HomeMy WebLinkAboutFY 2011 Comprehensive Annual Financial ReportComprehensive
Annual Financial Report
;Ade~~~~AUU3a 2011
Table of Contents
Introductory Section
Letter of Transmittal……………………………………………………………………. 1 Organization Chart……………………………………………………………………… 7
List of Principal Officials……………………………………………………………….. 8 GFOA Certificate of Achievement……………………………………………………….. 9
Financial Section
Independent Auditors’ Report………………………………………………………….. 11
Management’s Discussion & Analysis…………………………………………………... 13
Basic Financial Statements:
Statements of Net Assets………………………………………………………………. 21 Statements of Revenues, Expenses, and Changes in Net Assets………………………. 23
Statements of Cash Flows………………………………………………………………. 24
Notes to Financial Statements…………………………………………………………... 26
Required Supplementary Information: Schedule of Funding Progress for PERS………………………………………………... 55 Schedule of Funding Progress for DPHP……………………………………………...... 55
Statistical Section
Net Assets by Component……………………………………………………………… 58
Changes in Net Assets…………………………………………………………………... 59 Operating Revenues by Source…………………………………………………………. 60
Operating Expenses by Function……………………………………………………….. 61
Non-Operating Revenues by Source…………………………………………………… 62 Non-Operating Expenses by Function………………………………………………… 63
Assessed Valuation of Taxable Property Within the District………………………… 64
Water Purchases, Production, and Sales……………………………………………...… 65 Meter Sales by Type……………………………………………………………………. 66
Number of Customers by Service Type………………………………………………… 67 Property Tax Levies and Collections…………………………………………………… 68 Water and Sewer Fixed Rates ……….…………………………………………………. 69
Water and Sewer Variable Rates…….…………………………………………………. 70 Ten Largest Customers…………………………………………………………………. 71 Ratios of Outstanding Debt by Type……………………………………………………. 72
Pledged Revenue Coverage…………………………………………………………….. 73 Ratios of General Bonded Debt Outstanding…………………………………………… 74 Computation of Direct and Overlapping Bonded Debt……………………………..… 75
Principal Employers…………………………..………………………………………... 76 Demographic and Economic Statistics………………………………………………….. 77 Number of Employees by Function…………………………………………………….. 78
Active Meters by Size………………………………………………………………..… 79 Operating and Capital Indicators……………………………………………………….. 80
October 13, 2011
Honorable Board of Directors
Otay Water District
I am pleased to present the Otay Water District’s (the “District”) Comprehensive Annual
Financial Report (CAFR) for the fiscal year ended June 30, 2011.
This report was prepared by the District’s Finance Department following guidelines set forth by
the Government Accounting Standards Board (GASB) and generally accepted accounting
principles (GAAP). Responsibility for the accuracy of the data presented and the completeness
and fairness of the presentation, including all disclosures, rests with the District’s management.
We believe the data, as presented, is accurate in all material respects and that it is presented in a
manner that provides a fair representation of the financial position and results of the District’s
operations. Included are all disclosures we believe necessary to enhance your understanding of
the financial condition of the District. GAAP requires that management provide a narrative
introduction, overview, and analysis, to accompany the basic financial statements in the form of
Management’s Discussion and Analysis (MD&A), which should be read in conjunction with this
report. The District’s MD&A can be found immediately following the Independent Auditors’
Report.
The District’s financial statements have been audited by White Nelson Diehl Evans LLP, a firm
of licensed certified public accountants. The goal of the independent audit was to provide
reasonable assurance that the financial statements of the District for the fiscal year ended June
30, 2011, are free of material misstatement. The independent audit involved examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements; assessing the
accounting principles used and significant estimates made by management; and evaluating the
overall financial statement presentation. The independent auditor concluded, based upon the
audit, that there was reasonable basis for rendering an unqualified opinion that the District’s
financial statements for the fiscal year ended June 30, 2011, are fairly presented in conformity
with GAAP. The Independent Auditors’ Report is presented as the first component of the
financial section of this report.
REPORTING ENTITY
The District is a publicly-owned water and sewer agency, authorized on January 27, 1956 as a
California special district by the State Legislature, with an entitlement to import water under the
provisions of the Municipal Water District Act of 1911. Its ordinances, policies, taxes, and rates
for service are set by five Directors, elected by voters in their respective divisions, to serve
staggered four-year terms on its Governing Board. The District is a “revenue neutral” public
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Otay Water District
1
agency, meaning that each end-user pays only their fair share of the District’s costs of water
acquisitions, construction, operation, maintenance, betterment, renewal, and replacement of the
public water and sewer facilities.
The General Manager reports directly to the Board of Directors and, through two Assistant
General Managers and the District management, oversees day-to-day operations. One Assistant
General Manager oversees the departments of Administrative Services, Finance, Information
Technology and Strategic Planning, while the other oversees the Water Operations and
Engineering departments. These and other lines of reporting are shown on the organization chart
on page 7.
Over the last 55 years, the District has grown from a handful of customers and two employees to
become an organization operating a network with more than 893 miles of pipelines, 44
operational reservoirs, a reclaimed water facility, and one of the largest recycled water
distribution networks in San Diego County. The character of the service area has also changed
from predominantly dry-land farming and cattle ranching, to businesses, high-tech industries,
and large master-planned communities.
Today the District
provides water service to
nearly 48,169 potable and
685 recycled customers
within approximately
125.5 square miles of the
southeastern San Diego
metropolitan area. All of
the potable water sold to
customers is purchased
through the San Diego
County Water Authority
(CWA). Much of this
water is purchased from
the region’s water importer, the Metropolitan Water District of Southern California (MWD).
The District also has entered into an agreement with the CWA to have the neighboring Helix
Water District treat imported water, on behalf of the Otay Water District, at their Levy Water
Treatment Plant. This action has brought regional water treatment closer to our customers and
helped reduce dependence on water treatment facilities located outside of San Diego County.
To deliver this locally treated water to customers, the District recently completed a 5.1 mile, 36-
inch diameter pipeline. Drinking water delivered by this new pipeline is stored in two recently
constructed 10 million gallon reservoirs. In addition to bringing water treatment closer to
customers, this new source of water diversifies the District’s supply and improves reliability.
The District also owns and operates a wastewater collection and recycling system providing
public sewer service to approximately 4,646 customer accounts within portions of the
communities of La Mesa, Rancho San Diego, El Cajon, Jamul, and Spring Valley.
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Comprehensive Annual Financial Report
Balanced Scorecard
Wastewater collected is conveyed to the District’s Ralph W. Chapman Water Recycling Facility
(RWCWRF), which is capable of reclaiming wastewater at a rate of 1.3 million gallons per day.
The District also purchases up to 6 million gallons per day of recycled water from the City of
San Diego’s South Bay Reclamation Plant. Recycled water from these two sources is used to
irrigate golf courses, schools, public parks, roadway landscapes, and various other approved uses
in eastern Chula Vista. The use of recycled water reduces dependency on imported supplies and
provides a local supply, thereby diversifying District resources.
MISSION, CURRENT ECONOMIC CONDITIONS, AND OUTLOOK
The mission of the District is to provide high value water and wastewater services to the
customers of the Otay Water District, in a professional, effective, and efficient manner.
As with the past few years, we continue to face numerous challenges with the large economic
downturn and the slow recovery from ongoing home foreclosures. The District also faces large
water supply cost increases, inaction in the State Capitol to address the water crisis in the
Sacramento – San Joaquin Bay Delta, and the uncertainty of Colorado River water, which
combined are the source for 100% of our imported water.
While overall growth in San Diego County has slowed over the last three years, population
within the District’s service area continues to increase albeit at a much reduced rate. As of July
2011, it is estimated that the District served 206,500 residents. The San Diego Association of
Governments (SANDAG), the regional planning agency, has estimated the District’s growth will
continue for a decade or more. The District projects an ultimate customer population of 285,000
residents.
BUDGETING CONTROLS
The District views the budget as an essential tool for proper financial management. The budget
is developed with input from the various departments of the organization and is adopted prior to
the start of each fiscal year. It is designed and presented for the general needs of the District, its
staff, and customers. It is a comprehensive and balanced financial plan that features District
services, resources and their allocation, financial policies, and other useful information to allow
the users to gain a general understanding of the District’s financial status and future. Monthly
comparison reports of budget to actual are prepared and distributed along with variance
explanations to all department heads, with top level information provided to the Board at the
monthly board meetings.
BUDGET SUMMARY
The District’s Fiscal Year 2012 budget is $100.7 million, with operating expenditures of $78.1
million and capital expenditures of $22.6 million. The District’s goal is to provide the most
effective and efficient service possible while maintaining affordability of the water supply for the
community.
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Otay Water District
3
The Otay Water District’s operating expenditures consist of three major sectors: potable water,
recycled water, and sewer, totaling $78,062,200 for Fiscal Year 2012. Revenues from potable
and recycled water are projected to be $65,304,300, about $1,348,800 (2.1%) more than the
Fiscal Year 2011 budget. Water revenues are expected to increase as a result of water supply
rate increases of 7.5% from MWD and 7.7% from CWA, because of the high cost of supply
programs, higher energy and operating costs. Sewer revenues are projected to be $2,336,000,
about $65,500 more than the Fiscal Year 2011 budget, because of necessary rate increases. The
remaining revenue of $10.4 million comes from special fees and assessments and miscellaneous
income.
The 2011-12 Capital Improvement Program
(CIP) budget consists of 74 projects and a
budget of $22.6 million. The budget
emphasizes long-term planning for on-going
programs while functioning within fiscal
constraints and population growth. This
year’s CIP budget decreased by $5.8 million
compared to last year’s projection, which is
due to the completion of the Jamacha Pipeline
Project, and the deferment of several
additional projects until growth resumes.
STRATEGIC PLAN
The Strategic Plan is the core document which guides the District’s efforts to meet and positively
adapt to change. Every three years the District engages in a major revision of its Strategic Plan.
The current plan (covering fiscal years 2012 – 2014) is the fourth in a series of three-year plans
than began in 2003.
The Strategic Plan is focused on the District’s transformation from a growth-centric to a
maintenance-based organization. Where growth has been a significant focus in prior years,
today we have become equally focused in managing long-term maintenance and replacement of
our infrastructure. Performance metrics and targets are a critical element of the Strategic Plan
but differ from Strategic Plan objectives. Objectives identify the action items that are necessary
to achieve the strategic vision. Performance measures are designed to ensure the day-to-day
operations of the utility are meeting agreed-upon expectations. Performance measures are
revised from the prior year and updated quarterly, and reviewed by the Board on a semi-annual
basis.
Our key District challenge is to add increased value by improving our core business processes.
From a water supply perspective, this means determining the optimum mix of water supply,
treatment, and delivery solutions for our customers. From a daily operating perspective,
efficiency improvements have become the primary source of competitive advantage and cost
optimization for utilities. Adding value from this perspective means the entire team focusing on
not only the highest priority goals but also examining the details of what we do every day and be
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Comprehensive Annual Financial Report
willing to alter how we do it if it makes a positive difference. Our employees voice a high
degree of personal and professional satisfaction with our direction and the entire team is
committed to meeting this key challenge with distinction.
The Future
The coming years will continue to pose challenges for those in California’s water community.
While the State of California received a normal amount of rainfall this year, federal court orders
continue to curtail water deliveries from Northern California due to environmental factors in the
Sacramento-San Joaquin Bay Delta. The political stalemate in the State Capital has also made
finding compromise or addressing the environmental issues in the Bay Delta difficult. These
factors combined are driving the higher cost of water statewide. However, through foresight,
investments in drought-proof recycled water, conservation, and a water rate structure that
rewards conservation, the Otay Water District has thus far avoided having to require mandatory
water conservation. The District has instead achieved its water conservation goals using
voluntary measures.
As one would expect, the anticipated reduction in water availability has impacted projected
revenues and will continue to affect the District’s finances. With that in mind, our success as an
organization is vastly enhanced by the practices and policies put in place by the Board of
Directors to ensure the strength and stability of the District, even as we move forward into
uncertain times. We are fully confident that with these policies and practices, supported by
dedicated and talented staff, the District will achieve continued success as an organization and
thus assure the well-being of the people we serve.
ACCOUNTING SYSTEM
The Finance Department is responsible for providing financial services to the District, including
financial accounting, reporting, payroll, accounts payable, investment of funds, billing and
collection of water and wastewater charges, taxes, and other revenues. The District’s books and
records are maintained on an enterprise basis, matching revenues against the costs of providing
services. Revenues and expenses are recorded on the accrual basis in the period in which
revenue is earned and expenses are incurred.
INTERNAL CONTROLS
Otay Water District operates within a system of internal controls established and continually
reviewed by management. This provides reasonable, but not absolute, assurance that assets are
adequately safeguarded and transactions are recorded correctly according to District policies and
procedures. When establishing or reviewing controls, management must also consider the cost
of the control and the value of the benefit derived from its utilization. Management maintains
and implements all sensitive controls, and those controls whose value adequately exceeds their
cost.
Management believes the District’s internal controls, procedures, and policies adequately
safeguard assets and provide reasonable assurance of proper recording of financial transactions.
In addition, the District maintains controls to provide for compliance with all finance related
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Otay Water District
5
legal and contractual provisions. Management believes the activities reported within the
presented Comprehensive Annual Financial Report comply with these finance related legal and
contractual provisions, including bond covenants and fiduciary responsibilities.
AWARDS AND ACKNOWLEDGMENTS
The Government Finance Officers Association of the United States and Canada (GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to Otay Water
District for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2010.
This was the seventh consecutive year that the District has achieved this prestigious award. In
order to be awarded a Certificate of Achievement, a government agency must publish an easily
readable and efficiently organized Comprehensive Annual Financial Report. This report must
satisfy both generally accepted accounting principles and applicable legal requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
Comprehensive Annual Financial Report continues to meet the Certificate of Achievement
Program’s requirements and we are submitting it to the GFOA to determine its eligibility for
another certificate.
The District also received a Distinguished Budget Presentation Award from the GFOA for the
District’s Operating and Capital Budget for Fiscal Year beginning July 1, 2010, as well as two
awards from the California Society of Municipal Finance Officers (CSMFO) for Excellence in
Operating Budgeting and Excellence in Capital Budgeting. These prestigious awards recognize
conformance with the highest standards for preparation of state and local government financial
reports.
The Irrigation Association presented Otay Water District with the 2010 National Water &
Energy Award. This award is in recognition of significant achievement in the conservation of
water and energy relating to irrigation procedures, equipment, methods, and techniques.
The Otay Water District was presented the 2011 Project of the Year Award for the Jamacha
Road Pipeline Project from the American Public Works Association (APWA), in addition to the
2011 Honor Award for the 1296-3 Reservoir (2MG).
I would like to thank all of the staff involved for their efforts in preparing this Comprehensive
Annual Financial Report and for their hard work to ensure a successful outcome. I would also
like to thank the firm of White Nelson Diehl Evans LLP, for their professional work and opinion.
To the Board of Directors, staff and I acknowledge and appreciate their continued support and
direction in achieving excellence in financial management.
___________________________
Mark Watton, General Manager
6
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Comprehensive Annual Financial Report
GENERAL MANAGER
BOARD OF DIRECTORS
Assistant General Manager
Engineering
Planning
Design
Water
Resources
Public Services
Construction
Survey
Environmental
Water
Operations
Water System
Operations
Utility
Maintenance/
Construction
Collection/
Treatment/
Recycle
Operations
Assistant General Manager
Information
Technology and
Strategic Planning
IT Applications
IT Operations
GIS
Finance
Controller
and
Budgetary
Services
Treasury
and
Accounting
Services
Customer
Service
Payroll and
Accounts
Payable
Administrative
Services
Human Resources
Purchasing and
Facilities
Safety and Risk
Administration
Water
Conservation
Organization Chart
Citizens and
Customers
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Otay Water District
7
List of Principal Officials
Board of Directors - Fiscal Year 2010-2011
District Financial Management
Mark Watton - General Manager
German Alvarez - Assistant General Manager, Finance and Administration
Manny Magaña - Assistant General Manager, Engineering and Operations
Joseph R. Beachem - Chief Financial Officer
Gary Croucher
Vice President
Jaime Bonilla
President
David Gonzalez, Jr. Treasurer
Jose Lopez Mark Robak
Division 2 Division 3 Division 1
Division 4 Division 5
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Comprehensive Annual Financial Report
Award
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Otay Water District
9
Certificate of
Achievement
for Excellence
in Financial
Reporting
Pn:scnled 10
Otay Water District
California
For iiS Comprehensive Annual
Financial Repon
for the Fiscal Y car Ended
June30, 2010
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Executive Director
2965 Roosevelt Street, Carlsbad, CA 92008-2389 • Tel: 760.729.2343 • Fax: 760.729.2234
Offices located in Orange and San Diego Counties
October 13, 2011
INDEPENDENT AUDITORS' REPORT
Board of Directors
Otay Water District
Spring Valley, California
We have audited the accompanying basic financial statements of Otay Water District as of and for the years
ended June 30, 2011 and 2010, as listed in the table of contents. These basic financial statements are the
responsibility of the Otay Water District’s management. Our responsibility is to express opinions on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America, the State Controller’s Minimum Audit Requirements for California Special Districts, and the standards
applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit 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 District’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinions.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the
financial position of the Otay Water District as of June 30, 2011 and 2010, and the respective changes in
financial position and cash flows for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated October 13, 2011 on
our consideration of the District’s internal control over financial reporting and our tests of its compliance with
certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report
is 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 internal control over financial reporting or on compliance.
That report is an integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.
11
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, PERS Defined Benefit Pension Plan – schedule of funding progress, and Other Post-
Employment Benefit Plan – schedule of funding progress, as identified in the accompanying table of contents be
presented to supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate operational,
economic, or historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and comparing the
information for consistency with management’s responses to our inquiries, the basic financial statements, and
other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with sufficient
evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming an opinion on the accompanying basic financial statements
of the Otay Water District. The Introductory Section and the Statistical Section, as identified in the
accompanying table of contents, are presented for purposes of additional analysis and are not a required part of
the financial statements. The Introductory Section and the Statistical Section have not been subjected to the
auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an
opinion or provide any assurance on them.
12
Management’s Discussion and Analysis
As management of the Otay Water District (the “District”), we offer readers of the District’s financial statements this
narrative overview and analysis of the District’s financial performance during the fiscal year ending June 30, 2011. 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.
Financial Highlights
The assets of the District exceeded its liabilities at the close of the most recent fiscal year by $459.6 million
(net assets). Of this amount, $77.0 million (unrestricted net assets) may be used to meet the District’s ongoing
obligations to citizens and creditors.
The District’s total net assets decreased by $1.7 million, after a prior period adjustment of an additional $1.3
million decrease. This is primarily attributable to the write off of selected Fixed Assets identified as no longer
serviceable, and several CIP projects that were no longer viable as a part of the District’s long range plans for
growth
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 Assets, 2) Statement of Revenues, Expenses and Changes in Net Assets,
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 Assets presents information on all of the District’s assets and liabilities, with the difference between
the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether
the financial position of the District is improving or weakening.
The Statement of Revenues, Expenses and Changes in Net Assets presents information showing how the District’s net
assets changed during the most recent fiscal year. All changes in net assets 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 that is essential to a full understanding of the data
supplied in each of the specific financial statements listed above.
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 pension benefits to its
employees.
Financial Analysis
As noted earlier, net assets may serve over time as a useful indicator of an entity’s financial position. In the case of the
District, assets exceeded liabilities by $459.6 million at the close of the most recent fiscal year.
By far the largest portion of the District’s net assets, $377.7 million (82%), reflects its investment in capital assets, less any
remaining outstanding debt used to acquire those assets. The District uses these capital assets to provide services to
citizens; consequently, these assets are not available for future spending. Although the District’s investment in its capital
assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from
other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
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Otay Water District
13
Management’s Discussion and Analysis
Statements of Net Assets
(In Millions of Dollars)
2011 2010 2009
Assets
Current and Other Assets $ 124.1 $ 135.3 $ 98.2
Capital Assets 474.4 469.2 452.7
Total Assets 598.5 604.5 550.9
Liabilities
Long-Term Debt Outstanding 114.5 117.7 69.1
Other Liabilities 24.4 25.5 21.5
Total Liabilities 138.9 143.2 90.6
Net Assets
Invested in Capital Assets
Net of Related Debt 377.7 375.9 382.4
Restricted for Debt Service 4.9 5.2 1.8
Unrestricted 77.0 80.2 76.1
Total Net Assets $ 459.6 $ 461.3 $ 460.3
While the District’s operations and population continue to grow, albeit at slower rates than in prior years, the pattern of
reduced growth of the District’s Net Assets is indicative of the reduction in new development projects within the District.
This reduction is a result of the ongoing national housing slump and financial crisis.
In response to this prolonged business slowdown, during FY-2011 the District performed a review of Fixed Assets
throughout the system and wrote off $2.9 million of fully depreciated Property, Plant & Equipment that was no longer
serviceable or functioning efficiently. Additionally, the Engineering Department completed an analysis of several
Construction in Progress projects that were still in the developmental stages and determined they were no longer viable as a
part of the District’s long range plan for growth and improvements to infrastructure. This resulted in current expenses of $1.2
million in accumulated charges from the current year, and a prior period adjustment of $1.3 million. For the entire financial
reporting period, Fiscal Years 2011 and 2010, total Net Assets decreased approximately $1.7 million for FY-2011, to $459.6
million, as compared to FY-2010 when Net Assets increased by $1.0 million.
At the end of FY-2011 the District is able to report positive balances in all categories of net assets. This situation also held
true for the prior two fiscal years.
In FY-2010, the District issued $51.2 million of new Water Revenue Bonds, contributing to the increase in Current and Other
Assets of $38.5 million, and the increase in Long-Term Debt Outstanding of $48.6 million. (See Note 5 in the Notes to
Financial Statements). The use of the 2010 Water Revenue Bonds is also reflected in the increase in Capital Assets of $15.1
million, as the District continued its CIP program. (See Note 3 in the Notes to Financial Statements). These funds continued
to be used in FY-2011, as seen by the decrease in Current and Other Assets of $11.2 million, which was offset by a
corresponding increase in Capital Assets of $5.2 million and a decrease in Long-Term Debt of $3.2 million.
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Comprehensive Annual Financial Report
Management’s Discussion and Analysis
Statements of Revenues, Expenses, and Changes in Net Assets
(In Millions of Dollars)
2011 2010 2009
Water Sales $ 58.3 $ 56.3 $ 52.4
Wastewater Revenue 2.4 2.3 2.2
Connection and Other Fees 2.5 2.1 2.5
Non-operating Revenues 8.8 8.9 14.0
Total Revenues 72.0 69.6 71.1
Depreciation Expense 13.9 13.3 12.5
Other Operating Expense 63.4 59.8 59.0
Non-operating Expense 4.3 3.0 3.1
Total Expenses 81.6 76.1 74.6
Loss Before Capital
Contributions (9.6) (6.5) (3.5)
Capital Contributions 7.9 8.8 7.0
Change in Net Assets
Prior Period Adjustment
(1.7) 2.3
(1.3)
3.5
Beginning Net Assets 461.3 460.3 456.8
Ending Net Assets $ 459.6 $ 461.3 $ 460.3
Water Sales increased by $3.9 million in FY-2010 and $2.0 million in FY-2011, mainly due to rate increases in both years,
and offset by reduced rainfall during FY-2010. The slowdown in growth throughout the District was also reflected in the
decrease in Connection and Other Fees of $0.4 million in FY-2010, followed by a slight increase of $0.2 million in FY-2011.
In FY-2010, Non-operating Revenues decreased by $5.1 million due to a combination of factors. First, there was a decrease
in investment income due to a continuing drop in rates on investment securities. Also, in FY-2009 the District received a
large, one-time legal settlement as a member of a class action lawsuit against a major supply vendor. Finally, in FY-2009 the
District brought in capacity fee revenue to offset the write-off of a capital asset project that was deemed no longer
economically viable for continued operations.
Other Operating Expense has increased predominantly due to the increase in Cost of Water Sales, from a combination of the
increased price-per-acre-foot of water obtained from Los Angeles Metropolitan Water District of 7.5%, and 7.7% from San
Diego County Water Authority, brought on by the high cost of supply programs as well as higher energy and operating costs.
Due to the nationwide housing mortgage crisis throughout the last several years, developers have either slowed-down or
totally stopped work on many projects until economic conditions improve and the demand for growth returns. This has
resulted in Capital Contributions remaining low over the last 3-years, compared to the extended growth of the previous 10-
years. While this slowdown now appears to have stabilized, the District was aided in its Capital Contributions through the
receipt of additional federal grant monies of $2.2 million in FY-2010, and $1.6 million in FY-2011, due to last minute
availability of funds from the federal budget.
________________________________________________________________
Otay Water District
15
Management’s Discussion and Analysis
Capital Assets and Debt Administration
Capital Assets. The District’s capital assets as of June 30, 2011, totaled $474.4 million (net of accumulated depreciation).
Included in this amount is land. The total increase in the District’s capital assets was 3.3% for FY-2010 and 1.1% in
FY-2011.
Capital Assets
(In Millions of Dollars)
2011 2010 2009
Land $ 13.6 $ 13.6 $ 13.4
Construction in Progress 17.9 35.2 16.9
Water System 441.9 409.5 403.1
Recycled Water System 98.3 97.7 96.8
Sewer System 37.7 37.4 37.2
Field Equipment 9.8 9.5 9.5
Buildings 18.5 18.5 18.2
Transportation Equipment 3.2 3.3 3.3
Communication Equipment 2.4 1.3 0.8
Office Equipment 17.3 18.4 17.4
660.6 644.4 616.6
Less Accumulated
Depreciation (186.2) (175.2) (163.9)
Net Capital Assets $ 474.4 $ 469.2 $ 452.7
As indicated by figures in the table above, the majority of capital assets added during both fiscal years were related to the
potable and recycled water systems. In addition, the majority of the cost of construction in progress is also related to these
water systems.
Additional information on the District’s capital assets can be found in Note 3 of the Notes to Financial Statements.
Long-Term Debt. At June 30, 2011, the District had $114.6 million in outstanding debt which consisted of the following:
General Obligation Bonds $ 6.3
Certificates of Participation 57.9
Revenue Bonds 50.4
Total Long-Term Debt $ 114.6
Additional information on the District’s long-term debt can be found in Note 5 of the Notes to Financial Statements.
16
________________________________________________________________
Comprehensive Annual Financial Report
Management’s Discussion and Analysis
Fiscal Year 2011-2012 Budget
Economic Factors
Growth in the San Diego area has slowed over the last 3 years, and demand for housing is reflected in a similarly reduced
pace. Water sales volumes have gradually decreased as a result of a combination of the slowing economy and expanded
efforts to promote water conservation. The coming years will continue to pose challenges for those in California’s water
community and customers. While the State of California received a greater than normal amount of rainfall this year,
federal court orders continue to curtail water deliveries from Northern California due to environmental factors in the
Sacramento-San Joaquin Bay Delta, and the uncertainty of Colorado River water deliveries continues. In addition, the
political situation in the State Capitol has made it difficult to find the compromise necessary to address the environmental
challenges in the Delta, which brings added uncertainty to the delivery of water through the State Water Project. The
combination of these factors will add to the cost of providing water.
The District currently provides water service to about 72% of its total projected future population, serving approximately
206,500 people. Long-term, this percentage should continue to increase as the District's service area continues to develop
and grow. Ultimately, the District is projected to serve approximately 285,000 people, with an average daily demand of 26
million gallons per day (MGD). Currently, the District services the needs of this growing population by purchasing water
from CWA, who in turn purchases its water from MWD and the Imperial Irrigation District (IID). Otay takes delivery of
the water through several connections of large diameter pipelines owned and operated by CWA. The District currently
receives treated water from CWA and the Helix Water District (HWD), by contract with CWA. In addition, the District
has an emergency agreement with the City of San Diego to purchase water in the case of a shutdown of the main 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 this, benefits can be achieved by both parties by using excess
capacity of another agency, and diversifying local supply, thereby increasing reliability.
Financial
The District is projected to deliver approximately 28,950 acre-feet of potable water to 48,370 potable customer accounts
during Fiscal Year 2011-2012. Management feels that these projections are very realistic after accounting for low growth,
supply changes, and a focus on conservation. Current economic conditions throughout America have created an
unprecedented uncertainty for business and economic projections in the current fiscal year. The nationwide housing
mortgage crisis has resulted in hundreds of foreclosures throughout the District. Additionally, the crisis in the banking and
financial industry has had a ripple effect of employee layoffs across a wide swath of the business community. One of the
subsequent results of these two broad events is the relocation of many homeowners and renters into new housing
arrangements throughout San Diego County. Even with the housing pattern changes throughout the District, people’s need
for water remains an underlying constant. Staff continues working diligently on developing new water supplies as it
addresses the financial impacts of conservation, preparing for the possibility of a continued water shortage and prolonged
sales reductions.
Management is unaware of any other conditions that could have a significant impact on the District’s current financial
position, net assets or operating results.
Contacting the District’s Financial Management
This financial report is designed to provide a general overview of the Otay Water District’s finances for the Board of
Directors, taxpayers, creditors, and other interested parties. Questions concerning any of the 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.
________________________________________________________________
Otay Water District
17
2011
(As Restated)
2010
ASSETS
Current Assets:
Cash and Cash Equivalents (Notes 1 and 2)48,563,129$ 40,180,519$
Restricted Cash and Cash Equivalents (Notes 1 and 2)5,239,430 21,131,924
Investments (Note 2)28,691,752 43,085,300
Restricted investments (Notes 1 and 2)20,622,679 11,150,549
Accounts Receivable, net 9,235,138 8,959,367
Accrued Interest Receivable 180,113 239,355
Taxes and Availability Charges Receivable, net 454,948 366,535
Restricted Taxes and Availability Charges Receivable, net 75,588 186,813
Inventories 835,321 954,007
Prepaid Expenses and Other Current Assets 1,189,206 626,421
Total Current Assets 115,087,304 126,880,790
Non-current Assets:
Net OPEB Asset (Note 8)7,416,346 6,783,385
Deferred bond issuance costs (Note 4)1,618,069 1,703,282
Capital Assets (Note 3):
Land 13,636,663 13,620,963
Construction in progress 17,909,282 35,179,104
Capital assets, net of depreciation 442,881,020 420,363,833
Total Capital Assets, net of depreciation 474,426,965 469,163,900
Total Non-Current Assets 483,461,380 477,650,567
Total Assets 598,548,684$ 604,531,357$
Statement of Net Assets
June 30, 2011 and 2010
See accompanying independent auditors' report and notes to financial statements.________________________________________________________________
Otay Water District
21
2011
(As Restated)
2010
LIABILITIES
Current Liabilities:
Current Maturities of Long-Term Debt (Note 5)3,146,010$ 2,668,734$
Accounts Payable 13,000,560 15,327,365
Accrued Payroll Liabilities 2,932,277 2,743,408
Other Accrued Liabilities 739,868 638,015
Customer Deposits 2,105,187 2,146,360
Accrued Interest 1,656,826 1,154,286
Liabilities Payable From Restricted Assets:
Restricted Accrued Interest 86,405 100,326
Total Current Liabilities 23,667,133 24,778,494
Non-current Liabilities:
Long-Term Debt (Note 5)
General Obligation Bonds 6,298,577 6,763,127
Certificates of Participation 57,865,531 59,694,612
Revenue Bonds 50,395,822 51,255,224
Notes Payable - 6,010
Other Non-current Liabilities 715,037 684,309
Total Non-current Liabilities 115,274,967 118,403,282
Total Liabilities 138,942,100 143,181,776
NET ASSETS
Invested in Capital Assets, Net of Related Debt 377,656,762 375,953,042
Restricted for Debt Service 4,915,555 5,192,111
Unrestricted 77,034,267 80,204,428
Total Net Assets 459,606,584$ 461,349,581$
Statement of Net Assets
June 30, 2011 and 2010
Continued
See accompanying independent auditors' report and notes to financial statements.
22
________________________________________________________________
Comprehensive Annual Financial Report
2011
(As Restated)
2010
OPERATING REVENUES
Water Sales 58,293,184$ 56,249,816$
Wastewater Revenue 2,396,385 2,299,585
Connection and Other Fees 2,514,647 2,137,280
Total Operating Revenues 63,204,216 60,686,681
OPERATING EXPENSES
Cost of Water Sales 42,029,819 39,338,495
Wastewater 2,592,823 2,169,988
Administrative and General 18,763,380 18,320,362
Depreciation 13,880,206 13,297,497
Total Operating Expenses 77,266,228 73,126,342
Operating Income (Loss)(14,062,012)(12,439,661)
NON-OPERATING REVENUES (EXPENSES)
Investment Income 854,440 1,323,844
Taxes and Assessments 3,895,938 3,973,328
Availability Charges 653,012 670,784
Gain on Sale of Capital Assets 55,300 (143,086)
Miscellaneous Revenues 3,304,963 2,921,016
Donations (120,648)(100,240)
Interest Expense (3,877,531)(2,404,530)
Miscellaneous Expenses (312,649)(303,541)
Total Non-operating Revenues (Expenses)4,452,825 5,937,575
Income (Loss) Before Contributions (9,609,187)(6,502,086)
Capital Contributions 7,866,190 8,839,892
Change in Net Assets (1,742,997)2,337,806
Total Net Assets, Beginning, as originally stated 461,349,581 460,344,871
Prior period adjustment - (1,333,096)
Total Net Assets, Beginning, as restated 461,349,581 459,011,775
Total Net Assets, Ending 459,606,584$ 461,349,581$
Statement of Revenues,Expenses and Changes in Net Assets
For the Years Ended June 30, 2011 and 2010
See accompanying independent auditors' report and notes to financial statements.________________________________________________________________
Otay Water District
23
2011
(As Restated)
2010
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers 60,372,625$ 56,959,013$
Receipts from Connections and Other Fees 2,514,647 2,137,280
Other Receipts 2,119,390 1,837,028
Payments to Suppliers (47,028,888)(36,816,755)
Payments to Employees (19,439,549)(18,659,239)
Other Payments (269,198)(831,391)
Net Cash Provided (Used) By Operating Activities (1,730,973)4,625,936
CASH FLOWS FROM NON-CAPITAL AND RELATED FINANCING ACTIVITIES
Receipts from Taxes and Assessments 3,918,750 4,023,131
Receipts from Property Rents and Leases 1,185,573 1,083,988
Net Cash Provided (Used) By Non-Capital
and Related Financing Activities 5,104,323 5,107,119
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Proceeds from Capital Contributions 7,386,617 7,717,207
Proceeds from Sale of Capital Assets 81,220 94,118
Proceeds from Debt Related Taxes and Assessments 653,012 670,784
Net proceeds from issuance of Long-Term Debt - 57,826,816
Retirement of Long-Term Debt - (7,231,011)
Principal Payments on Long-Term Debt (2,668,734) (2,521,772)
Interest Payments and Fees (4,696,309) (2,477,158)
Acquisition and Construction of Capital Assets (17,474,142) (28,420,368)
Net Cash Provided (Used) By Capital and
Related Financing Activities (16,718,336) 25,658,616
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received on Investments 945,888 1,336,944
Proceeds from Sale and Maturities of Investments 114,918,280 53,997,000
Purchase of Investments (110,029,066) (81,997,040)
Net Cash Provided (Used) by Investing Activities 5,835,102 (26,663,096)
Net Increase (Decrease) in
Cash and Cash Equivalents (7,509,884) 8,728,575
Cash and Cash Equivalents -Beginning 61,312,443 52,583,868
Cash and Cash Equivalents -Ending 53,802,559$ 61,312,443$
Statement of Cash Flows
For the Years Ended June 30, 2011 and 2010
See accompanying independent auditors' report and notes to financial statements.
24
________________________________________________________________
Comprehensive Annual Financial Report
2011
(As Restated)
2010
Reconciliation of operating income (loss) to net cash
provided (used) by operating activities:
Net Operating Income (Loss)(14,062,012)$ (12,439,661)$
Adjustments to Reconcile Operating Income
to Net Cash Provided (Used) by Operating Activities:
Depreciation 13,880,206 13,297,497
Miscellaneous Revenues 2,119,390 1,837,028
Miscellaneous Expenses (269,198) (261,742)
(Increase) Decrease in Accounts Receivable (275,771) (929,758)
(Increase) Decrease in Inventory 118,686 (137,142)
(Increase) Decrease in Net OPEB Asset (632,961) (578,509)
(Increase) Decrease in Prepaid Expenses and Other Current Assets (562,785) 349,624
Increase (Decrease) in Accounts Payable (2,326,805) 3,761,412
Increase (Decrease) in Accrued Payroll and Related Expenses 188,869 194,677
Increase (Decrease) in Other Accrued Liabilities 101,853 193,140
Increase (Decrease) in Customer Deposits (41,173) (660,630)
Increase (Decrease) in Prepaid Capacity Fees 30,728 -
Net Cash Provided (Used) By Operating Activities (1,730,973)$ 4,625,936$
Schedule of Cash and Cash Equivalents:
Current Assets:
Cash and Cash Equivalents 48,563,129$ 40,180,519$
Restricted Cash and Cash Equivalents 5,239,430 21,131,924
Total Cash Provided (Used) By Operating Activities 53,802,559$ 61,312,443$
Supplemental Disclosures
Non-Cash Investing and Financing Activities Consisted of the Following:
Contributed Capital for Water and Sewer System 479,573$ 1,122,685$
Change in Fair Value of Investments and Recognized Gains/Losses (73,092) 230,747
Amortization Related to Long-Term Debt 164,101 142,039
Statement of Cash Flows
For the Years Ended June 30, 2011 and 2010
Continued
See accompanying independent auditors' report and notes to financial statements.________________________________________________________________
Otay Water District
25
Notes to Financial Statements
Years Ended June 30, 2011 and 2010
NOTE DESCRIPTION PAGE
1 Reporting Entity and Summary of Significant Accounting Policies..… 27
2 Cash and Investments…………………………………………..……... 30
3 Capital Assets…………………………………………………..……... 36
4 Other Non-Current Assets…………………………………………….. 37
5 Long-Term Debt………………………………………………….…… 38
6 Net Assets…………………………………………………………….. 42
7 Defined Benefit Pension Plan…………………………………………. 42
8 Other Post Employment Benefits………………………..…………..... 44
9 Water Conservation Authority………………………………………... 47
10 Commitments and Contingencies…………………………………….. 47
11 Risk Management…………………………………………………….. 48
12 Interest Expense……………………………………………………..... 49
13 Subsequent Events…………………………………………………..... 49
14 Prior Period Adjustment……………………………………………..... 49
15 Segment Information.…………………………………………………. 50
Required Supplementary Information:
1 Schedule of Funding Progress for PERS……………………………… 55
2 Schedule of Funding Progress for DPHP……………………………... 55
26
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Reporting Entity
Otay Water District (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 sewer 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.
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 Assets. The Statement of Revenues,
Expenses and Changes in Net Assets present increases (revenues) and decreases (expenses) in total net assets. 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 assets of the District are classified into three components: (1) invested in capital assets, net of related debt, (2)
restricted net assets, and (3) unrestricted net assets. These classifications are defined as follows:
Invested in Capital Assets, Net of Related Debt
This component of net assets 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 asset, 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 invested in capital assets, net of related debt.
Restricted Net Assets
This component of net assets consists of constraints placed on net asset use through external constraints imposed by
creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or
constraints imposed by law through constitutional provisions or enabling legislation.
Unrestricted Net Assets
This component of net asset consists of net assets that do not meet the definition of “invested in capital assets, net of
related debt” or “restricted net assets”.
________________________________________________________________
Otay Water District
27
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation - Continued
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 directly 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 $58,948 and $61,483 at June 30, 2011 and 2010, respectively.
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
Assets.
When both restricted and unrestricted resources are available for use, it is the District’s practice to use restricted
resources first, then unrestricted resources as they are needed.
The District has elected under GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds
and Other Governmental Activities That Use Proprietary Fund Accounting, to apply all GASB pronouncements as
well as any applicable pronouncements of the Financial Accounting Standards Board (FASB), the Accounting
Principles Board (APB), or any Accounting Research Bulletins (ARB) issued on or before November 30, 1989,
unless they contradict or conflict with GASB pronouncements.
C) 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.
D) Investments
The District’s investments are stated at fair value, except for short-term investments, which are reported at cost,
which approximates fair value. Investments in governmental investment pools are reported on the fair value per
share of the pool’s underlying portfolio.
E) Inventory and Prepaids
Inventory consists primarily of materials used in the construction and maintenance of the water and sewer system and is
valued at weighted average cost. Both inventory and prepaids use the consumption method whereby they are reported
as an asset and expensed as they are consumed.
F) Capital Assets
Capital assets are recorded at cost, where historical records are available, and at an estimated historical cost where no
historical records exist. 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, overhead, and
interest incurred during the construction period. Repairs, maintenance, and minor replacements of property are charged
to expense. Donated assets are capitalized at their approximate fair market value on the date contributed.
28
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
F) Capital Assets - Continued
The District capitalizes interest on construction projects up to the point in time that the project is substantially
completed. Capitalized interest for fiscal year ending June 30, 2011 of $1,215,476 is included in the cost of water
system assets and is depreciated on the straight-line basis over the estimated useful lives of such assets.
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 2-4 Years
Office Equipment 2-10 Years
Recycled Water System 50-75 Years
Sewer System 25-50 Years
G) Compensated Absences
In accordance with GASB Statement No. 16, a liability is recorded for unused vacation and sick leave balances since
the employees’ entitlement to these balances are attributable to services already rendered and it is probable that virtually
all of these balances will be liquidated by either paid time-off or payment upon termination or retirement.
H) Restricted Assets and Liabilities
Certain current liabilities have been classified as current liabilities payable from restricted assets as they will be
funded from restricted assets.
I) 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 $148,047 and $12,937 for 2011 and 2010, respectively.
J) 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
and liabilities 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.
K) 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.
________________________________________________________________
Otay Water District
29
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
K) Property Taxes – Continued
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.
L) Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
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, and
generate income under the parameters of such policies.
Cash and Investments are classified in the accompanying financial statements as follows:
Statement of Net Assets:
Current Assets 2011 2010
Cash and Cash Equivalents $ 48,563,129 $ 40,180,519
Restricted Cash and Cash Equivalents 5,239,430 21,131,924
Investments 28,691,752 43,085,300
Restricted Investments 20,622,679 11,150,549
Total Cash and Investments $ 103,116,990 $ 115,548,292
Cash and Investments consist of the following:
2011 2010
Cash on Hand $ 2,950 $ 2,800
Deposits with Financial Institutions 981,696 4,158,859
Investments 102,132,344 111,386,633
Total Cash and Investments $ 103,116,990 $ 115,548,292
30
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
2) CASH AND INVESTMENTS – Continued
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.
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturity Of Portfolio(1) In One Issuer
U.S. Treasury Obligations 5 years None None
U.S. Government Sponsored Entities 5 years None None
Certificates of Deposit 5 years 15% None
Corporate Medium-Term Notes 5 years 15% None
Commercial Paper 270 days 15% 10%
Money Market Mutual Funds N/A 15% None
County Pooled Investment Funds N/A None None
Local Agency Investment Fund (LAIF) N/A None None
(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 a combination of shorter
term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or
coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.
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, 2011 and
2010.
________________________________________________________________
Otay Water District
31
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
2) CASH AND INVESTMENTS – Continued
Disclosures Relating to Interest Rate Risk - Continued
June 30, 2011
12 Months 13 to 24 25 to 60 More Than
Investment Type Or Less Months Months 60 Months
U.S. Government Sponsored Entities $ 49,263,245 $ - $21,821,835 $27,441,411 $ -
Local Agency Investment Fund
(LAIF) 35,876,620 35,876,620 - - -
Corporate Medium-Term Notes - - - - -
San Diego County Pool 16,992,479 16,992,479 - - -
Total $102,132,344 $52,869,099 $21,821,835 $27,441,411 $ -
Remaining Maturity (in Months)
June 30, 2010
12 Months 13 to 24 25 to 60 More Than
Investment Type Or Less Months Months 60 Months
U.S. Government Sponsored Entities $ 53,911,225 $ - $21,801,325 $32,109,900 $ -
Local Agency Investment Fund
(LAIF) 34,561,668 34,561,668 - - -
Corporate Medium-Term Notes 4,062,740 4,062,740 - - -
San Diego County Pool 18,851,000 18,851,000 - - -
Total $111,386,633 $57,475,408 $21,801,325 $32,109,900 $ -
Remaining Maturity (in Months)
32
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
2) CASH AND INVESTMENTS - Continued
Disclosures Relating to Credit Risk
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, 2011 and 2010 for each investment type.
June 30, 2011
Minimum
Legal Not
Investment Type Rating AAA AA Rated
U.S. Government Sponsored Entities $ 49,263,245 N/A $49,263,246 $ - $ -
Local Agency Investment Fund
(LAIF) 35,876,620 N/A - - 35,876,620
San Diego County Pool 16,992,479 N/A - - 16,992,479
Total $102,132,344 $49,263,246 $ - $52,869,099
Rating as of Year End
June 30, 2010
Minimum
Legal Not
Investment Type Rating AAA AA Rated
U.S. Government Sponsored Entities $ 53,911,225 N/A $53,911,225 $ - $ -
Local Agency Investment Fund
(LAIF) 34,561,668 N/A - - 34,561,668
Corporate Medium-Term Notes 4,062,740 A - 4,062,740 -
San Diego County Pool 18,851,000 N/A - - 18,851,000
Total $111,386,633 $53,911,225 $ 4,062,740 $53,412,668
Rating as of Year End
________________________________________________________________
Otay Water District
33
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
2) CASH AND INVESTMENTS - Continued
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.
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, 2011 and 2010 are as follows:
June 30, 2011
June 30, 2010
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 entity’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, 2011, $1,308,661 of the District’s deposits with financial institutions in excess of federal depository insurance
limits was held in collateralized accounts. As of June 30, 2010, $819,689 of the District’s deposits with financial institutions in
excess of federal depository insurance limits was held in collateralized accounts.
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 17,791,131
Federal Home Loan Mortgage Corp
Federal National Mortgage Association
U.S. Government Sponsored Entities
U.S. Government Sponsored Entities
$ 25,827,735
$ 5,644,380
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 20,044,400
Federal Home Loan Mortgage Corp
Federal National Mortgage Association
U.S. Government Sponsored Entities
U.S. Government Sponsored Entities
$ 11,791,825
$ 22,075,000
34
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
2) CASH AND INVESTMENTS - Continued
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.
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 anytime without penalty.
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 (CAFR).
Copies of the CAFR may be obtained from the County of San Diego Auditor-Controller’s Office, 1600 Pacific Highway, San
Diego, CA 92101.
Collateral for Deposits
All cash and Certificates of Deposit are entirely insured or collateralized.
Under the provisions of the California Government Code, California banks and savings and loan associations are required to
secure the District's deposits by pledging government securities as collateral. The market value of the pledged securities must
equal at least 110% of the District's deposits. California law also allows financial institutions to secure District deposits by
pledging first trust deed mortgage notes having a value of 150% of the District's total deposits.
The District may waive the 110% collateral requirement for deposits which are insured up to $250,000 by the FDIC.
________________________________________________________________
Otay Water District
35
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
3) CAPITAL ASSETS
The following is a summary of changes in Capital Assets for the year ended June 30, 2011:
Depreciation expense for the years ended June 30, 2011 and 2010 was $13,880,206 and $13,297,497, respectively.
Beginning Balance
(As Restated)Additions Deletions Ending Balance
Capital Assets, Not Depreciated
Land 13,620,963$ 15,700$ -$ 13,636,663$
Construction in Progress 35,179,104 18,141,296 (35,411,118) 17,909,282
Total Capital Assets Not Depreciated 48,800,067 18,156,996 (35,411,118) 31,545,945
Capital Assets, Being Depreciated
Infrastructure 544,533,985 33,440,219 (47,686) 577,926,518
Field Equipment 9,529,558 489,019 (170,768) 9,847,809
Buildings 18,451,132 - - 18,451,132
Transportation Equipment 3,278,692 347,077 (448,082) 3,177,687
Communication Equipment 1,335,820 1,023,223 - 2,359,043
Office Equipment 18,430,388 1,123,775 (2,221,197) 17,332,966
Total Capital Assets Being Depreciated 595,559,575 36,423,313 (2,887,733) 629,095,155
Less Accumulated Depreciation:
Infrastructure 146,106,000 11,507,589 (47,686) 157,565,903
Field Equipment 8,685,579 104,372 (170,768) 8,619,183
Buildings 6,475,141 436,150 - 6,911,291
Transportation Equipment 2,477,854 203,715 (431,147) 2,250,422
Communication Equipment 468,548 175,469 - 644,017
Office Equipment 10,982,620 1,452,911 (2,212,212) 10,223,319
Total Accumulated Depreciation 175,195,742 13,880,206 (2,861,813) 186,214,135
Total Capital Assets Being Depreciated, Net 420,363,833 22,543,107 (25,920) 442,881,020
Total Capital Assets, Net 469,163,900$ 40,700,103$ (35,437,038)$ 474,426,965$
36
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
3) CAPITAL ASSETS - Continued
The following is a summary of changes in Capital Assets for the year ended June 30, 2010:
Depreciation expense for the years ended June 30, 2010 and 2009 was $13,297,497 and $12,475,714, respectively.
4) OTHER NON-CURRENT ASSETS
Deferred bond issue costs totaled $1,618,069 and $1,703,282, net of accumulated amortization of $380,418 and $295,204 as
of June 30, 2011 and 2010, respectively. The costs are amortized on the straight-line method based on the estimated term of
the related bond debt. Amortization expense of $85,212 and $66,704 for the years ended June 30, 2011 and 2010 is included
in miscellaneous non-operating expenses.
Beginning Balance
(As Restated)Additions Deletions
Ending Balance
(As Restated)
Capital Assets, Not Depreciated
Land 13,402,840$ 280,065$ (61,942)$ 13,620,963$
Construction in Progress 16,947,182 28,300,354 (10,068,432) 35,179,104
Total Capital Assets Not Depreciated 30,350,022 28,580,419 (10,130,374) 48,800,067
Capital Assets, Being Depreciated
Infrastructure 537,188,394 8,508,856 (1,163,265) 544,533,985
Field Equipment 9,473,571 422,577 (366,590) 9,529,558
Buildings 18,165,527 299,465 (13,860) 18,451,132
Transportation Equipment 3,284,639 325,228 (331,175) 3,278,692
Communication Equipment 787,358 548,462 - 1,335,820
Office Equipment 17,403,147 1,362,848 (335,607) 18,430,388
Total Capital Assets Being Depreciated 586,302,636 11,467,436 (2,210,497) 595,559,575
Less Accumulated Depreciation:
Infrastructure 135,582,472 11,462,706 (939,178) 146,106,000
Field Equipment 8,963,959 93,704 (372,084) 8,685,579
Buildings 6,090,921 446,906 (62,686) 6,475,141
Transportation Equipment 2,655,866 149,802 (327,814) 2,477,854
Communication Equipment 410,205 58,343 - 468,548
Office Equipment 10,230,056 1,086,036 (333,472) 10,982,620
Total Accumulated Depreciation 163,933,479 13,297,497 (2,035,234) 175,195,742
Total Capital Assets Being Depreciated, Net 422,369,157 (1,830,061) (175,263) 420,363,833
Total Capital Assets, Net 452,719,179$ 26,750,358$ (10,305,637)$ 469,163,900$
________________________________________________________________
Otay Water District
37
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
5) LONG-TERM DEBT
Long-Term liabilities for the year ended June 30, 2011 are as follows:
Beginning
Balance Additions Deletions
Ending
Balance
Due Within
One Year
General Obligation Bonds:
Improvement District No. 27 - 2009 $ 7,780,000 $ - $ 520,000 $ 7,260,000 $ 505,000
Unamortized Bond Premium 198,981 - 16,355 182,626 -
Deferred Amount on Refunding (695,854) - (56,805) (639,049) -
Net General Obligation Bonds 7,283,127 - 479,550 6,803,577 505,000
Certificates of Participation:
1996 Certificates of Participation 11,700,000 - 400,000 11,300,000 400,000
2004 Certificates of Participation 9,790,000 - 545,000 9,245,000 565,000
2007 Certificates of Participation 40,400,000 - 850,000 39,550,000 885,000
1996 COPS Unamortized Discount (12,668) - (745) (11,923) -
2007 COPS Unamortized Discount (241,175) - (9,044) (232,131) -
2004 COPS Unamortized Premium 15,335 - 1,165 14,170 -
2004 COPS Deferred Amount on
Refunding (161,880) - (12,295) (149,585)-
Net Certificates of Participation 61,489,612 - 1,774,081 59,715,531 1,850,000
Revenue Bonds:
2010 Water Revenue Bonds Series A 13,840,000 - 13,840,000 785,000
2010 Water Revenue Bonds Series B 36,355,000 - 36,355,000 -
2010 Series A Unamortized Premium 1,060,224 74,402 985,822 -
Net Revenue Bonds 51,255,224 - 74,402 51,180,822 785,000
Notes Payable:
State Water Resource Control Board 359,744 - 353,734 6,010 6,010
Total Long-Term Liabilities $120,387,707 $ - $ 2,681,767 $117,705,940 $3,146,010
38
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
5) LONG-TERM DEBT – Continued
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 to refund the 1998 issue. The proceeds from the bond issue were $7,989,884, which
included an original issue premium of $209,884. An amount of $7,824,647, which consisted of unpaid principal and accrued
interest, was deposited into an escrow fund. Pursuant to an optional redemption clause in the 1998 bonds, the District was able
to redeem the 1998 bonds, without premium at any time after September 1, 2009. On December 15, 2009 the 1998 were
refunded.
The savings between the cash flow required to service the old debt and the cash flow required to service the new debt is
$1,099,110 and represents an economic gain on refunding of $640,925.
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 refunding of the 1998 bonds resulted in a deferred amount of $728,989 which is being amortized over the remaining life of
the refunded debt. Amortization for the year ended June 30, 2011 was $56,805 and is included in miscellaneous non-operating
expenses. As of June 30, 2011, the unamortized deferred amount of refunding is $639,049.
The 2009 General Obligation 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 Total
2012 $ 505,000 $ 251,637 756,637$
2013 520,000 236,262 756,262
2014 535,000 220,437 755,437
2015 550,000 204,162 754,162
2016 570,000 187,362 757,362
2017-2021 3,155,000 607,706 3,762,706
2022-2023 1,425,000 57,303 1,482,303
$ 7,260,000 $ 1,764,869 $ 9,024,869
________________________________________________________________
Otay Water District
39
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
5) LONG-TERM DEBT - Continued
Certificates of Participation (COPS)
In June 1996, COPS with face value of $15,400,000 were sold by the Otay Service Corporation to finance the cost of design,
acquisition, and construction of certain capital improvements. An installment purchase agreement between the District, as
Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principal and interest associated with the
COPS. The installment payments are to be paid from taxes and “net revenues,” as described in the installment agreement. The
certificates bear interest at a variable weekly rate not to exceed 12%. The variable interest rate is tied to the 30-day LIBOR
index and the Securities Industry and Financial Markets Association (SIFMA) index. An irrevocable letter of credit facility is
necessary to market the District’s variable rate debt. This facility is with Union Bank and covers the outstanding principal
and interest. The facility expires on June 29, 2014.The interest rate at June 30, 2011 was 0.10%. The installment payments
are to be paid annually at $350,000 to $900,000 from September 1, 1996 through September 1, 2026.
In July 2004, Refunding Certificates of Participation (COPS) with a face value of $12,270,000 were sold by the Otay Service
Corporation to advance refund $11,680,000 of outstanding 1993 COPS. An installment agreement between the District, as
Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principal and interest associated with the
COPS. The installment payments are to be paid from taxes and “net revenues,” as described in the installment agreement. The
certificates are due in annual installments of $445,000 to $895,000 from September 1, 2005 through September 1, 2023;
bearing interest at 3% to 4.625%.
In March 2007, Revenue Certificates of participation (COPS) with face value of $42,000,000 were sold by the Otay Service
Corporation to improve the District’s water storage system and distribution facilities. An installment purchase agreement
between the District, as a Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principal and
interest associated with the COPS. The installment payments are to be paid from taxes and “net revenues,” as described in the
installment agreement. The certificates are due in annual installments of $785,000 to $2,445,000 from September 1, 2007
through September 1, 2036; bearing interest at 3.7% to 4.47%.
There is no aggregate reserve requirement for the COPS. Future debt service requirements for the certificates are as follows:
For the Year
Ended June 30,Principal Interest* Principal Interest Principal Interest
2012 $ 400,000 $ 10,967 $ 565,000 $ 368,607 $ 885,000 $ 1,622,864
2013 500,000 10,483 580,000 349,566 920,000 1,589,020
2014 500,000 9,983 600,000 328,906 955,000 1,553,864
2015 500,000 9,483 625,000 306,388 995,000 1,517,301
2016 600,000 8,900 650,000 281,994 1,035,000 1,479,239
2017-2021 3,300,000 34,950 3,645,000 985,557 5,795,000 6,759,952
2022-2026 4,400,000 15,533 2,580,000 180,097 7,065,000 5,479,227
2027-2031 1,100,000 183 - - 8,695,000 3,831,363
2032-2036 - - - - 10,760,000 1,751,175
2037-2038 - - - - 2,445,000 53,484
$11,300,000 $ 100,483 $ 9,245,000 $ 2,801,115 $39,550,000 $25,637,489
1996 COPS 2004 COPS 2007 COPS
* Variable Rate - Interest reflected at June 30, 2011 at a rate of 0.10%.
40
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
5) LONG-TERM DEBT - Continued
Certificates of Participation (COPS) - Continued
The three COP debt issues contain various covenants and restrictions, principally that the District fix, prescribe, revise and
collect rates, fees and charges for the Water System which will be at least 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, 2011.
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 2011B (Taxable Build America Bonds) with a face value of
$36,255,000. The Series 2010A bonds are due in annual installments of $785,000 to $1,295,000 from September 1, 2011
through September 1, 2025; bearing interest at 2% to 5.25%. The Series 2011B 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
1996, 2004 and 2007 Certificates of Participation described above.
The proceeds of the bonds will be used to fund the project described above as well as to fund reserve funds of $1,030,688
(Series 2010A) and $2,707,418 (Series 2010B). $542,666 was used to fund various costs of issuance.
The original issue premium is being amortized over the 14 year life of the Series 2010A bonds. Amortization for the year
ending June 30, 2011 was $74,402 and is included in interest expense. The unamortized premium at June 30, 2011 is
$985,822.
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 be at least 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, 2011.
The total amount outstanding at June 30, 2011 and aggregate maturities of the revenue bonds for the fiscal years subsequent to
June 30, 2011, are as follows:
For the Year
Ended June 30,Principal Interest Principal Interest
2012 $ 785,000 $ 569,688 $ - $ 2,371,868
2013 800,000 553,838 - 2,371,868
2014 820,000 533,538 - 2,371,868
2015 845,000 508,563 - 2,371,868
2016 870,000 478,488 - 2,371,868
2017-2021 4,895,000 1,811,588 - 11,859,342
2022-2026 4,825,000 508,456 1,365,000 11,815,819
2027-2031 - - 8,235,000 10,175,654
2032-2036 - - 11,265,000 7,040,514
2037-2041 - - 15,490,000 2,676,839
$ 13,840,000 $ 4,964,157 $ 36,355,000 $ 55,427,508
2010 Water Revenue Bond Series A 2010 Water Revenue Bond Series B
________________________________________________________________
Otay Water District
41
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
5) LONG-TERM DEBT – Continued
Note Payable
In December 1990, the District entered into a 3.5% note payable to the State Water Resources Control Board. This note is
unsecured and payable in annual installments of $366,325 including principal and interest from 1992 through 2012. The total
amount outstanding at June 30, 2011 and aggregate maturities of the note for the fiscal years subsequent to June 30, 2011, are
as follows:
For the Year
Ended June 30,Principal Interest
2012 $ 6,010 $ 1
$ 6,010 $ 1
6) NET ASSETS
Designated Net Assets
In addition to the restricted net assets, a portion of the unrestricted net assets have been designated by the Board of Directors
for the following purposes as of June 30, 2011 and 2010:
2011 2010
Designated Betterment $ 13,221,595 $ 6,653,909
Expansion Reserve 13,216,223 21,096,749
Replacement Reserve 30,156,082 24,483,877
Insurance Reserve 4,526,516 6,639,953
Total $ 61,120,416 $ 58,874,488
7) DEFINED BENEFIT PENSION PLAN
Plan Description
The District’s defined plan, (the “Plan”), provides retirement and disability benefits, annual cost-of-living adjustments, and
death benefits to plan members and beneficiaries. The Plan is part of the Public Agency portion of the California Public
Employees’ Retirement System (CalPERS), an agent multiple-employer plan administered by CalPERS, which acts as a
common investment and administrative agent for participating public employers within the State of California. A menu of
benefit provisions as well as other requirements is established by State statute within the Public Employees’ Retirement Law.
The Plan selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits
through District resolution. 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.
42
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
7) DEFINED BENEFIT PENSION PLAN - Continued
Funding Policy
Active members in the Plan are required to contribute 8% of their annual covered salary. The District has elected to contribute
7% on behalf of its employees. The District is required to contribute the actuarially determined remaining amounts necessary
to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of
Administration. The required employer contribution rate for the fiscal year ended June 30, 2011 was 20.489%. The
contribution requirements of the Plan members are established by State statute and the employer contribution rate is established
and may be amended by the CalPERS.
Annual Pension Costs
For the fiscal year ended June 30, 2011, the District’s annual pension cost and actual contribution was $2,427,744. The
required contribution for the fiscal year ended June 30, 2011 was determined as part of the June 30, 2008 actuarial valuation.
The following is a summary of the actuarial assumptions and methods:
Valuation Date June 30, 2008
Actuarial Cost Method Entry Age Actuarial Cost Method
Amortization Method Level Percent of Payroll
Average Remaining Period 20 Years as of the Valuation Date
Asset Valuation Method 15 Year Smoothed Market
Actuarial Assumptions:
Investment Rate of Return 7.75% (Net of Administrative Expenses)
Projected Salary Increase 3.25% to 14.45% Depending on Age, Service, and Type of Employment
Inflation 3.00%
Payroll Growth 3.25%
Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed annual
inflation component of 3.00% and an annual production growth of 0.25%.
Initial unfunded liabilities are amortized over a closed period that depends on the Plan’s date of entry into CalPERS.
Subsequent Plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that
occur in the operation of the plan are amortized over a rolling period, which results in an amortization of 6% of unamortized
gains and losses each year. If the plan’s accrued liability exceeds the actuarial value of the plan assets, then the amortization
payment of the total unfunded liability may be lower than the payment calculated over a 30-year amortization period.
THREE-YEAR TREND INFORMATION FOR PERS
Fiscal Annual Pension Percentage of Net Pension
Year Cost (APC) APC Contributed Obligation
6/30/11 $ 2,427,744 100% $ 0
6/30/10 $ 2,240,538 100% $ 0
6/30/09 $ 2,150,579 100% $ 0
Funded Status and Funding Progress
As of June 30, 2009, the most recent actuarial valuation date, the plan was 71.4% funded. The actuarial accrued liability
(AAL) for benefits was $75,300,790, and the actuarial value of assets was $53,736,612, resulting in an unfunded actuarial
accrued liability (UAAL) of $21,564,178. The covered payroll (annual payroll of active employees covered by the plan) was
$11,880,481, and the ratio of the UAAL to the covered payroll was 181.5%.
________________________________________________________________
Otay Water District
43
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
7) DEFINED BENEFIT PENSION PLAN - Continued
Funded Status and Funding Progress - Continued
The schedule of funding progress, presented as required supplementary information following the notes to the financial
statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing
over the time relative to the actuarial accrued liability for benefits.
8) OTHER POST EMPLOYMENT BENEFITS
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. A menu of benefit provisions as well as other requirements is established by State statute within the Public
Employees’ Retirement Law. DPHP selects optional benefit provisions from the benefit menu by contract with CalPERS and
adopts those benefits through District resolution. 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.
Funding Policy
The contribution requirements of plan members and the District are established and may be amended by the Board of
Directors. DPHP members receiving benefits contribute based on their selected plan options of EPO, Silver or Gold and if
they are located outside the State of California. Contributions by plan members range from $0 to $134 per month for
coverage to age 65, and from $0 to $133 per month, respectively, thereafter.
Annual OPEB Cost and Net OPEB Obligation/Asset
The District’s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC),
an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of
funding that, if paid on an ongoing basis is projected to cover the normal annual cost. Any unfunded actuarial liability (or
funding excess) is amortized over a period not to exceed thirty years. The current ARC rate is 2.9% of the annual covered
payroll.
44
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
8) OTHER POST EMPLOYMENT BENEFITS - Continued
Annual OPEB Cost and Net OPEB Obligation/Asset - Continued
The following table shows the components of the District’s annual OPEB cost for the year, the amount actually contributed
to the plan, and changes in the District’s net OPEB obligation/asset:
2011 2010
Annual Required Contribution (ARC) 289,000$ 345,000$
Interest on net OPEB asset (525,712) (480,878)
Adjustment to Annual Required Contribution
(ARC) 646,000 591,000
Annual OPEB cost (expense) 409,288 455,122
Contributions made 1,042,249 1,033,631
Increase in net OPEB asset (632,961) (578,509)
Net OPEB asset - beginning of year (6,783,385) (6,204,876)
Net OPEB asset - end of year (7,416,346)$ (6,783,385)$
For 2011, in addition to the ARC, the District contributed cash benefit payments outside the trust (healthcare premium
payments for retirees to Special District Risk Management Authority (SDRMA) in the amount of $654,250, which is included
in the $1,042,249 of contributions shown above. For 2010 this amount was $597,631, which is included in the $1,033,631 of
contributions shown above.
The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB
obligation/asset for the fiscal years 2011, 2010 and 2009 were as follows:
Fiscal Annual OPEB Percentage of Net OPEB
Year Cost (AOC) OPEB Cost Contributed Asset
6/30/2011 $ 409,288 255% $ (7,416,346)
6/30/2010 $ 455,122 227% $ (6,783,385)
6/30/2009 $ 925,201 160% $ (6,204,876)
THREE-YEAR TREND INFORMATION FOR CERBT
________________________________________________________________
Otay Water District
45
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
8) OTHER POST EMPLOYMENT BENEFITS - Continued
Funded Status and Funding Progress
The funded status of the plan as of June 30, 2011, the most recent actuarial valuation date, was as follows:
Actuarial Accrued Liability (AAL) $ 18,289,000
Actuarial Value of Plan Assets $ 7,893,000
Unfunded Actuarial Accrued Liability (UAAL) $ 10,396,000
Funded Ratio (Actuarial Value of Plan Assets/AAL)43.16%
Covered Payroll (Active Plan Members) $ 12,264,000
UAAL as a Percentage of Covered Payroll 84.77%
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the
probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality,
and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required
contributions of the employer are subject to continual revision as actual results are compared with past expectations and
new estimates are made about the future. The schedule of funding progress, presented as required supplementary
information following the notes to the financial statements, presents multi-year trend information about whether the
actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for the
benefits.
Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the
employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical
pattern of sharing of benefit costs between employer and plan members to that point. The actuarial methods and
assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued
liabilities and the actuarial assets, consistent with the long-term perspective of the calculations.
The following is a summary of the actuarial assumptions and methods:
Valuation Date June 30, 2011
Actuarial Cost Method Entry Age Normal Cost Method
Amortization Method Level Percent of Payroll
Remaining Amortization Period 26 Year fixed (closed) period as of the Valuation Date
Asset Valuation Method 15 Year Smoothed Market
Actuarial Assumptions:
Investment Rate of Return 7.25% (Net of Administrative Expenses)
Projected Salary Increase 3.25%
Inflation 3.00%
Individual Salary Growth CalPERS 1997-2007 Experience Study
Healthcare Cost Trend Rate Medical: 10% per annum graded down in approximately
one-half percent increments to an ultimate rate of 5%.
Dental: 4% per annum.
46
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
9) WATER CONSERVATION AUTHORITY
In 1999 the District formed the Water Conservation Authority (the “Authority”), a Joint Powers Authority, with other local
entities to construct, maintain and operate a xeriscape demonstration garden in the furtherance of water conservation. The
authority is a non-profit public charity organization and is exempt from income taxes. During the years ended June 30, 2011
and 2010, the District contributed $120,648 and $100,240, respectively, for the development, construction and operation costs
of the xeriscape demonstration garden.
A summary of the Authority’s June 30, 2010 audited financial statement is as follows (latest report available):
Assets $ 2,518,545
Liabilities $ 107,001
Revenues, Gains and Other Support $ 1,090,595
Changes in Net Assets $ 75,630
10) COMMITMENTS AND CONTINGENCIES
Construction Commitments
The District had committed to capital projects under construction with an estimated cost to complete of $11,894,108 at June
30, 2011.
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, all such 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.
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, 2010, 1,751 EDUs had been relinquished and
refunded, 14,663 EDUs had been connected, and 1,453 EDUs have neither been relinquished nor connected. At June 30,
2011, 1,751 EDUs had been relinquished and refunded, 14,957 EDUs had been connected, and 1,159 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, 2011, none of the outstanding developer agreements had
been accepted, however, it is anticipated that the District will be liable for an amount not to exceed $20,300 at the point of
acceptance. Accordingly, the District did not accrue a liability as of year end.
________________________________________________________________
Otay Water District
47
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
11) RISK MANAGEMENT
The District is exposed to various risks of loss related to torts, theft, damage and destruction of assets, errors and
omissions, and natural disasters. Beginning in July 2003, the District began participation in an insurance pool through the
Special District Risk Management Authority (SDRMA). SDRMA is a not-for-profit public agency formed under
California Government Code Sections 6500 et. Seq. SDRMA is governed by a board composed of members from
participating agencies. The mission of SDRMA is to provide renewable, efficiently priced risk financing and risk
management services through a financially sound pool. The District pays an annual premium for commercial insurance
covering general liability, excess liability, property, automobile, public employee dishonesty, and various other claims.
Accordingly, the District retains no risk of loss. Separate financial statements of SDRMA may be obtained at Special
District Risk Management Authority, 1112 “I” Street, Suite 300, Sacramento, CA 95814.
General and Auto Liability, Public Officials’ and Employees’ Errors and Omissions and Employment Practices Liability: Total
risk financing limits of $10 Million combined single limit at $10 Million per occurrence, subject to the following deductibles:
$500 per occurrence for third party general liability property damage;
$1,000 per occurrence for third party auto liability property damage;
50% co-insurance of cost expended by SDRMA, in excess of $10,000 up to $50,000, per occurrence, for employment
related claims. However, 100% of the obligation will be waived if certain criteria are met, as provided in the
Memorandum of Coverage.
Employee Dishonesty Coverage: Total of $400,000 per loss includes Public Employee Dishonesty, Forgery or Alteration and
Theft, Disappearance and Destruction coverage’s effective July 1, 2010.
Property Loss: Replacement cost, for property on file, if replaced, and if not replaced within two years after the loss, paid on
an actual cash value basis, to a combined total of $1 Billion per occurrence, subject to a $2,000 deductible per occurrence,
effective July 1, 2010.
Boiler and Machinery: Replacement cost up to $100 Million per occurrence, subject to a $1,000 deductible, effective July 1,
2010.
Public Officials Personal Liability: $500,000 each occurrence, with an annual aggregate of $500,000 per each
elected/appointed official to which this coverage applies, subject to the terms, conditions and exclusions as provided in the
Memorandum of Coverage’s, deductible of $500 per claim, effective July 1, 2010.
Comprehensive and Collision: on selected vehicles, with deductibles of $250/$500 or $500/$1,000, as elected; ACV limits;
fully self-funded by SDRMA; Policy No. LCA - SDRMA - 201011, effective July 1, 2010.
Workers’ Compensation Coverage and Employer’s Liability: Statutory limits per occurrence for Workers’ Compensation and
$5.0 Million for Employer’s Liability Coverage, subject to the terms, conditions and exclusions as provided in the
Memorandum of Coverage, effective July 1, 2010.
Health Insurance
Beginning in January 2008, the District began providing health insurance through SDRMA covering all of its employees,
retirees, and other dependents. SDRMA is a self-funded, pooled medical program, administered in conjunction with the
California State Association of Counties (CSAC).
Adequacy of Protection
During the past three fiscal (claims) years none of the above programs of protection have had settlements or judgments that
exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability coverage
from coverage in the prior year.
48
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
12) INTEREST EXPENSE
Interest expense for the years ended June 30, 2011 and 2010, is as follows:
2011 2010
Amount Expensed $ 3,877,531 $ 2,404,530
Amount Capitalized as a Cost of
Construction Projects 1,215,476 510,115
Total Interest $ 5,093,007 $ 2,914,645
13) SUBSEQUENT EVENTS
a) Security Rating Downgrade
In August 2011, Standard & Poor’s downgraded the AAA rating of the United States government and all federally backed
agencies to AA+. Moody’s Investor Service continues to hold its rating of AAA. All securities held by the District are
affected by the downgrade, however the underlying value of the securities has not been affected and interest payments
continue to be received as scheduled.
b) Changes to Other Post Employee Benefits Plan (OPEB):
The District’s Board of Directors met on 7/15/11, and again on 8/10/11, and approved enhanced retiree health benefits for
employees hired on or after July 1, 1993. The immediate financial result is an increase to the District’s Annual Required
Contribution (ARC) for fiscal year 2012, from a projected $495,000 to $1,313,000, based on an updated GASB 45
Actuarial Valuation effective as of June 30, 2011. Employee contributions to offset this expense are being increased by
3.5% of base pay in FY-2012, and an additional 3.5% in FY-2013, for a continuing total of 7.5% contribution until the
employee retires or otherwise ends District employment.
14) PRIOR PERIOD ADJUSTMENT
During the fiscal year, District management evaluated projects capitalized in Construction in Progress and determined that
several projects should not have been capitalized, but rather should have been expensed in the year the expenses occurred.
The District determined that $1,333,096 of costs in Construction in Progress at June 30, 2009 should have been expensed.
As a result, on the Statement of Revenues, Expenses and Changes in Net Assets beginning net assets in the 2010 column is
being restated for this prior period adjustment.
During fiscal year 2010, there was an additional $569,649 of costs capitalized to these projects. On the Statement of
Revenues, Expenses and Changes in Net Assets, the operating expense “Administrative and General” has been restated to
include this $569,649. On the Statement of Net Assets, the Capital Asset Construction in Progress has been restated in the
2010 column to be $35,179,104.
When projects are fully or partially funded by capacity fees and those projects are expensed, the portion of the capacity fee
funding is reclassified from Capital Contributions to miscellaneous non-operating revenue. The $569,649 of project
expenses during 2010 was partially funded by capacity fees of $229,483. As a result, on the Statement of Revenues,
Expenses and Changes in Net Assets, 2010 Capital Contributions and operating revenue “Connection and Other Fees” have
both been restated by $229,483.
________________________________________________________________
Otay Water District
49
Notes to Financial Statements
See independent auditors’ report.
15) SEGMENT INFORMATION
During the June 30, 2010 fiscal year, the District issued Revenue Bonds to finance certain capital improvements. While water
and wastewater services are accounted for in a single fund in these financial statements, the investors in the Revenue Bonds
rely solely on the revenues of the water services for repayment.
Summary financial information for the water services is presented for June 30, 2011.
Water Services
ASSETS
Current Assets 115,292,575$
Capital Assets 458,866,020
Other Assets 9,034,415
Total Assets 583,193,010
LIABILITIES
Current Liabilities 23,066,871
Long-Term Liabilities 115,267,467
Total Liabilities 138,334,338
NET ASSETS
Invested in capital assets, net of related debt 362,101,827
Restricted for debt service 4,915,555
Unrestricted 77,841,290
Total Net Assets 444,858,672$
Condensed Statement of Net Assets
June 30, 2011
50
________________________________________________________________
Comprehensive Annual Financial Report
Notes to Financial Statements
See independent auditors’ report.
15) SEGMENT INFORMATION - Continued
Water Services
OPERATING REVENUES
Water Sales $ 58,269,897
Connection and Other Fees 2,405,515
Total Operating Revenues 60,675,412
OPERATING EXPENSES
Cost of Water Sales 42,029,819
Administrative and General 18,761,669
Depreciation 13,063,809
Total Operating Expenses 73,855,297
Operating Income (Loss)(13,179,885)
NON-OPERATING REVENUES (EXPENSES)
Investment Income 844,310
Taxes and Assessments 3,530,675
Availability Charges 600,742
Gain (loss) on Sale of Capital Assets 55,300
Miscellaneous Revenues 3,304,963
Donations (120,648)
Interest Expense (3,872,284)
Miscellaneous Expenses (296,959)
Total Non-operating Revenues (Expenses) 4,046,099
Income (Loss) Before Capital Contributions (9,133,786)
Capital Contributions 7,840,528
Changes in Net Assets (1,293,258)
Total Net Assets, Beginning 448,053,976
Prior Period Adjustment (1,902,046)
Total Net Assets, Beginning, as restated 446,151,930
Total Net Assets, Ending 444,858,672$
Condensed Statement of Revenues, Expenses and Changes in Net Assets
For The Year Ended June 30, 2011
________________________________________________________________
Otay Water District
51
Notes to Financial Statements
See independent auditors’ report.
15) SEGMENT INFORMATION - Continued
Water Services
Net Cash Provided by Operating Activities (1,824,631)$
Net Cash Provided by Noncapital and Related
Financing Activities 4,430,147
Net Cash Provided by Capital and Related
Financing Activities (15,940,372)
Net Cash Used by Investing Activities 5,824,972
Net Increase in Cash and Cash Equivalents (7,509,884)
Cash and cash equivalents, Beginning 61,312,443
Cash and cash equivalents, Ending 53,802,559$
Condensed Statement of Cash Flows
For The Year Ended June 30, 2011
52
________________________________________________________________
Comprehensive Annual Financial Report
Required Supplementary Information
See independent auditors’ report.
Years Ended June 30, 2011 and 2010
PPLEMENTARY INFORMATION
IRED SUPPLEMENTARY INFORMATION
Schedule of Funding Progress for PERS Actuarial Accrued UAAL as a Actuarial Actuarial Liability Unfunded Percentage of Valuation Value of (AAL) Entry AAL Funded Covered Covered Date Assets Age (UAAL) Ratio Payroll Payroll (A) (B) (B - A) (A/B) (C) [(B-A)/C] 6/30/09 Miscellaneous $ 53,736,612 $ 75,300,790 $ 21,564,178 71.4% $ 11,880,481 181.5% 6/30/08 Miscellaneous $ 49,712,016 $ 65,542,736 $ 15,830,720 75.8% $ 11,174,528 141.7% 6/30/07 Miscellaneous $ 44,910,326 $ 59,412,116 $ 14,501,790 75.6% $ 10,663,440 136.0%
Schedule of Funding Progress for DPHP Actuarial Accrued UAAL as a Actuarial Actuarial Liability Unfunded Percentage of Valuation Value of (AAL) Entry AAL Funded Covered Covered Date Assets Age (UAAL) Ratio Payroll Payroll
(A) (B) (B - A) (A/B) (C) [(B-A)/C] 6/30/11 Miscellaneous $ 7,893,000 $ 18,724,000 $ 10,831,000 42.16% $ 12,264,000 88.32% 6/30/09 Miscellaneous $ 6,273,000 $ 10,070,000 $ 3,797,000 62.29% $ 11,878,000 31.97%
6/30/08 Miscellaneous $ 5,649,000 $ 11,581,000 $ 5,932,000 48.78% $ 11,307,000 52.5%
________________________________________________________________
Otay Water District
55
Statistical Schedules
The Statistical Schedule is part of understanding what the information in the financial statements, note
disclosures, and required supplementary information says about the District’s overall financial health.
Contents Page
Financial Trends 5588
These schedules contain trend information to help the reader understand how the
District’s financial performance and well-being have changed over time.
Revenue Capacity 6644
These schedules contain information to help the reader assess the factors affecting the
District’s ability to generate its water, reclaimed, and sewer sales as well as property
and sales taxes.
Debt 7722
These schedules present information to help the reader assess the affordability of the
District’s current levels of outstanding debt and the District’s ability to issue
additional debt in the future.
Demographic and Economic Information 7766
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the District’s financial activities take place
and to help make comparisons over time and with other governments.
Operating Information 7788
These schedules contain information about the District’s operation and resources to
help the reader understand how the District’s financial information relates to the
services the District provides and the activities it performs.
Sources
Unless otherwise noted, the information in these schedules is derived from the comprehensive
annual financial reports of the relevant year. The District implemented GASB Statement 34
in 2001; schedules presenting government-wide information include information beginning in
that year.
________________________________________________________________
Otay Water District
57
Invested in
Fiscal Capital Assets Total
Year Net of Related Debt Restricted Unrestricted Net Assets
2011 377,656,762$ 4,915,555$ 77,034,267$ 459,606,584$
2010 375,953,042 5,192,111 80,204,428 461,349,581
2009 382,410,491 1,797,512 76,136,868 460,344,871
2008 372,696,591 9,411,114 74,719,712 456,827,417
2007 374,667,591 2,071,307 70,282,627 447,021,525
2006 361,590,845 2,408,473 58,066,009 422,065,327
2005 325,676,089 16,188,364 69,224,020 411,088,473
2004 291,863,666 23,853,441 67,244,139 382,961,246
2003 269,579,907 40,945,837 49,828,535 360,354,279
2002 245,290,752 46,866,439 45,580,508 337,737,699
Source: Otay Water District
Net Assets by Component
Last Ten Fiscal Years
$300,000,000
$320,000,000
$340,000,000
$360,000,000
$380,000,000
$400,000,000
$420,000,000
$440,000,000
$460,000,000
$480,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
TOTAL NET ASSETS
58
________________________________________________________________
Comprehensive Annual Financial Report
Total
Non-Operating Income (Loss)Change
Fiscal Operating Operating Operating Revenues/Before Capital Capital in Net
Year Revenues Expenses Income (Expenses)Contributions Contributions Assets
2011 63,204,216$ 77,266,228$ (14,062,012)$ 4,452,825$ (9,609,187)$ 7,866,190$ (1,742,997)$
2010 60,686,681 73,126,342 (12,439,661)5,937,575 (6,502,086)8,839,892 2,337,806
2009 57,103,311 71,507,161 (14,403,850)10,932,096 (3,471,754)6,989,208 3,517,454
2008 55,714,845 71,474,372 (15,759,527)10,623,457 (5,136,070)14,941,962 9,805,892
2007 53,250,481 64,651,050 (11,400,569)9,793,692 (1,606,877)26,563,075 24,956,198
2006 47,861,088 59,528,094 (11,667,006)7,242,280 (4,424,726)15,401,580 10,976,854
2005 43,335,915 56,449,475 (13,113,560)6,271,482 (6,842,078)34,969,305 28,127,227
2004 41,539,293 51,516,096 (9,976,803)3,484,492 (6,492,311)29,099,278 22,606,967
2003 36,961,980 46,143,486 (9,181,506)4,517,049 (4,664,457)22,616,580 17,952,123
2002 37,312,385 43,509,038 (6,196,653)6,193,303 (3,350)15,732,451 15,729,101
Source: Otay Water District
Changes in Net Assets
Last Ten Fiscal Years
-$5,000,000
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
CHANGES IN NET ASSETS
________________________________________________________________
Otay Water District
59
Fiscal Wastewater Connection and Percent
Year Water Sales Revenue Other Fees Total Change
2011 58,293,184$ 2,396,385$ 2,514,647$ 63,204,216$ 4.1%
2010 56,249,816 2,299,585 2,137,280 60,686,681 6.3%
2009 52,428,648 2,182,429 2,492,234 57,103,311 2.5%
2008 50,808,825 2,386,285 2,519,735 55,714,845 4.6%
2007 48,605,606 2,604,431 2,040,444 53,250,481 11.3%
2006 43,755,610 2,331,094 1,774,384 47,861,088 10.4%
2005 39,348,056 2,018,596 1,969,263 43,335,915 4.3%
2004 39,044,712 1,774,366 720,215 41,539,293 12.4%
2003 34,621,890 1,648,227 691,863 36,961,980 -0.9%
2002 34,980,289 2,031,855 300,241 37,312,385 65.1%
Operating Revenues by Source
Last Ten Fiscal Years
,,,,,,,
Source: Otay Water District
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
TOTAL OPERATING REVENUES
60
________________________________________________________________
Comprehensive Annual Financial Report
Administrative Percent
Year Water Sales Wastewater and General Depreciation Total Change
2011 42,029,819$ 2,592,823$ 18,763,380$ 13,880,206$ 77,266,228$ 5.7%
2010 39,338,495 2,169,988 18,320,362 13,297,497 73,126,342 2.3%
2009 37,252,482 1,890,804 19,888,161 12,475,714 71,507,161 0.05%
2008 35,296,002 2,009,876 21,127,922 13,040,572 71,474,372 10.6%
2007 33,994,841 1,508,672 18,418,441 10,729,096 64,651,050 8.6%
2006 32,043,395 1,899,957 15,477,287 10,107,455 59,528,094 5.5%
2005 30,127,087 2,050,643 13,747,611 10,524,134 56,449,475 9.6%
2004 27,899,376 2,446,603 11,081,599 10,088,518 51,516,096 11.6%
2003 24,477,487 2,548,881 9,310,381 9,806,737 46,143,486 6.1%
2002 23,070,355 2,404,720 8,388,045 9,645,918 43,509,038 8.2%
CHART SOURCE DATA
Source: Otay Water District
Operating Expenses by Function
Last Ten Fiscal Years
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
OPERATING EXPENSES
Depreciation Administrative and General Wastewater Cost of Water Sales
________________________________________________________________
Otay Water District
61
Fiscal Investment Taxes and Availability Percent
Year Income Assessments Charges Miscellaneous Total Change
2011 854,440$ 3,895,938$ 653,012$ 3,360,263$ 8,763,653$ 0.2%
2010 1,323,844 3,973,328 670,784 2,777,930 8,745,886 -37.7%
2009 2,252,335 4,586,823 625,065 6,574,850 (2)14,039,073 3.5%
2008 4,538,791 4,591,023 744,722 3,692,206 13,566,742 22.3%
2007 4,416,342 4,151,956 715,664 1,811,619 11,095,581 29.7%
2006 3,188,645 2,779,635 609,099 1,978,632 8,556,011 4.1%
2005 2,052,292 2,326,526 556,590 3,285,128 (1)8,220,536 15.5%
2004 1,097,449 3,071,685 1,132,278 1,816,967 7,118,379 -10.8%
2003 2,578,231 2,600,411 1,069,750 1,731,384 7,979,776 -12.4%
2002 4,466,383 2,381,170 1,052,222 1,207,920 9,107,695 -31.8%
(1) The District sold capital assets during Fiscal Year 2005 which resulted in a gain of $2,196,655.
(2) The District received a large, one-time legal settlement as a member of a class action lawsuit in Fiscal Year 2009.
Source: Otay Water District
Non-Operating Revenues by Source
Last Ten Fiscal Years
$0.00
$2,000,000.00
$4,000,000.00
$6,000,000.00
$8,000,000.00
$10,000,000.00
$12,000,000.00
$14,000,000.00
$16,000,000.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
TOTAL NON-OPERATING REVENUES
Total Non-Operating Revenues
62
________________________________________________________________
Comprehensive Annual Financial Report
Fiscal Interest Percent
Year Donations (1)Expense Miscellaneous Total Change
2011 120,648$ 3,877,531$ 312,649$ 4,310,828$ 53.5%
2010 100,240 2,404,530 303,541 2,808,311 -9.6%
2009 95,270 1,340,110 1,671,597 3,106,977 5.6%
2008 80,541 2,601,252 261,492 2,943,285 126.1%
2007 80,000 950,479 271,410 1,301,889 -0.9%
2006 75,000 959,225 279,506 1,313,731 -32.6%
2005 61,411 1,327,844 559,799 1,949,054 -46.4%
2004 59,220 1,252,307 2,322,360 3,633,887 4.9%
2003 68,756 947,099 2,446,872 3,462,727 18.8%
2002 131,225 1,503,063 1,280,104 2,914,392 3.3%
(1) Donations are contributions to the Water Conservation Authority formed in 1999. See Note 9 in the Notes
to Financial Statements for more information.
Source: Otay Water District
Non-Operating Expenses by Function
Last Ten Fiscal Years
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
NON-OPERATING EXPENSES
Miscellaneous Interest Expense Donations
________________________________________________________________
Otay Water District
63
Fiscal Percent
Year Secured Unsecured Total Change
2011 22,997,752,952$ 521,424,896$ 23,519,177,848$ -2.81%
2010 23,671,616,006 527,200,694 24,198,816,700 -9.54%
2009 26,269,630,081 482,465,611 26,752,095,692 3.28%
2008 25,333,821,005 568,975,196 25,902,796,201 14.19%
2007 22,166,251,649 518,441,943 22,684,693,592 15.94%
2006 19,204,029,184 361,636,280 19,565,665,464 19.13%
2005 16,121,465,817 301,937,884 16,423,403,701 16.23%
2004 13,833,852,366 296,691,701 14,130,544,067 16.50%
2003 11,786,410,218 343,253,933 12,129,664,151 15.63%
2002 10,239,985,732 249,933,698 10,489,919,430 16.67%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Source: County of San Diego Auditor and Controller
Assessed Valuation of Taxable Property within the District
Last Ten Fiscal Years
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
In
T
h
o
u
s
a
n
d
s
Fiscal Year
ASSESSED VALUATION OF PROPERTY
64
________________________________________________________________
Comprehensive Annual Financial Report
Fiscal
Year Purchases Sales Production Purchases Sales
2011 13,007,365 12,363,608 461,060 1,293,310 1,676,775
2010 13,580,004 12,749,799 449,771 1,250,873 1,774,563
2009 15,233,498 14,923,843 367,461 1,593,621 1,991,737
2008 16,572,271 15,575,662 538,227 1,566,148 2,001,137
2007 18,255,735 16,059,464 550,206 284,499 (2)1,920,287
2006 17,972,146 14,723,988 537,400 - 1,722,057
2005 16,412,711 13,708,001 501,114 - 1,447,020
2004 18,424,007 14,711,176 568,589 - 1,492,453
2003 16,486,502 13,613,885 486,739 - 1,109,691
2002 17,084,537 13,723,241 471,581 - 1,000,007
(1) Rates are not presented on this schedule because the District has multiple water rates for various meter sizes and
cannot represent rates in a meaningful manner with a weighted average rate. See Water and Sewer rates on page 69-70
for meter sizes and their corresponding water rates.
(2) The District entered into an agreement with the City of San Diego and began purchasing recycled water from
their South Bay Water Reclamation Plant in 2007.
Source: Otay Water District
Water Purchases, Production, and Sales
Last Ten Fiscal Years
Potable Water (1)Recycled Water (1)
Per 100 Cubic Feet Per 100 Cubic Feet
0
50,000
100,000
150,000
200,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Hu
n
d
r
e
d
C
u
.
F
t
.
…
.
Fiscal Year
Recycled Water Purchases Recycled Water Production Potable Water Purchases
POTABLE WATER PURCHASES AND
RECYCLED WATER PRODUCTION
________________________________________________________________
Otay Water District
65
Fiscal
Year Potable Recycled Total
2011 283 9 292
2010 288 17 305
2009 113 44 157
2008 224 22 246
2007 563 85 648
2006 788 47 835
2005 1,406 95 1,501
2004 2,125 64 2,189
2003 1,782 123 1,905
2002 2,308 33 2,341
Source: Otay Water District
Meter Sales by Type
Last Ten Fiscal Years
-
500
1,000
1,500
2,000
2,500
3,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
METER SALES
Recycled Meter Sales Potable Meter Sales
66
________________________________________________________________
Comprehensive Annual Financial Report
Fiscal Year Potable Recycled Sewer Total
2011 48,169 685 4,655 53,509
2010 47,844 684 4,646 53,174
2009 47,689 671 4,638 52,998
2008 47,591 626 4,627 52,844
2007 47,461 588 4,567 52,616
2006 46,851 558 4,571 51,980
2005 46,042 483 4,570 51,095
2004 44,583 348 4,548 49,479
2003 42,438 312 4,510 47,260
2002 40,732 189 4,342 45,263
Source: Otay Water District
Number of Customers by Service Type
Last Ten Fiscal Years
0
20,000
40,000
60,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
NUMBER OF CUSTOMERS
Potable Recycled Sewer
________________________________________________________________
Otay Water District
67
LEVIES (1)
Fiscal 1% Property Special Total Total Net Change in
Year Tax Assessments Levies Collections (1)Receivable
2011 2,651,938$ 2,497,117$ 5,149,055$ 5,123,709$ 25,346$
2010 3,030,369 2,179,270 5,209,639 5,259,442 (49,803)
2009 3,415,348 2,370,767 5,786,115 5,712,831 73,284
2008 3,202,880 2,627,518 5,830,398 5,754,836 75,563
2007 2,775,882 2,465,497 5,241,379 5,263,367 (21,988)
2006 1,420,049 2,519,927 3,939,976 3,935,983 3,993
2005 1,173,319 2,430,267 3,603,586 3,455,852 147,734
2004 1,844,604 2,442,356 4,286,961 4,108,581 178,380
2003 1,541,362 2,246,865 3,788,227 3,721,776 66,451
2002 1,314,354 2,305,191 3,619,545 3,558,105 61,440
(1) Levies and collections include Current Secured, Current Unsecured, and Supplemental Homeowners Exemptions.
Source: Otay Water District
Property Tax Levies and Collections
Last Ten Fiscal Years
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Th
o
u
s
a
n
d
s
Fiscal Year
LEVIES AND COLLECTIONS
Levies Collections
68
________________________________________________________________
Comprehensive Annual Financial Report
System Fee (Meter Size)2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
Residential
3/4"14.58$ 14.58$ 13.83$ 12.30$ 11.30$ 10.25$ 10.25$ 10.25$ 10.25$ 10.25$
1"18.52 18.52 17.56 19.80 18.15 16.50 16.50 16.50 16.50 16.50
1.5"28.37 28.37 26.90 51.95 35.75 32.50 32.50 32.50 32.50 32.50
Non-Residential & Others
3/4"14.58 14.58 13.83 24.00 22.00 20.00 20.00 20.00 20.00 20.00
1"18.52 18.52 17.56 36.95 33.90 30.80 30.80 30.80 30.80 30.80
1.5"28.37 28.37 26.90 51.95 47.50 43.30 43.30 43.30 43.30 43.30
2"40.18 40.18 38.10 64.95 59.60 54.20 54.20 54.20 54.20 54.20
3"71.68 71.68 67.98 104.55 95.90 87.20 87.20 87.20 87.20 87.20
4"107.13 107.13 101.59 119.70 109.80 99.80 99.80 99.80 99.80 99.80
6"205.59 205.59 194.96 239.20 219.45 199.50 199.50 199.50 199.50 199.50
8"323.73 323.73 307.00 - - - - - - -
10"461.57 461.57 437.71 456.60 418.90 380.50 380.50 380.50 380.50 380.50
CWA and MWD Pass-through charges (Meter Size)
Residential
3/4"11.82 9.77 4.33 3.85 3.55 2.85 2.50 2.00 1.00 1.00
1"19.69 16.28 6.91 6.15 5.65 4.55 4.00 3.20 1.60 1.60
1.5"39.44 32.61 13.04 11.60 10.65 8.55 7.50 6.00 3.00 3.00
Non-Residential & Others
3/4"11.82 9.77 4.33 3.85 3.55 2.85 2.50 2.00 1.00 1.00
1"19.69 16.28 6.91 6.15 5.65 4.55 4.00 3.20 1.60 1.60
1.5"39.44 32.61 13.04 11.60 10.65 8.55 7.50 6.00 3.00 3.00
2"63.07 52.15 22.54 20.05 18.45 14.80 13.00 10.40 5.20 5.20
3"126.14 104.30 41.53 36.95 34.05 27.35 19.20 9.60 9.60 9.60
4"197.17 162.98 70.98 63.15 58.20 46.75 41.00 16.40 16.40 16.40
6"394.17 325.92 129.82 115.50 106.45 85.50 75.00 30.00 30.00 30.00
8"630.71 521.51 374.62 - - - - - - -
10"903.58 749.61 538.52 300.30 276.75 222.30 195.00 78.00 78.00 78.00
Fire Services
All Types 30.11 30.11 28.55 25.40 23.30 21.20 21.20 21.20 21.20 21.20
Sewer Rates 39.39 36.88 33.26 32.70 30.90 26.90 23.35 20.95 20.95 20.95
Source: Otay Water District
Water and Sewer Fixed Rates
Last Ten Fiscal Years
________________________________________________________________
Otay Water District
69
Usage Rate (1)2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
Tier 1 1.49$ 1.35$ 1.12$ 1.12$ 1.08$ 1.05$ 1.01$ 1.01$ 1.01$ 1.01$
Tier 2 2.31 2.10 1.74 1.85 1.78 1.73 1.67 1.67 1.67 1.67
Tier 3 3.00 2.73 2.26 2.01 1.94 1.88 1.81 1.81 1.81 1.81
Tier 4 4.63 4.21 3.48 2.94 2.83 2.75 2.65 2.13 2.13 2.13
Tier 5 - - - - - - 2.65 2.65 2.65
Tier 1 2.29 2.08 1.72 1.85 1.78 1.73 1.67 1.78 1.78 1.78
Tier 2 2.97 2.70 2.23 2.01 1.94 1.88 1.81 - - -
Tier 3 4.57 4.15 3.43 2.94 2.83 2.75 2.65 - - -
Publicly-Owned (2)2.06 1.99 1.93 1.86 1.86 1.86 1.86
Commercial & Others (3)1.98 1.91 1.85 1.78 1.78 1.78 1.78
Government Fee (2)0.293 0.29 0.29 0.28 - - - - - -
Tier 1 2.44 2.22 1.84
Tier 2 2.50 2.27 1.88
Tier 3 2.54 2.31 1.91
Tier 1 3.32 3.02 2.50
Tier 2 3.39 3.08 2.55
Tier 3 3.45 3.14 2.60
Recycled (Commercial)1.67 1.65 1.57 1.51 1.51 1.51 1.51
Recycled (Publicly-Owned) (2)1.75 1.73 1.65 1.59 1.59 1.59 1.59
Tier 1 2.84 2.58 2.13
Tier 2 2.88 2.62 2.17
Tier 3 2.94 2.67 2.21
Energy Pumping Fee:
Per 100 cubic feet (4)0.044 0.038 0.034 0.034 0.032 0.032 0.032 0.032 0.032 0.032
Sewer Charges:
Residential Customers (5)1.67 1.56 1.47 1.41 - - - - - -
Footnotes:
(1) Effective 2009, all non-residential customers are charged based on a tiered rate system in which the water rates are
based on meter size and amount of water units consumed each month.
(2) An additional $.293 per unit is charge to governmental customers this is in lieu of tax revenues. In the past an addditional $.08
is added to the publicly-owned companies water rate.
(3) Others include landscaping, agricultural, and temporary meters. Agricultural customers under Special Agricultural
Water Program (SAWR) shall receive a $0.12 discount per hundred cubic feet (HCF).
(4) Water customers are charged an energy pumping charge based on the quantity of water used and the elevation to which
the water has been lifted to provide service. The energy pumping charge is the rate of $.038 per 100 cubic feet of water
for each 100 feet of lift above the base elevation of 450 feet. All water customers are in one of twenty-nine zones based on elevation.
(5) For residential sewer customers, effective January 1, 2008, a "Winter Average" fee structure was implemented for
calculating the monthly sewer charge. A usage fee will be charged based on the prior year's "Winter Average" water
consumption, reduced by a 15% usage discount, times a rate of $1.67
Source: Otay Water District
Water and Sewer Variable Rates
Residential:
Master Meter:
Public Agency & Commercial:
Landscape, Agricultural & Construction:
Recycled:
Last Ten Fiscal Years
70
________________________________________________________________
Comprehensive Annual Financial Report
FISCAL YEAR 2011
Annual % of
Business Type Revenues Water Sales
1. City of Chula Vista Publicly Owned 2,298,356$ 3.9%
2. State of California Publicly Owned 1,003,099 1.7%
3. Sweetwater School District Publicly Owned 668,588 1.1%
4. County of San Diego Publicly Owned 636,773 1.1%
5. Eastlake Summit Assoc Commercial (Irrigation)628,860 1.1%
6. Eastlake III Community Assoc Commercial (Irrigation)578,224 1.0%
7. Eastlake Country Club Commercial (Irrigation)412,035 0.7%
8. Cuyamaca College Publicly Owned 399,884 0.7%
9. Chula Vista School District Publicly Owned 391,737 0.7%
10. Windingwalk Master Association Commercial (Irrigation)341,281 0.6%
Total (10 Largest)7,358,837$ 12.6%
Other Customers 50,934,347$ 87.4%
Total Water Sales 58,293,184$ 100.0%
FISCAL YEAR 2004 (1)
Annual % of
Business Type Revenues Water Sales
1. City of Chula Vista Publicly Owned 1,127,011$ 2.9%
2. State of California Publicly Owned 849,140 2.2%
3. County of San Diego Publicly Owned 725,507 1.9%
4. Steele Canyon Irrigation (Potable Permanent)526,582 1.3%
5. Eastlake III Business/Irrigation (Reclaimed)419,942 1.1%
6. Singing Hills Residential/Irrigation (Potable Permanent)390,720 1.0%
7. McMillin Construction (Potable Temporary)377,591 1.0%
8. Eastlake Country Club Irrigation (Reclaimed Permanent)325,036 0.8%
9. California Bank & Trust Irrigation (Reclaimed Permanent)243,689 0.6%
10. Sweetwater School District School/Irrigation (Reclaimed Publicly Owned)224,054 0.6%
Total (10 Largest)5,209,272$ 13.3%
Other Customers 33,835,440$ 86.7%
Total Water Sales 39,044,712$ 100.0%
(1) Because the District did not begin tracking its ten largest customers until Fiscal Year 2004, data for nine years ago is not available.
Accordingly, the current fiscal year and Fiscal Year 2004 are presented.
Source: Otay Water District
Ten Largest Customers
Customer Name
Customer Name
Current Year and Nine Years Ago
________________________________________________________________
Otay Water District
71
As a Share
Fiscal Population GO Revenue Capital Per of Personal
Year Estimate Bond COPS Bonds Notes Leases Total Capita Income (1)
2011 206,500 6,803,577$ 59,715,531$ 51,180,822$ 6,010$ - 117,705,940$ 570.00 1.24%
2010 206,000 7,283,127 61,489,612 51,255,224 359,744 - 120,387,707 584.41 1.32%
2009 195,000 7,726,575 63,213,693 - 701,516 - 71,641,784 367.39 0.87%
2008 191,500 8,093,302 64,892,774 - 1,031,730 - 74,017,806 386.52 0.85%
2007 190,000 8,445,029 65,851,790 - 1,350,778 - 75,647,597 398.15 0.89%
2006 189,000 8,776,755 24,909,352 - 1,659,037 51,589 35,396,733 187.28 0.44%
2005 186,000 9,093,482 25,653,607 - 1,956,871 100,666 36,804,626 197.87 0.49%
2004 180,000 9,395,209 25,666,312 2,244,633 147,343 37,453,497 208.07 0.54%
2003 176,000 9,681,937 26,298,239 2,522,665 191,742 38,694,583 219.86 0.62%
2002 166,000 9,953,664 26,915,166 2,791,295 - 39,660,125 238.92 0.69%
(1) See the Demographics and Economic Statistics schedule on page 77 for personal income data.
Source: Otay Water District
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
$0
$100
$200
$300
$400
$500
$600
$700
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
OUTSTANDING DEBT PER CAPITA
72
________________________________________________________________
Comprehensive Annual Financial Report
Adjusted Net Revenue (4)
Fiscal Adjusted Operating Available for Debt Service Requirements Coverage
Year Revenue (1)Expense (2)Debt Service Principal Interest Total Factor (3)
2011 69,653,627$ 60,117,245$ $9,536,382 $1,795,000 $5,084,450 $6,879,450 139%
2010 65,573,058 57,084,904 8,488,154 1,745,000 2,720,258 4,465,258 190%
2009 63,739,773 57,076,567 6,663,207 1,700,000 2,342,048 4,042,048 165%
2008 63,732,275 56,420,286 7,311,989 800,000 2,567,884 3,367,884 217%
2007 69,442,301 52,413,282 17,029,019 790,000 1,513,834 2,303,834 739%
2006 58,572,428 47,520,682 11,051,746 745,000 917,790 1,662,790 665%
2005 56,597,040 43,936,109 12,660,931 650,000 869,715 1,519,715 833%
2004 57,195,289 38,980,975 18,214,314 635,000 891,796 1,526,796 1,193%
2003 53,077,164 33,787,868 19,289,296 620,000 908,416 1,528,416 1,262%
2002 51,604,999 31,904,402 19,700,597 605,000 987,467 1,592,467 1,237%
(1) Adjusted revenues exclude sewer revenues and taxes collected for Improvement District 27 and are inclusive
of capacity fees.
(2) Adjusted operating expenses exclude sewer expenses and depreciation expense.
(3) The District's bond covenants require a minimum coverage factor of 120%.
(4) Pledge debts are Certificates of Participation (COPS) and Revenue Bonds.
Source: Otay Water District
Pledged Revenue Coverage
Last Ten Fiscal Years
0%
200%
400%
600%
800%
1000%
1200%
1400%
2002 2003 2004 2005 2006 2007 2008 2009 2010
Fiscal Year
PLEDGED REVENUE COVERAGE
________________________________________________________________
Otay Water District
73
Net Bonded
Net Debt to Net Bonded
Fiscal Population Assessed Bonded Assessed Debt Per
Year Estimate Valuation Debt Valuation Capita
2011 206,500 23,519,177,848$ $6,803,577 0.03%32.95
2010 206,000 24,198,816,700 7,283,127 0.03%35.35
2009 195,000 26,752,095,692 7,726,575 0.03%39.62
2008 191,500 25,902,796,201 8,093,302 0.03%42.26
2007 190,000 22,684,693,592 8,449,025 0.04%44.47
2006 189,000 19,565,665,464 8,776,755 0.04%46.44
2005 186,000 16,423,403,701 9,093,482 0.06%48.89
2004 180,000 14,130,544,067 9,395,209 0.07%52.20
2003 176,000 12,129,664,151 9,681,937 0.08%55.01
2002 166,000 10,489,919,430 9,953,664 0.09%59.96
Source: Otay Water District
Ratios of General Bonded Debt Outstanding
Last Ten Fiscal Years
0.00%
0.01%
0.02%
0.03%
0.04%
0.05%
0.06%
0.07%
0.08%
0.09%
0.10%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
BONDED DEBT RATIOS
74
________________________________________________________________
Comprehensive Annual Financial Report
2010-11 Assessed Valuation:23,519,177,848$
Redevelopment Incremental Valuation:271,298,445
Adjusted Assessed Valuation:23,247,879,403$
Total Debt District’s Share of
OVERLAPPING TAX AND ASSESSMENT DEBT:6/30/2011 % Applicable (1)Debt 6/30/2011
Metropolitan Water District 227,670,000$ 1.300%2,959,710$
Otay Municipal Water District Improvement District No. 27 7,260,000 100.000 7,260,000
Grossmont-Cuyamaca Community College District 193,373,290 16.958 32,792,243
Southwestern Community College District 246,769,345 45.918 113,311,548
Grossmont Union High School District 419,743,431 17.502 73,463,495
Sweetwater Union High School District 338,359,415 55.304 187,123,526
Chula Vista City School District 74,835,000 63.894 47,815,075
San Ysidro School District 103,296,727 62.207 64,257,795
Other School Districts 2,460,867,466 Various 38,184,627
City of San Diego 2,240,000 1.184 26,522
Grossmont Healthcare District 222,282,076 15.453 34,349,249
City of Chula Vista Community Facilities District 226,625,000 100.226,625,000
Chula Vista City School District Community Facilities Districts 6,040,000 100.6,040,000
Sweetwater Union High School District Community Facilities Districts 183,040,363 2.523-100 169,768,690
City 1915 Act Bonds 50,523,450 37.539-100 42,921,072
California Statewide Communities Development Authority
San Diego County/ Venture Community Center Assessment District 1,097,148 100.1,097,148
TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 1,047,995,700$
Ratios to 2010-11 Assessed Valuation:
Total Overlapping Tax and Assessment Debt 4.46%
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
San Diego County General Fund Obligations 385,650,000$ 6.780%26,147,070$
San Diego County Pension Obligations 820,288,160 6.780 55,615,537
San Diego Superintendent of Schools Certificates of Participation 19,992,500 6.780 1,355,492
Otay Water District Certificates of Participation 60,095,000 100.000 60,095,000
Grossmont and Southwestern Community College District General Fund Obligations 3,075,000 16.958 & 45.918 929,795
Grossmont Union High School District Certificates of Participation 1,212,500 17.502 212,212
Sweetwater Union High School District Certificates of Participation 8,730,000 55.304 4,828,039
Chula Vista City School District Certificates of Participation 140,055,000 63.894 89,486,742
San Ysidro School District Certificates of Participation 36,540,000 62.207 22,730,438
Other School District Certificates of Participation 13,770,000 Various 3,704,813
City of Chula Vista Certificates of Participation 136,060,000 72.632 98,823,099
City of Chula Vista Pension Obligations 2,655,000 72.632 1,928,380
City of San Diego General Fund Obligations 506,155,000 1.184 5,992,875
San Miguel Consolidated Fire Protection District Certificates of Participation 6,450,000 52.705 3,399,473
TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT 375,248,965$
Less: Otay Water District Certificates of Participation (100% self-supporting)60,095,000
TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT 315,153,965$
TOTAL DIRECT DEBT 60,095,000$
TOTAL GROSS OVERLAPPING DEBT 1,363,149,665$
TOTAL NET OVERLAPPING DEBT 1,363,149,665$
GROSS COMBINED TOTAL DEBT (2)1,423,244,665$
NET COMBINED TOTAL DEBT 1,363,149,665$
(1) Percentage of overlapping agency's assessed valuation located within boundaries of the district.
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded
capital lease obligations. Qualified Zone Academy Bonds are included based on principal due at maturity
Ratios to Adjusted Assessed Valuation:
Gross Combined Direct Debt ($60,095,000)0.26%
Net Combined Direct Debt 0.00%
Gross Combined Total Debt 6.12%
Net Combined Total Debt 5.86%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/11: $0
Source: California Municipal Statistics, Inc. and Otay Water District
Computation of Direct and Overlapping Bonded Debt
June 30, 2011
________________________________________________________________
Otay Water District
75
2011 2002
% of Total % of Total
County County
Employer Employees Rank Employment Employees Rank Employment
U.S. Department of Defense 136,664 1 9.74%-0.00%
Federal Government 46,300 2 3.30%39,900 1 2.90%
State of California 45,500 3 3.24%37,000 2 2.69%
UC San Diego 27,393 4 1.95%18,936 3 1.38%
County of San Diego 15,109 5 1.08%17,951 4 1.30%
Sharp HealthCare 14,969 6 1.07%11,642 5 0.85%
Scripps Health 13,830 7 0.99%8,237 6 0.60%
San Diego Unified School District 13,730 8 0.98%-0.00%
Qualcomm Inc.10,509 9 0.75%5,100 -0.37%
City of San Diego 10,211 10 0.73%-0.00%
Pacific Bell -7,178 7 0.52%
Kaiser Permanente 8,200 -0.58%6,892 8 0.50%
US Postal Service 5,795 -0.41%6,619 9 0.48%
San Diego Community College District 4,310 -0.31%5,878 10 0.43%
Total 352,520 25.13%165,333 12.02%
Source: California Labor Market Info, The Daily Transcript, and San Diego Business Journal
Principal Employers
Current Year and Nine Years Ago
76
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Comprehensive Annual Financial Report
Personal Per Capita
Income Personal Unemployment
Year Population (in 000'S)Income Rate
2011 (1)3,272,200 149,900,000$ 45,810$ 10.40%
2010 3,095,313 137,525,000 44,430 10.50%
2009 3,173,407 134,696,000 42,445 10.20%
2008 3,001,072 143,783,000 45,728 6.00%
2007 2,959,734 131,499,657 44,830 4.60%
2006 2,948,362 126,193,721 42,801 4.20%
2005 2,941,658 118,792,540 40,383 4.50%
2004 2,938,822 113,003,044 38,452 5.10%
2003 2,932,802 104,630,453 35,676 5.70%
2002 2,908,091 100,655,726 34,612 5.30%
(1) Forecast
Source: Census 2010,California Department of Finance; LAEDC-Los Angeles Economic Development Corp.
The Kyser Center for Economic Research Employment Development Department; Labor Market Info
Demographic and Economic Statistics
Last Ten Fiscal Years
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
UNEMPLOYMENT RATE
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Otay Water District
77
Department 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
General Manager 6 6 6 6 6 6 6 4 4 3
Finance 35 38 37 36 35 34 34 33 32 32
Operations/Maintenance 66 68 70 71 71 72 71 70 70 71
Engineering 21 21 23 27 31 15 13 33 31 24
Administrative Services 19 20 20 20 19 19 20 21 24 16
IT and Strategic Planning 12 13 13 13 13 12 11 10 10 6
Development Services (1)- - - - 17 17 - - -
Total 159 166 169 173 175 175 172 171 171 152
(1) Development Services was broken out from the Engineering and Planning Department in FY 2005
and then re-combined in FY 2007.
Source : Otay Water District
Number of Employees by Function
Last Ten Fiscal Years
125
130
135
140
145
150
155
160
165
170
175
180
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
TOTAL EMPLOYEES
78
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Comprehensive Annual Financial Report
Meter Size 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
3/4" & 5/8"44,065 43,815 43,641 43,551 43,544 43,070 42,420 41,069 39,138 37,178
1"1,881 1,815 1,804 1,747 1,618 1,514 1,364 1,220 1,132 1,110
1-1/2"1,317 1,317 1,309 1,275 1,242 1,199 1,147 1,037 918 889
2"1,278 1,292 1,299 1,283 1,262 1,242 1,199 1,168 1,140 1,124
3"75 75 75 76 76 69 67 66 61 57
4"193 184 202 258 275 277 289 329 308 526
6"21 22 21 19 24 27 27 27 27 40
Others 9 8 9 10 7 11 12 15 26 35
Total 48,839 48,528 48,360 48,219 48,048 47,409 46,525 44,931 42,750 40,959
% Change 0.6%0.3%0.3%0.4%1.3%1.9%3.5%5.1%4.4%6.0%
Increase 311 168 141 171 639 884 1,594 2,181 1,791 2,329
Source : Otay Water District
Active Meters by Size
Last Ten Fiscal Years
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Fiscal Year
ACTIVE METERS
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Otay Water District
79
2011 2010 2009 2008 2007 2006 2005 2004 2003 2002
Water System
Service Area (Square Miles)125.5 125.5 125.5 125.5 125.5 125.5 125.5 125.5 125.5 125.5
Miles of Potable Water Main 709 709 736 722 680 663 623 609 594 576
Number of Operational Storage
Reservoirs in Service 40 40 38 36 37 37 36 37 37 38
Water Storage Capacity
(in Acre-Feet)694.74 663.8 655.5 605.5 601.7 601.7 582.4 585.4 582.3 587.5
Total Water Connections
(No. of Meters in Service) 47,341 48,074 48,522 48,376 47,615 47,409 46,525 44,931 42,750 40,959
Number of Pump Stations 24 23 24 24 24 22 21 21 21 21
Number of Potable Water
Valves 19,522 19,522 19,192 19,131 18,721 18,042 17,696 16,204 15,830 15,073
Sewer System
Miles of Sewer Lines 88.0 88.0 90.0 88.0 86.2 86.2 85.9 85.4 84.8 83.5
Number of Treatment Plants 1 1 1 1 1 1 1 1 1 1
Treatment Plant Capacity
(Million Gallons per Day)1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3
Total Flows for Fiscal Year
2011 (in Million Gallons)481 474 483 503 514 528 506 479 463 455
Recycled System
Miles of Recycled Water Mains 96.0 96.0 97.0 93.0 83.0 77.6 76.4 70.7 60.6 49.2
Number of Pumping Facilities 3 3 3 3 3 2 2 2 2 1
Number of Acre-Feet Storage 134.2 134.1 133.2 135.0 134.1 97.3 97.3 97.3 97.3 86.9
Number of Recycled Water
Valves 1,380 1,380 1,338 1,314 1,245 1,189 1,155 1,097 948 730
Source : Otay Water District
Operating and Capital Indicators
Last Ten Fiscal Years
0
200
400
600
800
2002 2003 2004 2005 2006 2007 2008 2010 2011
Mi
l
e
s
Fiscal Year
MILES OF POTABLE WATER MAINS
80
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Comprehensive Annual Financial Report