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The following information presented in the Otay Water District CAFR
has not been updated for developments subsequent to the date
of the independent auditor’s report
(September 21, 2007)
C mrtprelle:n_si'Ve ~t!ltua£ :financis£ 2{eport;
:fisc a{ Year 'Ended June 30, 2007
-
Prepared by the Finance Department
Spring Valley, California
IINNTTRROODDUUCCTTOORRYY SSEECCTTIIOONN
Letter of Transmittal……………………………………………………………………. 1
Organization Chart……………………………………………………………………… 11
List of Principal Officials……………………………………………………………….. 12
GFOA Certificate of Achievement……………………………………………………… 13
FFIINNAANNCCIIAALL SSEECCTTIIOONN
Independent Auditors’ Report………………………………………………………….. 15
Management’s Discussion & Analysis…………………………………………………... 17
Basic Financial Statements:
Statement of Net Assets……………………………………………………………….. 25
Statement of Revenues, Expenses, and Changes in Net Assets……………………….. 26
Statement of Cash Flows……………………………………………………………….. 27
Notes to Financial Statements…………………………………………………………... 29
Required Supplementary Information:
Schedule of Funding Progress for PERS………………………………………………... 49
SSTTAATTIISSTTIICCAALL SSEECCTTIIOONN
Net Assets By Component……………………………………………………………… 52
Changes in Net Assets…………………………………………………………………... 53
Operating Revenues by Source…………………………………………………………. 54
Operating Expenses by Function……………………………………………………….. 55
Non-Operating Revenues by Source…………………………………………………… 56
Non-Operating Expenses by Function………………………………………………… 57
Assessed Valuation of Taxable Property Within The District………………………… 58
Water Purchases, Production, and Sales……………………………………………...… 59
Meter Sales by Type……………………………………………………………………. 60
Number of Customers by Service Type………………………………………………… 61
Property Tax Levies and Collections…………………………………………………… 62
Water and Sewer Rates…………………………………………………………………. 63
Ten Largest Customers…………………………………………………………………. 64
Ratios of Outstanding Debt by Type……………………………………………………. 65
Pledged Revenue Coverage…………………………………………………………….. 66
Ratios of General Bonded Debt Outstanding…………………………………………… 67
Computation of Direct and Overlapping Bonded Debt……………………………..… 68
Principal Employers…………………………………………………………………….. 69
Demographic and Economic Statistics………………………………………………….. 70
Number of Employees by Function…………………………………………………….. 71
Active Meters by Size…………………………………………………………………… 72
Operating and Capital Indicators……………………………………………………….. 73
TABLE OF CONTENTS
September 21, 2007
Honorable Board of Directors
Otay Water District
I am pleased to present the Otay Water District’s (the “District”) Comprehensive Annual
Financial Report (CAFR) for the fiscal year ended June 30, 2007. With the District’s mission to
provide safe and reliable potable and recycled water and sewer service, there is an emphasis on
new water sources, system reliability, and new maintenance requirements.
This report was prepared by the District’s Finance Department following guidelines set forth by
the Government Accounting Standards Board (GASB) and generally accepted accounting
principles (GAAP). Responsibility for both the accuracy of the data presented, and the
completeness and fairness of the presentation, including all disclosures, rests with the District.
We believe the data, as presented, is accurate in all material respects and that it is presented in a
manner that provides a fair representation of
the financial position and results of
operation of the District. Included are all
disclosures we believe necessary to enhance
your understanding of the financial
condition of the District. GAAP requires
that management provide a narrative
introduction, overview and analysis, to
accompany the basic financial statements in
the form of Management’s Discussion and
Analysis (MD&A), which should be read in
conjunction with this report. The District’s
MD&A can be found immediately following
the Independent Auditors’ Report.
The District’s financial statements have been audited by Teaman, Ramirez and Smith Inc., a firm
of licensed certified public accountants. The goal of the independent audit was to provide
reasonable assurance that the financial statements of the District for the fiscal year ended June
30, 2007, are free of material misstatement. The independent audit involved examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements; assessing the
accounting principles used and significant estimates made by management; and evaluating the
overall financial statement presentation. The independent auditor concluded, based upon the
audit, that there was reasonable basis for rendering an unqualified opinion that the District’s
financial statements for the fiscal year ended June 30, 2007, are fairly presented in conformity
with GAAP. The Independent Auditors’ Report is presented as the first component of the
financial section of this report.
1
REPORTING ENTITY
The District is a publicly-owned water and sewer agency, authorized on January 27, 1956 as a
California special district by the State Legislature, with an entitlement to import water under the
provisions of the Municipal Water
District Act of 1911. Its ordinances,
policies, taxes, and rates for service are
set by five Directors, elected by voters
in their respective divisions, to serve
staggered four-year terms on its
Governing Board. The District is a
“revenue neutral” public agency,
meaning that each end-user pays his or
her fair share of the District’s costs of
water acquisition, operation and
maintenance, betterment, and renewal
and replacement of the public water and
sewer facilities.
Over the last 51 years, the District has grown from a handful of customers and two employees to
become an organization operating a network with more than 849 miles of pipelines, 41
operational reservoirs, a sewer treatment plant, and one of the largest recycled water distribution
networks in San Diego County. The character of the service area has also changed from
predominantly dry-land farming and cattle ranching, to businesses, high-tech industries, and
large master-planned communities.
Today the District provides water service to nearly 47,030 potable and 585 recycled customers
within approximately 125 square miles of southeastern San Diego County. In the past, all of the
potable water delivered by the District was purchased from the San Diego County Water
Authority (CWA) who in turn purchases water from the region’s water importer, the
Metropolitan Water District of Southern California (MWD). In Fiscal Year 2007, the District
began purchasing raw water from CWA and made an agreement with the City of San Diego to
treat this raw water, giving the District a new source of potable water. By taking raw water
through CWA’s system, there is increased reliability of water supplied to the District. There are
ongoing negotiations with the City of San Diego to expand future water treatment services
through a new connection.
The District also owns and operates a
wastewater collection and recycling
system to provide public sewer service to
approximately 4,630 homes and
businesses (or 6,620 Assigned Service
Units) within portions of the communities
of La Mesa, Rancho San Diego, El Cajon,
Jamul, and Spring Valley. Recycled water
from the Ralph W. Chapman Water
2
Recycling Facility (RWCWRF) is used to irrigate golf courses, schools, public parks, roadway
landscapes, and various other approved uses in eastern Chula Vista. The RWCWRF project is
capable of reclaiming wastewater at a rate of 1.3 million gallons per day.
On June 1, 2007, the District dedicated its new Supply Link Project connecting its recycled water
system to San Diego’s South Bay Water Reclamation Plant, taking about six million gallons a
day of recycled water for irrigation purposes and allowing more potable water to be available for
human consumption. The purchase and delivery of this water allows the District to receive
financial incentives from both MWD and CWA, which helps to offset the investment in capital
necessary to make this new source of water a reality.
CURRENT ECONOMIC CONDITIONS AND OUTLOOK
While overall growth in San Diego County has slowed over the last two years, population within
the District’s service area continues to increase albeit at a reduced rate. As of January 2007, it is
estimated that the District served 190,000 residents. The District’s Development Services
Department currently approves
approximately 35 permits per
month, and sold 548 water
meters in Fiscal Year 2006-2007.
The San Diego Association of
Governments (SANDAG), the
regional planning agency, has
estimated the District’s growth
will continue for a decade or
more. The District projects an
ultimate customer population of
277,000 residents.
BUDGET SUMMARY
For the first time in the District’s history, the fiscal year budget exceeds $100 million, with 2008
operating expenditures of $66.2 million and capital expenditures of $35.5 million. The District’s
goal is to provide the most effective and efficient service possible while maintaining
affordability of the water supply for the community.
The District’s operating expenditures are derived from three major sectors: water, reclamation,
and sewer. Revenues from potable and recycled water for Fiscal Year 2008 are budgeted to be
$63.3 million, about $10.0 million (15.8%) greater than Fiscal Year 2007. Water sales are
expected to increase as a result of a slowing but continuing growth trend occurring within the
District’s service area.
3
Significant aspects of the Operating Budget are:
• A balanced budget meeting the goals of the Strategic Plan.
• An updated a six-year Rate Model to ensure sound financial planning and reserve levels.
• Implemented rate increases in potable and reclaimed water, and sewer. This included
pass-through rate increases from CWA, City of San Diego, and County of San Diego,
who raised costs to the water and sewer customers.
• Of San Diego County’s 23 water agencies, Otay’s water rate is the eighth-lowest and
below the county-wide average.
• The District issued $42 million in debt in Fiscal Year 2007, which is being used to fund
the construction of new facilities and replacement or enhancement of existing facilities.
• Funding for the six million gallons per day recycled water purchase agreement with the
City of San Diego.
• Increased credits from MWD and CWA for recycled water purchases from the City of
San Diego.
• Expanded residential, landscape, and commercial water conservation programs.
• Funding for the fourth year of a Five-Year Labor Agreement ending in Fiscal Year 2008.
The projected operating cost for salaries and benefits is $15.6 million, which is an increase of
$988,000 (6.8%) compared to Fiscal Year 2007. The increase in labor is predominately the
result of negotiated pay and benefit increases.
The ultimate population projection of 277,000 will result in an estimated 114,000 EDUs and an
average annual water demand of approximately 56 million gallons per day (MGD). To
accommodate this growth, the District will need to invest an estimated $500 million in capital
assets before ultimate build-out is realized. The Fiscal Year 2007-08 Capital Budget consists of
82 projects and a budget of $34.5 million. The budget emphasizes long-term planning for on-
going programs while functioning within fiscal constraints and population growth.
STRATEGIC PLAN
In 2001, the District began developing a Strategic Plan to
guide operations and planning efforts through projected
upcoming years of sustained growth. The plan was
designed to address the unique challenges and
opportunities resulting from this growth. It would also
guide the District as it strives to develop the necessary
infrastructure and operational practices to perform its
primary business, while ensuring quality customer
service and competitive rates are maintained.
The first multi-year Strategic Plan was adopted by the Board of Directors in 2002. Each year the
Board of Directors reviews and updates the plan. While the first plan guided the District through
a period of record growth, the updated plan using a balanced scorecard method, looks forward to
a time when the majority of the requisite physical infrastructure is in place and the District
begins to transform from a growth-centric entity to a maintenance-based organization.
4
Developer fees support growth but replacement and maintenance is supported by rates and
operating expenses. Otay has been very successful managing growth and recognizes that
continued success is predicated on developing reliable, long-term water supplies, as well as
managing long-term maintenance and replacement of its infrastructure.
A key to addressing future challenges is to capitalize on the significant investment that has been
made in the integrated information systems. With the Otay Information System in place, the
District has focused on business process improvement utilizing best-in-class technology. Other
Strategic Business Plan objectives include securing additional water sources, continuing
expansion of potable and recycled water networks, expanding use of recycled water, and
continuing efforts to promote conservation.
The current Strategic Plan identifies how the
District needs to change in order to meet
future challenges and responsibilities. The
plan is focused on all areas of the agency and
describes, through cascading strategies, goals,
and objectives, how it will achieve the desired
changes. Major themes in the updated plan
are: 1) the movement toward improvement of
maintenance business practices so that the life
of assets can be extended; 2) the development
of improved and more precise financial
information to assist in management
decisions; 3) the improvement of customer
service through enhanced customer
knowledge and contact; and 4) the building of critical assets on time and on budget. As noted,
the plan calls for the rapid adoption of technological systems and the review of business
practices that will yield increased productivity. Part of the plan is a set of detailed performance
measures which monitor the quarterly productivity of the agency. This mix of long-term
objectives and short-term measures of productivity focuses the District on change while
maintaining a high quality of customer service.
Putting the Strategic Plan to Work
Using the Strategic Plan as a guide and with the Board of Directors support, the District has been
able to put into place many substantial improvements. Some of the most significant
accomplishments are the integrated information system, the GIS system, and numerous policy
and procedure improvements. These accomplishments, along with the forward thinking
perspective of the District, paved the way for a thorough and persuasive presentation to two
rating agencies, resulting in the positive outcome of a bond rating upgrade for Otay Water
District from A+ to an AA-. Putting the Strategic Plan to work has resulted in operational
savings and, in the case of the bond rating, it has resulted in approximately $1.5 million of
interest expense savings.
5
Water Resources
The Strategic Plan drives advances in every aspect of District operations. For instance, the
Strategic Plan calls for a periodic updating of the Urban Water Management Plan (UWMP),
which was most recently completed in July 2007. The UWMP serves as a long-range planning
document for water supply and demand, and provides an overview of the District’s water supply,
water usage, recycled water, and conservation programs. The UWMP works to ensure the
District always has the water resources it needs to meet the demands of a growing community.
Last year the District completed an
Integrated Water Resources Plan
(IRP). The mission of the IRP is to
find the optimal mix of imported
water, local supplies, and
conservation efforts to meet
projected ultimate supply
requirements in a cost-effective
manner, while also incorporating
implementation risks, environmental
impacts, and other factors. The
planning objectives are to maintain
affordability, meet water quality
standards, achieve supply reliability, increase system flexibility, increase supply diversity, and
address environmental and institutional constraints. The IRP identifies and evaluates all
potential water resource supply opportunities to arrive at a recommended diverse water supply
portfolio. This provides a strategic approach and focused direction, which is incorporated into
the water resources master plan and the Capital Improvement Program for the development of
sufficient water supply to meet the planning objectives for long-term sustainability.
Current water supply alternatives include all potential opportunities such as desalination,
groundwater, water transfers, recycled water supply development, and interagency agreements.
In the coming year, the District will begin facilities rehabilitation and replacement assessment
which will define expected capital outlays for future system replacements. This approach is
clearly focused on asset management as a core discipline.
Recycled Water
Included in the UWMP is an agreement with the City of San Diego allowing the District to
purchase recycled water from the City’s South Bay Reclamation Facility. This contract delivers,
on average, more than six million gallons per day (MGD) of recycled water to the District’s
growing population, with the potential to increase these purchases up to nine MGD. Using this
resource, in addition to the 1.3 MGD produced from the District’s recycling facility, has enabled
the District to reduce its potable water use by approximately 15%, maximizing the beneficial use
of an alternative resource and making millions of gallons per day of potable water available for
higher quality and better purposes.
6
To date, the District has received $3.3 of a $4 million grant from Proposition 50 and another $2.4
million from the State Water Resources Control Board (SWRCB) for partial funding of recycled
water projects. The District is continuing to seek opportunities for increasing the capacity and
usage of recycled water with the assistance of state and federal funding sources.
The Future
The Otay Water District continues to use the
challenges presented by growth to create new
opportunities and new organizational
efficiencies. By utilizing and continuing to
refine its Strategic Plan, it has captured the
Board of Director’s vision and united its staff
in a common mission. The organization has
achieved a number of significant
accomplishments based on its successful
adherence to the plan. As a result, the District
is poised to successfully continue providing
an affordable, safe, and reliable water supply
for the people of its service area.
ACCOUNTING SYSTEM
The Finance Department is responsible for providing financial services to the District, including
financial accounting, reporting, payroll, accounts payable, custody and investment of funds,
billing and collection of water and wastewater charges, taxes, and other revenues. The District’s
books and records are maintained on an enterprise basis, matching revenues against the costs of
providing services. Revenues and expenses are recorded on the accrual basis in the period in
which revenue is earned and expenses are incurred.
Otay Water District operates within a system of internal controls established and continually
reviewed by management. This provides reasonable assurance that assets are adequately
safeguarded and transactions are recorded correctly according to District policies and procedures.
When establishing or reviewing controls, management must consider the cost of the control and
the value of the benefit derived from its utilization. Management normally maintains and
implements all sensitive controls and those controls whose value adequately exceeds their cost.
INTERNAL CONTROLS
Management believes the District’s internal controls, procedures, and policies adequately
safeguard assets and provide reasonable assurance of proper recording of financial transactions.
In addition, the District maintains controls to provide for compliance with all finance related
legal and contractual provisions. Management believes the activities reported within the
presented Comprehensive Annual Financial Report (CAFR) comply with these finance related
legal and contractual provisions, including bond covenants and fiduciary responsibilities.
7
BUDGETING CONTROLS
The District views the budget as an essential tool for proper financial management. The budget
is developed with input from the various departments of the organization and is adopted prior to
the start of each fiscal year. It is designed and presented for the general needs of the District, its
staff, and customers. It is a comprehensive and balanced financial plan that features District
services, resources and their allocation, financial policies, and other useful information to allow
the users to gain a general understanding of the District’s financial status and future. Monthly
comparison reports of budget to actual are prepared and distributed to all department heads, with
top level information provided to the Board at the monthly Board meetings.
CASH MANAGEMENT
During the year, available funds are invested in eligible securities, as required by law, and in
accordance with the District’s own investment policy adopted by the Board of Directors. The
investment objectives of the District, in order of priority, are: 1) to preserve the capital of the
portfolio; 2) to maintain adequate liquidity to meet cash flow requirements; and 3) to obtain a
reasonable rate of return without compromising the first two objectives.
RISK MANAGEMENT
In 2003, the District became a member of the Special District Risk Management Authority
(SDRMA), a pool program which provides the District's coverage for property, auto, liability,
and workers’ compensation claims. During Fiscal Year 2006-2007, the District continued its
proactive liability risk management role through careful monitoring of losses and designing and
implementing programs to minimize risks and losses. In addition, the District’s Safety
Committee analyzes workers’ compensation issues by monitoring work conditions, and
organizing and implementing safety training programs to reduce employee exposure to hazards.
PENSION PLANS
In addition to participating in Social Security, the District provides a defined benefit pension
plan for its employees through the California Public Employees’ Retirement System (CalPERS).
The District contributes a specified percentage of covered employees’ payroll, which is invested
by CalPERS. Upon retirement, District employees are entitled to a specified retirement benefit.
The plan is more fully described in Note 8 to the Financial Statements.
OTHER POST-EMPLOYMENT BENEFITS (OPEB)
The District provides other post-employment benefits (OPEB) as a part of the total compensation
offered to attract and retain the services of qualified employees. OPEB includes healthcare and
other forms of benefits (for example life insurance), in addition to the benefits provided from
specific pension plans. Financial reporting of the actuarial accrued liabilities corresponding to
all promised benefits associated with past services of District employees is not required until
Fiscal Year 2008-2009. Setting the District apart from most state and local government
employers, the District designated $16.7 million which fully funded its net OPEB obligations as
8
of the last actuarial projection dated June 30, 2004. For additional information see Note 9 to the
Financial Statements.
AWARDS AND ACKNOWLEDGMENTS
Because of the vision and years of hard work that went into the
Supply Link Project connecting our recycled water system to the
City of San Diego’s South Bay Water Reclamation Plant, the San
Diego County Taxpayer’s Association awarded the District with
the Golden Watchdog of the Year Award for 2007. In addition, the
American Society of Civil Engineers presented the District the
Award of Merit, and the WateReuse Association of California
named Otay its Utility of the Year.
The Government Finance Officers Association (GFOA) awarded a
Certificate of Achievement for
Excellence in Financial Reporting to
the Otay Water District for its
Comprehensive Annual Financial Report (CAFR) for the fiscal year
ended June 30, 2006. In order to be awarded a Certificate of
Achievement, a government agency must publish an easily readable
and efficiently organized Comprehensive Annual Financial Report.
This report must satisfy both generally accepted accounting
principles and applicable legal requirements. A Certificate of
Achievement is valid for a period of one year only. We believe that
our current Comprehensive Annual Financial Report continues to
meet the program requirements and are submitting it to the GFOA
to determine its eligibility for future awards.
The District also received a Distinguished Budget Presentation Award from the GFOA for the
District’s Operating and Capital Budget for Fiscal Year beginning July 1, 2006, as well as three
awards from the CSMFO for Excellence in Budgeting, Excellence in Public Communications,
and Excellence in Capital Budgeting. These prestigious awards recognize conformance with the
highest standards for preparation of state and local government financial reports.
I would like to thank all of the staff involved for their efforts in preparing this Comprehensive
Annual Financial Report, and for their hard work to ensure a successful outcome. I would also
like to thank the firm of Teaman, Ramirez and Smith, Inc., for their professional work and
opinion. To the Board of Directors, staff and I acknowledge and appreciate their continued
support and direction in achieving excellence in financial management.
__
Mark Watton, General Manager
9
ORGANIZATION CHART
BOARD OF DIRECTORS
GENERAL MANAGER
FINANCEADMINISTRATIVE
SERVICES INFORMATION
TECHNOLOGY
AND STRATEGIC
PLANNING
ENGINEERING WATER
OPERATIONS
Controller and
Budgetary Services
Treasury and
Accounting
Services
Customer
Service
Payroll and
Accounts Payable
Human
Resources
Purchasing and
Facilities
Safety and Risk
Administration
Water
Conservation
IT
Application
Public Services
Construction
Survey
Environmental
Water System
Operations
Utility
Maintenance/
Construction
Collection/
Treatment/
Recycle
Operations
GIS
ASSISTANT GENERAL MANAGER ASSISTANT GENERAL MANAGER
IT
Operations Water Resources
Design
Planning
11
Board of Directors
Listed from Left to Right
Larry Breitfelder - Division 1
Jose Lopez – Vice President, Division 4
Jaime Bonilla – Treasurer, Division 2
Mark Robak - Division 5
Gary Croucher - President, Division 3
District Financial Management
Mark Watton - General Manager
German Alvarez - Assistant General Manager, Finance and Administration
Manny Magaña - Assistant General Manager, Engineering and Operations
Joseph R. Beachem - Chief Financial Officer
LIST OF PRINCIPAL OFFICIALS
FISCAL YEAR 2006-2007
12
AWARDS
13
Certificate of
Achieve1nent
for Excellence
in F inancial
Reporting
Presented to
Otay Water District
California
l'or its Comprehensive Annunl
Fin:.ncial Reporl
for the Fiscol Year Ended
June 30, 2006
A Cenlfic~ue or Aehie~Jement (or Exctllence in fimmelal
Reponing Is preunu~d by 1he Govemmen1 r1 nance Officers
Assoctation orthe Umlc=d Slates :md CnnruJ11 lo
i:OVtnur.tnl UU.il$ IUKf publiC cmplO~ rtti~UK'I\1
systcow whose comprthensivc ~ruu~l fitl:tnci~l
n::ports (CAPRA) :.u:h1cvo lhc h1ghcs1
m~ndar<b in gove-rnment o«<wltin&
lind financial reponing.
Executive Director
15
•I C>CSTEAMAN, RAMIREZ & SMITH, INC. I ~ CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Otay Water District
Spring Valley, California
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying financial statements of the business-type activities of the Otay Water District, as of and for the
years ended June 30, 2007 and 2006, which collectively comprise the District's basic fmancial statements, as listed in the Table of
Contents. These basic financial statements are the responsibility of the District's management. Our responsibility is to express an
opinion on these fmancial statements based on our audit.
We conducted our audit in accordance with 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall basic fmancial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial
position of the business-type activities of the Otay Water District, as of June 30, 2007 and 2006, and the cash flows where
applicable, thereof for the years then ended in conformity with accounting principles generally accepted in the United States of
America.
In accordance with Government Auditing Standards, we have also issued our report dated September 21, 2007 on our
consideration of the District's internal control over financial reporting and our test of its compliance with certain provisions of
laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results ofthat testing, and not to provide an opinion on
the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance
with Government Auditing Standards and should be considered in assessing the results of our audit.
The infoimation identified in the accompanying table of contents as Management's Discussion and Analysis and Required
Supplementary Information is not a required part of the basic financial statements, but are supplementary information required by
the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of
inquires of management regarding the methods of measurement and presentation of the supplementary information. However, we
did not audit the information and do not express an opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements that collectively comprise the
Otay Water District's basic financial statements. The introductory section and statistical section, as listed in the table of contents,
are presented for purposes of additional analysis and are not a required part of the basic fmancial statements. The introductory
section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial
statements and, accordingly, we express no opinion on them.
September 21, 2007
Richard A. Teaman, CPA • Greg W. Fankhanel, CPA • David M. Ramirez, CPA • Joseph A. Deledonne, CPA • Javier H. Carrillo, CPA
4201 Brockton Ave. Suite 100, Riverside CA 92501 • 951.274.9500 • 951.274.7828 FAX • www.trscpas.com
As management of the Otay Water District (the “District”), we offer readers of the District’s financial statements this
narrative overview and analysis of the District’s financial performance during the fiscal year ending June 30, 2007. Please
read it in conjunction with the District’s financial statements that follow Management’s Discussion and Analysis. All
amounts, unless otherwise indicated, are expressed in millions of dollars.
Financial Highlights
• The assets of the District exceeded its liabilities at the close of the most recent fiscal year by $447.0 million
(net assets). Of this amount, $70.3 million (unrestricted net assets) may be used to meet the District’s ongoing
obligations to citizens and creditors.
• The District’s total net assets increased by $24.9 million. Approximately two-thirds of this increase is attributable
to a $5.4 million increase in operating revenues and an $11.1 million increase in capital contributions over the
prior fiscal year.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the District’s basic financial statements, which are
comprised of the following: 1) Statement of Net Assets, 2) Statement of Revenues, Expenses and Changes in Net Assets,
3) Statement of Cash Flows, and 4) Notes to the financial Statements. This report also contains other supplementary
information in addition to the basic financial statements.
The Statement of Net Assets presents information on all of the District’s assets and liabilities, with the difference between
the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether
the financial position of the District is improving or weakening.
The Statement of Revenues, Expenses and Changes in Net Assets presents information showing how the District’s net
assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event
giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported
in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and
earned but unused vacation leave).
The Statement of Cash Flows presents information on cash receipts and payments for the fiscal year.
The Notes to the Financial Statements provide additional information that is essential to a full understanding of the data
supplied in the each of the specific financial statements listed above.
In addition to the basic financial statements and accompanying notes, this report also presents certain required
supplementary information concerning the District’s progress in funding its obligation to provide pension benefits to its
employees.
Financial Analysis
As noted earlier, net assets may serve over time as a useful indicator of an entity’s financial position. In the case of the
District, assets exceeded liabilities by $447.0 million at the close of the most recent fiscal year.
By far the largest portion of the District’s net assets, $368.6 million (82%), reflects its investment in capital assets, less any
related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide services to
citizens; consequently, these assets are not available for future spending. Although the District’s investment in its capital
assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from
other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
MANAGEMENT’S DISCUSSION AND ANALYSIS
17
Statement of Net Assets
(In Millions of Dollars)
2007 2006 2005
Assets
Current and Other Assets $ 122.1 $ 86.4 $ 107.8
Capital Assets 424.3 397.0 362.5
Total Assets 546.4 483.4 470.3
Liabilities
Long-term Debt Outstanding 74.2 33.9 35.4
Other Liabilities 25.2 27.4 23.8
Total Liabilities 99.4 61.3 59.2
Net Assets
Invested in Capital Assets
Net of Related Debt 374.6 361.6 325.7
Restricted 2.1 2.4 16.2
Unrestricted 70.3 58.1 69.2
Total Net Assets $ 447.0 $ 422.1 $ 411.1
At the end of the fiscal year, the District is able to report positive balances in all categories of net assets. This situation also
held true for the prior fiscal year. Total Net Assets increased to $447.0 million, approximately $24.9 million more than the
prior year. The increase in Current and Other Assets of $35.7 million is off-set by the increase in Long-term Debt of $40.3
million, due to the issuance of $42 million in new Certificates of Participation (COPS-2007). (See Note 5 in the Notes to
Financial Statements). Capital Assets increased by $27.3 million, to $424.3 million (net of related accumulated
depreciation), due predominantly to the District’s aggressive Capital Improvement Program (CIP). (See Note 3 in the
Notes to Financial Statements for additional information. Other less significant changes included an increase in accounts
receivable of $1.9 million and a decrease in accounts payable of $3.8 million.
MANAGEMENT’S DISCUSSION AND ANALYSIS
18
Statements of Revenues, Expenses, and Changes in Net Assets
(In Millions of Dollars)
2007 2006 2005
Water Sales $ 48.6 $ 43.8 $ 39.3
Wastewater Revenue 2.6 2.3 2.0
Connection and Other Fees 2.1
1.8
2.0
Non-operating Revenues 11.1 8.5 8.3
Total Revenues 64.4 56.4 51.6
Depreciation Expense 10.8 10.1 10.5
Other Operating Expense 53.9 49.5 46.0
Non-operating Expense 1.3 1.2 1.9
Total Expenses 66.0 60.8 58.4
Loss Before Capital
Contributions (1.6) (4.4) (6.8)
Capital Contributions 26.5 15.4 34.9
Change in Net Assets 24.9 11.0 28.1
Beginning Net Assets 422.1 411.1 383.0
Ending Net Assets $ 447.0 $ 422.1 $ 411.1
Water sales increased by $4.8 million from the prior year mainly due to reduced rainfall during the current year, as well as an
additional 548 new water meter sales (47,483 to 48,031). There was a significant decrease in rainfall of 2.21 inches (6.06 to
3.85), and total water sales increased by 1,420 acre-feet.
Wastewater revenue increased by $0.3 million due to a rate increase from $30.90 to $32.70 per assigned service unit. This
increase was implemented in January of 2007 and was predominantly a pass-through of cost increases from the City of San
Diego and the County of San Diego, as discussed in the Budget 2007-2008 section of this document.
Other operating expenses increased by approximately $4.4 million, predominately as a result of increases in outside services
and higher pension costs.
MANAGEMENT’S DISCUSSION AND ANALYSIS
19
MANAGEMENT’S DISCUSSION AND ANALYSIS
Capital Assets and Debt Administration
Capital Assets. The District’s capital assets as of June 30, 2007, totaled $424.3 million (net of accumulated depreciation).
Included in this amount is land. The total increase in the District’s capital assets for the current fiscal year was 6.9%.
Capital Assets
(In Millions of Dollars)
2007 2006 2005
Land $ 13.0 $ 12.5 $ 12.2
Construction in Progress 40.3 58.9 45.1
Water System 356.6 333.0 313.9
Reclaimed Water System 73.5 49.1 39.8
Sewer System 37.7 37.7 37.2
Buildings 17.6 17.5 16.7
Transportation Equipment 3.1 2.9 2.8
Engineering Equipment 5.6 5.7 5.7
Power Operated Equipment 1.6 1.6 1.6
Other Equipment 18.5 10.9 10.3
567.5 529.8 485.3
Less Accumulated
Depreciation (143.2) (132.8) (122.8)
Net Capital Assets $ 424.3 $ 397.0 $ 362.5
As indicated by figures in the table above, the majority of capital assets added during the current fiscal year were related to
the potable and reclaimed water systems. In addition, the majority of the cost of construction in progress is also related to
these water systems.
Additional information on the District’s capital assets can be found in Note 3 of the Notes to Financial Statements.
Long-term Debt. At June 30, 2007, the District had $74.2 million in outstanding debt which consisted of the following:
General Obligation Bonds $ 8.1
Certificates of Participation 65.1
Notes Payable 1.0
Total Long-term Debt $ 74.2
As mentioned earlier, this increase in long-term debt is due to District’s issuance of $42 million in Certificates of
Participation (COPS) during the current fiscal year. Additional information on the District’s long-term debt can be found
in Note 5 of the Notes to Financial Statements.
20
MANAGEMENT’S DISCUSSION AND ANALYSIS
Fiscal Year 2007-2008 Budget
Economic Factors
Growth in the San Diego area has slowed over the last year, and demand for housing is reflected in a similarly reduced
pace. The District currently provides water service to about 69% of its total projected population, serving approximately
190,000 people. This percentage should continue to increase as the District's service area continues to develop and grow.
The District is projected to deliver approximately 43,327 acre-feet of water to 48,645 customers during Fiscal Year 2007-
2008. Ultimately, the District is projected to serve approximately 277,000 people, creating an average daily demand of
56.3 million gallons per day (MGD).
Financial
The District has implemented a six-year rate study projection that forecasts minimum essential rate increases in order to
fund required growth and improvements in infrastructure, as well as to pass along cost increases from the City of San
Diego, the County of San Diego, and the San Diego County Water Authority. The expanding demand for water service
over the past few years continues to support the incremental costs associated with meeting this increase in demand. As a
result, the District has been able to implement strategic changes that will provide long-term benefits to the District, while
only increasing rates at modest levels.
Conversely, decreased levels of rainfall over the last two years have caused historic dry conditions and depleted water
reserves throughout the entire state. Water agencies throughout the San Diego County Water Authority area have
implemented voluntary water conservation programs, along with several incentive programs, to encourage customers to
make a variety of water-saving improvements with their appliances and landscape irrigation. If these drought conditions
continue through the upcoming fiscal year, there is a potential for both legal constraints on California’s water supply and
regulatory constraints upon all customer water usage, which would ultimately have a corresponding negative effect on the
District’s total water sales revenue. Mitigating the impact of this revenue decrease would be corresponding reductions in
expenses, to include the cost of water and the associated electricity required for pumping.
Management is unaware of any other conditions that could have a significant past, present, or future impact on the
District’s current financial position, net assets or operating results.
Contacting the District’s Financial Management
This financial report is designed to provide a general overview of the Otay Water District’s finances for the Board of
Directors, taxpayers, creditors, and other interested parties. Questions concerning any of the information provided in the
report or requests for additional information should be addressed to the District’s Finance Department, 2554 Sweetwater
Springs Blvd., Spring Valley, CA 91978-2004.
21
'Basic :f_inancia{ Statements
2007 2006
ASSETS
Current Assets:
Cash and Cash Equivalents (Note 2) 8,048,633$ 11,347,434$
Restricted Cash and Cash Equivalents (Note 2) 11,191,213 2,408,473
Investments (Note 2) 68,912,864 62,596,513
Restricted Investments (Note 2) 19,975,538
Accounts Receivable 8,675,458 6,808,999
Accrued Interest Receivable 1,559,081 818,798
Restricted Taxes and Availability Charges Receivable 443,854 318,090
Inventory 633,697 592,426
Prepaid Expenses and Other Current Assets 1,164,300 664,133
Total Current Assets 120,604,638 85,554,866
Non-current Assets:
Capital Assets, Net of Depreciation (Note 3) 424,260,968 396,987,584
Other Non-current Assets (Note 4) 1,490,515 838,990
Total Non-current Assets 425,751,483 397,826,574
Total Assets 546,356,121 483,381,440
LIABILITIES
Current Liabilities:
Current Maturities of Long-term Debt (Note 5) 1,519,048 1,529,848
Accounts Payable 10,930,658 11,617,499
Accrued Payroll Liabilities 2,270,958 2,348,853
Other Accrued Liabilities 1,597,012 683,350
Customer Deposits 2,622,646 2,489,101
Liabilities Payable From Restricted Assets:
Accounts Payable 4,492,364 7,633,220
Accrued Interest 882,888 413,442
Total Current Liabilities 24,315,574 26,715,313
Non-current Liabilities:
Liabilities Payable From Restricted Assets:
Prepaid Capacity Fees 890,473 733,915
Long-term Debt (Note 5)
General Obligation Bonds 8,045,029 8,396,755
Certificates of Participation 65,051,790 24,119,352
Notes Payable 1,031,730 1,350,778
Total Non-current Liabilities 75,019,022 34,600,800
Total Liabilities 99,334,596 61,316,113
NET ASSETS (NOTE 7)
Invested in Capital Assets, Net of Related Debt 374,667,591 361,590,845
Restricted 2,071,307 2,408,473
Unrestricted 70,282,627 58,066,009
Total Net Assets 447,021,525$ 422,065,327$
STATEMENT OF NET ASSETS
JUNE 30, 2007 AND 2006
The accompanying notes are an integral part of this statement.
25
2007 2006
OPERATING REVENUES
Water Sales 48,605,606$ 43,755,610$
Wastewater Revenue 2,604,431 2,331,094
Connection and Other Fees 2,040,444 1,774,384
Total Operating Revenues 53,250,481 47,861,088
OPERATING EXPENSES
Cost of Water Sales 33,994,841 32,043,395
Wastewater 1,508,672 1,899,957
Administrative and General 18,418,441 15,477,287
Depreciation 10,729,096 10,107,455
Total Operating Expenses 64,651,050 59,528,094
Operating Income (Loss) (11,400,569) (11,667,006)
NON-OPERATING REVENUES (EXPENSES)
Investment Income 4,416,342 3,188,645
Taxes and Assessments 4,151,956 2,779,635
Availability Charges 715,664 609,099
Gain on Sale of Capital Assets 1,817 142,922
Miscellaneous Revenues 1,809,802 1,835,710
Donations (80,000) (75,000)
Interest Expense (950,479) (959,225)
Miscellaneous Expenses (271,410) (279,506)
Total Non-operating Revenues (Expenses) 9,793,692 7,242,280
Income (Loss) Before Contributions (1,606,877) (4,424,726)
Capital Contributions 26,563,075 15,401,580
Change in Net Assets 24,956,198 10,976,854
Total Net Assets, Beginning 422,065,327 411,088,473
Total Net Assets, Ending 447,021,525$ 422,065,327$
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 2007 AND 2006
The accompanying notes are an integral part of this statement.
26
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Cash Received from Customers 49,477,123$ 46,628,097$
Cash from Other Operating Activities 2,040,444 1,774,384
Other Receipts 894,234 920,142
Cash Payments to Suppliers (41,462,779) (30,885,263)
Cash Payments to Employees (15,835,985) (15,530,526)
Other Payments (167,472) (186,793)
Net Cash Provided (Used) By Operating Activities (5,054,435) 2,720,041
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Receipts from Taxes and Assessments 4,026,192 2,783,983
Receipts from Property Rents and Leases 951,020 927,628
Net Amounts Paid for Acquisition and Maintenance of
Demonstration Garden (80,000) (75,000)
Net Cash Provided (Used) By Noncapital Financing Activities 4,897,212 3,636,611
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Proceeds from Capital Contributions 17,476,332 9,467,925
Proceeds from Sale of Capital Assets 1,817 142,922
Proceeds from Debt Related Taxes and Assessments 715,664 609,099
Proceeds from Long-Term Debt (Note 5) 40,989,797 0
Principal Payments on Long-Term Debt (Note 5) (1,529,848) (1,456,911)
Acquisition and Construction of Capital Assets (28,915,737) (38,680,673)
Interest Paid (481,033) (949,622)
Net Cash (Used) By Capital and Related Financing Activities 28,256,992 (30,867,260)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest Received on Investments 3,676,059 2,959,008
Proceeds from Sale and Maturities of Investments 44,708,111 52,780,016
Purchase of Investments (71,000,000) (42,000,000)
Net Cash Provided (Used) by Investing Activities (22,615,830) 13,739,024
Net Increase (Decrease) in Cash and Cash Equivalents 5,483,939 (10,771,584)
Cash and Cash Equivalents - Beginning of Year 13,755,907 24,527,491
Cash and Cash Equivalents - End of Year 19,239,846$ 13,755,907$
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2007 AND 2006
The accompanying notes are an integral part of this statement.
27
2007 2006
Reconciliation of operating income (loss) to net cash
provided (used) by operating activities:
Net Operating Income (Loss) (11,400,569)$ (11,667,006)$
Adjustments to Reconcile Operating Income to
Net Cash Provided (Used) by Operating Activities:
Depreciation 10,729,096 10,107,455
Miscellaneous Revenues 894,234 920,142
Miscellaneous Expenses (167,472) (186,793)
(Increase) Decrease in Accounts Receivable (1,866,459) 296,485
(Increase) Decrease in Inventory (41,271) 27,693
(Increase) Decrease in Prepaid Expenses and Other Current Assets (500,167) (322,447)
Increase (Decrease) in Accounts Payable (3,827,697) 2,883,852
Increase (Decrease) in Accrued Payroll and Related Expenses (77,895) 335,998
Increase (Decrease) in Other Accrued Liabilities 913,662 79,693
Increase (Decrease) in Customer Deposits 133,545 244,908
Increase (Decrease) in Prepaid Capacity Fees 156,558 61
Total Cash Provided (Used) By Operating Activities (5,054,435)$ 2,720,041$
SUPPLEMENTAL DISCLOSURES
Non-cash Investing and Financing Activities Consisted of the Following:
Contributed Capital for Water and Sewer System 8,812,611$ 24,494,557$
Change in Fair Value of Investments and Recognized Gains/Losses 223,829 354,270
Capital Contribution Resulting from Prepaid Capacity Fees 156,558 61
Amortization Related to Long-term Debt 103,938 92,713
Cash Paid for Interest Expense 1,478,461$ 1,410,957$
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2007 AND 2006
The accompanying notes are an integral part of this statement.
28
NOTE DESCRIPTION PAGE
1 Reporting Entity and Summary of Significant Accounting Policies..… 30
2 Cash and Investments…………………………………………..……... 32
3 Capital Assets…………………………………………………..……... 36
4 Other Non-current Assets…………………………………………….. 37
5 Long-Term Debt………………………………………………….…… 37
6 Segment Information………………………………………………..… 40
7 Net Assets…………………………………………………………….. 42
8 Defined Benefit Pension Plan…………………………………………. 42
9 Post Employment Benefits…………………………………………..... 44
10 Water Conservation Authority………………………………………... 44
11 Commitments and Contingencies…………………………………….. 45
12 Risk Management…………………………………………………….. 45
13 Interest Expense……………………………………………………..... 46
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
29
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Reporting Entity
Otay Water District (the “District”) is a public entity established in 1956 pursuant to the Municipal Water District Law of
1911 (Section 711 et. Seq. of the California Water Code) for the purpose of providing water and sewer services to the
properties in the District. The District is governed by a Board of Directors consisting of five directors elected by
geographical divisions based on District population for a four-year alternating term.
B) Measurement Focus, Basis of Accounting and Financial Statement Presentation
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.
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. 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. Revenues and expenses are recognized on the accrual basis. Revenues are recognized in
the accounting period in which they are earned and expenses are recognized in the period incurred.
Fund equity is displayed as three components: (1) Invested in capital assets, net of related debt, which reflects the cost of
capital assets less accumulated depreciation and less the outstanding principal of related debt not associated with unspent
bond proceeds; (2) Restricted, which reflects the carrying value of assets less related liabilities that are restricted by
outside covenants or by law; and (3) Unrestricted, which represents the remaining fund equity balance.
The District distinguishes operating revenues and expenses from those revenues and expenses that are non-operating.
Operating revenues are those revenues that are generated by water sales and wastewater services while operating
expenses pertain directly to the furnishing of those services. Non-operating revenues and expenses are those revenues
and expenses generated that are not directly associated with the normal business of supplying water and wastewater
treatment services.
The District recognizes revenues from water sales, wastewater revenues, and meter fees as they are earned. Taxes and
assessments are recognized as revenues based upon amounts reported to the District by the County of San Diego, net of
allowance for delinquencies of $49,317 and $35,343 at June 30, 2007 and 2006, respectively.
Additionally, capacity fee contributions received in an amount corresponding to expansion specific operating expenses
are offset against these expenses and included in Cost of Water Sales in the Statement of Revenues and Expenses and
Changes in Net Assets.
When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources
first, then unrestricted resources as they are needed.
The accounting policies of the District conform to generally accepted accounting principles (GAAP) as applicable to
governmental enterprise funds. In accordance with GASB Statement 20, the District has elected to follow all GASB
Pronouncements and apply all Financial Accounting Standards Board Statements and Interpretations issued on or before
November 30, 1989, with the exception of those that conflict with or contradict GASB Pronouncements.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
30
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
C) Statement of Cash Flows
For purposes of the Statement of Cash Flows, the District considers all highly liquid investments (including
restricted assets) with a maturity period, at purchase, of three months or less to be cash equivalents.
D) Investments
As a governmental entity other than an external investment pool in accordance with GASB 31, the District’s
investments are stated at fair value, which is determined using selected basis. Short-term investments are reported
at cost, which approximates fair value. Investments in government obligations are valued on over-the-counter bid
quotations available at year-end. Cash deposits are reported at carrying amount, which reasonably estimates fair
value. Investments in governmental investment pools are reported on the fair value per share, of the pool’s
underlying portfolio.
E) Inventory and Prepaids
Inventory consists primarily of materials used in the construction and maintenance of the water and sewer system and
is valued at weighted average cost. Both inventory and prepaids use the consumption method whereby they are
reported as an asset and expensed as they are consumed.
F) Capital Assets
Capital assets are recorded at cost, where historical records are available, and at an estimated historical cost where no
historical records exist. Infrastructure assets in excess of $20,000 and other Capital assets in excess of $10,000 are
capitalized if they have an expected useful life of two years or more. The 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 interest incurred
during the construction period. Repairs, maintenance, and minor replacements of property are charged to expense.
Donated assets are capitalized at their approximate fair market value on the date contributed.
The District capitalizes interest on construction projects up to the point in time that the project is substantially
completed. Capitalized interest is included in the cost of water system assets and is depreciated on the straight-line
basis over the estimated useful lives of such assets.
Depreciation is calculated using the straight-line method over the following estimated useful lives:
Water System 15-70 Years
Engineering Equipment 2-50 Years
Buildings 30-50 Years
Power Operated Equipment 5-10 Years
Transportation Equipment 2-4 Years
Other Equipment 2-10 Years
Reclaimed Water System 50-75 Years
Sewer System 25-50 Years
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
31
1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
G) Compensated Absences
In accordance with GASB Statement No. 16, a liability is recorded for unused vacation and sick leave balances since the
employees’ entitlement to these balances are attributable to services already rendered and it is probable that virtually all
of these balances will be liquidated by either paid time-off or payment upon termination or retirement.
H) Restricted Assets and Liabilities
Certain current liabilities have been classified as current liabilities payable from restricted assets as they will be
funded from restricted assets.
I) Allowance for Doubtful Accounts
The District charges doubtful accounts arising from water sales receivable to bad debt expense when it is probable that
the accounts will be uncollectible. Uncollectible accounts are determined by the allowance method based upon prior
experience and management’s assessment of the collectibility of existing specific accounts.
J) Use of Estimates
The financial statements have been prepared in accordance with accounting principles generally accepted in the United
States of America and necessarily include amounts based on estimates and assumptions by management.
K) Property Taxes
Tax levies are limited to 1% of full market value (at time of purchase) which results in a tax rate of $1.00 per $100
assessed valuation, under the provisions of Proposition 13. Tax rates for voter-approved indebtedness are excluded
from this limitation.
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 March 1. Taxes are levied on July 1 and
are payable in two equal installments on November 1 and February 1, and become delinquent after December 10 and
April 10, respectively.
L) Reclassifications
Certain reclassifications have been made to prior year amounts to conform to the current year presentation.
2) CASH AND INVESTMENTS
The primary goals of the District’s Investment Policy are to assure compliance with all Federal, State, and Local laws
governing the investment of funds under the control of the organization, protect the principal of investments entrusted, and
generate income under the parameters of such policies.
The District’s Investment Policy and State statues authorize the District to invest in obligations of the U.S. Treasury, agencies
and instrumentalities, prime commercial paper, repurchase agreements, and negotiable certificates of deposit. Funds may also
be invested in the State Treasurer’s Local Agency Investment Fund (LAIF) and the San Diego County Treasurer’s Pooled
Money Fund.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
32
2) CASH AND INVESTMENTS - Continued
Cash and Investments are classified in the accompanying financial statements as follows:
Statement of Net Assets:
Cash and Cash Equivalents $ 8,048,633
Investments 68,912,864
Restricted:
Cash and Cash Equivalents 11,191,213
Investments 19,975,538
Total Cash and Investments $ 108,128,248
Cash and investments consist of the following:
Cash on Hand $ 2,800
Deposits with Financial Institutions 1,125,589
Investments 106,999,859
Total Cash and Investments $108,128,248
Investments Authorized by the California Government Code and the District’s Investment Policy
The table below identifies the investment types that are authorized for the District by the California Government Code (or
the District’s Investment Policy, where more restrictive). The table also identifies certain provisions of the California
Government Code (or the District’s Investment Policy, where more restrictive) that address interest rate risk, credit risk,
and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are
governed by the provisions of debt agreements of the District, rather than the general provisions of the California
Government Code or the District’s Investment Policy.
Maximum Maximum
Authorized Maximum Percentage Investment
Investment Type Maturity Of Portfolio(1) In One Issuer
U.S. Treasury Obligations 5 years None None
Federal Agency Securities 5 years(2) None None
Certificates of Deposit 1 year 15% None
Bankers Acceptances 180 Days 15% None
Medium-Term Notes 5 years 15% None
Commercial Paper 270 days 15% 10%
Money Market Mutual Funds N/A 15% None
County Pooled Investment Funds N/A None None
Local Agency Investment Fund
(LAIF)
N/A None None
(1) Excluding amounts held by bond trustee that are not subject to California Government Code restrictions.
(2) No more than 30% of the portfolio shall exceed two years to maturity.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
33
2) CASH AND INVESTMENTS - Continued
Investments Authorized by Debt Agreements
Investment 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 rates risk is by purchasing a combination of shorter
term and longer term investments and by timing cash flows from maturities, so that a portion of the portfolio is maturing or
coming close to maturity evenly over time, as necessary, to provide the cash flow and liquidity needed for operations.
Information about the sensitivity of the fair values of the District’s investments (including investments held by the bond
trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the District’s
investments by maturity.
Remaining Maturity (in Months)
12 Months 13 to 24 25 to 60 More Than
Investment Type Or Less Months Months 60 Months
Federal Agency Securities $ 88,888,402 $ 42,957,962 $ 42,935,888 $ 2,994,552 $
Local Agency Investment Fund
(LAIF)
18,005,611
18,005,611
San Diego County Pool 105,846 105,846
Total $106,999,859 $ 61,069,419 $ 42,935,888 $ 2,994,552 $ 0
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment.
This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is
the minimum rating required by (where applicable) the California Government Code or the District’s Investment Policy, or
debt agreements, and the actual rating as of year end for each investment type.
Minimum Rating as of Year End
Legal Not
Investment Type Rating AAA Aa Rated
Federal Agency Securities $ 88,888,402 N/A $ 88,888,402 $ $
Local Agency Investment
Fund (LAIF)
18,005,611
N/A
18,005,611
San Diego County Pool 105,846 N/A 105,846
Total $ 106,999,859 $ 88,888,402 $ 0 $ 18,111,457
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
34
2) CASH AND INVESTMENTS - Continued
Concentration of Credit Risk
The investment policy of the District contains no limitation on the amount that can be invested in any one issuer beyond that
stipulated by the California Government Code, Sections 53600 through 53692. Investments in any one issuer (other than U.S.
Treasury securities, mutual funds, and external investment pools) that represent 5% or more of total District investments are as
follows:
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government
will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside
party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-
dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in
the possession of another party. The California Government Code and the Entity’s investment policy do not contain legal or
policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following
provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or
local government units by pledging securities in an undivided collateral pool held by a depository regulated under state law
(unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at
least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure
deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.
As of June 30, 2007, $823,206 of the District’s deposits with financial institutions in excess of federal depository insurance
limits were held in collateralized accounts. As of June 30, 2007, District investments in the following investment types were
held by the same broker-dealer (counter party) that was used by the District to buy the securities:
Investment Type Reported Amount
Federal Agency Securities $ 88,888,402
Local Agency Investment Fund (LAIF)
The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California
Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the
District’s investment in this pool is reported in the accompanying financial statements at amounts based upon District’s pro-
rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio).
The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an
amortized cost-basis.
The LAIF is a special fund of the California State Treasury through which local governments may pool investments. The
District may invest up to $40,000,000 in the fund. Investments in LAIF are highly liquid, as deposits can be converted to
cash within 24 hours without loss of interest. Investments with LAIF are secured by the full faith and credit of the State of
California. The yield of LAIF during the quarter ended June 30, 2007 was 5.23%. The carrying value and estimated market
value of the LAIF Pool at June 30, 2007 was $65,786,597,418 and $65,756,665,933, respectively. The District's share of the
Pool at June 30, 2007 was approximately 0.027 percent. Included in LAIF's investment portfolio are structured notes and
asset-backed securities totaling $774,000,000 and $1,501,103,000, respectively. LAIF's and the District's exposure to risk
(credit, market or legal) is not currently available. The LAIF has oversight by the Local Investment Advisory Board. The
LAIF Board consists of five members as designated by statute.
Issuer Investment Type Reported Amount
Federal Home Loan Bank Federal Agency Securities $ 51,942,188
Federal Home Loan Mortgage Corp Federal Agency Securities $ 30,952,777
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
35
2) CASH AND INVESTMENTS - Continued
San Diego County Pooled Fund
As permitted by its Investment Policy, the District has placed funds with the San Diego County Pooled Fund. The pool may
invest some of their portfolios in derivatives. Detailed information on derivative investments held by this pool is not readily
available.
Collateral for Deposits
All cash and Certificates of Deposit are entirely insured or collateralized.
Under the provisions of the California Government Code, California banks and savings and loan associations are required to
secure the District's deposits by pledging government securities as collateral. The market value of the pledged securities must
equal at least 110% of the District's deposits. California law also allows financial institutions to secure city deposits by
pledging first trust deed mortgage notes having a value of 150% of the District's total deposits.
The District may waive the 110% collateral requirement for deposits which are insured up to $100,000 by the FDIC.
3) CAPITAL ASSETS
The following is a summary of changes in Capital Assets for the year ended June 30, 2007:
Beginning Ending Balance Additions Deletions Balance Capital Assets, Not Depreciated Land $ 12,494,062 $ 477,417 $ $ 12,971,479 Construction in Progress 58,869,241 31,629,969 (50,199,155) 40,300,055 Total Capital Assets Not Depreciated 71,363,303 32,107,386 (50,199,155) 53,271,534 Capital Assets, Being Depreciated Infrastructure 419,795,999 48,055,106 (48,084) 467,803,021 Field Equipment 9,202,543 164,906 (8,587) 9,358,862 Buildings 17,469,999 137,656 17,607,655 Transportation Equipment 2,934,069 254,844 (132,205) 3,056,708 Communication Equipment 520,540 78,912 599,452 Office Equipment 8,464,962 7,415,384 (93,033) 15,787,313 Total Capital Assets Being Depreciated 458,388,112 56,106,808 (281,909) 514,213,011 Less Accumulated Depreciation: Infrastructure 110,157,652 9,210,199 (40,384) 119,327,467 Field Equipment 8,368,755 216,424 (8,004) 8,577,175 Buildings 4,493,308 571,127 5,064,435 Transportation Equipment 2,557,207 187,812 (130,135) 2,614,884 Communication Equipment 195,470 69,649 265,119 Office Equipment 6,991,439 473,885 (90,827) 7,374,497 Total Accumulated Depreciation 132,763,831 10,729,096 (269,350) 143,223,577 Total Capital Assets Being Depreciated, Net 325,624,281 45,377,712 (12,559) 370,989,434 Total Capital Assets, Net $ 396,987,584 $ 77,485,098 $ (50,211,714) $ 424,260,968
Depreciation expense for the year ended June 30, 2007 and 2006 was $10,729,096 and $10,107,455, respectively.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
36
4) OTHER NON-CURRENT ASSETS
Contracts receivable totaled $55,759 and $92,375, net of no allowance as of June 30, 2007 and 2006, respectively.
Deferred bond issue costs totaled $1,254,821 and $555,550, net of accumulated amortization of $357,952 and $326,552 as of
June 30, 2007 and 2006, respectively. The 1993 COPS had refunding transactions net of accumulated amortization of
$179,935 for June 30, 2007 and $191,065 for June 30, 2006. The costs are amortized on the straight-line method based on the
estimated term of the related bond debt. Amortization expense of $31,400 for the years ended June 30, 2007 and 2006 is
included with miscellaneous expense.
5) LONG-TERM DEBT
Long-term liabilities for the year ended June 30, 2007 are as follows:
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
General Obligation Bonds:
Improvement District No. 27 $ 9,590,000 $ $ 380,000 $ 9,210,000 $ 400,000
Unamortized Bond Discount (118,351) (7,398) (110,953)
Deferred Amount of Funding (694,894) (40,876) (654,018)
Net General Obligation Bonds 8,776,755 331,726 8,445,029 400,000
Certificates of Participation:
1996 Certificates of Participation 13,100,000 300,000 12,800,000 300,000
2004 Certificates of Participation 11,825,000 490,000 11,335,000 500,000
2007 Certificates of Participation 42,000,000 42,000,000
Unamortized Discount (15,648) (745) (14,903)
2007 COPS Unamortized Discount (271,322) (3,015) (268,307)
Net Certificates of Participation 24,909,352 41,728,678 786,240 65,851,790 800,000
Notes Payable
State Water Resource Control
Board
1,659,037
308,259
1,350,778
319,048
Capital Leases
Vactor 51,589 51,589 0
Total Long-Term Liabilities $ 35,396,733 $ 41,728,678 $ 1,477,814 $ 75,647,597 $ 1,519,048
General Obligation Bonds
In June 1998, the District issued $11,835,000 of General Obligation Refunding Bonds. The proceeds of this issue, together
with other lawfully available monies, were to be used to establish an irrevocable escrow to advance refund and defease in
their entirety the District’s previous outstanding General Obligation Bond issue. These bonds are general obligations of
Improvement District No. 27 (ID 27) of the District. The Board of Directors has the power and is obligated to levy annual ad
valorem taxes without limitation, as to rate or amount for payment of the bonds and the interest upon all property which is
within ID 27 and subject to taxation. The General Obligation Bonds are payable from District-wide tax revenues. The Board
may utilize other sources for servicing the bond debt and interest.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
37
5) LONG-TERM DEBT - Continued
The refunding resulted in a deferred amount of $1,021,903, which is being amortized over the remaining life of the refunded
debt. Amortization for the years ended June 30, 2007 and 2006 was $40,876 for each year and is included in miscellaneous
non-operating expenses. As of June 30, 2007 and 2006, the amortized deferred amount of refunding is $654,018, and
$694,894, respectively.
The 1998 General Obligation Bonds have interest rates from 4.5% to 5% with maturities through Fiscal Year 2023.
Future debt service requirements for the bonds are as follows:
For the Year
Ended June 30, Principal Interest
2008 $ 400,000 $ 440,385
2009 415,000 422,047
2010 435,000 402,705
2011 455,000 382,235
2012 475,000 360,607
2013-2017 2,735,000 1,426,238
2018-2022 3,490,000 654,750
2023 805,000 20,125
$ 9,210,000 $ 4,109,092
The following General Obligation Bonds have been authorized by the Board of Directors, but were unissued as of June 30,
2007:
Improvement Construction
Date Authorized District (ID) Purpose Bond Amount
December 30, 1960 5 Water System $ 605,000
December 20, 1960 6 Sewer System 705,000
August 23, 1960 1 - 3 Sewer System 405,000
August 23, 1960 1 - 4 Water System 75,000
March 18, 1970 U - 18 Sewer System 2,700,000
April 19, 1971 U - 19 Water System 1,000,000
May 17. 1971 U - 20 Water System 13,000,000
June 5, 1972 U - 22 Water System 6,000,000
May 1, 1978 U - 25 Water System 5,050,000
November 1, 1989 U - 27 Water System 88,500,000
Certificates of Participation (COPS)
In June 1996, COPS with face value of $15,400,000 were sold by the Otay Service Corporation to finance the cost of design,
acquisition, and construction of certain capital improvements. An installment purchase agreement between the District, as
Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principal and interest associated with the
COPS. The installment payments are to be paid from taxes and “net revenues,” as described in the installment agreement.
The certificates bear interest at a variable weekly rate not to exceed 12%. The interest rate at June 30, 2007 was 3.75%. The
installment payments are to be paid annually at $350,000 to $900,000 from September 1, 1996 through September 1, 2026.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
38
5) LONG-TERM DEBT - Continued
Certificates of Participation (COPS) - Continued
In July 2004, Refunding Certificates of Participation (COPS) with a face value of $12,270,000 were sold by the Otay Service
Corporation to advance refund $11,680,000 of outstanding 1993 COPS. An installment agreement between the District, as
Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principle and interest associated with the
COPS. The installment payments are to be paid from taxes and “net revenues,” as described in the installment agreement.
The certificates are due in annual installments of $445,000 to $895,000 from September 1, 2005 through September 1, 2023;
bearing interest at 3% to 4.625%.
In February 2007, Revenue Certificates of participation (COPS) with face value of $42,000,000 were sold by the Otay Service
Corporation to improve the District’s water storage system and distribution facilities. An installment purchase agreement
between the District, as a Buyer, and the Corporation, as Seller, was executed for the scheduled payment of principle and
interest associated with the COPS. The installment payments are to be paid from taxes and “net revenues,” as described in the
installment agreement. The certificates are due in annual installments of $785,000 to $2,445,000 from September 1, 2007
through September 1, 2036; bearing interest at 3.7% to 4.47%.
There is no aggregate reserve requirement for the COPS. Future debt service requirements for the certificates are as follows:
For the Year 1996 COPS 2004 COPS 2007 COPS
Ended June 30, Principal Interest* Principal Interest Principal Interest
2008 $ 300,000 $ 468,750 $ 500,000 $ 433,534 $ $ 836,424
2009 400,000 453,750 515,000 418,309 785,000 1,730,532
2010 400,000 438,750 530,000 402,634 815,000 1,701,487
2011 400,000 423,750 545,000 386,236 850,000 1,671,333
2012 400,000 408,750 565,000 368,607 885,000 1,639,458
2013-2017 2,700,000 1,751,250 3,130,000 1,522,672 4,980,000 7,672,475
2018-2022 3,500,000 1,158,750 3,795,000 828,394 6,020,000 6,647,564
2023-2027 4,700,000 378,750 1,755,000 81,441 7,360,000 5,334,096
2028-2032 9,070,000 3,646,594
2033-2037 11,235,000 1,517,031
$ 12,800,000 $ 5,482,500 $ 11,335,000 $ 4,441,827 $ 42,000,000 $ 32,396,994
* Variable Rate - Interest reflected at June 30, 2007 at a rate of 3.75%.
Note Payable
In December 1990, the District entered into a 3.5% note payable to the State Water Resources Control Board. This note is
unsecured and payable in annual installments of $366,325 including principal and interest from 1994 through 2010. The total
amount outstanding at June 30, 2007 and aggregate maturities of the note for the fiscal years subsequent to June 30, 2007, are
as follows:
For the Year Ended
June 30, Principal Interest
2008 $ 319,048 $ 47,277
2009 330,214 36,111
2010 341,772 24,553
2011 359,744 12,591
$ 1,350,778 $ 120,532
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
39
6) SEGMENT INFORMATION
The District issued Certificates of Participation to finance certain capital improvements. Both the water and sewer
departments are accounted for in a single fund. The sewer department operates the District’s sewage treatment plant,
sewage pumping stations, and collection systems, while the water department accounts for all other services. However,
investors in the Certificates of Participation rely solely on the revenues generated by the individual activities for
repayment.
Summary financial information for the water and sewer departments is presented below.
Condensed Statement of Net Assets
Water Sewer Total
Assets:
Current Assets $ 117,995,148 $ 94,329 $ 118,089,477
Current Restricted Assets 2,515,161 2,515,161
Capital Assets 423,343,737 917,231 424,260,968
Other Non-current Assets 1,490,515 1,490,515
Total Assets 545,344,561 1,011,560 546,356,121
Liabilities:
Current Liabilities 18,689,465 250,857 18,940,322
Current Liabilities Payable from
Restricted Assets
5,323,479
51,773
5,375,252
Non-current Liabilities Payable
from Restricted Assets
882,973
7,500
890,473
Non-current Liabilities 74,128,549 74,128,549
Total Liabilities 99,024,466 310,130 99,334,596
Net Assets:
Invested in Capital Assets, Net of
Related Debt
373,750,360
917,231
374,667,591
Restricted 2,071,307 2,071,307
Unrestricted 70,498,428 (215,801) 70,282,627
Total Net Assets $ 446,320,095 $ 701,430 $ 447,021,525
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
40
6) SEGMENT INFORMATION - Continued
Condensed Statement of Cash Flows
Water Sewer Total
Net Cash Provided (Used) by:
Operating Activities (6,155,309) 1,100,874 (5,054,435)
Non-capital Financing Activities 5,949,935 (1,052,723) 4,897,212
Capital and Related Financing Activities 28,372,351 (115,359) 28,256,992
Investing Activities (22,683,038) 67,208 (22,615,830)
Net Increase (Decrease) 5,483,939 0 5,483,939
Beginning Cash and Cash Equivalents 13,755,907 0 13,755,907
Ending Cash and Cash Equivalents $ 19,239,846 $ 0 $ 19,239,846
Condensed Statement of Revenues, Expenses, and Changes in Net Assets
Water Sewer Total
Operating Revenues $ 50,646,050 $ 2,604,431 $ 53,250,481
Depreciation (10,729,096) (10,729,096)
Other Operating Expenses (52,413,282) (1,508,672) (53,921,954)
Operating Income (12,496,328) 1,095,759 (11,400,569)
Non-operating Revenues (Expenses):
Investment Income 4,349,134 67,208 4,416,342
Taxes and Assessments 3,794,489 357,467 4,151,956
Availability Charges 662,674 52,990 715,664
Gain on Sale of Capital Assets 1,817 1,817
Other Non-operating Revenues 1,809,802 1,809,802
Donations (80,000) (80,000)
Interest Expense (898,706) (51,773) (950,479)
Other Non-operating Expenses (271,410) (271,410)
Transfers 1,358,441 (1,358,441) 0
Capital Contributions 26,563,075 26,563,075
Total Non-operating Revenues (Expenses) 37,289,316 (932,549) 36,356,767
Change in Net Assets 24,792,988 163,210 24,956,198
Total Net Assets, Beginning 421,527,107 538,220 422,065,327
Total Net Assets, Ending $ 446,320,095 $ 701,430 $ 447,021,525
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
41
7) NET ASSETS
A summary of changes in net assets for the year ended June 30, 2007 is as follows:
Investment in
Capital Assets Restricted Unrestricted
Description (Net of Related Debt) Net Assets Net Assets Total
Beginning of Year $ 361,590,845 $ 2,408,473 $ 58,066,009 $ 422,065,327
Income (Loss) Before Contributions (10,729,096)* 3,917,141 5,205,078 (1,606,877)
Capital Contributions
Construction of Water and Sewer Systems 9,086,743 9,086,743
Capacity Fees and Capital Contributions 15,356,447 15,356,447
Betterment Fees
Annexation Fees 2,119,885 2,119,885
Change in Related Capital Debt/(Transfers) (14,467,966) 15,945,780 (1,477,814) 0
Acquisition and Construction/(Transfers) 29,187,065 (35,556,534) 6,369,469 0
End of Year $ 374,667,591 $ 2,071,307 $ 70,282,627 $ 447,021,525
*Depreciation Expense
Designated Net Assets
In addition to the restricted net assets, unrestricted net assets have been designated by the Board of Directors for the following
purposes as of June 30, 2007 and 2006:
2007 2006
Replacement Reserve $ 31,779,960 $ 22,876,118
Insurance Reserve 16,893,128 16,428,945
Expansion Reserve 17,809,405 5,772,470
Total $ 66,482,493 $ 45,077,533
8) DEFINED BENEFIT PENSION PLAN
Plan Description
The District’s defined plan, (the “Plan”), provides retirement and disability benefits, annual cost-of-living adjustments, and
death benefits to plan members and beneficiaries. The Plan is part of the Public Agency portion of the California Public
Employees’ Retirement System (CalPERS), an agent multiple-employer plan administered by CalPERS, which acts as a
common investment and administrative agent for participating public employers within the State of California. A menu of
benefit provisions as well as other requirements is established by State statute within the Public Employees’ Retirement Law.
The Plan selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits
through District resolution. CalPERS issues a separate Comprehensive Annual Financial Report. Copies of the CalPERS’
annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
42
8) DEFINED BENEFIT PENSION PLAN - Continued
Funding Policy
Active members in the Plan are required to contribute 8% of their annual covered salary. The District has elected to
contribute 7% on behalf of its employees. The District is required to contribute the actuarially determined remaining amounts
necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the
CalPERS Board of Administration. The required employer contribution rate for the fiscal year ended June 30, 2007 was
18.864%. The contribution requirements of the Plan members are established by State statute and the employer contribution
rate is established and may be amended by the CalPERS.
Annual Pension Costs
For the fiscal year ended June 30, 2007, the District’s annual pension cost and actual contribution was $1,925,758. The
required contribution for the fiscal year ended June 30, 2007, was determined as part of the June 30, 2004 actuarial valuation.
The following is a summary of the actuarial assumptions and methods:
Valuation Date June 30, 2004
Actuarial Cost Method Entry Age Actuarial Cost Method
Amortization Method Level Percent of Payroll
Average Remaining Period 22 Years as of the Valuation Date
Asset Valuation Method 15 Year Smoothed Market
Actuarial Assumptions:
Investment Rate of Return 7.75% (Net of Administrative Expenses)
Projected Salary Increase 3.25% to 14.45% Depending on Age, Service, and Type of Employment
Inflation 3.00%
Payroll Growth 3.25%
Individual Salary Growth A merit scale varying by duration of employment coupled with an assumed
annual inflation component of 3.00% and an annual production growth of 0.25%.
Initial unfunded liabilities are amortized over a closed period that depends on the Plan’s date of entry into CalPERS.
Subsequent Plan amendments are amortized as a level percentage of pay over a closed 20-year period. Gains and losses that
occur in the operation of the plan are amortized over a rolling period, which results in an amortization of 10% of unamortized
gains and losses each year. If the plan’s accrued liability exceeds the actuarial value of the plan assets, then the amortization
payment of the total unfunded liability may be lower than the payment calculated over a 30-year amortization period.
THREE-YEAR TREND INFORMATION FOR PERS
Fiscal Annual Pension Percentage of Net Pension
Year Cost (APC) APC Contributed Obligation
6/30/07 1,925,758 100% 0
6/30/06 2,120,529 100% 0
6/30/05 1,684,657 100% 0
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
43
9) POST EMPLOYMENT BENEFITS
In addition to the pension benefits described in Note 8, it is the District’s practice and policy to provide certain life insurance
and health care benefits for eligible retired employees, directors and eligible dependents. These benefits vary based on the
hire date of the employee. All retired employees receive life insurance benefits provided by the District ($3,000 to age 70 for
employees and $1,000 to age 70 for spouse).
For retiring employees hired prior to January 1, 1981, and who are age 55 or over with five years of continuous service at
retirement, the District provides dental and health care benefits and prescription drug coverage.
For retiring employees hired on or after January 1, 1981 and before July 1, 1993, the District provides health care benefits and
prescription drug coverage if, at retirement, the employees have neither:
Attained age 60 with age plus years of credited service equal to or greater than 70 (with dental benefits provided) or,
Attained age 55 but not age 60 with age plus years of credited service equal to or greater than 75 (without dental benefits
provided).
For retired directors who commenced office prior to January 1, 1995, and have attained age 60 with at least twelve years
service as a director, the District provides dental and health care benefits and prescription drug coverage.
Expenses for these post retirement benefits are recognized as insurance premiums and are paid as retirees report claims under
the health insurance program described in Note 12. Post retirement benefits expense of $1,080,334 and $641,464, were
recognized for 65 and 59 eligible retirees, for the years ended June 30, 2007 and 2006, respectively.
10) WATER CONSERVATION AUTHORITY
In 1999 the District formed the Water Conservation Authority (the “Authority”), a Joint Powers Authority, with other local
entities to construct, maintain and operate a xeriscape demonstration garden in the furtherance of water conservation. The
authority is a non-profit public charity organization and is exempt from income taxes. During the years ended June 30, 2007
and 2006, the District contributed $80,000 and $75,000, respectively, for the development, construction and operation costs of
the xeriscape demonstration garden.
A summary of the Authority’s June 30, 2006 audited financial statement is as follows (latest report available):
Assets $ 2,525,619
Liabilities 78,812
Revenues, Gains and Other Support 649,142
Changes in Net Assets (184,414)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
44
11) COMMITMENTS AND CONTINGENCIES
Construction Commitments
The District had committed to capital projects under construction with an estimated cost to complete of $3,171,073 at June 30,
2007.
Litigation
Certain claims, suits and complaints arising in the ordinary course of operation have been filed or are pending against the
District. In the opinion of the staff and counsel, all such matters are adequately covered by insurance, or if not so covered, are
without merit or are of such kind, or involved such amounts, as would not have significant effect on the financial position or
results of operations of the District if disposed of unfavorably.
Refundable Terminal Storage Fees
The District has entered into an agreement with several developers whereby the developers prepaid the terminal storage fee in
order to provide the District with the funds necessary to build additional storage capacity. The agreement further allows the
developers to relinquish all or a portion of such water storage capacity. If the District grants to another property owner the
relinquished storage capacity, the District shall refund to the applicable developer $746 per equivalent dwelling unit (EDU).
There were 17,867 EDUs that were subject to this agreement. At June 30, 2006, 1,750 EDUs had been relinquished and
refunded, 13,412 EDUs had been connected, and 2,705 EDUs have neither been relinquished nor connected. At June 30,
2007, 1,750 EDUs had been relinquished and refunded, 13,424 EDUs had been connected, and 2,693 EDUs have neither
been relinquished nor connected.
Developer Agreements
The District has entered into various Developer Agreements with developers towards the expansion of District facilities. The
developers agree to make certain improvements and after the completion of the projects the District agrees to reimburse such
improvements with a maximum reimbursement amount for each developer. Contractually, the District does not incur a
liability for the work until the work is accepted by the District. As of June 30, 2007, none of the 18 outstanding developer
agreements had been accepted, however it is anticipated that the District will be liable for an amount not to exceed $1,987,941
at the point of acceptance. Accordingly, the District did not accrue a liability as of year end.
12) RISK MANAGEMENT
General Liability
The District is exposed to various risks of loss related to torts, theft, damage and destruction of assets, errors and omissions,
and natural disasters. The District pays an annual premium for commercial insurance covering general liability, excess
liability, property, automobile, public employee dishonesty, and various other claims. Coverage limits range up to $100
million. Accordingly, the District retains no risk of loss.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
45
12) RISK MANAGEMENT - Continued
Workers’ Compensation
The District is a member of the Special District Risk Management Authority (SDRMA). SDRMA is a not-for-profit public
agency formed under California Government Code Sections 6500 et. Seq. SDRMA is governed by a board composed of
members from participating agencies. The mission of SDRMA is to provide renewable, efficiently priced risk financing and
risk management services through a financially sound pool. The District is insured up to $300,000,000 for statutory workers’
compensation and $5,000,000 for employers’ liability coverage with no deductible. Separate financial statements of
SDRMA may be obtained at Special District Risk Management Authority, 1112 “I” Street, Suite 300, Sacramento, CA
95814.
Health Insurance
The District maintains a self-insurance program covering all of its employees, retirees, and other dependents. Health claims
are processed and administered through a health insurance administrator and paid by the District upon presentation. The
District has obtained a stop-loss insurance policy to cover individuals with claims exceeding $45,000. The District has
estimated accrued claims to be $474,413 and $422,327 at June 30, 2007 and 2006, respectively. Accrued health costs are
included in other accrued liabilities. Changes in the balances of claims liabilities during the past two years are as follows:
Year Ended Year Ended
June 30, 2007 June 30, 2006
Unpaid Claims, Beginning of Fiscal Year $ 422,327 $ 299,700
Incurred Claims (Including IBNRS) 1,399,661 1,417,561
Claim Payments (1,347,575) (1,294,934)
Unpaid Claims, End of Fiscal Year $ 474,413 $ 422,327
Adequacy of Protection
During the past three fiscal (claims) years none of the above programs of protection have had settlements or judgments that
exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability coverage from
coverage in the prior year.
13) INTEREST EXPENSE
Interest expense for the years ended June 30, 2007 and 2006, is as follows:
2007 2006
Amount Expensed $ 950,479 $ 959,225
Amount Capitalized as a Cost of
Construction Projects 997,428 460,535
Interest Paid $ 1,947,907 $ 1,419,760
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2007 AND 2006
46
~ uired Su '.E.{ementary_ Intprmation
Schedule of Funding Progress for PERS
Actuarial
Accrued UAAL as a
Actuarial Actuarial Liability Unfunded Percentage of
Valuation Value of (AAL) Entry AAL Funded Covered Covered
Date Assets Age (UAAL) Ratio Payroll Payroll
(A) (B) (B - A) (A/B) (C) [(B-A)/C]
6/30/06
Miscellaneous $ 40,321,483 $ 54,228,041 $ 13,906,558 74.4% $ 10,470,766 132.8%
6/30/05
Miscellaneous $ 36,029,595 $ 50,249,943 $ 14,220,348 71.7% $ 10,005,158 142.1%
6/30/04
Miscellaneous $ 31,591,156 $ 45,156,690 $ 13,565,534 70.0% $ 9,764,596 138.9%
REQUIRED SUPPLEMENTARY INFORMATION
YEARS ENDED JUNE 30, 2007 AND 2006
49
STATISTICAL SCHEDULES
This part of Otay Water District’s comprehensive annual financial report presents detailed information
as a context for understanding what the information in the financial statements, note disclosures, and
required supplementary information says about the District’s overall financial health.
CCOONNTTEENNTTSS PPAAGGEE
FFIINNAANNCCIIAALL TTRREENNDDSS 5522
These schedules contain trend information to help the reader understand how the
District’s financial performance and well-being have changed over time
RREEVVEENNUUEE CCAAPPAACCIITTYY 5588
These schedules contain information to help the reader assess the factors affecting the
District’s ability to generate its water, reclaimed, and sewer sales as well as property
and sales taxes.
DDEEBBTT 6655
These schedules present information to help the reader assess the affordability of the
District’s current levels of outstanding debt and the district’s ability to issue additional
debt in the future
DDEEMMOOGGRRAAPPHHIICC AANNDD EECCOONNOOMMIICC IINNFFOORRMMAATTIIOONN 6699
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the District’s financial activities take place
and to help make comparisons over time and with other governments
OOPPEERRAATTIINNGG IINNFFOORRMMAATTIIOONN 771
These schedules contain information about the District’s operation and resources to
help the reader understand how the District’s financial information relates to the
services the District provides and the activities it performs
SSOOUURRCCEESS
Unless otherwise noted, the information in these schedules is derived from the comprehensive
annual financial reports of the relevant year. The District implemented GASB Statement 34
in 2001; schedules presenting government-wide information include information beginning in
that year.
51
Invested in
Fiscal Capital Assets Total
Year Net of Related Debt Restricted Unrestricted Net Assets
2007 374,667,591$ 2,071,307$ 70,282,627$ 447,021,525$
2006 361,590,845 2,408,473 58,066,009 422,065,327
2005 325,676,089 16,188,364 69,224,020 411,088,473
2004 291,863,666 23,853,441 67,244,139 382,961,246
2003 269,579,907 40,945,837 49,828,535 360,354,279
2002 245,290,752 46,866,439 45,580,508 337,737,699
2001 (1) 237,230,807 42,923,480 41,854,311 322,008,598
(1) As recommended by GASB 44, this schedule provides data retroactive to the year GASB 34 was implemented.
The District implemented GASB 34 in Fiscal Year 2002 and presented comparative data for Fiscal Year 2001.
Accordingly, the last seven fiscal years are presented.
Source: Otay Water District
NET ASSETS BY COMPONENT
LAST TEN FISCAL YEARS
$300,000,000
$320,000,000
$340,000,000
$360,000,000
$380,000,000
$400,000,000
$420,000,000
$440,000,000
2001 2002 2003 2004 2005 2006 2007
Fiscal Year
TOTAL NET ASSETS
52
Total
Non-Operating Income (Loss) Change
Fiscal Operating Operating Operating Revenues/ Before Capital Capital in Net
Year Revenues Expenses Income (Expenses) Contributions Contributions Assets
2007 53,250,481$ 64,651,050$ (11,400,569)$ 9,793,692$ (1,606,877)$ 26,563,075$ 24,956,198$
2006 47,861,088 59,528,094 (11,667,006) 7,242,280 (4,424,726) 15,401,580 10,976,854
2005 43,335,915 56,449,475 (13,113,560) 6,271,482 (6,842,078) 34,969,305 28,127,227
2004 41,539,293 51,516,096 (9,976,803) 3,484,492 (6,492,311) 29,099,278 22,606,967
2003 36,961,980 46,143,486 (9,181,506) 4,517,049 (4,664,457) 22,616,580 17,952,123
2002 37,312,385 43,509,038 (6,196,653) 6,193,303 (3,350) 15,732,451 15,729,101
2001 (1) 22,598,438 40,203,049 (17,604,611) 10,526,110 (7,078,501) 30,209,604 23,131,103
(1) As recommended by GASB 44, this schedule provides data retroactive to the year GASB 34 was implemented.
The District implemented GASB 34 in Fiscal Year 2002 and presented comparative data for Fiscal Year 2001.
Accordingly, the last seven fiscal years are presented.
Source: Otay Water District
CHANGES IN NET ASSETS
LAST TEN FISCAL YEARS
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
2001 2002 2003 2004 2005 2006 2007
Fiscal Year
CHANGES IN NET ASSETS
53
Fiscal Wastewater Connection and Percent
Year Water Sales Revenue Other Fees Total Change
2007 48,605,606$ 2,604,431$ 2,040,444$ 53,250,481$ 11.3%
2006 43,755,610 2,331,094 1,774,384 47,861,088 10.4%
2005 39,348,056 2,018,596 1,969,263 43,335,915 4.3%
2004 39,044,712 1,774,366 720,215 41,539,293 12.4%
2003 34,621,890 1,648,227 691,863 36,961,980 -0.9%
2002 34,980,289 2,031,855 300,241 37,312,385 65.1%
2001 20,645,462 (1) 1,578,581 374,395 22,598,437 -31.5%
2000 30,928,092 1,742,537 333,389 33,004,018 24.2%
1999 24,732,564 1,544,975 293,908 26,571,447 13.6%
1998 21,551,988 1,679,145 161,022 23,392,155 -11.1%
(1) During the year ended June 30, 2001, the District's Board authorized three separate potable water rebates totaling
$9,700,089. The rebates were accounted for as a reduction of Water Sales.
Source: Otay Water District
OPERATING REVENUES BY SOURCE
LAST TEN FISCAL YEARS
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
TOTAL OPERATING REVENUES
54
Administrative Percent
Year Water Sales Wastewater and General Depreciation Total Change
2007 33,994,841$ 1,508,672$ 18,418,441$ 10,729,096$ 64,651,050$ 8.6%
2006 32,043,395 1,899,957 15,477,287 10,107,455 59,528,094 5.5%
2005 30,127,087 2,050,643 13,747,611 10,524,134 56,449,475 9.6%
2004 27,899,376 2,446,603 11,081,599 10,088,518 51,516,096 11.6%
2003 24,477,487 2,548,881 9,310,381 9,806,737 46,143,486 6.1%
2002 23,070,355 2,404,720 8,388,045 9,645,918 43,509,038 8.2%
2001 20,998,534 2,447,034 8,014,245 8,743,236 40,203,049 9.5%
2000 19,416,956 1,833,775 7,444,505 8,023,280 36,718,516 11.5%
1999 16,730,248 1,519,670 6,466,836 8,225,750 32,942,504 14.0%
1998 14,658,041 1,488,123 5,737,077 7,007,965 28,891,206 1.6%
Source: Otay Water District
OPERATING EXPENSES BY FUNCTION
LAST TEN FISCAL YEARS
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
OPERATING EXPENSES
Cost of Water Sales Wastewater Administrative and General Depreciation
55
Fiscal Investment Taxes and Availability Percent
Year Income Assessments Charges Miscellaneous Total Change
2007 4,416,342$ 4,151,956$ 715,664$ 1,811,619$ 11,095,581$ 29.7%
2006 3,188,645 2,779,635 609,099 1,978,632 8,556,011 4.1%
2005 2,052,292 2,326,526 556,590 3,285,128 (1) 8,220,536 15.5%
2004 1,097,449 3,071,685 1,132,278 1,816,967 7,118,379 -10.8%
2003 2,578,231 2,600,411 1,069,750 1,731,384 7,979,776 -12.4%
2002 4,466,383 2,381,170 1,052,222 1,207,920 9,107,695 -31.8%
2001 7,606,185 3,054,917 1,116,084 1,568,874 13,346,060 24.7%
2000 5,088,516 3,164,910 949,612 1,499,818 10,702,856 5.6%
1999 5,142,904 2,523,746 1,084,910 1,387,088 10,138,648 -15.7%
1998 6,462,771 2,795,952 1,284,987 1,476,786 12,020,496 8.1%
(1) The District sold capital assets during Fiscal Year 2005 which resulted in a gain of $2,196,655.
Source: Otay Water District
NON-OPERATING REVENUES BY SOURCE
LAST TEN FISCAL YEARS
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
TOTAL NON-OPERATING REVENUES
56
Fiscal Interest Percent
Year Donations (1)Expense Miscellaneous Total Change
2007 80,000$ 950,479$ 271,410$ 1,301,889$ -0.9%
2006 75,000 959,225 279,506 1,313,731 -32.6%
2005 61,411 1,327,844 559,799 1,949,054 -46.4%
2004 59,220 1,252,307 2,322,360 3,633,887 4.9%
2003 68,756 947,099 2,446,872 3,462,727 18.8%
2002 131,225 1,503,063 1,280,104 2,914,392 3.3%
2001 145,500 1,543,336 1,131,114 2,819,950 -6.8%
2000 184,507 1,540,592 1,301,961 3,027,060 -31.0%
1999 1,602,883 1,809,747 974,558 4,387,188 53.9%
1998 - 1,952,742 897,011 2,849,753 -11.0%
(1) Donations are contributions to the Water Conservation Authority formed in 1999. See Note 10 in the Notes to Financial
Statements for more information.
Source: Otay Water District
NON-OPERATING EXPENSES BY FUNCTION
LAST TEN FISCAL YEARS
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
NON-OPERATING EXPENSES
Miscellaneous Interest Expense Donations
57
Fiscal Percent
Year Secured Unsecured Total Change
2007 22,166,251,649$ 518,441,943$ 22,684,693,592$ 15.94%
2006 19,204,029,184 361,636,280 19,565,665,464 19.13%
2005 16,121,465,817 301,937,884 16,423,403,701 16.23%
2004 13,833,852,366 296,691,701 14,130,544,067 16.50%
2003 11,786,410,218 343,253,933 12,129,664,151 15.63%
2002 10,239,985,732 249,933,698 10,489,919,430 16.67%
2001 8,767,643,482 223,676,433 8,991,319,915 9.33%
2000 7,809,527,552 414,404,800 8,223,932,352 15.61%
1999 6,953,623,384 159,752,464 7,113,375,848 7.51%
1998 6,480,364,157 136,236,552 6,616,600,709 1.19%
Source: County of San Diego Auditor and Controller
ASSESSED VALUATION OF TAXABLE PROPERTY WITHIN THE DISTRICT
LAST TEN FISCAL YEARS
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
In
T
h
o
u
s
a
n
d
s
.
.
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
ASSESSED VALUATION OF PROPERTY
58
Fiscal
Year Purchases Sales Production Purchases Sales
2007 18,255,735 16,059,464 550,206 284,499 (2) 1,920,287
2006 17,972,146 14,723,988 537,400 - 1,722,057
2005 16,412,711 13,708,001 501,114 - 1,447,020
2004 18,424,007 14,711,176 568,589 - 1,492,453
2003 16,486,502 13,613,885 486,739 - 1,109,691
2002 17,084,537 13,723,241 471,581 - 1,000,007
2001 14,521,902 12,057,399 418,873 - 674,670
2000 14,801,644 12,023,682 408,636 - 564,843
1999 12,537,309 10,335,051 363,029 - 390,603
1998 9,963,479 9,164,466 425,407 - 323,549
(1) Rates are not presented on this schedule because the District has multiple water rates for various meter sizes and
cannot represent rates in a meaningful manner with a weighted average rate. See Water and Sewer rates on page 65
for meter sizes and their corresponding water rates.
(2) The District entered into an agreement with the City of San Diego and began purchasing recycled water from
their South Bay Water Reclamation Plant in 2007.
Source: Otay Water District
Per 100 Cubic Feet
Potable Water (1)
WATER PURCHASES, PRODUCTION, AND SALES
LAST TEN FISCAL YEARS
Recycled Water (1)
Per 100 Cubic Feet
0
5,000,000
10,000,000
15,000,000
20,000,000
Hu
n
d
r
e
d
C
u
.
F
t
.
….
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
POTABLE WATER PURCHASES AND
RECYCLED WATER PRODUCTION
Potable Water Purchases Recycled Water Production Recycled Water Purchases
59
Fiscal
Year Potable Recycled Total
2007 563 85 648
2006 788 47 835
2005 1,406 95 1,501
2004 2,125 64 2,189
2003 1,782 123 1,905
2002 2,308 33 2,341
2001 2,667 43 2,710
2000 2,485 78 2,563
1999 2,010 69 2,079
1998 1,126 58 1,184
Source: Otay Water District
METER SALES BY TYPE
LAST TEN FISCAL YEARS
-
500
1,000
1,500
2,000
2,500
3,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
METER SALES
Potable Meter Sales Recycled Meter Sales
60
Fiscal Year Potable Recycled Sewer Total
2007 47,461 588 4,633 52,682
2006 46,851 558 4,571 51,980
2005 46,042 483 4,570 51,095
2004 44,583 348 4,548 49,479
2003 42,438 312 4,510 47,260
2002 40,732 189 4,342 45,263
2001 38,502 128 4,240 42,870
2000 36,005 106 4,199 40,310
1999 32,773 59 4,094 36,926
1998 30,943 44 4,030 35,017
Source: Otay Water District
NUMBER OF CUSTOMERS BY SERVICE TYPE
LAST TEN FISCAL YEARS
0
20,000
40,000
60,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
NUMBER OF CUSTOMERS
Potable Recycled Sewer
61
LEVIES (1)
Fiscal 1% Property Special Total Total Net Percent
Year Tax Assessments Levies Collections (1) Receivable Collected
2007 2,775,882$ 2,465,497$ 5,241,379$ 5,263,367$ (21,988)$ 100%
2006 1,420,049 2,519,927 3,939,976 3,935,983 3,993 100%
2005 1,173,319 2,430,267 3,603,586 3,455,852 147,734 96%
2004 1,844,604 2,442,356 4,286,961 4,108,581 178,380 96%
2003 1,541,362 2,246,865 3,788,227 3,721,776 66,451 98%
2002 1,314,354 2,305,191 3,619,545 3,558,105 61,440 98%
2001 1,134,675 3,171,206 4,305,882 4,176,331 129,551 97%
2000 997,055 3,321,696 4,318,751 4,053,482 265,269 94%
1999 870,451 2,753,571 3,624,023 3,475,903 148,120 96%
1998 801,536 3,158,394 3,959,929 3,740,021 219,908 94%
(1) Levies and collections include Current Secured, Current Unsecured, and Supplemental Homeowners Exemptions.
Source: Otay Water District
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
LEVIES AND COLLECTIONS
Levies Collections
62
Base Rate (Meter Size) 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
Residential
3/4" 11.30$ 10.25$ 10.25$ 10.25$ 10.25$ 10.25$ 10.25$ 10.25$ 10.25$ 10.25$
1" 18.15 16.50 16.50 16.50 16.50 16.50 16.50 16.50 16.50 16.50
1.5" 35.75 32.50 32.50 32.50 32.50 32.50 32.50 32.50 32.50 32.50
Non-Residential & Others (1)
3/4" 22.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00
1" 33.90 30.80 30.80 30.80 30.80 30.80 30.80 30.80 30.80 30.80
1.5" 47.50 43.30 43.30 43.30 43.30 43.30 43.30 43.30 43.30 43.30
2" 59.60 54.20 54.20 54.20 54.20 54.20 54.20 54.20 54.20 54.20
3" 95.90 87.20 87.20 87.20 87.20 87.20 87.20 87.20 87.20 87.20
4" 109.80 99.80 99.80 99.80 99.80 99.80 99.80 99.80 99.80 99.80
6" 219.45 199.50 199.50 199.50 199.50 199.50 199.50 199.50 199.50 199.50
10" 418.90 380.50 380.50 380.50 380.50 380.50 380.50 380.50 380.50 380.50
Fire Services
All Types 23.30 21.20 21.20 21.20 21.20 21.20 21.20 21.20 21.20 21.20
Usage Rate
Residential:
Tier 1 (1-5) 1.08 1.05 1.01 1.01 1.01 1.01 1.01 1.01 1.01 1.01
Tier 2 (6-25) 1.78 1.73 1.67 1.67 1.67 1.67 1.67 1.67 1.67 1.65
Tier 3 (26-35) 1.94 1.88 1.81 1.81 1.81 1.81 1.81 1.81 1.81 1.79
Tier 4 (36-50) (2)2.83 2.75 2.65 2.13 2.13 2.13 2.13 2.13 2.13 2.11
Tier 5 (51+) - - - 2.65 2.65 2.65 2.65 2.65 2.65 2.62
Master Meter:
Tier 1 (1-5) 1.78 1.73 1.67 1.78 1.78 1.78 1.78 1.78 1.78 1.76
Tier 2 (6-25) 1.94 1.88 1.81 - - - - - - -
Tier 3 (16+) 2.83 2.75 2.65 - - - - - - -
Publicly-Owned 1.99 1.93 1.86 1.86 1.86 1.86 1.86 1.86 1.86 1.84
Commercial & Others (3)1.91 1.85 1.78 1.78 1.78 1.78 1.78 1.78 1.78 1.76
Recycled (Commercial)1.65 1.57 1.51 1.51 1.51 1.51 1.51 1.51 1.51 1.50
Recycled (Publicly-Owned)1.73 1.65 1.59 1.59 1.59 1.59 1.59 1.59 1.59 1.58
Sewer Rates 32.70 30.90 26.90 23.35 20.95 20.95 20.95 20.95 20.95 20.95
Note: Above rates do not include Infrastructure Access Charge, a pass-through charge from CWA and MWD.
(1) For services provided through one meter to more than one occupancy, an additional fee of $3.21 will be charged
for each unit in a multiple unit residential, commercial or industrial building.
(2) Effective January 2005, Tier 5 has been eliminated and replaced by Tier 4 (36+).
(3) Others include landscaping, agricultural, and temporary meters. Agricultural customers under Interim
Agricultural Water Program (IAWP) shall receive a $0.33 discount per hundred cubic feet (HCF)
Source: Otay Water District
WATER AND SEWER RATES
LAST TEN FISCAL YEARS
63
FISCAL YEAR 2007
Annual % of
Business Type Revenues Water Sales
1. City of Chula Vista Publicly Owned 2,555,440$ 5.3%
2. State of California Publicly Owned 993,602 2.0%
3. County of San Diego Publicly Owned 801,420 1.6%
4. Eastlake III Business/Irrigation (Reclaimed) 576,165 1.2%
5. McMillin Construction (Potable) 571,469 1.2%
6. Eastlake Country Club Irrigation (Reclaimed, Permanent) 547,092 1.1%
7. Country Hills Apartments Residential (Master Meter) 491,231 1.0%
8. Otay River Construction Construction (Potable, Temporary) 386,212 0.8%
9. Salt Creek Partners LLC Irrigation (Reclaimed, Permanent) 383,076 0.8%
10. Otay Project LP Construction (Potable, Temporary) 365,690 0.8%
Total (10 Largest)7,671,398$ 15.8%
Other Customers 40,934,208$ 84.2%
Total Water Sales 48,605,606$ 100.0%
FISCAL YEAR 2004 (1)
Annual % of
Business Type Revenues Water Sales
1. City of Chula Vista Publicly Owned 1,127,011$ 2.9%
2. State of California Publicly Owned 849,140 2.2%
3. County of San Diego Publicly Owned 725,507 1.9%
4. Steele Canyon Irrigation (Potable Permanent) 526,582 1.3%
5. Eastlake III Business/Irrigation (Reclaimed) 419,942 1.1%
6. Singing Hills Residential/Irrigation (Potable Permanent) 390,720 1.0%
7. McMillin Construction (Potable Temporary) 377,591 1.0%
8. Eastlake Country Club Irrigation (Reclaimed Permanent) 325,036 0.8%
9. California Bank & Trust Irrigation (Reclaimed Permanent) 243,689 0.6%
10. Sweetwater School District School/Irrigation (Reclaimed Publicly Owned) 224,054 0.6%
Total (10 Largest)5,209,273$ 13.3%
Other Customers 33,835,439$ 86.7%
Total Water Sales 39,044,712$ 100.0%
(1) Because the District did not begin tracking its ten largest customers until Fiscal Year 2004, data for nine years ago is not available.
Accordingly, the current fiscal year and Fiscal Year 2004 are presented.
Source: Otay Water District
TEN LARGEST CUSTOMERS
CURRENT YEAR AND NINE YEARS AGO
Customer Name
Customer Name
64
As a Share
Fiscal Population GO Capital Per of Personal
Year Estimate Bond COPS Notes Leases Total Capita Income (1)
2007 190,000 8,445,029$ $65,851,790 1,350,778 - 75,647,597$ 398.15 0.93%
2006 189,000 8,776,755 24,909,352 1,659,037 51,589 35,396,733 187.28 0.46%
2005 186,000 9,093,482 25,653,607 1,956,871 100,666 36,804,626 197.87 0.49%
2004 180,000 9,395,209 25,666,312 2,244,633 147,343 37,453,497 208.07 0.54%
2003 176,000 9,681,937 26,298,239 2,522,665 191,742 38,694,583 219.86 0.61%
2002 166,000 9,953,664 26,915,166 2,791,295 - 39,660,125 238.92 0.69%
2001 156,000 10,210,392 27,517,093 3,050,841 - 40,778,326 261.40 0.77%
2000 147,000 10,452,118 28,004,021 3,301,610 - 41,757,749 284.07 0.87%
1999 142,000 10,683,845 28,480,948 3,543,899 - 42,708,692 300.77 0.99%
1998 137,000 11,300,572 28,942,243 3,777,994 - 44,020,809 321.32 1.13%
(1) See the Demographics and Economic Statistics schedule on page 70 for personal income data. Because
per capita personal income data was not available for 2007 the percentage for 2007 was calculated using per capita
personal income for 2006.
Source: Otay Water District
RATIOS OF OUTSTANDING DEBT BY TYPE
LAST TEN FISCAL YEARS
$0
$100
$200
$300
$400
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
OUTSTANDING DEBT PER CAPITA
65
Adjusted Net Revenue
Fiscal Adjusted Operating Available for Debt Service Requirements Coverage
Year Revenue (1) Expense (2) Debt Service Principal Interest Total Factor (3)
2007 69,442,301$ 52,413,282$ 17,029,019 $790,000 $1,513,834 2,303,834 739%
2006 58,572,428 47,520,682 11,051,746 745,000 917,790 1,662,790 665%
2005 56,597,040 43,936,109 12,660,931 650,000 869,715 1,519,715 833%
2004 57,195,289 38,980,975 18,214,314 635,000 891,796 1,526,796 1,193%
2003 53,077,164 33,787,868 19,289,296 620,000 908,416 1,528,416 1,262%
2002 51,604,999 31,904,402 19,700,597 605,000 987,467 1,592,467 1,237%
2001 51,547,298 29,012,779 22,534,519 490,000 1,181,032 1,671,032 1,349%
2000 46,922,341 26,861,461 20,060,880 480,000 1,252,054 1,732,054 1,158%
1999 39,509,478 23,197,084 16,312,394 470,000 1,202,210 1,672,210 975%
1998 35,474,313 20,395,118 15,079,195 460,000 1,311,930 1,771,930 851%
(1) Adjusted revenues exclude sewer revenues and taxes collected for Improvement District 27 and are inclusive
of capacity fees.
(2) Adjusted operating expenses exclude sewer expenses and depreciation expense.
(3) The District's bond covenants require a minimum coverage factor of 120%.
Source : Otay Water District
PLEDGED REVENUE COVERAGE
LAST TEN FISCAL YEARS
0%
200%
400%
600%
800%
1000%
1200%
1400%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
PLEDGED REVENUE COVERAGE
66
Net Bonded
Net Debt to Net Bonded
Fiscal Population Assessed Bonded Assessed Debt Per
Year Estimate Valuation Debt Valuation Capita
2007 190,000 22,684,693,592$ $8,449,025 0.04% 44.47
2006 189,000 19,565,665,464 8,776,755 0.04% 46.44
2005 186,000 16,423,403,701 9,093,482 0.06% 48.89
2004 180,000 14,130,544,067 9,395,209 0.07% 52.20
2003 176,000 12,129,664,151 9,681,937 0.08% 55.01
2002 166,000 10,489,919,430 9,953,664 0.09% 59.96
2001 156,000 8,991,319,915 10,210,392 0.11% 65.45
2000 147,000 8,223,932,352 10,452,118 0.13% 71.10
1999 142,000 7,113,375,848 10,683,845 0.15% 75.24
1998 137,000 6,616,600,709 11,300,572 0.17% 82.49
Source: Otay Water District
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
0.00%
0.02%
0.04%
0.06%
0.08%
0.10%
0.12%
0.14%
0.16%
0.18%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
BONDED DEBT RATIOS
67
2006-07 Assessed Valuation: 22,684,693,593.00$
Redevelopment Incremental Valuation:234,388,909
Adjusted Assessed Valuation: 22,450,304,684.00$
Total Debt District’s Share ofOVERLAPPING TAX AND ASSESSMENT DEBT:6/30/2007 % Applicable (1)Debt 6/30/07
Metropolitan Water District 351,215,000$ 1.379% 4,952,196$ Otay Municipal Water District Improvement District No. 27 9,210,000 100.000 9,210,000
Padre Dam Municipal Water District Improvement District No. CB 235,000 0.026 61
Grossmont-Cuyamaca Community College District 144,324,623 17.510 25,271,241
Southwestern Community College District 88,567,442 45.910 40,661,313
Grossmont Union High School District 173,780,422 18.061 31,386,482
Sweetwater Union High School District 178,139,415 53.568 95,425,722
Chula Vista City School District 85,960,000 63.497 54,582,021
San Ysidro School District 56,994,363 48.269 27,510,609 Other School Districts 1,834,707,966 Various 32,408,520 City of San Diego 9,905,000 0.929 92,017
San Diego Open Space Park Facilities District No. 1 13,500,000 0.929 125,415
City of Chula Vista Community Facilities District 249,815,000 100 249,815,000
Chula Vista City School District Community Facilities Districts 7,425,000 100 7,425,000
Sweetwater Union High School District Community Facilities Districts 193,304,633 2.523-100 180,448,680
City 1915 Act Bonds (Estimate)73,873,197 37.539-100 60,305,300
TOTAL GROSS OVERLAPPING TAX AND ASSESSMENT DEBT 819,619,577$
Less: San Diego Open Space Park Facilities District No. 1 (self-supporting) 125,415
TOTAL NET OVERLAPPING TAX AND ASSESSMENT DEBT 819,494,162$
DIRECT AND OVERLAPPING GENERAL FUND DEBT:
San Diego County General Fund Obligations 351,215,000$ 7.107% 24,960,850$
San Diego County Pension Obligations 1,343,747,916 7.107 95,500,164 San Diego Superintendent of Schools Certificates of Participation 18,042,500 7.107 1,282,280 Otay Water District Certificates of Participation 66,135,000 100.000 66,135,000
Southwestern Community College District General Fund Obligations 3,945,000 17.510 & 45.910 1,213,330
Grossmont Union High School District Certificates of Participation 1,712,000 18.061 309,295
Sweetwater Union High School District Certificates of Participation 12,145,000 53.568 6,505,834
Chula Vista City School District Certificates of Participation 133,905,000 63.497 85,025,658
San Ysidro School District Certificates of Participation 25,910,000 48.269 12,506,498
Other School District Certificates of Participation 20,085,000 Various 5,281,579
City of Chula Vista Certificates of Participation 119,520,000 72.439 86,579,093 City of Chula Vista Pension Obligations 10,415,000 72.439 7,544,522
City of San Diego General Fund Obligations 481,270,000 0.929 4,470,998
San Miguel Consolidated Fire Protection District Certificates of Participation 8,615,000 57.190 4,926,919
TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT 402,242,020$ Less: Otay Water District Certificates of Participation (self-supporting) 66,135,000
TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT 336,107,020$
GROSS COMBINED TOTAL DEBT (2)1,222,046,597$
NET COMBINED TOTAL DEBT 1,155,786,182$
(1) Percentage of overlapping agency's assessed valuation located within boundaries of the district
capital lease obligations.
Ratios to 2006-07 Assessed Valuation:
Total Gross Overlapping Tax and Assessment Debt 3.61%
Total Net Overlapping Tax and Assessment Debt 3.61%
Ratios to Adjusted Assessed Valuation:
Gross Combined Direct Debt ($66,135,000) 0.29%
Net Combined Direct Debt 0.00%
Gross Combined Total Debt 5.44%
Net Combined Total Debt 5.15%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/07: $10
Source: California Municipal Statistics, Inc. and Otay Water District
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded
COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT
JUNE 30, 2007
68
2007 1998
% of Total % of Total
County County
Employer Employees Rank Employment Employees Rank Employment
United States Navy 42,000 1 2.87% - - -
Federal Government 39,100 2 2.67% 44,200 1 3.53%
State of California 37,100 3 2.53% 32,400 2 2.59%
University of California, San Diego 24,790 4 1.69% 21,444 4 1.71%
San Diego Unified School District 21,073 5 1.44% 25,230 3 2.01%
City of San Diego 20,700 6 1.41% 11,085 6 0.88%
County of San Diego 18,900 7 1.29% 17,700 5 1.41%
Sharp Healthcare 13,872 8 0.95% 8,111 8 0.65%
United States Postal Service 11,611 9 0.79% 7,162 9 0.57%
Scripps Health 10,313 10 0.70% - - -
Kaiser Permanente - - - 5,959 10 0.48%
Qualcomm, Inc. - - - 10,431 7 0.83%
Total 239,459 16.36% 183,722 14.67%
Source: San Diego County Water Authority and County of San Diego
PRINCIPAL EMPLOYERS
CURRENT YEAR AND NINE YEARS AGO
69
Per Capita
Personal Personal Unemployment
Year Population Income Income Rate
2006 (1) 299,398,484 125,885,164$ 42,797$ 4.40%
2005 296,507,061 119,135,889 40,569 4.60%
2004 293,656,842 113,062,259 38,536 5.10%
2003 290,656,005 104,630,453 35,810 5.60%
2002 287,984,799 100,655,726 34,688 5.60%
2001 285,107,923 97,009,480 33,865 4.40%
2000 282,193,477 92,654,006 32,799 4.50%
1999 275,130,000 84,346,910 30,236 3.50%
1998 272,690,813 77,968,184 28,490 3.90%
(1) Information for Fiscal Year 2007 was not available at the time of this report.
Source: County of San Diego
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN FISCAL YEARS
3.00%
3.50%
4.00%
4.50%
5.00%
1998 1999 2000 2001 2002 2003 2004 2005 2006
Fiscal Year
UNEMPLOYMENT RATE
70
Department 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
General Manager 6 6 6 4 4 3 6 8 8 6
Finance 35 34 34 33 32 32 33 33 32 29
Operations/Maintenance 71 72 71 70 70 71 73 74 71 68
Engineering 31 15 13 33 31 24 27 32 31 28
Administrative Services 19 19 20 21 24 16 19 14 14 12
IT and Strategic Planning 13 12 11 10 10 6 6 7 6 4
Development Services (1) - 17 17 - - - - - - -
Total 175 175 172 171 171 152 164 168 162 147
(1) Development Services was broken out from the Engineering and Planning Department in FY 2005
and then re-combined in FY 2007.
Source: Otay Water District
NUMBER OF EMPLOYEES BY FUNCTION
LAST TEN FISCAL YEARS
125
130
135
140
145
150
155
160
165
170
175
180
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
TOTAL EMPLOYEES
71
Meter Size 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
3/4" 43,544 43,070 42,420 41,069 39,138 37,178 35,014 32,672 30,456 28,515
1" 1,618 1,514 1,364 1,220 1,132 1,110 1,079 1,041 1,010 881
1-1/2" 1,242 1,199 1,147 1,037 918 889 837 806 766 660
2" 1,262 1,242 1,199 1,168 1,140 1,124 1,084 1,059 992 858
3" 76 69 67 66 61 57 50 43 40 35
4" 275 277 289 329 308 526 496 431 55 48
6" 24 27 27 27 27 40 35 34 14 12
Others 7 11 12 15 26 35 35 25 12 11
Total 48,048 47,409 46,525 44,931 42,750 40,959 38,630 36,111 33,345 31,020
% Change 1.3% 1.9% 3.5% 5.1% 4.4% 6.0% 7.0% 8.3% 7.5% 2.8%
Increase 639 884 1,594 2,181 1,791 2,329 2,519 2,766 2,325 853
Source: Otay Water District
ACTIVE METERS BY SIZE
LAST TEN FISCAL YEARS
20,000
25,000
30,000
35,000
40,000
45,000
50,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
ACTIVE METERS
72
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
Water System
Service Area (Square Miles)125.5 125.5 125.5 125.5 125.5 125.5 125.5 125.5 125.5 125.5
Miles of Potable Water Main 680 663 623 609 594 576 554 539 501 484
Number of Operational Storage
Reservoirs in Service 37 37 36 37 37 38 37 37 37 38
Water Storage Capacity
(in Acre-Feet)601.7 601.7 582.4 585.4 582.3 587.5 538.4 538.4 538.4 541.4
Total Water Connections
(No. of Meters in Service)47,615 47,409 46,525 44,931 42,750 40,959 38,630 36,111 33,345 31,020
Number of Pump Stations 24 22 21 21 21 21 20 20 20 20
Number of Potable Water
Valves 18,721 18,042 17,696 16,204 15,830 15,073 14,296 13,519 12,340 11,846
Sewer System
Miles of Sewer Lines 86.2 86.2 85.9 85.4 84.8 83.5 82.9 82.1 81.3 80.9
Number of Treatment Plants 1 1 1 1 1 1 1 1 1 1
Treatment Plant Capacity
(Million Gallons per Day)1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3
Total Flows for Fiscal Year
2007 (in Million Gallons)514 528 506 479 463 455 452 442 413 456
Recycled System
Miles of Recycled Water Mains 83.0 77.6 76.4 70.7 60.6 49.2 40.3 37.7 29.3 20.8
Number of Pumping Facilities 3 2 2 2 2 1 1 1 1 1
Number of Acre-Feet Storage 134.1 97.3 97.3 97.3 97.3 86.9 86.9 86.9 86.9 86.9
Number of Recycled Water
Valves 1,245 1,189 1,155 1,097 948 730 588 542 437 282
Source: Otay Water District
OPERATING AND CAPITAL INDICATORS
LAST TEN FISCAL YEARS
0
100
200
300
400
500
600
700
Mi
l
e
s
..
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Fiscal Year
MILES OF POTABLE WATER MAINS
73