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HomeMy WebLinkAbout; ; 1989-1990 CMWD CAFR; 1990-06-30' ^.'"vairifc- ^ ' "T^3r*\. Ik- Allan O. Kelly Operations Center Dedicated July 18, 1990 CARLSBAD MUNICIPAL WATER DISTRICT Comprehensive Annual Financial Report for Fiscal Year Ending June 30, 1990 Comprehensive Annual Financial Report for Fiscal Year Ending June 30, 1990 Table of Contents Introductory Section Transmittal Letter A-l District Purposes and Powers A-2 District Officials A-3 District Organizational Chart A-4 Financial Section Auditor's Opinion B-l Balance Sheets B-2 Statement of Operations B-4 Statement of Changes in Equity B-5 Statement of Cash Flows B-6 Statements of Changes in Financial Position B-7 Notes to Financial Statements B-8 Water Treatment, Transmission and Distribution, and Administrative and General Expenses B-25 Improvement Districts' Balance Sheet B-26 Improvement Districts' Statement of Revenues and Expenditures B-27 Supplemental Section Water Purchases (1985/86 thru 1989/90) C-l Agricultural Usage (1985/86 thru 1989/90) C-2 Water Purchases and Agricultural Usage - Graph C-3 Cost of Purchased Water (1985/86 thru 1989/90) C-4 Employee Summaries C-5 Introductory Section - A ^/?<V Carlsbad v/(\? Municipa Water District%V/"*, — <$? 5950 E! Camino Real, Carlsbad, CA 92008 ^ M/ATt*Engineering: (619) 438-3367 Administration: (619) 438-2722 Fax: (619) 431-1601 Board of Directors Carlsbad Municipal Water District 5950 El Camino Real Carlsbad, CA 92008 Fiscal Year 1988-90 was another year in which the District took great strides in a wide variety of areas, and at the same time continued to enjoy its sound financial condition. In particular, the District confirmed its commitment to capital project construction with the completion of numerous improvements. Construction projects initiated during the year will benefit existing consumers by upgrading the current distribution system and ensure future consumers that the facilities will be in place to meet projected needs. Existing consumers will benefit by the replacement of the major pipeline in El Camino Real from Palomar Airport Road to Tamarack. In preparation for the future, the Allan O. Kelly Operations Center was completed that includes a state-of-the-art telemetry system for water distribution system monitoring that is unsurpassed by any other water agency in the County. Additionally, the first phase of the improvements to the District's 195 million-gallon Maerkle Reservoir was completed with the construction of a 10 million-gallon reservoir. This is the first in a series of projects to that crucial component of the water system. Also, an application was filed during the year for a low-interest loan from the State of California for the construction of reclaimed water facilities. This as well as the other actions are all significant portions of Carlsbad's water resource planning efforts. Also during the year, the District's public education programs were tested with the declaration of a Stage II-Water Alert in response to the current drought conditions. In conjunction with the San Diego County Water Autority, consumers in our service area were asked to reduce demands by 10%. Over the summer months, which go beyond the 1989-90 fiscal year, demands were reduced by 9.5% in comparison to those experienced during the same period hi previous years. More important, consumers in the District took steps toward permanently altering their water use habits by creating a new water ethic for Carlsbad. Special recognition should be given to members of the District's Board of Directors and Water Commission for their assistance in giving the policy direction needed in these vital undertakings. In addition, the staff at the District should receive accolades for their hard work during the year, for without them, none of these activities could have occurred. Sncerely, A-l Robert J. Greaney' ' / General Manager/District Engineer "Serving Carlsbad for over 35 years" District Purposes and Powers The Carlsbad Municipal Water District (formerly Costa Real Municipal Water District) was formed March 22, 1954, under the Municipal Water District Act of 1911, to apply for water service from the San Diego County Water Authority. Local water sources had been utilized to the extent that an alternate supply was required to meet the demands of Carlsbad. Now in its 35th year of service, the District has kept pace with the phenomenal demands of an area that is experiencing tremendous growth. However, just as significantly, the District has retained a "work ethic" that meets the extremely high level of service that the residents Carlsbad have grown accustomed to receiving. This commitment, on the part of all public service providers in the City, has contributed to the evolution of Carlsbad into one of the most desirable communities in all of San Diego County. The District's Board of Directors sets all rates and fees which are required for opera- tions and maintenance of District facilities, principal and interest on debt obligations, and system replacement and expansion. Expenditures are funded from the various revenue sources available to the District dependent upon the project's beneficiary. Projects that benefit future residents in the form of new construction or expansion of existing facilities are funded by fees collected when a building permit is issued. Likewise, the replacement of existing projects and the day-to-day operations of the District are funded primarily by property taxes and water rates. This system ensures equitable financing of all District activities. A-2 Carlsbad Municipal Water District Listing of District Officials Board of Directors Claude "Bud" Lewis, President Ann Kulchin, Vice President Eric Larson John Mamaux Mark Pettine Water Commission John Henley, Chair Fred Maerkle, Vice Chair Margaret Bonas Roger Greer E.J. Woodward Jr. Officials Raymond Patchett, Executive Manager Robert Greaney, General Manager / District Engineer Geoffrey Poole, Administrative Manager Kurt Musser, Superintendent F. Jerry Whitley, Engineering Manager A-3 Carlsbad Municipal Water District Organizational Chart p — — - — -i• Administrative Engineering iGeneral Manager/1 ' District Engineer ' r Water ~I Commission II i 11-27-90 Financial Section - B CARLSBAD MUHICIPAL WATER DISTRICT Financial Statements and Schedules June 30, 1990 and 1989 (With Independent Auditors' Report Thereon) KPMG Peat Marwick Certified Public Accountants North County Office: Telephone 619 931-8700 Telecopier 619 438-4298 2011 Palomar Airport Road Carlsbad, CA 92008 Independent Auditors' Report The Board of Directors Carlsbad Municipal Water District: We have audited the accompanying balance sheets of Carlsbad Municipal Water District as of June 30, 1990 and 1989, and the related statements of operations, and changes in equity for the years then ended, the statement of cash flows for the year ended June 30, 1990, and the statement of changes in financial position for the year ended June 30, 1989. These component unit financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these component unit financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the component unit financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the component unit financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall component unit financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the component unit financial statements referred to above present fairly, in all material respects, the financial position of Carlsbad Municipal Water District at June 30, 1990 and 1989, and the results of its operations for the years ended June 30, 1990 and 1989, its cash flows for the year ended June 30, 1990 and its changes in financial position for the year ended June 30, 1989 in conformity with generally accepted accounting principles. As discussed in Note I to the component unit financial statements, the District adopted Statement of Governmental Accounting Standards No. 9 "Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities that use Propriety Fund Accounting" in 1990. Our audits were made for the purpose of forming an opinion on the component unit financial statements taken as a whole. The current year's supplementary information included in Schedules 1 through 3 is presented for purposes of additional analysis and is not a required part of the component unit financial statements. Such supplementary information, except for that portion marked "unaudited," on which we express no opinion, has been subjected to the auditing procedures applied in the audits of the component unit financial statements and, in our opinion, is fairly stated in all material respects in relation to the component unit financial statements taken as a whole. September 28, 1990 , • • • B-l Member Firm of Klvnvefd Peat Marwick Goerdeler CARLSBAD MUNICIPAL WATER DISTRICT Balance Sheets June 30, 1990 and 1989 Assets Current assets: Cash (note 2) Investments (note 2) Accounts receivable Inventories Total current assets Current restricted assets: Cash (notes 2 and 6) Investments (notes 2 and 6) Interest receivable Contract receivable Total current restricted assets Restricted assets: Investments (notes 2 and 6) Deferred compensation investment (note 9) Utility plant (notes 1 and 3): Property and equipment, at cost, net of accumulated depreciation Construction in progress Total utility plant 1990 $ 209,356 8,280,302 2,095,605 191.805 26,289 2,252,169 214,456 2.492.914 1,339,059 862.010 2.201.069 30,340,339 8.914.026 39.254.365 $ 54.725.416 1989 349,791 12,007,904 1,956,247 162.050 10.777.068 14.475.992 24,424 1,617,815 227,981 3.125 1.873.345 5,656,934 646.967 6.303.901 26,515,277 2.352.005 28.867.282 51.520.520 B-2 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Balance Sheets, Continued June 30, 1990 and 1989 Liabilities and Equity Current liabilities: Accounts payable Current portion of certificates of participation payable (note 4) Current portion of note payable Interest payable Accrued expenses Construction deposits 1990 L989 740,598 610,000 - 153,188 326,040 152.218 1,074,602 575,000 20,502 160,270 280,848 155.914 Total current unrestricted liabilities 1,982,044 2,267,136 Current liabilities payable from restricted assets: Current portion of bonds payable (note 5) Accrued interest and unredeemed bonds and bond coupons Total current liabilities Certificates of participation payable, net of unamortized issuance costs of $400,650 in 1990 and $427,361 in 1989 (note 4) Bonds payable (note 5) Deferred compensation payable (note 9) Total liabilities Equity: Equity in utility plant Retained earnings: Reserved (note 6) Unreserved: Designated (note 6) Undesignated Total equity 623,000 35.308 12,299,350 40,000 862.010 28,015,703 1,154,420 9,245,371 468.210 38.883.704 $ 54.725.416 65,000 36.005 2,640,352 2,368,141 12,882,639 663,000 646.967 15.841.712 16.560.747 18,880,916 1,135,886 14,399,413 543.558 34.959.773 51.520.520 See accompanying notes to financial statements. B-3 CARLSBAD MUNICIPAL WATER DISTRICT Statements of Operations . Years ended June 30, 1990 and 1989 Operating revenues: Water sales Cost of water purchased Gross margin from water sales Other operating revenues: Facilities revenue Miscellaneous revenue Operating expense: Water treatment Transmission, distribution and maintenance Administrative and general Reimbursement agreement Depreciation Loss on disposal of assets Total operating expense Net income from operations Other income (expense): Property taxes Interest earned Rent Interest expense, net of capitalized interest Amortization of issuance costs Total other income, net Income before extraordinary item Extraordinary item - increased principal on early extinguishment of debt (note 4) Net income 1990 $ 6,513,806 4.969.862 2,661,294 194.595 4.399.833 74,346 965,444 1,163,687 24,561 648,974 82.908 2.959.920 1.439.913 668,427 1,524,172 19,775 (645,557) (26.710) 1.540.107 2,980,020 1989 5,996,772 4.166.065 1,543,944 1,830,707 2. 980. 020 2,225,380 214.026 4.270.113 118,900 909,694 994,353 74,723 604,766 2.702.436 1.567.677 637,989 1,727,611 18,400 (951,782) (23. 275") 1.408.943 2,976,620 1.812.322 .164.298 See accompanying notes to financial statements. B-4 CARLSBAD MUNICIPAL WATER DISTRICT Statements of Changes in Equity For the years ended June 30, 1990 and 1989 Balance at June 30, 1988 Net income Contribution of assets Transfer pursuant to debt agreements Transfer to fund current year's depreciation expense Transfer to designated retained earnings (note 6) Balance at June 30, 1989 Net income Contribution of assets Transfer pursuant to debt agreements Transfer from undesignated retained earnings for major facilities and replacement project fees (note 6) Transfer from designated retained earnings for capital expenditures (note 6) Balance at June 30, 1990 Equity in Utility Plant $ 17,150,623 1,125,527 Retained Earnings Unreserved- Unreserved- Designated UndesiqnatedReserved 1,091,341 Total 1,951,695 12,476,289 32,669,948 1,164,298 1,164,298 1,125,527 44,545 - (44,545) 604,766 - - (604,766) 12.447.718 (12.447.718) 18,880,916 1,135,886 14,399,413 543,558 2,980,020 943,911 - - 34,959,773 2,980,020 943,911 18,534 - (18,534) 2,661,294 (2,661,294) 8.190.876 . (7.815.336) (375.540) - $ 28.015.703 1.154.420 9.245.371 468.210 38.883.7Q4 See accompanying notes to financial statements. B-5 CARLSBAD MUNICIPAL WATER DISTRICT Statement of Cash Flows For the year ended June 30, 1990 Cash flows from operating activities: Net income from operations $ 1,439,913 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 675,684 Increase in receivables (136,684) Increase in inventories (29,755) Decrease in accounts payable and accrued expenses (288,812) Increase in deferred compensation payable 215.043 Net cash provided by operating activities 1.875.389 Cash flows from noncapital financing activities: Property taxes received 668,427 Rent received 19.775 Net cash provided by noncapital financing activities 688.202 Cash flows from capital and related financing activities: Acquisition and construction of capital assets (9,700,106) Principal payments on bonds (70,000) Interest paid on bonds (1,046,242) Decrease in construction deposits (3,696) Decrease in notes payable (20,502) Principal payments on certificate of participation (575,000) Increase in unredeemed coupons and bonds payable 1.867 Net cash used in capital and related financing activities (11.413.679) Cash flows from investing activities: Net decrease in investments 7,042,234 Interest on investments 1.510.647 Net cash provided by investing activities 8,552,881 Net decrease in cash (297,207) Cash and cash equivalents at beginning of period 8.583.324 Cash and cash equivalents at end of period $ 8.286.117 Supplemental schedule of noncash investing and financing activities - Capital assets contributed by contractors $ 943.911 See accompanying notes to financial statements. B-6 CARLSBAD MUNICIPAL WATER DISTRICT Statement of Changes in Financial Position Year ended June 30, 1989 Sources of working capital: Net income before extraordinary item $ 2,976,620 Depreciation 604,766 Amortization 23.275 Working capital provided by operations before extraordinary loss 3,604,661 Extraordinary item, net of write-off of issuance costs 1.463.189 Working capital provided by operations 2,141,472 Contributed utility plant 1,125,527 Issuance of refunding certificate of participation payable 14,370,000 Increase in deferred compensation payable 178.920 Total sources of working capital 17.815.919 Uses of working capital: Issuance costs paid with debt proceeds 427,361 Certificates of participation payable defeased 11,650,000 Additions to utility plant, net 3,636,240 Increase in restricted assets 224,478 Current maturity of long-term debt 70,000 Decrease in current liabilities payable from restricted assets 2,332 Current maturity of certificates of participation payable 1.060.OOP Total uses of working capital 17.070.411 Increase in working capital $ 745.508 Increase (decrease) in working capital: Cash (41,161) Investments 1,392,176 Accounts receivable 241,524 Inventories (29,133) Accounts payable (530,105) Current portion of certificates of participation payable (225,000) Current portion of note payable 200 Accrued expenses and interest payable (69,130) Construction deposits 6.137 Increase in working capital $ 745.508 See accompanying notes to financial statements. B-7 CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements June 30, 1990 and 1989 (1) Reporting Entity and Summary of Significant Accounting Policies (a) Reporting Entity; The Carlsbad Municipal Water District, (the District) of the City of Carlsbad (City) operates under a water service agreement with the City wherein the District provides all capital facility financing and development, operation and maintenance and planning for the consolidated water system, and the City provides all customer service functions for essentially the entire City of Carlsbad. The District is a member of the San Diego County Water Authority, from whom it purchases its water. On January 1, 1990, the District was established as a component unit of the City. The City and the District continued to function as separate entities for reporting purposes until December 31, 1989. The District is an integral part of the reporting entity of the City. The accounts of the District have been included within the scope of the general purpose financial statements of the City because the City Council exercises oversight responsibility over the operations of the District. Only the accounts of the District are included herein; therefore, these financial statements do not purport to represent the financial position or results of operations of the City of Carlsbad. The District maintains two fund types which are combined on the face of the financial statements, the description of which is as follows: (1) General Fund - The general fund is used to account for the major portion of District operations which are financed and operated in a manner similar to that of a private business enterprise. The intent of the District is to establish rates and fees sufficient to provide for payment of general District operations and maintenance expenses as well as required annual debt service. (2) Improvement District Funds - Improvement district funds are used to account for the financing of public improvements as set forth in original bond covenants as established by voter approval. The District accounts for the activity related to each improvement district's debt and acquisition appropriations within separate improvement district funds. B-8 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (1) Reporting Entity and Summary of Significant Accounting Policies. Continued (b) Summary of Significant Accounting Policies: The accounting policies of the District conform to generally accepted accounting principles as applicable to single enterprise funds. Revenues and expenses are recorded on the accrual basis of accounting. Resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. (i) Investments; Investments are recorded at cost, which approximates market value. (ii) Inventories; Inventories of materials are stated at weighted average cost. Inventory of water is stated on a lower of cost (last-in, first-out) or market basis. (iii) Utility Plant; Utility plant is stated at cost or, if donated, at estimated fair market value at date of transfer. Expenditures for improvements and betterments (including labor and overhead) are capitalized. Maintenance, repairs and minor improvements are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. (iv) Vacation and Sick Leave; The District records a liability equal to 100 percent of eligible vacation and sick leave available to employees. (v) Interest Earned; The District maintains centralized cash and investment accounts in order to maximize investment return. The District allocates interest earned among the various funds based on each fund's share of the cash and investment balance. (vi) Statement of Cash Flows and Cash Equivalents; In September 1989, the Governmental Accounting Standards Board issued Statement No. 9, "Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental B-9 .. (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (1) Reporting Entity and Summary of Significant Accounting Policies. Continued (b) Summary of Significant Accounting Policies. Continued; (vi) Statement of Cash Flows and Cash Equivalents. Continued; Entities that Use Proprietary Fund Accounting." Effective June 30, 1990, the District prospectively adopted the provisions of Statement No. 9 and has presented a statement of cash flows instead of the statement of changes in financial position for the year ended June 30, 1990. The District has elected not to restate the statement of changes in financial position for the year ended June 30, 1989. For purposes of the statement of cash flows, cash and cash equivalents consists of cash on hand, Local Agency Investment Fund and County Treasurer Investment Pool. (vii) Issuance Costs; Issuance costs of the 1988 COP are amortized using a straight-line method over the 16-year life of the issue. (2) Cash and Investments Authorized deposits and investments of the District are governed by the California Government Code as well as policies set forth by the Board of Directors. Within the contents of these limitations, permissible investments include: obligations of the U.S. Treasury, agencies and instrumentalities, bankers' acceptances, commercial paper rated A-1+ by Standard and Poor's Corporation or P-l by Moody's Commercial Paper Record, and certificates of deposit issued by nationally or state-chartered banks or federal or state savings and loans associations. Funds may also be invested in the State Treasury's Local Agency Investment Fund and the County Treasurer Investment Pool. In order to diversify the District's portfolio, a policy was adopted which provides for the District to only hold deposits and investments totalling up to 30% of total available investment capital at any one bank or savings and loan, up to the lesser of $5,000,000 or 50% of total available investment capital in the Local Agency Investment Fund and the option to invest with a registered investment advisory firm. B-10 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (2) Cash and Investment. Continued State statutes require that all deposits be insured or collateralized. Depositories holding public funds on deposit are required to maintain collateral in the form of a pool of securities with the agent of the depository having a market value of at least 10 to 50 percent in excess of the total amount of all public funds on deposit. The District's deposits are entirely insured or collateralized. A summary of cash and investments is as follows: 1990 1989 Deposits: Cash $ 235,645 374,215 Time certificates of deposit 2.482,000 4.855.000 2,717,645 5,229,215 Investments 10.251,540 15.074.620 12,969,185 20,303,835 Less restricted portion 4.479,527 7.946.140 Unrestricted cash and investments $ 8.489.658 12.357.695 Deposits: The following summary presents the amount of the District's deposits which are fully insured or collateralized with securities held by the District or its agent in the District's name (Category One), those deposits which are collateralized with securities held by the pledging financial institution's trust department or agent in the District's name (Category Two), and those deposits which are not collateralized or are collateralized with securities held by the pledging financial institution or its trust department or agent but not in the District's name (Category Three) at June 30, 1990. B-ll (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (2) Cash and Investments. Continued Cash Time certificates of deposit Investments; Category One 126,290 2.482.000 Two Three 143,647 Total Bank 269,937 2.482.000 Carrying Amount 235,645 2,482.000 $ 2.608.290 2.751.937 The District categorizes investments according to the level of risk assumed by the District. Category One includes investments that are insured, registered or held by the District's agent in the District's name. Category Two includes uninsured and unregistered investments held by the counterparty's trust department or agent in the District's name. Category Three includes uninsured and unregistered investments held by the counterparty, its trust department or its agent, but not in the District's name. Certain investments have not been categorized because securities are not used as evidence of the investment. These uncategorized investments include ownership interests in pooled investment funds. The summary below identifies the level of risk assumed by the District and the total carrying amount and market value of the District's investments at June 30, 1990. Local agency investment fund County treasurer investment pool U.S. Treasury Bills Money Market Fund Deferred compensation investment fund Total Category One Two Three 1,221,876 117,182 $ 1.339.058 Invest-ments Market 5,000,000 5,000,000 5,000,000 3,050,472 3,050,472 3,050,472 1,221,876 1,239,269 117,182 117,215 862.010 862.010 862.010 8.912.482 1Q.251.54Q 10.268.966 B-12 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (3) Utility Plant A summary of utility plant and the related accumulated depreciation as of June 30, 1990 and 1989 follows: Cost of participation - San Diego Water Authority Land and easements Reservoirs and dams Pipelines and pumping stations Chlorination stations Meters and accessories Buildings Machinery and equipment Office fixtures and equipment Less accumulated depreciation Construction in progress Net utility plant 1990 33,175 1,023,186 9,650,951 20,615,977 83,267 662,810 2,206,372 823,589 410.777 35,510,104 5.169.765 30,340,339 8.914.026 33,175 322,007 9,717,095 19,185,582 83,267 662,810 303,686 665,977 193.668 31,167,267 4.651.990 26,515,277 2.352.005 $ 39.254.365 28.867.282 Interest costs incurred during construction of the District's projects have been capitalized as costs of acquiring the assets and such costs will be amortized on a straight-line basis over the life of the related assets. Interest costs of $391,040 and $91,475 were capitalized in 1990 and 1989, respectively. Total interest costs incurred, including capitalized amounts during these same periods, were $1,036,597 and $1,043,257, respectively. B-13 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements. Continued (3) Utility Plant. Continued Depreciation is computed on the straight-line method over the estimated lives of the respective assets, as follows: Estimated Assets useful lives Reservoirs and dams 75 years Pipelines and pumping stations 50 years Chlorination stations 25 to 40 years Meters and accessories 25 to 40 years Buildings 40 years Machinery and equipment 5 to 20 years Office fixtures and equipment 5 to 10 years (4) Certificates of Participation In November 1988, the District issued $14,370,000 in Certificates of Participation (1988 COP). A portion of the proceeds were used to refund $12,000,000 of the outstanding 1984 Certificates of Participation (1984 COP). The District deposited funds in an irrevocable trust with an escrow agent to provide for all future service payments on the 1984 COP. As a result, the 1984 COPs are considered to be defeased and the liability for those certificates are not included in the District's financial statements. At June 30, 1990, $11,250,000 of outstanding 1984 COPs are considered defeased. The 1988 COPs bear interest ranging from 5.6% to 7.3% per year, payable semi-annually on May 1 and November 1, beginning May 1, 1989. Principal payments are payable annually through May 1, 2004. The debt agreement stipulates that the District adhere to specified covenants. At June 30, 1990, the District was in compliance with these requirements. Although the advance refunding resulted in increased principal payments of approximately $1,812,000 which is reflected in the statement of operations for the year ended June 30, 1989, the District in effect reduced its aggregate debt service payments by $3,229,000 over the next 15 years and obtained an economic gain (difference between the present values of the old and new debt service payments) of $609,000. B-14 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (4) Certificates of Participation. Continued Maturities of the 1988 COPs during the years subsequent to June 30, 1990 are as follows: 1991 $ 610,000 1992 645,000 1993 685,000 1994 730,000 1995 775,000 Thereafter 9.865.000 $ 13.310.000 (5) Bonds Payable Bonds payable at June 30, 1990 comprise the following individual issues: Improvement District 2 Improvement Improvement Series 2 District 3 District 4 Total Date of issue 1961-Series 2 1961 1961 Coupon interest rate 4.5% 4.75 & 5.0% 3.5 & 4.0% Interest payment dates 5/1 & 11/1 3/1 & 9/1 6/1 & 12/1 Principal payment dates 5/1 3/1 12/1 Authorized $ 425,000 1,000,000 690,000 2,115,000 Authorized - unissued - (200.000) - (200.000) Original issue 425,000 800,000 690,000 1,915,000 Redeemed as of June 30, 1990 (400.000) (242.000) (610.000) (1.252.000) Outstanding as of June 30, 1990 25,000 558,000 80,000 663,000 Less current portion (25.000) (558.000) (40.000) (623.000) Long-term portion $ - - 40.000 40.000 Minimum annual principal payments for retirement of outstanding bonds as of June 30, 1990 are as follows: Fiscal Years Ending June 30. 1991 1992 Total Series 2 1961 $ 25,000 $ 25.000 B-15 1961 558,000 558.000 1961 40,000 40.000 80.000 Total 623,000 40.000 663.000 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (5) Bonds Payable. Continued A sinking fund was established in conjunction with the issuance of bonds for Improvement District No. 3. Board Resolution No. 128 prescribes the establishment of the sinking fund for the payment of debt as it becomes due. (6) Reserved/Designated Retained Earnings The following is a summary of reserved/designated retained earnings as of June 30, 1990 and 1989: 1990 1989 Reserved for debt agreements: Sinking Fund $ - 539,466 Debt Service 623,702 65,702 Acquisition 530.718 530.718 1.154.420 1.135.886 Designated for: Contingencies 1,856,112 1,710,004 Construction 500,000 500,000 Major Facilities Charges 6,534,955 8,889,445 Replacement Projects 354,304 3,230,737 Fully reserved assets -. 69.227 9.245.371 14.399.413 $ 10.399.791 15.535.299 The following reserves have been established pursuant to debt agreements: (a) Sinking Fund; This reserve was established in conjunction with the issuance of bonds for Improvement District No. 3. Funding of the sinking fund during fiscal 1989 was by proceeds from property taxes and transfers of interest from the general fund. (b) Debt Service; These reserves were established in conjunction with the various bond issues. The reservations are restricted to the payment of current bond service requirements. B-16 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (6) Reserved/Designated Retained Earnings. Continued (c) Acquisition; The original bond issues of the District were for the purpose of acquisition of facilities. To date, through various reimbursements to these acquisition funds, there remains $530,718 reserved for acquisition purposes. The following designations of retained earnings have been established: (a) Contingencies; During fiscal 1990 and 1989, the Board of Directors designated an amount equal to 25% of the subsequent years annual operating budget. This appropriation was made to offset the "stand by" fees which are now kept by the City of Carlsbad as part of the Water Service Agreement (Note 7). The "stand by" fees provide a source of revenue even if water sales were significantly reduced. Amounts appropriated are to be used for operations in the event of a temporary decline in water revenue from an unforeseen event. (b) Construction: During fiscal 1985, the Board $500,000 to be used for em appropriated are only to of Directors designated an amount of =rgency capital improvements. Amounts De used for significant non-recurring items which are not included in the operating budget. (c) Major Facilities Charges: During fiscal 1984, the Board of Directors established a program for funding the construction of new major facilities. The balance of $6,534,955 at June 30, 1990 is the cumulative result of the fees collected and expenditures identified as major facilities during the period that this program has been in place. (d) Replacement Projects; During fiscal 1984, the Board of Directors established a program for funding replacement projects. The balance of $354,304 at June 30, 1990 is the cumulative result of fees collected and expenditures identified as replacement projects during the period that this program has been in place. B-17 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (7) Agreement With the City of Carlsbad As part of an agreement with the City of Carlsbad, the City has set aside a water utility fund, approximately $4,700,000 as of June 30, 1990, for the District for the acquisition and construction of certain specific projects which will benefit the District. This agreement also specified that if and when a piece of property presently held by the City is sold or leased, all proceeds will be donated to the District. (8) Defined Benefit Pension Plan (a) Plan Description; The District contributes to the California Public Employees' Retirement System (PERS), an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for participating public entities within the state of California. For the years ended June 30, 1990 and 1989, the District's payroll for employees covered by the PERS was $1,047,044 and $1,026,090, respectively. Total payroll for the same period was $1,152,725 and $1,069,408, respectively. All full-time District employees are eligible to participate as members of the PERS. Benefits vest after 5 years of service. District employees who retire at or after age 60 with 5 years of credited service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 2% of their average salary during their last 12 months of employment or another period of 12 months selected by the member if the average pay rate was higher. The PERS also provides death and disability benefits. These benefit provisions and all other requirements are established by state statute and District ordinance. District employees contribute 7% of their annual salary to the PERS. This is paid by the District for the benefit of the employees in lieu of salary. The District is required to contribute the remaining amounts necessary to fund the benefits for its members, using the actuarial basis recommended by the PERS actuaries and actuarial consultants and adopted by the Board of Administration. B-18 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (8) Defined Benefit Pension Plan, Continued (b) Funding Status and Progress; The amount shown as the "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and step-rate benefits, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of the PERS on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due and make comparisons among employers. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the PERS. The pension benefit obligation was computed as part of an actuarial valuation performed as of June 30, 1989. Significant actuarial assumptions used in the valuation include: (1) A rate of return on the investment of present and future assets of 8.5% a year compounded annually; (2) Projected salary increases of 5% a year compounded annually, attributable to inflation; (3) Additional projected salary increases of 2% a year, attributable to seniority/merit, and (4) No post-retirement benefit increases. B-19 - (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (8) Defined Benefit Pension Plan, Continued (b) Funding Status and Progress. Continued; Assets in excess of the pension benefit obligation applicable to the District's employees was $75,724 at June 30, 1989 (the date of the latest actuarial valuation), as follows: Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits $ 459,979 Current employees: Accumulated employee contributions, including allocated investment earnings 422,880 Employer-financed vested 197,852 Employer-financed nonvested 61.012 Total pension benefit obligation 1,141,723 Net assets available for benefits, at cost (market value, $1,426,848) 1.217.447 Assets in excess of the pension benefit obligation $ 75.724 (c) Actuariallv Determined Contribution Requirements and Contribution Made; PERS uses the Entry Age Normal Actuarial Cost Method which is a projected benefit cost method. It takes into account those benefits that are expected to be earned in the future as well as those already accrued. According to this cost method, the normal cost for an employee is the level amount which would fund the projected benefit if it were paid annually from date of employment until retirement. PERS uses a modification of the Entry Age Cost Method in which the employer's total normal cost is expressed as a level percentage of payroll. B-20 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (8) Defined Benefit Pension Plan. Continued (c) Actuariallv Determined Contribution Requirements and Contribution Made, Continued; PERS also uses the level percentage of payroll method to amortize any unfunded actuarial liabilities. At June 30, 1990 and 1989, the District did not have any unfunded actuarial liabilities. The amortization period of the unfunded actuarial liability ends on June 30, 1990 for the prior service benefit and June 30, 2000 for other benefits. The significant actuarial assumptions used to compute the actuarially determined contribution requirement are the same as those used to compute the pension benefit obligation as described above. The actuarially determined employer and employee contributions applicable to the District at June 30, 1990 and 1989 were as follows: Required normal cost contribution Less overfunding Total required contributions Contributions made by the District Contributions made by the employees Total actual contributions 1990 1989 Contri- butions 80,738 (55.420) Covered Payroll Contri- butions 7.7 % 73,112 :5.3)% (39,071) 2.4 % 80,826 7.7 % 76,956 73.374 7.0 % 66.363 Covered Payroll 7.8 % 3.6 % 8.2 % 7.1 % $ 154.200 14.7 % 143.319 13.3 % B-21 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (8) Defined Benefit Pension Plan. Continued (c) Actuariallv Determined Contribution Requirements and Contribution Made. Continued: The District has a surplus as a result of prior year actuarial gains. In order to maintain a level pattern of contributions, the District has chosen not to apply it to fully offset the current years contributions. Trend information gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. Ten-year historical trend information is not available from the California Public Employees Retirement System; therefore, only the available information is presented. Fiscal year ended June 30. 1989 1988 1987 Net assets available for benefits (at cost) $ 1,217,447 981,451 823,110 Pension benefit obligation (PBO) 1,141,723 941,218 749,880 Net assets as a % of PBO 106.6% 104.3% 109.8% Assets in excess of pension benefit obligation 75,730 40,240 73,240 Annual covered payroll 1,026,090 960,250 825,380 Assets in excess of PBO as a % of annual covered payroll 7.4% 4.2% 8.9% The following is three-year trend information which gives an indication of the progress made in accumulating sufficient assets to pay benefits when due. The pension benefit obligation has not yet been calculated by PERS for the plan year 1990, therefore, some B-22 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (8) Defined Benefit Pension Plan. Continued (c) Actuarially Determined Contribution Requirements and Contribution Made. Continued; of the percentages noted below were not available (N/A) for disclosure: 1990 1989 1988 Net assets available for benefits as a percentage of pension benefit obligation N/A 106.6% 104.3% Assets in excess of the pension benefit obligation as a percentage of annual covered payroll N/A 7.4% 4.2% Actuarially determined employer contributions as a percentage of annual covered payroll 7.7% 3.6% 4.1% (9) Deferred Compensation Plan The District offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all District employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseen emergency. All amounts of compensation deferred under the plan, all investments and rights purchased with those amounts, and all income attributable to those amounts, or rights, are (until paid or made available to the employee or other beneficiary) solely the property and rights of the District (without being restricted to the provisions of benefits under the plan), subject only to the claims of the District's general creditors. Participants' rights under the plan are equal to those of general creditors of the District in an amount equal to the fair market value of the deferred account of each participant. B-23 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (9) Deferred Compensation Plan. Continued The District believes it has no liability for losses under the plan but does have the duty of due-care that would be required of an ordinary prudent investor. The District believes that it is highly unlikely that it will use the assets to satisfy the claims of general creditors in the future. (10) Commitments Various construction contracts were in progress at June 30, 1990 with an estimated cost to complete of approximately $540,000. B-24 Schedule 1 CARLSBAD MUNICIPAL WATER DISTRICT Water Treatment, Transmission and Distribution, and Administrative and General Expenses For the year ended June 30, 1990 (With comparative totals for the year ended June 30, 1989) (Unaudited) Water treatment: Labor I Chlorine Equipment, maintenance, materials and supplies Laboratory services testing Total Transmission, distribution and maintenance: Water distribution Pipeline installation Pipeline repair and maintenance Fire hydrant maintenance and installation Waterline markout Vehicle maintenance Purchasing/receiving Facility maintenance Total Administrative and general: Administration Engineering and special services Professional fees Directors fees and expenses Utilities Insurance Office supplies and expense Water conservation Total Budget 56,130 15,000 5,000 25.000 101,130 290,164 71,467 251,978 47,133 25,518 56,851 32,268 167.106 942.485 309,433 454,168 165,000 22,550 39,500 68,000 31,750 30.000 1.120.401 2.164.016 Actual 29,769 15,056 3,131 26.390 74.346 352,712 141,676 204,228 43,385 22,423 48,499 52,780 99.741 965.444 245,385 542,150 188,445 17,765 45,716 54,783 38,429 31.014 1.163.687 2.203.477 (Over) under Budget 26,361 (56) 1,869 (1.390) 26.784 (62,548) (70,209) 47,750 3,748 3,095 8,352 (20,512) 67.365 (22.959) 64,048 (87,982) (23,445) 4,785 (6,216) 13,217 (6,679) (1.014) (43.286) (39.461) 1989 Actual 54,751 29,498 7,862 26.789 118.900 377,158 89,769 255,688 41,950 52,670 92.459 909.694 241,666 487,418 89,359 23,832 38,484 56,470 35,200 21.924 994.353 2.022.947 B-25 CARLSBAD MUNICIPAL WATER DISTRICT Improvement Districts' Balance Sheet June 30, 1990 (With comparative totals for June 30, 1989) Schedule 2 Assets Current restricted assets: Cash Investments Contract receivable Restricted assets - Investments Utility plant: Water transmission and distribution facility Less accumulated depreciation Liabilities and Equity Current liabilities payable from restricted assets: Current portion of bonds payable Accrued interest and unredeemed bonds and bond coupons Total current liabilities payable from restricted assets Bonds payable Total liabilities Equity: Equity in utility plant Retained earnings (deficit): Reserved Unreserved: Designated Undes ignated Total equity Improvement District #1 2 345 348 1,074 (599 475 323 ,367 ,827 .194 ,916 ,132) ,784 .978 Improvement District #2 16 737 754 4,191 (1,387 2,803 3,557 ,818 ,636 ,454 ,056 .820) .236 .690 Improvement District #3 6 1,048 1,055 1,108 (480 628 1.683 ,521 ,648 ,169 ,849 ,125) ,724 .893 Improvement District #4 120 120 731 (276 455 575 583 ,058 ,641 ,540 ,327) ,213 .854 Total 1990 26 2,252 2,278 7,106 (2,743 4,362 6,641 ,289 ,169 ,458 ,361 ,404) ,957 ,415 1, 2. 7, (2. 4, 6. 1989 24,424 617,815 3,125 539,466 184,830 106,362 607,009) 499,353 684.183 2,367 2,367 2,367 546,751 274,860 821,611 823,978 25,000 16,304 41,304 41,304 3,454,756 413,165 (351,535) 3,516,386 3,557,690 558,000 15,822 573,822 573,822 256,133 701,255 152,683 1,110,071 1,683,893 40,000 816 40,816 40,000 80,816 311,790 40,000 143,248 495,038 575,854 623,000 35,309 658,309 40,000 698,309 4,569,430 1,154,420 219,256 5,943,106 6,641,415 65,000 36,005 101,005 663,000 764,005 4,433,034 1,135,. 886 69,228 282,030 5,920,178 6,684,183 B-26 Schedule 3 CARLSBAD MUNICIPAL WATER DISTRICT Improvement Districts' Statement of Revenues and Expenditures For the year ended June 30, 1990 (With comparative totals for the year ended June 30, 1989) Improvement Improvement Improvement Improvement Total District #1 District #2 District #3 District #4 1990 1989 Operating expense - Depreciation Net operating loss Other income (expense): Property taxes - 3,550 1,433 3,027 8,010 59,392 Interest earned 27,466 59,796 84,937 11,007 183,206 174,882 Interest on bonds and note payable Total other income, net Net income (loss) B-27 Supplemental Section - C The following data is presented in order for the reader to get a better understanding of the District and its operations. The information is taken from a variety of sources and while appropriate measures were taken to ensure material provided is as accurate as possible, the information was not audited, and is solely the responsibility of District staff. Carlsbad Municipal Water District Water Purchases (Acre Feet) Month 85/86 86/87 87/88 88/89 89/90 Average July August September October November December January February March April May June 1,522.0 1,631.4 1,449.4 1,370.2 864.4 612.1 856.0 613.1 740.7 1,107.2 1,482.9 1,427.4 1,620.4 1,745.3 1,474.0 1,130.0 1,054.5 868.3 746.9 775.1 796.0 1,301.6 1,526.7 1,632.2 1,687.9 1,828.0 1,624.2 1,149.4 858.5 753.1 698.9 906.6 1,300.0 1,152.7 1,529.0 1,668.6 1,886.3 1,797.4 1,674.9 1,517.3 1,003.4 893.5 897.7 847.9 1,140.8 1,409.8 1,651.2 1,667.5 1,997.2 2,093.6 1,741.3 1,712.5 1,445.2 1,397.0 896.9 854.0 1,193.3 1,203.2 1,775.1 1,609.5 1,742.8 1,819.1 1,592.8 1,375.9 1,045.2 904.8 819.3 799.3 1,034.2 1,234.9 1,593.0 1,601.0 Annual Demands 13,676.8 14,671.0 15,156.9 16,387.7 17,918.8 15,5623 C-l Carlsbad Municipal Water District Agricultural Usages (Acre Feet) Month 85/86 86/87 87/88 88/89 89/90 Average July August September October November December January February March April May June 352.3 375.7 320.5 299.9 113.8 95.2 89.0 53.4 128.1 201.1 203.3 256.6 251.9 318.5 260.0 167.8 55.9 76.8 74.4 68.5 153.0 194.6 189.6 238.5 207.1 275.2 289.5 86.9 72.4 44.8 87.0 100.1 138.1 124.4 226.0 249.1 266.5 259.0 233.1 295.7 79.3 62.2 176.0 170.3 178.7 244.5 138.4 213.4 259.3 309.8 253.3 234.4 129.9 93.7 70.4 78.4 128.4 187.9 247.2 235.2 267.4 307.6 271.3 216.9 90.3 74.5 99.4 94.1 145.3 190.5 200.9 238.6 Demands 2,488.9 2,049.5 1,900.6 2^17.1 2,227.9 2,196.8 C-2 Agricultural vs. Total Usage 1985-86 thru 1989-90 Acre Feet (326,000 Gal.) o iL^il Agricultural 85-86 86-87 87-88 88-89 Fiscal Year 89-90 Carlsbad Municipal Water District Cost of Purchased Water (In $1,000) Month 85/86 86/87 87/88 88/89 89/90 Average July August September October November December January February March April May June 366.8 393.1 349.3 330.2 208.3 147.5 206.3 147.7 178.5 266.8 357.3 344.0 400.2 431.1 364.1 279.1 260.5 214.5 184.5 191.4 196.6 321.5 377.1 403.2 416.9 451.5 401.2 283.9 212.0 186.0 176.1 228.5 327.6 290.5 385.3 420.5 484.8 461.9 430.4 390.0 257.9 229.6 235.2 222.2 298.9 369.4 432.6 436.9 553.2 579.9 482.3 474.4 400.3 387.0 248.4 236.6 330.5 333.3 491.7 445.8 444.4 463.5 405.5 351.5 267.8 232.9 210.1 205.3 266.4 316.3 408.8 410.1 Annual Demands 3,295.8 3,623.8 3,780.0 4,249.8 4,963.4 3,982.6 C-4 Carlsbad Municipal Water District Employee Summaries 85/86 86/87 87/88 88/89 89/90 Managerial Administration Engineering Operations 4.0 4.0 5.0 13.0 3.0 4.0 5.0 14.0 4.0 4.0 6.0 15.0 4.0 3.0 6.0 15.0 4.0 5.0 7.0 15.0 Total 26.0 26.0 29.0 28.0 3LO Tenure Summary > 20 Years 15-19 Years 10-14 Years 5-9 Years < 5 Years Avg, Years of Service 2 4 8 5 12 7.90 C-5