Management's Discussion and Analysis 5
Basic Financial Statements:
Statement of Net Assets 14
Statement of Revenues, Expenses, and Changes in Net Assets 17
Statement of Cash Flows 18
Notes to Basic Financial Statements 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 56
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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Mayer Hoffman McCann P.C.
An Independent CPA Firm
2301 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, 2009, 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, 2008
and, in our report dated January 13, 2010, 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 disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe
that our audit 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, 2009, 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.
1
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
January 13, 2010 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 Government Auditing
Standards and should be considered in assessing the results of our audit.
Irvine, California
January 13, 2010
2
MANAGEMENT'S DISCUSSION AND ANALYSIS
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City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2009 and 2008
(in thousands)
As management of the San Bernardino Municipal Water Department (Department), we
offer the readers of the Department's financial statement a narrative overview and
analysis of the financial statements for the fiscal year ended June 30, 2009. We
encourage 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.
Mission and organizational structure
The San Bernardino City Municipal Water Department operates the water system for the
City of San Bernardino (City) as well as sewer treatment facilities for the cities of San
Bernardino, Loma Linda, and portions of the area served by East Valley Water District.
The Department is comprised of two major operating funds - the water utility and the
sewer utility.
Overview of the financial statements
This discussion and analysis letter is intended to serve as an introduction to the
Department's financial statements. 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 financial statements are comprised of two components: 1) financial
statements, and 2) notes to the financial statements. Included as part of the financial
statements are the balance sheets, statement of revenues, 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, increases or decreases in net assets may serve as a useful indicator
of the improvement or deterioration of the financial condition of the Department.
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 statement 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 additional information essential to the full
understanding of the data provided in the financial statements.
Performance goals and results
The assets of the Department exceeded its liabilities at the close of fiscal years 2009
and 2008 by $249,096 and $248,054, respectively. Of these amounts, $29,637 and
$26,956 respectively were available to meet the Department's ongoing obligations to
creditors and customers (the unrestricted net assets). The Department's net assets
5
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2009 and 2008
(in thousands)
have increased by $1,042 and $9,687 respectively. Unrestricted net assets represent
55% and 50% of annual operating expenses for fiscal years 2009 and 2008,
respectively.
Water Utility:
Financial analysis
As noted earlier, net assets may serve over time as a useful indicator of an entity's
financial position. The water utility's assets exceed liabilities by $149,161 and $148,064
at June 30, 2009 and 2008, respectively.
Almost 90% 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 4% 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 legally 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
Fiscal year ended June 30 2009 2008 2007
Assets:
Current and other assets $ 91,562 97,564 91,461
Net utility lant 148,126 143,254 130,861
Total assets $ 239,688 240,815 222,322
Liabilities:
Long-term liabilities, net $ 82,118 83,672 75,269
Current liabilities 8,409 9,078 8,750
Total liabilities $ 90,527 92,750 1 84,019
Net Assets:
Investment in capital assets, net $ 133,834 130,610 122,081
Restricted 6,328 8,407 11,294
Unrestricted 8,999 9,047 4,928
Total net assets $ 149,161 148,064 138,303
Assets
Total assets of the water utility as of June 30, 2009 and 2008 were $239,688 and
$240,815, respectively, a decrease of $1,127. Fixed asset additions include wells and
pumps ($7,695), and distribution lines ($3,634). This was offset by a decrease in CWIP
($2,784) as projects were closed to fixed assets, and higher accumulated depreciation
($3,658). Additional changes in other assets include a decrease in notes held by CIEDB
($2,136) that fund construction projects; a decrease in capital fees utilized to meet
expansion requirements ($2,078); and a decrease in prepaid insurance used fund
reimbursement expenses at Consent Decree sites ($2,043).
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City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2009 and 2008
(in thousands)
Liabilities
Total liabilities as of June 30, 2009 and 2008 were $90,527 and $92,750 respectively
which is a decrease of $2,223. One significant increase in liabilities is the OPEB
obligation ($1,105) offset by the recognition of deferred revenue ($1,581); the reduction
of accounts payable ($770); the reduction in consumer deposits ($543) and debt
reduction ($539).
Net assets
Total net assets as of June 30, 2009 and 2008 were $149,161 and $148,064,
respectively, representing an increase of $1,097. Internal investment in capital assets
increased $3,224; offset by decreases in restricted funds of $2,079 and unrestricted
cash of $48.
Statement of revenues, expenses and chan es in net assets
Fiscal year end June 30 2009 2008 2007
Revenue:
Sale of water $ 25,309 25,295 26,244
Other operating revenue 1,950 2,042 1,988
Investment income 1,009 1,613 1,181
Non-operating revenue 2,447 2,459 2,467
Capital contributions 3,919 11,398 11,931
Total revenue $ 34,634 42,807 43,965
Ex enses:
Operating and maintenance $ 15,808 15,470 14,862
Administration 11,902 12,494 9,143
Depreciation 5,225 4,490 4,065
Interest expense 602 592 313
Total expense $ 33,537 33,046 28,383
Net assets
Change in net assets $ 1,097 9,761 15,582
Net assets at beginning of year 148,064 138,303 122 721
Net assets at year end $ 149,161 148,064 138,303
Revenues
Total revenues for fiscal year ended June 30, 2009 are $34,634 compared with $42,807
in fiscal year 2008. The decrease of $8,173 is due to the slow down in the economy.
Capital contributions for construction declined ($7,479); and investment income was
substantially lower ($604). Lower sales were offset, in part by a 3.3% rate increase
implemented in August 2008.
Expenses
Total expenses for fiscal year ended June 30, 2009 are $33,537 compared with $33,046
in fiscal year 2008. The increase of $491 is due to increased depreciation costs ($735),
and the Department's charge off of operational costs of planning, previously in CWIP, for
capital projects that will not be completed within the next five years ($481). The
Department has managed to trim other operational, maintenance and administration
costs.
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.
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City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2009 and 2008
(in thousands)
Additionally, the Department provides free and discounted water service to City facilities
and contracts for master agreement services provided by the City.
Capital assets
Fiscal year end June 30 1 2009 2008 2007
Assets:
Land and easements $ 2,945 2,945 2,945
Wells and pumping plant 69,684 61 989 48,220
Distribution 103,973 100,339 73,377
Plant and facilities 2,52' 1,930
Other capital 12,971 13,189 12,261
Construction work in process 12,661 15,445 41,651
Total capital assets $ 20417-54 196,224 180,384
Accumulated depreciation 56,628 52,970 49,523
Total capital assets net $ 148,126 143,254 i 130,861
Long-term debt and coverage
Fiscal year end June 30 2009 2008 2007
Net profit: $ 2,823 1,636 3,650
Add back:
Depreciation $ 5,225 4,490 4,065
Amortization -0- -0- 28
Interest expense 602 692 313
Otherfees -0- -0- -0-
Gain /loss on assets 310 532 37
Total cash available a $ 2,694 3,978 8,019
Senior debt
C I E D B 1,073 932 777
Total senior debt b $ 1,073 932 777
Sub debt
Subordinate debt 79 79 79
Aqoreqate P&I c $ 1,152 1,011 856
Coverage:
Senior debt coverage a/b X 2.5 x 4.3 x 10.3 x
Aggregate covers a a/c X 2.3 x 4.0 x 3.9 x
Management challenges:
Regional and state-wide drought conditions have created a high demand/low supply
paradigm for water resources. Recent legal decisions involving endangered species
have exacerbated this low supply condition. Management continues to actively pursue
political strategies to augment water supply, including preparation of planning and
environmental documents for a recycled water recharge project. The only source of
additional supply at this time is imported water. The costs for imported water have
increased, and will continue to increase into the future. The water utility actively
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City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2009 and 2008
(in thousands)
encourages conservation measures and has embarked in the last 3 years on an
aggressive conservation program.
The water utility provided Prop 218 notification to all rate payers and property owners for
a multi-year rate increase to support escalating costs for imported water, for oil and gas
products, electricity, rehabilitation of aging infrastructure, and staff retention and training
A public Rate Hearing has been set for January 5, 2010. The proposed rates are
restructured and contain separate charges for elevation, purchased water and a two-
tiered conservation program. The monthly charges are increasing to recover a greater
portion of fixed expenses to protect the utility's financial position in a period of declining
sales.
It is expected the utility will finance $30-50 million to pay for the rehabilitation of aging
infrastructure over the next five years. Two major capital efforts are expected including
the replacement and upsizing of water distribution mains in downtown San Bernardino
(some of which are in excess of 100 years old), and the replacement of meters to
encourage conservation and reduce water loss in the system.
Sewer Utility:
Financial analysis
The sewer utility's assets exceed liabilities by $99,935 and $99,989 at June 30, 2009
and 2008, 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 14% 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
Fiscal ear ended June 30 2009 2008 2007
Assets:
Current and other assets $ 42,725 42,362 41,564
Net utility plant 97,100 101,763 105,396
Total assets $ 139,825 144,125 146,960
Liabilities:
Long-term liabilities, net $ 31,819 35,493 39,154
Current liabilities 8,071 8,643 7,741
Total liabilities $ 39,890 44,136 46,895
Net Assets:
'r Investment in capital assets, net $ 65,794 66,282 66,116
! Restricted 13,503 15,798 15,986
Unrestricted 20,638 17,909 17,963
Total net assets $ 99,935 99,989 100,065
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i
City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2009 and 2008
(in thousands)
Assets
Total assets of the sewer utility as of June 30, 2009 and 2008 were $139,825 and
$144,125 respectively which is a decrease of $4,300. CWIP increased ($1,670) as
projects were still in the construction phase at year end. Fixed asset additions include
plant improvement projects ($123). The additions were more than offset by higher
accumulated depreciation ($5,888). Additional changes in other assets include a
decrease in capital fees utilized to meet expansion requirements ($2,208), and increases
in unrestricted cash ($3,002).
Liabilities
Total liabilities as of June 30, 2009 and 2008 were $39,890 and $44,136 respectively
which is a decrease of $4,246. The sewer utility paid off $4,274 worth of principal on
notes and certificates of participation without incurring additional debt for construction.
Net assets
Total net assets as of June 30, 2009 and 2008 were $99,935 and $99,989 respectively
which is a decrease of $54. A $488 decrease in invested capital and a $2,295 decrease
in restricted assets, are partially offset by a $2,729 increase in unrestricted assets.
Statement of revenues, expenses and changes in net assets
Fiscal year end June 30 2009 2008 2007
Revenue:
Sewer charges $ 2-0-112-4 20,010 20,083
Other o erating revenue 1,084 838 919
Investment income 1,653 2,320 1,906
Non-operating revenue ex 87 93 65
Ca itai contributions 1,278 1,865 2,974
Total revenue $ 24,052 24,940 25,817
Expenses:
Operating and maintenance $ 3,305 4,319 3,181
Administration 13,212 13,465 13,522
Depreciation 5,888 5,364 5,338
Non-recurring expense -0- -0- 1,200
Interest expense 1,701 1,868 2,021
Total expense $ 24,106 25,016 25,262
Net assets
j
Change in net assets $ 54 76 555
Net assets at beginning of year 99,989 100,065 99,510
Net assets at year end 1 $ 99,935 1 99,989 100,065
Revenues
Total revenues for fiscal year ended June 30, 2009 are $24,052 compared with $24,940
in fiscal year 2008, a decrease of $888. This decrease resulted from a decrease in
investment income ($667), and a decrease in capital contributions ($587) both as a
result of the economic downturn. Sewer charges increased slightly ($114) despite a
decrease in usage as a result of a 5% rate increase which took effect in January 2009.
Expenses
Total expenses for the fiscal year ending June 30, 2009 are $24,106 compared with
$25,016 in fiscal year 2008, a decrease of $910. The decrease occurred despite an
increase in depreciation costs ($524). All other aspects of the Department operation,
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City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2009 and 2008
(in thousands)
maintenance and administration costs decreased as management proactively
implemented financial controls to match the downturn in the economy.
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. Therefore, sewer
revenues are not included in the calculation. The sewer fund does, however, pay
$500,000 annually to the City General Fund in support of fire and police services for the
reclamation facility included in the Master Services Agreement with the City.
Capital assets
Fiscal year end June 30 2009 2008 2007
Assets:
Land and easements $ 12,471 12,471 12,471
Wells and pumping plant 3,192 3,192 3,192
Bldg, plant and facilities 152,859 152,736 151,901
Other capital 5,857 6,469 6,451
Construction work in process 7,290 6,176 5,340
Total capital assets
$ 181,669 181,044 179,355
Accumulated de reciation 84,569 79,281 73,959
Total capital assets net $ 97,100 101,763 105,396
Long-term debt and coverage
Fiscal ear end June 30 2009 2008 2007
Net rofit: $ (1,333)_ 1 940 2 420
Add back:
Depreciation $ 5,888 5,364 5,338
Amortization 36 38 44
Interest expense 1,701 1,868 2,021
Otherfees 1,279 1865 2,974
Gain /loss on assets 4 4 2
Total cash available a $ 7,575 7,199 7,959
Senior debt
COPS 3,300 3,285 3,285
Total senior debt b $ 3,300 3,285 3,285
Sub debt
Subordinate debt 2,494 2,494 3,285
Aggregate P&I c $ 5,794 5,779 5,779
Coverage:
Senior debt coverage (a/b) X 23x _22x 2.4 x
Aggregate coven a a/c X 1.3 x 1.3 x 1.4 x
Management challenges:
The sewer utility is authorized to increase rates by 5% in January 2010, the second
increase approved in 2008 as part of a two-phase rate increase. The sewer utility
continues to work with the water utility toward a 30% design and environmental review to
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City of San Bernardino Municipal Water Department
Management's Discussion and Analysis
June 30, 2009 and 2008
(in thousands)
utilize tertiary treated water for much needed basin reclamation. The recycled water may
be used to irrigate City parks and green areas, roadside medians, golf courses and other
facilities as well as recharging the groundwater basin. $1.5 million in federal grant money
has been earmarked to assist the Department in this effort during the next fiscal year.
The recent downturn in the economy has deferred the probable expansion of the Water
Reclamation Plant. Construction in San Bernardino has concurrently diminished in the
past two years allowing deferral of the expansion. The sewer utility continues to look
toward technological improvements in order to run more efficiently. No additional
financing is expected for the sewer utility over then next 12-24 months; however it is
expected that the sewer utility will apply for additional rates in January 2011.
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.
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BASIC FINANCIAL STATEMENTS
13
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Statement of Net Assets
June 30,2009
(With comparative totals for 2008)
Water Sewer Interfund Totals
Utility utility Eliminations 2009 2008
Assets
Current assets:
Cash and investments(note 2) 10,988,446 20,756,145 31,744,591 28,110,364
Accounts receivable, net 4,313,408 2,491,485 6,804,893 7,029,063
Due from other entities 1,036,286 373,538 1,409,824 2,076,110
Interfund receivable 197,149 - (197,149) - -
Related parties receivable(note 8) 258,780 445,865 704,645 1,076,546
Inventory 1,604,597 - 1,604,597 1,474,300
Prepaid expenses 73,201 1,006,657 - 1,079,858 1,146,490
Total current assets 18,471,867 25,073,690 (197,149) 43,346,408 40,912,873
Noncurrent assets:
Restricted assets:
Cash and investments(note 2):
Restricted for debt service 32,840 3,560,993 3,593,833 3,501,829
Restricted for rapital-related fees 6,328,449 13,503,277 19,831,726 24,205,033
Restricted for consumer deposits 2,592,741 - 2,592,741 2,533,998
Restricted for consent decree(note 12) 21,059,979 21,059,979 2,215,690
Guaranteed investment contract(note 12) - - - - 17,545,260
Interest receivable 149,385 80,765 - 230,150 1,031,389
Prepaid insurance-consent decree(note 12) 39,414,022 - - 39,414,022 41,457,912
Note proceeds held by state 3,506,098 - 3,506,098 5,642,389
Total restricted assets 73,083,514 17,145,035 90,228,549 98,133,500
Notes receivable 6,295 6,295 -
Capital assets(note 3):
Land and easements 2,944,972 12,470,740 15,415,712 15,415,712
Construction in progress 12,660,529 7,289,753 19,950,282 21,620,323
Water rights,wells and pumping plants 69,684,287 3,192,218 72,876,505 65,181,301
Distribution systems 103,972,604 - 103,972,604 100,339,018
Building, plants and store yards 2,520,636 152,858,610 155,379,246 155,053,204
Tools and equipment 3,005,222 2,898,010 5,903,232 5,811,187
Fleet and rolling stock 3,537,350 1,094,166 4,631,516 4,773,485
Office leasehold improvements 2,190,680 - 2,190,680 2,190,680
Office, computer, engineering
equipment 2,671,657 944,172 3,615,829 4,449,106
Radio communication equipment 296,242 99,138 - 395,380 382,940
Telemetry systems and equipment 1,036,527 628,699 1,665,226 1,623,161
Miscellaneous 233,534 193,015 426,549 426,549
Less accumulated depreciation and
amortization (56,627,872) (84,568,764) - (141,196,636) (132,250,577)
Total capital assets(net of
accumulated depreciation
and amortization) 148,126,368 97,099,757 - 245,226,125 245,016,089
Other assets:
Debt issue costs, net - 187,387 - 187,387 223,267
Deferred call premium 319,448 - 319,448 361,573
Total other assets 506,835 - 506,835 584,840
Total noncurrent assets 221,216,177 114,751,627 335,967,804 343,734,429
Total assets 239,688,044 139,825,317 (197,149) 379,316,212 384,647,302
(Continued)
14
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Statement of Net Assets
(Continued)
Water Sewer Interfund Totals
utility Utility Eliminations 2009 2008
Liabilities and net assets
_ Liabilities:
Current liabilities:
Accounts payable 3,617,011 1,892,734 5,509,745 6,913,187
Interfund payable - 197,149 (197,149) - -
Related parties payable(note 8) 765,280 185,195 - 950,475 865,073
Accrued expenses 1,738 10,080 - 11,818 36,489
Accrued compensation 897,208 342,381 - 1,239,589 1,125,438
Claims payable (note 10) 323,062 98,237 - 421,299 391,368
Consumer deposits 312,123 - - 312,123 854,969
Current portion of compensated
absences (note 5) 966,929 472,561 - 1,439,490 1,443,678
Current portion of leases payable (note 5) 19,642 - - 19,642 76,794
Current portion of notes payable (note 5) 926,464 2,056,342 - 2,982,806 2,457,494
Current portion of certificates of
participation (note 5) - 2,217,793 - 2,217,793 2,102,242
Current portion of bonds payable(note 5) 10,000 - - 10,000 10,000
Current portion of OPEB obligation(note 7) 347,900 67,200 - 415,100 342,000
Accrued interest payable 221,275 530,808 - 752,083 809,684
Total current liabilities 8,408,632 8,070,480 (197,149) 16,281,963 17,428,416
Noncurrent liabilities:
Consumer deposits 2,579,699 - - 2,579,699 2,582,506
Compensated absences (note 5) 447,308 57,126 504,434 519,975
Deferred revenue-consent decree(note 12) 60,473,518 - 60,473,518 62,055,217
Leases payable (note 5) - - - 19,642
Notes payable (note 5) 16,859,776 11,052,837 27,912,613 30,895,419
Certificates of participation (note 5) - 19,539,695 19,539,695 21,757,488
Bonds payable(note 5) 35,000 - 35,000 45,000
OPEB obligation (note 7) 1,723,100 1,169,800 2,892,900 1,290,000
Total noncurrent liabilities 82,118,401 31,819,458 113,937,859 119,165,247
Total liabilities 90,527,033 39,889,938 (197,149) 130,219,822 136,593,663
Net assets(note 13):
Invested in capital assets, net of related
debt 133,834,066 65,794,083 - 199,628,149 196,892,664
Restricted for:
Capital-related fees 6,328,449 13,503,277 19,831,726 24,205,033
Unrestricted 8,998,496 20,638,019 29,636,515 26,955,942
Total net assets $ 149,161,011 $ 99,935,379 249,096,390 248,053,639
See accompanying notes to basic financial statements.
15
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16
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Statement of Revenues, Expenses, and Changes in Net Assets
Year ended June 30, 2009
(With comparative totals for the year ended June 30, 2008)
Water Sewer Interfund Totals
Utility Utility Eliminations 2009 2008
Operating revenues:
Charges for services $ 25,308,524 20,124,192 (31,426) 45,401,290 45,263,083
Other operating revenues 1,950,430 1,083,829 (1,263,751) 1,770,508 1,494,328
Total operating revenues 27,258,954 21,208,021 (1,295,177) 47,171,798 46,757,411
Operating expenses:
Administration and customer service 8,275,959 - 8,275,959 7,890,871
Engineering, operations, and distribution
administration 736,112 1,424,089 (965,073) 1,195,128 1,364,642
Plant operations 7,155,031 9,644,861 (272,938) 16,526,954 17,204,720
Maintenance 1,853,244 2,928,189 (26,949) 4,754,484 4,922,993
Environmental control - 592,629 592,629 703,880
Distribution 3,753,301 - 3,753,301 3,621,228
Engineering 3,046,765 16,278 3,063,043 2,437,557
General,administration,and overhead 2,889,629 1,910,451 (30,217) 4,769,863 6,172,571
Depreciation and amortization (note 3) 5,224,933 5,888,314 11,113,247 9,854,512
Total operating expenses 32,934,974 22,404,811 (1,295,177) 54,044,608 54,172,974
Operating income(loss) (5,676,020) (1,196,790) - (6,872,810) (7,415,563)
Non-operating revenues (expenses):
Investment income 1,008,607 1,652,562 - 2,661,169 3,932,762
Rental income 101,130 26,826 - 127,956 125,243
Noncapital grant funds 2,043,889 - - 2,043,889 2,715,957
Gain (loss)on asset disposition 309,708 (3,736) - 305,972 (535,312)
Interest expense and fiscal charges (601,795) (1,701,371) - (2,303,166) (2,460,215)
Amortization of issuance costs - (35,881) - (35,881) (38,077)
Other (8,021) (74,211) - (82,232) 98,230
Total non-operating revenues (expenses) 2,853,518 (135,811) - 2,717,707 3,838,588
Net profit(loss) (2,822,502) (1,332,601) - (4,155,103) (3,576,975)
Capital contributions:
Acquisition fees 1,239,309 - - 1,239,309 2,895,970
Capacity fees 1,202,964 968,298 - 2,171,262 5,220,756
Contributed capital assets 1,476,924 - - 1,476,924 4,974,723
Other capital restricted fees - 310,359 310,359 171,887
Total capital contributions 3,919,197 1,278,657 - 5,197,854 13,263,336
Net assets:
Balance at beginning of year 148,064,316 99,989,323 248,053,639 238,367,278
Balance at end of year $ 149,161,011 99,935,379 249,096,390 248,053,639
See accompanying notes to basic financial statements.
17
MUNICIPAL WATER DEPARTMENT OF THE CITY OF SAN BERNARDINO,CALIFORNIA
Statement of Cash Flows
Year Ended June 30,2009
(With comparative totals for 2008)
Totals
Water Sewer 2009 2008
Cash flows from operating activities:
Cash received from customers $ 27,477,387 21,412,636 48,890,023 48,122,588
Rental income 101,130 26,826 127,956 125,243
Nonoperating miscellaneous revenue(expenses) 301,687 (77,947) 223,740 (437,652)
Cash paid to employees for services (7,665,862) (3,397,946) (11,063,808) (11,459,925)
Cash paid to suppliers of goods and services (18,935,373) (13,464,015) (32,399,388) (32,783,593)
Net cash provided by operating activities 1,278,969 4,499,554 5,778,523 3,566,661
Cash flows from noncapital financing activities:
Collection on notes receivable (6,295) - (6,295) 785,250
Consent decree insurance drawdowns 2,043,889 - 2,043,889 2,715,957
Net cash provided by noncapital financing activities 2,037,594 - 2,037,594 3,501,207
Cash flows from capital and related financing activities:
Capital fees received 2,442,273 1,278,657 3,720,930 8,288,613
Drawdown on CIEDM loan 2,136,291 - 2,136,291 4,357,611
Proceeds from sale of fixed assets 156,615 156,615
Cash paid to acquire fixed assets (8,777,437) (839,053) (9,616,490) (13,309,041)
Principal paid on capital-related debt (559,106) (4,197,317) (4,756,423) (4,364,354)
Interest paid on capital-related debt (608,368) (1,687,518) (2,295,886) (2,341,141)
Net cash provided by(used for)capital and related
financing activities (5,209,732) (5,445,231) (10,654,963) (7,368,312)
Cash flows from investing activities:
Liquidation of GIC 17,545,260 17,545,260 -
Interest received 1,809,845 1,652,562 3,462,407 3,847,833
Net cash provided by investing activities 19,355,105 1,652,562 21,007,667 3,847,833
Net increase in cash 17,461,936 706,885 18,168,821 3,547,389
Cash and cash equivalents at beginning of year 23,540,519 33,552,537 57,093,056 53,545,667
Cash and cash equivalents at end of year $ 41,002,455 34,259,422 75,261,877 57,093,056
18
MUNICIPAL WATER DEPARTMENT OF THE CITY OF SAN BERNARDINO,CALIFORNIA
Statement of Cash Flows
(Continued)
Totals Totals
Water Sewer 2009 2008
Reconciliation of cash and cash equivalents to amounts
reported on the balance sheet:
Reported on the balance sheet:
Cash and investments $ 10,988,446 20,756,145 31,744,591 28,110,364
Restricted assets 73,083,514 17,145,035 90,228,549 98,133,500
Less restricted assets not meeting the definition of
cash equivalents:
Investment agreements - (3,560,993) (3,560,993) (3,473,858)
Government investment contract (17,545,260)
.Interest receivable (149,385) (80,765) (230,150) (1,031,389)
Prepaid insurance-consent decree (39,414,022) - (39,414,022) (41,457,912)
Note proceeds held by state (3,506,098) (3,506,098) (5,642,389)
Cash and cash equivalents at end of year $ 41,002,455 34,259,422 75,261,877 57,093,056
Reconciliation of operating income to net cash
provided by(used for)operating activities:
Operating income $ (5,676,020) (1,196,790) (6,872,810) (7,415,563)
Depreciation and amortization 5,224,933 5,888,314 11,113,247 9,854,512
Rental income 101,130 26,826 127,956 125,243
Gain (loss)on asset disposition 309,708 (3,736) 305,972 (535,312)
Other receipts(expenses) (8,021) (74,211) (82,232) 98,230
Adjustments:
(Increase)decrease in accounts receivable 218,433 5,737 224,170 (206,554)
(Increase)decrease in due from other entities 585,421 80,865 666,286 (1,056,297)
(Increase)decrease in interfund receivable 95,637 - 95,637 (148,459)
(Increase)decrease in related parties receivable 158,251 213,650 371,901 (108,521)
(Increase)decrease in inventory (130,297) - (130,297) 163,366
(Increase)decrease in prepaid expenses 13,480 53,152 66,632 (61,305)
(Increase)decrease in note proceeds held by state -
-_ 934 000
(Increase)decrease in other assets - 275,343 275,343 (329,516)
Increase(decrease)in accounts payable (747,622) (677,683) (1,425,305) 1,652,163
Increase(decrease)in interfund payable - (95,637) (95,637) 148,459
Increase(decrease)in related parties payable 72,672 1,445 74,117 8,726
Increase(decrease)in accrued expenses 467 (25,138) (24,671) (3,659)
Increase(decrease)in accrued compensation 103,233 2,474 105,707 (143,817)
Increase(decrease)in claims payable (318,074) 24,943 (293,131) (45,721)
Increase(decrease)in consumer deposits-current (542,846) - (542,846) -(822,835)
increase(decrease)in consumer deposits-noncurrent (2,807) - (2,807) 127,803
(Increase)decrease in OPEB obligation 1,359,100 - 1,359,100 711,900
(Increase)decrease in prepaid insurance-consentdecree 462,191 462,191 41,698
l.. Increase(decrease)in deferred revenue _ _
Net cash provided by operating activities $ 1,278,969 4,499,554 5,778,523 2,988,561
Noncash investing, capital, and financing activities:
Capital assets constructed by developers 1,476,924 - 1,476,924 4,974,723
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, 2009
(1) Summary of Significant Accounting Policies
Reporting Entity
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 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 (GAAP) 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 Accounting
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 earned,
costs incurred and/or net income is necessary for management accountability.
Basis of Accounting
Proprietary funds are accounted for on the flow 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 FASBs 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 Significant Accounting 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" (i.e., the current portion of interfund loans) or "advances to/from
other funds" (i.e., 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) Summary of Significant Accounting 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 8 to 50 years
Interceptor lines 50 years
Disposal plant 35 to 50 years
Leasehold improvements 5 to 25 years
Shops, offices, stores, and yards 10 to 20 years
Tools and equipment 4 to 20 years
Office equipment 5 to 20 years
Communication equipment 8 to 10 years
Computer equipment 3 to 5 years
Automotive equipment 3 to 15 years
22
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(1) Summary of Significant Accounting 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 result 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) Summary of Significant Accounting 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, 2009 are classified in the accompanying financial
statements as follows:
Cash and investments $31,744,591
Cash and investments for debt service 3,593,833
Cash and investments for capital-related fees 19,831,726
Cash and investments for consumer deposits 2,592,741
Cash and investments for consent decree 21,059,979
Total cash and investments 78
Cash and investments as of June 30, 2009 consist of the following:
Cash on hand $ 17,569
Deposits with financial institutions 44,639
Investments 78,760,662
Total cash and investments $78,822,8ZQ
24
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(2) Cash and Investments. (Continued)
Investments Authorized by the California Government Code and the Entity's Investment
Policy
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 policy.
Authorized by Maximum Maximum
Investment Types Investment Maximum Percentage Investment
Authorized by State Law Policy Maturity* of Portfolio* 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
restrictive.
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 by Debt Agreements
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 Type Maturity 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 years None None
Disclosures Relating 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:
Remaining Maturing (in Months)
12 Months 13 to 24 25 to 60 More Than
Investment Tvpe Total Or Less Months Months 60 Months
Equity in City
investment pool $54,143,289 54,143,289 -
Consent Decree
State investment pool 10,135,702 10,135,702 - -
Federal agency
securities 10,920,678 - - 10,920,678
Held by bond trustee:
Federal agency
securities 87,243 87,243 - - -
Investment Agreement 3,473.750 - 3.473,750
Total $78.760 662 64.366.234 10.920.678 .473.750
27
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(2) Cash and Investments, (Continued)
Disclosures Relating 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.
Minimum Rating as of Year End
Legal Not
Investment Type Total Rating AAA AA Rated
Equity in City
investment pool $54,143,289 N/A - 54,143,289
Consent Decree
State investment pool 10,135,702 N/A - - 10,135,702
Federal agency
securities 10,920,678 10,920,678 - -
Held by bond trustee:
Federal agency
securities 87,243 87,243 - -
Investment Agreement 3,473,750 - 3,473.750
Total 11,007,921 67.752 741
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).
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. (Continued)
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) Capital Assets
Capital asset activity for the year ended June 30, 2009 is as follows:
Balance at Balance at
July 1 2008 Additions Deletions June 30, 2009
Capital assets, not being depreciated:
Land and easements $ 15,415,712 - 15,415,712
Construction in progress 21,620,323 11091,355 (12,761,396) 19,950,282
Total capital assets, not being depreciated 37,036,035 11,091,355 (12,761,396) 35 365,994
Capital assets, being depreciated:
Water rights,wells and pumping plants 65,181,301 7,757,856 (62,652) 72,876,505
Distribution systems 100,339,018 4,008,441 (374,855) 103,972,604
Building, plants and store yards 155,053,204 345,322 (19,280) 155,379,246
Tools and equipment 5,811,187 468,676 (376,631) 5,903,232
Fleet and rolling stock 4,773,485 364,569 (506,538) 4,631,516
Office leasehold improvements 2,190,680 - 2,190,680
Office,computer, engineering equipment 4,449,106 207,334 (1,040,611) 3,615,829
Radio and interoffice communication equip 382,940 12,440 395,380
Telemetry system and equipment 1,623,161 42,065 1,665,226
Miscellaneous 426,549 426,549
Total capital assets, being depreciated 340230,631 13,206.703 (2,380,567) 351,056,767
Less accumulated depreciation for:
Water rights,wells and pumping plants (23,850,248) (2,139,645) 94,066 (25,895,827)
Distribution systems (23,043,468) (2,223,459) 369,724 (24,897,203)
Building, plants and store yards (73,494,246) (5,527,019) 35,808 (78,985,457)
Tools and equipment (3,833,022) (282,556) 345,074 (3,770,504)
Fleet and rolling stock (2,923,674) (330,215) 420,832 (2,833,057)
Office leasehold improvements (342,478) (142,353) - (484,831)
Office,computer and engineering equipment (3,485,720) (212,459) 955,590 (2,742,589)
Radio and interoffice computer equipment (295,964) (565) - (296,529)
Telemetry system and equipment (716,172) (289,061) (1,005,233)
Miscellaneous (265585) (19,821) (285,406)
Total accumulated depreciation (132250,577) (11,167,153) 2,221.094 (141,196,636)
Total capital assets, being depreciated, net 207,980,054 2,039,550 (159,473) 209,860,131
Net property, plant and equipment $245 016 089 13 130 905 (12 920 869) 245 226 125
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, 2009 are as follows:
Cumulative
Expenditures Other
Project Amount as of Unexpended Funding
Proiect Description Number Authorized June 30, 2009 Commitments Sources
Water Fund
Palm pump station 10340 $ 2,890,000 1,278,820 1,611,180 1,611,180
Magnolia pump station 10341 2,157,000 740,798 1,416,202 1,416,202
Caltrans freeway
widening (relocation
of water lines) 10352 2,775,000 2,051,939 723,061 723,061
Palm reservoir#3 10463 3.900,000 145.677 3,754,323 1.391.639
Totals 11.722.000 21 Q 5.142.082
Sewer Fund
RIX facility expansion 00038 8,000,000 2,624,432 5,735,568 1,075,114
Cogeneration 00062 5,537,303 3,765,085 1,772,218 -
Digester gas treatment 1,330,000 379.483 950.517
Totals 51ZO2= .458.303 9.9Z�511
(4) Operating Leases
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 took possession of leased space 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, 2009:
Office and Warehouse Space
For the year ending June 30 Water Sewer Total
2010 415,907 21,479 437,386
2011 415,907 21,479 437,386
2012 311,930 16,109 328,039
2013 259.560 259,560
1.403.304 � 2 71
Rent expense was $318,421 for the period ending June 30, 2009 and $177,826 for the
period ending June 30, 2008
31
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Long-Term Debt
The following is a summary of changes in long-term debt obligations for the year ended
June 30, 2009:
Amounts Amounts Due
Balance at Balance at Due Within Beyond
July 1. 2008 Additions Reductions June 30, 2009 One Year One Year
Compensated absences $ 1,963,653 (19,729) 1,943,924 1,439,490 504,434
Lease payable 96,436 (76,794) 19,642 19,642 -
Notes payable 33,352,913 (2,457,494) 30,895,419 2,982,806 27,912,613
Certificates of
Participation 24,035,000 (2,125,000) 21,910,000 2,240,000 19,670,000
Less:
Unamortized discounts (175,270) 22,758 (152,512) (22,207) (130,305)
Bonds payable 55.000 (10.000) 45.000 10.000 35.000
59.327.73 - (4.5&5.25.9) 54 S4Z'� 6.669-73 47.991 74_
Lease/Purchase Payable
California First Leasing Corporation
Maturity date: 2009
Interest rate: 3.68%
Repayment provisions: Quarterly principal and interest
Payments of$19,822.20
Balance $18,642
Less current portion 1�)
Long-term portion $__-
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) Long-Term Debt, (Continued)
Notes Payable
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 $7,786,240
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 10,000,000
San Bernardino 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 1,536,733
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 532,008
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 11,040,438
Total notes payable 30,895,419
Less current portion (2,982,806)
Long-term portion 27.912.613
33
i
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Long-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. On July 1, 2007, the California
Infrastructure and Economic Development (CIEDB) issues its Infrastructure State
Revolving Fund Revenue Bonds to provide additional funding for a portion of the costs of
Phase 1 of the Verdamont Area Infrastructure Project including booster stations and
transmission mains. Installment Sale Agreement No. BC05-076 between the City of San
Bernardino Municipal Water 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 of 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.
On June 22, 1993 the Department entered into an agreement with the San Bernardino
Municipal Water District (SMVMWD) for the purchase of Santa Ana Regional Interceptor
(SARI) pipeline discharge rights allocation of 2.5 million gallons per day. The agreement
allows the Department to discharge 2.5 MGD of industrial waste water into the
interceptor pipeline which was constructed and completed in 1995 as a joint project by
SMVMWD and Santa Ana Watershed Project Authority (SAWPA) as funded by a state
revolving fund loan obtained by SAWPA. The Department pledged its income from
sewer revenues as security for the monthly payments.
34
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Long-Term Debt. (Continued)
Certificates of Participation
Annual
Interest Issue Maturity Original Principal
Rates Date Date Amount Installments Balance
1998 Refinancing Sewer 3.95% 1998 2017 $36,230,000 $1,505,000
to to
5.00% $3,220,000 $21,910,000
Less current portion
payable from restricted assets (2,240,000)
deferred unamortized discount 22.207
(2,217,793)
Long-term portion
payable from restricted assets 19,670,000
deferred unamortized discount (130.305)
Long-term portion, net of unamortized
discount $19.539.695
It has been determined that the amount of $22,664 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 rebate arbitrage. The Trust Rebate Fund
has a current balance of$87,150 to cover the amount due.
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 pay off 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.
35
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Long-Term Debt (Continued)
The required reserve for the 1998 Refunding Sewer Revenue Certificates of Participation
is $2,240,000. As of June 30, 2009, the reserve was fully funded.
Costs related to the issuance of the 1998 Certificates have been paid out of the proceeds
of the issue.
Bonds Payable
Annual
Interest Issue Maturity Original Principal
Rates Date Date Amount Installments Balance
Waterworks Bonds, 7.75% 1988 2013 $150,000 $ 5,000
Series C to
$15,000 $45,000
Total bonds payable $45,000
Less current portion
payable from
restricted assets 1( 0,000)
Long-term portion $35-000
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.
36
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Long-Term Debt. (Continued)
The annual requirements to amortize long-term debt subsequent to June 30, 2009 are as
follows:
June 30 Principal Interest Total
Lease payable 2010 19,642 180 19,822
19,642 180 19.822
Notes payable 2010 2,982,806 1,016,581 3,999,387
2011 3,085,118 911,227 3,996,345
2012 2,913,058 801,067 3,714,125
2013 3,014,053 696,951 3,711,004
2014 2,663,608 587,930 3,251,538
2015-2019 9,093,220 1,833,886 10,927,106
2020-2024 5,125,762 695,317 5,821,079
2025-2027 2.017.794 95.213 2.113,007
30.895.419 6,638.172 37.533,591
Certificates of participation 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 2,805,000 607,650 3,412,650
2015-2017 9.340,000 954.163 10.294,163
21,910,000 5.205,968 27.115,968
Bonds payable 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
45,000 9,302 54,302
$52.870,061 1.853.622 4.723.683
37
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(5) Long-Term Debt, (Continued)
Compensated Absences
The Department's policies relating to compensated absences are described in note 1.
This liability, amounting to $1,943,924 and $1,963,653 at June 30, 2009 and June 30,
2008, respectively, will be paid in future years from future resources from the water and
sewer funds.
Rate Covenants
As part of the 1998 Certificates of Participation Revenue Covenant Requirement, the
Department is required to set rates and charges for sewer service that will be at least
sufficient to yield during each fiscal year Net Revenues equal to at least 110% of Debt
Service.' For the fiscal year ended June 30, 2009 Net Revenues represented 130% of
Debt Service.
(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 "P"
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.
38
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(7) Post-employment 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.
Eligibility: Employees are eligible for retiree health benefits if they retire from the
Department on or after age 50 with at least 5 years of service, and are eligible for a
PERS pension. Membership of the plan consisted of the following at June 30, 2009, the
date of the latest actuarial valuation:
Retirees and beneficiaries receiving benefits 79
Terminated plan members entitled to but
not yet receiving benefits 0
Active plan members 238
Total 317
Funding Policy: The contribution requirements of plan members and the Department are
established and may be amended by the Board of Water Commissioners. The required
contribution is based on projected pay-as-you-go financing requirements, with an
additional amount to prefund benefits as may be determined annually by the Board of
Water Commissioners. The Department has not established an irrevocable trust to which
pre-funding contributions have been made. For fiscal year 2008-09, the Department
contributed $743,000 to the plan, including $743,000 for current premiums (100% of total
premiums). Plan members receiving benefits contributed $150,000 (approximately 6.2%
of total premiums) through their required contribution. The Department pays up to the
entire cost of health benefits for eligible retirees and their spouses subject to the City's
vesting schedule.
Annual OPEB Cost and Net OPEB Obligation. The Department's annual other
postemployment benefit (OPEB) cost (expense) is calculated based on the annual
required contribution of the employer (ARC), an amount actuarially determined in
accordance with the parameters of GASB Statement 45. The ARC represents a level of
funding that, if paid on an ongoing basis, is projected to cover normal cost each year and
39
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(7) Post-employment Benefits other than Pensions. (Continued)
Annual OPEB Cost and Net OPEB Obligation, (Continued)
amortize any unfunded actuarial liabilities (or funding excess) not to exceed thirty years.
The following table shows the components of the Department's annual OPEB cost for
the year, the amount actually contributed to the plan, and changes in the Department's
net OPEB obligation:
Annual required contribution $2,419,000
Interest on net OPEB obligation -
Annual OPEB cost (expense) 2,419,000
Contributions made (743.000)
Increase in net OPEB obligation 1,676,000
Net OPEB obligation — beginning of year 1,632,000
Net OPEB obligation —end of year 3.308.000
The Department's annual OPEB cost, the percentage of annual OPEB cost contributed
to the plan, and the net OPEB obligation for 2009 and the two preceding years were as
follows:
Year Annual Annual OPEB OPEB
Ended OPEB Cost Cost Contributed Obligation
6/30/07 N /A N /A N /A
6/30/08 $2,264,000 72.1% $1,632,000
6130/09 $2,419,000 69.3% $3,308,000
Funded Status and Progress. The actuarial accrued liability for benefits was $26 million,
and the actuarial value of the assets was zero, resulting in an unfunded actuarial
accrued liability (UAAL) of $26 million and a funded ratio (actuarial value of assets as
percentage of the actuarial liability) of zero percent. The covered payroll (annual payroll
of active employees covered by plan) was $13.2 million, and the ratio of the UAAL to the
covered payroll was 198.9 percent.
40
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(7) Post-employment Benefits other than Pensions. (Continued)
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.
Actuarial 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.
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
Actuarial Liability Unfunded Percentage of
Actuarial Value of (AAL)- AAL Funded Covered Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll
Date f a� f lq (b-a) a (c) b-a /c
6/30/09 $0 $26,190,000 $26,190,000 0% $13,169,000 198.9%
41
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(8) Related Party 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, 2009 and 2008:
Receipts 2009 2008
City of San Bernardino
Revenue from water charges $ 204,487 151,015
Revenue from sewer charges 55,760 57,466
Revenue from geothermal charges 13,321 13,750
Billing and collection charges-refuse 208,648 197,258
Billing and collection charges -storm drain 4,973 5,242
Cost reimbursement 2,000 1,000
Reimbursement- sale of land 474,591 804,881
Interest income 2,258,883 2,416,738
Economic Development Agency
Revenue from geothermal charges 755 617
Total receipts from related parties 13-,223.41- 6
Payments 2009 2008
City of San Bernardino
10% water revenue $2,353,148 2,368,049
Sewer collection system maintenance 3,055,617 3,036,221
Worker's compensation - administration charges 170,659 177,469
Printing services 2,723 2,319
Postage 11,866 10,757
City Hall rent 177,826 177,826
Phone charges 119,369 131,109
Refuse disposal service 90,949 74,595
Civil service/human resources 177,800 170,700
Legal services 181,800 176,000
Data processing services 710,700 659,455
Police & Fire Protection 500,000 500,000
Permits 73,119 0
Cost reimbursement 108,552 96,922
Other services 3,302 5,142
Miscellaneous charges 942 60
Total payments to related parties 7 7 72 7�5$S.624
42
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(8) Related Party Transactions, (Continued)
Receivables
The receivables to the City of San Bernardino are classified within the Statement of Net
Assets as follows:
2009 2008
Related party receivable $704,645 1,076,546
Accounts receivable, net 27,028 49,903
Due from other entities 64,565 53,837
Total receivables from related parties 796 238 1 180.286
Payables
The payables to the City of San Bernardino are classified within the Statement of Net
Assets as follows:
2009 2008
Related party payable $ 950,475 865,073
Accounts payable 674,707 1,052,441
Claims payable (note 10) 421,299 391,368
Total payables to related parties $2.046 4 Za08.882
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.
43
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(9) Joint Venture. (Continued)
West End Water Development Treatment and Conservation Joint Powers Authority,
(Continued)
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.
San Bernardino Public Safety Authority
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, 2nd Floor, San Bernardino, California 92402. The joint venture is not
experiencing fiscal stress.
Colton/San Bernardino Regional Tertiary 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 Department's 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.
44
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(10) Construction and Other Significant Commitments
Commitments
Commitments in the form of signed contracts for costs to complete construction projects
or other improvements amounted to $4,340,533 and $5,730,384 at June 30, 2009 and
June 30, 2008, respectively.
Risk Management
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' Compensation 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, 2009:
Total
Liability balance, July 1, 2008 $391,368
Claims and changes in estimates 147,683
Claim payments 11( 7,752)
Claims payable, June 30, 2009 4 2
The following represents the changes in approximate aggregate liabilities for the
Department for the year ended June 30, 2008:
Total
Liability balance, July 1, 2007 $437,089
Claims and changes in estimates 97,058
Claim payments (142,779)
Claims payable, June 30, 2008 91
45
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i
i
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(11) Contingencies
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 cannot 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.
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.
46
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i
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Notes to Basic Financial Statements
(Continued)
(12) Consent Decree. (Continued)
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.
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.
The terms of the Guaranteed Investment Contract only provided the Department with the
position of a secured creditor with respect to an AIG bankruptcy. As concern rose
regarding AIG's financial credibility, on October 9, 2008, the Department negotiated and
accepted a "payout" of the Guaranteed Investment Contract in the amount of
$18,661,876 which represented the principal and accrued interest as of that date. These
funds are currently invested in the Local Agency Investment Fund and Federal Agencies
investments. The Department is reviewing alternate investment options for these funds.
47
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.
Water Sewer
Total capital assets (net of accumulated
depreciation and accumulated amortization) $148,126,368 97,099,757
Less related debt:
Notes payable (17,786,240) (13,109,179)
Bonds payable (45,000)
Certificates of participation - (21,757,488)
Add back:
Portion of debt offsetting debt service reserves 32,840 3,560,993
Note proceeds hold by state 3,506,098 -
Total invested in capital assets, net of related
debt 133,834,066 65,794,083
Restricted Net Assets - Capital related fees 6,328,449 13,503,277
Unrestricted Net Assets 8,998,496 20.638,019
Total Net Assets 149.161.011 99.935.379
Amounts restricted for debt service is calculated as follows:
Water Sewer
Cash and investments with fiscal agent restricted
for debt service $32,840 3,560,993
Less portion of debt offsetting unexpended debt
proceeds held in the debt service amounts (32,840) (3,560,993)
48
SUPPLEMENTARY INFORMATION
49
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50
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Board of Water Commissioners and Organization
As of June 30, 2009
MAYOR OF THE CITY OF SAN BERNARDINO
Patrick J. Morris
BOARD OF WATER COMMISSIONERS
Name Office
Toni Callicott President
B. Warren Cocke Commissioner
Louis A. Fernandez Commissioner
Wayne Hendrix Commissioner
Norine I. Miller Commissioner
ADMINISTRATION
Stacey R. Aldstadt
General Manager
Robin L. Ohama
Deputy General Manager
Matthew H. Litchfield, P.E.
Director, Water Utility
John Claus
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, the City of Loma Linda, the
former Norton Air Force Base, Patton State Hospital and portions of the areas service by East
Valley Water District.
51
MUNICIPAL WATER DEPARTMENT OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Schedule of Insurance Coverage
As of June 30, 2009
Insurance coverage for the Department at June 30, 2009 is summarized below:
Multiple insurance companies and policies; all-risk property coverage, including
earthquake and flood —July 1, 2007, to July 1, 2008
Primary limit:
Commonwealth Insurance Company, Policy#USS2118 $10,000,000
Excess limits:
Catlin Insurance Company, Policy#SJC2003 5,000,000
Lloyds of London, Policy#DP650108 5,000,000
Lloyds of London, Policy#DP650108 10,000,000
Landmark American Insurance Company, Policy#LHD414755 95,000,000
Policy Deductible (other deductibles apply for Earthquake and Flood) 25,000
Pacific Indemnity Company, Policy#78357989; boiler and machinery
Coverage—July 1, 2008 to July 1, 2009
Per occurrence limit 25,000,000
Policy Deductible 10,000
American Alternative Insurance Co., Policy#SDISSP9152180-02; general
liability, including bodily injury and property damage, personal injury and advertising injury,
professional liability and wrong acts — October 30, 2008 to October 30, 2009
Each Occurrence 1,000,000
Special District Professional Activity Wrongful Act 1,000,000
Personal/Advertising Injury Limit 1,000,000
Fire Damage Legal Liability 1,000,000
Medical Expense— each Accident 10,000
Aggregate Limit 3,000,000
Products/Completed Operations Aggregate 3,000,000
Management Liability - Occurrence
Wrongful Act per Claim 1,000,000
Wrongful Act Aggregate 3,000,000
Defense Expense for Injunctive Relief 5,000
Deductible 25,000
American Alternative Insurance Co., Policy #SDISSA8052089-03; business
Automobile coverage — October 30, 2008 to October 30, 2009
Owned automobile liability limit 1,000,000
Hired/non-owned automobile liability 1,000,000
Uninsured motorist liability 1,000,000
Auto medical payments 5,000
Hired car physical damage 50,000
Comprehensive Deductible 100
Collision Deductible 1,000
Owned Vehicle Physical Damage 2002 &newer
Comprehensive Deductible 1,000
Collision Deductible 1,000
52
MUNICIPAL WATER DEPARTMENT OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Schedule of Insurance Coverage (Continued)
As of June 30, 2009
Multiple insurance companies and policies; excess liability coverage —
October 30, 2008 to October 30, 2009
First Excess:
American Alternative Ins. Co., Policy # SDISSX9250792-02 10,000,000
Second Excess:
Everest National Insurance Company, Policy#1 P7000039-081 10,000,000
American International Specialty Lines, Policy#26738997; pollution
Liability —October 30, 2004 to October 30, 2009 (each incidentlaggregate)
Third-Party Claims, On-site Bodily Injury and Property Damage 5,000,000
Third-Party Claims, Off-site Clean-Up Resulting from New Conditions 5,000,000
Third-Party Claims, Off-site Bodily Injury and Property Damage 5,000,000
Deductible 25,000
National Union, Policy#94-555-64-97; employment practices liability —
October 30, 2008 to October 30, 2009
Limit of Liability— Claims Made 2,000,000
Deductible 50,000
Hartford Fire Insurance Company, Policy#83BPEEG2769; crime
coverage's; — March 15, 2008 to October 30, 2009
Employee theft (per loss) 500,000
Theft, disappearance and destruction 500,000
Deductible 2,500
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
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54
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO, CALIFORNIA
Schedule of Water System Demographics
Water Production/Utilization (Cubic Feet)
2008-2009 2007-2008 2006-2007
Water utilization (shown in cubic feet)
Water sold to direct customers 1,833,498,000 1,914,684,000 1,979,377,300
Water sold to other agencies 319,104,303 362,858,972 424,271,042
Water sold to or used by City 83,505,608 74,856,597 90,022,904
2,236,107,911 2,352,399,569 2,493,671,246
Loss and other factors 185,909,109 220,169,231 240,610,084
Total water sold, used or lost 2,422,017,020 2,572,568,800 2,734,281,330
Loss and other factors percentage 7.676% 8.558% 8.800%
55
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO,CALIFORNIA
SCHEDULE OF WATER PRODUCTION
June 30,2009
2008-2009 2007.2008 2006-2007
Total Water Total Water Total Water
Per 1,000 Per 1,000 Per 1,000
Amount Cubic Fast Amount Cubic Feet Amount Cubic Feet
Summary of total water
production and purchased cost
Total production,purchases,and 2,422,017 2,572,569 2,734,281
supplemental
Production and pumping expenses
Salaries&benefits $1,367,844 $0.56475 $1,359,697 $0.52854 $1,236,416 $0.45219
Employee related expenses 9,019 0.00372 10,181 0.00396 18,430 0.00674
Office related expenses 26,917 0.01111 29,599 0.01151 26,690 0.00976
Contract services - - - - 11,221 0.00410
Permits&fees 70,478 0.02910 51,686 0.02009 102,279 0.03741
Utilities 3,980,007 1.64326 4,273,914 1.66134 4,803,782 1.75687
Materials&supplies 24,570 0.01014 31,137 0.01210 22,105 0.00808
Equipment 29,755 0.01229 139,928 0.05439 73,101 0.02674
Chemical&carbon 758,495 0.31317 732,931 0.28490 543,460 0.19876
Sub-total $6,267,084 2.58754 $6,629,073 2.57683 $6,837,484 2.50065
Water stock assessments 200,228 0.08267 105,990 0.04120 34,550 0.01264
Supplemental water purchases 350,000 0.14451 670,000 0.26044 - -
Water extraction fees 21,476 0.00887 27,161 0.01056 14,968 0.00547
Total expense before depreciation $6,838,788 $2.62359 $7,432,224 $2.88903 $6,887,003 $2.51876
Depreciation of plant facilities 4,166,816 1.72039 3,396,226 1.32017 3,016,056 1.10305
Totals $11,005,604 $4.54398 $10,828,450 $4.20920 $9,903,059 $3.62181
Summary of costs per acre foot
Acre feet 55,601.860 59,058.058 62,770.455
Cost per acre feet for direct operating costs $112.71 $112.25 $108.93
Cost per acre feet for assessment,purchases,
and extraction fees $1028 $13.60 $0.79
Cost per acre feet for depreciation $74.94 $57.51 $48.05
Total cost per acre feet $197.93 $183.36 $157.77
56
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO, CALIFORNIA
SCHEDULE OF WATER RATES
Rates are summarized as follows:
Single and Multiple Family Dwelling Units Commercial Landscape and Industrial Users
Minimum Monthly Charge
Meter Effective Dates
Size July 1,2007 July 1,2008
518" $8.59 $8.88
3/4" $11.47 $11.84
1" $13.71 $14.16
1-1/2" $24.60 $25.41
2" $34.36 $35.49
3" $58.43 $60.35
4" $99.19 $102.46
6" $178.57 $184.47
8" $267.84 $276.67
10" $334.80 $345.84
12" $401.82 $415.08
All water usage,except municipal,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 Charge
Zone Charge per 100 cubic feet
1 $0.00 $0.00
2 $0.06 $0.06
3 $0.14 $0.15
4 $0.21 $0.21
5 $0.12 $0.13
6 $0.12 $0.13
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$0.30 and $0.31 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$0.288 per 100 cubic foot.
Enemy Surchame
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 of Sundry Water Statistical Data
2008-2009 2007-2008
Production Percent Production Percent
Pumping Plants in Cubic Feet Production in Cubic Feet Production
Antil Plant 3,187,500 0.13% 7,230,500 0.28%
Baseline&California Well 17,030,300 0.70% 13,181,800 0.52%
Cajon Boulevard Plant 154,296,100 . 6.37% 180,770,100 7.10%
Cajon Pass&Vincent Wells 36,383,100 1.50% 27,090,300 1.06%
Devil Canyon Plant 119,543,520 4.94% 97,533,700 3.83%
EPA Wells- Newmark OU 633,243,100 26.14% 658,427,200 25.85%
EPA Wells-Muscoy OU 510,480,900 21.08% 544,411,900 21.38%
40th Street Well 2,775,500 0.11% 1,030,100 0.04%
Gilbert Street Well 18,356,700 0.76% 61,852,400 2.43%
IVDA Well#11 4,261,200 0.18% 2,909,300 0.11%
Kenwood Wells 116,867,000 4.83% 146,497,800 5.75%
LeRoy Street Well 26,660,100 1.10% 34,819,700 1.37%
Lynwood Well 59,487,600 2.46% 49,079,300 1.93%
Lytle Creek Plant 31,738,000 1.31% 14,934,300 0.59%
Mallory Well 28,712,000 1.19% 11,402,900 0.45%
Mill&'D"Streets Well 18,942,400 0.78% 18,743,500 0.74%
Newmark Plant 170,516,700 7.04% 183,678,000 7.21%
19th Street Plant 78,886,800 3.26% 84,608,100 3.32%
Olive&Garner Well 67,065,900 2.77% 56,468,700 2.22%
Perris Hill Plant 42,900 0.00% 130,900 0.01%
7th Street Well 9,706,100 0.40% 2,217,500 0.09%
Sierra Way& 16th Street Wells 90,576,200 3.74% 86,170,100 3.38%
10th&"J"Street Well 98,529,200 4.07% 70,158,900 2.76%
30th&Mountain View Wells 67,436,800 2.78% 92,911,700 3.65%
27th Street Well 21,888,300 0.90% 20,681,000 0.82%
Waterman Avenue Plant 35,403,100 1.46% 79,205,900 3.11%
Total Water Produced 2,422,017,020 100.00% 2,546,345,600 100.00%
Purchased water-
East Valley Water District 0 26,223,200
Total Water Production 2,422,017,020 100.00% 2,572,568,800 100.00%
58
2006-2007 2005-2006 2004-2005
Production Percent Production Percent Production Percent
in Cubic Feet Production in Cubic Feet Production in Cubic Feet Production
3,228,400 0.12% 94,600 0.00% 33,443,800 1.63%
13,730,300 0.52% 4,058,500 0.18% 12,249,100 0.60%
183,006,100 6.90% 156,173,000 7.00% 114,021,100 5.54%
10,725,600 0.41% 1,568,900 0.07% 26,840,000 1.30%
148,230,130 5.60% 87,633,950 3.93% 94,388,390 4.59%
656,297,800 24.78% 670,111,400 30.06% 576,392,400 28.02%
533,951,600 20.17% 577,040,000 25.89% 133,156,900 6.47%
1,757,700 0.07% 1,311,500 0.06% 1,505,100 0.07%
62,571,700 2.36% 12,634,000 0.57% 43,913,100 2.14%
1,985,500 0.07% 0 0.00% 0 0.00%
144,349,100 5.45% 159,946,600 7.18% 153,162,100 7.45%
45,795,300 1.73% 23,716,800 1.06% 59,151,700 2.88%
61,583,900 2.33% 34,866,600 1.56% 38,705,300 1.88%
17,428,200 0.66% 0 0.00% 5,509,700 0.27%
35,684,900 1.35% 35,182,700 1.58% 35,523,100 1.73%
19,501,400 0.74% 18,456,300 0.83% 20,305,400 0.99%
168,064,900 6.35% 122,521,500 5.50% 148,870,200 7.24%
71,438,800 2.70% 69,559,800 3.12% 129,585,600 6.30%
63,649,600 2.40°% 41,192,200 1.85% 96,972,900 4.71%
5,858,600 0.22% 6,814,300 0.31°% 17,526,200 0.85°%
7,003,400 0.26% 3,916,700 0.18% 5,186,600. 0.25%
44,616,500 1.69°% 210,000 0.01% 166,100 0.01%
91,265,200 3.45°% 67,220,600 3.02% 98,420,900 4.79%
130,756,000 4.94°% 66,308,800 2.97°% 116,906,300 5.68°%
26,624,700 1.01°% 14,396,300 0.65°% 27,794,700 1.35°%
98,441,900 3.72°% 54,028,000 2.42°% 67,056,200 3.26°%
2,647,547,230 100.00°% 2,228,963,050 100.00% 2,056,752,890 100.00°%
86,734,100 100,444,900 73,492,900
2,734,281,330 100.00% 2,329,407,950 100.00% 2,130,245,790 100.00°%
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, 2005 through June 30, 2009
User Type 2009 2008 2007 2006 2005
Single family residential 34,450 34,316 34,842 34,900 34,360
Multiple family residential 2,810 2,834 2,913 2,922 2,930
Commercial/institutional 3,985 4,003 3,954 3,847 3,812
Other 1,818 1,820 1,755 1,572 1,299
Total all users, active 43,063 42,973 43,464 43,241 42,401
Revenue by Class of User
Fiscal Year 2008-2009
Fiscal Year Percentage of
User Class Revenue Annual Revenue
Single family residential $ 13,943,439 55.98%
Multiple family residential 3,547,811 14.24%
Commercial/industrial 5,990,149 24.05%
Other and unmetered 1,426,183 5.73%
Total all users $ 24,907,582 100%
Largest users: The System had no customer accounting for more than three percent of the
revenues for the fiscal year 2008-2009.
60
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO, CALIFORNIA
Schedule of Sewer Rates and Statistics
Regional Facilities Collection
and Treatment System Total monthly
Classification Charge Charge City Charge
Rates effective as of January 1, 2009
Residential $15.25 per month $3.75 per month $19.00/
month/unit
Commercial:
Multi-family, mobil home parks $0.90 1HCF $0.34/HCF $1.24/HCF
(4 or more units) + $2.00/month +$1.25/month + $3.25/mo
Retail, commercial, light industrial $1.80/HCF $0.34/HCF $2.14/HCF
(non-office,bakeries,markets,theaters,dry cleaners) + $2.00/month + $1.25/month + $3.25/mo
Auto repair, car wash $1.25/HCF $0.34/HCF $1.59/HCF
+$2.00/month +$125/month + $3.25/mo
Offices, motels(without restaurants) $1.40/HCF $0.34 1HCF $1.74/HCF
+$2.00 1month +$125/month + $3.25/mo
Restaurants, hotels $1.90/HCF $0.34/HCF $2.24/HCF
(hotel/motels with restaurants) + $2.00/month + $1.25/month + $3.25/mo
Laundromats $1.25/HCF $0.34/HCF $1.59/HCF
+ $2.00/month + $1.25/month + $3.25/mo
Hospitals, convalescent homes $0.90 1HCF $0.34/HCF $1.24/HCF
+$2.00/month + $125/month + $3.25/mo
Schools, churches, nursey schools, $0.65 1HCF $0.34/HCF $0.99/HCF
daycares +$2.00/month + $1.25/month +$3.25/mo
Industry $860.00/MG DF $0.34/HCF
$280.00/1,000 LBS BOD + $125/month
$610.00/1,000 CBS SS
The last rate change prior to January 2009 occurred in July 2004.
61
MUNICIPAL WATER DEPARTMENT OF THE CITY OF
SAN BERNARDINO, CALIFORNIA
Schedule of Sewer Rates and Statistics, (Continued)
June 30, 2009
Residential Nonresidential Total
Number of connections
City of San Bernardino 32,050 5,434 37,484
East Valley Water District 17,986 1,146 19,132
City of Loma Linda 4,692 559 5,251
54,728 7,139 61,867
Annual billings
City of San Bernardino $6,288,804 $6,625,012 $12,913,816
East Valley Water District 3,285,452 2,139,543 5,424,995
City of Loma Linda 781,159 984,117 1,765,276
$10,355,415 $9,748,672 $20,104,087
62
June 30,2008 June 30,2007
Residential Nonresidential Total Residential Nonresidential Total
32,058 5,491 37,549 32,367 5,528 37,895
17,956 1,159 19,115 18,085 1,160 19,245
4,407 576 4,983 4,567 584 5,151
54,421 7,226 61,647 55,019 7,272 62,291
$6,197,816 $6,570,125 $12,767,941 $6,238,570 $6,654,231 $12,892,801
3,221,455 2,213,946 5,435,401 3,231,282 2,252,260 5,483,542
767,075 1,011,795 1,778,870 728,111 950,227 1,678,338
$10,186,346 $9,795,866 $19,982,212 $10,197,963 $9,856,718 $20,054,681
63
,
i
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Schedule -1992 Certificates of Participation
San Bernardino Public Safety Authority
June 30, 2009
EARLY PAY OFF
During Fiscal Year 2001, the 1992 Certificates of Participation were retired by an early call and payoff.
The total principal amount of$34,805,000 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$25,321 will continue to be amortized annually in the amount of
$16,520 with the final payment of$9,681 due February 1, 2017.
Funds used for the Primary Hydraulic Reliability Project, remodel of the administration laboratory building
and design of 3A secondary treatment.
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, 2009
Principal
Principal Unamortized Payments Interest
Date Due Payments Discounts (Net) Interest Total Rate
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%
211/2013 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 3,155,000 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%
$ 21,910,000 $ 27,191 $ 21,882,809 $ 5,205,968 $ 27,088,777
65
MUNICIPAL WATER DEPARTMENT
OF THE CITY OF SAN BERNARDINO, CALIFORNIA
Bond Schedule - General Obligation Waterworks Bonds, Series C
June 30, 2009
Principal Interest
Date Due Payments Interest Total Rate
9/1/2009 1,744 1,744 7.75%
3/1/2010 10,000 1,744 11,744 7.75%
9/112010 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%
$ 45,000 $ 9,298 $ 54,298
Bonds related to water system improvements for South San Bernardino Water District,
which was acquired by the Department in 1991.
66
Mayer Hoffman McCann P.C.
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2301 Dupont Drive, Suite 200
Irvine,California 92612
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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, 2009, which
collectively comprise the Department's basic financial statements and have issued our
report thereon, dated January 13, 2010. 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 Reporting
In planning and performing our audit, we considered the Department's internal control
over financial reporting as a basis for designing 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 design 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
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.
67
Board of Water Commissioners
Municipal Water Department of the City of San Bernardino, California
Page Two
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.
Irvine, California
January 13, 2010
68