HomeMy WebLinkAboutFY 2019 Comprehensive Annual Financial ReportOtay Water District
Comprehensive Annual Financial Report
for the Fiscal Years Ended June 30, 2019 and 2018
BOARD OF DIRECTORS
Mitch Thompson, Division 2 President
Mark Robak, Division 5 Vice President
Hector Gastelum, Division 4 Treasurer
Tim Smith, Division 1
Gary Croucher, Division 3
DISTRICT FINANCIAL MANAGEMENT
Mark Watton General Manager
Joseph R. Beachem Chief Financial Officer
Kevin Koeppen Assistant Chief, Finance
PREPARED BY
Finance Department
Otay Water District, Spring Valley, California
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Table of Contents
Introductory Section
Letter of Transmittal…………………………………………………………………………………………………………………………………….iii
Organization Chart…………………………………………………………………………………………...………………………………………… xii
List of Principal Officials…………………………………………………………………………………………………...……………………….. xiii
GFOA Certificate of Achievement……………………………………………………………………………………………...……………. xiv
Financial Section
Independent Auditors’ Report………………………………………………………………………………………………………...………..… 1
Management’s Discussion & Analysis…………………………………………………...…………………………………...…………..3
Basic Financial Statements:
Statements of Net Position..…………………………………………………………………………………………………………...….…..13
Statements of Revenues, Expenses, and Changes in Net Position………….…………………………...…… 15
Statements of Cash Flows……………………………………………………………….…………………………………………………...…..16
Notes to Financial Statements………………………………………………………………………………………………………………...18
Required Supplementary Information:
Schedule of Changes in the Net OPEB Liability and Related Ratios for Measurement
Periods Ended June 30, ………………………………………………………………………………………………………………………..69
Schedule of Contributions for Fiscal Year Ended June 30, ……………………………………………………………. 70
Schedule of Changes in the Net Pension Liability and Related Ratios for Fiscal Year Ended
June 30, …………………………………………………………. ………………………………………………………………………………………... 71
Schedule of Plan Contributions for Fiscal Year Ended June 30, ..…………………………………………………. 72
Statistical Section
Net Position by Component…………………………………………………………………………………………………………………….. 74
Changes in Net Position………………………………………………………………..………………………………………………………….. 75
Operating Revenues by Source…………………………………………………………………………………………….……………….. 76
Operating Expenses by Function………………………………………………………..…………………………………………………. 77
Non-Operating Revenues by Source……………………………………………………………………………………………………. 78
Non-Operating Expenses by Function………………………………………………………………………………………………. 79
Assessed Valuation of Taxable Property within the District…………………………………………………………. 80
Water Purchases, Production, and Sales……………………………………………...………………………….…………………. 81
Meter Sales by Type…………………………………………………………………….……………………………………………………………. 82
Number of Customers by Service Type………………………………………………………………………………………………..83
Property Tax Levies and Collections…………………………………………………………………………………………………….. 84
Water Fixed Rates ……….………………………………………………………………………………………………………………………….…. 85
Water Variable Rates…….…………………………………………………………………………………………………………………………... 87
Sewer Variable and Fixed Rates…….………………………………………………………………………..…………………………….. 88
Ten Largest Customers…………………………………………………………………………………………………………………………….. 89
Ratios of Outstanding Debt by Type…………………………………………………….……………………………………………….. 90
Pledged Revenue Coverage……………………………………………………………………………………………………………………. 91
Ratios of General Bonded Debt Outstanding………………………………………………………………….………………..… 92
Computation of Direct and Overlapping Bonded Debt………………………………………………………………… 93
Principal Employers…………………………..……………………………………….......................................................……………….. 95
Demographic and Economic Statistics……………………………………………………………………………………………….. 96
Number of Employees by Function………………………………………………………………………………………………………. 97
Active Meters by Size………………………………………………………………..………………………………………………………………. 98
Operating and Capital Indicators…………………………………………………………………………………………………………... 99
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October 24, 2019
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, 2019.
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 Teaman, Ramirez & Smith, Inc., 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, 2019, 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 financial statements
present fairly, in all material respects, the respective financial position of the District as of June 30, 2019
and are presented in conformity with GAAP. The Independent Auditors’ Report is presented as the first
component of the financial section of this report.
REPORTING ENTITY
The District is a publicly-owned water and sewer agency, authorized on January 27, 1956 as a
California special district by the State Legislature, with an entitlement to import water under the
provisions of the Municipal Water District Act of 1911. Its ordinances, policies, taxes, and rates for
service are set by five Directors, elected by voters in their respective divisions, to serve staggered four-
year terms on its Governing Board. The District is a “revenue neutral” public agency which does not
iii
operate at a profit. The District also performs cost of service studies to ensure 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 four District Chiefs,
oversees day-to-day operations of Administrative Services, Finance, Water Operations, and
Engineering. These and other lines of reporting are shown on the organization chart on page xii. Over
the last 63 years, the District has grown from a handful of customers and two employees to become
an organization operating a network of more than 933 miles of pipelines, 44 operational reservoirs, a
recycled 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
approximately 51,034
potable and 731 recycled
customers within 125
square miles of the
southeastern San Diego
metropolitan area. The
District purchases all
potable water sold to its
customers from the San
Diego County Water
Authority (CWA). The CWA
purchases much of this
water from the region’s
main water importer; the Metropolitan Water District of Southern California (MWD), and the Imperial
Irrigation District. Beginning in December 2015, the Claude “Bud” Lewis Carlsbad Desalination Plant,
began delivering water to the region. The District also entered into an agreement with the CWA that
brought regional water treatment closer to our customers and helped reduce dependence on water
treatment facilities located outside of San Diego County. In 2010, the District constructed two 10
million-gallon reservoirs and a 5.1-mile, 36-inch diameter pipeline to receive locally treated potable
water from Helix Water District’s R.M. Levy Water Treatment Plant and convey it to customers.
The District also owns and operates a wastewater collection and recycling system providing public
sewer service to approximately 4,729 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 Reclamation Facility, 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 Water Reclamation Plant.
Recycled water from these two sources is used to irrigate eastern Chula Vista schools, public parks,
roadway landscapes, a golf course, and various other approved uses per California Code of
iv
Regulations, Title 22. 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 quality and reliable water and wastewater services to the
customers of the Otay Water District, in a professional, effective, and efficient manner.
As part of a Governor mandate, the State Water Resources Control Board (SWRCB) adopted
Resolution No. 2016-0029, which allowed individual suppliers to self-certify there would be no supply
shortfall assuming three additional dry years. With the certification of the Carlsbad Desalination Plant,
additional water storage capacity, and upgraded conveyance systems, the San Diego region’s water
agencies can provide enough water supplies to meet customer demands, assuring there would be
no supply shortfall during a period of three dry years. The District, as a member of the CWA, is well
positioned for water coming from the Colorado River due to the Quantification Settlement Agreement
and the development of the desalination plant in Carlsbad.
In April 2017, Governor Jerry Brown issued an executive order officially ending the drought state of
emergency in most of California. The Governor also released the state’s long-term plan to better
prepare the state for future droughts and make conservation a way of life in California. On April 26,
2017, the SWRCB rescinded the conservation mandates but continued the water-use reporting
requirements and prohibitions against wasteful practices.
Building on efforts to make water conservation a way of life, and to better prepare the state for droughts
and climate change, Governor Brown signed two bills into law on May 31, 2018. Senate Bill 606 and
Assembly Bill 1668 established permanent water-use restrictions throughout California. The laws
outline an overall framework to guide the District and other urban water suppliers in setting water-use
targets and efficiency standards by June 30, 2022. The District will continue to work with the CWA,
other water agencies, and state officials over the next several years to define how the new laws will
be implemented, ensuring the regulations are both equitable and reflect local conditions.
Growth in San Diego County has improved over the last two years. The District’s Public Services
Division has seen improvements in recent years approving an average of 19 permits per month and
selling 507 and 592 water meters during fiscal years 2019 and 2018, respectively, versus 100 and 120
water meters in fiscal years 2017 and 2016, respectively. As of July 2018, it is estimated that the District
served approximately 224,000 residents. The San Diego Association of Governments (SANDAG), the
regional planning agency, has estimated the District’s approximate growth will be 1.4% per year for
the next decade. Using historical data and considering current economic conditions, staff has
moderated this projection to a growth rate of 1.0% for FY 2020. The District projects an ultimate
customer population of 308,000 residents by 2050.
KEY LEGISLATION
On May 2, 2019, Department of Water Resources and the U.S. Bureau of Reclamation withdrew their
joint water right change petition for the California WaterFix Project, abandoning its two-tunnel
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California WaterFix project. The state asked the U.S. Fish & Wildlife Service and National Marine
Fisheries Service to withdraw their biological opinions for the project, which ended the WaterFix
hearing, and withdrew the application for Section 401 water quality certification.
To broaden the state’s approach on water, as California faces a range of existing challenges, on April
29, 2019, Governor Newsom issued Executive Order N-10-19 to modernize Delta Water conveyance.
The order directs the secretaries of the California Natural Resources Agency to inventory and assess
current planning to modernize conveyance through the Delta with a new single tunnel project .
As part of its efforts to keep stakeholders engaged in the conservation legislation (AB 1668 and SB
606), in May 2019, the SWRCB held its first quarterly Urban Overview Meeting. The SWRCB’s goal is to
keep the District, other water agencies, and stakeholders apprised of the big picture through progress
reports provided by each of the eight urban project workgroups. The workgroups include the following:
Model Water Efficient Landscape Ordinance; Landscape Area Measurement; Wholesale Water Loss;
Water Use Studies; Standard, Methodologies and Performance Measures; Urban Water Management
Plan Guidebook; Annual Water Supply and Demand Assessment; and Data Streamlining.
An ongoing concern is access to safe and affordable drinking water in the state. The District generally
supports initiatives that improve its ability to obtain cost-effective financing for the construction,
operation, and maintenance of public facilities. The District has played an active role in opposing
unfunded federal and state mandates and initiatives that reallocate the District’s revenues or reserves
to statewide purposes, including the proposed imposition by the state of a “public goods charge,” or
excise tax, to pay the interest or principal on a statewide water bond. Several of the efforts to impose
the water tax would have required significant administrative costs to water agencies, which would be
counterproductive to the effort. In July, the Governor signed SB 200 (Monning), which establishes a
stable ongoing fund to help communities access safe drinking water, putting to rest the water tax
discussion for this year.
Senate Bill 998 (Dodd), a measure which places limitations on water agency shutoff policies and
procedures, passed during the 2018 legislative session and has a financial impact on the District and
its ratepayers. The new measure will increase the District’s service shut-off days for delinquent
accounts from 45 days to no less than 60 days, create a cap on reconnection fees, and grant authority
to both the SWRCB and the Attorney General to enforce provisions of the bill. Because the new law
impacts existing practices, policies, and procedures, the District, along with other urban and
community water systems that provide water to more than 200 service connections, continue to
evaluate the details of SB 998 so the District is prepared for when the new requirements go into effect
on February 1, 2020.
STRATEGIC PLAN
The Strategic Plan is the core document which ensures alignment of common goals across the
agency, and a unified approach toward plan execution. The plan is extensively reviewed and revised
every three to four years. The current Strategic Plan (covering fiscal years 2019-2022) is a continuation
of the 2015-2018 plan and is the sixth multi-year plan.
vi
Since its establishment, the District’s motto has been “Dedicated to Community Service.” From modest
beginnings in 1956 through today, the District continues its commitment of providing outstanding
service to the residents and businesses it has the honor to serve. This serves as a great reminder to
our staff and customers as to why the District exists.
During the District’s early years, a key focus of its preceding strategic plans was to meet the demands
of growth. Today, the District’s four-year Strategic Plan still has the word “growth” in its theme of
“Growth and Sustainability,” but “sustainability” is a critical element in managing long-term
maintenance and replacement of infrastructure. Moving from growth to sustainment is based on the
recognition that as an organization evolves, fewer resources may be needed to support growth, but
greater effort is required to maintain and upgrade infrastructure and assets. This is important because
in this phase of the lifecycle, an organization derives income more from customer rates and less from
developer fees.
Therefore, future rise in maintenance and replacement costs will place increased pressure on
customer rates. To balance rate pressure, while also maintaining the organization’s infrastructure,
investments, and a strong financial position, the management team must place greater emphasis on
efficiencies within the agency, including innovation and continued technology adoption.
The District’s Strategic Plan also serves as a roadmap to execute its objectives and track day-to-day
performance metrics, which ensure deliverables are being met, and essential work processes are
continuously being fine-tuned, having a positive impact on the long-term financial health of the District.
Using the Balanced Scorecard framework, management and staff share a focused strategy to ensure
the District is moving along the right path and maximizing its limited resources.
In effect, the District leverages its investments in technology to do more with the same or fewer
resources. With sound planning, prudent fiscal management, community focus, and a work culture
prepared to adapt to new challenges, the District is well positioned to support its growing customer
base, while sustaining the quality of water service its customers expect.
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. The budget is designed and presented for the general needs of the District,
its staff, and its 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.
vii
BUDGET SUMMARY
The District’s operating expenditures consist of three major sectors: potable water, recycled water, and
sewer. The total budget is $105,806,300 for FY 2020. Revenues from potable and recycled water sales
are projected to be $93,768,300, about $2,591,200 (2.7%) lower than the FY 2019 budget. Water sales
volumes are expected to decrease by 8.3% versus FY 2019. The MWD and CWA water supply rate
increased by 3.4% due to the high cost of supply programs, higher energy costs, and increasing
operating costs. District staff projects sewer revenues to be $2,890,000, approximately $32,600 less
than the FY 2019. The remaining budgeted revenues of $9.1 million come from various special fees,
assessments, and non-operating revenues. An increase of 4.7% for water rate has been budgeted for
January 1, 2020, while an 8.9% rate increase for sewer has been budgeted, effective January 1, 2020.
The 2019-20 Capital Improvement Program (CIP) budget consists of 97 projects and a budget of $17.2
million. The budget emphasizes maintenance of existing infrastructure and long-term planning for
ongoing programs to meet population growth while functioning within fiscal constraints. This year’s
six-year CIP budget is similar in size to prior year’s projection and decreased only by $4.5 million from
$92.8 to $88.3. The budget emphasizes long-term planning for ongoing programs while functioning
within fiscal constraints and population growth.
THE FUTURE
The District continues its commitment to diversify water resources, reducing dependence on
traditional water supplies from the Colorado River and the Sacramento-San Joaquin Bay-Delta. The
coming years will continue to pose challenges for those in California’s water community. Due to
heavy rains in FY 2019, potable sales volumes decreased 7% from FY 2018 levels. While the District
expects rain levels to return to average levels, homeowners and businesses have implemented
conservation measures that are expected to generate permanent reductions in water use. As a result,
the District expects sales volumes to recover only 4% in FY 2020 from FY 2019 level but remain 5%
below FY 2018 levels.
SAN DIEGO COUNTY WATER SUPPLY
San Diego County imports about 73% of its water from the Colorado River and Northern California.
Since these sources face legal and environmental constraints, the region has been exploring other
ways to ensure an adequate water supply, including increased water recycling, incorporating water-
use efficiency and conservation programs as a way of life, increased water storage, groundwater
desalination, and seawater desalination.
OTAY MESA DESALINATION CONVEYANCE AND DISINFECTION SYSTEM
PROJECT (P2451)
In light of the District’s continuing commitment to conserve and recycle water and to diversify the
water resources that serve its customers, the District is preparing for the future by leveraging its unique
proximity to the U.S.-Mexico border to create a potential cross-border regional alternative to traditional
water sources. The proposed Rosarito desalination plant and District’s Otay Mesa Conveyance and
Disinfection System Project could provide a new drought-proof water supply to its customers. In May
viii
2017, the U.S. Department of State granted a presidential permit to allow the Otay Water District to
build a potable water pipeline to cross the U.S.-Mexico border. This permit authorized the District to
“construct, connect, operate, and maintain cross-border water pipeline facilities for the importation of
desalinated seawater at the International Boundary between the United States and Mexico in San
Diego County, California.”
Although the project has been halted, purchasing and transporting excess desalinated ocean water
from the proposed Rosarito desalination plant has been a component of the District’s water supply
diversification efforts. If the project does move forward, the District’s project has already undergone
environmental review as required by the California Environmental Quality Act and National
Environmental Policy Act and has obtained a U.S. Fish and Wildlife biological permit. The District
recognizes that such a project requires rigorous safeguards and review to ensure the protection of
public health and has discussed the potential water supply project with the California Water Resources
Control Board’s Division of Drinking Water to ensure that water imported from Mexico meets the same
water quality drinking standards as water from regional lakes, from the Claude “Bud” Lewis Carlsbad
Desalination Plant, and from the City of San Diego’s Pure Water Program.
CAPITAL IMPROVEMENT PROGRAM (CIP)
The District provides water and sewer service to a population of more than 225,000 customers,
including residential, business, government, industrial, and agricultural water users across urban,
suburban, and rural areas. The District’s service area population is projected to grow by 37% to 308,000
residents by 2050. To ensure a reliable water supply and sewer system for the future including
sustaining the current infrastructure, the District has developed several future planning documents,
which provide a guide to defining the District’s proposed projects. These planning documents include:
The District’s 2015 Water Facilities Master Plan Update, Wastewater Management Plan, 2015 Urban
Water Management Plan, 2015 Integrated Water Resources Plan, and 2019-2022 Strategic Plan.
The major projects planned for delivery over the next six fiscal years include:
• 711-2 Pump Station Replacement (P2578)
• Various Waterline Replacements (11 Total)
• Reservoir Improvements (17 Total)
•Sewer Basin Improvements (S2049, S2050, and S2053)
• 870-2 Pump Station Replacement (P2083)
• Automated Meter Reading (P2604 and R2143) and Meter Replacement (P2594, P2662,
R2148, and R2152)
ACCOUNTING SYSTEM
The Finance Department is responsible for providing financial services to the District including
financial accounting; reporting; payroll; accounts payable; investment of funds; billing and collection
of water and wastewater charges; taxes; and other revenues. The District’s books and records are
maintained on an enterprise basis, matching revenues against the costs of providing services.
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Revenues and expenses are recorded on the accrual basis in the period in which revenues are earned
and expenses are incurred.
INTERNAL CONTROLS
The 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 finances related legal and contractual provisions including bond
covenants and fiduciary responsibilities.
AWARDS AND ACKNOWLEDGMENTS
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
to Otay Water District for its
Comprehensive Annual Financial Report for the fiscal year ended June 30, 2018. To earn 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. Staff believes that the District’s
current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement
Program’s requirements and is submitting it to the GFOA to determine its eligibility for another
certificate.
In addition to the the District has
received the following awards:
The Government Finance Officers Association of the United States and Canada presented a
to Otay Water District, for its annual budget for the
Fiscal Year 2018-2019. To achieve 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.
The California Society of Municipal Finance Officers presented the District with the Certificate
of Award for
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The California Society of Municipal Finance Officers presented the District with the Certificate
of Award for Excellence in Capital Budgeting for Fiscal Year 2018-2019.
I would like to thank all the staff involved for their efforts in preparing this Comprehensive Annual
Financial Report and for their hard work to ensure a successful outcome. I would also like to thank
the firm of Teaman, Ramirez & Smith, Inc., for their professional work and opinion.
To the Board of Directors, staff and I acknowledge and appreciate the Board's continued-support and
direction in achieving excellence in financial management.
Joseph R. Beachem Chief Financial Officer
General Manager
xi
Organization Chart
District Position Count – (137 Positions)
Citizens and Customers Board of Directors
General Manager (5)
Safety and
Security
Administration
Purchasing
and Facilities
Controller and
Budgetary
Services
Treasury and
Accounting
Services
Customer
Service
Meter
Services
Water System
Operations
Utility
Maintenance/
Construction
Water Resources,
Planning, Design
and
Environmental
Administrative
Services
(23)
Human
Resources
Information
Technology
and Geographic
Information
System
Finance
(31)
Strategic
Planning
Public Services
and
Field Services
Engineering
(26)
Water
Operations
(52)
Collection/
Treatment/
Reclamation
Operations
xii
List of Principal Officials
Tim Smith
Division 1
Mitch Thompson
President
Division 2
Mark Robak
Vice President
Division 5
Gary Croucher
Division 3
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. The District does,
however, answer to the public 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.
Hector Gastelum
Treasurer
Division 4
Mission Statement
To provide exceptional water and
wastewater service to its customers, and
to manage District resources in a
transparent and fiscally responsible
manner.
xiii
GFOA CERTIFICATE OF ACHIEVEMENT
FOR EXCELLENCE IN FINANCIAL REPORTING
The Government Finance Officers Association (GFOA) awarded a
to the Otay Water District for its
CAFR for the fiscal year ended June 30, 2018. This is the fifteenth 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.
xiv
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Opinions
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Richard A. Teaman, CPA David M. Ramirez, CPA Javier H. Carrillo, CPA Bryan W͘Daugherty, CPA Joshua :͘Calhoun, CPA
4201 Brockton AveŶƵĞ Suite 100Riverside CA 92501 951.274.9500d > 951.274.7828 FAX www.trscpas.com
1
Emphasis of Matters
As described in Note 1 to the basic financial statements, as of June 30, 2019, the District adopted the provisions of
Governmental Accounting Standards Board Statement No. 89, Accounting for Interest Cost Incurred before the End
of a Construction Period. Our opinion is not modified with respect to this matter.
As described in Note 1 to the basic financial statements, as of June 30, 2018, the District adopted the provisions of
Governmental Accounting Standards Board Statement No. 75, Accounting and Financing Reporting for
Postemployment Benefits Other Than Pensions. 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 and required supplementary information on pages 3-10 and 69-72 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 opinions 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 a 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.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 24, 2019, on our
consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely
to describe the scope of our testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on the effectiveness of the District’s 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.
Riverside, California
October 24, 2019
2
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, 2019. Please read it in conjunction with the District’s financial statements that follow
Management’s Discussion and Analysis. All amounts, unless otherwise indicated, are expressed in
millions of dollars.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the District’s basic financial
statements, which are comprised of the following: 1) Statements of Net Position, 2) Statements of
Revenues, Expenses, and Changes in Net Position, 3) Statements 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 presents information on the District’s assets, deferred outflows of
resources, liabilities, and deferred inflows of resources, with the difference reported as Total Net Position.
Over time, increases or decreases in net positions may serve as a useful indicator of whether the financial
position of the District is improving or weakening.
The 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 presents information on cash receipts and payments for the fiscal year.
The provides additional information that is essential to a full
understanding of the data supplied in each of the specific financial statements listed above.
Financial Highlights
The assets and deferred outflows of resources of the District exceeded its liabilities and deferred inflows of resources at
the close of the most recent fiscal year by $387.6 million Of this amount, $28.7 million
may be used to meet the District’s ongoing obligations to residents and creditors.
Total assets decreased by $6.5 million or 1.17% during Fiscal Year 2019, to $548.0 million, due primarily to depreciation
and a $31.8 million advance payment to CALPERS plan, reducing the District’s unfunded pension liability. These
reductions are partially offset by Water Bond proceeds and investments in capital infrastructure.
3
MANAGEMENT’S DISCUSSION AND ANALYSIS
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the District’s progress in funding its obligation to provide
retirement benefits to its employees.
Financial Analysis:
As noted, net position may serve, over time, as a useful indicator of an entity’s financial position. In the
case of the District, assets and deferred outflows of resources exceeded liabilities and deferred inflows of
resources by $387.6 million at the close of the most recent fiscal year.
The largest portion of the District’s net position, $354.6 million (91%), reflects its investment in capital
assets, plus unused debt proceeds, less any remaining outstanding debt used to acquire those assets.
The District uses these capital assets to provide services to customers; consequently, these assets are not
available for future spending. Although the District’s investment in its capital assets is reported effectively
as a resource, it should be noted that the resources needed to repay the debt must be provided from other
sources, since the capital assets themselves cannot be used to liquidate these liabilities.
4
MANAGEMENT’S DISCUSSION AND ANALYSIS
Statements of Net Position
(In Millions of Dollars)
2019 2018 2017
Assets
Current and Other Assets $ 89.7 $ 103.6 $112.9
Capital Assets 458.3 450.9 450.2
Total Assets 548.0 554.5 563.1
Deferred Outflows of Resources
Deferred Amount on Refunding 0.0 0.0 0.2
Deferred Actuarial Pension Costs 39.0 10.2 10.7
Deferred Actuarial OPEB Costs 2.2 2.2 0.0
Total Deferred Outflows of Resources 41.2 12.4 10.9
Liabilities
Long-Term Debt Outstanding 114.3 91.2 95.6
Net Pension Liability 48.4 49.6 45.2
Net OPEB Liability 3.4 4.7 0.0
Other Liabilities 33.8 32.4 28.2
Total Liabilities 199.9 177.9 169.0
Deferred Inflows of Resources
Deferred Actuarial Pension Costs 1.2 0.9 3.8
Deferred Actuarial OPEB Costs 0.5 0.6 0.0
Total Deferred Inflows of Resources 1.7 1.5 3.8
Net Position (1)
Net Investment in Capital Assets 354.6 355.6 351.0
Restricted for Debt Service 4.3 4.2 4.3
Unrestricted 28.7 27.7 45.9
Total Net Position $ 387.6 $ 387.5 $401.2
The District’s operations and population continue to grow, albeit at slower rates than the housing boom
years. Much of this growth has and will continue to occur in the residential sector, especially in the area of
multi-family dwellings, as well as in the commercial area. The District still has available land to develop
unlike other parts of the County, as well as low unemployment and job creation, which has spurred the
development in the service area.
In FY 2019, the District’s Capital Assets increased by $18.9 million before accumulated depreciation. (See
Note 4 in the Notes to Financial Statements). The District also saw an increase in long-term debt of $23.1
5
MANAGEMENT’S DISCUSSION AND ANALYSIS
million due to the issuance of the 2018 Water Revenue Bonds partially offset by annual debt service
payments (See Note 5 in the Notes to Financial Statements).
Deferred outflows of Resources increased by $28.8 million in FY 2019 and by $1.5 million in FY 2018. The
significant increase in FY 2019 is due to the $31.8 additional funding to CALPERS which will reduce the Net
Pension Liability in FY 2020.
At the end of FY 2019, the District can report positive balances in all categories of net position. This
situation also held true for the prior two fiscal years.
Statements of Revenues, Expenses, and Changes in Net Position
(In Millions of Dollars)
2019 2018 2017
Water Sales $ 86.8 $ 92.6 $ 83.7
Wastewater Revenue 3.0 2.9 3.0
Connection and Other Fees 2.2 2.0 1.8
Non-operating Revenues 10.5 7.9 10.1
Total Revenues 102.5 105.4 98.6
Depreciation Expense 16.8 17.5 17.8
Other Operating Expenses 86.9 88.3 78.8
Non-operating Expenses 8.1 5.0 7.7
Total Expenses 111.8 110.8 104.3
Loss Before Capital
Contributions (9.3) (5.4) (5.7)
Capital Contributions 9.4 9.5 5.6
Change in Net Position 0.1 4.1 (0.1)
Beginning Net Position, As Previously Stated 387.5 401.2 401.3
Prior Period Adjustment 0.0 (17.8) 0.0
Beginning Net Position, As Restated 387.5 383.4 401.3
Ending Net Position $ 387.6 $ 387.5 $ 401.2
Water Sales decreased by $5.8 million in FY 2019 due to a decrease in units sold as the result of above
average rainfall, partially offset by increases in water rates. Water Sales increased by $8.9 million in FY
2018 due to increases in units sold as a result of the removal of state mandates, dry winters, increased
development and increases in water rates.
6
MANAGEMENT’S DISCUSSION AND ANALYSIS
Other Operating Expenses decreased by $1.4 million in FY 2019 and increased by $9.5 million in FY 2018,
predominantly due to the decrease and increase in water units purchased as a result of changes in water
sales volumes in FY 2019 and FY 2018, respectively.
Certain planning and environmental study costs associated with capital projects, such as the North &
South District Interconnection in 2019, and recycled permanent moratorium in Otay Mesa for 2018, do not
qualify as capital costs under Generally Accepted Accounting Principles and are included in the
miscellaneous (non-operating) expenses of the District. For FY 2019 and FY 2018, those expenses were
$3.3 million and $0.9 million, respectively.
Connection and Other Fees increased by $0.2 million in FY 2019 and FY 2018. Capital Contributions
decreased by $0.1 million in FY 2019 brought about by the steady economy as compared to an increase of
$3.9 million in FY 2018.
Non-operating Revenues
Non-operating Revenues by Major Source
(In Millions of Dollars)
2019 2018 2017
Taxes and Assessments $ 4.7 $ 4.5 $ 4.1
Rents and Leases 1.4 1.4 1.4
Other Non-operating Revenue 4.4 2.0 4.6
Total Non-operating Revenues $ 10.5 $ 7.9 $ 10.1
The District’s total non-operating revenues increased by $2.6 million in FY 2019 due to increases in
investment earnings, taxes and transfer of capacity revenue from capital contribution to fund project
expenditures that do not qualify as capital expenditures. Total non-operating revenues in FY 2018
decreased by $2.2 million due to decreases in investment income, capacity fee revenue and an increase in
losses from capital asset disposals.
Capital Assets and Debt Administration
The District’s capital assets (net of accumulated depreciation) as of June 30, 2019, totaled $458.3 million.
Included in this amount is land, which is a non-depreciable asset. The District’s net capital assets
increased by 1.64% and .16% for FY 2019 and FY 2018 respectively.
7
MANAGEMENT’S DISCUSSION AND ANALYSIS
Capital Assets
(In Millions of Dollars)
As indicated by figures in the table above, majority of capital assets added during both fiscal years were
related to the water and sewer systems. In addition, a majority of the cost of construction-in-progress is
also related to water systems. Additional information on the District’s capital assets can be found in Note 4
of the Notes to Financial Statements.
In November 2018, the District issued $32.4 million in Water Revenue Bonds, Series 2018 to provide funds
for construction of water storage, treatment and transmission facilities and advance refunded $6.9 million
of the 1996 Certificates of Participation. As of June 30, 2019, approximately $15.3 million of the bond
proceeds remain in cash and investments.
At June 30, 2019, the District had $114.3 million in outstanding debt (net of $4.7 million of maturities
occurring in FY 2020), which consisted of the following:
General Obligation Bonds $ 2.2
Revenue Bonds 112.1
Total Long-Term Debt $ 114.3
2019 2018 2017
Land $ 14.4 $ 14.4 $ 14.4
Construction in Progress 33.2 17.6 14.2
Potable Water System 488.8 484.2 483.8
Recycled Water System 114.8 114.7 112.3
Sewer System 48.5 48.2 44.5
Field Equipment 8.6 8.5 9.0
Buildings 19.2 20.1 20.6
Transportation Equipment 3.5 3.4 3.3
Communication Equipment 3.4 3.5 3.4
Office Equipment 16.8 17.7 17.6
751.2 732.3 723.1
Less Accumulated
Depreciation (292.9) (281.4) (272.9)
Net Capital Assets $ 458.3 $ 450.9 $ 450.2
8
MANAGEMENT’S DISCUSSION AND ANALYSIS
Additional information on the District’s long-term debt can be found in Note 5 of the Notes to Financial
Statements.
Prior Period Adjustment
The Governmental Accounting Standards Board (GASB) issued Statement No. 75,
for periods beginning after June 15, 2017. The District implemented these standards in
FY 2018. The result of the implementation of these standards was to decrease the net position at July 1,
2017 by $17.8 million, which recognizes net OPEB liability, deferred outflows of resources, deferred inflows
of resources, and expenses related to the OPEB plan.
Fiscal Year 2019-2020 Budget
Economic Factors
The San Diego region imports 80% of its potable supply, so factors such as local rainfall as well as weather
conditions elsewhere in the western portion of the nation can affect the region. San Diego received above
average rainfall in FY 2019, and the District anticipates an average rainfall pattern in the coming years.
Between 2008 and 2016, the District’s water sales declined by nearly 30%. This decrease was driven by
many factors including the economic downturn caused by the great recession, increases in the price of
imported water, State mandated cuts in potable water use due to the prolonged statewide drought, and
reductions as a result of increasing conservation efforts. Decreases in water sales during this period were
offset by corresponding decreases in water purchases and District managed costs such as reduced
employee count and internal cost cuts, achieved through automation and streamlining of processes. Due
to record rain and snowfall, the state mandated conservation ended in FY 2017. Above average rainfall has
led to water sales volume decreasing 7.4% in 2019 while an increase of 9.0% in 2018 was due to the
removal of state mandates, dry winters and increased development. The District is budgeting an 8.3%
sales volume decrease in FY 2020 compared to the FY 2019 budget. The FY 2019 budget assumed that
rainfall would be less than average and comparable to FY 2018. The FY 2020 budget volume is based on
3-year average sales volumes.
The District continues to respond to the challenges presented by growth, State mandates, and the
potential of drought, by creating new opportunities and new organizational efficiencies. By utilizing and
continuing to refine its Strategic Business Plan, it has captured the Board of Director’s vision and united its
staff in a common mission. The District has achieved several significant accomplishments due to its
successful adherence to its Strategic Business Plan. The District is not only poised to continue
successfully providing an affordable, safe, and reliable water supply for the people of its service area but is
set to reap the rewards of greater efficiencies and economies of scale.
9
MANAGEMENT’S DISCUSSION AND ANALYSIS
The District is currently at about 69% of its projected ultimate population, serving approximately 225,000
people. Long-term, this percentage should continue to increase as the District's service area continues to
develop and grow. By 2050, the District is projected to serve approximately 308,000 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 the San Diego County Water Authority (CWA), who in turn
purchases its water from the Metropolitan Water District (MWD), the Imperial Irrigation District (IID), and
Poseidon Resources (Channelside) LP.
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 directly and from the Helix Water
District via a 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 these, benefits can be achieved by both parties by using
excess capacity of another agency, and diversifying local supply, thereby increasing reliability.
Financial
The District is budgeted to deliver approximately 26,949.2 acre-feet of potable water to 51,034 potable
customer accounts during FY 2019-2020. Management feels that these projections are realistic after
accounting for low growth, supply changes, and a focus on conservation. A combination of factors,
including weather patterns and economic uncertainty, have created challenges in developing projections
for the current fiscal year. Unemployment is currently at historical lows and there is minimal distressed
activity in the commercial and residential resale market. The housing market has experienced higher
demand compared to the previous years and unemployment is at record lows. District staff projects that
over the next six years the District will sell another 2,600 meters which translates to 3,230 equivalent
dwelling units (EDUs). This growth is estimated to increase sales volumes by an average of 1% per year
over the next five years. While all these factors impact the region’s water usage, 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, customers, 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.
10
11
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12
2019 2018
ASSETS
Current Assets:
Cash and Cash Equivalents (Notes 1 and 2)34,024,168$ 24,147,997$
Restricted Cash and Cash Equivalents (Notes 1 and 2)19,114,137 80,477
Investments (Note 2)18,951,991 30,866,180
Board Designated Investments (Note 2)2,537,589 29,879,617
Restricted Investments (Notes 1 and 2)460,060 4,166,548
Accounts Receivable, Net 11,787,954 12,109,378
Accrued Interest Receivable 341,518 295,947
Taxes and Availability Charges Receivable, Net 187,203 215,704
Restricted Taxes and Availability Charges Receivable, Net 38,070 27,480
Inventories 775,546 822,737
Prepaid Items and Other Receivables 1,493,831 1,018,820
Total Current Assets 89,712,067 103,630,885
Capital Assets (Note 4):
Land 14,403,823 14,406,778
Construction in Progress 33,149,164 17,618,059
Capital Assets, Net of Depreciation 410,756,360 418,825,726
Total Capital Assets, Net of Depreciation 458,309,347 450,850,563
Total Assets 548,021,414 554,481,448
DEFERRED OUTFLOWS OF RESOURCES
Deferred Actuarial Pension Costs (Note 7)39,022,818 10,186,229
Deferred Actuarial OPEB Costs (Note 8)2,209,574 2,202,004
Total Deferred Outflows of Resources 41,232,392$ 12,388,233$
Continued
STATEMENTS OF NET POSITION
June 30, 2019 and 2018
The accompanying notes are an integral part of this statement.
13
2019 2018
LIABILITIES
Current Liabilities:
Current Maturities of Long-term Debt (Note 5)4,725,000$ 4,040,000$
Accounts Payable 14,061,824 15,437,565
Accrued Payroll Liabilities 639,247 694,859
Other Accrued Liabilities 5,519,259 4,089,640
Customer and Developer Deposits 3,601,094 3,340,010
Accrued Interest 1,826,242 1,380,446
Unearned Revenues 135,223 233,251
Liabilities Payable from Restricted Assets:
Restricted Accrued Interest 36,733 45,200
Total Current Liabilities 30,544,622 29,260,971
Non-current Liabilities:
Long-term Debt (Note 5):
General Obligation Bonds 2,156,789 2,823,143
Certificates of Participation -6,893,293
Revenue Bonds 112,114,228 81,465,550
Net Pension Liability 48,388,906 49,582,316
Net OPEB Liability 3,415,025 4,710,492
Other Non-current Liabilities 3,337,674 3,117,705
Total Non-current Liabilities 169,412,622 148,592,499
Total Liabilities 199,957,244 177,853,470
DEFERRED INFLOWS OF RESOURCES
Deferred Actuarial Pension Costs (Note 7)1,157,175 936,234
Deferred Actuarial OPEB Costs (Note 8)544,777 539,449
Total Deferred Inflows of Resources 1,701,952 1,475,683
NET POSITION
Net Investment in Capital Assets 354,639,520 355,628,577
Restricted for Debt Service 4,248,007 4,247,025
Unrestricted 28,707,083 27,664,926
Total Net Position 387,594,610$ 387,540,528$
June 30, 2019 and 2018
STATEMENTS OF NET POSITION - Continued
The accompanying notes are an integral part of this statement.
14
Statements of Revenues, Expenses, and Changes in Net Position
2019 2018
OPERATING REVENUES
Water Sales 86,756,222$ 92,595,195$
Wastewater Revenue 2,961,157 2,865,520
Connection and Other Fees 2,234,787 2,013,057
Total Operating Revenues 91,952,166 97,473,772
OPERATING EXPENSES
Cost of Water Sales 60,065,964 62,321,213
Wastewater 2,784,579 2,501,240
Administrative and General 24,070,648 23,445,578
Depreciation 16,807,797 17,466,318
Total Operating Expenses 103,728,988 105,734,349
Operating Income (Loss)(11,776,822)(8,260,577)
NON-OPERATING REVENUES (EXPENSES)
Investment Earnings 1,978,392 723,860
Taxes and Assessments 4,671,182 4,481,719
Availability Charges 723,246 697,724
Gain (Loss) on Disposal of Capital Assets (1,058,571)(1,709,538)
Rents and Leases 1,384,211 1,439,247
Miscellaneous Revenues 2,800,613 2,255,605
Donations (118,040)(123,050)
Interest Expense (4,713,883)(3,941,321)
Miscellaneous Expenses (3,293,055)(900,247)
Total Non-operating Revenues (Expenses)2,374,095 2,923,999
Income (Loss) Before Capital Contributions (9,402,727)(5,336,578)
Capital Contributions 9,456,809 9,506,192
Change in Net Position 54,082 4,169,614
Total Net Position, Beginning, As Previously Reported 387,540,528 401,186,989
Prior Period Adjustment (Note 14)- (17,816,075)
Total Net Position, Beginning, As Restated 387,540,528 383,370,914
Total Net Position, Ending 387,594,610$ 387,540,528$
For the Years Ended June 30, 2019 and 2018
The accompanying notes are an integral part of this statement.
15
2019 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers 90,299,887$ 95,612,497$
Receipts from Connections and Other Fees 2,234,787 2,013,057
Receipts from Property Rents and Leases 1,384,211 1,316,197
Other Receipts 2,702,585 2,183,296
Payments to Suppliers (63,834,433)(61,807,704)
Payments to Employees (54,403,110)(21,689,670)
Other Payments (3,411,095)(899,502)
Net Cash Provided By (Used For) Operating Activities (25,027,168)16,728,171
CASH FLOWS FROM NONCAPITAL AND RELATED
FINANCING ACTIVITIES
Receipts from Taxes and Assessments 4,689,093 4,495,002
Net Cash Provided By (Used For) Noncapital and Related
Financing Activities 4,689,093 4,495,002
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from Capital Contributions 6,788,777 9,254,970
Proceeds from Sale of Capital Assets 50,119 77,684
Proceeds from Debt Related Taxes and Assessments 723,246 697,724
Proceeds from Long-Term Debt 35,145,512 -
Principal Payments on Long-Term Debt (10,940,000)(3,820,000)
Interest Payments and Fees (4,708,034)(4,427,336)
Acquisition and Construction of Capital Assets (22,707,238)(19,388,972)
Net Cash Provided By (Used For) Capital and Related
Financing Activities 4,352,382 (17,605,930)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received on Investments 1,932,821 643,924
Proceeds from Sale and Maturities of Investments 43,170,616 12,631,381
Purchase of Investments (207,913)(10,142,153)
Net Cash Provided By (Used For) Investing Activities 44,895,524 3,133,152
Net Increase (Decrease) in Cash and Cash Equivalents 28,909,831 6,750,395
Cash and Cash Equivalents - Beginning 24,228,474 17,478,079
Cash and Cash Equivalents - Ending 53,138,305$ 24,228,474$
Continued
Statements of Cash Flows
For the Years Ended June 30, 2019 and 2018
The accompanying notes are an integral part of this statement.
16
2019 2018
Reconciliation of Operating Income (Loss) to Net Cash Flows
Provided By (Used For) Operating Activities:
Operating Income (Loss)(11,776,822)$ (8,260,577)$
Adjustments to Reconcile Operating Income to
Net Cash Provided By (Used For) Operating Activities:
Depreciation 16,807,797 17,466,318
Receipts from Property Rents and Leases 1,384,211 1,316,197
Miscellaneous Revenues 2,702,585 2,183,296
Miscellaneous Expenses (3,411,095) (899,502)
(Increase) Decrease in Accounts Receivable 321,424 263,462
(Increase) Decrease in Inventory 47,191 (85,552)
(Increase) Decrease in Prepaid Items and Other Receivables (475,011) (56,801)
(Increase) Decrease in Deferred Actuarial Pension Costs (28,836,589) 494,900
(Increase) Decrease in Deferred Actuarial OPEB Costs (7,570) 82,416
Increase (Decrease) in Accounts Payable (1,375,741) 3,893,151
Increase (Decrease) in Accrued Payroll and Related Expenses (55,612) (90,637)
Increase (Decrease) in Other Accrued Liabilities 1,429,619 318,137
Increase (Decrease) in Customer and Developer Deposits 261,084 (111,680)
Increase (Decrease) in Prepaid Capacity Fees 219,969 43,392
Increase (Decrease) in Net OPEB Liability (1,295,467) (1,834,367)
Increase (Decrease) in Net Pension Liability (1,193,410) 4,332,872
Increase (Decrease) in Deferred Actuarial Pension Costs 220,941 (2,866,303)
Increase (Decrease) in Deferred Actuarial OPEB Costs 5,328 539,449
Net Cash Provided By (Used For) Operating Activities (25,027,168)$ 16,728,171$
Schedule of Cash and Cash Equivalents:
Current Assets:
Cash and Cash Equivalents 34,024,168$ 24,147,997$
Restricted Cash and Cash Equivalents 19,114,137 80,477
Total Cash and Cash Equivalents 53,138,305$ 24,228,474$
Supplemental Disclosures
Non-Cash Investing and Financing Activities Consisted of the Following:
Contributed Capital for Water and Sewer System 2,668,032$ 251,222$
Change in Fair Value of Investments and Recognized Gains/Losses (685,227) 360,248
Amortization Related to Long-term Debt 431,482 364,678
For the Years Ended June 30, 2019 and 2018
Statements of Cash Flows - Continued
The accompanying notes are an integral part of this statement.
17
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
NOTE DESCRIPTION PAGE
1 Reporting Entity and Summary of Significant Accounting Policies..…………… 19 - 29
2 Cash and Investments………………………………………………………...........................................29 - 34
3 Fair Value Measurements…………………………………………..………........................................35 - 36
4 Capital Assets…………………………………………………..…………….……...........................................37 - 38
5 Long-Term Debt………………………………………………….…………………………………………………….39 - 45
6 Net Position………………………………………………………………………………………………………………....45
7 Defined Benefit Pension Plan………………………………………………………………………………. . 45 - 53
8 Other Post Employment Benefits………………………..…………...........................................53 - 59
9 Water Conservation Authority………………………………………..............................................59 - 60
10 Commitments and Contingencies……………………………………………………………………… 60 - 61
11 Risk Management…………………………………………………………………………………………………… 61 - 62
12 Interest Expense…………………………………………………….......................................................... 62
13 Segment Information………………………………………………..…………………………………………….63 - 65
14 Prior Period Adjustment…………………………………………..………............................................65
18
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
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, Otay
Service Corporation (the “Corporation”) and the Otay Water District Financing Authority (the
“Financing Authority”).
The Otay Water District (the “District”) is a public entity established in 1956 pursuant to the Municipal
Water District Law of 1911 (Section 711 et. Seq. of the California Water Code) for the purpose of
providing water and sewer services to the properties in the District. The District is governed by a
Board of Directors consisting of five directors elected by geographical divisions based on District
population for a four-year alternating term.
The District formed the Otay Service Corporation on June 21, 1993, a nonprofit public benefit
corporation duly organized and existing under the laws of the State of California. The Service
Corporation was formed to assist the District in the financing of public capital improvements.
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 units will provide a financial benefit or impose a financial burden
on the District. The District has accounted for the Service Corporation and Financing Authority as
“blended” component units. Despite being legally separate, the Service Corporation and Financing
Authority are so intertwined with the District that they are in substance, part of the District’s
operations. Accordingly, the balances and transactions of these component units are reported within
the funds of the District. Separate financial statements are not issued for the Service Corporation and
the Financing Authority.
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation
Measurement focus is a term used to describe “which” transactions are recorded within the various
financial statements. Basis of accounting refers to “when” transactions are recorded regardless of
the measurement focus applied. The accompanying financial statements are reported using the
economic resources measurement focus, and the accrual basis of accounting. Under the economic
measurement focus all assets and liabilities (whether current or noncurrent) associated with these
activities are included on the Statements of Net Position. The Statements of Revenues, Expenses
and Changes in Net Position present increases (revenues) and decreases (expenses) in total net
19
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation - Continued
position. Under the accrual basis of accounting, revenues are recorded when earned and expenses
are recorded when a liability is incurred, regardless of the timing of related cash flows.
The District reports its activities as an enterprise fund, which is used to account for operations that are
financed and operated in a manner similar to a private business enterprise, where the intent of the
District is that the costs (including depreciation) of providing goods or services to the general public
on a continuing basis be financed or recovered primarily through user charges.
The basic financial statements of the Otay Water District have been prepared in conformity with
accounting principles generally accepted in the United States of America. The Governmental
Accounting Standards Board (GASB) is the accepted standard setting body for governmental
accounting financial reporting purposes.
Net position of the District is classified into three components: (1) net investment in capital assets,
(2) restricted net position, and (3) unrestricted net position. These classifications are defined as
follows:
Net Investment in Capital Assets
This component of net position consists of capital assets, net of accumulated depreciation and
reduced by the outstanding balances of notes or borrowing that are attributable to the acquisition of
the assets, construction, or improvement of those assets. If there are significant unspent related debt
proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in
the calculation of the net investment in capital assets.
Restricted Net Position
This component of net position consists of net position with constrained use through external
constraints imposed by creditors (such as through debt covenants), grantors, contributions, or laws or
regulations of other governments or constraints imposed by law through constitutional provisions or
enabling legislation.
Unrestricted Net Position
This component of net position consists of net position that do not meet the definition of “net investment
in capital assets” or “restricted net position”.
The District distinguishes operating revenues and expenses from those revenues and expenses that
are non-operating. Operating revenues are those revenues that are generated by water sales and
wastewater services while operating expenses pertain directly to the furnishing of those services.
20
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation - Continued
Unrestricted Net Position - Continued
Non-operating revenues and expenses are those revenues and expenses generated that are not
associated with the normal business of supplying water and wastewater treatment services.
The District recognizes revenues from water sales, wastewater revenues, and meter fees as they are
earned. Taxes and assessments are recognized as revenues based upon amounts reported to the
District by the County of San Diego, net of allowance for delinquencies of $25,030 at June 30, 2019 and
$27,020 at June 30, 2018.
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 Statements of Revenues and
Expenses and Changes in Net Position.
Sometimes the District will fund outlays for a particular purpose from both restricted (e.g., restricted
bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as
restricted - net position and unrestricted - net position, a flow assumption must be made about the
order in which the resources are considered to be applied.
It is the District’s practice to consider restricted - net position to have been depleted before unrestricted
- net position is applied, however it is at the Board’s discretion.
C) New Accounting Pronouncements
Implemented as of June 30, 2019
Governmental Accounting Standard Board Statement No. 83
In November of 2016, GASB issued Statement No. 83, Certain Asset Retirement Obligations. This
Statement was issued to address the criteria for the recognition and measurement of the liability and
corresponding deferred outflows of resources associated with certain asset retirement obligations
(AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital
asset. Statement No. 83 is effective for reporting periods beginning after June 15, 2018. Currently,
this Statement has no effect on the District’s financial statements.
Governmental Accounting Standard Board Statement No. 88
In March of 2018, GASB issued Statement No. 88,
. This Statement was issued to improve the information
that is disclosed in the notes to government financial statements related to debt, including direct
borrowings and direct placements. This Statement requires that additional essential information
21
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
C) New Accounting Pronouncements - Continued
Implemented as of June 30, 2019 - Continued
Governmental Accounting Standard Board Statement No. 88 - Continued
related to debt be disclosed in notes to financial statements, including unused lines of credit; assets
pledged as collateral for the debt; and terms specified in debt agreements related to significant
events of default with finance-related consequences, significant termination events with finance-
related consequences, and significant subjective acceleration clauses. Statement No. 88 is effective
for fiscal years beginning after June 15, 2018. Currently, this Statement has no effect on the District’s
financial statements.
Governmental Accounting Standard Board Statement No. 89
In June of 2018, GASB issued Statement No. 89,
. This Statement was issued to (1) to enhance the relevance and
comparability of information about capital assets and the cost of borrowing for a reporting period
and (2) to simplify accounting for interest cost incurred before the end of a construction period. This
Statement requires that interest cost incurred before the end of a construction period be recognized
as an expense in the period in which the cost is incurred for financial statements prepared using the
economic resources measurement focus. As a result, interest cost incurred before the end of a
construction period will not be included in the historical cost of a capital asset reported in a business-
type activity or enterprise fund. Statement No. 89 is effective for fiscal years beginning after
December 15, 2019. The District elected to early implement this Statement in the 2019 fiscal year
which is reflected in the District’s financial statements.
Implemented as of June 30, 2018
Governmental Accounting Standard Board Statement No. 75
In June of 2015, GASB issued Statement No. 75,
. This Statement was issued to improve accounting
and financial reporting for postemployment benefits other than pensions (other postemployment
benefits or OPEB). It also improves information provided by governmental employers about financial
support for OPEB that is provided by other entities. This Statement replaces the requirements of
Statements No. 45,
, as amended, and No. 57,
, for OPEB. Statement No. 74,
, establishes new accounting and financial reporting
requirements for OPEB plans. The provisions of this Statement are effective for fiscal years beginning
after June 15, 2017. This Statement has been implemented in the District’s financial statements.
22
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
C) New Accounting Pronouncements - Continued
Implemented as of June 30, 2018 - Continued
Governmental Accounting Standard Board Statement No. 81
In March of 2016, GASB issued Statement No. 81, This
statement was issued to improve accounting and financial reporting for irrevocable split-interest
agreements by providing recognition and measurement guidance for situations in which a
government is a beneficiary of the agreement. Split-interest agreements are a type of giving
agreement used by donors to provide resources to two or more beneficiaries, including
governments. Split-interest agreements can be created through trusts—or other legally enforceable
agreements with characteristics that are equivalent to split-interest agreements—in which a donor
transfers resources to an intermediary to hold and administer for the benefit of a government and at
least one other beneficiary. This Statement requires that a government that receives resources
pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows
of resources at the inception of the agreement. Furthermore, this Statement requires that a
government recognize assets representing its beneficial interests in irrevocable split-interest
agreements that are administered by a third party, if the government controls the present service
capacity of the beneficial interests. This Statement requires that a government recognize revenue
when the resources become applicable to the reporting period. The requirements of this Statement
are effective for reporting periods beginning after December 15, 2016. Currently, this statement has
no effect on the District’s financial statements.
Governmental Accounting Standard Board Statement No. 82
In March of 2016, GASB issued Statement No. 82,
This statement was issued to address certain issues that
have been raised with respect to Statements No. 67, , No. 68,
, and No. 73,
. Specifically, this Statement
addresses issues regarding (1) the presentation of payroll-related measures in required
supplementary information, (2) the selection of assumptions and the treatment of deviations from
the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the
classification of payments made by employers to satisfy employee (plan member) contribution
requirements. Prior to the issuance of this Statement, Statements 67 and 68 required presentation
of covered-employee payroll, which is the payroll of employees that are provided with pensions
through the pension plan, and ratios that use that measure, in schedules of required supplementary
information. This Statement amends Statements 67 and 68 to instead require the presentation of
covered payroll, defined as the payroll on which contributions to a pension plan are based, and ratios
that use that measure. This Statement also clarifies the term deviation used in Actuarial Standards
23
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
C) New Accounting Pronouncements - Continued
Implemented as of June 30, 2018 – Continued
Governmental Accounting Standard Board Statement No. 82 - Continued
of Practice and payments made by the employer to satisfy contribution requirements. The
requirements of this Statement are effective for reporting periods beginning after June 15, 2016,
except for the requirements of this Statement for the selection of assumptions in a circumstance in
which an employer’s pension liability is measured as of a date other than the employer’s most recent
fiscal year-end. In that circumstance, the requirements for the selection of assumptions are effective
for that employer in the first reporting period in which the measurement date of the pension liability
is on or after June 15, 2017. The District has implemented GASB No. 82 which is reflected in the
District’s financial statements.
Governmental Accounting Standard Board Statement No. 85
In March of 2017, GASB issued Statement No. 85, . This Statement addresses practice
issues that have risen from the implementation of certain GASB Statements; primarily pension and
OPEB related measurement, recognition, timing, and reporting issues. Other issues include blending
of component units for governments whose primary activity is business-type, goodwill reporting,
classifying real estate held by insurance entities and measuring particular investments at amortized
cost. This Statement is effective for reporting periods beginning after June 15, 2017. Currently, this
statement has no effect in the District’s financial statements.
Governmental Accounting Standard Board Statement No. 86
In May of 2017, GASB issued Statement No. 86, This Statement
expands upon GASB No. 7 which defines debt
defeased in substance and the criteria for the trusts used to extinguish debt. This Statement
establishes essentially the same requirements for when a government places cash and other
monetary assets acquired with only existing resources in an irrevocable trust to extinguish the debt.
This Statement is effective for reporting periods beginning after June 15, 2017. Currently, this
statement has no effect on the District’s financial statements.
Pending Accounting Standards
GASB has issued the following statements which impact the District’s financial reporting
requirements in the future:
i. GASB 84 – , effective for fiscal years beginning after December 15, 2018.
ii. GASB 87 – “, effective for fiscal years beginning after December 15, 2019.
24
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
C) New Accounting Pronouncements - Continued
Pending Accounting Standards - Continued
iii. GASB 90 –,
effective for fiscal years beginning after December 15, 2018.
iv. GASB 91 –, effective for fiscal years beginning after December 15,
2020.
D) Deferred Outflows / Inflows of Resources
In addition to assets, the Statements of Net Position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element,
, 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 two items
that qualify for reporting in this category, deferred actuarial pension costs and deferred actuarial OPEB
costs are items that are deferred and recognized as an outflow of resources in the period the amounts
become available.
In addition to liabilities, the Statements of Net Position will sometimes report a separate section for
deferred inflows of resources. This separate financial statement element, ,
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 has two items that qualify for reporting in
this category. Accordingly, the items, deferred actuarial pension costs and deferred actuarial OPEB
costs, are deferred and recognized as an inflow of resources in the period that the amounts become
available.
E) Statements of Cash Flows
For purposes of the Statements 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 costs.
25
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
G) Inventory and Prepaid Items
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 prepaid items use the
consumption method whereby they are reported as an asset and expensed as they are consumed.
H) Capital Assets
Capital assets are recorded at cost, where historical records are available, and at an estimated
historical cost where no historical records exist. Infrastructure assets in excess of $20,000 and other
capital assets in excess of $10,000 are capitalized if they have an expected useful life of two years or
more. The District will also capitalize individual purchases under the capitalization threshold if they are
part of a new capital program. The cost of purchased and self-constructed additions to utility plant
and major replacements of property are capitalized. Costs include materials, direct labor,
transportation, and such indirect items as engineering, supervision, employee fringe benefits,
overhead, and interest incurred during the construction period. Repairs, maintenance, and minor
replacements of property are charged to expense. Donated assets are capitalized at their acquisition
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 years ending June 30, 2019 of $0 (Implemented
GASB 89) and June 30, 2018 of $266,959 was 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 2-7 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.
26
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
I) Compensated Absences - Continued
June 30, 2019
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Compensated
Absences $ 2,807,614 $ 1,637,194 $ 1,432,953 $ 3,011,855 $ 301,186
Current portion is reflected in accrued payroll liabilities and remainder in other non-current
liabilities on the Statements of Net Position.
June 30, 2018
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Compensated
Absences $ 2,733,700 $ 1,596,084 $ 1,522,170 $ 2,807,614 $ 280,761
Current portion is reflected in accrued payroll liabilities and remainder in other non-current
liabilities on the Statements of Net Position.
J) Classification of Liabilities
Certain current liabilities have been classified as current liabilities payable from restricted assets as
they will be funded from restricted assets.
K) Allowance for Doubtful Accounts
The District charges doubtful accounts arising from water sales receivable to bad debt expense when
it is probable that the accounts will be uncollectible. Uncollectible accounts are determined by the
allowance method based upon prior experience and management’s assessment of the collectability
of existing specific accounts. The allowance for doubtful accounts was $96,944 for 2019 and $223,005
for 2018.
L) Property Taxes
Tax levies are limited to 1% of full market value (at time of purchase) which results in a tax rate of
$1.00 per $100 assessed valuation, under the provisions of Proposition 13. Tax rates for voter-
approved indebtedness are excluded from this limitation.
The County of San Diego (the “County”) bills and collects property taxes on behalf of the District. The
County’s tax calendar year is July 1 to June 30. Property taxes attach as a lien on property on
27
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
L) Property Taxes - Continued
January 1. Taxes are levied on July 1 and are payable in two equal installments on November 1 and
February 1, and become delinquent after December 10 and April 10, respectively.
M) Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources
related to pensions, and pension expense, information about the fiduciary net position of the District’s
California Public Employees’ Retirement System (CalPERS) plans (Plans) and additions
to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they
are reported by CalPERS. For this purpose, benefit payments (including refunds of employee
contributions) are recognized when due and payable in accordance with the benefit terms.
Investments are reported at fair value.
N) Other Post-Employment Benefits (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows/inflows of resources related to
OPEB, and OPEB expense, information about the fiduciary net position of the District’s plan (OPEB Plan)
and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the
same basis. For this purpose, benefit payments are recognized when currently due and payable in
accordance with the benefit terms. Investments are reported at fair value.
Generally accepted accounting principles require that the reported results must pertain to liability and
asset information within certain defined timeframes. For this report, the following timeframes are used:
2019 2018
Valuation Date June 30, 2018 June 30, 2017
Measurement Date June 30, 2018 June 30, 2017
Measurement Period July 1, 2017 to June 30, 2018 July 1, 2016 to June 30, 2017
O) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in
the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of
resources, and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
28
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
P) Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year
presentation.
2) CASH AND INVESTMENTS
The primary goals of the District’s Investment Policy are to assure compliance with all Federal, State, and
Local laws governing the investment of funds under the control of the organization, protect the principal of
investments entrusted, and generate income under the parameters of such policies.
Cash and Investments are classified in the accompanying financial statements as follows:
2019 2018
Statements of Net Position:
Cash and Cash Equivalents $34,024,168 $ 24,147,997
Restricted Cash and Cash Equivalents 19,114,137 80,477
Investments 18,951,991 30,866,180
Board Designated Investments 2,537,589 29,879,617
Restricted Investments 460,060 4,166,548
Total Cash and Investments $ 75,087,945 $ 89,140,819
Cash and Investments consist of the following:
2019 2018
Cash on Hand $2,950 $2,950
Deposits with Financial Institutions 1,218,516 754,437
Investments 73,866,479 88,383,432
Total Cash and Investments $ 75,087,945 $ 89,140,819
Investments Authorized by the California Government Code and the District’s Investment Policy
The table below identifies the investment types that are authorized for the District by the California
Government Code (or the District’s Investment Policy, where more restrictive). The table also identifies
certain provisions of the California Government Code (or the District’s Investment Policy, where more
restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table does not
address investments of debt proceeds held by bond trustee that are governed by the provisions of debt
29
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
2) CASH AND INVESTMENTS - Continued
Investments Authorized by the California Government Code and the District’s Investment Policy-
Continued
agreements of the District, rather than the general provisions of the California Government Code or the
District’s Investment Policy.
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturity Of Portfolio(1) In One Issuer
U.S. Treasury Obligations 5 years None None
U.S. Government Sponsored Entities 5 years None None
Certificates of Deposit 5 years 15% None
Corporate Medium-Term Notes 5 years 10% None
Commercial Paper 270 days 10% 10%
Money Market Mutual Funds N/A 10% 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 investments with shorter durations than the maximum allowable under the District’s
Investment Policy and by timing cash flows from maturities, so that a portion of the portfolio is maturing or
coming close to maturity evenly over time, as necessary, to provide the cash flow and liquidity needed for
operations.
Information about the sensitivity of the fair values of the District’s investments to market interest rate
fluctuations are provided by the following tables that show the distribution of the District’s investments by
maturity as of June 30, 2019 and 2018.
30
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
2) CASH AND INVESTMENTS - Continued
June 30, 2019 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 $31,670,612 $27,673,372 $ 3,997,240 $ - $-
Local Agency Investment Fund (LAIF) 41,855,272 41,855,272 ---
San Diego County Pool 281,000 281,000 ---
Money Market Funds 59,595 59,595 - --
Total $73,866,479 $ 69,869,239 $ 3,997,240 $ -$-
June 30, 2018 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 $64,967,885 $ 27,845,100 $27,313,861 $ 9,808,924 $-
Local Agency Investment Fund (LAIF) 11,204,070 11,204,070 - --
San Diego County Pool 12,131,000 12,131,000 - --
Money Market Funds 80,477 80,477 - --
Total $88,383,432 $ 51,260,647 $27,313,861 $ 9,808,924 $-
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, 2019 and 2018.
June 30, 2019 Minimum Rating as of Year End
Legal Not
Investment Type Rating AAA AA A-1 Rated
U.S. Government Sponsored Entities $ 31,670,612 N/A $31,670,612 $ - $ - $-
Local Agency Investment Fund (LAIF) 41,855,272 N/A - -- 41,855,272
San Diego County Pool 281,000 N/A - -- 281,000
Money Market Funds 59,595 N/A - -59,595 -
Total $ 73,866,479 $31,670,612 $ -$ 59,595 $42,136,272
31
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
2) CASH AND INVESTMENTS - Continued
Disclosures Relating to Credit Risk - Continued
June 30, 2018 Minimum Rating as of Year End
Legal Not
Investment Type Rating AAA AA A-1 Rated
U.S. Government Sponsored Entities $ 64,967,885 N/A $64,967,885 $ - $ - $-
Local Agency Investment Fund (LAIF) 11,204,070 N/A - -- 11,204,070
San Diego County Pool 12,131,000 N/A - -- 12,131,000
Money Market Funds 80,477 N/A - -80,477 -
Total $ 88,383,432 $ 64,967,885 $ -$ 80,477 $23,335,070
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, 2019 and 2018:
June 30, 2019
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 5,986,340
Federal National Mortgage Association U.S. Government Sponsored Entities $ 19,689,152
Federal Farm Credit Banks U.S. Government Sponsored Entities $ 3,995,820
June 30, 2018
Issuer Investment Type Reported Amount
Federal Home Loan Bank U.S. Government Sponsored Entities $ 13,877,960
Federal Home Loan Mortgage Corp U.S. Government Sponsored Entities $ 13,789,744
Federal National Mortgage Association U.S. Government Sponsored Entities $ 23,423,521
Federal Farm Credit Banks U.S. Government Sponsored Entities $ 11,890,740
32
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
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 District’s Investment Policy do not contain legal or policy
requirements that would limit the exposure to custodial credit risk for deposits or investments, other than
the following provision for deposits: The California Government Code requires that a financial institution
secure deposits made by state or local government units by pledging securities in an undivided collateral
pool held by a depository regulated under state law (unless so waived by the governmental unit). The
market value of the pledged securities in the collateral pool must equal at least 110% of the total amount
deposited by the public agencies. California law also allows financial institutions to secure deposits by
pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.
As of June 30, 2019, $1,570,995 and as of June 30, 2018, $555,267 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.
The LAIF is a special fund of the California State Treasury through which local governments may pool
investments. The District may invest up to $65,000,000 in the fund. Investments in LAIF are highly liquid,
as deposits can be converted to cash within twenty-four hours without loss of interest. Investments with
LAIF are secured by the full faith and credit of the State of California. The yield of LAIF for the quarter ended
June 30, 2019 was 2.57%. The estimated amortized cost and fair value of the LAIF pool at June 30, 2019
was $105,633,660,465 and $105,814,483,092. The District’s share of the pool at June 30, 2019 was
approximately 0.03955%. The yield of LAIF for the quarter ended June 30, 2018 was 1.90%. The estimated
amortized cost and fair value of the LAIF pool at June 30, 2018 was $88,964,875,827 and $88,798,232,977.
The District’s share of the pool at June 30, 2018 was approximately 0.0126%.
33
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
2) CASH AND INVESTMENTS - Continued
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, determined on an amortized cash basis, the same as the fair value of the District’s
position in the pool.
The County of San Diego’s bank deposits are either federally insured or collateralized in accordance with
the California Government Code. Pool detail is included in the County of San Diego Comprehensive Annual
Financial Report (CAFR). Copies of the CAFR may be obtained from the County of San Diego Auditor-
Controller’s Office – 1600 Pacific Coast Highway, San Diego California 92101.
Restricted Cash and Cash Equivalents
2019 2018
Debt Service:
Water Revenue Bond Series 2010A $ 1,044,426 $ 22,024
Water Revenue Bond Series 2010B 2,743,521 58,453
Water Revenue Bond Series 2018 15,326,190 -
Total $ 19,114,137 $ 80,477
Board Designated Investments
Investments are Board restricted for the cost of the following District projects:
2019 2018
New Water Supply $ 2,537,589 $ 1,341,075
Replacement - 28,538,542
Total $ 2,537,589 $ 29,879,617
Restricted Investments
2019 2018
Debt Service:
General Obligation Bond ID No. 27-2009 $ 460,060 $ 487,087
Water Revenue Bond Series 2010A - 1,014,684
Water Revenue Bond Series 2010B - 2,664,777
Total $ 460,060 $ 4,166,548
34
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
3) FAIR VALUE MEASUREMENTS
Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurements and
Application, provides the framework for measuring fair value. The framework provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value with Level 1 given
the highest priority and Level 3 the lowest priority. The three levels of the fair value hierarchy are as
follows:
inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
organization has the ability to access at the measurement date.
inputs are inputs other than quoted prices included within that are observable for the
asset or liability, either directly or indirectly. inputs include the following:
a. Quoted prices for similar assets or liabilities in active markets.
b. Quoted prices for identical or similar assets or liabilities in markets that are not active.
c. Inputs other than quoted prices that are observable for the asset or liability (for example, interest
rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds,
loss severities, credit risks, and default rates).
d. Inputs that are derived principally from or corroborated by observable market data by correlation
or other means (market-corroborated inputs).
inputs are unobservable inputs for the asset or liability.
Fair value of assets measured on a recurring basis at June 30, 2019 and 2018, are as follows:
June 30, 2019
Significant Other
Observable Inputs
Fair Value (Level 2) Uncategorized
U.S. Government Sponsored Entities $ 31,670,612 $ 31,670,612 $ -
Local Agency Investment Fund (LAIF)41,855,272 -41,855,272
San Diego County Pool 281,000 -281,000
Money Market Funds 59,595 59,595 -
Total $ 73,866,479 $ 31,730,207 $ 42,136,272
35
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
3) FAIR VALUE MEASUREMENTS - Continued
June 30, 2018
Significant Other
Observable Inputs
Fair Value (Level 2) Uncategorized
U.S. Government Sponsored Entities $ 64,967,885 $64,967,885 $-
Local Agency Investment Fund (LAIF) 11,204,070 -11,204,070
San Diego County Pool 12,131,000 -12,131,000
Money Market Funds 80,477 80,477 -
Total $ 88,383,432 $ 65,048,362 $ 23,335,070
Investments classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique.
Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted
prices. Uncategorized investments do not fall under the fair value hierarchy as there is no active market
for the investments.
36
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
4) CAPITAL ASSETS
The following is a summary of changes in Capital Assets for the year ended June 30, 2019:
Beginning Ending
Balance Additions Deletions Balance
Capital Assets, Not Depreciated:
Land $ 14,406,778 $ - $(2,955)$ 14,403,823
Construction in Progress 17,618,059 22,707,240 (7,176,135)33,149,164
Total Capital Assets,
Not Depreciated 32,024,837 22,707,240 (7,179,090) 47,552,987
Capital Assets, Being Depreciated:
Infrastructure 647,074,001 7,980,161 (2,988,133) 652,066,029
Field Equipment 8,518,901 803,018 (749,209) 8,572,710
Buildings 20,080,216 270,320 (1,107,797) 19,242,739
Transportation Equipment 3,429,304 338,220 (241,576) 3,525,948
Communication Equipment 3,514,315 101,878 (198,275) 3,417,918
Office Equipment 17,649,987 353,273 (1,221,689)16,781,571
Total Capital Assets,
Being Depreciated 700,266,724 9,846,870 (6,506,679) 703,606,915
Less Accumulated Depreciation:
Infrastructure 243,900,677 14,960,831 (1,882,398) 256,979,110
Field Equipment 6,819,064 314,198 (747,520) 6,385,742
Buildings 9,505,939 516,862 (1,107,797) 8,915,004
Transportation Equipment 2,627,069 201,495 (240,561) 2,588,003
Communication Equipment 2,860,523 252,845 (198,275) 2,915,093
Office Equipment 15,727,726 561,566 (1,221,689)15,067,603
Total Accumulated
Depreciation 281,440,998 16,807,797 (5,398,240) 292,850,555
Total Capital Assets,
Being Depreciated, Net 418,825,726 (6,960,927)(1,108,439)410,756,360
Total Capital Assets, Net $ 450,850,563 $ 15,746,313 $ (8,287,529) $ 458,309,347
Depreciation expense for the year ended June 30, 2019 was $16,807,797.
37
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
4) CAPITAL ASSETS - Continued
The following is a summary of changes in Capital Assets for the year ended June 30, 2018:
Beginning Ending
Balance Additions Deletions Adjustments1 Balance
Capital Assets, Not Depreciated:
Land $ 14,389,187 $ - $- $ 17,591 $ 14,406,778
Construction in Progress 14,201,511 19,344,410 (15,927,862)-17,618,059
Total Capital Assets,
Not Depreciated 28,590,698 19,344,410 (15,927,862) 17,591 32,024,837
Capital Assets, Being Depreciated:
Infrastructure 640,641,602 14,875,150 (9,312,310) 869,559 647,074,001
Field Equipment 8,988,620 60,471 (530,190) - 8,518,901
Buildings 20,576,125 635,154 (243,913) (887,150) 20,080,216
Transportation Equipment 3,286,998 278,472 (136,166) - 3,429,304
Communication Equipment 3,371,041 155,636 (12,362) - 3,514,315
Office Equipment 17,620,584 554,553 (525,150)-17,649,987
Total Capital Assets,
Being Depreciated 694,484,970 16,559,436 (10,760,091) (17,591) 700,266,724
Less Accumulated Depreciation:
Infrastructure 235,280,822 15,735,932 (7,597,237) 481,160 243,900,677
Field Equipment 7,036,892 307,889 (525,717) - 6,819,064
Buildings 9,596,983 509,171 (119,055) (481,160) 9,505,939
Transportation Equipment 2,608,206 155,029 (136,166) - 2,627,069
Communication Equipment 2,627,246 245,639 (12,362) - 2,860,523
Office Equipment 15,728,569 512,658 (513,501) -15,727,726
Total Accumulated
Depreciation 272,878,718 17,466,318 (8,904,038) -281,440,998
Total Capital Assets,
Being Depreciated, Net 421,606,252 (906,882)(1,856,053) (17,591) 418,825,726
Total Capital Assets, Net $ 450,196,950 $18,437,528 $ (17,783,915) $ -$ 450,850,563
1 Adjustments are related to recategorization of capital assets during the fiscal year.
Depreciation expense for the year ended June 30, 2018 was $17,466,318.
38
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
5) LONG-TERM DEBT
Long-term liabilities for the year ended June 30, 2019 are as follows:
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
General Obligation Bonds:
Improvement District No. 27 – 2009 $ 3,390,000 $ - $ 635,000 $ 2,755,000 $ 650,000
Unamortized Bond Premium 68,143 -16,354 51,789 -
Net General Obligation Bonds 3,458,143 -651,354 2,806,789 650,000
Certificates of Participation:
1996 Certificates of Participation 7,600,000 - 7,600,000
(1) --
1996 COPS Unamortized Discount (6,707)-(6,707)--
Net Certificates of Participation 7,593,293 -7,593,293 --
Revenue Bonds:
2010 Water Revenue Bonds Series A 7,880,000 -975,000 6,905,000 1,015,000
2010 Water Revenue Bonds Series B 36,355,000 --36,355,000 -
2013 Water Revenue Refunding Bonds 4,560,000 -685,000 3,875,000 715,000
2016 Water Revenue Refunding Bonds 31,170,000 -1,045,000 30,125,000 1,100,000
2018 Water Revenue Bonds -32,435,000 -32,435,000 1,245,000
2010 Series A Unamortized Premium 465,009 -74,400 390,609 -
2013 Bonds Unamortized Premium 496,493 -96,097 400,396 -
2016 Bonds Unamortized Premium 3,244,048 -178,572 3,065,476 -
2018 Bonds Unamortized Premium -2,710,512 72,765 2,637,747 -
Net Revenue Bonds 84,170,550 35,145,512 3,126,834 116,189,228 4,075,000
Total Long-Term Liabilities $ 95,221,986 $35,145,512 $ 11,371,481 $118,996,017 $ 4,725,000
(1)This amount includes a bond refunding of $6,900,000.
39
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
5) LONG-TERM DEBT - Continued
Long-term liabilities for the year ended June 30, 2018 are as follows:
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
General Obligation Bonds:
Improvement District No. 27 – 2009 $ 3,995,000 $ - $ 605,000 $ 3,390,000 $ 635,000
Unamortized Bond Premium 84,498 -16,355 68,143 -
Net General Obligation Bonds 4,079,498 -621,355 3,458,143 635,000
Certificates of Participation:
1996 Certificates of Participation 8,200,000 - 600,000 7,600,000 700,000
1996 COPS Unamortized Discount (7,452)-(745)(6,707)-
Net Certificates of Participation 8,192,548 -599,255 7,593,293 700,000
Revenue Bonds:
2010 Water Revenue Bonds Series A 8,820,000 - 940,000 7,880,000 975,000
2010 Water Revenue Bonds Series B 36,355,000 -- 36,355,000 -
2013 Water Revenue Refunding Bonds 5,220,000 - 660,000 4,560,000 685,000
2016 Water Revenue Refunding Bonds 32,185,000 - 1,015,000 31,170,000 1,045,000
2010 Series A Unamortized Premium 539,411 - 74,402 465,009 -
2013 Bonds Unamortized Premium 592,588 - 96,095 496,493 -
2016 Bonds Unamortized Premium 3,422,619 -178,571 3,244,048 -
Net Revenue Bonds 87,134,618 -2,964,068 84,170,550 2,705,000
Total Long-Term Liabilities $ 99,406,664 $ -$ 4,184,678 $ 95,221,986 $ 4,040,000
General Obligation Bonds
In June 1998, the District issued $11,835,000 of General Obligation Refunding Bonds. The proceeds of this
issue, together with other lawfully available monies, were to be used to establish an irrevocable escrow to
advance refund and defease in their entirety the District’s previous outstanding General Obligation Bond
issue. In November 2009, the District issued $7,780,000 of General Obligation Refunding Bonds
Improvement District No. 27-2009 to refund the 1998 issue. The proceeds from the bond issue were
$7,989,884, which included an original issue premium of $209,884. 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.
40
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
5) LONG-TERM DEBT - Continued
General Obligation Bonds - Continued
These bonds are general obligations of Improvement District No. 27 (ID 27) of the District. The Board of
Directors has the power and is obligated to levy annual ad valorem taxes without limitation, as to rate or
amount for payment of the bonds and the interest upon all property which is within ID 27 and subject to
taxation. The General Obligation Bonds are payable from District-wide tax revenues. The Board may utilize
other sources for servicing the bond debt and interest.
The Improvement District No. 27-2009 General Obligation Refunding Bonds have interest rates from 3.00%
to 4.00% with maturities through Fiscal Year 2023.
Future debt service requirements for the bonds are as follows:
For the Year Ended
June 30, Principal Interest
2020 $ 650,000 $ 97,200
2021 680,000 70,600
2022 705,000 42,900
2023 720,000 14,400
$ 2,755,000 $ 225,100
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, 2020. The installment payments are to
be paid annually at $350,000 to $1,100,000 from September 1, 1996 through September 1, 2026. The interest
rate at June 30, 2018 was 1.50% and during the 2019 fiscal year these COPS were advanced refunded.
The COPS debt issue contain various covenants and restrictions, principally that the District fix, prescribe,
revise and collect rates, fees and charges for the Water System which will at lease 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, 2019.
41
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
5) LONG-TERM DEBT - Continued
Certificate of Participation (COPS) Advanced Refunding
In November 2018, the District issued $32,435,000 in Water Revenue Bonds, Series 2018, with interest rates
of 3% to 5% which a portion of the proceeds was used to advance refund $6,900,000 of the 1996 Certificates
of Participation. Bond proceeds of $6,900,000 were used to advance refund the 1996 Certificates of
Participation on November 1, 2018 to fully repay the obligation. The net savings and economic gain (loss)
from this current advance refunding is unavailable due to the 1996 Certificates of Participation having a
variable interest rate.
Water Revenue Bonds
In April 2010, Water Revenue Bonds with a face value of $50,195,000 were sold by the Otay Water District
Financing Authority to provide funds for the construction of water storage and transmission facilities. The
bond issue consisted of two series; Water Revenue Bonds, Series 2010A (Non-AMT Tax Exempt) with a
face value of $13,840,000 plus a $1,078,824 original issue premium, and Water Revenue Bonds, Series
2010B (Taxable Build America Bonds) with a face value of $36,355,000. The Series 2010A bonds are due
in annual installments of $785,000 to $1,295,000 from September 1, 2012 through September 1, 2025;
bearing interest at 2% to 5.25%. The Series 2010B bonds are due in annual installments of $1,365,000 to
$3,505,000 from September 1, 2025 through September 1, 2040; bearing interest at 6.377% to 6.577%.
Interest on both Series is payable on September 1, 2010 and semiannually thereafter on March 1st and
September 1st of each year until maturity or earlier redemption. The installment payments are to be made
from taxes and net revenues of the Water System as described in the installment purchase agreement, on
parity with the payments required to be made by the District for the 1996 Certificates of Participation
described above and the 2013 and 2016 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, 2019 was $74,400 and for June 30, 2018 was $74,402. The amortizations are
included in interest expense. The unamortized premium at June 30, 2019 is $390,609 and at June 30, 2018
is $465,009.
The 2010 Water Revenue Bonds contains various covenants and restrictions, principally that the District fix,
prescribe, revise and collect rates, fees and charges for the Water System which will at least be sufficient
to yield, during each fiscal year, taxes and net revenues equal to one hundred twenty-five percent (125%)
of the debt service for such fiscal year. The District was in compliance with these rate covenants for the
fiscal years ended June 30, 2019 and 2018.
42
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
5) LONG-TERM DEBT - Continued
Water Revenue Bonds - Continued
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 2016 Water Revenue Bonds 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, 2019 was $96,097 and for June 30, 2018 was $96,095. The amortizations are
included in interest expense. The unamortized premium at June 30, 2019 is $400,396 and at June 30, 2018
is $496,493.
In May 2016, Water Revenue Refunding Bonds were issued to defease the 2007 Revenue Certificates of
Participation. The bonds are due in annual installments of $1,200,000 to $2,235,000 from September 1,
2016 through September 1, 2036; bearing interest of 2% to 5%. The bonds were issued with a face value
of $33,385,000 plus $3,630,950 original issue premium. The savings between the cash flow required to
service, the old debt and the cash flow required to service the new debt is $5,664,140 and represent an
economic gain on refunding of $4,538,175.
The original issue premium is being amortized over the 20 year life of the Series 2016 bonds. Amortization
for the year ending June 30, 2019 was $178,572 and for June 30, 2018 was $178,571. The amortizations are
included in interest expense. The unamortized premium at June 30, 2019 is $3,065,476 and at June 30,
2018 is $3,244,048.
In November 2018, Water Revenue Bonds were issued to provide funds for construction of water storage,
treatment and transmission facilities and to refinance the 1996 Certificates of Participation. The bonds are
due in annual installments of $775,000 to $1,915,000 from September 1, 2019 through September 1, 2043;
bearing interest of 3% to 5%. The bonds were issued with a face value of $32,435,000 plus $2,710,512
original issue premium.
The original issue premium is being amortized over the 25 year life of the Series 2018 bonds. Amortization
for the year ending June 30, 2019 was $72,765. The amortization expense is included in interest expense.
The unamortized premium at June 30, 2019 is $2,637,747.
43
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
5) LONG-TERM DEBT - Continued
Water Revenue Bonds - Continued
The total amount outstanding at June 30, 2019 and aggregate maturities of the revenue bonds for the fiscal
years subsequent to June 30, 2019, are as follows:
For the Year
2010 Water Revenue Bond
Series A
2010 Water Revenue Bond
Series B
Ended June 30, Principal Interest Principal Interest
2020 $1,015,000 $ 323,112 $-$2,371,868
2021 1,065,000 271,112 -2,371,868
2022 1,120,000 216,488 -2,371,868
2023 1,175,000 159,113 -2,371,868
2024 1,235,000 98,862 -2,371,868
2025-2029 1,295,000 33,994 6,000,000 11,123,436
2030-2034 - -9,925,000 8,425,226
2035-2039 - - 13,635,000 4,590,581
2040-2041 - -6,795,000 453,977
$6,905,000 $ 1,102,681 $36,355,000 $36,452,560
For the Year
2013 Water Revenue
Refunding Bonds
2016 Water Revenue
Refunding Bonds
2018 Water Revenue
Refunding Bonds
Ended June 30,Principal Interest Principal Interest Principal Interest
2020 $ 715,000 $ 140,700 $ 1,100,000 $ 1,119,831 $ 1,245,000 $ 1,424,913
2021 745,000 111,500 1,155,000 1,063,456 1,310,000 1,361,038
2022 775,000 81,100 1,215,000 1,004,206 1,370,000 1,294,038
2023 805,000 49,500 1,285,000 941,706 1,455,000 1,223,413
2024 835,000 16,700 1,350,000 875,831 1,650,000 1,145,787
2025-2029 - - 7,845,000 3,300,031 7,575,000 4,471,312
2030-2034 - - 9,655,000 1,611,809 6,220,000 2,935,237
2035-2039 - - 6,520,000 286,219 6,550,000 1,596,500
2040-2044 - -- - 5,060,000 450,331
$3,875,000 $ 399,500 $30,125,000 $10,203,089 $32,435,000 $15,902,569
Revenues Pledged
The District has pledged a portion of future water sales revenues to repay its Water Revenue Bonds and
Certificates of Participation. Total principal and interest remaining on the water revenue bonds and
44
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
5)LONG-TERM DEBT - Continued
Revenues Pledged - Continued
certificates of participation is $173,755,399 payable through fiscal year 2044. For June 30, 2019, principal
and interest paid by the water sales revenues were $3,405,000 and $4,593,173, respectively. For June 30,
2018, principal and interest paid by the water sales revenues were $3,215,000 and $4,268,091, respectively.
6)NET POSITION
Designations of Net Position
In addition to the restricted net position, a portion of unrestricted net position, have been designated by the
Board of Directors for the following purposes as of June 30, 2019 and 2018:
2019 2018
Designated Betterment $ 2,204,313 $ 2,293,440
Replacement Reserve 18,650,150 20,510,569
Designated Expansion 7,155 -
Designated New Supply Fund 406,545 325,645
Employee Benefits Reserve 276,168 262,404
Total $ 21,544,331 $ 23,392,058
7)DEFINED BENEFIT PENSION PLAN
A)General Information about the Pension Plans
Plan Descriptions
All qualified permanent and probationary employees are eligible to participate in the District’s Plan,
agent multiple-employer defined benefit pension plans administered by the California Public
Employees’ Retirement System (CalPERS), which acts as a common investment and administrative
agent for its participating member employers. Benefit provisions under the Plans are established by
State statute and District resolution. CalPERS issues publicly available reports that include a full
description of the pension plans regarding provisions, assumptions and membership information
that can be found on the CalPERS website.
Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and
death benefits to plan members, who must be public employees and beneficiaries. Benefits are
based on years of credited service, equal to one year of full time employment. Members with five
45
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
7)DEFINED BENEFIT PENSION PLAN - Continued
A)General Information about the Pension Plans – Continued
Benefits Provided - Continued
years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are
eligible for non-duty disability benefits after 10 years of service.
The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the
Optional Settlement 2W Death Benefit. The cost of living adjustments for the plan are applied as
specified by the Public Employees’ Retirement Law.
The Plans’ provisions and benefits in effect at June 30, 2019 and 2018 are summarized as follows:
Prior to On or After
Hire Date January 1, 2013 January 1, 2013
Benefit Formula 2.7% at 55 2% at 62
Benefit Vesting Schedule 5 years service 5 years service
Benefit Payments Monthly for life Monthly for life
Retirement Age 50 – 55+ 52 – 67+
Monthly Benefits, as a % of Eligible Compensation 2.0% to 2.7% 1.0% to 2.5%
Required Employee Contribution Rates (2019 and
2018)
8% 6.25%
Required Employer Contribution Rates
2019 37.436% 37.436%
2018 34.246% 34.246%
Employees Covered
The following employees were covered by the benefit terms for the Plan:
2019 2018
Inactive Employees or Beneficiaries Currently Receiving Benefits 183 175
Inactive Employees Entitled to But Not Yet Receiving Benefits 131 140
Active Employees 133 134
Total 447 449
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer
contribution rates for all public employers be determined on an annual basis by the actuary and shall
46
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
7)DEFINED BENEFIT PENSION PLAN - Continued
A)General Information about the Pension Plans - Continued
Contributions - Continued
be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plan
are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined
rate is the estimated amount necessary to finance the costs of benefits earned by employees during
the year, with an additional amount to finance any unfunded accrued liability. The District is required
to contribute the difference between the actuarially determined rate and the contribution rate of
employees.
B)Net Pension Liability
The District’s net pension liability for the Plan is measured as the total pension liability, less the
pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30,
2018 and 2017, using the annual actuarial valuations as of June 30, 2018 and 2017, respectively, rolled
forward to June 30, 2018 and 2017, respectively, using standard update procedures. A summary of
principal assumptions and methods used to determine the net pension liability is shown below:
Actuarial Assumptions
The total pension liabilities in the June 30, 2018 and 2017 actuarial valuations were determined using
the following actuarial assumptions:
2019 2018
Valuation Date June 30, 2017 June 30, 2016
Measurement Date June 30, 2018 June 30, 2017
Actuarial Cost Method Entry-Age Normal Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 7.15% 7.15%
Inflation 2.5% 2.75%
Salaries Increases Varies(1) Varies(1)
Mortality Rate Table CalPERS Membership Data(2) CalPERS Membership Data(4)
Post Retirement Benefit Increase See Footnote(3) See Footnote(5)
(1)Depending on age, service and type of employment.
(2)The mortality table used was developed based on CalPERS-specific data. The table includes 15 years of mortality
improvements using the Society of Actuaries Scale 90% of scale MP 2016. For more details on this table, please refer to
the December 2017 experience study report (based on CalPERS demographic data from 1997 to 2015) that can be found
on the CalPERs website.
(3)Contract COLA up to 2% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.50%
thereafter.
(4)The mortality table used was developed based on CalPERS-specific data. The table includes 20 years of mortality
improvements using the Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience
study report.
(5)Contract COLA up to 2.75% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.75%
thereafter.
47
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
7)DEFINED BENEFIT PENSION PLAN - Continued
B)Net Pension Liability - Continued
Actuarial Assumptions - Continued
All other actuarial assumptions used in the valuations were based on the results of an actuarial
experience study for the period from 1997 to 2011, including updates to salary increase, mortality and
retirement rates. The Experience Study report may be accessed on the CalPERS website at
www.calpers.ca.gov under Forms and Publications.
Change of Assumptions
In the June 30, 2017 valuation, the accounting discount rate was reduced from 7.65 percent to 7.15
percent.
Discount Rate
The discount rate used to measure the total pension liability at June 30, 2018 and 2017 measurement
dates was 7.15% for the Plan. To determine whether the municipal bond rate should be used in the
calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result
in a discount rate that would be different from the actuarially assumed discount rate. The tests
revealed the assets would not run out. Therefore, the 7.15% discount rate is appropriate and the use
of the municipal bond rate calculation is not deemed necessary. The long term expected discount
rate of 7.15% is applied to all plans in the Public Employees Retirement Fund (PERF). The stress test
results are presented in a detailed report called “GASB 68 Crossover Testing Report” that can be
obtained from the CalPERS website.
The long-term expected rate of return on pension plan investments was determined using a building-
block method in which best-estimate ranges of expected future real rates of return (expected returns,
net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and
long-term market return expectations as well as the expected pension fund cash flows. Using
historical returns of all the funds’ asset classes, expected compound returns were calculated over
the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using
the expected nominal returns for both short-term and long-term, the present value of benefits was
calculated for each fund. The expected rate of return was set by calculating the single equivalent
expected return that arrived at the same present value of benefits for cash flows as the one
calculated using both short-term and long-term returns. The expected rate of return was then set
equal to the single equivalent rate calculated above and adjusted to account for assumed
administrative expenses.
48
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
7)DEFINED BENEFIT PENSION PLAN - Continued
B)Net Pension Liability – Continued
Discount Rate - Continued
The following table reflects the long-term expected real rate of return by asset class.
Asset Class(a)
Assumed
Asset Allocation
Real Return
Years 1 - 10(b)
Real Return
Years 11+(c)
2018 2017 2018 2017 2018 2017
Global Equity 50.0% 47.0% 4.80% 4.90% 5.98% 5.38%
Global Fixed Income 28.0% 19.0% 1.00% 0.80% 2.62% 2.27%
Inflation Assets/Sensitive -6.0%0.77% 0.60% 1.81% 1.39%
Private Equity 8.0% 12.0%6.30% 6.60% 7.23% 6.63%
Real Estate 13.0% 11.0%3.75% 2.80% 4.93% 5.21%
Infrastructure and Forestland -3.0%-3.90%-5.36%
Liquidity 1.0% 2.0%--0.40%-0.92%-0.90%
Total 100% 100%
(a) In the System’s CAFR, Fixed Income in included in Global Debt Securities; Liquidity is included in Short-
term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt
Securities.
(b) An expected inflation of 2.00% used for this period.
(c)An expected inflation of 2.92% used for this period.
49
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
7)DEFINED BENEFIT PENSION PLAN - Continued
C)Changes in the Net Pension Liability
The changes in the Net Pension Liability for the Plan for June 30, 2019:
Increase (Decrease)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(Asset)
Beginning Balance $130,809,611 $ 81,227,295 $ 49,582,316
Changes in the Year:
Service Cost 2,528,271 -2,528,271
Interest on the Total Pension Liability 9,168,092 -9,168,092
Changes in Benefit Terms - - -
Changes in Assumptions (1,312,634) -(1,312,634)
Differences Between Actual and Expected
Experience 461,917 -461,917
Net Plan to Plan Resource Movement -(203)203
Contributions - Employer -4,441,517 (4,441,517)
Contributions - Employees -1,015,008 (1,015,008)
Net Investment Income -6,949,676 (6,949,676)
Benefit Payments, Including Refunds of
Employee Contributions (5,995,949) (5,995,949)-
Administrative Expense -(126,575)126,575
Other Miscellaneous Income/(Expense) -(240,367)240,367
Net Changes 4,849,697 6,043,107 (1,193,410)
Ending Balance $135,659,308 $ 87,270,402 $ 48,388,906
50
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
7)DEFINED BENEFIT PENSION PLAN - Continued
C)Changes in the Net Pension Liability - Continued
The changes in the Net Pension Liability for the Plan for June 30, 2018:
Increase (Decrease)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(Asset)
Beginning Balance $119,095,572 $ 73,846,128 $ 45,249,444
Changes in the Year:
Service Cost 2,556,902 -2,556,902
Interest on the Total Pension Liability 8,836,284 -8,836,284
Changes in Benefit Terms - - -
Changes in Assumptions 7,308,486 -7,308,486
Differences Between Actual and Expected
Experience (1,208,593) -(1,208,593)
Contributions - Employer -4,105,810 (4,105,810)
Contributions - Employees -1,014,329 (1,014,329)
Net Investment Income -8,149,097 (8,149,097)
Benefit Payments, Including Refunds of
Employee Contributions (5,779,040) (5,779,040)-
Administrative Expense -(109,029)109,029
Net Changes 11,714,039 7,381,167 4,332,872
Ending Balance $130,809,611 $ 81,227,295 $ 49,582,316
51
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
7)DEFINED BENEFIT PENSION PLAN - Continued
C)Changes in the Net Pension Liability - Continued
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the District for the Plan, calculated using the
discount rate for the Plan, as well as what the District’s net pension liability would be if it were
calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than
the current rate:
2019 2018
1% Decrease 6.15% 6.15%
Net Pension Liability $ 66,284,590 $ 67,205,545
Current Discount Rate 7.15% 7.15%
Net Pension Liability $ 48,388,906 $ 49,582,316
1% Increase 8.15% 8.15%
Net Pension Liability $ 33,516,191 $ 34,980,142
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately
issued CalPERS financial reports.
D)Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the years ended June 30, 2019 and 2018, the District recognized pension expense of $6,855,984
and $6,413,616. At June 30, 2019 and 2018, the District reported deferred outflows of resources and
deferred inflows of resources related to pensions from the following services:
Deferred Outflows
of Resources
Deferred Inflows of
Resources
2019 2018 2019 2018
Pension contributions subsequent to measurement
date
$36,665,042 $4,452,147 $ -$-
Differences between actual and expected experience 296,947 -(313,339)(936,234)
Changes in assumptions 1,894,792 4,601,639 (843,836)-
Net difference between projected and actual earnings
on pension plan investments 166,037 1,132,443 - -
Total $39,022,818 $10,186,229 $(1,157,175) $ (936,234)
52
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
7)DEFINED BENEFIT PENSION PLAN - Continued
D)Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
Liability - Continued
$36,665,042 reported as deferred outflows of resources related to contributions subsequent to the
measurement date will be recognized as a reduction of the net pension liability in the year ended
June 30, 2020. Those contributions include a $31,800,000 additional payment to reduce the District’s
unfunded pension liability. Other amounts reported as deferred outflows of resources and deferred
inflows of resources related to pensions will be recognized as pension expense as follows:
Deferred
Year Ended Outflow/(Inflows)
June 30 of Resources
2019 $ 2,286,620
2020 (20,789)
2021 (825,349)
2022 (239,881)
2023 -
Thereafter -
E)Payable to the Pension Plan
At June 30, 2019 and 2018, the District reported a payable of $44,905 and $88,989, respectively, for
the outstanding amount of contributions to the pension plan required for the years ended June 30,
2019 and 2018. These payables are reflected in the accrued payroll liabilities on the Statements of
Net Position.
8)OTHER POST EMPLOYMENT BENEFITS (OPEB)
Plan Description
The District’s defined benefit postemployment healthcare plan, (DPHP), provides medical benefits to
eligible retired District employees and beneficiaries. DPHP is part of the Public Agency portion of the
California Employers’ Retiree Benefit Trust Fund (CERBT), an agent multiple-employer plan administered
by California Public Employees’ Retirement System (CalPERS), which acts as a common investment and
administrative agent for participating public employers within the State of California. CalPERS issues a
separate Comprehensive Annual Financial Report. Copies of the CalPERS’ annual financial report may
be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814.
Prior to the plan agreements signed in 2011, the eligibility in the plan was broken into 3 tiers, employees
hired before January 1, 1981, employees hired on or after January 1, 1981 but before July 1, 1993 and
employees hired on or after July 1, 1993. Board members elected before January 1, 1995 are also eligible
53
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
Plan Description - Continued
for the plan. Eligibility also includes age and years of service requirements which vary by tier. Benefits
include up to 100% medical and/or dental premiums for life for the retiree for Tier I, II or III employees,
and up to 100% spouse premium until death of retiree or age 65 whichever is greater and dependent
premium up to age 19 depending on the tier.
Subsequent to the agreements in 2011 and 2012 all employees are eligible for the plan after 20 years of
consecutive service and unrepresented employees hired before January 1, 2013 are eligible after 15
years. Survivor benefits are covered beyond Medicare.
Employees Covered
As of June 30, 2018 and 2017 actuarial valuations, the following current and former employees were
covered by the benefit terms under the Plan:
Active employees 131
Inactive employees or beneficiaries currently receiving benefits 79
Inactive employees entitled to, but not yet receiving benefits -
Total 210
Contributions
The annual contribution is based on the actuarially determined contribution. For the fiscal years ended
June 30, 2019 and 2018, the District’s cash contributions were $2,049,038 and $2,054,208, respectively, in
payments to the trust and the estimated implied subsidy was $160,536 and $147,796, respectively,
resulting in total payments of $2,209,574 and $2,202,004, respectively.
Net OPEB Liability
The District’s net OPEB liability was measured as of June 30, 2018 and 2017 and the total OPEB liability
used to calculate the net OPEB liability was determined by actuarial valuations dated June 30, 2018 and
2017 based on the following actuarial methods and assumptions:
54
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
Net OPEB Liability - Continued
Actuarial Assumptions
Discount Rate 7.00%
Inflation 2.75%
Salary Increases 3.0% plus merit
Investment Rate of Return 7.00%
Mortality Rate(1)Derived using CalPERS Membership Data for all funds
Pre-Retirement Turnover(2) Derived using CalPERS Membership Data for all funds
Healthcare Trend Rate 6.00% HMO/6.50% PPO decreasing to 5.00% HMO/5.00%
PPO
Notes:
(1)Pre-retirement mortality information was derived from data collected during 1997 to 2011 CalPERS Experience Study dated January
2014 and post-retirement mortality information was derived from the 2007 to 2011 CalPERS Experience Study. The Experience
Study Reports may be access on the CalPERS website www.calpers.ca.gov under Forms and Publications.
(2)The pre-retirement turnover information was developed based on CalPERS specific data. For more details, please refer to the 2007
to 2011 Experience Study Report. The Experience Study Report may be accessed on the CalPERS website www.calpers.ca.gov
under Forms and Publications.
The long-term expected rate of return on OPEB plan investments was determined using a building block
method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB
plan investment expense and inflation) are developed for each major asset class. These ranges are
combined to produce the long-term expected rate of return by weighting the expected future real rates of
return by the target asset allocation percentage and by adding expected inflation. Best estimates of
arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset are
summarized in the following table for the June 30, 2018 and 2017 actuarial valuations:
Long-term
Target Expected Real
Asset Class Allocation Rate of Return
Global Equity 57.0% 5.50%
REITs 8.0% 3.65%
Global Fixed Income 27.0% 2.35%
Commodities 3.0% 1.75%
TIPS 5.0% 1.50%
Total 100%
55
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
Discount Rate
The discount rate used to measure the total OPEB liability was 7.00% for the June 30, 2018 and 2017
actuarial valuations. The projection of cash flows used to determine the discount rate assumed that District
contributions will be made at rates equal to the actuarially determined contribution rates. Based on those
assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected
OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term
expected rate of return on OPEB plan investments was applied to all periods of projects benefit payments
to determine the total OPEB liability.
Changes in the OPEB Liability
The changes in the net OPEB liability for the Plan are as follows:
June 30, 2019 Increase (Decrease)
Total OPEB
Liability
(a)
Plan
Fiduciary
Net Position
(b)
Net OPEB
Liability/(Asset)
(c) = (a) - (b)
Balance at June 30, 2018
(Valuation Date June 30, 2017) $ 26,449,527 $ 21,739,035 $ 4,710,492
Changes Recognized for the Measurement
Period:
Service Cost 735,655 -735,655
Interest 1,864,967 -1,864,967
Changes of Assumptions - - -
Contributions - Employer -2,202,004 (2,202,004)
Net Investment Income -1,734,626 (1,734,626)
Benefit Payments (1,085,586) (1,085,586)-
Administrative Expenses -(11,784)11,784
Other Expenses -(28,757)28,757
Net Changes 1,515,036 2,810,503 (1,295,467)
Balance at June 30, 2019
(Measurement Date June 30, 2018) $ 27,964,563 $ 24,549,538 $ 3,415,025
56
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
Changes in the OPEB Liability - Continued
June 30, 2018 Increase (Decrease)
Total OPEB
Liability
(a)
Plan
Fiduciary
Net Position
(b)
Net OPEB
Liability/(Asset)
(c) = (a) - (b)
Balance at June 30, 2017
(Valuation Date June 30, 2016) $ 25,037,076 $ 18,492,217 $ 6,544,859
Changes Recognized for the Measurement
Period:
Service Cost 687,528 -687,528
Interest 1,764,343 -1,764,343
Changes of Assumptions - - -
Contributions - Employer -2,284,420 (2,284,420)
Net Investment Income -2,011,985 (2,011,985)
Benefit Payments (1,039,420) (1,039,420)-
Administrative Expense -(10,167)10,167
Net Changes 1,412,451 3,246,818 (1,834,367)
Balance at June 30, 2018
(Measurement Date June 30, 2017) $ 26,449,527 $ 21,739,035 $ 4,710,492
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate
The following presents the net OPEB liability of the District if it were calculated using a discount rate that
is one percentage point lower or one percentage point higher than the current rate, for the measurement
periods ended June 30, 2018 and 2017:
2019
(2018 Measurement
Period)
2018
(2017 Measurement
Period)
1% Decrease
Net OPEB Liability $ 7,750,569 $ 8,830,538
Current Discount Rate
Net OPEB Liability $ 3,415,025 $ 4,710,492
1% Increase
Net OPEB Liability $ 195,486 $ 1,378,817
57
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
Sensitivity of the Net OPEB Liability to Changes in the Health Care Cost Trend Rates
The following presents the net OPEB liability of the District if it were calculated using health care cost
trend rates that are one percentage point lower or one percentage point higher than the current rate, for
measurement periods ended June 30, 2018 and 2017:
1% Decrease
(5.00% HMO/5.50%
PPO
Decreasing to
4.00% HMO/4.00%
PPO)
Current Healthcare
Cost
Trend Rates
(6.00% HMO/6.5%
PPO
Decreasing to
5.00% HMO/5.00%
PPO)
1% Increase
(7.00% HMO/7.50%
PPO
Decreasing to
6.00% HMO/6.00%
PPO)
2019 Net OPEB Liability (Asset) $ (550,596) $ 3,415,025 $ 8,456,194
(2018 Measurement Period)
2018 Net OPEB Liability $ 1,158,335 $ 4,710,492 $ 9,214,495
(2017 Measurement Period)
OPEB Plan Fiduciary Net Position
CERBT issues a publicly available financial report that may be obtained from the California Public
Employees Retirement System Executive Office, 400 P Street, Sacramento, California 95814.
Recognition of Deferred Outflows and Deferred Inflows of Resources
Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in
OPEB expense systematically over time.
Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining
amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and
are to be recognized in future OPEB expense.
The recognition period differs depending on the source of the gain or loss:
Net difference between projected and actual
earnings on OPEB plan investments 5 years
All other amounts Expected average remaining service lifetime (EARSL)
58
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
8) OTHER POST EMPLOYMENT BENEFITS (OPEB) - Continued
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal years ended June 30, 2019 and 2018, the District recognized OPEB expense (credit) of
$(177,250) and $(39,299), respectively. As of fiscal years ended June 30, 2019 and 2018, the District
reported deferred outflows of resources related to OPEB from the following sources:
Deferred Outflows
of Resources
Deferred Inflows of
Resources
2019 2018 2019 2018
OPEB contributions subsequent to measurement date $ 2,209,574 $2,202,004 $ -$-
Changes in assumptions - - --
Net difference between projected and actual earnings
on OPEB plan investments - - (544,777) (539,449)
Total $ 2,209,574 $2,202,004 $ (544,777) $ (539,449)
The $2,209,574 reported as deferred outflows of resources related to contributions subsequent to the
June 30, 2018 measurement date will be recognized as a reduction of the net OPEB liability during the
fiscal year ending June 30, 2020. Other amounts reported as deferred outflows of resources related to
OPEB will be recognized as expense as follows:
Deferred
Year Ended Outflow/(Inflows)
June 30, of Resources
2020 $ 169,910
2021 169,910
2022 169,911
2023 35,046
2024 -
Thereafter -
9)WATER CONSERVATION AUTHORITY
In 1999, the District formed the Water Conservation Garden 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, 2019 and 2018, the District contributed
$118,040 and $123,050, respectively, for the development, construction and operation costs of the
xeriscape demonstration garden.
59
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
9) WATER CONSERVATION AUTHORITY - Continued
A summary of the Authority’s June 30, 2018 audited financial statement is as follows (latest report available):
Assets $ 1,230,627
Liabilities 34,000
Net Position $ 1,196,627
Revenues, Gains and Other Support $ 540,783
Expenses 594,203
Changes in Net Position $ (53,420)
10)COMMITMENTS AND CONTINGENCIES
Construction Commitments
The District had committed to capital projects under construction with an estimated cost to complete of
$2,245,835 and $21,974,525 at June 30, 2019 and 2018, respectively.
Litigation
Certain claims, suits and complaints arising in the ordinary course of operation have been filed or are
pending against the District. In the opinion of the staff and counsel, all such matters are adequately
covered by insurance, or if not so covered, are without merit or are of such kind, or involved such amounts,
as would not have significant effect on the financial position or results of operations of the District if
disposed of unfavorably.
Refundable Terminal Storage Fees
The District has entered into an agreement with several developers whereby the developers prepaid the
terminal storage fee in order to provide the District with the funds necessary to build additional storage
capacity. The agreement further allows the developers to relinquish all or a portion of such water storage
capacity. If the District grants to another property owner the relinquished storage capacity, the District shall
refund to the applicable developer $746 per equivalent dwelling unit (EDU). There were 17,867 EDUs that
were subject to this agreement. At June 30, 2019, 1,750 EDUs had been relinquished and refunded, 15,143
EDUs had been connected, and 974 EDUs have neither been relinquished nor connected. At June 30,
2018, 1,750 EDUs had been relinquished and refunded, 15,086 EDUs had been connected, and 1,031 EDUs
have neither been relinquished nor connected.
Developer Agreements
The District has entered into various Developer Agreements with developers towards the expansion of
District facilities. The developers agree to make certain improvements and after the completion of the
projects the District agrees to reimburse such improvements with a maximum reimbursement amount for
60
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
10) COMMITMENTS AND CONTINGENCIES – Continued
Developer Agreements – Continued
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, 2019 and 2018, none of the outstanding developer agreements had been
accepted.
11) RISK MANAGEMENT
General Liability
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. 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’ 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:
$25,000 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,
as respects any employment practices claim or suit arising in whole or any part out of any action
involving discipline, demotion, reassignment or termination of any employee of the member.
Employee Dishonesty Coverage: Total of $1,000,000 per loss includes Public Employee Dishonesty,
Forgery or Alteration and Theft, Disappearance and Destruction coverage’s effective July 1, 2017 and 2018.
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
$1,000 deductible per occurrence, effective July 1, 2017 and 2018.
Boiler and Machinery: Replacement cost up to $100 million per occurrence, subject to a $1,000 deductible,
effective July 1, 2017 and 2018.
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Notes to Financial Statements
Years Ended June 30, 2019 and 2018
11) RISK MANAGEMENT - Continued
General Liability - Continued
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 $1,000 per occurrence, effective
July 1, 2017 and 2018.
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 – 2017-18 and 2018-19, effective
July 1, 2017 and 2018.
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, 2017 and 2018.
Cyber Coverage: $2,000,000 Annual Aggregate Limit of Liability for each Insured/Member for Information
Security & Privacy Liability. Policy includes at $25,000 deductible per claim.
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 pooled medical program, administered in
conjunction with the California State Association of Counties (CSAC).
Adequacy of Protection
During the past four 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.
12) INTEREST EXPENSE
Interest expense for the years ended June 30, 2019 and 2018 are as follows:
2019 2018
Amount Expensed $ 4,713,883 $ 3,941,321
Amount Capitalized as a Cost of
Construction Projects -266,959
Total Interest $ 4,713,883 $ 4,208,280
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Notes to Financial Statements
Years Ended June 30, 2019 and 2018
13) SEGMENT INFORMATION
The District has issued Water Revenue Bonds in previous fiscal years to finance certain capital
improvements. While water and wastewater services are accounted for jointly in these financial
statements, the investors in the Water Revenue Bonds rely solely on the revenues of the water services
for repayment.
Summary financial information for the water and wastewater services is presented for June 30, 2019 and
2018:
Condensed Statements of Net Position
June 30, 2019 and 2018
Water Services Wastewater Services
2019 2018 2019 2018
ASSETS
Cash and Investments $ 72,508,971 $ 83,936,096 $ 2,578,974 $ 5,204,723
Accounts Receivable, Net 11,577,454 11,937,362 210,500 172,016
Other Current Asset 2,801,868 2,346,388 34,300 34,300
Capital Assets 428,856,190 425,858,728 29,453,157 24,991,835
Total Assets 515,744,483 524,078,574 32,276,931 30,402,874
DEFERRED OUTFLOWS OF RESOURCES
Deferred Actuarial Pension Costs 36,957,507 9,760,597 2,065,311 425,632
Deferred Actuarial OPEB Costs 2,105,670 2,098,510 103,904 103,494
Total Deferred Outflows of Resources 39,063,177 11,859,107 2,169,215 529,126
LIABILITIES
Accounts Payable 13,882,636 14,537,105 179,188 900,460
Other Miscellaneous Liabilities 5,515,011 4,345,073 643,495 439,426
Other Current Liabilities 10,324,292 9,038,907 - -
General Obligation Bonds 2,156,789 2,823,143 --
Certificates of Participation -6,893,293 - -
Revenue Bonds 112,114,228 81,465,550 - -
Net Pension Liability 46,167,836 47,296,682 2,221,070 2,285,634
Net OPEB Liability 3,263,717 4,489,099 151,308 221,393
Other Non-current Liabilities 3,337,674 3,117,705 - -
Total Liabilities 196,762,183 174,006,557 3,195,061 3,846,913
DEFERRED INFLOWS OF RESOURCES
Deferred Actuarial Pension Costs 1,125,287 916,299 31,888 19,935
Deferred Actuarial OPEB Costs 519,135 514,095 25,642 25,354
Total Deferred Inflows of Resources 1,644,422 1,430,394 57,530 45,289
NET POSITION
Net Investment in Capital Assets 325,186,363 330,636,742 29,453,157 24,991,835
Restricted for Debt Service 4,248,007 4,247,025 - -
Unrestricted 26,966,685 25,616,963 1,740,398 2,047,963
Total Net Position $ 356,401,055 $360,500,730 $ 31,193,555 $ 27,039,798
63
Notes to Financial Statements
Years Ended June 30, 2019 and 2018
13) SEGMENT INFORMATION - Continued
Condensed Statements of Revenues, Expenses and Changes in Net Position
For the Years Ended June 30, 2019 and 2018
Water Services Wastewater Services
2019 2018 2019 2018
Operating Revenues
Water Sales $86,756,222 $92,595,195 $ - $ -
Wastewater Revenue - - 2,961,157 2,865,520
Connection and Other Fees 2,222,393 2,009,084 12,394 3,973
Total Operating Revenues 88,978,615 94,604,279 2,973,551 2,869,493
Operating Expenses
Cost of Water Sales 60,065,964 62,321,213 - -
Wastewater - - 2,784,579 2,501,240
Administrative and General 24,070,648 23,445,578 - -
Depreciation 15,973,877 16,462,306 833,920 1,004,012
Total Operating Expenses 100,110,489 102,229,097 3,618,499 3,505,252
Operating Income (Loss) (11,131,874) (7,624,818) (644,948) (635,759)
Non-operating Revenues (Expenses)
Investment Earnings 1,845,805 656,472 132,587 67,388
Taxes and Assessments 4,671,182 4,480,930 -789
Availability Charges 671,428 646,323 51,818 51,401
Gain (Loss) on Sale of Capital Assets (1,030,346) (1,527,679) (28,225) (181,859)
Rents and Leases 1,384,211 1,439,247 - -
Miscellaneous Revenues 2,407,989 2,255,605 392,624 -
Donations (118,040) (123,050)--
Interest Expense (4,713,883) (3,941,321)--
Miscellaneous Expenses (3,288,540) (893,623) (4,515) (6,624)
Total Non-operating Revenues (Expenses) 1,829,806 2,992,904 544,289 (68,905)
Income (Loss) Before Capital Contributions
and Transfers (9,302,068) (4,631,914) (100,659) (704,664)
Capital Contributions 9,416,804 9,469,083 40,005 37,109
Transfers In (Out) (4,214,411)- 4,214,411 -
Change in Net Position (4,099,675) 4,837,169 4,153,757 (667,555)
Total Net Position, Beginning,
As Previously Reported 360,500,730 372,812,297 27,039,798 28,374,692
Prior Period Adjustment - (17,148,736)- (667,339)
Total Net Position, Beginning, As Restated 360,500,730 355,663,561 27,039,798 27,707,353
Total Net Position, Ending $356,401,055 $360,500,730 $31,193,555 $27,039,798
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Notes to Financial Statements
Years Ended June 30, 2019 and 2018
13) SEGMENT INFORMATION - Continued
Condensed Statements of Cash Flows
For the Years Ended June 30, 2019 and 2018
Water Services Wastewater Services
2019 2018 2019 2018
Net Cash Provided/(Used) by:
Operating Activities $ (23,286,064) $ 15,788,039 $ (1,741,104) $ 940,132
Non-capital and Related Financing
Activities
474,682 4,495,002 4,214,411 -
Capital and Related Financing Activities 9,584,026 (16,598,410)(5,231,644) (1,007,520)
Investing Activities 42,137,187 3,065,764 2,758,337 67,388
Net Increase (Decrease) in
Cash and Cash Equivalents 28,909,831 6,750,395 --
Cash and Cash Equivalents, Beginning 24,228,474 17,478,079 --
Cash and Cash Equivalents, Ending $ 53,138,305 $ 24,228,474 $- $-
14)PRIOR PERIOD ADJUSTMENT
In the fiscal year 2018, the prior period adjustment of $17,816,075 relates to the implementation of GASB
Statement 75 for postemployment benefits other than pensions. According to GASB Statement 75,
, which was
implemented by the District in the 2018 fiscal year, recognizing liabilities, deferred outflows of resources,
deferred inflows of resources, and expenses related to OPEB plan.
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Schedule of Changes in the Net OPEB Liability and Related
Ratios for Measurement Periods Ended June 30,
Last Ten Fiscal Years (1)
Measurement Period 2018 2017
Total OPEB Liability
Service Cost $ 735,655 $ 687,528
Interest on the Total OPEB Liability 1,864,967 1,764,343
Actual and Expected Experience Difference --
Changes in Assumptions --
Changes in Benefit Terms --
Benefit Payments (1,085,586) (1,039,420)
Net Change in Total OPEB Liability 1,515,036 1,412,451
Total OPEB Liability - Beginning 26,449,527 25,037,076
Total OPEB Liability - Ending (a)$ 27,964,563 $ 26,449,527
Plan Fiduciary Net Position
Contributions - Employer $ 2,202,004 $ 2,284,420
Net Investment Income 1,734,626 2,011,985
Benefit Payments (1,085,586) (1,039,420)
Administrative Expenses (11,784) (10,167)
Other Expenses (28,757) -
Net Change in Plan Fiduciary Net Position 2,810,503 3,246,818
Plan Fiduciary Net Position - Beginning 21,739,035 18,492,217
Plan Fiduciary Net Position - Ending (b)$ 24,549,538 $ 21,739,035
Net OPEB Liability - Ending (a)-(b)$ 3,415,025 $ 4,710,492
Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 87.8%82.2%
Covered Payroll $ 12,969,485 $ 12,513,000
Net OPEB Liability as a Percentage of Covered-employee Payroll 26.3% 37.6%
Notes to Schedule:
(1)Historical information is required only for measurement periods for which GASB 75 is applicable. Future years’ information will be
displayed up to 10 years as information becomes available. Contributions are determined by an actuarial valuation based on eligible
participants’ estimated medical and dental benefits.
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Schedule of Contributions
For Fiscal Year Ended June 30,
Last Ten Fiscal Years (1)
2019 2018
Actuarially Determined Contribution (ADC)$ 1,065,019 $ 1,116,418
Contributions in Relation to the ADC (2,209,574) (2,202,004)
Contribution Deficiency (Excess)$ (1,144,555) $ (1,085,586)
Covered-Employee Payroll $ 13,092,319 $ 12,969,485
Contributions as a percentage of covered-employee payroll 16.88%16.98%
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year
2019 were from the June 30, 2018 actuarial valuation.
Methods and assumptions used to determine contributions:
Actuarial Cost Method Entry Age Normal
Amortization Method/Period Level percent of payroll over a closed rolling 15-year period
Asset Valuation Method Market value
Inflation 2.75%
Payroll Growth 3.00% plus merit
Investment Rate of Return 7.00% per annum
Healthcare Cost-trend Rates 6.00% HMO/6.5% PPO decreasing to 5.00% HMO/5.00% PPO
Retirement Age Tier 1 employees - 2.7% at 55 and Tier 2 employees - 2.0% at 62.
The probabilities of Retirement are based on the 2014 CalPERS
Experience Study for the period from 1997 to 2011.
Mortality Pre-retirement mortality probability based on 2014 CalPERS 1997-
2011 Experience Study covering CalPERS participants. Post-
retirement mortality probability based on CalPERS Experience Study
2007-2011 covering participants in CalPERS.
(1)Historical information is required only for measurement periods for which GASB 75 is applicable. Future years’ information will be
displayed up to 10 years as information become available. Contributions are determined by an actuarial valuation based on eligible
participants’ medical and dental benefits.
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Schedule of Changes in the Net Pension Liability
and related Ratios for Fiscal Years Ended June 30,
Last Ten Fiscal Years (1)
Measurement Period (2)2017-2018 2016-2017 2015-2016 2014-2015 2013-2014
TOTAL PENSION LIABILITY
Service Cost $ 2,528,271 $ 2,556,902 $ 2,298,617 $ 2,250,860 $ 2,330,709
Interest 9,168,092 8,836,284 8,575,275 8,229,312 7,907,915
Changes of Benefit Terms -- - --
Changes of Assumptions (1,312,634) 7,308,486 - (1,996,819)-
Difference Between Expected and Actual
Experience 461,917 (1,208,593) (613,440) (981,200)-
Benefit Payments, Including Refunds of
Employee Contributions (5,995,949)(5,779,040) (5,448,218) (5,288,251) (4,885,406)
Net Change in Total Pension Liability 4,849,697 11,714,039 4,812,234 2,213,902 5,353,218
Total Pension Liability - Beginning 130,809,611 119,095,572 114,283,338 112,069,436 106,716,218
Total Pension Liability - Ending (a)$135,659,308 $130,809,611 $119,095,572 $ 114,283,338 $112,069,436
PLAN FIDUCIARY NET POSITION
Net Plan to Plan Resource Movement $ (203) $ - $ - $ - $ -
Contributions - Employer 4,441,517 4,105,810 3,819,770 3,557,098 3,137,174
Contributions - Employee 1,015,008 1,014,329 1,010,337 1,007,023 1,074,954
Net Investment Income 6,949,676 8,149,097 369,214 1,601,760 10,874,999
Benefit Payments, Including Refunds of
Employee Contributions
(5,995,949) (5,779,040)
(5,448,218) (5,288,251) (4,885,406)
Administrative Expense (126,575) (109,029) (45,185) (83,511)-
Other Changes in Fiduciary Net Position (240,367) - - --
Net Change in Fiduciary Net Position 6,043,107 7,381,167 (294,082) 794,119 10,201,721
Plan Fiduciary Net Position - Beginning 81,227,295 73,846,128 74,140,210 73,346,091 63,144,370
Plan Fiduciary Net Position - Ending (b) $ 87,270,402 $81,227,295 $73,846,128 $ 74,140,210 $73,346,091
Plan Net Pension Liability/(Asset) -
Ending (a) - (b)$ 48,388,906 $49,582,316 $45,249,444 $ 40,143,128 $38,723,345
Plan Fiduciary Net Position as a Percentage
of the Total Pension Liability
64.33%62.10%
62.01% 64.87%65.45%
Covered Payroll $ 12,969,485 $ 12,829,415 $ 12,767,963 $ 12,451,513 $ 12,276,578
Plan Net Pension Liability/(Asset) as a
Percentage of Covered Payroll
373.10% 386.47%
354.40%
322.40% 315.42%
(1) Measurement period 2017-18 (fiscal year 2018-2019) was the fifth year of implementation; therefore, only five years are shown.
(2) Historical information is required only for measurement periods for which GASB 68 is applicable
Notes to Schedule:
Benefit Changes: The figures above do not include any liability impact that may have resulted from plan
changes which occurred after June 30, 2016.
Changes of Assumptions: For the 2019 and 2017 fiscal years, there were no changes. For the 2018 fiscal year,
the accounting discount rate reduced from 7.65% to 7.15%. For the 2016 fiscal year, the discount rate changed
from 7.5% to 7.65% to correct for an adjustment to exclude administrative expenses.
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Schedule of Plan Contributions
For Fiscal Year Ended June 30,
Last Ten Fiscal Years (1)
Fiscal Year
2018-2019
Fiscal Year
2017-18
Fiscal Year
2016-17
Fiscal Year
2015-16
Fiscal Year
2014-15
Actuarially Determined Contribution(2) $ 4,865,042 $4,452,147 $ 4,105,810 $ 3,819,770 $ 3,557,098
Contributions in Relation to the Actuarially
Determined Contribution(2)(36,665,042) (4,452,147) (4,105,810) (3,819,770) (3,557,098)
Contribution Deficiency (Excess)$(31,800,000) $ - $ - $ - $ -
Covered Payroll(3)$ 13,092,319 $12,969,485 $12,829,415 $ 12,767,963 $12,451,513
Contributions as a Percentage of Covered
Payroll(3)280.05% 34.33% 32.00% 29.92%28.57%
(1) Historical information is required only for measurement periods for which GASB 68 is applicable.
(2) Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers may
choose to make additional contributions toward their unfunded liability. Employer contributions for such plans exceed the actuarially
determined contributions.
(3) Includes one year’s payroll growth using 3.00% payroll assumption.
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year
2018-19 were from the June 30, 2016 public agency valuations.
Actuarial Cost Method Entry Age Normal
Amortization Method/Period For details see June 30, 2016 Funding Valuation Report
Asset Valuation Method Actuarial Value of Assets. For details, see June 30, 2016 Funding
Valuation Report
Discount Rate 7.375%
Inflation 2.75%
Salary Increases Varies by Entry Age and Service
Payroll Growth 3.00%
Investment Rate of Return 7.50% Net of Pension Plan Investment and Administrative Expenses;
includes Inflation
Retirement Age The probabilities of Retirement are based on the 2010 CalPERS
Experience Study for the period from 1997 to 2007
Mortality
The probabilities of mortality are based on the 2010 CalPERS
Experience Study for the period from 1997 to 2007. Pre-retirement
and Post-retirement mortality rates include 5 years of projected
mortality improvement using Scale AA published by the Society of
Actuaries.
72
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 74
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 80
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 tax.
Debt 90
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 95
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 97
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.
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NON-OPERATING EXPENSES BY FUNCTION -LAsT TEN FISCAL YEARS
Fiscal Interest Percent
Year Donations <1> Expense Miscellaneous Total Change
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
$10,000
$9,000
$8,000
$7,000
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
$
!II!
V -
2010
118,040
123,050
125,742
120,722
117,462
119,687
120,684
121,617
120,648
100,240
!II'!
-
2011
$ 4,713,883 $ 4,351,626 (5) $9,183,549 37.6%
3,941,321 2,609,785 6,674,156 -19.2%
5,069,767 3,068,596 (4) 8,264,105 33.1%
4,603,093 1,485,778 6,209,593 3.7%
4,545,530 1,324,155 5,987,147 -25.6%
4,872,060 3,054,447 (3) 8,046,194 33.8%
3,977,538 1,917,389 6,015,611 6.8%
3,899,927 1,612,914 (2) 5,634,458 35.6%
3,877,531 158,337 4,156,516 48.0%
2,404,530 303,541 2,808,311 -9.6%
Non-Operating Expenses, in Thousands ($)
!'!
!II! !II!
!!I!
!II
-
� --
-----�-7
2012 2013 2014 2015 2017 2018 2019
Miscellaneous ■Interest Expense Donations
<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.
<3> Miscellaneous expense includes $2.3 million of non-capitalizable expenses which were partially funded by capacity revenue.
<4> Miscellaneous expense includes $1.8 million of non-capitalizable expenses which were primarily funded by capacity revenue.
<5> Miscellaneous expense includes $3.0 million of non-capitalizable expenses which were partially funded by capacity revenue
and $1.1 million loss on disposal of capital assets.
Source: Otay Water District
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