HomeMy WebLinkAbout03.a. Review draft Position Paper to accept (1) the comparative audited Financial Statements for fiscal years ended June 30, 2016 and 2017 performed by Maze & Associates, and (2) the auditor's memorandum on internal control and required communicationsPage 1 of 80
Item 3.a.
' CENTRAL SAN BOARD OF DIRECTORS
POSITION PAPER
� DRAFT
MEETING DATE: NOVEMBER 21, 2017
SUBJECT: REVIEW DRAFT POSITION PAPER TO ACCEPT (1) THE COMPARATIVE
AUDITED FINANCIAL STATEMENTS FOR FISCAL YEARS ENDED JUNE
30, 2016 AND 2017 PERFORMED BY MAZE & ASSOCIATES, AND (2) THE
AUDITOR'S MEMORANDUM ON INTERNAL CONTROLAND REQUIRED
COMMUNICATIONS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 -
INVITED GUEST.- VIKKI RODRIGUEZ, CERTIFIED PUBLIC ACCOUNTANT
OF MAZE & ASSOCIATES
SUBMITTED BY: INITIATING DEPARTMENT:
THEAVASSALLO, FINANCE MANAGER ADMINISTRATION -FINANCE
REVIEWED BY: PHIL LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION
ANN SASAKI, DEPUTY GENERAL MANAGER
ISSUE
The comparative audited financial statements of Central San for the Fiscal Years (FY) ended June 30,
2016 and 2017, and the auditor's memorandum on internal control and required communications for the
year ended June 30, 2017 are being submitted to the Board.
BACKGROUND
The firm of Maze & Associates has completed its fifth examination of Central San's financial statements
for the FYs ended June 30, 2016, and 2017, 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 and the standards for financial audits contained in Government Auditing
Standards (GAS), issued by the Controller 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, 2016 and 2017 expresses an
unmodified (clean) opinion.
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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, 2018. 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 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 GAS. Based on their observations during the course of the
examination, the auditors advise Central San management of any significant deficiencies or material
misstatements and any recommendations to improve the system of internal accounting controls. See
attached "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. Finance is
currently working with Purchasing to issue a new Request for Proposal for audit services by the end of
2017.
ALTERNATIVES/CONSIDERATIONS
None.
FINANCIAL IMPACTS
Below is information regarding implementation of significant changes included in the basic audited
Financial Statements for FYs ended June 30, 2016 and 2017. The new Governmental Accounting
Standards Board (GASB) Statements that affect Central San this audit cycle are as follows:
GASB Statement No. 74 - Financial Reporting for Post -Employment Benefit (OPEB) Plans Other
Than Pension Plans
Implementation requires Central San to report its OPEB trust held with the Public Agency Retirement
System (PARS) as a fiduciary fund - see the Statement of Fiduciary Net Position and Statement of
Changes in Fiduciary Net Position. GASB 74 also required changes to Central San's footnote disclosures
including Note 2 - Cash and Investments, and Note 10 - Post Employment Health Care Benefits.
The adjustment made was for $39,917,736 in FY 2015-16 to set up the beginning net position in this fund
and is reflected in the Statements of Changes in Fiduciary Net Position - Fiduciary Funds.
GASB Statement No. 82 - Pension Issues - an amendment of GASB Statements No. 67, No. 68,
and No. 73.
Specifically, this Statement addresses issues regarding (1) the presentation of payroll -related measures in
required supplementary information, (2) the selection of assumptions and the treatment of deviations from
the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the
classification of payments made by employers to satisfy employee contribution requirements.
The collective net pension liability included in the Statement of Net Position for FY June 30, 2017, the
third year of implementation, is $87,847,116. This is a decrease of $3.9 million from FY 2015-16.
Additional information is provided in Footnote 9,and the Required Supplementary Information - Schedule
of Changes in the Net Pension Liability and Related Ratios, of the basic financial statements.
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COMMITTEE RECOMMENDATION
The audited financial statements and the auditor's memorandum on internal control and required
communications were reviewed by Vikki Rodriguez from Maze & Associates at the Finance Committee
meeting on November 21, 2017. The Committee recommended Board acceptance.
RECOMMENDED BOARD ACTION
Accept the basic audited financial statements for the FYs ended J une 30, 2016 and 2017, and the
auditor's memorandum on internal control and required communications for the FY ended June 30, 2017.
Strategic Plan Tie -In
GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility
Strategy 1 - Conduct Long -Range Financial Planning, Strategy 2 - Manage Costs
ATTACHMENTS:
1. Draft Audited Financial Statements for June 30, 2016 and 2017
2. Memorandum on Internal Control and Required Communication
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CENTRAL CONTRA COSTA SANITARY DISTRICT
BASIC FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
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2
This Page Left Intentionally Blank
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3
CENTRAL CONTRA COSTA SANITARY DISTRICT
BASIC FINANCLAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
Table of Contents
INTRODUCTORY SECTION
Tableof Contents........................................................................................................................... i
FINANCIAL SECTION
INDEPENDENT AUDITOR'S REPORT............................................................................................1
MANAGEMENT'S DISCUSSION AND ANALYSIS...................................................................... 3
BASIC FINANCIAL STATEMENTS
Statementsof Net Position..............................................................................................................10
Statements of Revenues, Expenses and Changes in Net Position.................................................13
Statements of Cash Flows................................................................................................................14
Statement of Fiduciary Net Position — Fiduciary Fund...................................................................15
Statement of Changes in Fiduciary Net Position — Fiduciary Fund................................................16
NOTES TO BASIC FINANCIAL STATEMENTS.........................................................................17
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Changes in the Net Pension Liability and Related Ratios ...................................... 46
Scheduleof Contributions..........................................................................................................47
Post -Retirement Health Care Defined Benefit Plan —
Schedule of Changes in the Net OPEB Liability and Related Ratios ............................... 48
Schedule of Contributions.................................................................................................47
Schedule of Funding Progress...........................................................................................48
November 16, 2017 Review Draft 1:56:49 PM
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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
Expensesby Department........................................................................................................ 52
Running Expense — Schedule of
Supplemental Net Position Analysis...................................................................................... 53
November 16, 2017 Review Draft
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AF
..MAZE
i &ASSOCIATES
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Central Contra Costa Sanitary District
Martinez, California
We have audited the accompanying financial statements of the business -type activities and the fiduciary
fund, of the Central Contra Costa Sanitary District (District) as of and for the years ended June 30, 2017 and
2016, and the related notes to the financial statements, which collectively comprise the District's basic
financial statements as listed in the Table of Contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of the financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audits. We conducted
our audits in accordance with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the District's preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District's internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by management,
as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective net position of the business -type activities and the fiduciary fund of the Central Contra Costa
Sanitary District as of June 30, 2017 and 2016, and the respective changes in net position and cash flows,
where applicable, for the years then ended in accordance with accounting principles generally accepted in
the United States of America.
Accountancy Corporation
3478 Buskirk Avenue, Suite 215
Pleasant Hill, CA 94523
November 16, 2017
Review Draft
T 925.930.0902
F 925.930.0135
E maze@mazeassociates.com
w mazeassociates.com
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6
Emphasis of a Matter
Management adopted the provisions of Governmental Accounting Standards Board Statement No. 74 —
Financial Reporting for Post -employment Benefit Plans Other Than Pension Plans, which became effective
during the year ended June 30, 2017 and had material effects on the financial statements as discussed in
Note 10Y. in the notes to the financial statements.
The emphasis of this matter does not constitute a modification to our opinions.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that Management's
Discussion and Analysis and other Required Supplementary Information, as listed in the table of contents,
be presented to supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board, who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the United States of
America, which consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the information because the limited procedures do not
provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively
comprise the District's financial statements as a whole. The Supplementary Information listed in the Table
of Contents is presented for purposes of additional analysis and is not a required part of the financial
statements.
The Supplementary Information is the responsibility of management and was derived from and relates
directly to the underlying accounting and other records used to prepare the financial statements. The
information has been subjected to the auditing procedures applied in the audit of the financial statements and
certain additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the financial statements or to the financial
statements themselves, and other additional procedures in accordance with auditing standards generally
accepted in the United States of America. In our opinion, the Supplementary Information is fairly stated in
all material respects in relation to the financial statements as a whole.
Pleasant Hill, California
November 16, 2017
November 16, 2017 Review Draft
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J� Central Contra Costa Sanitary District
MANAGEMENT'S DISCUSSION AND ANALYSIS
This section of the Central Contra Costa Sanitary District's annual financial report presents an analysis
of the District's financial performance during the fiscal year ended June 30, 2017. This information is
presented in conjunction with the audited financial statements, which follow this report.
FINANCIAL HIGHLIGHTS
The District's 2016-17 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 $33.1 million or 5.57% in 2016-17. This is
mainly due to increases in operating and non-operating revenues and capital contributions.
• Total revenues in 2016-17 increased by $2.4 million or 2.25%. The total Sewer Service Charge
(SSC) rate increased for single family homes by 6.79% to $503 and 5.18% for multi -family
homes to $487. Increased property values in the service area lead to an increase in property
taxes.
• Total 2016-17 expenses increased by $3.56 million or 3.59%. This is mainly due to an increase
in the pension expense adjustment.
• Capital Contributions increased in 2016-17 by $4.3 million or 19.10%. The increase is mainly
due to an increase in contributions from the City of Concord and a higher allocation of SSC to
customer contributions to capital costs.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report includes the Management's Discussion and Analysis report, the independent auditor's
report and the basic financial statements of the District. The financial statements also include notes that
explain information in the financial statements in more detail. This report also contains other
supplementary information in addition to the basic financial statements.
REQUIRED FINANCIAL STATEMENTS
The District's financial statements report information utilizing methods similar to those used by private
sector companies. These statements offer short and long-term financial information about the District's
activities.
Statement of Net Position — reports the District's current financial resources (short-term
spendable resources) with capital assets, deferred outflows of 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 16-17 FY 16-17
vs. vs.
2016-17 2015-16 2014-15 FY 15-16 FY 14-15
Current Assets
$ 105,876,117
$ 95,584,553
$ 82,554,355
10.77%
28.25%
Capital Assets
632,452,631
616,005,037
609,718,479
2.67%
3.73%
Other Non-current Assets
10,057,548
7,580,512
7,832,901
32.68%
28.40%
Total Assets
748,386,296
719,170,102
700,105,735
4.06%
6.90%
Deferred Outflows of
Resources - Pension
Related
29,078,203
34,464,472
12,420,138
-15.63%
134.12%
Current Liabilities
13,720,331
10,986,379
10,029,487
24.88%
36.80%
Non -Current Liabilities
121,055,247
127,458,808
127,324,915
-5.02%
-4.92%
Total Liabilities
134,775,578
138,445,187
137,354,402
-2.65%
-1.88%
Deferred Inflows of
Resources - Pension
related
16,051,905
21,618,960
11,564,393
-25.75%
38.80%
Net Investment in
Capital Assets
600,770,254
581,844,903
573,175,094
3.25%
4.81%
Restricted - Debt Service
4,449,437
4,363,251
4,288,008
1.98%
3.76%
Unrestricted
21,417,325
7,362,273
13,856,024
190.91%
254.57%
Total Net Position
$ 626,637,016
$ 593,570,427
$ 563,607,078
5.57%
11.18%
The total net position of the District increased from $563.6 million in 2014-15 to $593.6 million in
2015-16 and increased to $626.6 million in 2016-17. The District's total assets have increased by $29.2
million or 4.06% compared to 2015-16, and $48.3 million or 6.90% compared to 2014-15. The total
liabilities decreased $3.7 million or -2.65% compared to 2015-16, and decreased $2.6 million or -1.88%
compared to 2014-15. The increase in net position over the three-year period totals $63.0 million or
11.18% 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 (95.87%) reflects its investment in capital assets
(e.g. land, buildings, machinery, equipment, intangible assets, and sewer line infrastructure), less any
related debt used to acquire those assets that are still outstanding. The District uses these capital assets
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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 $21.4 million in unrestricted net position increased by $14.1 million from
2015-16 and increased by $35.3 million from 2014-15 due to increased operating and non-operating
revenues and capital contributions.
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 16-17 FY 16-17
vs.vs.
2016-17 2015-16 2014-15 FY 15-16 FY 14-15
Sewer Service Charges SSC $ 86,989,488
$ 86,147,863
$ 82,916,457
0.98%
4.91%
Other Service Charges and
Miscellaneous 1,635,953
1,586,673
1,599,997
3.11%
2.25%
Total Operating Revenue 88,625,441
87,734,536
84,516,434
1.02%
4.86%
Property Tax 16,318,874
14,835,167
14,083,331
10.00%
15.87%
Permit & Inspection Fees 2,600,888
2,546,723
1,843,922
2.13%
41.05%
Interest and All Other 1,728,082
1,757,403
2,147,005
-1.67%
-19.51%
Total Non -Operating
Revenues 20,647,844
19,139,293
18,074,278
7.88%
14.24%
Total Revenues 109,273,285
106,873,829
102,590,712
2.25%
6.51%
Total Labor and Benefits 62,305,898
63,988,158
66,104,630
-2.63%
-5.75%
Chemicals & Utilities 6,106,904
5,053,263
5,532,237
20.85%
10.39%
Repairs and Maintenance 4,662,918
4,891,062
3,873,557
-4.66%
20.38%
Professional, Legal and
Outside Services 3,891,224
4,196,302
3,322,881
-7.27%
17.10%
Materials & Supplies 2,008,100
2,251,356
1,934,253
-10.80%
3.82%
Hauling and Disposal 999,168
889,471
884,703
12.33%
12.94%
Self -Insurance Expense 697,792
1,600,617
1,333,518
-56.40%
-47.67%
Pension Expense 4,080,558
9,778,389
3,012,757
-58.27%
35.44%
All Other 1,981,186
1,815,647
1,636,826
9.12%
21.04%
Depreciation Expense 22,892,153
22,885,030
22,740,942
0.03%
0.66%
Total Operating Expenses 101,464,785
97,792,517
104,350,790
3.76%
-2.77%
Non -Operating Expense -
Interest Expense 1,313,398
1,427,641
1,523,127
-8.00%
-13.77%
Total Expenses 102,778,183
99,220,158
105,873,917
3.59%
-2.92%
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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 16-17 FY 16-17
vs. vs.
2016-17 2015-16 2014-15 FY 15-16 FY 14-15
Income Before Capital
Contributions
6,495,102
7,653,671
3,283,205
-15.14%
297.83%
Customer Contributions SSC
16,628,105
11,991,752
6,769,623
38.66%
145.63%
Contributed Sewer Lines
2,899,042
1,774,168
794,218
63.40%
265.02%
Capital Contributions -
Connection Fees
7,044,340
8,543,758
6,673,298
-17.55%
5.56%
Total Capital Contributions
26,571,487
22,309,678
14,237,139
19.10%
86.64%
Change in Net Position
33,066,589
29,963,349
10,953,934
10.36%
201.87%
Beginning Net Position
593,570,427
563,607,078
644,345,666
5.32%
-7.88%
Restatement -
Implementation of GASB 68
and GASB 71
-
-
91,692,522
-
100%
Ending Net Position
$ 626,637,016
$ 593,570,427
$ 563,607,078
5.57%
11.18%
Revenue
Total operating revenues increased from $84.5 million in 2014-15 to $87.7 million in 2015-16 and to
$88.6 million in 2016-17. Operating revenues increased by $0.89 million or 1.02% compared to 2015-
16, and increased by $4.1 million or 4.86% comparing 2016-17 to 2014-15.
Total non-operating revenue increased from $18.1 million in 2014-15 to $19.1 million in 2015-16 and to
$20.6 million in 2016-17. An increase compared to 2015-16 by $1.5 million or 7.88%, and increased by
$2.6 million or 14.24% comparing 2016-17 to 2014-15.
Total revenues increased from $102.6 million in 2014-15 to $106.9 million in 2015-16 to $109.3 million
in 2016-17. The change in total revenue resulted in an increase of $2.4 million or 2.25% comparing
2016-17 to 2015-16, and increased by $6.7 million or 6.51 % comparing 2016-17 to 2014-15. There was
a 6.79% rate increase for single family homes and a 5.18% rate increase for multi -family homes in
2016-17, a 7.29% rate increase for single family homes and a 5.47% rate increase for multi -family
homes in 2015-16, and an 8.40% SSC general rate increase in 2014-15. Property tax revenue increased
by $1.5 million or 10.00% from 2016-17 to 2015-16, and $2.2 million or 15.87% comparing 2016-17 to
2014-2015 due to the continued increase in property values.
Expenses
Total expenses decreased from $105.9 million in 2014-15 to $99.2 million in 2015-16 and increased to
$102.8 million in 2016-17. In 2016-17, total expenses increased by $3.6 million or 3.59% compared to
2015-16. Comparing 2016-17 to 2014-15, total expenses were $3.1 million or -2.92% lower. Increase
from 2015-16 is mainly due to reduction in pension expense adjustments. 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 -$3.3 million in 2014-15, to $7.7 million in 2015-
16, and $6.5 million in 2016-17.
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Total capital contributions in 2016-17 were $26.6 million compared to $22.3 million in 2015-16 and
$14.2 million in 2014-15. This was mainly due to higher customer contributions SSC in 2016-17 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
$3.1 million or 10.36% when comparing 2016-17 to 2015-16 and increased $22.1 million or 201.87%
when comparing 2016-17 to 2014-15.
CAPITAL ASSETS
Capital assets for fiscal years 2016-17, 2015-16 and 2014-15 totaled $632.5 million, $616.0 million, and
$609.7 million, respectively. Capital assets include the District's entire major infrastructure including
wastewater treatment facilities, sewers, land, buildings, pumping stations, vehicles, intangible assets and
furniture and equipment exceeding our capitalization policy limit of $5,000, net of depreciation. As of
June 30, 2017, the District's investment in capital assets totaled $632.5 million, an increase of $16.4
million or 2.67% over the capital asset balance of $616.0 million at June 30, 2016. Capital assets
increased by $22.7 million or 3.73% comparing 2016-17 to 2014-15. 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 16-17 FY 16-17
vs. vs.
2016-17 2015-16 2014-15 FY 15-16 FY 14-15
Land
$ 17,320,570
$ 17,320,570
$ 17,320,570
0.00%
0.00%
Sewage Collection System
351,503,806
341,412,320
331,167,382
2.96%
6.14%
Contributed Sewer Lines
157,791,719
154,863,632
153,091,464
1.89%
3.07%
Outfall Sewers
11,371,574
11,371,574
11,339,298
0.00%
0.28%
Sewage Treatment Plant
333,962,356
323,360,945
320,717,418
3.28%
4.13%
Recycled Water Infrastructure
20,292,366
19,215,350
19,065,139
5.60%
6.44%
Pumping Stations
57,278,141
56,270,149
56,046,563
1.79% 1
2.20%
Buildings
44,238,508
42,412,648
42,412,648
4.30%
4.30%
Intangible Assets
4,941,707
4,936,407
4,875,507
0.11%
1.36%
Furniture & Equipment
14,012,837
12,627,569
10,886,007
10.97%
28.72%
Motor Vehicles
7,614,982
7,378,730
6,883,134
3.20%
10.63%
Construction In Progress
33,388,571
24,480,982
13,958,646
36.39%
139.20%
Subtotal
1,053,717,137
1,015,650,876
987,763,776
3.75%
6.68%
Less Accumulated
Depreciation
421,264,506
399,645,839
378,045,297
5.41%
11.43%
Total Capital Assets (net of
depreciation)
$ 632,452,631
$ 616,005,037
$ 609,718,479
2.67%
3.73%
The major reasons for the increase in capital assets, net of depreciation, of $16.4 million from 2015-16
to 2016-17 and $22.7 million from 2014-15 to 2016-17, are as follows:
• Sewer pipe ongoing renovations, upgrades, expansion, pumping station improvements, and
contributed sewer lines increased by $14.0 million comparing 2016-17 to 2015-16 and $26.3
million comparing 2016-17 to 2014-15.
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 16 of 219
Page 15 of 80
• Treatment plant infrastructure renovations, upgrades, equipment, and improvements increased by
$10.6 million comparing 2016-17 to 2015-16 and $13.2 million comparing 2016-17 to 2014-15.
All other asset categories, including construction in progress, increased by $11.6 million
comparing 2016-17 to 2015-16 and increased by $24.6 million comparing 2016-17 to 2014-15.
• Capital asset increases are offset by an increased subtraction of accumulated depreciation of
$21.6 million comparing 2016-17 to 2015-16 and $43.2 million comparing 2016-17 to 2014-15
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 2016-17, 2015-16 and 2014-15 totaled $31.7 million, $34.2
million, and $36.5 million, respectively. As of June 30, 2017, the District's outstanding debt totaled
$31.7 million, which is a decrease of $2.5 million or -7.25% over the debt balance of $34.2 million at
June 30, 2016. Debt decreased by $4.9 million or -13.30% comparing 2016-17 to 2014-15. 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 16-17 FY 16-17
vs. vs.
2016-17 2015-16 2014-15 FY 15-16 14-15
Revenue Bonds
$ 31,500,000 $
33,800,000
$ 36,010,000
-6.80%
-12.52%
Water Reclamation Loan
182,377
360,134
533,385
-49.36%
-65.81%
Total Debt Service
$ 31,682,377 $
34,160,134
$ 36,543,385
-7.25%
-13.30%
See Note 6 in the audited financial statements.
ECONOMIC AND OTHER FACTORS
The Federal and State of California economies continue to grow at a modest 2-3% and are operating at
near full employment. Unemployment rates are projected to be between 4-5% through 2019. Increased
property values and development in the service area should continue to bring increased tax revenue for
the next several years. The State is now faced with the challenge of providing affordable housing to the
larger markets. There is optimism for a federal tax reform and an infrastructure improvement spending
package which should help continue to stimulate growth in the national and local economy. 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.
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 17 of 219
Page 16 of 80
Items specifically 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.
• Potential changes to the healthcare providers in order to reduce operating costs.
• The necessary replacement and upgrading of existing infrastructure.
• Implementation of the Comprehensive Wastewater Master Plan.
• 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 in the near future.
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.
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 18 of 219
Page 17 of 80 l
14
CENTRAL CONTRA COSTA SANITARY DISTRICT
STATEMENTS OF NET POSITION
JUNE 30, 2017 AND 2016
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 2)
Short term investments (Note 2)
Accounts receivable, net (Note 3)
Interest receivable
Parts and supplies
Prepaid expenses
Total current assets
NON-CURRENT ASSETS
Restricted cash and cash equivalents (Notes 1.F. and 2)
Restricted investments (Note 2)
Assessment Districts receivable (Note 4)
Net OPEB asset (Note 10)
Capital assets:
Nondepreciable (Note 5)
Depreciable, net of accumulated depreciation (Note 5)
Total capital assets, net
Total non-current assets
TOTAL ASSETS
DEFERRED OUTFLOWS OF RESOURCES
Pension related (Note 9)
2017 2016
$41,346,327
$32,451,718
39,000,000
39,000,000
19,965,896
19,018,549
14,665
181,707
2,089,765
2,146,172
3,459,464
2,786,407
105,876,117
95,584,553
236,702
100,000
4,856,450
4,856,450
1,311,825
1,515,818
3,652,571
1,108,244
748,386,296
55,650,848
46,737,959
576,801,783
569,267,078
632,452,631
616,005,037
642,510,179
623,585,549
748,386,296
719,170,102
29,078,203 34,464,472
(Continued)
See accompanying notes to financial statements
10
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 19 of 219
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15
CENTRAL CONTRA COSTA SANITARY DISTRICT
STATEMENTS OF NET POSITION
JUNE 30, 2017 AND 2016
LIABILITIES 2017 2016
CURRENT LIABILITIES
Accounts payable and accrued expenses $8,908,133 $6,174,225
Interest payable 558,380 592,380
Refunding Water Revenue Bonds - current portion (Note 6) 2,405,000 2,300,000
Water Reclamation Loan Contract - current portion (Note 6) 182,377 177,756
Accrued compensated absences - current portion (Note 1.J.) 457,000 448,000
Provision for uninsured claims (Note 7) 807,079 1,000,000
Refundable deposits 402,362 294,018
Total current liabilities, 13,720,331 10,986,379
NON-CURRENT LIABILITIES
Refunding Water Revenue Bonds, noncurrent portion (Note 6) 29,095,000 31,500,000
Water Reclamation Loan Contract, noncurrent portion (Note 6) - 182,378
Accrued compensated absences, noncurrent portion (Note 11) 4,113,131 4,029,542
Collective net pension liability (Note 9) 87,847,116 91,746,888
Total non-current liabilities 121,055,247 127,458,808
TOTAL LIABILITIES 134,775,578 138,445,187
DEFERRED INFLOWS OF RESOURCES
Pension related (Note 9) 16,051,905 21,618,960
NET POSITION (Note 11)
Net investment in capital assets 600,770,254 581,844,903
Restricted for debt service 4,449,437 4,363,251
Unrestricted 21,417,325 7,362,273
TOTAL NET POSITION $626,637,016 $593,570,427
See accompanying notes to financial statements
11
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 20 of 219
CENTRAL CONTRA COSTA SANITARY DISTRICT
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
2017 2,016
OPERATING REVENUES
Page 19 of 80
16
Sewer service charges (SSC)
$73,138,235
$72,233,903
Service charges - City of Concord (Note 8)
13,851,253
13,913,960
Other services charges
1,029,500
963,014
Miscellaneous charges
606,453
623,659
Total operating revenues
88,625,441
87,734,536
OPERATING EXPENSES
Sewage collection and pumping stations
16,826,922
16,977,612
Sewage treatment
25,631,809
25,959,525
Engineering
15,342,640
16,301,976
Recycled water
970,640
559,272
Administrative and general
23,881,179
24,887,491
Pension expense adjustments (Note 9)
(4,080,558)
(9,778,389)
Depreciation (Note 5)
22,892,153
22,885,030
Total operating expenses
101,464,785
97,792,517
OPERATING (LOSSES)
(12,839,344)
(10,057,981)
NONOPERATING REVENUES (EXPENSES)
Taxes
16,318,874
14,835,167
Permit and inspection fees
2,600,888
2,546,723
Interest earnings
761,838
562,308
Interest expense
(1,313,398)
(1,427,641)
Other income (expense), net
966,244
1,195,095
Total nonoperating revenues (expenses), net
19,334,446
17,711,652
INCOME BEFORE CAPITAL CONTRIBUTIONS
6,495,102
7,653,671
CAPITAL CONTRIBUTIONS
City of Concord contributions to capital costs (Note 8)
4,476,961
3,671,892
Customer contributions to capital cost (SSC)
12,151,144
8,319,860
Contributed sewer lines
2,899,042
1,774,168
Capital contributions - connection fees
7,044,340
8,543,758
Total capital contributions
26,571,487
22,309,678
CHANGE IN NET POSITION
33,066,589
29,963,349
NET POSITION, BEGINNING OF YEAR
593,570,427
563,607,078
NET POSITION, END OF YEAR
$626,637,016
$593,570,427
See accompanying notes to financial statements
13
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 21 of 219
CENTRAL CONTRA COSTA SANITARY DISTRICT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers
Payments to suppliers
Payments to employees and related benefits
Net cash provided (used) by operating activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Receipt of taxes
Inspection/permit fees and other non-operating income
Cash flows from noncapital financing activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Capital contributions
Connection fees
Acquisition and construction of capital assets
Proceeds from disposal of capital assets
Interest paid on long-term debt
Principal payments on long-term debt
Cash flows (used for) capital and related financing activities
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption of investments
Acquisition of investments
Interest received
Cash flows from (used for) investing activities
NET INCREASE (DECREASE) IN CASH
Cash, beginning of year
Cash, end of year
Page 20 17o 80
2017 2016
$87,882,087 $86,011,329
(40,233,129) (42,386,633)
(42,646,197) (41,204,947)
5,002,761 2,419,749
16,318,874 14,835,167
3,567,132 3,741,818
19,886,006 18,576,985
19,527,147
13,765,920
7,044,340
8,543,758
(39,595,091)
(29,535,660)
255,344
364,072
(1,347,398)
(1,457,108)
(2,477,757)
(2,383,251)
(16,593,415) (10,702,269)
43, 807, 079 15,498, 572
(44,000,000) (39,000,000)
928,880 440,668
735,959 (23,060,760)
9,031,311 (12,766,295)
32,551,718 45,318,013
$41,583,029 $32,551,718
(Continued)
See accompanying notes to financial statements
14
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 22 of 219
Page 21 of 80
18
CENTRAL CONTRA COSTA SANITARY DISTRICT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
SCHEDULE OF NON CASH ACTIVITY
Change in fair value of investments
Capital asset donations
Total non cash activity
CASH AND CASH EQUIVALENTS, AS PRESENTED ON
STATEMENT OF NET POSITION:
Unrestricted cash and cash equivalents
Restricted cash and cash equivalents
Total cash and cash equivalents at end of year
$928,880 $440,668
2,899,052 1,774,168
$3,827,932 $2,214,836
$41,346,327 $32,451,718
236,702 100,000
$41,583,029 $32,551,718
See accompanying notes to financial statements
15
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 23 of 219
2017
2016
Reconciliation of operating (loss) to net cash provided by
operating activities:
Operating (losses)
($12,839,344)
($10,057,981)
Adjustments to reconcile operating losses to cash
flows from operating activities:
Depreciation
22,892,153
22,885,030
Changes in assets and liabilities:
Receivables, net
(743,354)
(1,723,207)
Parts and supplies
56,407
(66,737)
Prepaid expenses
(673,057)
(229,613)
Net OPEB asset
(2,544,327)
98,521
Accounts payable and accrued expenses
2,733,908
799,784
Accrued payroll and related expenses
92,589
445,271
Refundable deposits
108,344
47,070
Net pension liability
(4,080,558)
(9,778,389)
Net cash provided (used) by operating activities
$5,002,761
$2,419,749
SCHEDULE OF NON CASH ACTIVITY
Change in fair value of investments
Capital asset donations
Total non cash activity
CASH AND CASH EQUIVALENTS, AS PRESENTED ON
STATEMENT OF NET POSITION:
Unrestricted cash and cash equivalents
Restricted cash and cash equivalents
Total cash and cash equivalents at end of year
$928,880 $440,668
2,899,052 1,774,168
$3,827,932 $2,214,836
$41,346,327 $32,451,718
236,702 100,000
$41,583,029 $32,551,718
See accompanying notes to financial statements
15
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 23 of 219
Page 22 of 80
19
CENTRAL CONTRA COUNTY SANITARY DISTRICT
STATEMENTS OF FIDUCIARY NET POSITION
FIDUCIARY FUND
OTHER POST -EMPLOYMENT BENEFIT TRUST FUND
JUNE 30, 2017 AND 2016
ASSETS
Investments with Trustees:
Cash equivalents
Equity securities
Equity mutual funds
Total investments
Total Assets
NET POSITION
2017 2016
$1,137,442 $1,574,922
26,564,682 20,039,811
24,626,243 21,088,421
51,190,925 41,128,232
$52,328,367 $42,703,154
Net position held in trust for OPEB benefits $52,328,367 $42,703,154
See accompanying notes to basic financial statements
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 24 of 219
Contributions:
District
Page 23 of 80
20
CENTRAL CONTRA COUNTY SANITARY DISTRICT
STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION
FIDUCIARY FUNDS
OTHER POST -EMPLOYMENT BENEFIT TRUST FUND
FOR THE YEARS ENDED JUNE 30, 2017 AND 2016
ADDITIONS
Total contributions
Investment income:
Net appreciation in fair value of investments
Interest, dividends and other
Less: investment expenses
Total net investment income
Change in net position
Total additions
NET POSITION
2017 2016
$5,028,700
$2,631,600
5,028,700
2,631,600
3,802,694
(505,729)
932,882
783,027
(139,063)
(123,480)
4,596,513
153,818
9,625,213
2,785,418
9,625,213
2,785,418
Beginning of year as adjusted (Note 1.N.) 42,703,154 39,917,736
End of year $52,328,367 $42,703,154
See accompanying notes to basic financial statements
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 25 of 219
Page 2421f 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 1— DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
A. Reporting Entity
The Central Contra Costa Sanitary District (District), a special district and a public entity
established under the Sanitary District Act of 1923, provides sewer service for the incorporated
and unincorporated areas under its jurisdiction. A Board of Directors comprised of five elected
members governs the District.
As required by accounting principles generally accepted in the United States of America, these
basic financial statements present the financial statements of Central Contra Costa Sanitary
District and its component unit. The component unit discussed in the following paragraph is
blended in the District's reporting entity because of the significance of its operational and
financial relationship with the District.
Blended Component Unit - Component units are legally separate organizations for which the
District is financially accountable. Component units may also include organizations that are
fiscally dependent on the District, in that the District approves their budget, the issuance of their
debt or the levying of their taxes. In addition, component units are other legally separate
organizations for which the District is not financially accountable but the nature and significance
of the organization's relationship with the District is such that exclusion would cause the District's
financial statements to be misleading or incomplete. For financial reporting purposes, the
component unit discussed below is reported in the District's financial statements because of the
significance of its relationship with the District. The component unit, although a legally separate
entity, is reported in the financial statements using the blended presentation method as if it were
part of the District's operations because the Governing Board of the component unit is the same
as of Governing Board of the District and because its purpose is to finance facilities to be used for
the direct benefit of the District. The Central Contra Costa Sanitary District Facilities Financing
Authority (Authority) was organized solely for the purpose of providing financial assistance to the
District. The Authority does this by acquiring, constructing, improving and financing various
facilities, land and equipment purchases, and by leasing or selling certain facilities, land and
equipment for the use, benefit and enjoyment of the public served by the District. The Authority
has no 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.
November 16, 2017 Review Draft 1:56:49 PM
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 26 of 219
Page 2522 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
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
fmancial 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 fmancial 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 fmancial 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.
November 16, 2017 Review Draft 1:56:49 PM
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 27 of 219
Page 26 of 80
23
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 1— DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
The District reports its Other Post -Employment Benefit Trust Fund as a fiduciary fund. The
Fund consists of the Public Agencies Post -Retirement Health Care Plan, which was established in
2005, amended and restated in 2007. The fundamental purpose of the trust is to fund post -
employment benefits (other than pension benefits), such as medical, dental, vision, life insurance,
long-term care and similar benefits.
C. Investments
Investments held at June 30, 2017 and 2016 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.
November 16, 2017 Review Draft 1:56:49 PM
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 28 of 219
Page 2724f 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 1— DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
G. Parts and Supplies
Parts and supplies are valued at average cost and are used primarily for internal purposes.
H. Property, Plant, and Equipment
Purchased capital assets are stated at historical cost. Capital assets contributed to the District are
reported at acquisition value. 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
I. 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 11/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.
November 16, 2017
Review Draft
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 29 of 219
1:56:49 PM
Page 28 of 80
25
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE I — DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
J. Compensated Absences
The liability for vested vacation, compensatory time, and sick pay is recorded as an expense when
earned. District employees have a vested interest in 100 percent of accrued vacation time and 85
percent of accrued sick time for employees hired before May 1, 1985. Employees hired after May
1, 1985 have a vested interest in up to 40 percent of their sick time, based upon length of
employment with the District.
The changes in compensated absences were as follows for fiscal years ended June 30:
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.
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1:56:49 PM
2017
2016
Beginning Balance
$4,477,542
$4,032,271
Additions
627,663
558,479
Payments
(535,074)
(113,208)
Ending Balance
$4,570,131
$4,477,542
Current Portion
$457,000
$448,000
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.
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 1— DESCRIPTION OF DISTRICT AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
M. Implementation of Governmental Accounting Standards Board (GASB) Pronouncements
GASB Statement No. 74 — Financial Reporting for Post -employment Benefit Plans Other Than
Pension Plans - The objective of this Statement is to improve the usefulness of information about
postemployment benefits other than pensions (other postemployment benefits or OPEB) included
in the general purpose external financial reports of state and local governmental OPEB plans for
making decisions and assessing accountability. 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 interperiod equity, and creating
additional transparency. This statement is effective for periods beginning after December 15,
2015 and required the District to include fiduciary fund statements for its trust with PARS as well
as additional disclosures in Note 10 of the notes to the basic financial statements.
GASB Statement No. 77 — Tax Abatement Disclosures. This Statement establishes financial
reporting standards for tax abatement agreements entered into by state and local governments.
The disclosures required by this Statement encompass tax abatements resulting from both (a)
agreements that are entered into by the reporting government and (b) agreements that are entered
into by other governments and that reduce the reporting government's tax revenues. The
statement is effective for the periods beginning after December 15, 2015, or the 2016-2017 fiscal
year and had no impact on the District's financial statements.
GASB Statement No. 82 — Pension Issues — an amendment of GASB Statements No. 67, No. 68,
and No. 73. The objective of this Statement is to address certain issues that have been raised with
respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and
Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions
and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to
Certain Provisions of GASB Statements 67 and 68. Specifically, this Statement addresses issues
regarding (1) the presentation of payroll -related measures in required supplementary information,
(2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial
Standard of Practice for financial reporting purposes, and (3) the classification of payments made
by employers to satisfy employee (plan member) contribution requirements. This statement is
effective for the periods beginning after June 15, 2015, or the 2016-2017 fiscal year and had no
significant impact on the District's financial statements.
N. New Fund
During the current fiscal year, the District added a new fiduciary fund, Other Post -Employment
Benefits (OPEB) Trust Fund, as required by the implementation of GASB Statement No. 74,
Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. The District
made an adjustment for $39,917,736 in fiscal year 2016 to setup beginning net position in this
fund.
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27
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
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:
Cash and cash equivalents
Short term investments
Restricted cash and cash equivalents
Restricted investments
Total District Cash and Investments
Cash and investments held with OPEB trust
Total Cash and Investments
A Policies and Practices
2017
$41,346,327
39,000,000
236,702
4,856,450
85,439,479
2016
$32,451,718
39,000,000
100,000
4,856,450
76,408,168
52,328,367 42,703,154
$137,767,846 $119,111,322
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.
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 2 — CASH AND INVESTMENTS (Continued)
C. General Authorizations
Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are
indicated in the schedules below:
California State Limits
Maximum Maximum
Percentage Investment
of Portfolio In One Issuer
None
None
20%
30%
40%
25%
30%
30%
30%
None
None
None
None
10%
30%
40%
10%
5%
None
5%
None
$65 million
(1) Prime quality; limited to corporations with assets over $500,000,000
Treasury Notes and LAIR
(2) Prior approval ofthe Board ofDirectors must be obtained to acquire maturities beyond one year, excluding
Treasury Notes and LAIR
November 16, 2017
Review Draft
District
Policy
Maximum
Maximum
Remaining
Authorized Investment Type
Maturity
U.S. Treasury Obligations
5 years
U.S. Government Agency Issues
5 years
Money Market Funds
N/A
Negotiable Certificates ofDeposit
5years
Banker's Acceptances
180
Commercial Paper (1)
270
Medium TermNotes
5 years
Collateralized Certificates ofDeposit (2)
5 years
Supranationals
5 years
County Pooled Investment Funds
N/A
Local Agency Investment Fund (LAIF)
N/A
California State Limits
Maximum Maximum
Percentage Investment
of Portfolio In One Issuer
None
None
20%
30%
40%
25%
30%
30%
30%
None
None
None
None
10%
30%
40%
10%
5%
None
5%
None
$65 million
(1) Prime quality; limited to corporations with assets over $500,000,000
Treasury Notes and LAIR
(2) Prior approval ofthe Board ofDirectors must be obtained to acquire maturities beyond one year, excluding
Treasury Notes and LAIR
November 16, 2017
Review Draft
District
Policy
District
Policy
Maximum
Percentage
Minimum
ofPortfolio
Credit
(Perlssuer)
Quality
100%
N/A
100%
N/A
10%
A
30%
AA
5%
N/A
5%
A-1
5%
AA
30%
Aaa
5%
AA
100%
N/A
100%
N/A
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Page 32 of 80
29
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 2 — CASH AND INVESTMENTS (Continued)
D. 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, 2017:
Investment Type
Investments Reported at Fair Value:
U.S. Federal Agency Securities -FHLB
U.S. Treasury Notes
Commercial Paper - BNP Paribas
Total Investments
Investments Reported at Cost:
Certificates ofDeposit -Non-Negotiable
Mutual Funds in OPEB Trust
Investments Uncategorized
California Local Agency Investment Fund
Total Investments
Cash in bank
Total Cash and Investments
2017
Level Level Total
$20,000,000 $20,000,000
$15,000,000 15,000,000
4,000,000 4,000,000
$15,000,000 $24,000,000 39,000,000
4,856,450
52,328,367
30,200,000
126,384,817
11,383,029
$137,767,846
U.S. Treasury Notes totaling $15 million, classified in Level 1 of the fair value hierarchy are
valued using a quoted price in an active market for an identical asset. U.S. Federal Agency
Securities and Commercial Paper totaling $20 million and $4 million, 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.
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 2 — CASH AND INVESTMENTS (Continued)
The following is a summary of the fair value hierarchy of the fair value of investments of the
District as of June 30, 2016:
Investment Type
investments Reported at Fair Value:
Commercial Paper - ABBEY
Commercial Paper - Credit Agricole
Comrnercial Paper - Toyota Motor Credit
Comrnercial Paper - JP Morgan
Comrnercial Paper - Standard Charter
Certificates of Deposit -ABBEY
Certificates of Deposit - Union Bank
Certificates of Deposit - BNP Paribas
Total Investments
Investments Reported at Cost:
Certificates ofDeposit -Non-Negotiable
Mutual Funds in OPEB Trust
Investments Uncategorized:
Califomia Local Agency Investment Fund
Total Investments
Cash in bank
Total Cash and Investments
2016
Level 2 Total
$4,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
$39,000,000
$4,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
39,000,000
4,856,450
42,703,154
32,300,000
118,859,604
251,718
$119,111,322
Commercial Paper and Certificates of Deposit totaling $24 million and $15 million in 2016,
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.
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.
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Page 3431 80"
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 2 — CASH AND INVESTMENTS (Continued)
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:
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:
Investment
Rated Aaa:
Certificates of Deposit
U.S. Federal Agency Securities - FHLB
Co rcial Paper
Rated P-1:
Commercial Paper - BNP Paribas
Total Rated Investments
Not rated:
Certificates of Deposit - non-negotiable
Mutual Funds in OPEB Trust
California Local Agency Investment Fund
U.S. Treasury Notes
Cash in Bank
Total Cash and Investments
November 16, 2017
Review Draft
Totals
2017 2016
$20,000,000
$15,000,000
24,000,000
4,000,000
2017
39,000,000
4,856,450
2016
52,328,367
12Months
More than
32,300,000
12 Months
Investment Type
or less
12Months
Maturity
orless
Maturity
CertifcatesofDeposit -Debt Reserve
$4,856,450
4/28/20
$4,856,450
4/28/17
Certificates ofDeposit-ABBEY
5,000,000
4/27/17
Certificates ofDeposit- UnionBank
5,000,000
7/22/16
Certificates of Deposit - BNP Paribas
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
Commercial Paper - JP Morgan
5,000,000
1/20/17
Commercial Paper- Standard Charter
5,000,000
1/26/17
Commercial Paper - BNP Paribas New York
$4,000,000
7/19/17
U.S. Treasury Notes
15,000,000
12/7/17
U.S Federal Agency Securities -FIIIB
20,000,000
7/20/17
California Local Agency Investment Fund
30,200,000
Not applicable
32,300,000
Not appheable
Mutual Funds (in OPEB Trust)
52,328,367
Not applicable
42,703,154
Not applicable
Total Investments
121,528,367
4,856,450
118,859,604
Cash in bank
11,383,029
251,718
Total Cash and Investments
$132,911,396
$4,856,450
$119,111,322
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:
Investment
Rated Aaa:
Certificates of Deposit
U.S. Federal Agency Securities - FHLB
Co rcial Paper
Rated P-1:
Commercial Paper - BNP Paribas
Total Rated Investments
Not rated:
Certificates of Deposit - non-negotiable
Mutual Funds in OPEB Trust
California Local Agency Investment Fund
U.S. Treasury Notes
Cash in Bank
Total Cash and Investments
November 16, 2017
Review Draft
Totals
2017 2016
$20,000,000
$15,000,000
24,000,000
4,000,000
24,000,000
39,000,000
4,856,450
4,856,450
52,328,367
42,703,154
30,200,000
32,300,000
15,000,000
11,383,029
251,718
$137,767,846
$119,111,322
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 2 — CASH AND INVESTMENTS (Continued)
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, 2017 and 2016, these investments matured in an average of 194
and 167 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.
H. 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:
City of Concord (see Note 8)
Household Hazardous Waste Partners
All Other
Total Accounts Receivable
November 16, 2017
Review Draft
2017
$18,328,214
753,686
883,996
$19,965,896
2016
$17,585,852
727,513
705,184
$19,018,549
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
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, 2017 and
2016 was $217,778 and $257,159, respectively.
The District also established the Alhambra Valley Assessment District (AVAD) to provide
services to residents in the Alhambra Valley in Martinez. Residents have the choice to pay cash
or finance the construction costs and connection fees. The AVAD receivable balance at June 30,
2017 and 2016 was $1,094,047 and $1,258,659, respectively.
The total receivable balance at June 30, 2017 and 2016 for CAD and AVAD was $1,311,825 and
$1,515,818, respectively, and is shown as a non-current asset on the Statement of Net Position.
November 16, 2017 Review Draft 1:56:49 PM
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 5 — CAPITAL ASSETS
Property, plant and equipment, and construction in progress are summarized below for the year
ended June 30, 2017:
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November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 39 of 219
Balance at
Transfers &
Balance at
June 30, 2016
Additions
Retirements
Adjustments
June 30, 2017
Capital assets not being depreciated:
Land
$17,320,570
$17,320,570
Easements (intangible)
4,936,407
$5,300
4,941,707
Construction in Progress
24,480,982
$36,696,049
($255,344)
(27,533,116)
33,388,571
Total nondepreciated assets
46,737,959
36,696,049
(255,344)
(27,527,816)
55,650,848
Capital assets being depreciated:
Sewage collection system
341,412,320
(335,000)
10,426,486
351,503,806
Contributed sewer lines
154,863,632
2,899,042
(5,440)
34,485
157,791,719
Outfall sewers
11,371,574
11,371,574
Sewage treatment plant
323,360,945
(550,000)
11,151,411
333,962,356
Recycled water infrastructure
19,215,350
1,077,016
20,292,366
Pump ing stations
56,270,149
1,007,992
57,278,141
Buildings
42,412,648
1,825,860
44,238,508
Furniture and equipment
12,627,569
(159,988)
1,545,256
14,012,837
Motor vehicles
7,378,730
(223,058)
459,310
7,614,982
Total depreciated assets
968,912,917
2,899,042
(1,273,486)
27,527,816
998,066,289
Less accumulated depreciation:
Sewage collection system
64,587,611
4,690,151
(335,000)
68,942,762
Contributed sewer lines
57,268,867
2,097,574
(5,440)
59,361,001
Outfall sewers
3,465,586
151,395
3,616,981
sewage treatment plant
210,866,708
10,065,439
(550,000)
220,382,147
Recycled water infrastructure
8,060,811
805,541
8,866,352
Pumping stations
30,884,104
2,220,533
33,104,637
Buildings
11,617,825
1,258,681
12,876,506
Furniture and equipment
8,188,890
1,231,360
(159,988)
9,260,262
Motorvehicles
4,705,437
371,479
(223,058)
4,853,858
Total accumulated depreciation
399,645,839
22,892,153
(1,273,486)
421,264,506
Total capital assets being
depreciated, net
569,267,078
(19,993,111)
27,527,816
576,801,783
Capital assets, net
$616,005,037
$16,702,938
($255,344)
-
$632,452,631
November 16, 2017 Review Draft 1:56:49 PM
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Page 38 of 80
35
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 5 — CAPITAL ASSETS (Continued)
Property, plant and equipment, and construction in progress are summarized below for the year
ended June 30, 2016:
Less accumulated depreciation
Sewage collection system
Balance at
4,544,975
(1,105,003)
Transfers &
Balance at
55,204,677
June 30, 2015
Additions
Retirements
Adjustments
June 30, 2016
Capital assets not being depreciated:
3,465,586
Sewage treatment plant
200,602,861
10,363,847
Land
$17,320,570
Recycled water infrastructure
7,276,987
783,824
$17,320,570
Easements (intangible)
4,875,507
28,643,263
2,245,841
$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:
(72,485)
4,705,437
Total accumulated depreciation
378,045,297
22,885,030
Sewage collection system
331,167,382
Total capital assets being
(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
$6,650,630
($364,072)
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
Pumpingstations
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
1,821,856
(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
10,363,847
(100,000)
210,866,708
Recycled water infrastructure
7,276,987
783,824
8,060,811
Pumpingstations
28,643,263
2,245,841
(5,000)
30,884,104
Buildings
10,387,226
1,230,599
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
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 6 — LONG-TERM DEBT
A. Summary of Activity
The changes in the District's long-term obligations during the year ended June 30, 2017 consisted
of the following:
2009 Series A Certificates ofParticipation
Wastewater Revenue
3.45-3.78%, due 9/1/2029
2009 Series B Certificates ofParticipation
Wastewater Revenue
.40-3.791/o, due 9/1/2029
1999 State Water Resources Control Board
Water Reclamation Loan
2.60%, due 3/31/2018
Total Long -Term Debt
Less current portion
Original Amount
Issue Balance Balance due within
Amount June 30, 2016 Retirements June 30, 2017 one year
$19,635,000 $19,635,000 $19,635,000
34,490,000 14,165,000 $2,300,000 11,865,000 $2,405,000
2,916,872 360,134 177,757 182,377 182,377
34,160,134 $2,477,757 31,682,377 $2,587,377
(2,471,756) (2,587,377)
$31,682,378 $29,095,000
The changes in the District's long-term obligations during the year ended June 30, 2016 consisted
of the following:
2009 Series A Certificates ofParticipation
Wastewater Revenue
3.45-3.78%, due 9/1/2029
2009 Series B Certificates ofParticipation
Wastewater Revenue
.40-3.79%, due 9/1/2029
1999 State Water Resources Control Board
Water Reclamation Loan
2.60%, due 3/31/2018
Total Long -Term Debt
Less current portion
Original Amount
Issue Balance Balance due within
Amount June 30, 2015 Retirements June 30, 2016 one year
$19,635,000 $19,635,000 $19,635,000
34,490,000 16,375,000 $2,210,000 14,165,000 $2,300,000
2,916,872 533,385 173,251 360,134 177,756
36,543,385 $2,383,251 34,160,134 $2,477,756
(2,383,251) (2,477,756)
$34,160,134 $31,682,378
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37
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
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
2018
$1,190,840
$2,405,000
$424,175
$2,405,000
$1,615,015
($416,794)
$3,603,221
2019
1,190,840
2,480,000
329,483
2,480,000
1,520,323
(416,794)
3,583,529
2020
1,190,840
2,580,000
226,950
2,580,000
1,417,790
(416,794)
3,580,996
2021
$1,660,000
1,118,907
1,025,000
175,583
2,685,000
1294,490
(391,617)
3,587,873
2022
1,715,000
1,028,060
1,070,000
124,167
2,785,000
1,152,227
(359,821)
3,577,406
2023-2027
9,550,000
3,540,805
2,305,000
78,208
11,855,000
3,619,013
(1,239,282)
14,234,731
2028-2030
6,710,000
524,874
6,710,000
524,874
(183,706)
7,051,168
Total
$19,635,000
$9,785,166
$11,865,000
$1,358,566
$31,500,000
$11,143,732
($3,424,808)
$39,218,924
As part of the Federal budget sequestration, the Internal Revenue Service (IRS) has announced
that, as of March 1, 2017, credit payments claimed by issuers of certain tax credit bonds,
including Build America Bonds, may be subject to a reduction of 6.9%.
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 raise an additional $30
million in new proceeds with yields ranging from .40% to 3.79%.
The two bonds total $54,125,000, and are secured by a pledge of tax and net revenues of the
wastewater system. Principal payments began annually on September 1, 2010 with semi-annual
payments due on September 1 and March 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.
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
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:
Fis cal Year
Ending June 30 Principal Interest Total
2018 $182,377 $4,742 $187,119
Total $182,377 $4,742 $187,119
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:
Type of Coverage
Insurer
Limits
All -Risk Property:
Special Form Property
Alliant Property Insurance Program (APIP)
$553,087,101
Crime
National Union Fire Ins. Co.
1,000,000
Liability:
Fiduciary Liability Insurance
RLI Insurance Company
1,000,000
Pollution- General Liability
Aspen Specialty Ins. Co.
1,000,000
Environmental Exposure (GLEE)
Commercial Environment Excess
Aspen Specialty Ins. Co.
9,000,000
Special Excess Liability Coverage-ANIv1L
Security National Ins. Co.
10,000,000
Excess Following Form Liability Policy
Allied World Assurance Company (U. S), Inc.
5,000,000
Employment Practice Liability
Hiscox Insurance Co. (Bermuda) Ltd.
500,000
Workers' Compensation:
Excess Workers' Compensation
Safety National Casually Corporation
Statutory
November 16, 2017
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November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 43 of 219
Self Insured
Deductible Per
occurrence
$250,000
2,500
5,000
50,000
500,000
35,000
1:56:49 PM
Page 423o9f 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 7 — RISK MANAGEMENT (Continued)
B. Provision for Uninsured Claims
The Governmental Accounting Standard Board (GASB) requires state and local governments to
record their liability for uninsured claims in their financial statements. The District's 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, 2017 to be
$807,079.
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, 2017, 2016, and 2015, settlements have not exceeded insurance
coverage. Changes in the District's estimated liability for retained losses are summarized as
follows as of June 30:
Beginning balance
Provisions for claims incurred in the current year
and changes in the liability for retained -
losses incurred in prioryears
Claims paid and/or adjustments
Ending balance
NOTE 8 — AGREEMENT WITH THE CITY OF CONCORD
2017 2016 2015
$1,000,000 $1,000,000 $1,000,000
(127,214) 888,745 499,956
(65,707) (888,745) (499,956)
$807,079 $1,000,000 $1,000,000
In 1974, the District and the City of Concord (the City) entered into a cost-sharing agreement
under which the District became responsible for providing sewage treatment facilities and
services to the City. Under this agreement, the City pays a service charge for its share of
operating, maintenance and administrative costs and makes a contribution for its share of
facilities and makes a contribution for its share of facilities capital costs expended. Service
charges and contributions to capital costs from the City totaled $13,581,253 and $4,476,961
respectively, for the year ended June 30, 2017, for a total of $18,058,214. 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.
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40
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
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, 2016. 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, 2017, are summarized as follows:
Membership date
Benefit formula
Benefit vesting schedule
Benefit payments
Retirement age
Monthly benefits, as a % of eligible compensation
Required employee contribution rates
Required employer contribution rates
Mseellaneous
On or after
Prior to January 1, 2013 January 1, 2013
2% at 55 2% at 62
10 years service
monthly for life
50
0% to 100%
11.76%
55.36%
5 years service
monthly for life
52
No limit
12.06%
50.43%
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 part 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, 2017, the contributions to
the Plan were $17,854,714.
November 16, 2017
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1:56:49 PM
Page 44 lf 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 9 — PENSION PLANS (Continued)
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to
Pensions - As of June 30, 2017, the District reported net pension liabilities for its proportionate
share of the net pension liability of the Plan as follows:
Miscellaneous
Proportionate Share of Net Pension Liability
2017 2016
$87,847,116 $91,746,888
Total Net Pension Liability $87,847,116 $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, 2016, 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, 2015 rolled forward to December 31, 2016 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 all participating employers, actuarially determined. The District's
proportionate share of the net pension liability for the Plan as of December 31, 2015, 2016, and
2017 were as follows:
Proportionate share of the Plan Fiduciary Net
Reporting Date for Proportion of the Proportionate share Net Pension Liability as a Pension as a
Employer under GASB 68 Net Pension of Net Pension Covered percentage of its covered percentage of the Total
as of December 31 Liability Liability Payroll payroll Pension Liability
2015 7.488% $89,535,510 $27,930,233 332.77% 73.86%
2016 6.088% 91,746,888 30,552,659 315.70% 74.14%
2017 6.273% 87,847,116 32,501,073 278.14% 76.44%
For the year ended June 30, 2017, the District recognized negative pension expense of
$4,080,558. At June 30, 2017, the District reported deferred outflows of resources and deferred
inflows of resources related to pensions from the following sources:
Pension contributions subsequent to measurement date
Differences between expected and actual experience
Changes of assumptions or other inputs
Deferred Outflows Deferred Inflows
of Resources of Resources
$9,004,848
$7,205,850
2,541,979 1,661
Change in proportion and differences between employer
contributions and proportionate share of contributions 2,023,895 8,844,394
Net difference between projected and actual earnings
on pension plan investments
Total
November 16, 2017
Review Draft
15,507,481
$29,078,203 $16,051,905
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 46 of 219
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 9 — PENSION PLANS (Continued)
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
The $9,004,848 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, 2018.
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
June 30
Annual
Amortization
2018
($164,716)
2019
630,717
2020
3,609,732
2021
(54,283)
2022
-
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 9 — PENSION PLANS (Continued)
Actuarial Assumptions — The total pension liabilities in the December 31, 2015 actuarial
valuations were determined using the following actuarial assumptions:
Valuation Date
Measurement Date
Actuarial Cost Method
Amortization Method
Actuarial Assumptions:
Discount Rate
Inflation Rate
Payroll Growth
Projected Salary Increase
Cost of Living Adjustments
Investment Rate of Return
Mortality
Miscellaneous
December 31, 2015
December 31, 2016
Entry Age Actuarial Cost Method
Level percent of payroll
7.00%
2.75%
2.75%(l)
4.00% - 13.25% (2)
2.75%
7.00%(3)
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
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, 2016.
November 16, 2017
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Page 474of 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 9 — PENSION PLANS (Continued)
The long-term expected rate of return on pension plan investments was determined in 2017 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:
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 $139,044,846
Current Discount Rate 7.00%
Net Pension Liability $87,847,116
1% Increase 8.00%
Net Pension Liability $46,135,827
November 16, 2017 Review Draft 1:56:49 PM
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 49 of 219
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
17%
6.30%
Private Equity
17%
8.10%
Total
100%
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 $139,044,846
Current Discount Rate 7.00%
Net Pension Liability $87,847,116
1% Increase 8.00%
Net Pension Liability $46,135,827
November 16, 2017 Review Draft 1:56:49 PM
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 49 of 219
Page 484o5 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 9 — PENSION PLANS (Continued)
B. Deferred Compensation Plan
District employees may defer a portion of their compensation under a District sponsored Deferred
Compensation Plan created in accordance with Internal Revenue Code Section 457. The plan
was established by the District's Board of Directors and any amendments to the plan must be
authorized by the Board of Directors. Under this plan, participants are not taxed on the deferred
portion of their compensation until it is distributed to them; distributions may be made only at
termination, retirement, death, or in an emergency as defined by the plan. The District does not
make contributions to the plan.
The plan's 457 assets are held in trust with ICMA Retirement Corporation for the exclusive
benefit of the participants and are not included in the District's financial statements.
C. 401(a) Defined Contribution Plan
The District also contributes to a money purchase plan created in accordance with Internal
Revenue Code section 401(a). The plan was established by the District's Board of Directors and
any amendments to the plan must be authorized by the Board. Contributions to the plan are made
in accordance with a memorandum of understanding stating that in lieu of making payments to
Social Security, the District contributes to the 401(a) Plan an amount equal to that which would
have been contributed to Social Security on behalf of its employees as long as the District is not
required to participate in Social Security. The District contributed $1,964,899 and $1,856,025 to
the Plan during the years ended June 30, 2017 and 2016, respectively.
The 401(a) money purchase plan assets are held in trust with ICMA Retirement Corporation for
the exclusive benefit of the participants and are not included in the District's financial statements.
NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS
A. Plan Description
The District's defined benefit post employment healthcare plan (DPHP) provides medical benefits
to eligible retired District employees and beneficiaries. DPHP is part of the Public Agency
portion of the Public Agency Retirement System (PARS), an agent multiple -employer plan
administered by PARS, which acts as a common investment and administrative agent for
participating public employees within the State of California. A menu of benefit provisions as
well as other requirements is established by the State statute with the Public Employees'
Retirement Law. DPHP selects optional benefit provisions from the benefit menu by contract
with PARS and adopts those benefits through District resolution. PARS issues a separate
Comprehensive Annual Financial Report. Copies of the PARS annual financial report may be
obtained from PARS, 4350 Von Karman Ave., Suite 100, Newport Beach, CA 92660, by calling
1(800) 540-6369, or by emailing info@pars.org.
November 16, 2017 Review Draft 1:56:49 PM
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Page 494o6f 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued)
B. Funding Policy
GASB Statement No. 45 set rules for computing the employer's expense for retiree benefits other
than pension, called OPEB. The expense, called the annual OPEB Cost (AOC), is determined
similarly to pensions. The annual required contribution (ARC) of the employer, represents a level
of funding that, if paid on an ongoing basis, is projected to cover normal annual costs each year
and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30
years.
When an agency contributes more than the ARC, there is a net OPEB asset (NOA); when the
contribution is less than the ARC, a net OPEB obligation (NOO) results. The District had a net
OPEB asset of $3,652,571 and $1,108,244 as of June 30, 2017 and 2016, 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.
November 16, 2017 Review Draft 1:56:49 PM
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47
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued)
C. Annual OPEB Cost and Net OPEB Asset
For 2017, the District's annual OPEB cost (expense) was $7,235,000. The District contributed
$4,750,627 for retiree health care premiums and $5,028,700 to the PARS trust for a total of
$9,779,327 The following table summarizes the changes in the District's net OPEB (Asset) at
June 30, 2017:
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:
7,235,000
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)
Annual Required Contribution (ARC)
7,866,000
Interest on Net OPEB Asset
(69,000)
Implicit Subsidy
(654,000)
Adjustment to ARC
92,000
Annual OPEB Cost (AOC)
7,235,000
Contributions Made:
Net OPEB
Health care premiums paid
(4,750,627)
ARC Contributions to PARS trust
(2,528,700)
Additional Contributions to PARS trust
(2,500,000)
Increase (decrease) in net OPEB obligation
(2,544,327)
Net OPEB Obligation (Asset) at June 30, 2017 ($3,652,571)
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:
November 16, 2017 Review Draft 1:56:49 PM
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 52 of 219
Percentage of
Annual OPEB
Actual
AOC
Current Year
Net OPEB
Fiscal Year
Cost (AOC)
Contribution
Contributed
AOC
Obligation (Asset)
June 30, 2015
$8,125,000
$8,124,087
100%
$913
($1,206,765)
June 30, 2016
7,890,000
7,791,479
99%
98,521
(1,108,244)
June 30, 2017
7,235,000
9,779,327
135%
(2,544,327)
(3,652,571)
November 16, 2017 Review Draft 1:56:49 PM
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 52 of 219
Page 5148 80
�1
i'
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued)
D. Funded Status and Funding Progress
Per PARS, trust assets as of June 30, 2017 and 2016, including trust contributions and interest,
total $52,328,367 and $42,703,154, respectively. Actuarial valuations of an ongoing plan involve
estimates of the value of reported amounts and assumptions about the probability of occurrence
of events far into the future. Examples include assumptions about future employment, mortality,
and the health care cost trend. The funded status of the plan and the annual required
contributions of the employer are subject to continual revision, as actual results are compared
with past expectations and new estimates are made about the future. The schedule of funding
progress 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:
Projections for benefits for financial reporting purposes are based on the substantive plan (the
plan as understood by the employer and plan members) and include the types of benefits provided
at the time of each valuation as well as the historical pattern of sharing benefit costs between the
employer and plan members. The actuarial methods and assumptions used include techniques
that are designed to reduce short-term volatility in actuarial accrued liabilities and actuarial value
of assets, consistent with the long-term perspective of the calculations.
The District's most recent actuarial valuation was prepared as of July 1, 2016 and was fmalized
on February 17, 2017. The July 1, 2014 actuarial valuation results are budgeted in fiscal year
2016-17.
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1:56:49 PM
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
(AB)
(C)
[(A — B)/C]
July 1, 2016
$48,913,000
$102,943,000
$54,030,000
47.51%
$32,501,073
166%
E. Actuarial Methods and Assumptions
.
Projections for benefits for financial reporting purposes are based on the substantive plan (the
plan as understood by the employer and plan members) and include the types of benefits provided
at the time of each valuation as well as the historical pattern of sharing benefit costs between the
employer and plan members. The actuarial methods and assumptions used include techniques
that are designed to reduce short-term volatility in actuarial accrued liabilities and actuarial value
of assets, consistent with the long-term perspective of the calculations.
The District's most recent actuarial valuation was prepared as of July 1, 2016 and was fmalized
on February 17, 2017. The July 1, 2014 actuarial valuation results are budgeted in fiscal year
2016-17.
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CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 10 POST EMPLOYMENT HEALTH CARE BENEFITS (Continued)
The following is a summary of the actuarial assumptions and methods:
Valuation Date
Actuarial Cost Method
Amortization Method
Average Remaining Period
Actuarial Assumptions:
Inflation Rate
Investment Rate of Return
Projected Salary Increases
Post -Retirement Benefit Increases
Health Care Cost Trend Rates
F. OPEB Trust Fund
July 1, 2016
Entry Age Normal Cost Method
Level Dollar/Closed
23 years fiord
3.00%
6.25%
2.75%
No planned changes
Medical - 7.2% grading to 5% in 2021- 22
Medicare Part B - same as medical trend
Dental - 4%
Page 52 of 80
49
Plan Administration — The District administers the District's retiree healthcare benefit plan — a
single -employer defined benefit OPEB plan that provides healthcare benefits for eligible
employees of the District.
Fiscal Year Ended
6/30/2017
Plan Type Single Employer
OPEB Trust Yes
Special Funding Situation No
Nonemployer Contributing Entity No
Plan Membership — As described in the table in Note 10, plan membership varies based on
different employee bargaining groups. As of June 30, 2017, membership in the plan consisted of
the following:
Retirees and beneficiaries receiving benefits
Active plan members
November 16, 2017
Review Draft
Number of
Covered Employees
258
276
534
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Page 535o0f 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued)
Benefits Provided and Contribution Information — Post -employment healthcare and similar
benefit allowances are provided to eligible employees who retire from the District or to their
surviving spouses. As noted in the table above, there were 534 participants receiving these
healthcare benefits as of June 30, 2017.
Contribution Information — PARS establishes rates for each employer based on an actuarially
determined rate for each employer. For the year ended June 30, 2017, the District's average
contribution rate was 32.1% of covered -employee payroll. Plan members are not required to .
contribute to the plan.
For the year ended June 30, 2017, the District contributed $10,433,327 in relation to the
actuarially determined contribution.
Investment Policy — PARS offers different investment portfolios as part of the investment
vehicle. The District invests in "Moderate" portfolio; the primary goal of the Capital
Appreciation objective is growth of income and principal. The major portions of the assets are
invested in the equity securities and market fluctuations are expected. The portfolio is
constructed to control risk through four layers of diversification — asset classes (cash, fixed
income, equity), investment styles (large cap, small cap, international, value, growth), managers
and securities. Disciplined mutual fund selections and monitoring helps to drive return potential
while reducing portfolio risk.
The following is the District's adopted asset allocation policy as of June 30, 2017:
Target
Allocation
Asset Class Component:
Equity 50%
Fixed Income 45%
Cash 5%
Total 100%
Investment Concentration — As of June 30, 2017, the District did not have investments in any
one organization exceeding 5% of the District's investments.
Investment Rate of Return — For the year ended June 30, 2017, the annual money -weighted rate
of return on investments, net of investment expense, was 6.25%. The money -weighted rate of
return expresses investment performance, net of investment expense, adjusted for the changing
amounts actually invested.
November 16, 2017 Review Draft 1:56:49 PM
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 55 of 219
Page 5451 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued)
Net OPEB Liability — The components of the net OPEB liability of the District at June 30, 2017,
were as follows:
Measurement Date - 6/30/2017
Total OPEB Liability
Plan Fiduciary Net Position (FNP)
District's Net OPEB Liability
Plan Fiduciary Net Position as a
Percentage of the Total OPEB Liability
Fiscal Year Ended
6/30/17
$ 102,752,608
(52,328,367)
$ 50,424,241
50.9%
Actuarial Assumptions — The total OPEB liability was determined by an actuarial valuation as of
June 30, 2017, using the following actuarial assumptions:
Measurement Date
Funding Policy
Trend
Healthcare Participation for Future Retirees
Actuarial Assumptions:
Discount Rate
Inflation
Investment Rate of Return
Mortality
June 30, 2017
Full pre -funding to PARS trust
PARS portfolio: Moderate
Pre -Medicare - 7.0% for 2017, decreasing to
5.0% for 2021 and later
Medicare - 7.2% for 2017, decreasing to
5.0% for 2021 and later
Not in RHSA: 95%
In RHSA: 50% (implied subsidy only)
6.25%
3.00%
6.25% (Z)
Derived using CCCERA's Membership Data for all Funds (3)
t11 Crossover analysis showed benefit payments always fully funded by plan assets
(Z) Net of investment expenses
(3) The mortality table used was developed based on CCCERA's specific data. The table includes 20 years of mortality improvements
using RP -2000 Combined Healthy Mortality Table projected with Scale AA to 2030. For more details on this table, please refer to
the CCCERA 2012-2014 experience study report available on the CCCERA website.
November 16, 2017
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1:56:49 PM
Page 5552 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued)
The target allocation and projected arithmetic real rates of return, after deducting inflation, but
before investment expenses, used in the derivation of the long-term expected investment rate of
return assumption for each major asset class are summarized below:
Discount Rate — The discount rates used to measure the total OPEB liability were 6.25% as of
June 30, 2017. The projection of cash flows used to determine the discount rate assumed that
District contributions will be made at rates equal to the actuarially determined contribution rates.
Based on those assumptions, the OPEB plan's fiduciary net position was projected to be available
to make all projected future benefit payments of current plan members. Therefore, the long term
expected rate of return on OPEB plan investments was applied to all periods of projected benefit
payments to determine the total OPEB liability.
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate — In accordance with
GASB 74, regarding the disclosure of the sensitivity of the net OPEB liability to_ changes in the
discount rate, the following table presents the net OPEB liability of the Plan as of June 30, 2017,
calculated using the discount rate of 6.25%, as well as what the Plan's net OPEB liability would
be if it were calculated using a discount rate that is 1 -percentage -point lower or 1 -percentage
point higher than the current rate:
Net OPEB Liability
November 16, 2017
Discount Rate
1% Decrease Current 1% Increase
(5.25%) (6.25%) (7.25%)
$ 63,678,892 $ 50,424,241 $ 39,523,773
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1:56:49 PM
Target
Expected Real
Allocation
Rate of Return
Asset Class Component:
Equity
50%
5.35%
Fixed Income
45%
1.55%
Cash
5%
0.45%
Assumed Long -Term Rate of Inflation
3.00%
Assumed Long -Term Investment Expenses
0.30%
Discount Rate
6.25%
Discount Rate — The discount rates used to measure the total OPEB liability were 6.25% as of
June 30, 2017. The projection of cash flows used to determine the discount rate assumed that
District contributions will be made at rates equal to the actuarially determined contribution rates.
Based on those assumptions, the OPEB plan's fiduciary net position was projected to be available
to make all projected future benefit payments of current plan members. Therefore, the long term
expected rate of return on OPEB plan investments was applied to all periods of projected benefit
payments to determine the total OPEB liability.
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate — In accordance with
GASB 74, regarding the disclosure of the sensitivity of the net OPEB liability to_ changes in the
discount rate, the following table presents the net OPEB liability of the Plan as of June 30, 2017,
calculated using the discount rate of 6.25%, as well as what the Plan's net OPEB liability would
be if it were calculated using a discount rate that is 1 -percentage -point lower or 1 -percentage
point higher than the current rate:
Net OPEB Liability
November 16, 2017
Discount Rate
1% Decrease Current 1% Increase
(5.25%) (6.25%) (7.25%)
$ 63,678,892 $ 50,424,241 $ 39,523,773
Review Draft
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 57 of 219
1:56:49 PM
Page 565o3f 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
NOTE 10 — POST EMPLOYMENT HEALTH CARE BENEFITS (Continued)
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates — The
following presents the net OPEB liability of the District, as well as what the District's net OPEB
liability would be if it were calculated using healthcare cost trend rates that are 1 -percentage -
point lower or 1 -percentage -point higher than the current healthcare cost trend rates:
1% Decreas e
Healthcare Trend Rate
Current
6.00% decreasing 7.00% decreasing
to 4.00% to 5.00%
1% Increase
8.001/6 decreasing
to 6.00%
Net OPEB Liability $ 39,132,526 $ 50,424,241 $ 64,225,602
NOTE 11— NET POSITION
Net Position is the excess of all the District's assets and deferred outflows of resources over all its
liabilities and deferred inflows of resources, 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 COM UTMENTS
The District leases various facilities and equipment under operating leases. Following is a
summary of operating lease commitments as of June 30, 2017:
Fiscal Year
Ending
2018
Total
Office
Equipment
Facilities
Total
$248,212 $33,922 $282,134
$248,212 $33,922 $282,134
Total rental expense for the fiscal years ended June 30, 2017 and 2016 was $168,336 and
$279,636, respectively.
November 16, 2017
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1:56:49 PM
Page 57 of 80
54
CENTRAL CONTRA COSTA SANITARY DISTRICT
NOTES TO THE BASIC FINANCIAL STATEMENTS
For the Years Ended June 30, 2017 and 2016
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 $16,006,727 and $21,187,890 as of June 30, 2017 and 2016, respectively.
November 16, 2017 Review Draft 1:56:49 PM
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Page 5855 80
REQUIRED SUPPLEMENTARY INFORMATION
November 16, 2017 Review Draft 1:56:49 PM
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CENTRAL CONTRA COSTA SANITARY DISTRICT
Cost -Sharing Multiple Employer Defined Benefit Retirement Plan
As of fiscal year ended June 30, 2017
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS
Last 10 Years*
2017 2016
Net Change in Total Pension Liability
Service Cost
Interest on the Total Pension Liability
Expensed portion of current -period changes in proportion and
difference between employer's contributions and proportionate
share of contributions
Expensed portion of current -period benefit changes
Expensed portion of current -period difference between expected
and actual experience in the Total Pension Liability
Expensed portion of current -period changes of assumptions or
other inputs
Member contributions
Projected earnings on plan investments
Expensed portion of current -period differences between actual and
projected earnings on plan investments
Administrative expense
Other
Recognition of beginning of year deferred outflows of resources as
pension expense
Recognition of beginning ofyear deferred inflows of resources as
pension expense
Net amortization of deferred amounts from changes in proportion
and differences between employer's contributions and
proportionate share of contributions
Net change in total pension liability
Reconciliation of Net Pension liability
Beginning Net Pension Liability
Pension expense
Employer contributions
New net deferred inflows/outflows
Change in allocation of prior deferred inflows/outflows
New net deferred flows due to change in proportion
Recognition of prior deferred inflows/outflows
Recognition of prior deferred flows due to change in proportion
Net pension liability - ending
Plan fiduciary net position as a percentage of the total pension
liability
Page 595o6f 80
2015
$ 12,802,725 $
11,744,271 $
14,396,402
37,390,012
35,450,291
42,024,521
327,813
(3,509,681)
533,503
(275,839)
(836,604)
(2,988,813)
11,824,671
972,205
(1,231)
(5,608,003)
(5,196,358)
(5,860,025)
(30,774,476)
(30,472,528)
(34,980,271)
(83,909)
5,198,286
(200,059)
536,021
494,025
522,670
(563,858)
40,685
-
6,402,259
(3,558,862) (2,593,424)
(2,976,178)
533,503
-
$ 13,617,705 $
11,824,671 $
13,446,697
$ 91,746,888 $
89,535,510 $
110,183,830
13,617,705
11,824,671
13,446,697
(18,043,391)
(22,752,611)
(24,451,234)
(1,320,379)
21,270,461
(11,564,393)
541221
2,163,011
-
1,170,291
(12,354,075)
1,920,610
(2,843,397)
2,593,424
-
2,976,178
(533,503)
-
$ 87,847,116 $
91,746,888 $
89,535,510
76.44%
74.14%
73.86%
Covered payroll $ 32,501,073 $ 30,552,659 $ 27,930,233
Net pension liability as percentage of covered payroll 278.14% 315.70% 332.77%
Notes to Schedule:
Changes in assumptions - In 2017, amounts reported as changes in assumptions resulted primarily from adjustments to
expected retirement ages of general employees.
* Fiscal year 2015 was the 1st year of implementation, therefore only three years are shown.
November 16, 2017 Review Draft 1:56:49 PM
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 61 of 219
CENTRAL CONTRA COSTA SANITARY DISTRICT
Cost -Sharing Multiple Employer Defined Benefit Retirement Plan
As of fiscal year ending June 30, 2017
SCHEDULE OF CONTRIBUTIONS
Last 10 Years*
Actuarially determined contribution
Contributions in relation to the actuarially determined
contributions
Contribution deficiency (excess)
Covered payroll
Contributions as a percentage of covered -employee payroll
Notes to Schedule
Measurement Date:
Methods and assumptions used to determine contribution rates:
Actuarial cost method
Amortization method
Remaining amortization period
Asset valuation method
Inflation
Salary increases
Investment rate of return
Retirement age
Mortality
,1A19 ' A1C
Page 60 of 80
57
�A1C
$ 18,043,391 $ 22,752,611 $ 24,451,234
14 Ant ]07 77 1747 K11 1)A A41 '94A
$ 32,501,073 $ 30,552,659 $ 27,930,233
55.52% 74.47%
12231/2016
Fntry age
Level percentage of payroll, closed
7years **
5 -year semi-annually
2.75%
4% - 13.25%
7.0%, net of pension plan
investment expense, including
5U years Classic, 52 years PEPRA
RP -2014 Healthy Annuitant Mortality Table
with setbacks and forwards
* Fiscal year 2015 was the 1st year of implementation, therefore only three years are shown.
* * Remaining balance of December 31, 2007 UAAL is amortized over a fixed (decreasing or closed) period
with 7 years remaining as of December 31, 2015. 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.
November 16, 2017
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87.54%
1:56:49 PM
CENTRAL CONTRA COSTA SANITARY DISTRICT
Post -Retirement Health Care Defined Benefit Plan
As of fiscal year ended June 30, 2017
IEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RAT
Last 10 Years*
Plan fiduciary net position as a percentage of the total OPEB
liability 50.9%
Covered -employee payroll $ 32,501,073
Net pension OPEB as percentage of covered -employee payroll 155%
Notes to Schedule:
Benefit changes: None
Changes in assumptions: None
* Fiscal year 2017 was the 1st year of implementation, therefore only one year is shown.
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2017
Net Change in Total OPEB Liability
Service cost
$
2,295,667
Interest
6,203,230
Difference between expected and actual experience
-
Chnages of assumptions
-
Changes of benefit terms
-
Benefit payments including refunds
(5,404,627)
Net change in Total OPEB Liability
3,094,270
Beginning Net OPEB Liability
99,658,338
Net OPEB Liability - ending (a)
$
102,752,608
Plan Fiduciary Net Position
Contributions - employer
$
10,433,327
Contributions - employee
-
Net investment income
4,735,576
Benefit payments including refunds
(5,404,627)
Administrative expense
(139,063)
Net change in Fiduciary Net Position
9,625,213
Beginning Fiduciary Net Position
42,703,154
Plan Fiduciary Net Position - ending (h)
$
52,328,367
Net OPEB Liability - ending (a) - (b)
$
50,424,241
Plan fiduciary net position as a percentage of the total OPEB
liability 50.9%
Covered -employee payroll $ 32,501,073
Net pension OPEB as percentage of covered -employee payroll 155%
Notes to Schedule:
Benefit changes: None
Changes in assumptions: None
* Fiscal year 2017 was the 1st year of implementation, therefore only one year is shown.
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1:56:49 PM
Page 625o9f 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
Post -Retirement Health Care Defined Benefit Plan
As of fiscal year ending June 30, 2017
SCHEDULE OF CONTRIBUTIONS
Last 10 Years*
Actuarially determined contribution
Contributions in relation to the actuarially determined
contributions
Contribution deficiency (excess)
Covered -employee payroll
Contributions as a percentage of covered -employee payroll
Notes to Schedule
Measurement Date:
Methods and assumptions used to determine contribution rates:
Actuarial cost method
Amortization method
Remaining amortization period
Asset valuation method
Inflation
Healthcare cost trend rates
Salary increases
Investment rate of return
Retirement age
Mortality
Benefit changes: None
Changes in assumtpions: None
2017
$ 7,866,000
10,433,327
$ (2,567,327)
$ 32,501,073
32.1%
6/30/2017
Entry age, level dollar
Level dollar over closed 23 year period
18 years
5 -year rolling period
3.00%
Pre -Medicare - 8.0% for 2015, decreasing to
5.0% for 2021 and later
Medicare- 8.3% for 2015, decreasing to 5.0% for
2021 and later
3.25%
6.25%, net of plan investment expense
57.2
Mortality improvement projected to
year 2030 with Scale AA
* Fiscal year 2017 was the 1st year of implementation, therefore only one year is shown.
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1:56:49 PM
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CENTRAL CONTRA COSTA SANITARY DISTRICT
Post -Retirement Health Care Defined Benefit Plan
Schedule of Funding Progress
As of fiscal year ended June 30, 2017
Last Three Valuations
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1:56:49 PM
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
(AB)
(C)
[(A — B)/C]
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%
July 1, 2016
48,913,000
102,943,000
54,030,000
47.51%
32,501,073
166%
November 16, 2017
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1:56:49 PM
Page 64 of 80
61
SUPPLEMENTARY INFORMATION
November 16, 2017 Review Draft November 16, 2017
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Page 656of 80
CENTRAL CONTRA COSTA SANITARY DISTRICT
COMBINING SCHEDULE OF NET POSITION
ENTERPRISE SUB -FUNDS
JUNE 30, 2017
50
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 67 of 219
Running
Sewer
Self
Debt
Expense
Construction
Insurance
Service Elimination
Total
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$1,115,613
$33,504,281
$6,726,433
$41,346,327
Short term investments
37,000,000
2,000,000
39,000,000
Accounts receivable
15,297,687
4,668,209
19,965,896
Interest receivable
$14,665
14,665
Parts and supplies
2,089,765
2,089,765
Prepaid expenses
3,459,464
3,459,464
Total current assets
58,962,529
40,172,490
6,726,433
14,665
105,876,117
NON-CURRENT ASSETS:
Restricted cash and equivalents
100,000
136,702
236,702
Restricted investments
4,856,450
4,856,450
Assessment Districts receivable
1,311,825
1,311,825
Net OPEB asset
3,652,571
3,652,571
CAPITAL ASSETS
Nondepreciable
55,650,848
55,650,848
Depreciable, net of accumulated depreciation
576,801,783
576,801,783
Total capital assets, net
632,452,631
632,452,631
Total non-current assets
636,205,202
1,311,825
4,993,152
642,510,179
TOTAL ASSETS
695,167,731
41,484,315
6,726,433
5,007,817
748,386,296
DEFERRED OUTFLOWS OF RESOURCES
Pension related
29,078,203
29,078,203
LIABILITIES
CURRENT LIABILITIES:
Accounts payable and accrued expenses
3,024,789
5,822,672
60,672
8,908,133
Interest payable
558,380
558,380
Refunding Water Revenue Bonds - current portion
2,405,000
2,405,000
Water Reclamation Loan Contract - current portion
182,377
182,377
Accrued compensated absences - current portion
457,000
457,000
Liability for uninsured claims
807,079
807,079
Refundable deposits
146,119
256,243
402,362
Total current liabilities
3,627,908
6,078,915
867,751
3,145,757
13,720,331
NON-CURRENT LIABILITIES:
Refunding Water Revenue Bonds, noncurrent portion
29,095,000
29,095,000
Accrued compensated absences, noncurrent portion
4,113,131
4,113,131
Net pension liability
87,847,116
87,847,116
Total noncurrent liabilities
91,960,247
29,095,000
121,055,247
TOTAL LIABILITIES
95,588,155
6,078,915
867,751
32,240,757
134,775,578
DEFERRED INFLOWS OF RESOURCES
Pension related
16,051,905
16,051,905
NET POSITION
Net investment in capital assets
632,452,631
(31,682,377)
600,770,254
Restricted for debt service
4,449,437
4,449,437
Unrestricted
(19,846,757)
35,405,400
5,858,682
21,417,325
TOTAL NET POSITION
$612,605,874
$35,405,400
$5,858,682
($27,232,940)
$626,637,016
50
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63
CENTRAL CONTRA COSTA SANITARY DISTRICT
COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
ENTERPRISE SUB -FUNDS
FOR THE YEAR ENDING JUNE 30, 2017
NONOPERATING REVENUES (EXPENSES)
Taxes
Permit and inspection fees
Interest earnings
Interest expense
Other income (expense), net
Total nonoperating revenues
NET INCOME (LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS
CAPITAL CONTRIBUTIONS AND TRANSFERS
City of Concord contributions to capital costs
Customer contributions to capital cost (SSC)
Contributed sewer lines
Capital contributions - connection fees
Transfers In (Out)
Total capital contributions and transfers
CHANGE IN NET POSITION
NET POSITION, BEGINNING OF YEAR
NET POSITION, END OF YEAR
Running
Sewer Self
Debt
16,318,874
2,181,221
Expense
Construction Insurance
Service Elimination
Total
OPERATING REVENUES
588,387
46,792
49,436
761,838
Sewer service charges (SSC)
$73,138,235
(1,313,398)
$73,138,235
Service charges - City of Concord
13,851,253
997,900
(997,900)
13,851,253
Other services charges
1,029,500
1,044,692
2,477,756 (997,900)
1,029,500
Miscellaneous charges
606,453
346,900
2,477,756
606,453
Total operating revenues
88,625,441
88,625,441
OPERATING EXPENSES
4,476,961
Sewage collection and pumping stations
16,826,922
12,151,144
16,826,922
Sewage treatment
25,631,809
2,899,042
25,631,809
Engineering
15,342,640
7,044,340
15,342,640
Recycled water
970,640
86,187
970,640
Administrative and general
24,181,287
$697,792
($997,900)
23,881,179
Pension expense
(4,080,558)
2,563,943
33,066,589
(4,080,558)
Depreciation
22,892,153
(29,796,883)
593,570,427
22,892,153
Total operating expenses
101,764,893
697,792
(997,900)
101,464,785
OPERATING INCOME (LOSS)
(13,139,452)
(697,792)
997,900
(12,839,344)
NONOPERATING REVENUES (EXPENSES)
Taxes
Permit and inspection fees
Interest earnings
Interest expense
Other income (expense), net
Total nonoperating revenues
NET INCOME (LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS
CAPITAL CONTRIBUTIONS AND TRANSFERS
City of Concord contributions to capital costs
Customer contributions to capital cost (SSC)
Contributed sewer lines
Capital contributions - connection fees
Transfers In (Out)
Total capital contributions and transfers
CHANGE IN NET POSITION
NET POSITION, BEGINNING OF YEAR
NET POSITION, END OF YEAR
51
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 68 of 219
$12,577,156
$3,741,718
16,318,874
2,181,221
419,667
2,600,888
77,223
588,387
46,792
49,436
761,838
(1,313,398)
(1,313,398)
910,655
55,589
997,900
(997,900)
966,244
3,169,099
13,640,799
1,044,692
2,477,756 (997,900)
19,334,446
(9,970,353)
13,640,799
346,900
2,477,756
6,495,102
4,476,961
4,476,961
12,151,144
12,151,144
2,899,042
2,899,042
7,044,340
7,044,340
30,640,630
(30,899,661)
172,844
86,187
33,539,672
(7,227,216)
172,844
86,187
26,571,487
23,569,319
6,413,583
519,744
2,563,943
33,066,589
589,036,555
28,991,817
5,338,938
(29,796,883)
593,570,427
$612,605,874
$35,405,400
$5,858,682
($27,232,940)
$626,637,016
51
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64
CENTRAL CONTRA COSTA SANITARY DISTRICT
Schedule of Running Expenses
Comparison of Budget and Actual Expenses by Department
June 30, 2017
52
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 69 of 219
Sewage
Variance
Sewage
Treatment
Pumping
Recycled
Favorable
Administration
Engineering
Collection
Plant
Station
Water
Total
Budget
(Unfavorable)
Salaries and Wages
$6,294,088
$8,764,886
$5,733,331
$9,693,046
$946,052
$362,933
$31,794,336
$33,158,707
$1,364,371
Employee Benefits
13,415,972
6,788,627
4,937,415
8,019,057
743,147
258,526
34,162,744
37,511,904
3,349,160
Less Capitalized
Overhead and Benefits
(30,775)
(3,409,675)
(38,720)
(135,518)
-
-
(3,614,688)
(3,744,593)
(129,905)
Total Salaries and Benefits
19,679,285
12,143,838
10,632,026
17,576,585
1,689,199
621,459
62,342,392
66,926,018
4,583,626
Directors' Fees and Expense
136,315
-
-
-
-
-
136,315
168,555
32,240
Chemicals
-
-
-
1,046,350
328,092
51,648
1,426,090
1,920,000 -
493,910
Utilities
116,383
180,819
164,312
3,416,933
610,841
191,526
4,680,814
4,315,790
(365,024)
Repairs and Maintenance
721,567
97,766
1,823,745
1,768,081
249,917
1,842
4,662,918
5,222,852
559,934
Hauling and Disposal
-
481,910
122,098
385,376
9,784
-
999,168
941,050
(58,118)
Professional and Legal Services 428,005
169,401
9,498
3,422
-
36,275
646,601
630,750
(15,851)
Outside Services
1,415,994
1,442,372
144,183
122,034
91,163
28,877
3,244,623
3,980,175
735,552
Self Insurance
920,000
-
-
-
-
-
920,000
920,000
-
Materials and Supplies
146,060
361,812
742,704
719,738
33,043
4,743
2,008,100
2,100,025
91,925
Other
617,678
464,722
121,705
593,290
54,612
34,270
1,886,277
2,685,703
799,426
Total
$24,181,287
$15,342,640
$13,760,271
$25,631,809
$3,066,651
$970,640
$82,953,298
$89,810,918
$6,857,620
52
November 21, 2017 Regular FINANCE Committee Meeting Agenda Packet - Page 69 of 219
CENTRAL CONTRA COSTA SANITARY DISTRICT
RUNNING EXPENSE
SCHEDULE OF SUPPLEMENTAL NET POSITION ANALYSIS
FOR THE FISCAL YEAR ENDED NNE 30, 2017
Prior Year Balance
2016 - 2017 Revenue
2016 - 2017 Expense
Add Back Depreciation Expense
Net Position Attributed to General Operations
Net Position Attributed to All Other
Running Expense Net Position
Page 68 of 80
65
$16,434,521
$91,794,540
(101,764,893)
22,892,153 12,921,800
29,356,321
583,249,553
$612,605,874
53
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CENTRAL CONTRA COSTA SANITARY DISTRICT
MEMORANDUM ON INTERNAL CONTROL
AND
REQUIRED COMMUNICATIONS
FOR THE YEAR ENDED
JUNE 30, 2017
November 16, 2017 Review Draft 12:17:41 PM
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CENTRAL CONTRA COSTA SANITARY DISTRICT
MEMORANDUM ON INTERNAL CONTROL
AND
REQUIRED COMMUNICATIONS
For the Year Ended June 30, 2017
Table of Contents
Page 71 of 80
Page
Memorandum on Internal Control...................................................................................................
l
Scheduleof Other Matters.......................................................................................................3
Required Communications...............................................................................................................
5
SignificantAudit Findings..........................................................................................................5
AccountingPolicies................................................................................................................
5
Unusual Transactions, Controversial or Emerging Areas.....................................................6
AccountingEstimates.............................................................................................................
6
Disclosures..............................................................................................................................
6
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................................................7
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U1. M ACZTE
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, 2017, and have issued our report thereon dated November 16, 2017. In planning and performing
our audit of the financial statements of the District as of and for the year ended June 30, 2017, 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 16, 2017
T 925.930.0902
Accountancy Corporation F 925.930.0135
3478 Buskirk Avenue, Suite 215 1 e maze@mazeassociates.com
Pleasant Hill, CA 94523 w mazeassociates.com
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CENTRAL CONTRA COSTA SANITARY DISTRICT
SCHEDULE OF OTHER MATTERS
FOR THE YEAR ENDED JUNE 30, 2017
2017-01: 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 a significant 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 — Accountinz and Financial Reportinz for Postemployment 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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N MAZE
&ASSOCIATES
REQUIRED COMMUNICATIONS
To the Board of Directors
Central Contra Costa Sanitary District
Martinez, California
We have audited the basic financial statements of the Central Contra Costa Sanitary District (District) for
the year ended June 30, 2017. 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:
The following Governmental Accounting Standards Board (GASB) pronouncement became effective and
did have a material effect on the financial statements as discussed in Note 10:
GASB 74 — Financial Reporting for Post -employment BeneFt Plans Other Than Pension
Plans
The objective of this Statement is to improve the usefulness of information about
postemployment benefits other than pensions (other postemployment benefits or OPEB) included
in the general purpose external financial reports of state and local governmental OPEB plans for
making decisions and assessing accountability. 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 interperiod equity, and creating
additional transparency.
With the implementation of GASB 74, the District was required to report its OPEB trust held with the
Public Agency Retirement System (PARS) as a fiduciary fund — see the Statements in Fiduciary Net
Position and Statements of Changes in Fiduciary Net Position. GASB 74 also required changes to the
District's footnote disclosures including Note 2 — Cash and Investments, and Note 10 — Post Employment
Health Care Benefits.
The following Governmental Accounting Standards Board (GASB) pronouncements became effective
and did not have a material effect on the financial statements:
GASB 77 - Tax Abatement Disclosures
Financial statement users need information about certain limitations on a government's ability to
raise resources. This includes limitations on revenue -raising capacity resulting from government
programs that use tax abatements to induce behavior by individuals and entities that is beneficial
T 925.930.0902
Accountancy Corporation F 925.930.0135
3478 Buskirk Avenue, Suite 215 5 E maze@mazeassociates.com
Pleasant Hill, CA 94523 w mazeassociates.com
N&YKVRT Regular FINANCE Committee Meeting Agenda Packet - Page 79 of 219 11/16
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to the government or its citizens. Tax abatements are widely used by state and local governments,
particularly to encourage economic development. For financial reporting purposes, this Statement
defines a tax abatement as resulting from an agreement between a government and an individual
or entity in which the government promises to forgo tax revenues and the individual or entity
promises to subsequently take a specific action that contributes to economic development or
otherwise benefits the government or its citizens.
GASB 82 - Pension Issues—an amendment of GASB Statements No. 67, No. 68, and No. 73
The objective of this Statement is to address certain issues that have been raised with respect to
Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial
Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and
Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain
Provisions of GASB Statements 67 and 68. Specifically, this Statement addresses issues regarding
(1) the presentation of payroll -related measures in required supplementary information, (2) the
selection of assumptions and the treatment of deviations from the guidance in an Actuarial
Standard of Practice for financial reporting purposes, and (3) the classification of payments made
by employers to satisfy employee (plan member) contribution requirements.
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.
Accounting 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,
2017. The value of the District's net pension liability was obtained from an actuarial valuation provided
by CCCERA.
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, 2017. 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.
Disclosures
The financial statement disclosures are neutral, consistent, and clear.
0
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Difficulties Encountered in Performing 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 in a management
representation letter dated November 16, 2017.
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.
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.
7
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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 16, 2017
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