AGENDA. Approve 3. Forbes Hill Tank Solar Panel Array Project Approve 4. Fire Flow Improvement Program - Fiscal Year Annual Report

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1 NOTICE OF MEETING BOARD OF DIRECTORS MEETING DATE: TUESDAY, January 5, 2016 TIME: 7:30 p.m. LOCATION: 1) MMWD Board Room, 220 Nellen Ave., Corte Madera, CA ) American Airlines Terminal 3, Admirals Club 1 World Way, Los Angeles, CA (Director Russell) Posting Date: December 31, Nellen Avenue Corte Madera CA AGENDA ITEM RECOMMENDATION APPROX. START CALL TO ORDER 7:30 p.m. 1. A. Elect President for 2016 B. Elect Vice President for 2016 C. Approve 2016 Board Calendar D Committee Assignments ADOPT AGENDA PUBLIC EXPRESSION* DIRECTORS AND GENERAL MANAGER S ANNOUNCEMENTS 7:31 p.m. 7:38 p.m. 7:40 p.m. 7:50 p.m. 7:55 p.m. CONSENT CALENDAR ITEMS Minutes of November 17 and December 8, 2015 meetings Approve 3. Forbes Hill Tank Solar Panel Array Project Approve 4. Fire Flow Improvement Program - Fiscal Year Annual Report Approve 5. Agreement with Best Best and Krieger Approve REGULAR CALENDAR 6. Water Production, Storage, and Drought Response Report Information 8:00 p.m. MMWD BOARD OF DIRECTORS: Jack Gibson, President; Larry Bragman; Cynthia Koehler; Armando Quintero, Larry Russell *Anyone wishing to speak on an item other than those listed on this agenda will be recognized at this time. We ask any person wishing to be heard to come to the podium to address the board and state your name and address for the public record. A 3-minute limit is customary; however the committee chair may adjust the actual time allotted to accommodate the number of speakers. **All matters listed on the consent calendar are considered to be routine and will be enacted by a single action of the board, unless specific items are removed from the consent calendar during adoption of the agenda for separate discussion and action. - over -

2 7. Comprehensive Annual Financial Report (CAFR) for fiscal year ending June 30, 2015 Accept 8:05 p.m. 8. Future Agenda Items Information 8:15 p.m. ADA NOTICE AND HEARING IMPAIRED PROVISIONS: The board room is equipped with sound amplifying units for use by the hearing impaired. The units operate in conjunction with the room's sound system. You may request the personal sound amplifier from the Board Secretary for use during meetings. In accordance with the Americans with Disabilities Act and California Law, it is the policy of the Marin Municipal Water District to offer its public programs, services, and meetings in a manner that is readily accessible to everyone, including those with disabilities. If you are disabled and require a copy of a public hearing notice, an agenda, and/or agenda packet in an appropriate alternative format, or if you require other accommodation, please contact Stephanie Eichner-Gross at (415) , at least two days in advance of the meeting. Advance notification within this guideline will enable the district to make reasonable arrangements to ensure accessibility. * * * * * * * * * * * * * * * * INFORMATION PACKETS ARE AVAILABLE FOR REVIEW AT THE CIVIC CENTER LIBRARY, CORTE MADERA LIBRARY, FAIRFAX LIBRARY, MILL VALLEY LIBRARY, MMWD OFFICE, AND MMWD WEBSITE (MARINWATER.ORG) * * * * * * * * * * * * * * * * FUTURE BOARD MEETINGS: Tuesday, January 19, 2016, 7:30 p.m. Tuesday, February 2, 2016, 7:30 p.m. MMWD Board Room MMWD Board Room

3 ITEM NO. 1 MEETING DATE: January 5, 2016 MEETING: Board of Directors STAFF REPORT SUBJECT: Organization of Board of Directors for 2016 SUBMITTED BY: Krishna Kumar, General Manager RECOMMENDED ACTION: A. Elect President for 2016 B. Elect Vice President for 2016 C. Approve 2016 Board Calendar D Committee Assignments EXECUTIVE SUMMARY Each year, at the first regular meeting, the Board elects a new President and Vice President. According to the District code, the Board of Directors meets on the first and third Wednesday each month unless otherwise specified at the first meeting of the year. Attached is a draft schedule of Board and Committee meetings for The following changes are proposed: Regular Board meetings are scheduled on the first and third Tuesdays of each month No meeting is scheduled on May 3 (which coincides with the ACWA Spring Conference) Due to the Thanksgiving holiday, the Finance Committee meeting for November is scheduled for November 17 FISCAL IMPACT: YES NO X FISCAL YEAR: BACKGROUND: N/A STRATEGIC PLAN ALIGNMENT: The requested action aligns with the district s Strategic Plan Goal 3: Communications - We will partner with our community, customers, and staff to understand & reflect their interests and clearly articulate the programs & policies of Marin Municipal Water District; Strategy 1 - Support the Board of Directors to facilitate informed policy / decisionmaking; Objective 1 Support Board and committee meetings REVIEWED BY: Finance Manager [ ] NA [ X ] General Counsel [ ] NA [ X ] General Manager [ X ] NA [ ] ATTACHMENTS: 1. Draft Board Calendar for Committee Assignments 3. Committee Descriptions

4 DRAFT 220 Nellen Avenue Corte Madera CA marinwater.org 2016 BOARD MEETING SCHEDULE STANDING COMMITTEES 1 MONTH BOARD MEETING Tuesday 7:30 p.m. DOC 3 Friday 9:30 a.m. Finance Thursday 9:30 a.m. Watershed Thursday 1:30 p.m. Communications Wednesday 4 p.m. Resiliency Friday 9:30 a.m. OTHER 2 JAN FEB 2 16 MARCH 1 15 APRIL MAY JUNE 7 21 JULY 5 19 AUG 2 16 SEPT 6 20 OCT 4 18 NOV 1 15 DEC Draft The following committees meet as needed: Russian River Ad Hoc Committee, Las Gallinas Ad Hoc Committee, and Compensation Committee. 2 This column lists special meetings and workshops. 3 District Operations Committee. CONFERENCES: CA Water Policy Conf.., Apr ACWA Spring Conf., May 3-6 AWWA Annual Conf., June ACWA Fall Conf., Nov 29-Dec 2

5 BOARD COMMITTEES AND OTHER ASSIGNMENTS FOR 2015 STANDING BOARD COMMITTEES DISTRICT OPERATIONS Larry Russell, Chair Armando Quintero, Vice-Chair WATERSHED Armando Quintero, Chair Larry Bragman, Vice-Chair FINANCE Cynthia Koehler, Chair Jack Gibson, Vice-Chair COMMUNICATIONS Cynthia Koehler, Chair Jack Gibson, Vice Chair DROUGHT RESILIENCY TASKFORCE Jack Gibson, Chair Larry Russell, Vice Chair STAFF LIAISON Mike Ban Crystal Yezman Oreen Delgado Libby Pischel Krishna Kumar AD HOC BOARD COMMITTEES Conservation Action Cynthia Koehler, Member Larry Russell, Member Compensation Larry Russell, Chair Jack Gibson, Vice Chair Russian River Jack Gibson Larry Russell (Alternate) Dan Carney Krishna Kumar Krishna Kumar OTHER ASSIGNMENTS Tamalpais Lands Collaborative Executive Committee Armando Quintero Jack Gibson Technical Advisory Committee - Lagunitas Creek Larry Bragman Cynthia Koehler, Alternate Krishna Kumar Gregory Andrew

6 OTHER ASSIGNMENTS (con t) North Bay Watershed Association Jack Gibson Larry Russell, Alternate Tomales Bay Watershed Council Armando Quintero Sonoma County Water Agency, Water Advisory Committee (WAC) Jack Gibson Larry Russell, Alternate North Bay Water Reuse Authority Jack Gibson Larry Russell Las Gallinas Recycled Water Ad Hoc Jack Gibson Larry Russell ACWA Federal Affairs Committee Cynthia Koehler STAFF LIAISON Krishna Kumar Krishna Kumar Krishna Kumar Krishna Kumar Krishna Kumar Krishna Kumar M:\BOARD\REPORTS\2016\JAN 5\ITEM 01.2 BOARD COMMITTEE ASSIGNMENTS JAN 2015 FINAL.DOC

7 DESCRIPTION OF BOARD COMMITTEES AND OTHER ASSIGNMENTS STANDING BOARD COMMITTEES: District Operations (DOC): The DOC reviews proposed contracts for capital projects and facilities maintenance, consulting agreements, pipeline extension agreements, variance requests, leasing proposals, disposal of surplus real estate, and any other matters relating to facilities and operations prior to the Regular board meeting. It is an opportunity to review an item in greater detail for those board members who may wish to attend. The items are forwarded on to the full board at a regular meeting with a recommendation from the Committee. This Committee generally meets on the third Friday of each month at 9:30 am. Watershed: The purpose of the Watershed Committee is to discuss matters concerning the District's watershed and reservoirs such as protection of the fishery, vegetation management, recreational uses, and sources of revenue. This Committee meets once a quarter on the third Thursday of the month at 1:30 pm. Finance: The purpose of the Finance Committee is to discuss matters related to the District's finances such as rates, debt and budget. This Committee generally meets monthly on the fourth Wednesday of the month at 4:00 pm. Communications: The purpose of the Communications Committee is to discuss all matters related to the District's communications planning and public outreach. The Committee generally meets monthly on the third Tuesday of the month at 4:00 pm. Drought Resiliency Task Force: The purpose of the Drought Resiliency Task Force is to discuss all matters related to drought resiliency. The Committee meets quarterly on the second Friday of the month at 9:30 a.m. AD HOC BOARD COMMITTEES: Conservation Action: The focus of the committee is to serve as a networking forum for local resource conservation programs and assist in implementation of community conservation programs. Members of the CAC will include representatives from all agencies, organizations, and businesses interested in promoting natural resource conservation actions in Marin. Compensation: The purpose of the Compensation Committee is to discuss all matters related to the District's employee compensation. The Committee meets as needed. Russian River: This ad hoc committee meets as needed to review issues associated with water supply and water resources management in Sonoma County. M:\BOARD\REPORTS\2016\JAN 5\ITEM 01.3 DESCRIPTION OF BOARD AND OTHER COMMITTEES.DOC

8 OTHER ASSIGNMENTS: Tamalpais Lands Collaborative Executive Committee: The purpose of the Tamalpais Lands Collaborative (TLC) Executive Committee is to review projects and programs supported by the TLC and to review and direct the activities of the Working Group which is composed of staff from each of the agency partners. The Committee meets 2 to 4 times per year as needed. Technical Advisory Committee - Lagunitas Creek Sediment and Riparian Management Plan: Representatives of approximately 20 agencies and environmental/community organizations meet to collaborate on water resources issues in the Lagunitas Creek Watershed. The Committee is chaired by a member of the Committee and meets two to four times a year at 9 am on Fridays. North Bay Watershed Association (NBWA): MMWD joined the NBWA as a Charter member when it was created in The association of water, wastewater and storm water agencies works together to meet regulatory requirements of the Clean Water Act and Safe Drinking Water Act, conduct public education programs, and conduct water resources improvement projects. The Association meets monthly on the first Friday at 9:30 am. Tomales Bay Watershed Council (TBWC): MMWD was asked by the TBWC to appoint a representative to their group to participate in the development and implementation of a watershed plan. The role of Lagunitas Creek in this watershed area is significant and therefore the request for representation. The Council generally meets bi-monthly in Point Reyes. Sonoma County Water Agency Water Advisory Committee (WAC): The WAC is composed of the primary and secondary contractors to the Sonoma County Water Agency. The purpose of the WAC is to discuss water supply, environmental and contract issues relevant to water deliveries to the contractors from the Agency. The WAC also negotiates any changes to contracts between the Agency and the contractors. The WAC meets on the first Monday of every month at 9:00 am. North Bay Water Reuse Authority (NBWRA): The purpose of this committee, which was originally established in 2005, is to seek and obtain federal and state funds for recycled water projects. Original members include the Las Gallinas Valley Sanitary District, Novato Sanitary District, North Marin Water District, Sonoma County Water Agency, Napa Sanitation District and County of Napa. In 2013 NBWRA amended its MOU to include new members. MMWD and the City of Petaluma joined the NBWRA in The NBWRA Board generally meets the third Monday of every other month. Meetings start at 9:30 and are held at the Novato Sanitary District. M:\BOARD\REPORTS\2016\JAN 5\ITEM 01.3 DESCRIPTION OF BOARD AND OTHER COMMITTEES.DOC

9 ITEM NO. 2 MEETING DATE: January 5, 2016 MEETING: Board of Directors STAFF REPORT SUBJECT: SUBMITTED BY: Minutes District Secretary RECOMMENDED ACTION: Approve minutes from November 17 and December 8, 2015 meetings. ATTACHMENTS Minutes

10 ** D R A F T ** MMWD Board of Directors meeting November 17, 2015 THE BOARD OF DIRECTORS OF MARIN MUNICIPAL WATER DISTRICT Minutes of the meeting of the Board of Directors held on Tuesday, November 17, 2015 at 220 Nellen Avenue, Corte Madera, California. Directors present: Larry Bragman, John C. Gibson, Armando Quintero, Cynthia Koehler and Larry L. Russell (Directors Russell, Quintero and Gibson participated by teleconference) Directors absent: None CALL TO ORDER Vice President Koehler called the meeting to order at 7:30 p.m. AGENDA David Brown requested that Item 6 be moved forward since many people in the audience were attending for Item 6. On motion of Director Gibson, seconded by Director Bragman, the agenda was adopted as amended by the following vote: Ayes: Noes: Absent: Abstain: Directors Bragman, Gibson, Koehler, Quintero and Russell None None None PUBLIC EXPRESSION None. DIRECTORS' AND GENERAL MANAGER S ANNOUNCEMENTS None. 1

11 ** D R A F T ** MMWD Board of Directors meeting November 17, 2015 CONSENT CALENDAR (ITEMS 1-2) On motion of Director Bragman, seconded by Director Gibson, the Board approved Consent Calendar Items 1-2 by the following vote: Ayes: Noes: Absent: Abstain: ITEM 1 ITEM 2 Directors Bragman, Gibson, Koehler, Quintero and Russell None None None Minutes of November 3, 2105 meeting as presented. General Manager s Report for October. ITEM 3 WATER PRODUCTION, STORAGE, AND DROUGHT RESPONSE REPORT Mike Ban, Engineering and Environmental Services Division Manager, presented the staff report. He said fiscal year water production through November 16 was 10,000 AF, cumulative water production through November was 28% below November of 2013 which indicates the District is on track to meet the State requirement for a 20% reduction. He said current storage volume was 51,600 AF, 102% of normal. A brief question and answer period followed. ITEM 6 RATE PROCESS AND TIMETABLE Oreen Delgado, Finance Manager, presented the staff report. She summarized the Proposition 218 process and timing of the rate proposal. She said the first of two public workshops was held on November 10 and was attended by approximately 35 people. She said at the November 12 Finance and Communications Committee meetings, the committees discussed the workshop, public outreach and comments and requested staff present the Board with options regarding the process and timetable. She said there were two options for the Board to consider: 1) keep the current schedule for the public hearing on December 8 at which time, the Board would consider and vote on the proposed rates; 2) cancel the public hearing, reissue the Proposition 218 notice for a hearing in April with the proposed rates to be effective on May 1, 2016, this option would allow additional time for public outreach. A question and answer period followed with discussion on the options, addition of a sunset provision, cutting back the bond coverage ratio to the legal requirement of 1.25 and effects of delaying the process. Director Koehler opened the matter for public comment. The following individuals addressed the Board: Paul Premo, Richard Tait, Carolyn Lennert, David Brown and Priscilla Bull. 2

12 ** D R A F T ** MMWD Board of Directors meeting November 17, 2015 In response to comments regarding employee compensation, Director Koehler requested staff look into making salary comparisons available. Director Koehler proposed proceeding with the December 3 workshop. She said the workshop should be significantly restructured and staff should be prepared to respond to questions asked by the public. She said the Board was committed to having a partnership with the public. She also requested the information on the possibility of adding a sunset provision. Director Quintero spoke in support Director Koehler s proposal. He requested a handout describing the Proposition 218 process be made available at the workshop and the workshop be held in a larger venue with a facilitator. ITEM 4 AGREEMENT FOR ENGINEERING SERVICES FOR THE LAGUNITAS CREEK WINTER HABITAT AND FLOODPLAIN ENHANCEMENT PROJECTS PHASE I AND PHASE II CONSTRUCTABILITY REVIEW AND CONSTRUCTION MANAGEMENT Greg Andrew, Fishery Program Manager, presented the staff report requesting authorization to proceed with an agreement with The Covello Group, Inc. engineering services for Lagunitas Creek Winter Habitat and Floodplain Enhancement Projects Constructability Review and Construction Management. On motion of Director Bragman, seconded by Director Russell, the Board approved Resolution No authorizing the general manager to execute a professional services agreement with The Covello Group, Inc. for Engineering Services for the Lagunitas Creek Winter Habitat and Floodplain Enhancement Projects Phase I and Phase II Constructability Review & Construction Management, in the amount of $270,820 by the following vote: Ayes: Noes: Absent: Abstain: Directors Bragman, Gibson, Koehler, Quintero and Russell None None None ITEM 5 AGREEMENT FOR INFORMATION SYSTEMS DEVELOPMENT SERVICES Bob Fairchild, Information Technology Manager, presented the staff report requesting authorization to contract with Quintel Management Consulting to assist with current projects until the currently vacant Information Technology Analyst position has been filled. On motion of Director Quintero, seconded by Director Bragman, the Board authorized the general manager to execute a contract with Quintel Management Consulting in an amount 3

13 ** D R A F T ** MMWD Board of Directors meeting November 17, 2015 not-to-exceed $75,000 by the following vote: Ayes: Noes: Absent: Abstain: Directors Bragman, Gibson, Koehler, Quintero and Russell None None None ITEM 7 FUTURE AGENDA ITEMS Michael Ban, Acting General Manager, presented the staff report listing upcoming items. The Communications Committee meeting was rescheduled for December 10 at 12 pm. Director Bragman requested there be an item on Community Media Center services at an upcoming Communications Committee meeting. ADJOURNMENT There being no further business, the meeting of November 17, 2015, was adjourned at 9:14 p.m. ATTEST: President, Board of Directors Secretary 4

14 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 THE BOARD OF DIRECTORS OF MARIN MUNICIPAL WATER DISTRICT Minutes of the meeting of the Board of Directors held on Tuesday, December 8, 2015 at 220 Nellen Avenue, Corte Madera, California. Directors present: Larry Bragman, John C. Gibson, Armando Quintero, Cynthia Koehler and Larry L. Russell Directors absent: None CALL TO ORDER President Gibson called the meeting to order at 7:30 p.m. AGENDA On motion of Director Bragman, seconded by Director Quintero, the agenda was adopted as amended by the following vote: Ayes: Noes: Absent: Abstain: Directors Bragman, Gibson, Koehler, Quintero and Russell None None None ITEM 1 ORDINANCE NO. 431 INCREASING RATES FOR POTABLE, RAW AND RECYCLED WATER AND METER SERVICE CHARGE AND ADDING WATERSHED FEE: A. PUBLIC HEARING B. RESOLUTION NO C. ORDINANCE NO. 431 Oreen Delgado, Finance Manager, presented the staff report and gave an overview of the District s operation which includes delivery of safe and reliable water 365 days a year, 24/7 emergency response and maintenance of 21,000 acres of watershed lands open for recreational and public access with over 1.5 million visitors each year. She said 80% the District s operational costs are fixed and do not vary when demand for water decreases. She said the proposed rate restructuring would increase the portion of revenues collected from fixed charges to 28% which would help create revenue stability and decrease volatility. She said the proposed rates were based on requirements of Proposition 218 which includes a 45-day notice of public hearing and establishing a nexus between the amount charged and 1

15 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 the cost to the provide service. She said a cost of service analysis was completed by Carollo Engineers. Oreen Delgado said the proposed rates would be effective January 1, 2016 and contained two main components which include an increase to the bimonthly service charge and the addition of a new fixed bimonthly watershed management fee, the total of which would increase fixed charges from 17% to 28% of total revenues. She said the two main components of the proposed rates restructuring were the result of a two-year process and recommendations from a citizen advisory committee. She said as a result of structural changes to the rates, the tiered rates would continue to change to meet the cost of service element of Proposition 218. She said the rate proposal includes a 4% increase to all fees, rates and charges would be effective on May 1, 2016 and noted that the current rates have been in effect since May She said an average customer using 19 CCF would see an increase of $21 for the two-month billing period or approximately $10 per month. She said both of fixed charges would be waived for customers that qualify for the service charge waiver and medical disability discount programs. She said the cost of service analysis will be updated in late 2016 to evaluate the proposed rates and any changes in water demand. Krishna Kumar, General Manager, said the District has a history of prudent, reasonable rate increases which over the last 25 years cumulatively added up to less than consumer price index during the same period. He summarized the proposal into five key items as follows: 1. An increase in fixed bimonthly service charge of approximately $5 per month for 80% of residential customers; introduction of a new fixed watershed management fee of less than $5 for 80% of residential customers, and an increase of 7 cents for Tier 1 rate and decreases in Tier 2, 3 and 4 rates. 2. A 4% increase to all water service rates, fees and charges effective May 1, Pass through adjustment for wholesale water rate increases in excess of 5%. 4. Drought Surcharges. 5. Revenue Recovery Surcharges. President Gibson opened the public hearing. The following spoke in opposition to the proposed rate increase Robert Archer, Paul Primo; Richard Tait, Michael Lotito, Lisa Miller, Fritz Bathelt, Richard Owen, Gary Runes, Paul Minault, Olly Larsen, John Q Public, Garrill Page, Roger Peters, Robert Perez, Mike Ghilotti, Marilyn Rich, Mimi Willard, Roger Kuhn, Terry Brooks, Carolyn Lenert, David Barni, Nancy Okada, Victoria DeWitt, Jack Nixon and Dean Jones. The following people expressed support for the proposed rate increase Phil Sotter, John Henley, Peter Yolles; Megan Clark, Ann Thomas and Rachel Ginis. 2

16 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 Michael Lotito submitted a letter to the Board summarizing his comments. Roger Roberts said he would like to see reassurance that the watershed fee will be in addition to the existing watershed budgetary expenses. Director Bragman said he believed there was discretion within the Proposition 218 noticing to customize the proposal with a range of options and timeframes. He spoke in support of a sunset provision because of the volatility of water consumption in Marin. Director Russell said the District provides healthful water, fire protection and recreation. He said water is available on demand and using less does not change the cost, only the consumption is changed. He said water is essential and the proposed increase would amount to $10 per month. He said the District charges a fair rate to keep the District solvent and to maintain AA+ bond rating. He said the drought situation is caused by nature and the governor s mandate for agencies to reduce consumption. He said there is a misconception that additional rain will increase consumption. He said additional rain reduces consumption. He said Carollo Engineers did an excellent job with the Cost of Service Study. He said the proposal before the Board is a one-time restructuring of rates. He said the District has held 42 meetings on rates and heard 32 speakers at this meeting. He said the public input will have an effect on the outcome, but the District is suffering from a government imposed reduction of 20% of its business. Director Quintero said the District needs to learn how to communicate better and spoke in support of holding annual town hall meetings to update the public on the status of the District. He said along with maintaining its bond rating, the District must also meet water standards or face significant risks. He said looking operations to evaluate efficiency is always worthwhile. He said the District is considering another cost of service analysis during the calendar year and that many of the public comments can be evaluated as part of the analysis. Director Koehler said water conservation and efficiency is water supply and if the District needed to look elsewhere for additional supply, the rates would be substantially higher than the current proposal. She said she was sympathetic to the concerns raised from those who are conserving and seeing their rates increase. She said it was important to communicate that District is selling a service, not a commodity, and there is no municipal water agency in the west that is not in the same situation. She said efficiency is the cheapest new water supply, but it has a cost and that is the service being provided. She said investing in efficiency will make the District more resilient, sustainable and financially sound. She said the current average use per person per day is 121 gallons but more can be done. She said average use in Australia is 45 gallons per person per day. She said the new cost of service study will bring the District into a more defensible, sustainable and resilient track. Director Gibson said during his 20 years on the Board he voted against rate increases more 3

17 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 often than he has voted for rate increases. He said of all the increases he has seen, the current proposal, while not perfect, was the one he was most comfortable with, given the level of detail and effort. He expressed an interest in Director Bragman s earlier comment regarding flexibility. Director Bragman proposed the watershed fee be accounted for and tracked separately. President Gibson closed the public hearing and requested the Board first consider Resolution Director Bragman proposed the 4% increase scheduled in May be removed from the ordinance since the cost of service analysis and rates would be reevaluated in 12 months. He also proposed the drought fee be removed from the ordinance. Krishna Kumar reviewed the five components of the proposal. Director Russell said the 4% increase in May was an integral part of package and its removal would have a significant impact on revenue. He said in the event that too much money is collected, rates can be adjusted. Director Bragman proposed that approval of the 4% increase in May be conditional subject to implementation upon a future vote of the Board. Mary Casey, General Counsel, said a conditional approval would not be an approval and the District would need to send out another Proposition 218 notice with 45 day period before the rate could be enacted. Oreen Delgado said the proposed rate for May 1 would be effective for billing in July 1. She also said that the Standard & Poor s bond rating was conditional on approval of the proposed rate increases. Additional discussion followed that focused on potential impacts to the debt coverage ratio if the 4% increase effective in May 2016 was not approved. Krishna Kumar recommended approving Items 1, 2 and 3 and revisiting item 4 and 5 at a future date. Director Bragman made a motion for the proposed rate restructuring Items 1, 2 and 3 with the Cost of Service Analysis beginning in December 2016 and reviewing the budget in April of 2016 regarding the 4% increase. Director Quintero seconded Director s Bragman s motion. Mary Casey said the record of the proceedings included the 683 protest letters submitted in advance of the meeting and approximately 12 letters submitted during this meeting; the Finance Manager s binder contained on thumb drives includes the presentations and 4

18 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 minutes of the 42 public meetings, staff documents presented at this meeting; and the testimony of the people who spoke at this meeting. On motion of Director Bragman, seconded by Director Quintero, the Board approved Resolution 8373 regarding CEQA review of Ordinance No. 431 by the following roll call vote: Ayes: Noes: Absent: Abstain: Directors Bragman, Gibson, Koehler, Quintero and Russell None None None Mary Casey clarified that changes would be made to Section 6, the drought surcharges and SCWA surcharges; Section , the revenue recovery charges; and Section and the companion Section would be removed from the Ordinance 431. On motion of Director Bragman, seconded by Director Quintero, the Board approved Ordinance 431 with revisions to include Items 1, 2 and 3 of the proposed rate structure as described by Mr. Kumar and a Cost of Service Analysis in December of 2016 and review of the budget regarding the 4% increase in April of 2016 by the following roll call vote: Ayes: Noes: Absent: Abstain: Directors Bragman, Gibson, Koehler, Quintero and Russell None None None The text of the revised ordinance is shown on the following pages: 5

19 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 MARIN MUNICIPAL WATER DISTRICT ORDINANCE NO. 431 AN ORDINANCE AMENDING AND ADDING CERTAIN PROVISIONS TO MARIN MUNICIPAL WATER DISTRICT S CODE, TITLE 6 ENTITLED WATER RATES AND CHARGES CHAPTER 6.01 BE IT ORDAINED BY THE BOARD OF DIRECTORS OF THE MARIN MUNICIPAL WATER DISTRICT AS FOLLOWS: SECTION 1. Purpose: The purpose of this ordinance is to enact changes to the rate structure, effective January 1, 2016 which include: (1) an increase to the Bi-Monthly Fixed Service Charge and Fire Service Line Charges; (2) implementation of a Bi-Monthly Fixed Watershed Management Fee; (3) adjustments to the Tier Rates of the Commodity Charge for all customer classes; (4) changes in the Tier allotments for multi-family and duplex customer classes; (5) a water pass-through adjustment for Sonoma County Water Agency water purchases; 6) effective May 1, 2016 an increase of 4% for all water service rates, fees and charges SECTION 2. Section of the Marin Municipal Water District Code is amended to read as follows: Service Charge. All consumers on metered service and all consumers with offmeter services utilizing an alternate water supply, but wishing to maintain a service commitment from the District, shall pay a bimonthly charge based upon meter size to cover a portion of the District s operational costs. Except for service charges for private fire taps, which are specified in Section , and service charges for hydrant meters, which are specified in Section , the bimonthly service charges are as follows: Service Charge Meter Size Effective 1/1/2016 Effective 5/1/2016 5/8" $32.55 $ /4" " /2" " " " " 1, , " 2, , " 3, , All single-family residences with a meter larger than one-inch required solely for fire sprinkler systems and/or due to low system pressure will be charged the one-inch meter rate. Notwithstanding the above, consumers with properties where use of reclaimed water 6

20 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 requires a water meter in addition to the meter required to provide potable service to the same user shall be exempt from the service charge for the reclaimed water meter. SECTION 3. Section entitled Watershed Management Fee is added to Chapter 6.01 to read as follows: Watershed Management Fee. All consumers for Billing Codes 1 through 19 shall pay a bimonthly Watershed Management Fee based upon meter size to cover a portion of the District s watershed maintenance and operational costs. Watershed Management Fee Service Charge Meter Size Effective 1/1/2016 Effective 5/1/2016 5/8" $8.45 $8.80 3/4" " /2" " " " " " "

21 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 SECTION 4. Section entitled Pass-Through Adjustments is added to Chapter 6.01 to read as follows: Pass-Through Adjustments. An annual pass through to customers, except for those in Billing Code 10 (recycled water) and those receiving raw water, of any increases in Sonoma County Water Agency s (SCWA) wholesale water rates that are greater than the 5% price increase anticipated in the September 2015 Cost of Service Analysis. Provided, however, that (1) any increase in the tier rates of the Commodity Charge described in District Code Section below as a result of any SCWA pass-through adjustment shall not exceed 15% per year; (2) in no event shall such rates be increased by more than the cost of providing water service; and (3) the District shall provide all customers at least 30 days written notice prior to implementing any SCWA pass-through adjustment. SECTION 5. Section of the Marin Municipal Water District Code is amended to read as follows: Tiered water rate. All single-family residential consumers, Billing Code 1, on metered service shall pay a bimonthly charge for water consumption per the following tiered rate schedule: Rate (CCF) Tier Effective Effective Winter Use Summer Use 1/1/2016 5/1/2016 (CCF) (CCF) 1 $3.81 $ $6.40 $ $10.96 $ $18.85 $ All single-family residential consumers with two legal living units not required to have separate meters pursuant to Section , and duplexes, Billing Code 2, on metered service shall pay a bimonthly charge for water consumption per the following tiered rate schedule: Rate (CCF) Tier Effective Effective Winter Use Summer Use 1/1/2016 5/1/2016 (CCF) (CCF) 1 $3.81 $ $6.52 $ $10.69 $ $18.17 $ All other multiple-unit residential consumers, Billing Codes 3, 4 and 5, on metered service, shall pay a bimonthly charge for water consumption for each living unit per the following tiered rate schedule: 8

22 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 Rate ($CCF) Tier Effective 1/1/2016 Effective 5/1/2016 Winter Use (CCF) Summer Use (CCF) 1 $3.83 $ All nonresidential consumers, Billing Codes 6, 7 and 8, on metered service, shall pay a bimonthly charge for water consumption per the following tiered rate schedules: Rate ($CCF) Percentages are of water budget allotment or, if one is not in place, of consumption Tier Effective 1/1/2016 Effective 5/1/2016 Winter Use (CCF) Summer Use (CCF) 1 $3.65 $ % 0-85% % % over 150% over 150% If the nonresidential account was not on service in the fiscal year, the water use per billing period will be based on that of the previous consumer s use for the fiscal year where records for such a consumer exist. If such records are not available, and where an estimated annual consumption for the service was established by the District at the time of service application, that estimated annual consumption will be used to develop the fiscal year water use per billing period. If none of the aforementioned information is available, the District will estimate annual consumption for the service based on a water use by other, similar customers of the District. All single-family residential consumers, Billing Code 19, on metered service, shall pay a bimonthly charge for water consumption per the following tiered rate schedules: Rate ($CCF) Percentages are of water budget allotment or, if one is not in place, of consumption Tier Effective 1/1/2016 Effective 5/1/2016 Winter Use (CCF) Summer Use (CCF) 1 $5.19 $ % 0-50% % % over 100% over 100% If a single-family residential account was not on service in the fiscal year, the water use per billing period will be based on that of the previous consumer s use for the fiscal year where records for such a consumer exist. If such records are not available, and where an estimated annual consumption for the service was established by the District at the time of service application, that estimated annual consumption will be used to develop the fiscal year water use per billing period. If none of the aforementioned information is available, the 9

23 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 District will estimate annual consumption for the service based on a water use by other, similar customers of the District. For purposes of this section, winter use shall include consumption in the months of December through May, and summer use shall include consumption in the remaining months. The winter use schedule shall be applied on all bills for which the meter is read during the winter period. The summer use schedule shall be applied on all consumption on bills for which the meter is read during the summer period. SECTION 6. Section of the Marin Municipal Water District Code is amended to read as follows: Private fire taps. All private fire taps shall pay a bimonthly basic service charge as follows: Size of Tap (in inches) Service Charge Effective 1/1/2016 Effective 5/1/ $26.50 $ " " " " In addition, all consumption for testing or fire suppression registered on a detector check bypass meter shall be billed at twice the water rates for Billing Code 1 specified in Section SECTION 7. Section of the Marin Municipal Water District Code is amended to read as follows: Metered raw water rate. All consumers on metered raw water service shall pay a bimonthly charge for raw water consumption per the following tiered rate schedule: Rate ($/CCF) Percentage of water budget allotment Tier Effective 1/1/2016 Effective 5/1/2016 Winter Use (CCF) Summer Use (CCF) 1 $3.65 $ % 0-85% % % over 150% over 150% 10

24 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 SECTION 8. Section of the Marin Municipal Water District Code is amended to read as follows: Metered recycled water rate. All consumers on metered recycled water service shall pay a bimonthly charge for recycled water consumption per the following tiered rate schedule: Tier Rate ($/CCF) Percentages are of water budget allotment or, if Effective Effective one is not in place, of consumption 1/1/2016 5/1/2016 A $2.65 $ % B % C over 150% SECTION 9. Section of the Marin Municipal Water District Code is amended to read as follows: Water Rate for People with Medical Disabilities. (a) A consumer may qualify for receipt of the water rate for people with medical disabilities, if the person shows proof of medical disabilities and of having installed low volume shower heads, ULF toilets, and faucet washers. Upon qualifying for the water rate for people with medical disabilities, the following apply: (1) Tier 1 allotment for single-family and multi-unit residential consumers will be increased by 9 CCF s for each qualifying individual residing at a water service, for each billing period, for summer and winter use as specified in Section Tiered Water Rate of the Billing Code for Billing Code 1. The Tier 2 through Tier 4 allotments for single-family and multi-family residential customers for summer and winter use are those specified in Section Tiered Water Rate of the Billing Code; and (2) The Fixed Service Charge per Section and the Watershed Management Fee per Section are waived. (b) In order to qualify for the rate, a person must fill out applications specified by the District, show proof of a disability requiring use of additional amounts of water from a doctor of medicine or osteopathy licensed to practice medicine in the State of California, and use per billing period an average in excess of the amount specified in Section for Billing Code 1 at Tier 1. (c) The District may perform a water audit on any property of a consumer receiving the water rate for people with disabilities to assure that the consumer is in compliance with this section and other provisions in this code pertaining to water conservation. SECTION 10. Section of the Marin Municipal Water District Code is amended to read as follows: Low income discount. A single family residential consumer with a meter size no larger than one inch and the water service in his or her name may qualify to have the service charge specified in Section and the Watershed Management Fee in Section waived if he/she shows proof of having installed low volume shower heads and faucet washers 11

25 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 and has an annual household income at or below the low income level set by the Federal Department of Housing and Urban Development. SECTION 11. Section of the Marin Municipal Water District Code is repealed. Section is repealed in its entirety. SECTION 12. Findings: The Board of Directors, after considering all of the information, documentation and testimony presented at its December 8, 2015 meeting and all of the comments and protests lodged in relation thereto, finds as follows: 1. Water is a finite and precious resource. 2. California Constitution Article X, section 2 and California Water Code section 100 provide that because of conditions prevailing in the State of California (the State ), it is the declared policy of the State that the general welfare requires that the water resources of the State shall be put to beneficial use to the fullest extent of which they are capable, the waste or unreasonable use of water shall be prevented, and the conservation of such waters is to be exercised with a view to the reasonable and beneficial use thereof in the interest of the people and the public welfare. 3. Pursuant to California Water Code section 106, it is the declared policy of the State that the use of water for domestic use is the highest use of water and that the next highest use is for irrigation. 4. California Water Code Section 375 et seq. authorizes water suppliers to adopt and enforce a comprehensive water conservation program and may also encourage water conservation through rate structure design. 5. In February 2011 the Board of Directors created a Citizens Water Rate Advisory Committee (WRAC) to review the District s water rate structure and provide recommendations to the Board of Directors on the design of a rate structure that meets the District s revenue needs and has wide public understanding and acceptance. The fourteen WRAC members were selected from each of the five District Divisions and represented a variety of customer classes. The WRAC met for over 20 months and presented its recommendations and findings to the Board in January One of the WRAC s major concerns was that the District s financial situation was unstable because 17% of revenue came from fixed charges while 80% of the District s costs are fixed and 83% of water revenues are highly dependent upon volumetric water consumption charges. To remedy the instability, the WRAC recommended that the District increase the percentage of revenue generated from the fixed Service Charge and incorporate a dedicated Watershed Fee into its rate structure. The District would be better situated to financially manage recessions, droughts and major swings in water usage with more stability and less volatility in revenues. 7. During 2013, the District s Finance Committee, comprised of the Board of Directors, met over many months, evaluated, considered and discussed the WRAC s report, recommendations and findings. The Finance Committee decided to explore the WRAC s recommendation to bring more stability to District revenues by increasing the bi-monthly fixed Service Charge based on meter size and the implementation of a dedicated Watershed Fee. 12

26 ** D R A F T ** MMWD Board of Directors meeting December 8, In June 2014, the District contracted with Carollo Engineers for completion of a COSA which included a multi-year long-range financial forecast, revenue requirements and rate review analysis. Completion of a revenue requirement analysis and rate review included reviewing demand trends and projecting consumption by incorporating impacting factors such as weather, water rates, economy, and water conservation. 9. Staff and Carollo Engineers presented draft long-term financial analysis and rate structure proposals to the Finance Committee at meetings from October 2014 to February On February 10, 2015, the Finance Committee directed staff to complete the draft COSA based on proposed rate structure modifications which (1) would increase the fixed Service Charge, based on meter size, and (2) add a new Watershed Management Fee. Combined, these two changes would increase MMWD s revenue from fixed charges from 17% to 28% of total water rate revenue. Both of these structural modifications were also identified by the WRAC in its recommendations to the District. 10. Rob Grantham from Carollo and District staff made a presentation on the draft COSA and proposed rate structure at the September 15, 2015 Board meeting. An executive summary of the draft COSA was attached to the staff report and a full copy of the draft COSA was made available on the District s website. 11. The COSA is a five year analysis for the period from fiscal years 2015/ /20 and includes a five year financial forecast, projection of revenue requirements and rate review and analysis. The rate review and analysis includes modifications to the current rate structure design to improve the District s revenue and financial stability in light of ongoing reductions in water usage. 12. At the Board meeting of September 15, 2015 the first two years of proposed water service rates, fees and charges were presented which would be effective January 1, 2016 and May 1, The proposed water service rates, fees and charges to be effective January 1, 2016 reflect rate structure modifications which include increasing the fixed Service Charge, adding a fixed Watershed Management Fee, adjustments to the tier rates of the Commodity Charge for all customer classes and changes in the tier allotments for multi-family and duplex customer classes. Also included in the proposed water service rates, fees, charges are Drought Surcharges, the introduction of a pass-through water service rate in the event SCWA raises its rates in excess of 5% per year and Revenue Recovery Surcharges, all as described above. The Revenue Recovery Surcharges would be implemented only when it is necessary to safeguard against significant financial losses resulting from greater than projected reductions in water usage by District customers. The proposed water service rates, fees and charges, effective May 1, 2016, reflect an increase of 4%. 13. The proposed rate structure modifications are a result of the District s review and consideration of rate restructuring options dating back to the impact from the recession of which resulted in a significant decline in water sales and an accompanying substantial drop in revenue. 14. In California, rate setting must meet the requirements of California Constitution Article 13D, section 6 (commonly referred to as Proposition 218) which requires that the District s water rates and charges be based upon the cost of providing water service. The District s COSA is an analytical tool that identifies the District s costs to provide water service, allocates those costs based on usage and impacts to the District s water system and evaluates all rates and charges. The proposed rate structure changes, (i.e., increasing the bimonthly fixed Service Charge based on meter size and adding a dedicated fixed Watershed Management Fee) require a review of all of the District s variable Commodity Charge tier allotments and rates. 13

27 ** D R A F T ** MMWD Board of Directors meeting December 8, As the COSA illustrates, increasing revenues recovered from fixed charges impacts the variable Commodity Charge tier rates for all customer classes differently, increasing some and decreasing others depending on the cost of providing water service for each customer class and tier. 16. Based on the COSA, the District s water service rates to respective customer classes, fees and charges are structured to proportionally allocate the cost of providing water service and are billed on a bi-monthly basis. The rate structure has seven customer classes: (1) Single- Family; (2) Multi- Family; (3) Duplex; (4) Commercial; (5) Irrigation; (6) Recycled Water; and (7) Raw Water, i.e., customers who receive untreated water. The rate structure for the District s water service has three components: (1) a fixed Service Charge; (2) a variable volumetric Commodity Charge (i.e., tier rates); and (3) a new fixed Watershed Management Fee. 17. The Fixed Service Charge is based on the size of the water meter (in inches) serving a property and is calculated to recover a significant portion of the District s fixed costs, such as billing and collections, customer service, meter reading, meter maintenance, and meter related capital and infrastructure. Depending on the customer class, the Commodity Charge consists of three or four tiers which impose higher rates per unit of water usage as the level of water consumption increases, with one unit equal to one hundred cubic feet ( CCF ) or 748 gallons, and is calculated to recover a portion of the District s fixed costs and its variable costs of providing water service. 18. For Single-Family, Multi-Family, and Duplex customers, the amount of water allotted to each tier changes depending on when the water is used summer (June through November) or winter (December through May). Where residential accounts are provided tier allotments, Commercial, Irrigation, Recycled Water, and Raw Water customers are provided an allotment based on their defined water needs. This difference in structure is generally implemented as non-residential demands vary significantly from customer to customer, whereas residential demands are relatively homogenous. Customers who use more water place greater demands and burdens on the District s water system and scarce resources. The tiered rate structure is designed to recover the incremental costs incurred by the District as a result this higher usage and its impacts. 19. A new fixed Watershed Management Fee is being established. In addition to its public water supply costs, the District also has obligations to preserve the ecological health of its watershed and downstream ecosystems. The Watershed Management Fee is based on the size of a meter serving a property (in inches) and is designed to recover watershed maintenance and vegetation management costs. 20. The District also imposes a Fixed Bi-monthly Fire Service Line Charge on certain properties as a condition of extending or initiating water service (1) by the installation of a private fire suppression system, and (2) upon the request of the customer or property owner for the delivery of water to the property for the purpose of fire service protection. The rates for the bi-monthly Fire Service Line Charges are established on the basis of the size of the fire service lateral through which water is delivered (in inches) and is calculated to recover the cost of providing water to such properties for private fire service protection. 21. The District is committed to efficiently providing high quality, reliable water service at the lowest possible rates for its customers, while protecting the water resources and public health of our community. As the oldest water District in California, it is critically important that the District continually invests in and maintains its assets and keeps pace with inflation and other cost increases. 22. Typically, 75% of the District's annual water supply comes from more than 21,000 acres of protected watershed on Mt. Tamalpais and in the grassy hills of west Marin. Rainfall from these watersheds flows into one of seven reservoirs and is then treated at one of the District s potable water treatment plants before being delivered to residential and 14

28 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 commercial customers. The District has developed local surface water supplies, and implemented both conservation programs and a recycled water program, to maximize the use of local resources and increase water supply reliability. The remaining 25% of the District s annual water supply is imported from the Sonoma County Water Agency ( SCWA ). SCWA water originates from Lake Sonoma and Lake Mendocino and is released into the Russian River. 23. On January 17, 2014, Governor Jerry Brown issued a drought state of emergency declaration in response to record-low water levels in California s rivers and reservoirs as well as an abnormally low snowpack. On April 1, 2015, Governor Brown issued an Executive Order calling for statewide mandatory water reductions of up to 25%. 24. On May 5, 2015, the State Water Resources Control Board approved regulations, based on Governor Brown s Executive Order, mandating that the District reduce its water consumption by 20% percent for June 2015 through February 2016 as compared to the same months in This mandate has had a significant impact on the District s revenues, further necessitating increases in the District s water service rates, fees and charges for fiscal years 2015/16 and 2016/17. In response to the Executive Order, as of August 31, 2015, the cumulative reduction in water use from June 1, 2015 by District customers was 22.9%, exceeding the 20% mandatory reduction level. Water usage for fiscal year 2014/15 was at the lowest level since 1999/00 and lower than demand during the recession. 25. Sound financial operation of the District s water system requires that the revenues it generates must be sufficient to meet the expenditures or cash obligations of the utility. The revenue needs are defined as the amount of revenues that must be recovered through its water service rates, fees and charges to cover annual expenditures, less any offsetting revenues. Over the next five years, the District s operating expenses are projected to annually increase by an average of approximately 5% due in part to significant improvements to the District s aging infrastructure. Projected annual operating expenditure levels are significantly influenced by the amount of water purchased from SCWA. 26. Approximately 80% of the District s costs to operate and maintain its water system are fixed, meaning costs remain the same regardless of water sales. Over the last several years, the District has experienced declines in water demand resulting from the recession of and the voluntary and state-mandated water use reductions. To offset the revenue shortfall and fund operating costs, $1.4 million of reserves was used in FY 2014/15 and $1.2 million is projected to be used in FY 2015/16. While experiencing these declines in water demand and revenues, the District has exercised fiscal discipline by managing operating costs to avoid significant increases in water service rates, fees and charges to its customers, including reducing its staff by 9% to offset rising costs. The District s current water service rates, fees and charges have been in effect since May 1, The proposed increase in the water service rates, fees and charges will allow the District to recover its costs and to continue to provide safe, reliable drinking water to its customers. Absent critical rate increases, the District will run budget deficits for each year of the five-year forecast performed by the rate study. 27. The District anticipates that SCWA will increase its wholesale water rates. In developing the proposed increases, the District included projected increases in these costs of 5% per year as part of its five-year financial projection and in calculating the proposed increases in water service rates, fees and charges. To ensure sufficient revenues to provide water services, the District is proposing to annually pass through to its customers any increases in SCWA s wholesale water rates that are greater than those anticipated in the 2015 Cost of Service Analysis. 28. Except for Raw Water and Recycled Water customers, any SCWA pass-through adjustment will impact the tier rates of the Commodity Charge for all customer classes set forth in the 15

29 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 tables included in the District s Proposition 218 notice. If approved, the District s Board of Directors may implement any SCWA pass-through adjustment at any time for the five year period commencing January 1, 2016 and ending on December 31, Provided, however, that (1) any increase in the tier rates as a result of any SCWA pass-through adjustment shall not exceed 15% per year; (2) in no event shall such rates be increased by more than the cost of providing water service; and (3) the District shall provide all customers at least 30 days written notice prior to implementing any SCWA pass-through adjustment. 29. California Constitution article XIII D, section 6 ( Article XIII D ) requires that prior to imposing any increase of its water service fees, the District shall provide written notice (the Notice ) by mail of: (1) the proposed increases to such rates and fees to the record owner of each parcel upon which the rates and fees are proposed for imposition and any tenant directly liable for payment of the rates and fees; (2) the amount of the rates and fees proposed to be imposed on each parcel; (3) the basis upon which the rates and fees were calculated; (4) the reason for the rates and fees; and (5) the date, time, and location of a public hearing (the Hearing ) on the proposed rates and fees. 30. Pursuant to Article XIII D such Notice is required to be provided to the affected property owners and any tenant directly liable for the payment of the rates and charges not less than forty-five days prior to the Hearing on the proposed rates and charges. 31. The District did provide such Notice to the affected property owners and tenants of the proposed Water Service Charges in compliance with Article XIII D. 32. Attached hereto as Exhibit A is proof of such mailing. 33. There are 67,573 identified parcels that receive water service from the District, of which a majority would be 33, The Hearing was held on this day, December 8, At the Hearing, the District Board heard and considered all oral testimony, written materials, and written protests concerning the establishment and imposition of the proposed rate increases for the water service fees, entered such written protests into the record of such Hearing and at the close of the Hearing, the District did not receive written protests against the establishment and imposition of the proposed rate increases for the water service fees from a majority of the affected property owners and tenants directly liable for the payment of the water service fees. 36. As explained in the Notice and the District s 2015 Cost of Service Analysis, the rate restructuring and increases are to pay for water service actually provided to the property identified in the Notice and not being used for general governmental purposes. 37. The revenues from water service rates, fees and charges do not exceed the costs required to provide such water service. 38. The revenues collected from water service fees have been and will be used only to pay for the water services for which they were collected. 39. The water service rates, fees and charges are not standby charges, but are imposed for water immediately available to the property subject to the imposition of the fees and are enacted under the Board s authority contained in Water Code Section The Board is committed to transparency in the rate making process and is mindful that water demand over the last several fiscal years has been volatile and most recently hit historic lows, due to District customers fabulous response to the Governor s mandate to reduce water consumption District-wide by 20% from 2013 levels and their continuing conservation ethic. 41. The District s 2015 Cost of Service Analysis (COSA) is predicated on demand projections of about 22,000 AFA. Currently, District demand has dipped below that level to about 21,000 AFA. In any given year, demand could fluctuate based upon a variety of factors, 16

30 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 including but not limited to climatic, regulatory, economic and/or conservation measures taken by District consumers. 42. The Board is committed to continuing to track water demand on a monthly basis and desires to keep District customers informed about the status of District water demand on a regular basis. In that spirit, the Board directs staff to do the following: Report to the Board on a monthly basis in open session, the status of existing water demand relative to the projection in the District s 2015 COSA; Publicize the status of demand on the District s website; Annually provide the Board with the cumulative status of demand in the twelfth month of fiscal year. 43. In December 2016, the Board shall direct staff to undertake an update to the 2015 COSA, or create a new Cost of Service Analysis, whichever is preferable, and will make any necessary adjustments to the rates, fees and charges within four months from that date or as soon as practical based on then existing demand. 44. Utilization of the revenues generated by the Watershed Management Fee shall be for the benefit of the maintenance and operation of the Mt Tamalpais Watershed. Those revenues shall be separately tracked and accounted for and annually reported to the Board. SECTION 13. Severability: If any section, subsection, sentence, clause, phrase, portion or part of this ordinance is for any reason held to be invalid or unconstitutional by any court of competent jurisdiction, such section shall not affect the validity of the remaining portions of this code. The Board of Directors hereby declares that it would have adopted this ordinance and each section, subsection, sentence, clause, phrase, part or portion thereof, irrespective of the fact that any one or more sections subsections, clauses, phrases, parts or portions be declared invalid or unconstitutional. SECTION 14. Effective Date: This ordinance shall be effective for water used as of January 1, PASSED AND ADOPTED this 8th day of December, 2015 by the following vote of the Board: AYES: NOES: ABSENT: Directors Bragman, Gibson, Koehler, Quintero and Russell None None President, Board of Directors ATTEST: Secretary 17

31 ** D R A F T ** MMWD Board of Directors meeting December 8, 2015 ADJOURNMENT There being no further business, the meeting of December 8, 2015, was adjourned at 10:40 p.m. ATTEST: President, Board of Directors Secretary 18

32 ITEM NO. 3 MEETING DATE: January 5, 2016 MEETING: Board of Directors SUBJECT: SUBMITTED BY: RECOMMENDED ACTION: STAFF REPORT Forbes Hill Tank Solar Panel Array Project Carl A. Gowan, P.E., Principal Engineer Kristin Cole, Assistant Engineer Environmental and Engineering Services Division Authorize the General Manager to execute all documents required to proceed with the Option No kw Forbes Hill Tank Solar Panel Array Project and continuing to review Option No kw with PG&E RES-BCT. EXECUTIVE SUMMARY: This item was reviewed by the District Operations Committee on December 15, 2015, and is referred to the Board with the recommendation shown above. In 2015, the district completed the Forbes Hill Tank Cover Replacement Project and evaluated options for installation of a solar panel array on the new roof. Staff recommends proceeding with Option No kw solar panel array at an estimated cost of $65,000. This option takes advantage of Marin Clean Energy s (MCE) Net Energy Metering (NEM) program and offsets the energy cost for the adjacent pump station, has a payback of eight years and an Internal Rate of Return of 13.3%. Staff also recommends continuing to review expanding the solar array to a kw system on PG&E s Renewable Energy Self-Generation Bill Credit Transfer for a Local Government (RES-BCT) rate schedule. FISCAL IMPACT: YES X NO FISCAL YEAR: 2015/ 16 EXPENDITURES FUNDING SOURCES Budgeted Amount $65,000 Operating Fund $ Budget Augmentation Requested $ Capital Fund $65,000 $ Other $ $ Operating Reserves $ TOTAL EXPENDITURES $65,000 TOTAL SOURCES $65,000

33 Forbes Hill Tank Solar Panel Array Project January 5, 2016 Page 2 FISCAL IMPACT NARRATIVE: The cost to complete the Forbes Hill Tank solar array is $65,000 and is included in the FY budget. BACKGROUND: Over the last ten years, the district s energy use has decreased approximately 1.8%/year (compared to a 1.6% decrease in water production). Over this ten year period, the KWh/acre-ft of water produced has averaged approximately 765 KWh/AF. In 2006 and 2007, the district installed solar arrays on the roofs of the Corte Madera office building, the new carport, and the existing corporation yard shop building. These solar arrays provide approximately 350,000 KWh/year, a savings of approximately $50,000/year in energy costs. More recently, the district completed the Lagunitas Booster Pump Energy Savings Project. This project installed a main-line check valve that allows for easier change from pumped flows to gravity flows and replaced pump control valves with check valves. This energy savings project saves approximately 230,000 KWh/year, equal to $37,000/year. At the same time the district has completed projects to reduce energy usage and costs, a new entity, the Marin Clean Energy (MCE), was founded in 2010 and partnered with PG&E to provide energy in Marin County. Since June 2010 every PG&E bill the district receives has a generation credit from PG&E and a generation charge from MCE. When MCE began generating energy for the county, they also set up a Net Energy Metering (NEM) program. When MCE s customers install a solar array they are automatically enrolled in MCE s NEM program. MCE also offers a Feed-in Tariff (FIT) program, which allows customers to build solar arrays up to 1 megawatt and be paid a flat rate for 20 years. PG&E also has numerous options for their solar customers. The main program that the district is interested in is the Renewable Energy Self-Generation Bill Credit Transfer for a Local Government (RES-BCT). The next energy efficiency project being contemplated by the District is the installation of a solar array on the new roof at the Forbes Hill Tank site. All of these options are discussed below with respect to this project. Forbes Hill Tank Solar Array Project The district is designing the installation of a solar panel array at Forbes Hill Tank to reduce electric energy costs. Energy at the site is used to operate the adjacent pump station, which

34 Forbes Hill Tank Solar Panel Array Project January 5, 2016 Page 3 annually uses approximately 36,000 Kwh of electric energy at a cost of $7,000. The location of the tank is shown on the map of potential solar projects (Attachment 5). The following four options were reviewed for this site: Option No kw Solar Array with MCE NEM Option No kw Solar Array with PG&E RES-BCT Option No. 3 Two Meter kw Solar Array with MCE NEM and MCE FIT Option No kw system with MCE FIT Option No. 1, a 14.7 kw system, will automatically switch from PG&E time of use rates to the NEM rates when the solar array is completed, and includes the installation of forty-nine solar array panels. The MCE NEM charges the customer at MCE generation rates and credits the customer the generation rates plus one penny, which averages $0. 295/ kwh. The solar array is projected to provide approximately 23,067 KWh/year. At the higher rate payback available during the day in time of day pricing, this roughly offsets the cost of energy used annually at the site, saving approximately $6,808 in the first year. The budgeted cost to complete Option No. 1 is $65,000 and has an eight year payback period (see Attachment 1 for cost analysis). The $65,000 includes design, materials and installation. Option No. 2, a kw system, uses PG&E s RES-BCT rate schedule, which allows local governments to have a solar array offset multiple meters as long as they are located within the government s service area. This option averages $0.138/kWh, and is projected to provide 249,971 KWh/year. The estimated cost of Option No. 2 is $585,000 and the payback period is 13 years (see Attachment 2 for cost analysis). The $585,000 includes design, materials, installation, PG&E applications, and a PG&E site visit. The applicant needs to submit to PG&E a final set of plans and specifications. PG&E s evaluation can take anywhere from six months to a year. This option includes installation of five hundred and thirty one solar array panels, which is the maximum amount that can be installed on the Forbes Reservoir roof. Option No. 3 has a 14.7 kw solar array with MCE NEM rates, and a kw solar array with MCE Feed-in-Tariff rate. This is essentially a kw system with two meters. One meter will be for MCE NEM and will cover the energy use of Grove Hill Pump Station. The second meter will be for the MCE FIT program. Together the two systems will average $0.132/kWh. This option is projected to provide 249,971 KWh/year. The estimated cost of Option No. 3 is $585,000 and the payback period is 17 years (see Attachment 3 for cost analysis). The $585,000 includes design, materials, installation, PG&E applications, and a PG&E site visit. The applicant needs to submit to PG&E a final set of plans and specifications. PG&E s evaluation can take anywhere from six months to a year. Like Option No. 2, this option includes the maximum amount of panels that can be installed on the Forbes Reservoir roof.

35 Forbes Hill Tank Solar Panel Array Project January 5, 2016 Page 4 Option No. 4, a kw system, will switch from a PG&E time of use rate structure to a 20 year Feed-in Tariff contract with MCE, which pays at a flat rate of $0.115 /KWh. Option No. 4 is projected to provide 249,971 KWh/year. The estimated cost of Option No. 4 is $585,000 and the payback period is 23 years (see Attachment 4 for cost analysis). The $585,000 includes design, materials, installation, PG&E applications, and a PG&E site visit. The applicant needs to submit to PG&E a final set of plans and specifications. PG&E s evaluation can take anywhere from six months to a year. Similar to Options 2 and 3, this option includes the maximum amount of panels that can be installed on the Forbes Reservoir roof. Table 1 below compares the four options. Description Option No kw Solar Array with MCE NEM (1) Table 1. Comparison Between Solar Array Projects at Forbes Tank Option No kw Solar Array with PG&E RES-BCT (2) Option No. 3 Hybrid (two meter) kw Solar Array with MCE NEM (14.7 kw) (1) Option No kw with MCE FIT (3) and MCE FIT (144.6 kw) (3) No. of panels System Size 14.7 DC kw DC kw DC kw DC kw Total Cost $65,000 $585,000 $585,000 $585,000 Payback (Years) Internal Rate of Return 13.3% 7.1% 2.8% 0.8% Annual Production 23, , , ,971 (kwh) Credit Per kwh for the First Year Energy Savings $0.295 $0.138 $0.132 $0.115 First Year Energy Savings $6,808 $34,374 $32,902 $28,747 Profit over 20 years $138,566 $444,176 $102,764 ($60,739) Profit over 25 years $226,036 $885,787 $227,776 (4) $62,950 (4) (1) Credit for transmission, distribution, and generation (2) Credit for generation only (3) Credit at FIT rate (4) MCE FIT is a 20 year program; after 20 years energy produced in excess of the cost of energy for the pump station is assumed to be credited between $0.03 and $0.04 per kwh The table above shows that the solar array Option Nos. 1 and 2 are feasible. The solar array for Option No kw is not financially feasible since the return of 2.8% is less than the District s cost of capital. The solar array for Option No kw is not financially feasible because it does not return all the capital during the MCE Program and has a return of 0.8% on capital over the 25 year life of the panels. A potential benefit for Option No. 2 is that covering the roof with additional solar arrays could extend its design life. The design life of the aluminum

36 Forbes Hill Tank Solar Panel Array Project January 5, 2016 Page 5 roof is a minimum of 50 years. However, the roof manufacture, CST, informed district staff the additional solar arrays proposed under Options No. 2, 3 and 4 would not increase the design life of the roof. After careful review of all the options, district staff recommends moving forward with Option No. 1 and continuing to review Option No. 2. Option No. 1 has the highest payback per kwh, and the design for Option No.1 is nearly complete and can quickly move into the installation phase. Option No. 2 requires coordinating with PG&E, which is known to be a lengthy process, and requires more capital funding. Additionally, MCE is working with PG&E to determine if meters on an RES-BCT Tariff can stay on MCE generation rates. Completing Option No. 1 and continuing to review Option No. 2 allows the district to replace the energy used at Grove Hill Pump Station during the review process. Upcoming Energy Recovery Projects The district is reviewing installing solar panel arrays at Lucas Valley Tank in conjunction with the planned recoating of this tank scheduled to begin in FY The location of the tank is shown on the map of potential solar projects (Attachment 5). The project would replace the energy used at the Lucas Valley Pump Station. The solar array is projected to provide approximately 79,000 KWh/year, saving approximately $25,000 in the first year. The budgeted cost to complete the Lucas Valley Tank solar arrays is $300,000. This results in an estimated payback of nine years. The district is also evaluating the potential for solar panel arrays at 25 tank sites with adjacent pump stations The location of the tanks are shown on the map of potential solar projects (Attachment 5). The total amount of energy that can be saved is estimated at 6.8 million KWh/year, which amounts to $1,000,000/year in energy costs. The estimated capital costs for these 25 projects are still under review. The district is including a Francis Hydraulic Electric Turbine in the Water Storage Improvement Project. The proposed location is adjacent to Ross Reservoir and is shown on the map of potential energy recovery projects (Attachment 6). This project recovers the energy between the new potable water storage tanks located along the Concrete Pipe Road Transmission Line. The turbine is projected to provide approximately 835,000 KWh/year, which amounts to $100,000/year in energy costs. Lastly, two conceptual level projects are in planning. Alto Tanks Energy Recovery Project is projected to provide approximately 900,000 KWh/year, or an offset of approximately $110,000/year in energy cost. Smith Saddle Energy Recovery Project is projected to provide approximately 900,000 KWh/year, which amounts to $110,000/year in energy cost. The

37 Forbes Hill Tank Solar Panel Array Project January 5, 2016 Page 6 locations are shown on the map of potential energy recovery projects (Attachment 6). These projects are tentatively scheduled to occur by Staff will continue evaluating and installing energy savings, recovery, and renewal projects as part of current and future district planning, operations, and special projects. When the detailed evaluation of the proposed future projects are completed, staff will present those projects to the Board of Directors. Summary In summary, district staff recommends the District Operations Committee refer this item to the Board with the Committee s recommendation to authorize the General Manager to execute all documents required to proceed with the Option No kw Forbes Hill Tank Solar Panel Array Project, and continue to review Option No solar array on a RES-BCT rate schedule. STRATEGIC PLAN ALIGNMENT: These continuing actions align with the district s Strategic Plan Goal 2 (Financial Stewardship), Strategy 4 (Ensure cost-effective and efficient business processes), Objective 1 (Develop an inclusive MMWD process for re-engineering business processes and encourage a re-engineering environment for processes at all levels of the organization); and Strategic Plan Goal 4 (Environmental Stewardship), Strategy 5 (Reduce MMWD carbon footprint), Objective 1 (Develop an energy efficiency opportunity assessment). REVIEWED BY: Finance Manager X NA General Counsel NA X General Manager X NA ATTACHMENTS: 1. Option No. 1 Analysis for a 14.7 kw Solar Array with MCE NEM 2. Option No. 2 Analysis for a kw Solar Array with PG&E RES-BCT 3. Option No. 3 Analysis for a Two Meter kw Solar Array with MCE NEM and MCE FIT 4. Option No. 4 Analysis for a kw Solar Array System with MCE FIT 5. Map of Potential Solar Projects 6. Map of Potential Energy Recovery Projects

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42 UTUT UT UT UT UT LUCAS VALLEY TANK SAN GERONIMO CLEARWELL TANK #1 SAN GERONIMO CLEARWELL TANK #2 CONIFER WAY TANK OAK MANOR FIRST LIFT TANK REDWOOD DRIVE UPPER TANK UT UT UT RAFAEL HIGHLANDS TANK LOS RANCHITOS TANK UT PUERTO SUELLO TANK FORBES HILL RESERVOIR UT KENT WOODLANDS 1ST LIFT TANK BON UT TEMPE CLEARWELL TANK GREENBRAE TANK UT Kent Fire Trail Tank #2 Kent Fire Trail Tank #1 UTUT SUMMIT AVENUE LOWER TANK UT UT UT UT UT UT UT MADERA PARK TANK #1 UT SUMMIT AVENUE UPPER TANK SAN CLEMENTE TANK MILL VALLEY TANK LONE TREE AVENUE TANK MOUNT TIBURON TANK #1 TAM WOODS FIRST LIFT TANK TENNESSEE VALLEY TANK UTUT UT UTUT UT UT MOUNT TIBURON TANK #2 SPRING LANE TANK #1 SPRING LANE TANK #2 SAUSALITO PUMP HOUSE TANK #2 SAUSALITO PUMP HOUSE TANK #1 BEACON HILL TANK CLOUDVIEW TANK SAUSALITO BLVD. TANK Miles Map of Potential Solar Projects

43 SMITH SADDLE TANK #2 SMITH SADDLE TANK #1 ROSS RESERVOIR ALTO TANK #2 ALTO TANK #1 0 1Miles Map of Potential Energy Recovery Projects

44 ITEM NO. 4 MEETING DATE: January 5, 2016 MEETING: Board of Directors STAFF REPORT SUBJECT: SUBMITTED BY: RECOMMENDED ACTION: Fire Flow Improvement Program Fiscal Year Annual Report Carl A. Gowan, P.E., Principal Engineer Environmental and Engineering Services Division Accept the Fire Flow Improvement Program FY Annual Report EXECUTIVE SUMMARY: This item was reviewed by the District Operations Committee on December 15, 2015, and is referred to the Board with the recommendation shown above. In Fiscal Year the District invested $4,313,862 for the installation of approximately 17,700 feet of pipeline in support of the Fire Flow Improvement Program (FFIP). Since FY , when the Fire Flow Master Plan program began, and through June 30, 2015, the District has invested a cumulative total of $90,767,602 on the Fire Flow Master Plan and the FFIP. The work completed includes over 426,300 feet of pipeline replacements as well as seismic retrofits of the treatment plants and the critical transmission tanks and pump stations. FISCAL IMPACT: YES NO X FISCAL YEAR: FISCAL IMPACT NARRATIVE: N/A BACKGROUND: The Fire Flow Master Plan (FFMP) was initiated in Fiscal Year to increase the water distribution system s ability to provide water for fire protection and to strengthen the system to increase its survivability during a seismic event. The 15 year improvement program was concluded in Fiscal Year In May 2012, the MMWD Board of Directors amended the MMWD Code and extended the collection of the $75 per year Fire Flow Fee for an additional period of nineteen years. The extended Fire Flow Fee revenue will be used to fund the replacement of 52 miles of fire flow deficient distribution piping. The Fire Flow Improvement Program (FFIP) includes both new fire flow projects and remaining uncompleted work from the FFMP. In Fiscal Year approximately 17,700-feet of pipe was replaced in support of the FFIP in the following areas/neighborhoods. Westland Parks in San Rafael Alto Down Line in Mill Valley Homestead Valley in Mill Valley

45 Fire Flow Improvement Program Fiscal Year Annual Report January 5, 2016 Page 2 Areas in Kentfield and Greenbrae Sleepy Hollow in San Anselmo North Marin Line in Woodacre Hawthorne Transmission in San Anselmo The FFIP FY expenditures totaled $4,313,862. The attached tabulations summarize the FFIP and FFMP expenditures through Fiscal Year The Fiscal Year Summary & Comparison of Expenditures to Revenue (Attachment 1) shows actual expenditures and compares them to Fire Flow Fund revenue by fiscal year. Also attached is the Prioritized Summary of Fire Flow and Seismic Improvements (Attachment 2) which provides a detailed accounting of the recommended improvements in each area and their costs by fiscal year. Through June 30, 2015 the District has invested a cumulative total of $90,767,602 in support of the Fire Flow Master Plan and the Fire Flow Improvement Program. The work completed includes over 426,300 feet of pipeline replacements as well as seismic retrofits of the treatment plants and the critical transmission tanks and pump stations. STRATEGIC PLAN ALIGNMENT: This action aligns with the District s 5-Year Strategic Plan Goal 1 (Water Supply Resiliency) and Strategy 4 (Ensure facilities and equipment are maintained and sufficient to support resiliency, water quality, watershed management and a productive workforce). REVIEWED BY: Finance Manager X NA General Counsel NA X General Manager X NA ATTACHMENTS: 1. Fiscal Year Summary and Comparison of Expenditures to Revenue 2. Prioritized Summary of Fire Flow and Seismic Improvements

46 Attachment 1 MARIN MUNICIPAL WATER DISTRICT FIRE FLOW MASTER PLAN / FIRE FLOW IMPROVEMENT PROGRAM FISCAL YEAR SUMMARY & COMPARISON OF EXPENDITURES TO REVENUE Fiscal Year ($1,000) Revenue Actual Interest Total Fire Flow Fiscal Year Parcel Fee Difference Expenditure Income Revenue Fund Balance 1996/97 $25.3 $0.0 $0.0 $0.0 ($25.3) ($25.3) 1997/98 $3,208.8 $4,481.7 $0.0 $4,481.7 $1,272.9 $1, /99 $2,134.3 $4,486.2 $131.0 $4,617.2 $2,482.9 $3, /00 $5,288.9 $4,493.9 $453.7 $4,947.6 ($341.3) $3, /01 $5,638.5 $4,490.7 $177.8 $4,668.5 ($970.0) $2, /02 $3,920.7 $4,492.3 $71.0 $4,563.3 $642.6 $3, /03 $4,292.7 $4,501.6 $56.9 $4,558.5 $265.8 $3, /04 $2,416.0 $4,469.2 $60.4 $4,529.5 $2,113.5 $5, /05 $5,274.0 $4,493.5 $124.6 $4,618.1 ($655.9) $4, /06 $7,646.9 $4,501.4 $100.2 $4,601.6 ($3,045.3) $1, /07 $2,568.8 $4,508.0 $146.7 $4,654.7 $2,085.9 $3, /08 $4,271.8 $4,510.4 $163.5 $4,673.9 $402.1 $4, /09 $6,319.0 $4,502.9 $37.9 $4,540.8 ($1,778.2) $2, /10 $2,936.6 $4,467.1 $19.5 $4,486.6 $1,550.0 $3, /11 $4,645.6 $4,483.7 $18.2 $4,501.9 ($143.7) $3, /12 $3,709.6 $4,523.3 $15.1 $4,538.4 $828.8 $4,684.7 FFMP Totals $64,297.6 $67,405.9 $1,576.5 $68,982.3 $4, /13 $6,751.1 $4,540.4 $9.4 $4,549.8 ($2,201.3) $2, /14 $5,275.0 $4,524.2 $3.8 $4,528.0 ($747.0) $1, /15 $4,313.9 $4,511.6 $5.3 $4,516.9 $203.0 $1,939.5 FFMP - FFIP Totals $80,637.5 $80,982.0 $1,595.0 $82,577.0 $1,939.5 FY 15 FFIP Page 1 of 1 12/15/2015

47 Attachment 2 MARIN MUNICIPAL WATER DISTRICT FIRE FLOW IMPROVEMENT PROGRAM PRIORITIZED SUMMARY OF FIRE FLOW AND SEISMIC IMPROVEMENTS Priority Proj. Fire Project Name System Construction Costs per Fiscal Year ($1,000) Total No. No. Dept. / Fire Department No. FFMP 12/13 13/14 14/15 15/16 16/17 17/18 Cost System Description Thru $1,000 FY A. FIRE FLOW IMPROVEMENT PROJECTS 1 F13003 SR New Hydrants for SR Fire $45 $0 $45 1 F13006 SR Hydrants Relocation in Glenwood $77 ($0) $0 $76 2 F12007 MC Meadow Way PRP $7 $837 $49 $0 $893 3 F13001 RV Fairfax PRP $127 $1,260 $5 $1,392 4 F13002 RV Brookside Dr SA PRP $688 $299 $5 $993 5 F12006 Ross-Sausalito Line Project $1 $30 $5 $35 6 F13008 MC Woodacre Area PRP $301 $329 $15 $645 6 F13011 MC Sylvan Way PRP $27 $505 $13 $545 7 F13009 LK Marina Vista PRP $33 $733 $68 $834 8 F14003 MC NML Stabilization Project $73 $27 $100 9 F14005 MC NML Woodacre Relocation Proj $3 $24 $27 10 F13005 MV Rose & Hazel Av PRP $307 $829 $1, F13007 RV Oak Ave Area PRP $36 $806 $ F14002 SR Forbes Hill Area PRP $40 $989 $1, F14007 MV Alto Down Line PRP $1 $305 $ F14006 KT Kentfield/Greenbrae $31 $93 $ F13010 SM Marin Drive PRP $30 $91 $0 $ F14001 MV Sequoia Valley Rd & Tourist Club Rd $113 $31 $ F14004 RV Sleepy Hollow Area PRP $68 $785 $ F15003 RV FFIP San Anselmo $89 $89 22 F13004 SM Ross/Sausalito PRP $74 $0 $728 $ F15002 RV FFIP Ross $125 $ F15001 MV FFIP Mill Valley PRP $515 $ F15005 MV FFIP Molino Lane PRP $13 $13 37 F15004 FFIP Tiburon PRP $4 $4 40 F14008 RV Hawthorne PRP Phase I $2 $458 $460 Total FFIP Fire Flow Project Funds $8 $2,611 $5,231 $4,298 $0 $0 $0 $12,148 FY 15 FFIP Page 1 of 8 12/15/2015

48 Attachment 2 MARIN MUNICIPAL WATER DISTRICT FIRE FLOW IMPROVEMENT PROGRAM PRIORITIZED SUMMARY OF FIRE FLOW AND SEISMIC IMPROVEMENTS Priority Proj. Fire Project Name System Construction Costs per Fiscal Year ($1,000) Total No. No. Dept. / Fire Department No. FFMP 12/13 13/14 14/15 15/16 16/17 17/18 Cost System Description Thru $1,000 FY B. FFMP FUNDED FIRE FLOW PROJECTS 1 MV Mill Valley Business Dist COSTS IN CASCADE CANYON AREA - PRIORITY NO. 9 2 F9803 F9804 F9805 F11001 SR Dominican Area $2,016 $1 $0 $2,017 3 F9901 MC Throckmorton Ridge 6-53 $1,221 $1,221 4 F9805 SR Montecito Area COSTS IN DOMINICAN AREA - PRIORITY NO. 2 5 F9810 SR Lincoln Avenue Area $918 $918 6 F9905 RV Sky Ranch/Oak Ave Area 3-60 $143 $143 7 F9809 RV Sky Ranch/Oak Ave Area 3-52 $574 $574 8 F9903 LK Madrone Canyon Area 5-12 $712 $712 9 F9907 F9908 F9815 F00110 F00120 F00130 F00170 F01300 F01310 MV Cascade Canyon Area Central Business District, Warner Canyon & Blithedale Canyon 6-02 $6,299 $6, F01280 F01290 RV Cascade Canyon Area/FX 2-07 $1,495 $1, F01190 SR Fairhills / Rafael Highlands Area $638 $638 F F00140 SM Throckmorton Ridge 6-61 $387 $ F01200 SR Fairhills / Rafael Highlands Area $588 $ SR Dominican Area $0 15 F02005 KT Kent Woodlands Area 4-56 $1,622 $1,622 F F9905 SR California Park Area $86 $86 17 SR Country Club Area COSTS IN COUNTRY CLUB AREA - PRIORITY NO F02004 Warner Canyon / Scott Highlands MV F03001 Area 6-23 $827 $827 FY 15 FFIP Page 2 of 8 12/15/2015

49 Attachment 2 MARIN MUNICIPAL WATER DISTRICT FIRE FLOW IMPROVEMENT PROGRAM PRIORITIZED SUMMARY OF FIRE FLOW AND SEISMIC IMPROVEMENTS Priority Proj. Fire Project Name System Construction Costs per Fiscal Year ($1,000) Total No. No. Dept. / Fire Department No. FFMP 12/13 13/14 14/15 15/16 16/17 17/18 Cost System Description Thru $1,000 FY F01260 KT Del Mesa Area 4-54 $591 $591 F F01260 KT Del Mesa Area 4-55 $377 $ F03006 KT Greenbrae Area $502 $ F03003 KT Greenbrae Area $547 $ F02003 SR Montecito Area $320 $ F04001 SM Cypress Ridge 8-52/59 $784 $ SR Glenwood Area COSTS IN GLENWOOD AREA - PRIORITY NO F03005 CM Chapman Park Area 5-16 $698 $698 F03008 F F03005 F03008 CM Chapman Park Area 5-07 $666 $ SR Upper Toyon / Gerstle Park Area NO IMPROVEMENTS RECOMMENDED 29 F00150 SR Country Club / Montecito Area $440 $440 F00150 Marina Court Dr. F00150 Marina Court F00150 Marina Court Dr. F00150 Alta Vista Way F00150 Pigeon Hollow Rd. F00150 Montecito Rd. 30 F06003 SR Glenwood Area $842 $ F04003 MV Blithedale Canyon Area 6-03 $2,009 $2,009 F04004 F F02003 SR California Park Area $118 $ SR California Park Area $0 34 F05005 MV Blithedale Canyon Area 6-51 $1,028 $1, F04002 RV Manor Hill Area 2-51 $1,000 $1, CM Christmas Tree Hill Area 5-51 NO IMPROVEMENTS RECOMMENDED 37 F05002 SR West End Area $481 $ F05003 MV Blithedale Canyon Area 6-11 $1,735 $1,735 F05004 F F03004 TV Marin Drive & Adjacent Sts 7-51 $549 $0 $ F06005 SM Marion Avenue Area 8-56 $622 $622 FY 15 FFIP Page 3 of 8 12/15/2015

50 Attachment 2 MARIN MUNICIPAL WATER DISTRICT FIRE FLOW IMPROVEMENT PROGRAM PRIORITIZED SUMMARY OF FIRE FLOW AND SEISMIC IMPROVEMENTS Priority Proj. Fire Project Name System Construction Costs per Fiscal Year ($1,000) Total No. No. Dept. / Fire Department No. FFMP 12/13 13/14 14/15 15/16 16/17 17/18 Cost System Description Thru $1,000 FY F06006 TB Main Street 9-19 $666 $ F03007 SR Country Club Area COSTS IN COUNTRY CLUB AREA - PRIORITY NO F06002 SR Country Club Area COSTS IN COUNTRY CLUB AREA - PRIORITY NO F07004 SR Country Club Area $1,803 $1, F09004 SR Bayside Acres Area $470 $ F06004 SM Strawberry Point Peninsula 9-20 $929 $ F05006 KT Kent Woodlands Area 4-07 $758 $ F07003 SR Country Club Area $612 $ F09004 SR Bayside Acres Area $379 $ F09003 MV Blithedale Canyon Area 6-52 $497 $10 $508 F F07002 SM Northern Ave / Eastwood Park 7-01 $635 $635 Area 52 F08003 CM Christmas Tree Hill Area 5-06 $514 $ F09002 LK Baltimore Canyon Area 5-01 $418 $ F10002 SM Throckmorton Ridge 6-59 $867 $5 $ KT Kent Woodlands Area F10004 F10005 KT Kent Woodlands Area 4-06/10 $2,181 $15 $4 $2, F09005 F12004 KT Greenbrae Area $1,155 $16 $0 $1, SR Dominican Area NO IMPROVEMENTS RECOMMENDED 59 SR Dominican Area $0 60 F10001 CM Meadowsweet/Casa Buena 5-07 $340 $ KT Marin General Hospital NO IMPROVEMENTS RECOMMENDED 62 F11003 SR Upper Toyon / Gerstle Park $242 $357 $10 $ SR Glenwood Area $0 64 F11002 SR San Rafael Hill $330 $937 $3 $1 $1, F11001 SR Dominican Area $631 $6 $2 $1 $ F11004 RV Sequoia Park Area $414 $2 $2 $ F11003 SR Upper Toyon / Gerstle Park $164 $286 $8 $ F11003 SR Upper Toyon / Gerstle Park $41 $71 $2 $ F10003 RV Sky Ranch / Oak Ave Area 3-53 $608 $4 $8 $4 $ KT Kent Woodlands Area 4-57 $0 71 KT Kent Woodlands Area 4-09 $0 72 F12001 RS Chestnut / Willow Hill 4-05 $25 $409 $4 $438 FY 15 FFIP Page 4 of 8 12/15/2015

51 Attachment 2 MARIN MUNICIPAL WATER DISTRICT FIRE FLOW IMPROVEMENT PROGRAM PRIORITIZED SUMMARY OF FIRE FLOW AND SEISMIC IMPROVEMENTS Priority Proj. Fire Project Name System Construction Costs per Fiscal Year ($1,000) Total No. No. Dept. / Fire Department No. FFMP 12/13 13/14 14/15 15/16 16/17 17/18 Cost System Description Thru $1,000 FY F03002 TB Paradise Drive 9-01 $88 $88 74 F12002 RV Willow Ave-Rocca Area 2-03 $300 $2 $8 $ SR Fairhills/Rafael Highlands $0 76 SM NW Alto (E. of Hwy 101) 9-20 $0 77 F10003 RS Ross Proper 4-02 $94 $1 $1 $95 78 SR Bayside Acres Area $0 79 SR Fairhills/Rafael Highlands $0 80 MV Blithedale Canyon Area 6-04 $0 81 RV Sky Ranch/Oak Ave Area 3-04 $0 82 KT Marin General Hospital $0 83 SR San Rafael Hill $0 84 F10003 RS Upper Road / Bald Hill Area 4-12 $234 $1 $3 $ MC Throckmorton Ridge 6-54 $0 86 RS Winship Park Area 4-11 $0 87 SR Glenwood Area $0 88 TV Throckmorton Ridge 6-60 $0 89 F12003 KT Murray Park Area 5-03 $66 $971 ($31) $1, CM Baltimore Park Area 5-10 $0 91 RV Manor Hill Area 2-52 $0 92 TIB Centro/Mar East 9-19 $0 93 LK Baltimore Canyon Area 5-05 $0 94 SM NW Alto (E. of Hwy 101) 9-05 $0 95 SR Sun Valley Area $0 96 SM Hawk Hill Area 7-58 $0 97 TB Geldert Area 9-57 NO IMPROVEMENTS RECOMMENDED 98 SM Marin Drive & Adjacent Sts 7-52 $0 99 RS Upper Road- Bald Hill Area 4-52 $0 100 TB Hill Haven Area 9-53 NO IMPROVEMENTS RECOMMENDED Total Assigned FFMP Fire Flow Project Funds $46,299 $3,085 $35 $5 $0 $0 $0 $49,425 FY 15 FFIP Page 5 of 8 12/15/2015

52 Attachment 2 MARIN MUNICIPAL WATER DISTRICT FIRE FLOW IMPROVEMENT PROGRAM PRIORITIZED SUMMARY OF FIRE FLOW AND SEISMIC IMPROVEMENTS Priority Proj. Fire Project Name System Construction Costs per Fiscal Year ($1,000) Total No. No. Dept. / Fire Department No. FFMP 12/13 13/14 14/15 15/16 16/17 17/18 Cost System Description Thru $1,000 FY C. FFMP FUNDED SEISMIC PROJECTS 1 F9802 Lucas Valley Tank $93 $93 2, 3 F9904 F9906 Hawthorne Hills Tanks $808 $808 4 F9806 Tiburon First Lift Tank $128 $128 5 F9801 Tiburon Supply Pipeline $813 $813 7 F9807 Forbes Reservoir $227 $227 8 F9808 BTTP Washwater Tank $107 $107 6, 9, 10, F Steel Tank Seismic Retrofit $1,043 $1, F9812 San Geronimo Booster Station $65 $65 12 F9813 Kastania Pump Station NO IMPROVEMENTS RECOMMENDED 13 F9814 Ignacio Pump Station $1 $1 14 F9811 San Geronimo Treat Plant $314 $ F9910 Lagunitas Booster Station $275 $ F9909 Bon Tempe Treat Plant $367 $ F00180 Ross Reservoir $26 $26 19 San Anselmo Hub Regulator $0 20 Las Gallinas Recl Plant $0 21, 22, F Steel Tank Seismic $338 $1 $1 $340 23, 24 F10006 Retrofit 25 F02001 Marinwood Tank $106 $ North Marin Line Trestles $0 27 North Marin Line $0 28 F01220 Phoenix By-Pass $364 $ F02007 F06001 Concrete Pipe Road $4,829 $1 $4,829 30, 31 F07001 Ross Reservoir Inlet Pipe / $4,830 $12 $6 $4,849 F09001 Phoenix Lake Rd PRP 32 F08002 Smith Saddle Access Rd. $115 $ North Marin Line $0 34 Sausalito Line $0 35 Los Ranchitos-Forbes Line NO IMPROVEMENTS RECOMMENDED 36 Southern Marin Line $0 37 Alto Downline $0 38 Marinship Cast Iron Pipe NO IMPROVEMENTS RECOMMENDED FY 15 FFIP Page 6 of 8 12/15/2015

53 Attachment 2 MARIN MUNICIPAL WATER DISTRICT FIRE FLOW IMPROVEMENT PROGRAM PRIORITIZED SUMMARY OF FIRE FLOW AND SEISMIC IMPROVEMENTS Priority Proj. Fire Project Name System Construction Costs per Fiscal Year ($1,000) Total No. No. Dept. / Fire Department No. FFMP 12/13 13/14 14/15 15/16 16/17 17/18 Cost System Description Thru $1,000 FY Alto-Sausalito Line $0 40 F00160 Tamalpais Drive Pipeline $363 $ Lucas Valley Tank Outlet $0 42 F12005 Fifth Street Pipeline $219 $1,054 ($5) $4 $1, Hawthorne-Fairfax Pipeline $0 44 Glenwood Pipeline $0 45 Sausalito Cast Iron Pipe NO IMPROVEMENTS RECOMMENDED 46 BTTP Landslide Stabilization $0 47 Lagunitas Boosters $0 48 Kastania Pump Station NO IMPROVEMENTS RECOMMENDED 49 San Geronimo Treat Plant $0 50 F05001 F08001 Tiburon Supply Pipeline #2 $2,560 $2,560 Total Assigned FFMP Seismic Project Monies $17,990 $1,055 $9 $11 $0 $0 $0 $19,065 FY 15 FFIP Page 7 of 8 12/15/2015

54 Attachment 2 MARIN MUNICIPAL WATER DISTRICT FIRE FLOW IMPROVEMENT PROGRAM PRIORITIZED SUMMARY OF FIRE FLOW AND SEISMIC IMPROVEMENTS Priority Proj. Fire Project Name System Construction Costs per Fiscal Year ($1,000) Total No. No. Dept. / Fire Department No. FFMP 12/13 13/14 14/15 15/16 16/17 17/18 Cost System Description Thru $1,000 FY FIRE FLOW IMPROVEMENT PROGRAM TOTALS Total Assigned FFIP and FFMP Project Monies $64,298 $6,751 $5,275 $4,314 $0 $0 $0 $80,637 Average Annual FFIP Funding $4,500 $4,500 $4,500 $4,500 $4,500 $4,500 Difference $2,251 $775 ($186) ($4,500) ($4,500) ($4,500) NOTE: FIRE DEPARTMENT / DISTRICT ABBREVIATIONS CM CORTE MADERA MV MILL VALLEY MC COUNTY OF MARIN RV ROSS VALLEY KT KENTFIELD SM SOUTHERN MARIN LK LARKSPUR SR SAN RAFAEL TOTAL FFIP EXPENDITURES FOR FISCAL YEAR : TOTAL FFMP/FFIP EXPENDITURES THROUGH FISCAL YEAR ENDING JUNE 30, 2015: CIP EXPENDITURES ON FFMP IMPROVEMENTS (THROUGH FY ): TOTAL: $4,313,862 $80,637,479 $10,130,123 $90,767,602 FY 15 FFIP Page 8 of 8 12/15/2015

55 ITEM NO. 5 MEETING DATE: January 5, 2016 MEETING: Board of Directors STAFF REPORT SUBJECT: SUBMITTED BY: RECOMMENDED ACTION: Agreement for Professional Services Best Best & Krieger Mary Casey, General Counsel Approve the Agreement EXECUTIVE SUMMARY: Best Best & Krieger provides legal services to public agencies, ranging from general municipal law to more focused advice on Proposition 218, rate setting and litigation support services for rate challenges. FISCAL IMPACT: YES X NO FISCAL YEAR: EXPENDITURES FUNDING SOURCES Budgeted Amount $80,000 Operating Fund $80,000 Budget Augmentation Requested $ Capital Fund $ $ Other $ $ Operating Reserves $ TOTAL EXPENDITURES $80,000 TOTAL SOURCES $80,000 FISCAL IMPACT NARRATIVE: As staff advised the District Operations Committee on December 18, 2015, monies to cover these expenses have been budgeted in the liability claims account. That account was budgeted at $500,000 for fiscal year BACKGROUND: Over the next several months, specialized legal support services in the area of Proposition 218, rate setting and rate challenges will be needed. Currently, the District is defending a law suit challenging its existing rate structure. Going forward, staff will need advice on an ad hoc basis on issues related to that litigation (immediate need) and other municipal law matters. Best Best & Krieger has two attorneys who can assist in meeting those needs, Kelly Salt and Kimberly Hood. Kelly Salt s specialty is in the arena of rate setting and finance and Kimberly Hood has experience litigating rate cases (for the City of Davis). Best Best & Krieger s rates are public agency rates and within a competitive range. At the December 18 th District Operations Committee meeting, staff advised the Committee that to date, $56,000 in attorneys fees from Best Best & Krieger has been utilized, $80,000 in fees were anticipated through fiscal year end and monies to cover these expenses were budgeted in the liability claims account. The District Operations Committee and the General Counsel

56 Best, Best Krieger Agreement January 5, 2016 Page 2 recommend that the Board approves the Professional Services Agreement with Best Best and Krieger. STRATEGIC PLAN ALIGNMENT: This action aligns with the District s 5-Year Strategic Plan Goal 2 (Financial Stewardship) and Strategy 1 (Ensure financial planning is sufficient to address MMWD needs and risks). REVIEWED BY: Finance Manager [x ] NA [ ] General Counsel [x ] NA [ ] General Manager [x ] NA [ ] ATTACHMENTS: 1. Best Best & Krieger Agreement

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65 ITEM NO. 6 MEETING DATE: January 05, 2016 MEETING: Board of Directors STAFF REPORT SUBJECT: SUBMITTED BY: RECOMMENDED ACTION: Water Production and Storage Report Michael Ban, P.E., Manager Environmental and Engineering Services Division Information EXECUTIVE SUMMARY: The District's treated water production for the report period ending December 29, 2015 has averaged mgd. Potable water production for the fiscal year has been 12, acrefeet, which is 5.94% below FY14/15. District reservoir storage, as of this date is 55,651 acre-feet. This is 69.94% of total storage capacity and 93.94% of normal storage. Last year on this date, storage was 79,527 acre-feet. Storage on December 08, 2015 (as reported to you at the Board meeting of December 15, 2015) was 50,859 acre-feet and has increased in the two-week interval by 4,792 acre-feet. As measured from the lip of each spillway, the water surface at Kent is down feet; Bon Tempe is down 4.21 feet; Alpine is down 4.06 feet; Nicasio is down feet; Soulajule is down feet; Lagunitas is spilling 0.03 feet; and Phoenix is down 0.22 feet. The stream release from Kent Reservoir is cfs (8.49 mgd), and the release from Soulajule is cfs (7.74 mgd). ATTACHMENTS: Monthly Water Production From FYE (removed for 1 st report period) Daily Production-Potable Water for the past two years Running 12-month Water Production for 1987 to present Total Reservoir Storage for the past three years Cumulative Precipitation for the past two years

66 Marin Municipal Water District Monthly Water Production (acre-feet) Total Potable Water Production % Change Month FYE 16 FYE 15 FYE 14 FYE 13 FYE 12 FYE 11 FYE 10 FYE16 vs FYE15 July 2,287 2,690 2,977 3,038 2,851 3,029 3,054-15% August 2,369 2,590 2,960 3,042 2,865 3,003 3,048-9% September 2,239 2,298 2,742 2,744 2,700 2,851 2,781-3% October 2,148 2,118 2,599 2,345 2,182 2,383 2,143 1% November 1,628 1,641 2,090 1,622 1,728 1,612 1,793-1% Total YTD 10,671 11,337 13,367 12,791 12,326 12,878 12,820-6% Imported Water Production % Change Month FYE 16 FYE 15 FYE 14 FYE 13 FYE 12 FYE 11 FYE 10 FYE16 vs FYE15 July % August % September % October % November % Total YTD 1,806 3,416 2,575 2,020 1,971 2,063 2,216-47% Reservoir Water Production % Change Month FYE 16 FYE 15 FYE 14 FYE 13 FYE 12 FYE 11 FYE 10 FYE16 vs FYE15 July 1,922 1,980 2,460 2,689 2,476 2,702 2,729-3% August 2,014 2,139 2,458 2,686 2,489 2,673 2,716-6% September 1,861 1,431 2,244 2,381 2,332 2,542 2,470 30% October 1,769 1,499 2,079 1,921 1,804 1,934 1,683 18% November 1, ,551 1,094 1, ,007 49% Total YTD 8,865 7,921 10,792 10,770 10,354 10,815 10,604 12% Recycled Water Production % Change Month FYE 16 FYE 15 FYE 14 FYE 13 FYE 12 FYE 11 FYE 10 FYE16 vs FYE15 July % August % September % October % November % Total YTD %

67 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC DAILY PRODUCTION - POTABLE WATER MONTHS PRODUCTION (MILLIONS OF GALLONS)

68 ,000 30,000 25,000 20,000 15,000 RUNNING 12 MONTH POTABLE WATER PRODUCTION Acre-Feet/Year

69 TOTAL RESERVOIR STORAGE 90 MAXIMUM STORAGE MEDIAN 2015 STORAGE (Thousands of Acre Feet) DROUGHT 10 0 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC MONTHS MEDIAN 1977 DROUGHT MAX STORAGE

70 RAINFALL (IN) JULY AUG SEPT OCT NOV DEC JAN FEB MAR APR MAY JUNE Cumulative Precipitation AVERAGE RAINFALL DROUGHT YEAR MONTH

71 ITEM NO. 7 MEETING DATE: January 5, 2016 MEETING: Board of Directors STAFF REPORT SUBJECT: SUBMITTED BY: RECOMMENDED ACTION: Comprehensive Annual Financial Report and Auditor s Communication with Those Charged with Governance for the Fiscal Year Ended June 30, 2015 Oreen Delgado, Finance Manager Accept. EXECUTIVE SUMMARY: Attached is the Comprehensive Annual Financial Report (CAFR), and Auditor s Communication with Those Charged with Governance for the fiscal year ended June 30, The audit was completed by Badawi & Associates, Certified Public Accountants. The CAFR includes the audited financial statements which are provided in accordance with state law requiring local agencies to have an annual audit performed by a qualified independent certified public accountant. The District received an unqualified opinion from Badawi & Associates for the year ended June 30, 2015 for the CAFR. FISCAL IMPACT: YES NO X FISCAL YEAR: 2014/15 FISCAL IMPACT NARRATIVE: None. BACKGROUND: Attached is the Comprehensive Annual Financial Report (CAFR) and Auditor s Communication with Those Charged with Governance for the fiscal year ended June 30, Comprehensive Annual Financial Report (CAFR) The audit of the CAFR was performed in accordance with generally accepted auditing standards and included tests necessary for the auditors to form an opinion regarding the district's financial statements. This report is also provided in accordance with state law which requires local agencies to have an annual audit performed by a qualified independent certified public accountant. The district received an unqualified opinion from Badawi & Associates as the statements fairly present the financial condition and results of the operations of the district as of June 30, Significant items to note from the financial statements for the year ended June 30, 2015, when compared to the prior year ended June 30, 2014, include the following: Unrestricted cash and investments at $20 million decreased by $1.1 million to approximately four months of budgeted operating expenses.

72 Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015 January 5, 2016 Page 2 Net pension liability of $62.1 million has been recorded on the Statement of Net Position per implementation of Governmental Accounting Standards Board Statement No. 68 which became effective in the fiscal year ended June 30, For prior years, the net pension liability was disclosed in the notes to the financial statements under Employee Retirement Plans. Water sales and service charge revenue decreased by $7.6 million and net operating income decreased by $7.8 million. The district s net income decreased by $8.4 million. The district s debt service ratio was 1.28x annual debt service for the fiscal year ended June 30, 2015 after a transfer from the Rate Stabilization Fund of $1.4 million. The CAFR includes the Governmental Finance Officers Association award of the Certificate of Achievement for Excellence in Financial Reporting Program for the CAFR for the year ended June 30, The CAFR for the year ended June 30, 2015 will be submitted for review for the Certificate of Achievement for Excellence in Financial Reporting Program. An acknowledgment of appreciation for the work by Mikyung Pustelnik, Assistant Finance Manager, Helen Ng, Accountant II, Nathan Quach, Accountant II, Cheryl Howlett, Finance Specialist and Anne Vallee, Public Information Representative in completion of the annual audit and preparation of the CAFR. Auditor s Communication with Those Charged with Governance The Auditor s Communication with Those Charged with Governance for the year ended June 30, 2015 is attached. The communication identifies the responsibilities of the auditor, district management, scope and timing of audit work, findings and other matters related to completion of the audit. There were no audit findings or matters to note in completion of the audit. Staff recommends the board accept the CAFR and Auditor s Communication with Those Charged with Governance as of June 30, STRATEGIC PLAN ALIGNMENT: The requested action aligns with the district s Strategic Plan Goal 2 (Financial Stewardship We will prudently manage the public resources entrusted to us), Strategy 2 (Ensure financial activities are transparent and reporting is accurate) and Objective 1 (Continue to obtain unqualified audit every year).

73 Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015 January 5, 2016 Page 3 REVIEWED BY: Finance Manager [X ] NA [ ] General Counsel [ ] NA [X ] General Manager [X ] NA [ ] ATTACHMENTS: 1. Comprehensive Financial Annual Report for the Fiscal Year Ended June 30, Auditor s Communication with Those Charged with Governance for the Year Ended June 30, 2015

74 COMPREHENSIVE ANNUAL FINANCIAL REPORT For the years ended June 30, 2015 and Nellen Avenue, Corte Madera, CA 94925

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76 Corte Madera, California Comprehensive Annual Financial Report for the years ended June 30, 2015 and 2014 Prepared by Finance Division

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78 Marin Municipal Water District Basic Financial Statements Table of Contents For the years ended June 30, 2015 and 2014 Page INTRODUCTORY SECTION Transmittal Letter... i List of Board Members and Committees... xii Division Map... xiii Organizational Chart... xiv GFOA Award... xv FINANCIAL SECTION Independent Auditor s Report... 1 Management s Discussion and Analysis... 5 Basic Financial Statements: Statements of Net Position Statements of Revenues, Expenses and Changes in Net Position Statements of Cash Flows Statements of Fiduciary Net Position Notes to Basic Financial Statements Required Supplementary Information: Defined Benefit Pension Plans OPEB Plan Schedule of Funding Progress Other Supplementary Information: Statement of Changes in Fiduciary Assets and Liabilities STATISTICAL SECTION: Financial Trends Revenue Capacity Debt Capacity Demographic and economic information Operating information... 75

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80 INTRODUCTORY SECTION

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82 220 Nellen Avenue Corte Madera CA marinwater.org December 30, 2015 To the Board of Directors of the Marin Municipal Water District: It is our pleasure to submit this Comprehensive Annual Financial Report (CAFR) of the Marin Municipal Water District (MMWD) for the fiscal year ended June 30, Responsibility for the accuracy of this data and the completeness and fairness of the presentation, including all disclosures, rests with the district. To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a mannerr designed to fairly set forth the financial position and results of operations of the district. All disclosures necessary to enable the reader to understandd the district s financial affairs have been included. FINANCIAL STATEMENT PRESENTATION The Comprehensive Annual Financial Report is preparedd in accordance with Generally Accepted Accounting Principles (GAAP) as promulgated by thee Governmental Accounting Standards Board (GASB). This report consists of management s representations concerning the finances of the district. Consequently, management assumes full responsibility for the accuracy and the completeness of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the district has established a comprehensive internal control framework that is designed both to protect the district s assetss from loss, theft, or misuse, and to compile sufficient and reliable information for the preparation of the district s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the district s comprehensive framework of internal controls has been designedd to provide reasonablee rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The district s financial statements have been audited by Badawi & Associates, a public accounting firm licensed and qualified to perform audits of local governments within the State of California. The purpose of the independent audit was to provide reasonable assurance that the financial statements of the district for the fiscal year ended June 30, 2015, are free of material misstatement. The independent audit involved examining, on a testt basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; ; and evaluating the overall financial statement presentation. The audit included obtaining an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material i

83 misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the district s financial statements for the fiscal year ended June 30, 2015, are fairly presented in conformity with GAAP. The independent auditor s report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The district s MD&A can be found immediately following the report of the independent auditor. DISTRICT PROFILE On April 25, 1912, the Marin Municipal Water District received its charter as the first municipal water district in California. Before that, water in central and southern Marin was provided by a number of small, private companies, many of them subsidiaries of real estate developers. To ensure a reliable water supply, the citizens of Marin came together to create a publicly owned and managed water system. Over the years, our customer base has expanded through the acquisition of 26 small, private water companies. Today, MMWD provides high quality drinking water to 187,500 people in a 147 square mile area of south and central Marin County that includes ten towns and cities as well as unincorporated areas, located immediately north of the Golden Gate Bridge and the City of San Francisco. The district is responsible for the stewardship of more than 21,000 acres of watershed land on Mt. Tamalpais and in west Marin. Seventy five percent of the district's water supply comes from the protected watershed on Mt. Tamalpais and hills of west Marin. The Mt. Tamalpais Watershed is a unique natural resource providing prime recreational and open space for the district s surrounding communities. Over 1.5 million visitors use the 150 miles of watershed roads and trails per year. Caring for nature, managing visitors, and involving the public in watershed stewardship are the central tasks of district rangers, natural resource specialists, and watershed maintenance staff. Watershed responsibilities include ii

84 protecting resources, managing fire risks, assisting visitors, monitoring plants and animal populations, restoring natural habitats, and maintaining access roads and trails. As an independent special district, MMWD operates as a separate local government agency that has no reporting responsibilities to either Marin cities or Marin County. Our five member Board of Directors governs MMWD, with each director elected to represent one of five geographic areas. Directors serve overlapping four year terms. The board, in turn, elects one of its members to serve as board president each year. The board appoints the general manager, finance manager, board secretary, and legal counsel, each of whom serves at the pleasure of the board. The general manager is the chief executive and is responsible for hiring all division managers for each of the district functions and to administer the programs in accordance with the policies. WATER SYSTEM & TREATMENT FACILITIES With the annual water production currently averaging 25,800 acre feet over the last five fiscal years, MMWD maintains over 913 miles of water pipeline, four treatment plants including one plant for recycled water, seven reservoirs with a storage capacity of 79,566 acre feet (one acre foot is equal to 325,851 gallons, enough water to cover one acre to a depth of one foot), 127 storage tanks, 95 pumping stations, 80 square miles of watershed, and over 61,670 service connections. Five of the seven district reservoirs (Alpine, Bon Tempe, Kent, Lagunitas, and Phoenix Lake) are located on the north slope of Mt. Tamalpais. The other two (Nicasio and Soulajule) are outside the district s service area in western Marin County. Alpine Lake was built in 1919 and has an arched concrete dam. The dam was raised in 1923 and 1941 to its present height and a total storage capacity of 8,891 acrefeet. Bon Tempe Lake has an earth fill dam and was built in 1948 with a capacity of 4,017 acre feet. Kent Lake has an earth fill dam and was built in The structure was enlarged in 1982 to accommodate a total capacity of 32,895 acre feet. Lake Lagunitas, the oldest facility, has an earth fill dam built in Lake Lagunitas still maintains its original capacity of 350 acre feet. Phoenix Lake, has an earth fill dam, was constructed in 1905, and was significantly modified in 1968 and The last modification reduced the lake s capacity to 411 acre feet. It now serves primarily as a scenic resource for the community and is used as a water supply source only in very dry years. Nicasio Reservoir has an earth fill dam and was built in 1960, with a capacity of 22,340 acre feet. Soulajule Reservoir is impounded by an earth fill dam built in 1979 with a capacity of 10,572 acre feet. The district operates three water treatment facilities: San Geronimo Treatment Plant, Bon Tempe Treatment Plant, and Ignacio Pump Station, where the quality of potable water iii

85 purchased from the Sonoma County Water Agency (SCWA) is adjusted to match that of the water in the rest of the district s system, and one water recycling facility, Las Gallinas Valley Water Recycling Plant. San Geronimo and Bon Tempe Plants, with 35 million gallons per day (mgd) and 20 mgd maximum capacity, respectively, treat water originating from the district reservoirs. Ignacio Pump Station, with 16 mgd maximum capacity, performs chemical treatment in a polishing operation on water received from SCWA via the North Marin Intertie Pipeline. Las Gallinas Reclamation Plant, with 2 mgd current maximum capacity, performs tertiary treatment of wastewater effluent and distributes water used mainly for irrigation to more than 350 service connections through more than 25 miles of pipeline. WATER SUPPLY Historically, the district s water supply comes primarily from rainfall runoff captured on the north slope of Mt. Tamalpais in the westerly slopes of the coastal range. District facilities, constructed in stages over the last 100 years, divert approximately two thirds of the flow of Lagunitas Creek above Kent Lake and more than one third of the flow of Nicasio Creek to developed areas of eastern Marin. The district s watershed drainage system has four creek units: Lagunitas Creek above Kent Lake, Nicasio Creek at Nicasio Dam, Ross Creek above Phoenix Lake, and Walker Creek above Soulajule Reservoir. The district and its predecessor agencies have maintained rainfall records for a period over 130 years. Average annual precipitation varies across the drainage basins above the reservoirs from about 60 inches above Kent Lake to 28 inches on Walker Creek. Average annual net runoff (total runoff less losses) on the district s watershed lands is more than 75,000 acre feet. However, year to year net runoff figures vary significantly from a high net runoff in 1982/83 of approximately 213,000 acre feet to a low of approximately 3,000 acre feet in 1976/77. Today, about 75% of the potable water used by district customers comes from the local reservoir system. The district has considerable stewardship responsibility for the aquatic species that reside in the streams below its reservoirs. In particular, the district must release water from its reservoirs to help sustain downstream fisheries. To meet the terms included in the district s water rights, an average of about 11,000 acre feet per year is released for that purpose. In addition to the above described local water sources, since 1976 the district has contracted for imported delivery from Sonoma County Water Agency (SCWA). The contract with SCWA allows the district to take delivery of up to 14,300 acre feet of water iv

86 per year. During the fiscal year 2015, the district produced 24,407 acre feet of water for its customers, including 7,000 acre feet of water imported from SCWA. ECONOMIC CONDITION AND OUTLOOK Local Economy The district is located in Marin County with a diversified economic base, which includes high tech, financial, service based, entertainment, and industrial businesses. Recent economic trends for Marin County indicate that it has recovered and gained the economic strength it had before the 2008 recession. In June 2015, the county s unemployment rate of 3.4% (not seasonally adjusted) was down from 4.2% in June 2014, and lower than the rates of the state and the nation of 6.2% and 5.3%, respectively. Factors Affecting the District s Financial Condition The district s revenues are dependent upon the demand for water sales, which can be affected by weather, economy, population factors, more stringent drinking water regulations, or problems with the water supply. As of June 2015, the district s reservoir levels are above average at 84.32% of capacity due to continued water conservation by district customers and unusual rainfall events. In January 2014 the MMWD Board of Directors, in response to the lowest recorded rainfall in calendar year 2013, requested 25% voluntary water use reductions from customers. During December 2014, inches or 31,345 acre feet of rain fell on the district s Mt. Tamalpais and west Marin watersheds, bringing all seven reservoirs to full capacity for the first time since January Despite the strong local economy and above average water supply, the district has faced a steady decrease in water sales as the California four year statewide drought continued through the fiscal year 2015, and the California State Water Resources Control Board adopted an expanded emergency regulation on March 17, 2015, prohibiting certain water uses for all Californians. In addition, on April 1, 2015, California Governor Brown issued Executive Order B calling for statewide mandatory water use reductions. On May 19, 2015, the MMWD Board of Directors received a report from the State Water Resources Control Board requesting that MMWD reduce the water use by 20% compared to MMWD s amended ordinance adopted on April 7, 2015, is consistent with the state conservation standard of a 20% reduction and remained in effect throughout the fiscal year ended June 30, The mandatory 20% water use reduction is in effect through October Water production for the fiscal year ended June 30, 2015, was 24,407 acre feet, 12% less than the previous fiscal year. MMWD customers have been conserving water since January 2014, and in the month of June 2015, MMWD achieved a 26% savings compared to June The decrease in the demand for water resulted in a decrease in water revenue by approximately $7.6 million or 14% less than the previous fiscal year. The debt coverage v

87 ratio for the fiscal year ended June 30, 2015, before utilization of the Rate Stabilization Fund is 1.07x. MMWD's board approved on November 3, 2015, the withdrawal of $1.4 million from the Rate Stabilization Fund to increase the debt coverage ratio for the year ended June 30, 2015 to 1.28x. After the withdrawal of $1.4 million, the Rate Stabilization Fund balance is $5.9 million as of June 30, As a result of the state drought restrictions, MMWD customers have had to decrease their water use in both 2014 and To address the decrease in water sales revenue as a result of water use reductions, on December 8, 2015, the Board of Directors approved a two year water rate package which incorporated rate restructuring effective January 1, 2016 and a 4% increase in all water rates, fees, and charges effective May 1, The rate restructuring changes effective January 1, 2016, are projected to increase the total revenue from fixed charges from 17% to 28% in order to reduce the district s revenue volatility. The 4% rate increase effective May 1, 2016, applies to all fixed and variable portions of the water rates, fees, and charges, and is subject to a board review in April Long Term Financial Planning Consistent with Government Finance Officers Association (GFOA) recommendations, MMWD adopted a five year strategic plan in 2014 which is the how MMWD will respond to current challenges and make the best of future opportunities for the benefit of our customers. The plan confirms our mission and goals as a public agency dedicated to high quality water service. It establishes approaches for the preservation of our precious resources for future generations utilizing the principles of sustainability and prudent fiscal practices. It also outlines the specific goals, strategies, and objectives we will pursue to move us from where we are to where we want to be, and establishes a process to measure our progress. Vision Statement MMWD will be a valued water service provider supporting the high quality of life in Marin County. Mission Statement MMWD will manage our natural resources in a sustainable manner and provide our customers with reliable, high quality water at a reasonable price. Values MMWD will embody the following core values in the setting and implementation of its policies and practices. Environmental stewardship & sustainability Integrity and ethics Open and responsive communications Diversity vi

88 Healthy work environment Cooperation Fairness, dignity, and respect Continuous improvement through initiative, leadership, personal development, training Culture of excellence and innovation Responsible financial management Goals Water Supply Resiliency We will maintain a level of reliability that supports MMWD s customers needs, our community s quality of life, and the local economy. Financial Stewardship We will prudently manage the public resources entrusted to us. Communications We will partner with our community, customers, and staff to understand and reflect their interests and clearly articulate the programs and policies of Marin Municipal Water District. Environmental Stewardship We will serve the community and manage the environmental assets entrusted to us for the benefit of present and future generations. Workforce We will maintain a diverse, highly qualified and trained, motivated, and productive workforce to achieve MMWD s goals. FINANCIAL POLICIES Budgetary Controls The district s budget is balanced when operating revenues are equal to or greater than operating expenditures including debt service but excluding depreciation and amortization (i.e., budgeted expenditures shall not exceed budgeted revenues). The district wide funds management system provides budgetary controls that monitor spending within budgeted amounts. Budgetary controls function differently for operating and capital budget expenditures. For the operating budget, each department is controlled within an expenditure category such as materials, supplies, freight and utilities, repairs, and maintenance, for example. A department cannot exceed their authorized operating budget within an expenditure category or the total department budget for a fiscal year. Capital project spending is controlled based on the funding source. There may be more than one capital project assigned to a funding source. Reallocation of the operating budget for a department among its line item expenses allows the departments to have financial flexibility within the funds management system. Budget vii

89 adjustments to a departmental budget are reallocations of funds between line item expenses and between fund centers. Approval from the affected department(s), applicable division manager, and the finance manager are required for all departmental budget adjustments. The general manager s approval is required for the reallocation of funds between the operating and capital budgets and between departments. Overall increases to the operating or capital budgets require approval from the Board of Directors. Investments Annually, the board adopts an investment policy that is in compliance with the California Government Code et eq. The investment of funds is delegated by the board to the district s finance manager as the treasurer who assumes full responsibility for the vestment transactions. The objectives of the investment policy are safety, liquidity, yield, and diversity. The district s investments are in compliance with the adopted investment policy. See Note 2 of the finance statements for detailed investment information. Rate Stabilization Fund The Installment Sale Agreement from the 2012 Revenue Bond issue allowed the creation of a Rate Stabilization Fund. The district may deposit into the fund gross revenue from one year, which can then be withdrawn and added to the gross revenues in calculating the debt ratio for a future year. The funds may also be used by the district for any other lawful purpose. A deposit of gross revenue to or a withdrawal from the Rate Stabilization Fund may be made within 180 days after the fiscal year end. Accordingly, the district revised its Policy No. 46 Reserve Policy on November 21, 2013, to establish a Rate Stabilization Fund. Per the bond covenants for the district s existing debt, the district is required to meet an annual debt service ratio of 1.25x annual debt service. In order to meet the required debt service ratio of 1.25x for the fiscal year ended June 30, 2015, the board approved a withdrawal of $1.4 million from the Rate Stabilization Fund on November 3, After the withdrawal, the annual debt service ratio is 1.28x and the Rate Stabilization Fund balance is $5.9 million. Debt Management The district s primary source of revenue is water sales and related service charges, followed by connection charges, rent and lease revenues, and interest. The district has the power and is mandated to establish rates and charges for water service as necessary to meet all of its expenses and obligations including debt service on existing revenue bonds, coverage requirements, and installment payments. The outstanding revenue bonds have a first lien on net revenues. Net revenues are all enterprise revenues after deducting all maintenance and operation costs, plus connection charges after all costs of connections are deducted. viii

90 The district rating on existing debt is AA Standard & Poor s and AA+ Fitch Ratings. The AA rating was reaffirmed by Standard & Poor s on December 4, Budget The district adopts biennial budgets and employs long term planning as the framework for its fiscal decisions. The district makes decisions on the efficient use of its resources. The financial plan and biennial budget includes the operating and capital programs, and sets levels of related operating, capital, and debt service expenditures that may be made during the budget period. The budget is developed to reflect the costs necessary to provide customers with safe and reliable water service over the long term while keeping rate increases as low as possible. The budget not only allocates resources but is also used to develop rates and charges that provide adequate revenues to meet the district s needs and encourages the efficient use of water. Decisions on allocating resources and addressing budget needs do not end when the board adopts the budget. Throughout the year, departments are responsible for implementing the budget and monitoring budget performance, responding to unforeseen or emergency circumstances, and participating in long range financial planning. The adopted biennial budget for fiscal year 2015/16 supports the mission, value, goals, and objectives of the district s strategic plan. The total budget for 2015/16 is $94.8 million, with an operating budget of $66.8 million and capital improvement program budget of $28.1 million. MAJOR INITIATIVES The district evaluates a wide range of water supply and water conservation options as well as land use projections in the district s service area to develop a long range water supply strategy necessary to meet projected demands. To ensure the availability of water purchases from SCWA for the next 40 years, the district successfully obtained agreement of contract revisions for water purchases from SCWA, effective July 1, 2015 and renewal of the intertie agreement with North Marin Water District (NMWD), effective February 4, 2014, for transmission of water purchases from SCWA. The Capital Improvement Program (CIP) includes both district capital and fire flow projects. The budget is based on the 10 year capital improvement plan developed by the Engineering and Environmental Services Division and incorporates staff requests for upgrading or replacing water system and watershed facilities and information systems software and equipment. The 2014/15 CIP spending was approximately $24.5 million, an increase of 15% from the 2013/14 CIP expense of $21.4 million. The district s capital projects, excluding fire flow and reimbursable projects, was funded from the 2012 Revenue Bond proceeds in the amount of $18 million. ix

91 Pipeline Replacement Program: Projects in this capital program provide for replacement of worn and deteriorated transmission and distribution system piping. The district maintains records of all leaks and leak repair. Staff utilizes the district s GIS (Geographic Information System) to identify pipe segments with a significant leak rate (generally 1 leak/year/1,000 ft pipe). The segments identified through this process are added to the pipeline replacement (leak) list. Pipeline replacements are prioritized primarily based on leak rate and risk related to damages to the environment or property in the event of a main break. Special consideration is given to pipelines in close proximity to salmonid bearing streams. The pipeline spending including Fire Flow Improvement Program was approximately $6.5 million, which replaced about 7 miles. Treatment Plants: Capital projects at the treatment plants address three main functional areas; (1) Structure, (2) Primary treatment unit processes, and (3) Secondary unit processes. The capital work is guided by a Treatment Plant Master Plan that started in 2013 to provide a roadmap for replacement of these critical facilities. The district spent approximately $0.6 million during FY2015. Tank Recoating Program: Coating and linings are an integral part of corrosion control as they provide a barrier between the structure and a corrosive environment. Corrosion control staff also work with water quality staff to ensure that interior tank coatings and linings are in compliance with State Department of Health Services drinking water requirements. Prioritization of tanks requiring recoating is based on maintaining water quality and the current requirement for interior cathodic protection. During the FY2015, County View Tank and Elda Tank were recoated, which hold 0.15 million gallons of water each. Storage Tanks Replacement and Improvement Program: MMWD has 138 tanks storing the daily water needs of the customers. They contain approximately 80 million gallons of water. These tanks are of vastly different ages and a variety of materials (redwood, welded steel, bolted steel, riveted steel, concrete), all requiring different maintenance and capital investment. Over the past 10 years, the district has invested approximately $21 million replacing deficient redwood tanks. During the FY2015, two redwood tanks, Slide Gulch Tank and Oak Avenue Tank, were replaced. Each tank holds 50,000 gallons of water. In addition, the cover and the lining of Forbes Hill Reservoir Concrete Tank, which holds 4 million gallons of water, were replaced. AWARDS AND ACKNOWLEDGEMENTS We are pleased that the Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the district for its CAFR (Comprehensive Annual Financial Report) for the fiscal year ended June 30, In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized CAFR. This report must satisfy both generally accepted accounting principles and applicable legal requirements. x

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93 MARIN MUNICIPAL WATER DISTRICT BOARD OF DIRECTORS Jack Gibson, President Division I Representative Cynthia Koehler, Vice President Division IV Representative Armando Quintero Division II Representative Larry Bragman Division III Representative Larry Russell Division V Representative BOARD COMMITTEES District Operations Committee Finance Committee Communications Committee Watershed Committee Drought Resiliency Taskforce Committee Compensation Committee Conservation Action Committee Russian River Committee Ad Hoc Committee Ad Hoc Committee Ad Hoc Committee xii

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95 MMWD Organizational Chart Board of Directors Legal Counsel General Manager Environmental & Engineering Division Human Resources Division General Manager Division Finance Division Facilities & Watershed Management Division Operations Recruitment & Examination Board Administration Support Customer Service System Maintenance Planning Labor / Employee Relations Public Information Office Support Watershed Management Design and Construction Staff Development Water Conservation Purchasing Facilities Maintenance Water Treatment & Water Quality Benefits Administration Information Technology Meter Operations Support Services Support Services Accounting Safety Environmental Services Payroll xiv Revised May 2012

96 Certificate of Achievement for Excellence in Financial Reporting Presented to Marin Municipal Water District Text38: Government Finance Officers Association California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2014 Executive Director/CEO xv

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98 FINANCIAL SECTION

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100 INDEPENDENT AUDITOR S REPORT To the Board of Directors of the Marin Municipal Water District Corte Madera, California Report on the Financial Statements We have audited the accompanying financial statements of the enterprise fund and the agency fund information of Marin Municipal Water District (District) as of and for the years ended June 30, 2015 and June 30, 2014, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Address: 180 Grand Avenue, Suite 1500 Oakland, CA Phone: Fax:

101 To the Board of Directors of the Marin Municipal Water District Corte Madera, California Page Two Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the the enterprise fund and the agency fund information of the District, as of June 30, 2015 and June 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, defined benefit pension plan, and schedule of funding progress for OPEB plans on pages 5 to 10 and pages 55 to 57 to be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The Introductory section, Statement of Changes in Fiduciary Assets and Liabilities, and Statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The statements of changes in fiduciary assets and liabilities are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the statements of changes in fiduciary assets and liabilities are fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2

102 To the Board of Directors of the Marin Municipal Water District Corte Madera, California Page Three The Introductory section and Statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Badawi & Associates Certified Public Accountants Oakland, California December 30,

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104 Marin Municipal Water District Management s Discussion and Analysis For the Years Ended June 30, 2015 and 2014 As management of the Marin Municipal Water District (MMWD), we offer readers of MMWD s financial statements this narrative overview and analysis of the financial statements of MMWD for the fiscal year ended June 30, We encourage readers to considerr the information presented here in conjunction with the transmittal letter in the Introductory Section and the Basic Financial Statements and Required Supplementary Information, which follows this section. Overview of the Financial Statements MMWD s financial section consists of the following three parts: Management s Discussion and Analysis, Basic Financial Statements and Required Supplementary Information. This management s discussion and analysis is intended to serve as an introduction to the MMWD s basic financial statements. The basic financial statements include notes which explain in detail information included in the financial statements. The Required Supplementary Information includes financial information in addition to the basic financial statements. Proprietary Fund Financial Statements MMWD s operations are accounted for as a single proprietary enterprise fund using the full accrual basis of accounting. In this regard, MMWD operations are accounted for in a manner similar to a private business enterprise. Within this one proprietary fund, MMWD segregates revenues and expenses for various purposes such as operations, debt service and capital improvements, but that segregation does not create separate proprietary funds. Notes to the Financial Statements The notes provide additional information thatt is essentiall to a full understanding of the data provided in the financial statements. The notes to the financial statements can be found beginning on page 21 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain supplementary and statistical information. Supplement tary and statistical information can be found beginning on page 60 of this report. 5

105 Marin Municipal Water District Management s Discussion and Analysis For the Years Ended June 30, 2015 and 2014 Financial Highlights The District s net position at June 30, 2015 decreased by $70 million or 22. 3% from $313.7 million to $243.7 million mainly due to prior year adjustment to record the net pension liability of $67.7 million, in accordance with GASB Statement No Capital assets, net of accumulated depreciation, att June 30, 2015 increased by $14.4 million or 4% 4 as compared to June 30, 2014 due to continued investment in water system infrastructure. Operating revenues decreased by $8.5 million or 12.54%, and operating expenses decreased by $0.7 million or 1.1% as compared to June 30, For the fiscal year ended June 30, 2015 net operating revenuee decreasedd by $7.8 million or 390%, and net income decreased $8.4 million or 137% as compared to the prior fiscal year. The decreases are mainly due a decrease in water sales revenue resulting from the voluntary and mandatory water use reductions per the Governor s Emergency Orders in response to the four year state wide drought. As of June 30, 2015, unrestricted and designated reserves were $41.8 million, a decrease of $0.8 million over the prior fiscal year. Designated reserves include the Rate Stabilization Fund which had a balance at June 30, 2015 of $5.9 million, a decrease of $1.4 million resulting from a withdrawal to meet the district s annual debt coverage ratio of 1.25x. Amounts placed in the Rate Stabilization Fund can be used in the calculation to meet the District s annual debt service ratio in any future year or may be used by the District for any other lawful purpose. Financial Analysis The Statements of Net Position in page and the Statement of Revenues, Expenses and Changes in Net N Position in page 14 provide an indication of the District ss financial position and changes during the fiscal year. The District s net position reflects the difference between assets, deferred outflows of resources, liabilities, and deferred inflows of resources. 6

106 Marin Municipal Water District Management s Discussion and Analysis For the Years Ended June 30, 2015 and 2014 Table 1 NET POSITION Assets: Current assets Non current assets Capital assets, net Total assets $ 2015 vs vs June 30, June 30, Increase/ % June 30, Increase/ % ,000,054 $ ,937,520 $ (Decrease) (1,937,466) Change 5.88% $ ,295,230 $ (Decrease) (1,357,710) Change 3.96%% 58,621, ,110,366 (16,489,228) 21.95% 80,419,036 (5,308,670) 6.60%% 372,717, ,319,959 14,397, % 345,844,486 12,475, % % 462,338, ,367,845 (4,029,033) 0.86% 460,558,752 5,809, % % Deferred outflows of resources: 7,182,8722 2,045,773 5,137, % 2,224,396 (178,623) 8.03%% Total assets and deferred outflows of resources 469,521, ,413,618 1,108, % 462,783,148 5,630, % % Liabilities: Current liabilities Non current liabilities Total liabilities 18,335,354 17,873, , % 19,690,620 (1,817,480) 9.23%% 197,343, ,843,958 60,499, % 135,502,167 1,341, % % 215,679, ,717,098 60,962, % 155,192,787 (475,689) 0.31%% Deferred inflow off resources: 10,156, ,156,785 Total liabilities and deferred inflows of resources 225,836, ,717,098 71,118, % 155,192,787 (475,689) 0.31%% Net position: Net Investmentt in capital assets Restricted Unrestricted Total net position $ 263,879,1911 1,939,5299 (22,133,080) 243,685,640 $ 265,964,474 1,736,460 45,995, ,696,520 $ (2,085,283) 203,069 (68,128,666) (70,010,880) 0.78% 11.69% % 22.32% $ 266,939,799 2,483,468 38,167, ,590,361 $ (975,325) (747,008) 7,828,492 6,106, %% 30.08%% 20.51% % 1.99% % In Table 1 above, the District s total net position decreased by $70 million or 22.3% largely due to the implementation of GASB Statement No. 68 the effect of which was recognizing the District s net pension liability in the amount of $62.1 million at June 30, Accordingly, the District s unrestricted net position at June 30, 2015 decreased by $68.1 million or 148.1% from the priorr year due to an increasee in long term liabilities by $60.5 million from the District s recognitionn of net pension liability of $62.1 million and a decrease in the long term debt by $2.1 million. The largest portion of the District ss total net position reflects the District s investment in capital assets, net n of related debt, which was $263.9 million or 108.3% and $266 million or 84.8% as of June 30, 2015 and 2014 respectively. The net investment in capital assets ass of June 30, 2015, decreased by $2.1 million or 0.8% compared to June 30, The decrease of $2.1 million wass comprised of an increase of $14.4 7

107 Marin Municipal Water District Management s Discussion and Analysis For the Years Ended June 30, 2015 and 2014 million in capital assets, net of accumulated depreciation, offset by a decrease in the 2012 Water Revenue Bond proceeds by $18.5 million and a decreasee in the long term as of June 30, 2015 at $7.2 million increased by $5.3 million or 251.1% over the prior year. The total includes the unamortized bond refunding amounts and pension contributions made to California Public Employees Retirement System (CalPERS) after the actuarial measurement date of June 30, 2014 which are deferred to the nextt fiscal year in accordance with GASB Statement No. 68. The deferred outflow of resources due to unamortized bond refunding amounts at June 30, 2015 and 2014 were $1.9 million and $2.1 million, respectively. The deferredd pension contributions at debt by $2.0 million. The total of the deferred outflows of resourcess June 30, 2015 were $5.3 million which will be recognized inn the next fiscal year. The total deferred inflows of resources as of June 30, 2015 was $10.2 million and is the difference between expected and actual investment returns in the CalPERS pension fund which will be amortized as a component of pension expense over the remaining four years of the five year amortization period. Table 2 Statement of Revenues, Expenses and Changes in Net Position June 30, 2015 June 30, vs Increase/ / % (Decrease) Change June 30, vs Increase/ (Decrease) s % Change Revenues: Water sales and service charges Connection charges Other operating revenue Total operating revenue Expenses: Electrical power Water purchased Other operating expenses Depreciation and amortization Total operating expenses Net operating income (loss) Non operating revenue, net Less: Interest expense Total nonoperating revenue/(expense) Income (Loss) before capital contributions Capital contributions Net Income (Loss)) $ 57,117,530 $ 64,677,493 $ (7,559,963) 11.69%% $ 64,930,6899 $ (253,196) 0.39% 969,356 1,705,549 (736, 193) 43.16%% 737, , % 1,154,210 1,351,687 (197,477) 14.61%% 1,003, , % 59,241,096 67,734,729 (8,493,633) 12.54%% 66,672,109 1,062, % ` 3,152,661 3,397,161 (244,500) 7.20%% 3,046, , % 6,720,104 7,437,740 (717,636) 9.65%% 5,606,167 1,831, % 44,364,505 43,585, , % 40,253,0022 3,332, % 10,776,549 11,324,138 (547,589) 4.84%% 10,935, , % 65,013,819 65,744,284 (730,465) 1.11%% 59,841,0888 5,903, % (5,772,723) 1,990,445 (7,763, 168) %% 6,831,0211 (4,840,576) 70.86% 2,214,441 2,938,421 (723,980) 24.64%% 3,066,087 (127,666) 4.16% (4,465,063) (4,686,280) (221,217) 4.72%% (4,090,263) 596, % (2,250,622) (1,747,859) (502,763) 28.76% (1,024,176) (723,683) 70.66% (8,023,345) 242,586 (8,265,931) %% 5,806,8455 (5,564,259) 95.82% 5,748,183 5,863,573 (115,390) 1.97%% 4,903, , % (2,275,162) 6,106,159 (8,381,321) %% 10,710,546 (4,604,387) 42.99% Net Position: Beginning of year Prior year adjustment for GASB 68 End of year $ 313,696,520 (67,735,718) 243,685,640 $ 307,590, ,696,520 $ 6,106, 159 (67,735,718) (70,010,880) 1.99% 22.32%% $ 296,879, ,590,361 $ 10,710,546 6,106, % 1.99% 8

108 Marin Municipal Water District Management s Discussion and Analysis For the Years Ended June 30, 2015 and 2014 The Statements of Revenues, Expenses and Changes in Net Position identify the various revenue and expense items which impact the changes in net position. The net position at June 30, 2015 of $243.7 million, decreased by $70 million from the prior year due too the current year net loss of $2.3 million and the prior year adjustment to record the net pension liability of $67.77 million, in accordance with GASB Statement No. 68. Total operating revenuee for the year ended June 30, 2015 of $59.2 million (see table 2), decreased by $8.5 million or 12.5% from the prior year, primary due a decrease in water sales revenue of $7.6 million or 11.7%. The decrease in water sales and service charge revenue was a result of the voluntary and mandatory water use reductions per the Governor s Emergency Orders in response to the four year state year which were a result of decreases in water purchasess from SCWA of $0.7 million, electrical power for f wide drought. Total operating expensee for June 30, 2015 of $65 million, decreased by $0.7 million or 1.11% from the prior pumping of $0.2 million and depreciation and amortization n of $0.5 million which were offset by an increase in other operating expenses of $0.8 million. Net non operating revenue/expense increased by $0.5 million due to reduced grant and rent revenue by $0.4 million, an increasee in losses on the sale of capital assets of $0.3 million and offset by reduced interest expense of $0.2 million. Capital contributions, which include revenues from connection fees, the $75 per parcel Fire Flow Fee and capital grants decreasedd by $0.1 million primarily due to a decrease in connections fees. Table 3 CAPITAL ASSETS, NET OF ACCUMULATED DEPRECIATION Plant, buildings and equipment, net Land Construction in progress North Marin Water Right, net (AEEP) Sonoma County Water Rights, net Total $ $ 2015 vs vs June 30, 2015 June 30, 2014 Increase/ (Decrease) % Change June 30, 2013 Increase/ (Decrease) % Change 336,,286,240 $ 312,056,350 $ 24,229, % $ 303,716,325 $ 8,340, % 11,,129,340 11,128, % 10,800, , % 16,,393,445 25,942,572 (9,549,127) 36.81% 25,879,384 63, % 3,,873,417 4,028,354 (154,937) 3.85% 4,028,354 5,,035,178 5,164,278 (129,100) 2.50% 5,448,378 (284,100) 5.21% 372,,717,620 $ 358,319,959 $ 14,397, % $ 345,844,486 $ 12,475, % As of June 30, 2015, the District ss net investment in capital assets totaled $372.7 million, which is an increase of $14.4 million or 4.02% over the prior fiscal year. The investment in capital assets includes: land, buildings, improvements, water treatments plants, filter plants, waterr transmission and distribution mains, water storage facilities, reservoirs, pump stations, water reclamation facilities, machinery, equipment and water rights as shown above in Table 3. Additional information on the District s capital assetss is provided in Note 4 starting on page 32 of the financial statements. 9

109 Marin Municipal Water District Management s Discussion and Analysis For the Years Ended June 30, 2015 and 2014 Table 4 LONG TERM DEBT 2004 Certificates of Participation 2010 Water Revenue Bonds 2012 Water Revenue Bonds Clean Renewablee Energy Bonds (CREBs) Aqueduct Energy Efficiency Project (AEEP) Unamortized costs, net $ $ 2015 vs vs June 30, June 30, Increase/ % June 30, Increase/ % ,915,000 $ ,935,000 $ (Decrease) ( 1,020,000) Change 34.75% $ ,865,000 $ (Decrease) (1,930,000) Change 39.67% 31,850,000 31,850, % 31,850, % 84,680,000 85,000,000 (320,000) 0.38% 85,000, % 1,100,250 1,222,500 3,355,000 3,600,000 (245,000) 9,289,903 9,611,556 (321,653) 132,190,153 $ 134,219,056 $ ( 2,028,903) (122,250) 10.00% 1,344, % 3.35% 9,933, % $ 132,992,957 $ (122,250) 3,600,000 (321,651) 1,226, % 3.24% 0.92% As of June 30, 2015 the District had total long term debt outstanding of $130.4 million, net of unamortized costs, whichh decreased $2.1 million from the prior year due to a reduction in principal of debt service as shown in Table 4 above. Additional information on the District s long term debt is provided in Note 5 starting on page 33 of the financial statements. The District is required by bond covenants to maintain principal, interest and reserve funds for each bond issue outstanding. In addition, the District is required to set rates and charges to yield revenues equal to at least 125% of the current annual debt service requirements of the outstanding revenue bonds and certificates of participation. The coverage of annual debtt service forr the year ended June 30, 2015 was w 128% after the transfer of $1.4 million from the Rate Stabilization Fund. The District s bond ratings for the existing bond and certificates of participation issues are AA Standard & Poor s and AA+ Fitch Ratings. Request for Information This financial report is designed to provide interested parties with a general overview of the District s financial operations and condition. Should the reader have any questions regarding the information included in this report or wish to request additional information, please submit a request in writing to: t Finance Manager, Marin Municipal Water District, 220 Nellen Avenue, Corte Madera, CA 94925, or telephone (415)

110 BASIC FINANCIAL STATEMENTS 11

111 Marin Municipal Water District Statement of Net Position Enterprise Fund June 30, 2015 and ASSETS Current assets: Cash and investments (Note 2) $ 19,959,569 $ 21,026,899 Receivables: Customer billed (net of allowances for doubtful account of $308,866 and $279,430 in 2015 and 2014, respectively.) 4,286,334 4,636,953 Customer unbilled 3,736,770 4,846,666 Interest and other (net of allowances for doubtful account of $384,900 and $384,900 in 2015 and 2014, respectively.) 1,091,212 1,024,204 Materials and supplies 1,802,568 1,284,790 Prepaid expenses 123, ,008 Total current assets 31,000,054 32,937,520 Noncurrent assets: Restricted cash and investments (Note 2) 33,093,240 49,929,461 Designated cash and investments (Note 2) 21,857,584 21,585,661 Deposits and advances (Note 2) 3,670,314 3,595,244 Total restricted cash and investments 58,621,138 75,110,366 Capital assets: (Note 3) Land and land rights 11,129,340 11,128,405 Depreciable assets 549,596, ,323,840 Construction in progress 16,393,445 25,942,572 Less accumulated depreciation 204,401, ,074,858 Total capital assets 372,717, ,319,959 Total noncurrent assets 431,338, ,430,325 Total assets 462,338, ,367,845 DEFERRED OUTFLOWS OF RESOURCES Deferred loss on refunding 1,867,150 2,045,773 Deferred employer pension contributions 5,315,722 Total deferred outflows of resources 7,182,872 2,045,773 See accompanying Notes to Basic Financial Statements. 12

112 Marin Municipal Water District Statement of Net Position Enterprise Fund, Continued June 30, 2015 and 2014 LIABILITIES Current liabilities: Accounts payable $ 5,893,561 $ 4,218,283 Accrued payroll and payroll expenses 755, ,491 Compensated absences 3,292,028 3,720,835 Customer and other deposits 435, ,444 Long term debt due within one year 1,767,250 1,707,250 Accrued interest payable 2,716,670 2,745,369 Agency deposits payables 207, ,944 Customer advances for construction 2,441,848 3,415,338 Claims payable 825, ,186 Total current liabilities 18,335,354 17,873,140 Noncurrent Liabilities: (Note 4) Claims payable due in more than one year 2,682,054 2,742,526 Compensated absences due in more than one year 2,099,871 1,589,626 Long term debt due in more than one year 130,422, ,511,806 Net pension liability 62,139,077 Total noncurrent liabilities 197,343, ,843,958 Total liabilities 215,679, ,717,098 DEFERRED INFLOWS OF RESOURCES Pension related amounts (Note 5) 10,156,785 Total deferred inflows of resources 10,156,785 NET POSITION Net investment in capital assets 259,038, ,964,474 Restricted for fire flow parcel fee program 1,939,529 1,736,460 Unrestricted (17,292,019) 45,995,586 Total net position $ 243,685,640 $ 313,696,520 See accompanying Notes to Basic Financial Statements. 13

113 Marin Municipal Water District Statements of Revenues, Expenses and Changes in Net Position Enterprise Fund For the Years Ended June 30, 2015 and OPERATING REVENUES Water sales and service charges $ 57,117,530 $ 64,677,493 Connection charges 969,356 1,705,549 Other operating revenue 1,154,210 1,351,687 Total operating revenues 59,241,096 67,734,729 OPERATING EXPENSES Water Purchases 6,720,104 7,437,740 Watershed Maintenance 5,206,134 4,632,367 Water treatment 7,070,203 6,657,304 Pumping 2,742,815 2,955,530 Transmission and distribution 12,568,990 10,682,167 Customer service and meter operation 2,796,058 2,734,368 Water Conservation 2,238,765 1,925,266 Administrative and general 14,894,201 17,395,404 Depreciation and amortization (Note 3) 10,776,549 11,324,138 Total operating expenses 65,013,819 65,744,284 Operating income (loss) (5,772,723) 1,990,445 NONOPERATING REVENUES (EXPENSES) Federal, state and other grants 865,443 1,137,330 Investment income 4,630 69,251 Interest income 171, ,055 Other income (Note 9) 1,172,975 1,584,785 Interest & other expense (4,465,063) (4,686,280) Total nonoperating revenues (expenses), net (2,250,622) (1,747,859) Total income (loss) before capital contributions (8,023,345) 242,586 Fire flow parcel fee (Note 9) 4,511,604 4,524,178 Contributions in aid of construction (Note 9) 1,236,579 1,339,395 Total capital contributions 5,748,183 5,863,573 Net income (2,275,162) 6,106,159 NET POSITION: Beginning of year, as restated 245,960, ,590,361 End of year $ 243,685,640 $ 313,696,520 See accompanying Notes to Basic Financial Statements. 14

114 Marin Municipal Water District Statements of Cash Flows Enterprise Fund For the Years Ended June 30, 2015 and CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 59,615,388 $ 68,690,532 Other operating revenue 917,793 1,182,278 Cash payments to employees (34,706,642) (33,144,469) Cash payments to suppliers for goods and services (19,028,571) (21,970,760) Net cash provided by operating activities 6,797,968 14,757,581 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Rent and watershed permits and other income 1,619,503 1,754,808 Increase (decrease) in deposits North Bay Watershed Association 5,183 (38,655) Federal, state and other grant revenues 861,896 1,133,783 Net cash provided by noncapital financing activities 2,486,582 2,849,936 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Principal payments on long term debt (1,707,250) (2,532,250) Interest paid on long term debt (5,272,109) (5,411,956) Acquisition and construction of capital assets (24,858,545) (19,344,234) Proceeds from sale of capital assets 15,221 86,627 Decrease in customer advances for construction (973,490) (544,414) Proceeds from fire flow parcel fee 4,511,604 4,524,178 Cash Contributions in aid of construction 1,236,579 1,339,395 Net cash provided (used) by capital and related financing activities (27,047,990) (21,882,654) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of investment securities 165,864 1,074,451 Purchase of investment securities (2,014,371) (3,073,820) Interest received on investments 173, ,241 Net cash provided by investing activities (1,674,928) (1,850,128) Net change in cash and cash equivalents (19,438,368) (6,125,265) CASH AND CASH EQUIVALENTS: Beginning of year 90,833,345 96,958,610 End of year $ 71,394,977 $ 90,833,345 See accompanying Notes to Basic Financial Statements. 15

115 Marin Municipal Water District Statements of Cash Flows Enterprise Fund, Continued For the Years Ended June 30, 2015 and 2014 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH AND CASH EQUIVALENTS PROVIDED BY OPERATING ACTIVITIES Operating income (loss) $ (5,772,723) $ 1,990,445 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation and amortization 10,776,549 11,324,138 (Increase) decrease in assets : Receivables, net 1,224,098 2,158,878 Materials and supplies (517,778) (72,069) Prepaid expenses (5,593) 426,657 Increase (decrease) in liabilities: Accounts payable 1,675,278 (1,044,273) Accrued payroll and payroll expenses 294,901 92,785 Claims payable (189,173) (98,183) Customer deposits 67,987 (20,797) Net Pension Liabilities (10,230,386) Deferred inflows of resources pension 10,156,785 Deferred employer pension contributions (681,977) Net cash provided by operating activities 6,797,968 14,757,581 RECONCILIATION OF CASH AND CASH EQUIVALENTS Unrestricted 19,959,569 21,026,899 Restricted 33,093,240 49,929,461 Designated 21,857,584 21,585,661 Deposits and advances 3,670,314 3,595,244 Total cash and investments 78,580,707 96,137,265 Less investments with original maturities in excess of three months (7,185,730) (5,303,920) Cash and cash equivalents $ 71,394,977 $ 90,833,345 NON CASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Change in fair value of investments (35,948) (97,630) Capitalized interest 778, ,397 See accompanying Notes to Basic Financial Statements. 16

116 Marin Municipal Water District Statement of Fiduciary Net Position Agency Fund June 30, 2015 and 2014 Wolfback Ridge Assessment District ASSETS Cash and investments $ 255,761 $ 211,438 Total assets $ 255,761 $ 211,438 LIABILITIES Deposits and Advances $ 255,761 $ 211,438 Total liabilities $ 255,761 $ 211,438 See accompanying Notes to Basic Financial Statements. 17

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118 NOTES TO FINANCIAL STATEMENTS 19

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120 Marin Municipal Water District Notes to Basic Financial Statements For the years ended June 30, 2015 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Marin Municipal Water District (the District ) was formed on April 25, 1912 as a public district under the provisions of the Municipal Water District Act of 1911 for the purpose of developing a domestic water supply for the central and southwestern areas of Marin County. The District is governed by a five-member Board of Directors who are elected for four-year alternating terms. A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: A. Reporting Entity Generally accepted accounting principles of the United States of America require that these financial statements present the District (the primary government) and its component units. Component units generally are legally separate entities for which a primary government is financially accountable. Financial accountability ordinarily involves meeting both of the following criteria: the primary government is accountable for the potential component unit and is able to impose its will upon the potential component unit, or there is a possibility that the potential component unit may provide specific financial benefits or impose specific financial burdens on the primary government. The MMWD Financing Corporation ("Financing Corporation") is a blended component unit that is a separate government entity that was created in It is reported as if it is part of the primary government as the District Board of Directors, although acting in a different capacity, is the controlling authority. Accounting and administrative functions are performed by the District. The purpose of the Financing Corporation is to issue debt, acquire certain property pursuant to an installment agreement with the District and defease certain outstanding debt. In May 2004 the Financing Corporation issued the 2004 Certificates of Participation. The Financing Corporation does not issue separate financial statements. See Note 5 for additional information. In April 2010, the District formed the Marin Municipal Financing Authority (Financing Authority), a joint powers authority, with the California Municipal Financing Authority. The Authority is also reported as if it is part of the primary government as the District s Board of Directors, although acting in a different capacity, is the controlling authority. Accounting and administrative functions are performed by the District. The purpose of the Financing Authority is to issue debt to acquire certain property pursuant to an installment agreement with the District. The Financing Authority issued in May 2010 the 2010 Series A, Water Revenue Bonds and in May 2012, the 2012 Series A, Water Revenue Bonds. The Financing Authority does not issue separate financial statements. See Note 5 for additional information. A fiduciary fund is used to account for resources held for the benefit of others outside the District. The District's fiduciary fund consists of the Wolfback Ridge Assessment District Agency Fund, for which the District is acting as an agent for the property owners and bondholders. Assets held by the District as an agent for the fiduciary fund are excluded from the District's balance sheet. 21

121 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus The District accounts for its activities as a proprietary fund. The financial statements are accounted for on a flow of economic resources measurement focus, using the accrual basis of accounting. Under this method all assets, deferred outflows and inflows of resources, and liabilities associated with operations are included on the balance sheet, revenues are recorded as earned and expenses are recorded at the time liabilities are incurred. Grants and similar items are recognized as revenue as soon as all eligibility requirements are met. The accounting for fiduciary funds is much like that used for proprietary funds. The District applies all applicable GASB pronouncements, including all NCGA Statements and Interpretations currently in effect. The intent of the District is to establish water usage rates sufficient to provide for payment of general operations and maintenance expenses as well as required debt service. When both restricted and unrestricted resources are available for use, restricted resources are generally assumed to have been used first. The District distinguishes operating revenues and expenses from non-operating items. Operating revenues include revenues derived from water sales and water related activities; operating expenses include all expenses applicable to the furnishing of these services. Nonoperating revenue and expenses include revenue and expenses not associated with the District's normal business of supplying water. Non-operating revenues and expenses include interest income and expense, gain and loss on disposition of property and equipment, grants, and other peripheral activities. Although capital contributions, as well as special and extraordinary items when there are any, are shown separately, technically they are subcategories of non-operating revenues and expenses. C. Cash, Cash Equivalents and Investments Investments are stated at fair value based on quoted market prices. For purposes of the statement of cash flows, the District considers all highly liquid investments (including restricted and designated assets) with original maturities of three months or less to be cash equivalents. D. Materials and Supplies Materials and supplies are stated at the lower of average cost or market. E. Capital Assets The cost of purchased and self-constructed additions to utility plant and major replacements of property are capitalized with a capitalization threshold of $2,000. Cost includes materials, direct labor, transportation, and such indirect items as engineering, supervision, employee fringe benefits, and interest incurred during the construction period. Repairs, maintenance, and minor replacements of 22

122 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued E. Capital Assets, Continued property are charged to expense. Contributed assets are capitalized at the developer's cost, which approximates fair value. Depreciation is computed on the straight-line basis over the estimated useful lives of the various classes of assets as follows: Buildings Dams and reservoirs Pumping plant Water treatment plant Transmission and distribution Vehicles Equipment years 100 years years 30 years years 12 years 5-40 years F. Bond Issuance Costs/Advance Refunding of Long-Term Debt Bond premiums and discounts, are deferred and amortized over the life of the bonds using the straight line method which does not significantly differ from the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed as incurred. Accounting gains or losses resulting from advance refunding of long-term debt are deferred in accordance with GASB Statement No. 65, Items preiviously Reported as Assets and Liabilities, and are reported as deferred inflows of resources or deferred outflows of resources on the financial statements. Deferred amounts on bond refunding are amortized over the remaining life of the old debt (had it not been refunded) or the life of the new debt, whichever is shorter. G. Compensated Absences Unused vacation may be accumulated and paid to a District employee at the time of termination from District employment in accordance with the current collective bargaining agreement. At the time of retirement, an employee will be paid out, in a lump sum, seventy-five percent of their accumulated sick leave balance, not to exceed 750 hours, based upon their current salary. Compensated absences are expensed in the fiscal year incurred. 23

123 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued H. Customer Advances for Construction, Contributions in Aid of Construction and Connection Fees Customer advances for construction include deposits which are restricted to fund new subdivisions, transmission lines, tank and storage facilities, and other specific assets, along with connection fees. Connection fees are assessed on new connections to recover the past and future capital costs of the District's water system. Upon completion of construction of specific assets, the District will record an amount equal to the actual construction costs of providing service as connection charge revenue and will record the portion relating to the recovery of past and future capital costs, other fees, and advances as contributions in aid of construction. Advances in excess of construction costs are refundable. I. Net Position In the statements of net position, net position are classified in the following categories: Net Investment in Capital Assets This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that is attributed to the acquisition, construction, or improvement of the capital assets. Restricted Net Position This amount is restricted by external creditors, grantors, contributors, laws or regulations of other governments. Unrestricted Net Position This amount is all net position that do not meet the definition of net investment in capital assets or restricted net position. J. Water Sales Revenue Generally, customers are billed as the water meters are read on a bimonthly cyclical basis. Revenues related to water delivered through the fiscal year-end, but unbilled, are accrued. K. Use of Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management, at the date of the financial statements, to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets, deferred inflows and outflows of resources, and liabilities as well as the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates. 24

124 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L. Pension For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the District s California Public Employees Retirement System (CalPERS) plans (Plans) and additions to/deductions from the Plans fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. M. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The government reports a deferred loss on refunding debt and deferred employer pension contributions in this category in the statement of net position. A deferred loss on refunding results from the difference in the carrying value of refunded debt and it reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Employer pension contributions made during period between the measurement date and the report date are deferred and reflected as a reduction in the net pension liability in the subsequent fiscal year. In addition to liabilities, the statement of net position or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District only has one item that qualifies for reporting in this category. Certain changes in the District s net pension liability are required to be deferred and reflected in pension expense over a closed amortization period. The District reported the unamortized net difference between the projected and actual earnings on pension plans as deferred inflows of resources in the statements of net position. N. New Pronouncements In 2015, the District adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statements: GASB Statement No. 68, Accounting and Financial Reporting for Pensions An Amendment of GASB Statement No. 27 This statement improves accounting and financial reporting by state and local governmental employers about financial support for pensions that is provided by other entities. The District restated beginning net position as part of implementation of this statement. 25

125 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued N. New Pronouncements, Continued This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit pensions, this statement identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about pensions also are addressed. Distinctions are made regarding the particular requirements for employers based on the number of employers whose employees are provided with pensions through the pension plan and whether pension obligations and pension plan assets are shared. The following are major impacts: This Statement requires the liability of employers and nonemployer contributing entities to employees for defined benefit pensions (net pension liability) to be measured as the portion of the present value of projected benefit payments to be provided through the pension plan to current active and inactive employees that is attributed to those employees past periods of service (total pension liability), less the amount of the pension plan s fiduciary net position. The actuarial present value of projected benefit payments is required to be attributed to period of employee service using the entry age actuarial cost method with each period s service cost determined as a level percentage of pay. The actuarial present value is required to be attributed for each employee individually, from the period when the employee first accrues pensions through the period when the employee retires. GASB Statement No. 69, Government Combinations and Disposals of Government Operations This statement establishes accounting and financial reporting standards related to government combinations and disposals of government operations. As used in this statement, the term government combinations include a variety of transactions referred to as mergers, acquisitions, and transfers of operations. There was no effect on net position as part of implementation of this standard. GASB Statement No. 71, Pension Transition for the Contributions Made Subsequent to the Measurement Date An Amendment of GASB Statement No. 68 The objective of this statement is to address an issue regarding the application of the transition provisions of Statement No. 68, Accounting and Financial Reporting for Pensions. The issue related to amounts associated with contributions, if any, made by a state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement date of the government s beginning net pension liabity. The District restated beginning net position as part of implementation of this standard. 26

126 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and CASH AND INVESTMENTS The District pools its cash and investments for investment purposes. Certain cash and investments are segregated for specific purposes. Under the provisions of the District s investment policy, and in accordance with California Government Code, the following investments are authorized: Maximum Maximum Minimum Credit Percentage of Authorized Investment Type Maturity Quality Portfolio U.S. treasury Bonds/Notes/Bills 365 days N/A No limit U.S. Government Agency Obligation 5 years N/A No limit Time Certificates of Deposits 180 days AAA 20% Money Market Mutual Fund N/A AAAm 10% California Local Agency Investment N/A N/A No limit Negotiable Certificate of Deposit 180 days AA 20% Medium Term Corporate Notes 5 years A 30% Commercial Paper 270 days AAA 15% Bank's Acceptances 180 days AAA 40% Repurchase Agreements 90 days AAA 10% Investments are stated at fair value. Included in investment income (loss) on the accompanying statement of activities and changes in net position is the net change in the fair value of investments, which consists of realized gains or losses and the unrealized appreciation (depreciation) of those investments. Measurement of the fair value of investments is based upon quoted market prices, if available. The estimated fair value of investments that have no quoted market price is determined based on equivalent yields for such securities or on securities of comparable maturity, quality, and type as obtained from market makers. Investments made by the District are summarized below at June 30, 2015 and 2014: 27

127 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and CASH AND INVESTMENTS, Continued Business-Type Fiduciary Business-Type Fiduciary Activities Activities Total Activities Activities Total Cash in banks $ 3,179,250 $ - $ 3,179,250 $ 5,055,304 $ - $ 5,055,304 U.S. Government Obligations 7,076,980-7,076,980 5,120,170-5,120,170 Corporate notes 108, , , ,750 Money Market 334, , ,839 2,209, ,438 2,420,916 Cash & Cash Equivalent- Bond Funds: Certificate of Participation 1,119,213-1,119,213 1,094,717-1,094, Water Revenue Bond 1,064,886-1,064,886 1,064,901-1,064, Water Revenue Bond 24,669,265-24,669,265 42,995,619-42,995,619 Local Agency Investment Fund 41,028,285-41,028,285 38,413,326-38,413,326 Total $ 78,580,707 $ 255,761 $ 78,836,468 $ 96,137,265 $ 211,438 $ 96,348,703 Cash and investments, unrestricted $ 19,959,569 $ - $ 19,959,569 $ 21,026,899 $ - $ 21,026,899 Cash and investments, restricted 33,093,240-33,093,240 49,929,461-49,929,461 Cash and investments, designated 21,857,584-21,857,584 21,585,661-21,585,661 Cash and investments, deposits and advances 3,670,314-3,670,314 3,595,244-3,595,244 Cash and investments - Agency Fund - 255, , , ,438 Total $ 78,580,707 $ 255,761 $ 78,836,468 $ 96,137,265 $ 211,438 $ 96,348,703 Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a depositor will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counter-party (e.g., broker-dealer) to a transaction, a depositor will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the District's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the following provisions for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governments units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. The carrying amount of the District's deposits as of June 30, 2015 and 2014 was $3,179,250 and $5,055,304 respectively. The bank balance of deposits as of June 30, 2015 and 2014 was $3,803,767 and $5,942,793, of which $500,000 was covered by federal depository insurance. The difference between the carrying amount and the bank balance is primarily due to checks outstanding at June 30, 2015 and The remaining was uninsured and not collateralized in the District's name. However, as noted above, the financial institutions which hold these deposits are required by state statute to maintain collateral pools against all public deposits they hold. As a means to limiting its exposure to fair value losses arising from interest rates, the District's investment policy limits the District's investment portfolio to maturities of five years or less. 28

128 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and CASH AND INVESTMENTS, Continued Under the District's investment guidelines and state statute, the District is authorized to invest in certificates of deposit, U.S. government securities, the State Local Agency Investment Fund, and other investment pools, money market funds and commercial paper with a bond rating of "A" or better. As of June 30, 2015, one of the District s investments on Medium Term Corporate Notes were in default even though the investment at time of purchase was rated in accordance with the investment policy. The investment in default has been recorded at fair market value of $108,750, while the cost basis of the investment was $630,812. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As a means of limiting exposure to fair value losses arising from rising interest rates, the District s investment policy provides that final maturities of securities cannot exceed five years. Specific maturities of investments depend on liquidity needs. At June 30, 2015 and 2014, the District s pooled cash and investments had the following maturities: Percentage of Investment Maturity Less than one year 96% 94% One to two years 3% 5% Two to five years 1% 1% The District's investments at June 30, 2015 are summarized as follows: Remaining Maturity (in Months) 12 Months 13 to to 60 Investment Type Fair Value Or Less Months Month U. S. Government Agency Obligation $ 7,076,980 $ 4,055,140 $ 2,010,980 $ 1,010,860 Corporate Notes 108, , State investment pool (LAIF) 41,028,285 41,028, Money market 589, , Held by bond trustee: Money market 26,853,364 26,853, Total $ 75,657,218 $ 72,635,378 $ 2,010,980 $ 1,010,860 29

129 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and CASH AND INVESTMENTS, Continued Credit Risk This is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. It is measured by the assignment of a rating by a nationally recognized credit rating organization. Presented below are the actual ratings, as of year-end, for each investment type: Exempt Rating as of Year-End From Investment Type Fair Value Disclosure AA+ A In Default Not Rated U. S. Government Agency Obligation $ 7,076,980 $ 7,076,980 Corporate Notes 108, ,750 State investment pool (LAIF) 41,028,285 41,028,285 Money market 589, ,839 Held by bond trustee: Money market 26,853,364 26,853,364 Total $ 75,657,218 $ 48,105,265 $ - $ - $ 108,750 $ 27,443,203 The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429, under the oversight of the Treasurer of the State of California. The balance is available for withdrawal on demand. The District s investments with LAIF at June 30, 2015 include a portion of the pool funds invested in Structured Notes and Asset-Backed Securities. These investments include the following: Structured Notes are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables. As of June , the District had $41,028,285 invested in LAIF, which had invested 2.08% of the pool investment funds in Structured Notes and Asset-Backed Securities. The District reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The fair value of LAIF was calculated by applying a factor of to total investments held by LAIF. 30

130 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and RESTRICTED AND DESIGNATED CASH AND INVESTMENTS The District, because of certain bond covenants and legal requirements, is required to establish and maintain prescribed amounts of resources (consisting of cash and investments) that can be used only for their specified purposes. A portion of the District's cash and investments have been internally designated for the acquisition or the construction of specific capital projects, future self insurance claims, and for rate stabililzation. These designations may be removed at the discretion of the Board. Restricted and designated cash and investments are as follows as of June 30: June 30, Restricted cash and investments: 2004 Certificates of Participation, 2010 Revenue Bonds and 2012 Revenue Bonds: Principal and interest fund $ 8,186,445 $ 6,897,753 Reserve fund 1,275,563 1,275,506 Project fund 21,484,576 39,817,798 Agency deposits 207, ,944 Fire Flow Parcel Fee Program 1,939,529 1,736,460 Deposits and advances 3,670,314 3,595,244 Total restricted cash and investments 36,763,554 53,524,705 Designated cash and investments: Capital projects 8,559,584 7,487,661 Rate stabilization 5,900,000 7,300,000 Liability claims 7,398,000 6,798,000 Total designated cash and investments 21,857,584 21,585,661 Total restricted & designated cash and investments $ 58,621,138 $ 75,110,366 31

131 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and CAPITAL ASSETS Capital assets consists of the following at June 30: Balance 2014 Balance 2015 Balance June 30, 2013 Additions Reductions CIP Transfer June 30, 2014 Additions Reductions CIP Transfer June 30, 2015 Capital assets not being depreciated, excluding construction in progress: Land and land rights $ 10,800,399 $ - $ - $ 328,006 $ 11,128,405 $ - $ - $ 935 $ 11,129,340 Capital assets being depreciated: Water Rights 9,193,601 4,080, ,273, ,273,601 Buildings 21,756, ,023 21,999, ,184,432 23,184,242 Dams and reservoirs 96,928,260 - (450,234) 1,621,590 98,099,616 - (343,143) 11,142, ,899,065 Pumping plants 30,306,613 - (280,471) 2,404,735 32,430, ,435 32,938,312 Water treatment plants 42,601, ,773 42,937,155 - (18,915) 3,572,077 46,490,317 Transmission and distribution 266,691, ,550, ,241,492 - (639,487) 17,538, ,140,918 Vehicles 7,100, ,992 (308,669) - 7,123, ,061 (199,349) - 7,515,628 Equipment 22,458, ,500 (3,306,313) 1,732,697 21,217, ,089 (710,769) ,154,243 Total assets being depreciated 497,037,193 4,744,492 (4,345,687) 18,887, ,323,840 1,238,150 (1,911,663) 33,945, ,596,326 Total capital assets, excluding construction in progress 507,837,592 4,744,492 (4,345,687) 19,215, ,452,245 1,238,150 (1,911,663) 33,946, ,725,666 Construction in progress 25,879,384 19,279,036 - (19,215,848) 25,942,572 24,397,807 - (33,946,934) 16,393,445 - Total capital assets 533,716,976 24,023,528 (4,345,687) - 553,394,817 25,635,957 (1,911,663) - 577,119,111 Less accumulated depreciation for: Water Rights 3,745, , ,080, , ,365,006 Buildings 9,832, , ,527, , ,266,891 Dams and reservoirs 29,788,847 1,550,679 (290,334) - 31,049,192 1,746,291 (152,555) - 32,642,928 Pumping plants 15,622,374 1,089,590 (238,848) - 16,473,116 1,188, ,661,978 Water treatment plants 24,954,926 1,060, ,015,052 1,268,698 (16,104) - 27,267,646 Transmission and distribution 78,317,039 5,108, ,425,427 4,278,850 (371,300) - 87,332,977 Vehicles 5,376, ,080 (295,449) - 5,520, ,544 (199,349) - 5,755,270 Equipment 20,235,046 1,045,890 (3,297,140) - 17,983, ,605 (710,606) - 18,108,795 Total accumulated depreciation 187,872,490 11,324,138 (4,121,771) - 195,074,857 10,776,548 (1,449,914) - 204,401,491 Total capital assets, net $ 345,844,486 $ 12,699,390 $ (223,916) $ - $ 358,319,959 $ 14,859,409 $ (461,749) $ - $ 372,717,620 32

132 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and CAPITAL ASSETS, Continued Sonoma County Water Rights In January 1996, the District revised its agreement with the Sonoma County Water Agency (the "Agency") for the purchase of water during off-peak periods. The revised contract guarantees the District a source of water during drought years. For revisions to the agreement the District has paid $2,867,344, which has been capitalized, and is being amortized, over the life of the agreement of 18 years on a straight-line basis. In June 2005, MMWD exercised an option within the agreement to convert 5,000 acre-feet of water from an "as available" basis to a "firm" basis of water supply from Sonoma County Water Agency for a one-time payment of $6,326,257. This amount is being amortized on a straight-line basis over the remaining term of the agreement of nine years, plus an additional 40 years which is the renewal term at the option of the District, as management believes it is likely the agreement will be renewed. Aqueduct Energy Efficiency Project On February 5, 2014, the district entered into an agreement with the North Marin Water district to pay 51% of the final actual costs, currently estimated at $4,080,000, of the Aqueduct Energy Efficiency Project which will upsize the North Marin Aqueduct from Kastania Pump Station to Redwood Landfill road. This amount is being amortized on a straight-line basis over the remaining term of the agreement of 26 years and 4 months. 5. LONG-TERM DEBT Long-term debt consists of the following at June 30: Issue Due Interest Principal Amount Date Serially Rate Certificates of Participation 4/1/04 To % % $ 1,915,000 $ 2,935, Water Revenue Bonds 5/1/10 To % % 31,850,000 31,850, Water Revenue Bonds 6/20/12 To % % 84,680,000 85,000,000 Clean Renewable Energy Bonds 9/29/08 To 2023 Tax credit 1,100,250 1,222,500 Aqueduct Energy Efficiency Project 2/5/14 To 2032 N/A 3,355,000 3,600,000 Total 122,900, ,607,500 Original issue premium/discount, net 9,289,903 9,611,556 Less Long-term debt, due within one year 1,767,250 1,707,250 Long-term debt - Due in more than one year $ 130,422,903 $ 132,511,806 33

133 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and LONG-TERM DEBT, Continued On April 30, 2004, the District issued $40,165,000 of 2004 Certificates of Participation (COPs) for the purpose of refunding the $11,925,000 of outstanding 1994 Revenue Bonds, prepayment of the Federal Drought Loan and the State Reclamation Loan in the amounts of $2,592,146 and $2,528,101, respectively, financing capital improvements to the District's water system, funding a deposit to a reserve fund, and paying the costs of the financing. Interest payments are payable semi-annually on January 1 and July 1. The bonds mature through July 1, 2029, and bear interest at the rate of 5%. The bonds were partially refunded by the 2012 Series A Water Revenue Bonds. The COPs are limited obligations of the District payable from, and secured by, a pledge of the Net Revenues of Water systems. The refunding took advantage of lower interest rates which were available and resulted in reductions in debt service requirements over the life of the new debt. Proceeds of $11,869,114 from the COPs were transferred to a trustee and placed in an irrevocable trust to redeem the 1994 Revenue Bonds. These funds were invested in U.S. government securities to provide for the redemption price and interest through the call date. Accordingly, the 1994 Revenue Bonds were removed from the balance sheet as of June 30, Proceeds of approximately $25 million from the COPS were transferred to a trustee to fund capital improvements to the District's water system over the next three years. These funds were fully invested in a guaranteed investment contract. As of June 30, 2008 there were no funds remaining. The advanced refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $1,208,048 which has been deferred and amortized in accordance with GASB Statement No. 23. A portion of the unamortized deferred amount of refunding of $293,181 was written off and included in interest expense for the year ended June 30, 2012 as the bonds were partially refunded by the 2012 Series A Water Revenue Bonds. Total amortization related to the above bond refunding was $25,995 and $25,995 for fiscal 2015 and 2014, which was included in interest expense. On September 29, 2008, the District issued Clean Renewable Energy Bonds (CREBs) for the installation of solar panels on the District's administration building and at its corporate yard. The CREBs were authorized by the Internal Revenue Service and are structured so that bondholders receive a federal income tax credit in lieu of interest. The amount of the tax credit is set by the U.S. Treasury department on a daily basis. The total principal amount of the CREBs issued for both projects was $1,956,000. The net proceeds of the two issues were $1,845,030, less original issue discount of $56,630 and issuance costs of $54,340. The debt service is paid annually over 15 years in the amount of $122,250, principal only. The issues mature on September 30, The installment payments are payable from the net revenue of the District. On May 26, 2010, the joint power authority, Marin Municipal Water District Financing Authority issued the 2010 Series A Water Revenues Bonds in the amount of $32,235,000 to fund the acquisition and construction of additions, betterments, extensions and improvements to the District s municipal water system including, but not limited to: watershed improvement projects, water treatment and water quality projects, water distribution piping and related facility projects, water storage projects and computer and technology system projects. Interest payments are payable semi-annually on January 1 and July 1. The bonds mature through July 1, 2040, and bear interest at the rate of 5%. The Bonds are special limited obligations of the Financing Authority payable from and secured by a pledge of the Net Revenues of Water Systems. 34

134 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and LONG-TERM DEBT, Continued On June 20, 2012, the joint power authority, Marin Municipal Water District Financing Authority issued the 2012 Series A Water Revenues Bonds in the amount of $85,000,000 to refund the District s outstanding 2002 Water Revenue Bonds and a portion of the 2004 Certificant of Participation. Interest payments are payable semi-annually on January 1 and July 1. The bonds mature through July 1, 2052, and bear interest at the rate of 5%. The bonds are special limited obligations of the Financing Authority payable solely from and secured by a pledge of amounts held in certain funds and accounts under the indenture and the revenues derived from the 2012 installment payments made by the District under the 2012 installment sale agreement. The net proceeds of $38,126,123 from these refunding bonds were transferred to a trustee and placed in an irrevocable trust to redeem 2002 Water Revenue Bonds and a portion of the 2004 Certificant of Participation. These funds were invested in U.S. government securities to provide for the redemption price and interest through the call date. Accordingly, the 2002 Revenue Bonds and a portion of the 2004 Certificant of Participation were removed from the balance sheet as of June 30, The advanced refunding resulted in a difference of $2,303,279 between the reacquisition price and the net carrying amount of the old debt, that has been deferred and amortized in accordance with GASB Statement No. 23. On February 5, 2014, the district entered into an agreement with the North Marin Water district to pay 51% of the final actual costs, currently estimated at $4,080,000, of the Aqueduct Energy Efficiency Project which will upsize the North Marin Aqueduct from Kastania Pump Station to Redwood Landfill road. Marin Municipal Water District takes delivery of Agency water through a connection to an Aqueduct in Northern Novato. Part of the Aqueduct is being replaced under the Marin-Sonoma Narrows High Occupancy Vehicle Widening project, a joint project between Caltrans and the Federal Highway Administration. The relocation and replacement of the Aqueduct is called the Aqueduct Energy Efficiency Project, which includes relocation and replacement of 24,000-feet of Aqueduct with a larger diameter pipe. The final costs of the Aqueduct Energy Efficiency Project are to be determined once the Aqueduct Energy Efficiency Project is completed, which is expected to occur in 2016 or Marin Municipal Water District shall make payments in the amount of $245,000 to the North Marin Water District, each July 1, from 2014 through 2032 as fair compensation for the AEEP capital cost. The District is subject to certain debt covenants, the most restrictive of which requires the setting of rates and charges to yield net revenue equal to at least 125 percent of the current annual debt service requirement of the revenue bonds and other parity debt, as well as the establishment of certain principal, interest and reserve funds. The 2004 COPS, 2010 Revenues Bonds and 2012 Revenues Bonds are collateralized by a pledge of the District's net revenues of Water Systems, as defined in the Master Indenture. The total principal and interest remaining on the bonds is $231,498,414, payable through June, For FYE 14/15 principal and interest paid, and total net revenues of Water Systems received, were $6,755,140 and $8,613,637 respectively. For FYE 13/14 principal and interest paid, and total net revenues of Water Systems received, were $7,422,090 and $11,283,753 respectively. 35

135 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and LONG-TERM DEBT, Continued Changes in long-term obligations and debt for the fiscal years ended June 30, 2015, and 2014 are as follows: Balance 2014 Balance 2015 Balance Due Within July 1, 2013 Additions Reductions June 30, 2014 Additions Reductions June 30, 2015 One Year Bonds payable: 2004 $ 4,865,000 $ - $ 1,930,000 $ 2,935,000 $ - $ 1,020,000 $ 1,915,000 $ 1,070, ,850, ,850, ,850, ,000, ,000, ,000 84,680, ,000 Clean Renewable Energy Bonds (CREBs) 1,344, ,250 1,222, ,250 1,100, ,250 Original bond premium/discount, net 9,933, ,651 9,611, ,653 9,289,903 Aqueduct Energy Efficiency Project (AEEP) - 4,080, ,000 3,600, ,000 3,355, ,000 Total $ 132,992,957 $ 4,080,000 $ 2,853,901 $ 134,219,056 $ - $ 2,028,903 $ 132,190,153 $ 1,767,250 36

136 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and LONG-TERM DEBT, Continued The annual debt service requirements are as follows: Fiscal Year 2004 COP 2010 Revenue Bonds 2012 Revenue Bonds CREBS AEEP Ending June 30, Principal Interest Principal Interest Principal Interest Principal Principal 2016 $ 1,070,000 $ 70,338 $ - $ 1,526,338 $ 330,000 $ 3,758,378 $ 122,250 $ 245, ,000 21, ,000 1,512,137-3,755, , , ,000 1,479,563 1,860,000 3,727, , , ,000 1,445,687 1,910,000 3,661, , , ,415,000 6,668,925 10,665,000 17,165, ,250 1,225, ,410,000 5,639,325 13,350,000 14,360,637-1,150, ,875,000 4,125,625 5,065,000 11,928, ,775,000 2,178,375 3,050,000 11,232, ,155, ,375 10,935,000 9,852, ,085,000 6,026, ,430,000 1,607, Total $ 1,915,000 $ 91,463 $ 31,850,000 $ 24,786,350 $ 84,680,000 $ 87,075,351 $ 1,100,250 $ 3,355,000 Non-District Obligation: During October 1996, the District issued the following debt, for which the District is acting as an agent for the property owners and bondholders; accordingly, unpaid principal balances on June 30, 2015 and 2014 are not included in the District's financial statements. During the fiscal years ended June 30, 2015 and 2014, bonds in the amounts of $20,000 and $25,000 respectively were repaid: Issue Due Interest Authorized Outstanding Outstanding Date Serially Rates And Issued June 30, 2015 June 30, 2014 Limited obligation bonds: Wolfback Ridge Assessment District 10/3/96 9/2/ % % $ 996,920 $ 325,000 $ 345, EMPLOYEE RETIREMENT PLANS A. Pension Plans I. General Information about the Pension Plans Plan Descriptions All qualified permanent and probationary employees are eligible to participate in the District s Miscellaneous Plans, agent multiple-employer defined benefit pension plans administered by the California Public Employees Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and Local Government resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. 37

137 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and EMPLOYEE RETIREMENT PLANS, Continued I. General Information about the Pension Plans, Continued Benefits Provided CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees Retirement Law. The Plans provisions and benefits in effect at June 30, 2015, are summarized as follows: Miscellaneous Benefit vesting schedule 5 years of service Benefit payments monthly for life Earliest retirement age 50 Benefit factor for each year of service as a % of annual salary 2.7% at age 55 Required employee contribution rates 7.5% Required employer contribution rates % On January 1, 2013, the Public Employee Pension Reform Act (PEPRA) went into effect. This State law applies to employees hired after January 1, 2013 who are new to PERS. These employees are termed PEPRA members and employees that were enrolled in PERS (without significant separation) prior to January 1, 2013 are now referred to as classic members. PEPRA miscellaneous members will be enrolled in a 2% at 62 plan. PEPRA members will be required to pay half the normal cost of their plans. Employees Covered At June 30, 2015, the following employees were covered by the benefit terms for each Plan: Miscellaneous Inactive employees or beneficiaries currently receiving benefits 289 Inactive employees entitled to but not yet receiving benefits 97 Active employees 227 Total

138 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and EMPLOYEE RETIREMENT PLANS, Continued I. General Information about the Pension Plans, Continued Contributions Section 20814(C) of the California Public Employees Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 th by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with additional amount to finance any unfunded accrued liability. The District is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the measurement period ended June 30, 2014 (the measurement date), the average active employee contribution rate is percent of annual pay for the Miscellaneous Plan, and employer contribution rate is percent of annual payroll for the Miscellaneous Plan. II. Net Pension Liability The District s net pension liability for each Plan is measured as the total pension liability, less the pension plan s fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2014, using an annual actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Actuarial Assumptions The total pension liabilities in the June 30, 2013 actuarial valuations were determined using the following actuarial assumptions: Miscellaneous Valuation Date June 30, 2013 Measurement Date June 30, 2014 Actuarial Cost Method Entry-Age Normal Cost Method Actuarial Assumptions: Discount Rate 7.50% Inflation 2.75% Salary Increases Varies by Entry Age and Service Investment Rate of Return (1) 7.50% Derived using CalPERS' Membership Data Mortality (2) for all Funds Post Retirement Benefit Increase Protection Allowance Floor on Purchasing Power applies, 2.75% thereafter (1) Net of pension plan investment and administrative expenses, including inflation. (2) The mortality table used was developed based on CalPERS' specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. 39

139 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and EMPLOYEE RETIREMENT PLANS, Continued II. Net Pension Liability, Continued The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2013 valuation were based on the results of a January 2014 actuarial experience study for the period 1997 to Further details of the Experience Study can be found on the CalPERS website. Discount Rate The discount rate used to measure the total pension liability was 7.50% for each Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.50 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.50 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website. According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher Total Pension Liability and Net Pension Liability. CalPERS checked the materiality threshold for the difference in calculation and did not find it to be a material difference. CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management (ALM) review cycle that is scheduled to be completed in February Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as it has changed its methodology. The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. 40

140 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and EMPLOYEE RETIREMENT PLANS, Continued II. Net Pension Liability, Continued The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses. New Strategic Real Return Real Return Asset Class Allocation Years 1-10(a) Years 11+(b) Global Equity 47.00% 5.25% 5.71% Global Fixed Income 19.00% 0.99% 2.43% Inflation Sensitive 6.00% 0.45% 3.36% Private Equity 12.00% 6.83% 6.95% Real Estate 11.00% 4.50% 5.13% Infrastructure and Forestland 3.00% 4.50% 5.09% Liquidity 2.00% -0.55% -1.05% Total 100% (a) An expected inflation of 2.5% used for this period. (b) An expected inflation of 3.0% used for this period. 41

141 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and EMPLOYEE RETIREMENT PLANS, Continued III. Changes in the Net Pension Liability The changes in the Net Pension Liability for the Plan follows: Miscellaneous Plan: Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) Balance at June 30, 2014 (1) $ 201,686,269 $ 129,316,806 $ 72,369,463 Changes in the year: Service cost 3,643,451-3,643,451 Interest on the total pension liability 14,880,788-14,880,788 Differences between actual and expected experience Changes in assumptions Changes in benefit terms Contribution - employer - 4,633,745 (4,633,745) Contribution - employee - 1,909,494 (1,909,494) Net investment income - 22,211,386 (22,211,386) Administrative expenses Benefit payments, including refunds of employee contributions (10,194,990) (10,194,990) - Net changes 8,329,249 18,559,635 (10,230,386) Balance at June 30, 2015 $ 210,015,518 $ 147,876,441 $ 62,139,077 (1) The fiduciary net position includes receivables for employee service buyback, deficiency reserve, and fiduciary self-insurance. Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the District for each Plan, calculated using the discount rate for each Plan, as well as what the District s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate: Miscellaneous 1% Decrease 6.50% Net Pension Liability $ 87,637,727 Current Discount Rate 7.5% Net Pension Liability $ 62,139,077 1% Increase 8.5% Net Pension Liability $ 40,725,228 42

142 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and EMPLOYEE RETIREMENT PLANS, Continued III. Changes in the Net Pension Liability, Continued Pension Plan Fiduciary Net Position Detailed information about each pension plan s fiduciary net position is available in the separately issued CalPERS financial reports. IV. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2015, the District recognized pension expense of $4,560,144. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Pension contributions subsequent to measurement date $ 5,315,722 Net differences between projected and actual earnings on plan investments $ 10,156,785 Total $ 5,315,722 $ 10,156,785 $5,315,722 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Measurement Period Ending June 30: Deferred Outflows/(Inflows) of Resources 2016 $ 2,539, ,539, ,539, ,539,196 V. Payable to Pension Plans As of June 30, 2015, the District reported a payable of $310,718 for the outstanding amount of contributions to the pension plans required for the year ended June 30, DEFERRED COMPENSATION PLAN The District offers its employees a 457 deferred compensation plan which assets are invested by independent third party custodians. The assets are not subject to claims by creditors of the District and are not reflected in the accompanying financial statements. 43

143 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS In FYE 2009, the District implemented Governmental Accounting Standards Board Statements No. 45, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions by State and Local Governmental Employers (GASB 45). A. Plan Description The District provides retiree medical insurance and dental benefits to eligible retirees and a dependent in accordance with various labor agreements. Medical insurance benefits are provided under the CalPERS health plan. Dental benefits are provided by a private insurance carrier. B. Eligibility The District provides medical and dental benefits to employees if they retire from the District on or after age 50 (unless disabled), and are eligible for a CalPERS pension. The medical benefits cover the employee and their one dependent from retirement date for life. The employee and their one dependent receive dental coverage from retirement until the employee reaches age 65. Employees are not obligated to contribute unless plan costs exceed the District's maximum contribution. For health insurance, the District pays the cost for the health insurance premium up to the cost for the retiree plus one dependent. Medicare Supplemental insurance coverage is used when a plan participant reaches age 65. For dental coverage, the District pays the entire cost of the dental insurance until the retiree reaches age 65. The retiree at age 65 may elect to continue coverage for themselves plus a dependent at their own cost. 44

144 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS, Continued C. Funding Policy The contribution requirement of plan members and the District are established and may be amended by agreement between the District and its collective bargaining units. The District must agree to make a defined monthly payment towards the cost of each retiree's medical and dental coverage. The required contribution is based on an amount established by the District annually. Effective January 1, 2015, the District's contribution rate for medical coverage was up to $ and $1, per month for retiree and retiree plus one dependent, respectively. For dental coverage the annual contribution amount is up to $1,500 and $3,000 for retiree and retiree plus one dependent, respectively. Actual contributions by the District for each retiree for medical and dental benefits vary depending on medical plan coverage and actual dental costs. The District's contribution requirements for the plan provides for annual contributions authorized by the District's board of directors. The required contribution rate is based on the annual required contribution (ARC), an amount that is actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) of the District's plan over a period not to exceed thirty years. The ARC rate is 18% and 17.0% in FY 2015 and FY 2014, respectively. D. Annual OPEB Cost and Net OPEB Obligation For the years ended June 30, 2015 and 2014, the District's annual OPEB costs (expenses) of $3,817,000 and $4,153,000, was equal to the ARC plus the accrued interest on prior OPEB liabilities. Actual contributions were based on the actuarial projection for the year. The District's net OPEB obligations as of and for the fiscal year June 30, 2015 and 2014 were as follows: Net OPEB obligation as of June 30, 2013 $ - Annual required contribution 4,153,000 Annual OPEB costs 4,153,000 Contributions made (4,153,000) Increase in net OPEB obligation - Net OPEB obligation as of June 30, 2014 $ - Annual required contribution 3,817,000 Annual OPEB costs 3,817,000 Contributions made (3,817,000) Increase in net OPEB obligation - Net OPEB obligation as of June 30, 2015 $ - 45

145 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS, Continued D. Annual OPEB Cost and Net OPEB Obligation, Continued The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB obligation for the current fiscal year and each of the two preceding years are as follows: Percentage of Annual Annual OPEB Cost Net OPEB Fiscal Year OPEB Cost Contributed Obligation/(Asset) 6/30/2013 4,051, % - 6/30/2014 4,153, % - 6/30/2015 3,817, % - E. Funded Status and Funding Progress As of June 30, 2012, the most recent actuarial valuation date, the plan was not fully funded. The actuarial accrued liability for benefits was $42,419,000, and the actuarial value of assets was $9,028,000, resulting in an unfunded actuarial accrued liability (UAAL) of $33,391,000. The covered payroll (annual payroll of active employees covered by the plan) was $21,231,000, and the ratio of the UAAL to the covered payroll was 157%. For the years ended June 30, 2015 and 2014, $1,855,000 and $2,184,000 respectively were contributed to an irrevocable trust established with CalPERS to temporarily hold funds in anticipation of unfunded future retiree benefits. The contribution amounts in FY13/14 and FY 14/15 were not reflected in the actuarial calculation as of June 30, 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 the healthcare cost trend. 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 that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. 46

146 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS, Continued F. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the District and 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 District and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the June 30, 2012, actuarial valuation, the entry age level percentage of payroll method was used. The actuarial assumptions included a 7.5% investment rate of return, (net of administrative expenses), which is based upon the expected rate of return on the CalPERS California Employers' Retiree Benefit Trust Fund (CERBT); an annual healthcare cost trend rate of 8.9% initially, graded down by decrements to an ultimate rate of 5% percent after 7 years; and a 4% dental cost trend rate. These rates include an inflation assumption of 2.75% and projected payroll increases of 3%. The UAAL is being amortized as a level percentage of payroll on a closed basis. The remaining amortization period at June 30, 2015 was 28 years. 9. OTHER INCOME/CAPITAL CONTRIBUTIONS Other income and capital contributions are comprised of the following for the years ending June 30: Other income: Rents and royalties $ 1,619,503 $ 1,754,808 Net gain (loss) on sale of assets (446,528) (170,023) Total other income $ 1,172,975 $ 1,584,785 Capital contributions: Fire flow parcel fee $ 4,511,604 $ 4,524,178 Contributions in aid of construction 1,236,579 1,339,395 Total capital contributions $ 5,748,183 $ 5,863,573 47

147 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and COMMITMENTS AND CONTINGENCIES Capital Budget The District's fiscal 2015 capital budget is approximately $23.5 million of which approximately $1,880,000 is anticipated to be reimbursed to the District by contractors, users and grants. Commitments As of June 30, 2015, the District has $3,944,475 of outstanding construction contracts and purchase orders. This is the amount that the District will be obligated to pay if all contractors and vendors perform per their contract or commitments. The District could substantially reduce the amount of this commitment by notifying contractors to suspend further work and paying for work completed to that point. Legal Matters The District is a defendant in a number of lawsuits and claims pending at June 30, Based on correspondence with the District's legal counsel, it is the opinion of District management that unfavorable outcomes are unlikely and that the settlement of such pending cases would not have a material adverse effect on the District's financial position. Accordingly, no provision for any liability that may result from adjudication has been made in the accompanying financial statements. Grants The District participates in several federal and state grant programs. These programs are subject to examination by the grantors and the amount, if any, of expenses which may be disallowed by the granting agency cannot be determined at this time. The District expects such amounts, if any, to be immaterial. Joint Power Agreement The District participates in a joint powers agreement through the Marin Emergency Radio Authority ("MERA") under an operating agreement dated February 1, MERA was created July 1, 1997 by an agreement between certain public agencies in Marin County to provide a public safety radio system, which is owned by MERA, to its members. The members have agreed to assign a portion of their revenues to make annual payments to MERA on a pro rata basis to cover the costs of debt financing and operating the system. The District's annual payments related to the debt financing and to fund operations are recorded as an expense. The future payments required for the fiscal years ending after June 30, 2015 are as follows: , , , , ,670 Total $ 122,031 48

148 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and COMMITMENTS AND CONTINGENCIES, Continued Joint Power Agreement, Continued Summarized audited financial information for the Marin Emergency Radio Authority as of June 30, 2014 is shown below. Total assets & deferred outflows of resources $ 17,132,405 Total liabilities 16,314,651 Total net position 817,754 Total operating revenues 1,651,432 Total operating expenses 5,237,503 Total non-operating revenues & expenses 1,841,657 Decrease in net position $ 1,744,414 49

149 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and RISK MANAGEMENT The District is exposed to various risks of loss related to workers' compensation and general liability. It is the policy of the District not to purchase commercial insurance for risk of losses to which it is exposed for general and auto liability. Instead, District management believes it is more economical to manage this risk internally and set aside assets for claim settlements. However, the District carries excess liability insurance for losses in excess of $250,000, not to exceed $10,000,000 on a per occurrence basis. Settled claims have never exceeded the District's policy limits in any fiscal year. The District is self-insured for workers' compensation, and has purchased an umbrella policy to cover catastrophic losses. The policy has a self-insured retention of $750,000 per occurrence with a maximum limit of indemnity per occurrence of $25,000,000. Claim liabilities are recorded when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported. Because actual claim liabilities depend on such complex factors as inflation, changes in legal doctrines, and damage awards, the process used in computing claim liabilities does not necessarily result in an exact amount. Claim liabilities are reevaluated periodically to take into consideration recently settled claims, the frequency of claims, and other economic and social factors. These liabilities are the District's best estimate based on available information. Changes in the reported liabilities for the years ended June 30, 2015 and 2014 resulted from the following: Workers Compensation General Liabilities Total Workers Compensation General Liabilities Total Balance at the beginning of year $ 2,987,000 $ 807,895 $ 3,794,895 $ 3,148,058 $ 548,655 $ 3,696,713 Current year claims and changes in estimate 458, , , , , ,259 Claims payments (296,981) (550,156) (847,137) (415,235) (528,198) (943,433) Balance at the end of year $ 3,148,058 $ 548,655 $ 3,696,713 $ 3,289,000 $ 218,539 $ 3,507,539 Due within one year $ 479,613 $ 474,573 $ 954,186 $ 484,104 $ 341,381 $ 825,485 50

150 Marin Municipal Water District Notes to Basic Financial Statements, Continued For the years ended June 30, 2015 and COMPENSATED ABSENCES The District records a liability to recognize the financial effect of unused vacation and other compensated absences. Changes in the reported liabilities for the years ended June 30, 2015 and 2014 resulted from the following: Balance 2014 Balance 2015 Balance Due Within June 30, 2013 Additions Reductions June 30, 2014 Additions Reductions June 30, 2015 One Year Compensated Absences $ 4,697,426 $ 3,274,197 $ (2,661,160) $ 5,310,462 $ 3,311,318 $ (3,229,880) $ 5,391,899 $ 3,292,028 Total $ 4,697,426 $ 3,274,197 $ (2,661,160) $ 5,310,462 $ 3,311,318 $ (3,229,880) $ 5,391,899 $ 3,292, PRIOR PERIOD ADJUSTMENT The District recorded prior period adjustments to record the beginning balance of the net pension liability, and to record employer contributions made for pension in fiscal year 2014 as a deferred outflow of resources. Net Position, as Previously Deferred Employer Net Pension Net Position Reported Pension Contributions Liability as Restated Business-Type Activities $ 313,696,520 $ 4,633,745 $ (72,369,463) $ 245,960,802 Total $ 313,696,520 $ 4,633,745 $ (72,369,463) $ 245,960,802 51

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152 REQUIRED SUPPLEMENTARY INFORMATION 53

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154 Marin Municipal Water District Required Supplementary Information For the years ended June 30, 2015 and DEFINED BENEFIT PENSION PLANS A. Schedule of Changes in Net Pension Liability and Related Ratios During the Measurement Period Miscellaneous Plan Measurement Period (1) TOTAL PENSION LIABILITY Service Cost $ 3,643,451 Interest 14,880,788 Changes of Benefit Terms - Difference Between Expected and Actual Experience - Changes of Assumptions - Benefit Payments, Including Refunds of Employee Contributions (10,194,990) Net Change in Total Pension Liability 8,329,249 Total Pension Liability - Beginning 201,686,269 Total Pension Liability - Ending (a) $ 210,015,518 PLAN FIDUCIARY NET POSITION Contributions - Employer $ 4,633,745 Contributions - Employee 1,909,494 Net Investment Income (2) 22,211,386 Benefit Payments, Including Refunds of Employee Contributions (10,194,990) Other Changes in Fiduciary Net Position - Net Change in Fiduciary Net Position 18,559,635 Plan Fiduciary Net Position - Beginning 129,316,806 Plan Fiduciary Net Position - Ending (b) $ 147,876,441 Plan Net Position Liability/(Asset) - Ending (a) - (b) $ 62,139,077 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 70.41% Covered-Employee Payroll $ 20,899,731 Plan Net Pension Liability/(Asset) as a Percentage of Covered-Employee Payroll % (1) Historical information is required only for measurement periods for which GASB 68 is applicable. (2) Net of administrative expenses. Notes to Schedules Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a Golden Handshakes). Changes of Assumptions: There were no changes in assumptions. 55

155 Marin Municipal Water District Required Supplementary Information For the years ended June 30, 2015 and DEFINED BENEFIT PENSION PLANS, Continued B. Schedule of Plan Contributions Miscellaneous Plan Fiscal Year Actuarially determined contribution $ 5,315,722 Contribution in relation to the actuarially determined contributions (5,315,722) Contribtion deficiency (excess) $ - Covered-emplyee payroll $ 22,784,797 Contributions as a percentage of covered-employee payroll 23.33% Notes to Schedules The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year were from the June 30, 2012 public agency valuations. Miscellaneous Plan Actuarial cost method Entry Age Normal Amortization method Level percentage of payroll Remaining amortization period 28 Years as of valuation date Asset valuation method 15-year smoothed market Inflation 2.75% Salary increases Varies by Entry Age and Service Payroll Growth 3.00% Investment rate of return Retirement age 7.50%, net of pension plan investment expense, including inflation The probabilities of Retirement are based on the 2010 CalPERS Experience Study for the period from 1997 to Mortality The probabilities of mortality are based on the 2010 CalPERS Experience Study for the period from 1997 to Preretirement and Post-retirement mortality rates include 5 years of projected mortality improvement using Scale AA published by the Society of Actuaries. 56

156 Marin Municipal Water District Required Supplementary Information For the years ended June 30, 2015 and OTHER POSTEMPLOYMENT BENEFIT PLAN SCHEDULE OF FUNDING PROGRESS The table below, which is from the latest available actuarial valuation, shows a three-year analysis of the actuarial value of assets as a percentage of the actuarial accrued liability and the funded status of the accrued liability as a percentage of the annual covered payroll for the District s contribution to OPEB as of June 30: Funded Status of Plan Entry Age Actuarial Liability as Actuarial Actuarial Actuarial Unfunded Percentage of Valuation Value of Accrued (Overfunded) Funded Covered Covered Date Assets Liability Liability Ratio Payroll Payroll 6/30/2009 $ - $ 30,211,000 $ 30,211, % $ 21,593, % 6/30/2010 4,725,000 38,989,000 34,264, % 22,385, % 6/30/2012 9,028,000 42,419,000 33,391, % 21,231, % 57

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158 OTHER SUPPLEMENTARY INFORMATION 59

159 Marin Muncipal Water District Statement of Changes in Fiduciary Assets and Liabilities Agency Fund For the year ended June 30, 2015 Wolfback Ridge Assessment District Balance Balance July 1, 2014 Additions Deductions June 30, 2015 Assets: Cash and investments $ 211,438 $ 92,200 $ 47,877 $ 255,761 Total assets $ 211,438 $ 92,200 $ 47,877 $ 255,761 Liabilities: Deposits and Advances $ 211,438 $ 92,200 $ 47,877 $ 255,761 Total liabilities $ 211,438 $ 92,200 $ 47,877 $ 255,761 60

160 STATISTICAL SECTION

161 MARIN MUNICIPAL WATER DISTRICT Statistical Section This part of Marin Municipal Water District s comprehensive annual financial statement report presents detailed information as a context for understanding what the information in the financial statement, note disclosures, and required supplementary information says about the District s overall financial health. Index Page Financial Trends These schedules contain trend information to help the reader understand how the District s 63 financial performance and well being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the District s most significant 67 local revenues source, the water revenues. Debt Capacity These schedules present information to help the reader assess the affordability of the District s 71 current level of outstanding debt and the District s financial activities take place. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand 73 the environment within which the District s financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the 75 information in the District s financial report relates to the services the District provides and the activities it performs. 61

162 Marin Municipal Water District Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2015 Statistical Section Table of Content Page Financial Trends: Net Position Last Ten Fiscal Years 63 Changes in Net Position Last Ten Fiscal Years 65 Revenue by Source Last Ten Fiscal Years 66 Revenue Capacity: Ten Year Summary of Water Rates Bimonthly Readings and Billings 67 Ten Year Summary of Water Sales by Category 68 Largest Distribution Water Revenue Accounts 69 Fire Flow Parcel Fee Program 70 Debt Capacity: Net Revenues and Debt Service Coverage Last Ten Fiscal Years 71 Ten Year Summary of Outstanding Debt 72 Demographic and Economic Information: Demographic and Economic Statistics 73 Principal Employers in County of Marin 74 Operating Information: Full Time Employees by Function 75 Ten Year Summary of Utility Plant and Accumulated Depreciation 76 Ten Year Summary of Water Production by Water Supply Sources 77 Ten Year Summary of Water Demand 78 Miscellaneous Statistics 79 62

163 Marin Municipal Water District TEN YEAR SUMMARY OF REVENUES, EXPENSES BY FUNCTION AND RATE INCREASES Year ended June 30, OPERATING REVENUES: Water sales and service charges $ 42,751,689 $ 47,022,277 $ 49,151,241 $ 50,802,203 $ 50,111,192 $ 53,969,373 $ 57,277,794 $ 64,930,689 $ 64,677,493 $ 57,117,530 Connection charges 1,317,566 2,404,381 1,371,798 2,748,427 1,311,139 1,009,829 1,034, ,597 1,705, ,356 Other operating revenue 491,917 1,489,844 1,949, ,306 1,727,948 1,300,208 1,106,286 1,003,823 1,351,687 1,154,210 Total operating revenues 44,561,172 50,916,502 52,472,384 54,549,936 53,150,279 56,279,410 59,418,736 66,672,109 67,734,729 59,241,096 OPERATING EXPENSES: Water Purchases 4,122,824 4,403,617 4,644,304 4,912,997 5,617,017 4,960,870 5,419,232 5,606,167 7,437,740 6,720,104 Watershed Maintenance 3,057,828 3,273,313 3,125,209 3,245,397 3,718,014 3,310,471 3,595,992 4,259,670 4,632,367 5,206,134 Water treatment 5,497,033 5,429,841 5,879,008 6,517,390 6,604,356 6,736,995 6,548,344 6,721,730 6,657,304 7,070,203 Pumping 2,402,711 2,602,698 2,885,435 2,810,450 2,755,879 2,382,117 2,482,649 2,650,674 2,955,530 2,742,815 Transmission and distribution 10,563,060 10,487,676 10,002,424 11,066,171 10,178,125 10,077,643 9,537,758 10,360,869 10,682,167 12,568,990 Customer service and meter operation 2,098,053 1,999,286 2,203,839 2,652,404 2,399,933 2,430,379 2,580,350 2,567,618 2,734,368 2,796,058 Water Conservation 1,178,494 1,413,590 1,976,548 2,363,591 2,431,791 1,861,704 1,439,227 1,285,842 1,925,266 2,238,765 Administrative and general 12,590,419 12,825,302 12,781,180 15,546,768 13,439,062 13,991,401 14,634,047 15,453,350 17,395,404 14,894,201 Depreciation and amortization 8,028,204 8,073,345 8,723,817 9,384,921 10,350,791 10,480,987 10,506,699 10,935,168 11,324,138 10,776,549 Total operating expenses 49,538,626 50,508,668 52,221,764 58,500,089 57,494,968 56,232,567 56,744,298 59,841,088 65,744,284 65,013,819 NONOPERATING REVENUES (EXPENSES): Federal, state and other grants 705,957 1,331, ,276 1,487, , , ,079 1,113,955 1,137, ,443 Investment income (loss) (1,094,893) 802, ,149 (560,702) (52,176) 75,634 88,242 75,509 69,251 4,630 Interest income 2,698,064 2,488,169 2,134,914 1,380, , , , , , ,393 Other income 1,292,644 1,126,356 1,262,289 1,178,798 1,520,928 1,407,414 1,590,443 1,744,362 1,584,785 1,172,975 Interest expense (2,923,885) (2,857,380) (2,707,312) (2,574,404) (2,399,793) (3,887,448) (3,730,202) (4,090,263) (4,686,280) (4,465,063) Total nonoperating revenues (expenses), net 677,887 2,890,597 1,930, ,588 5,847 (1,844,546) (1,191,101) (1,024,176) (1,747,859) (2,250,622) Captial contributions 6,047,444 5,302,034 6,086,208 5,098,404 6,147,539 5,184,421 4,880,159 4,903,701 5,863,573 5,748,183 Increase in Net Positions (2) $ 1,747,877 $ 8,600,465 $ 8,267,144 $ 2,059,839 $ 1,808,697 $ 3,386,718 $ 6,363,496 $ 10,710,546 $ 6,106,159 $ (2,275,162) % Water rate increase * Number of Employees (1) * Rate increased on July 5, 2009 and March 1, 2010 (1) The number represents filled positions only (2) Implemented GASB 68 requirement for pension liability in FY

164 Marin Municipal Water District TEN YEAR SUMMARY OF REVENUES, EXPENSES AND CHANGES IN NET POSITION Year ended June 30, OPERATING REVENUES: Water sales and service charges $ 42,751,689 $ 47,022,277 $ 49,151,241 $ 50,802,203 $ 50,111,192 $ 53,969,373 $ 57,277,794 $ 64,930,689 $ 64,677,493 $ 57,117,530 Connection charges 1,317,566 2,404,381 1,371,798 2,748,427 1,311,139 1,009,829 1,034, ,597 1,705, ,356 Other operating revenue 491,917 1,489,844 1,949, ,306 1,727,948 1,300,208 1,106,286 1,003,823 1,351,687 1,154,210 Total operating revenues 44,561,172 50,916,502 52,472,384 54,549,936 53,150,279 56,279,410 59,418,736 66,672,109 67,734,729 59,241,096 OPERATING EXPENSES: Personnel services 26,991,961 26,766,178 28,007,711 32,570,801 29,857,987 30,042,858 29,685,634 31,077,225 33,237,254 34,245,965 Materials and supplies 2,324,291 2,212,118 2,191,405 2,849,991 2,195,723 2,062,044 2,194,427 2,413,999 2,331,826 2,173,853 Operations 3,185,953 3,579,822 3,281,367 3,894,330 2,220,017 2,042,623 2,410,100 3,713,314 4,006,611 4,238,295 Water conservation rebate program 304, , , , ,202 94,634 1, , ,563 Electrical power 2,761,737 2,991,607 3,316,592 3,230,402 3,167,677 2,738,066 2,853,620 3,046,751 3,397,161 3,152,661 Water purchased 4,122,824 4,403,617 4,644,304 4,912,997 5,617,017 4,960,870 5,419,232 5,606,167 7,437,740 6,720,104 Insurance, including claims 1,237,562 1,466,562 1,389,867 1,236,816 1,313,605 1,896,908 1,760,577 1,053,329 1,310,545 1,141,719 General and administrative 2,023,752 2,436,332 2,331,121 2,313,539 2,029,949 1,913,577 1,912,834 1,994,710 2,566,990 2,327,110 Depreciation and amortization 8,028,204 8,073,345 8,723,817 9,384,921 10,350,791 10,480,987 10,506,699 10,935,168 11,324,138 10,776,549 Research and development 897, , , Indirect costs capitalized (2,340,029) (2,501,785) (2,575,500) (2,694,596) Total operating expenses 49,538,626 50,508,668 52,221,764 58,500,089 57,494,968 56,232,567 56,744,298 59,841,088 65,744,284 65,013,819 NONOPERATING REVENUES (EXPENSES): Federal, state and other grants 705,957 1,331, ,276 1,487, , , ,079 1,113,955 1,137, ,443 Investment income (loss) (1,094,893) 802, ,149 (560,702) (52,176) 75,634 88,242 75,509 69,251 4,630 Interest income 2,698,064 2,488,169 2,134,914 1,380, , , , , , ,393 Other income 1,292,644 1,126,356 1,262,289 1,178,798 1,520,928 1,407,414 1,590,443 1,744,362 1,584,785 1,172,975 Interest expense (2,923,885) (2,857,380) (2,707,312) (2,574,404) (2,399,793) (3,887,448) (3,730,202) (4,090,263) (4,686,280) (4,465,063) Total nonoperating revenues (expenses), net 677,887 2,890,597 1,930, ,588 5,847 (1,844,546) (1,191,101) (1,024,176) (1,747,859) (2,250,622) Captial contributions 6,047,444 5,302,034 6,086,208 5,098,404 6,147,539 5,184,421 4,880,159 4,903,701 5,863,573 5,748,183 Increase in Net Positions $ 1,747,877 $ 8,600,465 $ 8,267,144 $ 2,059,839 $ 1,808,697 $ 3,386,718 $ 6,363,496 $ 10,710,546 $ 6,106,159 $ (2,275,162) 64

165 MARIN MUNICIPAL WATER DISTRICT TEN YEAR SUMMARY OF NET POSITION Year ended June 30, NET POSITION: Net investment in capital assets $ 200,508,973 $ 211,986,804 $ 227,155,224 $ 243,945,226 $ 273,838,602 $ 273,186,687 $ 262,581,208 $ 266,939,799 $ 265,964,474 $ 263,879,191 Restricted for Fire Flow Parcel Fee Program 10,460,439 7,649,780 8,263,843 6,845,171 3,999,728 3,855,977 4,684,736 2,483,468 1,736,460 1,939,529 Unrestricted 54,307,323 54,240,616 46,725,277 34,169,438 8,930,201 13,112,586 29,252,802 38,167,094 45,995,586 (22,133,080) TOTAL NET POSITION $ 265,276,735 $ 273,877,200 $ 282,144,344 $ 284,959,835 $ 286,768,531 $ 290,155,250 $ 296,518,746 $ 307,590,361 $ 313,696,520 $ 243,685,640 Millions $350 $300 $250 $200 $150 $100 $50 $ $(50) Net Investment in Capital Assets Restricted for Debt Service Unrestricted 65

166 MARIN MUNICIPAL WATER DISTRICT REVENUE BY SOURCE LAST TEN FISCAL YEARS Year Ended Service Connection Interest Fire Flow June 30, Total Water Sales Charge Charges Income Parcel Fee Other 2006 $ 54,210,388 35,288,474 7,463,215 1,317,566 2,698,064 4,501,377 2,941, $ 61,966,512 39,462,839 7,559,438 2,404,381 2,488,169 4,507,996 5,543, $ 63,196,220 41,305,864 7,845,377 1,371,798 2,134,914 4,510,433 6,027, $ 63,134,332 42,628,226 8,173,977 2,748,427 1,380,137 4,502,860 3,700, $ 61,703,450 41,557,677 8,553,515 1,311, ,623 4,467,137 5,373, $ 63,506,733 45,101,916 8,867,457 1,009, ,886 4,483,662 3,805, $ 66,837,996 48,069,979 9,207,815 1,034, ,337 4,523,329 3,877, $ 74,641,897 55,125,168 9,805, , ,261 4,540,389 4,300, $ 76,536,722 54,840,298 9,837,195 1,705, ,055 4,524,178 5,482, $ 67,203,721 47,239,262 9,878, , ,393 4,511,604 4,433,838 Millions Other Fire Flow Parcel Fee Interest Income Connection Fee Service Charge Water Sales

167 MARIN MUNICIPAL WATER DISTRICT TEN YEAR SUMMARY OF WATER RATES BIMONTHLY READINGS AND BILLINGS Year ended June 30, FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 Effective Date 1/1/2004 5/1/2007 5/1/2008 5/1/2008 7/5/2009 3/1/2010 6/1/2011 5/1/2012 5/1/2012 5/1/2012 5/1/2012 Single-Family Residential. Tier 1 $ 2.43 $ 2.52 $ 2.81 $ 2.81 $ 3.04 $ 3.39 $ 3.53 $ 3.74 $ 3.74 $ 3.74 $ 3.74 Tier Tier Tier Duplex Residential Tier Tier Tier Tier Multi-Unit Residential Tier Tier Tier Tier Business, Institutional and Irrigation Tier Tier Tier Raw Water Tier Tier Tier Recycled Water Tier Tier Tier Bimonthly Service Charges by meter size 5/8" /4" " " " " " " " " 1, , , , , , , , , , ,

168 MARIN MUNICIPAL WATER DISTRICT TEN YEAR SUMMARY OF WATER SALES BY CATEGORY Year ended June 30, (dollars in thousands) Treated Recycled Raw Fiscal Year Water Sales Water Sales Water Sales Total , , , , , , , , , , , , , , ,536 1, , , , , ,239 60,000 50,000 (dollars in thousands) 40,000 30,000 20,000 10, Treated Water Sales Recycled Water Sales Raw Water Sales 68