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Home My WebLink AboutMINUTES - 11042003 - C108 lot THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA Adopted this Order on November 4 2003 by the following vote: AYES: Supervisors Gioia, Uilkema, Greenberg, Glover and De ler NOES: Mne ABSENT: Now ABSTAIN: Nom SUBJECT: Annual Report of the Central Contra Costa Sanitary District The Board of Supervisors ACKNOWLEDGES receipt of the Annual Report of the Central Contra Costa Sanitary District for the Fiscal Year ending June 30, 2003. 1 hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. Attested:November 4,2003 John Sweeten,,Clerk of the Board of Supervisors and County Administrator By: P40t&b /Y Deputy Clerk SAJune-Share\Board0rders 2003\rpt CCC San 2003 Central Contra Costa Sanitary District 5019 Imhoff Place, Martinez, Ca 94553 (925) 228-9500 www.cetitralsall.org FAX:(925)676-7211 CHARLES W.BA ITS General Manager KEA TON L ALM Counsel for Me District OCT 2 12003 (510)8M-2000 11 C T �21 JOYCE E.MURPHY Secretary of the District CLERK BOARD OF SUPERVISORS COSIA Co October 20, 2003 CONTRA Board of Supervisors County of Contra Costa Financial Building 651 Pine Street Martinez, CA 94553 Attn: Mr. John A. Aylard Chief, Division of Audits Enclosed is a copy of the audited financial statements of the Central Contra Costa Sanitary District for the fiscal year ended June 30, 2003. There was no management letter on internal accounting controls this year. Sincerely, Debbie Ratcliff Controller DR/amt Enclosure S:\ADMIN\RATCLIFFI seline.itrO3.doc Recycled Paper CENTRAL CONTRA COSTA SANITARY DISTRICT FINANCIAL STATEMENTS AND ACCOMPANYING INFORMATION JUNE 30,2003 WITH INDEPENDENT AUDITORS' REPORT CENTRAL CONTRA COSTA SANITARY DISTRICT JUNE 30,2003 TABLE OF CONTENTS INTRODUCTORY SECTION PAGE ELECTED OFFICALS AND ADMINISTRATIVE PERSONNEL INDEPENDENT AUDITORS" REPORT................ ...... I MANAGEMENT'S DISCUSSION AND ANALYSIS.......................... 2 FINANCIAL STATEMENTS Statement of Net Assets..................o........... ........... ..................... 6 Statement of Revenues,Expenses and Changes in Net Assets...................•......... 7 Statement of Cash Flows....................o...................o...............o......................... 8 NOTES TO FINANCIAL STATEMENTS...............0..............................•............ 10 (SUPPLEMENTARY INFORMATION) Schedule of Combining Statement of Net Assets..•................................•.., 25 Schedule of Combining Statement of Revenues,Expenses and Changes in Net Assets......... 26 Schedule of Running Expenses—Comparison of Budget and Actual Expenses byDepartment....................................0............................ .......0.............. 27 Running Expense—Schedule of Supplemental Net Assets Analysis............o.................. 28 CENTRAL CONTRA COSTA SANITARY DISTRICT ELECTED OFFICIALS AND ADMINISTRATIVE PERSONNEL JUNE 309 2003 BOARD OF DIRECTORS James A.Neieffly .................................................................. President Gerald R.Lucey .................................................................... President Pro-Tem Parke L.Boneysteele .............................................................. Member Barbara D.Hockett................................................................. Member MarioA Menesini ................................................................. Member SECRETARY OF THE DISTRICT Joyce Murphy LEGAL COUNSEL Kenton L. Alm MANAGEMENT Charles Batts,Jr.................................................................... General Manager Ann Farrell........................................................................... Director of Engineering James Kelly......................................................................... Director of Operations Randall Musgraves................................................................. Director of Administration DebbieRatcliff.................................................................... Controller Vavrinek, Trine, Day& Co., LLP VALUE THE DIFFERENCE 11141 Certified Public Accountants&Consultants INDEPENDENT AUDITORS' REPORT Board of Directors Central Contra Costa Sanitary District Martinez,California We have audited the accompanying basic financial statements of the Central Contra Costa Sanitary District as of and for the year ended June 30,2003,as listed in the table of contents. These basic financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the State Controller's Audit Requirements for California Special Districts. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining,on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion,the financial statements referred to above present fairly,in all material respects,the financial position of the Central Contra Costa Sanitary District as of June 30,2003,and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America,, as well as accounting systems prescribed by the State Controller's office for special districts. As described in Note I the District adopted the provisions of the Governmental Standards Board Statements No.34,, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments. Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The Management's Discussion and Analysis is not a required part of the basic financial statements but is supplemental information required by the Government Accounting Standards Board. The financial information listed as supplementary information in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and,in our opinion,is fairly stated in all material respect in relation to the basic financial statements taken as a whole. r C ,;A Vr A 4e, � f 7 VAVRENEK1 TRL,DAY&CO,LLP August 15,2003 5000 Hopyard Road,Suite 335 Pleasanton,CA 94588-3351 Tel:925.734.6600 Fax:925.734.6611 www.vtdcpa.com FRESNO • LAGUNA HILLS • PLEASANTON RANCHO CUCAMONGA SAN JOSE STATEMENT OF NET ASSETS The following table shows the condensed statement of net assets of the Central Contra Costa Sanitary District for the past two years: Condensed Statement of Net Assets Dollar Percent Fiscal Year 2003 Fiscal Year 2002 chane Change current Assets 67,431,648 49,930,148 1795019500 35.05% Capital Assets 4801726,367 465,5449195 15,1829172 3.26% Other Non-current Assets 7,222,919 20,383,873 13,1609954 -64.57% Total Assets 555,3809934 535,8589216 1995229718 3.64% Long-Term Debt 379624,349 381885,818 (11261946 -3.24% Other Liabilities 10,848,673 91329,621 19519,052 16.28% Total Liabilities 48,473,022 48,2151439 2579583 01.53% Invested in Capital Assets, Net of Related Debt 44313509152 426,9302524 16,419,628 3.85% Restricted -Debt Service 41484,542 18,685,155 14,2002613 -76.00% Unrestricted 59,073,218 42,027,098 173046,120 40.56% Total Net Assets 506,907,912 487,6429777 19,2659135 3.95% The total net assets of the District increased to $507 million, a $19.3 million increase from 2001-2002. The increase in net assets is the result of net income of $5.9 million and capital contributions of$13.4 million. REVIEW OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS The following table shows the condensed statement of revenues, expenses, and changes in net assets for the Central contra Costa Sanitary District: Condensed Statement of Revenues, Expenses, and Changes in Net Assets Dollar Percent Fiscal Year 2003 Fiscal Year 2002 Chane Change 10perating Revenues 39,4281402 38,2529547 19175,855 3.07% Non-Operating Revenues 20,1169904 1598889105 412287799 26.62% Total Revenues 5995459306 549140,652 5,4049654 9.98% Depreciation Expense 14,527,871 13,833,124 694,747 5.02% Other Operating Expense 37,947,552 36,8671957 19079,595 2.93% Non-Operating Expense 191532349 11202,782 49,433 -4.11% Total Expenses 53,628,772 5199031863 19724,909 3.32% Income(Loss) Before Capital contributions 51916,534 2,2369789 396799745 164.51% Capital Contributions 13,348,601 18,586,939 52238,338 -28.18% Change in Net Assets 19,265,135 20,8239728 11,5589593 -7.48% Beginning Net Assets 48796429777 4669819,049 20,8239728 4.46% lEnding Net Assets 1 506,907,912 1 487,6429777 19,265,135 3.95% 3 In 2002-2003, operating revenues increased by $1.2 million or 3.07%; non-operating revenue increased by $4.2 million or 26.62%; depreciation expense increased by $0.7 million or 5.02%; other operating expense increased by $1.1 million or 2.93%; non- operating expense decreased slightly. Total 2002-2003 income before capital contributions was $5.9 million compared to 2001-2002 income before capital contributions of $2.2 million for an increase of $3.7 million or 164.51%. Capital contributions in 2002-2003 were $13.3 million compared to $18.6 million in 2001-2002, resulting in a decrease of $5.2 million or—28.18%. Change in net assets decreased by $1.6 million or-7.48% BUDGETARY HIGHLIGHTS The Board of Directors adopted the District's budget for 2002-2003 on June 20, 2002. Variances between actual and budget are presented in the monthly financial statements, which are reviewed with the Board. CAPITAL ASSETS As of June 30, 2003, the District's investment in capital assets totaled $480.7 million., which is an increase of $15.1 million or 3.26% over the capital asset balance of$465.5 million at June 30, 2002. Capital assets include all of the District's major infrastructure including wastewater treatment facilities, sewers, land, buildings, pumping stations, vehicles, and furniture and equipment exceeding our capitalization limit of $1,000. A comparison of the District's capital assets over the past two fiscal years is presented below: Dollar Percent Capital Assets Fiscal Year 2003 Fiscal Year 2002 Change Change 11-and 16,780,269 1 16,780,269 1 0.00% Sewage Collection System 176,747,156 168,538,299 8,208,857 4.87% Contributed Sewer Lines 128,375,019 120,737,0230 7,637,789 6.33% Outfall Sewers 6,259,061 6,259,061 - 0.00% Sewage Treatment Plan 232,436,748 228,8501106 31586,642 1.57% Recycled Water Infrastructure 81390,1794 81268,111 122,683 1.48% Pumping Stations 29,7359335 28,2579079 1,478,256 5.23% Buildings 12,972,762 129960,139 12,623 0.10% Furniture& Equipment 13,147,842 12,932,577 215,265 1.66% Motor Vehicles 31828,433 39269,853 558,580 17.08% Construction In Progress 28,827,469 21,333,905 71493,564 35.13% Subtotal 657,504,888 628.9186,629 29,314,259 4.67% Less Accumulated Depreciation 176,7749521 162,642,434 14,132l087 8.69% ITotal Capital Assets net of deprec.) 480,9726,367 465,5449195 15,182gl 72 3.26% An 11,000-unit development is being built in the Dougherty Valley, near San Ramon. The San Ramon Valley interceptor project was completed this year and $3.6 million was added to Sewage Collection System assets; the additional $4.6 million came from numerous projects supplying ongoing sewer renovation and repair. Contributed sewer line additions consisted of $7.6 million, $3.6 million from developers, and the remaining amount from Contractual Assessment District (CAD) projects (Note #5.) The Treatment 4 Plant assets include ultraviolet light improvements, treatment plant capacity evaluation and improvements, and furnace and dewatering upgrades. The Concord Industrial Force Main/Pumping Station project made up the bulk of Pumping Station Improvements. DEBT ADMINISTRATION The District has the following outstanding debt as of June 30, 2003: 1998 Revenue Refunding Bonds $ 18,759,507 2002 Revenue Bonds 161565,000 Water Reclamation Loan Contract 21299,842 $ 37,624,349 See Note#6 on page 14. ECONOMIC AND OTHER FACTORS Changes in the state economy have an impact on the District. Currently, the California budget deficit may cause the District to lose in excess of $8.0 million in property tax revenue in the 2003-2004 fiscal year. Regulatory compliance is also becoming more stringent, causing the District to spend more to comply with rigorous testing and compliance requirements. In addition to making efforts to reduce spending, the District has the ability to raise the Sewer Service Charge to meet our long-term commitments. FINANCIAL CONTACT The financial report is designed to provide our customers and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact: Controller, Central Contra Costa Sanitary District, 5019 Imhoff Place, Martinez, CA 94553. 5 CENTRAL CONTRA COSTA SANITARY DISTRICT STATEMENT OF NET ASSETS AS OF JUNE 309 2003 ASSETS CURRENT ASSETS Cash and investments available for operations $ 56,872,402 Accounts receivable 81764,953 Interest receivable 251565 Parts and supplies 14111673 Prepaid expenses 3571,055 TOTAL CURRENT ASSETS 67,431,648 NONCURRENT ASSETS Restricted cash and investments 5,0203705 Property,plant and equipment,net 4511,898,898 Construction in progress 28,827,469 Contractual assessment district receivable 884,796 Capital cost receivable 935,940 Revenue bond issuance costs,net or amortization 381,478 TOTAL ASSETS 555,3801934 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued expenses 51018,031 Interest payable 536,163 Current portion of refunding revenue bonds 13,375,000 Current portion of water reclamation loan contract 1271323 Liability for uninsured claims 437,360 Accrued compensation absences 41564,611 Refundable deposits 2921508 TOTAL CURRENT LIABILITIES 121,350,996 NONCURRENT LIABILITIES Revenue Bonds,Net of Current Portion 331949,507 Water Reclamation Loan Contract,Net of Current Portion 2,172,519 TOTAL LIABILITIES 481,473,022 NET ASSETS: Invested in capital assets,net of related debt 443,3501152 Restricted for debt service 454841542 Unrestricted 593,073,218 TOTAL NET ASSETS $ 5061,9071,912 The accompanying notes are an integral part of these financial statements. 6 CENTRAL, CONTRA COSTA SANITARY DISTRICT STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 309 2003 OPERA'T'ING REVENUE Sewer service charges . $ 31,9672101 Service charges-City of concord 61,321,452 Other service charges 6331037 Miscellaneous charges 506,812 Total operating revenue 39,4281402 OPERATING EXPENSES Sewage collection and pumping stations 7,0481216 Sewage treatment 16,330,071 Engineering 513841,469 Administrative and general 9,184,796► Depreciation 1.451527,871 Total operating expenses 52,475,423 OPERATING LUSS (13,047,021) NON-OPERATING REVENUES(EXPENSES): Taxes 8,801,230 City of Concord cash contributions to capital costs 1114933525 Customer cash contributions to capital cost 63,3403,116 Permit and inspection fees 862,757 Interest earnings 925,509 Pump Zone fees 617,113 Interest expense (1,153,349) Other income(expense) 11,0761,654 Total non-operating revenues(expenses) 18,963,555 Income before contributions and transfers 51,9161,534 Contributed sewer lines 71818537 Capital contributions-connection fees 555303,064 CHANGE IN NET ASSETS 195265,135 Total Net Assets-Beginning 487,642,777 Total Net Assets-Ending 506,907,9 12 The accompanying notes are an integral part of these financial statements. 7 CENTRAL CONTRA COSTA SANITARY DISTRICT STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 309 2003 Cash Flows From Operating Activities: Receipts from customers and users $ 35,12443,680 Payments to suppliers (11,0781,432) Payments to employees (25,6141,909), Net cash used by operating activities (1,448,661) Cash Flows From Noncapital Financing Activities: Other income 11113793,820 Cash Flows From Capital And Related Financing Activities: Connection fees and other capital contributions 13,363,705 Acquisition and construction of capital assets (21.)0843734) Principal paid on bonds (11,454,097) Interest paid on bonds (11498,1833) Net cash used by capital and related financing activities (1011673,959) Cash Flows From Investing Activities: Interest received 9731,192 Net increase in cash and cash equivalents 230,392 Cash and cash equivalents,July 1 611,662,715 Cash and cash equivalents,June 30 $ 6158931,107 End of Period: Unrestricted cash and equivalents $ 561872)402 Restricted cash and equivalents 590203,705_ $ 61,8931107 The accompanying notes are an integral part of these financial statements. 8 CENTRAL CONTRA COSTA SANITARY DISTRICT STATEMENT OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED JUNE 309 2003 Reconciliation of operating income to net cash provided(used)by operating activities: rovi Operating loss $ (13,0471021) Adjustment to reconcile operating loss to net cash provided(used) by operating activities: Depreciation expense 14,15273,871 (Increase)decrease in Accounts receivable (43,1833,722) Parts and supplies (90,1569) Prepaid expenses 781715 Increase(decrease)in: Accounts payable and accrued expenses 933,418 Deposits (5,1257) Liability for uninsured claims 57 650 Accrued compensated absences 280,254 Net cash used by operating activities .. A $ (114483,661) Noncash investing,capital,and financing activities: Contributions of capital assets $ 71818,537 The accompanying notes are an integral part of these financial statements. 9 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR.THE YEAR ENDED JUNE 309 2003 NOTE#1 -SIGNIFICANT,4CCOUNTING POLICIES Reporting entity The Central Contra Costa Sanitary District,a special district and a public entity established under the Sanitary District Act of 1923,provides sewer service for the incorporated and unincorporated areas under its jurisdiction. A Board of Directors comprised of five elected members governs the district. As required by accounting principles generally accepted in the United States of America,these general purpose financial statements present Central Contra Costa Sanitary District and its component unit. The component unit discussed in the following paragraph is included in the District's reporting entity because of the significance of its operational or financial relationship with the District. Blended Component Unit-The Central Contra Costa Sanitary District Facilities Financing Authority,was organized solely for the purpose of providing financial assistance to the District by acquiring,constructing,, improving and financing various facilities,land and equipment purchases,and by leasing or selling certain facilities,land and equipment for the use,benefit and enjoyment of the public served by the District. The Corporation has no members and the Board of Directors of the Corporation consist of the same persons who are serving as the Board of Directors of the District. There are no separate general-purpose financial statements prepared for the Corporation. Basis of accounting The District's financial statements are prepared on the accrual basis in accordance with accounting principles generally accepted in the United States of America as promulgated by the Governmental Accounting Standards Board(GASB). In addition,the District applies all applicable Financial Accounting Standards Board(FASB) pronouncements issued on or before November 301) 1989,unless those pronouncements conflict with or contradict GASB pronouncements. The District is a proprietary entity; it uses an enterprise fund format to report its activities for financial statement purposes. Enterprise finds are used to account for operations that are financed and operated in a manner similar to private business enterprises,where the intent of the governing body is that the cost and expenses,including depreciation,of providing goods or services to its customers be financed or recovered primarily through user charges; or where the governing body has decided that periodic determination of revenues earned,expenses incurred,and net income is appropriate for capital maintenance,public policy,management control, accountability,or other purposes. Enterprise funds are used to account for activities similar to those in the private sector,where the proper matching of revenues and costs is important and the full accrual basis of accounting is required. With this measurement focus,all assets and all liabilities of the enterprise are recorded on its statement of net assets,all revenues are recognized when earned and all expenses,including depreciation,are recognized when incurred. For internal operating purposes,the District's Board of Directors has established three separate sub-funds,each of which includes a separate self-balancing set of accounts and a separate Board approved budget for revenues and expenses. These sub-funds are combined into the single enterprise fund presented in the accompanying financial statements. The nature and purpose of these sub-funds are as follows: 10 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30.) 2003 Property,Plant and Equipment-continued Depreciation of exhaustible fixed assets has been provided using the straight line method as follows: Years Sewage Collection Facilities 75 Sewage Treatment Plant and Pumping Plants 40 Buildings 50 Furniture and Equipment 7-15 Motor Vehicles 6-15 Defined Contributed Retirement Plans District employees may defer a portion of their compensation under a District sponsored Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. Under this Plan,participants are not taxed on the deferred portion of their compensation until it is distributed to them; distributions may be made only at termination,retirement,death,or in an emergency as defined by the Plan. The District does not make contributions to the Plan. On August 20, 1997,the provisions of the Internal Revenue Code covering section 457 were amended to require existing plans to establish trusts for assets of plans so that they would not be subject to the right of general creditors. The District amended its plan during the fiscal year ended June 30, 1999 to meet this requirement. Consequently,at June 30,2003,the plans assets are held in trust for the exclusive benefit of the participants are not included in the District's financial statements. The District also contributes to a money purchase plan created in accordance with Internal Revenue Code section 401 (a). Contributions to the plan are made in accordance with a memorandum of understanding stating that in lieu of making payments to Social Security,the District contributes to the 401 (a)Plan an amount equal to that which would have been contributed to Social Security on behalf of its employees as long as the District is not required to participate in Social Security. The assets are held in trust and are not recorded on the books of the District. The District contributed$1,153,504 to the plan during the year ended June 30,2003. Property Taxes Property tax revenue is recognized in the fiscal year for which the tax is levied. The County of Contra Costa levies,bills and collects property taxes for the District; all material amounts are collected by June 30. General County taxes collected are the same as the amount levied since the County participates in California's alternative method of apportionment called the Teeter Plan. The Teeter Plan as provided in Section 4701 et. seq. 12 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 309 2003 Property Taxes-continued of the State of Revenue and Taxation Code establishes a mechanism for the county to advance the full amount of property tax and other levies to taxing agencies based on the tax levy,rather than on the basis of actual tax collections. Although this system is a simpler method to administer,the County assumes the risk of delinquencies. The County in return retains the penalties and accrued interest thereon. Secured property tax is due in two installments,on November i and February 1,becoming a lien on those dates, and becoming delinquent on December 10 and April 10,respectively. Delinquent accounts are assessed a penalty of 10 percent. Accounts,which remain unpaid on June 30,are charged an additional 1 %2 percent. Accounts, which remain unpaid on June 30,are charged an additional 1 %2 percent per month. Unsecured property tax is due on July 1 and becomes delinquent on August 31. The penalty percentage rates are the same as secured property tax. Compensated Absences The liability for vested vacation and sick pay is recorded as an expense when earned. District employees have a vested interest in 100 percent of accrued vacation time and 85 percent of accrued sick time for employees hired before May 1, 1985. Employees hired after May 1, 1985 have a vested interest in up to 40 percent of their sick time,based upon length of employment with the District. Statement of Cash Flows For purposes of the statement of cash flows,all highly liquid investments,including restricted assets,are considered to be cash equivalents. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. New Governmental Accounting Standards The District has implemented GASB Statement No. 34 for the fiscal year ended June 30,2003,and its statements are presented according to those requirements. Statement 34 established standards for external financial reporting for all state and local governmental entities,which includes a management discussion and analysis section,a statement of net assets,a statement of activities and changes in net assets and a statement of cash flows. It requires the classification of net assets into three components-invested in capital assets,net of related debt; restricted; and unrestricted. The adoption of Statement 34 had no significant effect on the basic financial statements except for the classification of net assets and the inclusion of a Management Discussion and Analysis section providing an analysis of the District's overall financial position and results of operation. 13 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 309 2003 NOTE#2- CASH ANI. CASH EQUIVALENTS Cash and Investments The District invests in individual investments and in investment pools. individual investments are evidenced by specific identifiable securities instruments,or by an electronic entry registering the owner in the records of the institution issuing the security,called the book entry system. In order to maximize security, individual investment securities,such as treasury notes,are held in custodial accounts maintained by the bank. The District's operating fiends are held in the Contra Costa County Treasurer investment pool. All District receipts are deposited with the County and all District disbursements are made from the County account. The County Treasurer's Office executes investment transactions on behalf of the District in accordance with the District's investment policy and the constraints prescribed by the Government Code of the State of California for authorized investments. Categorization of investments Investments that are represented by specific identifiable investment securities are classified as to credit risk by three categories as follows: Category 1: Insured or registered,or securities held by the District or its agent in the District's name. Category 2: Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the District's name. Category 3: Uninsured and unregistered, with securities held by the counterparty., or by its trust department or agent,but not in the District's name. Uncategorized Instruments Pooled investments are not categorized because of their pooled,rather than individual nature. Authorized Investments The District's Investment Policy and the California Government Code allow the District to invest in the following,provided the credit rating of the issuers are acceptable to the District. Maturities may not exceed one year except for Treasury notes and the Local Agency Investment Fund{LAIF). United States Treasury Bills and Notes,and obligations of government agencies for which the full faith and credit of the United States is pledged, Collateralized Certificates of Deposit issued by a Federal or State chartered bank or a Federal or State chartered savings and loan association. 14 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 309 2003 Cash and Cash Equivalents and Investments (continued) Bankers Acceptances, drawn on and accepted by a commercial bank,which are eligible for purchase by the Federal Reserve System, Commercial Paper of prime quality limited to corporations with assets over$500 million, State of California Local Agency Investment Fund(LAIF). The total amount invested in a single issuer,except for Treasury Bills and Notes and LAIF,may not exceed 15%of the District's investment portfolio. Carrying Value Investments in U.S.Treasury Notes are presented in the financial statements at cost adjustment for amortization of premiums or discounts,which approximates fair value in the aggregate. Cash and investments are comprised of the following at June 30,2003: Reported Fair Uncategorized: Amount Value Contra Costa County Treasurer $ 318721,402 $ 3,8831427 California Local Agency Investment Fund 4114231,000 411540,901 Money Market Fund-First American Treasury Obligations 2313021,573 21302,573 Categorized: Commercial Paper-Category 2 131,0001,000 13,0001,000 U.S.Treasury Bills and Notes-Category 2 111295,132 1,295,132 Total cash and investments $ 613,8931,107 $62,022,033 As presented on the Statement of Net Assets: Cash and investments available for operations $ 561,872,0402 Restricted cash and investments 530203,705 Total cash and investments $61.18931,107 15 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 309 2003 Investment In State Treasurer's Pool The Local Agency Investment Fund(LAIF)is an external investment pool sponsored by the State of California authorized under Section 16429.1,2,and 3 of the California Government codes. The fund is a voluntary program created by statute as an investment alternative for California local governments and special districts. The fund is administered by the California State Treasurer. The District deposits excess cash in LAIF for investment purposes. LAIF is not required to be categorized. The fair value for these deposits was provided by the pool sponsor. Contra Costa County Investment Pool Cash with County is an external investment pool sponsored by the County of Contra Costa. The District deposits excess cash in the pool for investment purposes. County deposits are not required to be categorized. The fair value for these deposits was provided by the pool sponsor. Restricted Cash and Investments—Debt Service The District has monies held in trust,pledged to the payment or security of its outstanding bond issues. All transactions associated with debt service are administered by the trustee. NOTE#3—A CCO U7V7S RECEIVABLE At June 30,2003,accounts receivable are comprised of the following: City of Concord(see Note 8) $ 757901,344 Commercial and other services charges, franchises fees and assessments 974,609 Total accounts receivable $ 8,764,95 3 16 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2003 NOTE##4—PROPERTY PLANT AICD EQUIPMENT AND CONSTRUCTION IN PROGRESS Property,plant and equipment,and construction in progress are summarized below for the year ended June 30, 2003: Balance Beginning Transfer Balance of Year Additions Retirements from CP End of Year At cost: Land $ 1697803,269 $ 163,7803,269 Sewage collection system 1681,5383,299 $ (161,800) $ 82225,657 176,747,156 Contributed sewer lines 120,737,230 $ 73,637,789 128,3751,019 {outfall sewers 6125931061 6,2591061 Sewage treatment plant 228,8501106 (60,000) 316461,642 23254365748 Recycled water infrastructure 812683,111 1225683 813903,794 Pumping stations 281257,079 (22,000) 111500,256 29,7351335 Buildings 1259601,137 121,625 123,972,762 Furniture and equipment 12,932,577 (2361,248) 451,513 13,1473842 Motor vehicles 312691,853 641,378 (82,798) 31828,433 Total cost 6061852,722 8,27910167 (417,846) 13,959,376 628,6735419 Less accumulated depreciation: Sewage system and lines 5255991,533 4300591272 (16,800) 563,642,005 Sewage treatment plant 8914185155 753799573 (60,000) 9611737,728 Pumping stations 6,0713562 1,060,363 (22,000) 75109,925 Buildings 31,6763,346 2922851 31969,197 Furniture and equipment 716851162 1,0733,878 (214,966) 8,5443074 Motor vehicles 250771435 291,047 (82,018) 2,2861,464 Recycled water infrastructure 1,114,241 370,1887 1,485,12 8 Total accumulated depreciation: 162316421434 14,5271,871 (3951,784) 176117745521 Net book value $444,210,288 $ (6,248,704) $ (22,062) $ 131,959,376 $4511,898,898 Transfer to Additions Fixed Assets Construction in progress $ 21,333,905 $213,4522940 $(13,959,376) $ 283,8275469 17 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 309 2003 NOTE#5—CONTRACTUAL ASSESSMENT DISTRICTS: The District established the Contractual Assessment District(CAD)program to help homeowners finance the cost of connecting to the District. The construction costs associated with the project within the program are capitalized and depreciated. Individual homeowners are assessed an amount equal to their share of the construction cost and the connection fee. The assessments plus interest are generally payable over 10 years. At year end,the receivable balance was$884,796. NOTE#6—L ONG-TERM DEB T Revenue Bonds-2002 In May 2002,the District issued$16,565,000 of Revenue Installment Certificates for Wastewater Facilities Improvements,with interest rates ranging from 4.0%to 5.0%. The bonds are secured by a pledge of revenue. Principal payments are due annually on September 1,commencing in fiscal year 2005,and interest is payable semi-annually on September I and March I of each year. Refunding Revenue Bonds--1998 In September 1998,the District issued$25,335,000 of Refunding Revenue Bonds with interest rates ranging from 3.5%and 4.7%. The Bonds are secured by a pledge of revenue. Principal payments are due annually on September 1,and interest is payable semiannually on September I and March 1. The District issued the 1998 Refunding Revenue Bonds to advance refund the 1994 Revenue Installment Certificates,which had interest rates of 5.25 to 6.25%. The net proceeds were deposited in an escrow fund to service and redeem the 1994 debt. As a result,the advance refunding met the requirements of an in-substance debt defeasance,and the outstanding balance of the 1994 debt was removed from the District's accounts. The excess of the amount required to be deposited into the escrow fund over the net carrying amount of the 1994 debt resulted in a deferred loss. The deferred loss is reported as reduction of the new debt and is being amortized over the 15 year term of the new debt. The outstanding principal balance of the defeased 1994 Revenue Installment Certificates is$18,795,000 at June 30, 2003. 18 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2003 -------------- Refunding Revenue Bonds--1998-continued The 2002 and 1998 Revenue Bonds debt service requirements are as follows: 2002 1998 Fiscal Year Debt Service Debt Service Ending June 30, Requirement Requirement Total 2004 $ 74231561 $ 21216,178 $ 2,958,739 2005 13129630261 21219,973 355165234 2006 112831,461 23,220,674 3,5041,135 2007 152803,061 212181,570 3,4983,631 2008 112705961 252171,310 314881,271 2009-2013 6,3321)036 11095073 17,421,109 2014-2018 613325714 43440,595 1057731,309 2019--2023 65346,524 653461,524 2024-2028 112711000 1527100 Total 263,1555579 265622,373 5257775952 Amount representing interest (9,590,579) (5,872,373) (15,462,952) Principal outstanding 161565,000 20,750,000 3753155000 Less:Unamortized deferred loss on refunding at year end (1,990,493) (1,990,493) 163,565,000 1857593,507 351,324,507 Less: Current portion of revenue bonds (15375,000) (113751,000) Long-term portion of revenue bonds $ 16,5651000 $ 17,384,507 $ 331,9493,507 Water Reclamation Loan Contract The District has entered into a contract with the State of California State Water Resources Control Board(the Board)where the Board advanced to the District$2,916,872 for design and construction costs for projects related to recycled water treatment programs. 19 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30.) 2003 Water Reclamation Loan Contract-continued The District must repay advances from the Board over a 20 year period beginning March 31, 1999,with an interest rate of 2.6%. Debt service requirements are as follows: Debt Service Years Requirements 2004 $ 1873,119 2005 187,119 2006 187,119 2007 187,119 2008 187,119 2009-2013 9351,596 2014-2008 935,1596 Total 231806,787 Amount representing interest (5061,945) 2)2991,842 Less: Current portion of Water Reclamation Loan Contract (1271,323) Long term portion of water Reclamation Loan Contract $ 2,172,519 Local Improvement District Bonds Within the District's boundaries,there exist several improvement districts,which were formed for the sole purpose of financing sewer system improvements. The District has no oversight responsibility for these districts and is not liable for repayment of any bonds issued to finance these local district improvements.Contra Costa County acts as the agent for the property owners in these districts in collecting assessments, forwarding collections to bondholders,and initiating foreclosure procedures,if appropriate. The outstanding balance on these district's bonds was$260,000 at June 30,2003. 20 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 309 2003 NOTE#7—RISK MA NA GEMENT Insurance Coverage The District's insurance coverage is as follows: Self Insured Deductible Per Type of Insurance Coverage Insurer Limits Occurrence AH-Risk Property Fire California Sanitation Risk Management Authority(CSRMA) $35050000,000 $ 2501,000 Boiler&Machinery (Shared Limits per Occurrence) CSRMA $ loopo,000 $ 2501,000 Liability Errors&Omissions Insurance Company of the State of Pennsylvania(AIG) $ 103,0003,000 $ 500,000 General Liability AIG $ 10,0001,000 $ 500,000 Auto Liability AIG $ 10,1000,000 $ 500,000 Pollution(General Aggregate) General Liability American International Specialty Lines Insurance Co. $ 5,000,000 $ 50,000 Pollution Liability American International Specialty Lines Insurance Co. $ 103,0003,000 $ 50,000 Pollution(Legal Liability Aggregate) American International Specialty Lines Insurance Co. $ 10,000,000 $ 50,000 Workers' Compensation CSRMA $ 251,7505000 $ - Liability for Uninsured Claims The Governmental Accounting Standards Board(GASB)requires state and local governments to record their liability for uninsured claims in their financial statements. 21 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 309 2003 Liability for Uninsured Claims-continued The District's uninsured claims activity and exposure relates primarily to its general and automobile liability program. The District records its estimated liability for uninsured claims in this area based on the results of periodic actuarial evaluations. The actuarial evaluations are typically performed every two years. For intervening years,the liability for uninsured claims is reviewed for adequacy based on claims activity during the intervening period. For the fiscal years 2003,2002, and 2001 settlements have not exceeded insurance coverage. Changes in the District's estimated liability for uninsured claims for fiscal years 2003,2002,and 2001 are summarized as follows: 2003 2002 2001 Beginning balance $ 379,710 $ 150661,924 $ 901,000 Provisions for claims incurred in the current year and changes in the liability for uninsured claims incurred in prior years 215,534 (417,947) 567,1562 Claims and claim adjustment expenses paid (1571,884) (269,1267) (401.1638) Ending balance $ 4375360 $ 379,710 $ 110663,924 NOTE#8—AGREEMENT WITH CITY OF CONCORD In 1974,the District and the City of Concord(the City)entered into a cost-sharing agreement under which the District became responsible for providing sewage treatment facilities and services to the City. Under this agreement,the City pays a service charge for its share of operating,maintenance and administrative costs and makes a contribution for its share of facilities capital costs expended. Service charges and contributions to capital costs from the City totaled$6,321,452 and$1,493,525 respectively, for the year ended June 30,2003. The District had the opportunity to make an unexpected capital purchase of real property adjacent to its existing treatment plant. The city of Concord's share according to the terms of the above agreement is$905,255. Because the purchase was unexpected,the District agreed to accept four equal annual payments beginning July 1,2004 and annually thereafter on July 1. The interest shall accrue at 2.06%on a declining balance basis and each installment payment will be in the amount of$246,000. At the end of June 30,2003,interest of$30,685 had accrued for a total receivable balance of$935,940. 22 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 309 2003 NOTE#9—PENSION PL" Plan Description Substantially,all District full-time employees are required to participate in the Contra Costa County Employees' Retirement Association,a cost-sharing multiple-employer public employee deferred benefit retirement plan (Plan),governed by the County Employee's Retirement Law of 1937,as amended. The latest available actuarial and financial information for the Plan is for the year ended December 31,2002. The Contra Costa Employees' Retirement Association issues a publicly available financial report that includes financial statements and supplemental information of the Plan. That report is available by writing to Contra Costa County Employees' Retirement Association, 1355 Willow Way Suite 221,Concord,CA 94520-5728 or calling(925)646-5741. The Plan provides for retirement,disability,death and survivor benefits. Annual cost of living(COL)adjustments to retirement allowances can be granted by the Retirement Board as provided by State statutes. Service retirements are based on age, length of service and final average salary. Subject to vested status,employees can withdraw contributions plus interest credited or leave them as a deferred retirement when they terminate or transfer to a reciprocal retirement system. Plan Contribution Requirement The Plan requires employees to pay one-half of the basic retirement benefit and on-half of future COL costs. However,the District has chosen to pay the employee's basic contributions. The contribution requirement and payment from the District for the plan year ended December 31,2002,was$3,641,530. These contributions represented 21%of covered payroll. The District's contribution for the plan years ended December 31,2001 and 2000 were$3,395,287 and$3,155,031 respectively and were equal to the District's required contributions and the employee's basic contributions for each year. NOTE#10—POST EMPL 0 YEMENT HEALTH CANE BENEFITS The District provides certain health care and life insurance benefits for retired employees. These benefits are provided for in negotiated employment agreements,commonly referred to as Memorandums of Understanding, which cover substantially all employees who reach normal retirement age while working for the District. These benefits,and similar benefits for active employees,are provided through a health maintenance organization and an insurance company whose premiums are based on the benefits paid during the year. The District recognizes the cost of providing those benefits by expensing the annual insurance premiums,which were$1,283,466 for the 164 eligible retirees for the year ended June 30, 2003. 23 CENTRAL CONTRA COSTA SANITARY DISTRICT NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 309 2003 NOTE#H—COMMITMENTS AND CONTINGENCIES Commitments and contingencies,undeterminable in amount,include normal recurring pending claims and litigation. In the opinion of management,based upon discussion with legal counsel,there is no pending litigation which is likely to have a material adverse affect on the financial position of the District. Claims and losses are recorded when they are reasonably probable of being incurred and the amount is estimable. Insurance proceeds and settlements are recorded when received. The District has purchase commitments relating to construction projects at June 30, 2003 of approximately $14,3503,000. NOTE#12—RESTATEMENT OF BEGINNING NET ASSETS The accompanying financial statements reflect an adjustment that resulted in a restatement of net assets due to the implementation of GASB Statement No. 34. Retained Earnings at July 1,2002 as previously reported $ 234521%555 Cumulative effect of GASB Statement No. 34 (Combine contributed capital with retained earnings) 253,423,222 Net assets at July 1,2002 as restated $ 487,642,777 24 SUPPLEMENTARY CENTRAL CONTRA COSTA SANITARY DISTRICT SCHEDULE OF COMBINING STATEMENT OF NET ASSETS AS OF JUNE 309 2003 Running Sewer Self Expense Construction Insurance Eliminations Total ASSETS CURRENT ASSETS Cash and investments available for operations $ 223872838 $ 50,046,264 $ 4,4381300 $ 56,872,402 Accounts receivable 720757297 116893,656 81764,953 Interest receivable 2511565 2511565 Due from other sub-funds 5610162708 4823179100 6143846 $ (104,9481654) Parts and supplies 124111673 134112673 Prepaid expenses 357,055 3572055 TOTAL CURRENT ASSETS 6772481571 1002078,585 51053,146 (1043,948,654) 6724312648 NONCURRENT ASSETS Restricted Cash and Investments 2,2801592 217403,113 51,020,705 Property,Plant and Equipment,net 45118981,898 451,898,898 Construction in Progress 2878271469 28,8272469 Contractual Assessment District Receivable 8843,796 884,796 Capital Cost Receivable 9351,940 93$2940 Revenue Bond Issuance Costs, net or amortization 2481134 1333,344 3811478 TO'T'AL ASSETS 550,503,664 10477722778 57053,146 (_ 4,948,654 55523801,934 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued expenses 2,9311814 230721466 131,751 520183,031 Due from other sub-funds 48,3631537 553,844,895 7401,222 (1041,9483654) Interest payable 28 8,643 247,520 5363,163 Current portion of refunding revenue bonds 11375,000 1,3753,000 Current portion of water reclamation loan contract 127,323 127,323 Liability for uninsured claims 4371360 4372360 Accrued compensation absences 43,564,611 415643,611 Refundable deposits 1541,504 1381004 2923,508 TOTAL CURRENT LIABILI'T'IES 5728052432 582302,885 1,191,333 (1041,948,654) 1213505996 NONCURRENT LIABILITIES Revenue Bonds,Net of Current Portion 17,3842507 16,5653,000 331,9491,507 Water Reclamation Loan Contract, Net of current portion 251721519 231172,519 TOTAL LIABILITIES 771,3621,458 741,8673885 1,191,333 (10419482654) 4824733,022 NET ASSETS: Invested in capital assets,net of related debt 459,9153,152 (161565,000) 443,350,152 Restricted for debt service 119911,949 224922593 414842542 Unrestricted 117234)105 431)9773300 32861,813 59,0732218 TOTAL NET ASSETS $ 47310141,206 $ 291904,893 $ 31,861,813 $ $ 50629071,912 25 CENTRAL CONTRA COSTA SANITARY DISTRICT SCHEDULE OF COMBINING STATEMENT OF REVENUES AND EXPENSES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 309 2003 Running Sewer Self Expense Construction Insurance Eliminations Totals �9 I III-�IYI��1 YiY� Operating Revenues: Sewer service charges $ 31,967,101 $ 31,967,141 Service charges-City of Concord 61,3211,452 61321,452 Other service charges 63 3,03 7 63 3,03 7 Miscellaneous charges 5061,812 5061812 Total operating revenues 39,428,402 393428,402 Operating Expenses: Sewage collection and pumping stations 7,0483,216 71048,216 Sewage treatment 16,3301,071 16,330,071 Engineering 51384,469 51384,469 Administrative and general 81777,789 $ 632,007 $ (225,000) 91184,796 Depreciation 14,527,871 145527,871 Total operating expenses 521,068,416 6325007 (2253000) 52 475 423 Operating Loss:Loss: _(12,6403,014) - - (6323,007) 2251,000 (13,04. 7,021) Non-Operating Revenues(Expenses): Taxes 120913018 $ 7137101212 8,8011230 City of Concord cash contributions to capital costs 1,493,525 114937525 Customer cash contributions to capital cost 613401)116 61340,116 Permit and inspection fees 573,146 289,611 862,757 Interest earnings 118,007 7121456 95,046 925,509 Pump Zone fees 617,113 617,113 Interest expense (1,153,349) (111531,349) Other income(expense) 311,246 797,812 192,596 (225000) 110761654 Total non-operating revenues(expenses) 9403,068 171960,845 287,642 (225,000) 18,963,555 Income before contributions and transfers (11,699,946) 1739601,845 (344,365) 51916,534 Contributed sewer lines 778183537 738181537 Capital contributions-connection fees 515302064 5,5303064 Transfers 2256271249 (2276275249) Change In Net Assets 181745,840 863,660 (3443,365) 19,2659135 Total Net Assets-Beginning 4541,395,366 291,041,233 4,206,178 48736421777 Total Net Assets-Ending $ 473,1411206 $29,904,893 $ 31,861,813 $ $506,907,912 26 tU CN 10 1110 N O N 00 00 d' r-4 to N •--+ I-- 'd` to O M M O 10 00 Q 10 to C1 ] t` N CJS N •-+ 10 r-+ CT to 10 Q ON 4% IN 0O 00 r-+ ' > > N `--' M M M N N N Cr- > ds P.4 N v, ch o Cl) O N O h O 10 10 cMl^ 10 00 W) O O O M 10 00 r- ON 10 --+ W) 10 O Q N r-+ qt � O r- h N v .. .. ., h ., h h h h h oil CT O O 00 C- t) O O try N *-+ 00 '� `t Nto «-� N N o 01 CT t *-+ O t`- 10 C> try .� M C� •-� 10 qT 00 qt M N 00 ON CA eq V-4 bg Q x 1 ct 00 O O N 04% 10 to � W) to M O It CT M O to r--4 00 C31 O (ON tet- 00 CT O t'- M to M 00 N N M 00 w� h h h h h f� h h h h h h 11 wl CT 10 CN en 't N C to N to O a r-- 't00 't 14, C- 00 M ON N d' wl t`-- 'Ct �o 00 �o M .--� r--•1 [` r-•r M 5� �g Q N 1MU Q CT � M �O 00 Nt � O \10 Oo 00 O 'dam t h C 10 00 *-+ �.+ N M 0 . 00 C. 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'v (.� b4 cn y C� Ch CIS .� � o Cd - v CENTRAL CONTRA COSTA SANITARY DIS'T'RICT RUNNING EXPENSE SCHEDULE OF SUPPLEMENTAL NET ASSETS ANALYSIS FOR THE YEAR ENDED JUNE 309 2003 Prior Year Balance $ 61172,550 2002-2003 Revenue 4115211,819 2002-2003 Expense (53,221,765) Add Back Depreciation Expense 14,5271,871 2,827,925 Net Assets Attributed to General Operations 9,01001475 All Other Net Assets 464,140,731 Running Expenses Net Assets $4731,1415206 28