2016 SDWD Annual Financial Report
San Dieguito Water District
Annual Financial Report
For the Year Ended June 30, 2016
San Dieguito Water District
A Component Unitof the City of Encinitas
For the Years Ended June 30, 2016 and 2015
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Government Auditing Standards
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Investment in R.E. Badger Filtration Plant
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Investment in R.E. Badger Water Facilities Financing Authority
Government Auditing Standards
Required Supplementary Information
Other Information
Government Auditing Standards
Government Auditing Standards
Government Auditing Standards
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GOVERNMENT AUDITING STANDARDS
Government Auditing Standards
deficiencyin internal control
material weakness
significant deficiency
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Government Auditing Standards
Government Auditing Standards
San Dieguito Water District
Management Discussion & Analysis
(Unaudited)
This section of theSan Dieguito Water District(the “District”)Annual Financial Reportpresents
Management’sDiscussion and Analysis
of the District’s financial position and performancefor fiscal
year 2015-16.Please read it in conjunction with the District’s Basic Financial Statements,which include
explanatory footnotes and required supplementary information.
FINANCIAL HIGHLIGHTS
Table 1
Summarized Statement of Net Position
(Millions of Dollars)
Fiscal Fiscal Dollar Percent Fiscal Dollar Percent
Year 2016Year 2015ChangeChangeYear 2014ChangeChange
Current assets$18.1$18.6$(0.5)-2.7%$20.1$(1.5)-7.5%
Restricted assets1.40.01.40.0%1.0(1.0)-100.0%
Other noncurrent assets0.10.2(0.1)-50.0%0.3(0.1)-33.3%
Investments in joint ventures19.817.72.111.9%18.3(0.6)-3.3%
Capital assets (net)22.522.50.00.0%22.00.52.3%
Total Assets61.959.02.961.7(2.7)
4.9%-4.4%
Current liabilities1.81.70.15.9%2.8(1.1)-39.3%
Current portion of long-term debt1.21.10.19.1%1.2(0.1)-8.3%
Net pension liability5.03.81.2100.0%0.03.80.0%
Long-term debt10.910.70.21.9%12.6(1.9)-15.1%
Total Liabilities18.917.31.616.60.7
9.2%4.2%
Total Deferred Outflows-Inflows0.5(0.7)1.20.00.0
-171.4%0.0%
Net Position:
Net investment in capital assets13.110.82.321.3%8.32.530.1%
Restricted0.00.00.00.0%1.0(1.0)-100.0%
Unrestricted30.430.20.20.7%35.8(5.6)-15.6%
Total Net Position$43.5$41.0$2.5$45.1$(4.1)
6.1%-9.1%
The District’s net position increasedby $2.5million, or 6.1%, from 2015 to 2016anddecreased $4.1
million from 2014 to 2015.The majority of the 2016increasefrom2015is the result ofan increase in
SDWD’s joint venture investment with R.E. Badger Filtration Plant.The District had positive cash flows
from operations in 2016, after factoring in debt service payments of $1.4million.On January 20, 2016, the
Board approved an updated two-year water rate study, modifying the District’s water rates and service
charges. This action approved an overall revenue increase from rates and charges of 6.5% onFebruary 1,
2016.
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San Dieguito Water District
Management Discussion & Analysis (Continued)
(Unaudited)
Table 2
Changes in Net Position are affected by revenues and operating expensesas summarized in .
Table 2
Summarized Statement of Revenues, Expenses and Changes in Net Position
(Millions of Dollars)
Fiscal
Year Fiscal Dollar Percent Fiscal Dollar Percent
2016Year 2015ChangeChangeYear 2014ChangeChange
Operating revenues$14.8$14.9$(0.1)-0.7%$15.4$(0.5)-3.2%
Operating expenses:
Source of supply5.46.8(1.4)-20.6%6.4$0.46.2%
General operations & maintenance4.74.30.49.3%2.3$2.087.0%
Facility operations & maintenance1.81.70.15.9%1.5$0.213.3%
General and administrative0.1(0.1)0.2-200.0%1.8$(1.9)-105.6%
Depreciation and amortization1.52.3(0.8)-34.8%1.6$0.743.8%
Total operating expenses13.515.0(1.5)-10.0%13.61.410.3%
Operating income1.3(0.1)1.4-1400.0%1.8(1.9)-105.6%
Nonoperating revenues1.00.90.111.1%0.8$0.112.5%
Nonoperating (expenses)(0.3)(0.5)0.2-40.0%(0.6)$0.1-16.7%
Income before transfers and
capital contributions2.00.31.7566.7%2.0(1.7)-85.0%
Transfers in from City of Encinitas0.00.00.00.0%0.0$-0.0%
Capital contributions0.50.30.266.7%0.5$(0.2)-40.0%
Change in net position2.50.61.9316.7%2.50.14.0%
Net position, beginning 41.040.40.61.5%42.6$(2.2)-5.2%
Net position, ending$43.5$41.0$2.56.1%$45.1$(4.1)-9.1%
Revenues–Operating revenues decreased $0.1million from 2015 to 2016anddecreased $0.5 million
from 2014to 2015. In 2016, water sales were down 17% compared to 2015. However, a 6.5% water rate
increase was enacted on February 1, 2016 and revenues were further supplemented through temporary
drought rates through most of the year. The decreasefrom 2014 to 2015 wasmainlydue to customer
demand for potable water was 6% lower than 2014due to mandatory water-use restrictions in response to
the statewide drought situation.Non-operating revenues wereessentially flat from both 2015 to 2016 and
2014 to 2015.
Expenses–Operating expenses decreasedby $1.5millionfrom 2015 to 2016 and increased $1.5 million
from 2014 to 2015.The 2016decreasein source of supply (water purchases) of $1.4million wasprimarily
due to overall lower water purchases from less customer demand as well as a higher amount of local
water utilization compared to imported water.
Capital contributionswere slightly higher in 2016,mainly due to the level of development activity and the
timing of donated infrastructure. Other donated assets (easements) exhibited lower levels of activity this
year, as well. Connection fees paid by applicants werelower due to a decreasein the number of hookups,
year-over-year.
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San Dieguito Water District
Management Discussion & Analysis (Continued)
(Unaudited)
Net Position, Beginning–The beginning net position wasrestated in 2015 from $45,090,418 to
$40,426,540 due with a prior period adjustment of $4,663,878. The District implemented GASB
Statements No. 68 and No. 71 during the year ended June 30, 2015. The restatement to the beginning
net position is to report the net pension liabilities for the District’s CalPERS plans in accordance with
GASB Statements No. 68 and No. 71 based on the measurement date of June 30, 2014.
CAPITAL ASSETS AND CAPITAL IMPROVEMENT PROGRAMS
The District has an ongoing capital improvement program and publishes a capital budget every year. The
District’s capital budget includes funding for both infrastructure and various large consulting projects, such
as capital masterplans and water rate studies. The District generally capitalizes infrastructure and
expenses consulting studies in the accompanying Basic Financial Statements.
Capital expenditures for infrastructure are accountedforinthe accompanying financial statements either
as: (1) additions to Capital Assets,or(2)additions to Investmentsin Joint Ventures.
Additionsto Capital Assetstotaled approximately $0.6million,which is primarilyreplacement or
improvements to the water distribution systemand purchases of vehicles and equipment. The District also
capitalized approximately $155,000of capital improvement costs paid for the R.E. Badger Joint Facilities.
The overall budget of the District for capitalimprovements averages about $3.2million per year over the
next sevenyears.
Table 3
Capital Assets, Net of Accumulated Depreciation
(Millions of Dollars)
201620152014
Land easements$3.2$3.0$3.0
Public works facility right-of-use3.43.43.4
Construction in progress1.51.30.8
Capacity rights0.10.20.2
Utility, plant and equipment14.314.614.6
Total$22.5$22.5$22.0
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San Dieguito Water District
Management Discussion & Analysis (Continued)
(Unaudited)
DEBT ADMINISTRATION
Table 4
Long-Term Debt
The District’s total long-term debt outstanding at June 30consisted of:
On September 18, 2014, the District issued $5,870,000 of Water Revenue Refunding Bonds, Series 2014.
The Series 2014 bonds redeemed all of the District’s outstanding 2004 Water Revenue Refunding Bonds
remaining of $8,110,000, which were themselves a refunding of the District’s original 1993 Water Revenue
Bonds. The 2014 refunding resulted in saving the District approximately $250,000 annually in debt service
costs, due to lower market interest rates and the elimination of a reserve previously required on the 2004
bonds. Interest is due and payable semi-annually at rates ranging from 3.0% to 4.0%.
On November 20, 2007, the Authority issued $20,685,000 of 2007 Water Refunding Bonds while
concurrently redeeming all of its outstanding 1999 Water Revenue Bonds, on behalf of its member
agencies, the Santa Fe Irrigation District and the San Dieguito Water District. The transaction was a
current refunding intended to save the member agencies future interest costs due to lower market interest
rates. No new fundswere raised by either agency. New Installation Purchase Agreements were
executed, which save the District approximately $60,000 per year on debt service.
The debt service payments on these two obligations will total approximately $1.4million annually,going
forward. The District has covenanted to maintain debt service coverage of at least 115% of net revenues
available for debt service each fiscal year.The District was in compliancewith its debt service coverage
requirement for the fiscal year 2015-16, and is projected to be in compliance in fiscal year 2016-17.
TheDistrict does not currently haveplans to issue additional debt.
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San Dieguito Water District
Management Discussion & Analysis (Continued)
(Unaudited)
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
On June 17, 2015, the District Board of Directors (Board) approved the two-year operating and capital
budget for FY 2015-16 and FY 2016-17.During the two-year budget cycle, funds are appropriatedin the
first fiscal year onlyand then the District returns to the Board one year later to present its “second-year
revise” budget, which is revised based on changed assumptions to the originally published figures for the
second year. On June 15, 2016, the Board approved theFY 2016-17operating and capital budgets.The
operating budget anticipates total revenues of $17.0million, which is an overall increase of $1.0 million
over the prior year.On January 20, 2016, the Board approved an updated two-year water rate study,
modifying the District’s water rates and meter servicecharges. This action approved an overall revenue
increase from rates and charges of 6.5% on February 1, 2016 and another 6.5% overall rate and charge
increase on January 1, 2017. Operating expenses for FY 2016-17are budgeted atapproximately $0.8
Million morethan prior year. The increase is largelydue towholesale water rate and charge increases as
well as a minor projected increase in water purchases.The Board also approved a modest 1% increase in
salaries andbenefits inFY 2016-17.
The capital budget anticipatescapital costs at $3.2million, which is on par withthe average for the next
seven years. This includes $1.2millionfor District capital improvements and $2.0million for capital
contributions to the R.E. Badger Joint Facilities.
Overall, the District expects to end Fiscal Year 2016-17with anavailable fund balance of $9.8million,
based on its internal projections.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
If you have questions about this report or need additional information, please contactthe City of Encinitas
Finance Department orthe SanDieguito Water District General Manager’s office.
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The Financial Reporting Entity: Omnibus - An Amendment
of GASB Statement No. 14 and No. 34
“economic resources”
Financial Reporting of Deferred Outflows of Resources,
Deferred Inflows of Resources, and Net Position,
Deferred Outflows of Resources
Deferred Inflows of Resources
Joint Facilities
operating expenses
Financing Authority
non-operating revenues and expenses
.
Net Investment in Capital Assets
Restricted
Unrestricted
investments
San Dieguito Water District
Notes to the Financial Statements (Continued)
For the Years Ended June 30, 2016 and 2015
Note 5 – Capital Assets (Continued)
Summary of changes in capital assets for the year ended June 30, 2015 is as follows:
BalanceBalance
July 1, 2014AdditionsDeletionsTransfersJune 30, 2015
Capital assets, not depreciated
Land easements$3,047,151-$ -$ -$ 3,047,151$
Public works facilities right of use3,378,700 - - - 3,378,700
Construction in progress776,497 1,112,036 - (547,196) 1,341,337
1,112,0367,202,348 - (547,196) 7,767,188
Total capital assets, not depreciated
Capital assets, being depreciated
Structures and improvements11,007 - - - 11,007
Machinery and equipment2,444,050 113,070 (248,507) - 2,308,613
Distribution system37, -852,958 - 547,196 38,400,154
Capacity rights323,190 - - - 323,190
113,07040,631,205 (248,507) 547,196 41,042,964
Total capital assets, being depreciated
Less accumulated depreciation
Structures and improvements(2,294) (1,101) - - (3,395)
Machinery and equipment(2,002,698) (407,106) - 961 (2,408,843)
Distribution system(23, (248,372)762,859) 248,507 (961) (23,763,685)
Capacity rights(119,042) (6,464) - - (125,506)
(663,043)(25,886,893) 248,507 - (26,301,429)
Total accumulated depreciation
(549,973)14,744,312 - 547,196 14,741,535
Total capital assets, being depreciated, net
$ 562,06321,946,660$ -$ -$ 22,508,723$
Total capital assets, net
Note 6 – Compensated Absences
Summary of changes in compensated absences for the years ended June 30, 2016 and 2015 is as
follows:
Compensated absences represent the dollar value of employee vacation leave earned (up to the specified
maximum amount of hours) but unused as of June 30, 2016 and 2015. The balance outstanding of
$161,310 and $148,064 at June 30, 2016 and 2015, respectively, are classified as a current liability
because there are no restrictions on when employees may make use of their accrued vacation.
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SDWD Plan
SDWD Plan
California Employers’ Retiree Benefit Trust
Annual Required Contribution
Required Supplementary Information
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Summary of Operational Data
The following tables are being presented as supplementary information based on
requirements for bonds issued by SDWD for continuing bond disclosure certificate.
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TABLE 1
San Dieguito Water District
Schedule of Water Rates
As of June 30, 2016
Rate (footnote 1)
Customer Class Residential Rate TiePotableRecycled
r
Single-family residential 0-12 units2.92$
13-20 units4.62
21-40 units5.72
41+ units6.50
Multi-family residential (per dwelling 0-8 units2.92
)
9-12 units4.62
13-16 units5.72
17+ units6.50
Agriculture Uniform4.95 3.80$
Commercial Uniform4.95 3.80
GovernmentUniform5.42 4.17
Uniform5.42 4.17
Publi
c
Landscaping Uniform5.70 4.39
Construction Uniform5.81 4.47
Note: Drought rates associated with a 10% reduction in water use in effect on June 30, 2016,
per Board action.
(1) Per Unit (one hundred cubic feet or 748 gallons)
Source: San Dieguito Water District
TABLE 2
San Dieguito Water District
Bi-Monthly Meter Service Availability Charge
s
As of June 30, 2016
Water Meter ServiceInfrastructureFire Meter Service
AvailabilitAccessAvailabilit
yy
Meter SizeChargeChargeCharge
5/8" & 3/4"37.39$ 5.52$ 7.95$
1"55.05 8.83 7.95
1-1/2"98.82 16.56 8.97
2"151.55 28.70 15.63
3"274.67 52.99 39.55
4"450.52 90.52 80.79
6"889.76 165.60 228.82
8"1,417.05 287.04 484.14
(2) San Dieguito Water District charges a bi-monthly service availability charge, which covers the costs for
the maintenance of meters, water lines, and storage facilities, to ensure that water is available upon demand.
This charge also covers customer service costs for meter reading and billing. The Intrastructure Access
Charge is levied by the San Diego County Water Authority and is collected from the customer by the District.
Source: San Dieguito Water District
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TABLE 3
San Dieguito Water District
Historic Potable Water System Revenues
Last Ten Fiscal Years
Mete
r
FiscalPotablePercentageAvailabilitPercent
y
Yea
Water SalesChange (2)ChargeChange (2)
r
20077,579,205$ 17.2%2,251,011$ 9.2%
20087,717,818 1.8%2,404,547 6.8%
20097,525,927 -2.5%2,453,075 2.0%
20107,146,854 -5.0%2,501,264 2.0%
20118,205,876 14.8%3,007,127 20.2%
20128,528,418 3.9%3,196,605 6.3%
20139,236,462 8.3%3,087,794 -3.4%
201410,649,157 15.3%3,227,823 4.5%
20159,728,434 -8.6%3,415,227 5.8%
20169,503,108 -2.3%3,503,933 2.6%
(3) Due to the varying number of billing cycles in a fiscal year, changes year-over-year may not be exactl
y
comparable.
Source: San Dieguito Water District
TABLE 4
San Dieguito Water District
Historic Recycled Water System Revenues
Last Ten Fiscal Years
Mete
r
FiscalRecyclePercentAvailabilitPercent
y
YeaWater SalesChangeCharges (4)Change
r
2007596,299$ 31.3%-$ N/
A
2008600,401 0.7%- N/
A
2009663,036 10.4%- N/
A
2010537,654 -18.9%- N/
A
2011523,397 -2.7%- N/
A
2012422,925 -19.2%- N/
A
2013400,244 -5.4%- N/
A
2014460,383 15.0%60,048 N/
A
2015648,398 40.8%80,585 34.2%
2016702,301 8.3%85,149 5.7%
(4) The District first implemented a meter availability charge for recycled customers on September 1, 2013.
Source: San Dieguito Water District
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TABLE 5
San Dieguito Water District
Summary of Water Production by Source
Last Ten Fiscal Years
Potable Production (5)
Fiscal LocalImportedTotalRecycled Total
Yea
WaterWaterPotableWaterProduction
r
20072,706 5,692 8,398 708 9,106
20083,539 3,753 7,292 676 7,968
20093,869 3,369 7,237 694 7,931
20104,399 2,156 6,555 498 7,053
20114,434 1,901 6,335 511 6,846
20123,719 2,663 6,382 578
6,960
(6)
20134,200 2,395 6,595 678
7,273
(6)
20141,136 5,598 6,734 692 7,426
2015603 5,726 6,329 736 7,065
20161,400 3,839 5,239 628 5,867
(5) Potable water production is defined as water either produced locally or purchased from imported
sources (expressed in acre-feet).
TABLE 6
San Dieguito Water District
Summary of Water Deliveries by Source
Last Ten Fiscal Years
FiscalPercent Percent
YeaPotableChangeRecycledChange
r
20077,59248.5%70812.7%
20086,753-11.1%676-4.5%
20096,463-4.3%6942.7%
20105,649-12.6%498-28.2%
20115,425-4.0%5112.6%
20125,9579.8%57813.1%
(6)
20136,2845.5%67817.3%
(6)
20146,4492.6%6922.1%
20156,134-4.9%7366.4%
20165,112-16.7%628-14.7%
(6) Since2012, Recycled Water Production and Delivery figures are revised to include water provided to the
Encinitas Ranch Golf Authority (ERGA). Beginning in 2012, the San Elijo Joint Powers Authority (SEJPA)
began directly providing recycled water to ERGA and the District ceased selling recycled water to ERGA.
The recycled water provided to ERGA credits towards the Districts production and delivery figures as ERGA
falls within the District's sphere of influence.
Note: The differences between potable water production and deliveries represents water loss in the
distribution system and/or water pumped or used through the fire distribution system.
Source: San Dieguito Water District
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TABLE 7
San Dieguito Water District
Sales by Customer Class
As of June 30, 2016
Acre-FeetPercent of
SoldWater Sold
Customer Description
Agriculture981.9%
Commercial4759.3%
Construction90.2%
Government210.4%
Landscaping2635.2%
Multi-Family Residential1,03820.3%
Pooled Meters3546.9%
Publi
691.3%
c
Single-Family Residential2,78754.5%
Subtotal - Top 10 Customers5,114100.0%
Source: San Dieguito Water District
TABLE 8
San Dieguito Water District
Total Service Connections by Categor
y
Last Ten Fiscal Years
FiscalPercent Percent
YearPotableIncreaseRecycledIncrease
200711,338-3.3%56-31.7%
200811,3640.2%595.4%
200911,3700.1%6815.3%
201011,3880.2%737.4%
201111,3970.1%72-1.4%
201211,4760.7%742.8%
201311,5020.2%774.1%
201411,6100.9%770.0%
201511,6440.3%815.2%
201611,7210.7%821.2%
Source: San Dieguito Water District
(8) The decline of one connection in 2011 reflects the change in the contract arrangement with the
Encinitas Ranch Golf Course.
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City of Encinitas
Historical Debt Service Coverag
e
Last Five Fiscal Year
s
San Dieguito Water District
20122013201420152016
Revenues:
Operating revenues - including connection fees13,170,422$ 13,789,636$ 15,715,575$ 15,152,433$ 14,851,652$
Non-operating revenues813,610 869,568 827,676 927,526 1,013,706
Gross Revenues13,984,032 14,659,204 16,543,251 16,079,959 15,865,358
Total Operating & Non-Operating Expenses12,448,911 12,198,228 14,066,485 15,481,543 13,800,671
Net Income1,535,121 2,460,976 2,476,766 598,416 2,064,687
Add back……..
Interest expense 698,908 657,963 622,075 475,775 337,736
Depreciation and amortization expense1,294,904 1,476,044 1,490,806 2,271,907 1,514,716
Net Revenues Available for Debt Service3,528,933 4,594,983 4,589,647 3,346,098 3,917,139
Less: Debt Service Paid
2004 Water Revenue Refunding Bonds - Interest Charges433,950 408,906 380,731 144,720 -
2004 Water Revenue Refunding Bonds - Principal Payments595,000 615,000 640,000 665,000 -
2007 Note Payable to Financing Authority - Interest Charges270,352 256,744 241,344 224,994 211,144
2007 Note Payable to Financing Authority - Principal Payments365,000 375,000 385,000 405,000 415,000
2014 Water Revenue Refunding Bonds - Interest Charges- - - 106,061 202,400
2014 Water Revenue Refunding Bonds - Principal Payments- - - - 570,000
Total Debt Service1,664,302$ 1,655,650$ 1,647,075$ 1,545,775$ 1,398,544$
Coverage by Net Revenues Available for Debt Service212%278%279%215%279%
Debt service coverage requirement is minimum 115% including connection fees. The above schedules include connection fees in operating revenues.
60