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Home My WebLink About03.d. (CAFR) Comprehensive Annual Financial Report - June 30, 2012Central Contra Costa Sanitary District November 30, 2012 TO: HONORABLE BOARD OF DIRECTORS VIA: ANN FARRELL, GENERAL MANAGER FROM: THEA VASSALLO, FINANCE MANAGER SUBJECT: COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR FISCAL YEAR ENDED JUNE 30, 2012 Attached is a copy of the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2012 (see corresponding Board Agenda Item 3.d.). Staff has prepared the CAFR for submission to the Government Finance Officers Association (GFOA). The Budget and Finance Committee will review the draft CAFR when it meets on December 3, 2012. Any changes recommended by the Committee will be incorporated into the final CAFR to be distributed at the December 6 Board meeting. At that meeting, the Board will be asked to approve the CAFR for submission to the GFOA. TV:dma Attachment — Draft CAFR for 6130112 U Central Contra Costa Sanitary District 5019 Imhoff Place, Martinez, CA 94553 Comprehensive Annual Financial Report CENTRAL CONTRA COSTA SANITARY DISTRICT MARTINEZ, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2012 Prepared By: Finance & Accounting Division CENTRAL CONTRA COSTA SANITARY DISTRICT Comprehensive Annual Financial Report Table of Contents For the Year Ended June 30, 2012 INTRODUCTORY SECTION: Letterof Transmittal ................................................................ ............................... i Boardof Directors ................................................................ ............................... vii MissionStatement .................................... ............................... ...........................viii OrganizationChart ................................................................ ............................... ix Mapof Service Area .............................................................. ............................... x Certificate of Achievement .................................................... ............................... xi FINANCIAL SECTION: Independent Auditors' Report ................................................. ..............................1 Management's Discussion and Analysis ................................. ..............................3 Changes in Net Position and Statement of Net Position - Basic Financial Statements Last Ten Fiscal Years ..................................................... ............................... Statement of Net Position ............................................. ..............................9 Revenue by Type - Last Ten Fiscal Years ......................... ............................... Statement of Revenues, Expenses and Changes in Net Position ............ 10 Statement of Cash Flows ............................................. .............................11 Major Revenue Base and Rates - Historical and Current Fees - Notes to Financial Statements — The accompanying notes are an LastTen Fiscal Years ..................................................... ............................... integral part of the basic financial statements ..... .............................12-37 Sewer Service Charge - List of Ten Largest Customers - Supplementary Information LastTen Fiscal Years ..................................................... ............................... Combining Schedule of Statement of Net Position ...... .............................38 Assessed and Estimated Actual Valuation of Taxable Property - Combining Schedule of Statement of Revenues, Expenses and Last Ten Fiscal Years ..................................................... ............................... Changes in Net Position ............................................ .............................39 Property Tax and Sewer Service Charge Fees Levied and Collected - Schedule of Running Expenses - Comparison of Budget and Actual Last Ten Fiscal Years ..................................................... ............................... Expenses by Department .......................................... .............................40 Running Expense - Schedule of Supplemental Net Position Analysis .....41 STATISTICAL SECTION (Unaudited): Changes in Net Position and Statement of Net Position - Last Ten Fiscal Years ..................................................... ............................... S -1 Revenue by Type - Last Ten Fiscal Years ......................... ............................... S -2 Operating Expenses by Type - Last Ten Fiscal Years ....... ............................... S -3 Major Revenue Base and Rates - Historical and Current Fees - LastTen Fiscal Years ..................................................... ............................... S -4 Sewer Service Charge - List of Ten Largest Customers - LastTen Fiscal Years ..................................................... ............................... S -5 Assessed and Estimated Actual Valuation of Taxable Property - Last Ten Fiscal Years ..................................................... ............................... S -6 Property Tax and Sewer Service Charge Fees Levied and Collected - Last Ten Fiscal Years ..................................................... ............................... S -6 Summary of Debt Service - Type, Debt Service Coverage, Debt Ratio - LastTen Fiscal Years ..................................................... ............................... S -7 Demographic and Economic Data - Population Served - Last Ten Calendar Years ................................................ ............................... S -8 List of Ten Largest Employers in Contra Costa County - Last Year and Eleven Years Ago .................................... ............................... S -8 Demographic and Economic Statistics - Contra Costa County - Last Ten Fiscal Years ..................................................... ............................... S -9 Full -time Equivalent Employees by Department - Last Ten Fiscal Years........ S -10 Number of Retirees and Surviving Spouses - Last Ten Fiscal Years .............. S -10 Capital Asset and Operating Statistics - Last Ten Calendar or Fiscal Years.. S -11 Miscellaneous Statistics ................................................... ............................... S -11 (THIS PAGE INTENTIONALLY LEFT BLANK) -DI 'S Central Contra Costa Sanitary District Introductory Section Jl Central Contra Costa Sanitary District November 14, 2012 Central Contra Costa Sanitary District Ratepayers and The Honorable Board of Directors, Martinez, California: State law requires that every general - purpose local government publish within six months of the close of each fiscal year a complete set of audited financial statements. This report is published to fulfill that requirement for the fiscal year ended June 30, 2012. Management of Central Contra Costa Sanitary District assumes full responsibility for the completeness and reliability of the information in these financial statements, based upon a comprehensive system of internal controls that is 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 misstatements. Cropper Accountancy Corporation has issued an unqualified ( "clean ") opinion on the Central Contra Costa Sanitary District's financial statements for the year ended June 30, 2012. The independent auditor's report is located at the front of the financial section of this report. Management's Discussion and Analysis report (MD &A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD &A complements this letter of transmittal and should be read in conjunction with it. PROFILE OF THE GOVERNMENT History and Services Provided The District was established in 1946 under the Sanitary District Act of 1923 and is located about 30 miles east of San Francisco. The District builds, operates and maintains the facilities required to collect and process wastewater for approximately 327,000 residents of Danville, Lafayette, Martinez, Moraga, Orinda, Pleasant Hill, San Ramon, Walnut Creek and some of the unincorporated communities within Central Contra Costa County. The District also treats wastewater for 134,000 residents of the Cities of Concord and Clayton under a 1974 contract with the City of Concord. 0 Recycled Paper The District is committed to protecting the public health and preserving the environment while minimizing facility and operating costs. The District has approximately 1,500 miles of sewer pipeline, ranging in size from 6 inches to 120 inches in diameter, and 16 sewage - pumping stations in the District's sewage collection system. The District is the sole provider of wastewater service within the District limits (see map of service area). Residents make up the largest segment of the District's customer base representing approximately 80% of the Sewer Service Charge revenue. The District's treatment capacity has grown from 4.5 million gallons per day (mgd) initiated in 1948 to 53.8 mgd currently. Bonds, state grants, federal grants, and pay -as- you -go resources of the District have financed expansions. The District also provides an alternative source of water for irrigation by producing high quality recycled water. Recycled water can safely be used on freeway landscaping, street medians, golf courses, athletic fields, parks, playgrounds, schoolyards and multi- family residential common areas. In addition to its wastewater responsibility, the District also teamed with Mountain View Sanitary District and other local governments to build and operate the first permanent Household Hazardous Waste (HHW) Collection Facility in Contra Costa County. The HHW Collection Facility is located adjacent to the District's wastewater treatment plant and seeks to keep pollutants out of the sewer system, making this facility an important part of our Pollution Prevention Program. Organization, Accounting and Budgetary Controls A 5- member Board of Directors governs the District. Board members are elected on a non - partisan basis and serve a four -year term. The Board appoints the General Manager, who in accordance with policies established by the Board of Directors, manages District affairs. The District employs 235 regular employees organized in four departments led by Managers responsible for their budgets and expenses. The four departments are: Administrative, Engineering, Operations, and Collection Systems. The District by law uses an enterprise fund to account for the operations of the District, which is run in a manner similar to private industry. The District currently has one enterprise fund which is comprised of four internal sub - funds: • Running Expense - accounts for the general operations of the District. Substantially all operating revenues and expenses are accounted for in this fund (also referred to as Operations & Maintenance or O &M). • Sewer Construction - accounts for non - operating revenues that are to be used for acquisition or construction of plant, property, and equipment (also referred to as the Capital Fund). • Self- Insurance - accounts for interest earnings on cash balances in this sub -fund and cash allocations from other funds, as well as costs of insurance premiums and claims not covered by the District's insurance policies. • Debt Service — accounts for activity associated with the payment of the District's long term bonds and loans. Each year, the Board adopts the following four budgets: Operations and Maintenance, Capital Improvement and Sewer Construction, Self- Insurance, and Debt - Service. The Board Finance Committee reviews disbursements prior to each regular Board meeting, and disbursements are then approved by the full Board. Monthly financial statements are issued to management and the Board. A detailed mid -year and annual budget analysis are prepared and presented to the Board. District management is accountable for variances and adhering to budget constraints. The District also has several documented financial policies that are reviewed and updated as appropriate. ASSESSING THE DISTRICT'S ECONOMIC CONDITION Local Economy and Outlook Current economic data indicate the economy is improving, but at a sluggish pace. California's economic outlook is in alignment with the national forecast with continued slow growth throughout 2012, but a more robust growth expected for 2013 and 2014. According to the Legislative Analyst's Office (LAO), the foreclosure rate still remains very high in some regions of the state and depressed housing prices are expected to cause a drag on the state economy for some time. Weakness in the housing market continues to affect both the construction industry and the financial services sector negatively. Many households continue to have difficulty acquiring home loans limiting the ability of consumers to refinance at lower rates. Job growth and economic confidence is rising, but California's unemployment remains higher than most of the U.S. and more than one -third of California's unemployed have been unable to find work for over one year. The Federal Reserve continues to rely on the historically low interest rate to boost the economy. Local and state governments face declining employment as a result of declining revenues and an increase in pension and healthcare obligations for current employees and retirees. State and local employment contraction is expected to contribute to the weak labor market in the state and the unemployment rate for California is forecasted to be above the national level throughout the next few years. A weak California revenue forecast has initiated a state ballot measure in the upcoming election which would increase income and sales taxes temporarily in an effort to restore budgetary balance. The state faces an ongoing, multibillion dollar annual deficit and faces large payments to schools as well as a repayment for Proposition 1A property tax loan that was used to help balance the budget in 2009. Additionally, the state faces a long -term fiscal challenge of billions of dollars in unfunded retirement liabilities which must be addressed. The one -time budget actions which have been used in prior years to help balance the budget are no longer available and the work of eliminating the state's deficit will require more difficult cuts in programs and /or increases in revenues. The weak housing market has resulted in a decrease in the growth of new sewer service connections for the District. However, Contra Costa County population growth remains positive and is projected to be one of the fastest growing counties in the Bay Area so the growth outlook for the District remains positive. The District has an excellent reputation in all areas of public service, which include finance, collection, treatment, training, safety, technology, capital projects, construction and customer service. The Central Contra Costa Sanitary District has balanced revenue sources, adequate reserves, and a moderate debt obligation. CCCSD reviews its rate and other charges annually. The District can increase its sewer service charge rates when needed to make up revenue shortfalls by providing public notice to all customers, holding a Public Hearing, and obtaining approval by the Board of Directors. The District is also able to obtain bond financing, as needed, due to the District's AAA bond rating. The District anticipates that it will continue to meet its mission and goals, continue to provide excellent customer service and reasonable rates to its customers, and meet compliance requirements given the current economic conditions. Long Term Financial Planning District management analyzes and updates their strategic plan annually, with the four main goals being: providing exceptional customer service, maintaining full regulatory compliance, maintaining responsible rates, and continuing to be a high performance organization. Strategies to achieve each of the goals are developed, as well as metrics to evaluate success. The District performs a 10 -year long -term cash flow forecast each year shortly before the budget process begins. The main economic factors considered in long range forecasting are: the impact of state legislation and mandates, regulatory compliance, GASB requirements, negotiated salary increases and employee benefits including significant increases in retirement and health care costs, energy costs and interpreting the energy market, housing growth, and infrastructure renewal and replacement needs. The District has a significant amount of unfunded actuarial liability for both pension and other post employment costs (OPEB) and various options for managing these liabilities are explored in the financial planning process. Relevant Financial Policies Investment Policy: The District's investment policies for District assets and GASB 45 Trust are reviewed and approved annually by the Board of Directors in accordance with District investment policy. Section 53646 of the California Government Code governs our investment practices, and is reviewed annually by staff, legal counsel and the Board. No required changes were necessary. The Board receives monthly financial statements that include District investment performance. Since 2008, the GASB 45 Trust investments are in a moderate investment strategy fund. The Board Budget and Finance Committee review GASB 45 Trust quarterly financial statements to monitor the District's investment strategy in the current volatile economy. Internal Audit Program: In addition to the annual external independent audit, the District contracted with an additional auditing firm to perform an internal audit. The purpose of this audit is to test internal controls and to receive recommendations to improve our operations. This year the permit counter and connection fee collection practices were reviewed. Several recommendations were made by Bartle Wells Associates which included implementing procedures for routine review of permit applications and improved coordination with the County's and City's building departments to require District inspectors to sign -off before final approval. iv Maior Initiatives The District's vision is to be a high - performance organization that provides exceptional customer service and full regulatory compliance at responsible rates. Full regulatory compliance is provided through exceptional operation of our collection system and treatment facilities, as well as through continued investment in our infrastructure. Our current capital plan has an emphasis on renovation, particularly in the collection system, in order to improve service, and fix deteriorating pipes and pumping stations before they can contribute to a sewer system overflow. Both at the state and federal level, regulations addressing sewer system overflows and public notification have become increasingly stringent over the last several years. Collection system operations was enhanced by the newly constructed administration /crew /warehouse building, which was designed to be LEED certified and incorporates many green design features. LEED represents "Leadership in Energy and Environmental Design," which is administered by the U.S. Green Building Council. The former facilities had reached an age and condition where significant rehabilitation, upgrading, and replacements were needed. Furthermore, the collection systems operations staff had increased to meet District growth and increasing regulatory demands and additional space was needed. It was determined that replacing several antiquated buildings on the existing site with a new state -of -the art facility was the best long -term solution. The new facility was completed in late 2011. Our capital plan is also addressing treatment plant reliability through design and construction of several recently completed projects. The Outfall Improvements, Phase 6 project, allowed the District to inspect and repair the 3.5 mile 72 -inch diameter outfall pipeline that transports fully treated effluent from the Martinez Treatment Plant Facility to Suisun Bay. A second project, the Piping Renovations, Phase 6 project, replaces aging pipe infrastructure with new modern piping. These projects are supplemented with treatment plant renovation projects to increase safety and replace other plant infrastructure. The District has received Platinum and Gold awards from the National Association of Clean Water Agencies (NACWA) for fourteen straight years in recognition of 100 percent compliance with our National Pollutant Discharge Elimination System (NPDES) permit. It has also reduced the number of sanitary sewer overflows by more than 72% in the past 9 years by improved sewer cleaning and a robust sewer rehabilitation program. AWARDS AND ACKNOWLEDGEMENTS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Central Contra Costa Sanitary District for its comprehensive annual financial report for the fiscal year ended June 30, 2011. This was the twelfth consecutive year that the District has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. This report could not have been accomplished without the dedication and commitment provided by District staff. I would like to express my appreciation to the following employees who assisted in its preparation: • The Finance and Accounting staff who compiled the information contained in this document with a special thanks to Jamie King, Accountant, and Todd Smithey, Finance Administrator. • The Reproduction and Graphics Team who creatively and professionally prepared this finished document. • Engineering and Operations staff who provided much of the statistical information included in this document. • The District's Board of Directors and Management Team for their support in preparing this document as well as their day -to -day support in conducting the financial operations of the District in a prudent and responsible manner. Respectfully submitted, Thea Vassallo Finance Manager Vi CENTRAL CONTRA COSTA SANITARY DISTRICT BOARD OF DIRECTORS June 30, 2012 James A. Nejedly .............. ............................... President David R. Williams .............................. President Pro -Tern Barbara D. Hockett .............. ............................... Member Michael R. McGill ................ ............................... Member Mario M. Menesini ............... ............................... Member Vii 11 Central Contra Costa Sanitary District OUR MISSION Ian Toprotect the public health and the environment by: • Collecting and treating wastewater • Recycling high quality water • Promoting pollution prevention l OUR VISION Be a high performance organization gp g that provides exceptional customer service and full regulatory compliance at responsible rates. OUR VALUES We will achieve our goals by valuing: g • Each other • Ethics and integrity 1 A healthy and safe environment • Community • • relationsh ips i s The meeting f commitments All aspects of diversit y 0021 -10/08 viii U � .O >- Q H O Z V a� U) vJ OV U c z .N O = U � J � w O Z W U I a) cu 70 L a cu Q) % 4.1 ��N C cu 0 O C W 0 U _ C a) u C D O O U C E O U a) �p N 2 0 a 0 W U C C cn C a E .V �. O E O O .r O CL U) a) " Q- m (0 CU N O M �6 w w a Q Q O � O - - —) O +' C E O U a) �p N 2 0 a 0 rn a U _ cn C a E .V -O .O U N E O � U_ CL U) a) " Q- m CD I O �- U d w w rn a E .V CU � 0 .o o m a) U) U d w w - - —) O +' O +� O U co C) � CO) C Ui U a) U N 0 Co 0 CD O U m N � 'I U a) U) IX I k Wm i i ou 5M F1 UsTol 2011 Update 80 �0 680 ©' Central Contra 4 Ma tinez Clyde 4 �' Costa Sanitary District 242 Map of `Pachec oncord o Service Area Pleasant June 30, 2011 Hill � layton 0 Walnut N �0 Creek Orinda Lafa tte 1. 24 Alamo Moraga �-� Danville San x Wastewater collection and treatment and t;c;c;su Pumping stations HHW collection for 462,000 people Wastewater treatment and HHW collection Pump i Pumping Station S 1. Martinez 11. Lower Orinda for 135,400 residents in Concord and sizes (Flow Rates): 2. Fairview 12. Bates Blvd.- Orinda Clayton by contract Between 0 - 0.1 MGD HHW collection service only 3. Maltby 13. Orinda Cross roads A CCCSD's Headquarters Office Building, • Between 0.1 -1 MGD 4. Clyde 14. Via Robles treatment plant, HHW Collection Facility, 5. Concord Industrial 15. Moraga and temporarily located CSO Department 6. Buchanan Field North 16. San Ramon (Sewer Maintenance) in Martinez Between 1 -10 MGD 7. Buchanan Field South PRIVATELY OWNED: CCCSD's Collection System Operations 8. Sleepy Hollow Department (sewer maintenance) located 17. Wagner Ranch in Walnut Creek. New facility under 9. Acacia 18. Lower Wilder (2012) construction through 2011. • Greater than 10 MGD 10. Flush Kleen 19. Upper Wilder (2012) x Certificate of Achievement for Excellence in Financial Reporting Presented to Central Contra Costa Sanitary District, California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2011 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. DF STATES AND CORPU''' President eF RATION AdA tai w Executive Director Xi (THIS PAGE INTENTIONALLY LEFT BLANK) Central Contra Costa Sanitary District Financial Section rEPTIFIED PJSLIC ACCOUNTANTS rfirr:e 1..:zG01i ,;aMtino addrass 2700 Ygnacio Valley Rd, Ste 230 2977 Ygnacio Valley Rd, PMB 460 wvlVV.ci- DpP,raccot/17Mnc!co1T1 Walnut Creek, CA 94598 Walnut Creek, CA 94598 (925) 932 -3860 tel (925) 476 -9930 efax INDEPENDENT AUDITORS' REPORT Board of Directors Central Contra Costa Sanitary District Martinez, California We have audited the accompanying financial statements of the Central Contra Costa Sanitary District as of and for the year ended June 30, 2012, as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the State Controllers Audit Requirements for California Special Districts. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the financial position of the Central Contra Costa Sanitary District as of June 30, 2012, and the changes in financial position and cash flows thereof for the years then ended, in conformity with accounting principles generally accepted in the United States of America, as well as accounting systems prescribed by the California State Controller's office for Special Districts. Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. Based on the audit of the financial statements, the Combining Schedule of Net Position, Combining Schedule of Revenues, Expenses, and Changes in Net Position, Schedule of Running Expense — Comparison of Budget and Actual Expenses by Department, and Running Expense — Schedule of Supplemental Net Position Analysis are fairly presented in relation to the basic financial statements. Ptu,msior"- Z4. aer?'eo. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Central Contra Costa Sanitary District's financial statements as a whole. The introductory section and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the 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. ��CDUq�Q GL� CROPPER ACCOUNTANCY CORPORATION Walnut Creek, CA October 4, 2012 Central Contra Sanitary District MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the District's annual financial report presents an analysis of the District's financial performance during the fiscal year ended June 30, 2012. This information is presented in conjunction with the audited financial statements, which follow this report. FINANCIAL HIGHLIGHTS The District's 2011 -12 financial highlights are listed below. These results are discussed in more detail later in the report. • The District's total ending net position increased by $3.8 million or 0.61% in 2011 -12 when compared to fiscal year 2010 -11; when comparing 2011 -12 to 2009 -10, net position has increased by $5.2 million or 0.83 %. This is mainly due to capital project asset additions. • Total revenues in 2011 -12 increased by $2.1 million or 2.87% when compared to 2010 -11; when comparing 2011 -12 to 2009 -10, total revenue has increased by $2.4 million or 3.21 %. The total SSC rate increased by 9.6 %; a larger portion of the internal SSC allocation was shifted from Operating Revenue to Capital Contributions. • Total 2011 -12 expenses increased by $6.0 million or 7.36% compared to 2010 -11; when comparing 2011 -12 to 2009 -10, total expenses increased by $8.0 million or 10.10 %. This is mainly due to higher cost of total labor and technical services for temporary staff. • Capital Contributions increased in 2011 -12 compared to 2010 -11 by $6.4 million or 69.90 %. Capital Contributions decreased by $43 million or -1.95% comparing 2011 -12 to 2009 -10. The increases in 2011 -12 were due to the SSC rate increase (capital allocation) and higher connection fees when comparing 2011 -12 to 2010 -11. The volatile housing and construction markets caused swings in connection fee revenue (Connection fee revenue of $5.7 million in 2011 -12, $3.5 million in 2010 -11 and $7.1 million in 2009 -10). OVERVIEW OF THE FINANCIAL STATEMENTS This annual report includes management's discussion and analysis report, the independent auditor's report and the basic financial statements of the District. The financial statements also include notes that explain information in the financial statements in more detail. REQUIRED FINANCIAL STATEMENTS The Financial Statements of the District report information utilizing methods similar to those used by private sector companies. These statements offer short and long -term financial information about its activities. ® Recycled Paper Statement of Net Position — reports the District's current financial resources (short-tern spendable resources) with capital assets and long -term obligations Statement of Revenues, Expenses and Changes in Net Position — reports the District's operating and non - operating revenues by major source along with operating and non - operating expenses and capital contributions • Statement of Cash Flows — reports the District's cash flows from operating activities, non - capital financing activities, capital and related financing activities, and investing activities STATEMENT OF NET POSITION The following table shows the condensed statement of net position of the Central Contra Costa Sanitary District for the past three years: Condensed Statement of Net Position Fiscal Year Fiscal Year Fiscal Year 2011 -2012 2010 -2011 2009 -2010 Current Assets $ 78,506,812 $ 80,407,120 $ 77,968,736 Capital Assets 597,689,744 593,461,791 586,785,155 Other Non - current Assets 9,332,364 12,456,011 27,196,507 Total Assets 685,528,920 686,324,922 691,950,398 Current Liabilities 11,128,540 10,682,746 11,255,377 Non - Current Liabilities 47,797,407 52,844,305 59,243,809 Total Liabilities 58,925,947 63,527,051 70,499,186 Invested in Capital Assets, Net of Related Debt 549,462,506 541,613,208 531,324,187 Restricted - Debt Service 4,663,601 4,612,103 4,565,970 Unrestricted 72,476,866 76,572,560 85,561,055 Total Net Position $ 626,602,973 $ 622,797,871 $ 621,451,212 The total net position of the District increased from $621.5 million in 2009 -10 to $622.8 million in 2010 -11 and to $626.6 million in 2011 -12. The increase in net position over the 3 -year period totals $5.2 million and is the result of the combination of net income and capital contributions; comparing 2011 -12 to 2010 -11 net position increases by $3.8 million. By far the largest portion of the District's net position (87.7% percent) reflects its investment in capital assets (e.g. land, buildings, machinery, equipment, intangible assets, and sewer line infrastructure), less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide services to its ratepayers; consequently, these assets are not available for future spending. Although the District's investment in its capital assets is reported net of debt, it should be noted that the funds needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. There is currently $4.7 million restricted for debt service. The remaining balance of $72.4 million in unrestricted net position may be used to meet the District's ongoing obligations to its ratepayers and creditors. The unrestricted net position may also be used for payment of long -term unfunded liabilities. H REVIEW OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION The table below shows the condensed statement of revenues, expenses, and changes in net position for the Central Contra Costa Sanitary District for the past 3 years: Condensed Statement of Revenues, Expenses, and Changes in Net Position Fiscal Year Fiscal Year Fiscal Year 2011 -2012 2010 -2011 2009 -2010 Sewer Service Charges SSC $ 59,771,237 $ 58,320,822 $ 57,357,188 Other Service Charges and misc. 1,845,402 11575,738 1,474,898 Total Operating Revenue 61,616,639 59,896,560 58,832,086 Property Tax 12,047,169 12,213,624 12,260,123 Permit & Inspection Fees 903,810 895,825 776,348 Interest and All Other 1,226,598 673,990 1,568,235 Total Non-Operating Revenues 14,177,577 13,783,439 14,604,706 Total Revenues 75,794,216 73,679,999 73,436,792 Total Labor and Benefits 45,562,430 41,705,131 39,986,763 Chemicals & Utilities 6,090,408 5,664,360 6,268,343 Repairs and Maintenance 3,068,604 2,972,395 2,868,675 Professional, Legal and Outside Services 4,099,876 2,425,612 2,129,552 Materials & Supplies 2,031,401 1,944,767 1,705,649 Hauling and Disposal 1,009,137 944,394 939,960 Self- Insurance Expense 810,849 1,003,115 746,612 All Other 1,612,482 1,575,905 1,223,191 Depreciation Expense 21,190,059 20,580,061 20,969,429 Total Operating Expenses 85,475,246 78,815,740 76,838,174 Non - Operating Expense - Interest Expense 1,919,375 2,585,112 2,539,383 Total Expenses 87,394,621 81,400,852 79,377,557 Income Before Capital Contributions 11,600,405 7,720,853 5,940,765 Customer Contributions SSC 8,888,663 5,018,092 6,793,040 Contributed Sewer Lines 792,011 533,616 1,840,259 Capital Contributions - Connection Fees 5,724,833 3,515,804 7,078,635 Total Capital Contributions 15,405,507 9,067,512 15,711,934 Change in Net Position 3,805,102 1,346,659 9,771,169 Beginning Net Position 622,797,871 621,451,212 611,680,043 Ending Net Position $ 626,602,973 $ 622,797,871 $ 621,451,212 In 2011 -12, operating revenues increased by $1.7 million or 2.87% compared to 2010 -11 and increased by $2.8 million or 4.73% comparing 2011 -12 to 2009 -10. Total non - operating revenue increased in 2011 -12 compared to 2010 -11 by $0.4 million or 2.86% and decreased by -$0.4 million or -2.92% comparing 2011 -12 to 2009 -10. The change in total revenue resulted in an increase of $2.1 million or 2.87% comparing 2011 -12 to 2010 -11 and increased by $2.4 million or 3.21% comparing 2011 -12 to 2009 -10. There was a 9.6% SSC rate increase in 2011 -12 but no SSC rate increases occurred in 2010 -11 and 2009 -10. Property Tax revenue has basically remained flat for the 3 -year period due to housing values remaining low. 5 In 2011 -12, total expenses increased by $6.0 million or 7.36% compared to 2010 -11. Comparing 2011- 12 to 2009 -10, total expenses were $8.0 million or 10.10% higher. Increases are mainly due to higher labor and benefit costs along with technical services for temporary staff. Labor costs increased due to employee benefit costs (primarily pension and healthcare costs), cost -of- living adjustments, merit increases, and filling of vacant positions. Depreciation expense increased due to new capital additions. Non - Operating Expense is mainly driven by debt service interest expense. Total income before capital contributions went from -$6.0 million in 2009 -10 to -$7.2 million in 2010 -11 and -$11.6 million in 2011 -12. Total capital contributions in 2011 -12 were $15.4 million compared to $9.1 million in 2010 -11 and $15.7 million in 2009 -10. This was mainly due to higher customer contributions (SSC) in 2011 -12 due to the 9.6% rate increase, shift of the internal SSC revenue allocation, and volatility in connection fees due to the fluctuation of the housing and construction markets. Connection fees for one large complex were received in 2009 -10 which contributed to the $15.7 million in revenue that year. The total change in net position decreased by -$6.0 million or - 61.06% when comparing 2011 -12 to 2009 -10. CAPITAL ASSETS Capital assets include the District's entire major infrastructure including wastewater treatment facilities, sewers, land, buildings, pumping stations, vehicles, intangible assets and furniture and equipment exceeding our capitalization policy limit of $5,000, net of depreciation. As of June 30, 2012, the District's investment in capital assets totaled $597.7 million, which is an increase of $4.2 million or 0.71% over the capital asset balance of $593.5 million at June 30, 2011. Capital Assets increased by $10.9 million or 1.86% comparing 2011 -12 to 2009 -10. A comparison of the District's capital assets over the past 3 fiscal years is presented below: Fiscal Year Fiscal Year Fiscal Year Capital Assets 2011 -2012 2010 -2011 2009 -2010 Land $ 17,114,720 $ 17,114,720 $ 17,114,720 Sewage Collection System 303,693,519 290,317,724 286,351,576 Contributed Sewer Lines 149,895,302 149,110,351 148,580,734 Outfall Sewers 8,518,443 8,518,443 8,518,443 Sewage Treatment Plant 292,432,883 287,537,513 275,413,411 Recycled Water Infrastructure 13,335,295 12,300,131 12,281,480 Pumping Stations 54,412,730 54,412,730 53,750,940 Buildings 34,477,124 31,317,466 21,206,981 Intangible Assets 2,463,834 2,058,921 1,806,272 Furniture & Equipment 14,031,564 13,243,330 13,756,662 Motor Vehicles 6,010,773 6,038,527 5,759,209 Construction In Progress 22,469,694 22,632,142 26,735,297 Subtotal 918,855,881 894,601,998 871,275,725 Less Accumulated Depreciation 321,166,137 301,140,207 284,490,570 Total Capital Assets (net of depreciation) $ 597,689,744 $ 593,461,791 $ 586,785,155 ON The major reasons for the increase in capital assets, net of depreciation, of $4.2 million from 2010 -11 to 2011 -12 and $10.9 million from 2009 -10 to 2011 -12, are as follows: • Treatment plant infrastructure renovations, upgrades, equipment, and improvements increased by $4.9 million comparing 2011 -12 to 2010 -11 and $17.0 million comparing 2011 -12 to 2009 -10. • Buildings increased by $3.2 million comparing 2011 -12 to 2010 -11 and $13.3 million comparing 2011 -12 to 2009 -10. The Walnut Creek Collection System Operations new building construction substantially completed cost of $11.5 million was capitalized in 2010 -11 and $3.2 million more was capitalized in 2011 -12. • Sewer pipe ongoing renovations, pumping station improvements, and contributed sewer lines increased by $14.2 million comparing 2011 -12 to 2010 -11 and $19.3 million comparing 2011 -12 to 2009 -10. • All other asset categories, including construction in progress, increased by $2.0 million comparing 2011 -12 to 2010 -11 and deceased by $2.0 million comparing 2011 -12 to 2009 -10. • Capital Asset increases are offset by an increased subtraction of accumulated depreciation of $20.0 million comparing 2011 -12 to 2010 -11 and $36.7 million comparing 2011 -12 to 2009 -10 due to our increasing capital asset investment and its associated depreciation expense. See Note 4 in the audited financial statements. DEBT ADMMSTRATION The District has the following outstanding debt as of June 30, 2012: Revenue Bonds $ 47,200,000 Water Reclamation Loan 1,027,238 $ 48,227,238 See Note 6 in the audited financial statements. ECONOMIC AND OTHER FACTORS The Federal and State of California economies still struggle to recover from the 2008 recession. Federal economic challenges continue and there is added uncertainty due to the 2012 Presidential election outcome not being known at this time. The housing market is still in recovery and continues to impact user fees. Fiscal year 2011 -12 resulted in the fourth consecutive year to end with a deficit for the State of California. Pension reform is in the spotlight and the governor's 2012 -13 Budget Package relies on voters passing Proposition 30, which temporarily increases state sales and income taxes. 7 Items impacting the District are: • Employee Memorandum of Understanding contract negotiations; although the current contracts end as of April 17, 2012 negotiations are still ongoing • Employee benefits may be reduced due to the negotiations outcome in which employees may pay a larger share of benefit costs. Also, current and future legislation impacting public employee pensions is in play, also calling for higher employee contributions and lower pensions by eliminating spiking. Also, a larger than number of anticipated early retirements may occur depending on negotiated and legislated changes to public employee salary and benefits. • Regulatory requirements becoming more stringent, causing the District to spend more on compliance, both for operations and maintenance costs and capital projects. • Anticipated continuation of the slow recovery and associated impacts to connection and other fees. • Continued low interest rates negatively impact interest earnings for District temporary investments as well as OPEB trust and pension plan assets. In addition to making efforts to reduce spending and improve process efficiencies, the District has the ability to raise the Sewer Service Charge to meet our long -term commitments. The District has a Standard and Poors AAA rating, and can obtain bond financing if necessary. FINANCIAL CONTACT The financial report is designed to provide our customers and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact: Finance Manager, Central Contra Costa Sanitary District, 5019 Imhoff Place, Martinez, CA 94553. FINANCIAL STATEMENTS CENTRAL CONTRA COSTA SANITARY DISTRICT Statement of Net Position June 30, 2012 2012 ASSETS Current Assets Cash and cash equivalents $ 42,428,045 Short term investments 16,496,087 Accounts receivable, net 15,019,382 Interest receivable 55,148 Parts and supplies 2,007,445 Prepaid expenses 2,500,705 Total Current Assets 78,506,812 Noncurrent Assets Restricted cash and equivalents 193,592 Restricted investments 5,318,908 Land, property, plant and equipment, net 575,220,050 Construction in progress 22,469,694 Contractual and Alhambra Valley assessment districts receivable 2,221,330 OPEB asset (obligation) 1,263,542 Revenue bond issuance costs, net 334,992 Total Noncurrent Assets 607,022,108 Total Assets 685,528,920 LIABILITIES Current Liabilities Accounts payable and accrued expenses 4,904,644 Interest payable 754,197 Current portion of refunding revenue bonds 3,605,000 Current portion of water reclamation loan contract 160,411 Current portion of accrued compensated absences 375,000 Liability for uninsured claims 1,000,000 Refundable deposits 329,288 Total Current Liabilities 11,128,540 Noncurrent Liabilities Revenue bonds, net of current portion 43,595,000 Accrued compensated absences, net of current portion 3,335,580 Water reclamation loan contract, net of current portion 866,827 Total Noncurrent Liabilities 47,797,407 Total Liabilities 58,925,947 NET POSITION Net investment in capital assets 549,462,506 Restricted for debt service 4,663,601 Unrestricted 72,476,866 Total Net Position $ 626,602,973 The accompanying notes are an integral part of the financial statements 2 CENTRAL CONTRA COSTA SANITARY DISTRICT Statement of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2012 2012 OPERATING REVENUE Sewer service charges (SSC) 49,123,848 Service charges - City of Concord 10,647,389 Other service charges 915,485 Miscellaneous charges 929,917 Total operating revenue 61,616,639 OPERATING EXPENSES Sewage collection and pumping stations 11,987,373 Sewage treatment 23,708,309 Engineering 8,023,226 Administrative and general 20,566,279 Depreciation 21,190,059 Total operating expenses 85,475,246 OPERATING LOSS (23,858,607) NON - OPERATING REVENUES (EXPENSES) Taxes 12,047,169 Permit and inspection fees 903,810 Interest earnings 294,938 Interest expense (1,919,375) Other income (expense) 931,660 Total non - operating revenues (expenses) 12,258,202 Income before contributions and transfers (11,600,405) City of Concord contributions to capital costs 2,541,688 Customer contributions to capital cost (SSC) 6,346,975 Contributed sewer lines 792,011 Capital contributions - connection fees 5,724,833 CHANGE IN NET POSITION Net Position - Beginning Net Position - Ending 3,805,102 622,797,871 $ 626,602,973 The accompanying notes are an integral part of the financial statements 10 CENTRAL CONTRA COSTA SANITARY DISTRICT Statement of Cash Flows Year Ended June 30, 2012 The accompanying notes are an integral part of the financial statements 2012 Cash Flows From Operating Activities: Receipts from customers and users $ 60,547,670 Payments to suppliers (113,842,860) Payments to employees and related benefits 48,453,775 Net cash used in operating activities (4,841,415) Cash Flows From Noncapital Financing Activities: Receipt of taxes 12,047,169 Inspection/permit fees and other non - operating income 1,835,469 Net cash provided by non capital and related financing activities 13,882,638 Cash Flows From Capital And Related Financing Activities: Capital contributions 9,680,674 Connection fees 5,724,833 Acquisition and construction of capital assets (26,578,417) Principal paid on bonds (3,601,640) Interest paid on bonds (1,965,575) Net cash provided by (used in) capital and related financing activities (16,740,125) Cash Flows From Investing Activities Purchases of short term investments (1,503,427) Interest received 301,631 Net cash provided by (used in) investing activities (1,201,796) Net increase (decrease) in cash and cash equivalents (8,900,698) Cash and cash equivalents, July 1 51,522,335 Cash and Cash equivalents, June 30 $ 42,621,637 Reconciliation of operating loss to net cash provided (used) by operating activities Operating gain (loss) (23,858,607) Adjustments to reconcile operating income to net cash used in operating activities: Depreciation expense 21,190,059 Net book value on capital assets retired 1,160,405 (Increase) decrease in: Accounts receivable (1,068,969) Parts and supplies (164,977) Prepaid expenses (818,962) Increase (decrease) in: Accounts payable and accrued expenses 385,104 Refundable deposits 102,825 OPEB obligation (346,806) Accred compensated absences (1,421,487) Net cash provided by (used in) operating activities $ (4,841,415) Noncash investing, capital, and financing activities Contributions of capital assets $ 792,011 End of Period: Unrestricted cash and equivalents $ 42,428,045 Restricted cash and equivalents 193,592 $ 42,621,637 The accompanying notes are an integral part of the financial statements NOTES TO THE FINANCIAL STATEMENTS CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting g ntity The Central Contra Costa Sanitary District, a special district and a public entity established under the Sanitary District Act of 1923, provides sewer service for the incorporated and unincorporated areas under its jurisdiction. A Board of Directors comprised of five elected members governs the District. As required by accounting principles generally accepted in the United States of America, these basic financial statements present the financial statements of Central Contra Costa Sanitary District and its component unit. The component unit discussed in the following paragraph is blended in the District's reporting entity because of the significance of its operational or financial relationship with the District. Blended Component Unit — Component units are legally separate organizations for which the District is financially accountable. Component units may also include organizations that are fiscally dependent on the District, in that the District approves their budget, the issuance of their debt or the levying of their taxes. In addition, component units are other legally separate organizations for which the District is not financially accountable but the nature and significance of the organization's relationship with the District is such that exclusion would cause the District's financial statements to be misleading or incomplete. For financial reporting purposes, the component unit discussed below is reported in the District's financial statements because of the significance of its relationship with the District. The component unit, although a legally separate entity, is reported in the financial statements using the blended presentation method as if it were part of the District's operations because the Governing Board of the component unit is essentially the same as of governing board of the District and because its purpose is to finance facilities to be used for the direct benefit of the District. The Central Contra Costa Sanitary District Facilities Financing Authority was organized solely for the purpose of providing financial assistance to the District. The authority does this by acquiring, constructing, improving and financing various facilities, land and equipment purchases, and by leasing or selling certain facilities, land and equipment for the use, benefit and enjoyment of the public served by the District. The Corporation has no members and the Board of Directors of the Corporation consists of the same persons who are serving as the Board of Directors of the District. There are no separate basic financial statements prepared for the Corporation. Basis of Accounting The District's financial statements are prepared on the accrual basis of accounting. The District applies all applicable GASB pronouncements for certain accounting and financial reporting guidance. In December of 2010, GASB issued GASBS No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre - November 30, 1989 FASB and AICPA Pronouncements. This statement incorporates pronouncements issued on or before November 30, 1989 into GASB authoritative literature. This includes pronouncements by the Financial Accounting Standards Board (FASB), Accounting Principles Board Opinions (APB), and the Accounting Research Bulletins of the American Institute of Certified Public Accountants' ( AICPA) Committee on Accounting Procedure, unless those pronouncements conflict with or contradict with GASB pronouncements. 12 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The District is a proprietary entity; it uses an enterprise fund format to report its activities for financial statement purposes. Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that the cost and expenses, including depreciation, of providing goods or services to its customers be financed or recovered primarily through user charges; or where the governing body has decided that periodic determination of revenues earned, expense incurred, and net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Enterprise funds are used to account for activities similar to those in the private sector, where the proper matching of revenues and costs is important and the full accrual basis of accounting is required. With this measurement focus, all assets and liabilities of the enterprise are recorded on its statement of net assets, all revenues are recognized when earned and all expenses, including depreciation, are recognized when incurred. Enterprise funds distinguish operating revenues and expenses from non - operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with an enterprise fund's principal ongoing operations. The principal operating revenues of the District are charges to customers for services. Operating expenses for the District include the costs of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non - operating revenues and expenses. For internal operating purposes, the District's Board of Directors has established four separate sub - funds, each of which includes a separate self - balancing set of accounts and a separate Board approved budget for revenues and expenses. These sub -funds are combined into the single enterprise fund presented in the accompanying financial statements. The nature and purpose of these sub -funds are as follows: Running Expense Running expense accounts for the general operations of the District. Substantially all operating revenues and expenses are accounted for in this sub -fund. Sewer Construction Sewer construction accounts for non - operating revenues, which are to be used for acquisition or construction of plant, property and equipment. Self Insurance Self insurance accounts for interest earnings on cash balances in this sub -fund and cash allocations from other sub - funds, as well as for costs of insurance premiums and claims not covered by the District's insurance coverage. 13 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Debt Service Debt service accounts for activity associated with the payment of the District's long term bonds and loans. That portion of the District's net assets which is allocable to each of these sub -funds has been shown separately in the accompanying supplementary information to the financial statements. The District's Board of Directors adopts annual budgets on a basis consistent with accounting principles generally accepted in the United States of America. Investments Investments held at June 30, 2012, with original maturities greater than one year, are stated at fair value. Fair value is estimated based on quoted market prices at year -end. All investments not required to be reported at fair value are stated at cost or amortized cost. Prepaids Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. Bank Escrow Deposit An escrow agreement was formed between the District and the National Park Service for the Right of Way through the John Muir National Historic Site, in lieu of issuing a performance bond. The current Right of Way Permit is 10 years, but is renewable and must remain in effect so long as there is sewerage running through the area; therefore, it is unlikely that the escrow funds will ever be released to the District. These funds are listed as restricted cash in the financial statements. See note 2. Parts and Supplies Parts and supplies are valued at average cost and are used primarily for internal purposes. Property, Plant, and Equipment Purchased capital assets are stated at historical cost. Capital assets contributed to the District are stated at estimated fair value at the time of contribution. The capitalization threshold for capital assets is $5,000. Expenditures which materially increase the value or life of capital assets are capitalized and depreciated over the remaining useful life of the asset. The term depreciation includes amortization of intangible assets. 14 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Depreciation of exhaustible capital assets has been provided using the straight -line method as follows: Years Sewage Collection Facilities 75 Intangible Assets 75 Sewage Treatment Plant and Pumping Plants 40 Buildings 50 Furniture and Equipment 5-15 Motor Vehicles 6-15 Defined Contribution Retirement Plans District employees may defer a portion of their compensation under a District sponsored Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. Under this Plan, participants are not taxed on the deferred portion of their compensation until it is distributed to them; distributions may be made only at termination, retirement, death, or in an emergency as defined by the Plan. The District does not make contributions to the plan. The plan's 457 assets are held in trust for the exclusive benefit of the participants and are not included in the District's financial statements. The District also contributes to a money purchase plan created in accordance with Internal Revenue Code section 401(a). Contributions to the plan are made in accordance with a memorandum of understanding stating that in lieu of making payments to Social Security, the District contributes to the 401(a) Plan an amount equal to that which would have been contributed to Social Security on behalf of its employees as long as the District is not required to participate in Social Security. The assets are held in trust and are not recorded on the books of the District. The District contributed $1,478,038 to the plan during the year ended June 30, 2012. Reclassifications Certain items in the prior year financial statements have been reclassified to match their presentation in the current year financial statements. Property Taxes Property tax revenue is recognized in the fiscal year for which the tax is levied. The County of Contra Costa levies, bills and collects property taxes for the District; all material amounts are collected by June 30. 15 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) General County taxes collected are the same as the amount levied since the County participates in California's alternative method of apportionment called the Teeter Plan. The Teeter Plan as provided in Section 4701 at seq. of the State of Revenue and Taxation Code establishes a mechanism for the county to advance the full amount of property tax and other levies to taxing agencies based on the tax levy, rather than on the basis of actual tax collections. Although this system is a simpler method to administer, the County assumes the risk of delinquencies. The County in return retains the penalties and accrued interest thereon. Secured Property tax bills are mailed once a year, during the month of October on the current secured tax roll, to the owner of the property as of the lien date (January 1). Payments can be made in two installments, and are due on November 1 and February 1. Delinquent accounts are assessed a penalty of 10 percent. Accounts which remain unpaid on June 30 are charged an additional 1 '/2 percent per month. Unsecured property tax is due on July 1 and becomes delinquent on August 31. The penalty percentage rates are the same as secured property tax. Compensated Absences The liability for vested vacation, compensatory time, and sick pay is recorded as an expense when earned. District employees have a vested interest in 100 percent of accrued vacation time and 85 percent of accrued sick time for employees hired before May 1, 1985. Employees hired after May 1, 1985 have a vested interest in up to 40 percent of their sick time, based upon length of employment with the District. In fiscal 2012, accrued compensated absences decreased from $5,132,067 to $3,710,580, or by $1,421,487. The current portion of the liability to be used within the next year was estimated by management to be approximately $375,000 at June 30, 2012. The change of $1,421,487 during fiscal 2012 consists of increases of $337,579 and decreases of $1,759,066. Statement of Cash Flows For purposes of the statement of cash flows, all highly liquid investments, including restricted assets, with maturities of three months or less when purchased, are considered to be cash equivalents. Included therein are petty cash, bank accounts, and the State of California Local Agency Investment Fund (LAIF). Restricted assets are debt service amounts maintained by fiduciaries and not available for general expenses. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 16 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accounting Pronouncements In December of 2009, GASB issued GASBS No. 57, OPEB Measurements by Agent Employers and Agent Multiple- Employer Plans. This Statement amends Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, to permit an agent employer that has an individual- employer OPEB plan with fewer than 100 total plan members to use the alternative measurement method, at its option, regardless of the number of total plan members in the agent multiple- employer OPEB plan in which it participates. Consistent with this change to the employer- reporting requirements, this Statement also amends a Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, requirement that a defined benefit OPEB plan obtain an actuarial valuation. The amendment permits the requirement to be satisfied for an agent multiple - employer OPEB plan by reporting an aggregation of results of actuarial valuations of the individual - employer OPEB plans or measurements resulting from use of the alternative measurement method for individual - employer OPEB plans that are eligible. The District is required to implement the provisions of the Statement for the year ended June 30, 2012 (effective for periods beginning after June 15, 2011). This Statement will not result in a change in current practice, since the District does not use the alternative measurement method. In November of 2010, GASB issued GASBS No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The objective of this Statement is to improve financial reporting by addressing issues related to service concession arrangements (SCAs), which are a type of public - private or public - public partnership. As used in this Statement, an SCA is an arrangement between a transferor (a government) and an operator (governmental or nongovernmental entity) in which (1) the transferor conveys to an operator the right and related obligation to provide services through the use of infrastructure or another public asset (a "facility ") in exchange for significant consideration and (2) the operator collects and is compensated by fees from third parties. The District is required to implement the provisions of this Statement for the year ended June 30, 2013 (effective for periods beginning after December 15, 2011). The District has no known SCAs that would require disclosure or have a material effect on the financial statements of the District. In November of 2010, GASB issued GASBS No. 61, The Financial Reporting Entity: Omnibus. This Statement amends Statements No. 14 and 34, to modify certain requirements for inclusion of component units in the financial reporting entity. For organizations that previously were required to be included as component units by meeting the fiscal dependency criterion, a financial benefit or burden relationship also would need to be present between the primary government and that organization for it to be included in the reporting entity as a component unit. Further, for organizations that do not .meet the financial accountability criteria for inclusion as component units but that, nevertheless, should be included because the primary government's management determines that it would be misleading to exclude them, this Statement clarifies the manner in which that determination should be made and the types of relationships that generally should be considered in making the determination. 17 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accounting Pronouncements (continued) This Statement also amends the criteria for reporting component units as if they were part of the primary government (that is, blending) in certain circumstances and clarifies the reporting of equity interests in legally separate organizations. It requires a primary government to report its equity interest in a component unit as an asset. The District is required to implement the provisions of this Statement for the year ended June 30, 2013 (effective for periods beginning after June 15, 2012). This Statement will not result in a change in current practice, or have a material effect on the financial statements of the District. In December of 2010, GASB issued GASBS No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre - November 30, 1989 FASB and AICPA Pronouncements. The objective of this Statement is to incorporate into the GASB's authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements: 1. Financial Accounting Standards Board (FASB) Statements and Interpretations 2. Accounting Principles Board Opinions 3. Accounting Research Bulletins of the American Institute of Certified Public Accountants' ( AICPA) Committee on Accounting Procedure This Statement also supersedes Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, thereby eliminating the election provided in paragraph 7 of that Statement for enterprise funds and business -type activities to apply post- November 30, 1989 FASB Statements and Interpretations that do not conflict with or contradict GASB pronouncements. However, those entities can continue to apply, as other accounting literature, post- November 30, 1989 FASB pronouncements that do not conflict with or contradict GASB pronouncements, including this Statement. The District-is required to implement the provisions of this Statement for the year ended June 30, 2013 (effective for periods beginning after December 15, 2011). This Statement will not result in a change in current practice, or have a material effect on the financial statements of the District. In June of 2011, GASB issued GASBS No. 63, Financial Reporting and Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. This Statement provides financial reporting guidance for deferred outflows of resources and deferred inflows of resources. Concepts Statement No. 4, Elements of Financial Statements, introduced and defined those elements as a consumption of net assets by the government that is applicable to a future reporting period, and an acquisition of net assets by the government that is applicable to a future reporting period, respectively. Previous financial reporting standards do not include guidance for reporting those financial statement elements, which are distinct from assets and liabilities. IM] CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accounting Pronouncements (continued Concepts Statement 4 also identifies net position as the residual of all other elements presented in a statement of financial position. This Statement amends the net asset reporting requirements in Statement No. 34, Basic Financial Statements —and Management's Discussion and Analysis for State and Local Governments, and other pronouncements by incorporating deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and by renaming that measure as net position, rather than net assets. The District is required to implement the provisions of this Statement for the year ended June 30, 2013 (effective for periods beginning after December 15, 2011). This Statement should not result in a change in current practice, or have a material effect on the financial statements of the District. In June of 2011, GASB issued GASBS No. 64, Derivative Instruments: Application of Hedge Accounting Termination Provisions. This Statement amends Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. Some governments have entered into interest rate swap agreements and commodity swap agreements in which a swap counterparty, or the swap counterparty's credit support provider, commits or experiences either an act of default or a termination event as both are described in the swap agreement. Many of those governments have replaced their swap counterparty, or swap counterparty's credit support providers, either by amending existing swap agreements or by entering into new swap agreements. When these swap agreements have been reported as hedging instruments, questions have arisen regarding the application of the termination of hedge accounting provisions in Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. Those provisions require a government to cease hedge accounting upon the termination of the hedging derivative instrument, resulting in the immediate recognition of the deferred outflows of resources or deferred inflows of resources as a component of investment income. The objective of this Statement is to clarify whether an effective hedging relationship continues after the replacement of a swap counterparty or a swap counterparty's credit support provider. This Statement sets forth criteria that establish when the effective hedging relationship continues and hedge accounting should continue to be applied. The District is required to implement the provisions of this Statement for the year ended June 30, 2012 (effective for periods beginning after June 15, 2011). This Statement will not result in a change in current practice, or have a material effect on the financial statements of the District. 19 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012. 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accounting Pronouncements (continued) In March of 2012, GASB issued GASBS No. 65, Items Previously Reported as Assets and Liabilities. This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. This Statement also provides other financial reporting guidance related to the impact of the financial statement elements deferred outflows of resources and deferred inflows of resources, such as changes in the determination of the major fund calculations and limiting the use of the term deferred in financial statement presentations. The District is required to implement the provisions of this Statement for the year ended June 30, 2014 (effective for periods beginning after December 31, 2012). This Statement will not result in a change in current practice, or have a material effect on the financial statements of the District. In March of 2012, GASB issued GASBS No. 66, Technical Corrections — 2012 — an Amendment of GASB Statements No. 10 and No. 62. This Statement amends Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues, by removing the provision that limits fund -based reporting of an entity's risk financing activities to the general fund and the internal service fund type. This Statement also amends Statement 62 by modifying the specific guidance on accounting for (1) operating lease payments that vary from a straight -line basis, (2) the difference between the initial investment (purchase price) and the principal amount of a purchased loan or group of loans, and (3) servicing fees related to mortgage loans that are sold when the stated service fee rate differs significantly from a current (normal) servicing fee rate. The objective of this Statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre - November 30, 1989 FASB and AICPA Pronouncements. The District is required to implement the provisions of this Statement for the year ended June 30, 2014 (effective for periods beginning after December 31, 2012). This Statement will not result in a change in current practice, or have a material effect on the financial statements of the District. 20 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accountinc Pronouncements (continued In June of 2012, GASB issued GASBS No. 67, Financial Reporting for Pension Plans – an Amendment of GASB Statement No. 25. The objective of this Statement is to improve financial reporting by state and local governmental pension plans. This Statement and Statement 68 establish a definition of a pension plan that reflects the primary activities associated with the pension arrangement — determining pensions, accumulating and managing assets dedicated for pensions, and paying benefits to plan members as they come due. This Statement replaces the requirements of Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and No. 50, Pension Disclosures, as they relate to pension plans that are administered through trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria relating to irrevocable contributions, dedicated plan assets, and protection of plan assets from creditors. The requirements of Statements 25 and 50 remain applicable to pension plans that are not administered through trusts covered by the scope of this Statement and to defined contribution plans that provide postemployment benefits other than pensions. For defined benefit pension plans, this Statement establishes standards of financial reporting for separately issued financial reports and specifies the required approach to measuring the pension liability of employers and nonemployer contributing entities for benefits provided through the pension plan (the net pension liability), about which information is required to be presented. Distinctions are made regarding the particular requirements depending upon the type of pension plan administered, including cost - sharing multi - employer pension plans, in which the District participates. Cost - sharing plans are those in which the pension obligations to the employees of more than one employer are pooled and plan assets can be used to pay the benefits of the employees of any employer that provides pensions through the pension plan. The requirements of this Statement will improve financial reporting primarily through enhanced note disclosures and schedules of required supplementary information that will be presented by the pension plans. The new information will enhance the decision - usefulness of the financial reports of these pension plans, their value for assessing accountability, and their transparency by providing information about measures of net pension liabilities and explanations of how and why those liabilities changed from year to year. The net pension liability information will offer an up -to -date indication of the extent to which the total pension liability is covered by the fiduciary net position of the pension plan. The contribution schedule will provide measures to evaluate decisions related to the assessment of contribution rates in comparison to actuarially determined rates. In that circumstance, it also will provide information about whether employers and nonemployer contributing entities are keeping pace with actuarially determined contribution measures. In addition, new information about rates of return on pension plan investments will inform financial report users about the effects of market conditions on the pension plan's assets over time and provide information for users to assess the relative success of the pension plan's investment strategy and the relative contribution that investment earnings provide to the pension plan's ability to pay benefits to plan members when they come due. The District is required to implement to provisions of this Statement for the year ended June 30, 2014 (effective for periods beginning after June 15, 2013). 21 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accounting Pronouncements (continued) This Statement will result in a change in current practice, but will most likely not have a material effect on the financial statements of the District. In June of 2012, GASB issued GASBS No. 68, Financial Reporting for Pension Plans – an Amendment of GASB Statement No. 27. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts that meet certain criteria relating to irrevocable contributions, dedicated plan assets, and protection of plan assets from creditors. The requirements of Statements 27 and 50 remain applicable for pensions that are not covered by the scope of this Statement. Note disclosure and required supplementary information requirements about pensions also are addressed. Distinctions are made regarding the particular requirements for employers based on the number of employers whose employees are provided with pensions through the pension plan and whether pension obligations and pension plan assets are shared. Employers are classified into categories. Cost- sharing employers, such as the District, are those whose employees are provided with defined benefit pensions through cost - sharing multiple- employer pension plans. Cost - sharing plans are pension plans in which the pension obligations to the employees of more than one employer are pooled and plan assets can be used to pay the benefits of the employees of any employer that provides pensions through the pension plan. Cost-sharing employers In financial statements prepared using the economic resources measurement focus and accrual basis of accounting, a cost - sharing employer that does not have a special funding situation is required to recognize a liability for its proportionate share of the net pension liability (of all employers for benefits provided through the pension plan )—the collective net pension liability. An employer's proportion is required to be determined on a basis that is consistent with the manner in which contributions to the pension plan are determined, and consideration should be given to separate rates, if any, related to separate portions of the collective net pension liability. 22 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 1. DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accountine Pronouncements (continued In addition, the effects of (1) a change in the employer's proportion of the collective net pension liability and (2) differences during the measurement period between the employer's contributions and its proportionate share of the total of contributions from employers included in the collective net pension liability are required to be determined. These effects are required to be recognized in the employer's pension expense in a systematic and rational manner over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pensions through the pension plan (active employees and inactive employees). The portions of the effects not recognized in the employer's pension expense are required to be reported as deferred outflows of resources or deferred inflows of resources related to pensions. Employer contributions to the pension plan subsequent to the measurement date of the collective net pension liability also are required to be reported as deferred outflows of resources related to pensions. A cost - sharing employer is required to recognize pension expense and report deferred outflows of resources and deferred inflows of resources related to pensions for its proportionate shares of collective pension expense and collective deferred outflows of resources and deferred inflows of resources related to pensions. This Statement requires that notes to financial statements of cost - sharing employers include descriptive information about the pension plans through which the pensions are provided. Cost - sharing employers should identify the discount rate and assumptions made in the measurement of their proportionate shares of net pension liabilities. Cost - sharing employers also should disclose information about how their contributions to the pension plan are determined. This Statement requires cost - sharing employers to present in required supplementary information 10 -year schedules containing (1) the net pension liability and certain related ratios and (2) information about required contributions, contributions to the pension plan, and related ratios. The District is required to implement provisions of this Statement for the year ended June 30, 2015 (effective for periods beginning after June 15, 2014). This Statement will result in a change in current practice, and may have a material effect on the financial statements of the District. 23 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 2. CASH AND CASH EQUIVALENTS Summary of Cash and Investments Investments as of June 30 are classified in the accompanying financial statements as follows: Cash and cash equivalents Short term investments Restricted cash and investments Total Cash and Investments * Includes $100,000 bank escrow deposit- see note 1. Policies and Practices $ 42,428,045 16,496,087 5,512,500 $ 64,436,632 The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; and certificates of participation. State code and the District's investment policy prohibit the District from investing in investments with a rating of less than A or equivalent. District policy limits investments in commercial paper to prime quality with corporate assets over $500,000,000. General Authorizations Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below: California State Limits Maximum Maximum Percentage Investment of Portfolio In One Issuer District Policv Maximum Percentage of Portfolio None Maximum 100% Remaining Authorized Investment Type Maturity U.S. Treasury Obligations 5 years Banker's Acceptance 180 Commercial Paper (1) 270 Collateralized Certificates of Deposit (2) 5 years County Pooled Investment Funds N/A Local Agency Investment Fund (LAIF) N/A Maximum Maximum Percentage Investment of Portfolio In One Issuer District Policv Maximum Percentage of Portfolio None None 100% 40% 40% 10% 25% 10% 10% 30% None 10% None None 100% None None 100% (1) Prime quality; limited to corporations with assets over $500,000,000 (2) Prior approval of the Board of Directors must be obtained to acquire maturities beyond one year 24 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 2. CASH AND CASH EQUIVALENTS (continued) Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment; generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. It is the District's policy to manage exposure to interest rate risk by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. District policy is that investment maturities do not exceed one year, with the exception of Treasury Notes or Local Agency Investment Fund; however, investments can be held longer with Board approval. The District's investments at year end with the exception of the U.S Treasuries and Commercial Paper below are held in external investment pools which are liquid investments. Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuation is provided by the following schedule that shows the distribution of the District's investment by maturity: Investment Type Certificates of Deposit Commercial Paper Certificates of Deposit Commercial Paper Total Credit Risk Fair Value Maturity $ 5,001,098 08/01/12 2,994,207 10/17/12 3,998,672 12/17/12 4,502,110 9/21/12 $ 16,496,087 Aaa Credit risk is the risk that an issue 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 the California Government Code, the District's investment policy, and the actual rating as of the year -end for each investment type. Minimum Total $ 64.436.632 25 Not Fair Legal Investment Tyne Value Rating, Cash $ 1,558,558 N/A Money Markets 5,381,987 Aaa Commercial Paper /CDs 16,496,087 Aaa State Investment Pool 41,000,000 N/A Total $ 64.436.632 25 Not Required Rating at Year -End To Be Rated Aaa Unrated $ 1,558,558 $ - $ - - 5,381,987 - - 16,496,087 - - - 41,000,000 $ 1.558.558 21.878.074 41,000.000 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 2. CASH AND CASH EQUIVALENTS (continued) Concentration of Credit Risk The investment policy of the District contains the limitation that no more that 10% of the District's investment portfolio will be invested in a single issuer. During the current fiscal year the District invested 64% of its monies in the State Investment Pool (LAIF) which is not limited by the California Government Code or District Investment Policy. Investments in County Treasury — The District is considered to be a voluntary participant in an external investment pool. The fair value of the District's investment in the pool is reported in the accounting financial statements at amounts based upon the District's pro -rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis. Investment in the State Investment Pool — The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California government code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the District's investment in the pool is reported in the accompanying financial statement at amounts based upon the District'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 is recorded on the amortized cost basis. Custodial Credit Risk — Investments Custodial risk for investments is the risk that, in the event of the failure of the counterparty (e.g. the broker - dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code does not contain legal or policy requirements that would limit the exposure to custodial credit risk. The District's policy is to use the services of the Treasurer's Office of the County of Contra Costa, which will transact the District's investment decisions in compliance with the requirements of the District's policy. The County Treasurer's Office will execute the District's investments through such broker - dealers and financial institutions as are approved by the County Treasurer, and through the State Treasurer's Office for investment in the Local Agency Investment Fund. 26 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 3. ACCOUNTS RECEIVABLE At June 30, 2012, accounts receivable are comprised of the following: City of Concord (see Note 8) $ 13,189,077 Household Hazardous Waste Partners 766,204 Proposition 1 A loan 985,916 Permit counter 214,490 All other 849,611 Total Accounts Receivable 16,005,298 Allowance for Doubtful Accounts (985,916) Net Accounts Receivable 15.019.382 Proposition IA Loan Receivable Under the provisions of Proposition IA, and as part of the 2009 -10 budget package passed by the California state legislature on July 28, 2009, the State of California borrowed 8% of the amount of property tax revenue, including those property taxes associated with the supplemental property tax apportioned to special districts. The state is required to repay this borrowing, plus interest, by June 30, 2013. After repayment of this initial borrowing, the California legislature may consider only one additional borrowing within a ten -year period. The amount of this borrowing pertaining to the District was $ 985,916. The borrowing by the State of California was recognized as a receivable in the accompanying financial statements, with an equal amount set up as an allowance for doubtful accounts. In the Statement of Net Assets and Statement of Revenues, Expenses and Changes in Net Assets, the tax revenues were recognized in the fiscal year for which they were levied (fiscal year 2010). Due to the economic climate, and the ongoing budget difficulties of the State of California, District management decided to reserve the entire Proposition IA loan of $985,916 in fiscal year 2010. This amount is tracked as a loan receivable on the books, with a corresponding contra account on the Statement of Net Assets, which effectively eliminates the receivable. 27 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 4. LAND, PROPERTY, PLANT AND EQUIPMENT, AND CONSTRUCTION IN PROGRESS Property, plant and equipment, and construction in progress are summarized below for the year ended June 30, 2012: Capital assets being depreciated Sewage collection system Balance - - 13,375,795 Beginning Transfer Balance 630,767 of Year Additions Retirements from CIP End of Year At Cost 8,518,443 - - Capital assets not being depreciated 8,518,443 Sewage treatment plant 287,537,513 Land $ 17,114,720 $ - $ - $ - $ 17,114,720 Construction in progress 22,632,142 24,787,334 - (24,949,782) 22,469,694 Total nondepreciated assets 39,746,862 24,787,334 - (24,949,782) 39,584,414 Capital assets being depreciated Sewage collection system 290,317,724 - - 13,375,795 303,693,519 Contributed sewer lines 149,110,351 630,767 (7,060) 161,244 149,895,302 Outfall sewers 8,518,443 - - - 8,518,443 Sewage treatment plant 287,537,513 - (1,100,000) 5,995,370 292,432,883 Recycled water infrastructure 12,300,131 - - 1,035,164 13,335,295 Pumping stations 54,412,730 - - - 54,412,730 Buildings 31,317,466 - - 3,159,658 34,477,124 Intangibles 2,058,921 - - 404,913 2,463,834 Furniture and equipment 13,243,330 - (26,120) 814,354 14,031,564 Motor vehicles 6,038,527 - (31,038) 3,284 6,010,773 Total depreciated assets 854,855,136 630,767 (1,164,218) 24,949,782 879,271,467 Less accumulated depreciation Sewage collection system 44,948,296 4,007,175 - - 48,955,471 Contributed sewer lines 47,111,102 2,005,303 (7,060) - 49,109,345 Outfall sewers 2,766,972 113,353 - - 2,880,325 Sewage treatment plant 161,800,408 10,003,134 (1,100,000) - 170,703,542 Recycled water infrastructure 4,848,535 513,851 - - 5,362,386 Pumping stations 19,991,305 2,176,437 - - 22,167,742 Buildings 6,031,677 988,057 - - 7,019,734 Intangibles 58,095 30,152 - - 88,247 Furniture and equipment 9,775,349 1,069,343 (26,031) - 10,818,661 Motor vehicles 3,808,468 283,254 (31,038) - 4,060,684 Total accumulated depreciation 301,140,207 21,190,059 (1,164,129) - 321,166,137 Total capital assets being depreciated, net 553,714,929 (20,559,292) (89) 24,949,782 558,105,330 Capital assets, net $ 593,461,791 $ 4,228,042 X89) $ - $ 597,689,744 EM CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 5. ASSESSMENT DISTRICTS The District established the Contractual Assessment District (CAD) program to help homeowners finance the cost of connecting to the District. The construction costs associated with the project within the program are capitalized and depreciated. Individual homeowners are assessed an amount equal to their share of the construction costs and connection fee. The assessments plus interest are generally payable over 10 years. At year -end, the CAD receivable balance was $519,426. The District also established the Alhambra Valley Assessment District (AVAD) to provide services to residents in the Alhambra Valley in Martinez. Residents have the choice to pay cash or finance the construction costs and connection fees. At year -end the AVAD receivable balance was $1 ,701,904. The total receivable balance for the CAD and AVAD is $2,221,330, and is shown as a non - current asset on the Statement of Net Position. 6. LONGTERM DEBT 2009 Wastewater Revenue Certificates of Participation On November 12, 2009 and December 3, 2009 the District issued two Certificates of Participation (COP). The 2009 Wastewater Revenue Certificates of Participation, Series A and Series B were issued for $19,635,000 and $34,490,000, respectively. The Series A COP are federally taxable `Build America Bonds" which have a direct 35% interest rate subsidy from the Federal Government. Yields on this series range from 3.45% to 3.78% net of the subsidy. The Series B COP are tax exempt bonds that were used to refund the 1998 and 2002 bond issues and raise an additional $30 million in new proceeds with yields ranging from .4% to 3.79 %. The two bonds total $54,125,000, and are secured by a pledge of revenue. Principal payments begin annually on September 1, 2010 with semi - annual payments due on September 1 and March 1 of each year. Both bonds will be fully amortized as of September 1, 2029. The refunded portion of the original bonds will be paid off based on the original amortization schedule. Summary The changes in the District's long -term obligations during the year consisted of the following: Revenue bonds Water Reclamation Loan Balance July 1, 2011 Deductions $ 50,665,000 $ 3,465,000 1,183,583 156,345 51.848.583 3.621.345 29 Balance Due in Additions June 30, 2012 One Year $ - $ 47,200,000 $ 3,605,000 1,027,238 160,411 - 48.227.238 $ 3.765.411 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 6. LONG -TERM DEBT (continued) Debt Service Requirements In 2009, the District issued Certificates of Participation (COP), which retired the 2002 and 1998 debt. The 2009 Revenue COP debt service requirements are as follows: Requirements 2013 $ 187,119 Series A Series B 2015 Series A 2016 Fiscal Year Debt Service Debt Service Gross 35% Tax Net Ending June 30, Requirement Requirement Total Subsidy Total 2013 1,190,840 4,586,625 5,777,465 (416,794) 5,360,671 2014 1,190,840 4,571,683 5,762,523 (416,794) 5,345,729 2015 1,190,840 4,565,467 5,756,307 (416,794) 5,339,513 2016 1,190,840 2,811,033 4,001,873 (416,794) 3,585,079 2017 1,190,840 2,801,300 3,992,140 (416,794) 3,575,346 2018-2022 9,064,808 10,870,037 19,934,845 (2,001,820) 17,933,025 2023 —2027 12,995,263 2,478,751 15,474,014 (1,239,282) 14,234,732 2028 —2030 7,161,643 73,230 7,234,873 (183,706) 7,051,167 Total 35,175,914 32,758,126 67,934,040 (5,508,778) 62,425,262 Amount representing interest (15,540,914) (5,193,126) (20,734,040) - (20,734,040) Principal outstanding 19,635,000 27,565,000 47,200,000 (5,508,778) 41,691,222 Short-term portion of revenue bonds - (3,605,000) (3,605,000) 416,794 (3,188,206) Long -term portion of revenue bonds $ 19,635,000 $ 23,960,000 $ 43,595,000 $(5,091,984) $ 38,503,016 Water Reclamation Loan Contract The District has entered into a contract with the State of California State Water Resources Control Board (the Board), which advanced the District $2,916,872 for design and construction costs for projects related to recycled water treatment programs. The District must repay advances from the Board over a 20 -year period beginning March 31, 1999, with an interest rate of 2.60 %. Debt service requirements are as follows: Fiscal Year Debt Service Ending June 30, Requirements 2013 $ 187,119 2014 187,119 2015 187,119 2016 187,119 2017 187,120 2018 187,120 Total 1,122,716 Amount representing interest (95,478) 1,027,238 Less: Current portion of Water Reclamation Loan Contract (160,411) Long term portion of Water Reclamation Loan Contract $ 866,827 30 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 7. RISK MANAGEMENT The District is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disaster. The District joined with other entities to form the California Sanitation Risk Management Authority ( CSRMA), a public entity risk pool currently operating as a common risk management and insurance program for the member entities. The purpose of CSRMA is to spread the adverse effects of losses among the member entities and to purchase excess insurance as a group, thereby reducing its cost. Through CSRMA, the District purchases property insurance and workers' compensation insurance. Insurance Coveraize The District's insurance coverage is as follows: Insurance Company of the State of Self Insured $ 15,500,000 $ 1,000,000 Deductible Per Type of Insurance Coverage Insurer Limits Occurrence All -Risk Property Admiral Insurance Company $ 1,000,000 Fire Public Entity Property Insurance Chartis $ 15,500,000 Program ( PEPIP) $533,523,156 $ 250,000 Boiler & Machinery PEPIP $ 1,000,000 Pollution (General Aggregate) (Shared Limits per Occurrence) $ $100,000,000 $ 250,000 Crime Travelers $ 1,000,000 $ 25,000 Liability Errors and Omissions Insurance Company of the State of Pennsylvania (Chartis) $ 15,500,000 $ 1,000,000 Employment Practices Liability Chartis $ 15,500,000 $ 1,000,000 Employment Practices Liability Admiral Insurance Company $ 1,000,000 $ 15,000 General Liability Chartis $ 15,500,000 $ 1,000,000 Auto Liability Chartis $ 15,500,000 $ 1,000,000 Pollution (General Aggregate) Chartis Specialty Insurance Co. $ 5,000,000 $ 5,000 General Liability (Occurrence) Pollution (Legal Liability Chartis Specialty Insurance Co. Aggregate) $ 10,000,000 $ 50,000 Fiduciary Liability RLI Insurance Company $ 1,000,000 - Workers' Compensation CSRMA $ 750,000 - Excess Workers' Compensation Safety National Casualty Corporation Statutory $ 750,000 Liability for Uninsured Claims The Governmental Accounting Standards Board (GASB) requires state and local governments to record their liability for uninsured claims in their financial statements. The District's uninsured claims activity and exposure relates primarily to its general and automobile liability program. The District records its estimated liability for uninsured claims in this area based on the results of periodic actuarial evaluations. The actuarial evaluations are typically performed every two years. For intervening years, the liability for uninsured claims is reviewed for adequacy based on claims activity during the intervening period. 31 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 7. RISK MANAGEMENT (continued) For the fiscal years ended June 30, 2012, 2011, and 2010, settlements have not exceeded insurance coverage. Changes in the District's estimated liability for uninsured claims for fiscal years 2012, 2011, and 2010 are summarized as follows: Beginning balance Provisions for claims incurred in the current year and changes in the liability for uninsured — claims incurred in prior years Claims and claim adjustment expenses paid Ending balance 8. AGREEMENT WITH THE CITY OF CONCORD 2012 2011 2010 $1,000,000 $1,000,000 $ 750,000 72,606 240,844 295,348 (72,606) (240,844) (45,348) $1,000,000 $1,000,000 $1,000,000 In 1974, the District and the City of Concord (the City) entered into a cost - sharing agreement under which the District became responsible for providing sewage treatment facilities and services to the City. Under this agreement, the City pays a service charge for its share of operating, maintenance and administrative costs and makes a contribution for its share of facilities capital costs expended. Service charges and contributions to capital costs from the City totaled $10,647,389 and $2,541,688 respectively, for the year ended June 30, 2012, for a total of $13,189,077. 9. PENSION PLAN Plan Description Substantially all District full -time employees are required to participate in the Contra Costa County Employees' Retirement Association (CCCERA), a cost - sharing multiple - employer public employee defined benefit retirement plan (Plan), governed by the County Employee's Retirement Law of 1937, as amended. The latest available actuarial and financial information for the Plan is for the year ended December 31, 2011. The Contra Costa Employees' Retirement Association issues a publicly available financial report that includes financial statements and supplemental information of the Plan. That report is available by writing to Contra Costa County Employees' Retirement Association, 1355 Willow Way, Suite 221, Concord, CA 94520 -5728 or by calling (925) 521 -3960. The Plan provides for retirement, disability, and death and survivor benefits. Annual cost of living (COL) adjustments to retirement allowances can be granted by the Retirement Board as provided by State statutes. Retirement benefits are based on age, length of service and final average salary. Subject to vested status, employees can withdraw contributions plus interest credited, or leave them as a deferred retirement when they terminate, or transfer to a reciprocal retirement system. 32 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 9. PENSION PLAN (continued) Plan Contribution Requirement The Plan requires employees to pay a portion of the basic retirement benefit and a portion of future COL costs. However, the District has paid the employee's basic contributions in accordance with the Memorandum of Understanding (MOU). Employees must pay the COL portion of the employee rate. The contribution requirement and payment from the District for the plan years ended June 30, 2012, 2011 and 2010 was as follows: 2012 2011 2010 Covered payroll for fiscal years ended June 30 $ 24,305,548 $ 24,709,477 $ 25,080,233 Employer required contributions to pension 10,961,853 8,950,938 8,804,127 Employee (COL) required contributions to pension 922,520 930,648 939,388 Total required contributions $ 11,884,373 $ 9,881,586 $ 9,743,515 Percentage of payroll 49% 40% 39% The District pension plan covered 231 participants during the year. The CCCERA Board took a depooling action in October 2009 which yielded 12 separate cost groups by employer, with the exception of smaller employers (those with less than 50 active members) who continue to be pooled with the applicable county tier. The depooling action affected employer rates effective July 1, 2011. 10. POST EMPLOYMENT HEALTH CARE BENEFITS Plan Description The District's defined benefit post employment healthcare plan, (DPHP), provides medical benefits to eligible retired District employees and beneficiaries. DPHP is part of the Public Agency portion of the Public Agency Retirement System (PARS), an agent multiple - employer plan administered by PARS, which acts as a common investment and administrative agent for participating public employees within the State of California. A menu of benefit provisions as well as other requirements is established by the State statute with the Public Employees' Retirement Law. DPHP selects optional benefit provisions from the benefit menu by contract with PARS and adopts those benefits through District resolution. PARS issues a separate Comprehensive Annual Financial Report. Copies of the PARS annual financial report may be obtained from PARS, 4350 Von Karman Ave., Suite 100, Newport Beach, CA 92660; by calling 1(800) 540 -6369; or by emailing info @pars.org. 33 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 10. POST EMPLOYMENT HEALTH CARE BENEFITS (continued) Funding Policy Statement No. 45 sets rules for computing the employer's expense for retiree benefits other than pension, called OPEBs. The expense, called the annual OPEB Cost (AOC), is determined similarly to pensions. The annual required contribution (ARC) of the employer, represents a level of funding that, if paid on an ongoing basis, is projected to cover normal annual costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. When an agency contributes more than the ARC, there is a net OPEB asset; when the contribution is less, a net OPEB obligation results. There is a net OPEB asset of $1,263,542 and $916,736 as of June 30, 2012 and 2011, respectively. Because of the volatility of the investment market, the District Board voted to make monthly installments into the OPEB Trust to take advantage of dollar- cost - averaging. Annual OPEB Cost For 2012, the District's annual OPEB cost (expense) was equal to the ARC of $8,300,000. The District contributed $8,646,806; $4,139,606 for retiree health care premiums and $4,507,200 to the PARS trust. The following table shows the components of the District's annual OPEB costs for the years 2012 and 2011, the amount actually contributed to the plan, and changes in the District's net OPEB obligation: 2012 2011 Annual Required Contribution (ARC) $ 8,300,000 $6,976,364 Interest on net OPEB obligation (asset) _ _ Adjustment to annual required contribution _ - Annual OPEB cost (AOC) 8,300,000 6,976,364 Contributions Made: Health care premiums paid (4,139,606) (3,571,141) Contributions to PARS trust (4,507,200) (3,575,028) Increase (decrease) in net OPEB obligation (346,806) (169,805) Net OPEB Obligation (Asset) — Beginning of Year (916,736) (746,931) Net OPEB Obligation (Asset) — End of Year $ (1,263,542) $ (916,736) The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the OPEB obligation for 2012 and the preceding years are presented below: Annual Current OPEB Annual Percentage Year AOC Net OPEB Cost Employer of AOC Obligation Obligation Fiscal Year (AOC) Contribution Contributed (Asset) (Asset) June 30, 2012 $8,300,000 $ 8,646,806 104% $ (346,806) $ (1,263,542) June 30, 2011 $6,976,364 $ 7,146,169 102% $ (169,805) $ (916,736) June 30, 2010 $6,976,364 $ 9,334,917 134% $(2,358,553) $ (746,931) W CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 10. POST EMPLOYMENT HEALTH CARE BENEFITS (continued) Funding Status and Funding Progress The funded status of the plan as of July 1, 2010 was as follows: Overfunded Per PARS, actuarial assets as of June 30, 2012, including trust contributions and interest, total $22,718,524 ($18,077,303 at June 30, 2011). Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. The funded status of the plan and the annual required contributions of the employer are subject to continual revision, as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information, presents multiyear trend information that shows whether the actuarial value of the plan assets is increasing or decreasing over time, relative to the actuarial liabilities for benefits. Actuarial Methods and Assumptions Projections for benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation as well as the historical pattern of sharing benefit costs between the employer and plan members. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and actuarial value of assets, consistent with the long -term perspective of the calculations. In August 2011, the District had an additional actuarial valuation prepared as of July 1, 2010. This additional valuation was not required at the time, but was prepared in order to begin a completion schedule that allows the District to have data available for future budget cycles, in this case for the 2011 — 2012 and 2012 — 2013 fiscal years. The ARC in 2011 — 2012 and 2012 — 2013 increased to $8.3 million per year. The next actuarial valuation is scheduled to be performed by December 31, 2012 to be applied to the 2013 — 2014 fiscal year. 35 Cost Method (Underfunded) Actuarial Actuarial Actuarial UAAL as Actuarial Valuation Accrued Accrued Funding Covered Payroll a % of Valuation of Assets Liability Liability Ratio (Active Plan Covered Date (A) (B) (A -B) UAAL (A/B) Members) Payroll June 30, 2010 $ 9,404,000 $ 90,337,000 $ (80,933,000) 10.41 % $ 25,080,233 323% June 30, 2009 $ 2,341,251 $ 68,769,305 $ (66,428,054) 3.40% $ 25,080,233 265% June 30, 2007 $ 2,341,251 $ 68,447,956 $ (66,106,705) 3.42% $ 22,648,230 292% Per PARS, actuarial assets as of June 30, 2012, including trust contributions and interest, total $22,718,524 ($18,077,303 at June 30, 2011). Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. The funded status of the plan and the annual required contributions of the employer are subject to continual revision, as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information, presents multiyear trend information that shows whether the actuarial value of the plan assets is increasing or decreasing over time, relative to the actuarial liabilities for benefits. Actuarial Methods and Assumptions Projections for benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation as well as the historical pattern of sharing benefit costs between the employer and plan members. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and actuarial value of assets, consistent with the long -term perspective of the calculations. In August 2011, the District had an additional actuarial valuation prepared as of July 1, 2010. This additional valuation was not required at the time, but was prepared in order to begin a completion schedule that allows the District to have data available for future budget cycles, in this case for the 2011 — 2012 and 2012 — 2013 fiscal years. The ARC in 2011 — 2012 and 2012 — 2013 increased to $8.3 million per year. The next actuarial valuation is scheduled to be performed by December 31, 2012 to be applied to the 2013 — 2014 fiscal year. 35 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 10. POST EMPLOYMENT HEALTH CARE BENEFITS (continued) The following is a summary of the actuarial assumptions and methods: Valuation Date Actuarial Cost Method Amortization Method Average Remaining Period Actuarial Assumptions: Investment Rate of Return Inflation Financial Statements July 1, 2010 Entry Age Normal Cost Method Level Dollar /Closed 28 Years fixed 6.5% Medical — 10% grading to 5% in 2021 — 22 Medicare Part B — same as medical trend Dental — 4% The District has deposited monies to the PARS trust in excess of the actuarial determined annual required contribution (ARC), therefore, under the provisions of GASB 45, the District has an OPEB asset of $1,263,542 for reporting purposes. The provision for the GASB 45 OPEB obligation is an asset of $1,263,542 at June 30, 2012. The actuarial determined liability, which is being paid over the next 30 years, is $80,933,000 at July 1, 2010, of which, $22,718,524 (or 28 %) has been funded. 11. LEASE COMMITMENTS The District leases various facilities and equipment under operating leases. Following is a summary of operating lease commitments as of June 30, 2012: Fiscal Year Office Ending Equipment Facilities Total 2013 $ 249,924 $ 56,784 $ 306,708 2014 249,924 58,416 308,340 2015 249,924 60,096 310,020 2016 249,924 61,827 311,751 2017 - 63,610 63,610 Thereafter - 33,922 33,922 Total $ 999,696 $ 334,655 $ 1,334,351 Total rental expense for the fiscal year ended June 30, 2012 was $349,655. 36 CENTRAL CONTRA COSTA SANITARY DISTRICT Notes to Financial Statements Year Ended June 30, 2012 12. COMMITMENTS AND CONTINGENCIES Commitments and contingencies, undeterminable in amount, include normal recurring pending claims and litigation. In the opinion of management, based upon discussion with legal counsel, there is no pending litigation which is likely to have a material adverse effect on the financial position of the District. Claims and losses are recorded when they are reasonably probable of being incurred and the amount is estimable. Insurance proceeds and settlements are recorded when received. The District has purchase commitments relating to construction projects at June 30, 2012 of $12,941,372. 13. SUBSEQUENT EVENTS Management has evaluated subsequent events through October 4, 2012, the date on which the financial statements were available to be issued. 37 (THIS PAGE INTENTIONALLY LEFT BLANK) SUPPLEMENTARY INFORMATION CENTRAL CONTRA COSTA SANITARY DISTRICT Combining Schedule of Net Position for the Year Ended June 30, 2012 LIABILITIES Running Sewer Self Debt Current Liabilities Expense Construction Insurance Service Elimination Total ASSETS 168,037 - 4,904,644 Due to other sub -funds 161,650,119 150,748,651 Current Assets 9,749,587 (322,767,347) - Interest payable - - - Cash and cash equivalents $ 797,055 $ 37,114,879 $ 4,546,624 $ (30,513) $ $ 42,428,045 Short term investments - 16,496,087 - 16,496,087 Accounts receivable, net of allowance for 160,411 160,411 Accrued compensated absences Sewer Construction Fund of $985,916 12,076,614 2,942,768 - - - 15,019,382 Interest receivable - 45,782 4,068 5,298 - 55,148 Due from other sub -funds 147,719,332 120,975,602 1,063,668 53,008,745 (322,767,347) - Parts and supplies 2,007,445 - 2,007,445 Prepaid expenses 2,500,705 - - - 43,595,000 2,500,705 Total Current Assets 165,101,151 177,575,118 5,614,360 52,983,530 (322,767,347) 78,506,812 Noncurrent Assets net of current portion - Restricted cash and equivalents 100,000 - - 93,592 168,616,207 193,592 Restricted investments - - NET POSITION 5,318,908 5,318,908 Land, property, plant and equipment, net 575,220,050 - 597,689,744 - - 575,220,050 Construction in progress 22,469,694 - - - 4,663,601 22,469,694 Contractual assessment district and Alhambra (2,151,514) 27,237,410 3,827,333 43,563,637 - 72,476,866 Total Net Position Valley Assessment District receivable - 2,221,330 - $ $ 626,602,973 2,221,330 OPEB liability- medical insurance premiums 1,263,542 - - 1,263,542 Revenue bond issuance costs net of amortization - 334,992 334,992 764,154,437 179,796,448 5,614,360 58,731,022 (322,767,347) 685,528,920 LIABILITIES Current Liabilities Accounts payable and accrued expenses 3,066,490 1,670,117 168,037 - 4,904,644 Due to other sub -funds 161,650,119 150,748,651 618,990 9,749,587 (322,767,347) - Interest payable - - - 754,197 754,197 Current portion of refunding water revenue bonds - 3,605,000 3,605,000 Current portion of water reclamation loan contract 160,411 160,411 Accrued compensated absences 375,000 - - 375,000 Liability for uninsured claims - - 1,000,000 1,000,000 Refundable deposits 189,018 140,270 - - 329,288 Total Current Liabilities 165,280,627 152,559,038 1,787,027 14,269,195 (322,767,347) 11,128,540 NONCURRENT LIABILITIES Revenue bonds, net of current portion - - - 43,595,000 43,595,000 Accrued compensated absences 3,335,580 - 3,335,580 Water reclamation loan contract net of current portion - - - 866,827 866,827 Total Liabilities 168,616,207 152,559,038 1,787,027 58,731,022 (322,767,347) 58,925,947 NET POSITION Net investment in capital assets 597,689,744 - - (48,227,238) - 549,462,506 Restricted for debt service - - - 4,663,601 - 4,663,601 Unrestricted (2,151,514) 27,237,410 3,827,333 43,563,637 - 72,476,866 Total Net Position $ 595,538,230 $ 27,237,410 $ 3,827,333 $ - $ $ 626,602,973 The accompanying notes are an integral part of the financial statements 38 CENTRAL CONTRA COSTA SANITARY DISTRICT Combining Schedule of Revenues, Expenses and Changes in Net Position for the Year Ended June 30, 2012 Running Sewer Self Debt Expense Construction Insurance Service Elimination Total Operating Revenues Sewer Service Charges (SSC) $ 49,123,848 $ - $ - $ - $ - $ 49,123,848 Service charges - City of Concord 10,647,389 - - - 10,647,389 Other service charges 915,485 - - - 915,485 Miscellaneous charges 929,917 - - - 929,917 Total operating revenues 61,616,639 - - - - 61,616,639 Operating Expenses - - Sewage collection and pumping stations 11,987,373 - - - 11,987,373 Sewage treatment 23,708,309 - - - - 23,708,309 Engineering 8,023,226 - - - - 8,023,226 Administrative and general 20,631,967 - 810,849 - (876,537) 20,566,279 Depreciation 21,190,059 - - - - 21,190,059 Total operating expenses 85,540,934 - 810,849 - (876,537) 85,475,246 Operating Loss (23,924,295) - (810,849) - 876,537 (23,858,607) Non - Operating Revenues (Expenses): Taxes - 6,367,268 - 5,679,901 12,047,169 Permit and inspection fees 801,017 102,793 - - - 903,810 Interest earnings 182,114 232,568 19,436 (139,180) 294,938 Interest expense - - - (1,919,375) (1,919,375) Other income (expense) 538,757 392,903 876,537 - (876,537) 931,660 Total non - operating revenues (expenses) 1,521,888 7,095,532 895,973 3,621,346 (876,537) 12,258,202 Income (loss) before contributions and transfers (22,402,407) 7,095,532 85,124 3,621,346 - (11,600,405) City of Concord contributions to capital costs - 2,541,688 - - - 2,541,688 Customer contributions to capital cost (SSC) - 6,346,975 - - - 6,346,975 Contributed sewer lines 792,011 - - - - 792,011 Capital contributions - connection fees - 5,724,833 - - - 5,724,833 Transfers 24,787,334 (21,165,988) (3,621,346) - - Change in Net Position 3,176,938 543,040 85,124 - - 3,805,102 Net Position - Beginning 592,361,292 26,694,370 3,742,209 - - 622,797,871 Net Position - Ending $ 595,538,230 $ 27,237,410 $ 3,827,333 $ - $ - $ 626,602,973 The accompanying notes are an integral part of the financial statements 39 �F+ C 4) i. CC U A y rA C> C. C � N a � M O � � O � � O U O O C� a O U a� y N N W') vi "'F N O, U p 01 O, t-- O\ Vl cad w O N n W O to C14 00 to to to w M M_ �c �D t- t` M t-:, O O; �V 'IF tr r- O; t- O N 1.0 O zT llC O O �O -Cl M \�p d' 00 00 r- l� of � Q� Ch \C M t- O H N N �o W) V 110 V) 69 \O O O O 00 O O vl O 00 O r- N llC tl t- O M llC N N 00 00 O t- v) O N (D m t\ N oo T — N tf) t— ,I- N t` tf) to Cl kn ON ON 00 0o vi m — N — .-.I �o FA tl- 00 't, M to — \10 ' N vi O\ Vl M kn O M 00 to C14 00 to to to M M_ �c tl- t- t` M t-:, O O; t` 'IF tr r- O; t- O �O an r zT O� O 00 00 M �. 6 of � .-, \O oo t` O H d• .--i Q1 O 00 �o W) 110 V) N M \O O O O 00 d' m O O O vl O 00 O r- N llC tl t- O M llC N N 00 00 O t- v) O N (D m t\ N oo T — N tf) t— ,I- N t` tf) to Cl kn ON ON 00 0o vi m — N — .-.I �o FA O d' tl- 00 't, O M :T � r- v1 r+ O � kn Q, t- eF M N O M_ O\ 00 O O D1 t� N \O O M - M O �O an 01 00 V' O vl 00 M �. 6 of � .-, \O oo t` O H d• .--i Q1 O 00 �o W) 110 V) N M \O O O O 00 d' m O tf) 00 00 to M M to N kn .•r �' M •-+ kn M N :T ~ -j N N 'IT �. cn 1.0 6R N 69 69 O d' i i i by rn M O O ,M-� N l� M 000 N 000 c - an t- V1 an M �. 6 of � \O oo t` O O kr Y 00 �p kn :T .fi �. cn N 69 69 O, 1.0 I ' \O as C1 M (= IT 01, G M M -It O M N y Y 00 �o \O t� 00 \�O tr O o0 [� t` kr 00 3 W) 00 00 v Wn t- r- m o 00 v O a 00 lll� •-+ r- M kn r" gym' M N .-. H N b9 69 00 M --� O 'T O N M ' M W) y p kn P, n 00 �O to 't tri M t- 00 00 .y U t- v) \O r- 00 - IC 00 �o O h O O --' N N M � O N O� 00 '•-� 3 ?2 O 7 vl 00 00 O �O O � N 00 N Wn N U s� �» •� t- � v1 �+ Cl) � O � O � V'1 00 N � 00 00 D1 N N v� Cl) oo N N y o0 00 M 00 O O M M M c 00 .� N t` IC � � O W) W) W) N tc N M M �--� N r-+ ..r O c v) M N IC 00 W v) s5 c O �O It N M N Q1 O M O as \.O 00 l- IC O O� kn r+ O, N O W) 00 Ch O vi N m c a\ 00 00 N m N N 00 �o Y w c cq b c N � b � � t«• aci � to > N W C y tv N 3 y n N Q Cd U •� o U .b i� N N w 'O 'b id c c ❑ •:� ❑ n U cd V] p U N 'A by •„ N id m y O Ln V) W a H 4--I U 5 W W Pr 0 coo Q O d' CENTRAL CONTRA COSTA SANITARY DISTRICT Running Expense Schedule of Supplemental Net Position Analysis June 30, 2012 Prior Year Balance 2011 -2012 Revenue 2012 - 2012 Expense Add Back Depreciation Expense Net Position Attributed to General Operations Net Position Attributed to All Other Running Expense Net Position $ 9,918,758 $ 63,138,527 (85,540,934) 21,190,059 (1,212,348) 8,706,410 586,831,820 $ 595,538,230 The accompanying notes are an integral part of the financial statements 41 (THIS PAGE INTENTIONALLY LEFT BLANK) Central Contra Costa Sanitary District Statistical Section Central Contra Costa Sanitary District Statistical Section Table of Contents Financial Trends These schedules contain trend information to help the reader understand how the District's financial performance has changed over time. Changes in Net Position and Statement of Net Position - Last Ten Fiscal Years ...................................................... ............................... S -1 Revenue by Type - Last Ten Fiscal Years ......................... ............................... S -2 Operating Expenses by Type - Last Ten Fiscal Years ...... ............................... S -3 Revenue Capacity These schedules contain information to help the reader assess the District's most significant revenue sources. Major Revenue Base and Rates - Historical and Current Fees - LastTen Fiscal Years ...................................................... ............................... S -4 Sewer Service Charge - List of Ten Largest Customers - Last Ten Fiscal Years ...................................................... ............................... S -5 Assessed and Estimated Actual Valuation of Taxable Property - LastTen Fiscal Years ...................................................... ............................... S -6 Property Tax and Sewer Service Charge Fees Levied and Collected - LastTen Fiscal Years ...................................................... ............................... S -6 Debt Capacity This schedule contains information to help the reader assess the affordability of the District's current levels of outstanding debt and the District's ability to issue additional debt in the future. Summary of Debt Service - Type, Debt Service Coverage, Debt Ratio - Last Ten Fiscal Years ...................................................... ............................... S -7 Demographic and Economic Information This schedule offers demographic and economic indicators to help the reader understand the environment within which the District's financial activities take place. Demographic and Economic Data - Population Served - Last Ten Calendar Years ................................................ ............................... S -8 List of Ten Largest Employers in Contra Costa County - Last Year and Eleven Years Ago .................................... ............................... S -8 Demographic and Economic Statistics - Contra Costa County - Last Ten Fiscal Years ...................................................... ............................... S -9 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the District's financial report relates to the services the District provides and the activities it performs. Full -time Equivalent Employees by Department - Last Ten Fiscal Years........ S -10 Number of Retirees and Surviving Spouses - Last Ten Fiscal Years .............. S -10 Capital Asset and Operating Statistics - Last Ten Calendar or Fiscal Years.. S -11 Miscellaneous Statistics ................................................... ............................... S -11 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The District implemented GASB Statement 34 in the 2002 -2003 fiscal year; schedules presented include information beginning in that year. a00)NnO O0) W ac) 0)O n 0)OOoa ON (n M rM c•( d co aO M cc Met O(O MOnd W 0 d drown O as ON 0 (O (D Mn(o0 rO0)M(pN O v O M (0 000 Onn rO0) 00(OOn cV �(D OO W M M N O� (O N Oi n (n O Oi N (0 N a) n (0 0 OD n 00 N n M d (4 OD d 0 0) M V) O c0 (V d 0 n N N M W N r (D tAmt O N rOO r d'a ac O0)NOON O (0 OD O N Onn 0 0)Q 00 n(D O (0 (o n 0 NdtO d(t(pp0 r 00 tD d OD d d NNa�O Cl) N v N r OD N MNN O dnN O N „' (D W N (Y) (o On(Nn N (D W O MN N OMOh(D (o d O 0) dN0O1rnn NN W OON M (0 04 04 O ,R 0)Nr N n ODMO o O tDh '. 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X 00 O 00 CA Cl) 'It Lo CD fl- 00 O O r N_ 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Co N N N N N N N N N N o O } & M 4 L6 CO I%� 00 6 O r LL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 N N N N N N N N N N N c o o a-) U N N -O o a U C N � C V) O O U U a � c .. .a 007 U C O c N N � a U � 1) z E L "O •3 `o U pl C o U m o m o y U a) E O O � U LL C O O 0 m C) N V- N c C v) m U O 00 N c`o CO 0) N m N Ln U) E a Q o 0 (7 17-0 C L c 0 N LL j U N O OC1 c Cn N as as n o X j Z5 O U 07 U Z (D a) C u) LL cis c a c a o�°0 NQ C N U7Q yrooCL u, oao c C d N w d 0_ c 'p � D ot. O7a� CL o m `7 U C C C 01 O U c U) U) •9 .0 ui L4 co X N u) N zi N C O C O O r O Co V o c m 0 U U N U fi N CAN Ea ani d o N c U U N Cl) U C U N Cl) W cn Z W CL x W Z Q ir W IL O O LO r- V IZT N 0 Cl) N LO a ,�t r LO O O 't 00 00 n m Cl) 00 M f +- CO M r Cl) Q c * M ^ Ln �' CA 00 O LO c) A m O f` 0 CO LO � Ln Ln O) d c C c r r r r .- N N c CL � , 0 CL T m c x c 0 Lu o z E � o c O N M � N O N � -t,t O M t O N O N r r n N `m N �; N N N M n N Oa O. 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C C O _C Q � r a a °) o a U Q .5 0 (1) .cu C C X N .0 C)) U C 0 '6 U N CL C O O c U O C O C O N N U CA 0) O O N 0 + U) M U N N NN N U O U O N � U I N a o CO � N O do 06 .: N C CO .O U U a) 07 CL N O O N ❑ ❑ O 0 N �+ v .i I i CA Ln N O �= G1 U) fll N y l0 n a +�+ N 0 N O Q to o t0 C-6 UJ i N i F LO (U � so LL vi N i C.) d J _ °o ca v=i Q, �O N o C a) C � N L U cn 'I I 0 0 N O N (U U C M aci � o C C', O N Cl) o 06 0 N N cz a c 0 0 _ c c co a) U o N m O N N a y La 0 U N L_ c: ro = O 0 C 0 0 0 0 0 0 0 0 4 n 2 Q C O O O O O O O ❑❑❑ 0 O 0 O 0 O 0 O 0 O 0 O 0 O 0 O 0 O O O O C C O O O O N 000 0 0 C) 0 N o 6a tG d} 63 (a Efl ka (a H3 sielloa W cn Z W CL x W Z Q ir W IL O O LO r- V IZT N 0 Cl) N LO a ,�t r LO O O 't 00 00 n m Cl) 00 M f +- CO M r Cl) Q c * M ^ Ln �' CA 00 O LO c) A m O f` 0 CO LO � Ln Ln O) d c C c r r r r .- N N c CL � , 0 CL T m c x c 0 Lu o z E � o c O N M � N O N � -t,t O M t O N O N r r n N `m N �; N N N M n N Oa O. 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