2 0 Annual Report 1 7

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1 2 0 Annual Report 1 7

2 Our Mission Since To Define, Develop, And Implement Cost-Effective Plans And Programs For Solid Waste Management Which Best Serve Delaware And Protect Our Public Health And Environment. 1 Annual Report 2017

3 CONTENTS Chairman s Letter...3 Board of Directors...4 CEO s Review...5 Recycling Diversion Rates in Delaware...7 DSWA Recycling...8 Landfill Gas Utilization... 9 Facility Recyclable Quantities...10 Electronics Recycling...11 Document Shredding...12 Household Hazardous Waste Collection...13 Financial Statements

4 Chairman s Letter It is with great pleasure that I am able to reflect on 2017 and the great strides DSWA continues to make in order to stay true to its mission of providing plans and programs that best serve the solid waste management needs for the residents of Delaware. In 2017, DSWA was able to offer lower tipping fees to all of the businesses, municipalities and government agencies who signed a 5-year contract; agreeing to bring all the waste they collect to DSWA facilities. This act insures steady and predictable revenue streams which allow the DSWA to run the many programs and services it provides for Delaware. The Board of Directors is proud of the hard work DSWA employees have put in to become proficient in reducing operating costs to make this happen. One of the greatest undertakings for 2017 was the revitalization of the recycling drop-off program. The DSWA management team took a close, resolute look at the program to determine the most cost effective and responsible way to revamp the program. Staff had to find a way to eliminate the historically heavy contamination of recyclables being collected. Although it was a hard decision the Board agreed with staff s recommendation to reduce the number of centers. The remaining centers would be centralized and manned to provide an increase in the level of service for our customers. These improvements were implemented while allowing the recycling drop-off program to continue to be cost free to Delaware residents. I continue to be a proud member of your DSWA Board of Directors. Speaking for my Board member colleagues I continue to be so very impressed with the DSWA staff and their dedication to providing the best service and experience to all Delawareans. I hope as you read through this report that you will be able to see the hard work and dedication that runs through DSWA on all levels. Gerard L. Esposito, Chairman of the Board 3 Annual Report 2017

5 Board of Directors Ronald G. McCabe Vice Chairman Timothy P. Sheldon Norman D. Griffiths Tonda L. Parks Michael R. Paraskewich, Jr., Ph.D, P.E. William J. Strickland The Board of Directors consists of seven members all working towards the mission of the Delaware Solid Waste Authority (DSWA). The Board of Directors takes this mission very seriously and is always looking for ways to improve within the organization. They set policies and make decisions regarding current operations, programs, and planning. All board members are appointed by the Governor and confirmed by the Senate for three-year terms and the Chairman serves at the pleasure of the Governor. Board members serve voluntarily and without pay. All members are Delaware residents and take an active role in their local communities and charity organizations. They are also active within DSWA by visiting DSWA facilities and attending events. The Board of Directors realizes the importance of these events in getting information about DSWA s facilities and programs out to the public. 4

6 CEO s Review Fiscal Year 2017 (July 1, 2016 June 30, 2017) was the beginning of a new chapter in Delaware Solid Waste Authority s (DSWA) history. It was our first full year under the new 5-year Discount Disposal Fee (DDF) contract system and the revision to DSWA s Regulations requiring solid waste (excluding construction and demolition waste) generated in Delaware to be brought to DSWA facilities. The new 5-year DDF contract substantially reduced the net amount a customer pays to use DSWA facilities compared to the prior DDF contract. FY2017 FY2016 Reduction Landfills $65.00/ton $80.50/ton 19% Transfer Stations $75.00/ton $84.50/ton 11% By signing this contract, our customers agree to bring all their Delaware-generated solid waste (excluding construction and demolition waste) to DSWA facilities. They also agree to either commit to bring all their Delaware recyclables to DSWA or provide additional free service such as free hauling of community cleanup event materials. Customers who chose not to sign this contract still saw a four (4) percent decrease in the gate rate from $88.50/ ton in FY2016 to $85.00/ton in FY2017 at DSWA landfills and transfer stations. This substantial reduction in our rates was made possible from our efforts in the past few years to become more efficient, reduce operating costs and from the early redemption of our 2006 Series Revenue Bonds on June 1, The revision to DSWA s Regulation resulted in an estimated two (2) percent increase in solid waste coming to DSWA facilities. In addition, an increase in Delaware s population and a stronger economy resulted in an overall increase in solid waste coming to DSWA of 5.7 percent. Delaware s recycling programs continued to perform very well even in the challenging time of weak markets for the recovered materials. The recycling diversion rate for the State of Delaware as reported by the Recycling Public Advisory Council, increased again in 2016 to 44.5%. DSWA Recycling Drop-Off Centers continued on their transition from numerous unmanned remote sites to manned DSWA properties. FY2017 began with 47 sites and ended with 17 sites, 11 of which were manned. This transition succeeded in reaching its goal of reducing the severe contamination of recyclables that was occurring at unmanned sites, yet still providing a recycling option for persons who self-haul their recyclables. At the height of this Drop-Off Recycling Program there were over 180 centers, that collected over 20,000 tons per year of recyclables. After the implementation of the Universal Recycling Law in 2010 which required all licensed waste haulers to provide customers with both waste and recycling collection services, the need for Drop-Off Centers decreased to 8,249 tons in FY Annual Report 2017

7 Simultaneously, with the transition to manned sites, DSWA made improvements to other programs including household hazardous waste, electronic goods, paper shredding, batteries, oil filters and oil. As part of DSWA s solid waste management planning effort, we performed a Waste Characterization Analysis that measured more than 50 categories of materials received at our facilities to determine the effectiveness of our recycling efforts and the potential opportunities for other materials such as organics to be targeted for recovery. The results will be evaluated and incorporated into our future plans for sustainable materials management. I am proud to be able to lead an extraordinarily knowledgeable, dedicated and motivated staff who enables our organization to provide Delaware with a superior sustainable recycling and solid waste management system that maintains outstanding fiscal responsibility and value while protecting the public health and environment. Richard P. Watson P.E., BCEE Chief Executive Officer 6

8 Recycling Diversion Rates in Delaware Diverted Recyclables (tons) YEAR Landfilled Municipal Solid Waste (MSW) (tons) Total MSW = Diverted Recyclables + Landfilled MSW (tons) PERCENT DIVERTED RECYCLABLES 318, , , , , , , , , , , , , , , , , ,721 1,059, ,990 1,065,515 1,074,492 1,013,492 1,073,962 1,131,132 1,172,421 1,216, % 32.6% 33.7% 37.4% 40.1% 41.9% 41.8% 42.6% 44.5% Source: Recycling Public Advisory Council Annual Report 7 Annual Report 2017

9 DSWA Recycling SINGLE-STREAM RECYCLING FOR FY 2017 TONS RECEIVED Delaware Recycling Center Milford Transfer Station Rt. 5 Transfer Station Total Total Material Received (tons) 86,567 18,395 25, ,955 DROP-OFF CENTER PROGRAM Item/Source Tons Sent To Single-Stream 7,654 Recommunity Motor Oil 510 Heritage-Crystal Clean Oil Filters 37 Heritage-Crystal Clean Textiles 9 Goodwill Household Batteries 40 Inmetco + Call2Recycle Polystyrene Foam 13 Dart Container Totals 8,

10 Landfill Gas Utilization LANDFILL GAS = GREEN ENERGY LFG Beneficially Used Flared Collected Energy Derived from Beneficially Used Gas GHG Reduced (MMSCF) (MMSCF) (MMSCF) (MMBTU) (KwH) a (# homes powered) b (MTCO2E) c NSWMC , ,983 43,673,767 3, ,949 CSWMC ,917 26,917,253 2, ,098 SSWMC ,894 26,134,859 2, ,157 Total 2, ,118 1,090,794 96,725,879 8, ,204 a - estimated value b - determined by USEPA 2014 LMOP LFG Energy Benefits Calculator c - metric tons of carbon dioxide equivalents per year reduced thru LFG collection Landfill gas (LFG) is a product of the decomposition that occurs naturally in a landfill. It contains approximately 50% methane, which is the main component of natural gas. DSWA collects and utilizes the energy capacity of the LFG at all three of our active landfill facilities. In New Castle County the Cherry Island Landfill collects approximately 3,200 cubic feet of LFG per minute. More than half of the LFG collected is utilized by Cummins Power Generation to generate power for the Croda Atlas Point Facility and the City if Wilmington s Wastewater Treatment Plant. In Kent County the Central Solid Waste Management Center (CSWMC) collects approximately 1,400 cubic feet of LFG per minute. In Sussex County the Southern Solid Waste Management Center (SSWMC) collects approximately 1,300 cubic feet of LFG per minute. LFG collected at the CSWMC and SSWMC facilities is utilized by Ameresco Delaware Energy, LLC. Ameresco uses engines to generate electricity for Delaware homes and businesses. Ameresco has 5 MW of energy generating capacity at each facility. LFG is a valuable source of green energy for the State of Delaware. Use of LFG to generate electricity diverts the use of fossil fuel energy sources including coal, natural gas and oil. The carbon dioxide generated from utilizing LFG is considered biogenic, which means that it is carbon neutral so it does not contribute to climate change. LFG is a source of green energy that is available at DSWA facilities. DSWA is committed to continued public/private partnerships that will utilize LFG to produce green energy for Delaware. 9 Annual Report 2017

11 Facility Recyclable Quantities Sent to Market by Material Type-FY 2017 Material Cherry Island Landfill Sandtown Landfill (TONS) Sent to Market NSWMC CSWMC SSWMC PTCTS MTS RT 5 TS TOTAL Refrigerant White Goods Non Refrigerant White Goods , Tires , Dry Wall , , Propane Bottles Metal Shreds Matresses TOTAL (TONS) , , Jones Crossroads Landfill Pine Tree Corners Transfer Station Milford Transfer Station Rt. 5 Transfer Station Total Facility Recyclable Quantities Used by Material Type - FY 2017 Cherry Island Landfill Sandtown Landfill Jones Crossroads Landfill Total Materials (Tons Material Used) Alternative Materials Used For Soil Cover Clean Earth 342, , Barrier 79, , Recycled C&D - - 3, , Total 422, , , Alternative Materials Used For Road Building Steel Slag 44, , Clear Earth Aggregate 8, , Chipped Yardwaste - 1, , Total 52, , , Alternative Materials Used for Soil Amendment Yard Waste 3, , , Total 3, , , TOTALS 478, , , ,

12 Electronics Recycling Saturday Collections Locations (FY 2017) Pounds Collected Cost Per Event July 2016 St. Anne s School 26,566 $6, August 2016 Mt. Pleasant Elementary 44,951 $11, September 2016 Town of Elsmere 23,765 $5, September 2016 Nylon Capital Shopping Center 10,671 $2, October 2016 Hocker s Super Center 14,723 $3, November 2016 U of D STAR Campus 53,844 $13, April 2017 Blue Hen Corporate Center 26,497 $6, April 2017 St. Anne s School 40,389 $10, April 2017 Mt. Pleasant Elementary 46,947 $11, May 2017 Nylon Capital Shopping Center 12,559 $3, May 2017 DuPont Barley Mill 29,131 $7, June 2017 Delaware City 19,495 $4, June 2017 North Star Elementary 42,725 $10, June 2017 Milford Transfer Station 15,523 $3, Total 407,786 $103, DSWA provides free electronics recycling collection services for Delaware residents. In addition, free electronics recycling services are provided to governmental offices, non-profits and schools. Recycling electronic goods removes potentially hazardous materials from the waste stream and saves landfill space. Primary Devices Collected Number Collected CPU/Laptops/Servers 14,747 Monitors 5,688 Televisions 18,586 Total Items 39,021 Electronic Goods Collection Totals Material Collection Point Pounds Collected Saturday Collection Events 407,786 Weekly Drop-offs 927,563 Government Offices Collection 178,649 Non-profits Collections 71,976 School Collection 423,711 TOTAL 2,009,685 TOTAL COST $491, Annual Report 2017

13 Document Shredding Paper Shredding Events Locations (FY 2017) Pounds Collected Cost July 2016 St. Anne s School 16,720 $2, August 2016 Mt. Pleasant Elementary 30,420 $3, September 2016 Town of Elsmere 13,280 $2, September 2016 Nylon Capital Shopping Center 6,560 $1, October 2016 Hocker s Super Center 8,700 $1, November 2016 U of D STAR Campus 27,240 $3, April 2017 Blue Hen Corporate Center 18,480 $3, April 2017 St. Anne s School 17,840 $2, April 2017 Mt. Pleasant Elementary 28,560 $3, May 2017 Nylon Capital Shopping Center 5,220 $1, May 2017 DuPont Barley Mill 17,300 $3, June 2017 Delaware City 9,700 $1, June 2017 North Star Elementary 25,720 $3, June 2017 Milford Transfer Station 6,040 $1, Total 231,780 $31, DSWA offers document shredding at many Saturday Collection Events throughout the year, as well as special monthly events during our weekly collections at DSWA facilities. 12

14 Household Hazardous Waste Collection Saturday Collection Events Event (FY 2017) Pounds Collected Cost Per Event Participants July 2016 St. Anne s School 6,356 $9, July DE Recycling Center (Latex Paint Only) 49,600 $19, August 2016 Mt. Pleasant Elementary 17,716 $21, ,110 September 2016 Town of Elsmere 13,198 $15, September 2016 Nylon Capital Shopping Center 3,962 $7, October 2016 Hocker s Super Center 3,687 $7, November 2016 U of D STAR Campus 23,316 $24, ,243 April 2017 Blue Hen Corporate Center 17,538 $16, April 2017 St. Anne s School 31,719 $23, April 2017 Mt. Pleasant Elementary 29,029 $25, ,195 May 2017 Nylon Capital Shopping Center 6,879 $10, May 2017 DuPont Barley Mill 24,357 $18, June 2017 Delaware City 18,158 $14, June 2017 North Star Elementary 38,714 $30, ,133 June 2017 Milford Transfer Station 12,670 $14, Totals 296,899 $257, ,347 DSWA operates Household Hazardous Waste (HHW) Saturday Collection Events at different locations throughout the year. In addition, weekly collection is provided in each of Delaware s three counties. Delaware residents can bring their HHW to DSWA free of charge. 13 Annual Report 2017

15 Weekly Collection Events July 2016-June 2017 Location Weight (LBS) Cost Participants Delaware Recycling Center 198,744 $250, ,503 Cheswold Collection Station 97,767 $163, ,935 Jones Crossroads Landfill 103,059 $164, ,818 Total 399,570 $577, ,256 LATEX PAINT COLLECTION EVENT Event Weight (lbs) Participants Cost July 2016 (DE Recycling Center) 49, $19,

16 DELAWARE SOLID WASTE AUTHORITY FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2017 AND 2016

17 DELAWARE SOLID WASTE AUTHORITY TABLE OF CONTENTS Page INDEPENDENT AUDITORS' REPORT 1-2 MANAGEMENT'S DISCUSSION AND ANALYSIS 3-8 FINANCIAL STATEMENTS Statements of Net Position 9-10 Statements of Revenues and Expenses and Changes in Net Position 11 Statements of Cash Flows Notes to Financial Statements ADDITIONAL INFORMATION Schedules of Operating Revenues and Expenses 33 Schedules of Proportionate Share of the Pension Liability 34 Schedules of Contributions 35

18 INDEPENDENT AUDITORS' REPORT To the Board of Directors Delaware Solid Waste Authority Dover, Delaware Report on the Financial Statements We have audited the accompanying statements of net position of Delaware Solid Waste Authority as of June 30, 2017 and 2016, and the related statements of revenues and expenses and changes in net position, and cash flows for the years then ended, and the related notes to the financial statements. 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; 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 an opinion on these financial statements based on our audits. We conducted our audits 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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Delaware Solid Waste Authority as of June 30, 2017 and 2016, and the changes in financial position, and cash flows thereof, for the years then ended in accordance with accounting principles generally accepted in the United States of America.

19 Page 2 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 3 through 8 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 audits 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 audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The schedules of operating revenues and expenses, schedules of proportionate share of the pension liability and schedules of contributions (the "supplemental schedules") are presented for purposes of additional analysis and are not a required part of the financial statements. The supplemental schedules 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 audits 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 supplemental schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. Media, Pennsylvania November 8, 2017

20 Page 3 Management's Discussion and Analysis The Management of the Delaware Solid Waste Authority (DSWA) presents the readers of our financial statements the following overview and analysis of the financial activities of the DSWA for the fiscal years ended June 30, 2017 and We encourage readers to consider the information presented here in conjunction with the accompanying financial statements and notes to the financial statements. The Reporting Entity The DSWA is a body politic and corporate created in 1975 by an act of the Delaware Legislature and is a public instrumentality and political subdivision of the State of Delaware (the "State"). The DSWA is responsible for implementing solid waste disposal, recycling and resources recovery systems, facilities and services. Revenues generated by DSWA operations, primarily disposal fees, provide for the support of the DSWA and its operations on a self-sustaining basis. The State provides no revenues to the DSWA. In carrying out its mission, the DSWA utilizes private industry in the construction and operation of solid waste disposal and transfer facilities and the operation of various segments of its recycling programs. The DSWA is authorized to issue bonds to finance its activities. The DSWA is governed by a seven-member Board of Directors appointed by the Governor with the advice and consent of the Senate. The Chairman of the Board of Directors is designated by and serves at the pleasure of the Governor. Budgetary and Accounting Controls The DSWA adopts an annual operating budget as a financial plan for the year. Actual operating results are monitored on a monthly basis and compared to the adopted budget so that variances can be identified and analyzed. Budgetary compliance is reported to the Board of Directors on a monthly basis. The DSWA s accounting records are maintained on the accrual basis of accounting. Under this method, revenues are recognized when earned and expenses are recorded as liabilities when incurred, without regard to receipt or payment of cash. Current controls provide reasonable assurance that the DSWA s assets are properly recorded and protected and that the financial data may be used with confidence in the preparation of historical reports and projections. Accounting controls, which are reviewed regularly by staff, are maintained by segregation of duties and physical and data security systems in all areas of recordkeeping, billing, cash receipts, disbursements and purchasing authority. Cash Management Wilmington Trust Company under an Investment Management Agreement that includes the State of Delaware, Delaware State Housing Authority and the Delaware Transportation Trust manages the DSWA s Operations Cash and Cash Reserves. The majority of funds are invested in United States Government Backed Fixed Income Securities, AA or better Corporate Securities and U.S. Government Sub Agency Securities. A Repurchase Agreement Account is maintained to provide daily liquidity for DSWA s Disbursement Account. Current safekeeping and delivery arrangements are felt by management to provide appropriate security for the DSWA s investments.

21 Page 4 Risk Management The DSWA maintains a comprehensive package of property and liability insurance relevant to its operations. For Worker s Compensation Insurance, the DSWA participates in the State of Delaware s plan. Since, by law, the DSWA can sue and be sued, it purchases Employers Liability Coverage under an endorsement to its General Liability Policy on the open market. A safety program including safety regulations, first aid training, and driver safety classes is actively administered and enforced to minimize exposures and manage incidents. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the DSWA s basic financial statements. Since the DSWA is engaged only in business type activities, its basic financial statements are comprised of only two components: 1) Enterprise Fund Financial Statements and 2) Notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Enterprise Fund Financial Statements are designed to provide readers with a broad overview of the DSWA s finances in a manner similar to a private sector business. The Statement of Net Position presents information on the DSWA s assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the DSWA is improving or deteriorating. The Statement of Revenues and Expenses and Changes in Net Position presents information showing how the DSWA s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused vacation leave). The Statement of Cash Flows presents the change in the DSWA s cash and cash equivalents during the period being reported. This information can assist the user of the report in determining how the DSWA financed its activities and how it met its cash requirements. The basic Enterprise Fund Financial Statements can be found on pages 9 through 13 of this report. The notes to financial statements provide additional information that is essential to a full understanding of the data provided in the financial statements. The notes to the financial statements can be found on pages 14 through 32 of this report. Financial Highlights The DSWA s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources (net position) by approximately $210.6 million and $209.4 million at the close of fiscal years 2017 and 2016, respectively. This represents an increase of approximately $1.2 million (.6%) in net position in 2017 over the previous year. Total incoming tonnage in fiscal year 2017 increased by approximately 45,000 tons resulting in a 5.6% increase in revenue-generating tons compared to fiscal year Total operating revenue decreased by approximately $4.7 million or 6.8% less than fiscal year By comparison, the prior year was $4.5 million or a 7.0% increase from fiscal year This change was expected due to changes in rebates beginning in fiscal year Net user fees reported in this item are net of the Differential Disposal Fee Programs rebates of approximately $9.15 million in 2017 and $3.65 million in 2016 (see Note 8).

22 Page 5 Total operating expenses for 2017 (prior to depreciation and closure costs) increased by approximately $4.5 million or 11.8% from the previous year. This was, in part, due to an increase in tonnage of 5.6% with variable related cost and significant pension related costs incurred as a result of net pension liability adjustments. Operating income for 2017 was approximately $500,000 versus the prior year operating income of $18.3 million. This was due to the reduction of net tipping fees related to the new DDF agreements, increases to long term post closure costs ($10.6 million), and increases to pension related costs ($2.1 million). The closure and pension costs are non-cash items in the foreseeable future but liabilities related to these future costs are adjusted annually. DSWA issued Revenue Bonds in December 2006 to finance the expansion of the Cherry Island Landfill and provide for the design of future cells at the Sandtown Landfill and the Jones Crossroads Landfill. These bonds were issued for $95.7 million with final maturity in In June 2010, an additional bond series was issued to finance the construction of new landfill cells at Sandtown and Jones Crossroads. The issue was split into the 2010 Series "A" Tax Exempt Bonds with principal of $24,625,000 maturing in 2018 and the 2010 Series "B" Taxable Build America Bonds with principal of $18,855,000, maturing in 2022 (see Note 6). The above noted Revenue Bonds issued in 2006 included a provision for early redemption as early as June The DSWA opted to exercise that option resulting in accelerated redemption on June 1, 2016 of what would have been principal payments post fiscal year 2016 of $60.8 million. With adequate reserve levels allowing for the flexibility to exercise this option, the DSWA will save $17.9 million in interest payments over the next ten years. Summary of Net Position As noted earlier, net position may serve over time as a useful indicator of DSWA s financial position. The DSWA s net position increased during fiscal year 2017 by $1,213,281 and also increased by $20,480,670 for A condensed summary of DSWA s net position for the two years being reported is presented below: Net Position Current and Other Assets $ 121,863,271 $ 103,384,280 Capital Assets 193,496, ,311,952 Deferred Outflow of Resources 567, ,277 Total Assets and Deferred Outflow of Resources 315,926, ,215,509 Current Liabilities 14,790,168 13,036,402 Long-Term Obligations 90,124,509 81,908,141 Deferred Inflow of Resources 411, ,147 Total Liabilities and Deferred Inflow of Resources 105,325,733 95,827,690 Net Position: Invested in Capital Assets 178,761, ,962,384 Unrestricted 31,321,008 25,999,920 Restricted 518, ,515 Total Net Position $ 210,601,100 $ 209,387,819

23 Page 6 Net position invested in capital assets represents the DSWA s investment in capital assets (e.g., land, land improvements, buildings and equipment). The DSWA uses these capital assets to provide services to its customers and consequently, these assets are not available for future spending. The DSWA is bound by the provisions of the Indentures under the issuance of the 2006 Series and 2010 Series A & Series B Solid Waste System Revenue Bonds that established various funds administered by the Trustee and certain funds to be administered by DSWA. The unrestricted funds administered by DSWA can be used to fund Capital Improvement Projects and other operating costs. Restricted net position is limited to outside third party restrictions and represents the net position that has been legally identified for specific purposes. Summary of Revenues and Expenses and Changes in Net Position A summary of revenues and expenses and changes in net position for the years ended June 30, 2017 and 2016 is presented below: Change in Net Position Operating Revenues Net User Fees: Solid Waste $ 59,761,833 $ 65,048,689 L/F Gas Marketing Income 1,298,489 1,273,155 Marketing Income Recyclables 1,802,843 1,241,201 Other Income 1,668,641 1,694,214 Total Operating Revenues 64,531,806 69,257,259 Operating Expenses Salaries and Related Costs 11,083,051 8,363,458 Contractual Services 27,343,915 25,705,083 Depreciation 10,976,113 11,122,025 Landfill Closure 10,557,467 1,802,474 Other Expenses 4,067,317 3,936,665 Total Operating Expenses 64,027,863 50,929,705 Operating Income 503,943 18,327,554 Net Nonoperating Revenue 709,338 2,153,116 Increase in Net Position 1,213,281 20,480,670 Net Position - Beginning of Year 209,387, ,907,149 Net Position - End of Year $ 210,601,100 $ 209,387,819 Capital Asset Activity The following provides a summary of the significant changes in capital assets for the year ended June 30, 2017 and a description of the major items affecting the year-end balances (see Note 4 - Capital Assets). 1. Construction in Progress Increases: Central Landfill scalehouse - $987, Depreciable Capital Assets Increases: Vehicles - $376,525, Building and Land Improvements - $550,434, Heavy Construction Equipment and Processing Equipment - $1,054,529 Decreases: Vehicles sold or traded-in - $105,917

24 Page 7 Review of Operations Landfill Operations. During the fiscal year 2017, the Delaware Solid Waste Authority s three operating landfills managed the safe disposal or recycling of 845,397 tons of waste compared to 799,762 tons during the previous year. Of the total waste received, dry waste, which includes construction and demolition waste, 101,573 tons were received in fiscal year 2017 compared to 91,834 tons in the previous fiscal year. During fiscal year 2017, 3,309 tons of the dry waste was recycled into an alternate material used for soil cover at the Jones Crossroads Landfill. In addition, 1,010 tons of tires were recycled as either tire-derived fuel or consumer products. A total of 8,836 tons of yard waste was recycled as mulch or compost or staged for future processing. The user fee for solid waste was $85.00 per ton at the landfills and transfer stations versus $88.50 per ton for the prior year. Solid waste rebates per ton were $20 at the landfills and $10 at the transfer stations compared to $8 and $4 for these facilities in the prior year. Transfer Stations. During the fiscal year 2017, the DSWA s Pine Tree Corners, Milford and Route 5 Transfer Stations received and transferred a total of 199,262 tons of waste compared to 195,339 tons during the prior fiscal year. The waste from Pine Tree Corners Transfer Station and Milford Transfer Station was transported to the Sandtown Landfill for disposal. The Route 5 Transfer Station transported its waste to the Jones Crossroads Landfill for disposal. Collection Stations. The DSWA s five collection stations located in Kent and Sussex Counties continued to provide disposal services to residents for bagged household waste and yard waste at the rate of $1/bag. A total of 79,591 customers disposed of 106,576 bags of household waste and 23,023 bags of yard waste during fiscal year Recycling. During the fiscal year 2017, the DSWA s Drop Off Center Program collected 8,249 tons of various recyclables including cardboard, single stream, batteries, textiles, oil filters and oil from its 17 sites. The Oil Filter Program marketed 37 tons of oil filters collected statewide. The oil filters were generated from the dropoff sites. The Electronic Goods Program collected 1,005 tons of electronic goods for recycling. The Recycling Group conducted 15 special collection events for the collection of household hazardous waste, electronic goods, and paper shredding at various locations statewide. From the special collection events, 148 tons of hazardous materials and 204 tons of electronic goods were either recycled or safely disposed of along with 116 tons of paper shredded. In addition to the special collection events, three weekly Household Hazardous Waste collection programs were conducted during fiscal year 2017 at our Cheswold Collection Center, Delaware Recycling Center, and Southern Solid Waste Management Center. At those three locations 200 tons of material were collected, which were then either recycled or safely disposed. In fiscal year 2017, a mattress recycling program collected 161 tons of mattresses that were able to be recycled. In February 2012, DSWA entered into a Service Agreement with Revolution Recovery Delaware, LLC (Revolution) to construct and operate a C&D materials recovery facility at DSWA's Delaware Recycling Center on behalf of DSWA. Revolution is in the business of receiving, processing and reselling recyclable C&D materials that have residual value. During fiscal year 2017, Revolution took in 112,195 tons of C&D materials for processing versus fiscal year 2016 tonnage of 85,019 tons. Also, in February 2012, DSWA entered into a Service Agreement with ReCommunity Delaware, LLC (ReCom) to construct and operate a material recovery facility (the "MRF") at DSWA's Delaware Recycling Center on behalf of DSWA. ReCom is in the business of receiving, processing and reselling residential and commercial recyclable materials that have residual value. During fiscal year 2017, ReCom received 130,451 tons of recyclable materials for processing versus fiscal year 2016 incoming tonnage of 131,325 tons.

25 Page 8 Plans for the Future. The DSWA continues to experience an upward trend with regard to incoming revenue generating tonnage. Subsequent to the downturn in the overall economy in 2008, the DSWA experienced several years of declining tonnage only to rebound with four consecutive years of notable annual increases and a total increase of over 25% in fiscal year 2017 above the low levels reached in fiscal year This increase is due to an economy that continues a steady recovery, implementation of flow control in Delaware in fiscal year 2017, and a new discount disposal fee arrangement in Flow control is a mechanism by which certain waste is mandated to be brought to DSWA facilities instead of a portion of that waste being directed to competing facilities in the region. This implementation of flow control was done at the same time the DSWA decided to offer a more aggressive rebate program to assure the public that it was doing all it could to remain competitively priced in the region while flow control was being put into place. With the implementation of flow control and a steady increase in tonnage, the DSWA made a decision to effectively reduce the net per ton fees for discount disposal fee customers by up to almost 20% in an effort to make sure cost cutting measures taken over the last few years were passed along to its customers. This was done in order to continue to serve the community and do so in a financially responsible manner understanding that the community we serve should benefit. With the satisfaction of debt obligations from expansion projects in the past and the operational cost efficiencies put in place, the DSWA will continue to pass these savings along while also putting in place a long term framework for investments into its sustainability. While the DSWA is always reviewing its operations for cost savings, it also understands the need to invest in infrastructure and technology in its field that allow for accomplishing its mission while understanding its long term financial and social responsibilities. As confidence grows on the stability of the revenue generating waste tonnage, there is cautious optimism in the area of recycling operations. In the prior year, DSWA had made some additional commitments to its recycling operations in an effort to be sure the processing of these materials would remain a priority by DSWA and its recycling partners in what had become uncertain market conditions. During 2017, with the help of some of the restructuring of these arrangements, the DSWA experienced an increase of recycling related revenue of over 18% to offset some of the costs assumed to secure the long term health of its partnerships. There will be a continued effort to monitor the market conditions and balance the financial impact of decisions surrounding this area of operations with the social responsibility of finding a suitable use of these products in the recycling arena. This financial report is designed to provide its readers with an overview of the DSWA finances and to show DSWA s accountability for safeguarding the funds it receives and disburses in the course of conducting its business. If you have any questions concerning this report or need additional financial information, please contact: Joseph J. Koskey Chief Financial Officer Delaware Solid Waste Authority 1128 S. Bradford Street Dover, DE Telephone: (302) Respectfully submitted, Joseph J. Koskey Joseph J. Koskey Chief Financial Officer

26 STATEMENTS OF NET POSITION

27 Page 9 DELAWARE SOLID WASTE AUTHORITY STATEMENTS OF NET POSITION ASSETS AND DEFERRED OUTFLOW OF RESOURCES JUNE 30, CURRENT ASSETS Unrestricted Current Assets: Cash and cash equivalents - Note 2 $ 616,078 $ 786,032 Investments - Note 3 6,419,050 2,484,789 Accounts receivable (net of allowance for doubtful accounts of $93,507 and $97,750, respectively) 6,181,888 6,266,399 Interest receivable 262, ,335 Prepayments and miscellaneous receivables 1,710,119 2,177,935 Total Unrestricted Current Assets 15,189,731 11,899,490 Restricted Current Assets: Investments - Note 3 60,667,300 47,956,081 Total Current Assets 75,857,031 59,855,571 NONCURRENT ASSETS Unrestricted Noncurrent Assets: Investments - Note 3 17,498,406 21,398,316 Capital Assets - Note 4 Land 24,941,548 24,941,548 Land improvements 312,845, ,296,897 Buildings 44,777,510 44,753,189 Equipment and furniture 19,319,889 19,792,843 Vehicles 2,879,466 2,608,858 Total 404,763, ,393,335 Less: Accumulated depreciation 213,392, ,092, ,371, ,300,579 Construction in progress - Note 4 2,125,194 1,011,373 Total Capital Assets 193,496, ,311,952 Restricted Noncurrent Assets: Investments - Note 3 28,507,834 22,130,393 Total Noncurrent Assets 239,502, ,840,661 DEFERRED OUTFLOW OF RESOURCES Related to pensions - Note 7 567, ,277 TOTAL ASSETS AND DEFERRED OUTFLOW OF RESOURCES $ 315,926,833 $ 305,215,509 The accompanying Notes are an integral part of these statements.

28 Page 10 JUNE 30, LIABILITIES, DEFERRED INFLOW OF RESOURCES AND NET POSITION CURRENT LIABILITIES Accounts payable $ 4,374,203 $ 4,250,181 Accrued compensation 1,145,402 1,395,547 Current portion of bonds payable - Note 6 4,737,171 3,741,296 Contract rebate payable - Note 8 4,533,392 3,649,378 Total Current Liabilities 14,790,168 13,036,402 NONCURRENT LIABILITIES Bonds payable - Note 6 16,176,008 20,812,251 Accrued landfill closure and post closure care costs - Note 5 69,665,567 59,108,100 Net pension liability - Note 7 4,282,934 1,987,790 Total Noncurrent Liabilities 90,124,509 81,908,141 Total Liabilities 104,914,677 94,944,543 DEFERRED INFLOW OF RESOURCES Related to pensions - Note 7 411, ,147 NET POSITION Invested in capital assets, net of related debt and accumulated depreciation 178,761, ,962,384 Unrestricted 31,321,008 25,999,920 Restricted 518, ,515 Total Net Position 210,601, ,387,819 TOTAL LIABILITIES, DEFERRED INFLOW OF RESOURCES AND NET POSITION $ 315,926,833 $ 305,215,509 The accompanying Notes are an integral part of these statements.

29 DELAWARE SOLID WASTE AUTHORITY STATEMENTS OF REVENUES AND EXPENSES AND CHANGES IN NET POSITION Page 11 FOR THE YEARS ENDED JUNE 30, OPERATING REVENUES Net user fees: solid waste $ 59,761,833 $ 65,048,689 Landfill gas 1,298,489 1,273,155 Other income 3,471,484 2,935,415 Total Operating Revenues 64,531,806 69,257,259 OPERATING EXPENSES Salaries and related costs 11,083,051 8,363,458 Professional services 1,280,993 1,424,239 Travel 68, ,743 Supplies and materials 1,950,658 1,537,111 Utilities 767, ,572 Contractual services 27,343,915 25,705,083 Closure and post closure care of landfills 10,557,467 1,802,474 Depreciation expense 10,976,113 11,122,025 Total Operating Expenses 64,027,863 50,929,705 OPERATING INCOME 503,943 18,327,554 NONOPERATING REVENUES (EXPENSES) Net investment income 334,808 2,815,148 Bond interest and related expenses (149,808) (1,357,830) Other nonoperating revenue - net 524, ,798 Net Nonoperating Revenues (Expenses) 709,338 2,153,116 INCREASE IN NET POSITION 1,213,281 20,480,670 NET POSITION - BEGINNING OF YEAR 209,387, ,907,149 NET POSITION - END OF YEAR $ 210,601,100 $ 209,387,819 The accompanying Notes are an integral part of these statements.

30 Page 12 DELAWARE SOLID WASTE AUTHORITY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 61,198,174 $ 65,036,427 Cash paid to suppliers (31,287,210) (29,572,254) Cash paid to employees (9,557,866) (8,745,609) Landfill gas marketing revenues 1,298,489 1,273,155 Other operating revenues 3,471,484 2,935,415 Net Cash Provided by Operating Activities 25,123,071 30,927,134 CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 970,650 1,289,456 Purchases of investments (439,304,172) (1,645,199,939) Proceeds from sale of investments 419,421,550 1,687,286,863 Other investing income 318,826 1,143,520 Net Cash Provided by (Used In) Investing Activities (18,593,146) 44,519,900 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Payments for debt service requirements (3,650,000) (68,055,000) Interest paid on bonds (1,095,557) (4,460,512) Cash payments for capital assets (2,245,012) (3,473,901) Proceeds from sale of capital assets 290, ,900 Net Cash Used in Capital and Related Financing Activities (6,699,879) (75,780,513) NET DECREASE IN CASH AND CASH EQUIVALENTS (169,954) (333,479) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 786,032 1,119,511 CASH AND CASH EQUIVALENTS - END OF YEAR $ 616,078 $ 786,032 The accompanying Notes are an integral part of these statements.

31 Page 13 DELAWARE SOLID WASTE AUTHORITY STATEMENTS OF CASH FLOWS (CONTINUED) RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES FOR THE YEARS ENDED JUNE 30, OPERATING INCOME $ 503,943 $ 18,327,554 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 10,976,113 11,122,025 Recovery of doubtful accounts (4,242) (1,886) Decrease in accounts receivable 88, ,022 Decrease (increase) in prepayments and miscellaneous receivables 467,816 (1,089,896) Decrease (increase) in deferred outflow of resources (47,723) 13,454 Increase in accounts payable 124, ,234 Decrease in contracts payable - (17,263) Decrease in refundable security deposits - (60,491) Decrease in accrued compensation (250,145) (145,663) Increase in accrued closure and post closure care of landfills 10,557,467 1,640,974 Increase in contract rebate payable 884, ,989 Increase in net pension liability 2,295, ,859 Decrease in deferred inflow of resource (472,091) (1,143,779) Total Adjustments 24,619,128 12,599,579 Net Cash Provided by Operating Activities $ 25,123,071 $ 30,927,133 SUPPLEMENTAL DISCLOSURE OF NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES Amortization of premium/discount on bonds $ (18,756) $ 1,757,324 Gain on disposition of capital assets (251,022) (208,900) Unrealized loss (gain) on investments 748,550 (1,017,128) Realized loss on sale of investments 11,061 36,629 Capitalized interest 955,379 1,064,945 The accompanying Notes are an integral part of these statements.

32 Page 14 DELAWARE SOLID WASTE AUTHORITY NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 NOTE 1 - Summary of Significant Accounting Policies (A) Reporting Entity The Delaware Solid Waste Authority (the "DSWA") is a body politic and corporate constituting a public instrumentality of the State of Delaware established and organized in 1975 under Delaware Code, Title 7, Chapter 64. The DSWA has been designated by the State of Delaware, under this act, as the sole entity, governmental or private, with the responsibility for planning and implementing solid waste and resource recovery programs and facilities throughout Delaware in accordance with the Statewide Plan for Solid Waste Management. The DSWA is governed by a Board of Directors consisting of seven directors, who are appointed by the Governor with the advice and consent of the Senate. Currently, the DSWA operates solid waste management facilities in each of Delaware's three counties and it has consolidated the financing and operation of its solid waste disposal facilities into a unitary Statewide system. (B) Basis of Presentation The DSWA operates as an enterprise activity and its accounts are maintained on the accrual basis of accounting. Under this method, revenues are recognized when earned, and expenses are recognized when incurred. The DSWA follows all applicable pronouncements of the Governmental Accounting Standards Board (GASB). The DSWA distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing goods in connection with the DSWA's principal ongoing operations. The principal operating revenues of the DSWA are charges to residents and customers for waste disposal and collection of recyclables and the revenues from the sale of processed recyclable materials. Operating expenses include the cost of waste disposal, recyclable collection and processing services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. (C) Cash and Cash Equivalents The DSWA's cash and cash equivalents consist of cash on hand and demand deposits. For purposes of determining cash equivalents, the DSWA has defined its policy concerning the treatment of short-term investments to include investments with a maturity of three months or less when purchased, as cash equivalents if management does not plan to reinvest the proceeds. Shortterm investments that management intends to rollover into similar investments are considered part of the investment portfolio and are classified as investments. (D) Restricted Assets Restricted assets of the DSWA represent bond proceeds restricted for construction, and other amounts legally required by the DSWA's bond covenants and trust indenture to be set aside for debt service, customer deposits, operations, renewal and replacement and capital improvements. Restricted resources are used first to fund expenses incurred for restricted purposes.