HomeMy WebLinkAbout07.a. Accept the audited financial statements for fiscal years ended 06-30-15 and 06-30-16 and Auditors Memorandum on Internal CommunicationsCentral San
BOARD OF DIRECTORS
POSITION PAPER
7.a.
Board Meeting Date: December 1, 2016
Subject:
ACCEPT THE COMPARATIVE AUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS ENDED JUNE 30, 2015 AND 2016, AND THE
AUDITOR'S MEMORANDUM ON INTERNAL CONTROL AND REQUIRED
COMMUNICATIONS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
Submitted By: Initiating Dept/Div.:
Thea Vassallo, CPA, CMA
Finance Manager
Administrative / Finance & Accounting
REVIEWED AND RECOMMENDED FOR BOARD ACTION:
1L").•
Roger S. Bailely
General Manager
ISSUE: The comparative audited financial statements of the &Trtral Contra Costa
Sanitary District for the Fiscal Years (FY) ended June 30, 2015 and 2016, and the
auditor's memorandum on internal control and required communications for the year
ended June 30, 2016 are being submitted to the Board of Directors.
BACKGROUND: The firm of Maze & Associates has completed its fourth examination
of Central San's financial statements for the FYs ended June 30, 2015, and 2016, 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 Central San and other
procedures considered necessary to express such an opinion. The independent
auditor's report for the FYs ending June 30, 2015 and 2016 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 will be sent electronically
by the annual deadline of January 31, 2017. The audited financial statements are also
sent to the County Auditor -Controller, Contra Costa County Board of Supervisors, and
the Bond Rating Agencies.
In the performance of their examination of the financial statements, the auditors
evaluate Central San's internal accounting controls related to the financial statements in
Page 1 of 3
POSITION PAPER
Board Meeting Date: December 1, 2016
Subject:
ACCEPT THE COMPARATIVE AUDITED FINANCIAL STATEMENTS FOR
THE FISCAL YEARS ENDED JUNE 30, 2015 AND 2016, AND THE
AUDITOR'S MEMORANDUM ON INTERNAL CONTROL AND REQUIRED
COMMUNICATIONS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
compliance with laws, regulations, and the provisions or grant agreements,
noncompliance with which could have a material effect on the financial statements as
required by Government Auditing Standards. Based on their observations during the
course of the examination, the auditors advise management of any significant
deficiencies or material misstatements and any recommendations to improve the
system of internal accounting controls. See Attachment 2, "Memorandum on Internal
Control and Required Communications." There were no significant deficiencies or
material misstatements identified.
The original contract with Maze & Associates is for a four-year term with a one-year
extension.
ALTERNATIVES/CONS1DERATIONS: None.
FINANCIAL IMPACTS: Below is information regarding implementation of significant
pension reporting changes included in the basic audited Financial Statements for FYs
ended June 30, 2015 and 2016. The new Governmental Accounting Standards Board
(GASB) Statements that affect Central San this audit cycle are as follows:
GASB Statement No. 68 --- Accounting and Financial Reporting for Pensions
Requires recognition of the entire net pension liability and a more comprehensive
measure of pension expense.
GASB Statement No. 71 — Pension Transition for Contributions Made Subsequent
to the Measurement Date
GASB 71 amends GASB 68 by eliminating the source of a potential significant
understatement of restated beginning net position and expense in the first year of
implementation of GASB 68 in the accrual basis financial statements of employer
contributing entities.
The collective net pension liability included in the Statement of Net Position for FY
June 30, 2016, the second year of implementation, is $91,746,888. This is an increase
of $2.2 million from FY 2014-15, mainly due to a reduction in the discount rate assumed
by CCCERA from 7.25% to 7.0%. Additional information related to GASB 68 and 71
are provided in Footnote 9 - Pension Plans -- Pension Liabilities, Pension Expenses
and Deferred Outflows/Inflows of Resources Related to Pensions, starting on page 34
through 38. Additionally, the Required Supplementary Information includes new
schedules on changes in net pension liability, ratios and contributions - see pages 46
and 47.
Page 2 of 3
POSITION PAPER
Board Meeting Date: December 1, 2016
Subject:
ACCEPT THE COMPARATIVE AUDITED FINANCIAL STATEMENTS FOR
THE FISCAL YEARS ENDED JUNE 30, 2015 AND 2016, AND THE
AUDITOR'S MEMORANDUM ON INTERNAL CONTROL AND REQUIRED
COMMUNICATIONS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
GASB Statement No. 72 - Fair Value Measurement and Application
This Statement addresses accounting and financial reporting issues related to fair value
measurements. The Statement provides guidance for determining a fair value
measurement for financial reporting purposes.
COMMITTEE RECOMMENDATION: The audited financial statements and the
auditor's memorandum on internal control and required communications will be
reviewed by Vikki Rodriguez from Maze & Associates at the Finance Committee
meeting on November 28, 2016.
RECOMMENDED BOARD ACTION: Accept the basic audited financial statements for
the FYs ended June 30, 2015 and 2016, and the auditor's memorandum on internal
control and required communications for the FY ended June 30, 2016.
Attached Supporting Documents:
1. Basic Financial Statements for the Years Ended June 30, 2015 and 2016
2. Memorandum on Internal Control and Required Communications for the Year Ended June 30, 2016
Page 3 of 3
ATTACHMENTI
CENTRAL CONTRA COSTA SANITARY DISTRICT
BASIC FINANCIAL STATEMENTS
FOR THE YEARS ENDED JTJNE 30, 2016 AND 2015
REVIEW DRAFT 11/18/2016 1:30 PM
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CENTRAL CONTRA COSTA SANITARY DISTRICT
BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
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
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Changes in the Net Pension Liability and Related Ratios ......................................46
Schedule of Contributions ..........................................................................................................47
Post-Retirement Health Care Defined Benefit Plan
Schedule of Funding Progress...........................................................................................48
SUPPLEMENTARY INFORMATION
Combining Schedule of Net Position—
EnterpriseSub-Funds.............................................................................................................50
Combining Schedule of Revenues,
Expenses and Changes in Net Position—Enterprise Sub-Funds ........................................51
Schedule of Running Expenses, Comparison of Budget and Actual
Expenses by Department........................................................................................................52
Running Expense—Schedule of
Supplemental Net Position Analysis......................................................................................53
i
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N�M A�ZTE
INDEPENDENT AUDITOR'S REPORT
To the Board o£Directors
Central Contra Costa Sanitary District
Martinez,California
Report on Fin¢ncla[Statements
We have audited the accompanying financial statements of the Central Contra Costa Sanitary District
(District) as o£and for the years ended June 30, 2016 and 2015, 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 Responsfbi[isy for the Financial Statcments
Management is responsible for the preparation and fair presenffition of these financial statements in
accordance with accounting principles generally accepted in the United States o£America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of the Financial statements that are£tee from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements basad 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. Tha procedures selected depend on the auditor's judgment, including the assessment
o£the risks o£material misstatement o£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 fav
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 o£the District's internal
control. Accordingly,we express no such opinion. An audit also includes evaluating the appropriateness o£
accounting policies used and the reasonableness of significant accounting estimates made by management,
as well as evaluating the overall presentation of the$nancial sffitements.
We believe that the audit 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, 2016 and 2015, and the changes in
Financial position and cash flows for the years then ended in con£ormiTy with accounting principles
generally accepted in the United States o£America.
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Emphasis ofa Matter
Management adopted the provisions of Governmental Accounting Standards Board Statement No.72—Fair
YaZue Measurement and Application, which became effective during the year ended June 30, 2016 as
discussed in Note 1 to the fmancial statements.
The emphasis of this matter does not constitute a modification to our opinion.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States o£ America require that Management's
Discussion and Analysis and pension and OPEB related tables 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£or
consistency with management's responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit o£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 Buff tient
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 £or purposes o£ additional analysis and is not a required part of the £mancial
statements.
The Supplementary Information is the responsibility of management and was derived from and relates
directly to the underlying accounting and other recoMs 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 £mancial 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.
�la� & ��u�-y--
Pleasant Hill,California
November 28,2016
2
_ ' Centra/ 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, 2016. This information is
presented in conjunction with the audited financial statements, which follow this report.
FINANCIAL HIGHLIGHTS
The District's 2015-16 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 $30.0 million or 532% in 2015-16. This is
mainly due to increases in operating revenues, capital contributions, and a decrease in operating
expenses.
• Total revenues in 2015-16 increased by $43 million or 4.17^^/0. The total Sewer Service Charge
(SSC) rate increased for single family homes by 729% to $471 and 5.47% for multi-family
homers to $463. Increased development in the service area lead to an increase in permit and
inspection fees.
• Total 2015-I 6 expenses decreased by $6.7 million or-6.28%. This is mainly due to a reduction
in sewage treatment costs and pension expense.
Capital Contributions increased in 2015-16 by $8.1 million or 56.70%. The increase is mainly
due to an increase in connection fees and a higher allocation of SSC to Capital Contributions
from Operating Revenues.
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 fmancial 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£nancial statements.
REQUIRED FRVANCIAL 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 inforrnaflon about the District's
activities.
• Statement of Net Position — reports the District's current financial resources (short-term
spendable resources) with capital assets, deferred outflows o£resources, long-term obligations,
and deferred inflows of resources.
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• 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:
Table 1 - Condensed Statement of Net Position
% Increase
Fiscal Year Ended June 30 (Decrease)
FY 15-16 FY 15-16
vs. vs.
2015-16 2014-15 2013-14 FY 14-15 FY 13-14
Current Assets $ 95,584,553 $ 82,554,355 $ 79,291,642 15.78% 20.55%
Capital Assets 616,005,037 609,718,479 608,583,268 1.03% 1.22%
Other Non-current Assets 7,580,512 7,832,901 8,621,042 -3.22% -12.07%
Total Assets 719,170,102 700,105,735 696,495,952 2.72% 3.26%
Deferred Outflows of
Resources-Pension
Related 34,464,472 12,420,138 - 177.49% 100.00%
Current Liabilities 10,986,379 10,029,487 12,145,509 9.54% -9.54%
Non-Current Liabilities 127,458,808 127,324,915 40,004,777 0.11% 218.61%
Total Liabilities 138,445,187 137,354,402 52,150,286 0.79% 165.47%
Deferred Inflows of
Resources - Pension
related 21,618,960 11,564,393 - 86.94% 100.00%
Net Investment in
Capital Assets 581,844,903 573,175,094 568,006,023 1.51% 2.44%
Restricted - Debt Service 4,363,251 4,288,008 4,809,248 1.75% -9.27%
Unrestricted 7,362,273 (13,856,024) 71,530,395 -153.13% -89.71%
Total Net Position $ 593,570,427 $ 563,607,078 $ 644,345,666 5.32% -7.88%
The total net position of the District decreased from. $644.3 million in 2013-14 to $563.6 million in
2014-15 and increased to $593.6 million in 2015-16. The District's total assets have increased by $19.1
million or 2.72% compared to 2014-15, and $22.7 million or 3.26% compared to 2013-14. The total
liabilities increased $1.1 million or 0.79% compared to 2014-15, and increased $86.3 million or
165.47% compared to 2013-14. The decrease in net position over the three-year period totals $50.8
million or -7.88% and is the result of the combination of net income, capital contributions, and the
implementation of GASB 68 and GASB 71 which required the District to record the Net Pension
Liability.
By far the largest portion of the District's net position (98.02% percent) reflects its investment in capital
assets (e.g. land, buildings, machinery, equipment, intangible assets, and sewer line infrastructure), less
4
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 $4.4 million restricted
for debt service. The remaining balance of$7.4 million in unrestricted net position increased by $21.2
million from 2014-15 and decreased by $64.2 million from 2013-14 due to the implementation of GASB
68 and 71 which required the District to record its Net Pension Liability.
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:
Table 2 - Condensed Statement of Revenues, Expenses, and Changes in Net Position
% Increase
Fiscal Year Ended June 30 (Decrease)
FY 15-16 FY 15-16
vs. vs.
2015-16 2014-15 2013-14 FY 14-15 FY 13-14
Sewer Service Charges SSC $ 86,147,863 $ 82,916,457 $ 72,422,285 3.90% 18.95%
Other Service Charges and
Miscellaneous 1,586,673 1,599,997 1,579,723 -0.83% 0.44%
Total Operating Revenue 87,734,536 84,516,434 74,002,008 3.81% 18.56%
Property Tax 14,835,167 14,083,331 13,093,841 5.34% 13.30%
Permit& Inspection Fees 2,546,723 1,843,922 1,575,251 38.11% 61.67%
Interest and All Other 1,757,403 2,147,005 1,291,752 -18.15% 36.05%
Total Non-Operating
Revenues 19,139,293 18,074,278 15,960,844 5.89% 19.91%
Total Revenues 106,873,829 102,590,712 89,962,852 4.17% 18.80%
Total Labor and Benefits 63,988,158 66,104,630 58,954,453 -3.20% 8.54%
Chemicals & Utilities 5,053,263 5,532,237 6,002,514 -8.66% -15.81%
Repairs and Maintenance 4,891,062 3,873,557 3,126,617 26.27% 56.43%
Professional, Legal and
Outside Services 4,196,302 3,322,881 3,995,861 26.29% 5.02%
Materials & Supplies 2,251,356 1,934,253 2,060,796 16.39% 9.25%
Hauling and Disposal 889,471 884,703 914,739 0.54% -2.76%
Self-Insurance Expense 1,600,617 1,333,518 858,738 20.03% 86.39%
Pension Expense 9,778,389) (3,012,757) - 224.57% 100.00%
All Other 1,815,647 1,636,826 1,702,131 10.92% 6.67%
Depreciation Expense 22,885,030 22,740,942 21,892,545 0.63% 4.53%
Total Operating Expenses 97,792,517 104,350,790 99,508,394 -6.28% -1.72%
Non-Operating Expense -
Interest Expense 1,427,641 1,523,127 1,996,689 -6.27% -28.50%
Total Expenses 99,220,158 105,873,917 101,505,083 -6.28% -2.25%
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Table 2 - Condensed Statement of Revenues, Expenses, and Changes in Net Position
(Continued)
% Increase
Fiscal Year Ended June 30 (Decrease)
FY 15-16 FY 15-16
vs. vs.
2015-16 2014-15 2013-14 FY 14-15 FY 13-14
Income Before Capital
Contributions 7,653,671 (3,283,205) (11,542,231) 333.12% 166.31%
Customer Contributions (SSC) 11,991,752 6,769,623 10,486,067 77.14% 14.36%
Contributed Sewer Lines 1,774,168 794,218 1,462,316 123.39% 21.33%
Capital Contributions -
Connection Fees 8,543,758 6,673,298 8,224,517 28.03% 3.88%
Total Capital Contributions 22,309,678 14,237,139 20,172,900 56.70% 10.59%
Change in Net Position 29,963,349 10,953,934 8,630,669 173.54% 247.17%
Beginning Net Position 563,607,078 644,345,666 635,714,997 -12.53% -11.34%
Restatement-
Implementation of GASB 68
and GASB 71 - (91,692,522) - 100.00% -
Ending Net Position $ 593,570,427 $ 563,607,078 $ 644,345,666 5.32% -7.88%
Revenue
Total operating revenues increased from $74.0 million in 2013-14 to $84.5 million in 2014-15 and to
$87.7 million in 2015-16. Operating revenues increased by $3.2 million or 3.81% compared to 2014-15,
and increased by $13.7 million or 18.56%comparing 2015-16 to 2013-14.
Total non-operating revenue increased from $16.0 million in 2013-14 to $18.1 million in 2014-15 and to
$19.1 million in 2015-16. An increase compared to 2014-15 by $1.1 million or 5.89%, and increased by
$3.2 million or 19.91% comparing 2015-16 to 2013-14.
Total revenues increased from $90.0 million in 2013-14 to $102.6 million in 2014-15 to $106.9 million
in 2015-16. The change in total revenue resulted in an increase of $4.3 million or 4.17% comparing
2015-16 to 2014-15, and increased by $16.9 million or 18.80% comparing 2015-16 to 2013-14. There
was a 7.29% rate increase for single family homes and a 5.47% rate increase for multi-family homes in
2015-16, an 8.40% SSC general rate increase in 2014-15, and a 9.16% SSC general rate increase in
2013-14. Property tax revenue increased by $0.75 million or 5.34% from 2015-16 to 2014-15, and $1.7
million or 13.30% comparing 2015-16 to 2013-2014 due to the recovery of housing values.
Expenses
Total expenses increased from $101.5 million in 2013-14 to $105.9 million in 2014-15 and decreased to
$99.2 million in 2015-16. In 2015-16, total expenses decreased by $6.7 million or -6.28% compared to
2014-15. Comparing 2015-16 to 2013-14, total expenses were $2.3 million or-2.25% lower. Decreases
were mainly due to a reduction in sewage treatment costs and pension expense. 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 -$11.5 million in 2013-14, to -$3.3 million in 2014-
15, and $7.7 million in 201516.
6
Total capital contributions in 2015-16 were $22.3 million compared to $14.2 million in 2014-15 and
$20.2 million in 2013-14. This was mainly due to higher customer contributions SSC in 2015-16 due to
the 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 increased by
$19.0 million or 173.54% when comparing 2015-16 to 2014-15 and increased $21.3 million or 247.17%
when comparing 2015-16 to 2013-14.
CAPITAL ASSETS
Capital assets for fiscal years 2015-16, 2014-15 and 2013-14 totaled $616.0 million, $609.7 million, and
$608.6 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, 2016, the District's investment in capital assets totaled $616.0 million, an increase of $6.3
million or 1.03% over the capital asset balance of $609.7 million at June 30, 2015. Capital assets
increased by $7.4 million or 1.22% comparing 2015-16 to 2013-14. A comparison of the District's
capital assets over the past three fiscal years is presented below:
Table 3 - Capital Assets
% Increase
Fiscal Year Ended June 30 (Decrease)
FY 15-16 FY 15-16
vs. vs.
2015-16 2014-15 2013-14 FY 14-15 FY 13-14
Land $ 17,320,570 $ 17,320,570 $ 17,320,570 0.00% 0.00%
Sewage Collection System 341,412,320 331,167,382 318,206,017 3.09% 7.29%
Contributed Sewer Lines 154,863,632 153,091,464 152,297,246 1.16% 1.69%
Outfall Sewers 11,371,574 11,339,298 11,339,298 0.28% 0.28%
Sewage Treatment Plant 323,360,945 320,717,418 303,606,835 0.82% 6.51%
Recycled Water Infrastructure 19,215,350 19,065,139 17,127,656 0.79% 12.19%
Pumping Stations 56,270,149 56,046,563 54,956,574 0.40% 2.39%
Buildings 42,412,648 42,412,648 42,196,085 0.00% 0.51%
Intangible Assets 4,936,407 4,875,507 4,812,127 1.25% 2.58%
Furniture & Equipment 12,627,569 10,886,007 10,025,826 16.00% 25.95%
Motor Vehicles 7,378,730 6,883,134 6,721,031 7.20% 9.79%
Construction In Progress 24,480,982 13,958,646 27,508,158 75.38% -11.00%
Subtotal 1,015,650,876 987,763,776 966,117,423 2.82% 5.13%
Less Accumulated
Depreciation 399,645,839 378,045,297 357,534,155 5.71% 11.78%
Total Capital Assets (net of
depreciation) $ 616,005,037 $ 609,718,479 $ 608,583,268 1.03% 1.22%
The major reasons for the increase in capital assets, net of depreciation, of$6.3 million from 2014-15 to
2015-16 and $7.4 million from 2013-14 to 2015-16, are as follows:
Sewer pipe ongoing renovations, upgrades, expansion, pumping station improvements, and
contributed sewer lines increased by $12.2 million comparing 2015-16 to 2014-15 and $27.1
million comparing 2015-16 to 2013-14.
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• Treatment plant infrastructure renovations, upgrades, equipment, and improvements increased by
$2.6 million comparing 2015-16 to 2014-15 and $19.8 million comparing 2015-16 to 2014-15.
• All other asset categories, including construction in progress, increased by $13.0 million
comparing 2015-16 to 2014-15 and increased by $2.5 million comparing 2015-16 to 2013-14.
• Capital asset increases are offset by an increased subtraction of accumulated depreciation of
$21.6 million comparing 2015-16 to 2014-15 and $42.1 million comparing 2015-16 to 2013-14
due to increasing capital asset investment and its associated depreciation expense.
See Note 5 in the audited financial statements.
DEBT ADMINISTRATION
The total debt obligations for fiscal years 2015-16, 2014-15 and 2013-14 totaled $34.2 million, $36.5
million, and $40.6 million, respectively. As of .lune 30, 2016, the District's outstanding debt totaled
$34.2 million, which is a decrease of$2.4 million or -6.52% over the debt balance of$36.5 million at
June 30, 2015. Debt decreased by $6.4 million or -15.81% comparing 2015-16 to 2013-14. 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:
Table 4— Debt Outstanding
Outstanding Balance-Fiscal Year Ended June 30 % Increase (Decrease)
FY 15-16 FY 15-16
vs. vs.
2015-16 2014-15 2013-14 FY 14-15 13-14
Revenue Bonds $ 33,800,000 $ 36,010,000 $ 39,875,000 -6.14% -15.24%
Water Reclamation Loan 360,134 533,385 702,245 -32.48% -48.72%
Total Debt Service $ 34,160,134 $ 36,543,385 $ 40,577,245 -6.52% -15.81%
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.
8
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 still being litigated,
currently requiring higher employee contributions and lower pensions by eliminating spiking.
• Increased cost of employee benefits, mainly due to pension costs and healthcare.
• The necessary replacement and upgrading of existing infrastructure.
• Strong demand for recycled water from District customers as a result of mandatory water
restrictions due to the current drought conditions in the state.
• 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.
• 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, 2016 AND 2015
ASSETS 2016 2015
CURRENT ASSETS
Cash and cash equivalents(Note 2) $32,451,718 $45,218,013
Short term investments(Note 2) 39,000,000 15,498,572
Accounts receivable,net(Note 3) 19,018,549 17,141,474
Interest receivable 181,707 60,067
Parts and supplies 2,146,172 2,079,435
Prepaid expenses 2,786,407 2,556,794
Total current assets 95,584,553 82,554,355
NON-CURRENT ASSETS
Restricted cash and cash equivalents(Notes I.F. and 2) 100,000 100,000
Restricted investments(Note 2) 4,856,450 4,856,450
Assessment Districts receivable(Note 4) 1,515,818 1,669,686
Net OPEB asset(Note 10) 1,108,244 1,206,765
Capital assets:
Nondepreciable(Note 5) 46,737,959 36,154,723
Depreciable,net of accumulated depreciation(Note 5) 569,267,078 573,563,756
Total capital assets,net 616,005,037 609,718,479
Total non-current assets 623,585,549 617,551,380
TOTAL ASSETS 719,170,102 700,105,735
DEFERRED OUTFLOWS OF RESOURCES
Pension related(Note 9) 534,464,472 $12,420,138
(Continued)
10
CENTRAL CONTRA COSTA SANITARY DISTRICT
STATEMENTS OF NET POSITION
JUNE 30, 2016 AND 2015
LIABILITIES 2016 2015
CURRENT LIABILITIES
Accounts payable and accrued expenses $6,174,225 $5,374,441
Interest payable 592,380 621,847
Refunding Water Revenue Bonds-current portion(Note 6) 2,300,000 2,210,000
Water Reclamation Loan Contract-current portion(Note 6) 177,756 173,251
Accrued compensated absences-current portion(Note 1.J.) 448,000 403,000
Provision for uninsured claims(Note 7) 1,000,000 1,000,000
Refundable deposits 294,018 246,948
Total current liabilities 10,986,379 10,029,487
NON-CURRENT LIABILITIES
Refunding Water Revenue Bonds,noncurrent portion(Note 6) 31,500,000 33,800,000
Water Reclamation Loan Contract,noncurrent portion(Note 6) 182,378 360,134
Accrued compensated absences,noncurrent portion(Note 1.J) 4,029,542 3,629,271
Collective net pension liability(Note 9) 91,746,888 89,535,510
Total non-current liabilities 127,458,808 127,324,915
TOTAL LIABILITIES 138,445,187 137,354,402
DEFERRED INFLOWS OF RESOURCES
Pension related(Note 9) 21,618,960 11,564,393
NET POSITION(Note 1 l)
Net investment in capital assets 581,844,903 573,175,094
Restricted for debt service 4,363,251 4,288,008
Unrestricted 7,362,273 (13,856,024)
TOTAL NET POSITION $593,570,427 $563,607,078
See accompanying notes to financial statements
11
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CENTRAL CONTRA COSTA SANITARY DISTRICT
STATEMENTS OF REVENUES,EXPENSES AND CHANGES IN NET POSITION
FOR THE YEARS ENDED JUNE 30, 2016 AND 2015
2016 2015
OPERATING REVENUES
Sewer service charges(SSC) $72,233,903 $70,023,512
Service charges-City of Concord(Note 8) 13,913,960 12,892,945
Other services charges 963,014 1,006,197
Miscellaneous charges 623,659 593,780
Total operating revenues 87,734,536 84,516,434
OPERATING EXPENSES
Sewage collection and pumping stations 16,977,612 18,200,513
Sewage treatment 25,959,525 29,507,722
Engineering 16,301,976 13,200,972
Recycled water 559,272 -
Administrative and general 24,887,491 23,713,398
Pension expense(Note 9) (9,778,389) (3,012,757)
Depreciation(Note 5) 22,885,030 22,740,942
Total operating expenses 97,792,517 104,350,790
OPERATING(LOSS) 10,057,981 (19,834,3561
NONOPERATING REVENUES(EXPENSES)
Taxes 14,835,167 14,083,331
Permit and inspection fees 2,546,723 1,843,942
Interest earnings 562,308 318,475
Interest expense (1,427,641) (1,523,127)
Other income(expense),net 1,195,095 1,828,530
Total nonoperating revenues(expenses),net 17,711,652 16,551,151
INCOME(LOSS)BEFORE CAPITAL CONTRIBUTIONS 7,653,671 (3,283,205)
CAPITAL CONTRIBUTIONS
City of Concord contributions to capital costs(Note 8) 3,671,892 2,897,491
Customer contributions to capital cost(SSC) 8,319,860 3,872,132
Contributed sewer lines 1,774,168 794,218
Capital contributions-connection fees 8,543,758 6,673,298
Total capital contributions 22,309,678 14,237,139
CHANGE IN NET POSITION 29,963,349 10,953,934
NET POSITION,BEGINNING OF YEAR 563,607,078 644,345,666
Prior period adjustment for implementation of GASB Statements 68 and 71 (Note 9) - (91,692,522)
NET POSITION,END OF YEAR _ $593,570,427 $563,607,078
See accompanying notes to financial statements
13
CENTRAL CONTRA COSTA SANITARY DISTRICT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NNE 30,2016 AND 2015
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $86,011,329 $84,488,757
Payments to suppliers (42,386,633) (48,383,516)
Payments to employees and related benefits (41,204,947) (36,727,579)
Net Cash Provided(Used)by Operating Activities 2,419,749 (622,338)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Receipt of taxes 14,835,167 14,083,331
Inspection/permit fees and other non-operating income 3,741,818 3,672,472
Cash Flows from Noncapital Financing Activities 18,576,985 17,755,803
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Capital contributions 13,765,920 7,563,841
Connection fees 8,543,758 6,673,298
Acquisition and construction of capital assets (29,535,660) (23,887,364)
Proceeds from sale of capital assets 364,072 11,211
Interest paid on long-term debt (1,457,108) (1,574,660)
Principal payments on long-term debt (21383,251) (4,033,860)
Cash Flows(Used for)Capital and Related Financing Activities (10,702,269) (15,247,534)
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of investments 15,498,572 10,613,063
Acquisition of investments (39,000,000) (15,500,000)
Interest received 440,668 289,489
Cash Flows from(Used for)Investing Activities (23,060,760) (4,597,448)
NET INCREASE(DECREASE)IN CASH (12,766,295) (2,711,517)
Cash,beginning of year 45,318,013 48,029,530
Cash,end of year $32,551,718 $45,318,013
(Continued)
See accompanying notes to financial statements
14
CENTRAL CONTRA COSTA SANITARY DISTRICT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30,2016 AND 2015
2016 2015
Reconciliation of operating(loss)to net cash provided by
operating activities:
Operating(loss) ($10,057,981) ($19,834,356)
Adjustments to reconcile operating loss to cash
flows from operating activities:
Depreciation 22,885,030 22,740,942
Change in assets and liabilities:
Receivables,net (1,723,207) (27,677)
Parts and supplies (66,737) 9,450
Prepaid expenses (229,613) (252,852)
Net OPEB asset 98,521 913
Accounts payable and accrued expenses 799,784 (467,989)
Accrued payroll and related expenses 445,271 185,878
Refundable deposits 47,070 36,110
Net pension liability (9,778,389) (3,012,757)
Net cash provided(used)by operating activities $2,419,749 ($622,338)
SCHEDULE OF NON CASH ACTIVITY
Change in fair value of investments $440,668 $289,489
Capital asset donations 1,774,168 633,208
Total non cash activity $2,214,836 $922,697
CASH AND CASH EQUIVALENTS,AS PRESENTED ON
STATEMENT OF NET POSITION:
Unrestricted cash and cash equivalents $32,451,718 $45,218,013
Restricted cash and cash equivalents 100,000 100,000
Total cash and cash equivalents at end of year $32,551,718 $45,318,013
See accompanying notes to financial statements
15
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
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 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 employees 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 of Accounting
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.lune 30,2016 and 2015
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 THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 1 —DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
C. Investments
Investments held at June 30, 2016 and 2015 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. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. The
District categorizes its fair value measurements within the fair value hierarchy established by
generally accepted accounting principles. The fair value hierarchy categorizes the inputs to
valuation techniques used to measure fair value into three levels based on the extent to which
inputs used in measuring fair value are observable in the market.
Level 1 .inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2 inputs are inputs -- other than quoted prices included within level 1 — that are
observable for an asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for an asset or liability.
If the fair value of an asset or liability is measured using inputs from more than one level of the
fair value hierarchy, the measurement is considered to be based on the lowest priority level input
that is significant to the entire measurement.
E. Prepaid Expenses
Certain payments to vendors reflect costs applicable to future accounting periods and are
recorded as prepaid items in the financial statements.
F. 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.
G. Parts and Supplies
Parts and supplies are valued at average cost and are used primarily for internal purposes.
19
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE I --DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
H. 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:
Years
Sewage Collection Facilities 75
Intangible Assets 75
Sewage Treatment Plant and Pumping Plants 40
Buildings 50
Furniture and Equipment 5— 15
Motor Vehicles 7- 15
L Property Taxes
Property tax revenue is recognized in the fiscal year for which the tax is levied. The County of
Contra Costa levies, bills and collects property taxes for the District; all material amounts are
collected by June 30.
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'/z 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.
i Compensated Absenees
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.
20
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE I--DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
The changes in compensated absences were as follows for fiscal years ended June 30:
2016 2015
Beginning Balance $4,032,271 $3,846,393
Additions 558,479 413,745
Payments (113,208) (227,867)
Ending Balance $4,477,542 $4,032,271
Current Portion $448,000 $403,000
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.
K 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.
L. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
M. Implementation of Governmental Accounting Standards Board(GASB)Pronouncements
GASB Statement No. 72 — In 2015, the GASB issued Statement No. 72, Fair Value
Measurement and Application. This Statement addresses accounting and financial reporting
issues related to fair value measurements. The Statement provides guidance for determining a
fair value measurement for financial reporting purposes. This Statement also provides guidance
for applying fair value to certain investments and disclosures related to all fair value
measurements. The requirements of this Statement are effective for financial statements for
period beginning after June 15, 2015, therefore, the District implemented this Statement in fiscal
year ending June 30,2016.
GASB Statement No. 76— The Hierarchy of Generally Accepted Accounting Principles for State
and Local Governments. The objective of this statement is to reduce the GAAP hierchy to two
categories of authoritative GAAP from the four categories under GASB Statement No. 55. The
statement is effective for the periods beginnings after June 15, 2015, or the 2015-2016 fiscal year.
21
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 1 —DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
GASB Statement No. 79 — Certain External Investment Pools and Pool Participants. The
objective of this Statement is to address for certain external investment pool and their participants
the accounting and financial reporting implications that result from changes in the regulatory
provisions referenced by previous accounting and financial reporting standards. This statement is
effective for the periods beginning after December 15,2015, or the 2015-2016 fiscal year.
NOTE 2--CASH AND INVESTMENTS
A. Summary of Cash and Investments
Cash and investments as of June 30, are classified in the accompanying financial statements as
follows:
2016 2015
Cash and cash equivalents $32,451,718 $45,218,013
Short term investments 39,000.000 15,498,572
Restricted cash and cash equivalents 100;000 100,000
Restricted investments 4,856.450 4,856,450
Total Cash and Investments $76,408,168 $65,673,035
B. 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.
C. General Authorizations
Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are
indicated in the schedules below:
22
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 2--CASH AND INVESTMENTS (Continued)
District District
California State Limits Policy Policy
Maximum
Maximum Maximum Maximum Percentage Minimum
Remaining Percentage Investment of Portfolio Legal
Authorized Investment Type Maturity of Portfolio In One Issuer (Per Issuer) Quality
U.S. Treasury Obligations 5 years None None 100% N/A
U.S. Government Agency Issues 5 years None None 100% N/A
Money Market Funds 5 years 30% 10% 20% A
Negotiable Certificates of Deposit 5 years 30% 30% 30% AA
Banker's Acceptances 180 40% 40% 10% N/A
Commercial Paper(1) 270 25% 10% 10% A-1
Medium Term Notes 5 years 30% 5% 5% AA
Collateralized Certificates of Deposit(2) 5 years 30% None 10% Aaa
Supranationals 5 years 30% 5% 5% AA
County Pooled Investment Funds N/A None None 100% N/A
Local Agency Investment Fund(LAIF) 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 and LAIF.
23
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 2—CASH AND INVESTMENTS (Continued)
A Fair Value Hierarchy
The District categorizes its fair value measurements within the fair value hierarchy established by
generally accepted accounting principles. The hierarchy is based on the valuation inputs used to
measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical
assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant
unobservable inputs.
The following is a summary of the fair value hierarchy of the fair value of investments of the
District as of June 30,2016:
2016
Investment Type Level 2 Total
Commercial Paper-ABBEY $4,000,000 $4,000,000
Commercial Paper-Credit Agricole 5,000,000 5,000,000
Commercial Paper-Toyota Motor Credit 5,000,000 5,000,000
Commercial Paper-JP Morgan 5,000,000 5,000,000
Commercial Paper- Standard Charter 5,000,000 5,000,000
California Local Agency Investment Fund 32,300,000 32,300,000
Total Investments $56,300,000 56,300,000
Cash in bank 20,108,168
Total Cash and Investments $76,408,168
The following is a summary of the fair value hierarchy of the fair value of investments of the
District as of June 30, 2015:
2015
Investment Type Level 2 Total
Commercial Paper-Toyota Motor Credit $5,000,000 $5,000,000
Commercial Paper-Toyota Motor Corp 2,250,000 2,250,000
Commercial Paper-General Electric 2,500,000 2,500,000
U.S Federal Agency Securities-FHLB 2,500,000 2,500,000
U.S Federal Agency Securities-FNMA 1,000,000 1,000,000
California Local Agency Investment Fund 43,000,000 43,000,000
Total Investments $56,250,000 56,250,000
Cash in bank 9,423,035
Total Cash and Investments $65,673,035
24
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 2—CASH AND INVESTMENTS (Continued)
Investments classified in Level 1 of the fair value hierarchy, valued at $19.9 million in 2016 and
$7.1 million in 2015, respectively, are valued using quoted prices in active markets. Commercial
paper totaling$24 million in 2016 and $9.8 million in 2015, respectively, classified in Level 2 of
the fair value hierarchy, is valued using matrix pricing techniques maintained by various pricing
vendors. Matrix pricing is used to value securities based on the securities' relationship to
benchmark quoted prices. The California Local Agency Investment Fund, classified in Level 2 of
the fair value hierarchy, is valued based on the fair value factor provided by the Treasurer of the
State of California, which is calculated as the fair value divided by the amortized cost of the
investment pool.
E. 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:
2016 2015
12 Months 12 Months
Investment Type or less Maturity or less Maturity
Certificates of Deposit-Debt Reserve $4,856,450 4,28/17 $4;856,450 4/28/17
Certificates of Deposit 21250,000 7/24/15
Certificates of Deposit-ABBEY 5,000,000 4,27/17
Certificates of Deposit-Union Bank 5,000,000 7/22/16
Certificates of Deposit-BNP Panbas 5,000,000 10/26/16
Commercial Paper -ABBEY 4,000,000 7,22/16
Commercial Paper-Credit Agricole 5,000,000 10/25/16
Commercial Paper-Toyota Motor Credit 5,000,000 7,22/16 5,000,000 7/24/15
Commercial Paper-JP Morgan 5,000,000 1/20/17
Commercial Paper-Standard Charter 5,000,000 1126/17
Commercial Paper-Toyota Motor Corp 2,250,000 7/24/15
Commercial Paper-General Electric 2,500,000 7/24/15
U.S Federal Agency Securities-FHLB 2,500,000 7/22/15
U.S Federal Agency Securities-FNMA 1,000,000 8/12/15
California Local Agency Investment Fund 32,300,000 Not applicable 43,000,000 Not applicable
Total Investments 76,156,450 63,356,450
Cash in bank 251,718 2,316,585
Total Cash and Investments $76,408,168 $65,673,035
25
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
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 June 30, of each
investment type:
Totals
Investment Type 2016 2015
Rated Aaa:
Certificates of Deposit $19,856,450 $7,106,450
U.S. Federal Agency Securities 3,500,000
Commercial Paper 24,000,000 9,750,000
Totals 43,856,450 20,356,450
Not rated.-
California
ated:California Local Agency Investment Fund 32,300,000 43,000,000
Cash in Bank 251,718 2,316,585
Total Cash and Investments $76,408,168 $65,673,035
G. Concentration of Credit Risk
Investments in LAIF— 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 LAIF, which are recorded on an
amortized cost basis. At June 30, 2016 and 2015, these investments matured in an average of 167
and 191 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.
26
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 2—CASH AND INVESTMENTS (Continued)
K 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 are comprised of the following:
2016 2015
City of Concord(see Note 8) $17,585,852 $15,790,436
Household Hazardous Waste Partners 727,513 749,827
All Other 705,184 601,211
Total Accounts Receivable $19,018,549 $17,141,474
NOTE 4--ASSESSMENT DISTRICTS RECEIVABLE
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, 2016 and
2015 was $257,159 and$289,505, 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,
2016 and 2015 was$1,258,659 and $1,380,181,respectively.
The total receivable balance at June 30, 2016 and 2015 for CAD and AVAD was $1,515,818 and
$1,669,686, respectively, and is shown as a non-current asset on the Statement of Net Position.
27
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 5—CAPITAL ASSETS
Property, plant and equipment; and construction in progress are summarized below for the year
ended June 30, 2016:
Balance at Transfers& Balance at
June 30,2015 Additions Retirements Adjustments June 30,2016
Capital assets not being depreciated:
Land $17,320,570 $17,320,570
Basements(intangible) 4,875,507 $60,900 4,936,407
Construction in Progress 13,958,646 $27,713,804 ($364,072) (16,827,396) 24,480,982
Total nondepreciated assets 36,154,723 27,713,804 (364,072) (16,766,496) 46,737,959
Capital assets being depreciated:
Sewage collection system 331,167,382 (1,105,003) 11,349,941 341,412,320
Contributed sewer lines 153,091,464 1,774,168 (2,000) 154,863,632
Outfall sewers 11,339,298 32,276 11,371,574
Sewage treatment plant 320,717,418 (100,000) 2,743,527 323,360,945
Recycled water infrastructure 19,065,139 150,211 19,215,350
Pump ing stations 56,046,563 (5,000) 228,586 56,270,149
Buildings 42,412,648 42,412,648
Furniture and equipment 10,886,007 47,688 1,693,874 12,627,569
Motor vehicles 6,883,134 (72,485) 568,081 7,378,730
Total depreciated assets 951,609,053 11821,856 (1,284,488) 16,766,496 968,912,917
Less accumulated depreciation:
Sewage collection system 61,147,639 4,544,975 (1,105,003) 64,587,611
Contributed sewer lines 55,204,677 2,066,190 (2,000) 57,268,867
Outfall sewers 3,314,407 151,179 3,465,586
Sewage treatment plant 200,602,861 10363,847 (100,000) 210,866,708
Recycled water infrastructure 7,276,987 783,824 8,060,811
Pumping stations 28,643,263 2,245,841 (5,000) 30,884,104
Buildings 10,387,226 L230,599 11,617,825
Furniture and equipment 7,049,851 1,139,039 8,188,890
Motor vehicles 4,418,386 359,536 (72,485) 4,705,437
Total accumulated depreciation 378,045,297 22,885,030 (1,284,488) 399.645,839
Total capital assets being
depreciated,net 573,563,756 (21,063,174) 16,766,496 569,267,078
Capital assets,net $609,718,479 $6,650,630 ($364,072) - $616,005,037
28
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 5—CAPITAL ASSETS (Continued)
Property, plant and equipment, and construction in progress are summarized below for the year
ended June 30, 2015:
Balance at Transfers& Balance at
June 30,2014 Additions Retirements Adjustments June 30,2015
Capital assets not being depreciated:
Land $17,320,570 $17,320,570
Easements(intangible) 4,812,127 $63,380 4,875,507
Construction in Progress 27,508,158 $23,254,156 ($5,629) (36,798,039) 13,958,646
Total nondepreciated assets 49,640,855 23,254,156 (5,629) (36,734,659) 36,154,723
Capital assets being depreciated:
Sewage collection system 318,206,017 (580,000) 13,541,365 331,167,382
Contributed sewer lines 152,297,246 633,208 (5,582) 166,592 153,091,464
Outfall sewers 11,339,298 11,339,298
Sewage treatment plant 303,606,835 (850,000) 17,960,583 320,717,418
Recycled water infrastructure 17,127,656 1,937,483 19,065,139
Pumping stations 54,956,574 (80,000) 1,169,989 56,046,563
Buildings 42,196,085 216,563 42,412,648
Furniture and equipment 10,025,826 (450,000) 1,310,181 10,886,007
Motor vehicles 6,721,031 (269,800) 431,903 6,883,134
Total depreciated assets 916,476,568 633,208 (2,235,382) 36,734,659 951,609,053
Less accumulated depreciation:
Sewage collection system 57,348,606 4,379,033 (580,000) 61,147,639
Contributed sewer lines 53,161,229 2,043,448 55,204,677
Outfall sewers 3,163,443 150,964 3,314,407
Sewage treatment plant 190,858,122 10,594,739 (850,000) 200,602,861
Recycled water infrastructure 6,527,311 749,676 7,276,987
Pumping stations 26,503,493 2,219,770 (80,000) 28,643,263
Building, 9,158,948 1,228,278 10,387,226
Furniture and equipment 6,473,327 1,026,524 (450,000) 7,049,851
Motor vehicles 4,339,676 348,510 (269,800) 4,418,386
Total accumulated depreciation 357,534,155 22,740,942 (2,229,800) 378,045,297
Total capital assets being
depreciated,net 558,942,413 (22,107,734) (5,582) 36,734,659 573,563,756
Capital assets,net $608,583,268 $1,146,422 ($11,211) - $609,718,479
29
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 6—LONG-TERM DEBT
A. Summary of Activity
The changes in the District's long-term obligations during the year ended June 30, 2016 consisted
of the following:
Original Amount
Issue Balance Balance due within
Amount June 30,2015 Retirements June 30,2016 one year
2009 Series A Certificates of Participation
Wastewater Revenue
3.45-3.78%,due 9/1/2029 $19,635,000 $19,635,000 $19,635,000
2009 Series B Certificates of Participation
Wastewater Revenue
.40-3.79%,due 9/1/2029 34,490,000 16,375,000 $2,210,000 14,165,000 $2,300,000
1999 State Water Resources Control Board
Water Reclamation Loan
2.60%,due 3/31/2018 2,916,872 533,385 173251 360,134 177,756
Total Long-Term Debt 36,543,385 $2,383,251 34,160,134 $2,477,756
Less current portion (2,383,251) (2,477,756)
$34,160,134 $31,682,378
The changes in the District's long-term obligations during the year ended June 30,2015 consisted
of the following:
Original Amount
Issue Balance Balance due within
Amount June 30,2014 Retirements Jame 30,2015 one year
2009 Series A Certificates of Participation
Wastewater Revenue
3.45-3.78%,due 9/1/2029 $19,635,000 $19,635000 $19,635,000
2009 Series B Certificates of Participation
Wastewater Revenue
.40-3.79%,due 9/1/2029 34,490,000 20240,000 $3,865,000 16,375,000 $2.210,000
1999 State Water Resources Control Board
Water Reclamation Loan
2.60%,due 3/31/2018 2,916,872 702245 168,860 533,385 173,251
Total Long-Term Debt 40,577245 $4,033,860 36,543,385 S2383,251
Less current portion (4,033,861) (2,383,251)
$36,543,384 $34,160,134
30
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 201.5
NOTE 6--LONG-TERM DEBT (Continued)
B. Debt Service Requirements
The 2009 Revenue COP debt service requirements are as follows:
Fiscal Year Series A
Ending Series A Series B Total 35%Tax Net
June 30, Principal Interest Principal Interest Principal Interest Subsidy Total
2017 $1,190,840 $2,300,000 $501,300 $2,300,000 $1,692,140 ($416,794) $3,575,346
2018 1190,840 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 1,190,840 2,580,000 226,950 2,580,000 1,417,790 (416,794) 3,580,996
2021 1,118,907 1,025,000 175,583 1,025,000 13294,490 (391,617) 1,927,873
2022-2026 $8,890,000 4,106,872 3,375,000 202,375 12,265,000 4,309,247 (1,437,405) 15,136,842
2027-2030 10,745,000 986,867 10,745,000 986,867 (345,404) 11,386,463
Total $19,635,000 $10,976,006 $14,165,000 $1,859,866 $33,800,000 $12,835,872 ($3,841,602) $42,794,270
As part of the Federal budget sequestration, the Internal Revenue Service (IRS) has announced
that, as of March 1, 2016, credit payments claimed by issuers of certain tax credit bonds,
including Build America Bonds, may be subject to a reduction of 6.8%.
C. 2009 Wastewater Revenue Certificates of Participation
On November 12,2009 and December 3, 2009 the District issued two Certificates of Participation
(COP).
The 2009 Wastewater Revenue Certificates of Participation, Series A and Series B were issued
for $19,635,000 and $34,490,000, respectively. The Series A COP are federally taxable "Build
America Bonds" which have a direct 35% interest rate subsidy from the Federal Government.
Yields on this series range from 3.45% to 3.78%, net of the subsidy_ The Series B COP are tax
exempt bonds that were used to refund the 1998 and 2002 bond issues and fraise 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 1 of each year. Both bonds will be fully amortized as of
September 1, 2029. The refunded portion of the original bonds will be paid off based on the
original amortization schedule.
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.
31
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 6—LONG-TERM DEBT (Continued)
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 Principal Interest Total
2017 $177,756 $9,363 $187,119
2018 182,378 4,742 187,120
Total $360,134 $14,105 $374,239
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.
Fire/Boiler&Machinery Public Entity Property Insurance
Program(PEPIP) $532,743,577 $250,000
Crime Alliant 1,000,000 2,500
Liability:
Fiduciary Liability Board RLI Insurance Company 1,000,000 0
Commercial General Liability and
Environmental Exposure
Aspen Specialty Ins. Co. 1,000,000 5,000
Pollution Liability Aspen Specialty Ins. Co. 9,000,000 50,000
Commercial/Excess Liability Chartis Specialty Ins. Co. 15,000,000 500,000
Employment Practice Liability Hiscox Insurance Co. 1,000,000 35,000
Workers' Compensation:
Excess Workers' Compensation CSRMA Statutory 0
32
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 7-..RISK MANAGEMENT (Continued)
R 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 policy is to
maintain a reserve for claims of$1,500,000 which is equivalent to three claims at $500,000 per
occurrence. The District's actuary has calculated its potential liability as of June 30, 2016 to be
$559,000. The District has recorded a liability of$1,000,000 which is the District's Self-Insured
Retention.
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, 2016, 2015, and 2014, settlements have not exceeded insurance
coverage. Changes in the District's estimated liability for retained losses are summarized as
follows as of June 30:
2016 2015 2014
Beginning balance $1,000,000 $1,000,000 $1,000,000
Provisions for claims incurred in the current year
and changes in the liability for retained-
losses incurred in prioryears 888,745 499,956 171,806
Claims paid and/or adjustments (888,745) (499,956) (171,806)
Ending balance $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 $13,913,960 and $3,671,892,
respectively, for the year ended June 30, 2016, for a total of$17,585,852. Service charges and
contributions to capital costs from the City totaled $12,892,945 and $2,897,491, respectively, for
the year ended June 30,2015, for a total of$15,790,436.
33
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 9—PENSION PLANS
A. Contra Costa County Employees'Retirement Association Pension Plan
Plan Descriptions— 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, and the California Public Employees' Pension Reform Act
of 2013 (PEPRA). The latest available actuarial and financial information for the Plan is for the
year ended December 31, 2015. CCCERA 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.
Benefits Provided—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.
The Plans' provisions and benefits in effect at June 30, 2016, are summarized as follows:
Miscellaneous
On or after
Hire date Prior to January 1,2013 January 1,2013
Benefit formula 2%at 55 2%at 62
Benefit vesting schedule 10 years service 5 years service
Benefit payments monthly for life monthly for life
Retirement age 50 52
Monthly benefits,as a%of eligible compensation 0%to 100% No limit
Required employee contribution rates 9.08% 8.42%
Required employer contribution rates 61.41% 58.67%
Contributions—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. .For the year ended June 30, 2016, the
contributions to the Plan were $18,330,143.
34
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 9—PENSION PLANS(Continued)
Pension Liabilities,Pension Expenses and Deferred Oatlows/Inflows of Resources Related to
Pensions-As of June 30, 2016,the District reported net pension liabilities for its proportionate
share of the net pension liability of the Plan as follows:
Proportionate Share
of Net Pension Liability
Miscellaneous $91,746,888
Total Net Pension Liability $91,746,888
The District's net pension liability for the Plan is measured as the proportionate share of the net
pension liability. The net pension liability of the Plan is measured as of December 31, 2015, and
the total pension liability for the Plan used to calculate the net pension liability was determined by
an actuarial valuation as of December 31, 2014 rolled forward to December 31, 2015 using
standard update procedures. The District's proportion of the net pension liability was based on a
projection of the District's long-term share of contributions to the pension plan relative to the
projected contributions of at] participating employers, actuarially determined. The District's
proportionate share of the net pension liability for the Plan as of December 31, 2013, 2014, and
2015 were as follows:
Proportionate share of the Plan Fiduciary Net
Reporting Date for Proportion of the Proportionate share Covered- Net Pension Liability as a Pension as a
Employer under GASB 68 Net Pension of Net Pension employee percentage of its covered- percentage of the Total
as of December 31 Liability Liability payroll employee payroll Pension Liability
2013 7.488% $110,183,830 $25,791,346 427.21% 67.22%
2014 7.488% 89,535,510 26,906,131 332.77% 73.86%
2015 6.088% 91,746,888 29,061,743 315.70% 74.14%
For the year ended June 30,2016,the District recognized negative pension expense of$9,778,389. At
June 30,2016,the District reported deferred outflows of resources and deferred inflows of resources
related to pensions from the following sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date $9,349,978
Differences between expected and actual experience $9,262,284
Changes of assumptions or other inputs 3,422,162 2,601
Change in proportion and differences between employer
contributions and proportionate share of contributions 1,387,107 12,354,075
Net difference between projected and actual earnings
on pension plan investments 20,305,225
Total $34,464,472 $21,618,960
35
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 9—PENSION PLANS(Continued)
The $9,349,978 reported as deferred outflows of resources related to contributions subsequent to
the measurement date will be recognized as a reduction of the net pension liability in the year
ended June 30, 2017.
Other amounts reported as deferred outflows of resources and deferred inflows of resources
related to pensions will be recognized as pension expense as follows:
Year Ended Annual
June 30 Amortization
2017 ($235,715)
2018 (235,715)
2019 523,197
2020 3,443,767
2021 -
Actuarial Assumptions --- The total pension liabilities in the December 31, 2014 actuarial
valuations were determined using the following actuarial assumptions:
Miscellaneous
Valuation Date December 31,2014
Measurement Date December 31,2015
Actuarial Cost Method Entry Age Actuarial Cost Method
Amortization Method Level percent of payroll
Actuarial Assumptions:
Discount Rate 7.00%
Inflation Rate 2.75%
Payroll Growth 2.75%(1)
Projected Salary Increase 4.00%- 13.25%(2)
Cost of Living Adjustments 2.75%
Investment Rate of Return 7.00%(3)
Mortality RP-2014 Healthy Annuitant Mortality Table
(1) Plus "across the board"real salary increases of 0.5%per year
(2) Vary by service,including inflation
(3) Net of pension plan investment expenses,including inflation
36
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 9—PENSION PLANS (Continued)
Discount Rate—The discount rate used to measure the total pension liability was 7%for the Plan.
The projection of cash flows used to determine the discount rate assumed plan member
contributions will be made at the current contribution rate and that employer contributions will be
made at rates equal to the actuarially determined contribution rates. For this purpose, only
employee and employer contributions that are intended to fund benefits for current plan members
and their beneficiaries are included. Projected employer contributions that are intended to fund
the service costs for future plan members and their beneficiaries, as well as projected
contributions from future plan members, are not included. Based on those assumptions, the
pension plan's fiduciary net position was projected to be available to make all projected future
benefit payments for current plan members. Therefore, the long-term expected rate of return on
pension plan investments was applied to all periods of projected benefit payments to determine
the total pension liability as December 31, 2015.
The long-term expected rate of return on pension plan investments was determined in 2016 using
a building-block method in which expected future real rates of return (expected returns, net of
inflation) are developed for each major asset class. The target allocation and projected arithmetic
real rates of return for each major asset class, after deducting inflation, but before investment
expenses, used in the derivation of the long-term expected investment rate of return assumption
are summarized in the following table:
Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
Large Cap U.S.Equity 6% 5.75%
Developed International Equity 10% 6.99%
Emerging Markets Equity 14% 8.95%
Short-Term Govt/Credit 24% 0.20%
U.S.Treasury 2% 0.30%
Real Estate 7% 4.45%
Cash&Equivalents 1% -0.46%
Risk Diversifying Strategies 2% 4.30%
Private Credit 171/16 6.30%
Private Equity 1711/6 8.10%
Total 100%
37
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 9—PENSION PLANS (Continued)
A change in the discount rate would affect the measurement of the Total Pension Liability(TPL).
A lower discount rate results in a higher TPL and higher discount rates results in a lower TPL.
Because the discount rate does not affect the measurement of assets,the percentage change in the
Net Pension Liability (NPL) can be very significant for a relatively small change in the discount
rate.The table below shows the sensitivity of the NPL to a one percent decrease and a one percent
increase in the discount rate:
Miscellaneous
1%Decrease 6.00%
Net Pension Liability $140,696,391
Current Discount Rate 7.00%
Net Pension Liability $91,746,888
1%Increase 8.00%
Net Pension Liability $51,886,697
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 $1,856,025 and $1,740,604 to
the Plan during the years ended June 30,2016 and 2015,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.
38
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 10—POST EMPLOYMENT HEALTHCARE BENEFITS
A. Plan Description
The District's defined benefit post employment healthcare plan (DPBP) provides medical benefits
to eligible retired District employees and beneficiaries. DPHP is part of the Public Agency
portion of the Public Agency Retirement System (PARS), an agent multiple-employer plan
administered by PARS, which acts as a common investment and administrative agent for
participating public employees within the State of California. A menu of benefit provisions as
well as other requirements is established by the State statute with the Public Employees'
Retirement Law. DPHP selects optional benefit provisions from the benefit menu by contract
with PARS and adopts those benefits through District resolution. PARS issues a separate
Comprehensive Annual Financial Report. Copies of the PARS annual financial report may be
obtained from PARS, 4350 Von Karman Ave., Suite 100, Newport Beach, CA 92660, by calling
1(800) 540-6369, or by emailing info@pars.org.
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$1,108,244 and $1,206,765 as of June 30, 2016 and 2015, 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 OPER Cost and Net OPEB Asset
For 2016, the District's annual OPEB cost (expense) was equal to the ARC of$7,890,000. The
District contributed $5,159,879 for retiree health care premiums and $2,631,600 to the PARS
trust for a total of$7,791,479. The following table summarizes the changes in the District's net
OPEB (Asset) at June 30, 2016:
39
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 10—POST EMPLOYMENT HEALTH CARE BENEFITS (Continued)
Net OPEB Obligation(Asset)at June 30,2014 ($1,207,678)
Annual Required Contribution(ARC) $8,103,000
Interest on Net OPEB Asset (75,000)
Adjustment to ARC 97,000
Annual OPEB Cost(AOC) 8,125,000
Contributions Made:
Health care premiums paid (5,314,087)
Contributions to PARS trust (2,810,000)
Increase(decrease)in net OPEB obligation 913
Net OPEB Obligation(Asset)at June 30,2015 (1,206,765)
Annual Required Contribution(ARC) 7,866,000
Interest on Net OPEB Asset (79,000)
Adjustment to ARC 103,000
Annual OPEB Cost(AOC) 7,890,000
Contributions Made:
Health care premiums paid (5,159,879)
Contributions to PARS trust (2,631,600)
Increase(decrease)in net OPEB obligation 98,521
Net OPEB Obligation(Asset)at June 30,2016 ($1,108,244)
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:
Percentage of
Annual OPEB Actual AOC Current Net OPEB
Fiscal Year Cost(AOC) Contribution Contributed Year AOC Obligation(Asset)
June 30,2014 $8,128,000 $7,798,040 96% $329,960 ($1,207,678)
June 30,2015 8,125,000 8,124,087 1000/0 913 (1,206,765)
June 30,2016 7,890,000 7,791,479 99% 98,521 (1,108,244)
40
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 10—POST EMPLOYMENT HEALTH CARE BENEFITS(Continued)
D. Funded Status and Funding Progress
Per PARS, trust assets as of June 30, 2016 and 2015, including trust contributions and interest,
total $42,703,154 and $39,917,736,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 fixture 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 information below and the required supplementary information immediately following
the notes to the financial statements 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. Trend data from the most recent actuarial study is presented below:
Unfunded
Unfunded (Overfunded)
Cost Method (Overfunded) Actuarial
Actuarial Actuarial Actuarial Covered Payroll Liability as
Actuarial Value of Accrued Accrued Funded (Active Plan Percentage of
Valuation Assets Liability Liability Ratio Members) Covered Payroll
Date (A) (B) (B-A)UAAL (A/B) (C) [(A—B)/Cl
July 1,2014 $39,220,000 $107,181,000 $67,961,000 36.59% $30,552,659 222%
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 tecbmques
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, 2014 and was finalized
on April 6, 2015. The July 1, 2012 actuarial valuation results are budgeted in fiscal year 2015-
16.
41
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30,2016 and 2015
NOTE 10—POST EMPLOYMENT HEALTH CARE BENEFITS(Continued)
The following is a summary of the actuarial assumptions and methods:
Valuation Date July 1,2014
Actuarial Cost Method Entry Age Normal Cost Method
Amortization Method Level Dollar/Closed
Average Remaining Period 24 Years fixed
Actuarial Assumptions:
Inflation Rate 3,00%
Investment Rate of Return 6.25%
Projected Salary Increases 3.25%
Post-Retirement Benefit Increases No planned changes
Health Care Cost Trend Rates Medical- 8.3%grading to 5%in 2021 -22
Medicare Part B-same as medical trend
Dental-4%
NOTE 11—NET POSITION
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.
NOTE 12—LEASE COMMITMENTS
The District leases various facilities and equipment under operating leases. Following is a
summary of operating lease commitments as of June 30, 2016:
Fiscal Year Office
Ending Equipment Facilities Total
2017 $248,212 $63,610 $311,822
2018 248,212 33,922 282,134
Total $496,424 $97,532 $593,956
Total rental expense for the fiscal years ended June 30, 2016 and 2015 was $279,636 and
$308,484,respectively.
42
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended Mune 30,2016 and 2015
NOTE 13—COMMITMENTS AND CONTINGENCIES
Commitments and contingencies, undeterminable in amount, include normal recurring pending
claims and litigation. In the opinion of management, based upon discussion with legal counsel,
there is no pending litigation which is likely to have a material adverse effect on the financial
position of the District.
Claims and losses are recorded when they are reasonably probable of being incurred and the
amount is estimable. Insurance proceeds and settlements are recorded when received.
The District has 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$21,187,890 and$9,493,695 as of June 30, 2016 and 2015, respectively.
43
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REQUIRED SUPPLEMENTARY INFORMATION
CENTRAL CONTRA COSTA SANITARY DISTRICT
Cost-Sharing Multiple Employer Defined Benefit Retirement Plan
As of fiscal year ended June 30,2016
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS
Last 10 Years*
2016 2015
Net Change in Total Pension Liability
Service Cost $ 11,744,271 $ 14,396,402
Interest on the Total Pension Liability 35,450,291 42,024,521
Expensed portion of current-period changes in proportion and
difference between employer's contributions and proportionate
share of contributions (3,509,681) 533,503
Expensed portion of current-period benefit changes - -
Fxpensed portion of current-period difference between expected
and actual experience in the Total Pension Liability (836,604) (2,988,813)
Expensed portion of current-period changes of assumptions or
other inputs 972,205 (1,231)
Member contributions (5,196,358) (5,860,025)
Projected earnings on plan investments (30,472,528) (34,980,271)
Expensed portion of current-period differences between actual and
projected earnings on plan investments 5,198,286 (200,059)
Administrative expense 494,025 522,670
Other 40,685 -
Recognition ofbeginning ofyear deferred outflows ofresources as
pension expense -
Recognition ofbeginning of year deferred inflows of resources as
pension expense (2,593,424)
Net amortization of deferred amounts from changes in proportion
and differences between employer's contributions and
proportionate share of contributions 533,503 -
Net change in total pension liability $ 11,824,671 $ 13,446,697
Reconciliation of Net Pension Liability
Beginning Net Pension Liability $ 89,535,510 $ 110,183,830
Pension expense 11,824,671 13,446,697
Employer contributions (22,752,611) (24,451,234)
Newnet deferred inflows/outflows 21,270,461 (11,564,393)
Change in allocation of prior deferred inflows/outflows 2,163,011 -
New net deferred flows due to change in proportion (12,354,075) 1,920,610
Recognition of prior deferred inflows/outflows 2,593,424 -
Recognition of prior deferred flows due to change in proportion (533,503) -
Netpensionliability-ending $ 91,746,888 $ 89,535,510
Plan fiduciary net position as apercentage of the total pension
liability 74.14% 73.86%
Covered-employee payroll $ 29,061,743 $ 26,906,131
Net pension liability as percentage of covered-employee payroll 315.70% 332.77%
Notes to Schedule:
Changes in assumptions.- In 2016,amounts reported as changes in assumptions resulted primarily from adjustments to
expected retirement ages of general employees.
*Fis cal year 2015 was the 1st year of implementation,therefore only two years are shown.
46
CENTRAL CONTRA COSTA SANITARY DISTRICT
Cost-Sharing Multiple Employer Defined Benefit Retirement Plan
As of fiscal year ending June 30, 2016
SCHEDULE OF CONTRIBUTIONS
Last 10 Years*
2016 2015
Actuarially deterniined contribution $ 22,752,611 $ 24,451,234
Contributions in relation to the actuarially determined
contributions 22,752,611 24,451,234
Contribution deficiency(excess) - -
Covered-employee payroll $ 29,061,743 $ 26,906,131
Contributions as a percentage of covered-employee payroll 78.29% 90.88%
Notes to Schedule
Measurement Date: 12//31/2015
Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry age
Amortization method Level percentage of payroll,closed
Remaining amortization period 8 years **
Asset valuation method 5-year semi-annually
Inflation 2.75%
Salary increases 4%-13.25%
Investment rate of return 7,0%,net of pension plan
investment expense,including
inflation
Retirement age 50 years Classic,52 years PEPRA
Mortality RP-2014 Healthy Annuitant Mortality Table
with setbacks and forwards
* Fiscal year 2015 was the 1st year of implementation,therefore only two years are shown.
**Remaining balance of December 31,2007 UAAL is amortized over a fixed(decreasing or closed)period
with 8 years remaining as of December 31,2014. Any changes in UAAL after December 31,2007 will be
separately amortized over a fixed 18-year period effective with that valuation. Any changes in UAAL due
to plan amendments will be amortized over a 10-year fixed period effective with that valuation.
47
CENTRAL CONTRA COSTA SANITARY DISTRICT
Post Retirement Health Care Defined Benefit Plan
Schedule of Funding Progress
As of fiscal year ended June 30,2016
Last Three Valuations
Unfunded
Unfunded (Overfunded)
Cost Method (Overfunded) Actuarial
Actuarial Actuarial Actuarial Covered Payroll Liability as
Actuarial Value of Accrued Accrued Funded (Active Plan Percentage of
Valuation Assets Liability Liability Ratio Members) Covered Payroll
Date (A) (B) (13—A)UAAL (AB) (C) [(A—B)/C]
June 30,2010 $9,404,000 $90,337,000 $80,933,000 10.41% $25,080,233 323%
July 1,2012 22,481,000 100,498,000 78,017,000 22.37% 24,305,548 321%
July 1,2014 33,695,000 103,904,000 70,209,000 32.43% 27,930,233 251%
48
SUPPLEMENTARY INFORMATION
CENTRAL CONTRA COSTA SANITARY DISTRICT
COMBINING SCHEDULE OF NET POSITION
ENTERPRISE SUB-FUNDS
JUNE 30,2016
Running Sewer Self Debt
Expense Construction Insurance Service Elimination Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $76,496 $26,038,953 $6,336,269 $32,451,718
Short term investments 38,000,000 1,000,000 39,000,000
Accounts receivable 15,156,849 3,861,700 19,018,549
Interest receivable 74,038 8,488 $99,181 181,707
Parts and supplies 2,146,172 2,146,172
Prepaid expenses 2,786,407 2,786,407
Total current assets 58,165,924 30,974,691 6,344,757 99,181 - 95,584,553
NON-CURRENT ASSETS:
Restricted cash and equivalents 100,000 100,000
Restricted investments 4,856,450 4,856,450
Assessment Districts receivable 1,515,818 1,515,818
Net OPEB asset 1,108,244 1,108,244
CAPITAL ASSETS
Nondepreciable 46,737,959 46,737,959
Depreciable,net of accumulated depreciation 569,267,078 569,267,078
Total capital assets,net 616,005,037 - - 616,005,037
Total non-current assets 617,213,281 1,515,818 - 4,856,450 623,585,549
TOTAL ASSETS 675,379,205 32,490,509 6,344,757 4,955,631 719,170,102
DEFERRED OUTFLOWS OF RESOURCES
Pension related 34,464,472 - - - 34,464,472
LIABILITIES
CURRENT LIABILITIES:
Accounts payable and accrued expenses 2,821,413 3,346,993 5,819 6,174,225
Interest payable 592,380 592,380
Refunding Water Revenue Bonds-current portion 2,300,000 2,300,000
Water Reclamation Loan Contract-current portion 177,756 177,756
Accrued compensated absences-current portion 448,000 448,000
Liability for uninsured claims 1,000,000 1,000,000
Refundable deposits 142,319 151,699 294,018
Total current liabilities 3,411,732 3,498,692 1,005,819 3,070,136 10,986,379
NON-CURRENT LIABILITIES:
Refunding Water Revenue Bonds,noncurrent portion 31,500,000 31,500,000
Water Reclamation Loan Contract,noncurrent portion 182,378 182,378
Accrued compensated absences,noncurrent portion 4,029,542 4,029,542
Net pension liability 91,746,888 91,746,888
Total noncurrent liabilities 95,776,430 - - 31,682,378 127,458,808
TOTAL LIABILITIES 99,188,162 3,498,692 1,005,819 34,752,514 138,445,187
DEFERRED INFLOWS OF RESOURCES
Pension related 21,618,960 - 21,618,960
NET POSITION
Net investment in capital assets 616,005,037 (34,160,134) 581,844,903
Restricted for debt service 4,363,251 4,363,251
Unrestricted (26,968,482) 28,991,817 5,338,938 7,362273
TOTAL NET POSITION $589,036,555 $28,991,817 $5,338,938 ($29,796,883) $593,570,427
50
CENTRAL CONTRA COSTA SANITARY DISTRICT
COMBINING SCHEDULE OF REVENUES,EXPENSES,AND CHANGES IN NET POSITION
ENTERPRISE SUB-FUNDS
FOR THE YEAR ENDING JUNE 30,2016
Running Sewer Self Debt
Expense Construction Insurance Service Elimination Total
OPERATING REVENUES
Sewer service charges(SSC) $72,233,903 $72,233,903
Service charges-City of Concord 13,913,960 13,913,960
Other services charges 963,014 963,014
Miscellaneous charges 623,659 623,659
Total operating revenues 87,734,536 87,734,536
OPERATING EXPENSES
Sewage collection and pumping stations 16,977,612 16,977,612
Sewage treatment 25,959,525 25,959,525
Engineering 16,301,976 16,301,976
Recycled water 559,272 559,272
Administrative and general 24,815,005 $1,600,617 ($1,528,131) 24,887,491
Pension expense (9,778,389) (9,778,389)
Depreciation 22,885,030 22,885,030
Total operating expenses 97,720,031 1,600,617 (1,528,131) 97,792,517
OPERATING INCOME(LOSS) (9,985,495) (1,600,617) 1,528,131 (10,057,981)
NONOPERATING REVENUES(EXPENSES)
Taxes $11,067,302 $3,767,865 14,835,167
Permit and inspection fees 2,267,520 279,203 2,546,723
Interest earnings 321,519 169,350 28,413 43,026 562,308
Interest expense (1,427,641) (1,427,641)
Other income(expense),net 945,947 249,148 1,528,131 (1,528,131) 1,195,095
Total nonoperating revenues 3,534,986 11,765,003 1,556,544 2,383,250 (1,528,131) 17,711,652
NET INCOME(LOSS)BEFORE CAPITAL (6,450,509) 11,765,003 (44,073) 2,383,250 7,653,671
CONTRIBUTIONS AND TRANSFERS
CAPITAL CONTRIBUTIONS AND TRANSFERS
City of Concord contributions to capital costs 3,671,892 3,671,892
Customer contributions to capital cost(SSC) 8,319,860 8,319,860
Contributed sewer lines 1,774,168 1,774,168
Capital contributions-connection fees 8,543,758 8,543,758
Transfers In(Out) 23,247,614 (23,297,147) (25,711) 75,244
Total capital contributions and transfers 25,021,782 (2,761,637) (25,711) 75,244 22,309,678
CHANGE IN NET POSITION 18,571,273 9,003,366 (69:784) 2,458,494 29,963,349
NET POSITION,BEGINNING OF YEAR 570,465,282 19,988,451 5,408,722 (32,255,377) 563,607,078
NET POSITION,END OF YEAR $589,036,555 $28,991,817 $5,338,938 ($29,796,883) $593,570,427
51
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CENTRAL CONTRA COSTA SANITARY DISTRICT
RUNNING EXPENSE
SCHEDULE OF SUPPLEMENTAL NET POSITION ANALYSIS
FOR THE FISCAL YEAR ENDED JUNE 30,2016
Prior Year Balance $17,079,944
2015-2016 Revenue $91,269,522
2015 -2016 Expense (97,720,031)
Add Back Depreciation Expense 22,885,030 16,434,521
Net Position Attributed to General Operations 33,514,465
Net Position Attributed to All Other 555,522,090
Running Expense Net Position $589,036,555
53
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ATTACHMENT 2
CENTRAL CONTRA COSTA SANITARY DISTRICT
MEMORANDUM ON INTERNAL CONTROL
AND
REQUIRED COMMCTNICATIONS
FOR THE YEAR ENDED
JUNE 3U,2016
REVIEW DRAFT 11/18/2016 9:56 AM
This Page Left Intentionally Blank
CENTRAL CONTRA COSTA SANITARY DISTRICT
MEMORANDUM ON INTERNAL CONTROL
AND
REQUIRED COMMUNICATIONS
For the Year Ended June 30, 2016
Table of Contents
Memorandum on Internal Control ................................................................................................... 1
Schedule of Other Matters ....................................................................................................... 3
Required Communications ................................................................................................................ 5
Significant Audit Findings .......................................................................................................... 5
Accounting Policies ................................................................................................................. 5
Unusual Transactions, Controversial or Emerging Areas ..................................................... 6
Estimates .................................................................................................................................. 6
Disclosures ............................................................................................................................... 7
Difficulties Encountered in Performing the Audit ................................................................ 7
Corrected and Uncorrected Misstatements ............................................................................ 7
Disagreements with Management .......................................................................................... 7
Management Representations ................................................................................................. 7
Management Consultations with Other Independent Accountants ...................................... 7
Other Audit Findings or Issues ............................................................................................... 7
Other Information Accompanying the Financial Statements .............................................. 8
This Page Left Intentionally Blank
MEMORANDUM ON INTERNAL CONTROL
To the Board of Directors
Central Contra Costa Sanitary District
Martinez, California
We have audited the financial statements of the Central Contra Costa Sanitary District (District) for the year
ended June 30 , 2016 , and have issued our report thereon dated November 28 , 2016. In planning and performing
our audit of the financial statements of the District as of and for the year ended June 30, 2016 , in accordance
with auditing standards generally accepted in the United States of America, we considered the District's internal
control over financial reporting (internal control) as a basis for designing our auditing procedures that are
appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not
for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly , we
do not express an opinion on the effectiveness of the District's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees , in the normal course of performing their assigned functions , to prevent, or detect and correct
misstatements on a timely basis . A material weakness is a deficiency , or a combination of deficiencies, in
internal control, such that there is a reasonable possibility that a material misstatement of the District's financial
statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a
deficiency, or a combination of deficiencies , in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance .
Our consideration of internal control was for the limited purpose described in the first paragraph and was not
designed to identify all deficiencies in internal control that might be significant deficiencies or material
weaknesses and, therefore, there can be no assurance that all such deficiencies have been identified. In addition,
because of inherent limitations in internal control, including the possibility of management override of controls,
misstatements due to error or fraud may occur and not be detected by such controls. Given these limitations,
during our audit we did not identify any deficiencies in internal control that we consider to be a material
weakness. However, material weaknesses may exist that have not been identified.
Included in the Schedule of Other Matters are recommendations not meeting the above definitions that we
believe to be of potential benefit to the District.
This communication is intended solely for the information and use of management, Board of Directors, others
within the organization , and agencies and pass-through entities and is not intended to be and should not be used
by anyone other than these specified parties.
Pleasant Hill, California
November 28 , 2016
Accountancy Corporation
3478 Buskirk Avenue , Suite 215
Plea sant Hill , CA 94523
T 925.930 .0902
F 925 .930 .0135
E maze@mazeassoc iates.com
w mazeassociates.com
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CENTRAL CONTRA COSTA SANITARY DISTRICT
SCHEDULE OF OTHER MATTERS
FOR THE YEAR ENDED JUNE 30, 2016
2016-01: UPCOMING GASB
There are a number of new accounting and financial reporting pronouncements that have been issued by the
Governmental Accounting Standards Board, the authoritative standard setting body in the United States. We
have included the one that will have an impact on the District's financial statements, effective in fiscal year
ending June 30, 2018, to keep you informed about these developments on a proactive basis.
The following pronouncement is effective in fiscal year 2017 /18:
GASB 75 -Accounting and Financial Reporting (or Postemplovment Benefits Other Than Pensions
The primary objective of this Statement is to improve accounting and financial reporting by state and
local governments for postemployment benefits other than pensions (other postemployment benefits or
OPEB). It also improves information provided by state and local governmental employers about
financial support for OPEB that is provided by other entities. This Statement results from a
comprehensive review of the effectiveness of existing standards of accounting and financial reporting
for all postemployment benefits (pensions and OPEB) with regard to providing decision-useful
information, supporting assessments of accountability and inter-period equity, and creating additional
transparency.
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REQUIRED COMMUNICATIONS
To the Board of Directors
Central Contra Costa Sanitary District
Martinez, California
MAZE
& ASSOCIATES
We have audited the basic financial statements of the Central Contra Costa Sanitary District (District) for
the year ended June 30, 2016. Professional standards require that we communicate to you the following
information related to our audit under generally accepted auditing standards.
Significant Audit Findings
Accounting Policies
Management is responsible for the selection and use of appropriate accounting policies. The significant
accounting policies used by the District are included in Note 1 to the financial statements . No new
accounting policies were adopted and the application of existing policies was not changed during the year,
except as follows:
GASB Statement No. 72 -Fair Value Measurement and Application
This Statement addresses accounting and financial reporting issues related to fair value
measurements. The definition of fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the
measurement date. This Statement provides guidance for determining a fair value measurement
for financial reporting purposes. This Statement also provides guidance for applying fair value to
certain investments and disclosures related to all fair value measurements.
The requirements of this Statement enhance comparability of financial statements among
governments by requiring measurement of certain assets and liabilities at fair value using a
consistent and more detailed definition of fair value and accepted valuation techniques. This
Statement also enhances fair value application guidance and related disclosures in order to
provide information to financial statement users about the impact of fair value measurements on a
government 's financial position.
The pronouncement became effective, and as disclosed in Note l .M. to the financial statements.
Accountancy Corporation
3478 Buskirk Avenue , Suit e 2 15
Pleasant Hill , CA 94523
5
T 925.930.0902
F 925 .930.0135
E maze@mazeassociates.com
w mazeassociates.com
GASB Statement No. 76 -The Hierarchy of Generally Accepted Accounting Principles for
State and Local Governments
The objective of this Statement is to identify, in the context of the current governmental financial
reporting environment, the hierarchy of generally accepted accounting principles (GAAP). The
"GAAP hierarchy" consists of the sources of accounting principles used to prepare financial
statements of state and local governmental entities in conformity with GAAP and the framework
for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of
authoritative GAAP and addresses the use of authoritative and non-authoritative literature in the
event that the accounting treatment for a transaction or other event is not specified within a source
of authoritative GAAP. This Statement supersedes Statement No. 55, The Hierarchy of Generally
Accepted Accounting Principles for State and Local Governments.
GASB Statement No. 79 -Certain External Investment Pools and Pool Participant
The objective of this Statement is to address for certain external investment pool and their
participants the accounting and financial reporting implications that result from changes in the
regulatory provisions referenced by previous accounting and financial reporting standards. This
statement is effective for the periods beginning after December 15, 2015, or the 2015-2016 fiscal
year.
Unusual Transactions, Controversial or Emerging Areas
We noted no transactions entered into by District during the year for which there is a lack of authoritative
guidance or consensus. All significant transactions have been recognized in the financial statements in the
proper period.
Estimates
Accounting estimates are an integral part of the financial statements prepared by management and are
based on management's current judgments. Those judgments are normally based on knowledge and
experience about past and current events and assumptions about future events. Certain accounting
estimates are particularly sensitive because of their significance to the financial statements and because of
the possibility that future events affecting them may differ significantly from those expected. The most
sensitive estimates affecting the District's financial statements are depreciation, claims liability and
actuarial estimates for net pension liability and other post-employment benefits.
The value of the assets, liability and assumptions used to determine annual required contributions for
other post-employment benefits is determined by an actuary study provided to the District as of June 30,
2016. The value of the District's net pension liability was obtained from an actuarial valuation provided
byCCCERA.
Management's estimate of depreciation is based on the estimated useful lives of the capital assets, and its
estimate of claims is based on the District Attorney's estimates of current and potential litigation, as well
as actuary studies provided for the District as of June 30, 2016. We evaluated the key factors and
assumptions used to develop the depreciation expense and claims liability and reviewed the current
actuary study and determined that they are reasonable in relation to the basic financial statements taken as
a whole.
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Disclosures
The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Peiforming the Audit
We encountered no significant difficulties in dealing with management in performing and completing our
audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the
audit, other than those that are clearly trivial, and communicate them to the appropriate level of
management. Management has corrected all/certain such misstatements. In addition, none of the
misstatements detected as a result of audit procedures and corrected by management were material, either
individually or in the aggregate, to each opinion unit's financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or
auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial
statements or the auditor's report. We are pleased to report that no such disagreements arose during the
course of our audit.
Management Representations
We have requested certain representations from management that are included m a management
representation letter dated November 28, 2016.
Managements Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting
matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves
application of an accounting principle to the governmental unit's financial statements or a determination
of the type of auditor's opinion that may be expressed on those statements, our professional standards
require the consulting accountant to check with us to determine that the consultant has all the relevant
facts. To our knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing
standards, with management each year prior to retention as the governmental unit's auditors. However,
these discussions occurred in the normal course of our professional relationship and our responses were
not a condition to our retention.
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Other Information Accompanying the Financial Statements
With respect to the supplementary information accompanying the financial statements, we made certain
inquiries of management and evaluated the form, content, and methods of preparing the information to
determine that the information complies with accounting principles generally accepted in the United
States of America, the method of preparing it has not changed from the prior period, and the information
is appropriate and complete in relation to our audit of the financial statements. We compared and
reconciled the supplementary information to the underlying accounting records used to prepare the
financial statements or to the financial statements themselves.
With respect to the required supplementary information accompanying the financial statements, we
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 did not express an opinion nor 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.
The Introductory and Statistical Sections included as part of the Comprehensive Annual Financial Report
have not been subjected to the auditing procedures applied in the audit of the basic financial statements and,
accordingly, we did not express an opinion nor provide any assurance on them.
******
This information is intended solely for the use of the Board of Directors and management and is not
intended to be, and should not be, used by anyone other than these specified parties.
Pleasant Hill, California
November 28, 2016
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