HomeMy WebLinkAbout10-19-22 F&A Committee Packet 1
OTAY WATER DISTRICT
FINANCE AND ADMINISTRATION
COMMITTEE MEETING
and
SPECIAL MEETING OF THE BOARD OF DIRECTORS
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
BOARDROOM
WEDNESDAY
October 19, 2022
12:00 P.M.
This is a District Committee meeting. This meeting is being posted as a special meeting
in order to comply with the Brown Act (Government Code Section §54954.2) in the event that
a quorum of the Board is present. Items will be deliberated, however, no formal board actions
will be taken at this meeting. The committee makes recommendations
to the full board for its consideration and formal action.
AGENDA
1. ROLL CALL
2. PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO
SPEAK TO THE COMMITTEE ON ANY SUBJECT MATTER WITHIN THE COMMIT-
TEE'S JURISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA
DISCUSSION ITEMS
3. APPROVE THE AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR
ENDED JUNE 30, 2022 (DYCHITAN) [5 minutes]
4. UPDATE OF THE DISTRICT’S HAZARD MITIGATION ACTION PLAN (ZUNIGA) [5
minutes]
5. ADJOURNMENT
BOARD MEMBERS ATTENDING:
Mark Robak, Chair
Jose Lopez
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All items appearing on this agenda, whether or not expressly listed for action, may be delib-
erated and may be subject to action by the Board.
The agenda, and any attachments containing written information, are available at the Dis-
trict’s website at www.otaywater.gov. Written changes to any items to be considered at the
open meeting, or to any attachments, will be posted on the District’s website. Copies of the
agenda and attachments are also available by contacting the District Secretary at (619) 670-
2253.
If you have any disability which would require accommodations to enable you to participate in
this meeting, please call the District Secretary at 670-2253 at least 24 hours prior to the
meeting.
Certification of Posting
I certify that on October 14, 2022 I posted a copy of the foregoing agenda near the
regular meeting place of the Board of Directors of Otay Water District, said time being at least
24 hours in advance of the meeting of the Board of Directors (Government Code Section
§54954.2).
Executed at Spring Valley, California on October 14, 2022.
/s/ Tita Ramos-Krogman, District Secretary
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 2, 2022
SUBMITTED BY: Marissa Dychitan
Senior Accountant
PROJECT: DIV. NO. All
APPROVED BY: Eid Fakhouri, Finance Manager
Kevin Koeppen, Assistant Chief of Finance
Joseph R. Beachem, Chief Financial Officer
Jose Martinez, General Manager
SUBJECT: Approve the Audited Financial Statements for the Fiscal Year
Ended June 30, 2022
GENERAL MANAGER'S RECOMMENDATION:
That the Board approve the Audited Financial Statements (Attachment
B), including the Independent Auditors' unqualified opinion, for the
fiscal year ending June 30, 2022.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To inform the Board of the significant financial events which
occurred during the fiscal year ended June 30, 2022, as reflected in
the audited financial statements.
ANALYSIS:
Davis Farr LLP performed the audit and found that, in all material
respects, the financial statements correctly represent the District's
AGENDA ITEM 3
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financial position. They found no material errors in the financial
records or statements (Attachment D).
Total Assets:
Total assets increased by $50.2 million or 8.92% during Fiscal Year
2022, to $613.0 million, due to increases in cash and cash equivalents,
investments, lease receivables, net Other Post-Employment Benefits
(OPEB) assets, capital contributions, and improved operating results,
which were partially offset by depreciation.
Deferred Outflows & Deferred Inflows:
Deferred outflows decreased by $0.3 million or 4.00% in Fiscal Year
2022 due primarily to the amortization of the difference between
projected and actual earnings on OPEB and the Pension plan.
Deferred inflows increased by $56.1 million or 3,935.40% due to the
recognition of deferred inflows from leases as the result of
implementing GASB Statement No. 87 Leases and increases in deferred
investment income for the Pension and OPEB plans.
Total Liabilities & Net Positions:
Total liabilities decreased by approximately $25.6 million or 15.58%
from the previous fiscal year to $138.4 million. The decrease is
attributable to the annual debt payment of $5.3 million and decreases
in the net Pension and OPEB liabilities.
The net position increased by $19.4 million, or 4.79%, to $424.7
million as of June 30, 2022.
Capital Contributions:
Capital contributions for Fiscal Year 2022 were $13.2 million.
Capital contributions consist of developers contributing $8.6 million
in capacity fees and $4.0 million in contributed fixed assets; and
Caltrans contributed $0.1 million in reimbursements for utility
relocations. Ratepayers also paid $0.5 million in availability fees,
which are considered a part of capital contributions.
Results of Operations:
Operating revenues increased by $1.6 million, or 1.51%, due to
increased water and wastewater rates.
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The cost of water sales increased by $3.7 million, or 5.49%, due to
increased unit purchase costs.
Non-Operating Revenues & Expenses:
Non-operating revenues decreased by $1.0 million or 7.80% for Fiscal
Year 2022 due primarily to the decrease in investment income.
Non-operating expenses in Fiscal Year 2022 were $5.3 million, the
same as the previous year.
Conclusion:
In summary, the overall audit process was successful, and the
auditors found no material errors or misstatements in the District's
financial statements.
Additional Audit Correspondence:
As a part of completing the audit engagement, Davis Farr LLP also
provided the following letters summarizing their observations and
conclusions concerning the District's overall financial processes:
• Management Letter: The auditors did not identify any internal
control deficiencies that they considered material weaknesses.
(Attachment C).
• Audit Committee Letter: This letter describes the overall
aspects of the audit, including audit principles, performance,
dealings with management, and significant findings or issues.
There were no disagreements with management concerning
financial accounting, reporting, or auditing matters, and
there were no significant difficulties in dealing with
management in performing the audit. (Attachment D).
• Report on Applying Agreed-Upon Procedures: A review of the
District's investment portfolio at year-end and a sample of
specific investment transactions completed throughout the
fiscal year were performed. There were no exceptions to
compliance from the District's Investment Policy. (Attachment
E).
FISCAL IMPACT:
None.
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STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning, formalized financial policies, enhanced budget
controls, fair pricing, debt planning, and improved financial
reporting.
LEGAL IMPACT:
None.
Attachments:
A) Committee Action
B) Audited Annual Financial Statements
C) Management Letter
D) Audit Committee Letter
E) Report on Applying Agreed-Upon Procedures
ATTACHMENT A
SUBJECT/PROJECT:
Approve the Audited Financial Statements for the Fiscal
Year Ended June 30, 2022
COMMITTEE ACTION:
NOTE:
OTAY WATER DISTRICT
FINANCIAL STATEMENTS
WITH
REPORT ON AUDIT BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
JUNE 30, 2022
Attachment B
Table of Contents
Year Ended June 30, 2022
Page
Number
Independent Auditors’ Report 1
Management’s Discussion & Analysis 4
Basic Financial Statements:
Statement of Net Position 13
Statement of Revenues, Expenses, and Changes in Net Position 15
Statement of Cash Flows 16
Notes to Financial Statements 18
Required Supplementary Information:
Schedule of Changes in the Net OPEB Liability and Related Ratios 63
Schedule of Contributions 64
Schedule of Changes in the Net Pension Liability and Related Ratios 65
Schedule of Plan Contributions 67
Independent Auditor’s Report
Board of Directors
Otay Water District
Spring Valley, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Otay Water District (District), as of and for
the year ended June 30, 2022 and the related notes to the financial statements, which
collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects,
the respective financial position of the District as of June 30, 2022, and the respective changes
in financial position and cash flows thereof for the year then ended in accordance with
accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the
United States of America (GAAS) and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities
for the Audit of the Financial Statements section of our report. We are required to be
independent of the District and to meet our other ethical responsibilities, in accordance with
the relevant ethical requirements relating to our audit. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of Matter
As described further in Note 13 to the financial statements, during the year ended June 30,
2022, the District implemented Governmental Accounting Standards Board (GASB) Statement
No.87, Lease Accounting. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
The District’s management is responsible for the preparation and fair presentation of the
financial statements in accordance with accounting principles generally accepted in the United
States of America,and for the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
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In preparing the financial statements, management is required to evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the
District’s ability to continue as a going concern for one year after the date that the financial
statements are issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance
but is not absolute assurance and therefore is not a guarantee that an audit conducted in
accordance with GAAS will always detect a material misstatement when it exists. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control. Misstatements are considered material if there is a
substantial likelihood that, individually or in the aggregate, they would influence the judgment
made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the
audit.
Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, and design and perform audit procedures responsive to
those risks. Such procedures include examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the District’s internal control.
Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluate the overall
presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the
aggregate, that raise substantial doubt about the District’s ability to continue as a
going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit, significant audit findings, and certain
internal control–related matters that we identified during the audit.
Report on Summarized Comparative Information
The financial statements of the District for the year ended June 30, 2021 were audited by
other auditors whose report dated October 20, 2021 expressed an unmodified opinion on
those financial statements.In our opinion, the summarized comparative information
presented herein as of and for the year ended June 30, 2021, is consistent, in all material
respects, with the audited financial statements from which it has been derived.
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Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
Management’s Discussion and Analysis, Schedule of Changes in the Net OPEB Liability and
Related Ratios, Schedule of Contributions, Schedule of Changes in the Net Pension Liability
and Related Ratios, and Schedule of Plan Contributions, be presented to supplement the basic
financial statements.Such information is the responsibility of management and, although not
a part of the basic financial statements, is required by the Governmental Accounting
Standards Board who considers it to be an essential part of financial reporting for placing the
basic financial statements in an appropriate operational, economic, or historical context. We
have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management’s responses to our inquiries, the
basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide any assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
October 19, 2022 on our consideration of the District’s internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements and other matters. The purpose of that report is solely to describe the
scope of our testing of internal control over financial reporting and compliance and the results
of that testing, and not to provide an opinion on the effectiveness of internal control over
financial reporting or on compliance.That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the District’s internal control
over financial reporting and compliance.
Irvine, California
October 19, 2022
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Management’s Discussion and Analysis
As the management of the Otay Water District (the "District"), we offer readers of the District's financial
statements,this narrative overview,and an analysis of the District's financial performance during the fiscal
year ending June 30, 2022.Please read it in conjunction with the District's financial statements that follow
Management's Discussion and Analysis.All amounts, unless otherwise indicated, are expressed in millions
of dollars.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the District's basic financial
statements, which are comprised of the following: 1) Statement of Net Position, 2) Statement of Revenues,
Expenses,and Changes in Net Position, 3) Statement of Cash Flows, and 4) Notes to the Financial
Statements.This report also contains other supplementary information in addition to the basic financial
statements.
The Statement of Net Position presents information on the District's assets,deferred outflows of resources,
liabilities,and deferred inflows of resources, with the difference reported as Total Net Position.Over time,
increases or decreases in net positions may serve as a valuable indicator of whether the District's financial
position is improving or weakening.
The Statement of Revenues, Expenses,and Changes in Net Position presents information showing how
the District's net position changed during the most recent fiscal year.All changes in net positions are
reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of
related cash flows.Thus, revenues and expenses are reported in this statement for some items that will
only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).
The Statement of Cash Flows presents information on cash receipts and payments for the fiscal year.The
Notes to the Financial Statements provide additional information essential to a complete understanding of
the data supplied in the specific financial statements listed above.
Financial Highlights
The assets and deferred outflows of resources of the District exceeded its liabilities and deferred inflows of resources at
the close of the most recent fiscal year by $424.7 million (net position). Of this amount, $80.0 million (unrestricted net
position)may be used to meet the District’s ongoing obligations to residents and creditors.
Total assets increased by $50.2 million or 8.92% during Fiscal Year 2022,to $613.0 million, due to increases in cash and
cash equivalents,investments, recording of lease receivables due to implementation of GASB 87,and net OPEB assets,
which were partially offset by a drop in capital assets due to depreciation exceeding current year additions.
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Management’s Discussion and Analysis
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the District's progress in funding its obligation to provide
retirement benefits to its employees.
Financial Analysis:
As noted, net position may serve,over time,as a valuable indicator of an entity's financial position.In the
case of the District, assets and deferred outflows of resources exceeded liabilities and deferred inflows of
resources by $424.7 million at the close of Fiscal Year 2022.
The most significant portion of the District's net position, $340.3 million (80%), reflects its investment in
capital assets,plus unused debt proceeds,less any remaining outstanding debt used to acquire those
capital assets.The District uses these capital assets to provide services to customers; consequently, these
assets are not available for future spending.Although the District's investment in its capital assets is
reported effectively as a resource,it should be noted that the resources needed to repay the debt must be
provided from other sources since the capital assets themselves cannot be used to liquidate these
liabilities.
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Management’s Discussion and Analysis
Statement of Net Position
(In Millions of Dollars)
2022 2021 2020
Assets
Current and Other Assets $ 166.3 $111.2 $94.4
Capital Assets 446.7 451.6 456.5
Total Assets 613.0 562.8 550.9
Deferred Outflows of Resources
Deferred Actuarial Pension Costs 4.5 5.4 3.4
Deferred Actuarial OPEB Costs 3.1 2.5 1.1
Total Deferred Outflows of Resources 7.6 7.9 4.5
Liabilities
Current Liabilities 33.5 32.1 32.2
Long-Term Debt Outstanding 100.9 106.2 112.0
Net Pension Liability 0.3 20.0 16.6
Net OPEB Liability 0.0 1.8 0.0
Other Liabilities 3.7 3.9 3.5
Total Liabilities 138.4 164.0 164.3
Deferred Inflows of Resources
Deferred Inflows from Leases 36.6 0.0 0.0
Deferred Actuarial Pension Costs 14.4 0.0 1.3
Deferred Actuarial OPEB Costs 6.5 1.4 2.3
Total Deferred Inflows of Resources 57.5 1.4 3.6
Net Position
Net Investment in Capital Assets 340.3 340.4 345.2
Restricted for Debt Service 3.7 4.2 4.3
Unrestricted 80.7 60.7 38.0
Total Net Position $ 424.7 $405.3 $387.5
The District's operations and population are growing.Much of this expansion has occurred in the
residential sector, particularly in the multi-family dwellings and commercial areas. By 2055, the District's
service area population is expected to increase by 19% to 271,531 residents.The District has created
several future planning documents to ensure a reliable water supply and sewer system in the future,
including the maintenance of current infrastructure.
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Management’s Discussion and Analysis
In FY 2022,the District's Capital Assets increased by $3.7 million before accumulated depreciation.(See
Note 4 in the Notes to Financial Statements).The District also saw a decrease in long-term debt of $5.3
million (excluding current maturities)due to annual debt service payments (See Note 5 in the Notes to
Financial Statements).
Total Liabilities decreased by $25.6 million in FY 2022 primarily due to decreases in Net Pension and OPEB
liabilities and annual debt service payments. In FY 2021, Total Liabilities decreased by $0.3 million due to a
reduction in long-term debt,partially offset by increases in Net Pension and Net OPEB liabilities.
In FY 2022, deferred outflows of resources decreased by $0.3 million due to the amortization of the
difference between projected and actual earnings of the pension plan. Deferred outflows of resources
increased by $3.4 million in FY 2021 due to additional funding of $1.2 million to CalPERS;an increase of
$1.0 million on the net difference between projected and actual earnings for the pension, a $1.0 million
increase in the OPEB differences between expected and actual experience,and a $0.2 million increase in
FY 2021 PERS Unfunded Actuarial Liability (UAL).
Deferred inflows of resources increased by $56.1 million in FY 2022 due to the recognition of deferred
inflows from leases related to the implementation of GASB Statement No. 87 Leases, and increases in
deferred Pension and OPEB investment income. Deferred inflows of resources declined by $2.2 million in
FY 2021 due to decreases in deferred investment income for the pension and OPEB.
At the end of FY 2022,the District reports positive balances in all net position categories.This situation also
applies to the prior two fiscal years.
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Management’s Discussion and Analysis
Statement of Revenues, Expenses,and Changes in Net Position
(In Millions of Dollars)
2022 2021 2020
Water Sales $102.8 $101.7 $90.4
Wastewater Revenue 3.1 2.9 2.9
Connection and Other Fees 2.9 2.5 2.6
Non-operating Revenues 11.9 12.9 10.9
Total Revenues 120.7 120.0 106.8
Depreciation Expense 17.6 17.2 16.8
Other Operating Expenses 91.6 91.5 90.2
Non-operating Expenses 5.3 5.3 6.9
Total Expenses 114.5 114.0 113.9
Income (Loss) Before Capital
Contributions 6.2 6.0 (7.1)
Capital Contributions 13.2 11.8 7.0
Change in Net Position 19.4 17.8 (0.1)
Beginning Net Position 405.3 387.5 387.6
Ending Net Position $ 424.7 $405.3 $387.5
Water Sales increased by $1.1 million in FY 2022 due to the increase in water rates. Water Sales increased
by $11.3 million in FY 2021 due to an increase in units sold because of the lockdown during the pandemic
and higher water rates.
Other Operating Expenses increased by $0.1 million in FY 2022,predominantly due to the increase in the
cost of water, partially offset by decreases in wastewater costs and general and admin expenses. Other
Operating Expenses increased by $1.3 million in FY 2021,predominantly due to the increased water units
purchased because of increased water sales volumes.The FY 2021 increases were partially offset by a
credit received from the City of San Diego due to a reduction in the contractual recycled water volumes
resulting from the City's plant being shut down.
Specific planning and environmental study costs associated with capital projects do not qualify as capital
costs under Generally Accepted Accounting Principles.
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Management’s Discussion and Analysis
These costs are included in the District's miscellaneous (non-operating) expenses.For FY 2022 and FY
2021, those expenses were $0.4 million and $0.2 million, respectively.
Connection and Other Fees increased by $0.4 million in FY 2022 and decreased by $0.1 million in FY 2021
due to continued development in the District.
Capital Contributions increased by $1.4 million and $4.8 million in FY2022 and FY 2021,respectively,due to
high demand in the housing development market.
Non-operating Revenues
Non-operating Revenues by Major Source
(In Millions of Dollars)
2022 2021 2020
Taxes and Assessments $ 5.2 $5.3 $ 4.9
Rents and Leases 2.1 1.6 1.5
Other Non-operating Revenue 4.6 6.0 4.5
Total Non-operating
Revenues
$ 11.9 $ 12.9 $ 10.9
The District's total non-operating revenues decreased by $1.0 million in FY 2022 due primarily to the
decrease in investment earnings. Total non-operating revenues increased by $2.0 million in FY 2021 due
mainly to the $3.2 million settlement from Metropolitan Water District (MWD),partially offset by a decrease
in investment earnings.
Capital Assets and Debt Administration
The District's capital assets (net of accumulated depreciation) as of June 30, 2022, totaled $446.7 million.
Included in this amount is land, which is a non-depreciable asset.The District's net capital assets
decreased by 1.09% and 1.07% in FY 2022 and FY 2021, respectively.
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Management’s Discussion and Analysis
Capital Assets
(In Millions of Dollars)
As indicated by the figures in the table above, most capital assets added during both fiscal years were
related to the water systems.Additionally,most of the construction-in-progress cost is associated with
water systems.Additional information on the District's capital assets can be found in Note 4 of the Notes to
Financial Statements.
In November 2018, the District issued $32.4 million in Water Revenue Bonds, Series 2018,to provide funds
for the construction of water storage, treatment,and transmission facilities and advance refunded $6.9
million of the 1996 Certificates of Participation.As of June 30, 2022, all the bond proceeds were used to pay
for the construction cost of the water system.
In December 2019, the District issued $3.1 million in Wastewater Revenue Bonds to fund specific capital
improvements to the District's wastewater system.As of June 30, 2020,all the bond proceeds were used to
pay for the construction cost of the wastewater main replacement at Campo Road.
2022 2021 2020
Land $14.4 $14.4 $14.4
Construction in Progress 7.3 25.8 24.7
Potable Water System 535.5 506.7 498.1
Recycled Water System 117.8 116.6 115.5
Wastewater System 59.1 59.1 59.1
Field Equipment 8.1 8.1 8.4
Buildings 19.6 19.6 19.5
Transportation Equipment 3.8 3.8 3.6
Communication Equipment 2.5 2.8 2.7
Office Equipment 8.1 16.3 16.5
Right to Use Assets 0.7 0.0 0.0
Total Capital Assets 776.9 773.2 762.5
Less Accumulated
Depreciation (330.2)(321.6)(306.0)
Net Capital Assets $ 446.7 $451.6 $456.5
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Management’s Discussion and Analysis
On June 30, 2022,the District had $100.9 million in outstanding debt (net of $5.3 million of maturities
occurring in FY 2023), which consisted of the following:
Lease Payable $ 0.7
Revenue Bonds 100.2
Total Long-Term Debt $ 100.9
Additional information on the District's long-term debt can be found in Note 5 of the Notes to Financial
Statements.
Fiscal Year 2022-2023 Budget
Economic Factors
The San Diego region imports 76%of its potable supply; therefore,factors such as local rainfall and
weather conditions elsewhere in the western portion of the nation can affect the region.San Diego
received below-average rainfall of 6.83 inches in FY 2022.The 10-year average of 8.90 inches for San Diego
rainfall reflects the long-term drought conditions for our area.San Diego's rainfall average over 20 years is
9.20 inches; the 30-year average is 9.44 inches,and the 40-year average is 9.80 inches.
While water sales peaked in 2008, prolonged droughts have led to an increase in conservation which has
had permanent influence on volumes.Higher rainfall resulted in a 2.37% decline in potable water sales
volume in FY 2022, whereas below-average rainfall and COVID-19 raised potable water sales volume by
10.7% in FY 2021.The FY 2023 sales volume is anticipated to increase by 1.2% compared to the previous
year's budget and decrease by 3.3%versus the FY 2021 actual sales volume.
The District continues to respond to the challenges presented by growth, State mandates,and drought by
creating new opportunities and new organizational efficiencies.Utilizing and refining its Strategic Business
Plan has captured the Board of Directors'vision and united its staff in a joint mission.The District has
achieved several significant accomplishments due to its successful adherence to its Strategic Business
Plan.The District is poised to continue successfully providing an affordable,safe, and reliable water supply
for the people of its service area, while also being set to reap the rewards of greater efficiencies and
economies of scale.
The District is currently at about 77% of its projected ultimate population, serving approximately 228,000
people.Long-term, this percentage should continue to increase as the District's service area develops and
grows.By 2055,the District is projected to serve approximately 271,531 people, with an average daily
demand of 36.6 million gallons per day (MGD)compared to the current average daily demand of 28.9
million gallons per day (MGD).
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Management’s Discussion and Analysis
Currently,the District services the needs of this growing population by purchasing water from the San
Diego County Water Authority (CWA), which in turn purchases its water from the Metropolitan Water
District (MWD) and the Imperial Irrigation District (IID).
Otay takes delivery of water through several connections of large-diameter pipelines owned and operated
by CWA.The District receives treated water from CWA directly and from the Helix Water District via a CWA
contract.Also, the District has an emergency agreement with the City of San Diego to purchase water in
the case of a shutdown of the primary treated water source.The City of San Diego also has a long-term
contract with the District to provide recycled water for landscape and irrigation usage.Through innovative
agreements like these, both parties can benefit by using another agency's excess capacity and diversifying
local supply, thereby increasing reliability.
Financial
The District is budgeted to deliver approximately 27,337 acre-feet of potable water to 51,494 potable
customer accounts during FY 2022-2023.The Fiscal Year 2023 budget was prepared with the continuing
challenges of inflation,supply-chain challenges, water supply rate increases, added CIP projects,
increasing power costs, and current and pending legislative initiatives. Additional hurdles include the
expenditures associated with the City of San Diego's Pure Water program, the County of San Diego's
renovation of shared facilities, and the anticipated future issuance of debt.The nationwide demand for
new homes and condominiums is expected to continue unabated. An increase in consumer goods
demand is expected due to the Federal government's assistance programs.District staff projects that the
District will sell another 1,384 meters over the next six years,translating to 3,890 equivalent dwelling units
(EDUs).This growth is estimated to increase sales volumes by an average of less than 1% per year over
the next five years.While all these factors impact the region's water usage, people's water needs remain
an underlying constant.
Management is unaware of any other conditions that are likely to have a significant impact the District's
current financial position, net position,or operating results.
Contacting the District's Financial Management
This financial report provides a general overview of the Otay Water District's finances for the Board of
Directors, customers, creditors, and other interested parties.Questions concerning any information
provided in the report or requests for additional information should be addressed to the District's Finance
Department, 2554 Sweetwater Springs Blvd., Spring Valley, CA 91978-2004.
12
STATEMENT OF NET POSITION
June 30, 2022
(with comparative totals as of June 30, 2021)
2022 2021
ASSETS
Current Assets:
Cash and Cash Equivalents (Notes 1 and 2)87,556,645$ 84,818,274$
Board Designated Cash and Cash Equivalents (Notes 1 and 2)3,021,765 3,092,512
Restricted Cash and Cash Equivalents (Notes 1 and 2)186,346 816,218
Investments (Notes 1 and 2)11,689,224 -
Restricted Investments (Notes 1 and 2)3,499,094 3,666,097
Accounts Receivable, Net 15,450,919 14,840,937
Accrued Interest Receivable 262,315 144,169
Taxes and Availability Charges Receivable, Net 277,505 252,183
Restricted Taxes and Availability Charges Receivable, Net 15,059 21,170
Current Lease Receivable (Note 11)1,055,499 -
Inventories 1,350,220 855,563
Prepaid Items and Other Receivables 2,507,703 2,710,237
Total Current Assets 126,872,294 111,217,360
Non-current Assets:
Capital Assets (Note 4):
Land 14,423,773 14,423,773
Construction in Progress 7,306,003 25,786,352
Capital Assets, Net of Depreciation 425,017,900 411,352,279
Net OPEB Asset (Note 8)3,005,037 -
Lease Receivable (Note 11)36,446,255 -
Total Non-current Assets 486,198,968 451,562,404
Total Assets 613,071,262 562,779,764
DEFERRED OUTFLOWS OF RESOURCES
Deferred Actuarial Pension Costs (Note 7)4,481,769 5,421,523
Deferred Actuarial OPEB Costs (Note 8)3,078,056 2,439,632
Total Deferred Outflows of Resources 7,559,825 7,861,155
Continued
The accompanying notes are an integral part of this statement.
13
STATEMENT OF NET POSITION
Continued
June 30, 2022
(with comparative totals as of June 30, 2021)
2022 2021
LIABILITIES
Current Liabilities:
Current Maturities of Long-term Debt (Note 5)5,525,676$ 5,250,000$
Accounts Payable 15,694,680 14,735,726
Accrued Payroll Liabilities 978,174 910,173
Other Accrued Liabilities 4,973,784 4,985,693
Customer and Developer Deposits 4,658,907 4,480,951
Accrued Interest 1,649,672 1,722,189
Liabilities Payable from Restricted Assets:
Restricted Accrued Interest 9,600 19,000
Total Current Liabilities 33,490,493 32,103,732
Non-current Liabilities:
Long-term Debt (Note 5):
General Obligation Bonds 2,726 739,080
Revenue Bonds 100,237,053 105,484,807
Lease Payable 707,725 -
Net Pension Liability (Note 7)280,298 20,043,519
Net OPEB Liability - 1,801,159
Other Non-current Liabilities (Note 1)3,704,232 3,793,011
Total Non-current Liabilities 104,932,034 131,861,576
Total Liabilities 138,422,527 163,965,308
DEFERRED INFLOWS OF RESOURCES
Deferred Inflows from Leases (Note 11)36,619,439 -
Deferred Actuarial Pension Costs (Note 7)14,422,139 -
Deferred Actuarial OPEB Costs (Note 8)6,444,195 1,424,536
Total Deferred Inflows of Resources 57,485,773 1,424,536
NET POSITION
Net Investment in Capital Assets 340,274,496 340,383,389
Restricted for Debt Service 3,685,440 4,187,443
Unrestricted 80,762,851 60,680,243
Total Net Position 424,722,787$ 405,251,075$
The accompanying notes are an integral part of this statement.
14
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
Year Ended June 30, 2022
(with comparative totals for the year ended June 30, 2021)
2022 2021
OPERATING REVENUES
Water Sales 102,807,098$ 101,742,970$
Wastewater Revenue 3,073,326 2,899,180
Connection and Other Fees 2,874,174 2,498,318
Total Operating Revenues 108,754,598 107,140,468
OPERATING EXPENSES
Cost of Water Sales 70,562,038 66,889,570
Wastewater 1,802,256 2,633,413
Administrative and General 19,174,479 21,948,435
Depreciation 17,688,535 17,212,905
Total Operating Expenses 109,227,308 108,684,323
Operating Income (Loss)(472,710)(1,543,855)
NON-OPERATING REVENUES (EXPENSES)
Investment Earnings (Losses)(1,506,486)254,668
Taxes and Assessments 5,244,584 5,251,540
Availability Charges 740,928 686,697
Gain (Loss) on Disposal of Capital Assets (187,313)(159,734)
Rents and Leases 2,071,200 1,587,687
Miscellaneous Revenues 5,417,588 5,062,779
Donations (106,913)(84,389)
Interest Expense (4,551,134)(4,782,490)
Miscellaneous Expenses (447,192)(241,379)
Total Non-operating Revenues (Expenses)6,675,262 7,575,379
Income (Loss) Before Capital Contributions 6,202,552 6,031,524
Capital Contributions 13,269,160 11,752,788
Change in Net Position 19,471,712 17,784,312
Total Net Position, Beginning 405,251,075 387,466,763
Total Net Position, Ending 424,722,787$ 405,251,075$
The accompanying notes are an integral part of this statement.
15
STATEMENT OF CASH FLOWS
For the Year Ended June 30, 2022
(with comparative totals for the year ended June 30, 2021)
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers 105,448,398$ 104,028,293$
Receipts from Connections and Other Fees 2,874,174 2,498,318
Receipts from Property Rents and Leases 109,941 1,587,687
Other Receipts 4,634,753 4,222,338
Payments to Suppliers (73,728,635) (70,598,225)
Payments to Employees (22,002,283) (22,630,352)
Other Payments (554,105) (325,768)
Net Cash Provided By (Used For) Operating Activities 16,782,243 18,782,291
CASH FLOWS FROM NONCAPITAL AND RELATED
FINANCING ACTIVITIES
Receipts from Taxes and Assessments 5,483,041 5,170,067
Net Cash Provided By (Used For) Noncapital and Related
Financing Activities 5,483,041 5,170,067
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from Capital Contributions 9,236,895 8,560,257
Proceeds from Sale of Capital Assets 35,370 24,748
Proceeds from Property Rents and Leases 1,553,886 -
Proceeds from Debt Related Taxes and Assessments 483,260 748,857
Principal Payments on Long-Term Debt (5,265,100) (4,955,000)
Interest Payments and Fees (4,324,324) (4,551,016)
Acquisition and Construction of Capital Assets (8,325,724) (9,264,511)
Net Cash Provided By (Used For) Capital and Related
Financing Activities (6,605,737) (9,436,665)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received on Investments 518,928 371,234
Proceeds from Sale and Maturities of Investments 3,666,096 170,315
Purchase of Investments (17,806,819) (95,892)
Net Cash Provided By (Used For) Investing Activities (13,621,795) 445,657
Net Increase (Decrease) in Cash and Cash Equivalents 2,037,752 14,961,350
Cash and Cash Equivalents - Beginning 88,727,004 73,765,654
Cash and Cash Equivalents - Ending 90,764,756$ 88,727,004$
Continued
The accompanying notes are an integral part of this statement.
16
STATEMENT OF CASH FLOWS
Continued
For the Year Ended June 30, 2022
(with comparative totals for the year ended June 30, 2021)
2022 2021
Reconciliation of Operating Income (Loss) to Net Cash Flows
Provided By (Used For) Operating Activities:
Operating Income (Loss)(472,710)$ (1,543,855)$
Adjustments to Reconcile Operating Income to
Net Cash Provided By (Used For) Operating Activities:
Depreciation 17,688,535 17,212,905
Receipts from Property Rents and Leases 109,941 1,587,687
Miscellaneous Revenues 4,634,753 4,222,338
Miscellaneous Expenses and Donations (554,105) (325,768)
(Increase) Decrease in Accounts Receivable (609,982) (1,420,833)
(Increase) Decrease in Inventory (494,657) 87,001
(Increase) Decrease in Prepaid Items and Other Receivables 202,534 (706,267)
(Increase) Decrease in Net OPEB Asset (3,005,037) 20,021
(Increase) Decrease in Deferred Actuarial Pension Costs 939,754 (2,063,158)
(Increase) Decrease in Deferred Actuarial OPEB Costs (638,424) (1,300,097)
Increase (Decrease) in Accounts Payable 958,954 (1,488,391)
Increase (Decrease) in Accrued Payroll and Related Expenses 68,001 98,652
Increase (Decrease) in Other Accrued Liabilities (11,909) 341,188
Increase (Decrease) in Customer and Developer Deposits 177,956 806,976
Increase (Decrease) in Other Non-current Liabilities (88,779) 242,440
Increase (Decrease) in Net OPEB Liability (1,801,159) 1,801,159
Increase (Decrease) in Net Pension Liability (19,763,221) 3,426,664
Increase (Decrease) in Deferred Actuarial Pension Costs 14,422,139 (1,366,658)
Increase (Decrease) in Deferred Actuarial OPEB Costs 5,019,659 (849,713)
Net Cash Provided By (Used For) Operating Activities 16,782,243$ 18,782,291$
Schedule of Cash and Cash Equivalents:
Current Assets:
Cash and Cash Equivalents 87,556,645$ 84,818,274$
Board Designated Cash and Cash Equivalents 3,021,765 3,092,512
Restricted Cash and Cash Equivalents 186,346 816,218
Total Cash and Cash Equivalents 90,764,756$ 88,727,004$
Supplemental Disclosures
Non-Cash Investing and Financing Activities Consisted of the Following:
Contributed Capital for Water and Sewer System 4,032,265$ 3,192,531$
Change in Fair Value of Investments and Recognized Gains/Losses 2,618,502 360,636
Amortization Related to Long-term Debt 474,108 474,110
The accompanying notes are an integral part of this statement.
17
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A)Reporting Entity
The reporting entity Otay Water District (the “District”) includes the accounts of the District and the
Otay Water District Financing Authority (the “Financing Authority”).
The District is a public entity established in 1956 pursuant to the Municipal Water District Law of 1911
(Section 711 et. Seq. of the California Water Code) for the purpose of providing water and wastewater
services to the properties in the District.The District is governed by a Board of Directors consisting
of five directors elected by geographical divisions based on District population for a four-year
alternating term.
The District formed the Financing Authority on March 3, 2010 under the Joint Exercise of Powers Act,
constituting Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of
the California Government Code. The Financing Authority was formed to assist the District in the
financing of public capital improvements.
The financial statements present the District and its component unit. The District is the primary
government unit. Component units are those entities which are financially accountable to the
primary government, either because the District appoints a voting majority of the component unit’s
board, or because the component units will provide a financial benefit or impose a financial burden
on the District. The District has accounted for the Financing Authority as a “blended” component
unit. Despite being legally separate, the Financing Authority is so intertwined with the District that it
is in substance, part of the District’s operations. Accordingly, the balances and transactions of this
component unit are reported within the funds of the District. Separate financial statements are not
issued for the Financing Authority.
B)Measurement Focus, Basis of Accounting and Financial Statement Presentation
Measurement focus is a term used to describe “which” transactions are recorded within the various
financial statements. Basis of accounting refers to “when” transactions are recorded regardless of
the measurement focus applied. The accompanying financial statements are reported using the
economic resources measurement focus, and the accrual basis of accounting. Under the economic
measurement focus all assets and liabilities (whether current or noncurrent) associated with these
activities are included on the Statement of Net Position.
18
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –Continued
B)Measurement Focus, Basis of Accounting and Financial Statement Presentation -Continued
The Statement of Revenues, Expenses and Changes in Net Position present increases (revenues)
and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are
recorded when earned and expenses are recorded when a liability is incurred, regardless of the
timing of related cash flows.
The District reports its activities as an enterprise fund, which is used to account for operations that are
financed and operated in a manner similar to a private business enterprise, where the intent of the
District is that the costs (including depreciation) of providing goods or services to the general public
on a continuing basis be financed or recovered primarily through user charges.
The basic financial statements of the Otay Water District have been prepared in conformity with
accounting principles generally accepted in the United States of America. The Governmental
Accounting Standards Board (GASB) is the accepted standard setting body for governmental
accounting financial reporting purposes.
Net position of the District is classified into three components: (1) net investment in capital assets,
(2) restricted net position, and (3) unrestricted net position. These classifications are defined as
follows:
Net Investment in Capital Assets
This component of net position consists of capital assets, net of accumulated depreciation and
reduced by the outstanding balances of notes or borrowing that are attributable to the acquisition of
the assets, construction, or improvement of those assets. If there are significant unspent related debt
proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in
the calculation of the net investment in capital assets.
Restricted Net Position
This component of net position consists of net position with constrained use through external
constraints imposed by creditors (such as through debt covenants), grantors, contributions, or laws or
regulations of other governments or constraints imposed by law through constitutional provisions or
enabling legislation.
19
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
B)Measurement Focus, Basis of Accounting and Financial Statement Presentation -Continued
Unrestricted Net Position
This component of net position consists of net position that do not meet the definition of “net investment
in capital assets” or “restricted net position”.
The District distinguishes operating revenues and expenses from those revenues and expenses that
are non-operating. Operating revenues are those revenues that are generated by water sales and
wastewater services while operating expenses pertain directly to the furnishing of those services. Non-
operating revenues and expenses are those revenues and expenses generated that are not associated
with the normal business of supplying water and wastewater treatment services.
The District recognizes revenues from water sales, wastewater revenues, and meter fees as they are
earned. Taxes and assessments are recognized as revenues based upon amounts reported to the
District by the County of San Diego, net of allowance for delinquencies of $32,507 at June 30, 2022.
Additionally, capacity fee contributions received which are related to specific operating expenses are
offset against those expenses and included in Cost of Water Sales in the Statement of Revenues and
Expenses and Changes in Net Position.
Sometimes the District will fund outlays for a particular purpose from both restricted (e.g., restricted
bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as
restricted -net position and unrestricted -net position, a flow assumption must be made about the
order in which the resources are considered to be applied.It is the District’s practice to consider
restricted -net position to have been depleted before unrestricted -net position is applied, however it
is at the Board’s discretion.
20
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
C)New Accounting Pronouncements
Implemented as of June 30, 2022
Governmental Accounting Standard Board Statement No. 87
In June 2017, GASB issued Statement No. 87, Leases. This Statement was issued to increase the
usefulness of governmental financial statements by requiring recognition of certain lease assets and
liabilities for all leases, including those that previously were classified as operating leases and
recognized as income by lessors and expenditures by lessees. This Statement replaces the previous
lease accounting methodology and establishes a single model for lease accounting based on the
foundation principle that leases are a financing of the right to use an underlying asset.
Governmental Accounting Standard Board Statement No. 2019-3
In August 2019, GASB issued Statement No. 2019-3, Leases. This Statement was issued to increase
clarify, explain, or elaborate on the GASB’s new standards on accounting and financial reporting for
leases, GASB Statement 87, “Leases.”.The implementation guide includes new Q&As to address
accounting and financial reporting topics for leases relative to the following areas: Scope and
applicability of Statement 87 (1-11); Lease term (12-16); Short-term leases (17-20); Contracts that
transfer ownership (21-22); Lessee and lessor recognition and measurement for leases other than
short-term leases and contracts that transfer ownership (23-36) and (43-53); Notes to financial
statements –lessees and lessors (37-42) and (54-55); Lease incentives (56-57); Contracts with multiple
components (58-62); Contract combinations (63-64); Lease modifications and terminations (65-70);
Sale-leaseback transactions (71-72); Lease-leaseback transactions (73-74); Intra-entity leases (75);
Effective date and transition of Statement 87 (76-77).
Governmental Accounting Standard Board Statement No. 91
In May 2019, GASB issued Statement No. 91, Conduit Obligations. This Statement was issued to
provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in
practice associated with (1) commitments extended by issuers, (2) arrangements associated with
conduit debt obligations, and (3) related note disclosures. Currently, this Statement has no effect on
the District’s financial statements.
21
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
C)New Accounting Pronouncements -Continued
Governmental Accounting Standard Board Statement No. 92
In January 2020, GASB issued Statement No. 92, Omnibus 2020. This Statement was issued to
enhance comparability in accounting and financial reporting and to improve the consistency of
authoritative literature by addressing practice issues that have been identified during implementation
and application of certain GASB Statements.
.
Governmental Accounting Standard Board Statement No. 93
In March 2020, GASB issued Statement No. 93, Replacement of Interbank Offered Rates. This
Statement was issued to address those and other accounting and financial reporting implications
that result from the replacement of an IBOR. Currently, this Statement has no effect on the District’s
financial statements.
Governmental Accounting Standard Board Statement No. 97
In June 2020, GASB issued Statement No. 97, Certain Component Unit Criteria, and Accounting and
Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans—An
Amendment of GASB Statements No. 14 and No. 84, and a Supersession of GASB Statement No. 32
Leases. This Statement was issued to (1) increase consistency and comparability related to the
reporting of fiduciary component units in circumstances in which a potential component unit does
not have a governing board and the primary government performs the duties that a governing board
typically would perform; (2) mitigate costs associated with the reporting of certain defined
contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and
employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as
fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance,
consistency, and comparability of the accounting and financial reporting for Internal Revenue Code
(IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a
pension plan and for benefits provided through those plans. Currently, this Statement has no effect
on the District’s financial statements.
22
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
C)New Accounting Pronouncements -Continued
Governmental Accounting Standard Board Statement No.2019-1
In May 2019, GASB issued Statement No. 2019-1, Replacement of Interbank Offered Rates. This
Statement was issued to clarify, explain, or elaborate on certain GASB pronouncements. The guide
includes 14 new questions and answers to address application of existing GASB standards covering
various topics including Postemployment benefits –plan and employer (1-5); derivative instruments
(6); nonexchange transactions (7)impairment of capital assets and insurance recoveries (8); intra-
entity transfers of assets (9-10); fund balance reporting and governmental fund type definitions (11);
tax abatement disclosures (12); irrevocable split-interest agreements (13-14). Currently, this
Statement has no effect on the District’s financial statements.
Pending Accounting Pronouncements
GASB has issued the following statements which may impact the District’s financial reporting
requirements in the future:
i.GASB Statement 94 -“Public-Private and Public-Public Partnerships and Availability Payment
Arrangements”, effective for reporting periods beginning after June 15, 2022.
ii.GASB Statement 96 -“Subscription-Based Information Technology Arrangements”, effective
for reporting periods beginning after June 15, 2022.
iii.GASB Statement 99 -“Omnibus 2022”, effective for reporting periods beginning after June 15,
2023.
iv.GASB Statement 100 -“Accounting Changes and Error Corrections”, effective for reporting
periods beginning after June 15, 2023.
v.GASB Statement 101 -“Compensated Absences”, effective for reporting periods beginning
after December 15, 2023.
D)Deferred Outflows/Deferred Inflows
In addition to assets, the Statement of Net Position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element, deferred outflows of
resources, represents a consumption of net assets that applies to a future period(s) and so will not be
recognized as an outflow of resources (expense/expenditure) until then. The District has two items
that qualify for reporting in this category, deferred actuarial pension costs and deferred actuarial OPEB
costs are items that are deferred and recognized as an outflow of resources in the period the amounts
become available.
23
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
D)Deferred Outflows/ Deferred Inflows -Continued
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for
deferred inflows of resources. This separate financial statement element, deferred inflows of resources,
represents an acquisition of net assets that applies to a future period(s) and will not be recognized as
an inflow of resources (revenue) until that time. The District has three items that qualify for reporting in
this category.
Accordingly, the items, deferred actuarial pension costs,deferred actuarial OPEB costs, and deferred
lease revenue are deferred and recognized as an inflow of resources in the period that the amounts
become available.
E)Statement of Cash Flows
For purposes of the Statement of Cash Flows, the District considers all highly liquid investments
(including restricted assets) with a maturity period, at purchase, of three months or less to be cash
equivalents.
F)Investments
Investments are stated at their fair value, which represents the quoted or stated market value.
Investments that are not traded on a market, such as investments in external pools, are valued based
on the stated fair value as presented by the external pool. All investments are stated at their fair value.
The District has not elected to report certain investments at amortized costs.
G)Inventory and Prepaid Items
Inventory consists primarily of materials used in the construction and maintenance of the water and
wastewater system and is valued at weighted average cost. Both inventory and prepaid items use the
consumption method whereby they are reported as an asset and expensed as they are consumed.
H)Capital Assets
Capital assets are recorded at cost, where historical records are available, and at an estimated
historical cost where no historical records exist.
24
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
H)Capital Assets –Continued
Infrastructure assets in excess of $20,000 and other capital assets in excess of $10,000 are capitalized
if they have an expected useful life of two years or more. The District will also capitalize individual
purchases under the capitalization threshold if they are part of a new capital program. The cost of
purchased and self-constructed additions to utility plant and major replacements of property are
capitalized. Costs include materials,direct labor, transportation, and such indirect items as engineering,
supervision, employee fringe benefits and overhead. Repairs, maintenance, and minor replacements
of property are charged to expense. Donated assets are capitalized at their acquisition value on the
date contributed.
Depreciation is calculated using the straight-line method over the following estimated useful lives:
Water System 15-70 Years
Field Equipment 2-50 Years
Buildings 30-50 Years
Communication Equipment 2-10 Years
Transportation Equipment 2-7 Years
Office Equipment 2-10 Years
Recycled Water System 50-75 Years
Wastewater System 25-50 Years
Right to Use Asset The estimated life of the leased asset or the
contract term whichever is shorter
I)Other Non-current Liabilities
For compensated absences, the District’s policy is to record vested and accumulated vacation and
sick leave as an expense and liability as benefits accrue to employees.
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
Compensated absences 3,509,161$3,437,206$(3,521,817)$3,424,550$ 342,455$
Customer credits 278,122 - (12,629) 265,493 -
Reimbursement agreements 356,644 - - 356,644 -
Total 4,143,927$3,437,206$(3,534,446)$4,046,687$ 342,455$
25
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
I)Other Non-current Liabilities –Continued
Current portion is reflected in accrued payroll liabilities and remainder in other non-current liabilities on
the Statement of Net Position.
J)Classification of Liabilities
Certain current liabilities have been classified as current liabilities payable from restricted assets as
they will be funded from restricted assets.
K)Allowance for Doubtful Accounts
The District charges doubtful accounts arising from water sales receivable to bad debt expense when
it is probable that the accounts will be uncollectible. Uncollectible accounts are determined by the
allowance method based upon prior experience and management’s assessment of the collectability
of existing specific accounts. The allowance for doubtful accounts was $177,283 for 2022.
L)Property Taxes
Tax levies are limited to 1% of full market value (at time of purchase) which results in a tax rate of
$1.00 per $100 assessed valuation, under the provisions of Proposition 13. Tax rates for voter-
approved indebtedness are excluded from this limitation.
The County of San Diego (the “County”) bills and collects property taxes on behalf of the District. The
County’s tax calendar year is July 1 to June 30. Property taxes attach as a lien on property on January
1. Taxes are levied on July 1 and are payable in two equal installments on November 1 and February
1, and become delinquent after December 10 and April 10, respectively.
M)Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources
related to pensions, and pension expense, information about the fiduciary net position of the District’s
California Public Employees’ Retirement System (CalPERS)plans (Plans) and additions
to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they
are reported by CalPERS.
26
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
M)Pensions –Continued
For this purpose, benefit payments (including refunds of employee contributions) are recognized
when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Valuation Date June 30, 2020
Measurement Date June 30, 2021
Measurement Period July 1, 2020 to June 30, 2021
N)Other Post-Employment Benefits (OPEB)
For purposes of measuring the net OPEB liability(asset), deferred outflows/inflows of resources related
to OPEB, and OPEB expense, information about the fiduciary net position of the District’s plan (OPEB
Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined
on the same basis. For this purpose, benefit payments are recognized when currently due and payable
in accordance with the benefit terms. Investments are reported at fair value.
Generally accepted accounting principles require that the reported results must pertain to liability and
asset information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date June 30, 2021
Measurement Date June 30, 2021
Measurement Period July 1, 2020 to June 30, 2021
O)Leases
The District is a lessor and lessee for leases as detailed in Footnotes 5 and 11. The District recognizes
a lease receivable, a deferred inflow of resources, and a lease payable in the financial statements.
At the commencement of the lease, the District initially measures the lease receivable at the present
value of payments expected to be received and paid during the lease term. Subsequently, the lease
receivable is reduced by the principal portion of lease payments received and the lease payable is
reduced by the principal portion of lease payments made. The deferred inflow of resources is initially
measured as the initial amount of the lease receivable, adjusted for lease payments received at or
before the lease commencement date. Subsequently, the deferred inflows of resources is
recognized as revenue over the life of the lease term.
27
Notes To Financial Statements
Year Ended June 30, 2022
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
O)Leases –Continued
Key estimates and judgments include how the district determines the discount rate it uses to
discount the expected lease receipts and payments to present value, lease term and lease receipts.
The District used the estimated cost of capital rate as the discount rate for leases.
The lease term includes the noncancellable period of the lease.
The District monitors changes in circumstances that would require a remeasurement of its leases
and will remeasure the lease receivable and deferred inflows of resources if certain changes occur
that are expected to significantly affect the amount of the lease receivable.
P)Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in
the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of
resources, and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Q)Prior Year Comparative Information
Selected information regarding the prior year has been included in the accompanying financial
statements. This information has been included for comparison purposes only and does not represent
a complete presentation in accordance with generally accepted accounting principles. Accordingly,
such information should be read in conjunction with the government’s prior year financial statements,
from which this selected financial data was derived. In addition, certain minor reclassifications of the
prior year data have been made to enhance their comparability to the current year.
2)CASH AND INVESTMENTS
The primary goals of the District’s Investment Policy are to assure compliance with all Federal, State, and
Local laws governing the investment of funds under the control of the organization, protect the principal of
investments entrusted, remain sufficiently liquid to enable the District to meet all operating requirements
and generate income under the parameters of such policies.
28
Notes To Financial Statements
Year Ended June 30, 2022
2)CASH AND INVESTMENTS -Continued
Cash and Investments are classified in the accompanying financial statements as follows:
Cash and Investments consist of the following:
Investments Authorized by the California Government Code and the District’s Investment Policy
The table below identifies the investment types that are authorized for the District by the California
Government Code (or the District’s Investment Policy, where more restrictive). The table also identifies
certain provisions of the California Government Code (or the District’s Investment Policy, where more
restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not
address investments of debt proceeds held by bond trustee that are governed by the provisions of debt
agreements of the District, rather than the general provisions of the California Government Code or the
District’s Investment Policy.
Statement of Net Position:
Cash and Cash Equivalents 87,556,645$
Board Designated Cash and Cash Equivalents 3,021,765
Restricted Cash and Cash Equivalents 186,346
Investments 11,689,224
Restricted Investments 3,499,094
Total Cash and Investments 105,953,074$
Cash on Hand 2,950$
Deposits with Financial Institutions 1,868,242
Investments 104,081,882
Total Cash and Investments 105,953,074$
29
Notes To Financial Statements
Year Ended June 30, 2022
2)CASH AND INVESTMENTS -Continued
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturity Of Portfolio(1)In One Issuer
U.S. Treasury Obligations 5 years 100%100%
U.S. Government Sponsored Entities 5 years 100% 100%
Certificates of Deposit 5 years 15%100%
Corporate Medium-Term Notes 5 years 10%2%
Commercial Paper 270 days 10%2%
Money Market Mutual Funds N/A 10%100%
County Pooled Investment Funds N/A 100%N/A
Local Agency Investment Fund (LAIF)N/A $75 Million N/A
(1)Excluding amounts held by bond trustee that are not subject to California Government Code
restrictions.
Investments Authorized by Debt Agreements
Investments of debt proceeds held by the bond trustee are governed by provisions of the debt agreements,
rather than the general provisions of the California Government Code or the District’s Investment Policy.
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment. Generally,the longer the maturity of an investment, the greater the sensitivity of its fair value
to changes in market interest rates.
One of the ways that the District manages its exposure to interest rate risk is by purchasing investments
with shorter durations than the maximum allowable under the District’s Investment Policy and by timing
cash flows from maturities,so that a portion of the portfolio is maturing or coming close to maturity evenly
over time,as necessary,to provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the District’s investments to market interest rate
fluctuations are provided by the following tables that show the distribution of the District’s investments by
maturity as of June 30, 2022.
30
Notes To Financial Statements
Year Ended June 30, 2022
2)CASH AND INVESTMENTS –Continued
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of
the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating
organization. Presented below is the minimum rating required by (where applicable) the California
Government Code or the District’s Investment Policy, or debt agreements, and the Moody’s ratings as of
June 30, 2022.
Concentration of Credit Risk
The investment policy of the District contains various limitations on the amounts that can be invested in
any one type or group of investments and in any issuer, beyond that stipulated by the California
Government Code, Sections 53600 through 53692. All the investments for fiscal year 2022 are within the
limitations of the District’s investment policy.
12 Months 13 to 36 More than
Investment Type Total Or Less Months 36 Months
U.S. Government Sponsored Entities $ 15,122,453 -$ 7,822,100$ 7,300,353$
Local Agency Investment Fund (LAIF) 33,659,564 33,659,564 - -
San Diego County Pool 55,234,000 55,234,000 - -
Money Market Funds 65,865 65,865 - -
Total $ 104,081,882 $ 88,959,429 $ 7,822,100 $ 7,300,353
Remaining Maturity (in Months)
Legal
Minimum Not
Investment Type Total Rating AAA Rated
U.S. Government Sponsored Entities $ 15,122,453 A 15,122,453$ -$
Local Agency Investment Fund (LAIF) 33,659,564 N/A - 33,659,564
San Diego County Pool 55,234,000 N/A - 55,234,000
Money Market Funds 65,865 AAA 65,865 -
Total $ 104,081,882 15,188,318$ 88,893,564$
Rating as of Year End
31
Notes To Financial Statements
Year Ended June 30, 2022
2)CASH AND INVESTMENTS –Continued
The investments listed below disclose the concentration of risk within the District’s investment portfolio.
Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment
pools) that represent 5% or more of total District investments as of June 30, 2022:
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored
Entities
$5,890,920
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution,
a government will not be able to recover its deposits or will not be able to recover collateral securities that
are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the
event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able
to recover the value of its investment or collateral securities that are in the possession of another party.
The California Government Code and the District’s Investment Policy do not contain legal or policy
requirements that would limit the exposure to custodial credit risk for deposits or investments, other than
the following provision for deposits: The California Government Code requires that a financial institution
secure deposits made by state or local government units by pledging securities in an undivided collateral
pool held by a depository regulated under state law (unless so waived by the governmental unit). The
market value of the pledged securities in the collateral pool must equal at least 110% of the total amount
deposited by the public agencies. California law also allows financial institutions to secure deposits by
pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.As of June
30, 2022, $2,397,878 of the District’s deposits with financial institutions in excess of federal depository
insurance limits, were held in collateralized accounts.
Local Agency Investment Fund (LAIF)
The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by
California Government Code Section 16429 under the oversight of the Treasurer of the State of California.
The fair value of the District’s investment in this pool is reported in the accompanying financial statements
at amounts based upon District’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio
(in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the
accounting records maintained by LAIF, which are recorded on an amortized cost-basis.
32
Notes To Financial Statements
Year Ended June 30, 2022
2)CASH AND INVESTMENTS –Continued
The LAIF is a special fund of the California State Treasury through which local governments may pool
investments. The District may invest up to $75,000,000 in the fund. Investments in LAIF are highly liquid,
as deposits can be converted to cash within twenty-four hours without loss of interest. Investments with
LAIF are secured by the full faith and credit of the State of California. The annualized yield of LAIF for the
quarter ended June 30, 2022 was 0.69%. The estimated amortized cost and fair value of the LAIF pool at
June 30, 2022 was $33,659,564.
San Diego County Pooled Fund
The San Diego County Pooled Investment Fund (SDCPIF) is a pooled investment fund program governed
by the County of San Diego Board of Supervisors and administered by the County of San Diego Treasurer
and Tax Collector. Investments in SDCPIF are highly liquid as deposits and withdrawals can be made at
any time without penalty, determined on an amortized cash basis, the same as the fair value of the District’s
position in the pool.
The County of San Diego’s bank deposits are either federally insured or collateralized in accordance with
the California Government Code. Pool detail is included in the County of San Diego Comprehensive Annual
Financial Report (“Annual Report”). Copies of the Annual Report may be obtained from the County of San
Diego Auditor-Controller’s Office –1600 Pacific Coast Highway, San Diego California 92101.
Restricted Cash and Cash Equivalents
Board Designated Cash and Investments
Cash and investments are Board restricted for the cost of the following District projects:
Debt Service:
General Obligation Bond ID No. 27-2009 186,346$
Cash and Cash Equivalents:
New Water Supply 3,021,765$
33
Notes To Financial Statements
Year Ended June 30, 2022
2)CASH AND INVESTMENTS –Continued
Restricted Investments
3)FAIR VALUE MEASUREMENTS
Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurements and
Application, provides the framework for measuring fair value. The framework provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value with Level 1 given
the highest priority and Level 3 the lowest priority. The three levels of the fair value hierarchy are as
follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
organization has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs include the following:
a.Quoted prices for similar assets or liabilities in active markets.
b.Quoted prices for identical or similar assets or liabilities in markets that are not active.
c.Inputs other than quoted prices that are observable for the asset or liability (for example, interest
rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds,
loss severities, credit risks, and default rates).
d.Inputs that are derived principally from or corroborated by observable market data by correlation
or other means (market-corroborated inputs).
Level 3 inputs are unobservable inputs for the asset or liability.
Debt Service:
Water Revenue Bond Series 2010A 964,819$
Water Revenue Bond Series 2010B 2,534,275
$ 3,499,094
34
Notes To Financial Statements
Year Ended June 30, 2022
3)FAIR VALUE MEASUREMENTS -Continued
Fair value of assets measured on a recurring basis at June 30, 2022 are as follows:
Investments classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique.
Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted
prices. Investments not measured at fair value do not fall under the fair value hierarchy as there is no
active market for the investments.
Significant Other
Observable Inputs Not Measured
Total (Level 2)at Fair Value
U.S. Government Sponsored Entities 15,122,453$ 15,122,453$ -$
Local Agency Investment Fund (LAIF) 33,659,564 - 33,659,564
San Diego County Pool 55,234,000 - 55,234,000
Money Market Funds 65,865 - 65,865
Total $ 104,081,882 $ 15,122,453 $ 88,959,429
35
Notes To Financial Statements
Year Ended June 30, 2022
4)CAPITAL ASSETS
The following is a summary of changes in Capital Assets for the year ended June 30, 2022:
Depreciation expense for the year ended June 30, 2022 was $17,688,535.
Beginning Ending
Balance Additions Deletions Balance
Capital Assets, Not Depreciated:
Land $ 14,423,773 $ - $ - $ 14,423,773
Construction in Progress 25,786,352 8,325,724 (26,806,073) 7,306,003
Total Capital Assets, Not Depreciated 40,210,125 8,325,724 (26,806,073) 21,729,776
Capital Assets, Being Depreciated:
Infrastructure 682,453,956 30,710,630 (763,282) 712,401,304
Field Equipment 8,107,404 85,186 (82,826) 8,109,764
Buildings 19,581,800 40,230 (3,776) 19,618,254
Transportation Equipment 3,750,101 75,148 (85,417) 3,739,832
Communication Equipment 2,777,165 66,083 (331,430) 2,511,818
Office Equipment 16,313,938 99,896 (8,312,114) 8,101,720
Right to Use Assets - 738,501 - 738,501
Total Capital Assets, Being Depreciated 732,984,364 31,815,674 (9,578,845) 755,221,193
Less Accumulated Depreciation:
Infrastructure 285,006,319 16,018,245 (311,541) 300,713,023
Field Equipment 6,399,838 277,337 (82,826) 6,594,349
Buildings 9,955,756 555,231 (3,776) 10,507,211
Transportation Equipment 2,550,362 275,208 (85,417) 2,740,153
Communication Equipment 2,485,718 135,141 (331,430) 2,289,429
Office Equipment 15,234,092 392,206 (8,302,337) 7,323,961
Right to Use Assets - 35,167 - 35,167
Total Accumulated Depreciation 321,632,085 17,688,535 (9,117,327) 330,203,293
Total Capital Assets, Being Depreciated, Net 411,352,279 14,127,139 (461,518) 425,017,900
Total Capital Assets, Net $ 451,562,404 $ 22,452,863 $ (27,267,591) $ 446,747,676
36
Notes To Financial Statements
Year Ended June 30, 2022
5) LONG-TERM DEBT
Long-term liabilities for the year ended June 30, 2022 are as follows:
General Obligation Bonds
In June 1998, the District issued $11,835,000 of General Obligation Refunding Bonds. The proceeds of this
issue, together with other lawfully available monies, were to be used to establish an irrevocable escrow to
advance refund and defease in their entirety the District’s previous outstanding General Obligation Bond
issue.In November 2009, the District issued $7,780,000 of General Obligation Refunding Bonds
Improvement District No. 27-2009 to refund the 1998 issue. The proceeds from the bond issue were
$7,989,884, which included an original issue premium of $209,884.
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
General Obligation Bonds:
Improvement District No. 27 – 2009 1,425,000$ -$ (705,000)$ 720,000$ 720,000$
Unamortized Bond Premium 19,080 - (16,354) 2,726 -
Net General Obligation Bonds 1,444,080 - (721,354) 722,726 720,000
Revenue Bonds:
2010 Water Revenue Bonds Series A 4,825,000 - (1,120,000) 3,705,000 1,175,000
2010 Water Revenue Bonds Series B 36,355,000 - - 36,355,000 -
2013 Water Revenue Refunding Bonds 2,415,000 - (775,000) 1,640,000 805,000
2016 Water Revenue Refunding Bonds 27,870,000 - (1,215,000) 26,655,000 1,285,000
2018 Water Revenue Bonds 29,880,000 - (1,370,000) 28,510,000 1,455,000
2019 Wastewater Revenue Bonds 3,120,000 - (65,000) 3,055,000 70,000
2010 Series A Unamortized Premium 241,805 - (74,401) 167,404 -
2013 Bonds Unamortized Premium 208,206 - (96,095) 112,111 -
2016 Bonds Unamortized Premium 2,708,333 - (178,571) 2,529,762 -
2018 Bonds Unamortized Premium 2,419,451 - (109,148) 2,310,303 -
2019 Bonds Unamortized Discount (12,988) - 461 (12,527) -
Net Revenue Bonds 110,029,807 - (5,002,754) 105,027,053 4,790,000
Lease Payable - 738,501 (15,100) 723,401 15,676
Total Long-Term Liabilities 111,473,887$738,501$(5,739,208)$ 106,473,180$5,525,676$
37
Notes To Financial Statements
Year Ended June 30, 2022
5)LONG-TERM DEBT -Continued
These bonds are general obligations of Improvement District No. 27 (ID 27) of the District. The Board of
Directors has the power and is obligated to levy annual ad valorem taxes without limitation, as to rate or
amount for payment of the bonds and the interest upon all property which is within ID 27 and subject to
taxation. The General Obligation Bonds are payable from District-wide tax revenues. The Board may utilize
other sources for servicing the bond debt and interest.
The Improvement District No. 27-2009 General Obligation Refunding Bonds have interest rates from 3.00%
to 4.00% with maturities through Fiscal Year 2023.
Future debt service requirements for the bonds are as follows:
For the Year Ended
June 30,Principal Interest
2023 $720,000 $14,400
Water Revenue Bonds
In April 2010, Water Revenue Bonds with a face value of $50,195,000 were sold by the Otay Water District
Financing Authority to provide funds for the construction of water storage and transmission facilities. The
bond issue consisted of two series; Water Revenue Bonds, Series 2010A (Non-AMT Tax Exempt) with a
face value of $13,840,000 plus a $1,078,824 original issue premium, and Water Revenue Bonds,Series
2010B (Taxable Build America Bonds) with a face value of $36,355,000. The Series 2010A bonds are due
in annual installments of $785,000 to $1,295,000 from September 1, 2012 through September 1, 2025;
bearing interest at 2% to 5.25%. The Series 2010B bonds are due in annual installments of $1,365,000 to
$3,505,000 from September 1, 2026 through September 1, 2040; bearing interest at 6.377% to 6.577%.
Interest on both Series is payable on September 1, 2010 and semiannually thereafter on March 1st and
September 1st of each year until maturity or earlier redemption. The installment payments are to be made
from taxes and net revenues of the Water System as described in the installment purchase agreement, on
parity with the payments required to be made by the District for the 2013,2016 Water Revenue Refunding
Bonds and 2018 Water Revenue Bonds described below.
The original issue premium is being amortized over the 14-year life of the Series 2010A bonds. Amortization
for the year ending June 30, 2022 was $74,401. The amortizations are included in interest expense. The
unamortized premium at June 30, 2022 is $167,404.
38
Notes To Financial Statements
Year Ended June 30, 2022
5)LONG-TERM DEBT –Continued
Water Revenue Bonds –Continued
The 2010 Water Revenue Bonds contains various covenants and restrictions, principally that the District fix,
prescribe, revise and collect rates, fees and charges for the Water System which will at least be sufficient
to yield, during each fiscal year, taxes and net revenues equal to one hundred twenty-five percent (125%)
of the debt service for such fiscal year. The District was in compliance with these rate covenants for the
fiscal year ended June 30, 2022.
In June 2013, the 2013 Water Revenue Refunding Bonds were issued to defease the 2004 Refunding
Certificates of Participation. The bonds were issued with a face value of $7,735,000 plus a $984,975 original
issue premium. The bonds are due in annual installments of $660,000 to $835,000 from September 1, 2013
through September 1, 2023; bearing interest at 1% to 4%. The installment payments are to be made from
taxes and net revenues of the Water System, on parity with the payments required to be made by the
District for the 2016 Water Revenue Refunding Bonds,the 2010A,2010B and 2018 Water Revenue Bonds.
The original issue premium is being amortized over the 11-year life of the Series 2013 bonds. Amortization
for the year ending June 30, 2022 was $96,095. The amortizations are included in interest expense. The
unamortized premium at June 30, 2022 is $112,111.
In May 2016, Water Revenue Refunding Bonds were issued to defease the 2007 Revenue Certificates of
Participation. The bonds are due in annual installments of $1,200,000 to $2,235,000 from September 1,
2016 through September 1, 2036; bearing interest of 2%to 5%. The bonds were issued with a face value
of $33,385,000 plus $3,630,950 original issue premium. The savings between the cash flow required to
service, the old debt and the cash flow required to service the new debt is $5,664,140 and represent an
economic gain on refunding of $4,538,175.
The original issue premium is being amortized over the 20-year life of the Series 2016 bonds. Amortization
for the year ending June 30, 2022 was $178,571. The amortizations are included in interest expense. The
unamortized premium at June 30, 2022 is $2,529,762.
In November 2018, Water Revenue Bonds were issued to provide funds for construction of water storage,
treatment and transmission facilities and to refinance the 1996 Certificates of Participation. The bonds are
due in annual installments of $775,000 to $1,915,000 from September 1, 2019 through September 1, 2043;
bearing interest of 3% to 5%. The bonds were issued with a face value of $32,435,000 plus $2,710,512
original issue premium.
39
Notes To Financial Statements
Year Ended June 30, 2022
5)LONG-TERM DEBT –Continued
Water Revenue Bonds –Continued
The original issue premium is being amortized over the 25-year life of the Series 2018 bonds. Amortization
for the year ending June 30, 2022 was $109,148. The amortization expense is included in interest expense.
The unamortized premium at June 30, 2022 is $2,310,303.
The total amount outstanding at June 30, 2022 and aggregate maturities of the revenue bonds for the fiscal
years subsequent to June 30, 2022, are as follows:
For the Year
Ended June 30,Principal Interest Principal Interest Principal Interest
2023 1,175,000$ 159,113$ -$ 2,371,868$ 805,000$ 49,500$
2024 1,235,000 98,862 -2,371,868 835,000 16,700
2025 1,295,000 33,994 -2,371,868 - -
2026 - - 1,365,000 2,328,345 - -
2027 - -1,450,000 2,238,589 - -
2028-2032 - -8,760,000 9,631,793 - -
2033-2037 - -12,005,000 6,275,281 - -
2038-2042 --12,775,000 1,747,345 --
3,705,000$ 291,969$ 36,355,000$29,336,957$1,640,000$66,200$
2013 Water Revenue
Refunding Bonds
2010 Water Revenue Bond
Series A
2010 Water Revenue Bond
Series B
For the Year
Ended June 30,Principal Interest Principal Interest
2023 1,285,000$ 941,706$ 1,455,000$ 1,223,413$
2024 1,350,000 875,831 1,650,000 1,145,788
2025 1,420,000 806,581 1,730,000 1,061,288
2026 1,495,000 733,706 1,820,000 972,538
2027 1,570,000 657,081 1,915,000 879,163
2028-2032 8,955,000 2,238,718 5,685,000 3,479,288
2033-2037 10,580,000 761,972 6,775,000 2,122,338
2038-2042 - - 5,905,000 875,269
2043-2044 - - 1,575,000 63,500
26,655,000$7,015,595$28,510,000$11,822,585$
2016 Water Revenue 2018 Water Revenue
Refunding Bonds Refunding Bonds
40
Notes To Financial Statements
Year Ended June 30, 2022
5)LONG-TERM DEBT -Continued
Wastewater Revenue Bonds
In December 2019, Wastewater Revenue Bonds were issued to provide funds to pay for certain capital
improvements to the District’s wastewater system. The bonds are due in annual installments of $65,000 to
$160,000 from September 1, 2021 through September 1, 2049; bearing interest of 2% to 3.125%. The bonds
were issued with a face value of $3,120,000 less a $13,680 original issue discount.
The original issue discount is being amortized over the 30-year life of the Series 2019 bonds. Amortization
for the year ending June 30, 2022 was $(461). The amortization expense is included in interest expense.
The unamortized discount at June 30,2022 is $(12,527).
The 2019 Wastewater Revenue Bonds contains various covenants and restrictions, principally that the
District fix, prescribe, revise and collect rates, fees and charges for the Wastewater System which will at
least be sufficient to yield, during each fiscal year, net revenues equal to one hundred fifteen percent
(115%) of the debt service for such fiscal year. The District was in compliance with these rate covenants
for the fiscal year ended June 30, 2022.
Future debt service requirements for the bonds are as follows:
For the Year
Ended June 30,Principal Interest
2023 70,000$ 88,741$
2024 75,000 87,291
2025 75,000 85,416
2026 80,000 83,091
2027 80,000 80,691
2028-2032 445,000 365,069
2033-2037 505,000 299,722
2038-2042 585,000 221,984
2043-2047 675,000 126,875
2048-2051 465,000 22,109
3,055,000$ 1,460,989$
2019 Wastewater
Revenue Bonds
41
Notes To Financial Statements
Year Ended June 30, 2022
5)LONG-TERM DEBT –Continued
Revenues Pledged
The District has pledged a portion of future water sales revenues to repay its Water Revenue and Water
Revenue Refunding Bonds. Total principal and interest remaining on the water revenue bonds and water
revenue refunding bonds is $145,398,305 payable through fiscal year 2044. For June 30, 2022, principal
and interest paid by the water sales revenues were $4,480,000 and $4,967,700 respectively.
The District has pledged a portion of future wastewater sales revenues to repay its Wastewater Revenue
Bonds. Total principal and interest remaining on the wastewater revenue bonds is $4,515,991 payable
through fiscal year 2050. For June 30, 2022, principal and interest paid by the wastewater sales revenues
were $65,000 and $90,091, respectively
Lease Payable
Antenna Site Lease
The District has one antenna site sublease payable with a lease term of forty-eight years. The District is
required to make annual fixed payments ranging from $15,100 to $64,303, with a discount rate of 1.39%.
The lease has three extension options of 5 years each. As of June 30, 2022, the value of the lease payable
is $723,401. Future lease payable requirements are as follows:
For the Year
Ended June 30,Principal Interest
2023 15,676$ 9,956$
2024 17,188 9,728
2025 18,781 9,479
2026 20,469 9,207
2027 22,253 8,911
2028-2032 141,611 39,180
2033-2037 203,442 27,318
2038-2042 283,981 10,546
723,401$ 124,325$
42
Notes To Financial Statements
Year Ended June 30, 2022
6)NET POSITION
Designations of Net Position
In addition to the restricted net position, a portion of unrestricted net position has been designated by the
Board of Directors for the following purposes as of June 30, 2022:
7)DEFINED BENEFIT PENSION PLAN
A)General Information about the Pension Plans
Plan Descriptions
All qualified permanent and probationary employees are eligible to participate in the District’s Plan,
agent multiple-employer defined benefit pension plans administered by the California Public
Employees’ Retirement System (CalPERS), which acts as a common investment and administrative
agent for its participating member employers. Benefit provisions under the Plans are established by
State statute and District resolution.
CalPERS issues publicly available reports that include a full description of the pension plans
regarding provisions, assumptions and membership information that can be found on the CalPERS
website.
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and
death benefits to plan members, who must be public employees and beneficiaries. Benefits are
based on years of credited service, equal to one year of full-time employment. Members with five
years of total service are eligible to retire at age 50 (52 if new PERS member)with statutorily reduced
benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death
benefit is one of the following: the Basic Death Benefit, the 1959 Survivor Benefit, or the Optional
Settlement 2W Death Benefit. The cost-of-living adjustments for the plan are applied as specified by
the Public Employees’ Retirement Law.
Designated Betterment 548,740$
Replacement Reserve 56,027,557
Designated Expansion 440,374
Designated New Supply Fund 5,961
Total $ 57,022,632
43
Notes To Financial Statements
Year Ended June 30, 2022
7)DEFINED BENEFIT PENSION PLAN -Continued
Benefits Provided
The Plans’ provisions and benefits in effect at June 30, 2022 are summarized as follows:
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 2.7% at 55 2% at 62
Benefit Vesting Schedule 5 years service 5 years service
Benefit Payments Monthly for life Monthly for life
Retirement Age 50 –55+52 –67+
Monthly Benefits, as a % of Eligible Compensation 2.0% to 2.7% 1.0% to 2.5%
Required Employee Contribution Rates
2022 8.00%7.00%
Required Employer Contribution Rates
2022 21.62% 21.62%
Employees Covered
The following employees were covered by the benefit terms for the Plan:
Inactive Employees or Beneficiaries Currently Receiving Benefits 208
Inactive Employees Entitled to But Not Yet Receiving Benefits 121
Active Employees 135
Total 464
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer
contribution rates for all public employers be determined on an annual basis by the actuary and shall
be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plan
are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined
rate is the estimated amount necessary to finance the costs of benefits earned by employees during
the year, with an additional amount to finance any unfunded accrued liability.
44
Notes To Financial Statements
Year Ended June 30, 2022
7)DEFINED BENEFIT PENSION PLAN -Continued
The District is required to fund the difference between the actuarially determined rate and the
contribution rate of employees.
B)Net Pension Liability
The District’s net pension liability for the Plan is measured as the total pension liability, less the
pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30,
2021 rolled forward to June 30, 2022 using standard update procedures. A summary of actuarial
assumptions and methods used to determine the net pension liability is shown below:
Actuarial Assumptions
The total pension liabilities in the June 30, 2021 actuarial valuations were determined using the
following actuarial assumptions:
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 7.15%
Inflation 2.50%
Salaries Increases Varies(1)
Mortality Rate Table CalPERS Membership Data(2)
Post Retirement Benefit Increase See Footnote(3)
(1)Depending on age, service and type of employment.
(2)The mortality table used was developed based on CalPERS-specific data. The probabilities of
mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pe-
retirement and Post-retirement mortality rates include 15 years of projected mortality
improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details
on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions
report form December 2017 that can be found on the CalPERS website.
(3)The lesser of contract COLA or 2.5% until Purchasing Power Protection Allowance floor on
purchasing power applies, 2.5% thereafter.
45
Notes To Financial Statements
Year Ended June 30, 2022
7)DEFINED BENEFIT PENSION PLAN –Continued
Discount Rate
The discount rate used to measure the total pension liability at June 30, 2021 measurement date was
7.15% for the Plan. The projection of cash flows used to determine the discount rate assumed that
contributions from plan members will be made at the current member contribution rates and that
contributions from employers will be made at statutorily required rates, actuarially determined.
Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make
all projected future benefit payments of current plan members. Therefore, the long-term expected
rate of return on plan investments was applied to all periods of projected benefit payments to
determine the total pension liability.
Long-term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-
block method in which best-estimate ranges of expected future real rates of return (expected returns,
net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and
long-term market return expectations as well as the expected pension fund cash flows. Using
historical returns of all the funds’ asset classes, expected compound (geometric) returns were
calculated over the short-term (first 10 years) and the long-term (11+years) using a building-block
approach. Using the expected nominal returns for both short-term and long-term, the present value
of benefits was calculated for each fund.
The expected rate of return was set by calculating the single equivalent expected return that arrived
at the same present value of benefits for cash flows as the one calculated using both short-term and
long-term returns. The expected rate of return was then set equal to the single equivalent rate
calculated above and adjusted to account for assumed administrative expenses.
46
Notes To Financial Statements
Year Ended June 30, 2022
7)DEFINED BENEFIT PENSION PLAN –Continued
The following table reflects the long-term expected real rate of return by asset class.
(a)In the System’s Comprehensive Annual Financial Report, Fixed Income is included in
Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets
are included in both Global Equity Securities and Global Debt Securities.
(b)An expected inflation of 2.00% used for this period.
(c)An expected inflation of 2.92% used for this period.
Subsequent Events:
On July 12, 2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year
2020-21. Based on the threshold specified in CalPERS Funding Risk Mitigation policy, the excess
return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the
discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the
final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any
changes to the asset allocation until the ALM process concluded, and the board could make its final
decision on the asset allocation in November 2021.
On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation
along with the new capital market assumptions, economic assumptions and administrative expense
assumption support a discount rate of 6.90% (net of investment expense but without a reduction for
administrative expense) for financial reporting purposes.
Assumed Real Return Real Return
Asset Class(a)Asset Allocation Years 1 - 10(b)Years 11+(c)
Global Equity 50.00%4.80%5.98%
Fixed Income 28.00%1.00%2.62%
Inflation Assets/Sensitive -0.77%1.81%
Private Equity 8.00%6.30%7.23%
Real Assets 13.00%3.75%4.93%
Liquidity 1.00%--0.92%
47
Notes To Financial Statements
Year Ended June 30, 2022
7)DEFINED BENEFIT PENSION PLAN –Continued
This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in
the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also
recommended modifications to retirement rates, termination rates, mortality rates and rates of salary
increases that were adopted by the board. These new assumptions will be reflected in the GASB 68
accounting valuation reports for the June 30, 2022, measurement date.
C)Changes in the Net Pension Liability (Asset)
The changes in the Net Pension Liability (Asset) for the Plan for June 30, 2022:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning Balance 148,318,894$ 128,275,375$ 20,043,519$
Changes in the Year:
Service Cost 2,662,845 - 2,662,845
Interest on the Total Pension Liability 10,489,284 - 10,489,284
Changes in Benefit Terms - - -
Changes in Assumptions - - -
Difference Between Expected and Actual Experience 705,426 - 705,426
Net Plan to Plan Resource Movement - - -
Contributions - Employer 3,945,147 (3,945,147)
Contributions - Employees 1,095,898 (1,095,898)
Net Investment Income 28,707,870 (28,707,870)
Benefit Payments, Including Refunds of Employee
Contributions (7,304,947) (7,304,947) -
Administrative Expense - (128,139) 128,139
Other Miscellaneous Income (Expense)- - -
Net Changes 6,552,608 26,315,829 (19,763,221)
Ending Balance 154,871,502$ 154,591,204$ 280,298$
Increase ( Decrease)
48
Notes To Financial Statements
Year Ended June 30, 2022
7)DEFINED BENEFIT PENSION PLAN –Continued
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the District for the Plan, calculated using the
discount rate for the Plan, as well as what the District’s net pension liability would be if it were
calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than
the current rate:
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately
issued CalPERS financial reports.
D) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2022, the District recognized pension expense (income)of $(440,542).
At June 30, 2022, the District reported deferred outflows of resources and deferred inflows of
resources related to pensions from the following services:
1% Decrease 6.15%
Net Pension Liability 19,737,148$
Current Discount Rate 7.15%
Net Pension Liability 280,298$
1% Increase 8.15%
Net Pension Liability/(Asset)(15,969,291)$
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions subsequent to measurement date 3,960,785$ -$
Differences between actual and expected experience 520,984 -
Net difference between projected and actual earnings
on pension plan investments - 14,422,139
Total 4,481,769$ 14,422,139$
49
Notes To Financial Statements
Year Ended June 30, 2022
7)DEFINED BENEFIT PENSION PLAN –Continued
D)Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions -Continued
For fiscal year 2022, $3,960,785 reported as deferred outflows of resources related to contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in
the fiscal year ended June 30, 2023. Other amounts reported as deferred outflows of resources and
deferred inflows of resources related to pensions will be recognized as pension expense as follows:
E)Payable to the Pension Plan
At June 30, 2022, the District reported a payable of $104,458 for the outstanding amount of
contributions to the pension plan required for the year ended June 30, 2022. These payables are
reflected in the accrued payroll liabilities on the Statement of Net Position.
8)OTHER POST EMPLOYMENT BENEFITS (OPEB)
Plan Description
The District’s defined benefit postemployment healthcare plan, (DPHP), provides medical benefits to
eligible retired District employees and beneficiaries. DPHP is part of the Public Agency portion of the
California Employers’ Retiree Benefit Trust Fund (CERBT), an agent multiple-employer plan administered
by California Public Employees’ Retirement System (CalPERS), which acts as a common investment and
administrative agent for participating public employers within the State of California. CalPERS issues a
separate Comprehensive Annual Financial Report. Copies of the CalPERS’ annual financial report may
be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814.
Fiscal Deferred
Year Ended Outflow/(Inflows)
June 30 of Resources
2023 (3,351,450)$
2024 (3,229,454)
2025 (3,393,836)
2026 (3,926,415)
2027 -
Thereafter -
50
Notes To Financial Statements
Year Ended June 30, 2022
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Prior to the plan agreements signed in 2011, the eligibility in the plan was broken into 3 tiers, employees
hired before January 1, 1981, employees hired on or after January 1, 1981 but before July 1, 1993 and
employees hired on or after July 1, 1993. Board members elected before January 1, 1995 are also eligible
for the plan. Eligibility also includes age and years of service requirements which vary by tier. Benefits
include up to 100% medical and/or dental premiums for life for the retiree for Tier I or II employees, and
up to 100% spouse premium until death of retiree or age 65 whichever is greater and dependent
premium up to age 19.Tier III employees received up to 50% medical (no dental coverage) up to age 65
and did not include dependent coverage.
Subsequent to the agreements in 2011 and 2012 all employees are eligible for the plan after 20 years of
consecutive service and unrepresented employees hired before January 1, 2013 are eligible after 15
years. Survivor benefits are covered beyond Medicare.
Employees Covered
As of June 30, 2021 actuarial valuations, the following current and former employees were covered by
the benefit terms under the Plan:
Contributions
The annual contribution is based on the actuarially determined contribution. For the fiscal year ended
June 30, 2022, the District made no cash contributions to the trust.
Active Employees 132
Inactive Employees or Beneficiaries Currently Receiving Benefits 80
Inactive Employees Entitled to But Not Yet Received Benefits -
Total 212
51
Notes To Financial Statements
Year Ended June 30, 2022
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Net OPEB Liability
The District’s net OPEB liability was measured as of June 30, 2021 and the total OPEB liability used to
calculate the net OPEB liability was determined by actuarial valuations dated June 30, 2021 based on
the following actuarial methods and assumptions:
Actuarial Assumptions
Discount Rate 6.75%
Inflation 2.50%
Salary Increases 2.75% plus merit
Investment Rate of Return 6.75%
Mortality Rate(1)Derived using CalPERS Membership Data for all funds
Pre-Retirement Turnover(2)Derived using CalPERS Membership Data for all funds
Healthcare Trend Rate 6.00% PPO decreasing to 4.50% PPO
Notes:
(1)The pre-retirement mortality information is derived from the 2017 CalPERS Retiree Mortality for All
Employees table created by CalPERS. CalPERS periodically studies mortality for participating agencies
and establishes mortality tables that are modified versions of commonly used tables. This table
incorporates mortality projection as deemed appropriate based on CalPERS analysis.
(2)The pre-retirement turnover information is based on the 2017 CalPERS Turnover for Miscellaneous
Employees table created by CalPERS. CalPERS periodically studies the experience for participating
agencies and establishes tables that are appropriate for each pool.
52
Notes To Financial Statements
Year Ended June 30, 2022
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
The long-term expected rate of return on OPEB plan investments was determined using a building block
method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB
plan investment expense and inflation) are developed for each major asset class. These ranges are
combined to produce the long-term expected rate of return by weighting the expected future real rates of
return by the target asset allocation percentage and by adding expected inflation. Best estimates of
arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset are
summarized in the following table for the June 30, 2021 actuarial valuations:
Discount Rate
The discount rate used to measure the total OPEB liability was 6.75%for the June 30, 2021 measurement
period.The projection of cash flows used to determine the discount rate assumed that District contributions
will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions,
the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments
for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of
return on OPEB plan investments was applied to all periods of projects benefit payments to determine the
total OPEB liability.
Long-Term
Target Expected RealAsset Class Allocation Rate of Return
Global Equity 59.00%7.55%
Global Fixed Income 25.00%4.25%
TIPS 5.00%3.00%
Commodities 3.00%7.55%
REITs 8.00%7.25%
53
Notes To Financial Statements
Year Ended June 30, 2022
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Changes in the OPEB Liability (Asset)
The changes in the net OPEB liability (asset) for the Plan are as follows:
Sensitivity of the Net OPEB Liability (Asset) to Changes in the Discount Rate
The following presents the net OPEB liability (asset) of the District if it were calculated using a discount
rate that is one percentage point lower or one percentage point higher than the current rate, for the
measurement period ended June 30, 2021:
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability (Asset)
Balance at June 20, 2021
(Valuation Date June 30, 2020)29,859,997$ 28,058,838$ 1,801,159$
Changes Recognized for the Measurement Period:
Service Cost 755,756 - 755,756
Interest on TOL/Return on FNP 2,077,446 7,880,863 (5,803,417)
Difference Between Expected and Actual Experience 2,595,855 - 2,595,855
Changes of Assumptions (1,557,334) - (1,557,334)
Contributions - Employer 807,867 (807,867)
Benefit Payments (1,201,678) (1,201,678) -
Administrative Expenses - (10,811) 10,811
Other Expenses - - -
Net Changes 2,670,045 7,476,241 (4,806,196)
Balance at June 30, 2022
(Measurement Date June 30, 2021)32,530,042$ 35,535,079$ (3,005,037)$
Increase ( Decrease)
Current
1% Decrease Discount Rate 1% Increase
2022 Net OPEB Liability (Asset)
(2021 Measurement Period)1,573,406$ (3,005,037)$ (6,778,400)$
54
Notes To Financial Statements
Year Ended June 30, 2022
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Sensitivity of the Net OPEB Liability (Asset) to Changes in the Healthcare Cost Trend Rates
The following presents the net OPEB liability of the District if it were calculated using health care cost
trend rates that are one percentage point lower or one percentage point higher than the current rate, for
measurement period ended June 30, 2021:
OPEB Plan Fiduciary Net Position
CERBT issues a publicly available financial report that may be obtained from the California Public
Employees Retirement System Executive Office, 400 P Street, Sacramento, California 95814.
Recognition of Deferred Outflows and Deferred Inflows of Resources
Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in
OPEB expense systematically over time.
Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining
amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and
are to be recognized in future OPEB expense.
The recognition period differs depending on the source of the gain or loss:
Net difference between projected and
actual earnings on OPEB plan investments
5 years
All other amounts Expected average remaining service lifetime
(EARSL)
Current Healthcare Cost
1% Decrease Trend Rates 1% Increase
(4.00% HMO/4.00% PPO (5.00% HMO/5.00% PPO (6.00% HMO/6.00% PPO
Decreasing to Decreasing to Decreasing to
3.50% HMO/3.50% PPO)4.50% HMO/4.50% PPO)5.50% HMO/5.50% PPO)
2022 Net OPEB Liability (Asset)
(2021 Measurement Period)(7,330,550)$ (3,005,037)$ 2,357,056$
55
Notes To Financial Statements
Year Ended June 30, 2022
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal year ended June 30, 2022, the District recognized OPEB expense (income)of $(1,672,344).
As of the fiscal year ended June 30, 2022, the District reported deferred outflows and inflows of resources
related to OPEB from the following sources:
Other amounts reported as deferred outflows of resources related to OPEB will be recognized as
expense as follows:
9)COMMITMENTS AND CONTINGENCIES
Construction Commitments
The District has commitments related to capital projects under construction with an estimated cost to
complete of $2,552,684 at June 30, 2022.
Deferred Outflows Deferred Inflows
of Resources of Resources
Differences between expected and actual experience 3,078,056$ (811,646)$
Changes in assumptions - (1,466,358)
Net difference between projected and actual earnings
on OPEB plan investments - (4,166,191)
Total 3,078,056$ (6,444,195)$
Fiscal Deferred
Year Ended Outflows/(Inflows)
June 30, of Resources
2023 (1,184,152)$
2024 (1,149,103)
2025 (706,303)
2026 (889,463)
2027 296,715
Thereafter 266,167
56
Notes To Financial Statements
Year Ended June 30, 2022
9)COMMITMENTS AND CONTINGENCIES –Continued
Litigation
Certain claims, suits and complaints arising in the ordinary course of operation have been filed or are
pending against the District. In the opinion of the staff and counsel, most of those matters are adequately
covered by insurance, or if not so covered,are without merit or are of such kind, or involved such amounts,
as would not have significant effect on the financial position or results of operations of the District if
disposed of unfavorably. There is one potential case, see below, that could have a significant effect on the
District’s financial position.
In November 2015, a District ratepayer filed a lawsuit against the District (Coziahr v.Otay Water District,
Superior Court of the State of California, County of San Diego, contending that the District’s water rates
violated Article XIIID of the California Constitution (“Proposition 218”). The court subsequently certified the
action as a class action on behalf of all single-family residential ratepayers who have received water
service at any time after July 14, 2014.
On March 4, 2021, the court issued a decision in favor of the plaintiffs holding its tiered water rates adopted
in 2013 and 2017 for the following 5-year periods were not proportionate to the cost of service attributable
to each customer’s parcel, as required by Proposition 218.
On June 15, 2022, the court issued a Statement of Decision in the case. The Statement of Decision adopts
a methodology for computing overcharges to ratepayers in the class based on the court’s earlier finding
that the District’s tiered water rates adopted in 2013 and 2017 were not proportionate to the cost of service
attributable to each customer’s parcel, as required by Proposition 218.
Applying its methodology, the court states that the overcharges to ratepayers through June 2021 is
estimated to be approximately $18,105,256, with an approximate additional $208,762 of overcharges, plus
interest accruing each month subsequent to June 2021 until the District changes its rates to be consistent
with Proposition 218.
The District’s position is that the Court decision is inconsistent with rates set by water districts across the
State and the District will vigorously defend its interests. The District also notes that the court’s ruling is
inconsistent with some case law. The District and its Attorney has objected to the decision and the District
will appeal the Courts decision and believes a favorable outcome is reasonable and as such a liability has
not been recorded.
57
Notes To Financial Statements
Year Ended June 30, 2022
9)COMMITMENTS AND CONTINGENCIES –Continued
Refundable Terminal Storage Fees
The District has entered into an agreement with several developers whereby the developers prepaid the
terminal storage fee in order to provide the District with the funds necessary to build additional storage
capacity. The agreement further allows the developers to relinquish all or a portion of such water storage
capacity. If the District grants to another property owner the relinquished storage capacity, the District shall
refund to the applicable developer $746 per equivalent dwelling unit (EDU). There were 17,867 EDUs that
were subject to this agreement. At June 30, 2022, 1,750 EDUs had been relinquished and refunded, 15,095
EDUs had been connected, and 1,022 EDUs have neither been relinquished nor connected.
Developer Agreements
The District has entered into various Developer Agreements with developers towards the expansion of
District facilities. The developers agree to make certain improvements and after the completion of the
projects the District agrees to reimburse such improvements with a maximum reimbursement amount for
each developer. Contractually, the District does not incur a liability for the work until the work is accepted
by the District. As of June 30, 2022, none of the outstanding developer projects had been completed.
10)RISK MANAGEMENT
General Liability and Property
The District is exposed to various risks of loss related to torts, theft, damage and destruction of assets, errors
and omissions, and natural disasters. The District is a member of an insurance pool through the
Association of California Water Agencies Joint Powers Insurance Authority (ACWA JPIA). ACWA JPIA is a
not-for-profit public agency formed under California Government Code Sections 6500 et. Seq.
ACWA JPIA is governed by a board composed of members from participating agencies. The District pays
an annual premium for commercial insurance covering general liability, excess liability, property,
automobile, public employee dishonesty, and various other claims. Separate financial statements of
ACWA JPIA may be obtained at ACWA JPIA 2100 Professional Drive, Roseville, CA 95661-3700.
58
Notes To Financial Statements
Year Ended June 30, 2022
10)RISK MANAGEMENT -Continued
General and Auto Liability, Public Officials’ Errors and Omissions and Employment Practices Liability: Total
limits of $5 million combined single limit at $5 million per occurrence, with excess aggregate coverage at
$50 million subject to the following deductibles:
$50,000 per occurrence for third party general liability property damage;
$50,000 per occurrence for third party auto liability property damage;
Employee Dishonesty Coverage: Total of $1,000,000 per loss includes Public Employee Dishonesty,
Forgery or Alteration and Theft and Faithful Performance of Duty effective July 1, 2021.
Property Loss: Replacement cost, for property on file, paid on an actual cash value basis, to a combined
total of $500 million per occurrence, subject to a $1,000 deductible per occurrence, effective July 1, 2021.
Boiler and Machinery: Replacement cost up to $100 million per occurrence, subject to a $1,000 deductible,
effective July 1, 2021.
Comprehensive and Collision: Deductibles of $1,000, as elected; ACV limits; fully self-funded by ACWA,
effective July 1, 2021.
Workers’ Compensation Coverage and Employer’s Liability: Statutory limits per occurrence for Workers’
Compensation and $2.0 million for Employer’s Liability Coverage, subject to the terms, conditions and
exclusions as provided in the Memorandum of Coverage, effective July 1, 2021.
Cyber Coverage: $5,000,000 Annual Program-Wide Aggregate Limit of Liability for each Insured/Member
for Information Security & Privacy Liability. Policy includes $50,000 deductible per claim.
11) LEASES RECEIVABLE
Leases Receivable
The District has entered into 29 cell site leases with lease terms ranging from less than one year to sixty
years. The lessees are required to make annual fixed payments ranging from $29,532 to $60,503, with
discount rates of 1.39%. As of June 30, 2022, the lease receivable is $37,501,754 and deferred inflows of
resources is $36,619,439. The District recognized $1,402,389 of lease revenue during the fiscal year.
59
Notes To Financial Statements
Year Ended June 30, 2022
12)SEGMENT INFORMATION
The District has issued Water and Wastewater Revenue Bonds in the previous fiscal years to finance certain capital
improvements. While water and wastewater services are accounted for jointly in these financial statements, the
investors in the Water Revenue Bonds rely solely on the revenues of the water services for repayment and the
Wastewater Revenue Bonds solely on the revenues of the wastewater services for repayment.
Summary financial information for the water and wastewater services is presented for June 30, 2022:
Water Wastewater
Services Services Total
Assets
Cash and Investments 100,700,457$ 5,252,617$ 105,953,074$
Accounts Receivable, Net 15,250,261 200,658 15,450,919
Other Current Assets 4,333,973 78,829 4,412,802
Leases Receivable 37,501,754 - 37,501,754
Net OPEB Asset 2,832,142 172,895 3,005,037
Capital Assets 418,117,496 28,630,180 446,747,676
Total Assets 578,736,083 34,335,179 613,071,262
Deferred Outflows of Resources
Deferred Actuarial Pension Costs 4,414,755 67,014 4,481,769
Deferred Actuarial OPEB Costs 2,937,822 140,234 3,078,056
Total Deferred Outflows of Resources 7,352,577 207,248 7,559,825
Liabilities
Accounts Payable 15,661,906 32,774 15,694,680
Other Miscellaneous Liabilities 5,445,866 506,092 5,951,958
Other Current Liabilities 11,744,041 99,814 11,843,855
General Obligation Bonds 2,726 - 2,726
Revenue Bonds 97,264,580 2,972,473 100,237,053
Lease Payable 707,725 - 707,725
Net Pension (Asset) Liability 680,991 (400,693) 280,298
Other Non-current Liabilities 3,704,232 - 3,704,232
Total Liabilities 135,212,067 3,210,460 138,422,527
Deferred Inflows of Resources
Deferred Actuarial Pension Costs 13,745,566 676,573 14,422,139
Deferred Actuarial OPEB Costs 6,122,270 321,925 6,444,195
Deferred Leases 36,619,439 - 36,619,439
Total Deferred Inflows of Resources 56,487,275 998,498 57,485,773
Net Position
Net Investment in Capital Assets 314,686,789 25,587,707 340,274,496
Restricted for Debt Service 3,685,440 - 3,685,440
Unrestricted 76,017,089 4,745,762 80,762,851
Total Net Position 394,389,318$ 30,333,469$ 424,722,787$
June 30, 2022
Condensed Statement of Net Position
60
Notes To Financial Statements
Year Ended June 30, 2022
12)SEGMENT INFORMATION –Continued
Water Wastewater
Services Services Total
Operating Revenues
Water Sales 102,807,098$ -$ 102,807,098$
Wastewater Revenue - 3,073,326 3,073,326
Connection and Other Fees 2,863,017 11,157 2,874,174
Total Operating Revenues 105,670,115 3,084,483 108,754,598
Operating Expenses
Cost of Water Sales 70,562,038 - 70,562,038
Wastewater - 1,802,256 1,802,256
Administrative and General 19,174,479 - 19,174,479
Depreciation 16,577,035 1,111,500 17,688,535
Total Operating Expenses 106,313,552 2,913,756 109,227,308
Operating Income (Loss)(643,437) 170,727 (472,710)
Non-Operating Revenues (Expenses)
Investment Earnings (Losses)(1,490,694) (15,792) (1,506,486)
Taxes and Assessments 5,244,584 - 5,244,584
Availability Charges 688,008 52,920 740,928
Gain (Loss) on Sale of Capital Assets (187,313) - (187,313)
Rents and Leases 2,071,200 - 2,071,200
Miscellaneous Revenues 5,392,269 25,319 5,417,588
Donations (106,913) - (106,913)
Interest Expense (4,461,015) (90,119) (4,551,134)
Miscellaneous Expenses (387,538) (59,654) (447,192)
Total Non-operating Revenues (Expenses)6,762,588 (87,326) 6,675,262
Income (Loss) Before Capital Contributions
and Transfers 6,119,151 83,401 6,202,552
Capital Contributions 12,874,942 394,218 13,269,160
Change in Net Position 18,994,093 477,619 19,471,712
Total Net Position, Beginning 375,395,225 29,855,850 405,251,075
Total Net Position, Ending 394,389,318$ 30,333,469$ 424,722,787$
Condensed Statement of Revenues, Expenses and Changes in Net Pension
Year Ended June 30, 2022
61
Notes To Financial Statements
Year Ended June 30, 2022
12)SEGMENT INFORMATION –Continued
13)IMPLEMENTATION OF NEW ACCOUNTING STANDARDS
As described in Note 11 to the financial statements, the District changed accounting policies related to
leases by adopting Statement of Governmental Accounting Standards Board (GASB) Statement No. 87,
Leases, in the fiscal year 2022. The District did not restate prior year balances as it was not practicable
to do so.
Water Wastewater
Services Services Total
Net Cash Provided/(Used) by:
Operating Activities 16,039,567$ 742,676$ 16,782,243$
Non-capital and Related Financing Activities 5,430,121 52,920 5,483,041
Capital and Related Financing Activities (6,597,611) (8,126) (6,605,737)
Investing Activities (13,606,003) (15,792) (13,621,795)
Net Increase(Decrease) in
Cash and Cash Equivalents 1,266,074 771,678 2,037,752
Cash and Cash Equivalents, Beginning 84,246,065 4,480,939 88,727,004
Cash and Cash Equivalents, Ending 85,512,139$ 5,252,617$ 90,764,756$
For the Year Ended June 30, 2022
Condensed Statement of Cash Flows
62
Schedule of Changes in the Net OPEB Liability and Related Ratios
Measurement Periods Ended June 30,
Last Ten Fiscal Years (1)
Measurement Period 2021 2020 2019 2018 2017
Total OPEB Liability
Service Cost 755,756$ 735,529$ 757,725$ 735,655$ 687,528$
Interest on the Total OPEB Liability 2,077,446 1,915,358 1,970,613 1,864,967 1,764,343
Actual and Expected Experience Difference 2,595,855 1,151,927 (2,029,118) - -
Changes in Assumptions (1,557,334) - (345,110) - -
Changes in Benefit Terms - - - - -
Benefit Payment (1,201,678) (1,120,146) (1,141,344) (1,085,586) (1,039,420)
Net Change in Total OPEB Liability 2,670,045 2,682,668 (787,234) 1,515,036 1,412,451
Total OPEB Liability - Beginning 29,859,997 27,177,329 27,964,563 26,449,527 25,037,076
Total OPEB Liability - Ending (a)32,530,042$ 29,859,997$ 27,177,329$ 27,964,563$ 26,449,527$
Plan Fiduciary Net Position
Contributions - Employer 807,867$ 1,011,358$ 2,206,363$ 2,202,004$ 2,284,420$
Net Investment Income 7,880,863 983,790 1,595,092 1,734,626 2,011,985
Benefit Payments (1,201,678) (1,120,146) (1,141,344) (1,085,586) (1,039,420)
Administrative Expenses (10,811) (13,514) (12,299) (11,784) (10,167)
Other Expenses - - - - -
Net Change in Plan Fiduciary Net Position 7,476,241 861,488 2,647,812 2,839,260 3,246,818
Plan Fiduciary Net Position - Beginning 28,058,838 27,197,350 24,549,538 21,739,035 18,492,217
Plan Fiduciary Net Position - Ending (b)35,535,079$ 28,058,838$ 27,197,350$ 24,578,295$ 21,739,035$
Net OPEB Liability/(Asset) - Ending (a)-(b)(3,005,037)$ 1,801,159$ (20,021)$ 3,386,268$ 4,710,492$
Plan Fiduciary Net Position as a Percentage of
the Total OPEB Liability 109.24%94.00%100.10%87.80%82.20%
Covered-Employee Payroll 13,917,932$ 13,538,959$ 13,176,602$ 12,677,000$ 12,513,000$
Net OPEB Liability/(Asset) as a Percentage of
Covered-Employee Payroll -21.59%13.30%-0.20%26.90%37.60%
Notes to Schedule
(1)Historical information is required only for measurement periods for which GASB 75 is applicable.Future years’information will be
displayed up to 10 years as information becomes available.Contributions are determined by an actuarial valuation based on eligible
participants’ estimated medical and dental benefits.
63
Schedule of Contributions
For Fiscal Year Ended June 30,
Last Ten Fiscal Years (1)
Actuarially
Determined Contributions in Contribution Covered-Contributions as a
Fiscal Contribution Relation to the Deficiency Employee Percentage of Covered-
Year (ADC)ADC (Excess)Payroll Employee Payroll
2018 1,116,418$ (2,202,004)$ (1,085,586)$ 12,677,000$ 17.37%
2019 1,149,911 (2,206,363) (1,056,452) 13,176,602 16.74%
2020 1,011,358 (1,011,358) - 13,538,959 7.47%
2021 807,867 (807,867) - 13,917,932 5.80%
2022 - - - 14,148,052 0.00%
Notes to Schedule:
Methods and assumptions used to determine contributions:
Actuarial Cost Method Entry Age Normal
Amortization Method/Period Level percent of payroll over a closed rolling 15-year period
Asset Valuation Method Market value
Inflation 2.50%
Payroll Growth 2.75%
Investment Rate of Return 6.75%
Healthcare Cost-trend Rates 6.00% HMO/6.00% PPO decreasing to 4.50% HMO/4.50% PPO
Retirement Age
Mortality
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2022 were
from the June 30, 2021 actuarial valuation.Also note,that some of the data from prior years were updated with the
most current available information.
Tier 1 employees -2.7%at 55 and Tier 2 employees -2.0%at 62.The probabilities
of Retirement are based on the 2014 CalPERS Experience Study for the period
from 1997 to 2011.
Pre-retirement mortality and post-retirement mortality probability
based on CalPERS Experience Study with mortality improvements
using Mortality Improvement Scale MP2018
(1)Historical information is required only for measurement periods for which GASB 75 is applicable.Future years’
information will be displayed up to 10 years as information becomes available.Contributions are determined by an
actuarial valuation based on eligible participants’ medical and dental benefits.
64
Schedule of Changes in the Net Pension Liability
and Related Ratios
Fiscal Years Ended June 30,
Last Ten Years(1)
Measurement Period 2020 - 2021 2019 - 2020 2018 - 2019 2017 - 2018
Total Pension Liability
Service Cost 2,662,845$ 2,623,208$ 2,586,911$ 2,528,271$
Interest 10,489,284 10,043,778 9,638,674 9,168,092
Changes in Benefit Terms - - - -
Changes in Assumptions - - - (1,312,634)
Difference Between Expected and actual Experience 705,426 260,337 1,183,213 461,917
Benefit Payments, including Refunds of
Employee Contributions (7,304,947) (7,017,816) (6,658,719) (5,995,949)
Net Change in Total Pension Liability 6,552,608 5,909,507 6,750,079 4,849,697
Total Pension Liability - Beginning 148,318,894 142,409,387 135,659,308 130,809,611
Total Pension Liability - Ending (a)154,871,502$ 148,318,894$ 142,409,387$ 135,659,308$
Plan Fiduciary Net Position
Net Plan to Plan Resource Movement -$ -$ -$ (203)$
Contributions - Employer 3,945,147 2,437,119 36,706,983 4,441,517
Contributions - Employee 1,095,898 1,055,769 1,019,255 1,015,008
Net Investment Income 28,707,870 6,185,108 7,516,686 6,949,676
Benefit Payments, Including Refunds of
Employee Contributions (7,304,947) (7,017,816) (6,658,719) (5,995,949)
Administrative Expenses (128,139) (177,337) (62,278) (126,575)
Other Changes in Fiduciary Net Position - - 203 (240,367)
Net Change in Plan Fiduciary Net Position 26,315,829 2,482,843 38,522,130 6,043,107
Plan Fiduciary Net Position - Beginning 128,275,375 125,792,532 87,270,402 81,227,295
Plan Fiduciary Net Position - Ending (b)154,591,204$ 128,275,375$ 125,792,532$ 87,270,402$
Plan Net Pension Liability/(Asset) - Ending (a)-(b)280,298$ 20,043,519$ 16,616,855$ 48,388,906$
Plan Fiduciary Net Position as a Percentage of the
Total Pension Liability 99.82%86.49%88.33%64.33%
Covered Payroll 13,768,586$ 13,383,715$ 12,892,655$ 12,969,485$
Plan Net Pension Liability/(Asset) as a
Percentage of Covered Payroll 2.04%149.76%128.89%373.10%
(2) Historical information is required only for measurement periods for which GASB 68 is applicable.
(1) Measurement period 2020-21 (fiscal year 2021-2022) was the eighth year of implementation; therefore, only eight years are shown.
65
Schedule of Changes in the Net Pension Liability
and Related Ratios
Fiscal Years Ended June 30,
Last Ten Years(1)
Measurement Period 2016 - 2017 2015 - 2016 2014 - 2015 2013 - 2014
Total Pension Liability
Service Cost 2,556,902$ 2,298,617$ 2,250,860$ 2,330,709$
Interest 8,836,284 8,575,275 8,229,312 7,907,915
Changes in Benefit Terms - - - -
Changes in Assumptions 7,308,486 - (1,996,819) -
Difference Between Expected and actual Experience (1,208,593) (613,440) (981,200) -
Benefit Payments, including Refunds of
Employee Contributions (5,779,040) (5,448,218) (5,288,251) (4,885,406)
Net Change in Total Pension Liability 11,714,039 4,812,234 2,213,902 5,353,218
Total Pension Liability - Beginning 119,095,572 114,283,338 112,069,436 106,716,218
Total Pension Liability - Ending (a)130,809,611$ 119,095,572$ 114,283,338$ 112,069,436$
Plan Fiduciary Net Position
Net Plan to Plan Resource Movement -$ -$ -$ -$
Contributions - Employer 4,105,810 3,819,770 3,557,098 3,137,174
Contributions - Employee 1,014,329 1,010,337 1,007,023 1,074,954
Net Investment Income 8,149,097 369,214 1,601,760 10,874,999
Benefit Payments, Including Refunds of
Employee Contributions (5,779,040) (5,448,218) (5,288,251) (4,885,406)
Administrative Expenses (109,029) (45,185) (83,511) -
Other Changes in Fiduciary Net Position - - - -
Net Change in Plan Fiduciary Net Position 7,381,167 (294,082) 794,119 10,201,721
Plan Fiduciary Net Position - Beginning 73,846,128 74,140,210 73,346,091 63,144,370
Plan Fiduciary Net Position - Ending (b)81,227,295$ 73,846,128$ 74,140,210$ 73,346,091$
Plan Net Pension Liability/(Asset) - Ending (a)-(b)49,582,316$ 45,249,444$ 40,143,128$ 38,723,345$
Plan Fiduciary Net Position as a Percentage of the
Total Pension Liability 62.10%62.01%64.87%65.45%
Covered Payroll 12,829,415$ 12,767,963$ 12,451,513$ 12,276,578$
Plan Net Pension Liability/(Asset) as a
Percentage of Covered Payroll 386.47%354.40%322.40%315.42%
(2) Historical information is required only for measurement periods for which GASB 68 is applicable.
(1) Measurement period 2020-21 (fiscal year 2021-2022) was the eighth year of implementation; therefore, only eight years are shown.
66
Schedule of Plan Contributions
For Fiscal Year Ended June 30,
Last Ten Fiscal Years(1)
Actuarially
Determined Contributions in Contribution Covered-Contributions as a
Fiscal Contribution Relation to the Deficiency Employee Percentage of Covered-
Year (ADC)(2)ADC(2)(Excess)Payroll(3)Employee Payroll(3)
2015 3,557,098$ (3,557,098)$ -$ 12,451,513$ 28.57%
2016 3,819,770 (3,819,770) - 12,767,963 29.92%
2017 4,105,810 (4,105,810) - 12,829,415 32.00%
2018 4,441,517 (4,441,517) - 12,969,485 34.25%
2019 4,906,983 (36,706,983) (31,800,000) 12,892,655 284.71%
2020 2,437,119 (2,437,119) - 13,383,715 18.21%
2021 2,765,952 (3,965,952) (1,200,000) 13,768,586 28.80%
2022 2,971,785 (3,960,785) (989,000) 14,148,052 28.00%
(1) Historical information is required only for measurement periods for which GASB 68 is applicable.
Notes to Schedule:
Actuarial Cost Method Entry Age Normal
Amortization Method/Period For details see June 30, 2018 Funding Valuation Report
Asset Valuation Method Actuarial Value of Assets. For details see June 30, 2018 Funding Valuation Report
Discount Rate 7.15%
Inflation 2.50%
Salary Increases Varies by Entry Age and Service
Payroll Growth 2.75%
Investment Rate of Return 7.00% Net of Pension Plan Investments and Administrative Expenses, includes inflation.
Retirement Age
Mortality
(2)Employers are assumed to make contributions equal to the actuarially determined contributions.However,some employers may
choose to make additional contributions toward their unfunded liability.Employer contributions for such plans exceed the
actuarially determined contributions.
(3) Includes one year’s payroll growth assumption using 2.75% payroll growth assumption for fiscal years 2018-2021; 3.00% payroll
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2021-22 were from the
June 30, 2019 public agency valuations. Also note, that some of the data from prior years were updated with the most current
available information.
The probabilities of Retirement are based on the 2017 CalPERS
The probabilities of mortality are based on the 2017 CalPERS
67
Report on Internal Control Over Financial Reporting and on Compliance and Other
Matters Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards
Board of Directors
Otay Water District
Spring Valley, California
Independent Auditor’s Report
We have audited, in accordance with the auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States, the financial
statements of Otay Water District (“the District”), as of and for the year ended June 30, 2022,
and the related notes to the financial statements, which collectively comprise the District’s
basic financial statements, and have issued our report thereon dated October 19, 2022.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Attachment C
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District's financial statements
are free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements, noncompliance with which
could have a direct and material effect on the financial statements.However, providing an
opinion on compliance with those provisions was not an objective of our audit, and
accordingly, we do not express such an opinion. The results of our tests disclosed no instances
of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness
of the District’s internal control or on compliance. This report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the District’s
internal control and compliance. Accordingly, this communication is not suitable for any other
purpose.
Irvine, California
October 19, 2022
To the Board of Directors
Otay Water District
Spring Valley, California
We have audited the financial statements of the Otay Water District (“the District”)as of and
for the year ended June 30, 2022 and have issued our report thereon dated October 19, 2022.
Professional standards require that we advise you of the following matters relating to our
audit.
Our Responsibility in Relation to the Financial Statement Audit
As communicated in our engagement letter dated February 15, 2022, our responsibility, as
described by professional standards, is to form and express an opinion about whether the
financial statements that have been prepared by management with your oversight are
presented fairly, in all material respects, in accordance with accounting principles generally
accepted in the United States of America. Our audit of the financial statements does not
relieve you or management of your respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our audit
to obtain reasonable, rather than absolute, assurance about whether the financial statements
are free of material misstatement. An audit of financial statements includes consideration of
internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of
our audit, we considered the internal control of the District solely for the purpose of
determining our audit procedures and not to provide any assurance concerning such internal
control.
We are also responsible for communicating significant matters related to the audit that are,
in our professional judgment, relevant to your responsibilities in overseeing the financial
reporting process. However, we are not required to design procedures for the purpose of
identifying other matters to communicate to you.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously
communicated to you.
Compliance with All Ethics Requirements Regarding Independence
The engagement team, others in our firm, as appropriate, our firm, and our network firms
have complied with all relevant ethical requirements regarding independence.
We identified self-review threats to independence as a result of non-attest services provided.
Those non-attest services included the preparation of the financial statements and recording
journal entries detected during the audit process. To mitigate the risk,management has
compared the draft financial statements and footnotes to the underlying accounting records
to verify accuracy and has reviewed a disclosure checklist to ensure footnotes are complete
and accurate.
Attachment D
Additionally, we utilize a quality control reviewer to perform a second review of journal entries
and the financial statements. We believe these safeguards are sufficient to reduce the
independence threats to an acceptable level.
Significant Risks Identified
We have identified implementation of Governmental Accounting Standards Board No. 87 –
Leases as a significant risk. We compared the terms of the agreements to the information
included in the calculation of the lease receivable, deferred inflows of resources and
recognition of revenue and leases payable for 67% of outstanding balance.
We have identified capital assets as a significant risk due to the significance of the balance.
As a result, we ensured that asset additions are properly recorded and removed from
construction in progress when completed. We reviewed 66% of the construction in progress
balance to ensure projects were in fact, still in process and appropriately classified. We also
recalculated current year depreciation expense and accumulated depreciation.
Qualitative Aspects of the Entity’s Significant Accounting Practices
Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A
summary of the significant accounting policies adopted by the District is included in Note 1 to
the financial statements. As described in Note 11 to the financial statements, the District
changed accounting policies related to leases by adopting Statement of Governmental
Accounting Standards (GASB Statement) No. 87, Leases, in the fiscal year 2022.No matters
have come to our attention that would require us, under professional standards, to inform
you about (1) the methods used to account for significant unusual transactions and (2) the
effect of significant accounting policies in controversial or emerging areas for which there is a
lack of authoritative guidance or consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by
management and are based on management’s current judgments. Those judgments are
normally based on knowledge and experience about past and current events and assumptions
about future events. Certain accounting estimates are particularly sensitive because of their
significance to the financial statements and because of the possibility that future events
affecting them may differ markedly from management’s current judgments.
The most sensitive accounting estimates affecting the financial statements are:
Management’s estimate of which capital projects represent ordinary maintenance
activities necessary to keep an asset operational for its originally intended useful life
versus significant improvement, replacement, and life extending projects that should
be capitalized as additions to capital assets is based on management’s knowledge of
the assets and their useful lives. We evaluated the key factors and assumptions used
to develop the amounts added to capital assets in determining that it is reasonable in
relation to the financial statements taken as a whole.
Management’s estimate of transactions related to net pension liabilities based on
actuarial information. We evaluated the key factors and assumptions used to develop
the amounts by the actuary and determined that it is reasonable in relation to the
financial statements taken as a whole.
Management’s estimate of transactions related to net OPEB liabilities based on
actuarial information. We evaluated the key factors and assumptions used to develop
the amounts by the actuary and determined that it is reasonable in relation to the
financial statements taken as a whole.
Financial Statement Disclosures
Certain financial statement disclosures involve significant judgment and are particularly
sensitive because of their significance to financial statement users. The most sensitive
disclosures affecting the District’s financial statements were:
The disclosure of pensions in note 7 of the financial statements.
The disclosure of OPEB in note 8 to the financial statements.
The financial statement disclosures are neutral, consistent, and clear.
Significant Unusual Transactions
For purposes of this communication, professional standards require us to communicate to you
significant unusual transactions identified during our audit.There were no significant unusual
transactions identified as a result of our audit procedures.
Identified or Suspected Fraud
We have not identified or have obtained information that indicates that fraud may have
occurred.
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the
performance of the audit.
Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards also require us to accumulate all
known and likely misstatements identified during the audit, other than those that we believe
are trivial, and communicate them to the appropriate level of management. Further,
professional standards require us to also communicate the effect of uncorrected
misstatements related to prior periods on the relevant classes of transactions, account
balances or disclosures, and the financial statements as a whole and each applicable opinion
unit.There were no uncorrected misstatements that we identified as a result of our audit
procedures.
In addition, professional standards require us to communicate to you all material, corrected
misstatements that were brought to the attention of management as a result of our audit
procedures. There were no material misstatements that we identified as a result of our audit
procedures.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management
as a matter, whether or not resolved to our satisfaction, concerning a financial accounting,
reporting, or auditing matter, which could be significant to the District’s financial statements
or the auditor’s report. No such disagreements arose during the course of the audit.
Circumstances that Affect the Form and Content of the Auditor’s Report
For purposes of this letter, professional standards require that we communicate any
circumstances that affect the form and content of our auditor’s report. There were none.
Representations Requested from Management
We have requested certain written representations from management, which are included in
the attached letter dated October 19, 2022.
Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing
and accounting matters. Management informed us that, and to our knowledge, there were no
consultations with other accountants regarding auditing and accounting matters.
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the District, we generally discuss a
variety of matters, including the application of accounting principles and auditing standards,
significant events or transactions that occurred during the year,operating and regulatory
conditions affecting the entity, and operational plans and strategies that may affect the risks
of material misstatement. None of the matters discussed resulted in a condition to our
retention as the District’s auditors.
Restriction on Use
This report is intended solely for the information and use of the Board of Directors and
management of the District and is not intended to be and should not be used by anyone other
than these specified parties.
Irvine, California
October 19, 2022
Otay Water District
Spring Valley, California
INDEPENDENT ACCOUNTANTS’ REPORT
ON AGREED UPON PROCEDURES APPLIED TO INVESTMENTS FOR OTAY WATER
DISTRICT
We have performed the procedures enumerated below, in reviewing the Otay Water District’s
(“the District”) compliance with the requirements of the Investment Policies as such
requirements apply to the Investments of the District for the period July 1, 2021, through
June 30, 2022. The District is responsible for compliance with the requirements as noted in
the referenced Investment Policies.
The District has agreed to acknowledge that the procedures performed are appropriate to
meet the intended purpose of determining compliance by the District with respect to the
Investment Policies for the period July 1, 2021, through June 30, 2022.This report may not
be suitable for any other purpose. The procedures performed may not address all the items
of interest to a user of this report and may not meet the needs of all users of this report and,
as such, users are responsible for determining whether the procedures performed are
appropriate for their purposes.
The procedures performed, and the results of those procedures are as follows:
1.Obtain a copy of the District’s investment policy and determine that it is in effect for the
fiscal year ended June 30, 2022.
Results:At June 30, 2022 the current investment policy (Policy #27) is dated May 5, 2021.
No exceptions were noted.
2.Select 4 investments held at year end and determine if they are allowable investments
under the District’s Investment Policy.
Results:No exceptions were noted as a result of applying the above procedure.
3.For the four investments selected in #2 above, determine if they are held by a third party
custodian designated by the District.
Results:No exceptions were noted as a result of applying the above procedure.
4.Confirm the par or original investment amount and market value for the four investments
selected above with the custodian or issuer of the investments.
Results:No exceptions were noted as a result of applying the above procedure.
Attachment E
Otay Water District
Spring Valley, California
Page 2
5. Select two investment earnings transactions that took place during the year and recompute
the earnings to determine if the proper amount was received.
Results:No exceptions were noted as a result of applying the above procedure.
6. Trace amounts received for transactions selected at #5 above into the District’s bank
accounts.
Results:No exceptions were noted as a result of applying the above procedure.
7. Select five investment transactions (buy, sell, trade or maturity) occurring during the year
under review and determine that the transactions are permissible under the District’s
investment policy.
Results:No exceptions were noted as a result of applying the above procedure.
8. Review the supporting documents for the five investments selected at #7 above to
determine if the transactions were appropriately recorded into the District’s general ledger.
Results:No exceptions were noted as a result of applying the above procedure.
We were engaged by Otay Water District to perform this agreed-upon procedures engagement
and conducted our engagement in accordance with attestation standards established by the
American Institute of Certified Public Accountants. We were not engaged to and did not
conduct an examination or review engagement, the objective of which would be the
expression of an opinion or conclusion, respectively, on the District’s accounting records.
Accordingly, we do not express such an opinion or conclusion. Had we performed additional
procedures other matters might have come to our attention that would have been reported
to you.
We are required to be independent of the District and to meet our other ethical responsibilities
in accordance with the relevant ethical requirement related to our agreed-upon procedures
engagement.
This report is intended solely for the information and use of management of Otay Water
District and is not intended to be and should not be used by anyone other than those specified
parties.
Irvine, California
October 19, 2022
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 2, 2022
PROJECT: Various DIV. NO. ALL
SUBMITTED BY: Emilyn Zuniga
Safety & Security Specialist
APPROVED BY: Adolfo Segura, Chief, Administrative Services
Jose Martinez, General Manager
SUBJECT: UPDATE OF THE DISTRICT’S HAZARD MITIGATION ACTION PLAN
GENERAL MANAGER’S RECOMMENDATION:
No recommendation. This is an informational item only.
COMMITTEE ACTION:
Please see “Attachment A”.
PURPOSE:
To provide an update of the District’s Hazard Mitigation Action Plan.
ANALYSIS:
The Otay Water District (District) is exposed to natural and human-
caused hazards. To mitigate the potential impacts of these hazards, the
District has developed a draft of its local Hazard Mitigation Action
Plan (Plan). This Plan is a living document that guides action over the
next five (5) years and will be part of the San Diego County’s, and its
partners', Multi-Jurisdictional Hazard Mitigation Plan (MJHMP). The
District's Hazard Mitigation Plan will be included as an annex to the
MJHMP.
Hazard mitigation planning reduces loss of life and property by
lessening the impact of disasters. A hazard mitigation plan increases
AGENDA ITEM 4
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awareness of hazards, risks, vulnerabilities, identifies actions for
risk reduction, and focuses local resources on the most significant
dangers while communicating priorities to state and federal officials.
The process further validates the District’s mitigation practice of
our day-to-day decision-making about land use planning, watershed
management, reservoir retrofits, site design, and other functions.
Mitigation is an investment in the District's future safety and
sustainability. Mitigation planning guides us to take action before a
disaster occurs to reduce losses. The benefits of mitigation planning
include:
• Protecting public safety and preventing loss of life and injury.
• Reducing damage to existing and future development.
• Maintaining community continuity and strengthening the social
connections that are essential for recovery.
• Avoiding damage to our current environmental assets.
• Minimizing downtime, accelerating recovery, and reducing financial
costs.
• Helping accomplish other District objectives, such as capital
improvements, infrastructure protection, open space preservation,
and economic resiliency.
The local planning process and annex development consisted of an
internal planning committee, which includes representatives from
Engineering, Finance, Operations, Communications, and Administrative
Services. The mitigation plan consists of:
1. Organizing the planning process and resources, which included
reaching out to technical experts, defining the planning area, and
identifying individuals, agencies, neighboring jurisdictions,
businesses, and other partners to participate in the process.
2. Assessing risks, which identified the characteristics and
potential consequences of the District's hazards.
3. Developing and updating mitigation strategies to set priorities
and develop long-term strategies for avoiding or minimizing the
undesired effects of disasters.
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4. Adopting and implementing the Plan. Once the Cal Office of
Emergency Services (Cal OES) and the Federal Emergency Management
Agency (FEMA) approve the Plan, staff will present it to the Board
of Directors for their review, endorsement, and adoption so that
the mitigation actions outlined in the strategy can be implemented.
The process and annex development were conducted from December 2021
through June 2022. Attached herein is the draft of the District's Hazard
Mitigation Action Plan/Projects Matrix (“Attachment B”).
FISCAL IMPACT: Joe Beachem, Chief Financial Officer
Informational item only; no fiscal impact.
STRATEGIC GOAL:
Mitigation plans are a prerequisite for certain non-emergency disaster
assistance, such as Hazard Mitigation Assistance (HMA) projects,
including those funded by the Building Resilient Infrastructure and
Communities program (BRIC). The District listed its mitigation
strategies in the annex to qualify for BRIC funding instead of using
internal capital improvement funds.
This year, the County OES updated its MJMHP with input from county
residents, officials, the San Diego Water County Water Authority, the
Alpine and Rancho Santa Fe Fire Protection Districts, the Padre Dam
Municipal Water District, Otay Water District, the San Diego Foundation,
ICLEI, the Cal OES, and FEMA.
During this update, the County informed agencies that did not have a
local hazard mitigation plan (LHMP) that new partners could develop
their LHMPs and be included in the County program. The advantage of the
MJHMP is that it helps the County, and its partners, remain eligible
for various types of pre-and post-disaster community assistance, such
as grants from the FEMA and the State government.
The process was facilitated by a County steering committee and had a
robust public engagement. As a result, the District created its draft
annex and, in June 2022, submitted it to the County to be included in
their revised MJHMP. The MJHMP was submitted to Cal OES for review and
approval in August.
In the meantime, the County OES shared the MJHMP Base Plan with the
Unified Disaster Council (UDC) for their review on October 6, 2022. The
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updated Hazard Mitigation/MJHMP purpose and process will then be
presented to the UDC on October 20, 2022, for a vote of UDC acceptance,
even with Cal OES/FEMA plan edits pending.
The UDC presentation and acceptance vote differ from the MJHMP adoption
by the County of San Diego Board of Supervisors, which will mark FEMA-
approved, regional adoption of the plan. After the Board of Supervisor
approval, tentatively scheduled for February 2023, staff will be able
to present the District’s annex for Board approval and adoption at the
March or April 2023 Board Meeting.
LEGAL IMPACT:
None.
ATTACHMENTS:
Attachment A – Committee Action Report
Attachment B – Mitigation Action Plan Matrix
ATTACHMENT A
SUBJECT/PROJECT: UPDATE OF DISTRICT’S HAZARD MITIGATION ACTION PLAN
COMMITTEE ACTION:
The Finance, Administration and Communications Committee met on October
19, 2022, to review this item. The Committee supports presentation to
the full Board for their consideration.
NOTE:
The “Committee Action” is written in anticipation of the Committee moving
the item forward for Board approval. This report will be sent to the
Board as a committee approved item or modified to reflect any discussion
or changes as directed from the committee prior to presentation to the
full Board.
SECTION 6 Develop a Mitigation Strategy
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ATTACHMENT B