COMPREHENSIVE ANNUAL
FINANCIAL REPORT
Year Ended June 30, 2011
Asheville, North Carolina
Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2011
For
Metropolitan Sewerage District of Buncombe County, North Carolina Asheville, North Carolina
Prepared By ‐ Finance Department W. Scott Powell, Director of Finance Published December 14, 2011
Table of Contents
Page No.
Introductory Section Letter of Transmittal Certificate of Achievement for Excellence in Financial Reporting (GFOA) Map of District Boundary Principal Officials Organizational Chart
1‐7 8 9 10 11
Financial Section Independent Auditor’s Report Management’s Discussion and Analysis
Basic Financial Statements: Statement of Net Assets Statement of Revenues, Expenses and Changes in Net Assets Statement of Cash Flows Notes to Basic Financial Statements
Required Supplemental Information: Other Post‐Employment Benefits – Schedule of Funding Progress Other Post‐Employment Benefits – Employer Contributions and Notes to the Required Schedules
Supplemental Financial Data: Comparative Statement of Net Assets Comparative Statements of Revenues, Expenses and Changes in Net Assets Schedules of Revenues and Expenditures – Budget and Actual (Non‐GAAP): Enterprise Fund Combining Statement of Net Assets, All Funds (Non‐GAAP) Combining Schedule of Revenues, Expenses and Changes in Net Assets, All Funds – (Non‐GAAP)
13‐14 15‐22 23 24 25 26‐51 53 54 56 57 58‐59 60 61
Statistical Section Introduction Net Assets by Component Changes in Net Assets General Revenues by Source Expenses by Function Sewer Charge Revenue by Customer Type Customers by Member Agency Residential Sewer Rates Principal Commercial Users
63 64 65 66 67 68 69 70 71
Table of Contents
Page No.
Statistical Section (continued) Ratio of Outstanding Debt Revenue Bond Coverage Demographic & Economic Statistics Personal Income by Industry Principal Employers Employees by Division Operating Indicators by Division
72 73‐74 75 76 77 78‐80 81‐83
Compliance Section Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed In Accordance with Government Auditing Standards
85‐86
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Introductory SecƟon
INTRODUCTORY SECTION
December 1 14, 2011 To the Metrropolitan Sew werage District of Buncomb be County, Noorth Carolina Board of Dirrectors, Bondholders, and Customers We are pleaased to present the Comprrehensive Annual Financiaal Report (CAFFR) of the Meetropolitan Seewerage District of Buncombe County, North C Carolina (MSD D or District) for the fiscall year ended June 30, 201 11. State law requiress local govern nments to publish within ssix months of f the close of each fiscal yeear a complette set of financial staatements pre esented in co onformity with generallyy accepted a ccounting prrinciples (GAA AP) and audited in accordance wiith auditing sttandards generally acceptted in the Uniited States off America by aa firm of licensed certified public accountants. MSD’s Bond B Order requires rellease of succh audited ffinancial statements within seven months of o the close of the fiscaal year. This CAFR preseents MSD’s ffinancial statements, and adds thiis transmittall letter and sttatistical dataa to assist thee reader in an nalyzing our ffinancial statements. This report cconsists of m management’ss representattions concernning the finan nces of the Diistrict. Consequently, managemen nt assumes full f responsib bility for the e completeneess and reliaability of all of the info ormation presented in this repo ort. To provvide a reaso onable basis for makingg these representations,, MSD’s managemen nt established d an internal control framework that iss designed bo oth to protectt the District’’s assets from loss, theft, t or misu use and to compile c sufficcient reliablee information n for the preparation of ffinancial statements in conformitty with GAA AP. Because the cost of internal con ntrols should not outweiggh their benefits, MSD’s framew work of interrnal controls has been ddesigned to provide reassonable rath her than absolute asssurance that the financial statements will be free ffrom materiaal misstatemeent. As managgement, we assert th hat, to the be est of our knowledge and d belief, this ffinancial repo ort is compleete and reliab ble in all material respects. Cherry, Bekaert & Hollan nd, L.L.P., a firm f of licenssed certified public accou untants, has aaudited the ffinancial statements. The goal of the independent audit was w to providee reasonablee but not absolute assuran nce that MSD’s finan ncial statemen nts for the fiscal year end ded June 30, 2011, are freee of materiaal misstatemeent. The independent audit involvved examinin ng, on a test basis, eviden ce supportin g the amoun nts and disclo osures in the financiaal statements; assessing the accountting principlees used and d significant estimates m made by managemen nt; and evaluating the overall finan ncial statemeent presentaation. The independent auditor concluded, b based upon the audit, thatt there was aa reasonable bbasis for rend dering an unq qualified opin nion that MSD’s finan ncial statemen nts for the fiscal year end ded June 30, 2011, are fairly presented in conform mity with GAAP. The iindependent auditor’s rep port is presen nted as the fiirst componeent of the financial section n of this report. Accounting standards (G GASB No. 34) require thatt managemennt provide a narrative introduction, ovverview, and analysiss to accompany the basiic financial statements inn the form o of Managemeent’s Discusssion and Analysis (M MD&A). This letter of traansmittal is designed too complemen nt the MD& &A, which iss placed immediatelyy following th he report of th he independe ent auditors, aand should be read in con njunction with h it. Introd ductory Secttion |
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Accounting standard (GASB No. 44) calls for revised statistical reports designed to increase assistance to the reader in assessing the financial situation and condition of the District. Readers may note some changes in report formats from prior years. In addition, new schedules for which there is no information prior to implementation of GASB No. 34 may have less than the otherwise required ten years of comparative data. Financial trend information is presented to assist readers in understanding and assessing how a government’s financial position has changed over time. Revenue capacity information is intended to assist users in understanding and assessing the factors affecting a government’s ability to generate revenues. Debt capacity information is designed to assist users in understanding and assessing a government’s debt burden and its ability to issue additional debt. Demographic and economic information is intended to (1) assist users in understanding the socioeconomic environment within which a government operates and (2) provide information that facilitates comparisons of financial statement information over time and among governments. Operating information should provide contextual information about a government’s operations and resources to assist readers in using financial statement information to understand and assess a government’s economic condition.
Profile of the District Overview The District was created by the state of North Carolina in 1962 to provide a wastewater treatment plant serving the City of Asheville and surrounding communities, including Biltmore Forest, Weaverville, Black Mountain, Montreat, Woodfin, the Woodfin Sanitary Water & Sewer District, and certain other unincorporated areas of Buncombe County. Through separate contractual arrangements, the District also serves customers in the Cane Creek Water and Sewer District in northern Henderson County and in the Avery Creek Sanitary Sewer District in southern Buncombe County. The collection system has been extended over the years as a result of expansion and development, and now collects wastewater through approximately 977 miles of sewer line with 28,000 manholes and serves over 50,000 residential and commercial customers. The wastewater treated by the District is gathered in the collector sewer systems located primarily within the boundaries of the municipalities and other political subdivisions comprising the District and conveyed to the wastewater treatment plant through large sewer lines called interceptors that generally run parallel to the French Broad River, the Swannanoa River or one of their primary and secondary tributaries. Included in the system are remote pumping stations that pump wastewater through force mains where gravity flow is not feasible. With the Sewer Consolidation, which was signed in 1990, the District agreed to take possession of and to operate, maintain, and repair or replace, as necessary, the various collector sewer systems, which were simultaneously deeded to MSD by these same political subdivisions. Many of the collector sewer systems were undersized, deteriorated, and inadequately maintained. Since taking over the sewer systems, the District has developed and implemented, with input from its member political subdivisions, an ongoing Capital Improvement Program (the “CIP”). Approximately 872,000 feet of existing sewer line have been replaced since consolidation, representing over 17% of the entire collection system. In addition, the District expects to replace another 250,000 feet of existing sewer lines over the next five years as mandated by our Collection System Permit. The District also has an aggressive program in effect for systematic preventative maintenance of collector sewers. The lines are first cleaned using water under high pressure and then are videotaped. The cleaning reduces line blockages and overflows, and the videotapes enable the District to locate and repair problems in the lines. The District cleans and inspects by videotaping between 15% and 20% of its system each year. Introductory Section |
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Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
The District also owns,, operates, an nd maintainss a 40 millionn gallon per d day (MGD) wastewater treeatment plant to treat t raw sew wage and industrial wasttewater as w well as a hyd droelectric faacility, which is used primarily tto generate p power for the e wastewaterr treatment pplant, but also o provides eleectricity for sale back to the locaal utility. Member aagencies provviding water sservice includ de the sewer fees on their water bills and provide cu ustomer service an nd collection services to th he District for a negotiateed fee. However, the Distrrict direct bills about 410 customers, predom minantly local industries and private re sidences servved by wells, yet are conneected to the sewer system.
Budget The annual budget serves as the foundation f fo or the Districct’s financial planning and control. Th he Bond Order requires that the e District ado opt its final bu udget on or bbefore June 15 of each yeaar after a preliminary budget he earing no morre than 30 daays prior to ad doption. Nortth Carolina G General Statuttes call for an n annual balanced budget ordinance based u upon expecte ed revenues, aalong with a budget message, to be prresented to the govverning board d no later thaan June 1. Du uring the sprring, District d departmental staff work w with the Board’s Finance and Pe ersonnel Com mmittees to d develop an opperational bu udget by funcction (adminisstration, system se ervices, plant operation, etc.), and Disttrict engineerrs work with the Board’s Planning and d Capital Improvem ment Plan Com mmittees on aa capital budgget. After thee Board appro oves the budgget, it is administered by Departtment heads who may maake transfers of appropriattions within aa department and by the General Manager who may maake transfers between dep partments. B Budget to actual comparissons of financcial data for the year ended June 30, 2011 m may be found in the suppleemental information follow wing the notees to the financial sstatements.
Factors A Affectingg Financiaal Condition The informaation presente ed in the finaancial stateme ents is perhapps best underrstood when it is considerred from the broader perspective of the specific environmen nt within whi ch the Districct operates.
Local Ecconomy The Ashe eville‐Buncom mbe County area in which the Distrrict is locateed possessess a combinaation of characteriistics that help protect it in the current economic climate. Theey consist of a re‐emergin ng more technologgically advancced industrial base, a stron ng tourism poosition, conceentrated healthcare emplo oyment, Introd ductory Secttion |
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
manufacturing diversity, and positive population in‐migration. These factors are discussed in further detail in the Management’s Discussion and Analysis (MD&A). Local economic development initiatives and various private/public programs have arisen in response to these recent developments designed to strengthen the local economy. Industrial recruitment, workforce development, urban revitalization, broadband access, and improvements to interstate highways are examples of active and pending projects. Area leaders realize the importance of cooperation and action to maintain a healthy, diverse, and sustainable economy. While industrial usage is declining, residential and commercial expansion has resulted in a higher demand for MSD services, as evidenced by growth in overall revenue, and especially by facility and tap fees directly resulting from new development. The majority of new residents being District customers result from emphasis on in‐fill development by local communities and large new subdivisions with developer‐donated sewer infrastructure.
Long‐Term Financial Planning In 2001, the District completed a twenty‐year Wastewater System Master Plan to identify system improvements needed to handle structural problems and wet‐weather flow conditions, to improve the performance at the Water Reclamation Facility (WRF), and to prepare the system to handle expected future wastewater flows. In 2007, the District completed a Facility Plan, which specifically focused on the equipment and processes within the WRF. This plan established a methodology for prioritizing rehabilitation efforts at the plant. In November 2008, the District’s Collection System Master Plan was completed. This plan focuses on the orderly growth of the collection system into future service areas. As the sewer system grows over time, this plan will ensure that extensions of the system are made in an orderly fashion, in accordance with the planning policies of the District’s member agencies. Using these plans as guides, District engineers developed a ten‐year Capital Improvement Program (CIP), which is updated annually. The capital budgeting process begins with considering projects identified in these plans, as well as those recommended by various departments to deal with recurring wastewater collection and treatment problems. Engineering staff prioritize such projects, preparing cost estimates and a suggested timetable for construction. The CIP Committee, consisting of representatives from the District’s member agencies, meets to review the program and to make recommendations to the Board concerning the CIP’s adoption as part of the annual budget. The CIP continues to have the largest impact on the District’s current and future financial position. In connection with the long‐term CIP, the District prepares a ten‐year cash flow projection, which integrates revenue and expenditure projections with planned capital expenditures to anticipate rate increases and timing of debt issuance. Introductory Section |
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Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
Major In nitiatives and Acco omplishm ments Lake Jullian Interce eptor Rehabilitation n The Distrrict recently completed aa major rehaabilitation p roject in Sou uthern Bunccombe Coun nty. This four‐phasse effort haas rehabilitated the largge intercepttor lines dirrectly surrou unding Lakee Julian. These lines serve large resideential neighb borhoods as well as com mmercial aareas alongg the Hen ndersonvillee Road corridor. The ffour phases totaled oveer 22,700 feeet; and the total amoount reinvessted to reh habilitate theese old sewer lines waas approxim mately $5.8 m million.
Final Microsscreen Rep placementt Project Th he District iss well into tthe construcction phase for the rep placement off its Final Miccroscreen pro ocess at the W WRF. The ne ew process w will use “micro o‐filters” to rremove fine p particles fro m the treate ed Lakke Julian Interceptor Project Ma ap wasttewater. Thhis $10.2 million project w will help to further improve e MSD efflueent quality to well‐above p permit standaards, prior to final dischargge into the Frrench Broad R River.
Morris SStreet @ T Talmadge C Court Project The Distriict parttners witth locaal agencies oon projjects wheneever Inteerior of Final Miicroscreen Build ding, under Reenovation possible. This not onlyy reduces ooverall costs, but also h helps to reduce the num mber of timees that a neighborhood w will be distu urbed to rehaabilitate old iinfrastructuree. In th his example, the District aand the City o of Asheville paartnered to rrehabilitate thhe water & seewer systemss, and the strreets ‐ all of o which neeeded Morris Strreet @ Talmadgge Court Project Map rehabilitation inn this area. TThe sewer po ortion alone ttotaled over 3 3,300 feet.
Significa ant Reducttion of San nitary Sew wer Overflow ws Reduction n of Sanitary Sewer Overfllows (SSO’s) is one of thee District’s p primary goalss related to the collection system. Thiss has been accomplished by aggre essive rehabilitation andd preventative maintenance (line cleaaning) programs. Over thee past eleven years, th he District has h realized a significantt reduction of SSO’s – fro om 289 in FY2 2000 to 24 in FY2011.
EExample of Streaam Crossing
Introd ductory Secttion |
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Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
Excellen nce in Man nagement Recognitio on Program m Award On Februaary 4, 2009, TThe District w was one of four honorees nationwide sselected to reeceive the Excellence in Manage ement Recogn nition award from the Nattional Associaation of Clean n Water Agencies (NACWA A). NACWA haas established d the Excelleence in Manaagement Recognitionn Program tto recognize public clean n water utilities thhat implem ment progreessive manaagement initiatives aand thereby advance thee goals of th he Clean Water Act. NACWA is ccommitted to o clean wateer and a healthy ennvironment aand strives tto help ensu ure that member aagencies have e the tools the ey need to meet these objjectives.
Improve ed Custom mer Service e Response e The System ms Services D Department reclassified a managementt position to tthat of a first responder to o handle emergenccy calls betwe een 4:00 p.m m. and 11:30 p.m. as well as holidays, which reduceed average response time from 90 minutes in FY2006 to 3 36 minutes in n FY2011.
Environmental Re egulations Compliance The Districct received faavorable regu ulatory reportts from the N orth Carolinaa Departmentt of Environm ment and Natural Resources R forr wastewater discharge, pretreatmennt, collectionss system, an nd air qualityy permits. In n addition, t he District maintained m ISO 14000 Environmenttal complian ce certificatio on. The Collection C Systems S permit requirres replaceme ent or rehabilitation of at least 250,000 linear feet of sewer main every five years. In FY2 2011, the Disttrict completeed in excess of 49,099 linear feet, over o 20,493 of which w was performed d by District forces. Ove er the past four f years, thhe District haas rehabilitate ed a total of 2 208,973 lineaar feet of sew wer main. Another requirement o of the annual Collection SSystems perm mit View w of the RBC's & & Incinerator Bu uilding is to perfform preventtative mainte enance on at a least 500, 000 linear feett of sewer line e. During the current yearr, the District cleaned overr 614,543 lineear feet.
Continuing Disclo osure Obligation 2009. In The District issued reven nue bonds ass well as reve enue refundinng bond mosst recently in September 2 accordance with the requ uirements of the Securitie es Exchange CCommission R Rule 15C‐12, aas amended, and the North Carolina Local Govvernment Commission, the District wil l provide con ntinuing disclosure inform mation to recognized municipal security inform mation repositories. This w will include tthe audited ffinancial stattements, historical net revenues and debt coverage, c futture rate in creases and listing of tthe District’s largest commercial and industriaal customers.
Introd ductory Secttion |
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Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
Financia al Awardss The Government Finance e Officers Asssociation of th he United Staates and Canaada (GFOA) aawarded a Ceertificate ment for Excelllence in Financial Reportin ng to Metroppolitan Sewerrage District o of Buncombe County, of Achievem North Carolina for its com mprehensive annual finan ncial report (CCAFR) for thee fiscal year eended June 30, 2010. This was the sixteenth consecutive c year y that the e District has achieved this prestigiouss award. In o order to receive a Ce ertificate of Achievement A award, a go overnment m must publish aan easily readable and effficiently organized comprehensiv c ve annual financial repo ort. This re port must ssatisfy both generally aaccepted accounting p principles and d applicable le egal requirem ments. A Certificatte of Achievvement is vaalid for a period of on e year onlyy. We believve that our current Comprehenssive Annual Financial Re eport continu ues to meett the Certificate of Achievement Prrogram’s requirementts and we are e submitting it to the GFOA A to determinne its eligibilitty for anotheer certificate. In addition, the District also received d the GFOA’ss Distinguisheed Budget Presentation A Award for itss annual 2011 budge et document. In order to qualify for th he Distinguishhed Budget PPresentation Award, the D District’s budget docu ument was judged proficcient in severral categoriess, including aas a policy document, a ffinancial plan, an ope erations guide e, and a comm munications d device.
Acknowledgments The preparaation of this report could d not have be een accompl ished withou ut the dedicaated services of staff throughout the District and a the Distrrict’s indepen ndent auditorr, Cherry, Beekaert & Hollaand L.L.P. We would like to ackn nowledge the e hard work and dedicatiion of Cheryyl Rice, the D District’s Acco ounting Man nager. In addition, a sspecial thankks to Teresa G Gilbert who aassembled thee CAFR documents and prepared man ny of the graphs and to Asheville Chamber of Commerce for f current eeconomic datta and insigh htful identification of business trends. We also wo ould like to thank the members m of the Finance Committee and Board ffor their sup pport of maintaining high standarrds of fiscal acccountability and responsiibility for the District. Respecttfully Submittted, Thomas E. Hartye e, P.E. W. Scott Powell,, CLGFO Ge eneral Managger D Director of Fin nance
Introd ductory Secttion |
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Certificate of Achievement
Introductory Section |
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Metropolita an Sewerage District of Bu uncombe Cou unty, North C arolina
FY En nding June 30, 2011
Map of D District B Boundary
Introd ductory Secttion |
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Principal Officials
Board Members Steven T. Aceto Terry Bellamy Jackie W. Bryson Jon E. Creighton Max L. Haner E. Glenn Kelly Esther Manheimer Al Root Bill Russell Bill Stanley M. Jerry VeHaun Robert C. Watts
Legal Counsel Roberts & Stevens, P.A.
Representative of Town of Montreat City of Asheville Woodfin Sanitary Water & Sewer District County of Buncombe County of Buncombe Town of Biltmore Forest City of Asheville Town of Weaverville City of Asheville County of Buncombe Town of Woodfin Town of Black Mountain
Auditing Firm Cherry, Bekaert & Holland, L.L.P.
General Manager Thomas E. Hartye, P.E.
Engineer of Record McGill & Associates
Director of Finance W. Scott Powell, CLGFO
Introductory Section | P a g e | 10
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Organizational Chart
MSD Board Committees CIP Finance Personnel Planning Right of Way
Legal Counsel
Auditing Firm
Engineer of Record
General Manager Thomas E. Hartye, P.E.
# of employees = 2
Executive Secretary Sondra Honeycutt
Administrative Services
Capital Improvement
Financial Services
Human Resources
Planning & Development
System Services
Water Reclamation Facility
Director Peter Weed
Director Ed Bradford, P.E.
Director W. Scott Powell, CLGFO
Director Jim Hemphill
Director Stan Boyd, P.E.
Director Mike Stamey, P.E.
Director John Kiviniemi
Accounting Investments Cash Flow Mgmt Finance & Budget Purchasing Warehouse # of employees = 8
Human Resources Payroll Employee Benefits # of employees = 4
Financial Forecasting Environmental Health & Safety Fleet Maintenance IT MIS # of employees = 12
Project Mgmt Design & Drafting Construction Right‐of‐Way GIS # of employees = 20
Planning & Development # of employees = 8
Director Ken Stines Construction Pipeline Mtce. Technical Services
# of employees = 57
Operations Maintenance Electrical Structural Mtce. Industrial Waste # of employees = 39
Number of Employees: 150 Employee/Representative Contractors Introductory Section | P a g e | 11
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
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Introductory Section | P a g e | 12
FINANCIAL SECTION Financial SecƟon
Inde ependent Auditorrs' Reportt The Board o of Directors Metropolitan Sewerage D District of Bun ncombe Coun nty, North Ca rolina Asheville, No orth Carolina We have au udited the acccompanying financial staatements of M Metropolitan n Sewerage D District of Buncombe County, Norrth Carolina ((the “District””) as of and ffor the year eended June 330, 2011, as listed in the table of contents. Th hese financiall statements are the respo onsibility of thhe District’s m management. Our responssibility is to express an opinion on these financial statementts based on o ur audit. We conductted our auditt in accordan nce with audiiting standardds generally accepted in the United SStates of America and d the standards applicable e to financial aaudits contai ned in Goverrnment Auditiing Standardss, issued by the Comp ptroller General of the United States. TThose standarrds require th hat we plan and perform the audit to obtain re easonable asssurance abou ut whether th he financial sttatements arre free of maaterial misstaatement. An audit includes examin ning, on a testt basis, eviden nce supportinng the amoun nts and disclo osures in the ffinancial statements. An audit also includes asssessing the aaccounting p rinciples used and significcant estimatees made by managem ment, as well as evaluatingg the overall ffinancial stateement presen ntation. We b believe that o our audit provides a re easonable baasis for our op pinion. In our opinio on, the financcial statemen nts referred to o above preseent fairly, in aall material reespects, the ffinancial position of tthe District ass of June 30, 2 2011, and the e respective cchanges in fin nancial positio on and cash fflows for the year the en ended in conformity with w accountting principlees generally aaccepted in tthe United SStates of America. In accordancce with Goveernment Auditting Standard ds, we have aalso issued ou ur report dateed October 24, 2011, on our con nsideration of the District's internal control c over financial reeporting and on our testts of its compliance with certain provisions off laws, regulaations, contraacts and gran nt agreementts and other m matters. The purpose e of that repo ort is to describe the scop pe of our testting of internaal control oveer financial reeporting and compliaance and the results of th hat testing, and not to proovide an opinion on the internal conttrol over financial rep porting or on compliance. That report iss an integral part of an au udit performeed in accordan nce with Governmentt Auditing Sta andards and sshould be con nsidered in asssessing the rresults of our audit. Managemen nt’s Discussio on and Analyssis and the Re equired Suppplemental Infformation as listed in the table of contents arre not a required part of o the basic financial stattements but are supplem mentary info ormation required byy the Governmental Accounting Standards Board. We have applied certain limited proccedures, which consisted princip pally of inquiries of man nagement reegarding the methods off measuremeent and n of the required supplemental information. How wever, we did d not audit tthe informattion and presentation accordingly, express no o opinion on it.
Finan ncial Section
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Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
Our audit was w conducte ed for the pu urpose of forming an oppinion on thee basic financial statemen nts. The Introductoryy Section, Sup pplemental Financial Data, and Statisticcal Tables as listed in the ttable of contents are presented fo or purposes of additional analysis and d are not a reequired part o of the basic ffinancial statements. The Supplem mental Financcial Data have e been subjected to the aauditing proceedures applieed in the audit of the basic financial statementts, and in our opinion, are fairly stated in all materiaal respects in relation to the basic financial statements take en as whole. TThe Introducttory Section aand Statisticaal Tables havee not been su ubjected to the auditing procedures applied in the audit of tthe basic finaancial statements and, acccordingly, we express no opinion o on them.
Charlotte, N North Carolinaa October 24, 2011
Finan ncial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Management’s Discussion and Analysis As management of the Metropolitan Sewerage District of Buncombe County (District), we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 2011.
Financial Highlights Net assets—Net assets are defined as the value of all assets less all liabilities, and net restricted assets
are those assets restricted by law, bond covenant, or other contractual arrangement, less debt incurred for these restricted assets. The financial well‐being of a government is reflected to a large degree in the growth of net assets.
The District’s net assets total $299.2 million and reflect a $9.3 million or 3.2% increase from the prior year. The income and expense items affecting this improvement will be discussed in greater detail in the section below titled Financial Analysis of the District.
The $9.3 million increase attributable to the District’s normal operations includes contributed capital assets from developers and member agencies of $2.2 million.
Net assets invested in capital assets, net of related debt increased by $16.3 million or 6.9%, evidencing the District’s aggressive rehabilitation of infrastructure as well as an increase in developer and member agency donated sewer lines and pump stations. Outstanding debt:
After a principal repayment of $4.6 million, the District’s has approximately $101.5 million of outstanding debt exclusive of related unamortized discounts and premiums.
Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District’s basic financial statements. The District’s basic financial statements are comprised of two components: 1) the financial statements and 2) notes to the financial statements that explain in more detail some of the information in the financial statements. After the notes, supplemental information is provided to show details about the District’s fund structure as set forth in the Bond Order. Budgetary information required by the North Carolina General Statutes also can be found in this part of the statements.
Basic Financial Statements The financial statements of the District report information about the District using accounting methods similar to those used by private‐sector companies. There are three required statements, which provide both long‐term and short‐term information about the District’s overall financial status. 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. This statement provides information about the types and amounts of resources (assets) and the obligations to District creditors (liabilities) and may be used to measure the financial health of the District by providing the basis for evaluating the capital structure of the District and assessing liquidity and financial flexibility. The Statement of Revenues, Expenses, and Changes in Net Assets presents the current year’s results of operations and can be used to determine how successful the District has been in collecting revenues, controlling expenses, and recovering costs through user fees and charges. Financial Section
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Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
The final rrequired finan ncial stateme ent is the Stattement of Cassh Flows. Thiss statement rreports cash rreceipts, cash paym ments, and ne et changes in n cash resultiing from opeerating, investting, and finaancing activitties, and may be used to determine how caash originated, what thatt cash was ussed for, and how these aactivities n the change to cash balan nce during the e year. resulted in These finaancial statements should be evaluated d with other eexternal factors such as eeconomic con nditions, statistics, an regional employment e nd population n growth forr a more co omplete analyysis of the D District’s current an nd future financial conditio on.
Financial Analysis o of the Distrrict Net Assets As previously noted, net assets may m serve ovver time as one useful iindicator of an entity’s ffinancial condition.. The Districct’s assets exxceeded liab bilities by $2299.2 million at June 30 0, 2011. The largest proportion n of the Disttrict’s net asssets, approximately 84.1% %, reflects th he District’s investment in n capital assets (e.gg. land, buildiings, intercep ptor and colle ector sewer liines, treatmeent facilities, eequipment, eetc.) less any related d debt outsstanding that wass issued to acquire these iteems. As thesee assets are req quired to provide wastewater collectio on and treatmen nt services, these resources are not aavailable for futuree spending. A Although the District’s investm ment in its capitaal assets is rreported net of the outsstanding related d debt, the reesources needed to repay that debt must be provided b by other sources aas the capitaal assets cannot b be used to liquidate these liabilities. An ad dditional $8.7 million n or 2.9% of the District’s net assets aree funds restricted by the Bond Order to be held in reserve r for eeither debt sservice or for emergencyy capital equipmen nt repair or re eplacement. TThe District aalso has $0.6 million net aassets restrictted for rehab bilitation of the Ave ery’s Creek Sanitary Distriict. The remaaining balanc e of $38.2 m million is unreestricted and may be used to fund f pay‐as‐yyou go capittal projects, medical or workers com mpensation claims, replaacement reserves, o or any other legal purpose e. The Districct’s overall financial position improved d during the ffiscal year en nded June 30 0, 2011 as oveerall net assets gre ew by 3.2%. TThe District’s financial straategy is to seet rates at a level sufficien nt to cover op perating and debt service expen nses as well aas to provide about half oof the fundingg for pay‐as‐yyou‐go infrastructure pproach is vissible in the coontinuing growth of Districct net assets. Current rehabilitattion. The succcess of this ap assets willl decrease graadually as cassh and investments are us ed to rehabilitate infrastru ucture, until tthe next planned re evenue bond issuance.
Finan ncial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Table 1 – Condensed Summary of Net Assets
Restated FY 2009
FY 2011
FY 2010
$ 56,484,271
$ 63,221,296
Capital Assets, net
351,722,014
Total Assets
408,206,285
Current and Other Assets
% Increase (Decrease) 2011 versus 2010
$
43,378,629
(10.66%)
340,276,663
337,585,832
3.36%
403,497,959
380,964,461
1.17%
Long‐Term Liabilities Outstanding Other Liabilities Total Liabilities
99,491,444
105,549,731
88,318,800
(5.74%)
9,494,496
8,032,399
7,906,235
18.20%
108,985,940
113,582,130
96,225,035
(4.05%)
Invested in Capital Assets, Net of Related Debt
251,754,578
235,471,938
244,675,790
6.91%
7,849,253
7,093,201
8,688,327
10.66%
Restricted under Bond Covenant
824,822
812,454
805,170
1.52%
Restricted for Avery’s Creek Sanitary District
620,880
‐
‐
‐
1,343,058
‐
(100.00%)
38,170,812
45,195,178
30,570,139
(15.54%)
Restricted for Debt Service
Restricted for Capital Projects Unrestricted
100.00%
Total Net Assets
$ 299,220,345 $ 289,915,829
$ 284,739,426
Financial Section
3.21%
| P a g e | 17
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Table 2 – Condensed Summary of Revenues, Expenses, and Changes in Net Assets Operating Revenues: Sewer Charges Facility and Tap Fees Miscellaneous Total Operating Revenues Operating Expenses: Salaries and Employee Benefits Contractual Services Utilities Repairs and Maintenance Other Supplies and Expenses Insurance Claims and Expenses Depreciation Total Operating Expenses Operating Income Nonoperating Revenues (Expenses): Interest Income Interest Expense Less Capitalized Interest Amortization of Bond Issuance Costs Gain (Loss) on Sale of Surplus Property Total Nonoperating Revenues (Expenses) Income before other transactions Capital Contribution Special item – Avery’s Creek Sanitary District asset contribution from Buncombe County Change in Net Assets Total Net Assets, beginning of year As previously reported Cumulative affect of accounting change As restated Total Net Assets, end of year
FY 2011
FY 2010
% Increase (Decrease) 2011 versus 2010
Restated FY 2009
$
26,894,894 $ 25,369,818 $ 24,290,719 2,238,171 1,654,010 2,959,115 612,721 770,389 509,239 29,745,786 27,794,217 27,759,073 6,536,352 6,303,951 6,181,775 1,337,258 1,240,175 1,387,098 1,234,810 1,111,644 1,298,053 927,655 851,966 877,124 1,344,307 1,468,655 1,337,610 2,142,086 1,778,336 1,726,689 7,520,744 8,556,365 8,520,993 21,043,212 21,311,092 21,329,342 8,702,574 6,483,125 6,429,731 493,002 578,302 1,047,587 (3,042,912) (3,113,366) (3,545,226) 423,881 178,386 341,821 (156,120) (145,827) (73,887) 42,232 67,099 22,150 (2,239,917) (2,435,406) (2,207,555) 6,462,657 4,047,719 4,222,176 742,770 1,128,684 5,856,798 2,099,089 ‐ ‐ 9,304,516 5,176,403 10,078,974
289,915,829 ‐ 289,915,829 $ 299,220,345
284,739,426 ‐ 284,739,426
274,532,352 128,100 274,660,452
$ 289,915,829 $ 284,739,426
6.01% 35.32% (20.47%) 7.02%
3.69% 7.83% 11.08% 8.88% (8.47%) 20.45% (12.10%) (1.26%) 34.23%
(14.75%) (2.26%) 137.62% 7.06% (37.06%) (8.03%) 59.66% (34.19%)
79.75%
1.82% 3.21%
The Condensed Summary of Revenues, Expenses, and Changes in Net Assets shown in Table 2 above provides information concerning what contributed to the net changes reported in Table 1. The section below discusses significant factors contributing to the District’s 3.2% increase in net assets from $289.9 million to $299.2 million. Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Operating Revenues:
Sewer revenues increased 6.0%. The District had raised domestic sewer rates by 3.5% at the beginning of the fiscal year and experienced a consumption increase due to a dry spring and summer.
Facility and tap fees received increased 35.3% from the previous year reflecting a rebound in development in the area.
Miscellaneous Income decreased 20.5%. This was due to the recognition of the “principal forgiveness” pertaining to a revolving fund loan received from the Department of Environmental and Natural Resources in the prior year. Operating expenses were kept fairly flat with the exception of:
Insurance claims and expense—The District experienced a 20.5% increase due to a number of high dollar claims.
Utilities expense—a decrease in internally generated hydroelectric power due to a repair attributed to the 11.1% increase in the current year. Interest income—Decreasing short‐term interest rates resulted in the 14.8% decrease in the District’s
interest income. Interest expense—Interest expense decreased due to reduction in short term rates paid on the District’s variable rate debt in the current year. Capitalized interest—Interest capitalized on rehabilitated infrastructure is computed based on construction‐in‐progress beginning balances plus additions during the year. Current year additions were up 67.3% as compared to FY 2010, which attributed to the 137.6% increase in capitalized interest. Capital Contribution—The amounts reported as capital contributions represent the estimated fair market value of donated sewer collection lines by developers and member agencies. The District has no direct control over the amount of contributions received. These amounts are reflected as equal income and capital expenditures in the financial statements.
Capital Asset and Debt Administration Capital Assets The District owns capital assets with a historical cost of $483,619,289. These assets consist of land (including easements), land improvements including a hydroelectric dam, buildings, collector sewer lines, interceptor lines (large pipelines into which collector sewers feed), construction equipment and machinery, service vehicles, office machines, and computer hardware and software. The District has begun several projects expected to cost $35.5 million to complete, and at June 30, 2011, was committed to contracts expected to cost $5 million. Major capital asset transactions during the year include: Rehabilitation of over 50,000 feet of sewer line including:
Morris Street at Talmadge Town Branch Interceptor Lake Julian Wet Weather Interceptor
Intermediate Pump replacement Secondary Microscreen replacement Various equipment & building renovations
Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Table 3 – Capital Assets
FY 2011
FY 2010
Restated FY2009
Land $ 2,515,666 $ 2,515,666 $ 2,515,666 Easements 6,061,191 5,689,498 5,369,875 Land Improvements 4,149,044 3,803,650 3,662,906 Buildings 49,041,068 49,057,309 49,087,449 Machinery and Equipment 55,507,672 53,544,930 53,907,560 Interceptor Sewer Lines 108,621,465 102,296,341 101,771,854 Collector Sewer Lines 252,904,769 242,739,098 235,608,941 Construction in Progress 4,818,414 5,478,752 3,005,453 Subtotal 483,619,289 465,125,244 454,929,704 Less: Accumulated Depreciation (131,897,275) (124,848,581) (117,343,872) Net Property, Plant and Equipment $ 351,722,014 $ 340,276,663 $ 337,585,832 More detailed information on the District’s capital assets is presented in Note 5 to the financial statements.
Debt Administration At June 30, 2011, the District had $101,533,665 in par value of outstanding revenue bonds. Unlike cities and counties, the District does not have a debt limit. However, the District’s Bond Order requires that user rates be set to achieve a minimum debt service coverage ratio of 1.2 annually. This means that in any year, after the District pays all current operating expenses, the net revenues remaining must be at least 120% of that year’s principal and interest payments. The District holds an Aa2 rating from Moody’s Investor Service, an AA rating from Standard & Poor’s, and an AA+ rating from Fitch. These high ratings allow the District to pay a lower rate of interest than other entities with less favorable ratings. Further details on long‐term debt are provided in Note 3 and 4 to the financial statements.
Economic Factors and Next Year’s Budget and Rates The District, located in Buncombe County within the Asheville Metropolitan Area, has been in a better economic position than many other communities in the state and the nation due to several key factors. Unemployment—From 2003 through 2011, Asheville’s unemployment rate has been among the lowest
compared to the other ten metropolitan areas in North Carolina. As of June 2011, Asheville’s unemployment rate was 8.3%. This holds well below the state and national averages of 10.4% and 9.3% respectively. Over the past year, about 1,170 jobs have been added to the economy increasing current employment to 190,223. Balanced economic growth—The Asheville metropolitan area has developed a unique and balanced
economy based on several key drivers. Actions of each driver can overlap and support other drivers in the local economy. History has also shown that a period of weakness for one driver can lead to the expansion of another. Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Key drivers include: Specialized health care industry Stable tourism activity Growing professional services sector Resilient housing market Baby‐boom fueled population growth Restructured manufacturing sector
Local healthcare employment—At over 31,000 workers, health services are now the largest industry sector in the Asheville metropolitan area. Ambulatory health services are the chief source of the new jobs. Strong gains in well‐paying health services had softened earlier losses in the traditional manufacturing sector. As of June 2011, stable growth in local healthcare services continued at an annual rate of 2% to 4% due to the concentration of tertiary care facilities and the in‐migration of baby‐boomers and retirees. Future growth in local healthcare services is expected to be at a more moderate rate due to the national economic downturn.
Consistent tourism destination—The tourism market experienced a 7.7% increase over the previous year. Evidence of a slow recovering economy having an impact on travel patterns.
Reduction of manufacturing jobs—Recent economic indicators suggest job loss in manufacturing has been impacted by the current recession. The industry lost approximately 200 jobs during the current year. With 18,000 workers, the industry continues to be transformed into a high‐skilled sector restructured around an advanced group of machinery, plastics, and electronics manufacturers.
Continued moderate population growth—Population growth remains a consistent and stable contributor to the local economy. Estimates indicate moderate growth patterns will continue between 1.5% and 2.0% per year. More than 95% of local population growth is from in‐ migration, with the remaining from births over deaths.
Residential building—Asheville is seeing a downturn in the residential market. Currently, homes sales are down 10.4% with the average price decreases over 6.0%. In addition, nearly 572 new residential building permits were issued in 2011. This is an 18.3% decrease over the previous year.
Professional and business sector—The confluence of retiring baby boomers, local quality of life, and economic growth has resulted in the emergence of a growing professional and business services sector. This sector includes many highly technical and well‐paid services such as engineering and computer design, and temporary employment services.
The major economic challenge facing the District is the decline of traditional industry in the area, especially textiles. However, the loss in industrial sewer revenues is expected to be offset from growing numbers of domestic customers and increased consumption rates. Based on the District’s projections for residential, commercial, and industrial sewer use, sewer rates will increase by 3.00% for the fiscal year ending June 30, 2012 to provide adequate funding for operations, debt service, and the District’s long‐term Capital Improvement Program.
Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Requests for Additional Information This report is designed to provide an overview of the District’s finances for those with an interest in this area. Questions concerning any of the information found in this report or requests for additional information should be directed to W. Scott Powell, Director of Finance, Metropolitan Sewerage District, 2028 Riverside Drive, Asheville, NC 28804, (828)‐255‐8211, or spowell@msdbc.org.
Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Statement of Net Assets June 30, 2011 Assets: Current assets: Cash and cash equivalents Restricted cash and cash equivalents Receivables (net): Accounts Sales Employee Interest Inventories Prepaid expenses Total current assets
$
35,574,345 6,938,290 4,548,059 385,565 21,521 236,912 293,362 2,500 48,000,554
Noncurrent assets: Restricted cash and cash equivalents Restricted Investments Total restricted assets
3,309,083 180,615 3,489,698
Deferred bond issuance costs-net
1,443,733
Deferred outflow of resources
3,550,286
Capital Assets: Land Easements Plant and equipment Construction in progress Less: accumulated depreciation Total property and equipment
2,515,666 6,061,191 470,224,018 4,818,414 (131,897,275) 351,722,014
Total noncurrent assets
360,205,731
Total assets
408,206,285
Liabilities and Net Assets: Current liabilities: Payments from current assets: Accounts payable and accrued expenses Current portion of compensated absences payable Payments from restricted cash and cash equivalents: Bond interest payable Current portion of long term obligations Total current liabilities
3,007,888 28,750 1,133,033 5,324,825 9,494,496
Noncurrent liabilities: Compensated absences, net of current portion Other post-employment benefits Derivative liability Deferred Revenue Long-term obligations, net of current maturities Total noncurrent liabilities
685,347 607,700 3,550,286 5,500 94,642,611 99,491,444
Total liabilities
108,985,940
Net assets: Invested in capital assets, net of related debt Restricted for Avery's Creek Sanitry District Restricted for debt service Restricted under bond covenant Unrestricted Total net assets
251,754,578 620,880 7,849,253 824,822 38,170,812 299,220,345
$
The accompanying notes are an integral part of the financial statements. Financial Section
| P a g e | 23
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Statement of Revenues, Expenses, and Changes in Net Assets For the Year Ended June 30, 2011
Operating revenues: Sewer charges Facility and tap fees Miscellaneous Total operating revenues Operating expenses: Salaries and employee benefits Contractual services Utilities Repairs and maintenance Other supplies and expenses Insurance claims and expenses Depreciation Total operating expenses Operating income
$
26,894,894 2,238,171 612,721 29,745,786 6,536,352 1,337,258 1,234,810 927,655 1,344,307 2,142,086 7,520,744 21,043,212 8,702,574
Nonoperating revenues (expenses): Interest income Interest expense Amortization of bond issuance costs Gain (Loss) on disposal of surplus property Total nonoperating revenues (expenses) Income before contributions
493,002 (2,619,031) (156,120) 42,232 (2,239,917) 6,462,657
Capital contribution
2,841,859
Change in net assets
9,304,516
Total Net Assets, beginning of year
289,915,829
Total Net Assets, end of year
$ 299,220,345
The accompanying notes are an integral part of the financial statements. Financial Section
| P a g e | 24
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Statement of Cash Flows For the Year Ended June 30, 2011 Cash flows from operating activities: Cash received from customers Sales tax paid Cash paid to employees for services Cash paid for goods and services Other operating revenue Net cash provided by operating activities
$
Cash flows from capital and related financing activities Acquisition and construction of capital assets Proceeds from sale of surplus property Proceeds from Buncombe County in Avery's Creek Sewerage District asset contribution Principal paid on bond maturities Interest paid on bond maturities Net cash used by capital and related financing activities
29,019,235 (119,277) (5,259,456) (8,046,356) 733,289 16,327,435
(13,476,416) 77,325 (1,435,851) (4,636,825) (3,292,443) (22,764,210)
Cash flows from investing activities: Proceeds from sale of Investments Purchases of investments Interest on investments Net cash provided by investing activities
1,220,000 (1,400,000) 427,656 247,656
Net increase (decrease) in cash and cash equivalents
(6,189,119)
Cash and cash equivalents, July 1 Cash and cash equivalents, June 30
$
52,010,837 45,821,718
Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Changes in assets and liabilities: (Increase) in receivables (Increase) in inventory Decrease in prepaid items (Decrease) in accounts payable and accrued expenses Increase in other post-employment benefits Increase in accrued compensated absences Total adjustments
$
8,702,574
Net cash provided by operating activities
$
Reconciliation of operating income to net cash provided by operating activities:
7,520,744 (112,539) (24,763) 450 (17) 182,000 58,986 7,624,861 16,327,435
Noncash investing, capital, and financing activities:
1.
At various times during the year ended June 30, 2011 the District received contribution of sewer lines constructed by developers with a reported estimated fair value of $742,770.
2.
During the year ended June 30, 2011, the District received the assets of the Avery's Creek Sewerage District from Buncombe County with a reported estimated fair value of $1,435,851. The accompanying notes are an integral part of the financial statements. Financial Section
| P a g e | 25
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Notes to Basic Financial Statements June 30, 2011 Note 1 ‐ Summary of Significant Accounting Policies The accounting policies of the Metropolitan Sewerage District of Buncombe County, North Carolina (District) conform to generally accepted accounting principles as applicable to enterprise‐type governments. The following is a summary of the more significant accounting policies:
A. Reporting Entity The District is a public body and body politic and corporate of the State of North Carolina, created pursuant to the North Carolina Metropolitan Sewerage Districts Act (Article 5, Chapter 162A of the General Statutes of North Carolina, as amended). The District was established in 1962 by the North Carolina State Stream Sanitation Committee for the purpose of constructing and operating facilities for sewage treatment within the political subdivisions serviced by the District as listed below. City of Asheville Beaverdam Water and Sewer District Town of Biltmore Forest Town of Black Mountain Busbee Sanitary Sewer District Caney Valley Sanitary Sewer District Crescent Hill Sanitary Sewer District Woodfin Sanitary Water and Sewer District
Town of Montreat Enka‐Candler Water and Sewer District Fairview Sanitary Sewer District Skyland Sanitary Sewer District Swannanoa Water and Sewer District Town of Weaverville Venable Sanitary District
Under the North Carolina Metropolitan Sewerage Districts Act, the District is authorized, among other things, to: (a) acquire, construct, improve, extend, maintain, and operate any sewerage system or part thereof (including facilities for the generation and transmission of electric power and energy) within or without the District; (b) to issue revenue bonds to pay the costs of any of the foregoing; and (c) to set and collect rents, rates, fees and other charges for provision of sewerage services and the use of any District facilities. The District Board consists of twelve members appointed as follows: three from the County of Buncombe, three from the City of Asheville, and one each from Woodfin Sanitary Water & Sewer District, and the Towns of Biltmore Forest, Black Mountain, Montreat, Woodfin, and Weaverville. The District owns, operates, and maintains a wastewater treatment plant as well as the related network of collector and interceptor sewers. The treatment plant has a capacity to treat up to 40 million gallons per day, but currently receives an average of 18.5 million gallons per day from approximately 50,000 residential and commercial customers transported through approximately 960 miles of collector sewers. The District’s basic financial statements include all transactions of the District for which the District is financially accountable. Financial accountability is defined as appointment of a majority of a component unit’s board and either the ability to impose the will of the District or the possibility that the component unit will provide a financial benefit to or impose a financial burden on the District. Based on these criteria, the District has determined that there are no component units, which come under the criteria for inclusion. The District is not a component unit of any other governmental entity. Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
B. Basis of Presentation ‐ Fund Accounting The accounts of the District are organized and operated on the basis of funds in accordance with the District’s Bond Order. A Fund is an independent fiscal and accounting entity with a self‐balancing set of accounts comprised of assets, liabilities, fund equity, revenues, and expenditures or expenses as appropriate. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance‐related legal and contractual provisions. The minimum number of funds is maintained consistent with legal and managerial requirements. The District presents the basic financial statements on an enterprise fund basis. The Enterprise Fund accounts for those operations (a) that are financed and operated in a manner similar to private business enterprises where the intent of the governing body is that costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that the periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, and other purposes.
C. Measurement Focus and Basis of Accounting The proprietary fund is accounted for on the flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Proprietary Funds are presented in the financial statements on the accrual basis of accounting. Under this basis, revenues are recognized in the accounting period when earned and expenses are recognized in the period they are incurred. As permitted by generally accepted accounting principles, the District has elected to apply only applicable FASB Statements and Interpretations issued before November 30, 1989 that do not contradict GASB pronouncements in its accounting and reporting practices for its enterprise operations.
D. Budgetary Data Budgets are adopted as required by state statute and in compliance with the Bond Order. All annual appropriations lapse at fiscal year‐end. The budget is prepared using the modified accrual basis of accounting, which is consistent with the accounting system used to record transactions during the fiscal year. Expenditures may not legally exceed appropriations at the functional level. Management is authorized to transfer appropriations within a department; however, any revisions that alter total expenditures of any function must be approved by the governing board. There were no budget amendments. As required by North Carolina state law (G.S. 159‐26(d)), the District maintains encumbrance accounts, which are considered to be “budgetary accounts.” Encumbrances outstanding at year‐end represent the estimated amounts of the expenditures ultimately to result if unperformed contracts in progress at year‐end are completed. Encumbrances outstanding at year‐end do not constitute expenditures or liabilities.
E. Deposits and Investments All deposits of the District are made in board‐designated official depositories and are secured as required by State law [G.S. 159‐31]. The District may designate as an official depository any bank or savings and loan association whose principal office is located in North Carolina. In addition, the Board may establish time deposit accounts such as NOW and SuperNOW accounts, money market accounts, and certificates of deposit. Financial Section
| P a g e | 27
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
State law [G.S. 159‐30(c)] authorizes the District to invest in obligations of the United States or obligations fully guaranteed both as to principal and interest by the United States; obligations of the State of North Carolina, (the “State”); bonds and notes of any North Carolina local government or public authority; obligations of certain non‐guaranteed federal agencies; certain high quality issues of commercial paper and bankers’ acceptances and the North Carolina Capital Management Trust (NCCMT). The District’s Bond Order limits investments to: a. government obligations; b. obligations of the following agencies: Federal Financing Bank, Federal Home Loan Banks; Federal Home Loan Mortgage Corporation (except for stripped mortgage securities which are purchased at prices exceeding their principal amounts), The Federal National Mortgage Association (except for stripped mortgage securities which are purchased at prices exceeding their principal amounts), the Government National Mortgage Association, the Federal Housing Administration and the Farmers Home Administration; c. direct general obligations of the State secured by the full faith and credit and taxing power of the State rated in one of the two highest rating categories by Moody’s and S&P; d. bonds and notes of any North Carolina local government or public authority (other than the District), subject to such restrictions as the Secretary of the Local Government Commission may impose, provided such bonds or notes are rated in one of the two highest rating categories by Moody’s and S&P; e. savings certificates or certificates of deposit issued by any commercial bank or savings and loans association organized under the laws of the State or in any federal bank or savings and loan association having its principal office in the State; provided, however, that any principal amount of such certificates in excess of the amount insured by the federal government or any agency thereof; or by a mutual deposit guaranty association authorized by the Administrator of the Savings Institutions Division of the Department of Commerce of the State, be fully collateralized by obligations reserved by financial institution; f.
prime quality commercial paper (having original maturities of not more than 270 days) bearing the highest rating of Moody’s and S&P and not bearing a rating below the highest by any nationally recognized rating service which rates the particular obligation;
g. Participating shares in the cash portfolio of North Carolina Capital Management Trust, provided that the investments of such fund are limited to those qualifying for investment under this definition and that said fund is certified by the Local Government Commission; h. A commingled investment pool established and administered by the State Treasurer pursuant to G. S. 147‐69.3; i.
Repurchase agreements with respect to Government Obligations if entered into with certain restrictions;
j.
Any other investment now or hereafter permitted for investment of funds by the District by the General Statutes of North Carolina, including, without limitation, Section 159‐30 of the General Statutes of North Carolina.
The District’s investments with a maturity of more than one year at acquisition and non‐money market investments are reported at fair value as determined by quoted market prices. The securities of the NCCMT Cash Portfolio, a SEC‐registered (2a – 7) money market mutual fund, are valued at fair value, which is the NCCMT’s share price. Money market investments that have a remaining maturity at the Financial Section
| P a g e | 28
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
time of purchase of one year or less are reported at amortized cost. Non‐participating interest earnings and investment contracts are reported at cost.
F. Restricted Assets and Liabilities Any unexpended bond proceeds from the revenue bonds issued by the District are classified as restricted assets because their use is completely restricted to the purpose for which the bonds were originally issued. Cash and investments included in the District’s bond service and debt service reserve accounts are classified as restricted because their use is completely restricted for reserves and debt service of the outstanding bonds. The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. Any amounts payable from restricted assets are considered restricted liabilities. At June 30, 2011, the bond interest payable of $1,133,033 and the current portion of long‐term debt $5,324,825 represents total restricted liabilities of the District.
G. Allowance for Doubtful Accounts All receivables that historically experience uncollectible accounts are shown net of an allowance for doubtful accounts. This amount is estimated based on the percentage of receivables that were written off in prior years. The allowance was $555,098 as of June 30, 2011.
H. Inventories Inventories consist of materials and supplies held for consumption and expensed as used. Inventories are valued at the lower of cost (first‐in, first‐out) or market.
I. Capital Assets
Capital assets, primarily property and equipment, are recorded at original cost at the time of acquisition or constructed. Donated assets are recorded at the estimated fair market value at the date of donation. Any interest incurred during the construction phase of capital assets is reflected in the capitalized value of the assets constructed. Assets costing at least $15,000 and with a useful life of over one year are capitalized. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Depreciation is computed on the straight‐ line basis. Assets are depreciated based on useful life estimated by District engineers as follows: See Note 5 for further details. Buildings and Waste Treatment Plants 50 years Improvements other than Buildings 10‐50 years Waste Treatment and Pumping Stations Machinery 10‐15 years Interceptor Sewer Lines 50‐100 years 50‐100 years Collector Sewer Lines Office Furniture and Fixtures 10 years Lab Equipment 5‐10 years Maintenance Equipment 5‐10 years Automobiles and Trucks 5‐10 years Communication Equipment 5‐10 years Computer equipment and software 3‐5 years Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
J. Deferred Bond Issuance Costs Costs incurred in issuing the Series 1992A revenue refunding bonds, Series 1992B revenue bonds, Series 1999 revenue bonds, Series 2001 revenue bonds, Series 2003 refunding revenue bonds, Series 2008A refunding revenue bonds, Series 2008B refunding revenue bonds, Series 2009A revenue bonds, and Series 2009B refunding revenue bonds have been deferred and are being amortized over the term of the bonds using an effective interest method of amortization.
K. Compensated Absences The vacation policy of the District provides for the accumulation of up to forty (40) days earned vacation leave with such leave being fully vested when earned. Accordingly, an expense and a liability for compensated absences and any salary‐related payments such as retirement contributions and payroll taxes are recorded. Accumulated earned vacation at June 30, 2011 is $714,097 and is included in accrued expenses. See Note 3D for further details. The District's sick leave policy provides for an unlimited accumulation of earned sick leave. Accumulated sick leave at June 30, 2011 amounts to approximately $2.2 million. Sick leave does not vest but any unused sick leave accumulated at the time of retirement may be used in the determination of length of service for retirement benefit purposes. Since the District has no obligation for the accumulated sick leave until it is actually taken, no accrual for sick leave has been made.
L. Cash Equivalents For the purposes of the statement of cash flows, the District considers all highly liquid investments (including restricted assets) with an original maturity of three months or less when purchased to be cash equivalents.
M. New Pronouncements The Governmental Accounting Standards Board (GASB) has issued several statements not yet implemented by the District. Those statements which may have future impact on the District include: Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, will be effective for the District beginning after December 15, 2011. The objective of this Statement is provide financial reporting guidance for deferred outflows of resources and deferred inflows of resources. The requirements of this Statement will improve financial reporting by standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government’s net position. It alleviates uncertainty about reporting those financial statement elements by providing guidance where none previously existed. Management is currently evaluating the impact of this statement will have on the District’s financial statements. Statement No. 64, Derivative Instruments: Application of Hedge Accounting Termination Provisions—an amendment of GASB Statement No. 53 will be effective for the District beginning after June 15, 2011. The objective of this Statement is to clarify whether an effective hedging relationship continues after the replacement of a swap counterparty or a swap counterparty’s credit support provider. This Statement sets forth criteria that establish when the effective hedging relationship continues and hedge accounting should continue to be applied as a component of investment income. The requirements of this Statement enhance comparability and improve financial reporting by clarifying the circumstances in which hedge accounting should continue when a swap counterparty, or a swap counterparty’s credit support provider, is replaced. Management is currently evaluating the impact of this statement will have on the District’s financial statements. Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
N. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
O. Operating and Nonoperating Revenues and Expenses The District defines operating revenue and expenses as those directly received and incurred in the process of providing wastewater collection and treatment. Nonoperating revenues and expenses are those resulting from incidental functions such as investment income, interest expense on long‐term debt, and sale of surplus equipment.
P. Deferred Revenue From time to time, the District may receive grants, cost‐sharing or other revenue with respect to future periods. Such funds are classified as deferred revenue and recognized in the period when the requisite activities and conditions are completed.
Note 2 ‐ Deposits and Investments A. Deposits All of the District’s deposits are either insured or collateralized by using the Pooling Method. Under the Pooling Method, which is a collateral pool, all uninsured deposits are collateralized with securities held by the state treasurer’s agent in the name of the state treasurer. Since the state treasurer is acting in a fiduciary capacity for the District, these deposits are considered to be held by the District’s agent in the District’s name. The amount of the pledged collateral is based on an approved averaging method for non‐interest‐bearing deposits and the actual current balance for interest‐bearing deposits. Depositories using the Pooling Method report to the state treasurer the adequacy of their pooled collateral covering uninsured deposits. The state treasurer does not confirm this information with the District or the escrow agent. Because of the inability to measure the exact amount of collateral pledged for the District under the pooling method, the potential exists for under collateralization, and this risk may increase in periods of high cash flows. However, the state treasurer enforces strict standards of financial stability for each depository that collateralizes public deposits under the Pooling Method and the District relies on the State Treasurer to monitor those financial institutions. The District’s formally adopted investment policy attempts to mitigate custodial credit risk for deposits by pre‐qualifying the financial institutions receiving funds. The District also complies with the provisions of G.S. 159‐31 when designating official depositories and verifying that deposits are properly secured. At June 30, 2011, the District’s deposits had a carrying amount of $36,347,393 and a bank balance of $36,429,860. Of the bank balance, $750,000 was covered by federal depository insurance and $35,679,860 in interest‐bearing deposits was covered by collateral held under the pooling method. At June 30, 2011, the District had a cash balance of $1,325,794, which was held by a bank trustee under various escrow agreements with collateralization agreements as determined sufficient by the respective bond attorneys. The cash resulted from several investments, which had recently matured. The amount was reinvested on July 1, 2011. At June 30, 2011, the District had $350 cash on hand. Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
B. Investments As of June 30, 2011, the District had the following investments and maturities. Investment Type US Government Agencies NC Capital Management Trust – Cash Total
Fair Value $ 1,324,615 $ 7,004,181 $ 8,328,796
Less Than 6 Months $ 1,144,000 N/A $ 1,144,000
6 to 12 Months N/A N/A N/A
1 to 2 Years
3 to 5 Years
N/A $ N/A N/A $
180,615 N/A 180,615
Interest Rate Risk—As a means of limiting its exposure to changes in fair value arising from rising interest rates, the District’s formally adopted investment policy calls for structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations and/or scheduled debt service, thereby avoiding the need to sell securities on the open market prior to maturity. In addition, the District invests operating funds primarily in shorter‐term securities. Credit Risk—Credit risk is the risk of loss due to the failure of the security issuer or backer. The District’s formally adopted investment policy mitigates credit risk by limiting investments to the safest types of securities and restricts the purchase of securities to the highest possible ratings whenever particular types of securities are rated. The District’s investments in the NC Capital Management Trust Cash Portfolio carried a credit rating of AAAm by Standard & Poor’s as of June 30, 2011. The District’s investments in US Agencies (such as and the Federal Home Loan Bank) is rated AAA by Standard & Poor’s and Aaa by Moody’s Investors Service as of June 30, 2011. Custodial Credit Risk—For an investment, custodial credit risk is the risk that in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The District’s formally adopted investment policy requires all transactions to be conducted on a delivery‐versus‐payment (DVP) basis and to be held by a contracted third party custodian and evidenced by safekeeping receipts. At June 30, 2011, the District did not have any investments exposed to custodial credit risk. Concentration of Credit Risk—The District’s investment policy mitigates concentration of credit risk, that is, the risk from the failure of any one entity or industry, by limiting the maximum amount of the District’s portfolio that may be invested in Bankers’ Acceptances and Commercial Paper to 20% each. In addition, the District’s formally adopted policy limits investment in any single issue of a non‐ governmental entity to the greater of $500,000 or 1% of the entire portfolio. The District had 15.9% invested in two Federal Home Loan Bank securities.
C. Forward Delivery Agreement Objective—In connection with the debt service reserve funds for the 2001 Bonds, the District entered into Forward Delivery Agreement (FDA) under which it has received a guarantee of the rate of return it will receive during the term of the agreement on amounts held in the reserve funds. Because this agreement is not held as an investment, its fair value is not included in the financial statements. However, all investments acquired under the terms of the agreement are presented at fair value. Terms—Under this agreement, the Provider agrees to sell the District qualifying investments bearing a certain rate of interest and maturing at times when cash is needed for debt service requirements. The agreement entered into for the Series 2001 bonds with Salomon Brothers Holding Company Inc. matures July 1, 2021. The guaranteed rate of return is 5.38% and covers approximately $1.1 million of debt service reserve funds. Financial Section
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Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Interest Rate Risk—The FDA minimized the risk of loss resulting from fluctuations in interest rates during the term of the contract, but the District has also foregone the possibility of receiving greater returns on debt service reserve funds from such fluctuations. At June 30, 2011, the District has approximately $1.1 million of investments held under the remaining contract. Credit Risk—Credit risk is the risk of loss due to the failure of the security issuer or backer. The GIC agreement provides for additional collateral or other remedies in the event the providing institution suffers a serious downgrade by one or more of the major investment rating firms. Currently Citigroup, of which Salomon Brothers is a subsidiary, is rated A3 by Moody’s Investors Service, A by Standard & Poor’s Ratings Services, and A+ by Fitch Ratings. Custodial Credit Risk—These investments are not subject to custodial risk because they are not evidenced by securities that exist in physical or book entry form. Termination Risk—In the event the District desires to terminate the agreement, the provider will compute the value of the contract based on prevailing interest rates. If the amount is positive, the District will pay the amount to the provider, or if negative, the provider will pay such amount to the District. Due to current interest rates being below those of the guaranteed rates, the District does not believe any termination risk exists at this time. The provider has no option to terminate the contract.
D. Hedging Derivative Instrument At June 30, 2011, the District had the following hedging derivative instrument: Type Objective Cash Flow Hedge: Pay‐ Fixed Interest Rate Swap
Hedge of changes in cash flows on the 2005/2008A Series Revenue Refunding Bonds
Fair Value June 30, 2011
Changes in Fair Value Notional Amount $33,280,000
Classification Amount Deferred Outflow of Resources
$773,984
Effective Date
Maturity Date
Classification
Amount
1/6/2005
7/1/2031
Debt
$(3,550,286)
The mark‐to‐market valuation was established by market quotations from the counterparty representing estimates of the amounts that would be paid for replacement transactions. Because the coupons on the District’s variable‐rate bonds adjust to changing interest rates, the bonds do not have a corresponding fair value increase. Objective—As a means to lower its borrowing costs, when compared against fixed‐rate bonds at the time of issuance in January 2005, the District issued variable interest rate debt and entered into an interest rate exchange agreement (swap) in connection with its variable rate $33,915,000 Series 2005 Revenue Refunding Bonds. The intention of the swap was to effectively change the District’s variable interest rate on the bonds to a synthetic fixed rate of 3.4175%. In April 2008, the District issued $33,635,000 Revenue Refunding Bonds Series 2008A to currently refund the Series 2005 Revenue Refunding Bonds. The swap described above now applies to the Series 2008A Revenue Refunding Bonds. Financial Section
| P a g e | 33
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Terms—Under the terms of the swap, the District pays the counterparty a fixed payment of 3.4175% and receives a variable payment computed as 59% of the one‐month London Interbank Offered Rate (LIBOR) plus 35 basis points. The swap had an initial notional amount equal to the associated Series 2005 variable rate bond principal amount of $33,915,000. The swap was entered into at the same time the Series 2005 bonds were issued in January of 2005. Starting in fiscal year 2006, the notional value of the swap and the principal amount of the associated debt declined in equal amounts. As the swap now applies to the Series 2008A bonds, the remaining notional value of the swap is correlated to the variable rate bond principal amount of $33,635,000. Starting in fiscal year 2010, the notional value of the swap and the principal amount associated debt decline in similar amounts until the debt is completely retired. The notional amount outstanding is $33,280,000 as of June 30, 2011. The bonds’ variable rate coupons are determined by the remarketing agent based on prevailing market conditions. This usually approximates The Securities Industry and Financial Markets Association (SIFMA). The bonds and the related swap agreement both mature on July 1, 2031. Credit risk—As of June 30, 2011, the District was not exposed to credit risk because the swap had a negative fair value. However, should interest rates change and the fair value of the swap becomes positive, the District would be exposed to credit risk in the amount of the swap’s fair value. The swap counterparty was rated Aa3 by Moody’s and A+ by Standard & Poor’s, and Fitch Ratings as of June 30, 2011. To mitigate the potential credit risk, if the counterparty’s credit quality falls below Baa3 (Moody’s) and BBB‐(S&P), the value of the swap may be fully collateralized by the counterparty or by several other means specified in the International Swap Dealers association (ISDA) Master Agreement and Counterparty Schedule. Interest Rate/Basis Risk—As noted above, the swap exposes the District to basis risk should the relationship between LIBOR and SIFMA diverge, changing the synthetic rate on the bonds. The effect of this difference in basis is indicated by the difference between the intended synthetic rate of 3.4175% and the actual synthetic rate for the period ending June 30, 2011 of 3.15%. As of June 30, 2011 the rate on the District’s bonds was .07% whereas 59% of one‐month LIBOR plus 35 basis points was .4595%. If a change occurs that results in the rates’ moving in a direction unfavorable to the District, the expected cost savings may not be realized. Termination Risk—The interest rate exchange contract uses the International Swap Dealers Association (ISDA) Master Agreement, which includes standard termination events, such as failure to pay and bankruptcy. The ISDA Schedule to the Master Agreement includes an “additional termination event.” That is, the swap may be terminated by the District if the counterparty’s credit quality rating falls below Baa3 (Moody’s) and BBB‐(S&P). The District or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. If the swap were terminated, the variable‐rate bonds would no longer carry a synthetic interest rate. In addition, if at the time of termination the swap has a negative fair value, the District would be liable to the counterparty for a payment equal to the swap’s fair value. Market Access Risk/Rollover Risk—The District’s interest rate exchange contract is for the term (maturity) of the bonds and therefore there is no market‐access risk or rollover risk. Financial Section
| P a g e | 34
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Note 3 ‐ Long‐Term Debt Obligations A. Long‐Term Debt The District issues debt to help finance the cost of rehabilitation of wastewater interceptor and collection infrastructure, and treatment plant facilities. Unlike cities and counties, the District has no legal debt limit. However, the District must comply with the legal requirements contained in its Bond Order as described in Note 11. The District’s borrowings are subject to federal arbitrage regulations; however, management does not anticipate any material liability for arbitrage from any of these debt issues. The District currently has the following issues outstanding: Original Issue Amount
Revenue Bonds: Series 1992A, Revenue Refunding Bonds Series 1992B, Revenue Bonds Series 1993A, Revenue Refunding Bonds Series 1999, Revenue Bonds Series 2001, Revenue Bonds Series 2003, Revenue Refunding Bonds Series 2008A, Revenue Refunding Bonds Series 2008B, Revenue Refunding Bonds Series 2009A, Revenue Bonds Series 2009B, Revenue Refunding Bonds
$
20,845,000 22,500,000 33,130,000 31,815,000 21,020,000 26,970,000 33,635,000 22,165,000 17,205,000 13,360,000
672,980
State Revolving Fund: 2009 North Carolina Water Pollution Control Revolving Fund
The following is a summary of changes in the Districts’ long‐term debt for the fiscal year ended June 30, 2011:
Balance July 1, 2010
Additions
Retirements
Balance June 30, 2011
Revenue refunding bonds (Series 1992A) issued for the defeasance of Series 1986A revenue bonds: 6.60% term bonds issued April 1, 1992, at 100%, due July 1, 2007 through 2010, interest payable ‐ $ 25,000 $ semi‐annually. $ 25,000 $ Revenue bonds (Series 1992B) issued for construction costs during the final phase of the sewer wastewater treatment plant and improvements to selected interceptor sewers: 6.60% term bonds issued April 1, 1992, at 100%, due July 1, 2007 through 2010; interest payable ‐ 25,000 semi‐annually. 25,000
Revenue Bonds:
Financial Section
‐
‐
| P a g e | 35
Metropolitan Sewerage District of Buncombe County, North Carolina
Balance July 1, 2010
FY Ending June 30, 2011
Additions
Retirements
Balance June 30, 2011
Revenue bonds (Series 2001) issued for construction costs of a portion of the construction costs of a five‐year capital improvement plan adopted by the District: 2.80% to 4.50% serial bonds issued December 13, 2001, with maturities on each July 1, 2004 through 2013 varying from $250,000 to 1,535,000 ‐ 1,045,000 490,000 $555,000; interest payable semi‐annually Enka‐Candler Water and Sewer District Bonds liability assumed by the District on July 2, 1990 as stated in the sewer consolidation agreement: 5.00% serial bonds assumed July 2, 1990 with maturities on each June 1, through 2024 varying from $19,000 to $64,000, interest payable semi‐ ‐ 759,000 50,000 annually 809,000 Revenue refunding bonds (Series 2003) issued for the defeasance of a portion of the Series 1992A and 1992B revenue refunding bonds, and Series 1993A revenue bonds 2% to 5.25% serial bonds issued April 3, 2003, with maturities on each July 1, 2004 through 2022 varying from $205,000 to $2,730,000; 14,205,000 ‐ ‐ 14,205,000 interest payable semi‐annually 4% term bonds issued April 3, 2003, at 100% due July 1, 2014; interest payable semi‐annually
1,915,000
5,000
‐
1,910,000
4% term bonds issued April 3, 2003, at 99.09% ‐ 1,825,000 25,000 July 1, 2014; interest payable semi‐annually 1,850,000 Total ‐ Series 2003 Bonds 17,970,000 ‐ 30,000 17,940,000 Revenue Refunding Bonds (Series 2008A) issued to currently refund the Series 2005 Revenue Refunding Bonds: Interest at variable rates in the weekly mode, ‐ 180,000 33,280,000 payable monthly, due serially until 2031 33,460,000 Revenue Refunding Bonds (Series 2008B) issued to currently refund the Series 2005 Revenue Refunding Bonds Interest at variable rates in the weekly mode, ‐ payable monthly, due serially until 2031 21,445,000 740,000 20,705,000 2.0% to 5.00% serial bonds issued October 7, 2009, with maturities on each July 1, 2010 through 2024 varying from $400,000 to $700,000; interest payable semi‐annually.
7,920,000
5.00% term bonds issued October 7, 2009, at 109.001%, due July 1, 2029; interest payable semi‐annually. 2.0% to 5.00% serial bonds issued 5.00% term bonds issued October 7, 2009, at 107.240%, due July 1, 2034; interest payable semi‐annually. Total ‐ Series 2009A Bonds
4,065,000
‐
400,000
7,520,000
‐
‐
4,065,000
5,220,000 16,805,000
5,220,000
‐
‐
17,205,000
‐
400,000
Financial Section
| P a g e | 36
Metropolitan Sewerage District of Buncombe County, North Carolina Balance July 1, 2010
FY Ending June 30, 2011
Additions
Revenue Refunding Bonds (Series 2009B) used to refund portions of Series 1999 2.0% to 5.00% serial bonds issued October 7, 2009, with maturities on each July 1, 2010 through 2019 varying from $595,000 to ‐ $3,100,000; interest payable semi‐annually 13,360,000 Total Revenue Bonds 105,834,000 ‐
State Revolving Fund:
Balance June 30, 2011
Retirements
2,680,000 10,680,000 4,620,000 101,214,000
2009 North Carolina Water Pollution Control Revolving Fund used to construct certain sewerage projects $672,980 revolving loan issued August 18, 2009 unpaid principal sum is reduced by one‐half as "Principal Forgiveness", interest accrues at 0%, ‐ 16,825 20 annual installments May 1, 2011 to 2030. 336,490 Total State Revolving Fund 336,490 ‐ 16,825 Total Long‐Term Obligations Less net of unamortized discounts and premiums Series 1992A Series 1992B Series 2001 Series 2003 Series 2008A Series 2008B Series 2009A Series 2009B 2009 State Revolving Fund Enka‐Candler
106,170,490 (1,365,765) 104,804,725
‐
‐
4,636,825
101,533,665
200,464
25,000 25,000 490,000 30,000 180,000 740,000 400,000 2,680,000 16,825 50,000 (4,636,825) $100,167,900
319,665 319,665
(1,566,229) 99,967,436
‐ ‐ 1,045,000 30,000 185,000 770,000 415,000 2,810,000 16,825 53,000 (5,324,825) $94,642,611
Financial Section
| P a g e | 37
Metropolitan Sewerage District of Buncombe County, North Carolina
Maturities of long‐term debt are as follows: Principal Serial and Mandatory Year Ending Term Sinking Fund June 30: Maturity Requirements (Term Bonds) 2012 2013 2014 2015 2016
FY Ending June 30, 2011
Total
Interest
$ 5,294,825 $ 4,386,825 5,184,824 2,157,824 6,020,824 23,045,122
30,000 35,000 35,000 3,635,000 ‐ 3,735,000
$ 5,324,825 4,421,825 5,219,824 5,792,824 6,020,824 26,780,122
$ 3,904,137 3,702,901 3,494,039 3,287,196 3,049,444 17,437,717
Five Years Ending June 30: 2021 21,074,122 2026 23,952,123 2031 22,172,298 2035 5,560,000 $ 95,803,665 $
1,995,000 ‐ ‐ ‐ 5,730,000
23,069,122 23,952,123 22,172,298 5,560,000 $101,533,665
12,256,223 7,548,725 3,202,454 462,652 $ 40,907,771
The mandatory sinking fund requirements for the term bonds set forth above assume sufficient cash flow to provide for the sinking fund requirements. To the extent the sinking fund does not fully redeem the term bonds, the Series 1992A and 1992B bonds are payable in full at maturity on July 1, 2012, the Series 1999 bonds are payable in full at maturity on July 1, 2019, and the Series 2003 bonds are payable in full at maturity on July 1, 2014. The revenue bonds are secured by and payable solely from all sewer revenues of the District after provisions for operating expenses and from certain reserves and other monies of the District, as described in the bond order. Additional remittance requirements to the trustee for a sinking fund to redeem the term bonds, subordinated indebtedness outstanding, if any, and other purposes are set forth in the bond order. Commencing on or after July 1, 2013, the District may redeem in whole or in part, any of the Series 2003 bonds maturing on or after July 1, 2014, at 0% premium. Interest costs of $423,881 have been capitalized in the cost of construction for the year ended June 30, 2011. Net interest expense not capitalized in 2011 was $2,619,031.
B. Variable Debt Interest rates—Interest rates for variable debt change weekly as determined by the responsible remarketing agent based on competitive municipal bond rates in the secondary market. Liquidity Agreement—The District has entered into a remarketing agreement with the Bank of America to perform various functions in connection with the Series 2008A and Series 2008B variable debt. The Remarketing Agent’s major responsibilities include (i) soliciting of purchases of Bonds from qualified investors, (ii) processing and recordkeeping for such purchases, (iii) billing and receiving payment for Financial Section
| P a g e | 38
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Bonds purchased, and (iv) determining the interest rate on the Bonds as provided in the Series Resolution.
C. Hedging Derivative and Associated Hedged Debt As of June 30, 2011, debt service requirements of the variable‐rate debt and net swap payments, assuming current interest rates remain the same for their term were as follows. As rates vary, variable‐ rate bond interest payments and net swap payments will vary. Fiscal Year Ending June 30 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Variable Rate Bonds Principal Interest $
185,000 $ 170,000 740,000 765,000 790,000 825,000 855,000 885,000 920,000 2,075,000 2,160,000 2,235,000 2,320,000 2,400,000 2,485,000 2,585,000 2,685,000 2,785,000 2,890,000 1,240,000 1,285,000 $ 33,280,000 $
23,296 $ 23,167 23,048 22,530 21,994 21,441 20,864 20,265 19,646 19,002 17,549 16,037 14,473 12,849 11,169 9,429 7,620 5,740 3,791 1,768 900 316,578 $
Interest Rate Swap, Net 984,421 $ 978,949 973,920 952,031 929,402 906,034 881,631 856,340 830,162 802,948 741,570 677,677 611,566 542,940 471,948 398,442 321,978 242,556 160,176 74,689 38,010 13,377,390 $
Total 1,192,717 1,172,116 1,736,968 1,739,561 1,741,396 1,752,475 1,757,495 1,761,605 1,769,808 2,896,950 2,919,119 2,928,714 2,946,039 2,955,789 2,968,117 2,992,871 3,014,598 3,033,296 3,053,967 1,316,457 1,323,910 46,973,968
Financial Section
| P a g e | 39
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
The computations above are based on the following interest assumptions. Terms Interest Rate Swap: Fixed Payment to Counterparty Fixed Variable Payment from Counterparty 59% of LIBOR plus 35 Basis Points Net Interest Rate Swap Payments Variable‐rate Bond Coupon Payments Remarketed Rate Synthetic Interest Rate on Bonds
Rates at 6/30/2011
3.4175% (.4595%) 2.9580% .0700% 3.0280%
D. Compensated Absences Changes to the liability for compensated absences were as follows: Balance June 30, 2010 $ Additions Withdrawals Balance June 30, 2011 $
655,111 586,670 (527,684) 714,097
The District accounts for compensated absences on a LIFO basis, assuming that employees are taking leave time as it is earned. For the year ended June 30, 2011, the District estimates that $28,750 is the current portion of this liability.
Note 4 ‐ Defeasance of Bonds 1999 Refunding On April 12, 1999, the District deposited with an escrow agent sufficient funds to purchase Treasury obligations maturing as to principal and interest at such times and in such amounts as shall be sufficient to pay the principal and interest on a portion of the Series 1992A, Series 1992B, and Series 1993A bonds as follows: 1992A Revenue Refunding Term Bonds $ 3,545,000 1992B Revenue Refunding Term Bonds 2,395,000 1993A Revenue Serial Bonds 975,000 1993A Revenue Term Bonds 6,685,000 Total
$ 13,600,000
2003 Refunding On April 3, 2003, the District issued $26,970,000 of revenue advance refunding bonds to provide resources to purchase U.S. Government securities that were placed in an irrevocable trust for the purpose of general resources for all future debt service payments of $26,890,000 of 1992A, 1992B, and 1993A revenue bonds redeemed July 1, 2003. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the statement of net assets. The reacquisition price exceeded the net carrying amount of the old debt by $1,900,825. This amount is being netted against the new debt and amortized over the life of the refunded debt, which is shorter than the life of the new debt issued. This advance refunding was undertaken to reduce total debt service payments over the next 20 years by $3,591,700 and resulted in an economic gain of $2,026,796. Financial Section
| P a g e | 40
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
2005 Refunding On January 6, 2005, the District issued $33,915,000 of revenue advance refunding bonds to provide resources to purchase U.S. Government securities that were placed in an irrevocable trust for the purpose of general resources for all future debt service payments for $14,125,000 of 1999 bonds to be redeemed on July 1, 2009, and for $17,030,000 of 2001 bonds to be redeemed on July 1, 2011. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the statement of net assets. The reacquisition price exceeded the net carrying amount of the old debt by $2,760,000. This amount is being netted against the new debt and amortized over the life of the refunded debt, which is shorter than the life of the new debt issued. This advance refunding was undertaken to reduce total debt service payments over the next 25 years by $4,009,602 and resulted in an economic gain of $2,501,941. Summary Depositing these funds amounted to a defeasance of a portion of the 1992A, 1992B, 1993A, 1999 and 2001 series bonds. These liabilities, as well as the funds held by the escrow agent, were removed from the District’s financial statements. The defeased bonds at June 30, 2011 had the following outstanding balances: 1992A 1992B 1993A 2001
June 30, 2010 $
$
New
3,525,000 $ 2,375,000 6,685,000 17,030,000
Retired
29,615,000 $
June 30, 2011
‐ $ ‐ ‐ ‐
1,085,000 $ 725,000 1,025,000 ‐
2,440,000 1,650,000 5,660,000 17,030,000
‐ $
2,835,000
26,780,000
$
Outstanding amounts will be redeemed as follows: 1992A 1992B 1993A 2001
July 1, 2011 $
$
1,180,000 $ 800,000 1,080,000 17,030,000 20,090,000 $
July 1, 2012
July 1, 2013
1,260,000 $ 850,000 1,140,000 ‐ 3,250,000 $
‐ ‐ 3,440,000 ‐ 3,440,000
Financial Section
| P a g e | 41
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Note 5 ‐ Capital Assets A summary of changes in capital assets follows below. Capital Assets Not Being Depreciated Land Easements Buildings not currently in service Construction In Progress Total Capital Assets Not Being Depreciated Capital Assets Being Depreciated Buildings & Waste Treatment Plants Improvements & Other than Bldgs. Machinery & Equipment Interceptor Sewer Lines Collector Lines Automobiles and Trucks Computer Equipment Office Furniture & Equipment Total Capital Assets Being Depreciated Less Accumulated Depreciation Buildings & Waste Treatment Plants Improvements & Other than Bldgs. Machinery & Equipment Interceptor Sewer Lines Collector Lines Automobiles and Trucks Computer Equipment Office Furniture & Equipment Total Accumulated Depreciation Total Capital Assets Being Depreciated, Net
Balance 6/30/10 $ 2,515,666 5,689,498 1,159,908 5,478,752
Additions $
‐ ‐ ‐ 16,290,942
Disposals $
14,843,824 16,290,942
47,897,401 3,803,650 48,447,147 102,296,341 242,739,098 3,991,747 521,894 584,142
‐ 26,521 178,991 ‐ 2,804,280 245,028 76,048 ‐
450,281,420
3,330,868
(16,840,251) (2,462,996) (40,569,310) (15,875,708) (45,248,601) (2,889,840) (402,839) (559,036) (124,848,581)
(957,396) (160,993) (860,904) (1,169,090) (4,589,810) (318,793) (62,540) (21,840) (8,141,366)
325,432,839 (4,810,498) $ 340,276,663 $ 11,480,444 $
Balance 6/30/11
Transfers ‐ ‐ ‐ ‐
$
‐ 371,693 ‐ (16,951,280) ‐ (16,579,587) (16,241) ‐ (13,276) 332,149 (761,235) 2,405,953 (26,866) 6,351,990 (128,104) 7,489,495 (156,992) ‐ (25,051) ‐ ‐ ‐ (1,127,765) 16,579,587 12,997 ‐ 10,621 ‐ 732,041 ‐ 26,866 ‐ 128,104 ‐ 156,992 ‐ 25,051 ‐ ‐ ‐ 1,092,672 ‐ (35,093) ‐ (35,093) $ ‐
$
2,515,666 6,061,191 1,159,908 4,818,414
14,555,179
47,881,160 4,149,044 50,270,856 108,621,465 252,904,769 4,079,783 572,891 584,142 469,064,110
(17,784,650) (2,613,368) (40,698,173) (17,017,932) (49,710,307) (3,051,641) (440,328) (580,876) (131,897,275)
337,166,835 $ 351,722,014
Fully depreciated assets—The District currently has fully depreciated capital assets still in service with a historical cost of approximately $41.8 million, consisting primarily of sewer collector and interceptor lines, wastewater treatment plant facilities, and various machinery and equipment. Buildings not being depreciated—In January of 1999, the District modified its sewage treatment process, which resulted in retiring the digester equipment. However, the building in which it had been housed is still suitable for use, and accordingly, depreciation will not be charged until it is placed back in service. Contributed infrastructure—The District’s responsibility is to maintain existing collector and interceptor sewer lines as well as to provide wastewater treatment. The majority of sewer lines added Financial Section
| P a g e | 42
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
to the District are constructed by member agencies or developers and donated to the District. Occasionally, owners of private lines will petition the District to take over their sewer lines as well. This infrastructure must meet minimum District engineering standards, and when accepted by Board action, the District assumes all responsibility for future maintenance and rehabilitation. During the year ended June 30, 2011, the District accepted capital assets with an estimated fair market value of $742,770. As of July 1, 2010, Buncombe County transferred the operations of the Avery’s Creek Sanitary District (ACSD) to the District. All remaining assets of ACSD were transferred to the District. This included $663,238 in restricted cash as well as $2,056,471 in capital assets with accumulated depreciation of $620,620. The restricted cash is to be used for maintenance of the transferred capital assets. As of June 30, 2011, the District incurred $42,358 in maintenance cost for ACSD. Easements—The District acquires right‐of‐way easements in the course of sewer line rehabilitation projects. These easements have an indefinite useful life and are recorded at cost.
Note 6 ‐ Pension Plan Obligation A. North Carolina Local Governmental Employees' Retirement System Plan Description—The District contributes to the statewide Local Governmental Employees’ Retirement System (LGERS), a cost‐sharing multiple‐employer defined benefit pension plan administered by the State of North Carolina. LGERS provides retirement and disability benefits to plan members and beneficiaries. Article 3 of G.S. Chapter 128 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. The Local Governmental Employees’ Retirement System is included in the Comprehensive Annual Financial Report (CAFR) for the State of North Carolina. The State’s CAFR includes financial statements and required supplementary information for LGERS. That report may be obtained by writing to the Office of the State Controller, 1410 Mail Service Center, Raleigh, North Carolina 27699‐1410, or by calling (919) 981‐5454. Funding Policy— Plan members are required to contribute six percent of their annual covered salary. The District is required to contribute at an actuarially determined rate. For the District, the current rate for employees is 6.35% of annual covered payroll. The contribution requirements of members of the District are established and may be amended by the North Carolina General Assembly. The District’s contributions to LGERS for the years ended June 30, 2011, 2010 and 2009 were $468,731, $349,086, and $349,101 respectively. The contributions made by the District equaled the required contributions for each year.
B. Supplemental Retirement Income Plan for Non‐Law Enforcement Officers 401(k) Plan Plan Description—The District contributes to the Supplemental Retirement Income Plan of North Carolina, often referred to as the State’s 401(k) Plan, a defined contribution pension plan administered by the Department of State Treasurer and a Board of Trustees. The Plan provides retirement benefits to employees of the District who are members of the Local Government Employees’ Retirement System. Article 5 of G.S. Chapter 135 assigns the authority to establish and amend benefit provisions to the North Carolina General Assembly. Funding Policy—Employee contributions are voluntary and must conform to applicable IRS limits. The District has a graduated matching contribution plan as follows: if an employee contributes 1%, 2% or 3%, the District will contribute 2%, 4%, or 5%, respectively, of their salary to either the 401(k) plan or the 457 plan described below. The District Board has the authority to establish and amend contribution Financial Section
| P a g e | 43
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
requirements. During the year ended June 30, 2011, a total of $279,652 and $278,720 were contributed by the District and employees, respectively.
C. Deferred Compensation Plan Plan Description—The District also offers its employees a deferred compensation plan, another type of defined contribution plan, established under the Internal Revenue Code Section 457. The plan allows employees to defer receipt and taxation of a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. The plan is administered by a third party administrator who establishes and amends benefit provisions within the provisions of the Internal Revenue Code Section 457. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, and rights (until paid or made available to the employee or other beneficiary) are held in trust for the exclusive benefit of participants and their beneficiaries. As such, these assets and the related obligations are not reported in these financial statements. Funding Policy—Employee contributions are voluntary and must conform to applicable IRS limits. The District has a graduated matching contribution plan as follows: if an employee contributes 1%, 2% or 3%, the District will contribute 2%, 4%, or 5%, respectively, of their salary to either the 401(k) plan described above or the 457 plan. The District Board has the authority to establish and amend contribution requirements. During the year ended June 30, 2011, $28,385 and $31,487 were contributed by the District and employees, respectively, to the deferred compensation plan.
Note 7 ‐ Other Employment Benefit Death Benefits—The District has elected to provide death benefits to employees through the Death Benefit Plan for Members of the Local Governmental Employees' Retirement System (Death Benefit Plan), a multiple‐employer State‐administered cost‐sharing plan funded on a one‐year term cost basis. The beneficiaries of those employees who die in active service after one year of contributing membership in the System, or who die within 180 days after retirement or termination of service and have at least one year of contributing membership service in the System at the time of death are eligible for death benefits. Lump sum death benefit payments to beneficiaries are equal to the employee's 12 highest months’ salary in a row during the 24 months prior to his/her death, but the benefit may not be below $25,000 or exceed $50,000. All death benefit payments are made from the Death Benefit Plan. The District has no liability beyond the payment of monthly contributions. Contributions are determined as a percentage of monthly payroll, based upon rates established annually by the State. Because the benefit payments are made by the Death Benefit Plan and not by the District, the District does not determine the number of eligible participants. For the fiscal year ended June 30, 2011, the District made contributions of $7,382 to the State to provide death benefits. The District's required contributions for employees represented 0.10% of covered payroll. The contributions to the Death Benefit Plan cannot be separated between the post‐employment benefit amount and the other benefit amount.
Note 8 ‐ Other Post‐Employment Benefits Healthcare Benefits Plan Description—Under terms of a District resolution, the District administers a single‐employer defined benefit group health and dental insurance plan (the GHD Plan). As of May 14, 2008, the plan allow retirees to continue coverage under the Districts' self‐insured group health and dental insurance Financial Section
| P a g e | 44
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
plan until the earlier of (1) reaching age 65; or (2) becoming covered under another group medical plan; or (3) failing to timely pay any required premium for such coverage. The District will pay the premium cost for the eligible retired employee as follows: Years of Service
Subsidy Vesting %
30 years at any age
100%
25 years at 55 years of age
90%
20 years at 55 years of age
80%
15 years at 55 years of age
65%
10 years at 55 years of age
55% ‐ Existing Employees 50% ‐ Employees hired after 7/1/08
5 years at 55 years of age
50% ‐ Existing Employees
In addition, the District’s retirees can purchase coverage for their spouse at full actuarial cost. The District’s Board may amend the benefit provisions. Membership in the District’s GHD Plan consisted of the following at July 1, 2010, the date of the latest actuarial valuation:
Employees
Retirees Receiving Benefits Active Plan Members Total
1
148
149
Funding Policy—The District pays the full cost of coverage for the healthcare benefits provided to qualified retirees under the plan. The District has chosen to fund the healthcare benefits on a pay as you go basis. Funding for these costs is included in budgeted appropriations in the annual budget. For the current year, the District contributed 18,600 or .3% of annual covered payroll. The current ARC rate is 2.8% of annual covered payroll. The District had two participating retiree who contributed $7,340. Summary of Significant Accounting Policies— Postemployment expenditures are made from the Post employment account, which is maintained on the accrual basis of accounting. Expenditures are paid as they come due. The District’s board has agreed to set aside funds on an annual basis equivalent to the annual ARC requirement as determined by the District’s actuarial consultants. As of June 30, 2011, the District set aside $636,243. These funds are to be used to meet the District’s future post‐employment obligation. Annual OPEB Cost and Net OPEB Obligation—The District‘s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. Financial Section
| P a g e | 45
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
The following table shows the components of the District’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the District’s net OPEB obligation for the healthcare benefits: Annual Required Contribution $ 200,200 Interest on Net OPEB Obligation 17,000 Adjustment to Annual Required Contribution 16,600 Annual OPEB Cost (Expense) 200,600 Contributions Made 18,600 Increase (Decrease) in Net OPEB Obligation 182,000 Net OPEB Obligation, beginning of year 425,700 NET OPEB Obligation, end of year $ 607,700 The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2011, 2010, and 2009 were as follows: Percentage of For the Year Net OPEB Annual OPEB Cost Annual OPEB Cost Ended June 30 Obligation Contributed 2009 $ 212,000 0.0% $ 212,000 2010 $ 221,400 3.5% $ 425,700 2011 $ 200,600 9.3% $ 607,700 Funded Status and Funding Progress—As of July 1, 2010 the most recent actuarial valuation date, the plan was not funded. The actuarial accrued liability for benefits and, thus, the unfunded actuarial accrued liability (UAAL) was $1,678,300. The covered payroll (annual payroll of active employees covered by the plan) was $7,147,000 and the ratio of the UAAL to the covered payroll was 23.5%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and healthcare trends. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions—Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members at that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short‐term volatility in actuarial accrued liabilities and the actuarial value assets, consistent with the long‐term perspective of the calculations. In the July 1, 2010 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial assumptions included a 4.0% investment rate of return (net of administrative expenses), which is the expected long‐term investment returns on the employer’s own investments calculated Financial Section
| P a g e | 46
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
based on the funded level of the plan at the valuation date, and an annual medical cost trend increase of 9.0% to 5.0% annually. The investment rate included a 3.0% inflation assumption. The UAAL is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at July 1, 2010 was 30 years.
Note 9 ‐ Risk Management The District has established a self‐insured group health and dental insurance program, which provides medical coverage up to a maximum of $50,000 per employee, and approximately $1,000,000 in the aggregate. The District purchases commercial insurance for claims in excess of coverage. All employees participate in the program and are responsible for premium and co‐payment amounts as determined by the District. Charges to the Enterprise Fund are adjusted annually so that the Program revenues and expenses are approximately equal and there is an adequate amount in reserves in the event the District decides to discontinue the plan. The accrued self‐insurance claims liability of $136,435 reported at June 30, 2011 represents estimated claims liabilities, including incurred but not reported losses, at the estimated ultimate cost of settling the claims using historical experience as determined by the Third Party Administrator (TPA). Changes since inception in the claims liability amount are as follows: Current Year Fiscal Year Beginning of Claims & Claim Balances at Ending Fiscal Year Changes in Payments Fiscal Year End June 30 Liability Estimates 1995 $ 72,152 $ 530,786 $ 540,818 $ 62,120 1996 62,120 775,891 702,688 135,323 1997 135,323 381,338 433,163 83,498 1998 83,498 304,519 352,603 35,414 1999 35,414 484,512 451,556 68,370 2000 68,370 635,222 659,136 44,456 2001 44,456 610,882 577,655 77,683 2002 77,683 543,810 495,395 126,098 2003 126,098 783,630 818,228 91,500 2004 91,500 772,527 742,557 121,470 2005 121,470 1,030,787 1,036,715 115,542 2006 115,542 1,134,973 1,084,686 165,829 2007 165,829 1,092,881 1,147,691 111,019 2008 111,019 1,129,645 1,126,860 113,804 2009 113,804 1,217,628 1,278,376 53,056 2010 53,056 1,378,101 1,320,028 111,129 2011 111,129 1,622,029 1,596,723 136,435 The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District participates in two self‐funded risk‐financing pools administered by the North Carolina League of Municipalities. Through these pools, the District obtains general liability and auto liability coverage, property coverage up to the total insurance values of the property policy, and workers’ compensation coverage up to statutory limits. The pools are reinsured through commercial companies for single occurrence claims Financial Section
| P a g e | 47
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
against general liability, auto liability, and property in excess of $500,000 and $300,000 up to statutory limits for workers’ compensation. The property liability pool has an aggregate limit for the total property losses in a single year, with the reinsurance limit based upon a percentage of the total insurance values. The District carries commercial coverage for all other risks of loss. There have been no significant reductions in insurance coverage in the prior year, and settled claims have not exceeded coverage in any of the past three fiscal years. The District carries flood insurance through the National Flood Insurance Plan (NFIP). Because the District’s structures, situated adjacent to the French Broad River, are in an “A” area designated by the Federal Emergency Management Agency, the District has purchased coverage in the maximum amount of $500,000 through the NFIP for each eligible structure. Management believes this will be adequate to remediate flood damage to exposed buildings and their contents. In accordance with G.S. 159‐29, the District has adopted a system of blanket faithful performance bonds for all employees and has purchased coverage of $100,000 from a commercial insurance carrier. The Finance Officer is individually bonded for $250,000.
Note 10 ‐ Construction in Progress and Future Expansion Plans During the year ended June 30, 2002, consulting engineers finalized a comprehensive twenty‐year Wastewater System Master Plan to guide the District in reducing sanitary sewer overflows (SSOs) as well as keeping up with the maintenance and management of its infrastructure. The plan estimated that the District would need to spend approximately $257 million over a twenty‐year period. Portions of this Master Plan are periodically updated as required to meet the needs identified by engineering staff for the Water Reclamation Facility and the collector and interceptor sewer lines. The District uses these plans, along with other resources including representatives from the member agencies, to develop a ten‐year Capital Improvement Plan projected to spend an average of $14.9 million annually. The District expects to fund these costs out of user charges along with the issuance of additional bonds. As of June 30, 2011, the District had begun sewer projects expected to incur future costs of approximately $35.5 million, and the District is committed under various contracts encumbered for sewer construction and rehabilitation estimated to cost $5 million to complete. The majority of encumbered contracts are expected to be completed within the next fiscal year, and the projects currently under construction are scheduled to be completed within the next two to five years.
Note 11 ‐ Bond Covenants The District is subject to the 1999 Amended Bond Order, which contains several operational directives including internal accounting fund structure, disclosure of financial records, and setting rates. The District was in compliance with all requirements of the Bond Order during the year ended June 30, 2011. A copy of the Bond Order may be obtained by contacting the Director of Finance. Financial Section
| P a g e | 48
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
The District is required by the 1999 Amended Bond Order to set rates as summarized by the following: The District covenants to set rates and charges so that the Income Available for Debt Service (defined as the excess of “Revenues” over “Current Expenses”) will not be less than the greater of (i) one hundred twenty percent (120%) of the Long‐Term Debt Service Requirement for Parity Indebtedness only for such Fiscal Year and (ii) one hundred percent (100%) of the Long‐Term Debt Service Requirement for Parity Indebtedness and Subordinated Indebtedness for such Fiscal Year. The definition of revenues for this purpose does not include grants, contributions, investment income credited to non‐operating funds, or tap and connection fees. However, tap and connection fees may be considered revenues upon a resolution duly passed by the Board. Current expenditures include operating expenses other than additions to reserve funds, depreciation or amortization, or debt service payments. Long‐Term Debt Service Requirement means the aggregate of the required deposits to be made in respect of principal and interest. The various Bond Series Resolutions require either monthly or semi‐annual deposits of the upcoming principal and interest payments to be received by the Trustee at least one day prior to the payment date. In other words, during the fiscal year ended June 30, 2011, the Long‐Term Debt Service Requirement equaled principal and interest due on January 1, 2011 and July 1, 2011. The District does not currently have any subordinated indebtedness, so the computation of the current fiscal year’s compliance with this covenant is based solely on 120% of the debt service requirement as follows: Operating Revenues $ 29,745,786 Interest and Non‐Operating Revenues 1,198,472 Adjustments to Revenues: Interest Income allocable to Non‐Operating Funds (263,744) Donation (663,238) Facility, Tap, and Other Fees (2,320,276) (Gain) on Disposal of Property (42,232) Adjusted Revenues 27,654,768 Less: Operating Expenses (21,043,212) Add back Depreciation 7,520,744 Adjusted Current Expenditures (13,522,468) Income Available for Debt Service $ 14,132,300 Long Term Debt Service Requirement Minimum Required Percentage Minimum Required Income
$
8,565,201 120% 10,278,241
Therefore, the District is in compliance with the rate covenant as income available for debt service is in excess of 120% of the annual required debt service. The actual coverage ratio is 165%. Financial Section
| P a g e | 49
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Note 12 ‐ Hydroelectric Power The District operates a hydroelectric generation facility on the French Broad River in proximity to the wastewater treatment plant. In some years with above average rainfall, sufficient quantities of electricity are produced to supply all of the plant’s needs with excess electricity generated being sold to Progress Energy. During the year ended June 30, 2011, the District generated power used by the plant, which was estimated to have a net cost after deducting expenditures to generate such power of approximately $311,000 if purchased. An immaterial amount was sold to Progress Energy. This is considerably lower than in prior years due to rainfall that was significantly below average levels.
Note 13 ‐ Operating Leases Rental Income The District has entered into a cancelable agreement expiring in 2016 with an optional two‐year renewal, with Pace Analytical Services Inc. (Pace) which leases a portion of a building in the Wastewater Treatment Plant facilities along with laboratory equipment. In lieu of direct cash payments to the District for rent, Pace performs certain water sampling and analytical services required under the terms and conditions of the District’s NPDES Permit and its Industrial Waste Pretreatment Program. In the event that the fair market value of services rendered is less than the rent payment, Pace will remit funds for the deficit to the District. Conversely, if the fair market value of the laboratory services rendered exceeds the rental amount, the District will pay Pace for the difference. This agreement had an annual value of $60,000, and this amount is accordingly reflected as rental income and operating expense in these financial statements. The District has also entered in to a cancelable lease expiring in 2015 with an optional two‐year renewal, with Buncombe County Partnership for Children to lease the old Administration Building at an annual rent of $51,312. The final cancelable, renewable agreement entered into by the District is with a private company to lease land upon which the private company has placed a cell tower. The lease may be renewed indefinitely for five‐year terms with 15% increases upon each renewal, and will provide $19,044 annually until the next scheduled increase in 2015. Following are the carrying values of leased assets, along with current year depreciation and total accumulated depreciation at June 30, 2011. The value of the land leased for a cell tower is not included as it is immaterial and not otherwise useful to the District in current operations. Accumulated Leased Asset Cost Book Value Depreciation Portion of Plant Building (estimate) Laboratory Equipment Old Administration Building Office Equipment & Fixtures
$
426,000 $ 14,251 467,008 16,742
331,004 $ ‐ 202,312 ‐
95,026 14,251 204,696 16,742
Lease Expense The District leases certain office equipment under operating leases. Lease expenditures for these and other rental agreements during the year ended June 30, 2011 totaled $24,819. Financial Section
| P a g e | 50
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Future minimum lease payments are as follows: Year Ended June 30 2012 2013 2014 2015 2016 Total
Amount $
S
20,660 19,617 14,651 11,800 2,244 68,972
Note 14 ‐ Claims and Judgments The District may be a party to lawsuits arising from the ordinary conduct of business. In the opinion of management, settlement of actual or possible litigation, if any, will not have a material effect on the financial position of the District.
Note 15 – Subsequent Events The District has evaluated subsequent events through October 24, 2011, which is the date the financial statements were available to be issued.
Financial Section
| P a g e | 51
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
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Financial Section
| P a g e | 52
REQUIRED SUPPLEMENTAL INFORMATION
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Other Post‐Employment Benefits Required Supplement Information Schedule of Funding Progress Actuarial Valuation Date
Actuarial Value of Assets
(a)
7/1/2008 7/1/2010
$
Actuarial Accrued Liability Entry Age (b)
‐ $ 1,801,000 ‐
1,678,300
Unfunded AAL (UAAL)
Funded Ratio
Covered Payroll
% of Covered Payroll
(b‐a)
(a/b)
( c )
((b‐a) / c)
$1,801,000 1,678,300
0.0% $ 6,532,000
27.6%
0.0%
23.5%
7,147,000
Financial Section
| P a g e | 53
Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
Other Post‐Em mployment Benefits Requiired Supp plement IInformatiion Employer Contribu ution and Notes to o the Req quired Sch hedules
Year Ended June 30 0, 2009
Annu ual Required d Co ontribution $
P Percentage C Contributed
212,0000
0.0%
2010
221,5000
3.5%
2011
200,2000
9.3%
Notes to the e Required Scchedules ‐ This information presented in the requireed supplemen ntary schedules was determined as part of the e actuarial vaaluations at th he dates indiccated. Additio onal informattion as of the latest actuarial valluation follow ws:
Valuation Dat V te
• 7/1/2010
Actuarial Cost Metho od
• Entry Age N Normal
od Amortizaation Metho
• Level Perce entage of Paay, Open
Remainin ng Amortiization Perio od
• 30 Years • Investment Rate of Reeturn • Inflation Assumption • Healthcare e Cost Trend Rate
Actuarial Assumption ns
‐ ‐ ‐
4.0% % 3.0% % 9% in nitial, 5% ulttimate
Finan ncial Section
| P a g e | 54
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
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Financial Section
| P a g e | 55
SUPPLEMENTAL FINANCIAL DATA
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Comparative Statement of Net Assets June 30, 2011 and 2010 2011 Assets: Current assets: Cash and cash equivalents Restricted cash and cash equivalents Receivables (net): Accounts Sales Employee Interest Due for State Agency Inventories Prepaid expenses Total current assets
$
35,574,345 6,938,290
2010
$
41,580,024 7,021,092
4,548,059 385,565 21,521 236,912 293,362 2,500 48,000,554
4,434,229 266,288 15,690 172,181 126,399 268,599 2,950 53,887,452
3,309,083 180,615 3,489,698
3,409,721 3,409,721
Deferred bond issuance costs-net
1,443,733
1,599,853
Deferred outflow of resources
3,550,286
4,324,270
Noncurrent assets: Restricted cash and cash equivalents Restricted Investments Total restricted assets
Capital Assets: Land Easements Plant and equipment Construction in progress Less: accumulated depreciation Total property and equipment Total noncurrent assets Total assets Liabilities and Net Assets: Current liabilities: Payments from current assets: Accounts payable and accrued expenses Current portion of compensated absences payable Payments from restricted cash and cash equivalents: Bond interest payable Current portion of long term debt Total current liabilities Noncurrent liabilities: Compensated absences, net of current portion Other post-employment benefit Derivative liability Deferred Revenue Bonds payable, net of current maturities Total noncurrent liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted for debt service Restricted for Avery's Creek Sanitary District Restricted for capital projects Restricted under bond covenant Unrestricted Total net assets
$
2,515,666 6,061,191 470,224,018 4,818,414 (131,897,275) 351,722,014
2,515,666 5,689,498 451,441,328 5,478,752 (124,848,581) 340,276,663
360,205,731
349,610,507
408,206,285
403,497,959
3,007,888 28,750
2,184,724 28,750
1,133,033 5,324,825 9,494,496
1,182,100 4,636,825 8,032,399
685,347 607,700 3,550,286 5,500 94,642,611 99,491,444
626,361 425,700 4,324,270 5,500 100,167,900 105,549,731
108,985,940
113,582,130
251,754,578 7,849,253 620,880 824,822 38,170,812 299,220,345
235,471,938 7,093,201 1,343,058 812,454 45,195,178 289,915,829
$
Financial Section
| P a g e | 56
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Comparative Statement of Revenue, Expenses, and Changes in Net Assets For the Years Ended June 20, 2011 and 2010
2011 Operating revenues: Sewer charges Facility and tap fees Miscellaneous Total operating revenues Operating expenses: Salaries and employee benefits Contractual services Utilities Repairs and maintenance Other supplies and expenses Insurance claims and expenses Depreciation Total operating expenses Operating income
$
Nonoperating revenues (expenses): Interest income Interest expense Amortization of bond issuance costs Gain (Loss) on disposal of surplus property Total nonoperating expenses Income before contributions Capital contribution Change in net assets
Total Net Assets, beginning of year Total Net Assets, end of year
26,894,894 2,238,171 612,721 29,745,786
2010 $
25,369,818 1,654,010 770,389 27,794,217
6,536,352 1,337,258 1,234,810 927,655 1,344,307 2,142,086 7,520,744 21,043,212 8,702,574
6,303,951 1,240,175 1,111,644 851,966 1,468,655 1,778,336 8,556,365 21,311,092 6,483,125
493,002 (2,619,031) (156,120) 42,232 (2,239,917) 6,462,657
578,302 (2,934,980) (145,827) 67,099 (2,435,406) 4,047,719
2,841,859
1,128,684
9,304,516
5,176,403
289,915,829
284,739,426
$ 299,220,345
$ 289,915,829
Financial Section
| P a g e | 57
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Schedule of Revenues and Expenditures – Budget and Actual (NON‐GAAP) For the Year Ended June 30, 2011 Budget Revenues: Operating revenues: Sewer charges (net): Domestic users Industrial users Billings and collections
$
Facility and tap fees City of Asheville(Enka Bonds) Rental Income Miscellaneous Total operating revenues Nonoperating revenues: Interest income Total nonoperating revenues Total revenues
Expenses: Operating expenses: Salaries and employee benefits Contractual services Utilities Repairs and maintenance Other supplies and expenses Insurance claims and expenses Total operating expenses Capital Projects: Equipment Infrastructure Total capital projects Debt service Principal Interest Total debt service Total Expenses Revenues over (under) expenses
Revenues and other financing sources over (under) expenditures and other financing uses
Actual
23,654,586 1,562,644 645,243 25,862,473
$
$
1,031,642 2,758 (1,979) 1,032,421
2,238,171 37,085 20,507 555,129 29,745,786
869,201 869,201
493,002 493,002
28,117,345
30,238,788
2,121,443
13,926,160
6,536,352 1,337,258 1,234,810 927,655 1,344,307 2,142,086 13,522,468
403,692
22,916,471
457,576 16,082,779 16,540,355
6,376,116
8,577,769
5,324,825 2,891,515 8,216,340
361,429
45,420,400
38,279,163
7,141,237
(8,040,375)
9,262,680
-
1,334,421 85 3,947 126,768 2,497,642
(376,199) (376,199)
-
17,303,055 17,303,055
$
24,686,228 1,565,402 643,264 26,894,894
903,750 37,000 16,560 428,361 27,248,144
(17,303,055)
Other Financing Sources: Use of available funds
Variance Favorable (Unfavorable)
$
(8,040,375)
(17,303,055) (17,303,055)
$
(8,040,375)
Financial Section
| P a g e | 58
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Schedule of Revenues and Expenditures – Budget and Actual (NON‐GAAP) For the Year Ended June 30, 2011
Actual Reconciliation from budgetary basis (modified accrual) to full accrual: Revenues and other financing sources over (under) expenditures and other financing uses
$
Reconciling items: Interest expense capitalized Change in accrued interest expense Unamortized discount recognized in interest expense Debt principal payments Capital project transfers Contributed assets Avery's Creek assets contributed by Buncombe County Depreciation Gain (Loss) on disposal of surplus property Amortization of bond issuance cost
(8,040,375)
423,881 49,067 (200,464) 5,324,825 16,540,355 2,841,859 (7,520,744) 42,232 (156,120)
Total reconciling items
17,344,891
Change in net assets
$
9,304,516
Financial Section
| P a g e | 59
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Combining Statement of Net Assets, All Funds (NON‐GAAP) June 30, 2011 Capital Reserve Account
Enterprise Acccount Assets: Current assets: Cash and cash equivalents Investments Restricted cash and cash equivalents Restricted investments Receivables (net): Accounts Sales Tax Employee Interest Inventories Prepaid expenses Total current assets
4,548,059 229,884 21,521 874 293,362 2,500 27,235,415
-
Noncurrent assets: Restricted cash and cash equivalents Restricted investments Total restricted assets
-
Deferred bond issuance costs-net
$
-
$
6,317,410 -
$
Construction Account
General Account
Capital Account
Total
- $ -
4,648,714 $ -
7,970,822 620,880 -
815,594 $ -
35,574,345 6,938,290 -
6,317,410
-
151,598 4,800,312
236,038 8,827,740
4,083 819,677
4,548,059 385,565 21,521 236,912 293,362 2,500 48,000,554
824,822 824,822
-
2,484,261 180,615 2,664,876
-
-
-
3,309,083 180,615 3,489,698
-
-
-
-
-
-
1,443,733
1,443,733
Deferred outflow of resources
-
-
-
-
-
-
3,550,286
3,550,286
Capital Assets: Land Easements Plant and equipment Construction in progress Less accumulated depreciation Total property and equipment
-
-
-
-
-
-
27,235,415
824,822 824,822
6,317,410
2,664,876 2,664,876
4,800,312
Total noncurrent assets Total assets
22,139,215 -
Debt Service Reserve Account
Bond Service Account
2,515,666 6,061,191 470,224,018 4,818,414 (131,897,275) 351,722,014
2,515,666 6,061,191 470,224,018 4,818,414 (131,897,275) 351,722,014
8,827,740
356,716,033 357,535,710
360,205,731 408,206,285
General Account
Capital Account
Enterprise Account Liabilities and Net Assets: Current liabilities: Payments from current assets: Accounts payable and accrued expenses Current portion of compensated absences payable Payments from restricted cash and cash equivalents: Bond interest payable Current portion of long-term obligation Total current liabilities Noncurrent liabilities: Compensated absences, net of current portion Other post-employment benefits Derivative Liability Deferred Revenue Long-term obligations, net of current maturities Total noncurrent liabilities Total liabilities Net assets: Net assets
$
Capital Reserve Account
Debt Service Reserve Account
Bond Service Account
Construction Account
Total
1,259,446 28,750
-
-
-
1,679,102 -
12,640 -
56,700 -
3,007,888 28,750
1,288,196
-
1,133,033 1,133,033
-
1,679,102
12,640
5,324,825 5,381,525
1,133,033 5,324,825 9,494,496
685,347 607,700 5,500 1,298,547
-
-
-
-
-
3,550,286 94,642,611 98,192,897
685,347 607,700 3,550,286 5,500 94,642,611 99,491,444
2,586,743
-
1,133,033
-
1,679,102
12,640
103,574,422
108,985,940
253,961,288 $
299,220,345
24,648,672 $
824,822 $
5,184,377 $
2,664,876 $
3,121,210 $
8,815,100 $
Financial Section
| P a g e | 60
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Combining Schedule of Revenues, Expenses, and Changes in Net Assets – All Funds (NON‐GAAP) For the Year Ended June 30, 2010 Enterprise Account Operating revenues: Sewer charges (refunds) Facility and tap fees Miscellaneous Total operating revenues
Capital Reserve Account
$ 26,894,894 $ 517,006 27,411,900
Debt Service Reserve Account
Bond Service Account
- $ -
-
-
$
Construction Account
- $ -
Operating expenses: Operations Depreciation Total operating expenses Operating income (loss)
13,397,738 13,397,738 14,014,162
-
Nonoperating revenues (expenses): Interest income Interest expense Less capitalized interest Amortization of bond issuance costs Gain (Loss) on disposal of surplus property Miscellaneous expense Total nonoperating revenues (expenses) Income (loss) before other transactions
229,258 77,325 306,583 14,320,745
12,368 12,368 12,368
60 (3,042,912) 423,881 (2,618,971) (2,618,971)
67,609 67,609 67,609
-
8,368,120 (423,881)
-
1,399,424
12,368
(4,636,825) 688,443
67,609
23,249,248
812,454
4,495,934
Capital contribution Operating transfers Purchase of and transfer capital assets Payment of debt: Principal Change in net assets
Total Net Assets, beginning of year Total Net Assets, end of year
(12,463,745) (457,576)
-
2,597,267
General Account
- $ - $ 2,238,171 95,715 2,333,886
Capital Account
Total
-
$ 26,894,894 2,238,171 612,721 29,745,786
19,167 19,167 (19,167)
2,333,886
105,563 7,520,744 7,626,307 (7,626,307)
13,522,468 7,520,744 21,043,212 8,702,574
105,205 105,205 86,038
70,021 70,021 2,403,907
8,481 (156,120) (35,093) (182,732) (7,809,039)
493,002 (3,042,912) 423,881 (156,120) 42,232 (2,239,917) 6,462,657
2,841,859 4,215,871 (370,710) (16,082,779) (2,183,659)
250,464 19,147,895
2,841,859 -
(11,780,870)
2,691,397
4,636,825 16,226,145
9,304,516
14,902,080
6,123,703
237,735,143
289,915,829
$ 24,648,672 $ 824,822 $ 5,184,377 $ 2,664,876 $ 3,121,210 $ 8,815,100 $ 253,961,288 $ 299,220,345
Financial Section
| P a g e | 61
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
This page intentionally left blank.
Financial Section
| P a g e | 62
STATISTICAL SECTION
StaƟsƟcal SecƟon
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Introduction This part of MSD’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.
Financial Trends These schedules contain trend information to help the reader understand how the District’s financial performance and well‐being have changed over time.
Net Assets by Component Changes in Net Assets General Revenue by Source Expenses by Function
Revenue Capacity These schedules contain information to help the reader assess the District’s most significant revenue sources.
Sewer Charge Revenue by Type of Customer Residential Sewer Rates Principal Commercial Users
Debt Capacity 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.
Ratios of Outstanding Debt Revenue Bond Coverage
Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the District’s financial activities take place.
Demographic & Economic Statistics Personal Income by Industry Principal Employers
Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the District’s financial report relates to the services the District provides and the activities it performs.
Operating Indicators by Division Employees by Division
Source: Unless otherwise noted, the information in theses schedules is derived from the comprehensive annual financial reports for the relevant year. The District implemented GASB Statement 34 in the year ended June 30, 2003, therefore certain schedules do not contain information prior to this year. Statistical Section
| P a g e | 63
Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
Net Asse ets by Componentt
FY En nding June 30, 2011
FY 20 003 to FY Y 2011
Fisscal Ye ear End ded June e 30
Invested in Capiital Assets, N Net of Related Debt
Resstricted
Unrestrictted
TTotal Net Assets
20 003
$ 188,888,1 144
$ 8,930,265 8
$ 26,071,210
$ 223,889,619 2 9
20 004
200,997,2 207
9,156,422 9
22,071,391
232,225,020 2 0
20 005
190,156,0 068
11 1,404,911
38,055,205
239,616,184 2 4
20 006
197,656,0 088
9,446,269 9
38,041,0 095
245,143,452 2 2
20 007
214,808,6 683
9,447,494 9
36,699,672
260,955,849 2 9
20 008
231,678,0 011
8,886,108 8
33,968,233
274,532,352 2 2
20 009
244,875,7 790
9,493,497 9
30,570,139
284,939,426 2 6
20 010
235,471,9 938
9,248,713 9
45,195,178
289,915,829 2 9
20 011
251,754,5 578
9,294,955 9
38,170,8 812
299,220,345 2
Note: MSD D implemente ed GASB Stattements 34 aand 35 in FY 22003. In the future, up to o nine (9) prior years will be presented with the cu urrent year to illustrate t he District’s financial performance ovver time. neral Revenu ues by Sourcee and Expensses by Function on the fo ollowing The reader may refer to Gen page es containingg detailed com mparisons ove er the past teen years.
Statisstical Section n
| P a g e | 64
Miscellaneous
796,882 761,655 1,667,717 8,297,106
Repairs and maintenance
Other supplies and expenses
Insurance claims and expenses
Depreciation
24,791,169
18,488,479
17,446,973
4,994,835
Income before contributions & special items 2,187,732
Statistical Section $ 6,284,330
$ 7,391,164
‐
$ 8,335,401
3,053,623 ‐
3,340,566
4,184,135
$ 5,527,268
(2,678,176)
$ 15,812,397
‐
8,404,343
7,408,054
(1,828,865)
(13,698)
(80,684)
(3,924,737)
2,190,254
9,236,919
19,783,776
7,806,535
1,759,923
1,320,107
945,091
1,384,603
1,194,932
5,372,585
29,020,695
1,194,643
3,054,950
$ 24,771,102
FY 2007
$ 13,576,503
‐
6,244,304
7,332,199
(2,135,509)
(49,926)
(91,286)
(3,736,405)
1,742,108
9,467,708
19,135,947
7,065,752
1,753,911
1,288,061
877,634
1,265,901
1,167,260
5,717,428
28,603,655
702,777
3,005,184
$ 24,895,694
FY 2008
$ 10,078,974
‐
5,856,798
4,222,176
(2,549,376)
22,150
(73,887)
(3,545,226)
1,047,587
6,429,731
21,329,342
8,520,993
1,726,689
1,337,610
877,124
1,298,053
1,387,098
6,181,775
27,759,073
509,239
2,959,115
$ 24,290,719
FY 2009
$ 5,176,403
‐
1,128,684
4,047,719
(2,613,792)
67,099
(145,827)
(3,113,366)
578,302
6,483,125
21,311,092
8,556,365
1,778,336
1,468,655
851,966
1,111,644
1,240,175
6,303,951
27,794,217
770,389
1,654,010
$ 25,369,818
FY 2010
$ 9,304,516
‐
2,841,859
6,462,657
(2,663,798)
42,232
(156,120)
(3,042,912)
493,002
8,702,574
21,043,222
7,520,744
2,142,086
1,344,307
927,665
1,234,810
1,337,258
6,536,352
29,745,786
612,721
2,238,171
$ 26,894,894
FY 2011
Note: MSD implemented GASB Statements 34 and 35 in FY 2003. In the future, up to nine (9) prior years will be presented with the current year to illustrate the District’s financial performance over time. The reader may refer to General Revenues by Source and Expenses by Function on the following pages containing detailed comparisons over the past ten years.
Increase in net assets
4,096,598 ‐
Capital contribution
4,021,309
(2,413,103)
(101,491)
(81,306)
(4,152,308)
1,922,002
6,434,412
19,553,799
7,700,136
1,712,310
1,233,017
888,423
1,319,915
1,062,093
5,637,905
25,988,211
525,392
2,481,850
$ 22,980,969
FY 2006
Changes in Net Assets (Accrual Basis of Accounting)
Special items
4,337,541
60,985 (2,204,305)
‐ (2,349,361)
Total nonoperating revenues (expenses)
(2,060,141)
54,230
Gain (loss) on sale of surplus property
(67,760)
(3,482,174)
1,284,644
(93,432)
(2,703,836)
(2,757,040) (99,610)
Interest expense
447,907
6,541,846
7,319,331
7,344,196
1,649,369
1,443,927
1,225,679
907,881
943,951
1,041,397
6,871,100
962,080
772,187
1,153,457
1,067,585
5,400,871
1,091,124 25,030,325
594,118
5,176,637
1,769,620
$ 22,169,581
FY 2005
2,050,380
$ 22,146,671
FY 2004
742,279
4,247,873
Amortization of bond issuance costs
Interest income
Nonoperating revenues (expenses):
Operating income
19,095,715
1,154,367
Utilities
Total operating expenses
5,502,176 915,812
Salaries & employee benefits
Contractual services
Operating expenses:
23,343,588
502,172
Facility and tap fees
Total operating revenues
$ 21,283,426 1,557,990
Sewer charges
Operating revenues:
FY 2003
Metropolitan Sewerage District of Buncombe County, North Carolina FY Ending June 30, 2011
FY 2003 to FY 2011
| P a g e | 65
Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
General Revenue es by Source
FY En nding June 30, 2011
FY 20 002 to FY Y 2011
Fiscal Year Ended 0 June 30 2002
Industtrial Sewe er Chargges
Domestic Sewer C Charges
Facility & & Tap Feess
Misce ellaneous
Total
2,539 9,868
17 7,848,396
1,518,94 40
1,042,874 1
22,950,0 078
2003
3,169 9,870
18 8,113,556
1,557,99 90
1,298,681 1
24,140,0 097
2004
2,858 8,675
19 9,287,996
2,050,38 80
1,042,025 1
25,239,0 076
2005
2,912 2,188
19 9,257,393
1,769,62 20
2,436,753 2
26,375,9 954
2006
2,617 7,298
20 0,363,671
2,481,85 50
2,447,394 2
27,910,2 213
2007
2,693 3,328
22 2,077,774
3,054,95 50
3,384,897 3
31,210,9 949
2008
1,510 0,669
23 3,385,025
3,005,18 84
2,444,885 2
30,345,7 763
2009
1,386 6,132
22 2,904,587
2,959,11 15
1,578,976 1
28,828,8 810
2010
1,498 8,529
23 3,871,289
1,654,01 10
1,348,691 1
28,372,5 519
2011
1,565 5,402
25 5,329,492
2,238,17 71
1,147,955 1
30,281,0 020
Note: Doe es not include e Capital Conttributions.
Statisstical Section n
| P a g e | 66
Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
Expense es by Funcction
FY En nding June 30, 2011
FY 20 002 to FY Y 2011
Fiscal Year Ended June 30
Operatingg Expenses
(1 1)
Cap pital Improvement
Capital Contributions
(2)
(3)
Debtt Service (3)
Totaal
2002
10,647,19 93
12 2,553,858
2,874 4,738
5,497,793 31,57 73,582
2003
10,798,60 09
8 8,441,950
4,924 4,338
4,691,040 28,85 55,937
2004
10,575,87 73
11 1,816,018
3,340 0,566
4,754,836 30,48 87,293
2005
11,169,14 48
14 4,055,591
3,053 3,623
6,179,174 34,45 57,536
2006
11,853,66 63
11 1,213,052
4,184 4,135
7,071,308 34,32 22,158
2007
11,977,24 41
12 2,574,902
8,404 4,343
7,650,737 40,60 07,223
2008
12,070,19 95
12 2,471,794
6,244 4,304
8,419,405 39,20 05,698
2009
12,808,34 49
12 2,447,791
5,856 6,798
6,413,405 37,52 26,343
2010
12,754,72 27
9 9,173,231
1,128 8,684
7,212,980 29,14 40,938
2011
13,522,46 68
16 6,226,145
2,841 1,859
7,255,856 37,00 04,469
Note: (1) Includess general operations (2) Excludess depreciation expense. (3) This includes collectio on system inffrastructure ccontributed bby developerss. (4) Includess Bond Principal Expense and Bond Intterest Less CCapitalized Intterest Portion and exclud des early retireme ent of long‐te erm debt.
Statisstical Section n
| P a g e | 67
Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
Sewer Charge Re evenue byy Custom mer Type
FY 20 003 to FY Y 2011
FY 2003
FYY 2004
FY 20005
FY 2006
FY 2007
FY 2008
FY 20099
FY 2010
FY 2011
Asheville
$ 14,108,130
$ 155,256,447
$ 15,284,4448
$ 15,933,744
$ 17,083,346
$ 17,,979,548
$ 17,930,8555
$ 18,669,278
$ 19,638,890
Biltmore Forest
266,354
252,008
248,6609
268,993
266,318
288,205
282,6556
275,621
286,574
Black Mountain
719,448
726,796
704,4476
764,964
857,251
819,685
888,3668
905,930
921,612
Henderson County
595,780
679,790
445,2217
570,818
762,702
1,,133,375
925,7444
813,927
1,044,736
Montreat
186,002
185,604
209,9974
192,327
263,354
278,131
207,0887
242,821
233,859
Weaverville
464,927
505,419
547,4485
528,099
598,764
661,716
602,2332
611,983
608,323
Water & Sewer District Woodfin Sanitary W
678,807
597,993
656,3303
759,633
848,640
842,717
758,2994
803,368
924,567
Other
1,094,108
1,083,939 1
1,160,8881
1,345,093
1,397,399
1,,381,648
1,309,3551
1,548,361
1,670,931
3,169,870
2,858,675 2
2,912,1188
2,617,298
2,693,328
1,,510,669
1,386,1332
1,498,529
1,565,402
$ 21,283,426
$ 222,146,671
$ 22,169,5581
$ 22,980,969
$ 24,771,102
$ 24,,895,694
$ 24,290,719
$ 25,369,818
$ 26,894,894
Domestic Users
Industrial Users Tootal
D implemente ed GASB Stattements 34 aand 35 in FY 22003. In the future, up to o nine (9) prior years Note: MSD will be presented d with the currrent year to illustrate the District’s finaancial perform mance over time. Mun nicipalities include sewer charges on w water bills. "O Other" represents sewer charges billed directly by M MSD to domestic users on wells and to septage haul ers.
Statisstical Section n
| P a g e | 68
Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
Custome ers by Me ember Aggency
FY 20 003 to FY Y 2011
FY 2003 Asheville Woodfin Sanitary W Water & Sewer Districtt
FYY 2004
FY 20005
FY 2006
FY 2007
FY 2008
FY 20099
FY 2010
FY 2011
33,400 2,300
34,300 2,300
355,000 2 2,330
35,900 2,330
36,700 2,330
37,582 2,374
37,8878 2,5579
37,878 2,306
38,906 2,317
Black Mountain
2,300
2,350
2 2,375
2,400
2,479
2,519
2,5579
2,559
2,572
Weaverville
1,270
1,300
1 1,390
1,400
1,403
1,488
1,5503
2,246
2,281
Henderson County
1,611
1,817
2 2,106
2,237
2,574
2,957
3,0073
3,165
3,182
Biltmore Forest
624
631
637
642
637
633
6 636
644
639
Montreat
620
647
642
642
653
651
6 652
656
667
42,125
43,345
444,480
45,551
46,776
48,204
48,9900
49,454
50,564
Total
Note: MSD D implemente ed GASB Stattements 34 aand 35 in FY 22003. In the future, up to o nine (9) prior years will be presented d with the currrent year to illustrate the District’s finaancial perform mance over time. Source: Member Agenc M cies
Statisstical Section n
| P a g e | 69
Metropolitan Sewerage District of Buncombe County, North Carolina
Residential Sewer Rates
FY Ending June 30, 2011
FY 2002 to FY 2011
Fiscal Year Ended June 30
Monthly Base Rate
Rate Per 1,000 Gallons
Average Monthly Billing
2002
$ 4.40
$ 3.82
$ 19.48
2003
4.51
3.92
20.04
2004
4.60
4.00
20.43
2005
4.69
4.06
20.83
2006
4.83
4.20
21.45
2007
5.05
4.39
22.41
2008
5.25
4.56
23.28
2009
5.41
4.69
23.99
2010
5.61
4.87
24.84
2011
5.81
5.04
25.72
Note: Rates are based on 5/8" meter, which is the standard household meter size. The District charges a higher base rate for larger meters. Each municipality will set its own water rates.
Statistical Section
| P a g e | 70
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Principal Commercial Users
FY 2002 & FY 2011
2002 Commercial User
Type of Business
Total Charges
2011
Percentage Rank of Total Charges
Rank
$ 507,417
1
Percentage of Total Charges
Milkco, Inc.
Dairy Products & Juices
$ 420,433
3
Mission Health System
Health & Emergency Services
153,341
5
0.75 243,939
2
0.91
Ridgecrest Baptist Conference Center
Christian Conference Center
‐
‐
‐
168,202
3
0.63
Givens Estates
Retirement Community
‐
‐
‐
130,550
4
0.49
Jacob Holms Industries
Textile Manufacturing
‐
‐
‐
118,375
5
0.44
VA Medical Center ‐ Asheville Department of Veterans Affairs
Veterans Hospital
97,612
7
0.48 116,196
6
0.43
Colbond, Inc.
Chemical Manufacturer
‐
‐
‐
101,740
7
0.38
Day International
Textile Machine Parts
28,279
10
0.14 99,335
8
0.37
Arcadia Dairy Farm
Dairy Products & Juices
‐
‐
‐
73,876
9
0.27
The Biltmore Company
Tourist Attraction/Winery/Resort Services
‐
‐
‐
64,574
10
0.24
Lustar Dyeing & Finishing
Textile Manufacturing
706,850
1
3.47 ‐
‐
‐
Anvil Kintwear ‐ (formerly Asheville Dyeing & Finishing)
Textile Manufacturing
429,980
2
2.11
‐
‐
Owen Manufacturing Company, Inc.
Textile Manufacturing
217,216
4
1.07 ‐ ‐
‐
Grove Park Inn
Resort/Spa/Convention Services
129,507
6
0.64
‐
‐
‐
Beacon Blankets
Textile Manufacturing
44,914
9
0.22
‐
‐
‐
Uniform Rental Service
Uniform Rental
50,091
8
0.25
‐
‐
‐
TOTAL
$ 2,278,223
2.06%
Total Charges
11.17%
‐
$ 1,624,204
Source: District Billing Records
Statistical Section
1.89%
6.04%
| P a g e | 71
Metropolitan Sewerage District of Buncombe County, North Carolina
Ratio of Outstanding Debt
FY Ending June 30, 2011
FY 2003 to FY 2011
Fiscal Year
Revenue Bonds 1
Debt Per Capita 2
Per Capita Income 3
Percentage of Personal Income
2003
$ 85,751,666
$ 883
$ 27,770
3.18%
2004
83,788,169
843
29,932
2.82%
2005
102,182,133
1,127
31,166
3.62%
2006
98,689,233
1,076
33,293
3.23%
2007
95,098,097
968
34,838
2.78%
2008
91,539,395
912
35,721
2.55%
2009
87,481,237
887
34,774
2.55%
2010
100,167,900
1,002
Unavailable
‐
2011
94,642,611
832
Unavailable
‐
1
Details of the District's outstanding debt can be found in Note 3 to the Financial Statements.
2
This ratio was calculated by using the number of domestic accounts and multiplying by Buncombe County census average of 2.3 persons per household to get the number of users in the District. This information is not available for prior years.
3
Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce
Note: MSD implemented GASB Statements 34 and 35 in FY 2003. In the future, up to nine (9) prior years will be presented with the current year to illustrate the District’s financial performance over time. See Personal Income by Industry on page 76 to assess economic base of the County.
Statistical Section
| P a g e | 72
Metropolitan Sewerage District of Buncombe County, North Carolina
Revenue Bond Coverage
FY Ending June 30, 2011
FY 2002 to FY 2011
Fiscal Year Ended June 30
Revenues from Sewerage Rates
Direct Operating Expenses (A)
Required Deposits for Debt Service
120% Principal and Interest
Higher of Amount in Previous Two Columns
Sum of Expenses & Higher Debt Service
2002
20,701,237
10,647,193
6,030,929
7,237,115
7,237,115
17,884,308
Excess of Revenues over Expenses & Debt Service 2,816,929
(A) Includes all operation and maintenance expenses, except depreciation. (B) Excludes early retirement of long‐term debt. From 1985 to 2002, the District was subject to Section 501 of the 1985 Bond Order which covenants that the District will set rates to produce sufficient revenues, together with any other available funds, including the amounts transferred by the District from the General Fund to the Revenue Fund, to permit the deposit and transfer to the credit of the Revenue Fund in the then current fiscal year of a sum at least equal to the total of the following: 1. the current expenses of the Sewerage System for the current fiscal year, and 2. to provide for the higher of either: a. the amounts needed for making the required cash deposits in each fiscal year to the credit of the several accounts in the Bond Service Fund and to the credit of the Subordinated Indebtedness Service Fund, the Debt Service Reserve Fund and the Maintenance Reserve Fund, or b. one hundred twenty per centum (120%) of the amount of the principal and interest requirements for the current fiscal year on account of the indebtedness then outstanding excluding principal and interest requirements on account of indebtedness incurred to finance improvements or additional improvements which have not been completed as of the beginning of such fiscal year. However, with the issuance of refunding bonds on April 3, 2003, a sufficient amount of debt subject to the 1985 bond order was defeased allowing application of the 1999 Amended Bond Order whose rate covenant is summarized in the following paragraph. The District covenants to set rates and charges so that the Income Available for Debt Service (defined as the excess of “Revenues” over “Current Expenses”) will not be less than the greater of (i) one hundred twenty percent (120%) of the Long‐Term Debt Service Requirement for Parity Indebtedness only for such Fiscal Year and (ii) one hundred percent (100%) of the Long‐Term Debt Service Requirement for Parity Indebtedness and Subordinated Indebtedness for such Fiscal Year. The definition of revenues for this purpose does not include grants, contributions, investment income credited to non‐operating funds, or tap and connection fees. Current expenditures include operating expenses other than additions to reserve funds, depreciation or amortization, or debt service payments.
Statistical Section
| P a g e | 73
Metropolitan Sewerage District of Buncombe County, North Carolina
Revenue Bond Coverage (continued)
FY Ending June 30, 2011
FY 2002 to FY 2011
The District does not currently have any subordinated indebtedness, so the computation of the current fiscal year’s compliance with this covenant is based solely on 120% of the debt service requirement. Long‐Term Debt Service Requirement is defined as interest and principal required to be remitted to the Trustee, except that interest shall be excluded from the determination of Long Term Debt Service Requirement to the extent the same is provided from the proceeds of the Long Term Indebtedness. The coverage ratio is computed on the basis of 100% of required debt service. Excess of Income Available for Debt over Debt Service
Coverage Ratio
$ 6,611,230
$ 5,800,489
2.05
6,603,923
7,924,708
5,748,201
1.87
12,393,123
6,946,701
8,336,041
5,446,422
1.78
11,853,663
12,106,031
7,866,765
9,440,118
4,239,266
1.54
26,092,369
11,977,241
14,115,128
8,066,669
9,780,000
6,048,459
1.75
2008
26,104,746
12,070,195
14,034,551
8,074,031
9,831,535
5,960,520
1.74
2009
25,374,157
12,808,349
12,565,808
7,600,385
9,120,462
4,965,423
1.65
2010
26,268,075
12,754,727
13,513,348
7,855,989
9,427,187
5,657,359
1.72
2011
27,654,768
13,522,468
14,132,300
8,565,201
10,278,241
5,567,099
1.65
Principal and 120% Interest Principal Payable and Interest During Year Payable
Fiscal Year Ended June 30
Adjusted Revenues (B)
Current Expenses (A)
Income Available for Debt Service
2003
$ 22,108,456
$ 10,798,609
$ 11,309,847
$ 5,509,358
2004
22,927,997
10,575,873
12,352,124
2005
23,562,271
11,169,148
2006
23,959,694
2007
(A) (B)
Includes all operation and maintenance expenses, except depreciation. Does not include tap and connection fees, grants, contributions, investment income allocated to non‐operating funds.
Statistical Section
| P a g e | 74
Metropolitan Sewerage District of Buncombe County, North Carolina
Demographic & Economic Statistics
FY Ending June 30, 2011
FY 2002 to FY 2011
Population Estimates
1
Per Capita Income
2
Median Age 1
Employed
Civilian Labor Force 3 Unemployment Unemployed Rate
2002
210,717
27,798
39.44
105,733
6,023
5.4%
2003
213,210
27,770
39.70
108,133
6,038
5.3%
2004
215,867
29,932
39.96
109,231
5,249
4.6%
2005
218,684
31,166
40.23
109,666
5,454
4.7%
2006
223,012
33,293
40.39
114,899
4,751
4.0%
2007
226,823
34,838
40.49
116,997
4,510
3.7%
2008
229,373
35,721
40.65
118,235
5,849
4.7%
2009
231,452
34,774
40.84
108,177
10,944
9.2%
2010
239,179
Unavailable
41.01
110,464
10,032
8.3%
2011
242,509
Unavailable
Unavailable
111,161
9,882
8.2%
Note: The information above is for Buncombe County, N.C. The District believes that the above information is representative of the entire service area, which extends over approximately 80% of the County. Sources: 1 North Carolina Office of State Budget and Management 2 Regional Economic Information System, Bureau of Economic Analysis, U.S. Dept. of Commerce 3 North Carolina Employment Security Commission
Statistical Section
| P a g e | 75
2011
641,153 683,390 682,236 676,173 684,925 701,404 711,251 688,933 ‐ ‐ 413,948 458,716 468,405 469,289 480,697 503,211 ‐ ‐ ‐ ‐
Construction
Manufacturing Durable goods
377,195 394,919 401,801 437,437 467,334 488,065 483,030 459,639 ‐ ‐ 151,936 148,825 172,527 193,901 208,566 215,009 219,406 ‐ ‐ ‐ 2,042,215 2,140,454 2,295,341 2,435,897 2,635,671 2,805,666 2,877,462 2,801,705 ‐ ‐
Retail Trade
Transportation and public utilities
Services
475,883 490,470 510,733 541,319 578,117 615,536 660,008 661,770 ‐ ‐
18,812 24,851 25,748 28,937 29,097 29,480 31,948 34,194 ‐ ‐
Personal Income by Industry
Note: The above data is for Buncombe County, North Carolina. MSD believes the data is representative of the entire service area. Growth in personal income over time may be compared to average monthly billing to evaluate the affordability of sewer rates for customers. Source: Regional Economic Information System, Bureau of Economic Analysis, U.S. Department of Commerce
State and local
Military
Government and government enterprises 688,528 740,100 787,875 819,960 877,039 927,574 999,418 1,026,250 ‐ ‐ Federal, civilian 193,833 224,779 251,394 249,704 269,825 282,558 307,462 330,286 ‐ ‐
172,078 181,376 185,996 198,137 218,119 222,557 223,158 199,712 ‐ ‐
Wholesale trade
227,205 224,674 213,831 206,884 204,228 198,193 ‐ ‐ ‐ ‐
350,557 345,662 388,736 428,903 450,945 481,664 446,215 355,541 ‐ ‐
Mining
Nondurable goods
2,089 2,034 2,260 2,539 ‐ 3,071 3,310 3,523 ‐ ‐ 4,750 4,262 5,280 5,777 ‐ 6,038 5,851 6,221 ‐ ‐
Agricultural services, forestry, fishing
3,741,973 3,900,922 4,134,177 4,378,764 4,674,393 4,923,474 4,969,683 4,730,744 ‐ ‐
2010
$ 5,771,804 Unavailable Unavailable
2009
Private earnings
$ 5,982,712
2008
4,430,501 4,641,022 4,922,052 5,198,724 5,551,432 5,851,048 5,969,101 5,756,994 ‐ ‐
2007
Nonfarm earnings
2006
4,657 10,073 20,165 29,122 32,930 14,517 13,611 14,810 ‐ ‐
2005
Farm earnings
2004
$ 4,435,158 $ 4,651,095 $ 4,942,217 $ 5,227,846 $ 5,584,362 $ 5,865,565
2003
Total Personal Income
2002
Calendar Year
Metropolitan Sewerage District of Buncombe County, North Carolina FY Ending June 30, 2011
CY 2002 to CY 2011
Statistical Section
| P a g e | 76
Metropolitan Sewerage District of Buncombe County, North Carolina
Principal Employers
FY Ending June 30, 2011
FY 2002 to FY 2011
FY 2002
FY 2011
Employees
Rank
% of Total County Employment
Employees
Rank
% of Total County Employment
Mission Health System & Hospitals
5,125
1
4.85%
6,994
1
6.29%
Buncombe County Public Schools
3,650
2
3.45%
4,000
2
3.60%
Buncombe County Government
1,835
3
1.74%
1,673
3
1.51%
The Biltmore Company
900
7
0.85%
1,583
4
1.42%
VA Medical Center ‐ Asheville
991
6
0.94%
1,139
5
1.02%
Ingles Markets, Inc.
900
8
0.85%
1,137
6
1.02%
The Grove Park Inn Resort & Spa
891
9
0.84%
1,100
7
0.99%
1,010
8
0.91%
Employer
Eaton Corporation ‐ Electrical Division City of Asheville
1,237
4
1.17%
1,000
9
0.90%
CarePartners
1,200
5
1.13%
917
10
0.82%
830
10
0.78%
Sonopress, LLC Total for Principal Employers
17,559
16.61%
20,553
18.49%
Statistical Section
| P a g e | 77
Note: The information above is for Buncombe County, N.C. The District believes that the above information is representative of the entire service area, which extends over approximately 80% of the County. Source: Asheville Area Chamber of Commerce, Economic Development Department & NC Employment Security Commission
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Employees by Division
FY 2002 to FY 2011
FY 2002
FY 2003
FY 2004
FY 2005
Office of the General Manager Office Support
2
1
1
1
1
Human Resources Department Human Resource Environmental, Health & Safety
2 0
2 0
2 0
2 0
2 0
Administrative Services Department Office Support IT & MIS Environmental, Health & Safety Fleet Maintenance
0 6 2 4
0 9 2 4
0 9 2 4
1 8 2 4
1 7 2 4
Financial Services Department Finance & Budget Accounting, Investments & Cash Flow Mgmt. Purchasing & Warehouse
1 4 6
1 3 4
1 3 4
1 3 3
1 3 3
Water Reclamation Facility Office Support Plant Operations Laboratory Industrial Waste Mechanical Maintenance Electrical Maintenance/Hydro Structural Maintenance
1 16 1 4 10 6 8
2 15 0 4 9 7 5
1 15 0 4 9 7 5
1 15 0 4 9 7 5
0 15 0 4 9 7 5
System Services Department Office Support System Services
3 54
3 53
3 53
Engineering Services Department Planning and Development
9
9
9
Capital Improvement Department Office Support Right of Way Construction Administration Design and Drafting Engineers Geographic Information Systems
1 3 7 3 4 0
1 3 7 3 4 0
1 3 6 3 3 0
Management Division Heads General Manager
5 1
6 1
6 1
6 1
6 1
163
158
155
152
150
Division
FY 2006
Total
3 51
Statistical Section
8 1 3 7 3 3 0
4 52
7 1 3 6 3 3 0
| P a g e | 78
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
Employees by Division (continued)
FY 2002 to FY 2011
Division Office of the General Manager Office Support
FY 2007
FY 2008
FY 2009
FY 2010
FY 2011
1
1
1
1
1
3 0
3 2
Human Resources Department Human Resource Environmental, Health & Safety Administrative Services Department Office Support IT & MIS Environmental, Health & Safety Fleet Maintenance Financial Services Department Finance & Budget Accounting, Investments & Cash Flow Mgmt. Purchasing & Warehouse
3 0
3 0
3 0
0 8 2 4
0 5 2 4
0 5 2 4
0 5 2 4
0 5 2 4 1 3 3
2 3 3
1 3 3
1 3 3
1 3 3
Water Reclamation Facility Office Support Plant Operations Laboratory Industrial Waste Mechanical Maintenance Electrical Maintenance/Hydro Structural Maintenance
0 14 0 4 8 8 5
0 13 0 4 8 8 5
0 13 0 4 8 8 5
0 13 0 4 8 8 5
0 11 0 4
System Services Department Office Support System Services
4 52
4 52
4 52
4 52
4 51
8 8
5
Engineering Services Department Planning and Development
Capital Improvement Department Office Support Right of Way Construction Administration Design and Drafting Engineers Geographic Information Systems
Management Division Heads General Manager
7
7
7
7
7
1 3 5 3 3 4
1 3 5 3 3 4
1 3 5 3 3 4
7 1
7 1
8
1 3 5 3 3 0
1 3 5 3 3 4
6 1
7 1
1
Total 150 150 150 150 150 Note: All employees are considered full time based on 2080 hours worked per year. Above numbers represent budgeted positions and may include vacancies at year‐end. Statistical Section
| P a g e | 79
Metropolita an Sewerage District of Bu uncombe Cou unty, North C arolina
Employe ees by Divvision (conntinued)
FY En nding June 30, 2011
FY 20 002 to FY Y 2011
Source: Disttrict Personne el Records
Statisstical Section n
| P a g e | 80
114
18
Sanitary Sewer Overflows
Water Reclamation Facility Pump Stations
Statistical Section 16 1.30
552
10 1.32
650
88% 23
$ 84
59.75% $ 526
63.6
8,723.50 23.9
890
21
78
485
636 305
510,187
0.66
60,330
65,484
114
1,597
FY 2005
8 2.00
680
90% 24
$ 143
52.5% $ 621
51.0
7,665.00 21.0
900
23
55
483
602 294
638,683
0.71
59,459
76,056
115
1,236
FY 2006
11 3.00
710
90% 20
$ 178
45.5% $ 786
47.9
6,643.00 18.2
900
31
52
406
542 308
662,245
0.57
51,272
129,025
123
1,339
4 2.56
995
92% 23
$ 184
39.5% $ 873
33.2
5,767.00 15.8
930
31
41
411
513 260
893,206
0.53
69,249
78,451
123
1,145
11 3.00
890
91% 24
$ 179
41.3% $ 877
40.7
6,022.50 16.5
920
31
23
458
528 211
920,525
0.49
45,175
77,572
101
983
FY 2007 FY 2008 FY 2009
11 3.00
846
90% 18
$ 114
53.3% $ 721
57.8
7,774.50 21.3
960
31
34
461
445 225
1,019,852
0.52
45,450
10,400
47
1,094
FY 2010
2 1.33
606
93% 19
$ 163
45.0% $ 826
56.8
6,570.00 18.0
977
32
24
404
486 196
614,543
0.59
49,099
52,856
37
925
FY 2011
Note: MSD implemented GASB Statements 34 and 35 in FY 2003. In the future, up to nine (9) prior years will be presented with the current year to illustrate the District’s financial performance over time. Source: District Departmental Data
Number of workforce injuries Lost Work Rate per 100 employees
16 1.82
203
Restaurant inspections for Grease Reduction Compliance
91% 28
$ 116
54.75% $ 558
57.7
7,993.50 21.9
875
18
78
531
614 211
565,257
0.65
56,938
61,688
119
1,079
FY 2004
Operating Indicators by Division
Administrative Services Department
93% 28
$ 111
Total suspended solids (TSS) removal efficiency (percentage) Inspection of Significant Industrial Users
Energy cost per millions of gallons treated
63.1 54.5% $ 570
Maximum daily flow treated (millions of gallons daily)
Percentage of plant capacity used Cost per millions of gallons treated
7,957.00 21.8
Treatment Provided (millions of gallons) Daily (average) flow treated (millions of gallons daily)
860
535
Manhole Repairs
Sanitary Sewers (approximate miles)
677 251
456,315
0.66
63,596
30,304
133
2,025
FY 2003
Construction Repairs to Sewer Lines Taps Installed
Lines Washed (lineal feet) ‐ in‐house only
System Services Department Average Response Time to sewer problem (hours)
Linear Feet of rehabilitated Sewer Systems
Capital Improvement Department
Linear Feet of Accepted Sewer Systems
Plans Reviewed
Engineering Services Department Sewer Tap Applications
Division
Metropolitan Sewerage District of Buncombe County, North Carolina FY Ending June 30, 2011
FY 2003 to FY 2011
| P a g e | 81
Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
Operatin ng Indicators by D Division (continued)
FY En nding June 30, 2011
FY 20 002 to FY Y 2011
Statisstical Section n
| P a g e | 82
Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
Operatin ng Indicators by D Division (continued)
FY En nding June 30, 2011
FY 20 002 to FY Y 2011
Note: MSD iimplemented d GASB Statem ments 34 and 35 in FY 200 3. In the futu ure, up to ninee (9) prior yeaars will be presented with the cu urrent year to o illustrate the e District’s finnancial perforrmance over ttime. Source: Disttrict Operational Records
Statisstical Section n
| P a g e | 83
Metropolitan Sewerage District of Buncombe County, North Carolina
FY Ending June 30, 2011
This page intentionally left blank.
Statistical Section
| P a g e | 84
COMPLIANCE SECTION
Compliance SecƟon
REEPORT ON N INTERN NAL CONTTROL OVEER FINAN NCIAL REP PORTING AN ND ON CO OMPLIAN NCE AND O OTHER M MATTERS BASEED ON AN N AUDIT O OF FINAN NCIAL STA ATEMENTTS PERFO ORMED IN N ACCORD DANCE W WITH GOVERN NMENT A AUDITING G STANDA ARDS To the Board d of Directorss Metropolitan Sewerage D District of Bun ncombe Coun nty, North Ca rolina Asheville, No orth Carolina We have audited the finaancial statements of the M Metropolitan Sewerage Disstrict of Bunccombe County, North Carolina (the e “District”) aas of and for tthe year ende ed June 30, 2 011 and havee issued our rreport thereo on dated October 24, 2011. We conductted our auditts in accordan nce with aud diting standarrds generally accepted in the United SStates of America and d the standards applicable e to financial aaudits contai ned in Goverrnment Auditiing Standardss, issued by the Comp ptroller General of the Uniited States.
Internal Co ontrol Over Financial Reporting In planning and performiing our audit,, we considerred the Districct’s internal ccontrol over ffinancial repo orting as a basis for designing our auditing prrocedures forr the purposee of expressiing our opiniions on the ffinancial statements, but not for the purpose of expressingg an opinion on the effecctiveness of tthe District’s internal control overr financial rep porting. Accordingly,, we do not e express an opinion on the e effectivenesss of the District’s internal ccontrol over ffinancial reporting. A A deficiency in internal co ontrol exists when w the dessign or operaation of a control does no ot allow managemen nt or employyees, in the normal n coursse of perform ming their asssigned functtions, to prevvent, or detect and ccorrect missttatements on n a timely bassis. A materiaal weakness iis a deficienccy, or combin nation of deficiencies,, in internal control, such tthat there is aa reasonable possibility th hat a material misstatemen nt of the entity’s financial stateme ents will not b be prevented,, or detected and correcteed on a timelyy basis. Our conside eration of internal controll over financiial reporting was for the limited purpose described in the first paragraaph of this section s and was w not designed to ide ntify all defiiciencies in internal control over financial rep porting that might be defficiencies, siggnificant deficciencies, or m material weaknesses. We did not material identify anyy deficiencies in internal control over financial reporting th hat we consider to be m weaknesses, as defined aabove.
Compliancce and Othe er Matters As part of obtaining reaasonable assurance abou ut whether thhe District's financial statements are free of material misstatement, we w performe ed tests of itss compliancee with certain n provisions of laws, regu ulations, Comp pliance Sectio on
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Metropolita an Sewerage District of Bu uncombe Cou unty, North C Carolina
FY En nding June 30, 2011
contracts, and grant agre eements, non ncompliance with which ccould have a direct and m material effectt on the determination of financiial statementt amounts. However, H prooviding an op pinion on compliance witth those provisions w was not an ob bjective of our audit, and aaccordingly, w we do not exp press such an n opinion. Thee results of our tests disclosed no instances of noncomplian nce or other m matters that aare required tto be reporteed under Governmentt Auditing Staandards. This report is intended solely for the information and use of m management, Board of Directors, otherrs within the entity, and a federal and a State aw warding agenccies and passs‐through enttities, is not intended to be, and should not b be used by an nyone other than these spe ecified partiees. Charlotte, N North Carolinaa October 24, 2011
Comp pliance Sectio on
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