HomeMy WebLinkAboutFY 2013 Comprehensive Annual Financial Report
Otay Water District
Comprehensive Annual Financial Report
for the fiscal year ended June 30, 2013
BOARD OF DIRECTORS
Jose Lopez, Division 4 President
Mitchell Thompson, Division 2 Vice President
David Gonzalez, Jr., Division 1 Treasurer
Gary Croucher, Division 3
Mark Robak, Division 5
DISTRICT FINANCIAL MANAGEMENT
Mark Watton General Manager
German Alvarez Assistant General Manager
Joseph R. Beachem Chief Financial Officer
PREPARED BY:
Finance Department
Table of Contents
Introductory Section
Letter of Transmittal…………………………………………………………………………………………………………………… 1
Organization Chart…………………………………………………………………………………………...……………………….. 9
List of Principal Officials……………………………………………………………………………………………………………… 10
GFOA Certificate of Achievement………………………………………………………………………………………………. 11
Financial Section
Independent Auditors’ Report…………………………………………………………………………………………….…….. 12
Management’s Discussion & Analysis…………………………………………………...……………………………… 15
Basic Financial Statements:
Statements of Net Position..……………………………………………………………………………………………….…. 24
Statements of Revenues, Expenses and Changes in Net Position…………..………………. 26
Statements of Cash Flows……………………………………………………………….……………………………………… 27
Notes to Financial Statements……………………………………………………………………………………………... 29
Required Supplementary Information:
Schedule of Funding Progress for PERS………………………………………………...…………………………… 65
Schedule of Funding Progress for DPHP…………………………………………….....…………………………… 65
Statistical Section
Net Position by Component………………………………………………………………………………………………….. 67
Changes in Net Position………………………………………………………………..…………………………………………. 68
Operating Revenues by Source…………………………………………………………………………………………….. 69
Operating Expenses by Function………………………………………………………..………………………………… 70
Non-Operating Revenues by Source…………………………………………………………………………………… 71
Non-Operating Expenses by Function……………………………………………………………………………… 72
Assessed Valuation of Taxable Property within the District………………………………………… 73
Water Purchases, Production, and Sales……………………………………………...………………………….… 74
Meter Sales by Type…………………………………………………………………….……………………………………………. 75
Number of Customers by Service Type……………………………………………………………………………….. 76
Property Tax Levies and Collections…………………………………………………………………………………….. 77
Water and Sewer Fixed Rates ……….………………………………………………………………………………………. 78
Water and Sewer Variable Rates…….…………………………………………………………………………………….. 79
Ten Largest Customers…………………………………………………………………………………………………………….. 80
Ratios of Outstanding Debt by Type…………………………………………………….……………………………….. 81
Pledged Revenue Coverage………………………………………………………………………………………………….... 82
Ratios of General Bonded Debt Outstanding…………………………………………………………………...… 83
Computation of Direct and Overlapping Bonded Debt………………………………………………… 84
Principal Employers…………………………..………………………………………......................................................... 85
Demographic and Economic Statistics……………………………………………………………………………….. 86
Number of Employees by Function………………………………………………………………………………………. 87
Active Meters by Size………………………………………………………………..………………………………………………. 88
Operating and Capital Indicators…………………………………………………………………………………………... 89
October 22, 2013
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, 2013.
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,
2013, 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. In the independent auditors’ opinion, the following
District’s financial statements present fairly, in all material respects, the respective financial position
of the Otay Water District as of June 30, 2013 and are presented in conformity with GAAP. The
Independent Auditors’ Report is presented as the first component of the financial section of this
report.
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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 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 the Assistant General
Manager and the District management, oversee day-to-day operations. The Assistant General
Manager oversees the five departments of Administrative Services, Finance, Information
Technology and Strategic Planning, Water Operations, and Engineering. These and other lines of
reporting are shown on the organization chart on page 9.
Over the last 57 years, the District has grown from a handful of customers and two employees to
become an organization operating a network of more than 912 miles of pipelines, 44 operational
reservoirs, a reclaimed water facility, and one of the largest recycled water distribution networks in
the State of California. 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 approxi-
mately 48,911 potable and
709 recycled customers
within 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), or Imperial Irrigation District. 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
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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 constructed a 5.1 mile, 36-inch
diameter pipeline. Drinking water delivered by this new pipeline is stored in two 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 4,657 customer
accounts within portions of the communities of La
Mesa, Rancho San Diego, El Cajon, Jamul, and
Spring Valley. Wastewater collected is conveyed to
the District’s Ralph W. Chapman Water Recycling
Facility (RWCWRF), which is capable of recycling
wastewater at a rate of 1.3 million gallons per day.
The District also has the capability to purchase 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
slowdown and ongoing home foreclosures; however, this slowdown appears to have leveled off as
the District’s Public Services Division approved on average 24 permits per month, and sold 310
water meters in fiscal 2012-2013. The coming years will continue to pose challenges for those in
California’s water community. The region continues to face challenges and uncertainty due to the
environment constraints surrounding the Sacramento-San Joaquin Bay Delta, the source of 30% of
Southern California’s water supply. However, these constraints are being actively addressed by the
State Water Project and the Bay Delta Conservation Plan (BDCP). The BDCP is a part of California’s
overall water management portfolio. It is being developed as a 50-year habitat conservation plan
with the goals of restoring the Sacramento-San Joaquin delta ecosystem and securing California
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Balanced Scorecard
water supplies. In addition, weather and rainfall always bring a level of uncertainty to the delivery of
water to customers in the arid southwestern states. The combination of these factors add to the
cost of providing a stable supply of water as water providers look to new and more costly sources
of water.
Growth in San Diego County has slowed over the last four years, but is now expected to gradually
improve. The population within the District’s service area continues to increase, albeit at a reduced
rate. As of July 2013, it is estimated that the District served 211,000 residents. The San Diego
Association of Governments (SANDAG), the regional planning agency, has estimated the District’s
approximate growth will be 1.8% per year for the next decade. The District projects an ultimate
customer population of 285,000 residents.
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 that
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 metrics are designed to ensure the day-to-day
operations of the utility are meeting agreed-upon expectations. Both performance metrics and
objectives are revised from the prior year, 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 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.
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BUDGETING CONTROLS
The District views the budget as an essential tool for proper financial management and is adopted
prior to the start of each fiscal year. The budget is developed by combining the District’s strategic
objectives and measures with input from the various departments of the organization. By
incorporating these strategic measures and objectives the budget becomes a direct reflection of
the District’s strategic plan. 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, strategic objectives, and other useful
information that allows the users to gain a general understanding of the District’s financial status
and future. To monitor the District’s performance monthly comparison reports of budget to actual
are prepared and distributed to all department heads, with top level information provided to the
Board at the monthly board meetings.
BUDGET SUMMARY
The Otay Water District’s operating expenditures consist of three major sectors: potable water,
recycled water, and sewer. The total budget is $86,101,100 for Fiscal Year 2014. Revenues from
potable and recycled water are projected to be $75,373,600, about $5,916,800 (7.8%) more than the
Fiscal Year 2013 budget. Water sales volumes are expected to increase by less than 1% versus FY
2013. This slight increase is the net result of the economic recovery and conservation efforts. In
addition, rate increases are essential to keep pace with rising wholesale water costs. Sewer
revenues are projected to be $2,701,600, about $146,400 more than the Fiscal Year 2013. This
increase, from higher sewer rates, is primarily to cover $18.6 million of capital projects over the next
six years. The remaining budgeted revenues of $7.7 million come from various special fees,
assessments, and miscellaneous income.
The 2013-14 Capital Improvement Program
(CIP) budget consists of 63 projects and a
budget of $13.8 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 $4.2 million
compared to last year’s projection. The
decrease is due to the completion of some
large projects and the deferment of several
projects to match the timing of land
development.
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THE FUTURE
The coming years will continue to pose challenges for those in California’s water community. For
instance, the challenges facing the Sacramento-San Joaquin Bay Delta, the source of 30 percent of
Southern California’s water supply, are being addressed by the BDCP; however, the impact to end
users has not been fully determined at this time. The District, as a member of the CWA, is well
positioned for water coming from the Colorado River thanks to the Quantification Settlement
Agreement (QSA). As the cost of water has increased to the retail customer, sales have decreased.
As one would expect, water sales reductions have impacted revenues and will continue to affect
the District finances. The sales decreases have moderated as the District is seeing slight increases
in water sales. Our success as an organization is significantly enhanced by the practices and
policies put in place by the Board of Directors to ensure the strength and stability of the District.
We are fully confident that with these policies and practices, supported by dedicated and talented
staff, we 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 and 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
revenues are earned and expenses are incurred.
INTERNAL CONTROLS
Otay Water District operates within a system of internal controls established and periodically
reviewed by management. This provides reasonable 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 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.
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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, 2012. This was the ninth
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.
In addition to the Certificate of Achievement for Excellence in Financial Reporting, Otay Water
District has received the following awards:
The Government Finance Officers Association of the United States and Canada (GFOA)
presented a Distinguished Budget Presentation Award to Otay Water District, California for
its annual budget for the fiscal year beginning July 1, 2012. In order to receive this award, a
governmental unit must publish a budget document that meets program criteria as a policy
document, as an operations guide, as a financial plan, and as a communications device.
In addition, the District received two special recognitions for the FY 2012-2013 budget:
1) Outstanding as a Policy Document, and 2) Outstanding as a Communication Device.
These special recognitions are rarely given to agencies. In fiscal year 2012, only 10
agencies received the special recognition for a Communications Device and 10 agencies
received the special recognition for a Policy Document out of 1,376 applicants.
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water District
the Certificate of Award for Excellence in Operating Budgeting for Fiscal Year 2012-2013.
The California Society of Municipal Finance Officers (CSMFO) presented Otay Water District
the Certificate of Award for Excellence in Capital Budgeting for Fiscal Year 2012-2013.
Otay Water District has been awarded the 2013 Tyler Public Sector Excellence Award. This
award recognized the achievement of a high level of excellence in leadership, innovation,
and excellence in the use of Tyler’s ERP system for business solutions.
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Organization Chart
GENERAL MANAGER
Assistant General Manager
Administrative
Services Finance Water
Operations Engineering
Human
Resources
Purchasing and
Facilities
Safety and Risk
Administration
Water
Conservation
Controller
and
Budgetary
Services
Treasury and
Accounting
Services
Customer
Service
IT Applications
IT Operations
GIS
Water System
Operations
Utility
Maintenance/
Construction
Planning Design
Environmental
Water Resources
Public Services
Survey
Inspection
Construction
Citizens and
Customers
Information Technology
and Strategic Planning
BOARD OF DIRECTORS
Meter
Reading
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List of Principal Officials
Mission Statement
To provide safe, reliable water, recycled
water and wastewater services to our
community in an innovative, cost
efficient, water-wise and environmentally
responsible manner.
Mitchell Thompson
Vice President
Division 2
Gary Croucher
Division 3
David Gonzalez, Jr.
Treasurer
Division 1
Jose Lopez
President
Division 4
Mark Robak
Division 5
Board of Directors
The Otay Water District is a revenue-
neutral public agency established in
accordance with the California Water
Code. This not-for-profit status means
Otay has no private shareholders, pays
no dividends and therefore does not
report to, nor answer to the California
Public Utilities Commission. We do,
however, answer to the public we serve
through a five-member Board of
Directors. Each Director is elected by
voters within their respective division
boundaries to represent the public's
interest with regard to rates for service,
taxes, policies, ordinances and other
matters related to the management and
operation of the Otay Water District.
Directors serve four-year, alternating
terms on the Board.
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CERTIFICATE OF ACHIEVEMENT
FOR EXCELLENCE IN FINANCIAL REPORTING
The Government Finance Officers Association (GFOA) awarded a Certificate of
Achievement for Excellence in Financial Reporting to the Otay Water District for its
CAFR for the fiscal year ended June 30, 2012. This is the ninth year that the District
has achieved this prestigious award. In order to be awarded a Certificate of
Achievement, the District had to publish an easily readable and comprehensive
report. This report must satisfy both Generally Accepted Accounting Principles
(GAAP) and applicable legal requirements.
This award is valid for a period of one year only. We believe our current CAFR
continues to meet the Certificate of Achievement Program’s requirements, and will
be submitting it to GFOA to determine its eligibility for another certificate.
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2965 Roosevelt Street, Carlsbad, CA 92008-2389 • Tel: 760.729.2343 • Fax: 760.729.2234
Offices located in Orange and San Diego Counties
INDEPENDENT AUDITORS' REPORT
Board of Directors
Otay Water District
Spring Valley, California
Report on the Financial Statements
We have audited the accompanying financial statements of the Otay Water District as of and for the years ended
June 30, 2013 and 2012, and the related notes to the financial statements, which collectively comprise the
District’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America; this includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion 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 standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General
of the United States and the State Controller’s Minimum Audit Requirements for California Special Districts.
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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditors consider internal control relevant to the District’s preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we
express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
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Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the Otay Water District as of June 30, 2013 and 2012, and the respective changes in
financial position and cash flows thereof for the years then ended in accordance with accounting principles
generally accepted in the United States of America, as well as the accounting systems prescribed by the
California State Controller’s Office and California regulations governing Special Districts.
Emphasis of Matters
As discussed in Note 1 to the basic financial statements, the District incorporated deferred outflows of resources
and deferred inflows of resources into the definitions of the required components of the residual measure of net
position due to the adoption of Governmental Accounting Standards Board’s Statement No. 63, “Financial
Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position”. The adoption
of this standard also provides a new statement of net position format to report all assets, deferred outflows of
resources, liabilities, deferred inflows of resources, and net position. Our opinion is not modified with respect
to this matter.
As discussed in Note 1 to the basic financial statements, the District has changed its method for accounting and
reporting certain items previously reported as assets or liabilities during fiscal years 2012 and 2013 due to the
adoption of Governmental Accounting Standards Board’s Statement No. 65, “Items Previously Reported as
Assets and Liabilities”. The adoption of this standard required retrospective application resulting in a
$2,252,393 and $2,406,704 reduction of previously reported net position as of July 1, 2012 and 2011,
respectively. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
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.
Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively
comprise the District’s basic financial statements. The introductory section and statistical section are presented
for purposes of additional analysis and are not required part of the basic financial statements.
The introductory and statistical sections 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.
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Other Matters
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 22,
2013, on our consideration of the District’s internal control over financial reporting and on our tests of
its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is 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
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the District’s internal
control over financial reporting and compliance.
October 22, 2013
Carlsbad, California
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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, 2013. 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 $448.2 million (net
position). Of this amount, $67.1 million (unrestricted net position) may be used to meet the District’s ongoing
obligations to citizens and creditors.
Total assets decreased by $8.4 million or 1.42% during Fiscal Year 2013, to $582.3 million, due primarily to
depreciation and the write-off of CIP projects that were no longer viable as a part of the District’s long range
plans for growth and improvements to infrastructure. Other significant factors were the annual payment of
long-term debt, implementation of GASB 65 and a reduction in grant funds received.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the District’s basic financial
statements, which are comprised of the following: 1) Statement of Net Position, 2) Statement of
Revenues, Expenses and Changes in Net Position, 3) Statement of Cash Flows, and 4) Notes to the
Financial Statements. This report also contains other supplementary information in addition to the basic
financial statements.
The Statement of Net Position presents information on all of the District’s assets, deferred outflows of
resources, liabilities and deferred inflows of resources, with the difference reported as net position. Over
time, increases or decreases in net positions 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 Position presents information showing how
the District’s net position changed during the most recent fiscal year. All changes in net positions are
reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of
related cash flows. Thus, revenues and expenses are reported in this statement for some items that will
only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).
The Statement of Cash Flows presents information on cash receipts and payments for the fiscal year.
The Notes to the Financial Statements provide additional information that is essential to a full
understanding of the data supplied in each of the specific financial statements listed above.
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Management’s Discussion and Analysis
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the District’s progress in funding its obligation to provide
pension benefits to its employees.
Financial Analysis
As noted, net position may serve over time as a useful indicator of an entity’s financial position. In the
case of the District, assets and deferred outflow of resources exceeded liabilities and deferred inflows of
resources by $448.2 million at the close of the most recent fiscal year.
By far the largest portion of the District’s net position, $376.5 million (84%), 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 effectively as a resource, it
should be noted that the resources needed to repay the debt must be provided from other sources, since
the capital assets themselves cannot be used to liquidate these liabilities.
Statements of Net Position
(In Millions of Dollars)
2013 2012 2011
Assets
Current and Other Assets $ 106.3 $ 109.9 $ 122.5
Capital Assets 476.0 480.8 474.4
Total Assets 582.3 590.7 596.9
Deferred Outflows of Resources
Deferred Amount on Refunding 0.4 0.0 0.0
Total Deferred Outflows of Resources 0.4 0.0 0.0
Liabilities
Long-Term Debt Outstanding 109.0 112.0 115.3
Other Liabilities 25.5 24.6 24.4
Total Liabilities 134.5 136.6 139.7
Net Position
Net Investment in Capital Assets 376.5 381.7 377.7
Restricted for Debt Service 4.6 4.7 4.9
Unrestricted 67.1 67.7 74.6
Total Net Position $ 448.2 $ 454.1 $ 457.2
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Management’s Discussion and Analysis
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 Position is indicative of the reduction in new
development projects within the District. This reduction is a result of the ongoing national housing slump
and slow recovery from financial crisis.
In FY-2013 the District continued its use of the $51.2 million of proceeds from the issuance of its 2010 Water
Revenue Bonds program (See Note 4 in the Notes to Financial Statements) for its CIP program (See Note
3 in the Notes to Financial Statements), as seen by the decrease in Current and Other Assets of $3.6
million, which was partially offset by a corresponding increase in Capital Assets of $11.6 million before
accumulated depreciation. The District also saw a decrease in Long-Term Debt of $3.0 million due to the
annual payments of long-term debt and the advance refunding of its 2004 Certificates of Participation.
In response to the 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, an analysis of several Construction-
in-Progress projects such as the Otay Mesa Desalination and Disinfection System, Rancho Del Rey
Groundwater Well Development and San Miguel Habitat Management/Mitigation Area and determined
that some charges do not qualify as capitalizable cost. This resulted in FY-2012 expenses of $1.3 million
and FY-2013 expenses of $1.6 million.
For the entire financial reporting period, Fiscal Years 2013 and 2012, Total Net Position decreased
approximately $5.9 million for FY-2013, to $448.2 million, as compared to FY-2012 when Net Position
decreased by $3.1 million. At the end of FY-2013 the District is able to report positive balances in all
categories of net position. This situation also held true for the prior two fiscal years.
17
Management’s Discussion and Analysis
Statements of Revenues, Expenses, and Changes in Net Position
(In Millions of Dollars)
2013 2012 2011
Water Sales $ 72.2 $ 63.8 $ 58.3
Wastewater Revenue 2.6 2.4 2.4
Connection and Other Fees 2.1 2.2 2.5
Non-operating Revenues 8.6 9.1 8.8
Total Revenues 85.5 77.5 72.0
Depreciation Expense 16.5 15.2 13.9
Other Operating Expense 71.7 66.5 63.4
Non-operating Expense 6.0 5.7 4.1
Total Expenses 94.2 87.4 81.4
Loss Before Capital
Contributions (8.7) (9.9) (9.4)
Capital Contributions 2.8 6.8 7.9
Change in Net Position
Prior Period Adjustment
(5.9) (3.1) (1.5)
(2.6)
Beginning Net Position 454.1 457.2 461.3
Ending Net Position $ 448.2 $ 454.1 $ 457.2
Water Sales increased by $5.5 million in FY-2012 and $8.4 million in FY-2013, mainly due to rate increases
in both years and an increase in units sold in FY13 due to drier weather and warmer temperatures. The
slowdown in District growth, as a result of the economic crisis, appears to have leveled off as the annual
decreases in Connection and Other Fees eased from $0.3 million in FY-2012 to $0.1 million in FY-2013.
Other Operating Expense 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 the Los Angeles Metropolitan
Water District of 7.5%, and 9.1% from San Diego County Water Authority, brought on by the high cost of
supply programs as well as higher energy and operating costs.
The slowdown in the economy appears to have leveled off. However, 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 $935,000 in FY-2012 and
$184,000 in FY-2013.
18
Management’s Discussion and Analysis
Non-operating Revenues
Non-operating Revenues by Major Source
(In Millions of Dollars)
2013 2012 2011
Taxes and Assessments $ 3.5 $ 3.5 $ 3.9
Rents and Leases 1.3 1.2 1.2
Other Non-operating Revenue 3.8 4.4 3.7
Total Non-operating Revenues $ 8.6 $ 9.1 $ 8.8
The District’s non-operating revenues increased by $0.3 million in FY-2012 and decreased by $0.5 million
in FY-2013. The decrease in FY-2013 was primarily a result of decreased miscellaneous and investment
income.
Prior Period Adjustment
In March 2012 the Governmental Accounting Standards Board (GASB) issued statement No. 65,
“Items Previously Reported as Assets and Liabilities”, effective for periods beginning after December 15,
2012. The District implemented this standard in fiscal year 2013. The result of the implementation of this
standard was to decrease the net position at July 1, 2012 and July 1, 2011 by $2.2 million and $2.4 million,
respectively, which is the amount of unamortized debt issuance costs at July 1, 2012 and July 1, 2011.
19
Management’s Discussion and Analysis
Capital Assets and Debt Administration
The District’s capital assets (net of accumulated depreciation) as of June 30, 2013, totaled $476 million.
Included in this amount is land. The District’s capital assets decreased by 1.0% for FY-2013 and
increased by 1.4% in FY-2012.
Capital Assets
(In Millions of Dollars)
2013 2012 2011
Land $ 13.7 $ 13.7 $ 13.6
Construction in Progress 17.1 17.5 17.9
Water System 458.8 452.1 441.9
Recycled Water System 108.9 108.0 98.3
Sewer System 41.2 37.8 37.7
Field Equipment 8.9 8.6 9.8
Buildings 18.8 18.6 18.5
Transportation Equipment 3.5 3.2 3.2
Communication Equipment 2.6 2.5 2.4
Office Equipment 17.3 17.2 17.3
690.8 679.2 660.6
Less Accumulated
Depreciation (214.8) (198.4) (186.2)
Net Capital Assets $ 476.0 $ 480.8 $ 474.4
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.
At June 30, 2013, the District had $109 million in outstanding debt (net of $3.5 million of maturities
occurring in FY-2014), which consisted of the following:
General Obligation Bonds $ 5.8
Certificates of Participation 46.5
Revenue Bonds 56.7
Total Long-Term Debt $ 109.0
20
Management’s Discussion and Analysis
In June 2013, the District issued $7.7 million of 2013 Water Revenue Refunding Bonds for an advance
refunding of its 2004 Certificates of Participation, which will be called on September 1, 2014. Excluding
costs of issuance the District received $8.5 million in proceeds, including a $1.0 million premium, to fund
the $8.1 million of outstanding principal and $.4 million of remaining interest payments. In accordance
with GASB Nos. 23 and 65, the remaining interest payments of $.4 million are reflected as a deferred
outflow of resources on the Statement of Net Position.
Additional information on the District’s long-term debt can be found in Note 4 of the Notes to Financial
Statements.
Fiscal Year 2013-2014 Budget
Economic Factors
Growth in the San Diego area has declined over the last 4 years, but is now slowly improving. This
modest shift is also being reflected in the demand for housing. Although San Diego received less than
normal rainfall in Fiscal Year 2013, the District is expecting that San Diego’s rainfall will return to its
average pattern and volume in the coming years. Water sales volumes are expected to increase slightly
as the economy is slowly improving, but will be partially offset by customers’ efforts to conserve water in
a period of rising water costs. The coming years will continue to pose challenges for those in California’s
water community. It is uncertain if the challenges facing the Sacramento-San Joaquin Bay Delta, the
source of 30% of Southern California’s water supply, will be addressed. In addition, weather and rainfall
always bring a level of uncertainty to the delivery of water to customers in the arid southwestern states.
The combination of these factors add to the cost of providing a stable supply of water as water providers
look to new and more costly sources of water.
The District currently provides water service to about 74% of its projected ultimate population, serving
approximately 211,000 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 46 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.
21
Management’s Discussion and Analysis
Financial
The District is projected to deliver approximately 28,985 acre-feet of potable water to 49,150 potable
customer accounts during Fiscal Year 2013-2014. Management feels that these projections are realistic
after accounting for low growth, supply changes, and a focus on conservation. Current economic
conditions throughout America have created price elasticity uncertainty for business and economic
projections in the current fiscal year. The nationwide housing mortgage crisis has leveled off, but
continues to result in foreclosures within the District. Additionally, the crisis in the banking and financial
industry has had a ripple effect resulting in continued levels of high unemployment. 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 various challenges, people’s
need for water remains an underlying constant. Staff continues working diligently on developing new
water supplies as they work through the financial impacts of conservation and the modest economic
turnaround.
Management is unaware of any other conditions that could have a significant impact on the District’s
current financial position, net position, 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.
22
2013
2012
(As Restated)
ASSETS
Current Assets:
Cash and cash equivalents (Notes 1 and 2)33,958,281$ 31,075,455$
Restricted cash and cash equivalents (Notes 1 and 2)4,087,042 4,057,726
Investments (Note 2)31,134,182 37,069,853
Restricted investments (Notes 1 and 2)13,545,284 16,124,042
Accounts receivable, net 11,856,029 10,575,970
Accrued interest receivable 53,950 106,375
Taxes and availability charges receivable, net 431,159 481,955
Restricted taxes and availability charges receivable, net 41,657 57,313
Inventories 800,085 789,769
Prepaid expenses and other current assets 1,072,706 1,226,703
Total Current Assets 96,980,375 101,565,161
Non-current Assets:
Net OPEB asset (Note 7)9,345,437 8,321,902
Capital Assets (Note 3):
Land 13,714,963 13,703,463
Construction in progress 17,110,048 17,452,274
Capital assets, net of depreciation 445,203,648 449,674,352
Total capital assets, net of depreciaton 476,028,659 480,830,089
Total Non-current Assets 485,374,096 489,151,991
Total Assets 582,354,471 590,717,152
DEFERRED OUTFLOWS OF RESOURCES
Deferred amount on refunding 390,591 -
Total Deferred Outflows of Resources 390,591 -
See accompanying independent auditors' report and notes to financial statements.
Statements of Net Position
June 30, 2013 and 2012
24
2013
2012
(As Restated)
LIABILITIES
Current Liabilities:
Current maturities of long-term debt (Note 4)3,470,000 3,320,000
Accounts payable 11,733,543 10,478,366
Accrued payroll liabilities 2,755,421 2,591,272
Other accrued liabilities 3,487,430 3,932,442
Customer deposits 1,756,983 1,863,992
Accrued interest 1,518,651 1,639,681
Liabilities payable from restricted assets:
Restricted accrued interest 76,154 81,354
Total Current Liabilities 24,798,182 23,907,107
Non-current Liabilities:
Long-term debt (Note 4):
General obligation bonds 5,849,918 6,401,271
Certificates of participation 46,465,525 56,023,740
Revenue bonds 56,678,987 49,521,421
Other non-current liabilities 718,543 721,626
Total Non-current Liabilities 109,712,973 112,668,058
Total Liabilities 134,511,155 136,575,165
NET POSITION
Net investment in capital assets 376,549,168 381,725,015
Restricted for debt service 4,612,890 4,715,904
Unrestricted 67,071,849 67,701,068
Total Net Position 448,233,907$ 454,141,987$
See accompanying independent auditors' report and notes to financial statements.
June 30, 2013 and 2012 - Continued
Statements of Net Position
25
Statements of Revenues, Expenses and Changes in Net Position
2013
2012
(As Restated)
OPERATING REVENUES
Water sales 72,187,081$ 63,830,272$
Wastewater revenue 2,625,087 2,400,313
Connection and other fees 2,069,220 2,169,764
Total Operating Revenues 76,881,388 68,400,349
OPERATING EXPENSES
Cost of water sales 50,600,551 46,106,403
Wastewater 1,638,354 2,547,929
Administrative and general 19,428,008 17,926,430
Depreciation 16,545,622 15,214,704
Total Operating Expenses 88,212,535 81,795,466
Operating Income (Loss)(11,331,147) (13,395,117)
NON-OPERATING REVENUES (EXPENSES)
Investment income 22,155 436,596
Taxes and assessments 3,545,595 3,502,155
Availability charges 707,881 696,863
Gain (loss) on sale of capital assets (546,799) (278,540)
Miscellaneous revenues 4,934,714 4,788,711
Donations (120,684)(121,617)
Interest expense (3,977,538) (3,899,927)
Miscellaneous expenses (1,917,389) (1,612,914)
Total Non-operating Revenues (Expenses)2,647,935 3,511,327
Income (Loss) Before Capital Contributions (8,683,212) (9,883,790)
Capital Contributions 2,775,132 6,825,897
Changes in Net Position (5,908,080) (3,057,893)
Total Net Position, Beginning, As Originally Stated 454,141,987 459,606,584
Prior Period Adjustment (Note 12)- (2,406,704)
Total Net Position, Beginning, As Restated (Note 12)454,141,987 457,199,880
Total Net Position, Ending 448,233,907$ 454,141,987$
See accompanying independent auditors' report and notes to financial statements.
For the Years Ended June 30, 2013 and 2012
26
2013 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 73,425,100$ 64,648,558$
Receipts from connections and other fees 2,069,220 2,169,764
Other receipts 3,657,800 3,566,651
Payments to suppliers (51,083,778) (46,620,831)
Payments to employees (20,491,758) (20,521,468)
Other payments (2,038,073) (1,724,744)
Net Cash Provided (Used) by Operating Activities 5,538,511 1,517,930
CASH FLOWS FROM NON-CAPITAL AND RELATED FINANCING ACTIVITIES
Receipts from taxes and assessments 3,612,045 3,493,423
Receipts from property rents and leases 1,276,914 1,222,060
Net Cash Provided (Used) by Non-capital
and Related Financing Activities 4,888,959 4,715,483
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Proceeds from capital contributions 1,515,238 3,363,090
Proceeds from sale of capital assets - 28,128
Proceeds from debt related taxes and assessments 707,881 696,863
Net proceeds from issuance of long-term debt 8,329,385 -
Retirement of long-term debt (8,100,000) -
Principal payments on long-term debt (3,320,000) (3,146,010)
Interest payments and fees (5,201,467) (5,199,488)
Acquisition and construction of capital assets (10,035,376) (17,276,246)
Net Cash Provided (Used) by Capital
and Related Financing Activities (16,104,339) (21,533,663)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received on investments 395,773 580,872
Proceeds from sale and maturities of investments 68,832,000 108,410,000
Purchase of investments (60,638,762) (112,360,000)
Net Cash Provided (Used) by Investing Activities 8,589,011 (3,369,128)
Net Increase (Decrease) in
Cash and cash equivalents 2,912,142 (18,669,378)
Cash and cash equivalents, Beginning 35,133,181 53,802,559
Cash and cash equivalents, Ending 38,045,323$ 35,133,181$
See accompanying independent auditors' report and notes to financial statements.
Statements of Cash Flows
For the Years Ended June 30, 2013 and 2012
27
2013 2012
Reconciliation of operating income (loss) to net cash flows provided
(used) by operating activities:
Operating income (loss)(11,331,147)$ (13,395,117)$
Adjustments to reconcile operating income
to net cash provided (used) by operating activities:
Depreciation 16,545,622 15,214,704
Miscellaneous revenues 3,657,800 3,566,651
Miscellaneous expenses (2,038,073) (1,724,744)
(Increase) decrease in accounts receivable (1,280,059) (1,340,832)
(Increase) decrease in inventory (10,316) 45,552
(Increase) decrease in net OPEB asset (1,023,535) (905,556)
(Increase) decrease in prepaid expenses and other current assets 153,997 (37,497)
Increase (decrease) in accounts payable 1,255,177 (2,522,194)
Increase (decrease) in accrued payroll and related expenses 164,149 (341,005)
Increase (decrease) in other accrued liabilities (445,012) 3,192,574
Increase (decrease) in customer deposits (107,009) (241,195)
Increase (decrease) in prepaid capacity fees (3,083) 6,589
Net Cash Provided (Used) By Operating Activities 5,538,511$ 1,517,930$
Schedule of Cash and Cash Equivalents:
Current assets:
Cash and cash equivalents 33,958,281$ 31,075,455$
Restricted cash and cash equivalents 4,087,042 4,057,726
Total Cash and Cash Equivalents 38,045,323$ 35,133,181$
Supplemental Disclosures:
Non-cash Investing and Financing Activities Consisted of the Following:
Contributed Capital for Water and Sewer System 1,259,894$ 3,462,807$
Change in Fair Value of Investments and Recognized Gains/Losses (353,950) (127,662)
Amortization Related to Long-Term Debt 154,246 164,101
See accompanying independent auditors' report and notes to financial statements.
For the Years Ended June 30, 2013 and 2012 - Continued
Statements of Cash Flows
28
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
NOTE DESCRIPTION PAGE
1 Reporting Entity and Summary of Significant Accounting Policies..…………. 30
2 Cash and Investments……………………………………………………………………….…………..……... 36
3 Capital Assets……………………………………………………………………………………………….…..……... 44
4 Long–Term Debt…………………………………………………………………………………………..……….. 46
5 Net Position………………………………………………………………………………………………………….…… 51
6 Defined Benefit Pension Plan………………………………………….…………………………………... 52
7 Other Post Employment Benefits………………………………………………………...…………..... 54
8 Water Conservation Authority……………………………………………………………………………... 57
9 Commitments and Contingencies……………………………………………………………..……... 58
10 Risk Management……………………………………………………………………………………………….….. 59
11 Interest Expense………………………………………………………………………………………………..…..... 61
12 Prior Period Adjustment……………………………………………………………………………………....... 61
13 Segment information………………………………………………………………………………….….......... 62
Required Supplementary Information:
1 Schedule of Funding Progress for PERS……………………………………………..…………… 65
2 Schedule of Funding Progress for DPHP……………………………………….………………... 65
29
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Reporting Entity
The reporting entity Otay Water District (the “District”) includes the accounts of the District and the Otay
Water District Financing Authority (the Authority).
The Otay Water 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.
The District formed the Financing Authority on March 3, 2010 under the Joint Exercise of Powers Act,
constituting Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of
the California Government Code. The Financing Authority was formed to assist the District in the
financing of public capital improvements.
The financial statements present the District and its component units. The District is the primary
government unit. Component units are those entities which are financially accountable to the
primary government, either because the District appoints a voting majority of the component unit's
board, or because the component unit will provide a financial benefit or impose a financial burden
on the District. The District has accounted for the Financing Authority as a "blended" component
unit. Despite being legally separate, the Financing Authority is so intertwined with the District that it is
in substance, part of the District's operations. Accordingly, the balances and transactions of this
component unit are reported within the funds of the District. Separate financial statements are not
issued for the Financing Authority.
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation
Measurement focus is a term used to describe “which” transactions are recorded within the various
financial statements. Basis of accounting refers to “when” transactions are recorded regardless of
the measurement focus applied. The accompanying financial statements are reported using the
economic resources measurement focus, and the accrual basis of accounting. Under the economic
measurement focus all assets and liabilities (whether current or non-current) associated with these
activities are included on the Statement of Net Position. The Statement of Revenues, Expenses and
Changes in Net Position present increases (revenues) and decreases (expenses) in total net
position. Under the accrual basis of accounting, revenues are recorded when earned and expenses
are recorded when a liability is incurred, regardless of the timing of related cash flows.
30
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation - Continued
The District reports its activities as an enterprise fund, which is used to account for operations that
are financed and operated in a manner similar to a private business enterprise, where the intent of
the District is that the costs (including depreciation) of providing goods or services to the general
public on a continuing basis be financed or recovered primarily through user charges.
The basic financial statements of the Otay Water District have been prepared in conformity with
accounting principles generally accepted in the United States of America. The Governmental
Accounting Standards Board (GASB) is the accepted standard setting body for governmental
accounting financial reporting purposes.
Net Position of the District is classified into three components: (1) net investment in capital assets,
(2) restricted net position, and (3) unrestricted net position. These classifications are defined as
follows:
Net Investment in Capital Assets
This component of net position consists of capital assets, net of accumulated depreciation and
reduced by the outstanding balances of notes or borrowing that are attributable to the acquisition of
the 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.
Restricted Net Position
This component of net position consists of net position with constrained use through external
constraints imposed by creditors (such as through debt covenants), grantors, contributors, or laws or
regulations of other governments or constraints imposed by law through constitutional provisions or
enabling legislation.
Unrestricted Net Position
This component of net position consists of net assets that do not meet the definition of “invested in
capital assets” or “restricted net position.”
The District distinguishes operating revenues and expenses from those revenues and expenses that
are non-operating. Operating revenues are those revenues that are generated by water sales and
wastewater services while operating expenses pertain directly to the furnishing of those services.
Non-operating revenues and expenses are those revenues and expenses generated that are not
directly associated with the normal business of supplying water and wastewater treatment services.
31
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation - Continued
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 $52,535 and $57,465 at June
30, 2013 and 2012, 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 Position.
Sometimes the District will fund outlays for a particular purpose from both restricted (e.g., restricted
bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as
restricted - net position and unrestricted - net position, a flow assumption must be made about the
order in which the resources are considered to be applied.
It is the District’s practice to consider restricted – net position to have been depleted before
unrestricted – net position is applied, however it is the Board’s discretion.
C) New Accounting Pronouncements
Implemented
In fiscal year 2012-2013, the District implemented Governmental Accounting Standards Board
(GASB) Statement No. 63, “Financial Reporting of Deferred Outflows of Resources, Deferred Inflows
of Resources, and Net Position”. This statement incorporates deferred outflows of resources and
deferred inflows of resources, as defined by GASB Concepts Statement No. 4, “Elements of Financial
Statements” into the definitions of the required components of the residual measure of net position,
formerly net assets. This statement also provides a new Statement of Net Position format to report
all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position.
In fiscal year 2012-2013, the District early implemented GASB Statement No. 65, “Items Previously
Reported as Assets and Liabilities”. This statement established accounting and financial reporting
standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain
items that were previously reported as assets and liabilities. Due to the early implementation of this
statement, the calculation of deferred amount on refunding was revised to eliminate the inclusion of
costs that should be recognized as an expense in the period incurred and eliminated debt issuance
32
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
C) New Accounting Pronouncements - Continued
costs which should be recognized as an expense in the period incurred. Accounting changes
adopted to conform to the provisions of this statement should be applied retroactively. The result of
the implementation of this standard was to decrease the net position at July 1, 2012 and July 1, 2011
by $2,252,393 and $2,406,704, respectively, which is the amount of unamortized debt issuance costs
at July 1, 2012 and July 1, 2011, respectively.
Pending Accounting Standards
GASB has issued the following statements which may impact the District’s financial reporting
requirements in the future:
GASB 66 – “Technical Corrections, an amendment of GASB Statement No. 10 and Statement
No. 62”, effective for periods beginning after December 15, 2012.
GASB 67 – “Financial Reporting for Pension Plans, an amendment of GASB Statement No. 25”,
effective for the fiscal years beginning after June 15, 2013.
GASB 68 – “Accounting and Financial Reporting for Pensions, an amendment of GASB
Statement No. 27”, effective for the fiscal years beginning after June 15, 2014.
GASB 69 – Government Combinations and Disposals of Government Operations”, effective for
periods beginning after December 15, 2013.
GASB 70 – “Accounting and Financial Reporting for Nonexchange Financial Guarantees”,
effective for the periods beginning after June 15, 2013.
D) Deferred Outflows / Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element, deferred outflows of
resources, represents a consumption of net position that applies to a future period(s) and so will not be
recognized as an outflow of resources (expense/expenditure) until then. The District has one item that
qualifies for reporting in this category, deferred amount on refunding, which resulted from the
difference in the carrying value of refunded debt and its reacquisition price. This amount is shown as
deferred and amortized over the shorter of the life of the refunded or refunding debt.
33
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
D) Deferred Outflows / Inflows of Resources - Continued
In addition to liabilities, the statement of net position will sometimes report a separate section for
deferred inflows of resources. This separate financial statement element, deferred inflows of
resources, represents an acquisition of net position that applies to a future period(s) and will not be
recognized as an inflow of resources (revenue) until that time. The District does not have any type of
these items as of June 30, 2013 or June 30, 2012.
E) Statement of Cash Flows
For purposes of the Statement of Cash Flows, the District considers all highly liquid investments
(including restricted assets) with a maturity period, at purchase, of three months or less to be cash
equivalents.
F) Investments
Investments are stated at their fair value, which represents the quoted or stated market value.
Investments that are not traded on a market, such as investments in external pools, are valued
based on the stated fair value as represented by the external pool. All investments are stated at their
fair value, the District has not elected to report certain investments at amortized cost.
G) 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.
H) Capital Assets
Capital assets are recorded at cost, where historical records are available, and at an estimated
historical cost where no historical records exist. 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
34
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued
H) Capital Assets – Continued
are charged to expense. Donated assets are capitalized at their approximate fair market value on the
date contributed.
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, 2013 of $995,721 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
I) Compensated Absences
It is the District’s policy to record vested or accumulated vacation and sick leave as an expense and
liability as benefits accrue to employees. As of June 30, 2013 and 2012, total accrued paid time off
was $2,120,399 and $1,991,841, respectively.
J) Classification of Liabilities
Certain current liabilities have been classified as current liabilities payable from restricted assets as
they will be funded from restricted assets.
K) Allowance for Doubtful Accounts
The District charges doubtful accounts arising from water sales receivable to bad debt expense when
it is probable that the accounts will be uncollectible. Uncollectible accounts are determined by the
allowance method based upon prior experience and management’s assessment of the collectability of
existing specific accounts. The allowance for doubtful accounts was $150,000 and $14,461 for 2013
and 2012, respectively.
35
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
L) 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.
M) Property Taxes
Tax levies are limited to 1% of full market value (at time of purchase) which results in a tax rate of
$1.00 per $100 assessed valuation, under the provisions of Proposition 13. Tax rates for voter-
approved indebtedness are excluded from this limitation.
The County of San Diego (the “County”) bills and collects property taxes on behalf of the District. The
County’s tax calendar year is July 1 to June 30. Property taxes attach as a lien on property on January
1. Taxes are levied on July 1 and are payable in two equal installments on November 1 and February
1, and become delinquent after December 10 and April 10, respectively.
N) Reclassifications
Certain reclassification 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.
36
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
2) CASH AND INVESTMENTS - Continued
Cash and Investments are classified in the accompanying financial statements as follows:
Statement of Net Position:
Current Assets 2013 2012
Cash and Cash Equivalents $ 33,958,281 $ 31,075,455
Restricted Cash and Cash Equivalents 4,087,042 4,057,726
Investments 31,134,182 37,069,853
Restricted Investments 13,545,284 16,124,042
Total Cash and Investments $ 82,724,789 $ 88,327,076
Cash and Investments consist of the following:
2013 2012
Cash on Hand $ 2,950 $ 2,950
Deposits with Financial Institutions 1,107,051 1,519,979
Investments 81,614,788 86,804,147
Total Cash and Investments $ 82,724,789 $ 88,327,076
Investments Authorized by the California Government Code and the District’s Investment Policy
The following table 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 the 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.
37
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
2) CASH AND INVESTMENTS - Continued
Investments Authorized by the California Government Code and the District’s Investment Policy -
Continued
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.
38
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
2) CASH AND INVESTMENTS - Continued
Disclosures Relating to Interest Rate Risk - Continued
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, 2013 and 2012.
June 30, 2013
Remaining Maturity (in Months)
12 Months 13 to 24 25 to 60 More Than
Investment Type Or Less Months Months 60 Months
U.S. Government Sponsored Entities $44,599,731 $ 3,002,850 $17,974,890 $23,621,991 $ -
Local Agency Investment Fund
(LAIF) 17,032,057 17,032,057 - - -
San Diego County Pool 19,983,000 19,983,000 - - -
Total $81,614,788 $40,017,907 $17,974,890 $23,621,991 $ -
June 30, 2012
Remaining Maturity (in Months)
12 Months 13 to 24 25 to 60 More Than
Investment Type Or Less Months Months 60 Months
U.S. Government Sponsored Entities $53,100,166 $ 5,744,244 $24,995,670 $22,360,252 $ -
Local Agency Investment Fund
(LAIF) 11,614,981 11,614,981 - - -
San Diego County Pool 22,089,000 22,089,000 - - -
Total $86,804,147 $39,448,225 $24,995,670 $22,360,252 $ -
39
Notes to Financial Statements
See Independent auditors’ report.
Years Ended June 30, 2013 and 2012
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, 2013 and 2012 for each investment type.
June 30, 2013
Minimum Rating as of Year End
Legal Not
Investment Type Rating AAA AA Rated
U.S. Government Sponsored Entities $44,599,731 N/A $44,599,731 $ - $ -
Local Agency Investment
Fund (LAIF) 17,032,057 N/A - - 17,032,057
San Diego County Pool 19,983,000 N/A - - 19,983,000
Total $81,614,788 $44,599,731 $ - $37,015,057
June 30, 2012
Minimum Rating as of Year End
Legal Not
Investment Type Rating AAA AA Rated
U.S. Government Sponsored Entities $53,100,166 N/A $53,100,166 $ - $ -
Local Agency Investment
Fund (LAIF) 11,614,981 N/A - - 11,614,981
San Diego County Pool 22,089,000 N/A - - 22,089,000
Total $86,804,147 $53,100,166 $ - $33,703,981
40
Notes to Financial Statements
See Independent auditors’ report.
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, 2013 and 2012 are as follows:
June 30, 2013
June 30, 2012
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 12,961,010
Federal Home Loan Mortgage Corp
Federal National Mortgage Association
Federal Farm Credit Banks
U.S. Government Sponsored Entities
U.S. Government Sponsored Entities
U.S. Government Sponsored Entities
9,720,091
4,976,820
14,955,390
Issuer
Investment Type
Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 17,991,270
Federal Home Loan Mortgage Corp
Federal National Mortgage Association
Federal Farm Credit Banks
U.S. Government Sponsored Entities
U.S. Government Sponsored Entities
U.S. Government Sponsored Entities
15,753,834
14,993,400
4,361,662
41
Notes to Financial Statements
See Independent auditors’ report.
2) CASH AND INVESTMENTS – Continued
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, 2013, $1,063,279 of the District’s deposits with financial institutions in excess of federal
depository insurance limits were held in collateralized accounts. As of June 30, 2012, $1,720,135 of the
District’s deposits with financial institutions in excess of federal depository insurance limits were held in
collateralized accounts.
Local Agency Investment Fund (LAIF)
The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by
California Government Code Section 16429 under the oversight of the Treasurer of the State of California.
The fair value of the District’s investment in this pool is reported in the accompanying financial statements
at amounts based upon District’s pro-rata share of the fair value provided by LAIF for the entire LAIF
portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based
on the accounting records maintained by LAIF, which are recorded on an amortized cost-basis.
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 Coast Highway – San Diego, CA 92101.
42
Notes to Financial Statements
See Independent auditors’ report.
2) CASH AND INVESTMENTS – Continued
Collateral for Deposits
All cash is 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.
43
Notes to Financial Statements
See Independent auditors’ report.
3) CAPITAL ASSETS
The following is a summary of changes in Capital Assets for the year ended June 30, 2013:
Beginning Balance
Additions
Deletions
Ending Balance
Capital Assets, Not Depreciated
Land $ 13,703,463 $ 11,500 $ - $ 13,714,963
Construction in Progress 17,452,274 11,751,086 (12,093,312) 17,110,048
Total Capital Assets Not Depreciated 31,155,737 11,762,586 (12,093,312) 30,825,011
Capital Assets, Being Depreciated
Infrastructure 597,894,929 11,620,876 (881,331) 608,634,474
Field Equipment 8,602,060 331,974 - 8,934,034
Buildings 18,649,209 200,300 - 18,849,509
Transportation Equipment 3,221,249 277,860 (1,320) 3,497,789
Communication Equipment 2,514,151 81,670 (33,341) 2,562,480
Office Equipment 17,201,420 209,037 (112,115) 17,298,342
Total Capital Assets Being Depreciated 648,083,018 12,721,717 (1,028,107) 659,776,628
Less Accumulated Depreciation:
Infrastructure 169,258,402 12,993,086 (254,187) 181,997,301
Field Equipment 7,373,481 206,182 - 7,579,663
Buildings 7,347,820 484,727 - 7,832,547
Transportation Equipment 2,306,300 310,796 (1,321) 2,615,775
Communication Equipment 1,035,846 445,648 (33,342) 1,448,152
Office Equipment 11,086,817 2,105,183 (92,458) 13,099,542
Total Accumulated Depreciation 198,408,666 16,545,622 (381,308) 214,572,980
Total Capital Assets Being Depreciated, Net 449,674,352 (3,823,905) (646,799) 445,203,648
Total Capital Assets, Net $ 480,830,089 $ 7,938,681 $ (12,740,111) $476,028,659
Depreciation expense for the years ended June 30, 2013 and 2012 was $16,545,622 and $15,214,704,
respectively.
44
Notes to Financial Statements
See Independent auditors’ report.
3) CAPITAL ASSETS (Continued)
The following is a summary of changes in Capital Assets for the year ended June 30, 2012:
Beginning Balance
Additions
Deletions
Ending
Balance
Capital Assets, Not Depreciated
Land $ 13,636,663 $ 66,800 $ - $ 13,703,463
Construction in Progress 17,909,282 19,086,698 (19,543,706) 17,452,274
Total Capital Assets Not Depreciated 31,545,945 19,153,498 (19,543,706) 31,155,737
Capital Assets, Being Depreciated
Infrastructure 577,926,518 20,908,862 (940,451) 597,894,929
Field Equipment 9,847,809 149,661 (1,395,410) 8,602,060
Buildings 18,451,132 198,077 - 18,649,209
Transportation Equipment 3,177,687 221,872 (178,310) 3,221,249
Communication Equipment 2,359,043 155,108 - 2,514,151
Office Equipment 17,332,966 681,123 (812,669) 17,201,420
Total Capital Assets Being Depreciated 629,095,155 22,314,703 (3,326,840) 648,083,018
Less Accumulated Depreciation:
Infrastructure 157,565,903 12,330,306 (637,807) 169,258,402
Field Equipment 8,619,183 149,708 (1,395,410) 7,373,481
Buildings 6,911,291 436,529 - 7,347,820
Transportation Equipment 2,250,422 234,188 (178,310) 2,306,300
Communication Equipment 644,017 391,829 - 1,035,846
Office Equipment 10,223,319 1,672,144 (808,646) 11,086,817
Total Accumulated Depreciation 186,214,135 15,214,704 (3,020,173) 198,408,666
Total Capital Assets Being Depreciated, Net 442,881,020 7,099,999 (306,667) 449,674,352
Total Capital Assets, Net $ 474,426,965 $ 26,253,497 $ (19,850,373) $480,830,089
Depreciation expense for the years ended June 30, 2012 and 2011 was $15,214,704 and $13,880,206,
respectively.
45
Notes to Financial Statements
See Independent auditors’ report.
4) LONG-TERM DEBT
Long-term liabilities for the year ended June 30, 2013 are as follows:
Beginning
Balance
(As Restated)
Additions
Deletions
Ending
Balance
Due Within
One Year
General Obligation Bonds:
Improvement District No. 27 – 2009 $ 6,755,000 $ - $ 520,000 $ 6,235,000 $ 535,000
Unamortized Bond Premium 166,271 - 16,353 149,918 -
Net General Obligation Bonds 6,921,271 - 536,353 6,384,918 535,000
Certificates of Participation:
1996 Certificates of Participation 10,900,000 - 500,000 10,400,000 500,000
2004 Certificates of Participation 8,680,000 - 8,680,000 - -
2007 Certificates of Participation 38,665,000 - 920,000 37,745,000 955,000
1996 COPS Unamortized Discount (11,178) - (746) (10,432) -
2007 COPS Unamortized Discount (223,087) - (9,044) (214,043) -
2004 COPS Unamortized Premium 13,005 - 13,005 - -
Net Certificates of Participation 58,023,740 - 10,103,215 47,920,525 1,455,000
Revenue Bonds:
2010 Water Revenue Bonds Series A 13,055,000 - 800,000 12,255,000 820,000
2010 Water Revenue Bonds Series B 36,355,000 - - 36,355,000 -
2010 Series A Unamortized Premium 911,421 - 74,402 837,019 -
2013 Water Revenue Refunding Bonds - 7,735,000 - 7,735,000 660,000
2013 Bonds Unamortized Premium - 984,976 8,008 976,968 -
Net Revenue Bonds 50,321,421 8,719,976 882,410 58,158,987 1,480,000
Total Long-Term Liabilities $ 115,266,432 $8,719,976 $11,521,978 $112,464,430 $ 3,470,000
46
Notes to Financial Statements
See Independent auditors’ report.
4) 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 District
No. 27-2009 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 bonds were refunded.
These bonds are general obligations of Improvement District No. 27 (ID 27) of the District. The Board of
Directors has the power and is obligated to levy annual ad valorem taxes without limitation, as to rate or
amount for payment of the bonds and the interest upon all property which is within ID 27 and subject to
taxation. The General Obligation Bonds are payable from District-wide tax revenues. The Board may
utilize other sources for servicing the bond debt and interest.
The Improvement District No. 27-2009 General Obligation Refunding Bonds have interest rates from 3.00%
to 4.00% with maturities through Fiscal Year 2023.
Future debt service requirements for the bonds are as follows:
For the Year
Ended June 30, Principal Interest Total
2014 $ 535,000 $ 220,437 755,437$
2015 550,000 204,162 754,162
2016 570,000 187,362 757,362
2017 585,000 169,306 754,306
2018 605,000 147,700 752,700
2019-2023 3,390,000 348,003 3,738,003
$ 6,235,000 $ 1,276,970 $ 7,511,970
47
Notes to Financial Statements
See Independent auditors’ report.
4) 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, 2013
was 0.05%. 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.
In June 2013, the July 2004 COPS were refunded with the issuance of the 2013 Water Revenue
Refunding Bonds (see Revenue Bonds on page 40). Proceeds of $8,575,519, which consisted of unpaid
principal and accrued interest, were used to establish an irrevocable escrow to advance refund and
defease in their entirety the District’s 2004 COPS. Pursuant to an optional redemption clause in the 2004
COPS, the District will be able to redeem the 2004 bonds, without premium at any time after September
1, 2014. The savings between the cash flow required to service the old debt and the cash flow required
to service the new debt is $763,318 and represents an economic gain on refunding of $707,071.
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%.
48
Notes to Financial Statements
See Independent auditors’ report.
4) LONG-TERM DEBT - Continued
Certificates of Participation (COPS) - Continued
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
2014 $ 500,000 $ 4,992 $ 955,000 $ 1,553,864
2015 500,000 4,742 995,000 1,517,301
2016 600,000 4,450 1,035,000 1,479,239
2017 600,000 4,150 1,075,000 1,439,408
2018 600,000 3,850 1,115,000 1,397,798
2019-2023 3,700,000 13,908 6,260,000 6,287,081
2024-2028 3,900,000 3,425 7,670,000 4,867,417
2029-2033 - - 9,460,000 3,058,810
2034-2038 - - 9,180,000 824,687
$ 10,400,000 $ 39,517 $ 37,745,000 $ 22,425,605
1996 COPS 2007 COPS
* Variable Rate - Interest reflected at June 30, 2013 at a rate of 0.05%.
The two 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, 2013.
Water Revenue Bonds
In April 2010, Water Revenue Bonds with a face value of $50,195,000 were sold by the Otay Water District
Financing Authority to provide funds for the construction of water storage and transmission facilities.
The bond issue consisted of two series; Water Revenue Bonds, Series 2010A (Non-AMT Tax Exempt)
with a face value of $13,840,000 plus a $1,078,824 original issue premium, and Water Revenue Bonds
Series 2010B (Taxable Build America Bonds) with a face value of $36,255,000. The Series 2010A bonds
are due in annual installments of $785,000 to $1,295,000 from September 1, 2012 through September 1,
2025; bearing interest at 2% to 5.25%. The Series 2010B bonds are due in annual installments of
$1,365,000 to $3,505,000 from September 1, 2026 through September 1, 2040; bearing interest at 6.377%
to 6.577%. Interest on both Series is payable on September 1, 2010 and semiannually thereafter on
49
Notes to Financial Statements
See Independent auditors’ report.
4) LONG-TERM DEBT – Continued
Water Revenue Bonds - Continued
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, and
2007 Certificates of Participation described above and the 2013 Water Revenue Refunding Bonds
described below.
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, 2013 was $74,402 and is included in interest expense. The
unamortized premium at June 30, 2013 is $837,019.
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, 2013.
In June 2013, the 2013 Water Revenue Refunding Bonds were issued to defease the 2004 Refunding
Certificates of Participation. The bonds were issued with a face value of $7,735,000 plus a $984,975
original issue premium. The bonds are due in annual installments of $660,000 to $835,000 from
September 1, 2013 through September 1, 2023; bearing interest at 1% to 4%. The installment payments
are to be made from Taxes and Net Revenues of the Water System, on parity with the payments
required to be made by the District for the 1996, and 2007 Certificates of Participation and the 2010A and
2010B described above.
The original issue premium is being amortized over the 11 year life of the Series 2013 bonds.
Amortization for the year ending June 30, 2013 was $8,008 and is included in interest expense. The
unamortized premium at June 30, 2013 is $976,968.
50
Notes to Financial Statements
See Independent auditors’ report.
4) LONG-TERM DEBT – Continued
Water Revenue Bonds - Continued
The total amount outstanding at June 30, 2013 and aggregate maturities of the revenue bonds for the fiscal
years subsequent to June 30, 2013, are as follows:
5) NET POSITION
Designated Net Position
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, 2013 and 2012:
For the Year
Ended June 30, Principal Interest Principal Interest Principal Interest
2014 $ 820,000 $ 533,538 $ - $ 2,371,868 $ 660,000 $ 197,198
2015 845,000 508,563 - 2,371,868 605,000 258,700
2016 870,000 478,488 - 2,371,868 615,000 243,425
2017 900,000 443,088 - 2,371,868 635,000 221,500
2018 940,000 406,288 - 2,371,868 660,000 195,600
2019-2023 5,350,000 1,337,813 - 11,859,342 3,725,000 551,500
2024-2028 2,530,000 132,856 2,815,000 11,453,765 835,000 16,700
2029-2033 - - 8,760,000 9,049,258 - -
2034-2038 - - 12,005,000 5,459,732 - -
2039-2042 - - 12,775,000 1,002,335 - -
$ 12,255,000 $ 3,840,632 $ 36,355,000 $ 50,683,772 $ 7,735,000 $ 1,684,623
2010 Water Revenue Bond Series A 2013 Water Revenue Refunding Bonds2010 Water Revenue Bond Series B
2013 2012
Designated Betterment $ 3,629,786 $ -
Expansion Reserve 623,834 17,943,825
Replacement Reserve 24,182,442 15,911,850
Designated New Supply Fund 24,000 1,593,571
Employee Benefits Reserve 149,705 1,660,369
Total $ 28,609,767 $ 37,109,615
51
Notes to Financial Statements
See Independent auditors’ report.
6) 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.
Funding Policy
Active classic members in the Plan are required to contribute 8% of their annual covered salary. By
agreement between the Employee Association and the District, the represented employees paid 5.25%
of covered salaries beginning August 15, 2011. Also by agreement, the unrepresented employees began
paying 4.5% of covered salaries as of July 15, 2011. Prior to these agreements all employees paid 1% of
covered salaries. In these same agreements, all employees, after June 30, 2012 contributed an
additional 3.5% of covered salaries. Effective January 1, 2013, classic employees contributed an
additional 2.75% of covered salaries. For new members (employees hired on or after January 1, 2013
and are new entrants to the PERS System), employees pay a 6.25% contribution. The District is required
to contribute the actuarially determined remaining amounts necessary to fund the 2.7% at age 55
retirement plan benefits for its classic members and 2.0% at age 62 for its new members under the
California Employees’ Pension Reform Act (PEPRA) provisions. 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, 2013 was 24.318%. 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.
52
Notes to Financial Statements
See Independent auditors’ report.
6) DEFINED BENEFIT PENSION PLAN - Continued
Annual Pension Costs
For the fiscal year ended June 30, 2013, the District’s annual pension cost and actual contribution was
$3,130,754. The required contribution for the fiscal year ended June 30, 2013 was determined as part of the
June 30, 2010 actuarial valuation.
The following is a summary of the actuarial assumptions and methods:
Valuation Date June 30, 2010
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 3.55% 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 30 year 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
6/30/13 $ 3,130,754 100% $ -
6/30/12 $ 2,951,409 100% $ -
6/30/11 $ 2,427,744 100% $ -
53
Notes to Financial Statements
See Independent auditors’ report.
6) DEFINED BENEFIT PENSION PLAN - Continued
Funded Status and Funding Progress
As of June 30, 2011, the most recent actuarial valuation date, the Plan was 70.6% funded. The actuarial
accrued liability (AAL) for benefits was $88,411,019, and the actuarial value of assets was $62,435,349,
resulting in an unfunded actuarial accrued liability (UAAL) of $25,975,670. The covered payroll (annual
payroll of active employees covered by the Plan) was $12,289,529, and the ratio of the UAAL to the
covered payroll was 211.4%.
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.
7) 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. 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.
Prior to the plan agreements signed in 2011 the eligibility in the plan was broken into 3 tiers, employees
hired before January 1, 1981, employees hired between January 1, 1981 and July 1, 1993 and employees
hired on or after July 1, 1993. Board Members elected before January 1, 1995 are also eligible for the
plan. Eligibility also includes age and years of service requirements which vary by tier. Benefits include
100% medical and dental premiums for life for the retiree for Tier I, II or III employees, and up to 100%
spouse premium for life and dependent premium up to age 19 depending on the tier. The plan also
includes survivor benefits to Medicare.
Subsequent to the agreements in 2011 and 2012 all employees are eligible for the plan after 20 years of
consecutive service and unrepresented employees hired before January 1, 2013 are eligible after 15
years. Survivor benefits are covered beyond Medicare.
54
Notes to Financial Statements
See Independent auditors’ report.
7) OTHER POST EMPLOYMENT BENEFITS - Continued
Funding Policy
The contribution requirements of plan members and the District are established and may be amended
by the Board of Directors. Effective January 1, 2013, represented employees hired prior to January 1,
2013 or hired on or after January 1, 2013 from another public agency that has reciprocity without having
a break in service of more than six months, contribute .75% of covered salaries. In addition,
unrepresented and represented employees hired on or after January 1, 2013, and do not have reciprocity
from another public agency, contribute 1.75% and 2.5% of covered salaries, respectively. DPHP
members receiving benefits contribute based on their selected plan options of EPO, HMO or Gold, and
whether they are located outside the State of California. Contributions by plan members range from $0
to $149 per month for coverage to age 65, and from $0 to $148 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 10.0% of the annual covered payroll.
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:
2013 2012
Annual Required Contribution (ARC) $ 1,287,000 $ 1,304,000
Interest on net OPEB asset (603,338) (537,685)
Adjustment to annual Required
Contribution (ARC)
543,000
473,000
Annual OPEB Cost (expense) 1,226,662 1,239,315
Contributions made 2,250,198 2,144,871
Increase in net OPEB asset (1,023,535) (905,556)
Net OPEB asset – beginning of year (8,321,902) (7,416,346)
Net OPEB asset – end of year $ (9,345,437) $ (8,321,902)
55
Notes to Financial Statements
See Independent auditors’ report.
7) OTHER POST EMPLOYMENT BENEFITS - Continued
Annual OPEB Cost and Net OPEB Obligation/Asset - Continued
For 2013, 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 $877,196, which is included in the $2,250,198 of contributions shown on the previous page.
For 2012 this amount was $749,871, which is included in the $2,144,871 of contributions shown on the
previous page.
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 2013, 2012 and 2011 were as follows:
THREE-YEAR TREND INFORMATION FOR CERBT
Fiscal Annual OPEB Percentage of Net OPEB
Year Cost (AOC) OPEB Cost Contributed Asset
6/30/2013 $ 1,226,662 183% $ (9,345,437)
6/30/2012 $ 1,239,315 173% $ (8,321,902)
6/30/2011 $ 409,288 255% $ (7,416,346)
Funded Status and Funding Progress
The funded status of the plan as of June 30, 2013, the most recent actuarial valuation date, was as
follows:
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
Actuarial Accrued Liability (AAL) $ 22,891,000
Actuarial Value of Plan Assets $ 11,831,000
Unfunded Actuarial Accrued Liability (UAAL) $ 11,060,000
Funded Ratio (Actuarial Value of Plan Assets/AAL)51.68%
Covered Payroll (Active Plan Members) $ 12,833,000
UAAL as a Percentage of Covered Payroll 86.18%
56
Notes to Financial Statements
See Independent auditors’ report.
7) OTHER POST EMPLOYMENT BENEFITS - Continued
Funded Status and Funding Progress - Continued
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, 2013
Actuarial Cost Method Entry Age Normal Cost Method
Amortization Method Level Percent of Payroll
Remaining Amortization Period 24-Year fixed (closed) period as of the Valuation Date
Asset Valuation Method 5-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.
8) 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, 2013 and 2012, the District contributed $120,684 and $121,617,
57
Notes to Financial Statements
See Independent auditors’ report.
8) WATER CONSERVATION AUTHORITY - Continued
respectively, for the development, construction and operation costs of the xeriscape demonstration
garden.
A summary of the Authority’s June 30, 2012 audited financial statement is as follows (latest report
available):
Assets $ 1,655,591
Liabilities -
Net Assets $ 1,655,591
Revenues, Gains and Other Support $ 187
Expenses (160,398)
Changes in Net Assets $ (160,211)
9) COMMITMENTS AND CONTINGENCIES
Construction Commitments
The District had committed to capital projects under construction with an estimated cost to complete of
$6,879,357 at June 30, 2013.
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 a 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, 2012, 1,751 EDUs had been relinquished and refunded, 15,026
EDUs had been connected, and 1,090 EDUs have neither been relinquished nor connected. At June 30,
2013, 1,751 EDUs had been relinquished and refunded, 15,031 EDUs had been connected, and 1,085 EDUs
have neither been relinquished nor connected.
58
Notes to Financial Statements
See Independent auditors’ report.
9) COMMITMENTS AND CONTINGENCIES - Continued
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, 2013, 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 $341,046 at the point of
acceptance. Accordingly, the District has accrued a liability as of year end.
10) 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.
59
Notes to Financial Statements
See Independent auditors’ report.
10) RISK MANAGEMENT (Continued)
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, 2012.
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, 2012.
Boiler and Machinery: Replacement cost up to $100 Million per occurrence, subject to a $1,000 deductible,
effective July 1, 2012.
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,
2012.
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 - 201111, effective July 1, 2012.
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, 2012.
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.
60
Notes to Financial Statements
See Independent auditors’ report.
11) INTEREST EXPENSE
Interest expense for the years ended June 30, 2013 and 2012, is as follows:
2013 2012
Amount Expensed $ 3,977,538 $ 3,899,927
Amount Capitalized as a Cost of
Construction Projects 995,721 1,185,443
Total Interest $ 4,973,259 $ 5,085,370
12) PRIOR PERIOD ADJUSTMENT and RESTATEMENT OF 2012 BALANCES
During fiscal year ended June 30, 2013, the District early implemented GASB Statement No. 65, “Items
Previously Reported as Assets and Liabilities”. Due to the early implementation of this statement, bond
issuance costs and certain amounts classified as deferred amounts on refunding, which had previously
been capitalized on the statement of net position and written off over the life of the corresponding debt
issuance, have been restated as expenses in the periods incurred. The amount previously capitalized as
of July 1, 2011, $2,406,704, is reflected as a prior period adjustment. On the statement of net position,
fiscal year 2012 balances have been restated for the removal of debt issuance costs and certain
deferred amounts of refunding (previously shown as a component of long-term debt). On the statement
of revenues, expenses and changes in net position, 2012 columns have been restated to remove
$154,312 previously shown as amortization expense (a component of miscellaneous expenses).
61
Notes to Financial Statements
See Independent auditors’ report.
13) SEGMENT INFORMATION
During the June 30, 2011 fiscal year, the District issued Revenue Bonds to finance certain capital
improvements. While water and wastewater services are accounted for jointly 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, 2013.
Condensed Statement of Net Position
June 30, 2013
Water Services
ASSETS
Current Assets $ 98,171,085
Capital Assets 458,689,482
Other Assets 9,345,437
Total Assets 566,206,004
DEFERRED OUTFLOWS OF RESOURCES
Deferred amount on refunding 390,591
Total Deferred Outflows of Resources 390,591
LIABILITIES
Current Liabilities 24,364,563
Long-Term Liabilities 109,705,473
Total Liabilities 134,070,036
NET POSITION
Net investment in capital assets 359,209,991
Restricted for debt service 4,612,890
Unrestricted 68,703,678
Total Net Position $ 432,526,559
62
Notes to Financial Statements
See Independent auditors’ report.
13) SEGMENT INFORMATION - Continued
Condensed Statement of Revenues, Expenses
and Changes in Net Position
For The Year Ended June 30, 2013
Water Services
Operating Revenues
Water sales $ 72,157,781
Connection and other fees 1,915,679
Total Operating Revenues 74,073,460
Operating Expenses
Cost of Water Sales 50,600,551
Administrative and General 19,428,008
Depreciation 15,613,824
Total Operating Expenses 85,642,383
Operating Income (Loss) (11,568,923)
Non-operating Revenues (Expenses)
Investment income 19,851
Taxes and assessments 3,542,969
Availability charges 655,115
Gain (loss) on sale of capital assets (546,799)
Miscellaneous revenues 4,934,714
Donations (120,684)
Interest expense (3,977,538)
Miscellaneous expenses (1,917,390)
Total Non-operating Revenues (Expenses) 2,590,239
Income (Loss) Before Capital Contributions (8,978,684)
Capital Contributions 1,251,399
Changes in Net Position (7,727,285)
Total Net Position, Begin As Restated (Note 12) 440,253,844
Total Net Position, Ending $ 432,526,559
63
Notes to Financial Statements
See Independent auditors’ report.
13) SEGMENT INFORMATION - Continued
Condensed Statement of Cash Flows
For The Year Ended June 30, 2013
Water Services
Net Cash Provided by Operating Activities $ 4,963,208
Net Cash Provided by Non-capital and Related Financing Activities 2,954,725
Net Cash Provided (Used) by Capital and Related Financing Activities (13,592,496)
Net Cash Used by Investing Activities 8,586,705
Net Increase (Decrease) in Cash and Cash Equivalents 2,912,142
Cash and Cash Equivalents, Beginning 35,133,181
Cash and Cash Equivalents, Ending $ 38,045,323
64
Required Supplementary Information
Years Ended June 30, 2013 and 2012
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]
6/30/11
Miscellaneous $ 62,435,349 $ 88,411,019 $ 25,975,670 70.6% $ 12,289,529 211.4%
6/30/10
Miscellaneous $ 57,613,987 $ 81,306,934 $ 23,692,947 70.9% $ 12,140,989 195.1%
6/30/09
Miscellaneous $ 53,736,612 $ 75,300,790 $ 21,564,178 71.4% $ 11,880,481 181.5%
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]
6/30/13
Miscellaneous $ 11,831,000 $ 22,891,000 $ 11,060,000 51.68% $ 12,833,000 86.18%
6/30/11
Miscellaneous $ 7,893,000 $ 18,289,000 $ 10,396,000 43.16% $ 12,429,000 83.64%
6/30/09
Miscellaneous $ 6,273,000 $ 10,070,000 $ 3,797,000 62.29% $ 11,878,000 31.97%
65
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 6677
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 7733
These schedules contain information to help the reader assess the factors affecting the
District’s ability to generate its potable and recycled water, and sewer sales as well as
property and sales taxes.
Debt 8811
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.
Demographic and Economic Information 8855
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 8877
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.
66
Fiscal Net Investment Total
Year in Capital Assets Restricted Unrestricted Net Position
2013 376,549,168$ 4,612,890$ 67,071,849$ 448,233,907$
2012 381,725,015 4,715,904 67,701,068 454,141,987
2011 377,656,762 4,915,555 74,627,563 457,199,880
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
Source: Otay Water District
Net Position by Component - Last Ten Fiscal Years
$0
$80,000
$160,000
$240,000
$320,000
$400,000
$480,000
2004 2005 2008 2009 2010 2011 2012 2013
Total Net Positon, in Thousands ($)
67
Total
Operating Non-Operating Income (Loss)Change
Fiscal Operating Operating Income/Revenues/Before Capital Capital in Net
Year Revenues Expenses (Loss)(Expenses)Contributions Contributions Position
2013 76,881,388$ 88,212,535$ (11,331,147)$ 2,647,935$ (8,683,212)$ 2,775,132$ (5,908,080)$
2012 68,400,349 81,795,466 (13,395,117)3,511,327 (9,883,790)6,825,897 (3,057,893)
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
Source: Otay Water District
Changes in Net Position - Last Ten Fiscal Years
-$10,000
-$5,000
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Changes in Net Position, in Thousands ($)
68
Fiscal Connection and Percent
Year Water Sales Wastewater Other Fees Total Change
2013 72,187,081$ 2,625,087$ 2,069,220$ 76,881,388$ 12.4%
2012 63,830,272 2,400,313 2,169,764 68,400,349 8.2%
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%
CHART SOURCE DATA
Source: Otay Water District
Operating Revenues by Source - Last Ten Fiscal Years
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Operating Revenues, in Thousands ($)
69
Fiscal Cost of Administrative Percent
Year Water Sales Wastewater and General Depreciation Total Change
2013 50,600,551$ 1,638,354$ 19,428,008$ 16,545,622$ 88,212,535$ 7.8%
2012 46,106,403 2,547,929 17,926,430 15,214,704 81,795,466 5.9%
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%
CHART SOURCE DATA
Source: Otay Water District
Operating Expenses by Function - Last Ten Fiscal Years
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Operating Expenses, in Thousands ($)
Depreciation Administrative and General Wastewater Cost of Water Sales
70
Fiscal Investment Taxes and Availability Percent
Year Income Assessments Charges Miscellaneous Total Change
2013 22,155$ 3,545,595$ 707,881$ 4,387,915$ 8,663,546$ -1.1%
2012 436,596 3,502,155 696,863 4,510,171 9,145,785 4.6%
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%
(1) The District sold capital assets during Fiscal Year 2005 which resulted in a gain of $2,196,655.
in Fiscal Year 2009.
Source: Otay Water District
Non-Operating Revenues by Source - Last Ten Fiscal Years
(2) The District received a large, one-time legal settlement as a member of a class action lawsuit
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Non-Operating Revenues, in Thousands ($)
71
Fiscal Interest Percent
Year Donations (1)Expense Miscellaneous Total Change
2013 120,684$ 3,977,538$ 1,917,389$ 6,015,611$ 6.8%
2012 121,617 3,899,927 1,612,914 (2)5,634,458 35.6%
2011 120,648 3,877,531 158,337 4,156,516 48.0%
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%
(1) Donations are contributions to the Water Conservation Authority formed in 1999. See Note 9 in the Notes
to Financial Statements for more information.
(2) Miscellaneous expense includes $1.4 million of non-capitalizable expenses with corresponding
miscellaneous revenues. In prior years these expenses and revenues were presented, net of revenue,
in miscellaneous revenues.
Source: Otay Water District
Non-Operating Expenses by Function - Last Ten Fiscal Years
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Non-Operating Expenses, in Thousands ($)
Miscellaneous Interest Expense Donations
72
Fiscal Total Direct
Year Real Personal Total Tax Rate
2013 22,253,255,369$ 583,080,854$ 22,836,336,223$ 1.00%
2012 22,556,489,450 588,978,085 23,145,467,535 1.00%
2011 22,997,752,952 521,424,896 23,519,177,848 1.00%
2010 23,671,616,006 527,200,694 24,198,816,700 1.00%
2009 26,269,630,081 482,465,611 26,752,095,692 1.00%
2008 25,333,821,005 568,975,196 25,902,796,201 1.00%
2007 22,166,251,649 518,441,943 22,684,693,592 1.00%
2006 19,204,029,184 361,636,280 19,565,665,464 1.00%
2005 16,121,465,817 301,937,884 16,423,403,701 1.00%
2004 13,833,852,366 296,691,701 14,130,544,067 1.00%
Source: County of San Diego Auditor and Controller
Last Ten Fiscal Years
Assessed Valuation of Taxable Property within the District
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Assessed Valuation of Property, In Thousands ($)
73
Fiscal
Year Purchases Sales Production Purchases Sales
2013 13,888,496 13,189,042 486,610 1,415,610 1,878,950
2012 13,304,444 12,510,894 285,190 1,381,300 1,652,833
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
(1) Rates are not presented on this schedule because the District has multiple water rates for various meter sizes
and customer classes and cannot represent rates in a meaningful manner with a weighted average rate. See
Water and Sewer rates on pages 78-79 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
Per 100 Cubic Feet
Water Purchases, Production, and Sales - Last Ten Fiscal Years
Recycled Water (1)
Per 100 Cubic Feet
Potable Water (1)
0
50,000
100,000
150,000
200,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Recycled Water Purchases Recycled Water Production Potable Water Purchases
Water Purchases, Productions, and Sales, in Hundred Cubic Feet (HCF)
74
Fiscal
Year Potable Recycled Total
2013 305 5 310
2012 457 24 481
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
Source: Otay Water District
Meter Sales by Type - Last Ten Fiscal Years
0
500
1,000
1,500
2,000
2,500
3,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Meter Sales by Type
Recycled Potable
75
Fiscal
Year Potable Recycled Sewer Total
2013 48,962 704 4,655 54,321
2012 48,665 696 4,655 54,016
2011 48,154 685 4,655 53,494
2010 47,845 683 4,646 53,174
2009 47,608 671 4,638 52,917
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
Source: Otay Water District
Number of Customers by Service Type - Last Ten Fiscal Years
0
10,000
20,000
30,000
40,000
50,000
60,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Number of Customers by Service Type
Potable Recycled Sewer
76
End of Year Collections in Total
Fiscal
Year
Total
Levies
Total
Collections (1)
End of the Year
Percent
Collected
Subsequent
Years
Percent
Collected
2013 4,777,865$ 4,849,246$ 98.53%(71,381)$ 101%
2012 4,732,898 4,725,649 100.15%7,249 100%
2011 5,149,055 5,123,709 100.49%25,346 100%
2010 5,209,639 5,259,442 99.05%(49,803) 101%
2009 5,786,115 5,712,831 101.28%73,284 99%
2008 5,830,398 5,754,836 101.31%75,563 99%
2007 5,241,379 5,263,367 99.58%(21,988) 100%
2006 3,939,976 3,935,983 100.10%3,993 100%
2005 3,603,586 3,455,852 104.27%147,734 96%
2004 4,286,961 4,108,581 104.34%178,380 96%
(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
$6,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Levies and Collections, in Thousands ($)
Levies Collections
77
System Fee
(Meter Size)2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Residential
3/4"16.74$ 14.58$ 14.58$ 14.58$ 13.83$ 12.30$ 11.30$ 10.25$ 10.25$ 10.25$
1"21.26 18.52 18.52 18.52 17.56 19.80 18.15 16.50 16.50 16.50
1.5"32.57 28.37 28.37 28.37 26.90 51.95 35.75 32.50 32.50 32.50
Non-Residential & Others
3/4"16.74 14.58 14.58 14.58 13.83 24.00 22.00 20.00 20.00 20.00
1"21.26 18.52 18.52 18.52 17.56 36.95 33.90 30.80 30.80 30.80
1.5"32.57 28.37 28.37 28.37 26.90 51.95 47.50 43.30 43.30 43.30
2"46.13 40.18 40.18 40.18 38.10 64.95 59.60 54.20 54.20 54.20
3"82.29 71.68 71.68 71.68 67.98 104.55 95.90 87.20 87.20 87.20
4"122.99 107.13 107.13 107.13 101.59 119.70 109.80 99.80 99.80 99.80
6"236.02 205.59 205.59 205.59 194.96 239.20 219.45 199.50 199.50 199.50
8"371.64 323.73 323.73 323.73 307.00 - - - - -
10"529.88 461.57 461.57 461.57 437.71 456.60 418.90 380.50 380.50 380.50
CWA and MWD Pass-through charges (Meter Size)
Residential
3/4"13.28 14.01 11.82 9.77 4.33 3.85 3.55 2.85 2.50 2.00
1"22.12 23.33 19.69 16.28 6.91 6.15 5.65 4.55 4.00 3.20
1.5"44.31 46.74 39.44 32.61 13.04 11.60 10.65 8.55 7.50 6.00
Non-Residential & Others
3/4"13.28 14.01 11.82 9.77 4.33 3.85 3.55 2.85 2.50 2.00
1"22.12 23.33 19.69 16.28 6.91 6.15 5.65 4.55 4.00 3.20
1.5"44.31 46.74 39.44 32.61 13.04 11.60 10.65 8.55 7.50 6.00
2"70.85 74.74 63.07 52.15 22.54 20.05 18.45 14.80 13.00 10.40
3"141.71 149.48 126.14 104.30 41.53 36.95 34.05 27.35 19.20 9.60
4"221.43 233.58 197.17 162.98 70.98 63.15 58.20 46.75 41.00 16.40
6"442.80 467.09 394.17 325.92 129.82 115.50 106.45 85.50 75.00 30.00
8"708.53 747.39 630.71 521.51 374.62 - - - - -
10"1,015.06 1,070.74 903.58 749.61 538.52 300.30 276.75 222.30 195.00 78.00
Fire Services
All Types 34.57 30.11 30.11 30.11 28.55 25.40 23.30 21.20 21.20 21.20
Sewer Fixed Fee 45.30 41.75 39.39 36.88 33.26 32.70 30.90 26.90 23.35 20.95
Source: Otay Water District
Water and Sewer Fixed Rates - Last Ten Fiscal Years
78
Usage Rate (1)2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
Tier 1 1.73$ 1.58$ 1.49$ 1.35$ 1.12$ 1.12$ 1.08$ 1.05$ 1.01$ 1.01$
Tier 2 2.69 2.45 2.31 2.10 1.74 1.85 1.78 1.73 1.67 1.67
Tier 3 3.50 3.19 3.00 2.73 2.26 2.01 1.94 1.88 1.81 1.81
Tier 4 5.39 4.92 4.63 4.21 3.48 2.94 2.83 2.75 2.65 2.13
Tier 5 - - - - - - 2.65
Tier 1 2.66 2.43 2.29 2.08 1.72 1.85 1.78 1.73 1.67 1.78
Tier 2 3.45 3.15 2.97 2.70 2.23 2.01 1.94 1.88 1.81 -
Tier 3 5.32 4.85 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
Commercial & Others (3)1.98 1.91 1.85 1.78 1.78
Government Fee (2)0.29 0.29 0.29 0.29 0.29 0.28 - - - -
Tier 1 2.84 2.59 2.44 2.22 1.84
Tier 2 2.92 2.66 2.50 2.27 1.88
Tier 3 2.96 2.70 2.54 2.31 1.91
Tier 1 3.87 3.53 3.32 3.02 2.50
Tier 2 3.95 3.60 3.39 3.08 2.55
Tier 3 4.01 3.66 3.45 3.14 2.60
Recycled (Commercial)1.67 1.65 1.57 1.51 1.51
Recycled (Publicly-Owned) (2)1.75 1.73 1.65 1.59 1.59
Tier 1 3.31 3.02 2.84 2.58 2.13
Tier 2 3.35 3.06 2.88 2.62 2.17
Tier 3 3.42 3.12 2.94 2.67 2.21
Energy Pumping Fee
Per 100 cubic feet (4)0.042 0.045 0.044 0.038 0.034 0.034 0.032 0.032 0.032 0.032
(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 $.29 per unit was charged to governmental customers this is in lieu of tax revenues. In the past an
additional $.08 is added to the publicly-owned companies water rate.
(3) Others include agricultural and temporary meters.
(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 $.042 per 100 cubic
feet of water for each 100 feet of lift above the base elevation of 450 feet. All water customers are in one of
twenty-nine zones based on elevation.
Source: Otay Water District
Recycled
Public Agency & Commercial
Landscape, Agricultural & Construction
Master Meter
Residential
Water and Sewer Variable Rates - Last Ten Fiscal Years
79
Annual % of
Business Type Revenues Water Sales
1. City of Chula Vista Publicly Owned 3,079,176$ 4.3%
2. State of California Publicly Owned 948,779 1.3%
3. County of San Diego Publicly Owned 801,457 1.1%
4. City of San Diego Publicly Owned 638,175 0.9%
5. Eastlake Country Club Commercial 540,498 0.7%
6. Eastlake III Community Commercial 539,273 0.7%
7. Sweetwater School District Publicly Owned 460,200 0.6%
8. Highlands Golf Company, LLC Commercial 454,086 0.6%
9. Chula Vista School District Publicly Owned 448,741 0.6%
10. SANDAG Publicly Owned 362,369 0.5%
Total (10 Largest)8,272,754$ 11.5%
Other Customers 63,914,327 88.5%
Total Water Sales 72,187,081$ 100.0%
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 (Recycled)419,942 1.1%
6. Singing Hills Residential/Irrigation (Potable)390,720 1.0%
7. McMillin Construction (Potable)377,591 1.0%
8. Eastlake Country Club Irrigation (Recycled)325,036 0.8%
9. California Bank & Trust Irrrigation (Recycled)243,689 0.6%
10. Sweetwate School District School/Irrigation (Recycled 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%
Source: Otay Water District
Ten Largest Customers - Current Year and Nine Years Ago
Customer Name
Customer Name
FISCAL YEAR 2013
FISCAL YEAR 2004
80
As a Share
Fiscal Population GO Revenue Capital Per of Personal
Year Estimate Bond COPS Bonds Notes Leases Total Capita Income (1)
2013 211,000 6,384,918$ 47,920,525$ (2)58,158,987$ -$ - 112,464,430$ 533.01$ 1.06%
2012 208,500 6,921,271 58,023,740 50,321,421 - - 115,266,432 552.84 1.14%
2011 206,500 6,803,577 59,715,531 51,180,822 6,010 - 117,705,940 570.00 1.19%
2010 206,000 7,283,127 61,489,612 51,255,224 359,744 - 120,387,707 584.41 1.28%
2009 195,000 7,726,575 63,213,693 - 701,516 - 71,641,784 367.39 0.83%
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%
(1) See the Demographics and Economic Statistics schedule on page 86 for personal income data.
(2) 2004 COPS were refunded with the issuance of 2013 Water Revenue Refunding Bonds in June 2013.
Source: Otay Water District
Ratios of Outstanding Debt by Type - Last Ten Fiscal Years
$0
$100
$200
$300
$400
$500
$600
$700
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Outstanding Debt, Per Capita
81
Adjusted Net Revenues
Fiscal Adjusted Operating Available for Debt Service Requirements (4)Coverage
Year Revenues (1)Expenses (2)Debt Service Principal Interest Total Factor (3)
2013 81,778,447$ 70,228,987$ $11,549,460 $2,800,000 $4,988,640 $7,788,640 148%
2012 74,484,691 64,028,686 10,456,005 1,850,000 6,050,746 7,900,746 132%
2011 69,653,627 60,117,245 9,536,382 1,795,000 5,084,450 6,879,450 139%
2010 65,573,058 57,084,904 8,488,154 1,745,000 2,720,258 4,465,258 190%
2009 63,739,773 57,076,567 6,663,207 1,700,000 2,342,048 4,042,048 165%
2008 63,732,275 56,420,286 7,311,989 800,000 2,567,884 3,367,884 217%
2007 69,442,301 52,413,282 17,029,019 790,000 1,513,834 2,303,834 739%
2006 58,572,428 47,520,682 11,051,746 745,000 917,790 1,662,790 665%
2005 56,597,040 43,936,109 12,660,931 650,000 869,715 1,519,715 833%
2004 57,195,289 38,980,975 18,214,314 635,000 891,796 1,526,796 1,193%
(1) Adjusted revenues exclude sewer revenues and taxes collected for Improvement District 27 and are inclusive
of capacity fees.
(2) Adjusted operating expenses exclude sewer expenses and depreciation expense.
(3) The District's bond covenants require a minimum coverage factor of 125%.
(4) Pledge debts are Certificates of Participation (COPS) and Revenue Bonds.
Source : Otay Water District
Pledged Revenue Coverage - Last Ten Fiscal Years
00%
200%
400%
600%
800%
1,000%
1,200%
2004 2005 2006 2007 2009 2010 2012 2013
Coverage Factor, in Percentage (%)
82
Net Bonded
Net Debt to Net Bonded
Fiscal Population Assessed Bonded Assessed Debt Per
Year Estimate Valuation Debt Valuation Capita
2013 211,000 22,836,336,223$ 6,384,918$ 0.03%30.26
2012 208,500 23,145,467,535 6,921,271 0.03%33.20
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
Source: Otay Water District
Last Ten Fiscal Years
Ratios of General Bonded Debt Outstanding
0.00%
0.01%
0.02%
0.03%
0.04%
0.05%
0.06%
0.07%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Bonded Debt Ratios, in Percentage (%)
83
Computation of Direct and Overlapping Bonded Debt
June 30, 2013
2012-13 Assessed Valuation: $22,836,336,223
Redevelopment Incremental Valuation: 268,012,087
Adjusted Assessed Valuation: $22,568,324,136
Total Overlapping Tax Increment Debt 1.38%
Total Debt District’s Share of
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/13 % Applicable (1) Debt 6/30/13
Metropolitan Water District $ 165,085,000 1.085% $ 1,791,172
Otay Water District Improvement District No. 27 6,235,000 100.000 6,235,000
Grossmont-Cuyamaca Community College District 182,648,154 15.625 28,538,774
Southwestern Community College District 235,884,345 40.589 95,743,097
Grossmont Union High School District 406,100,095 16.057 65,207,492
Sweetwater Union High School District 361,299,415 48.502 175,237,442
Chula Vista City School District 97,160,000 60.525 58,806,090
San Ysidro School District 126,152,611 52.495 66,223,813
Other School Districts 3,494,839,142 Various 56,129,675
Grossmont Healthcare District 221,337,076 14.293 31,635,708
City of Chula Vista Community Facilities District 205,885,000 100.000 205,885,000
Chula Vista City School District Community Facilities Districts 5,040,000 100.000 5,040,000
Sweetwater Union High School District Community Facilities Districts 164,632,249 10.894-100. 154,386,575
City 1915 Act Bonds 44,237,400 28.742-100. 33,755,483
California Statewide Communities Development Authority
San Diego County / Venture Community Center Assessment District 1,059,278 100.000 1,059,278
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $ 985,674,599
Ratios to 2012-13 Assessed Valuation:
Direct Debt ($6,235,000) .......................................................................................... 0.03%
Total Overlapping Tax and Assessment Debt .........................................................4.32%
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
San Diego County General Fund Obligations $ 399,780,000 5.976% $ 23,890,853
San Diego County Pension Obligations 753,897,748 5.976 45,052,929
San Diego Superintendent of Schools Certificates of Participation 17,462,500 5.976 1,043,559
Otay Water District Certificates of Participation 48,145,000 100.000 48,145,000
Grossmont and Southwestern Community College District General Fund Obligations 2,655,000 15.625 & 40.589 725,646
Grossmont Union High School District Certificates of Participation 942,500 16.057 151,337
Sweetwater Union High School District Certificates of Participation 4,125,000 48.502 2,000,708
Chula Vista City School District Certificates of Participation 140,585,000 60.525 85,089,071
San Ysidro School District Certificates of Participation 42,932,385 52.495 22,537,356
Other School District Certificates of Participation 9,655,000 Various 2,405,929
City of Chula Vista Certificates of Participation 128,375,000 68.609 88,076,804
City of San Diego General Fund Obligations 533,235,000 0.948 5,055,068
San Miguel Consolidated Fire Protection District Certificates of Participation 5,230,000 52.567 2,749,254
TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT $ 326,923,514
Less: Otay Water District Certificates of Participation (100% self-supporting) 48,145,000
TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT $ 278,778,514
OVERLAPPING TAX INCREMENT DEBT (Successor Agency): $ 21,625,000 17.075% $ 3,692,469
TOTAL GROSS DIRECT DEBT $ 54,380,000
TOTAL NET DIRECT DEBT $ 6,235,000
TOTAL OVERLAPPING DEBT $1,261,910,582
GROSS COMBINED TOTAL DEBT $1,316,290,582 (2)
NET COMBINED TOTAL DEBT $1,268,145,582
(1) The percentage of overlapping debt applicable to the District is estimated using taxable assessed property value. Applicable percentages were estimated by determining
the portion of the overlapping district’s assessed value that is within the boundaries of the water district divided by the overlapping district’s total taxable assessed value.
(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 Total Direct Debt ($54,380,000)................................................................ 0.24%
Net Total Direct Debt ($6,235,000) ...................................................................... 0.03%
Gross Combined Total Debt.............................................................................................5.76%
Net Combined Total Debt .................................................................................................5.55%
Source: California Municipal Statistics, Inc. and Otay Water District
84
2004
% of Total % of Total
County County
Employer Employees Rank Employment Employees Rank Employment
U. S. Department of Defense 136,664 1 9.16%-0.00%
Federal Government 46,100 2 3.09%39,700 1 2.87%
State of California 44,700 3 3.00%38,200 2 2.77%
UC San Diego 26,000 4 1.74%23,225 3 1.68%
County of San Diego 16,011 5 1.07%17,886 5 1.29%
San Diego Unified School District 14,438 6 0.97%20,472 4 1.48%
Sharp HealthCare 14,390 7 0.96%12,896 6 0.93%
Scripps Health 13,000 8 0.87%10,438 8 0.76%
Qualcomm Inc.11,775 9 0.79%-0.00%
City of San Diego 10,296 10 0.69%12,384 7 0.90%
US Postal Service, San Diego District -0.00%6,464 9 0.47%
San Diego State University -0.00%4,585 10 0.33%
Total 333,374 22.98%186,250 13.48%
Source: California Labor Market Info, San Diego Sourcebook, and San Diego Business Journal.
Principal Employers - Current Year and Nine Years Ago
2013
85
Personal Per Capita
Fiscal Income Personal Unemployment
Year Population (in 000'S)Income Rate
2013 (1) 3,197,400 161,100,000$ 50,400$ 7.40%
2012 3,143,429 154,200,000 48,674 9.30%
2011 3,140,069 149,600,000 47,776 10.40%
2010 3,095,313 137,525,000 45,627 10.50%
2009 3,173,407 134,696,000 44,412 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%
(1) Forecast
Source: SANDAG; 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%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Unemployment Rate, in Percentage (%)
86
Department 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
General Manager 5 5 6 6 6 6 6 6 6 4
Finance 30 32 35 38 37 36 35 34 34 33
Operations/Maintenance 65 66 66 68 70 71 71 72 71 70
Engineering 19 21 21 21 23 27 31 15 13 33
Administrative Services 17 18 19 20 20 20 19 19 20 21
IT and Strategic Planning 12 13 12 13 13 13 13 12 11 10
Development Services (1) - - - - - - - 17 17 -
Total 148 155 159 166 169 173 175 175 172 171
(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
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Total Employees
87
Meter Size 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
3/4" & 5/8"44,354 44,376 44,065 43,815 43,641 43,551 43,544 43,070 42,420 41,069
1"2,412 2,099 1,881 1,815 1,804 1,747 1,618 1,514 1,364 1,220
1-1/2"1,333 1,326 1,317 1,317 1,309 1,275 1,242 1,199 1,147 1,037
2"1,295 1,277 1,278 1,292 1,299 1,283 1,262 1,242 1,199 1,168
3"76 75 75 75 75 76 76 69 67 66
4"169 180 193 184 202 258 275 277 289 329
6"18 19 21 22 21 19 24 27 27 27
Others 9 9 9 8 9 10 7 11 12 15
Total 49,666 49,361 48,839 48,528 48,360 48,219 48,048 47,409 46,525 44,931
% Change 0.6%1.1%0.6%0.3%0.3%0.4%1.3%1.9%3.5%5.1%
Increase 305 522 311 168 141 171 639 884 1,594 2,181
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
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Active Meters by Size
88
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
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 725 724 723 723 722 722 680 663 623 609
40 40 40 40 38 36 37 37 36 37
Water Storage Capacity
(in Acre-Feet) 667.79 670.83 673.84 663.8 655.5 605.5 601.7 601.7 582.4 585.4
Total Water Connections
(No. of Meters in Service)49,150 49,493 49,094 48,662 48,522 48,376 47,615 47,409 46,525 44,931
Number of Pump Stations 21 21 21 21 21 21 21 22 21 21
Number of Potable Water
Valves 20,317 20,317 19,522 19,522 19,192 19,131 18,721 18,042 17,696 16,204
Sewer System
Miles of Sewer Lines 88.0 88.0 88.0 88.0 88.0 88.0 86.2 86.2 85.9 85.4
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 2013 (in Million
Gallons)422 423 481 474 483 503 514 528 506 479
Recycled System
Miles of Recycled Water Mains 99.0 99.0 98.0 98.0 97.0 93.0 83.0 77.6 76.4 70.7
Number of Pumping Facilities 3 3 3 3 3 3 3 2 2 2
Number of Operational
Storage Reservoirs in Service 4 4 4 4 4 4 4 4 4 4
Number of Acre-Feet Storage 134.1 134.1 134.1 134.1 133.2 135.0 134.1 97.3 97.3 97.3
Number of Recycled
Water Valves 1,430 1,430 1,380 1,380 1,338 1,314 1,245 1,189 1,155 1,097
Source : Otay Water District
Operating and Capital Indicators - Last Ten Fiscal Years
Number of Operational Storage
Reservoirs in Service
550
600
650
700
750
2004 2005 2006 2007 2008 2010 2011 2012 2013
Potable Water Mains, in Miles
89