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Home My WebLink About07.a. Accept audited Financial Statements for fiscal years ended June 30, 2014 and 2013Central Contra Costa Sanitary District Ta. ' BOARD OF DIRECTORS POSITION PAPER Board Meeting Date: November 6, 2014 Subject. ACCEPT THE AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2014 AND 2013 Submitted By., Initiating Dept. /Div.: Thea Vassallo, CPA, CMA Administrative / Finance & Accounting Finance Manager REVIEWED AND RECOMMENDED FOR BOARD ACTION: K. Alm Roger S. Bailey Counsel for the District General Manage ISSUE: The audited financial statements of the Central Contra Costa Sanitary District for the Fiscal Years (FY) ended June 30, 2014 and 2013 are being submitted to the Board of Directors. RECOMMENDATION: Accept the audited financial statements for the FY ended June 30, 2014 and 2013. FINANCIAL IMPACTS: None. ALTERNATIVES /CONSIDERATIONS: None. BACKGROUND: The firm of Maze & Associates has completed its second examination of the District's financial statements for the FY ended June 30, 2014, and 2013, and has submitted the audited financial statements and auditor's opinion thereon. The objective of the audit is the expression of an opinion as to whether the basic financial statements are fairly presented, in all material respects, in conformity with United States generally accepted accounting principles and to report on the fairness of the supplementary information in relation to the financial statements taken as a whole. The audit is conducted in accordance with auditing standards generally accepted in the United States of America and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and includes tests of the accounting records of the District and other procedures considered necessary to express such an opinion. The independent auditor's report for the FY ending June 30, 2014 and 2013 expresses an unqualified (clean) opinion. In accordance with Government Code Section 53891, information from the audit is used to prepare a report to the State Controller's office. The report was sent electronically by the annual deadline of October 20, 2014. The audited financial statements are also sent to the County Auditor - Controller, Contra Costa County Board of Supervisors, and the Bond Rating Agencies. Page 1 of 2 POSITION PAPER Board Meeting Date: November 6, 2014 subject: ACCEPT THE AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE 30, 2013 AND 2014 The original contract with Maze & Associates is for a four -year term. This report from Maze & Associates is their second audited financial statement report and is comparative for FY June 30, 2014 and 2013. .COMMITTEE RECOMMENDATION: The audited financial statements were reviewed by Vikki Rodriguez from Maze & Associates at the Finance Committee meeting on September 1, 2014. The Committee recommends Board acceptance. RECOMMENDED BOARD ACTION: Accept the basic audited financial statements for the FY ended June 30, 2014 and 2013. Attached Suaoorting Documents: 1. Basic Financial Statements for the Years Ended June 30, 2014 and 2013 Page 2 of 2 e rl IV MAZE CENTRAL CONTRA COSTA SANITARY DISTRICT BASIC FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2014 AND 2013 a This Page Left Intentionally Blank CENTRAL CONTRA COSTA SANITARY DISTRICT BASIC FINANCIAL STATEMENTS For the Years Ended June 30, 2014 and 2013 Table of Contents INTRODUCTORY SECTION Tableof Contents ............................................................................................ ............................... i FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT .............................................................. ..............................1 MANAGEMENT'S DISCUSSION AND ANALYSIS ....................................... ............................... 3 BASIC FINANCIAL STATEMENTS Statements of Net Position ................................................................................. .............................10 Statements of Revenues, Expenses and Changes in Net Position .................... .............................13 Statementsof Cash Flows ................................................................................... .............................14 NOTES TO BASIC FINANCIAL STATEMENTS ............................................ .............................17 SUPPLEMENTARY INFORMATION Combining Schedule of Net Position — EnterpriseSub - Funds ................................................................................ .............................43 Combining Schedule of Revenues, Expenses and Changes in Net Position — Enterprise Sub -Funds ......... ............................... 44 Schedule of Running Expenses, Comparison of Budget and Actual Expensesby Department ......................................................................... ............................... 45 Running Expense — Schedule of Supplemental Net Position Analysis ....................................................... ............................... 46 This Page Left Intentionally Blank J)JA� M A�ZTE INDEPENDENT AUDITOR'S REPORT To the Board of Directors Central Contra Costa. Sanitary District Martinez, California Report on Financial Statements We have audited the accompanying financial statements of the Central Contra Costa Sanitary District (District) as of and for the years ended June 30, 2014 and 2013, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the Table of Contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audits evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, 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, 2014 and 2013, and the changes in financial position and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. T 925.930.0902 Accountancy Corporation F 925.930.0135 3478 Buskirk Avenue, Suite 215 a maze @mazeassociateszom Pleasant Hill, CA 94523 w mazeassociates.com Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management's Discussion and Analysis be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the District's financial statements as a whole. The Supplementary Information listed in the Table of Contents is presented for purposes of additional analysis and is not a required part of the financial statements. The Supplementary Information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America.. In our opinion, the Supplementary Information is fairly stated in all material respects in relation to the financial statements as a whole. Pleasant Hill, California September 18, 2014 2 Central Contra Costa Sanitary District MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the Central Contra Costa Sanitary District's annual financial report presents an analysis of the District's financial performance during the fiscal year ended June 30, 2014. This information is presented in conjunction with the audited financial statements, which follow this report. FINANCIAL HIGHLIGHTS The District's 2013 -14 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 $8.6 million or 1.36 % in 2013 -14. This is mainly due to capital project asset additions. • Total revenues in 2013 -14 increased by $5.3 million or 6.31 %. The total Sewer Service Charge (SSC) rate was increased and a larger portion of the internal SSC allocation was shifted from Operating Revenues to Capital Contributions. • Total 2013 -14 expenses increased by $11.0 million or 12.11 %. This is mainly due to higher cost of total labor, depreciation and technical services. • Capital Contributions increased in 2013 -14 by $5.1 million or 34.20 %. The increase is mainly due to the SSC rate increase and higher connection fees. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report includes the 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. This report also contains other supplementary information in addition to the basic financial statements. REQUIRED FINANCIAL STATEMENTS The District's financial statements report information utilizing methods similar to those used by private sector companies. These statements offer short and long -term financial information about the District's activities. • Statement of Net Position — reports the District's current financial resources (short-term 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, investing activities, and non- cash 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 fiscal years: Condensed Statement of % Increase Net Position Fiscal Year Ended June 30 (Decrease) FY 13 -14 FY 13 -14 vs. vs. 2013 -14 2012 -13 2011 -12 FY 12 -13 11 -12 Current Assets $ 79,291,642 $ 78,006,233 $ 78,506,812 1.65% 1.00% Capital Assets 608,583,268 603,985,469 597,689,744 0.76% 1.82% Other Non - current Assets 8,621,042 9,454,886 9,332,364 -8.82% - 7.62% Total Assets 696,495,952 691,446 588 685,528,920 0.73% 1.60% Current Liabilities 12,145,509 11,704,101 11,128,540 3.77% 9.14% Non - Current Liabilities 40,004,777 44,027,490 47,797,407 - 9.14% - 16.30% Total Liabilities 52150,286 55,731 591 58,925 947 -6.43% - 11.50% Net Investment in Capital Assets 568,006,023 559,523,642 549,462,506 1.52% 3.37% Restricted - Debt Service 4,809,248 4,730,837 4,663,601 1.66% 3.12% Unrestricted 71,530,395 71,460,518 72,476,866 0.10% - 1.31% Total Net Position $ 644,345 666 $ 635 714,997 $ 626,602 973 1.36% 2.83% The total net position of the District increased from $626.6 million in 2011 -12 to $635.7 million in 2012 -13 and to $644.3 million in 2013 -14. The District's total assets have increased by $5.0 million or 0.73% compared to 2012 -13, and $10.9 million or 1.6% compared to 2011 -12. The total liabilities decreased $3.6 million or -6.43% compared to 2012 -13, and decreased $6.8 million or - 11.50% compared to 2011 -12. The increase in net position over the three -year period totals $17.7 million or 2.83% and is the result of the combination of net income and capital contributions. By far the largest portion of the District's net position (88.15% 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 are 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 $4.8 million restricted for debt service. The remaining balance of $71.5 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. 4 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 District for the past three fiscal years: Condensed Statement of Revenues, Expenses, and % Increase Changes in Net Position Fiscal Year Ended June 30 (Decrease) FY 13 -14 FY 13 -14 vs. vs. 2013 -14 2012 -13 2011 -12 FY 12 -13 11 -12 Sewer Service Charges (SSC) $ 72,422,285 $ 67,254,405 $ 59,771,237 7.68% 21.17% Other Service Charges and Miscellaneous 1,579,723 1,828,281 1,845,402 - 13.60% - 14.40% Total Operating Revenue 74 002,008 6--9,0-8-2,686 61,616,639 7.12% 20.10% Property Tax 13,093,841 13,010,477 12,047,169 0.64% 8.69% Permit & Inspection Fees 1,575,251 1,169,809 903,810 34.66% 74.29% Interest and All Other 1,291,752 1,356,574 1,226,598 -4.78% 5.31% Total Non - Operating Revenues 15 960 844 15,536,860 14177 577 2.73% 12.58% Total Revenues 89 962,852 84,619 546 75,794,216 6.31% 18.69% Total Labor and Benefits 58,954,453 49,811,218 45,562,430 18.36% 29.39% Chemicals & Utilities 6,002,514 5,420,789 6,090,408 10.73% -1.44% Repairs and Maintenance 3,126,617 3,151,127 3,068,604 -0.78% '1.89% Professional, Legal and Outside Services 3,995,861 2,836,638 4,099,876 40.87% -2.54% Materials & Supplies 2,060,796 1,980,314 2,031,401 4.06% 1.45% Hauling and Disposal 914,739 1,088,294 1,009,137 - 15.95% - 9.35% Self- Insurance Expense 858,738 2,380,466 810,849 - 63.93% 5.91% All Other 1,702,131 472,630 1,612,482 260.14% 5.56% Depreciation Expense 21,892,545 21,596,266 21,190,059 1.37% 3.32% Total O eratin Expenses 99;608,394 881737,742 85,475,246 12.14% 16.42% Non -Operating Expense - Interest Expense 1,996,689 1 802 084 1,919,375 10.80% 4.03% Total Expenses 101,505,083 90,639,826 87,394,621 12.11% 16.15% Income Before Capital Contributions 11 542,231 5,920 280 ) (11,600,405) - 94.96% 0.50% Customer Contributions (SSC) 10,486,067 8,001,147 8,888,663 31.06% 17.97% Contributed Sewer Lines 1,462,316 939,628 792,011 55.63% 84.63% Capital Contributions - Connection Fees 8,224,517 6,091,529 5,724,833 35.02% 43.66% Total Capital Contributions 20172 900 15 032,304 15,405,507 34.20% 30.95% Change in Net Position 8,630,669 9112,024 3,805102 - 5.28% 126.82% Beginning Net Position 635,714,997 626,602 973 622,797,871 1.45% 2.07% Ending Net Position $ 644,345 666 $ 635,714,997 $ 626,602,973 1.36% 2.83% Revenue Total operating revenues increased from $61.6 million in 2011 -12 to $69.1 million in 2012 -13 and to $74.0 million in 2013 -14. Operating revenues increased by $4.9 million or 7.12% compared to 2012 -13, and increased by $12.4 million or 20.10% comparing 2013 -14 to 2011 -12. Total non - operating revenue increased from $14.2 million in 2011 -12 to $15.5 million in 2012 -13 and to $16.0 million in 2013 -14. An increase compared to 2012 -13 by $0.4 million or 2.73 %, and increased by $1.8 million or 12.58% comparing 2013 -14 to 2011 -12. Total revenues increased from $75.8 million in 2011 -12 to $84.6 million in 2012 -13 to $90.0 million in 2013 -14. The change in total revenue resulted in an increase of $5.3 million or 6.31% comparing 2013- 14 to 2012 -13, and increased by $14.2 million or 18.69% comparing 2013 -14 to 2011 -12. There was a 9.16% SSC rate increase in 2013 -14, 8.80% SSC rate increase in 2012 -13 and 9.65% increase in SSC for 2011 -12. Property tax revenue increased by $0.1 million or 0.64% from 2013 -14 to 2012 -13, and $1.0 million. or 8.69% comparing 2013 -14 to 2011 -2012 due to the recovery of housing values and Proposition IA monies repaid in 2013 -14. Ex R enses Total expenses increased from $87.4 million in 2011 -12 to $90.5 million in 2012 -13 and to $101.5 million in 2013 -14. In 2013 -14, total expenses increased by $11.0 million or 12.11% compared to 2012- 13. Comparing 2013 -14 to 2011 -12, total expenses were $14.1 million or 16.15% higher. Increases were 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 -$11.6 million in 2011 -12, to -$5.9 million in 2012- 13, and -$11.5 million in 2013 -14. Total capital contributions in 2013 -14 were $20.2 million compared to $15.0 million in 2012 -13 and $15.4 million in 2011 -12. This was mainly due to higher customer contributions SSC in 2013 -14 due to the 9.16% rate increase, a shift of the internal SSC revenue allocation, and volatility in connection fees due to the fluctuation of the housing and construction markets. The total change in net position decreased by -$0.5 million or -5.28% when comparing 2013 -14 to 2012 -13 and increased $4.8 million or 126.82% when comparing 2013 -14 to 2011 -12. CAPITAL ASSETS Capital assets for fiscal years 2013 -14, 2012 -13 and 2011 -12 totaled $608.6 million, $604.0 million, and $597.7 million, respectively. 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, 2014, the District's investment in capital assets totaled. $608.6 million, an increase of $4.6 million or 0.76% over the capital asset balance of $604.0 million at June 30, 2013. Capital assets increased by $10.9 million or 1.82% comparing 2013 -14 to 2011 -12. A comparison of the District's capital assets over the past three fiscal years is presented below: 6 % Increase Capital Assets Fiscal Year Ended June 30 (Decrease) FY 13 -14 FY 13 -14 vs. vs. 2013 -14 2012 -13 2011 -12 FY 12 -13 11 -12 Land $ 17,320,570 $ 17,262,249 $ 17,114,720 0.34% 1.20% Sewage Collection System 318,206,017 311,633,989 303,693,519 2.11% 4.78% Contributed Sewer Lines 152,297,246 150,834,930 149,895,302 0.97% 1.60% Outfall Sewers 11,339,298 11,338,935 8,518,443 0.00% 33.11% Sewage Treatment Plant 303,606,835 299,830,466 292,432,883 1.26% 3.82% Recycled Water Infrastructure 17,127,656 13,515,026 13,335,295 26.73% 28.44% Pumping Stations 54,956,574 54,412,730 54,412,730 1.00% 1.00% Buildings 42,196,085 36,120,720 34,477,124 16.82% 22.39% Intangible Assets 4,812,127 4,596,467 2,463,834 4.69% 95.31% Fumiture & Equipment 10,025,826 15,651,212 14,031,564 - 35.94% - 28.55% Motor Vehicles 6,721,031 6,558,065 6,010,773 2.48% 11.82% Construction In Progress 27,508,158 24,533,254 22,469,694 12.13% 22.42% Subtotal 966117 423 946$288,043 918,855,881 2.10% 5.14% Less Accumulated Depreciation 357,534,155 342,302,574 321,166,137 4.45% 11.32% Total Capital Assets (net of depreciation $ 608,583,268 $ 603,9 5 469 $ 597,689,744 0.76% 1.82% The major reasons for the increase in capital assets, net of depreciation, of $4.6 million from 2012 -13 to 2013 -14 and $10.9 million from 2011 -12 to 2013 -14, are as follows: • Sewer pipe ongoing renovations, upgrades, expansion, pumping station improvements, and contributed sewer lines increased by $8.6 million comparing 2013 -14 to 2012 -13 and $17.5 million comparing 2013 -14 to 2011 -12. • Treatment plant infrastructure renovations, upgrades, equipment, and improvements increased by $3.8 million comparing 2013 -14 to 2012 -13 and $11.2 million comparing 2013 -14 to 2011 -12. • Buildings increased by $6.1 million comparing 2013 -14 to 2012 -13 and $7.7 million comparing 2013 -14 to 2011 -12. • All other asset categories, including construction in progress, increased by $1.4 million comparing 2013 -14 to 2012 -13 and increased by $10.9 million comparing 2013 -14 to 2011 -12. • Capital asset increases are offset by an increased subtraction of accumulated depreciation of $15.2 million comparing 2013 -14 to 2012 -13 and $36.4 million comparing 2013 -14 to 2011 -12 due to increasing capital asset investment and its associated depreciation expense. See Note 5 in the audited financial statements. 7 DEBT ADMINISTRATION The total debt obligations for fiscal years 2013 -14, 2012 -13 and 2011 -12 totaled $40.5 million, $44.5 million, and $48.2 million, respectively. As of June 30, 2014, the District's outstanding debt totaled $40.5 million, which is a decrease of $3.9 million or -8.74% over the debt balance of $44.5 million at June 30, 2013. Debt decreased by $7.6 million or - 15.86% comparing 2013 -14 to 2011 -12. The 2009 certificates of participation and the 1999 State Water Resources Control Board Water Reclamation Loan principal and related interest for both decrease annually due to the scheduled principal payments. The District did not issue any new debt this fiscal year. The source of funds for repayment of debt issued for expansion purposes is the state property taxes received. A comparison of the District's debt service for the past three fiscal years is presented below: Debt Service Fiscal Year Ended June 30 % Increase (Decrease) FY 13 -14 FY 13 -14 vs. vs. 2013 -14 2012 -13 2011 -12 FY 12 -13 11 -12 Revenue Bonds $ 39,875,000 $ 43,595,000 $ 47,200,000 -8.53% - 15.52% Water Reclamation Loan 702,245 866,827 1,027,238 - 18.99% - 31.64% Total Debt Service $ 40,577,245 $ 44,461 827 $ 48,2 7 238 - 8.74% - 15.86% See Note 6 in the audited financial statements. ECONOMIC AND OTHER FACTORS The Federal and State of California economies continue to recover from the 2008 recession. The Federal economic challenges have resulted in budget sequestration. The State Budget Act reflects California achieving a solid balanced budget, however, there remain a number of major risks that threaten the state's fiscal stability, including the overhang of fiscal debts, growing long -term liabilities, and lingering uncertainties regarding the cost of the federal Affordable Care Act. The recent agreement between the Governor and legislative leaders to create a Rainy Day Fund will help the state minimize future boom and bust cycles. Changes in the state budget have a significant impact on the District. Federal and State economic challenges will continue into the future and will have a trickle -down effect on local government. Items impacting the District are: • Current Employee Memorandum of Understanding contracts end as of December 17, 2017. • Current and future legislation impacting public employee pensions is in play, also calling for higher employee contributions and lower pensions by eliminating spiking. • Increased cost of employee benefits, mainly due to pension costs and healthcare. • Housing market continues to show improvement which impacts the District's property tax revenues, and development and user fees. • Regulatory requirements becoming more stringent, causing the District to spend more on compliance, both for operations and maintenance costs and capital projects. This may require debt financing for large capital projects. 8 • 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 SSC to meet its long -term commitments. The District has a Standard and Poor's AAA rating, and can obtain bond financing if necessary. FINANCIAL CONTACT The financial report is designed to provide the District's customers and creditors with a general overview of District 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 Thea Vassallo, Central Contra Costa Sanitary District, 5019 Imhoff Place, Martinez, CA 94553. 9 CENTRAL CONTRA COSTA SANITARY DISTRICT STATEMENTS OF NET POSITION JUNE 30, 2014 AND 2013 ASSETS CURRENT ASSETS Cash and cash equivalents (Note 2) Short term investments (Note 2) Accounts receivable, net (Note 3) Interest receivable Parts and supplies Prepaid expenses Total current assets NON - CURRENT ASSETS Restricted cash and equivalents (Notes I.E. and 2) Restricted investments (Note 2) Assessment Districts receivable (Note 4) Net OPEB asset (Note 10) Revenue bonds issuance costs, net of amortization (Note 1.L.) Capital assets: Nondepreciable (Note 5) Depreciable, net of accumulated depreciation (Note 5) Total capital assets, net Total non - current assets TOTAL ASSETS 10 2014 2013 $47,929,530 $46,714,788 9,993,211 10,498,624 16,944,993 16,517,549 31,081 65,321 2,088,885 2,005,741 2,303,942 2,204,210 79,291,642 78,006,233 100,000 100,000 5,474,874 5,412,500 1,838,490 2,089,461 1,207,678 1,537,638 - 315,287 49,640,855 41,795,503 558,942,413 562,189,966 608,583,268 603,985,469 617,204,310 613,440,355 $696,495,952 $691,446,588 (Continued) CENTRAL CONTRA COSTA SANITARY DISTRICT STATEMENTS OF NET POSITION JUNE 30, 2014 AND 2013 LIABILITIES 2014 2013 CURRENT LIABILITIES Accounts payable and accrued expenses $5,842,430 $5,376,935 Interest payable 673,380 718,147 Refunding Water Revenue Bonds - current portion (Note 6) 3,865,000 3,720,000 Water Reclamation Loan Contract - current portion (Note 6) 168,861 164,582 Accrued compensated absences - current portion (Note 1.I.) 385,000 383,000 Provision for uninsured claims (Note 7) 1,000,000 1,000,000 Refundable deposits 210,838 341,437 Total current liabilities 12,145,509 11,704,101 NON - CURRENT LIABILITIES Refunding Water Revenue Bonds, noncurrent portion (Note 6) 36,010,000 39,875,000 Water Reclamation Loan Contract, noncurrent portion (Note 6) 533,384 702,245 Accrued compensated absences, noncurrent portion (Note 1.I.) 3,461,393 3,450,245 Total non - current liabilities 40,004,777 44,027,490 TOTAL LIABILITIES 52,150,286 55,731,591 NET POSITION (Note 11) Net investment in capital assets 568,006,023 559,523,642 Restricted for debt service 4,809,248 4,730,837 Unrestricted 71,530,395 71,460,518 TOTAL NET POSITION $644,345,666 $635,714,997 See accompanying notes to financial statements 11 This Page Left Intentionally Blank CENTRAL CONTRA COSTA SANITARY DISTRICT STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEARS ENDED JUNE 30, 2014 AND 2013 2014 2013 OPERATING REVENUES Sewer service charges (SSC) $60,796,421 $56,770,984 Service charges - City of Concord (Note 8) 11,625,864 10,483,421 Other services charges 1,035,134 1,076,401 Miscellaneous charges 544,589 751,880 Total operating revenues 74,002,008 69,082,686 OPERATING EXPENSES Sewage collection and pumping stations 16,109,927 14,327,933 Sewage treatment 27,808,819 23,035,943 Engineering 12,308,802 8,680,934 Administrative and general 21,388,301 21,096,666 Depreciation 21,892,545 21,596,266 Total operating expenses 99,508,394 88,737,742 OPERATING (LOSS) (25,506,386) (19,655,056) NONOPERATING REVENUES (EXPENSES) Taxes 13,093,841 13,010,477 Permit and inspection fees 1,575,251 1,169,809 Interest earnings 359,288 405,474 Interest expense (1,996,689) (1,802,084) Other income (expense) 932,464 951,100 Total nonoperating revenues (expenses), net 13,964,155 13,734,776 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS (11,542,231) (5,920,280) CAPITAL CONTRIBUTIONS City of Concord contributions to capital costs (Note 8) 3,820,858 3,616,771 Customer contributions to capital cost (SSC) 6,665,209 4,384,376 Contributed sewer lines (Note 5) 1,462,316 939,628 Capital contributions - connection fees 8,224,517 6,091,529 Total capital contributions 20,172,900 15,032,304 CHANGE IN NET POSITION 8,630,669 9,112,024 NET POSITION, BEGINNING OF YEAR 635,714,997 626,602,973 NET POSITION, END OF YEAR $644,345,666 $635,714,997 See accompanying notes to financial statements 13 CENTRAL CONTRA COSTA SANITARY DISTRICT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2014 AND 2013 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers Payments to employees and related benefits Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Receipt of taxes Inspection/permit fees and other non - operating income Cash Flows from Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital contributions Connection fees Acquisition and construction of capital assets Interest paid on long -term debt Principal payments on long -term debt Cash Flows (Used for) Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Redemption and acquisition of investments, net Interest received Cash Flows from Investing Activities NET INCREASE (DECREASE) IN CASH Cash, beginning of year Cash, end of year 2014 2013 $73,825,535 $67,716,388 (43,766,726) (36,581,237) (33,353,995) (29,929,031) (3,295,186) 1,206,120 13,093,841 13,010,477 2,507,715 2,120,909 15,601,556 15,131,386 11,948,383 8,940,775 8,224,517 6,091,529 (26,490,344) (27,891,991) (1,726,169) (1,838,134) (3,884,582) (3,448,341) See accompanying notes to financial statements 14 (11,928,195) (18,146,162) 443,039 5,606,506 393,528 395,301 836,567 6,001,807 1,214,742 4,193,151 46,814,788 42,621,637 $48,029,530 $46,814,788 (Continued) CENTRAL CONTRA COSTA SANITARY DISTRICT STATEMENT OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2014 AND 2013 Reconciliation of operating (loss) to net cash provided by operating activities: Operating (loss) Adjustments to reconcile operating loss to cash flows from operating activities: Depreciation Change in assets and liabilities: Receivables, net Parts and supplies Prepaid expenses Accounts payable and accrued expenses Accrued payroll and related expenses Refundable deposits Net OPEB asset Net cash provided (used) by operating activities SCHEDULE OF NON CASH ACTIVITY Change in fair value of investments Capital asset donations Total non cash activity CASH AND CASH EQUIVALENTS, AS PRESENTED ON STATEMENT OF NET POSITION: Unrestricted cash and cash equivalents Restricted cash and cash equivalents ($25,506,386) 21,892,545 (176,473) (83,144) (99,732) 465,495 13,148 (130,599) 329,960 ($19,655,056) 21,596,266 (1,366,298) 1,704 296,495 472,291 122,665 12,149 (274,096) ($3,295,186) $1,206,120 $393,528 $395,301 1,153,968 713,525 $1,547,496 $1,1082826 $47,929,530 $46,714,788 100,000 100,000 Total cash and cash equivalents at end of year $48,029,530 $46,814,788 See accompanying notes to financial statements 15 This Page Left Intentionally Blank CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 1— DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity The Central Contra Costa Sanitary District (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 and 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 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 (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 Authority has no members and the Board of Directors of the Authority 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 Authority. B. Basis ofAccounting The District's financial statements are prepared on the accrual basis of accounting. The District applies all applicable Governmental Accounting Standards Board (GASB) pronouncements for certain accounting and financial reporting guidance. 17 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 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 position, 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. 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 position 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. 18 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO TBE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 1— DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G Investments Investments held at June 30, 2014 and 2013 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. D. Prepaid Expenses Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. E. 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 sewage 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. F. Parts and Supplies Parts and supplies are valued at average cost and are used primarily for internal purposes. G. 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. Depreciation of exhaustible capital assets has been provided using the straight -line method over the asset's useful life as follows: 19 Years Sewage Collection Facilities 75 Intangible Assets 75 Sewage Treatment Plant and Pumping Plants 40 Buildings 50 Furniture and Equipment 5-15 Motor Vehicles 5-15 19 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 1— DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) H. Property Tikes 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. 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 %s 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. L 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. The changes in compensated absences were as follows for fiscal years ended June 30: 2014 2013 Beginning Balance $3,833,245 $3,710,580 Additions 391,927 783,906 Payments (378,779) (661,241) Ending Balance $3,846,393 $3,833,245 Current Portion $385,000 $383,000 The current portion of the liability to be used within the next year is estimated by management to be approximately 10% of the ending balance. 20 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 1– DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. 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. b Use of Esibnates 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. L. Implementation of Governmental Accounting Standards Board (GASB) Pronouncements GASB Statement No. 65 – In March 2012, the GASB issued Statement 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. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2012. This Statement required the District to remove its remaining unamortized revenue bond issuance costs of $315,287, previously reported as a noncurrent asset on the Statement of Net Position as of July 1, 2013. As the balance does not materially impact the District's net position, the balance was expensed in the current fiscal year ended June 30, 2014. GASB Statement No. 66 – In March 2012, the GASB issued Statement No. 66, Technical Corrections - 2012 —an amendment of GASB Statements No. 10 and No. 62. 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 provisions of this Statement are effective for financial statements for periods beginning after December 15, 2012. This Statement did not have a material impact on the financial statements. GASB Statement No. 67 – In June 2012, the GASB issued Statement No. 67, Financial Reporting for Pension Plans—an amendment of GASB Statement No. 25. 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 that are within its scope. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2013. This Statement did not have a material impact on the financial statements. 21 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 1– DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) GASB Statement No. 68 – In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions —an amendment of GASB Statement No. 27. The requirements of this Statement will improve the decision - usefulness of information in employer and governmental nonemployer contributing entity financial reports and will enhance its value for assessing accountability and interperiod equity by requiring recognition of the entire net pension liability and a more comprehensive measure of pension expense. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2014, therefore, the District will implement this Statement in fiscal year ending June 30, 2015. This Statement will have a material effect on the financial statements. GASB Statement No. 69 – In 2014, the GASB issued Statement No. 69, Government Combinations and Disposals of Government Operation. This Statement requires disclosures to be made about government combinations and disposals of government operations to enable financial statement users to evaluate the nature and financial effects of those transactions. The provisions of this Statement are effective for financial statements for periods beginning after December 15, 2013, therefore, the District will implement this Statement in fiscal year ending June 30, 2016. This Statement will not have a material impact on the financial statements. GASB Statement No. 70 – In 2014, the GASB has issued Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. This Statement establishes accounting and financial reporting standards for situations where a state or local government, as a guarantor, agrees to indemnify a third -party obligation holder under specified conditions (i.e., nonexchange financial guarantees). The issuer of the guaranteed obligation can be a legally separate entity or individual, including a blended or discretely presented component unit. Guidance is provided for situations where a state or local government extends or receives a nonexchange financial guarantee. The requirements of this Statement are effective for financial statements for reporting periods beginning after June 15, 2013. This Statement did not have a material effect on the financial statements. GASB Statement No. 71– In 2014, the GASB issued Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date —an amendment of GASB Statement No. 68. The requirements of this Statement will eliminate the source of a potential significant understatement of restated beginning net position and expense in the first year of implementation of Statement 68 in the accrual -basis financial statements of employers and non - employer contributing entities. This benefit will be achieved without the imposition of significant additional costs. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2014 therefore, the District will implement this Statement in fiscal year ending June 30, 2015. 22 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 2 — CASH AND INVESTMENTS A. Sumnmry of Cash and Investments Cash and investments ' as of June 30, are classified in the accompanying financial statements as follows: 2014 2013 Cash and cash equivalents $47,929,530 $46,714,788 Short term investments 9,993,211 10,498,624 Restricted cash and cash equivalents 100,000 100,000 Restricted investments 5,474,874 5,412,500 Total Cash and Investments $63,497,615 $62,725,912 R Policies and Practices 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. Governments, or its agencies, commercial paper, certificates of deposit placed with commercial banks and/or savings with 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. G General Authorizations Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below: Maximum Remaining Authorized Investment Type Maturity U.S. Treasury Obligations Banker's Acceptances Commercial Paper (1) Collateralized Certificates of Deposit (2) County Pooled Investment Funds Local Agency Investment Fund (LAIF) District District California State Limits Policy Policy Maximum Maximum Maximum Minimum Percentage Investment Percentage Legal of Portfolio In One Issuer of Portfolio Quality 5 years None None 100•/0 N/A 180 40% 40% 10% N/A 270 25% 10% 10% Aaa 5 years 30% None 10% Aaa N/A None None 100% N/A N/A None None 100% N/A (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, excluding Treasury Notes an. 23 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 2 — CASH AND INVESTMENTS (Continued) D. 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- 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 investments by maturity, as of June 30: 2014 2013 24 12 Months or less $5,412,500 7,000,136 3,498,488 43,011,748 58,922,872 3,803,040 $62,725,912 Maturity 4/30/14 7/26/13 7/26/13 Not applicable 12 Months Investment Type or less Maturity Certificates of Deposit - Debt Reserve $4,856,450 4/28/15 Money Market - Debt Reserve 618,423 24 days (avg.) Certificates of Deposit - Commercial Paper - Union Bank 5,000,000 7/25/14 Commercial Paper - Toyota Motor Credit 5,000,000 10/21/14 California Local Agency Investment Fund 46,500,000 Not applicable Total Investments 61,974,873 Cash in bank 1,522,742 Total Cash and Investments $63,497,615 24 12 Months or less $5,412,500 7,000,136 3,498,488 43,011,748 58,922,872 3,803,040 $62,725,912 Maturity 4/30/14 7/26/13 7/26/13 Not applicable CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 2 — CASH AND INVESTMENTS (Continued) F_ Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of the June 30, 2014 of each investment type: Investment Type Certificates of Deposit Money Market - Debt Reserve Commercial Paper Totals Not rated.- California Local Agency Investment Fund Cash in Bank Total Cash and Investments F. Concentration of Credit Risk 2014 2013 Aaa Total Aaa Total $4,856,450 $4,856,450 $12,412,636 $12,412,636 618,423 618,423 - 10,000,000 10,000,000 3,498,488 3,498,488 $15,474,873 15,474,873 $15,911,124 15,911,124 46,500,000 43,011,748 1,522,742 3,803,040 $63,497,615 $62,725,912 The District is a voluntary participant in LAIF which is regulated by the California Government Code under the oversight of the Treasurer of the State of California. LAIF is not registered with the Securities and Exchange Commission. The fair value of the District's investment in this pool is reported in the accompanying financial statements 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 LAW, which are recorded on an amortized cost basis. At June 30, 2014 and 2013, these investments matured in an average of 232 and 278 days, respectively. 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 financial statements in cash and cash equivalents 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. 25 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 2 — CASH AND INVESTMENTS (Continued) G. 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. NOTE 3 — ACCOUNTS RECEIVABLE Accounts receivable for the years ended June 30, 2014 and 2013 are comprised of the following: 2014 City of Concord (see Note 8) $15,446,722 Household Hazardous Waste Partners 755,296 All Other 742,975 Total Accounts Receivable $16,944,993 NOTE 4 — ASSESSMENT DISTRICTS RECEIVABLE 2013 $14,100,192 837,802 1,579,555 $16,517,549 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 at an amount equal to their share of the construction costs and connection fee. The assessments, plus interest, are generally payable over 10 years. The CAD receivable balance at June 30, 2014 and 2013 was $353,380 and $434,396, respectively. The District also established the Alhambra Valley Assessment District (AVAD) to provided services to residents in the Alhambra Valley in Martinez. Residents have the choice to pay cash or finance the construction costs and connection fees. The AVAD receivable balance at June 30, 2014 and 2013 was $1,485,110 and $1,655,065, respectively. The total receivable balance at June 30, 2014 and 2013 for CAD and AVAD was $1,838,490 and $2,089,461, respectively, and is shown as a non - current asset on the Statement of Net Position. 26 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 5 — CAPITAL ASSETS Property, plant and equipment, and construction in progress are summarized below for the year ended June 30,2014: Capital assets not being depreciated: Land Easements (intangible) Construction in Progress Total nondepreciated assets Capital assets being depreciated: Sewage collection system Contributed sewer lines Outfall sewers Sewage treatment plant Recycled water infrastructure Pumping stations Buildings Intangibles Furniture and equipment Motor vehicles Total depreciated assets Less accumulated depreciation: Sewage collection system Contributed sewer lines 0utfall sewers Sewage treatment plant Recycled water infrastructure Pumping stations Buildings Intangibles Furniture and equipment Motor vehicles Total accumulated depreciation Total capital assets being Balance at Transfers & Balance at June 30, 2013 Additions Retirements Adjustments June 30, 2014 $17,262,249 $58,321 $17,320,570 4,812,127 4,812,127 24,533,254 $26,848,688 ($1,510,352) (22,363,432) 27,508,158 41,795,503 26,848,688 (1,510,352) (17,492,984) 49,640,855 311,633,989 6,572,028 318,206,017 150,834,930 1,153,968 308,348 152,297,246 11,338,935 363 11,339,298 299,830,466 (102,000) 3,878,369 303,606,835 13,515,026 3,612,630 17,127,656 54,412,730 (25,000) 568,844 54,956,574 36,120,720 (38,000) 6,113,365 42,196,085 4,596,467 (4,596,467) - 15,651,212 (6,408,774) 783,388 10,025,826 6,558,065 (89,150) 252,116 6,721,031 904,492,540 1,153,968 (6,662,924) 17,492,984 916,476,568 53,103,663 4,244,943 57,348,606 51,127,280 2,033,949 53,161,229 3,012,481 150,962 3,163,443 180,670,824 10,289,298 (102,000) 190,858,122 5,898,343 628,968 6,527,311 24,342,929 2,185,564 (25,000) 26,503,493 8,059,168 1,137,780 (38,000) 9,158,948 135,316 (135,316) - 11,851,588 1,028,553 (6,406,814) 6,473,327 4,100,982 327,844 (89,150) 4,339,676 342,302,574 22,027,861 (6,660,964) (135,316) 357,534,155 depreciated, net 562,189,966 (20,873,893) (1,960) 17,628,300 558,942,413 Capital assets, net $603,985,469 $5,974,795 ($1,512,312) $135,316 $608,583,268 During fiscal year ended June 30, 2014, the District reclassified its easements from intangibles previously depreciated to non - depreciable assets. 27 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 6 — LONGTERM DEBT A. Summary ofActivity The changes in the District's long -term obligations during the year consisted of the following: 2009 Series A Certificates of Participation Wastewater Revenue 3.45- 3.78 0/9, due 9/12029 2009 Series B Certificates ofParticipation Wastewater Revenue .40- 3.790/c, due 9/12029 1999 State Water Resources Control Board Water Reclamation Loan 2.60%, due 3/312018 Total Long -Term Debt Less current portion B. Debt Service Requirements Original Amount issue Balance Balance due within Amount June 30, 2013 Retirements June 30, 2014 one year $19,635,000 $19,635,000 34,490,000 23,960,000 $3,720,000 $19,635,000 20,240,000 $3,865,000 2,916,872 866,827 164,582 702,245 168,861 44,461,827 $3,884,582 (3,884,582) $40,577,245 The 2009 Revenue COP debt service requirements are as follows: 40,577,245 $4,033,861 (4,033,861) $36,543,384 Fiscal Year Series A Ending Series A Series B Total 35% Tax Net June 30, Principal Merest Principal Interest Principal Interest Subsidy Total 2015 $1,190,840 $3,865,000 $700,467 $3,865,000 $1,891,307 ($416,794) $5,339,513 2016 1,190,840 2,210,000 601,033 2,210,000 1,791,873 (416,794) 3,585,079 2017 1,190,840 2,300,000 501,300 2,300,000 1,692,140 (416,794) 3,575,346 2018 1,190,840 2,405,000 424,175 2,405,000 1,615,015 (416,794) 3,603,221 2019 1,190,840 2,480,000 329,483 2,480,000 1,520,323 (416,794) 3,583,529 2020-2024 $6,985,000 5,098,729 6,980,000 604,908 13,965,000 5,703,637 (1,784,555) 17,884,082 2025 -2029 10,320,000 2,279,321 10,320,000 2,279,321 (797,762) 11,801,559 2030 2,330,000 25,436 2,330,000 25,436 (8,903) 2,346,533 Total $19,635,000 $13,357,686 $20,240,000 $3,161,366 $39,875,000 $16,519,052 ($4,675,190) $51,718,862 As part of the Federal budget sequestration, the Internal Revenue Service (IRS) has announced that, as of March 1, 2013, credit payments claimed by issuers of certain tax credit bonds, including Build America Bonds, may be subject to a reduction of 7.2 %. 28 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 6 — LONGTERM DEBT (Continued) C. 2009 Wastewater Revenue Certificates of Parficoadon 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 .40% to 3.79 %. The two bonds total $54,125,000, and are secured by a pledge of tax and net revenues of the wastewater system. Principal payments began annually on September 1, 2010 with semi - annual payments due on September 1 and March l 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. D. Water Reclamation Loan Contract The District entered into a contract with the State of California State Water Resources Control Board (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 Ending June 30 2015 2016 2017 2018 Total Principal Interest $168,861 $18,258 173,251 13,868 177,756 9,363 182,377 4,742 $702,245 $46,231 29 Total $187,119 187,119 187,119 187,119 $748,476 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 7 — RISK MANAGEMENT The District is exposed to various risks of loss including torts, theft of, damage to, and destruction of assets, errors and omissions, injuries to employees, and natural disasters. To manage these risks, 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. A. Insurance Coverage The District's insurance coverage is as follows: Self Insured Deductible Per Type of Coverage Insurer Limits Occurrence All -Risk Property: Special Form Property APIP $556,015,744 $250,000 Boiler and Machinery APIP 100,000,000 250,000 (Shared Limits per Occurrence) Crime National Union 1,000,000 2,500 Liability: Errors and Omissions Insurance Company of the State of Pennsylvania 15,000,000 1,000,000 Employment Practices Liability Insurance Company of the State of Pennsylvania 15,000,000 1,000,000 Employment Practices Liability Hiscox Insurance Company 1,000,000 35,000 General Liability Insurance Company of the State of Pennsylvania 15,000,000 1,000,000 Auto Liability Insurance Company of the State of Pennsylvania 15,000,000 1,000,000 Pollution (General Aggregate) Aspen Specialty Insurance Company 10,000,000 50,000 General Liability (Occurrence) Aspen Specialty Insurance Company 5,000,000 5,000 Pollution (Legal Liability Aggregate) Aspen Specialty Insurance Company 10,000,000 50,000 Fiduciary Liability RLI Insurance Company 1,000,000 0 Workers' Compensation: CSRMA 750,000 0 Excess Workers' Compensation Safety National Casualty Statutory 750,000 30 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 7 — RISK MANAGEMENT (Continued) B. Provision for Uninsured Claims The Governmental Accounting Standard 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. For fiscal years ended June 30, 2014, 2013, and 2012, settlements have not exceeded insurance coverage. Changes in the District's estimated liability for retained losses are summarized as follows as of June 30: Beginning balance Provisions for claims incurred in the current year and changes in the liability for retained- losses incurred in prior years Claims paid and/or adjustments Ending balance 2014 2013 2012 $1,000,000 $1,000,000 $1,000,000 171,806 1,659,291 72,606 (171,806) (1,659,291) (72,606) $1,000,000 $1,000,000 $1,000,000 NOTE 8 — AGREEMENT WITH THE CITY OF CONCORD 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 and makes a contribution for its share of facilities capital costs expended. Service charges and contributions to capital costs from the City totaled $11,625,864 and $3,820,858, respectively, for the year ended June 30, 2014, for a total of $15,446,722. Service charges and contributions to capital costs form the City totaled $10,483,421 and $3,616,771, respectively, for the year ended June 30, 2013, for a total of $14,100,192. 31 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 9 — PENSION PLANS A. Contra Costa County Employee's Retirement Association Plan Plan Description Substantially all District permanent employees are required to participate in the Contra Costa County Employees' Retirement Association (CCCERA), a cost - sharing multiple employer public 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, 2012. 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, date of membership and final average salary. Subject to vested status, employees can withdraw contributions plus interests credited, or leave them as a deferred retirement when they terminate, or transfer to a reciprocal retirement system. 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 majority of the employees' 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, 2014, 2013 and 2012 was as follows: Percentage of payroll 66% 62% 49% The District pension plan covered 258 and 251 participants as of June 30, 2014 and 2013, respectively. 32 2014 2013 2012 Covered Payroll for fiscal years ended June 30 $26,373,619 $24,752,463 $24,305,548 Employer required contributions to pension 16,132,863 14,029,374 10,961,853 Employee (COL) required contributions to pension 1,370,707 1,289,095 922,520 Total required contributions $17,503,570 $15,318,469 $11,884,373 Percentage of payroll 66% 62% 49% The District pension plan covered 258 and 251 participants as of June 30, 2014 and 2013, respectively. 32 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 9 — PENSION PLAN (Continued) CCCERA determines contribution requirements using a modification of the Entry Age Normal Method. Under this method, the District's total normal benefit cost for each employee from date of hire to date of retirement is expressed as a level percentage of the related total payroll cost. Normal benefit cost under this method is the level amount the employer must pay annually to fund an employee's projected retirement benefit. This level percentage of payroll method is used to amortize any unfunded actuarial liabilities. The actuarial assumptions used to compute contribution requirements are also used to compute the actuarially accrued liability. The District uses the actuarially determined percentages of payroll to calculate and pay contributions to CCCERA. This results in no net pension obligations or unpaid contributions. Annual Pension Costs, representing the payment of all actuarially required contributions required by CCCERA, for the last three years were as follows: Annual Pension Cost Fiscal Year* (APC) 12/31/2012 $11,884,373 12/31/2013 15,318,469 12/31/2014 17,503,570 Percentage Actual of APC Contribution Contributed $11,884,373 100% 15,318,469 100% 17,503,570 100% *Please note that CCCERA's fiscal year ends December 31. As part of the fiscal year 2013 -2014 budget process, the Board approved the normal prefunding of the required annual contribution, plus an additional $5 million to pay down the Unfunded Actuarial Accrued Liability. The $5 million additional payment was made in December of 2013. The following is a summary of the actuarial assumptions and methods: Valuation date December 31, 2012 Actuarial cost method Entry Age Normal Cost Method Amortization method Level percent of payroll for total unfunded liability (4.00% payroll growth assumed) Remaining amortization period Remaining balance of December 31, 2007 UAAL is amortized over a fixed (decreasing or closed) period with 10 years remaining as of December 31, 2012. Any changes in UAAL after December 31, 2007 will be separately amortized over a fixed 18 -year period effective with that valuation. Assets valuation method Market value of assets less unrecognized returns in each of the last of the last nine semi - annual accounting periods. Unrecognized return is equal to the difference between the actual market return and the expected return on the market value, and is recognized semi - annually over a five -year period. The Actuarial Value of Assets is reduced by the value of the non - valuation reserves and designations. Actuarial assumptions: Investment rate of return 725% Inflation rate 3.25% Cost -of- living adjustments 3.009/6 33 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO TBE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 9 — PENSION PLANS (Continued) The schedule of funding progress presents multi -year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. CCCERA's latest actuarial value and funding progress for the pool are shown below: 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. Public Employees' Pension Reform Act (PEPR,4) Assembly Bill 340 (AB 340) created the Public Employees' Pension Reform Act (PEPRA) that implemented new benefit formulas and final compensation periods, as well as new contribution requirements for most new employees with a membership date on or after January 1, 2013, who meet the definition of new member under PEPRA. The table below provides the details of the new provisions. Benefit Formula Final Compensation Period Employer Contribution Rate as a percentage payroll Member Contribution Rate as a percentage of payroll 2.5% at Age 67 Average of last 3 years 10.19% of Reportable Compensation 10.25% of Reportable Compensation The employer contribution rate listed above was in effect until June 30, 2014. In accordance with the provisions of AB 340, the member contribution rate shown above was set at 50 percent of expected total normal cost rate, rounded to the nearest 'A percent, for the benefits that will apply to new members on January 1, 2013. 34 Unfunded Unfunded (Overfunded) (Overfunded) Actuarial Accrued Entry Age Actuarial Liability as a Actuarial Accrued Percentage of Actuarial Actuarial Asset Accrued Liability (B -A), Funded Covered Covered Payroll Valuation Date Value (A) Liability (B) (C) Ratio (AB) Payroll (D) (C/D) 12/31/2010 $5,341,821,711 $6,654,036,801 $1,312,215,090 80.28% $687,443,206 190.88% 12/31/2011 5,426,719,066 6,915,311,649 1,488,592,583 78.47% 666,394,146 223.38% 12/31/2012 5,482,257,062 7,761,315,535 2,279,058,473 70.64% 652,312,180 349.38% 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. Public Employees' Pension Reform Act (PEPR,4) Assembly Bill 340 (AB 340) created the Public Employees' Pension Reform Act (PEPRA) that implemented new benefit formulas and final compensation periods, as well as new contribution requirements for most new employees with a membership date on or after January 1, 2013, who meet the definition of new member under PEPRA. The table below provides the details of the new provisions. Benefit Formula Final Compensation Period Employer Contribution Rate as a percentage payroll Member Contribution Rate as a percentage of payroll 2.5% at Age 67 Average of last 3 years 10.19% of Reportable Compensation 10.25% of Reportable Compensation The employer contribution rate listed above was in effect until June 30, 2014. In accordance with the provisions of AB 340, the member contribution rate shown above was set at 50 percent of expected total normal cost rate, rounded to the nearest 'A percent, for the benefits that will apply to new members on January 1, 2013. 34 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 9 — PENSION PLANS (Continued) B. Deferred Compensation Plan 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. The plan was established by the District's Board of Directors and any amendments to the plan must be authorized by the Board of Directors. 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 with ICMA Retirement Corporation for the exclusive benefit of the participants and are not included in the District's financial statements. C. 401(a) Defined Contribution Plan The District also contributes to a money purchase plan created in accordance with Internal Revenue Code section 401(a). The plan was established by the District's Board of Directors and any amendments to the plan must be authorized by the Board. 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 District contributed $1,646,041 and $1,546,318 to the Plan during the years ended June 30, 2014 and 2013, respectively. The 401(a) money purchase plan assets are held in trust with ICMA Retirement Corporation for the exclusive benefit of the participants and are not included in the District's financial statements. NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS A. Plan Description The District's defined benefit post employment healthcare plan (DPBP) provides medical benefits to eligible retired District employees and beneficiaries. DPE P 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. DPBP 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. 35 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued) B. Funding Policy GASB Statement No. 45 set rules for computing the employer's expense for retiree benefits other than pension, called OPEB. 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 (NOA); when the contribution is less than the ARC, a net OPEB obligation (NOO) results. The District had a net OPEB asset of $1,207,678 and $1,537,638 as of June 30, 2014 and 2013, 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. C Annual OPEB Cost and Net OPEB Asset For 2014, the District's annual OPEB cost (expense) was equal to the ARC of $8,103,000. The District contributed $4,718,600 for retiree health care premiums and $2,828,400 to the PARS trust for a total of $7,547,000. The following table summarizes the changes in the District's net OPEB (Asset) at June 30, 2014: Net OPEB obligation (asset) at June 30, 2012 ($1,263,542) Annual Required Contribution (ARC) $8,300,000 Interest on NOA (82,000) Adjustment to ARC 98,000 Annual OPEB Cost (AOC) 8,316,000 Contributions Made: Health care premiums paid (4,823,096) Contributions to PARS tug (3,767,000) Increase (decrease) in net OPEB obligation (274,096) Net OPEB Obligation (Asset) at June 30, 2013 (1,537,638) Annual Required Contribution (ARC) 8,103,000 Interest on NOA (95,000) Adjustment to ARC 120,000 Annual OPEB Cost (AOC) 8,128,000 Contributions Made: Health care premiums paid (4,969,640) Contributions to PARS frost (2,828,400) Increase (decrease) in net OPEB obligation 329,960 Net OPEB Obligation (Asset) at June 30, 2014 ($1,207,678) 36 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued) The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the OPEB asset for the past three years are presented below: D. Funded Status and Funding Progress Per PARS, actuarial assets as of June 30, 2014 and 2013, including trust contributions and interest, total $36,131,536 and $29,352,833, respectively. 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 health care 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 below 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. Percentage of Current Year Net OPEB Annual OPEB Actual AOC AOC Obligation Obligation Fiscal Year Cost (AOC) Contribution Contributed (Asset) (Asset) June 30, 2012 $8,300,000 $8,646,806 104% ($346,806) ($1,263,542) June 30, 2013 8,316,000 8,590,096 103% (274,096) (1,537,638) June 30, 2014 8,128,000 7,798,040 96% 329,960 (1,207,678) D. Funded Status and Funding Progress Per PARS, actuarial assets as of June 30, 2014 and 2013, including trust contributions and interest, total $36,131,536 and $29,352,833, respectively. 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 health care 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 below 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. 37 Unfunded (Overfunded) Actuarial Liability as Percentage of Covered Payroll [(A — B)ICI 265% 323% 321% Unfunded Cost Method (Overfunded) Actuarial Actuarial Actuarial Covered Payroll Actuarial Value of Accrued Accrued Funded (Active Plan Valuation Assets Liability Liability Ratio Members) Date (A) (B) (A — B) UAAL (AB) (C) June 30, 2009 $2,341,251 $68,769,305 ($66,428,054) 3.400% $25,080,233 June 30, 2010 9,404,000 90,337,000 (80,933,000) 10.41% 25,080,233 July 1, 2012 22,481,000 100,498,000 (78,017,000) 22.37% 24,305,548 37 Unfunded (Overfunded) Actuarial Liability as Percentage of Covered Payroll [(A — B)ICI 265% 323% 321% CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued) E. 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. The District's most recent actuarial valuation was prepared as of July 1, 2012 and was finalized on May 31, 2013. The June 30, 2012 actuarial valuation results are budgeted in fiscal years 2013 -14 and 2014 -15. The following is a summary of the actuarial assumptions and methods: Valuation Date Actuarial Cost Method Amortisation Method Average Remaining Period Actuarial Assumptions: Inflation Rate Investment Rate of Retum Projected Salary Increases Post - Retirement Benefit Increases Health Care Cost Trend Rates NOTE 11- NET POSITION July 1, 2012 Entry Age Normal Cost Method Level Dollar /Closed 25 Years fixed 3.00% 6.25% 3.25% No planned changes Medical - 9.4% grading to 5% in 2021 - 22 Medicare Part B - same as medical trend Dental - 4% Net Position is the excess of all the District's assets over all its liabilities, regardless of fund. Net Position is divided into three captions: Net Investment in Capital Assets describes the portion of Net Position which is represented by the current net book value of the District's capital assets, less the outstanding balance of any debt issued to finance these assets. Restricted describes the portion of Net Position which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the District cannot unilaterally alter. Unrestricted describes the portion of Net Position which is not restricted as to use. 38 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS For the Years Ended 30, 2014 AND 2013 NOTE 12 — LEASE COmmrrMENTS The District leases various facilities and equipment under operating leases. Following is a summary of operating lease commitments as of June 30, 2014: Fiscal Year Ending 2015 2016 Office Equipment $249,924 249,924 Facilities $58,560 29,712 Total $308,484 279,636 Total $499,848 $88,272 $588,120 Total rental expense for the fiscal years ended June 30, 2014 and 2013 was $309,320 and $306,708, respectively. NOTE 13 — commrTMENT5 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 a number of purchase commitments for ongoing operating and capital projects that involve multi -year contracts. Purchase commitments related to these multi-year contracts are approximately $13,901,807 and $11,808,184 as of June 30, 2014 and 2013, respectively. 39 This Page Left Intentionally Blank SUPPLEMENTARY INFORMATION This Page Left Intentionally Blank CENTRAL CONTRA COSTA SANITARY DISTRICT COMBINING SCHEDULE OF NET POSITION ENTERPRISE SUB -FUNDS JUNE 30, 2014 ASSETS CURRENT ASSETS: Cash and cash equivalents Short term investments Accounts receivable Interest receivable Due from other sub -funds Parts and supplies Prepaid expenses Total current assets NON -CURRENT ASSETS: Restricted cash and equivalents Restricted investments Assessment Districts receivable Net OPEB asset CAPITAL ASSETS Nondepreciable Depreciable, net of accumulated depreciation Total capital assets, net Total non- cun-ent assets TOTAL ASSETS CURRENT LL43111TIES: Accounts payable and accrued expenses Due to other sub -funds Interest payable Refunding Water Revenue Bonds - current portion Water Reclamation Loan Contract - current portion Accred compensated absences - current portion Liability for uninsured claims Refundable deposits Total current liabilities NON - CURRENT LIABILITIES: Refunding Water Revenue Bonds, noncurrent portion Water Reclamation Loan Contract, noncurrent portion Accrued compensated absences, noncurrent portion Total noncurrent liabilities TOTAL I (ABILITIES NET POSITION Net investment in capital assets Restricted for debt service Unrestricted TOTAL NET POSITION Running Sewer Self Debt 1,207,678 Expense Construction Insurance Service Elimination Total 608,583,268 3,865,000 609,890,946 $970,733 $42,453,785 $4,505,012 $47,929,530 9,993,211 1,000,000 126,069 84,769 9,993,211 12,921,644 4,023,349 16,944,993 20,968 2,359 $7,754 31,081 122,933,958 99,239,565 91,490 60,144,076 ($282,409,089) - 2,088,885 2,088,885 2,303,942 2.303.942 141,219,162 155,730,878 4,598,861 60,151,830 (282,409,089) 79,291,642 100,000 50,446 5,842,430 1,838,490 1,207,678 - 49,640,855 673,380 558,942,413 608,583,268 3,865,000 609,890,946 1,838,490 751,110,108 157,569,368 4,598,861 100,000 5,474,874 5,474,874 1,838,490 1,207,678 49,640,855 558,942,413 608,583,268 5,474,874 617,204,310 65,626,704 (282,409,089) 696,495,952 2,999,979 2,792,005 50,446 5,842,430 134,569,301 123,393,825 69,884 24,376,079 (282,409,089) - 673,380 673,380 3,865,000 3,865,000 168,861 168,861 385,000 385,000 1,000,000 1,000,000 126,069 84,769 210.838 138,080,349 126,270,599 1,120,330 29,083,320 (282,409,089) 12,145,509 36,010,000 36,010,000 533,384 533,384 3,461,393 3,461,393 3,461,393 - 36,543,384 40,004,777 141,541,742 126,270,599 1,120,330 65,626,704 (282,409,089) 52,150,286 608,583,268 (40,577,245) 568,006,023 4,809,248 4,809,248 985,098 31,298,769 3,478,531 35,767,997 71,530,395 5609,568,366 $31298,769 $3,478,531 $644,345,666 43 CENTRAL CONTRA COSTA SANITARY DISTRICT COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION ENTERPRISE SUB -FUNDS FOR THE YEAR ENDING JUNE 30, 2014 OPERATING REVENUES Sewer service charges (SSC) Service charges - City of Concord Other services charges Miscellaneous charges Total operating revenues OPERATING EXPENSES Sewage collection and pumping stations Sewage treatment Engineering Administrative and general Depreciation Total operating expenses OPERATING INCOME (LOSS) NONOPERATING REVENUES (EXPENSES) Taxes Permit and inspection fees Interest earnings Interest expense Other income (expense) Total nonoperating revenues NET INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS CAPITAL CONTRIBUTIONS AND TRANSFERS City of Concord contributions to capital costs Customer contributions to capital cost (SSC) Contributed Sewer lines Capital contributions - connection fees Transfers In (Out) Total capital contributions and transfers CHANGE IN NET POSITION NET POSITION, BEGINNING OF YEAR NET POSITION, END OF YEAR Running Sewer Self Debt Expense Construction Insurance Service Elimination Total $60,796,421 $60,796,421 11,625,864 11,625,864 1,035,134 1,035,134 544,589 544,589 74,002,008 - 74,002.008 16,109,927 27,808,819 12,308,802 21,174,011 $858,739 21,892,545 99,294,104 858,738 (25.92,096) (858,738) 16,109,927 27,808,819 12,308,802 ($644,448) 21,388,301 21,892,545 (644,448) 99,508,394 644,448 (25,506,386) 44 $7,243,464 55,850,377 13,093,841 1,331,821 243,430 1,575,251 172,844 145,370 10,180 30,894 359,288 (1.996.689) (1,996.689) 622,135 310,329 644,448 (644,448) 932,464 2,126,800 7,942,593 654,628 3,884,582 (644,448) 13,964,155 (23,165,296) 7,942,593 (204,110) 3,884,582 (11,542,231) 3,820,858 3,820,858 6,665,209 6,665.09 1,462,316 1,462,316 8.24,517 8,224,517 25 ,338 ,336 (21,453,754) (3,884,582) 26,800,652 (2,743,170) (3,884,582) 20,172,900 3,635 ,356 5,199,423 (204,110) 8,630,669 605,933,010 26,099,346 3,682,641 635,714,997 5609,568 ,366 $31 .98,769 53,478,531 5644,345,666 44 .A Salaries and Wages Employee Benefits Less Capitalized Overhead and Benefits Total Salaries and Benefits Directors' Fees and Expense Chemicals Utilities Repairs and Maintenance Hauling and Disposal Professional and Legal Services Outside Services Self Insurance Materials and Supplies Other CENTRAL CONTRA COSTA SANITARY DISTRICT Schedule of Running Expenses Comparison of Budget and Actual Expenses by Department June 30, 2014 Sewage Variance Sewage Treatment Pumping Favorable Administration Engineering Collection Plant Station Total Budget (Unfavorable) $4,766,009 $5,880,812 $5,313,247 $9,183,063 $935,973 $26,079,104 $26,722,021 $642,917 13,258,368 6,254,643 5,823,361 9,660,211 958,187 35,954,770 36,694,384 739,614 (23,353) (2,886,850) (51,463) (106,095) (11,660) (3,079,421) (4,124,238) (1,044,817) 18,001,024 9,248,605 11,085,145 18,737,179 1,882,500 58,954,453 59,292,167 337,714 153,735 - - - - 153,735 155,637 1,902 - - - 1,179,041 431,145 1,610,186 1,561,000 (49,186) 42,305 179,877 132,415 3,565,132 472,599 4,392,328 4,117,650 (274,678) 417,924 180,531 549,355 1,799,815 178,992 3,126,617 3,765,527 638,910 - 371,645 111,378 423,102 8,614 914,739 1,100,500 185,761 359,130 104,689 6,214 3,060 - 473,093 477,350 4,257 1,059,531 1,780,693 41,076 514,049 127,419 3,522,768 2,801,621 (721,147) 600,000 - - - - 600,000 600,000 - 131,453 240,545 829,940 807,667 51,191 2,060,796 2,016,715 (44,081) 408,909 202,215 171,242 779,784 30,700 1,592,850 1,936,785 343,935 $21,1742011 $12,308,800 $12,926,765 $27,808,829 $3,183,160 $77,401,565 $77,824,952 $423,387 CENTRAL CONTRA COSTA SANITARY DISTRICT RUNNING EXPENSE SCHEDULE OF SUPPLEMENTAL NET POSITION ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Prior Year Balance $12,572,710 2013 2014 Revenue $76,128,808 2013 - 2014 Expense (99,294,104) Add Back Depreciation Expense and Intangible Assets Adjustment 21,892,545 (1,272,751) Net Position Attributed to General Operations Net Position Attributed to All Other Running Expense Net Position 46 11,299,959 598,268,407 $609,568,366