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HomeMy WebLinkAbout06.B- Water t Staff Report 0 0 ` City of San Bernardino . Request for Council Action c Date: January 9, 2016 _ To: Honorable Mayor and City Council Members a 00 From: Stacey Aldstadt, General Manager CO By: Terri Willoughby, Finance Director �— Subject: Annual Financial Report of the Water Department's Water and o Sewer Utilities for Fiscal Year Ended June 30, 2016 Recommendation Receive and file the audited Annual Financial Report of the Water Department's water and sewer utilities for fiscal year ended June 30, 2016. D L QD 3 Background Cn Similar action taken each year following completion of the annual audit report. L Fiscal Impact None. Ul c Conclusion E Receive and File. 0. a� Attachments ° Attachment 1 — Comprehensive Annual Financial Report of the City of San Bernardino Municipal Water Department, A Department of the City of San Bernardino, California d 4- 0 r- 0 a a� Ward: Synopsis of Previous Council Actions: c LL Similar action taken each year following completion of the annual audit report. i6 c c a r E Y Q Packet Pg.440 6.B.b a� COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF SAN 3 U) BERNARDINO MUNICIPAL WATER L DEPARTMENT, A DEPARTMENT OF THE CITY OF SAN BERNARDINO, CALIFORNIA 0 L 2 m h, �a C LL s, IC R Co 00 d' 0 Q. Q) U f0 C LL R 7 C FOR THE FISCAL YEAR ENDED JUNE 301 • Q r C E .0 U Ri r Q C N E z U a� Q Packet Pg. 441 6.B.b City of San Bernardino Municipal Water Department Comprehensive Annual Financial Report Fiscal Year Ending June 30, 2016 as 3 Table of Contents in c Page No. �+ L Introductory Section: Letter of Transmittal i Organizational Chart vii Financial Section: E Independent Auditor's Report 1 Q Management's Discussion and Analysis 5-10 0 Basic Financial Statements: ? Statement of Net Position 12-13 Statement of Revenues, Expenses and Changes in Net Position 14 Statement of Cash Flows 15-16 »� Notes to the Basic Financial Statements 17-46 ° Statistical Section: ° a Changes in Net Position — Combined Funds 49 Changes in Net Position —Water Fund 50 Changes in Net Position—Sewer Fund 51 Net Position by Component—Combined 52 Net Position by Component—Water Fund 53 U- Net Position by Component— Sewer Fund 54 Water Fund Revenue by Type 55 Sewer Fund Revenue by Type 56 Q Water Fund Expenses by Type 57 co Sewer Fund Expenses by Type 58 v Water Fund Debt Service Coverage 60 Sewer Fund Debt Service Coverage 61 0 Demographic Statistics 63 Major Employers 64 Authorized Positions History 65 Water Rates: Minimum Monthly Charge 67 Water Connections and Revenues by User Types 68 Water Rates— Elevation Charges per HCF 69 Top Ten Water Consumers 70 = Sewage Treatment Rate History 71 Q Sewage Treatment Connections and Revenue by User Type 72 Top Ten Sewage Treatment Customers 73 a E Y F Q E U Q Packet Pg.442 i CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT N L BOARD OF WATER COMMISSIONERS B STACEY R.ALDSTADT 3 General Manager f4) TONI CALLICOTT Q �{a ROBIN L.OHAMA � President a, t'1 Deputy General Manager = E+ MIGUEL,GUERRERO.P.E. R Commissioners j O Director of Water Utility y JUDITH VALUES JOHN A.CLAUS R LOUIS A.FERNANDEZ Director of Water Reclamation �y WAYNE HENDRIX !f� �i JENNIFER SHEPARDSON rn Director of Environmental& DAVID E.MLYNARSKI �'j{ Q = Regulatory Compliance d TERRI WILLOUGHBY E Director of Finance M CL "Trusted, Quality Service since 1905" aa) 0 L December 1, 2016 m Members of the Board of Water Commissioners o San Bernardino Municipal Water Department a a� Introduction: c State law requires that every general purpose government publish within six months of the close of each fiscal i; year a complete set of audited financial statements. This report is published to fulfill that requirement for the Fa San Bernardino Municipal Water Department ("Department")for the fiscal year ended June 30, 2016. c a Management assumes full responsibility for the completeness and reliability of the information contained in this co report, based upon a comprehensive framework of internal control that it has established for this purpose. - Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material o misstatements. a� Davis Farr LLP has issued an unqualified ("clean") opinion on the Department's financial statements for the v year ended June 30, 2016. The independent auditor's report is located at the front of the financial section of g this report. S Management's discussion and analysis ("MD&A") immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complements a this letter of transmittal and should be read in conjunction with it. Z c Profile of the Department: E t The San Bernardino Municipal Water Department and the Board of Water Commissioners ("Board") were a established on May 8th, 1905 by the Mayor and Common Council of San Bernardino in accordance with the Q provisions specified in the City charter. The Board assembled for the first time on May 16th, 1905 to meet the c water supply needs of the community by providing trusted, quality service to our customers. This service has E grown through the years to include: water supply, water reclamation, geothermal heating supply, and administrative support for our growing community. r Q 300 North "D" Street, San Bernardino, California 92418 P.O. Box 710, 92402 Phone: (909) 384-5141 FACSIMILE NUMBERS: Administration:(909)384-5215 Engineering:(909)384-5532 Customer Service:(909)384-7211 Corporate Yards:(909)384-5260 Water Reclamation Plant:(909)384-5258 i Packet Pg.443 Board of Water Commissioners December 1, 2016 Page ii d w The first water distribution system of San Bernardino included water supply for approximately six thousand citizens within a one square mile service area. In contrast, the water supply distribution network now encompasses over 40,000 service connections including 550 miles of water mains. Although the number of 3: connections has increased during the past one hundred years, our commitment to providing trusted, quality cn service remains the same. c L The Department has operated the Water Reclamation Plant (WRP) since 1973. The WRP is a33 million gallons per day (MGD) Regional Secondary Treatment facility that provides trusted, quality wastewater treatment services for the City of San Bernardino, City of Loma Linda, East Valley Water District, San Bernardino International Airport, Patton State Hospital, and unincorporated areas of San Bernardino County. The WRP serves about 89,000 customers, of which 57,000 are located within the City's boundaries. R e. The San Bernardino service area receives the majority of its water supply from an underground aquifer called o Bunker Hill Basin which is concentrated at the Northwestern end of the city. The water contained in the Bunker Hill Basin is replenished with rain and snowmelt that filters through our local San Bernardino Mountains. This local water supply ensures that the customers of the San Bernardino Municipal Water Department receive high quality, inexpensive water as compared to other communities. Many other communities in Southern California must import their water supplies from remote locations via the Colorado River and Northern California o pipelines. Many water supplies imported from distant locations can be impacted by certain man-made and o natural contaminants as the water is transported to the customer. °- d The Department is committed to providing trusted, quality service to our customers as we provide water supply, water reclamation, geothermal heating, and administrative services to our community. c U_ Fiscal Management: The Board annually adopts an operating and capital budget prior to the new fiscal year. The budget authorizes a and provides the basis for reporting and control of financial operations and accountability for the Department's functions, including the Water and Sewer Funds. The budget and reporting treatment applied to a fund is co consistent with the accrual basis of accounting and the financial statement basis. Each year the Department : adopts a balanced budget. o as Local Economy: The Department's offices are located in the City of San Bernardino in San Bernardino County. According to q the California Department of Finance, San Bernardino's population as of January 1, 2016 was 215,491. San = Bernardino's local economy has been affected by the recent recession, both to a greater extent and for a "- longer period than surrounding cities. This has affected the Department as increased residential and commercial vacancies have led to a declining customer base. However, as the local real estate and a employment markets improve, this customer base should begin to recover. The City's unemployment rate is currently 7.5%, down from 7.6% in the prior year and 9.4% two years prior. The unemployment rate for San Bernardino County reflects a similar improvement, with a rate of 6.4%. Local Economists also project E continued improvement in the labor market and are forecasting that the region's unemployment rate will drop to 6.1% by the end of 2020. Q California's water supply continues to be a concern due to projected population increases and dwindling supplies from traditional sources. The Department has expanded and will continue to expand its conservation E efforts in order to respond to the state-wide drought emergency. Department staff members continue to seek various methods to decrease its dependence on imported water and to increase water source reliability, a including increasing production of recycled water. On January 17, 2014, Governor Edmund G. Brown Jr. proclaimed a State of Emergency related to the drought conditions in California and formed the Drought Task ii Packet Pg.444 p Board of Water Commissioners December 1, 2016 Page iii Force. On April 1, 2015, Governor Brown issued an executive order mandating a statewide 25% reduction for r urban water suppliers. On May 5, 2015, the State Water Resources Control Board adopted an emergency regulation which assigned a conservation standard to each urban water supplier. The conservation standard assigned to the Department was 28%. In turn, the Department's Board of Water Commissioners declared that 3: Stage IIA, Extreme Mandatory Restrictions were in effect. These restrictions imposed a 28% reduction in cn water usage and assess financial penalties on usage in excess of these amounts. Through May of 2016, the Department achieved a 25% reduction. 3 In May 2016, the State Water Resources Control Board adopted a revised emergency water conservation regulation which required local agencies to develop conservation standards based on the agencies' particular circumstances rather than a mandatory state conservation percentage. It allowed water suppliers to self-certify a� their own conservation standard based on supply and demand from previous years, and extended the E emergency regulation through February 2017. In accordance with this latest emergency regulation, the Q Department's conservation requirement is now set at 15%. o L r Water Production In Cubic Feet o 2,500,000,000 M 153,290 2,036,611,730 2,000,000,000 -017y82b 02 C 1,500,000,000 9854500 6,132 LL 1,000,000,000 7 C C 500,000,000 Q 00 00 ,ti0 ,ti0 ,LO ,LO •\tea o —4—Water Production CL ti R C R Long Term Financial Planning: U_ The Department's financial plan includes the establishment of reserve funds in accordance with the M Department's adopted Reserve Policy. Reserve funds are established to ensure the Department's financial a stability and to have sufficient funding available to meet its operating, capital and debt service cost obligations. The Department has committed to the following funds in its Reserve Policy, adopted by the Board in February 2013. E U ➢ Operating Reserve: This reserve is established to ensure adequate cash flow is available to meet day- y to-day expenses. The target balance is 45 days of the operating expenses budgeted for each Q r respective fund. E ➢ Rate Stabilization Reserve: This reserve is established to offset revenue risk associated with low u service demands years. The minimum target balance for the Water Fund is 20% of budgeted water a sales. The minimum target balance for the Sewer Fund is 10% of budgeted sewer sales. Packet Pg.445 6.B.b Board of Water Commissioners December 1, 2016 Page iv _ ➢ Emergency Replacement Reserve: The purpose of this reserve was to minimize the impact of w unforeseen capital asset and operating expenses. The target balance for the Water Fund is 2% of the total recorded value of capital assets as of the previous fiscal year. The target balance for the Sewer - Fund is 3% of the total recorded value of capital assets as of the previous fiscal year. U) ➢ Capital Replacement Reserve: The Capital Replacement Reserve was set up in order to provide 0 funding in support of the Department's capital program. The basis for calculating the target balance for this reserve is a rolling five-year average of the Department's Capital Improvement Program projects, excluding those with external funding. The target balance will be assessed on an annual basis as part of the budgeting process. aD Debt Administration: a. The Department's outstanding debt as of June 30, 2016 consists of four Notes Payable in the Water Fund, and o one Note Payable in the Sewer Fund, as shown in the table below: , �a Water Fund Long-Term Debt Activity Year of Issuance/Description Use of Proceeds Y w 2002 California Infrastructure & Economic Funding for transmission mains, booster o Development Bank CIEDB Note Stations and a reservoir. o 2007 California Infrastructure & Economic Funding for booster stations and transmission Development Bank CIEDB Note mains in the Verdemont area. Funding for the construction of the 12 million 2012 California Infrastructure & Economic gallon Development Bank CIEDB Note Ogden Reservoir and pipeline improvements U_ 2012 San Bernardino Valley Funding for the purchase of real property. Municipal Water District Note C a 00 Sewer Fund Long-Term Debt Activity CO Year of Issuance/Description Use of Proceeds Funding for UV System Rehabilitation for the o CL 2015 San Bernardino Valley Municipal Water San Bernardino/Colton District Note Ra id Infiltration Extraction (RIX) project c CU c Relevant Financial Policies: LL Internal Control Structure a Department management is responsible for the establishment and maintenance of the internal control structure that ensures that the assets of the Department are protected from loss, theft or misuse. The internal control structure also ensures that adequate accounting data are compiled to allow for the preparation of financial s statements in conformity with generally accepted accounting principles. The Department's internal control a structure is designed to provide reasonable assurance that these objectives are met. The concept of Q reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived and (2)the valuation of costs and benefits requires estimates and judgments by management. CU �I Q f iv Packet'Pg.446 Board of Water Commissioners December 1, 2016 Page 5 Major Initiatives and Key Values: y w The activities of the Board and staff at the Department are driven by our key value statements as outlined s.. below: 3 a� U) 1. Provide the highest level of customer service to our community. 2. Establish fair and equitable rates. 3. Provide the highest quality of water and wastewater services. 4. Provide responsible stewardship of our resources and our environment. 5. Require ethical business practices. N 6. Promote staff development. E Acknowledgements: a aD Preparation of this report was accomplished by the combined efforts of Department staff. We appreciate the ° dedicated efforts and professionalism that these staff members contribute to the service of the Department's customers. The contributions made by Susan Justice, Principal Accountant, and Michelle Honis and Jennifer 3: Francis, Senior Accountants, deserve special recognition. We would also like to thank and recognize the 0 members of the Board for their continued support in planning and implementation of the Department's fiscal 4Z 0 policies. t 0 Q. d W Respectfully submitted, C C i% Robin L. Ohama, Deputy General Manager Terri A. Willoughby, Director bT Finance C 00 T CO L O Q. NQ� LL .0 C R C LL a N 7 C C Q r r C E t V r Q C W E t V w Q V Packet Pg.447 E F 6.B.b Y City of San Bernardino Municipal Water Department Mayor of the City of San Bernardino R. Carey Davis Board of Water Commissioners Toni Callicott, President w David E. Mlynarski, Commissioner Dr. Louis A. Fernandez, Commissioner R Wayne Hendrix, Commissioner o Dr. Judith Valles, Commissioner Administration Stacey R. Aldstadt, General Manager Robin L. Ohama, Deputy General Manager o Miguel Guerrero, Director of Water Utilities f John A. Claus, Director of Water Reclamation Terri Willoughby, Director of Finance U C M C LL Mission Statement To meet our customer's needs by providing high-quality service in water supply, water reclamation and geothermal heating in the most professional a and cost-effective manner possible. co Organization 0 0 The City of San Bernardino Municipal Water Department was formed in 1905 under the Charter of the City of San Bernardino. The Department is U 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 LL Commissioners semi-autonomous authority to govern the Department independent of the City Council. The Department operates two enterprise a funds: the Water Utility Enterprise Fund and the Sewer Utility Enterprise Fund. Water service encompasses the City, with the exception of the east a) end, which is served by the East Valley Water District. Sewer service U encompasses all of the City of San Bernardino, the City of Loma Linda, the a former Norton Air Force Base, Patton State Hospital and portions of the areas serviced by East Valley Water District. E U w -1 ,I Vi Packet Pg.448 6# 'Bd9MWd C ( \ U- k ( ° k / 5 q } ] / 3 0 ® \ 2 I u c Cl- CL cu 0 _ < 2 — 06 M co D 7 E O /u f / ° ° E u \ § { u 7 C CL M m /> 3 / 3 k § LU — E m � m Ica &. > t \ o m { S f § w a m" m / E 2 D § � $ i § \ / § x q 2 $ f o o > a § / E m ƒ ; / 3 E % Ln ) f \ � k X / % $ \ } k > . 2 2 ) © 2 # o ® E / — = 3 c h \ / c ] / / S Q / . CD ; o CD _ LU \ $ �. biO e ° o R » ) \ � ) � M \ ƒ 0) ( ' » c a R = k \ ° k L E ) @ $ . m � c . . . . ' . o . E \ / : m79 w 6.B.b �p o q 4" U)W GPJ cn 0 Q a o I �o �Q'iZIJ LU D X00 v m Z U) uj Ww `dWVBVIF/ Z J ~ N QH W to Q wQ w aQ Z J < ~ J LL Z J 4 ��7 0 � i Qa ca N Z� Oo o — a� O Co V a)u(�'l� m w 30003dd11 MIT j o NVMb 11W O O _ _ 0 E'�1 - ----+-- L z U- NON'H3n'1W O a C 2 00 / ��'ir.l \ e Z r U � 0 O ( O CL LU _,,' H LL o @ %�� �1 !3atSZ13nIN is w r I z i a- w z .. 1 0 0 2 Q w F- z � Q aa - Ow r LL. as l � - w z � 1 Z ' Nt/a30 i wit i Qa t mW 0 Z tC - as � � w � w Ek: <, ly w� i Q mw LU a� o w �. 3:,5 A i t I wz I W v I, O z��u .� L) viii Packet Pg.450 i i Da j s Fa r Davis Farr LLP y 2301 Dupont Drive Suite 200( Irvine,CA 92612 2612 CERTIFIED PUBLIC ACCOUNTANTS Main;949.474.2020) Fox;949.263.5520 y Board of Water Commissioners L Municipal Water Department of the City of San Bernardino 3 San Bernardino, California Cn c Independent Auditor's Report d Report on the Financial Statements w We have audited the accompanying financial statements of each major fund of the Municipal Water Department of the City of San Bernardino, California ("Department"), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the a Department's basic financial statements as listed in the table of contents. o L Management's Responsibility for the Financial Statements (D Management is responsible for the preparation and fair presentation of these financial statements in w accordance with accounting principles generally accepted in the United States of America; this includes o the design, implementation, and maintenance of internal control relevant to the preparation and fair o presentation of financial statements that are free from material misstatement, whether due to fraud or 0 error. Auditor's Responsibility c Our responsibility is to express an opinion on these financial statements based on our audit. We U- 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 Q perform the audit to obtain reasonable assurance about whether the financial statements are free from co material misstatement. co !T- An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in o the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are C appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness c of the entity's internal control. Accordingly, we express no such opinion. An audit also includes iz evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the C financial statements. d We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for E our audit opinion. r d c m E U f0 r Q 1 Packet Pg.451 Board of Water Commissioners F Municipal Water Department of the City of °' San Bernardino, California Page 2 of 3 a� 3 Opinion in In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each major fund of the Municipal Water Department of the City of San , Bernardino, California, as of June 30, 2016, and the changes in its financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United y States of America. a� E Emphasis of Matters a As discussed in Note 1, the financial statements of the Municipal Water Department of the City of San o Bernardino ("Department") are intended to present the financial position, the changes in financial position and cash flows of only that portion of each major fund of the City of San Bernardino, California that are attributable to the transactions of the Department. They do not purport to, and do not, present fairly the financial position of the City of San Bernardino as of June 30, 2016, the changes in its financial position, or its cash flows for the year then ended in conformity with accounting principles o generally accepted in the United States of America. Our opinion is not modified with respect to this o matter. �- a� On August 1, 2012, the City of San Bernardino filed a petition under Chapter 9 of the United States R Bankruptcy Code seeking to adjust the timing and amount of the payments associated with the City's obligations. As discussed in note two to the financial statements, there is considerable uncertainty associated with this process and the effects of this process upon the Department are not known at this LL time. c c As described further in note 3 to the financial statements, during the year ended June 30, 2016, the a Department implemented Governmental Accounting Standards Board (GASB) Statement No. 72. Our co opinion is not modified with respect to this matter. v Other Matters 0 0 Q. a� Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis be presented to supplement the basic financial statements. c Such information, although not a part of the basic financial statements, is required by the Governmental LL Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with a auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other s knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us a with sufficient evidence to express an opinion or provide any assurance. a� E Q 2 Packet Pg.452 Board of Water Commissioners y Municipal Water Department of the City of San Bernardino, California Page 3of3 3 Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Department's basic financial statements. The introductory section and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The introductory and the statistical sections have not been subjected to the JA auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. E Other Reporting Required by Government Auditing Standards a 0 In accordance with Government Auditing Standards, we have also issued our report dated December 1, 2016 on our consideration of the Department's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on o internal control over financial reporting or on compliance. That report is an integral part of an audit V performed in accordance with Government Auditing Standards in considering the Department's internal a control over financial reporting and compliance. C R _ Irvine, California �- December 1, 2016 _ a 00 00 0 m m c c �a _ a _ E w a w _ ;_ w a 3 Packet Pg.453 i Y Y L d 3 m L Y c� N r C N E R CL 0 L Y m PAGE INTENTIONALLY LEFT BLANK d Y 0 0 a m w M c ca c U- c c Q w T Co 0 a N� LL 'w c c LL R c c Q Y c d E r U fQ Y Y Q c d E t U Q 4 Packet Pg. 454 MANAGEMENT'S DISCUSSION AND ANALYSIS The City of San Bernardino's Municipal Water Department (Department) is a water and sewer 6 treatment utility responsible for delivering high quality, economically priced water and sewer treatment °' service to a quarter of a million customers in and around the City of San Bernardino, California. This t section of the Department's annual financial report presents management's analysis of the Department's financial performance during the fiscal year that ended on June 30, 2016. Please read it 3 in conjunction with the basic financial statements, which follow this section. All amounts in the in Management's Discussion and Analysis within text areas are in thousands unless otherwise noted. m a� Financial Highlights s New significant Accounting Standards implemented. In fiscal year 2015-16, the Department N adopted one new statement of financial accounting standards issued by the Government Accounting Standards Board (GASB). Statement No. 72, "Fair Value Measurement and Application," (Statement) E defines fair value and describes how fair value should be measured, what assets and liabilities should Q. be measured at fair value, and what information about fair value should be disclosed in the notes to the o financial statements. The Department implemented this Statement in the fiscal year ended June 30, 2016. a Other highlights: • The Department's overall net position increased by $8.4 million. o • Operating revenues decreased by slightly more than 9.42% from the prior year, primarily due to Q reduced consumption in response to mandated drought-related conservation measures. � • Operating expenses decreased $1.8 million, or 3% from the prior fiscal year. • Net income/loss before capital contributions decreased by $2.4 million, primarily due to decreased water revenues, as noted above. U_ • The Department's current ratio (the ability to pay short-term obligations)was 3.66. c • Cash available (the ability to cover current expenses with cash)was 329 days. Q co Overview of the Financial Statements co The discussion and analysis are intended to serve as an introduction to the Department's basic financial statements. The Department's basic financial statements are comprised of two components: o the Financial Statements and the Notes to the Basic Financial Statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Information providing citywide financial results is available in the City's Comprehensive Annual Financial Report. c Required Financial Statements c LL The financial statements of the Department report information about the Department using accounting methods similar to those used by private sector companies. These statements offer short-term and = long-term financial information about its activities. The Statement of Net Position (pages 12-13) a includes all of the Department's investments in resources (assets) and the obligations to creditors (liabilities). It also provides the basis for evaluating the capital structure of the Department and assessing the liquidity and financial flexibility of the Department. All of the current year's revenues and = expenses are accounted for in the Statement of Revenues, Expenses and Changes in Net Position. (page 14) This statement measures the success of the Department's operations over the past year and a can be used to determine whether the Department has successfully recovered all its costs through its user fees and other charges, profitability, and credit worthiness. The final required financial statement is the Statement of Cash Flows (pages 15-16). The primary purpose of this statement is to provide s information about the Department's cash receipts and cash payments during the reporting period. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations, a Packet Pg.455 6.B.b investing, and financing activities and provides answers to such questions as where did cash come from, what was cash used for, and what was the change in cash balance during the reporting period. w Financial Analysis of the Department L Our analysis of the Department begins on page 12 of the financial statements. One of the most 3 important questions to ask about the Department's finances is "Whether the Department, as a whole, is Un better off or worse off as a result of the year's activities?" The Statement of Net Position, and the = Statement of Revenues, Expenses and Changes in Net Position report information about the L Department's activities in a way that will help answer this question. These two statements report the net position of the Department and changes in them. Measuring the change in the Department's net '3: position - the difference between assets and liabilities - is one way to measure financial health or N financial position. Over time, increases or decreases in the Department's net assets are indications of whether its financial health is improving or deteriorating. However, one will need to consider other non- E financial factors such as changes in economic conditions, population growth, zoning and new or Q changed government legislation. 0 L Water Utility Fund 2 To begin our analysis, a summary of the Water Utility Fund's Statement of Net Position is presented in a� Table A-1. TABLE A-1 t Condensed Statement of Net Position -Water Utility 0 0 (amounts expressed in thousands of dollars) 2016 2015 $ Change % Change Current and noncurrent assets $ 69,427 $ 78,876 $ (9,449) -11.98% c Capital assets 189,100 188,080 1,020 0.54% "- Total assets 258,527 266,956 (8,429) -3.16% Deferred outflows of resources 2,057 1,698 358 a co T co Current liabilities 8,345 12,730 (4,385) -34.45% Noncurrent liabilities 97,828 98,612 (784) -0.80% o Total liabilities 106,173 111,342 (5,169) -4.64% Deferred inflows of resources 2,337 5,501 (3,164) c ca Net investment in capital assets 169,731 166,963 2,768 1.66% Restricted - - - 0.00% i6 Unrestricted (17,658) (15,153) (2,505) 16.53% Total net position $ 152,073 $ 151,810 $ 263 0.17% Q _ As can be seen from the table above, the Water Utility net position increased .17%, or $263 to $152,073 in fiscal year 2016. The net investment in capital assets increased $2.8 million in fiscal year 2016 due to the completion of capital projects within the period. y Q r E (otoo, s U Q 6 Packet Pg.456 6.B.b TABLE A-2 u, Condensed Statement of Revenues, Expenses and Changes in Net Position -Water Utility L (amounts expressed in thousands of dollars) L 2016 2015 $ Change % Change 3 m Operating revenue $ 30,002 $ 33,121 $ (3,119) -9.42% Capital contributions 2,812 3,905 (1,093) -27.99% Other nonoperating revenue 2,390 2,872 (482) -16.79% , m Total revenues 35,204 39,898 (4,694) -11.77% Y) Operating expenses $ 34,834 $ 35,505 (670) -1.89% CD Nonoperating expenses 107 169 (62) -36.91% E Total expenses 34,941 35,674 (733) -2.05% d 0 Change in net position 263 4,225 (3,962) -93.78% L a� Net position, beginning balance 151,810 175,525 (23,715) -13.51% Prior period adjustment - (27,940) 27,940 N/A Total net position $ 152,073 $ 151,810 $ 263 0.17% o Total revenues decreased by 12%, or $4.7 million, primarily due to decreased water revenues from the a continuation of conservation efforts. Total expenses decreased 2% due to prudent cost control W measures adopted in response to the expected decline in revenues. i c TABLE A-3 U. Capital Assets -Water Utility c (amounts expressed in thousands of dollars) Q 2016 2015 $ Change % Change 00 00 Land and easements $ 5,654 $ 5,654 $ - 0.00% Construction in progress 3,932 3,523 409 11.61% o CL Wells and pumping 99,444 98,173 1,271 1.29% Distribution 151,104 146,681 4,423 3.02% Plant and facilities 3,648 3,222 426 13.23% Other capital assets 15,636 15,827 (190) -1.20% LL Total capital assets 279,419 273,079 6,340 2.32% 70 Less: accumulated depreciation (90,319) (84,999) (5,320) 6.26% a Total capital assets, net $ 189,100 $ 188,080 $ 1,020 0.54% c m Total capital assets increased $1.0 million in fiscal year 2016. Approximately $4.2 million in E construction in progress was completed and placed in service during the fiscal year. Major project completions include the Sheridan Road Main Replacement Project and the North Park Boulevard & Q University Tract 10773 Project. Additional information on capital assets is presented in Note 4 of the Notes to the Basic Financial Statements. r Q 7 Packet Pg.457 TABLE A-4 d Long-term Debt-Water Utility (amounts expressed in thousands of dollars) L 2016 2015 $ Change % Change 3 a� Notes payable $ 19,369 $ 21,117 $ (1,748) -8.28% U) Compensated absences 904 942 (37) -3.97% L Total long-term debt $ 20,273 $ 22,058 $ (1,785) -8.09% During the year, the Water Utility's long-term debt decreased by $1.8 million which can be attributed to c normal debt payments. Additional information on long-term debt is presented in Note 6 of the Notes to E Basic Financial Statements. �a Sewer Utility Fund o TABLE B-1 .r Condensed Statement of Net Position -Sewer Utility `0 (amounts expressed in thousands of dollars) _ 2016 2015 $ Change % Change o Current and noncurrent assets $ 57,331 $ 59,627 $ (2,296) -3.85% a Capital assets 67,139 64,146 2,993 4.67% 0 Total assets 124,470 123,773 697 0.56% •70 Deferred outflow of resources 1,551 1,348 2,899 215% Current liabilities 4,430 8,568 (4,138) -48.30% R Noncurrent liabilities 20,527 21,015 (489) -2.32% Total liabilities 24,957 29,583 (4,627) -15.64% Q CO Deferred inflow of resources 1,763 4,150 5,913 142% v Net investment in capital assets 65,939 56,090 9,849 17.56% a Restricted 7,814 7,516 298 3.97% Unrestricted 25,548 27,781 (2,233) -8.04% Total net position $ 99,301 $ 91,387 $ 7,914 8.66% c U. �o As can be seen from the table above, the Sewer Utility net position increased $8 million to $99,301 in fiscal year 2016. The primary result of this increase was a decrease in liabilities due to the elimination Q of debt associated with the Sewer Fund. The net investment in capital assets increased $9.8 million, .r due to the completion of several long-term capital projects within the period combined with the CD elimination of debt associated with these projects. E v r w Q .i+ C d E L V Q 8 Packet Pg.458 TABLE B-2 Condensed Statement of Revenues, Expenses and Changes in Net Position -Sewer Utility :r (amounts expressed in thousands of dollars) L 2016 2015 $ Change % Change 3 a� Operating revenue $ 25,411 $ 24,734 $ 676 2.73% co •a Capital contributions 1,459 1,073 386 36.01% Other nonoperating revenue 1,060 1,326 (266) -20.08% CU Total revenues 27,930 27,133 796 2.93% 3: N Operating expenses 18,731 19,620 (889) -4.53% Nonoperating expenses 1,284 227 1,057 465.17% E Total expenses 20,015 19,847 168 0.85% C Change in net position 7,914 7,286 629 8.63% Net position, beginning balance 91,387 105,178 (13,791) -13.11% Prior period adjustment - (21,077) 21,077 100.00% Total net position $ 99,301 $ 91,387 $ 7,914 8.66% c During Fiscal Year 2016, total revenues for the Sewer Utility increased 3% from the prior year, while 0 0. total expenses decreased almost 1% during the same time period. W TABLE B-3 Capital Assets -Sewer Utility (amounts expressed in thousands of dollars) U- 2016 2015 $ Change % Change c Land and easements $ 11,755 $ 12,168 $ (413) -3.39% Q Construction in progress 16,808 13,934 2,874 20.62% co Pumping 3,622 3,192 430 13.46% co Buildings, plants and stores 131,033 129,866 1,167 0.90% t Field and office equipment 5,921 5,866 54 0.93% Total capital assets 169,138 165,026 4,112 2.49% �a Less: accumulated depreciation (101,999) (100,880) (1,119) 1.11% c Total net assets $ 67,139 $ 64,146 $ 2,993 4.67% U. Total capital assets increased by $3 million in fiscal year 2016, with approximately $1.3 million in construction in progress completed and placed in service. Major project completions include the Santa a Ana River Interceptor (SARI) Line Pipe Projection project and the rehabilitation of the asphalt at the Water Reclamation Plant. More information relating to capital assets can be found in Note 4 of the Notes to the Basic Financial Statements. U f6 r Q C d E V Y a 9 Packet Pg.459 TABLE B-4 in m Long-term Debt-Sewer Utility (amounts expressed in thousands of dollars) L 2016 2015 $ Change % Change as Notes payable $ 1,200 $ 1,710 $ (510) -29.81% Certificates of participation - 6,346 (6,346) -100.00% Compensated absences 328 284 44 15.33% a; Total long-term debt $ 1,528 $ 8,340 $ (6,812) -81.68% During the year, the Sewer Utility's long-term debt decreased $6.8 million which can be attributed to both normal debt payments as well as the defeasance of the 1998 Certificates of Participation during the fiscal year. Additional information on long-term debt is presented in Note 6 of the Notes to Basic a Financial Statements. o Management Challenges and Opportunities Economics a The local economy of the Service Area (Service Area) served by the Department has been affected by o the recent recession, both to a greater extent and for a longer period than surrounding cities. This has t: affected the Department as increased residential and commercial vacancies have led to a declining °� customer base. However, as the local real estate and employment markets improve, this customer base should begin to recover. The City's unemployment rate continues to decline as the economy cu continues to improve. Local economists also project continued improvement in the labor market and are forecasting that the region's unemployment rate will drop to 6.1% by the end of 2020. The economic outlook for the Service Area looks promising, as the economy is improving regionally which U. will translate into improved economic conditions for Department customers. Capital Construction a The Sewer Utility faces an extensive list of compliance-related construction requirements over the next 00 several years, and is also rehabilitating facilities and designing/constructing Primary Influent Flow v Equalization. The Water Utility continues to concentrate on retrofitting and upgrading existing facilities to current design standards and Uniform Building Codes (UBC) as well as replacing aging pipelines, Q wells and plant facilities. aD W Rates 1° A three-part water utility rate increase was presented to the Board of Water Commissioners in June 2016, and was approved after the close of the current fiscal year. A three-phase sewer treatment rate it increase was approved in September 2015 consisting of increases of 8.5% implemented on October 1, 3 2015 and July 1, 2016 with an additional 3.25% to be implemented on July 1, 2017. The Department continues to review revenue and expense levels to determine when rate increases will be necessary. a Contacting the Department's Director of Finance a� This financial report is designed to provide our customers and creditors with a general overview of the E Department's finances and to demonstrate the Department's accountability for the money it receives. If you have questions about this report or need additional financial information, please contact the Q Department's Director of Finance at (909) 384-5184. For information on the City of San Bernardino's financial statements, please contact the City's finance department at (909) 384-5242. s U y Q 10 Packet Pg. 460 d Y Y L 3 a� U) L d Y N r C 61 E t6 Q. 0 0 L Y Basic Financial Statements 0 r- 0 0. a� �a U C (C C LL f0 0 C C a Co Co 0 M a� R c LL 16 M c Q Y E s U �o Y Y Q Y _ E U Y Y Q 11 Packet Pg. 461 a CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Statement of Net Position June 30,2016 Y Water Sewer Interfund y Utility Utility Eliminations Total ASSETS N Current assets: Cash and investments(note 3) $ 10,486,465 23,276,807 33,763,272 Accounts receivable,net 5,857,779 3,178,659 9,036,438 Interest receivable 11,494 59,396 70,890 R Due from other entities 29,929 436,526 - 466,455 Inventory 1,794,883 - - 1,794,883 y Current portion of prepaid expenses 729,891 - - 729,891 Total current assets 18,910,441 26,951,388 - 45,861,829 E to Noncurrent assets: CL Prepaid expenses 729,664 - 729,664 pa) Investment in joint venture-RIX(note 10) 21,413,314 21,413,314 Investment in joint venture-PSA(note 10) 422,263 - 422,263 Restricted assets: Cash and cash equivalents(note 3): Restricted for capital-related fees 7,814,086 - 7,814,086 Restricted for consent decree(notes 3&13) - - - O Investments(note 3): 1r Restricted for consent decree(note 13) 22,223,052 - - 22,223,052 p, Interest receivable-consent decree(note 13) 87,343 - - 87,343 d Prepaid insurance-consent decree(note 13) 28,206,540 - - 28,206,540 M Capital assets(note 4): Non-depreciable assets 9,586,423 28,562,968 - 38,149,391 c Depreciable assets 269,832,172 140,575,269 - 410,407,441 =_ Less:accumulated depreciation and amortization (90,318,935) (101,999,162) - (192,318,097) LL Total capital assets(net) 189,099,660 67,139,075 - 256,238,735 Total noncurrent assets 239,616,595 97,518,402 - 337,134,997 c Total assets 258,527,036 124,469,790 382,996,826 = Q 00 T DEFERRED OUTFLOW OF RESOURCES °O v Deferred pension contributions(note 7) 2,056,532 1,551,419 - 3,607,951 Total deferred outflow of resources 2,056,532 1,551,419 3,607,951 O CL 4) (continued on next page) fY c R c LL is c c Q w s U r w Q r C d L x C1 g R w Q See accompanying independent auditor's report and notes to the basic financial statements. 12 Packet Pg. 462 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Statement of Net Position,continued _ June 30, 2016 N d w Water Sewer Interfund y Utility Utility Eliminations Total LIABILITIES N Current liabilities: Accounts payable 1,466,630 2,370,588 3,837,218 Related parties payable(note 9) 1,570,911 721,511 2,292,422 Accrued compensation 760,319 525,699 1,286,018 0 Claims payable(note 11) 1,298,326 246,180 1,544,506 �S Consumer deposits 488,587 - 488,587 N Current portion of compensated absences(note 6) 723,569 262,255 985,824 Current portion of notes payable(note 6) 1,813,782 300,000 2,113,782 E Accrued interest payable 222,800 3,471 226,271 Total current liabilities 8,344,924 4,429,704 12,774,628 !Z CD O Noncurrent liabilities: �- Consumer deposits 3,039,610 - 3,039,610 Compensated absences(note 6) 180,892 65,564 246,456 Unearned revenue-consent decree(note 13) 50,516,936 - 50,516,936 Notes payable(note 6) 17,554,880 900,000 18,454,880 OPEB obligation(note 8) 932,476 246,614 1,179,090 0 Net pension liabilities(note 7) 25,603,182 19,314,681 44,917,863 0 Total noncuent liabilities 97,827,976 20,526,859 118,354,835 Q rr Total liabilities 106,172,900 24,956,563 131,129,463 IX R DEFERRED INFLOW OF RESOURCES v Deferred inflows-actuarial(note 7) 2,337,436 1,763,329 4,100,765 Total deferred inflow of resources 2,337,436 1,763,329 4,100,765 c LL NET POSITION Net investment in capital assets(note 14) 169,730,998 65,939,075 235,670,073 Restricted for capital-related fees(note 14) - 7,814,086 7,814,086 Unrestricted(note 14) 17,657,766) 25,548,156 7,890,390 Q Total net position $ 152,073,232 99,301,317 251,374,549 0o oo mot• 0 Q. a� c ca c 'u. R c c Q c CD E L U .w+ Q S= E L U Q See accompanying independent auditor's report and notes to the basic financial statements. 13 Packet Pg.463 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Statement of Revenues, Expenses and Changes in Net Position _ For the year ended June 30,2016 W Water Sewer Interfund 3 Utility Utility Eliminations Total Operating revenues: Charges for services $ 29,388,782 25,030,569 54,419,351 Other operating revenues 613,089 380,171 (35,961) 957,299 ea Total operating revenues 30,001,871 25,410,740 (35,961) 55,376,650 i`yr ca Operating expenses Administration and customer service 6,815,967 2,434,748 9,250,715 rn Utility administration 600,025 706,430 1,306,455 CD Plant operations 6,907,732 9,163,720 16,071,452 E Maintenance 1,978,534 2,874,352 (35,961) 4,816,925 ca Environmental control - 636,563 636,563 Distribution 4,499,129 - 4,499,129 p Engineering and water quality control 2,326,551 464,554 2,791,105 General,administration and overhead 5,897,093 1,158,630 7,055,723 Depreciation and amortization 5,809,331 1,292,426 7,101,757 Total operating expenses 34,834,362 18,731,423 (35,961) 53,529,824 Operating income(loss) (4,832,491) 6,679,317 1,846,826 0 V Nonoperating revenues(expenses) d Investment income 63,566 658,456 722,022 W Rental income 134,845 41,498 176,343 Noncapital grant funds 1,696,219 - 1,696,219 v Share of joint venture income(loss) - (1,116,078) _ (1,116,078) R Interest expense and fiscal charges (106,698) (167,795) (274,493) Other 495,298 359,800 855,098 LL Total nonoperating revenues(expenses) 2,283,230 (224,119) 2,059,111 c Net income(loss)before capital contributions (2,549,261) 6,455,198 3,905,937 Q Capital contributions: °r° Acquisition fees 361,030 - 361,030 Iq Capacity fees 2,441,162 1,277,397 3,718,559 EPA grants 10,000 - 10,000 G Other capital restricted fees - 181,736 181,736 C Total capital contributions 2,812,192 1,459,133 4,271,325 X Change in net position 262,931 7,914,331 8,177,262 v C m Net position,beginning of year 151,810,301 91,386,986 243,197,287 e Net position,end of year $ 152,073,232 99,301,317 251,374,549 LL io 3 c c Q w c m E t v Y Q c E t Q See accompanying independent auditor's report and notes to the basic financial statements. 14 Packet Pg.464 M, CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Statement of Cash Flows For the year ended June 30 2016 CD Water Sewer Interfund Utility Utility Eliminations Total Cash flow from operating activities: al Cash received from customers $ 30,749,151 24,422,913 55,172,064 Rental income 134,845 41,498 176,343 N Nonoperating miscellaneous revenue(expenses) 515,764 359,800 875,564 = Cash paid to employees for services (10,081,714) (6,329,020) (16,410,734) ca Cash paid to suppliers of goods and services (24,220,595) (8,936,848) (33,157,443) Cash paid to RIX joint venture operations (2,368,133) (2,368,133) Net cash provided by operating activities (2,902,549) 7,190,210 4,287,661 rn r Cash flow from noncapital financing activities: CD Cash paid to RIX joint venture(capital) - (641,578) (641,578) E Consent Decree insurance drawdowns 1,696,219 1,696,219 Net cash provided by noncapital financing activities 1,696,219 (641,578) 1,054,641 D Cash flow from capital and related financing activities: Capital fees received 2,802,192 1,459,133 4,261,325 Cash paid to acquire capital assets (6,849,742) (4,285,451) (11,135,193) Loan proceeds 1,200,000 1,200,000 W Principal paid on capital-related debt (1,747,865) (8,084,710) (9,832,575) Interest paid on capital-related debt (125,267) (213,714) (338,981) O Grant proceeds 10,000 10,000 t 0 Net cash provided by(used for)capital and related Q financing activities (5,910,682) (9,924,742) (15,835,424) tY Cash flow from investing activities: Purchase of investments (18,234,142) (13,953,642) (32,187,784) c Sales and maturities of investments 17,677,660 20,350,561 _ 38,028,221 Interest received 41,907 735,111 777,018 LL Net cash provided by investing activities (514,575) 7,132,030 6,617,455 Net increase(decrease)in cash (7,631,587) 3,755,920 (3,875,667) _ Cash and cash equivalents at beginning of year 14,292,091 6,619,012 20,911,103 Q Cash and cash equivalents at end of year $ 6,660,504 10,374,932 17,035,436 T_ rr Reconciliation of cash and cash equivalents to amounts reported on the statement of net position: V Cash and investments $ 10,486,465 23,276,807 33,763,272 C sZ Restricted cash and cash equivalents: IX Restricted for capital related fees - 7,814,086 7,814,086 R Less those not meeting the definition of a cash equivalent (4,075,961) (20,715,961) (24,791,922) Cash and cash equivalents at end of year $ 6,410,504 10,374,932 16,785,436 f° C LL (continued on next page) c c Q .r C m t v to r r Q c v Q See accompanying independent auditor's report and notes to the basic financial statements. 15 Packet Pg. 465 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Statement of Cash Flows,continued For the year ended June 30 2016 D Water Sewer Interfund a) Utility Utility Eliminations Total Reconciliation of operating income to net cash to provided by(used for)operating activities: Operating income(loss) $ (4.832,491) 6,679,317 1,846,826 Depreciation and amortization 5,809,381 1,292,426 7,101,807 d Nonoperating miscellaneous revenue(expenses) 515,764 359,799 875,563 Rental income 134,845 41,498 176,343 'S to Adjustments: (Increase)decrease in accounts receivable 507,291 (715,968) (208,677) E (Increase)decrease in due from other entities 569,234 (271,858) 297,376 (Increase)decrease in inventory 196,430 - 196,430 p. (Increase)decrease in prepaid expenses (431,980) 91,576 (340,404) (D (Increase)decrease in deferred pension contributions (358,411) (270,380) (628,791) Increase(decrease)in accounts payable (3,207,800) 15,249 (3,192,551) Increase(decrease)in related parties payable (1,084,226) 456,211 (628,015) ?� Increase(decrease)in accrued compensation (100,237) 54,913 (45,324) Increase(decrease)in compensated absences current portion (91,623) 34,861 (56,762) p Increase(decrease)in compensated absences _ non-current portion 54,195 8,716 62,911 tz Increase(decrease)in claims payable 84,787 6,507 91,294 d Increase(decrease)in consumer deposits current portion (94,758) (94,758) v Increase(decrease)in consumer deposits = non-current portion (234,487) (234,487) C Increase(decrease)in OPEB obligation 303,581 80,288 383,869 LL Increase(decrease)in net pension liability 2,271,715 1,713,750 3,985,465 Increase(decrease)in deferred inflows-actuarial (3,163,759) (2,386,695) (5,550,454) _ _ Net cash provided by operating activities $ (3,152,549) 7,190,210 4,037,661 a 00 There were no significant noncash investing,capital and financing related activties for the year ended June 30,2016. oo O sz d s: C LL cu c _ a w a E a See accompanying independent auditor's report and notes to the basic financial statements. 16 Packet Pg. 466 63.16 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements For the Year Ended June 30, 2016 ' w (1) Reporting Entity and Summary of Significant Accounting Policies a' A. Organization and Operations of the Reporting Entity L The San Bernardino Municipal Water Department (Department) is governed under the Charter of the 3 City of San Bernardino (City). A Board of Water Commissioners (BOWC) appointed by the Mayor and approved by City Council, has Charter defined powers, with full authority for administration of the water utility and delegated authority for the sewer treatment utility. The Department has served the community since 1905. B. Basis of Accounting and Measurement Focus N The Department reports its activities as enterprise funds, which are used to account for operations that are financed and operated in a manner similar to a private business enterprise, where the intent of the E Department is that the costs (including depreciation) of providing goods or services to the general Q public on a continuing basis be financed or recovered primarily through user charges. Revenues and o expenses are recognized on the accrual basis. Revenues are recognized in the accounting period in which they are earned and expenses are recognized in the period incurred, regardless of when the related cash flow takes place. m Operating revenues, such as charges for services (water sales, sewer services and water services) w result from exchange transactions associated with the principal activity of the Department. Exchange 0 transactions are those in which each party receives and gives up essentially equal values. a Nonoperating revenues, such as property taxes and investment income, result from nonexchange transactions or ancillary activities in which the Department gives (receives) value without directly receiving (giving) equal value in exchange. When both restricted and unrestricted resources are available for use, the Department uses restricted c resources and then unrestricted resources. U' The major funds of the Department are described below: Water Utility Fund — The Water Utility Enterprise Fund (Water Utility) is used to account for the a operations of the Department's water system and related revenues. 00 T- oo Sewer Utility Fund — The Sewer Utility Enterprise Fund (Sewer Utility) is used to account for the : operations of the City's wastewater treatment system and related revenues. The Sewer o conveyance system is under the direction of the City's Public Works Department. d Administrative and engineering services are provided by the Water Utility to the Sewer Utility. Electrical services are provided by the Sewer Utility to the Water Utility. C. Implementation of GASB Pronouncements LL In February 2015, the GASB issued Statement No. 72, Fair Value Measurement and Application. The Standard defines fair value and describes how fair value should be measured, what assets and c liabilities should be measured at fair value, and what information about fair value should be disclosed in a the notes to the financial statements. The provisions of this Statement are effective for financial w statements for periods beginning after June 30, 2016. The Department implemented this Statement in the fiscal year ending June 30, 2016. E D. Financial Reporting a The Department's basic financial statements are presented in conformance with the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, "Basic Financial Statements — E and Management's Discussion and Analysis — for State and Local Governments"(GASB No. 34). This = statement established revised financial reporting requirements for state and local governments w .r throughout the United States for the purpose of enhancing the understandability and usefulness of Q financial reports. 17 Packet Pg.467 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 `` a� (1) Reporting Entity and Summary of Significant Accounting Policies, continued D. Financial Reporting, continued a� GASB No. 34 and its related GASB pronouncements provide for a revised view of financial information and restructure the format of financial information provided prior to its adoption. A statement of net position replaces the balance sheet and reports assets, liabilities, and the difference between them as c net position, not equity. A statement of revenues, expenses and changes in net position replaces both the income statement and the statement of changes in retained earnings and contributed capital. GASB No. 34 also requires that the statement of cash flows be prepared using the direct method. Under the direct method, cash flows from operating activities are presented by major categories. c d E. Assets, Liabilities and Net Position E 1. Use of Estimates a W The preparation of the basic financial statements in conformity with generally accepted accounting ° principles requires management to make estimates and assumptions that affect the reported o amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the 3: financial statements, and the reported changes in net position during the reporting period. Actual results could differ from those estimates. o 2. Cash and Investments r- 0 a For the purpose of the statement of cash flows, cash and cash equivalents include highly liquid investments (including restricted assets)with a maturity of three months or less when purchased. 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 as they are not transferable S and 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 a gains or losses realized upon the liquidation of investments. 00 T co Fair Value Measurements 7t- Certain assets and liabilities are required to be reported at fair value. The fair value framework c CL provides a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are described as follows: LL Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets cc or liabilities in active markets. c Q Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly and fair value is determined through the use of models or other valuation methodologies including: �o • Quoted prices for similar assets or liabilities in active markets; Q • Quoted prices for identical or similar assets or liabilities in markets that are inactive; • Inputs other than quoted prices that are observable for the asset or liability; a� • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Q 18 Packet Pg.468 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT _< Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016r . f11 N (1) Reporting Entity and Summary of Significant Accounting Policies, continued E. Assets, Liabilities and Net Position, continued L 3 Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value in measurement. These unobservable input reflect the Department's own assumptions about the c inputs market participants would use in pricing the asset or liability (including assumptions about L risk). These unobservable inputs are developed based on the best information available in the circumstances and may include the Department's own data. 3. Accounts Receivable c CD Customer or trade receivables are shown net of an allowance for uncollectible accounts based on E historical and management estimates. Transactions between funds that are representative of a lending or borrowing arrangements outstanding at the end of the fiscal year are referred to as CD "interfund receivables / payables" or "advances to/from" other funds. All interfund transactions are ° eliminated for financial reporting. 4. Inventory d Materials and supplies inventory consists primarily of water meters, pipe and pipefittings for o construction and repair to the Department's water transmission and distribution system and items t� necessary for maintenance at the sewer treatment facilities. Inventory is valued at cost using a °� weighted average method. Inventory items are charged to expense at the time that individual items are withdrawn from inventory or consumed. U Water inventory is stated at its purchase cost using the first in, first out method. Inventory is recorded when purchased and expensed at the time the inventory is consumed. LL 5. Prepaid Expense and Deposit c Certain payments to vendors reflect costs or deposits applicable to future accounting periods and a are recorded as prepaid items in the basic financial statements. T 6. Capital Assets v Capital assets acquired or constructed are capitalized at historic cost. Department policy has set o the capitalization threshold for reporting capital assets at $5,000 and a life expectancy of at least 3 a years. Overhead is capitalized at the rate of 28.9% of labor and benefits, 10% of material and W supplies and 2% of significant contracts. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets as follows: • Source of supply plant 8 to 50 years LL • Disposal plant and interceptor lines 35 to 50 years • Other facilities (shops, leasehold & yards) 5 to 25 years = • Tools, office equipment& communications 4 to 20 years a • Computer equipment 3 to 5 years • Automotive and fleet equipment 3 to 15 years 7. Compensated Absences a Department policy is to permit employees to accumulate a limited amount of earned vacation and < sick leave. Various negotiation groups have different sell-back and cash out options. Additionally, cash out options upon retirement or death of the employee vary based on the negotiation group. E Employees' vacation and sick leave benefits are recognized as a liability of the Department. w Q 19 Packet Pg.469 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT ``°• Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 N (1) Reporting Entity and Summary of Significant Accounting Policies, continued E. Assets, Liabilities and Net Position, continued D L 8. Restricted Assets and Amounts Payable from Restricted Assets Cn Amounts shown as restricted assets have been restricted by bond indentures or are to be used for specified purposes based on contract provisions, such as bonded debt service. Certain liabilities c which are currently payable have been classified as current liabilities payable from restricted assets since assets have been restricted for their payment. f4 9. Pensions c For purposes of measuring the net pension liability, deferred outflows and inflows of resources E related to pensions, pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by the Department. For this purpose, benefit payments (including refunds of employee ° contributions) are recognized when due and payable in accordance with the benefit terms. 2 Investments are reported at fair value. as GASB 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used: o r- Valuation Date (VD) June 30, 2014 0 c. Measurement Date (MD) June 30, 2015 Measurement Period (MP) June 30, 2014 to June 30, 2015 10. Deferred Outflows/inflows c In addition to assets, the Statement of Net Position will sometimes report a separate section of U- deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents consumption of net position that applies to a future period and so will not be = recognized as an outflow of resources (expenses/expenditures) until then. The Department has two items that qualify for reporting in this category: the deferred outflows on pension contributions, co and the deferred charges on debt refundings. v In addition to liabilities, the statement of financial position will sometimes report a separate section r- for deferred inflows of resources. This separate financial statement element, deferred inflows of a resources, represents an acquisition of net position that applies to a future period and will not be X recognized as inflow of resources (revenue) until that time. The District has one item that qualifies R for reporting in this category, deferred inflow— actuarial. _ R 11. Interfund Eliminations LL The interfund eliminations column represents entries made to eliminate interfund income and expenditure transactions between the water utility fund and the sewer utility fund for the purposes of consolidated financial statements. a 12. Net Position CD The financial statements utilize a net position presentation. Net position is categorized as follows: • Net Investment in Capital Assets — This component of net position consists of capital Q assets, net of accumulated depreciation and reduced by any debt outstanding against the Y acquisition, construction or improvement of those assets. E • Restricted Net Position —This component of net position consists of constraints placed on net position use through external constraints imposed by creditors, grantors, contributors, or laws or regulations of other governments or constraints imposed by law through a constitutional provisions or enabling legislation. 20 ' Packet Pg.470 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 .4 . N AD (1) Reporting Entity and Summary of Significant Accounting Policies, continued r E. Assets, Liabilities and Net Position, continued � L 0 • Unrestricted Net Position — This component of net position consists of net position that does not meet the definition of restricted or net investment in capital assets. N 13. Capital Contributions Contributions in aid of construction represent cash and utility plant additions contributed to the Department by property owners or developers desiring services that require capital expenditures or capacity commitment. In accordance with Governmental Accounting Standards Board Statement n No. 33, the capital contributions are recorded on the Statement of Revenues, Expenses and E Changes in Net position. 14. Budgetary Policies o The Department adopts an annual budget for planning, control, and evaluation purposes. Budgetary , control and evaluation are affected by comparisons of actual revenues and expenses with planned revenues and expenses for the period. Encumbrance accounting is not used to account for commitments related to outstanding contracts for construction and services. 4- (2) City of San Bernardino Bankruptcy V- 0 Without reserves and facing a $45.8 million budget deficit, in July of 2012, the City determined that it 0 was no longer able to meet its contractual obligations and declared a fiscal emergency. On August 1, 2012, the City filed a petition under Chapter 9 of the United States Bankruptcy Code in Riverside seeking to adjust its debts. On August 28, 2013, the Bankruptcy Court ruled that the City is eligible for bankruptcy protection. U- Based on the California Constitution, precedents established in prior municipal bankruptcies in California, and various legal opinions provided to the Department by special legal counsel and the City Attorney's office, the Department believes that its revenues, derived from ratepayer fees, will be a protected from attachment by the City's creditors. Although unlikely, it is possible that the bankruptcy co court will make a different determination. The Department's arguments for the protection of its assets v from the claims of the City's creditors are set forth in further detail below. The bankruptcy case seeks the adjustment of the obligations of the City and does not extend to City 000 funds with Federal, State or other restrictions. The Department has continued to operate and use its W restricted resources for only the expenses incurred to operate the water system and sewer treatment m plants. Debt obligations secured by Department revenues are treated as secured obligations and are not expected to be affected so long as the revenues of the Department are sufficient to meet debt c service. LL �o State and federal laws place protections on the revenues of the Department. Section 902(2) of the Bankruptcy Code defines special revenues as, among other things, "receipts derived from the a ownership, operation, or disposition of projects or systems of the debtor that are primarily used or intended to be used primarily to provide transportation, utility, or other services, including the proceeds of borrowings to finance the projects or systems." Further, section 928 of the Bankruptcy Code states: E "(a) Notwithstanding section 552 (a) of this title and subject to subsection (b) of this section, special revenues acquired by the debtor after the commencement of the case shall remain subject to any lien Q resulting from any security agreement entered into by the debtor before the commencement of the case"; and "(b) Any such lien on special revenues, other than municipal betterment assessments, derived from a project or system shall be subject to the necessary operating expenses of such project E or system, as the case may be." 21 Packet Pg.471 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 d (2) City of San Bernardino Bankruptcy, continued Chapter 9 of the Bankruptcy Code does not have a provision for liquidation of assets of the City and L distribution of the proceeds to creditors. Additionally, Chapter 9 does not prevent a debtor from 3 borrowing additional funds while under bankruptcy protection. The Tenth Amendment of the United States Constitution and Supreme Court decisions in upholding municipal bankruptcy legislation place = severe limitations upon the power of the bankruptcy court in chapter 9 cases. m L In addition, at least two aspects of California law place restrictions on the use of revenue of the Department. First, under Articles XIIIC and XIIID of the California Constitution (enacted pursuant to the voter approved Proposition 218), money raised from municipal utility rates must only be used to fund such utility operations, and not to fund general municipal operations. Thus, when the Department charges a water delivery or consumption fee, or rates for wastewater services, and places those t monies into its specially segregated Water Fund and Sewer Fund accounts, those charges are a considered property-related fees and are subject to the constitutional constraints enacted pursuant to 0 Proposition 218. This has very specific consequences for the amount of money that can be collected, , as well as the use to which those funds can be put. Specifically, Cal. Const. Article XIII D section 6(b) M states that: t A fee or charge shall not be extended, imposed, or increased by any agency unless it meets all of the o following requirements: 0 (1) Revenues derived from the fee or charge shall not exceed the funds required to provide C the property related service. (2) Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed. c (3) The amount of a fee or charge imposed upon any parcel or person as an incident of U. property ownership shall not exceed the proportional cost of the service attributable to the parcel. a . . . 00 T (5) No fee or charge may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. (Cal Const, Art. XIII D § 6.) Put differently, use of fees for general governmental services is prohibited, fees can only be for the service provided, fees cannot exceed the cost of that service, and fees cannot exceed the proportional U. cost of the service attributable the payer.' _ _ a w _ E U w a Y E s U See League of California Cities,Proposition 218 Implementation Guide(2007 Ed.)at pp.49-50;see also Howard Jarvis Taxpayers Ass'n v.City Q of Roseville(2002)97 Cal.App.4th 637,647-648[interpreting Art.XIIID,§6(b)and emphasizing,"[t]he key is that the revenues derived from the fee or charge are required to provide the service,and may be used only for the service."] 22 Packet Pg.472 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 _ (2) City of San Bernardino Bankruptcy, continued N w The second relevant aspect of state law is the City's status as a Charter City. Under California law a L city charter is "the supreme law of the City," but is still subject to "conflicting provisions in the federal 3 and state Constitutions and to preemptive state law." (Howard Jarvis Taxpayers Assn. v. City of Roseville (2003) 106 Cal.App.4th 1178, 1186, citing Domar Electric, Inc. v. City of Los Angeles (1994) 9 Cal.4th 161, 170.) The Department was created by and currently operates pursuant to Article IX of the City's Charter, and provides both retail water and sewer service pursuant to the City Charter provisions. Specifically, Article IX, Section 164 of the City Charter provides that the Water Department Board of Commissioners, and not the City Council, " . . shall have power to control and order the expenditure of Un all money received from sale or use of water, for the defraying of expenses or maintenance and repairs w and operation of the water system, and for any expenses for additions to the same; and for supplying E the City with water for any and all purposes; provided that all such money shall be deposited in the a treasury of the City to the credit of a fund to be known as the Water Fund, and shall be kept separate o and apart from other moneys of the City . . ." (emphasis added). Consistent with the discussion above, the constitutional requirements under Proposition 218 apply to "counties, cities, cities and counties, including charter cities or counties, any special district, or other local or regional governmental entity. � (Cal. Const., art. XIIIC, § 1(b), emphasis added.) Courts have routinely held that "[t]here is no question that Proposition 218, as a constitutional initiative, is binding upon charter cities." (Howard Jarvis o Taxpayers Assn. v. City of Roseville (2003) 106 Cal.App.4th 1178, 1185.) In order to provide for the safety of the Department's liquid assets, the Department established its own bank account and a investment portfolio within the City treasury as required by the City Charter. Representatives of the City Treasurer's office and the Water Department are signatories to these accounts. As previously noted, i the City Charter specifically grants to the Water Department Board of Commissioners the power to control and order the expenditure of these funds and limits the withdrawal of these funds for the payment of demands authenticated by the Board of Commissioners. U. Accordingly, both the City Charter and the California Constitution require that the Department's special revenues collected for water-related services may only be used for expenditures related to those Q services. Due to these additional state law restrictions, the Department believes that the revenues of the Department (and accumulated assets since those assets were accumulated as a result of collection V_ of revenue) can only be used for Department expenses and obligations. On October 16, 2013, Bankruptcy Judge Meredith Jury issued an opinion on the City's eligibility for 0 CL bankruptcy. "...CalPERS submits that the uncontroverted fact that the City's Water Fund had a large 0 cash balance before and after the petition date which the City did not tap to attempt to balance its books is evidence of lack of desire to effect a plan. This argument has no legal legs. It is a matter of California constitutional law that the City may not use funds belonging to the Water Department for general fund purposes. Amendments to the Constitution enacted by Proposition 218 in 1996, which LL added Articles XIIIC and XIIID, expanded restrictions on local government revenue-raising and imposed 3 limitations on local government use of special fees, including water and sewer fees. C.A. Const. art. C XIIIC and XIIID. Article XIIID covers water fees and prohibits the use of such fees for general Q governmental services, including police, fire and other services. Bighorn Desert View Water Agency v. Y c Verjil, 39 Cal. 4th 205, 216-17 (2006); Richmond v. Shasta Cmty. Servs. Dist., 32 Cal. 4th 409 (2004). Thus, the City was legally prohibited by the California Constitution from using Water Department funds for general fund purposes. w Q :.c c d E w r a 23 Packet Pg.473 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT *"" > Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 (2) City of San Bernardino Bankruptcy, continued "Similarly, the City could not have borrowed funds from the Water Department without incurring debt L that it could not repay within one year. Article XVI, Section 18 of the Constitution prohibits the City from 3 incurring a debt in any year that exceeds the available revenues of the City for that year without the Cn approval of a two-thirds vote of qualified voters. C.A. Const. art. XVI, § 18. Looking at its dire financial status in July 2012, the City could not reasonably conclude that it would be able to repay to the Water Fund any loans it made within that fiscal year. The Water Fund cash was thereby out of reach to ar address the City's insolvency and this issue is an outlier to the Court's analysis." (Case No.: RS 6: 12- bk-28006 MJ). u, (3) Cash and Investments Cash and investments are reported in the accompanying statement of net position as follows: a Water Sewer o L Utility Utility Total ; �o Cash and investments $10,486,465 23,276,807 33,763,272 Restricted cash and cash equivalents: Restricted for capital-related fees - 7,814,086 7,814,086 0 Restricted investments: 0 0 Restricted for Consent Decree 22,223,052 - 22,223,052 CD Total Cash and Investments $32,709,517 31,090,893 63,800,410 U _ f4 Cash and investments at June 30, 2016 consisted of the following: Water Sewer Utility Utility Total a Cash on Hand $ 7,000 200 7,200 00 T Deposits with Financial Institutions 6,403,504 10,374,732 16,778,236 oo Investments 26,299,013 20,715,961 47,014,974 Total Cash and Investments $32,709,517 31,090,893 63,800,410 Q. a� o: Investments Authorized by the California Government Code and the Department's Investment Policy The table below identifies the investment types that are authorized by the Department and Consent Decree (see note 13) in accordance with the California Government Code (or the City's investment policy, where more restrictive). The table also identifies certain provisions of the California Q Government Code (or the City's investment policy, where more restrictive) that addresses interest rate risk, credit risk, and concentration of credit risk. Due to its long-term nature, the Consent Decree has been explicitly exempted from maximum maturity requirements of the California Government Code, E which limits maturity of most investments to five years. All other aspects of the Consent Decree investment policy are consistent with the City's investment policy. a r d E l � w r a 24 Packet Pg. 474 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT _ F Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 (3) Cash and Investments, continued Maximum Maturity as 3 Consent Maximum % Maximum % in Investment Type* Department Decree of Portfolio of Portfolio c d US treasury 5 years None None None US agency 5 years None None None Bankers acceptances 180 days 180 days 40% 40% Commercial paper 270 days 270 days 25% 25% E Negotiable CDs 5 years None 30% 30% Medium-term notes 5 years None 30% 30% o Money market mutual funds N/A N/A 20% 20% Mortgage pass through 5 years None 20% 20% Local Agency Investment Fund N/A N/A 40,000,000 40,000,000 Guaranteed investment N/A N/A None None o tf 0 Investments Authorized by Debt Agreements Investments 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 City's investment policy. Investments authorized for funds held by bond trustee include, U.S. Treasury Obligations, U.S. Government Sponsored Enterprise Securities, the California Local Agency Investment Fund, U. Guaranteed Investment Contracts, Commercial Paper, Local Agency Bonds, Banker's Acceptance and Money Market Mutual Funds. There are no limitations on the maximum amount that can be invested in one issuer, maximum percentage allowed or the maximum maturity of an investment, except for the a maturity of Banker's Acceptance which are limited to one year. 00 oo Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial 0 institution, a government will not be able to recover its deposits or will not be able to recover collateral 0) 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 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 a state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities in the collateral pool must equal at least 110% of the total Q 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 investment identified herein as held by bond trustee, the bond trustee selects the investment under a the terms of the applicable trust agreement, acquires the investment, and holds the investment on r behalf of the reporting government. �a r a 25 Packet Pg.475 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 °' (3) Cash and Investments, continued r Investment in State Investment Pool 3 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 �n amortized cost basis. LAIF is not rated by a nationally recognized statistical rating organization, but, as stated previously, it is regulated by the California Government Code, and is therefore exempt from E rating requirements. a Interest Rate Risk o L Interest rate risk is the possibility that fluctuations 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 will be to changes in market interest rates. One method that the Department uses to manage its exposure to interest rate risk is by purchasing a combination of shorter term and longer c term investments and by timing cash flows from maturities so that a portion of the portfolio matures or V comes close to maturity evenly over time as necessary to provide requirements for cash flow and n. CD liquidity needed for operations. Information about the sensitivity of the fair values of the Department's investments to market interest rate fluctuations is provided by the following table that shows the distribution of the Department's investments by maturity date: U. Maturities Less than 13-24 25-60 More than c Investment Type 12 months months months 60 months Total Q U.S.Agency Securities $1,505,308 3,551,993 5,315,477 - 10,372,778 00 U.S.Treasuries - 526,479 6,079,017 - 6,605,496 Medium Term Corporate Notes 360,428 310,763 1,487,494 - 2,158,685 Asset Backed Securities - 663,311 681,296 - 1,344,607 a m Commercial Paper 418,964 - - - 418,964 Money Market Funds 555,347 - - - 555,347 Local Agency Investment Fund 3,758,310 - - - 3,758,310 Consent Decree: U. U.S.Treasuries - - 7,924,189 - 7,924,189 U.S.Agency Mortgage Backed Securitie - - - 1,627,183 1,627,183 c U.S Agency Collateralized Mortgage = a Obligations - 144,618 138,945 1,005,704 1,289,267 U.S.Agency Securities - 125,495 1,872,417 - 1,997,912 CD Commercial Paper 796,512 - - - 796,512 E t Corporate Notes 1,455,617 2,393,486 1,704,248 - 5,553,351 r Certificates of Deposit 499,940 1,654,910 - - 2,154,850 Q Asset Back Securities/Collateralized Mortgage Obligations - - 835,252 - 835,252 E Money Market Funds 44,534 - - - 44,534 Total Investments $9,394,960 9,371,055 26,038,335 2,632,887 47,437,237 f° r Q 26 Packet Pg. 476 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 D (3) Cash and Investments, continued Credit Risk L d Generally, credit risk is the possibility 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 c California Government Code, the Department's investment policy, or debt agreements, and the actual rating as of year-end for each investment type. Minimum Jn Legal a Investment Type Rating Rating Total U.S. Agency Securities None AA+ $ 10,372,778 U.S. Treasuries Exempt Exempt 6,605,496 ° L Medium Term Corporate Notes AA- AAA 2,158,685 Asset Backed Securities AA AAA 1,344,607 Commercial Paper A-1 A-1 418,964 ii Money Market Funds AA+ AAA 555,347 0 Local Agency Investment Fund N/R not rated 3,758,310 0 Consent Decree: U.S. Treasuries No Limit Exempt 7,924,189 i U U.S. Agency Mortgage Backed Securities No Limit AA+ 1,627,183 U.S. Agency Securities No Limit AA+ 1,997,912 LL U.S. Agency Collateralized Mortgage Obligation AA AA 1,289,267 Corporate Notes A AAA 5,553,351 Q Commercial paper A-1 A-1 796,512 V_ 00 Certificates of Deposit A A-1+ 2,154,850 �! Asset Backed Secui rites/Col lateral ized 0 Mortgage Obligation AA AAA 835,252 Money Market Funds AA+ AA+ 44,534 Total Investments $47,437,237 c U_ c Q w m E U R r r Q _ E s c� .r Q 27 Packet Pg.477 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 `t 1D (3) Cash and Investments, continued Concentration of Credit Risk L d Investments in any one issuer (other than for U.S. Treasury securities, mutual funds, and external � investment pools)that represent 5% or more of total Department investments are as follows: U) Reported Percentage o- L Issuer Investment Type Amount Investments Federal National Mortgage Association U.S. Agency Securities $2,307,608 5% N r C CD Fair Value Measurement E The Department categorizes its fair value investments within the fair value hierarchy established by a generally accepted accounting principles. The Department has the following recurring fair value a measurements as of June 30, 2016: �a Fair Value Hierarchy Level Level Level Total »r U.S. Agency Securities $ - 12,370,690 - 12,370,690 0 U.S. Treasuries 14,529,685 - - 14,529,685 0 Medium Term Corporate Notes - 2,158,685 - 2,158,685 Asset Backed Securities - 1,344,607 - 1,344,607 Commercial Paper - 1,215,476 - 1,215,476 Local Agency Investment Fund - 3,758,310 - 3,758,310 = U- U.S. Agency Mortgage Backed Securities - 1,627,183 - 1,627,183 6 U.S. Agency Collateralized Mortgage Obligati - 1,289,267 - 1,289,267 Corporate Notes - 5,553,351 - 5,553,351 Q Asset Backed Securities/Collateralized 00 T co Mortgage Obligations - 835,252 - 835,252 Total investments 14,529,685 30,152,821 - 44,682,506 0 c. Investments not subject to fair value 2,754,731 Total $47,437,237 R c R c_ LL c c a r E U f6 a.r Q C E s U R a� r+ a 28 Packet Pg.478 ( .a 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 (4) Capital Assets Capital asset activity for the water utility for the fiscal year ended June 30, 2016: L Balance Deletions/ Balance July 1, 2015 Additions Transfers June 30, 2016 U) Non-depreciable assets: Land and easements $ 5,654,389 - - 5,654,389 `m Construction in progress 3,523,057 4,624,967 (4,215,990) 3,932,034 Total non-depreciable assets 9,177,446 4,624,967 (4,215,990) 9,586,423 w c m Depreciable assets: E Water rights,wells and pumping 98,085,162 1,358,790 - 99,443,952 a Distribution system 146,680,635 4,423,474 - 151,104,109 Buildings, plants, and stores 3,544,632 103,058 - 3,647,690 Field and office equipment 15,591,107 555,442 (510,128) 15,636,421 Total depreciable assets 263,901,536 6,440,764 (510,128) 269,832,172 t Less: accumulated depreciation Water rights,wells and pumping (33,775,555) (1,799,298) - (35,574,853) o Distribution system (37,493,486) (2,964,361) - (40,457,847) Buildings, plants, and stores (1,785,093) (131,749) - (1,916,842) Field and office equipment (11,945,082) (913,923) 489,612 (12,369,393) Total accumulated depreciation (84,999,216) (5,809,331) 489,612 (90,318,935) _ Total depreciable assets, net 178,902,320 631,433 (20,516) 179,513,237 c c Total capital assets, net $188,079,766 5,256,400 (4,236,506) 189,099,660 Q 00 00 1` 0 CL d R c c U_ Ta 0 c c Q w c m E r c� w Q w c m E ca Y Y Q 29 Packet Pg.479 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 Q' D (4) Capital Assets, continued *- Capital asset activity for the sewer utility for the fiscal year ended June 30, 2016: L Balance Deletions/ Balance 3 July 1,2015 Adjustments Additions Transfers June 30,2016 cn Non-depreciable assets: Land and easements $ 11,961,413 (206,240) - - 11,755,173 t6 L Construction in progress 13,933,993 - 4,177,470 (1,303,668) 16,807,795 �? Total non-depreciable assets 25,895,406 (206,240) 4,177,470 (1,303,668) 28,562,968 N Depreciable assets: c Pumping 3,192,218 - 429,800 - 3,622,018 E E Buildings, plants, and stores 130,072,212 206,240 882,955 (128,799) 131,032,608 Field and office equipment 5,866,346 - 98,895 (44,598) 5,920,643 C Total depreciable assets 139,130,776 206,240 1,411,650 (173,397) 140,575,269 0 L a� Less:accumulated depreciation R Water rights,wells and pumping (2,451,745) - (158,284) - (2,610,029) m Buildings, plants, and stores (93,126,106) - (1,103,355) 128,799 (94,100,662) Field and office equipment (5,302,282) - (30,787) 44,598 (5,288,471) 0 Total accumulated depreciation (100,880,133) - (1,292,426) 173,397 (101,999,162) o Total depreciable assets, net 38,250,643 206,240 119,224 - 38,576,107 �a Total capital assets, net $ 64,146,049 - 4,296,694 (1,303,668) 67,139,075 c R c LL c c Q ao w 1r 0 CL a) c R c i� c c Q .r c d E t U is Q r c m E t v R Y i+ Q 30 - Packet Pg.480 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 w (5) Operating Leases - r Effective December 15, 2008, the Department took possession of leased space for administrative office and warehouse space for a term of ten years. As of October 29, 2015, the lease ownership transferred 3 from Superior Homes LLC to Woo Sung Lim. The following is a schedule of minimum lease payments as of June 30, 2016: Water Sewer Year Utility Utility Total 2017 $ 228,408 31,152 259,560 N 2018 228,408 31,152 259,560 0 $ 456,816 m , 0 m Y (6) Long-term Liabilities Water Utility Fund = Changes in long-term liabilities in the water utility fund for the year ended June 30, 2016 are as follows: ° tf Balance Balance Current Long-term Q July 1,2015 Additions Reductions June 30,2016 Portion Portion (D Notes Payables: R 2002 CIEB $ 4,602,020 (594,440) 4,007,580 614,294 3,393,286 2007 CIEB 6,879,391 - (492,777) 6,386,614 506,131 5,880,483 2012 CIEB 9,162,694 - (435,113) 8,727,581 446,470 8,281,111 W SMVMWD Note 472,422 - (225,535) 246,887 246,887 - Total Notes Payable 21,116,527 - (1,747,865) 19,368,662 1,813,782 17,554,880 c c Compensated Absences 941,889 929,265 (966,693) 904,461 723,569 180,892 Q 00 Total longterm-debt,Water fund $22,058,416 929,265 (2,714,558) 20,273,123 2,537,351 17,735,772 2002 California Infrastructure and Economic Development Bank(CIEDB) Note Payable Q m In April 2002, CIEDB issued a $10,000,000 note to the Department to provide funding for transmission mains, booster stations and a reservoir identified in the Water System Reliability Schedule of I Improvements. The note was issued with an interest rate of 3.34% with interest payable semiannually on February 1 and August 1. Principal payments are due annually on February 1. c ii Debt service requirements on the 2002 CIEDB Note Payable are as follows: c Year Principal Interest Total Q 2017 $ 614,294 133,854 748,148 w 2018 634,812 113,336 748,148 2019 656,014 92,133 748,147 E 2020 677,925 70,222 748,147 2021 700,568 47,579 748,147 d 2022 723,967 24,181 748,148 $ 4,007,580 481,305 4,488,885 E s w r Q 31 Packet Pg.481 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued = For the Year Ended June 30, 2016 d w (6) Long-term Liabilities, continued 2007 CIEDB Note Payable 3 In July 2007, CIEDB issued a $10,000,000 note to the Department to provide funding for booster c) stations and transmission mains in the Verdemont area. The note was issued with an interest rate of c 2.71% with interest payable semiannually on February 1 and August 1. Principal payments are due annually on August 1. Debt service requirements on the 2007 CIEDB Note Payable are as follows: Year Principal Interest Total 2017 $ 506,131 166,219 672,350 2018 519,847 152,317 672,164 2019 533,935 138,038 671,973 0 2020 548,405 123,373 671,778 2 M 2021 563,266 108,310 671,576 2022-2026 3,053,743 300,920 3,354,663 w 2027 661,287 8,960 670,247 0 $ 6,386,614 998,137 7,384,751 0 a 2012 CIEDB Note Payable In May 2012, CIEDB issued a $10,000,000 note to the Department to provide funding for the construction of the 12 million gallon Ogden Reservoir and certain pipeline improvements. The note was issued with an interest rate of 2.61% with interest payable semiannually on February 1 and August 1. Principal payments are due annually on August 1. 5 Debt service requirements on the 2012 CIEDB Note Payable are as follows: a Year Principal Interest Total co 2017 $ 446,470 221,963 668,433 co 2018 458,123 210,158 668,281 2019 470,080 198,045 668,125 a 2020 482,349 185,616 667,965 2021 494,938 172,863 667,801 2022-2026 2,675,336 661,050 3,336,386 2027-2031 3,043,174 288,412 3,331,586 c 2032 657,111 8,575 665,686 LL $ 8,727,581 1,946,682 10,674,263 SBVMWD Note Payable a Y In July 2012, the Department closed escrow on the purchase of real property from the San Bernardino Valley Municipal Water District (SBVMWD), which included a down payment of $1,000,000 and a = promissory note of $1,117,500 to be paid in sixty (60) monthly installments due on or before the 1St of w each month. a Debt service requirements on the SBVMWD Note Payable are as follows: Year Principal Interest Total 2017 $ 246,887 1,443 248,330 w a 32 Packet Pg.482 4 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 ` ° N LD (6) Long-term Liabilities, continued Debt Service Coverage a� The Water Utility Fund is required to maintain net revenues adequate to cover 110% of annual debt service. Gross revenue is defined as Operating Revenue combined with non-operating revenue. Debt N service coverage for the Water Utility Fund for the year ended June 30, 2016 was as follows: C Gross revenue $30,310,800 Operating expenses 35,883,023 Less: depreciation expense (5,809,331) (D Net operating expenses 30,073,692 �a Net Non-Operating Income 2,615,915 0 Net revenues $ 2,853,023 �? Annual debt service $ 2,318,805 m Actual coverage ratio 1.23 0 Sewer Utility Fund 0 Changes in long-term liabilities in the sewer utility fund for the year ended June 30, 2016 are as follows: W Balance Balance Current Long-term U July 1,2015 Additions Reductions June 30,2016 Portion Portion cc Notes Payables: State Revolving Fund $1,709,710 - (1,709,710) - - - �- Total Notes Payable 1,709,710 - (1,709,710) c c Certificates of Participation: Q 1998 Certificates of Participation 6,375,000 - (6,375,000) - - - 00 Less: unamortized discounts (28,692) - 28,692 - - - v Total Certificates of Participation 6,346,308 (6,346,308) - - - -- Ic SBVMWD Loan - 1,200,000 1,200,000 300,000 900,000 CL Compensated Absences 284,242 581,434 (537,857) 327,819 262,255 65,564 W 16 Total long term-debt, Sewer fund $8,340,260 1,781,434 (8,593,875) 1,527,819 562,255 965,564 cv State Revolving Fund Note Payable = U. The State Water Resources Control Board issued a note to Santa Ana Watershed Authority to provide funding for the Santa Ana Watershed Authority providing funding for the San Bernardino/Colton Rapid Infiltration Extraction (RIX) project in the amount of $25,978,599. In April 2001, the agreement was a amended to transfer the note obligation to the successors in interest being the City of San Bernardino c Board of Water Commissioners and the City of Colton. The note was paid off during the fiscal year E ended June 30, 2016. 0 w a c aD E r Q 33 Packet Pg.483 i u CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 ' ;Yi (6) Long-term Liabilities, continued - 1998 Certificates of Participation L In 1998, the sewer treatment utility issued $36,230,000 in Certificates of Participation to advance refund the 1992 Sewer Certificates of Participation and fund additional capital improvements. The 1992 U) Certificates originally provided for the construction of certain capital improvements. The proceeds of c the 1998 Certificates were invested and used to pay interest on the 1998 issue until February 1, 2001, when the 1992 Certificates were called at a prepayment premium of two percent. The Department has paid the installment payments on the 1998 Certificates from the net revenues of the sewer treatment system. The Certificates of Participation were paid off during the fiscal year ended June 30, 2016. c aD SBVMWD Loan E In December 2015, the Department entered into an agreement loan of $1,200,000 with the San Q Bernardino Valley Municipal Water District (SBVMWD) for UV System Rehabilitation project o improvements to the Rapid Infiltration and Extraction (RIX) facility owned by the City of Colton and the Department. �o (7) Pension Plan D The Department is considered to be part of the City of San Bernardino PERS pension plan, therefore all o related information included in this note refers to the City as a whole unless specifically indicating o otherwise. All qualified permanent and probationary employees are eligible to participate in the CL Department's Miscellaneous Plan, an agent multiple-employer defined benefit pension plan administered by the California Public Employees' Retirement System (CaIPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statute and Local Government resolution. CalPERS c issues publicly available reports that include a full description of the pension plans regarding benefit _ provisions, assumptions and membership information that can be found on the CalPERS website. _ Additional disclosures and required supplementary information regarding the City's plan can be found in a the City's audited financial statements. 00 T Benefits provided v CalPERS provides service retirement and disability benefits, annual cost of living adjustments and t: death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. The Plans' provisions and benefits in effect at June 30, 2016, are summarized as follows: Miscellaneous c Hire date Prior to January 1, On or after January 2013 1, 2013 Benefit formula 2.7% @ 55 2% @ 60 Benefit vesting schedule 5 years service 5 years of service a Benefit payments monthly for life monthly for life Retirement age 50-55 52-67 .SEE Monthly benefits, as a % of eligible 2.0% to 2.7 U ° ° 1.0% to 2.5% ;a compensation a Required employee contribution rates 8% 8% Required employer contribution rates 22.024% 22.024% E U a 34 Packet Pg. 484 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 N d (7) Pension Plan, continued w Employees Covered D d As of June 30, 2014, the following employees were covered by the benefit terms of the Plan: City-wide Department Inactive employees or beneficiaries currently m receiving benefits 1,304 123 Inactive employees entitled to but not yet receiving benefits 855 - Active employees 765 246 Total 2,924 369 a (D Contribution Description L i� Section 20814(c) of the California Public Employees' Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CaIPERS' annual actuarial valuation process. The actuarially determined rate o is the estimated amount necessary to finance the costs of benefits earned by employees during the o year, with an additional amount to finance any unfunded accrued liability. The employer is required to CD contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. It is the responsibility of the employer to make necessary accounting adjustments to reflect the impact due to any Employer Paid Member Contributions or situations where members are paying a portion of the i,_ employer contribution. i c Actuarial Methods and Assumptions used to determine Total Pension Liability a For the measurement period ended June 30, 2015 (the measurement date), the total pension liability co was determined by rolling forward the June 30, 2014 total pension liability. The June 30, 2014 and the rr June 30, 2015 total pension liabilities were based on the following actuarial methods and assumptions: t 0 Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB Statement No. 68 L Actuarial Assumptions Discount Rate 7.65% c Inflation 2.75% LL Ta Salary Increases Varies by Entry Age and Service Investment Rate of Return 7.50% Net of Pension Plan Investment and a Administrative Expenses: includes Inflation w Mortality Rate Table' Derived using CaIPERS' Membership Data for all funds E t Post Retirement Benefit Increase Contract COLA up to 2.75% until Purchasing Power a applies, 2.75% thereafter a c ' The mortality table used was developed based on CalPERS' specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, L-1 please refer to the 2014 experience study report. Q 35 Packet Pg.485 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT ' "� rt Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 w (7) Pension Plan, continued All other actuarial assumptions used in the June 30, 2014 valuation were based on the results of an M L actuarial experience study for the period from 1997 to 2011, including updates to salary increase, 3 mortality and retirement rates. The Experience Study report can be obtained at the CalPERS website under Forms and Publications. �a Changes of Assumptions *; R GASB 68, paragraph 68 states that the long long-term expected rate of return should be determined net � of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50 percent used for the June 30, 2014 measurement date was net of administrative E expenses. The discount rate of 7.65 percent used for the June 30, 2015 measurement date is without _ reduction of pension plan administrative expense. 0 Discount Rate ; The discount rate used to measure the total pension liability was 7.65 percent. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the o actuarially assumed discount rate. Based on the testing of the plans, the test revealed that the assets o would not run out. Therefore, the current 7.65 percent discount rate is appropriate and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of 7.65 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called "GASB Crossover Testing Report" that can be obtained on CaIPERS' website under the GASB 68 section. U_ The long-term expected rate of return on pension plan investments was determined using a building- M block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Q co In determining the long-term expected rate of return, staff took into account both short-term and long- co term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on o time and as scheduled in all future years. Using historical returns of all the funds' asset classes, C expected compound (geometric) returns were calculated over the short-term (first 10 years) and the W long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both Fa short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present c value of benefits for cash flows as the one calculated using both short-term and long-term returns. The LL expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. a c aD E �o r r Q r p^�1Y11w., E fi V Y Q 36 Packet Pg.486 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 m (7) Pension Plan, continued The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset 3 allocation. These rates of return are net of administrative expenses. New Strategic Real Return Real Return Asset Class Allocation Years 1 - 10' Years 11+2 Global Equity 51.0% 5.25% 5.71% Global Fixed Income 19.0 0.99 2.43 c Inflation Sensitive 6.0 0.45 3.36 E Private Equity 10.0 6.83 6.95 Real Estate 10.0 4.50 5.13 0 Infrastructure and Forestland 2.0 4.50 5.09 Liquidity 2.0 (0.55) (1.05) d 'An expected inflation of 2.5% used for this period o 2 A expected inflation of 3.0% used for this period o CL Pension Plan Fiduciary Net Position W The plan fiduciary net position disclosed in the GASB 68 accounting valuation report may differ from the 5 plan assets reported in the funding actuarial valuation report due to several reasons. First, for the accounting valuations, CaIPERS must keep items such as deficiency reserves, fiduciary self-insurance U. and OPEB expense included as assets. These amounts are excluded for rate setting purposes in the funding actuarial valuation. In addition, differences may result from early Comprehensive Annual Financial Report closing and final reconciled reserves. a Changes in Net Pension Liability 00 T oo The following table shows the Plan's proportionate share of the net pension liability of the City's plan over the measurement period: a a) Increase Decrease Total Pension Plan Fiduciary Net Pension Liability Net Position Liability c a b c = a - b U. Balance at: 6/30/2014 (VD) $ 182,054,201 $ 141,121,803 $ 40,932,398 Balance at: 6/30/2015 (MD) 184,064,118 139,146,255 44,917,863 a Net Changes during 2014-15 2,009,917 (1,975,548) 3,985,465 Y E Sensitivity of the Net Pension Liability to Changes in the Discount Rate r The following presents the net pension liability of the Plan as of the Measurement Date, calculated a using the discount rate of 7.50 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.50 percent) or 1 percentage-point E higher (8.50 percent) than the current rate: U Q 37 Packet Pg.487 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 N d (7) Pension Plan, continued L Discount Rate— Current Discount Discount Rate + 3 1% (6.50%) Rate 7.50% 1% (8.5 % Plan's Net Pension Liability — Department Allocation 36% $ 68,746,040 $ 44,917,863 $ 25,222,701 d Subsequent Events ) c There were no subsequent events that would materially affect the results presented in this disclosure. Recognition of Gains and Losses Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position ° are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. o V The amortization period differs depending on the source of the gain or loss: Q a� Difference between projected and 5 year straight-line amortization actual earnings All other amounts Straight-line amortization over the average LL expected remaining service lives of all members that are provided with benefits c (active, inactive, and retired) as of the a beginning of the measurement period. 00 00 The expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired). o The EARSL for the Plan for the 2014-15 measurement period is 2.4 years, which was obtained by dividing the total service years of 6,904 (the sum of remaining service lifetimes of the active employees) by 2,924 (the total number of participants: active, inactive, and retired). Note that inactive employees and retirees have remaining service lifetimes equal to 0. Also note that total future service is based on the members' probability of decrementing due to an event other than receiving a cash refund. LL co Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions a Z For the measurement period ending June 30, 2015 (the measurement date), the Department recognized a pension expense of$1,414,171 for the Plan. E U f0 r Q i+ Q� E d V Q 38 Packet Pg.488 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT "' 5 Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 } w L (7) Pension Plan, continued As of June 30, 2016, the Department reports other amounts for the Plan as deferred outflow and L deferred inflow of resources related to pensions as follows: 3 m U) Deferred Outflows of Deferred Inflows of c Resources Resources d Pension contributions subsequent to 0 measurement date $3,607,951 $0 Differences between Expected and Actual w Experience 0 (971,986) E Changes of Assumptions 0 (1,845,803) V_ Net Difference between Projected and C Actual Earnings on Pension Plan o Investments 0 1,282,976 w Total $3,607,951 $(4,100,765) W The amounts above are net inflows and outflows recognized in the 2014-15 measurement period w expense. ° V $3,607,951 reported as deferred outflows of resources related to employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year W ended June 30, 2017. That and other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: R Deferred Measurement period Outflows/(Inflows) Ended June 30: of Resources c 2016 2,936,653 Q 2017 1,729,028 00 2018 923,945 co 2019 1,488,861 2020 0 0 2021 0 0 (8) Other Post-Employment Benefits R Plan Description LL The Department provides health benefits to all qualifying retirees and their spouses in accordance with Memorandums of Understanding under various labor agreements. a Eligibility Z C Employees are eligible for retiree health benefits if they retire from the Department on or after age 50 E with at least 10, 12 or 15 years of service, depending on bargaining unit, and are eligible for a PERS pension. The latest actuarial valuation of the plan occurred June 30, 2014. Membership consists of the w following: Q Retirees and beneficiaries receiving benefits 123 Active plan members 246 Total plan members 369 ;g Q 39 Packet Pg.489 i CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued x For the Year Ended June 30, 2016 ''A (8) Other Post-Employment Benefits Funding Policy L The contribution requirements of plan members and the Department are established and may be amended by the Board. 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. The Department has established an irrevocable trust to which pre-funding contributions are made. For fiscal year 2016, the Department has funded $2,401,131 for the current year. The Department pays up to the entire cost of health benefits for eligible retirees and their spouses, subject to the City's vesting schedule. CD Annual OPEB Cost and Net OPEB Obligation E The Department's annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in o 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 amortize any unfunded actuarial liabilities (or funding excess) over a period 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: ° t: 0 Actual required contribution (ARC) $2,794,000 0 Interest on new OPEB obligation 22,000 Amortization of net OPEB obligation (31,000) U Annual OPEB cost (expense) 2,785,000 Contributions made (2,401,131) LL Increase in net OPEB obligation 383,869 Net OPEB obligation - beginning of year 795,221 = Net OPEB obligation - end of year $1,179,090 a co T The Department's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and co the net OPEB obligation for 2014 and the two preceding years were as follows: t 0 Percentage of C Year Annual Paid Annual OPEB OPEB Ended OPEB Cost Contribution Cost Contibuted Obligation 6/30/2014 $ 2,438,000 3,872,869 159% 352,510 6/30/2015 2,699,032 2,256,321 84% 795,221 LL 6/30/2016 2,785,000 2,401,131 86% 1,179,090 c Funded Status and Funding Progress a As of June 30, 2014, the most recent actuarial valuation date, the plan was 38.2% funded. The actuarial accrued liability for benefits was $35,012,000, the actuarial value of assets was $13,380,000 E CD and the unfunded actuarial accrued liability (UAAL) was $21,632,000. The covered payroll (annual E payroll of active employees covered by the plan) was $15,531,000 and the ratio of the UAAL to the Y covered payroll was 139.3%. Q 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 = g assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined 0 regarding the funded status of the plan and the annual required contributions of the employer are Q subject to continual revision as actual results are compared with past expectations and new estimates 40 Packet Pg.490 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 .°-; (8) Other Post-Employment Benefits, continued _ are made about the future. The schedule of funding progress presents multi-year trend information D L about whether the actuarial value of plan assets is increasing or decreasing over time relative to the 3 actuarial accrued liabilities for benefits. U) 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 the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are a designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial E value of assets, consistent with the long-term perspective of the calculations. : 0. In the June 30, 2014, actuarial valuation, the entry age actuarial cost method was used. The actuarial o assumptions included a rate of return of 6.25% and annual healthcare cost trend rates of 7.5% initially, reduced by increments to an ultimate rate of 5% in 2021. Both rates included a 3% inflation assumption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization o period at June 30, 2015, was 18 years. o Q. Schedule of Funding Progress Actuarial UAAL as a U Actuarial Actuarial Accrued Unfunded % of Covered Valuation Value of Liability AAL Funded Ratio Covered Payroll =_ Date Assets(a) (AAL)(b) (UAAL)(b-a) (alb) Payroll(c) (b-a)lc u- 6/30/2010 $ - $28,676,000 $28,676,000 0.0% $12,619,000 227.2% 6/30/2012 8,556,000 28,831,000 20,275,000 29.7% 14,765,000 137.3% _ 6/30/2014 13,380,000 35,012,000 21,632,000 38.2% 15,531,000 139.3% Q w r oo v t 0 CL (D c R c U. �o Q .r c a� E U fQ Y rt+ Q _ E .0 U w Q 41 Packet Pg.491 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT :, a Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 N (9) Related Party Transactions Y The following is a summary of transactions and balances with the City of San Bernardino and its L various Departments as of and for the year ended June 30, 2016. 3 Water Sewer Receipts Utility Utility Total City of San Bernardino: Revenue from Water Charges $ 983,387 - 983,387 Revenue from Sewer Charges - 64,221 64,221 cn Revenue from Geothermal Charges 21,551 - 21,551 Billing & Collection Charges - Refuse 270,000 - 270,000 E Billing & Collection Charges - Storm Drain 4,602 - 4,602 a Billing & Collection Charges - Sewer Collection 63,000 - 63,000 0 Cost Reimbursement 69,400 - 69,400 Miscellaneous - 600 600 Total receipts from related parties $1,411,940 64,821 1,476,761 w Water Sewer 0 r- Payments Utility Utility Total 0 CL City of San Bernardino: W Worker's Compensation (Admin. Charges) $ 241,302 64,089 305,391 2a Printing Services 698 1,196 1,894 Postage 26,414 - 26,414 = Refuse Disposal Service 11,208 - 11,208 Consulting Services 3,158,832 - 3,158,832 Franchise Fee - 107,784 107,784 a Permits 87,760 7,203 94,963 00 Cost Reimbursement 9,488 2,646 12,134 Total payments to related parties $3,535,702 182,918 3,718,620 0 0. Water Sewer Receivables Utility Utility Total City of San Bernardino: c Related party receivable $ 842,909 39,356 882,265 c Accounts receivable, net 4,683 300 4,983 �o Due from other entities 29,929 113,651 143,580 = Total receivable from related parties $ 877,521 153,307 1,030,828 a Z Water Sewer a Payables Utility Utility Total E City of San Bernardino: y Related party payable $1,570,911 721,511 2,292,422 Q Accounts payable 18,109 - 18,109 Claims payable 1,048,326 246,180 1,294,506 E Total payable to related parties $2,637,346 967,691 3,605,037 a 42 Packet Pg. 492 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued Q., For the Year Ended June 30, 2016 ' w (10) Joint Ventures Colton/San Bernardino Regional Tertiary Treatment and Water Reclamation Authority D L 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 N and water reclamations systems, including the Regional Rapid Infiltration and Extraction Facility (RIX). 0 This authority is governed by a separate board consisting of four members; two appointed by the City of San Bernardino through the Department's BOWC and two appointed by the City Council of the City of Colton. Construction of RIX was administered by the Santa Ana Watershed Project Authority and was substantially completed during 1996. Administration and operation was turned over at that time. The cities of San Bernardino and Colton each have a measurable equity interest in the net position of RIX in a� proportion to its contributions, which are based on an 80% / 20% split, respectively. Substantially all of the assets of RIX are in the form of capital assets. Annual revenues (in the form of contributions from Q, the two member cities) are equal to annual expenses. The Department's equity interest in this joint o venture has been reported as an investment in joint venture in the accompanying statement of net a�L, position. The RIX complete financial statements may be obtained at City of San Bernardino Municipal Water Department at 444 W. Rialto Avenue San Bernardino, CA 92418. San Bernardino Public Safety Authority 0 On April 1, 1968, the City of San Bernardino and the County of San Bernardino formed the San o Bernardino Public Safety Authority (PSA), a joint powers authority, as a financing vehicle to construct public safety buildings and improvements to the wastewater treatment plant. In accordance with the terms of an installment purchase agreement, title to the capital assets financed through the PSA were T recognized as capital assets of the City at the inception of the installment purchase agreement between the City and the PSA. The City's remaining interest in the joint venture is in the form of cash and investments held by the PSA for debt service related activity. The Department's equity interest in these assets has been recognized in the accompanying statement of net position as an investment in joint = venture. _ a West End Water Development, Treatment and Conservation Joint Powers Authority 00 00 On August 15, 1990, the City of San Bernardino joined the West End Water Development, Treatment v and Conservation Joint Powers Authority (WEJPA) as a financing vehicle for construction of water o facilities. A three-member board consisting of one representative from each agency's governing body d governs the WEJPA. This joint venture was formed to provide a financing vehicle for the three member W agencies. This joint venture is currently inactive. (11) Commitments and Contingencies Risk Management U. Risk management activities are recorded in both utility funds. Significant losses are covered by = insurance for all major events except workers' compensation, for which the Department retains risk of a loss in conjunction with the City of San Bernardino's risk management program for workers compensation. Settlement amounts have not exceeded insurance coverage for the current year or the prior three years. Insurance coverage has been increased over the past several years. E The Department records an estimated liability for workers' compensation. Claims liabilities are based w on estimates of the ultimate cost of reported claims and an estimate for claims incurred but not reported a based upon historical experience. Workers' compensation claims liability is not discounted. a� E s U Rf r Q 43 Packet Pg.493 6.B.b CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 ` "" k (11) Commitments and Contingencies, continued _ The following are the changes in approximate aggregate liabilities for the year ended June 30, 2015 M L and June 30, 2016. During the past three fiscal (claims) years, the Department had no settlements or 3 judgments that exceeded pooled or insured coverage. There was also no significant reductions in pooled or insured liability coverage in fiscal year 2016. _ Water Sewer Claims Liabilities Utility Utility Total Balance, June 30, 2014 $ 731,496 268,107 999,603 0 Claims and changes in estimates 835,698 177,237 1,012,935 Claims payments (353,655) (205,671) (559,326) E Balance, June 30, 2015 1,213,539 239,673 1,453,212 a Claims and changes in estimates 119,427 81,607 201,034 0 Claims payments (284,640) (75,100) (359,740) a; Balance, June 30, 2016 $ 1,048,326 246,180 1,294,506 m t 0 Litigation r_ 0 In the ordinary course of operations, the Department is subject to claims and litigation from outside parties. After consultation with legal counsel, the Department believes the ultimate outcome of such matters, if any, will not materially affect its financial condition. c (12) Federal and State Grants = Grant funds received by the Department are subject to audit by the grantor agencies. Such audit could "' lead to requests for reimbursements to the grantor agencies for expenditures disallowed under terms of the grant. Management of the Department believes that such disallowances, if any, would not be a significant. The Department produces a Single Audit that details the use of grant and Consent Decree funds (see note 13 for information on the Consent Decree). V_ (13) Subsequent Events On November 16, 2016, the Department issued Series 2016 Water Revenue Bond in the amount of 0 $48,225,000. The proceeds of the 2016 Bonds will be used to (i) finance the acquisition and W construction of certain water system capital improvements (the "Project") of the Department; (ii) refund 70 outstanding obligations of the City of San Bernardino, California (the "City") relating to the Department; (iii) purchase a Municipal Bond Debt Service Reserve Insurance Policy in satisfaction of the Reserve Requirement (each as defined herein) for the 2016 Bonds; and (iv) pay the costs of issuance of the LL 2016 Bonds. c a r d E r U Q r C E t U f4 w a� a 44 Packet Pg.494 6 B= CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT , Notes to the Basic Financial Statements, continued _ For the Year Ended June 30, 2016 (13) Consent Decree In 1996, the City of San Bernardino filed a complaint against the United States of America, Department D L of the Army to recover damages, response costs and other available remedies relating to contamination 3 alleged to have originated at a World War II army installation known as Camp Ono. In March 2005, the in United States District Court, Central Division entered judgment, in the form of a consent decree, in the -a matter of City of San Bernardino v. United States of America. The Consent Decree settles the City's o 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 Department) to operate and maintain the Newmark Groundwater Superfund Site (Site). The Site consists of two u, operable units, the Newmark Operable Unit and the Muscoy Operable Unit. The Newmark Operable Unit was declared operational and functional in 1998. The Muscoy Operable unit was declared E operational and functional in 2007. a The Consent Decree provided for a payment of$69 million from the Army to the City for performance of o the work outlined in the Consent Decree. Upon acceptance of the Consent Decree, the Department received title to all facilities constructed by the United States Environmental Protection Agency (EPA) of the Site and agreed to operate and maintain the groundwater extraction and treatment system for a period of 50 years. The $69 million payment consisted of $59 million for operations and maintenance and $10 million for the construction of certain capital facilities that would be required in the future; the o funds are subject to strict limitations, contained in the Consent Decree, as to how the money may be - CL 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 u• not be used for costs incurred to operate, maintain, repair or retrofit components of the site extraction of treatment systems constructed by EPA. a In March 2006, the Department entered into a Guaranteed Investment Contract with AIG Match co Funding Corporation. The Department invested $16,482,039 of excess Consent Decree funds into an co interest bearing Escrow Fund investment with an interest rate of 4.95% per annum. These funds were invested to pay costs associated with the water facilities defined in the Consent Decree for years 2035- - 2056. An additional $50 million was used to purchase a blended insurance policy to provide a financial a vehicle that provides cost gap coverage for the first 30 years of 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 concerns arose regarding AIG's financial credibility, in October 2009, the Department negotiated and accepted a "payout" in the amount of ;E- $18,661,876 which represented the principal and accrued interest as of that date. These funds are 3 currently invested in a diversified portfolio managed by PFM Asset Management and present in more = detail in note 3. a .r c d E w Q u c d E t � a 45 - Packet Pg.495 CITY OF SAN BERNARDINO MUNICIPAL WATER DEPARTMENT Notes to the Basic Financial Statements, continued For the Year Ended June 30, 2016 '°� N L (14) Net Position Net position at June 30, 2016, consisted of the following: L Water Sewer Utility Utility Total Net investment in capital assets: Non-depreciable assets $ 9,586,423 28,562,968 38,149,391 Depreciable assets 269,832,172 140,575,269 410,407,441 Accumulated Depreciation and amortization (90,318,935) (101,999,162) (192,318,097) ca Less: related debt N Notes payable, current portion 1,813,782 300,000 2,113,782 Notes payable, noncurrent portion 17,554,880 900,000 18,454,880 Total net investment in capital assets 169,730,998 65,939,075 235,670,073 a w Restricted for capital-related fees: Cash and cash equivalents, restricted for capital-related fees - 7,814,086 7,814,086 Unrestricted: m Designated for operating reserve - 2,309,354 2,309,354 Designated for rate stabilization reserve - 2,679,273 2,679,273 0 Designated for emergency replacement reserve - 1,924,381 1,924,381 0 Designated for capital replacement reserve - 9,407,667 9,407,667 0- (D Undesignated (17,407,765) 9,252,054 (8,155,711) W Total unrestricted (17,407,765) 25,572,729 8,164,964 0 C Total net position $ 152,323,233 $ 99,325,890 $ 251,649,123 LL c c Q 00 r- 00 0 0- (D m c R c LL c c a c Q) E U Y Q i� c I_ U rt+ W Q 46 Packet Pg.496 N G1 a+ a+ L 3 m c L a� r ca c (D E a (D 0 L 4) O t O Q PAGE INTENTIONALLY LEFT BLANK R c R c R c c Q Co T 00 O a- 4) {i U- a E U a� Q r C d E t U R w a 47 Packet Pg. 497 N L 3 a� M L d Y) w c a� E t c. m L d W 0 STATISTICAL SECTION CL CD w (Unaudited) _ U- _ _ a co co t 0 CL m ii a _ a� E U lC r a w _ d E 0 w a 47 `' Packet Pg.498 N N w M L 3 m �a c �a L r N C d E t Q d 0 L O y L O FINANCIAL TRENDS U These schedules contain trend informaton to help the = U. reader understand how the Department's financial performance and well-being have changed over time. a 00 T 00 !t L O Q. Nd I.f. _ R _ _ _ a r E t U a r E U w Q 48 Packet Pg.499 i . City of San Bernardino Municipal Water Department Changes in Net Poistion Last Ten Fiscal Years Total Non- Total Total Operating Total � Fiscal Year Operating Operating Operating Income Contributed Changes in Net �= Ended Revenue Expense Income (Expense) Capital Position L d 6/30/2007 47,914,999 48,791,026 (876,027) 2,106,963 14,904,830 16,135,766 3 m 6/30/2008 46,757,411 54,172,974 (7,415,563) 3,838,588 13,263,336 9,686,361 = 6/30/2009 47,171,798 54,044,608 (6,872,810) 2,717,707 5,197,854 1,042,751 6/30/2010 47,808,997 57,965,395 (10,156,398) 1,375,536 7,510,777 (1,270,085) N r 6/30/2011 54,280,835 56,328,523 (2,047,688) 1,408,498 4,390,162 3,750,972 1 E 1 6/30/2012 60,756,697 58,971,535 1,785,162 1,974,266 3,055,921 6,815,349 _ 1 Q. 6/30/2013 61,883,615 57,327,537 4,556,078 1,861,758 4,896,921 11,314,757 m m 6/30/2014 62,292,428 57,965,395 4,327,033 1,375,536 7,510,777 13,213,346 6/30/2015 57,805,304 55,074,661 2,730,643 3,801,830 4,977,945 11,510,418 t 6/30/2016 55,376,650 53,529,824 1,846,826 2,059,111 4,271,325 8,177,262 0 0 Source: Department's annual reports is .v Changes in Net Position- Combined Funds ' 18,000 LL c 16,000 14,000 = 0 C -E 12,000 Q 10,000 00 8,000 Changes in Net Position 00 6,000 FS 4,000 - " ,11 (2,000) -007--2008 2009--2010-201-1-2012 -20-1-3-2014--2015--2DI6 (4,000) C t9 ;{ _C LL fC 1 � _ C a w _ d E r w a r U Q 49 Packet Pg.500 6.B.b City of San Bernardino Municipal Water Department Water Fund Changes in Net Position Last Ten Fiscal Years Total Non- y Total Total Operating Total Fiscal Year Operating Operating Operating Income Contributed Changes in Net = Ended Revenue Expense Income (Expense) Capital Position L 6/30/2007 28,232,366 28,069,392 162,974 3,487,628 11,931,117 15,581,719 U) 6/30/2008 27,337,093 32,453,101 (5,116,008) 3,479,605 11,397,947 9,761,544 c CU 6/30/2009 27,258,954 32,934,974 (5,676,020) 2,853,518 3,919,197 1,096,695 a� 6/30/2010 27,688,694 31,953,080 (4,264,386) 2,101,540 5,829,803 3,666,957 r c 6/30/2011 33,027,707 35,811,915 (2,784,208) 2,025,029 2,782,168 2,022,989 t 6/30/2012 37,106,217 39,155,830 (2,049,613) 2,436,449 2,384,710 2,771,546 Q a> 6/30/2013 37,868,846 37,430,224 438,622 2,492,448 3,421,521 6,352,591 L d 6/30/2014 36,671,903 36,041,616 630,287 2,504,705 6,521,601 9,656,593 t0 a� 6/30/2015 33,121,128 35,504,582 (2,383,454) 2,702,953 3,905,104 4,224,603 _ w. O 6/30/2016 30,001,871 34,834,362 (4,832,491) 2,283,230 2,812,192 262,931 0 Q. Source: Department's annual reports .v c Changes in Net Position-Water Fund LL N 18,000 16,000 ---- _ 0 14,000 '0 Q 12,000 00 10,000 -- 00 fr �' 8,000 R Changes in Net Position 6,000 O Q. 4,000 (D 2,000 f6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 to C LL N 7 C C Q r r C d E t U R r w Q w C U E t w Q 50 Packet Pg. 501 i City of San Bernardino Municipal Water Department Sewer Fund Changes in Net Position ' Last Ten Fiscal Years Total Non- N Total Total Operating Total D Fiscal Year Operating Operating Operating Income Contributed Changes in Net Ended Revenue Expense Income (Expense) Capital Position L d 6/30/2007 21,002,484 22,041,485 (1,039,001) (1,380,665) 2,973,713 554,047 ai 6/30/2008 20,847,984 23,147,539 (2,299,555) 358,983 1,865,389 (75,183) ca 6/30/2009 21,208,021 22,404,811 (1,196,790) (135,811) 1,278,657 (53,944) .r 6/30/2010 22,424,943 24,474,747 (2,049,804) (19,598) 495,768 (1,573,634) 'S rn 6/30/2011 23,433,833 22,697,313 736,520 (616,531) 1,607,994 1,727,983 y E 6/30/2012 25,888,729 22,053,954 3,834,775 (462,183) 671,211 4,043,803 ca O_ CD 6/30/2013 26,414,653 22,297,197 4,117,456 (630,690) 1,475,400 4,962,166 0 L d 6/30/2014 25,670,774 21,974,028 3,696,746 (1,129,169) 989,176 3,556,753 6/30/2015 24,734,425 19,620,328 5,114,097 1,098,877 1,072,841 7,285,815 m t w- 6/30/2016 25,410,740 18,731,423 6,679,317 (224,119) 1,459,133 7,914,331 O r_ O Source: Department's annual reports y R .v c Changes in Net Position-Sewer Fund LL 10,000 — — --- 70 c � m 8,000 � C o Q 6,000 00 4,000 Changes in Net Position 2,000 _�..._ _...._.. _ O CL 007 2008 2009 2(J0 2011 2012 2013 2014 2015 2016 0) (2,000) tC (4,000) -- -------- --- - - c co c LL is Q c d E s �a r Q r c E U Q 51 Packet Pg. 502 City of San Bernardino Municipal Water Department Net Position by Component Last Ten Fiscal Years N Fiscal Year Net Investment in Restricted Net Unrestricted Total Net Ended Capital Assets Position Net Position Position L 6/30/2007 188,196,495 27,280,333 22,890,450 238,367,278 6/30/2008 196,892,664 24,205,033 26,955,942 248,053,639 L r 6/30/2009 199,628,149 19,831,726 29,636,515 249,096,390 N w 6/30/2010 204,066,502 11,992,059 35,131,152 251,189,713 a E t= 6/30/2011 206,520,977 8,276,462 40,143,246 254,940,685 a d 0 6/30/2012 212,490,593 7,389,246 43,545,621 263,425,460 2 6/30/2013 200,072,942 7,799,773 69,315,171 277,187,886 0 0 6/30/2014 206,663,567 7,515,658 66,524,589 280,703,814 0 c. d 6/30/2015 223,053,269 7,633,049 12,510,969 243,197,287 �a 6/30/2016 235,670,073 7,814,086 7,890,390 251,374,549 R c U- Source: Department's annual reports c c Q co Net Position by Component Combined (in 1000s) 0 CL 300,000 Unrestricted Net Position w 250,000 c s Restricted Net Position H 200,000 LL 150,000 ■Net Investment in Capital Assets c 100,000 Q 50,000 E v 2007 2008 2009 2010 20112012 2013 2014 2015 2016 co r w Q r c 0 E t v M Q 52 Packet Pg. 503 6.B.b City of San Bernardino Municipal Water Department Net Position by Component-Water Fund Last Ten Fiscal Years N Fiscal Year Net Investment in Restricted Unrestricted Total Net LD Ended Capital Assets Net Position Net Position Position L 6/30/2007 122,080,723 11,294,440 4,927,609 138,302,772 3 6/30/2008 130,610,364 8,406,696 9,047,256 148,064,316 = L 6/30/2009 133,834,066 6,328,449 8,998,496 149,161,011 R 6/30/2010 139,688,690 1,528,434 11,610,844 152,827,968 JA c m 6/30/2011 140,912,873 13,938,084 154,850,957 E a 6/30/2012 148,063,104 41,320 13,658,195 161,762,619 0 L d 6/30/2013 156,758,127 - 12,133,904 168,892,031 m 6/30/2014 163,797,283 11,728,071 175,525,354 0 6/30/2015 166,963,238 - (15,152,937) 151,810,301 t 0 Q. d 6/30/2016 169,730,998 - (17,657,766) 152,073,232 FU U Source: Department's annual reports LL Net Position by Component: _ Water Fund (in 1000s) a 00 T N 200,000 V0 0 Unrestricted Net Position 150,000 0 o Q s m t' 100,000 ■Restricted Net Position R 50,000 N Net Investment in Capital c Assets = LL 07200820092010201120122013201420152016 (50,000) Q _ m E r U fQ w Q _ N E U Q 53 r� WE 1 04 City of San Bernardino Municipal Water Department Net Position By Component-Sewer Fund Last Ten Fiscal Years N Net Investment Fiscal Year in Capital Restricted Unrestricted Total Net Ended Assets Net Position Net Position Position 3 m 6/30/2007 66,115,772 15,985,893 17,962,841 100,064,506 CO 6/30/2008 66,282,300 15,798,337 17,908,686 99,989,323 6/30/2009 65,794,083 13,503,277 20,638,019 99,935,379 6/30/2010 64,377,812 10,463,625 23,520,308 98,361,745 E �a 6/30/2011 65,608,104 8,276,462 26,205,162 100,089,728 0 L 6/30/2012 64,427,489 7,347,926 29,887,426 101,662,841 as 6/30/2013 43,314,815 7,799,733 57,181,267 108,295,815 r 0 6/30/2014 42,866,284 7,515,658 54,796,518 105,178,460 t: 0 Q. a� 6/30/2015 56,090,031 7,633,049 27,663,906 91,386,986 6/30/2016 65,939,075 7,814,086 25,548,156 99,301,317 U_ 0 Source: Department's annual reports = Q co Net Position by Component: Sewer Fund (in 00 1000s) 0 C. a) 120,000 ^ F3 Unrestricted Net Position x 100,000 — s 80,000 — a Restricted Net Position 60,000 LL ®Net Investment in Capital � 40,000 Assets = _ 20,000 Q w aD r a+ Q r _ d E t V a-+ r+ Q 54 Packet Pg. 505 City of San Bernardino Municipal Water Department Water Fund Revenue by Type Last Ten Fiscal Years Air- N Gain on Total Non N Fiscal Year Service Other Total Operating Interest Rental Other asset Noncapital Operating y Ended Water Sales Charges/Fees Services Revenue Income Income Income disposition grant funds Income 6/30/2007 25,136,912 2,929,446 166,008 28,232,366 1,180,789 82,944 227,509 37,377 2,300,151 3,828,770 L 6/30/2008 24,194,275 3,005,938 136,880 27,337,093 1,613,192 95,818 178,348 - 2,715,957 4,603,315 3 41 6/30/2009 24,147,627 2,991,468 119,859 27,258,954 1,008,607 101,130 - 309,708 2,043,889 3,463,334 N 6/30/2010 24,436,854 3,118,571 133,269 27,688,694 578,912 98,638 175,782 8,988 1,894,624 2,756,944 C t0 L 6/30/2011 29,782,786 3,101,431 143,489 33,027,707 451,927 117,454 59,960 - 1,928,999 2,558,340 4: M 6/30/2012 33,315,084 3,665,354 125,779 37,106,217 219,027 133,400 1,041,667 1,838,223 3,232,317 N 6/30/2013 34,252,357 3,476,061 140,429 37,868,846 - 122,826 211,032 3,110,201 3,444,059 41 6/30/2014 34,777,112 1,754,614 140,176 36,671,903 93,428 160,089 478,512 4,446 2,030,066 2,766,541 E Ri 6/30/2015 31,217,534 1,789,654 113,940 33,121,128 54,786 181,809 545,840 - 2,089,637 2,872,072 d 6/30/2016 28,293,790 1,604,472 103,609 30,001,871 63,566 134,845 495,298 1,696,219 2,389,928 a L 41 Source: Department's annual reports M r w O Operating Revenue by Type-Water Fund p !z 40,000 y m 35,000 cl� c 30,000 25,000 U 20,000 ■Other Services R 15,000 ■Service Charges/Fees 10,000 iL 5,000 ■Water Sales . .ffm t6 o O°^ O°$ CY' Oti0 Oti~ Otiry Otis Otib 01y O,G = o\ti o\ti o\ti o\ti o\ti o\ti o\ti o\ti o\ti oP Q 00 r 00 Non-Operating Revenue by Type:Water Fund O 5,000 ---- - Noncapital grant funds t2 C 4,500 N 4,000 - ®Gain on asset disposition s3,500 ■Other Income 3,000 --- .0 2,500 ■Rental Income 2,000 ■Interest Income 1,500 1,000 LL 500 R O°^ CP6 0� 010 011 01'Y 01'5 01A 01h 016 � O\ 6\ 6\ 6\ 6\ 6\ 6\ 6\ 6\ G\ w C d t U f6 r a� Q G N U a 55 Packet Pg. 506 6.B.b City of San Bernardino Municipal Water Department Sewer Fund Revenue by Type Last Ten Fiscal Years Gain on Asset y Fiscal Sewer Other Total Disposition Total Non ' Year Treatment Industrial Operating Operating Interest Rental Other /Joint Operating Ended Revenue Waste Revenue Revenue Income Income Income Venture Income L d 6/30/2007 20,083,001 390,328 529,155 21,002,484 1,906,369 29,101 1,935,470 'S O 6/30/2008 20,009,959 372,631 465,394 20,847,984 2,319,570 29,425 2,348,995 0 6/30/2009 20,124,192 406,686 677,142 21,208,021 1,652,562 26,826 1,679,388 s- at Y 6/30/2010 20,771,749 431,300 1,221,894 22,424,942 1,603,840 26,303 1,630,143 rn 6/30/2011 21,833,085 379,316 1,221,431 23,433,833 817,740 23,517 41,609 882,866 C Q 6/30/2012 24,250,417 376,550 1,261,762 25,888,729 812,885 21,907 - 834,792 E 6/30/2013 25,261,792 296,153 856,708 26,414,654 340,689 22,574 - 363,263 N O 6/30/2014 25,350,988 319,786 - 25,670,774 443,836 20,669 202,078 666,583 6/30/2015 24,399,415 335,010 24,734,425 481,211 700 498,247 345,884 1,326,042 d 6/30/2016 25,039,569 380,171 25,419,740 658,456 41,498 359,800 1,059,754 Source: Department's annual reports O O 0- Operating Revenue by Type-Sewer Fund m 30,000 e U N 25,000 C 0 20,000 O LL 15,000 le�,Other Operating Revenue 0- 10,000 M Industrial Waste >_ C 5,000 0 Sewer Treatment Revenue Q 00 00 61 ,O O 0 a m L) Non-Operating Revenue by Type-Sewer Fund N 2,500 LL 0 c 2,000 Gain on Asset Disposition/Joint 7 1,500 Venture Other Income Q 1,000 K Rental Income C 500 O E ■Interest Income U U 001 000 000 0y0 6ti, 6111 0,0 O,yA 01y 016 R3 o\ti o\ti 61,p O\V o\� o\� o\ti o\ti o\ti o\� < r c d E U w Q 56 Packet Pg. 507 6.B.b City of San Bernardino Municipal Water Department Water Fund Expenses by Type Last Ten Fiscal Years Plant Fiscal Administration& Operations Depreciation Total Loss on Other Non- Total Non- to Year Customer and and Operating Interest asset operating Operating Ended Service Distribution Engineering Maintenance Amortization Expense Expense disposition expense Expense 6/30/2007 9,142,746 10,532,739 2,334,538 1,994,341 4,065,028 28,069,392 313,450 - 27,692 341,142 M 3. tv 6/30/2008 12,493,276 11,250,830 2,405,221 1,813,310 4,490,464 32,453,101 592,182 531,528 - 1,123,710 ?„ N 6/30/2009 11,901,700 10,908,332 3,046,765 1,853,244 5,224,933 32,934,974 601,795 - 8,021 609,816 fn 6/30/2010 11,552,062 11,209,298 2,204,374 1,577,642 5,409,704 31,953,080 175,782 8,988 1,894,624 2,079,394 l'0 L 6/30/2011 15,489,152 10,440,753 2,220,956 1,634,919 5,396,135 35,181,915 531,839 1,472 - 533,311 O w M 6/30/2012 16,304,830 12,959,507 2,492,056 1,628,764 5,770,673 39,155,830 526,915 268,953 795,868 6/30/2013 16,149,788 11,073,338 2,813,459 1,888,236 5,505,403 37,430,224 689,665 261,946 951,611 it C 6/30/2014 14,410,400 11,395,305 2,426,717 1,837,556 5,971,638 36,041,616 261,836 - 261,836 tv E 6/30/2015 13,244,552 12,467,017 2,439,170 1,988,719 5,365,124 35,504,582 169,119 169,119 sZ 6/30/2016 13,313,085 11,406,861 2,326,551 1,978,534 5,809,331 34,834,362 106,698 106,698 N Source: Department's annual reports i- N r l0 O Operating Expenses by Type-Water Fund O 45,000 r_ -O 40,000 -- 0 35,000 0- ° 30,000 ■Depreciation and Amortization 0) � 25,000 20,000 ■Maintenance f4 15,000 ■Engineering 'U 10,000 5,000 ■Plant Operations and Distribution ■Administration&Customer Service L= ~ b\O rod° 4 4, 3° b\° 4° b0, b\O c0 C Q Non-Operating Expense by Type:Water Fund 00 r 2,500 00 Other Non-operating expense tt' 2,000 1,500 ( ■Loss on asset disposition O Q 1,000 ■Interest Expense tv 500 f4 - U e°O^ 6 0 6~�O O�ti°1° O�ry°1~ O�tie O\tie O�ti°~p O\V°1y O\tiSO 0 b\3 S, 613 613 613 6\3 b\N 603 603 q1 _ LL 3 C Q r C N t U f9 r-r Q G 0) U Q 57 Packet Pg. 508 City of San Bernardino Municipal Water Department Sewer Fund Expenses by Type Last Ten Fiscal Years Loss on Asset N d Fiscal Administration Depreciation Disposition Other Non- Total Non- Year &Customer Plant and Total Operating Interest /Joint operating Operating Ended Service Operations Engineering Maintenance Amortization Expense Expense Venture expense Expense L 6/30/2007 3,180,710 10,388,472 45,794 3,088,137 5,338,372 22,041,485 2,021,326 2,037 1,292,772 3,316,135 3 tv 6/30/2008 4,318,939 10,293,707 32,336 3,138,509 5,364,048 23,147,539 1,868,033 3,784 118,195 1,990,012 (n 6/30/2009 3,334,540 10,237,490 16,278 2,928,189 5,888,314 22,404,811 1,701,371 3,736 110,092 1,815,199 R 6/30/2010 5,807,692 10,170,647 - 3,059,780 5,436,628 24,474,747 1,529,650 2,142 117,949 1,649,741 N 6/30/2011 3,989,616 10,627,225 3,108,701 4,971,771 22,697,313 1,343,649 - 155,748 1,499,397 { N 6/30/2012 3,823,627 10,328,073 3,257,127 4,645,127 22,053,954 1,147,810 34,114 118,051 1,299,975 C 6/30/2013 4,454,713 10,040,895 3,392,868 4,408,721 22,297,197 828,129 11,644 154,180 993,953 E 6/30/2014 5,345,726 9,528,218 527,294 3,146,275 3,426,515 21,974,028 557,049 16,244 1,238,703 1,811,996 M 41 6/30/2015 4,016,198 9,292,501 534,226 2,906,853 2,870,550 19,620,328 227,165 - 227,165 I' 6/30/2016 4,299,808 9,800,283 464,554 2,874,352 1,292,426 18,731,423 167,795 (1,116,087) 359,800 (588,492) Source: Department's annual reports d L r w. O O Operating Expenses by Type-Sewer Fund a 30,000 25,000 td1, 0 t/ r 20,000 - - - -° -°- N Depreciation and Amortization C tC 15,000 N Maintenance C 10,000 ■Engineering 5,000 ■Plant Operations 3 ■Administration&Customer Service C C O\��1 O\v�0 O\ry�°�O�~o1O 0��01~O�vo1ry O�tiO13 O�vO�p O�vO1y O�~o16 00 T 00 Non-Operating Expense by Type:Sewer Fund o 4000 sz N � -- _- .... ;.Other Non-operating expense � c 3,500 3,000 o 0 Loss on Asset Disposition/Joint 2,500 Venture V 2,000 ■Interest Expense @ 1,500 C 1,000 (L 500 t4 (500) - -ocP-��-s*-ti� 1 ,l, ti ti ,t0 .t0 ,10 x.10 .10 .t0 .t0 C ,0,#,\ w C a� E .0 U r Q G E s Q 58 Packet Pg. 509 6.B.b a� w L 3 U) L :r _ a� E �a CL U 0 L it 0 t: 0 DEBT CAPACITY INFORMATION _ These schedules contain information to help the reader assess the affordability of the Department's current level of outstanding debt and ability to issue debt in the future. a 0 _ LL t0 _ C a Z _ E U w Q _ d E t U r Q 59 Packet Pg. 510 City of San Bernardino Municipal Water Department Water Fund Debt Service Coverage Last Ten Fiscal Years Net Operating Net Net Non- Amount (D Fiscal Total Expenses Operating Operating Available for Year Operating (Excluding) Income Income/ Debt Total Debt Coverage Ended Revenue Depreciation (Loss) (Expense) Service Principal Interest Service Ratio 6/30/2007 28,232,366 24,004,364 4,228,002 3,487,628 7,715,630 523,644 582,772 1,106,416 6.97 6/30/2008 27,337,093 27,962,637 (625,544) 3,479,605 2,854,061 541,079 485,626 1,026,705 2.78 6/30/2009 27,258,954 27,710,041 (451,087) 2,853,518 2,402,431 559,106 603,368 1,162,474 2.07 +; ca 6/30/2010 27,688,694 26,543,376 1,145,318 2,101,540 3,246,858 956,106 667,146 1,623,252 2.00 Y) w 6/30/2011 33,027,707 29,785,780 3,241,927 2,025,029 5,266,956 1,352,148 548,318 1,900,466 2.77 m E 6/30/2012 37,106,217 33,385,157 3,721,060 2,436,449 6,157,509 974,027 505,819 1,479,846 4.16 R 6/30/2013 37,868,846 31,924,821 5,944,025 2,492,448 8,436,473 1,227,491 547,616 1,775,107 4.75 m L 6/30/2014 36,671,903 30,069,978 6,601,925 2,504,705 9,106,630 1,658,265 660,854 2,319,119 3.93 �S 6/30/2015 33,121,128 30,139,458 2,981,670 2,702,953 5,684,623 1,748,054 570,434 2,318,488 2.45 y 6/30/2016 30,001,871 29,025,031 976,840 2,283,230 3,260,070 1,813,594 523,274 2,336,868 1.40 V Source: Department's annual reports Q d C N t= LL C G Q 00 r 00 O !Z d fY RS C to C LL l4 C C a r d E U t6 r Q r C U U r a GO Packet Pg. 511 6Bb i`' �s City of San Bernardino Municipal Water Department Sewer Fund Debt Service Coverage Last Ten Fiscal Years Net Operating Net Non- U) Total Expenses Net Operating Operating Amount w Fiscal Year Operating (Excluding) Income Income/ Available for Total Debt Coverage Ended Revenue Depreciation (Loss) (Expense) Debt Service Principal Interest Service Ratio L 6/30/2007 21,002,484 16,703,113 4,299,371 (1,380,665) 2,918,706 3,761,442 2,003,864 5,765,306 0.51 d 3 tv 6/30/2008 20,847,984 17,783,491 3,064,493 358,983 3,423,476 3,823,275 1,855,515 5,678,790 0.60 to C 6/30/2009 21,208,021 16,516,497 4,691,524 (135,811) 4,555,713 4,197,317 1,687,518 5,884,835 0.77 tt3 d 6/30/2010 22,424,942 19,038,119 3,386,823 (19,598) 3,367,225 4,181,342 1,635,707 5,817,049 0.58 R 6/30/2011 23,433,833 17,725,542 5,708,291 (616,531) 5,091,760 2,130,378 3,706,195 5,836,573 0.87 U) 6/30/2012 25,888,729 17,408,827 8,479,902 (462,183) 8,017,719 4,417,731 1,166,496 5,584,227 1.44 O O E 6/30/2013 26,414,654 17,888,476 8,526,178 (630,690) 7,895,488 4,724,227 757,010 5,481,237 1.44 t= O 6/30/2014 25,670,774 18,547,513 7,123,261 (1,129,169) 5,994,092 4,424,090 747,460 5,171,550 1.16 N D 6/30/2015 24,734,425 16,749,778 7,984,647 1,098,877 9,083,524 4,629,425 568,888 5,198,313 1.75 y R 6/30/2016 25,410,740 17,438,997 7,971,743 (224,119) 7,747,624 300,000 - 300,000 25.83 may' O Source: Department's annual reports 4- O O t2 61 _R U O R C L7. to O C C a 00 V- 00 O CL 1.1. U. t. Q r (y V i� i� Q it c� C V r Q Gi Packet Pg. 512 L L 3 c L Y E t M Q L Q 0 0 DEMOGRAPHIC AND ECONOMIC INFORMATION ccU C These schedules offer demographic and economic indicators U- to help the reader understand the environment within which the Department's financial activities take place. a co co 0 a. as M 'v C c LL R 3 c c a w E U r w a r U R w 62 Packet Pg. 513 6.B.b City of San Bernardino Municipal Water Department Demographic Statistics Last Ten Fiscal Years Estimated Personal Per Capita Fiscal Year Population Income(In Personal Unemployment y N Ended (1) Thousands) Income(2) Rate(3) 6/30/2007 204,620 6,248,072 30,535 5.80% L 6/30/2008 205,493 6,318,704 30,749 8.30% d 6/30/2009 208,318 6,198,919 29,757 12.90% U) 6/30/2010 209,924 6,256,785 29,805 13.70% O tC L 6/30/2011 210,108 6,559,152 31,218 13.00% 4; N 6/30/2012 210,753 6,807,533 32,301 11.50% N 6/30/2013 211,994 7,001,102 33,025 9.80% d 6/30/2014 212,584 7,070,119 33,258 8.20% E to 6/30/2015 213,933 n/a n/a 7.30% fl N 6/30/2016 215,491 n/a n/a 5.40% L (1) California Department of Finance M (2) U.S.Department of Commerce,Bureau of Economic Analys for 2006-2013(Riverside-San Bernardino MSA) 3: (3) State of California,Economic Development Department;City of San Bernardino Economic Development Dept CD *Most recent complete year available. Information for 2015 and 2016 was unavailable. �- O Population Personal Income O 218,000 --- 8,000,000 Q" N 216,000 7,000,000 .�1-- 214,000 ! 6,000,000 - 212,000 210,000 ( 5,000,000 U 208,000 41000,000 2__'___ 3,000,000 C 204,000 2,000,000 202,000 200,000 1,000,000 76 198,000 ,p C CP^ 00$ CS' 010 011 01ry Ory3 O,b Oyh Orb 001 Opt 1P 6_1O I,- IZ5 6,111 Orb Ooh 0 C O\10\ry ro\ry0\ry b\�0\ry 0\10\ry�o\30\ry�o\�0\ry�o\30\ry�o\30\ry 6\30\ry ro\30\ry (o\30\ 1§1 tyro\30\ryC�\J\ryto\�0\ry0\ryro\�O\ryO\ry�o\ry0\ryo\�O\ry a ....._�__- 00 r 00 Per Capita Personal Income Unemployment O 35,000 ------ CL 0.16 -- d 30,000 0.14 25,000 0.12 fti 20,000 0.1 U C 15,000 0.08 ------- -- fp 10,000 0.06 5,000 0.04 IL 0.02 ,y00^ .y003 .1,000 ry010 ,1,011 'L01ry 'L013 'L01b 'L015 1 010 011 01ry 013 0,tib 01y C O\ O\ O\ O\ O\ O\ O\ O\ O\ ry00 ry000 ry" ry ry ry ry ry ry Q O\3 0\3 6\3 b\3 O\3 6\3 6\3 0\3 6\3 O\ O\ O\ O\ O\ O\ O\ O\ O\ O\3 6\3 IS, d\3 IS, 6\3 411 IS; IS, � C N E t U r Q r G 0) E U Y a 63 Packet Pg. 514 i 6.B.b City of San Bernardino Municipal Water Department Major Employers Current Year and Ten Years Ago Fiscal Year 2016 Fiscal Year 2007* Employer Ranking Number of Employees Ranking Number of Employees Stater Brothers 1 18,000 L Q� County of San Bernardino 2 17,395 9 1000+ 3 m San Bernardino City Unified School District 3 12,629 7 1000+ California State University,San Bernardino 4 3,012 1 1000+ y ca Saint Bernardine Medical Center 5 1,400 Community Hospital of San Bernardino 6 1,200 4 1000+ E cl City of San Bernardino 7 1,067 3 1000+ ar San Bernardino Community College District 8 862 8 1000+ 0 L The Sun Newspaper 9 526 M Blood Bank of San Bernardino 10 340 (D a- State of California,Department of Transportation 2 1000+ 0 t 0 Corona Regional Medical Center 5 1000+ y Renzenberger,Inc. 6 1000+ is V C San Bernardino Valley College 10 1000+ U- *Actual employment figures not available C Source: City of San Bernardino Economic Development Department and City's Annual Financial Report = Q 00 jl t 0 I a> Q V C C LL 7 C C a a) E V f0 r w Q r C Q E V Q 64 Packet Pg. 515 s City of San Bernardino Municipal Water Department Authorized Positions History Last Ten Fiscal Years L Year End Water Fund Sewer Fund Total 2007 185.0 78.0 263.0 2008 194.0 79.0 273.0 2009 183.0 78.0 261.0 2010 167.0 84.0 251.0 2011 163.5 78.0 241.5 a; 2012 173.5 82.0 255.5 2013 173.5 82.0 255.5 !� 2014 185.5 72.5 258.0 d 2015 183.5 74.5 258.0 E 2016 188.5 83.5 272.0 Q. a� 0 Source: Department's records a� s w 0 V 0 a a� o: Authorized Position History LL 250.0 -- c Q 200.0 00 T 00 150.0 0 Water Fund o Q. 100.0 Sewer Fund 50.0 " c LL ca 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 c a E s Q c 0 E Ar a 65 Packet Pg. 516 m L d 3 m c m L N C N E fQ CD L d R Q1 0 r- 0 0. REVENUE CAPACITY These schedules contain information to help the reader assess LL the Department's significant revenue sources. a �r 0 a. a� 'v c c LL cC 7 C C Q r w C d E t 0 t9 w r.+ Q C E 0 Q 66 Packet Pg. 517 City of San Bernardino Municipal Water Department Water Rates:Minimum Monthly Charge Last Ten Fiscal Years N r ($/month) Effective Date 1/2" 5/8" 3/4" 1" 1-1/2" 2" 3" 4" 6" 8" 10" 12" a) 7/1/2007 8.59 11.47 13.71 24.6 34.36 58.43 99.19 178.57 267.84 334.8 401.82 a3i 7/1/2008 8.88 11.84 14.16 25.41 35.49 60.35 102.46 184.47 276.67 345.84 415.08 7/1/2009 8.88 11.84 14.16 25.41 35.49 60.35 102.46 184.47 276.67 345.84 415.08 C 2/1/2010 10.55 10.55 13.00 17.90 30.15 44.85 79.15 128.15 250.70 397.75 569.30 L 1/1/2011 12.20 12.20 15.15 21.00 35.75 53.45 94.75 153.70 301.15 478.10 684.55 a? 1/1/2012 12.90 12.90 16.15 22.60 38.80 58.20 103.50 168.20 330.00 524.15 750.65 7/1/2013 12.90 12.90 16.15 22.60 38.80 58.20 103.50 168.20 330.00 524.15 750.65 N 7/1/2014 12.90 12.90 16.15 22.60 38.80 58.20 103.50 168.20 330.00 524.15 750.65 7/1/2015 12.90 12.90 16.15 22.60 38.80 58.20 103.50 168.20 330.00 524.15 750.65 (D 10/1/2016 16.09 16.09 20.15 28.19 48.40 72.60 129.12 197.36 411.68 653.88 936.44 E ca *Information not reported C 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, p 2008,respectively,with no minimum allowance. y w ca Source: Department's Records 'y at s r- 0 r- 0 CL CD W FU .0 LL0 c 0 c Q 00 00 0 CL m U C fC C LL t6 3 C C Q r w C CD E V c0 r+ w Q r C 0 E t V Q G7 Packet Pg. 518 6.B.b City of San Bernardino Municipal Water Department Water Connections and Revenues by User Type Last Ten Fiscal Years N L 2016 2015 2014 2013 User Type Connections Revenue Connections Revenue Connections Revenue Connections Revenue L Single family 35,729 $15,688,749 35,695 $16,775,834 35,012 $18,583,708 34,913 $18,741,773 3 Multiple family 2,873 4,225,832 2,869 4,349,601 2,824 4,591,290 2,820 4,704,384 O Commercial 3,092 4,913,942 3,097 6,332,882 3,085 6,566,344 3,082 6,800,310 to Landscape 1,129 3,203,907 1,130 3,079,610 1,140 3,616,135 1,104 3,591,678 Other 1,905 677,180 1,791 679,606 1,703 913,810 1,663 599,210 Total all users 44,728 $28,709,610 44,582 $31,217,533 43,764 $34,271,287 43,582 $34,437,355 a 2012 2011 2010 2009 Connections Revenue Connections Revenue Connections Revenue Connections Revenue N Single family 34,716 $18,094,052 34,695 $15,665,580 34,542 $13,899,599 34,418 $13,943,441 E Multiple family 2,801 4,510,962 2,806 4,025,079 2,799 3,442,271 2,801 3,547,811 Commercial 3,117 5,790,427 3,117 4,678,003 3,127 3,826,613 3,126 3,867,923 Landscape 1,151 3,321,846 1,149 2,745,990 1,158 2,367,514 1,173 2,454,044 0 Other 1,626 1,597,791 1,571 701,296 1,553 900,840 1,545 1,094,364 tv r Total all users 43,411 $33,315,078 43,338 $27,815,948 43,179 $24,436,837 43,063 $24,907,583 d 2008 2007 r Connections Revenue Connections Revenue r- O Single family 34,316 $13,419,093 34,842 $13,794,954 rO Multiple family 2,834 3,419,696 2,913 3,536,202 Commercial 4,003 5,765,993 3,954 5,807,406 Landscape - - - - Other 1,820 1,518,693 1,755 1,795,878 Total all users 42,973 $24,123,475 43,464 $24,934,440 C ii Source: Department's records C C a 00 00 O a tv U C ftl C LL t4 7 C C Q r w C N t V tC3 r w Q Y Q �'� Packet Pg. 519 6.B.b City of San Bernardino Municipal Water Department Water Rates: Elevation Charges $ per HCF Last Ten Fiscal Years N 7 EFFECTIVE DATE ZONE 1 ZONE 2 ZONE 3 ZONE 4 ZONE 5 ZONE 6 07/01/07 0.00 0.06 0.14 0.21 0.12 0.12 07/01/08 0.00 0.06 0.15 0.21 0.13 0.13 07/01/09 0.00 0.06 0.15 0.21 0.13 0.13 c 07/01/10 0.09 0.17 0.15 0.12 0.21 0.21 07/01/11 0.10 0.18 0.16 0.13 0.22 0.22 07/01/12 0.11 0.19 0.17 0.14 0.23 0.23 07/01/13 0.11 0.19 0.17 0.14 0.23 0.23 07/01/14 0.11 0.19 0.17 0.14 0.23 0.23 E 07/01/15 0.11 0.19 0.17 0.14 0.23 0.23 10/01/16 0.11 0.19 0.17 0.14 0.23 0.23 0 L i-i O y L C a- NN� I.f. •V Q 00 T-- 00 0 Q NN0 Ir L) c c LL io c c Q c (D E s U Q C d E V t4 rr w Q 69 Packet Pg.520 City of San Bernardino Municipal Water Department Top Ten Water Customers Fiscal Year 2016 LD r Customer-2016 Cn 3 City of San Bernardino $ 742,984 SBCUSD 702,383 Cott Beverages 319,619 a� Housing Authority 213,981 California State University 185,267 JA r W. Dean Weidner 135,168 a0i County of San Bernardino 134,195 Pama Management Company 115,364 Q. Hines 112,556 0 St. Bernardine Hospital 108,558 Top Ten Customers Total $ 2,770,075 0 Total Water Revenue $ 28,293,790 V 0 0. d Top Ten Customers Percent of Total 9.79% Note: Data not available for the fiscal period ended nine years prior. U- 00 V- 00 0 Q NQ� I.f. U. Q r" i.+ d E V Q E s � y Q 70 Packet Pg. 521 6.B.b City of San Bernardino Municipal Water Department Sewage Treatment Rate History Fiscal Years 1996 through 2016 it L 1996-2004 7/1/2004 1/1/2009 1/1/2010 2/1/2011 1/1/2012 10/1/2015 7/1/2016 3 Residential(monthly per EDU) no change 14.50 15.25 16.00 17.00 18.50 20.65 22.38 Commercial: co Commodity Charge(per HCF): Multi-family,mobile home parks no change 0.83 0.90 0.95 1.10 1.25 1.36 1.48 Retail,commercial,light industrial no change 1.70 1.80 1.90 2.00 2.10 2.28 2.47 ?� Auto repair,car wash no change 1.17 1.25 1.30 1.30 1.30 1.41 1.53 rn Offices,motels(w/o restaurants) no change 1.32 1.40 1.50 1.50 1.50 1.63 1.77 Restaurants,hotels no change 1.84 1.90 2.00 2.35 2.70 2.93 3.18 aD Laundromats no change 1.15 1.25 1.30 1.40 1.50 1.63 1.77 Hospitals,convalescent homes no change 0.84 0.90 0.95 1.15 1.35 1.46 1.58 Q. Schools,churches,nursery schools no change 0.62 0.65 0.70 0.90 1.10 1.19 1.29 CD Industrial: L Discharge Flow(per million gallons) no change 816.10 860.00 900.00 900.00 900.00 977.00 1,060.00 Biological Oxygen demand(per 1,000 Ibs) no change 264.91 280.00 292.00 330.00 360.00 391.00 424.00 Suspended Solids(per 1,000 lbs) no change 577.41 610.00 640.00 640.00 640.00 694.00 753.00 t O r- 0 Source: Department's records y [r is C R3 C LL t6 7 C C Q 00 T- oo O sZ d LY C t6 G LL t0 C Q r C d t V R Y Q i..1 Qc� G U w Q 71 Packet Pg. 522 6.B.b City of San Bernardino Municipal Water Department Sewage Treatment Connections and Revenue by User Type Last Ten Fiscal Years ID C. U) 2016 2015 2014 2013 User Type Connections Revenue Connections Revenue Connections Revenue Connections Revenue San Bernardino Residential 32,889 $8,746,617 32,874 $8,056,827 32,537 $8,111,634 32,563 $7,922,936 San Bernardino Nonresidential 5,377 7,125,053 5,344 7,240,533 5,410 8,033,072 5,447 8,332,214 East Valley Residential 18,477 4,008,039 18,480 4,093,625 18,404 4,149,836 18,925 4,188,434 3 East Valley Nonresidential 1,060 2,825,971 1,051 2,571,813 1,115 2,725,075 1,126 2,434,118 y Loma Linda Residential 5,948 1,008,071 5,040 997,242 4,656 991,387 4,663 1,063,124 to Loma Linda Nonresidential 591 1,308,474 588 1,294,612 592 1,330,102 585 1,549,643 C Total all users 64,342 $25,022,225 63,377 $24,254,652 62,714 $25,341,106 63,309 $25,490,469 N 2012 2011 2010 2009 Connections Revenue Connections Revenue Connections Revenue Connections Revenue San Bernardino Residential 32,571 $7,650,142 32,447 $7,053,263 32,307 $6,670,859 32,050 $6,288,804 San Bernardino Nonresidential 5,412 7,877,416 5,416 7,131,988 5,196 6,699,228 5,434 6,625,012 C East Valley Residential 18,813 4,019,127 18,700 3,645,721 18,157 3,348,238 17,986 3,285,452 tv East Valley Nonresidential 1,128 2,492,375 1,138 2,070,233 1,132 2,185,072 1,146 2,139,543 E Loma Linda Residential 4,443 933,648 4,648 870,734 4,688 839,451 4,692 781,159 Loma Linda Nonresidential 589 1,258,747 584 1,048,402 588 1,016,088 559 984,117 CL O Total all users 62,956 $24,231,455 62,933 $21,820,341 62,068 $20,758,936 61,867 $20,104,087 i d r 2008 2007 Connections Revenue Connections Revenue San Bernardino Residential 32,058 6,197,816 32,367 6,238,570 San Bernardino Nonresidential 5,491 6,570,125 5,528 6,654,231 _ East Valley Residential 17,956 3,221,455 18,085 3,231,282 O East Valley Nonresidential 1,159 2,213,946 1,160 2,252,260 t O Loma Linda Residential 4,407 767,075 4,567 728,111 0- Loma Linda Nonresidential 576 1,011,795 584 950,227 d lY Total all users 61,647 $19,982,212 62,291 $20,054,681 Ar U C Source: Department's records C U- 00 T 00 O t2 NQ� LL a E U f0 r Y Q Y E U Q 72 Packet Pg. 523 City of San Bernardino Municipal Water Department Top Ten Sewage Treatment Customers Fiscal Year 2016 m Customers -2016 3 d SBCUSD $ 260,086 Housing Authority 236,323 County of San Bernardino 186,730 a; Pama Management Company 134,567 St. Bernardine Hospital/CHW 131,408 N City of San Bernardino 91,303 243 North Meridian LLC 80,887 E Lido Condominiums 75,172 Q. W Dean Weidner 72,205 0 Baghdady, Henry 70,226 ; R Top Ten Customers Total $ 1,338,907 w 0 Total Sewer Revenue $ 25,030,568 V 0 CL d Top Ten Customers Percent of Total 5.35% Source: Department's records Note: Data not available for the fiscal period ended nine years prior. a CO CO 0 a a� m U- �o a _ E U R r+ w Q w _ E t V fSf w a 73 Packet Pg.524