HomeMy WebLinkAbout10-16-24 F&A Committee Packet1
OTAY WATER DISTRICT
FINANCE AND ADMINISTRATION
COMMITTEE MEETING
and
SPECIAL MEETING OF THE BOARD OF DIRECTORS
2554 SWEETWATER SPRINGS BOULEVARD
SPRING VALLEY, CALIFORNIA
BOARDROOM
WEDNESDAY
OCTOBER 16, 2024
12:00 P.M.
This is a District Committee meeting. This meeting is being posted as a special meeting
in order to comply with the Brown Act (Government Code Section §54954.2) in the event that
a quorum of the Board is present. Items will be deliberated, however, no formal board actions
will be taken at this meeting. The committee makes recommendations
to the full board for its consideration and formal action.
AGENDA
1.ROLL CALL
2.PUBLIC PARTICIPATION – OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO
SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD’S
JURISDICTION INCLUDING AN ITEM ON TODAY’S AGENDA
DISCUSSION ITEMS
3.APPROVE THE AUDITED FINANCIAL STATEMENTS, INCLUDING THE
INDEPENDENT AUDITORS’ UNQUALIFIED OPINION, FOR THE FISCAL YEAR
ENDING JUNE 30, 2024 (MARISSA DYCHITAN) [5 MINUTES]
4.AUTHORIZE THE GENERAL MANAGER TO ISSUE A PURCHASE ORDER TO
HAWTHORNE CAT IN THE AMOUNT OF $149,000.00 FOR THE PURCHASE OF
ONE REPLACEMENT STATIONARY EMERGENCY GENERATOR FOR THE AD-
MINISTRATIVE BUILDING, DECLARE EXISTING GENERATOR AS SURPLUS,
INCREASE CIP P2688 FROM $76,000.00 TO $239,000.00 FOR FISCAL YEAR
2025 AND TO INCREASE THE OVERALL SIX-YEAR CIP FROM $833,000.00 TO
$996,000.00 (CHARLES MEDEROS) [5 MINUTES]
5.ADJOURNMENT
BOARD MEMBERS ATTENDING:
Gary Croucher, Chair
Jose Lopez
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All items appearing on this agenda, whether or not expressly listed for action, may be de-
liberated and may be subject to action by the Board.
The agenda, and any attachments containing written information, are available at the Dis-
trict’s website at www.otaywater.gov. Written changes to any items to be considered at the
open meeting, or to any attachments, will be posted on the District’s website. Copies of the
agenda and attachments are also available by contacting the District Secretary at (619)
670-2253.
If you have any disability which would require accommodations to enable you to participate
in this meeting, please call the District Secretary at 670-2253 at least 24 hours prior to the
meeting.
Certification of Posting
I certify that on October 11, 2024, I posted a copy of the foregoing agenda near the
regular meeting place of the Board of Directors of Otay Water District, said time being at
least 24 hours in advance of the meeting of the Board of Directors (Government Code
Section §54954.2).
Executed at Spring Valley, California on October 11, 2024.
/s/ Tita Ramos-Krogman, District Secretary
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2024
SUBMITTED BY: Marissa Dychitan
Senior Accountant
PROJECT: DIV. NO. All
APPROVED BY: Jon Ravaglioli, Finance Manager
Kevin Koeppen, Assistant Chief of Finance
Joseph R. Beachem, Chief Financial Officer
Jose Martinez, General Manager
SUBJECT: Approve the Audited Financial Statements for the Fiscal Year
Ended June 30, 2024
GENERAL MANAGER'S RECOMMENDATION:
That the Board approve the Audited Financial Statements (Attachment
B), including the Independent Auditors' unqualified opinion, for the
fiscal year ending June 30, 2024.
COMMITTEE ACTION:
See Attachment A.
PURPOSE:
To inform the Board of the significant financial events which
occurred during the fiscal year ended June 30, 2024, as reflected in
the audited financial statements.
ANALYSIS:
Davis Farr LLP performed the audit and found that, in all material
respects, the financial statements correctly represent the District's
AGENDA ITEM 3
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financial position. They found no material errors in the financial
records or statements (Attachment D).
Total Assets:
Total assets increased by $5.0 million, or 0.81%, during Fiscal Year
2024, to $624.8 million, due to increases in cash and investments, as
well as accounts receivables, which were partially offset by
depreciation.
Deferred Outflows and Deferred Inflows:
Deferred outflows increased by $2.9 million, or 12.62%, in Fiscal
Year 2024 due to increases in pension and OPEB actuarial costs.
Deferred inflows decreased by $2.7 million, or 5.82%, due to
decreases in deferred investment income for the OPEB plan and
deferred inflows from leases.
Total Liabilities and Net Positions:
Total liabilities increased by $10.4 million, or 6.33%, from the
previous fiscal year to $174.7 million. The increase is attributable
to the increases in net pension and OPEB liabilities.
The net position increased by $0.2 million, or 0.05%, to $431.3
million as of June 30, 2024.
Capital Contributions:
Capital contributions for Fiscal Year 2024 totaled $7.5 million.
Fiscal Year 2024 capital contributions include $6.7 million from
developers contributing capacity fees, $0.2 million in contributed
fixed assets, and $0.1 million in CIP grants. Ratepayers also
contributed $0.5 million in availability fees, which are considered
part of capital contributions.
Results of Operations:
Operating revenues increased by $6.3 million, or 5.93%, due to
increases in water and wastewater rates.
The cost of water sales increased by $6.5 million, or 9.06%, due to
higher unit purchase costs and increased volumes purchased.
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Non-Operating Revenues and Expenses:
Non-operating revenues increased by $2.3 million, or 16.01%, for
Fiscal Year 2024, primarily due to an increase in investment income
brought about by high interest rates on investments.
Non-operating expenses increased by $0.6 million, or 12.42%, in
Fiscal Year 2024, primarily due to the increased loss on disposal of
capital assets and expenses associated with non-capitalizable CIP
costs.
Conclusion:
In summary, the overall audit process was successful, and the
auditors found no material errors or misstatements in the District's
financial statements.
Additional Audit Correspondence:
As a part of completing the audit engagement, Davis Farr LLP also
provided the following letters summarizing their observations and
conclusions concerning the District's overall financial processes:
•Management Letter (Independent Auditor’s Report): The
auditors did not identify any internal control deficiencies
that they considered material weaknesses. (Attachment C).
•Audit Committee Letter: This letter describes the overall
aspects of the audit, including audit principles, performance,
dealings with management, and significant findings or issues.
There were no disagreements with management concerning
financial accounting, reporting, or auditing matters, and
there were no significant difficulties in dealing with
management in performing the audit. (Attachment D).
•Report on Applying Agreed-Upon Procedures (Independent
Accountant’s Report): A review of the District's investment
portfolio at year-end and a sample of specific investment
transactions completed throughout the fiscal year were
performed. There were no exceptions to compliance from the
District's Investment Policy. (Attachment E).
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FISCAL IMPACT:
None.
STRATEGIC GOAL:
The District ensures its continued financial health through long-term
financial planning, formalized financial policies, enhanced budget
controls, fair pricing, debt planning, and improved financial
reporting.
LEGAL IMPACT:
None.
Attachments:
A)Committee Action
B)FY 2024 Audited Financial Statements
C)Management Letter: Independent Auditor’s Report
D)Audit Committee Letter
E)Report on Applying Agreed-Upon Procedures: Independent
Accountant’s Report
F)PowerPoint Presentation by Davis Farr LLP
ATTACHMENT A
SUBJECT/PROJECT: Approve the Audited Financial Statements for the Fiscal
Year Ended June 30, 2024
COMMITTEE ACTION:
NOTE:
OTAY WATER DISTRICT
FINANCIAL STATEMENTS
WITH
REPORT ON AUDIT BY INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
YEAR ENDED JUNE 30, 2024
Attachment B
Table of Contents
Year Ended June 30, 2024
Independent Auditor’s Report
Management’s Discussion & Analysis
Basic Financial Statements:
Statement of Net Position
Statement of Revenues, Expenses, and Changes in Net Position
Statement of Cash Flows
Notes to Financial Statements
Required Supplementary Information:
Schedule of Changes in the Net OPEB Liability and Related Ratios
Schedule of Contributions
Schedule of Changes in the Net Pension Liability and Related Ratios
Schedule of Plan Contributions
Page
Number
1
4
14
16
17
19
65
66
67
69
Independent Auditor’s Report
Board of Directors
Otay Water District
Spring Valley, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Otay Water District (District), as of and for
the year ended June 30, 2024 and the related notes to the financial statements, which
collectively comprise the District’s basic financial statements as listed in the table of contents.
In our opinion, the accompanying financial statements present fairly, in all material respects,
the respective financial position of the District as of June 30, 2024, and the respective changes
in financial position and cash flows thereof for the year then ended in accordance with
accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the
United States of America (GAAS) and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities
for the Audit of the Financial Statements section of our report. We are required to be
independent of the District and to meet our other ethical responsibilities, in accordance with
the relevant ethical requirements relating to our audit. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
The District’s management is responsible for the preparation and fair presentation of the
financial statements in accordance with accounting principles generally accepted in the United
States of America, and for the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the
District’s ability to continue as a going concern for one year after the date that the financial
statements are issued.
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Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance
but is not absolute assurance and therefore is not a guarantee that an audit conducted in
accordance with GAAS will always detect a material misstatement when it exists. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control. Misstatements are considered material if there is a
substantial likelihood that, individually or in the aggregate, they would influence the judgment
made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
Exercise professional judgment and maintain professional skepticism throughout the
audit.
Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, and design and perform audit procedures responsive to
those risks. Such procedures include examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the District’s internal control.
Accordingly, no such opinion is expressed.
Evaluate the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluate the overall
presentation of the financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the
aggregate, that raise substantial doubt about the District’s ability to continue as a
going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit, significant audit findings, and certain
internal control–related matters that we identified during the audit.
Report on Summarized Comparative Information
We have previously audited the District’s 2023 financial statements, and we expressed an
unmodified audit opinion on those audited financial statements in our report dated October
25, 2023. In our opinion, the summarized comparative information presented herein as of
and for the year ended June 30, 2023, is consistent, in all material respects, with the audited
financial statements from which it has been derived.
2
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
Management’s Discussion and Analysis, Schedule of Changes in the Net OPEB Liability and
Related Ratios, Schedule of Contributions, Schedule of Changes in the Net Pension Liability
and Related Ratios, and Schedule of Plan Contributions, be presented to supplement the basic
financial statements.Such information is the responsibility of management and, although not
a part of the basic financial statements, is required by the Governmental Accounting
Standards Board who considers it to be an essential part of financial reporting for placing the
basic financial statements in an appropriate operational, economic, or historical context. We
have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which
consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management’s responses to our inquiries, the
basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide any assurance.
Other Information
Management is responsible for the other information included in the Annual Comprehensive
Financial Report. The other information comprises the introductory section and statistical
section but does not include the financial statements and our auditor's report thereon. Our
opinions on the financial statements do not cover the other information, and we do not
express an opinion or any form of assurance thereon. In connection with our audit of the
financial statements, our responsibility is to read the other information and consider whether
a material inconsistency exists between the other information and the financial statements,
or the other information otherwise appears to be materially misstated. If, based on the work
performed, we conclude that an uncorrected material misstatement of the other information
exists, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
October 25, 2024 on our consideration of the District’s internal control over financial reporting
and on our tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements and other matters. The purpose of that report is solely to describe the
scope of our testing of internal control over financial reporting and compliance and the results
of that testing, and not to provide an opinion on the effectiveness of internal control over
financial reporting or on compliance.That report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the District’s internal control
over financial reporting and compliance.
Irvine, California
October 25, 2024
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Management’s Discussion and Analysis
As the management of the Otay Water District (the "District"), we offer readers of the District's financial
statements this narrative overview and an analysis of the District's financial performance during the fiscal
year ending June 30, 2024.Please read it in conjunction with the District's financial statements that follow
Management's Discussion and Analysis.All amounts, unless otherwise indicated, are expressed in millions
of dollars.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the District's basic financial
statements, which are comprised of the following: 1) Statement of Net Position, 2) Statement of Revenues,
Expenses,and Changes in Net Position, 3) Statement of Cash Flows, and 4) Notes to the Financial
Statements.This report also contains supplementary information in addition to the basic financial
statements.
The Statement of Net Position presents information on the District's assets,deferred outflows of resources,
liabilities,and deferred inflows of resources, with the difference reported as Total Net Position.Over time,
increases or decreases in net position may serve as a valuable indicator of whether the District's financial
position is improving or weakening.
The Statement of Revenues, Expenses,and Changes in Net Position presents information showing how
the District's net position changed during the most recent fiscal year.All changes in net position are
reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of
related cash flows.Thus, revenues and expenses are reported in this statement for some items that will
only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation
leave).
The Statement of Cash Flows presents information on cash receipts and payments for the fiscal year.The
Notes to the Financial Statements provide additional information essential to a complete understanding of
the data supplied in the specific financial statements listed above.
Financial Highlights
The assets and deferred outflows of resources of the District exceeded its liabilities and deferred inflows of resources at
the close of the most recent fiscal year by $431.3 million (net position). Of this amount, $88.5 million (unrestricted net
position)may be used to meet the District’s ongoing obligations to residents and creditors.
Total assets increased by $5.0 million,or 0.8%,during Fiscal Year 2024 to $624.8 million, due to increases in cash and
investments, and accounts receivables,which were partially offset by a drop in capital assets due to depreciation
exceeding current year additions.
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Management’s Discussion and Analysis
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the District's progress in funding its obligation to provide
retirement benefits to its employees.
Financial Analysis:
As noted, net position may serve,over time,as a valuable indicator of an entity's financial position.In the
case of the District, assets and deferred outflows of resources exceeded liabilities and deferred inflows of
resources by $431.3 million at the close of Fiscal Year 2024.
The most significant portion of the District's net position, $336.1 million (77.9%), reflects its investment in
capital assets,less any remaining outstanding debt used to acquire those capital assets.The District uses
these capital assets to provide services to customers; consequently, these assets are not available for
future spending.Although the District's investment in its capital assets is reported effectively as a resource,
it should be noted that the resources needed to repay the debt must be provided from other sources since
the capital assets themselves cannot be used to liquidate these liabilities.
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Management’s Discussion and Analysis
Statement of Net Position
(In Millions of Dollars)
2024 2023
Assets
Current and Other Assets $ 187.9 $ 176.3
Capital Assets 436.9 443.5
Total Assets 624.8 619.8
Deferred Outflows of Resources
Deferred Actuarial Pension Costs 13.3 15.9
Deferred Actuarial OPEB Costs 12.2 6.7
Total Deferred Outflows of Resources 25.5 22.6
Liabilities
Current Liabilities 36.4 34.6
Long-Term Debt Outstanding 95.0 95.0
Net Pension Liability 28.6 25.9
Net OPEB Liability 11.2 5.0
Other Liabilities 3.5 3.8
Total Liabilities 174.7 164.3
Deferred Inflows of Resources
Deferred Inflows from Leases 43.4 45.4
Deferred Actuarial OPEB Costs 0.9 1.6
Total Deferred Inflows of Resources 44.3 47.0
Net Position
Net Investment in Capital Assets 336.1 341.2
Restricted for Debt Service 3.6 3.5
Restricted for Capital Assets 3.1 3.0
Unrestricted 88.5 83.4
Total Net Position $ 431.3 $ 431.1
The District's operations and population are growing.Much of this expansion has occurred in the
residential sector, particularly in multi-family dwellings.The District’s commercial base is also expanding,
largely due to commercial development in the Otay Mesa area of the District’s service area, which borders
Mexico. By 2055, the District's service area population is expected to increase by 13% to 271,500 residents.
6
Management’s Discussion and Analysis
The District has created several future planning documents to ensure a reliable water supply and sewer
system in the future, including the maintenance of current infrastructure.
In FY 2024,the District's Capital Assets increased by $7.9 million before accumulated depreciation (see
Note 4 in the Notes to Financial Statements).The District’s long-term debt (excluding current maturities)
remains the same due to the addition of new Subscription-Based Technology Arrangements (SBITA),
offset by the annual debt service payments (see Note 5 in the Notes to Financial Statements).
Total liabilities increased by $10.4 million in FY 2024,primarily due to increases in Net Pension and OPEB
liabilities.
In FY 2024, deferred outflows of resources increased by $2.9 million due to increases in the actuarial
pension and OPEB costs.
Deferred inflows of resources decreased by $2.7 million in FY 2024 due to decreases in the actuarial OPEB
costs and deferred inflows from leases.
At the end of FY 2024,the District reports positive balances in all net position categories. This situation also
applied to the prior fiscal year.
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Management’s Discussion and Analysis
Statement of Revenues, Expenses, and Changes in Net Position
(In Millions of Dollars)
2024 2023
Water Sales $105.7 $99.9
Wastewater Revenue 3.5 3.3
Connection and Other Fees 3.3 3.0
Non-operating Revenues 16.9 14.6
Total Revenues 129.4 120.8
Depreciation Expense 18.3 17.9
Other Operating Expenses 113.0 100.9
Non-operating Expenses 5.4 4.8
Total Expenses 136.7 123.6
Income (Loss) Before Capital
Contributions (7.3)(2.8)
Capital Contributions 7.5 9.2
Change in Net Position 0.2 6.4
Beginning Net Position 431.1 424.7
Ending Net Position $ 431.3 $ 431.1
Water Sales increased by $5.8 million in FY 2024 due to the increase in water rates necessary to pass
through increasing costs placed on the District.
Other Operating Expenses increased by $12.1 million in FY 2024, predominantly due to the increase in
administrative and general expenses caused by increases in pension and OPEB costs and an increase in
the cost of water.
Specific planning and environmental study costs associated with capital projects do not qualify as capital
costs under Generally Accepted Accounting Principles. These costs are included in the District's
miscellaneous (non-operating) expenses. For FY 2024,those expenses were $0.5 million.
Connection and Other Fees increased by $0.3 million in FY 2024 due to an increase in expansion-related
operating costs, which are funded by capacity fees.
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Management’s Discussion and Analysis
Capital Contributions decreased by $1.7 million in FY2024 due to less developer-built facilities.
Non-operating Revenues
Non-operating Revenues by Major Source
(In Millions of Dollars)
2024 2023
Taxes and Assessments $5.8 $5.6
Rents and Leases 2.1 2.2
Other Non-operating Revenue 9.0 6.8
Total Non-operating Revenues $ 16.9 $ 14.6
The District's total non-operating revenues increased by $2.3 million in FY 2024 due primarily to the
increase in investment earnings brought about by high interest rates.
Capital Assets and Debt Administration
The District's capital assets (net of accumulated depreciation) as of June 30, 2024, totaled $436.9 million.
Included in this amount is land, which is a non-depreciable asset.The District's net capital assets
decreased by 1.5% in FY 2024.
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Management’s Discussion and Analysis
Capital Assets
(In Millions of Dollars)
As indicated by the figures in the table above, most capital assets added during the current fiscal year are
related to the water systems and Right to Use Assets.Additionally,most of the construction-in-progress
cost is associated with water systems.Additional information on the District's capital assets can be found
in Note 4 of the Notes to Financial Statements.
On June 30, 2024, the District had $95.0 million in outstanding debt (net of $5.2 million of maturities
occurring in FY 2025), which consisted of the following:
Lease Payable $ 0.7
Subscription-Based IT Payable 4.9
Revenue Bonds 89.4
Total Long-Term Debt $ 95.0
Additional information on the District's long-term debt can be found in Note 5 of the Notes to Financial
Statements.
2024 2023
Land $14.5 $14.5
Construction in Progress 10.7 11.7
Potable Water System 547.4 542.6
Recycled Water System 119.2 119.2
Wastewater System 59.3 59.4
Field Equipment 6.6 8.3
Buildings 19.3 19.7
Transportation Equipment 5.0 3.9
Communication Equipment 2.5 2.6
Office Equipment 8.0 8.1
Right to Use Assets –Leases 0.7 0.7
Right to Use Assets -SBITA 5.6 0.2
Total Capital Assets 798.8 790.9
Less Accumulated
Depreciation (361.9)(347.4)
Net Capital Assets $ 436.9 $ 443.5
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Management’s Discussion and Analysis
Fiscal Year 2024-2025 Budget
Economic Factors
The San Diego region imports 72.0% of its potable supply;therefore, factors such as local rainfall and
weather conditions elsewhere in the western portion of the nation can affect the region. San Diego
received above-average rainfall of 12.2 inches in FY 2024.The 10-year average of 10.7 inches for San Diego
rainfall reflects the long-term drought conditions for our area.San Diego's rainfall average over 20 years is
9.9 inches,the 30-year average is 9.5 inches,and the 40-year average is 9.9 inches.
While water sales peaked in 2008, prolonged droughts led to an increase in conservation,which has had a
permanent influence on volumes.The FY 2025 sales volume is budgeted to decrease by 1.0% compared to
the previous year's budget.
The District continues to respond to the challenges presented by growth, State mandates,and drought,by
creating new opportunities and new organizational efficiencies.Utilizing and refining its Strategic Business
Plan has captured the Board of Directors'vision and united its staff in a joint mission.The District has
achieved several significant accomplishments due to its successful adherence to its Strategic Business
Plan. The District is poised to continue successfully providing an affordable, safe, and reliable water supply
for the people of its service area, while also passing through the benefits of greater efficiencies and
economies of scale.
The District is currently at about 87.0%of its projected ultimate population, serving approximately 240,000
people. Long-term, this percentage should continue to increase as the District's service area develops and
grows. By 2055,the District is projected to serve approximately 271,500 people.Currently, the District
services the needs of this growing population by purchasing water from the San Diego County Water
Authority (CWA), which in turn purchases its water from the Metropolitan Water District (MWD) and the
Imperial Irrigation District (IID).
Otay takes delivery of water through several connections of large-diameter pipelines owned and operated
by CWA. The District receives treated water from CWA directly and from the Helix Water District via a CWA
contract. Additionally, the District has an emergency agreement with the City of San Diego to purchase
water in the case of a shutdown of the primary treated water source. The City of San Diego also has a
long-term contract with the District to provide recycled water for landscape and irrigation usage. Through
innovative agreements like these, both parties can benefit by using another agency's excess capacity and
diversifying local supply, thereby increasing reliability.
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Management’s Discussion and Analysis
Financial
The District is budgeted to deliver approximately 27,296.2 acre-feet of potable water to 52,057 potable
customer accounts during FY 2025.The FY 2025 budget was prepared with the continuing challenges of
potable water wholesale supplier rate increases, inflation, additional CIP projects, increasing power costs,
current and pending legislative initiatives, and climate change.Additional challenges include the costs
associated with the City of San Diego’s Pure Water program and the County of San Diego’s rehabilitation of
shared facilities.
Inflation and increased regulation continue to significantly impact the District’s financial position. The
District’s wholesale water supplier has approved a 14.0% overall rate increase in FY 2025, with projected
increases of 16.4% in FY 2026 and 5.6% in FY 2027. The FY 2025 inflationary impact on material and
administrative expenses is approximately $0.5 million, while the inflationary impact on the CIP is estimated
to be $5.4 million over the six-year projection.SDG&E rate increases are expected to increase energy costs
by 18.0%, resulting in a $0.8 million increase. Regulatory mandates are also adding pressure to both
operating and CIP budgets, increasing material and administrative expense budgets by $0.8 million.
Climate change presents another challenge for the District. Weather patterns today and in the future are
projected to bring longer drought periods and less frequent, but more intense, rainfall periods. These
prolonged drought periods result in increasing conservation requirements leading to permanent
reductions in water consumption.
The District partially mitigates inflationary impacts through increasing returns on investments and long-
term contracts with pricing structures that are fixed for the duration of the contract or include pricing
structures whereby annual price increases are for fixed dollar amounts that are less than CPI levels.The
London Moeder Advisors' economic report suggests that while the County’s economy would continue to
expand in 2024, the pace was anticipated to be consistent with the prior year in key metrics,including
inflation,as supported by March 2024 CPI data. The six-year rate model assumes administrative and
material inflation of 3.6% from FY 2025 through FY 2030.
District staff projects that the District will sell another 906 water meters over the next six years,translating to
3,209 equivalent dwelling units (EDUs).This growth is estimated to increase sales volumes by an average
of less than 1.0% per year over the next five years.While all these factors impact the region's water usage,
people's water needs remain an underlying constant.
Certain claims, suits,and complaints arising in the ordinary course of operation have been filed or are
pending against the District.There is one case that could potentially have a significant effect on the
District’s financial position.In November 2015, a District ratepayer filed a lawsuit against the District
(Coziahr v. Otay Water District, Superior Court of the State of California, County of San Diego), contending
12
Management’s Discussion and Analysis
that the District’s water rates violated Article XIIID of the California Constitution (“Proposition 218”). On
March 4, 2021, the court issued a decision in favor of the plaintiffs, the District appealed the trial court’s
decision to the Court of Appeal, and in July of 2024, the Court of Appeal issued its decision upholding
much of the trial court’s decision, but remanding the issue of the allocation of refunds back to the trial court
for a new trial.
The District’s position is that the court decision is inconsistent with the Constitution, case law, and with
recently enacted bills that clarify both that rates based on peaking factors,like Otay’s rates,are valid (AB
1824) and that challengers are not entitled to refunds for Proposition 218 rate challenges (SB 1072). The
District has petitioned for review of this decision by the California Supreme Court, and as of October 2024
is awaiting a decision by the Supreme Court as to whether it will review the prior ruling.
Management is unaware of any other conditions that are likely to 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 provides a general overview of the Otay Water District's finances for the Board of
Directors, customers, creditors, and other interested parties.Questions concerning any information
provided in the report or requests for additional information should be addressed to the District's Finance
Department, 2554 Sweetwater Springs Blvd., Spring Valley, CA 91978-2004.
13
STATEMENT OF NET POSITION
June 30, 2024
(with comparative totals as of June 30, 2023)
2024 2023
ASSETS
Current Assets:
Cash and Cash Equivalents (Notes 1 and 2)77,264,706$ 43,753,408$
Restricted Cash and Cash Equivalents (Notes 1 and 2)3,132,285 3,078,363
Investments (Notes 1 and 2)35,691,622 59,781,150
Restricted Investments (Notes 1 and 2)3,587,676 3,444,377
Accounts Receivable, Net 16,570,788 14,313,664
Accrued Interest Receivable 1,126,759 846,231
Taxes and Availability Charges Receivable, Net 287,785 305,094
Restricted Taxes and Availability Charges Receivable, Net 4,884 6,182
Current Lease Receivable (Note 12)1,041,530 962,482
Inventories 2,073,038 2,053,393
Prepaid Items and Other Receivables 1,885,417 1,501,252
Total Current Assets 142,666,490 130,045,596
Non-current Assets:
Capital Assets (Note 4):
Land 14,479,573 14,479,573
Construction in Progress 10,712,815 11,741,448
Capital Assets, Net of Depreciation 411,694,772 417,230,754
Lease Receivable (Note 11)45,228,436 46,270,266
Total Non-current Assets 482,115,596 489,722,041
Total Assets 624,782,086 619,767,637
DEFERRED OUTFLOWS OF RESOURCES
Deferred Actuarial Pension Costs (Note 7)13,279,616 15,951,074
Deferred Actuarial OPEB Costs (Note 8)12,206,112 6,679,231
Total Deferred Outflows of Resources 25,485,728 22,630,305
Continued
The accompanying notes are an integral part of this statement.
14
STATEMENT OF NET POSITION
Continued
June 30, 2024
(with comparative totals as of June 30, 2023)
2024 2023
LIABILITIES
Current Liabilities:
Current Maturities of Long-term Debt (Note 5)5,224,677$ 5,589,735$
Accounts Payable 16,842,486 14,985,218
Accrued Payroll Liabilities 1,095,145 1,102,208
Other Accrued Liabilities 6,247,354 5,729,278
Customer and Developer Deposits 5,490,122 5,573,296
Accrued Interest 1,491,005 1,573,222
Total Current Liabilities 36,390,789 34,552,957
Non-current Liabilities:
Long-term Debt (Note 5):
Revenue Bonds 89,430,762 94,256,620
Lease Payable 671,758 690,539
Subscription-Based IT Payable (Note 5)4,914,393 35,476
Net Pension Liability (Note 7)28,553,945 25,951,095
Net OPEB Liability (Note 8)11,202,346 5,051,261
Other Non-current Liabilities (Note 9)3,548,589 3,768,468
Total Non-current Liabilities 138,321,793 129,753,459
Total Liabilities 174,712,582 164,306,416
DEFERRED INFLOWS OF RESOURCES
Deferred Inflows from Leases (Note 12)43,410,817 45,442,359
Deferred Actuarial OPEB Costs (Note 8)870,274 1,574,138
Total Deferred Inflows of Resources 44,281,091 47,016,497
NET POSITION
Net Investment in Capital Assets 336,050,508 341,227,728
Restricted for Debt Service 3,636,078 3,476,509
Restricted for Capital Assets 3,083,883 3,046,231
Unrestricted (Note 6)88,503,672 83,324,561
Total Net Position 431,274,141$ 431,075,029$
The accompanying notes are an integral part of this statement.
15
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
Year Ended June 30, 2024
(with comparative totals for the year ended June 30, 2023)
2024 2023
OPERATING REVENUES
Water Sales 105,736,843$ 99,901,174$
Wastewater Revenue 3,494,312 3,315,754
Connection and Other Fees 3,253,978 2,975,495
Total Operating Revenues 112,485,133 106,192,423
OPERATING EXPENSES
Cost of Water Sales 77,807,009 71,342,741
Wastewater 2,400,881 2,497,316
Administrative and General 32,717,662 27,073,523
Depreciation 18,276,492 17,880,335
Total Operating Expenses 131,202,044 118,793,915
Operating Income (Loss)(18,716,911)(12,601,492)
NON-OPERATING REVENUES (EXPENSES)
Investment Earnings 6,393,523 4,088,331
Taxes and Assessments 5,777,012 5,618,253
Availability Charges 741,705 710,954
Gain (Loss) on Disposal of Capital Assets (725,060)(111,029)
Rents and Leases 2,083,669 2,181,634
Miscellaneous Revenues 1,896,115 1,961,168
Donations (103,200)(92,000)
Interest Expense (4,137,615)(4,310,352)
Miscellaneous Expenses (478,412)(330,421)
Total Non-operating Revenues (Expenses)11,447,737 9,716,538
Income (Loss) Before Capital Contributions (7,269,174)(2,884,954)
Capital Contributions 7,468,286 9,237,196
Change in Net Position 199,112 6,352,242
Total Net Position, Beginning 431,075,029 424,722,787
Total Net Position, Ending 431,274,141$ 431,075,029$
The accompanying notes are an integral part of this statement.
16
STATEMENT OF CASH FLOWS
Year Ended June 30, 2024
(with comparative totals for the year ended June 30, 2023)
2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Customers 106,875,559$ 105,268,572$
Receipts from Connections and Other Fees 3,253,978 2,975,495
Receipts from Property Rents and Leases 52,127 314,995
Other Receipts 1,128,578 1,178,333
Payments to Suppliers (80,512,056) (75,408,680)
Payments to Employees (25,474,256) (25,602,901)
Other Payments (581,612)(422,421)
Net Cash Provided By (Used For) Operating Activities 4,742,318 8,303,393
CASH FLOWS FROM NONCAPITAL AND RELATED
FINANCING ACTIVITIES
Receipts from Taxes and Assessments 6,530,074 6,065,432
Net Cash Provided By (Used For) Noncapital and Related
Financing Activities 6,530,074 6,065,432
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Proceeds from Capital Contributions 7,221,234 6,148,060
Proceeds from Sale of Capital Assets -64,042
Proceeds from Property Rents and Leases 1,630,303 1,503,495
Proceeds from Debt Related Taxes and Assessments 7,250 245,063
Principal Payments on Long-Term Debt (5,452,872) (5,563,365)
Interest Payments and Fees (3,814,672) (4,074,051)
Acquisition and Construction of Capital Assets (6,690,118) (11,547,330)
Net Cash Provided By (Used For) Capital and Related
Financing Activities (7,098,875) (13,224,086)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received on Investments 4,146,000 2,407,520
Proceeds from Sale and Maturities of Investments 40,339,069 7,600,000
Purchase of Investments (15,093,366) (55,085,244)
Net Cash Provided By (Used For) Investing Activities 29,391,703 (45,077,724)
Net Increase (Decrease) in Cash and Cash Equivalents 33,565,220 (43,932,985)
Cash and Cash Equivalents - Beginning 46,831,771 90,764,756
Cash and Cash Equivalents - Ending 80,396,991$ 46,831,771$
Continued
The accompanying notes are an integral part of this statement.
17
STATEMENT OF CASH FLOWS
Continued
Year Ended June 30, 2024
(with comparative totals for the year ended June 30, 2023)
2024 2023
Reconciliation of Operating Income (Loss) to Net Cash Flows
Provided By (Used For) Operating Activities:
Operating Income (Loss)(18,716,911)$ (12,601,492)$
Adjustments to Reconcile Operating Income to
Net Cash Provided By (Used For) Operating Activities:
Depreciation 18,276,492 17,880,335
Receipts from Property Rents and Leases 52,127 314,995
Miscellaneous Revenues 1,128,578 1,178,333
Miscellaneous Expenses and Donations (581,612)(422,421)
(Increase) Decrease in Accounts Receivable (2,257,124) 1,137,255
(Increase) Decrease in Inventory (19,645)(703,173)
(Increase) Decrease in Prepaid Items and Other Receivables (384,165)1,006,451
(Increase) Decrease in Net OPEB Asset -3,005,037
(Increase) Decrease in Deferred Actuarial Pension Costs 2,671,458 (11,469,305)
(Increase) Decrease in Deferred Actuarial OPEB Costs (5,526,881) (3,601,175)
Increase (Decrease) in Accounts Payable 1,857,268 (709,462)
Increase (Decrease) in Accrued Payroll and Related Expenses (7,063)124,034
Increase (Decrease) in Other Accrued Liabilities 518,076 755,494
Increase (Decrease) in Customer and Developer Deposits (98,472)914,389
Increase (Decrease) in Other Non-current Liabilities (219,879)64,236
Increase (Decrease) in Net OPEB Liability 6,151,085 5,051,261
Increase (Decrease) in Net Pension Liability 2,602,850 25,670,797
Increase (Decrease) in Deferred Actuarial Pension Costs -(14,422,139)
Increase (Decrease) in Deferred Actuarial OPEB Costs (703,864)(4,870,057)
Net Cash Provided By (Used For) Operating Activities 4,742,318$ 8,303,393$
Schedule of Cash and Cash Equivalents:
Current Assets:
Cash and Cash Equivalents 77,264,706$ 43,753,408$
Restricted Cash and Cash Equivalents 3,132,285 3,078,363
Total Cash and Cash Equivalents 80,396,991$ 46,831,771$
Supplemental Disclosures
Non-Cash Investing and Financing Activities Consisted of the Following:
Contributed Capital for Water and Sewer System 247,052$3,089,136$
Change in Fair Value of Investments (1,299,474) (551,965)
Amortization Related to Long-term Debt 377,675 460,484
The accompanying notes are an integral part of this statement.
18
Notes To Financial Statements
Year Ended June 30, 2024
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A)Reporting Entity
The reporting entity Otay Water District (the “District”) includes the accounts of the District and the
Otay Water District Financing Authority (the “Financing Authority”).
The District is a public entity established in 1956 pursuant to the Municipal Water District Law of 1911
(Section 711 et. Seq. of the California Water Code) for the purpose of providing water and wastewater
services to the properties in the District.The District is governed by a Board of Directors consisting
of five directors elected by geographical divisions based on District population for a four-year
alternating term.
The District formed the Financing Authority on March 3, 2010 under the Joint Exercise of Powers Act,
constituting Articles 1 through 4 (commencing with Section 6500) of Chapter 5, Division 7, Title 1 of
the California Government Code. The Financing Authority was formed to assist the District in the
financing of public capital improvements.
The financial statements present the District and its component unit. The District is the primary
government unit.Component units are those entities which are financially accountable to the
primary government, either because the District appoints a voting majority of the component unit’s
board, or because the component units will provide a financial benefit or impose a financial burden
on the District. The District has accounted for the Financing Authority as a “blended” component
unit. Despite being legally separate, the Financing Authority is so intertwined with the District that it
is in substance, part of the District’s operations. Accordingly, the balances and transactions of this
component unit are reported within the funds of the District. Separate financial statements are not
issued for the Financing Authority.
B)Measurement Focus, Basis of Accounting and Financial Statement Presentation
Measurement focus is a term used to describe “which” transactions are recorded within the various
financial statements. Basis of accounting refers to “when” transactions are recorded regardless of
the measurement focus applied. The accompanying financial statements are reported using the
economic resources measurement focus, and the accrual basis of accounting. Under the economic
measurement focus all assets and liabilities (whether current or noncurrent) associated with these
activities are included on the Statement of Net Position.
19
Notes To Financial Statements
Year Ended June 30, 2024
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –Continued
B)Measurement Focus, Basis of Accounting and Financial Statement Presentation -Continued
The Statement of Revenues, Expenses and Changes in Net Position present increases (revenues)
and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are
recorded when earned and expenses are recorded when a liability is incurred, regardless of the
timing of related cash flows.
The District reports its activities as an enterprise fund, which is used to account for operations that are
financed and operated in a manner similar to a private business enterprise, where the intent of the
District is that the costs (including depreciation) of providing goods or services to the general public
on a continuing basis be financed or recovered primarily through user charges.
The basic financial statements of the Otay Water District have been prepared in conformity with
accounting principles generally accepted in the United States of America. The Governmental
Accounting Standards Board (GASB) is the accepted standard setting body for governmental
accounting financial reporting purposes.
Net position of the District is classified into three components: (1) net investment in capital assets,
(2)restricted net position, and (3) unrestricted net position. These classifications are defined as
follows:
Net Investment in Capital Assets
This component of net position consists of capital assets, net of accumulated depreciation and
reduced by the outstanding balances of notes or borrowing that are attributable to the acquisition of
the assets, construction, or improvement of those assets. If there are significant unspent related debt
proceeds at year-end, the portion of the debt attributable to the unspent proceeds are not included in
the calculation of the net investment in capital assets.
Restricted Net Position
This component of net position consists of net position with constrained use through external
constraints imposed by creditors (such as through debt covenants), grantors, contributions, or laws or
regulations of other governments or constraints imposed by law through constitutional provisions or
enabling legislation.
20
Notes To Financial Statements
Year Ended June 30, 2024
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
B)Measurement Focus, Basis of Accounting and Financial Statement Presentation -Continued
Unrestricted Net Position
This component of net position consists of net position that do not meet the definition of “net investment
in capital assets” or “restricted net position”.
The District distinguishes operating revenues and expenses from those revenues and expenses that
are non-operating. Operating revenues are those revenues that are generated by water sales and
wastewater services while operating expenses pertain directly to the furnishing of those services. Non-
operating revenues and expenses are those revenues and expenses generated that are not associated
with the normal business of supplying water and wastewater treatment services.
The District recognizes revenues from water sales, wastewater revenues, and meter fees as they are
earned. Taxes and assessments are recognized as revenues based upon amounts reported to the
District by the County of San Diego, net of allowance for delinquencies of $32,519 at June 30, 2024.
Additionally, capacity fee contributions received which are related to specific operating expenses are
offset against those expenses and included in Cost of Water Sales in the Statement of Revenues and
Expenses and Changes in Net Position.
Sometimes the District will fund outlays for a particular purpose from both restricted (e.g., restricted
bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as
restricted -net position and unrestricted -net position, a flow assumption must be made about the
order in which the resources are considered to be applied.It is the District’s practice to consider
restricted -net position to have been depleted before unrestricted -net position is applied, however it
is at the Board’s discretion.
21
Notes To Financial Statements
Year Ended June 30, 2024
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
C)Pending Accounting Pronouncements
GASB has issued the following statements which may impact the District’s financial reporting
requirements in the future:
i.GASB Statement 101 -“Compensated Absences”, effective for reporting periods beginning
after December 15, 2023.
ii.GASB Statement 102 -“Certain Risk Disclosures”, effective for reporting periods beginning
after June 15, 2024.
iii.GASB Statement 103 -“Financial Reporting Model Improvements”, effective for reporting
periods beginning after June 15, 2025.
D)Deferred Outflows/Deferred Inflows
In addition to assets, the Statement of Net Position will sometimes report a separate section for
deferred outflows of resources. This separate financial statement element, deferred outflows of
resources, represents a consumption of net assets that applies to a future period(s) and so will not be
recognized as an outflow of resources (expense/expenditure) until then. The District has two items
that qualify for reporting in this category, deferred actuarial pension costs and deferred actuarial OPEB
costs are items that are deferred and recognized as an outflow of resources in the period the amounts
become available.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for
deferred inflows of resources. This separate financial statement element, deferred inflows of resources,
represents an acquisition of net assets that applies to a future period(s) and will not be recognized as
an inflow of resources (revenue) until that time. The District has two items that qualify for reporting in
this category. Accordingly, the items (deferred actuarial OPEB costs and deferred lease revenue)are
deferred and recognized as an inflow of resources in the period that the amounts become available.
22
Notes To Financial Statements
Year Ended June 30, 2024
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –Continued
E)Statement of Cash Flows
For purposes of the Statement of Cash Flows, the District considers all highly liquid investments
(including restricted assets) with a maturity period, at purchase, of three months or less to be cash
equivalents.
F)Investments
Investments are stated at their fair value, which represents the quoted or stated market value.
Investments that are not traded on a market, such as investments in external pools, are valued based
on the stated fair value as presented by the external pool. All investments are stated at their fair value.
The District has not elected to report certain investments at amortized costs.
G)Inventory and Prepaid Items
Inventory consists primarily of materials used in the construction and maintenance of the water and
wastewater system and is valued at weighted average cost. Both inventory and prepaid items use the
consumption method whereby they are reported as an asset and expensed as they are consumed.
H)Capital Assets
Capital assets are recorded at cost, where historical records are available, and at an estimated
historical cost where no historical records exist.
Right-to-use assets for leases and subscription-based information technology arrangements are
recorded at net present value at the time of inception. Infrastructure assets in excess of $20,000 and
other capital assets in excess of $10,000 are capitalized if they have an expected useful life of two years
or more. The District will also capitalize individual purchases under the capitalization threshold if they
are part of a new capital program. The cost of purchased and self-constructed additions to utility plant
and major replacements of property are capitalized.Costs include materials, direct labor,
transportation, and such indirect items as engineering, supervision, employee fringe benefits and
overhead. Repairs, maintenance, and minor replacements of property are charged to expense.
Donated assets are capitalized at their acquisition value on the date contributed.
23
Notes To Financial Statements
Year Ended June 30, 2024
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES –Continued
H)Capital Assets –Continued
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 15-70 Years
Wastewater System 25-50 Years
Right to Use Asset/SBITA The estimated life of the leased/subscribed
asset or the contract term whichever is shorter
I)Other Non-Current Liabilities
For compensated absences, the District’s policy is to record vested and accumulated vacation and
sick leave as an expense and liability as benefits accrue to employees.The current portion is reflected
in accrued payroll liabilities and remainder in other non-current liabilities on the Statement of Net
Position.
J)Classification of Liabilities
Certain current liabilities have been classified as current liabilities payable from restricted assets as
they will be funded from restricted assets.
K)Allowance for Doubtful Accounts
The District charges doubtful accounts arising from water sales receivable to bad debt expense when
it is probable that the accounts will be uncollectible. Uncollectible accounts are determined by the
allowance method based upon prior experience and management’s assessment of the collectability
of existing specific accounts. The allowance for doubtful accounts was $268,076 for 2024.
24
Notes To Financial Statements
Year Ended June 30, 2024
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
L)Property Taxes
Tax levies are limited to 1% of full market value (at time of purchase) which results in a tax rate of
$1.00 per $100 assessed valuation, under the provisions of Proposition 13. Tax rates for voter-
approved indebtedness are excluded from this limitation.
The County of San Diego (the “County”) bills and collects property taxes on behalf of the District. The
County’s tax calendar year is July 1 to June 30. Property taxes attach as a lien on property on January
1. Taxes are levied on July 1 and are payable in two equal installments on November 1 and February
1, and become delinquent after December 10 and April 10, respectively.
M)Pensions
For purposes of measuring the net pension liability,deferred outflows of resources, and deferred
inflows of resources related to pensions, and pension expense, information about the fiduciary net
position of the Plan and additions to/deductions from the Plans’ fiduciary net position have been
determined on the same basis.For this purpose, benefit payments (including refunds of employee
contributions) are recognized when currently due and payable in accordance with the benefit terms.
Investments are reported at fair value.
Valuation Date June 30, 2022
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
N)Other Post-Employment Benefits (OPEB)
For purposes of measuring the net OPEB liability(asset), deferred outflows/inflows of resources related
to OPEB, and OPEB expense, information about the fiduciary net position of the District’s plan (OPEB
Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined
on the same basis. For this purpose, benefit payments are recognized when currently due and payable
in accordance with the benefit terms. Investments are reported at fair value.
25
Notes To Financial Statements
Year Ended June 30, 2024
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
N)Other Post-Employment Benefits (OPEB)
Generally accepted accounting principles require that the reported results must pertain to liability and
asset information within certain defined timeframes. For this report, the following timeframes are used:
Valuation Date June 30, 2023
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
O)Leases
The District is a lessor and lessee for leases as detailed in Footnotes 5 and 11. The District recognizes
a lease receivable, a deferred inflow of resources, right to use capital assets, and a lease payable in
the financial statements.
At the commencement of the lease, the District initially measures the lease receivable at the present
value of payments expected to be received and paid during the lease term. Subsequently, the lease
receivable is reduced by the principal portion of lease payments received and the lease payable is
reduced by the principal portion of lease payments made. The deferred inflow of resources is initially
measured as the initial amount of the lease receivable, adjusted for lease payments received at or
before the lease commencement date.Subsequently, the deferred inflows of resources are
recognized as revenue over the life of the lease term.
Key estimates and judgments include how the district determines the discount rate it uses to
discount the expected lease receipts and payments to present value, lease term and lease receipts.
The District used the weighted average cost of capital rate as the discount rate for leases.
The lease term includes the non-cancellable period of the lease.
The District monitors changes in circumstances that would require a remeasurement of its leases
and will remeasure the lease receivable and deferred inflows of resources if certain changes occur
that are expected to significantly affect the amount of the lease receivable.
P)Subscription Based Information Technology Arrangements (SBITAs)
The District is a participant in subscription-based IT arrangements as detailed in Footnote 5. The
District recognizes a subscription-based IT payable and the right to use IT assets in the financial
statements.
26
Notes To Financial Statements
Year Ended June 30, 2024
1)REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -Continued
P)Subscription Based Information Technology Arrangements (SBITAs) -Continued
At the commencement of the arrangement, the District initially measures the payable at the present
value of payments expected to be paid during the arrangement term. Subsequently, the payable is
reduced by the principal portion of payments made. The right to use assets are initially measured at
the initial amount of the subscription-based IT payable. Subsequently, the right to use assets are
amortized over the life of the arrangement term.
Q)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.
R)Prior Year Comparative Information
Selected information regarding the prior year has been included in the accompanying financial
statements. This information has been included for comparison purposes only and does not represent
a complete presentation in accordance with generally accepted accounting principles. Accordingly,
such information should be read in conjunction with the government’s prior year financial statements,
from which this selected financial data was derived. In addition, certain minor reclassifications of the
prior year data have been made to enhance their comparability to the current year.
2)CASH AND INVESTMENTS
The primary goals of the District’s Investment Policy are to assure compliance with all Federal, State, and
Local laws governing the investment of funds under the control of the organization, protect the principal of
investments entrusted, remain sufficiently liquid to enable the District to meet all operating requirements
and generate income at a market rate of return under the parameters of such policies.
27
Notes To Financial Statements
Year Ended June 30, 2024
2)CASH AND INVESTMENTS -Continued
Cash and Investments are classified in the accompanying financial statements as follows:
Cash and Investments consist of the following:
Investments Authorized by the California Government Code and the District’s Investment Policy
The table on the following page 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 trustees that are governed by the provisions of
debt agreements of the District, rather than the general provisions of the California Government Code or
the District’s Investment Policy.
Statement of Net Position:
Cash and Cash Equivalents 77,264,706$
Restricted Cash and Cash Equivalents 3,132,285
Investments 35,691,622
Restricted Investments 3,587,676
Total Cash and Investments 119,676,289$
Cash on Hand 3,100$
Deposits with Financial Institutions 1,095,094
Investments 118,578,095
Total Cash and Investments 119,676,289$
28
Notes To Financial Statements
Year Ended June 30, 2024
2)CASH AND INVESTMENTS -Continued
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturity Of Portfolio(1)In One Issuer
U.S. Treasury Obligations 5 years 100%100%
U.S. Government Sponsored Entities 5 years 100% 100%
Certificates of Deposit 5 years 15%100%
Corporate Medium-Term Notes 5 years 10%2%
Commercial Paper 270 days 10%2%
Money Market Mutual Funds N/A 10%100%
County Pooled Investment Funds N/A 100%N/A
Local Agency Investment Fund (LAIF)N/A $75 Million N/A
(1)Excluding amounts held by bond trustee that are not subject to California Government Code
restrictions.
Investments Authorized by Debt Agreements
Investments of debt proceeds held by the bond trustee are governed by provisions of the debt agreements,
rather than the general provisions of the California Government Code or the District’s Investment Policy.
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an
investment. Generally,the longer the maturity of an investment, the greater the sensitivity of its fair value
to changes in market interest rates.
One of the ways that the District manages its exposure to interest rate risk is by purchasing investments
with shorter durations than the maximum allowable under the District’s Investment Policy and by timing
cash flows from maturities,so that a portion of the portfolio is maturing or coming close to maturity evenly
over time,as necessary,to provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the District’s investments to market interest rate
fluctuations are provided by the following tables that show the distribution of the District’s investments by
maturity as of June 30, 2024.
29
Notes To Financial Statements
Year Ended June 30, 2024
2) CASH AND INVESTMENTS – Continued
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of
the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating
organization. Presented below is the minimum rating required by (where applicable) the California
Government Code or the District’s Investment Policy, or debt agreements, and the Moody’s ratings as of
June 30, 2024.
Concentration of Credit Risk
The investment policy of the District contains various limitations on the amounts that can be invested in
any one type or group of investments and in any issuer, beyond that stipulated by the California
Government Code, Sections 53600 through 53692. All the investments for fiscal year 2024 are within the
limitations of the District’s investment policy.
12 Months 13 to 36 More than
Investment Type Total Or Less Months 36 Months
U.S. Government Sponsored Entities $ 46,304,216 32,862,350$ 13,441,866$ -$
U.S. Treasury Obligations 5,959,920 2,970,570 2,989,350 -
Local Agency Investment Fund (LAIF) 65,123,748 65,123,748 - -
San Diego County Pool 905,000 905,000 - -
Money Market Funds 285,211 285,211 - -
Total $ 118,578,095 $ 102,146,879 $ 16,431,216 -$
Remaining Maturity (in Months)
Legal
Minimum Not
Investment Type Total Rating AAA Rated
U.S. Government Sponsored Entities $ 46,304,216 A 46,304,216$ -$
U.S. Treasury Obligations 5,959,920 N/A - 5,959,920
Local Agency Investment Fund (LAIF) 65,123,748 N/A - 65,123,748
San Diego County Pool 905,000 N/A 905,000 -
Money Market Funds 285,211 AAA 285,211 -
Total $ 118,578,095 47,494,427$ 71,083,668$
Rating as of Year End
30
Notes To Financial Statements
Year Ended June 30, 2024
2)CASH AND INVESTMENTS –Continued
The investments listed below disclose the concentration of risk within the District’s investment portfolio.
Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment
pools) that represent 5% or more of total District investments as of June 30, 2024:
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution,
the District 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, the District 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
District. 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, 2024, $1,293,995 of
the District’s deposits with financial institutions in excess of federal depository insurance limits, were held
in collateralized accounts.
Local Agency Investment Fund (LAIF)
The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by
California Government Code Section 16429 under the oversight of the Treasurer of the State of California.
Reported
Issuer Investment Type Amount
Federal Home Loan Bank U.S. Government Sponsored Entities 8,977,800$
Federal National Mortgage Assoc.U.S. Government Sponsored Entities 11,846,300
Federal Farm Credit Bank U.S. Government Sponsored Entities 15,902,160
Federal Home Loan Mortgage U.S. Government Sponsored Entities 9,577,956
31
Notes To Financial Statements
Year Ended June 30, 2024
2)CASH AND INVESTMENTS –Continued
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 $75,000,000 in the fund. Investments in LAIF are highly liquid,
as deposits can be converted to cash within twenty-four hours without loss of interest. Investments with
LAIF are secured by the full faith and credit of the State of California. The annualized yield of LAIF for the
quarter ended June 30, 2024 was 4.36%. The estimated amortized cost and fair value of the LAIF pool at
June 30, 2024 was $65,123,748.
San Diego County Pooled Fund
The San Diego County Pooled Investment Fund (SDCPIF) is a pooled investment fund program governed
by the County of San Diego Board of Supervisors and administered by the County of San Diego Treasurer
and Tax Collector. Investments in SDCPIF are highly liquid as deposits and withdrawals can be made at
any time without penalty, determined on an amortized cash basis, the same as the fair value of the District’s
position in the pool.
The County of San Diego’s bank deposits are either federally insured or collateralized in accordance with
the California Government Code. Pool detail is included in the County of San Diego Comprehensive Annual
Financial Report (“Annual Report”). Copies of the Annual Report may be obtained from the County of San
Diego Auditor-Controller’s Office –1600 Pacific Coast Highway, San Diego California 92101.
Cash and investments are restricted for the cost of the following District projects and debt service:
Cash and Cash Equivalents:
New Water Supply 3,083,883$
Cash and Cash Equivalents:
Debt Service:
Water Revenue Bond Series 2010A 15,016$
Water Revenue Bond Series 2010B 33,386
48,402$
32
Notes To Financial Statements
Year Ended June 30, 2024
2)CASH AND INVESTMENTS –Continued
Restricted Investments
3)FAIR VALUE MEASUREMENTS
Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurements and
Application, provides the framework for measuring fair value. The framework provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value with Level 1 given
the highest priority and Level 3 the lowest priority. The three levels of the fair value hierarchy are as
follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
organization has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs include the following:
a.Quoted prices for similar assets or liabilities in active markets.
b.Quoted prices for identical or similar assets or liabilities in markets that are not active.
c.Inputs other than quoted prices that are observable for the asset or liability (for example, interest
rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds,
loss severities, credit risks, and default rates).
d.Inputs that are derived principally from or corroborated by observable market data by correlation
or other means (market-corroborated inputs).
Level 3 inputs are unobservable inputs for the asset or liability.
Debt Service:
Water Revenue Bond Series 2010A 987,651$
Water Revenue Bond Series 2010B 2,600,025
3,587,676$
33
Notes To Financial Statements
Year Ended June 30, 2024
3)FAIR VALUE MEASUREMENTS -Continued
Fair value of assets measured on a recurring basis at June 30, 2024 are as follows:
Investments classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique.
Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted
prices. Investments not measured at fair value do not fall under the fair value hierarchy as there is no
active market for the investments.
Quoted Prices in Significant Other
Active Markets Observable Inputs Not Measured
Total (Level 1)(Level 2)at Fair Value
U.S. Government Sponsored Entities 46,304,216$ -$46,304,216$ -$
U.S. Treasury Obligations 5,959,920 5,959,920 --
Local Agency Investment Fund (LAIF) 65,123,748 -- 65,123,748
San Diego County Pool 905,000 --905,000
Money Market Funds 285,211 --285,211
Total $118,578,095 $ 5,959,920 $ 46,304,216 $ 66,313,959
34
Notes To Financial Statements
Year Ended June 30, 2024
4)CAPITAL ASSETS
The following is a summary of changes in Capital Assets for the year ended June 30, 2024:
Depreciation expense for the year ended June 30, 2024 was $18,276,492.
Beginning Ending
Balance Additions Deletions Balance
Capital Assets, Not Depreciated:
Land $ 14,479,573 $-$-$ 14,479,573
Construction in Progress 11,741,448 6,690,119 (7,718,752) 10,712,815
Total Capital Assets, Not Depreciated 26,221,021 6,690,119 (7,718,752) 25,192,388
Capital Assets, Being Depreciated:
Infrastructure 721,156,409 6,465,414 (1,723,745) 725,898,078
Field Equipment 8,337,001 266,284 (1,962,160) 6,641,125
Buildings 19,729,303 91,050 (560,947) 19,259,406
Transportation Equipment 3,916,153 1,057,730 (2,177) 4,971,706
Communication Equipment 2,602,855 -(97,381) 2,505,474
Office Equipment 8,064,375 85,326 (172,656) 7,977,045
Right to Use Assets - Leases 738,501 - - 738,501
Right to Use Assets - SBITA 123,039 5,499,767 -5,622,806
Total Capital Assets, Being Depreciated 764,667,636 13,465,571 (4,519,066) 773,614,141
Less Accumulated Depreciation:
Infrastructure 316,855,095 16,555,831 (1,199,610) 332,211,316
Field Equipment 6,809,532 278,799 (1,935,467) 5,152,864
Buildings 11,015,579 483,851 (390,106) 11,109,324
Transportation Equipment 2,839,122 347,489 (2,176) 3,184,435
Communication Equipment 2,249,323 107,503 (97,382) 2,259,444
Office Equipment 7,560,048 174,167 (169,264) 7,564,951
Right to Use Assets - Leases 70,333 35,167 -105,500
Right to Use Assets - SBITA 37,850 293,685 -331,535
Total Accumulated Depreciation 347,436,882 18,276,492 (3,794,005) 361,919,369
Total Capital Assets, Being Depreciated, Net 417,230,754 (4,810,921) (725,061) 411,694,772
Total Capital Assets, Net $ 443,451,775 $ 1,879,198 $ (8,443,813) $ 436,887,160
35
Notes To Financial Statements
Year Ended June 30, 2024
5)LONG-TERM DEBT
Long-term liabilities for the year ended June 30, 2024 are as follows:
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, 2024;
bearing interest at 2% to 5.25%. The Series 2010B bonds are due in annual installments of $1,365,000 to
$3,505,000 from September 1, 2025 through September 1, 2040; bearing interest at 6.377% to 6.577%.
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
Revenue Bonds:
2010 Water Revenue Bonds Series A 2,530,000$ -$ (1,235,000)$ 1,295,000$ 1,295,000$
2010 Water Revenue Bonds Series B 36,355,000 --36,355,000 -
2013 Water Revenue Refunding Bonds 835,000 -(835,000)--
2016 Water Revenue Refunding Bonds 25,370,000 -(1,350,000)24,020,000 1,420,000
2018 Water Revenue Bonds 27,055,000 -(1,650,000)25,405,000 1,730,000
2019 Wastewater Revenue Bonds 2,985,000 -(75,000)2,910,000 75,000
2010 Series A Unamortized Premium 93,002 -(74,402)18,600 18,600
2013 Bonds Unamortized Premium 16,015 -(16,015)--
2016 Bonds Unamortized Premium 2,351,190 -(178,571)2,172,619 178,571
2018 Bonds Unamortized Premium 2,201,154 -(109,148)2,092,006 109,148
2019 Bonds Unamortized Discount (12,066) -461 (11,605) (461)
Net Revenue Bonds 99,779,295 -(5,522,675)94,256,620 4,825,858
Lease Payable 707,727 -(17,188)690,539 18,781
Subscription-Based IT Payable 85,348 5,499,767 (290,684)5,294,431 380,038
Total Long-Term Liabilities 100,572,370$ 5,499,767$ (5,830,547)$ 100,241,590$ 5,224,677$
36
Notes To Financial Statements
Year Ended June 30, 2024
5)LONG-TERM DEBT –Continued
Water Revenue Bonds –Continued
Interest on both Series is payable on September 1, 2010 and semiannually thereafter on March 1st and
September 1st of each year until maturity or earlier redemption. The installment payments are to be made
from taxes and net revenues of the Water System as described in the installment purchase agreement, on
parity with the payments required to be made by the District for the 2013, 2016 Water Revenue Refunding
Bonds and 2018 Water Revenue Bonds described below.
The original issue premium is being amortized over the 14-year life of the Series 2010A bonds. Amortization
for the year ending June 30, 2024 was $74,402. The amortization is included in interest expense. The
unamortized premium at June 30, 2024 is $18,600.
The 2010 Water Revenue Bonds contains various covenants and restrictions, principally that the District fix,
prescribe, revise and collect rates, fees and charges for the Water System which will at least be sufficient
to yield, during each fiscal year, taxes and net revenues equal to one hundred twenty-five percent (125%)
of the debt service for such fiscal year. The District was in compliance with these rate covenants for the
fiscal year ended June 30, 2024.
In June 2013, the 2013 Water Revenue Refunding Bonds were issued to defease the 2004 Refunding
Certificates of Participation. The bonds were issued with a face value of $7,735,000 plus a $984,975 original
issue premium. The bonds are due in annual installments of $660,000 to $835,000 from September 1, 2013
through September 1, 2023; bearing interest at 1% to 4%. The installment payments are to be made from
taxes and net revenues of the Water System, on parity with the payments required to be made by the
District for the 2016 Water Revenue Refunding Bonds, the 2010A, 2010B and 2018 Water Revenue Bonds.
The original issue premium is being amortized over the 11-year life of the Series 2013 bonds. Amortization
for the year ending June 30, 2024 was $16,015. The amortization is included in interest expense. The
unamortized premium at June 30, 2024 is $0.
37
Notes To Financial Statements
Year Ended June 30, 2024
5)LONG-TERM DEBT –Continued
Water Revenue Bonds –Continued
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, 2024 was $178,571. The amortization is included in interest expense. The
unamortized premium at June 30, 2024 is $2,172,619.
In November 2018, Water Revenue Bonds were issued by the Otay Water District Financing Authority 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, 2024 was $109,148. The amortization expense is included in interest expense.
The unamortized premium at June 30, 2024 is $2,092,006.
38
Notes To Financial Statements
Year Ended June 30, 2024
5)LONG-TERM DEBT –Continued
Water Revenue Bonds –Continued
The total amount outstanding at June 30, 2024 and aggregate maturities of the revenue bonds for the fiscal
years subsequent to June 30, 2024, are as follows:
For the Year
Ended June 30,Principal Interest Principal Interest
2025 1,295,000$ 33,994$ -$2,371,868$
2026 --1,365,000 2,328,345
2027 --1,450,000 2,238,589
2028 --1,545,000 2,143,093
2029 --1,640,000 2,041,540
2030-2034 --9,925,000 8,425,226
2035-2039 --13,635,000 4,590,582
2040-2041 --6,795,000 453,977
1,295,000$ 33,994$ 36,355,000$ 24,593,220$
2010 Water Revenue Bond
Series A
2010 Water Revenue Bond
Series B
For the Year
Ended June 30,Principal Interest Principal Interest
2025 1,420,000$ 806,581$ 1,730,000$ 1,061,288$
2026 1,495,000 733,706 1,820,000 972,538
2027 1,570,000 657,081 1,915,000 879,163
2028 1,645,000 584,931 1,030,000 805,538
2029 1,715,000 517,731 1,080,000 752,788
2030-2034 9,655,000 1,611,809 6,220,000 2,935,238
2035-2039 6,520,000 286,219 6,550,000 1,596,500
2040-2044 --5,060,000 450,331
24,020,000$ 5,198,058$ 25,405,000$ 9,453,384$
Refunding Bonds Revenue Bonds
2016 Water Revenue 2018 Water
39
Notes To Financial Statements
Year Ended June 30, 2024
5)LONG-TERM DEBT –Continued
Wastewater Revenue Bonds
In December 2019, Wastewater Revenue Bonds were issued by the Otay Water District Financing Authority
to provide funds to pay for certain capital improvements to the District’s wastewater system. The bonds
are due in annual installments of $65,000 to $160,000 from September 1, 2021 through September 1, 2049;
bearing interest of 2% to 3.125%. The bonds were issued with a face value of $3,120,000 less a $13,680
original issue discount.
The original issue discount is being amortized over the 30-year life of the Series 2019 bonds. Amortization
for the year ending June 30, 2024 was $461. The amortization expense is included in interest expense. The
unamortized discount at June 30,2024 is $11,605.
The 2019 Wastewater Revenue Bonds contains various covenants and restrictions, principally that the
District fix, prescribe, revise and collect rates, fees and charges for the Wastewater System which will at
least be sufficient to yield, during each fiscal year, net revenues equal to one hundred fifteen percent
(115%) of the debt service for such fiscal year. The District was in compliance with these rate covenants
for the fiscal year ended June 30, 2024.
Future debt service requirements for the bonds are as follows:
For the Year
Ended June 30,Principal Interest
2025 75,000$ 85,416$
2026 80,000 83,091
2027 80,000 80,691
2028 85,000 78,216
2029 85,000 75,666
2030-2034 470,000 339,364
2035-2039 535,000 270,623
2040-2044 615,000 186,188
2045-2049 725,000 83,203
2050 160,000 2,500
2,910,000$ 1,284,958$
2019 Wastewater
Revenue Bonds
40
Notes To Financial Statements
Year Ended June 30, 2024
5)LONG-TERM DEBT –Continued
Revenues Pledged
The District has pledged a portion of future water sales revenues to repay its Water Revenue and Water
Revenue Refunding Bonds. The total principal and interest remaining on the water revenue bonds and
water revenue refunding bonds is $126,353,656 payable through fiscal year 2044. For June 30, 2024,
principal and interest paid by the water sales revenues were $5,070,000 and $4,509,050 respectively.
The District has pledged a portion of future wastewater sales revenues to repay its Wastewater Revenue
Bonds. The total principal and interest remaining on the wastewater revenue bonds is $4,194,958 payable
through fiscal year 2050. For June 30, 2024, principal and interest paid by the wastewater sales revenues
were $75,000 and $87,291, respectively.
Lease Payable
Antenna Site Lease
The District has one antenna site sublease payable with a lease term of forty-eight years. The District is
required to make annual fixed payments ranging from $15,100 to $64,303, with a discount rate of 1.39%.
The lease has three extension options of 5 years each. As of June 30, 2024, the value of the lease payable
is $690,539. Future lease payable requirements are as follows:
For the Year
Ended June 30,Principal Interest
2025 18,781$ 9,479$
2026 20,469 9,207
2027 22,253 8,911
2028 24,134 8,590
2029 26,114 8,242
2030-2034 164,375 34,945
2035-2039 233,151 21,273
2040-2042 181,262 3,994
690,539$ 104,641$
41
Notes To Financial Statements
Year Ended June 30, 2024
5)LONG-TERM DEBT –Continued
Subscription-Based Information Technology Arrangements
Fracta AI-Based Condition Assessment Software
On July 20, 2022, the District entered into a 36-month subscription for the use of Fracta AI-Based Condition
Assessment Software.An initial subscription liability was recorded in the amount of $35,494. As of June
30, 2024, the value of the subscription liability is $11,831. The District is required to make annual fixed
payments of $11,995.The subscription has an interest rate of 1.39%. The value of the right to use asset
as of June 30, 2024 is $35,494 with accumulated amortization of $23,663 is included in note 4 with right to
use assets.
Samsara Networks, Inc.
On July 5, 2022, the District entered into a 36-month subscription for the use of GPS fleet management
system software.An initial subscription liability was recorded in the amount of $70,934. As of June 30,
2024, the value of the subscription liability is $23,643. The District is required to make annual fixed
payments of $23,972. The subscription has an interest rate of 1.39%.The value of the right to use asset
as of June 30, 2024 of $70,934 with accumulated amortization of $47,290 is included in note 4 with right
to use assets.
Drone Deploy
On April 30, 2023, the District entered into a 14-month subscription for the use of Drone Deploy software.
An initial subscription liability was recorded in the amount of $16,611. As of June 30, 2024, the value of the
subscription liability is $0. The value of the right to use asset as of June 30, 2024 of $16,611 with
accumulated amortization of $16,611 is included in note 4 with right to use assets.
Tyler Software SAAS
On January 1, 2024, the District entered into a 15-year subscription for the use of SaaS Services to access
Tyler Software. An initial subscription liability was recorded in the amount of $5,270,119. As of June 30,
2024, the value of the subscription liability is $5,101,340. The District is required to make annual variable
payments ranging from $168,779 to $467,260. The subscription has an interest rate of 1.39%. The value
of the right to use asset as of June 30, 2024 is $5,270,119 with accumulated amortization of $175,671 is
included in note 4 with right to use assets.
42
Notes To Financial Statements
Year Ended June 30, 2024
5)LONG-TERM DEBT –Continued
Subscription-Based Information Technology Arrangements –Continued
Planet Bids
On December 1, 2023, the District entered into a 30-month subscription for the use of Planet Bids software.
An initial subscription liability was recorded in the amount of $61,870. As of June 30, 2024, the value of
the subscription liability is $46,538. The District is required to make annual variable payments ranging
from $15,331 to $24,109. The subscription has an interest rate of 1.39%. The value of the right to use asset
as of June 30, 2024 is $61,870 with accumulated amortization of $12,374 is included in note 4 with right to
use assets.
ESRI
On June 26, 2023, the District entered into a 36-month subscription for the use of ESRI software. An initial
subscription liability was recorded in the amount of $167,779. As of June 30, 2024, the value of the
subscription liability is $111,079. The District is required to make annual fixed payments of $56,700. The
subscription has an interest rate of 1.39%. The value of the right to use asset as of June 30, 2024 is
$167,779 with accumulated amortization of $55,926 is included in note 4 with right to use assets.
Future SBITA payable requirements are as follows:
For the Year
Ended June 30,Principal Interest
2025 380,038$ 73,593$
2026 350,056 68,310
2027 274,113 63,444
2028 288,050 59,634
2029 302,485 55,630
2030-2034 1,747,504 210,816
2035-2039 1,952,185 77,409
5,294,431$ 608,836$
43
Notes To Financial Statements
Year Ended June 30, 2024
6)NET POSITION
Designations of Net Position
In addition to the restricted net position, a portion of unrestricted net position has been designated by the
Board of Directors for the following purposes as of June 30, 2024:
7)DEFINED BENEFIT PENSION PLAN
A)General Information about the Pension Plans
Plan Descriptions
All qualified permanent and probationary employees are eligible to participate in the District’s Plan,
agent multiple-employer defined benefit pension plans administered by the California Public
Employees’ Retirement System (CalPERS), which acts as a common investment and administrative
agent for its participating member employers. Benefit provisions under the Plans are established by
State statute and District resolution.
CalPERS issues publicly available reports that include a full description of the pension plans
regarding provisions, assumptions and membership information that can be found on the CalPERS
website.
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and
death benefits to plan members, who must be public employees and beneficiaries. Benefits are
based on years of credited service, equal to one year of full-time employment. Members with five
years of total service are eligible to retire at age 50 (52 if new PERS member)with statutorily reduced
benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death
benefit is one of the following: the Basic Death Benefit, the 1959 Survivor Benefit, or the Optional
Settlement 2W Death Benefit. The cost-of-living adjustments for the plan are applied as specified by
the Public Employees’ Retirement Law.
Designated Betterment 3,667,486$
Replacement Reserve 78,967,855
Designated Insurance 842,437
Designated New Supply Fund 6,381
Undesignated 5,019,513
Total $ 88,503,672
44
Notes To Financial Statements
Year Ended June 30, 2024
7)DEFINED BENEFIT PENSION PLAN –Continued
Benefits Provided
The Plans’ provisions and benefits in effect at June 30, 2024 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
2024 8.00%7.50%
Required Employer Contribution Rates
2024 22.07%22.07%
Employees Covered
The following employees were covered by the benefit terms for the Plan:
Inactive Employees or Beneficiaries Currently Receiving Benefits 228
Inactive Employees Entitled to But Not Yet Receiving Benefits 126
Active Employees 137
Total 491
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer
contribution rates for all public employers be determined on an annual basis by the actuary and shall
be effective on the July 1 following notice of a change in the rate. The total plan contributions for the
Plan are determined through CalPERS’ annual actuarial valuation process. 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.
45
Notes To Financial Statements
Year Ended June 30, 2024
7)DEFINED BENEFIT PENSION PLAN –Continued
The employer is required to contribute the difference between the actuarially determined rate and
the contribution rate of employees. Employer contribution rates may change if plan contracts are
amended.
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,
2023 rolled forward to June 30, 2024 using standard update procedures. A summary of actuarial
assumptions and methods used to determine the net pension liability is shown below:
Actuarial Assumptions
The total pension liabilities in the June 30, 2023 actuarial valuations were determined using the
following actuarial assumptions:
Actuarial Cost Method Entry-Age Actuarial Cost Method
Actuarial Assumptions:
Discount Rate 6.90%
Inflation 2.50%
Salaries Increases Varies by entry age and service
Mortality Rate Table Derived using CalPERS
membership data for all funds(1)
Post Retirement Benefit Increase See Footnote(2)
(1)The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of
Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using
80% of Scale MP-2020 published by the Society of Actuaries.
(2)The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on
purchasing power applies, 2.30% thereafter.
46
Notes To Financial Statements
Year Ended June 30, 2024
7)DEFINED BENEFIT PENSION PLAN –Continued
Discount Rate
The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows
used to determine the discount rate assumed that contributions from plan members will be made at
the current member contribution rates and that contributions from employers will be made at
statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary
net position was projected to be available to make all projected future benefit payments of current
plan members. Therefore, the long-term expected rate of return on plan investments was applied to
all periods of projected benefit payments to determine the total pension liability.
Long-term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-
block method in which 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. Using historical returns of all the funds’ asset classes, expected compound
(geometric) returns were calculated over the next 20 years using a building block approach. The
expected rate of return was then adjusted to account for assumed administrative expenses of 10
Basis points. The expected real rates of return by asset class are as follows:
(a)An expected inflation of 2.30% used for this period.
(b)Figures are based on the 2021 Asset Liability Management study.
Assumed
Asset Class(a)Asset Allocation Real Return(b)
Global Equity - Cap-weighted 30.00%4.54%
Global Equity - Non-Cap-weighted 12.00 3.84
Private Equity 13.00 7.28
Treasury 5.00 0.27
Mortgage-backed Securities 5.00 0.50
Investment Grade Corporates 10.00 1.56
High Yield 5.00 2.27
Emerging Market Debt 5.00 2.48
Private Debt 5.00 3.57
Real Assets 15.00 3.21
Leverage (5.00)(0.59)
47
Notes To Financial Statements
Year Ended June 30, 2024
7)DEFINED BENEFIT PENSION PLAN –Continued
C)Changes in the Net Pension Liability (Asset)
The changes in the Net Pension Liability (Asset) for the Plan for the year ending June 30, 2024:
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability (Asset)
Beginning Balance 165,738,046$139,786,951$ 25,951,095$
Changes in the Year:
Service Cost 2,989,611 -2,989,611
Interest on the Total Pension Liability 11,457,149 -11,457,149
Changes in Benefit Terms 137,177 -137,177
Changes in Assumptions ---
Difference Between Expected and Actual Experience 3,092,819 -3,092,819
Net Plan to Plan Resource Movement ---
Contributions - Employer 5,458,992 (5,458,992)
Contributions - Employees 1,112,562 (1,112,562)
Net Investment Income 8,605,145 (8,605,145)
Benefit Payments, Including Refunds of Employee Contributions (8,834,436) (8,834,436) -
Administrative Expense -(102,793) 102,793
Other Miscellaneous Income (Expense)---
Net Changes 8,842,320 6,239,470 2,602,850
Ending Balance 174,580,366$146,026,421$ 28,553,945$
Increase ( Decrease)
48
Notes To Financial Statements
Year Ended June 30, 2024
7)DEFINED BENEFIT PENSION PLAN –Continued
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the District for the Plan, calculated using the
discount rate for the Plan, as well as what the District’s net pension liability would be if it were
calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than
the current rate:
Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately
issued CalPERS financial reports.
D)Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2024, the District recognized pension expense of $8,369,481. At June 30,
2024, the District reported deferred outflows of resources and deferred inflows of resources related
to pensions from the following services:
1% Decrease 5.90%
Net Pension Liability 50,451,421$
Current Discount Rate 6.90%
Net Pension Liability 28,553,945$
1% Increase 7.90%
Net Pension Liability/(Asset)10,280,385$
Deferred Outflows
of Resources
Pension contributions subsequent to measurement date 3,095,172$
Changes of assumptions 1,424,127
Differences between actual and expected experience 2,038,160
Net difference between projected and actual earnings
on pension plan investments 6,722,157
Total 13,279,616$
49
Notes To Financial Statements
Year Ended June 30, 2024
7)DEFINED BENEFIT PENSION PLAN –Continued
D)Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions -Continued
For fiscal year 2024, $3,095,172 reported as deferred outflows of resources related to contributions
subsequent to the measurement date will be recognized as a reduction of the net pension liability in
the fiscal year ended June 30, 2025. Other amounts reported as deferred outflows of resources and
deferred inflows of resources related to pensions will be recognized as pension expense as follows:
Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net
position are recognized in pension expense systematically over time. The first amortized amounts
are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are
categorized as deferred outflows and deferred inflows of resources related to pensions and are to
be recognized in future pension expense.The amortization period differs depending on the source
of the gain or loss:
Net difference between projected and actual
earnings on pension plan investments
5-year straight-line amortization
All other amounts Straight-line amortization over the expected
average remaining service lifetime (EARSL) of
all members that are provided with benefits
(active, inactive, and retired) as of the
beginning of the measurement period
Fiscal Deferred
Year Ended Outflow/(Inflows)
June 30 of Resources
2025 3,802,044$
2026 1,574,503
2027 4,617,258
2028 190,639
2029 -
Thereafter -
50
Notes To Financial Statements
Year Ended June 30, 2024
7)DEFINED BENEFIT PENSION PLAN –Continued
E)Payable to the Pension Plan
At June 30, 2024, the District reported a payable of $136,734 for the outstanding amount of
contributions to the pension plan required for the year ended June 30, 2024. These payables are
reflected in the accrued payroll liabilities on the Statement of Net Position.
Subsequent Events
There were no subsequent events that would materially affect the results presented in this disclosure.
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 Annual Comprehensive 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 three tiers,
employees hired before January 1, 1981, employees hired on or after January 1, 1981 but before July 1,
1993 and employees hired on or after July 1, 1993. Board members elected before January 1, 1995 are
also eligible for the plan. Eligibility also includes age and years of service requirements which vary by
tier. Benefits include up to 100% medical and/or dental premiums for life for the retiree for Tier I or II
employees, and up to 100% spouse premium until death of retiree or age 65 whichever is greater and
dependent premium up to age 19.Tier III employees received up to 50% medical (no dental coverage)
up to age 65 and did not include dependent coverage.
Subsequent to the agreements in 2011 and 2012 all employees are eligible for the plan after 20 years of
consecutive service and unrepresented employees hired before January 1, 2013 are eligible after 15
years. Survivor benefits are covered beyond Medicare.
51
Notes To Financial Statements
Year Ended June 30, 2024
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Employees Covered
As of June 30, 2023 actuarial valuation, the following current and former employees were covered by the
benefit terms under the Plan:
Contributions
The annual contribution is based on the actuarially determined contribution. For the fiscal year ended
June 30, 2024, the District made cash contributions to the trust of $2,540,757 and had an estimated
implied subsidy of $234,971, resulting in total payments of $2,775,728.
Net OPEB Liability
The District’s net OPEB liability was measured as of June 30, 2023 and the total OPEB liability used to
calculate the net OPEB liability was determined by actuarial valuations dated June 30, 2023 based on
the following actuarial methods and assumptions:
Actuarial Assumptions
Discount Rate 6.75%
Inflation 2.50%
Salary Increases 2.75%
Investment Rate of Return 6.75%
Mortality Rate(1)Derived using CalPERS Membership Data for all funds
Pre-Retirement Turnover(2)Derived using CalPERS Membership Data for all funds
Healthcare Trend Rate 4.50% PPO
Notes:
(1)The mortality assumptions are based on the 2021 CalPERS Mortality for Miscellaneous and Schools
Employees table created by CalPERS. CalPERS periodically studies mortality for participating agencies
and established mortality tables that are modified versions of commonly used tables. This table
incorporates mortality projection as deemed appropriate based on CalPERS analysis.
(2)The retirement assumptions are based on the 2021 CalPERS 2.0%@62 and 2.7%@55.Rates for
Miscellaneous Employees tables created by CalPERS. CalPERS periodically studies the experience for
participating agencies and establishes tables that are appropriate for each pool.
Active Employees 137
Inactive Employees or Beneficiaries Currently Receiving Benefits 85
Inactive Employees Entitled to But Not Yet Received Benefits -
Total 222
52
Notes To Financial Statements
Year Ended June 30, 2024
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Net OPEB Liability (Continued)
The long-term expected rate of return on OPEB plan investments was determined using a building block
method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB
plan investment expense and inflation) are developed for each major asset class. These ranges are
combined to produce the long-term expected rate of return by weighting the expected future real rates of
return by the target asset allocation percentage and by adding expected inflation. Best estimates of
arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset are
summarized in the following table for the June 30, 2023 actuarial valuation:
Discount Rate
The discount rate used to measure the total OPEB liability was 6.75% for the June 30, 2023 measurement
period. The projection of cash flows used to determine the discount rate assumed that District contributions
will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions,
the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments
for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of
return on OPEB plan investments was applied to all periods of projects benefit payments to determine the
total OPEB liability.
Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
All Equities 59.00%7.545%
All Fixed Income 25.00%4.250%
Real Estate Investment Trust 8.00%7.250%
All Commodities 3.00%7.545%
Treasury Inflation Protected Securities (TIPS)5.00%3.000%
53
Notes To Financial Statements
Year Ended June 30, 2024
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Changes in the OPEB Liability (Asset)
The changes in the net OPEB liability (asset) for the Plan for the year ending June 30, 2024:
Sensitivity of the Net OPEB Liability (Asset) to Changes in the Discount Rate
The following presents the net OPEB liability (asset) of the District if it were calculated using a discount
rate that is one percentage point lower or one percentage point higher than the current rate, for the
measurement period ended June 30, 2023:
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability (Asset)
Beginning Balance 34,537,166$ 29,485,905$ 5,051,261$
Changes in the year:
Service Cost 1,018,363 -1,018,363
Interest on TOL/Return on FNP 2,324,644 1,969,238 355,406
Difference Between Expected and Actual Experience 5,942,003 -5,942,003
Changes of Assumptions 41,042 -41,042
Contributions - Employer -1,214,348 (1,214,348)
Benefit Payments (1,214,348) (1,214,348)-
Administrative Expenses -(8,619)8,619
Net Changes 8,111,704 1,960,619 6,151,085
Ending Balance 42,648,870$ 31,446,524$ 11,202,346$
Increase ( Decrease)
Current
1% Decrease Discount Rate 1% Increase
2024 Net OPEB Liability (Asset)
(2023 Measurement Date)17,012,011$ 11,202,346$ 6,410,368$
54
Notes To Financial Statements
Year Ended June 30, 2024
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
Sensitivity of the Net OPEB Liability (Asset) to Changes in the Healthcare Cost Trend Rates
The following presents the net OPEB liability of the District if it were calculated using health care cost
trend rates that are one percentage point lower or one percentage point higher than the current rate, for
measurement period ended June 30, 2023:
OPEB Plan Fiduciary Net Position
CERBT issues a publicly available financial report that may be obtained from the California Public
Employees Retirement System Executive Office, 400 P Street, Sacramento, California 95814.
Recognition of Deferred Outflows and Deferred Inflows of Resources
Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in
OPEB expense systematically over time.
Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining
amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and
are to be recognized in future OPEB expense.
The recognition period differs depending on the source of the gain or loss:
Net difference between projected and
actual earnings on OPEB plan investments
5 years
All other amounts Expected average remaining service lifetime
(EARSL)
Current Healthcare Cost
1% Decrease Trend Rates 1% Increase
2024 Net OPEB Liability (Asset)
(2023 Measurement Date)5,739,269$11,202,346$17,964,377$
55
Notes To Financial Statements
Year Ended June 30, 2024
8)OTHER POST EMPLOYMENT BENEFITS (OPEB) -Continued
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal year ended June 30, 2024, the District recognized OPEB expense of $1,196,786. As of the
fiscal year ended June 30, 2024, the District reported deferred outflows and inflows of resources related
to OPEB from the following sources:
For fiscal year 2024, $2,775,728 reported as deferred outflows of resources related to contributions
subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the
fiscal year ended June 30, 2025. Other amounts reported as deferred outflows of resources and deferred
inflows of resources related to pensions will be recognized as pension expense as follows:
Deferred Outflows Deferred Inflows
of Resources of Resources
OPEB contributions subsequent to measurement date 2,775,728$ -$
Differences between expected and actual experience 7,311,607 -
Changes in assumptions 35,261 (870,274)
Net difference between projected and actual earnings
on OPEB plan investments 2,083,516 -
Total 12,206,112$ (870,274)$
Fiscal Deferred
Year Ended Outflows/(Inflows)
June 30, of Resources
2025 1,596,718$
2026 1,413,558
2027 2,599,732
2028 1,150,488
2029 872,667
Thereafter 926,947
56
Notes To Financial Statements
Year Ended June 30, 2024
9)OTHER NON-CURRENT LIABILITIES
Other non-current liabilities for the year ended June 30, 2024, are as follows:
10)COMMITMENTS AND CONTINGENCIES
Construction Commitments
The District has commitments related to capital projects under construction with an estimated cost to
complete of $8,376,884 at June 30, 2024.
Litigation
Certain claims, suits and complaints arising in the ordinary course of operation have been filed or are
pending against the District. In the opinion of the staff and counsel, most of those matters are adequately
covered by insurance, or if not so covered,are without merit or are of such kind, or involved such amounts,
as would not have significant effect on the financial position or results of operations of the District if
disposed of unfavorably. There is one case, see below, that could potentially have a significant effect on
the District’s financial position.
In November 2015, a District ratepayer filed a lawsuit against the District (Coziahr v. Otay Water District,
Superior Court of the State of California, County of San Diego), contending that the District’s water rates
violated Article XIIID of the California Constitution (“Proposition 218”). The court subsequently certified the
action as a class action on behalf of all single-family residential ratepayers who have received water
service at any time after July 14, 2014.
On March 4, 2021, the court issued a decision in favor of the plaintiffs holding its tiered water rates adopted
in 2013 and 2017 for the following 5-year periods were not proportionate to the cost of service attributable
to each customer’s parcel, as required by Proposition 218
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
Compensated absences 3,485,451$1,315,897$(1,548,250)$3,253,098$ 325,309$
Customer credits 274,918 9,425 (20,187) 264,156 -
Reimbursement agreements 356,644 --356,644 -
Total 4,117,013$1,325,322$(1,568,437)$3,873,898$ 325,309$
57
Notes To Financial Statements
Year Ended June 30, 2024
10) COMMITMENTS AND CONTINGENCIES – Continued
On June 15, 2022, the court issued a Statement of Decision in the case. The Statement of Decision adopts
a methodology for computing overcharges to ratepayers in the class based on the court’s earlier finding
that the District’s tiered water rates adopted in 2013 and 2017 were not proportionate to the cost of service
attributable to each customer’s parcel, as required by Proposition 218.
Applying its methodology, the court states that the overcharges to ratepayers through June 2021 is
estimated to be approximately $18,105,256, with an approximate additional $208,762 of overcharges plus
interest accruing each month subsequent to June 2021 until the District changes its rates to be
consistent with Proposition 218. The District changed its rates effective January 2023.
The District appealed the trial court’s decision to the Court of Appeal, and in July of 2024, the Court of Appeal
issued its decision upholding much of the trial court’s decision, but remanding the issue of the allocation
of refunds back to the trial court for a new trial.
The District’s position is that the Court decision is inconsistent with the Constitution, case law, and with
recently-enacted bills that clarify both that rates based on peaking factors like Otay’s rates are valid (AB
1824) and that challengers are not entitled to refunds for Proposition 218 rate challenges (SB 1072). The
District has petitioned for review of this decision by the California Supreme Court, and as of September
2024 is awaiting a decision by the Supreme Court as to whether it will review the prior ruling.
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, 2024, 1,750 EDUs had been relinquished and refunded, 15,105
EDUs had been connected, and 1,012 EDUs have neither been relinquished nor connected.
58
Notes To Financial Statements
Year Ended June 30, 2024
10)COMMITMENTS AND CONTINGENCIES –Continued
Developer Agreements
The District has entered into various Developer Agreements with developers towards the expansion of
District facilities. The developers agree to make certain improvements and after the completion of the
projects,the District agrees to reimburse such improvements with a maximum reimbursement amount for
each developer. Contractually, the District does not incur a liability for the work until the work is accepted
by the District.
As of June 30, 2024, none of the outstanding developer projects had been completed. It is anticipated that
the District will be liable for an amount not to exceed $685,000 at the point of acceptance. Accordingly, the
District has accrued this amount as of year-end.
11)RISK MANAGEMENT
General Liability and Property
The District is exposed to various risks of loss related to torts, theft, damage and destruction of assets, errors
and omissions, and natural disasters. The District is a member in an insurance pool through the
Association of California Water Agencies Joint Powers Insurance Authority (ACWA JPIA). ACWA JPIA is a
not-for-profit public agency formed under California Government Code Sections 6500 et. Seq.
ACWA JPIA is governed by a board composed of members from participating agencies. The District pays
an annual premium for commercial insurance covering general liability, excess liability, property,
automobile, public employee dishonesty, and various other claims. Separate financial statements of
ACWA JPIA may be obtained at ACWA JPIA 2100 Professional Drive, Roseville, CA 95661-3700.
General and Auto Liability, Public Officials’ Errors and Omissions and Employment Practices Liability: Total
limits of $5 million combined single limit at $5 million per occurrence, with excess aggregate coverage at
$50 million subject to the following deductibles:
$50,000 per occurrence for third party general liability property damage;
$50,000 per occurrence for third party auto liability property damage;
59
Notes To Financial Statements
Year Ended June 30, 2024
11)RISK MANAGEMENT -Continued
Excess Crime Coverage: Total of $1 million per loss includes Public Employee Dishonesty, Forgery or
Alteration,Computer Fraud, Faithful Performance of Duty and Impersonation Fraud effective July 1, 2023.
Property Loss: Replacement cost, for property on file, paid on an actual cash value basis, to a combined
total of $372 million per occurrence, subject to a $25,000 deductible per occurrence, effective July 1, 2023.
Boiler and Machinery: Replacement costs up to $100 million per occurrence, subject to a $25,000
deductible, effective July 1, 2023.
Comprehensive and Collision: Deductibles of $1,000, as elected; ACV limits; fully self-funded by ACWA,
effective July 1, 2023.
Workers’ Compensation Coverage and Employer’s Liability: Statutory limits per occurrence for Workers’
Compensation and $2.0 million for Employer’s Liability Coverage, subject to the terms, conditions and
exclusions as provided in the Memorandum of Coverage, effective July 1, 2023.
Cyber Coverage: $5 million Annual Program-Wide Aggregate Limit of Liability and $3 million maximum for
each Insured/Member for Information Security & Privacy Liability. The policy includes a $100,000
deductible per claim,effective July 1, 2023.
Fiduciary Coverage: $2 million aggregate limit of liability, subject to $150,000 deductible.Per incident limits
of $1.5 million for HIPPA and HITECH fines/penalties and $250,000 for all else.
12) LEASES RECEIVABLE
The District has entered into 32 cell site leases with lease terms ranging from less than one year to sixty
years. The lessees are required to make annual fixed payments ranging from $29,532 to $60,503, with
discount rates of 1.39%. As of June 30, 2024, the lease receivable is $46,269,966 and deferred inflows of
resources is $43,410,817. The District recognized $1,619,301 of lease revenue during the fiscal year.
60
Notes To Financial Statements
Year Ended June 30, 2024
13)SEGMENT INFORMATION
The District has issued Water and Wastewater Revenue Bonds in the previous fiscal years to finance
certain capital improvements. While water and wastewater services are accounted for jointly in these
financial statements, the investors in the Water Revenue Bonds rely solely on the revenues of the water
services for repayment and the Wastewater Revenue Bonds solely on the revenues of the wastewater
services for repayment.
Summary of financial information for the water and wastewater services is presented for June 30, 2024
on the following pages:
61
Notes To Financial Statements
Year Ended June 30, 2024
13)SEGMENT INFORMATION –Continued
Water Wastewater
Services Services Total
Assets
Cash and Investments 112,544,293$ 7,131,996$ 119,676,289$
Accounts Receivable, Net 16,349,717 221,071 16,570,788
Other Current Assets 5,088,633 289,250 5,377,883
Leases Receivable 46,269,966 -46,269,966
Capital Assets 409,702,657 27,184,503 436,887,160
Total Assets 589,955,266 34,826,820 624,782,086
Deferred Outflows of Resources
Deferred Actuarial Pension Costs 12,812,557 467,059 13,279,616
Deferred Actuarial OPEB Costs 11,685,281 520,831 12,206,112
Total Deferred Outflows of Resources 24,497,838 987,890 25,485,728
Liabilities
Accounts Payable 16,790,220 52,266 16,842,486
Other Miscellaneous Liabilities 6,137,496 1,205,003 7,342,499
Other Current Liabilities 12,102,418 103,386 12,205,804
Revenue Bonds 86,606,906 2,823,856 89,430,762
Lease Payable 671,758 -671,758
Subscription-Based IT Payable 4,914,393 -4,914,393
Net Pension Liability 27,601,030 952,915 28,553,945
Net OPEB Liability 10,722,665 479,681 11,202,346
Other Non-current Liabilities 3,548,589 -3,548,589
Total Liabilities 169,095,475 5,617,107 174,712,582
Deferred Inflows of Resources
Deferred Actuarial OPEB Costs 843,812 26,462 870,274
Deferred Actuarial Pension Costs 21,458 (21,458)-
Deferred Inflows from Leases 43,410,817 -43,410,817
Total Deferred Inflows of Resources 44,276,087 5,004 44,281,091
Net Position
Net Investment in Capital Assets 311,764,400 24,286,108 336,050,508
Restricted for Debt Service 3,636,078 -3,636,078
Restricted for Capital Assets 3,083,883 -3,083,883
Unrestricted 82,597,181 5,906,491 88,503,672
Total Net Position 401,081,542$ 30,192,599$ 431,274,141$
June 30, 2024
Condensed Statement of Net Position
62
Notes To Financial Statements
Year Ended June 30, 2024
13)SEGMENT INFORMATION –Continued
Water Wastewater
Services Services Total
Operating Revenues
Water Sales 105,736,843$ -$105,736,843$
Wastewater Revenue -3,494,312 3,494,312
Connection and Other Fees 3,253,313 665 3,253,978
Total Operating Revenues 108,990,156 3,494,977 112,485,133
Operating Expenses
Cost of Water Sales 77,807,009 -77,807,009
Wastewater -2,400,881 2,400,881
Administrative and General 32,717,662 -32,717,662
Depreciation 17,163,463 1,113,029 18,276,492
Total Operating Expenses 127,688,134 3,513,910 131,202,044
Operating Income (Loss)(18,697,978) (18,933)(18,716,911)
Non-Operating Revenues (Expenses)
Investment Earnings (Losses)6,269,121 124,402 6,393,523
Taxes and Assessments 5,777,012 -5,777,012
Availability Charges 690,392 51,313 741,705
Gain (Loss) on Sale of Capital Assets (723,389) (1,671)(725,060)
Rents and Leases 2,083,669 -2,083,669
Miscellaneous Revenues 1,894,533 1,582 1,896,115
Donations (103,200) -(103,200)
Interest Expense (4,050,569) (87,046)(4,137,615)
Miscellaneous Expenses (463,732) (14,680)(478,412)
Total Non-operating Revenues (Expenses)11,373,837 73,900 11,447,737
Income (Loss) Before Capital Contributions
and Transfers (7,324,141) 54,967 (7,269,174)
Capital Contributions 7,432,482 35,804 7,468,286
Change in Net Position 108,341 90,771 199,112
Total Net Position, Beginning 400,973,201 30,101,828 431,075,029
Total Net Position, Ending 401,081,542$ 30,192,599$ 431,274,141$
Condensed Statement of Revenues, Expenses and Changes in Net Pension
Year Ended June 30, 2024
63
Notes To Financial Statements
Year Ended June 30, 2024
13)SEGMENT INFORMATION –Continued
14) Subsequent Event
Effective September 1, 2024, the District created an HRA plan (a defined contribution plan) and closed
the District’s current OPEB plan. Employees hired on or after September 1, 2024 are no longer eligible
to enter the District’s OPEB plan. However, they are required to join the HRA plan. Employees hired prior
to September 1, 2024 had the option to remain in the current OPEB plan or opt in to the HRA plan.
Water Wastewater
Services Services Total
Net Cash Provided/(Used) by:
Operating Activities 3,282,557$ 1,459,761$ 4,742,318$
Non-capital and Related Financing Activities 6,478,761 51,313 6,530,074
Capital and Related Financing Activities (6,801,389) (297,486) (7,098,875)
Investing Activities 29,316,260 75,443 29,391,703
Net Increase(Decrease) in
Cash and Cash Equivalents 32,276,189 1,289,031 33,565,220
Cash and Cash Equivalents, Beginning 40,988,806 5,842,965 46,831,771
Cash and Cash Equivalents, Ending 73,264,995$ 7,131,996$ 80,396,991$
For the Year Ended June 30, 2024
Condensed Statement of Cash Flows
64
Schedule of Changes in the Net OPEB Liability and Related Ratios
Last Ten Years (1)
June 30, 2024
Measurement Period: June 30 2023 2022 2021 2020 2019 2018 2017
Total OPEB Liability
Service Cost 1,018,363$ 991,108$ 755,756$ 735,529$ 757,725$ 735,655$ 687,528$
Interest on the Total OPEB Liability 2,324,644 2,189,619 2,077,446 1,915,358 1,970,613 1,864,967 1,764,343
Actual and Expected Experience Difference 5,942,003 254,888 2,595,855 1,151,927 (2,029,118) --
Changes in Assumptions 41,042 -(1,557,334)-(345,110)--
Changes in Benefit Terms -------
Benefit Payment (1,214,348) (1,428,491) (1,201,678) (1,120,146) (1,141,344) (1,085,586) (1,039,420)
Net Change in Total OPEB Liability 8,111,704 2,007,124 2,670,045 2,682,668 (787,234) 1,515,036 1,412,451
Total OPEB Liability - Beginning 34,537,166 32,530,042 29,859,997 27,177,329 27,964,563 26,449,527 25,037,076
Total OPEB Liability - Ending (a)42,648,870$ 34,537,166$ 32,530,042$ 29,859,997$ 27,177,329$ 27,964,563$ 26,449,527$
Plan Fiduciary Net Position
Contributions - Employer 1,214,348$ 127,444$ 807,867$ 1,011,358$ 2,206,363$ 2,202,004$ 2,284,420$
Net Investment Income 1,969,238 (4,739,093) 7,880,863 983,790 1,595,092 1,734,626 2,011,985
Benefit Payments (1,214,348) (1,428,491) (1,201,678) (1,120,146) (1,141,344) (1,085,586) (1,039,420)
Administrative Expenses (8,619) (9,034) (10,811) (13,514) (12,299) (11,784) (10,167)
Other Expenses -------
Net Change in Plan Fiduciary Net Position 1,960,619 (6,049,174) 7,476,241 861,488 2,647,812 2,839,260 3,246,818
Plan Fiduciary Net Position - Beginning 29,485,905 35,535,079 28,058,838 27,197,350 24,549,538 21,739,035 18,492,217
Plan Fiduciary Net Position - Ending (b)31,446,524$ 29,485,905$ 35,535,079$ 28,058,838$ 27,197,350$ 24,578,295$ 21,739,035$
Net OPEB Liability/(Asset) - Ending (a)-(b)11,202,346$ 5,051,261$ (3,005,037)$ 1,801,159$ (20,021)$ 3,386,268$ 4,710,492$
Plan Fiduciary Net Position as a Percentage of
the Total OPEB Liability 73.73% 85.37% 109.24% 94.00% 100.10% 87.80% 82.20%
Covered-Employee Payroll 14,393,757$ 14,054,264$ 14,006,918$ 13,538,959$ 13,176,602$ 12,677,000$ 12,513,000$
Net OPEB Liability/(Asset) as a Percentage of
Covered-Employee Payroll 77.83% 35.94%-21.45%13.30%-0.20%26.90% 37.60%
Notes to Schedule
(1)Historicalinformation is required only for measurement periods for which GASB75 is applicable.Future years’information will be displayed upto10 years
as information becomes available.Contributions are determined by an actuarial valuation based on eligible participants’estimated medical and dental
benefits.
65
Schedule of Contributions
Last Ten Years (1)
June 30, 2024
Actuarially
Determined Contributions in Contribution Contributions as a
Fiscal Contribution Relation to the Deficiency Covered-Percentage of Covered-
Year (ADC)ADC (Excess)Payroll Payroll
2018 1,116,418$ (2,202,004)$ (1,085,586)$ 12,677,000$ 17.37%
2019 1,149,911 (2,206,363)(1,056,452) 13,176,602 16.74%
2020 1,011,358 (1,011,358)-13,538,959 7.47%
2021 807,867 (807,867)-14,006,918 5.77%
2022 ---14,054,264 0.00%
2023 -(1,394,881)(1,394,881) 14,393,757 9.69%
2024 2,775,728 (2,775,728)-14,757,192 18.81%
Notes to Schedule:
Methods and assumptions used to determine contributions:
Actuarial Cost Method Entry Age Actuarial Cost Method
Amortization Method/Period Level percent of payroll over a closed rolling 15-year period
Asset Valuation Method Market value
Inflation 2.50%
Payroll Growth 2.75%
Investment Rate of Return 6.75%
Healthcare Cost-trend Rates 4.50% HMO/4.50% PPO
Retirement Age
Mortality
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2024 were
from the June 30, 2023 actuarial valuation.Also note,that some of the data from prior years were updated with the
most current available information.
Tier 1 employees -2.7%at 55 and Tier 2 employees -2.0%at 62.The probabilities
of Retirement are based on the 2021 CalPERS Experience Study.
The mortality assumptions are based on the 2021 CalPERS Mortality for
Miscellaneous and Schools Employees table created by 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 becomes available.Contributions are determined by an
actuarial valuation based on eligible participants’ medical and dental benefits.
66
Schedule of Changes in the Net Pension Liability and Related Ratios
Last Ten Years
June 30, 2024
Measurement Period: June 30 2023 2022 2021 2020 2019
Total Pension Liability
Service Cost 2,989,611$ 2,994,291$ 2,662,845$ 2,623,208$ 2,586,911$
Interest 11,457,149 10,864,205 10,489,284 10,043,778 9,638,674
Changes in Benefit Terms 137,177 ----
Changes in Assumptions -4,984,447 ---
Difference Between Expected and actual Experience 3,092,819 174,717 705,426 260,337 1,183,213
Benefit Payments, including Refunds of
Employee Contributions (8,834,436) (8,151,116) (7,304,947) (7,017,816) (6,658,719)
Net Change in Total Pension Liability 8,842,320 10,866,544 6,552,608 5,909,507 6,750,079
Total Pension Liability - Beginning 165,738,046 154,871,502 148,318,894 142,409,387 135,659,308
Total Pension Liability - Ending (a)174,580,366$ 165,738,046$ 154,871,502$ 148,318,894$ 142,409,387$
Plan Fiduciary Net Position
Net Plan to Plan Resource Movement -$-$-$-$-$
Contributions - Employer 5,458,992 3,928,187 3,945,147 2,437,119 36,706,983
Contributions - Employee 1,112,562 1,099,592 1,095,898 1,055,769 1,019,255
Net Investment Income 8,605,145 (11,584,615) 28,707,870 6,185,108 7,516,686
Benefit Payments, Including Refunds of
Employee Contributions (8,834,436) (8,151,116) (7,304,947) (7,017,816) (6,658,719)
Administrative Expenses (102,793) (96,301) (128,139) (177,337) (62,278)
Other Changes in Fiduciary Net Position ----203
Net Change in Plan Fiduciary Net Position 6,239,470 (14,804,253) 26,315,829 2,482,843 38,522,130
Plan Fiduciary Net Position - Beginning 139,786,951 154,591,204 128,275,375 125,792,532 87,270,402
Plan Fiduciary Net Position - Ending (b)146,026,421$ 139,786,951$ 154,591,204$ 128,275,375$ 125,792,532$
Plan Net Pension Liability/(Asset) - Ending (a)-(b)28,553,945$ 25,951,095$ 280,298$ 20,043,519$ 16,616,855$
Plan Fiduciary Net Position as a Percentage of the
Total Pension Liability 83.64%84.34%99.82%86.49%88.33%
Covered Payroll 14,539,529$ 14,148,052$ 13,768,586$ 13,383,715$ 12,892,655$
Plan Net Pension Liability/(Asset) as a
Percentage of Covered Payroll 196.39%183.43%2.04%149.76%128.89%
Notes to Schedule:
Changes in Benefit Terms:The figures above generally include any liability impact that may have resulted from voluntary benefit changes
that occurred on or before the Measurement Date.However,offers of Two Years Additional Service Credit (a.k.a.Golden Handshakes)that
occurred after the Valuation Date are not included in the figures above,unless the liability impact is deemed to be material by the plan
actuary.
In 2022,SB 1168 increased the standard retiree lump sum death benefit from $500 to $2,000 for any death occurring on or after July 1, 2023.
The impact, if any, is included in the changes of benefit terms.
Changes in Assumptions:There were no assumption changes in 2023.Effective with the June 30, 2021 valuation date (June 30, 2022
measurement date),the accounting discount rate was reduced from 7.15%to 6.90%.In determining the long-term expected rate of return,
CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows.In addition,demographic
assumptions and the price inflation assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of
Actuarial Assumptions.The accounting discount rate was 7.15%for measurement date June 30, 2017 through June 30, 2021,7.65%for
measurement dates June 30, 2015 through June 30, 2016, and 7.50% for measurement date June 30, 2014.
67
Schedule of Changes in the Net Pension Liability and Related Ratios
Last Ten Years
June 30, 2024
Measurement Period: June 30 2018 2017 2016 2015 2014
Total Pension Liability
Service Cost 2,528,271$ 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 in Benefit Terms -----
Changes in 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 Expenses (126,575) (109,029) (45,185) (83,511) -
Other Changes in Fiduciary Net Position (240,367) ----
Net Change in Plan 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%
Notes to Schedule:
In 2022,SB 1168 increased the standard retiree lump sum death benefit from $500 to $2,000 for any death occurring on or after July 1,
2023. The impact, if any, is included in the changes of benefit terms.
Changes in Assumptions:There were no assumption changes in 2023.Effective with the June 30, 2021 valuation date (June 30, 2022
measurement date),the accounting discount rate was reduced from 7.15%to 6.90%.In determining the long-term expected rate of
return,CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows.In addition,
demographic assumptions and the price inflation assumption were changed in accordance with the 2021 CalPERS Experience Study
and Review of Actuarial Assumptions.The accounting discount rate was 7.15%for measurement date June 30, 2017 through June 30,
2021, 7.65% for measurement dates June 30, 2015 through June 30, 2016, and 7.50% for measurement date June 30, 2014.
Changes in Benefit Terms:The figures abovegenerally include any liability impact that may have resulted from voluntary benefit changes
that occurred on or before the Measurement Date.However,offers of Two Years Additional Service Credit (a.k.a.Golden Handshakes)
that occurred after the Valuation Date are not included in the figures above,unless the liability impact is deemed to be material by the
plan actuary.
68
Schedule of Plan Contributions
Last Ten Years
June 30, 2024
Actuarially
Determined Contributions in Contribution Covered-Contributions as a
Fiscal Contribution Relation to the Deficiency Employee Percentage of Covered-
Year (ADC)(1)ADC(1)(Excess)Payroll(2)Employee Payroll(2)
2015 3,557,098$ (3,557,098)$ -$12,451,513$ 28.57%
2016 3,819,770 (3,819,770)-12,767,963 29.92%
2017 4,105,810 (4,105,810)-12,829,415 32.00%
2018 4,441,517 (4,441,517)-12,969,485 34.25%
2019 4,906,983 (36,706,983) (31,800,000) 12,892,655 284.71%
2020 2,437,119 (2,437,119)-13,383,715 18.21%
2021 2,765,952 (3,965,952)(1,200,000)13,768,586 28.80%
2022 2,971,785 (3,960,785)(989,000)14,148,052 28.00%
2023 3,163,698 (5,477,698)(2,314,000)14,539,529 37.67%
2024 3,095,172 (3,095,172)-14,893,185 20.78%
Notes to Schedule:
Actuarial Cost Method Entry Age Actuarial Cost Method
Amortization Method/Period Varies by date established and source. May be level dollar or level percent of pay
and may include direct rate smoothing.
Asset Valuation Method Market value of assets
Discount Rate 6.80% (net of investment and administrative expenses)
Inflation 2.30%
Salary Increases Varies by category, entry age, and duration of service.
Payroll Growth 2.80%
(1)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.
(2)Includes three year’s payroll growth assumption using 2.80% payroll growth assumption for fiscal year 2024; 2.75% payroll growth
assumption for fiscal years 2018-2023; and 3.00% payroll growth assumption for fiscal years 2015-2017.
The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2023-24 were from the June 30,
2021 public agency valuations. Also note, that some of the data from prior years were updated with the most current available information.
69
Report on Internal Control Over Financial Reporting and on Compliance and Other
Matters Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards
Board of Directors
Otay Water District
Spring Valley, California
Independent Auditor’s Report
We have audited, in accordance with the auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards issued by the Comptroller General of the United States, the financial
statements of Otay Water District (“the District”), as of and for the year ended June 30, 2024,
and the related notes to the financial statements, which collectively comprise the District’s
basic financial statements, and have issued our report thereon dated October 18,2024.
Report on Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that have not been identified.
Attachment C
Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District's financial statements
are free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts, and grant agreements, noncompliance with which
could have a direct and material effect on the financial statements.However, providing an
opinion on compliance with those provisions was not an objective of our audit, and
accordingly, we do not express such an opinion. The results of our tests disclosed no instances
of noncompliance or other matters that are required to be reported under Government
Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness
of the District’s internal control or on compliance. This report is an integral part of an audit
performed in accordance with Government Auditing Standards in considering the District’s
internal control and compliance. Accordingly, this communication is not suitable for any other
purpose.
Irvine, California October 25, 2024
To the Board of Directors
Otay Water District
Spring Valley, California
We have audited the financial statements of the Otay Water District (“the District”)as of and
for the year ended June 30, 2024 and have issued our report thereon dated October 18,2024.
Professional standards require that we advise you of the following matters relating to our
audit.
Our Responsibility in Relation to the Financial Statement Audit
As communicated in our engagement letter dated May 25, 2024, our responsibility, as
described by professional standards, is to form and express an opinion about whether the
financial statements that have been prepared by management with your oversight are
presented fairly, in all material respects, in accordance with accounting principles generally
accepted in the United States of America. Our audit of the financial statements does not
relieve you or management of your respective responsibilities.
Our responsibility, as prescribed by professional standards, is to plan and perform our audit
to obtain reasonable, rather than absolute, assurance about whether the financial statements
are free of material misstatement. An audit of financial statements includes consideration of
internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of
our audit, we considered the internal control of the District solely for the purpose of
determining our audit procedures and not to provide any assurance concerning such internal
control.
We are also responsible for communicating significant matters related to the audit that are,
in our professional judgment, relevant to your responsibilities in overseeing the financial
reporting process. However, we are not required to design procedures for the purpose of
identifying other matters to communicate to you.
Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously
communicated to you.
Compliance with All Ethics Requirements Regarding Independence
The engagement team, others in our firm, as appropriate and our firm, have complied with
all relevant ethical requirements regarding independence under the American Institute of
Certified Public Accountants (“AICPA”) independence standards, contained in the Code of
Professional Conduct.
We identified self-review threats to independence as a result of non-attest services provided.
Those non-attest services included the preparation of the financial statements. To mitigate
the risk,management has compared the draft financial statements and footnotes to the
underlying accounting records to verify accuracy and has reviewed a disclosure checklist to
ensure footnotes are complete and accurate.
Attachment D
Additionally, we utilize a quality control reviewer to perform a second review of the financial
statements. We believe these safeguards are sufficient to reduce the independence threats to
an acceptable level.
Significant Risks Identified
We have identified the addition of a new subscription-based information technology
arrangement (SBITA)as a significant risk due to the materiality of the arrangement and the
newness of the GASB 96 accounting standard implemented in the prior year. As a result, we
performed additional testing outside of our standard audit approach to ensure the transaction
was recorded correctly.
Qualitative Aspects of the Entity’s Significant Accounting Practices
Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A
summary of the significant accounting policies adopted by the District is included in Note 1 to
the financial statements. No matters have come to our attention that would require us, under
professional standards, to inform you about (1) the methods used to account for significant
unusual transactions and (2) the effect of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative guidance or consensus.
Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by
management and are based on management’s current judgments.There have been no initial
selection of accounting policies and no changes in significant accounting policies or their
application during 2024.Those judgments are normally based on knowledge and experience
about past and current events and assumptions about future events. Certain accounting
estimates are particularly sensitive because of their significance to the financial statements
and because of the possibility that future events affecting them may differ markedly from
management’s current judgments.
The most sensitive accounting estimates affecting the financial statements are:
Management’s estimate of which capital projects represent ordinary maintenance
activities necessary to keep an asset operational for its originally intended useful life
versus significant improvement, replacement, and life extending projects that should
be capitalized as additions to capital assets is based on management’s knowledge of
the assets and their useful lives. We evaluated the key factors and assumptions used
to develop the amounts added to capital assets in determining that it is reasonable in
relation to the financial statements taken as a whole.
Management’s estimate of transactions related to net pension liabilities based on
actuarial information. We evaluated the key factors and assumptions used to develop
the amounts by the actuary and determined that it is reasonable in relation to the
financial statements taken as a whole.
Management’s estimate of transactions related to net OPEB liabilities based on
actuarial information. We evaluated the key factors and assumptions used to develop
the amounts by the actuary and determined that it is reasonable in relation to the
financial statements taken as a whole.
Financial Statement Disclosures
Certain financial statement disclosures involve significant judgment and are particularly
sensitive because of their significance to financial statement users. The most sensitive
disclosures affecting the District’s financial statements were:
The disclosure of pensions in note 7 of the financial statements.
The disclosure of OPEB in note 8 to the financial statements.
The financial statement disclosures are neutral, consistent, and clear.
Significant Unusual Transactions
For purposes of this communication, professional standards require us to communicate to you
significant unusual transactions identified during our audit.There were no significant unusual
transactions identified as a result of our audit procedures.
Identified or Suspected Fraud
We have not identified or have obtained information that indicates that fraud may have
occurred.
Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the
performance of the audit.
Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards also require us to accumulate all
known and likely misstatements identified during the audit, other than those that we believe
are trivial, and communicate them to the appropriate level of management. Further,
professional standards require us to also communicate the effect of uncorrected
misstatements related to prior periods on the relevant classes of transactions, account
balances or disclosures, and the financial statements as a whole and each applicable opinion
unit.There were no uncorrected misstatements that we identified as a result of our audit
procedures.
In addition, professional standards require us to communicate to you all material, corrected
misstatements that were brought to the attention of management as a result of our audit
procedures. There were no material misstatements that we identified as a result of our audit
procedures.
Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management
as a matter, whether or not resolved to our satisfaction, concerning a financial accounting,
reporting, or auditing matter, which could be significant to the District’s financial statements
or the auditor’s report. No such disagreements arose during the course of the audit.
Circumstances that Affect the Form and Content of the Auditor’s Report
For purposes of this letter, professional standards require that we communicate any
circumstances that affect the form and content of our auditor’s report. There were none.
Representations Requested from Management
We have requested certain written representations from management, which are included in
the attached letter dated October 18, 2024.
Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing
and accounting matters. Management informed us that, and to our knowledge, there were no
consultations with other accountants regarding auditing and accounting matters.
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the District, we generally discuss a
variety of matters, including the application of accounting principles and auditing standards,
significant events or transactions that occurred during the year,operating and regulatory
conditions affecting the entity, and operational plans and strategies that may affect the risks
of material misstatement. None of the matters discussed resulted in a condition to our
retention as the District’s auditors.
Restriction on Use
This report is intended solely for the information and use of the Board of Directors and
management of the District and is not intended to be and should not be used by anyone other
than these specified parties.
Irvine, California
October 25, 2024
Otay Water District
Spring Valley, California
INDEPENDENT ACCOUNTANT’S REPORT
We have performed the procedures enumerated below, in reviewing the Otay Water District’s
(“the District”) compliance with the requirements of the Investment Policy as such
requirements apply to the Investments of the District for the period July 1, 2023, through
June 30, 2024. The District is responsible for compliance with the requirements as noted in
the referenced Investment Policies.
The District has agreed to acknowledge that the procedures performed are appropriate to
meet the intended purpose of determining compliance by the District with respect to the
Investment Policy for the period July 1, 2023, through June 30, 2024.This report may not be
suitable for any other purpose. The procedures performed may not address all the items of
interest to a user of this report and may not meet the needs of all users of this report and, as
such, users are responsible for determining whether the procedures performed are
appropriate for their purposes.
The procedures performed, and the results of those procedures are as follows:
1.Obtain a copy of the District’s investment policy and determine that it is in effect for the
fiscal year ended June 30, 2024.
Results:No exceptions were noted as a result of applying the above procedure.
2.Select 4 investments held at year end and determine if they are allowable investments
under the District’s Investment Policy.
Results:No exceptions were noted as a result of applying the above procedure.
3.For the four investments selected in #2 above, determine if they are held by a third-party
custodian designated by the District.
Results:No exceptions were noted as a result of applying the above procedure.
4.Confirm the par or original investment amount and market value for the four investments
selected above with the custodian or issuer of the investments.
Results:No exceptions were noted as a result of applying the above procedure.
5.Select two investment earnings transactions that took place during the year and recompute
the earnings to determine if the proper amount was received.
Results:No exceptions were noted as a result of applying the above procedure.
Attachment E
Otay Water District
Spring Valley, California
Page 2
6.Trace amounts received for transactions selected at #5 above into the District’s bank
accounts.
Results:No exceptions were noted as a result of applying the above procedure.
7.Select five investment transactions (buy, sell, trade or maturity) occurring during the year
under review and determine that the transactions are permissible under the District’s
investment policy.
Results:No exceptions were noted as a result of applying the above procedure.
8.Review the supporting documents for the five investments selected at #7 above to
determine if the transactions were appropriately recorded into the District’s general ledger.
Results:No exceptions were noted as a result of applying the above procedure.
We were engaged by Otay Water District to perform this agreed-upon procedures engagement
and conducted our engagement in accordance with attestation standards established by the
American Institute of Certified Public Accountants. We were not engaged to and did not
conduct an examination or review engagement, the objective of which would be the
expression of an opinion or conclusion, respectively, on the District’s accounting records.
Accordingly, we do not express such an opinion or conclusion. Had we performed additional
procedures other matters might have come to our attention that would have been reported
to you.
We are required to be independent of the District and to meet our other ethical responsibilities
in accordance with the relevant ethical requirement related to our agreed-upon procedures
engagement.
This report is intended solely for the information and use of management of Otay Water
District and is not intended to be and should not be used by anyone other than those specified
parties.
Irvine, California
October 25, 2024
OTAY
WATER DISTRICT
AUDIT RESULT
FISCAL YEAR ENDED JUNE 30, 2024
October 16, 2024
Attachment F
Audit Reports
2
❑Basic Financial Statements
❑Unmodified opinion will be dated October 18, 2024
❑Financial statements are consistent with prior year
and presented in accordance with generally accepted
accounting principles
❑Government Auditing Standards Opinion
❑Letter to Those in Governance
❑Agreed-Upon Procedures Report over
Investments
Audit Results
3
❑Finance staff was prepared for the audit
❑No material journal entries detected as a
result of the audit procedures
❑Noted no instances of noncompliance with
laws and regulations that are direct and
material to the financial statements
❑No material weaknesses or significant
deficiencies in internal controls
Areas of Audit Focus
4
Contract Review
and Compliance
with Policies
Review of
new SBITA
agreement
Questions?
Shannon Ayala | Partner
Davis Farr LLP | 1903 Wright Place, Suite 280 |Carlsbad, CA 92008
Phone: Direct:760.298.5872 | Email:sayala@davisfarr.com
STAFF REPORT
TYPE MEETING: Regular Board MEETING DATE: November 6, 2024
PROJECT:
SUBMITTED BY: [8] Charles Mederos, P2688 Utility Services Manager
[8] Andrew Jackson, Chief Water Operations
APPROVED BY: [8] Jose Martinez, General Manager
DIV. NO. All
SUBJECT: APPROVAL TO PURCHASE ONE REPLACEMENT STATIONARY EMERGENCY
GENERATOR IN THE AMOUNT OF $149,000.00 FOR THE ADMINISTRATIVE BUILDING, INCREASE CAPITAL IMPROVEMENT PROJECT (CIP) P2688 FROM
$76,000.00 TO $239,000.00 FOR FISCAL YEAR 2025, AND TO INCREASE
THE OVERALL SIX-YEAR CIP FROM $833,000.00 TO $996,000.00
GENERAL MANAGER'S RECOMMENDATION:
That the Board authorize the General Manager to issue a purchase order to Hawthorne CAT in the amount of $149,000.00 for the purchase of one replacement stationary emergency generator for the
Administrative Building, declare existing generator as surplus, increase CIP P2688 from $76,000.00 to $239,000.00 for Fiscal Year 2025 and to increase the overall six-year CIP from $833,000.00 to
$996,000.00.
COMMITTEE ACTION:
See "Attachment A."
PURPOSE:
To obtain Board authorization to purchase one replacement
stationary emergency generator for the Administrative Building, declare existing generator as surplus, increase CIP P2688 from
$76,000.00 to $239,000.00 for Fiscal Year 2025, and to increase the overall six-year CIP from $833,000.00 to $996,000.00.
AGENDA ITEM 4
ANALYSIS:
The existing generator for the Administrative Building is a TIER 2 Volvo 602 horsepower engine and runs a 403kW/504kVA 480 3-phase
generator. It is an emergency standby genset manufactured in 2004 by MQ Power (MQ). The District purchased this generator, in used condition, from Sloan electric on November 30, 2009, for $65,941.00 and it was installed in January 2010. In April 2017, the engine control panel failed with 172 hours of service on the meter. The
panel was replaced with no further issues. In August 2024, during a routine monthly inspection, it was discovered that the control panel had unexpectedly failed again with the generator having 231. 9
operating hours. Staff proceeded to bypass the stationary generator and installed a portable generator in the event of a planned or unplanned power outage. Staff contacted several
nationwide service providers, including the manufacturer, in search of replacement options. On August 28, 2024, staff received confirmation from MQ that this generator was no longer supported
by the manufacturer and there was no replacement engine controller available. The existing generator is classified as TIER 2 generator
emission level. Therefore, in anticipation of this possible order and the generator being past its service life expectancy and there are no available parts for repairs, it must be replaced with a
generator that is better in long term compliance and supported with current technology. The new generator will be a replacement in-kind and Tier 3 emission standards.
The specified replacement stationary emergency generator is
designed to operate as a backup power source in case of power outages, rolling blackouts, Public Safety Power Shutoffs, and Energy Conservation Activations at State or local level. The
generator is critical to maintain critical infrastructure, including SCADA servers, in the Administrative Building.
It is worth noting that Operations staff conducts annual testing on the District's emergency generators, which includes, but is not limited to the following procedures:
•Simulation of an actual loss of utility power.
•Observation of proper start up, operation, and shutdown of
the generator and associated Automatic Transfer Switch (ATS).
•Ability to monitor and operate the facility locally andremotely via the District's SCADA system.
•Use of a "Load Bank" which places actual power demands on the
generators to evaluate their performance (temperature,pressure, power output, etc.) when operating near rated
capacities.
•Additionally, exercising engines near their capacities isalso part of the recommended maintenance for the generators.
This testing is part of the ongoing efforts performed by staff to help ensure the District's ability to have auxiliary power in the
event of an emergency.
Staff plans to purchase the generator through Sourcewell
Cooperative Agreement with Caterpillar Inc., and received the following quote from Hawthorn Power Systems, Caterpillar Inc.'s authorized distributor. The price received includes all applicable
fees, taxes, delivery, testing, and training.
Dealer Price
Hawthrone Power Systems $149,000
Note: Cooperative/Joint Purchases are authorized under Section 6.2.3 of the Purchasing Manual. These purchases are exempt from the District's competitive solicitation requirements so long as
the contracts, schedules, and agreements are solicited in a manner consistent with the District's purchasing policies. Sourcewell is a national service cooperative created by the Minnesota
legislature as a government agency, which performs cooperative purchasing on behalf of itself and its participating public agencies to reduce the cost of procurement. Participating agencies
include all eligible government, education, and nonprofit agencies nationwide and in Canada. Sourcewell's solicitation process meets
the District's competitive solicitation requirements.
For Fiscal Year 2025, staff budgeted $76,000.00 for the replacement
of the 1200-1 Pump Station's generator under CIP P2688. The Board of Directors authorized the purchase and replacement of the 1200-1 emergency standby generator at the Board meeting held on August
7, 2024. However, the Administrative Building emergency standby generator controller and related equipment failed unexpectedly, as previously mentioned. The temporary portable emergency generator
currently in place and has a San Diego Air Pollution Control District (APCD) stationary time limitations of a maximum period of 12 months. CIP P2688 Standby Power Renovations has a six-year
expenditure schedule of $833,000.00, which includes a projected expenditure amount of $200,000.00 for Fiscal Year 2030 for the replacement of either the Administrative or Operations Building
emergency standby generator.
Staff requests to increase the overall six-year CIP from $833,000.00 to $996,000.00 to cover the future purchase of the Operations Building emergency standby generator. At the time the
CIP budget was prepared, Operations staff had only projected the
purchase of the emergency standby generator for either the Administrative Building or Operations Building, but not both buildings. Based on a recent assessment, Operations staff foresee that both will need to be replaced. The increased CIP amount for
Fiscal Year 2025 will also cover approximately $14,000.00 in expenses to the District's as-needed electrical engineering firm
"Engineering Partners, Ine ll (EPI) for their electrical assessment to replace the Administrative Building emergency generator.
Since the District requires reliable equipment for emergency response, staff recommends that the Board authorize the General Manager to:
•Pull funds from Fiscal Year 2030 and increase CIP P2688 from$76,000.00 to $239,000.00 for Fiscal Year 2025.
•Increase six-year CIP P2688 from $833,000.00 to $996,000.00for future replacement of the Operations building generator.
•Issue a purchase order to Hawthorne CAT for the purchase ofthe replacement of the emergency standby generator for theAdministrative Building.
•Declare the existing generator as surplus.
FISCAL IMPACT: � Joe Beachem, Chief Financial Officer
Projected purchase cost for one emergency standby generator for
the Administrative Building is $149,000.00 plus an additional $14,000.00 in consulting and assessment costs, which will be charged against CIP P2688. The total cost in this account will
exceed budgeted funding. The total Fiscal Year 2025 project budget for CIP P2688 is $76,000.00.
Staff is requesting to pull funds from Fiscal year 2030 projected purchase to replace the emergency standby generator for the
Administrative building to cover for this expense and to increase the overall six-year CIP from $833,000.00 to $996,000.00 for future projected replacement of an emergency standby generator.
The Finance Department has determined that, under the current rate model, an additional $163,000 in debt will be issued to offset the
requested increase in the six-year CIP budget. The additional debt
is projected to increase in Fiscal Year 2027 rates by less than 0.1%. The rate impact of pulling the requested amount for Fiscal
Year 2025 of approximately 0.01%.
The Finance Department has determined that 100% of the funds are
available to cover the cost of the replacement emergency standby generator for the Administrative Building.
ATTACHMENT A
SUBJECT/PROJECT:
Attachment B
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Administrative Building Emergency Standby Generator
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Controller For Generator No Longer Supported
OTAY WATER DISTRICT
OWD ADMINISTRATION BLDG ELECTRIC GENERATOR REPLACEMENT
EXHIBIT A
SEP 2024