ANNUAL REPORT. Truckee Meadows Water Authority, Nevada

Transcription

1 ANNUAL REPORT, Nevada Financial Information and Operating Data Pursuant to Amended SEC 15c2-12 June 30, 2016

2 BOARD OF DIRECTORS Geno Martini, Chairman Vaughn Hartung, Vice Chair Jenny Brekhus Naomi Duerr Jeanne Herman Neoma Jardon Ron Smith Mark W. Foree, PE Scott Estes, PE Mike Pagni Andy Gebhardt John Enloe Michele Sullivan, C.P.A. AUTHORITY ADMINISTRATION General Manager Director of Engineering General Counsel Director of Customer Relations Director of Natural Resources Planning and Development Chief Financial Officer/Treasurer BOND AND SPECIAL COUNSEL Swendseid & Stern a member in Sherman & Howard, L.L.C. 50 West Liberty Street, Suite 1000 Reno, Nevada (775) FINANCIAL ADVISORS Hobbs, Ong & Associates, Inc. Public Financial Management, Inc Paradise Road, Suite S. Figueroa Street, Suite 4500 Las Vegas, Nevada Los Angeles, California (702) (213)

3 TABLE OF CONTENTS I. Securities Offerings Subject to Continuing Disclosure... 1 Page II. Continuing Disclosure Undertaking... 2 III. General Financial Information and Operating Data Applicable to the Truckee Meadows Water Authority... 3 The following document(s) have been separately submitted to the Electronic Municipal Market Access System ( EMMA ) and are incorporated herein by reference:, Nevada, Comprehensive Annual Financial Reports for the fiscal years ended June 30, 2001 through 2016., Nevada, Annual Reports for the fiscal years ended June 30, 2001 through Official Statements for the following bond issues: REVENUE BONDS: Date of Issuance Original Amount Principal Outstanding June 30, 2015 CUSIP Base Water Revenue Refunding Bonds, Series /18/07 218,975, ,290, Water Revenue Refunding Bonds, Series 2015A 04/14/ ,750,000 28,750, Water Revenue Refunding Bonds, Series /01/ ,790, ,790, Beginning the fiscal year ending June 30, 2009, the Annual Reports and Comprehensive Annual Financial Reports are filed with the Municipal Securities Rulemaking Board (the MSRB ) through the Electronic Municipal Market Access system ( EMMA ). The Appendix includes the debt service schedule and the CUSIP numbers for each bond issue included in this Annual Report.

4 I. Securities Offerings Subject to Continuing Disclosure Pursuant to Amended SEC Rule 15c2-12 (the Rule ), the is required to provide ongoing secondary market disclosure for municipal transactions effective on and after July 3, Annual information is provided and distributed to the Municipal Securities Rulemaking Board, (the MSRB ) through the Electronic Municipal Market Access system ( EMMA ). The following municipal securities transactions are included in this annual report: REVENUE BONDS: Date of Issuance Original Amount Principal Outstanding June 30, 2015 CUSIP Base Water Revenue Refunding Bonds, Series /18/07 218,975, ,800, Water Revenue Refunding Bonds, Series 2015A 04/14/15 28,240,000 28,750, Water Revenue Refunding Bonds, Series /01/16 124,790, ,790, Beginning the fiscal year ending June 30, 2009, the Annual Reports and Comprehensive Annual Financial Reports are filed with the Municipal Securities Rulemaking Board (the MSRB ) through the Electronic Municipal Market Access system ( EMMA ). The Appendix includes the debt service schedule and the CUSIP numbers for each bond issue included in this Annual Report.

5 II. Continuing Disclosure Undertaking The (the Authority ) has covenanted to provide ongoing disclosure of certain annual financial information and operating data with respect to the Authority of the type specified in the respective original offering documents of the municipal securities transactions subject to the Rule. The Authority has also covenanted to provide the Authority s annual financial statements, prepared in accordance with generally accepted accounting principles, audited by a firm of certified public accountants or the legislative auditor as required by the laws of the State of Nevada. In addition, the Authority covenants to provide or cause to be provided, in a timely manner, to the Municipal Securities Rulemaking Board (the MSRB ), notice of the occurrence of any of the following events with respect to the Bonds if any such event is material: (1) principal and interest payment delinquencies; (2) non-payment related defaults; (3) unscheduled draws on debt service reserves, reflecting financial difficulties; (4) unscheduled draws on credit enhancements, reflecting financial difficulties; (5) substitution of credit or liquidity providers, or their failure to perform; (6) adverse tax opinions or events affecting the tax exempt status of the Bonds; (7) modifications to rights of Bondholders; (8) bond calls; (9) defeasances; (10) release, substitution or sale of property securing repayment of the Bonds; or (11) rating changes. Municipal Securities Rulemaking Board The annual financial information covered by the continuing disclosure undertaking(s) for all municipal securities transactions subject to the Rule will be provided to the Municipal Securities Rulemaking Board through the Electronic Municipal Market Access system ( EMMA ) annually within 9 months of the end of the fiscal year. Page 2

6 III. General Financial Information and Operating Data Historical Pledged Revenues and Debt Service Coverage (In Thousands) 1 Revenues Fiscal Year 2012 Fiscal Year 2013 Fiscal Year 2014 Fiscal Year 2015* Fiscal Year 2016* Operating revenues / charges for service (1) $76,452 $79,912 $79,190 $86,187 $87,534 Non-operating revenues (2) 7,643 7,672 7,176 5,970 11,132 Expenses 84,095 87,584 86,366 92,157 98,666 Operation and maintenance expenses (3) 33,851 36,672 35,850 41,875 48,030 Contribution to Rate Stabilization Account Taxes other than income taxes (4) ,273 37,101 36,290 42,318 48,481 Net Revenues 49,822 50,483 50,076 49,839 50,185 Annual debt service (5) 21,295 29,672 31,285 29,955 31,780 Coverage (excluding capital contributions) (6) 2.34x 1.70x 1.60x 1.66x 1.58x Capital Contributions System development charges ,588 2,473 Facility fees 263 1, ,494 2,932 Total capital contributions 416 1,518 1,374 4,082 5,405 Net revenues plus developer charges $50,238 $52,001 $51,450 $53,921 $55,590 Coverage (including Capital Contributions) 2.36x 1.75x 1.64x 1.80x 1.75x * Fiscal Years 2015 and 2016 reflects changes as a result of the water utility consolidation as discussed in the MD&A and the notes to financials. (1) Includes retail residential, commercial, irrigation and wholesale water sales, net of bad debt expense. (2) Reflects hydroelectric revenues, other miscellaneous operating revenues from fees and charges and reimbursements, as well as gross investment income before reduction by capitalized investment income pursuant to Financial Accounting Standards Board Pronouncement ( FASB ) 62. (3) Includes water supply, treatment, distribution, hydroelectric power plant maintenance, customer service, water resource planning, conservation programs, administration, and inspection services. Wages and salaries, employee benefits and services and supplies comprise these expenses. (4) The Authority is required to pay property taxes on water rights and storage facilities located in California. During the reported fiscal years TMWA paid various counties in California for hydroelectric facilities, and water storage rights in California. (5) This schedule does not include the payments on the DWSRF loan or the tax-exempt commercial paper, which are subordinate to the 2006, 2007, 2015-A and 2016 Refunding Bonds. (6) TMWA s bond covenants require a minimum coverage of 1.25x total principal and interest payments. In fiscal year 2012, TMWA defeased the remaining 2001A bonds. This resulted in a one time increase in senior lien debt coverage ratio. Without this defeasance, the senior lien debt coverage ratio would be 1.52x. SOURCE: Page 3

7 Category Average Number of Accounts CUSTOMERS BY CATEGORY Fiscal Year Ending June 30, 2016 % of Total Accounts FY 2015 Water Revenues (1) % of Total Revenues Gallons Sold (000) % of Total Gallons Residential - Unmetered 2, % $3,725, % (2) -- Residential - Metered 106, % 60,198, % 14,633, % Commercial and Irrigation 9, % 11,026, % 4,086, % Other (3) 3 0.0% 11,554, % 2,579, % Wholesale 1 0.0% 1,029, % 542, % Total 118, % $87,534, % 21,841, % (1) Includes revenues that were billed and estimated in the fiscal year. Estimated revenues are revenues for water deliveries just prior to the end of the fiscal year that are not billed until July (i.e., in the next fiscal year). (2) Volume information is not available for unmetered customers. (3) Includes private fire protection services located on the premises of commercial and some residential customers. SOURCE: The Authority Page 4

8 Historical Gallons of Water Sold and Revenues by Category Fiscal Year 2012 Fiscal Year 2013 Fiscal Year 2014 Fiscal Year 2015 Category Gallons Sold Revenue (1) Gallons Sold Revenue(1) Gallons Sold Revenue(1) Gallons Sold Revenue(1) Residential Unmetered (2) $10,889,330 (2) $10,288,324 (2) $9,731,811 (2) $9,366,307 Residential Metered 11,077,157 41,476,536 11,916,455 43,957,551 11,581,326 44,137,033 15,151,881 51,796,871 Commercial 3,902,183 10,473,659 4,083,972 10,885,539 3,913,088 10,755,824 4,350,417 11,339,953 Other (2) 2,543,132 10,129,233 2,816,474 11,031,924 2,688,389 10,720,156 2,913,757 11,123,168 Wholesale 1,831,821 3,473,100 1,982,557 3,748,276 2,070,593 3,845,593 1,598,995 2,560,399 Total 19,354,313 $76,451,858 20,799,458 $79,911,614 20,253,396 $79,190,417 24,015,050 $86,186,698 (1) Includes revenues that were billed and estimated in the fiscal year. Estimated revenues are revenues for water deliveries just prior to the end of the fiscal year that are unbilled until July (i.e., in the next fiscal year). (2) Includes irrigation and fire protection services located on the premises of some of the residential and commercial customers. SOURCE: The Authority Page 5

9 Ten Largest Water System Customers Fiscal Year 2016 Customer Gallons Used in (000 gallons) Total Paid Percent of Total Revenues Sun Valley Water 542,875 $997, % Washoe County School District 335, , % City of Reno 241, , % Washoe County 177, , % City of Sparks 116, , % Nevada Properties (Peppermill) 162, , % University of Nevada Reno 137, , % Somersett HOA 94, , % GSR Holdings, LLC 160, , % Renown System 100, , % Total 2,070,428 $5,336, % (1) City of Reno includes the Reno Housing Authority SOURCE: The Authority Page 6

10 History of Revenues, Expenses and Changes in Net Assets Fiscal Year Ended June 30, Operating Revenues Charges for water sales 76,451,858 79,911,614 79,190,417 86,186,698 87,534,332 Hydroelectric sales 3,519,897 3,557,965 3,045,147 1,366,786 1,175,195 Other operating sales 1,818,744 2,107,528 2,079,826 2,475,832 3,219,416 Total Operating Revenues 81,790,499 85,577,107 84,315,390 90,029,316 91,928,943 Operating Expenses Salaries and wages 11,128,162 12,007,022 11,855,796 13,763,006 16,541,811 Employee benefits 4,819,187 5,045,922 5,127,921 5,271,735 6,364,279 Services and supplies 18,325,699 20,048,245 19,305,945 23,180,670 25,575,227 Total before Depreciation 34,273,048 37,101,189 36,289,662 42,215,411 48,481,317 Depreciation 22,349,225 22,517,885 23,028,198 27,899,449 32,134,190 Total Operating Expenses 56,622,273 59,619,074 59,317,860 70,114,860 80,615,507 Operating Income (Loss) 25,168,226 25,958,033 24,997,530 19,914,456 11,313,436 Nonoperating Revenues (Expenses) Grants 791,773 Investment earnings 2,277,298 2,007,375 2,051,156 2,127,009 6,737,745 Unrealized gain (loss) on investments (64,336) (17,119) (13,139) 15,970 Gain on refunding 1,305, Gain (Loss) on disposal of assets (611,086) (21,463) (136,300) (653,698) 6,460,373 Amortization of bond issuance costs (969,053) (852,069) (936,664) (1,004,685) (1,219,746) Interest expense (21,786,675) (21,791,975) (21,282,412) (21,281,117) (21,549,864) Other non-operating revenue 248, , , , Other non-operating expense (215,457) (163,057) (248,980) (3,029,859) -- Total Nonoperating (19,023,050) (20,675,251) (20,386,339) (23,526,380) (9,491,450) Income (Loss) before Capital Contributions 6,145,176 5,282,782 4,611,191 (3,611,924) 1,821,986 Capital Contributions Grants 208, , , ,138 Water meter retrofit program 173, , ,488 1,013, ,081 Developer infrastructure contributions 263, ,699 1,723,023 2,703,092 8,454,980 Developer will-serve contributions 173, ,871 1,529,129 1,864,446 4,363,692 Developer capital contributions other 153, , ,447 1,588,158 2,473,163 Developer facility charges (1) 263,089 1,047, ,660 2,494,434 2,931,940 Contributions from others 82, ,662 66,829 9,698, ,200 Capital contribution from other governments Net Capital Contributions 1,109,062 2,947,604 5,516,204 19,638,821 19,286,194 Special Item Washoe County Water Utility Transfer of Operations ,516, Change in Net Assets 7,254,238 8,230,386 10,127, ,542,921 21,108,180 Net Assets, Beginning of Year 288,191, ,205, ,435, ,563, ,874,134 Adjustment -2,240,218 4,768,195 Net Assets, End of Year 293,205, ,435, ,563, ,874, ,982,314 SOURCE: The Authority Page 7

11 Operating Revenues Budget Summary and Comparison 2015 Augmented Budget Augmented Budget 2016 Revenues from water sales 85,695,423 86,186,698 88,328,024 87,534,332 Hydroelectric revenue 2,251,551 1,366, ,552 1,175,195 Other operating revenue 2,250,675 2,475,832 2,580,867 3,219,416 Total Operating Revenues 90,197,649 90,029,316 91,854,443 91,928,943 Operating Expenses Salaries and wages 14,682,962 13,763,006 16,609,056 16,541,811 Employee benefits 6,764,173 5,271,735 8,164,236 6,364,279 Services and supplies 23,935,127 23,180,670 27,666,431 25,575,227 Total before Depreciation 45,382,262 42,215,411 52,439,723 48,481,317 Depreciation 30,675,488 27,899,449 33,207,312 32,134,190 Total Operating Expenses 76,057,750 70,114,860 85,647,035 80,615,507 Operating Income (Loss) 14,139,899 19,914,456 6,207,408 11,313,436 Nonoperating Revenues (Expenses) Investment earnings 2,474,087 2,127,009 2,357,604 6,737,745 Unrealized (Loss) Gain on Investments 15,970 80,042 Gain (Loss) on disposal of assets (653,698) (625,000) 6,460,373 Amortization of bond issuance costs (920,714) (1,004,685) (1,105,128) (1,219,746) Other non-operating revenue 300, , Other non-operating expenses (900,000) (3,029,859) Interest expense (21,573,822) (21,281,117) (21,191,268) (21,549,864) Total Nonoperating (20,620,449) (23,526,380) (20,563,792) (9,491,450) Income (Loss) before Capital Contributions (6,480,550) (3,611,924) (14,356,384) 1,821,986 Capital Contributions Grants , ,138 Water meter retrofit program 656,892 1,013, , ,081 Developer infrastructure contributions 1,189,188 2,703, ,454,980 Developer will serve contributions (net of refunds) 272,004 1,864,446 1,152,288 4,363,692 Developer capital contributions-other 520,980 1,588, ,612 2,473,163 Developer Facility Charges 1,532,965 2,494,434 1,505,652 2,931,940 Contributions from Others 9,605,400 9,698,535 6,995, ,200 Net Capital Contributions 13,777,429 19,638,821 11,100,236 19,286,194 Washoe County Transfer of Operations 231,516,024 Change in Net Assets 7,296, ,246,042 (3,256,148) 21,108,180 Source: The Authority s Final Budget for FY 2015 and Augmented Budget for FY 2015 and the Authority s Comprehensive Annual Financial Report for FY 2014 and FY Page 8

12 Appendix Debt Service Schedules CUSIP Numbers Page 9

13 $218,975,000, Nevada Water Revenue Refunding Bonds Series 2007 Series 2007 Dated Date: 1/18/2007 Maturing July 1, CUSIP Interest Rate Amount DZ % $1,230, EA % 360, EB % 380, EC % 400, ED % 420, EE % 440, EF % 460, EG % 485, EH % 510, EJ % 11,390, EK % 505, EL % 705, EM % 585, EN % 14,745, EP % 15,010, EQ % 16,085, ER % 16,765, ES % 17,480, ET % 17,140, EU % 19,005, EV % 84,875,000 $218,975,000 Page 10

14 $28,750,000, Nevada Water Revenue Refunding Bonds Series 2015A Series 2015A Dated Date: 7/1/2015 Maturing July 1, CUSIP Interest Rate Amount FR % $830, FS % $850, FT % 885, FU % 925, FV % 970, FW % 995, FX % 1,055, FY % 1,110, FZ % 1,175, GA % 1,235, GB % 1,305, GC % 1,375, GD % 1,440, GE % 1,520, GF % 1,595, GG % 1,685, GH % 1,775, GJ % 1,860, GK % 1,955, GL % 2,055, GM % 2,155,000 28,750,000 Page 11

15 $124,790,000, Nevada Water Revenue Refunding Bonds Series 2016 Series 2016 Dated Date: 7/1/2016 Maturing July 1, Cusip Interest Rate Amount GN9 5.00% $23,505, GP4 5.00% 24,685, GQ2 5.00% 25,920, GR0 5.00% 27,215, GS8 5.00% 7,445, GT6 5.00% 7,815, GU3 5.00% 8,205,000 $124,790,000 Page 12

16 NOTICE OF CONSUMMATION OF MERGER In 2007, the Nevada Legislature passed Senate Bill known as the Western Regional Water Commission Act (the Act ). Among other purposes, the Act required public purveyors of water, including Washoe County, Nevada (the County ) and TMWA, to evaluate the costs and benefits of consolidation. Following the adoption of the Act, the County s water utility (the Water Utility ) and TMWA engaged in substantial amounts of due diligence and ultimately determined that the consolidation of the Water Utility into TMWA was feasible and that all related impediments to such a consolidation could be removed to the satisfaction of both parties. The County and TMWA approved an interlocal agreement, dated January 29, 2010, governing the merger of the Water Utility into TMWA. On December 11, 2013, the South Truckee Meadows General Improvement District ( STMGID ), a smaller water utility in the same basin, and TMWA also approved an interlocal agreement governing the merger of STMGID into TMWA. In October 2014, the County and TMWA approved an addendum to the interlocal agreement that included the schedules and exhibits necessary to merge the Water Utility into TMWA, and on December 31, 2014, the Water Utility was merged into TMWA. On the effective date of the merger of the Water Utility into TMWA, STMGID was also dissolved and merged into TMWA. As a consequence of the merger, all of the assets of the Water Utility and STMGID were transferred to TMWA, including, without limitation, all of the necessary infrastructure, land, and water resources necessary to serve the former customers of the Water Utility and STMGID. TMWA hired twenty-five former County employees who were responsible for the design, operation and maintenance of the Water Utility and who performed those same functions for STMGID under the Water Utility s contract with STMGID. Certain liabilities of the Water Utility and STMGID were also assumed by TMWA, including, without limitation, the County s Drinking Water State Revolving Loan in the outstanding amount of $9.1 million. Certain contingent liabilities of the Water Utility and STMGID were also assumed by TMWA including, without limitation, a potential claim by Pall Filter Company for a yet to be determined amount, and potential liabilities with respect to domestic well owners impacted by municipal pumping by the Water Utility and STMGID. Finally, on December 31, 2014, TMWA applied $27 million of proceeds of its commercial paper notes, together with $405,000 of other available funds, to the purchase of a portion of the assets of the Water Utility, which the County directed be deposited into a defeasance escrow to defease certain outstanding obligations of the County serviced by revenues of the Water Utility. As a result of the merger, TMWA s total net capital assets will increase by approximately $280 million or 42% from $666.7 million to approximately $946.7 million. Total operating revenues will also increase as a result of the merger by approximately $18.2 million or 23% from approximately $81.0 million to $99.2 million per year, and total debt will increase as a result of the merger by $36.1 million or 7.5% from $483.2 to $519.3 million. Finally, TMWA expects to add approximately 23,800 new service connections as a result of its merger with the Water Utility and STMGID. The County will continue to operate its wastewater, reclaimed water and storm water utilities whereas STMGID has ceased to exist. Page 13