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Agenda Packet - Finance & Human Resources Committee - 12/07/2021
FINANCE & HUMAN RESOURCES COMMITTEE DECEMBER 7, 2021 East Valley Water District was formed in 1954 and provides water and wastewater services to 103,000 residents within the cities of San Bernardino and Highland, and portions of San Bernardino County. EVWD operates under the direction of a 5member elected Board. COMMITTEE MEMBERS Phillip Goodrich Governing Board Member James Morales Jr. Governing Board Member Finance & Human Resources Committee Meeting December 07, 2021 1:30 PM 31111 Greenspot Road, Highland, CA 92346 Via Teleconference In an effort to protect public health and pursuant to Resolution 2021.22, an active State of Emergency still exists and continues to directly impact the ability of the members to meet safely in person; therefore, there will be no physical location to attend this meeting in person and it will be held via teleconference. Members of the public are invited to make a public comment telephonically during the public comment section of the meeting and after each agenda item. In addition, a public comment card may be submitted prior to the start of the meeting, or a request may be submitted to the District Clerk via email at administration@eastvalley.org. Anyone wishing to join the meeting may do so using the following information: DIAL: 12094255876 and enter CONFERENCE ID: 952 563 808# You may also join by clicking HERE to join the meeting via Microsoft Teams. PLEASE NOTE: Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for public inspection in the District’s office located at 31111 Greenspot Rd., Highland, during normal business hours. Also, such documents are available on the District’s website at eastvalley.org and are subject to staff’s ability to post the documents before the meeting. Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelated modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above agendized public meeting should be directed to the District Clerk at (909) 8854900 at least 72 hours prior to said meeting. CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. INFORMATIONAL ITEMS 1.Flexible Workplace Pilot Program 2.Review Auditor's Communication Letter with those Charged with Governance 3.Review the Popular Annual Financial Report for Year Ended June 30, 2021 REPORTS ADJOURN FINANCE & HUMAN RESOURCES COMMITTEEDECEMBER 7, 2021East Valley Water District was formed in 1954 and provides water and wastewater services to103,000 residents within the cities of San Bernardino and Highland, and portions of SanBernardino County.EVWD operates under the direction of a 5member elected Board.COMMITTEE MEMBERS Phillip Goodrich Governing Board Member James Morales Jr. Governing Board Member Finance & Human Resources Committee Meeting December 07, 2021 1:30 PM 31111 Greenspot Road, Highland, CA 92346 Via Teleconference In an effort to protect public health and pursuant to Resolution 2021.22, an active State of Emergency still exists and continues to directly impact the ability of the members to meet safely in person; therefore, there will be no physical location to attend this meeting in person and it will be held via teleconference. Members of the public are invited to make a public comment telephonically during the public comment section of the meeting and after each agenda item. In addition, a public comment card may be submitted prior to the start of the meeting, or a request may be submitted to the District Clerk via email at administration@eastvalley.org. Anyone wishing to join the meeting may do so using the following information: DIAL: 12094255876 and enter CONFERENCE ID: 952 563 808# You may also join by clicking HERE to join the meeting via Microsoft Teams. PLEASE NOTE: Materials related to an item on this agenda submitted to the Board after distribution of the agenda packet are available for public inspection in the District’s office located at 31111 Greenspot Rd., Highland, during normal business hours. Also, such documents are available on the District’s website at eastvalley.org and are subject to staff’s ability to post the documents before the meeting. Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelated modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above agendized public meeting should be directed to the District Clerk at (909) 8854900 at least 72 hours prior to said meeting. CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. INFORMATIONAL ITEMS 1.Flexible Workplace Pilot Program 2.Review Auditor's Communication Letter with those Charged with Governance 3.Review the Popular Annual Financial Report for Year Ended June 30, 2021 REPORTS ADJOURN FINANCE & HUMAN RESOURCES COMMITTEEDECEMBER 7, 2021East Valley Water District was formed in 1954 and provides water and wastewater services to103,000 residents within the cities of San Bernardino and Highland, and portions of SanBernardino County.EVWD operates under the direction of a 5member elected Board.COMMITTEE MEMBERSPhillip GoodrichGoverning Board Member James Morales Jr.Governing Board MemberFinance & Human Resources Committee MeetingDecember 07, 2021 1:30 PM31111 Greenspot Road, Highland, CA 92346Via TeleconferenceIn an effort to protect public health and pursuant to Resolution 2021.22, an active State ofEmergency still exists and continues to directly impact the ability of the members to meetsafely in person; therefore, there will be no physical location to attend this meeting inperson and it will be held via teleconference.Members of the public are invited to make a public comment telephonically during the publiccomment section of the meeting and after each agenda item. In addition, a public commentcard may be submitted prior to the start of the meeting, or a request may be submitted tothe District Clerk via email at administration@eastvalley.org.Anyone wishing to join the meeting may do so using the following information:DIAL: 12094255876 and enter CONFERENCE ID: 952 563 808#You may also join by clicking HERE to join the meeting via Microsoft Teams.PLEASE NOTE:Materials related to an item on this agenda submitted to the Board after distribution of theagenda packet are available for public inspection in the District’s office located at 31111Greenspot Rd., Highland, during normal business hours. Also, such documents are availableon the District’s website at eastvalley.org and are subject to staff’s ability to post thedocuments before the meeting.Pursuant to Government Code Section 54954.2(a), any request for a disabilityrelatedmodification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above agendized public meeting should be directed to the District Clerk at (909) 8854900 at least 72 hours prior to said meeting. CALL TO ORDER PLEDGE OF ALLEGIANCE ROLL CALL OF BOARD MEMBERS PUBLIC COMMENTS Any person wishing to speak to the Board of Directors is asked to complete a Speaker Card and submit it to the District Clerk prior to the start of the meeting. Each speaker is limited to three (3) minutes, unless waived by the Chairman of the Board. Under the State of California Brown Act, the Board of Directors is prohibited from discussing or taking action on any item not listed on the posted agenda. The matter will automatically be referred to staff for an appropriate response or action and may appear on the agenda at a future meeting. INFORMATIONAL ITEMS 1.Flexible Workplace Pilot Program 2.Review Auditor's Communication Letter with those Charged with Governance 3.Review the Popular Annual Financial Report for Year Ended June 30, 2021 REPORTS ADJOURN Agenda Item #1 December 7, 20211 2 7 0 Meeting Date: December 7, 2021 Agenda Item #1 Informational Item Regular Meeting TO: Committee Members FROM: Director of Administrative Services SUBJECT: Flexible Workplace Pilot Program RECOMMENDATION This agenda item is for informational purposes only, no action required. BACKGROUND / ANALYSIS When the COVID-19 outbreak was declared a pandemic in March of 2020, workplace flexibility, especially in regard to remote work, was not a common workplace practice. Pre-pandemic, only 2% of the US workforce worked remotely, however by May of 2020, 70% of the US workforce was working almost 100% remote. The pandemic unexpectedly transformed flexibility in the workplace. In an effort to prevent the spread of COVID-19 and protect the health and safety of staff and the community, office staff began working remotely in March 2020. The District was unsure how the transition would work, but were pleased to find that it was, and continues to be, a great success. The District’s office staff have continued to work effectively either fully remote or in alternating bi-weekly shifts throughout the entire pandemic. Recent studies show that 83% of organizations will continue workplace flexibility at a greater scale post-pandemic because of the benefits it offers to both employees and employers such as: Employee Benefits: Improved health & happiness Work-life balance Cost savings Time savings Less distraction Employer Benefits: Increased morale Cost savings Greater talent pool High likelihood of increased productivity Reduction in absenteeism Agenda Item #1 December 7, 20212 2 7 0 Meeting Date: December 7, 2021 Agenda Item #1 Informational Item Increase in loyalty and retention While the benefits outweigh the challenges of workplace flexibility, challenges do exist such as: Maintaining a cohesive team/workplace culture/communication Ensuring appropriate technology available Onboarding new-hires Home distractions EVWD staff were able to overcome the challenges of this new flexibility by embracing the changes brought on by the pandemic. Office staff members set up home offices/workstations and quickly familiarized themselves with new modes of communication and technology through Zoom and Microsoft Teams platforms. Staff members found it productive to spend more time virtually face-to-face while working remotely and were able to continue to maintain and build relationships via these new modes of communication. The District’s IT team provided employees access to tools they needed to work from home and were available at all times to address technology concerns by accessing staff’s computers remotely. The Operations Team utilized their critical thinking skills to develop a split-location plan to keep A and B shift staff separate, and they were able to successfully distribute duties accordingly. To ensure the District continued to meet the high communication standards staff was accustomed to, the General Manager/CEO held regular virtual “All-Hands” meetings, the management team provided staff updates through email blasts and Microsoft Teams messages, and department supervisors continued to hold staff meetings virtually. With the number of positive COVID-19 cases in California, and especially in our workplace, continuing to decrease, the District feels it is safe to fully reopen to all staff and external visitors beginning January 18, 2022, with proper precautions in place. Knowing that workplace flexibility is becoming more common and will continue on in a majority of workplaces, as well as District staff having proven they can be as productive and effective with flexible work schedules, staff will be implementing a six-month Flexible Workplace Pilot Program. The Program will incorporate flexible scheduling/remote work for eligible positions that can be accommodated, at the Department Manager’s discretion. Managers will be responsible for approving requests and determining flexibility arrangements that work for their respective departments, with a maximum of eight flexible/remote working days per month. Staff must understand that this Flexible Workplace Pilot Program is a privilege, not a right, and that the Manager can stop the flexible arrangement at any Agenda Item #1 December 7, 20213 2 7 0 Meeting Date: December 7, 2021 Agenda Item #1 Informational Item time. To maintain the District’s workplace culture and continue to be the Top Workplace our staff enjoys reporting to, every Wednesday will be a dedicated “All-Staff” day where all District staff are expected to report to work. There will also be a dedicated monthly All- Hands meeting where all staff will be expected to report to work. In addition, to ensure all new-hires have a successful onboarding process and get to familiarize themselves with District procedures and get to know all staff, new hires will not be offered flexible work arrangements for the first six months of their employment. To analyze the program’s success and viability, a mid-point evaluation with department managers and supervisors will be conducted in April 2022 to gather feedback and implement any improvement recommendations, and a final evaluation of the Pilot Program will be conducted in July 2022. If the Pilot Program is deemed unsuccessful, or productivity and effectiveness decline, the District will return to pre-pandemic work schedules. If the Program is determined to be successful and viable for the long term, staff will prepare a Flexible Workplace Program Policy, including a remote work agreement, for those who will utilize the Program, and recommend the policy to the Board of Directors for approval. Staff will continue to keep the Board updated throughout the six-month Pilot Program. AGENCY GOALS AND OBJECTIVES III - Deliver Public Service With Purpose While Embracing Continuous Growth C. Promote a Positive Organizational Culture REVIEW BY OTHERS This agenda item has been reviewed by the Executive Team. FISCAL IMPACT There is no fiscal impact associated with this agenda item. Agenda Item #1 December 7, 20214 2 7 0 Meeting Date: December 7, 2021 Agenda Item #1 Informational Item Respectfully submitted: ________________ Kerrie Bryan Director of Administrative Services ATTACHMENTS Presentation December 7, 2021 FLEXIBLE WORKPLACE PILOT PROGRAM 2 •COVID-19 transformed workplace flexibility •Pre-pandemic -2% of US workforce worked remotely •May 2020 -70% of US workforce working remotely 83% of organizations will continue workplace flexibility at a greater scale post-pandemic. WORKPLACE FLEXIBILITY 3 EMPLOYEE BENEFITS OF A FLEXIBLE WORKPLACE EmployeeImproved Health & Happiness Work-life Balance Cost Savings Time Saving Less Distraction 4 EMPLOYER BENEFITS OF A FLEXIBLE WORKPLACE •Increased morale •Cost savings •Greater talent pool •High likelihood of increased productivity •Reduction in absenteeism •Increase in loyalty and retention 90% of employers say productivity levels remained consistent or increased as a result of remote work during the pandemic. 5 WORKPLACE FLEXIBILITY CHALLENGES •Maintaining a cohesive team/workplace culture/communication •Ensuring appropriate technology available •Onboarding new-hires •Home distractions 6 THE DISTRICT MADE IT WORK Staff Embraced the Challenge IT Supported the Organization Operations Relocated/Distributed Duties Frequent All-Hands Meetings Ongoing Email Updates and Communication 7 WORKPLACE PILOT PROGRAM •District reopens January 18, 2022 •6-month pilot incorporating flexible scheduling/remote work for eligible positions •Managers approve requests and determine flexibility arrangements •Have the authority to cease arrangements at anytime •Maximum of 8 flexible/remote working days per month •Wednesday is dedicated “All-Staff” day •Flexibility is a privilege, not a right 8 •Mid-point review with department managers/supervisors –April 2022 •Gather feedback and implement recommendations •Pilot evaluation for program success and viability –July 2022 •If successful, staff will prepare a Flexible Workplace Program Policy including: •Telecommuting Staff Agreement •Board of Directors Adopted Policy •If unsuccessful, District will return to pre- pandemic schedules NEXT STEPS Agenda Item #2 December 7, 20211 2 5 9 Meeting Date: December 7, 2021 Agenda Item #2 Informational Item Regular Meeting TO: Committee Members FROM: Chief Financial Officer SUBJECT: Review Auditor's Communication Letter with those Charged with Governance RECOMMENDATION This agenda item is for informational purposes only, no action required. BACKGROUND / ANALYSIS On June 8, 2021 CliftonLarsonAllen (CLA) met with the Committee to review the auditing services to be provided during the audit for fiscal year ended June 30, 2021. In addition, CLA described the procedures that were to be used to perform their audit in accordance with generally accepted auditing standards (GAAS). Now that the audit is complete, the final requirement under Statement of Auditing Standards 114 (SAS 114) is for the auditors to communicate to those charged with governance: Their views about qualitative aspects of the entity's significant accounting practices, including accounting policies, accounting estimates, and financial statement disclosures Significant difficulties, if any, encountered during the audit Uncorrected misstatements, other than those the auditor believes are trivial, if any Disagreements with management, if any Other findings or issues, if any, arising from the audit that are, in the auditor's professional judgement, significant and relevant to those charged with governance regarding their oversight of the financial reporting process Also attached is a preliminary draft of the 2020-21 Comprehensive Annual Financial Report (Annual Report) for the Committee’s review. The 2020-21 Annual Report will receive an unmodified opinion from CLA. An unmodified opinion indicates the financial data of the District is presented fairly according to GAAP. In addition, the District will apply for the Government Finance Officers Association (GFOA), Certificate of Achievement for Excellence in Financial Reporting to ensure the District’s Annual Report once again meets high standards in governmental accounting and financial reporting. East Valley Water District has received the GFOA award for nine consecutive years. Agenda Item #2 December 7, 20212 2 5 9 Meeting Date: December 7, 2021 Agenda Item #2 Informational Item AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability A. Practice Transparent and Accountable Fiscal Management REVIEW BY OTHERS This agenda item has been reviewed by the Finance Department. FISCAL IMPACT There is no fiscal impact associated with this agenda item. Recommended by: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS 1. CLA Presentation 2. Draft SAS 114 Conclusion 3. Draft Annual Report 2021 WEALTH ADVISORY | OUTSOURCING AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor ©2 0 2 1 C l i f t o n L a r s o n A l l e n L L P 1 Audited Financial Statements June 30, 2021 Independent Auditor’s Report –Unmodified Opinion •Financial Statements prepared by management are fairly stated in accordance with generally accepted accounting principles Governance Letter •Required communication to those charged with governance on results of the audit not communicated through the audited financial statements Management Representation Letter •Required to document management’s responsibility for the financial statements and that information submitted is accurate and complete WEALTH ADVISORY | OUTSOURCING | AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor ©2 0 2 1 C l i f t o n L a r s o n A l l e n L L P Audit Process •Understanding the District and its control environment •Risk Assessment •Analytical Procedures •Interviews •Element of unpredictability •Examination of supporting documents •Corroboration of management responses Introduction of new lead audit partner •Kassie Radermacher, CPA, CFE –Lead Principal •Nitin Patel, CPA –Resource Principal Compliance with Government Code Section 12410.6(b) (audit partner cannot be responsible for reviewing the audit for 6 consecutive fiscal years) 2 Board of Directors East Valley Water District Highland, California We have audited the financial statements of the East Valley Water District (the District) as of and for the year ended June 30, 2021, and have issued our report thereon dated November 10, 2021. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Accounting policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by East Valley Water District are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2019-20. We noted no transactions entered into by the entity during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive accounting estimates affecting the financial statements were: Management’s estimate of the useful lives of its capital assets and the related period of depreciation which is based on historic knowledge of the assets and the frequency with which capital assets must be replaced; Management’s estimate of the fair value of investments based upon relevant information about similar investments held in managed portfolios and used to determine the probable market value of the investments; Management’s estimate of pension liabilities and postemployment benefits based upon actuarial assumptions; and Dr a f t Board of Directors East Valley Water District Page 2 Management’s estimate of unbilled revenues which is based on the revenue cycle of the water system and expected usage of water using historic information. We evaluated the key factors and assumptions used to develop the sensitive accounting estimates described above in determining that they are reasonable in relation to the financial statements taken as a whole. Financial statement disclosures Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. There were no particularly sensitive financial statement disclosures. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Uncorrected Misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management did not identify and we did not notify them of any uncorrected financial statement misstatements. Corrected Misstatements Management did not identify and we did not notify them of any financial statement misstatements detected as a result of audit procedures. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors’ report. No such disagreements arose during our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated November 10, 2021. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the entity’s financial statements or a determination of the type of auditors’ opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Dr a f t Board of Directors East Valley Water District Page 3 Significant Issues Discussed with Management Prior To Engagement We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to engagement as the entity’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our engagement. Other Information in Documents Containing Audited Financial Statements With respect to the required supplementary information (RSI) accompanying the financial statements, we made certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We compared the RSI for consistency with management’s responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance on the RSI. With respect to the supplementary information accompanying the financial statements, on which we were engaged to report in relation to the financial statements as a whole, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period or the reasons for such changes, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated November 10, 2021. The introductory and statistical sections accompanying the financial statements, which is the responsibility of management, was prepared for purposes of additional analysis and is not a required part of the financial statements. Such information was not subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we did not express an opinion or provide any assurance on it. Dr a f t Board of Directors East Valley Water District Page 4 This communication is intended solely for the information and use of the Board of Directors and management of East Valley Water District and is not intended to be, and should not be, used by anyone other than these specified parties. CliftonLarsonAllen LLP Glendora, California November 10, 2021 Dr a f t Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2021 East Valley Water District 31111 Greenspot Road Highland, CA 92346 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2021 Table of Contents 1 Page No. Introductory Section Letter of Transmittal.......................................................................................................... 6 Organizational Structure .................................................................................................. 10 Principal Officials ............................................................................................................. 11 GFOA Certificate ............................................................................................................ 12 Financial Section Independent Auditors’ Report ...................................................................................... 15-17 Management’s Discussion and Analysis ......................................................................... 18-28 Basic Financial Statements Statement of Net Position ......................................................................................... 31-32 Statement of Revenues, Expenses, and Changes in Net Position ................................... 33-34 Statement of Cash Flows ........................................................................................... 35-36 Notes to the Basic Financial Statements ..................................................................... 37-67 Required Supplementary Information Schedule of Proportionate Share of the Net Pension Liability ............................................ 69 Schedule of Contributions ............................................................................................. 70 Schedule of Changes in the Net OPEB Liability ................................................................ 71 Schedule of OPEB Contributions..................................................................................... 72 Notes to the Required Supplementary Information .......................................................... 73 Supplementary Information History and Organization ............................................................................................... 76 Combining Schedule of Net Position ........................................................................... 77-78 Combining Schedule of Revenues, Expenses, and Changes in Net Position .................... 79-81 Combining Schedule of Cash Flows ............................................................................ 83-84 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2021 Table of Contents 2 Page No. Statistical Information Section Financial Trends Changes in Net Position by Component – Last Ten Fiscal Years .................................... 89-90 Operating Revenue by Source – Last Ten Fiscal Years ..................................................... 91 Water Operating Expenses – Last Ten Fiscal Years .......................................................... 92 Wastewater Operating Expenses – Last Ten Fiscal Years ................................................. 93 Revenue Capacity Water Sales and Production – Last Ten Fiscal Years ........................................................ 94 Revenue Rates for Water – Last Ten Fiscal Years ........................................................ 95-96 Revenue Rates for Wastewater – Last Ten Fiscal Years ................................................ 97-98 Active Services by Type – Last Ten Fiscal Years .............................................................. 99 Principal Customers – Current Fiscal Year and Nine Years Ago......................................... 100 Debt Capacity Ratio of Outstanding Debt – Last Ten Fiscal Years .......................................................... 101 Debt Service Coverage – Last Ten Fiscal Years............................................................... 102 Demographic Information Demographic and Economic Statistics – Last Ten Calendar / Fiscal Years ......................... 103 Operating Information Full-Time Equivalent Employees by Department – Last Ten Fiscal Years ........................... 104 Operating and Capacity Indicators for Water and Wastewater – Last Ten Fiscal Years ....... 105 Other Information Capacity Charge Funds ............................................................................................ 107-109 3 4 5 6 November 10, 2021 To the Board of Directors and Customers of East Valley Water District, We are pleased to submit the Comprehensive Annual Financial Report (Annual Report) for East Valley Water District for the year ended June 30, 2021. This report was prepared by District staff in accordance with standards established by the Governmental Accounting Standards Board (GASB). The District’s management is responsible for the presented data, and the completeness and fairness of the presentation, including the note disclosures. We believe that the report presented is accurate in all material respects, and that the financial statements and other information are presented in a manner that enables readers to gain a full understanding of the District’s financial activities for the year. Readers should also refer to the Management’s Discussion and Analysis in the Financial Section of the Annual Report for a detailed discussion regarding the District’s financial condition and results of operations. The Annual Report follows the guidelines recommended by the Government Finance Officers Association (GFOA) of the United States and Canada. In October 2021, the District will, again, submit the Annual Report to this organization for review and possible recognition for achievement in reporting excellence. Background East Valley Water District (the District) was formed on January 18, 1954, and since then, has provided retail water service to customers in an expanding service area which now covers 30.1 square miles. The District directly serves treated water to approximately 103,000 people in the City of Highland, the eastern portion of the City of San Bernardino, the San Manuel Band of Mission Indians, and portions of the County of San Bernardino. In 1964, the District began providing wastewater collection services to the same service area. As of June 30, 2021, the District had 21,507 water connections and 19,679 wastewater connections. Water Supply and Reliability The District’s water supply for the year ended June 30, 2021 includes groundwater (79.3 percent), surface water (7.3 percent), and imported water (13.4 percent). Groundwater is pumped from the Bunker Hill Basin, and surface water from the Santa Ana River is diverted based on rights acquired from the North Fork Water Company. 7 Local Economy East Valley Water District is located within San Bernardino County in a metropolitan area referred to as the “Inland Empire”. Since 2012, the District’s population has grown by more than 59 percent and currently, comprised of mostly residential and commercial customers, with no major industrial users. Large consumers remain consistent year to year with the San Bernardino City Unified School District, Patton State Hospital, San Manuel Mission Indians, East Highlands Ranch, and the City of Highland, forming the list of top five users. In 2021, the average household income within the District’s service area was $47,000, approximately 21% lower than the County of San Bernardino. Customers who reside in the City of Highland account for approximately 65% of the District’s customer base. These customers had an average household income of $55,000, approximately 17% higher than the overall District average. Financial Management The District manages its resources conservatively to deliver safe and reliable services to its customers at a fair and cost-effective price. It focuses on establishing fair rates, cost containment, long-term planning, maintaining and upgrading infrastructure, and pursuing alternative source of funding. This approach has allowed the District to undertake substantial capital improvement projects during tough economic times, while passing a series of modest rate increases. The keys to the District’s successful financial management are the District’s Capital Improvement and Financial Plan (CIFP), comprehensive reviews of water and wastewater rates, and the annual budget process. The CIFP provides a comprehensive view of infrastructure investments necessary over a seven-year period to ensure that water resources are adequate, water quality is maintained, and the water and wastewater service needs of current and future customers are met. The CIFP is reviewed annually by the District’s Board of Directors 79.3% 7.3% 13.4% Water Supply Sources Groundwater Surface Water Imported 8 (Board) during the budget process, at which time the highest priority projects are adopted and receive authorization for expenditure along with the District’s operating budget. The District’s financial planning also includes the establishment and funding of reserves, and the pursuit of alternative funding sources, both of which help reduce reliance on rates and rate increases. In recent years the District has been very successful in pursuing project funding from the State Revolving Fund and Federal Emergency Management Agency (FEMA), and have applied for water and energy efficiency project funding from the Bureau of Reclamation and Edison. Internal Control District management is responsible for establishing a system of internal accounting controls designed to provide reasonable assurances that assets of the District are safeguarded against losses from unauthorized use or disposition, and theft. The District’s internal controls also ensure the proper recording of financial transactions, and the preparation of financial statements in accordance with Generally Accepted Accounting Principles (GAAP). The District’s internal control structure is designed to provide reasonable assurance that these objectives are met. The concept of reasonable assurance recognizes that 1) the cost of a control should not exceed the benefits likely to be derived and 2) the valuation of costs and benefits requires estimates and judgments by management. Budgetary Control The District’s Board of Directors annually adopt a balanced operating and capital budget prior to the new fiscal year. The budget authorizes expenditures and provides a basis for accountability over the District’s enterprise operations and capital projects. Each quarter, management provides the Board with a quarterly budget review to allow Board assessment of staff’s progress in meeting goals and objectives, and budget adjustments, if necessary, are requested at the mid-year budget review in February. Debt Administration The District utilizes proceeds from long-term debt, along with reserves and contributions from the operating budget, to finance major construction projects. Current debt consists of Revenue Bonds and loans from US Bancorp, the State Revolving Fund, and the San Bernardino Valley Municipal Water District. The District received a credit rating of AA- from Standard and Poor’s and Fitch when the Revenue Bonds were issued in September 2020. This rating was affirmed by Fitch as the result of a review conducted in August 2020. Investment Policy The Board of Directors annually adopts an investment policy that conforms to California State Law, District ordinances and resolutions, and the prudent person standard. The objectives of the policy are safety, liquidity, and 9 yield. District funds are normally invested in the State Treasurer’s Local Agency Investment Fund (LAIF), and Federal government Treasury notes or agency obligations. Audit and Financial Reporting State law requires the District to obtain an annual audit of its financial statements by an independent Certified Public Accountant. This year, the District’s Financial statements were audited by CliftonLarsonAllen LLP from Glendora, California. Their audit opinion is included in the Basic Financial Statements section of this report. 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 Comprehensive Annual Financial Report for the fiscal year ended June 30, 2020. This was the eighth year that the District has achieved this prestigious award. To be awarded a Certificate of Achievement, a governmental entity must publish an easily readable and efficiently organized Comprehensive Annual Financial Report. This report must satisfy both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements Preparation of this report was accomplished by the combined efforts of District staff. We appreciate the dedication and professionalism that our staff bring to the District. We would also like to thank the members of the Board of Directors for their continued support in the planning and implementation of the financial affairs of the District. Respectfully submitted, John Mura General Manager/CEO Brian W. Tompkins Chief Financial Officer EAST VALLEY WATER DISTRICT Organizational Structure Year Ended June 30, 2021 10 EAST VALLEY WATER DISTRICT Principal Officials Year Ended June 30, 2021 11 Vision Enhance and preserve the quality of life for our community through innovative leadership and world class public service. Core Values Leadership: Motivating a group of people to act towards achieving a common goal or destination. Partnership: Developing relationships between a wide range of groups and individuals through collaboration and shared responsibility. Stewardship: Embracing the responsibility of enhancing and protecting resources considered worth caring for and preserving. East Valley Water District Governing Board Members as of June 30, 2021 Name Title Elected / Appointed Current Term David E. Smith Chairman of the Board Elected 2020 - 2024 Phillip R. Goodrich Vice-Chairman of the Board Elected 2018 - 2022 Ronald L. Coats Governing Board Member Elected 2018 - 2022 James Morales, Jr.Governing Board Member Elected 2018 - 2022 Chris Carrillo Governing Board Member Elected 2020 - 2024 Contact Information East Valley Water District John Mura, General Manager/CEO 31111 Greenspot Road Highland, CA 92346 (909) 889-9501 www.eastvalley.org EAST VALLEY WATER DISTRICT GFOA Certificate Year Ended June 30, 2020 12 13 14 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2021 15 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2021 16 EAST VALLEY WATER DISTRICT Independent Auditor’s Report Year Ended June 30, 2021 17 EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 18 The District East Valley Water District (District) is a California Special District established under section 30000 et seq. of the California Water Code. The District is engaged in pumping, treating, and distributing water to its customers, as well as maintaining a collection system for residential and commercial wastewater that is delivered for treatment at a plant owned by the City of San Bernardino Water Department. The District serves the City of Highland and portions of the City and County of San Bernardino in California. The Basic Financial Statements East Valley Water District is a special-purpose government agency, engaged in activities that are supported exclusively by user charges. As such, the District’s financial statements are presented in the format prescribed for proprietary funds by the GASB. The following financial statements for the year ended June 30, 2021 (2020 for comparative purposes only) consist of three interrelated statements designed to provide the reader with relevant, understandable data about the District’s financial condition and operating results. They are the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Net Position, and the Statement of Cash Flows. The Statement of Net Position presents financial information on the District’s assets, liabilities, and deferred inflow and outflows of resources, with the difference reported as net position as of the last day of the District’s fiscal year. Over time, increases or decreases in net position can serve as a useful indicator of whether the financial position of the East Valley Water District is improving or deteriorating. The Statement of Revenues, Expenses, and Changes in Net Position presents information showing how the District’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 related cash flows. The Statement of Cash Flows (direct method) conveys to financial statement users how the District managed cash resources during the year. This statement converts the change in net position presented on the Statement of Revenues, Expenses, and Changes in Net Position into actual cash provided by or used for operations. The Statement of Cash Flows also details how the District obtains cash through financing and investing activities, and conversely, how cash is spent for these purposes. Summary Financial Information and Analysis Financial Condition During the year ended June 30, 2021, the District’s total assets and deferred outflows increased by $67.6 million, to $343.7 million, and included increases to the Current and Capital asset categories. Current assets decreased 2% to $38.7 million. While the decrease is a net between increases and decreases of the various current asset line items, the most significant increase was in Accounts Receivable which grew 26% to $6.03 million. When the Governor of California declared an emergency due to the COVID 19 pandemic, he also placed a EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 19 moratorium on disconnection of utility services for non-payment, including water services. The vast majority of District customers faithfully paid their water bills throughout the declared emergency, but some, who were presumably seriously affected by the pandemic and related economic ‘lockdowns’, ceased paying their bills under the relief offered by the moratorium. The disconnection moratorium will sunset on December 31, 2021 unless extended by executive or legislative action. After that date, the District will commence collection efforts on old outstanding balances using various processes, including offering payment plans and, when necessary, disconnection. In addition, the District will participate in State Arrearage Payment Plans, through which the state will pay customer outstanding balances that accrued between the dates of March 3, 2020 and June 15, 2021. The current estimate of customer balances eligible for this program is approximately $850 thousand, which the state has indicated will be paid entirely throughout the Arrearage Payment program. Restricted Asset balances decreased from $10.2 to $10.0 million. The decrease is the result of the use of developer capacity fees for component(s) of the Sterling Natural Resource Center water reclamation plant. 2021 2020 Current Assets 38.7 39.5$ Restricted Assets 10.0 10.2 Other Assets 0.3 0.3 Capital Assets - Net 290.1 222.0 Total Assets 339.1 272.0 Total Deferred Outflow of Resources 4.6 4.1 Current Liabilities 20.0 18.5 Non-Current Liabilities 182.0 121.0 Total Liabilities 202.0 139.5 Total Deferred Inflows of Resources 1.6 0.7 Net Position Net Investment in Capital Assets 114.8 106.7 Restricted 6.4 6.7 Unrestricted 18.9 22.5 Total Net Position 140.1$ 135.9$ Capital Assets increased by $68.1 million during the 2020-21 fiscal year. This amount is a net between capital additions of $75.9 million, less retirements of $1.3 million, less $6.5 million in charges for depreciation during the year. Capital additions during the year were primarily construction in progress on the SNRC. A more detailed description of capital spending is in the Capital Assets section of this analysis. Total Deferred Outflow of Resources consists of pension contributions made after the most recent pension plan actuarial valuation, as well as differences between projected and actual earnings on pension plan investments and changes in assumptions. It also includes Deferred Charges on Bond Refunding, which increased as a result of the District refunding its revenue bonds in September of 2020. Deferred outflows increased as of June 30, 2021 because deferred charges related to the 2020 refunding. While current assets decreased by $0.8 million, current liabilities increased by $1.5 million, the result of a growing retentions payable balance related to the SNRC, which is nearing the end of construction. The net impact of these EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 20 changes caused the District’s current ratio to fall slightly from 2.1:1 to 2.0:1. A 16% decline in liquid assets during the year also dropped the District’s liquidity ratio from 0.8:1 at June 30, 2020, to 0.6:1 at June 30, 2021. Non-Current Liabilities increased by $61.0 million, the net effect of: • $63.1 million in draws on the State Revolving Fund loan for the SNRC; plus • $33.8 million in 2020 refunding bonds; less • $(35.6) million in refunded 2010 and 2013 bonds; less • $(1.2) million in principal payments and premium amortization; • $0.3 million decrease in LT Debt amounts classified as current liabilities, and • $0.6 million increase in compensated absences and employee post-retirement benefit obligations calculated in accordance with GASB statements number 68 (pensions) and 75 (retiree medical). Pensions and OPEB (Other Post Employment Benefits) are further discussed in Notes 8 and 11 of the accompanying financial statements. Long-Term debt and Compensated absences are further explained in financial statement Notes 5 and 6, respectively. The District’s total Net Position was $140.1 million at the end of fiscal year 2021, a $4.2 million increase compared to the end of the previous fiscal year. Of the $140.1 million Net Position balance, $114.8 million is categorized as Net Investment in Capital Assets, $6.4 million is Restricted for Capital Expansion Projects, and $18.9 million is Unrestricted. The calculation of Net Investment in Capital Assets is included in Note 7 of the accompanying financial statements. Looking at longer term results, the District’s total Net Position has increased $22.4 million and $31.5 million over five and ten year periods, respectively. Results of Operations and Changes in Net Position Water Operations Water sales for fiscal year 2020-21 increased 14.0% to $19.3 million, the result of an increase in water demand by customers from 17,037 acre-feet in 2019-20, to 18,429 acre-feet. Total water produced by the District during the year was 18,784 acre feet, with the difference between water produced and water sold of 355 acre feet being the result of District flushing programs, water use at District facilities, and system leaks. Sales exceeded projections, which are based on historical usage, in eight out of twelve months during 2020-21, most notably during the period December through April when water usage is typically at its lowest. During that period sales in four months exceeded projections, while the fifth month was at projection. Higher than expected water demand during these months is the result of below average rainfall, a statewide problem as California is entering its third year of drought. In April 2021, a drought emergency was proclaimed for two California counties. In July the proclamation was expanded to 50 counties, and then on October 19, 2021 a statewide drought emergency was declared. East Valley Water District has been working to mitigate the effects of drought since before the previous drought emergency ended in April 2017. As referenced throughout this discussion, the District is building a water reclamation plant known as the Sterling Natural Resource Center (SNRC) which will allow the District to recharge more than six EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 21 million gallons of recycled water per day into the local groundwater basin. In addition, when the state experienced heavy rainfall in the winters of 2017 and 2018, the District participated in regional efforts to buy as much State Water Project water as possible for recharge into the basin. While these measures will not stave off local water shortages indefinitely, smart water conservation, including a statewide target of a 15% water use reduction in the next year, puts the District is in a better position than most for going years into the current drought without facing water shortages. Water System, or Meter Charge revenue increased by 2.1% to total $9.2 million for fiscal year 2020-21; meter charges are monthly fixed charges assessed to each account based on meter size serving the property. There were no rate adjustments effective for these charges during the year, but some small infill development increased the number of customer accounts explaining the small increase in revenue. $- $5 $10 $15 $20 $25 $30 $35 2017 2018 2019 2020 2021 Mi l l i o n s Water Department Operating Revenue versus Expenses Revenue Expenses Water Department operating expenses increased 0.2% to $23.3 million for fiscal year 2020-21. In general, water operations were significantly affected by power costs. Over the past few years, the District had implemented multiple energy efficiency and alternative energy production measures, and these helped mitigate the effects of rising power costs. However, by fiscal year 2019-20, Edison rate increases were beginning to offset the District’s energy measures, and in 2020-21 increases in power costs could not be avoided. In addition to rate increases, Edison redefined daily ‘peak’ hours. Peak hours and the high rates associated with them, were shifted away from the period 1:00 p.m. to 5:00 p.m., hours during which demands on the electrical grid have fallen because many customers are generating their own solar energy during those hours, to 4:00 p.m. to 9:00 p.m. when customers returning home from work/school are using electrical appliances but cannot generate solar energy. The District was able to adjust to the shift in peak hours during weekdays, but another revision that added peak hour pricing to weekend days disrupted District operational strategies that avoided peak hour rates by filling all reservoirs during the weekend. The effects of power cost increases and other costs fluctuations on the various cost centers and programs are outlined below: EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 22 • Source of Supply: SOS increased 11% overall, the net affect of two contributing factors. Power costs increased $475 thousand (40%) to $1.7 million due to increased customer demand and reason explained above, while purchased water costs decreased 51.3% to $398 thousand as the amount of water available from the state project water is declining due to the worsening drought. • Pumping: power costs related to boosting water to higher pressure zones increased $170 thousand (49%) to $519 thousand due to continued changes in Edison rates and rate structures explained above. • Treatment: these costs increased $117 thousand (13%) overall which consisted of a significant increase in materials costs, and modest increases over the remaining line items. An $80 thousand increase in materials was due to the periodic change out of filtration media at the District’s Plant 28 Granular Activated Carbon treatment module. Wastewater Operations Wastewater operating revenues consist of System Charges and Treatment Charges, and Other Operating Revenue. System Charge rates are set by the District to cover the cost of maintaining the District’s wastewater collection system and to cover a portion of administrative and general expenses. Treatment Charge rates are established by the City of San Bernardino Water Department, which treats the wastewater generated by the District’s customers – the District does not have the capability to treat wastewater until completion of the Sterling Natural Resource Center sometime in the summer of 2022. Until then, the District charges and collects treatment fees to its customers based on City rates, and at the end of each month remits those revenues to the City. Remittances to the City equal the revenue collected, therefore, wastewater treatment has no net effect on the District’s operating results. Other Operating Revenue includes inspections, plan checking, and other development related fees, and periodic reimbursements from other public agencies or utilities for shared costs or participation in conservation programs. In fiscal year 2020-21, Other Operating Revenue included the temporary rental of vacant land to an adjacent property owner who is now in escrow to buy the property in January 2022. Rate related wastewater revenue (System/Treatment Charges) during the 2020-21 fiscal year increased $19 thousand (0.1%), remaining at $13.1 million. This result is a net effect between an increase in system charges, and a decrease in treatment charges. System charges, assessed by the District for maintenance of wastewater collection mains, increased by 1.2% as a result of an increase in water usage by commercial customers. Commercial customers, which include multi-family residential complexes larger than three units, are billed for wastewater charges based on water consumption. The rate charged to commercial customers is the same for all customer types at $0.55 per hundred cubic feet. As discussed above, increased usage was generally residential, so multi-family complexes had the greatest effect on system charge revenue. Wastewater treatment revenues, and costs, both fell slightly by $40 thousand in fiscal year 2020-21, but are still displayed as $8.5 million for financial statement purposes. As with billing for system charges, commercial customer bills have a component based on water consumption, but the consumptions-based rates vary, based on customer types - charges to multi-family complexes being the lowest, and restaurants and hotels being the highest due to the nature of wastewater discharged. As fiscal year 2020-21 began, and well into the fiscal year, restaurants continued to have to limit operations due to fears of the COVID-19 Delta variant, therefore, treatment charge EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 23 revenue from restaurants and other high discharge businesses were suppressed, and led to decreased wastewater treatment revenue. Wastewater department collection line maintenance costs decreased by 5.8% compared to the prior year. This change is the result of a drop in Contract Services as the District had to deploy contractors for fewer sewer main repair incidents in 2020-21 than in the previous fiscal year. $6 $7 $8 $9 $10 $11 $12 $13 $14 $15 2017 2018 2019 2020 2021 Mi l l i o n s Wastewater Department Operating Revenue versus Expenses Revenue Expenses Shared Customer Account & Administrative Costs Costs related to Customer Accounts (Water & Wastewater Operations) decreased $100 thousand, or 5.8%. This decrease is the net effect of increased labor costs which were more than offset by reductions in contract services. Labor costs increased as the District hired an additional staff member to bolster the department in preparations for completion of the SNRC, at which time the department will be split between a new customer service counter there, and the existing counter at the District Headquarters. Contract Services were substantially cut as costly final notices to delinquent customers were eliminated because of a still affective because of an Executive Order by the Governor of California prohibiting the disconnection of delinquent customers during the COVID 19 pandemic. Administrative and general costs for the District increased by 1.1% to $10.7 million. The increase is the net effect of multiple variances for different line items in Admin and General costs, but the most significant included: 1. Conservation rebates fell 44% participation rates were affected by the inability to hold conservation workshops due to COVID 19. 2. Insurance costs continued to climb, 34.7% in 2020-21; an industry wide impact of the costly California wildfires in 2019. 3. Labor and Benefits rose 1.2% the result of COLA wage increases that became effective in September 2020. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 24 Non-Operating Activities The District’s non-operating revenue of $211 thousand includes investment earnings of $167 thousand, and $44 thousand in miscellaneous income and reimbursements. Non-operating expenses is $1.4 million in interest on District long-term obligations and $1.2 million for losses recognized on the disposal of assets. Most of the losses were due to the replacement of manual read meters, that were not fully depreciated, in favor of automated meters as the District pushed to complete the District-wide conversion/update to new metering devices. East Valley Water District Changes in Net Position (in millions) 2021 2020 Water Revenues 28.9$ 26.6$ Water Operating Expenses (23.3) (23.1) Wastewater Services 13.3 13.3 Wastewater Operating Expenses (13.2) (13.0) Non-Operating Revenues 0.2 0.6 Non-Operating Expenses (2.6) (1.6) Income Before Contributions & Special Item 3.3 2.8 Developer Contributions 0.6 3.2 Grant Funds Contributed 0.3 6.7 Change in Net Position 4.2 12.7 Beginning Net Position, as Previously Reported 135.9 123.2 Ending Net Position 140.1$ 135.9$ Investment earnings decreased 68% compared to the prior year due to the use of investible funds to prepay contractor costs on the SNRC project, costs which are being reimbursed under a State Water Resources Control Board (SWRCB) funding agreement. Earnings were also hampered by a decreasing interest rate paid by the California Local Agency Investment Fund, which dropped from 1.47% to 0.33% during fiscal year 2020-21. Capital Contributions Contributions received during fiscal year 2020-21 included $577 thousand in developer capacity fees, and a $300 thousand capital grant received from the SWRCB for the purchase of an emergency generator. Components of Net Position The District is required to present its net position in three categories: Net Investment in Capital Assets, Restricted, and Unrestricted. Net Investment in Capital Assets The components comprising Net Investment in Capital Assets are presented in Note 7 of the accompanying financial statements. The balance at June 30, 2021 is $114.8 million, an increase of $8.1 million compared to June 30, 2020. The increase is the net result of the acquisition or construction of capital assets for $74.6 million, offset by a $63.9 EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 25 million increase in outstanding debt, $3.9 million decrease in year-end project payables, and depreciation of $6.5 million. Restricted Restricted Net Position consists of unexpended development impact fees which may only be appropriated for a project included in the District’s Capital Improvement Program. A summary of the collection and use of these funds is presented as Other Information in this document. Unrestricted Unrestricted Net Position is the balance after amounts to be classified as Net Investment in Capital Assets or Restricted have been determined. Unrestricted Net Position decreased $3.6 million to $18.9 million in fiscal year 2020-21. Capital Assets The District spent approximately $72.5 million for expansion or replacement of property, plant, and equipment during the 2020-21 fiscal year. These amounts are reflected in Utility Plant, or as additions to Construction in Progress, in the accompanying financial statements. Placed in Service During the 2020-21 fiscal year, District staff, consultants, and contractors completed work on the following: • Installed 2 Tank Mixers at Plant 129 reservoirs; • Replaced fourth complete train of filtration membranes in Plant 134; • Completed comprehensive rehabilitation of tank at District Plant 39; • Installed the final 4,891 AMI meters to complete a multi-year, district wide upgrade to an automated meter reading system; and • Replaced and upsized 2,000 linear feet of sewer main. Utility Plant in Service – June 30th (in millions) Department 2021 2020 Water Source of Supply 19.3$ 19.1$ Pumping 14.9 14.6 Transmission & Distribution 101.9 101.8 Treatment 28.9 28.5 Wastewater Collection Lines 27.6 27.6 General Plant 30.4 28.9 Total 223.0$ 220.5$ EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 26 Construction in Progress (CIP) Construction in progress increased $69.9 million to $158.8 million (see note 4) between June 30, 2020 and June 30, 2021. With approximately 23 projects in progress, additions to CIP totaled $73.4 million, while $3.5 million was capitalized and transferred to Utility Plant in Service, or expenses. Of the $158.8 million balance in Construction in Progress at June 30, 2021, 98% is related to a single project, the Sterling Natural Resource Center. The SNRC is a water reclamation plant capable of converting six million gallons per day (mgd) of wastewater into recycled water that will be recharged into the regional groundwater basin. Future phases will increase capacity of the plant to 10 mgd. The SNRC project includes new interceptor mains to divert wastewater flows, treatment plant and administration facilities, and solid waste digesters. A regional recycled water pipeline and recharge basins are part of the overall project, but are being paid for by the San Bernardino Valley Municipal Water District as basin watermaster. The total cost to build the project is approximately $181 million. Through June 30, 2021, project costs totaled $156.5 million. Funding for the project will include a grant and low interest loan from the SWRCB totaling $157 million, an $18 million contribution for the basin water master for the recycled water pipeline, $4.5 million from anticipated sales tax exclusions / Edison rebates, and $1.5 million from District development impact fees or other reserves. Future Capital Improvements - Water The District’s ability to meet water quality requirements, promote water conservation, and increase efficiencies in conducting District business are the driving forces by which District management develops long term capital plans. To meet these objectives, the District’s 5-year Capital Improvement Plan includes the following projects: • Rehabilitation of District water storage tanks. • Addition of Granular Activated Carbon (GAC) filters at the District’s surface water treatment plant to mitigate the possibility of disinfectant by products • Replacement of aging water distribution pipelines that require frequent repair and are suspected of causing system water losses. • Partner with project developers to upsize their plans to build a new storage tank to serve their project The District is also exploring the feasibility of building a new surface water treatment plant in the District’s east end, closest to the source of surface water and to the largest areas of undeveloped land in the District’s service area. Future Capital Improvements - Wastewater The District maintains a list of recommended wastewater main replacements / rehabilitations based on assessments of pipeline condition noted during video logging of the collections system. Pipelines assessed at the highest risk of structural failure are prioritized on the District’s 5-year Capital Improvement Plan (CIP). EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 27 The District also completed an update to its Wastewater Collection System Master Plan in fiscal year 2018-19 which identified three wastewater pipelines that are susceptible to surcharging during heavy rains. Undersized pipelines can impede new development and will be included in discussions with developers as necessary. These pipelines are included in the District’s capacity fee structure. Long Term Debt / Credit The District’s long-term debt at June 30, 2021 consists of Revenue Bonds, loans from the California Department of Water Resources (DWR) State Revolving Fund, a capital lease purchase with US Bank, and a loan from the San Bernardino Valley Municipal Water District (SBVMWD). Outstanding balances as of June 30, 2021 were as follows: 2020A Refunding Bonds 16,885,000$ 2020B Refunding Bonds 13,615,000 SBVMWD Loan 2,146,022 AVAD Construction 5,601,571 EFAD Construction 64,240 Plant 134 Construction 286,354 SNRC Construction 126,447,674 U.S. Bank Lease Purchase 1,303,702 Total 166,349,563$ On September 10, 2020 the District refinanced 2010 Revenue Bonds, in a current refunding, and 2013 Revenue Bonds, in an advanced refunding, to take advantage of lower interest rates. The 2010 and 2013 bonds were refunded by issuance of 2020A and 2020B series revenue bonds, respectively. The favorable pricing received through the refunding transaction will save the District approximately $385,000 annually over the next 20 years. Note 5 to the accompanying financial statements explains the purposes for issuing all debt scheduled above. The funding agreement with the State Water Resources Control Board for the SNRC construction consists of a $150.3 million loan at 1.8% and a $6.7 million grant, was finalized on November 21, 2019. In December 2021 the District will formally request an increase in the loan to $164 million to finance a large emergency storage basin for off-spec water in the event the SNRC has to be taken completely offline for up to 24 hours. Part of the additional loan will also be used to fund a gap between the number of contracts signed to build digesters at the SNRC, and the existing loan funding for those digesters. Debt service of $6.8 million and plant operating expenses will be paid with $8.7 million currently paid to the City of San Bernardino Water Department for wastewater treatment, Additional revenue streams will include Local Resource Investment Program payments received from the San Bernardino Valley Municipal Water Department for the recharge of recycled water produced by the SNRC, tipping fees from waste haulers who dispose of liquid waste at the District digesters, and energy cost avoidance through use of power produced by the digesters. The loan balance as of June 30,2021 is $126.4 million; loan payments will begin one year after the Notice of Completion is filed for the SNRC. All scheduled debt payments for fiscal year 2020-21 were paid timely. EAST VALLEY WATER DISTRICT Management’s Discussion and Analysis Year Ended June 30, 2021 28 $- $20 $40 $60 $80 $100 $120 $140 $160 $180 2017 2018 2019 2020 2021 Mi l l i o n s Outstanding Long-Term Debt June 30th 2020B Bonds 2020A Bonds SBVMWD Loan US Bank Loan SRF Loans- Other SRF Loan-SNRC Standard & Poor’s and Fitch rated the District’s 2020 Series A and B Revenue Bonds at AA- at the time of issuance. Dun & Bradstreet (D&B), based on audited financial statements and creditor input, also rated the District. The rating given by D&B is currently 5A1 accompanied by a financial condition assessment of ‘strong’, which is no change from previous years. Rate Increases On May 12, 2021 the District adopted rate adjustments for water and wastewater collection activities, and adopted inaugural rates for the District’s water reclamation activities which will commence upon completion of the Sterling Natural Resource Center in mid-2022. Rate adjustments for water services will become effective on January 1, 2022, and adjustments for wastewater/recycling activities will become effective when the SNRC is completed. Additional information about the District’s water and wastewater rates can be found on the District’s website at www.eastvalley.org. Contacting the District’s Financial Management This financial report is designed to give our customers / ratepayers, creditors, and investors a general overview of the District’s finances, and to demonstrate the District’s accountability for money it receives, and stewardship over facilities it maintains. If you have questions about this report, or need additional information, contact the District’s Finance Department at 31111 Greenspot Road, Highland, California 92346, or call (909) 381-6463. 29 30 EAST VALLEY WATER DISTRICT Statement of Net Position June 30, 2021 The accompanying notes are an integral part of this statement. 31 For Comparative Purposes Only 2021 2020 ASSETS Current Assets: Cash and Cash Equivalents 8,718,115$ 8,777,977$ Investments 3,778,726 5,683,093 Accounts Receivable, Net 6,036,701 4,800,438 Interest Receivable 8,326 59,283 Other Receivables 681,203 567,882 Due from Other Governments 18,593,458 18,906,857 Inventory 503,614 486,971 Prepaid Expenses 387,404 250,403 Total Current Assets 38,707,547 39,532,904 Non-Current Assets: Restricted Cash and Cash Equivalents 9,975,888 10,195,046 Assessments Receivable 308,826 335,820 Capital Assets not being Depreciated 166,336,585 96,479,313 Capital Assets, Net 123,772,355 125,558,372 Total Non-Current Assets 300,393,654 232,568,551 Total Assets 339,101,201 272,101,455 DEFERRED OUTFLOWS OF RESOURCES Deferred Charge on Refunding 946,442 84,675 Deferred Outflows - Pensions 3,206,817 3,532,373 Deferred Outflows - OPEB 463,638 436,587 Total Deferred Outflows Of Resources 4,616,897 4,053,635 Total Assets and Deferred Outflows of Resources 343,718,098$ 276,155,090$ (Continued) EAST VALLEY WATER DISTRICT Statement of Net Position - Continued June 30, 2021 The accompanying notes are an integral part of this statement. 32 For Comparative Purposes Only 2021 2020 LIABILITIES Current Liabilities: Accounts Payable and Accrued Expenses 7,337,004$ 8,660,260$ Accrued Payroll and Benefits 684,607 598,055 Customer Service Deposits 1,331,243 1,563,518 Construction Advances and Retentions 7,324,945 3,908,876 Accrued Interest Payable 295,316 421,001 Current Portion of Compensated Absences 630,257 534,469 Current Portion of Long-Term Debt 2,441,104 2,838,685 Total Current Liabilities 20,044,476 18,524,864 Non-Current Liabilities: Compensated Absences, Less Current Portion 576,285 454,521 Net Pension Liability 12,313,294 11,805,140 Net OPEB Liability 2,040,977 2,096,677 Long-Term Debt, Less Current Portion 167,030,458 106,620,683 Total Non-Current Liabilities 181,961,014 120,977,021 Total Liabilities 202,005,490 139,501,885 DEFERRED INFLOWS OF RESOURCES Deferred Inflows - Refunding 1,268,266 Deferred Inflows - Pensions 275,850 682,596 Deferred Inflows - OPEB 55,030 62,612 Total Deferred Inflows Of Resources 1,599,146 745,208 Total Liabilities and Deferred Inflows Of Resources 203,604,636 140,247,093 NET POSITION Net Investment in Capital Assets 114,767,362 106,708,555 Restricted for: Future Capital Expansion Projects 6,435,505 6,659,487 Unrestricted 18,910,595 22,539,955 Total Net Position 140,113,462$ 135,907,997$ EAST VALLEY WATER DISTRICT Statement of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2021 The accompanying notes are an integral part of this statement. 33 For Comparative Purposes Only 2021 2020 OPERATING REVENUES Water Sales 19,305,631$ 16,902,370$ Wastewater Treatment Charges 8,456,508 8,496,012 System Charges 13,922,686 13,670,614 Other Charges 551,989 743,916 Total Operating Revenues 42,236,814 39,812,912 OPERATING EXPENSES Water Department: Source of Supply 3,617,788 3,263,403 Pumping 596,586 457,846 Treatment 1,008,129 891,127 Transmission and Distribution 3,253,175 3,460,642 Customer Accounts 1,185,551 1,356,840 Total Water Department 9,661,229 9,429,858 Wastewater Department: Wastewater Treatment 8,456,508 8,496,012 Wastewater Collection 722,680 767,448 Customer Accounts 438,645 367,097 Total Wastewater Department 9,617,833 9,630,557 Administrative and General 10,724,630 10,613,414 Operating Expenses Before Depreciation 30,003,692 29,673,829 Depreciation 6,492,372 6,575,821 Total Operating Expenses 36,496,064 36,249,650 Operating Income 5,740,750$ 3,563,262$ (Continued) EAST VALLEY WATER DISTRICT Statement of Revenues, Expenses, and Changes in Net Position - Continued Year Ended June 30, 2021 The accompanying notes are an integral part of this statement. 34 For Comparative Purposes Only 2021 2020 NON-OPERATING REVENUES (EXPENSES) Investment Income 167,499$ 524,675$ Other Income 43,744 121,983 Interest Expense (1,387,113) (1,579,104) Loss on Disposal of Assets (1,236,600) - Total Non-Operating Revenues (Expenses)(2,412,470) (932,446) Income Before Contributions 3,328,280 2,630,816 CONTRIBUTIONS Capacity Charges 577,185 3,219,397 Capital Grants 300,000 6,742,125 Total Contributions 877,185 9,961,522 CHA NGE IN NET POSITION 4,205,465 12,592,338 TOTA L NET POSITION, BEGINNING 135,907,997 123,315,659 TOTA L NET POSITION, ENDING 140,113,462$ 135,907,997$ EAST VALLEY WATER DISTRICT Statement of Cash Flows Year Ended June 30, 2021 The accompanying notes are an integral part of this statement. 35 For Comparative Purposes Only 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers 40,768,273$ 41,788,133$ Cash Payments for Employees Services (11,567,176) (10,822,584) Cash Payments to Suppliers (19,267,178) (14,067,425) Misc Income 24,325 254,644 Net Cash Provided by Operating Activities 9,958,244 17,152,768 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Grant Funds Received 316,145 6,742,125 Proceeds from Sale of Capital Assets 26,552 51,722 Developer Fees Received 577,185 3,219,397 Assessments Received 27,000 6,119 Proceeds/Draws from SRF Loan 63,384,866 33,232,846 Proceeds from Issuance of Bonds 33,761,890 - Payments to Retire Capital Debt (36,225,058) (2,669,311) Interest Paid on Capital Debt (1,718,549) (1,705,919) Acquisition of Capital Assets (72,417,532) (58,934,799) Net Cash Used for Capital and Related Financing Activites (12,267,501) (20,057,820) CASH FLOWS FROM INVESTING ACTIVITIES Interest Received from Investments 165,235 550,141 Acquisition of Investments (2,465,610) (5,819,234) Proceeds from Sale of Investments 4,330,612 5,598,153 Net Cash Provided (Used) by Investing Activities 2,030,237 329,060 Net Increase (Decrease) in Cash and Cash Equivalents (279,020) (2,575,992) Cash and Equivalents, Beginning of Year 18,973,023 21,549,015 Cash and Equivalents, End of Year 18,694,003$ 18,973,023$ RECONCILIATION TO STATEMENT OF NET POSITION Cash and Cash Equivalents 8,718,115$ 8,777,977$ Restricted Cash and Cash Equivalents 9,975,888 10,195,046 Total Cash and Cash Equivalents 18,694,003$ 18,973,023$ (Continued) EAST VALLEY WATER DISTRICT Statement of Cash Flows - Continued Year Ended June 30, 2021 The accompanying notes are an integral part of this statement. 36 For Comparative Purposes Only 2021 2020 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income 5,740,750$ 3,563,262$ Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation 6,492,372 6,575,821 Miscellaneous Income / (Expense)24,325 - CIP Projects Expensed 5,507 - Change in Assets and Liabilities: (Increase) Decrease in Accounts Receivable (1,236,263) (670,622) (Increase) Decrease in Other Receivables - 254,644 (Increase) Decrease in Inventory (16,643) (141,338) (Increase) Decrease in Prepaids (137,001) 19,459 (Increase) in Deferred Outflows of Resources - Pensions 298,504 (430,273) Increase (Decrease) in Accounts Payable (1,323,261) 4,089,472 Increase (Decrease) in Accrued Salaries and Benefits 86,552 104,777 Increase (Decrease) in Compensated Absences 217,552 31,711 Increase (Decrease) in Net Pension Liability 508,154 958,186 Increase in Net OPEB Liability (55,700) 80,259 Decrease in Deferred Inflows of Resources (414,328) 71,566 Increase (Decrease) in Customer Deposits (232,276) 13,180 Increase (Decrease) in Developer Deposits - 2,632,664 Total Cash Provided by Operating Activities 9,958,244$ 17,152,768$ NON-CASH INVESTING, CAPITAL, AND NON-CAPITAL FINANCING ACTIVITIES: Fair Value Adjustment to Investments 39,365$ 130,129$ Bond Issuance Costs Deducted from Bond Proceeds 72,255$ -$ 3,416,069$ 10,093,412$ Capital Assets Acquired by Assuming Liabilities, Including Retainage Payable EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 37 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A) Reporting Entity The East Valley Water District is a special district that was formed in 1954, as a result of an election by local residents who desired water service by a public water agency. Later, as the population increased, a modern wastewater system was needed to replace the septic tanks used at the time. Citizens voted to give the District responsibility for that service. The District encompasses an area of approximately 30.1 square miles and provides water and wastewater service to the City of Highland, parts of the City of San Bernardino, and unincorporated parts of the County of San Bernardino, California. The East Valley Water District Financing Authority (Authority), and the North Fork Water Company (Company) are component units of the East Valley Water District. A component unit is an entity which is financially accountable to the primary government, either because the primary government appoints a voting majority of the component unit's Board, or because the component unit will provide a financial benefit or impose a financial burden on the primary government. The Authority, and Company are blended component units. Only North Fork Water Company prepares separate financial statements. The Authority was created in August 2010 by a joint exercise of powers agreement for the purpose of financing public capital improvements. It is governed by a Board of Directors comprised of the District's Board of Directors. The Authority issued debt in October 2010 which is secured solely from installment payments under an installment purchase agreement entered into by the District and the Authority. The Company was established in February 1885 to deliver water, taken from the Santa Ana River, to its property owner /shareholders. The Company is governed by a Board of Directors comprised of, and elected by, Company shareholders. The District has purchased shares of Company stock as they become available to secure rights to the Santa Ana River water and have it delivered to the District's surface water treatment plant. At June 30, 2021, the District owned 7,146.99 of 7,156 outstanding Company shares. Due to the number of Company shares owned, the District is able to appoint a majority of the Company’s Governing Board and is therefore, financially accountable for the Company. In addition, management and staff of the District have complete responsibility for the operations of the Company. As a result, the Company's financial statements have been included in the accompanying financial statements as a blended component unit. Copies of the Company's financial statements may be obtained from the District’s Finance Department at 31111 Greenspot Road, Highland, California 92346. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 38 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued The following condensed combining schedule shows how the District and its component units are blended in the accompanying financial statements: Table 1-1 Financing District NFWC Authority Eliminations Total Statement of Net Position Current Assets 38,689,099$ 18,448$ -$ -$ 38,707,547$ Capital Assets 289,401,421 2,773,750 - (2,066,231) 290,108,940 Other Assets 10,013,298 271,416 30,500,000 (30,500,000) 10,284,714 Deferred Outflows 4,616,897 - - 4,616,897 Total Assets & Deferred Outflows 342,720,715 3,063,614 30,500,000 (32,566,231) 343,718,098 Current Liabilities 20,033,530 10,946 - - 20,044,476 Long-Term Liabilities 181,961,014 - 30,500,000 (30,500,000) 181,961,014 Deferred Inflows 1,599,146 - - - 1,599,146 Total Liabilities & Deferred Inflows 203,593,690 10,946 30,500,000 (30,500,000) 203,604,636 Net Investment in Capital Assets 113,941,060 2,892,533 - (2,066,231) 114,767,362 Restricted Net Position 6,275,370 160,135 - - 6,435,505 Unrestricted Net Position 18,910,595 - - - 18,910,595 Total Net Position 139,127,025 3,052,668 - (2,066,231) 140,113,462 Statement of Changes in Net Position Sales and Services 41,684,825$ -$ -$ -$ 41,684,825$ Other Operating Revenue 551,989 - - - 551,989 Operating Expenses 30,119,505 (115,813) - - 30,003,692 Depreciation 6,553,490 (61,118) - - 6,492,372 Operating Income 5,563,819 176,931 - - 5,740,750 Net Non-Operating Revenue (Expenses)(2,505,030) 92,560 - - (2,412,470) Capital Contributions 877,185 - - - 877,185 Special Items - - - - - Change in Net Position 3,935,974 269,491 - - 4,205,465 Beginning Net Position 135,191,051 2,783,177 - (2,066,231) 135,907,997 Ending Net Position 139,127,025$ 3,052,668$ -$ (2,066,231)$ 140,113,462$ Net Cash from Operating Activities 10,074,830$ (116,586) -$ -$ 9,958,244$ Net Cash from Capital and Related Financing Activities (12,367,303) 99,802 - - (12,267,501) Net Cash from Investing Activities 2,030,237 - - - 2,030,237 Beginning Cash and Equivalents 18,686,797 286,226 - - 18,973,023 Ending Cash & Equivalents 18,424,561$ 269,442$ -$ -$ 18,694,003$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 39 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued B) Measurement Focus, Basis of Accounting and Financial Statement Presentation The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. The District uses the economic resources measurement focus and the accrual basis of accounting. Accordingly, revenues are recognized when they are earned, and expenses are recorded when the liability is incurred. C) Comparative Data Prior year data has been included where practical for comparison purposes only. The prior year data does not represent a complete presentation in accordance with accounting principles generally accepted in the United States of America. D) Inventory Valuation Inventories are valued at cost using the average-cost method. E) Capitalization and Depreciation Capital assets purchased or constructed by the District are recorded at cost. Donated capital assets are recorded at acquisition value as of the date received. The District has a capitalization threshold of $5,000. Depreciation is computed using the straight-line method over the estimated useful lives of the various assets. Water canals, water, and wastewater lines are depreciated over 25 to 50 years; office equipment and vehicles are depreciated over 5 years. Water stock and rights contributed to the District are recorded at the same value the District is currently paying for the purchase of similar stock. F) Restricted Assets Certain assets of the District are restricted in use by ordinance or debt covenant and accordingly are shown as restricted assets on the accompanying statement of net position. Unexpended Bond proceeds are set aside for capital improvements, District deposits into Bond trustee accounts are to be used for debt service, and utility deposits must be returned to the customers at their request after their account has been paid timely for 12 consecutive months, or when their account is closed. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 40 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued G) Cash and Cash Equivalents For the purposes of the statement of cash flows, cash and cash equivalents have been defined as demand deposits and highly liquid investments purchased with an original maturity of 3 months or less. The District invests funds with the Local Agency Investment Fund (LAIF) and Money Market Mutual Funds. Due to the high liquidity of these investments, these funds are classified as cash equivalents. H) Investments The District has adopted the provisions of GASB Statement No. 72, Fair Value Measurement and Application. The objective of this Statement is to enhance comparability of financial statements among governments by measurement of certain assets and liabilities at their fair value using a consistent and more detailed definition of fair value and accepted valuation techniques. The definition of fair value is the price that would be received to sell and asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement establishes a hierarchy of inputs to valuation techniques used to measure fair value. I) Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position includes a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. The District has three items which qualify for reporting in this category; Deferred Outflows Charge on Refunding, Deferred Outflows Related to Pensions, and Deferred Outflows Related to OPEB. In addition to liabilities, the statement of financial position includes 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 has two items which qualify for reporting in this category: Deferred Inflows related to Pensions and Deferred Inflows related to OPEB. J) Compensated Absences The District has a policy whereby an employee can accumulate unused sick leave and vacation. Sick leave is to be used for extended periods of sickness; however, upon termination or retirement, a portion will be paid as additional benefits to the employee. At retirement or termination, employees who have accumulated over ten years of service will be paid between 50 to 70% of their unused sick leave (based upon their balance of unused sick leave) at their regular payroll rates in effect at the date of termination. Also, employees can cash out up to 300 hours of unused sick time, per calendar year, provided that a minimum of 160 hours is retained after said cash-out. The District has provided for these future costs by accruing a range of the earned and unused sick leave and 100% of the earned and unused vacation. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 41 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued K) Classification of Revenue As an enterprise (proprietary) fund, the District classifies its revenues into three classifications: operating revenue, non-operating revenue, and contributions. Operating revenues are defined as revenues realized by the District in exchange for providing its primary services of water distribution and wastewater collection to its customers. Non-operating revenues are those derived from the investment of cash reserves and from the disposal of excess property, and include those resources received from entities other than customers, such as governmental agencies and developers, for purposes not related to capital improvement. Donated plant and cash received for capital improvement without the requirement that the District give resources in exchange are recorded as contributions. L) Use of Restricted Resources The District uses restricted resources, prior to using unrestricted resources, to pay expenses meeting the criteria imposed on the use of restricted resources by a third party. M) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. N) 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) are additions to/deductions from the Plans’ fiduciary net position and 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. O) Postemployment Benefits Other Than Pensions (OPEB) For purposes of measuring the District’s OPEB liability related to the California Employer’s Retirement Benefits Trust (CERBT), deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the CERBT and additions to/deductions from the CERBT fiduciary net position have been determined on the same basis as they are reported by the CERBT. For this purpose, the CERBT recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments and participating interest earning investment contracts that have a maturity at the time of purchase of one year or less, which are reported at cost. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 42 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued P) Future Accounting Pronouncements The applicable GASB Statements listed below will be implemented in future financial statements: Table 1-2 GASB Statement Description Effective Date Statement No. 92 Omnibus 2020 The objectives of this statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. The statement addresses a variety of topics. Some requirements are effective upon issuance of the statement and other requirements are effective for the FY 2022-23. Statement No. 93 Replacement of Interbank Offered Rates As a result of global reference rate reform, the London Interbank Offered rate (LIBOR) is expected to cease to exist in its current form at the end of 2021. The objective of this statement is to address accounting and financial reporting implications that result from replacement of an IBOR. The statement is effective for the FY 2022-23. Statement No. 94 Public-Private and Public- Public Partnership and Availability Payment Arrangements Addresses issues related to public‐private and public‐public partnership arrangements (PPPs). A PPP is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange‐like transaction. The statement is effective for the FY 2022-23. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 43 1) REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued P) Future Accounting Pronouncements Table 1-2 - Continued GASB Statement Description Effective Date Statement No. 96 Subscription- based Information Technology Arrangements Guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). The statement is effective for the FY 2022-233 Statement No. 97 Certain Component Unit Criteria and Accounting and Financial Reports for IRS 457 Deferred Compensation Plans Objectives of this Statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans); and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans). The statement is effective for the FY 2021‐22. 2) CASH AND INVESTMENTS Cash and Investments as of June 30, 2021 are classified in the accompanying financial statements as follows: Table 2-1 Cash and Cash Equivalents 8,718,115$ Restricted Cash and Cash Equivalents 9,975,888 Investments 3,778,726 Total 22,472,729$ Cash and investments as of June 30, 2021 consist of the following: Table 2-2 Cash on Hand 5,250$ Deposits with Financial Institutions 11,245,250 Money Market Accounts with Financial Institutions 1,381,720 Investments with Local Agency Investment Fund 6,061,783 Investment in Debt Securities 3,778,726 Total 22,472,729$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 44 2) CASH AND INVESTMENTS - Continued Investments Authorized by the California Government Code and the District’s Investment Policy The table below identifies the investment types that are authorized by the District's investment policy and in accordance with Section 52601 of the California Government Code The table also identifies certain provisions of the District's investment policy that address interest rate risk and concentration of credit risk. Table 2-3 Authorized Investment Type Maximum Maturity Authorize d Limit Required Rating Bonds and Certificates of Participation by EVWD 5 years None None U.S. Treasury Bills, Notes, or Bonds 5 years None None State Registered Warrants, Notes, or Bonds 5 years None None Notes and Bonds of other Local California Agencies 5 years None None U.S. Agencies 5 years None None Negotiable Certificates of Deposits 5 years 30%None Money Market Mutual Funds and Mutual Funds 5 years 15%2 - AAA Collateralized Bank Deposits 5 years None None Local Agency Investment Fund (LAIF)N/A None None At June 30, 2021, the District had no investments in repurchase agreements and did not utilize this investment media during the reporting year. As a matter of investment policy, the District does not borrow funds with reverse repurchase agreements. Disclosures Relating to 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. One of the ways that the District minimizes its exposure to this type of risk is by investing in investments with laddered maturity dates. As of June 30, 2021, the District had the following investments and maturities: Table 2-4 Investment Type Fair Value Average Maturity Fannie Mae 300,612$ 0.15 years Freddie Mac 399,510 2.57 years Federal Home Loan Bank 1,152,243 2.44 years US Treasury 1,603,921 1.97 years Tenn Valley Authority 322,440 3.21 years LAIF 6,061,783 N/A Money Market Mutual Funds 1,381,720 N/A 11,222,229$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 45 2) CASH AND INVESTMENTS - Continued Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code or the District’s investment policy, and the actual rating as of year-end for each investment type. Table 2-5 Investment Type Fair Value Minimum Legal Rating Exempt From Disclosure Rating at Year End AAA Not Rated Fannie Mae 300,612$ N/A -$ 300,612$ -$ Freddie Mac 399,510 N/A - 399,510 - Federal Home Loan Bank 1,152,243 N/A - 1,152,243 - US Treasury 1,603,921 N/A 1,603,921 - - Tenn Valley Authority 322,440 N/A - 322,440 - LAIF 6,061,783 N/A - - 6,061,783 Money Market Mutual Funds 1,381,720 N/A - 1,381,720 - 11,222,229$ 1,603,921$ 3,556,525$ 6,061,783$ Fair Value Measurements The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. These principles recognize a three-tiered fair value hierarchy, as follows: • Level 1: Investments reflect prices quoted in active markets; • Level 2: Investments reflect prices that are based on a similar observable asset either directly or indirectly, which may include inputs in markets that are not considered to be active; and • Level 3: Investments reflect prices based upon unobservable sources. Valuation Technique: Level 2 Investments use the Market Approach which uses prices generated for identical or similar assets or liabilities. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 46 2) CASH AND INVESTMENTS – Continued The District has the following recurring fair value measurements as of June 30, 2021: Table 2-6 Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Investments by Fair Value Level (Level 1)(Level 2)(Level 3)Total Debt Securities Fannie Mae -$ 300,612$ -$ 300,612$ Freddie Mac - 399,510 - 399,510 Federal Home Loan Bank - 1,152,243 - 1,152,243 US Treasury 1,603,921 - - 1,603,921 Tenn Valley Authority - 322,440 - 322,440 Total Investments Measured at Fair Value 1,603,921$ 2,174,805$ -$ 3,778,726$ Investments Measured at Amortized Cost LAIF 6,061,783 Money Market Mutual Funds 1,381,720 Total Investments 11,222,229$ Fair Value Measurements Using Disclosure Related to Concentration of Credit Risk The District's policy places no limits on amounts invested in any given issuer beyond that stipulated by the California Government Code. At June 30, 2021, there were no investments (other than external pools, U.S. Government Securities and Money Market Mutual Funds) that exceeded 5% of the District's total investments. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government 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 counterparty (e.g., broker-dealer) to a transaction, a government 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 requires California banks and savings and loan associations to secure deposits by pledging government securities as collateral. Such collateralization of public funds is accomplished by pooling. As such, collateralized securities are held by the pledging financial institution's agent on behalf of the District. The fair value of the pledged securities must equal at least 110% of Districts deposits. California law also allows financial institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. The District may waive collateral requirements for deposits which are fully insured by Federal depository insurance. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 47 2) CASH AND INVESTMENTS – Continued As of June 30, 2021, the District had $10,237,782 deposited with financial institutions that were in excess of federal depository insurance limits. The federal deposit insurance limit is $250,000. Investment in State Investment Pool The management of the State of California Pooled Money Investment Account (generally referred to as LAIF) has reported to its participating agencies that, as of June 30, 2021, the carrying amount (at amortized cost) of the pool was $193,304,977,285 and the estimated fair value of the pool was $193,321,015,759. The District's proportionate share of the fair value (as determined by LAIF) as of June 30, 2021, was $6,062,286. Included in LAIF's investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset- backed securities, loans to certain State funds, and floating rate securities issued by federal agencies, government- sponsored enterprises, and corporations. 3) RESTRICTED CASH AND CASH EQUIVALENTS Restricted cash and cash equivalents at June 30, 2021 are restricted as follows: Table 3-1 Held for Debt Service 1,913,171$ Capacity Fees from Developers 6,275,370 Customer Deposits 1,331,242 Construction Advances 186,663 North Fork Water Company 269,442 Total 9,975,888$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 48 4) CAPITAL ASSETS A summary of changes in capital assets for the year ended June 30, 2021 is as follows: Table 4-1 Beginning of End of Year Additions Deletions Year Water Fund Non-Depreciable Assets Land and Easements 6,077,761$ -$ (2,669,491)$ 3,408,270$ Water Rights 732,835 - - 732,835 Construction in Progress 1,970,358 11,538,283 (3,450,074) 10,058,567 Total Non-Depreciable Assets 8,780,954 11,538,283 (6,119,565) 14,199,672 Depreciable Assets Source of Supply 19,130,694 122,991 - 19,253,685 Pumping Plant 14,615,217 275,445 - 14,890,662 Treatment Plant 28,526,855 357,448 - 28,884,303 Transmission and Distribution Plant 101,803,563 3,217,156 (3,084,165) 101,936,554 General Plant 19,133,335 1,508,793 (76,265) 20,565,863 Total Depreciable Assets 183,209,664 5,481,833 (3,160,430) 185,531,067 Accumulated Depreciation Source of Supply (7,788,091) (668,278) - (8,456,369) Pumping Plant (7,134,536) (466,065) - (7,600,601) Treatment Plant (12,322,121) (863,013) - (13,185,134) Transmission and Distribution Plant (42,289,994) (2,662,927) 1,848,540 (43,104,381) General Plant (6,752,234) (950,294) 76,265 (7,626,263) Total Accumulated Depreciation (76,286,976) (5,610,577) 1,924,805 (79,972,748) Water Fund Capital Assets, Net 115,703,642 11,409,539 (7,355,190) 119,757,991 Wastewater Fund Non-Depreciable Assets Land and Easements 713,940 - 2,669,491 3,383,431 Construction in Progress 86,984,419 61,818,059 (48,996) 148,753,482 Total Non-Depreciable Assets 87,698,359 61,818,059 2,620,495 152,136,913 Depreciable Assets Wastewater Collection Plant 27,559,015 40,587 - 27,599,602 General Plant 9,818,845 448,403 (402,867) 9,864,381 Total Depreciable Assets 37,377,860 488,990 (402,867) 37,463,983 Accumulated Depreciation Wastewater Collection Plant (15,043,911) (466,749) - (15,510,660) General Plant (3,698,265) (415,046) 374,024 (3,739,287) Total Accumulated Depreciation (18,742,176) (881,795) 374,024 (19,249,947) Wastewater Fund Capital Assets, Net 106,334,043 61,425,254 2,591,652 170,350,949 Total Capital Assets, Net 222,037,685$ 72,834,793$ (4,763,538)$ 290,108,940$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 49 5) LONG-TERM DEBT The schedule below summarizes changes in long-term debt during the year ended June 30, 2021: Table 5-1 Beginning Balance Additions Retirements/ Payments Ending Balance Current Portion Long-Term Portion Direct Placement: 2010 Refunding Bonds 21,635,000$ -$ (21,635,000)$ -$ -$ -$ Unamortized Premium 1,423,838 - (1,423,838) - - - 2013 Revenue Bonds 12,085,000 - (12,085,000) - - - Unamortized Premium 486,710 - (486,710) - - - Unamortized Discount (31,073) - 31,073 - - - 2020A Refunding Bonds - 16,885,000 - 16,885,000 895,000 15,990,000 2020A Unamortized Premium - 3,261,890 (139,892) 3,121,998 163,095 2,958,903 2020B Refunding Bonds - 13,615,000 - 13,615,000 275,000 13,340,000 2020B Unamortized Premium - - - - - - Subtotal Direct Placement 35,599,475 33,761,890 (35,739,367) 33,621,998 1,333,095 32,288,903 Direct Borrowing: U.S. Bank Lease Purchase 1,719,082$ -$ (415,379)$ 1,303,702 424,832$ 878,870$ SBVMWD Loan 2,576,022 - (430,000) 2,146,022 430,000 1,716,022 DWR Contracts AVAD Construction 71,002 - (6,762) 64,240 6,762 57,478 Plant 134 Construction 5,834,970 - (233,399) 5,601,571 233,399 5,368,172 EFAD Construction 299,370 - (13,016) 286,354 13,016 273,337 SNRC 63,360,062 63,087,612 - 126,447,674 - 126,447,674 Subtotal Direct Borrowing 73,860,507 63,087,612 (1,098,556) 135,849,563 1,108,009 134,741,554 Total 109,459,983$ 96,849,502$ (36,837,924)$ 169,471,561$ 2,441,104$ 167,030,457$ 2020 Revenue Bonds Series 2020A - On September 10, 2020, the District issued $16,885,000 of East Valley Water District Refunding Revenue Bonds, Series 2020A (2020A Bonds), to accomplish a current refunding of then outstanding 2010 Revenue Bonds ($21,635,000). The 2020A Bonds carry interest rates ranging from 3.00% to 5.00% and will be repaid in various principal increments with the final payment due on October 1, 2040. The refunded 2010 Bonds carried interest rates ranging from 4.00% to 5.00% and were due in various principal increments until October 1, 2040. The 2020A bonds were issued at a premium of $3,261,890, and after paying issuance costs of $161,885, net proceeds were $19,985,005. The net proceeds, combined with a $2,129,931 sinking fund for 2010 bond debt service, were sufficient to accomplish the refunding of the existing debt. All refunded debt has been retired. The refunding resulted in a difference between the reacquisition price and the carrying amount of the old debt of $259,548. This difference is included in the accompanying financial statements as a Deferred Outflows of Resources and is being charged to operations through the year 2040 using the straight-line method of amortization. The District completed the refunding to decrease total debt service over the next 20 years by $6,052,794, and to obtain an economic gain (difference between the present values of the old and new debt service payment) of $4,765,023. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 50 5) LONG-TERM DEBT - Continued Series 2020B - Also on September 10, 2020, the District issued $13,615,000 of East Valley Water District Refunding Revenue Bonds, Series 2020B (2020B Bonds), to accomplish an advance refunding of then outstanding 2013 Revenue Bonds ($12,085,000). The 2020B Refunding Bonds carry interest rates from 0.42 % to 2.93 % (federally taxable) and will be repaid in various principal increments with the final payment due on October 1, 2043. The refunded 2013 Bonds carried interest rates ranging from 4.00% to 5.00% and were due in various principal increments until October 1, 2043. The 2020B bonds were issued at face value, and after paying issuance costs of $123,500, net proceeds were $13,491,500. The net proceeds, combined with a $292,563 sinking fund held for 2013 bond debt service, were used to purchase US Government securities which were deposited in an irrevocable trust with an escrow agent to provide debt service on the 2013 Bonds until October 1, 2023 on which date all outstanding bonds will be redeemed. The advance refunding met the requirements of an in-substance defeasance therefore, accordingly, the 2013 Revenue Bonds are no longer reflected as a liability on the accompanying financial statements. The refunding resulted in a difference between the reacquisition price and the carrying amount of the old debt of $259,548. This difference is included in the accompanying financial statements as a Deferred Outflows of Resources and is being charged to operations through the year 2043 using the straight-line method of amortization. The District completed the refunding to decrease total debt service over the next 23 years by $3,014,190, and to obtain an economic gain (difference between the present values of the old and new debt service payment) of $2,154,117. US Bank Lease Purchase On November 13, 2013 the District entered into a Lease Purchase Agreement with US Bancorp Government Leasing and Finance, Inc. (US Bank), to implement Energy Conservation Measures (ECM) identified in a comprehensive energy conservation and operational efficiency study prepared by Honeywell International, Inc. (Honeywell). Honeywell has been contracted to install the facilities necessary to achieve the energy savings identified in their study, and has guaranteed that the savings will be sufficient to pay the debt service on the lease with US Bank. Project costs paid to Honeywell, and the amount borrowed from US Bank under the lease agreement is $3,998,560 with an interest rate of 2.38%. Semi-annual payments are $226,398, to commence in September 2014 through March 2024. The indenture authorizes, upon default, the Trustee to declare immediate due and payable the total unpaid principal of the Bonds and accrued interest thereon. San Bernardino Valley Municipal Water District - City Creek Turnout and Plant 134 Hydroelectric Station Loan On January 20, 2015, the District entered into an agreement with the SBVMWD for the construction, financing, and maintenance of a turnout by which the District’s surface water treatment plant can receive State Project water. The total amount borrowed for construction of the project is $4,367,927 bearing interest at the State of California Local Agency Investment Fund (LAIF) apportionment rate, which is 0.33% at June 30, 2021. Debt service payments are to be made annually on February 1st over ten years. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 51 5) LONG-TERM DEBT - Continued Department of Water Resources Contract 00C412 - Arroyo Verde Assessment District (AVAD) On June 30, 2004, the District entered into a Funding Agreement for replacement of distribution pipelines in the section of the District's service area formerly served by the Arroyo Verde Water Company. The original loan amount was $169,052 with an annual interest rate of 0%. Semi-annual payments of $3,381 are due through January 2031 and are secured by annual assessments to property owners within the Arroyo Verde Assessment District. The indenture authorizes, upon default, the Trustee to declare immediate due and payable the total unpaid principal of the Bonds and accrued interest thereon. Department of Water Resources Contract 10CX110 - Plant 134 On December 21, 2010, the District entered into a Funding Agreement to upgrade treatment methods utilized by the District's surface water treatment plant (Plant 134). The amount borrowed under the agreement is $7,001,964 with an annual interest rate of 0%. Semi-annual payments of $116,699 are due through January 2045, and are secured by a pledge of net revenues of the District's water operating fund. The indenture authorizes, upon default, the State to declare immediate due and payable the total unpaid principal of the debt and accrued interest thereon. Department of Water Resources Contract 11CX101 - Eastwood Farms Assessment District (EFAD) On June 15, 2011 the District entered into a Funding Agreement for replacement of distribution pipelines in the section of the District's service area formerly serviced by the Eastwood Farms Water Users Association. The amount of the loan is $390,482 with an annual interest rate of 0%. Semi-annual payments of $6,508 are due for 30 years through January 2043. Repayment of the loan is secured by annual assessments to property owners within the Eastwood Farms Assessment District. The indenture authorizes, upon default, the Trustee to declare immediate due and payable the total unpaid principal of the Bonds and accrued interest thereon. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 52 5) LONG-TERM DEBT – Continued The aggregate debt service requirements to maturity for long-term debt as of June 30, 2021 are as follows (excludes unamortized premiums/discounts and the California State Water Resource Control Board Contract C- 06-8106-110): Table 5-2 Year Ending June 30,Principal Interest Total 2022 2,278,009$ 1,074,493$ 3,352,502$ 2023 2,337,673 1,055,766 3,393,439 2024 2,397,552 984,649 3,382,201 2025 1,988,177 912,313 2,900,490 2026 1,633,177 856,412 2,489,589 2027-2031 6,577,505 3,657,570 10,235,075 2032-2036 7,617,075 2,575,849 10,192,924 2037-2041 8,752,075 1,442,303 10,194,378 2042-2045 6,320,647 245,607 6,566,254 39,901,890$ 12,804,962$ 52,706,852$ California State Water Resources Control Board Contract C-06-8106-110 – Sterling Natural Resource Center On June 26, 2018 the District entered into a Funding Agreement for the construction of a 6 million gallon per day (mgd) water recycling plant with the State Water Resources Control Board. The initial agreement approves $11.5 million for design cost reimbursement, with a revised agreement covering design and construction costs totaling $157 million executed on December 2, 2019. The revised Agreement includes a $6.7 million grant and a low interest (1.8%) loan for the balance of $150.3 million. As of June 30, 2021 the District has incurred $138.6 million in design and construction cost, the District has drawn approximately $126.4 million, $12.2 million is awaiting reimbursement (Due From Other Governments) of the $150.3 million in loan financing available. Repayment on the loan will begin one year after the completion of construction and annual installment payments of principal and interest are projected to be approximately $6.8 million. The District has pledged available water and wastewater revenue for the repayment of the loan, including the following new revenue streams: • Wastewater treatment charges (previously paid to the City of San Bernardino) • Sale of electrical energy produced by plant digesters (beyond energy used on site) • Local Resource Investment Program fees for recycled water delivered for groundwater recharge • Tipping fees from waste haulers Estimated debt service on this loan is not included in Table 5-2 above. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 53 5) LONG-TERM DEBT - Continued Security for debt is as follows: Table 5-3 Debt Security 2020A and 2020B Refunding Revenue Bonds and Department of Water Resources Construction Loans The District is required to maintain net revenues, as defined by the revenue bond trust agreements and State of California Department of Public Health Funding agreements of at least 120% of District's annual debt service (principal and interest). At June 30, 2021, net water revenues represented 731% of the annual water debt service and net wastewater revenues represented 2,496% of the annual wastewater debt service. 6) COMPENSATED ABSENCES Compensated absences are comprised of unused vacation leave and a limited amount of sick leave which is accrued as earned in accordance with District policy. The District's liability for compensated absences is determined annually. Current portions are determined based on estimates of usage, amounts in excess of 196 hours that will be voluntarily cashed out and amounts that will be cashed out upon termination of employment. Table 6-1 Beginning of Year Additions Usage / Payments End of Year Current Portion Long- Term Portion Accrued Vacation Leave 708,831$ 512,081$ (616,129)$ 604,783$ 413,032$ 191,751$ Accrued Sick Leave 280,159 503,282 (181,682) 601,759 217,225 384,534 Total 988,990$ 1,015,363$ (797,811)$ 1,206,542$ 630,257$ 576,285$ 7) NET INVESTMENT IN CAPITAL ASSETS Net Investment in capital assets at June 30, 2021 consisted of the following: Table 7-1 Non-Depreciable Capital Assets 166,336,585$ Depreciable Capital Assets 222,995,050 Accumulated Depreciation (99,222,695) Loans Payable (142,987,846) Bonds Payable (33,621,998) Deferred Amount on Refunding 1,268,266 Total 114,767,362$ EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 54 8) DEFINED BENEFIT PENSION PLAN (PERS) A) General Information about the Pension Plans Plan Description All qualified permanent and probationary employees are eligible to participate in the District’s Miscellaneous Employee Pension Plans, cost-sharing multiple employer defined benefit pension plans administered by the California Public Employees’ Retirement System (CalPERS). Benefit provisions under the Plans are established by State statue and East Valley Water District 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. 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 2 W 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, 2021, are summarized as follows: Table 8-1 Prior to On or after Hire Date January 1, 2013 January 1, 2013 Benefit Formula 2.7% @55 2.0% @62 Benefit Vesting Schedule 5 years service 5 years service Benefit Payments monthly for life monthly for life Retirement Age 50 - 55 52 - 67 Monthly Benefits, as a % of Eligible Compensation 2.0% to 2.7%1.0% to 2.5% Required Employee Contribution Rates 8.0%6.5% Required Employer Contribution Rates 12.805%7.026% Miscellaneous Contributions Section 20814(c) of the California Public Employees’ Retirement Law 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 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an 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. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 55 8) DEFINED BENEFIT PENSION PLAN (PERS) – Continued For the year ended June 30, 2021, the contributions recognized as part of pension expense for the Plans were as follows: Table 8-2 Miscellaneous Contributions - Employer $ 1,900,537 B) Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2021, the District reported net pension liabilities for its proportionate shares of the net pension liability of the Plans as follows: Table 8-3 Proportionate Share of Net Pension Liability Miscellaneous $ 12,313,294 The District’s net pension liability for each Plan is measured as the proportionate share of the net pension liability. The net pension liability of each of the Plans is measured as of June 30, 2020, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The District’s proportionate share of the net pension liability for each Plan as of June 30, 2019 and 2020 was as follows: Table 8-4 Prior to January 1, 2013 Proportion - June 30, 2019 0.294797% Proportion - June 30, 2020 0.291917% Change - Increase (Decrease)-0.002879% Miscellaneous EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 56 8) DEFINED BENEFIT PENSION PLAN (PERS) – Continued For the year ended June 30, 2021, the District recognized pension expense of $526,006. At June 30, 2021, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Table 8-5 Deferred Outflows of Resources Deferred Inflows of Resources Difference between expected and actual experience $ 634,541 -$ Changes in Assumptions - 87,823 Net differences between projected and actual earnings on plan investments 365,786 - Change in employer's proportion 108,274 102,175 Difference between the employer's contributions and the employer's proportionate share of contributions 197,679 85,852 Pension contributions subsequent to measurement date 1,900,537 - Total $ 3,206,817 $ 275,850 $1,900,537 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, 2022. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Table 8-6 Year Ended June 30,Amount 2022 $ 141,095 2023 402,605 2024 294,830 2024 191,900 $ 1,030,430 EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 57 8) DEFINED BENEFIT PENSION PLAN (PERS) – Continued Actuarial Assumptions The total pension liabilities in the June 30, 2019 actuarial valuations were determined using the following actuarial assumptions: Table 8-7 Miscellaneous Valuation Date June 30, 2019 Measurement Date June 30, 2020 Entry Age Normal Market Value of Assets 7.15% 2.50% Varies by Entry Age and Service Derived using CalPERS' membership data for all Funds The lesser of contract COLA or 2.50% until Purchasing Power (1) Mortality Rate Table (1) Post Retirement Benefit The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre- retirement and Post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found on the CalPERS website. Salary Increases Actuarial Cost Method Asset Valuation Method Actuarial Assumptions: Discount Rate Inflation Discount Rate The discount rate used to measure the total pension liability remained the same at 7.15%. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the 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 7.15% discount rate is adequate and the use of the municipal bond rate calculation EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 58 8) DEFINED BENEFIT PENSION PLAN (PERS) – Continued is not necessary. The long term expected discount rate of 7.15% 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. CalPERS continues the Asset Liability Management (ALM) process to expand its review of assets and liabilities to ensure financial risks to the System are better understood, communicated, and mitigated. To establish appropriate levels of risk, ALM is focused on investment and actuarial policies. These policies include key decision factors and intend to drive optimum asset allocations, while stabilizing employer contribution rates, and the volatility of those rates year to year. Additionally, to better manage risks arising from terminating agencies, CalPERS has enhanced its oversight of contracting public agencies' financial health through its development of a standardized review criteria. These improvements include streamlining the collection and termination process to reduce the timeframe, accelerating notifications to the Board and members, and adopting a risk oversight process to improve early detection of financial hardship issues. The long-term expected rate of return on pension plan investments was determined using a building-block method in which 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 considered both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all funds’ asset classes, expected compound (geometric) returns were calculated over the short term (first 10 years) and the long term (11+ 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 rounded 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 equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 59 8) DEFINED BENEFIT PENSION PLAN (PERS) – 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. Table 8-8 Asset Class (1) Assumed asset allocation Real Return Years 1 - 10 (2) Real Return Years 11 + (3) Global Equity 50.0%4.80%5.98% Global Fixed Income 28.0%1.00%2.62% Inflation Sensitive 0.0%0.77%1.81% Private Equity 8.0%6.30%7.23% Real Assets 13.0%3.75%4.93% Liquidity 1.0%0.00%-0.92% Total 100.0% (1)In the System's Annual Report,Fixed Income is included in Global Debt Securities; Liquidity is included in Short-term Investments;Inflation Assets are included in both Global Equity. (2) An expected inflation of 2.00% used for this period. (3) An expected inflation of 2.92% used for this period. C) Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents East Valley Water District’s proportionate share of the net pension liability for the Plan, calculated using the current discount rate, as well as what the District’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is one-percentage point lower or one-percentage point higher than the current rate: Table 8-9 Miscellaneous 1% Decrease 6.15% Net Pension Liability $ 18,765,533 Current Discount Rate 7.15% Net Pension Liability $ 12,313,294 1% Increase 8.15% Net Pension Liability $ 6,982,012 D) Pension Plan Fiduciary Net Position Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 60 8) DEFINED BENEFIT PENSION PLAN (PERS) – Continued E) Payable to the Pension Plan At June 30, 2021, the District reported a payable of $0 for the outstanding number of contributions to the pension plan required for the year ended June 30, 2021. 9) COMMITMENTS AND CONTINGENCIES Grant Awards Grant funds received by the District are subject to audit by the grantor agencies. Such audit could lead to requests for reimbursements to the grantor agencies for expenditures disallowed under terms of the grant. Management of the District believes that such disallowances, if any, would not be significant. 10) RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omission; injuries to employees; and natural disasters. The District participates in a joint powers agreement (JPA) with the Special District Risk Management Authority (Authority). The Authority is a risk-pooling self-insurance authority created under the provisions of California Government Code Section 6500 et. sec. The Authority is governed by a Board consisting of 7 directors that are either a manager or Board member of a current member agency that were elected by members of SDRMA. The Board controls the operations of the Authority including selection of management and approval of operation budgets. The relationship between the District and the Authority is such that the Authority is not a component unit of the District for financial reporting purposes. Settled claims have been immaterial and claims liabilities have not been reported in these financial statements as of June 30, 2021, or in the previous two fiscal years. The purpose of the Authority is to arrange and administer programs of insurance for the pooling of self-insured losses and to purchase excess insurance coverage. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 61 10) RISK MANAGEMENT – Continued At June 30, 2021, the District's participation in the self-insurance programs of the Authority was as follows: Table 10-1 Description Deductible Personal Injury and Property Damage Liability Coverage - General 10,000,000$ Per occurrence / aggregate where applicable $500 (property damage only) Personal Injury and Property Damage Liability Coverage - Auto 10,000,000$ Per accident None Public Officials and Employees Errors and bl 10,000,000$ Per wrongful act / annual member aggregate None Employment Practices Liability 10,000,000$ Per wrongful employment practice / aggregate limits per member included with Public Officials and Employee Errors and Omissions Coverage None up to $10,000, 50% co-insurance from $10,000 to $50,000, none for amounts greater than $50,000 Employee Benefits Liability 10,000,000$ Per wrongful act / annual member aggregate None Employee Dishonesty Coverage 1,000,000$ Per loss None Public Officials Personal Liability 500,000$ Per occurrence / annual aggregate per Board Mb $ 500 Automobile Physical Damage ACV Limits Replacement cost (stated value adjusted for depreciation on selected vehicles) $250/$500 or $500/$1,000 comprehensive / collision (as elected per vehicle) Uninsured Motorist Bodily Injury Coverage 750,000$ Per accident None Property Coverage 1,000,000,000$ Replacement cost for scheduled property if replaced (if not replaced within two years, actual cash value basis) $ 1,000 Boiler and Machinery 100,000,000$ Replacement cost $ 1,000 Limits EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 62 11) POST EMPLOYMENT HEALTHCARE BENEFITS The District provides post-employment healthcare benefits for retired employees and eligible surviving spouses in accordance with the plan as established by the District. As of June 30, 2021, the District’s total liability for post-employment healthcare benefits and details of the plan are explained below: Table 11-1 OPEB Plan Net OPEB Liability Deferred Outflows of Resources Deferred Inflows of Resources OPEB Expense Retiree Benefits Plan 2,040,977$ 463,638$ 55,030$ 277,638$ Plan Description and Eligibility The District contributes to the retiree health coverage of eligible retirees and eligible surviving spouses. As of June 7, 2011, the District is part of the Public Agency portion of the California Employers’ Retiree Benefit Trust Fund (CERBT), an agent multiple-employer plan administered by California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well as other requirements is established by State statute within the Public Employees’ Retirement Law. The District selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through District resolution. CalPERS issues a Comprehensive Annual Financial Report (Report). The Report is issued in aggregate and includes the sum of all CalPERS plans. Copies of the CalPERS Report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814. Membership in the health benefit plan consisted of the following at July 1, 2021, the date of the latest actuarial valuation: Table 11-2 Participant Type: 26 0 Active employees 65 91 Inactive participants currently receiving benefits Inactive participants entitled to but not yet receiving benefit Total Number of Participants Funding Policy The contribution requirements of plan members and the District are established and may be amended by the Board of Directors. At retirement, the District provides the minimum employer contribution under the CalPERS Health Program for eligible retirees and surviving spouses in receipt of a pension benefit from CalPERS. An employee is eligible for this employer contribution provided they are vested in their CalPERS pension benefit and commence payment of their pension benefit within 120 days of retirement with the District. Vesting requires at least five years of service. The surviving spouse of an eligible retiree who elected spouse coverage under CalPERS is eligible for the employer contribution upon death of the retiree. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 63 11) POST EMPLOYMENT HEALTHCARE BENEFITS – Continued Employees retiring with at least 10 years of District service will receive an additional District contribution through attainment of Medicare eligibility age. The additional contribution is based on the negotiated dollar amount at retirement (currently $750 per month). The surviving spouse of an eligible retiree is eligible for the District's contribution upon the death of the retiree through the spouse's attainment of Medicare eligibility age. The District’s funding policy is to contribute the Annual Determined Contribution (ADC) to their account within the CERBT. For fiscal year ended June 30, 2020, the District paid $405,008 to the plan including the implicit rate subsidy. The District contributed $184,692 including the implicit rate subsidy for retiree health benefits to the Trust during the fiscal year ended June 30, 2021. Net OPEB Liability The table herein shows the components of the net OPEB liability of the District: Table 11-3 Balance June 30, 2021 Total OPEB Liability $ 3,064,031 Plan Fiduciary Net Position 1,023,054 District's Net OPEB Liability (Asset) $ 2,040,977 Investments As described above, at June 30, 2021, all Plan investments are held in the CERBT through CalPERS. Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB At June 30, 2021, the District reported deferred outlflows of resources and deferred inflows of resources related to pensions from the sources as follows: Table 11-4 Deferred Outflows and Inflows of Resources Deferred Outflows of Resources Deferred Inflows of Resources Contributions subsequent to measurement date 225,321$ -$ Differences between expected and actuarial experience 222,115 - Changes of assumptions - (55,030) Differences between projected and actual earnings on 16,202 - Total 463,638$ (55,030)$ The deferred outflow of resources results from a change of assumptions and is amortized over the expected average remaining service life (EARSL) of the plan participants. The EARSL for the OPEB plan for June 30, 2021 is five years. The year of amortization is recognized in OPEB expense for the year the gain or loss occurs. The EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 64 11) POST EMPLOYMENT HEALTHCARE BENEFITS - Continued remaining amount is deferred and will be amortized over the remaining periods not to exceed four years. The deferred inflows of resources related to OPEB resulting from the net differences between projected and actual earnings on planned investments is amortized over a five-year period on a straight-line basis. One-fifth is recognized in pension expense during the measurement period and the remaining amount is deferred and will be amortized over the remaining four-year period. The deferred inflows of resources related to OPEB resulting from the net differences between projected and actual earnings on the plan investments is amortized over a five-year period on a straight-line basis. One-fifth is recognized in pension expense during the measurement period and the remaining amount is deferred and will be amortized over the remaining four-year period. Deferred inflows and outflows will be amortized as follow: Table 11-5 Year Ending June 30, Amortization 2022 $ 23,481 2023 23,789 2024 23,394 2025 24,088 2026 20,236 Thereafter 68,299 Total $ 183,287 Actuarial Methods and Assumptions The District’s net OPEB liability was measured as of June 30, 2020, and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation as of June 30, 2019. Liabilities in this report were calculated as of the valuation date. The total OPEB liability was determined by an actuarial valuation as of June 30, 2019, using the actuarial assumptions shown herein, applied to all periods included in the measurement, unless otherwise specified. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 65 11) POST EMPLOYMENT HEALTHCARE BENEFITS - Continued Table 11-6 Actuarial Methods and Assumptions Valuation Date June 30, 2019 Measurement Date June 30, 2020 Inflation 2.75% Salary Increases 2.75% Investment Rate of Return 6.50% Health Care Trend Rate 6.00% HMO / 6.00% PPO Mortality rates were based upon the rates under the CalPERS pensions plan updated to reflect the most recent experience study. The long-term expected rate of return on Plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the OPEB plan’s target asset allocation at June 30, 2019 are shown herein: Table 11-7 Asset Class Global Equity 40%5.00% Global Debt Securities 43%5.00% Inflation Assets 5%3.00% Commodities 4%3.00% REITs 8%5.00% Total 100%6.50% L/T Expected Real ROR Target Allocation The discount rate used to measure the total OPEB liability was 6.50 percent. The discount rate assumes the District continues to fully fund for its retiree health benefits through the CERBT under its investment allocation strategy 2. The rate reflects the CERBT published median interest rate for strategy 2 with an additional margin for adverse deviation. EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 66 11) POST EMPLOYMENT HEALTHCARE BENEFITS - Continued Changes in the Net OPEB Liability Table 11-8 Total OPEB Liability (a) Plan Fiduciary Net Position (b) Liability (Asset) (a) - (b) Balances at June 30, 2020 $ 2,896,822 $ 800,145 $ 2,096,677 Changes for the year: Service Cost 122,428 - 122,428 Interest 189,204 - 189,204 Differences between expected and actual experience 75,893 - 75,893 Employer Contributions - 405,008 (405,008) Net Investment Income - 38,644 (38,644) Change of assumptions - - - Benefit Payments (220,316) (220,316) - Administrative Expenses - (427) 427 Other Expenses - - - Net Changes 167,209 222,909 (55,700) Balances at June 30, 2021 $ 3,064,031 $ 1,023,054 $ 2,040,977 Increase (Decrease) The following presents the District’s net OPEB liability calculated using the discount rate of 6.50 percent, as well as what the net OPEB liability would be if it were calculated using a discount rate that is 1-percentage- point lower (5.5 percent) or 1-percentage-point higher (7.5 percent) than the current rate: Table 11-9 Discount Rate Net OPEB Liability (Asset) 2,456,883$ 2,040,977$ 1,863,026$ 1% Decrease (5.50%) Current Discount Rate (6.50%) 1% Increase (7.50%) The following presents the District’s net OPEB liability calculated using the current healthcare cost trend rate of 6.5 percent, as well as what the net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower (5.5 percent) or 1-percentage-point higher (7.5 percent) than the current rate: EAST VALLEY WATER DISTRICT Notes to the Basic Financial Statements Year Ended June 30, 2021 67 11) POST EMPLOYMENT HEALTHCARE BENEFITS - Continued Table 11-10 Healthcare Trend Rate Net OPEB Liability (Asset) 1% Decrease (5.00%HMO/5.00%PPO decreasing to 4.00%HMO/4.00%PPO)1,778,125$ Current Healthcare Cost Trend Rates (6.00%HMO/6.00%PPO decreasing to 5.00%HMO/5.00%PPO)2,040,977$ 1% Increase (7.00%HMO/7.00%PPO decreasing to 6.00%HMP/6.00%PPO)2,573,509$ OPEB Expense For the year ended June 30, 2021, the District recognized OPEB expense of $277,638 and recorded deferred outflows of resources of $463,638 for contributions made during fiscal year 2021 after the measurement date. The deferred outflows will be recognized in OPEB expense for the period ending June 30, 2022. The District recorded $55,030 of deferred inflows of resources resulting from the differences between projected and actual earnings on OPEB plan investments for the period ending June 30, 2020. The deferred inflows of resources will be amortized and recognized in OPEB expense over three remaining periods ending June 30, 2024. 12) CONSTRUCTION AND OTHER SIGNIFICANT COMMITMENTS The District has three significant active construction project commitments as of June 30, 2021. The following contracts are related to the construction of the Recycled Water Facility. Table 12-1 Contractual Commitments Spent to Date Remaining Commitment Design-Build Services of the Granular Activated Carbon Treatment System -$ 3,778,745$ Design-Build Services of the Recycled Water Facility 136,877,671$ 25,809,329$ Design-Build Services of the Digester 17,844,544$ 2,384,500$ 68 East Valley Water District Schedule of Proportionate Share of the Net Pension Liability Year Ended June 30, 2021 Last Ten Years* 69 Schedule of Proportionate Share of the Net Pension Liability The schedule presents information on the District’s proportionate share of the net pension liability, the plans’ fiduciary net position and, when applicable, the proportionate share of the net pension liability associated with the District. In the future, as data becomes available, 10 years of information will be presented. 2021 2020 Proportion of the Net Pension Liability 0.291917%0.294797% Proportionate Share of the Net Pension Liability $12,313,294 $11,805,140 Covered Payroll $ 6,188,589 $ 5,888,338 Proportionate Share of the Net Pension Liability as Percentage of Covered Payroll 198.97%200.48% Plan's Fiduciary Net Position $36,172,219 $34,016,773 Plan's Fiduciary Net Position as a Percentage of the Total Pension Liability 77.71%77.73% 2019 2018 2017 2016 2015 Proportion of the Net Pension Liability 0.28782%0.11699%0.11585%0.11551%0.10632% Proportionate Share of the Net Pension Liability $10,846,955 $11,601,798 $10,024,712 $ 7,928,173 $ 6,615,935 Covered Payroll $ 5,447,702 $ 4,489,575 $ 5,097,156 $ 4,715,712 $ 4,436,236 Proportionate Share of the Net Pension Liability as Percentage of Covered Payroll 199.11%258.42%196.67%168.12%149.13% Plan's Fiduciary Net Position $33,563,265 $27,706,747 $27,529,345 $28,045,198 $29,336,566 Plan's Fiduciary Net Position as a Percentage of the Total Pension Liability 77.69%71.37%74.06%78.40%79.82% Note: Fiscal year 2015 was the first year of implementation, therefore only seven years are shown. East Valley Water District Schedule of Contributions Year Ended June 30, 2021 Last Ten Years* 70 Schedule of Contributions The schedule presents information on the District’s required contribution, the amounts actually contributed, and any excess or deficiency related to the required contribution. In the future, as data becomes available, 10 years of information will be presented. 2021 2020 Contractually Required Contribution (Actuarially Determined)1,900,537$ 1,798,495$ Contributions in Relation to the Actuarially Determined Contributions 1,900,537$ 1,798,495$ Contribution Deficiency (Excess)-$ -$ Covered Payroll $ 6,188,589 $ 5,888,338 Contributions as a Percentage of Covered Payroll 30.71%30.54% 2019 2018 2017 2016 2015 Contractually Required Contribution (Actuarially Determined)1,228,277$ 1,579,268$ 1,035,102$ 895,822$ 742,546$ Contributions in Relation to the Actuarially Determined Contributions 1,228,277$ 1,579,268$ 1,035,102$ 895,822$ 742,546$ Contribution Deficiency (Excess)-$ -$ -$ -$ -$ Covered Payroll $ 5,658,626 $ 5,447,702 $ 4,489,575 $ 5,097,156 $ 4,715,712 Contributions as a Percentage of Covered Payroll 21.71%28.99%23.06%17.57%15.75% Note: Fiscal year 2015 was the first year of implementation, therefore only seven years are shown. East Valley Water District Schedule of Changes in the Net OPEB Liability Year Ended June 30, 2021 71 Schedule of Changes in the Net OPEB Liability Accounting standards require presentation of 10 years of information. However, the information in this schedule is not required to be presented retroactively. Years will be added to this schedule as future data becomes available. Total OPEB Liability 2021 2020 2019 2018 Service Cost 122,428$ 106,297$ 103,452$ 97,138$ Interest 189,204 174,233 166,826 160,043 Differences bewteen exptected and actual experience 75,893 192,265 - - Changes of assumptions - (65,796) - - Benefit Payments, including refunds of member contributions (220,316) (168,787) (149,550) (168,724) Net Change in Total OPEB Liability 167,209 238,212 120,728 88,457 Total OPEB Liability - Beginning 2,896,822 2,658,610 2,537,882 2,449,425 Total OPEB Liability - Ending (a)3,064,031$ 2,896,822$ 2,658,610$ 2,537,882$ Plan Fiduciary Net Position 2021 2020 2019 2018 Contributions - Employer 405,008$ 278,539$ 149,548$ 218,724$ Net Investment Income 38,644 48,769 37,365 36,877 Benefit Payments (220,316) (168,787) (149,548) (168,724) Administrative Expense - (330) - (261) Other Expense (427) (240) (683) - Net Change in Plan Fiduciary Net Position 222,909$ 157,951$ 36,682$ 86,616$ Plan Fiduciary Net Position - Beginning 800,145 642,194 605,512 518,896 Plan Fiduciary Net Position - Ending (b)1,023,054$ 800,145$ 642,194$ 605,512$ Net OPEB Liability (Asset) - Ending (a) - (b)2,040,977$ 2,096,677$ 2,016,416$ 1,932,370$ Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability 33.39%27.62%24.16%23.86% Covered-Employee Payroll 5,902,604$ 5,744,627$ 5,495,000$ 5,495,000$ Net OPEB Liability (Asset) as a Percentage of Covered-Employee Payroll 34.58%36.50%36.70%35.17% Note: Fiscal year 2018 was the first year of implementation, therefore only three years are shown. East Valley Water District Schedule of OPEB Contributions Year Ended June 30, 2021 72 Schedule of OPEB Contributions Accounting standards require presentation of 10 years of information. However, the information in this schedule is not required to be presented retroactively. Years will be added to this schedule as future data becomes available. OPEB Contributions 2021 2020 2019 2018 Actuarially Determined Contribution (ADC)350,024$ 362,533$ 285,551$ 144,415$ Contributions in Relation to the ADC (405,008) (278,539) (149,548) (218,724) Contribution Deficiency (Excess)(54,984) 83,994 136,003 (74,309) District's Covered-Employee Payroll 5,903,000$ 5,745,000$ 5,495,000$ 5,495,000$ Contributions as a Percentage of Covered-Employee Payroll 5.93%6.31%5.20%2.63% Note: Fiscal year 2018 was the first year of implementation, therefore only four years are shown. East Valley Water District Notes to the Required Supplementary Information Purpose of Schedules Year Ended June 30, 2021 73 Schedule of Changes in Net OPEB Liability The schedule is intended to show the funded status of the District’s actuarially determined liability for postemployment benefits other than pensions. In the future, as data becomes available, 10 years of information will be presented. Schedule of Postemployment Healthcare Contributions The schedule presents information on the District’s required contribution, the amounts actually contributed, and any excess or deficiency related to the required contribution. In the future, as data becomes available, 10 years of information will be presented. Schedule of District’s Proportionate Share of the Net Pension Liability The schedule presents information on the District’s proportionate share of the net pension liability, the plans’ fiduciary net position and, when applicable, the State’s proportionate share of the net pension liability associated with the District. In the future, as data becomes available, 10 years of information will be presented. Schedule of District’s Contributions The schedule presents information on the District’s required contribution, the amounts actually contributed, and any excess or deficiency related to the required contribution. In the future, as data becomes available, 10 years of information will be presented. 74 75 East Valley Water District History and Organization Year Ended June 30, 2021 76 Formation of the District The Board of Supervisors of San Bernardino County approved a petition in writing for the formation of the East Valley Water District (formerly East San Bernardino County Water District) under Division 12 of the Water Code of the State of California and ordered an election held January 12, 1954. The formation of the District was voted by the electors. The Board of Supervisors of San Bernardino County, by action on January 18, 1954, approved the formation of the District. Incorporation of the "East Valley Water District" was approved by the State of California on February 1, 1954. East Valley Water District Financing Authority The East Valley Water District Financing Authority (Authority) is a public body organized and existing under a Joint Exercise of Powers Agreement, and under the Constitution and laws of the State of California, between East Valley Water District and the California Municipal Finance Authority. The Authority was formed to assist in the financing and refinancing of capital improvement projects of the District for the use, benefit, and enjoyment of the public. Nature of Business The District has been engaged in the furnishing of water service and wastewater transmission services to its customers since inception. Location The District office is located at 31111 Greenspot Road, Highland, California. The office is situated within the District's boundaries which encompass an area of approximately 30.1 square miles within the County of San Bernardino, California. Directors David E. Smith Chairman of the Board Phillip R. Goodrich Vice-Chairman of the Board Ronald L. Coats Governing Board Member James Morales, Jr.Governing Board Member Chris Carrillo Governing Board Member East Valley Water District David E. Smith President Phillip R. Goodrich Vice President John Mura Secretary/Executive Director Brian W. Tompkins Director of Finance East Valley Water District Financing Authority Management John Mura General Manager/CEO Brian W. Tompkins Chief Financial Officer/Treasurer East Valley Water District District General Counsel Jean Cihigoyenetche JC Law Firm East Valley Water District East Valley Water District Combining Schedule of Net Position June 30, 2021 77 Water Wastewater Eliminations Total ASSETS Current Assets: Cash & Cash Equivalents 7,653,517$ 1,064,598$ -$ 8,718,115$ Investments 2,417,572 1,361,154 - 3,778,726 Accounts Receivable, Net 5,696,760 339,941 - 6,036,701 Interest Receivable 4,949 3,377 - 8,326 Other Receivables 681,203 - - 681,203 Due From Sewer Fund 16,218,871 - 16,218,871 - Due from Other Governments - 18,593,458 - 18,593,458 Inventory 496,893 6,721 - 503,614 Prepaid Expenses 331,597 55,807 - 387,404 Total Current Assets 33,501,362 21,425,056 16,218,871 38,707,547 Non-Current Assets: Restricted Cash & Cash Equivalents 5,989,459 3,986,429 - 9,975,888 Assessments Receivable 308,826 - - 308,826 Capital Assets not being Depreciated 14,199,672 152,136,913 - 166,336,585 Capital Assets, Net (Note 4)105,558,319 18,214,036 - 123,772,355 Total Non-Current Assets 126,056,276 174,337,378 - 300,393,654 Total Assets 159,557,638 195,762,434 16,218,871 339,101,201 DEFERRED OUTFLOWS OF RESOURCES Deferred Charge on Refunding 644,319 302,123 - 946,442 Deferred Outflows - Pensions 2,488,338 718,479 - 3,206,817 Deferred Outflows - OPEB 324,547 139,091 - 463,638 Total Deferred Outflows 3,457,204 1,159,693 - 4,616,897 Total Assets and Deferred Outflows of Resources 163,014,842$ 196,922,127$ 16,218,871$ 343,718,098$ (Continued) East Valley Water District Combining Schedule of Net Position – Continued June 30, 2021 78 Water Wastewater Eliminations Total LIABILITIES Current Liabilities: Accounts Payable & Accrued Expenses 7,309,562$ 27,442$ -$ 7,337,004$ Accrued Payroll & Benefits 512,425 172,182 - 684,607 Customer Service Deposits 1,331,243 - - 1,331,243 Construction Advances and Retentions 106,000 7,218,945 - 7,324,945 Accrued Interest Payable 270,191 25,125 - 295,316 Current Portion of Compensated Absences 494,407 135,850 - 630,257 Current Portion of Long-Term Debt 2,344,854 96,250 - 2,441,104 Due To Water Fund - 16,218,871 16,218,871 - Total Current Liabilities 12,368,682 23,894,665 16,218,871 20,044,476 Non-Current Liabilities: Compensated Absences, Less Current Portion 466,082 110,203 - 576,285 Net Pension Liability 9,421,282 2,892,012 - 12,313,294 Net OPEB Liability 1,428,684 612,293 - 2,040,977 Long-Term Debt, Less Current Portion 35,954,034 131,076,424 - 167,030,458 Total Non-Current Liabilities 47,270,082 134,690,932 - 181,961,014 Total Liabilities 59,638,764 158,585,597 16,218,871 202,005,490 DEFERRED INFLOWS OF RESOURCES Deferred Inflows - Refunding 1,268,266 - - 1,268,266 Deferred Inflows - Pensions 234,644 41,206 - 275,850 Deferred Inflows - OPEB 38,521 16,509 - 55,030 Total Deferred Inflows 1,541,431 57,715 - 1,599,146 Total Liabilities and Deferred Inflows of Resources 61,180,195 158,643,312 16,218,871 203,604,636 NET POSITION Net Investment in Capital Assets 82,727,369 32,039,993 - 114,767,362 Restricted for: Future Capital Expansion Projects 2,737,008 3,698,497 - 6,435,505 Unrestricted 16,370,270 2,540,325 - 18,910,595 Total Net Position 101,834,647$ 38,278,815$ -$ 140,113,462$ East Valley Water District Combining Schedule of Revenues, Expenses, and Changes in Net Position Year Ended June 30, 2021 79 Water Wastewater Total OPERATING REVENUE Water Sales 19,305,631$ -$ 19,305,631$ Wastewater Treatment Charges - 8,456,508 8,456,508 System Charges 9,217,003 4,705,683 13,922,686 Other Revenue 407,603 144,386 551,989 Total Operating Revenue 28,930,237 13,306,577 42,236,814 OPERATING EXPENSES Source of Supply: Salary & Benefits 755,556 - 755,556 Contract Services 423,426 - 423,426 Utilities 1,675,234 - 1,675,234 Insurance 6,284 - 6,284 Materials & Supplies 54,399 - 54,399 Purchased Water 397,625 - 397,625 Water Assessments 190,254 - 190,254 Chemicals 87,198 - 87,198 Professional Development 27,812 - 27,812 Taxes - - - Total Source of Supply 3,617,788 - 3,617,788 Pumping: Salary & Benefits 39,836 - 39,836 Contract Services 33,839 - 33,839 Utilities 518,725 - 518,725 Materials & Supplies 4,186 - 4,186 Total Pumping 596,586 - 596,586 Water Treatment: Salary & Benefits 461,936 - 461,936 Contract Services 160,146 - 160,146 Utilities 155,648 - 155,648 Materials & Supplies 106,250 - 106,250 Chemicals 124,149 - 124,149 Total Water Treatment 1,008,129 - 1,008,129 Wastewater Treatment: Treatment Services - 8,456,508 8,456,508 Transmission & Distribution: Salary & Benefits 2,282,590 - 2,282,590 Contract Services 545,199 - 545,199 Materials & Supplies 356,690 - 356,690 Chemicals 22,561 - 22,561 Permits 17,980 - 17,980 Tools 28,155 - 28,155 Total Transmission & Distribution 3,253,175$ -$ 3,253,175$ (Continued) East Valley Water District Combining Schedule of Revenues, Expenses, and Changes in Net Position - Continued Year Ended June 30, 2021 80 Water Wastewater Total OPERATING EXPENSES - Continued Wastewater Collection: Salary & Benefits -$ 540,956$ 540,956$ Contract Services - 168,545 168,545 Materials & Supplies - 11,213 11,213 Tools - 1,966 1,966 Total Wastewater Collection - 722,680 722,680 Customer Accounts: Salary & Benefits 703,851 227,136 930,987 Contract Services 345,410 162,285 507,695 Utilities 17,950 4,409 22,359 Materials & Supplies 5,838 1,843 7,681 General Office Supplies 12,042 648 12,690 Tools 1,602 - 1,602 Printing & Publishing 4,126 1,768 5,894 Postage 94,632 40,556 135,188 Professional Development 100 - 100 Total Customer Accounts 1,185,551 438,645 1,624,196 General & Administrative: Salary & Benefits 5,263,202 1,750,806 7,014,008 Contract Services 1,430,141 517,087 1,947,228 Conservation Rebates 80,214 - 80,214 Utilities 327,223 49,904 377,127 Insurance 287,229 123,025 410,254 Materials & Supplies 215,491 86,755 302,246 General Office Supplies 11,835 9,735 21,570 Legal Services 92,810 40,359 133,169 Permits 62,115 14,286 76,401 Memberships & Dues 87,108 32,145 119,253 Tools 13,297 1,822 15,119 Printing & Publishing 90,332 59,026 149,358 Professional Development 48,056 12,531 60,587 Rents & Leases 13,572 4,524 18,096 Total General & Administrative 8,022,625 2,702,005 10,724,630 OPERATING EXPENSES BEFORE DEPRECIATION 17,683,854 12,319,838 30,003,692 Depreciation 5,610,577 881,795 6,492,372 Total Operating Expenses 23,294,431 13,201,633 36,496,064 OPERATING INCOME (LOSS)5,635,806$ 104,944$ 5,740,750$ (Continued) East Valley Water District Combining Schedule of Revenues, Expenses, and Changes in Net Position - Continued Year Ended June 30, 2021 81 Water Wastewater Total NON-OPERA TING REVENUES Investment Income 164,903$ 2,596$ 167,499$ Other Income 50,342 (6,598) 43,744 Total Non-Operating Revenues 215,245 (4,002) 211,243 NON-OPERA TING EXPENSES Interest Expense 1,214,460 172,653 1,387,113 Loss on Disposal of Assets 1,234,309 2,291 1,236,600 Total Non-Operating Expenses 2,448,769 174,944 2,623,713 INCOME BEFORE CONTRIBUTIONS 3,402,282 (74,002) 3,328,280 CONTRIBUTIONS: Capacity Charges 292,851 284,334 577,185 Capital Grants 300,000 - 300,000 Total Contributions 592,851 284,334 877,185 CHA NGE IN NET POSITION 3,995,133 210,332 4,205,465 TOTA L NET POSITION, BEGINNING 97,839,514 38,068,483 135,907,997 TOTA L NET POSITION, ENDING 101,834,647$ 38,278,815$ 140,113,462$ 82 East Valley Water District Combining Schedule of Cash Flows Year Ended June 30, 2021 83 Water Wastewater Eliminations Total CASH FLOWS FROM OPERATING ACTIVITIES Cash Received from Customers 27,529,420$ 13,238,853$ -$ 40,768,273$ Cash Payments for Employees Services (9,212,448) (2,354,728) - (11,567,176) Cash Payments to Suppliers (3,128,974) (16,138,204) - (19,267,178) Misc Income / (Expense)30,923 (6,598) - 24,325 Net Cash Provided by Operating Activities 15,218,921 (5,260,677) - 9,958,244 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Grant Funds Received 316,145 - - 316,145 Proceeds from Sale of Capital Assets - 26,552 - 26,552 Developer Fees Received 292,851 284,334 - 577,185 Assessments Received 27,000 - - 27,000 Proceeds/Draws from SRF Loan - 63,384,866 - 63,384,866 Proceeds from Issuance of Bonds 29,036,890 4,725,000 - 33,761,890 Due To Water Fund - 3,300,413 (3,300,413) - Due From Sewer Fund (3,300,413) - 3,300,413 - Payments to Retire Capital Debt (31,430,518) (4,794,540) - (36,225,058) Interest Paid on Capital Debt (1,520,088) (198,461) - (1,718,549) Acquisition of Capital Assets (10,905,831) (61,511,701) - (72,417,532) Net Cash Used for Capital and Related Financing Activities (17,483,964) 5,216,463 - (12,267,501) CASH FLOWS FROM INVESTING ACTIVITIES Interest Received from Investments 149,669 15,566 - 165,235 Acquisition of Investment Securities (1,945,610) (520,000) - (2,465,610) Proceeds from Sales of Investments 3,160,612 1,170,000 - 4,330,612 Net Cash Provided (Used) by Investing Activities 1,364,671 665,566 - 2,030,237 Net (Decrease) Increase in Cash and Cash Equivalents (900,372) 621,352 - (279,020) Cash and Equivalents, Beginning of Year 14,543,348 4,429,675 - 18,973,023 Cash and Equivalents, End of Year 13,642,976$ 5,051,027$ -$ 18,694,003$ RECONCILIATION TO STATEMENT OF NET POSITION Cash and Cash Equivalents 7,653,517$ 1,064,598$ -$ 8,718,115$ Restricted Cash and Cash Equivalents 5,989,459 3,986,429 9,975,888 Total Cash and Cash Equivalents 13,642,976$ 5,051,027$ -$ 18,694,003$ (Continued) East Valley Water District Combining Schedule of Cash Flows - Continued Year Ended June 30, 2021 84 Water Wastewater Eliminations Total Reconciliation of Operating Income (Loss) to Net Cash Provided by Operating Activities Operating Income (Loss)5,635,806$ 104,944$ -$ 5,740,750$ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by Operating Activities: Depreciation 5,610,577 881,795 - 6,492,372 Miscellaneous Income/(Expense)30,923 (6,598) - 24,325 CIP Projects Expensed 5,279 228 - 5,507 Change in Assets and Liabilities: Customer Receivables (1,168,540) (67,723) - (1,236,263) Inventory (16,643) - - (16,643) Prepaids (127,781) (9,220) - (137,001) Deferred Outflow of Resources 208,953 89,551 - 298,504 Accounts Payable - Supplier 5,007,021 (6,328,273) - (1,321,252) Salaries & Benefits Payable 46,312 38,231 - 84,543 Compensated absences 192,602 24,950 - 217,552 Net Pension Liability 355,708 152,446 - 508,154 Net OPEB Liability (38,990) (16,710) - (55,700) Deferred Inflows of Resources (290,030) (124,298) - (414,328) Customer Deposits (232,276) - - (232,276) Developer Deposits - - - - 15,218,921$ (5,260,677)$ -$ 9,958,244$ NON-CASH INVESTING, CAPITAL, AND NON-CAPITAL FINANCING ACTIVITIES: Fair Value Adjustments to Investments 26,394$ 12,971$ -$ 39,365$ Bond Proceeds 51,195$ 21,060$ -$ 72,255$ Liabilities, Including Retainage -$ 3,416,069$ -$ 3,416,069$ Bond Issuance Cost Deducted from Capital Assets Acquired by Assuming 85 86 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2021 Table of Contents 87 Page No. Statistical Information Section Financial Trends .................................................................................................. 89-93 These schedules contain information to help the reader understand how the District’s financial performance and well-being have changed over time. Changes in Net Position by Component – Last Ten Fiscal Years .................................... 89-90 Operating Revenue by Source – Last Ten Fiscal Years ..................................................... 91 Water Operating Expenses – Last Ten Fiscal Years .......................................................... 92 Wastewater Operating Expenses – Last Ten Fiscal Years ................................................. 93 Revenue Capacity .............................................................................................. 94-100 These schedules contain information to help the reader assess the District’s most significant sources of revenue, water sales, meter charges, wastewater system charges, wastewater treatment charges, and other charges. Water Sales and Production – Last Ten Fiscal Years ........................................................ 94 Revenue Rates for Water – Last Ten Fiscal Years ........................................................ 95-96 Revenue Rates for Wastewater – Last Ten Fiscal Years ................................................ 97-98 Active Services by Type – Last Ten Fiscal Years .............................................................. 99 Principal Customers – Current Fiscal Year and Nine Years Ago......................................... 100 Debt Capacity ................................................................................................. 101-102 These schedules present information to help the reader assess the affordability of the District’s current levels of outstanding debt and the District’s ability to issue additional debt in the future. Ratio of Outstanding Debt – Last Ten Fiscal Years .......................................................... 101 Debt Service Coverage – Last Ten Fiscal Years............................................................... 102 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2021 Table of Contents 88 Page No. Statistical Information Section - Continued Demographic Information ..................................................................................... 103 These schedules offer demographic indicators to help the reader understand the environment within which the District’s financial activities take place. Demographic and Economic Statistics – Last Ten Calendar / Fiscal Years ......................... 103 Operating Information ................................................................................... 104-105 These schedules contain service and infrastructure data to help the reader understand how the information in the District’s financial report relates to the service provided by the District. Full-Time Equivalent Employees by Department – Last Ten Fiscal Years ........................... 104 Operating and Capacity Indicators for Water and Wastewater – Last Ten Fiscal Years ....... 105 EAST VALLEY WATER DISTRICT Changes in Net Position by Component Last Ten Fiscal Years 89 Year ended June 30, 2012 2013 2014 2015 2016 Change In Net Position Operating Revenue 28,652,017$ 31,513,194$ 32,620,577$ 30,743,445$ 33,024,082$ Operating Expenses 24,664,829 24,859,076 29,191,176 29,146,339 32,655,921 Operating Income (Loss)3,987,188 6,654,118 3,429,401 1,597,106 368,161 Non Operating Revenue (Expenses) Investment Income 84,094 55,310 49,846 100,830 146,874 Other Income 137,094 397,796 334,700 800,278 830,806 Interest Expense (1,451,516) (1,445,981) (1,917,676) (1,980,062) (1,843,440) Amortization (35,284) (69,038) (99,688) - - Gain (Loss) on Disposal of Assets - - (606,085) - - (1,265,612) (1,061,913) (2,238,903) (1,078,954) (865,760) Special Item Abandoned Projects - - - (2,413,478) - Hazard Mitigation - - - - - Capital Contributions 3,562,822 832,515 6,369,890 596,940 732,642 Change in Net Position 6,284,398 6,424,720 7,560,388 (1,298,386) 235,043 Prior Period Adjustment 2,861,951 (537,099) - (7,956,231) - Cumulative Effect of Change in Accounting Principles - - - - - Net Position - Beginning 99,475,136 108,621,485 114,509,106 122,069,494 112,814,877 Net Position - Ending 108,621,485$ 114,509,106$ 122,069,494$ 112,814,877$ 113,049,920$ Net Position By Component Net Investment in Capital Assets 96,919,789 95,258,164 101,757,787 98,091,685 103,222,160 Restricted 416,250 920,554 2,274,769 2,322,238 2,276,695 Unrestricted 11,285,446 18,330,388 18,036,938 12,400,954 7,551,065 108,621,485$ 114,509,106$ 122,069,494$ 112,814,877$ 113,049,920$ (Continued) SOURCE: East Valley Water District - Finance Department EAST VALLEY WATER DISTRICT Changes in Net Position by Component - Continued Last Ten Fiscal Years 90 Year ended June 30, 2017 2018 2019 2020 2021 Change In Net Position Operating Revenue 37,448,549$ 40,291,125$ 39,309,298$ 39,812,912$ 42,236,814$ Operating Expenses 32,299,587 35,980,099 35,898,073 36,249,650 36,496,064 Operating Income (Loss)5,148,962 4,311,026 3,411,225 3,563,262 5,740,750 Non Operating Revenue (Expenses) Investment Income 69,237 221,359 571,549 524,675 167,499 Other Income 401,323 258,560 307,247 121,983 43,744 Interest Expense (1,776,684) (1,777,852) (1,684,986) (1,579,104) (1,387,113) Amortization - - - - Gain (Loss) on Disposal of Assets - - 705,285 (1,579,104) (1,236,600) (1,306,124) (1,297,933) (100,905) (2,511,550) (2,412,470) Special Item Abandoned Projects (1,615,241) - - - - Hazard Mitigation - (155,177) - - - Capital Contributions 2,446,118 523,918 611,673 9,961,522 877,185 Change in Net Position 4,673,715 3,381,834 3,921,993 11,013,234 4,205,465 Prior Period Adjustment - - - Cumulative Effect of Change in Accounting Principles - (1,711,803) - - - Net Position - Beginning 113,049,920 117,723,635 119,393,666 123,315,659 135,907,997 Net Position - Ending 117,723,635$ 119,393,666$ 123,315,659$ 134,328,893$ 140,113,462$ Net Position By Component Net Investment in Capital Assets 104,659,796 103,210,762 95,468,735 106,708,555 114,767,362 Restricted 2,847,924 3,334,940 3,460,835 6,659,487 6,435,505 Unrestricted 10,215,915 12,847,964 24,386,089 22,539,955 18,910,595 117,723,635$ 119,393,666$ 123,315,659$ 135,907,997$ 140,113,462$ SOURCE: East Valley Water District - Finance Department EAST VALLEY WATER DISTRICT Operating Revenue by Source Last Ten Fiscal Years 91 Wastewater Wastewater Total Year Ended Water Meter System Treatment Other Operating June 30,Sales Charges Charges Charges Charges Revenue 2012 13,426,700$ 4,175,522$ 4,114,621$ 6,470,322$ 464,852$ 28,652,017$ 2013 14,780,448 4,555,414 4,473,032 6,998,487 705,813 31,513,194 2014 15,351,609 4,704,036 4,649,212 7,197,418 718,302 32,620,577 2015 13,505,159 4,874,581 4,531,355 6,907,828 924,522 30,743,445 2016 11,927,523 8,063,077 4,286,594 7,165,655 1,581,233 33,024,082 2017 14,556,339 8,944,652 4,703,439 8,128,030 1,116,089 37,448,549 2018 17,063,891 8,999,756 4,668,923 8,697,671 860,884 40,291,125 2019 15,746,654 9,009,881 4,643,732 8,592,950 1,316,081 39,309,298 2020 16,902,370 9,023,267 4,647,347 8,496,012 743,916 39,812,912 2021 19,305,631 9,217,003 4,705,683 8,456,508 551,989 42,236,814 SOURCE: East Valley Water District - Finance Department $- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 Other Charges Wastewater Treatement Charges Wastewater System Charges Meter Charges EAST VALLEY WATER DISTRICT Water Operating Expenses Last Ten Fiscal Years 92 Trans Customer Accts,Total Year Ended Source of Water &General, &Water Oper June 30,Supply Pumping Treatment Distribution Admin Expenses 2012 658,481$ 2,700,867$ 1,412,079$ 1,449,491$ 5,203,981$ 11,424,899$ 2013 672,101 2,683,340 874,448 1,469,243 5,323,101 11,022,233 2014 2,875,518 992,555 1,516,412 1,437,831 6,397,534 13,219,850 2015 3,025,714 615,147 743,099 2,120,374 6,785,909 13,290,243 2016 2,442,061 696,432 799,947 2,327,185 8,782,957 15,048,582 2017 3,401,062 646,940 750,052 2,222,953 7,696,211 14,717,218 2018 2,595,071 683,296 969,460 2,538,910 9,347,724 16,134,461 2019 2,975,348 585,585 840,623 2,819,288 9,393,555 16,614,399 2020 3,263,403 457,846 891,127 3,460,642 9,414,762 17,487,780 2021 3,617,788 596,586 1,008,129 3,253,175 9,208,176 17,683,854 SOURCES: East Valley Water District - Customer Service, Finance, and Operations Departments $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 $18,000,000 $20,000,000 Source of Supply Pumping Water Treatment Trans & Distribution EAST VALLEY WATER DISTRICT Wastewater Operating Expenses Last Ten Fiscal Years 93 Customer Accts,Total Year Ended Wastewater Wastewater General, &Wastewater Oper June 30,Collections Treatment Admin Expenses 2012 310,834$ 6,800,369$ 2,389,631$ 9,500,834$ 2013 382,197 6,998,487 2,758,848 10,139,532 2014 312,193 7,197,418 2,953,997 10,463,608 2015 448,399 6,907,828 3,356,250 10,712,477 2016 407,913 7,302,389 2,752,779 10,463,081 2017 425,944 8,128,030 2,510,920 11,064,894 2018 753,000 8,697,671 3,367,091 12,817,762 2019 700,507 8,592,950 3,309,983 12,603,440 2020 767,448 8,496,012 2,922,949 12,186,409 2021 722,680 8,456,508 3,140,650 12,319,838 SOURCES: East Valley Water District - Customer Service and Finance Departments $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 Customer Accts, General, & Admin Wastewater Treatment Wastewater Collections EAST VALLEY WATER DISTRICT Water Sales and Production Last Ten Fiscal Years 94 Water Sales Water Produced (Acre Feet)(Acre Feet) 2012 19,708 20,982 2013 20,036 22,308 2014 19,910 20,665 2015 17,431 18,494 2016 14,999 16,614 2017 16,223 17,922 2018 18,361 18,997 2019 16,167 17,397 2020 17,037 17,596 2021 18,371 18,784 SOURCES: East Valley Water District - Finance and Operations Departments Year Ended June 30, 0 5,000 10,000 15,000 20,000 25,000 Water Produced Water Sales EAST VALLEY WATER DISTRICT Revenue Rates for Water Last Ten Fiscal Years 95 Year ended June 30, 2012 2013 2014 2015*2016 Tier 1-$1.45 Tier 1-$1.45 Tier 2-$2.07 Tier 2-$2.07 Tier 3-$2.89 Tier 3-$2.89 Year ended June 30, 2012 2013 2014 2015*2016 12.58$ 13.71$ 13.71$ 20.96$ 20.96$ 12.58 13.71 13.71 26.61 26.61 19.14 20.87 20.87 37.92 37.92 35.41 38.60 38.60 66.19 66.19 81.17 88.48 88.48 100.12 100.12 149.77 163.25 163.25 207.54 207.54 247.76 270.06 270.06 365.85 365.85 492.74 537.09 537.09 744.67 744.67 786.72 857.52 857.52 1,366.62 1,366.62 (Continued) NOTES: HCF = Hundred Cubic Feet = 748 gallons *On June 1, 2015 the District adopted Water Budget Based Rates. *On January 1, 2020 the District adopted New Water Rates. SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions Meter Size Charge per HCF 1.62$ 1.77$ 1.77$ 2 (inches) 5/8 3/4 Water Consumption Rates Water Monthly System Charges 8 3 4 6 1 1 1/2 EAST VALLEY WATER DISTRICT Revenue Rates for Water - Continued Last Ten Fiscal Years 96 Year ended June 30, 2017 2018 2019 2020**2021 Tier 1-$1.63 Tier 1-$1.73 Tier 1-$1.73 Tier 1-$1.83 Tier 1-$1.83 Tier 2-$2.32 Tier 2-$2.46 Tier 2-$2.46 Tier 2-$2.61 Tier 2-$2.61 Tier 3-$3.24 Tier 3-$3.44 Tier 3-$3.44 Tier 3-$3.64 Tier 3-$3.64 Year ended June 30, 2017 2018 2019 2020 2021 23.06$ 23.06$ 23.06$ 23.06$ 23.06$ 29.27 29.27 29.27 29.27 29.27 41.71 41.71 41.71 41.71 41.71 72.81 72.81 72.81 72.81 72.81 110.13 110.13 110.13 110.13 110.13 228.30 228.30 228.30 228.30 228.30 402.44 402.44 402.44 402.44 402.44 819.14 819.14 819.14 819.14 819.14 1,503.28 1,503.28 1,503.28 1,503.28 1,503.28 NOTES: HCF = Hundred Cubic Feet = 748 gallons *On June 1, 2015 the District adopted Water Budget Based Rates. *On January 1, 2020 the District adopted New Water Rates. SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions Charge per HCF Meter Size 2 (inches) 5/8 3/4 Water Monthly System Charges 8 Water Consumption Rates 3 4 6 1 1 1/2 EAST VALLEY WATER DISTRICT Revenue Rates for Wastewater Last Ten Fiscal Years 97 Year ended June 30, 2012 2013 2014 2015*2016 Residential (1 to 3 units) Flat Monthly Charge (per unit)14.09$ 15.36$ 15.36$ 15.36$ 15.36$ Commercial Flat Monthly Charge 3.58 3.90 3.90 3.90 3.90 plus, Charge per HCF 0.50 0.55 0.55 0.55 0.55 Year ended June 30, 2012 2013 2014 2015*2016 Residential (Flat Monthly Charge) Flat Monthly Charge Residential (1 unit)18.50$ 18.50$ 18.50$ 18.50$ 19.18$ Multi-Family (2 units)37.00 37.00 37.00 37.00 38.37 Multi-Family (3 units)55.50 55.50 55.50 55.50 57.55 Commercial Multi-Family (4+ units)2.40 2.40 2.40 2.40 1.71 Non-Residential 2.40 2.40 2.40 2.40 3.18 plus, Charge per HCF: Multi-Family (4+ units)1.25 1.25 1.25 1.25 1.36 Retail 2.10 2.10 2.10 2.10 2.28 Restaurants/Lounges 2.70 2.70 2.70 2.70 2.93 Laundromats 1.50 1.50 1.50 1.50 1.63 Dry Cleaners 2.10 2.10 2.10 2.10 2.28 Schools/Churches 1.10 1.10 1.10 1.10 1.19 Governments/Municipal 1.50 1.50 1.50 1.50 1.63 Convalescent Homes 1.35 1.35 1.35 1.35 1.46 Hotels 2.70 2.70 2.70 2.70 2.93 Ofc Bldgs/Motels 1.50 1.50 1.50 1.50 1.63 Auto Repair/Svc Stations 1.30 1.30 1.30 1.30 1.41 Car Wash 1.30 1.30 1.30 1.30 1.41 NOTES:(Continued) HCF = Hundred Cubic Feet = 748 gallons *On June 1, 2015 the District adopted Water Budget Based Rates. SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions Wastewater Maintenance Charges Wastewater Treatment Charges EAST VALLEY WATER DISTRICT Revenue Rates for Wastewater - Continued Last Ten Fiscal Years 98 Year ended June 30, 2017 2018 2019 2020 2021 Residential (1 to 3 units) Flat Monthly Charge (per unit)15.36$ 15.36$ 15.36$ 15.36$ 15.36$ Commercial Flat Monthly Charge 3.90 3.90 3.90 3.90 3.90 plus, Charge per HCF 0.55 0.55 0.55 0.55 0.55 Year ended June 30, 2017 2018 2019 2020 2021 Residential (Flat Monthly Charge) Flat Monthly Charge Residential (1 unit)20.85$ 21.55$ 21.55$ 21.55$ 21.55$ Multi-Family (2 units)41.72 43.10 43.10 43.10 43.10 Multi-Family (3 units)62.58 64.64 64.64 64.64 64.64 Commercial Multi-Family (4+ units)1.90 1.97 1.97 1.97 1.97 Non-Residential 3.42 3.52 3.52 3.52 3.52 plus, Charge per HCF: Multi-Family (4 + units)1.48 1.53 1.53 1.53 1.53 Retail 2.47 2.55 2.55 2.55 2.55 Restaurants/Lounges 3.18 3.28 3.28 3.28 3.28 Laundromats 1.77 1.83 1.83 1.83 1.83 Dry Cleaners 2.47 2.55 2.55 2.55 2.55 Schools/Churches 1.29 1.33 1.33 1.33 1.33 Governments/Municipal 1.77 1.83 1.83 1.83 1.83 Convalescent Homes 1.58 1.63 1.63 1.63 1.63 Hotels 3.18 3.28 3.28 3.28 3.28 Ofc Bldgs/Motels 1.77 1.83 1.83 1.83 1.83 Auto Repair/Svc Stations 1.53 1.58 1.58 1.58 1.58 Car Wash 1.53 1.58 1.58 1.58 1.58 NOTES: HCF = Hundred Cubic Feet = 748 gallons *On June 1, 2015 the District adopted Water Budget Based Rates. SOURCE: East Valley Water District - Water and Wastewater Rate Resolutions Wastewater Maintenance Charges Wastewater Treatment Charges EAST VALLEY WATER DISTRICT Active Services by Type Last Ten Fiscal Years 99 Year Ended Residential Multi-Family Total June 30,(1 to 3 units)(4+ units)Commercial Irrigation Fire Svcs Service 2012 18,584 497 1,268 313 1,321 21,983 2013 18,584 497 1,268 313 1,321 21,983 2014 18,584 497 1,268 313 1,321 21,983 2015 18,584 497 1,268 313 1,321 21,983 2016 19,500 463 949 275 1,330 22,517 2017 19,526 463 988 275 1,339 22,591 2018 19,526 463 988 275 361 21,613 2019 19,883 474 681 322 252 21,612 2020 19,526 463 988 275 255 21,507 2021 19,526 463 988 275 255 21,507 SOURCES: East Valley Water District - Customer Service and Finance Departments 0 5,000 10,000 15,000 20,000 25,000 Residential Multi-Family Commercial Irrigation Fire Svcs EAST VALLEY WATER DISTRICT Principal Customers Current Fiscal Year and Nine Years Ago 100 Water Percentage Water Percentage Consumed of Total Consumed of Total Customer (AF)Rank (%)(AF)Rank (%) San Bernardino City Unified School District 602 1 3.20%599 1 2.85% Patton State Hospital 417 2 2.22%513 2 2.44% San Manuel Mission Indians 283 3 1.51%315 5 1.50% East Highlands Ranch 281 4 1.50%409 4 1.95% City of Highland 270 5 1.44%302 6 1.44% San Manuel Indian Bingo & Casino 194 6 1.03%435 3 2.07% Tuscany Apartments 161 7 0.86%- Village Lakes Homeowners Association 152 8 0.81%178 9 0.85% Stubblefield Mobile Home Parks & Offices 131 9 0.70%234 7 1.12% Valencia Lea Mobile Home Park 129 10 0.69%125 10 0.60% City of San Bernardino 207 8 0.99% Total - Top 10 2,620 13.96%3,317 15.81% Total - Water Produced 18,784 100.00%20,982 100.00% SOURCES: East Valley Water District - Customer Service and IT Departments 20122021 EAST VALLEY WATER DISTRICT Ratio of Outstanding Debt Last Ten Fiscal Years 101 Fiscal Year Revenue Bonds DWR Loans Capital Lease and Loan Certificates of Particaption Installment Note Outstanding Debt $ Per Capita As a Share of Personal Income 2012 32,490,000$ 3,460,760$ -$ -$ -$ $35,950,760 $ 546 1.72% 2013 43,400,000 7,101,964 - - - 50,501,964 540 1.66% 2014 42,195,000 7,091,964 3,998,560 - - 53,285,524 561 1.63% 2015 40,930,000 7,071,964 3,671,849 - - 51,673,813 508 1.40% 2016 39,615,000 6,818,565 3,299,108 - - 49,732,673 476 1.26% 2017 38,235,000 6,565,166 7,278,478 - - 52,078,644 510 1.31% 2018 36,800,000 6,721,695 6,392,308 - - 49,914,003 489 1.22% 2019 35,300,000 31,947,551 5,131,238 - - 72,378,789 710 1.69% 2020 33,720,000 69,565,404 4,295,104 - - 107,580,508 1,044 * 2021 30,500,000 132,399,838 3,449,725 - - 166,349,564 1,615 * NOTE: ** This data was not developed in the format required for this fiscal year. SOURCE: East Valley Water District - Finance Department $0 $20,000,000 $40,000,000 $60,000,000 $80,000,000 $100,000,000 $120,000,000 $140,000,000 $160,000,000 $180,000,000 Revenue Bonds DWR Loans Capital Lease and Loan Certificates of Particaption Installment Note EAST VALLEY WATER DISTRICT Debt Service Coverage Last Ten Fiscal Years 102 Gross Operating Net Available Revenue (1)Expenses(2)Revenue Principal(3)Interest Total 2012 18,286,850$ 11,424,899$ 6,861,951$ 1,048,319$ 980,000$ 2,028,319$ 3.38 % 2013 20,225,013 11,022,233 9,202,780 1,095,000 1,382,013 2,477,013 3.72 2014 27,397,559 13,219,850 14,177,709 1,167,718 1,840,671 3,008,389 4.71 2015 20,662,750 12,915,690 7,747,060 1,546,490 1,813,348 3,359,838 2.31 2016 22,543,107 15,048,582 7,494,525 1,851,139 1,718,658 3,569,797 2.10 2017 25,257,709 14,717,219 10,540,490 1,926,956 1,653,322 3,580,278 2.94 2018 27,537,072 16,134,461 11,402,611 2,479,570 1,584,820 4,064,390 2.81 2019 27,071,082 16,614,399 10,456,683 2,904,466 1,593,181 4,497,647 2.32 2020 27,466,707 17,487,780 9,978,927 2,564,310 1,456,842 4,021,152 2.48 2021 29,738,333 17,638,854 12,099,479 4,703,778 1,104,438 5,808,216 2.08 Gross Operating Net Available Revenue (1)Expenses(2)Revenue Principal Interest Total 2012 10,674,998$ 9,500,834$ 1,174,164$ 75,000$ 36,650$ $ 111,650 10.52 % 2013 11,600,800 10,139,532 1,461,268 80,000 35,100 115,100 12.70 2014 11,974,164 10,463,608 1,510,556 85,000 184,621 269,621 5.60 2015 11,578,742 10,606,751 971,991 85,000 229,725 314,725 3.09 2016 12,095,372 10,463,081 1,632,291 90,000 225,775 315,775 5.17 2017 13,134,564 11,064,894 2,069,670 95,000 221,625 316,625 6.54 2018 13,758,976 12,817,762 941,214 95,000 217,350 312,350 3.01 2019 14,433,970 12,603,440 1,830,530 100,000 212,475 312,475 5.86 2020 22,954,385 12,186,049 10,768,336 105,000 207,350 312,350 34.48 2021 13,586,909 12,319,838 1,267,071 110,000 158,476 268,476 4.72 NOTES: (1) (2)Operating expenses, less depreciation, for the utility fund. (3)Excludes Debt Service for Assessment Districts' Arroyo Verde and Eastwood Farms. *Not Applicable SOURCE: East Valley Water District - Finance Department Year Ended Gross revenue includes all operating revenue, interest income, other non-operating revenue and connection fees from the utility fund. Coverage Debt Service June 30, Wastewater Department Coverage Year Ended June 30, Debt Service Water Department EAST VALLEY WATER DISTRICT Demographics and Economic Statistics Last Ten Calendar / Fiscal Years 103 Personal Personal Income Income District Unemployment Population (thousands Per Capita Population (3)Rate (1) (3)(2) +of dollars)(2) +(dollars)(2) + 2012 65,850 12.2%2,073,512 65,821,308$ 31,744$ 2013 93,500 10.6%2,082,738 67,738,305 32,524 2014 95,000 8.9%2,099,181 72,118,958 34,356 2015 101,733 7.2%2,115,411 76,919,474 36,361 2016 104,457 6.0%2,131,960 80,401,688 37,713 2017 102,208 5.5%2,150,945 83,401,792 38,774 2018 102,000 4.4%2,166,753 86,995,697 40,150 2019 102,000 4.0%2,180,085 91,658,300 42,043 2020 103,000 6.4%*** 2021 103,000 9.0%*** NOTES: +This data was revised in 2021 (2) *This data was not developed in the format required for this fiscal year. SOURCES: (1)U.S. Department of Labor, Bureau of Labor Statistics (BLS) Census Bureau midyear population estimates. (2)Bureau of Economic Analysis (BEA) Computed using midyear population estimates. (3)Fiscal Year ends on June 30 of the year that is shown. SOURCE: East Valley Water District - Finance Department June 30, County of San Bernardino Year Ended EAST VALLEY WATER DISTRICT Full-Time Equivalent Employees by Department Last Ten Fiscal Years 104 Year Ended District Engineering & June 30,Administration Maintenance Operations Total 2012 21 31 11 63 2013 25 27 11 63 2014 25.5 29 11 65.5* 2015 27.5 28.5 11 67* 2016 27 28 13 68* 2017 27 29 12 68* 2018 26.5 29 13 68.5* 2019 27.5 32 11 70.5* 2020 26 30 11 67 2021 25 30 11 66 NOTES: * - Includes Part-Time Employees (PTEs) SOURCES: East Valley Water District - Finance and Human Resources Departments 0 10 20 30 40 50 60 70 80 District Administration Engineering & Maintenance Operations EAST VALLEY WATER DISTRICT Operating and Capacity Indicators for Water and Wastewater Last Ten Fiscal Years 105 Annual Average Miles of Number of Production Production Water Main Fire Hydrants (MG)(MGD) 2012 297 2,854 6,422 18 2013 303 2,915 6,529 18 2014 297 2,976 6,488 18 2015 316 3,005 5,680 16 2016 316 3,005 4,887 13 2017 316 3,005 5,286 14 2018 300 3,018 5,983 16 2019 300 3,025 5,268 14 2020 300 3,025 5,552 15 2021 300 3,029 6,121 17 Annual Daily Miles of Service Sewerage Sewerage Wastewater Connections (MG)(MGD) 2012 224 19,477 2,247.66 6.16 2013 224 19,502 2,285.06 6.26 2014 223 19,504 2,595.08 7.11 2015 224 19,544 2,271.96 6.22 2016 224 19,572 2,167.71 5.94 2017 260 20,290 2,175.40 5.96 2018 225 20,581 2,149.85 5.89 2019 214 20,563 2,091.45 5.73 2020 214 19,679 2,220.61 6.08 2021 214 19,679 2,448.31 6.71 NOTES: *This data was not developed in the format required for this fiscal year. SOURCE: East Valley Water District - Engineering and Finance Departments Water System Wastewater System Year Ended June 30, Year Ended June 30, 106 EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2021 107 Capacity Charge Funds Government Code Section 66013 requires local agencies that collect capacity charges to deposit and account for these fees in a separate capital facilities fund. In addition, local agencies are required to annual provide the information in this report to the public upon request. Government Code Section 66013 (b) (3) defines "Capacity charge" means a charge for public facilities at the time the charge is imposed or charges for new public facilities to be acquired or constructed in the future that are of proportional benefit to the person or property being charged, including supply or capacity contracts for rights or entitlements, real property interests, and entitlements and other rights of the local agency involving capital expense related to its use of the use of existing or new public facilities. " Government Code Section 66013 (d) outlines the reporting requirements on the capital facilities funds and expenditures. Government Code Section 66013 (f) (2) exempts capacity charges that are used to pay existing debt service from the reporting requirements of Section 66013 (d). Two of the District's capacity charges are used to pay existing debt service; therefore, they are exempt from the reporting requirements. For the purpose of enhancing transparency, the District has provided the reporting information on its capacity charges that are exempt from Section 66013 (d). The District has the following capacity charge funds: Water Capacity Fee Fund. This fund collects System Capacity Charges for new water service connections to pay for proportionate shares of the District equipment replacements and facility improvements. Wastewater Capacity Fee Fund. This fund collects a fee for the capacity used by new wastewater connections and the funds are used to pay for equipment replacements and facility improvements. EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2021 108 A summary of changes in Water Fund Capacity Fees collected for the year ended June 30, 2021 is as follows: Beginning of End of Categories Year Contributions Usage Year Storage 131,395$ $ 31,112 $ - $ 162,507 Treatment 801,103 12,599 - 813,702 Supply 428,142 8,062 - 436,204 Trans & Distribution 776,177 122,706 - 898,883 General 147,206 14,179 - 161,385 East Trmt Plnt - 104,193 - 104,193 2,284,023$ 292,851$ -$ 2,576,874$ A summary of Projects Funded by Capacity Fees for the year ended June 30, 2021: Categories CIP Project FY 2020-21 Expended % Funded by Capacity Total Capacity Fees Usage Storage -$ 0%-$ Treatment Supply Trans & Distrib General New Trmt Plt -$ -$ EAST VALLEY WATER DISTRICT Capacity Charge Funds Year Ended June 30, 2021 109 A summary of changes in Wastewater Fund Capacity Fees collected for the year ended June 30, 2021 is as follows: Beginning of End of Categories Year Contributions Usage Year Collection $ 1,467,020 $ 49,871 $ - $ 1,516,891 General 229,716 7,259 - 236,975 Greenspot Mn - 56,115 - 56,115 5th Street Mn - 22,303 - 22,303 Lynwood Mn - 5,604 - 5,604 Treatment 2,518,595 143,182 (801,168)1,860,609 4,215,331$ 284,334$ (801,168)$ 3,698,497$ A summary Project Funded by Capacity Fees for the year ended June 30, 2021: A summary of Projects Funded by Capacity Fees for the year ended June 30, 2021: Categories CIP Project* FY 2020-21 Expended % Funded by Capacity Total Capacity Fees Usage Collection -$ 0%-$ Transmission - Recharge - Operations - Treatment SNRC-Edison Intertie (801,168) 100%(801,168) (801,168)$ (801,168)$ Note: * The District did not have any CIP projects utilizing Capacity Fee funds for the year ended June 30, 2021. Agenda Item #3 December 7, 20211 2 6 4 Meeting Date: December 7, 2021 Agenda Item #3 Informational Item Regular Meeting TO: Committee Members FROM: Chief Financial Officer SUBJECT: Review the Popular Annual Financial Report for Year Ended June 30, 2021 RECOMMENDATION This agenda item is for informational purposes only, no action required. BACKGROUND / ANALYSIS Attached is the East Valley Water District Popular Annual Financial Report (PAFR) for fiscal year ended June 30, 2021. The PAFR is designed to be a summarized, user-friendly version of the District’s Comprehensive Annual Financial Report (Annual Report), which was audited in November and will be presented to the Board of Directors (Board) in December. Most financial information in the PAFR is presented in graphic form, and technical note disclosures are omitted. In addition, as with the Budget and Annual Report, the Government Finance Officers Association (GFOA) produces guidelines for producing an effective PAFR, and if an agency’s PAFR substantially meets or exceeds those guidelines, the GFOA presents the agency with an Award for Outstanding Achievement in Popular Annual Financial Reporting. The District received the award for its June 2020 PAFR, and that award appears on page 2 in the current year report. The District will submit the current year PAFR for award consideration. Staff recommends that the Board review the June 30, 2021 PAFR document, and approve it for distribution to District ratepayers. AGENCY GOALS AND OBJECTIVES II - Maintain a Commitment To Sustainability, Transparency, and Accountability A. Practice Transparent and Accountable Fiscal Management Agenda Item #3 December 7, 20212 2 6 4 Meeting Date: December 7, 2021 Agenda Item #3 Informational Item REVIEW BY OTHERS This agenda item has been reviewed by the Finance and Public Affairs Departments. FISCAL IMPACT There is no fiscal impact associated with this agenda item. Recommended by: ________________ Brian Tompkins Chief Financial Officer ATTACHMENTS Draft PAFR 2021 HIGHLAND, CALIFORNIA Popular Annual Financial Report Fiscal Year Ended June 30, 2021DRAFT Transmittal Letter .............................................................3 Core Values ................................................................................3 About the District ......................................................................4 Organizational Structure ........................................................4 District Vision .............................................................................5 District-At-a-Glance ..................................................................5 District Wide Goals & Objectives ........................................6 Capital Improvement Projects .............................................6 Sterling Natural Resource Center ......................................8 Community Involvement .....................................................10 Financial Performance ................................................11 Revenue and Expenses ........................................................11 Revenue by Sources .............................................................12 Breakdown of Expenses .....................................................13 Outstanding Long-Term Debt ............................................14 Comparative Net Position ...................................................15 Chairman of the Board DAVID E. SMITH Vice Chairman PHILLIP R. GOODRICH Governing Board Member CHRIS CARRILLO contentsTABLE OF GOVERNING BOARD OF DIRECTORS General Manager/CEO JOHN MURA Director ofAdministrative Services KERRIE BRYAN District Clerk JUSTINE HENDRICKSEN Director of Strategic Services KELLY MALLOY DISTRICT MANAGEMENT Government Finance Officers Association Award for Outstanding Achievement in Popular Annual Financial Reporting Presented to East Valley Water District California For its Annual Financial Report for the Fiscal Year Ended June 30, 2020 Executive Director/CEO The Government Finance Officers Association of the United Stated and Canada (GFOA) has given an Award for Outstanding Achievement in Popular Annual Financial Reporting to East Valley Water District, California for its Popular Annual Financial Report (PAFR) for the fiscal year ended June 30, 2020. In order to receive this award, a government unit must publish a Popular Annual Financial Report, whose contents conform to program standards of creativity, presentation, understandability, and reader appeal. We believe our current PAFR continues to conform to program requirements, and we are submitting it to GFOA to determine its eligibility for another Award. We also welcome and encourage feedback from District ratepayers to help make this publication more useful and/or informative. Popular Annual Financial Reporting Award POPULAR ANNUAL FINANCIAL REPORT2 Operations Manager PATRICK MILROY Director of Engineering & Operations JEFF NOELTE, PHD, PE Chief Financial Officer BRIAN TOMPKINS Water Reclamation Manager ROCKY WELBORN Governing Board Member RONALD L. COATS Governing Board Member JAMES MORALES, JR. To Our Ratepayers We are pleased to present East Valley Water District’s (District) Popular Annual Financial Report (PAFR) for the fiscal year ending June 30, 2021. This report summarizes financial information appearing in the 2021 Annual Report and was created to provide valuable information related to District finances and the Five-Year Capital Improvement Program, that support the expansion and improvement of our community’s distribution system. The PAFR is unaudited; however, the financial data presented in the PAFR is developed based on the audited Annual Report, which is consistent with Generally Accepted Accounting Principles. This document can also be reviewed on the District’s website at eastvalley.org/PAFR2021. For more detailed information, the District’s 2021 Annual Report is available for interested individuals at the District Headquarters, 31111 Greenspot Road, Highland, California 92346. It can also be viewed on the District’s website, along with other key financial documents, at eastvalley.org/2021AnnualReport. Questions, comments, and feedback regarding this report are encouraged. Please do not hesitate to contact Brian Tompkins, Chief Financial Officer, at finance@eastvalley.org or (909) 381-6463. On behalf of the District, thank you for the opportunity to serve you. Respectfully submitted, John Mura General Manager/CEO TRANSMITTAL LETTER & Community Core Values LEADERSHIP Motivating a group of people to act towards achieving a common goal or destination. PARTNERSHIP Developing relationships between a wide range of groups and individuals through collaboration and shared responsibility. STEWARDSHIP Embracing the responsibility of enhancing and protecting resources considered worth caring for and preserving. EAST VALLEY WATER DISTRICT 3 POPULAR ANNUAL FINANCIAL REPORT4 210 210 santa a n a r i v e r sant a a n a r i v e r plun g e c r e e k plunge creek eld e r c r e e k cit y c r e e k city c r e e k sa n d c r e e k tw i n c r e e k tw i n c r e e k warm cr e e k cook creek mil l c r e e k HIGHLAND SAN BERNARDINO District Service Area SEVEN OAKS DAM N The District was formed through a local election of mostly citrus grove operators, to have water service provided by a public agency. East Valley Water District is located in the foothills of the San Bernardino Mountains, 65 miles east of Los Angeles in the County of San Bernardino. ABOUT THE DISTRICT Presented to the right is an overview of East Valley Water District’s organizational structure*. The District employs 66 full-time positions. ORGANIZATIONAL STRUCTURE FTE: 3 EO: 5 FTE:3 FTE:5FTE:3 FTE: 1 FTE: 3 FTE: 15 FTE: 7 FTE: 4 FTE: 2 FTE: 2 FTE: 2 FTE: 1 FTE: 2 FTE: 1 GOVERNING BOARD RATEPAYERS GENERAL MANAGER/CEO DIRECTOR OF ENGINEERING & OPERATIONS LEGAL COUNSEL CHIEF FINANCIAL OFFICER GENERAL ADMINISTRATION HUMAN RESOURCES DIRECTOR OF STRATEGIC SERVICES DIRECTOR OF ADMINISTRATIVE SERVICES PUBLIC AFFAIRS ENGINEERING OPERATIONS METER SERVICES WATER MAINTENANCE WATER PRODUCTION WASTEWATER MAINTENANCE WATER TREATMENT FACILITIES MAINTENANCE WATER QUALITY FLEET MAINTENANCE INFORMATION TECHNOLOGY FINANCE FTE:6 CONSERVATION CUSTOMER SERVICE Program FTE: Full Time Employees EO: Elected Ocials Person/Position LEGEND *The organizational chart reflects the District during the timeframe reflected in this document. EAST VALLEY WATER DISTRICT 5 En ance and Pre ervethe ualit of Life FOR OUR COMMUNITY THROUGH INNOVATIVE LEADERSHIP World Cla & Public ervice DISTRICT VISION East Valley Water District provides water and wastewater services to residents within a 30.1 square mile area. This includes more than 103,000 people in the cities of Highland and San Bernardino, portions of the unincorporated County of San Bernardino, the San Manuel Band of Mission Indians, and Patton State Hospital. DISTRICT AT-A-GLANCE 103,000 population served Miles ofsewer videoMonitoring 263 water leaksrepaired 1,577 linear feet ofnew watermain installed square mile service area 30.1 miles ofsewer cleaned 300 3,400SAMPLES COLLECTED 47415,000,000 Average Gallons OFwater produced/day 28,977,000 gallons of water storage enough to fill 44 olympic-sized swimming pools MILES OFWATER MAINS 220 MILES OFSEWER MAINS hydrants flushed646hydrants repaired orreplaced & Painted activegroundwaterwells 4,891MANUAL AND16,016AMI AUTOMATIC METERSREAD MONTHLY 6,000,000 average gallons ofsewer conveyed daily 127 LOW WATER USEPLANT SPECIES INDISTRICT GARDEN 60+ POPULAR ANNUAL FINANCIAL REPORT6 As part of the annual budget process, District wide goals are established by the Governing Board to identify priority programs and projects. More specific goals were established for each program consistent with District wide goals. DISTRICT WIDE GOALS & OBJECTIVES 1 Optimize Infrastructure 2 Financial Stability with Full Understanding of Operational Complexities 3 Protect Organizational Investments 4 Maximize the District’s Position 5 Have Others See the District as a Premier Agency Final Phase of AMI Meter Upgrades Installed 4,891 Advanced Metering Infrastructure meters to automate the collection of consumption information. Over 20,000 meters were upgraded throughout the community. Date Completed: March 2021 Project Cost: $1,921,604 Project Benefits: Enhances service and allows customers to monitor consumption in near ‘real time’, receive leak alerts, and more. Elm Street Water Main Relocation Coordinated with the City of Highland to relocate an existing 4-inch water main pipeline that conflicted with a city project and upgraded it with an 8-inch pipeline. Date Completed: April 2021 Project Cost: $418,049 Project Benefits: Increased fire flow capability for customers in this area. Addressed a need identified in the District’s Water Master Plan. The District achieved a number of different accomplishments during Fiscal Year 2020-21. As a results-oriented organization, each program has clearly defined goals and objectives. During this period, there were five priority projects that contributed to supporting not only the District wide goals, but also the District Vision. These projects are included in the Five-Year Capital Improvement Program. Each year as part of the budget process, the District’s program managers and supervisors compile and submit a list of capital outlay requests for consideration. Staff reviews and prioritizes the list of equipment based on a needs assessment and the amount of funding available. Proposed Capital Improvement Projects for the budgeted fiscal year were submitted by the Engineering, Operations and Maintenance Programs in accordance with the anticipated needs of the District as outlined in the 2019 Sewer System Master Plan and 2019 Water System Master Plan. CAPITAL IMPROVEMENT PROJECTS EAST VALLEY WATER DISTRICT 7 Plant 129 Storage Tank Mixers Installed tank mixers in the reservoir at Plant 129 to keep the water circulating and reduce potential for Total Trihalomethanes (TTHM). Date Completed: September 2020 Project Cost: $25,645 Project Benefits: Maintain the quality and safety of water provided to the community. Barton Street Water Main Replacement Completed land survey necessary for new main alignment and replaced approximately 1,000 lineal feet of 4-inch steel water main with 6-inch ductile iron pipe; and installed 18 new water services and two new fire hydrants. Date Completed: April 2021 Project Cost: $144,019 Project Benefits: Allows the District to continue meeting the community’s water needs and minimize future leaks. Plant 134 Process Improvements Evaluated the necessary process for sludge removal to enhance the surface water treatment process; completed the Phase 1 Engineering Analysis in preparation for the addition of a Granular Activated Carbon system to the treatment process. Date Completed: September 2020 Project Cost: $357,448 Project Benefits: Once completed, it will remove organics and mitigate the occurrence of high Total Trihalomethanes (TTHM) levels to help maintain the quality and safety of water provided to the community. POPULAR ANNUAL FINANCIAL REPORT8 In 2018, East Valley Water District broke ground on the Sterling Natural Resource Center (SNRC) to provide a sustainable new water supply for the region. Since then, the site has transformed into a facility with structures, technology, and pipelines that will be used to recycle wastewater and replenish the local groundwater aquifer. October marked the three-year construction milestone of the project and the District anticipates operations to begin in 2022. Included in the project, an Administrative Center will house new customer service offices, a special community events area, and demonstration garden. PROGRESSING TOWARD THE FINISH LINE Construction of the Sterling Natural Resource Center has required a complex series of regulatory approvals, technical design, and world-class construction working together as a team. Members of Team Sterling are preparing for the final year of construction, testing, and celebrating full operation. CONSTRUCTION MILESTONES 2.5 Miles if laid end to end MILE1 MILE2 12,804 Feet design drawings on 24” x 36” sheets of paper Construction is n e a r l y complete. The n e x t p h a s e is facility testin g f o l l o w e d by the SNRC bec o m i n g fully operationa l . 8 structures have been completed8,627 elephants 18,744cubic yardsof concrete weighing75,913,512pounds = 95% CompletE STEP 1: CONSTRUCTION 5% REMAINING STEP 2:TESTING STEP 3:OPERATIONS Sterling Natural Resource Center The SNRC will provide benefits beyond transforming wastewater into recycled water to replenish our groundwater aquifer. PROJECT BENEFITS Picnic area, demonstration garden, walking paths, workshop space, and special events area. Water treated at the SNRC will recharge the local Bunker Hill Groundwater Basin. Hands-on training and career experiences in wastewater treatment available to students and residents. Improvements to the surrounding area include street paving, water lines, sidewalks, and more. EAST VALLEY WATER DISTRICT 9 GOVERNOR GAVIN NEWSOM The SNRC is Funded in Part By: Cap and TradeDollars at Work *Funding for this Sterling Natural Resource Center project has been provided in full or in part by the Proposition 1 - the Water Quality, Supply, and Infrastructure Improvement Act of 2014 and the Clean Water State Revolving Fund through an agreement with the State Water Resources Control Board. California’s Clean Water State Revolving Fund is capitalized through a variety of funding sources, including grants from the United States Environmental Protection Agency and state bond proceeds. The Urban Greening Program is part of California Climate Investments, a statewide program that puts billions of cap-and-trade dollars to work reducing greenhouse gas emissions, strengthening the economy and improving public health and the environment—particularly in disadvantaged communities. The cap-and-trade program also creates a financial incentive for industries to invest in clean technologies and develop innovative ways to reduce pollution. California Climate Investment projects include affordable housing, renewable energy, public transportation, zero-emission vehicles, environmental restoration, more sustainable agriculture, recycling and much more. At least 35 percent of these investments are made in disadvantaged and low-income communities. For more information, visit www.caclimateinvestments.ca.gov. A NEW PLACE TO GATHER In addition to creating a sustainable source of water for the region, the SNRC provides over 204,000 square feet of new outdoor space. The demonstration garden has not only been created using water efficient, lush and colorful plants but it has been designed to: • Build a space for the community to gather • Provide beautiful examples of water efficient landscaping • Deter wildlife from impacting the local airport • Benefit the environment by supporting carbon sequestration Trees Help Redu c e t h e A m o u n t o f Carbon Dioxide i n t h e A t m o s p h e r e PREVENTING UNWANTED GROUND AND SKY WILDLIFE The SNRC has a unique mission to create a beautiful community space without inviting feathered friends. In order to protect the safety of aircraft flying into and out of the San Bernardino International Airport, the site has creatively incorporated some landscaping features that are less welcoming to wildlife. For example, the grass that has been selected for the amphitheater has an unpleasant taste for geese, which discourages them from hanging around. Staff will also be specially trained to discourage wildlife from calling the SNRC home. All plants, trees, and grass installed at the SNRC will have low water use. • 15 Different Tree Species Will be Planted at the SNRC • Over 20,000 Plants and Trees Will be Part of the Garden DID YOU KNOW? Watch Now Learn more about the SNRC and watch construction progress at eastvalley.org/snrc. POPULAR ANNUAL FINANCIAL REPORT10 The COVID-19 pandemic temporarily changed the way East Valley Water District interacted with the community, but not the essence of public service. The District maintained its commitment to serving the community, even if it was at a distance. SERVING THE COMMUNITY East Valley Water District is proud to support local non-profit organizations with fulfilling their mission of serving the community through its Surplus Vehicle Donation Program. This program provides fully functional vehicles to organizations that provide valuable services to the community. This fiscal year, the District donated vehicles to The Can Man, a handyman service that assists veterans and seniors with home repairs and cleaning; the Yucaipa Animal Placement Society (YAPS), a local no-kill animal shelter; and the Highland Senior Center. Hope on Wheels The COVID-19 pandemic encouraged everyone to practice social distancing to protect the health and safety of the community. Students adapted to this new reality by attending and completing their schooling virtually. East Valley Water District donated commemorative t-shirts to Jefferson Hunt Elementary students graduating to middle school. To inspire students to stay engaged with their education, the District also donated a new mountain bike and helmet for the school’s attendance contest. One lucky student won the new bike in recognition of their achievement. CELEBRATING AND INSPIRING TOMORROW’S LEADERS While there is always a need for food supplies, the pandemic elevated the demand for meals within our community. East Valley Water District partnered with the San Bernardino City Mission, a local non-profit that assists residents in need, to conduct a food drive. Through the combined effort and generosity of staff and public, over 470 items were donated. Each food donation was included in a meal box and cash donations served to purchase additional items. Canned Food Drive EAST VALLEY WATER DISTRICT 11 Revenue & Providing safe drinking water to over 103,000 residents every day is the District’s top priority and also one of its most significant expenses. The graphs below represent the District’s combined revenue and expenses for FY 2020-21. For comparison purposes, FY 2018-19 and FY 2019-20 revenue and expenses have also been included. Please refer to the District’s 2021 Annual Report for a comprehensive breakdown of expenses. FINANCIAL PERFORMANCE Expenses East Valley Water District utilizes revenue to fund daily operations, scheduled capital improvements and replacements, and principal and interest for debt financed construction projects. Remaining revenue is invested back into capital improvement projects to help maintain and improve the system's reliability so that East Valley Water District may continue taking steps to support the Vision Statement of providing world-class public service. Revenue also provides funding for conservation and rebate programs, which empowers customers to be efficient water users and encourages water savings indoors and out. Excess net revenue after covering expenses and payments is added to reserves for capital replacements and unforeseen emergency expenses. HOW IS REVENUE MANAGED? Revenue Expenses -GrantsNon-OperatingOperating $37.58 Million $37.83 Million Expense Contributions Non-Operating FY 2019-20 FY 2018-19FY 2019-20FY 2020-21 $50.42 Million FY 2018-19 $41.50 Million $43.33 Million Revnue Operating $39.12 Million FY 2020-21 The District uses revenue to fund day-to-day operations. East Valley Water District receives 99 percent of its revenue from user rates and fees; the District receives no funding from property or sales taxes. Rates and fees are reviewed on 3 to 5 year cycles and are adjusted as necessary to meet the costs of providing services to customers. REVENUE BY SOURCES Note: The District’s water sales and meter charge revenue is expected to decrease through FY 2021-22. Due to rate increases, residents tend to reduce their water usage. Additional information regarding the approved rates can be found at eastvalley.org/rates. Meter charges are fixed monthly charges assessed to customers based on the size of the service connection to their property. Wastewater collection charges are 1) fixed monthly charges for single family residences, and 2) a combination of fixed and volumetric charges for commercial and multi-family customers. Wastewater treatment rates are established by, and revenue remitted to, the City of San Bernardino Municipal Water Department, which is currently contracted to treat all wastewater generated by District customers. Other charges are assessed according to an adopted fee schedule, but are only charged to users who request, or require, use of District resources beyond the scope of delivering normal water and wastewater services. Water sales are based on the volume of water used by a customer during the monthly billing period. POPULAR ANNUAL FINANCIAL REPORT12 FY 2020-21RATEREVENUE 46% Water Sales22% Meter Charges 11% WastewaterCollection 20% WastewaterTreatment 1%Other Charges Revenue History & Forecast (in millions) 25.5 26.6 26.9 27.5 13.8 13.2 13.3 14.3 15.3 10 15 20 25 30 FY 18-19 Actual FY 19-20 Actual FY 20-21 Actual FY 21-22 Projected FY 22-23 Projected Water Operating Revenue Wastewater Operating Revenue 28.9 EAST VALLEY WATER DISTRICT 13 BREAKDOWN OF EXPENSES Expenses are the cost of providing water to meet customer demand and collecting and treating wastewater from customer residences or places of business. East Valley Water District strives to provide safe and reliable water delivery services. Despite the severity of the current drought, the District has put forth significant effort to overcome the challenges of maintaining a fiscally sustainable and operationally dependable organization. EXPLANATION OF EXPENSES • Source of Supply - Expenses related to the extraction of groundwater, and for procuring water from the Santa Ana River or State Water Project when supply is available. • Pumping - Expenses related to moving water throughout the District’s water distribution system. • Water Treatment - Expenses related to the treatment of water. • Transmission and Distribution - Expenses for transmitting water to treatment plants and storage reservoirs for distribution to commercial and residential customers. • Customer Accounts - Expenses related to the service of customer accounts including, postage, telephone, printing and publishing, and billing services. • Wastewater Treatment - Expenses related to the contracted service currently provided by the City of San Bernardino Municipal Water Department. • Wastewater Collection - Expenses for the operation and maintenance of the District’s system of wastewater collection pipelines. • Administrative and General - Expenses related to the administration of District operations. For example, employee compensation, benefits, conservation rebates, office supplies, banking services, materials and supplies, utilities, fuel, permits, insurance claims, legal services, and printing and publishing. • Depreciation - Expenses related to the use of capital assets over time. • Other Expenses - Expenses not related to the District’s current cost of utility service delivery. Expenses Source of Supply Pumping Water Treatment Transmission Customer Accounts Wastewater Treatment Depreciation Interest Expense Wastewater Collection Administrative and General and Distribution 9 3 2 164 2 8 22 27 7 This graphic identifies how every dollar spent is allocated to cover expenses (in cents). POPULAR ANNUAL FINANCIAL REPORT14 Much like how a mortgage is financed to spread costs over 30 years, East Valley Water District has incurred debt to fund large capital projects. The District has adopted a Debt Management Policy to clearly state that long-term borrowing is only to be used for Capital Improvement Projects that cannot be funded from current revenues. Similar to an individual’s credit score, public agencies have a bond rating used by investors to determine risk. The District has a bond rating of AA- by both the Fitch and the Standard and Poor’s rating services. This is considered a high quality investment grade. OUTSTANDING LONG-TERM DEBT US Bank Loan - Issued for the purchase and installation of energy conservation equipment at several of the District’s water production facilities. Sterling Natural Resource Center Loan - Funded the design and construction of the District’s water recycling facility that will capture and treat District wastewater flows. Recycled water will be recharged to the Bunker Hill Groundwater basin. 2020A Bonds - Issued to refund outstanding 2010 revenue bonds and save $380,000 annually on interest. The 2010 bonds were issued to finance pipeline and other infrastructure projects. 2020B Bonds - Issued to refund outstanding 2013 revenue bonds, which were issued to finance the construction of a new administration and operations headquarters. State Department of Water Resources Loans - Funded the improvement and expansion of the District’s surface water treatment plant. SBVMWD Loans - Agreement with the San Bernardino Valley Municipal Water District for the construction, financing, and maintenance of a City Creek Turnout and Plant 134 Hydroelectric Station. The station provides the District with direct access to State Project Water, to be used for the surface water treatment plant. East Valley Water District’s long-term debt consists of bonds, loans and installment purchases. EXPLANATIONOF DEBT (IN MILLIONS) $126.4 Sterling Natural Resource Center $1.3US Bank Loan $16.9 2020A Bonds $13.6 2020B Bonds $2.1SBVMWD Loan $6.0State Dept. of Water Resource $39.5 $10.2 $0.3 $222 $4.1 $38.7 $9.97 $0.3 $290.1 $4.6 Current Assets Restricted Assets Other Assets Capital Assets Deferred Outflows Current Liabilities Non-Current Liabilities Net Position Deferred Inflows $20 $181.9 $140.1 $1.6 $18.5 $121 $135.9 $0.7 EAST VALLEY WATER DISTRICT 15 TWO-YEAR COMPARATIVE NET POSITION (IN MILLIONS) As an infrastructure based organization, the District directs significant resources in capital investments to maintain and improve its water and wastewater system. Comparative net position offers perspective of the District’s assets, liabilities, and equity. The information presented below applies to fiscal years ended June 30, 2021 and 2020. EXPLANATION OF ASSETS EXPLANATION OF LIABILITIES AND EQUITY (NET POSITION)Current Assets - Cash and cash equivalents, customer utility receivables, inventory, prepaid expenses, and other liquid assets that can be readily converted to cash. Restricted Assets - Cash equivalents, grants and bonds restricted for a specific purpose and therefore not readily available to use. Other Assets - Special assessments receivable from certain property owners for system improvements that benefit only their properties. Capital Assets - Any land, building, equipment, vehicles, inventory, treatment plants, pipeline, and water distribution systems owned by the District. Deferred Outflow of Resources - Use of net assets attributed to future reporting periods, such as prepaid items and deferred charges. Current Liabilities - Present financial obligations including, payments to vendors, payroll, and employee benefits. Non-Current Liabilities - Long-term financial obligations including payments for loans, bonds, and employee retirement benefits. Deferred Inflow of Resources - Receipt of net assets attributed to future reporting periods, such as deferred revenue and advance collections. Equity (Net Position) - Represents the excess of assets over liabilities. Current Liabilities - Present financial obligations including, payments to vendors, payroll, and employee benefits. Non-Current Liabilities - Long-term financial obligations including payments for loans, bonds, and employee retirement benefits. Deferred Inflow of Resources - Receipt of net assets attributed to future reporting periods, such as deferred revenue and advance collections. Equity (Net Position) - Represents the excess of assets over liabilities. 2021 Total Assets: $343.6 Million 2020 Total Assets: $276.1 Million 2021 Liabilities & Equity: $276.1 Million 2020 Liabilities & Equity: $343.6 Million Current Assets - Cash and cash equivalents, customer utility receivables, inventory, prepaid expenses, and other liquid assets that can be readily converted to cash. Restricted Assets - Cash equivalents, grants and bonds restricted for a specific purpose and therefore not readily available to use. Other Assets - Special assessments receivable from certain property owners for system improvements that benefit only their properties. Capital Assets - Any land, building, equipment, vehicles, inventory, treatment plants, pipeline, and water distribution systems owned by the District. Deferred Outflow of Resources - Use of net assets attributed to future reporting periods, such as prepaid items and deferred charges. Safe Reliable Water & Wastewater Service Provider East Valley Water District was formed in 1954 and provides water and wastewater services to over 103,000 residents within the cities of Highland and San Bernardino, and portions of San Bernardino County. EVWD operates under the direction of a 5-member elected Board. Office Hours Monday – Thursday 8:00am – 5:00pm 2nd and 4th Tuesday 9:00am – 5:00pm Friday 7:30am – 4:30pm Customer Service & After-Hours Emergency Service (909) 889-9501 District Headquarters 31111 Greenspot Road Highland, California 92346 (909) 889-9501 eastvalley.org District Board Meetings Second and Fourth Wednesday of Each Month at 5:30pm District Headquarters Board Room 31111 Greenspot Road Highland, CA 92346 Virtual Board Meetings (Temporary COVID-19 Measure) Second and Fourth Wednesday To attend online or telephonically visit eastvalley.org/boardmeetings for details and login information. @eastvalleywater 31111 Greenspot Road Highland, California 92346 DISTRICT HEADQUARTERS