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Home My WebLink About1992-02-18; Municipal Water District; 153; 1990-91 Comprehensive Financial Report, ,B# Is3 ITG. 2/l 8/92 IEPT. FIN P’IWD - AGENDA aILL TITLE: 1990-91 COMPREHENSIVE ANNUAL FINANCIAL REPORT RECOMMENDED ACTION: Accept the 1990-91 Comprehensive Annual Financial Report. ITEM EXPLANATION: Each year, an independent auditor examines the District’s financial records. This year the audit firm of KPMG Peat Mar-wick was retained. The audit process requires several months of on-site examination, testing, and reconciliation of the District’s financial records. The end result is an opinion on the fairness of the presentation of the financial statements. This year, as in the past, the District has received an “unqualified’ opinion which means that the information presents an accurate picture of the District when looked at as a whole. Fiscal year 90-91 was the first full year that the District acted as a subsidiary district of the City of Carlsbad. A tremendous amount of effort by City and District staff culminated in a full consolidation of all water-related services and the integration of the District’s administrative services into the City’s structure. The combined assets of the District now total over $57 million, with the investment in the utility plant making up almost $42 million or 74% of the total. All of the improvement district bonds have now been paid off with the last payment of $40,000 in Improvement District #4 made in December 1992. Remaining outstanding debt for the District consists of approximately $12,000,000 of Certificates of Participation which are due at various dates through 2004. Total equity increased by $3.8 million consisting of $810,000 of net income, $1.8 million in major facilities fees collected and $1.2 million in asset contributions to the water system. FISCAL IMPACT: This report presents the financial condition of the Carlsbad Municipal Water District as of and for the years ended June 30,199l and 1990. The Board and the Commission have previously received audit copies. Audits are on file with the City Clerk and the Finance Department. EXHIBIT: Comprehensive Annual Financial Report for the fiscal year ended June 30,199l. - - ON FILE WITH THE CITY CLERK AND THE FINANCE DEPARTMENT. CARLSBADMUNICIPALWATERDISTRICT Comprehensive Annual Financial Report for Fiscal Year Ending June 30, 1991 Introductory Section - A Comprehensive Annual Financial Report for Fiscal Year Ending June 30, 1991 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 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 (1986/87 thru 1990/91) C-l Ag-ricultural Usage (1986/87 thru 1990/91) c-2 Water Purchases and Agricultural Usage - Graph c-3 Cost of Purchased Water (1986/87 tluu 1990/91) c-4 Employee Summaries c-5 i Carlsbad Municipal Water District 5950 El Camino Real, Carlsbad, CA 92008 Engineering: (6 19) 438-3367 Administration: (619) 438-2722 Fax: (619) 431-1601 Board of Directors Carlsbad Municipal Water District 5950 El Camino Real Carlsbad, California 92008 Fiscal Year 1990-91 was another milestone in the development of the Carlsbad Municipal Water District. Fiscal year 1990-91 was the first full year that the District acted as a subsidiary district of the City of Carlsbad. A tremendous amount of effort by City and District staff culminated with a series of Board actions that laid the groundwork for changes in the District’s functions. The actions that are most noteworthy include a full consolidation of all water-related services and integration of the District's administrative services into the City's structure. For the first time in Carlsbad's history, all water-related services have been combined within the District's service area. The District is now responsible for operations and maintenance of the water and sewer systems, water billing and capital project construction. In addition, the District is now operating and maintaining the ever-expanding water reclamation system. Another benefit from the subsidiary district formation is the consolidation of the District's various administrative services with the City's structure. This new relationship provides the District with assistance from professionals in all issues including finance, law, human resources, purchasing and risk management. As evidenced by the following documents, the District's financial situation is continuing to be very sound. In the next few years the District is scheduled to construct a number of large capital projects. A reclaimed water system, major potable water pipelines and large storage reservoirs are all scheduled to occur in the very near future. Good planning and close monitoring of the District's financial condition will be essential to ensure funding of these critical projects. As in past years, the accomplishments of the District for the past year could not have occurred without the commitment from both the Board of Directors and the Water Commission. Their hard work makes the staff's job so much easier to complete. Last but definitely not least, a special thanks goes out to every member of the District and City staff. Our combined efforts have made the District what it is today, and will ensure a safe and reliable water supply for Carlsbad's future. General Pnlanager “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 37th 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 of 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 operations 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 water rates. This system ensures equitable financing of all District activities. A-2 Carlsbad Municipal Water District Listing of Dishict Officials Board of Jlirectors Claude “Bud” Lewis, President Ann Kulchin, Vice President Eric Larson Julianne Nygaard Margaret Stanton Water Commission Fred Mae&e, Chair Roger Greer, Vice Chair Margaret Bonas John Henley E. J. Woodward, Jr. officials Raymond Patchett, Executive Manager Robert Greaney, General Manager Bob Coates, Acting District Engineer Geoffrey Poole, Administrative Manager Kurt Musser, Superintendent A-3 u i, I- L 5 .- r-l P isf i -- L L z 0 d ti E! ii E P 2 m J r- .- m,c? LEb n ‘5 SW 5% m,c ‘-7 i .E t -I $3 i / .E 5 t, I I ' 1 z=j -- n- E .L i52 “,P sz 83 IA I’ EL 00 EZ az ‘5 0. UO w E ‘7 E I-D By” . L GO c3 8 A-4 Financial Section - B f&-e 00 0 v 3 4 w 0 c %, $ 11 bvrrt* 8 CARLSBAD MUNICIPAL WATER DISTRICT Financial Statements and Schedules June 30, 1991 and 1990 (With Independent Auditors' Report Thereon) KHWG Peat Marwick Certified Public Accountants 750 6 Street San Diego. CA 92101 IndeDendent Auditors' Reoort The Board of Directors Carlsbad Municipal Water District: We have audited the accompanying balance sheets of Carlsbad Municipal Water District as of June 30, 1991 and 1990, and the related statements of operations, changes in equity and cash flows for the years then ended. 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 as of June 30, 1991 and 1990, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the component unit financial statements taken as a whole. The 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 20, 1991 B-l Member Ftrm of Klynveld Peat Marw~ck Goerdelet CARLSBAD MUNICIPAL WATER DISTRICT Balance Sheets June 30, 1991 and 1990 Assets 1991 Current assets: Cash and cash equivalents (note 2) Time certificates of deposit (note 2) Accounts receivable Inventories $ 8,234,659 895,000 2,056,817 177.317 Total current assets 11.363.793 Restricted assets: Cash and cash equivalents (note 2) Investments (note 2) Interest receivable 1,772,181 2,278,459 1,417,015 1,339,058 18.826 214,456 Total restricted assets 3.208.022 3.831.973 Deferred compensation investments (notes 2 and 10) 1,101,849 862,010 Utility plant (note 3): Property and equipment, at cost, net of accumulated depreciation Construction in progress Total utility plant 41.779.744 39.254.365 . 1990 6,007,658 2,482,OOO 2,095,605 191.805 10.777.068 41,035,792 30,340,339 743.952 8.914.026 $ 57.453.408 54.725.416 . B-2 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Balance Sheets, Continued June 30, 1991 and 1990 Liabilities and Eauitv Current liabilities: Accounts payable Current portion of certificates of participation payable (note 4) Interest payable Accrued expenses Construction deposits Total current unrestricted liabilities 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 $373,940 in 1991 and $400,650 in 1990 (note 4) Bonds payable Deferred compensation payable (note 10) Total liabilities Equity: Contributed capital Retained earnings: Reserved (note 6) Unreserved: Designated (note 6) Undesignated Total equity 1991 $ 666,264 645,000 147,088 324,904 71.352 740,598 610,000 153,188 326,040 152.218 1,854,608 1,982,044 40,000 623,000 14.441 35.308 1,909,049 2,640,352 11,681,060 1.101.849 14.691.958 12,299,350 40,000 862.010 15.841.712 34,127,185 570,718 3,069,936 4.993.611 42.761.45Q 31,059,870 1,154,420 2,710,416 3.958.998 38.883.704 $4.725.416 $ 57.453.408 See accompanying notes to financial statements. B-3 CARLSBAD MUNICIPAL WATER DISTRICT Statements of Operations Years ended June 30, 1991 and 1990 1991 Operating revenues: Water sales Cost of water sales $ 6,306,926 6,513,806 (4.455.951) (4.969.862) Gross margin from water sales 1,850,975 Facilities revenue 871,917 988,815 Miscellaneous revenue 172.932 194.595 2.895.824 2.727.354 Operating expenses: Water treatment Transmission, distribution and maintenance Administrative and general Reimbursement agreement Depreciation Loss on disposal of assets 73,501 1,002,943 1,360,565 26,886 763,170 Total operating expenses 3.227.065 2.959.920 Loss from operations Other income (expense): Property taxes Interest earned Rent Interest expense, net of capitalized interest Amortization of debt issuance costs (331.241) 722,510 1,044,521 21,305 (619,954) (26.71Q) Total other income, net 1.141.672 1.540.107 Net income $ 810.431 1.307.541 1990 (as restated, see note 7) 1,543,944 74,346 965,444 1,163,687 24,561 648,974 82.908 (232.566) 668,427 1,524,172 19,775 (645,557) (26.710) See accompanying notes to financial statements. B-4 CARLSBAD MUNICIPAL WATER DISTRICT Statements of Changes in Equity For the years ended June 30, 1991 and 1990 Retained Earninos Balance at June 30, 1989 Contributed Capital Reserved $ 18,880,916 1,135,886 Prior period adjustment (note 7) 9.562.564 - Adjusted June 30, 1989 balance 28,443,480 1,135,886 5,380,407 Net income 1,307,541 Capital contributions: Cash Fixed assets Transfer pursuant to debt agreements (note 6) 1,672,479 943,911 1 18,534 (18,534) Transfer from designated retained earnings (note 6) Balance at June 30, 1990 31,059,870 1,154,420 (2.669.991) 2,710,416 Net income 7.669.99?. 3,958,998 810,431 Capital contributions: Cash Fixed assets Transfer pursuant to debt agreements (note 6) 1,779,841 1,287,474 : (583,702) Transfer to designated retained earnings (note 6) 359.57Q Balance at June 30, 1991 $ 34.127.185 570.71Q 3.069s 583,702 (359.520) 4.993.611 Unreserved- Unreserved- Desianated Undesignated 14,399,413 543,558 (9.019.006) (543,558) w 34,959,773 34,959,773 1,307,541 1,672.479 943,911 38,883,704 810,431 1,779,841 1,287,474 42.761.454 See accompanying notes to financial statements. B-5 CARLSBAD MUNICIPAL WATER DISTRICT Statements of Cash Flows For the years ended June 30, 1991 and 1990 1991 1990 (as restated, see note 7) $ (331,241) (232,566) Cash flows from operating activities: Loss from operations Adjustments-to reconcile net loss to net cash provided by operating activities: Depreciation (Increase) decrease in accounts receivables (Increase) decrease in inventories Decrease in accounts payable and accrued expenses 763,170 38,788 14,488 (75.470) 648,974 (136,684) (29,755) (288.812) Net cash provided by (used in) operating activities Cash flows from non-capital financing activities: Property taxes received Rent received Net cash provided by non-capital financing activities Cash flows from capital and related financing activities: Acquisition and construction of capital assets Principal payments on bonds Interest paid on bonds Decrease in construction deposits Decrease in notes payable Principal payments on certificate of participation (Decrease) increase in unredeemed coupons and bonds payable Major facilities fees received Net cash used in capital and related financing activities 409.735 (38.843) 722,510 668,427 21.305 19.775 743.815 688.202 (1,663,668) (623,000) (972,361) (80,866) (9,700,106) (70,000) (1,019,532) (3,696) (20,502) (610,000) (11,967) 1.779.841 (575,000) 1,867 1.672.479 (2.182.021) (9.714.490) ’ B-6 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Statement of Cash Flows, Continued For the years ended June 30, 1991 and 1990 Cash flows from investing activities: Net decrease in investments and time certificates of deposit Increase in deferred compensation payable Increase in deferred compensation investments Interest on investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental schedule of noncash investing and financing activities - Capital assets contributed by contractors 1991 $ 1,509,043 7,257,277 239,839 215,043 (239,839) (215,043) 1.240.151 1.510.647 2.749.194 1,720,723 (297,207) 8.286.117 8.583.324 $ 10.006.84Q 8.286.117 $ 1.287.474 1990 (as restated, see note 7) 8.767.924 943.911 See accompanying notes to financial statements. B-7 CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements June 30, 1991 and 1990 Reuorting Entitv and Summarv of Sianificant Accounting Policies (a) Renortinn 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 through 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) Imorovement 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) ReDorting Entitv and Summarv of Sianificant Accounting Policies. Continued (b) Summarv of Sianificant 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 at the lower of cost (last-in, first-out) or market. (iii) Utilitv 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. B-9 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (1) ReDorting Entitv and Summarv of Significant Accounting Policies. Continued (b) Summarv of Significant Accounting Policies: (vi) Cash and Cash Eauivalents: For purposes of the statement of cash flows, cash and cash equivalents consists of cash on hand, and amounts in the Local Agency Investment Fund and County Treasurer Investment Pool. (vii> Debt Issuance Costs: Debt issuance costs related to the 1988 COP are amortized using a straight-line method over the 16-year life of the issue. (viii) Reclassifications: Certain prior year amounts have been reclassified to conform with current year presentation. (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-l+ by Standard and Poor's Corporation or P-l by Moody's Connnercial 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. A summary of cash and investments is as follows: Deposits: Cash Time certificates of deposit Deferred compensation investments (certificates of deposit) S 205,185 235,645 895,000 2,482,OOO 1.101.849 862.010 2,202,034 3,579,655 Investments (including cash equivalents) 11.218.670 9.389.53Q Less restricted portion 13,420,704 12,969,185 3.189.196 3.617.517 Unrestricted cash and investments $ 10.231.508 9.351.668 A reconciliation of cash and cash equivalents for statement of cash flow purposes is as follows: Cash S 205,185 235,645 Local Agency Investment Fund 5,000,000 5,000,000 County Treasurer's Investment Pool 4.801.655 3.050.472 Total cash and cash equivalents $ 10.006.840 8.286.117 Dm: 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 Cne), 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, 1991: B-11 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (2) Cash and Investments. Continued Cateaorv Total Bank Carrying s?LLe &YQ Ih!le Balance Amount Cash $ 171,922 - 292,381 205,185 Time certificates of deposit v;,;f;; 895,000 895,000 Deferred compensation investments (certificates of deposit) 1.101.849 - - 1.101.849 1.101.849 $ 2.117.308 171.922 - 2.289.230 2.202.034 Investments: 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, 1991. Categorv Uncate- Carrying Market One Two Three aorized Amount value Local Agency Investment Fund $ - 5,000,000 5,000,000 5,000,000 County Treasurer Investment Pool 4,801,655 4,801,655 4,801,655 U.S. Treasury Bills 1.345.098 - 1,345,098 1,389,207 Money Market Fund 71.917 - 71.917 81.623 Total $ - 1.417.015 - 9.801.652 11.218.670 11.272.485 B-12 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (3) Utilitv Plant A summary of utility'plant and the related accumulated depreciation as of June 30, 1991 and 1990 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 $ 41.779.744 39.254.362 $ 33,175 33,175 1,644,436 1,023,186 16,111,281 9,650,951 24,752,639 20,615,977 662,810 83,267 944,393 662,810 486,133 2,206,372 83,267 823,589 2.238.98Q 410.777 46,957,114 35,510,104 5.921.322 5.169.765 41,035,792 30,340,339 743.952 8.914.026 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 $337,405 and $391,040 were capitalized in 1991 and 1990, respectively. Total interest costs incurred, including capitalized amounts during these same periods, were $957,359 and $1,036,597, 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: Assets Estimated useful lives Reservoirs and dams 25 to 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 Particioation 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 is not included in the District's financial statements. At June 30, 1991, $10,800,000 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. Principal payments are payable annually through May 1, 2004. The debt agreement stipulates that the District adhere to specified covenants. At June 30, 1991, the District was in compliance with these requirements. B-14 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (4) ) rtifi t Principal maturities of the 1988 COPS during the years subsequent to June 30, 1991 are as follows: 1992 $ 645,000 1993 685,000 1994 730,000 1995 775,000 1996 825,000 Thereafter 9.040.000 12,700,OOO Less unamortized issuance costs (373,940) Less current portion (645.00Q) $ 11.681.060 (5) Bonds Payable Bonds payable at June 30, 1991 are as follows: Improvement District 4 Date of issue Coupon interest rates Interest payment dates Principal payment dates Authorized and issued Redeemed as of June 30, 1991 Outstanding as of June 30, 1991 (Due on December 1, 1991) 1961 3.5 b 4.0% 6/l & 12/l 12/l 690,000 (650.000) $40.000 B-15 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (6) Reserved/Designated Retained Earnings The following is a summary of reserved/designated retained earnings as of June 30, 1991 and 1990: Reserved pursuant to debt agreements: Debt service Acquisition $ 40,000 623,702 530.718 530.718 $ 570.718 1.154.420 Designated for: Contingencies Construction Replacement projects 1,769,549 1,856,112 500,000 500,000 800.387 354.304 $ 3.069.936 2.710.416 The following reserves have been established pursuant to debt agreements: (a) 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) Acauisition: 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 1991 and 1990, 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 8). The "stand by" fees provide a source of revenue even if water sales are significantly reduced. Amounts appropriated are to be used for operations in the event of a B-16 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (6) Reserved/Designated Retained Earnings. Continued (a) Contingencies. Continued: temporary decline in water revenue from an unforeseen event. The designated amount was $1,769,549 and $1,856,112 at June 30, 1991 and 1990, respectively. (b) Construction: During fiscal 1985, the Board of Directors designated an amount of $500,000 to be used for emergency capital improvements. Amounts appropriated are only to be used for significant non-recurring items which are not included in the operating budget. (cl WProiects: During fiscal 1984, the Board of Directors established a program for funding replacement projects. The balances of $800,387 and $354,304 at June 30, 1991 and 1990, respectively, are the cumulative result of fees collected and expenditures identified as replacement projects during the period that this program has been in place. (7) Prior Period Adjustment In prior years, the District recorded fees charged to developers to connect to the water system as revenues rather than as contributed capital. The 1990 financial statements have been restated to reflect the reclassification of the accumulation of these fees in the amount of $9,562,564 from retained earnings to contributed capital and to appropriately present the 1990 fees as contributed capital rather than as revenue. (8) A)d As part of an agreement with the City of Carlsbad, the City has set aside in a water utility fund, approximately $5,090,000 as of June 30, 1991, for the acquisition and construction of certain specific projects which will benefit the District. This agreement also specifies 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. B-17 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (9) 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, 1991 and 1990, the District's payroll for employees covered by the PERS was $1,229,551 and $1,047,044, respectively. Total payroll for the same period was $1,325,207 and $1,152,725, respectively. All full-time District employees are eligible to participate as members of the PERS. Benefits vest after five years of service. District employees who retire at or after age 60 with five 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) 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. B-18 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (9) Defined Benefit Pension Plan. Continued (b) Funding Status and Progress, Continued: The pension benefit obligation was computed as part of an actuarial valuation performed as of June 30, 1990. 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. Assets in excess of the pension benefit obligation applicable to the (the date of District's employees totalled $88,617 at June 30, 1990 the latest actuarial valuation), as follows: Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits Current employees: Accumulated employee contributions, including allocated investment earnings Employer-financed vested Employer-financed nonvested Total pension benefit obligation Net assets available for benefits, at cost (market value, $1,659,513) Assets in excess of the pension benefit obligation Changes in the pension benefit obligation from last year due to changes in actuarial assumptions $ 485,676 500,674 329,899 58.549 1,374,798 1.463.415 $ 88.617 $ 27.021 B-19 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (9) Defined Benefit Pension Plan. Continued (c) Actuarially 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. PERS also uses the level percentage of payroll method to amortize any unfunded actuarial liabilities. At June 30, 1991 and 1990, the District did not have any unfunded actuarial liabilities. The amortization period of the unfunded actuarial liability ended on June 30, 1990. 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, 1991 and 1990 were as follows: 1991 1990 Contri- Covered Contri- Covered butions Payroll butiona Payroll Required normal cost contribution $ 183,916 15.0 % 154,031 14.7 % Less overfunding (92.499) LL5)X (55.420) (5.31% Total required contributions $ 91.417 98.611 7.5 % 9.4% B-20 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (9) Defined Benefit Pension Plan. Continued (c) Actuariallv Determined Q ntri Made. Continued: 1991 1990 Contri- Covered Contri- Covered butions Pavroll Pavroll butions Contributions made by the District $ 71,741 5.8 % 80,826 7.7 x Contributions made by the District on behalf of the employees 63,273 5.2 % 73.374 7.0% Total actual contributions $ 135.014 154.200 1l.Q % 14.7% 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. 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 1991; therefore, some of the percentages noted below were not available (N/A) for disclosure: Net assets available for benefits as a percentage of pension benefit obligation (PBO) N/A 106.5% 106.6% Assets in excess of the PBO as a percentage of annual covered payroll N/A 8.5% 7.4% Actuarially determined employer contributions as a percentage of annual covered payroll .5% 2.4% 3.6% B-21 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (9) Defined Benefit Pension Plan, Continued (c> A t ri 11 c D t rmin ntr' n ntr' tion Made. Continued: Ten-year historical trend information is not available from the California Public Employees Retirement System; therefore, only the available information is presented below. Fiscal vear ended June 30. Net assets available for benefits (at cost) $ 1,463,415 Pension benefit obligation (PBO) 1,374,798 Net assets as a % of PBO 106.5% Assets in excess of PBO 88,617 Annual covered payroll 1,047,044 Assets in excess of PBO as a % of annual covered payroll 8.5% 1,217,447 1,141,723 106.6% 75,730 1,026,090 leaa 981,451 941,218 104.3% 40,240 960,250 823,110 749,880 109.8% 73,240 825,380 7.4% 4.2% 8.9% B-22 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (10) 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. 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. (11) Post-retirement Health Care In addition to the pension benefits described in Note 8, the District, in accordance 'with the District's Administrative Code, provides post-retirement health care benefits to full-time employees (including their dependents) who voluntarily retired after the age of 50 with no less than 5 years of service and whose age combined with years of service equals 70 or more or who have reached the mandatory retirement age with at least 5 years of service. Currently, one retiree meets these eligibility requirements and is receiving benefits. The District will pay 100% of the premiums for health insurance which will be coordinated with Medicare and other benefits provided by federal and state law, when available, to the extent it reduces the cost of insurance premiums. Expenditures for post-retirement health care benefits are funded on a pay-as-you-go basis. Expenditures of approximately $1,182 and $974 were charged to expense for post-retirement health care costs during 1991 and 1990, respectively. B-23 (Continued) CARLSBAD MUNICIPAL WATER DISTRICT Notes to Financial Statements, Continued (11) Post-retirement Health Care. Continued Based on an actuarial valuation performed as of November 1991, the District's liability for the current and past service costs of these benefits is approximately $1,600,000. (12) Commitments Various construction contracts were in progress at June 30, 1991 with an estimated cost to complete of approximately $800,000. (13) Risk Management The District is exposed to various risks of loss related to torts; damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District has joined with other water agencies in the State of California to form the Joint Powers Insurance Authority (JPIA), a public entity risk pool currently operating as a common ris'k management and insurance program for 178 member water agencies. The District pays an annual premium to JPIA for its general insurance coverage. Premiums are calculated by JPIA based upon loss history at the District as well as for the water agencies pool as a whole. The premium to the District for this coverage is approximately $55,500 annually, although a portion may be rebated if actual losses are less than originally estimated. The expense for the year ended June 30, 1991 was approximately $35,000 after such rebates. The Joint Powers Agreement creating the JPIA provides that the JPIA will be self-insured for liability up to $500,000 per occurrence and will reinsure through commercial companies for claims up to $19,500,000 for each insured event. Claims settlements have not exceeded coverage provided by the JPIA pool. B-24 Schedule 1 CARLSBAD MUNICIPAL WATER DISTRICT Water Treatment, Transmission, Distribution and Maintenance and Administrative and General Expenses For the year ended June 30, 1991 (With comparative totals for the year ended June 30, 1990) (Unaudited) Budget (Over> under 1990 Actual Budget Actual Water treatment, transmission, distribution and maintenance expenses: Chlorine $ 15,000 Equipment, maintenance, materials and supplies 5,000 Laboratory services testing 25,000 Labor 1,003,978 Water distribution 43,000 Pipeline installation 35,000 Pipeline repair and maintenance 42,500 Fire hydrant maintenance and installation 14,000 Waterline markout 700 Vehicle maintenance 46,000 Facility maintenance 25.00Q 12,549 2,451 15,056 2,815 2,185 3,131 26,610 (1,610) 26,390 844,302 159,676 827,684 42,516 484 32,697 23,838 11,162 31,162 32,339 10,161 28,683 6,368 1,453 39,770 43.884 7,632 12,782 (753) 979 6,230 38,761 (18.884) 22.465 Total $ 1.255.178 1.076.444 178.734 1.039.790 Administrative and general: Administration labor Engineering Professional fees Directors fees and expenses Utilities Insurance Office supplies and expense Water conservation 394,942 367,128 27,814 245,385 604,978 540,597 64,381 542,151 82,000 152,061 (70,061) 188,445 19,750 21,965 (2,215) 17,765 55,700 60,837 (5,137) 45,716 71,000 14,877 56,123 54,783 60,500 44,407 16,093 38,428 30.000 158.693 (128.693) 31,014 Total $ 1.318.870 1.360.565 (41.695) 1.163.687 B-25 m z I W- : m m 2 -1 I - r? W b: .r( .:: 4 .d 9 .,” d 4 la u 0 * h .Y 2 w I I I I u .?-I J3E I-) cd 0 m.4l-l @J L)-lw $ E: 2 2 0” 2 m B-26 i? m 4 d r? w e g’: 2::: -2 SW :z 1x 7 Q-2 wu d c !4 wo w sol W4 +-," 22 u w ki .: cr.u 2 iz 8 " c u .d 3 s 2 : 9 I m et Iii -I - m 0-T P, B-27 Supplemental Section - C The following data is presented in order for the reader to get a better understanding of the District andits 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 86/87 87188 88j89 89/90 go/91 Average ---------------_---_----------------~---------------------------- ----------------__11_I__________________------------------------------- July August September October Novemlxr D(?cernber JmuarY February March April NY June 1,620.4 1,687.g 1,886.3 L745.3 1,828.0 1,797.4 1,474.o L624.2 1.674.9 1,130.o 1,149.4 15173 1,0x5 858.5 1,003.4 868.3 753.1 8935 746.9 698.9 897.7 775.1 906.6 847.9 796.0 1300.0 1,140.8 1301.6 L152.7 1,409.8 1526.7 1529.0 1.6512 1,632.2 L668.6 L667.5 1,997.2 1,962.2 2093.6 1,943.6 L741.3 1,882.7 L712.5 1,766.o 1,445.2 1,491.g 1397.0 1,154.9 8%.9 1218.8 854.0 818.3 L193.3 679.7 1203.2 916.6 1,775.l 1320.2 1,6C95 Q94.8 1,830.g L881.6 1,679.4 1,455.0 lS70.7 LO13.4 891.8 840.4 1,022.o 1,196.g lJ60.4 1574.5 AnnualDemands 14,671.0 15,156.g 16387.7 17918.8 16,449.6 16,116.8 C-l Carlsbad Municipal Water District AgriarlMusages (Acre Feet) Month 86l87 87B8 88l89 89/90 go/91 Average ========--========---I-----------------============== July August September October November December January February March April WY June 251.9 207.1 266.5 259.3 296.3 256.2 318.5 275.2 259.0 309.8 343.7 301.2 260.0 289.5 233.1 253.3 258.5 258.9 167.8 86.9 295.7 234.4 228.7 202.7 55.9 72.4 79.3 129.9 130.0 93.5 76.8 44.8 62.2 93.7 72.2 69.9 74.4 87.0 176.0 70.4 53.9 92.3 68.5 100.1 170.3 78.4 57.0 94.9 153.0 138.1 178.7 128.4 57.1 131.1 194.6 124.4 244.5 187.9 120.8 174.4 189.6 226.0 138.4 247.2 130.7 186.4 238.5 249.1 213.4 235.2 164.4 220.1 Annual Demands 2849.5 1900.6 2,317.l 2227.9 1,913.3 2,081.7 c-2 20 15 10 5 0 Carlsbad M.W.D. Ag. Usage vs. Total Sales Thousands 1 L I 1987 ____._ 1 . - I I v I v I V I , I I 1988 1989 1990 1991 0 Agriculture &$8 Other 1 c-3 CarlsbadMunicipalWaterDisbid costofPurchasedwater m %ooo) Month 86/87 87/88 8ww 89/90 90/9 1 Average ---____ ---- ----------n====-- ------ -_------------ --- --__-- __------------- July 400.2 416.9 484.8 553.2 543.5 479.7 August 431.1 451.5 461.9 579.9 538.4 492.6 September 364.1 401.2 430.4 482.3 521.5 439.9 October 279.1 283.9 390.0 474.4 489.2 383.3 November 260.5 212.0 257.9 400.3 413.2 308.8 December 214.5 186.0 229.6 387.0 319.9 267.4 January 184.5 176.1 235.2 248.4 337.6 236.4 February 191.4 228.5 222.2 236.6 226.7 221.1 March 196.6 327.6 298.9 330.5 188.3 268.4 April 321.5 290.5 369.4 333.3 253.9 3 13.7 WY 377.1 385.3 432.6 491.7 365.7 410.5 June 403.2 420.5 436.9 445.8 358.7 413.0 Annual Demands 3,623.g 3,780.O 4,249.g 4,%3.4 4,556.6 4,234.7 C-4 Carl&ad Municipal Water District Employee Sunmuui~ Division 86/87 87188 88189 89190 9019 1 Managerial 3.0 4.0 Administration 4.0 4.0 Engineering 5.0 6.0 ODerations 14.0 g.tJ Total 26.0 29.0 Tenure Summary >20 Years 15-19 Years lo-14 Years 5-9 Years <5 Years 4.0 4.0 4.0 3.0 5.0 6.0 6.0 7.0 7.0 15.0 15.0 14.0 28.0 31.0 31.0 2 4 8 7 10 Avg. Years of Service 8.9 c-5