Po p u l a r A n n u a l Fi n a n c i a l Re p o r t

Transcription

1 Po p u l a r A n n u a l Fi n a n c i a l Re p o r t Fiscal Year Ending June 30, 2016 METROPOLITAN ST. LOUIS SEWER DISTRICT ST. LOUIS, MISSOURI

2 MSD MISSION To protect the public s health, safety, and water environment by responsibly providing wastewater and stormwater management. ON THE COVER: 2016 MSD provides small grants to eligible property landowners in the Bissell Watershed area through MSD Project Clear s $100 million investment in rainscaping projects. The MSD Project Clear Rainscaping Small Grants Program encourages property owners to use rainscaping techniques on their properties like the examples on the cover to reduce the impact of stormwater on the sewer system. Rainscaping is a combination of plantings, water features, catch basins, permeable pavement, and other activities that manage stormwater as close as possible to where it falls. Used effectively, rainscaping can help to reclaim stormwater naturally, reduce sewer overflows, and minimize basement backups.

3 POPULAR ANNUAL FINANCIAL REPORT FY 16 1 TABLE OF CONTENTS Directors Letter...3 Proposition S and Proposition Y What We Do MSD at Work in the Community Year in Review...10 Looking Ahead...11 Condensed Statement of Net Position MSD Assets and Long-Term Obligations Income Statement Revenues and Expenses...15 Cash Flow Statement Performance Against Budget and Credit Rating...17

4 2 METROPOLITAN ST. LOUIS SEWER DISTRICT The Government Financial Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to the Metropolitan St. Louis Sewer District for its Popular Annual Financial Report for the fiscal year that ended June 30, The Award for Outstanding Achievement in Popular Annual Financial Reporting is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government popular reports. In order to receive an Award for Outstanding Achievement in Popular Annual Financial Reporting, a government unit must publish a Popular Annual Financial Report, the contents of which conform to program standards of creativity, presentation, understandability and reader appeal. We believe our current report continues to conform to the Popular Annual Financial Reporting requirements, and we are submitting it to the GFOA.

5 POPULAR ANNUAL FINANCIAL REPORT FY 16 3 DIRECTORS LETTER Welcome! We appreciate your interest in the Metropolitan St. Louis Sewer District (MSD) and are pleased to present to you our Popular Annual Financial Report for the Fiscal Year 2016 (FY 16). MSD s work includes meeting both the day-to-day needs of residents through basic sewer services, while also planning for and implementing small- to large-scale improvements that benefit the region in the long term. In FY 16, MSD appropriated funds for 222 new or continuing wastewater and stormwater projects that are scheduled for either design or construction. While our work is multifaceted, it is also singular in focus: to protect the public s health, safety, and water environment through responsible wastewater and stormwater management. This annual report is designed to provide an overview of MSD s work. Using non-technical language, it provides a snapshot of our activities from our most recent fiscal year: July 1, 2015 to June 30, As you read this report, you will learn how we are carefully investing the funds we receive to improve and manage our region s wastewater and stormwater systems. This report also contains financial information for this past fiscal year that summarizes the much more detailed information found in our Comprehensive Annual Financial Report. While the summary information you will find here uses principles and guidelines consistent with Generally Accepted Accounting Principles (GAAP), it has been simplified for general audiences and is not GAAPcompliant. If you are interested in a more in-depth financial review of our operations, our Comprehensive Annual Financial Report and audited financial statements, as well as this Popular Annual Financial Report, are available online at You may also request a printed copy of this information by contacting MSD at We hope you find this report to be useful and informative, and we welcome your comments and suggestions on how we might improve future reports to better serve your interests and needs. Respectfully submitted, Brian Hoelscher, P.E. Marion Gee Executive Director & CEO Director of Finance

6 4 METROPOLITAN ST. LOUIS SEWER DISTRICT 2016 BALLOT INITIATIVES PROPOSITIONS Y & S APPROVED In April 2016, MSD presented two initiatives to voters who reside within MSD s service area, Proposition Y for Wastewater Bond Authorization, and Proposition S for Stormwater Funding & Service Equalization. Both initiatives passed. Proposition Y: Wastewater Bond Authorization Seventy-six percent of voters in MSD s service area approved Proposition Y and the issuance of $900 million in bonds. The bond financing which is to be used exclusively for wastewater projects associated with an agreement with the Environmental Protection Agency and the Missouri Coalition for the Environment will help lower rate increases over FY 17 FY 20. For example, with the approval of Proposition Y, the average single family home s monthly MSD bill will eventually increase from $40.72 per month on July 1, 2015, to $60.44 per month on July 1, Without Proposition Y and its bond financing, these wastewater projects would have been paid for strictly through increased rates, and that same bill would have increased to $95.13 per month on July 1, Proposition S: Stormwater Funding & Service Equalization Through the same April 2016 election, 62 percent of voters in MSD s service area also approved Proposition S. Prior to the election, the amount of property taxes paid by an individual customer and the stormwater service received was dependent on where a customer lived. Thus, not all customers paid the same rates, and not all customers received the same level of stormwater service. The voter approval of Proposition S means all MSD customers will receive the same level of stormwater service for operations and maintenance. This process will occur gradually throughout FY 17 (July 1, 2016, through June 30, 2017). In addition, a few targeted stormwater capital projects will be completed throughout MSD s service area. In FY 17, MSD will explore options to fund additional capital projects addressing erosion and flooding.

7 POPULAR ANNUAL FINANCIAL REPORT FY 16 5 Examples of Unfunded Stormwater Issues Localized Flooding Erosion Regional Flooding

8 6 METROPOLITAN ST. LOUIS SEWER DISTRICT WHAT WE DO MSD s Dual Function The Metropolitan St. Louis Sewer District is two separate utilities within one organizational structure: Wastewater collect used water disposed of in sinks, toilets, and floor drains by households and businesses, and then treat it to high standards before returning it to the region s waterways. Stormwater operate and maintain the public storm sewer system and help coordinate regional efforts to address pollution carried in or caused by stormwater runoff. MSD owns, operates, and maintains the St. Louis region s public sewer systems, which consist of wastewater, stormwater, and combined collection sewers, pumping stations, and wastewater treatment facilities. Wastewater sewers accommodate household and commercial waste. Storm sewers carry stormwater and surface water runoff. Combined sewers carry both wastewater and stormwater. Additionally, MSD is responsible for wastewater and stormwater sewer maintenance, monitoring of industrial wastewater quality, rehabilitation of sewer lines, plan review and approvals, and issuance of connection permits. MSD s service area encompasses approximately 525 square miles, including all 62 square miles of the City and 463 square miles 90 percent of the County. The current population served by MSD is approximately 1.3 million, representing more than 422,000 accounts. Coldwater I-270 $70 RESIDENTIAL WASTEWATER USER CHARGE ST. LOUIS AND OTHER MUNICIPALITES I-270 I-70 Bissell Point $60 Missouri River I-170 I-70 $50 I-64 I-64 $40 Grand Glaize I-270 I-44 Lemay $30 I-55 Fenton $20 I-44 I-255 Lower Meramec $10 $0 MSD Wastewater Treatment Plants Service Area BOSTON DETROIT NEW ORLEANS ST. LOUIS SURVEY AVERAGE NASHVILLE Memphis Light, Gas and Water 2016 Utility Bill Comparisons Survey Rates as of January 1, 2016, based on 10 CCF COLUMBUS SPRINGFIELD

9 POPULAR ANNUAL FINANCIAL REPORT FY 16 7 Public Education and Community Outreach MSD engages with the public at a variety of events throughout the year to inform and educate residents about wastewater and stormwater issues, as well as MSD programs and services, including: PrideFest Fiscal Year 2016 was MSD s first year participating at St. Louis PrideFest. Representatives from our Human Resources department set up a booth to provide MSD career information and job opportunities to a quarter-million Pridefest attendees. Hispanic Festival MSD Project Clear sponsored the 2016 Greater St. Louis Hispanic Festival, providing the opportunity to present information on Project Clear and MSD s Customer Assistance Program to the local Hispanic community. Green Homes Festival In June, MSD Project Clear sponsored the 15th annual Green Homes Festival at the Missouri Botanical Garden. MSD helped treat more than 3,000 visitors to a celebration of sustainable living and promote environmentally-friendly lifestyles in the St. Louis community. Social Media and Online Communication Staying engaged with our customers is an important objective for MSD, and a quick peek at our web and social media numbers shows that we are maintaining consistent communication with the communities we serve. Our website (stlmsd.com) attracted more than 274,000 new visitors in FY 16, which added to the 262,000 returning visitors and resulted in a total of more than 2 million separate page views. Similarly, ProjectClearSTL.org attracted almost 20,000 unique visitors for the fiscal year, totaling almost 40,000 page views. YourMSD on Twitter and Facebook, which shares items like MSD blog posts, news releases, job opportunities, and more, earned nearly 2,400 Twitter followers and more than 400 Facebook likes. ProjectClearSTL shares information such as Get the Rain Out activities, maintenance, repairs, and building system improvements, and had nearly 400 Twitter followers and more than 200 Facebook likes. Overall, social network adoption increased approximately 15 percent between FY 15 and FY 16. Stevie the Sewer Hound was introduced as the MSD Project Clear mascot in FY 16. Stevie has his own Twitter account and is also featured on the MSD Project Clear website.

10 8 METROPOLITAN ST. LOUIS SEWER DISTRICT MSD AT WORK IN THE COMMUNITY Storm Drain Inlet Art Education Program Storm Drain Inlet Art Education Program With assistance from St. Louis ArtWorks, St. Louis County Department of Health, and other community partners, MSD developed a storm drain art education program promoting only rain to the storm drains. The program focuses on reducing pollution to storm drains. The inlet art serves as a visible reminder that improper waste such as motor oil, pesticides, street litter, yard debris, pet waste, etc. should not be thrown into storm drains. Through the program, volunteers can choose artwork from four available designs and follow a paint-by-number system using high-endurance paint. The program was implemented in FY 16, during which volunteers painted 15 storm inlets in five planned projects. Similarly, storm drain marker installation projects were conducted by a number of volunteers, including community groups, private citizens, and stormwater co-permittees. MSD provided kits containing 916 storm drain markers that were utilized in 17 planned projects. In addition to the markers, 982 door hangers were distributed to the households in the areas marked, explaining the marking project and providing households with stormwater best management practices.

11 POPULAR ANNUAL FINANCIAL REPORT FY 16 9 Customer Assistance Program Through the Customer Assistance Program (CAP), MSD offers a 50 percent rate-reduction to qualified low-income, elderly, and disabled customers. To qualify for CAP, a customer s total annual income for the previous year must be less than 200 percent of the most recent Health & Human Services (HHS) poverty guidelines, based on the size of the household (for disabled citizens and seniors, total annual income must be less than 250 percent). A customer must also have liquid assets and real estate valued at less than $10,000, excluding their residence and automobiles (disabled individuals and homeowners older than 62 are not subject to the liquid asset guideline), own and/or reside as a tenant in the property that receives the rate reduction, and own or live in a single-family residence or multi-unit property up to six units. MSD participates in a number of community events throughout the year to help get the word out about the program. For more information on CAP, visit stlmsd.com/customerassistanceprogram or use your smartphone to scan the QR code below. New Bill Format and Mobile App In FY 16, MSD customers began receiving a full-page, comprehensive billing statement each month. The new bill format offers customers greater account detail including previous balances and current charges along with explanations of how bills are calculated and descriptions of charges and services provided by MSD. The changes were made after customer feedback revealed the need for clearer, more detailed information and better readability; the new format now gives customers a broader look at their entire account. MSD also offers customers the ability to view and pay their bills online at stlmsd.com with Smart Pay, or via mobile bill pay app (MSD Bill Pay), which is downloadable at the Google Play Store or Apple App Store. On the mobile app, customers can also contact MSD about billing issues and see what s going on with MSD on Facebook and Twitter. MSD s Mobile App and Online Bill Payment

12 10 METROPOLITAN ST. LOUIS SEWER DISTRICT YEAR IN REVIEW Capital Improvement MSD made 222 appropriations for new or continuing wastewater and stormwater design and construction projects in FY 16, totaling $291.2 million. These numbers include $16.8 million appropriated on four emergency repair projects, three of which were related to the historic December 2015 flood event. Major Capital Projects Completed in FY 16: Bissell WWTP Disinfection Facilities, $25 M Coldwater Sanitary Relief Sections B, C and D, and Wet Weather Storage Facility Tank A, $11 M Taylor Fillmore Harrison Sanitary Relief Project, $5 M Diversity MSD understands the role of diversity in creating a strong and vibrant St. Louis community. Accordingly, we have had policies in place for many years that help develop and grow minority- and women-owned business enterprises. In recent years, we have expanded our focus to ensure broader workforce diversity for our capital construction projects. In FY 16, minority-owned firms performed $30,720,142 in capital work, representing percent of our capital program for that period. Women-owned firms performed $12,615,892 of capital work, representing 6.62 percent of our capital program spending. During that same timeframe, minority workforce participation was 251, hours, or percent, of total hours worked on capital projects by contractors. Women participation was 33,447 hours, or 3.50 percent, of total hours worked on capital projects by contractors. Stream and Neighborhood Cleanups In conjunction with local community and environmental groups, MSD sponsors neighborhood, river, and stream cleanup programs and events, including Operation Clean Stream in the Meramec watershed organized by the Open Space Council; River des Peres Watershed Trash Bash organized by the River des Peres Watershed Coalition; and the Confluence Trash Bash in the Missouri and northern Mississippi watershed organized by various partners. In FY16, partners and volunteers conducted 44 events, which together resulted in the collection and proper management of approximately 25.8 tons of trash, 2.5 tons of recycled metal and plastic bottles, and 1,052 tires. Peak Performance Awards In 2016, MSD was selected to receive seven Peak Performance Awards, presented by the National Association of Clean Water Agencies (NACWA). The award recognizes public wastewater treatment facilities for their outstanding compliance records with their National Pollution Discharge Elimination System (NPDES) permit, granted by the Missouri Department of Natural Resource (MDNR), in the 2015 calendar year. The Lower Meramec and Fenton wastewater treatment plants received Platinum Awards for maintaining a perfect compliance record for seven consecutive years. Gold Awards went to Missouri River, Coldwater Creek, Grand Glaize, Lemay, and the Missouri River treatment plants for achieving 100 percent compliance with their NPDES permit for an entire calendar year. The Bissell treatment plant was given the Silver Award, recognizing facilities that have received no more than five NPDES permit violations per calendar year. December Rain Event During late December 2015, an extreme amount of rainfall hit the St. Louis region, causing flash flooding and record-high river levels that hadn t been seen in more than 20 years. By the evening of December 28, part of the St. Louis area had recorded more than nine inches of rain well beyond the rain events that MSD s sewer system was designed to handle. Approximately 3,000 service calls were received during the rain event and in subsequent days as flooding followed the storm. As a result of the heavy rain and flash flooding, MSD sustained damage to three of its seven wastewater treatment plants. MSD s Missouri River Wastewater Treatment Plant sustained minor flood damage to the solids handling building. The Meramec River, which reached historic flood levels, caused serious disruptions at the Grand Glaize and Fenton Wastewater Treatment Plants. It was quickly determined that the Grand Glaize Wastewater Treatment Plant could be functional within weeks; the Fenton Wastewater Treatment Plant was able to provide full wastewater treatment in time for the water recreational season in April 2016.

13 POPULAR ANNUAL FINANCIAL REPORT FY LOOKING AHEAD MSD Project Clear MSD Project Clear will continue its work across the St. Louis area to get the rain out, repair and maintain, and build system-wide improvements. Future projects range in scale form massive storage tunnels to retain stormwater during heavy rain, to the disconnection of residential downspouts from wastewater sewer lines, and rainscaping improvements to manage stormwater. In FY 17, MSD has plans for 172 new, ongoing, or continued wastewater project appropriations totaling $354.2 million. These projects are funded primarily from the Sanitary Replacement Fund and represent $20.5 million in continued projects and $333.7 million in new and ongoing projects. Stormwater MSD, St. Louis County, and 58 St. Louis County Municipalities are regulated under a Missouri Department of Natural Resources Phase II Stormwater permit. Under the provisions of this permit, MSD is the St. Louis Coordinating Authority for the small municipal separate storm sewer system. In addition to its stormwater regulatory permit function, MSD plans 40 stormwater design and construction projects in FY 17, including continued projects from FY 16, totaling $24.2 million. Some of the Large Capital Projects Initiated or Continuing in FY 17: Maline Creek CSO BP 051 & 052 Local Storage Facility (Chain of Rocks Drive to Church Drive), $86 M Jefferson Barracks Tunnel (Lemay WWTP to Martigney PS), $65 M Deer Creek Sanitary Tunnel (Clayton Road to RDP), $150 M Flood Mitigation Projects The heavy rains and flooding in December 2015 affected a number of MSD facilities, causing millions of dollars in damage. Now that the majority of the required repairs are completed, a number of flood mitigation projects are proceeding and planned for the near future at MSD facilities. These projects include: Evaluating the feasibility of raising the levee that protects the Fenton Wastewater Treatment Plant and building a new gate structure to improve control of the stormwater flow to the plant. Building a levee around the solids handling building at the Missouri River Wastewater Treatment Plant, while still maintaining truck access to remove the solids. Constructing a levee/flood gates near the solids handling building at the Grand Glaize Wastewater Treatment Plant, and installing a gate structure on the stormwater drainage system to prevent flood waters from backing up into the plant. Raising several pump station control panels to help prevent flooding of the panels, ensuring continued service to our customers. Investigating the sewer systems that feed the Fenton and Meramec Wastewater Treatment Plants to determine how excessive stormwater is entering the collection system, causing high flows to the treatment plants.

14 12 METROPOLITAN ST. LOUIS SEWER DISTRICT KEY FINANCIAL INFORMATION CONDENSED STATEMENT OF NET POSITION (in thousands) FY 16 FY 15 ASSETS: Current, restricted, and other assets $ 707,033 $ 628,247 Capital assets (net of accumulated depreciation) 3,052,043 2,891,569 Total Assets 3,759,076 3,519,816 DEFERRED OUTFLOW OF RESOURCES: Bonds and Notes Payable-Deferred Loss on Refunding 11,974 9,599 Pension-related Outflows 31,144 19,210 Total Deferred Outflow of Resources 43,118 28,809 LIABILITIES: Current liabilities 125, ,153 Non-current liabilities 1,344,141 1,158,445 Total Liabilities 1,469,425 1,267,598 DEFERRED INFLOW OF RESOURCES: Pension-related Inflows 5,712 2,910 Total Deferred Inflow of Resources 5,712 2,910 NET POSITION: Net investment in capital assets 1,841,178 1,829,395 Restricted 146, ,292 Unrestricted 339, ,430 Total Net Position $ 2,327,057 $ 2,278,117 DEFINITIONS: Current, restricted, and other assets: all assets other than fixed assets that are owned or due to the District. Capital assets (net of accumulated depreciation): the total value of all fixed assets, including all sanitary infrastructure, general plant and equipment, and land. Deferred outflows: the use of resources that will be applied to future periods. Current liabilities: money owed by the District and due within 12 months. Non-current liabilities: money owed by the District that is due more than 12 months in the future. Deferred inflows: the purchase of resources that will be applied to future periods. Net investment in capital assets: the value or net worth of all fixed assets after related liabilities are deducted. Restricted: the value or net worth of all assets designated for specific purposes after related liabilities are deducted. Unrestricted: the value or net worth of all remaining assets after remaining liabilities are deducted. WHAT IT TELLS YOU A Statement of Net Position, also known as a balance sheet, is a financial statement that summarizes what MSD owns and owes at a given point in time. It also shows our net worth at that specific point in time. OUR FY 16 BALANCE SHEET SHOWS THAT: MSD s assets and deferred outflows exceed liabilities and deferred inflows by $2.3 billion. Overwhelmingly, MSD s assets are in the form of capital assets. The $3.1 billion in net capital assets is split into the five categories depicted in the pie chart (page 13). Of the $1.5 billion in liabilities, $1.3 billion are in the form of bonds and notes payable. An additional $52.6 million is in the form of pension liabilities.

15 POPULAR ANNUAL FINANCIAL REPORT FY WHAT WE OWN: MSD ASSETS CONDENSED STATEMENT OF CAPITAL ASSETS LESS NET OF DEPRECIATION (in millions) $94 M $1,698 M $531 M $730 M $24 M $70 M KEY Other (see detail) Construction In Progress Treatment, Disposal Plant and Equipment Collection and Pumping Plant Detail Land General Plant and Equipment WHAT WE OWE: MSD LONG-TERM OBLIGATIONS BONDS AND NOTES PAYABLE NOTE: Revenue Bonds and Direct Loan balances only $1,400 $1,200 $1,000 $800 $600 $400 MILLIONS $200 $

16 14 METROPOLITAN ST. LOUIS SEWER DISTRICT INCOME STATEMENT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (in thousands) The financial information included is derived from the CAFR and presented in conformity with the GAAP. FY 16 FY 15 FY 14 FY 13 FY 12 OPERATING REVENUES: Sewer service charges $302,012 $ 282,270 $ 257,343 $ 235,980 $ 220,766 Other 17,846 8,117 8,430 5,966 5,234 Total Operating Revenues 319, , , , ,000 NON-OPERATING REVENUES: Property taxes levied by the district 25,671 24,764 27,450 26,016 24,604 Other 4,739 3,038 3,269 1,350 2,702 Total Non-Operating Revenues 30,410 27,802 30,719 27,366 27,306 Total Revenues 350, , , , ,306 OPERATING EXPENSES: Pumping and treatment 59,100 60,766 54,126 54,526 49,005 General and administrative 55,315 48,551 45,661 41,485 33,180 Depreciation 83,984 78,641 74,087 70,030 66,742 Other 74,697 68,563 67,424 64,117 67,381 Total Operating Expenses 273, , , , ,308 NON-OPERATING EXPENSES: Interest expense 28,943 27,139 25,661 21,062 16,365 Other 11,325 13,738 8,741 5,472 9,571 Total Non-Operating Expenses 40,268 40,877 34,402 26,534 25,936 Total Expenses 313, , , , ,244 INCOME BEFORE CAPITAL GRANTS AND CONTRIBUTION 36,904 20,791 20,792 12,620 11,062 Capital grants and contributions 12,036 12,997 7,102 17,535 9,659 CHANGE IN NET POSITION 48,940 33,788 27,894 30,155 20,721 Net position - beginning of year 2,278,117 2,267,953 2,240,058 2,209,903 2,189,182 Effect of Adoption of GASB68 (23,623) NET POSITION END OF YEAR $ 2,327,057 $ 2,278,117 $ 2,267,953 $ 2,240,058 $ 2,209,903 DEFINITIONS: Operating revenues: all income received from the District s daily normal business activities. Operating expenses: all expenses related to the District s daily normal business activities. Non-operating revenues: all income not related to the District s daily normal business activities. Non-operating expenses: all expenses not related to the District s daily normal business activities. WHAT IT TELLS YOU An income statement tells you where MSD gets its funds and how they are spent. It also shows how much money MSD made or lost over a specific period of time. OUR FY 16 INCOME STATEMENT SHOWS THAT: Sewer service charge revenue increased as a result of the scheduled rate increase that occurred in FY 16. Operating expenses increased due to changes in reporting requirements for pension plans, depreciation for asset additions and water backup claims related to excess rain. Non-recurring projects and studies expense increased due to green infrastructure projects.

17 POPULAR ANNUAL FINANCIAL REPORT FY REVENUES WHERE THE MONEY COMES FROM (in thousands) $48,256 $103 $4,636 KEY Other (see detail) Sewer Service Charges, Net $302,012 $25,671 $3,620 $14,226 Detail Investment Income Other Operating Revenues Licenses, Permits, and Other Fees Property Taxes Levied by the District Rent and Other Income EXPENSES WHERE THE MONEY GOES (in thousands) $18,666 $83,984 $99,162 $49,782 $16,625 $16,202 $11,000 $325 $3,499 $624 $3,218 KEY Other (see detail) Employment Costs Utilities Materials and Supplies Contracted Services Depreciation Detail Net Loss on Sale of Assets Chemical Supplies Insurance Other Operating Expenses Non-Recurring Projects and Studies

18 16 METROPOLITAN ST. LOUIS SEWER DISTRICT CASH FLOW STATEMENT CONDENSED STATEMENT OF CASH FLOWS (in thousands) FY 16 FY 15 Cash flows from operating activities $ 127,665 $ 116,430 Cash flows from non-capital financing activities 25,583 25,824 Cash flows from capital activities (91,512) (225,778) Cash flows from investing activities (74,347) 86,332 Net increase (decrease) in cash and cash equivalents (12,611) 2,808 Cash and cash equivalents at beginning of year 61,808 59,000 Cash and Cash Equivalents at End of Year $ 49,197 $ 61,808 DEFINITIONS: Cash flows from operating activities: all cash received or spent related to MSD s daily normal business activities. Cash flows from non-capital financing activities: all cash received related to taxes. Cash flows from capital and related financing activities: all cash received or spent related to construction of MSD s infrastructure. Cash flows from investing activities: all cash received or spent related to investing MSD s cash reserves. WHAT IT TELLS YOU A cash flow statement summarizes both the cash and the net cash coming in and going out of MSD during a given period. OUR FY 16 CASH FLOW STATEMENT SHOWS THAT: Cash flows from operating activities increased due to increased receipts from customers. Cash flows from non-capital financing activities decreased due to less tax revenue collected. Cash flows from capital and related financing activities increased as a result of more bond proceeds and premiums received during FY 16. Cash flows from investing activities decreased due to a decrease in the volume of maturities of investments. CASH FLOWS COMPARISON 150, ,000 50, ,000 $127,665 $116,430 $25,583 $25,824 ($91,512) ($74,347) $86,332 THOUSANDS -100, , , ,000 KEY FY 16 FY 15 Operating Activities Non-Capital Financing Activities ($225,778) Capital Activities Investing Activities

19 POPULAR ANNUAL FINANCIAL REPORT FY PERFORMANCE AGAINST BUDGET Capital Improvement and Replacement Program (CIRP) Budget Expenses Unspent Budget $299.5 M $278.0 M $21.5 M Approximately $24 million in projects were delayed, and will be funded in the FY 17 Budget. Offsetting those delays were higher-than-anticipated project costs on the remaining projects. Operating M M 2.9 M Personnel Services, due in large part to vacancies, were $4.5 million under budget. Supply expenses were also favorable by $1.4 million, mostly due to savings on Chemicals and Fuel. Due to severe flooding in some parts of the District, Contractual Services and Capital Outlay were both over budget by $2.7 million and $0.9 million, respectively. Net other Operating Expenses were under budget approximately $0.6 million. Debt Service 73.5 M M (58.2) M Debt Service expenses were considerably higher than anticipated due to refinancing of previously issued bonds. The refinancing actually saves the District money, however the $87 million in proceeds of the new bond used to pay off the old bonds are not shown as a reduction to Debt Service expense. Total $555.0 M $506.2 M $48.8 M WHAT IT TELLS YOU A performance against budget statement shows the link between the funds used to serve the public and the outcomes of those services. In our case, it shows that MSD has been a good steward of the funds allocated to us. CREDIT RATING WHAT IT TELLS YOU A credit rating provides an assessment of an organization s credit worthiness, based on its history of borrowing and repayment of funds, as well as its assets and liabilities. A poor credit rating makes it more difficult to find financing and often results in higher interest rates. As the chart below illustrates, MSD has premium credit, with consistent ratings at the top of each credit rating agency s scale. On a scale of AAA to D, MSD earned AAA and AA+ ratings from Standard & Poors and Fitch, respectively. Similarly, on a scale of Aaa to C, MSD earned an Aa1 rating from Moody s. We have demonstrated to creditors and credit rating agencies our ability to manage large annual capital plans. Our solid financial management, including close monitoring of our financial performance, strong debt coverage, and liquidity also contribute to these ratings, which have remained constant the past three years. FY 16 FY 15 FY 14 Moody s Aa1 Aa1 Aa1 Standard & Poors (S&P) AAA AAA AAA Fitch AA+ AA+ AA+

20 METROPOLITAN ST. LOUIS SEWER DISTRICT ST. LOUIS, MISSOURI YourMSD YourMSD Metropolitan St. Louis Sewer District ProjectClearStl